FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
(this "Amendment") is made and entered into this 7th day of
August, 1997, by and among XXXXX, INC., a Delaware corporation
("Xxxxx"), XXXXXX'X, INC., a Texas corporation ("Xxxxxx'x"),
XXXXX-XXXXXXXXX OF MARYLAND, INC., a Delaware corporation
("Xxxxxxxxx" collectively referred to with Xxxxx and Xxxxxx, the
"Borrowers") and XXXXXXX NATIONAL LIFE INSURANCE COMPANY, a
Michigan insurance corporation, ("Xxxxxxx" or "Lender").
PRELIMINARY STATEMENTS
A. Borrowers and Lender have entered into that certain Loan
and Security Agreement, dated June 16, 1997 (the "Loan
Agreement").
B. The borrowers are in need of additional working capital
beyond the amounts permitted to be borrowed under the Loan
Agreement and have asked the Lender to amend the Loan Agreement
to, among other things, increase the Facility to $35,000,000.
C. The Lender is willing to amend the Loan Agreement
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises herein
contained and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, agree as follows:
AGREEMENT
ARTICLE I
Definitions
1.01 Capitalized terms used in this Amendment are defined in
the Loan Agreement, as amended hereby, unless otherwise stated.
ARTICLE II
Amendments to Loan Agreement
2.01 Amendments to Section 1 - Definitions. The following
definitions in Section l of the Loan Agreement are hereby amended
in their entirety as follows:
(a) "'Facility' means the credit facility extended to
the Borrower and the Borrowing Subsidiaries hereunder in the
principal amount of $35,000,000."
(b) "'Revolving Loan Commitment' shall mean the sum of
$33,000,000."
(c) "'Revolving Note' shall mean the Amended and
Restated Revolving Note in the original principal amount of
$33,000,000, executed by Borrower and each Borrowing
Subsidiary to the order of Lender, dated as of August 7,
1997."
2.02 Amendments to Section 2 - Loan and Terms of Payment.
(a) Section 2. 1(a)(ii) is hereby amended in its entirety as
follows:
"(ii) the lesser of: (x) $20,000,000 during the
months of January through April and $27,000,000 during
the months of May through December; or (y) the sum of
the following:
(A) during the months of January through
April, Sixty (60%) percent of the value of the
Borrower's and each Borrowing Subsidiary's Eligible
Inventory such value not to exceed 83% of the off-
peak mid-range GOB appraisal value of finished
goods based on the most recent appraisal prepared
by an independent appraiser acceptable to Lender;
and
(B) during the months of May through December,
Sixty-eight (68%) percent of the value of the
Borrower's and each Borrowing Subsidiary's Eligible
Inventory such value not to exceed 75% of the peak
GOB appraisal value of finished goods based on the
most recent appraisal prepared by an independent
appraiser acceptable to Lender; minus"
(b) The last full sentence in Section 2.1(a) is hereby
amended and restated as follows:
"So long as no Event of Default has occurred and is
continuing, however, Borrower shall only be required to
pay for two inventory appraisals annually."
2.03 Amendments to Section 2.5 - Fees. Section 2.5(a) is
hereby amended in its entirety as follows:
"(a) An unused line fee of three-tenths of one percent
(0.3%) per annum on the difference between $33,000,000 and
the average unpaid monthly balance
of the revolving loan Advances and undrawn Letter of Credit
Obligations outstanding under the Facility, payable
monthly."
2.04 Amendment to Section 10.1 - Affirmative Covenants;
Section 10.1(g) is hereby amended in its entirety as follows:
"Keep or cause to be kept in full force and effect each
Department License and promptly notify Lender of any default
under a Department License which could give rise to a
termination of such Department License, and, in such event,
at the request of Lender, remove all collateral located at
the Licensed Departments which are subject to such
Department License to a location satisfactory to Lender."
2.05 Amendments to Section 10.3 Financial Covenants.
Sections 10.3(a) and (b) are hereby amended in their entirety as
follows:
"(a) Borrower and Borrowing Subsidiaries shall
continuously maintain, on a consolidated basis:
(i) For the Fiscal Year ending March 1, 1997,
Consolidated Tangible Net Worth equal to or greater
than Eight Million Five Hundred Thousand Dollars
($8,500,000) and thereafter Consolidated Tangible Net
Worth equal to or greater than Six Million Five Hundred
Thousand Dollars ($6,500,000) increased quarterly by
75% of the Borrower's year to date consolidated Net
Income.
(ii) For each period specified below, Borrower and
Borrowing Subsidiaries will not permit consolidated
EBITDA to be less than the amounts set forth below:
March 1, 1997 through: Amount
---------------------- ------------
May 31, 1997 ($1,100,000)
August 31, 1997 ($2,500,000)
November 30, 1997 ($1,300,000)
February 28, 1998 $3,600,000
Thereafter, Borrower and Borrowing Subsidiaries shall
maintain a minimum ratio of EBITDA to interest expense of
2:00 to 1:00 for each Fiscal Quarter calculated on a rolling
twelve month basis.
(b) Borrower and Borrowing Subsidiaries shall not
permit Net Income excluding any after-tax extraordinary
gains or losses plus depreciation and amortization deducted
in determining Net Income minus Capital Expenditures not
financed to current principal maturities of long term debt
and Capital Leases paid during such period for the periods
set forth below to be less than the ratio set forth opposite
each such period:
PERIOD RATIO
------------------------------------- --------------
Fiscal Quarter ending nearest to (.4) to 1.00
November 30, 1997
Fiscal six month period ending nearest to 4.00 to 1.00
February 28, 1998
Fiscal nine month period ending nearest to 3.00 to 1.00
May 31, 1998
Fiscal twelve month period ending nearest to 1.00 to 1.00
August 31, 1998
Fiscal twelve month period ending nearest to 1.15 to 1.00
November 30, 1998
Thereafter, for each rolling twelve month 1.25 to 1.00
Fiscal Quarter"
ARTICLE III
Amendment Fee
The Borrower hereby agrees to pay to the Lender on the date
hereof an amendment fee in the amount of $5,000.
ARTICLE lV
Amendments to Revo1ving Note
The Borrower and each Borrowing Subsidiary shall deliver to
the Lender on the date hereof an Amended and Restated Revolving
Note in the principal amount of $33,000,000 in the form of
Exhibit A hereto (the "Amended Note").
ARTICLE V
Ratifications, Representations and Warranties
5.01 Ratifications. The terms and provisions set forth in
this Amendment shall modify and supersede all inconsistent terms
and provisions set forth in the Loan Agreement and the Other
Agreements, and, except as expressly modified and superseded by
this Amendment, the terms and Provisions of the Loan Agreement
and the Other Agreements are ratified and
confirmed and shall continue in full force and effect. Borrower
and each Borrowing Subsidiary and Lender agree that the Loan
Agreement and the Other Agreements, as amended hereby, shall
continue to be legal, valid, binding and enforceable in
accordance with their respective terms.
5.02 Representations and Warranties. Borrower and each
Borrowing Subsidiary hereby represent and warrant to Lender that
(a) the execution, delivery and performance of this Amendment and
any and all Other Agreements executed and/or delivered in
connection herewith including, without limitation, the Amended
Note, have been authorized by all requisite corporate action on
the part of Borrower and each Borrowing Subsidiary and will not
violate the Articles of Incorporation or Bylaws of Borrower or
either Borrowing Subsidiary; (b) the representations and
warranties contained in the Loan Agreement, as amended hereby,
and any Other Agreements are true and correct on and as of the
date hereof and on and as of the date of execution hereof as
though made on and as of each such date; (c) no Event of Default
or event or condition which, with notice or passage of time or
both, would constitute an Event of Default under the Loan
Agreement, as amended hereby, has occurred and is continuing; and
(d) Borrower and each Borrowing Subsidiary are in full compliance
with all covenants and agreements contained in the Loan Agreement
and the Other Agreements, as amended hereby.
ARTICLE VI
Miscellaneous Provisions
6.01 Survival of Representations and Warranties. All
representations and warranties made in the Loan Agreement or any
Other Agreements, including, without limitation, any document
furnished in connection with this Amendment, shall survive the
execution and delivery of this Amendment and the Other
Agreements, and no investigation by Lender shall affect the
representations and warranties or the right of Lender to rely
upon them.
6.02 Reference to Loan Agreement. Each of the Loan
Agreement and the Other Agreements and any and all other
agreements, documents or instruments now or hereafter executed
and delivered pursuant to the terms hereof or pursuant to the
terms of the Loan Agreement, as amended hereby, are hereby
amended so that any reference in the Loan Agreement and such
Other Agreements to the Loan Agreement or any such Other
Agreements shall mean a reference to the Loan Agreement and the
Other Agreements as amended hereby.
6.03 Expenses of Agent. As provided in the Loan Agreement,
Borrowers agree to pay on demand all reasonable costs and
expenses incurred by Lender in connection with the preparation,
negotiation and execution of this Amendment and the Other
Agreements executed pursuant hereto, and any and all amendments,
modifications, and supplements thereto, including, without
limitation, the reasonable costs and fees of Lender's legal
counsel.
6.04 Severability. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable
shall not impair or invalidate the remainder of this Amendment
and the effect thereof shall be confined to the provision so held
to be invalid or unenforceable.
6.05 Successors and Assigns. This Amendment is binding upon
and shall insure to the benefit of Lender and Borrower and each
Borrowing Subsidiary and their respective successors and assigns,
except that Borrower and Borrowing Subsidiaries may not assign or
transfer any of their rights or obligations hereunder without the
prior written consent of Lender.
6.06 Counterparts. This Amendment may be executed in one or
more counterparts, each of which when so executed shall be deemed
to be an original, but all of which when taken together shall
constitute one and the same instrument.
6.07 Effect of Waiver. No consent or waiver, express or
implied, by Lender to or for any breach of or deviation from any
covenant or condition by Borrower or Borrowing Subsidiaries shall
be deemed a consent to or waiver of any other breach of the same
or any other covenant, condition or duty.
6.08 Heading. The headings, captions, and arrangements used
in this Amendment are for convenience only and shall not affect
the interpretation of this Amendment.
6.09 Applicable Law. THIS AMENDMENT AND ALL OTHER AGREEMENTS
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO
BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS
(WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).
6.10 Final Agreement. THE LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE
EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER
HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED. THE LOAN AGREEMENT
AND THE OTHER AGREEMENTS, AS AMENDED HEREBY, MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION, RESCISSION,
WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT
SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY BORROWER,
EACH BORROWING SUBSIDIARY AND LENDER.
(REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
Witness the due execution hereof by the respective duly
authorized officers of the undersigned as of the date first
written above.
XXXXX, INC.
By: Xxxxxxx X. Xxxxxx
Title: Vice President
XXXXXX'X, INC.
By: Xxxxxxx X. Xxxxxx
Title: Vice President
XXXXX-XXXXXXXXX, OF MARYLAND, INC.
By: Xxxxxxx X. Xxxxxx
Title: Vice President
XXXXXXX NATIONAL LIFE INSURANCE
COMPANY, as Lender
By: PPM America, Inc., Attorney-in-Fact
By: Xxxxxxx X. Xxxxxxx
Title: Vice President
