FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (the "First Amendment") is made
this 20th day of August, by and among LIBERTY BIDCO INVESTMENT CORPORATION,
whose principal office is located at 00000 Xxxxxxxxxxxx Xxxxxxx, Xxxxx 000,
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000-0000 ("BIDCO") and HOME RETAIL HOLDINGS, INC.
(formerly known as Xxxxxxx Companies, Inc., and the surviving entity of a merger
between Xxxxxxx Companies, Inc. and Home Retail Acquisition Corp.), a Delaware
Corporation ("HRH"), THE COOKSTORE, INC, an Ohio Corporation ("TCI"), and THE
COOKSTORE WORTHINGTON, INC., an Ohio Corporation ("TCWI"), and AROPI,
INCORPORATED, an Iowa Corporation ("AROPI")(HRH, TCI, TCWI and AROPI hereinafter
collectively referred to as the "Borrower", and each a "Borrower", unless the
context otherwise requires).
RECITALS
A. HRH, TCI, TCWI and BIDCO entered into a Business Loan Agreement with
Covenants dated as of August 12, 1998 (the "Initial Agreement"),
pursuant to which BIDCO agreed to make available to HRH, TCI and TCWI a
loan of up to $1,300,000.00. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to them in the
Initial Agreement.
B. HRH has entered into a Stock Purchase Agreement (the "Stock Agreement")
with AROPI and the shareholders of AROPI for the purchase of all the
outstanding capital stock of AROPI;
C. HRH, TCI and TCWI have requested certain amendments to the Initial
Agreement, and have requested that BIDCO advance an additional Seven
Hundred Thousand Dollars ($700,000.00) to partially fund the purchase
of the AROPI stock and to provide working capital for the combined
operations of HRH, TCI, TCWI and AROPI.
D. In order that BIDCO may further secure the repayment of the amended
loan herein contemplated, HRH is willing to grant to BIDCO a security
interest in the stock of AROPI pursuant to a Stock Pledge Agreement.
E. As a material inducement to BIDCO to make the loan herein contemplated,
AROPI, for good and valuable consideration, is willing to become a
co-borrower hereunder, jointly and severally, and to pledge a security
interest in all of AROPI's assets to secure all obligations to BIDCO.
F. BIDCO is willing to make the loan herein described, upon the terms,
covenants and conditions herein set forth, and in reliance upon the
representations and warranties of Borrower herein contained.
NOW, THEREFORE, in consideration of the foregoing Recitals, the terms,
covenants and conditions hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. Amendments
1.1 The Initial Agreement is hereby amended to provide that BIDCO
shall lend or otherwise make available to Borrower, upon the satisfaction of the
terms and conditions set forth herein and in the Initial Agreement, and Borrower
may borrow from BIDCO, an additional principal sum of Seven Hundred Thousand
Dollars ($700,000.00) (the "Acquisition Financing") together with interest
thereon calculated on the basis of a 360 day year, counting the actual number of
days elapsed, at Note Rate. After maturity of the Acquisition Financing, the
interest rate on all principal or interest outstanding, whether by acceleration
or otherwise, shall be eleven (11) percentage points above such "prime" rate.
Such Acquisition Financing shall be used for the partial funding of the
acquisition by HRH of the outstanding capital stock or substantially all of the
assets of AROPI, and for working capital for the combined operations of the
combined Borrowers. Any and all advances for the Acquisition Financing shall be
evidenced by the $1,300,000 Note, as modified and amended by First Modification
and Amendment To Promissory Note of even date herewith, modifying and amending
the $1,300,000 Note. The $1,300,000 Note shall hereafter be known as the
"$2,000,000 Note".
1.2 At no time shall the aggregate outstanding principal, of the
Acquisition Financing and the Exit Financing, exceed the sum of Two Million
Dollars ($2,000,000.00).
1.3 The Initial Agreement is hereby modified and amended by replacing
the language "$130,000,000 Note" with the words "$2,000,000 Note" in each and
every place it appears therein.
1.4 The Borrower shall be jointly and severally liable for all
obligations arising pursuant to the $2,000,000 Note, the Initial Agreement, this
First Amendment, and any documents delivered with respect thereto. All funds
advanced by BIDCO to or for the benefit of the Borrower, whether pursuant to the
Initial Agreement or this First Amendmcnt, shall be repaid to BIDCO by Borrower
in the same manner as set forth in Section 3. the Initial Agreement.
1.5 The funding of the Acquisition Financing is expressly subject to
the following criteria being met to the sole satisfaction of BIDCO: favorable
findings upon completion of due diligence by BIDCO; subordination of officer and
shareholder debt to the obligations owed to BIDCO; and the execution and
delivery of a valid and binding definitive acquisition agreement between HRH,
AROPI and the shareholders of AROPI upon terms acceptable to BIDCO.
1.6 Concurrently herewith, HRH shall execute and deliver a Stock Pledge
Agreement to BIDCO, upon terms and conditions acceptable to BIDCO, granting a
security interest to BIDCO in all outstanding capital stock of AROPI.
1.7 Concurrently herewith, HRH shall execute and deliver an Amendment
to Common Stock Purchase Warrant to BIDCO, upon terms and conditions acceptable
to BIDCO, granting a put option to BIDCO witb respect to the August 12, 1998
Warrant.
1.8 Concurrently herewith. HRH shall execute, issue and deliver a
Common Stock Purchase Agreement Warrant evidencing the right to purchase two
percent (2.0%) fully paid and nonassessable shares of Class A Common Stock of
HRH subject to a put option by HRH, all upon terms and conditions acceptable to
BIDCO.
1.8.0.0.0.0.0.1 Concurrently herewith, AROPI shall execute
and deliver a Security Agreement to BIDCO,
upon terms and conditions acceptable to
BIDCO, granting a security interest to BIDCO
in all outstanding assets of AROPI.
1.9 The last sentence of the paragraph entitled "PAYMENT UPON PUBLIC
OFFERING OR PRIVATE PLACEMENT" in Section 3 of the Initial Agreement is hereby
amended to read in its entirety as follows;
All obligations owed by Borrower to BIDCO, as evidenced by the
Initial Agreement and the $2,000,000 Note, shall be paid in
full with the proceeds of the public offering or private
placement offering, whichever occurs first.
1.10 The paragraph entitled "MATURITY" in Section 3 of the Initial
Agreement is hereby amended to read in its entirety as follows:
MATURITY: In all events, payment in full of the obligations
hereunder shall be due January 31, 1999 (the "Maturity
Date"), at which time the entire balance of principal of the
obligations owed by Borrower to BIDCO, as evidenced by the
Initial Agreement, the $2,000,000 Note, together with all
accrued but unpaid interest, shall be due and immediately
payable.
1.11 Section 4. of the Initial Agreement is hereby amended to read in
its entirety as follows:
4. PREPAYMENT: The $2,000,000 Note, may be prepaid without
penalty at any time. Notwithstanding any prepayment of the
$2,000,000 Note, the Warrant, executed and delivered by
Borrower on even date herewith, shall remain in full force and
effect in accordance with the terms thereof.
1.12 Section 5. of the Initial Agreement is hereby amended to indicate
that the security interests granted therein, and the Collateral identified
therein, shall secure the $2,000,000 Note, the Initial Agreement and this First
Amendment, together with any other present or future liability of Borrower to
BIDCO, whether several, joint, or joint and several. Moreover, HRH hereby grants
to BIDCO a security interest in the stock of AROPI, Inc., and AROPI, Inc. hereby
grants to BIDCO a security interest in all the accounts, chattel paper,
instruments and general intangibles, machinery and equipment, inventory and
supplies, all furniture and fixtures and
interest in joint ventures or other entities of AROPI, all of which shall be
included within, and be added to, the definition of "Collateral" as that term is
defined in the Initial Agreement. The security interest in the Collateral may be
subordinated in an amount not greater than $2,000,000 only to a senior
commercial lender which finances the acquisition of AROPI.
1.13 The Borrower hereby reaffirms and represents that each of the
Representations and Warranties set forth in Section 6 of the Initial Agreement
are true as of the date hereof, and are applicable to the $2,000,000 Note, as if
such amended and modified Note was originally executed and delivered at the time
of the Initial Agreement. In addition, the following new Section 6.14 is added
to Section 6:
6.14 AROPI is a corporation duly organized and validly existing
under the laws of the State of Iowa, in good standing, and
duly licensed or qualified as a foreign corporation in all
states wherein the nature of its property owned or business
transacted by it makes such licensing or qualification
necessary.
1.14 Section 7. of the Initial Agreement is hereby amended to indicate
that the Borrower shall observe and maintain the Affirmative Covenants set forth
therein so long as the $2,000,000 Note, remains outstanding.
1.15 The last sentence of Subsection 7.10 of the Initial Agreement is
hereby amended to read in its entirety as follows:
The proceeds sought from such public and/or private financing
will be sufficient to pay in full all obligations owed by
Borrower to BIDCO, and the actual proceeds (after payment of
the expenses of such offering) shall be first used to pay in
full the $2,000,000 Note, together with any accrued but unpaid
interest.
1.16 Section 8. of the Initial Agreement is hereby amended to indicate
that the Borrower shall observe and maintain the Negative Covenants set forth
therein so long as the $2,000,000 Note, remains outstanding.
1.17 Subsection 8.2 of the Initial Agreement is hereby amended to read
in its entirety as follows:
Permit its net worth at any time to be less than:
Time Period Not Worth
August 20, 1998 through September 30, 1998 ($150,000)
October 1, 1998 through November 30, 1998 $100,000
December 1, 1998 and thereafter $500,000
The above net worth measurement shall be computed on a basis
consistent with financial statements previously submitted to
BIDCO and in
conformance with GAAP. For the purpose of this calculation,
net worth shall be reduced by loans to stockholders and
related party receivables.
1.18 The definition of "Permitted Debt" in Subsection 8.4 of the
Initial Agreement is hereby amended to include senior commercial financing in an
amount not to exceed $2,000,000 to fund the acquisition by HRH of the capital
stock of AROPI and working capital of the Borrowers.
1.19 Subsection 8.5 of the Initial Agreement is hereby amended to
permit a security interest and lien to be granted to a senior commercial
financing in an amount not to exceed $2,000,000 to fund the acquisition by HRH
of AROPI and working capital of the Borrowers.
1.20 Subsection 8.6 of the Initial Agreement is hereby amended to
permit AROPI to be mergcd into its new parent, HRH.
1.21 Subsection 8.8 of the Initial Agreement is hereby amended to
permit HRH to acquire the outstanding capital stock of AROPI pursuant to the
terms of the Stock Agreement.
1.22 Subsection 8.8 of the Initial Agreement is hereby amended to read
as follows in its entirety:
8.11 Allow HRH to sell, transfer or otherwise dispose of any
shares of the common stock of TCI, TCWI, or AROPI, to any
other person or entity.
1.23 Section 9. of the Initial Ageement is hereby amended to indicate
that there shall be a default of the $2,000,000 Note, the Initial Agreement, and
the First Amendment, and the $2,000,000 Note, the Initial Agreement and the
First Amendment, and all other liabilities of Borrower to BIDCO shall
immediately mature and be due and payable, without notice or demand, unless
BIDCO otherwise elects, upon the occurrence of any of the events set forth in
Section 9 of the Initial Agreement.
2. Borrower's Representations. Warranties and Events of Default.
2.1 Except as amended hereby, the terms, provisions, conditions and
agreements of the Initial Agreement are hereby ratified and confirmed and shall
remain in full force and effect. Borrower expressly acknowledges that this First
Amendment shall not constitute a novation, a waiver, or an accord and
satisfaction. Each and every representation and warranty of the Borrower set
forth in the Initial Agreement is hereby confirmed and ratified in all material
respects and such representations and Warranties shall be deemed to have been
made and undertaken as of the date of this First Amendment as well as at the
time they were made and undertaken.
2.2 The Borrower further represents and warrants that:
2.2.0.1 No Event of Default now exists or will exist
immediately following the execution bereof or after giving effect to
the transctions contemplated hereby.
2.2.0.2 All necessary corporate or shareholder actions on the
part of the Borrower to authorize the execution, delivery and
performance of this First Amendment, the First Modification and
Amendment to Promissory Note, the Stock Pledge Agreement, the Amendment
to Common Stock Purchase Warrant, the New Warrant and Put, and the
Aropi Security Agreement (the "Amendment Documents") and all other
documents or instruments required pursuant hereto or thereto have been
taken; the Amendment Documents and each such other document or
instrument have been duly and validly executed and delivered and are
legally binding and binding upon the parties thereto and enforceable in
accordance with their respective terms, except to the extent that the
enforceability thereof may be limited by bankruptcy, insolvency or like
laws or by general equitable principals.
2.2.0.3 The execution, delivery and performance of Amendment
Documents and all other documents or instruments required pursuant
hereto or thereto, and all actions and transactions contemplated hereby
and thereby will not (A) violate, be in conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a
default under (1) any provision of the Articles of Incorporation, Code
of Regulations or Bylaws of the Borrower, (2) any arbitration award or
any order of any court or of any other governmental agency or
authority, (3) any license, permit or authorization granted to the
Borrower or under which the Borrower operates, or (4) any applicable
law, rule, order or regulation, indenture, agreement or other
instrument to which the Borrower is a party or by which the Borrower or
any of its properties is bound and which has not here waived or
consented to, or (B) result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever, except as expressly
permitted in the Initial Agreement, upon any of the properties of the
Borrower.
2.2.0.4 No consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority or any
other person or entity is required to be obtained by the Borrower in
connection with the execution, delivery or performance of the Amendment
Documents or any document or instrument required in connection herewith
or therewith which has not already been obtained or completed.
3. Affirmation and Agreement of the Borrower. The Borrower has executed this
First Amendment to consent to the amendments to the Initial Agreement made
pursuant hereto and to acknowledge that the security interests and liens
granted by the Borrower to BIDCO pursuant to the Security Agreement and other
Amendment Documents shall secure all Obligations, as increased pursuant to the
terms hereof.
4. Fees and expenses. As required under the Initial Agreement, the Borrower
shall reimburse the BIDCO upon demand for all out-of-pocket costs, charges and
expenses of the BIDCO (including reasonable fees and disbursements of legal
counsel to BIDCO in connection with the preparation, negotiation, execution and
delivery of this First Amendment and the other agreements or documents relating
hereto or required hereby. Furthermore, the Borrower shall pay an additional
facility fee of $7,000 upon the funding of the Acquisition Financing.
5. Reference to Initial Agreement. Except as amended hereby, the Initial
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects. On and after the effectiveness of this First
Amendment, each reference in the Initial Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import, and each reference to
the Initial Agreement in any Note or other Loan Document, or other agreement,
document or instrument executed and delivered pursuant to the Initial Agrement,
shall be deemed a reference to the Initial Agreement as amended hereby.
6. Counterparts. This First Amendment may be executed in as many counterparts as
may be convenient, and via facsimile transmission, each of which when so
executed shall be deemed to be an original for all purposes, and shall become
binding when the Borrower and BIDCO have executed at least one counterpart.
7. Further Acts. The parties agree to perform any further acts and to execute
and deliver any additional documents which may be reasonably necessary to carry
out the intent and provisions of this First Amendment.
8. Binding Effect; Governing Law. This First Amendment shall be binding upon
and shall inure to the benefit of the Borrower and BIDCO, and their respective
heirs, personal representatives, successors and assigns. This First Amendment
shall be governed by Ohio law.
IN WITNESS WHEREOF, the parties have signed this First Amendment to Loan
Agreement, intending to be legally bound thereby as of the Effective Date.
BORROWER
WITNESS: HOME RETAIL HOLDINGS, INC.,
a Delaware Corporation
/s/ XXXXXXX X. XXXXXX By: /s/ XXXX XXXXXX
-------------------------- ------------------------
Xxxx Xxxxxx, Secretary
THE COOKSTORE, INC.,
an Ohio Corporation,
/s/ XXXXXXX X. XXXXXX By: /s/ XXXX XXXXXX
-------------------------- ------------------------
Xxxx Xxxxxx, Secretary
THE COOKSTORE WORTHINGTON, INC.,
an Ohio Corporation
/s/ XXXXXXX X. XXXXXX By: /s/ XXXX XXXXXX
-------------------------- ------------------------
Xxxx Xxxxxx, Secretary
AROPI, INCORPORATED,
an Iowa Corporation
By: /S/ XXXX XXXX
--------------------------------------
Its: President
BIDCO
Signed in the presence of: LIBERTY BIDCO INVESTMENT CORPORATION
(as to all signatures)
By: /s/ XXXXX X. XXXXXXXXX
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Xxxxx X. Xxxxxxxxx, Vice President
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