1
Exhibit 10.2.1
FIRST AMENDMENT AND WAIVER TO CREDIT AGREEMENT
This is the first amendment and waiver (the "Amendment") dated as of
March 23, 1999, to the Credit Agreement dated as of March 26, 1998 (the "Credit
Agreement") between Lechters, Inc., a New Jersey corporation (the "Borrower"),
The Chase Manhattan Bank as Agent, and the Banks listed on the signature pages
thereof (individually, each a "Bank", and collectively, the "Banks").
RECITALS
A. On March 26, 1998, the Banks loaned $20,000,000.00 in the form of a revolving
credit facility and $20,000,000.00 in the form of a letter of credit facility to
the Borrower under the terms of the Credit Agreement.
B. To evidence its obligations under the Credit Agreement with respect to the
Loans the Borrower issued promissory notes dated March 26, 1998.
C. As a condition to the effectiveness of the Credit Agreement the Corporate
Guarantors executed and delivered to the Banks their Guaranties of the
obligations of the Borrower to the Banks.
D. The Borrower and the Corporate Guarantors have (i) asked the Banks to waive
certain defaults that have arisen under the Credit Agreement and (ii) requested
certain amendments to the Credit Agreement.
E. The Banks are willing to waive such defaults and make such amendments subject
to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the agreement of the parties
contained herein, and intending to be legally bound, the parties hereto agree as
follows:
1. Recitals and Definitions.
Borrower and the Banks acknowledge and agree that the foregoing
recitals are true and correct as of the date of this Amendment. Capitalized
terms used herein and not defined shall have the meanings assigned to them in
the Credit Agreement.
2. Amendments to Article 1 of the Credit Agreement.
The chart of applicable margins and fees in Section 1.16(a) is deleted
and replaced with the following:
Consolidated Leverage Applicable LIBO Applicable Prime Letter of
Ratio Rate Margin Rate Margin Commitment Fee Credit Fees
--------------------- --------------- ---------------- -------------- -----------
Greater than 3.50x 2.50% 1.25% .625% 2.50%
2
Consolidated Leverage Applicable LIBO Applicable Prime Letter of
Ratio Rate Margin Rate Margin Commitment Fee Credit Fees
--------------------- --------------- ---------------- -------------- -----------
Greater than 3.00x but 2.00% .75% .5% 2.00%
less than or equal to
3.50x
Greater than 2.10x but 1.50% .25% .375% 1.50%
less than or equal to
3.00x
Less than or equal to 1.25% 0.0% .3% 1.25%
2.10x
3. Amendments to Article 5 of the Credit Agreement.
a. Section 5.04 is replaced with the following:
(i) Declare or pay any dividends, either in cash or property,
on any shares of its capital stock of any class (except dividends or
other distributions payable solely in shares of common stock of the
Borrower); or (ii) directly or indirectly, purchase, redeem or retire
any shares of its capital stock of any class or any warrants, rights or
options to purchase or acquire any shares of its capital stock; or
(iii) make any other payment or distribution, either directly or
indirectly, in respect of capital stock of the Borrower; or (iv) make,
directly or indirectly, any Restricted Investment; it being
specifically understood that the Borrower and any Subsidiary will enter
into a joint venture only with the prior written consent of all the
Banks; except the Borrower may (x) declare and pay preferred dividends
not to exceed 6% per annum in respect of the Perpetual Convertible
Preferred Stock, and (y) during such time as no Default or Event of
Default has occurred and is continuing and provided that no Default or
Event of Default shall be caused thereby, purchase, redeem or retire up
to 3,000,000 shares in the aggregate of the Borrower's common stock
subsequent to the Closing Date, provided that the aggregate price for
all such shares purchased, redeemed or retired shall not exceed
$5,000,000.
b. Section 5.11 is replaced with the following:
(i) Prepay, redeem, purchase, defease, retire or otherwise
satisfy in any manner prior to the scheduled maturity thereof any of
its Indebtedness, other than the Indebtedness under this Agreement or
(ii) amend, modify or change in any manner any term or condition of its
Indebtedness other than to prepay any Indebtedness payable by any
Subsidiary to the Borrower; provided, however, that the Borrower and
any Subsidiary may after the Closing Date, after providing at least
five Business Days prior written notice to the Banks, make payments of
Subordinated Indebtedness in an aggregate amount not to exceed (w)
$10,000,000, minus (x) the sum of any repayments of Subordinated
Indebtedness made, and Cash Charges taken, in each case between
-2-
3
February 1, 1997 and the Closing Date, minus (y) any Cash Charges taken
after the Closing Date, and minus (z) any amounts paid toward the
purchase, redemption or retiring of any shares of common stock as
described in clause (y) of Section 5.04; provided, further, that at the
time of such payment, no Default or Event of Default has occurred and
is then continuing and provided that no Default or Event of Default
shall be caused thereby.
4. Amendments to Article 6 of the Credit Agreement.
a. Section 6.03 is deleted and replaced with the following:
Permit the ratio of (i) Consolidated Funded Debt to (ii)
Consolidated EBITDA as determined as of the last day of each fiscal
quarter for the period of the four consecutive preceding fiscal
quarters ending on such day to be greater than or equal to (x) 5.00 to
1 through the end of the second quarter of fiscal year 1999, (y) 4.75
to 1 through the end of the third quarter of fiscal year 1999, and (z)
3.00 to 1 thereafter.
b. Section 6.05 is deleted and replaced with the following:
Have an Annual Adjusted Consolidated Net Income which is less
than (i) negative $4,000,000 for the fiscal year ending January 30,
1999, and (ii) zero for any fiscal year thereafter.
c. A new Section 6.06 is added to the Credit Agreement as
follows:
6.06 Minimum Tangible Net Worth.
Have at any time a Tangible Net Worth of less than
$145,000,000.
5. Amendments to Article 12 of the Credit Agreement.
a. A new defined term "Tangible Net Worth" is added as
follows:
"Tangible Net Worth" means the amount by which the total
assets of any Person exceeds its liabilities, excluding, however, from
the determination of total assets, all assets which would be classified
as intangible assets under generally accepted accounting principles,
consistently applied, such as goodwill, licenses, patents, trademarks,
tradenames, copyrights, and franchises, and further excluding from the
determination of total assets any obligations due from Subsidiaries,
Affiliates, directors, officers, shareholders, partners and employees
of the Person.
b. The term "Consolidated EBITDA" is hereby replaced with the
following:
"Consolidated EBITDA" means, for any period, Consolidated Net
Income for such period before taking into account interest expense,
income taxes, depreciation, amortization and Noncash Charges.
c. The term "Consolidated EBITDAR" is hereby replaced with the
following:
-3-
4
"Consolidated EBITDAR" means, for any period, Consolidated Net
Income for such period before taking into account interest expense,
rent, income taxes, depreciation, amortization and Noncash Charges.
d. The term "Consolidated Fixed Charges" is hereby replaced
with the following:
"Consolidated Fixed Charges" means, for any period, the sum of
(a) the aggregate amount of principal payments of Indebtedness
scheduled to have been made by the Borrower and the Consolidated
Subsidiaries during such period, determined on a consolidated basis,
and (b) to the extent they are taken into account in determining
Consolidated Net Income, interest expense, rent and income taxes.
e. The term "LC Line Termination Date" is hereby replaced with
the following:
"LC Line Termination Date" means March 24, 2000 or any
extension of that date as agreed to by all the Banks at their sole
discretion.
6. Waiver.
Provided that the Borrower is in compliance with Sections 6.03, 6.05
and 6.06 as amended herein on the effective date of this Amendment, the Banks
hereby waive any Default or Event of Default arising out of a breach of Sections
6.03 or 6.05 prior to such sections being amended herein.
7. General.
This Amendment is made pursuant to Section 11.06 of the Credit
Agreement, and the parties hereto acknowledge that all provisions of the Credit
Agreement, except as amended hereby, shall remain in full force and effect.
8. Definitions.
Whenever appearing in the Loan Agreement or any other Loan Document,
the term "Credit Agreement" shall be deemed to mean the Credit Agreement as
amended hereby.
9. Representations and Warranties.
The Borrower hereby represents and warrants to the Banks that, on and
as of the date of this Amendment: (a) each of the representations and warranties
contained in the Credit Agreement are accurate, (b) such representations and
warranties would continue to be accurate if, in each representation or warranty
where the term "Loan Documents" appears, the term "Amendment" was to be
substituted therefor, (c) no Event of Default has occurred and is continuing or
will result from the execution by the Borrower of this Amendment, and (d) that
the Loan Documents as amended herein are enforceable in accordance with their
terms without any offsets, counterclaims or defenses.
-4-
5
10. Amendment Fee.
The Borrower shall pay to the Agent for the benefit of the Banks an
amendment fee of $200,000 (the "Amendment Fee") in connection with this
Amendment which fee shall be due and payable upon the signing of this Amendment.
11. Letter of Credit Renewal Fee.
The Borrower shall pay to the Agent for the benefit of the Banks a
letter of credit renewal fee of $50,000 (the "LC Renewal Fee") in connection
with this Amendment which fee shall be due and payable upon the signing of this
Amendment.
12. Arrangement Fee.
The Borrower shall pay an arrangement fee to the Agent for the Agent's
own account, as required by the letter agreement of even date between the
Borrower and the Agent, as may be amended from time to time.
13. Fees of Bank's Counsel.
The Borrower shall pay the fees and expenses of XxXxxxxx & English in
connection with the preparation and negotiation of this Amendment and all
related documents.
14. Conditions to Effectiveness.
It shall be a condition to the effectiveness of this Amendment that the
Bank have received the following:
a. This Amendment, duly executed on behalf of the Borrower and
the Banks;
b. Payment of the Amendment Fee;
c. Payment of the LC Renewal Fee;
d. Payment of the Arrangement Fee; and
e. A certificate from the Secretary of the Borrower (i)
stating that there have been no amendments to the Certificate of
Incorporation or By-laws of such Borrower since the date of the Credit
Agreement, (ii) to which is attached a resolution of the Board of
Directors authorizing the execution, delivery and performance of this
Amendment, and (iii) setting forth the name and sample signature of the
officers of the Borrower authorized to execute and deliver this
Amendment.
15. Integration.
This Amendment together with the Credit Agreement constitute the entire
agreement and understanding among the parties relating to the subject matter
hereof and thereof and supersedes all prior proposals, negotiations, agreements
and understandings relating to such subject matter.
-5-
6
16. Severability.
If any provision of this Amendment shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
enforceability without in any manner affecting the validity or enforceability of
such provision in any other jurisdiction or the remaining provisions of this
Amendment in any other jurisdiction.
17. No Defenses, Off-Sets or Counterclaims.
By executing this Amendment, Borrower confirms and acknowledges that as
of the date of execution hereof, Borrower has no defenses, off-sets or
counterclaims against any of Borrower's obligations to the Banks under the Loan
Documents, including the Credit Agreement (as amended hereby). Borrower hereby
acknowledges and agrees that the actual amounts outstanding on the date of
execution hereof are owing the Banks without defense, offset or counterclaim.
18. Incorporation by Reference.
This Amendment is incorporated by reference into the Credit Agreement
and the other Loan Documents. Except as otherwise provided herein, all of the
other provisions of the Credit Agreement and the other Loan Documents are hereby
confirmed and ratified and shall remain in full force and effect as of the date
of this Amendment.
19. Governing Law.
This Amendment is governed by the laws of the State of New Jersey and
is binding upon the Borrowers and the Bank and their respective successors
and/or assigns and/or hers and executors, as the case may be.
20. Counterparts.
This Amendment may be executed by one or more of the parties in any
number of separate counterparts, and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, on the date
first above written.
LECHTERS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
____________________________________
Name: Xxxxx X. Xxxxxxxx
Title: Sr. Vice President -
Chief Financial Officer
-6-
7
THE CHASE MANHATTAN BANK,
as Agent, Issuing Bank and as a Bank
By: /s/ Xxxxxx Xxxxxxx
____________________________________
Xxxxxx Xxxxxxx
Vice President
FLEET BANK, NATIONAL ASSOCIATION
as Bank
By: /s/ Xxxxx X. Xxxxxxxxx
____________________________________
Xxxxx X. Xxxxxxxxx
Vice President
FIRST UNION NATIONAL BANK
as Bank
By: /s/ Xxxx X. Xxxxxx
____________________________________
Xxxx X. Xxxxxx
Vice President
-7-
