AMENDMENT NUMBER FIVE TO LOAN AND SECURITY AGREEMENT
EXHIBIT
10.25
AMENDMENT NUMBER FIVE
TO
THIS AMENDMENT NUMBER FIVE TO LOAN
AND SECURITY AGREEMENT (this “Amendment”), dated as
of June 11, 2009, is entered into between FIRST CAPITAL WESTERN REGION,
LLC (“Lender”), and XXXX’X, INC., a Delaware
corporation (“Borrower”), in light
of the following facts:
RECITALS
WHEREAS,
Borrower and Lender have previously entered into certain Loan and Security
Agreement, dated as of May 30, 2008, as amended by that certain Amendment Number
One to Loan and Security Agreement dated July 30, 2008, as amended by that
certain Amendment Number Two to Loan and Security Agreement dated September 3,
2008, as amended by that certain Amendment Number Three to Loan and Security
Agreement dated September 24, 2008, and as amended by that certain Amendment
Number Four to Loan and Security Agreement dated March 27, 2009 (collectively,
the “Agreement”).
WHEREAS,
Borrower has requested that (i) Lender consent to the sale of the Real Property
and certain Equipment to 000 Xxxxx Xxxxxxx Xxxxxx LLC (“Buyer”) for a purchase
price of $3,250,000, (ii) reduce frequency of audits, (iii) consent to an equity
raise that does not require Lender’s prior approval, (iv) reduce the tangible
net worth covenant, and (v) replace the Fixed Charge Coverage Ratio covenant for
the calendar month ended May 31, 2009, with a minimum EBITDA covenant for such
month.
WHEREAS,
Lender has agreed to Borrower's request subject to the terms and conditions
contained in this Amendment.
WHEREAS,
Borrower and Lender wish to amend the Agreement as set forth in this
Amendment.
NOW,
THEREFORE, the parties agree as follows:
1. DEFINITIONS. All
terms which are defined in the Agreement shall have the same definition when
used herein unless a different definition is ascribed to such term under this
Amendment, in which case, the definition contained herein shall
govern.
2. AMENDMENTS. Effective
as of the date of this Amendment (unless a different effective date is
specifically indicated), the Agreement is amended in the following
respects:
(a) Addition
of New Definitions. New definitions are added to Section 1 of the
Agreement as follows:
“Eligible Private Label
Inventory” means Inventory that (w) satisfies all of the criteria for
Eligible Inventory other than the criteria set forth in clause (i) of the
definition of Eligible Inventory as a result of such Inventory being subject to
a private label agreement, (x) the terms and conditions of the private label
agreement applicable to such Inventory, as well as the purchaser party to such
private label agreement, are satisfactory to Lender, in it is sole discretion,
(y) a purchase order has been issued with respect to Inventory and pursuant to
the applicable private label agreement that contains terms and conditions that
are satisfactory to Lender in its sole discretion, and (z) the purchaser under
the applicable private label agreement has entered into an agreement with Lender
under which Lender shall be authorized following a Default to sell Inventory
produced by Borrower pursuant to the private label agreement on terms and
conditions satisfactory to Lender in its sole discretion.
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“Permitted Sale
Transaction” means a sale of the Real Property and certain of the
Equipment by Borrower so long as the sale is conducted pursuant to that certain
Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate,
dated April 23, 2009, between 000 Xxxxx Xxxxxxx Xxxxxx LLC and
Borrower.
(b) Change in
Maximum Credit Limit. The definition of “Maximum Credit Limit”
in Section 1 of
the Agreement is deleted in its entirety and is replaced with a new definition
as follows:
“Maximum Credit Limit”
means $2,000,000.
(c) Change in
Advance Rate for Eligible Inventory. Item 1(a)(ii)(B) of
the Schedule to
the Agreement is deleted in its entirety and is replaced with a new Item 1(a)(ii)(B) as
follows:
(B) An
amount equal to the least of:
1. $1,000,000,
and
2. For
the period from June 1 through November 30 of each calendar year, an amount
equal to 125% of amount calculated pursuant to Item 1(a)(ii)(A), and
for the period from December 1 through May 31 of each calendar year, an amount
equal to 150% of amount calculated pursuant to Item 1(a)(ii)(A),
and
3. An
amount equal to (w) 50% of the dollar value (determined at the lower of cost or
market value) of Eligible Inventory (other than Eligible Private Label
Inventory) located at Borrower’s premises located at 12930 and 00000 Xxxxx
Xxxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, plus (x) 50% of the
dollar value (determined at the lower of cost or market value) of Eligible
Inventory (other than Eligible Private Label Inventory) consisting of finished
goods (and not raw materials) located at Valley Distributing & Storage
Company’s warehouse in Xxxxxx-Xxxxx, Pennsylvania, plus (y) 50% of the
dollar value (determined at the lower of cost or market value) of Eligible
Inventory (other than Eligible Private Label Inventory) consisting of finished
goods (and not raw materials) located at United Warehouses in Seattle,
Washington, plus (z) an amount
equal to the lesser of (1) $150,000, and (2) 30% of the dollar value (determined
at the lower of cost or market value) of Eligible Private Label
Inventory,
(d) Increased
in Reserve. Item 1(b) of the
Schedule to the
Agreement is deleted in its entirety and is replaced with a new Item 1(b) as
follows:
(b) the
sum of:
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(i) $350,000,
provided that upon Lender’s receipt of evidence of Borrower making a $50,000
California Redemption Value payment, the amount under this clause (i) shall be
reduced to $300,000, plus
(ii) the
Dilution Reserve and such other reserves as Lender may establish from time to
time in its discretion, including, but not limited to, reserves for excessive
and slow-moving Inventory and reserves for inaccuracies in Borrower’s perpetual
Inventory records, plus
(iii) the
amount available to be drawn under, plus the amount of any unreimbursed draws
with respect to, any letters of credit or acceptances which have been issued,
created or guaranteed by Lender or any Affiliate of Lender for Borrower’s
account.
(e) Reduce
Monthly Minimum Interest Charge. Item 10(c) of the
Schedule to the
Agreement is deleted in its entirety and is replaced with a new Item 10(c) as
follows:
(c) Lender
shall be entitled to charge a monthly minimum interest charge for each calendar
month during the term of this Agreement that the average outstanding principal
balance of the advances made pursuant to Section 2(a) during such month was less
than $500,000 (the “Minimum Average Monthly Loan
Balance”). The monthly minimum interest charge shall be equal
to the amount, if any, by which the interest charged for such month on the
outstanding advances under Section 2(a) was less than the amount of interest
that would have been charged had the average outstanding principal balance for
such month equaled the Minimum Average Monthly Loan Balance. The
monthly minimum interest charge shall represent an unconditional payment to
Lender in consideration of Lender’s agreement to extend financial accommodations
to Borrower pursuant to this Agreement.
(f) Increase
in Unused Line Fee. Item 10(d) of the
Schedule to the
Agreement is deleted in its entirety and is replaced with a new Item 10(d) as
follows:
(d) On
the first day of each month during the term of this Agreement, an unused line
fee in an amount equal to 1.50%, per annum, times the result of (i) the Maximum
Credit Limit, less (ii) the average daily net principal amount of loans
outstanding hereunder during the immediately preceding month.
(g) Addition
of Monitoring Fee. A new Item 10(f) is added to the Schedule
to the Agreement as follows:
(f) For
monitoring services performed by Lender in connection with the Agreement,
Borrower shall pay to Lender a monthly monitoring fee of $1,000 per month,
payable monthly in advance on the first day of each calendar month beginning
with the first day of July, 2009, and continuing so long as any advances shall
remain outstanding or this Agreement shall not have been
terminated.
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(h) Change in
Fixed Charge Coverage Ratio Covenant. Item 21(a) of the
Schedule to the
Agreement is deleted in its entirety and is replaced with a new Item 21(a) as
follows:
(a) Borrower
shall maintain a Fixed Charge Coverage Ratio (1) for each of the three-month
periods ending on the last day of each calendar month from June 2009 through
November 2009, and (2) for each of the twelve-month periods ending on the last
day of each calendar month thereafter for the balance of the term of this
Agreement, of at least 1.0 to 1.0. As used herein, “Fixed Charge Coverage
Ratio” means the ratio of Borrower’s (i) net income (excluding
extraordinary gains) before provision for interest expense, taxes, depreciation
and amortization, less cash taxes paid and unfinanced capital expenditures
during such period, plus stock option expenses and stock payments in lieu of
cash during the applicable period, plus any loss attributed to the Permitted
Sale Transaction so long as the Permitted Sale Transaction occurred during the
period being tested for compliance with the Fixed Charge Coverage Ratio; to (ii)
interest expense, plus payments of principal actually made or scheduled to be
made with respect to indebtedness (other than scheduled but unpaid payments on
Subordinated Debt and principal payments on revolving loans under this
Agreement), plus payments with respect to capitalized leases, plus cash
dividends and distributions during such period.
(i) Change in
Minimum Tangible Net Worth Covenant. Effective as of the
closing of the Permitted Sale Transaction, Item 21(b) of the
Schedule to the
Agreement is deleted in its entirety and is replaced with a new Item 21(b) as
follows:
(b) Borrower
shall have a Tangible Net Worth of at least $1,900,000. Thereafter,
as of the last day of each month, Borrower’s required minimum Tangible Net Worth
shall be increased by 50% of the Borrower’s net income for the calendar month
then ended (without reduction for any losses during any such calendar
month). As used herein, “Tangible Net Worth”
means, as of any date, the total assets of Borrower minus the total liabilities
of Borrower calculated in conformity with GAAP, less all amounts due from
Borrower’s Affiliates and the amount of all intangible items reflected
therein.
(j) Change in
EDITDA Covenant. Effective as May 1, 2009, Item 21(c) of the
Schedule to the
Agreement is deleted in its entirety and is replaced with a new Item 21(c) as
follows:
(c) Borrower’s
net gain (excluding extraordinary gains) before provision for interest expense,
taxes, depreciation, amortization, and non-cash stock option expenses, less cash
taxes paid and unfinanced capital expenditures for the one month period ending
May 1, 2009, shall not be less than $1.
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3. PERMITTED
TRANSACTIONS.
(a) Notwithstanding
the provisions contained in Section 8(a) of the
Agreement to the contrary, Lender hereby consents to the Permitted Sale
Transaction so long as all of the net proceeds from the sale of the Real
Property and the Equipment are paid to Lender and applied to the outstanding
Obligations. “Net proceeds” shall mean the gross proceeds from the
sale of the Real Property and Equipment subject to the Permitted Sale
Transaction, less the amount
required to be paid to the holder of the senior Lien on the Real Property, less all costs, fees
and expenses incurred in connection with the Permitted Sale
Transaction.
(b) Notwithstanding
any provisions in the Agreement to the contrary, Borrower shall be entitled to
raise additional capital by the issuance of common stock of Borrower without the
prior written approval of Lender so long as (i) the aggregate amount of
additional capital raised by Borrower does not exceed $2,500,000, (ii)
Xxxxxxxxxxx X. Xxxx continues to own not less that 25% of the outstanding common
stock of Borrower, (iii) all of the proceeds from the additional capital raised
by Borrower (or such lesser amount as shall equal the then outstanding
Obligations) shall be paid to Lender and applied to the outstanding Obligations,
and (iv) no Default shall exist as of the date the Borrower completes the
additional capital raise.
4. FIELD
EXAMINATIONS. Notwithstanding the provisions of Section 10(c) and
Item 27 of the
Schedule to the
contrary, so long as maintains unused borrowing availability under the Section
2(a) of the Agreement and no Default has occurred and is continuing, Lender
agrees that it shall not conduct more than three (3) field examinations during
any calendar year.
5. FINANCIAL COVENANT
VIOLATIONS. In the event Borrower is not in compliance with
any of the financial covenants set forth in Item 21 of the
Schedule to the
Agreement, and so long as Borrower has timely delivered its financial statements
to Lender pursuant to Section 9(a) of the
Agreement, Borrower shall have ten (10) business days following the reporting of
such non-compliance to submit to Lender a plan (the “Plan”) to correct the
non-compliance. During such ten day period Lender shall forbear from
issuing a notice of default (so long as no other Defaults then exist under the
Agreement or the other Loan Documents). If Borrower fails to timely
deliver a Plan or if a Plan that is timely delivered is not acceptable to
Lender, then Lender shall no longer be obligated to forbear from issuing a
notice of default.
6. FEE FOR
AMENDMENT/CONSENT. Upon execution of this Amendment, in
consideration of Lender’s agreeing to enter into this Amendment and to consent
to the sale of the Real Property and certain Equipment pursuant to this
Amendment, Borrower agrees to pay Lender a fee in the amount of $10,000, which
will be fully earned and due and payable on the date of this Amendment and shall
be non-refundable. Lender is authorized to charge Borrower’s loan
account for the full amount of such fee.
7. CONSENT TO PURCHASE OF
STOCK. Borrower has requested that Lender consent to the sale
of common stock of Borrower to Xxxx Xxxxx, an individual (“Xxxxx”), pursuant to
that certain Stock Purchase Agreement, dated June __, 2009, between Xxxxx and
Borrower (the “Stock
Purchase Agreement”). Lender hereby consents to such
sale so long as the aggregate number of shares of common stock purchased by
Xxxxx does not exceed 50,000 shares.
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8. REPRESENTATIONS AND
WARRANTIES. Borrower hereby affirms to Lender that all of
Borrower's representations and warranties set forth in the Agreement are true,
complete and accurate in all respects as of the date hereof.
9. LIMITED
EFFECT. Except for the specific amendments contained in this
Amendment, the Agreement shall remain unchanged and in full force and
effect.
10. COUNTERPARTS;
EFFECTIVENESS. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts, each of which
when so executed and delivered shall be deemed to be an original. All
such counterparts, taken together, shall constitute but one and the same
Amendment. This Amendment shall become effective upon the execution
of this Amendment by each of the parties hereto.
[Signatures
are on the next page]
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IN
WITNESS WHEREOF, Lender and Borrower have executed this Amendment.
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XXXX’X,
INC.,
a
Delaware corporation
By
/s/
Xxxxxxxxxxx X.
Xxxx
Name: Xxxxxxxxxxx X.
Xxxx
Title:
Chief Excecutive
Officer
FCC, LLC, a Florida
limited liability company
doing
business as First Capital Western Region, LLC
By
/s/ Xxxx
X.
Xxxxx
Name: Xxxx X.
Xxxxx
Title:
Vice
President
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ACKNOWLEDGMENT AND
REAFFIRMATION OF GUARANTOR
The
undersigned hereby acknowledges that he executed a Continuing Guaranty, dated on
or around May 30, 2008 (the “Guaranty”), with respect to the present and future
obligations of Borrower owing to Lender. The undersigned hereby
acknowledges the foregoing Amendment, consent to its terms, and reaffirms his
Guaranty. The undersigned further acknowledges that nothing in the
Guaranty obligates Lender to notify the undersigned of any changes in the
financial accommodations made available to Borrower or to seek future
reaffirmations of the Guaranty, even if the Agreement is further amended; and no
requirement to so notify the undersigned or to seek reaffirmations in the future
shall be implied by the execution of this reaffirmation.
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/s/ Xxxxxxxxxxx X.
Xxxx
Xxxxxxxxxxx
Xxxx, an individual
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