EXHIBIT 10.55
December 6, 1996
Empire Industries, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx
Re: First Amendment to Amended and Restated Loan and
Security Agreement
Gentlemen:
Reference is made to that certain Loan and Security Agreement (as
amended, the "Loan Agreement") dated as of May 29, 1996 among Empire Industries,
Inc., LaSalle National Bank as collateral agent ("Collateral Agent") for itself
("LaSalle"), BT Commercial Corporation, as a lender ("BTCC") and each other
lender now or hereafter a party to the Loan Agreement (LaSalle, BTCC and each
such other lender are sometimes collectively referred to as "Lenders"), BTCC as
administrative agent for all Lenders ("Administrative Agent") and all other
Lenders. Borrower has requested that Collateral Agent, Administrative Agent and
Lenders agree to amend the Loan Agreement in certain respects. Agents and
Lenders are willing to do so on the terms and subject to the conditions set
forth herein. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants and agreements set forth herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. The Loan Agreement is hereby amended as follows:
(a) Subparagraph 1(h)(iv) is hereby amended and
restated as follows:
"(iv) it is evidenced by an invoice rendered to the Account
Debtor thereunder, and either (a) is due and payable within sixty (60)
days after the date of the invoice and does not remain unpaid ninety
(90) days past the date thereof, (b) with respect to "datings"
(including Accounts payable ninety (90) days past the invoice date
thereof), is due and payable within one hundred eighty (180) days after
the date of invoice and does not remain unpaid thirty (30) days past
the due date thereof; provided that such invoices may remain unpaid up
to sixty (60) days past the due date thereof for the period beginning
January 1, 1997 and ending March 31, 1997 or (c) with respect to
datings having longer than
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one hundred eighty (180) day terms, is due and payable within two
hundred ten (210) days of the invoice date thereof and does not remain
unpaid two hundred ten (210) days past the invoice date thereof;
provided, however, that if more than twenty-five percent (25%) of the
aggregate dollar amount of invoices owing by a particular Account
Debtor remain unpaid (a) ninety (90) days after the invoice date
thereof, with respect to Accounts other than datings, (b) thirty (30)
days past the due date thereof with respect to datings of one hundred
eighty (180) days or less, or sixty (60) days for the period beginning
January 1, 1997 and ending March 31, 1997 or (c) two hundred ten (210)
days after the invoice date thereof with respect to datings having more
than one hundred eighty (180) day terms, up to two hundred ten (210)
day terms, then all Accounts owing by that Account Debtor shall be
deemed ineligible;"
(b) Paragraph 2(b) of the Loan Agreement is hereby
amended and restated in its entirety, as follows:
"(b) Notify each Lender by telecopy or other similar form of
teletransmission of the proposed advance on the same day Collateral
Agent is notified or deemed notified by Borrower of Borrower's request
for an advance pursuant to Paragraph 2 of this Agreement. Each Lender
shall remit, to the demand deposit account designated by Borrower at or
prior to three o'clock p.m., Chicago time, on the date of notification,
if such notification is made before twelve o'clock noon, Chicago time,
or by ten o'clock a.m., Chicago time, on the business day immediately
succeeding the date of such notification, if such notification is made
after twelve o'clock noon, Chicago time, immediately available funds in
an amount equal to such Lender's Pro Rata Share of such proposed
advance."
(c) Paragraph 8(a) is hereby amended to delete the provisos at
the end of the fifth sentence thereof such that the sentence now reads as
follows:
"Borrower agrees that all payments made to such Lockbox Account or
otherwise received by Collateral Agent, whether in respect of the
Accounts or as proceeds of other Collateral or otherwise will be
applied on account of the Liabilities in accordance with the terms of
this Agreement."
(d) Paragraphs 12(o) and 12(p) of the Loan Agreement are
hereby amended and restated in their entirety, as follows:
"(o) Borrower's Tangible Net Worth shall not at any time be
less than the "Minimum Tangible Net Worth";
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Minimum Tangible Net Worth being defined for purposes of this
subparagraph as (i) $9,000,000 for the period beginning December 31,
1996 and ending May 30, 1997, (ii) $10,500,000 for the period beginning
May 31, 1997 and ending September 29, 1997, (iii) $13,000,000 for the
period beginning September 30, 1997 and ending December 30, 1997 (iv)
$15,000,000 for the period beginning December 31, 1997 and ending
December 30, 1998 and (v) thereafter for each period from December 31
of each year through December 30 of the following year, Minimum
Tangible Net Worth shall equal the Minimum Tangible Net Worth during
the immediately preceding period, plus $2,000,000; provided, that in
all cases Minimum Tangible Net Worth shall automatically be adjusted as
follows: (A) it shall be increased dollar-for-dollar by the first
$3,000,000 of equity raised by Borrower's Parent and by 50% of any
equity raised in excess of $3,000,000, and (B) it shall be increased or
decreased, as applicable, by the amount any sale of assets or product
lines is greater than or less than the value attributed to such assets
or product line in determining Tangible Net Worth as of September 30,
1996; "Tangible Net Worth" being defined for purposes of this
subparagraph as Borrower's shareholders' equity (including retained
earnings) less the book value of all intangible assets as determined
solely by Collateral Agent on a consistent basis plus the amount of
LIFO reserve plus the amount of any debt subordinated to Agents and
Lenders on the date hereof, all as determined under generally accepted
accounting principles applied on a basis consistent with the financial
statement most recently presented to Collateral Agent prior to the date
hereof except as set forth herein;
(p) The ratio during each period of (i) the sum of Borrower's
Net Income before payment or provision for taxes measured by income,
plus, without duplication, Interest Expense, amortization and
depreciation expense and other non-cash items reducing Net Income
during such period, to (ii) Interest Expense during such period, shall
not be less than (A) 1.50 to 1.00 as of the last day of each month
commencing with the month ending March 31, 1997 through the month
ending July 31, 1997, for the period from January 1, 1997 to such date,
(B) 2.0 to 1.00 as of the last day of each month commencing with the
month ending August 31, 1997 through the month ending December 31,
1997, for the period from January 1, 1997 to such date and (C) 2.50 to
1.00 as of the last day of each fiscal quarter of Borrower thereafter,
commencing March 31, 1998, for the four (4) fiscal quarter period
ending on such date;"
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(e) Paragraph 13 of the Loan Agreement is hereby amended to
add a new subparagraph (n) as follows;
"(n) Borrower shall fail to receive an equity contribution of
at least Six Million Dollars ($6,000,000) between November 15, 1996 and
April 30, 1997, on terms and subject to conditions satisfactory to
Agents and Lenders."
(f) Paragraph (1) of Exhibit A to the Loan Agreement is hereby
amended and restated in its entirety, as follows:
"(1) LOAN LIMIT: Each Lender, severally and not jointly, agrees to
make its Pro Rata Share of such Loans as Borrower shall request
from time to time from the date hereof, subject to the terms and
conditions set forth in this Agreement, up to the sum of the
following sublimits (the "Loan Limit"):
(a) Up to eighty-five percent (85%) of the face amount (less
maximum discounts, credits and allowances which may be
taken by or granted to Account Debtors in connection
therewith) of Borrower's Eligible Accounts; plus
(b) Up to sixty-five percent (65%) of the lower of the cost or
market value of Borrower's Eligible Inventory consisting
solely of finished goods (other than finished goods which
are in transit); plus
(c) Up to fifty percent (50%) of the lower of the cost or
market value of Borrower's Eligible Inventory consisting
solely of finished goods or finished components of goods
which are in transit or Five Hundred Thousand Dollars
($500,000), whichever is less; plus
(d) Up to (i) for the period from November 15, 1996 through
April 30, 1997, sixty percent (60%) and (ii) at all other
times fifty percent (50%), of the lower of the costs or
market value of Borrower's Eligible Inventory consisting
solely of raw materials less than one (1) year old; plus
(e) Up to forty percent (40%) of the lower of the cost or
market value of Borrower's Eligible Inventory consisting
solely of work-in-process or Two Million Dollars
($2,000,000), whichever is less; plus
(f) Subject to Paragraph (2) of this Exhibit A, up to fifty
percent (50%) against the face amount of commercial Letters
of Credit issued by Issuing Bank for the purpose of
purchasing Inventory, provided
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that such commercial Letters of Credit are in form and
substance satisfactory to Collateral Agent; plus
(g) Subject to Paragraphs (3)(a) and (3)(c) hereof, up to Nine
Million One Hundred Thousand Dollars ($9,100,000) with
respect to Borrower's Equipment; plus
(h) Subject to Paragraphs (3)(b) and (3)(d) hereof, up to Three
Million Dollars ($3,000,000) with respect to Borrower's
real property located at 000 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxx
Xxxxxxxx; plus
(i) Subject to Paragraph (3)(f) hereof, up to Four Million
Dollars ($4,000,000) as a special accommodation; minus
(j) Such reserves as Collateral Agent elects, in its reasonable
discretion, to establish from time to time, including,
without limitation, a reserve to pay royalties or other
licensee fees with respect to patents, trademarks and
copyrights licensed by Borrower in connection with the
production or sale of Inventory, in the event that
Collateral Agent becomes aware that such license fees or
royalties are not being paid in a timely fashion or
following the occurrence and during the continuance of an
Event of Default;
provided that the advances at subparagraphs (b), (c), (d), (e) and
(f) above shall in no event exceed the aggregate amount of
Twenty-Five Million Dollars ($25,000,000); and further provided,
that the aggregate amount of Loans outstanding at any time shall
in no event exceed Eighty-Five Million Dollars ($85,000,000) (the
"Loan Limit")."
(g) Paragraph (3) of Exhibit A to the Loan Agreement is hereby
amended to add a new subparagraph (f) as follows:
"(f) The availability described in Paragraph (1)(i) above shall be
automatically curtailed by (i) the amount of any proceeds of any tax refund
received by Borrower or its Parent, (ii) the amount of any proceeds
received by Borrower from the refinancing of Borrower's real property
located at 000 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxx Xxxxxxxx in excess of the
amount of Borrower's then remaining availability pursuant to Paragraph
(1)(h) above, (iii) the amount of the net cash proceeds of any equity
contribution received by Borrower or its Parent, on a dollar-for-dollar
basis (or such lesser amount as determined by Agents and Lenders in their
sole discretion) and (iv) 25% of the then remaining availability on each
Monday in April 1997, commencing April 7, 1997; provided, that unless such
availability is reduced to $0 prior to such
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date as a result of the foregoing, such availability shall be reduced to $0
on April 28, 1997 and at all times thereafter. The availability reductions
described in this Paragraph (3)(f) shall not reduce the Maximum Loan Amount
of any Lender or reduce the aggregate Loan Limit of Eighty-Five Million
Dollars ($85,000,000) set forth in Paragraph (1) of this Exhibit A"
(h) Paragraph (4) of Exhibit A to the Loan Agreement is hereby
amended and restated in its entirety as follows:
"(4) INTEREST RATE: Subject to the terms and conditions set forth
below, the Loans shall bear interest at the per annum rate of one
and three-quarters percent (1.75%) plus LaSalle's publicly
announced prime rate (which is not intended to be LaSalle's lowest
or most favorable rate in effect at any time) (the "Prime Rate")
in effect from time to time, payable on the last Business Day of
each month in arrears. Said rate of interest shall increase or
decrease by an amount equal to each increase or decrease in the
Prime Rate effective on the effective date of each such change in
the Prime Rate."
(i) Paragraph (5) of Exhibit A to the Loan Agreement is hereby
deleted in its entirety and replaced with the phrase "Intentionally Omitted".
(j) Schedules 11(l) and 12(l) are hereby amended and restated on
their entirety as set forth on Exhibit A hereto.
2. As a condition to Agents and Lenders to the amendments set
forth above, Borrower agrees to pay to Collateral Agent, for the ratable benefit
of Lenders, a fee in the amount of $212,500, which fee shall be fully earned
upon this Amendment becoming effective. Concurrently with execution by Borrower
of this Amendment Borrower shall pay to Collateral Agent $100,000 of such fee.
The remaining $112,500 shall be payable on April 30, 1997; provided, that in the
event that Borrower has received an equity contribution of at least $6,000,000
on terms and conditions acceptable to Agents and Lenders after the date hereof
but prior to April 30, 1997, Agents and Lenders agree to waive payment of the
remaining $112,500, Collateral Agent agrees to pay to each Lender its Pro Rata
Share of such fee within three (3) Business Days of receipt thereof by
Collateral Agent.
3. This Amendment shall not become effective until (i) this
Amendment is fully executed by all parties hereto, (ii) Borrower's Parent
executes an amendment to its Subordination Agreement in favor of Collateral
Agent, Administrative and Lenders in the form of Exhibit B hereto, and (iii)
Borrower pays to Collateral Agent $100,000 as described above.
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Except as expressly amended hereby, the Loan Agreement and Exhibit
A thereto remain unchanged and of full force and effect in accordance with the
terms thereof.
LASALLE NATIONAL BANK, as Collateral
Agent and Lender
By /s/ Xxxxxx Xxxxxxxxxx
Its: Senior Vice President
Consented and agreed to this 6th day of December, 1996.
BT COMMERCIAL CORPORATION, as Administrative Agent
and a Lender
By /s/ Xxxxx X. Xxxxxxx
Its: Senior Vice President
CONGRESS FINANCIAL CORPORATION (CENTRAL), as a
Lender
By /s/ Xxxxxx Xxxxxxxx
Its: Senior Vice President
Accepted and agreed to this 6th day of December, 1996.
EMPIRE INDUSTRIES, INC.
By /s/ Xxxxxx Xxxxxxx
Its: President
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EXHIBIT A
SCHEDULE 11(l)
(a) Notwithstanding the provisions of Paragraph 11(l) of the Loan
and Security Agreement, so long as no Event of Default is then in existence or
would be caused thereby, Borrower may pay management fees to Borrower's Parent
in an amount equal to the interest payable by Borrower's Parent with respect to
the 12% Senior Subordinated Notes outstanding with respect to Borrower's Parent
on the date hereof and any indebtedness incurred to refinance such Senior
Subordinated Notes (excluding any interest on a loan from Borrower to refinance
such Senior Subordinated Notes), provided, that no such payments shall be
permitted until June 30, 1997.
(b) Ongoing business transactions between Borrower and Marchon
Toys, Ltd.
SCHEDULE 12(l)
Notwithstanding the provisions of Paragraph 12 (l) of the Loan and
Security Agreement, so long as no Event of Default is then in existence or would
be caused thereby, Borrower may make the following dividend payments:
(i) On a quarterly basis, after providing Collateral Agent
financial statements evidencing Borrower's compliance with the requirements
hereof, Borrower may pay dividends to its Parent in amounts necessary to pay
contingent obligations of Borrower's Parent which are listed on Exhibit A to
this Schedule 12(l) and are then due and owing; provided, that the amounts paid
shall not exceed $3,600,000 in the aggregate from and after the date hereof.
(ii) On a quarterly basis, after providing Collateral Agent with
financial statements and tax returns evidencing Borrower's compliance with the
requirements hereof, Borrower may make payments to its Parent in an amount equal
to Borrower's share of the Parent's consolidated tax obligations when due,
provided, that (a) such payments shall not exceed the payments which would be
made if the Borrower had entered into a tax sharing agreement which meets the
requirements of Treas. Reg. xx.xx. 1.1552-1(a)(2) and 1.1502-33(d)(3) (based on
the assumption that the percentage described in Treas. Reg. ss.
1.1502-33(d)(3)(i) is 100%) (a "Complying Tax Sharing Agreement"), (b) any
payments from other members of the consolidated group to which the Borrower
would be entitled under a Complying Tax Sharing Agreement will be paid
immediately after the amount can be calculated, (c) if the amount due from
Borrower in respect of a fiscal year calculated pursuant to Treas. Reg. ss.
1.1552-1(a)(2) without regard to Treas. Reg. ss. 1.1502-33(d) exceeds the amount
due from Borrower under a Complying Tax Sharing Agreement, the payment
attributable to such excess shall be
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deferred to the third anniversary of the due date of the tax return to which
such payment relates, and (d) if any amounts are distributed by Borrower
pursuant to (ii) above to pay part or all of the contingent obligations listed
on Exhibit A, the payment otherwise due under (c) above will be reduced by the
portion thereof attributable to the deductions which result from such part of
such contingent obligations.
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EXHIBIT B
FIRST AMENDMENT TO SUBORDINATION AGREEMENT
This First Amendment to Subordination Agreement is made this 6th
day of December, 1996 between Empire of Carolina, Inc. ("Junior Creditor") and
LaSalle National Bank as collateral agent ("Collateral Agent") for the benefit
of itself, BT Commercial Corporation as administrative agent ("Administrative
Agent") and all lenders ("Lenders") now or hereafter a party to that certain
Loan and Security Agreement among Empire Industries, Inc. ("Borrower"),
Collateral Agent, Administrative Agent and Lenders dated as of May 29, 1996 (as
amended from time to time, the "Loan Agreement").
Reference is made to that certain Subordination Agreement dated as
of May 29, 1996 executed by Junior Creditor in favor of Collateral Agent,
Administrative Agent and Lenders (the "Subordination Agreement"). Borrower has
requested that Collateral Agent, Administrative Agent and Lenders agree to amend
the Loan Agreement in certain respects, and Collateral Agent, Administrative
Agent and Lenders have agreed to do so; provided that Junior Creditor amend its
Subordination Agreement to limit the permitted payments that may be made
thereunder.
Therefore, Junior Creditor and Collateral Agent hereby agree as
follows:
1. Rider A - Special Provisions to the Subordination Agreement is
hereby amended and restated in its entirety as set forth on Exhibit A hereto.
2. Except as expressly amended hereby, the Subordination Agreement
remains unchanged and of full force and effect in accordance with the terms
hereof.
IN WITNESS WHEREOF the parties have executed this Amendment as of
the date set forth above.
EMPIRE OF CAROLINA, INC.
By /s/ Xxxxxx Xxxxxxx
Its: President
LASALLE NATIONAL BANK, as Collateral Agent
By /s/ Xxxxxx Xxxxxxxxxx
Its: Senior Vice President
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Consented and Agreed to this 6th day of
December, 1996.
EMPIRE INDUSTRIES, INC.
By: /s/ Xxxxxx Xxxxxxx
Its: President
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Exhibit A to First Amendment to Subordination Agreement
RIDER A - SPECIAL PROVISIONS
This Rider A - Special Provisions is attached to and made a part of that
certain Subordination Agreement (the "Agreement") of even date herewith executed
by Empire of Carolina, Inc. (the "Undersigned") and consented to by Empire
Industries, Inc. ("Borrower").
1. Permitted Payments. Notwithstanding anything contained in the Agreement
to the contrary, provided no Event of Default (as defined in that certain Loan
and Security Agreement dated of even date herewith among Collateral Agent,
Administrative Agent, Lenders and Borrower) exists at the time of, or would be
created by, the making of any such payment, Borrower shall be permitted to make
and the Undersigned shall be permitted to receive payment of the management fees
described on Schedule 11(l) of the Loan Agreement.
Payments permitted by this Rider A and made at the times specified herein
are hereinafter referred to as "Permitted Payments." The Undersigned
acknowledges and agrees that no other payments to the Undersigned, including,
without limitation, any other payments, whether constituting prepayments or
otherwise, of the Junior Debt Instruments, shall be Permitted Payments.
EMPIRE OF CAROLINA, INC.
By /s/ Xxxxxx Xxxxxxx
Its: President
Accepted and Agreed to this 6th day of
December, 1996.
LASALLE NATIONAL BANK, as Collateral Agent
By: /s/ Xxxxxx Xxxxxxxxxx
Its: Senior Vice President
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