EXHIBIT 10.36
FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is entered into as of this 8th day of July, 2003, among the
financial institutions listed on the signature pages hereof (such financial
institutions, together with their respective successors and assigns, are
referred to hereinafter each individually as a "Lender" and collectively as the
"Lenders"), Bank of America, N.A. (in its individual capacity, the "Bank") with
an office at 00 Xxxxx Xxxx Xxxxxx Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 00000, as
Administrative Agent for the Lenders (in its capacity as Administrative Agent,
the "Administrative Agent"), General Electric Capital Corporation (in its
individual capacity, "GE Capital") with an office at 000 Xxxxx Xxxxxxx Xxxxx
Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, as documentation agent for the
Lenders (in its capacity as documentation agent, the "Documentation Agent"),
Good Guys California, Inc. (formerly known as The Good Guys - California, Inc.),
a California corporation, with offices at 0000 Xxxxxx Xxx Xxxxxxx, Xxxxxxx,
Xxxxxxxxxx 00000 (the "Borrower"), and (for purposes of paragraphs 6, 7 and 9)
Good Guys, Inc., a Delaware corporation ("Parent"), with respect to that certain
Loan and Security Agreement, dated as of September 30, 1999 among the parties
hereto, as amended by that certain First Amendment to Loan and Security
Agreement dated as of August 16, 2001, by those certain letter amendments dated
as of March 27, 2002, and May 15, 2002, and as further amended by that certain
Second Amendment to Loan and Security Agreement dated as of May 22, 2001, and
that certain Third Amendment to Loan and Security Agreement dated as of July 2,
2002 (collectively, the "Loan Agreement"), and with reference to the following
facts:
RECITALS
A. Pursuant to the Loan Agreement, Lenders agreed to make certain
financial accommodations to or for the benefit of Borrower upon the terms and
conditions contained therein. Unless otherwise defined in this Amendment, (i)
capitalized terms used herein shall have the meanings attributed to them in the
Loan Agreement, and (ii) references to sections shall refer to sections of the
Loan Agreement.
B. Borrower has requested certain changes to the Loan Agreement,
as provided herein.
C. Lenders have agreed to make such changes to the Loan Agreement
on the terms and conditions set forth in this Amendment.
NOW, THEREFORE, in consideration of the continued performance
by Borrower of its promises and obligations under the Loan Agreement and the
other Loan Documents, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Borrower and Lenders hereby
agree as follows:
AGREEMENT
1. Acknowledgment of Loan Agreement and Other Loan Documents.
Except as expressly modified by this Amendment, the obligations of Borrower
under the Loan Agreement and the other Loan Documents are hereby acknowledged,
confirmed and ratified by Borrower.
2. Definitions. Unless otherwise defined in this Amendment,
capitalized terms used herein have the meanings given to them in the Loan
Agreement. Unless otherwise indicated, all references to sections, schedules, or
exhibits shall mean sections, schedules, or exhibits of or to the Loan
Agreement.
3. Amendment to Loan Agreement. The Loan Agreement shall be
amended as follows:
3.1 New Definitions. New definitions are hereby added in
appropriate alphabetical order to read as follows:
"Fourth Amendment" shall mean the Fourth Amendment to Loan and
Security Agreement dated as of July 8, 2003.
"Fourth Amendment Closing Date" shall mean the date of the
effectiveness of the Fourth Amendment, as provided in paragraph 8 of the Fourth
Amendment.
"Sales Tax Reserve" shall mean a reserve against the Borrowing
Base, to be reflected on each Borrowing Base Certificate submitted by Borrower,
equal to the amount, if any, by which Borrower's obligations for the remittance
of sales and use taxes payable to Governmental Authorities exceed $5,500,000.
3.2 Revised "Borrowing Base" Definition. The definition
of "Borrowing Base" is amended and restated (and such amendment and restatement
shall supersede any prior inconsistent course of dealings among the parties with
respect to the applicable calculations of the Borrowing Base) as follows:
"Borrowing Base" means, at any time, an amount equal to:
(a) the lowest of:
(i) the Maximum Revolver Amount, or
(ii) the sum of:
(A) one hundred percent (100%) of the
aggregate manufacturer's invoice price of
all Eligible Vendor Financed Inventory up to
an amount of $30,000,000, plus
(B) eighty-five percent (85%) of the
aggregate manufacturer's invoice price of
all Eligible Vendor Financed Inventory for
that portion of Eligible Vendor Financed
Inventory, if any, in excess of $30,000,000,
plus
(C) eighty-five percent (85%) of the
Recovery Value of Eligible Inventory not
constituting Eligible Vendor Financed
Inventory or Committed HDL Inventory, plus
2
(D) the lesser of (1) eighty-five percent
(85%) of Eligible Credit Card Accounts, and
(2) $10,000,000, plus
(E) the Seasonal Borrowing Base Adjustment,
if applicable, or
(iii) the sum of:
(A) eighty-five percent (85%) (or, during
any period when a Seasonal Borrowing Base
Adjustment is in effect, ninety percent
(90%)) of the aggregate manufacturer's
invoice price of all Eligible Vendor
Financed Inventory up to an amount of
$30,000,000, plus
(B) seventy percent (70%) (or, during any
period when a Seasonal Borrowing Base
Adjustment is in effect, seventy-five
percent (75%)) of the aggregate
manufacturer's invoice price of all Eligible
Vendor Financed Inventory for that portion
of Eligible Vendor Financed Inventory, if
any, in excess of $30,000,000, plus
(C) seventy percent (70%) (or, during any
period when a Seasonal Borrowing Base
Adjustment is in effect, seventy-five
percent (75%)) of the gross inventory (at
the lower of cost (determined on a FIFO
basis) or market as determined from time to
time by Administrative Agent, after
consultation among Co-Agents, in the
exercise of their reasonable credit
judgment) of all Eligible Inventory not
constituting Eligible Vendor Financed
Inventory or Committed HDL Inventory, plus
(D) the lesser of (1) eighty-five percent
(85%) of Eligible Credit Card Accounts, and
(2) $10,000,000, minus
(E) the General Ledger Variance Reserve, and
minus
(F) the Shrinkage and Obsolescence Reserve;
minus
(b) the sum of:
(i) the Vendor Inventory Financing Reserves, plus
(ii) the Landlord Waiver Reserves, plus
(iii) the Bank Product Reserves, plus
(iv) the Sales Tax Reserve, plus
3
(v) all other reserves that the Administrative Agent,
after consultation among Co-Agents, in the exercise
of their reasonable credit judgment, deems necessary
to maintain with respect to the Borrower's account,
including reserves for any amounts which the
Administrative Agent or any Lender may be obligated
to pay in the future for the account of the Borrower.
3.3 Revised "Eligible Credit Card Accounts" Definition.
Clause (iii) of the definition of "Eligible Credit Card Accounts" is amended and
restated as follows:
"(iii) no more than five (5) Business Days
from invoice date in the case of Accounts which arise from
Sony private label credit cards, and no more than two (2)
Business Days from invoice date in all other cases;"
3.4 Seasonal Borrowing Base Adjustment. Section 2.6 is
amended by substituting "September 23" in lieu of each reference to "October 1"
therein, and by substituting "December 12" in lieu of the reference to "December
20" therein.
3.5 Minimum Availability. Section 9.22 shall be amended
and restated as follows:
9.22 Minimum Availability. Borrower
shall maintain Availability of not less than the following at
all times during each of the following periods:
Period Minimum Availability
------ --------------------
From the date of the Fourth $ 6,500,000
Amendment through August 14, 2003
August 15, 2003 through September 14, $ 6,750,000
2003
September 15, 2003 through October $ 7,000,000
14, 2003
October 15, 2003 through November $ 7,250,000
14, 2003
November 15, 2003 and at all times $ 7,500,000
thereafter
3.6 Minimum EBITDA Covenant. Section 9.30 is hereby
deleted.
3.7 Amendment to Notice Addresses. The notice addresses
in Section 15.8 shall be amended and restated as follows:
4
If to the Administrative Agent or to the Bank:
Bank of America, N.A.
00 X. Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attn: Xxxx XxXxxxxx
Telecopy Number: 000-000-0000
If to the Documentation Agent:
General Electric Capital Corporation
Corporate Financial Services
000 Xxxxxxxxxxx Xxxxxx, 0 Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Account Manager (Good Guys)
Telecopy No.: (000) 000-0000
with copies to:
Winston & Xxxxxx
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Hill Xxxxxxxx, III, Esq.
Telecopy No.: (000) 000-0000
and
General Electric Capital Corporation
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Corporate Counsel
Telecopy No.: (000) 000-0000
If to the Borrower:
Good Guys California, Inc.
0000 Xxxxxx Xxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Telecopy No.:(000) 000-0000
with copies to:
Howard, Rice, Nemerovski, Canady, Xxxx & Rabkin,
a Professional Corporation
Three Xxxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
5
4. Consent to Acquisition of Online Venture Stock.
Notwithstanding anything contained in Section 9.10, Section 9.15 or Section 9.20
of the Loan Agreement, Co-Agents and Lenders, upon the effectiveness of the
Fourth Amendment, consent to Borrower's issuance of capital stock of Borrower to
the shareholders of the capital stock of Online Venture in connection with
Borrower's acquisition of all but not less than all of the outstanding capital
stock of Online Venture not already owned by Borrower, provided that (a) the
consideration given by Borrower for such capital stock of Online Venture shall
be limited to newly-issued capital stock of Borrower, (b) Borrower shall deliver
to Administrative Agent a pledge amendment to pledge all of the capital stock of
Online Venture in the manner and within the time provided in that certain Pledge
Agreement between Borrower and Administrative Agent dated as of August 16, 2001,
and (c) promptly upon consummation of such acquisition, Borrower shall deliver
to Administrative Agent copies of all documents pertaining to such acquisition.
5. Acknowledgments of Borrower.
5.1 Acknowledgment of Obligations. Borrower hereby
acknowledges, confirms and agrees that the Revolving Loans, together with
interest accrued and accruing thereon, and fees, costs, expenses and other
charges now or hereafter payable by Borrower to Lenders, are unconditionally
owing by Borrower to Lenders, without offset, defense or counterclaim of any
kind, nature or description whatsoever.
5.2 Acknowledgment of Security Interests. Borrower hereby
acknowledges, confirms and agrees that Co-Agents and Lenders have and shall
continue to have valid, enforceable and perfected first-priority liens upon and
security interests in the Collateral heretofore granted to Lenders pursuant to
the Loan Documents or otherwise granted to or held by Co-Agents and Lenders,
subject only to Permitted Liens.
5.3 Binding Effect of Documents. Borrower hereby
acknowledges, confirms and agrees that: (a) each of the Loan Documents to which
it is a party has been duly executed and delivered to Documentation Agent by
Borrower, and each is in full force and effect as of the date hereof, (b) the
agreements and obligations of Borrower contained in such documents and in this
Amendment constitute the legal, valid and binding Obligations of Borrower,
enforceable against it in accordance with their respective terms, and Borrower
has no valid defense to the enforcement of such Obligations, and (c) Co-Agents
and Lenders are and shall be entitled to the rights, remedies and benefits
provided for in the Loan Documents and applicable law.
6. Acknowledgment and Reaffirmation of Parent. Parent hereby
acknowledges that it has received and reviewed a copy of the Fourth Amendment
and consents to the terms and conditions of the Fourth Amendment. Parent hereby
ratifies and reaffirms each and every one of its obligations under the Parent
Guaranty, and confirms that such obligations are, and shall continue to be, in
full force and effect to the full extent provided therein without any defense,
claim, counterclaim, right of offset, recoupment or other defense to payment or
performance whatsoever, each of which is hereby expressly waived. Without
limiting the generality of the foregoing, Parent agrees and acknowledges that
the Parent Guaranty applies with full force and effect to the Loan Agreement as
amended by the Fourth Amendment and as previously amended.
6
7. Commercial Tort Claims. Each of Borrower and Parent represents
that, as of the Fourth Amendment Closing Date, it does not have any Commercial
Tort Claims.
8. Conditions of Effectiveness. This Amendment shall become
effective upon satisfaction of each of the following conditions:
(a) Documentation Agent shall have received
copies of this Amendment that bear the signatures of Borrower, Parent, GE
Capital and Bank;
(b) Documentation Agent shall have received each
of the documents listed on the Third Addendum to Schedule of Documents attached
hereto as Schedule A that bears the signatures of the respective parties
thereto, each of which shall be in form and substance satisfactory to Lenders.
9. Release.
9.1 In consideration of the agreements of Co-Agents and
Lenders contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, each of Borrower and
Parent, on behalf of itself and its successors, assigns, and other legal
representatives, effective as of the Fourth Amendment Closing Date, hereby
absolutely, unconditionally and irrevocably waives and releases any claim,
defense, demand, action or suit of any kind or nature whatsoever, known or
unknown, suspected or unsuspected, against the Co-Agents and Lenders, or any of
them, or their respective successors, assigns, or other legal representatives,
arising on or prior to the Fourth Amendment Closing Date in connection with the
Loan Agreement or any of the other Loan Documents, or any of the transactions
contemplated thereunder.
9.2 Each of Borrower and Parent understands, acknowledges
and agrees (i) that no fact, event, circumstance, evidence or transaction which
could now be asserted or which may hereafter be discovered shall affect in any
manner the final, absolute and unconditional nature of the release set forth
above, and (ii) that it is familiar with, and has been advised by its counsel
concerning, the provisions of Section 1542 of the California Civil Code, which
provides as follows:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
Each of Borrower and Parent expressly waives any and all rights under Section
1542 of the California Civil Code, and under any federal or state statute or law
of similar effect.
10. Representations and Warranties. Borrower hereby represents and
warrants that the representations and warranties contained in the Loan Agreement
were true and correct in all material respects when made and, except to the
extent (a) that a particular representation or warranty by its terms expressly
applies only to an earlier date, (b) Borrower has previously advised Co-Agents
in writing as contemplated under the Loan Agreement, or (c) amended by this
Amendment, are true and correct in all material respects as of the date hereof.
All
7
representations and warranties contained in the Loan Agreement which expressly
applied to the Closing Date, as amended in part by Section 7 of the Second
Amendment, remain true and correct in all material respects as of the Fourth
Amendment Closing Date. The Loan Agreement shall continue in full force and
effect in accordance with the provisions thereof on the date hereof.
11. Entire Agreement. This Amendment, together with the Loan
Agreement and the other Loan Documents, is the entire agreement between the
parties hereto with respect to the subject matter hereof. This Amendment
supersedes all prior and contemporaneous oral and written agreements and
discussions with respect to the subject matter hereof. Except as otherwise
expressly modified herein, the Loan Documents shall remain in full force and
effect.
12. Miscellaneous.
12.1 Counterparts. This Amendment may be executed in
identical counterpart copies, each of which shall be an original, but all of
which shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Amendment by facsimile transmission
shall be effective as delivery of a manually executed counterpart of this
Amendment. Any Person delivering this Amendment by facsimile shall send the
original manually executed counterpart of this Amendment to Documentation Agent
promptly after such facsimile transmission.
12.2 Headings. Section headings used herein are for
convenience of reference only, are not part of this Amendment, and are not to be
taken into consideration in interpreting this Amendment.
12.3 Recitals. The recitals set forth at the beginning of
this Amendment are true and correct, and such recitals are incorporated into and
are a part of this Amendment.
12.4 Governing Law. This Amendment shall be governed by,
and construed and enforced in accordance with, the laws of the State of
California applicable to contracts made and performed in such state, without
regard to the principles thereof regarding conflict of laws.
12.5 No Waiver. Except as specifically set forth in
paragraph 3 of this Amendment, the execution, delivery and effectiveness of this
Amendment shall not (a) limit, impair, constitute a waiver of or otherwise
affect any right, power or remedy by Administrative Agent, Documentation Agent
or any Lender under the Loan Agreement or any other Loan Document, (b)
constitute a waiver of any provision in the Loan Agreement or in any of the
other Loan Documents, or (c) alter, modify, amend or in any way affect any of
the terms, conditions, obligations, covenants or agreements contained in the
Loan Agreement, all of which are ratified and affirmed in all respects and shall
continue in full force and effect.
12.6 Conflict of Terms. In the event of any inconsistency
between the provisions of this Amendment and any provision of the Loan
Agreement, the terms and provisions of this Amendment shall govern and control.
8
IN WITNESS WHEREOF, the parties have entered into this
Amendment on the date first above written.
"Borrower"
GOOD GUYS CALIFORNIA, INC.
By /s/ Xxxxx X. Xxxxxx
------------------------------
Xxxxx X. Xxxxxx
Chief Financial Officer
"Parent"
GOOD GUYS, INC.
(executing for purposes of paragraphs 6, 7
and 9 only)
By /s/ Xxxxx X. Xxxxxx
------------------------------
Xxxxx X. Xxxxxx
Chief Financial Officer
"Administrative Agent"
BANK OF AMERICA, N.A.,
as the Administrative Agent
By /s/ Xxxx X. XxXxxxxx
------------------------------
Xxxx X. XxXxxxxx
Vice President
"Documentation Agent"
GENERAL ELECTRIC CAPITAL CORPORATION,
as the Documentation Agent
By /s/ Xxxxx X. Xxxxxxx
------------------------------
Xxxxx X.Xxxxxxx
Duly Authorized Signatory
9
"Lenders"
BANK OF AMERICA, N.A., as a Lender
By /s/ Xxxx X. XxXxxxxx
------------------------------
Xxxx X. XxXxxxxx
Vice President
GENERAL ELECTRIC CAPITAL CORPORATION,
as a Lender
By /s/ Xxxxx X. Xxxxxxx
-----------------------------------------
Xxxxx X. Xxxxxxx
Duly Authorized Signatory
10
