EXHIBIT 10.2
EIGHTH AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
This eighth amendment to first amended and restated credit agreement
("Amendment") is made and entered into as of August 13, 1998, by and between
U.S. BANK NATIONAL ASSOCIATION, successor by merger to U. S. Bank of Washington,
National Association ("U.S. Bank"), and GARGOYLES, INC., a Washington
corporation ("Borrower").
R E C I T A L S:
A. On or about April 7, 1997, U. S. Bank and Borrower entered into that
certain first amended and restated credit agreement (together with all
amendments, supplements, exhibits, and modifications thereto, the "Credit
Agreement") whereby U. S. Bank agreed to extend certain credit facilities to
Borrower. U. S. Bank and Borrower have entered into seven previous amendments to
the Credit Agreement.
B. The purpose of this Amendment is to set forth the terms and conditions
upon which U. S. Bank will grant Borrower's request to waive and reset certain
financial covenants under the Credit Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and conditions set
forth herein, the parties agree as follows:
ARTICLE I. AMENDMENT; DEFINITIONS
1.1 Amendment
The Credit Agreement and each of the other Loan Documents are hereby
amended as set forth herein. Except as specifically provided for herein, all of
the terms and conditions of the Credit Agreement and each of the other Loan
Documents shall remain in full force and effect throughout the terms of the
Loans, as well as any extensions or renewals thereof.
1.2 Definitions
As used herein, capitalized terms shall have the meanings given to them in
the Credit Agreement, except as otherwise defined herein, or as the context
otherwise requires. Section 1.1 of the Credit Agreement is hereby amended to
modify the following definition:
"EBITDA" means Borrower's net income (before taxes) for the relevant
period, subject to the following adjustments: (a) there shall be added to net
income: (i) charges against income consisting of depreciation of real and
personal property, and amortization of goodwill and other intangibles, (ii)
charges against income for non-cash stock compensation, (iii) charges against
income in an amount equal to the non-cash loss resulting from the sale of
Borrower's interest in the kindling Company, and (iv) interest expense; and (b)
there shall be deducted from net income revenues derived from sources other than
continuing operations, such as net gains from sales of capital assets,
restoration to contingency reserves, collection of proceeds of life insurance
policies, write-up of assets, or gains from the sale, acquisition, or retirement
of securities.
ARTICLE II. WAIVER
U. S. Bank hereby agrees to waive all violations of the following financial
covenants through July 30, 1998:
(a) Working Capital covenant set forth in Section 8.16 of the Credit
Agreement;
(b) Debt Service Coverage Ratio set forth in Section 8.17 of the Credit
Agreement;
(c) Minimum monthly sales covenant set forth in Section 8.19 of the Credit
Agreement; and
(d) Minimum monthly EBITDA covenant set forth in Section 8.20 of the Credit
Agreement.
Borrower shall be in compliance with all financial covenants as of July 31,
1998, and at all times thereafter.
ARTICLE III. MODIFICATION OF FINANCIAL COVENANTS
3.1 Tangible Net Worth
Section 8.15 of the Credit Agreement is hereby deleted in its entirety and
replaced with the following:
Permit Tangible Net Worth to be less than the following amounts at any
time during the time periods set forth below:
---------------------- --------------------------
Minimum Tangible
Time Periods Net Worth
---------------------- --------------------------
7/31/98 - 8/30/98 ($17,972,000)
---------------------- --------------------------
8/31/98 - 9/29/98 ($17,792,000)
---------------------- --------------------------
9/30/98 - 10/30/98 ($18,294,000)
---------------------- --------------------------
10/31/98 - 11/29/98 ($18,211,000)
---------------------- --------------------------
11/30/98 - 12/30/98 ($18,157,000)
---------------------- --------------------------
12/31/98 - 1/30/99 ($18,903,000)
---------------------- --------------------------
1/31/99 - 2/27/99 ($18,903,000)
---------------------- --------------------------
2/28/99 - 3/30/99 ($18,903,000)
---------------------- --------------------------
3/31/99 and thereafter ($18,903,000)
---------------------- --------------------------
3.2 Working Capital
Section 8.16 of the Credit Agreement is hereby deleted in its entirety
and replaced with the following:
Permit Working Capital to be less than the following amounts at any
time during the time periods set forth below:
---------------------- -----------------------
Time Periods Minimum Working Capital
---------------------- -----------------------
7/31/98 - 8/30/98 ($3,229,000)
---------------------- -----------------------
8/31/98 - 9/29/98 ($2,928,000)
---------------------- -----------------------
9/30/98 - 10/30/98 ($3,310,000)
---------------------- -----------------------
10/31/98 - 11/29/98 ($3,102,000)
---------------------- -----------------------
11/30/98 - 12/30/98 ($2,927,000)
---------------------- -----------------------
12/31/98 - 1/30/99 ($3,554,000)
---------------------- -----------------------
1/31/99 - 2/27/99 ($3,554,000)
---------------------- -----------------------
2/28/99 - 3/30/99 ($3,554,000)
---------------------- -----------------------
3/31/99 and thereafter ($3,554,000)
---------------------- -----------------------
3.3 Debt Service Coverage Ratio
Section 8.17 of the Credit Agreement is hereby deleted in its entirety and
replaced with the following:
Permit the Debt Service Coverage Ratio to be less than the following
amounts as of the last day of each month set forth below for such month.
----------------------- --------------------
Minimum Debt Service
Month Ending Coverage Ratio
----------------------- --------------------
7/31/98 1.67:1.00
----------------------- --------------------
8/31/98 1.93:1.00
----------------------- --------------------
9/30/98 -.51:1.00
----------------------- --------------------
10/31/98 1.64:1.00
----------------------- --------------------
11/30/98 1.52:1.00
----------------------- --------------------
12/31/98 -1.64:1.00
----------------------- --------------------
1/31/99 -1.81:1.00
----------------------- --------------------
2/28/99 1.79:1.00
----------------------- --------------------
3/31/99 and thereafter -1.95:1.00
----------------------- --------------------
3.4 Minimum Monthly Sales
Section 8.19 of the Credit Agreement is hereby deleted in its entirety and
replaced with the following:
Permit Borrower's net sales (determined in accordance with generally
accepted accounting principles) for any month to be less than the following
amounts:
------------------- ---------------------
Month Ending Minimum Monthly Sales
------------------- ---------------------
July 31, 1998 $3,232,000
------------------- ---------------------
August 31, 1998 $3,462,000
------------------- ---------------------
September 30, 1998 $2,616,000
------------------- ---------------------
October 31, 1998 $3,193,000
------------------- ---------------------
November 30, 1998 $3,059,000
------------------- ---------------------
December 31, 1998 $1,983,000
------------------- ---------------------
January 31, 1999 $3,157,000
------------------- ---------------------
February 28, 1999 $3,903,000
------------------- ---------------------
March 31, 1999 $3,268,000
------------------- ---------------------
3.5 Minimum Monthly EBITDA
Section 8.20 of the Credit Agreement is hereby deleted in its entirety and
replaced with the following:
Permit EBITDA for any month to be less than the following amounts:
------------------- --------------
Month Ending Minimum EBITDA
------------------- --------------
July 31, 1998 $ 383,000
------------------- --------------
August 31, 1998 $ 461,000
------------------- --------------
September 30, 1998 ($121,000)
------------------- --------------
October 31, 1998 $ 381,000
------------------- --------------
November 30, 1998 $ 350,000
------------------- --------------
December 31, 1998 ($375,000)
------------------- --------------
January 31, 1999 ($387,000)
------------------- --------------
February 28, 1999 $449,000
------------------- --------------
March 31, 1999 ($476,000)
------------------- --------------
ARTICLE IV. CONDITIONS PRECEDENT
The modifications set forth in this Amendment shall not be effective unless
and until the following conditions have been fulfilled to U.S. Bank's
satisfaction:
(a) U. S. Bank shall have received this Amendment, duly executed and
delivered by Borrower, H.S.C., Inc., Sungold Eyewear, Inc. and Private Eyes
Sunglass Corporation.
(b) After having given effect to any waivers and modifications of
definitions set forth in this Amendment, there shall not exist any Default or
Event of Default.
(c) All representations and warranties of Borrower contained in the Credit
Agreement or otherwise made in writing in connection therewith or herewith shall
be true and correct and in all material respects have the same effect as though
such representations and warranties had been made on and as of the date of this
Amendment.
(d) U. S. Bank shall have received a certified resolution of the board of
directors of Borrower and each of the undersigned guarantors in a form
acceptable to U. S. Bank.
ARTICLE V. GENERAL PROVISIONS
5.1 Representations and Warranties
Borrower hereby represents and warrants to U. S. Bank that as of the date
of this Amendment and after having given effect to any waivers and modifications
to definitions set forth in this Amendment, there exists no Default or Event of
Default. All representations and warranties of Borrower contained in the Credit
Agreement and the Loan Documents, or otherwise made in writing in connection
therewith, are true and correct as of the date of this Amendment. Borrower
acknowledges and agrees that all of Borrower's Indebtedness to U. S. Bank is
payable without offset, defense, or counterclaim.
5.2 Security
All Loan Documents evidencing U. S. Bank's security interest in the
Collateral shall remain in full force and effect, and shall continue to secure,
without change in priority, the payment and performance of the Loans, as amended
herein, and any other Indebtedness owing from Borrower to U. S. Bank.
5.3 Guaranties
The parties hereto agree that the Guaranties shall remain in full force and
effect and continue to guarantee the repayment of the Loans to U. S. Bank as set
forth in such Guaranties.
5.4 Payment of Expenses
Borrower shall pay on demand all costs and expenses of U. S. Bank incurred
in connection with the preparation, negotiation, execution, and delivery of this
Amendment and the exhibits hereto, including, without limitation, attorneys'
fees incurred by U. S. Bank.
5.5 Survival of Credit Agreement
The terms and conditions of the Credit Agreement and each of the other Loan
Documents shall survive until all of Borrower's obligations under the Credit
Agreement have been satisfied in full.
5.6 Release of Claims
IN CONSIDERATION FOR U. S. BANK'S AGREEMENT TO ENTER INTO THIS AMENDMENT,
BORROWER, H.S.C., INC., SUNGOLD EYEWEAR, INC., AND PRIVATE EYES SUNGLASS
CORPORATION EACH HEREBY RELEASES AND FOREVER DISCHARGES U. S. BANK, ITS
PREDECESSORS AND SUCCESSORS-IN-INTEREST, AND THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, REPRESENTATIVES AND AGENTS FROM ANY AND ALL CLAIMS,
DEMANDS, DAMAGES, LIABILITIES, CHARGES, ACTIONS, LOSSES, CAUSES OF ACTION,
COSTS, EXPENSES, COMPENSATION, AND SUITS OF ANY KIND, PAST, PRESENT OR FUTURE,
ARISING FROM OR ALLEGED TO ARISE FROM THEIR BUSINESS RELATIONSHIP, INCLUDING THE
RELATIONSHIP PROVIDED FOR IN THE CREDIT AGREEMENT THROUGH THE DATE OF THIS
AMENDMENT, WHETHER KNOWN OR UNKNOWN. THIS RELEASE IS INTENDED TO BE COMPLETE AND
COMPREHENSIVE WITH RESPECT TO ALL SUCH CLAIMS. THIS RELEASE OF CLAIMS HAS BEEN
COMPLETELY READ AND FULLY UNDERSTOOD AND VOLUNTARILY ACCEPTED FOR THE PURPOSE OF
MAKING A FULL AND FINAL COMPROMISE AND SETTLEMENT WITH RESPECT TO ALL CLAIMS,
DISPUTED OR OTHERWISE.
5.7 Counterparts
This Amendment may be executed in one or more counterparts, each of which
shall constitute an original agreement, but all of which together shall
constitute one and the same agreement.
5.8 Statutory Notice
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
IN WITNESS WHEREOF, U. S. Bank and Borrower have caused this Amendment to
be duly executed by their respective duly authorized signatories as of the date
first above written.
GARGOYLES, INC., a Washington corporation
By /s/ Xxx Xxxxxxxxxxx
Title CEO; CFO & Treasurer
U. S. BANK NATIONAL ASSOCIATION
By /s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx, Vice President
Each of the undersigned Guarantors hereby (i) reaffirms its Guaranty and its
Security Agreement, (ii) agrees that its Guaranty guarantees the repayment of
the Loans, as amended herein, (iii) agrees that its respective Security
Agreement and related collateral documents secures the payment and performance
of the Secured Obligations described in such Security Agreement, (iv)
acknowledges that its obligations pursuant to its Guaranty and Security
Agreement are enforceable without defense, offset, or counterclaim, and (v)
agrees to the release of claims set forth in Section 5.6 of this Amendment.
H.S.C., Inc., a Washington corporation
By: /s/ Xxx Xxxxxxxxxxx
Title: President, CFO and Treasurer
SUNGOLD EYEWEAR, INC., a Washington
corporation
By: /s/ Xxx Xxxxxxxxxxx
Title: CEO, CFO and Treasurer
PRIVATE EYES SUNGLASS CORPORATION, a Washington
corporation
By: /s/ Xxx Xxxxxxxxxxx
Title: President, CFO and Treasurer
