THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Amendment is made as of the 1st day of December, 2000, by and between
Xxxxxx Electronics, Inc. a New York corporation (the "Borrower"), and Paragon
Capital LLC, a Delaware limited liability company (the "Lender").
Recitals
The Borrower and the Lender have entered into a Loan and Security Agreement
dated as of November 3, 1997, as amended by First Amendment dated as of November
29, 1999, and Second Amendment dated as of July 7, 2000 (as so amended, the
"Loan Agreement").
The Lender has agreed to make certain loan advances to the Borrower and to
issue or cause to be issued certain letters of credit for the account of the
Borrower pursuant to the terms and conditions set forth in the Loan Agreement.
The loan advances under the Loan Agreement are evidenced by the Borrower's
promissory note dated as of July 7, 2000, in the maximum principal amount of
Three Million Five Hundred Thousand ($3,500,000.00) Dollars and payable to the
order of the Lender (the "Master Note").
All indebtedness of the Borrower to the Lender is secured pursuant to the
terms of the Loan Agreement and all other security documents executed in favor
of the Lender (collectively, the "Security Documents").
The Borrower has requested that certain amendments be made to the Loan
Agreement, which the Lender is willing to make pursuant to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. Terms used in this Amendment which are defined in the Loan Agreement
shall have the same meanings as defined therein, unless otherwise defined
herein.
2. The Loan Agreement is hereby amended as follows:
(a) Section 1-8(a) is stricken in its entirety and the following new
Section 1-8(a) substituted therefor:
"(a) The unpaid principal balance of the Loan Account shall bear interest,
until repaid (calculated based upon a 360-day year and actual days elapsed), at
the aggregate of Base plus one (1%) percent per annum but in no event less than
eight (8%) percent per annum or in excess of the maximum rate permitted by
applicable law."
(b) Section 1-9(b) is stricken in its entirety and the following new
Section 1-9(b) substituted therefor:
"(b) Annual Facility Fee. On October 1, 2000, a facility fee in an amount
equal to one-quarter of one (.25%) percent of the Credit Limit which shall have
been fully earned on October 1, 2000, shall be due and payable, and on each
October 1st thereafter, a facility fee in an amount equal to one-quarter of one
(.25%) percent of the Credit Limit, which shall have been fully earned as of the
applicable October 1st and shall be due and payable."
(c) Section 1-9(c) is stricken in its entirety and the following new
Section 1-9(c) substituted therefor:
"(c) Loan Maintenance Fee. As of October 1, 2000, and on each anniversary
thereof, a loan maintenance fee in the amount of $18,000.00. Such fee shall have
been fully earned as of October 1, 2000, and as of each October 1st thereafter
and shall be payable in twelve (12) installments as follows: $1,500.00 on
October 1, 2000, and $1,500.00 on the first day of each month thereafter until
the loan maintenance fee has been paid in full. The foregoing notwithstanding,
the aforementioned monthly loan maintenance fee shall be increased from
$1,500.00 to $3,500.00 for any such month in which the Advance Rate exceeds
seventy-five (75%) percent."
(d) Section 13-3 is stricken in its entirety and the following new Section
13-3 substituted therefor:
"13-3 Prepayment Premium. If Borrower pays in full all or substantially all
of the Liabilities prior to September 30, 2001, other than temporarily from
funds internally generated in the ordinary course of business, at the time of
such payment Borrower shall also pay to Lender a prepayment premium equal to the
sum of One Hundred Thousand ($100,000.00) Dollars, and if prepaid after
September 30, 2001, but prior to September 30, 2003, other than temporarily from
funds internally generated in the ordinary course of business, at the time of
such payment Borrower shall also pay to Lender a prepayment premium equal to the
sum of Seventy-Five Thousand ($75,000.00) Dollars. The foregoing
notwithstanding, the prepayment premium shall be reduced by fifty (50%) percent
if (a) Borrower grants to Lender a right of first refusal on any new financing,
(b) Borrower receives additional capital of not less than Ten Million
($10,000.00) Dollars, and (c) Lender is paid in full.
Any tender of payment in full of the Liabilities following an acceleration
by Lender of the Liabilities pursuant to Article 10, shall be for purposes of
this section deemed to be a prepayment requiring Borrower to pay the
aforementioned prepayment premium.
Such prepayment premium shall be paid to Lender as liquidated damages for
the loss of the bargain by Lender and not as a penalty."
(e) The definition of the term "Borrowing Base" contained on Exhibit 3 is
stricken in its entirety and the following new definition substituted therefor:
"'Borrowing Base': Means up to seventy-five (75%) percent of Cost of
Acceptable Inventory (the 'Advance Rate') thereof, minus (i) the then unpaid
principal balance of the Loan Account, minus (ii) the then aggregate of such
Availability Reserves as may have been established by the Lender, minus (iii)
the then outstanding Stated Amount of all L/C's."
(f) The definition of the term "Credit Limit" contained on Exhibit 3 is
stricken in its entirety and the following new definition substituted therefor:
"'Credit Limit': Means Seven Million ($7,000,000.00) Dollars, minus (i) the
then unpaid principal balance of the Loan Account, minus (ii) the then aggregate
of such Availability Reserves as may have been established by the Lender, minus
(iii) the then outstanding Stated Amount of all L/C's."
(g) The Capital Expenditure covenant contained on Exhibit 9-12(a) is
stricken in its entirety and the following covenant substituted therefor:
"Capital Expenditures
Capital Expenditures for the period beginning November 1, 2000, and ending
April 30, 2001, may be in an amount which does not exceed $2,145,000.00, and for
the period beginning May 1, 2001, and ending October 31, 2001, may be in an
amount which does not exceed $1,355,000.00, so long as Operating Income,
measured monthly on a rolling three-month basis, is not less than eighty-five
(85%) percent of the Operating Income set forth in the Business Plan for the
currently existing stores, i.e., existing as of December 1, 2000."
(h) The Maximum Effective Advance Rate covenant contained on Exhibit
9-12(a) is stricken in its entirety and the following covenant substituted
therefor:
"Maximum Effective Advance Rate
The Maximum Effective Advance Rate shall not exceed on any one occasion the
following percentages during the following periods:
Percentage Period
---------- ------
55% August through March
72% April through July"
3. Except as explicitly amended by this Amendment, all of the terms and
conditions of the Loan Agreement shall remain in full force and effect and shall
apply to any advance or letter of credit thereunder.
4. The Borrower agrees to pay the Lender as of the date hereof a fully
earned, non-refundable fee in the amount of Seventy-Five Thousand ($75,000.00)
Dollars in consideration of the execution by the Lender of this Amendment.
5. This Amendment shall be effective upon receipt by the Lender of an
executed original hereof, together with each of the following, each in substance
and form acceptable to the Lender in its sole discretion:
(a) The replacement note substantially in the form of Exhibit A hereto,
duly executed on behalf of the Borrower (the "Replacement Note").
(b) Certificate of the Secretary of the Borrower certifying as to the
resolutions of the Board of Directors of the Borrower approving the execution
and delivery of this Amendment.
6. The Borrower hereby represents and warrants to the Lender that (i) the
resolutions of the Board of Directors of the Borrower attached to the Borrower's
General Certificate dated as of July 7, 2000, and delivered to the Lender in
connection with the execution and delivery of the Agreement (the "Certificate")
are in full force and effect, (ii) the Articles of Organization and By-Laws of
the Borrower, which were certified and delivered to the Lender pursuant to the
Certificate, continue in full force and effect and have not been amended or
otherwise modified except as set forth in the Certificate to be delivered, and
(iii) the officers and agents of the Borrower who have been certified to the
Lender pursuant to the Certificate as being authorized.
7. All references in the Loan Agreement to "this Agreement" shall be deemed
to refer to the Loan Agreement as amended hereby; and any and all references in
the Security Documents to the Loan Agreement shall be deemed to refer to the
Loan Agreement as amended hereby. Upon the satisfaction of each of the
conditions set forth in paragraph 4 hereof, the definition of "Master Note" and
all references thereto in the Loan Agreement shall be deemed amended to describe
the Replacement Note, which Replacement Note shall be issued by the Borrower to
the Lender in replacement, renewal and amendment, but not in repayment, of the
Master Note.
8. This Amendment may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original and all of
which counterparts, taken together, shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
XXXXXX ELECTRONICS, INC.
By:______________________________________
Xxxxxxxx X. Carp, President
PARAGON CAPITAL LLC
By:______________________________________
Xxxxxx Xxxxxxxxx, Vice President
EXHIBIT A
EXHIBIT 1-6 TO LOAN AND SECURITY AGREEMENT
MASTER NOTE
(REVOLVING)
$7,000,000.00 Newton, Massachusetts
December 1, 2000
For value received, the undersigned, Xxxxxx Electronics, Inc., a New York
corporation (the "Borrower"), hereby promises to pay on September 30, 2003 (the
"Maturity Date", unless extended as provided in Article 13-1 of the Loan
Agreement (as defined below), in which event the Maturity Date shall be the last
day of the applicable renewal term), to the order of Paragon Capital LLC, a
Delaware limited liability company (the "Lender"), at its main office in Newton,
Massachusetts, or at any other place designated at any time by the holder
hereof, in lawful money of the United States of America and in immediately
available funds, the principal sum of Seven Million ($7,000,000.00) Dollars or,
if less, the aggregate unpaid principal amount of all advances made by the
Lender to the Borrower hereunder, together with interest on the principal amount
hereunder remaining unpaid from time to time, computed on the basis of the
actual number of days elapsed and a 360-day year, from the date hereof until
this Note is fully paid at the rate from time to time in effect under the Loan
and Security Agreement dated November 3, 1997 (the "Loan Agreement") by and
between the Lender and the Borrower. The principal hereof and interest accruing
thereon shall be due and payable as provided in the Loan Agreement. This Note
may be prepaid only in accordance with the Loan Agreement.
This Note is issued pursuant, and is subject, to the Loan Agreement, which
provides, among other things, for acceleration hereof. This Note is the Master
Note referred to in the Loan Agreement.
This Note is secured, among other things, pursuant to the Loan Agreement
and may now or hereafter be secured by one or more other security agreements,
mortgages, deeds of trust, assignments or other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when due,
whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest are
expressly waived.
This Note shall be deemed to be under seal.
XXXXXX ELECTRONICS, INC.
By:________________________
