EXHIBIT 10.15
THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT
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As of March 29, 1999
THIS THIRD AMENDMENT is made to the May 30, 1997 Loan and Security
Agreement, as amended (the "Loan Agreement") between
BankBoston Retail Finance Inc. (formerly known as "GBFC, Inc."), a Delaware
corporation with its principal executive offices at 40 Broad Street, Boston,
Massachusetts, as Administrative Agent for the ratable benefit of the "Lenders"
and as a "Lender;
Fleet National Bank, a national banking association with offices at One
Federal Street, Boston, Massachusetts, as Co-Agent for the ratable benefit of
the Lenders and as a "Lender;
and
JBI, Inc. a Massachusetts corporation with its principal executive
offices at 555 Turnpike Street, Canton, Massachusetts 02012, as "Lead Borrower"
and as agent for the "Borrowers", being the following:
JBI, Inc.;
Morse Shoe, Inc. (a Delaware corporation with its principal executive
offices at 555 Turnpike Street, Canton, Massachusetts, 02012); and
JBI Holding Company, Inc. (a Delaware corporation with its principal
executive offices at 900 Market Street, Wilmington, DE, 19801),
in consideration of the mutual covenants contained herein and benefits to be
derived herefrom,
WITNESSETH:
1. Agreement to Amend
Provided each of those "Conditions to Amendment" set forth in Section
2, below, is satisfied timely as provided in that Section, the Loan Agreement
shall be amended, as set forth below, such amendment to take effect as of March
29, 1999, it being understood, however, that in the event that any of such
conditions is not satisfied by 5:00PM (Boston Time) on the deadline date for
that condition (as stated in Section 2), then such amendment shall become null
and void, effective as of 5:00PM (Boston Time) on the subject deadline date:
Section 1-1(b) of the Loan Agreement is amended to read as follows:
(b) As used herein, the term "Availability" refers at any time to
the lesser of (i) or (ii), below, where:
(i) Is the result of:
(A) The Loan Ceiling.
Minus
(B) The then unpaid principal balance of the Loan Account.
Minus
(C) The then aggregate of such Availability Reserves as may
have been established by the Administrative Agent as provided
herein.
Minus
(D) The then outstanding Stated Amount of all L/C's.
(ii) Is the result of:
(A) Up the lesser of
(I) (1) During the calendar months of
November and December: Twelve Million
Dollars ($12,000,000.00).
(2) At all other times: Ten Million
Dollars ($10,000,000.00)
or
(II) Eighty-Five Percent (85%) of the face amount of
Acceptable Accounts.
Plus
(B) Up to twenty-five percent (25%) of the Retail of
Acceptable Inventory.
Plus
(C) "O/A Availability", being up to the following
percentage of the Retail of Acceptable Inventory:
(I) March 1 to May 31, 1999 : 3.0%
(II) June 1 to August 31, 1999 : 2.0%
(III) September 1 to October 31, 1999 : 1.0%
(IV) All other times : Zero
Plus
(D) Up to the lesser of
(I) Seven Million Five Hundred Thousand Dollars
($7,500,000.00).
or
(II) Fifty percent (50%) of the Cost of Acceptable
In-Transit Inventory.
Minus
(E) The then unpaid principal balance of the Loan Account.
Minus
(F) The then aggregate of such Availability Reserves as
may have been established by the Lender as provided
herein.
Minus
(G) The then outstanding Stated Amount of all L/C's.
PROVIDED, HOWEVER, that in determining Availability in accordance with
the percentages set forth in Section 1-1(b)(ii)(B), Section 1-1(b)(ii)(C), and
Section 1-1(b)(ii)(D) above, in no event, from and after May 1, 1999, shall any
of such percentages in Section 1-1(b)(ii)(B), Section 1-1(b)(ii)(C), and Section
1-1(b)(ii)(D) exceed ninety percent (90%) of the appraised value of the
Borrowers' Acceptable Inventory and Acceptable In-Transit Inventory, determined
in the aggregate based upon all loans and advances respecting Acceptable
Inventory and Acceptable In-Transit Inventory and which appraised value shall be
determined as a percentage of the total Retail of the Borrowers' Acceptable
Inventory and the total Cost of the Borrower's Acceptable In-Transit Inventory.
As further provided in Section 1-4 herein but without limiting the generality
thereof, the Administrative Agent may establish or change Availability Reserves
and/or Inventory Reserves based upon Administrative Agent's determination of
such appraised value of the Acceptable Inventory and the Acceptable In-Transit
Inventory.
Section 1-5 of the Loan Agreement is amended to read as follows:
1-5. Requests for Revolving Credit Loans.
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(a) Subject to the limitations included herein, the Lead Borrower shall
have the option to elect an interest rate and Interest Period to be applicable
to a Revolving Credit Loan by giving the Administrative Agent notice no later
than the following:
(i) If such Loan is, or is to be converted to a Base Rate Loan: By 1:00PM
on the Business Day on which the subject Revolving Credit Loan is to be made or
is to be so converted.
(ii) If such Loan is, or is to be continued as a Eurodollar Loan: By 1:00PM
Three (3) Business Days before the end of the then applicable Interest Period.
(iii) If such Loan is to be converted to a Eurodollar Loan: By 1:00PM Three
(3) Business Days before the day on which such conversion is to take place.
(b) Provided that there is sufficient Availability to support the same,
(but subject, however, to Subsection 1-8(d), below (which deals with the effect
of a Suspension Event)), a loan or advance under the Revolving Credit so
requested by the Lead Borrower shall be made by the transfer of the proceeds of
such loan or advance to the Funding Account or as otherwise instructed by the
Lead Borrower.
Section 1-6(a) of the Loan Agreement is amended to read as follows:
(a) Each Revolving Credit Loan shall bear interest at the Base Rate
unless timely notice is given (as provided in Section 1-5(a)), that the subject
Revolving Credit Loan (or a portion thereof) is, or is to be converted, to be a
Eurodollar Loan.
Section 1-11(a) of the Loan Agreement is amended to read as follows:
(a) The Borrowers may repay all or any portion of the principal balance
of the Loan Account from time to time until the Termination Date. Such payments
shall be applied first to Base Rate Loans and only then to Eurodollar Loans.
Section 1-11(b) of the Loan Agreement is amended to read as follows:
(b) The Borrowers, without notice or demand from any Agent or any
Lender, shall pay the Administrative Agent that amount, from time to time, which
is necessary so that the principal balance of the Loan Account does not exceed
Maximum Loan Exposure. Such payments shall be applied first to Base Rate Loans
and only then to Eurodollar Loans.
Section 1-19, to read as follows, is hereby added to the Loan Agreement:
1-19. Termination of O/A Availability.
--------------------------------
(a) Subject to the limitations included herein, the Lead Borrower shall
have the option to elect to terminate O/A Availability, provided, however, that
each of the following conditions precedent is satisfied:
(i) The Lead Borrower provides the Administrative Agent with
written notice of the Lead Borrower's election so to terminate O/A
Availability on or before the twentieth (20th) day of the month prior
to the intended effective date of termination;
(ii) After giving effect to the termination of O/A
Availability, Excess Availability shall be in an amount greater than
$2,000,000.00;
(iii) No Suspension Event has then occurred and is continuing;
(b) Provided that the Administrative Agent determines that each of the
foregoing conditions precedent is satisfied, the effective date of termination
of O/A Availability shall be the first (1st) day of the next full calendar month
and O/A Availability shall be deemed to be Zero from and after that date. Once
terminated, the Lead Borrower may not elect to reinstate O/A Availability.
(c) Once the Lead Borrower provides notice of its election to terminate
O/A Availability, then from and after the date of such notice Section
1-1(b)(ii)(C) shall no longer be applicable in determining Availability.
(d) Termination of O/A Availability shall not affect the applicable
interest rate for any Eurodollar Loan with an Interest Period extending beyond
the applicable termination date of O/A Availability.
Article 3 (Definition of "EBITDA") is amended to read as follows:
"EBITDA":The Borrowers' Consolidated earnings from continuing operations,
before interest, taxes, depreciation, and amortization, each as
determined in accordance with GAAP except that, in all events,
Permitted Overhead Contributions shall be deemed expenses for purposes
of determining the Borrowers' Consolidated earnings from continuing
operations.
Article 3 (Definition of "Interest Payment Date") is amended to read as follows:
"Interest Payment Date": With reference to:
(a) Any Eurodollar Loan: the last day of the Interest Period relating
thereto, the Termination Date, and the End Date.
(b) Any Base Rate Loan: the first day of each month; the Termination Date;
and the End Date.
Article 3 (Definition of "Interest Period") is amended to read as follows:
"InterestPeriod": (a) With respect to each Eurodollar Loan: Subject to
Subsection (d), below, the period commencing on the date of the making
or continuation of, or conversion to, such Eurodollar Loan and ending
one, two, or three months thereafter, as the Lead Borrower may elect by
notice (pursuant to Section 1-5(a)) to the Administrative Agent.
(b) With respect to each Base Rate Loan: Subject to Subsection (c),
below, the period commencing on the date of the making or continuation of or
conversion to such Base Rate Loan and ending on that date (i) as of which the
subject Base Rate Loan is converted to a Eurodollar Loan, as the Lead Borrower
may elect by notice (pursuant to Section 1-5(a)) to the Administrative Agent, or
(ii) on which the subject Base Rate Loan is paid by the Borrowers.
(c) The setting of Interest Periods is in all instances subject to the
following:
(i) Any Interest Period for a Base Rate Loan which would
otherwise end on a day which is not a Business Day shall be extended to
the next succeeding Business Day.
(ii) Any Interest Period for a Eurodollar Loan which would
otherwise end on a day that is not a Business Day shall be extended to
the next succeeding Business Day, unless that succeeding Business Day
is in the next calendar month, in which event such Interest Period
shall end on the last Business Day of the month during which the
Interest Period ends.
(iii) Subject to Subsection (v), below, any Interest Period
applicable to a Eurodollar Loan, which Interest Period begins on a day
for which there is no numerically corresponding day in the calendar
month during which such Interest Period ends, shall end on the last
Business Day of the month during which that Interest Period ends.
(iv) Subject to Subsection (vi), any Interest Period which
would otherwise end after the Termination Date shall end on the
Termination Date.
(v) Except as provided in Subsection (vi), below, the Borrower
shall not request any Eurodollar Loan which would have an Interest
Period of less than one (1) month.
(vi) For the period consisting of the last month prior to the
Maturity Date, the Borrower may request Eurodollar Loans otherwise
permitted by this Agreement, but with Interest Periods of 7, 14, and 21
days.
(vii) The number of Interest Periods in effect at any one time
is subject to Section 1-6(c), above.
Article 3 (Definition of "Inventory Reserves") is amended to read as follows:
"Inventory Reserves": Such Reserves as may be established from time to time by
the Administrative Agent in the Administrative Agent's reasonable
discretion with respect to the determination of the salability: (a) at
Retail, of the Acceptable Inventory or which reflect such other factors
as affect the market value of the Acceptable Inventory, or (b) at Cost,
of the Acceptable In-Transit Inventory or which reflect such other
factors as affect the market value of the Acceptable In-Transit
Inventory. Without limiting the generality of the foregoing, Inventory
Reserves may be established or continued as further set forth in
Section 1-4 and may also include (but are not limited to) reserves
based on the following:
(i) Obsolescence (determined based upon Inventory on hand
beyond a given number of days).
(ii) Seasonality.
(iii) Shrinkage.
(iv) Imbalance.
(v) Change in Inventory character.
(vi) Change in Inventory composition
(vii) Change in inventory mix.
(viii) Markdowns (both permanent and point of sale)
(ix) Retail markons and markups inconsistent with prior
period practice and performance; industry standards;
current business plans; or advertising calendar and
planned advertising events.
Article 3 (Definition of "Pricing Grid") is amended to read as follows:
"Pricing Grid": (I) For any month during any part of which month "O/A
Availability" is greater than zero (whether or not any Revolving Credit Loan is
made an account of such O/A Availability), the Eurodollar Margin, Base Margin,
and Line Fee shall be as follows:
PRICING GRID I
--------------
EURODOLLAR MARGIN BASE MARGIN LINE FEE
- ----------------- ----------- --------
(Basis Points) (Basis Points) (Percentage)
300 125 0.375%
(II) For any month during which "O/A Availability" is zero,
the Eurodollar Margin, Base Margin, and Line Fee shall be determined in
accordance with Pricing Grid II.
PRICING GRID II
---------------
EURODOLLAR MARGIN BASE MARGIN LINE FEE
- ----------------- ----------- --------
(Basis Points) (Basis Points) (Percentage)
275 100 0.375%
Article 3 (Definition of "Maturity Date") is amended to read as follows:
"Maturity Date": May 31, 2001
Article 3 (Definition of "O/A Availability") is amended to read as follows:
"O/A Availability": That percentage of Acceptable Inventory which is determined
in accordance with Section 1-1(b)(ii)(C).
Article 3 (Definition of "O/A Loan") is hereby deleted.
Article 3 (Definition of "O/A Margin") is hereby deleted.
Article 3 (Definition of "O/A Rate") is hereby deleted.
EXHIBIT 9-11(a) of the Loan Agreement (Financial Performance Covenants) is
amended by its replacement with EXHIBIT 9-11(a) annexed to this Third Amendment.
2. Conditions to Effectiveness of Amendment
The within Amendment shall remain effective only if each of the
following conditions is satisfied on or before 5:00PM (Boston Time) on the
deadline date for the subject condition:
(a) Deadline Date: March 29, 1999: Receipt by the Administrative Agent,
for the account of the Lenders, of the following: (i) a copy, by telecopier, of
this Third Amendment fully executed by the Borrwowers and (ii) an Amendment Fee
of $150,000.00, which Amendment Fee shall be fully earned as of the date hereof
(with the Borrowers hereby acknowledging that the Borrowers shall not be
entitled to any credit, rebate, or repayment of the Amendment Fee, or other fee
previously earned by the Administrative Agent or any Lender pursuant to this
Agreement, notwithstanding any termination of this Agreement or suspension or
termination of the Administrative Agent's and any Lender's respective obligation
to make loans and advances hereunder).
(b) Deadline Date: March 31, 1999: Receipt by the Administrative
Agent, for the account of the Lenders, of each of the following:
(i) A Certificate setting forth the text of the resolutions
adopted by the Directors of each Borrower authorizing that Borrower's
execution of the within Amendment, and attesting to the authority of
the persons who executed the within Amendment on behalf of that
Borrower.
(ii) An opinion of counsel to the Borrowers as to the due
execution and effectiveness of the within Amendment (which opinion is
subject only to the same qualifications as had been included in the
opinion delivered by that counsel at the initial execution of the Loan
Agreement).
(iii) An original of the fully executed Waiver Letter
heretofore executed between the parties hereto, concerning the
Borrowers' breach of the minimum Consolidated EBITDA, the minimum
Consolidated Gross Margin, and the minimum Consolidated Operating Cash
Flow to Total Debt Service covenants applicable for the month end of
January, 1999.
(iv) The original of this Third Amendment fully executed by
the Borrowers, a true and correct copy of which shall have been sent to
the Administrative Agent on March 29, 1999.
3. Additional Provisions
(a) Each Borrower hereby represents that, at the execution of the
within Agreement, no Suspension Event has occurred.
(b) Except as amended hereby or by the First Amendment and/or by the
Second Amendment to the Loan Agreement, all terms and provisions of the Loan
Agreement shall remain in full force and effect as executed.
The Agents and Lenders
BANKBOSTON RETAIL FINANCE INC. FLEET NATIONAL BANK
(Formerly "GBFC, Inc.")
By /s/John C. T. McNamara III By/s/ Gregory Kress
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Print Name: John C. T. McNamara III Print Name: Gregory Kress
Title: Vice President Title: AVP
The Lead Borrower
JBI, INC.
By /s/Philip Rosenberg
----------------------
Print Name:________________________
Title:/s/ Executive Vice President
The Borrowers
JBI, INC. MORSE SHOE, INC.
By/s/Philip Rosenberg By/s/ Philip Rosenberg
- --------------------- ----------------------
Print Name:_____________________ Print Name:________________________
Title: Executive Vice President Title: Executive Vice President
JBI HOLDING COMPANY, INC.
By /s/Philip Rosenberg
- ----------------------
Print Name:______________________
Title: Executive Vice President
EXHIBIT 9-11(a)
FINANCIAL PERFORMANCE COVENANTS
1. EBITDA: The Borrowers shall not permit or suffer their Consolidated
EBITDA, tested monthly, on an accruing monthly basis, at the end of
each of the Borrowers' fiscal months (with the first test period of
March 31, 1999), to be less than one of the following, nor less than
such minima as may be set by the Administrative Agent pursuant to the
Loan Documents for subsequent fiscal periods based upon the Lender's
review of the Borrowers' Business Plan and annual forecast for such
subsequent fiscal periods as required by such documentation:
MINIMUM CONSOLIDATED EBITDA: $ Thousands
("< >" denotes Negative Number)
Fiscal Month Min. Consolidated EBITDA
------------ ------------------------
March 300
April 1,800
May 4,350
June 6,207
July 6,529
August 7,527
September 8,691
October 10,103
November 11,575
December 14,348
2000 January 10,628
2. Minimum Excess Availability: The Borrower shall not suffer or permit
Availability to be less than $7,000,000.00 for the period commencing
December 15, 1999 through and including January 31, 2000.
3. Per Store Minimum and Maximum Inventory: The Borrowers shall not suffer
or permit the Retail of their Inventory, divided by the number of the
Borrowers' retail locations, to be less than or greater than the
following (nor less than or greater than such minima and maxima as may
be set by the Administrative Agent pursuant to the Loan Documents for
subsequent fiscal periods based upon the Lender's review of the
Borrowers' Business Plan and annual forecast for such subsequent fiscal
periods as required by such documentation), to be tested monthly:
PER STORE
MINIMUM / MAXIMUM INVENTORY($ Thousands)
Fiscal Month Minimum Maximum
------------ ------- -------
1999 February 140.3 171.5
March 149.9 183.2
April 139.2 170.1
May 134.2 164.0
June 124.3 152.0
July 135.8 166.0
August 114.0 139.3
September 121.5 148.5
October 119.3 145.8
November 108.3 132.3
December 89.9 109.8
2000 January 99.4 121.5
4. Gross Margin: The Borrowers will not suffer or permit their
Consolidated Gross Margin, tested monthly, on a two month rolling
average basis, at the end of each of the Borrowers' fiscal months (with
the first test period of March 31, 1999) to be less than the following
(nor less than such minima as may be set by the Administrative Agent
pursuant to the Loan Documents for subsequent fiscal periods based upon
the Lender's review of the Borrowers' Business Plan and annual forecast
for such subsequent fiscal periods as required by such documentation):
MINIMUM GROSS MARGIN - TWO MONTH ROLLING AVERAGE BASIS
Fiscal Month Minimum Gross Margin %
------------ ----------------------
March 43.5
April 45.4
May 43.1
June 41.9
July 41.8
August 42.1
September 43.1
October 44.2
November 42.9
December 41.6
2000 January 41.4
5. Capital Expenditures: The Borrowers will not suffer or permit their
Consolidated Capital Expenditures to exceed $3,000,000.00 for any
fiscal year, commencing with the Borrowers fiscal year ending in
January, 2000.