Exhibit 10.6
FIFTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT
This Fifth Amendment, dated as of July 11, 1996, is made by and between DAKOTAH,
INCORPORATED, a South Dakota corporation (the "Borrower"), and NORWEST BUSINESS
CREDIT, INC., a Minnesota corporation (the "Lender").
Recitals
The Borrower and the Lender have entered into an Amended and Restated Credit and
Security Agreement dated as of August 17, 1995, as amended by a First Amendment
to Amended and Restated Credit and Security Agreement dated as of October 5,
1995, a Second Amendment to Amended and Restated Credit and Security Agreement
dated as of November 15, 1995, a Third Amendment to Amended and Restated Credit
and Security Agreement dated as of March 15, 1996 and a Fourth Amendment to
Amended and Restated Credit and Security Agreement dated as of June 14, 1996 (as
so amended, the "Credit Agreement"). Capitalized terms used in these recitals
have the meanings given to them in the Credit Agreement unless otherwise
specified.
The loan advances under the Credit Agreement are evidenced by
the Borrower's First Replacement Revolving Note dated as of November 15, 1995,
in the maximum principal amount of $6,000,000 and payable to the order of the
Lender (the "Old Revolving Note"), and the Borrower's demand promissory note
dated as of October 5, 1995, in the maximum principal amount of $1,000,000 and
payable to the order of the Lender.
The Borrower has requested that certain amendments be made to the Credit
Agreement. The Lender is willing to grant the Borrower's request subject 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. Defined Terms. Capitalized terms used in this Fifth Amendment which are
defined in the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein. In addition, Section 1.1 of the Credit
Agreement is amended by adding or amending, as the case may be, the following
definitions:
" 'Borrowing Base' means, at any time and subject to change from time to time in
the Lender's sole discretion, the lesser of:
(a) the Maximum Line; or
(b) the sum of:
(i) 80% of Eligible Accounts; and
(ii) the lesser of (A) the product of
the Inventory Advance Rate and Eligible Inventory
or (B) the Inventory Cap.
" 'Inventory Advance Rate' means, during the calendar months of each
fiscal year described below, the percentage set forth opposite such calendar
month:
Month
January, February 20%
March 25%
April 30%
May 35%
June, July, August 40%
September 35%
October 30%
November 25%
December 20%
" 'Inventory Cap' means, during the calendar months of each fiscal year
described below, the amount set forth opposite such calendar month:
Month
January, February $1,000M
March $1,500M
April $2,500M
May $4,000M
June, July, August $4,500M
September, $4,000M
October,
November
December $2,000M
" 'Fifth Amendment' means that certain Fifth Amendment to Amended and Restated
Credit and Security Agreement dated as of July 11, 1996."
" 'Maturity Date' means August 31, 1998."
" 'Maximum Line' means $9,000,000."
" 'Revolving Note' means the Borrower's Second Replacement
Revolving Note, payable to the Lender in substantially the form of
Exhibit A to the Fifth Amendment."
2. Audits Upon Default. Section 2.4(b) of the Credit Agreement is hereby amended
by inserting at the end of said Section 2.4(b) the following:
"further provided, however, that upon and after any Default or Event of
Default, the Borrower shall be required to reimburse the Lender for any
and all audit or inspection expenses relating to any audit or
inspection performed by the Lender or any third party as required by
the Lender in its sole and absolute discretion."
3. Minimum Debt Service Coverage Ratio. Section 6.12 of the Credit Agreement is
amended in its entirety and replaced with the following new Section 6.12:
"Section 6.12 Minimum Debt Service Coverage Ratio. The Borrower will
maintain its Debt Service Coverage Ratio, determined at the end of each
fiscal year, at not less than 1.5 to 1.0."
4. Section 6.13 Deleted. Section 6.13 of the Credit Agreement, relating to
Minimum Tangible Net Worth, is hereby deleted in its entirety.
5. Minimum Book Net Worth. Section 6.14 of the Credit Agreement is amended in
its entirety and replaced with the following new Section 6.14:
"Section 6.14 Minimum Book Net Worth. The Borrower will maintain as of
the end of each month-end provided below, its Book Net Worth, determined as
at the end of each month, at an amount not less than the amount set forth
opposite such period:
Period Minimum Book Net Worth
6/30/96 $9,180,000
7/31/96 $8,970,000
8/31/96 $9,145,000
9/30/96 $9,370,000
10/31/96 $9,820,000
11/30/96 $10,220,000
12/31/96 $10,420,000
6. Minimum Net Income. Section 6.15 of the Credit Agreement is amended in its
entirety and replaced with the following new Section 6.15:
"Section 6.15 Minimum Net Income. The Borrower will achieve as of each
date described below, Net Income, of not less than the amount set forth
opposite such date:
Date Minimum Net Income
6/30/96 ($340,000)
7/31/96 ($550,000)
8/31/96 ($375,000)
9/30/96 ($150,000)
10/31/96 $300,000
11/30/96 $700,000
12/31/96 $900,000
7. Capital Expenditures. Section 7.10 of the Credit Agreement is amended in its
entirety and replaced with the following new Section 7.10:
"Section 7.10 Capital Expenditures. The Borrower will not
incur Capital Expenditures or contract to incur Capital Expenditures of
more than $2,000,000 in the aggregate during fiscal year 1996 or more
than $750,000 in the aggregate during any fiscal year thereafter, or
more than $100,000 in any one transaction at any time; provided,
however, that notwithstanding the $100,000 per transaction limitation,
the Borrower may, without the consent of the Lender, incur Capital
Expenditures during fiscal year 1996 (i) in an amount not to exceed
$200,000 for roof repairs to be performed on certain of the Borrower's
facilities and (ii) in an amount not to exceed $600,000 for expansion
of the Premises in Webster, South Dakota."
8. No Other Changes. Except as explicitly amended by this Fifth Amendment, all
of the terms and conditions of the Credit Agreement shall remain in full force
and effect and shall apply to any advance or letter of credit thereunder.
9. Amendment Fee. The Borrower agrees to pay the Lender as of the date hereof a
fully earned, non-refundable fee in the amount of $5,000 in consideration of the
execution by the Lender of this Amendment.
10. Conditions Precedent. This Amendment shall be effective when the Lender
shall have received an executed original hereof, together with each of the
following, each in substance and form acceptable to the Lender in its sole
discretion:
(d) The Second Replacement Revolving Note substantially in the form of Exhibit
A hereto, duly executed on behalf of the Borrower (the "Replacement Revolving
Note").
(e) The Trademark Security Agreement substantially in the form of Exhibit C
hereto, duly executed on behalf of the Borrower (the "Trademark Security
Agreement").
(f) Consent of the Participant.
(g) A Certificate of the Secretary of the Borrower certifying as to
(1) the resolutions of the board of directors of the Borrower approving
the execution and delivery of this Amendment, (2) the fact that the
Articles of Incorporation and Bylaws of the Borrower, which were
certified and delivered to the Lender pursuant to the Certificate of
Authority of the Borrower's Secretary dated as of August 17, 1995 (the
"Certificate of Authority") in connection with the execution and
delivery of the Credit Agreement 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 (3) certifying that the officers and
agents of the Borrower who have been certified to the Lender, pursuant
to the Certificate of Authority, as being authorized to sign and to act
on behalf of the Borrower continue to be so authorized or setting forth
the sample signatures of each of the officers and agents of the
Borrower authorized to execute and deliver this Amendment and all other
documents, agreements and certificates on behalf of the Borrower.
(h) Payment of the fee described in Paragraph 9.
(i) Such other matters as the Lender may require.
11. Representations and Warranties. The Borrower hereby represents and warrants
to the Lender as follows:
(j) The Borrower has all requisite power and authority to execute this Fifth
Amendment, the Replacement Revolving Note and the Trademark Security Agreement
and to perform all of its obligations hereunder, and this Fifth Amendment, the
Replacement Revolving Note and the Trademark Security Agreement have been duly
executed and delivered by the Borrower and constitute the legal, valid and
binding obligation of the Borrower, enforceable in accordance with its terms.
(k) The execution, delivery and performance by the Borrower of this Fifth
Amendment, the Replacement Revolving Note and the Trademark Security Agreement
have been duly authorized by all necessary corporate action and do not (I)
require any authorization, consent or approval by any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, (II)
violate any provision of any law, rule or regulation or of any order, writ,
injunction or decree presently in effect, having applicability to the Borrower,
or the articles of incorporation or by-laws of the Borrower, or (III) result in
a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the Borrower is a
party or by which it or its properties may be bound or affected.
(l) All of the representations and warranties contained in Article V of the
Credit Agreement are correct on and as of the date hereof as though made on and
as of such date, except to the extent that such representations and warranties
relate solely to an earlier date.
12. References. All references in the Credit Agreement to "this Agreement" shall
be deemed to refer to the Credit Agreement as amended hereby; and any and all
references in any other Loan Document to the Credit Agreement shall be deemed to
refer to the Credit Agreement as amended hereby. Upon the satisfaction of each
of the conditions set forth in paragraph 10 hereof, all references in the Credit
Agreement or any other Loan Document to the "Revolving Note" shall be deemed
amended to describe the Replacement Revolving Note, which Replacement Revolving
Note (to the extent it evidences Advances under the Old Revolving Note) shall be
issued by the Borrower to the Lender in substitution for and replacement of, but
not in payment of, the Old Revolving Note.
13. No Waiver. The execution of this Fifth Amendment and acceptance of any
documents related hereto shall not be deemed to be a waiver of any Default or
Event of Default under the Credit Agreement or breach, default or event of
default under any Security Document or other document held by the Lender,
whether or not known to the Lender and whether or not existing on the date of
this Fifth Amendment.
14. Release. The Borrower hereby absolutely and unconditionally releases and
forever discharges the Lender, and any and all parent corporations, subsidiary
corporations, affiliated corporations, insurers, indemnitors, successors and
assigns thereof, together with all of the present and former directors,
officers, agents and employees of any of the foregoing, from any and all claims,
demands or causes of action of any kind, nature or description, whether arising
in law or equity or upon contract or tort or under any state or federal law or
otherwise, which the Borrower has had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing
whatsoever arising from the beginning of time to and including the date of this
Fifth Amendment, whether such claims, demands and causes of action are matured
or unmatured.
15. Costs and Expenses. The Borrower hereby reaffirms its agreement under the
Credit Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Credit Agreement, the
Security Documents and all other documents contemplated thereby, including
without limitation all reasonable fees and disbursements of legal counsel.
Without limiting the generality of the foregoing, the Borrower specifically
agrees to pay all fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the preparation of this
Fifth Amendment and the documents and instruments incidental hereto. The
Borrower hereby agrees that the Lender may, at any time or from time to time in
its sole discretion and without further authorization by the Borrower, make a
loan to the Borrower under the Credit Agreement, or apply the proceeds of any
loan, for the purpose of paying any such fees, disbursements, costs and expenses
and the fee required under paragraph 9 hereof.
16. Miscellaneous. This Fifth 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 Fifth Amendment
to be duly executed as of the date first written above.
DAKOTAH, INCORPORATED
By_____________________________________________
Troy Jones, Jr.
Its Chief Executive Officer
NORWEST BUSINESS CREDIT, INC.
By_____________________________________________
Warren G. Lindman
Its Assistant Vice President
EXHIBIT A TO
FIFTH AMENDMENT
SECOND REPLACEMENT REVOLVING NOTE
$9,000,000 Minneapolis, Minnesota
July 11, 1996
For value received, the undersigned, DAKOTAH, INCORPORATED, a
South Dakota corporation (the "Borrower"), hereby promises to pay ON DEMAND, to
the order of NORWEST BUSINESS CREDIT, INC., a Minnesota corporation (the
"Lender"), at its main office in Minneapolis, Minnesota, 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 Nine
Million Dollars ($9,000,000) or, if less, the aggregate unpaid principal amount
of all Revolving Advances made by the Lender to the Borrower under the Credit
Agreement (defined below) 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
Amended and Restated Credit and Security Agreement dated as of August 17, 1995,
as amended by a First Amendment to Amended and Restated Credit and Security
Agreement dated as of October 5, 1995, a Second Amendment to Amended and
Restated Credit and Security Agreement dated as of November 15, 1995, a Third
Amendment to Amended and Restated Credit and Security Agreement dated as of
March 15, 1996, a Fourth Amendment to Amended and Restated Credit and Security
Agreement dated as of June 14, 1996 and a Fifth Amendment to Amended and
Restated Credit and Security Agreement dated as of July 11, 1996 (as the same
has been heretofore and may hereafter be amended or restated from time to time,
the "Credit 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 Credit Agreement. This Note may be prepaid only in accordance
with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof. This
Note is the Revolving Note referred to in the Credit Agreement. To the extent
this Note evidences the Borrower's obligations to the Lender under the
Borrower's promissory note dated as of November 15, 1995, payable to the Lender
in the original principal amount of $6,000,000 (herein the "Old Revolving
Note"), this Note is issued in substitution for and replacement of, but not in
payment of, the Old Revolving Note.
This Note is secured, among other things, pursuant to the
Credit Agreement and the Security Documents as therein defined, 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.
DAKOTAH, INCORPORATED
By_____________________________________________
Troy Jones, Jr.
Its Chief Executive officer