EXHIBIT 10.16
FOURTH AMENDMENT OF LOAN AGREEMENT
THIS FOURTH AMENDMENT OF LOAN AGREEMENT ("Agreement") is made and
entered into as of June 17, 1999, by and between SURREY, INC., ("Borrower"), a
Texas corporation, and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION ("Lender"), a
national banking association.
RECITALS:
On or about April 8, 1998, Borrower and Lender entered into a Loan
Agreement providing for loans to be made to the Borrower for the purposes
provided for therein. Such Loan Agreement has previously been amended pursuant
to a First Amendment of Loan Agreement dated effective May 14, 1998, by a Second
Amendment of Loan Agreement dated effective January 25, 1999, and by a Third
Amendment of Loan Agreement dated effective March 31, 1999. Such Loan Agreement,
as amended, is herein called the "Original Agreement".
The Borrower and the Lender now desire to further amend the Original
Agreement in certain respects as hereinafter provided, to increase the revolving
line of credit loan under the Original Agreement and to modify certain other
provisions of the Original Agreement, all as more particularly set forth herein.
AGREEMENTS:
For and in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
(1) The following new definition of "Eligible Purchase Orders" is
hereby added to the definitions contained in Paragraph 1 of the Original
Agreement:
Eligible Purchase Orders shall mean, as at any date of
determination, written purchase orders for goods to be manufactured
or sold by the Borrower to Bath & Body Works or Minnetonka Brands in
the ordinary course of its business, which are and at all times
shall continue to be acceptable to Lender in all respects. Standards
of eligibility for Eligible Purchase Orders may be fixed and revised
from time to time solely by Lender in Lender's exclusive judgment.
In general, without limiting the foregoing, an Eligible Purchase
Order must comply with the following requirements: (a) the
applicable purchasing party is not a foreign country or any
subdivision or agency or department there of or located outside of
the fifty (50) states of the United States or Puerto Rico, unless
the purchaser's obligation under such purchase order is insured or
backed by credit insurance or a letter of credit in form and
substance reasonably acceptable to Lender in all respects; (b) the
applicable purchasing party is not the United States of America or
any of its agencies, department, commissions, boards or bureaus or
is not otherwise subject to the Federal Assignment of Claims Act;
(c) the obligation of the purchasing party under the purchase order
is subject to no Lien whatsoever, except for the Liens created
pursuant to the Security Documents; (d) the applicable
purchasing party is not a Subsidiary, employee, officer, agent,
director, stockholder, partner, trustee or other owner or holder of
any indicia of equity rights (whether issued and outstanding capital
stock, partnership interests or otherwise) of Borrower or any
Affiliate of any such Person; (e) each of the representations and
warranties set forth in the Security Documents with respect to such
purchase order is true and correct in all material respects; and (f)
Lender has not deemed such purchase order ineligible because of
Lender's reasonable belief in the uncertainty about the
creditworthiness of the purchasing party or because Lender otherwise
reasonably considers the collateral value thereof to be impaired or
its ability to realize such value to be insecure; provided, however,
(a) if more than twenty percent (20%) of any purchasing party's
total Accounts with Borrower remain unpaid for more than 90 days
after the date of invoice, the total purchase orders owed to
Borrower by such purchasing party shall be excluded from Eligible
Purchasing Orders; (b) in the event that the sum of the total
purchase orders plus the aggregate Accounts owed to Borrower by
Minnetonka Brands exceeds ten percent (10%) of the total Accounts
owed to Borrower by all account debtors plus the total of all
outstanding unfilled purchase orders of all purchasing parties, the
purchase orders owed by Minnetonka Brands to Borrower in excess of
such ten percent (10%) amount shall be excluded from Eligible
Purchase Orders; (c) in the event that the sum of the total purchase
orders plus the aggregate Accounts owed to Borrower by Bath & Body
Works exceeds thirty-five percent (35%) of the total Accounts owed
to Borrower by all account debtors plus the total of all outstanding
unfilled purchase orders of all purchasing parties, the purchase
orders owed by Bath & Body Works to Borrower in excess of such
thirty-five percent (35%) amount shall be excluded from Eligible
Purchase Orders; and (d) no portion of a purchase order which
constitutes an Account of Borrower shall be included in Eligible
Purchase Orders. In the event of any dispute under the foregoing
criteria about whether a purchase order is or has ceased to be an
Eligible Purchase Order, the decision of Lender shall be conclusive
and binding. Nothing in this definition of "Eligible Purchase
Orders" shall be construed to limit or release any right of Lender
to any Collateral.
(2) The following definitions currently contained in Paragraph 1 of
the Original Agreement are hereby amended and restated to hereafter be and read
as follows:
Applicable Margin shall mean three and sixty-five one
hundredths of one percent (3.65%).
Base Rate shall mean for any day a rate per annum (rounded upwards
to the nearest 1/100 of 1%) equal to the lesser of (a) the Prime Rate (computed
on the basis of the actual number of days elapsed over a year of 360 days) in
effect on such day plus one percent (1%) per annum or (b) the Ceiling Rate. For
purposes of this Agreement any change in the Base Rate due to a change in the
Prime Rate shall be effective on the effective date of such change in the Prime
Rate.
Borrowing Base shall mean, as at any date, the amount of
the Borrowing Base shown on the Borrowing Base Certificate then most
recently delivered pursuant to Paragraph 10(b) hereof, determined by
the following calculation:
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80% of the Eligible Accounts of Borrower at said date
which are owed by account debtors plus the lesser of (i)
100% of the Eligible Purchase Orders from Bath & Body
Works and Minnetonka Brands and (ii) $500,000.00.
Notwithstanding anything to the contrary set forth in the
immediately preceding sentence, Lender reserves the right to adjust
downward to a level acceptable to Lender in its sole discretion the
eighty percent (80%) and one hundred percent (100%) advance rates
set forth above if Borrower's average dilution percentage for all
Accounts exceeds five percent (5%). In the absence of a current
Borrowing Base Certificate, Lender shall determine the Borrowing
Base from time to time in its discretion, taking into account all
information available to it, and the Borrowing Base from time to
time so determined shall be the Borrowing Base for all purposes of
this Agreement until a current Borrowing Base Certificate, in Proper
Form, is furnished to and accepted by Lender.
Eligible Accounts shall mean, as at any date of
determination thereof, Current Accounts Receivable created by
Borrower (but only to the extent that such Current Accounts
Receivable are Collateral hereunder and are subject to a first
priority perfected Lien in favor of Lender) in the ordinary course
of business arising out of the sale of goods or rendering of
serviced by Borrower, which are and at all times shall continue to
be acceptable to Lender in all respects. Standards of eligibility
for Eligible Accounts may be fixed and revised from time to time
solely by Lender in Lender's exclusive judgment. In general, without
limiting the foregoing, an Eligible Account must comply with the
following requirements: (a) the applicable account debtor is not a
foreign country or any subdivision or agency or department thereof
or located outside of the fifty (50) states of the United States or
Puerto Rico, unless the applicable Current Account Receivable is
insured or backed by credit insurance or a letter of credit in form
and substance reasonably acceptable to Lender in all respects; (b)
the applicable account debtor is not the United States of America or
any of its agencies, departments, commissions, boards or bureaus or
is not otherwise subject to the Federal Assignment of Claims Act;
(c) the Account is subject to no Lien whatsoever, except for the
Liens created pursuant to the Security Documents; (d) the Account
has not arisen out of transactions with a Subsidiary, employee,
officer, agent, director, stockholder, partner, trustee or other
owner or holder of any indicia of equity rights (whether issued and
outstanding capital stock, partnership interests or otherwise) of
Borrower or any Affiliate of any such Person; (e) each of the
representations and warranties set forth in the Security Documents
with respect to such Account is true and correct in all material
respects; (f) to the extent the total of the Eligible Accounts as
reflected in Borrower's aging of Accounts is different from the
total reflected in Borrower's general ledger, the lesser balance
will be used as the total of Eligible Accounts, and (g) Lender has
not deemed such Account ineligible because of Lender's reasonable
belief in the uncertainty about the creditworthiness of the account
debtor or because Lender otherwise reasonably considers the
collateral value thereof to be impaired or its ability to realize
such value to be insecure; provided, however, (a) if more than
twenty percent (20%) of any account debtor's total Accounts with
Borrower remain unpaid for more than 90 days after the date of
invoice, the total Accounts owed to Borrower by such account debtor
shall be excluded from Eligible Accounts; (b) in the event that the
aggregate Accounts owed to Borrower by any account debtor (other
than Wal-Mart Stores, Inc. and any of its Affiliates and Bath & Body
Works and any of its Affiliates) exceeds ten percent (10%)
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of the total Accounts owed to Borrower by all account debtors, the
Accounts owed by such account debtor to Borrower in excess of such
ten percent (10%) amount shall be excluded from Eligible Accounts;
(c) in the event that the aggregate Accounts owed by Borrower by
Wal-Mart Stores, Inc. and any of its Affiliates exceeds twenty-five
percent (25%) of the total Accounts owed to Borrower by all account
debtors, the Accounts owed by Wal-Mart Stores, Inc. and its
Affiliates in excess of such twenty-five percent (25%) amount shall
be excluded from Eligible Accounts; and (d) in the event that the
aggregate Accounts owed to Borrower by Bath & Body Works and any of
its Affiliates exceeds thirty-five (35%) of the total Accounts owed
to Borrower by all account debtors, the Accounts owed by Bath & Body
Works and its Affiliates in excess of such thirty-five percent (35%)
amount shall be excluded from Eligible Accounts. In the event of any
dispute under the foregoing criteria about whether an Account is or
has ceased to be an Eligible Account, the decision of Lender shall
be conclusive and binding. Nothing in this definition of "Eligible
Accounts" shall be construed to limit or release any right of Lender
to any Collateral.
Revolving Commitment shall mean the obligation of Lender
under this Agreement to make Revolving Loans and incur Letter of
Credit Liabilities in an aggregate principal amount at any on time
outstanding up to (but not exceeding) $2,500,000.00.
(3) The fifth (5th) sentence of Paragraph 2(a) of the Original
Agreement is hereby amended and restated in its entirety to hereafter be and
read as follows:
"The Revolving Loans shall be evidenced by the Revolving Note dated
June 17, 1999 executed by Borrower, payable to the order of Lender in the
original principal amount of $2,500,000.00."
(4) Exhibits A and B to the Original Agreement is hereby amended and
restated in its entirety to hereafter be in the form of Exhibit A and Exhibit B,
respectively, attached hereto and incorporated herein for all purposes.
(5) In consideration of Lender's agreement to enter into this
agreement and increase the Revolving Commitment, Borrower agrees to pay to
Lender concurrently herewith an amendment fee in the amount of $10,000.00, which
fee shall be deemed earned and accrued on the date hereof and due and payable on
demand thereafter. Any unpaid fee shall bear interest from its due date until
paid at the Past Due Rate.
(6) Borrower represents and warrants that the representations and
warranties contained in Paragraph 9 of the Original Agreement and in the other
Loan Documents are true and correct in all material respects on and as of the
date thereof as though made on and as of such date. The Borrower hereby
certifies that no event has occurred and is continuing which constitutes an
Event of Default under the Original Agreement or any of the other Loan Documents
or which upon the giving of notice of the lapse of time or both would constitute
such an Event of Default.
(7) The Borrower hereby ratifies and confirms that the Security
Agreement and the Deed of Trust executed by the Borrower are in full force and
effect, and since the Security Agreement and the Deed of Trust secure any and
all indebtedness of the Borrower to the Lender now or hereafter
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outstanding, each secures all amounts outstanding under the Original Agreement,
as amended hereby, including without limitation, all amounts outstanding under
the Revolving Loan, as increased hereby, and under the Advance/Term Loan.
(8) Except as expressly amended hereby, the Original Agreement and
the other Loan Documents shall remain in full force and effect. The Original
Agreement, as hereby amended, and all rights and powers created thereby or
thereunder and under the other Loan Documents are in all respects ratified and
confirmed and remain in full force and effect.
(9) Terms used herein which are defined in the Original Agreement or
in the other Loan Documents shall have the meanings therein ascribed to them.
The term "Loan Agreement" or "Credit Agreement" as used in the Original
Agreement, the other Loan Documents or any other instrument, document or writing
furnished to the Lender by the Borrower, when referring to the Original
Agreement, shall mean the Original Agreement as hereby amended.
(10) This Agreement (a) shall be binding upon the Borrower and the
Lender and their respective successors and assigns (provided, however, that the
Borrower shall not assign his rights hereunder without the prior written consent
of the Lender); (b) may be modified or amended only by a writing signed by each
party; (c) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OR THE
STATE OF TEXAS AND THE UNITED STATES OF AMERICA; (d) may be executed in several
counterparts, and by the parties hereto on separate counterparts, constitute an
original agreement, and all such separate counterparts shall constitute but one
and the same agreement; and (e) embodies the entire agreement and understanding
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, consents and understandings relating to such subject matter.
(11) BORROWER HEREBY RELEASES, DISCHARGES AND ACQUITS FOREVER LENDER
AND ITS OFFICERS, DIRECTORS, AGENTS, EMPLOYEES AND COUNSEL FROM ANY AND ALL
CLAIMS EXISTING AS OF THE DATE HEREOF. AS USED HEREIN, THE TERM "CLAIM" MEANS
ANY AND ALL LIABILITIES, CLAIMS, JUDGMENTS, DEFICIENCIES. INTEREST, LIENS, COSTS
OR EXPENSES (INCLUDING BUT NOT LIMITED TO COURT COSTS, PENALTIES, ATTORNEYS'
FEES AND DISBURSEMENTS, AND AMOUNTS PAID IN SETTLEMENT) OF ANY KIND AND
CHARACTER WHATSOEVER, INCLUDING BUT NOT LIMITED TO CLAIMS FOR USURY, BREACH OF
CONTRACT, AND NEGLIGENT MISREPRESENTATION, IN EACH CASE WHETHER NOW KNOWN OR
UNKNOWN, SUSPECTED OR UNSUSPECTED, ASSERTED OR UNASSERTED OR PRIMARY OR
CONTINGENT, AND WHETHER ARISING OUT OF WRITTEN DOCUMENTS, UNWRITTEN UNDERTAKINGS
OR COURSE OF CONDUCT.
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SS.26.02
THIS AGREEMENT, THE ORIGINAL AGREEMENT AND ALL OTHER LOAN DOCUMENTS
EXECUTED BY ANY OF THE PARTIES TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT
WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE
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PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
SURREY, INC.
a Texas corporation
By: /s/ Mark van der Hagen
Name: Mark van der Hagen
Title: Vice President / CFO
"Borrower"
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
By: /s/ Cindy Matula
Name: Cindy M. Matula
Title: President
"Lender"
Attach:
Exhibit A - Amended Exhibit A to Original Agreement (Request for Credit Form)
Exhibit B - Amended Exhibit B to Original Agreement (Borrowing Base Certificate)
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REQUEST FOR CREDIT
--------------
Chase Bank of Texas,
National Association
700 Lavaca
Austin, Texas 78701
Attn: Manager, Commercial Lending Division
Gentlemen:
The undersigned hereby certified that he is the __________________
of Surrey, Inc. ("Borrower"), and that as such is authorized to execute this
Request for Advance (the "Request") on behalf of Borrower pursuant to the Loan
Agreement (as it may be amended, supplemented or restated from time to time, the
"Loan Agreement") dated as of April 8, 1998 by and between Borrower and Chase
Bank of Texas, National Association. The (CHECK ONE) _____ Revolving Loan _____
Letter of Credit being requested hereby is to be in the amount set forth in (b)
below and is requested to be made or issued, as the case may be, on
__________________, which is a Business Day. On behalf of Borrower, the
undersigned further certifies, represents and warrants as follows (each
capitalized term used herein having the same meaning given to it in the Loan
Agreement unless otherwise specified herein):
a. As of the date hereof:
(1) The current Borrowing Base is: $____________
(2) Aggregate outstanding amount of
Revolving Loans is: $____________
(3) Aggregate face amount of all
outstanding Letters of Credit is: $____________
(4) The available Revolving Commitment
[the amount by which the lesser of
(x) the amount in (a)(1) above or
(y) $2,500,000 exceeds the sum of
the amounts in (a)(2) or (a)(3)
above], if positive is: $____________
EXHIBIT A
b. If and only if the available Revolving Commitment is positive,
Borrower hereby requests under this Request a (CHECK ONE) ______
Revolving Loan _____ Letter of Credit in the amount of
$____________ (which is no more than the available Revolving
Commitment).
c. The representations and warranties made in each Credit Document
are true and correct in all respects on and as of the time of
delivery hereof, with the same force and effect as if made on
and as of the time of delivery hereof.
d. No Default has occurred and is continuing or will occur as a
result of the requested Revolving Loan or Letter of Credit, as
the case may be.
e. If a Letter of Credit is being requested, attached hereto is all
pertinent information relating to the issuance of the requested
Letter of Credit, including the name of the beneficiary to be
designated, the proposed expiration date and any special
conditions to drawings to be included in the Letter of Credit.
(CHECK IF APPLICABLE) _____ The expiration date of the Letter of
Credit is after the Maturity Date; therefore, Cover must be
provided for such Letter of Credit prior to its issuance.
Thank you for your attention to this matter.
Very truly yours,
----------------------------------
Print Name: ----------------------
------------------ of Surrey, Inc.
EXHIBIT A
BORROWING BASE CERTIFICATE
Borrowing Base Report for Period Beginning: ______ and Ending ______ ("Current
Period") Loan Agreement (as amended, the "Agreement") dated as of April 8, 1998
by and between Surrey, Inc. and Chase Bank of Texas, National Association
The undersigned hereby certifies that he is the ______________________________
of Surrey, Inc., and that as such is authorized to execute this Borrowing Base
Certificate on behalf of Surrey, Inc. pursuant to the Agreement. On behalf of
the Borrower, the undersigned further certifies, represents and warrants that
the following components of the Borrowing Base and the calculation of the
Borrowing Base and amount available for borrowing, if any, are true and correct
(each capitalized term used herein having the same meaning given to it in the
Agreement unless otherwise specified herein):
Line 1. Total Accounts as of the end of the Current Period
(based on the lesser of each such Account as reflected in
Borrower's aging of Accounts and Borrower's general
ledger) $__________
2. Ineligible Accounts as of the end of the Current Period
(a) Accounts more than 90 days from invoice date $__________
(b) Other Accounts which are not Current Accounts
Receivable $__________
(c) Foreign Accounts (unless insured or backed by
credit insurance or a letter of credit in form
and substance reasonably acceptable to Lender in
all respects) $__________
(d) Government Accounts: $__________
(e) Accounts subject to a Lien, other than the Lien
of the Security Documents $__________
(f) Accounts owed by any Subsidiary, employee,
officer, agent, director, stockholder, partner,
trustee or other owner of equity rights of
Borrower or any Affiliate of any such Person $__________
(g) All of the Accounts of an account debtor(s) where
more than 20% of the total dollar amount of all
Accounts of the account debtor are unpaid more
than 90 days from invoice date $__________
(h) That portion of Accounts of an account debtor
(other than Wal-Mart Stores, Inc. and any of its
Affiliates and Bath & Body Works and of its
Affiliates) in excess of 10% of the total dollar
amount of the total Accounts for the Current
Period (Line 1) $__________
(i) That portion of Accounts, in the aggregate, of
Wal-Mart Stores, Inc. and its Affiliates in
excess of 25% of the total dollar amount of the
total Accounts for the Current Period (Line 1) $__________
(j) That portion of Accounts, in the aggregate, of
Bath & Body Works and its Affiliates in excess of
35% of the total dollar amount of the total
Accounts for the Current Period (Line 1) $__________
(k) Other ineligible Accounts under the Agreement $__________
3. Total ineligible Accounts for the Current Period (add
lines 2(a) through 2(k)) $__________
4. Total Eligible Accounts (line 1 minus line 3) $__________
EXHIBIT B
5. Multiplied by current advance rate ________%
6. Equals total Eligible Accounts component of Borrowing
Base as of the end of the Current Period $__________
7. Total purchase orders as of the end of the Current Period
from Bath & Body Works and Minnetonka Brands, excluding
any purchase orders or portions thereof which have become
Accounts $__________
8. Ineligible Purchase Orders as of the end of the Current
Period
(a) Foreign purchasers (unless insured or backed by
credit insurance or a letter of credit in form
and substance reasonably acceptable to Lender in
all respects) $__________
(b) Governmental purchasers $__________
(c) Obligations of purchasing party under purchase
orders which are subject to a Lien, other than
the Lien of the Security Documents $__________
(d) Purchase orders where the purchasing party is a
Subsidiary, employee, officer, agent, director,
stockholder, partner, trustee or other owner of
equity rights of Borrower or any Affiliate of any
such Person $__________
(e) All of the purchase orders of a purchasing party
where more than 20% of the total dollar amount of
all Accounts of such purchasing party are unpaid
more than 90 days from invoice date $__________
(f) That portion of the purchase orders of Minnetonka
Brands and any of its Affiliates which, when
added to the total Accounts of Minnetonka Brands
and its Affiliates exceeds 10% of the total
dollar amount of the total purchase orders then
outstanding and the total Accounts for the
Current Period $__________
(g) That portion of the purchase orders of Bath &
Body Works and any of its Affiliates which, when
added to the total Accounts of Bath & Body Works
and its Affiliates, exceeds 35% of the total
dollar amount of the total purchase orders and
Accounts for the Current Period $__________
(h) Other ineligible purchase orders under the
Agreement $__________
9. Total ineligible purchase orders for the Current Period
(add lines 8(a) through 8(h)) $__________
10. Total Eligible Purchase Orders for the Current Period
(line 7 minus line 9) $__________
11. Multiplied by current advance rate _________%
12. Equals, maximum Eligible Purchase Orders component of
Borrowing Base $__________
13. Lesser of (i) line 12 and (ii) $500,000, equals total
Eligible Purchase Orders component of Borrowing Base as
of the end of the Current Period $__________
14. Total Borrowing Base as of the end of the Current Period
(add lines 6 and 13) $__________
15. Revolving Commitment as of the date hereof $__________
16. Lesser of Borrowing Base (line 14) or Revolving
Commitment (line 15) $__________
EXHIBIT B
17. Minus the aggregate outstanding amount of the Revolving
Loans as of the date hereof $__________
18. Minus the aggregate face amount of all outstanding
Letters of Credit as of the date hereof $__________
19. Equals the amount available for borrowing subject to the
Agreement, if positive, or amount to be repaid, if
negative $__________
To the extent of any conflict between the components of the Borrowing Base as
set forth on this exhibit and the provisions of the Agreement, the Agreement
shall control.
The undersigned hereby certifies that the above information and computations are
true and correct and not misleading as of the date hereof, that no Default or
Event of Default has occurred and is continuing under the Agreement and that the
Borrower is in compliance with all the financial covenants set out in the
Agreement.
Very truly yours,
------------------------------------
Print Name: ------------------------
-------------------- of Surrey, Inc.
EXHIBIT B