EXHIBIT 3.2
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THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
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THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT, made, entered
into and effective as of the 29th day of January, 1999 (the "Amendment"), by and
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between ASSOCIATED HYGIENIC PRODUCTS LLC, a limited liability company duly
organized under the laws of the State of Wyoming ("Borrower"), and SOUTHTRUST
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BANK, N.A., successor by merger to SOUTHTRUST BANK OF GEORGIA, N.A., a national
banking association with offices in Atlanta, Georgia ("Lender").
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WITNESSETH:
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WHEREAS, Borrower and Lender are parties to a certain Loan and
Security Agreement, dated as of December 16, 1996 (as mended to date, the "Loan
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Agreement"; capitalized terms used herein and not defined herein have the
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meanings assigned to them in the Loan Agreement); and
WHEREAS, certain Events of Default, as set forth on Schedule I hereto,
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have occurred and are continuing under the Loan Agreement (collectively, the
"Existing Events of Default"); and
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WHEREAS, Borrower has requested that Lender waive the Existing Events
of Default and, subject to the terms and conditions set forth herein, Lender is
willing to do so; and
WHEREAS, Borrower has requested that Lender amend the financial
covenants set forth in Sections 8.18, 8.19 and 8.20 of the Loan Agreement and,
subject to the terms and conditions set forth herein, Lender is willing to do
so; and
WHEREAS, Borrower and Lender wish to amend the Loan Agreement in
certain other respects, as hereinafter set forth; and
WHEREAS, in order to give effect to the foregoing, Borrower and Lender
wish to enter into this Amendment;
NOW, THEREFORE, for and in consideration of the sum of $10.00, the
foregoing premises and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Waiver of Existing Events of Default. Effective upon satisfaction of
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each of the conditions precedent set forth in Section 3 hereof, Lender hereby
waives the Existing Events of Default; provided, however, that such waiver is
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expressly limited to the Existing Events of Default and shall not be, or be
deemed to be, a waiver of any other Events of Default or Default Conditions
presently or hereafter existing, including, without limitation any Events of
Default or Default Conditions occurring as a result of any further violations by
Borrower of the provisions of the Loan Agreement specified on Schedule I hereto.
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2. Amendments. Effective upon satisfaction of the conditions precedent
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set forth in Section 3 hereof, the Loan Agreement is hereby amended in the
following manner:
(a) Amendment to Definition of Fixed Charge Coverage Ratio. The definition
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of "Fixed Charge Coverage Ratio" set forth in Section 1.1 of the Loan Agreement
is hereby deleted in its entirety and the following revised definition of "Fixed
Charge Coverage Ratio" is hereby substituted in lieu thereof:
"Fixed Charge Coverage Ratio" shall mean, for any fiscal period, the
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ratio which (a) the sum of the net income plus management fees and
royalties paid plus depreciation and amortization expense plus Interest
Expense for AHP Holdings and its consolidated Subsidiaries for such period,
bears to (b) the sum of Interest Expense plus the current maturities of
long-term debt for AHP Holdings and its consolidated Subsidiaries for the
sine such period, all as determined under GAAP.
(b) Amendment to Section 2.2 of the Loan Agreement. Section 2.2 of the
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Loan Agreement is hereby amended by deleting the date "December 1, 1999" in
paragraph (c) thereof and substituting in lieu thereof the date "January 31,
2000".
(c) Amendment to Section 8.5 of the Loan Agreement. Section 8.5 of the
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Loan Agreement is hereby deleted in its entirety and the following revised
Section 8.5 is hereby substituted in lieu thereof:
8.5 Periodic Financial Statements of Borrower, AHP Holdings and
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Parent. Borrower shall, as soon as practicable, and in any event within
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thirty (30) days after the end of each calendar month, furnish to Lender
unaudited financial statements of Borrower, AHP Holdings and Parent (the
latter two on a consolidated basis), including a balance sheet, a cash flow
statement and an income statement, for the month then ended, the fiscal
quarter then ended (if applicable), and the Fiscal Year to date, certified
as to truth and accuracy by Borrower's chief executive officer or chief
financial officer.
(c) Amendment to Section 8.18 of the Loan Agreement. Section 8.18 of the
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Loan Agreement is hereby deleted in its entirety and the following revised
Section 8.18 is hereby substituted in lieu thereof:
8.18 Tangible Net Worth.
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Tangible Net Worth shall be at least equal to Thirteen Million Five
Hundred Thousand Dollars ($13,500,000) at all times.
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(d) Amendment to Section 8.19 of the Loan Agreement. Section 8.19 of the
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Loan Agreement is hereby deleted in its entirety and the following revised
Section 8.19 is hereby substituted in lieu thereof:
8.19 Net Income.
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The net income for AHP Holdings and its consolidated Subsidiaries,
determined in accordance with GAAP, for each fiscal quarter set forth below
shall be at least the amount set forth opposite such fiscal quarter:
Fiscal Quarter Net Income
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Fiscal Quarter ending
March 31, 1999 $0
Fiscal Quarter ending
June 30, 1999 $25,000
Fiscal Quarter ending
September 30, 1999 $25,000
Fiscal Quarter ending
December 31, 1999 $50,000
(e) Amendment to Section 8.20 of the Loan Agreement. Section 8.20 of the
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Loan Agreement is hereby deleted in its entirety and the following revised
Section 8.20 is hereby substituted in lieu thereof:
8.20 Fixed Charge Coverage Ratio.
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The Fixed Charge Coverage Ratio of AHP Holdings and its consolidated
Subsidiaries as of the end of each fiscal quarter in each fiscal year shall
be at least 1.00:1.00, as determined under GAAP.
(f) Amendment to Section 8.23 of the Loan Agreement. Section 8.23 of the
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Loan Agreement (which was added thereto pursuant to the First Amendment to Loan
and Security Agreement dated as of August 19, 1997) is hereby deleted in its
entirety and the following revised Section 8.23 is hereby substituted in lieu
thereof:
8.23 Balances Collateral.
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(a) Heretofore Borrower has, and Borrower shall continue to, cause
all cash, checks, drafts, items and other instruments for the payment of
money which it now has or
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may at any time hereafter receive as proceeds of Collateral or otherwise to
be deposited with Lender in such controlled account maintained with Lender
as Lender shall designate (the "Controlled Account").
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(b) All of such cash, checks, drafts, items and other instruments of
payment shall constitute Balances Collateral hereunder in which Borrower
hereby grants and re-grants to Lender a security interest as security for
the Obligations and as to which Lender shall have all rights of a secured
party arising under this Agreement, the other Loan Documents and applicable
law.
(c) Borrower shall cause the amount of the Balances Collateral
maintained in the Controlled Account to at all times equal or exceed the
sum of Six Million Dollars ($6,000,000) (the "Minimum Balances
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Collateral"). So long as Borrower is in compliance with such requirement
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and so long as no Default Condition or Event of Default has otherwise
occurred and is continuing, in the ordinary course of business, Borrower
shall have the right to withdraw from the Controlled Account Balances
Collateral in excess of the Minimum Balances Collateral for use in its
business.
(d) At Borrower's request from time to time, Lender shall permit
Borrower to invest the Balances Collateral maintained in the Controlled
Account in certificates of deposit and other investment products offered by
Lender and its affiliate, SouthTrust Securities, Inc. which are acceptable
to Lender for such purpose, so long as Borrower takes all actions requested
by Lender such that Lender will continue to have a first priority perfected
security interest in such Balances Collateral following such investment.
(e) Addition of new Section 8.24 to the Loan Agreement. The Loan
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Agreement is hereby further amended by adding, immediately after Section
8.23 thereof, a new Section 8.24 thereof, to read as follows:
8.24 Consultant.
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On or prior to January 30, 1999, at its expense Borrower shall hire a
business consultant selected by Borrower, but acceptable to Lender, to
provide to Lender and Borrower a detailed evaluation of the businesses of
Borrower and Associated Hygienic Products, Inc. and their respective
projections and business plans. Borrower shall cause such consultants to
deliver their report to Borrower and Lender on or prior to March 31, 1999.
3. Conditions Precedent. The waivers set forth in Section 1 hereof and
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the amendments set forth in Section 2 hereof shall not become effective unless
and until (a) Borrower shall have delivered to Lender a schedule of its and its
affiliates' patents and trademarks, (b) Brandon SL Wang shall have paid to
Lender the sum of $4,000,000 as a mandatory prepayment of the "Term Loan" (as
defined in the Wang Loan Agreement) pursuant to Section 2.4(b) of the Wang Loan
Agreement, for application to the unpaid principal installments of such Term
Loan in the inverse order of their
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respective maturities (which amount Lender has agreed to accept from Mr. Wang in
lieu of the sum of $6,807,993.75 previously demanded by Lender in accordance
with such Section 2.4(b)), and (c) Mr. Wang and Lender shall have entered into
an amendment to the Wang Loan Agreement relative to the "Events of Default" (as
defined therein) existing thereunder in form and substance satisfactory to
Lender.
4. Binding Effect. Except to the extent set forth expressly hereinabove to
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the contrary, Borrower acknowledges and agrees that all terms and provisions,
covenants and conditions of the Loan Agreement and all documents executed in
connection therewith shall be and remain in full force and effect and constitute
the legal, valid, binding and enforceable obligations of Borrower to Lender in
accordance with their respective terms as of the date hereof. To the extent of
any conflict between any provision of this Amendment and any provision of the
Loan Agreement or any other Loan Document, any such conflicting provision shall
be deemed to be amended in a manner consistent with this Amendment.
5. Representations. In order to induce Lender to enter into this
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Amendment, after giving effect thereto, Borrower hereby restates and renews each
and every representation and Warranty heretofore made by it under or pursuant to
the Loan Agreement, and represents and warrants further to Lender that it has
taken all necessary and appropriate company action to authorize the execution,
delivery and performance hereof and of any other document, instrument or
agreement executed and/or delivered in connection herewith and the same will not
violate the Organizational Documents or any document, instrument or agreement to
which Borrower is a party or any provision of law applicable to Borrower.
6. Further Assurances. Borrower agrees to take such further actions as
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Lender shall reasonably request in connection herewith to evidence the
amendments herein contained to the Loan Agreement.
7. No Default. Further to induce Lender to enter into this Amendment,
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Borrower hereby certifies to Lender that, upon execution of this Amendment,
there exists (i) after giving effect to this Amendment, no Default Condition or
Event of Default under the Loan Agreement and (ii) no right of offset, defense,
counterclaim, claim or objection in favor of Borrower as against Lender arising
out of or with respect to any of the Obligations.
8. Release. Effective as of the date of execution of this Amendment,
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Borrower releases and forever waives and relinquishes all claims, demands,
obligations, liabilities and causes of action of whatsoever kind or nature,
whether known or unknown, which it has, may have, or might have or assert now or
in the future against Lender and its directors, officers, employees, attorneys,
agents, successors, predecessors and assigns and any Affiliates of Lender and
their directors, officers, employees, attorneys, agents, successors,
predecessors and assigns, directly or indirectly, arising out of, based upon, or
in any manner connected with any transaction, event, circumstance, action,
failure to act, or occurrence of any sort or type, relative to the Loan
Agreement, whether known or
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unknown, which occurred, existed, was taken, permitted, or begun before the
execution of this Amendment.
9. Governing Law. This Amendment shall be governed by and construed in
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accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, Borrower and Lender have executed this Amendment,
through their duly authorized officers, under their hands and seals, effective
as of the date and year first above written.
"BORROWER"
ASSOCIATED HYGIENIC (SEAL)
PRODUCTS LLC,
a Limited Liability Company
By: /s/ PETER CHANG
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Name: Peter Chang
Title: President
Attest: /s/ PHILIP LEUNG
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Name: Philip Leung
Title: Secretary
"LENDER"
SOUTHTRUST BANK, N.A. (SEAL)
By: /s/ ROBERT E. MILAM SR.
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Name: Robert E. Milam Sr.
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Title: Vice President
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REAFFIRMATION OF GUARANTY
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The undersigned, each a guarantor of the "Obligations" of "Borrower"
to "Lender", as such terms are defined in the "Loan Agreement" referenced in the
within and foregoing Third Amendment to Loan and Security Agreement ("Third
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Amendment"), pursuant to a certain Guaranty dated December 16, 1996
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("Guaranty"), hereby acknowledges its receipt of a copy of the Third Amendment
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and agrees that its Guaranty shall continue in full force and effect from and
after the execution and delivery thereof.
Dated: January 29, 1999
AHP HOLDINGS, L.P.
By: ELMBAY LIMITED,
an English corporation, as General
Partner
By: /s/ PETER CHANG
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Peter Chang
Principal Executive Officer
DSG INTERNATIONAL LIMITED
By: /s/ PETER CHANG
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Peter Chang
Vice President
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SCHEDULE I
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Existing Events of Default
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Events of Default have occurred and are continuing under the Loan Agreement
as a result of (a) the failure of AHP Holdings to maintain Tangible Net Worth of
at least $16,000,000 as required pursuant to Section 8.18 of the Loan Agreement,
(b) the failure of AHP Holdings and its consolidated Subsidiaries to achieve
annual net income of at least $100,000 for their fiscal quarters ending June 30,
1998, September 30, 1998 and December 31, 1998 as required pursuant to Section
8.19 of the Loan Agreement, (c) the failure of AHP Holdings and its consolidated
Subsidiaries to achieve a Fixed Charge Coverage Ratio of at least 1.25:1.00 for
their fiscal quarters ending June 30, 1998, September 30, 1998 and December 31,
1998 as required pursuant to Section 8.20 of the Loan Agreement, (d) the
transfer by Borrower of certain of its equipment constituting part of the
Collateral of Lender from its former plant location in Bell, California to a
location of Associated Hygienic Products, Inc. in Wisconsin, in violation of the
provisions of Sections 6.5 and 9.9 of the Loan Agreement (although Borrower
disputes that this Event of Default occurred), (e) the failure of Borrower to
hold cash or cash equivalents at all times in the minimum mount of Eleven
Million Dollars ($11,000,000), as required pursuant to Section 8.23 of the Loan
Agreement, and (f) violations of Sections 9.6, 9.9 and 9.12 of the Loan
Agreement resulting from the making by Borrower of certain advances (as
reflected in Borrower's books and records) to Associated Hygienic Products, Inc.
An Event of Default has also occurred pursuant to Section 10.16 of the Loan
Agreement as a result of the occurrence and continuance of an "Event of Default"
under Section 5.1 of the Wang Loan Agreement resulting from the failure of Mr.
Wang to comply with the requirements of Section 4.2(b) of the Wang Loan
Agreement. Subject to the terms and conditions set forth therein, such Event of
Default is being separately waived by Lender pursuant to a First Amendment to
Loan Agreement dated of even date between Lender and Mr. Wang.
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