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EXHIBIT 4.6
THIRD AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
This THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment") is dated as of March 31, 1996 by and among The Rug Barn, Inc., a
South Carolina corporation ("Rug Barn"), Home Innovations, Inc., a Delaware
corporation ("HII"), Calvin Klein Home, Inc., a Delaware corporation ("Calvin
Klein"), Draymore Mfg. Corp., a North Carolina corporation ("Draymore"), R.A.
Briggs and Company, an Illinois corporation ("R.A. Briggs") (each of Rug Barn,
HII, Calvin Klein, Draymore and R.A. Briggs a "Borrower" and collectively the
"Borrowers"), LaSalle National Bank, as Agent and Lender, and General Electric
Capital Corporation, as Co-Agent and Lender. All capitalized terms used but not
otherwise defined herein shall have the meanings ascribed thereto in the Credit
Agreement (as hereinafter defined).
W I T N E S S E T H
WHEREAS, Rug Barn, Home Innovations, Inc., a Delaware corporation, Home
Curtain Corp., a New York corporation, Calvin Klein, Draymore and R.A. Briggs,
the Agent, the Co-Agent and the Lenders have entered into that certain Amended
and Restated Credit Agreement dated as of July 13, 1995, as amended by the
First Amendment to Amended and Restated Credit Agreement dated as of November
17, 1995 and the Second Amendment to Amended and Restated Credit Agreement
dated as of December 31, 1995 (as the same may hereafter be further amended,
supplemented or otherwise modified, the "Credit Agreement"); and
WHEREAS, the Lenders are willing to amend the Credit Agreement as
herein set forth, to, among other things, modify the financial covenants, all
on the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the premises herein and other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Borrowers hereby agree with the Agent, the Co-Agent and the
Lenders as follows:
SECTION 1. Amendments to the Credit Agreement. The parties hereto
agree that the Credit Agreement is amended as follows:
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A. Subsection (a) of Schedule I to the Credit Agreement is
hereby amended and replaced in its entirety with the following:
" (a) Maximum Total Liabilities Coverage Ratio. Holdings and each
of its Subsidiaries on a consolidated basis shall have at the end
of each Fiscal Quarter after the Closing Date, a Total Liabilities
Coverage Ratio for the 12-month period then ended (or with the
Fiscal Quarters ending on or before June 30, 1996, the period from
the Closing Date to the last day of such Fiscal Quarter) of not
greater than 6.5 to 1.0 for the Fiscal Quarters ending before (but
not including the Fiscal Quarter ending on) December 31, 1995 or
after (but not including the Fiscal Quarter ending on) March 31,
1996; provided, however, that for each Fiscal Quarter ending on or
before June 30, 1996, the calculation of EBITDA of Holdings used in
determining the Total Liabilities Coverage Ratio for the period
from the Closing Date through such Fiscal Quarter end shall be made
by taking the actual amount of EBITDA ("Actual EBITDA") that would
otherwise be calculated for such period in accordance with the
Agreement and (i) dividing such Actual EBITDA by the number of days
in the period then being tested and then (ii) multiplying such
product in clause (i) by 365."
B. The first sentence of subsection (b) of Schedule I to the
Credit Agreement is hereby amended and replaced in its entirety with the
following sentence:
"Holdings and its Subsidiaries shall have on a consolidated basis
at the end of each Fiscal Quarter beginning with June 30, 1995, a
Debt Service Coverage Ratio for the 12-month period then ended of
not less than 1.15 to 1.0 for the Fiscal Quarters ending before
September 30, 1995, 1.05 to 1.0 for the Fiscal Quarter ending on
September 30, 1995, 1.0 to 1.0 for the Fiscal Quarter ending on
December 31, 1995 and 1.25 to 1.0 for the Fiscal Quarters ending
after (but not including the Fiscal Quarter ending on) March 31,
1996; provided, however, that notwithstanding anything to the
contrary herein, this paragraph (b) shall not directly or
indirectly prohibit Holdings from paying in cash the
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interest due on the Senior Notes and the dividends due on the Preferred
Stock in January, 1996, if the Debt Service Coverage Ratio for the
trailing 12 month period ending on September 30, 1995 is not less than
1.15 to 1.0; provided, further, that for Fiscal Quarters ending on or
before June 30, 1996 the Debt Service Coverage Ratio shall be calculated
using historical EBITDA before the Closing Date of Holdings and
Borrowers (on a consolidated basis) to the extent necessary to complete
a twelve month period, and Debt Service shall be calculated assuming (i)
for all periods prior to the Closing Date, the Senior Notes, Preferred
Stock, Subordinated Notes and Revolving Credit Facility (with debt
service calculated as described in the next sentence) were the only
Indebtedness and Preferred Stock outstanding during such periods (ii)
that the Subordinated Debt and Senior Notes accrued interest in
accordance with their terms during such periods; (iii) that cash
dividends on the Preferred Stock were paid in full during each Fiscal
Quarter of such period, and (iv) that no Revolving Credit Loans were
outstanding on June 30, 1995, and for each Fiscal Quarter end thereafter
for purposes of calculating Debt Service on the Revolving Credit
Facility, Interest Expenses actually incurred by Borrowers subsequent to
the Closing Date shall be annualized as if such Interest Expenses had
been incurred during such period."
C. The proviso following Subsection 6.14(c) of the Credit
Agreement is hereby amended and replaced in its entirety as follows:
"provided, however, that for payments under clause (c)(iii) or the last
proviso to clause (b)(iii) above to be permitted under this Agreement,
Holdings and its Subsidiaries, on a consolidated basis, must also
demonstrate that they could have achieved a Debt Service Coverage Ratio
for the trailing twelve month period ending on the last day of the most
recently completed Fiscal Quarter for which financial statements are
available prior to such payment date of at least 1.15 to 1.0 for the
Fiscal Quarters ending before September 30, 1995, 1.05 to 1.0 for the
Fiscal Quarter ending on September 30, 1995, 1.0 to 1.0 for the Fiscal
Quarter
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ending on December 31, 1995 and 1.25 to 1.0 for the Fiscal Quarters
ending after (but not including the Fiscal Quarter ending on) March 31,
1996 (which shall include for purposes of such calculation if Holdings
intends to pay a cash dividend on the Preferred Stock or the arrearage
on any Management Fees in cash, an assumption that the amount of any
then contemplated cash dividend on the Preferred Stock or cash payment
of the Management Fee had been made in cash during the twelve month
period being tested and therefor increased Debt Service by the amount of
such payment, unless (with respect to Preferred Stock) such twelve month
period already includes four quarterly dividend payments on the
Preferred Stock which were made in cash, in which case the then
contemplated cash dividend need not be counted); provided, however, that
notwithstanding anything to the contrary herein, paragraph (b) of
Schedule I shall not directly or indirectly prohibit Holdings from
paying in cash the interest on the Senior Notes and the dividends due on
the Preferred Stock on January 1, 1996, if the Debt Service Coverage
Ratio for the trailing 12 month period ending on September 30, 1995 is
not less than 1.15 to 1.0."
D. The following section is hereby inserted after section (b)
of Schedule I of the Credit Agreement:
" (c) Minimum Excess Availability. From the Fiscal Quarter
ending on March 31, 1996 until Holdings receives a notice signed by each
of the Lenders expressly terminating application of this section (c),
Holdings and its Subsidiaries shall not permit at any given time the
difference between (a) Borrowing Availability minus (b) the aggregate
amount of all outstanding Revolving Credit Advances to be less than
$2,000,000."
Section 2. Borrowers' Representations and Warranties. In order to
induce the Agent, the Co-Agent and the Lenders to enter into this Amendment and
to amend the Credit Agreement in the manner provided herein, the Borrowers
represent and warrant to the Agent, the Co-Agent and the Lenders that the
following statements are true, correct and complete:
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A. Corporate Power and Authority. The Borrowers have all requisite
corporate power and authority to enter into this Amendment, and to carry out
the transactions contemplated by, and to perform their obligations under, the
Credit Agreement as amended by this Amendment (the "Amended Agreement").
B. Authorization of Agreements. The execution, delivery and
performance of this Amendment, and the performance of the Amended Agreement
have been duly authorized by all necessary corporate action by the Borrowers.
C. No Conflict. The execution, delivery and performance by the
Borrowers of this Amendment, and the performance by the Borrowers of the
Amended Agreement do not and will not (i) violate any provision of any law,
rule or regulation applicable to the Borrowers or Holdings, the Certificate or
Articles of Incorporation or Bylaws of the Borrowers or Holdings or any order,
judgment or decree of any court or other agency or government binding on any
Borrower or Holdings, (ii) conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any contract,
agreement, mortgage or obligation of any Borrower or Holdings except where the
Borrowers or Holdings, as the case may be, shall have obtained waivers or
consents from the other parties to such agreements and disclosed the same to
the Agent, (iii) result in or require the creation or imposition of any lien
upon any of the Borrowers' or Holdings' properties or assets (other than
Permitted Encumbrances) or (iv) require any approval of stockholders or any
approval or consent of any Person under any contract, agreement, mortgage or
obligation to which any Borrower or Holdings is a party (or by which its assets
or properties are bound) except for the approvals or consents which will be
obtained on or before the date hereof and disclosed in writing to the Agent.
D. Governmental Consents. The execution, delivery and performance by
the Borrowers of this Amendment, and the performance by the Borrowers of the
Amended Agreement do not and will not require any registration with, consent or
approval of, or notice to, or other action to, with or by, any
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Federal, state or other governmental authority or regulatory body or
other governmental Person.
E. Binding Obligation. This Amendment and the Amended Agreement are
legally valid and binding obligations of the Borrowers, enforceable against
the Borrowers in accordance with their respective terms except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to or
limiting creditors' rights generally or general principles of equity,
whether such enforceability is considered in a proceeding in equity or at
law, and subject to the discretion of the court before which any proceeding
therefor may be brought.
F. Incorporation of Representations and Warranties From Credit
Agreement. The representations and warranties contained in Section 3 of
the Amended Agreement are and will be true, correct and complete in all
material respects on and as of the effective date of this Amendment to the
same extent as though made on and as of that date, except to the extent
that such representations and warranties specifically relate to an earlier
date, in which case they are true, correct and complete in all material
respects as of such earlier date.
G. Absence of Default. No event has occurred and is continuing or
will result after giving effect to the consummation of the transactions
contemplated by this Amendment which would constitute a Default or an Event
of Default.
H. Accuracy of Information. All factual information heretofore or
contemporaneously furnished by or on behalf of Borrowers to the Agent, the
Co-Agent or any Lender for purposes of or in connection with this Amendment
or any transaction contemplated hereby is true, complete and accurate in
every material respect on the date as of which such information is dated or
certified and as of the date of execution and delivery of this Amendment by
the Agent and the Lenders and such information is not incomplete by
omitting to state any material fact necessary to make such information not
misleading.
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I. Material Adverse Change. Except as disclosed in the financial
statements that have heretofore been delivered to Agent, the Co-Agent and
the Lenders, there has been no material adverse change in the business,
assets, operations, operating properties, prospects or financial or other
condition of the Borrowers since the Closing Date.
SECTION 3. Borrowing Base Amendment. The parties hereto agree that
upon delivery by Agent and Co-Agent to the Borrowers of a notice describing the
final written results and recommendations of the certain field audit completed
on March 7, 1996, they shall negotiate in good faith to make any necessary
revisions to the method of calculation of the Borrowing Base, including but not
limited to amendments to: (a) the definition to "Borrowing Base" set forth in
Schedule A to the Credit Agreement, (b) the definition of "Eligible Account"
set forth in Schedule C to the Credit Agreement, (c) the definition of
"Eligible Inventory" set forth in Schedule D to the Credit Agreement and
(d) Exhibit B to the Credit Agreement. THE ENTIRETY OF THIS AMENDMENT SHALL BE
VOID AND OF NO FURTHER FORCE OR EFFECT UNLESS, WITHIN 30 DAYS OF THE DELIVERY
TO THE BORROWERS OF THE FINAL RESULTS AND RECOMMENDATIONS RESULTING FROM THE
FIELD AUDIT, ALL PARTIES TO THIS AMENDMENT (OR THEIR SUCCESSORS) SHALL (A)
EXECUTE AN AMENDMENT TO THE CREDIT AGREEMENT SETTING FORTH THE REVISIONS TO THE
METHOD OF CALCULATION OF THE BORROWING BASE NEGOTIATED AS DESCRIBED ABOVE OR
(B) ACKNOWLEDGE IN WRITING THAT, AFTER THE NEGOTIATION REFERRED TO ABOVE, NO
REVISIONS TO THE CREDIT AGREEMENT ARE NECESSARY.
Section 4. Conditions to Effectiveness. This Amendment shall become
effective only upon the satisfaction of all of the following conditions
precedent on the date hereof:
A. Amendment. Fully executed copies of this Amendment signed by the
Borrowers, each Lender, the Agent and the Co-Agent shall have been
delivered to the Agent.
B. Opinion of Borrowers' Counsel. The Agent shall have received an
opinion of the Borrowers' counsel in form and substance satisfactory to the
Agent and its counsel covering, without limitations, (i) the due
incorporation, valid existence, good standing and corporate power and
authority to conduct business of Holdings, (ii) each Borrower's due
incorporation, valid existence and good standing, corporate
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power and authority to conduct business, due authorization, execution
and delivery of this Amendment, (iii) enforceability of this Amendment
and (iv) no conflicts with laws generally or Holding's or each
Borrower's certificate or articles of incorporation, by-laws and other
material contracts.
C. Other Documents. The Agent shall have received copies of such
other documents as the Agent may reasonably request.
Section 5. Miscellaneous
A. Effect upon the Credit Agreement. Except as specifically amended
hereunder, the Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed. The execution, delivery and effectiveness of
this Amendment shall not operate as a waiver of any right, power or remedy
of the Agent or any Lender under any Loan Document, nor constitute a waiver
of any provision of any Loan Document or any Default or Event of Default.
B. Section Headings. All section headings are inserted for
convenience of reference only and shall not affect any construction or
interpretation of this Amendment or the Amended Agreement.
C. Execution in Counterparts. This Amendment may be executed in any
number of counterparts and by different parties in separate counterparts,
each of which when so executed and delivered shall be deemed to be an
original, but all of which taken together shall constitute one and the same
agreement.
D. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE INTERNAL LAWS, AS OPPOSED TO THE CONFLICT OF LAWS
PROVISIONS, AND DECISIONS OF THE STATE OF ILLINOIS. This Amendment and the
other Loan Documents constitute the entire understanding among the parties
hereto with respect to the subject matter hereof and supersede any prior
agreements, written or oral, with respect thereto.
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E. Severability. Whenever possible, each provision of this Amendment
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Amendment shall be prohibited by
or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this Amendment or
the Amended Agreement.
F. Binding Agreement. This Amendment shall be binding upon the
Borrowers, the Agent, the Co-Agent and the Lenders and their respective
successors and assigns, and shall inure to the benefit of the Borrowers, the
Agent, the Co-Agent and each Lender and the successors and assigns of the
Borrowers, the Agent, the Co-Agent and the Lenders.
G. JURY TRIAL WAIVER. THE BORROWERS, THE AGENT, THE CO-AGENT AND THE
LENDERS HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND AND RIGHTS UNDER THIS AMENDMENT, THE LOAN DOCUMENTS OR
UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY
IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY LENDING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AMENDMENT OR ANY LOAN DOCUMENT,
AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
H. Costs, Expenses and Taxes. As provided in Section 11.3 of the
Credit Agreement, the Borrowers agree to pay on demand all fees, costs and
expenses incurred by the Agent, the Co-Agent and the Lenders in connection with
the preparation, execution and delivery of this Amendment (including, without
limitation, all attorneys fees). In addition, the Borrowers shall pay any and
all stamp and other taxes and fees payable or determined to be payable in
connection with the execution and delivery of this Amendment and agree to hold
the Agent and the Lenders harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes or fees.
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I. Reaffirmation of Guaranty. Each of the Borrowers as a guarantor
under Section 12 of the Credit Agreement hereby (i) acknowledges and reaffirms
all of its obligations and undertakings under the guaranty under Section 12 of
the Credit Agreement, and (ii) acknowledges and agrees that subsequent to, and
taking into account this Amendment, the guaranty under Section 12 of the Credit
Agreement is and shall remain in full force and effect in accordance with the
terms thereof.
J. Releases. In further consideration of the execution of this
Amendment by the Agent, the Co-Agent and the Lenders, the Borrowers and Holdings
hereby release the Agent, the Co-Agent and the Lenders and all current and
future holders of assignments of or participations in the Obligations and their
respective affiliates, officers, employees, directors, agents and attorneys
(collectively, the "Releasees") from any and all claims, demands, liabilities,
responsibilities, disputes, causes of action (whether at law or in equity) and
obligations of every nature whatsoever, whether liquidated or unliquidated,
known or unknown, matured or unmatured, fixed or contingent (collectively,
"Claims") that any Borrower or Holdings may have against the Releasees which
arise from or relate to any actions which the Releasees may have taken or
omitted to take on or prior to the date hereof with respect to the Obligations,
any Collateral, the Credit Agreement, any other Loan Document and any third
parties liable in whole or in part for the Obligations. For purposes of the
release contained in this paragraph, the term "Borrowers" and "Holdings" shall
mean and include the Borrowers, Holdings and their successors and assigns,
including, without limitation, any trustees acting on behalf of such parties and
any debtor-in-possession in respect of any such party.
[signature pages follow]
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IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their duly authorized officers
on the date first above written.
"BORROWERS"
HOME INNOVATIONS, INC.
By: _____________________________
Title: __________________________
THE RUG BARN, INC.
By: _____________________________
Title: __________________________
DRAYMORE MFG. CORP.
By: _____________________________
Title: __________________________
CALVIN KLEIN HOME, INC.
By: _____________________________
Title: __________________________
R.A. BRIGGS AND COMPANY
By: _____________________________
Title: __________________________
"LENDERS"
LASALLE NATIONAL BANK, as Agent and
Lender
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By: _____________________________
Title: __________________________
GENERAL ELECTRIC CAPITAL
CORPORATION, as Co-Agent and Lender
By: _____________________________
Title: __________________________
Acknowledged and agreed to
DECORATIVE HOME ACCENTS, INC.
By: _____________________________
Title: __________________________