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EXHIBIT 10.50
AMENDMENT NO. 9 TO
LOAN AND SECURITY AGREEMENT
AMENDMENT NO. 9, dated as of June 30, 1999, to the LOAN AND SECURITY
AGREEMENT, dated as of March 28, 1997, as amended by the FIRST AMENDMENT dated
as of April 10, 1997, the SECOND AMENDMENT dated as of July 1, 1997, the THIRD
AMENDMENT dated as of August 1, 1997, the FOURTH AMENDMENT dated as of November
22, 1997, the FIFTH AMENDMENT dated as of July 10, 1998, the SIXTH AMENDMENT
dated as of August 31, 1998, the SEVENTH AMENDMENT dated as of December 31,
1998 and the EIGHTH AMENDMENT dated as of May 7, 1999 (as so amended, the "Loan
and Security Agreement"), between FOOTHILL CAPITAL CORPORATION, a California
corporation, with a place of business located at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333, and DORSEY TRAILERS, INC., a
Delaware corporation, with its chief executive offices located at 2727 Paces
Ferry Road, One Paces Ferry West, Suite 1700, Atlanta, Georgia 30339.
Preamble
The Borrower has requested Foothill to amend the Loan and Security
Agreement to, among other things, (i) adjust the advance rate with respect to
Eligible Accounts and Eligible Inventory as described below, (ii) amend the Net
Worth financial covenant for the fiscal quarter ended June 30, 1999 and for
each fiscal quarter thereafter, (iii) provide for an adjustment of the interest
rate if the Borrower satisfies certain financial tests, (vi) extend the Renewal
Date from March 28, 2002 to March 28, 2004, and (v) adjust the early
termination premium as described below. Accordingly, the Borrower and Foothill
hereby agree as follows:
1. Definitions. All terms used herein which are defined in the
Loan and Security Agreement and not otherwise defined herein are used herein as
defined therein.
2. Appraised Inventory Liquidation Value. The definition of
"Appraised Inventory Liquidation Value" is hereby amended in its entirety to
read as follows:
"Appraised Inventory Liquidation Value" means (i) in the case of Used
Trailer Inventory, the appraised orderly liquidation value of such Used
Trailer Inventory determined by Taylor & Martin, Incorporated or another
appraiser reasonably acceptable to Foothill and (ii) in the case of
Inventory (including raw materials, work-in-process and finished goods)
other than Used Trailer Inventory, the appraised orderly liquidation value
of such Inventory, determined by MB Valuation Services, Inc. or another
appraiser reasonably acceptable to Foothill. The Appraised Inventory
Liquidation Value shall be based on the most recent appraisal obtained by
Foothill or by Borrower."
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3. Borrowing Base. Clauses (x) and (y) of Section 2.1(a) of the
Loan and Security Agreement are hereby amended in their entirety to read as
follows:
"(x) the sum of (I) the lesser of (i)(A) 85% of Eligible Accounts
other than that portion of any Eligible Accounts that (1) is or will
be satisfied by the transfer to the Borrower of Used Trailer
Inventory or (2) is subject to a Contra Obligation, less (B) the
amount, if any, of the Dilution Reserve, and (ii) on and after June
1, 1997, an amount equal to Borrower's Collections with respect to
Accounts for the immediately preceding 30 day period, and (II) the
Overadvance Amount if any, plus
(y) the lowest of (i) $7,000,000, (ii) the sum of (A) the lesser of
(1) 35% of the value and (2) 100% of the Appraised Inventory
Liquidation Value, of Eligible Inventory constituting raw materials
Inventory, (B) prior to January 1, 2000, 40% of the value of Eligible
Used Trailer Inventory, provided, that, the amount of this subclause
(ii)(B) shall not, without the prior written consent of Foothill,
exceed $200,000, and (C) the lesser of (1) 70% of the value, and (2)
100% of the Appraised Liquidation Value, of Eligible Inventory
constituting finished goods Inventory, and (iii) 250% of the amount
of credit availability created by clause (x) above; minus"
4. Term Loan. Section 2.3 of the Loan and Security Agreement is
hereby amended in its entirety to read as follows:
"Foothill made a term loan (the "Term Loan") to Borrower on or about
May 7, 1999 in the original principal amount of $200,000. The Term Loan
shall be repaid in full on June 30, 1999. All amounts outstanding under
the Term Loan shall constitute Obligations."
5. Interest Rate. Section 2.5(a) of the Loan and Security Agreement
is hereby amended in its entirety to read as follows:
"(a) Interest Rate. Except as provided in clause (b)
below, all obligations (except for undrawn letters of Credit) shall bear
interest at a per annum rate of 2.0 percentage points above the Reference
Rate; provided, however, (i) if the Net Income of the Borrower for the
fiscal year ended December 31, 1999, as reported in the year-end audited
financial statements of the Borrower delivered to Foothill pursuant to
Section 6.3, is in excess of $1,500,000, such per annum rate of interest
shall be permanently reduced by 0.5 percentage points, (ii) if the Net
Income of the Borrower for the fiscal year ended December 31, 2000, as
reported in the year-end audited financial statements of the Borrower
delivered to Foothill pursuant to Section 6.3, is in excess of $2,000,000,
such per annum rate of interest shall be permanently reduced by 0.5
percentage points, (iii) if the Net Worth of the Borrower as of any fiscal
year-end of the Borrower occurring on or after December 31, 1999, as
reported in the year-end audited financial statements of the Borrower
delivered to Foothill pursuant to Section 6.3, is in excess of $2,500,000,
such per annum rate of interest shall be permanently reduced by 0.5
percentage points, and (iv) if the Net Worth of the Borrower as of any
fiscal year-end of the Borrower occurring on or after December 31, 1999,
as reported in the year-end audited financial statements of
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the Borrower delivered to Foothill pursuant to Section 6.3, is in excess
of $4,000,000, such per annum rate of interest shall be permanently
reduced by 0.5 percentage points. The reductions in subsections (i)
through (iv) above shall be calculated on a cumulative basis (for example
if the Borrower satisfies each of the conditions set forth in subsections
(i) through (iv) above, the interest rate shall be reduced to an amount
equal to the Reference Rate), and any such reductions shall be effective
as of the date the relevant year-end audited financial statements descried
above are delivered to Foothill."
6. Term; Automatic Renewal. Section 3.4 of the Loan and Security
Agreement is hereby amended in its entirety to read as follows:
"3.4 TERM; AUTOMATIC RENEWAL. This Agreement shall become effective
upon the execution and delivery hereof by Borrower and Foothill and shall
continue in full force and effect for a term ending on the date (the
"Renewal Date") that is seven (7) years from the Closing Date and
automatically shall be renewed for successive two (2) year periods
thereafter, unless sooner terminated pursuant to the terms hereof. Either
party may terminate this Agreement effective on the renewal Date or on any
two (2) year anniversary of the renewal Date by giving the other party at
least 90 days prior written notice. The foregoing notwithstanding,
Foothill shall have the right to terminate its obligations under this
Agreement immediately and without notice upon the occurrence and during
the continuation of an Event of Default."
7. Section 3.6 of the Loan and Security Agreement. Section 3.6 of
the Loan and Security Agreement is hereby amended in its entirely to read as
follows:
"3.6 EARLY TERMINATION BY BORROWER. The provisions of Section 3.4
that allow termination of this Agreement by Borrower only on the Renewal
Date and certain anniversaries thereof notwithstanding, Borrower has the
option, at any time upon 30 days prior written notice to Foothill, to
terminate this Agreement by paying to Foothill, in cash, the Obligations
(including an amount equal to 102% of the undrawn amount of the Letters of
Credit, such amount to be held as cash collateral and applied to the
Obligations and/or returned to the Borrower in accordance with Section 2.2
(e)), in full, together with a premium (the "Early Termination Premium")
equal to (i) if such date is on or prior to March 28, 2000, three percent
(3.00%) of the Maximum Amount, (ii) if such date is after March 28, 2000
and on or prior to March 28, 2002, two percent (2%) and (ii) if such date
is after March 28, 2002, one percent (1%)."
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8. Financial Covenants. Section 7.20(b) of the Loan and Security
Agreement is hereby amended in its entirety to read as follows:
"(b) Net Worth. Net Worth of at least the amount indicated
below for each date set forth below:
Fiscal Quarter Ended Net Worth
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June 30, 1997 ($3,000,000)
September 30, 1997 ($5,500,000)
December 31, 1997 ($7,500,000)
March 31, 1998 ($7,000,000)
June 30, 1998 ($6,500,000)
September 30, 1998 ($6,000,000)
December 31, 1998 ($5,500,000)
March 31, 1999 ($4,500,000)
June 30, 1999 ($4,250,000)
September 30, 1999 ($3,750,000)
December 31, 1999 ($3,250,000)
March 31, 2000 ($2,750,000)
June 30, 2000 ($2,000,000)
September 30, 3000 ($1,250,000)
December 31, 2000 ($500,000)
March 31, 2001 $250,000
June 30, 2001 $1,000,000
September 30, 2001 $1,750,000
December 31, 2001 $2,500,000
March 31, 2001 and thereafter $3,250,000"
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9. Conditions. This Amendment shall become effective only upon
satisfaction in full of the following conditions precedent (the first date upon
which all such conditions have been satisfied being herein called the
"Effective Date"):
(a) The representations and warranties contained in this Amendment
and in Section 5 of the Loan and Security Agreement and each other Loan
Document shall be correct on and as of the Effective Date as though made on and
as of such date (except where such representations and warranties relate to an
earlier date in which case such representations and warranties shall be true
and correct as of such earlier date); no Default or Event of Default shall have
occurred and be continuing on the Effective Date or result from this Amendment
becoming effective in accordance with its terms.
(b) Foothill shall have received a counterpart of this Amendment,
duly executed by the Borrower.
(c) The Borrower shall have repaid the Term Loan in full.
(d) All legal matters incident to this Amendment shall be
satisfactory to Foothill and its counsel; provided, however, that the Borrower
shall provided to Foothill, within 30 days of the Effective Date, updated
certified copies of its organizational documents, an incumbency certificate,
resolutions authorizing this Amendment and an opinion of counsel as to
Borrower's representations set forth in Section 10(a) through (d) hereof, all
in form and substance satisfactory to Foothill and its counsel; the failure of
Borrower to so timely provide such documents, certificates and opinion shall
constitute an Event of Default under the Loan and Security Agreement.
10. Representations and Warranties. The Borrower hereby represents
and warrants to Foothill as follows:
(a) The Borrower (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and (ii)
has all requisite corporate power, authority and legal right to execute,
deliver and perform this Amendment, and to perform the Loan and Security
Agreement, as amended hereby.
(b) The execution, delivery and performance of this Amendment by the
Borrower, and the performance by the Borrower of the Loan and Security
Agreement, as amended hereby (i) have been duly authorized by all necessary
corporate action, (ii) do not and will not contravene its charter or by-laws or
any applicable law, and (iii) except as provided in the Loan Documents, do not
and will not result in the creation of any Lien upon or with respect to any of
its respective properties.
(c) This Amendment and the Loan and Security Agreement, as amended
hereby, constitute the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with its terms.
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(d) No authorization or approval or other action by, and no notice
to or filing with, any Governmental Authority is required in connection with
the due execution, delivery and performance by the Borrower of this Amendment
and the performance by the Borrower of the Loan and Security Agreement as
amended hereby.
(e) The representations and warranties contained in Section 5 of the
Loan and Security Agreement and each other Loan Document are correct on and as
of the Effective Date as though made on and as of the Effective Date (except to
the extent such representations and warranties expressly relate to an earlier
date in which case such representations and warranties shall be true and correct
as of such earlier date), and no Default or Event of Default has occurred and
is continuing on and as of the Effective Date or will result from this
Amendment becoming effective in accordance with its terms.
11. Continued Effectiveness of the Loan and Security Agreement and
Loan Documents. The Borrower hereby (i) confirms and agrees that each Loan
Document to which it is a party is, and shall continue to be, in full force and
effect and is hereby ratified and confirmed in all respects except that on and
after the Effective Date of this Amendment all references in any such Loan
Document to "the Loan and Security Agreement", the "Agreement", "thereto",
"thereof", "thereunder" or words of like import referring to the Loan and
Security Agreement shall mean the Loan and Security Agreement as amended by
this Amendment and (ii) confirms and agrees that to the extent that any such
Loan Document purports to assign or pledge to Foothill, or to grant a security
interest in or Lien on, any collateral as security for the obligations of the
Borrower from time to time existing in respect of the Loan and Security
Agreement and the Loan Documents, such pledge, assignment and/or grant of the
security interest or Lien is hereby ratified and confirmed in all respects.
12. Miscellaneous.
(a) This Amendment may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
(b) Section and paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
(c) This Amendment shall be governed by, and construed in accordance
with, the laws of the State of California.
(d) The Borrower will pay on demand all reasonable fees, costs and
expenses of Foothill in connection with the preparation, execution and delivery
of this Amendment including, without limitation, reasonable fees disbursements
and other charges of Schulte Roth & Zabel LLP, counsel to Foothill.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed and delivered.
DORSEY TRAILERS, INC.,
a Delaware corporation
By: /s/ Charles A. Chesnutt
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Name: Charles A. Chesnutt
Title: Treasurer
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /S/ Victor Barwig
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Name: Victor Barwig
Title: Vice President
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