Exhibit 10.3
THIRD AMENDMENT TO SECOND AMENDED
AND RESTATED LOAN AGREEMENT
This Third Amendment to Second Amended and Restated Loan Agreement dated as
of September 4, 1998, by and between Citizens Bank of Massachusetts (herein
"BANK"), and DM Management Company, a Delaware corporation (herein "BORROWER").
WITNESSETH:
WHEREAS, BANK and BORROWER are parties to that certain Loan Agreement made
as of June 5, 1997 by and between BANK and BORROWER, as the same has been
amended and restated in a certain Amended and Restated Loan Agreement dated as
of October 31, 1997, and in a certain Second Amended and Restated Loan Agreement
dated March 5, 1998, and as amended by a certain First Amendment to Second
Amended and Restated Loan Agreement dated as of June 30, 1998, and Second
Amendment to Second Amended and Restated Loan Agreement dated as of September 4,
1998 (as so restated and amended, the "Loan Agreement");
WHEREAS, BORROWER and the BANK wish to amend the Loan Agreement as more
particularly hereafter set forth. Capitalized terms used herein without
definition shall have the meanings ascribed to them in the Loan Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereby agree that the Loan Agreement is hereby amended as
follows:
1. Section 1.01 of the Loan Agreement is hereby amended as follows:
(a) By deleting the definition of ADVANCE FORMULA and
substituting the following in lieu thereof:
"'ADVANCE FORMULA' shall mean the aggregate of (A) fifty
percent (50%) of the lower of (i) cost or (ii) market value of
ELIGIBLE INVENTORY, (B) One Million Dollars ($1,000,000.00), (C)
one hundred percent (100%) of the lower of (i) cost or (ii)
market value of IN TRANSIT INVENTORY to a maximum value of Two
Million Five
Hundred Thousand Dollars ($2,500,000.00) at any time, (D) fifty
percent (50%) of the lower of (i) cost or (ii) market value of IN
TRANSIT INVENTORY in excess of Two Million Five Hundred Thousand
Dollars ($2,500,000.00), and (E) during the SPECIAL PERIOD,
eighty percent (80%) of the cost of new materials handling
equipment delivered to the BORROWER (and upon which the BANK
shall hold a first priority security interest hereunder) and with
respect to which BORROWER has delivered to the BANK invoices
satisfactory to the BANK showing delivery to BORROWER of such
equipment, to a maximum delivered cost of Nine Million Five
Hundred Thousand Dollars ($9,500,000.00) provided however that
upon the BORROWER entering into the CITIZENS LEASE, no further
sums shall be included in this ADVANCE FORMULA pursuant to this
Clause E.
(b) By inserting a definition of CITIZENS LEASE as follows:
"CITIZENS LEASE" shall mean a lease of materials handling
equipment by Citizens Financial Group or any of its subsidiaries,
as lessor, to BORROWER, as lessee, in an amount not to exceed
Nine Million Five Hundred Thousand Dollars ($9,500,000.00)."
(c) By deleting the definition of IN TRANSIT INVENTORY and
substituting therefor the following:
"IN TRANSIT INVENTORY" shall mean inventory (A) which is in
the possession of a third party for delivery to BORROWER, after
delivery of a LETTER OF CREDIT to the vendor thereof (B) which
consists of finished first quality goods, and (C) with respect to
which at such time as the LETTER OF CREDIT shall be presented for
payment (i) title will have passed to BORROWER, and (ii) a first
security interest will have attached pursuant to the SECURITY
AGREEMENT."
(d) By deleting the definition of REVOLVING CREDIT COMMITMENT
AMOUNT and substituting the following in lieu thereof:
"REVOLVING CREDIT COMMITMENT AMOUNT' (sometimes the
'REVOLVING COMMITMENT AMOUNT') shall mean the sum of Eight
Million Five Hundred Thousand Dollars ($8,500,000.00) except that
during the SPECIAL
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PERIOD it shall mean Twenty-Three Million Five Hundred Thousand
Dollars ($23,500,000.00) (unless BORROWER delivers written notice
to the BANK requesting a lesser amount and BANK confirms same in
writing), provided however that any such increase as aforesaid
(consisting of Fifteen Million Dollars ($15,000,000)) shall be
reduced by the amount financed under the CITIZENS LEASE."
(e) By deleting the definition of REVOLVING NOTE and
substituting the following in lieu thereof:
"REVOLVING NOTE' shall mean a promissory note in the face
amount of REVOLVING CREDIT COMMITMENT AMOUNT (or if there be more
than one REVOLVING CREDIT COMMITMENT AMOUNT during any period,
the highest such REVOLVING CREDIT COMMITMENT AMOUNT during any
such period), issued by the BORROWER to the order of the BANK and
evidencing the obligation to repay the REVOLVING LOAN, as the
same may be amended from time to time, including without
limitation, as replaced by the REPLACEMENT REVOLVING NOTE and
SECOND REPLACEMENT REVOLVING NOTE. The REVOLVING NOTE , as so
replaced, was originally in the form of Exhibit '1.01.C'".
(f) By inserting a definition of SECOND REPLACEMENT REVOLVING
NOTE as follows:
"SECOND REPLACEMENT REVOLVING NOTE' shall mean the
promissory note dated September 4, 1998 in the face amount of
Twenty-Three Million Five Hundred Thousand Dollars
($23,500,000.00) provided for under the LOAN AGREEMENT, issued by
the BORROWER to the order of the BANK in substitution and
replacement, and not in payment, of the REPLACEMENT REVOLVING
NOTE and evidencing the obligation to repay the REVOLVING LOAN."
(g) By deleting the first four lines of the definition of REAL
ESTATE MORTGAGE and substituting therefor the following:
"REAL ESTATE MORTGAGE" shall mean a mortgage of the REAL
ESTATE, as the same may hereafter be amended from time to time,
granted by the BORROWER to the BANK securing repayment of the
OBLIGATIONS
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including without limitation the REAL ESTATE NOTE, which MORTGAGE
shall include without limitation:"
(h) By inserting a definition of SPECIAL EVENT as follows:
"SPECIAL EVENT" shall mean that on or before December 31,
1998 BORROWER has not received a written commitment to provide
mortgage funding for the Tilton, New Hampshire real estate
currently owned by the BORROWER, which commitment is satisfactory
to the BANK in its sole judgment as to amount committed and the
term contracted."
(i) By inserting a definition of SPECIAL PERIOD as follows:
"SPECIAL PERIOD" shall mean the period commencing September
11, 1998 and terminating March 31, 1999 unless the SPECIAL EVENT
shall have occurred in which case the SPECIAL PERIOD shall
terminate December 31, 1998."
2. Section 2.16 is hereby deleted and the following substituted in lieu
thereof:
"2.16 The initial BORROWING shall be in the form of the
making of ADVANCE(S) pursuant to Section 2.01 in an aggregate
principal amount which, when taken together with the proceeds of
the TERM LOAN and the INTERIM LOAN will be at least equal to the
aggregate outstanding principal amount of loans under existing
agreements with Fleet Bank. Such proceeds of such initial
ADVANCE(S) and of the TERM LOAN and of the INTERIM LOAN were
applied to repay in full all such outstanding loans. The
proceeds of all subsequent ADVANCES shall be applied to the
working capital needs of the BORROWER and for the cost of certain
materials handling equipment."
3. Section 5A.05 is hereby deleted and the following substituted in lieu
thereof:
"5A.05 The term of the BRIDGE NOTE having expired and all
of the conditions of Article XV and Section 2.08 having been
satisfied and no EVENT OF DEFAULT having occurred, the BANK
agreed to extend the term for repayment of the BRIDGE LOAN until
December 31, 1998
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and to reprice the same in the manner provided. Such BRIDGE LOAN
was evidenced by the NEW BRIDGE NOTE. The BORROWER having
represented that all of the conditions of Article XV and Section
2.08 have been satisfied and remain fulfilled as of the date
hereof, and that no EVENT OF DEFAULT has occurred, provided that
no SPECIAL EVENT shall have occurred on or before December 31,
1998, the BANK agrees to further extend the term of the BRIDGE
LOAN until March 31, 1999 and to reprice the same in the manner
provided in Section 5A.08 hereof."
4. Concurrently herewith, BORROWER shall execute and deliver to the BANK
a replacement NEW BRIDGE NOTE to reflect the amended maturity date of such note.
All references in the Loan Agreement to the "NEW BRIDGE NOTE" shall hereafter be
deemed to refer to such "REPLACEMENT NEW BRIDGE NOTE" executed of even date
herewith.
5. Section 5A.08 is hereby deleted and the following substituted in lieu
thereof:
"5A.08 The BORROWER shall from March 5, 1998 until the
full balance of principal and interest on the BRIDGE LOAN shall
have been paid in full, pay interest monthly in arrears on the
daily outstanding balance of the BRIDGE LOAN from time to time
outstanding at the rate provided in Section 5A.04. for each
INTEREST PERIOD (unless otherwise provided herein), provided
however that if no SPECIAL EVENT shall have occurred on or before
December 31, 1998 then, (and only in such case), from January 1,
1999 until March 31, 1999 interest for such period shall be paid
at the SPECIAL LIBOR RATE determined with respect to an INTEREST
PERIOD of ninety (90) days."
6. Section 5B.02 is hereby deleted and the following substituted in lieu
thereof:
"5B.02 The SHORT TERM REVOLVING LOAN shall be paid in full
on the first to occur of (1) the obtaining of permanent financing
with respect to such Project or (2) March 31, 1999, provided
however that if the SPECIAL EVENT shall have occurred, such
payment date shall be December 31, 1998."
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7. Concurrently herewith, BORROWER shall execute and deliver to the BANK
a replacement SHORT TERM REVOLVING NOTE to reflect the amended maturity date(s)
of such note. All references in the Loan Agreement to "SHORT TERM REVOLVING
NOTE" shall hereafter be deemed to refer to such "REPLACEMENT SHORT TERM
REVOLVING NOTE" executed of even date herewith.
8. Section 11.01 is hereby deleted and the following substituted in lieu
thereof:
"11.01 The BORROWER will not issue evidences of
INDEBTEDNESS nor create, assume, become contingently liable for,
nor suffer to exist INDEBTEDNESS for borrowed money in addition
to indebtedness to the BANK; provided, however, that BORROWER (a)
may incur liabilities other than for money borrowed which are
incurred or arise in the ordinary course of the BORROWER'S
business, (b) may in any fiscal year of the BORROWER grant
purchase money security interests in connection with the purchase
of property with a purchase price not to exceed Two Hundred Fifty
Thousand Dollars ($250,000.00) (c) may borrow an aggregate sum up
to One Million Dollars ($1,000,000.00) from the Belknap County
Development Council of the State of New Hampshire (the "Council")
solely for the purchase of equipment to be used in the operation
of the Tilton, N.H. facility and may grant a purchase money
security interest to said Council in conection therewith, and (d)
may enter into the CITIZENS LEASE provided that the amount of
INDEBTEDNESS secured by such purchase money security interests
permitted above, shall not exceed the lesser of (i) the purchase
price therefor or (ii) the fair market value of the property
financed and such purchase money security interest shall not
relate to any other assets or property of the BORROWER except the
property thereby acquired."
9. Paragraph 11.11 of the Loan Agreement is hereby deleted in the
following inserted in lieu thereof:
"11.11 The BORROWER will not, for any four (4) consecutive
fiscal quarters, permit DEBT SERVICE COVERAGE to be less than
1.25 to 1. Such covenant shall be calculated quarterly based
upon the preceding 12 months of operations commencing with the
twelve month period ending June 30, 1997. Notwithstanding the
foregoing, the calculation for the quarters ending June 30, 1998,
September 30, 1998, December 31, 1998 and March 31,
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1999 shall be made without any reference to UNFINANCED CAPITAL
EXPENDITURES."
This Amendment shall take effect as of the date first above written.
Except as hereby amended, the Loan Agreement is hereby ratified, confirmed
and republished.
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IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of
the date first above written.
Witness: DM MANAGEMENT COMPANY
/s/ Richard J. Snyder
- ------------------------------ By: /s/ Olga L. Conley
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Olga L. Conley, Chief Financial Officer
CITIZENS BANK OF MASSACHUSETTS
By: /s/ Lori B. Leeth, SVP
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Lori B. Leeth, Senior Vice President
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