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EXHIBIT 10.15
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Amendment") is
executed as of this 17th day of May, 1996, by and between RADIO SYSTEMS
CORPORATION, a Tennessee corporation with principal offices in Knoxville,
Tennessee ("Borrower") and FIRST AMERICAN NATIONAL BANK, a national banking
association with principal offices in Nashville, Tennessee ""Lender");
W I T N E S S E T H:
WHEREAS, Borrower and Lender entered into that certain Loan and
Security Agreement dated April 3, 1995, as amended by that certain First
Amendment to Loan and Security Agreement dated October 25, 1995 (collectively,
the "Agreement"), pursuant to which Lender has made available to Borrower a line
of credit in the maximum principal amount of $5,000,000, as described therein;
and
WHEREAS, Borrower and Lender desire to further amend the Agreement in
certain respects;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt. and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. Article I of the Agreement is hereby amended by
substituting the following definitions for the existing definitions of the
following terms:
"Borrowing Base" shall mean an aggregate amount equal to the
sum of (a) seventy percent (70%) of Eligible Receivables, plus (b) the
lesser of forty percent (40%) of Eligible Inventory or the Inventory
Borrowing Limit.
"Eligible Receivables" shall mean Receivables arising out of
the sale or other disposition of Borrower's Inventory or the rendering
of services to Borrower's customers, excluding (a) all Receivables that
have been outstanding for more than sixty (60) days after the due dates
of the corresponding invoices or more than one hundred eighty (180)
days after the dates of the corresponding invoices, (b) all Receivables
owing from any account debtor if more than fifty percent (50%) of the
Receivables owed to Borrower by such account debtor are otherwise
ineligible, (c) all returns, allowances, discounts, credits and contra
items, (d) all amounts owed from employees, officers, shareholders,
directors or affiliates and all intra-company items, (e) any
Receivables evidenced by instruments or chattel paper that have not
been endorsed and delivered to Lender by Borrower, and (g) all other
items which Lender in its sole discretion determines to be ineligible.
"Inventory Borrowing Limit" shall mean $800,000.
"Line of Credit" shall mean the revolving line of credit
Lender has made available to Borrower pursuant to the terms and
conditions of the Agreement, in the maximum principal amount not
exceeding the Line of Credit Borrowing Limit.
"Line of Credit Borrowing Limit" shall mean $4,000,000.
"Line of Credit Interest Rate" shall mean an annual rate equal
to the lesser of (a) the maximum contract rate of interest permitted to
be charged under applicable law or (b) the
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interest rate from time to time designated by Lender as its "Index
Rate" plus two percentage points (2%), computed on the basis of a
360-day year, actual number of days elapsed, adjusted daily as the
Index Rate changes; provided, however, such rate shall be reduced to
(a) the Index Rate plus one and three-quarters percentage points (1
3/4%) so long as no Event of Default exists hereunder and Borrower's
tangible net worth (as defined in Section 6.2 of this Agreement) is not
less than $2,750,000 as of September 30, 1996, and (b) the Index Rate
plus one and one-half percentage points (1 1/2%) so long as no Event of
Default exists and Borrower's tangible net worth (as defined in Section
6.2 of this Agreement) is not less than $3,000,000 as of December 31,
1996. Adjustments in the Line of Credit Interest Rate shall be
effective as of September 30, 1996, or December 31, 1996, as
applicable, based upon Lender's satisfactory review of Borrower's
financial statements for the applicable period (with adjustments to be
made, if necessary, based upon Borrower's audited financial statements,
effective December 31, 1996).
"Line of Credit Termination Date" shall mean June 30, 1997.
"Note" shall mean that certain Amended and Restated Master
Secured Promissory Note dated May 17, 1996, in the principal amount not
exceeding the Line of Credit Borrowing Limit, made and executed by
Borrower, payable to the order of Lender, evidencing the indebtedness
of Borrower to Lender in connection with the Line of Credit, together
with any and all extensions, modifications, renewals and/or
replacements thereof.
2. Assignment of Life Insurance. The Secured Obligations shall be
additionally secured by a Collateral Assignment of Life Insurance Policy on the
life of Xxxxxx Xxxx, in an amount not less than $500,000 (the "Assignment"). The
definition of "Security Instruments" is hereby amended to include the
Assignment.
3. Financial Covenants. Subsection 6.2 (Net Worth Requirements),
6.3 (Debt to Worth Ratio), 6.4 (Interest Coverage Ratio) and 6.5 (Subordinated
Debt) are hereby amended to provide as follows:
6.2 Net Worth Requirements. Borrower shall at all times
maintain a minimum tangible net worth of $2,200,000 from June 30, 1996
through September 29, 1996; $2,300,000 from September 30, 1996 through
December 30, 1996; and $2,400,000 thereafter. For purposes of this
covenant "tangible net worth" shall refer to Borrower's total assets
minus total liabilities minus prepaids, intangibles and amounts due
from affiliates plus any debt subordinated to indebtedness of Borrower
to Lender pursuant to subordination agreements satisfactory to Lender,
all determined in accordance with generally accepted accounting
principles consistently applied.
6.3 Debt to Worth Ratio. Borrower shall at all times maintain
a ratio of total liabilities (exclusive of any debt subordinated to
indebtedness of Borrower to Lender pursuant to subordination agreements
satisfactory to Lender) to tangible net worth of not more than 1.75 to
1.0. For purposes of this covenant, "tangible net worth" shall have the
meaning set forth in Section 6.2 hereof.
6.4 Interest Coverage Ratio. Borrower shall maintain a ratio
of income before interest and taxes to interest expense, all determined
in accordance with generally accepted accounting principles
consistently applied, calculated quarterly on a year-to-date basis, of
not less than 1.25 to 1.0.
6.5 Subordinated Debt. Any and all indebtedness of Borrower to
Sirrom Capital Corporation, together with any and all future
indebtedness of Borrower to its shareholders or
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any other investors in Borrower, shall be subordinated to the
indebtedness of Borrower to Lender pursuant to the subordination
agreements satisfactory to Lender in all respects.
4. Reporting Requirements. Until further notice from Lender to
Borrower, Borrower shall submit to Lender on a weekly (rather than monthly)
basis certifications of inventory, in form satisfactory to Lender in all
respects.
5. Upfront Commitment Fee. Upon execution of this Amendment, Borrower
shall pay to Lender a non-refundable commitment fee of $10,000 (the "Upfront
Fee").
6. Unused Portion Commitment Fee. In addition to the Upfront Fee,
Borrower shall pay to Lender a non-refundable commitment fee equal to
one-quarter percent (1/4%) per annum of the average, unfunded portion of the
Loan, payable monthly, in arrears, beginning June 1, 1996, and on the first day
of every month thereafter.
7. Waiver. Lender hereby waives compliance by Borrower with the
financial covenants set forth in Sections 6.2 (Net Worth Requirements), Section
6.3 (Debt to Worth Ratio) and Section 6.4 (Interest Coverage Ratio) for any
period ending prior to the effective date of this Amendment. This does not
constitute a waiver of these covenants for any other period.
8. Representations and Warranties. Borrower represents and warrants
that the representations and warranties set forth in Article IV of the Agreement
are true and correct on and as of the date of this Amendment, and that no
default or Event of Default exists under the Agreement or any other documents
executed in connection therewith.
9. Miscellaneous. Except as amended hereby, the Agreement shall remain
in full force and effect. Except as expressly set forth herein, this Amendment
does not constitute a waiver of any default or Event of Default under the
Agreement, whether or not Lender is aware of any such default or Event of
Default.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
LENDER:
FIRST AMERICAN NATIONAL BANK
By: /s/ Xxxx X. Xxxxxxx
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Title:
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BORROWER:
RADIO SYSTEMS CORPORATION
By: /s/ Xxxxx Xxxx
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Title: President
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