Exhibit 10.1
RESTATED SECOND AMENDMENT TO LOAN AGREEMENT
RESTATED SECOND AMENDMENT TO LOAN AGREEMENT ("Second Amendment") made as
of August 10, 2005 by and among XXXX XXXXXXX AUCTIONS, INC., a Delaware
corporation (the "Borrower"), XXXX XXXXXXX AUCTIONS REAL ESTATE, LLC, a Delaware
limited liability company (the "Mortgage Borrower") and PNC BANK, NATIONAL
ASSOCIATION ("Bank").
W I T N E S S E T H:
WHEREAS, the Borrower, the Mortgage Borrower and the Bank are parties to a
certain Loan Agreement dated as of May 28, 2004, as amended by the First
Amendment thereto dated as of December 22, 2004 (as so amended, the
"Agreement");
WHEREAS, the Borrower has requested the Bank's consent to the acquisition
by Spectrum PMI, Inc., a Delaware corporation, a newly-formed 80%
indirectly-owned Subsidiary of the Borrower, of all of the issued and
outstanding capital stock of A-Xxxx Precious Metals, Inc., a New York
corporation, notwithstanding the restrictions of the Agreement to the contrary;
WHEREAS, the Bank is willing to consent to such transaction, subject to
the terms and conditions of this Second Amendment;
WHEREAS, the Borrower has requested the Bank to renew and increase the
maximum principal amount of the Line of Credit, subject to the terms and
conditions of this Second Amendment;
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and other good and valuable consideration, receipt of which is hereby
acknowledged, it is agreed as follows:
1. Definitions.
(a) Capitalized terms used in this Second Amendment without
definition shall have the respective meanings assigned to such terms in
the Agreement.
(b) New defined terms, are added to Section 1.1 as follows:
"A-Xxxx" shall mean A-Xxxx Precious Metals, Inc., a New York
corporation.
"Spectrum PMI" shall mean Spectrum PMI, Inc., a Delaware
corporation.
(c) Existing defined terms in Section 1.1 are amended and restated
as follows:
"Borrowing Base Certificate" shall mean a certificate substantially
in the form of Exhibit C to the Second Amendment.
"Eligible Afinsa Accounts" shall mean each Account (exclusive of
amounts due in respect of finance charges) of an Obligor in which Afinsa
is the Customer, which the Bank, in its sole, but reasonable credit
judgment, shall deem to be an Eligible Afinsa Account based on such
considerations as the Bank may from time to time deem appropriate. An
Afinsa Account shall not be deemed eligible unless such Account is subject
to the Bank's first priority perfected security interest and no other
Lien, and is evidenced by an invoice, xxxx of lading or other documentary
evidence satisfactory to the Bank. In addition, no Afinsa Account shall be
an Eligible Afinsa Account
(A) if Afinsa has declared a default under Section 12.1 or 12.2 of
the agreement between Afinsa and the Borrower dated August 1, 2003;
(B) if it is unpaid thirty (30) or less days after the invoice
date;
(C) if it is unpaid more than ninety (90) days after the invoice
date;
(D) to the extent that the Account would be excluded under clauses
(c), (d), (e), (g), (h), (j), (k), (l), (m), (n) or (o) of the definition
of "Eligible Accounts."
"Eligible Inventory" shall mean only that Inventory (excluding
packaging and supplies) of the Obligors that is and at all times continues
to be, acceptable to the Bank in all respects in its sole but reasonable
discretion. Standards of eligibility may be fixed and revised by the Bank
in the Bank's reasonable discretion. In general, the Bank will deem
Inventory to be eligible if it:
(A) is owned solely by an Obligor, subject to a perfected Lien in
favor of the Bank, and free from any other Lien with the exception of a
Lien constituting a Permitted Encumbrance;
(B) can be sold in the ordinary course of business through normal
business channels and does not constitute damaged items;
(C) has been adequately described on certificates or other
disclosure statements given to the Bank;
(D) if any of the goods is represented or covered by documents of
title, instruments or chattel paper, the Obligor is the owner, and has
possession of, those documents, instruments or chattel paper, and none of
such goods, documents of title, instruments or chattel paper has been
transferred nor has any security interest been granted therein to any
other Person; and
(E) is under the direct control of the Obligor at a location
within the United States.
Any Inventory consisting of coins will not be Eligible Inventory
while such coins are in the possession of "graders."
"Expiration Date" shall mean August 31, 2007, or such later
Expiration Date designated by the Bank by written notice from the Bank to
the Borrower.
"Guarantor" shall mean each of Spectrum Numismatics International,
Inc., a California corporation ("Spectrum"), Spectrum Auction Services,
LLC, a Delaware limited liability company, Teletrade, Inc., a Delaware
corporation ("Teletrade") Spectrum Numismatic Auctions, Inc., a California
corporation, Ivy & Xxxxx Philatelic Auctions, Inc., a Texas corporation,
Xxxx Xxxxxxx Galleries, Inc., a New York corporation, Kensington
Associates, LLC, a California limited liability company, North American
Certified Trading, LLC, a California limited liability company, Kingswood
Coin Auctions, LLC, a Delaware limited liability company, Superior Sports
Auctions, LLC, a Delaware limited liability company, Xxxxxx & Xxxxxx
Auctions, LLC, a Delaware limited liability company, Xxxx Xxxxxxx Nutmeg
Auctions, Inc., a Delaware corporation, X.X. Xxxxxx, Inc., a Delaware
corporation and, as to the Obligations other than the Mortgage Loan, the
Mortgage Borrower.
"Line of Credit Term" shall mean the Closing Date through August 31,
2007, or such later Expiration Date designated by the Bank by written
notice from the Bank to the Borrower.
"Permitted Encumbrances" shall mean the following encumbrances: (i)
Liens for taxes or assessments or other governmental charges or levies,
either not yet due and payable, or, if due and payable, to the extent
payment thereof is being contested in good faith, by proper proceedings
diligently pursued, if adequate reserves therefor have been established on
the books of the an Obligor in conformity with GAAP; (ii) pledges or
deposits securing obligations under worker's compensation, unemployment
insurance, social security or public liability laws or similar
legislation; (iii) pledges or deposits securing bids, tenders, contracts
(other than for Indebtedness), statutory obligations, surety and appeal
bonds or leases, or other obligations of like nature, to which an Obligor
is a party as lessee made in the ordinary course of business; (iv)
deposits securing public or statutory obligations of an Obligor; (v)
workers', mechanics', suppliers', carriers', warehousemen's or other
similar liens arising in the ordinary course of business and securing
indebtedness aggregating not in excess of $100,000 at any time
outstanding, not yet due and payable; (vi) deposits securing, or in lieu
of, surety, appeal or customs bonds in proceedings to which an Obligor is
a party; (vii) any attachment or judgment Lien, unless the judgment it
secures shall not, within 30 days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall not have
been discharged within 30 days after the expiration of any such stay;
(viii) Liens securing Indebtedness subject to a subordination agreement in
form and substance reasonably satisfactory to the Bank and its counsel;
(ix) Liens of a depository institution arising by virtue of statutory or
common law relating to banker's Liens, rights of setoff or similar
rights and remedies as to deposit accounts or other funds maintained with
such institution; (x) purchase money Liens upon or in any property (other
than real property) of Borrower and Liens to secure Capital Lease
Obligations and any related payment and performance obligations
thereunder; (xi) Liens in favor of customs and revenue authorities arising
from the importation of goods. ; (xii) zoning restrictions, easements,
licenses, or other restrictions on the use of real property or other minor
irregularities in title thereto, so long as the same do not materially
impair the use, value, or marketability of such real property, leases or
leasehold estates and (xiii) Liens in favor of the Bank.
2. Amendment of Section 2.1. Section 2.1 of the Agreement is amended and
restated to provide as follows:
1.1 (a) Revolving Advances. Subject to the terms and conditions set
forth in this Agreement, the Bank will make Advances to the Borrower
in aggregate amounts outstanding at any time not to exceed the
lesser of (x) $12,500,000 (the "Commitment") less the aggregate
amount of outstanding Letters of Credit or (y) an amount equal to
the sum of:
(i) 85%, of the value of the Eligible Accounts, plus
(ii) 60% of the value of the Eligible Afinsa Accounts, to a maximum
of $3,000,000 plus
(iii) 50% of the value of the Eligible Inventory to a maximum of
$6,250,000 plus
(iv) 70% of the value of Eligible Consignor Advance Obligations,
provided, that (A) the limit for any single Consignor Advance
Obligation shall be $1,750,000 (after application of the 70%
Advance percentage) and (B) at no time shall the amount under
this clause (iv) exceed the lesser of $3,000,000, or 35% of
the aggregate value of the collectibles pledged to Obligors in
respect of the Eligible Consignor Advance Obligations, as
reasonably determined by management, minus
(v) such reserves as the Bank may reasonably deem proper and
necessary from time to time, including, without limitation, a
reserve for Inventory remaining unsold after 364 days.
The amount derived from (x) the sum of Sections 2.1(a)(i),(ii),
(iii) and (iv) minus (y) Section 2.1(a)(v) at any time and from time to
time shall be referred to as the "Formula Amount". The Advances shall be
evidenced by a promissory note (the "Line of Credit Note") substantially
in the form attached hereto as Exhibit A.
(b) Discretionary Rights. The Advance rates specified in Section
2.1(a) above may be increased or decreased by the Bank at any time and
from time to time in the exercise of its reasonable discretion. The
Borrower
consents to any such increases or decreases and acknowledges that
decreasing the Advance rates or increasing the reserves may limit or
restrict Advances requested by the Borrower.
3. Amendment of Section 2.4. Section 2.4 of the Agreement is amended and
restated as follows:
1.4 Repayment of Advances.
(a) The Advances shall be due and payable in full on the last
day of the Line of Credit Term subject to earlier prepayment as provided
in this Agreement.
(b) The Borrower recognizes that the amounts evidenced by
checks, notes, drafts or any other items of payment relating to and/or
proceeds of Collateral may not be collectible by the Bank on the date
received. In consideration of the Bank's agreement to conditionally credit
the Borrower's operating account as of the Business Day on which the Bank
receives those items of payment, the Borrower agrees that, in computing
the charges under this Agreement, all items of payment shall be deemed
applied by Bank on account of the Obligations with respect to the Line of
Credit one (1) Business Day after the Business Day the Bank receives such
payments via wire transfer or electronic depository check. The Bank is
not, however, required to credit the Borrower's account for the amount of
any item of payment which is unsatisfactory to the Bank and the Bank may
charge the Borrower's account for the amount of any item of payment which
is returned to the Bank unpaid.
4. Amendment of Section 6.1. Section 6.1 of the Agreement is amended
and restated to provide as follows:
6.1 Reports and Notices. The Borrower covenants and agrees that
from and after the Closing Date and until the payment of the Obligations
in full, it shall deliver to the Bank:
(c) On or before the 20th day of each month, as at the close
of the preceding month, (A) a Borrowing Base Certificate, (B) a report on
Obligors' outstanding Accounts due from Afinsa, and (C) such additional
back-up documentation reasonably requested by the Bank, including, without
limitation, an accounts receivable aging report, a report on outstanding
Consignor Advance Obligations together with copies of promissory notes and
security agreements held by the Obligors in connection therewith, and
inventory report (by product category and location), and all in such form
as the Bank shall require and certified by the President or Chief
Financial Officer of the Borrower;
(b) Within 60 days after the close of each of the first,
second and third fiscal quarters, the unaudited consolidated balance sheet
of the Borrower as at the close of such fiscal quarter and the related
consolidated statement of income and cash flows for such quarter setting
forth in comparative form in each
case the figures for such fiscal quarter of the previous year accompanied
by a certification of the President or Chief Financial Officer of the
Borrower that such financial statements are complete and correct and
present fairly in accordance with GAAP (subject to normal year end
adjustments and footnotes need not be included) the financial position and
the results of operation and cash flows of the Borrower as of the end of
such quarter and for the period then ended;
(c) Within 120 days after the close of each Fiscal Year, a
copy of the annual financial statements of the Borrower, consisting of a
consolidated balance sheet and consolidated statement of income and cash
flows, for such fiscal year setting forth in comparative form in each case
the figures for the previous fiscal year, which financial statements shall
be prepared in accordance with GAAP, certified by the President or Chief
Financial Officer of the Borrower and audited by Amper, Xxxxxxxx & Xxxxxx,
P.C. or other firm of independent certified public accountants of
recognized standing selected by the Borrower and acceptable to the Bank,
accompanied by a report from such accountants to the effect that in
connection with their review, nothing has come to their attention to cause
them to believe that a Default or Event of Default had occurred;
(d) Within 60 days after the close of each of the first,
second and third fiscal quarters and within 120 days after the close of
each Fiscal Year, the management-prepared consolidating balance sheet of
the Borrower and the Obligors and the related consolidating statement of
income, and cash flows for such quarter setting forth in comparative form
in each case the figures for such fiscal quarter of the previous year
accompanied by a certification of the President or Chief Financial Officer
of the Borrower that such financial statements are complete and correct
and present fairly in accordance with GAAP (subject to normal year end
adjustments and footnotes need not be included) the financial position and
the results of operation and cash flows of the Borrower as of the end of
such quarter and for the period then ended;
(e) Within 120 days after the close of each Fiscal Year, an
unaudited consolidated balance sheet of A-Xxxx and the related unaudited
consolidated statement of income, and cash flows for such Fiscal Year
setting forth in comparative form in each case the figures for the
previous year, provided, that, the Bank shall have the right, in its
discretion, to request the Borrower to provide financial information with
respect to A-Xxxx on a quarterly basis;
(f) Simultaneously with the delivery of each annual and
quarterly financial statement referred to in paragraph (d), a completed
certificate in form and substance acceptable to Bank, a copy of which is
attached hereto as Exhibit D ("Compliance Certificate"), executed by the
chief financial officer of the Borrower, and containing such additional
information as Bank may request from time to time, (i) certifying that the
financial statements being delivered with such Compliance Certificate are
true, complete and correct, in all material respects, (ii) setting forth
in reasonable detail the calculations required to establish whether the
Borrower was in compliance with all financial covenants for the
fiscal period in question, (iii) stating whether any Event of Default or
Default has occurred or is continuing since the date of the previously
delivered Compliance Certificate and the details of same, and (iv)
containing such other information as Bank may from time to time reasonably
require to be included in the Compliance Certificate.
(g) By August 31 of each year, copies of the annual audited
financial statements of Afinsa.
(h) Immediately after the Borrower becomes aware of the
existence of (i) any Default or Event of Default, or any development or
other information which would have a Material Adverse Effect, (ii) any
material claim, action, proceeding or investigation filed or instituted
against an Obligor, or any adverse determination in any material pending
action, proceeding or investigation affecting it, (iii) any loss from
casualty or theft in excess of $250,000 whether or not insured, affecting
property of the Borrower or (iv) any representation or warranty in any
Loan Document ceasing to be true, correct and complete in any material
respect, or telephonic or telegraphic notice specifying the nature of such
Default or Event of Default or development or information, including the
anticipated effect thereof, which notice shall be promptly confirmed by
the Borrower in writing within five (5) Business Days;
(i) Promptly after the same are received by the Borrower,
management letters provided to the Borrower by its independent certified
public accountants;
(j) An annual collateral audit, at the Borrower's expense;
(k) Within thirty days following the Closing Date, and
annually thereafter, a "privity letter" from Borrower's certified public
accountants stating that the Bank may rely on the Borrower's audited
annual financial statements; and
(l) Such other information respecting the Obligors' business
or financial condition, including, without limitation, copies of federal
tax returns, as Bank may, from time to time, reasonably request.
5. Amendment of Section 8.6. Section 8.6 of the Agreement is amended
and restated to provide as follows:
8.6 Indebtedness. Except as otherwise permitted by this Section 8.6,
no Obligor shall create, incur, assume or permit to exist any
Indebtedness, whether recourse or nonrecourse, and whether superior or
junior, resulting from borrowings, loans, advances, the granting of
credit, whether secured or unsecured, except (i) Indebtedness secured by
Permitted Encumbrances, (ii) Indebtedness of the Borrower and the Mortgage
Borrower to the Bank arising under or as a consequence of this Agreement
or the other Loan Documents, (iii) Indebtedness of the Borrower in the
maximum principal amount of $2,500,000 in favor of
Banco Santander Central Hispano, S.A., acting through its New York branch,
(iv) (A) Indebtedness of the Borrower to its wholly-owned Subsidiary GMAI
Auctentia Central de Compras, S.L. ("CDC") in the principal amount of
$1,710,000 incurred in connection with the acquisition of A-Xxxx (the
"A-Xxxx Debt"), and (B) additional Indebtedness of the Borrower to CDC or
other wholly-owned non-Obligor Subsidiary, in the maximum aggregate
principal amount of $5,000,000 (provided that no payments may be made by
the Borrower in respect of any such Indebtedness at any time while there
are outstanding Advances in respect of the Line of Credit, an Event of
Default has occurred and is continuing or an Event of Default would result
from the payment and, provided further, that any permitted payments shall
be applied first against the A-Xxxx Debt and shall not be available for
re-borrowing); (v) trade debt incurred in the ordinary course of business,
(vi) Indebtedness of the Borrower to its wholly-owned Subsidiary GMAI
Auctentia Central de Compras, S.L. in the principal amount of $8,200,000
incurred in connection with the acquisition of A-Xxxx (provided that no
payments may be made by the Borrower in respect of such Indebtedness at
any time while there are outstanding Advances in respect of the Line of
Credit), and (vii) all unfunded pension fund and other employee benefit
plan obligations and liabilities but only to the extent that they are
permitted to remain unfunded under applicable law. No Obligor shall incur,
assume or permit to exist liabilities under operating leases which have
aggregate outstanding obligations in excess of $500,000 at any time
(exclusive of obligations to landlords of leased premises).
6. Amendment of Section 8.8. Section 8.8 of the Agreement is amended
and restated to provide as follows:
8.8 Investments. Except as disclosed in Schedule 8.8 (as amended by
the Second Amendment to this Agreement), no Obligor shall purchase or
acquire any partnership, joint venture or other interest in obligations,
stocks or securities of, or make any capital contribution, loan or advance
to, any other Person (including, without limitation, any Subsidiary of the
Borrower), or make any other investments, except that the Borrower may
made advances to the Guarantors as long as they continue as guarantors of
the Obligations.
7. Amendment of Section 10.1. Clause (g) of Section 10.1 of the
Agreement is amended and restated as follows:
(g) (1) default shall be made, beyond any applicable grace period,
with respect to other Indebtedness of an Obligor (excluding obligations to
trade creditors being contested in good faith) or (2) a payment default
shall occur and continue, beyond any applicable grace period, or A-Xxxx
shall be in default of a financial covenant, with respect to Indebtedness
of A-Xxxx in an amount greater than $500,000, if the effect of any such
default shall be to accelerate, or to permit (with the giving of notice or
the passage of time or both) the holder or obligee of any Indebtedness (or
any trustee on behalf of such holder or obligee) at its option to
accelerate the maturity of such Indebtedness; or any amount of principal
or interest in respect of such Indebtedness shall not be paid as and when
due (after
giving effect to any period of grace specified for such payment in the
instrument evidencing or governing the same); provided that such a default
or failure to pay shall not be an Event of Default hereunder for a period
of thirty days after such default or failure to pay, if the Obligor or
A-Xxxx disputes in good faith the validity of such default or payment,
unless the holder or obligee of any Indebtedness (or any trustee on behalf
of such holder or obligee) commences an action to collect such
Indebtedness;
8. Representations and Warranties. The Borrower represents and warrants
as follows:
(i) As of this date, after giving effect to (A) the formation of
Spectrum PMI and the closing of the acquisition by PMI of A-Xxxx, (B) the
closing of the credit transaction on this date among A-Xxxx, Xxxxx Brothers
Xxxxxxxx and Co. and the other lenders party thereto and (C) the consent of the
Bank in paragraph 7 below, no Event of Default has occurred and is continuing
and no uncured Default exists. Without limiting the foregoing, no Obligor is or
will be liable for any obligation or liability of Spectrum PMI or A-Xxxx and no
creditor of either Spectrum PMI or A-Xxxx has or will have the benefit of any
Lien in any assets of the Obligors.
(ii) Since June 30, 2004 there has been no material adverse change in the
financial condition, operations, business or prospects of the Borrower taken as
a whole.
(iii) Each of the Borrower and the Mortgage Borrower has the power and
authority to enter into this Second Amendment and the execution hereof has been
duly authorized by all requisite corporate or limited liability company action.
(iv) Spectrum PMI was formed solely for the purpose of acquiring and
holding the capital stock of A-Xxxx. The outstanding capital stock of Spectrum
PMI is owned 80% by Spectrum Numismatics International, Inc. ("Spectrum") and
20% by Afinsa. Spectrum PMI has no outstanding Indebtedness and will have no
outstanding Indebtedness after giving effect to the acquisition of A-Xxxx.
(v) The Borrower has provided to the Bank true and complete copies of
the agreement pursuant to which Spectrum PMI has acquired the capital stock of
A-Xxxx.
9. Consent. Notwithstanding any provision in the Agreement to the
contrary, the Bank confirms its prior consent (by the Second Amendment dated as
of July 15, 2005, superceded by this Restated Second Amendment) to Spectrum's
formation of Spectrum PMI and Spectrum's acquisition, through Spectrum PMI, of
an 80% interest in A-Xxxx. The within consent does not constitute a waiver of a
Default or Event of Default pertaining to any other subject matter, that has not
been disclosed to the Bank or which may arise after the date hereof.
10. Conditions Precedent. The Bank shall have no obligation to increase
the Commitment and extend the Expiration Date of the Line of Credit Term unless:
(a) All proceedings taken in connection with the execution of this
Second Amendment and the execution and delivery of all other Loan Documents
relating thereto shall be satisfactory to the Bank and its counsel.
(b) The Borrower shall have paid the Bank an amendment fee of
$10,000.
(c) The Borrower shall have received all of the following:
(i) a Restated Committed Line of Credit Note in the form of
Exhibit A hereto;
(ii) an Amended and Restated Security Agreement of Spectrum
and Teletrade;
(iii) an Affirmation of Guaranty from the Guarantors;
(iv) a Joinder to Guaranty and Security Agreement by X.X.
Xxxxxx, Inc. ("XX Xxxxxx");
(v) a certificate of the Secretary of XX Xxxxxx certifying
as to resolutions of the Board of Directors of the corporation duly adopted and
in full force and effect authorizing officers to execute and deliver the
applicable Loan Documents, and having attached to it as exhibits, the
certificate of incorporation and by-laws of the corporation;
(vi) a certificate of the Secretary of the Borrower
certifying as to resolutions of the Board of Directors of the Borrower duly
adopted and in full force and effect authorizing (a) the consummation of the
transactions contemplated by this Second Amendment and (b) officers to execute
and deliver the applicable Loan Documents;
(vii) a certificate of the appropriate Governmental
Authorities dated the most recent practicable date, showing that each of the
Borrower and X.X. Xxxxxx is organized and in good standing in its jurisdiction
of organization;
(viii) a UCC search, in scope satisfactory to the Bank,
disclosing no Liens on the assets of Spectrum and Teletrade, other than Liens in
favor of the Bank;
(ix) a UCC search, in scope satisfactory to the Bank,
disclosing no Liens on the assets of X.X. Xxxxxx;
(x) amended UCC financing statements identifying Spectrum
and Teletrade as debtors designated for filing in their respective jurisdictions
of formation and having a description of Collateral consistent with the expanded
scope of the Collateral granted by those Obligors; and
(xi) a UCC financing statement identifying XX Xxxxxx as
debtor designated for filing in its jurisdiction of formation.
11. Counterparts. This Second Amendment may be executed in counterparts,
all of which taken together shall constitute one and the same agreement.
12. Affirmation. Except as amended hereby, in all respects, the Agreement
is ratified and confirmed. This Restated Second Amendment supercedes the Second
Amendment dated as of July 15, 2005.
IN WITNESS WHEREOF, this Restated Second Amendment has been duly executed
as of the date first above written.
XXXX XXXXXXX AUCTIONS, INC.
By: /s/ Xxxxx Xxxxxxxx
----------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Executive Vice President
XXXX XXXXXXX AUCTIONS REAL ESTATE, LLC
By: XXXX XXXXXXX AUCTIONS, INC., SOLE MEMBER
By: /s/ Xxxxx Xxxxxxxx
----------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Executive Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Xxxxxxx Xxxx
----------------------------------------
Name: Xxxxxxx Xxxx
Title: Vice President
EXHIBIT C
BORROWING BASE CERTIFICATE
AS OF ____________________
XXXX XXXXXXX AUCTIONS, INC.
This Borrowing Base Certificate is made pursuant to the Loan and Security
Agreement dated as of May 28, 2004, as amended (the "Loan Agreement") among Xxxx
Xxxxxxx Auctions, Inc., a Delaware corporation (the "Borrower"), Xxxx Xxxxxxx
Auctions Real Estate, LLC, a Delaware limited liability company and PNC Bank,
National Association (the "Bank").
Capitalized terms used in this Certificate without definition shall have
the respective meanings assigned to such terms in the Loan Agreement.
The Borrower hereby certifies, represents and warrants to the Bank, as of
the date hereof, that (a) the person signing below is the chief financial
officer or other authorized officer of the Borrower; (b) the statements below
concerning the Accounts and Inventory are true and complete; (c) the Borrower is
in compliance with all of the terms and provisions of the Loan Agreement and the
other Loan Documents; (d) all of the Borrower's representations and warranties
in the Loan Agreement and the other Loan Documents are true and correct in all
material respects; and (e) no Event of Default has occurred and is continuing.
1. Collateral Availability
A. Accounts Receivable
1. Total A/R (exclusive of Afinsa) $_____________
1A Less: Over 90 days past invoice date $_____________
1B Less: Entire Account if 50% of the amount owed is
greater than 90 days past invoice date $_____________
1C Less: Uninsured foreign Accounts $_____________
1D Less: Amount of accounts payable owing to Account $_____________
debtors (whether or not accounts payable are yet due) $_____________
1E Less: Inter-Obligor and affiliated Accounts $_____________
1F Less: Accounts of individuals $_____________
1G Less: In the case of Accounts
of a single Customer exceeding 20% of
an Obligor's total Accounts, the portion
in excess of 20%. $_____________
1H Less: All other Ineligible Accounts $_____________
2. Ineligible A/R (1A to 1H) $_____________
3. Qualified A/R (L1 - L2) $_____________
4. Advance Percentage $_____________
5. A/R Borrowing Availability (L3 x L4) $ 85%
-------------
B. Afinsa Accounts
6. Total Afinsa Accounts
6A Less: 30 or less days from invoice date $____________
6B Less: Over 90 days past invoice date $____________
6C Less: Entire Account is 50% of the amount $____________
owed is greater than 90 days past invoice date
7. Ineligible Afinsa Accounts (6A to 6C) $___________
8. Qualified Afinsa Accounts (L6-L7) $____________
9. Advance Percentage 60%
-------------
10. Borrowing Availability (L8 x L9) (not to exceed
$3,000,000) $____________
C. Consignor Advance Obligations
11. Total Consignor Advance Obligations $____________
11A Less: Over 150 days
11B Less: Entire Consignor Advance Obligations
if Customers' $____________
Accounts are ineligible $____________
11C Less: All other ineligible $____________
12. Ineligible Consignor Advance Obligations (11A to 11C) $____________
13. Qualified Consignor Advance Obligations (L11-L12) $____________
14. Advance Percentage or Cap 70%/$3,000,000
---------------
15. Tentative Borrowing Availability (lesser of L13 x
70% (less amount in excess of $1,750,000 for any
single CAO or cap) $____________
16. Aggregate value of pledged collections $____________
17. Advance Percentage or Cap 35%/$3,000,000
---------------
18. Alternate Borrowing Availability (L16 x 35% or cap) $____________
D. Inventory
19. Total Inventory $____________
19A Less: Slow Moving Inventory turning > 364 $____________
days and other reserves
19B Less: All other ineligible inventory $____________
20. Ineligible Inventory (19A + 19B) $____________
21. Eligible Xxxxxxxxx (X00 - L20) $____________
22. Advance Percentage or Cap (50% or $6,250,000) 50%/$6,250,000
--------------
23. Inventory Borrowing Availability (lesser of L21 x
50% or cap) $____________
24. Total Availability (Sum of L5 + (lesser of L15 or L18) $____________
2. Borrowing Availability
25. Maximum Line Amount $12,500,000
-----------
26. Total Availability (L24) $____________
27. Maximum Borrowing Capacity (lesser of L25 and L26) $____________
28. Outstanding Principal Balance - Direct Loans $____________
29. Outstanding documentary letters of credit $____________
30. Outstanding standby letters of credit $____________
31. Reserves $____________
31A: $____________
31B: $____________
32. Available to Borrow (L27 - L28 - L29 - L30 - sum
of all L31) $____________
Date:_____________________________ XXXX XXXXXXX AUCTIONS, INC.
By:_________________________________
Name:
Title:
Schedule 8.8 (Amended)
1. Hedging transactions from time to time.
2. As disclosed in Note 2 (Investments) to the Notes to Financial
Statements included in the Borrower's report on Form 10-Q for the
quarter ended March 31, 2004, filed with the SEC on May 6, 2004 and
as otherwise amended, supplemented or modified from time to time.
3. Investments made in the ordinary course of business, including
advances to consignors and purchases of collectibles.
4. Spectrum's formation of Spectrum PMI and Spectrum's acquisition,
through Spectrum PMI of an interest in A-Xxxx
5. Investments in Cash Equivalent Investments.
For purposes of this Schedule 8.8, Cash Equivalent Investment" means, at any
time: (a) any evidence of indebtedness, maturing not more than one year after
such time, issues or guaranteed by the United States government; (b) commercial
paper and money market instruments, maturing not more than nine months from the
date of issue, which is issued by (i) a corporation (other than an affiliate of
any Obligor) organized under the laws of any state of the United States or of
the District of Columbia and rated at least A-1 by Standard & Poor's Corporation
or P-1 by Xxxxx'x Investors Service, Inc., or (ii) any Lender (or its holding
company); (c) any certificate of deposit or bankers acceptance, maturing not
more than one year after such time.
