FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT WELLS FARGO RETAIL FINANCE, LLC
February 25, 2004
THIS FIRST AMENDMENT is made in consideration of the mutual covenants
contained herein and benefits to be derived herefrom to the February 3, 2004
Debtor-In-Possession Loan and Security Agreement (the "LOAN AGREEMENT") between:
Wells Fargo Retail Finance, LLC (the "LENDER"), a Delaware
liability company with offices at One Boston Place - 18th Floor, Boston,
Gadzooks, Inc. ( the " BORROWER"), a Texas
corporation with its
principal executive offices at 4121 International Parkway, Carrollton,
75007, Debtor and Debtor-In-Possession.
PART 1. AMENDMENT OF LOAN AGREEMENT:
The Loan Agreement is amended as follows:
I. The definition of "Appraised Inventory Liquidation Value" on Page 3 of
the Loan Agreement is hereby deleted in its entirety, and the following is
inserted in its place:
"APPRAISED INVENTORY LIQUIDATION VALUE": The product of (a) the Cost of
Eligible Inventory (net of Inventory Reserves) multiplied by (b) that
percentage, determined from the then most recent appraisal of the
Borrower's Inventory, acceptable to the Lender in the Lender's
discretion, undertaken by an independent appraiser engaged by the Lender
and otherwise acceptable to the Lender in its discretion, based upon the
appraiser's reasonable estimate of the net recovery on the Borrower's
Inventory in the event of an in-store liquidation of that Inventory.
II. The definition of "Borrowing Base" on Page 6 of the Loan Agreement is
hereby deleted in its entirety, and the following is inserted in its place:
"BORROWING BASE":The aggregate of the following:
The face amount of Eligible Credit Card Receivables multiplied by the
Credit Card Advance Rate.
The lesser of (a) the Cost of Eligible Inventory (net of Inventory
Reserves) multiplied by the Inventory Advance Rate or (b) the Appraised
Inventory Percentage of the Appraised Inventory Liquidation Value.
The Eligible Tax Refund multiplied by 75%.
III. The definition of "Inventory Advance Rate" on Page 15 of the Loan
Agreement is hereby deleted in its entirety, and the following is inserted in
"INVENTORY ADVANCE RATE": Seventy-five percent (75%). The Lender, in its
discretion, may permit an increase above the foregoing designated
percentage, and may thereafter remove any such increase.
IV. The definition of "Inventory Reserves" on Page 15 of the Loan
Agreement is hereby amended by the deletion of subsection (ii) thereof, and the
following is inserted in its place:
(ii) Shrinkage, to be released upon confirmation by the Lender, in the
Lender's reasonable discretion, that Borrower has posted annual shrink
results to the stock ledger system, and to remain released provided that
the accrual to the stock ledger is not less than the actual shrink results
for each period on a going forward basis.
V. The following definition is hereby added to Article I of the Loan
Agreement in alphabetical order on Page 10:
"ELIGIBLE TAX REFUND": The amount of the federal tax refund due the
Borrower for 2003, but only during the period commencing on that date
that each of the following conditions have been satisfied through that
date which is 90 days from the date that the Borrower's 2003 federal
tax return is filed:
(a) The Lender is satisfied, in the Lender's reasonable discretion,
that the Borrower's 2003 federal tax return has been properly filed,
along with a duly completed Form 1139 - -"Corporate Application for
(b) The Lender has received written confirmation from the Borrower's
tax advisors setting forth the anticipated timeline for receipt of
the expected federal tax refund, which must reflect that payment is
anticipated within 90 days of filing the federal tax return;
(c) The Borrower shall execute and deliver such power of attorney or
other forms as may be required to direct the Internal revenue
Service to pay all tax refunds directly to the Lender; and
(d) The amount of the federal tax refund, as shown on the federal
tax return, shall not be less than $4,000,000.00.
VI. Article 7 is hereby amended by the deletion of subsection (m)
(Leasehold Interests), provided that the Lender shall obtain and retain a
security interest in all proceeds of such Leasehold Interests.
PART 2. MISCELLANEOUS:
I. Except as provided herein, all terms and conditions of the Loan
Agreement and of the other Loan Documents remain in full force and effect. The
Borrower hereby ratifies, confirms, and re-affirms all terms and provisions of
the Loan Documents.
II. Terms used in this First Amendment which are defined in the Loan
Agreement are used as so defined.
III. This First Amendment may be executed in counterparts, each of which
when so executed and delivered shall be an original, and both of which together
shall constitute one instrument.
IV. This First Amendment expresses the entire understanding of the parties
with respect to the transactions contemplated hereby. No prior negotiations or
discussions shall limit, modify, or otherwise affect the provisions hereof.
V. Any determination that any provision of this First Amendment or any
application hereof is invalid, illegal, or unenforceable in any respect and in
any instance shall not affect the validity, legality, or enforceability of such
provision in any other instance, or the validity, legality, or enforceability of
any other provisions of this First Amendment.
VI. The Borrower shall pay on demand all reasonable costs and expenses of
the Lender, including, without limitation, reasonable attorneys' fees in
connection with the preparation, negotiation, execution, and delivery of this
VII. In connection with the interpretation of this Amendment and all other
documents, instruments, and agreements incidental hereto:
A. All rights and obligations hereunder and thereunder, including
matters of construction, validity, and performance, shall be governed by and
construed in accordance with the law of the Commonwealth of Massachusetts
are intended to take effect as sealed instruments.
B. The captions of this Amendment are for convenience purposes only, and
shall not be used in construing the intent of the Lender and the Borrower under
C. In the event of any inconsistency between the provisions of this
Amendment and any of the other Loan Documents or other agreements entered into
by and between the Lender and the Borrower, the provisions of this Amendment
shall govern and control.
D. The Lender and the Borrower have prepared this Amendment and all
documents, instruments, and agreements incidental hereto with the aid and
assistance of their respective counsel. Accordingly, all of them shall be deemed
to have been drafted by the Lender and the Borrower and shall not be construed
against either party.
WELLS FARGO RETAIL FINANCE, LLC