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EXECUTION COPY
EXHIBIT 4(a)
AMENDMENT NO. 3
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TO
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RESTATED CREDIT AND SECURITY AGREEMENT
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This Amendment No. 3 to Restated Credit And Security Agreement (this
"Amendment No. 3"), made as of the 29th day of September, 1997, between Royal
Appliance Mfg. Co. (the "Borrower"), National City Commercial Finance, Inc., as
agent for the Lenders (the "Agent"), National City Bank, as Letter of Credit
Bank (the "Letter of Credit Bank"), and the Lenders,
WITNESSETH:
WHEREAS, the Borrower, the Agent, the Letter of Credit Bank and the Lenders
have entered into that certain Restated Credit and Security Agreement, dated as
of March 27, 1996, as amended by that certain Amendment No. 1 to Restated Credit
and Security Agreement, dated October 1, 1996 and that certain Amendment No. 2
to Restated Credit and Security Agreement, dated April 1, 1997 (collectively,
the "Credit Agreement"), pursuant to which the Lenders have made Loans and other
financial accommodations available to the Borrower;
WHEREAS, the Borrower wishes to amend the Credit Agreement to increase the
amount of capital expenditures permitted to be incurred and the amount of
capital stock of the Borrower permitted to be repurchased; and
WHEREAS, the Borrower has advised the Agent that: (i) pursuant to Section
5.7 of the Credit Agreement, the Borrower desires to sell that portion of its
"Receivables" indebtedness owing from Wal-Mart Stores, Inc., Sears, ▇▇▇▇▇▇▇ &
Company and Target Stores, a division of ▇▇▇▇▇▇-▇▇▇▇▇▇ Corporation arising from
the provision of merchandise and goods by the Borrower, (ii) such sale shall be
made to Royal Appliance Receivables, Inc., an Ohio corporation and wholly-owned,
special purpose corporation of the Borrower, pursuant to that certain
Receivables Sale and Contribution Agreement, dated as of September 29, 1997 (the
"Sale Agreement"), and (iii) Royal Appliance Receivables, Inc. shall transfer
such "Receivables" to Llama Retail Funding, L.P., a Delaware limited partnership
(the "Purchaser") pursuant to that certain Receivables Purchase and Servicing
Agreement, dated as of September 29, 1997 (the "Receivables Purchase
Agreement");
WHEREAS, upon the terms and subject to the conditions as set forth
hereinafter the Borrower, the Agent and the Lenders desire to amend the Credit
Agreement as set forth herein to accommodate: (i) such increase capital
expenditures and increased repurchases and (ii) such sale of Sears, ▇▇▇▇▇▇▇ &
Company Receivables, Wal-Mart Stores, Inc. Receivables and Target Stores
Receivables as contemplated by the Sale Agreement and the Receivables Purchase
Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Borrower, the Agent and the
Lenders hereby agree as follows:
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SECTION 1. DEFINED TERMS. Unless otherwise specified herein, capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in the Credit Agreement.
SECTION 2. AMENDMENT CREDIT AGREEMENT. The Credit Agreement shall be
amended, effective as of the date of this Amendment, as follows:
2.1 AMENDMENT TO SECTION 1.1 - ELIGIBLE ACCOUNTS. The
definition of "Eligible Accounts" set forth in Section 1.1 of the Credit
Agreement is hereby amended by deleting clause (w) thereof and substituting the
following in lieu thereof:
(w) are Wal-Mart Accounts, Sears Accounts and Target Accounts.
2.2 AMENDMENT TO SECTION 1.1 - ROYAL APPLIANCE RECEIVABLES,
INC. The definition of "Royal Appliance Receivables, Inc." set forth in Section
1.1 of the Credit Agreement is hereby amended by deleting such definition in its
entirety and substituting the following in lieu thereof:
"ROYAL APPLIANCE RECEIVABLES, INC." means Royal Appliance
Receivables, Inc, an Ohio corporation and wholly-owned subsidiary of
the Borrower whose purpose is to purchase the Wal-Mart Accounts, Sears
Accounts and Target Accounts from the Borrower.
2.3 AMENDMENT TO SECTION 1.1 - DELETIONS. Section 1.1 of the
Credit Agreement is amended by deleting the definitions of "Capital USA
Funding", "Commerzbank", "Receivables Sale and Contribution Agreement",
"Receivables Purchase Agreement" and "Standby Receivables Purchase Agreement".
2.4 AMENDMENT TO SECTION 1.1 - ADDITIONS. Section 1.1 of the
Credit Agreement is hereby amended by adding thereto the following definitions:
"CAPITAL USA, L.L.C." means Capital USA, L.L.C., a Delaware
limited liability corporation.
"LLAMA FUNDING" means Llama Retail Funding, L.P., a Delaware
limited partnership.
"RECEIVABLES PURCHASE AND SERVICING AGREEMENT" means that
certain Receivables Purchase and Servicing Agreement, dated as of
September 29, 1997, among Royal Appliance Receivables, Inc., Llama
Funding, the Borrower and Capital USA, L.L.C. as Agent.
"REVOLVING CREDIT COMMITMENT" means the commitment of each
Lender to advance Loans up to the amount as set forth in Second Amended
Annex I.
"SALE AGREEMENT" means that certain Receivables Sale and
Contribution Agreement, dated as of September 29, 1997, between the
Borrower and Royal Appliance Receivables, Inc..
"SEARS" means Sears, ▇▇▇▇▇▇▇ & Company.
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"SEARS ACCOUNT" means: (i) indebtedness owing from Sears
arising from the provision of merchandise and goods by the Borrower to
Sears, including the right to payment of any interest or finance
charges and other obligations of Sears with respect thereto, (ii) all
security interests or liens and property subject thereto from time to
time purporting to secure payment by Sears, (iii) all guarantees,
indemnities and warranties and proceeds thereof, proceeds of insurance
policies, financing statements and other agreements or arrangements of
whatever character from time to time supporting or securing payment by
Sears, (iv) all collections (i.e., all cash collections and other cash
proceeds) and records (i. e., all contracts {i. e., a written agreement
or agreements pursuant to which, or under which, Sears is obligated to
pay for merchandise or goods sold to Sears by the Borrower from time to
time}) and other documents, books, records and other information
(including, without limitation, computer programs, tapes, disks, punch
cards, data processing software and related property and rights)
prepared and maintained by the Borrower or Royal Appliance Receivables,
Inc., with respect to Sears Accounts and Sears and (v) all proceeds of
any of the foregoing.
"TARGET" means Target Stores, a division of ▇▇▇▇▇▇-▇▇▇▇▇▇
Corporation.
"TARGET ACCOUNT" means: (i) indebtedness owing from Target
arising from the provision of merchandise and goods by the Borrower to
Target, including the right to payment of any interest or finance
charges and other obligations of Target with respect thereto, (ii) all
security interests or liens and property subject thereto from time to
time purporting to secure payment by Target, (iii) all guarantees,
indemnities and warranties and proceeds thereof, proceeds of insurance
policies, financing statements and other agreements or arrangements of
whatever character from time to time supporting or securing payment by
Target, (iv) all collections (i.e., all cash collections and other cash
proceeds) and records (i. e., all contracts {i. e., a written agreement
or agreements pursuant to which, or under which, Target is obligated to
pay for merchandise or goods sold to Target by the Borrower from time
to time}) and other documents, books, records and other information
(including, without limitation, computer programs, tapes, disks, punch
cards, data processing software and related property and rights)
prepared and maintained by the Borrower or Royal Appliance Receivables,
Inc., with respect to Target Accounts and Target and (v) all proceeds
of any of the foregoing.
2.5 AMENDMENT TO ANNEX I. Annex I of the Credit Agreement is
hereby deleted in its entirety and Second Amended Annex I attached hereto is
substituted in lieu thereof.
2.6 AMENDMENT TO SECTION 4.1. Section 4.1 of the Credit
Agreement is hereby amended by deleting the proviso at the end thereof and
substituting the following proviso in lieu thereto:
;PROVIDED, HOWEVER, that, so long as the Borrower shall be
permitted to sell Wal-Mart Accounts, Sears Accounts and Target
Accounts to Royal Appliance Receivables, Inc., the Collateral
shall not include Wal-Mart Accounts, Sears
Accounts and Target Accounts.
2.7 AMENDMENT TO SECTION 4.4. Section 4.4 of the Credit
Agreement is hereby amended by deleting clause (g) thereof and substituting the
following in lieu thereof:
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and (g) all Wal-Mart Accounts, Sears Accounts and Target
Accounts consist solely of open accounts, are not evidenced by
"chattel paper" within the meaning of the UCC, and are not
secured by Wal-Mart, Sears or Target, as applicable, or
Guaranteed by any Person.
2.8 AMENDMENT TO SECTION 4.5. Section 4.5 of the Credit
Agreement is hereby deleted in its entirety and the following substituted in
lieu thereof:
4.5 TITLE TO COLLATERAL; LIENS; TRANSFERS. Borrower
has good, indefeasible and merchantable title to and ownership
of the Collateral, free and clear of all Liens, except for
Liens permitted under Section 8.3(d) and the security interest
(within the meaning of Section 1309.02(A)(2) of the Ohio
Revised Code [9-102(1)(b) of the UCC]) in favor of Royal
Appliance Receivables, Inc. in Wal-Mart Accounts, Sears
Accounts and Target Accounts permitted in connection with
Section 5.8 of this Agreement. Except as permitted by Section
8.3(d) or 8.3(a) of this Agreement, as contemplated by Section
5.8 of this Agreement (with respect to such security interest
(within the meaning of Section 1309.02(A)(2) of the Ohio
Revised Code) [9-102(1)(a) of the UCC] in Wal-Mart Accounts,
Sears Accounts and Target Accounts), or as otherwise provided
herein or in any other Loan Document, the Borrower shall not
encumber, pledge, mortgage, grant a security interest in,
assign, sell, lease or otherwise dispose of or transfer,
whether by sale, merger, consolidation, liquidation,
dissolution or otherwise, any of the Collateral.
2.9 AMENDMENT TO SECTION 4.6. Clause (e) of Section 4.6 of the
Credit Agreement is hereby deleted in its entirety and the following substituted
in lieu thereof:
(e) make any other change (other than sales of
Inventory in the ordinary course of business and other than
sales (I.E., the security interest within the meaning of
Section 1309.02(A)(2) of the Ohio Revised Code [9-102(1)(b) of
the UCC]) of Wal-Mart Accounts, Sears Accounts and Target
Accounts to the extent permitted by Section 5.8 of this
Agreement to Royal Appliance Receivables, Inc.) which might
affect the perfection or priority of the Agent's Lien in the
Collateral.
2.10 AMENDMENT TO SECTION 4.9. The first clause of the first
sentence of Section 4.9 of the Credit Agreement is hereby deleted in its
entirety and following substituted in lieu thereof:
...During regular business hours and after reasonable notice
to the Borrower, the Agent and each of the Lenders (by any of
its officers, employees, agents, representatives, or
designees, including any Lender) shall have the right to
inspect the Borrower's Collateral or Wal-Mart Accounts, Sears
Accounts and Target Accounts and to inspect and audit, all
books, records, journals, orders, receipts, or other
correspondence related thereto (and to make extracts or copies
thereof as the Agent may desire) and to inspect the premises
upon which any of the Collateral or any Wal-Mart Account,
Sears Accounts or Target Accounts is located for the purpose
of verifying the amount, quality, quantity, value, and
condition of, or any other matter relating to, the Collateral
or Wal-Mart Account;...
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2.11 AMENDMENT TO SECTION 4.10. Section 4.10 of the Credit
Agreement is hereby amended by the last sentence of such section and
substituting the following in lieu thereof:
On or before the fifteenth day (15th) day of each calendar
month, the Borrower shall deliver to the Agent, in form and
substance satisfactory to the Agent, a summary of the sales of
Wal-Mart Accounts, Sears Accounts and Target Accounts to Royal
Appliance Receivables, Inc. showing the aggregate outstanding
face amount of the Receivables sold, the sale price of the
Receivables sold, the cash portion of the Sale Price
(indicating payment thereof to the Borrower by wire transfer
to the Blocked Accounts) and such other information relating
to the sales as the Agent may request from time to time.
2.12 AMENDMENT TO SECTION 5.8. Section 5.8 of the Credit
Agreement is hereby amended by deleting the proviso at the end of such section
and substituting the following proviso in lieu thereof:
;PROVIDED; HOWEVER, that:
(A) in respect of the sale of Wal-Mart
Accounts, Sears Accounts and Target Accounts, the
Borrower's ability to sell such Accounts is
conditioned upon continued satisfaction of the
following conditions: (i) the amount payable in
respect of a Purchase (as defined in the Sale
Agreement) for the sold Wal-Mart Accounts, Sears
Accounts and Target Accounts (other than the portion
thereof treated as capital contribution) shall be
paid by Royal Appliance Receivables, Inc. directly to
the Lockbox or Blocked Accounts established pursuant
to Section 5.2 of this Credit Agreement, (ii) the
amount payable in respect of a Purchase (as defined
in the Sale Agreement) payable to the Borrower by
Royal Appliance Receivables, Inc. shall not be less
than the portion of the Sale Price payable to Royal
Appliance Receivables, Inc. in cash pursuant to the
Receivables Purchase and Servicing Agreement (which
provisions shall not be modified without the Agent
and the Lenders' written consent) or treated as
equity or deferred purchase price and the cash
portion of such amount shall be immediately paid by
Royal Appliances Receivables, Inc., to the Borrower,
(iii) any deferred purchase price with respect to
Pool Receivables (as defined in the Sale Agreement)
shall be payable to the Borrower as soon as payable
to Royal Appliance Receivables, Inc. under the
Receivables Purchase and Servicing Agreement,
2.13 AMENDMENT TO SECTION 7.6. The second sentence of Section
7.6 of the Credit Agreement is hereby deleted in its entirety and the following
substituted in lieu thereof:
. . . All such assets are free and clear of any
mortgage, security interest or other Lien of any kind, other
than any Liens in favor of the Lenders, Liens permitted by
Section 8.3(d) of this Agreement, and the security interest
(within the meaning of Section 1309.02(A)(2) of the Ohio
Revised Code [9-102(1)(b) of the UCC]) in favor of Royal
Appliance Receivables, Inc. in respect of Wal- Mart Accounts,
Sears Accounts and Target Accounts permitted in connection
with Section 5.8 of this Agreement.
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2.14 AMENDMENT OF SECTION 8.3(d). Section 8.3(d) of the Credit
Agreement is hereby amended by deleting clause (J) thereof and substituting the
following in lieu thereof:
(J) any security interest (within the meaning of
Section 1309.02(A)(2) of the Ohio Revised Code [9-102(1)(b) of
the UCC]), to the extent permitted and satisfying the
condition set forth in Section 5.8 of this Agreement: (x) with
respect to the Borrower, in favor of Royal Appliance
Receivables, Inc. in respect of Wal-Mart Accounts, Sears
Accounts and Target Accounts of the Borrower permitted to be
transferred by Section 5.8 of this Agreement and (y) with
respect to the Royal Appliance Receivables, Inc., in favor of
Llama Funding or Capital USA, L.L.C., as Agent (together with
its successors and assigns), pursuant to the Receivables
Purchase and Servicing Agreement in respect of Wal-Mart
Accounts, Sears Accounts and Target Accounts purchased by
Royal Appliance Receivables, Inc. by the Borrower.
2.15 AMENDMENT OF SECTION 8.3(e)(i). Section 8.3(e)(i) of the
Credit Agreement is hereby deleted in its entirety and the following substituted
in lieu thereof:
(e) DIVIDENDS; RESTRICTED PAYMENTS.
(i) The Borrower will not declare or pay any
dividend or distribution in cash, property or obligations
(other than in shares of capital stock of the Borrower or any
Subsidiary of the Borrower or in options, warrants or other
rights to acquire any such capital stock or in other
securities convertible into any such capital stock) on any
shares of capital stock of the Borrower of any class and the
Borrower will not, and will not permit any Subsidiary to,
purchase, redeem or otherwise acquire for any consideration
any shares of capital stock of the Borrower of any class or
any option, warrant or other right to acquire any such capital
stock, except that: (A) the Borrower may pay cash dividends
during each Fiscal Year on a quarterly basis, provided that
(X) the aggregate amount of all such cash dividends in any
Fiscal Year shall not exceed fifty percent (50%) of the
Borrower's Consolidated Net Income for the Fiscal Year
immediately preceding the Fiscal Year in which such dividends
are paid, and (Y) after giving effect to any redemption
permitted below and any such dividend payment, no Potential
Default or Event of Default would occur or exist and (B) the
Borrower may redeem its capital stock, provided that (XX) the
aggregate amount of all such redemptions shall not exceed
fifteen million dollars ($15,000,000) and (YY) after giving
effect to any dividend payment permitted above and any such
redemption, no Potential Default or Event of Default would
occur or exist.
2.16 AMENDMENT OF SECTION 8.4(e). Section 8.4(e) of the Credit
Agreement is hereby deleted in its entirety and the following substituted in
lieu thereof:
(e) CONSOLIDATED CAPITAL EXPENDITURES. The
Borrower shall not permit its Consolidated Capital
Expenditures (including, for the purpose of calculating this
Consolidated Capital Expenditures covenant, any purchase money
Indebtedness permitted under Section of this Agreement) during
any Fiscal Year to exceed $13,000,000, or such greater amount
as the Agent, the Required Lenders and the Borrower shall
agree upon in writing from time to time.
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2.17 AMENDMENT OF SECTION 9. Section 9 of the Credit Agreement
is hereby amended by adding Subsection 9.14 thereto as follows:
9.14 EITHER: (i) the assertion by the Borrower, Royal
Appliance Receivables, Inc., Capital USA, L.L.C. or Llama
Funding, or a finding by any court, that the security interest
under the Sale Agreement constitutes a security interest
within the meaning a Section 1309.02(A)(1) of the Ohio Revised
Code [9-102(1)(a) of the UCC], (ii) Llama Funding or Capital
USA, L.L.C. exercise any remedy against the Borrower or Royal
Receivables, Inc. other than the liquidation settlement
procedures by Llama Funding as set forth in the Receivables
Purchase and Servicing Agreement, (iii) the Borrower fails at
any time to satisfy any of the conditions set forth in the
proviso to Section 5.8 of this Credit Agreement or (iv) the
Borrower agrees to any modification to the Sale Agreement, the
Receivables Purchase and Servicing Agreement or any Related
Documents (as defined in the Receivables Purchase and
Servicing Agreement) without ten (10) Business Days' prior
written notice to the Agent and the written consent of the
Agent and the Lenders.
SECTION 3. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT NO.
3. In addition to all of the other conditions and agreements set forth herein,
the effectiveness of this Amendment No. 3 is subject to the conditions precedent
that the Agent shall have received the following deliveries or shall have
satisfied the following conditions:
3.1 SALE TERMS. All Related Documents and all financing
statements filed by Royal Appliance Receivables, Inc. shall be limited to
Wal-Mart Accounts, Sears Accounts and Target Accounts (and shall specifically
exclude Wal-Mart Canada Accounts) and shall be in form and substance
satisfactory to the Agent.
3.2 THIS AMENDMENT NO. 3. The Agent shall have received this
Amendment No. 3, executed and delivered by a duly authorized officer of the
Borrower.
3.3 SECURITIZATION DOCUMENTATION. A fully executed copy of
each of the Receivables Purchase and Servicing Agreement, Sale Agreement and
each and every instrument, assignment, financing statement, certificate, opinion
and other document delivered in connection with any of the foregoing.
3.4 REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT. Upon the
effectiveness of this Amendment No. 3, each reference in the Credit Agreement to
"this Agreement", "hereunder", "hereof", "herein", or words of like import shall
mean and be a reference to the Credit Agreement, as amended hereby and each
reference to the Credit Agreement in any other document, instrument or agreement
executed and/or delivered in connection with the Credit Agreement shall mean and
be a reference to the Credit Agreement, as amended hereby.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Borrower hereby
represents and warrants to the Agent and the Lenders as follows:
4.1 THIS AMENDMENT NO. 3. This Amendment No. 3 has been duly
and validly executed by an executive officer of the Borrower and constitutes a
legal, valid and binding obligation of the Borrower enforceable against Borrower
in accordance with its terms.
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4.2 CREDIT AGREEMENT. The Credit Agreement, as amended by
this Amendment No. 3, remains in full force and effect and remains a valid and
binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms. The Borrower hereby ratifies and confirms the Credit
Agreement, as amended by this Amendment No. 3.
4.3 NON-WAIVER. The execution, delivery, performance and
effectiveness of this Amendment No. 3 shall not operate nor be deemed to be or
construed as, a waiver (i) of any right, power or remedy of the Agent or Lenders
under the Credit Agreement, nor (ii) of any term, provision, representation,
warranty or covenants contained in the Credit Agreement. Further, none of the
provisions of this Amendment No. 3 shall constitute, be deemed to be or
construed as a waiver of any default or Event of Default under the Credit
Agreement, as amended by this Amendment No. 3.
SECTION 5. MISCELLANEOUS.
5.1 GOVERNING LAW. This Amendment No. 3 shall be governed by
and construed in accordance with the laws of the State of Ohio.
5.2 SEVERABILITY. In the event any provision of this
Amendment No. 1 should be invalid, the validity of the other provisions hereof
and of the Credit Agreement shall not be affected thereby.
5.3 COUNTERPARTS. This Amendment No. 1 may be executed in one
or more counterparts, each of which, when taken together, shall constitute but
one and the same agreement.
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IN WITNESS WHEREOF, Royal Appliance Mfg. Co. has caused this Amendment
No. 3 to Restated Credit and Security Agreement to be executed and delivered as
of the date above written.
ROYAL APPLIANCE MFG. CO.
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By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Controller, Secretary and
Chief Accounting Officer
ACCEPTED AND AGREED:
NATIONAL CITY COMMERCIAL FINANCE, INC.,
as Agent
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By: ▇▇▇▇ ▇. ▇▇▇▇▇
Its: Vice President
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LENDERS
NATIONAL CITY COMMERCIAL FINANCE, INC.,
as a Lender
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By: ▇▇▇▇ ▇. ▇▇▇▇▇
Its: Vice President
THE CIT GROUP BUSINESS CREDIT, INC.,
as a Lender
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By: ▇▇▇ ▇▇▇▇▇
Its: Assistant Vice President
CORESTATES BANK, N.A. (as assignee of
Meridian Commercial Finance
Corporation), as a Lender
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By: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: Vice President
NATIONAL BANK OF CANADA, a Canadian
Chartered Bank, as a Lender
-----------------------------
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Vice President
BTM CAPITAL CORPORATION (as successor by
merger to BOT Financial Corporation),
as a Lender
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By: ▇▇▇▇▇▇▇ ▇. York
Its: Managing Director
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LETTER OF CREDIT BANK
NATIONAL CITY BANK
--------------------------
By: ▇▇▇▇▇▇ ▇. ▇▇▇
Its: Senior Vice President
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Second Amended Annex I
RESTATED CREDIT AND SECURITY AGREEMENT, DATED AS OF MARCH 27, 1996,
AMONG ROYAL APPLIANCE MFG. CO., THE AGENT, LETTER OF CREDIT BANK
AND THE LENDERS, AS AMENDED
COMMITMENTS AND PERCENTAGES OF THE LENDERS
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Ratable
Revolving Credit Portion
Name of Lender Commitment (percentage)
=================================================================================================================
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National City Commercial Finance, Inc. $12,000,000 30%
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The CIT Group Business Credit, Inc. $7,600,000 19%
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CoreStates Bank $7,200,000 18%
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National Bank of Canada, a Canadian Chartered Bank $6,800,000 17%
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BTM Capital $6,400,000 16%
=================================================================================================================
Total Revolving Credit Commitment $40,000,000 100%
---------------------------------
=================================================================================================================
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