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EXHIBIT 10.16
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Amendment") is
executed as of this 13th day of December, 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, and that
certain Second Amendment to Loan and Security Agreement dated May 17, 1996 (as
so amended, the "Agreement"), pursuant to which Lender has made available to
Borrower a line of credit in the maximum principal amount of $4,000,000, 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) from
December 16, 1996 through April 15, 1997, the lesser of fifty percent
(50%) of Eligible Inventory or the Inventory Borrowing Limit and,
thereafter, the lesser of forty percent (40%) of Eligible Inventory or
the Inventory Borrowing Limit, plus (c) from December 16, 1996 through
April 15, 1997, the lesser of fifty percent (50%) of the face amount of
trade letters of credit issued by Lender for the account of Borrower
securing the purchase of Inventory by Borrower or $150,000.
"Inventory Borrowing Limit" shall mean $1,500,000.
2. K-Mart Receivables. "Eligible Receivables" shall include all
Receivables arising out of the sale of Borrower's Inventory to K-Mart
Corporation (collectively the "K-Mart Receivables"), excluding (a) all K-Mart
Receivables that have been outstanding for more than thirty (30) days after the
due dates of the corresponding invoices or more than ninety (90) days after the
dates of the corresponding invoices, (b) all K-Mart Receivables if more than
fifteen percent (15%) of the K-Mart Receivables are otherwise ineligible (other
than pursuant to (c) or (d) of this paragraph), (c) the amount by which total
K-Mart Receivables exceed fifteen percent (15%) of Borrower's total Receivables,
(d) the amount by which total K-Mart Receivables exceed $700,000, and (e) any
K-Mart Receivables which are otherwise ineligible pursuant to the provisions of
the Agreement.
3. Financial Covenants. Section 6.2 (Net Worth Requirements) and
Section 6.3 (Debt to Worth Ratio) of the Agreement are hereby amended to provide
as follows:
6.2 (Net Worth Requirements). Borrower shall at all times
maintain a minimum tangible net worth of $2,400,000. For purposes of
this covenant, intangible net worth" shall refer to Borrower's total
assets minus total liabilities minus prepaids, intangibles and
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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 2.0 to 1.0. For purposes of this covenant, intangible
net worth" shall have the meaning set forth in Section 6.2 hereof.
4. Repayment of Subordinated Debt. So long as no Event of Default
exists under the Agreement, nor any event with which the giving of notice,
passage of time or both would constitute an Event of Default thereunder, Lender
hereby consents to the repayment in full of the existing indebtedness of
Borrower to Sirrom Capital Corporation (up to a maximum amount of $1,000,000
plus accrued interest), on or before December 25, 1996, and consents to the use
of proceeds of the Loan for the repayment of said subordinated indebtedness.
5. Loan Modification Fee. Upon execution of this Amendment, Borrower
shall pay to Lender a non-refundable loan modification fee of $5,000.
6. 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.
7. Miscellaneous. Except as amended hereby, the Agreement-shall remain
in full force and effect. 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: Assistant Vice-President
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BORROWER:
RADIO SYSTEMS CORPORATION
By: /s/ Xxxxx X. Xxxxxx
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Title: Chief Financial Officer
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