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Exhibit 10.25
SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
This Second Amendment (the "Amendment"), dated as of June 30, 2001, is
between U.S. Bank National Association (the "Bank") and Geographics, Inc. (the
"Borrower").
RECITALS
A. Bank and Borrower are parties to a Loan and Security Agreement dated
December 22, 1999, as amended by the First Amendment to Loan and Security
Agreement dated April 17, 2000 (as amended, the "Loan Agreement").
B. Borrower is in material default of the existing financial covenants
contained in Section 7.25, 7.26, 7.27 and 7.28 of the Loan Agreement (the
"Financial Covenants").
C. Bank and Borrower desire to amend the Loan Agreement as provided herein.
AGREEMENT
NOW, THEREFORE, the Bank and Borrower hereby agree as follows:
1. Definitions.
(a) Capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Loan Agreement.
(b) "Real Estate Sublimit" shall mean (i) from July 1, 2001 through and
including September 30, 2001, $1,750,000.00, and (ii) October 1, 2001 and
thereafter, $1,000,000.00.
(c) "Subordinated Creditors" shall mean the persons identified on the
attached Schedule A.
(d) "Subordinated Note" shall mean the promissory notes dated April 27,
2001, executed by the Borrower, in favor of Subordinated Creditors, in the
aggregate original principal amount of $1,200,000.00.
2. Collateral Obligation Ratio. Section 4 of the Loan Agreement is hereby
amended and restated in its entirety as follows:
"4. COLLATERAL-OBLIGATION RATIO
Without Bank's written consent, Borrower shall not at any time permit the
sum of the aggregate amount of those Obligations reflected by the loan account
ledger for The Revolving
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Credit Facility plus all Letter of Credit Liabilities to exceed the lesser of
$9,500,000.00 or the total sum of:
4.1 Seventy-five percent (75%) of the amount owing on Qualified
Accounts (after deducting payments on Qualified Accounts which are in the
process of collection by the Bank); plus
4.2 Fifty percent (50%) of Qualified Inventory at cost or wholesale
market value, whichever is lower, up to a maximum of $3,500,000.00; plus
4.3 Fifty percent (50%) of the face amount of outstanding import
letters of credit issued by the Bank, on behalf of Borrower, to secure the
purchase price of inventory purchased from Xxxxx Xxxx, or other vendors
approved by the Bank, for Borrower's "Geofile" product line, provided that
Borrower shall not include in Qualified Inventory any of the purchased
inventory relating to any letter of credit included in this Section 4.3;
plus
4.4 the Real Estate Sublimit; less
4.5 the Reserves for Returns; less
4.6 such reserves as Bank, in its sole discretion, deems necessary or
appropriate, taking into account the Borrower's and Borrower's Customers'
financial condition and prospects, the nature and condition of the
Collateral, applicable contingencies and any other factor deemed material
by Bank.
In addition to other required payments, Borrower shall pay Bank, in
reduction of the Obligations owing to Bank at any time, such sums as may be
necessary from time to time to maintain the foregoing ratios and to comply
with the foregoing advance limits. Such ratio is stated only for the
purpose of advances under this Agreement and not for valuation of the
Collateral.
3. Net Income. Section 7.25 of the Loan Agreement is hereby amended and
restated as follows:
7.25 Net Income. Borrower and its Subsidiaries shall, on a
consolidated basis, achieve Net Income of at least ($400,000.00) for its
fiscal quarter ending June 30, 2001.
4. Net Worth. Section 7.26 of the Loan Agreement is hereby amended to
delete "$8,500,000.00" and replace it with "$5,250,000.00."
5. Debt Service, EBIT/Interest. Sections 7.27 and 7.28 of the Loan
Agreement are hereby deleted.
6. Term and Termination. Section 10 of the Loan Agreement is hereby amended
to delete "December 22, 2001" and replace it with "September 30, 2001".
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7. Subordinated Debt and Security Interest. Bank hereby consents to (a)
Borrower's subordinated debt of $1,200,000.00 to the Subordinated Creditors, as
evidenced by the Subordinated Note; and (b) the Subordinated Creditors'
subordinated security interest in the Xxxxxx Property and Borrower's fixed
assets.
8. Business Plan. On or before August 15, 2001, Borrower shall furnish to
Bank a Business Plan (as defined hereinafter) for Borrower for the fiscal year
of Borrower ending March 31, 2002, in form and content satisfactory to Bank. For
purposes of this paragraph, "Business Plan" shall mean a statement prepared by
Borrower's management of management's intentions and projections with regard to
anticipated business developments or objectives relating to Borrower's business,
including (a) a statement of Borrower's projected Inventory and sales, (b) an
operating and capital budget, (c) information regarding projected collateral
levels that show that the Bank will continue to have sufficient collateral to
support the Obligations; and (d) projections of (i) monthly balance sheets of
Borrower, for such fiscal year of Borrower, (ii) monthly statements of income
and expense and of shareholders' equity of Borrower, for such fiscal year of
Borrower, and (iii) monthly budgets of capital expenditures to be incurred by
the Borrower during such fiscal year of Borrower. The Business Plan shall be in
reasonable detail and certified by the President of Borrower as having been
prepared in good faith and to the best knowledge and ability of Borrower.
Borrower shall, promptly upon any material revision of any of the foregoing,
provide a copy of such revision to Bank.
9. Waiver. Lender hereby waives the default by Borrower under the Financial
Covenants, of which Lender has received written notice from Borrower and which
is recognized in the Preliminary Recitals set forth above, existing as of or
prior to the date of this Amendment. The foregoing waiver does not, however, (a)
constitute a waiver of any other term, covenant or agreement contained in the
Loan Agreement, or (b) excuse strict compliance by Borrower with all of the
terms, covenants and agreements contained in this Amendment and in the Loan
Agreement, as amended hereby, in the future.
10. Conditions to Effectiveness of this Agreement. This Amendment shall not
be effective until this Amendment shall have been fully executed and delivered
to Bank and Bank shall have received the following in form and substance
satisfactory to Bank.
(a) The Subordination Agreement allowing the Subordinated Note; and
(b) Corporate Resolutions of Borrower authorizing this Amendment
accompanied by an Officer's Certificate signed by an officer of Borrower.
11. Effect of Amendment. Except as amended hereby, the Loan Agreement shall
remain in full force and effect.
12. Attorneys' Fees. The Borrower agrees to pay all reasonable attorneys'
fees of Bank relating to this Amendment and all amendments, modifications and
supplements hereto.
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13. Law Governing. This Amendment shall be governed by the laws of the
State of Wisconsin.
14. Binding Effect. This Amendment shall be binding upon the parties hereto
and their respective successors and assigns.
15. Release of Bank. In consideration of the accommodations by Bank
hereunder, Borrower does hereby, on behalf of itself, its agents, insurers,
successors and assigns, release, acquit and forever discharge Bank and Bank's
affiliates, together with all of their present and former directors, officers,
agents and employees, from any and all claims, demand or causes of action of any
kind, nature or description whether arising in law or equity or upon contract or
tort or under any state or federal law or otherwise, which Borrower has had, now
has or has made claim to have against any such party or by reason of any act,
omission, matter, cause or thing whatsoever from the beginning of time to and
including the date of this Amendment, whether such claims, demands and causes of
action are matured or unmatured or known or unknown, except Bank's executory
obligations under the Loan Agreement as hereby amended. Notwithstanding the
foregoing, nothing herein shall be construed as a release of Bank's liability
for gross negligence or willful misconduct.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
BORROWER:
Geographics, Inc.
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx, Chief Executive Officer
BANK:
U.S. Bank National Association
By: /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx, Vice President
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SCHEDULE A
[Subordinated Creditors]
Creditor Subordinated Debt
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Xxxxx X. Xxxxxx $100,000
X.X. Xxxxx $50,000
Xxxxx X. Xxxxxxx $10,000
Xxxxxx X. Xxxxxxx $30,000
Xxxxxx X. Xxxxxxx $30,000
J.B.H. Xxxx $100,000
L&D Investments LLP $100,000
Xxxxxx Partners II, LLC $200,000
Xxxxx X. Xxxxx $50,000
Xxxxx and Xxxxx Xxxxx $30,000
Xxxxxxx X. Xxxxxxx $150,000
Xxxxx X. Xxxxxx $100,000
Zilber Family Partnership LLP $200,000
Xxxxxx Xxxxxxxx $50,000