EXHIBIT 99.2
AMENDMENT TO LOAN AND SECURITY AGREEMENT
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This Amendment to Loan and Security Agreement (this "Amendment") dated
as of July 12, 2000 is entered into by and among Skateboard World Industries,
Inc., a California corporation ("SWI"); El Segundo Hat, Inc., a California
corporation ("ESH"); Red Lantern Distribution, Ltd., a California corporation
("RLD"); Diaxis, LLC, a California limited liability company ("Diaxis"); Dwindle
Inc., a California corporation ("Dwindle"); and Phase Three, Inc. (formerly
known as Central Coast Surfboards, Inc.), a California corporation ("CCS"); the
financial institutions party hereto (each, a "Lender" and collectively,
"Lenders"); Fleet Capital Corporation, itself a Lender and as agent for the
Lenders (in such capacity, "Agent"); and First Source Financial LLP, an Illinois
registered limited liability partnership, itself a Lender and as co-agent for
the Lenders (in such capacity, "Co-Agent"), and is made in reference to the
following facts:
A. SWI, ESH, RLD, Diaxis, Dwindle and CCS (collectively, "Borrowers")
previously entered into a Loan and Security Agreement with Lenders, Agent and
Co-Agent dated as of August 13, 1999 (as amended from time to time, the "Loan
Agreement"). Unless otherwise provided herein, capitalized terms used herein
without definition shall have the respective meanings assigned to such terms in
the Loan Agreement. Section references shall be to sections of the Loan
Agreement unless otherwise indicated.
B. Borrowers have requested that Lenders consent to the sale of the
stock of CCS and ▇▇▇▇▇ Marketing, Inc. (the "CCS/KMI Sale").
C. Lenders, Agent and Co-Agent are willing to grant such requests on
the terms and subject to the conditions set forth in this Amendment.
NOW THEREFORE, in consideration of the foregoing and on the terms
and subject to the conditions hereof, the parties do hereby agree as follows:
1. CONSENT TO CCS/HOLDCO SALE. Subject to the terms and conditions
of this Amendment, Agent and Lenders consent to the CCS/KMI Sale provided that:
(a) the CCS/KMI Sale is structured as follows:
(i) Alloy Online, Inc. ("Buyer") shall acquire all of the
outstanding capital stock of ▇▇▇▇▇ Marketing, Inc. ("KMI") pursuant to
documentation in form and substance satisfactory to Agent and all the Lenders
(the "Acquisition Documents") and at the time of such acquisition all of KMI's
assets except the stock of CCS shall have been transferred to SWI Holdings, LLC
("Holdings LLC").
(ii) at the closing of the CCS/KMI Sale, Buyer shall remit to
Agent for the ratable benefit of the Lenders not less than $10,000,000 (the
"Cash Payment").
(iii) at the closing of the CCS/KMI Sale, Buyer shall remit to
Agent for the ratable benefit of the Lenders not less than $297,768.72 cash
collateral with respect to the letter of credit #3003752 issued on behalf of CCS
(the "Cash Collateral").
(iv) Buyer shall deliver to Holdings LLC not less than 2,723,016
shares of Buyer's capital stock (the "Alloy Stock"); provided that not less than
403,092 additional shares of the Alloy Stock or any amounts in excess thereof
shall be deposited into escrow pursuant to the provisions of the Acquisition
Documents and Holdings LLC's interest in such escrowed Alloy Stock shall be
subject to a Control Agreement among Holdings LLC, the escrow agent and Agent in
form and substance acceptable to Agent and all the Lenders (the "Escrow Control
Agreement").
(v) Immediately prior to the CCS/KMI Sale or concurrent
therewith, (A) the beneficial ownership of the capital stock of SWI shall be
transferred from KMI to Holdings LLC, (B) subject to the prior assignment to
Agent which remains in full force and effect, KMI shall transfer its rights,
title and interest in and to the promissory note, warrant, and security
agreement executed by Antix, Inc. (f/k/a eKube, Inc.) in favor of KMI (the
"Antix Obligations") to SWI and SWI hereby acknowledges that Agent is the holder
of the note as the prior assignee of KMI, and (C) subject to the prior
assignment to Agent which remains in full force and effect, KMI shall transfer
its rights, title and interest in and to the promissory note and all other
documents or other evidence of indebtedness executed by DK Products, Inc. in
favor of KMI (the "DK Obligations") to SWI.
(vi) All amounts outstanding pursuant to the June 2000
Discretionary Extension as defined in the Amendment to Loan Agreement dated in
June, 2000 among Borrowers, Lenders, Agent and Co-Agent shall be paid in full by
the Cash Payment.
(vii) The members of Holdings LLC will include the former
shareholders of KMI and certain holders of notes from SWI and CCS.
(viii) Holdings LLC will receive a warrant from Buyer in form and
substance satisfactory to Agent and all the Lenders (the "Alloy Warrant") and
Holdings LLC assigns its rights under the Alloy Warrant to Agent for the benefit
of the Lenders pursuant to an agreement or confirming letter in form and
substance satisfactory to Agent and all the Lenders (the "Warrant Assignment
Agreement").
(ix) In connection with the CCS/KMI Sale, Borrowers will be
executing a subordinated note in the amount of $550,000 in favor of ▇▇▇▇▇▇▇ Pace
Capital Fund, L.P., to reflect payment of a transaction fee in the amount of
$300,000 for services rendered by ▇▇▇▇▇▇▇ ▇▇▇▇ Capital Fund, L.P. in connection
with the CCS/KMI Sale and management fees owed by Borrowers to ▇▇▇▇▇▇▇ Pace
Capital Fund, L.P., and in connection with such Subordinated Note, ▇▇▇▇▇▇▇ ▇▇▇▇
Capital Fund, L.P. shall enter into an intercreditor and subordination agreement
satisfactory to and with the Agent.
(b) ▇▇▇▇▇▇▇ Pace Capital Fund, L.P. executes a Credit Support
Agreement in form and substance satisfactory to Agent and all the Lenders in an
amount of up to four million dollars with respect to certain amounts remaining
unpaid in connection with the Liabilities (the "▇▇▇▇▇▇▇ Credit Support
Agreement").
(c) Holdings LLC pledges the stock of SWI to Agent for the benefit of
the Lenders pursuant to a Pledge Agreement in form and substance satisfactory to
Agent and all
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the Lenders (the "LLC/SWI Pledge Agreement"), delivers to Agent the stock of SWI
issued in the name of Holdings LLC.
(d) Holdings LLC pledges the Alloy Stock to Agent for the benefit of
the Lenders and the Alloy Stock shall be held in an account (the "Alloy
Account") with ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("Broker") with the Alloy Account also being
pledged to Agent for the benefit of the Lenders pursuant to a Pledge Agreement
in form and substance satisfactory to Agent and all the Lenders (the "LLC/Alloy
Pledge Agreement"). The Alloy Account shall further be subject to an account
control agreement among Agent, Holdings LLC and Broker in form and substance
satisfactory to Agent and all the Lenders (the "Alloy Control Agreement").
(e) the Alloy Account is governed by instructions providing for the
disposition of the Alloy Stock over a period of twelve months subject to certain
extensions (the "Sale Period") pursuant to the terms delineated in Section 5.2
of the Holdings LLC Operating Agreement (the "Operating Agreement") and the
Operating Agreement as a whole shall be in form and substance satisfactory to
Agent and all the Lenders with the proceeds of such disposition being
distributed as provided below (the "Alloy Stock Proceeds"). Pursuant to the
terms of the ▇▇▇▇▇▇▇ Credit Support Agreement, ▇▇▇▇▇▇▇ ▇▇▇▇ Capital Fund, L.P.
shall purchase from the Lenders any outstanding Liabilities up to $4,000,000 at
the end of the Sale Period or as otherwise provided in the ▇▇▇▇▇▇▇ Credit
Support Agreement. The Sale Period shall be calculated as set forth in
Subsection 3(b).
(f) Holdings LLC executes a Security Agreement in form and substance
satisfactory to Agent and all the Lenders (the "LLC Security Agreement") and
financing statements in connection with the LLC Security Agreement.
(g) Holdings LLC executes a Credit Support Agreement in form and
substance satisfactory to Agent and all the Lenders with respect to the
Liabilities under the Loan Agreement (the "Holdings LLC Credit Support
Agreement").
(h) The foregoing consent is a one-time consent. Without limiting the
generality of the foregoing, this consent shall not apply to any future
transaction whether or not similar to the foregoing. Any failure to satisfy all
the terms and conditions under this Amendment shall render the foregoing consent
null and void.
2. REAFFIRMATION OF ANTIX AND BORROWERS SWI agrees that in connection
with the Antix Obligations, it will remit any payments received by Antix in
connection with the Antix Obligations promptly to Agent to be applied to the
Liabilities. Borrowers agree that in connection with the DK Obligations, they
will promptly remit to Agent any and all amounts received by Borrowers as
payment of the DK Obligations to be applied to the Liabilities.
3. APPLICATION OF PROCEEDS. The parties hereto agree that:
(a) Cash Payment. The Cash Payment shall be applied to the
Liabilities as follows:
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(i) $5,000,000 to permanently reduce the then current balance of
the Term Loan applied in the inverse order of maturity of payment; and
(ii) $5,000,000 to pay the June 2000 Discretionary Extension and
then to reduce the then current balance of the Revolving Loans;
(b) Alloy Stock. The Sale Period shall begin on the earlier of
(x)the "S-3 Effective Date" as defined in the Operating Agreement or (y) 30 days
from the closing of the CCS/KMI Sale. In the event the S-3 registration
statement related to the Alloy Stock is suspended for any reason after the first
portion of the first quarterly payment has been made, the Payment Date which
follows such suspension and only that Payment Date shall be tolled for a period
equal to the shorter of (x) the actual period of suspension and (y) thirty
calendar days; provided that such tolling shall not be applied more than twice
during the Sale Period, provided, further, that the Maturity Date must be a date
no later than October 18, 2001. The Alloy Stock Proceeds shall be remitted to
Agent as received by Broker with each quarterly payment requiring a sale of at
least 399,339 shares per quarter (each such date is a "Payment Date") until such
time as Agent confirms to Broker in writing that it has received all amounts
owing in connection with the Term Loan; provided that as of each Payment Date,
all payments made in such quarter shall not be less than an amount sufficient to
pay all interest on the Liabilities due and payable at the time of each such
Payment Date. Alloy Stock Proceeds received in excess of the amounts required to
be remitted to Agent in accordance with this subsection (b) shall be used to
reduce the then current balance of the Term Loan applied in the inverse order of
maturity of payment:
(i) The first quarterly payment, requiring a sale of no less
than 399,339 shares of Alloy Stock, shall be due on the date 90 days after the
S-3 Effective Date but in no event greater than the date 120 days from the
closing of the CCS/KMI Sale;
(ii) the second quarterly payment, requiring a sale of no less
than 399,339 shares of Alloy Stock, shall be due on the date 90 days after the
due date of the second portion of the first quarterly payment;
(iii) the third quarterly payment, requiring a sale of no less
than 399,339 shares of Alloy Stock, shall be due on the date 90 days after the
due date of the second quarterly payment; and
(iv) the fourth quarterly payment, requiring a sale of no less
than 399,339 shares of Alloy Stock, shall be due on the date 90 days after the
due date of the third quarterly payment ("the Maturity Date"), provided that,
including the tolling periods provided for below, the Maturity Date and the due
date of the fourth quarterly payment shall not be later than October 18, 2001.
In accordance with subsection 3(b) above, in no event shall the number of Alloy
Stock shares sold for each quarterly payment be less than an amount sufficient
to generate net proceeds to Agent equal to the accrued and unpaid interest on
the Liabilities.
(c) any and all payments received by Agent with respect to the DK
Obligations or the Antix Obligations shall applied to the Liabilities to reduce
the then current balance of the Term Loan applied in the inverse order of
maturity of payment.
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4. CERTAIN AMENDMENTS. As of the Amendment Effective Date, the following
amendments shall be deemed to have been made:
(a) The definition of "Fixed Charge Coverage Ratio" in Section 1.43
of the Loan Agreement is hereby deleted.
(b) Subsection 1.51 of the Loan Agreement is hereby amended and
restated in full as follows:
"`HOLDCO' shall mean SWI Holdings LLC, a Delaware limited liability
company."
(c) Subsection 1.66 of the Loan Agreement is hereby amended by
deleting "corporation" from the second line of such subsection and substituting
"entity" in lieu therefor.
(d) Subsection 1.67 of the Loan Agreement is hereby amended and
restated in full as follows:
"`PERMITTED CAPITAL STOCK' shall mean capital stock, membership or other
ownership interests of HoldCo provided that (i) no dividends (other than
dividends payable solely in shares of stock or membership or other ownership
interests of Permitted Capital Stock) are payable on such capital stock,
membership or other ownership interests until after the maturity date of this
Agreement (as it may be extended) and (ii) such capital stock, membership or
other ownership interests is not mandatorily redeemable by HoldCo or at the
option of the holder thereof until after the maturity date of this Agreement (as
it may be extended)."
(e) The definition of "Total Funded Debt Multiple" in Section 1.89 of
the Loan Agreement is hereby deleted.
(f) Subsection 2.1(g) of the Loan Agreement is hereby amended by
replacing the language in subsection 2.1(g)(i) therein "one percent (1.00%)"
with "one and one-quarter percent (1.25%)", and also by replacing the language
in subsection 2.1(g)(ii) therein "three percent (3.00%)" with "three and one-
quarter percent (3.25%)"
(g) Subsection 2.1(h) of the Loan Agreement is hereby amended by
replacing the language in subsection 2.1(h)(i) therein "one and one-half percent
(1.50%)" with "one and three-quarters percent (1.75%)", and also by replacing
the language in subsection 2.1(h)(ii) therein "three and one-quarter percent
(3.25%)" with "three and one-half percent (3.50%)"
(h) The matrix provided for in subsection 2.1(j) of the Loan
Agreement is hereby deleted and such subsection shall be marked: "Intentionally
Deleted."
(i) Subsection 10.2(d) of the Loan Agreement is hereby amended by
replacing the amount "$2,000,000" therein with the amount "$1,600,000" in the
first sentence
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thereof, and is also hereby amended by adding the following language at the
beginning of such subsection 10.2(d):
"Exclusive of any non-cash loans to shareholders for the purpose of
purchasing options,"
(j) Subsection 10.2(l) of the Loan Agreement is hereby amended by
adding the following at the end of such subsection 10.2(l):
",provided, that Borrowers may, in connection with expenses related
to the CCS/KMI Sale, incur expenses in an amount not to exceed $1,000,000 in the
aggregate."
(k) The third sentence of Subsection 10.8 of the Loan Agreement is
hereby amended and restated in full as follows:
"HoldCo shall continue to own and control, beneficially and of
record, 100% of the issued and outstanding capital stock of SWI; and SWI shall
continue to own and control, beneficially and of record, 100% of the issued and
outstanding capital stock of ESH, RLD and Dwindle, 50% of the issued and
outstanding capital stock of Industry Threat, and 75% of the membership
interests in Diaxis."
(l) Exhibit I to the Loan Agreement is hereby amended by deleting
subsections (c) and (e) therein.
(m) Exhibit J to the Loan Agreement is hereby amended by deleting
Sections 3 and 5 therein.
5. FACILITY REDUCTION. The respective Commitment of each Lender for
Revolving Credit Loans is hereby reduced by $2,000,000 (such that the aggregate
Commitment for Revolving Credit Loans is reduced by $4,000,000 to a total of
$8,000,000, with a yearly seasonal increase to an amount not to exceed
$10,000,000 for the period of March 1 to October 1), the Total Facility under
the Loan Agreement is hereby reduced to $19,000,000 less amortization on the
Term Loan, the Revolving Loan line is hereby reduced to $8,000,000 (subject to
the seasonal increase as permitted above) and subject to a Letter of Credit
subline which is hereby reduced to $5,000,000, and an Inventory subline with
respect to Eligible Inventory, which is hereby reduced to $6,000,000.
6. TERM. Notwithstanding anything to the contrary in the Loan
Agreement, all Liabilities due or to become due to the Lenders shall be due and
payable on or before the Maturity Date.
7. RELEASE OF ALLOY STOCK. The parties hereto agree that, provided no
Event of Default exists, upon the payment in full of all Liabilities in
connection with the Term Loan, Alloy Stock may be sold and/or distributed by
Holdings LLC, provided that, other than in connection with such distributions,
the security interest in the Alloy Stock granted to Agent pursuant to the
LLC/Alloy Pledge Agreement shall be released only at such time as the
Liabilities are paid in full and the Loan Agreement is terminated. Upon request,
Agent shall
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send notice to Holdings LLC that the Term Loan has terminated and that Alloy
Stock may be distributed as provided above.
8. FINANCIAL COVENANTS. The financial covenants set forth on Exhibit "J"
and Section 10.2(m) shall be restated (within five (5) days of the Amendment
Effective Date in Agent's discretion)at 80% of Borrower's projections, provided
such projections are acceptable to Lenders, Agent and Co-Agent in their
discretion, reasonably exercised.
9. SUBORDINATED NOTES. Agent and Lenders hereby consent to the amendment
and restatement of each Subordinated Note as defined in the respective
Intercreditor and Subordination Agreements dated August 13, 1999 executed by
each of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, as Trustee of the ▇▇▇▇▇▇▇▇▇▇ Family
Trust, U/D/T dated ▇/▇/▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Yoshinosuke ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, Trentworth Securities, Inc., ▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇, as
Trustees of the Hall Living Trust dated April 12, 1994 ("Hall"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇"), and ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, as Trustee of the ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
Intervivos Trust of September 6, 1996 ("▇▇▇▇▇▇") (whose interest under the
Subordinated Note has been assigned to Holdings, LLC) (collectively, other than
▇▇▇▇▇▇ and Holdings LLC, the "Subordinated Noteholders"), provided that (a) the
original principal amount of and the interest rate under each Subordinated Note
remains unchanged (except that the interest payable to Hall and ▇▇▇▇▇▇▇ under
their respective Subordinated Notes may be increased to a rate not to exceed
13.25% per annum) and the principal amount of certain of the Subordinated Notes
may be increased in accordance with Schedule 1 attached hereto, (b) the
Subordinated Noteholders each sign the acknowledgement at the end of this
Amendment, (c) although the Subordinated Debt with CCS as debtor may be
converted to preferred shares of SWI stock on the Amendment Effective Date, no
cash payment in exchange for such preferred shares will be permitted until
repayment and satisfaction in full of the Liabilities with respect to the Term
Loan (subject to the provisions of Section 7), and then only from the proceeds
of the Alloy Stock, and (d) Holdings LLC enters into an Intercreditor and
Subordination Agreement in form and substance satisfactory to Agent and all the
Lenders (the "LLC Subordination Agreement").
10. CERTAIN RELEASES. Effective as of the Amendment Effective Date,
(a) Agent and the Lenders agree that:
(i) Agent is authorized and shall file Uniform Commercial Code
termination statements described related to (A) UCC-1 Financing Statement naming
Central Coast Surfboards, Inc. as debtor and Fleet Capital Corporation, as
Agent, as secured creditor, filed August 6, 1999 with the California Secretary
of State as document no. 9922460456 and (B) UCC-1 Fixture Filing naming Central
Coast Surfboards, Inc. as debtor and Fleet Capital Corporation, as Agent, as
secured creditor, recorded February 17, 2000 with the San ▇▇▇▇ Obispo County
Recorder as document no. 2000-008536, which, to the best of Agent's knowledge,
are the only financing statements which Lenders or Agent have filed against CCS
or KMI in respect of the transactions contemplated by the Loan Agreement and
(ii) such other termination statements, releases and other agreements as CCS may
reasonably request in connection with the Agent's release and termination of the
liens and security interests in the property of CCS;
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(ii) KMI shall be deemed released from its obligations under (A)
that certain Pledge Agreement dated August 13, 1999 between KMI and Agent (the
"Original Holdco Pledge") to the extent KMI has not previously been released
from the Original Holdco Pledge, and (B) that certain Secured Continuing
Corporate Guaranty dated August 13, 1999 executed by KMI in favor of Agent; and
(iii) Agent is authorized and shall deliver to KMI stock
certificate number 10 representing 918 shares of CCS stock issued in the name of
KMI and currently in Agent's possession pursuant to the Original Holdco Pledge;
and
(iv) CCS shall cease to be a Borrower under the Loan Agreement
and shall have no further obligation with respect to the Liabilities under the
Loan Agreement or the Ancillary Documents, including, but not limited to, any
notes or guaranty agreements previously executed by CCS in connection with the
Loan Agreement.
(b) CCS agrees that the Lenders shall have no further obligation to
extend financial accommodations to CCS under the Loan Agreement or Ancillary
Documents; and
(c) Agent and the Lenders, on the one hand, and CCS and KMI, on the
other hand, hereby release the other from any and all claims, causes of actions,
demands, debts, obligations, liabilities, and any and all other claims which
Agent and the Lenders, on the one hand, and CCS and KMI, on the other hand, may
now or hereafter have against the other in connection with the Loan Agreement
and the Ancillary Documents, all whether known or unknown (the "Loan Agreement
Claims"). Agent, each Lender, CCS and KMI expressly waive with respect to the
Loan Agreement Claims the provisions of the California Civil Code Section 1542,
which reads as follows:
"1542 (Certain claims not affected by general release.) A general
release does not extend to claims which the creditor does not know or suspect to
exist in his favor at the time of executing the release, which, if known by him,
must have materially affected his settlement with the debtor."
(d) ▇▇▇▇▇▇▇ ▇▇▇▇ Capital Fund, L.P. shall be released from (i) its
obligations with respect to the Limited Continuing Guaranty in favor of Agent
and Lenders dated as of _______, ____ and (ii) from its obligations with respect
to the 2000 Discretionary Extension Credit Support Agreement dated in June, 2000
in favor of Agent and Lenders.
11. FEES. BORROWER SHALL BE RESPONSIBLE FOR THE FOLLOWING FEES:
(a) Amendment Fee. In consideration of the financial accommodations
provided for herein and in addition to all other fees and charges, Borrowers
(other than CCS) shall pay to Agent, for the pro rata benefit of all Lenders, a
fee of $50,000 plus costs, fully earned and payable on the date hereof.
(b) Termination Fee. Borrowers agree to pay a fee on the Maturity
Date equal to the Prepayment Fee that would otherwise be applicable in
accordance
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with Section 2.10 of the Loan Agreement had the Maturity Date not been modified
by this Amendment.
12. CONDITIONS PRECEDENT. Agent and Lenders obligations under this
Amendment shall become effective only upon the satisfaction of all of the
following conditions precedent on or prior to July __, 2000 (the date of
satisfaction of all such conditions being referred to as the "Amendment
Effective Date"):
(a) Agent shall have received fully executed copies of:
(i) this Amendment;
(ii) the Acquisition Documents;
(iii) the Warrant Assignment Agreement;
(iv) the ▇▇▇▇▇▇▇ Credit Support Agreement;
(v) the LLC/SWI Pledge Agreement and financing statements in
connection therewith;
(vi) the LLC/Alloy Pledge Agreement and financing statements in
connection therewith;
(vii) the Alloy Control Agreement
(viii) the Escrow Control Agreement;
(ix) LLC Security Agreement and financing statements in
connection therewith;
(x) the Operating Agreement;
(xi) the Holdings LLC Credit Support Agreement;
(xii) the LLC Subordination Agreement; and
(xiii) any documents ancillary to any of the above.
(b) Agent shall have received:
(i) payment of the fee referred to in Section 11 hereof;
(ii) the Cash Payment;
(iii) the Cash Collateral;
(iv) evidence satisfactory to Agent that the capital stock of
SWI has been transferred from KMI to Holdings LLC;
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(v) the stock of SWI issued in the name of Holdings LLC;
(vi) an addendum to Exhibit G to the Loan Agreement outlining
the percentage ownership interest of each Person owning an interest in Holdings
LLC;
(vii) such opinions of counsel for ▇▇▇▇▇▇▇ ▇▇▇▇ Capital Fund,
L.P. and Holdings LLC as Agent shall deem appropriate; and
(viii) evidence that all actions necessary to consummate the
transactions contemplated in this Agreement or any other documents referenced
herein have been taken.
(c) The representations and warranties set forth in this
Amendment shall be true and correct as of the Amendment Effective Date.
13. MISCELLANEOUS.
(a) Reference to the Loan Agreement and the Ancillary
Agreements.
(i) Except as specifically amended by this Amendment and the
documents executed and delivered in connection herewith, the Loan Agreement and
the Ancillary Agreements shall remain in full force and effect in accordance
with their respective terms and are hereby ratified and confirmed.
(ii) Except as specifically provided in Section 1 above, the
execution and delivery of this Amendment shall not constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of Agent or
Lenders under, the Loan Agreement or any of the Ancillary Agreements.
(iii) Borrowers (other than CCS) hereby warrant and represent
to Agent that there does not exist a Default or an Event of Default and reaffirm
as of the date hereof of all of the warranties and representations of Borrowers
contained in the Loan Agreement and in the Ancillary Agreements.
(b) Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(c) Governing Law. This Amendment shall be governed by and construed
according to the laws of the State of California.
(d) Attorneys' Fees. Borrowers (other than CCS) shall pay, on demand,
all reasonable fees and costs incurred by Agent and Lenders in connection with
the negotiation, documentation and execution of this Amendment, including the
fees and expenses of attorneys, auditors, environmental consultants and other
similar Persons engaged by Agent and Lenders. If any legal action or proceeding
shall be commenced at any time by any party to this Amendment in connection with
its interpretation or enforcement, the prevailing party or parties
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in such action or proceeding shall be entitled to reimbursement of its
reasonable attorneys' fees and costs in connection therewith, in addition to all
other relief to which the prevailing party or parties may be entitled.
(e) Jury Trial Waiver. Each of the parties hereto waives its right to
a trial by jury in any action to enforce, defend, interpret or otherwise
concerning this Amendment.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
BORROWERS:
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SKATEBOARD WORLD INDUSTRIES, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_________________________________________
Title CEO
______________________________________
EL SEGUNDO HAT, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_________________________________________
Title CEO
______________________________________
RED LANTERN DISTRIBUTION, LTD.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_________________________________________
Title V.P.
______________________________________
DIAXIS, LLC
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_________________________________________
Title CEO
______________________________________
DWINDLE INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_________________________________________
Title CEO
______________________________________
PHASE THREE, INC.
formerly known as Central Coast Surfboards, Inc.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_________________________________________
Title V.P.
______________________________________
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GUARANTORS:
▇▇▇▇▇ MARKETING, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_________________________________________
Title CEO
______________________________________
▇▇▇▇▇▇▇ PACE CAPITAL FUND, L.P.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇
_________________________________________
Title Managing Director
______________________________________
AGENT:
FLEET CAPITAL CORPORATION
By /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_________________________________________
Title Sr. Vice President
______________________________________
CO-AGENT:
FIRST SOURCE FINANCIAL LLP,
an Illinois registered limited liability partnership
By: First Source Financial, Inc., its agent/manager
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
_________________________________________
Title Vice President
______________________________________
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LENDERS:
-------
FLEET CAPITAL CORPORATION
By /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_________________________________________
Title Sr. Vice President
______________________________________
FIRST SOURCE FINANCIAL LLP,
an Illinois registered limited liability partnership
By: First Source Financial, Inc., its agent/manager
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
_________________________________________
Title Vice President
______________________________________
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Each of the undersigned hereby consents to and acknowledges the terms
and conditions of the foregoing Amendment and agrees that its respective
Intercreditor and Subordination Agreement in favor of Agent remains in full
force and effect. Each of the undersigned further agree that (i) the
"Subordinated Note" as defined in their respective Intercreditor and
Subordination Agreement shall refer to the Amended and Restated Subordinated
Promissory Note dated substantially concurrently herewith executed by SWI in
favor of the respective Subordinated Noteholders, and (ii) except as to
Trentworth Securities, Inc., the last sentence of Section 2 of each of the
Intercreditor and Subordination Agreements shall be amended and restated in full
as follows: "Subordinated Lender shall not accept or receive dividends or
distributions from SWI Holdings, LLC on his membership or other ownership
interest of SWI Holdings, LLC if such dividends or distributions were made or
paid in violation of the terms of the Loan and Security Agreement."
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_______________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
_______________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, as Trustee of the ▇▇▇▇▇▇▇▇▇▇ Family Trust, U/D/T dated 4/6/98
/s/ ▇▇▇▇ ▇▇▇▇▇
_______________________
▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
_______________________
▇▇▇▇▇▇▇ ▇▇▇▇▇
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/s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
________________________
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
________________________
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
________________________
▇▇▇▇▇ ▇. ▇▇▇▇, as Trustee of the Hall Living Trust dated April 12, 1994
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
________________________
▇▇▇▇▇ ▇. ▇▇▇▇, as Trustee of the Hall Living Trust dated April 12, 1994
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
TRENWITH SECURITIES, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
________________________
Its: Managing Director
_______________________
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SCHEDULE 1
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CHANGES TO SUBORDINATED NOTES
-----------------------------
The principal amount of the below listed Subordinated Notes may be increased as
follows:
------------------------------------------------------------------------------------------------
NOTEHOLDER OLD PRINCIPAL AMOUNT NEW PRINCIPAL AMOUNT
------------------------------------------------------------------------------------------------
Rocco $1,347,701 $1,360,000
------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ $ 440,677 $ 450,000
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▇▇▇▇▇▇▇▇▇▇ FamilyTrust $ 330,523 $ 350,000
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