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EXHIBIT 10.11
THIRD AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND
WAIVER OF DEFAULTS
This Amendment, dated as of March 7, 2001, is made by and between THE
SPORTSMAN'S GUIDE, INC., a Minnesota corporation (the "Borrower"), and XXXXX
FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, f/k/a Norwest Bank Minnesota,
National Association, a national banking association (the "Lender").
Recitals
The Borrower and the Lender have entered into Credit and Security
Agreement dated as of December 27, 1999, as amended by a First Amendment to
Credit and Security Agreement dated as of May __, 2000, and a Second Amendment
to Credit Agreement dated as of August 2, 2000 (the "Credit Agreement").
Capitalized terms used in these recitals have the meanings given to them in the
Credit Agreement unless otherwise specified.
The Borrower has requested that certain amendments be made to the
Credit Agreement and certain Events of Default be waived. The Lender is willing
to grant the Borrower's requests subject to the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. Defined Terms. Capitalized terms used in this Amendment which are
defined in the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein. In addition, Section 1.1 of the Credit
Agreement is amended by adding or amending, as the case may be, the following
definitions:
"`Borrowing Base' means, at any time the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender's sole
discretion, the sum of:
(i) 80% of Eligible Accounts, plus
(ii) 48% of Eligible Inventory, less
(iii) the Landlord's Disclaimer Reserve."
"`Floating Rate' means an annual rate equal to the Prime Rate plus one
and one-quarter percent (1.25%), which annual rate shall change when and as
the Prime Rate changes."
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2. Margin. Subsection 2.7(a) of the Credit Agreement is hereby amended
in its entirety to read as follows:
"(a) REVOLVING MARGIN. [Reserved]"
3. Fees. Subsection 2.8(e) of the Credit Agreement is hereby amended in
its entirety to read as follows:
"(e) INVENTORY APPRAISALS. The Borrower shall reimburse the Lender on
demand for the cost of two appraisals of its Inventory per year; provided,
however, that during Default Periods or anytime after the average
Availability for any calendar month falls below $2,000,000, the Borrower
shall reimburse the Lender on demand for the cost of four appraisals of its
Inventory per year."
4. Capitalization. Schedule 5.2 to the Credit Agreement is hereby
amended in its entirety and replaced with Schedule 5.2 to the Third Amendment.
5. Waiver of Defaults. The Borrower is in default of the following
provisions of the Credit Agreement as of the Accounting Period ended on or about
December 31, 2000 (collectively, the "Defaults"):
SECTION/COVENANT REQUIRED PERFORMANCE ACTUAL PERFORMANCE
ss. 6.14 Minimum Pre-Tax Net Income not less than $(500,000) $(1,406,015)
per Accounting Period
ss. 6.15 Minimum Fiscal Year-To-Date not less than $(1,000,000) $(3,189,150)
Net Income
Upon the terms and subject to the conditions set forth in this Amendment, the
Lender hereby waives the Defaults. This waiver shall be effective only in this
specific instance and for the specific purpose for which it is given. This
waiver shall not entitle the Borrower to any other or further waiver in any
similar or other circumstances.
6. No Other Changes. Except as explicitly amended by this Amendment,
all of the terms and conditions of the Credit Agreement shall remain in full
force and effect and shall apply to any advance or letter of credit thereunder.
7. Amendment Fee. The Borrower shall pay the Lender as of the date
hereof a fully earned, non-refundable fee in the amount of $85,000 in
consideration of the Lender's execution of this Amendment.
8. Conditions Precedent. This Amendment shall be effective when the
Lender shall have received an executed original hereof, together with each of
the following, each in substance and form acceptable to the Lender in its sole
discretion:
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(a) Payment of the fee described in Paragraph 7.
(b) Such other matters as the Lender may require.
9. Representations and Warranties. The Borrower hereby represents and
warrants to the Lender as follows:
(a) The Borrower has all requisite power and authority to execute this
Amendment and to perform all of its obligations hereunder, and this
Amendment has been duly executed and delivered by the Borrower and
constitutes the legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms.
(b) The execution, delivery and performance by the Borrower of this
Amendment have been duly authorized by all necessary corporate action and do
not (i) require any authorization, consent or approval by any governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign, (ii) violate any provision of any law, rule or regulation or of
any order, writ, injunction or decree presently in effect, having
applicability to the Borrower, or the articles of incorporation or by-laws
of the Borrower, or (iii) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which the Borrower is a party or by which it or its
properties may be bound or affected.
(c) All of the representations and warranties contained in Article V of
the Credit Agreement are correct on and as of the date hereof as though made
on and as of such date, except to the extent that such representations and
warranties relate solely to an earlier date.
10. References. All references in the Credit Agreement to "this
Agreement" shall be deemed to refer to the Credit Agreement as amended hereby;
and any and all references in the Security Documents to the Credit Agreement
shall be deemed to refer to the Credit Agreement as amended hereby.
11. No Waiver. Except as set forth in paragraph 5 hereof, the execution
of this Amendment and acceptance of any documents related hereto shall not be
deemed to be a waiver of any Default or Event of Default under the Credit
Agreement or breach, default or event of default under any Security Document or
other document held by the Lender, whether or not known to the Lender and
whether or not existing on the date of this Amendment.
12. Release. The Borrower hereby absolutely and unconditionally
releases and forever discharges the Lender, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any
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state or federal law or otherwise, which the Borrower has had, now has or has
made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising 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.
13. Costs and Expenses. The Borrower hereby reaffirms its agreement
under the Credit Agreement to pay or reimburse the Lender on demand for all
costs and expenses incurred by the Lender in connection with the Credit
Agreement, the Security Documents and all other documents contemplated thereby,
including without limitation all reasonable fees and disbursements of legal
counsel. Without limiting the generality of the foregoing, the Borrower
specifically agrees to pay all fees and disbursements of counsel to the Lender
for the services performed by such counsel in connection with the preparation of
this Amendment and the documents and instruments incidental hereto. The Borrower
hereby agrees that the Lender may, at any time or from time to time in its sole
discretion and without further authorization by the Borrower, make a loan to the
Borrower under the Credit Agreement, or apply the proceeds of any loan, for the
purpose of paying any such fees, disbursements, costs and expenses and the fee
required under paragraph 7 hereof.
14. Miscellaneous. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
XXXXX FARGO BANK MINNESOTA, THE SPORTSMAN'S GUIDE
NATIONAL ASSOCIATION
By /s/ XXXXX XXXXXXXXXXX By /s/ XXXXXXX XXXXXX
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Xxxxx Xxxxxxxxxxx Xxxxxxx X. Xxxxxx
Its Vice President Its Chief Financial Officer
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SCHEDULE 5.2
TO CREDIT AND SECURITY AGREEMENT
CAPITAL STOCK
NUMBER OF AUTHORIZED NUMBER OF ISSUED AND
TYPE/CLASS/SERIES OF STOCK SHARES OUTSTANDING SHARES
Common, $.01 par value 36,800,000 4,747,810
Series A Preferred, $.01 par value 200,000 0
Undesignated 3,000,000 0
The Borrower has granted options to purchase up to 564,556 common
shares pursuant to incentive and other employee stock option plans.
The Borrower granted to the managing underwriters of the Borrower's
1998 public equity offering a warrant to purchase up to 100,000 common shares.
FIVE PERCENT BENEFICIAL OWNERS
The following list sets forth certain information with respect to the
beneficial ownership of common stock of the Borrower as of February 2, 2001 by
those persons or groups known to the Borrower to beneficially own more than 5%
of our common stock.
COMMON STOCK
BENEFICIALLY OWNED
NAME NUMBER PERCENT (1)
Xxxxxxx X. Xxxxx (2) 522,000 11.0%
Xxxx Xxxx (3) 264,798 5.4%
Xxxxx X. Xxxxxx, 383,725 8.1%
Individually and as trustee of
various trusts for the benefit of
Dr. and Xxx. Xxxxx and their children
and grandchildren (4)
E Com Ventures, Inc. (5) 298,900 6.3%
00000 X.X. 000 Xxxx
Xxxxx, XX 00000
Dimensional Fund Advisors Inc. (6) 342,700 7.2%
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxx Xxxxxx, XX 00000
Kalmar Investments Inc. (7) 300,000 6.3%
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
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(1) Percentages are calculated on the basis of the number of shares outstanding
on February 2, 2001 plus the number of shares issuable pursuant to options
held by the individual which are exercisable within 60 days after February
2, 2001.
(2) Includes 420,051 shares held by the Xxxxxxx X. Xxxxx Family Limited
Partnership of which the Xxxxxxx X. Xxxxx Revocable Trust, of which Xx.
Xxxxx is trustee, owns a 99.9% limited partnership interest and a 99.8%
interest in the general partner, and 101,949 shares held by the Xxxxx X.
Xxxxx Family Limited Partnership of which the Xxxxx X. Xxxxx Revocable
Trust, of which Xxx. Xxxxx is trustee, owns a 99.9% limited partnership
interest and a 99.8% interest in the general partner. Xxxxx X. Xxxxx is the
wife of Xx. Xxxxx. Does not include 633,848 shares held by Dr. and Xxx.
Xxxxx'x children or in trusts for the benefit of Dr. and Xxx. Xxxxx and
their children and grandchildren of which Xx. Xxxxx expressly disclaims
beneficial ownership.
(3) Includes 174,615 shares issuable upon the exercise of options. Does not
include 46,000 shares held in trusts for the benefit of Xx. Xxxx'x children
and grandchildren of which Xx. Xxxx expressly disclaims beneficial
ownership.
(4) Includes 382,725 shares held as trustee of various trusts for the benefit
of Dr. and Xxx. Xxxxx and their children and grandchildren, of which Xx.
Xxxxxx has no pecuniary interest. Does not include 522,000 shares held by
the Xxxxxxx X. Xxxxx Family Limited Partnership and the Xxxxx X. Xxxxx
Family Limited Partnership over which Xx. Xxxxxx shares voting and
dispositive power and of which Xx. Xxxxxx expressly disclaims beneficial
ownership.
(5) Based on a Schedule 13D filing dated April 20, 2000. Xxxx Xxxxxx, Chief
Executive Officer of E Com Ventures, Inc. has sole power to vote and
dispose of 40,000 shares and shared power to vote and dispose of 258,900
shares owned by E Com Ventures, Inc.
(6) Based on a Schedule 13G filing dated February 2, 2001. Dimensional Fund
Advisors Inc., a registered investment advisor, has sole power to vote and
dispose of 342,700 shares held by investment companies and other investment
vehicles to which Dimensional Fund Advisors Inc. provides investment
advice. Dimensional Fund Advisors Inc. disclaims beneficial ownership of
the 342,700 shares.
(7) Based on a Schedule 13G filing dated January 8, 1999. Kalmar Investments
Inc., a registered investment advisor, has sole power to dispose of 300,000
shares but does not have the power to vote the 300,000 shares.
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