EXHIBIT 99.3
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SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT ▇▇▇▇▇ FARGO RETAIL FINANCE, LLC
792314.9
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Execution Date: October __, 2003
Effective Date: October 1, 2003
THIS SECOND AMENDMENT is made in consideration of the mutual covenants
contained herein and benefits to be derived herefrom to the April 10, 2003 Loan
and Security Agreement (the "LOAN AGREEMENT"), as amended by a certain First
Amendment dated September 17, 2003, between:
▇▇▇▇▇ Fargo Retail Finance, LLC (the "LENDER"), a Delaware
limited liability company with offices at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ - ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
and
Gadzooks, Inc. ( the "BORROWER"), a Texas corporation with its
principal executive offices at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇.
PART 1. AMENDMENT OF LOAN AGREEMENT:
The Loan Agreement is amended as follows:
I.. The definition of "Appraised Inventory Percentage" on Page 2 of the
Loan Agreement is hereby deleted in its entirety, and the following is inserted
in its place:
"APPRAISED INVENTORY PERCENTAGE" shall mean the following
percentages during the specified corresponding periods:
Calendar Period Percentage
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April 1 through September 30, 2003 85%
October 1, 2003 through March 31, 2004 95%
April 1, 2004 and thereafter 85%
II.. The definition of "Availability Reserves" on Page 3 of the Loan
Agreement is hereby amended by deleting subparagraph (v) contained therein, and
inserting the following in its place:
(v) Permanent Availability Block in the amount of:
(a) $3,000,000.00 at all times through September 30,
2003;
(b) $1,500,000.00 from October 1, 2003 through December
31, 2003; and thereafter:
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(c) Increasing by $125,000.00 each week, as of the
commencement of business on Friday each week, such
that the Permanent Availability Block has been
restored to $3,000,000.00 on or before March 31,
2004.
III.. The definition of "Base Margin Rate" on Page 4 of the Loan
Agreement is hereby deleted in its entirety, and the following is inserted in
its place:
"BASE MARGIN RATE": Means the aggregate of ▇▇▇▇▇ Fargo Bank, N. A.'s
Base Rate, plus the following percentage based upon the corresponding criteria:
Line Utilization Base Margin
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Level I - - Up to $5,000,000.00 (0.25%)
Level II - - Greater than $5,000,000.00, 0.00%
but less than $10,000,000.00
Level III - - Greater than $10,000,000.00 0.50%
The Base Margin shall initially be established at Level II
until September 30, 2003. From October 1, 2003 through March
31, 2004, the Base Margin shall be established at 1.00%.
Thereafter, the Base Margin shall be adjusted monthly on the
first day of each calendar month, commencing with April 1,
2004, based upon the average line utilization during the prior
month. Upon the occurrence and during the continuance of an
Event of Default, the Base Margin may, at the option of the
Lender, be immediately increased to the percentage set forth
in Level III (even if the line utilization requirement for
another Level has been met) and interest shall be determined
in the manner set forth in Section 2-10, below.
IV.. The definition of "Libor Margin" on Page 16 of the Loan Agreement
is hereby deleted in its entirety, and the following is inserted in its place:
"LIBOR MARGIN": Means the following percentage based upon the
corresponding criteria:
Line Utilization LIBOR Margin
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Level I - - Up to $5,000,000.00 1.25%
Level II - - Greater than $5,000,000.00, 1.50%
but less than $10,000,000.00
Level III - - Greater than $10,000,000.00 2.00%
The Libor Margin shall initially be established at Level II
until September 30, 2003. From October 1, 2003 through March
31, 2004, the Libor Margin shall be established at 3.00%.
Thereafter, the Libor Margin shall be adjusted monthly on the
first day of each calendar month, commencing with April 1,
2004, based upon the average line utilization during the prior
month. Upon the occurrence and during the continuance of an
Event of Default, the Libor Margin may, at the option of the
Lender, be immediately increased to the percentage set forth
in Level III (even if the line utilization requirement for
another Level have been met) and interest shall be determined
in the manner set forth in Section 2-10, below.
V.. The definition of "Revolving Credit Ceiling" on Page 20 of the Loan
Agreement is hereby deleted in its entirety, and the following is inserted in
its place:
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"REVOLVING CREDIT CEILING": $36,500,000.00 through December
31, 2003, and thereafter $30,000,000.00.
VI.. The following new definitions are inserted in their appropriate
alphabetical place, as follows:
"2003 CAPITAL INFUSION": The receipt by the Borrower, scheduled to be
consummated on or before December 31, 2003, of not less than
$7,500,000.00 in new capital, on terms and conditions acceptable to the
Lender, in the Lender's sole and exclusive discretion.
"MEASUREMENT EVENT": The date that the sum of the aggregate unpaid
balance of the Loan Account and the aggregate undrawn Stated Amount of
all then outstanding L/Cs has exceeded the Borrowing Base minus the
aggregate of Availability Reserves for three consecutive days. For
purposes of determining whether a Measurement Event has occurred, in
calculating the Borrowing Base, the "Appraised Inventory Percentage"
shall at all times through March 31, 2004 be deemed to be 90%.
VII.. A new section, "Section 4-39", is hereby inserted in its
appropriate numerical order, as follows:
4-39 FINANCIAL PERFORMANCE COVENANTS. The Borrower shall comply with
each of the following financial performance covenants:
(a) 2003 Capital Infusion - - The Borrower shall have
consummated the 2003 Capital Infusion and shall have furnished
evidence thereof satisfactory to the Lender on or before
December 31, 2003.
(b) After the occurrence of a Measurement Event, the Borrower
shall comply with the following financial covenants:
(i) EBITDA - - The Borrower shall not permit its
EBITDA, tested monthly as of the end of each calendar month,
to be less than the following specified amounts with respect
to the corresponding designated period [To Be Established by
October 31, 2003]:
Month End Minimum EBITDA
October 31, 2003
November 30, 2003
December 31, 2003
January 31, 2004
February 29, 2004
▇▇▇▇▇ ▇▇, ▇▇▇▇
(▇▇) Minimum A/P - - The Borrower shall not permit
its accounts payable to be less than [To Be Established by
October 31, 2003] at any time.
Notwithstanding any other provision of this Agreement, upon
any breach by the Borrower of any of the foregoing covenants
after the occurrence of a Measurement Event, (i) the Appraised
Inventory
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Percentage shall automatically and immediately be reduced to
Eighty-five percent (85%), (ii) the Revolving Credit Ceiling
shall automatically and immediately be reduced to
$30,000,000.00, and (iii) the Permanent Availability Block
shall automatically and immediately be restored to $3,000,000.
PART 2. AMENDMENT OF FEE LETTER
The Fee Letter is hereby amended by deleting Paragraph 4 thereof in its
entirety, and inserting the following in its place:
4. EARLY TERMINATION FEE. (A) In the event that the
Termination Date occurs, for any reason, prior to the Maturity Date,
the Borrower shall pay to the Lender the "REVOLVING CREDIT EARLY
TERMINATION FEE" in respect of amounts which are or become payable by
reason thereof equal to the following:
(i) Termination Date on or before April 10, 2004,
$300,000.00;
(ii) Termination Date after April 10, 2004, $150,000.00.
(B) Notwithstanding the foregoing, if the Termination Date occurs as a
result of a refinancing of the Liabilities by the Borrower with ▇▇▇▇▇
Fargo Bank, N. A.. or any Affiliate thereof on an unsecured basis, then
no Revolving Credit Early Termination Fee shall be due or payable.
(C) The Lender and the Borrower agree and acknowledge that the Lender
will have suffered damages on account of the early termination of the
Revolving Credit and that, in view of the difficulty in ascertaining
the amount of such damages, the Early Termination Fee constitutes
reasonable compensation and liquidated damages to compensate the Lender
on account thereof.
PART 3. RATIFICATION OF LOAN DOCUMENTS. NO CLAIMS AGAINST THE LENDER:
I.. Except as provided herein, all terms and conditions of the Loan
Agreement and of the other Loan Documents remain in full force and effect. The
Borrower hereby ratifies, confirms, and re-affirms all terms and provisions of
the Loan Documents.
II.. The Borrower acknowledges and agrees that there is no basis nor
set of facts on which any amount (or any portion thereof) owed by the Borrower
under any Loan Document could be reduced, offset, waived, or forgiven, by
rescission or otherwise; nor is there any claim, counterclaim, off set, or
defense (or other right, remedy, or basis having a similar effect) available to
the Borrower with regard thereto; nor is there any basis on which the terms and
conditions of any of the Liabilities could be claimed to be other than as stated
on the written instruments which evidence such Liabilities.
III.. The Borrower hereby acknowledges and agrees that the Borrower has
no offsets, defenses, claims, or counterclaims against the Lender, or its
officers, directors, employees, attorneys, representatives, predecessors,
successors, or assigns with respect to the Liabilities, or otherwise, and that
if the Borrower now has, or ever did have, any offsets, defenses, claims, or
counterclaims against the Lender, or its officers, directors, employees,
attorneys, representatives, predecessors, successors, and assigns, whether known
or unknown, at law or in equity, from the beginning of the world through this
date and through the time of execution of this Amendment, all of them are hereby
expressly WAIVED, and the Borrower hereby RELEASES the Lender, and its officers,
directors, employees, attorneys, representatives, predecessors, successors, and
assigns from any liability therefor.
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PART 4. MISCELLANEOUS:
IV.. In consideration of the Lender's willingness to enter into this
Second Amendment, the Borrower shall pay to the Lender, as a precondition to the
effectiveness of this Second Amendment, an amendment fee in the amount of
$37,500.00. The amendment fee shall be fully earned by the Lender upon the
execution of this Second Amendment, shall not be applied in reduction of any of
the Liabilities, and shall be retained by the Lender under all circumstances.
The Lender is hereby authorized to make an advance under the Revolving Credit to
pay the Amendment Fee.
V.. Upon the occurrence of a Measurement Event, the Borrower shall pay
to the Lender a Measurement Event fee in the amount of $12,500.00. The
Measurement Event fee shall be fully earned by the Lender upon the occurrence of
a Measurement Event, shall not be applied in reduction of any of the
Liabilities, and shall be retained by the Lender under all circumstances. The
Lender is hereby authorized to make an advance under the Revolving Credit to pay
the Measurement Event Fee.
VI.. Terms used in this Second Amendment which are defined in the Loan
Agreement are used as so defined.
VII.. This Second Amendment may be executed in counterparts, each of
which when so executed and delivered shall be an original, and both of which
together shall constitute one instrument.
VIII.. This Second Amendment expresses the entire understanding of the
parties with respect to the transactions contemplated hereby. No prior
negotiations or discussions shall limit, modify, or otherwise affect the
provisions hereof.
IX.. Any determination that any provision of this Second Amendment or
any application hereof is invalid, illegal, or unenforceable in any respect and
in any instance shall not affect the validity, legality, or enforceability of
such provision in any other instance, or the validity, legality, or
enforceability of any other provisions of this Second Amendment.
X.. The Borrower shall pay on demand all reasonable costs and expenses
of the Lender, including, without limitation, reasonable attorneys' fees in
connection with the preparation, negotiation, execution, and delivery of this
Second Amendment.
XI.. In connection with the interpretation of this Amendment and all
other documents, instruments, and agreements incidental hereto:
A. All rights and obligations hereunder and thereunder,
including matters of construction, validity, and performance, shall be governed
by and construed in
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accordance with the law of the Commonwealth of Massachusetts and are intended to
take effect as sealed instruments.
B. The captions of this Amendment are for convenience purposes
only, and shall not be used in construing the intent of the Lender and the
Borrower under this Amendment.
C. In the event of any inconsistency between the provisions of
this Amendment and any of the other Loan Documents or other agreements entered
into by and between the Lender and the Borrower, the provisions of this
Amendment shall govern and control.
D. The Lender and the Borrower have prepared this Amendment
and all documents, instruments, and agreements incidental hereto with the aid
and assistance of their respective counsel. Accordingly, all of them shall be
deemed to have been drafted by the Lender and the Borrower and shall not be
construed against either party.
GADZOOKS, INC.
("BORROWER")
By
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Print Name:
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Title:
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▇▇▇▇▇ FARGO RETAIL FINANCE LLC
("LENDER")
By
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Print Name:
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Title:
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