Exhibit 10.2
[Execution Version]
TWENTY-SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS TWENTY-SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment"), dated as of October 31, 2003, is entered into by and among
CONGRESS FINANCIAL CORPORATION, a Delaware corporation ("Lender"), BRAWN OF
CALIFORNIA, INC., a California corporation ("Brawn"), GUMP'S BY MAIL, INC., a
Delaware corporation ("GBM"), GUMP'S CORP., a California corporation ("Gump's"),
HANOVER REALTY, INC., a Virginia corporation ("Hanover Realty"), THE COMPANY
STORE FACTORY, INC., a Delaware corporation ("TCS Factory"), THE COMPANY OFFICE,
INC., a Delaware corporation ("TCS Office"), SILHOUETTES, LLC, a Delaware
limited liability company ("Silhouettes LLC"), HANOVER COMPANY STORE, LLC, a
Delaware limited liability company ("HCS LLC"), DOMESTICATIONS, LLC, a Delaware
limited liability company ("Domestications LLC"), KEYSTONE INTERNET SERVICES,
LLC, a Delaware limited liability company ("KIS LLC"), and THE COMPANY STORE
GROUP, LLC, a Delaware limited liability company ("CSG LLC"; and, together with
Brawn, GBM, Gump's, Hanover Realty, TCS Factory, TCS Office, Silhouettes LLC,
HCS LLC, Domestications LLC and KIS LLC, collectively, "Borrowers" and each,
individually, a "Borrower"), HANOVER DIRECT, INC., a Delaware corporation
("Hanover"), HANOVER HOME FASHIONS GROUP, LLC, a Delaware limited liability
company ("HHFG LLC"), CLEARANCE WORLD OUTLETS, LLC, a Delaware limited liability
company ("Clearance World"), SCANDIA DOWN, LLC, a Delaware limited liability
company ("Scandia Down LLC"), LACROSSE FULFILLMENT, LLC, a Delaware limited
liability company ("LaCrosse LLC"), ▇.▇. ADVERTISING, LLC, a Delaware limited
liability company ("DM Advertising LLC"), AMERICAN DOWN & TEXTILE, LLC, a
Delaware limited liability company ("ADT LLC"), and HANOVER GIFTS, INC., a
Virginia corporation ("Hanover Gifts"; and, together with Hanover, HHFG LLC,
Clearance World, Scandia Down LLC, LaCrosse LLC, DM Advertising LLC and ADT LLC,
collectively, "Guarantors" and each, individually, a "Guarantor").
W I T N E S S E T H:
WHEREAS, Borrowers, Guarantors and Lender are parties to the Loan and
Security Agreement, dated November 14, 1995, as amended by the First Amendment
to Loan and Security Agreement, dated February 22, 1996, the Second Amendment to
Loan and Security Agreement, dated April 16, 1996, the Third Amendment to Loan
and Security Agreement, dated May 24, 1996, the Fourth Amendment to Loan and
Security Agreement, dated May 31, 1996, the Fifth Amendment to Loan and Security
Agreement, dated September 11, 1996, the Sixth Amendment to Loan and Security
Agreement, dated as of December 5, 1996, the Seventh Amendment to Loan and
Security Agreement, dated as of December 18, 1996, the Eighth Amendment to Loan
and Security Agreement, dated as of March 26, 1997, the Ninth Amendment to Loan
and Security Agreement, dated as of April 18, 1997, the Tenth Amendment to Loan
and Security
Agreement, dated as of October 31, 1997, the Eleventh Amendment to
Loan and Security Agreement, dated as of March 25, 1998, the Twelfth Amendment
to Loan and Security Agreement, dated as of September 30, 1998, the Thirteenth
Amendment to Loan and Security Agreement, dated as of September 30, 1998, the
Fourteenth Amendment to Loan and Security Agreement, dated as of February 28,
2000, the Fifteenth Amendment to Loan and Security Agreement, dated as of March
24, 2000, the Sixteenth Amendment to Loan and Security Agreement, dated as of
August 8, 2000, the Seventeenth Amendment to Loan and Security Agreement, dated
as of January 5, 2001, the Eighteenth Amendment to Loan and Security Agreement,
dated as of November 12, 2001, the Nineteenth Amendment to Loan and Security
Agreement, dated as of December 18, 2001, the Twentieth Amendment to Loan and
Security Agreement, dated as of March 5, 2002, the Twenty-First Amendment to
Loan and Security Agreement, dated as of March 21, 2002, the Twenty-Second
Amendment to Loan and Security Agreement, dated as of August 16, 2002, the
Twenty-Third Amendment to Loan and Security Agreement, dated as of December 27,
2002, the Twenty-Fourth Amendment to Loan and Security Agreement, dated as of
February 27, 2003, the Twenty-Fifth Amendment to Loan and Security Agreement,
dated as of April 21, 2003, and the Twenty-Sixth Amendment to Loan and Security
Agreement, dated as of August 29, 2003 (as so amended, the "Loan Agreement"),
pursuant to which Lender has made loans and advances to Borrowers;
WHEREAS, Borrowers and Guarantors have requested that Lender (a) extend
the term of the Loan Agreement until January 31, 2007, (b) reduce the amount of
the Maximum Credit, the amount of the Revolving Loan Limit and the amount of the
Inventory sublimits of Revolving Loan Borrowers, (c) make Revolving Loans
available to Revolving Loan Borrowers with respect to otherwise Eligible
Inventory in transit to Eligible Inventory locations, and (d) make certain other
amendments to the Loan Agreement; and
WHEREAS, the parties hereto desire to enter into this Amendment to
evidence and effectuate such amendments, subject to the terms and conditions and
to the extent set forth herein;
NOW, THEREFORE, in consideration of the premises and covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions.
(a) Additional Definitions. As used herein or in any of the
other Financing Agreements, the following terms shall have the meanings given to
them below, and the Loan Agreement shall be deemed and is hereby amended to
include, in addition and not in limitation, the following definitions:
(i) "Customs Broker" shall mean the Persons listed on
Schedule 1(a)(i) hereto or such other Person as may be selected by a Revolving
Loan Borrower after the date hereof that is acceptable to Lender and after
written notice by such Revolving Loan Borrower to Lender to perform port of
entry services to process Inventory and to supply facilities, labor and
materials to such Revolving Loan Borrower in connection therewith with respect
to Inventory as to which
-2-
legal title has passed to such Revolving Loan Borrower outside the United States
of America, and which Inventory is being imported by such Revolving Loan
Borrower to the United States of America; provided, that, as to each such Person
(including those listed on Schedule 1(a)(i) hereto), Lender shall have received
a Notification and Acknowledgment Agreement, duly authorized, executed and
delivered by such Person, such agreement is in full force and effect and such
Person shall be in compliance in all material respects with the terms thereof.
(ii) "Freight Forwarder" shall mean the Persons
listed on Schedule 1(a)(ii) hereto or such other Person as may be selected by a
Revolving Loan Borrower after the date hereof that is acceptable to Lender and
after written notice by such Revolving Loan Borrower to Lender to arrange, among
other things, on behalf of such Revolving Loan Borrower for the loading and
shipment of goods for such Revolving Loan Borrower by a shipper to a port of
entry in the United States of America, and the unloading and shipment of such
Inventory to an Eligible Inventory Location with respect to Inventory as to
which legal title has passed to such Revolving Loan Borrower outside the United
States of America, and which Inventory is being imported by such Revolving Loan
Borrower to the United States of America; provided, that, as to each such Person
(including those listed on Schedule 1 (a)(ii) hereto), Lender shall have
received a Notification and Acknowledgment Agreement, duly authorized, executed
and delivered by such Person, such agreement is in full force and effect and
such Person shall be in compliance in all material respects with the terms
thereof.
(iii) "Notification and Acknowledgment Agreement"
shall mean a Customs Broker or Freight Forwarder Notification and Acknowledgment
Agreement in the form attached hereto as Exhibit A, or otherwise in form and
substance satisfactory to Lender, from a Customs Broker, Freight Forwarder or
other Person to whom Inventory may be consigned or who has custody, control or
possession of any such Inventory (or other Collateral, including bills of lading
or other documents of title), pursuant to which such Customs Broker or Freight
Forwarder or other Person, among other things, (A) acknowledges the first
priority security interest of Lender in such Inventory and other Collateral, (B)
agrees to waive any and all claims such Customs Broker or Freight Forwarder or
other Person may, at any time, have against such Inventory and other Collateral,
and (C) in the case of any consignee or other person who at any time has
custody, control or possession of any Inventory or other Collateral,
acknowledges that it holds and will hold possession of the Collateral for the
benefit of Lender and agrees to follow all instructions of Lender with respect
thereto.
(iv) "Restructuring and Headquarters Relocation
Costs" shall mean the costs, fees and expenses incurred by Borrowers and
Guarantors solely in connection with (A) the consolidation and relocation of the
headquarters of the premises at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ and (B) certain additional severance
costs and severance expenses of Borrowers and Guarantors incurred in connection
with the implementation of Hanover's business strategy to focus the operations
and businesses of Borrowers and Guarantors to primarily the mail order catalog
business of HCS LLC and Domestications LLC.
(b) Amendment to Definitions
- 3 -
(i) Collateral Access Agreements. All references to
"Collateral Access Agreements" in the Loan Agreement and the other Financing
agreements are hereby amended to include, in addition and not in limitation, any
Notification and Acknowledgment Agreements.
(ii) Eligible Inventory. The second sentence of the
definition of Eligible Inventory is hereby deleted and replaced with the
following:
"Inventory located outside the United States of
America that a Revolving Loan Borrower has acquired in
accordance with the terms of the purchase arrangements between
such Revolving Loan Borrower and a supplier and as to which
such Revolving Loan Borrower has obtained legal title and that
would otherwise be determined by Lender to be Eligible
Inventory in all respects which is in transit to the premises
of a Customs Broker in the United States of America which is
an Eligible Inventory Location or such other Eligible
Inventory Location in the United States of America; provided,
that, (a) Lender has a first priority perfected security
interest in and lien upon such Inventory, (b) Lender has
possession of not less than two (2) of a total of three (3)
originals of the documents of title with respect to such
Inventory and all of the terms and conditions of Section 8 of
the Twenty-Seventh Amendment to Loan Agreement, dated as of
October 31, 2003, among Lender, Borrowers and Guarantors shall
have been satisfied, (c) Lender shall have received (i) a
Notification and Acknowledgment Agreement, duly authorized,
executed and delivered by either or both of the Customs Broker
and Freight Forwarder, as the case may be, handling the
shipping and delivery of such Inventory, (ii) a copy of the
certificate of marine cargo insurance in connection therewith
in which it has been named as an additional insured and loss
payee in a manner acceptable to Lender, and (iii) a copy of
the invoice, packing slip and manifest with respect thereto,
(d) such Inventory is not subject to any Letter of Credit
Accommodation, (e) the aggregate amount of the Value of such
Inventory that is deemed to be Eligible Inventory shall not at
any time exceed $1,000,000, and (f) such Inventory shall not
have been in transit for more than sixty (60) days."
(iii) Eligible Inventory Locations. The definition of
Eligible Inventory Locations in Section 1.35 of the Loan Agreement is hereby
deleted and replaced with the following
"1.35 Eligible Inventory Locations" shall mean (a)
the fulfillment centers or warehouses owned or leased by
Revolving Loan Borrowers listed on Exhibit C attached hereto
and the Gump's Main Store, (b) additional fulfillment centers
or warehouses first leased or owned by Revolving Loan
Borrowers after the date hereof, not located in the State of
California, with respect to the acquisition of which Revolving
Loan Borrowers provide thirty (30) days' prior written notice
to Lender; provided, however, as to both clauses (a) and (b),
Eligible Inventory Locations shall not include the Gump's Main
Store or any fulfillment center or warehouse owned or leased
by Revolving Loan Borrowers, unless Revolving Loan Borrowers
shall have delivered to Lender all instruments and documents
required by Lender to perfect or maintain perfection of
Lender's first priority security interest in and liens upon
such Inventory, subject to no other liens or claims,
- 4 -
except those, if any, expressly permitted hereunder, together
with, and without limiting the foregoing, a Collateral Access
Agreement, in form and substance satisfactory to Lender, from
each owner, operator and mortgagee of such location, and (c)
warehouse, ports of entry or other premises of a Customs
Broker or Freight Forwarder located in the United States of
America to which Eligible Inventory is in transit from a
location outside the United States of America; provided, that,
as to clause (c), Lender shall have received a Notification
and Acknowledgment Agreement, duly authorized, executed and
delivered by such Customs Broker and Freight Forwarder
handling the shipping and delivery of such Inventory."
(iv) Maximum Credit. Section 1.83 of the Loan
Agreement is hereby deleted in its entirety and replaced with the following:
"1.83 `Maximum Credit' shall mean the aggregate
principal amount of $56,500,000,"
(v) Revolving Loan Limit. Section 1.119 of the Loan
Agreement is hereby deleted in its entirety with the following:
"1.119 `Revolving Loan Limit' shall mean, at any
time, the amount equal to (a) $43,000,000."
(c) Interpretation. All capitalized terms used herein and not
defined herein shall have the meanings given to such terms in the Loan
Agreement.
2. Lending Sublimits. Sections 2.2 of the Loan Agreement is hereby
deleted in its entirety and replaced with the following:
"(a) Subject to, and upon the terms and conditions contained
herein, the aggregate principal amount of Revolving Inventory Loans and
Letter of Credit Accommodations made available to Brawn shall not
exceed Two Million Five Hundred Thousand Dollars ($2,500,000) at any
one time outstanding.
(b) Subject to, and upon the terms and conditions contained
herein, the aggregate principal amount of Revolving Inventory Loans and
Letter of Credit Accommodations made available to GBM shall not exceed
Two Million Five Hundred Thousand Dollars ($2,500,000) at any one time
outstanding.
(c) Subject to, and upon the terms and conditions contained
herein, the aggregate principal amount of Revolving Inventory Loans and
Letter of Credit Accommodations made available to Gump's shall not
exceed One Million Five Hundred Thousand Dollars ($1,500,000) at any
one time outstanding.
(d) Subject to, and upon the terms and conditions contained
herein, the aggregate principal amount of Revolving Inventory Loans and
Letter of Credit
- 5 -
Accommodations made available to HCS LLC shall not exceed Twelve
Million Five Hundred Thousand Dollars ($12,500,000) at any one time
outstanding.
(e) Subject to, and upon the terms and conditions contained
herein, the aggregate principal amount of Revolving Inventory Loans and
Letter of Credit Accommodations made available to Domestications LLC
shall not exceed Twelve Million Five Hundred Thousand Dollars
($12,500,000) at any one time outstanding.
(f) Subject to, and upon the terms and conditions contained
herein, the aggregate principal amount of Revolving Inventory Loans and
Letter of Credit Accommodations made available to Silhouettes LLC shall
not exceed Four Million Dollars ($4,000,000) at any one time
outstanding.
(g) Subject to, and upon the terms and conditions contained
herein, the aggregate principal amount of Revolving Inventory Loans and
Letter of Credit Accommodations made available to CSG LLC shall not
exceed Zero Dollars (-$0-) at any one time outstanding.
(h) Subject to, and upon the terms and conditions contained
herein, the aggregate principal amount of Revolving Inventory Loans and
Letter of Credit Accommodations made available to KIS LLC shall not
exceed Zero Dollars (-$0-) at any one time outstanding.
(i) Without limiting the foregoing lending sublimits, (i) the
aggregate amount of Revolving Loans shall not at any one time
outstanding exceed the Revolving Loan Limit for all Revolving Loan
Borrowers and (ii) the aggregate amount of Revolving Accounts Loans for
all Deferred Billing Borrowers, Installment Billing Borrowers,
Fulfillment Contract Borrowers and any other applicable Revolving Loan
Borrowers shall not at any one time outstanding exceed $8,000,000.
Lender shall have the right, from time to time, to establish and revise
Revolving Accounts Loan sublimits for each Deferred Billing Borrower,
Installment Billing Borrower, Fulfillment Contract Borrower and each
other applicable Revolving Loan Borrower within the overall $8,000,000
sublimit applicable to all Revolving Accounts Loans."
3. Letter of Credit Accommodations. Section 2.3(g) of the Loan
Agreement is hereby deleted in its entirety and replaced with the following:
"(g) Notwithstanding anything to the contrary contained herein
or in any of the other Financing Agreements, the aggregate amount of
all Letter of Credit Accommodations pursuant hereto and all other
commitments and obligations made or incurred by Lender pursuant hereto
for the account or benefit of Revolving Loan Borrowers in connection
therewith shall not, at any one time outstanding, exceed Ten Million
Dollars ($10,000,000); provided, however, the aggregate amount of all
outstanding Letter of Credit Accommodations consisting of or relating
to banker's acceptances and any other commitments and obligations made
or incurred by Lender in connection therewith, shall not at any time
exceed $750,000. Lender shall have the
- 6 -
right, from time to time, to establish and revise sublimits for Letter
of Credit Accommodations for the account of the respective Revolving
Loan Borrowers, within the overall Ten Million Dollar ($10,000,000)
limit on Letter of Credit Accommodations."
4. Unused Line Fee. Section 2.7(c) of the Loan Agreement is hereby
deleted in its entirety and replaced with the following:
"(c) Unused Line Fee. With respect to each calendar month (or
part thereof) during the Term, Borrowers shall pay to Lender monthly an
unused line fee, fully earned and payable on the first day of each
month, at a rate equal to one half of one percent (.5%) per annum,
calculated upon the excess, if any, of (i) Forty-Three Million Dollars
($43,000,000) over (ii) the average of the daily aggregate principal
balances of the outstanding Revolving Loans and Letter of Credit
Accommodations during the preceding month (or part thereof); provided,
however, that if Lender, solely on the basis of the exercise of its
discretion, reduces any Inventory Loan Formula for any calendar month
(or part thereof) in the absence of an Event of Default or Incipient
Default which is continuing, the amount of the unused line fee shall be
calculated for such month by decreasing the base amount of Forty-Three
Million Dollars ($43,000,000) set forth in clause (i) by a percentage
thereof equal to the difference between the Inventory Loan Formula
otherwise applicable under Section 2.1(b) and the Inventory Loan
Formula as so reduced solely by virtue of Lender's discretion."
5. EBITDA. Sections 6.31(d) and 6.31(e) of the Loan Agreement are
hereby deleted in their entirety and replaced with new Sections 6.31(d) and
6.31(e), Section 6.31(f) of the Loan Agreement is hereby redesignated Section
6.31(i), and new Sections 6.31(f), 6.31(g) and 6.31(h) are hereby added, as
follows:
(d) Hanover and its Subsidiaries shall not, as to any fiscal
quarter during the fiscal year 2003 of Hanover and its Subsidiaries,
permit EBITDA of Hanover and its Subsidiaries commencing on the first
day of such fiscal year and ending on the last day of the applicable
fiscal quarter set forth below on a cumulative YTD basis to be less
than the respective amount set forth below opposite such fiscal quarter
end YTD period:
Fiscal Quarter
End YTD Periods Cumulative
for Fiscal Year 2003 Minimum EBITDA
-------------------- --------------
(i) December 29, 2002 through $ 1,000,000
March 29, 2003
ii) December 29, 2002 through $ 4,000,000
June 28, 2003
(iii) December 29, 2002 through $ 5,000,000
- 7 -
Fiscal Quarter
End YTD Periods Cumulative
for Fiscal Year 2003 Minimum EBITDA
-------------------- --------------
September 27, 2003
(iv) December 29, 2002 through $ 11,000,000
December 27, 2003
;provided, that, to the extent that the amount of any of the
Restructuring and Headquarters Relocation Costs are required under GAAP
to be included in calculating EBITDA, then solely for the fiscal
quarters ending September 27, 2003 and the December 27, 2003, the
amount of the Restructuring and Headquarters Relocation Costs so
included in EBITDA may be added back to EBITDA for purposes of
determining cumulative EBITDA for the applicable third (3rd) and fourth
(4th) quarterly periods so long as each of the following conditions are
satisfied: (i) Borrowers shall have furnished to Lender each month
commencing November 1, 2003 financial statements that set forth the
information regarding any Restructuring and Headquarters Relocation
Costs that provide on a cumulative year-to-date basis, by category and
amount, any Restructuring and Headquarters Relocation Costs that have
been included in calculating EBITDA for such period, together with any
materials, information or documents in respect thereof that Lender may
reasonably request; (ii) the actual amount of Restructuring and
Headquarters Relocation Costs added back to EBITDA shall not exceed
$2,000,000 in the aggregate; and (iii) any Restructuring and
Headquarters Relocation Costs shall be added back only with respect to
Restructuring and Headquarters Relocation Costs incurred during
quarterly periods commencing after the fiscal month ended June 28, 2003
through and including the fiscal month ending December 27, 2003.
(e) Hanover and its Subsidiaries shall not, as to any fiscal
quarter during the fiscal year 2004 of Hanover and its Subsidiaries,
permit EBITDA of Hanover and its Subsidiaries commencing on the first
day of such fiscal year and ending on the last day of the applicable
fiscal quarter set forth below on a cumulative YTD basis to be less
than the respective amount set forth below opposite such fiscal quarter
end YTD period:
Fiscal Quarter
End YTD Periods Cumulative
for Fiscal Year 2004 Minimum EBITDA
-------------------- --------------
(i) December 28, 2003 through $ 1,000,000
▇▇▇▇▇ ▇▇, ▇▇▇▇
(▇▇) December 28, 2003 through $ 4,000,000
June 26, 2004
(iii) December 28, 2003 through $ 5,000,000
September 25, 2004
- 8 -
Fiscal Quarter
End YTD Periods Cumulative
for Fiscal Year 2004 Minimum EBITDA
-------------------- --------------
(iv) December 28, 2003 through $11,000,000
December 25, 2004
(f) Hanover and its Subsidiaries shall not, as to any fiscal
quarter during the fiscal year 2005 of Hanover and its Subsidiaries,
permit EBITDA of Hanover and its Subsidiaries commencing on the first
day of such fiscal year and ending on the last day of the applicable
fiscal quarter set forth below on a cumulative YTD basis to be less
than the respective amount set forth below opposite such fiscal quarter
end YTD period:
Fiscal Quarter
End YTD Periods Cumulative
for Fiscal Year 2005 Minimum EBITDA
-------------------- --------------
(i) December 26, 2004 through $ 1,000,000
▇▇▇▇▇ ▇▇, ▇▇▇▇
(▇▇) December 26, 2004 through $ 4,000,000
June 25, 2005
(iii) December 26, 2004 through $ 5,000,000
September 24, 2005
(iv) December 26, 2004 through $11,000,000
December 31, 2005
(g) Hanover and its Subsidiaries shall not, as to any fiscal
quarter during the fiscal year 2006 of Hanover and its Subsidiaries,
permit EBITDA of Hanover and its Subsidiaries commencing on the first
day of such fiscal year and ending on the last day of the applicable
fiscal quarter set forth below on a cumulative YTD basis to be less
than the respective amount set forth below opposite such fiscal quarter
end YTD period:
Fiscal Quarter
End YTD Periods Cumulative
for Fiscal Year 2006 Minimum EBITDA
-------------------- --------------
(i) January 1, 2006 through $ 1,000,000
▇▇▇▇▇ ▇, ▇▇▇▇
(▇▇) January 1, 2006 through $ 4,000,000
July 1, 2006
(iii) January 1, 2006 through $ 5,000,000
- 9 -
Fiscal Quarter
End YTD Periods Cumulative
for Fiscal Year 2006 Minimum EBITDA
-------------------- --------------
September 30, 2006
(iv) January 1, 2006 through $11,000,000
December 30, 2006
(h) Hanover and its Subsidiaries shall not, as to the first
fiscal quarter during the fiscal year 2007 of Hanover and its
Subsidiaries, permit EBITDA of Hanover and its Subsidiaries commencing
on the first day of such fiscal year and ending on the last day of the
first fiscal quarter set forth below on a cumulative YTD basis to be
less than the respective amount set forth below opposite such fiscal
quarter end YTD period:
Fiscal Quarter
End YTD Periods Cumulative
for Fiscal Year 2007 Minimum EBITDA
-------------------- --------------
(i) December 31, 2006 through $1,000,000"
March 31, 2007
6. Term.
(a) The first sentence of Section 9.1(a) of the Loan Agreement
is hereby deleted in its entirety and replaced with the following:
"(a) This Agreement and the other Financing
Agreements shall become effective as of the date hereof and
this Agreement shall continue in full force and effect for a
term ending on January 31, 2007 (the "Renewal Date"), and from
year-to-year thereafter, unless sooner terminated pursuant to
the terms hereof."
(b) The first sentence of Section 9.1(f) of the Loan Agreement
is hereby deleted and replaced with the following, effective with respect to any
termination after the date hereof:
"(f) If Lender terminates this Agreement or the other
Financing Agreements after the occurrence and during the
continuance of an Event of Default or at the request of Borrowers
prior to the Renewal Date, in view of the impracticality and
extreme difficulty of ascertaining actual damages, and by mutual
agreement of the parties as to a reasonable calculation of
Lender's lost profits as a result thereof, Borrowers hereby agree
to pay to Lender, upon the effective date of such termination, a
fee (the "Early Termination Fee") in an amount equal to one-half
of one percent (1/2%) of the Maximum Credit, if such termination
is effective on or before the Renewal Date, and from year to year
thereafter."
7. Amendment to Restated Tranche B Term Loan.
- 10 -
(a) Each of Tranche B Term Loan Borrowers hereby acknowledges,
confirms and agrees that as of the date hereof and immediately before giving
effect to this Amendment, Tranche B Term Loan Borrowers are indebted to Lender
for Obligations in respect of the Tranche B Term Loan in the principal amount of
$6,310,714 (the "Existing Tranche B Term Loan Balance"), together with interest
accrued and accruing thereon and costs, expenses, fees (including attorneys'
fees and legal expenses) and other charges now or hereafter owed by Borrowers to
Lender attributable to the Existing Tranche B Term Loan Balance, all of which
are unconditionally owing by Tranche B Term Loan Borrowers to Lender, without
offset, defense or counterclaim of any kind, nature and description whatsoever.
(b) Effective as of the date hereof, the Restated Tranche B
Term Note is hereby amended to provide that instead of the final installment of
principal being due and payable on January 31, ▇▇▇▇, ▇▇▇▇▇▇▇ ▇ Term Loan
Borrowers shall (unless sooner payable in accordance with the terms and
conditions of the Loan Agreement, the Restated Tranche B Term Note or any other
Financing Agreement) pay to Lender principal in respect of the Tranche B Term
Loan in thirty-nine (39) consecutive monthly installments on the first day of
each month commencing November 1, 2003, of which the first thirty-eight (38)
installments shall each be in the amount of One Hundred Fifty Thousand Dollars
($150,000) and the last installment shall be in the amount of the entire unpaid
balance of the Restated Tranche B Term Note.
(c) Principal in respect of the Tranche B Term Loan shall be
paid in immediately available funds and in the manner of payment otherwise
provided in the Restated Tranche B Term Note. All principal and interest
(together with any fees, costs, expenses and other charges in respect of the
Tranche B Term Loan payable by Tranche B Term Loan Borrowers to Lender) shall be
automatically, without notice or demand, absolutely and unconditionally due and
payable on the earlier of (i) the termination of the Loan Agreement and the
other Financing Agreements or (ii) January 31, 2007. All principal amounts due
in respect of the Tranche B Term Loan provided in this Section 7 are mandatory
payments that may be paid by means of any mandatory or voluntary prepayments set
forth in the Loan Agreement, the Restated Tranche B Note or any other Financing
Agreement.
(d) The amendment of the Restated Tranche B Term Note as set
forth herein, shall not, in any manner, be construed to constitute payment of,
or impair, limit, cancel or extinguish, or constitute a novation in respect of,
any of the obligations, liabilities or indebtedness evidenced by or arising
under the Restated Tranche B Term Note. Interest accrued and accruing shall
continue to be paid as provided in the Restated Tranche B Term Note. The liens
and security interests securing such obligations, liabilities or indebtedness
shall not in any manner be impaired, limited, terminated, waived or released
hereby. The Restated Tranche B Term Note shall continue to be secured by all the
Collateral.
8. Provisions Related to Lending on Inventory in Transit from a
location outside the United States.
(a) Availability Reserves. Lender may establish and maintain
from time to time an availability reserve against the amount of Revolving Loans
and Letter of Credit
- 11 -
Accommodations otherwise determined by Lender to be available to Revolving Loan
Borrowers under the Loan Agreement and the other Financing Agreements, to
reflect amounts payable to Customs Brokers or Freight Forwarders (except to the
extent that such Customs Broker or Freight Forwarder may have waived in writing
in favor of Lender any right to payment of amounts owing to it) and for inland
freight charges, and any other freight, taxes, duty and other amounts Lender
estimates must be paid in connection with Inventory in transit. The availability
reserves established in accordance with this Section 8 are in addition to, and
not in limitation of, all other existing availability reserves and the rights of
Lender from time to time to establish other and further reserves against the
availability of Revolving Loans and Letter of Credit Accommodations under the
Loan Agreement and the other Financing Agreements.
(b) Bills of Lading and Other Documents of Title.
Revolving Loan Borrowers shall cause all bills of lading and other documents of
title relating to goods being purchased by Revolving Loan Borrowers which are
outside the United States and in transit to the Eligible Inventory Locations in
the United States to name such Revolving Loan Borrower as consignee, unless and
until Lender may direct otherwise. At such time and from time to time as Lender
may direct, such Revolving Loan Borrower shall cause Lender or such other
financial institution or other person as Lender may specify to be named as
consignee. Without limiting any other rights of Lender hereunder, Lender shall
have the right to endorse and negotiate on behalf of, and as attorney-in-fact
for, such Revolving Loan Borrower any ▇▇▇▇ of lading or other document of title
with respect to such goods naming such Revolving Loan Borrower as consignee to
Lender. There shall be three (3) originals of each of such ▇▇▇▇ of lading or
other document of title which unless and until Lender shall direct otherwise
shall be delivered as follows: (i) one (1) original to such Customs Broker or
Freight Forwarder as such Revolving Loan Borrower may specify (so long as Lender
has received a Notification and Acknowledgment Agreement, duly authorized,
executed and delivered by such Customs Broker or Freight Forwarder, as the case
may be), and (ii) two (2) originals to Lender or to such other person as Lender
may designate for such purpose. Revolving Loan Borrowers shall obtain a copy
(but not the originals) of such ▇▇▇▇ of lading or other documents from the
Customs Broker or the Freight Forwarder, as the case may be. Borrowers shall
cause all bills of lading or other documents of title relating to goods
purchased by Borrower which are outside the United States of America and in
transit to the premises of an Eligible Inventory Location of a Customs Broker in
the United States of America or such other Eligible Inventory Location to be
issued in a form so as to constitute negotiable documents as such term is
defined in the Uniform Commercial Code.
(c) Reporting.
(i) Section 6.18(a)(viii)(D) of the Loan Agreement is
deleted and replaced with the following:
"(D) Weekly reports as to Inventory by Borrowers (1)
indicating items of Inventory purchased with respect to which
such Borrower has obtained legal title to such inventory and
which is in transit to such Borrower grouped according to
either or both of the Customs Broker and Freight Forwarder
handling such Inventory and the ▇▇▇▇ of lading number and (2)
indicating items of Inventory purchased with respect to which
such Borrower has not obtained legal title to such inventory
and which is in
- 12 -
transit to such Borrower grouped according to either or both
of the customs broker and freight forwarder handling such
Inventory and the ▇▇▇▇ of lading number."
(ii) In addition to and not in limitation of all
other reports, statements or other information required to be furnished by
Borrowers and Guarantors to Lender under the Loan Agreement and the other
Financing Agreements, Revolving Loan Borrowers shall include in the monthly
agings of accounts payable information indicating the status of payments to
Customs Brokers and Freight Forwarders.
(d) Power of Attorney. Section 8.4 of the Loan Agreement is
hereby amended by deleting the word "and" after clause (v) and adding new
clauses (vii) and (viii) after clause (vi) as follows:
"(vii) endorse such Borrower's or Guarantor's name
upon any chattel paper, document, instrument, invoice, or
similar document or agreement relating to any Receivable or
any goods pertaining thereto or any other Collateral,
including any warehouse or other receipts, or bills of lading
and other negotiable or non-negotiable documents, and (viii)
clear Inventory whether or not the purchase of such Inventory
was financed with Letter of Credit Accommodations through U.S.
Customs or other foreign export control authorities in such
Borrower's or Guarantor's name, Lender's name or the name of
Lender's designee, and to sign and deliver to customs
officials powers of attorney in such Borrower's or Guarantor's
name for such purpose, and to complete in such Borrower's or
Guarantor's or Lender's name, any order, sale or transaction,
obtain the necessary documents in connection therewith and
collect the proceeds thereof."
(e) Revolving Loan Borrowers purchase Inventory from
manufacturers or suppliers located in countries other than the United States of
America set forth on Schedule 8(e)hereto. None of the Customs Brokers or Freight
Forwarders arrange on behalf of any Revolving Loan Borrower for the purchase of
Inventory from a manufacturer or supplier located outside the United States of
America. Schedule 8(e) also sets forth only those countries in which purchases
are arranged by such Revolving Loan Borrower (or its agent) and Revolving Loan
Borrower has taken legal title to and owns the inventory purchased from such
manufacturer or supplier prior to such inventory being shipped to the United
States of America by or on behalf of the Customs Brokers or Freight Forwarders.
9. Fees. In addition to all other fees, charges, interest and expenses
payable by Borrowers to Lender under the Loan Agreement and the other Financing
Agreements, Borrowers shall pay to Lender the following additional fees:
(a) Amendment Fee. Subject to the terms and conditions of
Section 9(c) hereof, Borrowers shall pay to Lender, contemporaneously herewith,
an amendment fee in the amount of $325,000, which fee shall be fully earned and
nonrefundable as of the date hereof and may be charged into the loan account of
any Borrower.
(b) Tranche B Amendment Fee. Subject to the terms and
conditions of Section 9(c) hereof, Tranche B Term Loan Borrowers shall pay to
Lender, contemporaneously herewith, a
- 13 -
closing fee in the amount of $325,000, which fee shall be fully earned and
nonrefundable as of the date hereof and may be charged into the loan account of
any Tranche B Term Loan Borrower.
(c) Reduction in Amendment Fees. Notwithstanding anything to
the contrary contained in Sections 9(a) and 9(b) hereof, in the event of a
sale-leaseback transaction with respect to real property of Borrower located at
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, Borrowers and related assets shall be
entitled to a credit against the loan account(s) of Borrowers in the amount of
$25,000 with respect to the amendment fee paid pursuant to Section 9(a) hereof
and Tranche B Term Loan Borrowers shall be entitled to a credit against the loan
account(s) of Tranche B Term Loan Borrowers in the amount of $130,000 with
respect to the amendment fee payable pursuant to Section 9(b) hereof; provided,
that each of the following terms and conditions are satisfied as determined by
Lender:
(i) Lender shall have received not less than ten (10)
days' prior written notice of the intention of Borrowers and Guarantors to
effect such sale-leaseback transaction, setting forth a description of the terms
of such proposed transaction, the names of the parties thereto, the amount of
the gross and net proceeds to be received upon the closing, together with and
such other information and documents as Lender may reasonably request,
(ii) the terms and conditions of such sale-leaseback
transactions shall be on terms and conditions acceptable to Lender in its
discretion and shall have the consummation of such sale-leaseback shall have
occurred within one hundred twenty (120) days after the date hereof,
(iii) all of the Obligations owed by Term Loan Borrowers
with respect to the Tranche A Term Loans and by Tranche B Term Loan Borrowers
with respect to the Tranche B Term Loan are repaid in full in immediately
available funds in accordance with the terms of the Loan Agreement from the
proceeds of such sale-leaseback transaction,
(iv) Lender shall have received, in form and substance
satisfactory to Lender, a Landlord Agreement in the form attached as Exhibit I
to the Loan Agreement or in form and substance otherwise satisfactory to Lender,
from the purchaser (or other appropriate parties) of the real property and
related assets located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, duly authorized,
executed and delivered by such purchaser (or other appropriate parties); and
(v) at the time of such sale-leaseback transaction, no
Incipient Default or Event of Default shall exist or have occurred and be
continuing.
10. Representations, Warranties and Covenants. Each Borrower and
Guarantor represents, warrants and covenants with, to and in favor of Lender as
follows, which representations, warranties and covenants are continuing and
shall survive the execution and delivery hereof, the truth and accuracy of, or
compliance with, each, together with the representations, warranties and
covenants in the other Financing Agreements, being a condition of the
effectiveness of this Amendment and a continuing condition of the making or
providing of any Revolving Loans or Letter of Credit Accommodations by Lender to
Borrowers:
- 14 -
(a) This Amendment and each other agreement or instrument to
be executed and delivered by Borrowers or Guarantors hereunder have been duly
authorized, executed and delivered by all necessary action on the part of
Borrowers and Guarantors which are a party hereto and thereto and, if necessary,
their respective stockholders (with respect to any corporation) or members (with
respect to any limited liability company), and is in full force and effect as of
the date hereof, as the case may be, and the agreements and obligations of
Borrowers or Guarantors, as the case may be, contained herein and therein
constitute legal, valid and binding obligations of Borrowers and Guarantors, as
the case may be, enforceable against them in accordance with their terms.
(b) No action of, or filing with, or consent of any
governmental or public body or authority, and no approval or consent of any
other party, including, without limitation, Richemont or ▇▇▇▇▇▇▇, is required to
authorize, or is otherwise required in connection with, the execution, delivery
and performance of this Amendment.
(c) All of the representations and warranties set forth in the
Loan Agreement, as amended hereby, and the other Financing Agreements are true
and correct in all material respects, after giving effect to the provisions of
this Amendment, except to the extent any such representation or warranty is made
as of a specified date, in which case such representation or warranty shall have
been true and correct as of such date.
(d) On or before March 15, 2004, Borrowers and Guarantors
shall have entered into, each in form and substance satisfactory to Lender, an
Amended and Restated Loan and Security Agreement among Lender, Borrowers and
Guarantors and such other Financing Agreements or amendments to or amendments
and restatements of any existing Financing Agreements as Lender shall request in
connection with the amendment and restatement of the Loan Agreement.
(e) On or before October 31, 2003, Borrowers and Guarantors
shall deliver to Lender in form and substance satisfactory to Lender,
modifications or amendments to the existing Mortgages with respect to the
extension of the term of the Financing Agreements as provided herein, each duly
authorized, executed and delivered by Term Loan Borrowers that are mortgagors of
the existing Mortgages in favor of Lender, together with any bring down
endorsements, in form and substance satisfactory to Lender, to the existing
title policies with respect to the Mortgages in favor of Lender that Lender may
require; and
(f) After giving effect to the provisions of this Amendment,
no Event of Default or Incipient Default exists or has occurred and is
continuing.
11. Conditions Precedent. Concurrently with the execution and delivery
hereof (except to the extent otherwise indicated below), and as a further
condition to the effectiveness of this Amendment and the agreement of Lender to
the modifications and amendments set forth in this Amendment:
(a) Lender shall have received, in form and substance
satisfactory to Lender, a photocopy of an executed original or executed original
counterparts of this Amendment by facsimile (with the originals to be delivered
within five (5) Banking Days after the date hereof),
- 15 -
as the case may be, duly authorized, executed and delivered by each Borrower and
Guarantor; and
(b) each Borrower and Guarantor shall deliver, or cause to be
delivered, to Lender a true and correct copy of any consent, waiver or approval
to or of this Amendment, which any Borrower or Guarantor is required to obtain
from any other Person, including, without limitation, Richemont or ▇▇▇▇▇▇▇, and
such consent, approval or waiver shall be in a form reasonably acceptable to
Lender.
12. Effect of this Amendment. This Amendment constitutes the entire
agreement of the parties with respect to the subject matter hereof, and
supersedes all prior oral or written communications, memoranda, proposals,
negotiations, discussions, term sheets and commitments with respect to the
subject matter hereof. Except as expressly provided herein, no other changes or
modifications to the Loan Agreement or any of the other Financing Agreements, or
waivers of or consents under any provisions of any of the foregoing, are
intended or implied by this Amendment, and in all other respects the Financing
Agreements are hereby specifically ratified, restated and confirmed by all
parties hereto as of the effective date of this Amendment. To the extent that
any provision of the Loan Agreement or any of the other Financing Agreements
conflicts with any provision of this Amendment, the provision of this Amendment
shall control.
13. Further Assurances. Borrowers and Guarantors shall execute and
deliver such additional documents and take such additional action as may be
reasonably requested by Lender to effectuate the provisions and purposes of this
Amendment.
14. Governing Law. The validity, interpretation and enforcement of this
Amendment in any dispute arising out of the relationship between the parties
hereto, whether in contract, tort, equity or otherwise, shall be governed by the
internal laws of the State of New York, without regard to any principle of
conflict of laws or other rule of law that would result in the application of
the law of any jurisdiction other than the State of New York.
15. Binding Effect. This Amendment shall be binding upon and inure to
the benefit of each of the parties hereto and their respective successors and
assigns.
16. Counterparts. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
- 16 -
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed on the day and year first written.
CONGRESS FINANCIAL CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Title: AVP
BRAWN OF CALIFORNIA, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
GUMP'S BY MAIL, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇
Title: President
GUMP'S CORP.
By: /s/ ▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇
Title: President
HANOVER REALTY, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
THE COMPANY STORE FACTORY, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
THE COMPANY OFFICE, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
SILHOUETTES, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
HANOVER COMPANY STORE, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
DOMESTICATIONS, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
KEYSTONE INTERNET SERVICES, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
THE COMPANY STORE GROUP, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
By their signatures below, the
undersigned Guarantors acknowledge
and agree to be bound by the
applicable provisions of this
Amendment:
HANOVER DIRECT, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
HANOVER HOME FASHIONS GROUP, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
CLEARANCE WORLD OUTLETS, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
SCANDIA DOWN, LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
LA CROSSE FULFILLMENT, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
▇.▇. ADVERTISING, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
AMERICAN DOWN & TEXTILE, LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
HANOVER GIFTS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President