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EXECUTION COPY
AMENDMENT NO. 1
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TO
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RESTATED CREDIT AND SECURITY AGREEMENT
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This Amendment No. 1 to Restated Credit And Security Agreement
(this "Amendment No. 1"), made as of the 1st day of October, 1996, between Royal
Appliance Mfg. Co. (the "Borrower"), National City Commercial Finance, Inc., as
agent for the Lenders (the "Agent"), National City Bank, as Letter of Credit
Bank (the "Letter of Credit Bank"), and the Lenders,
WITNESSETH:
WHEREAS, the Borrower, the Agent, the Letter of Credit Bank and the
Lenders have entered into that certain Restated Credit and Security Agreement,
dated as of March 27, 1996 (the "Credit Agreement"), pursuant to which the
Lenders have made Loans and other financial accommodations available to the
Borrower; and
WHEREAS, the Borrower has advised the Agent that: (i) pursuant to
Section 5.7 of the Credit Agreement, the Borrower desires to sell an outstanding
amount not to exceed $16,000,000 (and after December 31, 1996, not to exceed
$9,000,000) of its "Receivables" indebtedness owing from Wal-Mart Stores, Inc.
arising from the provision of merchandise and goods by the Borrower, (ii) such
sale shall be made to Royal Appliance Receivables, Inc., an Ohio corporation and
wholly-owned, special purpose corporation of the Borrower, pursuant to that
certain Receivables Sale and Contribution Agreement, dated as of October 1, 1996
(the "Sale Agreement"), and (iii) Royal Appliance Receivables, Inc. shall
transfer such "Receivables" to Capital U.S.A. Funding, L.P., a Delaware limited
partnership (the "Purchaser") pursuant to that certain Receivables Purchase and
Servicing Agreement, dated as of October 1, 1996 (the "Receivables Purchase
Agreement") or, in the event the Purchaser, in its discretion as permitted by
the Receivables Purchase Agreement, declines to purchase any of the
"Receivables" offered by the Borrower, to Commerzbank Aktiengesellschaft, New
York Branch, as agent for certain banks parties to that certain Standby
Receivables Purchase and Servicing Agreement, dated as of October 1, 1996 (the
"Standby Receivables Purchase Agreement"), may elect to purchase such
Receivables.
WHEREAS, upon the terms and subject to the conditions as set forth
hereinafter the Borrower, the Agent and the Lenders desire to amend the Credit
Agreement as set forth herein to accommodate: (i) such sale of Wal-Mart Stores,
Inc. Receivables as contemplated by the Sale Agreement, the Receivables Purchase
Agreement and the Standby Receivables Purchase Agreement and (ii) the
establishment of Royal Appliance Receivables, Inc.
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Borrower, the Agent and the
Lenders hereby agree as follows:
SECTION 1. DEFINED TERMS. Unless otherwise specified herein,
capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Credit Agreement.
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SECTION 2. AMENDMENT CREDIT AGREEMENT. The Credit Agreement shall be
amended, effective as of the date of this Amendment, as follows:
2.1 AMENDMENT TO SECTION 1.1. The definition of "Eligible
Accounts" set forth in Section 1.1 of the Credit Agreement is hereby
amended by adding new clause (w) thereto as follows:
(w) are Wal-Mart Accounts.
2.2 AMENDMENT TO SECTION 1.1. Section 1.1 of the Credit
Agreement is hereby amended by adding thereto the following
definitions:
"CAPITAL USA FUNDING" means Capital USA Funding, L.P., a
Delaware limited partnership.
"COMMERZBANK" means Commerzbank Aktiengesellschaft, New York
Branch.
"RECEIVABLES PURCHASE AGREEMENT" means that certain
Receivables Purchase and Servicing Agreement, dated as of October 1,
1996, between Royal Appliance Receivables, Inc. and Capital USA.
"RECEIVABLES SALE AND CONTRIBUTION AGREEMENT" means that
certain Receivables Sale and Contribution Agreement, dated as of
October 1, 1996, between the Borrower and Royal Appliance Receivables,
Inc.
"REVOLVING CREDIT COMMITMENT" means the commitment of each
Lender to advance Loans up to the amount as set forth in Amended Annex
I.
"ROYAL APPLIANCE RECEIVABLES, INC." means Royal Appliance
Receivables, Inc., an Ohio corporation and wholly-owned subsidiary of
the Borrower established to purchase the Wal-Mart Accounts from the
Borrower.
"STANDBY RECEIVABLES PURCHASE AGREEMENT" means that certain
Standby Receivables Purchase and Servicing Agreement, dated as of
October 1, 1996, between Royal Appliance Receivables, Inc. and
Commerzbank, as agent for the banks which are from time to time parties
thereto.
"WAL-MART" means Wal-Mart Stores, Inc., a Delaware
corporation.
"WAL-MART ACCOUNT" means: (i) indebtedness owing from Wal-Mart
arising from the provision of merchandise and goods by the Borrower to
Wal-Mart (excluding Wal-Mart Canada Accounts), including the right to
payment of any interest or finance charges and other obligations of
Wal-Mart with respect thereto, (ii) all security interests or liens and
property subject thereto from time to time purporting to secure payment
by Wal-Mart, (iii) all guarantees, indemnities and warranties and
proceeds thereof, proceeds of insurance policies, financing statements
and other agreements or arrangements of whatever character from time to
time supporting or securing payment by Wal-Mart, (iv) all collections
(I.E., all cash collections and other cash proceeds) and records (I.
E., all contracts {I. E., a written agreement or agreements pursuant to
which, or under which, Wal-Mart is obligated to pay for merchandise or
goods sold to Wal-Mart by the Borrower
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from time to time}) and other documents, books, records and other
information (including, without limitation, computer programs, tapes,
disks, punch cards, data processing software and related property and
rights) prepared and maintained by the Borrower, Royal Appliance
Receivables, Inc., with respect to Wal-Mart Accounts and Wal-Mart and
(v) all proceeds of any of the foregoing.
"WAL-MART CANADA ACCOUNT" means an indebtedness owing by
Wal-Mart or any affiliate thereof located in Canada which is originally
invoiced and collected in Canadian Dollars.
2.3 AMENDMENT TO ANNEX I. Annex I of the Credit Agreement is
hereby deleted in its entirety and Amended Annex I attached hereto is
substituted in lieu thereof.
2.4 AMENDMENT TO SECTION 4.1. Section 4.1 of the Credit
Agreement is hereby amended by adding at the end thereof the following
proviso thereto:
; PROVIDED, HOWEVER, that, so long as the Borrower shall be
permitted to sell Wal-Mart Accounts to Royal Appliance
Receivables, Inc., the Collateral shall not include Wal-Mart
Accounts.
2.5 AMENDMENT TO SECTION 4.4. Section 4.4 of the Credit
Agreement is hereby amended by adding thereto new clause (g) as
follows:
and (g) all Wal-Mart Accounts consist solely of open accounts,
are not evidenced by "chattel paper" within the meaning of the
UCC, and are not secured by Wal-Mart or Guaranteed by any
Person.
2.6 AMENDMENT TO SECTION 4.5. Section 4.5 of the Credit
Agreement is hereby deleted in its entirety and the following
substituted in lieu thereof:
4.5 TITLE TO COLLATERAL; LIENS; TRANSFERS. Borrower
has good, indefeasible and merchantable title to and ownership
of the Collateral, free and clear of all Liens, except for
Liens permitted under Section 8.3(d) and the security interest
(within the meaning of Section 1309.02(A)(2) of the Ohio
Revised Code [9-102(1)(b) of the UCC]) in favor of Royal
Appliance Receivables, Inc. in Wal-Mart Accounts permitted in
connection with Section 5.8 of this Agreement. Except as
permitted by Section 8.3(d) or 8.3(a) of this Agreement, as
contemplated by Section 5.8 of this Agreement (with respect to
such security interest (within the meaning of Section
1309.02(A)(2) of the Ohio Revised Code) [9-102(1)(a) of the
UCC] in Wal-Mart Accounts), or as otherwise provided herein or
in any other Loan Document, the Borrower shall not encumber,
pledge, mortgage, grant a security interest in, assign, sell,
lease or otherwise dispose of or transfer, whether by sale,
merger, consolidation, liquidation, dissolution or otherwise,
any of the Collateral.
2.7 AMENDMENT TO SECTION 4.6. Clause (e) of Section 4.6 of the
Credit Agreement is hereby deleted in its entirety and the following
substituted in lieu thereof:
(e) make any other change (other than sales of
Inventory in the ordinary course of business and other than
sales (I.E., the security interest within the meaning of
Section 1309.02(A)(2) of the Ohio Revised Code [9-102(1)(b) of
the
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UCC]) of Wal-Mart Accounts to the extent permitted by Section 5.8 of
this Agreement to Royal Appliance Receivables, Inc.) which might
affect the perfection or priority of the Agent's Lien in the
Collateral.
2.8 AMENDMENT TO SECTION 4.9. The first clause of the first
sentence of Section 4.9 of the Credit Agreement is hereby deleted in
its entirety and following substituted in lieu thereof:
...During regular business hours and after reasonable notice
to the Borrower, the Agent and each of the Lenders (by any of
its officers, employees, agents, representatives, or
designees, including any Lender) shall have the right to
inspect the Borrower's Collateral or the Wal-Mart Accounts and
to inspect and audit, all books, records, journals, orders,
receipts, or other correspondence related thereto (and to make
extracts or copies thereof as the Agent may desire) and to
inspect the premises upon which any of the Collateral or any
Wal-Mart Account is located for the purpose of verifying the
amount, quality, quantity, value, and condition of, or any
other matter relating to, the Collateral or Wal-Mart
Account;...
2.9 AMENDMENT TO SECTION 4.10. Section 4.10 of the Credit
Agreement is hereby amended by adding at the end thereof the following
sentence thereto:
On or before the fifteenth day (15th) day of each calendar
month, the Borrower shall deliver to the Agent, in form and
substance satisfactory to the Agent, a summary of the sales of
Wal-Mart Accounts to Royal Appliance Receivables, Inc. showing
the aggregate outstanding face amount of the Receivables sold,
the sale price of the Receivables sold, the cash portion of
the Sale Price (indicating payment thereof to the Borrower by
wire transfer to the Blocked Accounts) and such other
information relating to the sales as the Agent may request
from time to time.
2.10 AMENDMENT TO SECTION 5.8. Section 5.8 of the Credit
Agreement is hereby amended by adding at the end thereof the following
proviso thereto:
; PROVIDED; HOWEVER, that, in respect of the sale of the
Wal-Mart Accounts, the Borrower's ability to sell such
Wal-Mart Accounts is conditioned upon continued satisfaction
of the following conditions: (i) the Sale Price (as defined in
the Sale Agreement) for the sold Wal-Mart Accounts (other than
the portion thereof treated as capital contribution) shall be
paid by Royal Appliance Receivables, Inc. directly to the
Lockbox or Blocked Accounts established pursuant to Section
5.2 of this Credit Agreement, (ii) the Sale Price (as defined
in Receivables Sale and Contribution Agreement) payable to the
Borrower by Royal Appliance Receivables, Inc. shall not be
less than the Cash Purchase Price payable to Royal Appliance
Receivables, Inc. pursuant to the Receivables Purchase
Agreement and the Standby Receivables Purchase Agreement
(which provisions shall not be modified without the Agent and
the Lenders' written consent) treated as equity or deferred
purchase price and such Sale Price shall be immediately paid
by Royal Appliances Receivables, Inc., to the Borrower, (iii)
any deferred purchase price with respect to Purchased
Receivable or Bank Purchased Receivable shall be payable to
the Borrower as soon as payable to Royal Appliance
Receivables, Inc.
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under the Receivables Purchase Agreement and the Standby
Receivables Purchase Agreement, (iv) the sale of Wal-Mart
Accounts to Royal Appliance Receivables, Inc. shall be at the
sole discretion of the Borrower and (v) without the consent of
the Lenders, the Borrower shall not have outstanding in excess
of (x) $16,000,000 in sold Wal-Mart Accounts prior to December
31, 1996, and (y) $9,000,000 in sold Wal-Mart Accounts
thereafter.
2.11 AMENDMENT TO SECTION 7.6. The second sentence of Section
7.6 of the Credit Agreement is hereby deleted in its entirety and the
following substituted in lieu thereof:
. . . All such assets are free and clear of any
mortgage, security interest or other Lien of any kind, other
than any Liens in favor of the Lenders, Liens permitted by
Section 8.3(d) of this Agreement, and the security interest
(within the meaning of Section 1309.02(A)(2) of the Ohio
Revised Code [9-102(1)(b) of the UCC]) in favor of Royal
Appliance Receivables, Inc. in respect of Wal-Mart Accounts
permitted in connection with Section 5.8 of this Agreement.
2.12 AMENDMENT OF SECTION 8.3(d). Section 8.3(d) of the Credit
Agreement is hereby amended by adding clause (J) thereto as follows:
(J) any security interest (within the meaning of
Section 1309.02(A)(2) of the Ohio Revised Code [9-102(1)(b) of
the UCC]), to the extent permitted and satisfying the
condition set forth in Section 5.8 of this Agreement: (x) with
respect to the Borrower, in favor of Royal Appliance
Receivables, Inc. in respect of Wal-Mart Accounts of the
Borrower permitted to be transferred by Section 5.8 of this
Agreement and (y) with respect to the Royal Appliance
Receivables, Inc., in favor of Capital USA, pursuant to the
Receivables Purchase Agreement, or Commerzbank, pursuant to
the Standby Receivables Purchase Agreement, as agent for the
banks which are parties thereto in respect of Wal-Mart
Accounts purchased by Royal Appliance Receivables, Inc. by the
Borrower.
2.13 AMENDMENT OF SECTION 9. Section 9 of the Credit Agreement
is hereby amended by adding Subsection 9.14 thereto as follows:
9.14 either: (i) the assertion by the Borrower, Royal
Appliance Receivables, Inc., Capital USA or Commerzbank, or a
finding by any court, that the security interest under the
Receivables Sale and Contribution Agreement constitutes a
security interest within the meaning a Section 1309.02(A)(1)
of the Ohio Revised Code [9-102(1)(a) of the UCC], (ii)
Capital USA or Commerzbank exercise any remedy against the
Borrower or Royal Receivables, Inc. other than the liquidation
settlement procedures by Capital USA as set forth in Section
2.8 of the Receivables Purchase Agreement and by Commerzbank
as set forth in Section 2.8 of the Standby Receivables
Purchase Agreement, (iii) the Borrower fails at any time to
satisfy any of the conditions set forth in the proviso to
Section 5.8 of this Credit Agreement or (iv) the Borrower
agrees to any modification to the Receivables Sale and
Contribution Agreement, the Receivables Purchase
Agreement, the Standby Receivables Purchase Agreement or any
Related Documents (as defined in the Receivables Purchase
Agreement) without ten (10)
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Business Days' prior written notice to the Agent and the
written consent of the Agent and the Lenders.
SECTION 3. WAIVER OF NON-COMPLIANCE WITH CERTAIN PROVISIONS. Subject to
the conditions set forth in Section 4 below, the Lenders hereby waive the
Borrower's any noncompliance with the provisions of Sections 8.3(f), 8.3(g) or
8.3(h) by reason of (i) the creation or operation of Royal Appliance
Receivables, Inc. or (ii) the pledge to the Agent in favor of the Lenders of the
capital stock of Royal Appliance Receivables, Inc.
SECTION 4. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT NO.
1. In addition to all of the other conditions and agreements set forth herein,
the effectiveness of this Amendment No. 1 is subject to the conditions
precedent that the Agent shall have received the following deliveries or shall
have satisfied the following conditions:
4.1 SALE TERMS. All Related Documents and all financing
statements filed by Royal Appliance Receivables, Inc., the Purchaser
and Commerzbank shall be limited to the Wal-Mart Accounts (and shall
specifically exclude Wal-Mart Canada Accounts and shall reflect, in the
case of the Bank Purchased Receivables (as defined in the Standby
Receivables Purchase Agreement) purchased from Royal Appliance
Receivables, Inc., Commerzbank as the secured party for the benefit of
the Banks.
4.2 THIS AMENDMENT NO. 1. The Agent shall have received this
Amendment No. 1, executed and delivered by a duly authorized officer of
the Borrower.
4.3 PLEDGE AGREEMENT. A Pledge Agreement, substantially in the
form of EXHIBIT 1 hereto (the "Pledge Agreement"), executed and
delivered by an authorized officer of the Borrower in favor of the
Agent for the benefit of the Lenders and pledging the capital stock of
Royal Appliance Receivables, Inc. owned by the Borrower.
4.4 SECURITIZATION DOCUMENTATION. A fully executed copy of
each of the Receivables Purchase Agreement, Receivables Sale and
Contribution Agreement, Standby Receivables Purchase Agreement and each
and every instrument, assignment, financing statement, certificate,
opinion and other document delivered in connection with any of the
foregoing.
4.5 REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT. Upon the
effectiveness of this Amendment No. 1, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof", "herein", or
words of like import shall mean and be a reference to the Credit
Agreement, as amended hereby and each reference to the Credit Agreement
in any other document, instrument or agreement executed and/or
delivered in connection with the Credit Agreement shall mean and be a
reference to the Credit Agreement, as amended hereby.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents
and warrants to the Agent and the Lenders as follows:
5.1 THIS AMENDMENT NO. 1. This Amendment No. 1 has been duly
and validly executed by an executive officer of the Borrower and
constitutes a legal, valid and binding obligation of the Borrower
enforceable against Borrower in accordance with its terms.
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5.2 THE PLEDGE AGREEMENT. The Pledge Agreement has been duly
and validly executed by an executive officer of the Borrower and
constitutes a legal, valid and binding obligation of the Borrower
enforceable against Borrower in accordance with its terms.
5.3 CREDIT AGREEMENT. The Credit Agreement, as amended by this
Amendment No. 1, remains in full force and effect and remains a valid
and binding obligation of the Borrower enforceable against the
Borrower in accordance with its terms. The Borrower hereby ratifies and
confirms the Credit Agreement, as amended by this Amendment No. 1.
5.4 NON-WAIVER. The execution, delivery, performance and
effectiveness of this Amendment No. 1 shall not operate nor be deemed
to be or construed as, a waiver (i) of any right, power or remedy of
the Agent or Lenders under the Credit Agreement, nor (ii) of any term,
provision, representation, warranty or covenants contained in the
Credit Agreement. Further, none of the provisions of this Amendment No.
1 shall constitute, be deemed to be or construed as a waiver of any
default or Event of Default under the Credit Agreement, as amended by
this Amendment No. 1.
SECTION 6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Amendment No. 1 shall be governed by
and construed in accordance with the laws of the State of Ohio.
6.2 SEVERABILITY. In the event any provision of this Amendment
No. 1 should be invalid, the validity of the other provisions hereof
and of the Credit Agreement shall not be affected thereby.
6.3 COUNTERPARTS. This Amendment No. 1 may be executed in one
or more counterparts, each of which, when taken together, shall
constitute but one and the same agreement.
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IN WITNESS WHEREOF, Royal Appliance Mfg. Co. has caused this Amendment
No. 1 to Restated Credit and Security Agreement to be executed and delivered as
of the date above written.
ROYAL APPLIANCE MFG. CO.
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By:
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Its:
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Accepted and Agreed:
NATIONAL CITY COMMERCIAL FINANCE, INC.,
as Agent
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By: ▇▇▇ ▇. ▇▇▇▇▇
Its: Vice President
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LENDERS
NATIONAL CITY COMMERCIAL FINANCE, INC.,
as a Lender
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By: ▇▇▇ ▇. ▇▇▇▇▇
Its: Vice President
THE CIT GROUP BUSINESS CREDIT, INC.,
as a Lender
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By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Vice President
CORESTATES BANK, N.A. (as assignee of
Meridian Commercial Finance
Corporation), as a Lender
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By: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: Vice President
NATIONAL BANK OF CANADA, a Canadian
Chartered Bank, as a Lender
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By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Vice President
BTM CAPITAL CORPORATION (as successor by
merger to BOT Financial Corporation),
as a Lender
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By: ▇▇▇▇▇▇▇ ▇. York
Its: Managing Director
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LETTER OF CREDIT BANK
NATIONAL CITY BANK
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By: ▇▇▇▇▇▇ ▇. ▇▇▇
Its: Senior Vice President
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Amended Annex I
RESTATED CREDIT AND SECURITY AGREEMENT, DATED AS OF MARCH 27, 1996,
AMONG ROYAL APPLIANCE MFG. CO., THE AGENT, LETTER OF CREDIT BANK
AND THE LENDERS, AS AMENDED BY AMENDMENT NO. 1 THERETO
COMMITMENTS AND PERCENTAGES OF THE LENDERS
Ratable
Revolving Credit Portion
Name Of Lender Commitment (Percentage)
============== ========== ===========
National City Commercial Finance, Inc. $15,000,000 30%
The CIT Group Business Credit, Inc. $9,500,000 19%
CoreStates Bank $9,000,000 18%
National Bank of Canada, a Canadian Chartered Bank $8,500,000 17%
BTM Capital $8,000,000 16%
TOTAL REVOLVING CREDIT COMMITMENT $50,000,000 100%
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