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EXHIBIT 10.1
FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT
This Amendment, dated as of May 12, 2000, is made by and between
The Sportsman's Guide, Inc., a Minnesota corporation (the "Borrower"), and
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 (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 the Lender waive certain Events of
Default and amend certain provisions of the Credit Agreement, which the Lender
is willing to do pursuant 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:
"`Gross Equity Proceeds' means the gross cash proceeds actually
received by the Borrower from sale of additional common or preferred
stock or convertible instruments in the Borrower."
"`First Amendment Effective Date' means the date the First
Amendment to Credit and Security Agreement and Waiver of Defaults by
and between the Borrower and the Lender becomes effective."
"`Floating Rate' means an annual rate equal to the Prime Rate plus
the Margin, which annual rate shall change when and as the Prime Rate
changes."
"`Margin' means an amount determined pursuant to Section 2.7(a)
that is added to the Prime Rate to determine the Floating Rate."
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2. Margin. Section 2.7(a) of the Credit Agreement is amended
to read as follows:
"(a) MARGIN. The interest rate margin ("Margin") to be added to
the Prime Rate shall be determined as follows:
(i) from the First Amendment Effective Date to the
earlier of May 19, 2000 or the date the Borrower receives Gross
Equity Proceeds of at least $3,300,000, "Margin" means negative one
quarter of one percent (-0.25%);
(ii) if the Borrower receives Gross Equity Proceeds of at
least $3,300,000 on or after the First Amendment Effective Date
but on or before May 19, 2000, "Margin" means negative one quarter
of one percent (-0.25%);
(iii) if the Borrower fails to receive Gross Equity
Proceeds of at least $3,300,000 on or after the First Amendment
Effective Date but on or before May 19, 2000, "Margin" means zero
percent (0%) as of May 19, 2000, subject to change when the Lender
receives and approves the Borrower's audited financial statements
for its fiscal year ending on or about December 31, 2000 (the
"Year 2000 Financial Statements"), at which time the Margin shall
be adjusted, effective as of the first day of the Borrower's 2001
fiscal year, as follows: if the Year 2000 Financial Statements
show that the Borrower's Net Income was:
(A) less than $(1,000) but greater than or equal to
$(500,000), "Margin" shall mean one quarter of one
percent (0.25%); and
(B) less than $(500,000) but greater than or equal to
$(1,000,000), "Margin" means one half of one
percent (0.5%);
(C) greater than $1,000,000, "Margin" means negative
one half of one percent (-0.50%);
otherwise, the Margin shall remain unchanged. If the Margin is
increased according to the foregoing and the Borrower is thus
determined to have underpaid interest since the beginning of its
2001 fiscal year, the Borrower shall pay such deficiency on
demand."
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3. Financial Covenants. Section 6.15 of the Credit Agreement
is to read as follows:
Section 6.15 Minimum Fiscal Year-To-Date Net Income. The Borrower
will achieve fiscal year-to-date Net Income, determined as of the end
of each fiscal quarter ending on or about the dates listed below, of
not less than the amount set forth opposite such date:
Date Minimum Fiscal Year-To-Date Net Income
---- --------------------------------------
3/31/2000 $(950,000)
6/30/2000 $(2,000,000)
9/30/2000 $(2,500,000)
12/31/2000 $(1,000,000);provided, however, if the
Borrower receives Gross Equity Proceeds
of not less than $3,300,000 on or before
May 19, 2000, $(2,000,000)
4. Compliance Certificate. Exhibit B to the Credit Agreement
is to read as Exhibit B attached hereto.
5. 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.
6. Waiver of Default. The Borrower is in default of Section
6.15 the Credit Agreement because its actual Net Income for its fiscal quarter
ending on or about March 31, 2000 was $(922,000) instead of the required amount
(before amendment pursuant to this Amendment) of not less than $(300,000). Upon
the terms and subject to the conditions set forth in this Amendment, the Lender
hereby waives such default. This waiver shall be effective only in this specific
instance and for the specific purpose for which it is given, and this waiver
shall not entitle the Borrower to any other or further waiver in any similar or
other circumstances.
7. Amendment Fee. The Borrower shall pay the Lender as of the
date hereof a fully earned, non-refundable fee in the amount of $35,000 in
consideration of the Lender's execution of this Amendment.
8. Conditions Precedent. This Amendment, and the waiver set
forth in Paragraph 6 hereof, shall be effective when the Lender shall have
received an executed original hereof, together with payment of the fee described
in Paragraph 7.
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9. Representations and Warranties. The Borrower hereby
represents 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) Except for the representations and warranties contained in
Section 5.2 as such representations and warranties specifically relate
to the Gross Equity Proceeds disclosed to the Lender prior to the date
of this Agreement and as contemplated by this Agreement, 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.
11. No Other Waiver. Except as set forth in Paragraph 6 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
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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 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.
NORWEST BANK MINNESOTA, THE SPORTSMAN'S GUIDE, INC.
NATIONAL ASSOCIATION
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its Vice President Its Chief Financial Officer
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Exhibit B to First Amendment
to Credit and Security Agreement
COMPLIANCE CERTIFICATE
To: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Norwest Bank Minnesota, National Association
Date: , 200
Subject: The Sportsman's Guide, Inc.
Financial Statements
In accordance with our Credit and Security Agreement dated as of
December 27, 1999 (the "Credit Agreement"), attached are the financial
statements of The Sportsman's Guide, Inc. (the "Borrower") as of and for
, 200 (the "Reporting Date") and the year-to-date period then
ended (the "Current Financials"). All terms used in this certificate have the
meanings given in the Credit Agreement.
I certify that the Current Financials have been prepared in
accordance with GAAP, subject to year-end audit adjustments, and fairly present
the Borrower's financial condition and the results of its operations as of the
Reporting Date.
Events of Default. (Check one):
[ ] The undersigned does not have knowledge of the occurrence of a
Default or Event of Default under the Credit Agreement.
[ ] The undersigned has knowledge of the occurrence of a Default
or Event of Default under the Credit Agreement and attached
hereto is a statement of the facts with respect to thereto.
The Borrower acknowledges that pursuant to Section 2.7(d) the
Lender may impose the Default Rate at any time during the
resulting Default Period.
Financial Covenants. I further hereby certify as follows:
1. Maximum Debt to Book Net Worth Ratio. Pursuant to Section
6.13 of the Credit Agreement, as of the Reporting Date, the ratio of
the Borrower's Debt to its Book Net Worth was to 1.00 which [ ]
satisfies [ ] does not satisfy the requirement that such ratio be no
more than to 1.00 on the Reporting Date as set forth in table
below:
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Date Maximum Debt to Book Net
---- ------------------------
Worth Ratio
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3/31/2000 2.25 to 1.00
6/30/2000 2.25 to 1.00
9/30/2000 2.50 to 1.00
12/31/2000 2.00 to 1.00
2. Minimum Net Income. Pursuant to Section 6.15 of the Credit
Agreement, the Borrower's fiscal year-to-date Net Income as of the
Reporting Date was $ , which [ ] satisfies [ ] does not
satisfy the requirement that such amount be not less than
$ during such period as set forth in table below:
Date Minimum Fiscal Year-To-Date Net Income
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3/31/2000 $(950,000)
6/30/2000 $(2,000,000)
9/30/2000 $(2,500,000)
12/31/2000 $(1,000,000);provided, however, if the
Borrower receives Gross Equity Proceeds
of not less than $3,300,000 on or before
May 19, 2000, $(2,000,000)
3. Minimum Pre-Tax Net Income per Accounting Period. Pursuant
to Section 6.14, for the Accounting Period ending on the Reporting
Date, the Borrower's Net Income plus Tax Expense was $ ,
which [ ] satisfies [ ] does not satisfy the requirement that such
amount be not less than $(500,000) during such Accounting Period.
4. Maximum Inventory Days. Pursuant to Section 6.16 of the
Credit Agreement, as of the end of the Reporting Date, the turnover
rate for Inventory was Inventory Days which [ ] satisfies [ ]
does not satisfy the requirement that such amount be not more than 175
Inventory Days.
5. Capital Expenditures. Pursuant to Section 7.11 of the
Credit Agreement, for the year-to-date period ending on the Reporting
Date, the Borrower has expended or contracted to expend during the
year ended , 199 , for Capital
Expenditures, $ in the aggregate and at most
$ in any one transaction, which [ ] satisfies
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[ ] does not satisfy the requirement that such expenditures not exceed
$3,000,000 in the aggregate and $ for any one transaction
during such year.
6. Salaries. As of the Reporting Date, the Borrower [ ] is [ ]
is not in compliance with Section 7.18 of the Credit Agreement
concerning salaries.
Attached hereto are all relevant facts in reasonable detail to
evidence, and the computations of the financial covenants referred to above.
These computations were made in accordance with GAAP.
THE SPORTSMAN'S GUIDE, INC.
By
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Its
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