EIGHTH AMENDMENT TO LOAN AGREEMENT AND OTHER LOAN DOCUMENTS
EIGHTH
AMENDMENT TO LOAN AGREEMENT
AND
OTHER LOAN DOCUMENTS
THIS EIGHTH AMENDMENT TO LOAN AGREEMENT
AND OTHER LOAN DOCUMENTS (this “Amendment”) is dated
as of May 27, 2010, among DGSE COMPANIES, INC., a Nevada
corporation (“Borrower”), and TEXAS CAPITAL BANK, NATIONAL
ASSOCIATION, a national banking association (“Lender”).
A. Borrower
and Lender are party to that certain Loan Agreement dated as of
December 22, 2005 (as modified, amended, renewed, extended, and restated,
the “Loan
Agreement”).
B. Superior
Galleries, Inc. (“Superior”) and
Stanford International Bank, Ltd. (“Stanford”) are
parties to that certain Amended and Restated Commercial Loan and Security
Agreement dated as of May 30, 2007 (“Superior/Stanford Loan and
Security Agreement”), which is permitted under the Loan
Agreement.
C. Borrower,
Stanford and Superior are parties to that certain Debt Conversion Agreement
dated as of January 27, 2010 (the “Debt Conversion
Agreement”), pursuant to which Borrower issued 1,000 shares (the “Shares”) of its
common stock, $0.01 par value per share, in full satisfaction of all amounts
outstanding under the Superior/Stanford Loan and Security Agreement, and
Stanford canceled all amounts outstanding under the Superior/Stanford Loan and
Security Agreement and terminated the Superior/Stanford Loan and Security
Agreement and all other agreements between Superior and Stanford.
▇. ▇▇▇▇▇▇▇▇
and Borrower have entered into that certain Purchase and Sale Agreement dated as
of January 27, 2010 (the “Purchase and Sale
Agreement”), pursuant to which Stanford sold the Shares and all other
equity security interests it owned in Borrower to the Buyers (as defined in the
Purchase and Sale Agreement).
E. Superior
desires to become a Guarantor under the Loan Agreement and pledge substantially
all of its assets for the benefit of Lender.
F. Borrower
has requested, and Lender has agreed to advance to Borrower, an additional
$866,695.80, which amount shall be evidenced by the Term Note.
G. Borrower
and Lender have agreed, upon the following terms and conditions, to amend the
Loan Agreement and certain other Loan Documents.
NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Borrower and Lender agree as follows:
1. Terms and
References. Unless otherwise stated in this Amendment,
(a) terms defined in the Loan Agreement have the same meanings when used in
this Amendment, and (b) references to “Sections” are to the Loan
Agreement’s sections.
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Eighth
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and
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2. Amendments
to Loan Agreement.
(a) Section 1.1 of
the Loan Agreement is hereby amended by deleting the definitions of “EGS Acquisition”,
“EGS Acquiistion
Agreement”, “EGS Acquisition
Date”, “EGS
Seller”, “EGS
Seller Note”, “EGS Subordination
Agreement”, “Permitted Subordinated
Payments”, “Restricted
Subsidiaries”, “Stanford”, “Stanford Intercreditor
Agreement”, “Stanford Limited
Guaranty”, “Stanford Loan
Documents”, “Stanford Notes”,
“Superior
Loans”, and “Superior Subordination
Agreement” therefrom.
(b) Section 1.1 of
the Loan Agreement is hereby amended by deleting the definitions of “Approved Equity
Issuances”, “Commitment”, “EBITDA”, “Loan Documents”,
“Subsidiary
Guarantors”, and “Termination Date”
therefrom, and substituting the following in lieu thereof:
“Approved Equity
Issuances” means (a) 1,403,134 shares of Borrower’s common stock issuable
upon the exercise of options outstanding under the Borrower’s 2004 Stock Option
Plan (whether or not initially issued under such plan), (b) 264,336 shares
of Borrower’s common stock available for issuance under the Borrower’s 2004
Stock Option Plan, including grants of options or other stock awards related
thereto, (c) 750,000 shares of Borrower’s common stock available for
issuance under the Borrower’s 2006 Equity Incentive Plan, including grants of
options, stock units or other awards related thereto, (d) the shares of
Borrower’s common stock being issued in connection with that certain Debt
Conversion Agreement dated as of January 27, 2010, by and among Borrower,
Superior and Stanford International Bank, Ltd., that certain Purchase and Sale
Agreement dated as of January 27, 2010, by and among Stanford International
Bank, Ltd. and Borrower, and the transactions contemplated thereby, (e) any
equity issuances by a Subsidiary to Borrower or to any other Subsidiary, and
(f) any change in the number of outstanding shares of a Subsidiary by
solely by reason of a stock dividend, subdivision, split, reverse split, or
combination thereof.
“Commitment” means the
obligation of Lender to make Revolving Credit Advances pursuant to Section 2.1 in
an aggregate principal amount at any time outstanding up to but not exceeding
three million five hundred thousand Dollars ($3,500,000), subject, however, to
termination pursuant to Section 10.2.
“EBITDA” means, for
any Person for any period, an amount equal to (a) net income determined in
accordance with GAAP, plus (b) the sum of
the following to the extent deducted in the calculation of net income: (i)
interest expense; (ii) income taxes; (iii) depreciation; (iv) amortization;
and (v) other non-recurring expenses of such Person reducing such net income
which do not represent a cash item in such period or any future period (provided that for
purposes of calculating the Fixed Charge Coverage Ratio in Section 9.3
below, Borrower shall only be allowed to include up to an aggregate amount of
$100,000 of non-recurring legal fees related to the settlement between Superior
and Stanford International Bank, Ltd.), minus (c) the sum of
the following to the extent included in the calculation of net income: (i)
income tax credits of such Person; (ii) all extraordinary gains and
(iii) all non-cash items increasing net income.
“Loan Documents” means
this Agreement and all promissory notes, security agreements, subordination
agreements, deeds of trust, assignments, letters of credit, guaranties, and
other instruments, documents, and agreements executed and delivered pursuant to
or in connection with this Agreement, as such instruments, documents, and
agreements may be amended, modified, renewed, restated, extended, supplemented,
replaced, consolidated, substituted, or otherwise changed from time to
time.
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Eighth
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“Subsidiary
Guarantors” means each Subsidiary of Borrower, including any
After-Acquired Subsidiary.
“Termination Date”
means 11:00 a.m., Dallas, Texas time on June 22, 2011, or such earlier date on
which the Commitment terminates as provided in this Agreement.
(c) All
references to the term “Restricted Subsidiary” in the
Loan Agreement are hereby deleted and replaced with the term “Subsidiary”.
(d) Section 8.1 is hereby
deleted, and the following Section 8.1 is
substituted in lieu thereof:
Section
8.1 Debt. Borrower will
not incur, create, assume, or permit to exist, and will not permit any
Subsidiary to incur, create, assume, or permit to exist, any Debt,
except:
(a) Debt
to Lender;
(b) Existing
Debt described on Schedule 8.1 hereto;
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(c)
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On
and after the ▇▇▇▇▇▇ Road Acquisition Date, the Debt evidenced by the
▇▇▇▇▇▇ Road Loan Documents; and
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(d)
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Additional
Debt not to exceed One Hundred Thousand Dollars ($100,000) in the
aggregate.
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(e) Section 8.2 is hereby
amended by deleting subsection (g) thereto and renumbering subsections (h) and
(i) accordingly.
(f) Section 8.6 is
hereby deleted in its entirety, and the following new Section 8.6 is
substituted in lieu thereof:
Section 8.6 Limitation
on Issuance of Equity. Except for the Approved Equity
Issuances, Borrower will not, and will not permit any of its Subsidiaries to, at
any time issue, sell, assign, or otherwise dispose of (a) any of its equity
interests, (b) any securities exchangeable for or convertible into or carrying
any rights to acquire any of its equity interests, or (c) any option, warrant,
or other right to acquire any of its equity interests.
(g) Section 8.10 is
hereby deleted in its entirety, and the following new Section 8.10 is
substituted in lieu thereof:
Section 8.10 Payment
of Debt. Borrower will not prepay, and will not permit any
Subsidiary to prepay, any Debt, except the Obligations.
(h) Section 9.1 is
hereby deleted in its entirety, and the following new Section 9.1 is
substituted in lieu thereof:
Section 9.1 Consolidated
Tangible Net Worth. Borrower shall not permit, as of any date,
Tangible Net Worth of Borrower and its Subsidiaries, on a consolidated basis, to
be less than Seventeen Million Seven Hundred Fifty Thousand Dollars
($17,750,000).
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Eighth
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(i) Section 9.2 is
hereby deleted in its entirety, and the following new Section 9.2 is
substituted in lieu thereof:
Section 9.2 Leverage
Ratio. Borrower will at all times maintain a ratio of
consolidated Liabilities minus Subordinated Debt to
consolidated Tangible Net Worth that is not greater than 0.75 to
1.0. This Section 9.2
shall be calculated based on the Liabilities, Subordinated Debt, and Tangible
Net Worth of Borrower and its Subsidiaries.
(j) Section 9.3 is
hereby deleted in its entirety, and the following new Section 9.3 is
substituted in lieu thereof:
Section 9.3 Fixed
Charge Coverage Ratio. Borrower and its Subsidiaries, shall
not, as of the last day of any fiscal quarter during the following periods,
beginning with the fiscal quarter ending on June 30, 2010, permit the ratio of
(a) EBITDA, minus Cash Taxes, minus Capital Expenditures not financed with
Indebtedness permitted hereunder (excluding Capital Expenditures approved in
writing by Lender, in its sole discretion), to (b) Debt Service, in each case
for the four (4) fiscal quarters ending on the date of determination, to be less
than 1.40 to 1.0. This Section 9.3 shall be
based on the rolling four (4) quarter cash flow and debt service obligations of
Borrower and its Subsidiaries; provided that the
financial results of Superior shall be excluded from the calculation for the
fiscal quarters ending on or before June 30, 2010.
(k) Article X is hereby
amended by deleting Section 10.1(o)
therefrom.
(l) Exhibit B (but not
Schedule A to
Exhibit B)
attached to the Loan Agreement is hereby deleted in its entirety and replaced
with Exhibit B
attached hereto.
3. Amendments
to Revolving Credit Note.
(a) The
Revolving Credit Note is hereby amended by deleting the definition of “Maturity Date”
therefrom, and substituting the following in lieu thereof:
Maturity Date: means June 22,
2011.
(b) The
Revolving Credit Note is hereby amended by replacing all references to the
amount of the Revolving Credit Note with “3,500,000” or “Three Million Five Hundred Thousand
Dollars”, as applicable.
4. Amendments to Term
Note.
(a) The
Term Note is hereby amended by deleting the definition of “Maturity Date”
therefrom, and substituting the following in lieu thereof:
Maturity Date: means June 22,
2011.
(b) The
Revolving Credit Note is hereby amended by replacing all references to the
amount of the Revolving Credit Note with “1,000,000” or “One Million Dollars”, as
applicable, which amount shall include the $866,695.80 advance made by Lender to
Borrower on the date hereof.
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Eighth
Amendment to Loan Agreement
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Other Loan Documents
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5. Amendments to Other Loan
Documents.
(a) All
references in the Loan Documents to the Loan Agreement shall henceforth include
references to the Loan Agreement, as modified and amended hereby, and as may,
from time to time, be further amended, modified, extended, renewed, and/or
increased. All references in the Loan Documents to the Notes shall
henceforth include references the Notes as amended hereby, and as may, from time
to time, be further amended, modified, renewed, extended, and/or
restated.
(b) Any
and all of the terms and provisions of the Loan Documents are hereby amended and
modified wherever necessary, even though not specifically addressed herein, so
as to conform to the amendments and modifications set forth herein.
6. Conditions
Precedent. This Amendment shall not be effective until
(a) Lender receives an executed copy of this Amendment, including the
ratifications attached hereto, (b) Lender receives a copy of that certain
Security Agreement dated of even date herewith and executed by Superior (the
“Superior Security
Agreement”), (c) Lender receives a copy of that certain Guaranty
Agreement dated of even date herewith and executed by Superior (the “Superior Guaranty
Agreement”), (d) Lender receives an amendment fee in the amount of
Forty-Five Thousand Dollars ($45,000), together with payment of the estimated
reasonable fees and expenses of Lender’s counsel incurred in connection with
this Amendment in immediately available funds, (e) all representations and
warranties set forth in this Amendment are true and correct, (f) after
giving effect to this Amendment, no Default or Event of Default exists,
(g) Lender receives a certificate of incumbency for Borrower certified by
its Secretary or an Assistant Secretary of Borrower certifying (i) the name
of each of its officers who is authorized to sign this Amendment, (ii) a
true and correct copy of the resolutions of the directors of Borrower which
authorize its execution and delivery of this Amendment, and the performance of
the Loan Documents as amended hereby, and (iii) that the charter and bylaws
of Borrower have not been amended since December 22, 2005, and that the same are
still in effect, (h) Lender receives a certificate of incumbency for
Superior certified by its Secretary or an Assistant Secretary of Superior
certifying (i) the name of each of its officers who is authorized to sign
this Amendment, the Superior Security Agreement, and the Superior Guaranty
Agreement (ii) a true and correct copy of the resolutions of the directors
of Borrower which authorize its execution and delivery of this Amendment, the
Superior Security Agreement, and the Superior Guaranty Agreement, and the
performance of the Loan Documents as amended hereby, and (iii) the
Constituent Documents of Superior, (i) Lender receives a certificate
evidencing the existence and good standing of Superior from the Secretary of
State of the State of Delaware, and (j) Lender receives a certificate for
Borrower certifying true and correct copies of the Debt Conversion Agreement and
the Purchase and Sale Agreement and the date of the closing of the transactions
contemplated thereby.
7. Covenant.
(a) Borrower
covenants and agrees that Borrower will pledge and assign to Lender a life
insurance policy on ▇▇▇▇▇▇▇ Oyster in the amount of Three Million Dollars
($3,000,000) within 90 days of the closing of this Amendment.
(b) Borrower
covenants and agrees that Borrower will require Superior to deliver landlord
subordination agreements required under the Superior Security Agreement within
sixty (60) days of the date hereof.
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Eighth
Amendment to Loan Agreement
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and
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8. Ratifications. Borrower (a)
ratifies and confirms all provisions of the Loan Documents as amended by this
Amendment, (b) ratifies and confirms that all Liens granted, conveyed, or
assigned to Lender under the Loan Documents are not released, reduced, or
otherwise adversely affected by this Amendment and continue to guarantee,
assure, and secure full payment and performance of the present and future
Obligations, and (c) agrees to perform such acts and duly authorize, execute,
acknowledge, deliver, file, and record such additional documents, and
certificates as Lender may request in order to create, perfect, preserve, and
protect those guaranties, assurances, and Liens.
9. Representations. Borrower
represents and warrants to Lender that as of the date of this Amendment:
(a) this Amendment has been duly authorized, executed, and delivered by
Borrower; (b) other than the filing of the Loan Agreement and this
Amendment with the Securities and Exchange Commission, no action of, or filing
with, any governmental authority is required to authorize, or is otherwise
required in connection with, the execution, delivery, and performance by
Borrower of this Amendment; (c) the Loan Documents, as amended by this
Amendment, are valid and binding upon Borrower and are enforceable against
Borrower in accordance with their respective terms, except as may be limited by
Debtor Relief Laws; (d) the execution, delivery, and performance by
Borrower of this Amendment do not require the consent of any other Person and do
not and will not constitute a violation of any laws, agreements, or
understandings to which Borrower is a party or by which Borrower is bound;
(e) all representations and warranties in the Loan Documents are true and
correct in all material respects; (f) after giving effect to this Amendment, no
Default or Event of Default exists; (g) the Debt Conversion Agreement, the
Purchase and Sale Agreement, and the transactions contemplated thereby became
effective and closed on May 25, 2010; and (h) as of the date hereof, the
principal amount of the Term Note is $1,000,000.
10. Miscellaneous. Unless
stated otherwise (a) the singular number includes the plural and vice versa and words of any
gender include each other gender, in each case, as appropriate, (b) headings and
captions may not be construed in interpreting provisions, (c) this Amendment
must be construed — and its performance enforced — under Texas law, (d) if any
part of this Amendment is for any reason found to be unenforceable, all other
portions of it nevertheless remain enforceable, and (e) this Amendment may be
executed in any number of counterparts with the same effect as if all
signatories had signed the same document, and all of those counterparts must be
construed together to constitute the same document.
11. Maximum Interest
Rate. Regardless of any provision contained in any of the Loan
Documents, Lender shall never be entitled to receive, collect, or apply as
interest (whether termed interest herein or deemed to be interest by operation
of law or judicial determination) on the Notes any amount in excess of interest
calculated at the Maximum Lawful Rate, and, in the event that Lender ever
receives, collects, or applies as interest any such excess, then the amount
which would be excessive interest shall be deemed to be a partial prepayment of
principal and treated hereunder as such; and, if the principal amount of the
Obligation is paid in full, then any remaining excess shall forthwith be paid to
Borrower. In determining whether or not the interest paid or payable
under any specific contingency exceeds interest calculated at the Maximum Lawful
Rate, Borrower and Lender shall, to the maximum extent permitted under
applicable law: (a) characterize any non-principal payment as an expense,
fee, or premium rather than as interest; (b) exclude voluntary prepayments
and the effects thereof; and (c) amortize, prorate, allocate, and spread,
in equal parts, the total amount of interest throughout the entire contemplated
term of the Notes; provided
that, if the Notes are paid and performed in full prior to the end of the
full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds interest calculated at the Maximum Lawful
Rate, then Lender shall refund to Borrower the amount of such excess or credit
the amount of such excess against the principal amount of the Notes and, in such
event, Lender shall not be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving, or receiving interest in excess of
interest calculated at the Maximum Lawful Rate.
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Eighth
Amendment to Loan Agreement
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and
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6
12. Entireties. The
Loan Agreement and other Loan Documents as amended by this Amendment represent
the final agreement between the parties about the subject matter of the Loan
Agreement and other Loan Documents as amended by this Amendment and may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. There are no unwritten oral agreements
between the parties.
13. RELEASE. BORROWER
AND THE OTHER OBLIGATED PARTIES HEREBY ACKNOWLEDGE THAT THEY HAVE NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF THEIR
LIABILITY TO REPAY ANY LOANS OR EXTENSIONS OF CREDIT FROM LENDER TO BORROWER OR
ANY OBLIGATED PARTY UNDER THE LOAN AGREEMENT OR THE OTHER LOAN DOCUMENTS OR TO
SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM
LENDER. BORROWER AND THE OBLIGATED PARTIES HEREBY VOLUNTARILY AND
KNOWINGLY RELEASE AND FOREVER DISCHARGE LENDER AND ITS PREDECESSORS, ATTORNEYS,
AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS,
ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER,
KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED,
CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY (INCLUDING, WITHOUT LIMITATION,
CLAIMS OF FRAUD, DURESS, MISTAKE, TORTIOUS INTERFERENCE, USURY, BREACH OF
FIDUCIARY DUTY, BREACH OF DUTY OF FAIR DEALING, BREACH OF CONFIDENCE, BREACH OF
FUNDING COMMITMENT, UNDUE INFLUENCE, NEGLIGENCE OR FRAUD IN RATES AND METHODS
USED TO COMPUTE INTEREST, DECEPTIVE TRADE PRACTICE OR THE RACKETEER INFLUENCED
AND CORRUPT ORGANIZATIONS ACT), ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE
DATE THIS AMENDMENT IS EXECUTED, WHICH BORROWER OR THE OTHER OBLIGATED PARTIES
MAY NOW OR HEREAFTER HAVE AGAINST LENDER, ITS PREDECESSORS, ATTORNEYS, AGENTS,
EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH
CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR
OTHERWISE, AND ARISING FROM ANY CREDIT ACCOMMODATIONS FROM LOAN DOCUMENTS,
INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING,
COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE
APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS,
AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.
14. Parties. This Amendment binds
and inures to Borrower, Lender, and their respective successors and
assigns.
[Remainder
of Page Intentionally Left Blank;
Signature
Pages to Follow]
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Eighth
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EXECUTED
as of the date first stated above.
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BORROWER:
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DGSE COMPANIES, INC., a
Nevada corporation
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By:
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▇▇▇▇▇▇▇
▇. Oyster, President
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LENDER:
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TEXAS
CAPITAL BANK, NATIONAL
ASSOCIATION,
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a
national banking association
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By:
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▇▇▇▇
▇▇▇▇▇▇, Senior Vice
President
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Signature
Page to DGSE Eighth Amendment
To induce
Lender to enter into this Amendment, the undersigned jointly and severally
(a) consent and agree to the execution and delivery of the Amendment, (b)
ratify and confirm that all guaranties, assurances, and Liens granted, conveyed,
or assigned to Lender under the Loan Documents are not released, diminished,
impaired, reduced, or otherwise adversely affected by this Amendment and
continue to guarantee, assure, and secure the full payment and performance of
all present and future Obligations including the Revolving Credit Note and the
Term Note, as amended hereby, (c) waive notice of acceptance of this
consent and agreement, which consent and agreement binds the undersigned and
their successors and permitted assigns and inures to Lender and its respective
successors and permitted assigns, and (d) acknowledge and agree to the
provisions of Section 13
of this Amendment.
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GUARANTORS:
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DGSE
CORPORATION
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By:
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▇▇▇▇▇▇▇
▇. Oyster, President
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NATIONAL
JEWELRY EXCHANGE, INC.
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By:
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▇▇▇▇▇▇▇
▇. Oyster, President
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CHARLESTON
GOLD & DIAMOND
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EXCHANGE,
INC.
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By:
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▇▇▇▇▇▇▇
▇. Oyster, President
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AMERICAN
PAY DAY CENTERS, INC.
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By:
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▇▇▇▇
▇▇▇▇▇▇, Secretary
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SUPERIOR
GALLERIES, INC.
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By:
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Name:
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Title:
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Signature
Page to DGSE Eighth Amendment
To induce
Lender to enter into this Amendment, the undersigned (a) consents and
agrees to the execution and delivery of the Amendment, (b) ratifies and confirms
that its obligations under the Limited Guaranty dated as of December 22, 2005
(the “Limited
Guaranty”) are not released, diminished, impaired, reduced, or otherwise
adversely affected by this Amendment and continue to guarantee, assure, and
secure the full payment and performance of all present and future Obligations
including the Revolving Credit Note and the Term Note, as amended hereby, to the
extent set forth in the Limited Guaranty, (c) waives notice of its
acceptance of this consent and agreement, which consent and agreement binds the
undersigned and its successors and permitted assigns and inures to Lender and
its respective successors and permitted assigns, and (d) acknowledge and
agree to the provisions of Section 13
of this Amendment.
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LIMITED
GUARANTOR:
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By:
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▇.▇.
▇▇▇▇▇, as an individual
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Signature
Page to DGSE Eighth Amendment
EXHIBIT
B
COMPLIANCE
CERTIFICATE
FOR
QUARTER/PERIOD ENDED ________________________ (THE "SUBJECT
PERIOD")
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TEXAS
CAPITAL BANK, National Association
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BORROWER:
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DGSE
COMPANIES, INC., a Nevada
corporation
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This certificate is delivered under the
Loan Agreement (as amended and modified from time to time, the “Agreement”)
dated as of December 22, 2005, between Parent, Borrower and
Lender. Capitalized terms when used in this certificate shall, unless
otherwise indicated, have the meanings set forth in the Agreement. On
behalf of Parent and Borrower, the undersigned certifies to Lender that, on the
date of this certificate, (a) the financial Statements of Parent and Borrower
attached to this certificate were prepared in accordance with GAAP, and present
fairly the financial condition and results of operations of Parent and Borrower,
with Superior and its consolidated Subsidiaries and without Superior and its
consolidated Subsidiaries, as applicable, as of the end of and for the Subject
Period, (b) no Default or Event of Default currently exists or has occurred
which has not been cured or waived by Lender, and (c) the status of compliance
by Parent and Borrower with certain covenants of the Agreement at the end of the
Subject Period is as set forth below:
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In
Compliance as of
End
of Subject Period
(Please
Indicate)
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1.
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Financial Statements and
Reports
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(a)
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Provide
annual audited FYE financial statements within 90 days after the last day
of each year.
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Yes
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No
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(b)
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Provide
quarterly financial statements within 30 days after the last day of each
quarter.
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Yes
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No
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(c)
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Provide
monthly financial statements within 30 days after the last day
of each month.
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Yes
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No
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(d)
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Provide
a monthly Compliance Certificate, Borrowing Base Report, inventory report,
Pawn Loan report, and summary accounts receivable aging, within 30 days
after the last day of each month.
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Yes
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No
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(e)
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Provide
Long Term Inventory Report within 30 days after June 30 and December
31.
|
Yes
|
No
|
||||
|
(f)
|
Provide
other required reporting timely.
|
Yes
|
No
|
||||
|
2.
|
Subsidiaries
None
except as listed on Schedule 2
|
Yes
|
No
|
||||
|
3.
|
Additional Indebtedness
None,
except Indebtedness permitted by Section 8.1 of
the Agreement.
|
Yes
|
No
|
||||
Exhibit
B
1
|
4.
|
Liens and Encumbrances; Negative Pledge
Agreements
None
at any time, except Liens permitted by Section 8.2 of
the agreement
|
Yes
|
No
|
||||
|
5.
|
Limitation of
Acquisitions and Mergers.
None
except those permitted by Section 8.3 of
the Agreement.
|
Yes
|
No
|
||||
|
6.
|
Dividends and Stock
Repurchase.
None,
except as permitted by Section 8.4 of
the Agreement.
|
Yes
|
No
|
||||
|
7.
|
Loans and Investments
None,
except those permitted by Section 8.5 of
the Agreement.
|
Yes
|
No
|
||||
|
8.
|
Issuance of Equity
None,
except issuances permitted by Section 8.6 of
the Agreement.
|
Yes
|
No
|
||||
|
9.
|
Affiliate Transactions
None,
except issuances permitted by Section
8.7 of the Agreement.
|
Yes
|
No
|
||||
|
10.
|
Disposal of Assets other than in the Ordinary
Course of Business
(Section
8.8 of the Agreement). None at any time without prior written
consent of Lender.
|
Yes
|
No
|
||||
|
11.
|
Sale and Leaseback
Transactions (Section 8.9 of the
Agreement).
None
at any time without prior written consent of Lender.
|
Yes
|
No
|
||||
|
12.
|
Prepayment of
Debt (Section 8.10 of the Agreement).
None
at any time without prior written consent of Lender.
|
Yes
|
No
|
||||
|
13.
|
Changes in Nature of
Business (Section 8.11 of the Agreement).
None
at any time without prior written consent of Lender.
|
Yes
|
No
|
||||
|
14.
|
Environmental
Laws (Section 8.12 of the Agreement).
No
activity likely to cause violations.
|
Yes
|
No
|
||||
|
15.
|
Changes in Fiscal
Year; Accounting Practices (Section 8.13 of the
Agreement).
None
at any time without prior written consent of Lender.
|
Yes
|
No
|
||||
|
16.
|
No Negative
Pledge (Section 8.14 of the Agreement).
None.
|
Yes
|
No
|
||||
Exhibit
B
2
|
17.
|
Fixed Charge Coverage Ratio
Minimum
of 1:40 to 1.00. (Defined as current assets
divided
by
current liabilities).
FCCR
=($__________ - $__________ - $ __________) ÷ Debt
Service ($_____ )
EBITDA Cash
Taxes Capital
Expenditures
not
financed with Indebtedness permitted
under
the Credit Agreement (excluding (i) the one-time and non-recurring Capital
Expenditures related to (A) the opening of new payday loan stores in an
amount not to exceed $70,000, and (B) the expenses related to the opening
of Borrower’s new store in Charleston, South Carolina in an amount not to
exceed $262,000, and (ii) such other Capital Expenditures approved in
writing by Lender, in its sole discretion)
**
Superior Galleries, Inc. shall not be included in the June 30, 2010
calculation.
**
Up to $100,000 of non-recurring legal expenses related to the Stanford
International Bank, Ltd. settlement may be added back to
EBITDA
(INCLUDE
SCHEDULE A HERETO FOR ITEM 17)
|
Yes
|
No
|
|||
|
19.
|
Tangible Net Worth (TNW)
Minimum
of at least $17,750,000 at all times. (TNW is defined
as
consolidated
total stockholders’ equity plus Subordinated Debt less intangible
assets).
|
Yes
|
No
|
|||
|
20.
|
Leverage
Ratio. Maximum of 0.75 to 1.00
________________
-
_________________ ÷
Liabilities Subordinated
Debt
________________
=
____________
Tangible
Net
Worth
|
Yes
|
No
|
|
DGSE
COMPANIES, INC., a Nevada
corporation
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
Exhibit
B
3