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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
____________________
Date of Report (Date of earliest event reported):
MAY 31, 1994
L.A. GEAR, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA
(State or other jurisdiction of incorporation)
1-10157
(Commission File Number)
95-3375118
(IRS Employer Identification No.)
2850 OCEAN PARK BOULEVARD, SANTA MONICA, CALIFORNIA 90405
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(310) 822-1995
NOT APPLICABLE
(Former name or former address, if changed since last report)
==============================================================
THIS REPORT INCLUDES A TOTAL OF 11 PAGES.
THE EXHIBIT INDEX APPEARS ON PAGE 4.
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Item 5. Other Events.
On May 31, 1994, L.A. Gear California, Inc. ("Borrower"), a
wholly-owned subsidiary of L.A. Gear, Inc. (the "Company"), entered into the
First Amendment to Loan and Security Agreement dated as of May 31, 1994 (the
"First Amendment") to the Loan and Security Agreement (the "Loan Agreement")
dated as of November 22, 1993, between Borrower and BankAmerica Business
Credit, Inc. ("Lender"), pursuant to which Lender provides to Borrower a
revolving line of credit facility for loans and letters of credit in an
aggregate amount not to exceed $75 million. The First Amendment principally
amends the Loan Agreement to (i) facilitate entry by Borrower into foreign
exchange contracts with an affiliate of Lender, (ii) permit Borrower to obtain
various overdraft extensions of credit from an affiliate of Lender and (iii)
provide greater financial flexibility to Borrower. The First Amendment reduces
the Adjusted Tangible Net Worth (as defined in the First Amendment) for the
remainder of the Company's 1994 fiscal year to $169.5 million from $175 million
and, as long as the Adjusted Tangible Net Worth is below $175 million, imposes
a quarterly minimum earnings requirement commencing with the Company's 1994
third fiscal quarter. The foregoing description of the First Amendment is
qualified in its entirety by reference to the full text of the First Amendment,
filed as Exhibit 99.2 hereto and which is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
99.2 First Amendment to Loan and Security
Agreement dated as of May 31, 1994, by and
between L.A. Gear California, Inc. and
BankAmerica Business Credit, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
L.A. GEAR, INC.
Dated: June 2, 1994 By: /s/ William L. Benford
-------------------------------
William L. Benford
Executive Vice President
and Chief Financial
Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
No. Document No.
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<S> <C> <C>
99.2 First Amendment to Loan and Security 5
Agreement dated as of May 31, 1994
by and between L.A. Gear California, Inc.
and BankAmerica Business Credit, Inc.
</TABLE>
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EXHIBIT 99.2
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Amendment") is
entered into as of May 31, 1994, by and between L.A. Gear California, Inc., a
California corporation ("Borrower"), and BankAmerica Business Credit, Inc., a
Delaware corporation ("Lender").
WHEREAS, Lender and Borrower entered into a certain Loan and Security
Agreement, dated as of November 22, 1993 (the Loan and Security Agreement, as
amended and supplemented, the "Agreement").
WHEREAS, Borrower desires to amend the Agreement (i) to facilitate the
Borrower entering into foreign exchange contracts with Bank of America, (ii) to
permit the Borrower to obtain overdrafts and other extensions of credit from
Bank of America, and (iii) with respect to other matters. Lender is willing to
amend the Agreement, subject to the terms and conditions stated herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and intending to be legally bound, the parties agree as follows.
SECTION ONE - AMENDMENTS
------------------------
1.1 The definition of "Availability" in Section 1 of the Agreement
is hereby amended in its entirety to read as follows:
"'Availability' means (a) the lesser at any point in time of
(i) $75,000,000 or (ii) the sum of (A) eighty percent (80%) of the Net
Amount of Eligible Accounts, and (B) the lesser of (1) $40,000,000 or
(2) fifty percent (50%) of the value of Eligible Inventory, valued at
the lower of market value or cost (established on a "first-in,
first-out" basis);less (b) the sum of (i) the unpaid balance of Loans
at that time; (ii) the aggregate undrawn face amount of all
outstanding Letters of Credit which Lender has, or has caused to be,
issued or obtained for Borrower's accountother than Cash Secured
Letters of Credit; (iii) reserves for accrued interest on the Loans;
(iv) the amount by which outstanding Guaranties of Debt of Foreign
Affiliates exceed $25,000,000, (v) the amount by which outstanding
Intercompany Receivables, in the aggregate, exceed $15,000,000, (vi)
the amount by which Intercompany Advances exceed $40,158,000, in the
aggregate, (vii) the Foreign Exchange Reserve, (viii) the Direct
Deposit and Overdraft Reserve, and (ix) all other reserves which
Lender in its Discretion deems necessary and desirable to maintain
with respect to Borrower's account, including, without limitation, any
amounts which Lender may reasonably be expected to be obligated to pay
in the future for the account of Borrower."
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1.2 The definition of "Obligations" in Section 1 of the Agreement
is hereby amended in its entirety to read as follows:
"'Obligations' means all present and future loans, advances,
liabilities, obligations, covenants, duties, and Debts owing by
Borrower to Lender, whether or not arising under this Agreement,
whether or not evidenced by any note, or other instrument or document,
whether arising from an extension of credit, opening of a letter of
credit, loan, guaranty, indemnification or otherwise, whether direct
or indirect (including, without limitation, those acquired by
assignment from others, and any participation by Lender in Borrower's
debts owing to others), absolute or contingent, due or to become due,
primary or secondary, as principal or guarantor, and including,
without limitation, all interest, charges, expenses, fees, attorneys'
fees, filing fees and any other sums chargeable to Borrower hereunder,
under another Loan Document, or under any other agreement or
instrument with Lender. "Obligations" includes, without limitation,
(i) all debts, liabilities, and obligations now or hereafter owing
from Borrower to Lender under or in connection with the Letters of
Credit and the Letter of Credit Agreement, (ii) all debts,
liabilities, and obligations now or hereafter owing from Borrower to
Lender arising from or relating to foreign exchange contracts between
Borrower and Bank of America, and (iii) all debts, liabilities, and
obligations now or hereafter owing from Borrower to Lender arising
from or relating to automated clearing house transfers of funds
initiated by Bank of America for the account of Borrower pursuant to
agreement, overdrafts and other extensions of credit by Bank of
America to Borrower."
1.3 Section 1 of the Agreement is hereby amended by the addition
of the following definition:
"'Foreign Exchange Reserve' means, at any date during which a
foreign exchange contract is outstanding between Borrower and Bank of
America, the amount of $500,000 plus such additional amount as Lender,
in its Discretion, calculates to be its current exposure with respect
to foreign exchange contracts then outstanding."
1.4 Section 1 of the Agreement is hereby amended by the addition
of the following definition:
"'Direct Deposit and Overdraft Reserve' means the amount of
$4,000,000 until such time, beginning with the Fiscal Quarter ending
May 31, 1994, as the Adjusted Tangible Net Worth is $175,000,000 or
greater, at which time the amount would be zero."
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1.5 Section 1 of the Agreement is hereby amended by the addition
of the following definition:
"'Adjusted Net Earnings From Operations' means, with respect
to any Fiscal Quarter of the Parent, the Parent's consolidated net
income after provision for income taxes for such fiscal period, as
determined in accordance with GAAP and reported on the Financial
Statements for such period, excluding any and all of the following
from such net income: (a) gain or loss arising from the sale of any
capital asset which in the aggregate during the Fiscal Quarter exceeds
$25,000; (b) gain arising from any write-up in the book value of any
asset; (c) earnings of any corporation, substantially all the
assets of which have been acquired by the Parent in any manner, to the
extent realized by such other corporation prior to the date of
acquisition; (d) earnings of any Person to which assets of the Parent
shall have been sold, transferred or disposed of, or into which the
Parent shall have been merged, or which has been a party with the
Parent to any consolidation or other form of reorganization, prior to
the date of such transaction; (e) gain arising from the acquisition of
debt or equity securities of the Parent or from cancellation or
forgiveness of Debt; and (f) gain or loss arising from extraordinary
item, as determined in accordance with GAAP, or any other
non-recurring transaction."
1.6 The definition of Adjusted Tangible Net Worth in Section 1 of
the Agreement is hereby amended in its entirety to read as follows:
"'Adjusted Tangible Net Worth' means, at any date (a) the book
value (after deducting related depreciation, obsolescence,
amortization, valuation, and other proper reserves as determined in
accordance with GAAP) at which the Adjusted Tangible Asset would be
shown on a consolidated balance sheet of Parent at such date prepared
in accordance with GAAPplus (b) the amount of any goodwill or debt
discount amortized in accordance with GAAP relating to periods
occurring after August 31, 1993, less (c) the amount at which Parent's
liabilities would be shown on such balance sheet, provided however,
that for the purpose of calculating Adjusted Tangible Net Worth, (i)
the retained earnings of Parent shall be deemed to exclude
extraordinary gains or losses and gains and losses associated with
foreign currency translation adjustments which occur after August 31,
1993, (ii) the remaining principal balance of Parent's liabilities
with respect to the Subordinated Debentures shall be excluded from
Parent's liabilities, and (iii) accrued and unpaid dividends of the
Preferred Stock, in an amount not exceeding $1,875,000, shall be
excluded from Parent's liabilities."
1.7 Section 2 of the Agreement is amended by the addition of the
following Section 2.4.
"2.4 Foreign Exchange Contracts, Automated Clearing House
Transfers and Overdrafts. Borrower may request and Lender may, in its
sole and absolute discretion, arrange for the Borrower to (i) enter
into foreign exchange contracts with Bank of America on terms and
conditions acceptable to Bank of America, and (ii) obtain automated
clearing house transfer of funds and overdrafts from Bank of America.
Borrower agrees to indemnify and hold Lender harmless from all losses,
liabilities, costs,
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expenses, claims incurred by Lender arising from or related to such
foreign exchange contracts, automated clearing house transfers, and
overdrafts. Borrower acknowledges and agrees that the obtaining of
foreign exchange contracts, automated clearing house transfers, and
overdrafts from Bank of America (i) is in the sole and absolute
discretion of Bank of America, (ii) may be terminated by Bank of
America at any time without notice, (iii) is subject to all rules and
regulations of Bank of America and (iv) is due to Bank of America
relying on the indemnity of Lender to Bank of America with respect to
all risks of loss associated with the foreign exchange contracts,
automated clearing house transfers, and overdrafts."
1.8 Section 9.18 of the Agreement is amended to read in its
entirety as follows:
"9.18 Adjusted Tangible Net Worth. Borrower will not permit
Adjusted Tangible Net Worth as of the last day of the following Fiscal
Quarters to be less than the following:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Amount
--------------------- ------
<S> <C>
May 31, 1994 $169,500,000
August 31, 1994 $169,500,000
November 30, 1994 $169,500,000
February 28, 1995 and each
Fiscal Quarter Thereafter $175,000,000"
</TABLE>
1.9 Section 9 of the Agreement is amended by the addition of the
following Section 9.24.
"9.24 Adjusted Net Earnings From Operations. Borrower will
not permit Adjusted Net Earnings From Operations during any Fiscal
Quarter to be less than the following:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Amount
--------------------- ------
<S> <C>
May 31, 1994 Not Applicable
August 31, 1994 $5,047,000
November 30, 1994 and each
Fiscal Quarter Thereafter $1,069,000
</TABLE>
Provided, however, that this Section 9.24 shall not apply to
any Fiscal Quarter in which the Adjusted Tangible Net Worth at the end
of such Fiscal Quarter is $175,000,000 or greater."
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SECTION TWO - REPRESENTATIONS AND WARRANTIES
--------------------------------------------
2.1 Acknowledgment of Borrower. Borrower hereby represents and
warrants that the execution and delivery of this Amendment and compliance by
Borrower with all of the provisions of this Amendment (i) are within the powers
and purposes of Borrower; (ii) have been duly authorized or approved by
Borrower; and (iii) constitute the valid and binding obligation of Borrower,
enforceable in accordance with its terms. Borrower reaffirms its obligation to
pay all amounts due Lender under the Agreement in accordance with, and subject
to, the terms thereof, as modified hereby.
SECTION THREE - GENERAL PROVISIONS
----------------------------------
3.1 Agreement Unmodified. Except as otherwise specifically
modified by this Amendment, all terms and provisions of the Agreement remain
unmodified and in full force and effect.
3.2 Total Agreement. This Amendment, and all other agreements
referred to herein or delivered in connection herewith, shall constitute the
entire agreement between the parties relating to the subject matter hereof,
shall rescind all prior agreements and understandings between the parties
hereto relating to the subject matter hereof, and shall not be changed or
terminated orally.
3.3 Definitions. Unless specifically defined herein, all
capitalized terms shall be defined in accordance with the Agreement.
3.4 Severability. To the extent any provision of this Amendment
is not enforceable under applicable law, such provision shall be deemed null
and void and shall have no effect on the remaining portions of the Amendment.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
L.A. Gear California, Inc.
California corporation
By: /s/ William L. Benford
----------------------------------
Title: Executive Vice President and
Chief Financial Officer
BankAmerica Business Credit, Inc.
Delaware corporation
By: /s/ Stephen King
----------------------------------
Title: Account Executive
RATIFICATION OF GUARANTY
------------------------
Raegal Finance Inc. hereby consents to the foregoing and confirms that
its Guaranty dated as of November 22, 1993 in favor of BankAmerica Business
Credit, Inc. relating to the obligations of L.A. Gear California, Inc. remains
unmodified and in full force and effect.
Raegal Finance, Inc.
By: /s/ William L. Benford
---------------------------------
Title:
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L.A. Gear, Inc. hereby consents to the foregoing and confirms that its
Guaranty dated as of November 22, 1993 in favor of BankAmerica Business Credit,
Inc. relating to the obligations of L.A. Gear California, Inc. remains
unmodified and in full force and effect.
L.A. Gear, Inc.
By: /s/ William L. Benford
---------------------------------
Title: Executive Vice President and
Chief Financial Officer
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