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):
March 3, 1995
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) 452-4327
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 5.
<PAGE>
Item 5. Other Events.
On March 3, 1995, L.A. Gear California, Inc. ("Borrower"), a
wholly-owned subsidiary of L.A. Gear, Inc. (the "Company"),
entered into the Fourth Amendment to Loan and Security Agreement
dated as of February 28, 1995 (the "Fourth Amendment") to the Loan
and Security Agreement, dated as of November 22, 1993, by and
between Borrower and BankAmerica Business Credit, Inc. ("Lender"),
as amended to date (the "Loan Agreement"), 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 "Revolving Facility").
The Fourth Amendment principally amends the Loan Agreement
to:
(a) revise the applicable interest rate payable on
outstanding borrowings under the Revolving Facility, (i) with
respect to loans on which interest is calculated with reference to
LIBOR, to 3% over the applicable LIBOR rate with respect to
outstanding balances up to $10 million and 3.5% thereafter and
(ii) with respect to loans on which interest is calculated with
reference to the Lender's reference rate, to 1% over the
applicable reference rate with respect to outstanding balances up
to $10 million and 1.5% thereafter;
(b) modify quarterly fees payable under the Loan
Agreement with respect to the Company's Adjusted Tangible Net
Worth (as defined in the Loan Agreement) at the end of each fiscal
quarter;
(c) restrict the payment of dividends on the
Company's Series A Cumulative Convertible Preferred Stock if the
Adjusted Net Earnings From Operations (as defined in the Loan
Agreement) for the immediately preceding fiscal quarter is less
than (i) $4.13 million for the quarter ending May 31, 1995; (ii)
$9.94 million for the quarter ending August 31, 1995; and (iii)
$0.98 million for the quarter ending November 30, 1995;
(d) reduce the minimum Adjusted Tangible Net Worth
test under the Loan Agreement to $150 million; and
(e) impose a requirement that Adjusted Net Earnings
From Operations during the fiscal year ending November 30, 1995
shall not be less than (i) $2.36 million for the quarter ending
May 31, 1995; (ii) $5.68 million for the quarter ending August 31,
1995; and (iii) $0.56 million for the quarter ending November 30,
1995.
The foregoing description of the Fourth Amendment is
qualified in its entirety by reference to the full text of the
Fourth Amendment, filed as Exhibit 99.7 hereto and incorporated
herein by reference.
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
99.7 Fourth Amendment to Loan and Security Agreement
dated as of February 28, 1995, by and between
L.A. Gear California, Inc. and BankAmerica
Business Credit, Inc.
<PAGE>
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: March 7, 1995 By: /s/ Thomas F. Larkins
Thomas F. Larkins,
Senior Vice-President and
General Counsel
<PAGE>
EXHIBIT INDEX
Exhibit Page
No. Document No.
99.7 Fourth Amendment to Loan and Security
Agreement dated as of February 28, 1995
by and between L.A. Gear California, Inc.
and BankAmerica Business Credit, Inc. 6
<PAGE>
EXHIBIT 99.7
FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
("Amendment") is entered into as of February 28, 1995, 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, as amended by:
a First Amendment to Loan and Security Agreement dated as of May
31, 1994; a Second Amendment to Loan and Security Agreement dated
as of August 31, 1994; and a Third Amendment to the Loan and
Security Agreement dated as of January 25, 1995(the Loan and
Security Agreement, as amended and supplemented, the "Agreement"),
and
WHEREAS, Borrower desires to amend the Agreement and 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 - AMENDMENT
1.1 Amendment of "Availability". The definition of
"Availability" in Article 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) $20,000,000, 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 account other 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
outstanding Intercompany Advances exceed $40,158,000, in the
aggregate, (vii) the Foreign Exchange Reserve, and (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
<PAGE>
may reasonably be expected to be obligated to pay in the
future for the account of Borrower."
1.2 Amendment of "Eligible Inventory". The definition of
"Eligible Inventory" in Article 1 of the Agreement is hereby
amended in its entirety to read as follows:
"`Eligible Inventory' means finished goods Inventory
meeting Borrower's or Parent's manufacturing specifications
that (a) is located on premises owned or leased by the
Borrower or Parent (and, in the case of leased premises,
from and after the 31st day following the Closing Date, a
landlord consent which is acceptable to Lender has been
executed by the landlord and delivered to Lender); (b) upon
which Lender has a first priority perfected security
interest; (c) which Borrower has not owned for a period in
excess of six months, (d) is not spare parts, packaging and
shipping materials, supplies, bill-and-hold Inventory or
defective Inventory, or Inventory delivered to the Borrower
on consignment, (e) does not consist of promotional items,
and (f) Lender otherwise deems eligible as the basis for
Loans based on such other credit and collateral
considerations as Lender may from time to time establish in
its Discretion. Notwithstanding any provision of this
Agreement and any prior course of dealing to the contrary,
Inventory which is not located in the United States shall
not be considered Eligible Inventory."
1.3 Amendment of "Libor Spread". The definition of "Libor
Spread" in Article 1 of the Agreement is hereby amended in its
entirety to read as follows:
"`Libor Spread' means, (a) 3.0% as of each date when
the aggregate principal amount of the outstanding Loans is
equal to or less than $10,000,000; and (b) 3.5% as of each
date when the aggregate principal amount of the outstanding
Loans is greater than $10,000,000."
1.4 Amendment of "Reference Spread". The definition of
"Reference Spread" in Article 1 of the Agreement is hereby amended
in its entirety to read as follows:
"`Reference Spread' means, (a) 1.0% as of each date
when the aggregate principal amount of the outstanding Loans
is equal to or less than $10,000,000; and (b) 1.5% as of
each date when the aggregate principal amount of the
outstanding Loans is greater than $10,000,000."
1.5 Amendment of Section 3.5. Section 3.5 of the
Agreement is amended in its entirety to read as follows:
"3.5 Quarterly Fee. Beginning on April 15, 1995,
Borrower shall pay to Lender on each April 15, July 15,
October 15 and February 28 of each year: (i) $0, if Adjusted
Tangible Net Worth is greater than $175,000,000, as of the
last day of the end of the previous Fiscal Quarter; (ii)
$25,000, if Adjusted Tangible Net Worth is greater than
$170,000,000, but equal to or less than $175,000,000, as of
<PAGE>
the last day of the end of the previous Fiscal Quarter;
(iii) $50,000, if Adjusted Tangible Net Worth is greater
than $165,000,000, but equal to or less than $170,000,000,
as of the last day of the end of the previous Fiscal
Quarter; (iv) $75,000, if Adjusted Tangible Net Worth is
greater than $160,000,000, but equal to or less than
$165,000,000, as of the last day of the end of the previous
Fiscal Quarter; (v) $100,000, if Adjusted Tangible Net Worth
is greater than $155,000,000, but equal to or less than
$160,000,000, as of the last day of the end of the previous
Fiscal Quarter; and (vi) $125,000, if Adjusted Tangible Net
Worth is equal to or less than $155,000,000 as of the last
day of the end of the previous Fiscal Quarter."
1.6 Amendment of Section 9.6. Section 9.6 of the
Agreement is amended by deleting subparagraph (b) of Section 9.6
and inserting in lieu thereof the following:
"(b) Distributions by Borrower and Raegal to Parent,
and by Parent to the holders of the Subordinated Debentures
and to its preferred shareholders, in the amount of any
scheduled payments of interest with respect to the
Subordinated Debentures and scheduled dividends with
respect to the Preferred Stock provided that no such
Distributions shall be made during the continuance of any
Event or Event of Default and provided further that in the
event the Adjusted Net Earnings From Operations for the
following Fiscal Quarters are less than the following
amounts then no such Distributions of scheduled dividends
with respect to the Preferred Stock shall be made in the
immediately subsequent Fiscal Quarter:
Fiscal Quarter Ending Amount
May 31, 1995 $4,130,000
August 31, 1995 $9,940,000
November 30, 1995 $ 980,000
and each fiscal quarter thereafter Not Applicable"
1.7 Amendment of Section 9.18. Section 9.18 of the
Agreement is amended to read in its entirety as follows:
"9.18 Adjusted Tangible Net Worth. Borrower shall
not permit Adjusted Tangible Net Worth, as of the last day
of any Fiscal Quarter, to be less than $150,000,000."
1.8 Amendment of Article 9. Article 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
the following Fiscal Quarters to be less than the following:
<PAGE>
Fiscal Quarter Ending Amount
February 28, 1995 Not Applicable
May 31, 1995 $2,360,000
August 31, 1995 5,680,000
November 30, 1995 560,000
and each Fiscal Quarter thereafter Not Applicable
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.
2.2 Ratifications. The terms and provisions set forth in
this Amendment shall modify and supersede all inconsistent terms
and provisions set forth in the Agreement and, except as expressly
modified and superseded by this Amendment, the terms and
provisions of the Agreement, including, without limitation, all
financial covenants contained therein, are ratified and confirmed
and shall continue in full force and effect. Lender and Borrower
agree that the Agreement as amended hereby shall continue to be
legal, valid, binding and enforceable in accordance with its
terms.
SECTION THREE - CONDITIONS PRECEDENT
Section 3.1. Conditions. The effectiveness of this
Amendment is subject to all of the holders of the Preferred Stock
consenting to the Amendment.
SECTION FOUR - MISCELLANEOUS
4.1 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.
4.2 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.
4.3 Definitions. Unless specifically defined herein, all
capitalized terms shall be defined in accordance with the
Agreement.
<PAGE>
4.4 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.
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: W.L. Benford
Title: President and Chief Operating Officer
BANKAMERICA BUSINESS CREDIT, INC.
Delaware corporation
By: Stephen King
Title: Senior 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: W.L. Benford
Title: President
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: W.L. Benford
Title: President and Chief Operating Officer
