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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):
JULY 14, 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 10 PAGES.
THE EXHIBIT INDEX APPEARS ON PAGE 4.
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Item 5. Other Events.
On July 14, 1995, L.A. Gear California, Inc. ("Borrower"), a
wholly-owned subsidiary of L.A. Gear, Inc. (the "Company"), entered into the
Fifth Amendment to Loan and Security Agreement effective as of May 31, 1995
(the "Fifth 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 Fifth Amendment principally amends the Loan Agreement to (a)
revise the definition of "Adjusted Tangible Net Worth"; (b) revise the minimum
Adjusted Tangible Net Worth test for each fiscal quarter in the fiscal year
ending November 30, 1995, and impose a monthly test of Adjusted Tangible Net
Worth for each month in the fiscal year ending November 30, 1996; (c) revise
the minimum Adjusted Net Earnings From Operations test for each fiscal quarter
in the fiscal year ending November 30, 1995, and impose a monthly test of
Adjusted Net Earnings From Operations for each month in the fiscal year ending
November 30, 1996; (d) impose a $10 million limit on the amount of cash
borrowings permitted, and revise the interest rate on such borrowings; and (e)
revise the various fees payable pursuant to the Loan Agreement.
The foregoing description of the Fifth Amendment is qualified in its
entirety by reference to the full text of the Fifth Amendment, filed as Exhibit
99.8 hereto and 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.
99.8 Fifth Amendment to Loan and Security Agreement dated
as of July 14, 1995, 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: July 17, 1995 By: /s/ William L. Benford
----------------------------------
William L. Benford
President and Chief Operating
Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
No. Document No.
------- -------- ----
<S> <C> <C>
99.8 Fifth Amendment to Loan and Security Agreement
dated as of July 14, 1995 by and between
L.A. Gear California, Inc. and BankAmerica Business
Credit, Inc. 5
</TABLE>
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Exhibit 99.8
FIFTH AMENDMENT
TO LOAN AND SECURITY AGREEMENT
THIS FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Amendment") is
entered into as of May 31, 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; a Third Amendment to
the Loan and Security Agreement, dated as of January 25, 1995; and a Fourth
Amendment to the Loan and Security Agreement, dated as of February 28, 1995
(the Loan and Security Agreement, as amended and supplemented, the
"Agreement"). (Unless specifically defined herein, all capitalized terms shall
be defined in accordance with 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 "Adjusted Tangible Net Worth." The definition of
"Adjusted Tangible Net Worth" in Section 1.1 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 Assets would be
shown on a consolidated balance sheet of Parent at such date prepared
in accordance with GAAP, less (b) the sum of the amount at which
Parent's liabilities would be shown on such balance sheet and the
amount of any minority interests; provided, however, that for the
purpose of calculating Adjusted Tangible Net Worth, (i) the remaining
principal balance of Parent's liabilities with respect to Subordinated
Debentures, and the amount of Parent's accrued and unpaid dividends on
the Preferred Stock shall be excluded from Parent's liabilities, and
(ii) Adjusted Tangible Net Worth shall be increased or decreased, as
appropriate, by the amount of Parent's cumulative currency translation
adjustments."
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1.2 Amendment of "Reference Spread". The definition of "Reference
Spread" in Section 1.1 of the Agreement is hereby amended in its entirety to
read as follows:
"`Reference Spread' means one and one-half percent (1.5%)."
1.3 Amendment of Section 2.2(a). Section 2.2(a) of the Agreement
is hereby amended by the addition of the following sentence:
"Notwithstanding any other provision of this Agreement to the
contrary, the aggregate unpaid amount of the Reference Rate Loans
shall not, at any time, exceed $10,000,000."
1.4 Amendment of Section 3.1(d). Section 3.1(d) of the Agreement
is hereby amended to read as follows:
(d) If, for any month during the term of this
Agreement, the sum of the average closing daily unpaid balances of the
Loans plus the average daily amount available for drawing under all
outstanding Letters of Credit does not equal the Total Facility (with
the unpaid balance calculated for this purpose by applying collections
immediately upon receipt), then Borrower shall pay Lender a fee in an
amount determined by multiplying three-eighths of one percent (0.375%)
per annum times the amount by which the Total Facility exceeds such
amount. Such a fee, if any, shall be calculated on the basis of a
year of 360 days and actual days elapsed, and shall be payable to
Lender on the first day of each month with respect to the prior
month."
1.5 Amendment of Section 3.3. Section 3.3 of the Loan Agreement
is hereby amended to read in its entirety as follows:
"3.3 Letter of Credit Fees. Borrower will pay to Lender a
commission of (i) one percent (1.0%)per annum of the outstanding Cash
Secured Letters of Credit, and (ii) two percent (2.0%) of the
outstanding Borrowing Base Letters of Credit. Letter of credit fees
shall be calculated on the basis of a year of 360 days for actual days
elapsed. The fee would be payable monthly in arrears and would be in
addition to reimbursement by Borrower of the issuing institution's
fees for issuing, amending, negotiating, and processing letters of
credit."
1.6 Deletion of Section 3.5. Section 3.5 of the Agreement is
hereby deleted from the Agreement in its entirety and shall be of no further
force or effect.
1.7 Amendment of Section 6.8. Section 6.8 of the Loan Agreement
is hereby amended to read in its entirety as follows:
"6.8 Collateral Reporting. Borrower shall also provide
Lender the following documents at the following times in form
satisfactory to Lender: (a)
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upon request, but in any event not less frequently than once each
week, a schedule of Accounts created since the date of the last such
schedule; (b) upon request, but in any event not less frequently than
once each week, a schedule of credit memorandums, remittances, and
deposits; (c) within ten (10) days after the end of each month, a
summary aging of Accounts as of such month end; (d) within twenty
(20) days after the end of each month, a calculation of Eligible
Accounts as of such month end; (e) upon request, but in any event not
less frequently than once each week, a line item perpetual inventory
report by style; (f) within twenty (20) days after the end of each
month, a calculation of Eligible Inventory as of such month end and a
gross inventory aging report; (g) promptly upon request, such other
reports as to the Collateral as Lender shall request from time to
time; and (h) certificates of an officer of Borrower certifying as to
the foregoing. If any of Borrower's records or reports of the
Collateral are prepared by an accounting service or other agent,
Borrower hereby authorizes such services or agent to deliver such
records, reports, and related documents to Lender."
1.8 Amendment of Section 9.18. Section 9.18 of the Agreement is
hereby amended to read in its entirety as follows:
"9.18 Adjusted Tangible Net Worth. Borrower shall not permit
Adjusted Tangible Net Worth, calculated as of the last day of each of
the following periods, to be less than the amount indicated opposite
such period:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Fiscal Quarter ending 05/31/95 $135,000,000
Fiscal Quarter ending 08/31/95 $116,000,000
Fiscal Quarter ending 11/30/95 $112,000,000
Month ending 12/31/95 $107,000,000
and at the end of each month thereafter $103,000,000."
</TABLE>
1.9 Amendment of Section 9.24. Section 9.24 of the Agreement is
hereby amended to read in its entirety as follows:
"9.24 Adjusted Net Earnings from Operations. Borrower shall
not permit Adjusted Net Earnings from Operations, calculated as of the
last day of each of the following periods, to be less than the amount
indicated opposite such period:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Fiscal Quarter ending 05/31/95 ($6,000,000)
Fiscal Quarter ending 08/31/95 ($4,900,000)
Fiscal Quarter ending 11/30/95 ($3,700,000)
Month ending 12/31/95 ($5,000,000)
Month ending 01/31/96 ($4,500,000)
</TABLE>
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<TABLE>
<S> <C>
Month ending 02/28/96 $1,100,000
Month ending 03/31/96 $1,400,000
Month ending 04/30/96 ($100,000)
Month ending 05/31/96 ($500,000)
Month ending 06/30/96 ($200,000)
Month ending 07/31/96 $1,600,000
Month ending 08/31/96 $500,000
Month ending 09/30/96 ($1,000,000)
Month ending 10/31/96 $800,000
Month ending 11/30/96 $400,000."
</TABLE>
1.10 Amendment of Section 13.10. Clause "(f)", contained in
Section 13.10 of the Agreement is hereby amended to read in its entirety as
follows:
"(f) costs of appraisals, inspections, and verifications of the
Collateral, including, without limitation, travel lodging, and meals
for inspection of the Collateral and Borrower's operations by Lender's
agents up to four times per year and whenever an Event of Default
exists;"
1.11 Discontinuance of Libor Rate Loans. Notwithstanding any
provision of the Agreement to the contrary, commencing on the effective date of
this Agreement, the Lender shall not be obligated to extend, continue, or renew
and the Borrower shall have no right to borrow, continue or renew any Loan as a
Libor Rate Loan. The Agreement shall be deemed to be amended in accordance
with this Section. At the expiration of the Interest Period applicable to any
Libor Rate Loan outstanding on the effective date of this Amendment, the
Borrower shall, subject to the terms of the Agreement, either (a) repay such
Libor Rate Loan, or (b) convert such Loan to a Reference Rate Loan.
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
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Agreement as amended hereby shall continue to be legal, valid, binding and
enforceable in accordance with its terms.
SECTION THREE - CONDITIONS PRECEDENT
3.1 Conditions. The effectiveness of this Amendment is subject
and as part of the consideration for Lender entering into this Amendment,
Borrower shall pay to Lender a fee of $125,000 which shall be due and payable
concurrently with Borrower's execution and delivery of this Amendment to
Lender. The fee may, at Lender's option, be charged to Borrower's loan account
as a Reference Rate Loan.
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 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.
a California corporation
By: W.L. Benford
------------------------------
Title: President
BankAmerica Business Credit, Inc.
a Delaware corporation
By: Stephen King
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Title: Senior Account Executive
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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.,
a Texas corporation
By: W.L. Benford
------------------------------
Title: President and Chief Executive
Officer
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 Executive
Officer
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