SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported):
SEPTEMBER 16, 1996
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)
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Page 1 of 12 pages.
The exhibit index appears on page 4.
Item 5. Other Events.
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On September 16, 1996, L.A. Gear California, Inc.
("Borrower"), a wholly-owned subsidiary of L.A. Gear, Inc. (the
"Company"), entered into the Seventh Amendment to Loan and
Security Agreement effective as of August 31, 1996 (the "Seventh
Amendment"), which amends 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.
The Seventh Amendment amends the Loan Agreement to, among
other things (a) extend the term of the Loan Agreement for an
additional three years, to November 30, 1999; (b) reduce the
maximum amount available for borrowing at any time from $75
million to $50 million; (c) increase the amount of aggregate cash
borrowings permitted to be outstanding at any time from $10
million to $20 million; (d) with respect to the minimum Adjusted
Tangible Net Worth required under the Loan Agreement, (i) reduce
the minimum Adjusted Tangible Net Worth generally required under
the Loan Agreement, (ii) restrict the payment of dividends on the
Company's Series B Cumulative Convertible Preferred Stock if the
level of Adjusted Tangible Net Worth is below certain thresholds,
and (iii) reduce the amount of the available Borrowing Base if
the level of Adjusted Tangible Net Worth is below certain
thresholds; (e) adjust the formula for calculating the Borrowing
Base; (f) increase the amount of permitted intercompany advances;
and (g) revise the fee structure.
The foregoing description of the Seventh Amendment is
qualified in its entirety by reference to the full text of the
Seventh Amendment, filed as Exhibit 99.11 hereto and incorporated
herein by reference.
Item 7. Financial Statements and Exhibits.
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(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
99.11 Seventh Amendment to Loan and Security Agreement
dated as of September 16, 1996, by and between
L.A. Gear California, Inc. and BankAmerica
Business Credit, Inc.
SIGNATURES
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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: September 16, 1996 By: /s/ William L. Benford
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William L. Benford
President and Chief
Operating Officer
EXHIBIT INDEX
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Exhibit Page
No. Document No.
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99.11 Seventh Amendment to Loan and Security
Agreement dated as of September 16, 1996
by and between L.A. Gear California,
Inc. and BankAmerica Business
Credit, Inc. 5
SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Seventh Amendment to Loan and Security Agreement
("Amendment") is entered into effective as of August 31, 1996, 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 Loan and Security
Agreement dated as of January 25, 1995; a Fourth Amendment to
Loan and Security Agreement dated as of February 28, 1995; a
Fifth Amendment to Loan and Security Agreement, dated as of May
31, 1995; and a Sixth Amendment to Loan and Security Agreement,
dated as of November 30, 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 - AMENDMENTS
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1.1 Amendment of Recitals. The amount "$75,000,000,"
appearing in the first recital to the Loan Agreement is hereby
deleted therefrom, and the amount "$50,000,000" is hereby
substituted in lieu thereof.
1.2 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) $50,000,000, or (ii) the sum of (A) eighty percent (80%) of
the Net Amount of Eligible Accounts, and (B) the lesser of (1)
$25,000,000, 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 Accounts exceeds $65,000,000 in the aggregate, (vi)
the Foreign Exchange Reserve, (vii) the Direct Deposit and
Overdraft Reserve, (viii) the Minimum Excess Availability
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."
1.3 Amendment of "Direct Deposit and Overdraft Reserve".
The definition of "Direct Deposit and Overdraft Reserve" in
Article 1 of the Agreement is hereby amended to read in its
entirety as follows:
"`Direct Deposit and Overdraft Reserve' means an amount
up to, but not exceeding, $4,000,000, which Lender in its
Discretion, calculates to be its current exposure with respect to
automated clearing house transfers and overdrafts."
1.4 Amendment of "Preferred Stock". The definition of
"Preferred Stock" in Article 1 of the Agreement is hereby amended
to read in its entirety as follows:
"`Preferred Stock' means Parent's Series B Cumulative
Convertible Preferred Stock."
1.5 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 Borrower or Parent
(and in the case of leased premises, a landlord's consent which
is acceptable to Lender has been executed by the landlord and
delivered to Lender); (b) are not goods in transit; (c) upon
which Lender has a first priority perfected security interest;
(d) which Borrower has not owned for a period in excess of six
(6) months; (e) is not spare parts, packaging and shipping
materials, supplies, bill-and-hold Inventory or defective
Inventory, or Inventory delivered to Borrower on consignment, (f)
does not consist of promotional items; and (g) 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 clause `(b)' above,
Inventory that it being imported and that is payable by
presentment of a letter of credit issued pursuant to this
Agreement, and that would be Eligible Inventory except for the
terms of such clauses (a) and (b), will be Eligible Inventory if
Lender is named as consignee on the applicable bill of lading or
other similar document of title, such bill of lading or document
has been delivered to Lender, and the Inventory is subject to
insurance acceptable to Lender."
1.6 Amendment of "Minimum Excess Availability Reserve".
The definition of "Minimum Excess Availability Reserve" in
Article 1 of the Agreement is hereby amended in its entirety to
read as follows:
"`Minimum Excess Availability Reserve' means $5,000,000
at all times following the end of any Fiscal Quarter as of the
last day of which Adjusted Tangible Net Worth is less than (a)
$82,500,000 for any Fiscal Quarter included within the Fiscal
Year ending November 30, 1996, and (b) $75,000,000 for any Fiscal
Quarter thereafter."
1.7 Amendment of Section 2.1. The amount "$75,000,000" in
Section 2.1 of the Agreement is hereby deleted therefrom, and the
amount "$50,000,000" is hereby substituted in lieu thereof.
1.8 Amendment of Section 2.2. The amount "$75,000,000" in
Section 2.2 of the Agreement is hereby deleted therefrom, and the
amount "$50,000,000" is hereby substituted in lieu thereof.
1.9 Amendment of Section 2.2(a). The last sentence of
Subsection 2.2(a) of the Agreement is hereby amended in its
entirety to read as follows:
"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 $20,000,000."
1.10 Amendment of Section 2.3(b). The amount "$75,000,000"
in Subsection 2.3(b) of the Agreement is hereby deleted
therefrom, and the amount "$50,000,000" is hereby substituted in
lieu thereof.
1.11 Amendment of Section 3.1(d). Section 3.1(d) of the
Agreement is hereby amended in its entirety to read as follows:
"(d) If, for any month during the term of this
Agreement, the sum of the average closing daily 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 one-
half of one percent (0.5%) 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."
1.12 Amendment of Section 3.3. Section 3.3 of the Agreement
is hereby amended in its entirety to read as follows:
"3.3 Letter of Credit Fees. Borrower will pay to
Lender a commission of (i) three-quarters of one percent (0.75%)
per annum of the outstanding Cash Secured Letters of Credit, and
(ii) one and three-quarters percent (1.75%) 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. This 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."
1.13 Amendment of Section 6.8. Clause "(c)" of Section 6.8
of the Agreement is hereby amended in its entirety to read as
follows:
"(c) upon request, but in any event not less
frequently than four times each month, a summary ageing of
Accounts for the most recently ended weekly period."
1.14 Amendment of Section 9.6. (a) Clause "(b)" of Section
9.6 of the Agreement is hereby amended in its entirety to read as
follows:
"(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 its Preferred Stock
provided that (i) no such Distributions shall be made during the
continuance of any Event or Event of Default, (ii) the quarterly
Preferred Stock dividend payable with respect to the Fiscal
Quarter ending February 28, 1997, shall not be paid unless the
Adjusted Tangible Net Worth as of November 30, 1996, is greater
than $85,000,000, and (iii) no quarterly dividend shall be paid
thereafter unless the Adjusted Tangible Net Worth as of the last
day of the Fiscal Quarter immediately preceding the quarterly
dividend payment date is greater than $80,000,000."
(b) Clause "(d)" of Section 9.6 of the Agreement is
hereby deleted from the Agreement in its entirety, and shall be
of no further force or effect.
1.15 Amendment of Section 9.17. Section 9.17 of the
Agreement is hereby amended in its entirety to read as follows:
"9.17 Captial Expenditures. Neither Parent, nor any
of the Restricted Subsidiaries (other than Borrower) shall make
or incur any Capital Expenditures. Borrower shall not make or
incur any Captial Expenditure if, after giving effect thereto,
the aggregate amount of all Capital Expenditures by Borrower
during any Fiscal Year would exceed $2,500,000; provided that the
amount of Captial Expenditures which may be made or incurred by
Borrower in any Fiscal Year shall be increased by the amount
permitted in preceding Fiscal Years and not actually expended."
1.16 Amendment of Section 9.18. Section 9.18 of the
Agreement is hereby amended in its entirety to read as follows:
"9.18 Adjusted Tangible Net Worth. Borrower will not
permit Adjusted Tangible Net Worth to be less than (a)
$80,000,000 as of August 31, 1996, and November 30, 1996; and (b)
$70,000,000 as of the last day of each Fiscal Quarter
thereafter."
1.17 Amendment of Section 9.25. Section 9.25 of the
Agreement is hereby amended in its entirety to read as follows:
"9.25 Intercompany Transactions. Borrower will not
permit the aggregate amount of the Intercompany Advances made by
Borrower plus the aggregate amount of outstanding Intercompany
Receivables to exceed at any time the sum of $65,000,000."
1.18 Amendment of Section 12. (a) The first sentence of
Section 12 of the Agreement is hereby amended in its entirety to
read as follows:
"The initial term of this Agreement shall terminate on
November 30, 1999."
(b) The fourth sentence of Section 12 of the Agreement
is hereby amended in its entirety to read as follows:
"Borrower may also terminate this Agreement at any time
during its initial term or any successive renewal term if (a) it
gives Lender sixty (60) days prior written notice of termination
by registered or certified mail; (b) it pays and performs all
Obligations on or prior to the effective date of termination; and
(c) unless such termination date is within sixty (60) days of
the scheduled termination date, it pays Lender, on or prior to
the effective date of termination, an early termination fee equal
to the sum of the average daily principal balance of the Loans
plus the average daily amount available for drawing under Letters
of Credit (in each case for the 180 day period preceding
termination), times (i) three percent (3%) if terminated prior to
November 30, 1997; (ii) two percent (2%) if terminated on or
after November 30, 1997, but prior to November 30, 1998; and
(iii) if terminated during the on or after November 30, 1998, but
prior to April 30, 1999, (A) one-half of one percent (0.5%) of
the amount of all Loans and Cash Letters of Credit, and (B) one
percent (1.0%) of all Borrowing Base Letters of Credit, and (iv)
if terminated on or after April 30, 1999, (A) zero percent (0%)
of the amount of all of the Loans and Cash Secured Letters of
Credit, and (B) one-half of one percent (0.5%) of the amount of
all Borrowing Base Letters of Credit, provided that Borrower
shall not have to pay any early termination fees in the event
that this Agreement is terminated, and the obligations hereunder
repaid, using the proceeds of a credit facility provided by Bank
of America or any Affiliate of Bank of America."
SECTION TWO - REPRESENTATIONS AND WARRANTIES
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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 (a) are within the powers and purposes of Borrower; (b)
have been duly authorized or approved by Borrower; and (c)
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
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3.1 Conditions Precedent. This Amendment shall become
binding upon Borrower and Lender upon satisfaction of the
following conditions precedent:
(a) Borrower shall have delivered this Amendment to
the Lender, executed by a duly authorized representative of
Borrower; and
(b) Borrower shall have paid to Lender an extension
fee of $250,000 which Lender may, in its sole discretion, charge
to Borrower's loan account as a Reference Rate Loan.
SECTION FOUR - MISCELLANEOUS
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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.
By:
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Name:
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Title:
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BANKAMERICA BUSINESS CREDIT, INC.
By:
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Name:
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Title:
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RATIFICATION OF GUARANTY
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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:
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Name:
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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:
Name:
Title:
