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):
FEBRUARY 18, 1997
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 11 pages.
The exhibit index appears on page 4.
Item 5. Other Events.
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On February 18, 1997, L.A. Gear California, Inc.
("Borrower"), a wholly-owned subsidiary of L.A. Gear, Inc. (the
"Company"), entered into the Eighth Amendment to Loan and
Security Agreement effective as of November 30, 1996 (the "Eighth
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. Capitalized terms used herein, if not otherwise defined,
shall have the meanings ascribed to such terms in the Loan
Agreement.
The Eighth Amendment amends the Loan Agreement to, among
other things (a) shorten the term of the Loan Agreement to May
31, 1998; (b) reduce the maximum amount available for aggregate
loans and letters of credit at any time under the credit facility
from $50 million to $25 million; (c) decrease the amount of
aggregate cash borrowings permitted to be outstanding at any time
from $20 million to $10 million; (d) revise the aggregate
borrowing availability calculation, including the elimination of
a reserve against availability; (e) reduce the minimum Adjusted
Tangible Net Worth required under the Loan Agreement to $40
million; and (f) increase certain fees payable to the Lender.
The foregoing description of the Eighth Amendment is
qualified in its entirety by reference to the full text of the
Eighth Amendment, filed as Exhibit 99.12 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.
99.12 Eighth Amendment to Loan and Security
Agreement, effective as of November 30, 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: February 20, 1996 By: Victor J. Trippetti
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Victor J. Trippetti
Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
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Exhibit Page
No. Document No.
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99.12 Eighth Amendment to Loan and Security
Agreement, effective as of November 30,
1996 by and between L.A. Gear California,
Inc. and BankAmerica Business Credit,
Inc. 5
EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Eighth Amendment to Loan and Security Agreement
("Amendment") is entered into effective as of November 30, 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; a Sixth Amendment to Loan and Security Agreement, dated
as of November 30, 1995; and a Seventh Amendment to Loan and
Security Agreement dated as of August 31, 1996 (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 "$50,000,000,"
appearing in the first recital to the Loan Agreement is hereby
deleted therefrom, and the amount "$25,000,000" is hereby
substituted in lieu thereof.
1.2 Amendment of "Availability". 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) $25,000,000, or (ii) the sum of (A)
eighty percent (80%) of the Net Amount of Eligible
Accounts ("Account Loans"), and (B) the lesser of (1)
$10,000,000, or (2) thirty-five percent (35%) of the
value of Eligible Inventory, valued at the lower of
market value or cost (established on a "first-in, first-
out" basis) ("Inventory Loans"); 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, and (vii)
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. Notwithstanding the foregoing, the maximum
Obligations outstanding based on the Eligible Imported
Inventory shall not at any time exceed $2,000,000 and
the maximum Inventory Loans outstanding shall not at
any time exceed the Account Loans then outstanding."
1.3 Amendment of "Direct Deposit and Overdraft Reserve".
The definition of "Direct Deposit and Overdraft Reserve" in
Section 1 of the Agreement is hereby deleted.
1.4 Amendment of "Foreign Exchange Reserve". The
definition of "Foreign Exchange Reserve" in Section 1 of the
Agreement is hereby amended in its entirety to read as follows:
"'Foreign Exchange Reserve' means, from February
14, 1997 through April 30, 1997, the amount of
$500,000; and from May 1, 1997 through May 30, 1997,
the amount of $250,000; and thereafter zero."
1.5 Amendment of "Minimum Excess Availability Reserve".
The definitions of "Minimum Excess Availability Reserve" in
Section 1 of the Agreement is hereby deleted.
1.6 Amendment of "Eligible Inventory". The definition of
"Eligible Inventory" in Section 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) is not in transit to Borrower; (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 the foregoing, Inventory that is 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
clauses (a) and (b) above ("Eligible Imported
Inventory"), 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."
1.7 Amendment of Section 2.1. The amount "$50,000,000" in
Section 2.1 of the Agreement is hereby deleted therefrom, and the
amount "$25,000,000" is hereby substituted in lieu thereof.
1.8 Amendment of Section 2.2. The amount "$50,000,000" in
Section 2.2 of the Agreement is hereby deleted therefrom, and the
amount "$25,000,000" 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
$10,000,000."
1.10 Amendment of Section 2.3(b). The amount "$50,000,000"
in Subsection 2.3(b) of the Agreement is hereby deleted
therefrom, and the amount "$25,000,000" is hereby substituted in
lieu thereof.
1.11 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) one percent (1%) per annum
of the outstanding Cash Secured Letters of Credit, and
(ii) two percent (2%) 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."
1.12 Amendment of Section 3. Section 3 of the Agreement is
hereby amended by the addition of a new Section 3.5 to read as
follows:
"3.5 Maintenance Fee. Borrower will pay Lender a
maintenance fee of $50,000 each month beginning on June
1, 1997 and continuing thereafter on the first day of
each month."
1.13 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
$40,000,000 as of November 30, 1996 and as of the last
day of each Fiscal Quarter thereafter."
1.14 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 May
31, 1998."
1.15 Amendment of Section 12. 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 thirty (30) days prior written
notice of termination by registered or certified mail
and (b) it pays and performs all Obligations on or
prior to the effective date of termination."
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 Borrower delivering this
Amendment to the Lender, executed by a duly authorized
representative of Borrower, and the ratification of the
guaranties by the guarantors.
SECTION FOUR - MISCELLANEOUS
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4.1 Borrower acknowledges and agrees that the Lender (i) as
of this date will no longer arrange for the Borrower to obtain
automated clearing house transfer of funds and overdrafts from
Bank of America and (ii) will not on and after this date arrange
for any new foreign exchange contracts to be opened for the
benefit of Borrower by Bank of America.
4.2 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.
4.3 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.
4.4 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.
By: Victor J. Trippetti
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Name: Victor J. Trippetti
Title: Senior Vice President
and Chief Financial Officer
BANKAMERICA BUSINESS CREDIT, INC.
By: Stephen King
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Name: Stephen King
Title: Vice President
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: Victor J. Trippetti
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Name: Victor J. Trippetti
Title: Vice 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: Victor J. Trippetti
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Name: Victor J. Trippetti
Title: Vice President
