Exhibit 10.13

 

FOURTH AMENDMENT LOAN AGREEMENT

 

THIS FOURTH AMENDMENT TO LOAN AGREEMENT (this “Amendment”) is made and entered
into as of February 7, 2017 (the “Effective Date”), by and between EDUCATIONAL
DEVELOPMENT CORPORATION, a Delaware corporation (“Borrower”), and MIDFIRST BANK,
a federally charted savings association (“Lender”).

 

BACKGROUND RECITALS

 

A.     Borrower and Lender are parties to that certain Loan Agreement dated as
of December 1, 2015, as amended by that certain First Amendment to Loan
Agreement dated as of March 10, 2016, as amended by that certain Second
Amendment to Loan Agreement dated as of June 15, 2016, and as further amended by
that certain Third Amendment to Loan Agreement dated as of June 28, 2016 (as
amended, the “Loan Agreement”). Unless the context otherwise requires,
capitalized terms used in this Amendment and not otherwise defined herein have
the respective meanings assigned to them in the Loan Agreement.

 

B.     Borrower failed to maintain a Debt to Worth Ratio not in excess of
3.50:1.00 as of November 30, 2016, which is a DTW Test Default in violation of
Section 5.1(i) of the Loan Agreement (the “Specified Default”), which
constitutes an Event of Default under the Loan Agreement. Borrower has requested
that Lender waive the Specified Default and any consequences thereof.

 

C.     The Lender has agreed to waive the Specified Default and any consequences
thereof, but only upon the terms and conditions set forth in this Amendment.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Parties agree as
follows:

 

1.

WAVIER OF SPECIFIED DEFAULT.

 

1.1.     Waiver. Subject to the terms of this Amendment, Lender hereby waives
the Specified Default and any consequences thereof. This waiver is limited to
the Specified Default, is only for the calculation period as of November 30,
2016, and does not extend to any other default or Event of Default that may have
occurred or be continuing as of the Effective Date.

 

1.2.     No Course of Dealing, Strict Compliance, No Prejudice. Under no
circumstance does Lender's election to waive the Specified Default (i) modify
the Loan Documents (except as expressly modified by this Amendment); (ii)
establish a custom or course of dealing with respect to any of the Loan
Documents or be construed as a waiver of Lender's insistence on strict
compliance by Borrower with the terms and provisions of the Loan Documents;
(iii) operate as a waiver of any existing or future default or Event of Default
under the Loan Documents; (iv) entitle Borrower to any other or further notice
or demand whatsoever; (v) except as set forth in this Amendment, in any way
modify, change, impair, affect, diminish or release any of Borrower's
obligations or liability under or pursuant to the Loan Documents or any other
liability Borrower may have to Lender; or (vi) waive, limit or condition
Lender's existing rights and remedies under the Loan Documents, all of which
rights and remedies are expressly reserved except with respect to the Specified
Default.

 

2.

PRICING.

 

2.1.     Definitions in Loan Agreement. The following definitions (a) to the
extent already defined in Exhibit A of the Loan Agreement, are hereby amended in
their entirety to read as follows, (b) to the extent not already defined in
Exhibit A, are hereby added to Exhibit A of the Loan Agreement, to be inserted
in alphabetical order, to read as follows:

 

“Adjusted Funded Debt to EBITDA Ratio” means, as of any date of determination,
the ratio that Lender reasonably determines of (i) Borrower's Funded Debt minus
the Principal Term Amount (Lender's Note #1108135-100 and Note #1108135-102) to
(ii) Borrower's EBITDA on trailing 12-month basis, minus lease payments received
by Borrower

 

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under the Hilti Lease during the same period.

 

“LIBOR Margin” means, for any day, a percentage per annum (expressed as basis
points) as set forth below, based upon the Adjusted Funded Debt to EBITDA Ratio
for the most recent fiscal quarter of Borrower:

 

Pricing Tier

Adjusted Funded Debt to EBITDA Ratio

LIBOR Margin (bps)

I

> 3.25

362.50

II

> 2.75 but < 3.25

350.00

III

> 2.25 but < 2.75

337.50

IV

< 2.25

325.00

 

Any increase or decrease in the LIBOR Margin resulting from a change in the
Adjusted Funded Debt to EBITDA Ratio for the most recent fiscal quarter of
Borrower shall become effective not later than 30 days following the date a
Compliance Certificate is delivered and confirmed by Lender; provided, however,
that if Borrower fails to deliver a Compliance Certificate on or before the
applicable Compliance Certificate Due Date, then Pricing Tier I shall apply as
of the first Business Day after such Compliance Certificate Due Date and shall
continue to apply until not later than 30 days following the date a Compliance
Certificate is delivered and confirmed by Lender, whereupon the LIBOR Margin
shall be adjusted based upon the Adjusted Funded Debt to EBITDA Ratio contained
in such Compliance Certificate. The initial LIBOR Margin shall be determined
based upon Pricing Tier IV until adjusted otherwise.

 

“Term Loan Principal Amount” means, at any point in time, that portion of the
principal balance of the Term Loan which is unpaid.

 

2.2.     Deleted Definition. Effective as of the Effective Date, the definition
of “Funded Debt to EBITDA Ratio” is hereby deleted from the Loan Agreement.

 

3.

OTHER MODIFICATIONS TO LOAN AGREEMENT.

 

3.1.     Definitions. The following definitions appearing in Exhibit A of the
Loan Agreement are hereby amended in their entirety to read as follows:

 

“AFD Test Default” means that, as of the last day of any calendar month, the
Adjusted Funded Debt to EBITDA Ratio is greater than 3.75:1.00.

 

“Compliance Certificate Due Date” means the 30th calendar day following the end
of each calendar month. If the Compliance Certificate Due Date is on a day which
is not a Business Day, then the Compliance Certificate Due Date will be the next
Business Day.

 

“OCR Test Default” means that, as of the last day of any calendar month, the
Debt Coverage Ratio is less than 1.25:1.00.

 

“Minimum Tangible Net Worth” means Borrower's tangible net worth as of February
28, 2017, plus 70% of the net profit (if positive) for each subsequent fiscal
quarter, with each increase to be cumulative.

 

“TNW Test Default” means that, as of the last day of any fiscal quarter,
Borrower's tangible net worth is less than the Minimum Tangible Net Worth.

 

3.2.     Deleted Definition. Effective as of the Effective Date, the definitions
of “DTW Test Default” and “Debt to Worth Ratio” are hereby deleted from the Loan
Agreement.

 

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3.3.     Reporting. Section 4.1(f) of the Loan Agreement is hereby amended in
its entirety to read as follow:

 

(f)     Financial Statements and other Reports. Borrower shall deliver to Lender
the below statements and reports on or before the below delivery deadline.
Borrower shall also deliver to Lender any other information, reports or
certificates as and when Lender requests.

 

Statement or Report

Frequency

Delivery Deadline

Borrower's audited annual financial statements

Annually

Within 90 days after each fiscal year ends

Borrower's monthly financial statements

Monthly

Within 30 days after each calendar month ends

Projections, prepared on a rolling 12-month basis, of inventory and compliance
with financial covenants

Quarterly

Within 30 days after each quarter ends

Guarantor's balance sheet

Annually

Within 90 days after each fiscal year ends

Guarantor's personal financial statement

Annually

Within 90 days after each fiscal year ends

Audited annual financial statements of Hilti

Annually

Within 90 days after each fiscal year of Hilti

Confirmation of payment of rent by

Hilti and CAM payments under Hilti Lease

Annually

Within 90 days after each anniversary of the Effective Date

Copies of filed federal income tax returns of Guarantor

Annually

Within 30 days after filing

 

All statements and reports must be in scope and detail reasonably satisfactory
to Lender. During any Event of Default Period, Lender may require that all
statements and reports be prepared, audited and certified (at Borrower's cost
and expense) by an independent certified public accountant, acceptable to
Lender. Each rent roll must, with respect to each of the Leases, contain: (i)
each Tenant's name and address; (ii) rental amount; (iii) square footage of the
premises; (iv) security deposit; (v) commencement date; (vi) termination date;
(vii) date through which rent is paid; and (viii) the occurrence of any default.
Each Guarantor balance sheet must include a detailed global schedule of all real
estate interests, directly or indirectly, owned. Borrower shall provide Lender
with such additional financial, management, or other information regarding any
Borrower Party or the Property, as Lender may request. Upon Lender's request,
Borrower shall deliver all items required by this Subsection in an electronic
format or by electronic transmission reasonably acceptable to Lender.

 

3.4.     Dividends. Section 4.1(v) of the Loan Agreement is hereby amended in
its entirety to read as follows:

 

(v)     Limitation on Dividends and Stock Buybacks. Borrower shall not declare,

make or pay any dividend, distribution or stock buyback, or set apart any sum or
any of its assets for the payment of any dividend, distribution or stock
buyback.

 

3.5.     Accounts. A new subsection (x) is hereby added to Section 4.1 of the
Loan Agreement to read as follows:

 

(x)     Accounts. Maintain its primary operating accounts with Lender and
utilize

Lender for its cash and treasury management services needs.

 

3.6.     Amended Event of Default. Section 5.l(i) of the Loan Agreement is
amended in its entirety to read as follows:

 

 

(i)

TNW Test Default. A TNW Test Default occurs; or

 

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3.7.     Additional Event of Default. A new subsection (m) is hereby added to
Section 5.1 of the Loan Agreement to read as follows:

 

(m)     AFD Test Default. An AFD Test Default occurs.

 

 

3.8.

Notices. The notice address for Borrower set forth in Section 6.18 shall be the
following:

 

5404 South 122nd East Avenue 

Tulsa, OK 74146

Attn: Randall W. White, Chairman, President and CEO

 

3.9.     Replacement Compliance Certificate. The form of Compliance Certificate
set forth in Exhibit C of Loan Agreement is hereby replaced with Exhibit C-1
attached to this Amendment.

 

4.

CONDITIONS TO EFFECTIVENESS. This Amendment will be effective as of the
Effective Date, but subject to satisfaction of each of the following conditions
precedent:

 

4.1.     Execution of Amendment     This Amendment shall have been executed by
Borrower and delivered to Lender.

 

 

4.2.

Fee. Borrower shall have paid a non-refundable fee in the amount of $10,000.

 

4.3.     Legal Matters. All legal matters incident to this Amendment shall be
satisfactory to Lender and its counsel.

 

5.

REPRESENTATIONS AND WARRANTIES.

 

5.1.     Reaffirmation. Borrower confirms that all representations and
warranties made by it in the Loan Agreement and the other Loan Documents are,
and as of the Effective Date will be, true and correct in all material respects,
and all of such representations and warranties are hereby remade and restated as
of the Effective Date and shall survive the execution and delivery of this
Amendment.

 

5.2       Additional Representations and Warranties.

 

(i)     Power; Transactional Authority; Enforceability. Borrower has the
requisite power and authority to execute, deliver and carry out the terms and
provisions of this Amendment, and has taken all necessary action to authorize
its execution, delivery and performance of this Amendment. Borrower has duly
executed and delivered this Amendment. This Amendment constitutes Borrower's
legal, valid and binding obligations, enforceable in accordance with the terms
of the Loan Documents, as amended by this Amendment, subject to (i) the effect
of any Applicable Bankruptcy Law, or (ii) general principles of equity.

 

(ii)     No Violation; No Consent. Borrower's execution, delivery and
performance of this Amendment, and compliance with the terms and provisions of
the Loan Documents, as amended by this Amendment, will not (i) contravene any
Applicable Law, (ii) conflict or be inconsistent with or result in any breach of
any term, covenant, condition or provision of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or impose)
any lien upon any of the Property or Borrower's other assets pursuant to the
terms of any indenture, mortgage, deed of trust, agreement or other instrument
to which Borrower is a party or by which Borrower or any of the Property or
Borrower's other assets is bound or may be subject, or (iii) violate any term of
Borrower's certificate of incorporation or other documents and agreements
governing Borrower's existence, management or operation. Borrower is not
required to obtain the consent of any other party, including any Governmental
Authority, in connection with the execution, delivery, performance, validity or
enforceability of the Loan Documents, as amended by the Amendment Documents.

 

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(iii)     Financial Matters. Each Borrower Party financial statement previously
delivered to Lender was prepared in accordance with GAAP and completely,
correctly and fairly present the financial condition and the results of
operations of each Borrower Party on the date and for the period covered by the
financial statements. All other reports, statements and other data that any
Borrower Party furnished to Lender in connection with the Loan are true and
correct in all material respects and do not omit any fact or circumstance
necessary to ensure that the statements are not misleading. Each Borrower Party
(i) is solvent, (ii) is not bankrupt, and (iii) has no outstanding liens, suits,
garnishments, bankruptcies or court actions which may render such Borrower Party
insolvent or bankrupt. Since the date of the last financial statements each
Borrower Party delivered to Lender, no event, act, condition or liability has
occurred or exists, which has had, or may reasonably be expected to have, a
material adverse effect upon (A) such Borrower Party's business, condition
(financial or otherwise) or operations, or (8) such Borrower Party's ability to
perform or satisfy, or Lender's ability to enforce, any of the Indebtedness.

 

(iv)     Litigation. There are no suits or proceedings (including condemnation)
pending or (to Borrower's knowledge, after reasonable inquiry) threatened
against or affecting any Borrower Party or the Property or involving the
validity, enforceability or priority of any of the Loan Documents. Borrower has
not received notice from any Governmental Authority alleging that any Borrower
Party or the Property is violating any Applicable Law.

 

(v)     No Default. No Event of Default currently exists or would exist after
giving effect to the transactions contemplated by this Amendment.

 

6.

MISCELLANEOUS.

 

6.1.     Effect of Amendment. The terms of this Amendment shall be incorporated
into and form a part of the Loan Agreement. Except as expressly amended,
modified and supplemented by this Amendment, the Loan Agreement shall continue
in full force and effect in accordance with its original stated terms, all of
which are hereby reaffirmed in every respect as of the Effective Date. In the
event of any irreconcilable inconsistency between the terms of this Amendment
and the terms of the Loan Agreement, the terms of this Amendment shall control
and govern, and the agreements shall be interpreted so as to carry out and give
full effect to the intent of this Amendment. All references to the Loan
Agreement appearing in any of the Loan Documents shall hereafter be deemed
references to the Loan Agreement as amended, modified and supplemented by this
Amendment.

 

6.2.     No Course of Dealing: Past Acceptance. This Amendment shall not
establish a course of dealing or be construed or relied upon as evidence of any
willingness on Lender's part to grant any future consent or amendment, should
any be requested. Lender acknowledges that Lender and its agents in the past may
have accepted, without exercising the remedies to which Lender was entitled,
payments and performance by Borrower that constituted Events of Default under
the Loan Documents. Borrower acknowledges that no such acceptance or grace
granted by Lender or its agents in the past, or Lender's agreement to the
modifications evidenced hereby, has in any manner diminished Lender's right in
the future to insist that Borrower Parties strictly comply with the terms of the
Loan Documents, as modified by the terms of this Amendment Furthermore, Borrower
specifically acknowledges that any future grace or forgiveness of any Events of
Default shall not constitute a waiver or diminishment of any right of Lender
with respect to any future Event of Default, whether or not similar to any Event
of Default with respect to which Lender has in the past chosen, or may in the
future choose, not to exercise all of the rights and remedies granted to it
under the Loan Documents.

 

6.3.     Release. Borrower hereby releases, remises, acquits and forever
discharges Lender and any co-lender or loan participant, together with their
respective employees, agents, representatives, consultants, attorneys,
fiduciaries, servants, officers, directors, partners, predecessors, successors
and assigns, subsidiary corporations, parent corporations, and related corporate
divisions (all of the foregoing the “Released Parties”), from any and all
actions and causes of action, judgments, executions, suits, liens, debts,
claims, counterclaims, defenses, demands, liabilities, obligations, damages and
expenses of any and every character (collectively, “Claims”), known or unknown,
direct or indirect, at law or in equity, of whatsoever kind or nature, whether
heretofore or hereafter accruing, for or because of any matter or things done,
omitted or suffered to be done by

 

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any of the Released Parties prior to and including the Effective Date, and in
any way directly or indirectly arising out of or in any way connected to this
Amendment or the other Loan Documents, or any of the transactions associated
therewith, or the Property, including specifically but not limited to claims of
usury, lack of consideration, fraudulent transfer and lender liability, that it
now has or may hereafter have against any Released Party, and hereby agrees to
indemnify and hold harmless Lender and each other Released Party for all Claims
that any Person may bring against any such Released Party that arise under or in
connection with the Loan Agreement based on facts existing on or before the
Effective Date. THE FOREGOING RELEASE INCLUDES ACTIONS AND CAUSES OF ACTION,
JUDGMENTS, EXECUTIONS, SUITS, DEBTS, CLAIMS, DEMANDS, LIABILITIES, OBLIGATIONS,
DAMAGES AND EXPENSES ARISING AS A RESULT OF THE NEGLIGENCE OR STRICT LIABILITY
OF ONE OR MORE OF THE RELEASED PARTIES.

 

6.4.     Ratification and Affirmation. Borrower hereby acknowledges the terms of
this Amendment and ratifies and affirms its obligations under, and acknowledges,
renews and extends its continued liability under, each Loan Document to which it
is a party and agrees that each Loan Document to which it is a party remains in
full force and effect.

 

6.5.     No Modification. This Amendment along with the Loan Documents
supersedes and merges all prior and contemporaneous promises and agreements. No
modification of this Amendment or any other Loan Document, or any waiver of
rights under any of the foregoing, shall be effective unless made by
supplemental agreement, in writing, executed by the Parties. The Parties further
agree that the Loan Agreement, as amended by this Amendment, may not in any way
be explained or supplemented by a prior, existing or future course of dealings
between the Parties or by any prior, existing, or future performance between the
Parties pursuant to this Amendment, the Loan Agreement or otherwise.

 

6.6.     Headings. The headings of the sections and subsections of this
Amendment are for convenience of reference only and will not affect the scope or
meaning of the sections of this Amendment

 

6.7.     Applicable Law. The Amendment Documents and the rights and obligations
of Borrower and Lender are in all respects governed by, and construed and
enforced in accordance with the Governing Law (without giving effect to its
principles of conflicts of law), except for those terms of the Security
Instruments pertaining to the creation, perfections, validity, priority or
foreclosure of the liens or security interests on the Property located within
the State, which terms will be governed by, and construed and enforced in
accordance with the laws of the State (without giving effect to its principles
of conflicts of law).

 

6.8.     Counterparts; Miscellaneous. This Amendment may be executed in any
number of counterparts with the same effect as if all signers executed the same
instrument. All counterparts of this Amendment must be construed together and
will constitute one instrument This Amendment is a Loan Document Time is of the
essence with respect to this Amendment. The Parties acknowledge and confirm that
each of their respective attorneys has participated or has had the opportunity
to participate jointly in the review and revision of this Amendment and that it
has not been written solely by counsel for one party. The Parties therefore
stipulate and agree that the rule of construction to the effect that any
ambiguities are to or may be resolved against the drafting Party will not favor
either Party against the other. The terms and provisions of this Amendment are
binding upon and inure to the benefit of the Parties and their successors and
assigns.

 

6.9.     Reimbursement of Expenses. Borrower agrees to pay or reimburse Lender
for all reasonable out-of-pocket expenses, including Attorneys' Fees, incurred
by Lender in connection with the negotiation, preparation, execution and
delivery of this Amendment and the other Amendment Documents and the
consummation of the transactions contemplated hereby.

 

 

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IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
effective as of the Effective Date.

 

 

Borrower:

EDUCATIONAL DEVELOPMENT CORPORATION

a Delaware corporation

 

 

 

 

 

 

 

 

 

 

By:

/s/ Randall W. White

 

 

Name:

Randall W. White

 

 

Title:

Chairman, President and CEO

 

 

 

 

 

 

 

 

BORROWER'S SIGNATURE PAGE

TO

FOURTH AMENDMENT TO LOAN AGREEMENT

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Lender:

MIDFIRST BANK, a federally chartered savings association

 

 

 

 

 

 

 

 

 

 

By:

/s/ Marc Short

 

 

Name:

Marc Short

 

 

Title:

Senior Vice President 

 

 

 

 

 

 

 

 

LENDER'S SIGNATURE PAGE

TO

FOURTH AMENDMENT TO LOAN AGREEMENT