Exhibit 10.01

 

 

SEVENTH AMENDMENT

TO

LOAN AND SECURITY AGREEMENT

 

Seventh Amendment dated as of November 20, 2008 to Loan and Security Agreement
(the “Seventh Amendment”), by and between SWANK, INC., a Delaware corporation
(the “Borrower”) and WELLS FARGO FOOTHILL, INC. (the “Lender”), amending certain
provisions of the Loan and Security Agreement dated as of June 30, 2004 (as
amended and in effect from time to time, the “Agreement”) by and between the
Borrower and the Lender. Terms not otherwise defined herein which are defined in
the Agreement shall have the same respective meanings herein as therein.

 

WHEREAS, the Borrower and the Lender have agreed to modify certain terms and
conditions of the Agreement as specifically set forth in this Seventh Amendment;

 

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

 

§1.        Amendment to Section 1 of the Agreement. Section 1.1 of the Agreement
is hereby amended as follows:

 

(a)        The definition of “Permitted Investment” set forth in Section 1.1 of
the Agreement is hereby amended by deleting such definition in its entirety and
restating it as follows:

 

“Permitted Investments” means (a) Investments in cash and Cash Equivalents; (b)
Investments in negotiable instruments for collection or deposit; (c) advances or
prepayments made in connection with purchases of goods or services in the
ordinary course of business consistent with past practices; (d) Investments
received in settlement of amounts due to Borrower or any of its Subsidiaries
effected in the ordinary course of business or owing to Borrower or any of its
Subsidiaries as a result of Insolvency Proceedings involving an Account Debtor
or upon the foreclosure or enforcement of any Lien in favor of Borrower or its
Subsidiaries; (e) Investments existing on the Closing Date and set forth on
Schedule PI-1 hereto; (f) Investments consisting of the granting of trade credit
in the ordinary course of business consistent with past practices; (g)
Investments consisting of advances to employees in the nature of draws against
commissions made in the ordinary course of business consistent with past
practices, provided, the aggregate amount of all such Investments do not exceed
$40,000 per month per employee at any time; (h) Investments consisting of
expense advances to employees in the ordinary course of business consistent with
past practices, provided no single expense advance exceeds $1,000; (i)
Investments consisting of obligations of Account Debtors to Borrower arising

 

 

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from amounts owing on past due Accounts and which amounts are evidenced by a
written promissory note from such Account Debtor to Borrower, provided all
actions necessary to perfect Lender’s security interest in such note have been
taken (including such original note being endorsed to Lender and delivered to
Lender); and (j) so long as no Default or Event of Default has occurred and is
continuing, Investments by Borrower (i) in The New Swank Inc. Retirement Plan
consisting of advances made by Borrower to The New Swank Inc. Retirement Plan,
the proceeds of which are used by The New Swank Inc. Retirement Plan to
repurchase from employees of Borrower shares of the Stock of Borrower owned by
such employee and (ii) consisting of advances to employees of Borrower to
repurchase from such employees shares of the Stock of Borrower owned by such
employee, provided, (x) the aggregate amount of any such Investment made
pursuant to this paragraph (j) shall be deducted from the calculation of EBITDA
in the applicable period in which such Investment was made (whether such
deduction is a result of such Investment being expensed or otherwise deducted);
(y) the aggregate amount of such Investment shall not exceed the amount set
forth in Section 7.10 hereof; and (z) the Borrower’s Availability both before
and after making such Investment is not less than $3,000,000.

 

(b)        Section 1.1 of the Agreement is further amended by inserting the
following definitions in the appropriate alphabetical order:

 

“Borrowing Base Calculation Amount” means, as of any relevant date of
determination, an amount equal to (a) the sum of (i) 85% of Eligible Accounts as
of such date, plus (ii) the lesser of (1) 60% of Eligible Inventory as of such
date and (2) 85% timesthe Net Liquidation Percentage times the book value of
Borrower’s Inventory at such date less (b) the Letter of Credit Usage.

 

“Revolver Commitment Amount” means, as of any relevant date of determination,
the Maximum Revolver Amount less the Letter of Credit Usage.

 

“Unused Availability Amount” means, as at any date of determination, an amount
equal to (a) the lesser of (i) the Revolver Commitment Amount on such date and
(ii) the Borrowing Base Calculation Amount on such date, minus (b) book
overdrafts on such date, minus (c) accounts payable which are more than sixty
(60) days past due, minus (d) the Revolver Usage on such date.

 

§2.        Amendment to Section 2 of the Agreement. Section 2 of the Agreement
is hereby amended as follows:

 

(a)        Section 2.1(c) of the Agreement is hereby amended by inserting
immediately after the end of the text of Section 2.1(c) the following sentence:
“In addition, Lender shall have no obligation to make additional Advances
hereunder to the extent such additional Advances would cause the Unused
Availability Amount to be less than $3,000,000.”

 

(b)        Section 2.4 of the Agreement is hereby amended by deleting the first
sentence of Section 2.4 in its entirety and restating it as follows: “If, at any
time or for any reason, the amount of Obligations (other than Bank Product
Obligations) owed by Borrower to Lender

 

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pursuant to Section 2.1 or Section 2.11 is greater than any of the limitations
set forth in Section 2.1 or Section 2.11, as applicable (including, without
limitation, if any time the Unused Availability Amount is less than $3,000,000)
(an “Overadvance”), Borrower shall immediately pay to Lender, in cash, the
amount of such excess, which amount shall be used by Lender to reduce the
Obligations in accordance with the priorities set forth in Section 2.3(b).”

 

§3.        Amendment to Section 7 of the Agreement. Section 7 of the Agreement
is hereby amended as follows:

 

(a)        Section 7.10 of the Agreement is hereby amended by deleting Section
7.10 in its entirety and restating it as follows:

 

7.10.     Restricted Payments. Make any Restricted Payment, provided, however,
so long as no Default or Event of Default has occurred and is continuing or
would exist as a result thereof, Borrower shall be permitted to (a) make a
Restricted Payment either (i) to The New Swank Inc. Retirement Plan consisting
of advances or other Distributions made by Borrower to The New Swank Inc.
Retirement Plan, the proceeds of which are used by The New Swank Inc. Retirement
Plan to repurchase from employees of Borrower shares of the Stock of Borrower
owned by such employee or (ii) to employees of the Borrower to repurchase from
such employees shares of the Stock of Borrower owned by such employee, provided,
in each case (x) the aggregate amount of all such Restricted Payments made
pursuant to this Section 7.10(a) shall be deducted from the calculation of
EBITDA in the applicable period in which such Restricted Payment was made
(whether such deduction is a result of such Restricted Payment being expensed or
otherwise deducted); (y) the aggregate amount of all such Restricted Payments
made pursuant to this Section 7.10(a) in any fiscal year shall not exceed
$1,000,000 less the aggregate amount of Third Party Purchases (as hereinafter
defined) made in such fiscal year; and (z) the Borrower’s Unused Availability
Amount both before and after making such Restricted Payment is not less than
$3,000,000; and (b) make a Restricted Payment to holders of shares of Borrower’s
stock which are not employees of Borrower (the “Non-Employee Holders”) to
repurchase from such Non-Employee Holders shares of the Stock of Borrower owned
by such Non-Employee Holders (each, a “Third Party Purchase”), provided, in each
case, (w) all Third Party Purchases must be consummated by not later than March
31, 2009 (the period that such Third Party Purchases may be consummated shall be
hereinafter referred to as the “Third Party Purchase Period”); (x) the aggregate
amount of (1) all such Restricted Payments made pursuant to this Section 7.10(b)
during the entire Third Party Purchase Period shall not exceed $1,000,000; (2)
all such Restricted Payments made pursuant to this Section 7.10(b) for the
fiscal year ending December 31, 2008 shall not exceed $1,000,000 less the
aggregate amount of any Restricted Payments made pursuant to Section 7.10(a) in
the fiscal year ending December 31, 2008; and (3) all such Restricted Payments
made pursuant to this Section 7.10(b) for the period of January 1, 2009 through
the end of the Third Party Repurchase Period shall not exceed $1,000,000 less
the aggregate amount of any Restricted Payments made pursuant to Section 7.10(a)
for the period of January 1, 2009 through the end of the Third Party Repurchase
Period; (y) the Borrower’s

 

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Unused Availability Amount both before and after making such Restricted Payment
is not less than $3,000,000; and (z) Borrower provides the Lender with prior
written notice of each such Third Party Purchase (including the amount of Stock
being repurchased and the purchase price in respect thereof).

(b)        Section 7.18(a) of the Agreement is hereby amended by deleting
Section 7.18(a) in its entirety and restating it as follows:

 

 

(a)

Minimum EBITDA: Fail to maintain or achieve EBITDA, measured on a month-end
basis, of at least the required amount set forth in the following table for the
applicable period set forth opposite thereto:

 

Applicable Amount

Applicable Period

($487,000)

For the 1 month period
ended April 30, 2004

($212,000)

For the 2 month period
ending May 31, 2004

($872,000)

For the 3 month period
ending June 30, 2004

($1,252,000)

For the 4 month period
ending July 31, 2004

($462,000)

For the 5 month period
ending August 31, 2004

$464,000

For the 6 month period
ending September 30, 2004

$1,455,000

For the 7 month period
ending October 31, 2004

$2,616,000

For the 8 month period
ending November 30, 2004

$2,611,000

For the 9 month period
ending December 31, 2004

$1,953,500

For the 10 month period
ending January 31, 2005.

$1,919,400

For the 11 month period
ending February 28, 2005.

 

 

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$1,742,500

For the 12 month period
ending March 31, 2005.

$1,990,300

For the 12 month period
ending April 30, 2005.

$906,500

For the 12 month period
ending May 31, 2005.

$781,000

For the 12 month period
ending June 30, 2005.

$884,600

For the 12 month period
ending July 31, 2005.

$1,091,900

For the 12 month period
ending August 31, 2005.

$1,370,800

For the 12 month period
ending September 30, 2005.

$1,501,000

For the 12 month period
ending October 31, 2005.

$1,519,500

For the 12 month period
ending November 30, 2005.

$1,806,200

For the 12 month period
ending December 31, 2005.

$3,951,800

For the 12 month period
ending January 31, 2006.

$4,073,900

For the 12 month period
ending February 28, 2006.

$3,768,300

For the 12 month period
ending March 31, 2006.

$3,762,800

For the 12 month period
ending April 30, 2006.

$3,555,200

For the 12 month period
ending May 31, 2006.

$3,151,100

For the 12 month period
ending June 30, 2006.

 

 

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$3,164,100

For the 12 month period
ending July 31, 2006.

$3,173,000

For the 12 month period
ending August 31, 2006.

$3,213,700

For the 12 month period
ending September 30, 2006.

$2,412,500

For the 12 month period
ending October 31, 2006.

$2,785,800

For the 12 month period
ending November 30, 2006.

$1,989,500

For the 12 month period
ending December 31, 2006.

$9,381,000

For the 12 month period
ending January 31, 2007.

$9,891,000

For the 12 month period
ending February 28, 2007.

$9,372,000

For the 12 month period
ending March 31, 2007.

$8,987,000

For the 12 month period
ending April 30, 2007.

$7,894,000

For the 12 month period
ending May 31, 2007.

$7,807,000

For the 12 month period
ending June 30, 2007.

$7,591,000

For the 12 month period
ending July 31, 2007.

$7,152,000

For the 12 month period
ending August 31, 2007.

$7,279,000

For the 12 month period
ending September 30, 2007.

$6,920,000

For the 12 month period
ending October 31, 2007.

 

 

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$7,725,000

For the 12 month period
ending November 30, 2007.

$5,551,000

For the 12 month period
ending December 31, 2007.

$7,350,000

For the 12 month period
ending January 31, 2008.

$7,200,000

For the 12 month period
ending February 29, 2008.

$7,150,000

For the 12 month period
ending March 31, 2008.

$6,915,000

For the 12 month period
ending April 30, 2008.

$6,530,000

For the 12 month period
ending May 31, 2008.

$6,225,000

For the 12 month period
ending June 30, 2008.

$4,000,000

For the 12 month period
ending July 31, 2008.

$4,000,000

For the 12 month period
ending August 31, 2008.

$4,000,000

For the 12 month period
ending September 30, 2008.

the lesser of (a) $1.00 and (b) the actual EBITDA for such 12 month period so
long as the Unused Availability Amount is not less than $3,000,000

For the 12 month period
ending October 31, 2008.

the lesser of (a) $1.00 and (b) the actual EBITDA for such 12 month period so
long as the Unused Availability Amount is not less than $3,000,000

For the 12 month period
ending November 30, 2008.

 

 

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the lesser of (a) $1.00 and (b) the actual EBITDA for such 12 month period so
long as the Unused Availability Amount is not less than $3,000,000

For the 12 month period
ending December 31, 2008.

An amount determined equal to the EBITDA set forth for the relevant period as
set forth in the Projections delivered pursuant to Section 6.3(c) minus
$1,500,000; provided that if Lender does not receive such Projections or the
Projections (including the information contained therein) are not acceptable to
Lender, then the Applicable Amount shall be the lesser of (a) $1.00 and (b)
actual EBITDA for such 12 month period so long as the Unused Availability Amount
is not less than $3,000,000.

For the 12 month period
ending January 31, 2009 and each calendar month thereafter.

 

(c)         Section 7.18 of the Agreement is further amended by inserting
immediately after the end of Section 7.18(b) the following:

 

(c)         Minimum Unused Availability. Maintain an Unused Availability Amount
of at least $2,000,000 at all times.

 

§4.       Conditions to Effectiveness. This Seventh Amendment shall not become
effective until the Lender receives a counterpart of this Seventh Amendment,
executed by the Borrower and the Lender.

 

§5.        Representations and Warranties. The Borrower hereby repeats, on and
as of the date hereof, each of the representations and warranties made by it in
Section 5 of the Agreement (except to the extent of changes resulting from
transactions contemplated or permitted by the Agreement and the other Loan
Documents and changes occurring in the ordinary course of business that singly
or in the aggregate are not materially adverse, and to the extent that such
representations and warranties relate expressly to an earlier date), provided,
that all references therein to the Agreement shall refer to such Agreement as
amended hereby. In addition, the

 

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Borrower hereby represents and warrants that the execution and delivery by the
Borrower of this Seventh Amendment and the performance by the Borrower of all of
its agreements and obligations under the Agreement as amended hereby are within
the authority of the Borrower and have been duly authorized by all necessary
action on the part of the Borrower.

 

§6.        Ratification, Etc. Except as expressly amended hereby, the Agreement,
the other Loan Documents and all documents, instruments and agreements related
thereto are hereby ratified and confirmed in all respects and shall continue in
full force and effect. The Agreement and this Seventh Amendment shall be read
and construed as a single agreement. All references in the Agreement or any
related agreement or instrument to the Agreement shall hereafter refer to the
Agreement as amended hereby.

 

§7.        No Waiver. Nothing contained herein shall constitute a waiver of,
impair or otherwise affect any Obligations, any other obligation of the Borrower
or any rights of the Lender consequent thereon.

 

§8.        Counterparts. This Seventh Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.

 

§9.        Governing Law. THIS SEVENTH AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).

 

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IN WITNESS WHEREOF, the parties hereto have executed this Seventh Amendment as a
document under seal as of the date first above written.

 

 

SWANK, INC.

 

By:

/s/ Jerold R. Kassner

Name:

Jerold R. Kassner

Title:

Executive Vice President

 

WELLS FARGO FOOTHILL, INC.,
a California corporation, as Lender

 

By:

/s/ Sean Spring

Name:

Sean Spring

Title:

Vice President