Modification Agreement - SkyMall Inc., Durham & Co. and Imperial Bank
MODIFICATION AGREEMENT
BY THIS MODIFICATION AGREEMENT, made and entered into as of the 1st
day of September, 1999, SKYMALL, INC., a Nevada corporation, skymall.com, inc.,
a Nevada corporation, and DURHAM & COMPANY, a Utah corporation (severally and
collectively, the "Borrower"), and IMPERIAL BANK, a California banking
corporation (the "Lender"), confirm and agree as follows:
SECTION 1. RECITALS.
1.1 Borrower and Lender entered into a Credit and Security Agreement
dated June 30, 1999 (as amended from time to time, the "Credit Agreement"),
which provides for a revolving line of credit (the "RLC") by Lender to Borrower
in the amount of $10,000,000.00 upon the terms and conditions contained therein.
All undefined capitalized terms used herein shall have the meaning given them in
the Credit Agreement.
1.2 The RLC is evidenced by a Revolving Promissory Note dated June
30, 1999, executed by Borrower, payable to the order of Lender, in the principal
amount of $10,000,000.00 (the "RLC Note").
1.3 The RLC is secured by the Security Documents.
1.4 Borrower has requested that Lender temporarily modify the Credit
Agreement until the Invested Capital Condition has been satisfied or until the
conditions contained in Section 3.6 herein have been satisfied. Lender is
willing to temporarily modify the Credit Agreement subject to the terms and
conditions contained herein.
SECTION 2. MODIFICATION OF CREDIT DOCUMENTS.
2.1 From and after the date hereof through and until the Invested
Capital Condition or the conditions contained in Section 3.6 herein have been
satisfied (the "Temporary Change Period"), the following definitions in Section
1.1 of the Credit Agreement are hereby amended to read as follows:
"RLC Commitment" means Ten Million Dollars ($10,000,000.00).
2.2 During the Temporary Change Period only, Section 1.1 of the
Credit Agreement is hereby amended by the addition of the following
definition(s):
"Cash Collateral" means an amount equal to one hundred percent
(100%) of the Trust's cash holdings that are subject to that Security Agreement
dated August 23, 1999, executed by the Trust in favor of Lender.
"Guarantor" means Robert M. and Christi M. Worsley, husband and
wife.
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"Maximum Adjusted Cash Flow Loan Amount" means an amount equal to
the lesser of (i) $5,000,000.00 and (ii) an amount not to exceed two and
one-half times (2.50x) Borrower's Adjusted Cash Flow for the preceding four (4)
quarters, measured on a quarterly basis in advance.
"Maximum Guaranteed Loan Amount" means an amount equal to the
lesser of (i) $5,000,000.00 and (ii) an amount not to exceed the sum of (A) the
Stock Collateral, plus (B) the Cash Collateral.
"Stock Collateral" means an amount equal to seventy-five percent
(75%) of the Trust's stock equity in stock that is subject to that Security
Agreement dated August 23, 1999, executed by the Trust in favor of Lender.
"Trust" means The Robert Merrill Worsley and Christi Marie
Worsley Family Revocable Trust dated July 28, 1998.
2.3 During the Temporary Change Period only, Section 2.1 of the
Credit Agreement is hereby amended to read as follows:
Section 2.1 RLC COMMITMENT. Lender agrees to loan to or for the
benefit of Borrower, and Borrower shall be entitled to draw upon and borrow in
the manner and upon the terms and conditions contained in this Agreement, an
amount, (the "Maximum RLC Loan Amount") not to exceed the lesser of the
following:
(a) The RLC Commitment.
(b) An amount equal to the sum of (i) the Maximum Adjusted Cash
Flow Loan Amount, plus (ii) the Maximum Guaranteed Loan Amount.
2.4 During the Temporary Change Period only, Section 7.1 of the
Credit Agreement is hereby amended by the addition of the following sub-section
7.1(m):
(m) as soon as possible, and in any event within twenty (20)
days after the end of each month, a monthly statement of Guarantor's stock and
cash holdings, in form and level of detail reasonably satisfactory to Lender;
and accompanied by a certificate of the chief financial officer of the Borrower,
substantially in the form of Exhibit D-1 hereto.
2.5 During the Temporary Change Period only, Section 9.1 of the
Credit Agreement is hereby amended to read as follows:
Section 9.1 EVENTS OF DEFAULT. "Event of Default", wherever used
herein, means any one of the following events:
(a) Default in the payment of any interest on or principal of the
RLC Note when it becomes due and payable, which default continues for a period
of ten (10) days; or
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(b) Default in the payment of any fees, commissions, costs or
expenses required to be paid by the Borrower under this Agreement, which default
continues for a period of thirty (30) days after the Lender has given written
notice thereof; or
(c) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in sections 7.12 through and including 7.16
of this Agreement; or
(d) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in this Agreement (other than sections 7.12
through and including 7.16 which are covered in the prior subsection), which
default continues for a period of twenty (20) days after the Lender has given
written notice thereof; or
(e) The Borrower or any guarantor shall be or become insolvent,
or admit in writing its inability to pay its debts as they mature, or make an
assignment for the benefit of creditors; or the Borrower or such guarantor shall
apply for or consent to the appointment of any receiver, trustee, or similar
officer for it or for all or any substantial part of its property; or such
receiver, trustee or similar officer shall be appointed without the application
or consent of the Borrower or such guarantor, as the case may be; or the
Borrower or such guarantor shall institute (by petition, application, answer,
consent or otherwise) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding relating to
it under the laws of any jurisdiction; or any such proceeding shall be
instituted (by petition, application or otherwise) against the Borrower or such
guarantor; or any judgment, writ, warrant of attachment, garnishment or
execution or similar process shall be issued or levied against a substantial
part of the property of the Borrower or such guarantor; or
(f) A petition shall be filed by or against the Borrower or any
guarantor under the United States Bankruptcy Code naming the Borrower or such
guarantor as debtor; or
(g) Any representation or warranty made by the Borrower in this
Agreement, or by the Borrower (or any of its officers) in any agreement,
certificate, instrument or financial statement or other statement contemplated
by or made or delivered pursuant to or in connection with this Agreement shall
prove to have been incorrect in any material respect when deemed to be
effective; or
(h) The rendering against the Borrower or any guarantor of a
final judgment, decree or order for the payment of money in excess of Five
Hundred Thousand Dollars ($500,000) and the continuance of such judgment, decree
or order unsatisfied and in effect for any period of thirty (30) consecutive
days without a stay of execution; or
(i) A material default under any bond, debenture, note or other
evidence of indebtedness of the Borrower or any guarantor owed to any Person
other than the Lender, or under any indenture or other instrument under which
any such evidence of indebtedness has been issued or by which it is governed, or
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under any lease of any of the Premises, and the expiration of the applicable
period of grace, if any, specified in such evidence of indebtedness, indenture,
other instrument or lease, which default continues for a period of thirty (30)
days; or
(j) Any Reportable Event, which the Lender determines in good
faith might constitute grounds for the termination of any Plan or for the
appointment by the appropriate United States District Court of a trustee to
administer any Plan, shall have occurred and be continuing 30 days after written
notice to such effect shall have been given to the Borrower by the Lender; or a
trustee shall have been appointed by an appropriate United States District Court
to administer any Plan; or the Pension Benefit Guaranty Corporation shall have
instituted proceedings to terminate any Plan or to appoint a trustee to
administer any Plan; or the Borrower shall have filed for a distress termination
of any Plan under Title IV of ERISA; or the Borrower shall have failed to make
any quarterly contribution required with respect to any Plan under Section
412(m) of the Internal Revenue Code of 1986, as amended, which the Lender
determines in good faith may by itself, or in combination with any such failures
that the Lender may determine are likely to occur in the future, result in the
imposition of a lien on the assets of the Borrower in favor of the Plan; or
(k) An event of default shall occur under any Security Document
or under any other security agreement, mortgage, deed of trust, assignment or
other instrument or agreement securing any obligations of the Borrower hereunder
or under any note (other than any obligations to pay principal and interest
under the RLC Note, which are covered in subsection (a) above), which continues
for a period of twenty (20) days after the Lender has given written notice
thereof; or
(l) The Borrower or any guarantor shall liquidate, dissolve,
terminate or suspend its business operations or otherwise fail to operate its
business in the ordinary course, or sell all or substantially all of its assets,
without the prior written consent of the Lender; or
(m) The Borrower or any guarantor shall fail to pay, withhold,
collect or remit any tax or tax deficiency when assessed or due (other than any
tax deficiency which is being contested in good faith and by proper proceedings
and for which it shall have set aside on its books adequate reserves therefor)
except as allowed by Section 7.5 or notice of any state or federal tax liens
shall be filed or issued, which continues for a period of thirty (30) days after
any such event has occurred; or
(n) Default in the payment of any amount owed by the Borrower or
any guarantor to the Lender other than any indebtedness arising hereunder, and
the expiration of the applicable period of grace, if any, specified in the
evidence of indebtedness; or
(o) Any breach, default or event of default by or attributable
to any Affiliate under any agreement between such Affiliate and the Lender, and
the expiration of the applicable period of grace, if any, specified in such
agreement; or
(p) Any default under that certain Continuing Guarantee dated
August 23, 1999, executed by Guarantor for the benefit of Lender or that certain
Security Agreement dated August 23, 1999, executed by the Trust for the benefit
of Lender.
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2.6 During the Temporary Change Period only, The Credit Agreement is
amended by the addition of Exhibit D-1 as attached hereto.
SECTION 3. OTHER MODIFICATIONS, RATIFICATIONS AND AGREEMENTS.
3.1 All references to the Credit Agreement in the RLC Note and in the
Security Documents are hereby amended to refer to the Credit Agreement as hereby
amended.
3.2 Borrower acknowledges that the indebtedness evidenced by the RLC
Note is just and owing, that the balance thereof in the amount of $4,925,250.00
on August 23, 1999 is correctly shown in the records of Lender as of the date
hereof, and Borrower agrees to pay the indebtedness evidenced by the RLC Note
and the indebtedness secured by the Security Documents, according to the terms
thereof, as herein modified.
3.3 Borrower hereby reaffirms to Lender each of the representations,
warranties, covenants and agreements of Borrower set forth in the RLC Note, the
Credit Agreement and all Security Documents, with the same force and effect as
if each were separately stated herein and made as of the date hereof.
3.4 Borrower hereby ratifies, reaffirms, acknowledges, and agrees
that the RLC Note, the Credit Agreement and the Security Documents represent
valid, enforceable and collectible obligations of Borrower, and that there are
no existing claims, defenses, personal or otherwise, or rights of setoff
whatsoever with respect to any of these documents or instruments. In addition,
Borrower hereby expressly waives, releases and absolutely and forever discharges
Lender and its present and former shareholders, directors, officers, employees
and agents, and their separate and respective heirs, personal representatives,
successors and assigns, from any and all liabilities, claims, demands, damages,
action and causes of action, whether known or unknown and whether contingent or
matured, that Borrower may now have, or has had prior to the date hereof, or
that may hereafter arise with respect to acts, omissions or events occurring
prior to the date hereof and, without limiting the generality of the foregoing,
from any and all liabilities, claims, demands, damages, actions and causes of
action, known or unknown, contingent or matured, arising out of, or in any way
connected with, the RLC. Borrower further acknowledges and represents that,
except as acknowledged above, no event has occurred and no condition exists
that, after notice or lapse of time, or both, would constitute a default under
this Agreement, the RLC Note, the Credit Agreement or any Security Document.
3.5 All terms, conditions and provisions of the RLC Note, the Credit
Agreement and the Security Documents are continued in full force and effect and
shall remain unaffected and unchanged except as specifically amended hereby. The
RLC Note, the Credit Agreement and the Security Documents, as amended hereby,
are hereby ratified and reaffirmed by Borrower, and Borrower specifically
acknowledges the validity and enforceability thereof.
3.6 The Temporary Change Period shall terminate upon the satisfaction
of the following conditions precedent:
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(a) Lender shall have received from Borrower written notice of
the requested termination of the Temporary Change Period at least ten (10) days
before such termination.
(b) No Event of Default and no event that with the giving of
notice or the passage of time, or both, would be an Event of Default, shall have
occurred and be continuing on the date of Borrower's notice and on the effective
date of such termination; and
(c) The outstanding principal balance of the Loan shall be an
amount not to exceed the lesser of:
(i) The RLC Commitment ; and
(ii) An amount not to exceed two and one-half times (2.50x)
Borrower's Adjusted Cash Flow for the preceding four (4) quarters, measured
on a quarterly basis in advance.
SECTION 4. GENERAL.
4.1 This Agreement in no way acts as a release or relinquishment of
those liens, security interests and rights securing payment of the RLC,
including, without limitation, the liens created by the Security Documents. Such
liens, security interests and rights are hereby ratified, confirmed, renewed and
extended by Borrower in all respects.
4.2 The modifications contained herein shall not be binding upon
Lender until Lender shall have received all of the following:
(a) An original of this Agreement fully executed by Borrower;
(b) An original Continuing Guarantee executed by Robert M. and
Christi M. Worsley, husband and wife;
(c) An original Security Agreement executed by Robert Merrill
Worsley and Christi Marie Worsley, as Trustees of The Robert Merrill Worsley and
Christi Marie Worsley Family Revocable Trust dated July 28, 1998 ("Trust");
(d) An original Securities Account Control Agreement fully
executed by Borrower, Trust and Intermediary (as defined therein);
(e) The additional non-refundable commitment fee in the amount
of $50,000.00;
(f) A Certification of Trust Agreement executed by all the
trustees and/or settlors of the Trust; and
(g) Such other documents as Lender may reasonably require.
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4.3 Borrower shall execute and deliver such additional documents and
do such other acts as Lender may reasonably require to fully implement the
intent of this Agreement.
4.4 Borrower shall pay all costs and expenses, including, but not
limited to, reasonable attorneys' fees incurred by Lender in connection
herewith, whether or not all of the conditions described in Paragraph 4.2 above
are satisfied. Lender, at its option, but without any obligation to do so, may
advance funds to pay any such costs and expenses that are the obligation of the
Borrower, and all such funds advanced shall bear interest at the highest rate
provided in the RLC Note, shall be due and payable upon demand and shall be
secured by all of the Security Documents.
4.5 Notwithstanding anything to the contrary contained herein or in
any other instrument executed by Borrower or Lender, or in any other action or
conduct undertaken by Borrower or Lender on or before the date hereof, the
agreements, covenants and provisions contained herein shall constitute the only
evidence of Lender's consent to modify the terms and provisions of the RLC Note,
the Credit Agreement or any Security Documents. Accordingly, no express or
implied consent to any further modifications involving any of the matters set
forth in this Agreement or otherwise shall be inferred or implied by Lender's
execution of this Agreement. Further, Lender's execution of this Agreement shall
not constitute a waiver (either express or implied) of the requirement that any
further modification of the RLC or of the RLC Note, the Credit Agreement or any
Security Document shall require the express written approval of Lender; no such
approval (either express or implied) has been given as of the date hereof.
4.6 Notwithstanding this or any prior forbearance, actual or implied,
of any nature by Lender, time is hereby declared to be of the essence hereof, of
the RLC, of the RLC Note, of the Credit Agreement and of all Security Documents,
and Lender requires, and Borrower agrees to, strict performance of each and
every covenant, condition, provision and agreement hereof, of the RLC Note, of
the Credit Agreement and of all Security Documents.
4.7 This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their heirs, personal representatives,
successors and assigns.
4.8 This Agreement is made for the sole protection and benefit of the
parties hereto, and no other person or entity shall have any right of action
hereon.
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4.9 This Agreement shall be governed by and construed according to
the laws of the State of California.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
SKYMALL, INC., a Nevada corporation
By: /s/ Stephen R. Peterson
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Name: Stephen R. Peterson
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Title: Chief Financial Officer
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skymall.com, inc., a Nevada corporation
By: /s/ Stephen R. Peterson
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Name: Stephen R. Peterson
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Title: Chief Financial Officer
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DURHAM & COMPANY, a Utah corporation
By: /s/ Stephen R. Peterson
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Name: Stephen R. Peterson
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Title: Chief Financial Officer
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BORROWER
IMPERIAL BANK, a California banking
corporation
By: /s/ R. Mark Chambers
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Name: R. Mark Chambers
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Title: Vice President
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