Exhibit 4.12
THIRD AMENDMENT
TO
TERM LOAN AND CREDIT AGREEMENT
THIS THIRD AMENDMENT OF TERM LOAN AND CREDIT AGREEMENT (the "Third
Amendment") is entered into this 22nd day of May, 1997, by and between Norwest
Bank Colorado, National Association (the "Bank") and the Rocky Mountain
Chocolate Factory, Inc. (the "Borrower").
RECITALS
I. On April 5, 1996, the Borrower and the Bank entered into a Term Loan
and Credit Agreement (the "Agreement") setting forth the terms and conditions of
a revolving line of credit facility and three term loan credit facilities
extended by the Bank to the Borrower.
II. On February 5, 1997, and May 2, 1997, the Bank and the Borrower
entered into agreements amending certain terms of the Agreement (the "First
Amendment" and the "Second Amendment," respectively).
III. The Bank and the Borrower now wish to modify certain other terms of
the Agreement concerning renewal of the Credit and changes of certain covenants.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties agree as follows:
1 INCORPORATION OF RECITALS. The recitals are incorporated herein.
2 CAPITALIZED TERMS. Unless the context requires otherwise, all capitalized
terms in the Second Amendment shall have the same meaning as ascribed to
them in the Agreement, the First Amendment and the Second Amendment.
3 AMENDMENTS. The Agreement is amended as follows:
3.1. Section 1.10 of the Agreement is deleted and replaced with the
following new section 1.10:
"1.10. Borrowing Base Certificate" shall mean a schedule of Borrower's
Accounts Receivable, Acceptable Accounts Receivable, Inventory,
Acceptable Inventory, and Account Receivable agings, executed by an
authorized officer of the Borrower and in form acceptable to the
Bank."
3.2. Section 1.14 of the Agreement is deleted and replaced with the
following new section 1.14:
"1.14. "Credit Maturity Date' shall mean July 31, 1998."
3.3 Section 2.1.2 of the Agreement is deleted and replaced with the
following new section 2.1.2:
"2.1.2. The purpose of the Credit is to finance Accounts Receivable
from the franchise stores and the purchase of raw materials."
3.4. Section 2.4 of the Agreement is deleted in its entirety.
3.5. Section 6 of the Agreement is deleted in its entirety and replaced
with the following new section 6, which new section 6 shall be effective
March 1, 1997:
"6. Affirmative Covenants
The Borrower covenants and agrees that so long as any
Indebtedness remains outstanding hereunder, unless the Bank shall
otherwise consent in writing, it will:
6.1 Pay, when due, all taxes assessed against it or its property
except to the extent and so long as contested in good faith.
6.2 Maintain its corporate existence, comply with all laws and
regulations applicable thereto, and comply with all laws
applicable to the Borrower and the Borrower's business,
including but not limited to all laws governing the
Borrower's franchise operations.
6.3 Furnish to the Bank:
6.3.1. Within 90 days after the end of each fiscal year of
the Borrower (i) a detailed report of audit of the Borrower
for such fiscal year including the balance sheet of the
Borrower as of the end of such fiscal year and the
statements of profit and loss and surplus of the Borrower
for the fiscal year then ended, prepared by independent
certified public accountants satisfactory to the Bank, and
(ii) a certificate of such accountants stating whether, in
making their audit, they have become aware of any Event of
Default set forth in Section 8 hereof, or of any event which
might become such an Event of Default after the lapse of
time or the giving of notice
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and the lapse of time, which has occurred and is then
continuing and, if any such event has occurred and is
continuing, specifying the nature and period of existence
thereof.
6.3.2. Within 30 days after the end of each month, the
balance sheet of the Borrower as of the end of such period
and the statement of profit and loss and surplus of the
Borrower from the beginning of such fiscal year to the end
of such period, unaudited, but certified as correct (subject
to year end adjustments) by an appropriate officer of the
Borrower.
6.3.3. Annually, within 90 days after the Borrower's fiscal
year end, a properly completed United States Securities and
Exchange Commission Form 10K.
6.3.4. Quarterly, within 45 days after the end of each
quarter, a properly completed United States Securities and
Exchange Commission Form 10Q.
6.3.5. Monthly, within 45 days after the end of each
calendar month, Borrowing Base Certificates.
6.3.6. Monthly, a list of all franchisees currently in
default, if any, together with a description of the nature
of each default.
6.3.7. Annually, within 90 days after the end of the
Borrower's fiscal year, a list of monthly projections of the
Borrower's business for the coming year and a list of annual
projections for the coming 3 years.
6.3.8. Annually, a copy of a policy of insurance, showing
the Bank as Loss Payee, Mortgagee, or Additional Insured,
covering all personal and real property of the Borrower, and
its subsidiaries and affiliates, if any.
6.3.9. Promptly upon knowledge thereof, notice of the Bank
in writing of the occurrence of any event which has or
might, after the lapse of time or the giving of notice and
the lapse of time, become an event of default under Section
8 of this Agreement; and,
6.3.10 Promptly, such other information as the Bank may
reasonably request.
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6.4. Maintain present management of the Borrower, present
ownership interest of the Borrower's management, and the
Borrower's present principal place of business.
6.5. Use proceeds from sales of Borrower's assets to repay
borrowings hereunder.
6.6. Maintain at all times its Inventory, Equipment, real estate
and other properties in good condition and repair (normal
wear and tear excepted), and pay and discharge or cause to
be paid and discharged when due, the cost of repairs to or
maintenance of the same, and pay or cause to be paid all
rental or mortgage payments due on such real estate.
6.7. Maintain at all times a ratio of debt to Tangible Net Worth
of not more than 1.00 to 1.00.
6.8. Maintain at all times a ratio of Current Assets to Current
Liabilities of not less than 1.50 to 1.00.
6.9. Maintain at all times a Tangible Net Worth of more than
$9,000,000.00.
6.10. Maintain at all times a minimum Cash Flow Coverage Ratio of
more than 1.25 to 1:00.
6.11. Maintain at all times a
loan-to-value ratio of no more than 75%. If the Bank
reasonably believes that (i) the market value of the
Borrower's real property has declined or (ii) Debt
Service Coverage has fallen below 1:25 to 1:00 or (iii)
regulatory requirements of the Bank have changed, the
Bank may require that the property be reappraised at
the Borrower's expense, and in the event of a decline
in the value of the property, that the Borrower reduce
amounts outstanding under Credit or the Term Loans or
take such other measures as the Bank may require at
that time.
6.12. Maintain at all times a Working Capital of at least
2,250,000.00.
6.13. When requested so to do, make available for inspection by
duly authorized representatives of the Bank any of its books
and records, and furnish the Bank any information regarding
its
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business affairs and financial condition within a
reasonable time after written request therefor.
6.14. Promptly notify the Bank of any defaults occurring
with any franchisee of the Borrower, of any litigation
initiated against the Borrower, and of the Borrower's
intent to acquire additional factory facilities or
other business operations."
3.6 Section 7.3 of the Agreement is deleted and replaced with the
following new section 7.3, which new section 7.3 shall be effective as of
March 1, 1997:
"7.3. Permit the aggregate amount of the Borrower's capital
expenditures for fixed assets, including but not limited to fixed
asset leases and lease purchases, to exceed $1,750,000.00 annually."
4 NEW LOANS. The Borrower agrees to inform the Bank of the Borrower's
intentions, if any, to incur new debt in order to perm the Bank to
offer financing of such new debt to the Borrower.
5 REPRESENTATION AND WARRANTIES. The Borrower restates and reaffirms
all warranties made in the Agreement, and represents and warrants that
no Event of Default or event that, with the passing of time may become
an Event of Default has occurred or is occurring, except for those
Events of Default or events previously disclosed to the Bank or
acknowledged by the Bank in writing.
6. INTEGRATION OF AGREEMENTS. The Agreement, the First Amendment, the
Second Amendment, and the Third Amendment shall be read together so
as to give effect to the terms of all. All terms and provisions set
forth in the Agreement, the First Amendment, and the Second Amendment
that are not specifically amended herein shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BANK:
Norwest Bank Colorado, National Association
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President
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BORROWER:
Rocky Mountain Chocolate Factory, Inc.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Title: Chief Financial Officer
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