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Exhibit 10.1
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FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT BANKBOSTON RETAIL FINANCE INC.
AGENT
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July 17, 1998
THIS FIRST AMENDMENT is made to the Loan and Security Agreement (the "LOAN
AGREEMENT") dated as of January 30, 1998, between
BankBoston Retail Finance Inc. (in such capacity, the "AGENT"), a
Delaware corporation with offices at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as agent for the ratable benefit of the "LENDERS",
who are, at present, those financial institutions identified on the
signature pages of the within Agreement and who in the future are those
Persons (if any) who become "Lenders" in accordance with the provisions
of Section 2-18 of the Loan Agreement,
and
Factory Card Outlet of America, Ltd. (hereinafter, the "BORROWER"),
an Illinois corporation with its principal executive offices at ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
in consideration of the mutual covenants contained herein and benefits to be
derived herefrom,
WITNESSETH:
1. AGREEMENT TO AMEND
Provided each of those "Conditions to Amendment" set forth in Section 2,
below, is satisfied on or before July 31, 1998, the Loan Agreement shall be
amended, as set forth below, such amendment to take effect contemporaneous with
the making of the Tranche B Loan (as described in the Amendments to Article 1
of the Loan Agreement, below):
ARTICLE 1 of the Loan Agreement is Amended so that the Definitions
of the following terms, included therein, read as follows:
"APPLICABLE ADVANCE RATE": The following percentage during the period
indicated:
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FROM TO RATE
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December 1 March 31 50%
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April 1 June 30 55%
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July 1 August 31 50%
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September 1 November 30 55% 50%
(1998) (1999
and 2000)
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"Base Margin Rate": (a) Base plus ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, subject, however, to
reduction as provided in (b) and (c) of this Definition.
(b) Base plus 25 Basis Points, commencing not more than 10
Business Days after the Agent's being providing with a certificate,
from the Borrower's accountants, which confirms (with supporting
calculations) that the Borrower's Consolidated EBITDA for its
fiscal year ending in January, 1999, was not less than
$14,000,000.00, but only if the Borrower's average daily Excess
Availability, during its fiscal month of January, 1999, was not
less than $4,000,000.00 and no Event of Default has occurred.
(c) Base, commencing not more than 10 Business Days after
the Agent's being providing with a certificate, from the Borrower's
accountants, which confirms (with supporting calculations) that the
Borrower's Consolidated EBITDA for its fiscal year ending in
January, 2000, was not less than $19,000,000.00, but only if the
Borrower's average daily Excess Availability, during its fiscal
month of January, 2000, was not less than $10,000,000.00 and no
Event of Default has occurred.
In all instances, the "Base Margin Rate" shall be determined on a
360 day year and actual days elapsed.
"BUSINESS PLAN": The Borrower's annual business plan dated June 24, 1998
which has been furnished to the Agent, and the projections hereafter
furnished to the Agent in accordance with the provisions of Section
5-11(c) hereof.
"CONSOLIDATED EBITDA": The Borrower's Consolidated earnings (excluding
any non-cash restructuring charges, non-cash write-offs or
write-downs of capital assets) before interest, taxes, depreciation,
and amortization, each as determined in accordance with GAAP.
"EXCESS PACKAWAY INVENTORY": (a) Until December 31, 1998:
Packaway Inventory then having an aggregate Cost in excess of the
product of (a) the per store cost for Packaway Inventory for the
relevant month, as set forth on EXHIBIT 1-0(b),
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annexed hereto, multiplied by (b) the number of Stores in
operation on the first day of the relevant month,
(b) On and after January 1,1999:
Packaway Inventory having a Cost in excess of the following
percentage of all Inventory:
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FROM TO PERCENTAGE
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January 1, 1999 June 29, 1999 6%
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June 30, 1999 January 30, 2000 5%
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January 31, 2000 Maturity Date 3%
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"LIBOR MARGIN": (a) ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, subject, however, to reduction as
provided in (b) and (c) of this Definition.
(b) ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, commencing not more than 10 Business
Days after the Agent's being providing with a certificate, from the
Borrower's accountants, which confirms (with supporting
calculations) that the Borrower's Consolidated EBITDA for its
fiscal year ending in January, 1999, was not less than
$14,000,000.00, but only if the Borrower's average daily Excess
Availability, during its fiscal month of January, 1999, was not
less than $4,000,000.00 and no Event of Default has occurred.
(c) ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, commencing not more than 10 Business
Days after the Agent's being providing with a certificate, from the
Borrower's accountants, which confirms (with supporting
calculations) that the Borrower's Consolidated EBITDA for its
fiscal year ending in January, 2000, was not less than
$19,000,000.00, but only if the Borrower's average daily Excess
Availability, during its fiscal month of January, 2000, was not
less than $10,000,000.00 and no Event of Default has occurred.
"LOAN DOCUMENTS": The within Agreement, each instrument and document executed
and/or delivered as contemplated by Article 3, below, and each
other instrument or document from time to time executed and/or
delivered in connection with the arrangements contemplated hereby
or in connection with any transaction with the Agent or any Lender
or any Affiliate of the Agent or any Lender, including, without
limitation, any transaction which arises out of any cash
management, depository, investment, letter of credit, interest rate
protection, or equipment leasing services provided by the Agent or
any Lender or any
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Affiliate of the Agent or any Lender, as each may be amended from time to
time. (The "Loan Documents" do not include any Tranche B Loan
Documents).
"YEAR 2000 PROBLEM": The risk that a computer application which is
material to the operation of the Borrower is unlikely to recognize
certain dates or properly perform date sensitive functions involving
dates prior to and after December 31, 1999.
ARTICLE 1 of the Loan Agreement is amended by the addition of the
following Definitions in alphabetical order therein:
"CONSOLIDATED FIXED CHARGES": Cash payments for Consolidated Capital
Expenditures and income taxes.
"CONSOLIDATED FIXED CHARGE RATIO": The following, for the period being
calculated:
(Consolidated EBITDA minus Consolidated Fixed Charges) (Cash
payments of principal of all funded debt other than the Revolving
Credit plus cash payments of interest on all funded debt plus cash
payments on Capital Leases)
"CONSOLIDATED CAPITAL EXPENDITURES": Cash payments for the purchase of
assets or the incurrence of liabilities, the purchase or incurrence
of which may be capitalized in accordance with GAAP.
"TRANCHE B LENDER": Back Bay Capital, LLC, a Delaware limited partnership
with its offices at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇.
"TRANCHE B LOAN": The $10,000,000.00 term loan made to the Borrower on or
about July 17, 1998, by the Tranche B Lender.
"TRANCHE B LOAN AGREEMENT": The Loan and Security Agreement between the
Borrower and the Tranche B Lender pursuant to which the Tranche B
Loan was made, as amended from time to time.
"TRANCHE B LOAN DOCUMENTS": "Loan Documents" as defined in the Tranche B
Loan Agreement.
"UMBRELLA CAP": Described in Section 2-1(e).
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"TRAILING TWELVE MONTH CONSOLIDATED EBITDA CERTIFICATE."
ARTICLE 1 is amended by the deletion of the following Definitions
included therein:
"TRAILING TWELVE MONTH CONSOLIDATED NET INCOME CERTIFICATE"
"TRAILING TWELVE MONTH"
SECTION 2-1(a) of the Loan Agreement is amended to read as follows:
(a) The Lenders hereby establish a revolving line of credit (the
"REVOLVING CREDIT") in the Borrower's favor pursuant to which each Lender,
subject to, and in accordance with, the within Agreement, acting through the
Agent, shall make loans and advances and otherwise provide financial
accommodations to and for the account of the Borrower as provided herein, in
each instance equal to that Lender's Commitment Percentage of Availability, up
to the maximum amount of that Lender's Dollar Commitment, but subject,
commencing on October 1, 1999, to the Umbrella Cap. The amount of the Revolving
Credit shall be determined by the Agent by reference to Availability, as
determined by the Agent from time to time hereafter. All loans made under this
Agreement, and all of the Borrower's other Liabilities under or pursuant to
this Agreement, are payable as provided herein.
SECTION 2-1(d) of the Loan Agreement is amended to read as follows:
(d) The proceeds of borrowings under the Revolving Credit shall be used
solely in accordance with the Business Plan for working capital purposes of the
Borrower and general corporate purposes, all solely to the extent permitted by
the within Agreement. No proceeds of the Revolving Credit may be used, directly
or indirectly, to repay any of the principal owed under the Tranche B Loan.
SECTION 2-1 of the Loan Agreement is amended by the addition of the
following as Section (e) thereof:
(e) Commencing on October 1, 1999, and at all times thereafter, the
aggregate of (i) the unpaid principal balance of Loan Account plus (ii) the
stated amount of outstanding L/C's plus (iii) Availability Reserves, shall not
exceed 85% of the appraised value of Acceptable Inventory as stated on the then
most recent inventory appraisal. The Borrower's compliance with this Section
2-1(e) may be measured, in the Agent's discretion, by synthetic appraised
values for up to six months after the date of the subject appraisal, which
synthetic appraised values shall be determined by the application of an
analytical methodology which is consistent with standard industry practice and
shall be based on the
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Business Plan; the Borrower's financial statements and performance; and current
operating trends . The foregoing limitation (herein, the "UMBRELLA CAP") shall
take effect on not less than Ten (10) Business Days notice by the Agent to the
Borrower of the then effective appraised value or synthetic appraised value of
the Borrower's Acceptable Inventory and any change to the Umbrella Cap shall
likewise taken effect on not less than Ten (10) Business Days notice by the
Agent to the Borrower of the then effective appraised value or synthetic
appraised value of the Borrower's Acceptable Inventory.
SECTION 2-9(b) of the Loan Agreement is amended to read as follows:
(b) The Borrower, without notice or demand from the Agent or any
Lender, shall pay the Agent those amounts, from time to time, which are
necessary, as follows:
(i) So that the unpaid balance of the Loan Account does not exceed
Borrowing Base, provided, however, in the event that, solely by reason of
the creation of one or more Reserves not extant when a Revolving Credit
Loan is made, the unpaid principal balance of the Loan Account exceeds
the Borrowing Base, then the Borrower shall have up to ten (10) Business
Days from the date on which the Loan Account first so exceeded the
Borrowing Base by reason of such creation, to cause the unpaid principal
balance of the Loan Account to not exceed Borrowing Base (during which
period, neither the Agent nor any Lender shall have any obligation to
make any advance under the Revolving Credit nor to provide any other
financial accommodations contemplated by this Agreement). The adjustment
or resetting of a then existing Reserve, by reason of changed
circumstances, shall not be deemed the creation of a Reserve as to which
the foregoing proviso shall apply.
(ii) So that the Borrower is in compliance with the Umbrella Cap
described in Section 2-1(e).
(ii) So that the Borrower is in compliance with the BaseLine
Covenant. Any payments made pursuant to this Section 2-9(b) shall be applied
first to Base Margin Loans and only then to Libor Loans.
SECTION 4-4(b) of the Loan Agreement is amended to read as follows:
(b) The Borrower's Year 2000 Problem is described on EXHIBIT 4-4,
annexed hereto. The Borrower will cure its Year 2000 Problem by no later than
August 31, 1999.
SECTION 4-5(a) of the Loan Agreement is amended so that its introductory
provision reads as follows:
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(a) At the execution of this Agreement, the Collateral, and the books,
records, and papers of Borrower pertaining thereto, are kept and maintained only
at the Borrower's chief executive offices at
SECTION 4-5(b)(iii) of the Loan Agreement is amended to read as follows:
(iii) store and transport the Collateral to and from such locations
and utilize such of the Collateral as is removed from such locations in
the ordinary course of business (such as motor vehicles).
SECTION 4-5(e) of the Loan Agreement is amended by the addition of the
following as Section (vi) thereof:
(vi) Not more than the following number of new stores may be opened
during the period indicated:
(a) July 1, 1998 to the end of the Borrower's fiscal year in
January, 1999: 15 new Stores.
(b) During the Borrower's fiscal year ending in January, 2000: 14
new Stores.
SECTION 4-6(a) of the Loan Agreement is amended by the addition of the
following as Section (iv) thereof:
(iv) Encumbrances in favor of the Tranche B Lender.
SECTION 4-7 of the Loan Agreement is amended by the addition of the
following as Section (d) thereof:
(d) Indebtedness on account of the Tranche B Loan. The Borrower
shall not amend any of the Tranche B Loan Documents, except upon the prior
written consent of the Agent in each instance.
SECTION 4-24(a) of the Loan Agreement is amended to read as follows:
(a) All financial statements furnished to the Lender by or on behalf of
the Borrower have been prepared in accordance with GAAP consistently applied and
present fairly the condition of the Borrower at the date(s) thereof and the
results of operations and cash flows for the period(s) covered. There has been
no change in the financial condition, results of operations, or cash flows of
the Borrower since the date(s) of such financial statements, other than changes
in the ordinary course of business,
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which changes have not been materially adverse, either singularly or in the
aggregate which has not been disclosed in writing to the Agent and each Lender
prior to the execution of the within Agreement.
SECTION 5-3(a)(iii) of the Loan Agreement is amended to read as follows:
(iii) Any failure of the Borrower to make payment to any
creditor, which payment, when aggregated with all other payments claimed
by that creditor to be due to that creditor, aggregates more than
$250,000.00 prior to such amount's becoming more than the following
number of days past customary payment dates of such creditor (other than
the failure to make such payment on account of a bona fide good faith
dispute with the subject creditor): (x) if prior to October 1, 1998,
sixty (60) days; (y) if after October 1, 1998, thirty (30) days.
SECTION 5-3(a) of the Loan Agreement is amended by the addition of the
following Section thereof:
(ix) The occurrence of any "Event of Default" (within the meaning
of the Tranche B Loan Agreement) or of any Suspension Event.
SECTION 5-6(a)(i) of the Loan Agreement is amended to read as follows:
(i) For all of its fiscal months, other than its fiscal January,
the Borrower shall provide the following within fifteen (15) days of the
end of the previous month and for its fiscal January, the Borrower shall
provide the following within thirty (30) days of the end of the previous
month:
SECTION 5-6(a)(ii)(F) AND (G) are amended to read as follows:
(F) Omitted.
(G) Omitted.
SECTION 5-10 of the Loan Agreement is amended by the addition of the
following preamble:
In all events, each of the limits (if any) on the number of events
which may take place in any Twelve (12) month period, and each "cap" (if
any) on costs and expenses for which the Borrower is obligated, as
included in this Section 5-10 shall be applied as if the like event or
payment of such costs and expenses, under the cognate styled Section of
the Tranche B Loan Agreement had taken place or been made under this
Section 5-10, it being the intention of the parties that the Borrower
shall not be subjected to a doubling of the number of such events or of
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such costs and expenses by reason of the inclusion of such requirements
in the Tranche B Loan Agreement and in this Section 5-10.
SECTION 5-10(c) of the Loan Agreement is amended to read as follows:
(c) The Borrower shall permit the Agent to obtain appraisals of the
Borrower's Inventory, conducted by such appraisers as are satisfactory to the
Agent. Provided that no Suspension Event has occurred, the Borrower shall be
obligated to reimburse the Agent for not more than (i) $55,000.00 of the fees
charged, in any twelve (12) month period, plus (ii) reasonable out of pocket
expenses. In the event that a Suspension Event has occurred, the Borrower shall
reimburse the Agent for the fees and expenses for each such appraisal without
regard to the forgoing fee cap. The Agent shall provide the Borrower with a
copy of each appraisal obtained pursuant to this Section 5-10(c) promptly
following receipt by the Agent. Notwithstanding any input which may be provided
to the appraiser by or on behalf of the Agent in connection with the preparation
of the subject appraisal and the conclusions and recommendations included
therein, each such appraisal, conclusions, and recommendations, shall be deemed
to have been prepared and provided by a Person which, as to the Agent, is an
independent contractor.
SECTION 5-12 of the Loan Agreement is amended to read as follows:
5-12. Financial Performance Covenants. The Borrower shall observe and
comply with those financial performance covenants set forth on EXHIBIT 5-12,
annexed hereto. Compliance with such financial performance covenants shall be
made as if no Material Accounting Changes had been made. The Agent may
determine the Borrower's compliance with such covenants based upon financial
reports and statements provided by the Borrower to the Agent (whether or not
such financial reports and statements are required to be furnished pursuant to
the within Agreement).
ARTICLE 5 of the Loan Agreement is amended by the addition of the
following as Section 5-11A thereof:
5-11A. Coordination with Tranche B Lender
(a) The Agent shall endeavor to coordinate the application of the
financial reporting requirements included in the Loan Documents with those which
are imposed upon the Borrower under the Tranche B Loan Documents, with a view
towards the containment of compliance costs to, and avoidance of the imposition
of redundant compliance burdens on, the Borrower on account of such financial
reporting requirements imposed under the Tranche B Loan documents and those
which are included herein.
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(b) The Borrower hereby consents to and authorizes the Agent to
provide the Tranche B Lender with copies of all financial statements, reports,
analysis, inventory appraisals, field audits, and other materials received or
developed by or for the Agent in the Agent's administration of the financial
transaction contemplated by the Loan Documents and to share all information and
opinions likewise received, developed, or reached by the Agent in such
administration.
SECTION 7-4 of the Loan Agreement is amended to read as follows:
7-4. Proceeds and Collection of Accounts.
(a) All Receipts constitute Collateral and proceeds of Collateral
and shall be held in trust by the Borrower for the Agent; shall not be
commingled with any of the Borrower's other funds; and shall be deposited and/or
transferred only to the Concentration Account.
(b) The Borrower shall cause the ACH or wire transfer to the
Concentration Amount, no less frequently than daily (and whether or not there is
then an outstanding balance in the Loan Account) of
(i) the then contents of each DDA (other than the Funding
Account), each such transfer to be net of any minimum balance, not to
exceed, with respect to each such DDA, the aggregate of $1,000.00 plus
not more than the sales deposited to that DDA since the then most recent
Business Day); and
(ii) the proceeds of all credit card charges not otherwise
provided for pursuant hereto.
At the Agent's request, from time to time, telephone advice (confirmed by
written notice) shall be provided to the Agent on each Business Day on which any
such transfer is made.
(c) In the event that, notwithstanding the provisions of this
Section 7-4, the Borrower receives or otherwise has dominion and control
of any Receipts, or any proceeds or collections of any Collateral, at a
time when such Receipts are to be transferred to the Concentration
Account, such Receipts, proceeds, and collections shall be held in trust
by the Borrower for the Agent and shall not be commingled with any of the
Borrower's other funds or deposited in any account of the Borrower other
than as instructed by the Agent.
SECTION 10-6 of the Loan Agreement is amended by the addition of the
following as Section (c) thereof:
(c) The occurrence of any "Event of Default" within the meaning of
the Tranche B Loan Agreement.
SECTION 12-1 of the Loan Agreement is amended so that the following
notice addresses, included therein, read as follows:
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If to the Agent:
BankBoston Retail Finance Inc., Agent
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention : ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Director
Fax : ▇▇▇ ▇▇▇-▇▇▇▇
Copies of Notices to the Borrower:
Sonnenschein, Nath & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention : ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esquire and Attorney ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax : ▇▇▇ ▇▇▇-▇▇▇▇
SECTION 14-7 of the Loan Agreement is amended by the addition of the
following Section:
(e) Prior to, or within a reasonable period after, the Agent's charging
any cost or expense to the Borrower as provided in this Section 14-7, the Agent
shall provide the Borrower with a copy of the invoice against which such cost or
expense was so charged or other written explanation of such charge or expense.
EXHIBIT 4-4, annexed to this First Amendment, is added as EXHIBIT 4-2 of
the Loan Agreement.
EXHIBIT 5-12, annexed to this First Amendment, is added as EXHIBIT 5-12
of the Loan Agreement.
2. CONDITIONS TO EFFECTIVENESS OF AMENDMENT
The within Amendment shall be effective if each of the following
conditions is satisfied on or before July 31, 1998 and on the date on which such
amendment is to take effect, no Event of Default (as defined in the Loan
Agreement) is extant:
(1) Receipt by the Agent of a Certificate setting forth the text of the
resolutions adopted by the Directors of the Borrower authorizing the Borrower's
execution of the within Amendment, and attesting to the authority of the persons
who executed the within Amendment on behalf of the Borrower.
(2) Receipt by the Agent of a Certificate, executed by the Borrower's
President and its Chief Financial Officer, respectively confirming that no Event
of Default has occurred.
(3) Receipt by the Agent of an opinion of counsel to the Borrower as to
the due execution and effectiveness of the within Amendment (which opinion is
subject only to the same qualifications as had been included in the opinion
delivered by that counsel at the initial execution of the Loan Agreement).
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(4) Satisfaction of all Conditions Precedent to the closing on the
Tranche B Loan (as defined in the foregoing Amendment (or the due waiver of one
or more of such Conditions Precedent by the Tranche B Lender (likewise so
defined)).
The Borrower hereby represents that, at the execution of the within
Agreement, no Event of Default has occurred.
Except as amended hereby, all terms and provisions of the Loan
Agreement, as originally executed, shall remain in full force and effect.
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▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, LTD.
("BORROWER")
By_________________________________
Print Name:________________________________
Title:________________________________
BANKBOSTON RETAIL FINANCE INC.
("AGENT")
By_________________________________
Print Name:________________________________
Title:________________________________
The "LENDERS"
BANKBOSTON RETAIL FINANCE INC.
By_________________________________
Print Name:________________________________
Title:________________________________
BANKAMERICA BUSINESS CREDIT, INC.
By_________________________________
Print Name:________________________________
Title:________________________________
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