FIRST AMENDMENT TO CREDIT AGREEMENT
Exhibit
10.29
FIRST
AMENDMENT TO
This
Amendment (this "Amendment")
is
made as of December 31, 2005 by and between KFLG
WATERTOWN, INC.,
a
Massachusetts corporation, with an address at 00 Xxxxx Xxxxxx, Xxxxx 000,
Brighton Landing East, Brighton, MA 02135 (the "Borrower"),
and
TD
BANKNORTH, N.A.,
a
national banking association with an office at 000 Xxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxxxxxxx 00000 (the "Lender").
A. The
Lender and the Borrower are parties to that certain Credit Agreement dated
as of
May 27, 2005 (as the same is and may hereafter be amended from time to time,
the
"Credit
Agreement").
Capitalized terms used herein without definition have the meanings assigned
to
them in the Credit Agreement.
B. The
Borrower has requested that the Lender amend the financial covenants and make
certain other modifications to the terms and conditions of the Credit Agreement
as described herein.
C. Subject
to certain terms and conditions, the Lender is willing to agree to the same,
as
hereinafter set forth.
I. AMENDMENTS TO CREDIT
AGREEMENT.
A. Definitions.
Section
1 of the Credit Agreement is hereby amended as follows:
1. The
following definition contained in Section 1.1 of the Credit Agreement is hereby
amended and restated in its entirety as follows:
"'Commitment':
the
Lender’s commitment to make Loans in an aggregate principal amount not to exceed
$1,392,422.22, which is the aggregate principal outstanding balance of the
Loans
as of December 31, 2005."
2. The
following new definitions are hereby inserted into the Credit Agreement in
proper alphabetical order:
"'Additional
New Equity':
new
equity of the Guarantor, consisting of either common or preferred stock, or
additional capital contributions, in either case resulting in the receipt by
the
Guarantor of unrestricted Gross Cash Proceeds of at least $5,000,000 and Net
Cash Proceeds of at least $4,500,000, which Net Cash Proceeds shall initially
be
deposited into an account held with the Lender."
"'Additional
New Equity Date':
the
date on which the Lender has verified that Borrower has received the Net Cash
Proceeds of the Additional New Equity required by Section 6.1(a)."
"'Blocked
Account':
as
defined in Section 6.1(b)."
"'Consolidated
Discretionary Capital Expenditures':
for
any period, Consolidated Capital Expenditures which do not constitute
Consolidated Maintenance Capital Expenditures, and which shall include for
the
purposes of Section 6.1(e) hereof, (i) investments by any Covered Party for
the
purposes of building, purchasing, maintaining or investing in new Units which
have been funded by such Covered Party as well as those investments which any
Covered Party has committed to make, but has not yet made,
and
(ii)
capital expenditures which have been funded by any Covered Party as well as
those capital expenditures for which any Covered Party has committed to make
payment, but has not yet made payment thereon."
"'Gross
Cash Proceeds':
Net
Cash Proceeds before attorneys’ fees, accountants’ fees, commissions and other
customary fees and expenses incurred in connection with the incurrence of
Indebtedness or issuance of any new equity or additional capital
contributions."
"'Permitted
Accounts':
any
passbook, savings, demand, time, money market, operating or depository bank
accounts with the Lender, and/or
certificates of deposit issued by the Lender."
"'Permitted
Blocked Accounts':
subject to the Lender's prior approval thereof, any passbook savings or savings
statement account with the Lender, and/or certificates of deposit issued by
the
Lender; in each case on which the Lender has placed a hold causing access to
such account or certificate of deposit to be restricted."
1. Section
2.2 of the Credit Agreement is hereby amended and restated in its entirety
as
follows:
"2.2 Additional
Term Loans.
The
Borrower acknowledges and agrees that after the Closing Date, the Lender made
additional term loans (the "Additional
Term Loans")
to the
Borrower and that as of December 31, 2005, the aggregate outstanding principal
amount of the Initial Term Loan and the Additional Term Loans (collectively,
the
"Loans")
is
$1,392,422.22. The Borrower and the Lender agree that as of December 31, 2005,
no further advances of Additional Term Loans shall be made by the Lender to
the
Borrower."
2. Sections
2.3, 2.4(b) and 2.4(c) of the Credit Agreement are hereby deleted in their
entireties and in each case the phrase "Intentionally Omitted" is substituted
therefor.
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C. Repayment
of Loans.
Section
2.5 of the Credit Agreement is hereby amended and restated in its entirety
as
follows:
"2.5 Repayment
of Loans.
Unless
an Event of Default shall occur and be continuing, prior to the Additional
New
Equity Date, the Loans shall not amortize. Commencing on the Additional New
Equity Date, the Loans shall amortize and principal shall be payable in
consecutive monthly installments, each in the principal amount of $29,167.00,
commencing on January 1, 2007 and on the first Business Day of each calendar
month thereafter. The remaining outstanding principal amount of the Loan shall
be payable in full on the Maturity Date. Amounts paid or prepaid with respect
to
the Loans may not be reborrowed. The amount of any principal prepayment of
the
Loans shall be applied to reduce the then remaining installments of the Loans
in
inverse order of maturity."
D. Prepayment.
Section
2.6 of the Credit Agreement is hereby amended and restated in its entirety
as
follows:
"2.6 Prepayment
Penalty.
The
Borrower may at any time and from time to time prepay the Loans, in whole or
in
part, without premium or penalty except for any prepayment fee that may be
due
under the following sentence. Any such prepayment shall be made together with
all other amounts due and owing under the Loan Documents at the time of
prepayment (including, without limitation, any amounts owing pursuant to Section
2.12) and, if the date of such prepayment is on or before the second anniversary
of the date hereof (unless such prepayment is made in connection with the
occurrence of an Event of Default or at the written request of the Lender),
a
prepayment fee in the amount of $10,000. Prepayments shall be made upon
irrevocable notice by the Borrower delivered to the Lender no later than 11:00
A.M., Boston time, one Business Day prior thereto, which notice shall specify
the date and amount of prepayment. If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified therein,
together with accrued and unpaid interest to such date on the amount prepaid.
Partial prepayments of any Loan shall be in an aggregate principal amount of
$100,000 or a whole multiple of $50,000 in excess thereof."
E. Mandatory
Prepayments.
Section
2.7(e) of the Credit Agreement is hereby deleted in its entirety and the phrase
"Intentionally Omitted" is substituted therefor.
F. Interest
Rate.
Section
2.8(a) of the Credit Agreement is hereby amended and restated in its entirety
as
follows:
"(a) The
Loans
shall bear interest at a rate per annum equal to the Prime Rate."
1. Section
5.1(a) of the Credit Agreement is hereby amended by deleting the word "and"
at
the end of subsection (vii) thereof, substituting a semi-colon for the period
at
the end of subsection (viii) thereof; and adding the following new subsections
(ix) and (x) immediately following subsection (vii) thereof as
follows:
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"(ix)
as
soon as available, but in any event not later than 15 days after the end of
each
calendar month, the unaudited consolidated and consolidating balance sheet
of
the Borrower and its Subsidiaries as at the end of such month and the related
unaudited consolidated and consolidating statements of income and of cash flows
for such month and the portion of the fiscal year through the end of such month,
setting forth in each case in comparative form the figures for the previous
year
and the corresponding figures from the Borrower’s budget for such period, in
each case certified by a Responsible Officer as being fairly stated in all
material respects (subject to normal year-end audit adjustments);
and
(x)
as
soon as available, but in any event not later than 15 days after the end of
each
calendar month, the unaudited consolidated and consolidating balance sheet
of
the Guarantor and its Subsidiaries as at the end of such month and the related
unaudited consolidated and consolidating statements of income and of cash flows
for such month and the portion of the fiscal year through the end of such month,
setting forth in each case in comparative form the figures for the previous
year
and the corresponding figures from the Guarantor’s budget for such period
together with a report on franchisee royalties received with respect to such
month and a statement as to the number of franchise agreements in effect and
whether any of such franchise agreements are then in default, in each case
certified by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments);"
2. Section
5.1(b) of the Credit Agreement is hereby amended by adding the following
sentence at the end thereof:
"The
Covered Parties will permit the Lender to monitor at all times the account
balances in Borrower's and/or Guarantor's accounts held with the
Lender."
H. Certificates;
Other Information.
Section
5.2(b) of the Credit Agreement is hereby amended by adding the phrase "and
Section 5.1(a)(ix) and (x)" immediately after the phrase "pursuant to Section
5.1(a)(iii) and (iv)"; and by inserting at the end thereof the
following:
"Any
compliance certificates furnished in connection with the calculations required
by Sections 6.1(c), (d) and (e) hereof shall include with respect to the
applicable period, a listing of all Consolidated Discretionary Capital
Expenditures made during such period, the amount of same that has been funded
during such period, and the amount of commitments to make Discretionary Capital
Expenditures which are outstanding and/or were committed to during such period,
but have not yet been paid."
I. Notices
regarding Additional New Equity.
Section
5.7 of the Credit Agreement is hereby amended by deleting the word "or" at
the
end of subsection (g) thereof, deleting the period at the end of subsection
(h)
thereof and substituting therefor "; or"; and adding the following new
subsection (i) immediately following subsection (h) thereof as
follows:
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"(i)
any
Additional New Equity raised by the Guarantor and the details thereof, including
without limitation, the type, amount, source, date raised, the Gross Proceeds
and Net Cash Proceeds thereof."
J. Bank
Accounts.
Section
5.10 of the Credit Agreement is hereby amended and restated in its entirety
as
follows:
(a)
At
all times prior to the Additional New Equity Date, maintain all operating,
depository and disbursement bank accounts with the Lender, except as otherwise
permitted by Section 3.23 hereof and Section 4(j) of the Security Agreement.
After the Additional New Equity Date, provided the Borrower and Guarantor
maintain their respective operating accounts with the Lender and no Event of
Default shall have occurred and be continuing (including without limitation
a
Default or Event of Default under Section 6.1(c)(ii) hereof), the Loan Parties
may maintain accounts at banks and financial institutions other than the Lender.
(b)
Establish and maintain at all times prior to the Additional New Equity Date,
the
Blocked Account as required by Section 6.1(b) hereof. The Covered Parties each
represent and warrant that there are no perfected liens or encumbrances with
respect to the Blocked Account, other than in favor of the Lender, and each
agrees that it shall not enter into any acknowledgment or agreement that gives
any other person or entity except Lender control over, or any other security
interest, lien or title in, the Blocked Account. The Blocked Account shall
be
under the sole dominion and control of the Lender. Neither any Covered Party,
nor any other person or entity, acting through or under any Covered Party,
shall
have any control over the use of, or any right to withdraw any amount from,
the
Blocked Account, provided however, that as long as no Default or Event of
Default exists immediately before and after giving effect thereto, the Lender
will distribute to the Guarantor cash interest earned on the funds in the
Blocked Account. No Covered Party will close the Blocked Account prior to the
Additional New Equity Date. All funds in the Blocked Account shall be subject
to
the provisions of Section 8.7 hereof."
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K. Financial
Covenants.
Section
6.1 of the Credit Agreement is hereby amended and restated in its entirety
as
follows:
(a) Minimum
Additional New Equity.
Fail to
cause the Guarantor to raise the Additional New Equity by June 1,
2006.
(b) Blocked
Account. Fail
to
cause the Guarantor to maintain at all times prior to the Additional New Equity
Date, cash (in U.S. Dollars) in an aggregate amount of at least $1,400,000
in a
Permitted Blocked Account held with Lender (the "Blocked
Account").
(c) Minimum
Account Balances.
Fail to
maintain, on a combined basis with the Guarantor, in Permitted Accounts held
with the Lender: (i) at all times prior to the Additional New Equity Date,
cash
(in U.S. Dollars) in an aggregate amount of at least $1,500,000 (which amount
may include, without limitation, amounts held in the Blocked Account); and
(ii)
at all times on and after the Additional New Equity Date, cash (in U.S. Dollars)
in an aggregate amount of at least $1,700,000.
(d) Consolidated
Maintenance Capital Expenditures.
After
the Additional New Equity Date, the Borrower will not make Consolidated
Maintenance Capital Expenditures unless both before and after giving effect
to
such capital expenditure, no Default or Event of Default shall have occurred
and
be continuing, including without limitation, under Section 6.1(c)
hereof.
(e) Consolidated
Discretionary Capital Expenditures.
After
the Additional New Equity Date, the Borrower will not make Consolidated
Discretionary Capital Expenditures unless: (i) at the time of any such funding
of such Consolidated Discretionary Capital Expenditures or commitment to make
any such Consolidated Discretionary Capital Expenditures there is not (and
after
giving effect to such funding, and/or giving effect to such commitment as though
such commitment has been funded on the date of such commitment, there will
not
be) any Default or Event of Default (with compliance with Section 6.1(c) being
determined for this purpose as at the date immediately preceding the date of
such funding and/or commitment, giving effect to such funding and/or commitment
on a pro forma
basis),
and (ii) prior to the funding of any Consolidated Discretionary Capital
Expenditure or commitment to make any Consolidated Discretionary Capital
Expenditure, the Borrower shall have delivered to the Lender a pro forma
Compliance Certificate containing all information and calculations necessary
for
evidencing compliance by each Covered Party with the provisions of Section
6.1(c) hereof."
L. Indebtedness
to Borrower.
Section
6.2(b) of the Credit Agreement is hereby deleted in its entirety and the phrase
"Intentionally Omitted" is substituted therefor.
M. Loans
to Guarantor.
Section
6.8(d) of the Credit Agreement is hereby deleted in its entirety and the phrase
"Intentionally Omitted" is substituted therefor.
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N. Full
Funding.
Section
6.17 of the Credit Agreement is hereby deleted in its entirety and the phrase
"Intentionally Omitted" is substituted therefor.
O. Title
to Accounts.
Section
8.7 of the Credit Agreement is hereby amended by adding the following at the
end
thereof:
"In
addition to the foregoing, upon any Event of Default, all right, title and
interest in each account of each Covered Party held with the Lender shall
immediately and automatically, without demand or notice of any kind, be
transferred to the Lender, the Lender shall be the owner thereof, and as such,
the Lender may apply the funds held in such accounts to the Obligations in
such
manner and order as the Lender may elect in its sole discretion."
Except
as
specifically amended herein, all terms and conditions of the Credit Agreement
shall remain in full force and effect as originally constituted and is hereby
ratified and affirmed in all respects and the indebtedness of the Borrower
to
the Lender evidenced hereby and by the Note is hereby reaffirmed in all
respects. This Amendment constitutes an amendment to and modification of the
Credit Agreement. On and after the date hereof, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof" or words of like import
referring to the Credit Agreement, shall mean and be a reference to the Credit
Agreement as amended by this Amendment, and each reference in any Loan Document
between the Borrower and the Lender or, the Guarantor and the Lender, to the
Credit Agreement, "thereunder", "thereof" or words of like import referring
the
Credit Agreement shall mean a reference to the Credit Agreement as amended
by
this Amendment.
The
Borrower represents, warrants and covenants as follows as of the date
hereof:
A. Each
of
the representations and warranties contained in the Credit Agreement, as amended
by this Amendment, and the other Loan Documents are true and correct as of
the
date hereof. No material adverse change has occurred in the assets, liabilities,
financial condition, business or prospects of the Borrower or the Guarantor
from
that disclosed in the management-prepared financial statements most recently
distributed to the Lender. No Default or Event of Default has occurred or is
continuing.
B. The
Credit Agreement, as amended by this Amendment, constitutes the legal, valid
and
binding obligations of the Borrower, enforceable against it in accordance with
their respective terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting the rights and remedies of creditors
generally or the application of principles of equity, whether in any action
at
law or proceeding in equity, and subject to the availability of the remedy
of
specific performance or of any other equitable remedy or relief to enforce
any
right thereunder.
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C. The
execution and delivery of this Amendment and the other documents, if any, by
the
Borrower and the transactions contemplated hereby are within the corporate
power
and authority of the Borrower and have been authorized by all necessary
corporate proceedings, and do not and will not (i) contravene any provision
of
the charter documents or by-laws of the Borrower or any law, rule or regulation
applicable to the Borrower; (ii) contravene any provision of, or constitute
an
event of default or event that, but for the requirement that time elapse or
notice be given (or both) would constitute an event of default under, any other
agreement, instrument, order or undertaking binding on the Borrower; or (iii)
result in or require the imposition of any encumbrance or lien on any of the
properties, assets or rights of the Borrower (other than pursuant to any
Security Document executed in connection with the Credit
Agreement).
D. The
Borrower and the Lender acknowledge and agree that but for this Amendment,
the
Borrower would have been in default under the terms and conditions of the Credit
Agreement, and that the terms and conditions set forth herein and the avoidance
of such a default constitute fair and adequate consideration mutually exchanged
by the Borrower and the Lender in their execution and delivery of this
Amendment.
IV. CONDITIONS.
A. This
Amendment shall become effective on the first date on which the Borrower shall
have executed and delivered to the Lender (or shall have caused to be executed
and delivered to the Lender by the appropriate persons) the
following:
1. This
Amendment;
2. Evidence
that Borrower shall have caused the Guarantor to deposit cash (in U.S. Dollars)
in an aggregate amount of at least $1,400,000 in a Permitted Blocked Account
held with the Lender;
3. A
fully-executed copy of the agreement with the investor group evidencing a
commitment for Additional New Equity in a minimum amount of $5,000,000;
and
4. Such
other supporting documents and certificates as the Lender or its counsel may
reasonably request.
B. All
legal
matters incident to the transactions contemplated hereby shall be satisfactory
to counsel for the Lender.
The
Obligations of the Borrower to the Lender, including, without limitation, the
liabilities and obligations of the Borrower under the Credit Agreement, as
amended hereby, and the Notes, are secured by, and entitled to all benefits
of,
the Security Agreement, the Guarantee and Security Agreement, any Mortgage,
any
Leasehold Security Document, and any other collateral granted by the Borrower
or
Guarantor to the Lender. The Covered Parties confirm and reaffirm that each
has
granted to Lender a security interest in, among other property, its deposit
accounts, including without limitation the Blocked Account, and all credits
or
proceeds thereto and all monies, checks and other instruments held or deposited
therein.
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VI. MISCELLANEOUS.
A. The
Borrower represents, warrants, and agrees that, to its knowledge, the Borrower
has no claims, defenses, counterclaims or offsets against the Lender in
connection with the Credit Agreement or the Obligations, and, to the extent
that
any claim, defense, counterclaim, or offset may exist, the Borrower hereby
affirmatively WAIVES
AND RELEASES
the
Lender from the same.
B. The
Borrower agrees to reimburse the Lender upon demand for all reasonable
out-of-pocket costs, charges, liabilities, taxes and expenses of the Lender
in
connection with (i) the preparation, negotiation, interpretation, execution
and
delivery of this Amendment and any other agreements, instruments or documents
executed pursuant or relating hereto, and (ii) any enforcement hereof. The
legal
fees for the preparation, negotiation, interpretation, execution and delivery
of
this Amendment and any other agreements, instruments or documents executed
pursuant or relating hereto shall be limited to $2000.
C. This
Amendment shall take effect as a sealed instrument under the laws of The
Commonwealth of Massachusetts.
D. This
Amendment may be executed by the parties hereto in several counterparts hereof
and by the different parties hereto on separate counterparts hereof, all of
which counterparts shall together constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Amendment by
facsimile shall be effective as delivery of a manually executed counterpart
of
this Amendment.
[The
next page is the signature page.]
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KFLG
WATERTOWN, INC.
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By:
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Name:
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Title:
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TD
BANKNORTH, N.A.
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By:
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Name:
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Title:
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The
undersigned Guarantor does hereby acknowledge and consent to the execution,
delivery and performance of the within foregoing Amendment, confirms the
continuing effect of that certain Guarantee and Security Agreement dated as
of
May 27, 2005, as amended, made by such Guarantor in favor of the Lender, after
giving effect to the foregoing Amendment, and agrees to the provisions of the
within and foregoing Amendment which apply to it by their terms, including
without limitation, the obligation of the Guarantor to (i) raise the Additional
New Equity by June 1, 2006 as required by Section 6.1(a) of the Credit
Agreement, (ii) maintain at all times prior to the Additional New Equity Date
at
least $1,400,000 cash in the Blocked Account as required by Section 6.1(b)
of
the Credit Agreement, and (iii) comply with the provisions of Section 5.10(b)
hereof.
Accepted
and agreed to as of December 31, 2005:
KNOWFAT
FRANCHISE COMPANY, INC.
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By:
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Name:
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Title:
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