EXHIBIT 10.2
FIRST AMENDMENT TO
CREDIT AGREEMENT AND REVOLVING NOTE
This Amendment, dated as of August 8, 1997, is made by and
between GROW BIZ INTERNATIONAL, INC., a Minnesota corporation (the "Borrower"),
and TCF NATIONAL BANK MINNESOTA, f/k/a TCF Bank Minnesota fsb, a national
banking association (the "Bank").
RECITALS
The Borrower and the Bank have entered into a Credit Agreement
dated as of July 31, 1996 (the "Credit Agreement"). Capitalized terms used in
these recitals have the meanings given to them in the Credit Agreement unless
otherwise specified.
The Borrower has requested that the Bank (i) extend the
Maturity Date of the existing revolving loan from July 31, 1997 to July 31,
1998, (ii) make an additional term loan of $4,500,000 to the Borrower and (iii)
make certain amendments to the Credit Agreement.
The Bank is willing to grant the Borrower's request pursuant
to the terms and upon the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, the parties hereto hereby
agree as follows:
1. The Revolving Loan. Section 3.1 (a) of the Credit Agreement
is amended by deleting "July 31, 1997" as it appears in the third line and
replacing it with "July 31, 1998."
2. Late Payment Fee. Section 4.6 of the Credit Agreement is
deleted and Section 3.1 (g) is added to the Credit Agreement as follows:
"Section 3.1 (g) Late Fees. If any amount due hereunder or
under the Revolving Note or other Obligations (whether principal,
interest, fees, costs, expenses or otherwise) is paid more than thirty
(30) days after the stated due date for such payment, the Borrower
shall pay to the Bank, on demand, a late payment fee equal to five
percent (5%) of the past due amount."
3. The Term Loan. Section 3.2 is added to the Credit Agreement
as follows:
"Section 3.2 The Term Loan (Single Advance Term Loan).
(a) General Terms and Conditions. The Bank agrees, on the
terms and subject to the conditions herein set forth, to make on the
Term Loan Funding Date a single advance term loan to the Borrower in
the amount of $4,500,000 (the "Term
Loan"). The Term Loan shall have a term of five (5) years and shall be
repayable in equal principal payments of $75,000 per month, beginning
on October 10, 1997, and continuing thereafter on the tenth day of each
month until September 10, 2002, at which time a final payment of the
remaining unpaid principal balance and all accrued and unpaid interest
thereon shall be made. Interest on the Term Loan shall be payable
monthly on the tenth day of the next succeeding month and at maturity
or earlier prepayment in full. Payments of interest shall begin on
September 10, 1997.
(b) The Term Loan Note. The Term Loan shall be evidenced by,
and payable with interest in accordance with, the Borrower's promissory
note of even date herewith, payable to the order of the Bank in the
original principal amount of $4,500,000 and otherwise in substance and
form acceptable to the Bank in its sole discretion, as attached hereto
as Exhibit A (as the same may hereafter be extended, renewed, amended
or replaced from time to time, the "Term Loan Note").
(c) Normal Rate of Interest. The principal balance of the Term
Loan Note outstanding from time to time shall bear interest from the
Term Loan Funding Date until paid in full at an annual rate which shall
at all times be equal to one-half of one percent (.50%) over the Base
Rate, which annual rate shall change when and as the Base Rate changes;
subject, however, to the imposition of the Default Rate pursuant to
Section 4.5.
(d) Use of Proceeds. The Borrower shall use the proceeds of
the Term Loan to fund the acquisition of the assets of Video Game
Exchange, Inc. by one of its Subsidiaries.
(e) Late Payment Fee. If any installment of interest or
principal on the Term Loan is paid more than ten (10) days after the
stated due date for such installment, a late payment fee shall be due
and payable in the amount of five percent (5%) of the installment so
paid.
(f) Prepayment. The Borrower may, upon at least one Business
Day's prior notice to the Bank, prepay the principal balance of the
Term Loan voluntarily in whole or in part at any time, without premium
or penalty. Prepayments of principal of the Term Loan shall be applied
to installments becoming due and payable thereunder in inverse order of
their respective maturities. No prepayment of the Term Loan shall
suspend or delay any required payments of principal or interest
otherwise due and payable thereunder."
4. Default Rate of Interest. Section 4.5 of the Credit
Agreement is amended as follows:
"Section 4.5 Default Rate of Interest. If an Event of Default
shall occur and continue for a period of 30 days after the Bank has
given notice to the Borrower
specifying such Event of Default and stating the Bank's intent to
implement the Default Rate (it being understood that such grace period
and notice requirement are conditions only to imposing the Default
Rate), the Borrower shall pay interest on the unpaid principal balance
of the Revolving Note, the Term Loan Note and any other Obligations,
from the first day immediately following the expiration of such 30-day
period until the earlier of payment in full of the Revolving Note, the
Term Loan Note and any other Obligations or the day on which such Event
of Default is cured to the written satisfaction of the Bank, at an
annual rate at all times equal to two percent (2%) over the annual rate
or rates of interest that would otherwise be in effect from time to
time with respect to such Revolving Note, Term Loan Note or any other
Obligations had there been no occurrence of an Event of Default (the
"Default Rate").
5. Subsidiaries. Section 6.4 of the Credit Agreement is
deleted in its entirety and replaced with the following new Section 6.4:
"Section 6.4 Subsidiaries. The Borrower has two (2)
Subsidiaries, Grow Biz Worldwide, Ltd. and Grow Biz Games, Inc."
6. Financial Covenants. Section 7.9 of the Credit Agreement is
deleted in its entirety while Sections 7.8 and 7.10 of the Credit Agreement are
amended and new Sections 7.11 and 7.12 are added as follows:
"Section 7.8 Current Ratio. The Borrower will maintain at all
times the ratio of its Current Assets to Current Liabilities at not
less than 1.25 to 1.00.
Section 7.10 Maximum Total Liabilities to Capital Base. The
Borrower will maintain the ratio of its Total Liabilities to Capital
Base at not more than the ratio set forth below opposite the applicable
period:
Period Maximum Total Liabilities to
------ ----------------------------
Capital Base
------------
Term Loan Funding Date
to 2.50 to 1.00
December 30, 1997
December 31, 1997
to 2.00 to 1.00
December 30, 1998
December 31, 1998
to 1.50 to 1.00
December 30, 1999
December 31, 1999
and thereafter 1.25 to 1.00
Section 7.11 Minimum Capital Base. The Borrower will maintain
its Capital Base at an amount not less than the amount set forth below
opposite the applicable period:
Period Minimum Capital Base
------ --------------------
Term Loan Funding Date
to $ 9,500,000
December 30, 1998
December 31, 1998
to $14,000,000
December 30, 1999
December 31, 1999
and thereafter
$20,000,000
Section 7.12 Debt Service Coverage Ratio. The Borrower will
maintain at all times the ratio of its Cash Flow Available for Debt
Service to its Debt Service Requirements at not less than 1.50 to 1.00.
For purposes of the foregoing, "Cash Flow Available for Debt Service"
means the pre-tax net income of the Borrower, plus interest expense,
depreciation, amortization and other non-cash charges, and "Debt
Service Requirements" means current maturities of long-term debt,
interest expense of the Borrower and income tax expense."
7. Defined Terms. Capitalized terms used in this Amendment
which are defined in the Glossary of Terms Appendix to the Credit Agreement
shall have the same meanings as defined therein, unless otherwise defined herein
or in the recitals hereto. In addition, the Glossary of Terms Appendix to the
Credit Agreement is hereby amended by adding or substituting, as the case may
be, the following definitions:
"'Compliance Certificate' means a certificate of an officer
of the Borrower in the form of Exhibit B to the First Amendment setting
forth in reasonable detail all relevant information and the
calculations necessary to determine the Borrower's compliance with its
covenants set forth in Sections 7.8, 7.10, 7.11, and 7.12 hereof."
"'First Amendment' means the First Amendment to Credit
Agreement and Revolving Note dated as of August 8, 1997, between the
Borrower and the Bank."
"'Note' or 'Notes' means collectively the Revolving Note and
the Term Loan Note and any other promissory note now or hereafter
evidencing any Obligation."
"'Term Loan' has the meaning given in Section 3.2 hereof."
"'Term Loan Funding Date' means the date all of the conditions
set forth in Paragraph 10 of the First Amendment are satisfied."
"'Term Loan Note' has the meaning given in Section 3.2 (b)
hereof."
8. Revolving Note. The Revolving Note is amended by deleting
the date "July 31, 1997" as it appears in the fifth line of the first paragraph
thereof and by substituting therefor the date "July 31, 1998", and by deleting
the term "first" from the second line of the second paragraph thereof and by
substituting therefor the term "tenth".
9. No Other Changes. Except as explicitly amended by this
Amendment, all of the terms and conditions of the Credit Agreement shall remain
in full force and effect.
10. Conditions Precedent. This Amendment shall be effective
when the Bank shall have received an executed original hereof, together with
each of the following, each in substance and form acceptable to the Bank in its
sole discretion:
(a) The Term Loan Note, as attached hereto as Exhibit A, duly
executed on behalf of the Borrower.
(b) A Certificate of the Secretary of the Borrower certifying
as to (i) the resolutions of the board of directors of the Borrower
approving the execution and delivery of this Amendment, (ii) the fact
that the articles of incorporation and bylaws of the Borrower, which
were certified and delivered to the Lender pursuant to the Certificate
of Authority of the Borrower's secretary or assistant secretary dated
as of July 30, 1996 continue in full force and effect and have not been
amended or otherwise modified except as set forth in the Certificate to
be delivered, and (iii) certifying that the officers and agents of the
Borrower who have been certified to the Lender, pursuant to the
Certificate of Authority of the Borrower's secretary or assistant
secretary dated as of July 30, 1996, as being authorized to sign and to
act on behalf of the Borrower continue to be so authorized or setting
forth the sample signatures of each of the officers and agents of the
Borrower authorized to execute and deliver this Amendment and all other
documents, agreements and certificates on behalf of the Borrower.
(c) An opinion of the Borrower's counsel as to the due
authorization, execution and delivery of the First Amendment and the
Term Loan Note, the enforceability of such documents against the
Borrower and as to such other matters as the Lender shall require.
(d) Copies of the acquisition agreement with Video Game
Exchange, Inc. (the "Seller") and the proposed note for the $2,000,000
payable by a Subsidiary of the Borrower to the Seller evidencing the
deferred portion of the purchase price for the Seller's assets.
(e) The Borrower requests, in accordance with Section 4.1 of
the Credit Agreement, that the Lender make the Term Loan advance.
(f) Such other matters as the Bank may require.
11. Representations and Warranties. The Borrower hereby
represents and warrants to the Bank that all of the representations and
warranties contained in Article VI of the Credit Agreement are correct on and as
of the date hereof as though made on and as of such date, except to the extent
that such representations and warranties relate solely to an earlier date.
12. References. All references in the Credit Agreement to
"this Agreement" shall be deemed to refer to the Credit Agreement as amended
hereby; and any and all references in the Security Documents to the Credit
Agreement shall be deemed to refer to the Credit Agreement as amended hereby.
13. No Waiver. The execution of this Amendment and acceptance
of any documents related hereto shall not be deemed to be a waiver of any
Default or Event of Default under the Credit Agreement or breach, default or
event of default under any Security Document or other document held by the Bank,
whether or not known to the Bank and whether or not existing on the date of this
Amendment.
14. Release. The Borrower hereby absolutely and
unconditionally releases and forever discharges the Bank, and any and all
participants, parent corporations, subsidiary corporations, affiliated
corporations, insurers, indemnitors, successors and assigns thereof, together
with all of the present and former directors, officers, agents and employees of
any of the foregoing, from any and all claims, demands or causes of action of
any kind, nature or description, whether arising in law or equity or upon
contract or tort or under any state or federal law or otherwise, which the
Borrower has had, now has or has made claim to have against any such person for
or by reason of any act, omission, matter, cause or thing whatsoever arising
from the beginning of time to and including the date of this Amendment, whether
such claims, demands and causes of action are matured or unmatured or known or
unknown.
15. Costs and Expenses. The Borrower hereby reaffirms its
agreement under Section 10.5 of the Credit Agreement to pay or reimburse the
Bank on demand for all costs, expenses and fees incurred by the Bank in
connection with the Credit Agreement, the Security Documents and all other
documents contemplated thereby, including without limitation all reasonable fees
and disbursements of legal counsel. Without limiting the generality of the
foregoing, the Borrower specifically agrees to pay all fees and disbursements of
counsel to the Bank for the services performed by such counsel in connection
with the preparation of this Amendment and the documents and instruments
incidental hereto.
16. Miscellaneous. This Amendment may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original and all of which counterparts, taken together, shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and year first above written.
GROW BIZ INTERNATIONAL, INC.
By /s/ Xxxxx X. Xxxxxx, Xx.
-----------------------------------
Its Vice President of Finance/CFO
TCF NATIONAL BANK MINNESOTA f/k/a
TCF Bank Minnesota fsb
By /s/ R. Xxxxx Xxxxxxx
-----------------------------------
Its Vice President
And
By /s/ Milli A. Navara
-----------------------------------
Its Vice President
