AMENDMENT TO CREDIT AGREEMENT
THIS AMENDMENT is entered into as of June 30, 1997 by and
between FUNCO, INC., a Minnesota corporation (the "Borrower"), and MARQUETTE
CAPITAL BANK, N.A., formerly known as Marquette Capital Bank (the "Bank"). In
consideration of the mutual agreements set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties, the Borrower and the Bank agree as follows:
1. The Credit Agreement dated June 20, 1995, by and between the
Borrower and the Bank, as amended by an Amendment to Credit Agreement dated
February 5, 1996 and by an Amendment to Credit Agreement and Security Agreement
dated June 30, 1996 (the "Credit Agreement"), is amended as follows:
a. The definitions of Borrowing Base, Borrowing Base
Certificate, and Eligible Inventory in Section 1.01 of the Credit Agreement are
deleted.
b. Section 2.01 of the Credit Agreement is amended to read as
follows:
Section 2.01 Advances. Subject to the provisions of
this Agreement, the Bank shall make Advances to the Borrower
from time to time during the period from the date hereof to
June 30, 1998, or the earlier date of termination of the Line
of Credit pursuant to Section 6.02, in an aggregate amount not
exceeding at any time outstanding $10,000,000.00 during the
period from September 15, 1997 through December 15, 1997, and
in an aggregate amount not exceeding at any time outstanding
$3,000,000.00 at all other times (the "Line of Credit"). Each
Advance shall be in the amount of $10,000.00 or an integral
multiple thereof. Within the limits of the Line of Credit, the
Borrower may borrow, prepay, and reborrow under this Section
2.01. During the period from December 29, 1997 through March
29, 1998 the Borrower shall cause the aggregate outstanding
amount of Advances to be zero for 45 consecutive days.
c. Section 2.03 of the Credit Agreement is amended to read as
follows:
Section 2.03 Revolving Note. The obligation to repay
the Advances and to pay interest and other charges, fees and
expenses thereon is evidenced by the Borrower's $10,000,000.00
Amended and Restated Promissory Note dated June 30, 1997 in
favor of the Bank (together with any amendments, extensions,
renewals and replacements thereof, called the "Revolving
Note").
d. The Section number of the Section of the Credit Agreement
entitled Letters of Credit is changed to Section 2.08. All references to June
30, 1997 are changed to June 30, 1998 in such Section 2.08.
e. Section 5.01(d) of the Credit Agreement is deleted.
f. Section 5.15 of the Credit Agreement is amended to read as
follows:
Section 5.15 Capital Expenditures. The Borrower shall
not permit the aggregate amount of Capital Expenditures of the
Borrower and the Subsidiaries in the Borrower's fiscal year
ending March 30, 1997 to exceed $2,000,000.00. The Borrower
shall not permit the aggregate amount of Capital Expenditures
of the Borrower and the Subsidiaries in the Borrower's fiscal
year ending March 29, 1998 to exceed $6,000,000.00.
g. Section 5.16 of the Credit Agreement is amended to read as
follows:
Section 5.16 Consolidated Tangible Net Worth. The
Borrower shall not permit the Consolidated Tangible Net Worth
of the Borrower and the Subsidiaries to be less than (a)
$22,000,000.00 at any time during the period from June 30,
1997 through March 28, 1998; or (b) $28,000,000.00 at any time
during the period after March 28, 1998.
h. Section 5.17 of the Credit Agreement is amended to read as
follows:
Section 5.17 Consolidated Current Ratio. The Borrower
shall not permit the ratio of Consolidated Current Assets to
Consolidated Current Liabilities of the Borrower and the
Subsidiaries to be less than: (a) 2.00 to 1 at any time during
the period from June 30, 1997 through August 24, 1997; or (b)
1.75 to 1 at any time during the period from August 25, 1997
through November 23, 1997; or (c) 2.00 to 1 at any time during
the period from November 24, 1997 through March 28, 1998; or
(d) 3.00 to 1 at any time after March 28, 1998.
i. Section 5.18 of the Credit Agreement is amended to read as
follows:
Section 5.18 Consolidated EBITDA. The Borrower shall
not at any time permit the consolidated earnings before
interest, taxes, depreciation and amortization expense of the
Borrower and the Subsidiaries in any period of 12 consecutive
fiscal months of the Borrower designated below to be less than
the amount set forth below for such period:
12-Fiscal Month Period Ending: Minimum Amount
------------------------------ --------------
From 6/30/97 through 3/28/98 $ 6,000,000.00
After 3/28/98 $10,000,000.00
j. The following Section 5.19 is added to Article V of the
Credit Agreement:
Section 5.19 New Stores. In the Borrower's fiscal
year ending March 29, 1998, the Borrower shall not permit the
number of new stores opened by the Borrower minus the number
of stores closed by the Borrower to exceed 65.
k. Section 6.02 of the Credit Agreement is amended to read as
follows:
Section 6.02 Rights and Remedies. Upon the
commencement of any proceeding under any bankruptcy law by or
against the Borrower, the Line of Credit shall automatically
terminate, and all principal, interest, and other charges,
fees and expenses under the Revolving Note and this Agreement
automatically shall become immediately due and payable in
full, all without any declaration, presentment, demand,
protest or other notice of any kind, all of which are hereby
expressly waived by the Borrower. In addition, upon the
occurrence of an Event of Default or at any time thereafter
until such Event of Default is cured to the written
satisfaction of the Bank, the Bank may exercise any and all of
the following rights and remedies:
(a) The Bank may, by notice to the Borrower, declare
the Line of Credit to be terminated, whereupon the same shall
terminate.
(b) The Bank may declare all principal, interest and
other charges, fees and expenses under the Revolving Note and
this Agreement to be immediately due and payable in full,
whereupon the same shall become immediately due and payable in
full, without any presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by the
Borrower.
(c) The Bank may, without notice to the Borrower or
any other person, apply any and all money owing by the Bank to
the Borrower to the payment of principal, interest and other
charges, fees and expenses under the Revolving Note and this
Agreement.
(d) The Bank may exercise and enforce its rights and
remedies under the Security Agreement, the other writings
contemplated hereby, the Uniform Commercial Code and any other
applicable law.
In addition, immediately upon the commencement of any
proceeding under any bankruptcy law by or against the
Borrower, and at the Bank's option upon the occurrence of an
Event of Default, the Borrower shall pay to the Bank a sum
equal to the then outstanding amount of the Letters of Credit,
without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the
Borrower. The Borrower grants the Bank a first lien and
security interest in all such funds paid to the Bank,
including without limitation all instruments evidencing such
funds, and all products and proceeds of the foregoing, as
security for all now existing and hereafter arising debts,
obligations and liabilities of the Borrower to the Bank.
l. Exhibit A to the Credit Agreement is deleted.
m. Exhibit D to the Credit Agreement is amended to read as set
forth in Exhibit D attached hereto.
2. The Bank releases and terminates its security interest under the
Borrower's Security Agreement dated June 20, 1995, as amended, and such amended
Security Agreement is terminated.
3. Except as amended or terminated herein or herewith, all provisions
of the Credit Agreement and all other agreements of the parties remain in full
force and effect. All references to Marquette Capital Bank are changed to
Marquette Capital Bank, N.A. in all other agreements and certificates of the
parties. No provision of this Amendment can be amended, modified, waived or
terminated, except by a writing executed by the Borrower and the Bank. The
Borrower shall pay to the Bank on demand all of the Bank's costs and expenses,
including but not limited to reasonable attorneys' fees and legal expenses, in
connection with this Amendment, the writings executed herewith, and the
transactions described herein and therein. This Amendment shall bind and benefit
the parties and their respective successors and assigns; provided, the Borrower
shall not assign any of its rights or obligations under this Amendment without
the prior written consent of the Bank, and any assignment in violation of this
sentence shall be null and void. This Amendment and the Credit Agreement as
amended herein shall be governed by and construed in accordance with the
internal laws of the State of Minnesota (excluding conflict of law rules).
Executed as of the date first above written.
FUNCO, INC.
By /s/Xxxxxx X Xxxxx
--------------------------------
Title Chief Financial Officer
-----------------------------
MARQUETTE CAPITAL BANK, N.A.
By /s/Xxxxxxxx Xxxx Xxxxx
--------------------------------
Title Vice President
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EXHIBIT D
FUNCO, INC.
COVENANT COMPLIANCE CERTIFICATE
The undersigned chief financial officer of Funco, Inc.,
pursuant to the Credit Agreement dated June 20, 1995, as amended (the
"Agreement"), hereby certifies to Marquette Capital Bank, N.A. as follows:
As of the close of business on _____________, 19__, the
following amounts and ratios were true and correct:
1. Section 5.16 Consolidated Tangible Net Worth:
a. Actual Consolidated Tangible Net Worth $____________
b. Minimum Consolidated Tangible Net Worth $____________
2. Section 5.17 Consolidated Current Ratio:
a. Consolidated Current Assets $____________
b. Consolidated Current Liabilities $____________
c. Actual Ratio of Consolidated Current
Assets to Consolidated Current Liabilities _________to 1
d. Minimum Ratio _________to 1
3. Section 5.18 Consolidated EBITDA
for 12-Fiscal Month Period Ending __________________, 19___:
a. Earnings: Net Income or (Loss) $____________
b. Interest Expense $____________
c. Taxes Expense $____________
d. Depreciation Expense $____________
e. Amortization Expense $____________
f. Actual EBITDA (a + b + c + d + e) $____________
g. Minimum EBITDA $____________
As of the date of this Certificate, no event has occurred
which constitutes an Event of Default under the Agreement or would constitute an
Event of Default under the Agreement with notice or the passage of time or both.
Date of Certificate: ______________________, 19____
_____________________________________
Signature
AMENDED AND RESTATED PROMISSORY NOTE
Date: June 30, 1997
For valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by the parties, the $10,000,000.00 Amended and
Restated Promissory Note of Funco, Inc. dated June 30, 1996, payable to the
order of Marquette Capital Bank, now known as Marquette Capital Bank, N.A., is
amended and restated to read as follows:
$10,000,000.00 Minneapolis, Minnesota
FOR VALUE RECEIVED, on June 30, 1998, the undersigned, FUNCO,
INC., promises to pay to the order of MARQUETTE CAPITAL BANK, N.A. (the "Bank"),
at its office in Minneapolis, Minnesota, or at such other place as any present
or future holder of this Note may designate from time to time, the principal sum
of (i) $10,000,000.00, or (ii) the aggregate unpaid principal amount of all
advances of credit made by the Bank to the undersigned pursuant to this Note as
shown in the records of any present or future holder of this Note, whichever is
less, plus interest thereon from the date of each advance in whole or in part
included in such amount until this Note is fully paid, computed on the basis of
the actual number of days elapsed and a 360-day year, at an annual rate that
shall always be equal to the Prime Rate and that shall change when and as the
Prime Rate shall change. Interest is due and payable on the last day of each
month and at maturity. The term "Prime Rate" means the rate established by the
Bank from time to time in its sole discretion as its Prime Rate; the Bank may
lend to its customers at rates that are at, above or below the Prime Rate.
Notwithstanding the foregoing, after an Event of Default this Note shall bear
interest until paid at 2% per annum in excess of the rate otherwise then in
effect, which rate shall continue to vary based on further changes in the Prime
Rate. The undersigned shall not permit the unpaid principal balance of this Note
to exceed $3,000,000.00, except during the period from September 15, 1997
through December 15, 1997.
All or any part of the unpaid balance of this Note may be
prepaid at any time without penalty. At the option of the then holder of this
Note, any payment under this Note may be applied first to the payment of other
charges, fees and expenses under this Note and any other agreement or writing in
connection with this Note, second to the payment of interest accrued through the
date of payment, and third to the payment of principal. Also, at the option of
the holder of this Note, if there is any overpayment of interest under this
Note, the holder may hold the excess and apply it to future interest accruing
under this Note. Amounts may be advanced and readvanced under this Note,
provided the principal balance outstanding shall not exceed $10,000,000.00
during the period from September 15, 1997 through December 15, 1997, and shall
not exceed $3,000,000.00 at any other time.
The occurrence of an Event of Default under the Credit
Agreement dated June 20, 1995 by and between the undersigned and the Bank, as it
may be amended from time to time, shall constitute an Event of Default under
this Note.
Upon the commencement of any proceeding under any bankruptcy
law by or against any maker of this Note, this Note automatically shall become
immediately due and payable for the entire unpaid principal balance of this Note
plus accrued interest and other charges, fees and expenses under this Note
without any declaration, presentment, demand, protest, or other notice of any
kind. Upon the occurrence of any other Event of Default and at any time
thereafter, the then holder of this Note may, at its option, declare this Note
to be immediately due and payable and thereupon this Note shall become
immediately due and payable for the entire unpaid principal balance of this Note
plus accrued interest and other charges on this Note without any presentment,
demand, protest or other notice of any kind.
The undersigned (i) waives demand, presentment, protest,
notice of protest, notice of dishonor and notice of nonpayment of this Note; and
(ii) agrees that when or at any time after this Note becomes due the then holder
of this Note may offset or charge the full amount owing on this Note against any
account then maintained by the undersigned with such holder of this Note without
notice. Interest on any amount under this Note shall continue to accrue, at the
option of any present or future holder of this Note, until such holder receives
final payment of such amount in collected funds in form and substance acceptable
to such holder.
The extensions of credit under this Note are made under
Section 47.59 of the Minnesota Statutes. No waiver of any right or remedy under
this Note shall be valid unless in writing executed by the holder of this Note,
and any such waiver shall be effective only in the specific instance and for the
specific purpose given. All rights and remedies of all present and future
holders of this Note shall be cumulative and may be exercised singly,
concurrently or successively. This Note shall bind the undersigned and the
successors and assigns of the undersigned. This Note shall be governed by and
construed in accordance with the internal laws of the State of Minnesota
(excluding conflict of law rules).
THE UNDERSIGNED REPRESENTS, CERTIFIES, WARRANTS AND AGREES
THAT THE UNDERSIGNED HAS READ ALL OF THIS NOTE AND UNDERSTANDS ALL OF THE
PROVISIONS OF THIS NOTE.
Executed as of June 30, 1997.
FUNCO, INC.
By /s/Xxxxxx X. Xxxxx
--------------------------------
Title Chief Financial Officer
-----------------------------
Marquette Capital Bank, N.A. agrees to this Amended and Restated Promissory
Note.
Executed as of June 30, 1997.
MARQUETTE CAPITAL BANK, N.A.
By /s/Xxxxxxxx Xxxx Xxxxx
--------------------------------
Title Vice President
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