THIRD AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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THIRD AMENDMENT TO
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This THIRD AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT entered into as of June 26, 2003 (this "Third Amendment"), is hereby entered into among XXXXX FARGO FOOTHILL, INC. (formerly known as Foothill Capital Corporation), a California corporation ("Lender") and XXX. XXXXXX' ORIGINAL COOKIES, INC., a Delaware corporation ("Borrower").
RECITALS
WHEREAS, Borrower and Lender have executed and delivered that certain Second Amended and Restated Loan and Security Agreement dated as of January 16, 2003 (as amended prior to the date hereof, and as may be further amended, modified or supplemented from time to time, the "Loan Agreement");
WHEREAS, Borrower has requested that Lender amend the Loan Agreement as set forth in this Third Amendment; and
WHEREAS, Lender is willing to so amend the Loan Agreement in accordance with the terms and conditions hereof;
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and upon the terms and conditions set forth herein Borrower and Lender hereby agree as follows:
SECTION 1. RELATION TO THE LOAN AGREEMENT; DEFINITIONS.
1.1 Relation to Loan Agreement. This Third Amendment constitutes an integral part of the Loan Agreement and shall be deemed to be a Loan Document for all purposes. Upon the effectiveness of this Third Amendment, on and after the date hereof each reference in the Loan Agreement to "this Agreement," "hereunder," "hereof," or words of like import referring to the Loan Agreement, and each reference in the other Loan Documents to "the Loan Agreement," "thereunder," "thereof" or words of like import referring to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended hereby.
1.2 Capitalized Terms. For all purposes of this Third Amendment, capitalized terms used herein without definition shall have the meanings specified in the Loan Agreement.
SECTION 2. AMENDMENT TO LOAN AGREEMENT.
2.1 Amendment to Section 1. Section 1.1 of the Loan Agreement is hereby amended by deleting the definition of "Adjusted EBITDA" in its entirety and replacing it with the following definition:
"Adjusted EBITDA" means with respect to any Person for any fiscal period, EBITDA plus (a) to the extent and only to the extent deducted from earnings used in calculating EBITDA, the sum of $5,300,000 related to the Wal-Mart store impairment charges incurred in June 2002 for any period that includes the month of June 2002, (b) to the extent and only to the extent deducted from earnings used in calculating EBITDA, non-cash charges in compensation expense attributable to stock options granted by Parent in the aggregate amount over the term of this Agreement of up to $2,000,000, (c) to the extent and only to the extent deducted from earnings used in calculating EBITDA and only to the extent not already deducted from earnings as a result of clause (a) above, charges related to the closure of Borrower's operations in Wal-Mart stores in an aggregate amount of up to $1,950,000, (d) to the extent and only to the extent deducted from earnings used in calculating EBITDA, charges related to the impairment of goodwill under the Statement of Financial Accounting Standards No. 142 for Fiscal Year 2002 of up to $39,111,000, (e) to the extent and only to the extent not already included in the calculation of EBITDA, the amounts
received by Borrower as the Americana Sale Advisory Fee under the TCBY Management Agreement up to the amount of $2,500,000 whether or not such fee would be considered an "extraordinary gain" under GAAP, and (f) to the extent and only to the extent deducted from earnings used in calculating EBITDA, severance related expenses (consisting of 28 month's salary, together with associated taxes and medical and legal fees) of Borrower in connection with the resignation of Xxxxx Xxxxxx, in an aggregate amount not to exceed $1,160,000 and payable by Borrower during Fiscal Year 2003 or Fiscal Year 2004; and less (x) the sum of $1,500,000 in insurance proceeds received in July 2002 for any period that includes the month of July 2002 and (y) the sum of the net gains resulting from the Company Store Sales so long as such net gains exceed the net losses resulting from the Company Stores Sales on a trailing twelve month basis; provided, however, that for the purpose of calculating the Borrowing Base, Adjusted EBITDA shall be calculated without regard to clause y hereof.
2.2 Amendment to Section 7.20. Section 7.20 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
"7.20 Financial Covenants.
- (a)
- Fail to maintain:
(i) Minimum Adjusted EBITDA. Adjusted EBITDA, measured on a Fiscal Quarter-end basis, for the trailing twelve (12) month period most recently ended, of Borrower and its Subsidiaries, of not less than the required amount set forth in the following table for the applicable period set forth opposite thereto;
| Applicable Amount |
Fiscal Period Ending |
||
|---|---|---|---|
| $ | 19,630,000 | December 2002 | |
| $ | 18,815,000 | March 2003 | |
| $ | 18,350,000 | June 2003 | |
| $ | 19,625,000 | September 2003 | |
| $ | 18,825,000 | December 2003 | |
| $ | 19,185,000 | March 2004 | |
| $ | 19,225,000 | June 2004 | |
| $ | 19,930,000 | September 2004 | |
| $ | 20,260,000 | December 2004 | |
(ii) Leverage Ratio. A Leverage Ratio, measured on a Fiscal Quarter-end basis, for the trailing twelve (12) month period most recently ended of Borrower and its Subsidiaries of not more than:
| Quarter Ending |
Applicable Amount |
|
|---|---|---|
| December 2002 | 7.95 | |
| March 2003 | 8.25 | |
| June 2003 | 8.45 | |
| September 2003 | 7.90 | |
| December 2003 | 8.20 | |
| March 2004 | 8.00 | |
| June 2004 | 8.00 | |
| September 2004 | 7.70 | |
| December 2004 | 7.55 |
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(iii) Fixed Charge Coverage Ratio. A Fixed Charge Coverage Ratio, measured on a Fiscal Quarter-end basis for the trailing twelve (12) month period most recently ended of Borrower and its Subsidiaries of not less than:
| Quarter Ending |
Applicable Amount |
|
|---|---|---|
| December 2002 | 0.73 | |
| March 2003 | 0.72 | |
| June 2003 | 0.71 | |
| September 2003 | 0.80 | |
| December 2003 | 0.78 | |
| March 2004 | 0.85 | |
| June 2004 | 0.88 | |
| September 2004 | 0.94 | |
| December 2004 | 0.98 |
- (b)
- Make:
(i) Capital Expenditures. Capital expenditures in excess of the amount set forth in the following table for the applicable period:
| December 2002 |
Fiscal Year 2003 |
Fiscal Year 2004 |
|||
|---|---|---|---|---|---|
| $ | 350,000 | $4,300,000 for the Fiscal Year | $4,300,000 for the Fiscal Year but no more than $1,500,000 in any one Fiscal Quarter | ||
provided, that to the extent the capital expenditures are less than $4,300,000 for Fiscal Year 2003 the amount of permissible capital expenditures for Fiscal Year 2004 shall be increased by the difference between $4,300,000 and the actual amount of capital expenditures for Fiscal Year 2003."
SECTION 3. REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENTS.
3.1 Representations.
Borrower and each Guarantor hereby represents and warrants to Lender that:
(a) Borrower and each Guarantor is a corporation duly organized and existing and in good standing under the laws of its respective jurisdiction of formation and is duly qualified to do business and in good standing in every jurisdiction in which the nature of the business done or the property owned by it would make such qualification necessary;
(b) Borrower and each Guarantor has all requisite power and authority to own and operate its properties, and to conduct its business as currently conducted and as currently proposed to be conducted. Borrower and each Guarantor has all requisite power and authority necessary to enter into this Third Amendment and to perform its respective obligations under this Third Amendment;
(c) Borrower and each Guarantor has taken all corporate action necessary to be taken by it to authorize the execution and delivery of this Third Amendment. This Third Amendment has been duly executed and delivered by Borrower and each Guarantor and constitutes legal, valid and binding obligations of Borrower and each Guarantor, enforceable against Borrower and each Guarantor in accordance with its terms;
(d) After giving effect to the amendments and waivers herein, no event has occurred and no condition exists which constitutes a Default or an Event of Default under the Loan Agreement or the other Loan Documents; and
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(e) The Loan Agreement and all other Loan Documents and all representations, warranties, terms and conditions therein remain in full force and effect, and Borrower and each Guarantor hereby confirms and ratifies each of the provisions of the Loan Agreement and the other Loan Documents.
SECTION 4. MISCELLANEOUS.
4.1 Conditions to Effectiveness. The amendments contained in Section 2 above shall become effective as of the date hereof when, and only when, the following conditions have been satisfied as determined in Lender's sole and absolute discretion:
(a) Duly executed counterparts of this Third Amendment have been executed and delivered by Lender, Borrower and each Guarantor on or before the 30th day of June, 2003;
(b) Borrower shall have paid to Lender an amendment fee in the amount of $250,000; and
(c) Borrower has paid all fees, costs and expenses incurred in connection with this Third Amendment as of the date of this Third Amendment, including, without limitation, legal fees and expenses as have been billed as of the date of the Third Amendment.
4.2 Cross-References. References in this Third Amendment to any Section (or "§") are, unless otherwise specified, to such Section (or "§") of this Third Amendment.
4.3 Successors and Assigns. This Third Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
4.4 Counterparts. This Third Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, each of which shall be deemed an original and all of which, taken together, shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of this Third Amendment by facsimile transmission shall be as effective as delivery of an originally executed counterpart hereof.
4.5 GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES.
4.6 Outstanding Indebtedness.
(a) Borrower and each Guarantor hereby acknowledges and agrees that as of June 26, 2003, the aggregate outstanding principal amount due under the Loan Agreement is $8,788,890.70 and that such principal amount is payable pursuant to the Loan Agreement as amended hereby without defense, offset, withholding, counterclaim or deduction of any kind.
(b) Borrower and each Guarantor, their successors-in-title, legal representatives and assignees and, to the extent the same is claimed by right of, through or under Borrower or any Guarantor, for their past, present and future employees, agents, representatives, officers, directors, shareholders, and trustees, do hereby forever remise, release and discharge Lender, and Lender's respective successors-in-title, legal representatives and assignees, past, present and future officers, directors, shareholders, trustees, agents, employees, consultants, experts, advisors, attorneys and other professionals and all other persons and entities to whom Lender would be liable if such persons or entities were found to be liable to Borrower or any Guarantor, or any of them (collectively hereinafter the "Lender Parties"), from any and all manner of action and actions, cause and causes of action, claims, charges, demands, counterclaims, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, damages, judgments, expenses, executions, liens, claims of liens, claims of costs, penalties, attorneys' fees, or any other compensation, recovery or relief
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on account of any liability, obligation, demand or cause of action of whatever nature relating to, arising out of or in connection with the Loan Agreement or any other Loan Document, including but not limited to, acts, omissions to act, actions, negotiations, discussions and events resulting in the finalization and execution of this Third Amendment, as, among and between the Borrower and the Lender Parties, such claims whether now accrued and whether now known or hereafter discovered, from the beginning of time through the date hereof.
Borrower and each Guarantor hereby knowingly, voluntarily, intentionally and expressly waive and relinquish any and all rights and benefits that they may have under Section 1542 of the California Civil Code, or any other similar provision of any other jurisdiction, as against the Lender Parties. Section 1542 of the Civil Code of California provides:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
Borrower and each Guarantor hereby acknowledge that the foregoing waiver of the Section 1542 of the California Civil Code was separately bargained for. Borrower and each Guarantor knowingly, voluntarily, intentionally and expressly waive any and all rights and benefits conferred by Section 1542, or by any law of the any state or territory of the United States or any foreign country or principle of common law that is similar or analogous to Section 1542 and agree and acknowledge that this waiver is an essential term of this Third Amendment, without which the consideration would not have been given by the Lender to the Borrower.
4.7 Ratification. Except as expressly amended or waived herein, all of the representations, warranties, terms, covenants and conditions of the Loan Agreement and the other Loan Documents shall remain unamended and unwaived and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms. The amendments set forth herein shall be limited precisely as provided for herein to the provisions expressly amended herein and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of any other document or of any transaction or further action on the part of the Borrower or the Guarantors which would require the consent of Lender under the Loan Agreement.
4.8 Consent of Guarantors. Without limiting any waivers or any other provisions contained in its respective Guaranty, each Guarantor hereby consents to the terms of this Third Amendment and hereby confirms and agrees that its respective Guaranty is and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects.
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IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be executed and delivered as of the date first above written.
| XXX. XXXXXX' ORIGINAL COOKIES, INC., a Delaware corporation |
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By: |
/s/ XXXXXXX X. XXXX |
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| Name: Xxxxxxx X. Xxxx Title: Senior Vice President |
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XXXXX FARGO FOOTHILL, INC., a California corporation |
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By: |
/s/ XXXX XXXXXX |
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| Name: Xxxx Xxxxxx Title: Vice President |
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THE FOREGOING THIRD AMENDMENT IS AGREED TO, CONSENTED TO AND ACCEPTED BY EACH GUARANTOR, AND EACH GUARANTOR EXPRESSLY AGREES TO BE BOUND BY SECTIONS 4.6 AND 4.8 HEREOF:
| GREAT AMERICAN COOKIE COMPANY, INC., a Delaware corporation, as Guarantor |
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By: |
/s/ XXXXXXX X. XXXX |
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| Name: Xxxxxxx X. Xxxx Title: Senior Vice President |
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PRETZEL TIME, INC., a Utah corporation, as Guarantor |
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By: |
/s/ XXXXXXX X. XXXX |
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| Name: Xxxxxxx X. Xxxx Title: Senior Vice President |
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[Signature Page to Third Amendment—1 of 2]
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| PRETZELMAKER, INC., a Utah corporation, as Guarantor |
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By: |
/s/ XXXXXXX X. XXXX |
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| Name: Xxxxxxx X. Xxxx Title: Senior Vice President |
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XXX. XXXXXX GIFTS, INC., a Utah corporation, as Guarantor |
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By: |
/s/ XXXXXXX X. XXXX |
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| Name: Xxxxxxx X. Xxxx Title: Senior Vice President |
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XXX. XXXXXX COOKIES AUSTRALIA, a Utah corporation, as Guarantor |
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By: |
/s/ XXXXXXX X. XXXX |
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| Name: Xxxxxxx X. Xxxx Title: Senior Vice President |
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[Signature Page to Third Amendment—2 of 2]
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