The Term Loan Facility requires the Borrower to maintain minimum excess availability of at least the greater of (i) $25 million or (ii) 10% of the sum of (x) Amended ABL Facility (defined below) loan cap (calculated without giving effect to any term pushdown reserve) plus (y) the lesser of (A) the outstanding principal balance under the Term Loan Facility and (B) the term loan borrowing base. In addition, the Term Loan Facility contains customary covenants and restrictions on the Company’s and its subsidiaries’ activities, including, but not limited to, limitations on the incurrence of additional indebtedness, liens, negative pledges, guarantees, investments, loans, asset sales, mergers, acquisitions, prepayment of other debt, distributions, dividends, the repurchase of capital stock, transactions with affiliates, the ability to change the nature of its business or its fiscal year, and permitted activities of the Company.
The Term Loan Facility includes customary events of default that, include among other things, non-payment defaults, inaccuracy of representations and warranties, covenant defaults, cross-default to material indebtedness, bankruptcy and insolvency defaults, material judgment defaults, ERISA defaults, structural defaults under the loan documents and a change of control default. The occurrence of an event of default could result in the acceleration of the obligations under the Term Loan Facility. Under certain circumstances, a default interest rate will apply on any amount payable under the Term Loan Facility during the existence of an event of default at a per annum rate equal to 2.00% above the applicable interest rate for any principal and 2.00% above the rate applicable for base rate loans for any other interest.
Borrower is also obligated to pay other customary closing fees, arrangement fees and administration fees for a credit facility of this size and type.
All obligations under the Term Loan Facility are guaranteed by the Loan Parties (other than the Borrower) and secured by (a) a second priority lien on, substantially all of the Loan Parties’ working capital assets, including cash, accounts receivable, and inventory, and (b) a first priority lien on, substantially all of the Loan Parties’ non-working capital assets, including intellectual property, and the tax refund payable to the Company pursuant to the CARES Act, in each case, subject to certain permitted liens.
The description of the Term Loan Facility in this Current Report on Form 8-K is qualified in its entirety by reference to the complete text of the Term Loan Facility, a copy of which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.
Amendment of ABL Credit Agreement
On the Initial Effective Date, the Loan Parties entered into the Second Amendment to the Second Amended and Restated $250,000,000 Asset-Based Loan Credit Agreement and the Second Amendment to the Amended and Restated Security Agreement, among the Loan Parties, the lenders party thereto, and Wells Fargo, as administrative agent, as collateral agent, as issuing bank and as swing line lender (the “ABL Facility Amendment”). The ABL Facility Amendment amends the Loan Parties’ existing asset-based revolving credit facility (the “ABL Facility” and, as amended by the ABL Facility Amendment, the “Amended ABL Facility”), which is scheduled to expire on May 24, 2024.
The ABL Facility Amendment added the Company and Express Topco as Loan Parties, fully obligated and bound by all of the respective covenants, representations, warranties and events of default.
Under the Amended ABL Facility, revolving loans may be borrowed, repaid and reborrowed until May 24, 2024, at which time all amounts borrowed must be repaid. Borrowings under the Amended ABL Facility bear interest at variable rates that are indexed, at the Borrower’s option, to LIBOR or the base rate as defined in the credit agreement governing the asset-based loan credit facility, in each case plus a pricing margin. The pricing margin for LIBOR loans ranges from 2.00% to 2.25% per annum, and the pricing margin for base rate loans ranges from 1.00% to 1.25% per annum, in each case as determined in accordance with the provisions of the Amended ABL Facility based on average daily excess availability. The Amended ABL Facility has a maximum borrowing amount of $250 million, subject to a borrowing base which is calculated based on specified percentages of eligible inventory, credit card receivables and cash, less certain reserves. Commitment reductions and termination of the Amended ABL Facility prior to the maturity date is permitted, subject in certain instances to a prepayment fee.
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