EXHIBIT 10.1a
AMENDMENT TO CREDIT AGREEMENT
THIS AMENDMENT is entered into as of June 30, 1998 by and between
FUNCO, INC., a Minnesota corporation (the "Borrower"), and MARQUETTE CAPITAL
BANK, N.A. (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 and by an Amendment to Credit Agreement dated June 30, 1997
(the "Credit Agreement"), is amended as follows:
a. 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, 1999, 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, 1998 through
December 15, 1998, 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 28, 1998 through March 28, 1999 the
Borrower shall cause the aggregate outstanding amount of Advances to
be zero for 45 consecutive days.
b. 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, 1998 in favor of the Bank
(together with any amendments, extensions, renewals and replacements
thereof, called the "Revolving Note").
c. All references to June 30, 1998 are changed to June 30, 1999 in
Section 2.08 of the Credit Agreement.
d. Section 5.01(c) of the Credit Agreement is amended to read as
follows:
(c) As soon as available and in any event within 35 days
after the end of each fiscal quarter of the Borrower: (I) the
consolidated and consolidating balance sheets of the Borrower and the
Subsidiaries and the summary inventory report of the Borrower as of
the end of such quarter and the related consolidated and consolidating
statements of income and cash flow of the Borrower and the
Subsidiaries for such quarter and for the year to date, all in
reasonable detail, prepared and certified by the chief financial
officer of the Borrower to have been prepared in accordance with GAAP,
subject, however, to year-end audit adjustments, and (ii) a Covenant
Compliance Certificate completed with amounts as of the end of such
quarter and executed by the chief financial officer of the Borrower.
e. The reference to $250,000.00 is changed to $4,000,000.00 in Section
5.10 of the Credit Agreement.
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 28,
1999 to exceed $6,500,000.00.
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) $28,000,000.00 at any time
during the period from June 30, 1998 through March 27, 1999; or (b)
$32,000,000.00 at any time during the period after March 27, 1999. '
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 I at any time during the period from June 30, 1998
through August 23, 1998; or (b) 1.50 to I at any time during the
period from August 24, 1998 through November 22, 1998; or (c) 2.00 to
I at any time during the period from November 23, 1998 through March
27, 1999; or (d) 3.00 to I on March 28, 1999; or (e) 2.00 to I at any
time after March 28,1999.
i. Section 5.18 of the Credit Agreement is amended to read as follows:
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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
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From 6/30/98 through 3/27/99 $ 8,000,000.00
After 3/27/99 $10,000,000.00
j. Section 5.19 to the Credit Agreement is amended to read as follows:
Section 5.19 New Stores. In the Borrower's fiscal year
ending March 28, 1999, 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. The following Section 5.20 is added to Article V of the Credit
Agreement:
Section 5.20 Year 2000 Compliance. "Year 2000 Compliant"
means, with regard to any person or entity, that all software,
embedded microchips, and other processing capabilities utilized by,
and material to the business operations or financial condition of,
such person or entity are able to interpret and manipulate data on and
involving all calendar dates correctly and without causing any
abnormal ending scenario including, but not limited to, all dates in
and after the year 2000. The Borrower represents and warrants to the
Bank and agrees that" (a) on or before June 30, 1999, the Borrower
will make due inquiry to determine whether the computer applications
and hardware of the Borrower and the Borrower's material suppliers
will be Year 2000 Compliant by January 1, 2000; and (b) the Borrower
has a plan in place to become Year 2000 Compliant by January 1, 2000,
and the Borrower agrees to devote adequate resources toward,
diligently pursue, and take reasonable actions necessary to complete
such plan and become Year 2000 Compliant by January 1, 2000; and (c)
the Borrower agrees to deliver to the Bank such information as may be
available in the normal course of business regarding the plans and
progress of the Borrower toward becoming Year 2000 Compliant as the
Bank may reasonably request from time to time including, but not
limited to, any existing assessment by a third party of the Borrower's
efforts to become Year 2000 Compliant; and (d) the Borrower agrees to
notify the Bank when the Borrower becomes aware that one if its
material suppliers is not Year 2000 compliant; and (e) at the Bank's
request from time to time, the Borrower shall deliver to the Bank a
copy of any existing audits of the Borrower's plans and progress to
become Year 2000 Compliant by January 1, 2000, and solely at the
Bank's expense, the Borrower shall permit the Bank and the Bank's
representatives to conduct audits of the Borrower's operations for
such purpose. Breach of any
representation, warranty or agreement in this paragraph, or failure of
the Borrower to become Year 2000 Compliant by January 1, 2000 shall
constitute an Even of Default under this agreement.
2. 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. No provision of this Amendment can be amended, modified,
waived or tenninated, 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/ Robert M. Hiben
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Title CFO
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MARQUETTE CAPITAL BANK, N.A.
By /s/ Margaret Mary Yanez
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Title Vice President
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AMENDED AND RESTATED PROMISSORY NOTE
Date: June 30,1998
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, 1997, payable to the order of
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, 1999, 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 2.50% per annum in excess of the Index Rate and that shall
change when and as the Index Rate shall change. Interest is due and payable on
the last day of each month and at maturity. In each calendar month, "Index Rate"
means the average 1-month LIBOR Rate published in The Wall Street Journal in the
previous calendar month. If the Index Rate is no longer available, the Bank may
select a comparable rate to be used as the Index Rate under this Note. The Bank
may lend to its customer at rates that are equal to, greater than, or less than
the Index Rate. Notwithstanding the foregoing, after an Event of Default this
Note shall bear interest until paid at 2.00% per annum in excess of the rate
otherwise then in effect, which rate shall continue to vary based on further
changes in the Index 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, 1998 through December 15, 1998.
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, 1998 through December 15, 1998, 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
and replaced 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, 1998.
FUNCO, INC.
By /s/ Robert M. Hiben
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Title CFO
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Marquette Capital Bank, N.A. agrees to this Amended and Restated Promissory
Note.
Executed as of June 30, 1998.
MARQUETTE CAPITAL BANK, N.A.
By /s/ Margaret Mary Yanez
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Title Vice President
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