[LOGO]
SPECIALTY CATALOG CORP.
SUMMARY OF PROPOSED TERMS AND CONDITIONS
FOR EXISTING $13,000,000 CREDIT FACILITIES
CONFIDENTIAL - FOR SCC OFFICER EYES ONLY
APRIL 30, 2001
THE PROPOSED TERMS AND CONDITIONS SUMMARIZED IN THIS TERM SHEET ARE PROVIDED FOR
DISCUSSION PURPOSES ONLY AND DO NOT CONSTITUTE AN OFFER, AGREEMENT OR COMMITMENT
TO LEND. THE ACTUAL TERMS AND CONDITIONS UPON WHICH FLEET NATIONAL BANK ("THE
BANK") MIGHT EXTEND CREDIT TO THE BORROWER ARE SUBJECT TO SATISFACTORY
COMPLETION OF DUE DILIGENCE, CREDIT APPROVAL, SATISFACTORY REVIEW AND EXECUTION
OF DOCUMENTATION AND SUCH OTHER TERMS AND CONDITIONS AS MAY BE DETERMINED BY
FLEET NATIONAL BANK AND ITS COUNSEL.
- ----------------------------------------------------------------------------------------------------------------
BORROWER: Specialty Catalog Corp. and its Subsidiaries (the "Borrower")
- ----------------------------------------------------------------------------------------------------------------
LENDER: Fleet National Bank (the "Bank")
- ----------------------------------------------------------------------------------------------------------------
PROPOSED CURRENT AGREEMENT
- ----------------------------------------------------------------------------------------------------------------
TOTAL FACILITY SIZE No Change $12,250,000 year 1
2x EBITDA up to
a maximum of $13,000,000 in year 2
- ----------------------------------------------------------------------------------------------------------------
TERM DEBT No Change $8,100,000
- ----------------------------------------------------------------------------------------------------------------
PERMITTED USE No Change Working Capital, general corporate
purposes and
approved acquisitions.
- ----------------------------------------------------------------------------------------------------------------
TERM DEBT AMORTIZATION No Change $450,000 per quarter
- ----------------------------------------------------------------------------------------------------------------
QUARTERLY EXCESS On December 31, 2001, 25 % of OCF after On December 31, 2001, 25 % of OCF
CASH FLOW RECAPTURE debt service up to a maximum of $500,000 after debt service up to a maximum
per year (excluding approved of $500,000 per year (excluding
acquisitions). Pari passu between Senior approved acquisitions).
and Subordinated debt
- ----------------------------------------------------------------------------------------------------------------
EXPIRY Revolver - March 31, 2003 Revolver - December 31, 2002
Term - December 31, 2005 Term - December 31, 2005
- ----------------------------------------------------------------------------------------------------------------
INTEREST RATES No Change Pricing Grid
- ----------------------------------------------------------------------------------------------------------------
COMMITMENT FEE No Change .375% per annum, payable quarterly
- ----------------------------------------------------------------------------------------------------------------
CLOSING FEE Three quarters of one percent None
(0.75%) of maximum committed amount.
- ----------------------------------------------------------------------------------------------------------------
COVENANT - No Change Operating Cash Flow
DEBT SERVICE COVERAGE (EBITDA-unfinanced CAPEX-Net Cash
Taxes) covers Debt Service (P&I) at
1.25x
- ----------------------------------------------------------------------------------------------------------------
COVENANT - No Change 80% of quarterly budgeted EBITDA -
QUARTERLY EBITDA TEST if covenant missed in any one
quarter the company can make up the
difference in the following quarter
before default.
- ----------------------------------------------------------------------------------------------------------------
COVENANT - $4,500,000 $4,500,000
MINIMUM ANNUAL EBITDA
- ----------------------------------------------------------------------------------------------------------------
COVENANT - 2.75x rolling 4Q year 1 2.75x rolling 4Q year 1
SENIOR DEBT LEVEL 2.50x rolling 4Q year 2 2.50x rolling 4Q year 2
2.00x rolling 4Q year 3
- ----------------------------------------------------------------------------------------------------------------
Specialty Catalog Corp. May 17, 2001
Summary of Terms and Conditions
- ----------------------------------------------------------------------------------------------------------------
CAPEX LIMITATION Annual CAPEX $600,000 Annual CAPEX $600,000
If FY '01 EBITDA > $5.5 million Year 2 If FY '01 EBITDA > $5.5 million
CAPEX $1,500, 000. No amendment fee Year for 2 CAPEX $1,500, 000. No
for waiver if requested amendment fee waiver if
before commitment. requested before commitment.
- ----------------------------------------------------------------------------------------------------------------
ACQUISITION No Change Approval not required for related
business (wig or direct marketing)
if purchase price plus assumed
non-trade debt less than $300,000,
no amendment fee for waiver if
requested before commitment
- ----------------------------------------------------------------------------------------------------------------
DISPOSITION RECAPTURE No Change All proceeds unless used for a
permitted acquisition
- ----------------------------------------------------------------------------------------------------------------
EARLY TERMINATION FEE No Change $50,000 yr. one and $25,000 yr. two.
- ----------------------------------------------------------------------------------------------------------------
REPORTING REQUIREMENTS: Periodic financial reporting, including, but not limited to, the following:
certified annual audited consolidated financial statements for Borrower and
Guarantor (within 120 days from year-end), management prepared quarterly
consolidated financial statements (within 45 days from quarter-end), annual
budgets (within 45 days after each fiscal year-end), and other information
that may from time to time be requested by the Bank.
- ----------------------------------------------------------------------------------------------------------------
OTHER TERMS AND CONDITIONS: Usual and customary for facilities of this size and type, including, but not
limited to, the following:
|o| Customary events of default, including without limitation, a cross
default to other indebtedness, non-payment, breach of a covenant, breach
of a representation, bankruptcy, un-stayed judgment, ERISA default and \
a change in control default.
|o| All other debt to be subordinated to Fleet's with Subordination Agreement
with terms and conditions acceptable to the Bank.
|o| Borrower's principal operating and investment accounts to be held at the
Bank.
|o| Departure of Joe Grabowski is an event of default.
- ----------------------------------------------------------------------------------------------------------------
CONDITIONS PRECEDENT: The transaction contemplated is hereby subject to those conditions which are
customary to this type of transaction including, but not limited to, the
following:
(i) Negotiation, execution and delivery of a Credit Agreement and other
loan documents satisfactory to the Bank, which shall contain,
without limitation, representations and warranties (usual and
customary for transactions of this type, including without
limitation, corporate existence, corporate and government
authorizations and consents, financial information, no material
adverse change in assets, business, financial condition or prospects,
payment of taxes, compliance with laws and regulations, no material
litigation or contingent liabilities other than those disclosed,
no default, etc.), conditions, covenants, reporting requirements,
capital adequacy and yield protection provisions, indemnities
and events of default;
(ii) Completion of due diligence which is satisfactory to the Bank in all
respects including, but not limited to, satisfactory review
of legal documents and commercial finance examinations;
(iii) Minimum availability under the borrowing base at closing in an
amount to be determined.
- ----------------------------------------------------------------------------------------------------------------
Confidential Page 2 of 3
[LOGO]
Specialty Catalog Corp. May 17, 2001
Summary of Terms and Conditions
- ----------------------------------------------------------------------------------------------------------------
EXPENSES: Borrower shall pay or reimburse the Bank promptly whether or not the
transaction closes for all of the Bank's reasonable expenses incurred in
connection with the negotiation, preparation, execution, interpretation and
administration of the Credit Agreement and any other loan documents and any
amendment, consent or waiver thereof including, without limitation, the fees
and expenses of the Bank's counsel, appraisal and collateral examination
fees, due diligence investigation expenses and any other reasonable
out-of-pocket expenses. Borrower shall also pay or reimburse the Bank and all
of the Lenders for all reasonable expenses incurred or expended in connection
with the enforcement of the Credit Agreement and the other loan documents,
the exercise of any remedies thereunder or with respect to any Collateral and
in connection with any litigation in any way related to the credit facility
contemplated hereby.
- ----------------------------------------------------------------------------------------------------------------
GOVERNING LAW: Commonwealth of Massachusetts
- ----------------------------------------------------------------------------------------------------------------
AGREED AND ACCEPTED:
SPECIALTY CATALOG CORP.
BY: /s/ Thomas McCain
DATE: May 4, 2001
TITLE: Senior Vice President
and Chief Financial Officer
Confidential Page 3 of 3
[LOGO]