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EXHIBIT 10.31
[ FOOTHILL CAPITAL CORPORATION - LOGO ]
[ 00000 Xxxxx Xxxxxx Xxxxxxxxx - Xxxxx 0000 ]
[ Xxx Xxxxxxx, Xxxxxxxxxx 00000-3333 ]
[ A NORWEST Company ]
April 2, 1998
Mr. Xxxxxx Xxxxxx
Acting Chief Financial Officer
Garden Botanika, Inc.
0000 000xx Xxxxxx XX
Xxxxxxx, Xxxxxxxxxx 00000
Dear Xx. Xxxxxx:
In accordance with our recent discussions, Foothill Capital Corporation
("Lender") is pleased to issue this financing commitment to Garden Botanika,
Inc. ("Borrower"). Subject to the satisfactory completion of each of the
conditions contained herein, the financing would be as follows:
1. Maximum Amount: $10,000,000.
a. Revolving Line of Credit ("the line"): Lender would make revolving
advances to Borrower up to an amount equal to the result of: (i) the
lesser of (x) the Maximum Amount, (y) 55%, from January 1 through
September 30, or 65% from October 1 through December 31 (however, the
advance rate shall reduce by 2.5% percentage points per week beginning
the first week of December until the advance rate reaches 55%) of the
lower of cost or market value of finished goods inventory, net of
customary reserves as determined by Lender in accordance with its
standard credit policies; and (z) 85% of the net liquidation value of
retail inventory as determined by Great American/Hilco Appraisal &
Valuation Services.
2. Interest Rate:
The rate of interest charged on the loans would be at Borrower's option:
(i) one-half of one percent (0.50%) above the present and future Prime
Rate, or (ii) three percentage points (3.00%) above the London Interbank
Offered Rate ("LIBOR"). The Prime Rate shall be defined as the present
and future Prime Rate publicly announced as being charged from time to
time by Norwest Bank Minnesota, N.A. Interest would be calculated on the
basis of a three hundred sixty (360) day year and actual days elapsed
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and would be payable monthly in arrears. At no time would the interest
charged be less than seven percent (7.00%). A Default Rate would be
determined prior to Closing.
The Eurodollar rate shall be the rate at which Norwest is offered
deposits of U.S. dollars in the London interbank market ("LIBOR")
adjusted by the reserve percentage prescribed by governmental
authorities as determined by Xxxxxx. Lender's obligation to provide
Eurodollar rate loans shall be subject to, but not limited to (i) up to
five (5) Eurodollar loans shall be available at any time: (ii) in the
event of a default under the Line, all Eurodollar loans shall be
suspended; (iii) all Eurodollar loans shall be available in interest
periods of thirty (30) days, sixty (60) days or ninety (90) days, as
selected by Borrower; (iv) the minimum amount of each Eurodollar loan
shall be in an amount not less than $1,000,000 and in integral multiples
of $500,000 in excess thereof; and (v) Borrower shall be responsible for
any Eurodollar contract breakage fees or other associated costs, as
determined by Lender.
3. Collections:
Collections would be remitted to one or more concentration accounts that
would be assigned to and in form satisfactory to Lender. However, the
dominion of cash collections shall be retained by Borrower until the
occurrence of any of the following: a) an event of default under the
loan agreement, b) excess availability (i.e., formula availability as
determined in paragraph 1a) less outstanding loan balance is less than
$2,500.000 or, c) the outstanding loan balance exceeds $5,000,000.
Irrespective of the cash dominion, all collections would be subject to a
one business day clearance charge.
4. Fees and Expenses:
a. Commitment Fee: In consideration of Xxxxxx's issuance of this
commitment letter, Borrower shall pay to Lender a fee (the
"Commitment Fee") in an amount of $25,000. The Commitment Fee
shall be due and payable by wire transfer concurrently with
Xxxxxxxx's acceptance of this commitment letter. The Commitment
fee shall be fully earned and non-refundable when this commitment
letter is accepted by Xxxxxxxx.
b. Closing Fee: A fee equal to one-half of one percent (0.5%) of the
Maximum Amount would be fully earned at loan closing and payable
one-quarter of one percent (0.25%) on the first anniversary of
closing and one-quarter of one percent (0.25%) on the second
anniversary of closing.
c. Foothill Expenses: Borrower would agree to reimburse Lender for
all of Xxxxxx's out-of-pocket costs and expenses relating to this
financing transaction, including, but not limited to, search
fees, title search and insurance fees, filing and recording fees,
attorneys fees and expenses, and examination and appraisal fees
(collectively, "Foothill Expenses").
5. Loan Maturity and Prepayment:
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The Line would mature three years from the initial loan closing
("Maturity"). Termination of the loan prior to maturity would result in
a prepayment fee equal to three percent (3.0%) of the Maximum Amount if
occurring within one year of the closing date, two percent (2.0%) if
occurring within the second year of the closing date and one percent
(1.0%) if occurring thereafter. In the event that early termination is
the direct result of an acquisition or change of control of Borrower, a
prepayment fee would be 50% of such fee as determined above.
6. Purpose:
The purpose of this financing would be to provide for the general
corporate needs of Borrower.
7. Financial Examination and Appraisal Fees:
Borrower would be obligated to pay to Lender a fee of $650 per day per
examiner for financial examinations and out-of-pocket costs of inventory
appraisals for each such examination and appraisal performed by Lender
or its agents.
8. Collateral:
As collateral for all of Borrower's present and future obligations to
Lender, including those arising under the Line, Lender would be granted
first priority perfected liens or security interests in and to
Borrower's now owned or hereafter acquired accounts, chattel paper,
contract rights, documents, equipment, fixtures, general intangibles
(including, without limitation, all causes of action, copyrights,
deposit accounts, licensing agreements, patents, trademarks, and trade
names), instruments, inventory, investment property, leases, real
property, securities (including the stock of subsidiaries), and the
proceeds of all of the foregoing, wherever located. The foregoing is
collectively referred to as the "Collateral."
9. Financial Covenants:
A tangible net worth covenant would be established to allow for a
reduction to tangible net worth of $6,000,000 as measured from 1/31/98
to 1/31/99. Xxxxxx would also measure tangible net worth on a quarterly
basis during fiscal 1998 and for periods beyond 1/31/99 which would be
based upon a discount to projected operating performance. Maximum
capital expenditure and new store opening limits would also be
established based upon Xxxxxxxx's business plan.
10. Conditions Precedent:
The following would be conditions precedent to Xxxxxx's obligation to
extent credit to Borrower:
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a. Borrower, including each of the entities composing Borrower, would
need to be a corporation in good standing in the jurisdiction of its
incorporation and qualified to do business in any other jurisdiction
where such qualification is necessary or appropriate to its business;
b. The Line would need to be made pursuant to, and subject to, the terms
of loan agreements, and other financing documents (the "Loan Documents")
executed and delivered by Borrower on or prior to the Closing Date. The
Loan Documents would contain various representations, warranties, and
covenants (affirmative and negative) as are customary, in Lender's
experience, for a transaction of this type.
c. Borrower would need to have executed and/or delivered, or caused to
be delivered, to Lender prior to the Closing Date, such security
agreements, financing statements, fixture filings, deeds of trust,
mortgages, and chattel mortgages, title insurance policies and
endorsements, depositary account agreements, copies of leases, landlord
waiver, bailee agreements, and other agreements affecting the
Collateral, insurance certificates and endorsements, and other
documentation relative to the liens and security interest in the
Collateral as Lender reasonably may request (the "Security Documents").
Each of the Loan Documents and the Security Documents (the "Documents")
would be governed by the law of the State of California and would need
to be in form and substance reasonably satisfactory to Lender and its
counsel;
d. The financing statements, fixture filings, and other Documents
related to perfection of Xxxxxx's interests in the Collateral would need
to have been filed or recorded in all appropriate jurisdictions and,
with respect to financing statements, Lender would need to have received
searches reflecting its filings of record;
e. There would need to have not occurred any material adverse change in
Borrower's financial condition or any material adverse change in the
value of the Collateral;
f. Xxxxxx would need to have received such opinions of Xxxxxxxx's
counsel and such advice of Xxxxxx's local counsel as Xxxxxx would
reasonably require, which opinions and/or advice would need to be
satisfactory to Lender and its counsel as to both form and substance.
Such opinions of Xxxxxxxx's counsel would include, but not be limited
to, opinions as to Xxxxxxxx's corporate existence. Xxxxxxxx's power and
authority to enter into the Documents, the validity, binding effect, and
enforceability of each of the Documents, and the perfection of Xxxxxx's
liens and security interests in the Collateral;
g. Payment of all accrued and unpaid Foothill Expenses;
11. Brokers' Fees:
Any brokerage commission or finder's fees payable in connection with the
financing arrangement outlined herein will be payable by Borrower and
not by Xxxxxx. Borrower represents and warrants to Lender that it has
not incurred any obligation for a brokerage commission or a finder's fee
in connection with Xxxxxxxx's transactions with Lender.
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Xxxxxxxx agrees to indemnify, defend, and hold Xxxxxx harmless from and
against any claim of any broker or finder arising out of the financing
arrangement outlined herein.
12. Closing Date:
If the financing arrangement contemplated by this letter is not
consummated on or before May 6, 1998, then, without any requirement of
notice or other formality, no party hereto would have any obligation to
pursue the financing arrangement outlined in this letter. The date on
which the Documents are executed and all conditions precedent have been
met would be deemed the "Closing Date."
13. Complete Agreement; No Oral Modifications.
This commitment letter embodies the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all
prior proposals, negotiations, or agreements whether written or oral,
relating to the subject matter hereof including any letter of intent.
This letter may not be modified, amended, supplemented, or otherwise
changed, except by a document in writing signed by the parties hereto.
14. Governing Law; Jury Waiver.
This letter shall be deemed to have been made in the state of California
and the validity of this letter, and the construction, interpretation,
and enforcement hereof, and the rights of the parties hereto relating to
claims or causes of action arising in connection herewith shall be
determined under, governed by, and construed in accordance with the laws
of the state of California. Borrower and Xxxxxx hereby expressly waive
any right to trial by jury of any claim, demand, action, cause of
action, or proceeding arising under or respect to this letter, or in any
way related or incidental to the dealings of the parties hereto with
respect to this letter, or the transactions contemplated hereby, in each
case whether or now or hereafter arising, irrespective of whether
sounding in contract, tort, or otherwise. Borrower and Xxxxxx hereby
agree that any such claim, demand, action, cause of action, or
proceeding shall be decided by a court trial without a jury and that any
party hereto may file an original counterpart or a copy of this section
with any court as written evidence of the consent of the other party
hereto to waive its right to trial by jury.
15. Expense Deposit:
In connection with the requesting financing, Borrower understands that
it will be necessary for Lender to make certain financial, legal, and
collateral investigations and determinations. Borrower and Xxxxxx
acknowledge that Xxxxxxxx previously has paid to Lender the sum of
$25,000 (the "Expense Deposit") as a deposit against the Foothill
Expenses that may be incurred by Xxxxxx. Lender will require an
additional $20,000 Expense Deposit. This Expense Deposit will be held by
Xxxxxx while making such investigations and determinations and will be
applied to Foothill Expenses as and when they are incurred. If Xxxxxx
concludes for any reason, that it will not make the financing outlined
herein available to Borrower, it will return the unused balance of the
Expense
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Deposit. As an illustration, the amount to be deducted from the Expense
Deposit may include costs and expenses incurred by auditors and
appraisers and in verifying Borrower's records, Xxxxxx's legal expenses
in connection with advice concerning the subject financing or with the
preparation of the Documents, and any filing and search fees. If, on the
other hand, Xxxxxx continues to be prepared to extend the credit
described herein to Borrower and Borrower declines for any reason, to
accept such financial accommodations from Lender, Lender shall be
entitled to retain the full amount of the Expense Deposit, irrespective
of the amount of the Foothill Expenses incurred. Xxxxxx's retention of
the balance of the Expense Deposit results from its reasonable endeavor
to estimate the added administrative costs incurred and the amount of
damage sustained by Xxxxxx as a result of Xxxxxxxx's decision to decline
to accept the financing. If the financing is funded, the Expense Deposit
will be returned to Borrower after deducting all Foothill Expenses
actually incurred by Xxxxxx. Lender shall not be obligated to segregate
the Expense Deposit from its other funds and Borrower is not entitled to
receive interest on any portion of the Expense Deposit. Xxxxxxxx hereby
agrees to pay to Lender the full amount of the Foothill Expenses
incurred in connection with the transaction contemplated hereby,
irrespective of the amount of the Expense Deposit and whether the
subject transaction actually is consummated. From time to time, Xxxxxx
shall be entitled to request, and Borrower shall be obligated to provide
supplements to the Expense Deposit to the extent that actual or
projected Foothill Expenses exceed the Expense Deposit.
16. Indemnification:
Borrower shall pay, indemnify, defend, and hold Lender, and each of its
officers, directors, employees, counsel, agents, and attorneys-in-fact
(each, an "Indemnified Person") harmless (to the fullest extent
permitted by law) from and against any and all claims, demands, suits,
actions, investigations, proceedings, and damages, and all attorneys
fees and disbursements and other costs and expenses incurred in
connection therewith (as and when they are incurred and irrespective of
whether suit is brought), at any time asserted against, imposed upon, or
incurred by any of them in connection with or as a result of or related
to the execution, delivery, enforcement, or performance, of this
commitment letter or the transactions contemplated herein, and with
respect to any investigation, litigation, or proceeding related to this
commitment letter, (irrespective of whether any Indemnified Person is a
party thereto), or any act, omission, event or circumstance in any
manner related thereto. This provision shall survive the termination of
this letter.
We are very enthusiastic about the opportunity to finance the operations
of Garden Botanika, Inc. and believe that we can proceed very quickly to the
signing of the Documents and subsequent closing of the financing. If you wish to
proceed on the basis outlined above, please execute this letter in the space
provided below and return it to the undersigned no later than 12:00 p.m.,
California time, on or before April 7, 1998, which acceptance must be
accompanied by the payment of the Commitment Fee and the supplemental Expense
Deposit of $20,000. If you fail to do so by such date and time, this letter
shall expire automatically.
Very truly yours,
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FOOTHILL CAPITAL CORPORATION
/s/ XXXXX XXXXXXXXX
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Vice President
The foregoing terms and conditions are hereby accepted and agreed to as of April
7,1998, as amended as of April 27, 1998.
GARDEN BOTANIKA, INC.,
/s/ XXXXXX X. XXXXXX
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Vice President & Controller
cc: Xxxxx X. Xxxxxx - Senior Executive Vice President / Foothill Capital
Xxxx X. Xxxxxxx - Chairman / Foothill Capital
