Item 1.01.
Entry into a Material Definitive
Agreement.
Term Loan Credit Agreement
On August 13, 2019, Francesca’s Holdings
Corporation (the “
Company
”), as a guarantor, certain of its subsidiaries, as borrowers (the “
Borrowers
”),
and certain of its subsidiaries as guarantors (together with the Company and the Borrowers, the “
Loan Parties
”),
entered into a term loan Credit Agreement (“
Term Loan Credit Agreement
”) with Tiger Finance, LLC, as administrative
agent and the lenders party thereto.
The Term Loan Credit Agreement provides
for an aggregate term loan of $10.0 million and matures on August 13, 2022.
All obligations of each Loan Party
under the Term Loan Credit Agreement are unconditionally guaranteed by the Company and each of the Company’s existing and
future direct and indirect wholly owned domestic subsidiaries, including the Borrowers. All obligations under the Term Loan Credit
Agreement, and the guarantees of those obligations, are secured on a junior lien basis by substantially all of the assets of the
Company and each of the Company’s existing and future direct and indirect wholly owned domestic subsidiaries.
The loan under the Term Loan Credit Agreement
(the “
Term Loan
”) bears interest at a rate equal to LIBOR for the interest period relevant to the Term Loan,
subject to a 0.00% floor, plus 8.00%, provided that the interest rate on the Term Loan will not be less than 10.00%. The Term Loan
Credit Agreement also requires the Borrowers to pay a closing fee equal to 2.50% of the amount of the Term Loan and an annual agency
fee of $50,000.
The Term Loan Credit Agreement is subject
to a combined borrowing base together with the Company’s existing asset based revolving credit facility. This combined borrowing base, after taking into account the Term Loan Credit Agreement, is expected to provide approximately $7.0 million of net additional liquidity
to the Company.
The Term Loan Credit Agreement contains
customary affirmative and negative covenants, including limitations, subject to customary exceptions, on the ability of the Company
and its subsidiaries to (i) incur additional debt; (ii) create liens; (iii) make certain investments, acquisitions, loans and advances;
(iv) sell assets; (v) pay dividends or make distributions or make other restricted payments; (vi) prepay other indebtedness; (vii)
engage in mergers or consolidations; (viii) change the business conducted by the Company and its subsidiaries; (ix) engage in certain
transactions with affiliates; (x) enter into agreements that restrict dividends from subsidiaries or the ability of subsidiaries
to grant lines upon their assets; and (xi) amend certain charter documents and material agreements governing subordinated and junior
indebtedness.
In addition, the Term Loan Credit Agreement
limits the amount of capital expenditures that the Loan Parties may make through the fiscal year ending in 2021, provided that
the Loan Parties may make unlimited amounts of capital expenditures if certain payment conditions are met.
The Term Loan Credit Agreement also contains
customary events of default, including: (i) failure to pay principal, interest, fees or other amounts under the Term Loan Credit
Agreement when due taking into account any applicable grace period; (ii) any representation or warranty proving to have been materially
incorrect when made or deemed made; (iii) a cross default with respect to other material indebtedness; (iv) bankruptcy and insolvency
events; (v) unsatisfied material final judgments; (vi) a “change of control”; (vii) certain defaults under the
Employee Retirement Income Security Act of 1974; (viii) the invalidity or impairment of any loan document or any security interest;
and (ix) breach of covenants in the Term Loan Credit Agreement and other loan documents.
The foregoing summary of the Term Loan
Credit Agreement is qualified in its entirety by reference to the full text of the Term Loan Credit Agreement, which is filed as
Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
First Amendment to JPM Credit Agreement
On August 13, 2019, concurrent with entering
into the Term Loan Credit Agreement, the Company and the other Loan Parties, entered into a First Amendment to Credit Agreement
(the “
First Amendment to JPM Credit Agreement
”) with JPMorgan Chase Bank, N.A., as administrative agent, and
the lenders party thereto, which amends the existing Credit Agreement, dated as of May 25, 2018, by and among the Company, the
other Loan Parties, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (the “
JPM Credit
Agreement
”).
The First Amendment to JPM Credit Agreement,
among other things, (i) reduces the Aggregate Revolving Commitment (as defined in the JPM Credit Agreement) from $50.0 million
to $40.0 million; (ii) allows the Loan Parties to enter into the Term Loan Credit Agreement; (iii) changes the maturity date under
the JPM Credit Agreement from May 23, 2023 to the earlier of (a) May 23, 2023 and (b) the date that is 90 days prior to any scheduled
maturity of the Term Loan; (iv) removes the requirement to maintain a minimum Fixed Charge Coverage Ratio (as defined in the JPM
Credit Agreement) previously contained in the JPM Credit Agreement; and (v) limits the amount of capital expenditures that the
Loan Parties may make through the fiscal year ending in 2021, provided that the Loan Parties may make unlimited amounts of capital
expenditures if certain payment conditions are met.
The reduced Aggregate Revolving Commitment
of $40.0 million exceeds the current borrowing base under the JPM Credit Agreement by a significant amount and such reduction therefore
does not result in any reduction in available borrowings under the JPM Credit Agreement.
The foregoing summary of the First Amendment
to JPM Credit Agreement is subject to, and qualified in its entirety by, the full text of the First Amendment to JPM Credit Agreement,
which is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by reference.
Certain of the lenders party to the Term
Loan Credit Agreement and First Amendment to JPM Credit Agreement, as well as certain of their respective affiliates, have performed,
and may in the future perform, commercial banking, investment banking, underwriting and other financial advisory services for the
Company, for which they have received, and will receive, customary fees and expenses.