Item 1.01. Entry into a Material Definitive Agreement
etailz Financing
On February 20, 2020, etailz Inc. (the “etailz”), a wholly-owned subsidiary of Trans World Entertainment Corporation (the “Company”) entered into a Loan and Security Agreement (the “Loan Agreement”) with Encina Business Credit, LLC (“Encina”), as
administrative agent, under which the lenders party thereto committed to provide up to $25 million in loans under a three-year, secured revolving credit facility (the “Credit Facility”).
The commitments by the lenders under the Credit Facility are subject to borrowing base and availability restrictions. Up to $5.0 million of the Credit Facility may be used for the making of swing line loans.
Interest under the Credit Facility accrues, subject to certain terms and conditions under the Loan Agreement, at a LIBOR Rate or Base Rate, plus, in each case, an Applicable Margin, which is determined by reference to the level of Availability as
defined in the Loan Agreement, with the Applicable Margin for LIBOR Rate loans ranging from 4.00% to 4.50% and the Applicable Margin for Base Rate loans ranging from 3.00% to 3.50%.
The Credit Facility is secured by a first priority security interest in substantially all of the assets of etailz, including inventory, accounts receivable, cash and cash equivalents and certain other collateral of the borrowers and guarantors
under the Credit Facility (collectively, the “Credit Facility Parties”) and by a first priority pledge by the Company of its equity interests in etailz. The Company will provide a limited guarantee of etailz’s obligations under the Credit Facility.
Among other things, the Loan Agreement limits etailz’s ability to incur additional indebtedness, create liens, make investments, make restricted payments or specified payments and merge or acquire assets. The Loan Agreement also requires etailz
to comply with a financial maintenance covenant.
The Loan Agreement contains customary events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other obligations, customary ERISA defaults, certain events
of bankruptcy and insolvency, judgment defaults, the invalidity of liens on collateral, change in control, cessation of business or the liquidation of material assets of the Credit Facility Parties taken as a whole, the occurrence of an uninsured
loss to a material portion of collateral and failure of the obligations under the Credit Facility to constitute senior indebtedness under any applicable subordination or intercreditor agreements.
The proceeds from the Credit Facility will be used by etailz to repay certain intercompany indebtedness owed to the Company and for working capital and for other general corporate purposes.
etailz paid certain customary fees and expenses in connection with obtaining the lenders’ commitments pursuant to the terms of a related fee letter.
The foregoing description of the Credit Facility does not purport to be complete and is qualified in its entirety by reference to the Loan Agreement, a copy of which is attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated
herein by reference.
Amendment to Asset Purchase Agreement
On February 20, 2020, Trans World Entertainment Corporation, Record Town, Inc., Record Town USA LLC, Record Town Utah LLC, Trans World FL LLC, Trans World New York, LLC (collectively, “Sellers”), 2428392 Inc. (“Purchaser”), and 2428391 Ontario
Inc., o/a Sunrise Records (“Parent”), entered into an amendment (the “Amendment”) to the Asset Purchase Agreement dated January 23, 2020 by and among Sellers, Purchaser and Parent (the “Asset Purchase Agreement”). The Amendment reflects (i) agreed
upon changes to the Purchased Asset, Assumed Liabilities, Excluded Assets and Excluded Liabilities (each as defined in the Asset Purchase Agreement), (ii) an increase in the Escrow Amount and (iii) a change in payment mechanics.
The foregoing description of the Amendment is qualified in its entirety by reference to the complete text thereof, a copy of which is filed as Exhibit 10.2 to this Current Report on Form 8-K, and is incorporated herein
by reference.