Exhibit 10.1
FRANCHISEE FINANCING AGREEMENT
As of August 2, 2010
Between

     
ADMINISTRATOR
  LENDER
 
   
ColorTyme Finance, Inc.
  Citibank, N.A.
5501 Headquarters Drive
  8401 N. Central Expressway
Plano, Texas 75024
  Suite 500
 
  Dallas, Texas 75225

     In consideration of the creation of the revolving credit facility described
below and the mutual covenants and agreements contained herein, and intending to
be legally bound hereby, Lender and Administrator agree as follows:
SECTION 1. DEFINITIONS
     1.1 Certain Definitions. In addition to any other terms defined herein, the
following terms shall have the meanings set forth with respect thereto:
     “Administrator Interest” means that portion of any interest payment made by
a Borrower that accrued at the Administrator Interest Rate (as defined in such
Borrower’s Note).
     “Aggregate Revolving Loan Principal Debt” means, at any time, with respect
to all Borrowers collectively, the aggregate outstanding principal balance of
the Loans made to all Borrowers.
     “Agreement” means this Franchisee Financing Agreement and all subsequent
modifications and amendments hereto.
     “Bankruptcy Default” means an Event of Default described in Section 9.6.
     “Borrower Operating Accounts” means those certain operating accounts of
each Borrower held at Lender, and “Borrower Operating Account” means any one of
the Borrower Operating Accounts.
     “Borrowers” means, collectively, each franchisee of ColorTyme, Inc. who
(a) is approved by Lender in its sole discretion, and (b) satisfies the
conditions in Section 5.6. Franchisees may be added as Borrowers hereunder from
time to time.
     “Business Day” means a weekday, Monday through Friday, except a legal
holiday or a day on which banking institutions in Dallas, Texas are authorized
or required by law to be closed. Unless otherwise provided, the term “days” when
used herein shall mean calendar days.
     “Closing Date”: See Section 4.
     “Collateral LC”: See Section 3.4(a).
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     “Consolidated Fixed Charge Coverage Ratio” means the “Consolidated Fixed
Charge Coverage Ratio” as such term is defined in the Senior Credit Agreement as
of the Closing Date, without regard to any amendments, modifications,
supplements or restatements of the Senior Credit Agreement after the Closing
Date.
     “Consolidated Leverage Ratio” means the “Consolidated Leverage Ratio” as
such term is defined in the Senior Credit Agreement as of the Closing Date,
without regard to any amendments, modifications, supplements or restatements of
the Senior Credit Agreement after the Closing Date.
     “Contested in Good Faith” means, as to any payment, tax, assessment,
charge, levy, lien, encumbrance or claim, contesting the amount, applicability
or validity thereof in good faith by appropriate proceedings or other
appropriate actions promptly initiated and diligently conducted in a manner
reasonably satisfactory to Lender, provided (a) an adequate reserve or other
appropriate provision, as shall be required in conformity with GAAP shall have
been made therefor, and (b) the enforcement of the contested payment, tax,
assessment, charge, levy, lien, encumbrance or claim is stayed in a manner
reasonably satisfactory to Lender pending the resolution of such contest.
     “Corporate Guarantors” means Administrator and Parent
     “Corporate Guaranty Agreements”: See Section 3.2.
     “Event of Default”: See Section 9.
     “Financial Covenant Non-compliance Period” means any period during which
(a) either the Consolidated Leverage Ratio exceeds 3.25 to 1.0 or the
Consolidated Fixed Charge Coverage Ratio is less than 1.35 to 1.0, and (b) the
Administrator and Lender are unable to agree on a modification of such ratios
which would cure such non-compliance. The Consolidated Leverage Ratio and the
Consolidated Fixed Charge Coverage Ratio will be calculated for any period of
four consecutive fiscal quarters of Parent.
     “Funding Date”: See Section 5.
     “GAAP” means generally accepted accounting principles as in effect from
time to time, applied on a basis consistent with the most recent financial
statements and financial information of the Parent delivered to Lender pursuant
to Section 6.1(a).
     “Governmental Authority” means any nation, country, commonwealth,
territory, state, county, parish, municipality or any political subdivision,
agency, department, commission, board or other instrumentality of any of the
foregoing.
     “Guarantors” means collectively, the Corporate Guarantors and the Principal
Guarantors.
     “Guaranty Agreements” means, collectively, the Corporate Guaranty
Agreements and the Principal Guaranty Agreements.
     “Loan Documents” means this Agreement, the Notes, the Security Agreements,
the Guaranty Agreements, any applicable UCC-1 financing statements, the
Officer’s Certificates, the Notices of Final Agreement, and all other documents,
instruments, guarantees, security agreements, deeds of trust, pledge agreements,
certificates and agreements executed and/or delivered by any Loan Party in
connection with any Loan, together with all renewals, extensions, modifications
and amendments from time to time made of any such documents.
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     “Loan Party” means each Borrower, each Guarantor and each other Person who
is, or whose property is, directly or indirectly liable for the Obligations.
     “Loans”: See Section 2.1(a).
     “Material Adverse Effect” means (i) a material adverse effect upon the
validity or enforceability of any of the Loan Documents, (ii) a material adverse
change in, or a material adverse effect upon, the financial condition, business,
assets or operations of the Corporate Guarantors taken as a whole or the Loan
Parties taken as a whole, or (iii) a material impairment of the ability of
either Corporate Guarantor to fulfill its obligations under any of the Loan
Documents.
     “Maximum Rate” means the higher of the maximum interest rate allowed by
applicable United States or Texas law as amended from time to time and in effect
on the date for which a determination of interest accrued hereunder is made. The
determination of the maximum rate permitted by applicable Texas law shall be
made pursuant to the weekly ceiling as determined pursuant to Chapter 303 of the
Texas Finance Code, but Lender reserves the right to implement from time to time
any other rate ceiling permitted by such law.
     “Note Payment Default”: See Section 3.4(a).
     “Notes” means those certain revolving promissory notes made by the
Borrowers payable to the order of Lender, and all renewals, extensions,
modifications and amendments thereto, and substitutions therefor.
     “Notices of Final Agreement”: See Section 5.6.
     “Obligations” means the obligations of each Borrower (severally and not
jointly):
     (a) to pay all indebtedness arising out of this Agreement, any future
advances under this Agreement, and all renewals, extensions or amendments of
such indebtedness or any part thereof or any such future advances;
     (b) to pay the principal of and interest on its Note in accordance with the
terms thereof, and all renewals, extensions, modifications and amendments of
such Note or any part thereof, and any future advances made pursuant thereto;
     (c) to repay to Lender all amounts advanced by Lender hereunder or under
the other Loan Documents on behalf of such Borrower, including, without
limitation, advances for principal or interest payments to prior secured
parties, mortgagees, or lienors, or for taxes, levies, insurance, rent, repairs
to or maintenance or storage of any of the collateral;
     (d) to pay any and all other indebtedness of such Borrower to Lender of
every kind, nature and description, direct or indirect, primary or secondary,
secured or unsecured (including overdrafts), joint or several, absolute or
contingent, due or to become due, now existing or hereafter arising, regardless
of how it may be evidenced, including without limitation all future advances,
whether or not presently contemplated by the parties hereto;
     (e) to perform fully all of the terms and provisions of each of the
instruments constituting the Loan Documents; and
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     (f) to reimburse Lender, on demand, for all of Lender’s reasonable expenses
and costs, which each Borrower is obligated to pay pursuant to the terms of the
Loan Documents.

    “Parent” means Rent-A-Center, Inc., a Delaware corporation.

     “Person” means a corporation, a limited liability company, an association,
a partnership, a joint venture, an organization, a business, an individual or a
government or political subdivision thereof or any governmental agency.
     “Potential Default” means any condition, event or act, which with the
giving of notice or the lapse of time, or both, will constitute an Event of
Default hereunder.
     “Principal Guarantors” means, collectively, each Principal Owner of a
Borrower that executes a Principal Guaranty Agreement from time to time.
     “Principal Guaranty Agreements”: See Section 3.3.
     “Principal Owners”: See Section 3.3.
     “Program Amount” means the obligation of Lender, subject to the terms and
conditions of this Agreement, to make Loans which shall not exceed at any one
time outstanding $25,000,000.
     “Responsible Officer” means the chief executive officer, president, chief
financial officer, treasurer, assistant treasurer or any other executive officer
of a Loan Party whose signature incumbency is set forth in a certificate
delivered to Lender pursuant to Sections 4.2 or 5.6(d). Any document delivered
hereunder that is signed by a Responsible Officer of a Loan Party shall be
conclusively presumed to have been authorized by all necessary corporate,
partnership and/or other action on the part of such Loan Party and such
Responsible Officer shall be conclusively presumed to have acted on behalf of
such Loan Party. With respect to Administrator, the President, Chief Executive
Officer, Vice President — Finance and, with respect to requests for advances and
other administrative matters only, the Credit Manager, shall each be deemed a
Responsible Officer until Lender receives written notice from Administrator
otherwise.
     “Revolving Loan Commitment” means, with respect to each Borrower, the
obligation of Lender, subject to the terms and conditions of this Agreement and
the terms of such Borrower’s Note, to make Loans which shall not exceed the face
amount of such Borrower’s Note.
     “Revolving Loan Principal Debt” means, at any time, with respect to any
Borrower, the aggregate outstanding principal balance of the Loans made to such
Borrower.
     “Security Agreements”: See Section 3.1.
     “Senior Credit Agreement” means that certain Third Amended and Restated
Credit Agreement dated as of May 28, 2003, as amended and restated as of
November 15, 2006, among Parent, the lenders from time to time party thereto and
JPMorgan Chase Bank, N.A. as administrative agent, as amended pursuant to the
terms of that certain First Amendment dated as of December 2, 2009.
     “Store” means, with respect to any Borrower, each store operated by such
Borrower pursuant to a franchise or license agreement with ColorTyme, Inc.
     1.2 Terms Generally. All other terms contained in this Agreement, unless
the context indicates otherwise, have the same meanings as provided for by the
Uniform Commercial Code as
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adopted in Texas to the extent the same are used or defined therein. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including” shall
be deemed to be followed by the phrase “without limitation.” The word “will”
shall be construed to have the same meaning and effect as the word “shall.”
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), and (b) the words
“herein”, “hereof” and “hereunder” and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof.
     1.3 Accounting Terms. Unless specified elsewhere herein, all accounting
terms used herein shall be interpreted, all accounting determinations hereunder
shall be made, and all financial statements to be delivered hereunder shall be
prepared in accordance with GAAP.
     1.4 Counting Days. If any time period referenced herein ends on a day other
than a Business Day, such period shall be deemed to end on the next succeeding
Business Day.
     1.5 Rounding. Any financial ratio as required to be maintained by any Loan
Party pursuant to this Agreement shall be calculated by dividing the appropriate
component by the other component, carrying the result to one place more than the
number of places by which such ratio is expressed herein and rounding the result
up or down to the nearest number (rounding up if there is no nearest number).
SECTION 2. REVOLVING CREDIT FACILITY
     2.1 The Revolving Loans.
     (a) Lender agrees, subject to the terms and conditions hereof, to lend to
Borrowers at any time and from time to time sums (each herein called a “Loan”
and collectively the “Loans”) which may be repaid and reborrowed pursuant to the
terms of the Notes. The Aggregate Revolving Loan Principal Debt shall not exceed
at any one time outstanding an amount equal to the Program Amount. The Revolving
Loan Principal Debt of any Borrower shall not exceed such Borrower’s Revolving
Loan Commitment.
     (b) The proceeds of Loans may be used to finance purchases of inventory for
Borrowers’ Stores from Administrator, to finance working capital and
acquisitions, to refinance certain existing indebtedness of Borrowers to Wells
Fargo Capital Finance and other lenders permitted by Administrator and Lender,
and for such other purposes permitted by Administrator and Lender.
     (c) The obligation of each Borrower to repay its Revolving Loan Principal
Debt outstanding at any one time shall be evidenced by a Note which shall (a) be
payable for the amount of the Loans made to such Borrower, (b) be payable as to
principal and interest as provided therein, (c) be entitled to the benefits of
this Agreement and the security provided for herein and the other Loan
Documents, and (d) be substantially in the form of Exhibit B attached hereto.
     (d) Lender agrees to, as soon as reasonably practicable but in any event
within five Business Days of its receipt of each repayment of Loans under the
Notes, pay to Administrator an amount equal to that portion of such repayment
constituting Administrator Interest. Except as expressly provided herein to the
contrary, all payments on any Borrower’s Note shall be applied
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in the following order of priority: (a) the payment or reimbursement of any
expenses, costs or obligations (other than the outstanding principal balance
hereof and interest hereon) for which such Borrower shall be obligated or Lender
shall be entitled pursuant to the provisions of such Borrower’s Note or the
other Loan Documents related thereto; (b) the payment to Lender of accrued but
unpaid interest on such Borrower’s Note, other than Administrator Interest;
(c) the payment of accrued but unpaid Administrator Interest on such Borrower’s
Note; and (d) the payment to Lender of all or any portion of the principal
balance of such Borrower’s Note then outstanding thereunder, in the direct order
of maturity. If an event of default exists and is continuing under such
Borrower’s Note or under any of the other Loan Documents to which such Borrower
or applicable Principal Guarantor is a party related thereto, then Lender may,
at the sole option of Lender, apply any such payments, at any time and from time
to time, to any of the items specified in clauses (a), (b), (c) or (d) above
without regard to the order of priority otherwise specified in this
Section 2.1(d) and any application to the outstanding principal balance of such
Borrower’s Note may be made in either direct or inverse order of maturity.
During the continuance of any Event of Default, Administrator shall not be
entitled to receive any payments (whether for principal, interest or fees) until
such Event of Default is cured or waived other than payments due to
Administrator under such Borrower’s franchise agreement.
     2.2 Borrowings. Each Loan shall be made upon Administrator’s irrevocable
written notice to Lender given not more than once per calendar month on behalf
of the Borrowers. Each such notice must be received by Lender not later than
11:00 A.M. (Dallas, Texas time), one Business Day prior to the requested date of
any borrowing Loans. Each written request must be in the form of a Loan Notice
in the form of Exhibit A attached hereto (or such other form as agreed to by
both Administrator and Lender) (each such notice, a “Loan Notice”),
appropriately completed and signed by a Responsible Officer of Administrator.
Each Loan Notice shall specify (i) each Borrower for which a Loan is requested,
(ii) the requested date of the Loans (which shall be a Business Day), and
(iii) the requested principal amount of each Loan. Each Loan to a Borrower will
be advanced by Lender to Administrator or as otherwise directed by
Administrator.
     2.3 Credit Approval. Nothing herein shall obligate Lender to accept or
approve any request for financing submitted by or on behalf of a franchisee of
ColorTyme, Inc. to become a new Borrower hereunder. Lender may in its sole
discretion reject or otherwise decline to accept any franchisee of ColorTyme,
Inc. as a new Borrower hereunder.
     2.4 Modification of Revolving Loan Commitments. Upon written request of
Administrator to Lender on behalf of the Borrowers, Lender may increase,
decrease or otherwise modify the Notes and/or the Revolving Loan Commitments of
all or any portion of the Borrowers. Up to four such modification requests in
any calendar year may be made without payment of a modification fee to Lender.
For each modification request during any calendar year after four previous
modification requests have been made during such calendar year, Administrator
shall pay to Lender, as a condition to any modification, a fee equal to $1,000
per Borrower for each modification request made with respect to such Borrower;
provided, however, that no such modification fee shall be due and payable in
connection with any increase of the Revolving Loan Commitment of any Borrower
for which such Borrower pays an upfront fee as provided in such Borrower’s Note.
At the election of Administrator, such fee may be payable by the applicable
Borrower.
     2.5 Addition of Franchisees as Borrowers.
     (a) In the event that any franchisee (whether existing or prospective) of
ColorTyme, Inc. shall indicate an interest in obtaining financing as a new
Borrower hereunder, then Lender
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shall provide Administrator with Lender’s new account applications for a
Borrower Operating Account and with Lender’s loan application. Administrator
shall then provide such applications to such franchisee.
     (b) If the franchisee is a prospective franchisee, prior to delivery of the
new account and loan applications to Lender, Administrator may, but is under no
obligation to, provide Lender with preliminary financial information of such
prospective franchisee; provided, however, that the consent of such prospective
franchisee shall be obtained prior to delivery of such financial information to
Lender. Within a reasonable amount of time following receipt of such financial
information, Lender will (i) review such financial information, (ii) make a
preliminary determination of the credit worthiness of such prospective
franchisee as a new Borrower hereunder, and (iii) notify Administrator of such
preliminary determination; provided, however, that such preliminary
determination shall be non-binding on Lender.
     (c) After the franchisee (whether existing or prospective) has completed
the new account applications and the loan application and delivered the same to
Lender, Lender may request other financial information to evaluate the credit
worthiness of such franchisee.
     (d) If, following completion of its review of the franchisee’s (whether
existing or prospective) new account applications and other financial
information of such franchisee, Lender determines that it will provide financing
to such franchisee, it shall notify such franchisee and Administrator and, upon
receipt of the items set forth in Section 5.6 for such franchisee, such
franchisee shall become a new Borrower hereunder eligible to receive Loans as
otherwise set forth in this Agreement.
SECTION 3. COLLATERAL
     3.1 Assets of Borrowers. The payment and performance by each Borrower of
its Note and all of its other Obligations hereunder and under the Loan Documents
shall be secured by a first and superior lien against all of the assets of such
Borrower pursuant to the terms of one or more security agreements (each a
“Security Agreement”), which shall be in form and substance reasonably
satisfactory to Lender. Administrator hereby agrees that to the extent that it
has or obtains any lien on any assets of any Borrower, such lien shall be
subordinate and inferior to the lien of Lender on such assets granted pursuant
to the Loan Documents.
     3.2 Corporate Guaranty Agreements. The payment and performance of the Notes
and all of the other Obligations hereunder and under the Loan Documents shall be
unconditionally guaranteed by the Corporate Guarantors, pursuant to one or more
guaranty agreements (each, as amended from time to time, a “Corporate Guaranty
Agreement”), which shall be reasonably satisfactory in form and substance to
Lender.
     3.3 Principal Guaranty Agreements. The payment and performance of each
Borrower’s Note and each Borrower’s Obligations under the Loan Documents shall
be unconditionally guaranteed by such Borrower’s principal owners (the
“Principal Owners”) pursuant to one or more guaranty agreements (each, as
amended from time to time, a “Principal Guaranty Agreement”), which shall be
reasonably satisfactory in form and substance to Lender. The Principal Owners
for any Borrower shall be determined by Administrator in its reasonable
discretion.
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     3.4 Letters of Credit.
     (a) If any Borrower fails to make any required payment with respect to a
Loan (for purposes of this Section 3.4, a “Note Payment Default”) and such Note
Payment Default continues for seven days, then within 10 Business Days of
receipt of written notice from Lender Administrator shall either (i) purchase
such Loan from Lender for a price equal to all principal and interest
outstanding on the Loan as of the date purchase, or (ii) cause Parent to deliver
to Lender, as beneficiary, a standby letter of credit (a “Collateral LC”) in an
amount not less than 100% of the Revolving Loan Principal Debt of such Borrower.
Each Collateral LC shall be in form and substance reasonably acceptable to
Lender. If any Note Payment Default continues for a period of 30 days, then
Lender may draw on the Collateral LC and use the proceeds thereof to pay all
Revolving Loan Principal Debt of such Borrower.
     (b) At any time during a Financial Covenant Non-compliance Period, or if
any Event of Default occurs and is continuing, then within 10 Business Days of
receipt of written notice from Lender, Administrator shall cause Parent to
deliver to Lender, as beneficiary, a Collateral LC in an amount not less than
100% of the Aggregate Revolving Loan Principal Debt not already secured by a
Collateral LC issued pursuant to Section 3.4(a). Each Collateral LC shall permit
partial draws and shall be in form and substance reasonably acceptable to
Lender. Lender may draw on the Collateral LC and use the proceeds thereof to pay
the Aggregate Revolving Loan Principal Debt at any time during the continuance
of an Event of Default. If a Collateral LC is issued due to the existence of a
Financial Covenant Non-compliance Period, then (i) such Collateral LC shall be
terminated as of the last day of any fiscal quarter of Parent during which the
Financial Covenant Non-compliance Period no longer exists, and (ii) for so long
as such Collateral LC is outstanding, any failure by Parent to comply with the
Consolidated Fixed Charge Coverage Ratio or the Consolidated Leverage Ratio
shall not cause an Event of Default.
     (c) If any Collateral LC will mature by its terms at any time during a
Financial Covenant Non-Compliance Period or during the continuance of an Event
of Default, then Lender may in its discretion, within 30 days prior to the date
that such Collateral LC matures, either request that such Collateral LC be
renewed for a one year period or draw on the Collateral LC and use the proceeds
to pay the Aggregate Revolving Loan Principal Debt.
     (d) If Lender draws on any Collateral LC to pay the outstanding Revolving
Loan Principal Debt of any Borrower, then Lender shall promptly assign such
Borrower’s Note and other Loan Documents to which such Borrower or applicable
Principal Guarantor is a party to Administrator for collection.
SECTION 4. CONDITIONS PRECEDENT TO CLOSING
     The closing of the transactions contemplated by this Agreement shall take
place on or before August 2, 2010, as the parties shall agree (the “Closing
Date”). The obligations of Lender as set forth herein are subject to the
satisfaction (in the reasonable opinion of Lender), unless waived in writing by
Lender, of each of the following conditions. In the event that any of the
conditions precedent to the closing specified below have not been satisfied and
Lender nevertheless elects to close as an accommodation to Administrator (there
being no obligation or agreement that Lender will do so), such condition(s)
shall not be deemed waived and Administrator shall have thirty (30) days from
the Closing Date to comply with such condition(s) to the reasonable satisfaction
of Lender. Administrator’s failure to satisfy or cause the satisfaction of such
condition(s) precedent to the reasonable satisfaction of Lender within such
thirty (30) day period shall constitute an Event of Default hereunder.
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     4.1 Effectiveness of this Agreement and the Corporate Guaranty Agreements.
This Agreement and the Corporate Guaranty Agreements shall each be in full force
and effect.
     4.2 Documentation and Proceedings. Lender shall have received such evidence
as Lender requires as to the existence, good standing, authority and capacity of
each Corporate Guarantor, including: an officer’s certificate of each Corporate
Guarantor having attached thereto (i) a copy of its articles of incorporation
and bylaws, and all amendments thereto, a certificate of incumbency of all of
its officers who will be authorized to execute or attest any of the Loan
Documents to which it is a party, and a copy of resolutions approving the Loan
Documents to which it is a party and authorizing the transactions contemplated
by this Agreement; and (ii) certificates of existence and good standing issued
by the jurisdiction of its formation.
     4.3 No Material Changes. Lender shall have received reasonably satisfactory
evidence that (i) no material adverse change has occurred in the business,
assets, liabilities (actual or contingent), operations or financial condition of
either Corporate Guarantor since December 31, 2009, or (ii) there is no suit,
action, investigation or proceeding pending or threatened in any court or before
any arbitrator or Governmental Authority that purports to affect materially and
adversely either Corporate Guarantor.
     4.4 Representations and Warranties All representations and warranties
contained herein or in the documents referred to herein or otherwise made in
writing in connection herewith or therewith shall be true and correct with the
same force and effect as though such representations and warranties have been
made on and as of this date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case such
representations and warranties shall have been true and correct in all material
respects on and as of such earlier date.
     4.5 Expenses. Administrator shall have paid all reasonable expenses of
Lender in connection with the preparation of the Loan Documents, including but
not limited to, the reasonable fees and expenses of counsel for Lender to the
extent invoiced prior to the Closing Date.
SECTION 5. CONDITIONS PRECEDENT TO LOANS
     The obligation of Lender to make Loans to a Borrower is subject, at the
time of the funding of each such Loan (the “Funding Date”), to the satisfaction
(in the reasonable opinion of Lender), unless waived in writing by Lender, of
each of the following conditions:
     5.1 Loan Notice. Administrator shall have delivered to Lender, within the
time frame specified in Section 2.2(a) hereof, a Loan Notice appropriately
completed in compliance herewith.
     5.2 Availability of Commitment. The Aggregate Revolving Loan Principal Debt
plus the amount of the requested Loans shall be equal to or less than the
Program Amount. Furthermore, the Revolving Loan Principal Debt of any Borrower
(including such requested Loan) shall not exceed such Borrower’s Revolving Loan
Commitment.
     5.3 Expenses. Administrator shall have paid all reasonable costs and
expenses (including without limitation reasonable attorneys’ fees, consultants’
fees, and miscellaneous expenses) incurred by Lender in connection with the
making of the Loans.
     5.4 Representations and Warranties. All representations and warranties
contained herein and in the Loan Documents shall be true and correct in all
material respects as though such representations and warranties have been made
on and as of the Funding Date, except to the extent such
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representations and warranties specifically relate to an earlier date, in which
case such representations and warranties shall have been true and correct in all
material respects on and as of such earlier date.
     5.5 No Default. There shall exist no Event of Default or Potential Default
hereunder.
     5.6 Borrower Loan Documents. Receipt, prior to the Funding Date, from each
Borrower of the following, in each case in form and substance reasonably
acceptable to Lender:
     (a) a signed copy of the Note, with the original Note to follow promptly
after the Funding Date;
     (b) a signed copy of the Security Agreement, with the original Security
Agreement to follow promptly after the Funding Date;
     (c) a signed copy of the Principal Guaranty Agreement, with the original
Principal Guaranty Agreement to follow promptly after the Funding Date;
     (d) such evidence as Lender requires as to the existence, good standing,
authority and capacity of such Borrower and related Principal Guarantor as
applicable, including:
     (i) For each limited partnership: A partner’s certificate having attached
thereto (A) a true and complete copy of an executed copy of its partnership
agreement and all amendments thereto; (B) a copy of the certificate of limited
partnership issued by the jurisdiction of its formation and, if the jurisdiction
of its formation is other than Texas, reasonably satisfactory evidence of
qualification to do business in good standing in each state where such
Borrower’s Stores are located, and (C) an incumbency provision evidencing the
identity, authority and capacity of each Responsible Officer.
     (ii) For each corporation: An officer’s certificate having attached thereto
(A) a copy of its articles of incorporation and bylaws, and all amendments
thereto, a certificate of incumbency of all of its officers who will be
authorized to execute or attest any of the Loan Documents to which it is a
party, and a copy of resolutions approving the Loan Documents to which it is a
party and authorizing the transactions contemplated by this Agreement;
(B) certificates of existence and good standing issued by the jurisdiction of
its formation and, if the jurisdiction of its formation is other than Texas,
certificates of qualification to do business and good standing in each state
where such Borrower’s Stores are located, and (C) an incumbency provision
evidencing the identity, authority and capacity of each Responsible Officer.
     (iii) For each limited liability company: an officer’s certificate having
attached thereto (A) a true and complete copy of the articles of organization
and operating agreement, and all amendments thereto, a certificate of incumbency
of all of its [members] [managers and officers] who are authorized to execute or
attest to any of the Loan Documents, and a true and complete copy of resolutions
approving the Loan Documents and authorizing the transactions contemplated in
this Agreement and the other Loan Documents; and (B) certificates of existence,
good standing and qualification to do business issued by appropriate
governmental officials in the state of its formation and, if the jurisdiction of
its formation is other than Texas, certificates of qualification to do business
and good standing in each state where such Borrower’s Stores are located.
     (e) a signed copy of such Borrower’s franchise agreement with ColorTyme,
Inc.;
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     (f) a signed copy of a notice in compliance with the provisions of Section
26.02 of the Texas Business and Commerce Code (the “Notice of Final Agreement”),
with the original Notice of Final Agreement to follow promptly after the Funding
Date;
     (g) a UCC-1 Financing Statement evidencing such Borrower as debtor and
Lender as secured party and identifying the collateral as “all assets of debtor”
or a similar description;
     (h) payment, in immediately available funds, of an administration fee in an
amount equal to $1,250 and an upfront fee in an amount equal to 1% of such
Borrower’s Revolving Loan Commitment, which administration fee and upfront fee
may be added to the total amount of such Borrower’s Loan; and
     (i) with respect to any franchisee with existing operations, the financial
information set forth in Section 6.1(b) for the previous calendar quarter.
SECTION 6. AFFIRMATIVE COVENANTS
     Until full payment and performance of all Obligations of the Borrowers
under the Loan Documents and unless Lender consents otherwise in writing (and
without limiting any requirement of any other Loan Document), Administrator
shall:
     6.1 Financial Statements and Other Information. Deliver or cause to be
delivered to Lender:
     (a) Parent Financial Statements. Concurrently with the delivery of the same
to the lenders party to the Senior Credit Agreement, a copy of Parent’s
Compliance Certificate (as defined in the Senior Credit Agreement) and financial
statements delivered pursuant to Section 6.2(b) of the Senior Credit Agreement.
     (b) Quarterly Borrower Financial Information. Within sixty (60) days of
each calendar quarter end, a report from Administrator listing the financial
ratios of each Borrower calculated by Administrator, including average revenue,
debt multiple, operating efficiency, and stale inventory for such quarter.
     (c) Additional Information. Such additional information, reports and
statements with respect to the business operations and financial condition of
the Loan Parties as Lender may reasonably request from time to time.
     6.2 Adverse Conditions or Events. Promptly advise Lender in writing of (i)
any condition, event or act which comes to its attention that would reasonably
be expected to materially adversely affect either Corporate Guarantor’s
financial condition or operations or Lender’s rights under the Loan Documents,
(ii) any litigation filed by or against either Corporate Guarantor in which the
amount in controversy exceeds $30,000,000, (iii) the occurrence of any Event of
Default, or of any Potential Default, or to any Corporate Guarantor’s knowledge,
the failure of any other Loan Party to observe any of its undertakings hereunder
or under any of the other Loan Documents, (iv) any event of default by a
Borrower known to Administrator or ColorTyme, Inc. under the terms of its
franchise agreement with ColorTyme, Inc. and (v) any other event which has or
would reasonably be expected to have a Material Adverse Effect.
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     6.3 Taxes and Other Obligations. Pay all of Administrator’s taxes,
assessments and other obligations, including, but not limited to taxes and
assessments and lawful claims which, if unpaid, might by law become a lien
against the assets of Administrator, as the same become due and payable, except
to the extent the same are being Contested in Good Faith or except for taxes,
the failure of which to pay, could not reasonably be expected to have a Material
Adverse Effect.
     6.4 Insurance. Keep its properties of an insurable nature insured at all
times against such risks and to the extent that like properties are customarily
insured by other companies engaged in the same or similar businesses similarly
situated and maintain insurance of the types and in the coverage amounts and
with reasonable deductibles as are usual and customary.
     6.5 Compliance with Laws. Comply with all applicable laws (including
environmental laws), rules, regulations and orders of any Governmental
Authority, a breach of which (when considered alone or when aggregated with the
effect of other breaches) would reasonably be expected to have a Material
Adverse Effect.
     6.6 Compliance with Material Agreements. Comply in all respects with all
existing and future agreements, indentures, mortgages, or documents which are
binding upon it or affect any of its properties or business, a breach of which
(when considered alone or when aggregated with the effect of other breaches)
would reasonably be expected to have a Material Adverse Effect.
     6.7 Maintenance of Records. Keep at all times books and records of account
in accordance with GAAP in which full, true and correct entries will be made of
all dealings or transactions in relation to the business and affairs of
Administrator, and Administrator will provide adequate protection against loss
or damage to such books of record and account.
     6.8 Inspection of Books and Records. Allow any representative of Lender to
visit and inspect its properties, to examine its books of record and account and
to discuss its affairs, finances and accounts with any of its officers,
directors, employees and agents, all at such reasonable times during normal
business hours and upon at least three Business Days advance notice and as often
as Lender may request; provided, however, that so long as no Event of Default or
Potential Default has occurred and is continuing, (i) such inspections,
examinations and discussions shall be conducted no more than four times per
calendar year and (ii) a Responsible Officer of the Administrator shall have the
option to be present at all such inspections, examinations and discussions.
     6.9 Existence and Qualification. Preserve and maintain its existence and
good standing in Texas and in each other jurisdiction in which qualification is
required and where failure so to qualify would be reasonably expected to have a
Material Adverse Effect.
     6.10 Collateral LCs. Cause Parent to deliver one or more Collateral LCs as
described in Section 3.4.
     6.11 Borrower Operating Accounts. Cause each Borrower to maintain a
Borrower Operating Account at Lender, with an aggregate minimum average daily
balance for such accounts as follows: (i) for each Store of such Borrower that
has been open for business less than two years, the Borrower Operating Account
for such Borrower at Lender shall have an aggregate minimum average daily
balance of at least $2,500; (ii) for each Store of such Borrower that has been
open for business between two and four years, the Borrower Operating Account for
such Borrower at Lender shall have an aggregate minimum average daily balance of
at least $5,000; and (iii) for each Store of such Borrower that has been open
for business more than four years, the Borrower Operating Account for such
Borrower
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at Lender shall have an aggregate minimum average daily balance of at least
$7,500. If at any time any Borrower does not comply with foregoing, then such
Borrower shall pay to Lender a $100 fee for each month Borrower is not in
compliance with this Section 6.11. Such fee shall be assessed on a yearly basis.
No breach of the obligations of this Section 6.11 shall cause an Event of
Default.
     6.12 Further Assurances. Make, execute or endorse, acknowledge and deliver
or file or cause the same to be done, all such vouchers, invoices, notices,
certifications and additional agreements, undertakings, conveyances, deeds of
trust, mortgages, assignments, financing statements or other assurances, and
take any and all such other action as Lender may from time to time deem
necessary or reasonably appropriate in connection with this Agreement or any of
the other Loan Documents (a) to cure any defects in the creation of the Loan
Documents, or (b) to evidence further or more fully describe, perfect or realize
on the collateral intended as security, or (c) to correct any omissions in the
Loan Documents, or (d) to state more fully the security for the Obligations, or
(e) to perfect, protect or preserve any liens pursuant to any of the Loan
Documents, or (f) for better assuring and confirming unto Lender all or any part
of the security for any of the Obligations.
SECTION 7. NEGATIVE COVENANTS
     Until full payment and performance of all Obligations under the Loan
Documents, Administrator shall not without the prior written consent of Lender
(and without limiting any requirement of any other Loan Documents):
     7.1 Merger, Etc. Enter into any merger or consolidation.
     7.2 Transfer of Assets. Convey, assign, transfer, sell, lease or otherwise
dispose of, in one transaction or a series of transactions (or agree to do any
of the foregoing at any future time), all or substantially all or a substantial
part of its properties or assets (whether now owned or hereafter acquired) or
any part of such properties or assets which are essential to the conduct of its
business substantially as now conducted.
SECTION 8. REPRESENTATIONS AND WARRANTIES
     Administrator hereby represents and warrants to Lender as follows:
     8.1 Financial Statements. The financial statements and ratios of each
Corporate Guarantor heretofore delivered to Lender have been prepared in
accordance with GAAP and fairly present such Corporate Guarantor’s financial
condition as of the date or dates thereof, and there have been no material
adverse changes in such Corporate Guarantor’s financial condition or operation
since the date or dates thereof.
     8.2 Good Standing. Administrator is a corporation, duly organized, validly
existing and in good standing under the laws of Texas and has the power and
authority to own its property and to carry on its business in Texas and in each
other jurisdiction in which Administrator does business and in which the failure
to be so qualified would (when considered alone or when aggregated with the
effect of failure to qualify in all other jurisdictions) reasonably be expected
to have a Material Adverse Effect.
     8.3 Authority and Compliance. Administrator has full power and authority to
execute, deliver and perform the Loan Documents to which it is a party and to
incur and perform the obligations provided for therein. No consent or approval
of any Governmental Authority or other third party is required as a condition to
the validity or performance of any Loan Document, and Administrator is in
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compliance with all material laws and regulatory requirements to which it is
subject, except to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect.
     8.4 Binding Agreements. This Agreement and the other Loan Documents
executed by Administrator constitute valid and legally binding obligations of
Administrator, enforceable in accordance with their terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law.
     8.5 Litigation. There is no proceeding involving Administrator pending or,
to the knowledge of Administrator, threatened before any court or Governmental
Authority, agency or arbitration authority, except (a) as disclosed to Lender in
writing and acknowledged by Lender prior to the date of this Agreement or
(b) that either individually or in the aggregate could not reasonably be
expected to have Material Adverse Effect.
     8.6 No Conflicting Agreements. There is no charter, bylaw, stock provision,
partnership agreement or other document pertaining to the power or authority of
Administrator and no provision of any existing material agreement, mortgage,
indenture or contract binding on Administrator or affecting any property of
Administrator, which would conflict with or in any way prevent the execution,
delivery or carrying out of the terms of this Agreement and the other Loan
Documents.
     8.7 Taxes. All taxes and assessments due and payable by Administrator have
been paid or are being Contested in Good Faith, except for taxes, the failure of
which to pay, could reasonably be expected not to have a Material Adverse
Effect.
     8.8 No Default. No Event of Default or Potential Default has occurred and
is continuing.
     8.9 Accuracy of Information. To the best of Administrator’s knowledge, all
factual information furnished to Lender in connection with this Agreement and
the other Loan Documents is and will be accurate and complete on the date as of
which such information is delivered to Lender and is not and will not be
incomplete by the omission of any material fact necessary to make such
information not misleading.
     8.10 Borrowers. To the best of Administrator’s knowledge, each Borrower is
in compliance with the terms of its franchise agreement with ColorTyme, Inc.,
and each Borrower has satisfied and continues to perform its obligations as a
franchisee of ColorTyme, Inc., except to the extent that failure of such
Borrower to do so could not reasonably be expected to have a Material Adverse
Effect. No breach of this Section 8.10 shall cause an Event of Default.
SECTION 9. DEFAULT
     Any of the following shall constitute events of default (each an “Event of
Default”):
     9.1 Representations and Warranties. Any representation, warranty or
statement made by either Corporate Guarantor herein or otherwise in writing in
connection herewith or in connection with any of the other Loan Documents and
the agreements referred to herein or therein or in any financial statement,
certificate or statement signed by any Responsible Officer of either Corporate
Guarantor and furnished pursuant to any provision of the Loan Documents shall be
breached, or shall be materially false, incorrect or incomplete when made.
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     9.2 Default in Covenants Under Agreement. (a) A default shall occur in the
due performance or observance of any term, covenant or agreement set forth in
Section 6.10 or in Section 7 hereof; or, (b) Administrator shall default in the
due performance or observance of any term, covenant or agreement contained in
this Agreement other than those specified in clause (a) immediately preceding
(and other than those described in Section 9.1 hereof or any default under
Section 6.11 or 8.10), and such default continues unremedied for a period of
thirty (30) days after notice thereof from Lender or Lender is notified of such
default or should have been so notified pursuant to the provisions of
Section 6.2 hereof, whichever is earlier.
     9.3 Default in Other Loan Documents. Either Corporate Guarantor shall
default in the due performance of or observance by it of any term, covenant or
agreement on its part to be performed pursuant to the terms of any of the other
Loan Documents and the default shall continue unremedied beyond any grace or
cure period therein provided.
     9.4 Default Under Senior Credit Agreement. An event of default shall have
occurred and be continuing under the provisions of the Senior Credit Agreement,
the effect of which is to permit the holder or holders of indebtedness
thereunder to cause the indebtedness to become due and payable prior to its
stated maturity (whether or not the holder actually exercises such option).
     9.5 Bankruptcy. Either Corporate Guarantor shall suspend or discontinue its
business operations, or shall generally fail to pay its debts as they mature, or
shall file a petition commencing a voluntary case concerning such Corporate
Guarantor under any chapter of the United States Bankruptcy Code; or any
involuntary case shall be commenced against either Corporate Guarantor under the
United States Bankruptcy Code that results in the entry of an order for relief
or any such adjudication or appointment or remains undismissed, undischarged or
unbonded for a period of 60 days; or either Corporate Guarantor shall become
insolvent (howsoever such insolvency may be evidenced).
SECTION 10. REMEDIES
     Upon the occurrence of a Bankruptcy Default, the entire principal of and
accrued interest on the Notes shall forthwith be due and payable without demand,
presentment for payment, notice of nonpayment, protest, notice of protest,
notice of intent to accelerate, notice of acceleration and all other notices and
further actions of any kind, all of which are hereby expressly waived by the
Loan Parties. In the event that any other Event of Default shall occur and be
continuing, Lender may, without demand or notice of its election, terminate its
obligation to make further Loans hereunder and/or declare the entire unpaid
balance of the Notes and all other indebtedness of Borrowers to Lender, or any
part thereof, immediately due and payable, whereupon the principal of and
accrued interest on such Notes and other indebtedness shall be forthwith due and
payable without demand, presentment for payment, notice of nonpayment, protest,
notice of protest, notice of intent to accelerate, notice of acceleration and
all other notices and further actions of any kind, all of which are hereby
expressly waived by the Loan Parties. Upon the occurrence and during the
continuance of any Event of Default, Lender may (a) exercise any and all rights
under or pursuant to any of the Loan Documents, and (b) exercise any and all
rights afforded to Lender by the laws of the State of Texas or any other
applicable jurisdiction or in equity or otherwise, as Lender may deem
appropriate.
SECTION 11. EXPENSES AND INDEMNITY
     11.1 Payment of Expenses. Administrator shall promptly (and in any event,
within 30 days after any invoice or other statement or notice) pay to Lender
immediately upon demand the full amount of all reasonable costs and expenses
(including without limitation reasonable attorneys’ fees, consultants’
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fees, engineering fees, travel costs and miscellaneous expenses) incurred by
Lender in connection with (a) negotiation, preparation, execution and delivery
of this Agreement and each of the Loan Documents, and (b) any modifications of
or consents or waivers under or amendments to or interpretations of this
Agreement, the Notes, or the other Loan Documents, and (c) all transfer, stamp,
mortgage, documentary or other similar taxes, assessments or other charges
levied by any Governmental Authority or revenue authority in respect of this
Agreement or any of the other Loan Documents, and (d) the filing, recording,
refiling and rerecording of any Loan Documents and any other documents or
instruments or further assurances required to be filed or recorded or refiled or
rerecorded by the terms of any Loan Document. Administrator further agrees to
pay on demand all reasonable costs and expenses of Lender, if any (including
without limitation reasonable attorneys’ fees and expenses and the cost of
internal counsel), in connection with the enforcement (whether through
negotiations, arbitration proceedings, legal proceedings or otherwise) of the
Loan Documents; provided however, with respect to enforcement and collection of
the Obligations of any Borrower that is in default, such costs and expenses
shall not exceed $1,500 per enforcement action without first giving
Administrator prior written notice of such enforcement action and the
opportunity to purchase the Note of such Borrower.
     11.2 Indemnity. Administrator further agrees to indemnify Lender and its
employees and agents, from and hold them harmless against any and all losses,
liabilities, claims, damages or expenses which any of them suffers or incurs as
a result of Lender’s entering into this Agreement and the Loan Documents, or the
consummation of the transactions contemplated by this Agreement and the Loan
Documents, or the use or contemplated use of the proceeds of the Loans,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any litigation, arbitration or other proceeding
arising out of or by reason of any of the aforesaid. IT IS THE INTENTION OF THE
PARTIES THAT THE FOREGOING INDEMNITIES SHALL APPLY TO LOSSES, LIABILITIES,
CLAIMS, DAMAGES OR EXPENSES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT
OF THE NEGLIGENCE OF AN INDEMNIFIED PARTY. No such indemnified party, however,
shall be entitled to be indemnified for its or his own gross negligence or
willful misconduct. In the case of an investigation, litigation or other
proceeding to which the indemnity in this Section applies, such indemnities
shall be effective whether or not such investigation, litigation or proceeding
is brought by Administrator, its directors, shareholders or creditors, or by an
indemnified party and whether or not the transactions hereby are consummated.
Administrator shall defend any claim for which an indemnified party is entitled
to seek indemnity pursuant to the preceding sentence, and the indemnified party
shall cooperate with the defense. The indemnified party may have separate
counsel, and Administrator will pay the expenses and reasonable fees of such
separate counsel if either counsel for Administrator or counsel for the
indemnified party shall advise the indemnified party that the interests of both
Administrator and the indemnified party with respect to such claim are or with
reasonable certainty will become adverse. The agreements and obligations of
Administrator contained in this Section shall survive payment in full of the
Obligations.
SECTION 12. MISCELLANEOUS
     Administrator and Lender further covenant and agree as follows, without
limiting any requirement of any other Loan Document:
     12.1 Notices. All notices, requests or demands which any party is required
or may desire to give to any other party under any provision of this Agreement
must be in writing (including telegraphic, telex and facsimile transmission)
delivered to the other party at the addresses set forth on the first page of
this Agreement or to such other address as any party may designate by written
notice to the other party. Each such notice, request and demand shall be deemed
given or made (whether actually received or not) (a) if sent by mail, upon the
earlier of the date of receipt or five (5) days after deposit in the U.S. Mail,
first class postage prepaid, and (b) if sent by any other means, upon delivery.
Unless otherwise changed
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by notice given pursuant to this Section, the facsimile transmission number for
Administrator shall be 972-403-4923, and the facsimile transmission number for
Lender shall be 972-419-3589.
     12.2 Cumulative Rights and No Waiver. Each and every right granted to
Lender under any Loan Document, or allowed it by law or equity shall be
cumulative of each other and may be exercised in addition to any and all other
rights of Lender, and no delay in exercising any right shall operate as a waiver
thereof, nor shall any single or partial exercise by Lender of any right
preclude any other or future exercise thereof or the exercise of any other
right. Administrator expressly waives any presentment, demand, protest or other
notice of any kind, including but not limited to notice of intent to accelerate
and notice of acceleration. No notice to or demand on Administrator in any case
shall, of itself, entitle Administrator to any other or future notice or demand
in similar or other circumstances.
     12.3 Choice of Law and Venue. (a) THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS (BUT NOT THE RULES GOVERNING CONFLICTS
OF LAWS) OF THE STATE OF TEXAS AND SHALL BE PERFORMABLE IN DALLAS COUNTY, TEXAS.
The parties hereto irrevocably submit themselves to the jurisdiction of any
Texas state court or any United States court located in the State of Texas (or
any court having jurisdiction over appeals from any such court) in any
proceeding between or among them arising out of or in any way relating to this
Agreement or the Loan Documents whether arising in contract, tort or otherwise.
Any suit, action or proceeding may be brought in the courts of the State of
Texas, County of Dallas, or in the United States District Court for the Northern
District of Texas, Dallas Division. All parties hereto irrevocably consent to
the service of process in any suit, action or proceeding in said court by the
mailing thereof, by registered or certified mail, postage prepaid, to its
address for notices set forth in this Agreement. Service shall be deemed
effective five (5) days after such mailing. If requested to do so by any party,
each party hereto agrees to waive service of process and to execute any and all
documents necessary to implement such waiver in accordance with the Texas Rules
of Civil Procedure. All parties hereto irrevocably waive any objections which
any may now or hereafter have (including any based on the grounds of forum non
conveniens) to the laying of venue of any suit, action or proceeding arising out
of or relating to this Agreement or the Loan Documents brought in the courts
located in Dallas County, Texas. Nothing herein impairs the right to bring
proceedings in the courts of any other jurisdiction or to effect service of
process in any other manner permitted.
     (b) The parties recognize that courts outside of Dallas County, Texas, may
also have jurisdiction over suits, actions or proceedings arising out of this
Agreement and the Loan Documents. In the event any party shall institute a
proceeding involving this Agreement or the Loan Documents in a jurisdiction
outside Dallas County, Texas, the party instituting such litigation shall
indemnify the other parties for any losses and expenses that may result from the
breach of the foregoing covenant to institute such proceeding only in a state or
federal court in Dallas County, Texas, including without limitation any
additional expenses incurred as the result of litigating in another
jurisdiction, such as the expenses and reasonable fees of local counsel and
travel and lodging expenses of the indemnified parties, its witnesses, experts
and support personnel.
     12.4 Amendment and Assignment. No modification, consent, amendment or
waiver of any provision of this Agreement, nor consent to any departure by
Administrator therefrom, shall be effective unless the same shall be in writing
and signed by an officer of Lender, and then shall be effective only in the
specified instance and for the purpose for which given. This Agreement is
binding upon Administrator, its successors and assigns, and inures to the
benefit of Lender, its successors and assigns. However, no assignment or other
transfer of Administrator’s rights or obligations hereunder shall be made or be
effective without Lender’s prior written consent, nor shall it relieve
Administrator of any obligations hereunder. There is no third party beneficiary
of this Agreement. Lender may assign this
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Agreement and the other Loan Documents without consent of any Loan Party, and
such assignment shall not relieve any Loan Party from its obligations under the
Loan Documents.
     12.5 Authorization to File Financing Statements. Lender is authorized to
complete and file financing statements in any state to perfect the security
interests granted by any of the Loan Documents.
     12.6 Partial Invalidity. The unenforceability or invalidity of any
provision of this Agreement shall not affect the enforceability or validity of
any other provision herein and the invalidity or unenforceability of any
provision of any Loan Document to any Person or circumstance shall not affect
the enforceability or validity of such provision as it may apply to other
Persons or circumstances.
     12.7 Survivability. All covenants, agreements, representations and
warranties made herein or in the other Loan Documents shall survive the making
of the initial Loans and shall continue in full force and effect so long as the
Obligations are outstanding or the outstanding Revolving Loan Commitments have
not expired.
     12.8 Communications via Internet. Administrator and each Loan Party by its
or his execution of the Loan Documents to which it or he is a party, hereby
authorizes Lender and its counsel to communicate and transfer documents and
other information (including without limitation, confidential information)
concerning this transaction or Borrower or any other Loan Party or the business
affairs of Borrower and any other Loan Party by unencrypted e-mail sent over the
Internet without regard to the lack of security of such communications.
     12.9 Agreement Controlling. In the event of a conflict between the terms
and provisions of this Agreement and the terms and provisions of any of the
other Loan Documents, the terms and provisions of this Agreement shall control.
This Agreement replaces and supersedes in its entirety that certain proposal
letter between the parties dated as of June 2, 2010.
     12.10 Setoff. In addition to, and without limitation of, any rights of
Lender under applicable law, if any Event of Default occurs and is continuing,
then any and all deposits (including all account balances, whether provisional
or final and whether or not collected or available but excluding any payroll
accounts) and any other indebtedness at any time held or owing by Lender or any
affiliate of Lender to or for the credit or account of Administrator may be
offset and applied toward the payment of the Obligations, whether or not the
Obligations, or any part thereof, shall then be due.
     12.11 Joint Preparation; Construction of Indemnities and Releases. This
Agreement and the other Loan Documents have been reviewed and negotiated by
sophisticated parties with access to legal counsel and no rule of construction
shall apply hereto or thereto which would require or allow any Loan Documents to
be construed against any party because of its role in drafting such Loan
Document. All indemnification and release provisions of this Agreement shall be
construed broadly (and not narrowly) in favor of the Persons receiving
indemnification or being released.
     12.12 Form and Number of Documents. Each agreement, document, instrument,
or other writing to be furnished to Lender under any provision of this Agreement
must be in form and substance and in such number of counterparts as may be
reasonably satisfactory to Lender and its counsel.
     12.13 Multiple Counterparts. This Agreement has been executed in a number
of identical counterparts, each of which constitutes an original and all of
which constitute, collectively, one agreement; but in making proof of this
Agreement, it shall not be necessary to produce or account for more than one
such counterpart. Delivery of an executed counterpart of a signature page of
this
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Agreement by telecopy or electronic mail shall be effective as delivery of a
manually executed counterpart of this Agreement.
     12.14 Lender’s Consent or Approval. Except where otherwise expressly
provided in the Loan Documents, in any instance where the approval, consent or
the exercise of judgment of Lender is required, the granting or denial of such
approval or consent and the exercise of such judgment shall be (a) within the
reasonable discretion of Lender, and (b) deemed to have been given only by a
specific writing intended for the purpose and executed by Lender. Each provision
for consent, approval, inspection, review, or verification by Lender is for
Lender’s own purposes and benefit only.
     12.15 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT,
TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF LENDER IN THE
NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
SECTION 13. NOTICE OF FINAL AGREEMENT
     THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Remainder of Page Intentionally Blank; Signatures Begin on Next Page]
FRANCHISEE FINANCING AGREEMENT

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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.

            ADMINISTRATOR:

COLORTYME FINANCE, INC.
      By:   /s/ Robert F. Bloom       Name:   Robert F. Bloom        Title:  
President & CEO     

FRANCHISEE FINANCING AGREEMENT

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            LENDER:

CITIBANK, N.A.
      By:   /s/ David C. Hauglid       David C. Hauglid        Vice President   
 

FRANCHISEE FINANCING AGREEMENT

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LIST OF EXHIBITS

       
A
Loan Notice   § 2.1
 
     
B
Form of Revolving Note   § 2.1(c)

FRANCHISEE FINANCING AGREEMENT

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EXHIBIT A

LOAN NOTICE
(from ColorTyme Finance, Inc. to Lender)
     Reference is made to (i) that certain Franchisee Financing Agreement
between ColorTyme Finance, Inc. and Citibank, N.A. dated as of August 2, 2010
(together with all amendments and modifications, if any, from time to time made
thereto, the “Agreement”) and (ii) Section 2.4 of each Note, pursuant to which
Administrator is authorized, on behalf of the Borrowers, to request Loans. The
terms used herein shall have the same meanings as provided therefor in the
Agreement unless the context hereof otherwise requires or provides. This notice
may only be delivered by Administrator to Lender. Lender will not accept any
loan notice from a Borrower.

A.   GENERAL.

                 
 
    1.     Date of proposed Loans    
 
               
 
               
 
    2.     Aggregate amount of Loans requested.    
 
               
 
                      3.     Administrator hereby certifies that all conditions
precedent specified by the Agreement for these Loans have been complied with in
all respects.
 
                      4.     Attached hereto is a schedule evidencing the
Borrowers requesting Loans and the requested Loan amounts.

B.   AVAILABILITY.

                     
 
    1.     Enter: Program Amount   $25,000,000
 
                   
 
    2.     Enter: Aggregate Revolving Loan Principal Debt outstanding as of this
date.        
 
                   
 
                   
 
    3.     Excess (deficit) available for Loans (subtract line B2 from line B1).
       
 
                   

     Administrator hereby certifies that on the date hereof the representations
and warranties contained the Agreement are true in all material respects as if
made on the date hereof, except to the extent such representations and
warranties specifically relate to an earlier date, in which case such
representations and warranties shall have been true and correct in all material
respects on and as of such earlier date and no Event of Default or Potential
Default exists and is continuing.
     Dated                                         , 2010.

            COLORTYME FINANCE, INC.
      By:           Name:           Title:        

EXHIBIT A — Solo Page

 

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EXHIBIT B
FORM OF REVOLVING NOTE
FORM OF REVOLVING NOTE

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