exv10w23



 





Exhibit 10.23




FIRST AMENDMENT TO AMENDED AND

RESTATED FRANCHISEE FINANCING AGREEMENT




     This First Amendment to Amended and Restated Franchisee Financing
Agreement (“Amendment”) is made and entered into by and among Wells Fargo
Foothill, Inc., a California corporation (“Lender”), ColorTyme, Inc., a Texas
corporation (“ColorTyme”), and Rent-A-Center East, Inc., a Delaware corporation
(the “RAC”).



RECITALS




     A. Lender, ColorTyme and RAC entered into that certain Amended and
Restated Franchisee Financing Agreement dated October 1, 2003 (the
“Agreement”).



     B. Lender, ColorTyme and RAC desire to amend the Agreement in accordance
with the terms of this Amendment.



AGREEMENT




     For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:



     1. Definitions. All capitalized terms not defined herein shall be
construed to have the meaning and definition set forth in the Agreement.



     2. Amendments. (a) Section 1.4 of the Agreement is hereby amended in its
entirety to read as follows:




      “1.4 Credit Limits. When a Line of Credit is established for a
Franchisee pursuant to this Agreement, Lender shall fix a credit limit
for each of the Franchisee’s Stores of (i) two hundred fifty thousand
dollars ($250,000), if such Franchisee is not designated by ColorTyme as
having prior “rent-to-own” experience; (ii) three hundred thousand
dollars ($300,000), if such Franchisee is designated by ColorTyme as
having prior “rent-to-own” experience; or (iii) such other amount as may
be agreed upon from time to time by Lender and ColorTyme (the credit
limit established for each of Franchisee’s Stores is referred to herein
as a “Credit Limit”). The amount of each Credit Limit may be adjusted
from time to time upon agreement by Lender and ColorTyme. When a Term
Loan is made to a Franchisee pursuant to this Agreement, the principal
amount of the Term Loan and the interest thereon shall not be included in
or subject to a Credit Limit.”



     (b) Section 1.5 of the Agreement is hereby amended in its entirety to
read as follows:




      “1.5 Advance Limits. The aggregate amount of credit available under
each Receivable for all of Franchisee’s Stores that have been open for
business for one (1) year or more (notwithstanding the amount of such
Franchisee’s Credit Limit(s), in the case of a Line of Credit) including
the Credit Limit for such Stores plus each Term Loan related to such
Stores shall be limited to the product of the Franchisee’s Average
Monthly



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Revenue for all Stores that have been open for business for one (1) year
or more multiplied by five (the advance limit established for such
Franchisee’s Stores is referred to herein as the “Advance Limit”). For
purposes of this Agreement, a Franchisee’s “Average Monthly Revenue”
shall mean the average monthly total revenue of the Franchisee (excluding
sales tax and excluding revenues from Stores open for business less than
one year) from the sale, lease or rental of Inventory and other customary
fees, calculated in accordance with generally accepted accounting
principles applied on a consistent basis, for the three calendar months
preceding the most recent periodic review of such Franchisee’s
Receivable. Notwithstanding anything in this section to the contrary, if
the Advance Limit established pursuant to this section for Stores that
have been open for business for one (1) year or more would otherwise be
an amount that is less than the then outstanding balance of such
Receivable for such Stores (each such Receivable is referred to herein as
an “Overline Receivable”), the Advance Limit for such Overline Receivable
will be set at the then outstanding balance thereof, and such Overline
Receivable will continue to be administered as provided herein, unless
Lender and ColorTyme agree otherwise. The Advance Limit for each Store
that has not been open for business for one (1) year or more shall be the
Credit Limit for such Store plus any Term Loan(s) related to such Store.”



     (c) Section 1.6 of the Agreement is hereby amended in its entirety to
read as follows:




      “1.6 Use of Proceeds. Lender will advance funds pursuant to a
Franchisee’s Line of Credit or Term Loan(s) only for the following
purposes: (i) the Franchisee’s acquisition of Inventory; (ii) the
Franchisee’s acquisition or conversion of a Store; (iii) the buyout of an
ownership interest in the Franchisee; and/or (iv) the Franchisee’s
working capital.




          (a) Inventory. Advances to a Franchisee for inventory for a
Store will be limited to the lesser of (i) the cost of the
Inventory acquired by such Franchisee for such Store; (ii) the
amount of such Franchisee’s Credit Limit for such Store; or (iii)
in the case of Stores that have been open for business for one (1)
year or more, the amount of the Franchisee’s Advance Limit for such
Stores after deducting the outstanding balance of all Term Loans to
such Franchisee relating to such Stores.




          (b) Store Acquisitions and Conversions. Advances to a
Franchisee for Store acquisitions and/or conversions (i.e., the
acquisition of existing ColorTyme Stores and/or the acquisition of
other “rent-to-own” stores for conversion to ColorTyme Stores) will
be limited to the lesser of (i) in the case of a store that has
been open for business (either as a ColorTyme Store or as another
“rent-to-own” store) for one (1) year or more, the product of the
Average Monthly Revenue of the individual store multiplied by nine
(9); and (ii) the amount that, when added to the Credit Limit and
other Term Loans to such Franchisee for all Stores that have been
open for business for one (1) year or more, would cause the
Debt-to-Revenue Ratio for the Franchisee for such Stores to equal
or exceed 5:1. For purposes of this paragraph, “Debt-to-Revenue
Ratio” shall mean the ratio of (x) Funded Debt to (y) the Average
Monthly Revenue of the Franchisee (calculated



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on an aggregate basis for all Stores owned and/or operated,
including such Store to be acquired or converted, by such
Franchisee and any and all affiliates of such Franchisee, each such
Store having been open for business for one (1) year or more); and
“Funded Debt” shall mean, as of any date, the total amount of
liabilities (including the advance contemplated by this paragraph)
that would be reflected on the consolidated balance sheet of
Franchisee and its parent and any and all subsidiaries and
affiliates, if any, in accordance with generally accepted
accounting principles applied on a consistent basis. All Advances
for Store acquisitions and/or conversions will be subject to the
approval of ColorTyme, but shall otherwise be at the sole
discretion of Lender.




          (c) Franchisee Owner Buyouts. Advances for the buyout of an
ownership interest in a Franchisee, either by the Franchisee or by
one (1) or more other owners of interests in the Franchisee, will
be limited to the amount of the Franchisee’s Advance Limits for all
of the Franchisee’s Stores that have been open for business for one
(1) year or more minus the Franchisee’s Credit Limits for all such
Stores and minus the outstanding balance of all other Term Loans to
such Franchisee and owners relating to such Stores. All Advances
for Franchisee owner buyouts will be subject to the approval of
ColorTyme, but shall otherwise be at the sole discretion of Lender.




          (d) Working Capital. Advances to a Franchisee for working
capital will be limited to the lesser of (i) the amount by which
ColorTyme’s minimum working capital requirement exceeds such
Franchisee’s working capital available from other sources; (ii)
sixty thousand and no/100 dollars ($60,000.00); and (iii) the
amount of such Franchisee’s Advance Limits for all of the
Franchisee’s Stores that have been open for business for one (1)
year or more, minus such Franchisee’s Credit Limits for all such
Stores and minus the outstanding balance of all other Term Loans to
such Franchisee related to such Stores. Financing for working
capital will be made available only to Franchisees designated by
ColorTyme as having prior “rent-to-own” experience and approved by
ColorTyme for such financing in connection with the opening of a
Store, but shall otherwise be at the sole discretion of Lender.”



     (d) Section 1.8 of the Agreement is hereby amended in its entirety to
read as follows:




      “1.8 Suspension of Advances. Advances to a Franchisee under any
Line of Credit for a Store of such Franchisee may, at Lender’s sole
discretion, be suspended or limited at any time that the unpaid balance
of all Advances under all Lines of Credit for such Franchisee’s Stores
that have been open for business for one (1) year or more, when added to
the outstanding principal balance of all Term Loans made to such
Franchisee related to such Stores exceeds the product of such Stores’
Average Monthly Revenue multiplied by four (4) where (i) the ratio of
cash expenses of such Stores (total annual expenses, less depreciation
directly related to the operation of such Stores that have been open for
business for one (1) year or more, calculated in accordance with
generally accepted accounting principles applied on a consistent basis)
to total revenue for such Stores (calculated in accordance with generally
accepted accounting principles applied on



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a consistent basis, excluding extraordinary items, based on a three
(3) month rolling average) exceeds 64%; (ii) the Franchisee fails to
maintain the number of rental contracts for all Stores that have been
open for business for one (1) year or more that are seven (7) or more
days past due (calculated on a three (3) month rolling average) at 8% or
less of its total outstanding rental contracts for such Stores; (iii)
expenses of a Store that has been open for business for less than twelve
(12) months cause the ratio of actual expenses to actual revenue to
exceed the ratio of expenses to revenue reflected in the proforma cash
flow projections for that Store; (iv) payments (principal and/or
interest) under any Receivable of the Franchisee are more than fifteen
(15) days past due; (v) the idle inventory percentage for Stores that
have been open for business for one (1) year or more (the quotient of the
idle inventory divided by the total inventory, calculated on a three (3)
month rolling average and based on the idle inventory and total inventory
figures reflected on the Franchisee’s monthly royalty reports for such
Stores) exceeds twenty-five percent (25%); or (vi) in Lender’s
determination, the Receivable is otherwise in default.”



     3. Effect of Amendment. Except as amended hereby, the Agreement shall
remain in full force and effect.



     4. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF CALIFORNIA.



     5. Counterparts. This Amendment may be executed in counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute but one and the same instrument.



     IN WITNESS WHEREOF, the parties have executed this Amendment on this    
day of December, 2003.



	 	 	 	 	 
	 	 	COLORTYME, INC.
	 
	 	 	 	 
	

	 	By:	 	/s/ Steven Arendt
	

	 	 	 	
 
	

	 	Title:	 	President/CEO
	

	 	 	 	
 
	 
	 	 	 	 
	 	 	RENT-A-CENTER EAST, INC.
	 
	 	 	 	 
	

	 	By:	 	/s/ Mitchell E. Fadel
	

	 	 	 	
 
	

	 	Title:	 	President
	

	 	 	 	
 







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	 	 	WELLS FARGO FOOTHILL, INC.
	 
	 	 	 	 
	

	 	By:	 	/s/ David B. Friche
	

	 	 	 	
 
	

	 	Title:	 	 Senior Vice President
	

	 	 	 	
 







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SCHEDULE A




TO




CREDIT AND SECURITY AGREEMENT

(THE “AGREEMENT”)





	A.	 	Credit Limit For Debtor’s Stores: The sum of the unpaid balance of all
advances made hereunder with respect to each Debtor’s store (each, a
“Store”) shall not exceed the lesser of (1) the Credit Limit for such
Store established by Secured Party from time to time and set forth in a
notice from Secured Party to Debtor, (2) the cost of the inventory
acquired by Debtor for such Store with advances hereunder and (3) if such
Store has been open for business for one (1) year or more, the amount of
the Debtor’s Advance Limit (as defined below) for all Stores that have
been open for business for one (1) year or more after deducting the
outstanding balance of all advances under Lines of Credit for such Stores
plus all term loans made to Debtor by Secured Party (and its predecessors
in interest) relating to such Stores. The Credit Limit for each of
Debtor’s Stores is subject to change from time to time in accordance with
the terms of this Agreement.
	 
	B.	 	Limitation on Advances to Debtor. Notwithstanding the amount of the
Credit Limit for any of Debtor’s Stores, from time to time, the sum of the
unpaid balance of all advances made hereunder for all of Debtor’s Stores
that have been open for business for one (1) year or more and the
aggregate unpaid balance of all term loans and other loans heretofore, now
or hereafter made by Secured Party (and its predecessors in interest) to
Debtor relating to such Stores shall not exceed the product of the
Debtor’s Average Monthly Revenue for such Stores multiplied by five (this
advance limit established for such Stores is referred to herein as the
“Advance Limit”). For purposes of this Agreement, a Debtor’s “Average
Monthly Revenue” shall mean the average monthly total revenue of the
Debtor from Stores that have been open for business for one (1) year or
more (excluding sales tax and excluding revenues from Stores open less
than one year) from the sale, lease or rental of inventory and other
customary fees, calculated in accordance with generally accepted
accounting principles applied on a consistent basis, for the three
calendar months preceding the most recent periodic review of Debtor’s
financial performance.
	 
	C.	 	Additional Limitation on Advances to Debtor. Without requiring that
Secured Party make any advances to Debtor at any time, Secured Party
currently intends to limit or suspend any additional advances under this
Agreement, and may decline to fund any separately documented term loans or
other loans, if the unpaid balance of all obligations owing by Debtor to
Secured Party relating to all Stores of Debtor’s that have been open for
business for one (1) year or more exceeds the product of the Debtor’s
Average Monthly Revenue for such Stores multiplied by four (4) and any of
the following conditions apply:




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      (a) Debtor’s cash expenses for all of its Stores that have
been open for business for one (1) year or more (total annual
expenses, less depreciation directly related to the operation of
such Stores that have been open for business for one (1) year or
more, calculated in accordance with generally accepted accounting
principles applied on a consistent basis) exceed 64% of Debtor’s
total revenue for such Stores (calculated in accordance with
generally accepted accounting principles applied on a consistent
basis, excluding extraordinary items, based on a three (3) month
rolling average);




      (b) Debtor fails to maintain the number of rental contracts
for Stores that have been open for business for one (1) year or
more that are seven (7) or more days past due (calculated on a
three (3) month rolling average) at 8% or less of its total
outstanding rental contracts for all such Stores;




      (c) expenses of a Store that has been open for business for
less than twelve (12) months cause the ratio of actual expenses to
actual revenue to exceed the ratio of expenses to revenue reflected
in the proforma cash flow projections for that Store;




      (d) any payment (principal and/or interest) of any portion of
the Debtor’s obligations to Secured Party is more than fifteen (15)
days past due;




      (e) the idle inventory percentage for Stores that have been
open for business for one (1) year or more (the quotient of the
idle inventory divided by the total inventory, calculated on a
three (3) month rolling average and based on the idle inventory and
total inventory figures reflected on the Debtor’s monthly royalty
reports to ColorTyme, Inc. for such Stores) exceeds twenty-five
percent (25%); or




      (f) Secured Party determines that any portion of the
Obligations is in default.




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