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EXHIBIT 10.5
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Execution Copy
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT, dated as
of July 27 1999 (this "Amendment"), is by and among XXXXXX GREETINGS, INC., a
Delaware corporation (the "Borrower"), the lenders party to the Credit Agreement
described below (each a "Lender" and, collectively, the "Lenders") and BANK ONE,
INDIANA, N.A., a national banking association formerly known as NBD Bank, N.A.,
as agent (in such capacity, the "Agent") for the Lenders.
RECITALS
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A. The Borrower, the Lenders and the Agent have entered into
the Amended and Restated Credit Agreement, dated as of May 11, 1999 (the "Credit
Agreement"), pursuant to which the Lenders, subject to the terms and conditions
therein set forth, provided to the Company an unsecured revolving credit
facility in the aggregate principal amount of $30,000,000.
B. The Company has informed the Lenders of the following (collectively,
the "Known Default"): that during the Company's fiscal quarter ended on or about
June 30, 1999, the Company incurred substantial operating losses and elected to
write-down inventory in the approximate amount of $21,100,000, both of which
resulted in the Interest Coverage (as defined in the Credit Agreement) as of
such fiscal quarter-end being significantly lower than is required under the
Credit Agreement, and these developments constitute a Material Adverse change
(as defined in the Credit Agreement).
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein and in the Credit Agreement contained, the parties hereto
agree as follows:
ARTICLE 1. AMENDMENTS TO CREDIT AGREEMENT
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Effective upon the date that the conditions precedent set forth in
Article 3 of this Amendment are satisfied, which date (the "Amendment Date")
shall be determined by the Agent in its sole discretion, the Credit Agreement
hereby is amended as follows:
1.1 The definition of the term "COMMITMENT AMOUNT" in Section 1.1 is
amended and restated in full as follows:
"COMMITMENT AMOUNT": as of any date prior to the end of the
Review Period and with respect to any Lender, the amount set forth
below opposite each such Lender's name:
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Lender Commitment Amount
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Bank One, Indiana, N.A. $ 5,000,000
Xxxxxx Trust and Savings Bank $ 4,000,000
Fifth Third Bank $ 3,000,000
Total $ 12,000,000
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, and as of any date during the portion of the Commitment Period, if
any, after the Review Period and with respect to any Lender, the amount
set forth adjacent to its name under the heading "Commitment Amount" in
Exhibit A on such date or, in the event that such Lender is not listed
on Exhibit A, the "Commitment Amount" which such Lender shall have
assumed from another Lender in accordance with Section 11.7 on or prior
to such date, as all of the same may be adjusted from time to time
pursuant to Sections 2.4 and 11.7(c).
1.2 The definition of the term "COMMITMENT TERMINATION DATE" in Section
1.1 is amended and restated in full as follows:
"COMMITMENT TERMINATION DATE": the earlier to occur of (a) the
last day of the Review Period or such later date, if any, to which the
Borrower and the Required Lenders may agree in writing (and subject to
such terms and conditions as the Required Lenders may require) in their
sole discretion prior to the end of the Review Period, which later date
shall not in any event be later than May 8, 2000, and (b) the date on
which the Commitments shall have been terminated in accordance with
Section 2.4 or Section 9.2. Notwithstanding anything in Section 11.1(a)
to the contrary, no reinstatement of the Commitment Period beyond the
end of the Review Period but not later than May 8, 2000 with the
written consent of the Required Lenders shall be deemed an extension of
the Commitment Period as contemplated by Section 11.1(a).
1.3 The following definition of the term "FIRST AMENDMENT" is added to
Section 1.1 in alphabetical order:
"FIRST AMENDMENT": the First Amendment to this Agreement,
dated as of July 27, 1999.
1.4 The following definition of the term "First Amendment Effective
Date" is added to Section 1.1 in alphabetical order:
"FIRST AMENDMENT EFFECTIVE DATE": the Amendment Date (as
defined in the First Amendment).
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1.5 The definition of the term "LOAN DOCUMENTS" in Section 1.1 is
amended and restated in full as follows:
"LOAN DOCUMENTS": this Agreement, the Notes and the Security Documents.
1.6 The following definition of the term "REVIEW PERIOD" is added to
Section 1.1 in alphabetical order:
"REVIEW PERIOD": the period from and including the First
Amendment Effective Date to and including August 27, 1999.
1.7 The following definitions of the terms "SECURITY AGREEMENT" and
"SECURITY DOCUMENTS", respectively are added to Section 1.1 in alphabetical
order:
"SECURITY AGREEMENT": each Security Agreement entered into by
the Borrower and the Domestic Subsidiaries in favor of the Agent for
the benefit of the Agent and the Lenders pursuant to this Agreement, in
form and substance satisfactory to the Agent, as amended or modified
from time to time.
"SECURITY DOCUMENTS": collectively, the Pledge Agreement, the
Security Agreements and the Subsidiary Guaranty and all other related
agreements and documents, including financing statements and similar
documents, delivered pursuant to this Agreement or otherwise entered
into by any person to secure the Notes and the Loans.
1.8 The following new Section 2.7 is added to the Credit Agreement
immediately following Section 2.6:
2.7 SECURITY AND COLLATERAL
To secure the payment when due of the Notes and all other
obligations of the Borrower under this Agreement, the Notes and the
other Loan Documents, on or before the First Amendment Effective Date,
the Borrower, and each of its Domestic Subsidiaries, if any, shall
execute and deliver a Security Agreement granting a first-priority,
perfected security interest in all present and future accounts
receivable and inventory of the Borrower and such Domestic Subsidiaries
and all related assets as described in the Security Agreement. In
connection with the foregoing, the Borrower shall deliver, or cause to
be delivered, to the Agent, and cause to be completed, the following,
in form and substance satisfactory to the Agent:
(a) Evidence of the recordation, filing and other
action (including payment of any applicable taxes or fees) in
such jurisdictions as the Agent may deem necessary or
appropriate with respect to the Security Agreement, including
the filing of financing statements and similar
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documents which the Agent may deem necessary or appropriate to
create, preserve or perfect the liens, security interests and
other rights intended to be granted to the Agent thereunder,
together with Uniform Commercial Code searches in such offices
as the Agent may request.
(b) Evidence that the casualty and other insurance
required pursuant to the Security Agreement is in full force
and effect.
(c) Such other documents, and completion of such
other matters, in connection with the Security Agreement as
the Agent may reasonably request.
1.9 The following sentence is added to the end of Section 3.4(a) of the
Credit Agreement:
Notwithstanding anything in this Agreement to the contrary, during the
Review Period, the Advances shall bear interest on the unpaid principal
balance thereof at the Alternate Base Rate only, subject to Sections
3.4(b), (c), (d) and (e) below.
1.10 Subpart (i) of Section 7.7 of the Credit Agreement is relabeled as
subpart (j), and the following new subpart (i) is added immediately following
subpart (h) of such Section 7.7:
(i) As soon as available, and in any event within 15 days
after the First Amendment Effective Date, the draft financial
statements and covenant compliance ratios for the fiscal quarter of the
Borrower ending on or about June 30, 1999, the financial projections by
fiscal quarter for the Borrower's 1999 fiscal year, including covenant
calculations and a cash budget, and written responses, in form and
detail satisfactory to the Lenders, to all questions and other requests
for information made by the Lenders or the Agent in connection with the
First Amendment or otherwise; and
1.11 The following new Section 7.17 is added to the Credit Agreement
immediately following Section 1.16:
7.17 ADDITIONAL COLLATERAL; FURTHER ASSURANCES.
Execute and deliver, and cause each Domestic Subsidiary to execute and
deliver, additional Security Documents, promptly and in any event
within 30 days after request therefore by the Agent, sufficient to
grant to the Agent for the benefit of the Agent and the Lenders liens
and security interests in all after-acquired property of the type
described in Section 2.7. The Borrower shall notify the Agent, within
10 days after the occurrence thereof, of the acquisition of any such
property by the Borrower or any Domestic Subsidiary that is not subject
to the existing Security Documents, any person's becoming a Domestic
Subsidiary and any other event or condition that may require additional
action of any nature in
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order to preserve the effectiveness and perfected status of the liens
and security interests of the Agent with respect to such property
pursuant to the Security Documents; and will, and will cause each
Domestic Subsidiary to, execute and deliver promptly after request
therefor by the Agent, all further instruments and documents and take
such further action that be necessary or desirable, or that the Agent
may request, in order to give affect to, and to aid the exercise
enforcement of the rights and remedies of the Agent under, the Security
Documents, including without limitation causing each lessor of real
property to the Borrower or any Domestic Subsidiary to execute and
deliver to the Agent an agreement in form and substance acceptable to
the Agent and duly executed on behalf of such lessor waiving any
distraint, liens and similar rights with respect to any property
subject to the Security Documents and agreeing to permit the Agent and
its representatives to enter such promises in connection therewith.
1.12 The following sentence is added to the end of Section 8.2 of the
Credit Agreement:
Nothing is this Section 8.2 shall prohibit the Liens in favor of the
Agent for the benefit of the Agent and the Banks under the Security
Documents.
1.13 The following new Section 8.13 is added to the Credit Agreement
immediately following Section 8.12:
8.13 NEGATIVE PLEDGE LIMITATION.
Enter into any agreement with any person other than the
Lenders pursuant hereto which prohibits or limits the ability of the
Borrower or any of its Domestic Subsidiaries to create, incur, assume
or suffer to exist any Lien upon any of their assets, rights, revenues
or property, real, personal or mixed, tangible or intangible, whether
now owned or hereafter acquired.
1.14 Section 9.1(l) of the Credit Agreement is amended and restated in
full as follows:
(l) The Subsidiary Guaranty shall cease to be in full force
and effect (except as provided in Section 7.16 with respect to Xxxxxx
International), or any event of default described in the Subsidiary
Guaranty or any other Loan Document shall have occurred and be
continuing, or any material provision of any Security Document shall at
any time for any reason cease to be valid and binding and enforceable
against any obligor thereunder, or the validity, binding effect or
enforceability thereof shall be contested by any person, or any obligor
shall deny that it has any or further liability or obligation
thereunder, or any Loan Document shall be terminated, invalidated or
set aside, or be declared ineffective or inoperative or in any way
cease to give or provide to the Lenders and the Agent the benefits
purported to be created thereby; or
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ARTICLE 2. TEMPORARY WAIVER OF DEFAULT
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The Borrower has informed the Lenders that the Known Default has
occurred and is continuing, and hereby acknowledges that therefor the Lenders
are not obligated to make Loans under the Credit Agreement and are entitled to
exercise all rights, and remedies available to the Lenders and the Agent with
respect to such Known Default. The Borrower has requested that the Lenders
temporarily waive the Known Default, and make Loans under the Credit Agreement,
as amended by this Amendment, subject to the terms and conditions of the Credit
Agreement as so amended, notwithstanding the occurrence of the Known Default,
until the Commitment Termination Date or, if earlier, the permanent waiver of
such Known Default by the Lenders. Based upon such request, the Lenders hereby
temporarily waive the Known Default, provided that upon the occurrence of the
Commitment Termination Date (whether before, at or after the end of the Review
Period), the Agent and the Lenders shall have all the rights and remedies
provided under the Credit Agreement and the other Loan Documents and by law with
respect to the Known Default and any other Defaults that may then exist. The
Borrower acknowledges that the Lenders and the Agent have no obligation to
extend the terms of this temporary waiver.
ARTICLE 3. CONDITIONS PRECEDENT
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As conditions precedent to the effectiveness of the amendments to the
Credit Agreement set forth in Article 1 of this Amendment and the temporary
waiver set forth in Article 2 of this Amendment, the Agent shall receive the
following documents and the following matters shall be completed, all in form
and substance satisfactory to the Agent:
3.1 This Amendment duly executed on behalf of the Borrower, the Agent
and Required the Lenders.
3.2 The Security Agreement duly executed on behalf of the Borrower and
completion of the other matters contemplated by Section 2.7 of the Credit
Agreement, as amended by this Amendment.
3.3 An incumbency certificate, and such documents evidencing necessary
corporate action of the Borrower with respect to this Amendment and the
transactions contemplated hereby as the Agent may request.
3.4 Payment to each Lender executing this Amendment of a fee for this
Amendment in the amount equal to one-quarter percent (1/4%) of such Lender's
Commitment Amount for the Review Period, and payment to the Agent (for its own
account) of such fees to which the Agent and the Borrower may agree in
connection with this Amendment.
3.5 Such other documents, and completion of such other matters, as the
Agent may reasonably request.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
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In order to induce the Lenders and the Agent to enter into this
Amendment, the Borrower represents and warrants that:
4.1 The execution, delivery and performance by the Borrower of this
Amendment and the Security Documents to which it is a party are within its
corporate powers, have been duly authorized by all necessary corporate action
and are not in contravention of any law, rule or regulation, or any judgment,
decree, writ, injunction, order or award of any arbitrator, court or
governmental authority, or of the terms of the Borrower's charter or by-laws, or
of any contract or undertaking to which the Borrower is a party or by which the
Borroweror its property is or may be bound or affected.
4.2 This Amendment is, and the Security Agreement when delivered
pursuant hereto will be, a legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with their respective terms.
4.3 No consent, approval or authorization of or declaration,
registration or filing with any governmental or nongovernmental person or
entity, including without limitation any creditor, stockholder or lessor of the
Borrower, is required on the part of the Borrower in connection with the
execution, delivery and performance of this Amendment or the Security Agreement
or the transactions contemplated hereby or as a condition to the legality,
validity or enforceability of this Amendment or the Security Agreement.
4.4 Excluding the effect of the Known Default, (a) after giving effect
to the Amendments contained in Article 1 of this Amendment, the representations
and warranties contained in Section 4 of the Credit Agreement are true on and as
of the date hereof with the same force and effect as if made on and as of the
date hereof, and (b) no Default or Event of Default has occurred and is
continuing under the Credit Agreement.
ARTICLE 5. MISCELLANEOUS
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5.1 If the Borrower shall fail to perform or observe any term, covenant
or agreement in this Amendment, or any representation or warranty made by the
Borrower in this Amendment shall prove to have been incorrect in any material
respect when made, such occurrence shall be deemed to constitute an Event of
Default. Upon the occurrence of any such Event of Default, any other Event of
Default (other than the Known Default) under the Credit Agreement and the other
Loan Documents or the Commitment Termination Date (whether before, at or after
the end of the Review Period), notwithstanding anything in this Amendment to the
contrary, the Agent and the Lenders shall be entitled to exercise any and all
rights and remedies available to the Agent and the Lenders under the Credit
Agreement and the other Loan Documents and by law and the temporary waiver under
Article 2 shall automatically be terminated and have no further force or effect.
5.2 All references to the Credit Agreement in any document, instrument
or certificate referred to in the Credit Agreement or delivered in connection
therewith or pursuant thereto, hereafter shall be deemed references to the
Credit Agreement, as amended hereby.
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5.3 Subject to the amendments herein provided and the other terms and
conditions of this Amendment, the Credit Agreement shall in all respects
continue in full force and effect.
5.4 Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement.
5.5 This Amendment shall be governed by and construed in accordance
with the laws of the State of Indiana.
5.6 The Borrower agrees to pay the reasonable fees and expenses of
Xxxxxxxxx Xxxxxx PLLC, counsel for the Agent, in connection with the negotiation
and preparation of this Amendment and the documents referred to herein and the
consummation of the transactions contemplated hereby.
5.7 This Amendment may be executed upon any number of counterparts with
the same effect as if the signatures thereto were upon the same instrument.
5.8 The Borrower hereby represents and warrants that it is aware of no
claims or causes of action against the Agent, the Lenders or any of them.
Notwithstanding such representation and warranty, and as further consideration
for the agreements set forth in this Amendment, the Borrower, for itself and its
successors and assigns, hereby releases the Agent and each Lender, and their
respective officers, directors, employees, agents, attorneys, affiliates,
subsidiaries, and successors and assigns, from any liability, claim, right or
cause of action which now exists or hereafter arises, whether known or unknown,
arising from or in any way related to facts in existence as of the date hereof.
5.9 Each party hereto, after consulting or having had the opportunity
to consult with counsel, knowing, voluntarily, and intentionally waives any
right any of them may have to a trial by jury in any litigation based upon or
arising out of this Amendment, or any agreement referenced herein or other
related instrument or agreement, or any of the transactions contemplated by this
Amendment, or any course of conduct, dealing, statements (whether oral or
written) or actions of any of them. None of the parties hereto shall seek to
consolidate, by counterclaim or otherwise, any such action in which a jury trial
has been waived with any other action in which a jury trial cannot be or has not
been waived. These provisions shall not be deemed to have been modified in any
respect or relinquished by any party hereto except by a written instrument
executed by all of them.
5.10 The Borrower agrees to execute any and all documents reasonably
deemed necessary or appropriate by the Agent to carry out the intent of, and/or
to implement, this Amendment.
5.11 This Amendment constitutes the entire understanding of the parties
with respect to the subject matter hereof. This Amendment is binding on the
parties hereto and their respective successors and assigns, and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
If any of the provisions of this Amendment are in conflict with any applicable
statute or rule or law or otherwise unenforceable, such offending provisions
shall be null and void only to the extent of such conflict or unenforceability,
but shall be deemed separate from and shall not invalidate any other provision
of this Amendment.
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5.12 No course of dealing on the part of the Agent or any Lender, nor
any delay or failure on the part of the Agent or any Lender in exercising any
right, power or privilege hereunder shall operate as a waiver of such right,
power or privilege or otherwise prejudice the Agent's or any Lender's rights and
remedies hereunder or under any Loan Document or any other agreement or
instrument of the Borrower with or in favor of the Agent and the Lenders; nor
shall any single or partial exercise thereof preclude any further exercise
thereof or the exercise of any other right, power or privilege. No right or
remedy conferred upon or reserved to the Agent and the Lenders under this
Amendment or under any Loan Document or any other agreement or instrument of the
Borrower with or in favor of the Agent and the Lenders is intended to be
exclusive of any other right or remedy, and every right and remedy shall be
cumulative and in addition to every other right or remedy granted thereunder or
now or hereafter existing under any applicable law. Every right and remedy
granted by this Amendment or under any Loan Document or any other agreement or
instrument of the Borrower with or in favor of the Agent and the Lenders or by
applicable law to the Agent and the Lenders may be exercised from time to time
and as often as may be deemed expedient by the Agent and the Lenders.
5.13 The parties hereby agree that, in order to secure the Borrower's
reimbursement obligations with respect to all outstanding letters of credit
issued by Fifth Third Bank ("Fifth Third") for the account of the Borrower,
within 10 days after the Amendment Date, the Borrower and each of its Domestic
Subsidiaries, if any, shall execute and deliver to Fifth Third a security
agreement (or, if elected by the Agent in its sole discretion, the existing
Security Documents in favor of the Agent shall be amended) to provide to Fifth
Third a perfected security interest in the same collateral as may be provided by
the Borrower and such Domestic Subsidiaries from time to time to the Agent for
the benefit of the Banks and the Agent to secure the Borrower's obligations
under the Credit Agreement, and in connection therewith the Borrower shall
provide to Fifth Third such related items as are contemplated by Section 2.7 of
the Credit Agreement as amended by this Amendment, PROVIDED that such security
interest in favor of Fifth Third shall be subordinate in priority, operation and
effect to the security interest in such collateral in favor of the Agent for the
benefit of the Banks and the Agent under the Credit Agreement, and the parties
shall execute and deliver such subordination/intercreditor agreement, and take
such further action, including without limitation the modification of financing
statements to reflect such subordination, as the Agent may reasonably deem
necessary or desirable in order to give full effect to and further evidence such
subordination.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first-above written.
XXXXXX GREETINGS, INC.
By: /s/ Xxxxx X. Xxxxxx
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Its: Chief Financial Officer
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BANK ONE, INDIANA, N.A., in its
capacity as a Lender and in its
capacity as the Agent
By: /s/ Xxxxxx X. Xxxxxxxx
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Its: First Vice President
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XXXXXX TRUST AND SAVINGS BANK
By: _________________________________
Its: ___________________________
FIFTH THIRD BANK
By: /s/ Xxxxx X. Xxxxxxx
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Its: Asst. Vice President
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[First Amendment to Amended and Restated Credit Agreement]
