EXHIBIT 10.2
[LETTERHEAD OF FLEET NATIONAL BANK]
May 14, 2003
Enesco Group, Inc.
000 Xxxxxxx Xxxxx
Xxxxxx, XX 00000
Re: Amended and Restated Senior Revolving Credit Agreement with
Fleet National Bank and LaSalle Bank National Association, as amended
Ladies and Gentlemen:
Reference is made to that certain Xxxxxxx and Restated Senior Revolving
Credit Agreement dated as of August 23, 2000 by and among Enesco Group, Inc., a
Massachusetts corporation (the "Borrower"), the Borrowing Subsidiaries who may
from time to time become a party to the Amended and Restated Senior Revolving
Credit Agreement, Fleet National Bank ("Fleet") and LaSalle Bank National
Association ("LaSalle" and together with Fleet, the "Banks"), as amended by a
First Amendment to Amended and Restated Senior Revolving Credit Agreement dated
as of November 27, 2000, as further amended by a Second Amendment to Amended and
Restated Senior Revolving Credit Agreement dated as of November 30, 2000, as
further amended by a Third Amendment to Amended and Restated Senior Revolving
Credit Agreement dated as of March 23, 2001, as further amended by a Fourth
Amendment to Amended and Restated Senior Revolving Credit Agreement dated as of
April 6, 2001, as further amended by a Fifth Amendment to Amended and Restated
Senior Revolving Credit Agreement dated as of June 18, 2001, as further amended
by a Sixth Amendment to Amended and Restated Senior Revolving Credit Agreement
dated as of August 2, 2001, as further amended by a Seventh Amendment to Amended
and Restated Senior Revolving Credit Agreement dated as of September 7, 2001, as
further amended by an Eighth Amendment to Amended and Restated Senior Revolving
Credit Agreement dated as of May 15, 2002, and as further amended by a Ninth
Amendment to Amended and Restated Senior Revolving Credit Agreement dated as of
the date hereof (the "Credit Agreement"). Capitalized terms not otherwise
defined herein shall have their meanings as defined in the Credit Agreement.
Enesco Group, Inc.
May 14, 2003
Page 2
We are pleased to advise you of commitment by the Banks to extend the
various credit accommodations made available to the Borrower by the Banks
pursuant to the Credit Agreement in accordance with the terms and conditions set
forth in the attached Summary Terms and Conditions attached hereto as Appendix A
(the "Term Sheet") and in this letter (the "Commitment"). Capitalized terms used
herein or in the Term Sheet, unless otherwise defined herein or in the Term
Sheet, shall have their meanings as defined in the Credit Agreement.
The terms and conditions of this Commitment are not limited to the Term
Sheet. This Commitment is based upon our present understanding of the financial
condition of the Borrower. As additional or changed facts and circumstances
become known to us, we may impose additional terms and conditions. Those matters
that are not covered by or made clear in the Term Sheet are subject to mutual
agreement of the parties.
This Commitment is conditional upon:
(a) The preparation, execution and delivery of usual and
customary legal documentation all in form and
substance satisfactory to the Banks and the Banks'
counsel including, without limitation, a Second
Amended and Restated Senior Revolving Credit
Agreement and the related Loan Documents
incorporating substantially the terms and conditions
outlined or referred to in this Commitment and the
Term Sheet;
(b) The accuracy and completeness of all representations
made by and all information furnished by the
Borrower, and compliance by the Borrower with the
terms and conditions set forth in this Commitment and
in the Term Sheet;
(c) Payment in full of all fees, expenses and other
amounts due and payable under the terms of this
Commitment and the Term Sheet; and
(d) The absence of any material adverse change in the
financial condition, business or operations of the
Borrower since the date of the financial statements
and other financial information most recently
delivered by the Borrower to the Banks.
Enesco Group, Inc.
May 14, 2003
Page 3
Through your acceptance of this Commitment, you hereby, jointly and
severally, agree to pay or reimburse the Banks on demand for all costs and
expenses incurred by the Banks in connection with this commitment and the
transactions contemplated in the Term Sheet including, without limitation, legal
fees and disbursements and other expenses incurred by the Banks in connection
with our processing of the extension and amendment documentation, whether or not
the transaction does in fact close. You also agree to pay all reasonable costs
and expenses of the Banks (including, without limitation, reasonable fees and
disbursements of counsel) incurred in connection with enforcement by the Banks
of their rights and remedies hereunder.
This Commitment is not assignable by operation of law or otherwise
without the prior written consent of the Banks, and supersedes all other prior
dealings between the Borrower and the Banks in connection with the Credit
Agreement. The terms of this Commitment may not be waived, modified or in any
way changed by implication, correspondence or otherwise unless such waiver,
modification or change is made in the form of an amendment to this Commitment in
writing and signed by all parties.
If for any reason the transactions contemplated by this Commitment and
the attached Term Sheet do not close by June 16, 2003, time being of the
essence, this Commitment shall lapse and shall be of no further force or effect
unless the time for closing is extended in writing by the Banks.
This Commitment shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts. This Commitment may be executed
in any number of counterparts, each of which, when so executed, shall be deemed
to be an original and all of which when taken together shall constitute one and
the same Commitment. Delivery of an executed counterpart of a signature page to
this Commitment by telecopier shall be effective as delivery of a manually
executed counterpart of this Commitment. The obligations of the Borrower for
fees, costs and expenses incurred by the Banks and governing law shall survive
the expiration or termination of this Commitment.
[SIGNATURES ON FOLLOWING PAGE]
Enesco Group, Inc.
May 14, 2003
Page 4
This Commitment shall become effective only upon your written
acceptance hereto which must be returned to us not later than May 14, 2003, time
being of the essence.
Very truly yours,
FLEET NATIONAL BANK
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Regional President
LASALLE BANK NATIONAL
ASSOCIATION
By: /s/ Xxxxxx X. Xxxxxxx, Xx.
-----------------------------
Name: Xxxxxx X. Xxxxxxx, Xx.
Title: Vice President
ACCEPTED AND AGREED TO AS AN INSTRUMENT UNDER SEAL THIS 14TH DAY OF MAY, 2003.
ENESCO GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Financial Officer & Treasurer
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Assistant Treasurer
APPENDIX A
SUMMARY TERMS AND CONDITIONS
BORROWERS: Enesco Group, Inc. and its wholly owned
subsidiaries ("Enesco" or the "Borrower").
LENDER/AGENT: Fleet National Bank ("Fleet or Bank")
LENDER/ASSIGNEE: LaSalle Bank National Association ("LaSalle").
CREDIT FACILITIES: A maximum amount of $50,000,000 in senior
credit facilities consisting of the following:
1. A Committed Revolving Credit Facility
(the "Revolver") in the maximum principal
amount of $40.0 million. Notwithstanding
the foregoing, the Bank shall, subject to
Borrowing Capacity, make loans of up to
$5.0 million in excess of the $40.0
million Commitment based upon availability
under the Letter of Credit /Banker's
Acceptance Facility Limit described in (2)
below ("L/C and B/A Facility"). The $5.0
million component of the L/C and B/A
Facility that may be used for working
capital purposes will be referred to as
the "Swing-line".
Subject to Borrowing Capacity, up to $5.0
million of availability under the Revolver
can be used for the purpose of issuing
Letters of Credit or Banker's Acceptances
under the same terms and conditions as the
L/C and B/A Facility. Availability under
the Revolver shall be reduced, Dollar for
Dollar, in an amount equal to the amount
of L/Cs or B/As issued under the Revolver.
2. A Committed L/C and B/A Facility in the
maximum amount of $10.0 million, subject
to Borrowing Capacity as defined below.
Availability under the L/C and B/A
Facility shall be reduced, Dollar for
Dollar, in an amount equal to such advance
made under the "Swing-line".
BORROWING CAPACITY: Advances under the Credit Facilities 1 and 2
above will be subject to a Borrowing Base
equal to the lesser of (i) $50,000,000, or
(ii) 80% of "Eligible" Accounts Receivable, on
a consolidated basis, as defined in the Credit
Agreement.
USE OF PROCEEDS: 1. To refinance the Borrower's existing
revolving credit facility, for working
capital or other general corporate
purposes, including up to $15,000,000 for
Permitted Acquisitions (hereinafter
defined) and up to $5,000,000 for
Permitted Dividends and Stock Repurchases.
2. To issue Letters of Credit and permit
Xxxxxxx' Acceptances.
SUBSIDIARY GUARANTIES/ The Credit Facilities shall be unconditionally
STOCK PLEDGE: guaranteed by certain of the Material Domestic
Subsidiaries of the Borrower as determined by
the Lender.
In addition, 65% of the outstanding capital
stock of the Borrower's future material 1st
tier foreign subsidiaries, as determined by
the Lenders, shall be pledged to the Lender.
Additionally, not more than 40% of the
Borrower's consolidated total assets or 40% of
the Borrower's consolidated revenues shall be
in existing subsidiaries which are either not
a guarantor or the stock of which is not
pledged as set forth above.
CLOSING DATE: A mutually agreeable date targeted for on or
before June 16, 2003.
FINAL MATURITY DATE: Three years from the Closing Date.
AVAILABILITY: Advances under the Revolver may be borrowed,
repaid, and reborrowed from the Closing Date
Enesco Group, Inc.
May 14, 2003
Page 6
through the Facility Termination Date, subject
to the advance rate. L/C's and B/A's may be
issued, extended and renewed at any time prior
to the Facility Termination Date. No L/C shall
have an expiration date that is more than
ninety days beyond the Facility Termination
Date and no B/A shall have an expiration date
that is more than one hundred and fifty days
beyond the Facility Termination Date. L/C and
B/A issues will reduce availability under the
Revolving Credit.
MANDATORY PREPAYMENTS: Mandatory prepayment of the Revolver (with
concurrent reduction in commitment) shall be
required from the net proceeds of asset sales
(other than in the ordinary course of business
and in amounts greater than $5MM) and net cash
proceeds from equity or new debt offerings.
LIBOR and Cost of Funds loans may be subject
to a make whole provision under the
circumstances of prepayment.
DOCUMENTATION: The credit facilities will be evidenced by a
credit agreement, note, guarantees, and other
loan documents mutually satisfactory to the
Borrower and the Lenders.
SECURITY: Unsecured with an exclusive double negative
pledge on all tangible and intangible assets,
subject to existing agreements on terms and
conditions mutually acceptable to the Borrower
and the Bank.
INTEREST RATES: (i) LIBOR, adjusted for eurocurrency
liability reserves
(ii) Alternate Base Rate
(iii) Cost of Funds
The "Alternate Base Rate" means the greater of
(i) the prime rate of interest announced by
Fleet National Bank from time, or (ii) the sum
of the Federal Funds Effective Rate for such
day plus 1/2% per annum changing when and as
said rate changes. All interest in Alternate
Base Rate loans will be calculated on an
actual / 365 day basis.
"LIBOR" means the applicable London Interbank
Offered Rate for deposits in U.S. Dollars
appearing on Reuters Screen as of 11:00 a.m.
(London Time) two business days prior to the
first day of the applicable interest period,
adjusted for eurocurrency liability reserves.
All interest will be calculated on an actual /
360 day basis.
"Cost of Funds" means the rate determined by
Fleet National Bank, in its sole discretion,
to be its cost of funds, changing when and as
said rate changes. All interest in Cost of
Funds rate loans will be calculated on an
actual / 360 day basis.
INTEREST PERIOD: LIBOR loans will be available for interest
periods of one, two, three, six months, or one
year. Cost of Funds loans will be available
for interest periods of overnight up to one
week.
INCREASED COSTS: The Credit Agreement will contain customary
provisions regarding availability, increased
costs (including capital cost increases
imposed by regulatory authorities), illegality
and early payment.
INTEREST For Alternate Base Rate and Cost of Funds
PAYMENTS/MINIMUM DRAW: loans the end of each fiscal quarter. For
Libor loans at the end of each Interest
Period, or quarterly, if earlier. No Minimum
Draw shall apply unless/until required by
Lenders as a result of a change in
administrative procedures, with reasonable
notice given to Borrower.
PRICING: Pricing for the Revolver and the Swingline
will be at the rate, expressed in basis points
per annum,
Enesco Group, Inc.
May 14, 2003
Page 7
in accordance with the following pricing grid.
Pricing for the Loans is based on a
relationship pricing model, with consideration
for all credit and non-credit service revenue
earned by the respective Lenders. Pricing
adjustments may be negotiated based on
meaningful changes in current service revenue
levels.
LEVEL 1 LEVEL 2 LEVEL 3___
FUNDED DEBT/EBITDA < 1.3:1 1.3:1<1.5:1 1.5:1<2.00:1
-
UNUSED FEE 25bps 25bps 25bps
LIBOR/COST OF FUNDS + 100bps 140bps 175bps
ALTERNATE BASE RATE 0bps 0bps 0bps
ALL-IN DRAWN 100bps 140bps 175bps
Notwithstanding the Pricing Grid, for the
period following the Closing Date through the
delivery of the compliance certificate for
the fiscal quarter ending June 30, 2003,
pricing would not be lower than Level 1.
Funded Debt/EBITDA ratios will mirror the
Funded Debt/EBITDA covenant calculation
hereinafter defined.
COMMITMENT FEE: The Borrower shall pay a Commitment Fee to the
Bank equal to $180,000 on the Revolver and L/C
Facility Commitment, of which 70% would be for
the account of Fleet and 30% would be for the
account of LaSalle. The Commitment Fee will be
paid over a three year period at a rate of
$100,000 at closing, $50,000 in year 2 and
$30,000 in year 3, charged on the anniversary
date of the Commitment.
CANCELLATION/TERMINATION: The Commitment may be reduced by $1,000,000
increments upon request by the Borrower after
providing reasonable notice to the Bank.
UNUSED FEE: A per annum fee payable on the unused
Commitment, payable quarterly in arrears, at a
rate that is in accordance with the grid set
forth above.
LATE FEE: If the entire amount of any required principal
or interest is not paid in full within 10 days
after the same is due, the Borrower shall pay
the Bank a late fee equal to 5% of the
required payment.
DEFAULT RATE: The Borrower will pay a Default Rate of
Interest equal to the rate otherwise
applicable to such interest Period plus 2% per
annum.
REPRESENTATIONS AND WARRANTIES
The Credit Agreement shall contain representations and warranties with respect
to the Borrower and its subsidiaries which are customary in transactions of this
nature including, without limitation, representations and warranties with
respect to: absence of material adverse change; absence of default or unmatured
default; corporate existence and standing; authorization and validity; no
conflict; government consent; financial statements; taxes; litigation and
contingent obligations; subsidiaries; ERISA; accuracy of information; Regulation
U, T and X; material agreements; compliance with laws; ownership of property and
environmental matters. These representations and warranties will be subject to
customary materiality limitations.
Enesco Group, Inc.
May 14, 2003
Page 8
COVENANTS
The Agreement will have customary covenants including without limitation,
limitations on change of control, consolidations and mergers, acquisitions, sale
of assets, ERISA, investments, indebtedness, liens, guarantees and other
contingent liabilities, dividends, distributions and retirement of stock, loans
and advances, transactions with affiliates, changes in line of business,
operating leases, sale leasebacks, prohibition on granting other Lenders
negative lien covenants, customary affirmative covenants including without
limitation, inspection of records and assets, notice of default, taxes,
insurance, compliance with laws, maintenance of properties etc. and the
following:
REPORTING REQUIREMENTS: o Annual certified audited and consolidated
financial statements of the Borrower and
its consolidated subsidiaries due within
90 days after each fiscal year, prepared
by an independent auditing firm of
recognized national standing;
o Quarterly management certified unaudited
consolidated financial statements of the
Borrower and its consolidated subsidiaries
due within 45 days after each of the first
three fiscal quarters, and
o Quarterly compliance certificates signed
by the Assistant Treasurer or Chief
Financial Officer and delivered with the
financial statements.
o Quarterly Summary Accounts Receivable
Aging including a Schedule of specifically
dated Receivables, and Inventory Schedule
by location including a summary of
Inventory Reserve delivered with the
financial statements.
o Monthly Borrowing Base Certificates signed
by the Assistant Treasurer or Chief
Financial Officer and a Summary Accounts
Receivable aging within 15 days of month
end.
o Borrowing Base Certificate will require
detail on A/R by domicile i.e.: Domestic,
Canadian, International.
o Annual consolidated balance sheet, income
statement, and cash flow budgets prepared
by management, with quarterly detail.
o Other information as may be reasonably
requested from time to time by the Lender.
o Copy of Annual management letter, if one
is prepared.
PERMITTED The Borrower may use the Facility to make
ACQUISITIONS/DIVIDENDS/STOCK non-hostile acquisitions, acquire a
REPURCHASES: controlling interest in a joint venture, as
well as pay dividends or make stock
repurchases, provided the following conditions
are met:
o Aggregate cash purchase price for all
acquisitions not to exceed $15,000,000
during a fiscal year.
o Dividends and Stock Repurchases, in the
aggregate on a combined basis, shall be
limited to $5,000,000.
o Dividends and Stock Repurchases may not
exceed the Borrower's profitability for
the trailing 12 month period prior to the
period in which the dividend/stock
repurchase event is occurring.
o At the time thereof the Borrower must
demonstrate that (i) there is no Default
or Unmatured Default and (ii) the proposed
acquisition and borrowing will not result
in any default under the Facility.
o The acquired entity shall become a
Guarantor under the Facility, or in the
case of an acquisition resulting in a 1st
tier foreign subsidiary, a 65% stock
pledge will be offered.
o The business acquired is in the same line
of business as the Borrower.
o The joint venture interest is consolidated
for financial reporting purposes with the
Borrower under Agreement Accounting
Principles.
o The Borrower is in pro forma compliance
with the financial covenants for the
twelve-month period ending on the last day
of the Borrower's most recently completed
fiscal quarter as if such other
acquisition had occurred on the first day
of such twelve-month period.
Enesco Group, Inc.
May 14, 2003
Page 9
o Indebtedness incurred (other than
borrowings under the Facility) or assumed
in conjunction with any acquisition must
be unsecured subject to the other
indebtedness basket (limited to $5MM with
foreign banks for acquired foreign
subsidiaries only) and on terms acceptable
to the Lender.
o After giving effect to such acquisition,
the representations and warranties set
forth in the Credit Agreement shall be
true and correct in all material respects.
o Compliance with laws and regulations and
review of acquisition documents and due
diligence, in each case satisfactory to
the Agent.
FINANCIAL COVENANTS: Fixed Charge Coverage- The Borrower shall be
required to maintain a minimum Fixed Charge
Coverage Ratio as calculated for the four
consecutive fiscal quarters most recently
ended of not less than:
o 2.25 to 1.00, tested quarterly at this
limit through the quarters ending June 30,
2003, September 30, 2003 and December 31,
2003.
The calculation is based on rolling
four-quarter EBITDA less capex (including
acquisition or joint venture investments net
of balance sheet cash applied), total cash
taxes paid (to the extent amounts paid exceed
$5MM), dividends and stock repurchases,
plus/minus joint venture share income/losses
divided by gross interest expense plus
principal paid on long term debt.
Funded Indebtedness/EBITDA- The Borrower shall
have a ratio of quarterly Funded
Indebtedness/EBITDA, as calculated for the
four consecutive fiscal quarters most recently
ended of not greater than:
o 2.00:1.00, tested quarterly at this
limit, through the fiscal quarters ending
June 30, 2003, September 30 and December
31, 2003;
Annual Operating Profit- The Borrower shall
have a minimum operating profit of $7,500,000
for the fiscal year ending December 31, 2003.
Covenants set forth herein are for the fiscal
year ended 12/31/03. Covenants will be
required to be reset for each commitment year
based upon the financial budget provided on or
before May 15 of the subsequent commitment
years 2004 and 2005. Failure to agree to
financial covenants by this date, based upon
similar standards established for 2003, will
constitute a default.
CONDITIONS PRECEDENT: A closing for the proposed financing is
subject to, but not limited to, the following
customary conditions precedent: Borrowing
certificates, legal opinions, accuracy of
representations and warranties, no default
certificate, corporate resolutions, no
material adverse change, etc.
Closing will further be conditional upon
payment of all obligations under existing loan
facility under the August 23, 2000 credit
agreement in which LaSalle is a Assignee.
DEFAULTS
The Agreement will have customary defaults including, but not limited to,
defaults for nonpayment of principal when due, nonpayment of interest and fees
within 5 business days, material misrepresentations, default in the performance
of any negative covenant, default in performance of any other term or covenant
for 30 days, bankruptcy or insolvency, ERISA, change in ownership
Enesco Group, Inc.
May 14, 2003
Page 10
or control, cross-default to any indebtedness for the Borrower, or any
subsidiary which default would permit the holders of such indebtedness to cause
such indebtedness to become due prior to its stated maturity.
OTHER MATTERS
PARTICIPATION: The Lender shall have the unrestricted right
at any time and from time to time, and without
the consent of or notice to Borrower or
Guarantors, to grant to one or more banks or
other financial institutions (each a
"Participant") participating interests in any
or all of the loans held by the Lender. In the
event of any such grant by the Lender of a
participating interest to a Participant,
whether or not upon notice to Borrower, the
Lender shall remain responsible for the
performance of its obligations under the
Facility and Borrower shall continue to deal
solely and directly with the Lender in
connection with the Lender's rights and
obligations under the Facility. The Lender may
furnish any information concerning the
Borrower in its possession from time to time
to prospective Participants, provided that the
Lender shall require any such prospective
Participant to agree in writing to maintain
the confidentiality of such information.
LEGAL FEES/ INDEMNIFICATION: The Borrower agrees to reimburse or pay the
Bank for all reasonable costs, fees and
expenses, whether incurred prior to or
subsequent to closing, in the preparation,
negotiation, or execution of the Facility. The
Borrower will indemnify and hold harmless the
Bank, and its respective affiliates,
directors, officers, employees against all
losses, costs, expenses (including reasonable
fees, charges and disbursements of counsel)
incurred in respect of the financing
contemplated hereby or the use or proposed use
of proceeds thereof (except to the extent
resulting from the gross negligence or willful
misconduct of the indemnified party.) An
estimate of legal fees will be provided to the
Borrower in advance of closing.
GOVERNING LAW: Commonwealth of Massachusetts.
COUNSEL TO AGENT Xxxxxxx, Xxxxxxxxxx and Xxxxxxx, LLP
