SIXTH AMENDMENT TO CREDIT AGREEMENT
Exhibit 10.28
SIXTH AMENDMENT TO CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated as of November 12,
2008, is by and between ARABICA FUNDING, INC., a Delaware corporation (the “Borrower”), the
several banks and other financial institutions or entities from time to time parties to this
Agreement (the “Lenders”), and BANK OF AMERICA, N.A., as successor-by-merger to Fleet
National Bank, as administrative agent (the “Administrative Agent”).
RECITALS
A. The Borrower, the Lenders and the Administrative Agent are parties to the Credit Agreement
dated as of June 29, 2004 (as amended and in effect from time to time, the “Credit
Agreement”). Capitalized terms used herein without definition have the meanings assigned to
them in the Credit Agreement.
B. The Borrower has requested certain amendments to the Credit Agreement and the consent of
the Lenders to the Borrower’s execution and delivery of an amendment to the Master Lease. The
Lenders signing below are willing to effect such amendment and consent to such execution and
delivery, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
I. AMENDMENT TO CREDIT AGREEMENT AND CONSENT. Subject to the satisfaction of each of the
conditions set forth herein, the Credit Agreement is hereby amended as follows:
A. Definitions. Section 1.1 of the Credit Agreement is hereby amended as follows:
1. By adding the following new definitions of “Base Rate”, “Base Rate Loan” and “New Store”,
each in proper alphabetical order:
“Base Rate Loan”: any Loan bearing interest based upon the
Base Rate.
“Base Rate”: for any day, a fluctuating rate per annum equal
to the higher of (a) the Federal Funds Effective Rate plus 1/2 of 1%
and (b) the rate of interest in effect for such day as publicly announced
from time to time by the Reference Lender as its “prime rate”,
provided that notwithstanding anything in this Agreement to the
contrary, at no time shall the Base Rate be less than four (4.0%) percent.
The “prime rate” is a rate set by the Reference Lender based upon various
factors including the Reference Lender’s costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such announced
rate. Any change in such rate announced by the Reference Lender shall take
effect at the opening of business on the day specified in the public
announcement of such change.
“New Store”: any Store not previously in existence at a
location, provided that a relocation of any Store within the same building,
strip mall or retail mall shall not be considered a New Store.
Notwithstanding the foregoing provision, the definition of New Store shall
at all times be consistent with the Company’s reporting of the opening of
new Stores in all financial statements and reports that any member of the
Restricted Group makes to, or files with, the SEC or provides to the holders
of any class of its debt securities or public equity securities.
2. By deleting in their entireties the definitions of “Adjustment Date”, “COF Loan”, “COF
Rate” and “Pricing Grid”.
3. By amending and restating the definition of “Applicable Margin” in its entirety as
follows:
“Applicable Margin”: at any time, in respect of Base Rate
Loans, two (2.0%) percent per annum and in respect of Eurodollar Loans,
three and three-quarters (3.75%) percent per annum.
4. By amending and restating the definition of Commitment Fee Rate in its entirety as
follows:
“Commitment Fee Rate”: one (1.0%) percent per annum.
5. By amending the definition of “Consolidated EBITDA” by deleting the reference to “fiscal
quarter” contained therein and by substituting therefor the phrase “fiscal period”.
6. By inserting the following at the end of the definition of “Eurodollar Base Rate”:
“Notwithstanding anything in this Agreement to the contrary, at no time
shall the Eurodollar Base Rate be less than two and one-quarter (2.25%)
percent.”
7. By amending and restating the definition of “New Store Commitment” in its entirety as
follows:
“New Store Commitment”: an enforceable obligation of the Company or
any of its Subsidiaries to lease, acquire, develop or open a New Store.
8. By amending and restating the definition of “Revolving Termination Date” in its entirety
as follows:
“Revolving Termination Date”: June 30, 2010.
9. By amending and restating the last sentence in the definition of “Revolving Commitment”
in its entirety as follows:
“The amount of the Total Revolving Commitments as of November 12, 2008 is
$9,000,000.”
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10. By amending and restating the definition of “Store” in its entirety as follows:
“Store”: any store, kiosk, or other retail unit, including
without limitation, any New Store, which is owned or controlled directly or
indirectly by the Company or any of its Subsidiaries.
B. Base Rate Loans. The Credit Agreement is amended by deleting the phrases “COF
Loan” and “COF Loans” in each place where such phrases appear and by in each case substituting
therefor the phrases “Base Rate Loan” and “Base Rate Loans”, respectively.
C. Base Rate. The Credit Agreement is amended by deleting the phrase “COF Rate” in
each place where such phrase appears and by substituting therefor the phase “Base Rate”.
D. Commitment Fees. Section 2.3(a) of the Credit Agreement is hereby amended and
restated in its entirety as follows:
“(a) The Borrower agrees to pay to the Administrative Agent for the account
of each Lender in accordance with its Revolving Percentage, a commitment fee
for the period from and including November 12, 2008 to the last day of the
Revolving Commitment Period, computed at the Commitment Fee Rate on the
amount of the Total Revolving Commitments in effect (regardless of usage) on
the due date of each such payment, payable monthly in advance on the first
Business Day of each calendar month, commencing on the first such date to
occur after the date hereof.”
E. Interest Rate on Base Rate Loans. Section 2.9(b) of the Credit Agreement is hereby
amended and restated as follows:
“(b) Each Base Rate Loan shall bear interest at a rate per annum equal
to the Base Rate plus the Applicable Margin.”
F. Debit Authorization. Section 2.12(c) of the Credit Agreement is hereby amended by
inserting the following at the end thereof:
“The Borrower hereby irrevocably authorizes the Administrative Agent to
debit any of Borrower’s accounts held with the Reference Bank (any of the
foregoing, a “Borrower Account”), or if the funds therein are
insufficient, to advance to a Borrower Account as a Revolving Loan that is a
Base Rate Loan and simultaneously debit such Borrower Account, a sum
sufficient to pay when due all scheduled payments of principal and all
interest accrued on the Obligations and to pay when due all costs, fees and
expenses at any time owed by the Borrower to the Administrative Agent, the
Lenders and/or the Issuing Lender.”
G. Monthly Compliance Certificates. Section 6.2(b) of the Credit Agreement is hereby
amended and restated in its entirety as follows:
“(b) concurrently with the delivery of any financial statements
pursuant to Section 6.1, (i) (A) a certificate of a Responsible Officer
stating that, to the best of such Responsible Officer’s knowledge, each of
Holdings and each
of its Subsidiaries during such period has observed or performed all of its
covenants and other agreements, and satisfied every condition contained in
this
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Agreement and the other Transaction Documents to which it is a party to
be observed, performed or satisfied by it, and that such Responsible Officer
has obtained no knowledge of any “Default” or “Event of Default” (each as
defined in the Master Lease) except as specified in such certificate, and
(B) a certificate of appropriate officer of the Borrower, such officer to be
reasonably acceptable to the Administrative Agent, stating that to the best
of such officer’s knowledge, each of the Borrower and the Securities Pledgor
during such period has observed or performed all of its covenants and other
agreements, and satisfied every condition contained in this Agreement and
the other Transaction Documents to which it is a party to be observed,
performed or satisfied by it, and that such officer has obtained no
knowledge of any Default or Event of Default except as specified in such
certificate, (ii) a Store by Store report substantially in the form of
Exhibit 6.2(b), and (iii) in the case of quarterly, annual and monthly
financial statements, (x) a Compliance Certificate and (y) to the extent not
previously disclosed to the Administrative Agent, a description of any
change in the jurisdiction of organization of any Loan Party and a list of
any Intellectual Property or other property as to which action is required
under Section 6.10 hereof, in each case acquired by any Loan Party since the
date of the most recent report delivered pursuant to this clause (y), and
(z) the applicable compliance certificate required to be delivered under the
Master Lease;”
H. Financial Covenants. Section 7.1 of the Credit Agreement is hereby amended and
restated in its entirety as follows:
“7.1 Financial Condition Covenants; New Stores.
(a) Maximum Senior Leverage Ratio. Permit the ratio (the
‘Consolidated Senior Leverage Ratio‘) of the Consolidated Funded
Indebtedness of the Company and its Subsidiaries (excluding any Additional
Subordinated Debt included therein) at September 30, 2008 and at the last
day of each fiscal month thereafter to the Consolidated EBITDA of the
Company for the twelve fiscal month period ending on such last day of the
fiscal month to be greater than 1.00:1.00.
(b) Minimum Consolidated EBITDA. Permit the Consolidated
EBITDA of the Company for the twelve fiscal month period ending on September
30, 2008 and for the twelve fiscal month period ending on the last day of
each fiscal month thereafter to be less than $9,000,000.
(c) Minimum Interest Coverage Ratio. Permit the ratio of (i)
the Consolidated EBITDAR of the Company for any Reference Period ending on
any Quarterly Date falling in any period referred to below to (ii) the sum
of Consolidated Interest Expense plus Consolidated Rental Expense of the
Company and its Subsidiaries for such Reference Period to be less than the
ratio specified below for the period during which such date falls.
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| Minimum Interest | ||||
| Quarterly Dates | Coverage Ratio | |||
January 1, 2008 through June 30, 2008 |
1.38:1.00 | |||
July 1, 2008 through September 30, 2008 |
1.40:1.00 | |||
October 1, 2008 and thereafter |
1.35:1.00 | |||
(d) Maximum Capital Expenditures.
(i) Make any Capital Expenditures, except to purchase and
lease back assets of the Company and its Subsidiaries in connection
with Loans hereunder (limited in purchase price to the amount of
such Revolving Loans) pursuant to the Lease/Purchase Documents.
(ii) Permit the Capital Expenditures made by the Company and
its Subsidiaries in any fiscal year to exceed $10,000,000.
(e) Minimum Rental Payments. Permit the Lease/Purchase
Documents not to provide at all times for rental and other payments from the
Company under the Lease/Purchase Documents in amounts sufficient to cover
all of the Obligations and all of its operating and other expenses, in each
case on or prior to the dates when such Obligations and expenses become due
and payable.
(f) New Store Commitments. Permit the Company to enter into
any New Store Commitment if at such time (A) the Coffeehouse Level EBITDA
Margin for the Reference Period ended December 30, 2007 and each Reference
Period thereafter is less than 15% of Coffeehouse Level Sales for such
Reference Period, or (B) the aggregate Available Revolving Commitments of
all Lenders are less than (1) the budgeted amount of Capital Expenditures
for outstanding New Store Commitments (including the New Store Commitment in
question, and assuming that the budgeted amount of Capital Expenditures for
any New Store Commitment for which a Capital Expenditure budget has not been
determined is $300,000), less (2) the aggregate amount of Capital
Expenditures made toward New Store Commitments prior to the opening of each
such New Store.”
I. Foreign Intellectual Property. Section 7.3 of the Credit Agreement is hereby
amended by inserting the following at the end thereof:
“Without limitation of the foregoing, the Borrower covenants and agrees that it will
not enter into (and will not suffer or permit any of its Subsidiaries to enter into)
any agreement or understanding (each, a ‘Restrictive Agreement‘) with any
Person other than the Administrative Agent which could prohibit or restrict in any
manner the right of the Borrower or any such Subsidiary to grant to the
Administrative Agent any Lien on any of its Intellectual Property arising under laws
other than those of the United States, whether such Intellectual Property is now
owned or hereafter acquired. The Borrower represents and warrants that, at the date
of this Agreement, neither the Borrower nor any such Subsidiary is party to any such
Restrictive Agreement.”
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J. Commitments. Schedule 1.1(A) of the Credit Agreement is amended and
restated in its entirety in the form attached hereto as Annex I.
K. Borrower Schedules. Each of Schedule 1.1B, 1.1C, 4.4, 4.9, 4.15, 4.17, 4.19(a),
4.24, 4.25(a) and 4.25(d) to the Credit Agreement is amended and restated in its entirety in the
form attached hereto as Annex II by updating each as of the date hereof
L. Amendment to Lease/Purchase Documents. The Lenders hereby agree to the form of the
Seventh Amendment to Second Amended and Restated Lease and License Financing and Purchase Option
Agreement attached hereto as Exhibit A (the “Amendment to Lease/Purchase
Documents”).
M. No Further Amendments. Except as specifically amended hereby, the text of the
Credit Agreement and all other Loan Documents shall remain unchanged and in full force and effect.
II. REFERENCES IN LOAN DOCUMENTS; CONFIRMATION OF SECURITY. All references to the “Credit
Agreement” in all Loan Documents shall, from and after the date hereof, refer to the Credit
Agreement, as amended by this Amendment, and all obligations of the Borrower under the Loan
Documents shall be secured by and be entitled to the benefits of the Security Documents. All
Security Documents heretofore executed by the Restricted Group shall remain in full force and
effect and, by the Borrower’s signature hereto, and Holdings’ and the Company’s and its
Subsidiaries’ signatures to such Amendment to Lease/Purchase Documents, such Security Documents are
hereby ratified and affirmed.
III. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Borrower hereby represents and
warrants to, and covenants and agrees with the Lenders that:
A. The execution and delivery of this Amendment has been duly authorized by all requisite
action on the part of the Borrower and does not contravene, conflict with, or constitute a default
under, any provision of: (i) the Borrower’s articles of incorporation or bylaws, (ii) any law,
judgment, decree or order applicable to the Borrower or to any other Loan Party, or (iii) any
provision of any material agreement or instrument binding upon any Loan Party or upon any of the
respective property of a Loan Party. The execution and delivery of this Amendment by the Borrower
do not and will not cause any lien to arise under any provision of any material agreement or
instrument binding upon any Loan Party or upon any of the respective property of a Loan Party.
B. The representations and warranties of the Borrower contained in the Credit Agreement and
the other Loan Documents are true and correct in all material respects on and as of the date of
this Amendment as though made at and as of such date, except to the extent (a) such representations
and warranties expressly relate to an earlier date (and the representations and warranties set
forth in Section 4.1 and Section 4.18 (relating solely to the Confidential Offering Memorandum) of
the Credit Agreement and Section 19(a) and Section 19(q) (relating solely to the Confidential
Offering Memorandum) of the Master Lease shall be construed to relate only to the date of the
Credit Agreement and the Master Lease, respectively, and to the
Closing Date), in which case each such representation and warranty shall be true and correct in all
material respects as of such earlier date and (b) of inaccuracies resulting from transactions
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expressly permitted under the Loan Documents. No Default or Event of Default has occurred and is
continuing under the Credit Agreement or any other Loan Document.
C. Attached hereto as Exhibit A is a true, correct and complete copy of the Amendment
to Lease/Purchase Documents.
D. No member of the Restricted Group is required to obtain any consent, approval or
authorization from, or to file any declaration or statement with, any governmental instrumentality
or other agency or any other person or entity in connection with or as a condition to the
execution, delivery or performance of this Amendment.
E. This Amendment constitutes the legal, valid and binding obligation of the Borrower,
enforceable against it in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the rights and remedies of creditors
generally or the application of principles of equity, whether in any action at law or proceeding in
equity, and subject to the availability of the remedy of specific performance or of any other
equitable remedy or relief to enforce any right thereunder.
F. $3,000,000 in Total Revolving Extensions of Credit are outstanding as of September 12,
2008.
G. By the Borrower’s signature hereto, and Holdings’, the Company’s and its Subsidiaries’
signatures to the Amendment to Lease/Purchase Documents, each such party hereby acknowledges and
confirms that (i) it does not have any grounds, and hereby agrees not to challenge (or to allege or
to pursue any matter, cause or claim arising under or with respect to), in any case based upon acts
or omissions of the Administrative Agent or the Lenders, the effectiveness, genuineness, validity,
collectibility or enforceability of the Credit Agreement or any of the other Loan Documents, the
Lease/Purchase Documents, the Obligations, the Grantor Obligations (as defined in the Borrower
Security Agreement and the Company Guarantee and Security Agreement, respectively), the Liens
securing the Obligations and Grantor Obligations, or any of the terms or conditions of any Loan
Document or any Lease/Purchase Document, and (ii) it does not possess (and hereby forever waives,
remises, releases, discharges and holds harmless each Lender, the Administrative Agent, and their
respective affiliates, stockholders, directors, officers, employees, attorneys, agents and
representatives and each of their respective heirs, executors, administrators, successors and
assigns (collectively, the “Indemnified Parties”) from and against, and agrees not to
allege or pursue) any action, cause of action, suit, debt, claim, counterclaim, cross-claim,
demand, defense, offset, opposition, demand and other right of action whatsoever, whether in law,
equity or otherwise (which it, all those claiming by, through or under it, or its successors or
assigns, have or may have) against the Indemnified Parties, or any of them, by reason of, any
matter, cause or thing whatsoever, with respect to events or omissions occurring or arising on or
prior to the date hereof and relating to the Credit Agreement, any of the other Loan Documents or
any of the other Lease/Purchase Documents (including, without limitation, with respect to the
payment, performance, validity or enforceability of the Obligations, the Grantor Obligations, the
Liens securing the Obligations and Grantor Obligations, or any or all of the terms or conditions of
any Loan Document or any
Lease/Purchase Document) or any transaction relating thereto.
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H. Attached hereto as Annex III is a true and correct list of all deposit accounts,
securities accounts, commodities accounts and similar accounts maintained by the Borrower and each
other Loan Party as of the date hereof. On or before January 15, 2009, the Borrower will obtain
and maintain, or cause to be obtained and maintained, control agreements in form and substance
satisfactory to the Administrative Agent with respect to each such account set forth on Annex
III and shall take, or cause to be taken, any other actions deemed necessary by the
Administrative Agent to obtain and maintain “control” of each such account (as such term is defined
in Section 9-104 of the Uniform Commercial Code in the applicable jurisdiction), and the Borrower
shall thereafter in connection with the opening of any new deposit, securities, commodities or
similar account, deliver or cause to be delivered a control agreement in form and substance
satisfactory to the Administrative Agent simultaneously with the opening of such new account;
provided that so long as no Default or Event of Default shall have occurred and be
continuing, the Borrower and the other Loan Parties shall be permitted to maintain those accounts
expressly designated on Annex III hereto not subject to the Administrative Agent’s control
(the “Unrestricted Accounts”) if (i) the total amount of funds on deposit in all
Unrestricted Accounts does not exceed $200,000 in the aggregate at any given time and (ii) such
Unrestricted Accounts are used solely for xxxxx cash purposes. Failure to comply with this Section
III.H. shall constitute an Event of Default under the Credit Agreement.
I. On or before January 31, 2009, the Borrower will use its reasonable efforts to obtain and
maintain, or cause to be obtained and maintained, landlord waivers, warehouseman’s waivers or other
similar agreements, each in form and substance reasonably satisfactory to the Administrative Agent,
with respect to those locations which are requested by the Administrative Agent in its sole
discretion and are listed on Schedule 2.6 of the Perfection Certificate of the Company delivered in
connection herewith and designated thereon as “food” or “green coffee storage” sites. Failure to
comply with this Section III.I. shall, if unremedied for a period of 30 days after notice to the
Borrower from the Administrative Agent, constitute an Event of Default under the Credit Agreement.
J. As of the date hereof, at least fifty (50%) percent of the Company’s total number of Stores
located in the United States utilize a Lender for their primary cash management functions and the
Borrower will cause at least such percentage to be maintained at all times hereafter. In the event
that Wachovia Corporation and/or its Affiliates with commercial banking operations (collectively,
“Wachovia”) are merged with any Lender by March 31, 2009, then at all times thereafter, the
Borrower will cause at least seventy (70%) percent of the Company’s total number of Stores located
in the United States to utilize a Lender for their primary cash management functions (inclusive of
Wachovia). On or before March 31, 2009 and at all times thereafter, the Borrower shall cause all
of the Borrower’s, the Company’s and its Subsidiaries’ operating accounts to be maintained with a
Lender. Failure to comply with this Section III.J. shall constitute an Event of Default under the
Credit Agreement.
IV. CONDITIONS.
A. This Amendment shall become effective on the first date on which the Borrower shall have
executed and delivered to the Administrative Agent (or shall have caused to be executed and
delivered to the Administrative Agent by the appropriate persons) the following:
1. This Amendment;
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2. The Amendment to Lease/Purchase Documents between the Borrower and the Company;
3. Completed Perfection Certificates for the Borrower and each other Loan Party,
each in form and substance satisfactory to the Administrative Agent;
4. Trademark Security Agreements and any other intellectual property security
agreements deemed necessary by the Administrative Agent with respect to the
Borrower’s and the Company’s domestic intellectual property not already subject to
such an agreement; such documents to be in form and substance satisfactory to the
Administrative Agent and to be suitable for filing with the United States Patent and
Trademark or Copyright Office, as applicable;
5. Payment in immediately available funds of all fees agreed to be paid by the
Borrower in connection with this Amendment, including without limitation, a
fully-earned and non-refundable amendment fee in the amount of Fifty Thousand
Dollars ($50,000.00), which amendment fee shall be payable to the Administrative
Agent for pro rata distribution to the Lenders; and
6. Such other supporting documents and certificates as the Administrative Agent or
its counsel may reasonably request.
B. All legal matters incident to the transactions contemplated hereby shall be satisfactory to
counsel for the Administrative Agent.
V. MISCELLANEOUS.
A. As provided in the Credit Agreement, the Borrower agrees to reimburse the Administrative
Agent upon demand for all reasonable fees and disbursements of counsel incurred in connection with
the preparation of this Amendment.
B. This Amendment shall be governed by and construed in accordance with the laws of the State
of New York.
C. This Amendment may be executed by the parties hereto in several counterparts hereof and by
the different parties hereto on separate counterparts hereof, all of which counterparts shall
together constitute one and the same agreement. Delivery of an executed signature page of this
Amendment by facsimile transmission shall be effective as an in-hand delivery of an original
executed counterpart hereof.
[The next pages are the signature pages.]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as a
sealed instrument by their duly authorized representatives, all as of the day and year first above
written.
| ARABICA FUNDING, INC. |
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| By: | ||||
| Name: | ||||
| Title: | ||||
[Signatures continue on next page]
Signature Page to Sixth Amendment to Credit Agreement
| BANK OF AMERICA, N.A., successor-by-merger to Fleet National Bank, as Administrative Agent |
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| By: | ||||
| Name: | ||||
| Title: | ||||
[Signatures continue on next page]
Signature Page to Sixth Amendment to Credit Agreement
| BANK OF AMERICA, N.A., successor-by-merger to Fleet National Bank, as a Lender |
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| By: | ||||
| Name: | ||||
| Title: | ||||
[Signatures continue on next page]
Signature Page to Sixth Amendment to Credit Agreement
| XXXXX FARGO BANK, N.A. |
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| By: | ||||
| Name: | ||||
| Title: | ||||
