EXHIBIT 10.36
EXECUTION COPY
SECOND AMENDMENT TO
REVOLVING CREDIT AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO REVOLVING CREDIT AND SECURITY AGREEMENT, dated as
of June 21, 2004, 2004 (this "AMENDMENT"), is entered into by and between
CAPITALSOURCE FINANCE LLC, a Delaware limited liability company, as
administrative, payment, and collateral agent for the Lenders ("AGENT") and as a
Lender ("LENDER"), and REDENVELOPE, INC., a Delaware corporation (the
"BORROWER"). Capitalized terms used and not otherwise defined herein are used
herein as defined in the Credit Agreement (as defined below).
WHEREAS, the parties hereto entered into that certain Revolving Credit and
Security Agreement, dated as of June 13, 2003 (as amended to date and hereby and
as further amended, supplemented, modified or restated from time to time
hereafter, the "CREDIT AGREEMENT");
WHEREAS, there are no outstanding Advances under the Revolving Facility as
of the date of this Amendment;
WHEREAS, the Borrower has requested that Agent and Lender amend certain
provisions of the Credit Agreement as provided herein; and
WHEREAS, subject to satisfaction of the conditions set forth herein, Agent
and Lender are willing to amend the Credit Agreement as provided herein.
NOW, THEREFORE, in consideration of the premises and the other mutual
covenants contained herein, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT. The following sections of
the Credit Agreement are amended as follows:
1.1 Section 2.1 of the Credit Agreement. The following sentences
are hereby added to the end of Section 2.1 of the Credit Agreement:
"Notwithstanding anything to the contrary in this Section 2.1, no Advances
shall be made or permitted on or after the Second Amendment Effective Date
unless and until Borrower has provided Lender with an irrevocable written
notice of Borrower's intent to utilize the Revolving Facility (the
"ACTIVATION NOTICE"). The Activation Notice shall not become effective
(the "ACTIVATION EFFECTIVE Date") until the later of: (i) the third
Business Day after the date of Receipt by Agent of the Activation Notice;
and (ii) the second Business Day after (A) Agent and Borrower have
arranged for all future cash collections and cash payments of Borrower to
be swept to the Concentration Account on terms and conditions, and
pursuant to such agreements, as required by Agent in its Permitted
Discretion; and (B) all of the conditions precedent set forth in Section
4.3 have been satisfied."
1.2 Section 2.4 of the Credit Agreement. The third sentence of
Section 2.4 of the Credit Agreement is amended to read in full as follows:
"Notwithstanding the provisions of the Weekly Borrowing Certificates and
Monthly Borrowing Certificates, (i) except as provided in clause (ii) of
this sentence, Eligible Inventory is only required to be computed on a
monthly basis based on the most recent Monthly Borrowing Certificate
submitted or, if such Monthly Borrowing Certificate was not timely
submitted, as determined by Agent in its Permitted Discretion, and (ii) on
and
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after the Receipt by Agent of a Activation Notice, from July 1 through
December 31 of each year, the Value of Eligible Inventory is only required
to be computed on a weekly basis based on the most recent Weekly Borrowing
Certificate submitted or, if such Weekly Borrowing Certificate was not
timely submitted, as determined by Agent in its Permitted Discretion."
1.3 Section 2.5 of the Credit Agreement. The following sentence is
hereby added to the end of Section 2.5 of the Credit Agreement:
"Notwithstanding anything to the contrary in this Section 2.5, collections
of Borrower's Accounts, proceeds of Inventory, and other cash payments
received by Borrower (including any credit card payments from credit card
processors) shall not be swept into the Concentration Account unless and
until the earlier of (i) a Default or Event of Default has occurred, or
(ii) Lender has received an Activation Notice in accordance with Section
2.1."
1.4 Section 2.14(e) of the Credit Agreement. Section 2.14(e) of
the Credit Agreement is amended to read in full as follows:
"(e) Upon delivery of the Activation Notice to Agent, and in no
event later than three (3) Business Days prior to the Activation Effective
Date, and/or upon the occurrence of a Default or Event of Default,
Borrower (i) shall provide prompt written notice to its current bank to
transfer all items, collections and remittances to the Concentration
Account, (ii) shall direct or shall have directed each Account Debtor to
make payments to the appropriate Blocked Account, and Borrower hereby
authorizes Agent and/or Lenders, upon any failure to send such directions
within ten (10) calendar days after the Person becomes an Account Debtor,
to send any and all similar notices and directions to such Account
Debtors, and (iii) shall cause each credit card and debit card processor
which processes credit card or debit card payments made by Borrower's
customers to enter into Credit Card Processor Agreements, and Borrower
hereby authorizes Agent and/or Lenders, upon any failure by Borrower to
enter into any Credit Card Processor Agreements as required pursuant to
this Agreement, to send notices and directions to such credit card and
debit card processors instructing them to make payment only to the Blocked
Account or Concentration Account, as determined by Agent."
1.5 Section 4.3 of the Credit Agreement. The following new Section
4.3 is hereby added to the Credit Agreement:
"4.3 ADDITIONAL CONDITIONS PRECEDENT TO ACTIVATION EFFECTIVE DATE
The obligations of Lenders to make any Advance on or after the
Second Amendment Effective Date are subject to, and the Activation
Effective Date shall not occur until, the satisfaction, in the sole
judgment of Agent, of the following additional conditions precedent:
(a) Agent shall have received the Activation Notice; and
(b) Agent shall have received such consents, approvals, and
agreements from such third parties as Agent and its counsel shall
determine in their Permitted Discretion are necessary or desirable, each
in form and substance satisfactory to Agent in its Permitted Discretion,
including, without limitation, (1) the Landlord Waivers and Consents with
respect to any and all leases of real property, (2) fully executed Credit
Card Processor Agreements for all credit card and debit card processors
and (3) fully executed account control agreements with respect to each of
the Borrower's Deposit
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Accounts and Borrower shall have provided Agent with (x) a current
Schedule 5.5 (which shall list all credit card and debit card processors
used by Borrower to process credit card or debit card payments) and (y) a
current Schedule 5.18(c) (which shall list all of Borrower's Deposit
Accounts and Investment Property);
(c) Agent shall have received a complete list, in form and
substance satisfactory to Agent, of (i) all of Borrower's domain names,
domain name registrations, and the name and contact information for each
registrar of all of Borrower's domain names; and (ii) all of Borrower's
leased locations, together with copies of all leases and related documents
and agreements entered into in connection therewith;
(d) Borrower shall (i) be in compliance with and (ii) deliver
projections on the financial covenants set forth on Annex I to this
Agreement [on a pro forma and prospective basis after giving effect to
such Advance];
(e) Borrower shall have delivered to Agent certified historical
and prospective financial statements of Borrower through the end of the
Term on a quarter by quarter basis no less than fifteen (15) calendar days
before the proposed Advance; and
(f) Lender will have the opportunity to perform due diligence to
investigate Borrower's projections and such projections must be
satisfactory to Lender in is Permitted Discretion
1.6 Section 6.1(b)(iv) of the Credit Agreement. Clause (iv) of
Section 6.1(b) of the Credit Amendment is amended to read in full as follows:
"(iv) on and after the earlier of the occurrence of a Default or Event of
Default and the receipt by Agent of an Activation Notice, on each
Wednesday of each week during the Term until the Obligations are paid in
cash in full and this Agreement is terminated (and more frequently if an
Event of Default has occurred and is continuing and Agent shall so request
in its Permitted Discretion), Borrower shall deliver to Agent a Weekly
Borrowing Certificate,"
1.7 Section 6.1(c) of the Credit Agreement. Each "$100,000" that
appears in Section 6.1(c) of the Credit Agreement, other than the "$100,000"
contained in clause (xiv) of Section 6.1(c), is hereby changed to "$250,000,"
and each "$200,000" in Section 6.1(c) of the Credit Agreement is hereby changed
to "$500,000."
1.8 Section 6.4 of the Credit Agreement. The following new Section
6.4(b) is hereby added to the Credit Agreement:
"Borrower shall not transfer, assign, encumber, or terminate, or permit to
be encumbered or terminated, any of Borrower's domain names."
1.9 Section 6.7(b) of the Credit Agreement. Section 6.7(b) of the
Credit Agreement is amended to read in full as follows:
"Notwithstanding any other provision of this Agreement and in addition to
the other provisions of this Section 6.7, Agent shall be entitled to
conduct or obtain, or cause to be conducted or obtained, and Borrower upon
Agent's request shall permit to be conducted and obtained, from time to
time as determined by Agent, appraisals of Borrower's property and assets,
including
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without limitation, its Inventory, in all events, at the Borrower's
expense (but no more than one (1) time each year, provided, however that
upon Lender receiving an Activation Notice in accordance with Section 2.1
such limitation shall be not more than two (2) times each year; provided
further, however, that no such limits shall apply if a Default or Event of
Default has occurred and is continuing or Borrower has requested (i)
Agent's or Lenders' consent or approval to some matter, or (ii) Agent or
Lenders to take or refrain from taking any action), to be conducted by
such appraisers as are satisfactory to the Agent in its sole and absolute
discretion. Agent intends to require Borrower to conduct one (1) or two
(2) such appraisals, as provided above, in each twelve (12) month period
during which this Agreement is in effect, provided however, Agent shall be
entitled to conduct or obtain or require to be conducted or obtained more
or fewer appraisals in its Permitted Discretion. This Section 6.7(b) is in
addition to and not in limitation of Sections 6.7(a)."
1.10 Section 7.1 of the Credit Agreement. Section 7.1 of the Credit
Agreement is amended to read in full as follows:
"Upon delivery of the Activation Notice to Agent and thereafter, Borrower
shall not violate, and shall fully comply with, the financial covenants
set forth on Annex I to this Agreement, which annex is incorporated herein
and made a part hereof."
1.11 Section 7.4 of the Credit Agreement. Section 7.4 of the Credit
Agreement is amended to read in full as follows:
"Borrower shall not, directly or indirectly, (a) merge with, purchase,
own, hold, invest in or otherwise acquire any obligations or stock or
securities of, or any other interest in, or all or substantially all of
the assets of, any Person or any joint venture, (b) purchase, own, hold,
invest in or otherwise acquire any Investment Property (except those set
forth on Schedule 5.3 as of the Closing Date and with respect to which
Agent, for itself and the benefit of the Lenders, has a perfected, first
priority Lien in form and substance satisfactory to Agent in its Permitted
Discretion), or (c) make or permit to exist any loans, advances or
guarantees to or for the benefit of any Person or assume, guarantee,
endorse, contingently agree to purchase or otherwise become liable for or
upon or incur any obligation of any Person (other than (i) those created
by the Loan Documents, (ii) trade credit extended in the ordinary course
of business, (iii) advances for business travel and similar temporary
advances made in the ordinary course of business to officers, directors
and employees, and (iv) the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business). Borrower shall not, directly or indirectly, purchase, lease,
own, operate, hold, invest in or otherwise acquire any property or asset
or any Collateral that is located (A) outside of the continental United
States of America or (B) at locations other than the locations set forth
on Schedule 5.18B, each of which locations is either owned by Borrower or
leased by Borrower but subject to a valid Landlord Waiver and Consent if
required by Agent in its Permitted Discretion. Borrower shall not have any
Subsidiaries. On and after the delivery of an Activation Notice, (1)
Borrower shall have complied with Section 4.3 hereof, and (2) Borrower
shall not thereafter enter into any agreement(s) with any credit card or
debit card processors to process credit card or debit card payments made
by Borrower's customers without (i) providing Agent at least thirty (30)
calendar days advance written notice, and (ii) entering into a Credit Card
Processor Agreement with such Person prior to the commencement of any such
credit card and/or debit card processing arrangements between Borrower and
such Person. No agreement or
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arrangement between Borrower and any credit card or debit card processor
to process credit card or debit card payments made by Borrower's customers
shall be amended, modified or otherwise changed in any manner which would
be materially adverse to Agent or any Lender as determined by Agent in its
Permitted Discretion without Agent's prior written consent.
Notwithstanding any other provision of the Loan Documents and without
limiting Agent's other remedies hereunder, to the extent that any
agreement or arrangement between Borrower and any credit card or debit
card processor to process credit card or debit card payments made by
Borrower's customers is amended, modified or otherwise changed in any
manner which would be materially adverse to Agent or any Lender as
determined by Agent in its Permitted Discretion without Agent's prior
written consent, Agent shall be entitled to require Borrower to either
amend such agreement or arrangement on terms satisfactory to Agent in its
Permitted Discretion or terminate such arrangement or agreement and to
establish a new arrangement or agreement with another credit card or debt
card processor subject to a Credit Card Processor Agreement."
1.12 Section 8(c) of the Credit Agreement. The parenthetical that
appears in Section 8(c) of the Credit Agreement is amended to read in full as
follows:
"(other than Sections 6.2 (except to the extent of the cure period
specified in clause (a) of Article VIII above), 6.3(b), 6.4(b), 6.9
(except to the extent of the cure period specified therein) and 6.11, for
which there shall be no cure periods, and Section 6.1 for which there
shall be a fifteen (15) calendar day cure period from the due dates
required pursuant thereto regardless of the knowledge of any Person or any
notices)"
1.13 Annex I to the Credit Agreement. Annex I to the Credit
Agreement is hereby replaced in full by Annex I attached to this Amendment.
1.14 Annex II to the Credit Agreement. The following new item is
hereby added to Annex II to the Credit Agreement:
"As required pursuant to Section 6.1(b) of the Agreement, Borrower shall
furnish to Agent as soon as available, and in any event within five (5)
Business Days after June 30 and December 31 of each year a current list,
in form and substance satisfactory to Agent, of all of Borrower's domain
names, domain name registrations, and the name and contact information for
each registrar of all of Borrower's domain names."
1.15 Appendix A to the Credit Agreement. Appendix A to the Credit
Agreement is hereby amended by deleting the following definitions therein and
replacing it with the following new definitions:
""Credit Card Processor Agreement" shall mean, individually and
collectively, agreements in form and substance satisfactory to Agent in its sole
and absolute discretion by and between Borrower, Agent and credit card and/or
debit card processors which process credit card and/or debit card payments made
by Borrower's customers, providing, among other things, for the payment to the
Blocked Account or Concentration Account, as determined by Agent in its
Permitted Discretion, of all amounts due to Borrower from credit card and/or
debit card processors."
"Monthly Borrowing Certificate" shall mean a Borrowing Base
Certificate accompanied by the monthly reporting information and accompanying
materials and documentation as set forth on the Borrowing Certificate,
including, without limitation, (i) monthly internally prepared flash sales
report and collections report in each case covering the prior month for
Borrower, (ii) inventory perpetual by warehouse, (iii) listing of discontinued
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product inventory (coded C1) by warehouse and location, (iv) calculation of
ineligibles and rollforward of inventory calculations and characterizations,
including purchases, sales and costs of product sales, (v) reconciliation of
inventory to the Borrower's general ledger and financial statements, (vi)
listing of inventory reserves and support for calculations, (vii) summary aging
of Borrower's inventory and status of top 10 products by dollar value over 180
days old, (viii) inventory listing by product category for usable and unusable
inventory (by warehouses > 87 and warehouses < 88), (ix) detailed aging of
Borrower's accounts payable with reconciliations to Borrower's general ledger
and financial statements, (x) monthly sales demand and gross margin for Borrower
by category for the prior month of Borrower and year to date, (xi) such other
supporting documentation and information with respect to the foregoing and other
figures and information in the Monthly Borrowing Certificate as Agent shall
request in its Permitted Discretion, all of which shall be in form and substance
satisfactory to Agent in its Permitted Discretion and based on Borrower's
accounting months, (xii) the payroll taxes report required pursuant to Section
6.1(e), and (xiii) calculation of Unrestricted Cash Balance."
1.16 Appendix A to the Credit Agreement. Appendix A to the Credit
Agreement is hereby amended by adding the following definitions thereto in the
proper alphabetical order:
""Activation Effective Date" shall have the meaning given in Section 2.1
hereof."
""Activation Notice" shall have the meaning given in Section 2.1 hereof."
""Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency
thereof and backed by the full faith and credit of the United States, in
each case maturing within 1 year from the date of acquisition thereof, (b)
marketable direct obligations issued by any state of the United States or
any political subdivision of any such state or any public instrumentality
thereof maturing within 1 year from the date of acquisition thereof and,
at the time of acquisition, having the highest rating obtainable from
either S&P or Xxxxx'x, (c) commercial paper maturing no more than ninety
(90) days from the date of acquisition thereof and, at the time of
acquisition, having a rating of A-1 or P-1, or better, from S&P or
Xxxxx'x, (d) certificates of deposit, Eurodollar deposits or bankers'
acceptances maturing within 1 year from the date of acquisition thereof
and bank deposits, in each case either (i) issued by any bank organized
under the laws of the United States or any state thereof or the District
of Columbia or any U.S. branch of a foreign bank or any foreign branch of
a U.S. bank, in each case having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000, or (ii)
certificates of deposit less than or equal to $100,000 in the aggregate
issued by any other bank insured by the Federal Deposit Insurance
Corporation, (e) repurchase obligations with a term of not more than seven
days for underlying obligations of the types described in clause (a) above
entered into with any bank meeting the qualifications specified in clause
(d)(i) above, and (f) investments in money market funds with assets at
least equal to $500,000,000."
""Second Amendment Effective Date" shall mean June 21, 2004."
""Unrestricted Cash Balance" shall mean the aggregate amount of Borrower's
cash and Cash Equivalents that are not subject, in each case, to any
restrictions or encumbrances (other than Agent's security interest in such
cash and Cash Equivalents)."
1.17 Schedule A to the Credit Agreement. Schedule A to the Credit
Agreement is hereby replaced in full by Schedule A attached to this Amendment.
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1.18 Schedule 6.8 to the Credit Agreement. Paragraph 2 of Schedule
6.8 of the Credit Agreement is amended to read in full as follows:
"2. Landlord Consent. Not less than three (3) Business Days prior to the
Activation Effective Date, Borrower (i) shall deliver to Agent a Landlord
Waiver and Consent for the leased facility located at 0000 Xxxxxxxx Xxxxxx
Xxxx, Xxx Xxxxx, XX which is acceptable to Agent in its Permitted
Discretion, or (ii) shall have relocated its operations from such leased
facility to another leased facility and shall deliver to Agent a Landlord
Waiver and Consent for such new leased facility which is acceptable to
Agent in its Permitted Discretion."
SECTION 2. CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS REMAIN IN FULL FORCE
AND EFFECT AS AMENDED BY THIS AMENDMENT. Except as specifically amended by the
Amendment and by the other New Loan Documents (as defined in Section 4.2 of this
Amendment), the Credit Agreement and the other Loan Documents shall remain in
full force and effect and hereby are ratified and confirmed as so amended. The
New Loan Documents shall not constitute novations, satisfactions and accords,
cures, releases or satisfactions of the Credit Agreement and/or Loan Documents,
but shall constitute amendments thereof. The parties hereto agree to be bound by
the terms and conditions of the Credit Agreement and the Loan Documents as
amended by the New Loan Documents, as though such terms and conditions were set
forth herein and therein in full. Each reference in the Credit Agreement to
"this Agreement," "hereunder," "hereof," "herein" or words of similar import
shall mean and be a reference to the Credit Agreement as amended by this
Amendment, and each reference herein or in any other Loan Document to the
"Agreement", the "Loan Agreement" or the "CapitalSource Loan Agreement" shall
mean and be a reference to the Credit Agreement as amended and modified by this
Amendment. Each reference herein or in any Loan Document to any other Loan
Document shall mean and be a reference to such Loan Document as amended and
modified by the New Loan Documents.
SECTION 3. REPRESENTATIONS. The Borrower hereby represents and warrants
to the Agent and Lenders as follows (with the understanding that the Agent and
Lenders are relying materially on such representations and warranties in
entering into and performing this Amendment): (i) the Borrower is duly
incorporated or organized, validly existing and in good standing under the laws
of its jurisdiction of organization and in good standing in each jurisdiction
where Borrower is required to be qualified to do business, (ii) the execution,
delivery and performance by the Borrower of the New Loan Documents to which it
is a party are within its powers, have been duly authorized, and do not
contravene (A) its certificate of incorporation or bylaws or other
organizational documents, (B) any applicable law, or (C) any other agreement,
document, instrument, order, judgment, or decree to which it is a party or by
which it is bound, (iii) no consent, license, permit, approval or authorization
of, or registration, filing or declaration with, any Governmental Authority or
other Person is required in connection with the execution, delivery,
performance, validity or enforceability of the New Loan Documents by or against
the Borrower, (iv) the New Loan Documents have been duly executed and delivered
by the Borrower, and the execution, delivery and performance of the New Loan
Documents have been duly authorized by all requisite corporate action on the
part of the Borrower, (v) the New Loan Documents constitute the Borrower's
legal, valid and binding obligations enforceable against it in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally or by general principles of equity, (vi) the
Borrower is not in default under or breach of any Loan Document or any document,
instrument or agreement evidencing or relating to any other indebtedness of
Borrower and no such default or any other Default or Event of Default exists,
has occurred and is continuing or would result from the execution, delivery or
performance of the New Loan Documents, and (vii) all representations and
warranties made by
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the Borrower under the Loan Documents are true and correct as of the date hereof
(except to the extent that any such representation and warranty expressly
relates only to an earlier date) and are made as to the New Loan Documents. All
representations and warranties made in this Amendment shall survive the
execution and delivery of this Amendment and no investigation by the Agent or
the Lenders shall affect such representations or warranties or the right of the
Agent and the Lenders to rely upon them.
SECTION 4. CONDITIONS PRECEDENT TO EFFECTIVENESS. The New Loan Documents
shall be effective only upon the satisfaction of the following conditions:
4.1 The Borrower shall have delivered to the Agent an executed
original of this Amendment;
4.2 The Borrower shall have delivered to the Agent each other
agreement, document and instrument required by Agent in connection with this
Amendment, including, without limitation, one or more modifications to the
Credit Card Processor Agreements as requested by Agent in Agent's Permitted
Discretion (this Amendment and such other agreements, documents, instruments,
and modifications, collectively, the "NEW LOAN DOCUMENTS");
4.3 All representations and warranties made by the Borrower under
the New Loan Documents shall be true and correct as of the date hereof;
4.4 No breach of or default under any New Loan Document or any
document, instrument or agreement evidencing or relating to any other
indebtedness of Borrower shall have occurred, and no such default or any other
Default or Event of Default exists, has occurred and is continuing or would
result from the execution, delivery or performance of the New Loan Documents;
4.5 There shall be no outstanding Advances under the Revolving
Facility; and
4.6 The Borrower shall have delivered to Agent a certificate of
the corporate secretary or assistant secretary of Borrower, dated the date of
this Amendment and in form and substance acceptable to Agent, as to (i) the
incumbency and signature of the Persons executing the New Loan Documents on
behalf of Borrower, (ii) the resolutions of the Borrower's Board of Directors
approving the New Loan Documents, and (iii) confirmation that there have been no
changes to Borrower's Certificate of Incorporation and Bylaws since June 13,
2003.
SECTION 5. MISCELLANEOUS.
5.1 The execution, delivery and effectiveness of the New Loan
Documents shall not, except as expressly provided therein, be deemed to be an
amendment or modification of, or operate as a waiver of, any provision of any
Loan Document or any right, power or remedy of the Agent and the Lenders, nor
constitute a waiver of any provision of any Loan Document, or any other
document, instrument and/or agreement executed or delivered in connection
therewith or of any Default or Event of Default under any of the foregoing, in
each case whether arising before or after the date hereof or as a result of
performance thereunder. No New Loan Document shall preclude the future exercise
of any right, remedy, power or privilege available to the Agent and the Lenders
whether under the Loan Documents, at law or otherwise.
5.2 The New Loan Documents may be executed in any number of
counterparts (including by facsimile), and by the different parties hereto or
thereto on the same or separate counterparts, each of which shall be deemed to
be an original instrument but all of
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which, as applicable, together shall constitute one and the same agreement. The
descriptive headings of the various sections of the New Loan Documents are
inserted for convenience of reference only and shall not be deemed to affect the
meaning or construction of any of the provisions thereof. Whenever the context
and construction so require, all words in the New Loan Documents in the singular
number herein shall be deemed to have been used in the plural, and vice versa,
and the masculine gender shall include the feminine and neuter and the neuter
shall include the masculine and feminine.
5.3 The New Loan Documents may not be changed, amended, restated,
waived, supplemented, discharged, canceled, terminated or otherwise modified
orally or by any course of dealing or in any manner other than as provided in
the applicable Loan Documents to which they relate or are a part. This Amendment
shall be considered part of the Credit Agreement and, together with the New Loan
Documents, shall each be a Loan Document for all purposes.
5.4 The Loan Documents as amended by the New Loan Documents
constitute the final, entire agreement and understanding between the parties
with respect to the subject matter thereof and may not be contradicted by
evidence of prior, contemporaneous or subsequent oral agreements between the
parties, and shall be binding upon and inure to the benefit of the successors
and assigns of the parties thereto and supersede all other prior agreements and
understandings, if any, relating to the subject matter thereof. There are no
unwritten oral agreements between the parties with respect to the subject matter
thereof.
5.5 THE NEW LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE CHOICE OF LAW PROVISIONS SET FORTH IN, AND
SHALL BE SUBJECT TO THE WAIVER OF JURY TRIAL AND NOTICE PROVISIONS OF, THE
CREDIT AGREEMENT.
5.6 BORROWER ACKNOWLEDGES AND AGREES THAT (A) IT HAS NO CLAIMS,
COUNTERCLAIMS, OFFSETS, CREDITS OR DEFENSES TO THE LOAN DOCUMENTS AND THE
PERFORMANCE OF ITS OBLIGATIONS THEREUNDER, OR (B) IF IT HAS ANY SUCH CLAIMS,
COUNTERCLAIMS, OFFSETS, CREDITS OR DEFENSES TO THE LOAN DOCUMENTS AND/OR ANY
TRANSACTION RELATED TO THE LOAN DOCUMENTS AND/OR THE OBLIGATIONS, THE SAME ARE
HEREBY WAIVED, RELINQUISHED AND RELEASED IN CONSIDERATION OF AGENT'S AND
LENDERS' EXECUTION AND DELIVERY OF THIS AMENDMENT.
5.7 The Borrower may not assign, delegate or transfer any New Loan
Document or any of its rights or obligations thereunder without the prior
written consent of the Agent and the Lenders and any delegation, transfer or
assignment in violation hereof shall be null and void. No rights are intended to
be created under any New Loan Document for the benefit of any third party donee,
creditor or incidental beneficiary of the Borrower or any other Person other
than the Agent and the Lenders. Nothing contained in any New Loan Document shall
be construed as a delegation to the Agent and the Lenders of the Borrower's duty
of performance, including, without limitation, any duties under any account or
contract in which the Agent and the Lenders have a security interest or Lien.
The New Loan Documents shall be binding upon the Borrower and its respective
successors and permitted assigns. The Agent and the Lenders' ability to assign,
sell or transfer all or any part of the New Loan Documents shall be governed by
the Credit Agreement.
5.8 Except as specifically amended by the New Loan Documents, (i)
the New Loan Documents shall not limit or diminish the obligations of the
parties under the Loan
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Documents, and (ii) the Borrower reaffirms its obligations under the Loan
Documents to which it is a party and agrees that the Loan Documents remain in
full force and effect and are hereby ratified and confirmed. Each party consents
to the execution and delivery of the New Loan Documents by the other parties
hereto.
5.9 The Borrower shall execute and deliver such other documents,
certificates and/or instruments and take such other actions or cause such other
actions to be taken as the Agent or the Lenders may request in order more
effectively to consummate the transactions contemplated hereby.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have caused this Second Amendment to
Revolving Credit and Security Agreement to be executed by their respective
officers thereunto duly authorized, as of the date first above written.
AGENT AND LENDER: CAPITALSOURCE FINANCE LLC
By:___________________________________
Name:_________________________________
Title:________________________________
BORROWER: REDENVELOPE, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
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ANNEX I
FINANCIAL COVENANTS
A) MINIMUM UNRESTRICTED CASH BALANCE
As measured on the last calendar day of the Borrower's accounting quarter ending
on or closest to each of the following dates (each, a "TEST DATE"), Borrower's
Unrestricted Cash Balance for the applicable Test Period ending on such Test
Date shall not be less than the following:
ACCOUNTING/FISCAL
QUARTER ENDED MINIMUM UNRESTRICTED CASH
(ON OR ABOUT) BALANCE
------------- -------
June 30, 2004 $19,724,000
September 30, 2004 $15,052,000
December 31 2004 $25,594,000
March 31, 2005 $19,103,000
June 30, 2005 $19,724,000
September 30, 2005 $15,052,000
December 31 2005 $25,594,000
March 31, 2006 $19,103,000
; provided, however, that if Borrower's Unrestricted Cash Balance is less than
the amounts set forth in (A) above as of such Test Date, the Borrower shall be
in compliance with (B) below:
B) MINIMUM EXCESS AVAILABILITY AND MINIMUM EBITDA
(i) Borrower shall maintain Excess Availability of at least
$500,000.00 at all times; and
(ii) As measured on the last calendar day of the Borrower's
accounting quarter ending on or closest to each of the
following dates, EBITDA for the trailing tweleve (12) months
ending on such Test Date taken as one accounting period shall
not be less than the following:
ACCOUNTING/FISCAL
QUARTER ENDED
(ON OR ABOUT) MINIMUM EBITDA
------------- --------------
June 30, 2004 $(3,115,000)
September 30, 2004 $(5,170,000)
December 31 2004 $(2,248,000)
March 31, 2005 $ (614,000)
June 30, 2005 $ 363,000
September 30, 2005 $ 820,000
December 31 2005 $ 3,597,000
March 31, 2006 $ 4,894,000
For purposes of the covenants set forth in this Annex I, the terms listed below
shall have the following meanings:
"EBITDA" shall mean the sum, without duplication, of the following:
Net Income determined in accordance with GAAP, plus, (a) Interest Expense, (b)
taxes on income,
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(c) depreciation expense, (d) amortization expense, (e) all other non-cash
and/or non-recurring charges and expenses approved by Agent in its Permitted
Discretion, excluding accruals for cash expenses made in the ordinary course of
business, and (f) loss from any sale of assets, other than sales in the ordinary
course of business, less (a) gain from any sale of assets, other than sales in
the ordinary course of business, and (b) all non-cash and/or non-recurring
income, all of the foregoing determined in accordance with GAAP.
"Interest Expense" shall mean total interest expense generated
during the period in question (including attributable to conditional sales
contracts, Capital Leases and other title retention agreements in accordance
with GAAP) of Borrower with respect to all outstanding Indebtedness including
accrued interest and payment-in-kind interest and capitalized interest but
excluding commissions, discounts and other fees owed with respect to letters of
credit and bankers' acceptance financing, and net costs under Interest Rate
Agreements.
"Interest Rate Agreement" shall mean any interest rate swap, cap or
collar agreement or other similar agreement or arrangement designed to hedge the
position with respect to interest rates.
"Net Income" shall mean the net income (or loss) of Borrower for
such period taken as a single accounting period determined in conformity with
GAAP; provided, that there shall be excluded (i) the income (or loss) of any
Person in which any other Person (other than Borrower) has a joint interest,
except to the extent of the amount of dividends or other distributions actually
paid to Borrower by such Person during such period, (ii) the income (or loss) of
any Person accrued prior to the date it becomes a Borrower or is merged into or
consolidated with Borrower or that Person's assets are acquired by Borrower,
(iii) the income of any Subsidiary of Borrower to the extent that the
declaration or payment of dividends or similar distributions of that income by
that Subsidiary is not at the time permitted by operation of the terms of the
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary, (iv) compensation expense
resulting from the issuance of capital stock, stock options or stock
appreciation rights issued to former or current employees, including officers,
of Borrower, or the exercise of such options or rights, in each case to the
extent the obligation (if any) associated therewith is not expected to be
settled by the payment of cash by Borrower or any Affiliate thereof, and (v)
compensation expense resulting from the repurchase of capital stock, options and
rights described in clause (iv) of this definition of Net Income.
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SCHEDULE A
Lenders/Commitments
LENDERS COMMITMENT
------- ----------
CAPITALSOURCE FINANCE LLC $11,000,000.00
0000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Attention: Corporate Finance Group, Portfolio Manager
Telephone: (000) 000-0000
FAX: (000) 000-0000
E-Mail: xxxxxxx@xxxxxxxxxxxxx.xxx
Wire Instructions:
Bank: Bank of America, Baltimore, MD
Account: 003939396662
ABA: 0000-0000-0
Account Name: CapitalSource Funding LLC -- CFG
Reference: RedEnvelope, Inc.
TOTAL: $11,000,000.00
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