EXHIBIT 10.35
Xxxxx 00, 0000
XXX XXXXXXXXX ((000) 000-0000) AND FEDERAL EXPRESS
RedEnvelope, Inc.
000 Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxx, President and CEO
RE: WAIVERS UNDER AND AMENDMENT OF THE REVOLVING CREDIT AND SECURITY
AGREEMENT DATED AS OF JUNE 13, 2003, BETWEEN REDENVELOPE, INC.
("BORROWER") AND CAPITALSOURCE FINANCE LLC, AS AGENT AND LENDER
("AGENT") (AS AMENDED, MODIFIED, SUPPLEMENTED AND/OR RESTATED TO
DATE AND FROM TIME TO TIME, THE "AGREEMENT")
Dear Alison:
Reference is hereby made to the Agreement. All capitalized terms
used herein without definition shall have the meanings ascribed to such terms in
the Agreement.
Pursuant to Section 7.1 and paragraph 1 of Annex I of the Agreement,
Borrower was required to maintain minimum EBITDA of at least $3,100,000 as
measured on the last calendar day of the Borrower's accounting quarter ending on
or closest to March 31, 2004 (the "MARCH TEST DATE"). Borrower has informed
Agent that its EBITDA as measured on the March Test Date was $(1,631,000).
Borrower's failure to maintain such minimum required EBITDA constitutes an Event
of Default under the Agreement (the "EBITDA EXISTING DEFAULT").
Pursuant to Section 7.1 and paragraph 2 of Annex I of the Agreement,
Borrower was required to maintain Inventory Percentages not exceeding 51%, 41%
and 42% respectively as measured on the last calendar day of each of the
Borrower's accounting months ending on or closest to January 31, 2004, February
28, 2004 and March 31, 2004, respectively (each, an "INVENTORY TEST DATE").
Borrower has informed Agent that its Inventory Percentage as measured on each
applicable Inventory Test Date was 56%, 55% and 49%, respectively. Borrower's
failure to maintain such maximum required Inventory Percentages constitute
Events of Default under the Agreement (collectively, the "INVENTORY EXISTING
DEFAULTS," and together with the EBITDA Existing Default, the "EXISTING
DEFAULTS").
Pursuant to Section 8(i)(i) of the Agreement and the definition of
"Change of Control" in the Agreement, an Event of Default would occur if Xxxxxx
Xxxxxxxx were to cease being employed as Brand Strategist of Borrower and not be
replaced within sixty (60) calendar days by an interim Brand Strategist and
within 180 calendar days by a permanent Brand Strategist, each to Agent's
satisfaction as determined in its Permitted Discretion. Borrower has informed
Agent that Xxxxxx Xxxxxxxx is resigning from the Borrower and that Borrower does
not
RedEnvelope, Inc.
April 29, 2004
Page 2
intend to replace her. Such resignation and failure to replace Xxxxxx Xxxxxxxx
would be an Event of Default (the "ANTICIPATED DEFAULT").
Subject to the terms of this waiver and amendment letter, (A) Agent
hereby waives the Existing Defaults and the Anticipated Default, and (B)
Borrower and Agent hereby amend the definition of "Change of Control" in the
Agreement by deleting clause (v)(A) of such definition in its entirety and
deleting the words "or (B)" in such definition such that what was clause (v)(B)
is now just clause (v) of said definition, provided that (i) Agent shall have
received the countersignatures of Borrower on this letter agreeing to the terms
of this waiver and amendment letter, (ii) all representations, warranties,
covenants and agreement of Borrower in the Agreement and Loan Documents shall be
true and correct in all material respects at and as of the date hereof as though
then made, except (A) to the extent of the changes caused by the transactions
expressly contemplated herein, and (B) for such representations and warranties
as by their terms expressly speak as of an earlier date, and (iii) there shall
be no Default or Event of Default under the Agreement or other Loan Documents
after giving effect to this waiver letter and the waiver contemplated hereby.
In order to induce Agent to execute and deliver this waiver and
amendment letter, Borrower hereby represents and warrants that no Default or
Event of Default exists on the date hereof after giving effect to the waivers
and amendment contemplated hereby. In consideration of the foregoing, Borrower
hereby ratifies and confirms all of its Obligations pursuant to the Agreement
and other Loan Documents.
Except as expressly set forth herein, (i) the Loan Documents remain
in full force and effect, (ii) this waiver and amendment letter shall not be
deemed to be a waiver, amendment or modification of, or consent to or departure
from, any provisions of any Loan Document or to be a waiver of any Default or
Event of Default under any Loan Document whether arising before or after the
date hereof (except for the specific waivers and amendment referenced above in
this waiver and amendment letter), and (iii) this waiver and amendment letter
shall not preclude the future exercise of any right, remedy, power or privilege
available to Agent whether under the Loan Documents or otherwise and shall not
be construed or deemed to be a satisfaction, novation, cure, modification,
amendment or release of the Note, Obligations or any Loan Document.
This waiver and amendment letter (i) constitutes the entire
understanding of the parties with respect to the subject matter hereof, and any
other prior or contemporaneous agreements, whether written or oral, with respect
hereto are expressly superseded hereby, (ii) shall be governed by and construed
in accordance with the laws of the State of Maryland, and (iii) shall be binding
upon and inure to the benefit of the successors and assigns of the parties
hereto. This waiver and amendment letter may be executed in one or more
counterparts (which taken together shall constitute one and same instrument) and
by facsimile transmission, which facsimile signatures shall be considered
original executed counterparts.
All representations and warranties made in this waiver and amendment
letter shall survive the execution and delivery of this waiver letter and no
investigation by Agent shall affect such representations or warranties or the
right of Agent to rely upon them.
RedEnvelope, Inc.
April 29, 2004
Page 3
Please indicate your consent to the terms and conditions of this
waiver and amendment letter by signature of your authorized officer in the space
indicated below.
Very truly yours,
CAPITALSOURCE FINANCE LLC
By: /s/ XXXXXX XXXXXX
Name: Xxxxxx Xxxxxx
Title: General Counsel, Corporate Finance
ACKNOWLEDGED AND AGREED TO as of April 29, 2004
REDENVELOPE, INC.
By: /s/ XXXXXX X.MAY
Name: Xxxxxx X. May
Title: President & C.E.O.
