EXHIBIT 10.23
THIRD AMENDMENT TO CREDIT AGREEMENT
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THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Third Amendment") is
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entered into by and among PEET'S OPERATING COMPANY, INC. (formerly known as
Peet's Coffee and Tea, Inc.) ("Borrower"), PEET'S TRADEMARK COMPANY, and PEET'S
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COFFEE & TEA, INC. (formerly known as Peet's Companies, Inc.), each a Washington
corporation (each a "Credit Party" and collectively, the "Credit Parties"), and
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GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation ("Lender"), as of
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March 1, 2002, with reference to the following facts:
RECITALS
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A. Pursuant to that certain Credit Agreement dated as of September 1,
2000, as amended by that certain First Amendment to Credit Agreement dated as of
January 19, 2001, and that certain Second Amendment to Credit Agreement dated as
of June 29, 2001, each by and among Credit Parties and Lender (as the same may
have been further amended, supplemented, or otherwise modified from time to time
prior to the date of this Third Amendment, the "Credit Agreement"), Lender
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agreed to provide certain financial accommodations to or for the benefit of
Borrower and the other Credit Parties upon the terms and conditions contained
therein. Unless otherwise defined in this Third Amendment, (i) capitalized terms
or matters of construction defined or established in Annex A to the Credit
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Agreement shall be applied as defined or established therein, and (ii)
references to Sections, Schedules, and Annexes shall refer, respectively, to
Sections, Schedules, and Annexes of the Credit Agreement.
B. Credit Parties have requested certain modifications to the Credit
Agreement, and Lender has agreed to such request on the terms and conditions set
forth in this Third Amendment.
NOW, THEREFORE, in consideration of Credit Parties' performance of
their promises and obligations hereunder, the continued performance by Credit
Parties of their promises and obligations under the Credit Agreement and the
other Loan Documents, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Credit Parties and Lender
hereby agree as follows:
AGREEMENT
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1. Amendments. Subject to satisfaction of the conditions set forth in
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Section 3, effective as of December 24, 2001, the Credit Agreement is hereby
amended as follows:
1.1 Section 1.5(a) is hereby amended by adding the following to the
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end of such section:
The Applicable Margins shall be adjusted (up or down)
prospectively on a quarterly basis as determined by Borrower's
consolidated financial performance, commencing with the first day
of the first calendar month that occurs more than 5 days after
delivery of Borrower's quarterly Financial
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Statements to Lender for the Fiscal Quarter ending December 31,
2001. Adjustments in Applicable Margins shall be determined by
reference to the following grids:
Level of
If Leverage Ratio is: Applicable Margins:
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* 1.50:1 Level I
** 1.50:1, but * 2.00:1 Level II
** 2.00:1 Level III
Applicable Margins
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Level I Level II Level III
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Applicable Revolver
Index Margin 0.00% 0.00% 0.25%
Applicable Revolver
LIBOR Margin 2.00% 2.25% 2.50%
All adjustments in the Applicable Margins after December 31, 2001
shall be implemented quarterly on a prospective basis, for each
calendar month commencing at least 5 days after the date of
delivery to Lender of the quarterly unaudited or annual audited
(as applicable) Financial Statements evidencing the need for an
adjustment. Concurrently with the delivery of those Financial
Statements, Borrower shall deliver to Lender a certificate,
signed by its chief financial officer, setting forth in
reasonable detail the basis for the continuance of, or any change
in, the Applicable Margins. Failure to timely deliver such
Financial Statements shall, in addition to any other remedy
provided for in this Agreement, result in an increase in the
Applicable Margins to the highest level set forth in the
foregoing grid, until the first day of the first calendar month
following the delivery of those Financial Statements
demonstrating that such an increase is not required. If a Default
or Event of Default has occurred and is continuing at the time
any reduction in the Applicable Margins is to be implemented,
that reduction shall be deferred until the first day of the first
calendar month following the date on which such Default or Event
of Default is waived or cured.
1.2 Notwithstanding any contrary provision contained in Section
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1.14(b) of the Credit Agreement, the cost of the field audit
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conducted by Lender in December 2001 shall not exceed $5,000 in
the aggregate.
1.3 Section 6.3(b) is hereby deleted in its entirety and the
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following is substituted in lieu thereof :
* >
** >
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No Credit Party shall, directly or indirectly, voluntarily
purchase, redeem, defease or prepay any principal of, premium, if
any, interest or other amount payable in respect of any
Indebtedness, other than: (i) the Obligations; (ii) Indebtedness
secured by a Permitted Encumbrance if the asset securing such
Indebtedness has been sold or otherwise disposed of in accordance
with Section 6.8(b) or (c); (iii)regularly scheduled payments in
respect of the Facility Bond as set forth in Disclosure Schedule
(6.3); and (iv) Indebtedness evidenced by the Heller Loan
Documents up to a maximum aggregate amount of $3,000,000, so long
as no Default or Event of Default shall have occurred and be
continuing or would result after giving effect to any such
payment.
1.4 Section 6.13 is hereby deleted in its entirety and the following
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is substituted in lieu thereof:
Cancellation of Indebtedness. No Credit Party shall cancel any
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claim or debt owing to it, except for reasonable consideration
negotiated on an arm's length basis and in the ordinary course of
its business consistent with past practices; provided, that,
Borrower may cancel claims or debt up to a maximum of $100,000,
individually, and $200,000, in the aggregate, in any one Fiscal
Year.
1.5 Section 6.18(a)(ii) is hereby amended by deleting "$250,000"
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referenced therein and substituting "$500,000" in lieu thereof.
1.6 Section 6.18(b) is hereby deleted in its entirety and the
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following is substituted in lieu thereof : "[Intentionally
Omitted]"
1.7 Section 6.19(b)(ii) is hereby deleted in its entirety and the
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following is substituted therefor:
(ii) From and after the Term Loan B Repayment Date, Borrower may
engage in transactions and enter into agreements with respect to
the opening of up to ten (10) new retail locations during any
Fiscal Year; provided, that (A) Credit Parties shall not make any
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Capital Expenditures in connection with such new retail locations
exceeding, $800,000, individually, or $5,000,000, in the
aggregate, during any such Fiscal Year; and (B) no more than
three (3) of such new retail locations may be located more than
twenty (20) miles from any existing retail location of Borrower
in California.
1.8 Annex A is hereby amended by adding the following new definitions
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thereto in appropriate alphabetical order:
"Heller Loan Documents" shall mean (a) that certain Master Lease
Agreement between Heller Financial Leasing, Inc. and Peet's
Coffee & Tea, Inc. (formerly
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known as Peet's Companies, Inc.) as lessee, dated as of August
21, 1998, and schedules 0001, 0002 and 0004 relating thereto, and
(b) that certain Master Lease Agreement between Heller Financial
Leasing, Inc., as lessor, and Peet's Coffee & Tea, Inc., as
lessee, and schedules 0006 and 0007 relating thereto.
"Leverage Ratio" shall mean, with respect to Borrower, on a
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consolidated basis, the ratio of (a) Funded Debt as of any date
of determination, to (b) the sum of EBITDA less Capital
Expenditures (excluding $2.84 million applied in satisfaction of
Borrower's obligations under the Heller Loan Documents) for the
twelve months ending on that date of determination.
1.9 Annex A is hereby further amended by deleting the reference to
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"3.25" contained in clause (a)(iii) of the definition of
Borrowing Base and substituting "2.50" in lieu thereof.
1.10 Annex G is hereby amended by deleting paragraph (a) in its
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entirety and substituting the following in lieu thereof:
(a) Maximum Capital Expenditures. Credit Parties shall not make
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Capital Expenditures on a consolidated basis (i) during the
period from August 1, 2000, through December 31, 2000, in excess
of $3,000,000, or (ii) during any Fiscal Year of Borrower
commencing during or after January 2001, in excess of $6,500,000
(excluding $2.84 million applied in satisfaction of Borrower's
obligations under the Heller Loan Documents); provided, that the
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amount of permitted Capital Expenditures referenced above will be
increased in any period by the positive amount equal to the
lesser of (x) 25% of the amount of permitted Capital Expenditures
for the immediately prior period, and (y) the amount (if any),
equal to the difference obtained by taking the Capital
Expenditures limit specified above for the immediately prior
period minus the actual amount of any Capital Expenditures
expended during such prior period (the "Carry Over Amount"), and
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for purposes of measuring compliance herewith, the Carry Over
Amount shall be deemed to be the last amount spent on Capital
Expenditures in that succeeding year; and provided further, that
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during any Fiscal Year of Borrower, no more than $3,500,000 may
be used for purposes other than in connection with the opening of
new retail locations of Borrower.
2. Certain Additional Documents. Within sixty, (60) days of the date of
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this Third Amendment, each Credit Party shall execute and deliver to Lender, in
form and substance satisfactory to Lender, an amendment to the Security
Agreement, amended or additional financing statements, and such other and
further documents, instruments and agreements as are necessary to maintain the
perfection of Lender's Liens in all Collateral under the Code consistent with
the amendments to Annex A set forth in the Second Amendment (collectively, the
"Security Amendments").
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3. Effectiveness. This Third Amendment shall become effective only upon
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the satisfaction of following conditions: receipt by Lender of an original of
this Third Amendment duly executed by the Credit Parties and Lender.
4. Representations and Warranties. Each Credit Party hereby represents
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and warrants that (a) as of the date of this Third Amendment, it has no
Commercial Tort Claims, (b) at all times from the Closing Date through and until
the date of this Third Amendment WBG has remained inactive and (c) the
representations and warranties contained in the Credit Agreement were true and
correct in all material respects when made and, after giving effect to this
Third Amendment, shall remain true and correct in all material respects as of
the date hereof and thereof, except to the extent that a particular
representation or warranty by its terms expressly applies only to an earlier
date. The Credit Agreement and the other Loan Documents, as modified and amended
by this Third Amendment, constitute legal, valid and binding obligations of each
Credit Party that is a party thereto, enforceable against such Credit Party in
accordance with their respective terms.
5. Ratification. Except as specifically modified by this Third Amendment,
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the parties acknowledge that the Credit Agreement shall remain binding upon
Credit Parties and Lender and all provisions of the Credit Agreement shall
remain in full force and effect. Credit Parties expressly ratify and affirm
their respective obligations to Lender under the Credit Agreement and the other
Loan Documents.
6. Miscellaneous.
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6.1 Entire Agreement; Amendment. This Third Amendment, together with
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the Credit Agreement and the other Loan Documents, is the entire agreement
between the parties hereto with respect to the subject matter hereof. This Third
Amendment supersedes all prior and contemporaneous oral and written agreements
and discussions with respect to the subject matter hereof or thereof. No
amendment, modification, or waiver of any of the provisions of this Third
Amendment shall be valid or enforceable unless set forth in a writing signed by
Credit Parties and Lender.
6.2 Recitals. The recitals set forth at the beginning of this Third
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Amendment are true and correct, and such recitals are incorporated into and are
a part of this Third Amendment.
6.3 Headings. Section headings used herein are for convenience of
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reference only, are not part of this Third Amendment, and are not to be taken
into consideration in interpreting this Third Amendment.
6.4 Counterparts. This Third Amendment may be executed in identical
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counterpart copies, each of which shall be an original, but all of which shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Third Amendment by facsimile transmission shall be
effective as delivery of a manually executed counterpart of this Third
Amendment. Any party delivering this Third Amendment by facsimile shall send the
original manually executed counterpart of this Third Amendment to the other
party promptly after such facsimile transmission.
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6.5 GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY, AND
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CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE
PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS.
5.6 No Waiver. Except as specifically set forth in this Third
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Amendment, the execution, delivery and effectiveness of this Third Amendment
shall not (a) limit, impair, constitute a waiver of or otherwise affect any
right, power or remedy by Lender under the Credit Agreement or any other Loan
Document, (b) constitute a waiver of any provision in the Credit Agreement or
any other Loan Document, or (c) alter, modify, amend or in any way affect any of
the terms, conditions, obligations, covenants or agreements contained in the
Credit Agreement or any other Loan Document, all of which are ratified and
affirmed in all respects and shall continue in full force and effect.
5.7 Conflict of Terms. In the event of any inconsistency between the
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provisions of this Third Amendment and any provision of the Credit Agreement,
the terms and provisions of this Third Amendment shall govern and control.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, this Third Amendment to Credit Agreement has been
duly executed as of the date first written above.
"Credit Parties"
PEET'S COFFEE & TEA, INC.
By: /s/ Mark N. Rudolph
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Name: Mark N. Rudolph
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Title: Chief Financial Officer
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PEET'S OPERATING COMPANY, INC.
By: /s/ Mark N. Rudolph
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Name: Mark N. Rudolph
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Title: Chief Financial Officer
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PEET'S TRADEMARK COMPANY
By: /s/ Mark N. Rudolph
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Name: Mark N. Rudolph
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Title: Chief Financial Officer
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"Lender"
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Todd Gronski
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Name: Todd Gronski
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Duly Authorized Signatory
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