Exhibit 10.1
Execution Copy
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THIRD AMENDMENT AND SECOND WAIVER, dated as of September 28, 2005
(this "Amendment and Waiver"), to and under the CREDIT AGREEMENT, dated as of
March 31, 2004 (as heretofore amended, supplemented or otherwise modified, the
"Credit Agreement"), among HOME INTERIORS & GIFTS, INC., a Texas corporation
(the "Borrower"), the several banks and other financial institutions from time
to time parties thereto (the "Lenders"), BEAR STEARNS CORPORATE LENDING INC., as
syndication agent (in such capacity, the "Syndication Agent") and JPMORGAN CHASE
BANK, N.A. (formerly known as JPMorgan Chase Bank), as administrative agent for
the Lenders (in such capacity, the "Administrative Agent").
W I T N E S S E T H :
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WHEREAS, the Borrower, the Lenders, the Syndication Agent and the
Administrative Agent are parties to the Credit Agreement;
WHEREAS, the Borrower has requested that the Lenders agree to (a)
waive until November 28, 2005 compliance with the financial covenants contained
in Section 7.1 of the Credit Agreement and (b) amend certain provisions of the
Credit Agreement; and
WHEREAS, the Lenders are willing to agree to such requested waivers
and amendments, but only upon the terms of this Amendment and Waiver;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
SECTION 1 Definitions. Unless otherwise defined herein, capitalized
terms which are defined in the Credit Agreement shall be used as so defined.
SECTION 2 Waiver to the Credit Agreement. The Lenders hereby waive
during the period from and including June 30, 2005 to but excluding November 28,
2005 compliance by the Borrower with the Consolidated Leverage Ratio set forth
in Section 7.1(a) of the Credit Agreement and the Consolidated Interest Coverage
Ratio set forth in Section 7.1(b) of the Credit Agreement, in each case for the
period ending on each of June 30, 2005 and September 30, 2005 (it being
understood that such waiver shall expire on November 28, 2005 such that any
Default or Event of Default that would have occurred during the period from and
including June 30, 2005 to but excluding November 28, 2005 (without giving
effect to any waiver by the Lenders of such Default or Event of Default) shall
be deemed to have occurred on November 28, 2005 and shall be continuing
thereafter).
SECTION 3 Amendments to the Credit Agreement.
(a) Amendment to Section 1.1 of the Credit Agreement. Section 1.1 of
the Credit Agreement is hereby amended by:
(i) adding thereto the following definitions in their
appropriate alphabetical order:
"Supermajority Lenders": at any time, the holders of more
than 66-2/3% of the sum of (a) the aggregate unpaid principal amount
of the Term Loans then outstanding and (b) the Total Revolving
Commitments then in effect or, if the Revolving Commitments have been
terminated, the Total Revolving Extensions of Credit then
outstanding. Defaulting Lenders shall not be included in the
calculation of Supermajority Lenders.
"Third Amendment": the Third Amendment and Second Waiver,
dated as of September 28, 2005, to and under this Agreement.
"Third Amendment Effective Date": the date on which the
conditions to the effectiveness of the Third Amendment shall have
been satisfied, which date is September 28, 2005.
(ii) adding "or Section 7.5(k)" at the end of the
definition of "Asset Sale" immediately before the period therein; and
(iii) adding at the following at the end of the definition
of "Interest Payment Date" immediately before the period therein:
", provided, however, that during the Waiver Period, (x) as to any
ABR Loan, the last day of each calendar month, (y) as to any
Eurodollar Loan having an Interest Period of one month, the last day
of such Interest Period and (z) as to any Eurodollar Loan having an
Interest Period longer than one month, each day that is one month, or
a whole multiple thereof, after the first day of such Interest Period
and the last day of such Interest Period".
(iv) deleting the definition of Waiver Period in its
entirety and substituting in lieu thereof the following definition:
"Waiver Period": the period from and including September
29, 2005 to but excluding November 28, 2005.
(b) Amendment to Section 2.1 of the Credit Agreement. Section 2.1(b)
of the Credit Agreement is hereby amended by adding the following new sentence
at the end thereof:
"Notwithstanding the foregoing, during the Waiver Period this Section
2.1(b) shall be inoperative.".
(c) Amendment to Section 2.11 of the Credit Agreement. Section 2.11
of the Credit Agreement is hereby amended by:
(i) inserting the words "(provided that any such Net Cash
Proceeds excluded during the Waiver Period shall not exceed
$1,000,000)" immediately after the amount "$5,000,000" where it
appears therein;
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(ii) deleting the words "this Section 2.11" in the first
sentence of Section 2.11(d) and replacing in lieu thereof the words
"Sections 2.11(a), (b) or (c)"; and
(iii) adding the following new Section 2.11(e):
"(e) If, after giving effect to any Revolving Extension of
Credit made during the Waiver Period and the anticipated use thereof
within three Business Days of the date of such Revolving Extension of
Credit, Available Cash exceeds $7,500,000 (any such excess, "Excess
Available Cash"), the Borrower shall, on such third Business Day,
apply such Excess Available Cash toward the prepayment of any
outstanding Revolving Loans (without a concurrent reduction of the
Revolving Commitments)."
(d) Amendment to Section 4.2 of the Credit Agreement. Section 4.2 of
the Credit Agreement is hereby amended by adding the following proviso at the
end of such Section immediately before the period therein:
"; provided, however, that during the Waiver Period, the foregoing
representation as to a material adverse effect on the business,
property, operations or condition (financial or otherwise) of the
Group Members taken as a whole shall be made since June 30, 2005".
(e) Amendment to Section 5.2 of the Credit Agreement. Section 5.2 of
the Credit Agreement is hereby amended by deleting Section 5.2(c) in its
entirety and replacing in lieu thereof the following paragraph:
"(c) Post Third Amendment Effective Date Conditions to
Revolving Extensions of Credit. After the Third Amendment Effective
Date, (i) after giving effect to any proposed Revolving Extension of
Credit, the Total Revolving Extensions of Credit shall not exceed
$35,000,000 and (ii) after giving effect to any proposed Revolving
Extension of Credit and the anticipated use thereof within three
Business Days of the date of such Revolving Extension of Credit,
Available Cash shall not exceed $7,500,000.".
(f) Amendment to Section 6.2 of the Credit Agreement. Section 6.2 of
the Credit Agreement is hereby amended by (i) deleting the word "and" at the end
of Section 6.2(e), (ii) renaming Section 6.2(f) as Section 6.2(g) and (iii)
inserting the following new Section 6.2(f):
"(f) On or before November 15, 2005, a detailed business
and balance sheet recapitalization plan for fiscal years 2005-2010
and a written analysis of the business prospects of the Borrower and
its Subsidiaries for the period from 2005 through 2010, in each case
in form and substance reasonably satisfactory to the Administrative
Agent; and".
(g) Amendment to Section 7.2 of the Credit Agreement. Section 7.2 of
the Credit Agreement is hereby amended by:
(i) inserting the words "(provided that any such
Indebtedness incurred and outstanding during the Waiver Period shall
not exceed $1,000,000)" immediately after the amount "$15,000,000"
where it appears in Section 7.2(b);
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(ii) adding the following proviso at the end of Section
7.2(k):
"; provided that during the Waiver Period, no such Indebtedness shall
be permitted";
(iii) adding the following proviso at the end of Section
7.2(m):
"; provided that during the Waiver Period, no such Indebtedness shall
be permitted"; and
(iv) inserting the words "(provided that any such
Indebtedness incurred and outstanding during the Waiver Period shall
not exceed $1,000,000)" immediately after the amount "$20,000,000"
where it appears in Section 7.2(n).
(h) Amendment to Section 7.3 of the Credit Agreement. Section 7.3(q)
of the Credit Agreement is hereby amended by inserting the words "(provided that
any such obligations secured by Liens created, incurred, assumed or suffered to
exist during the Waiver Period shall not exceed $1,000,000)" immediately after
the amount "$20,000,000" where it appears in Section 7.3(q).
(i) Amendment to Section 7.7 of the Credit Agreement. Section 7.7 of
the Credit Agreement is hereby amended by inserting the words "(provided that
during the Waiver Period, such Capital Expenditures shall not exceed $3,000,000
)" immediately after the date "December 31, 2005".
(j) Amendment to Section 7.8 of the Credit Agreement. Section 7.8 of
the Credit Agreement is hereby amended by:
(i) adding the following proviso at the end of Section
7.8(c)(i):
"; provided that during the Waiver Period, no such Guarantee
Obligations shall be permitted in respect of any primary obligor who
is not the Borrower or a Subsidiary of the Borrower.";
(ii) inserting the words "(provided that any such
Investments made and outstanding during the Waiver Period shall not
exceed $1,000,000)" immediately after the amount "$15,000,000" where
it appears in Section 7.8(e);
(iii) adding the following proviso at the end of Section
7.8(f):
"; provided that during the Waiver Period, no such Investments shall
be permitted.";
(iv) inserting the words "(provided that any such
Investments made during the Waiver Period shall not exceed
$1,000,000)" immediately after the phrase "$5,000,000 during the term
of this Agreement" where it appears in Section 7.8(i);
(v) inserting the words "(provided that any such loans or
advances made and outstanding during the Waiver Period shall not
exceed $1,000,000)" immediately after the amount "$5,000,000" where
it appears in Section 7.8(j); and
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(vi) inserting the words "(or, during the Waiver Period,
10%)" immediately after the percentage "25%" where it appears in
Section 7.8(k).
(k) Amendment to Section 7.10 of the Credit Agreement. Section
7.10(e) of the Credit Agreement is hereby amended by inserting the words "and
September 30, 2005" immediately after the date "June 30, 2005" in the proviso
thereto.
(l) Amendment to Section 8 of the Credit Agreement. Section 8(c) of
the Credit Agreement is hereby amended by inserting the words "Section 6.2(f),"
immediately after the words "performance of any agreement contained in" where
they appear therein.
(m) Amendment to Section 10.1 of the Credit Agreement. Section 10.1
of the Credit Agreement is hereby amended by deleting the word "or" immediately
before clause (vii) in the first proviso therein and inserting the following at
the end of such proviso immediately before the period therein:
"or (viii) amend, modify or waive any provision of the Credit
Agreement to have the effect of reducing the dollar amount, or
eliminating or making less restrictive the requirements, set forth in
Section 2.11(e) or 5.2(c)(ii) without the consent of the
Supermajority Lenders".
SECTION 4 Representations and Warranties. The Borrower represents and
warrants to each Lender as of the date hereof that, after giving effect to this
Amendment and Waiver, (a) the Credit Agreement constitutes the legal, valid and
binding obligation of the Borrower, enforceable against the Borrower 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 and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law)), (b) the
representations and warranties made by the Borrower and the other Loan Parties
in or pursuant to the Loan Documents are true and correct in all material
respects (except to the extent that such representations and warranties are
expressly made only as of an earlier date, in which case such representations
and warranties shall have been true and correct in all material respects on and
as of such earlier date) and (c) no Default or Event of Default has occurred and
is continuing.
SECTION 5 Conditions to Effectiveness. This Amendment and Waiver
shall become effective as of the date hereof upon receipt by the Administrative
Agent of (i) counterparts of this Amendment and Waiver duly executed and
delivered by a duly authorized officer of each of the Borrower and the Required
Lenders, (ii) an Acknowledgement and Consent in the form of Annex A hereto, duly
executed by each Guarantor, (iii) payment of its invoiced out-of-pocket costs
and expenses, including without limitation, the reasonable fees and expenses of
counsel and the financial advisor to the Administrative Agent to the extent
invoices therefor have been presented to the Borrower by 5:00 pm (New York City
time) September 27, 2005, and (iv) for the account of each Lender that executes
and delivers this Amendment and Waiver on or before 5:00 P.M. (New York City
time) on September 28, 2005, an amendment fee equal to 0.10% of the outstanding
principal amount of such Lender's Term Loans and Revolving Commitments.
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SECTION 6 Continuing Effect; No Other Amendments or Waivers. Except
as expressly amended or waived hereby, all of the terms and provisions of the
Credit Agreement and the other Loan Documents are and shall remain in full force
and effect in accordance with their terms. The Borrower acknowledges and agrees
that nothing in this Amendment and Waiver shall, except as expressly provided
herein, operate as a waiver of any right, power or remedy of any Lender or Agent
under any of the Loan Documents or constitute an indication of the Lenders'
willingness to consent to any other amendment or waiver of any other provision
of the Credit Agreement or a waiver of compliance with any such provision not
referenced in Section 2 of this Amendment and Waiver or for any other time
period.
SECTION 7 GOVERNING LAW. THIS AMENDMENT AND WAIVER SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 8 Counterparts. This Amendment and Waiver may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Amendment and
Waiver by facsimile shall be effective as delivery of a manually executed
counterpart of this Amendment and Waiver. The execution and delivery of this
Amendment and Waiver by any Lender shall be binding upon each of its successors
and assigns (including Transferees of its Commitments and Loans in whole or in
part prior to the effectiveness hereof) and binding in respect of all of its
Commitments and Loans, including any acquired subsequent to its execution and
delivery hereof and prior to the effectiveness hereof.
SECTION 9 Costs and Expenses. Pursuant to Section 10.5 of the Credit
Agreement, the Borrower shall pay out-of-pocket costs and expenses of the
Administrative Agent, including without limitation, the reasonable fees and
expenses of counsel and the financial advisor to the Administrative Agent in
connection with (a) the development, preparation and execution of this Amendment
and Waiver and (b) the administration, enforcement and preservation of any
rights under the Loan Documents.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Waiver to be executed by their respective officers thereunto duly authorized, as
of the date first above written.
HOME INTERIORS & GIFTS, INC.
By: /s/ Keith S. Krzeminski
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Name: Keith S. Krzeminski
Title: Senior Vice President and Chief
Financial Officer
JPMORGAN CHASE BANK, N.A.
(formerly known as JPMorgan Chase Bank),
as Administrative Agent and as a Lender
By: /s/ Neil R. Boylan
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Name: Neil R. Boylan
Title: Managing Director
BEAR STEARNS CORPORATE LENDING INC.,
as Syndication Agent and as a Lender
By: /s/ Victor Bulzacchelli
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Name: Victor Bulzacchelli
Title: Vice President
THIRD AMENDMENT AND SECOND WAIVER, dated as of
September 28, 2005 to and under the CREDIT
AGREEMENT, dated as of March 31, 2004, as
amended, among HOME INTERIORS & GIFTS, INC., a
Texas corporation, the several banks and other
financial institutions from time to time
parties thereto (the "Lenders"), BEAR STEARNS
CORPORATE LENDING INC., as syndication agent
and JPMORGAN CHASE BANK, N.A. (formerly known
as JPMorgan Chase Bank), as administrative
agent for the Lenders.
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[NAME OF LENDER]
By:
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Name:
Title:
Annex A
to the Third Amendment and Second Waiver
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ACKNOWLEDGEMENT AND CONSENT
Dated as of September 28, 2005
Each of the undersigned, in its capacity as a Guarantor under the
Guarantee and Collateral Agreement, does hereby (a) consent, acknowledge and
agree to the transactions described in the foregoing Amendment and Waiver and
(b) after giving effect to such Amendment and Waiver, (i) confirms, reaffirms
and restates the representations and warranties made by it in each Loan Document
to which it is a party, (ii) ratifies and confirms each Security Document to
which it is a party and (iii) confirms and agrees that each such Security
Document is, and shall continue to be, in full force and effect, with the
Collateral described therein securing, and continuing to secure, the payment of
all obligations of the undersigned referred to therein; provided that each
reference to the Credit Agreement therein and in each of the other Loan
Documents shall be deemed to be a reference to the Credit Agreement after giving
effect to such Amendment and Waiver.
DWC GP, INC.
HOME INTERIORS DE PUERTO RICO, INC.
SPRING VALLEY SCENTS, INC.
EM BOEHM, INC.
HOMCO, INC.
GIA, INC.
By:
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Name:
Title:
DOMISTYLE, INC.
By:
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Name:
Title:
HIG INVESTMENTS, INC.
By:
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Name:
Title:
DALLAS WOODCRAFT COMPANY, LP.
By: DWC GP, Inc., its general partner
By:
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Name:
Title:
LAREDO CANDLE COMPANY, LP.
By: Spring Valley Scents, Inc.,
its general partner
By:
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Name:
Title: