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EXHIBIT 10.38
FIRST AMENDMENT
TO PARTICIPATION AGREEMENT
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT (this
"Amendment"), dated as of December 21, 1998, is entered into among: (a) Dreyer's
Grand Ice Cream, Inc., a Delaware corporation ("Dreyer's"), and Edy's Grand Ice
Cream, a California corporation ("Edy's"), as Lessees (collectively, the
"Lessees"); (b) BA Leasing & Capital Corporation, a California corporation, not
in its individual capacity except to the extent expressly set forth herein, but
solely in its capacity as Agent for the Participants from time to time
hereunder, as Lessor (the "Agent"), and (c) the several Participants listed on
the signature pages hereto (together with their respective permitted successors,
assigns and transferees, collectively, the "Participants").
WHEREAS, Lessees, Agent and the Participants are parties to that certain
Participation Agreement, dated as of March 29, 1996 (the "Participation
Agreement"). Capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in Schedule X to the Participation
Agreement;
WHEREAS, simultaneously with execution of the Participation Agreement,
Lessees and the Agent, as lessor, entered into a Master Lease Intended as
Security (the "Lease") and the other Operative Documents;
WHEREAS, Dreyer's, certain financial institutions party thereto
(collectively, the "Banks"), Bank of America National Trust and Savings
Association ("BofA"), as agent for the Banks, ABN-AMRO Bank N.V., San Francisco
International Branch, as co-agent, entered into that certain Credit Agreement,
dated as of December 22, 1995 (such Credit Agreement, as amended as of April 15,
1996, December 26, 1997, March 27, 1998 and November 3, 1998, is referred to
herein as the "Revolving Credit Facility"), pursuant to which BofA and the Banks
have extended certain credit facilities to Dreyer's;
WHEREAS, the Participation Agreement incorporates by reference the
Financial Covenants set forth in the Revolving Credit Facility and certain
definitions set forth in Schedule X to the Participation Agreement; and
WHEREAS, the parties hereto desire to enter into this Amendment in order
to amend Schedule X to the Participation Agreement and to confirm certain
amendments recently made to the Revolving Credit Facility.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
terms and conditions herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
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i. Modifications to Schedule X to Participation Agreement. The
parties hereto amend Schedule X to the Participation Agreement as follows, and
all references to "Schedule X" or "Schedule X to the Participation Agreement" or
"Schedule X hereto" shall hereinafter refer to Schedule X as amended hereby:
(a) The following definition is hereby added to Schedule X to the
Participation Agreement in the proper alphabetical order:
"Adjusted EBITDA" of Dreyer's means Dreyer's EBITDA computed on a rolling four
quarter basis, adding back amounts related to non-recurring charges taken in the
third and fourth quarter of 1998, not to exceed $70,000,000 (collectively, the
"Add-back Charges"). An amount of $13,000,000 of Add-back Charges shall be added
back in the calculation of Adjusted EBITDA for the third quarter of 1998, an
amount equal to the total Add-back Charges shall be added back for the fourth
quarter of 1998 and the first, second, and third quarter of 1999 calculations of
Adjusted EBITDA, with no amounts added back for the fourth quarter of 1999 and
thereafter. For the avoidance of doubt, it is understood and agreed that in each
calculation of Adjusted EBITDA, the aggregate Add-back Charges added back for
such calculation shall not exceed an aggregate amount of $70,000,000.
(b) The definition of "Base Rate" is deleted in its entirety and
replaced with the following:
"Base Rate" means, for the initial Rent Period, the Reference Rate, and for each
Rent Period thereafter with respect to the Lease Balance and each Supplement
Balance, the higher of (a) 0.50% per annum above the Federal Funds Rate for such
day and (b) the rate of interest in effect for such day as publicly announced
from time to time by Bank of America National Trust and Savings Association
("BofA") in San Francisco, California, as its "Reference Rate." The "Reference
Rate" is a rate set by BofA based upon various factors including BofA'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 the Reference Rate announced by BofA
shall take effect at the opening of business on the day specified in the public
announcement of such change.
(c) The following definition is hereby added to Schedule X to the
Participation Agreement in the proper alphabetical order:
"Funded Debt/Adjusted EBITDA Ratio" of any Person means the ratio of such
Person's Funded Debt to its Adjusted EBITDA.
(d) The definition of "Interest Rate" is deleted in its entirety
and replaced with the following:
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"Interest Rate" means (a) for the initial Rent Period, the Reference Rate (as
defined in the definition of "Base Rate" set forth above), (b) for the second
Rent Period, the rate per annum equal to the sum of the LIBO Rate for such Rent
Period plus 1.250%, (c) for each Rent Period thereafter until December 28, 1998,
the rate per annum equal to the sum of the LIBO Rate for such Rent Period plus
the percentage set forth below opposite Dreyer's Funded Debt/EBITDA Ratio as of
the most recently ended fiscal quarter reported prior to the commencement of
such Rent Period:
Ratio Percentage
----- ----------
Below 2.50 0.500%
2.50 or greater but less than 3.0 0.625%
3.0 or greater but less than 3.5 0.750%
3.5 or greater but less than 4.0 0.875%
4.0 or greater but less than 4.5 1.000%
4.5 or greater 1.250%;
and (d) for each Rent Period after December 28, 1998, the rate per annum equal
to the sum of the LIBO Rate for such Rent Period plus the percentage set forth
below opposite Dreyer's Funded Debt/Adjusted EBITDA Ratio as of the most
recently ended fiscal quarter reported prior to the commencement of such Rent
Period:
Ratio Percentage
----- ----------
Below 2.50 0.750%
2.50 or greater but less than 3.0 0.875%
3.0 or greater but less than 3.5 1.000%
3.5 or greater but less than 4.0 1.125%
4.0 or greater but less than 4.25 1.375%
4.25 or greater but less than 5.00 2.000%
5.00 or greater but less than 5.50 2.250%
5.50 or greater 2.750%
(e) The definition of "Revolving Credit Facility" is deleted in
its entirety and replaced with the following:
"Revolving Credit Facility" shall mean that certain Credit
Agreement dated as of December 22, 1995, among Dreyer's, the Banks listed
therein, Bank of America National Trust and Savings Association, as Agent, and
ABN Amro Bank N.V., as Co-Agent, as amended as of April 15, 1996, December 26,
1997, March 27, 1998, November 3, 1998, and as the same may be further amended,
restated, replaced, refinanced, supplemented, waived and otherwise in effect
from time to time, including any similar successor agreement or agreements or
arrangement or arrangements providing for revolving or working capital
indebtedness, whether or not secured; provided that if at any time there shall
exist no such arrangement or agreement, the term "Revolving Credit Facility"
shall
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be deemed to refer to the last such agreement or arrangement to have been in
effect, exclusive of any modification to the terms of such agreement or
arrangement that were made in contemplation of the termination thereof.
ii. Inducing Representations. As an inducement to the Agent and
the Participants to execute and deliver this Amendment, the Lessees represent
and warrant that (i) immediately before and after giving effect to this
Amendment, no default under the Revolving Credit Facility, the Lease or any of
the Operative Documents shall have occurred and be continuing and (ii) it has
full corporate power and authority to execute, deliver and perform its
obligations under this Amendment; its execution, delivery and performance of
this Amendment have been duly authorized by all necessary actions to be taken;
and this Amendment constitutes its legal, valid and binding obligation,
enforceable against it in accordance with the terms hereof, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights generally
and by general principles of equity.
iii. Effectiveness. This Amendment shall be effective as of
December 28, 1998 (the "Effective Date") provided that each of the following
conditions precedent is satisfied on or before the date set forth in the
preamble to this Amendment:
(a). The Agent has received from each of the Lessees and the
Participants a duly executed original (or, if elected by the Agent, an
executed facsimile copy) of this Amendment;
(b). The Agent has received from each of the Lessees a copy of
the resolution passed by the board of directors of such corporation,
certified by the Secretary or an Assistant Secretary of such corporation
as being in full force and effect, authorizing the execution, delivery
and performance of this Amendment; and
(c). The payment by the Lessees of all expenses incurred by the
Agent and the Lessors (including the fees and expenses of Mayer, Brown &
Platt, counsel to the Agent and the Participants and allocated costs of
internal counsel to the Agent) incurred in connection herewith.
iv. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD
TO THE CHOICE OF LAW PROVISIONS THEREOF.
v. Counterparts. This Amendment may be executed in any number
of counterparts and by different parties hereto on separate counterparts, each
executed counterpart constituting an original but all together one agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered as of the date first above written.
DREYER'S: DREYER'S GRAND ICE CREAM, INC.,
as Lessee
By: /s/ William C. Collett
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Name Printed: William C. Collett
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Title: Treasurer
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EDY'S: EDY'S GRAND ICE CREAM,
as Lessee
By: /s/ William C. Collett
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Name Printed: William C. Collett
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Title: Treasurer
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LESSOR: BA LEASING & CAPITAL CORPORATION,
not individually except as set forth herein, but
solely in its capacity as Agent
By: /s/ Christine Lee
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Name Printed: Christine Lee
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Title: Vice President
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PARTICIPANTS: BA LEASING & CAPITAL CORPORATION,
as Participant
By: /s/ Sonia T. Delen
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Name Printed: Sonia T. Delen
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Title: Vice President
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ABN AMRO BANK N.V.
San Francisco International Branch, as
Participant
By: /s/ Matthew Harvey
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Name Printed: Matthew Harvey
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Title: Vice President
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By: /s/ Diane D. Barkley
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Name Printed: Diane D. Barkley
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Title: Group Vice President
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CREDIT SUISSE FIRST BOSTON, formerly
Credit Suisse, as Participant
By: /s/ Thomas G. Muoio
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Name Printed: Thomas G. Muoio
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Title: Vice President
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By: /s/ William S. Lutkins
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Name Printed: William S. Lutkins
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Title: Vice President
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Reference is made to the Guarantee, dated as of March 29, 1996 (the
"Guarantee"), made by DREYER'S GRAND ICE CREAM, INC., a Delaware corporation
(the "Guarantor"), in favor of the Beneficiaries identified therein and
delivered to BA Leasing & Capital Corporation, not individually, but solely in
its capacity as Agent (the "Agent") for the Participants party to the
Participation Agreement. Guarantor hereby consents to the foregoing amendments,
and acknowledges and agrees that all references in the Guarantee to the
"Participation Agreement" or to the "Participation Agreement, dated as of March
29, 1996," will hereafter refer to such Participation Agreement, as the case may
be, as respectively amended by this First Amendment to Participation Agreement,
dated as of the date of the foregoing amendment, among the Guarantor, Edy's
Grand Ice Cream, a California corporation, the Agent and the Participants listed
on the signature pages thereto. Except as modified by this paragraph, the
Guarantee is unmodified; and, as modified by this paragraph, the Guarantee
remains in full force and effect and is hereby reaffirmed by the Guarantor.
Guarantor:
DREYER'S GRAND ICE CREAM, INC.
By: /s/ William C. Collett
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Name Printed: William C. Collett
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Title: Treasurer
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Date: December 21, 1998
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