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EXHIBIT 10.26
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (hereinafter, this
"AGREEMENT") is made this 26th day of February, 2001 by and among:
FLEET NATIONAL BANK, FORMERLY KNOWN AS BANKBOSTON, N.A.
(hereinafter, the "LENDER"), a bank organized under the laws of the
United States of America, having an office located at 100 Federal
Street, Boston, Massachusetts; and
DIEDRICH COFFEE, INC., a Delaware corporation, and its
Subsidiaries, COFFEE PEOPLE WORLDWIDE, INC., a Delaware corporation,
COFFEE PEOPLE, INC., an Oregon corporation, GLORIA JEAN'S, INC., a
Delaware corporation, EDGLO ENTERPRISES, INC., an Illinois corporation,
GLORIA JEAN'S GOURMET COFFEES CORP., an Illinois corporation, and GLORIA
JEAN'S GOURMET COFFEES FRANCHISING CORP., an Illinois corporation.
Hereinafter, each of the foregoing entities shall be referred to
collectively, jointly and severally as the "BORROWERS".
BACKGROUND
Reference is hereby made to a certain loan arrangement (hereinafter, the
"LOAN ARRANGEMENT") entered into among the Lender and the Borrowers, evidenced
by, among other things, the following documents, instruments, and agreements
(hereinafter, together with this Agreement and all documents, instruments, and
agreements executed incidental hereto, and contemplated hereby, collectively the
"LOAN DOCUMENTS") (Reference to the "Lender" in Paragraphs 1-7 below refers to
BankBoston, N.A.):
1. Revolving Note (hereinafter, the "REVOLVING NOTE") dated July
7, 1999 in the maximum principal amount of $3,000,000.00 made by the
Borrowers payable to the Lender;
2. Term Note (hereinafter, the "TERM NOTE") dated July 7, 1999 in
the original principal amount of $12,000,000.00 made by the Borrowers
payable to the Lender;
3. Credit Agreement dated July 7, 1999, entered into among the
Lender and the Borrowers, as amended by a certain First Amendment to
Credit Agreement dated September 26, 2000 entered into among the Lender
and the Borrowers (hereinafter, as amended from time to time, the
"CREDIT AGREEMENT");
4. Security Agreement (hereinafter, the "SECURITY AGREEMENT")
dated July 7, 1999 pursuant to which each of the Borrowers granted the
Lender a security interest in the Collateral (as defined in the Security
Agreement);
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5. Trademark Security Agreement (hereinafter, the "TRADEMARK
SECURITY AGREEMENT") dated July 7, 1999 pursuant to which each of the
Borrowers granted the Lender a security interest in the Collateral (as
defined in the Trademark Security Agreement);
6. Securities Pledge Agreement (hereinafter, the "PLEDGE
AGREEMENT") dated July 7, 1999 pursuant to which each of the Borrowers
granted the Lender a security interest in the Ownership Interests (as
defined in the Pledge Agreement); and
7. Letter Agreements dated June 27, 2000 and August 17, 2000
pursuant to which certain provisions of the Credit Agreement were
amended and the Lender agreed to forbear from exercising its rights and
remedies.
Capitalized terms used herein and not otherwise defined shall have the
meanings as set forth in the Credit Agreement.
The Borrowers have advised the Lender that the Borrowers intend to
complete an Equity Issuance with Westcliff Capital Management, LLC (among other
investors), and have represented that the proceeds shall be in the amount of
$6,000,000, with transaction costs of not more than $400,000. The Borrowers have
requested that the Lender amend certain terms and conditions of the Credit
Agreement to provide that the Borrowers shall be entitled to retain up to
$2,000,000 from the proceeds of the contemplated Equity Issuance. The Lender has
agreed to do so, BUT ONLY upon the terms and conditions set forth herein.
Accordingly, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed by and among
the Lender and the Borrowers, as follows:
ACKNOWLEDGMENT OF INDEBTEDNESS
1. The Borrowers each hereby acknowledge and agree that, in accordance
with the terms and conditions of (i) the Loan Documents, (ii) this Agreement,
and (iii) all documents, instruments, and agreements executed incidental to, and
contemplated by, this Agreement, the Borrowers are jointly and severally liable
to the Lender as of February 26, 2001, as follows:
(a) Revolving Note:
(i) Principal: $0.00
(ii) Interest: $0.00
(b) Legal Fees & Expenses
(Pursuant to Paragraph 5 hereof): $1,440.00
(c) LC Exposure Amount: $209,696.00
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(d) Term Note:
(i) Principal: $9,767,000.00
(ii) Interest: $73,193.28
TOTAL $10,051,329.28
(e) All interest accruing from and after February 26, 2001 under the
Revolving Note, and the Term Note, respectively, and all late fees,
reasonable costs, expenses, and costs of collection (including
reasonable attorneys' fees and the allocated costs of the Lender's
in-house counsel) incurred by the Lender from and after February
26, 2001 in connection the Loan Documents, including, without
limitation, all reasonable attorney's fees and expenses incurred in
connection with the negotiation and preparation of this Agreement
and all documents, instruments, and agreements incidental hereto.
(f) Hereinafter all amounts due as set forth in this Paragraph 1, and
elsewhere payable under this Agreement, shall be referred to
collectively as the "OBLIGATIONS".
WAIVER OF CLAIMS
2. The Borrowers each hereby acknowledge and agree that they have no
offsets, defenses, claims, or counterclaims against the Lender or the Lender's
officers, directors, employees, attorneys, representatives, predecessors,
successors, and assigns with respect to the Obligations, or otherwise, and that
if any of the Borrowers now have, or ever did have, any offsets, defenses,
claims, or counterclaims against the Lender or the Lender's officers, directors,
employees, attorneys, representatives, predecessors, successors, and assigns,
whether known or unknown, at law or in equity, from the beginning of the world
through this date and through the time of execution of this Agreement, all of
them are hereby expressly WAIVED, and the Borrowers each hereby RELEASE the
Lender and the Lender's officers, directors, employees, attorneys,
representatives, predecessors, successors, and assigns from any liability
therefor.
RATIFICATION OF LOAN DOCUMENTS; FURTHER ASSURANCES
3. The Borrowers:
(a) Hereby ratify, confirm, and reaffirm all and singular the terms and
conditions of the Loan Documents each as a Borrower thereunder. The
Borrowers further acknowledge and agree that except as specifically
modified in this Agreement, all terms and conditions of those
documents, instruments, and agreements shall remain in full force
and effect; and
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(b) Shall, from and after the execution of this Agreement, execute and
deliver to the Lender whatever additional documents, instruments,
and agreements that the Lender reasonably may require in order to
vest or perfect the Loan Documents and the collateral granted
therein more securely in the Lender and to otherwise give effect to
the terms and conditions of this Agreement.
AMENDMENTS TO CREDIT AGREEMENT
4. From and after the execution of this Agreement, the Credit
Agreement shall be amended as follows:
(a) Section 1 of the Credit Agreement is hereby amended by inserting
the following defined term directly below the definition of
"Transaction Documents" on page 15 of the Credit Agreement:
WESTCLIFF CAPITAL EQUITY ISSUANCE: THE SALE BY THE PARENT OF
8,000,000 SHARES OF COMMON CAPITAL STOCK OF THE PARENT, AND
ISSUANCE OF WARRANTS TO PURCHASE AN ADDITIONAL 2,000,000 SHARES OF
COMMON CAPITAL STOCK, TO WESTCLIFF CAPITAL MANAGEMENT, LLC AND
OTHER INVESTORS FOR CONSIDERATION IN THE AMOUNT OF SIX MILLION
DOLLARS ($6,000,000).
(b) Section 2.7(c) of the Credit Agreement is hereby amended by
deleting same in its entirety and substituting the following
therefor:
(c) MANDATORY PAYMENTS IN CONNECTION WITH DEBT OR EQUITY
ISSUANCES. IF AT ANY TIME ANY PORTION OF THE TERM LOAN IS
OUTSTANDING, THE BORROWERS SHALL:
(i) IMMEDIATELY, UPON RECEIPT OF ANY BORROWER OR ANY OF
ITS SUBSIDIARIES OF ANY NET DEBT/EQUITY PROCEEDS IN EXCESS OF
$2,000,000 IN THE AGGREGATE (THE "WESTCLIFF NET EQUITY
PROCEEDS") RECEIVED IN CONNECTION WITH OR ARISING OUT OF THE
WESTCLIFF CAPITAL EQUITY ISSUANCE, PAY THE LENDER THE AMOUNT
OF SUCH WESTCLIFF NET EQUITY PROCEEDS, PROVIDED, HOWEVER, THAT
SUCH PAYMENT SHALL BE IN THE AMOUNT OF NOT LESS THAN
$3,600,000; AND
(ii) NOT LATER THAN 30 DAYS FOLLOWING THE RECEIPT BY ANY
BORROWER OF ANY OF ITS SUBSIDIARIES OF ANY NET/DEBT EQUITY
PROCEEDS IN EXCESS OF $1,000,000 IN THE AGGREGATE RECEIVED IN
CONNECTION WITH OR ARISING OUT OF ANY DEBT ISSUANCES AND
EQUITY ISSUANCES (WITH THE EXCEPTION OF THE WESTCLIFF CAPITAL
EQUITY ISSUANCE) OF ALL COMPANIES IN ANY FISCAL YEAR, PAY TO
THE LENDER THE AMOUNT OF SUCH NET DEBT/EQUITY PROCEEDS.
EACH SUCH PAYMENT MADE TO THE LENDER PURSUANT TO THIS
PARAGRAPH 2.7(c)(i) AND (ii), INCLUDING, WITHOUT LIMITATION, THE
PAYMENT OF THE WESTCLIFF NET EQUITY PROCEEDS, SHALL BE REFERRED
TO HEREIN AS A "DEBT/EQUITY PROCEEDS PAYMENT").
COSTS/EXPENSES
5. The Borrowers shall pay to the Lender:
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(a) On or before the execution of this Agreement the sum of $1,440.00
in reimbursement for reasonable costs, expenses, and costs of
collection (including reasonable attorneys' fees and expenses)
incurred by the Lender from February 20, 2001 through and including
February 25, 2001, in connection with the protection, preservation,
and enforcement by the Lender of its rights and remedies under the
Loan Documents, including, without limitation, the negotiation and
preparation of this Agreement;
(b) On demand for any and all other reasonable costs, expenses, and
costs of collection (including reasonable attorneys' fees and
expenses) incurred by the Lender in connection with the protection,
preservation, and enforcement by the Lender of its rights and
remedies under the Loan Documents, including, without limitation,
reimbursement of all costs and expenses for all attorneys' fees and
expenses incurred by the Lender prior to February 20, 2001 and/or
after February 25, 2001.
WAIVERS
6. NON-INTERFERENCE. From and after the occurrence of any Event of
Default, the Borrowers agree not to interfere with the exercise by the Lender of
any of its rights and remedies. The Borrowers further agree that they shall not
seek to distrain or otherwise hinder, delay, or impair the Lender's efforts to
realize upon any of the collateral granted to the Lender under the Loan
Documents, or otherwise to enforce the Lender's rights and remedies pursuant to
the Loan Documents. This provision shall be specifically enforceable by the
Lender.
7. AUTOMATIC STAY. The Borrowers hereby expressly assent to any motion
filed by the Lender seeking relief from the automatic stay in connection with
any Petition for Relief filed by or against any one or more of the Borrowers
under the United States Bankruptcy Code.
8. JURY TRIAL. THE BORROWERS AND THE LENDER MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY COURSE OF CONDUCT, COURSE OF
DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY,
INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS, OR ACTIONS OF THE LENDER RELATING TO THE ADMINISTRATION OF THE LOANS
OR ENFORCEMENT OF THE LOAN DOCUMENTS, AND AGREE THAT NEITHER PARTY WILL SEEK TO
CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, THE BORROWERS HEREBY
WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN,
OR IN ADDITION TO, ACTUAL
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DAMAGES. THE BORROWERS CERTIFY THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE
LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDER WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR THE LENDER TO ENTER INTO THIS AGREEMENT.
ENTIRE AGREEMENT
9. This Agreement shall be binding upon the Borrowers and the Borrowers'
respective employees, representatives, successors, and assigns, and shall inure
to the benefit of the Lender and the Lender's successors and assigns. This
Agreement and all documents, instruments, and agreements executed in connection
herewith incorporate all of the discussions and negotiations between the
Borrowers and the Lender, either expressed or implied, concerning the matters
included herein and in such other documents, instruments and agreements, any
statute, custom, or usage to the contrary notwithstanding. No such discussions
or negotiations shall limit, modify, or otherwise affect the provisions hereof.
No modification, amendment, or waiver of any provision of this Agreement, or any
provision of any other document, instrument, or agreement between the Borrowers
and the Lender shall be effective unless executed in writing by the party to be
charged with such modification, amendment, or waiver, and if such party be the
Lender, then by a duly authorized officer thereof.
CONSTRUCTION OF AGREEMENT
10. In connection with the interpretation of this Agreement and all
other documents, instruments, and agreements incidental hereto:
(a) All rights and obligations hereunder and thereunder, including
matters of construction, validity, and performance, shall be
governed by and construed in accordance with the law of the
Commonwealth of Massachusetts and are intended to take effect as
sealed instruments.
(b) The captions of this Agreement are for convenience purposes only,
and shall not be used in construing the intent of the Lender and
the Borrowers under this Agreement.
(c) In the event of any inconsistency between the provisions of this
Agreement and any other document, instrument, or agreement entered
into by and between the Lender and the Borrowers, the provisions of
this Agreement shall govern and control.
(d) The Lender and the Borrowers have prepared this Agreement and all
documents, instruments, and agreements incidental hereto with the
aid and assistance of their respective counsel. Accordingly, all of
them shall be deemed to have been
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drafted by the Lender and the Borrowers and shall not be construed
against either the Lender or the Borrowers.
ILLEGALITY OR UNENFORCEABILITY
11. Any determination that any provision or application of this
Agreement is invalid, illegal, or unenforceable in any respect, or in any
instance, shall not affect the validity, legality, or enforceability of any such
provision in any other instance, or the validity, legality, or enforceability of
any other provision of this Agreement.
INFORMED EXECUTION
12. The Borrowers warrant and represent to the Lender that the
Borrowers:
(a) Have read and understand all of the terms and conditions of this
Agreement;
(b) Intend to be bound by the terms and conditions of this Agreement;
(c) Are executing this Agreement freely and voluntarily, without
duress, after consultation with independent counsel of their own
selection; and
(d) Acknowledge and agree that the modifications provided to the
Borrowers by the Lender pursuant to this Agreement constitute a
fair and reasonable time frame within which all Obligations are to
be paid in full.
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IN WITNESS WHEREOF, this Second Amendment to Credit Agreement has been
executed this 26th day of February 2001.
FLEET NATIONAL BANK DIEDRICH COFFEE, INC.
By: /s/ Anthony D. Healy By: /s/ Matthew C. McGuinness
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Title: Vice President Title: Sr. Vice President/CFO
COFFEE PEOPLE WORLDWIDE, INC.
By: /s/ Matthew C. McGuinness
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Title: Sr. Vice President/CFO
COFFEE PEOPLE, INC.
By: /s/ Matthew C. McGuinness
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Title: Sr. Vice President/CFO
GLORIA JEAN'S, INC.
By: /s/ Matthew C. McGuinness
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Title: Sr. Vice President/CFO
EDGLO ENTERPRISES, INC.
By: /s/ Matthew C. McGuinness
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Title: Sr. Vice President/CFO
GLORIA JEAN'S GOURMET COFFEES
CORP.
By: /s/ Matthew C. McGuinness
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Title: Sr. Vice President/CFO
GLORIA JEAN'S GOURMET COFFEES
FRANCHISING CORP.
By: /s/ Matthew C. McGuinness
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Title: Sr. Vice President/CFO
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