EXHIBIT 10.13
WAIVER AGREEMENT AND
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS WAIVER AGREEMENT AND FIRST AMENDMENT TO CREDIT AGREEMENT (this "First
Amendment") is dated as of the 31st day of January 1997, and entered into among
MICHAELS STORES, INC., a Delaware corporation ("Company"), the Lenders signatory
hereto, NATIONSBANK OF TEXAS, N.A., a national banking association, individually
and as Administrative Lender (in such latter capacity, the "Administrative
Lender"), and BANK OF AMERICA ILLINOIS, a national banking association,
individually and as Co-Agent.
WITNESSETH:
WHEREAS, Company, the Lenders, and the Administrative Lender entered into a
Second Amended and Restated Credit Agreement, effective as of June 20, 1996 (as
amended, restated, waived or otherwise modified from time to time, the "Credit
Agreement");
WHEREAS, Company, the Lenders, and the Administrative Lender entered into a
Limited and Conditional Waiver Letter to certain terms of the Credit Agreement
dated November 14, 1996 (the "Waiver Agreement");
WHEREAS, Company has requested a waiver of compliance with certain
provisions of the Credit Agreement and an amendment to certain provisions of the
Credit Agreement, and the Lenders and the Administrative Lender have agreed to
such a waiver and amendment upon the terms and conditions set forth below; and
WHEREAS, the Lenders, the Administrative Lender, and Company have agreed to
amend the Credit Agreement to make certain changes to the terms therein upon the
terms and conditions set forth below;
NOW, THEREFORE, for valuable consideration hereby acknowledged, Company,
the Lenders and the Administrative Lender agree as follows:
SECTION 1. DEFINITIONS. Unless specifically defined or redefined below,
capitalized terms used herein shall have the meanings ascribed thereto in the
Credit Agreement.
SECTION 2. AMENDMENTS TO SECTION 1.01, CERTAIN DEFINITIONS.
(a) The definition of "ELIGIBLE INVENTORY" on page 8 of the Credit
Agreement is hereby deleted and the following definition of "ELIGIBLE
INVENTORY" is hereby substituted in its stead:
"ELIGIBLE INVENTORY" means at any date the lesser of
the actual cost or the current fair market value of
inventory of Company and its Guarantors on such date
determined in accordance with GAAP, provided that such
inventory shall constitute Eligible Inventory only if on the
date as of which the determination is being made it (i)
shall not be damaged or obsolete, (ii) shall not have
exceeded its normal shelf life, and (iii) shall not be
subject to any Lien, except Permitted Liens. Eligible
Inventory will include the face amount of Commercial Letters
of Credit outstanding in support of the purchase of Eligible
Inventory, but shall not include any inventory of Company or
any Guarantors which is subject to a security interest
securing any indebtedness of Company or such Guarantor.
(b) The definition of "GUARANTORS" on page 11 of the Credit Agreement
is hereby deleted and the following definition of "GUARANTORS" is hereby
substituted in its stead:
"GUARANTORS" means at any date, each Subsidiary that
executes a Guaranty of the Obligations which such Guaranty
is effective and enforceable against such Subsidiary, and
"GUARANTOR" means any one of the Guarantors.
SECTION 3. AMENDMENT TO SECTION 6.15, GUARANTIES OF THE SUBSIDIARIES.
Section 6.15 on page 46 of the Credit Agreement is hereby deleted in its
entirety and the following Section 6.15 is hereby substituted in its stead:
Section 6.15 GUARANTIES OF THE SUBSIDIARIES. Each
existing and future Subsidiary except ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc.
and its subsidiaries and successors, Michaels of Canada,
Inc., Michaels of Puerto Rico, Inc., 5931, Inc., 5931
Business Trust, Michaels International Finance, Inc. and
Riverside Craft & Floral Supply Co., Inc. shall have
executed and delivered to Administrative Lender a duly
completed Guaranty in the form of EXHIBIT D attached hereto.
On the date that any such Subsidiary delivers any such
Guaranty, such Subsidiary shall deliver to the
Administrative Lender together therewith:
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(i) certificate or articles of incorporation of such
Subsidiary certified as of a recent date by the Secretary of
State of the state of such Subsidiary's incorporation;
(ii) bylaws of such Subsidiary certified by the secretary or
assistant secretary of such Subsidiary;
(iii) recent certificates of the appropriate government
officials of the state of incorporation of such Subsidiary and
any other state in which such Subsidiary conducts business as to
the existence and good standing of such Subsidiary in such state;
(iv) resolutions of the Board of Directors of such
Subsidiary certified by its secretary or assistant secretary,
which resolutions shall authorize the execution, delivery and
performance by such Subsidiary of the Guaranty; and
(v) a certificate of incumbency certified by the
secretary or assistant secretary of such Subsidiary with
specimen signatures of the president or vice president and
secretary or other officers of such Subsidiary who will sign
the Guaranty and any other Loan Papers to which such
Subsidiary is a party.
SECTION 4. AMENDMENT TO SUBSECTION 7.01(d), TANGIBLE ASSETS OF
SUBSIDIARIES THAT ARE NOT GUARANTORS. Subsection 7.01(d) on page 48 of the
Credit Agreement is hereby deleted in its entirety and the following
subsection 7.01(d) is hereby substituted in its stead:
(d) INTENTIONALLY DELETED.
SECTION 5. AMENDMENT TO SUBSECTION 7.02(b). Subsection 7.02(b) on page 48
of the Credit Agreement is hereby deleted in its entirety and the following
subsection 7.02(b) is hereby substituted in its stead:
(b) Company, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. (and its
subsidiaries and successors), Michaels of Canada, Inc. and
Michaels of Puerto Rico, Inc. may incur or permit to exist
accounts payable and accrued liabilities incurred in the
ordinary course of business, and each of the Subsidiaries
except 5931, Inc. and 5931 Business Trust may incur or
permit to exist accounts payable to the Company related to
the Company's transfer of inventory to each Subsidiary in
the ordinary course of business, and
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SECTION 6. AMENDMENT TO SECTION 7.07, SUBSIDIARIES. Section 7.07 on page
53 of the Credit Agreement is hereby deleted in its entirety and the following
Section 7.07 is hereby substituted in its stead:
Section 7.07 SUBSIDIARIES. Company will not (a)
(directly or indirectly) create or acquire, in any manner
whatsoever, any new Subsidiaries; provided, however, that
Company or any Subsidiary may create or acquire
Subsidiaries, so long as (i) there exists no Default or
Event of Default at the time of each creation or after
giving effect thereto; (ii) each new United States
Subsidiary shall execute a Guaranty of the Obligations
hereunder, other than any new Subsidiaries of ▇▇▇▇▇
▇▇▇▇▇▇▇▇, Inc.; (iii) Company and each new United States
Subsidiary shall execute and deliver such other
certificates, agreements and documents as Administrative
Lender or any Lender may reasonably require, other than any
new Subsidiaries of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc.; and (iv) no United
States Subsidiary shall issue any new stock, of any
classification, without Lenders' prior written consent,
except issuance to Company or any Subsidiary, and (b) permit
intercompany transactions among the Company and the
Guarantors with Subsidiaries that are not Guarantors, other
than (i) as specifically permitted in Section 7.09 hereof
and (ii) as disclosed on SCHEDULE 7.07 hereto. 5931, Inc.
and 5931 Business Trust shall enter into a full
subordination agreement for the benefit of the
Administrative Lender and the Lenders subordinating all
amounts owed by the Company or any Guarantor to 5931, Inc.
and/or 5931 Business Trust, to the Obligations hereunder and
the Guaranties, on terms and conditions, and subject to
documentation acceptable to the Majority Lenders.
SECTION 7. AMENDMENT TO SUBSECTION 7.09(a)(vi). Subsection 7.09(a)(vi) on
page 54 of the Credit Agreement is hereby deleted in its entirety and the
following Subsection 7.09(a)(vi) is hereby substituted in its stead:
(vi) invest in Subsidiaries that are not Guarantors (A) in connection
with the transfer of inventory to such Subsidiary (except 5931, Inc.
and 5931 Business Trust) in the ordinary course of business and (B) in
connection with (I) invoices representing obligations incurred and
(II) payments required under operating leases, each in the ordinary
course of business and paid by Company to Persons on behalf of such
Subsidiaries; or
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SECTION 8. AMENDMENT TO SUBSECTION 8.01(m), TANGIBLE ASSETS OF
SUBSIDIARIES THAT ARE NOT GUARANTORS. Subsection 8.01(m) on page 59 of the
Credit Agreement is hereby deleted in its entirety and the following
Subsection 8.01(m) is hereby substituted in its stead:
(m) INTENTIONALLY DELETED.
SECTION 9. LIMITED AND CONDITIONAL WAIVER.
(a) The Company has informed the Lenders that the Company is in breach of
Section 5.03, due to financial covenant defaults under the Tax Retention Leases,
and Section 7.01(b) of the Credit Agreement (the "Subject Non-Compliance"). The
Company has requested from the Lenders a limited waiver of (a) any Default or
Event of Default caused by the Subject Non-Compliance, for the period from
October 27, 1996 through and including ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇) any breach of
Sections 4.02(a), (b) and (c) of the Credit Agreement due to the Subject
Non-Compliance, but only to permit $10,000,000 in the aggregate to be advanced
by the Lenders to the Company during the period from November 5, 1996 through
and including November 30, 1996, in accordance with the terms of each other
provision of the Credit Agreement and (c) any breach of Sections 4.03(a), (b)
and (c) of the Credit Agreement due to the Subject Non-Compliance, but only to
permit the issuance of Letters of Credit in accordance with the terms of the
Credit Agreement from the date hereof through and including March 15, 1997;
provided that the aggregate of all borrowings advanced by the Lenders and
Letters of Credit issued during the period from November 5, 1996 through and
including March 15, 1997 shall not exceed $10,000,000 (collectively, the
"Limited Conditional Waiver").
(b) Subject to the terms and conditions of this First Amendment, the
Lenders agree to waive (a) any Default or Event of Default caused by the Subject
Non-Compliance only during the period from October 27, 1996 through and
including March 15, 1997, and (b) compliance with Sections 4.02(a), (b) and (c)
and Sections 4.03(a), (b) and (c) with respect to the Subject Non-Compliance
only, but, with respect to this subsection (b) only, for the sole purpose of
allowing the Company to (i) borrow in accordance with all other terms of the
Credit Agreement a maximum of $10,000,000 from the period from November 5, 1996
through and including November 30, 1996, and (ii) obtain Letters of Credit in
accordance with the terms of the Credit Agreement from the date hereof through
and including March 15, 1997; provided that, in each case set forth above, the
aggregate of all borrowings advanced by the Lenders and Letters of Credit issued
during the period from November 5, 1996 through and including March 15, 1997
shall not exceed $10,000,000 (the "Permitted Borrowings") and provided further
that, only documentary Letters of Credit may be obtained and only if the Company
certifies to the Administrative Lender along with each application for such
Letter of Credit as to the amount of cash the Company has on hand in its deposit
accounts as of the date of such application. This Limited Conditional Waiver is
NOT a waiver of any other breach of any other term or provision of the Credit
Agreement or any other Loan Paper. This Limited Conditional Waiver is solely
for the time periods stated above, and shall not be extended or used for any
other purpose.
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(c) Notwithstanding anything herein to the contrary, if there exists a
Default or Event of Default (that is not a result of the Subject Non-Compliance)
or any other event or circumstance which would not permit the Company to borrow
under the Credit Agreement under the terms of Section 4.02 of the Credit
Agreement or otherwise (other than any caused by the Subject Non-Compliance),
the Permitted Borrowings may not, and no other borrowings may, be made under the
Credit Agreement.
(d) In connection with the limited waiver set forth above, and
notwithstanding anything in the Credit Agreement or in any Loan Paper to the
contrary:
(i) effective on the date hereof, for every determination and
calculation under the Credit Agreement and the Loan Papers, the Applicable
Margin means with respect to (i) Eurodollar Rate Borrowings and Stand-By
Letters of Credit, 1.50% per annum, (ii) Commercial Letters of Credit,
0.38% per annum, and (iii) the Commitment Fee, 0.35% per annum. This
provision shall supersede the definition of "Applicable Margin" on page 2
of the Credit Agreement in its entirety; and
(ii) any voluntary or mandatory repayment or prepayment of all or any
portion of the Obligations may not be reborrowed by the Company. No
continuation or conversion under Section 2.22 of the Credit Agreement shall
constitute a repayment or prepayment for purposes of this provision. Under
no circumstances shall the Company be entitled to borrow additional
Advances under the Credit Agreement during the period from November 5, 1996
through and including November 30, 1996 aggregating in excess of an amount
equal to (i) $10,000,000 minus (ii) the sum of the face amount of all
Letters of Credit issued during such period. In no event shall the Company
be entitled to any borrowing in the form of Advances of any type under the
Credit Agreement and the Loan Papers after November 30, 1996 (except
documentary Letters of Credit in accordance with the terms hereof until
March 15, 1997).
(e) The effectiveness of this Limited Conditional Waiver is conditioned
upon the receipt by the Company of a comparable waiver under each Tax Retention
Lease by January 31, 1997.
(f) This Limited Conditional Waiver is intended by the parties to be
narrowly construed. This Limited Conditional Waiver expires in accordance with
its terms on March 15, 1997.
SECTION 10. AFFIRMATION. Company hereby acknowledges and agrees that
nothing in this First Amendment shall affect Company's obligations under the
Credit Agreement or the other Loan Papers executed in connection therewith
(except as specifically provided in this First Amendment), which remain valid,
binding and enforceable, and except as amended hereby, unamended, or shall
constitute a waiver by the Lenders of any of their rights or remedies (except as
specifically provided in this First Amendment), now or at any time in the
future, with respect
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to any requirement under the Credit Agreement or the other Loan Papers or
with respect to an Event of Default or Default, occurring now or at any time
in the future.
SECTION 11. CONDITIONS PRECEDENT. This First Amendment shall not be
effective until (a) all proceedings of Company taken in connection with this
First Amendment and the transactions contemplated hereby shall be satisfactory
in form and substance to the Administrative Lender and Lenders signatory hereto,
(b) the Company has delivered the waivers required by Section 9(e) hereof, and
(c) the Administrative Lender and Lenders shall have each received such
documents, instruments, and certificates, in form and substance satisfactory to
the Lenders, as the Lenders shall deem necessary or appropriate in connection
with this First Amendment and the transactions contemplated hereby.
SECTION 12. REPRESENTATIONS AND WARRANTIES. Company represents and
warrants to the Lenders and the Administrative Lender that (a) this First
Amendment constitutes its legal, valid, and binding obligations, enforceable in
accordance with the terms hereof (subject as to enforcement of remedies to any
applicable bankruptcy, reorganization, moratorium, or other laws or principles
of equity affecting the enforcement of creditors' rights generally), (b) there
exists no Event of Default or Default under the Credit Agreement after giving
effect to this First Amendment, except as described in Section 9 hereof, (c) its
representations and warranties set forth in the Credit Agreement and other Loan
Papers are true and correct on the date hereof after giving effect to this First
Amendment, (d) it has complied with all agreements and conditions to be complied
with by it under the Credit Agreement as amended hereby and the other Loan
Papers by the date hereof, except as indicated in Section 9 hereof, (e) the
Credit Agreement, as amended hereby, and the other Loan Papers remain in full
force and effect, and (f) no notice to, or consent of, any Person is required
under the terms of any agreement of Company in connection with the execution of
this First Amendment, except as required by Section 9(e) hereof.
SECTION 13. FURTHER ASSURANCES. Within 15 days after the date hereof, the
Company shall have delivered a subordination agreement in form and substance
acceptable to the Administrative Lender and Majority Lenders fully subordinating
all receivables owed by the Company and the Guarantors to 5931, Inc. and/or 5931
Business Trust to the Obligations and the Guaranties, in form and substance, and
subject to documentation, acceptable to the Majority Lenders. Company shall
execute and deliver such further agreements, documents, instruments, and
certificates in form and substance satisfactory to the Administrative Lender, as
the Administrative Lender or any Lender may deem reasonably necessary or
appropriate in connection with this First Amendment.
SECTION 14. COUNTERPARTS. This First Amendment and the other Loan Papers
may be executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument. In making proof of any such agreement,
it shall not be necessary to produce or account for any counterpart other than
one signed by the party against which enforcement is sought.
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SECTION 15. PRIOR WAIVER; ENTIRE AGREEMENT. THIS FIRST AMENDMENT
SUPERSEDES IN ITS ENTIRETY THAT CERTAIN LIMITED AND CONDITIONAL WAIVER LETTER
DATED NOVEMBER 14, 1996, FROM THE LENDERS TO COMPANY. THIS FIRST AMENDMENT AND
THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
SECTION 16. GOVERNING LAW. (a) THIS FIRST AMENDMENT AND ALL LOAN PAPERS
SHALL BE DEEMED CONTRACTS MADE UNDER THE LAWS OF TEXAS AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF TEXAS, EXCEPT TO THE
EXTENT FEDERAL LAWS GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND
INTERPRETATION OF ALL OR ANY PART OF THIS FIRST AMENDMENT AND ALL LOAN PAPERS.
WITHOUT EXCLUDING ANY OTHER JURISDICTION, COMPANY AND EACH SUBSIDIARY AGREES
THAT THE COURTS OF TEXAS WILL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION
HEREWITH.
(b) COMPANY AND EACH SUBSIDIARY HEREBY WAIVES PERSONAL SERVICE OF ANY
LEGAL PROCESS UPON IT. IN ADDITION, COMPANY AND EACH SUBSIDIARY AGREES THAT
SERVICE OF PROCESS MAY BE MADE UPON IT BY REGISTERED MAIL (RETURN RECEIPT
REQUESTED) DIRECTED TO COMPANY AT ITS ADDRESS DESIGNATED FOR NOTICE UNDER THE
CREDIT AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON
RECEIPT BY COMPANY. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE
ADMINISTRATIVE LENDER OR ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.
SECTION 17. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
COMPANY, EACH SUBSIDIARY AND EACH LENDER HEREBY WAIVES ANY RIGHT THAT IT MAY
HAVE TO A TRIAL BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN TORT, CONTRACT,
EQUITY, OR OTHERWISE) ARISING UNDER OR RELATING TO THIS FIRST AMENDMENT, THE
OTHER LOAN PAPERS, OR ANY RELATED MATTERS, AND AGREES THAT ANY SUCH DISPUTE
SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
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IN WITNESS WHEREOF, this First Amendment to Credit Agreement is executed as
of the date first set forth above.
COMPANY: MICHAELS STORES, INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: Vice President of Finance
LENDERS: NATIONSBANK OF TEXAS N.A., as Administrative
Lender, and individually as a Lender
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Vice President
BANK OF AMERICA ILLINOIS, as Co-Agent,
and individually as a Lender
/s/ J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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By: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Its: Senior Vice President
CREDIT LYONNAIS NEW YORK BRANCH, as
a Lender
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its: Senior Vice President
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▇▇▇▇▇ FARGO BANK (TEXAS), N.A., as
a Lender
/s/ ▇▇▇▇ ▇. ▇▇▇▇
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By: ▇▇▇▇ ▇. ▇▇▇▇
Its: Vice President
MELLON BANK, N.A., as a Lender
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By:
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Its:
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UNITED STATES NATIONAL BANK OF
OREGON, as a Lender
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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By: ▇▇▇▇▇▇ ▇▇▇▇▇
Its: Assistant Vice President
THE FIRST NATIONAL BANK OF BOSTON, as
a Lender
/s/ ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇
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By: ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇
Its: Vice President
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