Exhibit 10.37
THIRD AMENDMENT TO CREDIT AGREEMENT
To Each of the Lenders Signatory Hereto
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of
January 31, 1997, as amended (the "CREDIT AGREEMENT"), between the undersigned,
HA-LO Industries, Inc., an Illinois corporation (the "COMPANY"), American
National Bank and Trust Company of Chicago, as agent for the Lenders (the
"AGENT"), and you (the "LENDERS"). All capitalized terms used herein without
definition shall have the same meanings herein as such terms have in the Credit
Agreement.
The Company has requested that the Lenders, among other things,
increase the Revolving Credit Commitments and extend the Termination Date, and
the Lenders are willing to do so on the terms and conditions set forth in this
agreement (herein, the "AMENDMENT").
1. AMENDMENTS.
Subject to the satisfaction of the conditions precedent set forth in
Section 2 below, the Credit Agreement shall be amended as follows:
(a) Section 1.3(b) of the Credit Agreement shall be amended
by deleting the first sentence thereof and inserting in its place the
following sentence:
"At any time before the Termination Date, the Agent shall, at
the request of the Company, issue one or more Letters of
Credit to or for the account of the Company in a form
satisfactory to the Agent, with expiration dates no later than
the Termination Date then in effect, in an aggregate face
amount as set forth above, upon the receipt of an application
for the relevant Letter of Credit in the form then customarily
prescribed by the Agent duly executed by the Company (each an
"APPLICATION")."
(b) Section 3.1 of the Credit Agreement shall be amended by
deleting the first sentence thereof and inserting in its place the
following sentences:
"For the period from the date hereof to but not including the
Termination Date, the Company shall pay to the Agent for the
account of the Lenders in accordance with their Percentage a
commitment fee for each day at the rate per annum equal to the
Commitment Fee Rate in effect on such day on the daily unused
amount of the Revolving Credit Commitments hereunder.
Notwithstanding anything contained in this Agreement to the
contrary, for the purposes of calculating the commitment fee
hereunder, the undrawn face amount of any commercial Letter of
Credit outstanding hereunder shall not be considered usage of
the Revolving Credit Commitments.
(c) Section 3.4 of the Credit Agreement shall be amended by
deleting the date "January 31, 1997" appearing therein and inserting
the date "February 18, 1999" in its place.
(d) Section 5.5 of the Credit Agreement shall be amended by
deleting the dates "December 31, 1995" and "September 30, 1996"
appearing therein and inserting in their places the dates "December 31,
1997" and "September 30, 1998, respectively.
(e) The Credit Agreement shall be amended by inserting the
following new Section 5.15 at the end of Section 5.14:
"SECTION 5.15. YEAR 2000. The Company has made a full and
complete assessment of the Year 2000 Issues and has a
realistic and achievable program for remediating the Year 2000
Issues on a timely basis (the "YEAR 2000 Program"). Based on
such assessment and on the Year 2000 Program the Company does
not reasonably anticipate that Year 2000 Issues will have a
Material Adverse Effect.
(f) Section 7.5(e) of the Credit Agreement shall be amended
by deleting the "." at the end thereof and inserting in its place the
following clause:
"or of any other development, financial or otherwise
(including, without limitation, developments with respect to
Year 2000 Issues) which would reasonably be expected to have a
Material Adverse Effect."
(g) Sections 7.7, 7.8, 7.9 and 7.10 of the Credit Agreement
shall be amended in their entirety to read as follows:
"SECTION 7.7. [RESERVED].
SECTION 7.8. TANGIBLE NET WORTH. The Company shall, at all
times, maintain Tangible Net Worth of not less than the sum of
(a) $180,000,000 plus (b) 50% of Net Income for each fiscal
year of the Company ending after February 26, 1999 (commencing
with the fiscal year ending December 31, 1999) for which such
Net Income is a positive amount (i.e., there shall be no
reduction to the amount of Tangible Net Worth required to be
maintained
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hereunder for any fiscal year in which Net Income is less
than zero).
SECTION 7.9. FUNDED DEBT/EBITDA RATIO. As of the last day
of each fiscal quarter of the Company, the Company shall
maintain the Funded Debt/EBITDA Ratio for the four fiscal
quarters of the Company then ended of not more than 3.25 to
1.0.
SECTION 7.10. FIXED CHARGE COVERAGE RATIO. As of the last
day of each fiscal quarter of the Company, the Company shall
maintain a Fixed Charge Coverage Ratio of not less than 3.0 to
1.0."
(h) The Credit Agreement shall be amended by inserting the
following new Section 7.20 at the end of Section 7.19:
"SECTION 7.20. YEAR 2000. The Company will take and will
cause each of its Subsidiaries to take all such actions as are
reasonably necessary to successfully implement the Year 2000
Program and to assure that Year 2000 Issues will not have a
Material Adverse Effect. At the request of the Agent or any
Lender, the Company will provide a description of the Year
2000 Program, together with any updates or progress reports
with respect thereto."
(i) Sections 8.1(a) of the Credit Agreement shall be amended
in its entirety to read as follows:
"(a) default in the payment when due of all or any part of
the principal of any Note (whether at the stated maturity
thereof or at any other time provided for in this Agreement)
or of any Reimbursement Obligation or default for a period of
5 days in the payment when due of all or any part of the
interest on any Note (whether at the stated maturity thereof
or at any other time provided for in this Agreement) or any
fee or other Obligation payable hereunder or under any other
Loan Document;"
(j) Section 9.1 of the Credit Agreement shall be amended by
deleting the definitions of "APPLICABLE MARGIN", "FIXED CHARGES" and
"TERMINATION DATE" appearing therein and inserting the following
definitions in a proper alphabetical order:
""APPLICABLE MARGIN" means, with respect to LIBOR
Portions, .50% per annum until the first Pricing Date, and
thereafter from one Pricing Date to the next, the Applicable
Margin with respect to LIBOR Portions shall mean a rate per
annum determined in accordance with the following schedule:
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FUNDED DEBT/EBITDA RATIO APPLICABLE MARGIN
FOR SUCH PRICING DATE SHALL BE
Greater than 2.5 to 1.0 1.50%
Equal to or less than 2.5 to 1.0, but 1.25%
greater than 2.0 to 1.0
Equal to or less than 2.0 to 1.0, but 1.00%
greater than 1.5 to 1.0
Equal to or less than 1.5 to 1.0 but greater .75%
than 1.0 to 1.0
Equal to or less than 1.0 to 1.0 but greater .625%
than 0.5 to 1.0
Equal to or less than 0.5 to 1.0 .50%
For purposes hereof, the term "PRICING DATE" means, for any
fiscal quarter of the Company ended after the date hereof, 15
days after the date the Agent is in receipt of the Company's
most recent financial statements for the fiscal quarter then
ended, pursuant to Section 7.5(a) or (b) hereof. The
Applicable Margin established on a Pricing Date shall remain
in effect until the next Pricing Date. If the Company has not
delivered its financial statements by the date such financial
statements (and, in the case of the year-end financial
statements, audit report) are required to be delivered under
Section 7.5(a) and (b) hereof, until such financial statements
and audit report are delivered, the Applicable Margin for
LIBOR Portions shall be 1.50%. If the Company subsequently
delivers such financial statements before the next Pricing
Date, the Applicable Margin established by such late delivered
financial statements shall take effect from the date of
delivery until the next Pricing Date. In all other
circumstances, the Applicable Margin established by such
financial statements shall be in effect from the Pricing Date
that occurs immediately after the end of the Company's fiscal
quarter covered by such financial statements until the next
Pricing Date. Each determination of the Applicable Margin made
by the Agent in accordance with the foregoing shall be
conclusive and binding on the Company and the Lenders if
reasonably determined."
""COMMITMENT FEE RATE" means, for each day, .20% per annum
until the first Pricing Date, and thereafter from one Pricing
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Date to the next, the Commitment Fee Rate shall mean a rate
per annum determined in accordance with the following
schedule:
FUNDED DEBT/EBITDA RATIO COMMITMENT FEE RATE
FOR SUCH PRICING DATE SHALL BE
Greater than 2.5 to 1.0 .30%
Equal to or less than 2.5 to 1.0, but .25%
greater than 2.0 to 1.0
Equal to or less than 2.0 to 1.0, but .225%
greater than 1.5 to 1.0
Equal to or less than 1.5 to 1.0 but greater .225%
than 1.0 to 1.0
Equal to or less than 1.0 to 1.0 but greater .20%
than 0.5 to 1.0
Equal to or less than 0.5 to 1.0 .20%
For purposes hereof, the term "PRICING DATE" means, for any
fiscal quarter of the Company ended after the date hereof, 15
days after the date the Agent is in receipt of the Company's
most recent financial statements for the fiscal quarter then
ended, pursuant to Section 7.5(a) or (b) hereof. The
Commitment Fee Rate established on a Pricing Date shall remain
in effect until the next Pricing Date. If the Company has not
delivered its financial statements by the date such financial
statements (and, in the case of the year-end financial
statements, audit report) are required to be delivered under
Section 7.5(a) and (b) hereof, until such financial statements
and audit report are delivered, the Commitment Fee Rate shall
be .30%. If the Company subsequently delivers such financial
statements before the next Pricing Date, the Commitment Fee
Rate established by such late delivered financial statements
shall take effect from the date of delivery until the next
Pricing Date. In all other circumstances, the Commitment Fee
Rate established by such financial statements shall be in
effect from the Pricing Date that occurs immediately after the
end of the Company's fiscal quarter covered by such financial
statements until the next Pricing Date. Each determination of
the Commitment Fee Rate made by the Agent in accordance with
the foregoing shall be conclusive and binding on the Company
and the Lenders if reasonably determined."
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""FIXED CHARGE COVERAGE RATIO" means, as of the last day
of the most recently completed fiscal quarter of the Company
for the four fiscal quarters of the Company then ended, the
ratio of (x) the sum of (i) Net Income for such period plus
(ii) Interest Expense for such period plus (iii) federal,
state and local income taxes for such period plus (iv)
operating lease expense for such period to (y) the sum of (i)
Interest Expense for such period plus (ii) operating lease
expense for such period."
""TERMINATION DATE" means February 25, 2000, or such
earlier date on which the Revolving Credit Commitments are
terminated in whole pursuant to Sections 3.6, 8.2 or 8.3
hereof, or such later date to which the Revolving Credit
Commitments are extended pursuant to Section 11.11 hereof."
""YEAR 2000 ISSUES" means anticipated costs, problems and
uncertainties associated with the inability of certain
computer applications to effectively handle data including
dates on and after January 1, 2000, as such inability affects
the business, operations and financial condition of the
Company and its Subsidiaries and of the Company's and its
Subsidiaries material customers, suppliers and vendors."
""YEAR 2000 PROGRAM" is defined in Section 5.15 hereof."
(k) Section 11.11 of the Credit Agreement shall be amended in
its entirety to read as follows:
"SECTION 11.11. EXTENSION OF THE REVOLVING CREDIT
COMMITMENTS. The Company shall have the option to request
extensions to the Termination Date pursuant to this Section
11.11. No earlier than 45 days prior to, but no later than 40
days prior to, the Termination Date then in effect, the
Company may advise the Agent in writing of the Company's
desire to extend the Termination Date for an additional 364
day period and the Agent shall promptly notify the Lenders of
each such request. If the Company makes any such request, each
Lender agrees to notify the Company and the Agent no earlier
than 30 days prior to, but no later than 25 days prior to, the
Termination Date then in effect stating whether such Lender is
declining or consenting to any such request, or consenting to
such request subject to specified terms and conditions. In the
event that a Lender fails to so notify the Agent and the
Company during such period, such Lender shall be deemed to
have refused the requested extension. In the event that each
Lender is agreeable to such extension (it being understood
that the Lenders may accept or decline such a request in their
sole
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discretion and on such terms as they may elect), the Company
and the Lenders shall enter into such documents as the Agent
may reasonably deem necessary or appropriate to reflect such
extension, and all actual out-of-pocket costs and expenses
incurred by the Agent in connection therewith (including
reasonable attorneys' fees) shall be paid by the Company."
(l) The signature pages to the Credit Agreement shall be
amended by (i) deleting the amount "$22,500,000" appearing under the
caption "Revolving Credit Commitment" opposite American National Bank
and Trust Company of Chicago's signature and inserting in its place the
amount "$37,500,000", (ii) deleting the amount "$15,576,923" appearing
under the caption "Revolving Credit Commitment" opposite ▇▇▇▇▇▇ Trust
and Savings Bank's signature and inserting in its place the amount
"$25,000,000", (iii) deleting the amount "$6,923,077" appearing under
the caption "Revolving Credit Commitment" opposite Comerica Bank's
signature and inserting in its place the amount "$12,500,000" and (iv)
deleting the amounts "$10,000,000", "$6,923,077" and "$3,076,923"
appearing under the caption "Term Loan Commitment" opposite signatures
of American National Bank and Trust Company of Chicago, ▇▇▇▇▇▇ Trust
and Savings Bank and Comerica Bank, respectively and inserting in their
places the amount "$0".
(m) Schedule 5.2 of the Credit Agreement shall be amended in
its entirety to read as Exhibit B attached hereto.
(n) Schedule I to Exhibit D of the Credit Agreement shall be
amended in its entirety to read as Schedule I attached to this
Amendment.
2. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of
all of the following conditions precedent:
2.1 The Company, the Agent and the Lenders shall have
executed and delivered this Amendment.
2.2 The Company shall have executed and delivered to each of
the Lenders a Revolving Credit Note in the form of Exhibit A to the
Credit Agreement payable to the order of such Lender in the principal
amount of its Revolving Credit Commitment in effect after giving effect
to this Amendment.
2.3 Each Subsidiary of the Company party to the Guaranties
shall have executed and delivered the Guarantor's Acknowledgment in the
form attached hereto as Exhibit A and each of Promotional Marketing
LLC, ▇▇▇▇▇▇ Associates, Inc., Premier Promotional Marketing, Inc. and
▇▇▇ ▇▇▇▇▇ Corporation shall have executed and delivered the Assumption
and Supplement to Guaranty Agreement.
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2.4 The Agent shall have received, in form and substance
satisfactory to the Lenders (a) corporate resolutions of the Company
and the Subsidiaries of the Company executing the Assumption and
Supplement to Guaranty Agreement and (b) an opinion of counsel to the
Company and such Subsidiaries.
2.5 The Company shall have paid in full to the Lenders
through the Agent the Term Loans and interest thereon, together with,
if any, all amounts required under Section 2.8 of the Credit Agreement.
2.6 The Agent and the Lenders shall have received information
satisfactory to the Agent and the Lenders regarding the Company's Year
2000 Program.
3. REPRESENTATIONS.
In order to induce the Lenders to execute and deliver this Amendment,
the Company hereby represents to the Lenders that as of the date hereof the
representations and warranties set forth in Section 5 of the Credit Agreement
are and shall be and remain true and correct (except that the representations
contained in Section 5.5 shall be deemed to refer to the most recent financial
statements of the Company delivered to the Lenders) and the Company is in
compliance with all of the terms and conditions of the Credit Agreement and no
Default or Event of Default has occurred and is continuing under the Credit
Agreement or shall result after giving effect to this Amendment.
4. EQUALIZATION.
Anything contained in the Credit Agreement or in this Amendment to the
contrary notwithstanding, upon satisfactory completion of the conditions
precedent to the effectiveness of this Amendment as set forth above, there shall
be such purchases and sales of interests in the Revolving Loans, if any then
outstanding, as shall be necessary so that after giving effect thereto each
Lender holds its ratable share of the total of the Revolving Loans then
outstanding in accordance with its Percentage of the Revolving Credit
Commitments.
5. MISCELLANEOUS.
5.1 Except as specifically amended herein, the Credit Agreement shall
continue in full force and effect in accordance with its original terms.
Reference to this specific Amendment need not be made in the Credit Agreement,
the Notes, or any other instrument or document executed in connection therewith,
or in any certificate, letter or communication issued or made pursuant to or
with respect to the Credit Agreement, any reference in any of such items to the
Credit Agreement being sufficient to refer to the Credit Agreement as amended
hereby.
5.2 The Company agrees to pay on demand all costs and expenses of or
incurred by the Agent in connection with the negotiation, preparation, execution
and delivery of this Amendment, including the fees and expenses of counsel for
the Agent.
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5.3 This Amendment may be executed in any number of counterparts, and
by the different parties on different counterpart signature pages, all of which
taken together shall constitute one and the same agreement. Any of the parties
hereto may execute this Amendment by signing any such counterpart and each of
such counterparts shall for all purposes be deemed to be an original. This
Amendment shall be governed by the internal laws of the State of Illinois.
Dated as of March 1, 1999.
HA-LO INDUSTRIES, INC.
By
Name
-----------------------------
Title
----------------------------
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Accepted and agreed to as of the date and year last above written.
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, individually and as
Agent
By
Name
-------------------------------------
Title
------------------------------------
▇▇▇▇▇▇ TRUST AND SAVINGS BANK
By
Name
-------------------------------------
Title
------------------------------------
COMERICA BANK
By
Name
-------------------------------------
Title
------------------------------------
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EXHIBIT A
GUARANTOR'S ACKNOWLEDGMENT
Each of the undersigned has heretofore executed in favor of American
National Bank and Trust Company of Chicago, as Agent for American National Bank
and Trust Company of Chicago, ▇▇▇▇▇▇ Trust and Savings Bank and Comerica Bank
(the "LENDERS") a Guaranty Agreement dated January 31, 1997 and hereby
acknowledges and consents to the amendment of the Credit Agreement dated as of
January 31, 1997 (the "CREDIT AGREEMENT") among Ha-Lo Industries, Inc. (the
"COMPANY") and the Lenders pursuant to the Third Amendment to Credit Agreement
dated as of March 1, 1999 (the "THIRD AMENDMENT") among the Company and the
Lenders. Each of the undersigned confirms that the Guaranty Agreement and all of
its obligations thereunder remain in full force and effect and, without limiting
the foregoing, acknowledges and agrees that all of the Company's indebtedness,
obligations and liabilities to the Lenders, under the Credit Agreement, as
amended by the Third Amendment, constitutes "indebtedness hereby guaranteed"
under the Guaranty Agreement. Each of the undersigned further agrees that its
consent to any further amendments to the Credit Agreement shall not be required
as a result of this consent having been obtained, except to the extent, if any,
required by the Guaranty Agreement referred to above.
Dated as of March 1, 1999.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & WHITE, INC.
By
Its
-----------------------------------
HA-LO SPORTS, INC.
By
Its
-----------------------------------
MARKET U.S.A., INC.
By
Its
-----------------------------------
CREATIVE CONCEPTS IN ADVERTISING, INC.
By
Its
-----------------------------------
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EXHIBIT B
THIRD AMENDMENT TO CREDIT AGREEMENT
SCHEDULE 5.2
SUBSIDIARIES
JURISDICTION OF INCORPORATION/
ORGANIZATION PERCENTAGE
NAME OWNERSHIP
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & White, Inc. Illinois 100%
HA-LO Sports, Inc. Illinois 100%
Market U.S.A., Inc. Illinois 100%
Creative Concepts in Advertising, Inc. Michigan 100%
Creadis Group, Inc. Ontario 100%
▇▇▇▇▇▇ Marketing, Inc. Ontario 100%
Promotional Marketing LLC (d.b.a. UPSHOT) Illinois 100%
▇▇▇▇▇▇ Associates, Inc. Ohio 100%
Premier Promotional Marketing, Inc. California 100%
▇▇▇ ▇▇▇▇▇ Corporation Illinois 100%
SCHEDULE I
COMPLIANCE CALCULATIONS
FOR JANUARY 31, 1997 CREDIT AGREEMENT
CALCULATIONS AS OF _____________, ____
A. TANGIBLE NET WORTH (SECTION 7.8)
1. Stockholders Equity $___________
2. Sum of:
(i) intangible assets $___________
(ii) write-up of assets $___________
(iii) sample inventory $___________
3. Line A1 minus A2 $___________
(Tangible Net Worth)
4. Line A3 must not be less than $___________
5. The Company is in compliance (circle yes or no) yes/no
B. FUNDED DEBT/EBITDA RATIO (SECTION 7.9)
1. Total Funded Debt $___________
2. EBITDA $___________
3. Ratio of Line B1 to Line B2 ___: 1.0
4. Line B3 Ratio must not be more than 3.25: 1.0
5. The Company is in compliance (circle yes or no) yes/no
C. FIXED CHARGE COVERAGE RATIO (SECTION 7.10)
1. Net Income for past 4 quarters $________
2. Interest Expense for past 4 quarters $________
3. Federal, state and local income tax expense for past 4 quarters $________
4. Operating lease expense for past 4 quarters $________
5. Sum of Lines C1, C2, C3 and C4 $________
6. Sum of Lines C3 and C4 $________
7. Ratio of Line C5 to Line C6 ______:1.0
8. Line C7 ratio must not to be less than 3.0:1.0
9. The Company is in compliance (circle yes or no) Yes/No
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