FOURTH AMENDMENT TO CREDIT AGREEMENT
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT, dated as of December 15, 2005 (the “Fourth
Amendment”), is by and among DEI SALES, INC., a Florida corporation (f/k/a Directed
Electronics, Inc., a Florida corporation) (the “Borrower”), those Affiliates of the
Borrower identified as “Guarantors” on the signature pages hereto (the “Guarantors”), the
financial institutions party hereto (collectively, the “Lenders”; and individually, a
“Lender”), and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as
administrative agent for the Lenders (in such capacity, the “Administrative Agent”).
W I T N E S S E T H
WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties to that certain
Credit Agreement dated as of June 17, 2004 (as previously amended and modified and as amended,
modified, supplemented or restated from time to time, the “Credit Agreement”; capitalized
terms used herein shall have the meanings ascribed thereto in the Credit Agreement unless otherwise
defined herein);
WHEREAS, the Borrower has requested that the Requisite Lenders amend Section 7.18 of the
Credit Agreement to allow (i) Holdings to issue shares of its common stock in an initial public
equity offering (the “Holdings IPO”), (ii) Holdings to hold 100% of the capital stock of
DEI International, Inc., a Florida corporation (“DEI International”), and (iii) Holdings to
hold 100% of the capital stock of DEI Headquarters, Inc., a Florida corporation (“DEI
Headquarters”);
WHEREAS, the Borrower has requested that the Requisite Lenders consent to the transfer by the
Borrower of DEI Headquarters to Holdings notwithstanding the terms of Sections 7.5 and 7.7 of the
Credit Agreement, the effect of which is that DEI Headquarters will cease to be a wholly-owned
Subsidiary of the Borrower and will become a wholly-owed Subsidiary of Holdings (the “DEI
Headquarters Transfer”);
WHEREAS, the Borrower has requested that the Requisite Lenders waive the mandatory prepayment
required under Section 2.8(b)(iv) of the Credit Agreement (the “Holdings IPO Prepayment”)
in connection with the Holdings IPO so long as the Subordinated Notes are prepaid in full with the
proceeds of the Holdings IPO;
WHEREAS, the Borrower has requested that the Requisite Lenders consent to the prepayment by
Holdings and/or the Borrower in full of the Subordinated Notes with the proceeds of the Holdings
IPO notwithstanding the terms of Section 7.5 of the Credit Agreement (the “Subordinated Debt
Prepayment”);
WHEREAS, the Borrower has requested that the Requisite Lenders consent to (i) the termination
of the existing Trivest Management Agreement and the replacement thereof with a new Trivest
Advisory Agreement (the “Trivest Management Agreement Replacement”), notwithstanding the
terms of Sections 7.12 and 7.15 of the Credit Agreement and (ii) the payment to Trivest of a fee in
an amount not to exceed $3,500,000 in connection with the termination of the existing Trivest
Management Agreement (the “Trivest Fee”);
WHEREAS, the Borrower has requested that the Requisite Lenders consent to the termination of
its sale bonus agreements with various executives and its associate equity gain program (the
“Program Compensation Termination”) and to certain payments in connection with such
termination (the “Program Compensation Payments”), notwithstanding the terms of Sections
7.5 and 7.12 of the Credit Agreement;
WHEREAS, the Borrower has requested that the Requisite Lenders waive any Event of Default or
Potential Event of Default resulting from the formation of DEI International or any Subsidiary of
DEI International prior to the Fourth Amendment Effective Date in violation of Section 7.18 of the
Credit Agreement (the “Subsidiary Formation Default”);
WHEREAS, the Borrower has requested that the Requisite Lenders amend the change of control
under Section 8.11(i) and (ii) of the Credit Agreement (the “Change of Control”) in
connection with the Holdings IPO;
WHEREAS, the Borrower has requested that the Lenders permit the Holdings IPO and agree to
certain modifications to the terms of the Credit Agreement, including, but not limited to, reducing
the Applicable Percentage with respect to the Loans, Letter of Credit Fee and Commitment Fee,
replacing the existing Term Loan with a new Term Loan and eliminating the Consolidated Senior
Leverage Ratio financial covenant; and
WHEREAS, the Lenders have agreed to (i) permit the Holdings IPO so long as the proceeds of the
Holdings IPO are used (in part) to repay in full the Subordinated Notes, (ii) permit the DEI
Headquarters Transfer, (iii) waive the Holdings IPO Prepayment, (iv) consent to the Subordinated
Debt Prepayment, (v) consent to the payment of the Trivest Fee and the Trivest Management Agreement
Replacement, (vi) consent to the Program Compensation Termination and the Program Compensation
Payments, (vii) waive the Subsidiary Formation Default and (viii) amend certain other provisions of
the Credit Agreement, in each case on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the agreements hereinafter set forth, and for other good
and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties
hereto agree as follows:
SECTION 1
WAIVER AND CONSENT
1.1 Notwithstanding the terms of Section 2.8(b)(iv) and Section 7.5 of the Credit Agreement,
the Requisite Lenders hereby consent to the proceeds of the Holdings IPO being used for the
Subordinated Debt Prepayment.
2
1.2 Notwithstanding the terms of Sections 7.5, 7.7 and 7.13 of the Credit Agreement, the
Requisite Lenders hereby consent to the DEI Headquarters Transfer so long as DEI Headquarters
executes and delivers to the Administrative Agent, in connection with the DEI Headquarters
Transfer, a reaffirmation of its Obligations and its pledge of Collateral in support thereof.
1.3 Notwithstanding the terms of Sections 7.12 and 7.15 of the Credit Agreement, the Requisite
Lenders hereby consent to the Trivest Fee and the Trivest Management Agreement Replacement.
1.4 Notwithstanding the terms of Sections 7.5 and 7.12 of the Credit Agreement, the Requisite
Lenders hereby consent to (i) the Program Compensation Termination and (ii) the Program
Compensation Payments so long as the cash portion of such Program Compensation Payments do not
exceed the amounts described in Amendment No. 4 to Holdings’ Form S-1 Registration Statement filed
with the SEC on December 5, 2005.
1.5 The Requisite Lenders hereby waive the Subsidiary Formation Default.
1.6 The Requisite Lenders hereby waive the Holdings IPO Prepayment in respect of the proceeds
of the Holdings IPO so long as the Subordinated Notes are prepaid in full with the proceeds of the
Holdings IPO.
1.7 Except for the specific waivers set forth herein, nothing contained herein shall be deemed
to constitute a waiver of (i) any rights or remedies the Administrative Agent or any Lender may
have under the Credit Agreement or any other Loan Document or under applicable law or (ii) the Loan
Parties’ obligation to comply fully with any duty, term, condition, obligation or covenant
contained in the Credit Agreement and the other Loan Documents not specifically waived. The
specific waivers set forth herein are one-time waivers and shall be effective only in this specific
instance and shall not obligate the Lenders to waive any Default or Event of Default, now existing
or hereafter arising.
SECTION 2
AMENDMENTS
2.1 Amendments to Credit Agreement. Subject to the satisfaction of the closing
conditions set forth in Section 3 below, from and after the Fourth Amendment Effective Date
(defined below), the Credit Agreement is amended in its entirety to read in the form of such Credit
Agreement attached hereto as Exhibit A to this Fourth Amendment (the “Amended Credit
Agreement); provided, however, the amendments and modifications to, and the
revisions reflected in, (i) the definition of “Applicable Percentage” in the Amended Credit
Agreement shall not become effective until the later of (a) February 4, 2006, (b) the date the
Holdings IPO is consummated, and (c) the date the Subordinated Notes have been paid in full, and
(ii) the definitions of Consolidated Senior Debt and Consolidated Senior Leverage Ratio and
Sections
6.1(i), 6.1(ii), 7.6A, 7.6B and 8.11 of the Amended Credit Agreement shall not become
effective until the date the Holdings IPO is consummated.
2.2 Schedule 1.1(a). Schedule 1.1(a) of the Credit Agreement shall be deemed
replaced in its entirety by Exhibit B attached hereto.
2.3 Schedule 5.1. Schedule 5.1 of the Credit Agreement shall be deemed
replaced in its entirety by Exhibit C attached hereto.
2.4 Schedule 5.8. Schedule 5.8 of the Credit Agreement shall be deemed
replaced in its entirety by Exhibit D attached hereto.
2.5 Effect of Amendment. Except as modified hereby, all of the terms and provisions
of the Credit Agreement (including the Schedules) and the other Credit Documents remain in full
force and effect. To the extent that any conflict may exist between the provisions of this Fourth
Amendment and the provisions of the Amended Credit Agreement attached hereto as Exhibit A,
then this Fourth Agreement shall control.
SECTION 3
CLOSING CONDITIONS
3.1 Conditions Precedent. This Fourth Amendment shall become effective as of the date
hereof upon the receipt by the Administrative Agent of the following (the “Fourth Amendment
Effective Date”):
(a) Executed Agreement. Receipt by the Administrative Agent of a duly executed
signature page to this Fourth Amendment from each of Borrower, the Guarantors, and the
Administrative Agent, on behalf of the Requisite Lenders.
(b) Executed Consents. Receipt by the Administrative Agent of executed consents from
the Requisite Lenders authorizing the Administrative Agent to enter into this Fourth Amendment on
their behalf.
(c) Executed Subsidiary Guaranty. Receipt by the Administrative Agent of the
Subsidiary Guaranty duly executed by DEI International.
(d) Authority Documents.
(i) Articles of Incorporation; Partnership Agreement. Copies of the articles
of incorporation, partnership agreement, or other charter documents of each Loan Party
certified to be true and complete as of a recent date by the appropriate Governmental
Authority of the state of its organization or formation;
(ii) Resolutions. Copies of resolutions of the board of directors or other
comparable governing body of each Loan Party approving and adopting this Fourth Amendment,
the transactions contemplated herein and authorizing execution and delivery hereof,
certified by an officer of such Loan Party as of the Fourth Amendment Effective Date to be
true and correct and in force and effect as of such date;
(iii) Bylaws. A copy of the bylaws or other operating agreement of each Loan
Party certified by an officer of such Loan Party as of the Fourth Amendment Effective Date
to be true and correct and in force and effect as of such date;
(iv) Good Standing. Copies of (i) certificates of good standing, existence or
its equivalent with respect to each Loan Party certified as of a recent date by the
appropriate Governmental Authorities of the state of incorporation and each other state in
which such Loan Party is qualified to do business and (ii) to the extent readily available,
a certificate indicating payment of all corporate and other franchise taxes certified as of
a recent date by the appropriate governmental taxing authorities; and
(v) Incumbency. An incumbency certificate of each Loan Party certified by a
secretary or assistant secretary of such Loan Party to be true and correct as of the Fourth
Amendment Effective Date.
(e) Legal Opinions. The Borrower shall deliver opinions of counsel (including local
counsel opinions) in form and substance reasonably acceptable to the Administrative Agent and the
Lenders.
(f) Fees and Expenses. The Agents and the Lenders shall have received from the
Borrower the aggregate amount of fees and expenses payable in connection with the consummation of
the transactions contemplated hereby.
SECTION 4
MISCELLANEOUS
4.1 Post-Closing Covenant. Within 35 days of the Holdings IPO, the Borrower shall
deliver to the Agents satisfactory evidence that the Subordinated Notes have been paid in full.
4.2 Commitment Transfer Supplements. Each party bound hereby acknowledges and agrees
that (a) any Commitment Transfer Supplement executed in connection with the primary syndication of
the New Term Loan the consent of the Administrative Agent and (b) the registration and processing
fee, set forth in Section 10.1(e) of the Credit Agreement shall be waived with respect to any
Commitment Transfer Supplement executed in connection with the primary syndication of the New Term
Loan.
4.3 Amended Terms. The term “Credit Agreement” as used in each of the Loan Documents
shall hereafter mean the Credit Agreement as amended by this Fourth Amendment. Except as
specifically amended hereby or otherwise agreed, the Credit Agreement is hereby ratified and
confirmed and shall remain in full force and effect according to its terms.
4.4 Representations and Warranties of Credit Parties. Each of the Credit Parties
hereby represents and warrants as follows:
(a) Such Person has taken all necessary action to authorize the execution, delivery and
performance of this Fourth Amendment.
(b) This Fourth Amendment has been duly executed and delivered by such Person and constitutes
such Person’s legal, valid and binding obligations, enforceable in accordance with its terms,
except as such enforceability may be subject to (i) bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally
and (ii) general principles of equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity).
(c) No consent, approval, authorization or order of, or filing, registration or qualification
with, any court or governmental authority or third party is required in connection with the
execution, delivery or performance by such Person of this Fourth Amendment.
(d) After giving effect to this Fourth Amendment, the representations and warranties set forth
in Section 5 of the Credit Agreement are, subject to the limitations set forth therein, true and
correct in all respects as of the date hereof (except for those which expressly relate to an
earlier date).
(e) After giving effect to this Fourth Amendment, no Default or Event of Default has occurred
and is continuing.
4.5 Reaffirmation of Obligations. Each of the Loan Parties hereby acknowledges and
reaffirms their respective Obligations under the Loan Documents.
4.6 Loan Document. This Fourth Amendment shall constitute a Loan Document under the
terms of the Credit Agreement and shall be subject to the terms and conditions thereof (including,
without limitation, Sections 10.17 and 10.18 of the Credit Agreement).
4.7 Entirety. This Fourth Amendment and the other Loan Documents embody the entire
agreement between the parties hereto and supersede all prior agreements and understandings, oral or
written, if any, relating to the subject matter hereof.
4.8 Counterparts. This Fourth Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument. Delivery of executed counterparts of this Fourth
Amendment by telecopy or electronic mail shall be effective as an original and shall constitute a
representation that an original shall be delivered.
4.9 Expenses. The Borrower agrees to pay all reasonable costs and expenses of the
Administrative Agent in connection with the preparation, negotiation, execution and delivery of
this Fourth Amendment, including, without limitation, the reasonable fees and expenses of Xxxxx &
Xxx Xxxxx PLLC, and all previously incurred fees and expenses which remain outstanding on the date
hereof.
4.10 Further Assurances. The Loan Parties agree to promptly take such action, upon
the request of the Administrative Agent, as is necessary to carry out the intent of this Amendment.
4.11 GOVERNING LAW. THIS FOURTH AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
4.12 GENERAL RELEASE. IN CONSIDERATION OF THE LENDERS ENTERING INTO THIS FOURTH
AMENDMENT, THE LOAN PARTIES HEREBY RELEASE THE ADMINISTRATIVE AGENT, THE LENDERS, AND THE
ADMINISTRATIVE AGENT’S, AND THE LENDERS’ RESPECTIVE OFFICERS, EMPLOYEES, REPRESENTATIVES, AGENTS,
COUNSEL AND DIRECTORS FROM ANY AND ALL ACTIONS, CAUSES OF ACTION, CLAIMS, DEMANDS, DAMAGES AND
LIABILITIES OF WHATEVER KIND OR NATURE, IN LAW OR IN EQUITY, NOW KNOWN OR UNKNOWN, SUSPECTED OR
UNSUSPECTED TO THE EXTENT THAT ANY OF THE FOREGOING ARISES FROM ANY ACTION OR FAILURE TO ACT UNDER
THE CREDIT AGREEMENT OR UNDER THE OTHER CREDIT DOCUMENTS ON OR PRIOR TO THE DATE HEREOF.
DEI SALES, INC.
FOURTH AMENDMENT TO CREDIT AGREEMENT
FOURTH AMENDMENT TO CREDIT AGREEMENT
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Fourth
Amendment to be duly executed and delivered as of the date first above written.
| BORROWER: | DEI SALES, INC. f/k/a Directed Electronics, Inc., a Florida corporation |
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| By: | /s/ Xxxx X. Xxxxxxx | |||
| Name: Xxxx X. Xxxxxxx Title: Vice President and Chief Financial Officer |
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| GUARANTORS: | DIRECTED ELECTRONICS, INC. f/k/a DEI Holdings, Inc., a Florida corporation |
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| By: | /s/ Xxxx X. Xxxxxxx | |||
| Name: Xxxx X. Xxxxxxx Title: Vice President and Chief Financial Officer | ||||
| DEI HEADQUARTERS, INC., a Florida corporation |
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| By: | /s/ Xxxx X. Xxxxxxx | |||
| Name: Xxxx X. Xxxxxxx Title: Vice President and Chief Financial Officer |
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| DEI INTERNATIONAL, INC., a Florida corporation |
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| By: | /s/ Xxxx X. Xxxxxxx | |||
| Name: Xxxx X. Xxxxxxx Title: Vice President and Chief Financial Officer |
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DEI SALES, INC.
FOURTH AMENDMENT TO CREDIT AGREEMENT
FOURTH AMENDMENT TO CREDIT AGREEMENT
| ADMINISTRATIVE AGENT: | WACHOVIA BANK, NATIONAL ASSOCIATION, as Administrative Agent on behalf of the Lenders |
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| By: | /s/ Xxxxx X. Xxxxxxx, III | |||
| Name: Xxxxx X. Xxxxxxx, III Title: Director |
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