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EXHIBIT 10.12(ix)
FIRST AMENDMENT
TO
CREDIT AGREEMENT
This First Amendment to Credit Agreement ("Amendment") dated March
10, 1997 is entered into between CREDENTIALS SERVICES INTERNATIONAL, INC., a
Delaware corporation ("Borrower"), and LASALLE NATIONAL BANK, a national banking
association ("Lender").
Recitals:
A. Borrower and Lender are parties to a Credit Agreement dated
January 14, 1997 (as amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement").
B. Borrower has requested that Lender amend the Credit Agreement in
certain respects and Lender has agreed to enter into this Amendment on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the agreements contained herein
and in the Credit Agreement and in consideration of any loans or extensions of
credit heretofore, now or hereafter made to or for the benefit of Borrower by
Lender, Borrower and Lender agree as follows:
1. Definitions. Capitalized terms used herein without definition
shall have the meanings set forth in the Credit Agreement.
2. Amendments to the Credit Agreement. Effective as of the date
hereof and subject to the satisfaction of the conditions precedent set forth in
Section 3 below, the Credit Agreement is hereby amended as follows:
(a) The definition of "Affiliate" in Section 1.1 of the Credit
Agreement is amended by adding the following sentence at the end thereof:
"Canterbury Mezzanine Capital, L.P. shall not be deemed
an Affiliate of Borrower or any Subsidiary of Borrower solely
by virtue of its ownership of the Warrants or the shares of
common stock of Borrower issued upon exercise of the Warrants
in accordance with the terms thereof."
(b) The definition of "Asset Disposition" in Section 1.1 of the
Credit Agreement is amended to delete clause (ii) thereof.
(c) The definition of "Change of Control" in Section 1.1 of the
Credit Agreement is amended to read as follows:
""Change of Control" shall mean any event of series of events
by which either (a) Pledgors and any Subsequent Pledgor shall,
collectively, cease to own and control 100% of the outstanding
capital stock of Borrower (other than the capital stock
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subject to the Warrants), (b) the Fund shall cease to own,
directly or indirectly, beneficially or of record, at least 90%
of the issued and outstanding partnership interests of each
Pledgor owned by it on the Closing Date (without giving effect
to any issuance of options or exercise thereof pursuant to
management stock option plan to be adopted by CSI), or (c) the
Fund shall cease to own, directly or through one or more
intermediaries, at least 51% of the aggregate partnership
interests in each Pledgor."
(d) The definitions of "Common Stock Pledge Agreement," "Common
Stock Pledgor," "Preferred Stock Pledge Agreement" and "Preferred Stock Pledgor"
in Section 1.1 of the Credit Agreement are deleted in their entirety.
(e) The definition of "Net Issuance Proceeds" in Section 1.1 of
the Credit Agreement is amended to read as follows:
""Net Issuance Proceeds" shall mean, in respect of any
issuance of debt or equity, cash proceeds received in
connection therewith, net of reasonable out-of-pocket costs and
expenses paid or incurred in connection therewith in favor of
any Person not an Affiliate of Borrower; provided, however,
that the term "Net Issuance Proceeds" shall not include (a) any
proceeds in respect of the issuance of the Subordinated
Indebtedness described in clause (b) of the definition of
Subordinated Indebtedness; or (b) any proceeds in respect of
the issuance of debt or equity, or both, to the Fund or its
designee pursuant to and in accordance with the Securities
Purchase Agreement; (c) any proceeds in respect of the issuance
of equity to the Fund or its designee pursuant to and in
accordance with the Second Securities Purchase Agreement (as
defined in the Subordinated Loan Agreement dated March 10, 1997
between Canterbury Mezzanine Capital, L.P. and Borrower (the
"Canterbury Loan Agreement"); and (d) the issuance of the
Warrants and the shares of common stock of Borrower issued upon
the exercise thereof."
(f) The definition of "Pledge Agreement" in Section 1.1 of the
Credit Agreement is amended to read as follows:
""Pledge Agreements" shall mean the CIS Pledge Agreement
and the CSI Pledge Agreement."
(g) The definition of "Pledgors" in Section 1.1 of the Credit
Agreement is amended to read as follows:
""Pledgors" shall mean, collectively, CSI and CIS."
(h) The definition of "Subordinated Indebtedness" in Section
1.1 of the Credit Agreement is amended to read as follows:
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"Subordinated Indebtedness" shall mean (a) the
indebtedness of Borrower evidenced by that certain Subordinated
Promissory Note of Borrower dated October 1, 1994, payable to
TRW Inc. in the original principal amount of $3,000,000, as
amended prior to the Closing Date, as amended by Amendment No.
3 to Promissory Note dated March 10, 1997 and as amended,
restated or otherwise modified as permitted by the terms of the
TRW Subordination Agreement); (b) the indebtedness of Borrower
evidenced by that certain Subordinated Note of Borrower dated
March 10, 1997 payable to Canterbury Mezzanine Capital, L.P. in
the original principal amount of $3,000,000, as amended,
restated or otherwise modified as permitted by the terms of the
Canterbury Subordination Agreement (the "Canterbury Note"); and
(c) any other Indebtedness of Borrower or any Subsidiary of
Borrower issued on terms and conditions satisfactory to Lender
and the payment of which is subordinated in writing to the
payment of the Obligations on terms satisfactory to Lender."
(i) The definition of "Subordination Agreements" in Section 1.1
of the Credit Agreement is amended to read as follows:
""Subordination Agreements" shall mean the TRW
Subordination Agreement, the Management Fee Subordination
Agreement and the Canterbury Subordination Agreement."
(j) The following new definitions are added to Section 1.1 of
the Credit Agreement and inserted in appropriate alphabetical order:
""Canterbury Subordination Agreement" shall mean that
certain Subordination Agreement dated as of March 10, 1997
among Lender, TRW Inc., and Canterbury Mezzanine Capital, L.P.,
as amended, restated or otherwise modified and in effect from
time to time."
""CIS" shall mean CIS Acquisition Partners, L.P., a
Delaware limited partnership."
""CIS Pledge Agreement" shall mean that certain Pledge
Agreement dated as of the Closing Date made by CIS in favor of
Lender, as amended, restated or otherwise modified and in
effect from time to time."
""CSI" shall mean CSI Investment Partners II, L.P., a
Delaware limited partnership."
""CSI Pledge Agreement" shall mean that certain Amended
and Restated Pledge Agreement dated March 10, 1997 made by CSI
in favor of Lender, amending and restating the
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Preferred Stock Pledge Agreement, as amended, restated or
otherwise modified and in effect from time to time."
""Pledge Agreements" shall mean the CSI Pledge Agreement
and the CIS Pledge Agreement."
""Warrants" shall mean the warrants to purchase common
stock of Borrower issued by Borrower to Canterbury Mezzanine
Capital, L.P. pursuant to that certain Warrant Agreement dated
March 10, 1997, as in effect on the date hereof."
(k) A new Section 1.03 is added to read as follows:
"1.03 Other Definitional Provisions.
References in this Agreement to "fiscal year," and "fiscal
quarter" and "fiscal month" shall refer to such fiscal period
of Borrower. References to any fiscal year ended or ending on
September 30 of any year shall mean the fiscal year ended or
ending on or about September 30 of such year; references to any
fiscal quarter ended or ending on December 31, March 31 or June
30 of any year shall mean the fiscal quarter ended or ending on
or about December 31, March 31 or June 30 of such year and
references to any fiscal month ended or ending on the last day
of such month shall mean the fiscal month ended or ending on or
about the last day of such month."
(l) Section 6.01 of the Credit Agreement is amended to delete
the date "February 15, 1997" in line 3 thereof and inserting in lieu thereof the
date "March 15, 1997."
(m) Section 6.02(b) of the Credit Agreement is amended by
adding at the end thereof the words "and the provisions of Sections 7.16 and
7.17".
(n) Section 6.09 of the Credit Agreement is amended to read as
follows:
"Performance of Obligations. Borrower shall,
and shall cause each of its Subsidiaries to, comply with the
provisions of all contracts or agreements to which it is a
party or by which it is bound where the failure to so comply
could, individually or in the aggregate with all such other
failures, reasonably be expected to have a Material Adverse
Effect, including, without limitation, using its best efforts
to maintain adequate liquidity to process and pay all refund
requests within six weeks of receipt thereof."
(o) Section 6.14 of the Credit Agreement is amended by deleting
subsection (a) thereof.
(p) Section 7.06 of the Credit Agreement is amended to read as
follows:
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"7.06 Restricted Payments. Neither Borrower
nor any of its Subsidiaries shall declare or make any dividend
payment or other distribution of assets, properties, cash,
rights, obligations or securities on account of any shares of
any class of its capital stock or on account of any warrant to
acquire such shares, or purchase, redeem or otherwise acquire
for value any shares of its capital stock or any warrants,
rights or options to acquire such shares now or hereafter
outstanding, or any payment in respect of any Subordinated
Indebtedness which is prohibited by the terms of any applicable
Subordination Agreement, except that (a) any Wholly-Owned
Subsidiary of Borrower may declare and pay dividends to
Borrower or to any other Wholly-Owned Subsidiary of Borrower,
and (b) the Warrants may be exercised in accordance with their
terms."
(q) Section 7.07 of the Credit Agreement is amended by adding
the following words immediately after the words "Management Fee Subordination
Agreement" at the end of the first sentence thereof: "and payment of the
Management Fee in excess of $250,000 in any one Year shall be subject to the
consent of TRW Inc".
(r) Article 7 of the Credit Agreement is amended by adding a
new Section 7.16 and a new Section 7.17 at the end thereof to read as follows:
"Section 7.16 Mailings and Telemarketing
Calls. Borrower shall not make or undertake, or seek to make or
undertake, more than (i) 50,000,000 mailings and 3,600,000
telemarketing calls during the fiscal year ending September 30,
1997, (ii) 70,000,000 mailings and 5,000,00 telemarketing calls
during the fiscal year ending September 30, 1998 or (iii) an
amount for each of mailings and telemarketing calls that is 20%
greater than the amount for the preceding year in the case of
each fiscal year thereafter. In addition, neither Borrower nor
any of its Subsidiaries shall, without the prior written
consent of Lender, make or undertake more than two-thirds of
the total annual mailings and telemarketing calls (as permitted
during any fiscal year pursuant to the next preceding sentence)
during the six months ending on March 31 or September 30 of
each fiscal year of Borrower.
7.17 Discount Offers. Borrower shall not, in
any fiscal year, offer any discount of the subscription price
to be paid by any Subscriber other than such discounts to
Subscribers not exceeding 25% of the aggregate number of new
Subscribers that were not Subscribers during the immediately
preceding fiscal year."
(s) Section 8.01 of the Credit Agreement is amended to read as
follows:
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"8.01 Minimum EBITDA.
(a) Borrower shall not permit EBITDA for the
twelve month period ending on the last day of any calendar
quarter set forth below to be less than the minimum amount set
forth below opposite such fiscal quarter ending date:
Fiscal Quarter Ending Minimum EBITDA
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March 31, 1997 $2,000,000
June 30, 1997 $4,000,000
September 30, 1997 $6,500,000
December 31, 1997 and the
last day of each fiscal
quarter thereafter $7,500,000
provided, however, that for the quarters ending on each of
March 31, 1997 and June 30, 1997, the computation of EBITDA
shall be calculated on a year-to-date basis commencing with
September 30, 1996.
(b) Borrower shall not permit EBITDA (i) for
any fiscal quarter of Borrower ending March 31, June 30 or
September 30 to be less than $750,000: and (ii) for any fiscal
quarter of Borrower ending December 31 to be less than
$250,000."
(t) Section 8.03 of the Credit Agreement is amended to read as
follows:
"8.03 Debt Service Ratio.
(a) Borrower shall not permit the Debt Service
Ratio as determined as of any date set forth below to be less
than the minimum ratio set forth below opposite such date:
Twelve Months Ending Minimum Ratio
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June 30, 1997 1.10 to 1.00
September 30, 1997 1.25 to 1.00
December 31, 1997 and the 1.50 to 1.00
last day of each fiscal
quarter thereafter
provided, however, that for the quarter ending on June 30,
1997, the computation of the Debt Service Ratio shall be
calculated on a year-to-date basis commencing with September
30, 1996.
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(b) Borrower shall not permit the Debt Service
Ratio as determined as of the last day of each fiscal quarter
(i) for any fiscal quarter of Borrower ending March 31, June 30
or September 30 to be less than 1.20 to 1.00, and (ii) for any
fiscal quarter of Borrower ending December 31 to be less than
1.00 to 1.00."
(u) Section 8.05 of the Credit Agreement is amended to read as
follows:
"8.05 Capital Expenditures. Borrower shall not
expend, or commit to expend, for Capital Expenditures during
any one fiscal year on a non-cumulating basis in excess of (a)
$2,100,000 for the fiscal year ending September 30, 1997; and
(b) $200,000 for each fiscal year thereafter."
(v) Schedule 5.05(b) to the Credit Agreement is amended to read
as set forth on revised Schedule 5.05(b) attached to this Amendment.
3. Consent and Waiver. Lender hereby consents to, and waives any
default under Section 7.13 of the Credit Agreement that would otherwise be
caused by, the issuance of the Warrants, the exercise of the Warrants in
accordance with their terms and Borrower's amendment to its Certificate of
Incorporation pursuant to a Certificate of Amendment and Certificate of
Retirement and Prohibition of Reissuance of Shares, each as filed in the Office
of the Secretary of State of Delaware on March 4, 1997, true and correct copies
of which have been furnished by Borrower to Lender.
4. Conditions to Effectiveness of Amendment. This Amendment shall
become effective and be deemed effective as of the date hereof, if, and only if,
Borrower shall have received the proceeds of the Canterbury Note and Lender
shall have received each of the following:
(a) this Amendment, duly executed by Borrower and Lender;
(b) the Canterbury Subordination Agreement, duly executed by
Lender, TRW Inc. and Canterbury Mezzanine Capital, L.P.;
(c) the CSI Pledge Agreement, duly executed by CSI, together
with stock certificate representing the shares pledged thereunder with stock
powers duly executed in blank;
(d) a copy of all material documents executed and delivered by
Borrower on or prior to the date of this Amendment in connection with the
transactions contemplated by the Canterbury Loan Agreement, including, without
limitation, the Canterbury Note, the Warrant Agreement, the Stockholders
Agreement, the Management Fee Subordination Agreement, the Second Securities
Purchase Agreement and the Collateral Assignment, all as referred to in the
Canterbury Loan Agreement; and
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(e) such other documents, instruments and agreements as Lender
may reasonably request.
5. Representations and Warranties.
(a) Upon the effectiveness of this Amendment, Borrower hereby
reaffirms all covenants, representations and warranties made in the Credit
Agreement to the extent the same are not amended hereby and agrees that all such
covenants, representations and warranties shall be deemed to have been remade as
of the effective date of this Amendment (except to the extent any such
representations and warranties expressly refer to an earlier date, in which case
they shall be true and correct in all material respects as of such earlier
dates) and that, as of the effective date of this Amendment and after giving
effect hereto, no Default has occurred and is continuing.
(b) Borrower hereby represents and warrants that this Amendment
and the Credit Agreement, as previously executed and as amended hereby,
constitute legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
6. Reference to and Effect on Credit Agreement.
(a) Upon the effectiveness of this Amendment pursuant to
Section 4 hereof, on and after the date hereof, each reference in the Credit
Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of
similar import, and each reference to the Credit Agreement in any instrument or
document delivered in connection therewith, shall mean and be a reference to the
Credit Agreement as amended hereby.
(b) Except as specifically set forth herein, the Credit
Agreement, and all other documents, instruments and agreements executed or
delivered in connection therewith, shall remain in full force and effect and are
hereby ratified and confirmed.
(c) This Amendment may be executed in any number of separate
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
(d) This Amendment, together with the Credit Agreement and all
of the other Loan Documents, embodies the entire agreement and understanding of
the parties hereto and supersedes all prior agreements and understandings,
written and oral, relating to the subject matter hereof.
(e) This Amendment shall be governed by and construed in
accordance with the internal law (without regard to the conflict of laws
provisions) of the State of Illinois.
* * * * *
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IN WITNESS WHEREOF, the parties have executed this Amendment on the
date first written above.
CREDENTIALS SERVICES INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Title: Chairman
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LASALLE NATIONAL BANK
By: /s/ Andy [illegible]
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Title: Loan Officer
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