EXHIBIT 10.4
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FIRST AMENDMENT TO
CREDIT AGREEMENT
Dated as of October 3, 1997
Between
SPECIALTY CATALOG CORP.
SC CORPORATION, d/b/a SC DIRECT
SC PUBLISHING, INC.
and
BANKBOSTON, N.A.
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FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT is entered into as of October 3,
1997 by and among SPECIALTY CATALOG CORP., a Delaware corporation (the
"Company"), SC CORPORATION, a Delaware corporation d/b/a SC DIRECT ("SC
Direct"), and SC PUBLISHING, INC., a Delaware corporation ("SC Publishing")
(each a "Borrower" and collectively the "Borrowers"), and DAXBOURNE
INTERNATIONAL LIMITED, (Registered No. 3369640), a private company limited by
shares formed under the laws of England and Wales ("SC (UK)") and BANKBOSTON,
N.A. (f/k/a The First National Bank of Boston), a national banking association
(the "Bank").
Recitals
--------
The Borrowers and the Bank are parties to a Credit Agreement dated as of
March 12, 1997 as amended (the "Credit Agreement") and desire to amend the
Credit Agreement in various respects. All capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Credit Agreement.
NOW, THEREFORE, subject to the satisfaction of the conditions to
effectiveness specified in Section 12, the Borrowers and the Bank hereby amend
the Credit Agreement as follows:
Section 1. Title. The title of the Credit Agreement on the front
-----
cover, on page one and in any other instance is hereby deleted in its entirety
and a new title substituted therefor as follows:
"Credit and Guaranty Agreement"
Section 2. Definitions. Section 1.1 of the Credit Agreement is hereby
-----------
amended as follows:
(a) The definition of "Bank Agreement" is hereby deleted in its
entirety and a new definition substituted therefor as follows:
"'Bank Agreement' shall mean this Agreement, as amended, the
--------------
Revolving Credit Note, the Term Note, the Security Agreements,
the Pledge Agreements, the U.K. Credit Agreement and any other
present or future agreement from time to time entered into
between the Company or any Subsidiary and the Bank, each as
from time to time amended or supplemented, and all statements,
reports and certificates delivered by the Company or any
Subsidiary to the Bank in connection therewith."
(b) The definition of "Bank Obligations" is hereby deleted in its
entirety and a new definition substituted therefor as follows:
"'Bank Obligations' shall mean all present and future obligations
----------------
and Indebtedness of the Company and its Subsidiaries owing to the
Bank under this Agreement, the U.K. Credit Agreement or any other
Bank Agreement, including, without limitation, the obligations to
pay the Indebtedness from time to time evidenced by the Revolving
Credit Note, the Term Note, the obligations under the U.K. Credit
Agreement and obligations to pay interest, commitment fees,
balance deficiency fees, charges, expenses and indemnification
from time to time owed under any Bank Agreement."
(c) The definition of "Consolidated EBITDA" is hereby deleted in its
entirety and a new definition substituted therefor as follows:
"'Consolidated EBITDA' shall mean for any period the sum of
-------------------
(a) Consolidated Net Income plus (b) all amounts deducted in
----
computing Consolidated Net Income in respect of (i) interest
expense on Indebtedness, (ii) taxes based on or measured by
income, and (iii) depreciation and amortization expense, in each
case for the period under review; provided, however, that (A) in
-----------------
calculating EBITDA of the Borrowers for periods that include
results through the fiscal quarter ending in December, 1996, the
following assumed amounts shall be used in place of actual
amounts:
Quarter Ending Assumed EBITDA (000s)
-------------- ---------------------
September, 1996 $1,226
December, 1996 $1,998
and (B) in calculating EBITDA for the U.K. Subsidiary for periods
that include results through the fiscal quarter ending in
September, 1997, $260,000 per quarter shall be used in place of
actual amounts.
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(d) The definition of "Consolidated Operating Cash Flow" is hereby
deleted in its entirety and a new definition substituted therefor as
follows:
"'Consolidated Operating Cash Flow' shall mean (a) Consolidated
--------------------------------
EBITDA less (b) the sum of (i) Capital Expenditures plus (ii)
consolidated cash payments for taxes for the applicable period;
provided, however, in calculating Consolidated Operating Cash
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Flow for any period including any fiscal quarter ending on or
before October 3, 1998, there shall not be deducted as a Capital
Expenditure amounts expended for certain computer equipment under
the Master Lease described in Schedule 5.13(a) up to an aggregate
----------------
of $500,000."
(e) The definition of "Consolidated Total Debt Service" is hereby
deleted in its entirety and a new definition substituted therefor as
follows:
"'Consolidated Total Debt Service'shall mean for any period the
-------------------------------
sum of (a) interest expense for such period, plus (b) principal
----
payments on Indebtedness required to be made during such period;
provided, however, that with respect to periods prior to the
-----------------
Closing, Consolidated Total Debt Service shall be calculated on
the assumption that (i) there were principal payments in the
third and fourth quarter of fiscal 1996 of $250,000 and $500,000,
respectively, and principal payments in the third and fourth
quarter of fiscal 1997 of $250,000 and $500,000, respectively,
(ii) interest on the amount of indebtedness paid down at Closing
(less cash balances of $2,699,790 on hand at Closing) accrued at
a rate equal to 8.06% and (iii) interest expense for Daxbourne
and its Subsidiaries for periods prior to September 30, 1997 is
assumed to be $83,000 per quarter."
(f) New definitions of "Daxbourne", "Daxbourne Acquisition",
"Daxbourne Acquisition Documents", and "Daxbourne Disclosure Letter" shall
be added in alphabetical order, as follows:
"'Daxbourne' shall mean Daxbourne Limited (Registered No.
---------
1320298), a private company limited by shares formed under the
laws of England and Wales ("Daxbourne Limited"), together with
its wholly-owned Subsidiaries, including Postinstant Limited
(Registered No. 1559076), a private company limited by shares
formed under the laws of England and Wales ("Postinstant"), and
M.C. Hairways Limited (Registered No. 2758010), a private company
limited by shares formed under the laws of England and Wales
("M.C. Hairways")."
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"'Daxbourne Acquisition' shall mean the acquisition by SC (UK) of
---------------------
all of the assets of Daxbourne pursuant to the Daxbourne
Acquisition Documents."
"'Daxbourne Acquisition Documents' shall mean (a) the asset
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purchase agreement dated as of October 3, 1997 by and among SC
(UK), Daxbourne Limited, Postinstant and M.C. Hairways (the
"Daxbourne Asset Purchase Agreement"), (b) the Daxbourne
Disclosure Letter, and (c) all related documents and
instruments."
"'Daxbourne Disclosure Letter' shall mean that certain Disclosure
---------------------------
Letter dated October 3, 1997, from Xxxxx Xx Xxxxxxxx Xxxxxx,
solicitors for Daxbourne, addressed to [Dibb Xxxxxx Xxxxx,
solicitors acting for the Borrower in connection with the
Daxbourne Acquisition], together with the Schedules thereto and
the documents comprised in the Agreed Bundle referred to
therein."
(g) The definition of "Maximum Revolving Credit Amount" is hereby
deleted in its entirety and a new definition substituted therefor as
follows:
"'Maximum Revolving Credit Amount' shall mean as of any date of
-------------------------------
determination $6,000,000 less any U.K. Credit Reserve established
from time to time; provided that if the obligation of the Bank to
make further Revolving Credit Advances is terminated upon the
occurrence of an Event of Default, the Maximum Revolving Credit
Amount as of any date of determination thereafter shall be deemed
to be $0."
(h) The definition of "1996 Financial Statements" is hereby deleted in
its entirety and a new definition substituted therefor as follows:
"'1996 Financial Statements' shall mean (a) the Consolidated
-------------------------
Balance Sheet of the Company and its Subsidiaries as of December
28, 1996 and the related Consolidated Statements of Operations,
Stockholders' Equity (Deficit) and Cash Flows for the year then
ended and notes to such financial statements, audited by Deloitte
& Touche LLP and (b) the balance sheets of Daxbourne and each of
its Subsidiaries, as of April 30, 1997 and the related statements
of operations for each of them for the year then ended and notes
to such financial statements, audited by F.L.R. Linington FAPA,
ATII."
(i) The definition of "Pledge Agreements" is hereby deleted in its
entirety and a new definition substituted therefor as follows:
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"'Pledge Agreements' shall mean the Pledge Agreement from the
-----------------
Company to the Bank of even date herewith substantially in the
form of Exhibit D-1 hereto, as amended or supplemented from time
-----------
to time, and the Pledge Agreement from SC Corporation to the Bank
of even date herewith substantially in the form of Exhibit D-2
-----------
hereto, as amended or supplemented from time to time."
(j) The definition of "Revolving Credit Termination Date" is hereby
deleted in its entirety and a new definition substituted therefor as
follows:
"'Revolving Credit Termination Date' shall mean October 3, 2001."
---------------------------------
(k) The definition of "SC Publishing Disposition" is hereby amended by
deleting the clause "March 12, 1998" appearing in the last two lines
thereof and substituting therefor the following:
"June 30, 1998"
(l) A new definition of "SC (UK)" shall be added in alphabetical
order, as follows:
"'SC (UK)' shall mean Daxbourne International Limited,
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(Registered No. 3369640), a private company limited by shares
formed under the laws of England and Wales."
(m) The definition of "Security Agreements" is hereby deleted in its
entirety and a new definition substituted therefor as follows:
"'Security Agreements' shall mean (a) the Security Agreement from
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the Borrowers to the Bank of even date herewith substantially in
the form of Exhibit C hereto, as amended or supplemented from
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time to time, (b) the Assignment of Trademarks and Service Marks
(U.S.) from the Borrowers to the Bank of even date herewith
substantially in the form of Exhibit E hereto, as amended or
---------
supplemented from time to time, (c) the Assignment of Keyman Life
Insurance Policies from the Borrowers to the Bank of even date
herewith substantially in the form of Exhibit F hereto, as
---------
amended or supplemented from time to time, and (d) the Pledge
Agreements, as amended or supplemented from time to time."
(n) The definition of "Term Loan Maturity Date"is hereby deleted in
its entirety and a new definition substituted therefor as follows:
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"'Term Loan Maturity Date' shall mean October 3, 2001."
-----------------------
(o) A new definition of "U.K. Credit Agreement" shall be added in
alphabetical order, as follows:
"'U.K. Credit Agreement' shall mean the Credit Agreement, dated
---------------------
as of October 3, 1997, by and among SC (UK), the Company, SC
Direct, SC Publishing and the Bank."
(p) A new definition of "U.K. Subsidiary" shall be added in
alphabetical order, as follows:
"'U.K. Subsidiary' shall mean SC (UK) and any of its future
---------------
wholly-owned Subsidiaries."
Section 3. Revised Revolving Credit Note. The Bank and the Borrowers
-----------------------------
hereby agree that the Borrowers shall execute and deliver to the Bank the
Revolving Credit Note in the form of Exhibit A hereto to evidence the Revolving
---------
Credit Advances, which note, from and after the date hereof, shall be deemed to
be the Revolving Credit Note under the Credit Agreement. Accrued interest on
the Borrowers' Revolving Credit Note dated March 12, 1997 through the date
hereof shall be paid on October 3, 1997. Promptly following the execution and
delivery hereof, the Bank shall return to the Borrowers the Revolving Credit
Note dated March 12, 1997, marked paid in full and cancelled.
Section 4. Revised Term Note. The Bank and the Borrowers hereby agree
-----------------
that the Borrowers shall execute and deliver to the Bank the Term Note in the
form of Exhibit B hereto to evidence the Term Loan, which note, from and after
---------
the date hereof, shall be deemed to be the Term Note under the Credit Agreement.
Accrued interest on the Borrowers' Term Note dated March 12, 1997 through the
date hereof shall be paid on October 3, 1997. Promptly following the execution
and delivery hereof, the Bank shall return to the Borrowers the Term Note dated
March 12, 1997, marked paid in full and cancelled.
Section 5. Amendment of Article 2.
----------------------
(a) Article 2 of the Credit Agreement is hereby amended by deleting
the third sentence of Section 2.4(a) in its entirety and substituting
therefor the following:
"The principal amount of the Term Loan will be repaid in
quarterly installments, payable on the first day of each quarter
(i.e., April, July, October and January), as follows:
6
Quarterly Payment Date Amount
January 1, 1998 $ 250,000
July 1, 1998-2000 $ 250,000
October 1, 1998-2000 $ 500,000
January 1, 1999-2001 $ 500,000
July 1, 2001 $ 500,000
Term Loan Maturity Date $ 500,000
(b) Article 2 of the Credit Agreement is hereby amended by adding
Section 2.12 as follows:
"Section 2.12. Guaranty of SC (UK).
-------------------
(a) SC (UK) hereby unconditionally guaranties to the Bank the
prompt payment and performance of (a) all liabilities and
obligations and Indebtedness, direct and indirect, matured and
unmatured, primary or secondary, certain or contingent, of the
Borrowers to the Bank (including without limitation, costs and
expenses incurred by the Bank in attempting to collect or enforce
any of the foregoing), accrued in each case to the date of
payment, and (b) the performance of all other agreements,
covenants and conditions of the Borrowers with respect thereto
set forth in this Agreement and all other Bank Agreements. The
responsibilities and obligations of the Borrowers to the Bank
described in the preceding sentence are hereinafter referred to
collectively as the 'Guaranteed U.S. Obligations'. The guaranty
pursuant to this Section 2.12 is an absolute, unconditional and
continuing joint and several guarantee of the full and punctual
performance by the Borrowers of the Guaranteed U.S. Obligations
and not of collectability of the Guaranteed U.S. Obligations, and
is in no way conditioned upon any requirement that the Bank first
attempt to collect any of the Guaranteed U.S. Obligations from
the Borrowers or resort to any security or other means of
obtaining payment of any of the Guaranteed U.S. Obligations which
the Bank now has or may acquire after the date hereof, or upon
any other contingency whatsoever. Upon any default by the
Borrowers in the full and punctual payment and performance of the
Guaranteed U.S. Obligations, the liabilities and obligations of
SC (UK) hereunder shall, at the option of the Bank, become
forthwith due and payable to the Bank without demand or notice of
any nature, all of which are expressly waived by SC (UK).
Payments by SC (UK) under this Section 2.12 may be required by
the Bank on any number of occasions.
7
(b) Additionally,SC (UK) unconditionally and irrevocably
guaranties the payment of any and all of its Guaranteed U.S.
Obligations to the Bank whether or not then due or payable by the
Borrowers upon the occurrence in respect of the Borrowers of any
of the events specified in Section 10.1(f), and unconditionally
and irrevocably promises to pay upon the occurrence and during
the continuance of any such Event of Default such Guaranteed U.S.
Obligations to the Bank on demand, in lawful money of the United
States.
(c) The obligations of SC (UK) hereunder are independent of the
obligations of the Borrowers, and a separate action or actions
may be brought and prosecuted against SC (UK) whether or not
action is brought against the Borrowers and whether or not the
Borrowers be joined in any such action or actions. SC (UK)
waives, to the fullest extent permitted by law, the benefit of
any statute of limitations affecting its liability hereunder or
the enforcement thereof. Any payment by the Borrowers or other
circumstance which operates to toll any statute of limitations as
to the Borrowers shall operate to toll the statute of limitations
as to SC (UK).
(d) SC (UK) authorizes the Bank without notice, demand or consent
(except as shall be required under the Bank Agreements or as
required by applicable statute and cannot be waived), and without
affecting or impairing its liability hereunder, from time to time
to:
(i) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew, increase,
accelerate or alter, any of the Bank Obligations of the
Borrowers (including any increase or decrease in the rate of
interest thereon), any security therefor, or any liability
incurred directly or indirectly in respect thereof, and the
guaranty made in this Section 2.12 shall apply to such Bank
Obligations of the Borrowers as so changed, extended,
renewed or altered;
(ii) take and hold security for the payment of the Bank
Obligations of the Borrowers and sell, exchange, release,
surrender, realize upon or otherwise deal with in any manner
and in any order any property by whomsoever at any time
pledged or mortgaged to secure, or howsoever securing, such
Bank Obligations of the Borrowers or any
8
liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or
any offset thereagainst;
(iii) exercise or refrain from exercising any rights
against the Borrowers or others or otherwise act or refrain
from acting;
(iv) release or substitute any one or more endorsers,
guarantors, the Borrowers or other obligors;
(v) settle or compromise any of the Bank Obligations of the
Borrowers, any security therefor or any liability (including
those hereunder) incurred directly or indirectly in respect
thereof or hereof, and may subordinate the payment of all or
any part thereof to the payment of any liability (whether
due or not) of the Borrowers to its creditors other than the
Bank;
(vi) apply any sums by whomsoever paid or howsoever realized
to any liability or liabilities of the Borrowers to the Bank
regardless of what liability or liabilities of the Company
or its Subsidiaries remain unpaid;
(vii) consent to waive any breach of, or any act, omission
or default under, these guaranties in this Section 2.12 or
any of the Bank Agreements, or otherwise amend, modify or
supplement these guaranties in this Section 2.12 or any of
the Bank Agreements; and/or
(viii) take any other action which would, under otherwise
applicable principles of common law, give rise to a legal or
equitable discharge of the U.K. Subsidiary from its
liabilities under this Section 2.12.
(e) SC (UK) waives any right (except as shall be required by
applicable statute and cannot be waived) to require the Bank (i)
to proceed against the Borrowers, (ii) to proceed against or
exhaust any security held from the Borrowers, (iii) to pursue any
other remedy in the Bank's power whatsoever. SC (UK) waives any
defense based on or arising out of any defense of the Borrowers
other than payment in full of the Bank Obligations. The Bank
may, at its election, foreclose on any security held by the Bank
by one or more judicial or nonjudicial sales, whether or not
every
9
aspect of any such sale is commercially reasonable (to the extent
such sale is permitted by applicable law), or exercise any other
right or remedy the Bank may have against the Borrowers, without
affecting or impairing in any way the liability of SC (UK)
hereunder except to the extent the Bank Obligations of the
Borrowers have been paid.
(f) SC (UK) waives all presentments, demands for performance,
protests and notices, including, without limitation, notices of
nonperformance, notices of protest, notices of dishonor, notices
of acceptance of these guaranties in this Section 2.12, and
notices of the existence, creation or incurring of new or
additional Bank Obligations of the Company or its Subsidiaries.
SC (UK) assumes all responsibility for being and keeping itself
informed of the Borrowers' financial conditions and assets, and
of all other circumstances bearing upon the risk of nonpayment of
the Bank Obligations and the nature, scope and extent of the
risks which SC (UK) assumes and incurs hereunder, and agree that
the Bank shall have no duty to advise SC (UK) of information
known to them regarding such circumstances or risks."
(c) Article 2 of the Credit Agreement is hereby amended by adding
Section 2.13 as follows:
"Section 2.13. Guaranty of U.K. Credit Agreement.
---------------------------------
(a) The Borrowers hereby unconditionally guaranty to the Bank the
prompt payment and performance of (a) all liabilities and
obligations and Indebtedness, direct and indirect, matured and
unmatured, primary or secondary, certain or contingent, of the
U.K. Subsidiary to the Bank (including without limitation, costs
and expenses incurred by the Bank in attempting to collect or
enforce any of the foregoing), accrued in each case to the date
of payment, and (b) the performance of all other agreements,
covenants and conditions of the U.K. Subsidiary with respect
thereto set forth in the U.K. Credit Agreement and all other Bank
Agreements. The responsibilities and obligations of the U.K.
Subsidiary to the Bank described in the preceding sentence are
hereinafter referred to collectively as the 'Guaranteed U.K.
Obligations'. The guaranty pursuant to this Section 2.13 is an
absolute, unconditional and continuing joint and several
guarantee of the full and punctual performance by the U.K.
Subsidiary of the Guaranteed U.K. Obligations and not of
collectability of the
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Guaranteed U.K. Obligations, and is in no way conditioned upon
any requirement that the Bank first attempt to collect any of the
Guaranteed U.K. Obligations from the U.K. Subsidiary or resort to
any security or other means of obtaining payment of any of the
Guaranteed U.K. Obligations which the Bank now has or may acquire
after the date hereof, or upon any other contingency whatsoever.
Upon any default by the U.K. Subsidiary in the full and punctual
payment and performance of the Guaranteed U.K. Obligations, the
liabilities and obligations of the Borrowers hereunder shall, at
the option of the Bank, become forthwith due and payable to the
Bank without demand or notice of any nature, all of which are
expressly waived by the Borrowers. Payments by the Borrowers
under this Section 2.13 may be required by the Bank on any number
of occasions.
(b) Additionally, the Borrowers unconditionally and irrevocably
guaranty the payment of any and all of its Guaranteed U.K.
Obligations to the Bank whether or not then due or payable by the
U.K. Subsidiary upon the occurrence in respect of the U.K.
Subsidiary of any of the events specified in Section 10.1(f), and
unconditionally and irrevocably promise to pay upon the
occurrence and during the continuance of any such Event of
Default such Guaranteed U.K. Obligations to the Bank on demand,
in lawful money of the United States.
(c) The obligations of the Borrowers hereunder are independent of
the obligations of the U.K. Subsidiary, and a separate action or
actions may be brought and prosecuted against the Borrowers
whether or not action is brought against the U.K. Subsidiary and
whether or not the U.K. Subsidiary is joined in any such action
or actions. The Borrowers waive, to the fullest extent permitted
by law, the benefit of any statute of limitations affecting its
liability hereunder or the enforcement thereof. Any payment by
the U.K. Subsidiary or other circumstance which operates to toll
any statute of limitations as to the U.K. Subsidiary shall
operate to toll the statute of limitations as to the Borrowers.
(d) The Borrowers authorize the Bank without notice, demand or
consent (except as shall be required under the Bank Agreements or
as required by applicable statute and cannot be waived), and
without affecting or impairing their liability hereunder, from
time to time to:
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(i) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew, increase,
accelerate or alter, any of the Bank Obligations of the U.K.
Subsidiary (including any increase or decrease in the rate
of interest thereon), any security therefor, or any
liability incurred directly or indirectly in respect
thereof, and the guaranty made in this Section 2.13 shall
apply to such Bank Obligations of the U.K. Subsidiary as so
changed, extended, renewed or altered;
(ii) take and hold security for the payment of the Bank
Obligations of the U.K. Subsidiary and sell, exchange,
release, surrender, realize upon or otherwise deal with in
any manner and in any order any property by whomsoever at
any time pledged or mortgaged to secure, or howsoever
securing, such Bank Obligations of the U.K. Subsidiary or
any liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or
any offset thereagainst;
(iii) exercise or refrain from exercising any rights
against the U.K. Subsidiary or others or otherwise act or
refrain from acting;
(iv) release or substitute any one or more endorsers,
guarantors, the U.K. Subsidiary or other obligors;
(v) settle or compromise any of the Bank Obligations of the
U.K. Subsidiary, any security therefor or any liability
(including those hereunder) incurred directly or indirectly
in respect thereof or hereof, and may subordinate the
payment of all or any part thereof to the payment of any
liability (whether due or not) of the U.K. Subsidiary to its
creditors other than the Bank;
(vi) apply any sums by whomsoever paid or howsoever realized
to any liability or liabilities of the U.K. Subsidiary to
the Bank regardless of what liability or liabilities of the
Company or its Subsidiaries remain unpaid;
(vii) consent to waive any breach of, or any act, omission
or default under, these guaranties in this Section 2.13 or
any of the Bank Agreements, or otherwise amend,
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modify or supplement these guaranties in this Section 2.13
or any of the Bank Agreements; and/or
(viii) take any other action which would, under otherwise
applicable principles of common law, give rise to a legal or
equitable discharge of the Borrowers from their liabilities
under this Section 2.13.
(e) The Borrowers waive any right (except as shall be required by
applicable statute and cannot be waived) to require the Bank (i)
to proceed against the U.K. Subsidiary, (ii) to proceed against
or exhaust any security held from the U.K. Subsidiary, (iii) to
pursue any other remedy in the Bank's power whatsoever. The
Borrowers waive any defense based on or arising out of any
defense of the U.K. Subsidiary other than payment in full of the
Bank Obligations. The Bank may, at its election, foreclose on
any security held by the Bank by one or more judicial or
nonjudicial sales, whether or not every aspect of any such sale
is commercially reasonable (to the extent such sale is permitted
by applicable law), or exercise any other right or remedy the
Bank may have against the U.K. Subsidiary, without affecting or
impairing in any way the liability of the Borrowers hereunder
except to the extent the Bank Obligations of the U.K. Subsidiary
have been paid.
(f) The Borrowers waive all presentments, demands for
performance, protests and notices, including, without limitation,
notices of nonperformance, notices of protest, notices of
dishonor, notices of acceptance of these guaranties in this
Section 2.13, and notices of the existence, creation or incurring
of new or additional Bank Obligations of the Company or its
Subsidiaries. The Borrowers assume all responsibility for being
and keeping themselves informed of the U.K. Subsidiary's
financial conditions and assets, and of all other circumstances
bearing upon the risk of nonpayment of the Bank Obligations and
the nature, scope and extent of the risks which the Borrowers
assume and incur hereunder, and agree that the Bank shall have no
duty to advise the Borrowers of information known to them
regarding such circumstances or risks.
(g) Upon the occurrence of a material adverse change (i) to the
projected or actual financial performance of SC (UK), (ii) in the
title to the Collateral of SC (UK), or (iii) in the Bank's
security interest in the Collateral of SC (UK), the Bank, in its
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sole judgment and upon at least 10 days notice to the Company,
may require the Borrowers to immediately establish and maintain,
until the Bank in its sole judgment determines such material
adverse change is eliminated, a special reserve (the "U.K. Credit
Reserve") equal to all obligations and Indebtedness from time to
time owed by SC (UK) under the U.K. Credit Agreement. "
Section 6. Amendment of Payment and Repayment. Article 4 of the Credit
----------------------------------
Agreement is hereby amended by deleting Section 4.1(d) in its entirety and
substituting therefor the following:
"The Borrowers shall, on the date of receipt of the Net Cash
Proceeds by any Borrower or any of their Subsidiaries, except for
Net Cash Proceeds received by any U.K. Subsidiary to which the
provisions of Section 4.1(d) of the U.K. Credit Agreement apply,
from (i) the sale, lease, transfer or other disposition of any
assets of any Borrower or any of their Subsidiaries (other than
Net Cash Proceeds from a transaction permitted under Section
9.5), (ii) the incurrence or issuance by any Borrower or any of
their Subsidiaries of any Indebtedness for borrowed money, except
for Bank Obligations, (iii) the sale or issuance by any Borrower
or any or their Subsidiaries of any capital stock or other
ownership or profit interest or any warrants, options or rights
to acquire capital stock or other ownership or profits interest
(other than net Cash Proceeds from any such sale or issuance
which described as one of its purposes undertaking acquisitions
if such Net Cash Proceeds are used to finance any transaction
permitted under Section 9.7 within ninety (90) days of the
receipt thereof by such Borrower or Subsidiary), prepay an
aggregate principal amount of the Term Loan equal to the amount
of such Net Cash Proceeds. Partial prepayments of the Term Loan
under this Section 4.1(d) shall be applied to the scheduled
principal payments in inverse order of maturity and shall be
applied first to portions of the Term Loan which are outstanding
as Base Rate Loans."
Section 7. Representations and Warranties.
------------------------------
(a) Article 5 of the Credit Agreement is hereby amended by deleting
Section 5.4 in its entirety and substituting therefor the following:
14
"Section 5.4 Subsidiaries. Neither the Borrowers nor SC (UK)
------------
have any Subsidiaries except for those listed in Schedule 5.4.
------------
All of the issued and outstanding capital stock of each
Subsidiary listed on Schedule 5.4 is owned of record and
------------
beneficially by the Company or SC Direct as set forth on Schedule
--------
5.4. The Company does not have any assets except capital stock
---
of its Subsidiaries.
(b) Schedule 5.4 to the Credit Agreement is hereby deleted in its
------------
entirety and the new Schedule 5.4 attached hereto is substituted therefor.
------------
(c) Schedule 5.9 to the Credit Agreement is hereby deleted in its
------------
entirety and the new Schedule 5.9 attached hereto is substituted therefor.
------------
(d) Schedule 5.11 to the Credit Agreement is hereby deleted in its
-------------
entirety and the new Schedule 5.11 attached hereto is substituted therefor.
-------------
(e) Section 5.12 of the Credit Agreement is hereby amended by adding
the following at the end of the first sentence thereof:
", except as described on Schedule 5.12."
-------------
(f) Schedule 5.13(a) to the Credit Agreement is hereby deleted in its
----------------
entirety and the new Schedule 5.13(a) attached hereto is substituted
----------------
therefor.
(g) Schedule 5.13(b) to the Credit Agreement is hereby deleted in its
----------------
entirety and the new Schedule 5.13(b) attached hereto is substituted
----------------
therefor.
(h) Schedule 5.16 to the Credit Agreement is hereby deleted in its
-------------
entirety and the new Schedule 5.16 attached hereto is substituted therefor.
-------------
(i) Article 5 of the Credit Agreement is hereby further amended by
adding the following new Section 5.21 at the end thereof:
"Section 5.21. Confirmation of Representations and Warranties.
----------------------------------------------
The Borrowers and Guarantors hereby confirm and restate to the
Bank as if set forth herein in full the representations and
warranties set forth in Article 5 of the U.K. Credit Agreement."
(j) Article 5 of the Credit Agreement is hereby further amended by
adding the following new Section 5.22 at the end thereof:
"Section 5.22. Operation of Business on Consolidated Basis. The
-------------------------------------------
Company and its Subsidiaries conduct a substantial portion of
15
their business on a consolidated basis, including, but not
limited to, shared management, accounting, marketing and
operations. Any credit obtained by the Company or any Subsidiary
benefits the Company and all Subsidiaries on a consolidated
basis."
(k) Article 5 of the Credit Agreement is hereby further amended by
adding the following new Section 5.23 at the end thereof:
"Section 5.23. Daxbourne Acquisition. Simultaneously with the
---------------------
execution and delivery of the First Amendment to Credit Agreement
dated October 3, 1997, the Daxbourne Acquisition shall be
consummated in accordance with the terms of the Daxbourne
Acquisition Documents. The Company has provided the Bank with
true, correct and complete copies of the Daxbourne Acquisition
Documents and such documents have not been modified, amended or
supplemented and are in full force and effect."
Section 8. Amendment of Reports and Information.
------------------------------------
(a) Exhibit I to the Credit Agreement is hereby deleted in its
---------
entirety and the new Exhibit I attached hereto is substituted therefor.
---------
(b) Article 6 of the Credit Agreement is hereby amended by adding
Section 6.11 as follows:
"Section 6.11. Notice of Notice under Daxbourne Acquisition
--------------------------------------------
Documents. As soon as possible, and in any event within five (5)
---------
Business Days after the Company or any Subsidiary gives or
receives any notice under the Daxbourne Acquisition Documents,
the Company shall furnish to the Bank a copy of such notice and a
statement of its chief executive officer or chief financial
officer setting forth the action which the Company or any
Subsidiary has taken or proposes to take with respect thereto.
16
Section 9. Amendment of Covenants.
----------------------
(a) Section 7.1 of the Credit Agreement is hereby amended by
deleting the clause "to be greater than" appearing in the third line
thereof and deleting subsections (a) and (b) in their entirety and
substituting therefor the following:
"(the "Consolidated Leverage Ratio") to be greater than (a) 3.00-
to-1.00 on June 28, 1997 (the first date such ratio is to be
tested) and at any time thereafter but prior to October 3, 1998,
(b) 2.50-to-1.00 at October 3, 1998 and at any time thereafter
but prior to January 2, 1999."
(b) Section 7.3 of the Credit Agreement is hereby amended by deleting
the amount "$3,000,000" appearing in the last line thereof and substituting
therefor "$3,800,000."
(c) Schedule 8.4 to the Credit Agreement is hereby deleted in its
------------
entirety and the new Schedule 8.4 attached hereto is substituted therefor.
------------
(d) Section 9.1 of the Credit Agreement is hereby amended by adding a
new clause (f) as follows:
"(f) Indebtedness under the U.K. Credit Agreement to the Bank."
(e) Section 9.2 of the Credit Agreement is hereby amended by adding a
new clause (g) as follows:
"(g) Liens, pledges or guarantees in favor of the Bank securing
obligations under the U.K. Credit Agreement."
(f) Section 9.6 of the Credit Agreement is hereby amended by adding
the following clause at the end thereof:
"and except for guaranties in favor of the Bank under Sections
2.12 and 2.13 hereof and under the U.K. Credit Agreement."
(g) Section 9.7 of the Credit Agreement is hereby amended by deleting
the "and" preceding clause (c) thereof, inserting a comma in its place and
adding the following clause (d) at the end thereof:
"and (d) SC (UK) may acquire all of the assets of Daxbourne,
provided that immediately after and giving effect thereto, no
event shall occur and be continuing which constitutes a Default
17
(including under Section 8.1 and including under Article 7,
assuming that the financial restrictions set forth in Article 7
are applied immediately after and giving effect to such
acquisition) and provided further that SC (UK) becomes a
guarantor of the Bank Obligations under this Agreement."
Section 10. Amendment of Events of Default.
------------------------------
(a) Section 10.1(g) of the Credit Agreement is hereby amended by
deleting the clause $100,000 appearing in the second line thereof and
substituting therefor the following:
"$200,000"
(b) Section 10.1 of the Credit Agreement is hereby amended by deleting
clause (i) thereof in its entirety and substituting therefor the following:
"(i) Any 'Event of Default' under the U.K. Credit Agreement or
any other Bank Agreement shall have occurred."
Section 11. Amendment of Notices. Section 13.2(a) of the Credit
--------------------
Agreement is hereby amended by deleting the clause "Xxxxxxxx Xxxxx Stack, Vice
President" appearing in the second line thereof and substituting therefor the
following:
"Xxxxxx X. Xxxxxxxx, Assistant Vice President"
Section 12. Effectiveness; Conditions to Effectiveness. This First
------------------------------------------
Amendment to Credit Agreement shall become effective as of October 3, 1997 upon
execution hereof by the Borrowers, the U.K. Subsidiary and the Bank and
satisfaction of the following conditions:
(a) Revolving Credit Note. The Borrowers shall have delivered to the
---------------------
Bank an Amended and Restated Revolving Credit Note in the form of Exhibit A
---------
hereto.
(b) Term Note. The Borrowers shall have delivered to the Bank an
---------
Amended and Restated Term Note in the form of Exhibit B hereto.
---------
(c) Security Documents. SC Direct and SC Publishing shall have
------------------
delivered to the Bank an amendment to the Security Agreement, dated as of
March 12, 1997, in the form of Exhibit C hereto.
---------
18
(d) Officers' Certificate. The Borrowers shall have delivered to the
---------------------
Bank an Officers' Certificate in the form of Exhibit D hereto.
---------
(e) Opinion of Counsel. The Borrowers shall have delivered to the
------------------
Bank an opinion of Xxxxxxx Xxxx LLP, counsel to the Borrowers, in form and
substance satisfactory to the Bank.
(f) Pledge Agreement. The Company shall have delivered to the Bank an
----------------
amendment to the Stock Pledge Agreement, dated as of March 12, 1997, in the
form of Exhibit E hereto.
---------
(f) Pledge Agreement. SC Direct shall have delivered to the Bank an
----------------
amendment to the Stock Pledge Agreement, dated as of March 12, 1997, in the
form of Exhibit F hereto.
---------
(g) U.K. Credit Agreement. The Borrowers and SC (UK) shall have
---------------------
simultaneously entered into the U.K. Credit Agreement with the Bank.
(h) Daxbourne Acquisition. All conditions precedent to the
---------------------
consummation of the Daxbourne Acquisition, except for payment of the
purchase price, shall have been satisfied without waiver.
Section 13. Representations and Warranties; No Default. The Borrowers
------------------------------------------
hereby confirm to the Bank the representations and warranties of the Borrowers
set forth in Article 5 of the Credit Agreement (as amended hereby) as of the
date hereof, as if set forth herein in full. The Borrowers hereby certify that
no Default exists under the Credit Agreement.
Section 14. Miscellaneous. The Borrowers agree to pay on demand all the
-------------
Bank's reasonable expenses in preparing, executing and delivering this First
Amendment to Credit Agreement, and all related instruments and documents,
including, without limitation, the reasonable fees and out-of-pocket expenses of
the Bank's special counsel, Xxxxxxx, Procter & Xxxx LLP. This First Amendment
to Credit Agreement shall be a Bank Agreement and shall be governed by and
construed and enforced under the laws of The Commonwealth of Massachusetts.
19
IN WITNESS WHEREOF, the Borrowers, SC (UK) and the Bank have caused this
First Amendment to Credit Agreement to be executed by their duly authorized
officers as of the date first set forth above.
SPECIALTY CATALOG CORP.
By: /s/ Xxxxxx X. Xxxx
---------------------------------------------
Name: Xxxxxx X. Xxxx
Title: CEO
SC CORPORATION d/b/a SC DIRECT
By: /s/ Xxxxxx X. Xxxx
---------------------------------------------
Name: Xxxxxx X. Xxxx
Title: CEO
SC PUBLISHING, INC.
By: /s/ Xxxxxx X. Xxxx
---------------------------------------------
Name: Xxxxxx X. Xxxx
Title: CEO
DAXBOURNE INTERNATIONAL LIMITED
By: /s/ Xxxxxx X. Xxxx
---------------------------------------------
Name: Xxxxxx X. Xxxx
Title: Director
BANKBOSTON, N.A.
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President
20
