EXHIBIT 10.5
EXECUTION
WAIVER AND FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
WAIVER AND FIRST AMENDMENT (this Waiver and Amendment )
dated as of January
11, 1999, by and among BANKAMERICA BUSINESS CREDIT, INC., a
Delaware corporation, with
offices at 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the
Lender ); PENTECH
INTERNATIONAL, INC., a Delaware corporation with chief executive
offices at 000 Xxxxxx Xxxxx,
Xxxxxx, Xxx Xxxxxx 00000 ( Pentech ); PENTECH COSMETICS, INC., a
Delaware corporation with
chief executive offices at 000 Xxxxxx Xxxxx, Xxxxxx, Xxx Xxxxxx
00000 ( Cosmetics ); and SAWDUST
PENCIL CO., a Delaware corporation with chief executive offices
at 000 Xxxxxx Xxxxx, Xxxxxx, Xxx
Xxxxxx 00000 ( Sawdust ) (Pentech, Cosmetics and Sawdust,
individually, a Borrower, and collectively,
the Borrowers ).
W I T N E S S E T H :
WHEREAS, the Lender and the Borrowers have entered into a
Loan and Security Agreement
dated as of January 13, 1997 (as amended, restated, modified or
supplemented from time to time, the
Loan Agreement ); and
WHEREAS, the Borrowers have been in non-compliance (the
Financial Covenant Non-
compliance ) with the Minimum Interest Coverage Ratio and
Tangible Net Worth covenants set forth
in Sections 10.21 and 10.22 of the Loan Agreement for the fiscal
quarter ending September 30, 1998 and
during the period from October 1, 1998 through December 30, 1998;
and
WHEREAS, the Borrowers have requested that the Lender waive
the Financial Covenant Non-
compliance; and
WHEREAS, the Borrowers have requested that the Lender agree
to provide new seasonal
overadvances, modify in certain respects certain of the financial
covenants set forth in the Loan
Agreement, provide a bankers acceptance subfacility and modify
the Loan Agreement in certain other
respects; and
WHEREAS, the Lender is willing to waive the Financial
Covenant Non-compliance and to
agree to such other modifications on the condition that certain
other amendments be made to the Loan
Agreement and otherwise on the terms and conditions herein set
forth.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and for other
good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the
parties hereto hereby agree as follows:
SECTION 1. Defined Terms. Terms defined in the Loan
Agreement and not otherwise defined
herein shall have the meanings set forth in the Loan Agreement.
SECTION 2. Waiver of Financial Covenant Non-compliance.
The Lender hereby waives
compliance by the Borrowers with the provisions of Section 10.21
and 10.22 of the Loan Agreement
solely for and with respect to the fiscal quarter ending
September 30, 1998 and the period from October
1, 1998 through December 30, 1998; provided, however, that such
waiver is subject to the conditions
set forth in Section 5 of this Waiver and Amendment.
SECTION 3. Amendments to Loan Agreement. Effective as
of December 31, 1998, the Loan
Agreement shall be amended in the following respects.
3.1 Section 1.1 of the Loan Agreement is hereby
amended by adding the
following new definitions thereto, in appropriate
alphabetical order:
Applicable Inventory Advance Sublimit means the
amount indicated below
for the corresponding periods:
Period Amount
Prior to January 15, 1999 $12,000,000
January 15-May 31, 1999 $10,500,000
June 1-June 30, 1999 $10,000,000
July 1-July 31, 1999 $ 9,500,000
August 1-August 31, 1999 $ 9,000,000
At all times after August 31, 1999 $ 8,500,000
Banker s Acceptance means a banker s acceptance
issued or caused to be issued
for the account of any Borrower pursuant to Section 2.5
to the beneficiary of a Letter
of Credit upon such beneficiary s compliance with all
of the conditions required to
draw upon such Letter of Credit.
Banker s Acceptance Fee has the meaning
specified in Section 3.6.
3.2 Section 1.1 of the Loan Agreement is hereby
amended by restating the
definitions of Aggregate Availability, Aggregate Maximum
Revolver Amount, Allowable
Seasonable Overadvance, Availability, Loans, Maximum
Revolver Amount,
Overadvance Repayment Date, Seasonal Overadvance and
Seasonal Overadvance Limit
set forth therein in their entirety as follows:
Aggregate Availability means, at any time of
determination, (a) the Aggregate
Maximum Revolver Amount minus (b) the sum of (i) the
unpaid principal balance of
Revolving Loans outstanding to all Borrowers, (ii) the
aggregate undrawn face amount
of all outstanding Letters of Credit which the Lender
has caused to be issued or
obtained for the account of all Borrowers, and (iii)
the aggregate face amount of all
outstanding Banker s Acceptances which the Lender has
caused to be issued or obtained
for the account of all Borrowers.
Aggregate Maximum Revolver Amount means at any
time, for all Borrowers,
the lesser of:
(a) The amount of the Total Facility,
or
(b) The sum of
(i) up to eighty percent (80%) of the Net
Amount of Eligible
Accounts of all Borrowers;
the lesser of
a) the Applicable Inventory Advance
Sublimit; or
the sum of:
(i) up to 65% of all Eligible
Inventory of all Borrowers
not covered by any outstanding
Merchandise Letter of Credit;
and (ii) up to 60% of all Eligible
Inventory of all Borrowers
covered by any outstanding Merchandise
Letter of Credit; and
(iii) Allowable Seasonal Overadvances
available at such time;
provided, however, that the aggregate amount of all
Loans outstanding at any one such
time to all Borrowers shall not exceed an amount equal
to the respective percentages
indicated below of the Net Amount of Eligible Accounts
of all Borrowers for the
corresponding periods:
Period Percentage
At all times before February 1999 80%
February 1999 85%
March 1999 90%
April 1999 90%
May 1999 85%
At all times after May 1999 80%
plus 65% of all Eligible Inventory of all Borrowers not
covered by any outstanding
Merchandise Letter of Credit plus 60% of all Eligible
Inventory of all Borrowers
covered by any outstanding Merchandise Letter of
Credit; and provided further,
however, that at all times the Aggregate Maximum
Revolver Amount shall be reduced
(without duplication) by the sum of:
(A) reserves for accrued interest on the
Revolving Loans;
(B) the Environmental Compliance Reserve;
(C) the ACH Settlement Risk Reserve;
(D) the Royalty Reserve; and
(E) all other reserves which the Lender in its
reasonable discretion deems
necessary or desirable to maintain with respect to any
Borrower s account, including,
without limitation, any amounts which the Lender may be
obligated to pay in the
future for the account of any Borrower.
The Lender agrees to give the Borrowers at least three
Business Day s notice prior to
reducing any of the advance rates set forth above, but
the failure to give such notice
shall not affect the Lender s right to make such
reduction or the validity thereof.
Allowable Seasonal Overadvance means, at any
time during the months of
February through May, 1999, and prior to the
Overadvance Repayment Date, the
Seasonal Overadvance Limit.
Availability means, at any time of
determination, with respect to any
Borrower, (a) the Maximum Revolver Amount for such
Borrower at such time minus
(b) the sum of (i) the unpaid principal balance of
Revolving Loans outstanding to such
Borrower at such time, (ii) the aggregate undrawn face
amount of all outstanding
Letters of Credit which the Lender has caused to be
issued or obtained for such
Borrower s account at such time and (iii) the aggregate
face amount of all outstanding
Banker s Acceptances which the Lender has caused to be
issued or obtained for such
Borrower s account at such time.
Loans means, collectively, all loans and
advances provided for in Section 2
(including the aggregate face amounts of all letters of
credit and banker s acceptances
caused hereunder to be issued by the Lender and any
outstanding Seasonal
Overadvances).
Maximum Revolver Amount means at any time, for
any Borrower, the lesser
of:
(a) The amount of the Total Facility,
or
(b) The sum of
(i) up to eighty percent (80%) of the Net
Amount of Eligible
Accounts of such Borrower;
the lesser of
a) the Applicable Inventory Advance
Sublimit; or
the sum of:
(i) up to 65% of such Borrower s
Eligible Inventory not
covered by any outstanding Merchandise
Letter of Credit; and
(ii) up to 60% of such Borrower s
Eligible Inventory covered by
any outstanding Merchandise Letter of
Credit; and
(iii) Allowable Seasonal Overadvances
available at such time;
provided, however, that the aggregate amount of all
Loans outstanding at any one such
time to such Borrower shall not exceed an amount equal
to the respective percentages
indicated below of the Net Amount of Eligible Accounts
of such Borrower for the
corresponding periods:
Period Percentage
At all times before February 1999 80%
February 1999 85%
March 1999 90%
April 1999 90%
May 1999 85%
At all times after May 1999 80%
plus 65% of such Borrower s Eligible Inventory not
covered by any outstanding
Merchandise Letter of Credit plus 60% of such Borrower
s Eligible Inventory covered
by any outstanding Merchandise Letter of Credit; and
provided further, however, that
at all times the Maximum Revolver Amount shall be
reduced (without duplication) by
the sum of:
(A) reserves for accrued interest on the
Revolving Loans;
(B) the Environmental Compliance Reserve;
(C) the ACH Settlement Risk Reserve;
(D) the Royalty Reserve; and
(E) all other reserves which the Lender in its
reasonable discretion deems
necessary or desirable to maintain with respect to any
Borrower s account, including,
without limitation, any amounts which the Lender may be
obligated to pay in the
future for the account of any Borrower.
The Lender agrees to give the Borrowers at least three
Business Day s notice prior to
reducing any of the advance rates set forth above, but
the failure to give such notice
shall not affect the Lender s right to make such
reduction or the validity thereof.
Overadvance Repayment Date means May 31, 1999.
Seasonal Overadvance means special advances to
be made available to the
Borrowers in each of the months of February through May
1999, up to the Seasonal
Overadvance Limit.
Seasonal Overadvance Limit means $750,000.
3.3 The last sentence of the definition of the term
Obligations set forth in
Section 1.1 of the Loan Agreement is hereby amended to read
in its entirety as follows:
Obligations includes, without limitation, (a) all
debts, liabilities, and obligations now
or hereafter owing from Borrower to Lender under or in
connection with the Letters
of Credit, (b) all debts, liabilities, and obligations
now or hereafter owing from
Borrower to Lender under or in connection with the
Banker s Acceptances, and (c) all
debts, liabilities and obligations now or hereafter
owing from the Borrower to the
Lender arising from or related to ACH Transactions.
3.4 Clause (c)(ii) of the definition of the term
Performance Pricing Period
is hereby amended in its entirety to read as follows:
(ii) after taking into account the Revolving Loans and
the Letters of Credit and
Banker s Acceptances issued or to be issued at each
such time and
3.5 The caption to Article 2 of the Loan Agreement is
hereby amended to read in
its entirety as follows:
2 LOANS, LETTERS OF CREDIT AND BANKER S
ACCEPTANCES.
3.6 Section 2.1 of the Loan Agreement is hereby
amended to read in its entirety as
follows:
2.1 Total Facility Subject to all of the terms and
conditions of this Agreement,
the Lender shall make available a total credit facility
of up to $25,000,000 (the Total
Facility ) for Borrower s use from time to time during
the term of this Agreement.
The Total Facility shall be comprised of a revolving
line of credit up to the limits, for
each Borrower, of such Borrower s Maximum Revolver
Amount, and for all Borrowers,
of the Aggregate Maximum Revolver Amount, consisting of
revolving loans, seasonal
overadvances, letters of credit and banker s
acceptances as described in Sections 2.2, 2.3
and 2.5.
3.7 Clause (i) of Section 2.3(a) of the Loan Agreement
is hereby amended to read
in its entirety as follows:
(i) the maximum face amount of the requested Letter of
Credit, plus the aggregate
undrawn face amount of all outstanding Letters of
Credit, plus the aggregate face
amount of all outstanding Banker s Acceptances, would
exceed $10,000,000;
3.8 Clause (1) of Section 2.3(d) of the Loan Agreement
is hereby amended to read
in its entirety as follows:
(1) Payment of Letter of Credit Obligations. Each
Borrower agrees to reimburse
the issuer for any draw (other than the unreimbursed
amount of drawings under Letters
of Credit with respect to which Banker s Acceptances
have been issued at such time)
under any Letter of Credit immediately upon demand, and
to pay the issuer of the
Letter of Credit the amount of all other obligations
and other amounts payable to such
issuer under or in connection with any Letter of Credit
immediately when due,
irrespective of any claim, setoff, defense or other
right which such Borrower may have
at any time against such issuer or any other Person.
3.9 Subsection (g) of Section 2.3 of the Loan
Agreement is hereby deleted in its
entirety.
3.10 The Loan Agreement is hereby amended by adding a
new Section 2.5 thereto,
which new section shall read in its entirety as follows:
2.5 Banker s Acceptances.
(a) Subject to the terms and conditions of this
Agreement, the Lender shall,
upon Pentech s request on behalf of a Borrower, from
time to time, cause Banker s
Acceptances to be issued for such Borrower s account.
The Lender will not cause any
Banker s Acceptance to be issued if: (i) the face
amount of the requested Banker s
Acceptance, plus the aggregate face amount of all
outstanding Banker s Acceptances,
would exceed $4,000,000; (ii) the face amount of the
requested Banker s Acceptance,
plus the aggregate undrawn face amount of all
outstanding Letters of Credit, plus the
aggregate face amount of all outstanding Banker s
Acceptances, would exceed
$10,000,000; (iii) the face amount of the requested
Banker s Acceptance, and all
commissions, fees, and charges due from the Borrowers
to Lender in connection with
the issuance thereof, would cause such Borrower s
Availability or the Aggregate
Availability of all Borrowers to be exceeded at such
time; or (iv) the draft to which
such Banker s Acceptance relates has a maturity later
than 90 days after the date of
issuance thereof. All payments made and expenses
incurred by the Lender pursuant to
or in connection with the Banker s Acceptances will be
charged to the Borrowers loan
account as Revolving Loans.
(b) Other Conditions. In addition to being
subject to the satisfaction of the
applicable conditions precedent contained in Section
11, the obligation of the Lender
to cause any Banker s Acceptance to be issued is
subject to the following conditions
precedent having been satisfied in a manner
satisfactory to the Lender:
(1) Pentech, on behalf of the Borrower
requesting a Banker s
Acceptance, shall have delivered to the proposed
issuer of such Banker s
Acceptance, at such times and in such manner as
such proposed issuer may
prescribe, an application in form and substance
satisfactory to such proposed
issuer and the Lender for the issuance of the
Banker s Acceptance and such
other documents as may be required pursuant to the
terms thereof, and the
form and terms of the proposed Banker s Acceptance
shall be satisfactory to the
Lender and such proposed issuer;
(2) As of the date of issuance, no order of
any court, arbitrator or
Public Authority shall purport by its terms to
enjoin or restrain money center
banks generally from issuing banker s acceptances
of the type and in the
amount of the proposed Banker s Acceptance, and no
law, rule or regulation
applicable to money center banks generally and no
request or directive
(whether or not having the force of law) from any
Public Authority with
jurisdiction over money center banks generally
shall prohibit, or request that
the proposed issuer of such Banker s Acceptance
refrain from, the issuance of
banker s acceptances generally or the issuance of
such Banker s Acceptance; and
(3) Prior to the issuance of a Banker s
Acceptance, the beneficiary
of the Letter of Credit to which such Banker s
Acceptance shall relate, shall
have complied duly with all of the conditions
required to draw upon such
Letter of Credit.
(c) Payments Pursuant to Banker s Acceptances.
(1) Payment of Banker s Acceptance
Obligations. Each Borrower
agrees to reimburse the issuer for any draw or
payment under any Banker s
Acceptance immediately upon demand, and to pay the
issuer of the Banker s
Acceptance the amount of all other obligations and
other amounts payable to
such issuer under or in connection with any Banker
s Acceptance immediately
when due, irrespective of any claim, setoff,
defense or other right which such
Borrower may have at any time against such issuer
or any other Person.
(2) Revolving Loans to Satisfy Reimbursement
Obligations. In the
event that the issuer of any Banker s Acceptance
honors a draw or makes
payment under such Banker s Acceptance and the
relevant Borrower shall not
have repaid such amount to the issuer of such
Banker s Acceptance pursuant to
Section 2.5(c)(1), the Lender shall pay the issuer
and such amount when paid
shall constitute a Revolving Loan which shall be
deemed to have been requested
by such Borrower.
(d) Compensation for Banker s Acceptances.
(1) Banker s Acceptance Fee. Each Borrower
agrees to pay to the
Lender, with respect to each Banker s Acceptance,
the Banker s Acceptance Fee
specified in, and in accordance with the terms of,
Section 3.6.
(2) Issuer Fees and Charges. Each Borrower
shall pay to the issuer
of any Banker s Acceptance, or to the Lender, for
the account of the issuer of
any such Banker s Acceptance, solely for such
issuer s account, such fees and
other charges as are charged by such issuer for
banker s acceptances issued by
it, including, without limitation, its standard
fees for issuing, administering,
amending, renewing, paying and canceling banker s
acceptances and all other
fees associated with issuing or servicing banker s
acceptances, as and when
assessed.
(e) Indemnification; Exoneration; Power of
Attorney
(1) Indemnification. In addition to amounts
payable as elsewhere
provided in this Section 2.5, each Borrower hereby
agrees to protect,
indemnify, pay and save the Lender harmless from
and against any and all
claims, demands, liabilities, damages, losses,
costs, charges and expenses
(including reasonable attorneys fees) which the
Lender may incur or be subject
to as a consequence, direct or indirect, of the
issuance of any Banker s
Acceptance or the provision of any credit support
or enhancement in
connection therewith. The agreement in this
Section 2.5(e)(1) shall survive
payments of all Obligations and the termination of
this Agreement.
(2) Assumption of Risk by the Borrowers. As
between the
Borrowers and the Lender, the Borrowers assume all
risks of the acts and
omissions of, or misuse of any of the Banker s
Acceptances by, the respective
beneficiaries or holders of such Banker s
Acceptances. In furtherance and not
in limitation of the foregoing, the Lender shall
not be responsible for: (A) the
form, validity, sufficiency, accuracy, genuineness
or legal effect of any
document submitted by any Person in connection
with the application for and
issuance of and presentation of, or of drafts with
respect to, any of the Banker s
Acceptances, even if it should prove to be in any
or all respects invalid,
insufficient, inaccurate, fraudulent or forged;
(B) the validity or sufficiency of
any instrument transferring or assigning or
purporting to transfer or assign any
Banker s Acceptance or the rights or benefits
thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid
or ineffective for any
reason; (C) the failure of the beneficiary or
holder of any Banker s Acceptance
to comply duly with conditions required in order
to draw upon or receive
payment under such Banker s Acceptance; (D)
errors, omissions, interruptions,
or delays in transmission or delivery of any
messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in
cipher; (E) errors in
interpretation of technical terms; (F) any loss or
delay in the transmission or
otherwise of any document required in order make a
drawing or receive
payment under any Banker s Acceptance or of the
proceeds thereof; (G) the
misapplication by the beneficiary or holder of any
Banker s Acceptance of the
proceeds of any drawing or payment under such
Banker s Acceptance; or (H)
any consequences arising from causes beyond the
control of the Lender,
including, without limitation, any act or
omission, whether rightful or
wrongful, of any present or future de jure or de
facto Public Authority. None
of the foregoing shall affect, impair or prevent
the vesting of any rights or
powers of the Lender under this Section 2.5.
(3) Exoneration. In furtherance and
extension, and not in
limitation, of the specific provisions set forth
above, any action taken or
omitted by the Lender under or in connection with
any of the Banker s
Acceptances or any related certificates, if taken
or omitted in the absence of
gross negligence or willful misconduct, shall not
put the Lender under any
resulting liability to any Borrower or relieve any
Borrower of any of its
obligations hereunder to any such Person.
(4) Power of Attorney. In connection with
all Inventory financed
by Banker s Acceptances, each Borrower hereby
appoints the Lender, or the
Lender s designee, as its attorney, with full
power and authority: (a) to sign
and/or endorse such Borrower s name upon any
warehouse or other receipts;
(b) to sign such Borrower s name on bills of
lading and other negotiable and
non-negotiable documents; (c) to clear Inventory
through customs in the
Lender s or such Borrower s name, and to sign and
deliver to customs officials
powers of attorney in such Borrower s name for
such purpose; (d) to complete
in such Borrower s or the Lender s name, any
order, sale, or transaction, obtain
the necessary documents in connection therewith,
and collect the proceeds
thereof; and (e) to do such other acts and things
as are necessary in order to
enable the Lender to obtain possession of the
Inventory and to obtain payment
of the Obligations. Neither the Lender nor its
designee, as each Borrower s
attorney, will be liable for any acts or
omissions, nor for any error of judgment
or mistakes of fact or law. This power, being
coupled with an interest, is
irrevocable until all Obligations have been paid
and satisfied.
(5) Control of Inventory. In connection
with all Inventory
financed by Banker s Acceptances, each Borrower
will, at the Lender s request,
instruct all suppliers, carriers, forwarders,
warehouses or others receiving or
holding cash, checks, Inventory, documents or
instruments in which the Lender
holds a security interest to deliver them to the
Lender and/or subject to the
Lender s order, and if they shall come into any
Borrower s possession, to
deliver them, upon request, to the Lender in their
original form. Each
Borrower shall also, at the Lender s request,
designate the Lender as the
consignee on all bills of lading and other
negotiable and non-negotiable
documents.
3.11 The Loan Agreement is hereby amended by adding a
new Section 2.6 thereto,
which new section shall read in its entirety as follows:
2.6 Supporting Letter of Credit; Cash Collateral.
If, notwithstanding the
provisions of Sections 2.3, 2.5 and 14, any Letter of
Credit or Banker s Acceptance is
outstanding upon the termination of this Agreement,
then upon such termination the
Borrowers shall deposit with the Lender, at its
discretion, with respect to each Letter
of Credit and Banker s Acceptance then outstanding,
either (A) a standby letter of
credit (a Supporting Letter of Credit ) in form and
substance satisfactory to the
Lender, issued by an issuer satisfactory to the Lender
in an amount equal to the greatest
amount for which such Letter of Credit or Banker s
Acceptance may be drawn, under
which Supporting Letter of Credit the Lender is
entitled to draw amounts necessary to
reimburse the Lender for payments made by the Lender
under such Letter of Credit
or Banker s Acceptance or under any credit support or
enhancement provided through
the Lender with respect thereto, or (B) cash in amounts
necessary to reimburse the
Lender for payments made by the Lender under such
Letter of Credit or Banker s
Acceptance or under any credit support or enhancement
provided through the Lender.
Such Supporting Letter of Credit or deposit of cash
shall be held by the Lender, as
security for, and to provide for the payment of, the
aggregate undrawn amount of such
Letters of Credit and Banker s Acceptances remaining
outstanding.
3.12 Subsection (b) of Section 3.1 of the Loan
Agreement is hereby amended to read
in its entirety as follows:
(b) If any Event of Default occurs, then, from the
date such Event of Default
occurs until it is cured, or if not cured until all
Obligations are paid and performed in
full, the Borrowers will pay (A) interest (including
the margin applicable thereto) on
the unpaid principal balances of the Loans, (B) the
Letter of Credit Fee and (C) the
Banker s Acceptance Fee at a per annum rate two percent
(2%) greater than otherwise
specified herein for interest, the Letter of Credit Fee
and the Banker s Acceptance Fee.
3.13. The first sentence of subsection (c) of
Section 3.1 of the Loan Agreement is
hereby amended to read in its entirety as follows:
For every month during the term of this Agreement, the
Borrowers shall pay to the
Lender a fee (the Unused Line Fee ) in an amount equal
to three-eighths of one
percent (0.375%) per annum, multiplied by the average
daily amount by which the
Maximum Revolving Credit Line exceeds the sum of (i)
the average daily outstanding
amount of all Revolving Loans during such month, (ii)
the average daily undrawn face
amount of all outstanding Letters of Credit during such
month and (iii) the average
daily face amount of all outstanding Banker s
Acceptances during such month, with the
unpaid balance calculated for this purpose by applying
payments immediately upon
receipt.
3.14 The Loan Agreement is hereby amended by adding a
new Section 3.6 thereto,
which new section shall read in its entirety as follows:
3.6 Banker s Acceptance Fees. The Borrowers agree
to pay to the Lender,
for each Banker s Acceptance, a fee (the Banker s
Acceptance Fee ) equal to two
percent (2.00%) per annum of the face amount of each
Banker s Acceptance plus all out-
of-pocket costs, fees and expenses incurred by the
Lender in connection with the
application for, issuance of, or amendment to any
Banker s Acceptance, which costs,
fees and expenses could include a fronting fee
required to be paid by the Lender to
such issuer for the assumption of the settlement risk
in connection with the issuance
of such Banker s Acceptance and any charge associated
with the discount of such
Banker s Acceptance. The Banker s Acceptance Fee shall
be payable monthly in arrears
on the first day of each month following any month in
which a Banker s Acceptance
was issued and/or in which a Banker s Acceptance
remains outstanding. The Banker s
Acceptance Fee shall be computed on the basis of a year
of three hundred sixty (360)
days for the actual number of days elapsed.
3.15. The words or Banker s Acceptance or or
Banker s Acceptances are hereby
added immediately after the words Letter of Credit or
Letters of Credit, as the respective
cases may be, wherever set forth in the last sentence of
Section 9.25, in the preamble to Section
11.2, in clause (ii) of Section 13(a), in the penultimate
sentence of Section 14, and in Sections
15.7(h) and 15.17.
3.16 Sections 10.21 and 10.22 of the Loan Agreement are
hereby amended to read
in their entirety as follows:
10.21 Minimum EBITDA. The Borrowers will
maintain a cumulative
EBITDA, as determined at the end of each fiscal quarter
set forth below, for the
preceding fiscal quarter in the case of the fiscal
quarter ending December 31, 1998, for
the preceding two fiscal quarters in the case of the
fiscal quarter ending March 31, 1999,
for the preceding three fiscal quarters in the case of
the fiscal quarter ending June 30,
1999, and the preceding four fiscal quarters in the
case of the fiscal quarter ending
September 30, 1999 and each fiscal quarter ending
thereafter, of not less than the
amounts indicated below:
Quarter Ending Amount
December 31, 1998 ($ 250,000)
March 31, 1999 ($ 500,000)
June 30, 1999 $2,400,000
September 30, 1999,
and each fiscal
quarter thereafter
$3,300,000
10.22 Adjusted Tangible Net Worth. The
Borrowers will have Tangible Net
Worth of not less than the following amounts at the end
of each of the following fiscal
quarters:
Fiscal Quarter Ending Amount
December 31, 1998 $14,000,000
March 31, 1999 $13,000,000
June 30, 1999 $14,000,000
September 30, 1999,
and each fiscal
quarter thereafter $14,537,000
SECTION 4. Waiver and Amendment Fee. In order to induce
the Lender to enter into this
Waiver and Amendment, the Borrowers jointly and severally shall
pay to the Lenders a waiver and
amendment fee (the Waiver and Amendment Fee ) in the amount of
$175,000. The Waiver and
Amendment Fee shall be deemed fully earned upon the effectiveness
of this Waiver and Amendment,
shall be non-refundable when paid and shall be payable as
follows:
4.1 $25,000 of the Waiver and Amendment Fee shall be
paid simultaneously with
the effectiveness of this Waiver and Amendment; and
4.2 the remaining $150,000 of the Waiver and Amendment
fee shall be due and
payable in six consecutive monthly installments in the
amount of $25,000 each, payable on the
last day of each month, commencing February 28, 1999;
provided, however, that the entire
unpaid amount of the Waiver and Amendment Fee shall be due
and payable immediately upon
the occurrence of an Event of Default or the termination of
the Loan Agreement for any
reason whatsoever.
SECTION 5. Conditions to Effectiveness. This Waiver and
Amendment shall be effective as
of the date first above written when the Lender shall have
received the following:
5.1 counterparts of this Waiver and Amendment executed
by the Borrowers;
5.2 such other certificates, representations,
instruments and other documents as the
Agent and the Majority Lenders may require, in form and
substance satisfactory to the Agent;
and
5.3 payment of the $25,000 portion of the Waiver and
Amendment Fee referred to
in Section 4.1 of this Waiver and Amendment.
SECTION 6. Representations and Warranties. The
Borrowers hereby each represent and
warrant to the Lender that (i) the execution, delivery and
performance of this Waiver and Amendment
by each of the Borrowers are within their respective corporate
powers and have been duly authorized
by all necessary corporate action; (ii) no consent, approval,
authorization of, or declaration or filing
with, any Public Authority, and no consent of any other Person,
is required in connection with the
execution, delivery and performance of this Waiver and Amendment,
except for those already duly
obtained; (iii) this Waiver and Amendment has been duly executed
by each of the Borrowers and
constitutes the legal, valid and binding obligation of each of
the Borrowers, enforceable against them
in accordance with its terms; (iv) the execution, delivery and
performance by each of the Borrowers
of this Waiver and Amendment does not and will not conflict with,
or constitute a violation or breach
of, or constitute a default under, or result in the creation or
imposition of any Lien upon the property
of any Borrower or any of its Subsidiaries (except as
contemplated by the Loan Agreement and the
other Loan Documents) by reason of the terms of (a) any contract,
mortgage, lease, agreement, or
instrument to which such Borrower or such Subsidiary is a party
or which is binding upon it, (b) any
Requirement of Law applicable to such Borrower or such
Subsidiary, or (c) the Certificate or Articles
of Incorporation or By-Laws of such Borrower or such Subsidiary;
(v) after giving effect to this Waiver
and Amendment, the representations and warranties contained in
the Loan Agreement and in each
other document or instrument delivered by Borrower are true and
correct in all material respects as
though made on and as of the date hereof, except to the extent
that such representations and warranties
expressly relate solely to an earlier date (in which case such
representations and warranties were true
and accurate on and as of such earlier date); and (vi) after
giving effect to this Waiver and Amendment,
there exists no Event of Default or condition which would result
in an Event of Default.
SECTION 7. Reference to and Effect on Loan Documents.
7.1 On and after the date hereof, each reference in
the Loan Agreement to this
Agreement , hereunder , hereof , herein or words of like
import, and each reference in the
other Loan Documents to the Loan Agreement, shall mean and
be a reference to the Loan
Agreement as amended hereby.
7.2 Except as specifically amended above, all of the
terms of the Loan Agreement
shall remain unchanged and in full force and effect.
7.3 The execution, delivery and effectiveness of this
Waiver and Amendment shall
not operate as a waiver of any right, power or remedy of any
Lender or the Agent under the
Loan Agreement or any of the other Loan Documents, nor
constitute a waiver of any provision
of the Loan Agreement or any of the other Loan Documents.
SECTION 8. Execution in Counterparts. This Waiver and
Amendment may be executed in
any number of counterparts and by different parties hereto in
separate counterparts, each of which
when so executed and delivered shall be deemed to be an original
and all of which taken together shall
constitute one and the same instrument.
SECTION 9. Governing Law. This Waiver and Amendment
shall be governed by, and shall
be construed and enforced in accordance with, the laws of the
State of New York.
SECTION 10. Headings. Section headings in this Waiver
and Amendment are included
herein for convenience of reference only and shall not constitute
a part of this Waiver and Amendment
or be given any substantive effect.
IN WITNESS WHEREOF, this Waiver and Amendment has been duly
executed as of the date
first above written.
PENTECH INTERNATIONAL, INC.
By: ____________________________
Title:___________________________
PENTECH COSMETICS, INC.
By: ____________________________
Title:___________________________
SAWDUST PENCIL CO.
By: ____________________________
Title:___________________________
BANKAMERICA BUSINESS CREDIT, INC.
By: ____________________________
Xxxxx Xxxxxxxxx,
Vice President
