FIRST AMENDMENT TO
SECURED CREDIT AGREEMENT AND RELATED DOCUMENTS,
WAIVER AND CONSENT
This FIRST AMENDMENT TO SECURED CREDIT AGREEMENT AND RELATED DOCUMENTS
(this "Amendment"), dated as of July 13, 1999, is among BROWNSTONE HOLDINGS,
INC., a Delaware corporation ("Brownstone"), ECOLOGY KIDS, INC., a Delaware
corporation ("Ecology Kids"), DIPLOMAT HOLDINGS, INC., a California corporation
("Diplomat") and ▇▇▇ ▇▇▇▇▇▇ LTD., a New York corporation ("▇▇▇ ▇▇▇▇▇▇");
Brownstone, Ecology Kids, Diplomat and ▇▇▇ ▇▇▇▇▇▇ are hereinafter referred to,
collectively, as "Borrowers" and individually, as a "Borrower"), FIRST SOURCE
FINANCIAL LLP, an Illinois registered limited liability partnership ("Lender")
and DIPLOMAT DIRECT MARKETING CORPORATION, a Delaware corporation ("Parent"), in
its capacity as Guarantor and in its capacity as funds administrator and
borrowing agent for the Borrowers (in such capacity, the "Funds Administrator")
(this and all other capitalized terms used herein are defined in Section 1 of
the Credit Agreement defined below).
R E C I T A L S:
A. Borrowers, Parent and Lender are parties to that certain Secured
Credit Agreement dated as of May 12, 1999 (the "Credit Agreement") and certain
other Related Documents, subject to the terms and conditions of which Lender has
agreed to make loans and other financial accommodations to Borrowers.
B. Parent has entered and intends to enter into a series of
transactions with ▇▇▇▇▇ Holdings Inc. ("▇▇▇▇▇") and ▇▇▇▇▇ E - Commerce Corp.
("▇▇▇▇▇ E - Commerce") including the issuance by the Parent of Series G
Preferred Stock and a stock swap between ▇▇▇▇▇ and Parent.
C. Borrowers and Parent have requested modifications to the Credit
Agreement and the Guaranty to, among other things, waive the mandatory
prepayment of the Term B Loan, and Lender is willing to agree to such request
subject to the terms and conditions of this Amendment.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, and subject to the terms and conditions hereof,
Parent, Borrowers and Lender hereby agree as follows:
1. Definitions. All capitalized terms used but not elsewhere defined in
this Amendment shall have the respective meanings ascribed thereto in the Credit
Agreement.
2. Amendments to Credit Agreement. The Credit Agreement is amended as
follows:
2.01. The following definitions appearing in Section 1.1 of the Credit
Agreement are hereby deleted and the following definitions substituted in lieu
thereof:
"Pledge Agreements" shall mean the (i) Pledge Agreements from
Parent dated May 12, 1999 and June 30, 1999, respectively and (ii) Pledge
Agreement from ▇▇▇▇▇▇ ▇▇▇▇▇ dated May 12, 1999, each in favor of Lender as the
same may, in each case, be amended, modified, supplemented or replaced from time
to time.
"Preferred Stock Documents" shall mean the Certificates of
Designation (as amended and filed with the Delaware Secretary of State) for
Series B, C, D, E, F and G Preferred Stock of Parent."
2.02. Section 1.1 of the Credit Agreement is hereby amended by
inserting the following new definition in the alphabetically appropriate place
therein:
"▇▇▇▇▇ Stock" shall mean the common stock of ▇▇▇▇▇ Holdings
Inc. now owned or hereafter acquired by Parent or any Borrower."
2.03. Schedules 1.1(a), 10.6(b) and 11.10 are hereby deleted and the
new Schedules 1.1(a), 10.6(b) and 11.10 attached to this Amendment are
substituted in lieu thereof.
3. Waiver of Mandatory Prepayment. Lender hereby waives the mandatory
prepayment required by Section 2.5(b) of the Credit Agreement relating to the
issuance of 10,500 shares of Series G Preferred Stock of the Parent.
4. Amendments to Guaranty. The Guaranty is amended as follows:
4.01. Section 7.5 of the Guaranty is hereby deleted and the following
substituted in lieu thereof:
"7.5 Fundamental Business Changes. Engage in any business other than
the ownership of the Borrower's Equity Interests and the ▇▇▇▇▇ Stock."
5. Consent Relating to ▇▇▇▇▇ Stock. Notwithstanding Sections 7.5 and
7.7 of the Guaranty to contrary, Lender hereby consents to Parent's acquisition
of the ▇▇▇▇▇ Stock.
6. Conditions to Effectiveness. The effectiveness of this Amendment
shall be subject to the satisfaction of all of the following conditions in a
manner, form and substance satisfactory to Lender:
(a) Delivery of Documents. The following shall have been
delivered to Collateral Agent, each duly authorized and executed:
(1) this Amendment;
(2) a certificate of designation for the Series G
Preferred Stock of Parent in form and substance satisfactory
to Lender;
(3) the contracts between ▇▇▇▇▇, ▇▇▇▇▇ E - Commerce
and Parent;
(4) the Pledge Agreement dated as of even date
herewith relating to the ▇▇▇▇▇ Stock, the ▇▇▇▇▇ Stock, stock
powers therefor and an Irrevocable Proxy, each in form and
substance satisfactory to Lender;
(5) an opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇
relating to the transactions contemplated by this Amendment,
in form and substance satisfactory to Lender;
(6) the consent of ▇▇▇▇▇▇ ▇▇▇▇▇ to this Amendment in
the form set forth below;
(7) to the extent a default exists or would occur as
a result of the transactions contemplated by this Amendment, a
consent and/or waiver by FINOVA Mezzanine Capital Inc. to cure
or prevent any defaults under the Subordinated Debt Documents;
and
(8) such other instruments, documents, certificates,
consents, waivers and opinions as Lender reasonably may
request.
(b) Payment of Amendment Fee. The Borrowers shall have paid to
Lender a fee in the amount $25,000 for entering into this Amendment.
Lender and Borrowers agree such fee shall be paid from the proceeds of
a Revolving Loan which the Funds Administrator hereby requests Lender
to make on the date hereof.
(c) No Material Adverse Effect. No Material Adverse Effect
shall have occurred since the date of the most recent financial
statements for Parent and Borrowers received by Lender.
(d) Payment of Costs. Borrowers shall have paid or caused to
be paid to Lender all out of pocket expenses of Lender relating to this
Amendment and the transactions contemplated herein, including, without
limitation, the expenses and reasonable fees of Lender's counsel.
(e) Satisfaction of Lender's Counsel. All legal matters
incident to the transactions contemplated hereby shall be reasonably
satisfactory to counsel for Lender.
The date on which all of the conditions set forth in this Paragraph 6 have been
satisfied (or waived by Lender) is referred to herein as the "Effective Date."
7. References. From and after the Effective Date, all references in the
Credit Agreement and the Related Documents to the Credit Agreement shall be
deemed to refer to the Credit Agreement and Guaranty, as amended hereby.
8. Current Defaults. The Borrowers have failed to comply with various
provisions of the Credit Agreement (the "Current Defaults"), including but not
limited to the following: (i) Borrowers have failed to comply with the Borrowing
Base limitations (Section 2.7), (ii) failed to comply with limitations on
intercompany loans (Section 11.21) and (iii) failed to deliver financial
statements in a timely manner (Section 11.1). As a result of the Current
Defaults, Lender has elected to impose the Default Rate provided for in Section
4.2 of the Cedit Agreement, and has so notified the Borrowers in writing.
Nothing herein, or actions taken or not taken by Lender pursuant hereto
or pursuant to the Loan Documents, shall or be deemed to (i) constitute a waiver
of the Current Defaults described herein or any other Event of Default now
existing or hereafter arising, (ii) constitute a waiver of any rights, claims
and/or remedies under the Loan Documents and/or applicable law, or (iii)
constitute a course of dealing among the parties. Lender specifically reserves
each of its rights and remedies under the Credit Agreement and the other Related
Documents.
9. Representations and Warranties. Parent and each Borrower represents
and warrants to Lender that (a) it has full power and authority to execute and
deliver this Amendment and to perform its obligations hereunder, (b) upon the
execution and delivery hereof, this Amendment will be valid, binding and
enforceable upon it in accordance with its terms, (c) the execution and delivery
of this Amendment does not and will not contravene, conflict with, violate or
constitute a default under (A) the organizational documents or operating
agreement of Parent or any Borrower or (B) any applicable law, rule, regulation,
judgment, decree or order of which Parent or any Borrower has knowledge or any
agreement, indenture or instrument to which Parent or any Borrower is a party or
is bound or which is binding upon or applicable to all or any portion of its
property, and (d) no Material Adverse Effect has occurred since the date of the
last financial statements delivered by Borrowers to Lender.
10. Costs and Expenses. Borrowers agree, jointly and severally, to
reimburse Lender for all out of pocket expenses incurred in the preparation,
negotiation and execution of this Amendment and the consummation of the
transactions contemplated hereby, including, without limitation, the expenses
and fees of counsel for Lender.
11. No Further Amendments; Ratification of Liability. Except as amended
hereby, the Credit Agreement and each of the Related Documents shall remain in
full force and effect in accordance with their respective terms. Parent and each
Borrower hereby ratifies and confirms its liabilities, obligations and
agreements under the Credit Agreement and the Related Documents to which it is a
party, all as amended by this Amendment, and the liens and security interests
created thereby, and each acknowledges that (a) it has no defenses, claims or
set-offs to the enforcement of such liabilities, obligations and
agreements, (b) Lender has fully performed all obligations to Borrowers and
Parent which it may have had or have on and as of the date hereof and (c) other
than as specifically set forth herein, Lender does not waive, diminish or limit
any term or condition contained in any of the Credit Agreement or the Related
Documents. Lender's agreement to the terms of this Amendment or any other
amendment of the Credit Agreement or Related Documents shall not be deemed to
establish or create a custom or course of dealing among Lender on the one hand,
and Parent and Borrowers on the other hand. This Amendment and the documents
executed and delivered pursuant to this Amendment contain the entire agreement
among Lender, Parent and Borrowers with respect to the transactions contemplated
by this Amendment.
12. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which, when
taken together, shall constitute one and the same instrument.
13. Further Assurances. Parent and each Borrower covenants and agrees
that it will at any time and from time to time do, execute, acknowledge and
deliver, or will cause to be done, executed, acknowledged and delivered, all
such further acts, documents and instruments as reasonably may be required by
Lender in order to effectuate fully the intent of this Amendment.
14. Severability. If any term or provision of this Amendment or the
application thereof to any party or circumstance shall be held to be invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
the validity, legality and enforceability of the remaining terms and provisions
of this Amendment shall not in any way be affected or impaired thereby, and the
affected term or provision shall be modified to the minimum extent permitted by
law so as most fully to achieve the intention of this Amendment.
15. Captions. The captions in this Amendment are inserted for
convenience of reference only and in no way define, describe or limit the scope
or intent of this Amendment or any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment at Chicago, Illinois as of the day and year first above written.
DIPLOMAT DIRECT MARKETING CORPORATION, in its
capacity as Guarantor and Funds Administrator
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name Printed: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Its: President and Chief Executive Officer
BROWNSTONE HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name Printed: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Its: Vice President
ECOLOGY KIDS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name Printed: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Its: Chief Financial Officer
DIPLOMAT HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name Printed: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Its: Chief Financial Officer
▇▇▇ ▇▇▇▇▇▇ LTD.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name Printed: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Its: Executive Vice President
FIRST SOURCE FINANCIAL LLP
By: First Source Financial, Inc.
Its: Manager
By: /s/ ▇▇▇▇▇▇▇ ▇. ZARA
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Name Printed: ▇▇▇▇▇▇▇ ▇. Zara
Its: Senior Vice President
Guarantor's Consent
The undersigned, ▇▇▇▇▇▇ ▇▇▇▇▇, has heretofore executed and delivered to
the Lender a Guaranty dated as of May 12, 1999 and hereby consents to the
Amendment as set forth above and confirms that its Guaranty and all of the
undersigned's obligations thereunder remain in full force and effect. The
undersigned further agrees that the consent of the undersigned to any further
amendments to the Credit Agreement shall not be required as a result of this
consent having been obtained, except to the extent, if any, required by the
Guaranty referred to above.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇
