SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment") is
made as of April 19th, 2001, by and among MARKETING SPECIALISTS CORPORATION
("Borrower") and FIRST UNION NATIONAL BANK, as Agent ("Agent") and as sole
Lender thereunder ("First Union").
BACKGROUND
A. Pursuant to a Second Amended and Restated Credit Agreement
dated as of March 30, 2000 (as the same may be modified and amended from time
to time, including by the First Amendment dated as of November 17, 2000, and
by this Second Amendment, the "Credit Agreement"), First Union amended and
restated credit previously extended to Borrower in the form of a $35,000,000
term loan.
B. On January 26, 2001, February 1, 2001, March 5, 2001 and March
30, 2001, MS Acquisition Limited (the "Purchaser") contributed, respectively,
$3,000,000, $3,500,000, $2,500,000 and $2,000,000 in equity to the Borrower
(the "Capital Contributions").
C. In consideration of the Capital Contributions, Borrower has
agreed to issue (the "Issuance") eleven thousand (11,000) shares of its Series
C Convertible Paid-In-Kind Preferred Stock (the "Equity Interests") to the
Purchaser pursuant to a Preferred Stock Purchase Agreement to be dated no
later than May 31, 2001 between the Borrower and the Purchaser (the "Preferred
Stock Agreement").
D. Borrower has requested modifications to certain terms and
provisions of the Credit Agreement and waiver of certain Events of Default, to
which First Union is willing to agree on the terms and subject to the
condition set forth herein.
E. The Borrower and the Guarantors signatory hereto (each a
"Company," and collectively, the "Companies") are party to that certain Credit
Agreement dated Xxxxx 00, 0000 (xx amended from time to time, the "Revolver")
with the lenders identified therein ("Revolver Lenders") and The Chase
Manhattan Bank, as agent (the "Revolver Agent").
F. The Companies have advised the Revolver Agent and the Revolver
Lenders that "Events of Default" have occurred under: (i) Section 11.1(d) of
the Revolver as a result of the Companies' failure to comply with the covenant
set forth in Section 8.1(a) of the Revolver for the Fiscal Year ended December
31, 2000; (ii) Section 11.1(e) of the Revolver as a result of the Companies'
failure to deliver certain items to the Revolver Agent by March 15, 2001 as
required by Section 4.6 of the Second Amendment to the Revolver; and (iii)
Section 11.1(j) of the Revolver as a result of the "Term Defaults" described
below (collectively the "Revolver Covenant Defaults" and the covenants
described in this clause F., herein the "Violated Revolver Covenants"). In
accordance with the Revolver, the Companies have requested that the Revolver
Agent and the Revolver Lenders waive the Revolver Covenant Defaults.
G. The Revolver Covenant Defaults constitute an existing Event of
Default under Paragraph 7.1(c) of the Credit Agreement. The Revolver Covenant
Defaults, together with any cross defaults under the Revolver arising out of
Defaults under the Credit Agreement, are herein referred to as the "Existing
Revolver Defaults."
H. The Borrower has advised the Agent that "Events of Default"
have occurred under Paragraph 2.7(b)(i)(C) of the Credit Agreement as a result
of the Borrower's failure to pay the net cash proceeds of the
Capital Contributions to the Agent for the benefit of the Lenders (the
"Violated Term Covenant") which Event of Default, together with the existing
Event of Default under Section 7.1(c) of the Credit Agreement, are herein
referred to as the "Term Defaults."
I. The Companies have requested that the Revolver Lenders (a)
waive the Existing Revolver Defaults, (b) decrease the Minimum EBITDA amount
required as of March 31, 2001 (the "Minimum EBITDA Amendment"); (c) amend the
method of calculating the Borrowing Base and the advance percentage under the
Revolver (the "Borrowing Base Amendment"); and (d) make certain other
amendments to the Revolver (together with the Minimum EBITDA Amendment and the
Borrowing Base Amendment, the "Revolver Amendments"), all pursuant to a Third
Amendment to Credit Agreement dated as of the date hereof (the "Third Revolver
Amendment"), in order that the Companies will be in compliance with the terms
and covenants of the Revolver.
J. Pursuant to Section 2.20(a) of the Intercreditor Agreement
dated as of March 30, 2000 (the "Intercreditor Agreement"), among the
Companies, the Revolver Agent and the Agent, the approval of the Required
Lenders (as defined in the Intercreditor Agreement) is required to adopt the
Borrowing Base Amendment.
K. The Borrower has requested that First Union: (a) consent to
the Minimum EBITDA Amendment and the Borrowing Base Amendment; (b) amend the
Credit Agreement to reflect the terms of the Revolver Amendments; and (c)
waive the Term Defaults.
NOW, THEREFORE, in consideration of the foregoing premises and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows.
1. DEFINITIONS
(a) GENERAL RULE. Unless otherwise defined herein, terms
used herein which are defined in the Credit Agreement shall have the
respective meanings assigned to them in the Credit Agreement.
(b) AMENDED DEFINITION. The following definition
contained in Section 1.1 of the Credit Agreement is hereby amended and
restated to read in its entirety as follows:
"EBITDA" means, for any period and any Person, the total of the
following, each calculated without duplication for such Person on a
consolidated basis for such period: (a) Net Income; plus (b) any
provision for (or less any benefit from) income or franchise taxes
included in determining Net Income; plus (c) interest expense deducted in
determining Net Income; plus (d) amortization and depreciation expense
deducted in determining Net Income; provided that, with respect to the
Borrower, such amortization includes the impairment write-off of
approximately $307,000,000 recorded in the Fiscal Quarter ended December
31, 2001.
2. AMENDMENT TO PARAGRAPH 5.3. Paragraph 5.3 of the
Credit Agreement is amended to read in its entirety as follows:
5.3 ANNUAL FINANCIAL STATEMENTS. Furnish
to each Lender within ninety (90) days after
the close of each Fiscal Year audited
consolidated and consolidating annual
financial statements, including the
information required under Paragraph 5.2
hereof, which financial statements shall be
prepared in accordance with GAAP and shall be
certified without
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qualification (and without comment as to the
accountant's opinion whether the Borrower is a
going concern or can in the future continue to
be a going concern; provided, however, that
qualifications with respect to changes in GAAP
as to which Borrower's independent certified
public accountants have concurred shall be
permitted) by an independent certified public
accounting firm reasonably satisfactory to
Agent; and cause Agent to be furnished, at the
time of the completion of the annual audit,
with copies of any management letters prepared
by such accountants and with a certificate
signed by such accountants to the effect that
to the best of their knowledge there exists no
Event of Default or Default hereunder;
provided that the annual audit report
delivered for the Fiscal Year ended December
31, 2000 may contain the accountant's comment
that there is substantial doubt about the
Borrower's ability to continue as a going
concern.
3. AMENDMENT TO PARAGRAPH 5.16. Paragraph 5.16 of the
Credit Agreement is amended to read in its entirety as follows:
5.16 MINIMUM EBITDA. As of each date set
forth in the table below, Borrower shall cause
its EBITDA calculated for the four (4) Fiscal
Quarters then ended (or, if as of such date
less than four (4) Fiscal Quarters have
elapsed since September 30, 2000, then for the
Fiscal Quarters that have completely elapsed
since September 30, 2000), to be not less than
the amount set forth below opposite the
applicable date:
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Date Amount
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December 31, 2000 $ 9,000,000
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March 31, 2001 $14,250,000
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June 30, 2001 $25,400,000
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September 30, 2001 $34,000,000
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December 31, 2001 $39,000,000
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4. AMENDMENTS TO PARAGRAPHS 5.17 AND 5.18. Each of
Paragraphs 5.17 and 5.18 of the Credit Agreement are amended to add a new
sentence immediately after the table contained therein to read in its
entirety as follows:
If the EBITDA of Borrower for the two (2)
Fiscal Quarters ended March 31, 2001 is equal
to or greater than $14,250,000, then
compliance with this covenant for the Fiscal
Quarter ended March 31, 2001 is not required
but shall be required with respect to all
other Fiscal Quarters.
5. CONDITIONS. The effectiveness of this Second
Amendment is subject to the conditions precedent that no Default or Event
of Default (other than the Term Defaults) and no event or condition that
would have a Material Adverse Effect shall exist as of the effective date
hereof and the Agent shall have received all of the following, all in
form and substance acceptable to the Agent and its legal counsel, Xxxxxx
Xxxxxxxx LLP, and dated (unless other indicated or not applicable) the
date hereof:
(a) on or before April 27, 2001,
(i) AUDIT REPORT. An annual audit report for the
Borrower for the Fiscal Year ended December 31, 2000 in the
form required by Section 8.1(a) of the Revolver; and
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(ii) THIRD REVOLVER AMENDMENT. The Third Revolver
Amendment executed by all parties thereto; and
(b) on or before May 31, 2001:
(i) a landlord or mortgage waiver duly completed
and executed for each location where any of its Collateral is
located;
(i) lien acknowledgments from each third-party in
possession of Collateral and any other documents or
instruments necessary to create, preserve, protect and perfect
the Liens of the Agent for the benefit of the Lenders in the
Collateral;
(ii) true and correct copies of the Preferred Stock
Agreement and any other documents evidencing the Issuance, in
form and substance satisfactory to the Lenders, including,
without limitation, provisions subordinating any amounts due
by the Borrower in connection with the Equity Interests and
any related documents to amounts due by the Borrower under the
Credit Agreement and the Loan Documents;
(iii) A certificate of an Authorized Officer of
Borrower dated the date of consummation of the Issuance to the
effect that: (A) all conditions to the Issuance have been
satisfied, and the Issuance is being consummated in accordance
with its terms, as stated in the Preferred Stock Agreement,
without waiver of any material term or provision thereof by
Borrower; (B) all conditions to the Issuance set forth herein
or in the Credit Agreement (as modified hereby) have been
satisfied; and (C) there is no Event of Default or Default
under the Credit Agreement (as modified hereby) in existence
or which would be caused by the Issuance;
(iv) certificates of the appropriate government
officials for the states of Massachusetts, Oregon and
Washington as to the authority of Marketing Specialists Sales
Company to conduct business in such states;
(v) amendments or other modifications to the
promissory notes originally executed by Richmont Marketing
Specialist, Inc. and otherwise described below changing the
subordination provisions thereof to reflect that all the
"Obligations" (as defined in the Revolver) and all the Term
Loan Obligations are senior debt under the subordination
provisions thereof; and
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Payee Original Principal Amount
=========================================
Xxxxx Xxxxxxxx $174,116.02
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Barney Deal $148,061.35
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Xxxxxx Xxxx $ 28,554.82
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Xxxx Xxxxx $ 5,808.29
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Xxxx Xxxxxxx $ 87,057.78
-----------------------------------------
Xxxx Xxxxxxxxxx $174,116.02
-----------------------------------------
(vi) ATTORNEYS' FEES AND EXPENSES. Evidence that
the costs and expenses (including attorneys' fees) referred to
in Paragraph 5.11 of the Credit Agreement, to the extent
incurred and invoiced, have been paid in full.
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6. CONSENTS; WAIVERS OF THE TERM DEFAULTS. The Lender
hereby consents to the Revolver Amendments and waives the Term Defaults
and agrees not to exercise any rights or remedies available as a result
of the occurrence thereof. To induce the Lender to agree to the
foregoing, the Borrower agrees that this consent and waiver shall not
constitute and shall not be deemed a consent of any other amendment to
the Revolver or a waiver of any other Default or Event of Default,
whether arising as a result of any further violation of the Violated Term
Covenants or otherwise, or a waiver of any rights or remedies arising as
a result of other Default or Event of Default. The failure to comply
with the Violated Term Covenants for any date, or any period ending on
any date, other than as described above in the definition of Term
Defaults shall constitute an Event of Default.
7. RATIFICATIONS. Except as expressly modified and
superseded by this Second Amendment, the terms and provisions of the
Credit Agreement and the other Loan Documents are ratified and confirmed
and shall continue in full force and effect. Borrower, the Agent and the
Companies party hereto agree that the Credit Agreement as amended hereby
and the other Loan Documents shall continue to be legal, valid, binding
and enforceable in accordance with their respective terms, subject to the
terms and conditions of the Amended and Restated Intercreditor Agreement.
8. REPRESENTATIONS AND WARRANTIES. Each Company
represents and warrants to Lenders and Agent that:
(a) The information supplied to Lenders and Agent with respect to
the Revolver Amendments, the Existing Revolver Defaults and the Term
Defaults is true and correct in all material respects, and does not
contain any untrue statement of material fact or omit to state a material
fact necessary in order to make the statements contained in such
information not misleading.
(b) Except to the extent such violation, Default or Event of
Default is expressly waived or consented to by this Second Amendment, the
entering into of the Third Revolver Amendment and the Amended and
Restated Intercreditor Agreement, on the terms set forth herein have not
and will not violate any term or provision of the Credit Agreement or
result in any Default or Event of Default thereunder.
(c) The representations and warranties set forth in the Credit
Agreement, the Amended and Restated Intercreditor Agreement, and each of
the Loan Documents are true and correct in all material respects as of
the date hereof, after giving effect to the Third Revolver Amendment, the
Amended and Restated Intercreditor Agreement, and this Second Amendment.
(d) No term or provision of the Indenture will be violated by, and
no redemption or other rights of the holders of the Richmont Subordinated
Notes will be triggered by, the entering into of the Third Revolver
Amendment, the Amended and Restated Intercreditor Agreement or any
related transactions, including the incurrence of Indebtedness (as
defined in the Indenture) pursuant thereto.
(e) Except as effectively consented to or waived in writing by the
Revolver Lenders and/or Revolver Agent, no term or provision of the
Revolver will be violated by the entering into of the Third Revolver
Amendment, the Amended and Restated Intercreditor Agreement or any
related transactions.
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9. REFERENCE TO CREDIT AGREEMENT. Each of the Loan
Documents, including the Credit Agreement and any and all other
agreements, documents, or instruments now or hereafter executed and
delivered pursuant to the terms hereof or pursuant to the terms of the
Credit Agreement as amended hereby, are hereby amended so that any
reference in such Loan Documents to the Credit Agreement shall mean a
reference to the Credit Agreement as amended hereby.
10. EXPENSES OF AGENT. Borrower agrees to pay on demand
all costs and expenses incurred by Agent in connection with the
preparation, negotiation, and execution of this Second Amendment and the
other Loan Documents executed pursuant hereto, including without
limitation, the costs and fees of Agent's legal counsel.
11. SEVERABILITY. Any provision of this Second Amendment
held by a court of competent jurisdiction to be invalid or unenforceable
shall not impair or invalidate the remainder of this Second Amendment and
the effect thereof shall be confined to the provision so held to be
invalid or unenforceable.
12. APPLICABLE LAW. This Second Amendment and all other
Loan Documents executed pursuant hereto shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
and the applicable laws of the United States of America.
13. SUCCESSORS AND ASSIGNS. This Second Amendment is
binding upon and shall inure to the benefit of Agent, each Lender and the
Borrower and its respective successors and assigns, except Borrower may
not assign or transfer any of its rights or obligations hereunder without
the prior written consent of the Agent.
14. SECTION COUNTERPARTS. This Second Amendment may be
executed in one or more counterparts and on telecopy counterparts, each
of which when so executed shall be deemed to be an original, but all of
which when taken together shall constitute one and the same agreement.
15. EFFECT OF WAIVER. No consent or waiver, express or
implied, by Agent or any Lender to or for any breach of or deviation from
any covenant, condition or duty by Borrower shall be deemed a consent or
waiver to or of any other breach of the same or any other covenant,
condition or duty.
16. HEADINGS. The headings, captions, and arrangements
used in this Second Amendment are for convenience only and shall not
affect the interpretation of this Second Amendment.
17. WAIVER AND RELEASE. IN ADDITION, TO INDUCE THE AGENT
AND THE LENDERS TO AGREE TO THE TERMS OF THIS SECOND AMENDMENT, THE
BORROWER AND EACH GUARANTOR REPRESENTS AND WARRANTS THAT AS OF THE DATE
OF ITS EXECUTION OF THIS SECOND AMENDMENT THERE ARE NO CLAIMS OR OFFSETS
AGAINST OR DEFENSES OR COUNTERCLAIMS TO ITS OBLIGATIONS UNDER THE LOAN
DOCUMENTS AND IN ACCORDANCE THEREWITH IT:
(i) WAIVER. WAIVES ANY AND ALL SUCH CLAIMS, OFFSETS, DEFENSES OR
COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE DATE OF
ITS EXECUTION OF THIS SECOND AMENDMENT AND
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(ii) RELEASE. RELEASES AND DISCHARGES THE AGENT AND THE LENDERS,
AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
SHAREHOLDERS, AFFILIATES AND ATTORNEYS (COLLECTIVELY THE "RELEASED
PARTIES") FROM ANY AND ALL OBLIGATIONS, INDEBTEDNESS, LIABILITIES,
CLAIMS, RIGHTS, CAUSES OF ACTION OR DEMANDS WHATSOEVER, WHETHER KNOWN
OR UNKNOWN, SUSPECTED OR UNSUSPECTED, IN LAW OR EQUITY, WHICH THE
BORROWER OR ANY GUARANTOR EVER HAD, NOW HAS, CLAIMS TO HAVE OR MAY
HAVE AGAINST ANY RELEASED PARTY ARISING PRIOR TO THE DATE HEREOF AND
FROM OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
18. ENTIRE AGREEMENT. THIS SECOND AMENDMENT AND ALL OTHER
INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN
CONNECTION WITH THIS SECOND AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT
AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THIS SECOND AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR
DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG
THE PARTIES HERETO.
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IN WITNESS WHEREOF, the undersigned have executed this Second
Amendment to Credit Agreement the day and year first above written.
Attest: MARKETING SPECIALISTS CORPORATION
By:_________________________ By:____________________________
Name: Name:
Title: Title:
FIRST UNION NATIONAL BANK, as sole
Lender and as Agent
By:____________________________
Name:
Title:
Each of the undersigned Guarantors, intending to be legally bound
hereby, does hereby acknowledge and agree (i) to the terms of the foregoing
Second Amendment to Credit Agreement (the "Second Amendment"); (ii) that the
Second Amendment shall not in any way adversely affect or impair the
obligations of the undersigned to Lenders under that certain Second Amended
and Restated Guaranty Agreement from the Guarantors to First Union National
Bank dated as of March 30, 2000, as amended (the "Guaranty"), or under any
documents in connection therewith or collateral thereto; (iii) all sums
advanced under the Notes referenced in the Credit Agreement and all accrued
and unpaid interest thereon constitute "Guaranteed Obligations" under the
Guaranty; and (iv) the Guaranty and all such other Loan Documents are hereby
ratified, confirmed and continued, all as of this 19th day of April, 2001.
Attest: MARKETING SPECIALISTS SALES COMPANY
By:_________________________ By:_________________________
Name: Name:
Title: Title:
Attest: XXXX XXXXX ASSOCIATES, INC.
By:_________________________ By: _________________________
Name: Name:
Title: Title:
Attest: THE SALES FORCE COMPANIES, INC.
By:_________________________ By:_________________________
Name: Name:
Title: Title:
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