EXHIBIT 6
AMENDMENT
AMENDMENT, dated as of December 31, 1998 (this "AMENDMENT"), to the
Second Amended and Restated Credit Agreement, dated as of June 18, 1998 (as
heretofore amended, the "CREDIT AGREEMENT") among RECOTON CORPORATION, a New
York corporation (the "BORROWER"), the several banks and other financial
institutions from time to time parties thereto (the "LENDERS") and THE CHASE
MANHATTAN BANK, as Administrative Agent for the Lenders (in such capacity, the
"ADMINISTRATIVE AGENT").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to
make, and have made, certain loans and other extensions of credit to the
Borrower; and
WHEREAS, the Borrower has requested, and, upon this Amendment becoming
effective, the Lenders have agreed, that certain provisions of the Credit
Agreement be amended in the manner provided for in this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the
premises contained herein, the parties hereto hereby agree as follows:
SECTION I.I. AMENDMENTS
1.1. AMENDMENTS TO SUBSECTION 1.1. (a) Subsection 1.1 of the Credit
Agreement is hereby amended by inserting, in the appropriate alphabetical order,
the following new definitions:
"CONSOLIDATED TOTAL CAPITALIZATION": at any time, the sum of
Consolidated Net Worth on such date and Consolidated Indebtedness on such
date.
"HONG KONG SUBSIDIARIES": any Subsidiary of the Borrower that is
organized under the laws of Hong Kong.
"INTEREST COVERAGE RATIO": for any period, the ratio of (a) EBITDA for
such period to (b) Consolidated Interest Expense for such period.
"PRIORITY DEBT": the sum (without duplication) of (a) all Indebtedness
of the Borrower and its Subsidiaries secured by Liens other than Liens
permitted by clauses (a) through (f) and (j) and (l) of subsection 7.3 and
(b) all Indebtedness of Subsidiaries (other than Indebtedness (i) owing to
the Borrower or other Subsidiaries that are Guarantors or (ii) in respect
of Guarantee Obligations subject to the intercreditor sharing provisions of
the Sharing Agreement).
"SENIOR DEBT TO CAPITALIZATION RATIO": at any time, the ratio of (a)
all Senior Indebtedness of the Borrower and its Subsidiaries outstanding on
such date plus all Senior Guarantee Obligations of the Borrower and its
Subsidiaries in respect of Indebtedness of other Persons outstanding on
such date to (b) Consolidated Total Capitalization on such date.
"SHARING AGREEMENT": the First Amended and Restated Sharing Agreement
dated as of September 1, 1998, among the Lenders and the holders of Senior
Notes.
"TOTAL DEBT TO CAPITALIZATION RATIO": at any time, the ratio of (a)
all Indebtedness of the Borrower and its Subsidiaries outstanding on such
date plus all Guarantee Obligations of the Borrower and its Subsidiaries in
respect of Indebtedness of other Persons outstanding on such date to (b)
Consolidated Total Capitalization on such date.
(b) Subsection 1.1 of the Credit Agreement is hereby amended by
deleting therefrom the definition of "Senior Notes" and inserting in lieu
thereof the following new definition of "Senior Notes":
"SENIOR NOTES": collectively, the Adjustable Rate Senior Notes of the
Borrower due January 6, 2007 and the Adjustable Rate Senior Notes of the
Borrower due September 1, 2008.
1.2. AMENDMENT TO SECTION 4. Section 4 of the Credit Agreement is
hereby amended by inserting therein a new subsection 4.18 as follows:
"4.18 YEAR 2000 MATTERS" 4.18 YEAR 2000 MATTERS. Any
reprogramming required to permit the proper functioning (but only to
the extent that such proper functioning would otherwise be impaired by
the occurrence of the year 2000) in and following the year 2000 of
computer systems and other equipment containing embedded microchips,
in either case owned or operated by the Borrower or any of its
Subsidiaries or used or relied upon in the conduct of their business
(including any such systems and other equipment supplied by others or
with which the computer systems of the Borrower or any of its
Subsidiaries interface), and the testing of all such systems and other
equipment as so reprogrammed, will be completed by June 30, 1999. The
costs to the Borrower and its Subsidiaries that have not been incurred
as of the date hereof for such reprogramming and testing and for the
other reasonably foreseeable consequences to them of any improper
functioning of other computer systems and equipment containing
embedded microchips due to the occurrence of the year 2000 could not
reasonably be expected to result in a Default or Event of Default or
to have a Material Adverse Effect. Except for any reprogramming
referred to above, the computer systems of the Borrower and its
Subsidiaries are and, with ordinary course upgrading and maintenance,
will continue for the term of this Agreement to be, sufficient for the
conduct of their business as currently conducted."
1.3. AMENDMENT TO SUBSECTION 6.9. Subsection 6.9 of the Credit
Agreement is hereby amended by inserting, at the end thereof, the following new
sentence:
"At such time as the Borrower shall have (i) caused 65% of
each class of the Capital Stock of each PRC Subsidiary and Hong Kong
Subsidiary to have been pledged to a collateral agent acceptable to the
Required Lenders to secure PARI PASSU the obligations of the Borrower
(x) under this Agreement, (y) in respect of the Senior Notes and (z) in
respect of any other senior payment obligations of the Borrower to
Chase, pursuant to a pledge agreement in form and substance
satisfactory to the Required Lenders, and (ii) taken such action to
perfect such pledge, and delivered such additional documentation with
respect thereto (including acceptable legal opinions) as may be
reasonably required by the Required Lenders, then, upon delivery by the
Administrative Agent to the Borrower of a written notice confirming the
completion of the matters specified in the foregoing clauses (i) and
(ii), any Hong Kong Subsidiaries that are Guarantors shall be deemed
released from their obligations under the Guarantee, effective as of
the date given."
1.4. AMENDMENT TO SUBSECTION 7.1. Effective as of the date of this
Amendment, subsection 7.1 is hereby amended by deleting such subsection in its
entirety and inserting in lieu thereof the following new subsection 7.1
(provided, however, that solely for the purposes of calculating compliance with
subsection 7.1(h) for the period ending December 31, 1998, such calculation
shall be made as if the Subordinated Indebtedness contemplated pursuant to
section 1.6 of this Amendment had been issued and sold on December 31, 1998):
"7.1 FINANCIAL CONDITION COVENANTS.
(a) QUICK ASSETS RATIO. Permit at the end of any fiscal quarter set
forth below, the ratio of (x) the sum of (i) cash and Cash Equivalents of
the Borrower and its Subsidiaries at such time plus (ii) the amount shown
on a consolidated balance sheet of the Borrower and its Subsidiaries at
such time as accounts receivable (less provision for doubtful accounts) at
such time to (y) Consolidated Current Liabilities at such time to be less
than the ratio set forth opposite such period below:
FISCAL QUARTERS ENDING: RATIO
December 31, 1998 0.80 to 1.00
March 31 in each year 1.00 to 1.00
June 30 in each year 0.80 to 1.00
September 30 in each year 0.80 to 1.00
December 31 in each year other than 1998 1.00 to 1.00
(b) MAINTENANCE OF TANGIBLE NET WORTH. Permit Consolidated Tangible
Net Worth (i) on December 31, 1998 to be less than $100,000,000 or (ii) at
any time thereafter, to be less than the sum of (w) $100,000,000 plus (x)
an amount equal to the sum of 50% of Consolidated Net Income (but only if
positive) for each fiscal year ending after December 31, 1998 plus (y) an
amount equal to the Net Cash Proceeds from the first public offering of
Capital Stock of the Borrower after December 31, 1998 plus (z) an amount
equal to the sum (but only if positive) of (A) the aggregate amount of Net
Cash Proceeds from all issuances of Capital Stock of the Borrower other
than, and subsequent to, the issuance of Capital Stock referred to in the
preceding clause (y) minus (B) the portion of such Net Cash Proceeds used
by the Borrower or any Subsidiary to acquire Consolidated Intangibles (it
being understood that in any case where the Borrower or any Subsidiary
shall utilize any such Net Cash Proceeds to finance the acquisition of any
Person or business, the portion of such Net Cash Proceeds used by the
Borrower or such Subsidiary to acquire Consolidated Intangibles shall be
deemed to be equal to the amount, if any, of the increase in the amount of
Consolidated Intangibles directly resulting from such acquisition).
(c) FIXED CHARGE COVERAGE. Permit the Fixed Charge Total Debt Coverage
Ratio as of the end of any fiscal quarter to be less than 1.25 to 1.00.
(d) TOTAL DEBT LEVERAGE RATIO. Permit the Total Debt Leverage Ratio at
any time to be greater than 5.00 to 1.00.
(e) SENIOR DEBT LEVERAGE RATIO. Permit the Senior Debt Leverage Ratio
at any time during any fiscal quarter set forth below to be greater than
the amount set forth opposite such fiscal quarter below:
FISCAL QUARTERS ENDING: RATIO
December 31, 1998 4.50 to 1.00
March 31, 1999 4.50 to 1.00
June 30, 1999 4.25 to 1.00
September 30, 1999 4.25 to 1.00
December 31, 1999 and thereafter 4.00 to 1.00
(f) INTEREST COVERAGE RATIO. Permit the Interest Coverage Ratio for
any period of four consecutive fiscal quarters to be less than 2.50 to
1.00.
(g) TOTAL DEBT TO CAPITALIZATION RATIO. Permit the Total Debt to
Capitalization Ratio at any time to be greater than 0.65 to 1.00.
(h) SENIOR DEBT TO CAPITALIZATION RATIO. Permit the Senior Debt to
Capitalization Ratio at any time to be greater than 0.55 to 1.00.
(i) PRIORITY DEBT. Permit Priority Debt at any time to exceed 15% of
Consolidated Tangible Net Worth."
1.5. FURTHER AMENDMENT TO SUBSECTION 7.1. Notwithstanding the
provisions of subsection 1.3 of this Amendment, effective as of the date upon
which the Borrower receives aggregate Net Cash Proceeds of at least $75,000,000
from the issuance and sale of Capital Stock and/or Subordinated Indebtedness,
subsection 7.1 shall be further amended as follows:
(a) by deleting subsection 7.1(a) in its entirety and inserting in
lieu thereof the following new subsection 7.1(a):
"(a) QUICK ASSETS RATIO. Permit at the end of any fiscal quarter set
forth below, the ratio of (x) the sum of (i) cash and Cash Equivalents of
the Borrower and its Subsidiaries at such time plus (ii) the amount shown
on a consolidated balance sheet of the Borrower and its Subsidiaries at
such time as accounts receivable (less provision for doubtful accounts) at
such time to (y) Consolidated Current Liabilities at such time to be less
than the ratio set forth opposite such period below:
FISCAL QUARTERS ENDING: RATIO
December 31, 1998 0.80 to 1.00
March 31, 1999 and thereafter 1.00 to 1.00";
(b) by deleting subsection 7.1(e) in its entirety and inserting in
lieu thereof the following new subsection 7.1(e):
"(e) SENIOR DEBT LEVERAGE RATIO. Permit the Senior Debt Leverage Ratio
at any time during any fiscal quarter set forth below to be greater than
the amount set forth opposite such fiscal quarter below:
FISCAL QUARTERS ENDING: RATIO
December 31, 1998 4.50 to 1.00
March 31, 1999 4.50 to 1.00
June 30, 1999 and thereafter 3.50 to 1.00";
(c) by deleting subsection 7.1(h) in its entirety and inserting in
lieu thereof the following new subsection 7.1(h):
"(h) SENIOR DEBT TO CAPITALIZATION RATIO. Permit the Senior Debt to
Capitalization Ratio at any time during any fiscal quarter set forth below
to be greater than the ratio set forth opposite such fiscal quarter below:
FISCAL QUARTERS ENDING: RATIO
December 31, 1998 0.55 to 1.00
March 31, 1999 0.55 to 1.00
June 30, 1999 and thereafter 0.50 to 1.00".
1.6. AMENDMENT TO SUBSECTION 7.2. Subsection 7.2(i) of the Credit
Agreement is hereby amended by deleting such subsection in its entirety and
inserting in lieu thereof the following new subsection 7.2(i):
"(i) Subordinated Indebtedness of the Borrower in an amount not to
exceed $150,000,000."
1.7. AMENDMENT TO SUBSECTION 7.3. Subsection 7.3(l) of the Credit
Agreement is hereby amended by inserting, at the end thereof but before the
period ("."), the following: "and any Liens granted by the Borrower or any
Subsidiary with respect to the PRC Subsidiaries and Hong Kong Subsidiaries
pursuant to subsection 6.9 hereof".
1.8. AMENDMENT TO SUBSECTION 7.6. Subsection 7.6 of the Credit
Agreement is hereby amended by deleting such subsection in its entirety and
inserting in lieu thereof the following new subsection 7.6:
"7.6 FAR EAST SUBSIDIARIES. (a) Permit on the last day of any
fiscal quarter the sum of the Total Assets (as reported on the
consolidating financial statements referred to in subsection 6.1) of
the PRC Subsidiaries (less any such amount attributable to accounts
receivable due to any PRC Subsidiary from the Borrower or any
Subsidiary of the Borrower that is a Guarantor) to be greater than an
amount equal to 20% of Consolidated Tangible Net Worth determined as of
such day.
(b) Permit on the last day of any fiscal quarter the sum of
the Total Assets (as reported on the consolidating financial statements
referred to in subsection 6.1) of the PRC Subsidiaries and the Hong
Kong Subsidiaries (collectively, the "Far East Subsidiaries") (less any
such amount attributable to accounts receivable due to any Far East
Subsidiary from the Borrower or any Subsidiary of the Borrower that is
a Guarantor and not a Far East Subsidiary) to be greater than an amount
equal to 40% of Consolidated Tangible Net Worth determined as of such
day."
1.9. CONSENT TO TERMS OF SUBORDINATED INDEBTEDNESS. The Lenders hereby
consent to the terms and conditions of the Subordinated Indebtedness and the
Subordinated Guarantee Obligations relating thereto substantially in the form of
the January 29, 1999 draft of the Securities Purchase Agreement with respect
thereto, such Subordinated Indebtedness to be issued and sold by the Borrower in
an aggregate principal amount of $35,000,000.
SECTION II. MISCELLANEOUS
2.1. REPRESENTATIONS AND WARRANTIES. On and as of the date hereof
and after giving effect to this Amendment, the Borrower hereby confirms,
reaffirms and restates the representations and warranties set forth in Section 4
of the Credit Agreement MUTATIS MUTANDIS, except to the extent that such
representations and warranties expressly relate to a specific earlier date in
which case the Borrower hereby confirms, reaffirms and restates such
representations and warranties as of such earlier date, PROVIDED that the
references to the Credit Agreement in such representations and warranties shall
be deemed to refer to the Credit Agreement as amended prior to the date hereof
and pursuant to this Amendment.
2.2. EFFECTIVENESS. This Amendment shall become effective as of the
date hereof upon:
(a) receipt by the Administrative Agent of counterparts of this
Amendment duly executed and delivered by each of the Borrower, the
Administrative Agent and the Required Lenders;
(b) receipt by the Administrative Agent of an executed legal opinion
of Stroock & Stroock & Xxxxx LLP, counsel to the Borrower and the other
Loan Parties, substantially in the form of ANNEX A attached hereto;
(c) the Borrower having issued and sold Subordinated Indebtedness as
contemplated by subsection 1.6 of this Amendment in an aggregate principal
amount of $35,000,000;
(d) receipt by the Administrative Agent of amendments or waivers to
the Note Purchase Agreements with respect to the Senior Notes in form and
substance satisfactory to the Required Lenders; and
(e) receipt by the Administrative Agent of an amendment fee of
$125,000, to be shared pro rata among the Lenders.
2.3. CONTINUING EFFECT; NO OTHER AMENDMENTS. Except as expressly set
forth in this Amendment, all of the terms and provisions of the Credit Agreement
are and shall remain in full force and effect and the Borrower shall continue to
be bound by all of such terms and provisions. The amendments provided for herein
are limited to the specific subsections of the Credit Agreement specified herein
and shall not constitute an amendment of, or an indication of the Administrative
Agent=s or the Lenders= willingness to amend or waive, any other provisions of
the Credit Agreement or the same subsections for any other date or purpose.
2.4. SEVERABILITY. Any provision of this Amendment which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenfor ceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
2.5. INTEGRATION. This Amendment represents the agreement of the
Borrower and the Administrative Agent with respect to the subject matter hereof
and thereof, and there are no promises, undertakings, representations or
warranties by the Administrative Agent relative to the subject matter hereof and
thereof not expressly set forth or referred to herein.
2.6. EXPENSES. The Borrower agrees to pay and reimburse the
Administrative Agent for all its reasonable costs and expenses incurred in
connection with the preparation and delivery of this Amendment, including,
without limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent.
2.7. COUNTERPARTS. This Amendment may be executed by one or more of
the parties to this Amendment on any number of separate counterparts (including
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Amendment
signed by the parties hereto shall be delivered to the Borrower and the
Administrative Agent.
2.8. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
RECOTON CORPORATION
By: /S/ STUART MONT
--------------------------------
Name: Stuart Mont
Title: Executive Vice
President-Operations
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By /S/ X. X. XXXXXXXXXXX
-----------------------------------
Name: X. X. Xxxxxxxxxxx
Title: Vice President
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
By: /S/ XXXXXXX X. XXXX
------------------------------------
Name: Xxxxxxx X. Xxxx
Title: First Vice President
XXXXXX TRUST AND SAVINGS BANK
By:--------------------------------------
Name:
Title:
MARINE MIDLAND BANK
By: /S/ XXXXXX X. XXXXXXX
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
FIRST UNION NATIONAL BANK
By: /S/ XXXXXXX X. XXXXXX
-----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President
THE UNDERSIGNED GUARANTORS HEREBY CONSENT AND AGREE TO THE
FOREGOING AGREEMENT AS OF THE DATE HEREOF:
Christie Design Corporation, a Delaware
corporation
InterAct Accessories, Inc., a Delaware
corporation
Recoton Audio Corporation, a Delaware
corporation
ReCone, Inc., a Delaware corporation
Recoton Home Audio, Inc., a California
corporation
Recoton Japan, Inc., an Illinois
corporation
Recoton International Holdings, Inc., a
Delaware corporation
Recoton European Holdings, Inc., a
Delaware corporation
AAMP of Florida, Inc., a Florida
corporation
By: /S/ STUART MONT
--------------------------------
Name: Stuart Mont
Title: Vice President
Recoton German Holdings GmbH, a
German corporation
Mac Audio
Electronic GmbH, a German
corporation
Magnat Audio-Produkte
GmbH, a German corporation Heco
Audio-Produkte GmbH, a German
corporation
Recoton Italia s.r.l.,
an Italian corporation
By: /S/ Xxxxxx Xxxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Director
Recoton Canada Ltd., a Canadian
corporation
By: /S/ STUART MONT
--------------------------------
Name: Stuart Mont
Title: President
Recoton (Far East) Limited, a Hong Kong
corporation
STD Holding Limited, a Hong Kong
corporation
STD Electronic International Limited, a
Hong Kong corporation
STD Manufacturing Limited, a Hong Kong
corporation
STD Plastic Industrial Limited, a Hong Kong
corporation
STD Trading Limited, a Hong Kong
corporation
Peak Hero Limited, a Hong Kong corporation
Ever Smart Management Limited, a Hong Kong
corporation
By: /S/ Xxxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Director
