THIRD AMENDMENT TO CREDIT AGREEMENT
AND OTHER TRANSACTION DOCUMENTS
This Third Amendment to Credit Agreement and Other Transaction
Documents (the "Agreement"), made as of the 17th day of May, 1999, by
and between FLEET NATIONAL BANK, a national banking association with
its principal office at 000 Xxxxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxx
Xxxxxx 00000, in its capacity as agent and as lender ("Lender")
(sometimes hereinafter referred to as "Agent" or "Lender", as
appropriate depending on responsibility) and FRENCH FRAGRANCES, INC.,
a Florida corporation with its principal place of business at
00000 X.X. 00xx Xxxxxx, Xxxxx Xxxxx, Xxxxxxx 00000 ("Borrower").
W I T N E S S E T H:
WHEREAS, pursuant to the terms and conditions of that certain
Credit Agreement dated May 13, 1997 between Borrower and Lender, as
amended by a First Amendment to Credit Agreement and Other Transaction
Documents dated as of December 31, 1997 and as further amended by a
Second Amendment to Credit Agreement and Other Transaction Documents
dated as of November 13, 1998 (as amended, the "Credit Agreement"),
Lender agreed to make a revolving credit loan available to Borrower,
subject to the terms and conditions of the Credit Agreement; and
WHEREAS, Borrower has requested and Lender has agreed to renew
the revolving credit loan facility; and
WHEREAS, Lender is willing to amend the Credit Agreement subject
to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth herein, and for good and valuable other
consideration, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Defined Terms.
All capitalized terms not defined herein shall have the same
meaning ascribed to such terms as provided in the Credit Agreement.
Section 2. Representations and Warranties.
Borrower hereby represents and warrants to Lender that:
(a) Borrower is duly organized, validly existing and in good
standing as a corporation in the state of its incorporation, and is in
good standing and is qualified to do business as a foreign corporation
in all other jurisdictions where it is required to be so qualified,
except such jurisdictions, if any, in which the failure to be so
qualified will not have a material adverse effect on the financial
condition, business, assets, operations or properties of Borrower.
Borrower has all requisite power and authority to own and lease its
assets and properties and to conduct its business in the manner
presently conducted by it.
(b) Borrower has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement and the
execution, delivery and performance by Borrower of this Agreement has
been duly authorized by all requisite action. This Agreement has been
duly executed and delivered by Borrower, and is the valid and binding
obligation of Borrower, enforceable against Borrower in accordance
with its respective terms.
(c) The execution, delivery and performance by Borrower of this
Agreement will not violate or contravene (i) the articles of
incorporation or by-laws of Borrower, (ii) any provision of any law,
rule or regulation applicable to Borrower, (iii) any order, writ,
judgment, injunction, decree, determination or award of any court or
other agency of government to which Borrower is bound, or (iv) any
other agreement, lease, indenture or instrument to which Borrower is a
party or by which Borrower is bound, or be in conflict with, result in
a breach of, or constitute (with due notice or lapse of time or both)
a default under, or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever, upon any
properties or assets of Borrower pursuant to any such other agreement,
lease, indenture or instrument.
(d) There is no action, suit or proceeding at law or in equity
or by or before any court, governmental instrumentality or other
agency pending, or to Borrower's knowledge, threatened against, or in
any way affecting Borrower which, if adversely determined, would have
a material adverse effect on the business, operations, properties,
assets or condition, financial or otherwise, of Borrower.
(e) No consent, approval or authorization from, or filing of any
declaration or statement with, any court, governmental instrumentality
or other agency is required in connection with or as a condition to
the execution, delivery or performance of this Agreement, by Borrower.
(f) Except as set forth in Schedule I attached hereto, Borrower
hereby reaffirms and restates, as of the date hereof, all of the
representations and warranties made by it in the Credit Agreement, as
amended by this Agreement, except to the extent altered by actions
permitted pursuant to the terms thereof or expressly contemplated
pursuant to the terms hereof, or to the extent Lender has been advised
in writing of any inaccuracy with respect to such representations
or warranties and have waived the same in writing.
(g) No Event of Default exists under the Credit Agreement, or
any event which, with the giving of notice or passage of time or both,
would constitute such an Event of Default, has occurred which has not
been waived in writing by Lender or which will not be cured upon the
execution and delivery by Borrower of this Agreement.
Section 3. Amendments to Credit Agreement.
The Credit Agreement is hereby amended, effective as of the date
hereof, as follows:
Section 3.01. Amendments to Definitions.
The definitions of "Applicable Eurodollar Rate Margin",
"Applicable Revolving Funded Debt Rate", "Borrowing Base", "Eligible
Inventory", "Revolving Credit Maturity Date" and "Subordinated
Debentures" set forth in Section 1.01 of the Credit Agreement are
hereby amended to read in their entirety as follows:
"Applicable Eurodollar Rate Margin" shall mean,
if the Funded Debt to then the Applicable
Capital Base is: Eurodollar Rate Margin is:
greater than
2.00 : 1.00 2.125%
less than or equal to
2.00 : 1.00 but greater than
1.50 : 1.00 1.875%
less than or equal
to 1.50 : 1.00 1.625%.
"Applicable Revolving Funded Debt Rate" shall mean the rate of
interest which corresponds to the Funded Debt to Capital Base ratio as
follows:
Funded Debt to
Capital Base Interest Rate
greater than 2.00:1.00 Prime Rate + .50%
less than or equal to 2.00:1.00 Prime Rate + .25%
but greater than 1.50:1.00
less than or equal to 1.50:1.00 Prime Rate.
"Borrowing Base" shall mean, as of any date, the sum of, without
duplication, (i) eighty-five percent (85%) of Approved Eligible
Accounts Receivable determined as of such date, plus, (ii) eighty
percent (80%) of Eligible Accounts Receivable (other than Approved
Eligible Accounts Receivable) determined as of such date, plus (iii)
fifty percent (50%) of Eligible In-House Inventory; provided that the
portion of the Borrowing Base derived from clause (iii) shall be
capped at Twenty-Five Million Dollars ($25,000,000), and provided
further that there shall be a reserve against total Eligible In-House
Inventory of One Million Two Hundred Thousand Dollars ($1,200,000).
The foregoing definition of "Borrowing Base", including the
respective percentages set forth therein, may be amended from time to
time by the execution and delivery of an Amendment Letter or other
written instrument executed by Borrower and Lenders.
"Eligible Inventory" shall mean the lower of fair market value or
cost of Borrower's inventory of raw materials, work-in-process and
finished goods determined on a consolidated FIFO basis in accordance
with GAAP which, as of the day preceding any calculation of the
Revolving Credit Commitment, is in good condition, meets all standards
imposed by any governmental agency or department or division thereof
having regulatory authority over such goods, their use, manufacture
and/or sale, is currently usable or currently saleable in the normal
course of the applicable Borrower's business, is not on consignment to
or from any Person and is not otherwise deemed by the Majority Lenders
in their reasonable discretion to be ineligible less any Ineligible
Inventory.
"Revolving Credit Maturity Date" shall mean May 31, 2002, as
extended from time to time by the execution and delivery of an
Amendment Letter or other written instrument executed and delivered by
Lenders hereunder.
"Subordinated Debentures" shall mean the FMG Subordinated
Debentures, the 7.5% Convertible Debentures, the JPF Debentures and
the PSI Debenture.
Section 3.02. Additional Definitions.
Section 1.01 of the Credit Agreement is hereby further amended by
adding the following new definitions:
"Ineligible Inventory" shall mean all inventory over fifty
percent (50%) of Inventory which is subject to a Non-Permissible
Licensing Agreement".
"Non-Permissible Licensing Agreement" shall mean any licensing
agreement for the manufacturing and distribution of fragrance products
and related cosmetic products which does not allow Agent, on behalf of
the Lenders, to sell the applicable Inventory back to the licensor at
cost or/and sell such Inventory for a period of at least ninety days
following notice by Agent to the licensor of its intention to do so in
the event such agreement is terminated.".
"PSI Debenture" shall mean the $500,000 Junior Subordinated
Debenture issued by Borrower to Xxxx Xxxxxxxxx, Inc.
Section 3.03. Amendment to Section 2.03.
Section 2.03 of the Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
"Section 2.03. The Revolving Credit Commitment.
(a) The Revolving Credit Commitment shall be equal to the
lesser of:
(i) the Borrowing Base as in effect from time to time, or
(ii) Fifty Million Dollars ($50,000,000).
(b) The Borrowing Base shall be adjusted upon Agent's review and
acceptance of (i) each monthly Borrowing Base Certificate submitted by
Borrower or (ii) any additional information obtained by Agent
(including any Request for Advance or updated Borrowing Base
Certificates) relating to the determination of Eligible Accounts
Receivable and Eligible Inventory.
(c) Borrower may, at its option, upon prepayment of all
outstanding principal of and interest on the Revolving Credit Notes in
accordance with the terms of Section 2.06 hereof, and upon thirty (30)
days' prior written notice to Agent, cancel the Revolving Credit
Commitment. Borrower may, at its option, upon thirty (30) days' prior
written notice to Agent, but not more frequently than two (2) times in
any fiscal year of Borrower, reduce the Revolving Credit Commitment by
an amount not less than One Hundred Thousand Dollars ($100,000), or,
if a greater amount, in integral multiples of Fifty Thousand Dollars
($50,000); provided, however, that the Revolving Credit Commitment
shall not at any time be reduced by operation of this Section 2.03(c)
to an amount less than the aggregate unpaid principal amount then
outstanding under the Revolving Credit Notes and to an amount equal to
the face amount of any Letters of Credit still outstanding. Any such
reduction or cancellation shall be irrevocable and shall not affect
any of the obligations or liabilities of Borrower to Lenders under the
Revolving Credit Notes (except to the extent prepaid).".
Section 3.04. Amendment to Section 2.07.
Section 2.07 of the Credit Agreement is hereby amended to read in
its entirety as follows:
"Section 2.07. Revolving Credit Unused Commitment Fee.
Borrower hereby agrees to pay to Agent for the account of each
Lender computed from the Closing Date to and including the Revolving
Credit Maturity Date, a revolving credit commitment fee in an amount
equal to the applicable percentage of the average daily unused
portion of the Revolving Credit Commitment (as in effect as of the
date of any determination thereof, giving effect to any adjustment
pursuant to Section 2.03) based on the following:
if the Funded Debt to then the Applicable
Capital Base is: Percentage is:
greater than
2.00 : 1.00 .375%
less than or equal to
2.00 : 1.00 but greater than
1.50 : 1.00 .25%
less than or equal
to 1.50 : 1.00 .25%.
payable quarterly in arrears, commencing July 31, 1997 and continuing
on the last day of each October, January, April and July thereafter
and payable upon payment in full of the Revolving Credit Notes and
cancellation of the Revolving Credit Commitment, and on the Revolving
Credit Maturity Date. Such fee shall be computed on the basis of a
360-day year, counting the actual number of days elapsed.".
Section 3.05. Amendment to Section 4.11.
Subsection (b) of Section 4.11 of the Credit Agreement is hereby
amended to read in its entirety as follows:
"(b) The aggregate outstanding amount of all Letters of Credit
issued pursuant hereto shall at no time exceed a face amount equal to
Ten Million Dollars ($10,000,000).".
Section 3.06. Amendment to Article V.
Article V of the Credit Agreement is hereby amended by adding the
following new subsection:
"Section 5.21. Year 2000.
To Borrower's knowledge, Borrower has taken or will take all
necessary action to assess, evaluate and correct all of the hardware,
software, embedded microchips and other processing capabilities it
uses so that it will be able to function properly and without
interruption or ambiguity using date information before, during and
after January 1, 2000.".
Section 3.07. Amendment to Section 7.09.
Section 7.09 of the Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
"Section 7.09. Shareholders' Equity Base. Maintain at the end
of each fiscal quarter Shareholders' Equity Base at least equal to
$60,000,000 ("Minimum Amount") from the Closing Date through and
including the fiscal quarter ending January 31, 1999; provided,
however, such Minimum Amount shall be increased ninety (90) days
following each fiscal year end after January 31, 1999 in an amount
equal to 50% of the net income of Borrower for the preceding
fiscal year, and; provided further, the Minimum Amount shall be
immediately increased by an amount equal to the net proceeds received
by Borrower as a result of any Public Offering, upon Borrower's
receipt of the net proceeds therefrom.".
Section 3.08. Amendment to Article VII.
Article VII of the Credit Agreement is hereby amended by adding a
new Section 7.13 as follows:
"Section 7.13. Distribution Agreements.
"With respect to distribution agreements entered into by Borrower
after the date of this Third Amendment (and excluding product acquired
through license agreements or purchase orders), Borrower agrees to use
commercially reasonable efforts to obtain the agreement of the
manufacturer to allow Borrower or Agent, (on behalf of the Lenders),
as the case may be, the right upon termination of the distribution
agreement, to sell the Inventory sold under such distribution
agreement for a period of at least ninety (90) days following
termination or to require the manufacturer to repurchase such
Inventory at cost. Upon execution of any such agreement, Borrower
agrees to deliver a copy to Lender."
Section 3.09. Amendment to Section 8.01.
Subsection (f) of Section 8.01 of the Credit Agreement is hereby
amended by deleting the numerical reference to "$12,560,034" and
replacing it with "$15,000,000".
Section 3.10. Amendment to Section 8.09.
Section 8.09 of the Credit Agreement is hereby amended by
deleting subsection (f) and replacing it with the following two
subsections:
"(f) provided no Event of Default exists, to the stockholders of
the Borrower in order to repurchase such shares in an amount up to an
aggregate of Five Million Dollars ($5,000,000); and
(g) additional Restricted Distributions (exclusive of those set
forth in subsections (a) through (f) hereof) in an amount not to
exceed $50,000 in the aggregate per annum.".
Section 3.11. Amendment to Section 8.10.
Section 8.10 of the Credit Agreement is hereby amended to read in
its entirety as follows:
"Section 8.10. Capital Expenditures. Make Capital Expenditures
during any fiscal year in excess of $4,000,000.".
Section 3.12. Amendment to Article IX.
Article IX of the Credit Agreement is hereby amended by deleting
in subsections (e) and (i) the numerical reference to "$100,000" and
replacing it in both places with "$500,000".
Section 3.13. Amendment to Article IX.
Article IX of the Credit Agreement is further amended by deleting
in subsection (k) the numerical reference to "$50,000" and replacing
it with "$250,000".
Section 3.14. Amended Exhibit.
Exhibit A attached hereto is hereby intended to replace Exhibit B
to the Credit Agreement and is hereby intended to read as Exhibit B -
Amended.
Section 4. Security Documents.
(a) Borrower and Lender each hereby confirm that all references
to the "Credit Agreement" or the "Agreement" in any of the Security
Documents shall be deemed to be references to the Credit Agreement as
amended hereby; that the obligations of Borrower under the Credit
Agreement, as amended hereby, and fees and expenses in connection
therewith constitute additional indebtedness, liabilities and
obligations of Borrower to Lender, all of which are secured by the
Security Documents, and that all references to "indebtedness" and/or
"obligations" secured by such instruments shall be deemed amended to
include all obligations of Borrower in respect of the Credit Agreement
as amended hereby.
(b) Borrower hereby ratifies and reaffirms its grant and
conveyance to Agent for the ratable benefit of the Lenders of a
security interest in and lien upon all collateral covered by any
of the Security Documents.
(c) Borrower and Lender each hereby confirm that nothing
contained herein or done pursuant hereto shall limit or be construed
to limit the security interest or lien previously granted by Borrower
to Agent for the ratable benefit of the Lender under any of the
Security Documents, or the priority thereof over other liens,
encumbrances and security interests. Except as amended hereby, the
Security Documents shall remain in full force and effect and Borrower
hereby ratifies and confirms the Security Documents in all other
respects, including, without limitation, the continuing grant of a
lien on and interest in the collateral covered thereby.
Section 5. Conditions Precedent to Second Amendment.
The effectiveness of the transactions described herein shall be
subject to the following conditions:
(a) This Agreement and the First Amendment to Security Agreement
shall have been executed and delivered by Borrower and Lender.
(b) The fees and disbursements of Lender and Lender's counsel
shall be paid in full on the Effective Date.
(c) Borrower shall have executed and/or delivered to Agent the
following:
(i) Certificate of the Secretary or Assistant Secretary of
Borrower certifying as to the due authorization, execution and
delivery by Borrower of this Agreement; and
(ii) Certificate of the Secretary or Assistant Secretary of
Borrower certifying as to the names of the officers of Borrower
authorized to sign this Agreement, and any other documents or
certificates to be delivered pursuant to this Agreement, together with
the true signatures of such officers. Lender may conclusively rely on
such certificates until Agent shall receive a further certificate of
the Secretary or an Assistant Secretary of Borrower canceling or
amending the prior certificate and submitting the signatures of the
officers named in such further certificate.
(d) All legal matters relating to this Agreement shall be
satisfactory to Lender and its counsel.
Section 6. Ratification.
Borrower hereby ratifies and confirms all of its obligations,
covenants, duties and agreements set forth in the Credit Agreement, as
amended by the terms hereof. All references to the "Credit Agreement"
or the "Agreement" contained in the Credit Agreement, the Notes, the
Security Documents and all other documents and instruments evidencing
obligations of Borrower under or in connection with the Credit
Agreement, the Notes or the Security Documents, shall be deemed to be
amended to refer to the Credit Agreement, as amended by the
terms hereof.
Section 7. Expenses.
All costs and expenses, including reasonable attorneys' fees,
relating to the negotiation, preparation, execution and delivery of
this Agreement and all instruments, agreements and documents
contemplated hereby shall be the responsibility of Borrower.
Section 8. Miscellaneous.
This Agreement shall be governed by and construed in accordance
with the laws of the State of Rhode Island applicable to contracts
made and to be performed within such State. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. The headings of the Articles and Sections of this
Agreement are inserted for convenience only and shall not constitute a
part hereof.
Section 9. No Defenses.
Borrower hereby acknowledges and agrees that the Credit
Agreement, as amended by the terms hereof, and the other Transaction
Documents are not subject as of the date hereof to any defenses,
rights of setoff, claims or counterclaims that might limit the
enforceability thereof.
Section 10. Facility Fee.
In consideration of Lender's commitment to enter into this
Agreement, Borrower hereby agrees to pay to Lender a facility fee
equal to One Hundred Thousand Dollars ($100,000).
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers hereunto duly authorized,
all as of the day and year first above written.
LENDER:
FLEET NATIONAL BANK
By /s/ Xxxxxxx X. Xxxxx
--------------------
Xxxxxxx X. Xxxxx
Senior Vice President
AGENT:
FLEET NATIONAL BANK
By /s/ Xxxxxxx X. Xxxxx
--------------------
Xxxxxxx X. Xxxxx
Senior Vice President
BORROWER:
FRENCH FRAGRANCES, INC.
By /s/ Xxxxx X. Xxxxxx
-------------------
Vice President
EXHIBIT B- Amended
BORROWING BASE CERTIFICATE
Fleet National Bank
000 Xxxxxxxxxxx Xxxxxx Date:
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Senior Vice President
Ladies and Gentlemen:
Pursuant to the provisions of Section 2.01 of that certain Credit
Agreement (as amended, the "Agreement") dated as of May 13, 1997,
among Fleet National Bank, as agent, French Fragrances, Inc., as
Borrower, and Fleet National Bank, as a lender, the undersigned hereby
represents and warrants that the aggregate principal amount of
Advances (as defined in the Agreement) outstanding under the Revolving
Credit Notes dated as of May 13, 1997, (as amended, the "Note") of the
undersigned in the aggregate principal amount of $50,000,000, after
taking into consideration the amount of the Advance, if any, requested
this date, is less than or equal to the "Revolving Credit Commitment"
(as defined in the Agreement) in effect on the date hereof (as
calculated below in accordance with the Agreement).
Commitment: Lesser of:
A. $50,000,000
(or)
B. Borrowing Base:
1. Total Accounts Receivable (as of , 19 ): $________
(a) Approved Eligible Accounts Receivable
0-30 Days: $__________
31-60 Days: $__________
61-90 Days: $__________
Total Approved Eligible AR: $_________
Percentage advance: 85%
Approved AR Borrowing Base: $_________
(b) Eligible Accounts Receivable (other than Approved Eligible
Accounts Receivable):
0-30 Days: $__________
31-60 Days: $__________
61-90 Days: $__________
Total Eligible AR: $_________
Percentage advance: 80%
Approved AR Borrowing Base: $_________
TOTAL AR BORROWING BASE $_________
2. Inventory Borrowing Base
(a) Eligible In-House Inventory; at $________
(b) Less a reserve against Total Eligible In-House Inventory of
$1,200,000
(c) Capped at a maximum of $25,000,000
TOTAL INVENTORY
BORROWING BASE $_________
3. Total Borrowing Base:
AR Borrowing Base: $_________
plus
Inventory Borrowing Base $_________
TOTAL $_________
Very truly yours
FRENCH FRAGRANCES, INC.
By:
Title:
