FIRST AMENDMENT TO REVOLVING CREDIT
AND TERM LOAN AGREEMENT AND BASIC DOCUMENTS
THIS FIRST AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT AND BASIC
DOCUMENTS (the "Amendment") dated as of April 30, 1997, is made by and between
MARQUETTE CAPITAL BANK, N.A., a national banking association under the laws of
the United States of America (the "Lender"), having an office at 4000 Xxxx
Xxxxxxxx Plaza, 00 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, XX 00000, and ZOMAX OPTICAL
MEDIA, INC., a Minnesota corporation (the "Borrower") having its principal place
of business at 0000 Xxxxxx Xxxx, Xxxxxxxx, XX 00000.
RECITALS
WHEREAS, Zomax Optical Media Limited Partnership, a Minnesota limited
partnership (the "Partnership") and Lender entered into a Revolving Credit and
Term Loan Agreement dated as of December 31, 1995 (the "Loan Agreement") whereby
Lender agreed to provide to the Partnership a revolving line of credit in the
amount of $ 1,500,000 (the "Revolving Credit Commitment") and a discretionary
term loan in the amount of $3,000,000 (the "Original Capital Expenditures Term
Loan Commitment"), advances under both beingo at the sole discretion of Lender;
and
WHEREAS, in order to secure advances made pursuant to the Revolving Credit
Commitment and the Original Capital Expenditures Term Loan Commitment, the
Partnership and Lender entered into a Security Agreement dated as of December
31, 1995 (the "Security Agreement"); and
WHEREAS, pursuant to an Assignment and Assumption Agreement dated as of May
7, 1996, by and among the Partnership, the Borrower and the Lender (the
"Assignment"), the Borrower replaced the Partnership as "Borrower" (as such term
is defined in the Loan Agreement) under the Loan Agreement and agreed to perform
all of the Partnership's obligations under the Loan Agreement and the Security
Agreement; and
WHEREAS, pursuant to the Original Capital Expenditures Term Loan
Commitment, Lender loaned to Borrower the sum of $790,500, as evidenced by a
Promissory Note in the original principal amount of $790,500, executed by
Borrower in favor of Lender and dated May 10, 1996 (the "Original Capital
Expenditures Term Note"); and
WHEREAS, Borrower and Lender have agreed to amend the Loan Agreement
pursuant to the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
Section 1. Modification and Amendment to Loan Agreement.
(a) Section 1.1 - Defined Terms. The defined term: "Borrower" in Section
1.1 of the Loan Agreement is hereby amended and modified in its entirety to read
as follows:
"Borrower": shall mean Zomax Optical Media, Inc., a Minnesota
corporation.
(b) Section 1.1 - Defined Terms. The defined term: "Borrowing Base" in
Section 1.1 of the Loan Agreement is hereby amended and modified in its entirety
to read as follows:
"Borrowing Base": shall mean as of any given date, the lesser of
(i) the Revolving Credit Commitment as set forth in Section
2.1(a), or (ii) an amount equal to the sum of eighty percent
(80%) of Eligible Accounts Receivable (provided that no more than
Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00) of
the Borrowing Base may be attributable to Eligible Accounts owing
from Metacom) plus fifty percent (50%) of Eligible Inventory
(provided that the Eligible Inventory component of the Borrowing
Base shall not exceed One Million and no/100 Dollars
$1,000,000.00).
(c) Section 1.1 - Defined Terms. The defined term: "Capital Expenditures
Term Loan Commitment" in Section 1.1 of the Loan Agreement is hereby amended and
modified in its entirety to read as follows:
"Capital Expenditures Term Loan Commitment" shall mean the
Lender's obligation to make one or more capital expenditures term
loans pursuant to Section 2.1(c) of this Agreement.
(d) Section 1.1 - Defined Terms. The defined term: "Eligible Accounts
Receivable" in Section 1.1 of the Loan Agreement is hereby amended and modified
by deleting subparagraph (f) of such definition in its entirety and inserting
the following in place thereof:
(f) Fewer than one hundred twenty (120) days have elapsed since
such Accounts invoice date (provided that any Account shall be
excluded from Eligible Accounts Receivable in the event the
account debtor in total owes to Borrower Accounts ten percent
(10%) or more of which are otherwise not Eligible Accounts); and
(e) Section 1.1 - Defined Terms. The defined terms: "Maturity Option A"
9and "Maturity Option B" in Section 1.1 of the Loan Agreement are hereby amended
by deleting such defined terms and inserting in their place the following:
"Maturity Date": shall mean, with respect to the Capital
Expenditures Term Loans up to five (5) years from the date of any
Capital Expenditures Advance.
(f) Section 1.1 - Defined Terms. The defined term: "Termination Date" in
Section 1.1 of the Loan Agreement is hereby amended and modified in its entirety
to read as follows:
"Termination Date": shall mean the following: (i) with respect to
the Revolving Credit Commitment and the Revolving Credit Loans
thereunder, April 30, 1999 (or such other date to which the
Termination Date may be extended by the Lender in its discretion
in accordance with Section 2.2(d) of this Agreement); and (ii)
with respect to the Capital Expenditures Term Loan Commitment,
April 30, 1998.
(g) Section 2.1(a) - Revolving Credit Commitment. Section 2.1(a) of the
Loan Agreement is hereby amended and modified in its entirety to read as
follows:
(a) Revolving Credit Commitment. The Lender agrees, upon the
terms of this Agreement, to make loans to the Borrower from the
Agreement Date to the Termination Date in an aggregate principal
amount at any one time outstanding, up to but not exceeding Five
Million and no/100 Dollars ($5,000,000.00).
(h) Section 2.1(e) - Capital Expenditures Term Loan Commitment. A new
Section 2.1(c) is hereby added to the Loan Agreement to read as follows:
(c) Capital Expenditures Term Loan Commitment. The Lender agrees,
upon the terms of this Agreement, to make loans to the Borrower
from the Agreement Date to the Termination Date in an aggregate
principal amount up to but not exceeding Eight Million and no/100
Dollars ($8,000,000.00).
(i) Section 2.3(c). Section 2.3(c) of the Loan Agreement is hereby amended
and modified in its entirety to read as follows:
(c) Each Capital Expenditures Advance by the Lender to the
Borrower pursuant to this Agreement shall constitute a Capital
Expenditures Loan from the Lender to the Borrower as of the date
of such Capital Expenditures Advance, and shall, from the date of
such Capital Expenditures Advance until the same shall be paid in
full, bear interest, subject to Section 2.7 of this Agreement, at
all interest rate equal to a fixed rate of interest equal to the
yield as of such date on United States Treasury Obligations
scheduled to mature on or about the Maturity Date plus two and
one-quarter percent (2.25%), or such other interest rate as is
provided ill such Capital Expenditures Term Note. Such interest
shall be payable monthly, in arrears, based on a three hundred
sixty (360) day year counting the actual number of days elapsed.
Each Capital Expenditure Term Note shall be secured by the
equipment purchased with the proceeds of such Note pursuant to a
separate security agreement (in form and substance reasonably
acceptable to both Borrower and Lender) to be executed in
connection with such Note.
(j) Section 2.5(b). Section 2.5(b) of the Loan Agreement is hereby amended
and modified in its entirety to read as follows:
(b) Subject to Section 2.5(d), the principal amount of the
Capital Expenditures Term Note, together with interest thereon,
shall be fully amortized and payable in up to sixty (60) equal
monthly installments, with the first such installment due and
payable on the last day of the calendar month next following the
Capital Expenditures Advance.
(k) Section 2.5(c). Section 2.5(c) of the Loan Agreement is hereby amended
and modified in its entirety to read as follows:
(c) Subject to Section 2.5(d), such Capital Expenditures Term
Loan shall, from the date of such Capital Expenditures Advance
until the same shall be paid in full, bear interest on the
outstanding principal amount of each such Capital Expenditures
Term Note at a fixed rate of interest equal to the yield as of
such date on United States Treasury Obligations scheduled to
mature on or about the Maturity Date plus two and one-quarter
percent(2.25%), or such other interest rate as is provided in
such Capital Expenditures Term Note.
(l) Section 2.5(d). A new Section 2.5(d) is hereby added to the Loan
Agreement to read as follows:
(d) Upon the written request of Borrower, Lender shall allow
Borrower a period of up to six (6) months within which to fully
fund any particular Capital Expenditures Advance (such period
referred to herein as the "Capital Expenditures Advance Period").
The Capital Expenditures Advance Period shall commence as of the
date of the initial funding of a portion of any particular
Capital Expenditures Advance (the "Initial Capital Expenditures
Advance") and shall continue until the particular Capital
Expenditures Advance is fully funded or for a period of six
months, whichever is first to occur. During the Capital
Expenditures Advance Period, any Capital Expenditures Advance
amounts (any such amounts shall be referred to herein as "Interim
Capital Expenditures Advance Amounts") shall, from the date of
the Initial Capital Expenditures Advance, bear interest, subject
to Section 2.7 of this Agreement, at an interest rate equal to
the Prime Rate of interest. Upon expiration of the Capital
Expenditures Advance Period, the Capital Expenditures Advance
shall bear interest on the outstanding principal amount at a
fixed rate of interest pursuant to Section 2.5(c) of this
Agreement. During the Capital Expenditures Advance Period, any
outstanding Interim Capital Expenditures Advance Amounts shall
bear interest only and shall not be amortized. At the
commencement of the Capital Expenditures Advance Period, Borrower
shall execute and deliver to Lender an "Interim Revolving Note"
in the form attached hereto as Exhibit A-3. At the end of the
Capital Expenditures Advance Period, Borrower shall execute and
deliver to Lender the Capital Expenditures Advance Term Note,
which Capital Expenditures Advance Term Note, together with
interest thereon, shall be amortized in accordance with Section
2.5(b).
(m) Section 5.4 - Reporting. Section 5.4 of the Loan Agreement is hereby
amended and modified in its entirety to read as follows:
Reporting. Furnish to the Lender:
(a) Annual. As soon as available and in any event within ------
one hundred twenty (120) days after the close of each of
Borrower's fiscal years, the audited consolidated balance sheet
of the Borrower and its Subsidiaries as at the end of such year,
and the consolidated reviewed statement of income and retained
earnings for Borrower and its Subsidiaries for such year,
prepared by independent certified public accountants of
recognized standing selected by Borrower and acceptable to the
Lender. Such statement shall be accompanied by the written
statement of such accountants that in making the examination
necessary for their certification of such financial statements
they have obtained no knowledge of any default by Borrower (or
the continuance thereof) in the performance of any of the
financial covenants contained in this Agreement, or if such
accountants shall have obtained knowledge of any such default or
the continuance thereof, they shall disclose in such statement
such default or defaults or the continuance thereof, it being
understood that such accountants shall not be liable for failure
to obtain knowledge of any such default or the continuance
thereof. Borrower shall deliver to Lender with such statement all
management letters addressed to the Borrower that have been
prepared by such accountants.
(b) Monthly. As soon as available and in any event within -------
thirty (30) days after the end of each fiscal month, Borrower's
internally prepared balance sheet as of the end of such month and
statement of income and retained earnings for the portion of the
fiscal year then ended (such financial statement to be in a
format substantially similar to that of internally prepared
financial statements previously delivered to the Lender), all in
reasonable detail but subject to inventory and other year-end
audit adjustments and certified as accurate by the Borrower's
Chief Financial Officer or Controller.
(c) Borrowing Base and Compliance Certificate. As soon as
available and in any event within thirty (30) days after the end
of each month, a completed Borrowing Base and Compliance
Certificate as of the end of such month, in the form annexed
hereto as Exhibit D.
(d) Accounts Receivable Aging Reports. As soon as available and
in any event within thirty (30) days after the end of each month,
an accounts receivable aging summary setting forth by account
debtor the amounts and aging of all accounts receivable of
Borrower and a full accounts receivable report from which such
summaries were prepared.
(e) Inventory Reports. As soon as available and in any event
within thirty (30) days after the end of each month, an inventory
report setting forth by category and location the inventory of
the Borrower.
(f) Annual Budget. As soon as available and in any event within
sixty (60) days prior to the commencement of each fiscal year of
the Borrower, Borrower's internally prepared financial budget for
the coming fiscal year.
(g) 10-Q Reports. As soon as available and in any event within
ten (10) days after the date of filing, Borrower's 10-Q report.
(h) 10-K Reports. As soon as available and in any event within
ten (10) days after the date of filing, Borrower's 10-K report.
(i) Analyst Reports. As soon as available, any analyst reports
regarding Borrower, or any written information provided to
investors or potential investors by any market maker for the
Borrower's stock.
(j) Government Filings. As soon as available, any other filings
by Borrower with the United States' Securities and Exchange
Commission or state regulatory agencies.
(k) Other. From time to time such other information pertaining to
Borrower and any Subsidiary and their respective financial
condition as the Lender may reasonably request.
(n) Section 5.7 - Maintain Accounts with Lender. Section 5.7 of the Loan
Agreement is hereby amended and modified in its entirety to read as follows:
Use the Lender or a specified agent of the Lender (as the Lender
may, from time to time, specify) as the principal depository of
the Borrower's corporate funds.
(o) Section 5.9 - Financial Covenants. Section 5.9 of the Loan Agreement is
hereby amended and modified in its entirety to read as follows:
(a) Tangible Net Worth. Maintain at all times during the one (1)
year period commencing April 30, 1997, a Tangible Net Worth in an
amount equal to or in excess of Eleven Million Five Hundred
Thousand and no/100 Dollars ($11,500,000.00). The amount of such
Tangible Net Worth requirement shall increase each subsequent one
(1) year period by an amount equal to One Million and no/100
Dollars ($1,000,000.00).
(b) Total Liabilities to Tangible Net Worth Ratio. Maintain at
all times a Total Liability to Tangible Net Worth Ratio of not
greater than 1.25 to 1.00.
(c) Debt Service Coverage Ratio. Maintain as of the last day of
any fiscal quarter of Borrower a Debt Service Coverage Ratio of
not less than 1.25 to 1.00.
(d) Minimum Profitability. Maintain profitability, determined in
accordance with GAAP, of at least $1.00 in each fiscal quarter of
the Borrower.
(p) Section 6.6 - Dissolution/Sale/Acquisition/Merger. Section 6.6 of the
Loan Agreement is hereby amended and modified in its entirety to read as
follows:
Dissolution/Sale/Merger. Dissolve or liquidate, or consolidate or
merge with or into, sell all or substantially all of the assets
of the Borrower to any other Person.
(q) Section 6.7 - Dividends/Redemption. Section 6.7 of the Loan Agreement
is hereby amended and modified in its entirety to read as follows:
Declare or pay any dividends; or purchase, redeem, retire or
otherwise acquire for value any of its stock now or hereafter
outstanding; or make any distribution of assets to its
stockholders as such whether in cash, assets or obligations of
the Borrower; or allocate or otherwise set apart any sum for the
payment of any dividend or distribution on, or for the purpose
of, redemption or retirement of any shares of stock; or make any
other distribution by reduction of capital or otherwise in
respect of otherwise acquire for value any stock of the Borrower
or another Subsidiary.
(r) Section 6.14 - Capital Expenditures. Section 6.14 of the Loan Agreement
is hereby amended and modified in its entirety to read as follows:
Make any Capital Expenditures which, for any Fiscal Year, shall
exceed Three Million Five Hundred Thousand and no/100 Dollars
($3,500,000.00) in the aggregate.
(s) Section 6.15 - Acquisition. A new Section 6.15 is hereby added to the
Loan Agreement to read as follows:
Section 6.15 - Acquisitions. Acquire all or substantially all of
the securities, assets or properties of, any other Person, in the
event such acquisition is in excess of $2,500,000, without the
express written consent of Lender.
(t) Exhibits. Exhibit A-I, Exhibit A-2, and Exhibit D of the Loan Agreement
are hereby amended and modified in their entirety to read as set forth on the
attached Exhibit X-0, Xxxxxxx X-0, and Exhibit D, respectively, and attached
Exhibit A-3 is hereby added to the Loan Agreement.
(u) Section 10.11 - Assignment. A new Section 10.11 is hereby added to the
Loan Agreement to read as follows:
Section 10.11 - Assignment. Each Capital Expenditures Term Loan
and its related Capital Expenditures Term Note and Security
Agreement are assignable by Lender without the consent of
Borrower and, to the extent of any such assignment, Lender shall
be fully discharged from all responsibility. Lender's assignee
shall be vested with all of the powers and rights of Lender
thereunder and the assignee may fully enforce such rights and
powers as Lender and all references to Lender shall mean and
refer to such assignee. Without limiting the foregoing, the
Borrower understands and agrees that Lender may, from time to
time, sell, pledge, grant a security interest and collaterally
assign, transfer and deliver or otherwise encumber or dispose of
its interest in the Capital Expenditures Term Loan, the Capital
Expenditures Term Notes, their related security agreements and
its rights and powers thereunder. Lender's assignee shall have no
other powers and rights under the Loan Agreement or any other
Basic Document. Borrower may not, in whole or in part, directly
or indirectly, assign the Loan Agreement or any Basic Document or
its rights hereunder or thereunder or delegate its duties
hereunder or thereunder without, in each instance, the specific
prior written consent of Lender, which consent may be withheld or
delayed in Lender's sole discretion.
Section 2. Original Capital Expenditures Term Loan Commitment. The Borrower
and the Lender hereby acknowledge and agree that with the exception of the loan
evidenced by the Original Capital Expenditures Term Note, there are no advances
outstanding pursuant to the Original Capital Expenditures Term Loan Commitment
(Section 2.1(b) of the Loan Agreement). The Borrower and the Lender further
acknowledge and agree that there shall be no further advances under the Original
Capital Expenditures Term Loan Commitment, and that the Bank shall have no
further obligations under the Original Capital Expenditures Term Loan Commitment
to advance any amounts or to make any loans to the Borrower. The Original
Capital Expenditures Term Note dated May 10, 1996, executed and delivered by
Borrower to Lender, shall not be modified or amended by this Amendment and shall
continue to be paid by Borrower in accordance with its terms.
Section 3. Reaffirmation of Representations and Warranties. Borrower hereby
repeats and reaffirms each and every representation and warranty contained in
Article 3 of the Loan Agreement and Section 4 of the Security Agreement and
states that each such representation and warranty is true and correct as of the
date hereof, except as set forth below:
(a) All references to the limited partnership status and good standing of
the limited partnership in Minnesota and foreign jurisdictions shall be deemed
to be references to corporate status of the Borrower, and all references to
partnership action shall be deemed to be references to corporate action of the
Borrower.
(b) All references in Section 3.7 to financial statements of the Borrower
shall be deemed to be references to financial statements most recently delivered
by the Borrower to Lender.
Section 4. Additional Representations and Warranties. In order to induce
Lender to enter into this Amendment and to amend the Basic Documents in the
manner provided herein, Borrower does hereby represent and warrant to the Lender
(all of which representations and warranties shall survive the effective date of
this Amendment and shall continue in effect until the later of (i) Termination
Date or (ii) the repayment by the Borrower of all of the Obligations) on the
date hereof as follows:
(a) Shareholder Agreements. Borrower has entered into no agreements with
the shareholders of Borrower other than as has been disclosed to Lender, and has
been notified of no shareholder claims, and has entered into no other
contractual obligations, which would result in a violation of any of Borrower's
covenants contained in this Amendment or any of the Basic Documents or would
result in any representation made by Borrower in this Amendment or any of the
Basic Documents to be untrue.
(b) Violations. To the best of Borrower's knowledge, Borrower is in full
compliance with all United States Securities and Exchange Commission regulations
and reporting requirements. In addition, to the best of Borrower's knowledge,
the transfer of assets from the Partnership to the Borrower, which transfer is
referenced in the Assignment, constituted a tax free exchange under the Internal
Revenue Code of 1986, as amended.
(c) Absence of Default. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
which would constitute an Event of Default, and no event that with the passage
of time or the giving of notice or both has occurred which would constitute an
Event of Default.
Section 5. Corporate Status. Any references in the Loan Agreement or other
Basic Documents to Borrower's status as a partnership shall be denied to be
references to the corporate status of Borrower, and any provisions of the Loan
Agreement that require amendment or modification as a result of Borrower's
corporate status, shall be deemed to have been appropriately amended or modified
as the context so requires.
Section 6. Fees. Borrower shall pay or reimburse Lender for all costs,
expenses and other charges incurred or payable in connection with this
Amendment, including, but not limited to, search fees, recording fees, and legal
fees and disbursements of counsel to the Lender; provided, however, the Lender
hereby waives the Borrower's obligation to pay legal fees exceeding One Thousand
Five Hundred and no/100 Dollars ($1,500.00) incurred by counsel to the Lender in
connection with the preparation of this Amendment.
Section 7. Conditions to Effectiveness. This Amendment shall become
effective on the date that the following conditions are satisfied, such date
being referred to herein as the "Amendment Effective Date":
(a) On or before the Amendment Effective Date, the Borrower shall deliver
to the Lender, each, unless otherwise noted, dated the Amendment Effective Date:
(i) Copies of this Amendment executed by Borrower;
(ii) Executed Amended and Restated Revolving Credit Note;
(iii) Opinion of Borrower's counsel addressed to Lender in form
and substance satisfactory to Lender and its counsel;
(iv) Copies of certified resolutions of Borrower authorizing this
Amendment; and
(v) Such additional documents, agreements and certificates as
Lender shall reasonably request.
Section 8. Binding Nature of Basic Documents. Borrower acknowledges and
agrees that the terms, conditions and provisions of the Loan Agreement and each
other Basic Document executed and delivered in connection therewith are fully
binding and enforceable agreements, and are not subject to any defense,
counterclaim, set off or other claim of any kind or nature. Borrower hereby
reaffirms and restates its duties, obligations and liability under the Loan
Agreement and all other Basic Documents executed by it in connection with the
Loan Agreement, as amended hereby.
Section 9. Scope of Amendment. Except and to the extent amended hereby, the
terms conditions and provisions of the Loan Agreement and the Basic Documents
shall remain unchanged and shall be of full force and effect.
Section 10. Defined Terms. Any capitalized term not otherwise defined
herein shall have the meaning ascribed to it in the Loan Agreement.
Section 11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument. Any executed counterpart of this
Agreement delivered by facsimile or other electronic transmission to a party
hereto shall constitute an original counterpart of this Agreement.
Section 12. Recitals. The recitals to this Agreement are hereby
incorporated into and made a part of this Agreement as if fully set forth
herein.
(Intentionally Left Blank]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized representatives as of the day and year
first set forth above.
ZOMAX OPTICAL MEDIA, INC.,
a Minnesota corporation
By: /s/ Xxxxx X. Xxxxxxxx
Its: Chief Executive Officer
MARQUETTE CAPITAL BANK, N.A.
a national banking association
By: /s/ Xxxxxxxx Xxxx Xxxxx
Its: Vice President
