CONSENT, AMENDMENT AND JOINDER AGREEMENT
Exhibit 10.5
CONSENT, AMENDMENT AND JOINDER AGREEMENT
THIS CONSENT, AMENDMENT AND JOINDER AGREEMENT (this “Amendment”) is entered into as of
February 13, 2009 by and among ACCESS CAPITAL, INC. (“Access Capital”), TELESTAR MARKETING,
INC. (f/k/a Telestar Acquisition Corporation) (“Company”), TELE-RESPONSE CENTER, INC.
(“TRC”) and INTERNATIONAL CONSOLIDATED COMPANIES, INC. (“ICCI” and together with TRC, each
a “Joinder Party” and collectively, the “Joinder Parties”).
BACKGROUND
Company and Access Capital entered into an Accounts Receivable Purchase Agreement dated as of
July 31, 2005 (as the same has been and may further be amended, modified, restated and/or
supplemented from time to time, the “ARPA”) pursuant to which Access Capital provides
Company with certain financial accommodations.
Company has requested that Access Capital (a) consent to the Company’s entering into a Share
Purchase Agreement dated December 18, 2008 by and among Stuart Discount (“SD”), Company,
Tele-Response Center, Inc. (“TRC”) and International Consolidated Companies, Inc.
(“ICCI”), as amended by a First Amendment of Purchase Agreement dated as of January 1, 2009
(as so amended, the “Share Purchase Agreement”) and (b) amend the ARPA and Access Capital
is willing to do so on the terms and conditions set forth herein.
NOW, THEREFORE in consideration of the mutual covenants and undertakings set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. All capitalized terms not otherwise defined herein shall have the
meanings given to them in the ARPA.
2. Consent. Subject to satisfaction of the conditions precedent set forth in Section
5 below, Access Capital hereby consents to the consummation by the Company of the transactions
contemplated by the Share Purchase Agreement.
3. Amendment to ARPA. Subject to satisfaction of the conditions precedent set forth
in Section 5 below, the ARPA is hereby amended as follows:
(a) Section 2(a) of the ARPA is hereby deleted in its entirety and replaced with the
following:
"(a) For purchasing Accounts Receivable hereunder
the amount (the “Purchase Fee”) earned by Access Capital for the period
from the Initial Payment date (the “Purchase Date”) and the date when
payment is received by Access Capital shall be as follows: (i) 1 to 30
days from the Purchase Date: 1.6% (the “First Specified Percentage”)
of the value of the Purchased Receivable, (ii) 31 to 60 days from the
Purchase Date: 3.2% (the “Second Specified |
Percentage”) of the value of the Purchased Receivable, (iii) 61 to 90
days from the Purchase Date: 4.8% of the value of the Purchased
Receivable and (iv) Greater than 90 days from the Purchase Date:
7.0% (the “Fourth Specified Percentage”) of the value of the
Purchased Receivable. The First, Second, Third and Fourth Specified
Percentages as from time to time in effect shall collectively be
referred to as the “Purchase Fee Percentages”).” |
Notwithstanding the foregoing, in the event the:
(I) Stage 1 Conditions (as hereafter defined) are satisfied,
then the First Specified Percentage shall thereafter be reduced to
1.07%, the Second Specified Percentage shall thereafter be reduced to
2.13%, the Third Specified Percentage shall thereafter be reduced to
3.20% and the Fourth Specified Percentage shall thereafter be reduced
to 4.67%. The Purchase Fee Percentages in effect immediately
following satisfaction of the Stage 1 Conditions shall hereafter be
referred to as the “Stage 1 Percentages.”
(II) Stage 2 Conditions (as hereafter defined) are satisfied, then
the First Specified Percentage shall thereafter be reduced to 0.71%,
the Second Specified Percentage shall thereafter be reduced to 1.42%,
the Third Specified Percentage shall thereafter be reduced to 2.13%
and the Fourth Specified Percentage shall thereafter be reduced to
3.11%.
(III) Stage 3 Conditions (as hereafter defined) are satisfied, then
the Second Specified Percentage shall thereafter be reduced to 0.60%,
the Second Specified Percentage shall thereafter be reduced to 1.21%,
the Third Specified Percentage shall thereafter be reduced to 1.81%
and the Fourth Specified Percentage shall thereafter be reduced to
2.64%.
If a Default shall occur at any time following satisfaction of the
Stage 2 Conditions, then the Purchase Fee Percentages then in effect
shall automatically (without notice or demand of any kind) be
increased to the Stage 1 Percentages.
In addition to any and all Purchase Fees payable by the Company to
Access Capital hereunder, the Company shall pay interest at the
Contract Rate (as hereafter defined) on the unpaid amount of each
Initial Payment until such time as such Initial Payment is collected
in full in good funds of the United States of America. Interest
shall be computed on the basis of actual days elapsed in a year of
360 days. At Access Capital’s option, Access Capital may charge
Company’s account for said interest. For purposes hereof, (a) the
term “Contract Rate” shall mean an interest rate per annum equal
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to the incremental percentage over the Applicable Base Prime Rate and
(b) the term “Applicable Base Rate” shall mean, as applicable (i)
three and one-quarter percent (3.25%) following satisfaction of the
Stage 1 Conditions, (ii) four percent (4.00%) following satisfaction
of the Stage 2 Conditions and (iii) five percent (5.00%) following
satisfaction of the Stage 3 Conditions.
For purposes hereof, the following terms shall have the following
meanings:
(a) “Stage 1 Conditions” shall mean satisfaction in a manner
acceptable to Access Capital of the following conditions: (i) no
Default shall have occurred and then be continuing and (ii) receipt
by Access Capital of evidence reasonably satisfactory in all respects
to Access Capital of a contribution to the capital of Company and/or
(if TRC has joined the ARPA as a “Company”), TRC in an aggregate
amount of not less than Three Hundred Thousand Dollars ($300,000)
made subsequent to the date hereof (the “First Capital
Contribution”), a portion of the proceeds of which shall have been
received by Access Capital to pay down in full all overadvances then
outstanding under the ARPA.
(b) “Stage 2 Conditions” shall mean satisfaction in a manner
acceptable to Access Capital of the following conditions: (i) the
Stage 1 Conditions shall have been satisfied, (ii) at least six (6)
months shall have elapsed from the date hereof, (iii) no Default
shall have occurred and then be continuing, (iv) the Company and TRC
shall have delivered evidence satisfactory to Access Capital of
compliance by the Company and TRC on a consolidated basis with the
Tangible Net Worth and Working Capital covenants set forth in Section
3(g)(ii) and 3(g)(iii) of this Amendment, in each case as and for the
month immediately preceding the determination date of satisfaction of
the Stage 2 Conditions and (v) receipt by Access Capital of evidence
satisfactory in all respects to Access Capital of a contribution to
the capital of Company and/or (if TRC has joined the ARPA as a
“Company”), TRC in an aggregate amount of not less than One Million
Dollars ($1,000,000) made subsequent to the date of the First Capital
Contribution (the “Second Capital Contribution”).
(c) “Stage 3 Conditions” shall mean satisfaction in a manner
acceptable to Access Capital of the following conditions: (i) the
Stage 2 Conditions shall have been satisfied, (ii) no Default shall
have occurred and then be continuing and (iii) receipt by Access
Capital of evidence reasonably satisfactory in all respects to Access
Capital of a contribution to the capital of Company and/or (if TRC
has joined the ARPA as a “Company”), TRC in an aggregate amount of not less than Five Hundred Thousand Dollars
($500,000) made subsequent to the date of the Second Capital
Contribution (the “Third Capital Contribution”).
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(b) Section 3 of the ARPA is hereby deleted in its entirety and replaced with the
following:
“3. Term. This ARPA shall be in effect for an initial term
beginning on the date hereof and continuing until August 11, 2012 (the
“Initial Term”), and thereafter automatically renew for periods of two
years, unless otherwise terminated in accordance with the Standard Terms or
at Access Capital’s option.”
(c) Section 7(a) of Exhibit A to the ARPA is hereby amended in its entirety to provide
as follows:
“7(a) If for any reason this Agreement is terminated prior to the end of
the Initial Term, the Company shall pay to Access Capital, upon the
effective date of such termination or repayment, an early termination fee
equal to seventy-five percent (75%) of the average monthly fees paid to
Access Capital (based on the prior twelve months) multiplied by the number
of months remaining on the Initial Term.”
(d) In addition to the Default events set forth in the ARPA, the occurrence of any one
or more of the following events shall constitute a Default under the ARPA: (i) ICCI shall
fail to have a controlling ownership interest in each of Company and TRC; (ii) SD shall fail
at any time to be employed by ICCI and/or Company and/or TRC; (iii) SD shall at any time
fail to be involved in the senior management of Company and TRC; (iv) SD shall fail at any
time to be on the board of directors of ICCI; (v) either of ICCI, TRC or SD shall (1) apply
for, consent to or suffer to exist the appointment of, or the taking possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a substantial part of
his/its property, (2) admit in writing his/its inability, or be generally unable, to pay
his/its debts as they become due or cease operations of its present business, as applicable,
(3) make a general assignment for the benefit of creditors, (4) commence a voluntary case
under the federal bankruptcy laws (as now or hereafter in effect), (5) be adjudicated a
bankrupt or insolvent, (6) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (7) acquiesce to, or fail to have dismissed, within
thirty (30) days, any petition filed against him/it in any involuntary case under such
bankruptcy laws or (8) take any action for the purpose of effecting any of the foregoing;
(vi) if any Responsible Party attempts to terminate, challenges the validity of, or his/its
liability under any guaranty of the Obligations or if any Responsible Party who is an
individual shall die and Company shall fail to provide Access Capital with a replacement
Responsible Party acceptable to Access Capital within thirty (30) days of such occurrence or
if any other Responsible Party which is an entity shall cease to exist; or (vii) failure to
deliver to Access Capital, within four (4) business days of consummation of the transaction
contemplated by the Share Purchase Agreement, a copy of ICCI’s 8-K filing with the Securities and Exchange Commission covering, without limitation, the
consummation of such transaction.
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(e) Company, ICCI and TRC hereby acknowledge that with respect to the financial
reporting requirements set forth in Exhibit A to the ARPA: (i) all such financial
statements shall be provided when due on a consolidated and consolidating basis for each of
Company, ICCI and TRC, (ii) all year-end financial statements required to be delivered
thereunder shall be accompanied by a review report issued by independent certified public
accountants of recognized standing selected by Company and acceptable to Access Capital and
(iii) in addition to the other financial reporting requirements set forth therein, Company,
ICCI and TRC shall, within thirty (30) days after the end of each month, deliver to Access
Capital consolidated and consolidating unaudited/internal balance sheets and statements of
income, retained earnings and cash flows for each such entity as at the end of and for such
month, and for the year to date period then ended, in reasonable detail and stating in
comparative form the figures for the corresponding date and periods in the previous year.
Together with the delivery of all such financial statements, the Chief Executive Officer,
President or Chief Financial Officer of each such entity shall deliver to Access Capital a
certificate of such officer stating that, based on an examination sufficient to enable him
or her to make an informed statement, no Default exists, or, if such is not the case,
specifying such Default and its nature, when it occurred, whether it is continuing and the
steps being taken by such entity with respect to such event
(f) The following additional covenants shall be added to the ARPA to be effective on
and after the date the Stage 2 Conditions are satisfied, the breach of which shall
constitute a Default:
(i) The Company and TRC shall maintain on a consolidated basis, at of the
end of each month, positive Cash Flow. The first Cash Flow compliance test
shall commence with the fourth month following the date the Stage 2
Conditions are satisfied and shall be tested for such one month period, the
second Cash Flow compliance test shall commence with the fifth month
following the date the Stage 2 Conditions are satisfied and shall be tested
on a rolling two month basis and each subsequent monthly Cash Flow
compliance test shall be calculated on a rolling three (3) month basis.
“Cash Flow” shall mean, for any period, the net income of the Company and
TRC on a consolidated basis (as defined by Generally Accepted Accounting
Principles (“GAAP”), plus any non-cash charges less (i) any withdrawals or
loan advances or repayments to the officers, owners, or any other party, and
(ii) principal payments on any term debt and capital leases, and (iii)
capital expenditures paid or which were scheduled to be paid during said
period and (iv) dividend payments on preferred stock.
(ii) The Company and TRC shall maintain on a consolidated basis, as at the
end of each month, positive Working Capital. “Working Capital” shall mean,
at a particular date, the excess, if any, of current assets of the Company and TRC on a consolidated basis over current liabilities of the
Company and TRC on a consolidated basis, in each case as determined in
accordance with GAAP.
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(iii) The Company and TRC shall maintain on a consolidated basis, as at the
end of each month, positive Tangible Net Worth, “Tangible Net Worth” shall
mean, as at a particular date, (a) all amounts which would be included under
shareholders’ equity on a balance sheet of the Company and TRC on a
consolidated basis, less the amount of goodwill as shown on such balance
sheet minus (b) all intangible assets of the Company and TRC on a
consolidated basis at such date as determined in accordance with GAAP.
A breach of any financial covenant set forth herein shall be deemed to have
occurred as of any date of determination by Access Capital or as of the last
day of any specified measurement period, regardless of when the financial
statements reflecting such breach are delivered to Access Capital.
(g) The Company acknowledges that the Purchase Fee Percentages set forth herein were
established after negotiation between the parties on the assumption that following
satisfaction of the Stage 1 Conditions the Company would tender to Access Capital for
purchase acceptable Accounts Receivable aggregating at least (i) $11,000,000 during the 2009
calendar year (pro-rated for that portion of the 2009 calendar year for which the Stage 1
Conditions shall have been satisfied) (the “First Minimum Amount”), (ii) $12,000,000 during
the 2010 calendar year (pro-rated for that portion of the 2010 calendar year for which the
Stage 1 Conditions shall have been satisfied) (the “Second Minimum Amount”), (iii)
$13,000,000 during the 2011 calendar year (pro-rated for that portion of the 20011 calendar
year for which the Stage 1 Conditions shall have been satisfied) (the “Third Minimum
Amount”) and $14,000,000 for the 2012 calendar year (pro-rated for that portion of the 2012
calendar year for which the Stage 1 Conditions shall have been satisfied) (the “Fourth
Minimum Amount”) (as applicable, the “Base Purchase Amount”) during the Initial Term and
each renewal term. The Company acknowledges that Purchase Fee Percentages would have been
higher if the anticipated volume of purchases of Accounts Receivable were lower. In
consideration of Access Capital’s undertakings in this Amendment, the Company shall pay to
Access Capital a fee in an amount equal to one and six-tenths percent (1.6%) of the Base
Purchase Amount (the “Facility Fee”) with respect to the Initial Term and each renewal term,
but the amount thereof, less any credit accrued pursuant to the provisions of this clause
“(g)”, shall be payable in arrears in equal quarterly installments. Throughout the Initial
Term and any renewal term, each quarterly installment of the Facility Fee shall be paid
within 15 days after the end of each successive period of three full calendar months,
commencing with the period ending three full calendar months following the date hereof (such
initial period and each succeeding three month period is hereafter referred to as a
“Calendar Quarter”). Access Capital shall allow as a credit against the Base Purchase
Amount on which the Facility Fee is computed due for each respective Calendar Quarter (or if
paid as a Facility Fee, will refund to the Company, without interest, to the extent of such
payment) an amount equal to the aggregate Accounts Receivable (other than Accounts Receivable existing on the date hereof) tendered by the Company to Access
Capital for purchase for the applicable Calendar Quarter; provided, however, that the
aggregate amount of any credit allowed with respect to any Calendar Quarter shall not exceed
the amount of the Facility Fee payable with respect to such Calendar Quarter.
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(h) On and after the date on which the Stage 2 Conditions have been satisfied, the
First Minimum Amount shall be automatically increased to $13,000,000, the Second Minimum
Amount shall be automatically increased to $14,200,000, the Third Minimum Amount shall be
automatically increased to $15,400,000 and the Firth Minimum Amount shall be automatically
increased to $16,600,000.
(i) Notwithstanding any contained herein or in the ARPA to the contrary, (1) the
Company shall not be required to tender to Access Capital for purchase any Accounts
Receivable for which contractual payment in respect thereof is to be paid within fifteen
(15) days from invoice date (all such Accounts Receivable not so tendered to Access Capital
for purchase shall hereinafter be referred to as the “Specified Non-Purchased Accounts”);
(2) the Company acknowledges that the Specified Non-Purchased Accounts shall all times (i)
constitute Collateral under the ARPA, (ii) be subject to all terms and provisions of the
ARPA relating to Accounts Receivable and (iii) be subject to Access Capital’s first priority
perfected security interest; (3) for each period of calculation of the applicable Base
Purchase Amount under the foregoing clauses “(g)” and “(h)”, the applicable Base Purchase
Amount shall be reduced by the amount of Specified Non-Purchased Accounts created during
such calculation period; and (4) Access Capital shall earn an administration fee with
respect to all Specified Non-Purchased Accounts for the accounts receivable management and
administration services provided to the Company by Access Capital in an amount equal to
four-tenths of one percent (0.4%) of all Specified Non-Purchased Accounts created by the
Company, payable monthly. The foregoing administration fee may be charged by Access Capital
to the Company’s account when due.
4. Joinder. In consideration of Access Capital’s agreement to enter into this
Amendment, each Joinder Party hereby acknowledges that it is hereby a Responsible Party under the
ARPA with respect to the payment and performance of all Obligations of Company and each Responsible
Party hereby waives all suretyship defenses in connection therewith.
5. Conditions of Effectiveness. This Amendment shall become effective upon receipt by
Access Capital (unless otherwise waived by Access Capital in writing) of the following (all in form
and substance acceptable to Access Capital): (a) this Amendment duly executed and delivered by
Company, each Responsible Party and Access Capital, (b) the executed approvals and consents
required by Section 1.1 of the Share Purchase Agreement, (c) an acknowledgment letter executed by
SD, Company, TRC and ICCI confirming that all closing conditions set forth in the Share Purchase
Agreement have been satisfied and the transactions contemplated by the Share Purchase Agreement
have been consummated, (d) all such documentation as Access Capital shall require for each of ICCI
and TRC to grant to Access Capital a first priority perfected security interest in each such
entity’s assets, (e) pro-forma financial statements for ICCI for the six (6) full calendar month
period following the effective date hereof, (f) copies of all Schedules, Exhibits and amendments to
the Share Purchase
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Agreement, (g) copies of all amendments to Company’s and TRC’s certificate of incorporation
and bylaws as contemplated by Section 7.1(d) to the Share Purchase Agreement (which such amendments
shall not modify in any manner whatsoever the name of any such entity or modify any other provision
thereof deemed material by Access Capital), (h) copies of all documentation required to satisfy the
requirements of Section 10 of the Share Purchase Agreement, (i) corporate resolutions for Company,
ICCI and TRC authorizing the transactions contemplated by the Share Purchase Agreement and the this
Amendment and (j) a consent and amendment fee in the amount of $15,000 (the “Consent and Amendment
Fee”), which such fee shall be deemed earned in full on the date hereof, shall not be subject to
rebate or pro-ration for any reason and shall be payable by the Company to Access Capital in ten
consecutive monthly installments of $1500 each, the first payment of which shall commence on March
1, 2009 and the remaining payments of which shall be made on the first day of each succeeding
month, all of which payments may be charged when due by Access Capital to Company’s account. Any
unpaid portion of the Consent and Amendment Fee shall be due and payable in full upon the earlier
to occur of (1) the occurrence of an Event of Default, (2) termination of the ARPA and (3)
unwinding of the transactions contemplated by the Share Purchase Agreement in accordance with the
terms of Section 6 below.
6. Unwinding of Share Purchase Agreement Transaction. In the event the Company
delivers to Access Capital evidence satisfactory in all respects to Access Capital confirming and
evidencing that (i) the transactions contemplated by the Share Purchase Agreement have been unwound
in accordance with the terms of Section 6.4 of the Share Purchase Agreement as in effect on the
date hereof and (ii) Stuart Discount has acquired one hundred percent (100%) of the issued and
outstanding capital stock of each of the Company and TRC, then (a) the amendments to the ARPA set
forth in Section 3 hereof shall be of no further force or effect (provided that the provisions
relating to the Consent and Amendment Fee shall remain in effect and the unpaid portion of the
Consent and Amendment Fee shall be immediately paid to Access Capital in accordance with the terms
of Section 5 above) and (b) Access Capital shall release its security interest in the assets of
ICCI.
7. Representations and Warranties. Each of Company, TRC, ICCI and SD, as applicable,
hereby:
(a) represents and warrants to Access Capital that this Amendment and the
ARPA, as amended hereby, constitute legal, valid and binding obligations of
such party and are enforceable against such in accordance with their
respective terms.
(b) represents and warrants to Access Capital that upon the effectiveness of
this Amendment, all covenants, representations and warranties made in the
ARPA and the other Transaction Documents are hereby reaffirmed to the extent
the same are not amended hereby and agrees that all such covenants,
representations and warranties shall be deemed to have been remade as of the
effective date of this Amendment.
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(c) represents and warrants to Access Capital that no Default has occurred
and is continuing or would exist after giving effect to this Amendment.
(d) represents and warrants to Access Capital that no such party has any
defense, counterclaim or offset with respect to the ARPA or any other
Transaction Document.
(e) acknowledges that (a) Access Capital has and shall continue to have as
security for all Obligations a valid first priority perfected security
interest in all assets of Company, TRC and ICCI and to the extent not
otherwise granted under the ARPA and the other Transaction Documents hereby
assigns, pledges and grants to Access Capital a continuing security interest
in all Collateral (as defined in the ARPA) of such entity, whether now owned
or existing or hereafter acquired or arising and wheresoever located,
provided that the security interest granted by ICCI to Access Capital shall
be subject to the provisions of Section 6 hereof and (b) each such party has
had ample opportunity to consult with counsel prior to signing and
delivering this Amendment and has signed and delivered this Amendment freely
and voluntarily, without duress or coercion.
8. Effect on the Agreements.
Upon the effectiveness of this Amendment, each reference in the ARPA to
“this Agreement,” “hereunder,” “hereof,” “herein” or words of like import
shall mean and be a reference to the ARPA as amended hereby.
Except as specifically amended herein, the ARPA and all other documents,
instruments and agreements executed and/or delivered in connection
therewith, shall remain in full force and effect, and are hereby ratified
and confirmed.
The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of Access Capital, nor
constitute a waiver of any provision of the ARPA, or any other documents,
instruments or agreements executed and/or delivered under or in connection
therewith.
9. Governing Law. This Amendment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns and shall be governed by and
construed in accordance with the laws of the State of New York.
10. Headings. Section headings in this Amendment are included herein for convenience
of reference only and shall not constitute a part of this Amendment for any other purpose.
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11. Counterparts; Telecopier Signatures; Miscellaneous. This Amendment may be
executed by the parties hereto in one or more counterparts, each of which shall be deemed an original and all of which taken together shall constitute one and the same agreement. Any
signature delivered by a party via telecopier shall be deemed to be an original signature hereto.
Access Capital may charge to Company’s account all fees and expenses (including attorneys’ fees)
incurred by Access Capital in connection with the transactions contemplated hereby.
[Signature Page to Follow]
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IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first written
above.
| TELESTAR MARKETING, INC. |
||||
| By: | /S/ Stuart Discount | |||
| Stuart Discount, President | ||||
| TELE-RESPONSE CENTER, INC. |
||||
| By: | /S/ Stuart Discount | |||
| Stuart Discount, President | ||||
| INTERNATIONAL CONSOLIDATED COMPANIES, INC. |
||||
| By: | /S/ Xxxxxxx X. Xxxxxxx, III | |||
| Xxxxxxx X. Xxxxxxx, III, President | ||||
| and Chief Executive Officer | ||||
| ACCESS CAPITAL, INC. |
||||
| By: | /S/ Xxxxxx Xxxxx | |||
| Xxxxxx Xxxxx | ||||
| Vice President, Director of Client Management |
||||
ACKNOWLEDGED AND AGREED TO:
By: /S/ Stuart Discount
Stuart Discount, Individually
Stuart Discount, Individually
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