FOURTH AMENDMENT TO
CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT ("Third Amendment") dated as of
April 28, 1999. by and among SUCCESSORIES, INC., an Illinois corporation,
CELEBRATING EXCELLENCE, INC., an Illinois corporation, SUCCESSORIES OF ILLINOIS,
INC., an Illinois corporation, CELEX SUCCESSORIES, INC., a Canadian corporation,
BRITISH LINKS ACQUISITION CORP., an Illinois corporation, and B.L.G.C., INC., a
Texas corporation (hereinafter, together with their successors in title and
assigns, called the "Borrowers" and each of which individually is a "Borrower"),
THE PROVIDENT BANK, as Agent, an Ohio banking corporation ("Agent"), and various
Lenders as set forth in the Credit Agreement.
PRELIMINARY STATEMENT
WHEREAS, Borrowers, Agent and Lenders have entered into a Credit Agreement
dated as June 20, 1997, as amended by a First Amendment dated as of July 16,
1997, a Second Amendment dated as of May 14, 1998 and a Third Amendment dated as
of September 1, 1998 (as so amended, the "Credit Agreement"); and
WHEREAS, Borrowers have requested Lenders to make various financial
adjustments to the Credit Agreement and waive and adjust various covenants set
forth in the Credit Agreement; and
WHEREAS, Borrowers, Agent and Lenders now wish to amend the Credit
Agreement in accordance with the terms and provisions hereof.
NOW, THEREFORE, the parties hereto agree to supplement and amend the Credit
Agreement upon such terms and conditions as follows:
1. CAPITALIZED TERMS. All capitalized terms used herein shall have the
meanings assigned to them in the Credit Agreement unless the context hereof
requires otherwise. Any definitions as capitalized terms set forth herein shall
be deemed incorporated into the Credit Agreement as amended by this Third
Amendment.
2. WAIVER OF CERTAIN COVENANTS. The Lenders hereby agree to waive the
application of (i) Sections 7.1, 7.2 and 7.3 of the Credit Agreement solely as
they relate to the Reference Period ending on the Computation Date closest to
January 31, 1999, (ii) Section 7.6 of the Credit Agreement solely as it relates
to fiscal year ended January 30, 1999 and (iii) Section 7.5 of the Credit
Agreement solely as it relates to the Reference Periods ending on the
Computation Dates closest to January 31, 1999, April 30, 1999, July 31, 1999 and
October 31, 1999. The waivers contained in this Section 2 apply only to
Sections 7.1, 7.2, 7.3 and 7.5 and 7.6 of the Credit Agreement to the
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extent expressly stated herein and do not otherwise modify or waive any other
covenant or agreement contained in the Credit Agreement or for any other
Reference Period.
3. DEFINITIONS; EXHIBITS. (a) Section 1.2 of the Credit Agreement is
hereby amended to add the following definitions to read in its entirety as
follows:
"ADVANCE RATE" means an amount equal to 50%, until such time as
Borrowers close the Equity Transaction, in which event the Advance
Rate until May 1, 2000 shall be an amount based upon the net proceeds
thereof, as set forth below:
Aggregate Net Proceeds
of Equity Transaction Advance Rate
------------------------------- --------------
Between $1,000,000.00 and $1,999,999.99 54.0%
Between $2,000,000.00 and $2,999,999.99 57.0%
$3,000,000.00 or greater 60.0%
"FOURTH AMENDMENT CLOSING DATE" means the day on which the Fourth
Amendment to Credit Agreement is executed and delivered by all
applicable parties.
"EQUITY TRANSACTION" means the sale of Preferred Stock of
Holdings to Xxxx Xxxxxx, or other equity investor reasonably
acceptable to the Lenders.
(b) The following definitions contained in Section 1.2 of the Credit
Agreement are hereby amended as follows:
"APPLICABLE MARGIN" shall initially mean Three percent (3.00%)
for each of the Revolving Credit Loans and the Term Loan to be added
to the Prime Rate used in calculating the rate of interest for the
applicable Loan at any time; PROVIDED, that from and after the time at
which the Margin Ratio is less than 3.00 to 1.00, the Applicable
Margin shall mean the amount set forth below, as a percentage, to be
added to the Prime Rate, as the case may be, and used in calculating
the rate of interest for the applicable Loan at any time:
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Applicable Margin
Margin Ratio
----------------------------- --------------------
Revolving Credit Loan Term Loan
----------------------------------------------- ----------------------------- --------------------
Greater than or equal to 3.00 to 1.00 3.00% 3.00%
----------------------------------------------- ----------------------------- --------------------
Greater than or equal to 2.50 to 1.00
but less than 3.00 to 1.00 .75% 1.25%
----------------------------------------------- ----------------------------- --------------------
Greater than or equal to 2.00 to 1.00
but less than 2.50 to 1.00 .50% 1.00%
----------------------------------------------- ----------------------------- --------------------
Greater than or equal to 1.50 to 1.00
but less than 2.00 to 1.00 .25% .75%
----------------------------------------------- ----------------------------- --------------------
Less than 1.50 to 1.00 0.00% .50%
----------------------------------------------- ----------------------------- --------------------
The determination of Applicable Margin hereunder as of any Interest
Adjustment Date shall be based on unaudited quarterly compliance
certificates required to be delivered pursuant to Section 6.1(c)
hereof, PROVIDED that in the event of any discrepancy between
computations based upon any compliance certificate and the related
audited financial statements furnished pursuant to Section 6.1(c), the
computation based upon the audited financial statements shall govern
(retroactive to the Interest Adjustment Date as to which such
adjustment applies). In the event of a retroactive correction of the
determinations of the Applicable Margin in favor of the Lenders, the
amount of interest thereby overdue and payable by the Borrowers shall
be paid to the Lenders within five (5) days after the date of such
retroactive correction. In the event of a retroactive correction of
the determinations of the Applicable Margin in favor of the Borrowers,
the amount of interest overpaid by the Borrowers shall be applied by
the Lender as a credit against any fees, charges and interest or
principal payments then due hereunder or to become due hereunder to
Lenders. No downward adjustment of the Applicable Margin shall occur
if, at the time such downward adjustment would otherwise be made,
there shall exist any Default or Event of Default, PROVIDED that such
downward adjustment shall be made on the first day of the first month
after the date on which any Default or Event of Default shall have
been waived or cease to exist.
"BORROWING BASE" means, as of any date of determination, the sum
of (a) an amount equal to eighty-five percent (85%) of Eligible
Receivables, PLUS (b) an amount equal to a percentage of Eligible
Inventory equal to the Advance Rate; PROVIDED, HOWEVER, that (i)
through May 1, 2000, this clause (b) shall equal the lesser of Five
Million and 00/100 Dollars ($5,000,000.00) and an amount equal to a
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percentage of Eligible Inventory equal to the Advance Rate, and (ii)
during the months of February, March and April 2001 and each February,
March and April thereafter this clause (b) shall equal the lesser of
Three Million and 00/100 Dollars ($3,000,000.00) and an amount equal
to the percentage of Eligible Inventory equal to the Advance Rate.
"EBITDA" for any period shall mean, without duplication (i) Net
Income; PLUS (ii) for such period any Interest Expense deducted in the
determination of Net Income; PLUS (iii) any income and franchise taxes
deducted in the determination of Net Income; PLUS (iv) amortization
and depreciation deducted in determining Net Income for such period;
PLUS (v) extraordinary losses and losses on sales of assets (other
than sales of Inventory in the ordinary course of business); PLUS (vi)
for each of the Reference Periods ending on the Computation Date
closest to April 30, 1999, July 31, 1999 and October 31, 1999,
$2,000,000; MINUS (vii) the sum for such period of interest income,
extraordinary gains and gains from sales of assets (other than sales
of inventory in the ordinary course of business).
"MAXIMUM REVOLVING COMMITMENT" means the following amounts during
the periods set forth below:
PERIOD MAXIMUM REVOLVING COMMITMENT
-------------- ----------------------------
Fourth Amendment Closing Date through Nine Million and 00/100 Dollars
May 1, 2000 ($9,000,000.00)
May 1, 2000 through June 30, 2000 Six Million and 00/100 Dollars
($6,000,000.00)
July 1, 2000 through December 31, 2000 Nine Million and 00/100 Dollars
and each succeeding July 1, through ($9,000,000.00)
December 31
January 1, 2001 through June 30, 2001 Six Million and 00/100 Dollars
and each succeeding January 1, through ($6,000,000.00)
June 30
(a) RESTRICTED PAYMENT. Clause (a) (ii) of the definition of
"Restricted Payment" is hereby amended to read as follows:
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"(ii) a dividend payable solely in shares of that class of
stock to the holders of that class or payable solely in
common stock."
(b) FORM OF BORROWING BASE CERTIFICATE. Exhibit G to the Credit
Agreement is hereby amended in its entirety as Exhibit G to this Amendment.
(c) FORM OF COMPLIANCE CERTIFICATE. Exhibit H to the Credit
Agreement is hereby amended in its entirety as Exhibit H to this Amendment;
4. APPLICATION OF PROCEEDS. Section 2.6(i) of the Credit Agreement is
hereby amended in its entirety to read as follows:
(i) APPLICATION OF PROCEEDS. With respect to mandatory
prepayments described in Sections 2.6(d) through 2.6(g) above, such
prepayments shall first be applied in the inverse order of maturity to
the payment of the remaining installments on the Term Loan, and
thereafter such payments shall be applied in repayment of the
Revolving Loan; PROVIDED, HOWEVER, that with respect to a mandatory
prepayment of the proceeds of the Equity Transaction pursuant to
Section 2.6(f), the first One Million Dollars ($1,000,000) of such
prepayment shall be applied first to the next three principal payments
on the Term Loan due following such Equity Transaction and then to the
payment of the remaining installments of the Term Loan in the inverse
order of maturity, the next Two Million Dollars ($2,000,000) of such
prepayment shall be applied in repayment of the Revolving Loan, and
the balance of such prepayment shall be applied to the payment of the
remaining installments of the Term Loan in the inverse order of
maturity.
5. PREPAYMENT FEES. Section 2.6(j) of the Credit Agreement is hereby
amended to delete the phrase "and three-fourths of one percent (0.75%) upon
prepayment during the Third Loan Year."
6. EBITDA. Section 7.1 of the Credit Agreement is hereby amended in its
entirety to read as follows:
Section 7.1 EBITDA. Borrowers shall not permit its EBITDA for
the Reference Period ending on each Computation Date set forth below
to be less than the dollar amount set forth below opposite such date:
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Computation Date CONSOLIDATED
Closest to EBITDA
------------------------ ------------------
January 31, 1998 $4,164,000
April 30, 1998 $4,000,000
July 31, 1998 $4,200,000
October 31, 1998 $4,500,000
January 31, 1999 $5,300,000
April 30, 1999 ($1,565,000)
July 31, 1999 ($230,000)
October 31, 1999 $830,000
January 31, 2000 $4,100,000
April 30, 2000 $6,300,000
July 31, 2000 $6,500,000
October 31, 2000 $6,800,000
January 31, 2001 $6,800,000
7. INTEREST COVERAGE RATIO. Section 7.2 of the Credit Agreement is
hereby amended in its entirety to read as follows:
Section 7.2 INTEREST COVERAGE RATIO. On each Computation Date,
Borrowers shall not permit the ratio of Consolidated EBITDA to
Consolidated Cash Interest Expense to be less than the amount set
forth below opposite such date.
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COMPUTATION DATE
closest to RATIO
----------------- -------
January 31, 1998 Not Applicable
April 30, 1998, July 31, 1998, 3.0 to 1.0
October 31, 1998
January 31, 1999 4.0 to 1.0
April 30, 1999 Not Applicable
July 31, 1999 Not Applicable
October 31. 1999 0.75 to 1.0
January 31, 2000 3.80 to 1.00
April 30, 2000 and each 5.0 to 1.0
Computation Date thereafter
8. FIXED CHARGE COVERAGE. Section 7.3 of the Credit Agreement is hereby
amended in its entirety to read as follows:
Section 7.3 FIXED CHARGE COVERAGE. Borrower shall not permit the
Consolidated ratio of Cash Flow to Fixed Charges for the Reference
Period ending on the dates set forth below to be less than the amount
set forth opposite such date:
COMPUTATION DATE
closest to RATIO
------------------ --------
January 31, 1998, April 30, 1998, 1.25 to 1.0
July 31, 1998, October 31, 1998 and
January 31, 1999
April 30, 1999, July 31, 1999, and Not Applicable
October 31, 1999
January 31, 2000 2.60 to 1.00
April 30, 2000 and each 1.5 to 1.0
Computation Date thereafter
9. DEBT TO EBITDA. Section 7.5 of the Credit Agreement is hereby amended
in its entirety to read as follows:
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Section 7.5 DEBT TO EBITDA. Borrower shall not permit the
Consolidated ratio of Indebtedness for Borrowed Money on such date to
EBITDA for the Reference Period ending on the dates set forth below to
be greater than the amount set forth opposite such date:
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COMPUTATION DATE
closest to RATIO
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3.50 to 1.00
October 31, 1997; January 31, 1998
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April 30, 1998; July 31, 1998; 3.00 to 1.00
October 31, 1998 and January 31, 1999
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April 30, 1999; July 31, 1999 and Not Applicable
October 31, 1999
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January 31, 2000 and each 3.00 to 1.00
Computation Date thereafter
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10. REAFFIRMATION OF COVENANTS, WARRANTIES AND REPRESENTATIONS.
Borrowers hereby agree and covenant that all representations and warranties
set forth in the Credit Agreement including, without limitation, all of those
representations and warranties set forth in Article 5 thereof, are true and
accurate as of the date hereof. Borrowers further reaffirm all covenants set
forth in the Credit Agreement, and reaffirm each of the affirmative covenants
set forth in Article 6, all financial covenants set forth in Article 7, and
all negative covenants set forth in Article 8 thereof, as if fully set forth
herein, except to the extent modified by this Third Amendment.
11. CONDITIONS PRECEDENT TO CLOSING OF FOURTH AMENDMENT. On or prior to
the closing of this Fourth Amendment (hereinafter the "Fourth Amendment Closing
Date"), each of the following conditions precedent shall have been satisfied:
(a) DOCUMENTS. Each of the documents to be executed and delivered at
the Fourth Amendment Closing and all other certificates, documents and
instruments to be executed in connection herewith shall have been duly and
properly authorized, executed and delivered by Borrowers and shall be in full
force and effect on and as of the Fourth Amendment Closing Date.
(b) LEGALITY OF TRANSACTIONS. No change in applicable law shall have
occurred as a consequence of which it shall have become and continue to be
unlawful (i) for Agent and each Lender to perform any of their agreements or
obligations under any of the Loan Documents, or (ii) for Borrowers to perform
any of their agreements or obligations under any of the Loan Documents.
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(c) PERFORMANCE. Except as set forth herein, Borrowers shall have
duly and properly performed, complied with and observed each of their covenants,
agreements and obligations contained in each of the Loan Documents. Except as
set forth herein, no event shall have occurred on or prior to the Fourth
Amendment Closing Date, and no condition shall exist on the Fourth Amendment
Closing Date which constitutes a Default or an Event of Default.
(d) PROCEEDINGS AND DOCUMENTS. All corporate, governmental and other
proceedings in connection with the transactions contemplated on the Fourth
Amendment Closing Date, each of the other Loan Documents and all instruments and
documents incidental thereto, shall be in form and substance reasonably
satisfactory to Agent.
(e) NO CHANGES. Since the date of the most recent balance sheets of
Borrowers delivered to Agent, no changes shall have occurred in the assets,
liabilities, financial condition, business, operations or prospects of Borrowers
which, individually or in the aggregate, are material to Borrowers, and Agent
shall have completed such review of the status of all current and pending
legal issues as Agent shall deem necessary or appropriate.
(f) AMENDMENTS TO WARRANTS/ISSUANCE OF ADDITIONAL WARRANTS.
Successories, Inc. shall have issued to Agent amendments to the four existing
Warrants issued to Provident Financial Group, Inc. ("PFGI") extending the
expiration date of each Warrant to June 30, 2005 and shall have issued to PFGI a
new Warrant, substantially in the form of the existing Warrants, for 300,000
shares at an exercise price of $2.50 per share.
(g) PAYMENT OF WAIVER AND AMENDMENT FEE. Borrower shall have paid
Agent a fee equal to one-half of one percent (0.5%) of the aggregate Credit
Commitments of the Lenders.
12. MISCELLANEOUS.
(a) Borrowers shall reimburse Agent for all fees and disbursements of
legal counsel to Agent which shall have been incurred by Agent in connection
with the preparation, negotiation, review, execution and delivery of this Fourth
Amendment and the handling of any other matters incidental hereto.
(b) All of the terms, conditions and provisions of the Credit
Agreement not herein modified shall remain in full force and effect. In the
event a term, condition or provision of the Credit Agreement conflicts with a
term, condition or provision of this Third Amendment, the latter shall govern.
(c) This Fourth Amendment shall be governed by and shall be construed
and
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interpreted in accordance with the laws of the State of Ohio.
(d) This Fourth Amendment shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
(e) This Fourth Amendment may be executed in several counterparts,
each of which shall constitute an original, but all which together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, this Fourth Amendment has been duly executed and
delivered by or on behalf of each of the parties as of the day and year first
above written.
BORROWERS:
SUCCESSORIES, INC., an Illinois corporation
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
CELEBRATING EXCELLENCE, INC., an Illinois
corporation
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
SUCCESSORIES OF ILLINOIS, INC., an Illinois
corporation
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
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CELEX SUCCESSORIES, INC., a Canadian
corporation
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
BRITISH LINKS ACQUISITION CORP., an Illinois
corporation
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
B.L.G.C., INC., a Texas corporation
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
AGENT:
THE PROVIDENT BANK, as Agent, an Ohio banking
corporation
By: /s/ Xxxx Xxxxx
-------------------------------------------
Name: Xxxx Xxxxx
Title: Vice President
LENDERS:
THE PROVIDENT BANK, an Ohio banking corporation
By: /s/ Xxxx Xxxxx
-------------------------------------------
Name: Xxxx Xxxxx
Title: Vice President
Fourth Amendment to Warrant Certificate No. 1 Warrants for 75,000 Shares
Original Issue Date: June 20, 0000
XXXXXX XXXXXXXXX TO
WARRANT TO PURCHASE COMMON STOCK
OF
SUCCESSORIES, INC.
This certifies that the Warrant to Purchase Common Stock No. 1, issued to
PROVIDENT FINANCIAL GROUP, INC., an Ohio corporation, or its registered assigns
("Holder"), on June 20, 1997 is hereby amended as follows:
1. For purposes of this Warrant, the following capitalized term shall
have the meaning set forth below:
"Warrant Period" shall mean the period commencing
on June 20, 1997 and ending on June 20, 2005.
April 29, 1999 SUCCESSORIES, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
Fourth Amendment to Warrant Certificate No. 2 Warrants for 50,000 Shares
Original Issue Date: June 20, 0000
XXXXXX XXXXXXXXX TO
WARRANT TO PURCHASE COMMON STOCK
OF
SUCCESSORIES, INC.
This certifies that the Warrant to Purchase Common Stock No. 2, issued to
PROVIDENT FINANCIAL GROUP, INC., an Ohio corporation, or its registered assigns
("Holder"), on June 20, 1997 is hereby amended as follows:
1. For purposes of this Warrant, the following capitalized term shall
have the meaning set forth below:
"Warrant Period" shall mean the period commencing
on June 20, 1997 and ending on June 20, 2005.
April 29, 1999 SUCCESSORIES, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
Fourth Amendment to Warrant Certificate No. 3 Warrants for 25,000 Shares
Original Issue Date: June 20, 0000
XXXXXX XXXXXXXXX TO
WARRANT TO PURCHASE COMMON STOCK
OF
SUCCESSORIES, INC.
This certifies that the Warrant to Purchase Common Stock No. 3, issued to
PROVIDENT FINANCIAL GROUP, INC., an Ohio corporation, or its registered assigns
("Holder"), on June 20, 1997 is hereby amended as follows:
1. For purposes of this Warrant, the following capitalized term shall
have the meaning set forth below:
"Warrant Period" shall mean the period commencing
on June 20, 1997 and ending on June 20, 2005.
April 29, 1999 SUCCESSORIES, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
