Exhibit 10.14
SIXTH AMENDMENT TO THE CREDIT AGREEMENT
This SIXTH AMENDMENT TO THE CREDIT AGREEMENT dated as of April 1, 2002
(this "Sixth Amendment") is among MEMBERWORKS INCORPORATED, a Delaware
corporation (the "Company"), the lenders parties hereto (each a "Lender" and
collectively the "Lenders") and XXXXX BROTHERS XXXXXXXX & CO., as agent for the
Lenders (in such capacity, the "Agent").
PRELIMINARY STATEMENTS. The Company, the Lenders, and the Agent entered
into a Credit Agreement dated as of September 15, 1999, which Credit Agreement
was amended pursuant to that certain First Amendment to the Credit Agreement
dated as of February 25, 2000, that certain Second Amendment to the Credit
Agreement dated as of March 13, 2001, that certain Waiver and Third Amendment to
the Credit Agreement dated as of November 14, 2001, that certain Fourth
Amendment to the Credit Agreement dated as of February 1, 2002 and that certain
Fifth Amendment to the Credit Agreement dated as of February 28, 2002 (as so
amended, the "Existing Credit Agreement").
The Company has requested that the Agent and the Lenders, and the Agent
and the Lenders are willing to, among other things, extend the credit facility
upon the terms and conditions presented herein.
Accordingly, the Company, the Lenders and the Agent agree as follows:
Section 1.1 Amendments to the Existing Credit Agreement. Effective as
of the date hereof and subject to the satisfaction of the conditions precedent
set forth in Section 1.2 hereof, the Existing Credit Agreement is hereby amended
as follows:
(a) Notwithstanding anything to the contrary contained in the
Existing Credit Agreement, the Lenders shall not be required after the date
hereof to make any Eurodollar Rate Loans to the Company.
(b) The definition of "Restricted Securities" in Section 1.1
of the Existing Credit Agreement is deleted in its entirety and notwithstanding
anything to the contrary in the Existing Credit Agreement, any references to
"Restricted Securities" in the Existing Credit Agreement shall be of no force
and effect.
(c) The definition of "Total Commitment" in Section 1.1 of the
Existing Credit Agreement is deleted in its entirety and replaced with the
following:
"Total Commitment" shall mean $18,000,000.
(d) Section 3.1(c) of the Existing Credit Agreement is deleted
in its entirety and replaced with the following:
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The Company shall pay to the Agent, for the account of each
Lender, a facility fee from and including the Closing Date to and including the
Final Maturity Date, computed at the rate of .50% per annum on the average daily
unused portion of each Lender's Commitment with respect to the Loans; provided
however, prior to April 1, 2002, such facility fee shall be computed at the rate
of .25% per annum on the average daily unused portion of each Lender's
Commitment with respect to the Loans from the Closing Date to and including
March 31, 2002. Such fee shall be payable quarterly in arrears on the Quarterly
Payment Date.
(e) Section 6.9 of the Existing Credit Agreement is deleted in
its entirety and replaced with the following:
6.9 Security. The Company will cause any Subsidiary which becomes a
Significant Subsidiary after the Closing Date to duly execute and deliver to the
Agent a Subsidiary Security Agreement and Subsidiary Guaranty along with any
opinions, corporate documents, certificates and other documents reasonably
requested by the Agent and its special counsel in form and substance
satisfactory to the Agent and its special counsel within 30 days of such
Subsidiary becoming a Significant Subsidiary; provided however, if a Person
shall be deemed a Significant Subsidiary prior to the acquisition of such Person
by the Company, the Company shall cause such documents to be delivered to the
Agent within 30 days of the closing of such acquisition.
(f) Section 7.5 of the Existing Credit Agreement is deleted in
its entirety and replaced with the following:
7.5 Restricted Payments. The Company will not, and will not permit any
of its Subsidiaries to, declare any dividend on, or make any payment on account
of, any shares of any class of stock of the Company or any option or warrant
thereon, whether now or hereafter outstanding, or make any other distribution in
respect thereof or on any option or warrant thereon, either directly or
indirectly, whether in cash or property or in obligations of the Company or such
Subsidiary.
(g) Section 7.12 of the Existing Credit Agreement is deleted in
its entirety and replaced with the following:
7.12 Fixed Charge Coverage Ratio. The Company will not permit its Fixed
Charge Coverage Ratio to be less than 4.0 to 1.0 as of the end of any Test
Period.
(h) Section 7.14 of the Existing Credit Agreement is deleted in
its entirety and replaced with the following:
7.14 Acquisitions. Without the consent of each Lender the Company will
not, and will not permit its Subsidiaries to, acquire all or substantially all
of the assets or capital stock of another Person if (i) the total consideration
for such acquisition is greater than 10% of the consolidated Revenues of the
Company and its Subsidiaries as of the most recently completed 12-month period
and/or (ii) the total consideration paid in the form of cash or its equivalent
for such acquisition is greater than 5% of the consolidated Revenues of the
Company and its Subsidiaries as of the most recently completed 12-month period.
(i) Section 7.15 is added to the Existing Credit Agreement as
follows:
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7.15 Cash Flow. The Company will not permit its Net Cash Provided by
Operating Activities Before Changes in Working Capital to be less than or equal
to zero for any fiscal quarter.
(j) Section 7.16 is added to the Existing Credit Agreement as
follows:
7.16 Stock Buyback. During any two consecutive fiscal quarters,
measured of the end of such period, the Company will not, and will not permit
any of its Subsidiaries to, purchase, redeem, defease, retire or otherwise
acquire any shares of any class of stock of the Company or any option or warrant
thereon, whether now or hereafter outstanding (herein called "Stock Buybacks"),
either directly or indirectly, for total consideration in an amount in excess of
the sum of (i) its Net Cash Provided by Operating Activities Before Changes in
Working Capital during such two consecutive fiscal quarters plus (ii) the
aggregate net proceeds from sales of capital stock of the Company or the
exercise of options of the Company during such two consecutive fiscal quarters.
(k) Section 7.17 is added to the Existing Credit Agreement as
follows:
7.17 Borrowings Limited by Net Receivables. The Company will not permit
the aggregate principal amount of the Borrowings outstanding hereunder as of the
end of any fiscal quarter of the Company to exceed 85% of the accounts
receivable of the Company (net of all reserves for doubtful or uncollectable
receivables) as of the end of such fiscal quarter.
(l) The Commitment amounts on the signature page to the
Existing Credit Agreement is deleted and replaced with the Commitment amounts
set forth opposite the Lenders' signatures on the signature page hereto.
(m) The Commitment Percentages on the signature page to the
Existing Credit Agreement is deleted and replaced with the Commitment
Percentages set forth opposite the Lenders' signature page hereto.
Section 1.2 Conditions of Effectiveness. This Sixth Amendment shall
become effective when, and only when, the Agent and each of the Lenders shall
have received a counterpart of this Sixth Amendment executed by the Company and
the Agent shall have additionally received, in form and substance satisfactory
to the Agent and the Lenders, evidence of all corporate and other proceedings,
and all documents, instruments and other legal matters in connection with the
transactions contemplated by this Sixth Amendment, as the Lenders and the Agent
may reasonably request, all in form and substance satisfactory to the Agent and
its counsel which receipt the Lenders and Agent acknowledge and agree, by their
execution hereof, has been satisfied in full.
Section 1.3 Representations and Warranties of the Company. The Company
represents as follows:
(a) The representations and warranties contained in Section 5
of the Existing Credit Agreement are correct on and as of the date hereof as
though made on and as of such date (or, if such representation or warranty is
expressly stated to have been made as of a specific date, as of such specific
date); provided however, that Schedule 5.7 of the Existing Credit Agreement is
deleted in its entirety and restated in the form of Schedule 5.7 annexed hereto;
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(b) No Event of Default or Default has occurred and is
continuing or would result from the signing of this Sixth Amendment or the
transactions contemplated hereby;
(c) There has been no material adverse change in the financial
condition, operations, Properties, business or business prospects of the Company
and its Subsidiaries, if any, since June 30, 2001.
(d) The execution, delivery and performance by the Company of
this Sixth Amendment have been duly authorized by all necessary corporate action
and do not and will not (i) require any consent or approval of its shareholders;
(ii) violate any provisions of its articles of incorporation or by-laws; (iii)
violate any provision of, or require any filing, registration, consent or
approval under, any law, rule, regulation (including without limitation,
Regulation U and X), order, writ, judgment, injunction, decree, determination or
award presently in effect having applicability to and binding upon the Company
or any Subsidiary; or (iv) result in a breach of or constitute a default or
require any consent under any indenture or loan or credit agreement or any other
material agreement, lease or instrument to which the Company or any Subsidiary
is a party or by which it or its properties may be bound.
(e) This Sixth Amendment and the Existing Credit Agreement, as
amended hereby, constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency and other similar laws affecting creditors' rights
generally and by general principles of equity.
(f) No information, exhibit or report furnished in writing by
or on behalf of the Company or any officer or director of the Company to the
Lenders or the Agent in connection with the negotiation of, or pursuant to the
terms of, this Sixth Amendment contained when made any material misstatement of
fact or omitted to state a material fact necessary to make the statements
contained therein not misleading.
Section 1.4 Reference to and Effect on the Credit Agreement.
(a) Upon the effectiveness of this Sixth Amendment, on and
after the date hereof, each reference in the Credit Agreement to "this Credit
Agreement", "this Agreement", "hereunder", "hereof", "herein" or words of like
import shall mean and be a reference to the Existing Credit Agreement as amended
hereby.
(b) Except as specifically amended and waived above, the
Existing Credit Agreement shall remain in full force and effect and is hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Sixth
Amendment shall not operate as a waiver of any right, power or remedy of the
Lenders under the Existing Credit Agreement, nor constitute a waiver of any
provision of the Existing Credit Agreement.
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Section 1.5 Notes. Each Lender will xxxx the Note held by it to
reflect the reduction, if any, to the maximum amount of its Commitment. Failure
to so xxxx any Note shall not alter the obligations of the Company under this
Agreement, the Existing Credit Agreement or such Note. The Company may request
that the Loans made to it be evidenced by a new promissory note in the amount of
each Lender's Commitment in exchange for its outstanding Note to such Lender. In
such event, the Company shall prepare, execute and deliver to such Lender a Note
payable to the order of such Lender (or, if requested by such Lender, to such
Lender and its registered assigns) in the maximum amount of such Lender's
reduced Commitment and in the form of Exhibit A to the Existing Credit
Agreement.
Section 1.6 Costs, Expenses and Taxes. The Company agrees to pay on
demand all reasonable costs and expenses of the Lenders and the Agent in
connection with the preparation, execution and delivery of this Sixth Amendment
and the other instruments and documents to be delivered hereunder, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Lenders with respect thereto and with respect to advising the Lenders as
to its rights and responsibilities hereunder and thereunder. In addition, the
Company shall pay any and all stamp and other taxes payable or determined to be
payable in connection with the execution and delivery of this Sixth Amendment
and the other instruments and documents to be delivered hereunder, and agrees to
save the Lenders harmless from and against any and all liabilities with respect
to or resulting from any delay in paying or omission to pay such taxes.
Section 1.7 Execution in Counterparts. This Sixth Amendment may be
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which taken together
shall constitute but one and the same instrument.
Section 1.8 Governing Law. This Sixth Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York.
Section 1.9 Defined Terms. Capitalized terms used herein which are
not expressly defined herein shall have the meanings ascribed to them in the
Existing Credit Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment
to be duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.
MEMBERWORKS INCORPORATED
By: /s/ Xxxxx X . Xxxxx
-----------------------------------------------
Name: Xxxxx X. Xxxxx
Title: SVP and CFO
XXXXX BROTHERS XXXXXXXX & CO., as Agent
By: /s/ Xxxx X. Xxxx
-----------------------------------------------
Name: Xxxx X. Xxxx
Title: Vice President
Commitment
Percentage Commitment
---------- -----------
55.5556% $10,000,000 XXXXX BROTHERS XXXXXXXX & CO., as Lender
By: /s/ Xxxx X. Xxxx
-----------------------------------------------
Name: Xxxx X. Xxxx
Title: Vice President
44.4444% $8,000,000 LASALLE BANK NATIONAL ASSOCIATION, as Lender
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President
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SCHEDULE 5.7
MATERIAL LITIGATION
In January 2001, an action was instituted by plaintiff Xxxxxx X. Xxxx against
the Company and other defendants in the Court of Common Pleas in Cuyahoga
County, Ohio. The suit, which seeks unspecified monetary damages, alleges that
the Company and the other defendants violated various provisions of Ohio's
consumer protection laws in connection with the marketing of certain membership
programs offered by the Company. The plaintiff's motion to have the suit
certified as a class action was denied on February 6, 2002. The Company believes
that the claims asserted against it are unfounded and the Company will
vigorously defend its interests against this suit.
In March 2001, an action was instituted by plaintiff Xxxxxx XxXxxxx against
Xxxxxxxxx & Company ("Xxxxxxxxx"), a wholly-owned subsidiary of the Company,
Monumental Life Insurance Company and other defendants in the United States
District Court for the Eastern District of Michigan, Southern Division. The
suit, which seeks unspecified monetary damages, alleges that Xxxxxxxxx and the
other defendants violated the Michigan Consumer Protection Act and other
applicable Michigan laws in connection with the marketing of Monumental Life
Insurance Company insurance products. The complaint includes a claim that the
suit should be certified as a class action and the plaintiff has filed a motion
for class certification to which all of the defendants have filed opposing
papers regarding the same. The court has not ruled on the motion. The Company
believes that the claims asserted against Xxxxxxxxx are unfounded and the
Company and Xxxxxxxxx will vigorously defend their interests against this suit.
In June 2001, actions were instituted by plaintiffs Xxxxxx Xxxxxxxxx and Xxxxxx
Xxxxxxx against the Company and other defendants in Circuit Court of the Tenth
Judicial District, Highlands County Civil Division, Florida, and Circuit Court
of the Sixth Judicial Circuit, Pinellas County Civil Division, Florida,
respectively. The suits, which seek unspecified monetary damages, allege that
the Company and the other defendants violated the Florida Deceptive and Unfair
Trade Practices Act, in connection with the marketing of certain membership
programs offered by the Company. While the respective complaints include claims
that the suits should be certified as class actions, the plaintiffs have not
filed motions for class certification. The Company believes that the allegations
made in this lawsuit are unfounded and the Company will vigorously defend its
interests against the suits.
In July 2001, an action was instituted by Xxxx Xxxxx against the Company and
other defendants in Superior Court of the State of California, County of Orange.
The suit, which seeks unspecified monetary damages, alleges that the Company and
the other defendants violated California business practices law. While the
complaint includes a claim that the suit should be certified as a class action,
the plaintiff has not filed a motion for class certification. The Company
believes that the allegations made in this lawsuit are unfounded and the Company
will vigorously defend its interests against this suit.
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