EXECUTION
COPY
FIFTH AMENDMENT dated as of August 25, 1999 (the "Amendment") to REVOLVING
CREDIT AGREEMENT dated as of June 2, 1997 (the "Credit Agreement") between
XXXXXX XXX MARKETING, INC. (the "Borrower") and THE CIT GROUP/COMMERCIAL
SERVICES, INC. ("CIT"). Terms which are capitalized in this Amendment and not
otherwise defined shall have the meanings ascribed to them in the Credit
Agreement.
WHEREAS, the Borrower has requested CIT's consent to a series of transactions
pursuant to which, among other things, the Parent will purchase or redeem
approximately one million shares of its capital stock; and
WHEREAS, the Borrower has requested CIT to consider making a term loan to the
Borrower in the original principal amount of $5 million, the proceeds of which
would be distributed by the Borrower to the Parent and used by the Parent to
partially fund such purchase or redemption; and
WHEREAS, the Borrower has further requested CIT to consider extending the
Original Term and modifying certain financial covenants and other covenants
contained in the Credit Agreement; and
WHEREAS, CIT has agreed to make such term loan to the Borrower, to extend the
Original Term and to modify such covenants, on the terms and subject to the
fulfillment of the conditions contained in this Amendment;
NOW, THEREFORE, in consideration of the mutual promises contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION ONE - AMENDMENT OF CREDIT AGREEMENT. Upon the fulfillment of the
conditions contained in Section Three hereof, effective as of August 25, 1999,
the Credit Agreement is hereby amended to provide as follows:
(A) SECTION 10.1. CERTAIN DEFINITIONS. The definitions of the terms
Borrowing Base, Credit Extension, Loan, Obligations and Related Documents or
Loan Documents are deleted in their entirety, the following are substituted in
lieu thereof, and the terms "Fifth Amendment Closing Date", "Inventory Subline",
"Redemption", "Term Loan", and "Term Note", and the definition thereof, are
added to Section 1.01 in the appropriate alphabetical order, as follows:
"Borrowing Base" shall mean, as of the Relevant Date, an
amount equal to the difference between:
(i) the sum of (A) 85% of the Net Amount of Eligible Accounts
Receivable, plus (B) the lesser of (1) the sum of (x) 50% of
the Book Value of Eligible Inventory and (y) 50% of the amount
of L/C Inventory, provided that the Inventory with respect
thereto is not otherwise included in the Borrowing Base and
(2) the amount
of the Inventory Subline then in effect, plus (C) 100% of
the excess, if any, of the balance in the Funds-in-Use
Account over the debit balance in the Loan Account, as of
the opening of business on such date; and
(ii) such reserves as CIT, in its sole discretion exercised
reasonably, may deem appropriate.
"Credit Extension" shall mean (a) the making of any Loan by
CIT , (b) the making of the Term Loan by CIT or (c) the
issuance, or extension of the expiration date of, any Letter
of Credit which CIT assists the Borrower in opening or
establishing.
"Fifth Amendment Closing Date" shall mean the first date on
which each of the conditions set forth in Section Three of the
Fifth Amendment to the Revolving Credit Agreement, dated as of
August 25, 1999, shall have been satisfied.
"Inventory Subline" shall mean the sum of $20,000,000, which
amount shall increase automatically by $1,000,000 each fiscal
year, effective on the last day of each such year, commencing
with the fiscal year ending on January 1, 2000.
"Loan" or "Loans" shall mean any and all loan or loans made by
CIT to the Borrower under Section 2.01(a) of this Agreement.
"Obligations" shall mean all obligations, liabilities and
indebtedness of the Obligors to CIT incurred under or related
to this Agreement, the Note, the Term Note, the Factoring
Agreement or any other Related Document, the letter agreement
dated on or about the Closing Date among Bank Boston, N.A.,
Bank America Business Credit, Inc., Xxxxxx Financial, Inc.,
The Xxxxxx Xxx Companies, Inc. and CIT and all Ledger Debt,
whether such obligations, liabilities or indebtedness are
direct or indirect, secured or unsecured, joint or several,
absolute or contingent, due or to become due, whether for
payment or performance, now existing or hereafter arising,
including, without limitation, those which are described in
either of the following clauses (i) or (ii):
(i) All indebtedness, obligations (including Reimbursement
Obligations) and liabilities of any nature whatsoever, from
time to time arising under or in connection with or evidenced
or secured by this Agreement, the Note, the Term Note, the
Letters of Credit or any other Related Document, including but
not limited to the principal amount of the Term Loan and the
Loans outstanding, together with interest thereon, the amount
of the Letter of Credit Exposure, together with interest
thereon and all expenses, fees and indemnities hereunder or
under any other Related Document. Without limitation, such
amounts include the Term Loan and interest thereon, all Loans
and
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interest thereon and the amount of all Letter of Credit
Exposure whether or not the Term Loan or such Loans were made
or any Letters of Credit to which such Letter of Credit
Exposure relates were issued in compliance with the terms and
conditions hereof or in excess of CIT's obligation to lend and
arrange for the issuance of Letters of Credit hereunder.
Except as otherwise provided in the Factoring Agreement with
respect to Factor Risk Accounts (as defined in the Factoring
Agreement), if and to the extent any amounts in any account
(including the Loan Account, the Depository Accounts or
otherwise) constituting Collateral are applied to Obligations
hereunder, and CIT is subsequently obligated to return or
repay any such amounts to any Person for any reason, other
than as a direct result of CIT's gross negligence or willful
misconduct as determined by a final judgment of a court of
competent jurisdiction, the amount so returned or repaid shall
be deemed a Loan hereunder and shall constitute an Obligation.
(ii) All indebtedness, obligations and liabilities from time
to time arising under or in connection with any account from
time to time maintained by the Borrower with CIT, including
but not limited to all Reimbursement Obligations, service
charges and interest in connection with any overdrafts or
returned items from time to time arising in connection with
any such account, or arising under or in connection with any
investment services, cash management services or other
services from time to time performed by CIT pursuant to or in
connection with this Agreement or any other Related Document.
"Redemption" shall mean the election of certain shareholders
of the Parent to receive cash for some or all of the shares of
stock of the Parent held by such shareholders, pursuant to the
Agreement and Plan of Merger dated May 12, 1999 among Three
Cities Offshore II C.V., Three Cities Fund II, L.P., TCR
Acquisition Sub Co. and The Xxxxxx Xxx Company, Inc.
"Related Documents" or "Loan Documents" means this Agreement,
the Customer Terms Agreement, the Note, the Term Note, the
Security Agreement, the Trademark Agreement, each Guaranty,
the Stock Pledge Agreement, the Letters of Credit, each Letter
of Credit Application, the Confirmation Order, the Factoring
Agreement, the Factoring Documents, the other documents,
instruments and agreements referred to in Section 7.01 hereof,
and all other instruments, agreements and documents now
existing or hereafter entered into or in effect by the
Obligors or any other Person from time to time creating,
evidencing, directly or indirectly guaranteeing, or granting
CIT a Lien to secure, any obligations under or in connection
with this Agreement, the Note, the Term Note, the Security
Agreement, the Trademark Agreement, each
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Guaranty, the Stock Pledge Agreement, the Letters of Credit,
each Letter of Credit Application, the Confirmation Order, the
Factoring Agreement, the Factoring Documents or any other
Related Document, and all other instruments, agreements and
documents from time to time delivered in connection with or
otherwise relating to any Related Document.
"Term Loan" shall mean the term loan in the original principal
amount of $5,000,000 made by CIT to the Borrower on the Fifth
Amendment Closing Date.
"Term Note" shall mean the promissory note of the Borrower,
substantially in the form attached hereto as Exhibit A-1,
executed and delivered under this Agreement, as modified,
amended, supplemented or restated from time to time and any
promissory note or notes issued in exchange or replacement
thereof, including all extensions, renewals, refinancings or
refundings thereof in whole or part.
(B) SECTION 2.01. REVOLVING CREDIT LOANS. Section 2.01 is re-captioned
"Revolving Credit Loans and Term Loan", and a new subsection (c) of Section 2.01
is added as follows:
"(c) Term Loan. Subject to the terms and conditions and
relying upon the representations and warranties herein set
forth, on the Fifth Amendment Closing Date, CIT agrees to make
the Term Loan to the Borrower."
(C) SECTION 2.02. NOTE. Section 2.02 is re-captioned "Note and Term
Note", and the following sentences are added to the end of Section 2.02:
"The obligation of the Borrower to repay the unpaid principal
amount of the Term Loan made to it by CIT and to pay interest
thereon shall be evidenced in part by the Term Note, dated as
of the Fifth Amendment Closing Date with the blanks
appropriately filled in. The executed Term Note shall be
delivered by the Borrower to CIT on the Fifth Amendment
Closing Date."
(D) SECTION 2.03. MAKING OF LOANS. Section 2.03 is re-captioned "Making
of Loans and Term Loan", and the following sentence is added to the end of
subsection (a) of Section 2.03:
"On the Fifth Amendment Closing Date, CIT shall make the full
amount of the Term Loan available to the Borrower by
depositing the proceeds thereof in the Disbursement Account,
or at the Borrower's request, by wire transfer of same to the
bank accounts and in the amounts set forth in a duly executed
Notice of Borrowing."
(E) SECTION 2.04. MANDATORY PREPAYMENT; OPTIONAL PREPAYMENT; COMMITMENT
REDUCTION. Section 2.04 is amended by (i) deleting clause (ii) of subsection (a)
of Section 2.04
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in its entirety, (ii) deleting subsection (b) of Section 2.04 in its entirety,
(iii) substituting the following clause (ii) and subsection (b), respectively,
in lieu thereof, and (iv) adding a new subsection (e) to Section 2.04, as
follows:
"(ii) Disposition of Assets, etc. Without limiting any other
provision of this Agreement or any other Related Document
permitting or requiring prepayment of the Term Loan or the
Loans in whole or part, the Borrower shall prepay the Term
Loan in whole or in part, until paid in full, and then the
Loans in whole or in part, in each case without premium or
penalty, except as otherwise set forth in Section 5.03 (a)
(v), in an amount equal to 100% of the Net Sale Proceeds
constituting cash received by any Obligor from any sale,
lease, transfer or other disposition of any asset outside of
the ordinary course of the business of the Obligors, the
proceeds of any claim made under any insurance policy covering
any assets of any Obligor and the proceeds of any condemnation
or similar proceeding with respect to any real property of any
Obligor. Any prepayment required under this clause (ii) shall
be made on the first Business Day after the consummation of
such transfer, sale, disposition, settlement, issuance or
other event triggering a prepayment."
"(b) Optional Prepayment. Except as otherwise set forth in
Section 5.03 (a) (v), the Borrower may without penalty or
premium at any time or from time to time prepay, in whole or
in part, the Term Loan and any or all Loans then outstanding."
"(e) Application of Prepayments of Term Loan. All prepayments
of the Term Loan shall be applied against the scheduled
installments of principal thereof, in inverse order of
maturity."
(F) SECTION 2.05. INTEREST RATE. Section 2.05 is deleted in its
entirety and the following is substituted in lieu thereof:
"2.05. Interest Rate. The Term Loan, and each Loan, shall bear
interest on the principal amount thereof from time to time
outstanding for each day during each calendar month, until
paid, at a rate per annum for each such day equal to the Prime
Rate in effect on the last day of the previous month (the
"then applicable Prime Rate") (i) in the case of the Term
Loan, plus an interest rate margin of two percent (2%), and
(ii) in the case of the Loans, minus an interest rate margin
of one-quarter of one-percent (1/4 of 1%). "Prime Rate", as
used herein, shall mean the interest rate per annum publicly
announced from time to time by the Bank in New York, New York
as its Prime Rate. In the event of any change in the Prime
Rate, the rates of interest hereunder shall change, as of the
first day of the month following any change, so as to remain
(i) in the case of the Term Loan, two per cent (2%) above the
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then applicable Prime Rate, and (ii) in the case of the Loans,
one-quarter of one percent (1/4 of 1%) below the then
applicable Prime Rate. The Prime Rate is not intended to be
the lowest rate of interest charged by the Bank to its
borrowers."
(G) SECTION 2.06. INTEREST PAYMENT DATES. Section 2.06 is deleted
deleted in its entirety and the following is substituted in lieu thereof:
"2.06. Interest Payment Dates. The Borrower shall pay interest
on the unpaid principal amount of the Term Loan, from the date
the Term Loan is made until such principal amount shall be
paid in full, and on the unpaid principal amount of each Loan,
from the date of such Loan until such principal amount shall
be paid in full, which interest shall be payable monthly in
arrears on the first day of each month, commencing on the
first day of the month following the month in which the
Closing Date occurs, in the case of the Loans, and in the case
of the Term Loan, commencing on the first day of month
following the Fifth Amendment Closing Date. After maturity of
any principal amount of the Term Loan or any Loan (by
acceleration, at scheduled maturity or otherwise), interest on
such amount shall be due and payable on demand."
(H) SECTION 2.07. AMORTIZATION. Section 2.07 is deleted in its
entirety and the following is substituted in lieu thereof:
"2.07 Amortization. To the extent not due and payable earlier
pursuant to the terms of this Agreement, (a) the entire unpaid
principal amount of each of the Loans shall be due and payable
in full on the Maturity Date and (b) the principal balance of
the Term Loan shall be paid in equal and successive monthly
installments, based on an amortization schedule consisting of
sixty (60) months, each of which installments shall be due and
payable on the first day of the month, commencing on the
earlier to occur of (i) January 1, 2000 and (ii) the first day
of the sixth month after the month during which the Fifth
Amendment Closing Date shall occur, provided, however, that
the outstanding and unpaid principal balance of the Term Loan,
and all accrued and unpaid interest thereon, shall be due and
payable in full on the Maturity Date."
(I) SECTION 2.08. PAYMENTS. Section 2.08 is amended by deleting
subsections (a) and (b) thereof in their entirety, substituting the following in
lieu thereof, re-lettering subsection (e) thereof as subsection (f), and by
adding a new subsection (e) thereof as follows:
"2.08. Payments.
(a) Time, Place and Manner. Except with respect to optional
prepayments as provided in Section 2.04(b) hereof, all
payments and prepayments to be made in respect of principal,
interest, fees or other amounts due from the Borrower
hereunder, under the Note,
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the Term Note or any other Related Document shall be payable
at or before 12:00 Noon, New York City time, on the day when
due without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived. Such payments
shall be made to CIT in Dollars in funds immediately available
at its Office without setoff, counterclaim or other deduction
of any nature. The Borrower hereby authorizes CIT to, and CIT
may, from time to time, when due and payable, charge the Loan
Account with any interest, fees or expenses that are due and
payable under this Agreement or any Related Document. The
Borrower confirms that any charges which CIT may so make to
the Loan Account as herein provided will be made as an
accommodation to the Borrower and solely at CIT's discretion
and shall constitute a Loan to the Borrower. On the last day
of each month, CIT shall transfer and credit to the Loan
Account the amount reflected in the Funds-in-Use Account on
such day. Credit balances in the Loan Account may be
transferred to the Borrower at any time and from time to time.
CIT shall use reasonable efforts to provide the Borrower with
copies or other evidence of all charges to the Loan Account
promptly and within five Business Days of the date such
charges are made, provided that the failure to provide such
copies or such other evidence to the Borrower shall not
relieve the Borrower of any of its obligations under this
Agreement. Interest on the Term Loan, and on all Loans and all
fees that accrue on a per annum basis, shall be computed on
the basis of the actual number of days elapsed in the period
during which interest or such fee accrues and a year
consisting of 360 days. In computing interest on the Term Loan
and on any Loan, the date of the making of the Term Loan and
such Loan shall be included and the date of payment shall be
excluded."
(b) Interest Upon Events of Default. To the extent permitted
by law, after there shall have occurred and so long as there
is continuing an Event of Default pursuant to Section 11.01 of
this Agreement, all principal, interest, fees, indemnities or
any other obligations for the payment of money under this
Agreement, the Note, the Term Note or any other Related
Document (and including interest accrued under this Section
2.08(b)) shall bear interest for each day until paid (before
and after judgment), payable on demand, at two percent (2%) in
excess of the rate of interest otherwise in effect under this
Agreement and, if no interest rate is otherwise in effect, at
a rate per annum of three percent (3%), or five percent (5%),
in the case of the Term Note, above the Prime Rate for such
day (collectively, the "Default Rate"). CIT shall use
reasonable efforts to promptly provide the Borrower with
notice that interest is accruing at the Default Rate and of
the Event of Default giving rise thereto, provided that the
failure of CIT to provide such notice to the Borrower shall
not limit the rights of
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CIT under this Section 2.08(b) or relieve the Borrower of its
obligations under this Section 2.08(b) or the Agreement."
"(e) Unused Line Fee. The Borrower shall pay to CIT in
arrears, on the first day of each month, commencing on the
first day of the month following the Fifth Amendment Closing
Date, and on the Maturity Date, a fee (the "unused line fee")
of .25% per annum on the average daily unused amount of the
Revolving Credit Commitment. For purposes of calculating such
average daily unused amount on any date of determination, each
Loan made on such date, and each Letter of Credit outstanding
on such date, shall be considered a use of the Revolving
Credit Commitment."
(J) SECTION 2.09. USE OF PROCEEDS. Section 2.09 is deleted in its
entirety, and the following is substituted in lieu thereof:
"2.09 Use of Proceeds. The Borrower hereby covenants,
represents and warrants that (a) except as otherwise set forth
in clause (b) hereof, the proceeds of the Loans made to it
will be used solely to fund working capital in the ordinary
course of the Borrower's business and for other general
corporate purposes of the Borrower and (b) the proceeds of the
Term Loan and of the Loans made to it on the Fifth Amendment
Closing Date will be used to fund the declaration and payment
of a distribution to the Parent, the proceeds of which will be
used to fund the Redemption."
(K) SECTION 2.10. INCREASED COSTS AND REDUCED RETURN. Subsections (a)
and (b) of Section 2.10 are deleted in their entirety, and the following are
substituted in lieu thereof:
"2.10. Increased Costs and Reduced Return.
(a) If CIT or the Letter of Credit Issuer shall have
determined that the adoption or implementation of, or any
change in, any law, rule, treaty or regulation, or any policy,
guideline or directive of, or any change in the interpretation
or administration thereof by, any court, central bank or other
administrative or Governmental Authority, or compliance by the
Letter of Credit Issuer or CIT or any Person controlling CIT
or the Letter of Credit Issuer with any directive of or
guideline from any central bank or other Governmental
Authority or the introduction of or change in any accounting
principles applicable to the Letter of Credit Issuer, CIT or
any Person controlling CIT or the Letter of Credit Issuer (in
each case, whether or not having the force of law), shall (i)
change the basis of taxation of payments to the Letter of
Credit Issuer, CIT or any Person controlling CIT or the Letter
of Credit Issuer of any amounts payable hereunder (except for
taxes on the overall net income of the Letter of Credit
Issuer, CIT or any Person controlling CIT or the Letter of
Credit Issuer), (ii) impose, modify or deem
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applicable any reserve, special deposit or similar requirement
against the Term Loan, any Loan, Letter of Credit or against
assets of or held by, or deposits with or for the account of,
or credit extended by, the Letter of Credit Issuer, CIT, or
any Person controlling CIT or the Letter of Credit Issuer or
(iii) impose on the Letter of Credit Issuer, CIT or any Person
controlling CIT or the Letter of Credit Issuer any other
condition regarding this Agreement, the Term Loan, any Loan or
Letter of Credit, and the result of any event referred to in
clauses (i), (ii) or (iii) above shall be to increase the cost
to the Letter of Credit Issuer or CIT of making the Term Loan,
any Loan, issuing or guaranteeing any Letter of Credit, or
agreeing to make the Term Loan, any Loan or issue or guaranty
any Letter of Credit, or to reduce any amount received or
receivable by the Letter of Credit Issuer or CIT hereunder,
then, upon demand by the Letter of Credit Issuer or CIT, the
Borrower shall pay to the Letter of Credit Issuer or CIT such
additional amounts as will compensate the Letter of Credit
Issuer or CIT for such increased costs or reductions in
amount.
(b) If CIT or the Letter of Credit Issuer shall have
determined that any Capital Guideline or adoption or
implementation of, or any change in, any Capital Guideline by
the Governmental Authority charged with the interpretation or
administration thereof, or compliance by the Letter of Credit
Issuer, CIT or any Person controlling such Letter of Credit
Issuer or CIT with any Capital Guideline or with any request
or directive of any such Governmental Authority with respect
to any Capital Guideline, or the implementation of, or any
change in, any applicable accounting principles (in each case,
whether or not having the force of law), either (i) affects or
would affect the amount of capital required or expected to be
maintained by the Letter of Credit Issuer, CIT or any Person
controlling the Letter of Credit Issuer or CIT, and the Letter
of Credit Issuer or CIT determines that the amount of such
capital is increased as a direct or indirect consequence of
the Term Loan or any Loans made or maintained, Letters of
Credit issued or any guaranty with respect thereto, or the
Letter of Credit Issuer's or CIT's other obligations
hereunder, or (ii) has or would have the effect of reducing
the rate of return on the Letter of Credit Issuer's, CIT's or
any such other controlling Person's capital to a level below
that which the Letter of Credit Issuer, CIT or such
controlling Person could have achieved but for such
circumstances as a consequence of the Term Loan or any Loans
made or maintained, Letters of Credit issued, or any guaranty
with respect thereto or any agreement to make the Term Loan or
Loans, to issue Letters of Credit or the Letter of Credit
Issuer's or CIT's other obligations hereunder (in each case,
taking into consideration the Letter of Credit Issuer's, CIT's
or such other controlling Person's policies with respect to
capital adequacy), then, upon demand by the Letter of Credit
Issuer or CIT, the Borrower shall pay to the Letter of
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Credit Issuer or CIT from time to time such additional amounts
as will compensate the Letter of Credit Issuer or CIT for such
cost of maintaining such increased capital or such reduction
in the rate of return on the Letter of Credit Issuer's, CIT's
or such other controlling Person's capital."
(L) SECTION 5.01. TERMINATION. Section 5.01 is deleted in its
entirety, and the following is substituted in lieu thereof:
"5.01. Term of Agreement. Subject to CIT=s rights under
Article XI hereof, this Agreement shall be in effect during
the period commencing on the Closing Date and ending on June
2, 2004 (the "Original Term"), and thereafter shall
automatically renew itself for successive one-year periods
(each a "Renewal Term"), unless sooner terminated as provided
in Section 5.02 hereof."
(M) SECTION 5.03. EFFECT OF TERMINATION. Clause (v) of subsection
(a) of Section 5.03 is deleted in its entirety, and the following is substituted
in lieu thereof:
"(v) if such Notice of Termination is given by the Borrower to
CIT, and the Termination Date specified therein is a date
which is (x) prior to June 2, 2000, the Borrower shall pay to
CIT on such Termination Date an early termination fee in an
amount equal to one per cent (1%) of the "average outstanding
amount", as hereinafter defined, (y) on or after June 2, 2000
but prior to June 2, 2001, the Borrower shall pay to CIT on
such Termination Date an early termination fee in an amount
equal to three-quarters of one per cent (3/4 of 1%) of the
average outstanding amount, or (z) on or after June 2, 2001
but prior to June 2, 2004, the Borrower shall pay to CIT on
such Termination Date an early termination fee in an amount
equal to one-half of one per cent (1/2 of 1%) of the average
outstanding amount. As used in this Section, the term "average
outstanding amount" means, for the twelve month period ending
with the month preceding the Termination Date specified by the
Borrower in its Notice of Termination, the sum of (A) the
average amount of the Loans outstanding at the end of each day
during such period plus (B) the average amount of Letter of
Credit Exposure outstanding at the end of each day during such
period."
(N) SECTION 10.05. LOANS, ADVANCES AND INVESTMENTS. Section 10.05
is deleted in its entirety, and the following is substituted in lieu thereof:
"10.05. Loans, Advances and Investments. Except as otherwise
expressly permitted by this Section 10.05, the Borrower shall
not at any time make or suffer to remain outstanding any loan
or advance to, or purchase, acquire or own any stock, bonds,
notes or securities of, or any partnership interest (whether
general or limited) in, or any other interest in, or make any
capital contribution to, any other Person. By way of
illustration, and without limitation
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of the foregoing, it is understood that the Borrower will be
deemed to have made an advance to a Person: (x) to the extent
that the Borrower performs any service for such Person
(including but not limited to management services), or
transfers any property to such Person, and is not reimbursed
for such service or property and (y) to the extent that the
Borrower pays any obligation on behalf of such Person. The
amount of such advance shall be deemed to be the fair value of
the services so performed or property so transferred (in the
case of clause (x)) or the amount so paid by the Borrower (in
the case of clause (y)).
The following are excepted from the operation of this Section 10.05:
(a) loans or advances to Xxxxxxxx Xxxxxxxxx or any of the
Designated Officers (each, including Xxxxxxxx Xxxxxxxxx, a
"senior manager"), provided that (i) the proceeds of such
loans or advances are used to fund the acquisition of shares
of capital stock of the Parent, (ii) such shares shall be
owned or controlled, beneficially and of record, by the senior
manager to whom such loan or advance shall be made, (iii) the
principal amount of such loan or advance, together with the
unpaid principal amount of all previous loans and advances
made to such senior manager for such purpose, shall not
exceed, in the aggregate, the amount of the annual base salary
of such senior manager, as in effect on the date of such loan
or advance, and (iv) such senior manager shall pledge and
collaterally assign to CIT, or cause to be pledged and
collaterally assigned to CIT, pursuant to a duly executed
Stock Pledge Agreement, and shall deliver to CIT, or cause to
be delivered to CIT, all of the shares of capital stock of the
Parent so acquired, as collateral security for all
Obligations;
(b) in addition to loans and advances to employees permitted
under clause (a) above, (i) advances to employees to meet
expenses incurred or to be incurred by such employees, salary
advances and other similar advances to employees and (ii)
advances to Persons performing contracting services for the
Borrower, so long as such advances are made against the
amounts to be paid by the Borrower for such services, in each
case to non-Affiliates and in the ordinary course of the
Borrower's business, provided that all advances in the case of
clause (i) may not exceed $200,000 in the aggregate at any one
time outstanding, and in the case of clause (ii) may not
exceed $300,000 in the aggregate at any one time outstanding
(exclusive of that certain loan in the original principal
amount of $220,000 made, or which may be made, by the Borrower
to Metrix Computer Cutting, Inc.);
(c) ownership of any capital stock, bonds, notes, securities,
partnership or joint venture interests on the Closing Date;
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(d) the Cash Collateral Account and the other accounts
permitted or required to be maintained pursuant hereto, any
investment of funds on deposit in the foregoing to the extent
expressly permitted hereunder; and
(e) (i) direct obligations of the United States of America, or
any agency or instrumentality thereof, or obligations
guaranteed by the United States of America; (ii) certificates
of deposit maturing within one year from the date of
acquisition, bankers acceptances, or overnight bank deposits,
in each case issued by, created by, or with, a United States
bank whose long-term certificates of deposit have an
investment grade rating by S&P or Xxxxx'x; (iii) commercial
paper given a rating of A-1 or higher by S&P or P-1 or higher
by Xxxxx'x and maturing not more than 270 days from the date
of creation thereof; (iv) tender bonds, with a maturity day or
tender option of not in excess of one year, with ratings of
A-1 or AA or higher by S&P or P-1 or Aa or higher by Xxxxx'x
or the payment of the principal of and interest on which is
fully supported by a letter of credit issued by a United
States bank whose long-term certificates of deposit are rated
at least AA or the equivalent thereof by S&P and Aa or the
equivalent thereof by Xxxxx'x; and (v) repurchase agreements
pertaining to investments of the types described in clauses
(i) (ii), (iii) and (iv) hereof."
(O) SECTION 10.06. DIVIDENDS AND RELATED DISTRIBUTIONS.
Section 10.06 is deleted in its entirety, and the following is substituted in
lieu thereof:
"10.06. The Borrower shall not declare, make, pay or agree to
pay, any dividend or other distribution of any nature (whether
in cash, property, securities or otherwise) on account of or
in respect of shares of its capital stock or on account of the
purchase, redemption, retirement or acquisition of any shares
of capital stock (or warrants, options or rights therefor),
provided, however, that, in addition to amounts paid by the
Borrower on or prior to the Fifth Amendment Closing Date as
dividends or to repurchase stock, the Borrower shall be
permitted to declare and pay dividends or repurchase stock so
long as the amount to be declared and paid as a dividend or
the amount to be paid to repurchase stock, as the case may be,
together with all such amounts theretofore paid after the
Fifth Amendment Closing Date, shall not exceed, in the
aggregate, the sum of $2,000,000 plus, if and to the extent
that the Net Income of the Parent, calculated on a cumulative
basis for the period commencing with the fiscal quarter during
which the Fifth Amendment Closing Date occurs and ending with
the fiscal quarter preceding any date of determination,
exceeds $1,000,000, an amount equal to (x) one-half of such
cumulative Net Income in excess of $1,000,000 minus (y) all
amounts after the Fifth Amendment Closing Date and prior to
such date of determination distributed as dividends or paid to
repurchase stock (including
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amounts so distributed or paid pursuant to the $2,000,000
basket hereinabove provided), provided further that (a) at the
time of, and after giving effect to, any such payment of
dividends or repurchase of stock, no Event of Default shall
have occurred and be continuing, (b) the undrawn Availability
before and after the making of any such dividend payment or
stock repurchase shall be not less than $5,000,000.00 and (c)
solely for purposes of determining the Borrower's compliance
with this covenant, the calculation of such Net Income shall
exclude negative goodwill."
(P) SECTION 10.15. MINIMUM CONSOLIDATED TANGIBLE NET WORTH. Section
10.15 is deleted in its entirety, and the following is substituted in lieu
thereof:
"10.15 Minimum Consolidated Tangible Net Worth. The Borrower
will not permit the Parent's Consolidated Tangible Net Worth,
as of any date of determination, to be less than an amount
equal to $35,000,000 minus the aggregate amount of dividends
and repurchases of stock paid in cash, in accordance with the
terms of Section 10.06, during the period commencing on the
Fifth Amendment Closing Date and ending on such date of
determination, provided, however, that solely for purposes of
determining the Borrower's compliance with this covenant, the
calculation of such Consolidated Tangible Net Worth shall
include the value of goodwill, determined in accordance with
GAAP, created from the acquisition, directly or indirectly, by
the Parent, after the Fifth Amendment Closing Date, of stock
or assets, so long as such acquisition shall have been
consented to in advance, in writing, by CIT."
(Q) SECTION 10.16. MINIMUM CONSOLIDATED WORKING CAPITAL. Section 10.16
is deleted in its entirety, and the following is substituted in lieu thereof:
"10.16 Minimum Consolidated Working Capital. The Borrower will
not permit the Parent's Consolidated Working Capital, as of
any date of determination, to be less than an amount equal to
$30,000,000 minus the aggregate amount of dividends and
repurchases of stock paid in cash, in accordance with the
terms of Section 10.06, during the period commencing on the
Fifth Amendment Closing Date and ending on such date of
determination, provided, however, that solely for purposes of
determining the Borrower's compliance with this covenant, the
calculation of such Consolidated Working Capital shall include
the value of goodwill, determined in accordance with GAAP,
created from the acquisition, directly or indirectly, by the
Parent, after the Fifth Amendment Closing Date, of stock or
assets, so long as such acquisition shall have been consented
to in advance, in writing, by CIT."
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(R) SECTION 10.17. MINIMUM RATIO OF CONSOLIDATED CURRENT ASSETS TO
CONSOLIDATED CURRENT LIABILITIES. Section 10.17 is deleted in its entirety, and
the following is substituted in lieu thereof:
"10.17 Minimum Ratio of Consolidated Current Assets to
Consolidated Current Liabilities. The Borrower will not permit
the ratio of the Parent's Consolidated Current Assets to the
Parent's Consolidated Current Liabilities, as of any date of
determination, to be less than 2.50 to 1.00, provided,
however, that solely for purposes of determining the
Borrower's compliance with this covenant, the calculation of
such Consolidated Current Assets shall be deemed to be
increased by (i) the aggregate amount of dividends and
repurchases of stock paid in cash, in accordance with the
terms of Section 10.06, during the period commencing on the
Fifth Amendment Closing Date and ending on such date of
determination, and (ii) the value of goodwill, determined in
accordance with GAAP, created from the acquisition, directly
or indirectly, by the Parent, after the Fifth Amendment
Closing Date, of stock or assets, so long as such acquisition
shall have been consented to in advance, in writing, by CIT."
(S) SECTION 10.18. MINIMUM RATIO OF CONSOLIDATED EBITDA TO CONSOLIDATED
INTEREST EXPENSE. Section 10.18 is deleted in its entirety, and the following is
substituted in lieu thereof:
"10.18 Minimum Ratio of Consolidated EBITDA to Consolidated
Interest Expense. The Borrower will not permit the ratio of
the Parent's Consolidated EBITDA to the Parent's Consolidated
Interest Expense as at the end of each fiscal quarter,
commencing with the fiscal quarter ended on January 2, 1999,
on a cumulative basis with the preceding fiscal quarters of
the then current fiscal year, to be less than 3.00 to 1.00."
(T) A new Exhibit A-1, in the form of Exhibit A-1 annexed to this
Amendment, is hereby added to the Credit Agreement.
(U) In each instance in which the phrase "the Loan", "the Loans", or
"any Loan" appears in Sections 10.21, 12.06, 12.11 and 12.14, each such Section
shall be deemed amended by the insertion immediately before such phrase of the
phrase "the Term Loan and" or "the Term Loan or", as applicable, and in each
instance in which the phrase "the Note" appears in Section 5.03, 7.27, 11.02,
12.01 through 12.05, 12.11, 12.12 and 12.15, each such Section shall be deemed
amended by the insertion immediately before such phrase of the phrase "the Term
Note and" or "the Term Note or", as applicable.
SECTION TWO - CONSENT. Based on the representations and warranties made
by the Borrower pursuant to Section Four hereof, upon the fulfillment of the
conditions contained in Section Three hereof, effective as of August 25, 1999,
CIT hereby consents to the distribution by the Borrower to the Parent,
concurrent with and pursuant to the consummation of the Redemption, of cash in
an aggregate amount not to exceed $7,087,640, of which $5,000,000 shall
constitute proceeds of the Term Loan and up to $2,087,640 of which shall
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constitute proceeds of Loans, in each case made by CIT to the Borrower on the
Fifth Amendment Closing Date. CIT has been advised by the Borrower that during
the month of December, 1998, the Paymaster Affiliate merged with and into the
Borrower. The Borrower hereby represents and warrants that immediately prior to
the effectiveness of such merger, the Paymaster Affiliate had no obligations,
liabilities or indebtedness of any kind, whether absolute or contingent, whether
disclosable on a balance sheet prepared in accordance with GAAP, or otherwise,
except for (i) the contingent liability of the Paymaster Affiliate arising under
the Guaranty dated as of June 2, 1997 executed by the Paymaster Affiliate in
favor of CIT and (ii) as set forth on the Schedule annexed hereto. Based on such
representation and warranty, CIT hereby consents to such merger as of the
effective date thereof, and CIT hereby waives as an Event of Default the
Borrower's violation of Section 10.07 of the Credit Agreement, which prohibits
such merger.
SECTION THREE-CONDITIONS PRECEDENT. This Amendment shall become
effective on the date when all of the following conditions, the fulfillment of
each of which is a condition precedent to the effectiveness of this Amendment,
shall have occurred:
(A) CIT shall have received a fully executed counterpart or original of
this Amendment and the Term Note, together with a First Amendment to the
Factoring Agreement, in substantially the form annexed hereto as Exhibit B, and
a letter agreement executed in favor of CIT by each of the Guarantors, by the
Parent, as pledgor under the Stock Pledge Agreement, and by the Trademark
Affiliate, as party to the Trademark Agreement, in substantially the form
annexed hereto as Exhibit C.
(B) CIT shall have received a Certificate of the Secretary of the
Borrower relating to the adoption of the resolutions of the Board of Directors
of the Borrower, approving this Amendment, and a Solvency Certificate from the
chief financial officer of the Parent and the Borrower;
(C) Upon the effectiveness of this Amendment, all representations and
warranties set forth in the Credit Agreement (except for such inducing
representations and warranties that were only required to be true and correct as
of a prior date) shall be true and correct in all material respects on and as of
the effective date hereof, and no Event of Default shall have occurred and be
continuing;
(D) No event or development shall have occurred since the date of
delivery to CIT of the most recent financial statements of the Parent and its
Subsidiaries which event or development has had or is reasonably likely to have
a Material Adverse Effect;
(E) All corporate and legal proceedings and all documents and
instruments executed or delivered in connection with this Amendment shall be
satisfactory in form and substance to CIT and its counsel;
(F) CIT shall have received payment for its own account of a closing
fee in the amount of $250,000, which shall be payable in cash and which, when
paid, shall be deemed to be fully earned and non-refundable;
(G) The Redemption shall have been consummated in accordance with the
terms of the agreement described in the definition of such term, all of the
conditions precedent to
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its effectiveness shall have occurred, and CIT and its counsel shall have
received and reviewed to their satisfaction true and correct copies all of
material documents and agreements executed or delivered in connection with the
Redemption;
(H) CIT shall have received and reviewed to its satisfaction an
appraisal of the trademarks and other intellectual property of the Trademark
Affiliate; and (I) CIT shall have received a legal opinion from the firm of
Xxxxxx Xxxxxx Flattau & Klimpl, LLP, in form and substance satisfactory to CIT
and its counsel, and such further agreements, consents, instruments and
documents as may be necessary or proper in the reasonable opinion of CIT and its
counsel to carry out the provisions and purposes of this Amendment.
SECTION FOUR-REPRESENTATIONS AND WARRANTIES. The Borrower represents
and warrants (which representations and warranties shall survive the execution
and delivery hereof) to CIT that:
(A) The Borrower has the corporate power, authority and legal right to
execute, deliver and perform this Amendment, and the instruments, agreements,
documents and transactions contemplated hereby, and has taken all actions
necessary to authorize the execution, delivery and performance of this
Amendment, and the instruments, agreements, documents and transactions
contemplated hereby;
(B) No consent of any Person (including, without limitation,
stockholders or creditors of the Borrower or creditors of the Parent, as the
case may be) other than CIT, and no consent, permit, approval or authorization
of, exemption by, notice or report to, or registration, filing or declaration
with (collectively a "Consent") any governmental authority, is required in
connection with the execution, delivery, performance, validity or enforceability
of this Amendment, and the instruments, agreements, documents and transactions
contemplated hereby;
(C) This Amendment has been duly executed and delivered on behalf of
the Borrower by its duly authorized officer, and constitutes the legal, valid
and binding obligation of the Borrower, enforceable in accordance with its
terms;
(D) The Borrower is not in default under any indenture, mortgage, deed
of trust, or other material agreement or material instrument to which it is a
party or by which it may be bound. Neither the execution and delivery of this
Amendment, nor the consummation of the transactions herein contemplated, nor
compliance with the provisions hereof will (i) violate any law or regulation
applicable to it, or (ii) cause a violation by the Borrower, of any order or
decree of any court or government instrumentality applicable to it, or (iii)
conflict with, or result in the breach of, or constitute a default under, any
indenture, mortgage, deed of trust, or other material agreement or material
instrument to which the Borrower is a party or by which it may be bound, or (iv)
result in the creation or imposition of any lien, charge, or encumbrance upon
any of the property of the Borrower, except in favor of CIT, to secure the
Obligations, or (v) violate any provision of the Certificate of Incorporation,
By-Laws or any capital stock provisions of the Borrower;
(E) No Event of Default has occurred and is continuing; and
(F) Since the date of CIT's receipt of the financial statements of the
Parent and Subsidiaries on a consolidated and consolidating basis for the annual
period ending on January 2,
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1999, no change or event has occurred which has had or is reasonably likely to
have a Material Adverse Effect.
SECTION FIVE-GENERAL PROVISIONS.
(A) Except as herein expressly amended, the Credit Agreement and all
other agreements, documents, instruments and certificates executed in connection
therewith, are ratified and confirmed in all respects and shall remain in full
force and effect in accordance with their respective terms.
(B) All references in the Related Documents and Loan Documents to the
Credit Agreement shall mean the Credit Agreement as amended as of the effective
date hereof, and as amended hereby and as hereafter amended, supplemented or
modified from time to time. From and after the date hereof, all references in
the Credit Agreement to "this Agreement," "hereof," "herein," or similar terms,
shall mean and refer to the Credit Agreement as amended by this Amendment.
(C) This Amendment may be executed by the parties hereto individually
or in combination, in one or more counterparts, each of which shall be an
original and all of which shall constitute one and the same agreement.
(D) This Amendment shall be governed and controlled by the laws of the
State of New York without reference to its choice of law principles.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
XXXXXX XXX MARKETING, INC.
/s/
By:________________________________________
Name:
Title:
THE CIT GROUP/COMMERCIAL SERVICES, INC.
/s/
By:________________________________________
Name:
Title:
-00-
XXXXXXX X-0
TERM NOTE
$5,000,000 New York, New York
as of August 25, 1999
FOR VALUE RECEIVED, XXXXXX XXX MARKETING, INC., a Delaware corporation
("Borrower"), promises to pay to the order of THE CIT GROUP/COMMERCIAL SERVICES,
INC. ("CIT") on or before the Maturity Date (as defined in the Agreement
referred to below), the principal sum of FIVE MILLION DOLLARS ($5,000,000) or so
much of such principal sum as shall be outstanding and unpaid on the Maturity
Date. The Borrower further promises to pay to the order of CIT (a) the principal
amount of this Term Note in installments as set forth in Section 2.07 of the
Agreement, (b) mandatory prepayments of principal of this Term Note as set forth
in Section 2.04 of the Agreement and (c) interest on the unpaid principal amount
hereof from time to time outstanding at the rate per annum set forth in Section
2.05 to the Agreement, payable on the dates set forth in the Agreement.
This Note is the "Term Note" referred to in, and is entitled to the
benefits of, the Revolving Credit Agreement dated as of June 2, 1997 by and
between the Borrower and CIT (as the same may be amended, modified or
supplemented from time to time, the "Agreement") which, among other things,
provides for the acceleration of the maturity hereof upon the occurrence of
certain events and for prepayments in certain circumstances and upon certain
terms and conditions. Terms defined in the Agreement have the same meanings
herein.
This Term Note is secured by and is entitled to the benefits of the
liens and security interests granted by the Agreement and the other Related
Documents referred to in the Agreement, and is further entitled to the benefits
of the security agreements, guarantees and other Related Documents referred to
in the Agreement.
The Borrower hereby expressly waives presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Term Note and the
Agreement, and an action for amounts due hereunder or thereunder shall
immediately accrue.
This Term Note shall be governed by, construed and enforced in
accordance with the laws of the State of New York, without regard to choice of
law principles.
XXXXXX XXX MARKETING, INC.
______________________________________________
By: Xxxxxx Xxxxxxx
Title: Senior Vice President
Chief Financial Officer and Treasurer
