THIRD AMENDMENT TO CREDIT AGREEMENT
AND OTHER TRANSACTION DOCUMENTS
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This Third Amendment to Credit Agreement and Other
Transaction Documents (the "Agreement"), made as of the 31st day
of December, 1996, by and among FLEET NATIONAL BANK, a national
banking association with its principal office at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, in its capacity as agent
and as a lender ("Fleet"), BANK OF AMERICA ILLINOIS, an Illinois
banking company, as a lender ("Bank of America"; and together
with Fleet, collectively, the "Lenders") and FRENCH FRAGRANCES,
INC., a Florida corporation with its principal place of business
at ▇▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
("Borrower").
W I T N E S S E T H:
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WHEREAS, pursuant to the terms and conditions of that
certain Credit Agreement dated March 14, 1996 among Borrower and
Lenders, as amended by a First Amendment to Credit Agreement and
Other Transaction Documents dated as of May 10, 1996 and as
further amended by a Second Amendment to Credit Agreement and
Other Transaction Documents dated as of August 28, 1996 (as
amended, the "Credit Agreement"), Lenders agreed to make term
loans and revolving credit loans available to Borrower, subject
to the terms and conditions of the Credit Agreement; and
WHEREAS, Lenders desire to take a security interest in the
assets of a newly incorporated wholly owned subsidiary of
Borrower; and
WHEREAS, the parties have agreed to certain modifications to
the Credit Agreement which will allow for an increase in
availability under the Revolving Credit Facility; and
WHEREAS, pursuant to the terms of that certain Security
Agreement dated March 14, 1996 between Borrower and Fleet, as
agent for the ratable benefit of the Lenders (the "Security
Agreement"), Borrower granted to Fleet, as agent for the ratable
benefit of the Lenders a security interest in all fixtures and
tangible and intangible assets of Borrower whether now owned or
hereafter acquired; and
WHEREAS, Lenders are willing to amend the Credit Agreement
and the Security Agreement subject to the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants set forth herein, and for good and valuable
other consideration, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS.
All capitalized terms not defined herein shall have the same
meaning ascribed to such terms as provided in the Credit
Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
Borrower hereby represents and warrants to Lenders and each
of them that:
(a) Borrower is duly organized, validly existing and in
good standing as a corporation in the state of its incorporation,
and is in good standing and is qualified to do business as a
foreign corporation in all other jurisdictions where it is
required to be so qualified, except such jurisdictions, if any,
in which the failure to be so qualified will not have a material
adverse effect on the financial condition, business, assets,
operations or properties of Borrower. Borrower has all requisite
power and authority to own and lease its assets and properties
and to conduct its business in the manner presently conducted by
it.
(b) Borrower has all requisite power and authority to
execute, deliver and perform its obligations under this Agreement
and the Security Documents, as applicable, and the execution,
delivery and performance by Borrower of this Agreement and the
Security Documents, as applicable have been duly authorized by
all requisite action. This Agreement and the Security Documents,
as applicable have been duly executed and delivered by Borrower,
and are valid and binding obligations of Borrower, enforceable
against Borrower in accordance with their respective terms.
(c) The execution, delivery and performance by Borrower of
this Agreement and the Security Documents, as applicable, will
not violate or contravene (i) the articles of incorporation or
by-laws of Borrower, (ii) any provision of any law, rule or
regulation applicable to Borrower, (iii) any order, writ,
judgment, injunction, decree, determination or award of any court
or other agency of government to which Borrower is bound, or (iv)
any other agreement, lease, indenture or instrument to which
Borrower is a party or by which Borrower is bound, or be in
conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under, or result in
the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever, upon any properties or assets of Borrower
pursuant to any such other agreement, lease, indenture or
instrument.
(d) There is no action, suit or proceeding at law or in
equity or by or before any court, governmental instrumentality or
other agency pending, or to Borrower's knowledge, threatened
against, or in any way affecting Borrower which, if adversely
determined, would have a material adverse effect on the business,
operations, properties, assets or condition, financial or
otherwise, of Borrower.
(e) No consent, approval or authorization from, or filing
of any declaration or statement with, any court, governmental
instrumentality or other agency is required in connection with or
as a condition to the execution, delivery or performance of this
Agreement, by Borrower.
(f) Except as set forth in Schedule I attached hereto,
Borrower hereby reaffirms and restates, as of the date hereof,
all of the representations and warranties made by it in the
Credit Agreement, as amended by this Agreement, except to the
extent altered by actions permitted pursuant to the terms thereof
or expressly contemplated pursuant to the terms hereof, or to the
extent Lenders have been advised in writing of any inaccuracy
with respect to such representations or warranties and have
waived the same in writing.
(g) No Event of Default exists under the Credit Agreement,
or any event which, with the giving of notice or passage of time
or both, would constitute such an Event of Default, has occurred
which has not been waived in writing by Lenders or which will not
be cured upon the execution and delivery by Borrower of this
Agreement.
SECTION 3. AMENDMENTS TO CREDIT AGREEMENT.
The Credit Agreement is hereby amended, effective as of the
date hereof, as follows:
Section 3.01. Amendments to Definitions.
The definitions of "Borrowing Base", "Collateral" and
"Pledge Agreement" set forth in Section 1.01 of the Credit
Agreement are hereby amended to read in their entirety as
follows:
"Borrowing Base" shall mean, as of any date, the sum of,
without duplication, (i) eighty-five percent (85%) of Insured
Eligible Accounts Receivable determined as of such date, plus
(ii) eighty-five percent (85%) of Approved Eligible Accounts
Receivable determined as of such date, plus, (iii) eighty percent
(80%) of Eligible Accounts Receivable (other than Insured
Eligible Accounts Receivable or Approved Eligible Accounts
Receivable) determined as of such date, plus (iv) the lesser of
sixty percent (60%) of Eligible In-House Inventory (for the
period from May 10, 1996 through October 31, 1996 and for each
fiscal year thereafter for the period from July 1 through October
31) or fifty percent (50%) of Eligible In-House Inventory (for
the period from November 1, 1996 through June 30, 1997 and for
each fiscal year thereafter for the period from November 1
through June 30); provided that the portion of the Borrowing Base
derived from clause (iv) shall be capped at the lesser of (A) for
the period from December 1 through March 31 at Twenty Million
Dollars ($20,000,000); for the period from April 1 through June
30 at Fifteen Million Dollars ($15,000,000); for the period from
July 1 through October 31 at Thirty Million Dollars ($30,000,000)
and for the period November 1 through November 30 at Twenty
Million Dollars ($20,000,000) or (B) one hundred sixty percent
(160%) of Accounts Receivable Availability from January 1 through
June 30 of each year; two hundred twenty percent (220%) of
Accounts Receivable Availability for the period from July 1, 1996
through August 31, 1996 and for each fiscal year thereafter for
the period from July 1 through August 31; one hundred sixty
percent (160%) of Accounts Receivable Availability for the period
from September 1, 1996 through September 30, 1996 and for each
fiscal year thereafter for the period from September 1 through
September 30 and one hundred twenty percent (120%) of Accounts
Receivable Availability for the period from October 1, 1996
through December 31, 1996 and for each fiscal year thereafter,
and provided further there shall be a reserve against total
Eligible In-House Inventory of One Million Two Hundred Thousand
Dollars ($1,200,000). The foregoing definition of "Borrowing
Base", including the respective percentages set forth therein,
may be amended from time to time by the execution and delivery of
an Amendment Letter or other written instrument executed by
Borrower and Lenders. For purposes of the Borrowing Base
"Accounts Receivable Availability" shall mean the sum of
subsections (i), (ii) and (iii) above.
"Collateral" shall mean all fixtures (other than at the
Headquarters Location) and all tangible and intangible
personal property of the Borrower, G.B. Parfums, Halston and
FRM, whether now owned or hereafter acquired by the Borrower,
G.B. Parfums, Halston and FRM, or in which the Borrower, G.B.
Parfums, Halston and FRM may now have or hereafter acquire an
interest, including, without limitation, (a) all equipment
(including all machinery, tools and furniture), inventory
(including all merchandise, raw materials, work in process,
finished goods and supplies), and goods, whether now owned or
hereafter acquired by the Borrower, G.B. Parfums, Halston and
FRM, or in which the Borrower, G.B. Parfums, Halston and FRM
may now have or hereafter acquire an interest (the "Tangible
Collateral"); (b) all accounts, accounts receivable, other
receivables, contract rights, chattel paper, and general
intangibles of the Borrower, G.B. Parfums, Halston and FRM
(including, without limitation, goodwill, patents, trademarks,
tradenames, blueprints, designs, product lines and research and
development), whether now owned or hereafter acquired by the
Borrower, G.B. Parfums, Halston and FRM, or in which the
Borrower, G.B. Parfums, Halston and FRM may now have or hereafter
acquire an interest; (c) all instruments, documents of title,
policies and certificates of insurance, securities, bank
deposits, deposit accounts, checking accounts and cash now or
hereafter owned by the Borrower, G.B. Parfums, Halston and FRM,
or in which the Borrower, G.B. Parfums, Halston and FRM may now
have or hereafter acquire an interest; (d) all accessions,
additions or improvements to, all replacements, substitutions and
parts for, and all proceeds and products of, all of the
foregoing; and (e) all books, records and documents relating to
all of the foregoing. Notwithstanding the foregoing, Collateral
shall not include the G.B. Parfums License Agreement or any
rights therein.
"Pledge Agreements" shall mean collectively, (i) that
certain Pledge Agreement dated as of March 14, 1996 between
Borrower and Agent pursuant to which Borrower had pledged to
Agent, for the ratable benefit of Lenders and to Lenders, all of
the Capital Stock of G.B. Parfums and Halston owned by it and
(ii) that certain Pledge Agreement dated as of December 31, 1996
between Borrower and Agent pursuant to which Borrower has pledged
to Agent for the ratable benefit of the Lenders and to Lenders
all of the Capital Stock of FRM owned by it.
SECTION 3.02. ADDITIONAL DEFINITIONS.
"FRM" shall mean FRM Services, Inc., a Delaware corporation
and wholly owned subsidiary of Borrower.
"FRM Security Agreement" shall mean that certain Security
Agreement of even date herewith between FRM and Agent pursuant to
which FRM has granted to Agent for the ratable benefit of Lenders
and to Lenders a first priority security interest in all of its
fixtures and tangible and intangible personal properties now
owned or hereafter acquired to the extent provided therein.
"Revolving Credit Commitment Adjustment Letter" shall mean a
letter signed by Lenders and agreed to by Borrower in
substantially the form attached hereto as Exhibit A-1, which
letter shall constitute an adjustment to the Revolving Credit
Commitment for the corresponding time periods set forth in the
Revolving Credit Commitment Adjustment Letter.
Section 3.03. Amendment to Section 2.03(a).
Section 2.03(a) of the Credit Agreement is hereby amended to
read in its entirety as follows:
"Section 2.03. The Revolving Credit Commitment.
(a) The Revolving Credit Commitment shall be equal to the
lesser of:
(i) the Borrowing Base or the Net Borrowing Base (as
applicable) as in effect from time to time, or
(ii) Forty Million Dollars ($40,000,000); provided,
however, that the maximum Revolving Credit Commitment
contemplated by this clause (ii) shall be adjusted in accordance
with the following schedule:
Revolving Credit
Commitment
After Giving
Date of Amount of Effect to
Adjustment Adjustment Adjustment
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January 1, 1996
through May 10, 1996 $10,000,000 $30,000,000
May 11, 1996
through May 31, 1996 $5,000,000 $35,000,000
August 28, 1996
through December 31, 1996 $15,000,000 $55,000,000
April 1, 1997
through June 30, 1997 $10,000,000 $30,000,000
July 1, 1997
through December 31, 1997 $15,000,000 $55,000,000
January 1, 1998 through
through June 30, 1998. $10,000,000 $30,000,000"
Provided, however, the availability under the Revolving
Credit Commitment can be further adjusted (upward or downward)
upon execution and delivery of a Revolving Credit Commitment
Adjustment Letter.
Section 3.04. Amendment to Section 4.02.
Section 4.02 of the Credit Agreement is hereby amended by
adding a new subsection as follows:
"(l) the FRM Security Agreement.".
Section 4.02 is further amended by deleting the reference in
subsection (e) to "the Pledge Agreement" and replacing it with
the phrase "the Pledge Agreements".
Section 3.05. Security Documents.
(a) Borrower and Lenders each hereby confirm that all
references to the "Credit Agreement" or the "Agreement" in any of
the Security Documents shall be deemed to be references to the
Credit Agreement as amended hereby; that the obligations of
Borrower under the Credit Agreement, as amended hereby, and fees
and expenses in connection therewith constitute additional
indebtedness, liabilities and obligations of Borrower to Lenders,
all of which are secured by the Security Documents, and that all
references to "indebtedness" and/or "obligations" secured by such
instruments shall be deemed amended to include all obligations of
Borrower in respect of the Credit Agreement as amended hereby.
(b) Borrower hereby ratifies and reaffirms its grant and
conveyance to Agent for the ratable benefit of the Lenders of a
security interest in and lien upon all collateral covered by any
of the Security Documents. Nothing herein shall be deemed to
contravene the release by the Lenders of the Assignment of Life
Insurance as Collateral as a Security Document or the release of
any claim or right by the Lenders to shares of Data Technology,
Inc. held by Borrower.
(c) Borrower and Lenders each hereby confirm that nothing
contained herein or done pursuant hereto shall limit or be
construed to limit the security interest or lien previously
granted by Borrower to Agent for the ratable benefit of the
Lenders under any of the Security Documents, or the priority
thereof over other liens, encumbrances and security interests.
Except as amended hereby, the Security Documents shall remain in
full force and effect and Borrower hereby ratifies and confirms
the Security Documents in all other respects, including, without
limitation, the continuing grant of a lien on and interest in the
collateral covered thereby.
Section 4. Conditions Precedent to Third Amendment.
The effectiveness of the transactions described herein shall
be subject to the following conditions:
(a) This Agreement shall have been executed and delivered
by Borrower and Lenders, and consented to and confirmed by the
parties to the Subordination Agreement and the Subordination
Agreement II.
(b) Lenders shall have received payment of the fees
described in Section 9 hereof in immediately available funds.
(c) The fees and disbursements of Lenders' counsel shall be
paid in full on the Effective Date.
(d) Borrower shall have executed and/or delivered to Agent
the following:
(i) Certificate of the Secretary or Assistant
Secretary of Borrower certifying as to the due authorization,
execution and delivery by Borrower of this Agreement; and
(ii) Certificate of the Secretary or Assistant
Secretary of Borrower certifying as to corporate charter and
by-laws and the names of the officers of Borrower authorized to
sign this Agreement, and any other documents or certificates to
be delivered pursuant to this Agreement, together with the true
signatures of such officers. Lenders may conclusively rely on
such certificates until Agent shall receive a further certificate
of the Secretary or an Assistant Secretary of Borrower canceling
or amending the prior certificate and submitting the signatures
of the officers named in such further certificate.
(e) FRM shall have executed and/or delivered to Agent the
following:
(i) Certificate of the Secretary or Assistant
Secretary of FRM certifying as to the due authorization,
execution and delivery by FRM of this Agreement; and
(ii) Certificate of the Secretary or Assistant
Secretary of FRM certifying as to corporate charter and by-laws
and the names of the officers of FRM authorized to sign this
Agreement, and any other documents or certificates to be
delivered pursuant to this Agreement, together with the true
signatures of such officers. Lenders may conclusively rely on
such certificates until Agent shall receive a further certificate
of the Secretary or an Assistant Secretary of FRM canceling or
amending the prior certificate and submitting the signatures of
the officers named in such further certificate.
(f) Lenders shall have received a legal opinion of counsel
to FRM, satisfactory in scope and substance to Lenders' Counsel.
(g) All legal matters relating to this Agreement shall be
satisfactory to Lenders and their counsel.
Section 5. Ratification.
Borrower hereby ratifies and confirms all of its
obligations, covenants, duties and agreements set forth in the
Credit Agreement, as amended by the terms hereof. All references
to the "Credit Agreement" or the "Agreement" contained in the
Credit Agreement, the Notes, the Security Documents and all other
documents and instruments evidencing obligations of Borrower
under or in connection with the Credit Agreement, the Notes or
the Security Documents, shall be deemed to be amended to refer to
the Credit Agreement, as amended by the terms hereof.
Section 6. Expenses.
All costs and expenses, including reasonable attorneys'
fees, relating to the negotiation, preparation, execution and
delivery of this Agreement and all instruments, agreements and
documents contemplated hereby shall be the responsibility of
Borrower.
Section 7. Miscellaneous.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Rhode Island applicable
to contracts made and to be performed within such State. This
Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together
shall constitute one and the same instrument. The headings of
the Articles and Sections of this Agreement are inserted for
convenience only and shall not constitute a part hereof.
Section 8. Consent of Subordinated Lenders.
By their signature hereon, each of the parties to the
Subordination Agreement (other than Fleet), and the Subordination
Agreement II hereby (a) consent to the amendments of the Credit
Agreement and other Transaction Documents pursuant to this
Agreement, (b) confirm that the term "Senior Indebtedness" under
the Subordination Agreement and the Subordination Agreement II
shall include all amounts outstanding under the Credit Agreement,
as amended by this Agreement, including all amounts outstanding
under the Notes, and (c) ratify and confirm their respective
agreements in all respects.
Section 9. Facility Fee.
In consideration of Lenders' commitment to enter into this
Agreement, Borrower hereby agrees to pay to Agent, for the
ratable benefit of the Lenders a facility fee equal to Seventy
Thousand Dollars ($70,000) (the "Facility Fee"), Thirty-five
Thousand Dollars ($35,000) of which is payable on January 1, 1997
and the remaining balance ($35,000) is payable on April 1, 1997.
Section 10. No Defenses.
Borrower hereby acknowledges and agrees that the Credit
Agreement, as amended by the terms hereof, and the other
Transaction Documents are not subject as of the date hereof to
any defenses, rights of setoff, claims or counterclaims that
might limit the enforceability thereof.
Section 11. Consent of Lenders.
The Lenders do hereby consent to the assignment by Borrower
of all accounts receivable on its books as of December 31, 1996
to FRM Services, Inc., which assignment shall be subject to all
existing liens in favor of the Lenders.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed by their respective officers hereunto duly
authorized, all as of the day and year first above written.
LENDERS:
FLEET NATIONAL BANK
By: /s/ ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
Vice President
BANK OF AMERICA ILLINOIS
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Vice President
AGENT:
FLEET NATIONAL BANK
By: /s/ ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
Vice President
(SIGNATURES CONTINUED ON NEXT PAGE)
BORROWER:
FRENCH FRAGRANCES, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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President
CONSENTED AND AGREED:
NATIONAL TRADING
MANUFACTURING, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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President
BEDFORD CAPITAL CORPORATION
By: /s/ E. ▇▇▇▇▇ ▇▇▇▇▇▇▇
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E. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Executive Vice President
/s/ ▇▇▇▇ ▇▇▇▇▇▇
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