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EXHIBIT 10.11
FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT
THIS FIRST
AMENDMENT TO NOTE PURCHASE AGREEMENT (this "First Amendment"),
dated as of September 17, 2004, is by and
among DIRECTED ELECTRONICS, INC., a
California corporation ("Company"), DEI
HOLDINGS, INC., a Florida corporation
("Holdings"), and DEI HEADQUARTERS, INC., a
Florida corporation ("Headquarters",
and together with Company and Holdings, the
"Loan Parties"), the note purchasers
that are now and hereafter at any time
parties to the Note Purchase Agreement,
as defined below, (each a "Purchaser" and
collectively, "Purchasers"), and
AMERICAN CAPITAL FINANCIAL SERVICES, INC.,
a Delaware corporation, as
administrative agent for Purchasers (in
such capacity "Agent").
WITNESSETH
WHEREAS, the
Loan Parties, Purchasers and Agent are parties to that certain
Note Purchase Agreement dated as of June
17, 2004 (as amended, modified,
supplemented or restated from time to time,
the "Note Purchase Agreement";
capitalized terms used herein shall have
the meanings ascribed thereto in the
Note Purchase Agreement unless otherwise
defined herein);
WHEREAS,
Holdings has agreed to purchase the assets (the "Acquired
Assets")
of Definitive Technology LLP, a Maryland
limited liability partnership
("Definitive") pursuant to the terms of
that certain DT Purchase Agreement (as
defined in Section 2.1(a), below) by and
among Holdings, Definitive, Sandy
Gross, Donald Givogue and Edmond Blais for
an aggregate amount, including (i)
all related fees and expenses, (ii) a
working capital adjustment in an amount
not to exceed $1,000,000 and (iii) the DT
Deferred Payment (as defined in
Section 2.1(a), below), not exceeding
$54,000,000, with the Acquired Assets to
be acquired from Definitive by Company and
Headquarters (the "DT Acquisition");
WHEREAS, the
Loan Parties have requested that Agent and Purchasers waive
the prohibition under Section 7.2(p) of the
Note Purchase Agreement (i) to allow
Holdings to enter into and consummate the
transactions contemplated by the DT
Purchase Agreement (with Company and
Headquarters actually acquiring the
Acquired Assets), and (ii) to allow
Holdings to issue shares of its common stock
to Trivest and its assigns in connection
with the DT Acquisition (the "Trivest
Stock Issuance");
WHEREAS, the
Loan Parties have requested that Agent and Purchasers waive
the terms of Sections 7.1(a), 7.2(e) and
7.2(j) of the Note Purchase Agreement
to allow Company to change its domicile of
incorporation to Florida (the
"Redomestication");
WHEREAS, the
Company has requested an increase of the Term Loan Committed
Amount (as defined in the Senior Credit
Agreement) in an aggregate principal
amount not to exceed $45,000,000 for
purposes of funding the DT Acquisition (the
"Term Loan Increase");
WHEREAS, the
Loan Parties have requested that Agent and Purchasers permit
the DT Acquisition, the Redomestication,
the Trivest Stock Issuance, and the
Term Loan Increase and agree to certain
modifications to the terms of the Note
Purchase Agreement in connection
therewith;
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WHEREAS, Agent
and Purchasers have agreed to permit the DT Acquisition, the
Redomestication, the Trivest Stock
Issuance, and the Term Loan Increase, and
amend the Note Purchase Agreement in
connection therewith, in each case on the
terms and conditions set forth herein;
and
WHEREAS, the
Loan Parties have requested that Agent and Purchasers agree to
an extension, and Agent and Purchasers have
agreed to extend, the period by
which the Loan Parties shall have obtained
the Key-Man Insurance.
NOW, THEREFORE,
in consideration of the agreements hereinafter set forth,
and for other good and valuable
consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1
WAIVER
1.1 Agent and
Purchasers hereby waive Sections 7.1(a), 7.2(e) and 7.2(j) of
the Note Purchase Agreement to the extent
the same prohibits the
Redomestication.
1.2 Agent and
Purchasers hereby waive Section 7.2(f) of the Note Purchase
Agreement to the extent that same prohibits
the Company from paying Trivest a
one-time fee of $1,450,000 pursuant to
Section 6(c)(i) of the Management
Agreement at the closing of the DT
Acquisition (subject, however, to Trivest
waiving any increase in the "Base
Compensation" otherwise required by Section
6(b) of the Management Agreement in
connection with the DT Acquisition).
1.3 Agent and
Purchasers hereby waive Section 7.2(p) of the Note Purchase
Agreement to the extent the same prohibits
Holdings from executing, delivering,
and performing the obligations of the DT
Purchase Agreement and to the extent
the same prohibits the Trivest Stock
Issuance.
1.4 Except for
the specific waivers set forth herein, nothing contained
herein shall be deemed to constitute a
waiver of (i) any rights or remedies
Agent or any Purchaser may have under the
Note Purchase Agreement or any other
Purchase Document or under applicable law
or (ii) the Loan Parties' obligation
to comply fully with any duty, term,
condition, obligation or covenant contained
in the Note Purchase Agreement and the
other Purchase Documents not specifically
waived. The specific waivers set forth
herein are one-time waivers and shall be
effective only in this specific instance
and shall not obligate Agent or
Purchasers to waive any Default or Event of
Default, now existing or hereafter
arising.
2
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SECTION 2
AMENDMENTS
2.1 AMENDMENTS
TO SECTION 1.1.
(a) The
following definitions are hereby added to the Note Purchase
Agreement to read as follows:
"DT Acquisition" shall mean the acquisition by Company and
Headquarters of
substantially all of the assets of DT Seller for an
aggregate
amount, including (i) all related fees and expenses, (ii) a
working capital
adjustment in an amount not to exceed $1,000,000 and (iii)
the DT Deferred
Payment, not exceeding $54,000,000, consummated pursuant to
the terms of the
DT Purchase Agreement.
"DT Deferred Payment" shall mean the deferred payment in an
aggregate
amount not to
exceed $2,000,000 paid or payable pursuant to the DT Purchase
Agreement.
"DT Purchase Agreement" shall mean, that certain Asset Purchase
Agreement, dated
as of the First Amendment Effective Date, by and among
Holdings, the DT
Seller, Sandy Gross, Donald Givogue and Edmond Blais.
"DT Seller" shall mean Definitive Technology, LLP, a Maryland
limited
liability
partnership.
"First Amendment Effective Date" shall mean September 17, 2004.
(b) The
definition of "Consolidated EBITDA" in Section 1.1 of the Note
Purchase Agreement is hereby amended and
restated in its entirety as follows:
"Consolidated EBITDA" means, for any period, the sum of the
amounts
for such period
of (a) Consolidated Net Income plus, to the extent deducted
in determining
Consolidated Net Income, (i) Consolidated Interest Expense,
(ii) provisions
for taxes based on income, (iii) total depreciation
expense, (iv)
total amortization expense, (v) management fees paid to
Trivest pursuant
to the Management Agreement to the extent permitted by
Section 7.2(f),
(vi) other non-recurring and non-cash items reducing
Consolidated Net
Income in an aggregate amount not to exceed $3,000,000,
(vii) other one
time add-backs set forth on Annex C attached hereto (it
being understood
that such one-time add-backs shall roll-off on a quarterly
basis and shall
not affect Consolidated EBITDA after one year following the
Closing Date)
and (viii) other one time add-backs related to the DT Seller
set forth on
Annex D attached hereto (it being understood that such one
time add backs
shall roll-off on a quarterly basis and shall not affect
Consolidated
EBITDA after one year following the First Amendment Effective
Date, less (b)
interest income and any non-operating, non-recurring and
non-operating,
non-cash items increasing Consolidated Net Income, all of
the foregoing as
determined on a
3
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consolidated
basis for the Loan Parties in conformity with GAAP; provided
that in
calculating any such items for such period, any Asset Sales or
other
acquisitions or dispositions of assets during such period shall
have
been deemed to
have occurred on the first day of such period.
(c) The
definition of "Permitted Acquisition" in Section 1.1 of the
Note
Purchase Agreement is hereby amended and
restated in its entirety as follows:
"Permitted Acquisition" shall mean (a) the DT Acquisition and (b)
an
acquisition or
any series of related acquisitions by a Loan Party of (i)
all or
substantially all of the assets or a majority of the
outstanding
voting stock or
economic interests of a Person that is incorporated, formed
or organized in
the United States or Canada or (ii) any division, line of
business or
other business unit of a Person that is incorporated, formed or
organized in the
United States or Canada (such Person or such division,
line of business
or other business unit of such Person shall be referred to
herein as the
"Target"), in each case that is a type of business (or assets
used in a type
of business) permitted to be engaged in by the Loan Parties
pursuant to
Section 7.2(l) hereof, so long as (A) no Default or Event of
Default shall
then exist or would exist after giving effect thereto, (B)
Company shall
demonstrate to the reasonable satisfaction of Agent and the
Required
Purchasers that, after giving effect to the acquisition on a
pro
forma basis
(giving effect to adjustments for owner compensation for such
period,
documented to the reasonable satisfaction of Agent, to the
extent
such
compensation does not continue after such acquisition) (I) the
Consolidated
Total Leverage Ratio shall be less than or equal to the ratio
that is 0.25
lower than the Consolidated Total Leverage Ratio then required
under Section
7.3 and (II) the Loan Parties are in compliance with each of
the financial
covenants set forth in Section 7.3, (C) the Target shall have
earnings before
interest, taxes, depreciation and amortization for the four
fiscal quarter
period prior to the acquisition date in an amount greater
than $0, as
adjusted for owner compensation for such period, documented to
the reasonable
satisfaction of the Agent, to the extent such compensation
does not
continue after such acquisition (provided that the aggregate
consideration
paid by the Loan Parties shall not exceed $5,000,000 for any
Target which,
but for such owner compensation adjustment, would have
negative ea
