Amendment No. 3 to Subordinated Promissory Note by BrandPartners Group, Inc., BrandPartners Retail, Inc., Grafico Incorporated, and Corporate Mezzanine II, L.P.

AMENDMENT NO. 3 TO NOTE, dated as of March [__], 2009 (this “Amendment”)

(1)	BRANDPARTNERS GROUP, INC., a Delaware corporation (“BPG”);

 

(2)	BRANDPARTNERS RETAIL, INC., a New Hampshire corporation (formerly known as Willey Brothers, Inc.) (“BPR”, and together with BPG, each individually a “Company” and collectively, the “Companies”);

 

(3)	GRAFICO INCORPORATED, a Delaware corporation and wholly-owned subsidiary of BPG (“Grafico”); and

 

(4)	CORPORATE MEZZANINE II, L.P., a British Virgin Islands limited partnership (“CMII”).

 

WHEREAS, the Companies and CMII are parties to a certain Subordinated Note and Warrant Purchase Agreement dated as of October 22, 2001, as amended by Amendment No. 1 and Waiver dated as of May 14, 2002, Amendment No. 2 and Waiver dated as of August 9, 2002, Amendment No. 3 and Waiver dated as of January 7, 2004, Amendment No. 4, dated as of May 5, 2005, Amendment No. 5 and Waiver, dated as of March 28, 2007 and Amendment No. 6, dated as of March 27, 2008 (the “Original Purchase Agreement” and as amended hereby, the “Purchase Agreement”) pursuant to which (i) BPR has issued and sold to CMII a subordinated promissory note (as amended by Amendment No. 1, dated as of January 7, 2004, and Amendment No. 2, dated as of March 27, 2008, the “Original Note” and as amended hereby, the “Note”) in the original principal amount of $5,000,000 with a final maturity of October 22, 2008, and (ii) BPG has issued and sold to CMII certain warrants for the purchase of an aggregate of 665,000 shares of common stock of BPG (the “Warrants”); and

 

WHEREAS, the Companies, Grafico, and TD Banknorth, N.A., a national banking association (“TD Banknorth”) are parties to a Commercial Loan Agreement, dated as of May 5, 2005 (as the same has been or may be amended, restated, supplemented or otherwise modified from time to time as permitted under the Subordination Agreement, the “Senior Credit Agreement”); and

 

WHEREAS, BPR, Grafico, CMII and TD Banknorth are parties to a Subordination and Intercreditor Agreement, dated as of May 5, 2005 (as the same may be amended, restated, supplemented or otherwise modified from time to time as permitted thereunder, the “Subordination Agreement”); and

 

WHEREAS, the Companies have requested that CMII amend certain provisions of the Original Note; and

 

WHEREAS, subject to the satisfaction of the conditions set forth in Section 4, CMII is willing to amend certain provisions of the Original Note, but only on the terms and conditions set forth in this Amendment.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

(1)           Definitions.  Capitalized terms used in this Amendment shall have the meanings given them in the Original Purchase Agreement unless otherwise defined herein.

 

(2)           Affirmation of Original Purchase Agreement and Original Note.  Each Company acknowledges that each of the Original Purchase Agreement, the Original Note and each Warrant is a valid and binding obligation of the Companies, in the case of the Original Purchase Agreement, of BPG, in the case of the Warrants, and of BPR, in the case of the Original Note, enforceable against the Companies, BPG or BPR, as the case may be, in accordance with their respective terms.

 

(3)           Amendments to Original Note.

 

Effective as of the Effective Date and subject to the conditions to effectiveness set forth in Section 4 hereof, the Original Note is hereby amended as follows:

 

(a)

the first paragraph of the Original Note is amended by replacing the last sentence thereof with the following text:  “For purposes of this Note, the term “Maturity Date” shall mean October 29, 2010”; and

 

(b)

Section 2(a) of the Original Note is amended by amending the first sentence thereof as follows: “Subject to Section 4(a)(iv) hereof, the Company promises to pay interest on the Accreted Principal Amount (as hereinafter defined) of this Note at the rate of sixteen percent (16.0%) per annum.”

 

(c)

Section 4 of the Original Note is amended by (i) renumbering clause (iv) thereof as clause (v) and (ii) inserting the following new clause (iv) immediately following clause (iii) thereof:

 

“On or prior to July 31, 2010, the Company shall make a mandatory prepayment in the amount of $1,000,000.  If the Company fails to make such prepayment on or prior to July 31, 2010, then, notwithstanding anything to the contrary set forth in Section 2(a) hereof, from and after August 1, 2010, the Accreted Principal Amount of this Note shall bear interest at the rate of seventeen percent (17.0%) per annum.  Such interest on the Accreted Principal Amount of this Note at the rate of thirteen percent (13.0%) per annum that shall have accrued and shall remain unpaid as of any Interest Payment Date shall be paid on such Interest Payment Date by wire transfer of immediately available funds to an account at a bank designated by the Holder.  Such interest on the Accreted Principal Amount of this Note at the rate of four percent (4%) per annum that shall have accrued and shall remain unpaid as of any Interest Payment Date shall be payable on such Interest Payment Date by addition of a PIK amount to the Accreted Principal Amount of this Note.”

 

(d)

BPR hereby authorizes CMII to attach this Amendment as an allonge to the Note, and this Amendment shall be attached as Exhibit 3 to the Original Note.

 

(4)	Conditions.  The amendments contained in Section 3 hereof shall become effective upon the satisfaction in full of the following conditions on the date (the “Effective Date”), on or prior to March 31, 2009, on which:

 

(a)

CMII shall have executed and delivered a counterpart of this Amendment and CMII shall have received a counterpart of this Amendment executed and delivered by each Company;

 

(b)

CMII shall have received a fully executed counterpart of an amendment to the Senior Credit Agreement substantially in the form of Exhibit 1, executed by TD Banknorth and the Companies; and

 

(c)

TD Banknorth shall have consented in writing to the amendments contained in Section 3 hereof and CMII shall have received a counterpart of such consent substantially in the form of Exhibit 2.

 

(5)           Reimbursement of Expenses.  BPR will pay all out-of-pocket expenses, costs and charges incurred by CMII (including reasonable fees and disbursements of counsel) in connection with the preparation and implementation of this Amendment, and all documents executed in connection herewith.

 

(6)           Original Purchase Agreement and Original Note to Remain in Force.  Except as specifically provided herein, the Original Note and the other Transaction Documents shall remain in full force and effect and are in all respects hereby ratified and affirmed.  From and after the Effective Date, all references in the Note to “this Note”, “hereof” or “herein” or the like, and all references in the other Transaction Documents to the Note, shall mean and refer to the Original Note as amended hereby.

 

(7)           Successors and Assigns.  The Agreement shall inure to the benefit of and be binding upon the parties hereto and their successors and assigns.

 

(8)           Counterparts.  This Amendment may be executed in counterparts, each of which shall constitute an original and all of which, taken together, shall constitute one and the same agreement.

 

(9)           Headings.  The headings in this Amendment are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

(10)           No Implied Waivers.  No failure or delay on the part of CMII in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power preclude any other or further exercise thereof or the exercise of any other right or power hereunder or under the Purchase Agreement or the Note.  No modification or waiver of any provisions of this Amendment shall in any event be effective unless the same shall be in writing and signed by CMII, and then such modification, waiver or consent shall be effective only in the specific instance and for the purpose for which given.

 

(11)           Governing Law.  This Amendment shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law other than Section 5-1401 of the General Obligations Law of the State of New York.

 

(12)           Jurisdiction; WAIVER OF RIGHT TO JURY TRIAL.  Each party to this Amendment hereby irrevocably agrees that any legal action or proceeding arising out of or relating to this Amendment or any agreements or transactions contemplated hereby may be brought in the courts of the State of New York located in New York City or of the United States of America for the Southern District of New York and hereby expressly submits to the personal jurisdiction and venue of such courts for the purposes thereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AMENDMENT OR THE SUBJECT MATTER HEREOF.  EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS TRANSACTION, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS.

 

(13)           Severability.  In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof.

 

(14)           Reaffirmation of Subsidiary Guarantee.  Grafico reaffirms its obligations to CMII pursuant to the terms of the Subsidiary Guarantee, dated as of May 5, 2005, and acknowledges that CMII may amend, restate, extend, renew or otherwise modify the Purchase Agreement, the Note or the Warrants and any indebtedness or agreement of BPR, or enter into any agreement or extend additional or other credit accommodations to BPR, without notifying or obtaining the consent of Grafico and without impairing the liability of Grafico under the Subsidiary Guarantee for all of BPR’s present and future indebtedness to CMII.

 

 

 [signature page follows]

 

IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed all as of the day and year first above written.

 

 

By:           ……………………………………..

Name:

Title:

By:           ……………………………………..

Name:

Title:

 

 

 

By:           ……………………………………..

Name:

Title:

 

 

Accepted and agreed as to Section 15:

By:           ……………………………………..

Name:

Title:

 

 

 

 

 

 

Reference is made to (i) the foregoing Amendment No. 3 to Note, dated as of March [__], 2009, among BrandPartners Group, Inc., a Delaware corporation (“BPG”), BrandPartners Retail, Inc., a New Hampshire corporation (“BPR”), Grafico Incorporated, a Delaware corporation (“Grafico”) and Corporate Mezzanine II, L.P., a British Virgin Islands limited partnership (“CMII”) (the “Amendment”) and (ii) the Subordination Agreement, dated as of May 5, 2005, among the undersigned, CMII, BPR and Grafico (as heretofore amended, the “Subordination Agreement”).

 

The undersigned hereby (i) acknowledges receipt of the foregoing Amendment; (ii) consents to the terms and execution thereof and to the amendments set forth in Section 3 thereof; and (iii) reaffirms its obligations to CMII under the Subordination Agreement.

 

TD BANKNORTH, N.A.   By: Name: Its: