EXHIBIT 10.13
FIRST AMENDMENT AGREEMENT
TO
THIRD AMENDED AND RESTATED REVOLVING CREDIT LOAN AGREEMENT
Date: As of April 30, 1998
NationsBank of Texas, N.A.
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇
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Ladies and Gentlemen:
The undersigned, ODS Networks, Inc. (formerly known as Optical Data
Systems, Inc.), a Texas corporation ("Borrower"), entered into a Third
Amended and Restated Revolving Credit Loan Agreement (the "Loan Agreement")
dated December 31, 1997, with NationsBank of Texas, N.A., a national banking
association ("Bank"). Pursuant to the Loan Agreement, Bank agreed, under
certain terms and conditions, to extend a loan (the "Loan") to Borrower
evidenced by a Ninth Renewal Promissory Note (the "Note") dated December 31,
1997, executed by Borrower and payable to the order of Bank in the original
principal amount of $15,000,000.00.
Borrower has informed Bank that it desires, through its wholly-owned
subsidiary ECC Acquisition Corp., to merge (such merger herein referred to as
the "Essential Merger") with Essential Communication Corporation, a Delaware
corporation, with Essential Communication Corporation being the surviving
entity.
Borrower has also informed Bank that Borrower desires to purchase (such
purchase referred to herein as the "Blue Ridge Investment") convertible
preferred stock in Blue Ridge Networks, Inc. ("Blue Ridge") for a maximum
consideration of $1,250,000, which shares are convertible into common voting
stock of Blue Ridge in an amount, if converted, equal to a minimum of 25% of
the then outstanding voting interests of Blue Ridge.
Borrower has requested that Bank consent to Borrower's departure from
the covenants set forth in SECTIONS 7.5, 7.6, 7.9 and 7.11 of the Loan
Agreement (collectively, the "Applicable Covenants") to allow the Essential
Merger and the Blue Ridge Investment. Upon the terms and subject to the
conditions set forth in this First Amendment Agreement (the "Agreement",
terms used in this Agreement shall have the same meaning as in the Loan
Agreement, if defined therein, unless otherwise defined in this Agreement),
Bank consents to Borrower's departure
from the Applicable Covenants for the sole purpose of allowing the Essential
Merger and the Blue Ridge Investment.
Borrower has also requested that Bank make certain modifications to the
terms of the Loan Agreement. Bank has advised Borrower that Bank is willing
to do so upon the terms and subject to the conditions of this Agreement. In
consideration for the above premises and mutual promises and covenants herein
contained, Borrower and Bank do hereby agree as follows:
1. CONSENT.
(a) The Bank hereby consents to Borrower's departure from the
Applicable Covenants of the Loan Agreement to the extent such
covenants would be violated by either the Essential Merger or the Blue
Ridge Investment.
(b) The consent specifically described in clause 1(a) above shall not
constitute and shall not be deemed a waiver of any Event of Default or
a consent to the departure from any provisions to the Loan Agreement
other than the Applicable Covenants, or a waiver of any rights or
remedies arising as a result of any Event of Default. The failure to
comply with the covenants described in clause 1(a) above for any
activity other than the Essential Merger or the Blue Ridge Investment
shall constitute an Event of Default.
2. AMENDMENTS TO THE LOAN AGREEMENT. Effective as of the date hereof,
the Loan Agreement is hereby amended as follows:
(a) The first sentence in SECTION 2.4 is amended and restated to read
in its entirety as follows: "Borrower agrees to pay Bank a commitment
fee of one-fourth of one percent (0.25%) per annum on the daily
unused portion of the Revolving Credit Commitment."
(b) SECTION 7.12 is amended and restated to read in its entirety as
follows:
7.12 CONSOLIDATED TANGIBLE NET WORTH. Borrower will not
permit, as of the last day of any calendar quarter, the
Consolidated Tangible Net Worth for such day to be less than the
amount opposite the applicable date in the following chart:
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Minimum Consolidated
Date Tangible Net Worth
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December 31, 1997 $66,000,000
March 31, 1998 $63,000,000
June 30, 1998 $55,100,000
September 30, 1998 $55,050,000
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December 31, 1998 and the
last day of each fiscal
quarter thereafter $55,500,000
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(c) The first sentence in SECTION 7.13 is amended and restated to
read in its entirety as follows: "Borrower will at all times maintain
a Current Ratio of not less than 1.35 to 1.00."
(d) Exhibit "C" to the Loan Agreement is amended by adding the
following location to the list of U.S. Offices:
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3. CONDITIONS PRECEDENT. Bank's willingness to enter into this Agreement
is subject to the conditions precedent that, as of the date hereof:
(a) Bank shall receive the following (the "Amendment Documents"),
duly executed by each party thereto, other than Bank, each in form
and substance satisfactory to Bank:
(i) this Agreement;
(ii) a Subsidiary Joinder Agreement executed by
Essential Communication Corporation;
(iii) a certificate from the appropriate
governmental authority evidencing Essential
Communication Corporation's existence and good
standing in the state of its incorporation;
(iv) final, executed copies of each of the
agreements, bills of sale and other documents
effecting the Essential Merger and the Blue Ridge
Investment; and
(v) all other documents that Bank may request
with respect to any matter relevant to this
Agreement or the transactions contemplated hereby.
(b) The representations and warranties of Borrower
contained herein shall be true and correct in all material
respects on and as of the date hereof, and Borrower shall have
complied with all of the terms and conditions herein. The
execution by Borrower of this Agreement is hereby deemed to
constitute a
representation and warranty by Borrower to the foregoing effect.
4. REPRESENTATIONS AND WARRANTIES. In order to induce Bank to enter into
this Agreement, Borrower hereby represents and warrants to Bank that:
(a) The Loan Papers are the legal, valid and binding obligations of
Borrower, enforceable in accordance with their respective terms,
except as limited by bankruptcy, insolvency or other laws of general
application relating to the enforcement of creditors' rights;
(b) Neither the execution and delivery of this Agreement nor the
consummation of any of the transactions herein contemplated, nor
compliance with the terms and provisions hereof will contravene or
conflict with any provision of law, statute or regulation to which
Borrower is subject or any judgment, license, order or permit
applicable to Borrower or any indenture, mortgage, deed of trust or
other instrument to which Borrower may be subject; no consent,
approval, authorization or order of any court, governmental authority
or third party is required in connection with the execution, delivery,
or performance by Borrower of this Agreement or to consummate the
transactions contemplated herein;
(c) To the best of Borrower's knowledge, all financial statements
delivered by Borrower to Bank prior to the date hereof are true and
correct, fairly present the financial condition of Borrower and have
been prepared in accordance with generally accepted accounting
principles, consistently applied; as of the date hereof, there are no
obligations, liabilities or indebtedness (including contingent and
indirect liabilities) which are material to Borrower and not reflected
in such financial statements;
(d) To the best of Borrower's knowledge, no litigation,
investigation, or governmental proceeding is pending, or, to the
knowledge of any of Borrower's officers, threatened against or
affecting Borrower, which may result in any material adverse change in
Borrower's business, properties or operations, except as has been
previously disclosed by Borrower to Bank;
(e) To the best of Borrower's knowledge, Borrower owns all of the
assets reflected on its most recent balance sheet free and clear of
all liens, security interests or other encumbrances, other than those
(if any) in favor of Bank;
(f) To the best of Borrower's knowledge, Borrower is not in violation
of any law, ordinance, governmental rule or regulation to which it is
subject, and is not in default under any material agreement, contract
or understanding to which it is a party, except as has been previously
disclosed by Borrower to Bank; and
(g) All of the representations and warranties contained in SECTION 5
of the Loan Agreement are true and correct on and as of the date
hereof with the same force and effect as if made on and as of the date
hereof, provided that the representations and warranties contained in
SECTIONS 5.8 and 5.9 of the Loan Agreement are made with respect to
the financial statements most recently submitted to Bank pursuant to
SECTION 6.5 of the Loan Agreement.
(h) Borrower has (i) begun analyzing the operations of Borrower and
its subsidiaries and affiliates that could be adversely affected by
failure to become Year 2000 compliant (that is, that computer
applications, imbedded microchips and other systems will be able to
perform date-sensitive functions prior to and after December 31, 1999)
and; (ii) developed a plan for becoming Year 2000 compliant in a
timely manner, the implementation of which is on schedule in all
material respects. Borrower reasonably believes that it will become
Year 2000 compliant for its operations and those of its subsidiaries
and affiliates on a timely basis except to the extent that a failure
to do so could not reasonably be expected to have a material adverse
effect upon the financial condition of Borrower.
(i) Borrower reasonably believes any suppliers and vendors that are
material to the operations of Borrower or its subsidiaries and
affiliates will be Year 2000 compliant for their own computer
applications except to the extent that a failure to do so could not
reasonably be expected to have a material adverse effect upon the
financial condition of Borrower.
(j) Borrower will promptly notify Bank in the event Borrower
determines that any computer application which is material to the
operations of Borrower, its subsidiaries or any of its material
vendors or suppliers will not be fully Year 2000 compliant on a timely
basis, except to the extent that such failure could not reasonably be
expected to have a material adverse effect upon the financial
condition of Borrower.
5. MISCELLANEOUS.
(a) WAIVER. No failure to exercise, and no delay in exercising, on
the part of Bank, any right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right. The rights of
Bank hereunder and under the other Loan Papers shall be in addition to all
other rights provided by law. No notice or demand given in any case shall
constitute a waiver of the right to take other action in the same, similar
or other instances without such notice or demand.
(b) GOVERNING LAW. THIS AGREEMENT IS BEING EXECUTED AND DELIVERED,
AND IS INTENDED TO BE PERFORMED, IN THE STATE OF TEXAS, AND THE SUBSTANTIVE
LAWS OF TEXAS SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND
INTERPRETATION OF
THIS AGREEMENT AND ALL OTHER LOAN PAPERS, EXCEPT TO THE EXTENT: (i) OTHERWISE
SPECIFIED THEREIN; (ii) THE FEDERAL LAWS GOVERNING NATIONAL BANKS EXPRESSLY
SUPERSEDE AND HAVE CONTRARY APPLICATION; OR (iii) FEDERAL LAWS GOVERNING
MAXIMUM INTEREST RATES SHALL PROVIDE FOR RATES OF INTEREST HIGHER THAN THOSE
PERMITTED UNDER THE LAWS OF THE STATE OF TEXAS.
(c) INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws effective
during the term of this Agreement, such provision shall be fully severable
and this Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part of this
Agreement, and the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Agreement.
(d) ENTIRETY AND AMENDMENTS. The Loan Papers embody the entire
agreement between the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof and thereof,
and this Agreement and the other Loan Papers may be amended only by an
instrument in writing executed by the party, or an authorized officer of the
party, against whom such amendment is sought to be enforced.
(e) PARTIES BOUND. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns
and legal representatives; provided, however, that Borrower may not, without
the prior written consent of Bank, assign any rights, powers, duties or
obligations hereunder.
(f) PAYMENT OF EXPENSES. Borrower agrees to pay all costs and expenses
of Bank (including, without limitation, the reasonable attorneys' fees of
Bank's legal counsel) incurred by Bank in connection with the preparation of
this Agreement and the preservation and enforcement of Bank's rights under
this Agreement and the other Loan Papers.
(g) HEADINGS. Section headings are for convenience of reference only
and shall in no way affect the interpretation of this Agreement.
(h) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original and
all of which are identical.
6. NO ORAL AGREEMENTS. THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN
PAPERS AS WRITTEN, REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
If Bank agrees to the foregoing, Bank should execute this Agreement in the
space indicated below.
BORROWER:
ODS NETWORKS, INC.
(formerly known as Optical Data Systems, Inc.)
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President and CFO
ACCEPTED:
NATIONSBANK OF TEXAS, N.A.
By: /s/ ▇▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇
Title: Senior Vice President
SUBSIDIARY JOINDER AGREEMENT
This SUBSIDIARY JOINDER AGREEMENT (the "Agreement") dated as of April
30, 1998, is executed by the undersigned (the "Debtor") for the benefit of
NATIONSBANK OF TEXAS, N.A., (the "Bank") in connection with that certain
Third Amended and Restated Revolving Credit Loan Agreement dated as of
December 31, 1997, between the Bank and Optical Data Systems, Inc., now known
as ODS Networks, Inc. (the "Borrower) (as modified from time to time, the
"Credit Agreement", and capitalized terms not otherwise defined herein being
used herein as defined in the Credit Agreement).
The Debtor is a newly formed or newly acquired Granting Subsidiary and
is required to execute this Agreement pursuant to the Credit Agreement.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Debtor hereby agrees as follows:
1. The Debtor assumes all the obligations of a "Debtor" under the
Subsidiaries Security Agreement and agrees that it is a "Debtor" and bound as
a "Debtor" under the terms of the Subsidiaries Security Agreement as if it
had been an original signatory thereto. In furtherance of the foregoing, the
Debtor hereby assigns, pledges and grants to Bank a security interest in all
of its right, title and interest in and to Debtor's Collateral (as defined in
the Subsidiaries Security Agreement) to secure the Obligations (as defined in
the Subsidiaries Security Agreement) under the terms of the Subsidiaries
Security Agreement.
2. Schedules 3.1 and 3.2 of the Subsidiaries Security Agreement are
hereby amended to add the information relating to Debtor set out on Schedules
3.1 and 3.2 hereof. The Debtor hereby confirms that the representations and
warranties set forth in Article 3 of the Subsidiaries Security Agreement
applicable to it and its Collateral and the representations and warranties
set forth in the Credit Agreement are true and correct after giving effect to
such amendment to the Schedules.
3. In furtherance of its obligations under Section 4.2 of the
Subsidiaries Security Agreement, Debtor agrees to execute and deliver such
UCC (as defined in the Subsidiaries Security Agreement) financing statements
naming the Debtor as debtor, the Bank as secured party and describing its
Collateral and such other documentation as the Bank may require to evidence,
protect and perfect the Liens created by the Subsidiaries Security Agreement
as modified hereby.
4. This Agreement shall be deemed to be part of, and a modification
to, the Subsidiaries Security Agreement and shall be governed by all the
terms and provisions
of the Subsidiaries Security Agreement, which terms are incorporated herein
by reference, and which is ratified and confirmed and shall continue in full
force and effect as a valid and binding agreement of Debtor enforceable
against Debtor. The Debtor hereby waives notice of Bank's acceptance of this
Agreement.
IN WITNESS WHEREOF, the Debtor has executed this Agreement as of the
day and year first written above.
DEBTOR:
ESSENTIAL COMMUNICATION CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CFO and Secretary
SCHEDULE 3.1
TO
SUBSIDIARY JOINDER AGREEMENT
LOCATIONS
I. PRINCIPAL PLACE OF BUSINESS
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II. OTHER LOCATIONS
None
SCHEDULE 3.2
TO
SUBSIDIARY JOINDER AGREEMENT
TRADE AND OTHER NAMES; TAX ID NUMBER
Trade Name: Essential Communications Corporation
Tax ID#: ▇▇-▇▇▇▇▇▇▇
