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EXHIBIT 10.36
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated as of
March 19, 1998, by and among PNI SYSTEMS, LLC, a Georgia limited liability
company (the "Company"), PREFERRED NETWORKS, INC., a Georgia corporation (the
"Parent", the Parent, together with the Company, the "Borrowers"), and
NATIONSBANK, N.A., successor to NationsBank, N.A. (South) (the "Lender").
WHEREAS, the Borrowers and the Lender have entered into that certain
Credit Agreement dated as of August 8, 1996, as amended as of December 20, 1996,
as of March 12, 1997 and as of April 11, 1997 (as so amended, the "Credit
Agreement"); and
WHEREAS, the Borrowers and the Lender desire to amend certain provisions
of the Credit Agreement on the terms and conditions contained herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto hereby agree as follows:
Section 1. General Amendments to Credit Agreement. The parties hereto
agree that the Credit Agreement is amended as follows:
(a) The Credit Agreement is amended by deleting from Section 1.1 thereof
the definitions of the terms "Borrowing Base", "Net Proceeds", "Parent
Commitment" and "Termination Date" in their entirety and substituting in their
respective places the following:
"'Borrowing Base' shall mean at any time an amount equal to the
sum of:
(i) 75% of the face value of Eligible Receivables of the
Parent due and owing at such time, plus
(ii) 75% of the face value of Eligible Receivables of the
Company and the other Subsidiaries of the Parent due and owing at
such time, plus
(iii) the lesser of
(A) the sum of
(1) 40% of the lesser of cost (computed on a
first-in-first-out basis) and fair market value of Eligible
Inventory of the Parent at such time, plus
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(2) 40% of the lesser of cost (computed on a
first-in-first-out basis) and fair market value of Eligible
Inventory of the Company at such time, and
(B) $750,000."
"'Net Proceeds' shall mean, with respect to an Equity Issuance or
issuance of Subordinated Debt, the aggregate amount of all cash received
by the Parent in respect of such Equity Issuance or issuance of
Subordinated Debt net of investment banking fees, legal fees, accountants
fees, underwriting discounts and commissions and other customary fees and
expenses actually incurred by the Parent in connection with such Equity
Issuance or issuance of Subordinated Debt."
"'Parent Commitment' shall mean the obligation of the Lender to
make Parent Loans to the Parent in an aggregate principal amount at any
one time outstanding up to but not exceeding $3,750,000."
"'Termination Date' shall mean July 30, 2000."
(b) The Credit Agreement is amended by adding to the second line of the
definition of "Eligible Receivable" in Section 1.1 after the words "of the
Borrowers" the words "and their Subsidiaries".
(c) The Credit Agreement is amended by adding to Section 1.1 the
following new definitions in the appropriate alphabetical locations:
"Pro Forma Financial Statements" shall mean the pro forma
projected consolidated income statements, balance sheets and statements
of cash flows reflecting the forecasted financial condition and results
of operations of the Parent and its Subsidiaries on a quarterly basis for
the fiscal years ending December 31, 1998 and December 31, 1999, copies
of which are attached hereto as Exhibit A, as the same may be modified
from time to time with the written approval of the Lender (which may be
withheld in its sole and absolute discretion).
"Projected EBITDA" shall mean, for any fiscal period, the EBITDA
of the Parent and its Subsidiaries on a consolidated basis calculated
based upon the financial information contained in the Pro Forma Financial
Statements.
(d) The Credit Agreement is amended by deleting Section 2.4 thereof in
its entirety and substituting in its place the following:
"2.4 REPAYMENT OF LOANS
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(a) Company Loan. The principal balance of the Company Loan
shall be repaid in 18 consecutive monthly installments due and
payable on the last day of each calendar month, with the first
such installment being due on February 28, 1999. The first 17 such
installments shall each be in an amount equal to $120,833.33 and
the final installment shall be equal to the remaining principal
balance of the Company Loan. Notwithstanding the foregoing, on the
Termination Date, the aggregate principal amount of all Company
Loans then outstanding shall be due and payable in full.
(b) Parent Loans. On the Termination Date, the aggregate
principal amount of all Parent Loans then outstanding shall be due
and payable in full."
(e) The Credit Agreement is amended by deleting subsection (e) of Section
2.8 thereof in its entirety and substituting in its place the following:
"(e) During the period from the date of this Agreement to the
Termination Date, the Borrowers shall pay to the Lender any fees and
expenses incurred by the Lender and by NationsBank Business Credit
Services in connection with any monitoring and auditing relating to the
credit facilities and the Borrowers.
(f) All fees shall be fully earned and non-refundable upon
receipt."
(f) The Credit Agreement is amended by adding the following sentence to
the end of Section 2.10:
"Optional prepayments of Company Loans shall be applied to reduce
scheduled repayments of such Company Loans in inverse order of maturity."
(g) The Credit Agreement is amended by deleting clause (iv) of clause (d)
of the first sentence of Section 7.1 thereof in its entirety and substituting in
its place the following:
"(iv) if the amount of consideration (as determined as provided in the
definition of the term "Significant Acquisition") to be paid by the
Parent, the Company and their respective Subsidiaries in connection with
such Acquisition is greater than or equal to $250,000, the Lender shall
have given its prior written consent to such Acquisition."
(h) The Credit Agreement is amended by deleting Section 8.1 thereof in
its entirety and substituting in its place the following:
"8.1 CASH REQUIREMENT
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The Parent and its Subsidiaries must at all times hold on a
consolidated basis cash and Cash Equivalents in an aggregate amount
greater than or equal to $4,000,000."
(i) The Credit Agreement is amended by deleting Section 8.2 thereof in
its entirety and substituting in its place the following:
"8.2 TOTAL LIABILITIES TO NET WORTH
The Parent shall not permit the ratio of Total Liabilities to Net
Worth of the Parent and its Subsidiaries determined on a consolidated
basis to exceed 1.5 to 1.0 at any time."
(j) The Credit Agreement is amended by deleting Section 8.3 thereof in
its entirety and substituting in its place the following:
"8.3 MINIMUM NET WORTH
At all times following January 31, 1998, the Parent shall maintain
its Net Worth determined on a consolidated basis with its Subsidiaries
greater than or equal to (a) $28,000,000 plus (b) an amount equal to the
sum of 50% of net earnings of the Parent and its Subsidiaries determined
on a consolidated basis (without deduction for any losses) for each full
fiscal quarter ending after January 31, 1998 plus (c) 50% of the Net
Proceeds of any Equity Issuance or issuance by the Parent of any
Subordinated Debt after December 31, 1997."
(k) The Credit Agreement is amended by adding a new Section 8.5 as
follows:
"8.5 EBITDA TO PROJECTED EBITDA
The Parent shall not permit EBITDA of the Parent and its
Subsidiaries on a consolidated basis as of the end of each fiscal quarter
set forth below for the applicable period set forth below to be less than
75% of Projected EBITDA of the Parent and its Subsidiaries on a
consolidated basis as of the end of each such fiscal quarter for such
period:
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FISCAL QUARTER ENDING: PERIOD:
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March 31, 1998 fiscal quarter most recently ended
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June 30, 1998 two consecutive fiscal quarters most
recently ended
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September 30, 1998 three consecutive fiscal quarters
most recently ended
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Each March 31, June 30, September 30 four consecutive fiscal quarters most
and December 31 thereafter recently ended
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Section 2. Termination of Company Commitment; Company Loans. Immediately
prior to the effectiveness of this Amendment, the Lender had made available to
the Company $7,250,000 in aggregate principal amount of Company Loans. Upon the
effectiveness of this Amendment, the parties hereto agree as follows: (a) the
Company Commitment shall terminate and accordingly the Company may not borrow,
and the Lender shall be under no obligation whatsoever to make, any Company
Loans; (b) the outstanding Company Loans shall be repaid as provided in the
Credit Agreement, as amended hereby and (c) to the extent any of the principal
of any outstanding Company Loan is repaid, such principal may not be reborrowed
notwithstanding the last sentence of Section 2.1. of the Credit Agreement.
Section 3. Conditions Precedent to Effectiveness of this Amendment. The
effectiveness of this Amendment is subject to receipt by the Lender of each of
the following, each in form and substance satisfactory to the Lender:
(a) A counterpart of this Amendment duly executed by the Company, the
Parent and each Guarantor;
(b) Payment of a fee in the amount of $220,000, representing two percent
(2.0%) of the amount of the Commitment;
(c) A Parent Note executed by the Parent, payable to the order of the
Lender and in the original principal amount of $3,750,000.00 (the "New Note") in
replacement of the outstanding Parent Note in favor of the Lender in the
principal amount of $2,000,000.00;
(d) a copy of the Parent's Pro Forma Financial Statements for the fiscal
years ending December 31, 1998 and December 31, 1999;
(e) the results and auditor recommendations from the NationsBank Business
Credit Services' field audit of the Borrowers;
(f) A copy of the resolutions of the board of directors or members of
each Borrower, as applicable, authorizing the execution and delivery of this
Amendment and the New Note, certified by the Secretary or an Assistant Secretary
of each Borrower;
(g) an opinion of in-house counsel to the Borrowers, addressed to the
Lender, and regarding the authority of each Borrower to execute, deliver and
perform this Amendment, the Credit Agreement as amended hereby and the New Note;
(h) Payment of all costs and expenses incurred by the Lender, its counsel
and NationsBank Business Credit Services in connection with the preparation,
negotiation and
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execution of this Amendment and the other agreements and documents executed and
delivered in connection herewith; and
(i) Such other documents, instruments and agreements as the Lender may
reasonably request.
Section 4. Representations. Each of the Borrowers represents and warrants
to the Lender that:
(a) Authorization; No Conflict The execution and delivery by the
Borrowers of this Amendment and the New Note and the performance by the
Borrowers of this Amendment, the New Note and the Credit Agreement, as amended
by this Amendment, in accordance with their respective terms (a) have been duly
authorized by all requisite corporate and, to the extent required, stockholder
action (or membership action in the case of a limited liability company) on the
part of each Borrower and (b) will not (i) violate any provision of Applicable
Law, or any order of any Governmental Authority or any provision of the
certificate in incorporation, articles of organization or other comparable
organizational instrument or by-laws or operating agreement of either Borrower,
(ii) violate, conflict with, result in a breach of or constitute (alone or with
notice or lapse of time or both) a default or an event of default under any
Material Contract to which either Borrower is a party or by which each Borrower
or any of its property is or may be bound, or (iii) result in the creation or
imposition of any Lien upon any property or assets of the Borrowers.
(b) Enforceability. This Amendment and the New Note have been duly
executed and delivered by a duly authorized officer of each Borrower and each of
this Amendment, the New Note and the Credit Agreement, as amended by this
Amendment, is a legal, valid and binding obligation of the Borrowers enforceable
against the Borrowers in accordance with its respective terms except as the same
may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other laws affecting generally the enforcement of creditors'
rights and by general principles of equity (regardless of whether considered in
a proceeding in equity or at law).
(c) Financial Condition. Since September 30, 1997, there has been no
material adverse change in the business, property, assets, liabilities,
condition (financial or otherwise), operations or results of operations of the
Parent, the Company, any of their Subsidiaries or any other Loan Party. The Pro
Forma Financial Statements fairly present, in all material respects, the pro
forma financial condition of the Parent and its Subsidiaries on a consolidated
basis as of the date hereof.
Section 5. Reaffirmation by Borrowers. Each Borrower hereby repeats and
reaffirms all representations and warranties made by such Borrower to the Lender
in the Credit Agreement and the other Loan Documents to which it is a party on
and as of the date hereof with the same force and effect as if such
representations and warranties were set forth in this Amendment in full.
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Section 6. Reaffirmation by Guarantors. Each of the Guarantor reaffirms
its continuing obligations to the Lender under its Guaranty, and agrees that
this Amendment shall not in any way affect the validity and enforceability of
such Guaranty, or reduce, impair or discharge the obligations of such Guarantor
thereunder.
Section 7. Certain References. Each reference to the Credit Agreement in
any of the Loan Documents shall be deemed to be a reference to the Credit
Agreement as amended by this Amendment.
Section 8. Expenses. The Company shall reimburse the Lender upon demand
for all costs and expenses (including attorneys' fees) incurred by the Lender in
connection with the preparation, negotiation and execution of this Amendment and
the other agreements and documents executed and delivered in connection
herewith.
Section 9. Benefits. This Amendment shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
assigns.
Section 10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
Section 11. Effect. Except as expressly herein amended, the terms and
conditions of the Credit Agreement and the other Loan Documents remain in full
force and effect. The amendments contained herein shall be deemed to have
prospective application only, unless otherwise specifically stated herein.
Section 12. Counterparts. This Amendment may be executed in any number of
counterparts, each of which need not contain the signature of more than one
party and all of which taken together shall constitute one and the same original
instrument.
Section 13. Definitions. All capitalized terms not otherwise defined
herein are used herein with the respective definitions given them in the Credit
Agreement.
[Signatures on Next Page]
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IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment
to Credit Agreement to be executed as of the date first above written.
THE LENDER:
NATIONSBANK, N.A.
By:
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Name:
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Title:
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THE PARENT:
PREFERRED NETWORKS, INC.
By:
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Name:
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Title:
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THE COMPANY:
PNI SYSTEMS, LLC
By: Preferred Networks, Inc., its Manager
By:
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Name:
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Title:
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[Signatures Continued on Next Page]
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[SIGNATURE PAGE TO FOURTH AMENDMENT TO CREDIT AGREEMENT DATED
AS OF MARCH 19, 1998 FOR PREFERRED NETWORKS, INC.]
THE GUARANTORS:
PNI SPECTRUM, LLC PREFERRED TECHNICAL SERVICES, INC.
By: Preferred Networks, Inc., its Manager
By: By:
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Name: Name:
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Title: Title:
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PNI GEORGIA, INC. EPS WIRELESS, INC.
By: By:
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Name: Name:
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Title: Title:
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MERCURY PAGING & COMMUNICATIONS, INC. HTB COMMUNICATIONS, INC.
By: By:
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Name: Name:
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Title: Title:
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CUSTOM PAGE, INC. M.P.C. DISTRIBUTORS, INC.
By: By:
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Name: Name:
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Title: Title:
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EXHIBIT A
PRO FORMA FINANCIAL STATEMENTS
ATTACHED.
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