EXHIBIT 10.5
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SECOND AMENDMENT
TO
REVOLVING CREDIT AGREEMENT AND LIMITED WAIVER
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Second Amendment and Limited Waiver dated as of December 31, 2001 to
Revolving Credit Agreement (the "Second Amendment"), by and among PEREGRINE
SYSTEMS, INC., a Delaware corporation (the "Borrower"), FLEET NATIONAL BANK and
the other lending institutions listed on SCHEDULE 1 to the Credit Agreement (as
hereinafter defined) (the "Lenders"), amending certain provisions of the
Revolving Credit Agreement dated as of October 29, 2001 (as amended and in
effect from time to time, the "Credit Agreement") by and among the Borrower, the
Lenders and FLEET NATIONAL BANK in its capacity as administrative agent for the
Lenders (the "Administrative Agent") and waiving certain other provisions of the
Credit Agreement as more fully set forth herein. Terms not otherwise defined
herein which are defined in the Credit Agreement shall have the same respective
meanings herein as therein.
WHEREAS, the Borrower and the Lenders have agreed to modify certain
terms and conditions of the Credit Agreement as specifically set forth in this
Second Amendment and waive certain other terms and conditions of the Credit
Agreement as specifically set forth in this Second Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1. AMENDMENT TO SECTION 1.1 OF THE CREDIT AGREEMENT. Section
1.1 of the Credit Agreement is hereby amended as follows:
(a) the definition of "Applicable Margin" is hereby amended by
deleting such definition in its entirety and restating it as follows:
APPLICABLE MARGIN. For each period commencing on an Adjustment
Date through the date immediately preceding the next Adjustment Date
(each a "RATE ADJUSTMENT PERIOD"), the Applicable Margin shall be the
applicable margin set forth below with respect to the Leverage Ratio,
as determined for the Reference Period of the Borrower and its
Subsidiaries ending on the fiscal quarter ended immediately prior to
the applicable Rate Adjustment Period.
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BASE EURODOLLAR LETTER OF
LEVERAGE RATIO RATE RATE LOANS CREDIT COMMITMENT FEE
LEVEL LOANS FEES
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IB Greater than or
equal to 1.25% 3.50% 3.50% .50%
4.00:1.00
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IA Less than
4:00:1.00 but 0.75% 3.00% 3.00% .50%
greater than or
equal 3.00:1.00
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I Less than
3.00:1.00 but 0% 2.25% 2.25% .50%
greater than or
equal to
2.00:1.00
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II Less than
2.00:1.00 but
greater than or 0% 1.75% 1.75% .50%
equal to
1.50:1.00
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III Less than
1.50:1.00 but
greater than or 0% 1.50% 1.50% .375%
equal to
1.00:1.00
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IV Less than 0% 1.25% 1.25% .375%
1.00:1.00
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Notwithstanding the foregoing, (a) for the Revolving Credit
Loans outstanding and the Letter of Credit Fees and the Commitment Fee
payable during the period commencing on the Closing Date through
February 10, 2002, the Applicable Margin shall not be lower than the
Applicable Margin set forth in Level II above (except for the
Applicable Margin on any Revolving Credit Loans made from the Closing
Date through November 11, 2001, which shall be at Level II above until
the applicable Interest Period therefor expires and then shall be
governed by this paragraph (a)); (b) for the Revolving Credit Loans
outstanding and the Letter of Credit Fees and the Commitment Fee
payable during the period commencing on February 11, 2002 through the
date immediately preceding the first Adjustment Date to occur after the
fiscal quarter ending March 30, 2002, the Applicable Margin shall not
be lower than the Applicable Margin set forth in Level IA above; and
(c) if the Borrower fails to deliver any Compliance Certificate
pursuant to Section 8.4(c) hereof then, for the period commencing on
the next Adjustment Date to occur subsequent to such failure through
the date immediately following the date on which such Compliance
Certificate is
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delivered, the Applicable Margin shall be the highest Applicable Margin
set forth above.
(b) The definition of "Senior Funded Debt" is hereby amended by
deleting such definition in its entirety and restating it as follows:
SENIOR FUNDED DEBT. At any time of determination, the sum of
(a) Consolidated Total Funded Debt, PLUS (b) without duplication, at
any time from and after February 11, 2002, and solely for purposes of
calculating compliance with Section 10.3 hereof, Consolidated
Outstanding Indebtedness, and MINUS (c) Subordinated Debt.
(c) Section 1.1 of the Credit Agreement is further amended by inserting
the following definitions in the appropriate alphabetical order:
CONSOLIDATED OUTSTANDING INDEBTEDNESS. With respect to the
Borrower and its Subsidiaries, the aggregate amount of Consolidated
Total Funded Debt of the Borrower and its Subsidiaries outstanding on
February 11, 2002 (whether or not such Indebtedness is subsequently
repaid or reduced in whole or in part), other than Revolving Credit
Loans owing under the Credit Agreement.
CONSOLIDATED UNENCUMBERED CASH. The aggregate amount of cash
and Cash Equivalents of the Borrower and its Subsidiaries which is not
subject to any lien, encumbrance, security interest or other claim
whatsoever, except for a lien in favor of the Administrative Agent, for
the benefit of the Administrative Agent and the Lenders, to secure the
Obligations under the Loan Documents and other than a lien permitted by
Section 9.2.1(xiii).
NET CASH. As of any date of determination, an amount equal to
(a) Consolidated Unencumbered Cash as of such date, less (b) the
aggregate amount of Senior Funded Debt of the Borrower and its
Subsidiaries on such date.
SECTION 2. AMENDMENT TO SECTION 8 OF THE CREDIT AGREEMENT. Section 8 of
the Credit Agreement is hereby amended as follows:
(a) Section 8.4(d) of the Credit Agreement is hereby amended by
deleting Section 8.4(d) in its entirety and restating it as follows:
(d) (i) by not later than Tuesday, February 12, 2002 and then
every other Tuesday of each calendar week thereafter until March 31,
2002, the Borrower's cash flow forecast for a period and in form
acceptable to the Administrative Agent; and (ii) within forty five (45)
days after the end of each fiscal quarter or at such earlier time as
the Administrative Agent or the Required Lenders may reasonably
request, an Accounts Receivable aging report in form acceptable to the
Administrative Agent and the Required Lenders;
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(b) Section 8.18 of the Credit Agreement is hereby amended by deleting
the words "by not later than one hundred twenty (120) days after the Closing
Date" which appear in the last sentence thereof and substituting in place
thereof the words "by not later than one hundred sixty (160) days after the
Closing Date".
(c) Section 8 of the Credit Agreement is further amended by inserting
immediately after the end of Section 8.19 the following:
8.20. PLEDGE OF CERTAIN ADDITIONAL ASSETS. If (a) an Event of
Default has occurred and is continuing or (b) the Borrower's
consolidated revenues for the fiscal quarter ending March 31, 2002 do
not exceed $185,139,000 or (c) EBITDA as of March 31, 2002 for the
fiscal quarter ended March 31, 2002 does not exceed $9,953,000, the
Borrower shall, and shall cause any applicable Guarantor to,
immediately grant to the Administrative Agent for the benefit of the
Administrative Agent and the Lenders, a first priority perfected
security interest in all of the cash, Cash Equivalents, securities and
other investment property of the Borrower or such Guarantor (the
"Additional Collateral") with a collateral value (as determined by the
Administrative Agent in its reasonable discretion) of not less than
$25,000,000 and, in addition, the Administrative Agent shall be
permitted to take all action necessary to effectuate such pledge and
perfect its security interest in such Additional Collateral, including,
but not limited to releasing from escrow any pledge agreement executed
by the Borrower or such Guarantors on or about February 11, 2002 and/or
amending any Security Agreement to so include such Additional
Collateral, and the Borrower shall, and shall cause each Guarantor, to
take all action which the Administrative Agent shall request in order
to effectuate such pledge and perfect the Administrative Agent's
security interest in such Additional Collateral, and shall deliver all
corporate or similar documentation, authorizations and legal opinions
as the Administrative Agent may reasonably request. The parties hereto
hereby agree that any security agreement, pledge agreement or similar
security documents executed in connection with this Section 8.21 shall
constitute a "Security Document" hereunder.
8.21. PLEDGE OF INTELLECTUAL PROPERTY ASSETS. The Borrower
will, and will cause each Material Domestic Subsidiary to, as soon as
practicable but in no event later than May 10, 2002, (a) file for
registration of all material copyrights with the United States
Copyright Office, (b) enter into an amendment to the applicable
Security Agreement to grant to the Administrative Agent, for the
account of the Administrative Agent and the Lenders, a first priority
perfected security interest in all of its copyrights, patents, patent
rights, trademarks, service marks, trademark and service xxxx rights
and other general intangibles constituting intellectual property,
together with the goodwill appurtenant thereto (collectively, the "IP
Collateral"), (c) enter into a copyright mortgage with respect to such
copyrights in form and substance reasonably acceptable to the
Administrative Agent, (d) enter into a trademark collateral assignment
with respect to such trademarks and service marks in form and substance
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reasonably acceptable to the Administrative Agent, (e) enter into a
patent assignment with respect to such patents in form and substance
satisfactory to the Administrative Agent and, in addition, the
Administrative Agent shall be permitted to take all action necessary to
effectuate such pledge and perfect its security interest in such IP
Collateral, and the Borrower shall, and shall cause each Material
Domestic Subsidiary, to take all action which the Administrative Agent
shall request in order to effectuate such pledge and perfect the
Administrative Agent's security interest in such IP Collateral, and
shall deliver all corporate or similar documentation, authorizations
and legal opinions as the Administrative Agent may reasonably request.
The parties hereto hereby agree that any security agreement, pledge
agreement or similar security documents executed in connection with
this Section 8.22 shall constitute a "Security Document" hereunder
SECTION 3. AMENDMENT TO SECTION 10 OF THE CREDIT AGREEMENT. Section 10
of the Credit Agreement is hereby amended as follows:
(a) Section 10.1 - 10.4 of the Credit Agreement is hereby amended by
deleting Section 10.1 - 10.4 in their entirety and restating them as follows:
10.1. LEVERAGE RATIO. The Borrower will not permit the
Leverage Ratio to exceed (a) 2.50:1.00 at any time from the Closing
Date through December 30, 2001 or (b) 2.50:1.00 at any time from and
after April 1, 2002.
10.2. QUICK RATIO. The Borrower will not permit the ratio of
Consolidated Quick Assets to Consolidated Current Liabilities at any
time to be less than (a) 1.10:1.00 from the Closing Date through and
including December 30, 2001; (b) 1.10:1.00 from April 1, 2002 through
and including June 29, 2002; (c) 1.00:1.00 from June 30, 2002 through
and including September 29, 2002; (d) 1.10:1.00 from September 30, 2002
through and including March 30, 2003 and (e) 1.25:1.00 at any time
thereafter.
10.3. SENIOR FUNDED DEBT TO EBITDA. The Borrower will not at
any time permit the ratio of Senior Funded Debt outstanding on the date
of determination to EBITDA for the Reference Period ending on or
immediately prior to such date, as the case may be, to exceed (a)
1.00:1.00 at any time from the Closing Date through December 30, 2001;
or (b) 0.349:1.00 at any time from and after February 11, 2002.
10.4. MINIMUM EBITDA. Commencing with the fiscal quarter
ending March 31, 2002, the Borrower will not permit EBITDA for any
Reference Period ending during any period described in the table below
to be less than the amount set forth opposite such period in such
table:
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FISCAL QUARTER ENDED MINIMUM AMOUNT
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March 31, 2002 $41,000,000
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June 30, 2002 $39,000,000
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September 30, 2002 $41,000,000
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December 31, 2002 $52,000,000
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March 31, 2003 $60,000,000
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June 30, 2003 $46,000,000
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September 30, 2003 $48,000,000
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December 31, 2003 $60,000,000
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each fiscal quarter ending thereafter $70,000,000
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(b) Section 10 of the Credit Agreement is further amended by inserting
immediately at the end of the text of Section 10.4 the following:
10.5. MINIMUM NET CASH. The Borrower will not permit Net Cash to be
less than $40,000,000 at any time from and after February 11, 2002.
SECTION 4. AMENDMENT TO SECTION 13 OF THE CREDIT AGREEMENT. Section
13.1(c) of the Credit Agreement is hereby amended by inserting immediately after
the reference to Section 8.18 the following: "8.20, 8.21".
SECTION 5. LIMITED WAIVER. The Borrower has informed the Administrative
Agent and the Lenders that on December 31, 2001 the Borrower was in default of
certain of its financial covenants contained in Section 10.1 - 10.3 of the
Credit Agreement for the period of December 31, 2001 through and including the
effective date of this Second Amendment (the "Default Period") and was also in
default of its financial covenant contained in Section 10.4 of the Credit
Agreement for the quarter ended December 31, 2001. The Borrower's failure to
comply with such financial covenants during the Default Period constituted an
Event of Default for such period (which Event of Default will be subsequently
cured by the Borrower on the effective date of this Second Amendment). The
Borrower has requested that the Lenders waive, to the limited extent necessary
to permit the noncompliance for the Default Period, the requirements of Section
10.1 - 10.3 of the Credit Agreement for the Default Period and Section 10.4 of
the Credit Agreement for the fiscal quarter ended December 31, 2001. Subject
always to compliance by the Borrower with the terms and conditions of the Credit
Agreement and the other Loan Documents and the terms and conditions contained
herein, from and after the effective date of this Second Amendment, the Lenders
hereby waive the provisions of Section 10.1 - 10.4. of the Credit Agreement
solely to the extent necessary to permit the above-referenced noncompliance, and
only with respect to the Default Period. In addition, in connection with this
Second Amendment, the Borrower is making a prepayment of the Revolving Credit
Loans as required by Section 6(b) of this Second Amendment. The Lenders hereby
waive, for purposes of this prepayment (and only this prepayment) the advance
notice requirement set forth in Section 3.3 of the Credit Agreement.
SECTION 6. CONDITIONS TO EFFECTIVENESS. This Second Amendment shall not
become effective until the Administrative Agent receives the following:
(a) a counterpart of this Second Amendment, executed by the Borrower,
each Guarantor and the Required Lenders;
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(b) evidence satisfactory to the Administrative Agent that the sum of
(i) aggregate outstanding principal amount of all Revolving Credit Loans plus
(ii) the Maximum Drawing Amount of all issued and outstanding Letters of Credit
plus (iii) any Unpaid Reimbursement Obligations is not more than $18,609,166;
(c) a copy of the Borrower's most recent cash flow forecast; and
(d) payment to the Administrative Agent, for the respective accounts of
the Lenders, in cash of an amendment fee for each Lender which consents to this
Second Amendment on or prior to 3:00 p.m. (Boston time) on February 11, 2002, in
an aggregate amount equal to ten basis points on the amount of the Commitment of
each such consenting Lender.
SECTION 7. REPRESENTATIONS AND WARRANTIES. The Borrower hereby repeats,
on and as of the date hereof, each of the representations and warranties made by
it in Section 7 of the Credit Agreement (except to the extent of changes
resulting from transactions contemplated or permitted by this Credit Agreement
and the other Loan Documents and changes occurring in the ordinary course of
business that singly or in the aggregate are not materially adverse, and to the
extent that such representations and warranties relate expressly to an earlier
date), PROVIDED, that all references therein to the Credit Agreement shall refer
to such Credit Agreement as amended hereby. In addition, the Borrower hereby
represents and warrants that the execution and delivery by the Borrower of this
Second Amendment and the performance by the Borrower of all of its agreements
and obligations under the Credit Agreement as amended hereby are within the
corporate authority of the Borrower and has been duly authorized by all
necessary corporate action on the part of the Borrower.
SECTION 8. RATIFICATION, ETC. Except as expressly amended hereby, the
Credit Agreement and all documents, instruments and agreements related thereto,
including, but not limited to the Security Documents, are hereby ratified and
confirmed in all respects and shall continue in full force and effect. The
Credit Agreement and this Second Amendment shall be read and construed as a
single agreement. All references in the Credit Agreement or any related
agreement or instrument to the Credit Agreement shall hereafter refer to the
Credit Agreement as amended hereby.
SECTION 9. NO WAIVER. Except as expressly set forth in Section 4
hereof, nothing contained herein shall constitute a waiver of, impair or
otherwise affect any Obligations, any other obligation of the Borrower, any
Guarantor or any rights of the Administrative Agent or the Lenders consequent
thereon.
SECTION 10. COUNTERPARTS. This Second Amendment may be executed in one
or more counterparts, each of which shall be deemed an original but which
together shall constitute one and the same instrument.
SECTION 11. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
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IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as a document under seal as of the date first above written.
PEREGRINE SYSTEMS, INC.
By: /s/ Xxxxxxx. X. Xxxxx
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Xxxxxxx X. Xxxxx
Chief Financial Officer
FLEET NATIONAL BANK
By: /s/ Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx, Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Xxxx X. Xxxxx
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Xxxx X. Xxxxx
Vice President
BANK OF AMERICA, N.A.
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Managing Director
COMERICA BANK
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/ Xxxxxx Xxxxxxxx
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Xxxxxx Xxxxxxxx
Vice President
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XXX XXXX XX XXXX XXXXXX
By: /s/ Xx Xxxxxx
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Xx Xxxxxx, Director
BNP PARIBAS
By: /s/ Xxxxxx Xxxxxxxx / Xxxxxxx Xxx Pho
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Xxxxxx Xxxxxxxx / Xxxxxxx Xxx Pho
Director / Associate
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RATIFICATION OF GUARANTY
Each of the undersigned guarantors hereby acknowledges and consents
to the foregoing Second Amendment as of December 31, 2001, and agrees that
the applicable Guaranty from such Guarantor dated as of October 29, 2001,
December 20, 2001 and December 24, 2001, as applicable, in favor of the
Administrative Agent for the benefit of the Administrative Agent and the
Lenders and all other Loan Documents to which each of the Guarantors are a
party remain in full force and effect, and each of the Guarantors confirms
and ratifies all of its obligations thereunder.
PEREGRINE REMEDY, INC.
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Secretary
TELCO RESEARCH CORPORATION
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Secretary
HARBINGER HOLDINGS, INC.
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Secretary
PEREGRINE E-MARKETS, INC.
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Secretary
PEREGRINE DIAMOND, INC.
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Secretary
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PEREGRINE EXTRICITY, INC.
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Secretary
PEREGRINE CONNECTIVITY, INC.
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Secretary
PEREGRINE ONTARIO BLUE JAYS, INC.
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Secretary
PEREGRINE CALIFORNIA PADRES, INC.
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Secretary
BALLGAME ACQUISITION CORPORATION
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Secretary
OCTOBER ACQUISITION CORPORATION
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Secretary
PEREGRINE BODHA, INC.
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Secretary
