Exhibit 10(o)
SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
---------------------------
SECOND AMENDMENT dated as of February 14, 2002 (this
"AMENDMENT") to the LOAN AND SECURITY AGREEMENT dated as of July 17, 2001, as
amended by the First Amendment dated as of November 15, 2001 (the "LOAN
AGREEMENT"), between and among, on the one hand, the lenders identified on the
signature pages thereof (such lenders, together with their respective successors
and assigns, are referred to hereinafter each individually as a "LENDER" and
collectively as the "LENDERS"), FOOTHILL CAPITAL CORPORATION, a California
corporation, as the arranger and administrative agent for the Lenders ("AGENT"),
and, on the other hand, FRONTSTEP, INC., an Ohio corporation ("PARENT"), and
each of the Parent's Subsidiaries identified on the signature pages hereof (such
Subsidiaries, together with Parent, are referred to hereinafter each
individually as a "BORROWER", and individually and collectively, jointly and
severally, as "BORROWERS").
WHEREAS, the Borrowers have (a) requested the Agent to amend
the Loan Agreement to provide for, among other things, (i) an overadvance limit
through and including July 15, 2002 and (ii) the deferment of the monthly
amortization payments due in respect of the Term Loan A through July 31, 2002
and (b) advised the Agent that the Borrowers are in default under the Minimum
EBITDA, Tangible Net Worth and Leverage Ratio covenants set forth in the Loan
Agreement and have requested the Lenders to waive such defaults, and the Agent,
on behalf of the Lenders, has agreed to such waiver.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants, agreements and conditions hereinafter set forth, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. CAPITALIZED TERMS. All capitalized terms used in this
Amendment (including, without limitation, in the recitals hereto) and not
otherwise defined shall have their respective meanings set forth in the Loan
Agreement.
2. DEFINITIONS IN THE LOAN AGREEMENT. Section 1.1 of the Loan
Agreement is hereby amended as follows:
(a) A definition of the term "Bridge Loan" is hereby inserted,
in appropriate alphabetical order, to read as follows:
"'BRIDGE LOAN' means an unsecured term loan in the
original principal amount of $1,500,000 to be made by a Person (other
than a Borrower) to one or more of the Borrowers prior to April 15,
2002, the proceeds of which are remitted by the maker of such loan
directly to the Lender and applied by the Lender to repay the
Advances."
(b) A definition of the term "Maximum Amount" is hereby
inserted, in appropriate alphabetical order, to read as follows:
"'MAXIMUM AMOUNT' means $16,250,000, from January 1, 2002
to and including July 15, 2002, PROVIDED that, if the Bridge Loan is
not funded by April 15, 2002, the Maximum Amount shall reduce as
follows: (i) $15,750,000, from April 15, 2002 to and including April
30, 2002; (ii) $15,250,000, from May 1, 2002 to and including May 31,
2002; (iii) $14,750,000, from June 1, 2002 to and including June 14,
2002; and (iv) $14,250,000, from June 15, 2002 to and including July
15, 2002."
(c) The definition of the term "Maximum Revolver Amount" is
hereby amended in its entirety to read as follows:
"'MAXIMUM REVOLVER AMOUNT' means (a) from January 1, 2002
to and including July 15, 2002, the applicable Overadvance Amount, and
(b) after July 15, 2002, $25,000,000 minus the Term Loan A Amount."
(d) The definition of the term "Overadvance Amount" is hereby
amended in its entirety to read as follows:
"'OVERADVANCE AMOUNT' means (a) $2,500,000, from January
1, 2002 to and including July 15, 2002, PROVIDED that, if the Bridge
Loan is not funded by April 15, 2002, the Overadvance Amount shall
reduce as follows: (i) $2,000,000, from April 15, 2002 to and including
April 30, 2002; (ii) $1,500,000, from May 1, 2002 to and including May
31, 2002; (iii) $1,000,000, from June 1, 2002 to and including June 14,
2002; and (iv) $500,000, from June 15, 2002 to and including July 15,
2002; and (b) $0.00, after July 15, 2002."
(e) A definition of the term "Second Amendment Effective Date"
is hereby inserted, in appropriate alphabetical order, to read as follows:
"'SECOND AMENDMENT EFFECTIVE DATE' means the date on which
all of the conditions precedent to the effectiveness of Second
Amendment to Loan Agreement dated as of February 14, 2002, by and among
the Borrowers, the Agent and the Lenders have been fulfilled or
waived."
3. REVOLVER ADVANCES; MAXIMUM AMOUNT. (a) The first sentence
of Section 2.1(a) of the Loan Agreement is hereby amended in its entirety to
read as follows:
"(a) Subject to the terms and conditions of this Agreement,
and during the term of this Agreement, each Lender with a Revolver
Commitment agrees (severally, not jointly or jointly and severally) to
make advances ("Advances") to Borrowers in an amount at any one time
outstanding not to exceed such Lender's Pro Rata Share of an amount
equal to (i) prior to July 15, 2002, the Maximum Revolver Amount and
(ii) thereafter, the lesser of (A) the Maximum Revolver Amount LESS the
Letter of Credit Usage, or (B) the Borrowing Base less the Letter of
Credit Usage."
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(b) Section 2.1 of the Loan Agreement is hereby amended by
inserting new clauses (f) and (g) at the end thereof to read as follows:
"(f) Prior to July 15, 2002, the Lenders with Revolver
Commitments shall have no obligation to make additional Advances
hereunder to the extent such Advances would cause the Revolver Usage as
of the last Business Day of the applicable calendar week to exceed
Borrowers' projected Revolver Usage for such week by more than
$1,000,000 during any consecutive two calendar week period, and an
Event of Default shall occur in the event any such excess exists. The
provisions set forth in this paragraph (f) shall not be applicable
after July 15, 2002.
(g) Prior to July 15, 2002, the Lenders with Revolver
Commitments shall have no obligation to make additional Advances
hereunder to the extent such Advances would cause the sum of the
Revolver Usage and the Term Loan A Amount to exceed the Maximum Amount.
The provisions set forth in this paragraph (g) shall not be applicable
after July 15, 2002."
4. TERM LOANS. (a) The first sentence of Section 2.2(a)(ii) of
the Loan Agreement is hereby amended in its entirety to read as follows:
"(ii) The Term Loan A shall be repaid in consecutive
monthly installments each in a principal amount equal to 1/36th of the
Term Loan A Amount, plus accrued interest on the amount of principal so
repaid, on the first day of each month, commencing on August 1, 2002.
All amortization payments in respect of the Term Loan A that were
required, prior to the Second Amendment Effective Date, to be made by
Borrowers for the six-month period commencing on January 1, 2002
through July 1, 2002 have been deferred by the Lenders pursuant to the
Second Amendment to the Loan Agreement. Any such amortization payments
made by Borrowers between January 1, 2002 and the Second Amendment
Effective Date shall be promptly returned by Lenders to Borrowers.
(b) Section 2.2(b) of the Loan Agreement is hereby amended in
its entirety to read as follows:
"(b) (i) Subject to the terms and conditions of this
Agreement, on the First Amendment Effective Date each Lender with a
Term Loan B Commitment agrees (severally, not jointly or jointly and
severally) to make a term loan (collectively, the "Term Loan B") to
Borrowers in an amount equal to such Lender's Pro Rata Share of
$900,000. The Term Loan B shall be repaid on the first day of each
month, commencing on August 1, 2002, in equal monthly installments of
$75,000.
(ii) Borrowers may, at any time, prepay all or a
portion of the Term Loan B without penalty or premium. The outstanding
unpaid principal balance and all accrued and unpaid interest under the
Term Loan B shall be due and payable upon the date of termination of
this Agreement, whether by its terms, by prepayment, or by
acceleration. All amounts outstanding under the Term Loan B shall
constitute Obligations."
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5. INTEREST RATES. Section 2.6(a)(iii) of the Loan Agreement
is hereby amended in its entirety to read as follows:
"(iii) the Term Loan B Amount shall not bear interest on
the amount thereof outstanding."
6. COLLATERAL REPORTING. Section 6.2 of the Loan Agreement is
hereby amended by deleting the "Monthly" collateral reporting requirements from
the collateral reporting table set forth therein and inserting new "Monthly"
collateral reporting requirements in the collateral reporting table therein to
read as follows:
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(f) a calculation of Dilution for the prior month, and
Monthly (not later than (g) (i) a list of any software license agreements, Maintenance
the 10th day of Contracts or other agreements giving rise to Accounts of a Borrower
each month) which contain proscriptions of, or limitations on, a Borrower's right
to assign such agreements, and (ii) a Maintenance Contract Summary
Valuation Report for the prior month, in form and substance reasonably
acceptable to Agent.
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7. INDEBTEDNESS. Section 7.1 of the Loan Agreement is hereby
amended by (a) deleting the word "and" at the end of clause (g) thereof, (b)
deleting the period at the end of clause (h) thereof and inserting the word ";
and" at the end thereof and (c) inserting a new clause (i) therein to read as
follows:
"(i) the Bridge Loan."
8. FINANCIAL COVENANTS. Section 7.20 of the Loan Agreement is
hereby amended by deleting the phrase "Fail to maintain:" set forth as the
introductory clause thereof and by amending clauses (i), (ii) and (iii) thereof
as follows:
(a) MINIMUM EBITDA. Clause (i) of Section 7.20(a) is hereby
amended in its entirety to read as follows:
"(i) MINIMUM EBITDA. Fail to maintain EBITDA, measured on a
fiscal quarter-end basis, of not less than the required amount set
forth in the following table for the applicable period set forth
opposite thereto:
--------------------------- -------------------------------------------
APPLICABLE AMOUNT APPLICABLE PERIOD
----------------- -----------------
--------------------------- -------------------------------------------
$657,000 For the 9 month period ending
March 31, 2002
--------------------------- -------------------------------------------
$2,388,000 For the 12 month period ending
June 30, 2002
--------------------------- -------------------------------------------
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Borrowers' EBITDA for the 12 month period ending each month after June
30, 2002 shall be determined based upon Borrowers' projected EBITDA for
such period as set forth in the Projections delivered to Agent in
accordance with Section 6.3(c), which Projections are in form and
substance acceptable to Agent; provided, that if Agent and Borrowers
cannot agree on the EBITDA covenant number based upon Borrowers'
projected EBITDA, for purposes of this Section 7.20(a)(i), Borrowers'
EBITDA for such 12 month period shall be determined by Agent in its
Permitted Discretion and shall not be less than $2,388,000."
(b) TANGIBLE NET WORTH. Clause (ii) of Section 7.20(a) is
hereby amended in its entirety to read as follows:
"(ii) TANGIBLE NET WORTH. Fail to maintain Tangible Net
Worth of at least the required amount set forth in the following table
as of the applicable date set forth opposite thereto:
------------------------------ ---------------------------------------
APPLICABLE AMOUNT APPLICABLE DATE
------------------------------ ---------------------------------------
$8,100,000 March 31, 2002
------------------------------ ---------------------------------------
$8,300,000 June 30, 2002
------------------------------ ---------------------------------------
Borrowers' Tangible Net Worth for each fiscal quarter ending after June
30, 2002 shall be determined based upon Borrowers' projected Tangible
Net Worth for such period as set forth in the Projections delivered to
Agent in accordance with Section 6.3(c), which Projections are in form
and substance acceptable to Agent; provided, that if Agent and
Borrowers cannot agree on the Tangible Net Worth covenant number based
upon Borrowers' projected Tangible Net Worth, for purposes of this
Section 7.20(a)(ii), Borrowers' Tangible Net Worth for such fiscal
quarter shall be determined by Agent in its Permitted Discretion and
shall not be less than $8,300,000."
(c) LEVERAGE RATIO. Clause (iii) of Section 7.20(a) is hereby
amended in its entirety to read as follows:
"(iii) LEVERAGE RATIO. Permit the ratio (the "Leverage
Ratio") of (i) the aggregate amount of the Indebtedness of Parent and
its Subsidiaries divided by (ii) EBITDA, for the applicable period
set forth below to be less than the applicable ratio set forth below:
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--------------------------- ------------------------------------------
LEVERAGE RATIO APPLICABLE PERIOD
-------------- -----------------
--------------------------- ------------------------------------------
18:1 For the 9 month period ending
March 31, 2002
--------------------------- ------------------------------------------
4.5:1 For the 12 month period ending
June 30, 2002
--------------------------- ------------------------------------------
Borrowers' Leverage Ratio for the 12 month period ending each month
after June 30, 2002 shall be determined based upon Borrowers' projected
Leverage Ratio for such period as set forth in the Projections
delivered to Agent in accordance with Section 6.3(c), which Projections
are in form and substance acceptable to Agent; provided, that if Agent
and Borrowers cannot agree on the Leverage Ratio covenant based upon
Borrowers' projected Leverage Ratio, for purposes of this Section
7.20(a)(iii), Borrowers' Leverage Ratio for such 12 month period shall
be determined by Agent in its Permitted Discretion and shall not be
less than 4.5:1."
9. LENDERS' COMMITMENT SCHEDULE. Schedule C-1 to the Loan
Agreement is hereby amended in its entirety to read as set forth in Annex I to
this Amendment.
10. CONDITIONS. This Amendment shall become effective only
upon satisfaction in full of the following conditions precedent (the first date
upon which all such conditions have been satisfied being herein called the
"AMENDMENT EFFECTIVE DATE"):
(a) REPRESENTATIONS AND WARRANTIES; NO EVENT OF DEFAULT.
The representations and warranties contained herein, in Section 5 of the Loan
Agreement and in each other Loan Document and certificate or other writing
delivered to the Agent and the Lenders pursuant hereto on or prior to the
Amendment Effective Date shall be correct in all material respects on and as of
the Amendment Effective Date as though made on and as of such date (except to
the extent that such representations and warranties expressly relate solely to
an earlier date in which case such representations and warranties shall be true
and correct on and as of such date), and no Default or Event of Default shall
have occurred and be continuing on the Amendment Effective Date or would result
from this Amendment becoming effective in accordance with its terms, unless any
such Event of Default has previously been waived in accordance with Section 15
of the Loan Agreement.
(b) DELIVERY OF DOCUMENTS. The Agent shall have received
on or before the Amendment Effective Date the following, each in form and
substance reasonably satisfactory to the Agent and, unless indicated otherwise,
dated the Amendment Effective Date:
(i) counterparts of this Amendment, duly executed by
the Borrowers and the Agent;
(ii) a revised copy of Borrowers' Projections, in form
and substance satisfactory to Agent; and
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(iii) such other agreements, instruments, approvals,
opinions and other documents as the Agent may reasonably
request.
(c) AMENDMENT FEE. The Borrowers shall have paid to the
Agent, for the benefit of the Lenders, in immediately available funds, a fully
earned and nonrefundable amendment fee equal to $900,000, the payment of which
shall be effected by Agent applying the proceeds of the Term Loan B made
pursuant to the Loan Agreement (as amended hereby).
(d) PROCEEDINGS. All proceedings in connection with the
transactions contemplated by this Amendment, and all documents incidental
thereto, shall be reasonably satisfactory to the Agent and its special counsel,
and the Agent and such special counsel shall have received all such information
and such counterpart originals or certified copies of documents, and such other
agreements, instruments, approvals, opinions and other documents, as the Agent
or such special counsel may reasonably request.
11. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers
represent and warrant as follows:
(a) Except as previously disclosed in writing to the
Agent: (i) the representations and warranties made by such Borrower herein, in
the Loan Agreement and in each other Loan Document and certificate or other
writing delivered to the Lenders on or prior to the Amendment Effective Date
shall be correct and accurate on and as of the Amendment Effective Date as
though made on and as of such date (except to the extent that such
representations and warranties expressly relate solely to an earlier date in
which case such representations and warranties shall be true and correct on and
as of such date); and (ii) subject to Section 12 hereof, no Default or Event of
Default shall have occurred and be continuing on the Amendment Effective Date or
would result from this Amendment becoming effective in accordance with its
terms.
(b) Each of the Borrowers (i) is a corporation, duly
organized, validly existing and in good standing under the laws of its state of
organization, (ii) has all requisite power and authority to execute, deliver and
perform this Amendment, and to perform the Loan Agreement, as amended hereby,
and (iii) is duly qualified to do business and is in good standing in each
jurisdiction where the failure to be so qualified and in good standing
reasonably could be expected to have a Material Adverse Change.
(c) The execution, delivery and performance by each
Borrower of this Amendment, and the performance by each such Borrower of the
Loan Agreement, as amended hereby, (i) have been duly authorized by all
necessary action, (ii) do not and will not contravene such Borrower's charter or
by-laws, any applicable law or any contractual restriction binding on or
otherwise affecting it or any of its properties, (iii) do not and will not
result in or require the creation of any lien or other encumbrance (other than
pursuant to any Loan Documents) upon or with respect to any of its properties,
and (iv) do not and will not result in any suspension, revocation, impairment,
forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to its operations or any of its properties.
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(d) No authorization or approval or other action by, and
no notice to or filing with, any Governmental Authority or agency or other
regulatory body is required in connection with the due execution, delivery and
performance by such Borrower of this Amendment, or for the performance of the
Loan Agreement, as amended hereby.
(e) This Amendment, the Loan Agreement, as amended hereby,
and each other Loan Document to which such Borrower is a party is a legal, valid
and binding obligation of such Borrower, enforceable against such Borrower in
accordance with its terms, except as such enforceability may be limited by
equitable principles or by or subject to any bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally.
12. WAIVER AND CONSENT. (a) Pursuant to the request of the
Parent, the Lenders hereby consent to and waive any Event of Default that would
arise under the Loan Agreement from any noncompliance by the Borrowers with
Section 7.20 of the Loan Agreement to the extent specifically described below:
(i) the Borrowers and their Subsidiaries having a Minimum
EBITDA of less than $3,100,000 for the 6 month period ending December 31, 2001;
PROVIDED that the actual Minimum EBITDA of the Borrowers and their Subsidiaries
for such period was not less than $13,000;
(ii) the Borrowers and their Subsidiaries having a
Tangible Net Worth of less than $11,500,000 as of December 31, 2001; PROVIDED
that the actual Tangible Net Worth of the Borrowers and their Subsidiaries as of
December 31, 2001 was not less than $878,000; and
(iii) the Borrowers and their Subsidiaries having a
Leverage Ratio of less than 5.00:1 for the 6 month period ending December 31,
2001; PROVIDED that the actual Leverage Ratio of the Borrowers and their
Subsidiaries for such period was not less than 1,266:1.
(b) The Lenders' waiver and consent provided for in this
Amendment (i) shall be effective as of December 31, 2001 upon the execution of
this Amendment by the Lenders, (ii) shall be effective only in this specific
instance and for the specific purposes set forth herein, and (iii) does not
allow for any other or further departure from the terms and conditions of the
Loan Agreement or any other Loan Document, which terms and conditions shall
continue in full force and effect.
13. CONTINUED EFFECTIVENESS OF THE LOAN AGREEMENT. (a) Except
as otherwise expressly provided herein, the Loan Agreement and the other Loan
Documents are, and shall continue to be, in full force and effect and are hereby
ratified and confirmed in all respects, except that on and after the Amendment
Effective Date (i) all references in the Loan Agreement to "this Agreement",
"hereto", "hereof", "hereunder" or words of like import referring to the Loan
Agreement shall mean the Loan Agreement as amended by this Amendment and (ii)
all references in the other Loan Documents to the "Loan Agreement", "thereto",
"thereof", "thereunder" or words of like import referring to the Loan Agreement
shall mean the Loan Agreement as amended by this Amendment.
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(b) The Borrowers hereby acknowledge and agree that this
Amendment constitutes a "Loan Document" under the Loan Agreement. Accordingly,
it shall be an Event of Default under the Loan Agreement if any representation
or warranty made by the Borrowers under or in connection with this Amendment
shall have been untrue, false or misleading in any material respect when made.
14. COSTS AND EXPENSES. The Borrowers shall pay all reasonable
out-of-pocket costs and expenses of the Lender Group (including, without
limitation, the reasonable fees and charges of counsel to any member of the
Lender Group) in connection with this Amendment.
15. MISCELLANEOUS. (a) This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement. Delivery of an executed counterpart
of this Amendment by telefacsimile shall be equally as effective as delivery of
an original executed counterpart of this Amendment. Any party delivering an
executed counterpart of this Amendment by telefacsimile also shall deliver an
original executed counterpart of this Amendment but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Amendment.
(b) Section and paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
(c) This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York except to the extent governed
by the Bankruptcy Code.
16. THE BORROWERS, LENDERS AND THE AGENT EACH HEREBY
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AMENDMENT OR THE ACTIONS OF THE LENDER GROUP IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above written.
FRONTSTEP, INC.
an Ohio corporation
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President and Chief Financial
Officer
FRONTSTEP SOLUTIONS GROUP, INC.
an Ohio corporation
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President and Chief Financial
Officer
FRONTSTEP CANADA, INC.
an Ontario corporation
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President and Chief Financial
Officer
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Agent and as a Lender
By: /s/ Xxxxx X. Smart
---------------------------------------------
Name: Xxxxx X. Smart
Title: Vice President
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ANNEX I
-------
SCHEDULE C-1
COMMITMENTS
========================= ===================== ========================= ======================== ===================
REVOLVER TERM LOAN A TERM LOAN B TOTAL
LENDER COMMITMENT SUB-FACILITY COMMITMENT* COMMITMENT COMMITMENT
------------------------- --------------------- ------------------------- ------------------------ -------------------
Foothill Capital $25,000,000 $15,000,000 $900,000 $25,900,000
Corporation
------------------------- --------------------- ------------------------- ------------------------ -------------------
------------------------- --------------------- ------------------------- ------------------------ -------------------
All Lenders $25,000,000 $15,000,000 $900,000 $25,900,000
========================= ===================== ========================= ======================== ===================
*The Term Loan A Commitment is a sub-facility of the Revolver Commitment.
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