Contract
Exhibit
10.2
WAIVER
and FIRST AMENDMENT, dated as of June 21, 2007
(this “Waiver”), executed in connection with the LOAN AND
SECURITY AGREEMENT, dated as of June 8, 2005 (as
the same has heretofore been amended and may hereafter be amended, restated,
modified or supplemented from time to time, the “Loan and Security
Agreement”), among MTM TECHNOLOGIES, INC., a New York
corporation (“Parent”), each of its subsidiaries that is a party thereto
(each of Parent and each such subsidiary, a “Company” and collectively
the “Companies”), and any other entity that becomes a party thereto as a
borrower and TEXTRON FINANCIAL CORPORATION, a Delaware
corporation (“TFC”). Terms which are capitalized in this
Waiver and not otherwise defined shall have the meanings ascribed to such
terms
in the Loan and Security Agreement.
WHEREAS,
the Companies have requested that TFC (i) waive as Events of Default the
violation by the Companies of the Consolidated Fixed Charge Coverage Ratio
requirements of Section 1(b) of the Addendum to the Loan and Security Agreement
and the Consolidated Senior Leverage ratio requirements of Section 1(a) of
the
Addendum to the Loan and Security Agreement for the period of four consecutive
fiscal quarters ending on or about Xxxxx 00, 0000, (xx) waive the breach
by the
Companies of any representations and warranties set forth in the Loan and
Security Agreement or any other loan documents related thereto to which they
are
a party solely as a result of the foregoing, and (iii) agree to modify certain
terms of the Loan and Security Agreement, and TFC has agreed to the foregoing
requests, on the terms and subject to satisfaction of the conditions contained
in this Waiver;
NOW,
THEREFORE, in consideration of the mutual promises 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
One. Amendment. Effective
as of the date hereof, upon the satisfaction of the conditions precedent
set
forth in Section Four hereof, the Loan and Security Agreement is hereby amended
as follows:
(a) Section
4. Defined
Terms. Section 4 of the Loan and Security Agreement is
amended by adding thereto the terms “Consulting Charges,” “Consolidated
Liquidity” and “Business Day” and the respective definitions thereof, and by
deleting therefrom the definitions of the terms “Consolidated EBITDA” in
subclause (m) thereof, “Consolidated Fixed Charges” in subclause (n) thereof and
“Consolidated Senior Leverage” in subclause (p) thereof, and substituting the
following in lieu thereof:
(m)
“Consolidated EBITDA shall mean, for any period, with respect to
the Parent and its consolidated Subsidiaries, other than the Excluded
Subsidiaries, all earnings before all interest, tax obligations and depreciation
and amortization expense for such period, all determined in conformity with
GAAP
on a basis consistent with the latest audited financial statements of the
Parent, but excluding the
effect
of
extraordinary and/or nonrecurring gains or losses for such period and, to
the
extent included in the calculation of earnings for such period, excluding
any
Consulting Charges paid during such period.”
(n)
“Consolidated Fixed Charges shall mean, for any period,
with respect to the Parent and its consolidated Subsidiaries, other than
the
Excluded Subsidiaries, the sum of (i) all cash interest obligations
(including, without limitation, cash interest obligations in respect of any
Investor Obligations, loans under the CIT Financing Agreement and/or
Subordinated Debt) paid or due during such period, (ii) the amount of all
scheduled fees paid to CIT and the lenders under the CIT Financing Agreement
during such period, (iii) the amount of principal repaid in cash or
scheduled to be repaid but not paid on Indebtedness (other than the loans
under
the CIT Financing Agreement and any loans made hereunder) during such period
(including, without limitation, principal repayments in respect of any Investor
Obligations and/or Subordinated Debt, but not including principal repayments
in
respect of any Indebtedness that is, by its terms, payable only in stock)
provided, that, cash payments made in respect of Indebtedness incurred in
connection with any Permitted Acquisition (as such term is defined in the
CIT
Financing Agreement) will be excluded from Consolidated Fixed Charges to
the
extent that they were made with the proceeds of capital contributions (either
in
the form of equity or Subordinated Debt) and not with the proceeds of “Revolving
Loans” under, and as defined in, the CIT Financing Agreement or other working
capital, (iv) unfinanced Capital Expenditures incurred during such period,
(v) all cash payments made or due in respect of any earnout or similar
contingent obligations during such period, provided, that, such cash payments
will be excluded from Consolidated Fixed Charges to the extent that they
were
made with the proceeds of capital contributions (either in the form of equity
or
Subordinated Debt) and not with the proceeds of loans under the CIT Financing
Agreement or other working capital, (vi) all payments made or due in
respect of Capital Leases during such period, and (vii) all cash charges
incurred during such period relating to severance, restructuring and other
similar kinds of expenses. For avoidance of doubt, the calculation of
Consolidated Fixed Charges for any period of determination shall not include
any
Consulting Charges due or payable during such period.”
(p) Intentionally
Omitted.
(sss)
“Consulting Charges” shall mean,
for any period, the fees and disbursements due or payable in cash during
such
period by the Parent to Xxxx Xxxxx Associates for the consulting services
provided to the Companies by such consultant.”
2
(ttt)
“Consolidated Liquidity” shall mean, as of any date of determination, the
sum of (i) all cash and cash equivalents on the Consolidated Balance Sheet,
calculated after giving effect to all checks, drafts and other negotiable
instruments issued by and drawn on a bank account of any Company, which checks,
drafts and other negotiable instruments have not been presented for payment
as
of the opening of business on such date of determination, but not including
cash
reserved for accrued payroll obligations, plus (ii) the amount of Net
Availability (as such term is defined in the CIT Financing
Agreement).
(uuu)
“Business Day” shall mean any day on which you and JPMorgan
Chase Bank, N.A. are open for business.
(b)
Section 3(b).
Financial
Reporting. Section
3(b) of the Addendum to the Loan and Security Agreement is amended
by adding new clauses (v), (vi) and (vii) thereto, as
follows:
“(v)
on
each Business Day, a financial report, in form and substance reasonably
satisfactory to you, which report shall indicate the amount of Consolidated
Liquidity as of the close of business on the preceding Business Day, together
with a calculation thereof, in reasonable detail.”
“(vi)
on
Friday of each week (or on the following Business Day, if such Friday is
not a
Business Day), a rolling 13 week cash forecast and report, in form and substance
reasonably satisfactory to you, which report shall be updated each week,
through
the close of business on the Business Day preceding the date on which such
report is so delivered to you, and which report shall include an analysis,
in
reasonable scope and detail, of the preceding week’s variations to
budget.”
“(vii) deliver
to you a copy of each periodic report prepared for the Companies by Xxxx
Xxxxx
Associates, no later than the Business Day following the Parent’s receipt of
each such report, which report shall include, without limitation, (I) initially,
an analysis of the methodology employed by the Companies in the development
of
their rolling 13 week cash forecast and a discussion of the recommendations
made
by Xxxx Xxxxx Associates for the improvement of such methodology and
forecasting, and (II) on an ongoing bi-weekly basis (that is, every other
week),
an analysis of the actual performance and results of the Companies for each
month and each rolling 13 week period, a summary of the variations, if any,
between such results and the EBITDA and cash budgets forecasted for such
month
and period, and the reasons for such variations.”
3
(c) Section
1. Financial
Covenants. Section 1 of the Addendum to the Loan and
Security Agreement is amended as follows:
(i) Section
1(a) of the Addendum to the Loan and Security Agreement is hereby amended
and
restated in its entirety as follows:
a)
Consolidated Liquidity. To cause the Parent to have
Consolidated Liquidity at all times of not less than
$3,000,000.
(ii) Section
1(b) of the Addendum to the Loan and Security Agreement is hereby amended
and
restated in its entirety as follows:
b) Consolidated
Fixed Charge Coverage Ratio. To cause the Parent to maintain a
Consolidated Fixed Charge Coverage Ratio for each measuring period set forth
below of not less than the ratio set forth below opposite such measuring
period:
|
measuring
period
|
minimum
Consolidated Fixed Charge Coverage Ratio
|
|
|
(i)
|
fiscal
quarter ending on or about June 30, 2007
|
.17
to 1.00
|
|
(ii)
|
two
fiscal quarters ending on or about September 30, 2007
|
.34
to 1.00
|
|
(iii)
|
three
fiscal quarters ending on or about December 31, 2007
|
.57
to 1.00
|
|
(iv)
|
four
fiscal quarters ending on or about March 31, 2008
|
.68
to 1.00
|
(iii) Section
1(c) of the Addendum to the Loan and Security Agreement is hereby amended
and
restated in its entirety as follows:
c) Consolidated
EBITDA. To cause the Parent to have Consolidated EBITDA for each
measuring period set forth below of not less than the amount set forth below
opposite such measuring period:
4
|
measuring
period
|
minimum
Consolidated EBITDA
|
|
|
(i)
|
Fiscal
quarter ending on or about June 30, 2007
|
$ 424,000
|
|
(ii)
|
two
fiscal quarters ending on or about September 30, 2007
|
1,358,000
|
|
(iii)
|
Three
fiscal quarters ending on or about December 31, 2007
|
3,227,000
|
|
(iv)
|
four
fiscal quarters ending on or about March 31, 2008
|
5,096,000
|
(iv) A
new Section d) is hereby added to the Addendum to the Loan and Security
Agreement are set forth below:
d)
Consolidated Fixed Charges. To cause Parent to incur
Consolidated Fixed Charges for each fiscal quarter set forth below in an
aggregate amount not greater than the amount set forth below opposite such
fiscal quarter:
|
Fiscal
quarter ending on or about
|
maximum
Consolidated Fixed Charges
|
|
|
(i)
|
June
30, 2007
|
$2,455,000
|
|
(ii)
|
September
30, 2007
|
1,539,000
|
|
(iii)
|
December
31, 2007
|
1,682,000
|
|
(iv)
|
March
31, 2008
|
1,808,000
|
Section
Two. Waivers. The
Companies have advised TFC that Parent has (i) failed to maintain a Consolidated
Senior Leverage ratio for the period of four consecutive fiscal quarters
ended
on or about March 31, 2007 of not greater than 4.00 to 1.00, in violation
of
Section 1(a) of the Addendum to the Loan and Security Agreement, and (ii)
failed
to maintain a Consolidated Fixed Charge Coverage Ratio for the period of
four
consecutive fiscal quarters ended on or about March 31, 2007 of not less
than
1.00 to 1.00, in violation of Section 1(b) of the Addendum to the Loan and
Security Agreement. Each such violation constitutes an Event of
Default under Section 14(e) of the Loan and Security Agreement (such Events
of
Default, collectively, the “Financial Covenant
Defaults”). Effective as of the date hereof, upon the
satisfaction of the conditions precedent set forth in Section Four hereof,
TFC
hereby waives the Financial Covenant Defaults, the Event of Default under
Section 14(i) of the Loan and Security Agreement related to said Financial
Covenant Defaults and any breach by the Companies of any representations
and
warranties set forth in the Loan and Security Agreement or any other loan
documents related thereto to which they are a party solely as a result of
the
foregoing (each such breach, together with the Financial Covenant Defaults,
the
“Designated Defaults”) as Events of Default. Nothing contained
herein shall constitute a waiver by TFC of any Events of Default other than
the
5
Designated
Defaults, whether or not they have any knowledge thereof, nor shall anything
contained herein constitute a waiver of any future Event of Default
whatsoever. Parent and the Companies acknowledge that TFC shall not
accept anything other than full compliance by the Companies with all of the
terms and provisions contained in the Loan and Security Agreement.
Section
Three. Representations
and Warranties. To induce TFC to enter
into this Waiver, each Company hereby warrants and represents to TFC as
follows:
(a) all
of
the representations and warranties contained in the Loan and Security Agreement
and each other loan document related thereto to which such Company is a party
continue to be true and correct in all material respects as of the date hereof,
as if repeated as of the date hereof, except (i) with respect to the absence
of
the occurrence and continuation of any Event of Default, as to which TFC
acknowledges the occurrence of the Designated Defaults, and (ii) to the extent
of changes resulting from transactions expressly permitted by the Loan and
Security Agreement, this Waiver or any of the other related loan documents,
or
to the extent that such representations and warranties are expressly made
only
as of an earlier date;
(b) the
execution, delivery and performance of this Waiver by such Company are within
its corporate powers and have been duly authorized by all necessary corporate
action, and such Company has received all necessary consents and approvals,
if
any are required, for the execution and delivery of this Waiver;
(c) upon
the
execution of this Waiver, this Waiver shall constitute the legal, valid and
binding obligation of such Company, enforceable against such Company in
accordance with its terms, except as such enforceability may be limited by
(i)
bankruptcy, insolvency or similar laws affecting creditors’ rights generally and
(ii) general principles of equity;
(d) neither
the execution and delivery of this Waiver, nor the consummation of the
transactions herein contemplated, nor compliance with the provisions hereof
will
(i) violate any law or regulation applicable to any Company, (ii) cause a
violation by any Company of any order or decree of any court or government
instrumentality applicable to it, (iii) conflict with, or result in the breach
of, or constitute a default under, any indenture, mortgage, deed of trust,
or
other material agreement or material instrument to which any Company is a
party
or by which it may be bound, (iv) result in the creation or imposition of
any
lien, charge, or encumbrance upon any of the property of any Company, except
in
favor of TFC to secure the Obligations, (v) violate any provision of the
Certificate of Incorporation, By-Laws or any capital stock provisions of
any
Company, or (vi) be reasonably likely to have a Material Adverse Effect;
and
(e) the
Parent received by wire transfer of funds to its bank account on May 24,
2007
proceeds of the cash equity infusion described in Section Four (d) below
in the
aggregate amount of $4,999,000.28, which proceeds were used by the Parent
in
payment of the obligations in the respective approximate amounts and owing
to
the respective obligees set forth on Annex I to this Waiver.
Section
Four. Conditions
Precedent. This Waiver shall become
effective upon the satisfaction of the following conditions
precedent:
6
(a) TFC
shall
have received an original of this Waiver, duly executed by all of the
Comapnies;
(b) TFC
shall
have received and reviewed to its satisfaction a copy of the fully executed
waiver of CIT of all events of default existing under the CIT Financing
Agreement;
(c) TFC
shall
have received and reviewed to its satisfaction a copy of the fully executed
waiver of Columbia Partners, L.L.C. Investment Management and National
Electrical Benefit Fund (collectively, the “Columbia Lenders”) of all
events of default existing under that certain Credit Agreement dated as of
November 23, 2005, by and among the Columbia Lenders, on the one hand, and
Parent, together with each of its subsidiaries that is a party thereto, on
the
other hand;
(d) the
Parent shall have received the proceeds of a cash equity infusion in the
aggregate amount of not less than $4,999,000.28 from Constellation Venture
Capital II, L.P. and/or Pequot Private Equity Fund III, L.P. (or from affiliated
funds of either such entity), and, in conjunction therewith, TFC and its
counsel
shall have received and reviewed to their reasonable satisfaction all documents,
instruments and agreements executed or delivered in connection with such
equity
infusion;
(e) TFC
shall
have received and reviewed and be satisfied with a draft version of the audited
financial statements of the Parent and its consolidated subsidiaries for
the
fiscal year ended on or about March 31, 2007, together with all accompanying
footnotes, prepared without qualification by the Parent’s independent public
accountants; after giving effect to this Waiver and the waivers referred
to in
4(b) and (c) above, the certified public accountants auditing the aforesaid
financial statements shall have confirmed to TFC, in writing, that their
opinion
thereon will not be qualified;
(f) the
Parent shall have engaged Xxxx Xxxxx Associates (or shall have continued
the
existing engagement of Xxxx Xxxxx Associates) for the sole purpose of assisting
the Parent and the other Companies by providing the analysis described in
Section 3(b) of the Addendum to the Loan and Security Agreement, and TFC
shall
have received and reviewed to its satisfaction a copy of the agreement pursuant
to which such engagement (or the continuation of such existing engagement,
as
the case may be) shall have been accepted, and Xxxx Xxxxx Associates shall
have
commenced its work pursuant to such engagement no later than June 29,
2007;
(g) TFC
shall
have received a non-refundable fee in the amount of $22,500 (the “Fee”),
which shall be fully earned on the date hereof;
(h) except
for the Designated Defaults, no Default or Event of Default, and no event
or
development which has had or is reasonably likely to have a Material Adverse
Effect, shall have occurred or be continuing on the date hereof;
and
(i) TFC
shall
have received and reviewed and be satisfied with a field audit report (done
by
auditors engaged by CIT) dated May 25, 2007 for the period referred to in
said
report ending on April 30, 2007 with respect to the Inventory and Accounts
of
the Companies.
7
Section
Five. General
Provisions.
(a) Except
as
herein expressly amended, the Loan and Security Agreement and all other
agreements, documents, instruments and certificates executed in connection
therewith, are ratified and confirmed in all respects and shall remain in
full
force and effect in accordance with their respective terms.
(b) This
Waiver embodies the entire agreement between the parties hereto with respect
to
the subject matter hereof and supercedes all prior agreements, commitments,
arrangements, negotiations or understandings, whether written or oral, of
the
parties with respect thereto.
(c) This
Waiver, and matters relating hereto and arising herefore, shall be governed
by
and construed in accordance with the internal laws of the State of Rhode
Island,
without regard to the conflicts of law principals thereof.
(d) This
Waiver may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original, and such counterparts together
shall
constitute one and the same respective agreement.
(Signature
Page Follows)
8
IN
WITNESS WHEREOF, the parties to this Waiver have
signed below to indicate their agreement with the foregoing and their intent
to
be bound thereby.
| TEXTRON FINANCIAL CORPORATION | ||
|
By:
|
||
|
Name:
Title:
|
||
|
for
itself and as Borrowing Agent, and as successor by merger with
each of MTM
Technologies (California), Inc., and MTM Technologies (Texas),
Inc.
|
||
|
By:
|
||
|
Name:
Title: Senior
Vice President and Chief
Financial Officer
|
||
| MTM TECHNOLOGIES (US), INC. | ||
|
By:
|
||
| Name: | ||
| Title: Senior Vice President and Chief Financial Officer | ||
| INFO SYSTEMS, INC. | ||
|
By:
|
||
| Name: | ||
| Title: Senior Vice President and Chief Financial Officer | ||
| MTM TECHNOLOGIES (MASSACHUSETTS), LLC | ||
|
By:
|
||
| Name: | ||
| Title: Senior Vice President and Chief Financial Officer | ||
ANNEX
I
Schedule
of Payments Made From Proceeds of $5,000,000 Equity Infusion
|
Amount
|
Payee
|
|
$2.2
million
|
Textron
Financial Corporation
|
|
$600,000
|
Westcon
|
|
$500,000
|
Capatris
|
|
$500,000
|
EMC
|
|
$500,000
|
Cisco
|
|
$200,000
|
Arrow
|
|
$4.5
million
|
TOTAL
|
