AMENDMENT NUMBER THREE TO CREDIT AGREEMENT
Exhibit 10.50
AMENDMENT NUMBER THREE TO
CREDIT AGREEMENT
This Amendment
Number Three to Credit Agreement (“Amendment”) is
entered into as of February 18, 2009, by and among the lenders
identified on the signature pages hereof (such lenders, together with their
respective successors and permitted assigns, are referred to hereinafter each
individually as a “Lender” and
collectively as the “Lenders”), and XXXXX
FARGO FOOTHILL, INC., a California corporation, as the arranger and
administrative agent for the Lenders (in such capacity, together with its
successors and assigns in such capacity, “Agent”), on the one
hand, and TELTRONICS, INC., a Delaware corporation (“Borrower”), on the
other hand, with reference to the following facts:
A. Borrower, Agent,
and Lenders have previously entered into that certain Credit Agreement, dated as
of May 31, 2007 (as amended and modified, from time to time, the “Agreement”).
B. Borrower has
requested that (i) the Required Lenders consent to the sale of Borrower’s equity
interests (the “Sale”) in Omni
Technologies, Inc. a Florida corporation (“Omni”), formerly
known as Teltronics Direct, Inc., to Xxxx Xxxxxxxx and Xxxxx Xxxxxx, and (ii)
the Lenders (x) release Omni as a Guarantor, (y) terminate the Agent’s Liens
against the assets of Omni that secure its Guaranty (the “Omni Assets”), and
(z) release the capital stock of Omni from Agent’s Liens and deliver to Borrower
the original stock certificates issued by Omni that are in Agent’s possession
(the “Stock
Certificates”).
C. Borrower is in
non-compliance with the minimum EBITDA covenant set forth in Section 6.16(a) of
the Agreement for the months ending October 31, 2008, November 31, 2008 and
December 31, 2008 (collectively, the “Existing Events of
Non-Compliance”):
D. Borrower has
requested that Agent and Lenders waive the Existing Events of Non-Compliance and
make certain amendments to the Agreement as provided for and on the conditions
set forth herein.
NOW,
THEREFORE, for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby amend and supplement the Agreement as
follows:
1. DEFINITIONS. All initially
capitalized terms used in this Amendment shall have the meanings given to them
in the Agreement unless specifically defined herein.
2. AMENDMENTS.
(a) The
definition of “Base Rate Margin” set forth in Schedule 1.1 to the
Agreement is hereby amended by deleting such definition in its entirety and
replacing it with the following:
“Base Rate Margin”
means 3.75 percentage points.
(b) Clause
(i) of the definition of “Eligible Accounts” set forth in Schedule 1.1 to the
Agreement is hereby amended by deleting such clause in its entirety and
replacing it with the following:
(i) Accounts
with respect to an Account Debtor whose total obligations owing to Borrower
exceed (i) (1) solely during the period commencing on January 31, 2009 and
ending on June 30, 2009 (the “Modified Advance Period”), 85% of all Eligible
Accounts, with respect to Accounts owed by the New York City Board of Education
and its Affiliates (collectively, “NYBOE”), and (2) at any time other than the
Modified Advance Period, 55% of all Eligible Accounts, with respect to Accounts
owed by NYBOE, (ii) 30% of all Eligible Accounts, with respect to Accounts owed
by the New York City Department of Correction
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and its Affiliates
(collectively, “NYDOC”), (iii) 30% of all Eligible Accounts, with respect to
Accounts owed by the Federal Bureau of Prisons and its Affiliates (collectively,
“FBOP”), but in no event shall the aggregate amount of all Eligible Accounts
owed by NYBOE, NYDOC or FBOP (x) solely during the Modified Advance Period,
exceed 90% of all Eligible Accounts, and (y) at any time other than the Modified
Advance Period, exceed 75% of all Eligible Accounts, (iv) 20% of all Eligible
Accounts, with respect to Accounts owed by Xxxxxxx Media Research, and (v) 10%
of all Eligible Accounts in all other cases (such percentage, as applied to a
particular Account Debtor, being subject to reduction by Agent in its Permitted
Discretion if the creditworthiness of such Account Debtor deteriorates), in each
such case to the extent of the obligations owing by such Account Debtor in
excess of such percentages; provided, however, that, in
each case, the amount of Eligible Accounts that are excluded because they exceed
the foregoing percentages shall be determined by Agent based on all of the
otherwise Eligible Accounts prior to giving effect to any eliminations based
upon the foregoing concentration limit,
(c) The
definition of Fixed Charges set forth in Schedule 1.1 to the
Agreement is hereby amended by deleting such definition in its entirety and
replacing it with the following:
“Fixed Charges” means,
with respect to any fiscal period and with respect to Borrower determined on a
consolidated basis in accordance with GAAP, the sum, without duplication, of (a)
cash Interest Expense paid during such period, (b) cash principal payments in
respect of Indebtedness that are paid during such period, (c) all dividends and
distributions paid in cash during such period, (d) all federal, state, and local
income taxes paid in cash during such period, and (e) cash payments in respect
of Capital Leases that are paid during such period.
(d) Schedule 1.1 to the
Agreement is hereby amended by adding the following new definition thereto in
alphabetical order:
“Total
Sales” mean, with respect to any period of measurement, Borrower’s
consolidated total revenues, determined in accordance with GAAP, during such
period
(e) The
reference to Schedule
5.3 in clause (i) of Section
2.4(c) of the Agreement is hereby deleted in its entirety and
replaced with a reference to Schedule
5.2.
(f) Section 5.20 of the
Agreement is hereby amended by deleting such Section in its entirety and
replacing it with the following:
5.20 Cash Flow
Forecast. No later than the Thursday of each week, provide
Agent with a detailed forecast of Borrower’s cash flow for the then current week
and the immediately succeeding 12 weeks (a “Cash Flow
Forecast”). Each Cash Flow Forecast shall be reviewed by a
third-party as determined by Agent in its sole discretion.
(g) Section 6.16 of the
Agreement is hereby amended by deleting such Section in its entirety and
replacing it with the following:
(a) Minimum
EBITDA. Fail to achieve EBITDA, measured on a month-end basis,
of at least the required amount set forth in the following table for the
applicable period set forth opposite thereto:
Required Amount
|
Applicable
Period
|
2
($48,750)
|
For the 1
month period ending 1/31/09
|
$19,800
|
For the 2
month period ending 2/28/09
|
$325,000
|
For the 3
month period ending 3/31/09
|
$455,000
|
For the 4
month period ending 4/30/09
|
$645,000
|
For the 5
month period ending 5/31/09
|
$825,000
|
For the 6
month period ending 6/30/09
|
$1,025,000
|
For the 7
month period ending 7/31/09
|
$1,275,000
|
For the 8
month period ending 8/31/09
|
$1,510,000
|
For the 9
month period ending 9/30/09
|
$1,500,000
|
For the 10
month period ending 10/31/09
|
$1,615,000
|
For the 11
month period ending 11/30/09
|
$1,730,000
|
For the 12
month period ending
12/31/09
|
Minimum EBITDA
levels for each month in any fiscal year commencing with fiscal year 2010 shall
be determined by Agent, based upon the latest Projections for such fiscal year
delivered to Agent in accordance with Section 5.3. Such
financial projections must credibly reflect expected performance by Borrower in
each month of such fiscal year and shall otherwise be satisfactory to Agent in
its reasonable credit judgment.
(b) Minimum Fixed Charge Coverage
Ratio. Have a Fixed Charge Coverage Ratio, measured on a
month-end basis, commencing on April 30, 2009, of less than the required ratio
set forth in the following table for the applicable period set forth opposite
thereto:
Applicable Ratio
|
Month Ending
|
0.57:1.0
|
For the 4
month period ending 4/30/09
|
0.62:1.0
|
For the 5
month period ending 5/31/09
|
0.68:1.0
|
For the 6
month period ending 6/30/09
|
0.74:1.0
|
For the 7
month period ending 7/31/09
|
0.78:1.0
|
For the 8
month period ending 8/31/09
|
0.84:1.0
|
For the 9
month period ending 9/30/09
|
0.75:1.0
|
For the 10
month period ending
10/31/09
|
3
0.72:1.0
|
For the 11
month period ending 11/30/09
|
0.72:1.0
|
For the 12
month period ending
12/31/09
|
Minimum Fixed
Charge Coverage Ratios for each month in any fiscal year commencing with fiscal
year 2010 shall be determined by Agent, based upon the latest Projections for
such fiscal year delivered to Agent in accordance with Section 5.3. Such
financial projections must credibly reflect expected performance by Borrower in
each month of such fiscal year and shall otherwise be satisfactory to Agent in
its reasonable credit judgment.
(c) Capital
Expenditures. Make Capital Expenditures in any fiscal year in
excess of the amount set forth in the following table for the applicable
period:
Fiscal Year 2008
|
Fiscal Year 2009
|
Fiscal Year 2010
|
Fiscal Year 2011
|
$250,000
|
$250,000
|
$250,000
|
$250,000
|
(d) Minimum TTM Recurring
Revenue. Fail to achieve TTM Recurring Revenue, excluding
revenue generated from Teltronics UK, measured on a month-end basis, of at least
the required amount set forth in the following table for the applicable period
set forth opposite thereto:
Required Amount
|
Applicable Period
|
$8,950,000
|
For the 12
month period ending 1/31/09
|
$8,990,000
|
For the 12
month period ending 2/28/09
|
$8,865,000
|
For the 12
month period ending 3/31/09
|
$8,765,000
|
For the 12
month period ending 4/30/09
|
$8,665,000
|
For the 12
month period ending 5/31/09
|
$8,690,000
|
For the 12
month period ending 6/30/09
|
$8,680,000
|
For the 12
month period ending 7/31/09
|
$8,670,000
|
For the 12
month period ending 8/31/09
|
$8,660,000
|
For the 12
month period ending 9/30/09
|
$8,650,000
|
For the 12
month period ending 10/31/09
|
$8,640,000
|
For the 12
month period ending 11/30/09
|
$8,630,000
|
For the 12
month period ending
12/31/09
|
4
TTM Recurring
Revenue levels for each month in any fiscal year commencing with fiscal year
2010 shall be determined by Agent, based upon the latest Projections for such
fiscal year delivered to Agent in accordance with Section 5.3. Such
financial projections must credibly reflect expected performance by Borrower in
each month of such fiscal year and shall otherwise be satisfactory to Agent in
its reasonable credit judgment.
(e) Minimum Total
Sales. Fail to achieve Total Sales, measured on a quarter-end
basis, of at least the required amount set forth in the following table for the
applicable period set forth opposite thereto:
Required Amount
|
Month Ending
|
$7,200,000
|
For the 3
month period ending 3/31/09
|
$14,800,000
|
For the 6
month period ending 6/30/09
|
$23,250,000
|
For the 9
month period ending 9/30/09
|
$29,750,000
|
For the 12
month period ending
12/31/09
|
Minimum Total Sales
for each quarter in any fiscal year commencing with fiscal year 2010 shall be
determined by Agent, based upon the latest Projections for such fiscal year
delivered to Agent in accordance with Section 5.3. Such
financial projections must credibly reflect expected performance by Borrower in
each quarter of such fiscal year and shall otherwise be satisfactory to Agent in
its reasonable credit judgment.
(h) Schedule 5.2 to the
Agreement is hereby amended by deleting such schedule in its entirety and
replacing it with Schedule 5.2 attached
hereto.
3. CONSENT
TO SALE AND RELEASE.
(a) Pursuant to the
terms of the Agreement, without the consent of the Required Lenders, the Sale is
in violation of the negative covenant set forth in Section
6.4. Borrower has therefore requested that the Required Lenders
consent to the Sale. Subject to the satisfaction of each of the
conditions precedent to the effectiveness of this Amendment, the Required
Lenders hereby consent to the Sale and agree that the Sale shall not cause an
Event of Default.
(b) In accordance with
the terms of the Loan Documents, Omni pledged all of its assets to secure its
Guaranty and Borrower pledged the capital stock of Omni to secure the
Obligations. In connection with Sale, Borrower hereby requests that
the Lenders (i) release Omni as a Guarantor, (ii) terminate the Agent’s Liens
against the Omni Assets, and (iii) release the capital stock of Omni from the
Agent’s Liens and deliver the Stock Certificates to Borrower. Subject
to the satisfaction of each of the conditions precedent to the effectiveness of
this Amendment, (x) the Lenders hereby release Omni from its guaranty of the
Obligations and Omni’s Guaranty is hereby terminated, (y) the Agent’s Liens in
the Omni Assets are hereby released, and (z) Agent shall deliver the Stock
Certificates to Borrower.
(c) The consent and
releases set forth above are limited precisely as written and shall not be
deemed to be (i) an amendment, waiver, consent, release or modification of any
other term or condition of the Agreement or any other Loan Document, or (ii)
prejudice any right or remedy which Agent or Lenders may now or in the future
have at law or in connection with the Agreement or any other Loan
Document.
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4. WAIVER OF
EXISTING EVENTS OF NON-COMPLIANCE. Upon the terms and subject
to the conditions set forth in this Amendment, Agent and Lenders hereby waive
the Existing Events of Non-Compliance as of the dates set forth in Recital C
above. This waiver shall be effective only in this specific instance
and for the specific purpose for which it is given, and shall not entitle
Borrower to any other or further waiver in any similar or other
circumstances.
5. REPRESENTATIONS
AND WARRANTIES. Borrower hereby
affirms to Agent and Lenders that all of Borrower’s representations and
warranties set forth in the Agreement are true, complete and accurate in all
respects as of the date hereof.
6. NO
DEFAULTS. Other than the
Existing Events of Non-Compliance, Borrower hereby affirms to Agent and Lenders
that no Event of Default has occurred and is continuing as of the date
hereof.
7. CONDITIONS.
(a) Conditions
Precedent. The effectiveness of this Amendment is hereby
conditioned upon receipt by Agent of (i) a fully executed copy of this Amendment
from each party hereto, and (ii) a fully executed copy of the Amended and
Restated Fee Letter, each in form and substance satisfactory to
Agent.
(b) Condition
Subsequent. The effectiveness of this Amendment is also
conditioned upon Agent’s receipt of a fully executed copy of the Release and
Termination Agreement by Omni, in form and substance acceptable to Agent, on or
before February 27, 2009. The failure by Borrower to satisfy the
foregoing condition within the prescribed time period (except as may be extended
or waived by Agent in its sole discretion) shall constitute an Event of
Default.
8. REAFFIRMATION. Borrower hereby
acknowledges and reaffirms (i) all of its obligations and duties under the Loan
Documents, and (ii) that the Agent, for the ratable benefit of the Lender Group,
has and shall continue to have valid, perfected Liens in the Collateral as
provided in Section
5.2(d) of the Security Agreement.
9. COSTS AND
EXPENSES. Borrower shall
pay to Agent and Lenders all of Agent’s and Lenders’ out-of-pocket costs and
expenses (including, without limitation, the fees and expenses of its counsel,
which counsel may include any local counsel deemed necessary, search fees,
filing and recording fees, documentation fees, appraisal fees, travel expenses,
and other fees) arising in connection with the preparation, execution, and
delivery of this Amendment and all related documents.
10. LIMITED
EFFECT. In the event of a
conflict between the terms and provisions of this Amendment and the terms and
provisions of the Agreement, the terms and provisions of this Amendment shall
govern. In all other respects, the Agreement, as amended and
supplemented hereby, shall remain in full force and effect.
11. GENERAL
RELEASE. IN CONSIDERATION OF AGENT AND LENDERS AGREEING TO
ENTER INTO THIS AMENDMENT AND FOR OTHER GOOD AND VALUABLE CONSIDERATION,
BORROWER HEREBY RELEASES AND DISCHARGES AGENT AND LENDERS, THEIR AGENTS,
REPRESENTATIVES, OFFICERS, DIRECTORS, AND ASSIGNS, FROM ANY AND ALL CLAIMS,
LIABILITIES, RIGHTS AND OBLIGATIONS, OF ANY NATURE WHATSOEVER, WHETHER SOUNDING
IN TORT OR CONTRACT, ARISING PRIOR TO THE DATE HEREOF RELATING TO THE
OBLIGATIONS, THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS
RELEASE SHALL BE EFFECTIVE NOTWITHSTANDING, AND BORROWER HEREBY WAIVES ANY AND
ALL RIGHTS ARISING UNDER OR WITH RESPECT TO, CALIFORNIA CIVIL CODE SECTION 1542
(OR ANY NEW YORK LAW EQUIVALENT) WHICH PROVIDES:
6
“A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT
TO
EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE
MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”
12. COUNTERPARTS;
EFFECTIVENESS.
This Amendment may be executed in any number of counterparts and by
different parties on separate counterparts, each of which when so executed and
delivered shall be deemed to be an original. All such counterparts,
taken together, shall constitute but one and the same Amendment. This
Amendment shall become effective upon the execution of a counterpart of this
Amendment by each of the parties hereto. This Amendment is a Loan
Document and is subject to all the terms and conditions, and entitled to all the
protections, applicable to Loan Documents generally.
[remainder of page left blank
intentionally; signatures to follow]
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IN WITNESS WHEREOF,
the parties hereto have executed this Amendment as of the date first set forth
above.
TELTRONICS,
INC.,
a Delaware
corporation
|
||
By:
|
/s/ Xxxx X.
Xxxxxxx
|
|
Name:
|
Xxxx X.
Xxxxxxx
|
|
Title:
|
President
& CEO
|
|
XXXXX FARGO
FOOTHILL, INC.,
a California
corporation,
as Agent,
Lender and Required Lender
|
||
By:
|
/s/ Xxxxxxx
Xxxxx
|
|
Name
|
Xxxxxxx
Xxxxx
|
|
Title:
|
Vice
President
|
S-1
Amendment Number
Three