AMENDMENT NO. 6 AND WAIVER TO
LOAN AND SECURITY AGREEMENT
AMENDMENT NO. 6 AND WAIVER, dated as of August 11, 2000, to the LOAN AND
SECURITY AGREEMENT, dated as of September 30, 1998 (as amended by AMENDMENT NO.
1 dated as of September, 1999 and AMENDMENT NO. 2 AND WAIVER, dated as of
September, 1999, AMENDMENT NO. 3, dated as of December 13, 1999, AMENDMENT NO.
4, dated as of January 12, 2000, and AMENDMENT NO. 5 dated as of March 24, 2000,
as hereafter modified, amended and/or restated from time to time, the "Loan and
Security Agreement"), among FOOTHILL CAPITAL CORPORATION, a California
corporation ("Foothill"), DATA SYSTEMS NETWORK CORPORATION, a Michigan
corporation ("Old Borrower"), and TEKINSIGHT SERVICES INC., a Delaware
corporation ("New Borrower").
Preamble
Pursuant to the Loan and Security Agreement, Foothill established a
revolving line of credit for the benefit of Old Borrower. Old Borrower has
entered into an Agreement and Plan of Merger dated as of February 18, 2000, as
amended by the First Amendment to the Agreement and Plan of Merger dated as of
April 4, 2000 and the Second Amendment to the Agreement and Plan of Merger dated
as of June 28, 2000 (as so amended, the "Merger Agreement"), by and among
XxxXxxxxxx.Xxx, a Delaware corporation ("Tek"), New Borrower and Old Borrower.
Under the Merger Agreement, Old Borrower has agreed to merge with and into New
Borrower, with New Borrower to continue as the surviving corporation. Old
Borrower and New Borrower have requested that Foothill consent to, and waive any
Event of Default that would otherwise arise under, the Loan and Security
Agreement solely by virtue of the consummation of the Merger. Foothill is
willing to consent to the Merger, subject to the terms and conditions set forth
herein. Accordingly, Old Borrower, New Borrower and Foothill hereby agree as
follows:
1. Definitions. All terms used herein which are defined in the Loan
and Security Agreement and not otherwise defined herein are used
herein as defined therein.
2. Changes to Definitions.
(a) Section 1.1 of the Loan and Security Agreement is hereby amended
by adding the following definitions, in appropriate alphabetical order:
"Amendment No. 6 and Waiver" means Amendment No. 6 and Waiver to Loan
and Security Agreement dated as of August 11, 2000 among Foothill, Old Borrower
and New Borrower.
"Borrower" means, prior to the Merger, Old Borrower, and after
the Merger, New Borrower.
"Guaranty" means the Guaranty, in form and substance satisfactory to
Foothill, pursuant to which the Parent guarantees the payment of the
Obligations.
"Loan Parties" means Borrower and Parent.
"Merger" means the merger of Old Borrower with and into New Borrower,
with New Borrower being the surviving entity.
"New Borrower" means TekInsight Services Inc., a Delaware corporation
and a wholly-owned Subsidiary of the Parent.
"Old Borrower" means, prior to the Merger, Data Systems Network
Corporation, a Michigan corporation.
"Parent" means XxxXxxxxxx.Xxx, Inc., a Delaware corporation and after
the consummation of the Merger, the owner of all of the issued and outstanding
shares of capital stock of New Borrower.
(b) Section 1.1 of the Loan and Security Agreement is hereby amended
by deleting the definition of "Loan Documents" and "Material Adverse Change" and
by substituting therefor the following:
"Loan Documents" means this Agreement, the Disbursement Letter, the
Letters of Credit, the Lockbox Agreements, the Trademark Security
Agreement, the Copyright Security Agreement, the Parent Guaranty, the
Pledge Agreement, the Warrant, the Registration Rights Agreement, the
Intercreditor Agreement, any note or notes executed by Borrower and payable
to Foothill, and any other agreement entered into, now or in the future, in
connection with this Agreement.
"Material Adverse Change" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities
or condition (financial or otherwise) of either Loan Party, (b) the
material impairment of either Loan Party's ability to perform its
obligations under the Loan Documents to which it is a party or of Foothill
to enforce the Obligations or realize upon the Collateral, (c) a material
adverse effect on the value of the Collateral or the amount that Foothill
would be likely to receive (after giving consideration to delays in payment
and costs of enforcement) in the liquidation of such Collateral, or (d) a
material impairment of the priority of Foothill's Liens with respect to the
Collateral.
3. Affirmative Covenant. Section 6 of the Loan and Security Agreement
is hereby amended by adding a new Section 6.22, to read in its entirety as
follows:
6.22 Merger of Old Borrower into New Borrower. Furnish to Foothill,
in each case in form and substance satisfactory to Foothill, the following:
(a) not more than three Business Days after the Merger, (i) a
change of name certificate, if any, filed with the Delaware Secretary of
State, indicating that
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the name of the New Borrower has been changed to "Data Systems Network
Corporation", (ii) a copy of the resolutions adopted by the Board of
Directors of New Borrower, certified by an authorized officer thereof,
authorizing the execution, delivery and performance by New Borrower of
Amendment No. 6 and Waiver, and the execution and delivery of the other
documents to be delivered by it in connection herewith, (iii) a certificate
of an authorized officer of New Borrower, certifying the names and true
signatures of the officers of New Borrower authorized to sign Amendment No.
6 and Waiver, and the other documents which New Borrower is executing and
delivering in connection therewith, together with evidence of the
incumbency of such authorized officer, (iv) a certificate, dated as of a
date not more than ten (10) Business Days prior to the Effective Date (as
defined in Amendment No. 6 and Waiver), of the appropriate official of the
state of incorporation of New Borrower, certifying as to the subsistence in
good standing of, and the payment of taxes by, New Borrower in such state
and listing all charter documents of New Borrower on file with such
official, (v) a copy of the charter of New Borrower, certified as of a date
not more than 10 Business Days prior to the Effective Date by the
appropriate official of the state of incorporation of New Borrower and as
of the Effective Date by an authorized officer of New Borrower, and (vi) a
copy of the by-laws of New Borrower, certified as of the Effective Date by
an authorized officer of New Borrower;
(b) not more than 30 days after the Merger, (i) a copy of the
resolutions adopted by the Board of Directors of Parent, certified by an
authorized officer thereof, authorizing the execution, delivery and
performance by Parent of the Parent Guaranty and the other Loan Documents
to which it is a party, (ii) a certificate of an authorized officer of
Parent, certifying the names and true signatures of the officers of Parent
authorized to sign the Parent Guaranty and the other Loan Documents to
which it is a party, together with evidence of the incumbency of such
authorized officer, (iii) a certificate, dated as of a date not more than
10 Business Days prior to the Effective Date, of the appropriate official
of the state of incorporation of Parent, certifying as to the subsistence
in good standing of, and the payment of taxes by, Parent in such state and
listing all charter documents of Parent on file with such official, (iv) a
copy of the charter of Parent, certified as of a date not more than 10
Business Days prior to the Effective Date by the appropriate official of
the state of incorporation of Parent, and (v) a copy of the by-laws of
Parent, certified as of the Effective Date by an authorized officer of
Parent;
(c) not more than 30 days after the Merger, a warrant, duly
executed and delivered by Parent, in substitution for the existing Warrant
issued by Old Borrower substantially identical to the Warrant and providing
for the issuance to the holder thereof of Series A Preferred Stock of the
Parent, together with a Registration Rights Agreement by Parent;
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(d) not more than 30 days after the Merger, an opinion of legal
counsel to New Borrower and Parent, reasonably satisfactory to Foothill and
its counsel as to such matters as Foothill may reasonably request and
addressing such matters as are customary in loan transactions of this type;
and
(e) not more than 45 days after the Merger, such other agreements,
certificates and other documents as Foothill may reasonably require to
effect the purposes of Amendment No. 6 and Waiver.
4. Events of Default. Sections 8.1 through 8.15 of the Loan and
Security Agreement are hereby amended by deleting them in their entirety and by
substituting therefor the following:
"8.1 If Borrower fails to pay when due and payable or when declared
due and payable, any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the
Bankruptcy Code, would have accrued on such amounts), fees and charges due
Foothill, reimbursement of Foothill Expenses, or other amounts constituting
Obligations);
8.2 If any Loan Party fails to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in this
Agreement, in any of the Loan Documents, or in any other present or
future agreement between any Loan Party and Foothill;
8.3 If there is a Material Adverse Change;
8.4 If any material portion of any Loan Party's properties or assets
is attached, seized, subjected to a writ or distress warrant, or is levied
upon, or comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by any Loan Party;
8.6 If an Insolvency Proceeding is commenced against any Loan Party
and any of the following events occur: (a) such Loan Party consents to the
institution of the Insolvency Proceeding against it; (b) the petition
commencing the Insolvency Proceeding is not timely controverted; (c) the
petition commencing the Insolvency Proceeding is not dismissed within 45
calendar days of the date of the filing thereof; provided, however, that,
during the pendency of such period, Foothill shall be relieved of its
obligation to extend credit hereunder; (d) an interim trustee is appointed
to take possession of all or a substantial portion of the properties or
assets of, or to operate all or any substantial portion of the business of,
any Loan Party; or (e) an order for relief shall have been issued or
entered therein;
8.7 If any Loan Party is enjoined, restrained, or in any way prevented
by court order from continuing to conduct all or any material part of its
business affairs;
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8.8 If a notice of Lien, levy, or assessment is filed of record with
respect to any of any Loan Party's properties or assets by the United
States Government, or any department, agency, or instrumentality thereof,
or by any state, county, municipal, or governmental agency, or if any taxes
or debts owing at any time hereafter to any one or more of such entities
becomes a Lien, whether xxxxxx or otherwise, upon any of a Loan Party's
properties or assets and the same is not paid on the payment date thereof
or is not actively contested in good faith by such Loan Party and as to
which such Loan Party has taken adequate reserves under generally accepted
accounting principles;
8.9 If a judgment or other claim becomes a Lien or encumbrance upon
any material portion of any Loan Party's properties or assets;
8.10 If there is a default in any agreement relating to Indebtedness
owing by Borrower to IBM Credit Corporation or in any other material
agreement to which any Loan Party is a party with one or more third Persons
and such default (a) occurs at the final maturity of the obligations
thereunder, or (b) results in a right by such third Person(s), irrespective
of whether exercised, to accelerate the maturity of any Loan Party's
obligations thereunder;
8.11 If any Loan Party makes any payment on account of Indebtedness
that has been contractually subordinated in right of payment to the payment
of the Obligations, except to the extent such payment is permitted by the
terms of the subordination provisions applicable to such Indebtedness;
8.12 If any misstatement or misrepresentation exists now or hereafter
in any warranty, representation, statement, or report made to Foothill by
any Loan Party or any officer, employee, agent, or director of any Loan
Party, or if any such warranty or representation is withdrawn; or
8.13 If the obligation of the Parent under the Parent Guaranty, any
other guarantor under its guaranty or other third Person under any Loan
Document is limited or terminated by operation of law or by the Parent, the
guarantor or other third Person thereunder, or the Parent, any such
guarantor or other third Person becomes the subject of an Insolvency
Proceeding.
8.14 This Agreement or any security document after delivery thereof
pursuant hereto, shall for any reason fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or
thereof, first priority Lien on or security interest in any Collateral
covered hereby or thereby; or
8.15 Any provision of any Loan Document shall at any time for any
reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by any Loan Party, or a proceeding shall be
commenced by any Loan Party, or by any Governmental Authority or other
regulatory body having jurisdiction over such Loan Party, seeking to
establish the invalidity or unenforceability thereof, or any Loan Party
shall deny that such Loan Party has any liability or obligation purported
to be created under any Loan Document."
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5. Assumption. Effective as of the Effective Date, New Borrower hereby
expressly assumes, as its direct and primary obligation, the payment of all
obligations and liabilities of Old Borrower under the Loan Documents (including,
without limitation, the payment of all fees provided for in the Loan Documents)
and hereby expressly agrees to make all payments required under the Loan
Documents as they become due or are declared due. New Borrower also assumes the
punctual performance and observance of each of the covenants, terms and
conditions under the Loan Documents. Without limiting the generality of the
foregoing, New Borrower hereby expressly agrees to be bound in all respects by
the terms of the Loan Documents as if New Borrower were a signatory party
thereto. By virtue of the foregoing, New Borrower hereby accepts and assumes any
liability of Old Borrower related to any representation or warranty made by Old
Borrower in any Loan Document. Except as otherwise expressly provided herein,
New Borrower affirms on the date hereof, for the benefit of Foothill, that each
of such representations and warranties in the Loan Documents are true and
correct as applicable to New Borrower, and hereby expressly affirms on the date
hereof, for the benefit of Foothill, each of such representations and
warranties.
6. Waiver.
(a) Pursuant to the request of Borrower and in accordance with Section
16.6 of the Loan Agreement, Foothill hereby consents to, and waives any Event of
Default that would otherwise arise under Section 8.2 of the Loan and Security
Agreement by reason of, the following:
(i) any noncompliance with Section 7.3 of the Loan and Security
Agreement by reason of the execution, delivery and performance of the Merger
Agreement and the consummation of the Merger;
(ii) any noncompliance with Section 7.20(a) of the Loan and
Security Agreement (EBITDA), but solely for the four fiscal quarter period
ending as at June 30, 2000; and
(iii) any noncompliance with Section 7.20(b) of the Loan and
Security Agreement (Tangible Net Worth), but solely for the period ending as at
June 30, 2000.
(b) This waiver and consent shall be effective only in the specific
instances and for the specific purposes set forth herein and does not allow any
other or further departure from the terms and conditions of the Loan and
Security Agreement and other Loan Documents, which terms shall continue in full
force and effect. Without limiting the generality of the foregoing, it is
understood and agreed that (i) nothing in this Amendment No. 6 and Waiver shall
be deemed a waiver of any other Event of Default or Default, whether known or
unknown by Foothill and whether now existing or hereafter arising and (ii)
nothing in this Amendment No. 6 and Waiver shall be deemed to prevent Foothill
from declaring an Event of Default or Default (except with respect to the
matters waived pursuant to Paragraph 6 above) during the 120-day period
immediately following the Effective Date, notwithstanding that the parties may
be negotiating a replacement loan and security agreement at that time.
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7. Replacement Loan and Security Agreement. The parties hereto agree
to negotiate during the 120-day period following the Effective Date with a view
to entering into either (i) a loan and security agreement and related agreements
that would supercede the Loan and Security Agreement and Loan Documents or (ii)
amendments to the Loan and Security Agreement and Loan Documents on terms and
conditions to be determined. If no such agreements are executed and delivered on
or before the date which is 120 days after the Effective Date, all Notes shall
automatically mature, and all principal, interest, reimbursement obligations and
fees then accrued and outstanding under any Loan Document shall be immediately
due and payable together with a fee in the amount of two percent (2%) of the
Maximum Revolving Amount then in effect. Notwithstanding the provisions of
Section 3.6 of the Loan and Security Agreement, the Early Termination Premium
payable at any time during the 120-day period following the Effective Date shall
be two percent (2%) of the Maximum Revolving Amount then in effect.
8. Conditions and Covenants.
(a) 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 "Effective Date"):
(i) The representations and warranties contained in this
Amendment and in Section 5 of the Loan and Security Agreement and each other
Loan Document shall be correct on and as of the Effective Date as though made on
and as of such date (except where such representations and warranties relate to
an earlier date in which case such representations and warranties shall be true
and correct as of such earlier date); no Default or Event of Default shall have
occurred and be continuing on the Effective Date or result from this Amendment
becoming effective in accordance with its terms.
(ii) Foothill shall have received two (2) counterparts of this
Amendment, duly executed by Old Borrower and New Borrower.
(iii) Foothill shall have received the Parent Guaranty, duly
executed by the Parent.
(iv) All legal matters incident to this Amendment shall be
satisfactory to Foothill and its counsel.
(b) Borrower covenants to provide the following to Foothill:
(i) Within two business days after the Effective Date, the
merger of Old Borrower with and into New Borrower shall have become effective in
accordance with the Certificate of Merger dated August 14, 2000, between the Old
Borrower and the New Borrower and the General Corporation Law of the State of
Delaware.
(ii) On the first Business Day after the Effective Date,
Foothill shall have received a nonrefundable fee of $25,000 in consideration of
the execution and delivery by Foothill of this Amendment No. 6 and Waiver.
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(iii) Within five business days after the Effective Date, copies
of the Merger Agreement, the Certificate of Merger and all related agreements
and documents, duly certified by an authorized officer of the New Borrower.
(iv) Within thirty days after the Effective Date, Foothill shall
have conducted a search of Uniform Commercial Code and other filings against New
Borrower and New Borrower shall have caused such amendments and terminations of
existing filings to be executed and recorded as maybe deemed necessary or
desirable by Foothill and its counsel to protect the security interest granted
by the Loan and Security Agreement.
9. Representations and Warranties. New Borrower hereby represents and
warrants to Foothill as follows:
(a) New Borrower (i) is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and (ii) has all
requisite corporate power, authority and legal right to execute, deliver and
perform this Amendment, and to perform the Loan and Security Agreement, as
amended hereby.
(b) The execution, delivery and performance of this Amendment by New
Borrower, and the performance by New Borrower of the Loan and Security
Agreement, as amended hereby (i) have been duly authorized by all necessary
corporate action, (ii) do not and will not contravene its charter or by-laws or
any applicable law, and (iii) except as provided in the Loan Documents, do not
and will not result in the creation of any Lien upon or with respect to any of
its respective properties.
(c) This Amendment and the Loan and Security Agreement, as amended
hereby, constitute the legal, valid and binding obligations of New Borrower,
enforceable against New Borrower in accordance with its terms.
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or other Person is required in
connection with the due execution, delivery and performance by New Borrower of
this Amendment and the performance by New Borrower of the Loan and Security
Agreement as amended hereby.
(e) The representations and warranties contained in Section 5 of the
Loan and Security Agreement and each other Loan Document are correct on and as
of the Effective Date as though made on and as of the Effective Date (except to
the extent such representations and warranties expressly relate to an earlier
date in which case such representations and warranties shall be true and correct
as of such earlier date) and no Default or Event of Default has occurred and is
continuing on and as of the Effective Date or will result from this Amendment
becoming effective in accordance with its terms.
10. Continued Effectiveness of the Loan and Security Agreement and
Loan Documents. Borrower hereby (i) confirms and agrees that each Loan Document
to which it is a party is, and shall continue to be, in full force and effect
and is hereby ratified and confirmed in all respects except that on and after
the Effective Date of this Amendment all references in any such Loan Document to
"the Loan and Security Agreement", the "Agreement", "thereto",
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"thereof", "thereunder" or words of like import referring to the Loan and
Security Agreement shall mean the Loan and Security Agreement as amended by this
Amendment, (ii) confirms and agrees that to the extent that any such Loan
Document purports to assign or pledge to Foothill, or to grant a security
interest in or Lien on, any collateral as security for the obligations of
Borrower from time to time existing in respect of the Loan and Security
Agreement and the Loan Documents, such pledge, assignment and/or grant of the
security interest or Lien is hereby ratified and confirmed in all respects, and
(iii) confirms that Foothill is authorized, at its option, without prior notice
to Borrower, to charge any fees payable by Borrower pursuant to Section 6(d) of
this Amendment to Borrower's Loan Account.
11. 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.
(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.
(d) Borrower will pay on demand all reasonable fees, costs and
expenses of Foothill in connection with the preparation, execution and delivery
of this Amendment including, without limitation, reasonable fees disbursements
and other charges of Xxxxxxx Xxxx & Xxxxx LLP, counsel to Foothill.
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IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 6 and Waiver to be executed and delivered as of the date set forth
on the first page hereof.
DATA SYSTEMS NETWORK CORPORATION,
a Michigan corporation
By: /s/ Xxxxxxx Xxxxxx
Name: Xxxxxxx Xxxxxx
Title: Chief Financial Officer
TEKINSIGHT SERVICES INC.,
a Delaware corporation
By: /s/ Xxxxxxx Xxxxxx
Name: Xxxxxxx Xxxxxx
Title: Executive Vice President and Chief
Operating Officer
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ Xxxxxxx X. XxXxxx
Name: Xxxxxxx X. XxXxxx
Title: Vice President
