AMENDMENT AND WAIVER
to
CREDIT AGREEMENT
AMENDMENT AND WAIVER dated as of June 4, 1998 between V BAND
CORPORATION, a New York corporation (the "Borrower") and NATIONAL BANK OF
CANADA, NEW YORK BRANCH (the "Bank").
RECITALS
A. The Borrower and the Bank are party to the Credit Agreement dated
as of May 28, 1997 (as heretofore amended, the "Credit Agreement"), pursuant to
which the Bank agreed to extend credit to the Borrower in the form of revolving
loans and letters of credit upon the terms and subject to the conditions set
forth in the Credit Agreement.
B. The Borrower has advised the Bank that it was not in compliance
with the financial covenants set forth in Section 7.1 of the Credit Agreement on
April 30, 1998 (the "Financial Covenant Violations") and has requested that the
Bank waive the resulting Events of Default.
C. The Borrower has requested that the Bank permit it to borrow under
the Credit Agreement overadvances of up to $400,000 in the aggregate and allow
such overadvances to remain outstanding through August 17, 1998.
D. The Bank is willing to waive the Events of Default resulting from
the Financial Covenant Violations and to permit such overadvances, subject to
the terms and conditions set forth below.
ACCORDINGLY, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used in this Amendment, unless
otherwise defined, shall have the meanings given to them in the Credit
Agreement, as amended hereby. In addition, the following terms shall have the
following meanings:
"Credit Agreement" shall have the meaning specified in Recital A
hereto.
"Amendment Date" shall have the meaning specified in Section 7 hereof.
2. Amendments to Credit Agreement.
(a) The definition of the term "Borrowing Base" set forth in Section
1.1 of the Credit Agreement (Defined Terms) is hereby amended in its entirety to
read as follows:
"Borrowing Base": at any time, an amount equal to the sum of:
(i) up to the A/R Advance Rate of the aggregate amount of the
Eligible Accounts at such time; plus
(ii) up to the lesser of (x) 40% of the aggregate value (at
the lower of cost or market value) at such time of Eligible
Inventory or (y) the Inventory Cap in effect at such time;
plus
(iii) up to the Permitted Overadvance Amount.
For purposes of this definition, (a) the terms "A/R Advance Rate" and
"Inventory Cap" mean, during each period specified below, the A/R
Advance Rate and Inventory Cap set forth below opposite such period:
From To A/R Advance Rate Inventory Cap
---- -- ---------------- -------------
Closing Date February 8, 1998 85.00% $750,000
February 9, 1998 March 8, 1998 82.50% 740,000
March 9, 1998 April 5, 1998 80.00% 730,000
April 6, 1998 May 3, 1998 77.50% 720,000
May 4, 1998 May 30, 1998 75.00% 710,000
June 1, 1998 June 28, 1998 72.50% 700,000
June 29, 1998 and thereafter 70.00% 690,000
and (b) the term "Permitted Overadvance Amount" means (x) during the
period commencing on June 4, 1998 and ending on August 17, 1998, Four
Hundred Thousand Dollars ($400,000) and (y) thereafter, $0.00.
(b) Section 7.1 (Financial Covenants) of the Credit Agreement is
hereby amended in its entirety to read as follows:
7.1 Financial Covenants. The Borrower hereby covenants and agrees that
so long as the Commitment remains in effect or any Letter of Credit
remains outstanding and until the payment in full of the Obligations
and the complete performance of all of the Borrower's other
obligations hereunder and under the other Loan Documents, unless the
Bank shall otherwise consent in writing, the Borrower shall not:
(a) Permit its Consolidated EBITDA for any fiscal quarter specified
below to be less than the amount set forth below for such fiscal quarter:
Fiscal Year Ending First Quarter Second Quarter Third Quarter Fourth Quarter
------------------ ------------- -------------- ------------- --------------
October 31, 1997 Not Applicable $228,000 $225,000 $456,000
October 31, 1998 ($2,000,000) ($50,000) ($500,000) ($200,000)
October 31, 1999 $185,000 $438,000 $438,000 $690,000
(b) Permit its Leverage Ratio for any fiscal quarter specified below
to exceed the ratio set forth below for such fiscal quarter:
Fiscal Year Ending First Quarter Second Quarter Third Quarter Fourth Quarter
------------------ ------------- -------------- ------------- --------------
October 31, 1997 0.60:1.00 0.60:1.00 0.60:1.00 0.60:1.00
October 31, 1998 2.75:1.00 2.75:1.00 5.00:1.00 5.00:1.00
October 31, 1999 0.45:1.00 0.45:1.00 0.45:1.00 0.45:1.00
(c) Permit its Consolidated Tangible Net Worth as at the end of any
fiscal quarter specified below to be less than the amount set forth below for
such fiscal quarter:
Fiscal Year Ending First Quarter Second Quarter Third Quarter Fourth Quarter
------------------ ------------- -------------- ------------- --------------
October 31, 1997 $11,655,000 $11,868,000 $12,053,000 $12,469,000
October 31, 1998 $ 3,500,000 $ 3,500,000 $ 1,500,000 $ 1,500,000
October 31, 1999 $13,693,000 $14,096,000 $14,449,000 $15,157,000
(d) Permit its Interest Coverage Ratio to be less than 5.00 to 1.00
for any Calculation Period ending after October 31, 1998.
(e) Permit its Current Ratio to be (i) less than 2.50 to 1.00 as at
the end of any fiscal quarter of its fiscal year ending October 31, 1997, (ii)
less than 1.00 to 1.00 as at the end of any fiscal quarter of its fiscal year
ending October 31, 1998, or (iii) less than 3.00 to 1.00 as at the end of any
fiscal quarter ending thereafter.
(c) All references in the Credit Agreement to "this Agreement" or such
words as "hereof", "herein", "hereto" or "hereunder" shall be deemed to be
references to the Credit Agreement as amended by this Amendment.
3 Reaffirmation of Obligations. The Borrower hereby acknowledges and
confirms to the Bank (a) that the amendments and modifications to the Credit
Agreement made pursuant hereto shall not affect or impair in any way the
validity, binding effect or enforceability of any Loan Document to which the
Borrower is a party or of any liens or security interests granted to the Bank
thereunder, or the Borrower's obligations or the Bank's rights and remedies
thereunder and (b) that the Loan Documents to which the Borrower is a party, any
liens and security interests granted to the Bank thereunder, and the Borrower's
obligations and the Bank's rights and remedies thereunder shall continue in full
force and effect, notwithstanding such amendments and modifications.
4 Waivers. The Bank hereby waives the Events of Default resulting from
the Financial Covenant Violations. The foregoing waiver shall be limited
precisely as drafted, shall be effective only for the dates and periods
specified therein and for no subsequent date or period, and shall not amend or
modify, or constitute a waiver of, any other term or provision of the Credit
Agreement or any other Loan Document, all of which shall continue in full force
and effect.
5 Amendment Fee. As consideration for the amendment of the Credit
Agreement as provided herein and the waivers set forth herein, the Borrower
shall pay to the Bank on or before the Amendment Date a fee (the "Amendment
Fee") in the amount of $15,000, which fee shall be nonrefundable and shall be
deemed earned when paid.
6 Representations and Warranties. The Borrower hereby represents and
warrants to the Bank that (a) it has full power and authority to execute and
deliver this Amendment, (b) this Amendment, and the Credit Agreement as amended
hereby, constitute the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms, (c)
the Borrower's execution and delivery of this Amendment, and its performance of
this Amendment and of the Credit Agreement as amended hereby, have been duly
authorized by all requisite action of the Borrower and do not require the
approval of its shareholders, (d) the execution and delivery by the Borrower of
this Amendment and the performance by the Borrower of the Credit Agreement as
amended hereby do not and will not (i) violate the Borrower's Certificate of
Incorporation or By-Laws or any law or regulation applicable to the Borrower,
(ii) violate or constitute (with due notice or lapse of time or both) a default
under any indenture, agreement, license or other instrument to which the
Borrower is a party or by which the Borrower or any of its properties may be
bound or affected, (iii) violate any order of any court, tribunal or
governmental agency binding upon the Borrower or its properties, (iv) result in
the creation or imposition of any Lien of any nature whatsoever upon any
properties or assets of the Borrower, or (v) require any license, consent or
approval of any governmental agency or regulatory authority or any other third
party.
7 Conditions Precedent. This Amendment and Waiver shall become
effective on the date (the "Amendment Date") on which each of the following
conditions precedent shall have been satisfied or waived:
(a) The Borrower and the Bank shall have executed and delivered
counterpart originals or facsimiles hereof;
(b) The Bank shall have received payment in full of the Amendment Fee;
(c) The Borrower shall have executed and delivered to the Bank UCC
financing statements in form, substance and number sufficient for filing in all
offices specified by the Bank; and
(d) All legal, documentary and other matters in connection with this
Amendment and the transactions contemplated hereby shall be satisfactory to the
Bank and its counsel.
The amendments to the Credit Agreement set forth in Section 2 hereof
and the Waiver set forth in Section 5 hereof shall become effective
automatically on the Amendment Date, without the need for any further action by
any party hereto.
8 Miscellaneous.
(a) THIS AMENDMENT AND WAIVER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ITS CONFLICT OF LAWS RULES (OTHER THAN SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW).
(b) Except as expressly amended hereby, all terms and conditions of
the Credit Agreement and the other Loan Documents, and all rights of the Bank
and obligations of the Borrower thereunder and under all related documents,
shall remain in full force and effect. Without limiting the generality of the
foregoing, nothing herein contained shall be deemed to increase the Commitment.
(c) The Borrower hereby agrees to pay on demand all costs and expenses
(including without limitation the reasonable fees and expenses of outside
counsel to the Bank) incurred by the Bank in connection with the negotiation,
preparation, execution and delivery of this Amendment and Waiver and all related
documents, whether or not the transactions contemplated hereby are consummated.
(d) This Amendment and Waiver may be executed by one or more of the
parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of an executed signature page to this Amendment and Waiver
by facsimile transmission shall be as effective as delivery of a manually signed
counterpart hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS]
[SIGNATURE PAGE TO AMENDMENT AND WAIVER]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Waiver to be duly executed by their duly authorized officers as of the day and
year first above written.
V BAND CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Name:Xxxxxx X. Xxxxxx
Title:Chief Financial Officer
NATIONAL BANK OF CANADA, NEW YORK BRANCH
By: /s/ Xxxxxx X.Xxxxxxx
--------------------
Name:Xxxxxx X. Xxxxxxx
Title:Vice President
By: /s/ J. Xxxxxxx Xxxxx
--------------------
Name:J. Xxxxxxx Xxxxx
Title:Vice President
