WAIVER AND AMENDMENT NO. 2 TO CREDIT AND SECURITY AGREEMENT
WAIVER
AND AMENDMENT NO. 2
TO
THIS
WAIVER AND AMENDMENT NO. 2 (this “Amendment”) is entered into as of March 8,
2006, by
and
among OBLIO TELECOM, INC., a Delaware corporation (“Oblio”), each of its direct
and indirect subsidiaries signatory hereto (Oblio and each such subsidiary
are
referred to, individually and collectively, jointly and severally as the
“Borrower”), the other Credit Parties signatory hereto and CAPITALSOURCE FINANCE
LLC, a Delaware limited liability company (the “Lender”).
BACKGROUND
Borrower
and Lender entered into a Credit and Security Agreement dated as of August
12,
2005 (as amended, restated, supplemented or otherwise modified from time to
time, the “Loan Agreement”) pursuant to which Lender provided Borrower with
certain financial accommodations.
The
Borrower has requested that Lender (i) waive certain Defaults or Events of
Default that have occurred under the Loan Agreement (including Amendment No.1
thereto) and (ii) make
certain amendments to the Loan Agreement, and Lender is willing to do so on
the
terms and conditions hereafter set forth.
NOW,
THEREFORE, in consideration of any loan or advance or grant of credit heretofore
or hereafter made to or for the account of Borrower by Lender, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1.
Definitions.
All
capitalized terms not otherwise defined herein shall have the meanings given
to
them in the Loan Agreement.
2.
Acknowledgement.
Borrower hereby affirms and acknowledges that (a) as of February 28 2006, there
is presently due and owing to Lender the principal amounts of
$3,197,982.86 with
respect to the Revolving Facility, $3,958,333.35
with
respect to Term Loan A and $5,066,666.65
with
respect to Term Loan B, in each case together with interest, costs, fees
(including without limitation, the accrued Non-Compliance Fee) and expenses
(collectively, the “Amount”), (b) the Amount is due and owing without
defense, offset or counterclaim of any kind or nature whatsoever, and
(c) the Loan Documents are and shall continue to be legal, valid and
binding obligations and agreements of Borrower enforceable in accordance with
their respective terms.
3.
Waiver.
Certain Events of Default (the “Designated Events of Default”) have occurred
under the Loan Agreement as a result of Credit
Parties’ non-compliance
with Section
7
of Amendment No. 1
due to
Credit
Parties’
failure
to satisfy
the requirements set forth in Sections 7(a) and 7(b) of Amendment No.
1.
Subject
to the provisions set forth in this Amendment, Lender hereby waives the
Designated Events of Default and, from and after the Amendment No. 2 Effective
Date, hereby agrees that Paragraph 7 of Amendment No. 1 shall be of no further
force and effect and Lender shall no longer charge the amounts set forth in
Section 7(c) of Amendment No.1. Except for the foregoing waiver, the Loan
Agreement (including Amendment No.1) shall remain in full force and effect
and
is hereby ratified and confirmed.
4.
Amendment
to Loan Agreement. Subject to the satisfaction of the conditions
precedent set forth in Section 5 below, the Loan Agreement is hereby amended
as
follows:
(a) | The fifth sentence of Section 2.1(a) of the Loan Agreement is hereby amended in its entirety to provide as follows: |
|
“Subject
to the provisions of this Agreement, Borrower may request Advances
under
the Revolving Facility up to and including the value, in U.S. Dollars,
of
the sum of (i) the Receivables Percentage of the Borrowing Base for
Eligible Receivables, and (ii) the Inventory Percentage of the Borrowing
Base for Eligible Inventory, minus,
if applicable, amounts adjusted or reserved pursuant to this Agreement
(such calculated amount being referred to herein as the “Availability”).
|
(b) | Section 2.3 of the Loan Agreement is hereby amended in its entirety to provide as follows: |
“Interest
on outstanding Advances under the Facility shall be payable monthly
in
arrears on the first day of each calendar month at an annual rate
of the
Prime Rate plus one percent (1%), provided,
however,
that, notwithstanding any provision of any Loan Document, for the
purpose
of calculating interest hereunder, the Prime Rate shall be not less
than
six and one half percent (6.50%), in each case calculated on the
basis of
a 360-day year and for the actual number of calendar days elapsed
in each
interest calculation period. Interest accrued on each Advance under
the
Facility shall be due and payable on the first day of each calendar
month,
in accordance with the procedures provided for in Section 2.5 and
Section 2.12, commencing March 1, 2006, and continuing until the
later of the expiration of the Term and the full performance and
irrevocable payment in full in cash of the Obligations and termination
of
this Agreement.”
|
(c) | Section 2.7 of the Loan Agreement is hereby amended by amending the first sentence thereof in its entirety to |
provide as follows: |
“Interest
on the outstanding balance of Term Loan A shall be payable monthly
in
arrears on the first day of each calendar month at an annual rate
of (i)
the Prime Rate plus eight percent (8%) during the period commencing
on the
Amendment No. 1 Effective Date and continuing through the earlier
of (x)
June 30, 2007 or (y) the repayment in full in cash of Term Loan B
and (ii)
the Prime Rate plus four percent (4%) at all other times, provided,
however,
that, notwithstanding any provision of any Loan Document, for the
purpose
of calculating interest hereunder, the Prime Rate shall be not less
than
six and one half percent (6.50%), in each case calculated on the
basis of
a 360-day year and for the actual number of calendar days elapsed
in each
interest calculation period.”
|
2
(d) | Section 2.8 of the Loan Agreement is hereby amended in its entirety to provide as follows: |
“(a) Payment
of principal (in
addition to the interest payments in Section 2.7) and all other amounts
outstanding under Term Loan A shall be payable as follows: (i) commencing
October 1, 2005, equal monthly installments of $208,333.33 and continuing
on the first day of each month thereafter until February 1, 2006,
(ii)
commencing March 1, 2006, equal monthly installments of $75,000 and
continuing on the first day of each month thereafter until the earlier
of
(x) June 30, 2007 and (y) the repayment in full in cash of Term Loan
B and
(iii) commencing on the first Business Day of the immediately succeeding
month following the repayment in full of Term Loan B, equal monthly
installments of $300,000 and continuing on the first day of each
month
thereafter.
|
|
(b) The
unpaid principal
amount of Term Loan A and all other Obligations under Term Loan A
shall be
due and payable in full, if not earlier in accordance with this Agreement,
on the earlier of (i) the occurrence of an Event of Default if required
pursuant hereto or Lender’s demand upon an Event of Default, and (ii) June
30, 2007 (such earlier date being the “Term
Loan A Maturity Date”).”
|
(e) | Section 2.10 of the Loan Agreement is hereby amended by amending the first sentence thereof in its entirety to read |
as follows: |
“Interest
on the outstanding balance of Term Loan B shall be payable monthly
in
arrears on the first day of each calendar month at an annual rate
of the
Prime Rate plus four percent (4%), provided,
however,
that, notwithstanding any provision of any Loan Document, for the
purpose
of calculating interest hereunder, the Prime Rate shall be not less
than
six and one half percent (6.50%), in each case calculated on the
basis of
a 360-day year and for the actual number of calendar days elapsed
in each
interest calculation period.”
|
(f) | Section 2.11(b) of the Loan Agreement is hereby amended by deleting the reference to “February 28, 2006” and |
replacing the same with “June 30, 2007”. |
(g) | Section 2.15(c) of the Loan Agreement is hereby amended in its entirety to provide as follows: |
“(c)
until such time as the Obligations relating to the Term Loan Facilities
are indefeasibly paid in full in cash and fully performed, on or
before
the day of delivery to Lender of Borrower’s monthly financial statements
in accordance with the terms of this Agreement, but in any event
not later
than the 30th day after the end of each month (commencing with the
calendar month ending September 30, 2005), Borrower shall furnish
Lender
with a written calculation of Excess Cash Flow for such month and
deliver
to Lender an amount equal to the sum of (i) fifty percent (50%) of
Borrower’s Excess Cash Flow for such month (the “Initial Excess Cash Flow
Amount”), to be applied by Lender to reduce the Obligations as follows:
first, to all then unpaid fees and expenses; second, to all accrued
and
unpaid interest on the Term Loan Facilities; third, fifty percent
(50%) of
such Initial Excess Cash Flow Amount shall be applied to the principal
payment outstanding under Term Loan A in the inverse order of maturities
and fifty percent (50%) of such Initial Excess Cash Flow Amount shall
be
applied to the principal payment outstanding under Term Loan B in
the
inverse order of maturities; provided,
further,
one hundred percent (100%) of the Initial Excess Cash Flow Amount
shall be
applied to either Term Loan A or Term Loan B, as the case may be,
if the
balance of either Term Loan equals zero, plus (ii) an amount equal
to the
excess, if any, of fifty percent (50%) of Borrower’s Excess Cash Flow for
such month (the “Additional Excess Cash Flow Amount”) over any reduction
in the balance of Borrower’s accounts payable during such month, such
Additional Excess Cash Flow Amount to be applied by Lender to reduce
the
Obligations as follows: first, to all then unpaid fees and expenses;
second, to all accrued and unpaid interest on the Term Loan Facilities;
third, fifty percent (50%) of such Additional Excess Cash Flow Amount
shall be applied to the principal payment outstanding under Term
Loan A in
the inverse order of maturities and fifty percent (50%) of such Additional
Excess Cash Flow Amount shall be applied to the principal payment
outstanding under Term Loan B in the inverse order of maturities;
provided,
further,
one hundred percent (100%) of the Additional Excess Cash Flow Amount
shall
be applied to either Term Loan A or Term Loan B, as the case may
be, if
the balance of either Term Loan equals zero, provided,
further,
that the reduction of the principal balance of the Term Loan Facilities
described in clauses (i) and (ii) above shall not affect the amount
or
timing of principal payments (other than the extent to which reductions
have been made with respect to such principal payments as allocated
pursuant to this paragraph) required under this Agreement until the
balance of such Term Loan Facilities is reduced to zero. Notwithstanding
the foregoing, the sum of the Initial Excess Cash Flow Amount plus
the
Additional Excess Cash Flow Amount for the period commencing March
1, 2006
and ending June 30, 2006 shall not exceed an amount equal to fifty
percent
(50%) of the Borrower’s EBITDA for such
period.”
|
3
(h) | A new Section 2.15(e) is hereby added to the Loan Agreement in its appropriate sectional order to provide as follows: |
“(e)
If any Credit Party shall receives a refund of excise tax payments
(the
“Excise Tax Refund”) from the Internal Revenue Service or any other
governmental authority, whether such Excise Tax Refund is collected
by
such Credit Party directly from the Internal Revenue Service or indirectly
from Seller, Xxxxx Xxxxxx or Radu Archiriloaie or any other applicant,
then such Credit Party shall promptly remit to Lender an amount equal
to
one hundred percent (100%) of the Excise Tax Refund for application
to the
Obligations as follows: first, to all then unpaid fees and expenses;
second, to all accrued and unpaid interest on Term Loan B; third,
to all
accrued and unpaid interest on Term Loan A; fourth, to the principal
payments outstanding under Term Loan B in the inverse order of maturities;
fifth, to the principal payments outstanding under Term Loan A in
the
inverse order of maturities; and sixth, to the remaining Obligations
in
such order as Lender shall determine in its sole discretion; provided,
however,
that the reduction of the principal balance of the Term Loan Facilities
shall not affect the amount or timing of principal payments (other
than
the extent to which reductions have been made with respect to such
principal payments as allocated pursuant to this paragraph) required
under
this Agreement until the balance of such Term Loan Facilities is
reduced
to zero. Borrower agrees to execute such further documents, agreements,
assignments or powers of attorney with respect to the Excise Tax
Refund as
Lender may deem appropriate in its sole
discretion.”
|
(i) | Section 5.20(b) of the Loan Agreement is hereby amended by inserting the following sentence at the beginning of |
such Section 5.20(b) to provide as follows: |
(j) | “In determining which Inventory is Eligible Inventory, Lender may rely on all statements and representations made |
by Borrower with respect to any Inventory.” |
(k) | Section 7.6 is here by amended and restated in its entirety to read as follows: |
“7.6
Transactions with Affiliates
|
|
Borrower
shall not enter into or consummate any transaction of any kind with
any of
its Affiliates or any Guarantor or any of their respective Affiliates
other than the following payments, provided that no such payment
shall be
permitted if a Default or Event of Default has occurred and remains
in
effect or would be caused by or result from such payment: (i) salary,
bonus, employee stock option and other compensation and employment
arrangements with directors or officers in the ordinary course of
business, (ii) Distributions and dividends permitted pursuant to
Section
7.5, (iii) transactions with Lender or any Affiliate of Lender, (iv)
payments permitted under and pursuant to written agreements entered
into
by and between Borrower and one or more of its Affiliates that both
(A) reflect and constitute transactions on overall terms at least as
favorable to Borrower as would be the case in an arm’s-length transaction
between unrelated parties of equal bargaining power, and (B) are
subject
to such terms and conditions as determined by Lender in its sole
discretion; provided, that notwithstanding the foregoing Borrower
shall
not (Y) enter into or consummate any transaction or agreement pursuant
to
which it becomes a party to any mortgage, note, indenture or guarantee
evidencing any Indebtedness of any of its Affiliates or otherwise
to
become responsible or liable, as a guarantor, surety or otherwise,
pursuant to agreement for any Indebtedness of any such Affiliate,
or (Z)
make any payment to any of its Affiliates in excess of $10,000 without
the
prior written consent of Lender; and (v) Permitted Acquisition Payments
and other payments contemplated under Schedule
7.6.”
|
4
(l) | Section 7.11 of the Loan Agreement is hereby amended in its entirety to read as follows: |
“7.11.
Payment
on Permitted Subordinated Debt
|
|
Borrower
shall not (i) make any prepayment of any part or all of any Permitted
Subordinated Debt; provided,
however,
(A)
Borrower shall be permitted to make regularly scheduled payments
of
interest on the Seller Note on a quarterly basis and at an annual
interest
rate of not greater than one percent (1%) subject to the terms and
conditions of the Seller Subordination Agreement,
(B) Borrower shall be permitted to make regularly scheduled payments
of
interest on the Additional Seller Note on a quarterly basis and at
an
annual interest rate of not greater than four percent (4%) subject
to the
terms and conditions of the Seller Subordination Agreement, (C) Borrower
shall be permitted to make Permitted Principal Payments (as such
term is
defined in the Seller Subordination Agreement) on the Additional
Seller
Note on the terms and conditions set forth in the Seller Subordination
Agreement and (D) upon the payment in full in cash of the Obligations
relating to the Term Loan Facilities, Borrower may prepay, in whole
or in
part, the Seller Note and the Additional Seller Note; provided, further
that in no event may Borrower make any payment or distribution on
the
Seller Note or the Additional Seller Note if before and after giving
effect to such payment there exists an Event of Default, (ii) repurchase,
redeem or retire any instrument evidencing any such Permitted Subordinated
Debt prior to maturity, or (iii) enter into any agreement (oral or
written) which could in any way be construed to amend, modify, alter
or
terminate any one or more instruments or agreements evidencing or
relating
to any Permitted Subordinated Debt in a manner adverse to Lender,
as
determined by Lender in its sole
discretion.”
|
(m) | Paragraphs 1, 2, 3 and 4 of Annex 1 to the Loan Agreement are hereby amended in their entirety to read as follows: |
“1)
|
Minimum
EBITDA
|
5
Until
the
repayment in full in cash of the Term Loan Facilities, Borrower shall maintain
for each Test Period set forth below EBITDA of not less than the amount set
forth below opposite such period:
Period:
|
Minimum
EBITDA:
|
For
the three (3) month period ending November 30, 2005
|
$1,150,000
|
For
the four (4) month period ending December 31, 2005
|
$1,490,000
|
For
the five (5) month period ending January 31, 2006
|
$1,830,000
|
For
the six (6) month period ending February 28, 2006
|
$2,170,000
|
For
the one (1) month period ending March 31, 2006
|
$500,000
|
For
the two (2) month period ending April 30, 2006
|
$1,000,000
|
For
the three (3) month period ending May 31, 2006
|
$1,500,000
|
For
the four (4) month period ending June 30, 2006
|
$2,250,000
|
For
the five (5) month period ending July 31, 2006
|
$3,000,000
|
For
the six (6) month period ending August 31, 2006
|
$3,750,000
|
For
the seven (7) month period ending September 30, 2006
|
$4,500,000
|
For
the eight (8) month period ending October 31, 2006
|
$5,250,000
|
For
the nine (9) month period ending November 30, 2006
|
$6,000,000
|
For
the ten (10) month period ending December 31, 2006
|
$6,750,000
|
For
the eleven (11) month period ending January 31, 2007
|
$7,500,000
|
For
the twelve (12) month period ending February 28, 2007
|
$8,250,000
|
For
the twelve (12) month period ending March 31, 2007 and for the
Test
Periods ending on each subsequent month thereafter
|
$9,000,000
|
6
2)
|
Fixed
Charge Coverage Ratio (EBITDA/Fixed
Charges)
|
Borrower
shall maintain (x) prior to the repayment in full in cash of the Term Loan
Facilities for each Test Period set forth below a Fixed Charge Coverage Ratio
of
not less than the ratio set forth below opposite such period and (y) upon the
repayment in full of the Term Loan Facilities and for the Test Periods ending
on
each subsequent month thereafter, a Fixed Charge Coverage Ratio of not less
than
1.2 to 1.0:
Period:
|
Fixed
Charge Coverage Ratio:
|
For
the three (3) month period ending November 30, 2005
|
0.65
to 1.0
|
For
the four (4) month period ending December 31, 2005
|
0.65
to 1.0
|
For
the five (5) month period ending January 31, 2006
|
0.65
to 1.0
|
For
the six (6) month period ending February 28, 2006
|
0.65
to 1.0
|
For
the one (1) month period ending March 31, 2006
|
1.2
to 1.0
|
For
the two (2) month period ending April 30, 2006
|
1.2
to 1.0
|
For
the three (3) month period ending May 31, 2006
|
1.2
to 1.0
|
For
the four (4) month period ending June 30, 2006
|
1.5
to 1.0
|
For
the five (5) month period ending July 31, 2006
|
1.5
to 1.0
|
For
the six (6) month period ending August 31, 2006
|
1.5
to 1.0
|
For
the seven (7) month period ending September 30, 2006
|
1.5
to 1.0
|
For
the eight (8) month period ending October 31, 2006
|
1.5
to 1.0
|
For
the nine (9) month period ending November 30, 2006
|
1.5
to 1.0
|
For
the ten (10) month period ending December 31, 2006
|
1.5
to 1.0
|
For
the eleven (11) month period ending January 31, 2007
|
1.5
to 1.0
|
For
the twelve (12) month period ending February 28, 2007 and for
the Test
Periods ending on each subsequent month thereafter until the
repayment in
full of the Term Loan Facilities
|
1.5
to 1.0
|
7
3)
|
Minimum
Liquidity and Working Capital
|
Borrower
shall at all times have Available Cash on hand of not less than $500,000 at
all
other times (the “Required Liquidity Amount”); provided,
however,
that
payments made by or on behalf of Borrower prior to Closing, including without
limitation, commitment fees paid to Lender and all out of pocket expenses in
connection with this transaction (for the avoidance of doubt, such amounts
shall
include $150,000 paid by Xxxxxxx with respect to the Commitment Fee and $100,000
paid by Xxxxxxx for expenses incurred in connection with the Closing) will
reduce such Available Cash requirement on a dollar for dollar basis;
provided, further,
that if
Available Cash on hand is less than the Required Liquidity Amount at any time,
Borrower shall be required to raise additional equity in an amount sufficient
to
restore Available Cash in the amount of the Required Liquidity Amount by not
later than ten (10) calendar days after the occurrence of such breach and
otherwise pursuant to documentation and terms satisfactory to
Lender.
8
4)
|
Capital
Expenditures and Operating Leases
|
Borrower
shall not permit its Capital Expenditures and amounts owed under operating
leases, individually and collectively on a consolidated and consolidating basis,
in the aggregate to exceed (i) $250,000 for the fiscal year ending August 31,
2005, (ii) $400,000 for the fiscal year ending August 31, 2006 and (iii)
$250,000 in any fiscal year thereafter.”
(n) | Annex 1 of the Loan Agreement is hereby further amended by amending the following defined terms in their entirety |
to read as follows: |
“EBITDA”
shall mean, for any Test Period, the sum, without duplication, of
the
following for Borrower, on a consolidated basis: Net Income determined
in
accordance with GAAP, plus, (a) Interest Expense, (b) taxes on
income, whether paid, payable or accrued, (c) depreciation expense,
(d) amortization expense, (e) all other non-cash, non-recurring charges
and expenses, excluding accruals for cash expenses made in the ordinary
course of business, and (f) loss from any sale of assets, other than
sales
in the ordinary course of business, all of the foregoing determined
in
accordance with GAAP, minus (a) gains from any sale of assets, other
than
sales in the ordinary course of business and (b) other extraordinary
or
non-recurring gains. For avoidance of doubt, any income recognized
by
Borrower in a given Test Period which represents the recovery or
reversal
of federal excise taxes paid in prior periods, shall be excluded
from
EBITDA for such Test Period.
|
|
“Test
Period”
shall mean the twelve most recent calendar months then ended (taken
as one
accounting period), or such other period as specified in the Agreement
or
any Annex thereto; provided that for (i) the Test Period ended November
30, 2005 shall mean the three month period then ended, (ii) the Test
Period ended December 31, 2005 shall mean the four month period then
ended, (iii) the Test Period ended January 31, 2006 shall mean the
five
month period then ended, (iv) the
Test Period ended February 28, 2006 shall mean the six month period
then
ended, (v)
the Test Period ended March 31, 2006 shall mean the one month period
then
ended, (vi) the Test Period ended April 30, 2006 shall mean the two
month
period then ended, (vii) the Test Period ended May 31, 2006 shall
mean the
three month period then ended, (viii) the Test Period ended June
30, 2006
shall mean the four month period then ended, (ix) the Test Period
ended
July 31, 2006 shall mean the five month period then ended, (x) the
Test
Period ended August 31, 2006 shall mean the six month period then
ended,
(xi) the Test Period ended September 30, 2006 shall mean the seven
month
period then ended, (xii) the Test Period ended October 31, 2006 shall
mean
the eight month period then ended, (xiii) the Test Period ended November
30, 2006 shall mean the nine month period then ended, (xiv) the Test
Period ended December 31, 2006 shall mean the ten month period then
ended,
(xv) the Test Period ended January 31, 2007 shall mean the eleven
month
period then ended and (xvi) the Test Period ended February 28, 2007
shall
mean the twelve month period then
ended.
|
9
“Total
Debt Service”
shall mean the sum of (i) all payments of principql on Indebtedness
(including, without limitation, Permitted Principal Payments (as
such term
is defined in the Seller Subordination Agreement) with respect to
the
Additional Seller Note) and (ii) Interest Expense, in each case for
such
period.
|
(o) | Appendix A to the Loan Agreement is hereby amended by amending the following defined terms to provided as |
follows: |
“Permitted
Subordinated Debt”
shall mean indebtedness with respect to the (i) Seller Note in the
original aggregate principal amount of $2,500,000 and (ii) the Additional
Seller Note in the original aggregate principal amount of
$2,322,850.
|
|
“Term”
shall mean the period commencing on the date set forth on the first
page
hereof and ending March 8, 2009.
|
|
“Minimum
Termination Fee”
shall mean (for the time period indicated) the amount equal to (i)
$792,000 if the date of notice of such termination by Borrower is
after
the Closing Date but before March 8, 2007; (ii) $528,000 if the date
of
notice of such termination by Borrower is on or after March 8, 2007
but
before March 8, 2008 and (iii) $264,000 if the date of notice of
such
termination by Borrower is on or after March 8, 2008 but before March
8,
2009.
|
(p) | Appendix A to the Loan Agreement is hereby amended by inserting the following defined terms in their appropriate |
alphabetical order to provide as follows: |
“Additional
Seller Note”
shall mean that certain promissory note dated December 14, 2005 in
the
original principal amount of $2,322,850 executed by Borrower in favor
of
Seller, which Additional Seller Note shall provide for interest quarterly
at four percent (4%) and shall otherwise be in form and substance
satisfactory to Lender.
|
|
“Amendment
No. 2”
shall mean Waiver and Amendment No. 2 to Credit and Security Agreement
dated as of March 8, 2006.
|
|
“Amendment
No. 2 Effective Date”
shall mean, February 28, 2006.
|
|
“Borrowing
Base for Eligible Inventory”
shall mean, as of any date of determination, the lesser
of the cost (computed on a first in, first out basis in accordance
with
GAAP) or market value in U.S. Dollars of
Eligible Inventory, as determined with reference to the most recent
Borrowing Certificate and otherwise in accordance with this Agreement,
but
in no event in excess of eighty-five percent (85%) of the appraised
net
orderly liquidation value thereof, as determined by the most recent
appraisal accepted by Lender; provided,
however,
that if as of such date the most recent Borrowing Certificate is
of a date
more than four Business Days before or after such date, the Borrowing
Base
shall be determined by Lender in its sole
discretion.
|
10
“Credit
Parties”
shall mean, collectively, Parent, Xxxxxxx, Borrower and any Guarantor,
each individually a “Credit Party” and collectively the “Credit
Parties”.
|
|
“Eligible
Inventory”
shall mean Borrower’s saleable finished goods Inventory consisting of
BRAVO branded handsets and assembly units and is currently in existence
at
Borrower’s places of business for which Lender has received a Landlord
Waiver and Consent and/or Mortgagee Waiver and Consent in form
satisfactory to it and is saleable in the ordinary course of Borrower’s
business and which Lender, in its sole discretion, deems Eligible
Inventory unless one or more of the following applies which would
eliminate such items or items of Inventory consisting of finished
goods
from being considered as Eligible Inventory:
|
|
(a) such
Inventory is not subject to a valid perfected first priority security
interest in favor of the Lender;
|
|
(b) any
consent, license, approval or authorization required to be obtained
by
Borrower in connection with the granting of a security interest under
the
Security Documents or in connection with the manufacture or sale
of such
Inventory has not been or was not duly obtained and is not in full
force
and effect;
|
|
(c) any
covenant, representation or warranty contained in this Agreement
or in any
other Loan Document with respect to such Inventory has been breached
and
remains uncured;
|
|
(d) such
Inventory is not owned by Borrower;
|
|
(e) such
Inventory does not comply, or was not manufactured in compliance,
in all
material respects, with all applicable requirements of all statutes,
laws,
rules, regulations, ordinances, codes, policies, rules of common
law, and
the like, now or hereafter in effect, of any Governmental Authority,
including any judicial or administrative interpretations thereof,
and any
judicial or administrative orders, consents, decrees or judgments;
|
11
(f) such
Inventory does not, or at the time of its purchase from the vendor
did
not, constitute “inventory” under Article 9 of the UCC as then in effect
in the jurisdiction whose law governs perfection of the security
interest;
|
|
(g) the
Person for whose account such Inventory is being or was produced
has
commenced a voluntary case under any federal bankruptcy or state
or
federal insolvency laws or has made an assignment for the benefit
of
creditors, or if a decree or order for relief has been entered by
a court
having jurisdiction in respect of such Person in an involuntary case
under
any federal bankruptcy or state or federal insolvency laws, or if
any
other petition or application for relief under any federal bankruptcy
or
state or federal insolvency laws has been filed against such Person,
or if
such Person has failed, suspended business, ceased to be solvent,
called a
meeting of its creditors, or has consented to or suffered a receiver,
trustee, liquidator or custodian to be appointed for it or for all
or a
significant portion of its assets or affairs;
|
|
(h) the
transfer of Inventory to Borrower by vendor, supplier or other Person
did
not constitute a valid sale and transfer to Borrower of all right,
title
and interest of such Person in the inventory enforceable against
all
creditors of and purchasers from such person;
|
|
(i) (A)
Borrower is not the sole owner of all right, title and interest in
and to
such Inventory, (B) Borrower does not have a valid ownership interest
therein free and clear of all Liens other than Liens granted under
the
Loan Documents, or (C) any offsets, defenses or counterclaims have
been asserted or threatened in writing against such
Inventory;
|
|
(j) such
Inventory is not in good working order or is damaged;
|
|
(k) such
Inventory is not located at a location which is owned by Borrower
or
subject to a Landlord Waiver and Consent;
|
|
(l) such
Inventory consists only of packing materials, displays, supplies,
parts or
other components or is returned, rejected, repossessed or discontinued
product or Inventory;
|
|
(m) such
Inventory is subject to a bona fide dispute or is or has been classified
as counterfeit or fraudulent;
|
|
(n) such
Inventory has been sold, assigned, or otherwise encumbered by Borrower
except pursuant to the Loan Documents;
|
12
(o) such
Inventory is not associated with a documented purchase
order;
|
|
(p) such
Inventory consists of equipment that Borrower offers for rental or
that is
being rented from the Borrower or equipment borrowed by Borrower
or given
to Borrower to serve as demonstration equipment;
|
|
(q) such
Inventory constitutes custom Inventory, private-label Inventory,
raw
materials in process, work-in-process, obsolete or unmerchantable
Inventory, slow-moving, unsaleable, shop-worn, damaged or defective
Inventory, Inventory allocated to current warranty assignments, Inventory
that consists of spare parts or Inventory subject to a quality assurance
hold;
|
|
(r) such
Inventory is in transit;
|
|
(s) such
Inventory is (i) not in Borrower’s possession and control or (ii) outside
the continental United States;
|
|
(t) such
Inventory otherwise is not satisfactory to the Lender, as determined
in
the sole discretion of the Lender; or
|
|
(u) such
Inventory is or has been utilized as demonstration
models.
|
|
“Excise
Tax Refund”
shall have the meaning set forth in Section 2.15(e)
hereof.
|
|
“Inventory
Percentage”
shall mean, from time to time, the lesser of (i) 50% of cost or (ii)
85%
of the appraised net orderly liquidation value.
|
|
“Laurus
Loan”
shall mean all indebtedness owed by Parent to Laurus.
|
|
“Permitted
Acquisition Payments”
shall have the meaning set forth in Section
7.2.
|
(q) | Schedule 7.6 to the Loan Agreement is hereby amended in its entirety to read as set forth on Schedule 7.6 |
to this Amendment. |
5. Conditions
of
Effectiveness.
This
Amendment shall become effective upon Lender’s receipt of the following items in
form and substance satisfactory to Lender and its counsel:
(a) | four (4) copies of this Amendment duly executed by the Borrower; |
13
(b) | an amendment fee equal to $25,000 which fee shall be non-refundable and fully earned on the Amendment No. 2 |
Effective Date and which amount shall be paid by Lender by charging Borrower’s account with an Advance for such amount; |
(c) | all fees, interest and expenses payable under Amendment No.1 and Amendment No. 2; |
(d) | the Additional Seller Note, Amendment No. 1 to Seller Note Subordination and Intercreditor Agreement and copies |
of all documents, agreements and other instruments entered into or otherwise related to each transaction described above, each in form and substance satisfactory to Lender |
(e) | Borrower shall pay all costs, fees and expenses of Lender (including the reasonable costs, fees and expenses of |
Lender’s in-house and outside counsel, consultants and appraisers) incurred by Lender in connection with the negotiation, preparation and closing of this Amendment No. 2; and |
(f) | Such other certificates, instruments, documents and agreements as may be required by Lender or its counsel. |
6. Additional
Covenants.
Borrower covenants and agrees as follows:
(a) | By not later than March 15, 2006, Lender shall have received, all in form and substance satisfactory to Lender |
(i) an amendment to the Seller Subordination Agreement executed by F&L L.L.P. with respect to additional subordinated debt in the sum of $2,322,850 (the “Additional Subordinated Note”) and other matters set forth therein and (ii) copies of all documentation relating to the Additional Subordinated Note, including and amendment to the Additional Subordinated Note to extend the maturity thereof to a date which is satisfactory to Lender. |
(b) | Upon the repayment in full of the Laurus Loan, Parent shall promptly (but in no event later than two (2) Business |
Days after the repayment of the Laurus Loan) execute and deliver to Lender a full recourse guaranty of the Obligations substantially as set forth in the amendment to the Parent Stock Pledge Agreement attached to this Amendment as Exhibit 6(b). |
7. Representations
and Warranties.
(a) | This Amendment and the Loan Agreement, as amended hereby, constitute legal, valid and binding obligations |
of the Borrower and are enforceable against Borrower in accordance with their respective terms. |
(b) | Upon the effectiveness of this Amendment, Borrower hereby reaffirms all covenants, representations and |
warranties made in the Loan Agreement and the other Loan Documents to which it is a party to the extent the same are not amended hereby and agree that all such covenants, representations and warranties shall be deemed to have been remade as of the effective date of this Amendment. |
14
(c) | Except as otherwise provided herein, no Event of Default or Default has occurred and is continuing or would exist |
after giving effect to this Amendment. |
(d) | Borrower has no defense, counterclaim or offset with respect to the Loan Agreement or any other Loan Document |
to which it is a party. |
8. Effect
on the Loan
Agreement.
(a) | Upon the effectiveness of Sections 4 hereof, each reference in the Loan Agreement or any other Loan Document |
to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import shall mean and be a reference to the Loan Agreement or the applicable Loan Documents as amended hereby. |
(b) | Except as specifically amended herein, the Loan Documents, shall remain in full force and effect, and are hereby |
ratified and confirmed. |
(c) | The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or |
remedy of Lender, nor constitute a waiver of any provision of the Loan Agreement, or any other Loan Documents. |
9.
Release.
Each Credit Party, both individually and on behalf of its Affiliates, hereby
releases, remises, acquits and forever discharges Lender and its employees,
agents, representatives, consultants, attorneys, fiduciaries, servants,
officers, directors, partners, predecessors, successors and assigns, subsidiary
corporations, parent corporations, and related corporate divisions (all of
the
foregoing hereinafter called the “Released Parties”), from any and all actions
and causes of action, judgments, executions, suits, debts, claims, demands,
obligations, damages and expenses of any and every character, known or unknown,
direct and/or indirect, at law or in equity, of whatsoever kind or nature,
for
or because of any matter or things done, omitted or suffered to be done by
any
of the Released Parties prior to and including the date of execution hereof,
and
in any way directly or indirectly arising out of or in any way connected to
the
Loan Agreement, this Amendment and the other Loan Documents (all of the
foregoing hereinafter called the “Released Matters”). Each Credit Party, both
individually and on behalf of its Affiliates, acknowledges that the agreements
in this Section are intended to be in full satisfaction of all or any alleged
injuries or damages arising in connection with the Released Matters. Each Credit
Party agrees to indemnify and hold harmless the Released Parties with respect
to
any action brought on behalf of any of its Affiliates with respect to any of
the
Released Matters.
10. Governing
Law. This Amendment shall be governed by and construed in accordance
with the internal laws
of
the State of Maryland without giving effect to its choice of law provisions.
Any
judicial proceeding against Borrower with respect to the Obligations, any Loan
Document (including this Amendment) or any related agreement may be brought
in
any federal or state court of competent jurisdiction located in the State of
Maryland. Any judicial proceedings against Lender involving, directly or
indirectly, the Obligations, any Loan Document or any related agreement shall
be
brought only in a federal or state court located in the State of Maryland.
All
parties acknowledge that they participated in the negotiation and drafting
of
this Agreement with the assistance of counsel and that, accordingly, no party
shall move or petition a court construing this Agreement to construe it more
stringently against one party than against any other.
15
11. Headings.
Section headings in this Amendment are included herein for convenience of
reference only and shall not constitute a part of this Amendment for any other
purpose.
12. Counterparts;
Facsimile. This Amendment may be executed by the parties hereto in one or
more counterparts, each of which shall be deemed an original and all of which
when taken together shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
16
IN
WITNESS WHEREOF, each of the parties has duly executed this Amendment No. 2
as
of the date first written above.
CAPITALSOURCE FINANCE LLC | ||
|
|
|
By: | /s/ | |
|
||
Name: | ||
Its: |
OBLIO TELECOM, INC. | ||
|
|
|
By: | /s/ Xxxxx X. Xxxxx | |
|
||
Name: Xxxxx X. Xxxxx | ||
Its: Chairman |
PINLESS, INC. | ||
|
|
|
By: | /s/ Xxxxx X. Xxxxx | |
|
||
Name: Xxxxx X. Xxxxx | ||
Its: Chairman |
ACKNOWLEDGE
AND AGREED:
TITAN GLOBAL HOLDINGS, INC. | ||
|
||
By: | /s/ Xxxxx X. Xxxxx | |
|
||
Name: Xxxxx X. Xxxxx | ||
Title: Chairman |
XXXXXXX EQUITY PARTNERS, LLC | ||
|
||
By: | /s/ Xxxxx X. Xxxxx | |
|
||
Name: Xxxxx X. Xxxxx | ||
Its: Managing Member |
17
Schedule
7.6
Transactions
with Affiliates
1.
|
Up
to $27,500 per moh payable to Parent for overhead
allocation.
|
|
2.
|
Up
to $25,000 per month to Parent in payment of a service fee (the
“Parent
Fee”), provided that no such payment of the Parent Fee shall be made
until
the payment in full of the Laurus Loan and the receipt by Lender
of a
written acknowledgement from Laurus that the Laurus Loan has been
paid in
full.
|
|
3.
|
$10,000
per month payable to Xxxx Xxxxxx in connection with a month to
month
consulting agreement.
|
|
4.
|
Salaries
and bonuses payable under employment agreements with Xxxxx Xxxxxx
and Radu
Archiriloaie as permitted under Section 7.6(i).
|
|
5.
|
Dividend
and redemption payments on and any stock issues upon conversion
of, the
Series A Preferred Stock as permitted under Section
7.5.
|
|
6.
|
Payments
under the Seller Note and the Additional Seller Note as permitted
by
Section 7.11 and the Seller Subordination
Agreement
|
18