SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
(together with all appendices, exhibits, schedules and
attachments hereto, collectively this "Amendment") is made and
entered into as of September 16, 1997, by and between VALLEY
COMMUNICATIONS, INC., a California corporation ("Borrower") and
SANWA BUSINESS CREDIT CORPORATION, a Delaware corporation
("Lender").
RECITALS
WHEREAS, Borrower and Lender entered into that certain Loan
and Security Agreement dated as of March 14, 1996, as amended
from time to time (the "Loan Agreement"), together with documents
ancillary thereto;
WHEREAS, there currently exists several Events of Default
pursuant to the Loan Agreement due to Borrower's failure to
comply with certain covenants, as more fully described herein;
WHEREAS, Borrower has requested and Lender has agreed to
waive certain Events of Default, as more fully described herein;
WHEREAS, Borrower has requested and Lender has agreed to
reset certain financial covenants, as more fully described
herein;
WHEREAS, Borrower and Lender wish to amend the Loan
Agreement to incorporate the aforesaid;
NOW THEREFORE, for and in consideration of the premises, the
mutual covenants hereinafter set forth and other good and
valuable consideration, the receipt and sufficiency of which the
parties hereby acknowledge, the parties hereby agree as follows:
ARTICLE
1.
RECITALS AND DEFINITIONS
1.1. Borrower represents and warrants that the foregoing
recitals are true and correct and constitute an integral part of
this Amendment and Borrower and Lender hereby agree that all of
the recitals of this Amendment are hereby incorporated herein and
made a part hereof.
1.2. Unless otherwise defined herein or the context
otherwise requires, all capitalized terms used herein shall have
the same meanings as ascribed to them in the Loan Agreement.
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ARTICLE
2.
AMENDMENT OF THE LOAN AGREEMENT
2.1. Section 10.1(A) of the Loan Agreement hereby is
deleted in its entirety and the following substituted therefor:
(i) Maintain a ratio of total liabilities to Tangible
Net Worth of not more than 5.00:1.0 during the period
commencing on April 1, 1997 and ending on March 31, 1998
("Borrower's 1998 Fiscal Year") and of not more than 4.0:1.0
for all time thereafter; (ii) maintain at all times Tangible
Net Worth at least equal to $1,350,000, to be adjusted for
any dividends paid to or for the benefit of the holder or
holders of Borrower's Stock, as permitted by Section
10.2(C); provided, however, that for all times during
Borrower's 1998 Fiscal Year, Tangible Net Worth (as
adjusted) shall be at least equal to $950,000; (iii)
maintain a ratio of Current Assets to Current Liabilities of
not less than 1.0:1.0 during Borrower's 1998 Fiscal Year and
of not less than 1.1:1.0 for all times thereafter; and (iv)
maintain Pre-Tax Net Income of not less than $350,000 at the
end of each fiscal year of Borrower; all as determined for
each of the foregoing financial covenants in accordance with
generally accepted accounting principles consistently
applied;
ARTICLE
3.
WAIVER
3.1. Lender hereby waives the following existing Events of
Default under the Loan Agreement:
a. Borrower's failure to comply with the Tangible Net
Worth covenant set forth in Section 10.1(A)(ii) of the Loan
Agreement for the period commencing as of June 30, 1997, and
ending as of the date hereof; and
b. Borrower's failure to timely comply with the
audited financial statement deliveries set forth in Section
10.1(E)(i) for the fiscal year ending on March 31, 1997;
provided, however that this waiver is conditioned upon Borrower
delivering such audited financial statements to Lender on or
before September 30, 1997.
Except as specified in this Article 3, Lender is not
waiving any rights under the Loan Agreement or under any
Ancillary Agreements. Borrower acknowledges that except to the
extent expressly modified in this Agreement, Lender's waiver
herein shall not be construed as a bar to or waiver of any such
right or remedy which Lender would otherwise have on any future
occasion, whether similar in kind or otherwise. The waivers set
forth in this Article 3 shall not establish a course of dealing
and shall not, under any circumstances, constitute a waiver by
Lender of any subsequent failure on the part of Borrower to
comply with the provisions of the
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Loan Agreement. The waivers contained herein are specifically
limited to the facts, time periods and circumstances described
herein.
ARTICLE
4.
REPRESENTATIONS AND WARRANTIES
4.1. Borrower hereby makes the following representations
and warranties to Lender, which representations and warranties
shall constitute the continuing covenants of Borrower and shall
remain true and correct until all of Borrower's Liabilities are
paid and performed in full:
a. The representations and warranties of Borrower
contained in the Loan Agreement are true and correct on and as of
the date hereof as though made on and as of such date;
b. Except as described hereinbefore, no Event of
Default or event which, but for the lapse of time or the giving
of notice, or both, would constitute an Event of Default under
the Loan Agreement has occurred and is continuing or would result
from the execution and delivery of this Amendment;
c. Except as described hereinbefore, Borrower is in
full compliance with all of the terms, conditions and all
provisions of the Loan Agreement and the other agreements;
d. This Amendment and all other agreements required
hereunder to be executed by Borrower and delivered to Lender,
have been duly authorized, executed and delivered on Borrower's
behalf pursuant to all requisite corporate authority and this
Amendment and each of the other agreements required hereunder to
be executed and delivered by Borrower to Lender constitute the
legal, valid and binding obligations of Borrower enforceable in
accordance with their terms, except as enforceability thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to creditors' rights; and
e. Borrower hereby acknowledges and agrees that
Borrower has no defense, offset or counterclaim to the payment of
said principal, interest, fees or other liabilities and hereby
waives and relinquishes any such defense, offset or counterclaim
and Borrower hereby releases Lender and its respective officers,
directors, agents, affiliates, successors and assigns from any
claim, demand or cause of action, known or unknown, contingent or
liquidated, which may exist or hereafter be known to exist
relating to any matter prior to the date hereof.
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ARTICLE
5.
RATIFICATION
Except as expressly amended hereby, the Loan Agreement and
all other agreements executed in connection therewith shall
remain in full force and effect. The Loan Agreement, as amended
hereby, and all rights and powers created thereby and thereunder
or under such other agreements, are in all respects ratified and
confirmed. From and after the date hereof, the Loan Agreement
shall be deemed amended and modified as herein provided but,
except as so amended and modified, the Loan Agreement shall
continue in full force and effect and the Loan Agreement and this
Amendment shall be read, taken and construed as one and the same
instrument. On and after the date hereof, the term "Agreement"
as used in the Loan Agreement and all other references to the
Loan Agreement therein, in any other instrument, document or
writing executed by Borrower or any guarantor or furnished to
Lender by Borrower or any guarantor in connection therewith or
herewith shall mean the Loan Agreement as amended by this
Amendment.
ARTICLE
6.
MISCELLANEOUS
6.1. Borrower agrees to pay to Lender, contemporaneously
herewith, all out-of-pocket costs and expenses of Lender,
including without limitation, reasonable attorneys' fees, costs,
expenses incurred by Lender in connection with the negotiation,
preparation, execution and delivery of this Amendment and all
other matters pertaining hereto.
6.2. Borrower agrees to pay Lender, contemporaneously
herewith, an amendment fee in the amount of $2,500 in
consideration of Lender's agreements contained herein.
6.3. This Amendment may be signed in any number of
counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same
instrument.
6.4. Except as otherwise specified herein, this Amendment
embodies the entire agreement and understanding between Lender
and Borrower with respect to the subject matter hereof and
supersedes all prior agreements, consents and understandings
relating to such subject matter.
6.5. The headings in this Amendment have been inserted for
convenience only and shall be given no substantive meaning or
significance in construing the terms of this Amendment.
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6.6. This Amendment shall inure to the benefit of Lender
and its successors and assigns and shall be binding upon and
inure to the successors and assigns of Borrower, except that
Borrower may not assign any of its rights in and to this
Amendment.
6.7. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one in the same
document.
6.8. THIS AMENDMENT AND (UNLESS OTHERWISE EXPRESSLY STATED
THEREIN) EACH OTHER LOAN DOCUMENT AND/OR ANCILLARY AGREEMENT
SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF STATE
OF ILLINOIS, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
WHEREVER POSSIBLE, EACH PROVISION OF THIS AMENDMENT AND EACH
OTHER LOAN AGREEMENT AND/OR ANCILLARY AGREEMENT SHALL BE
INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER
APPLICABLE LAW, BUT IF ANY PROVISION OF THIS AMENDMENT OR ANY
OTHER LOAN DOCUMENT OR ANCILLARY AGREEMENT SHALL BE PROHIBITED BY
OR INVALID UNDER SUCH LAW, SUCH PROVISIONS SHALL BE INEFFECTIVE
TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING
PROVISIONS OF THIS AMENDMENT OR SUCH OTHER LOAN DOCUMENT AND/OR
ANCILLARY AGREEMENT. ALL OBLIGATIONS OF THE BORROWER, AND
RIGHTS OF THE LENDER AND OF ANY OTHER HOLDER OF ANY NOTE,
EXPRESSED HEREIN OR IN THE LOAN DOCUMENTS SHALL BE IN ADDITION TO
AND NOT IN LIMITATION OF THE THOSE PROVIDED BY APPLICABLE LAW.
IN WITNESS WHEREOF, Borrower and Lender have caused this
Second Amendment to Loan and Security Agreement to be executed
and delivered in Chicago, Illinois as of the day and year written
above.
VALLEY COMMUNICATIONS, INC.
By: /s/ R. Xxxxx Xxxxxxx
Assistant Secretary
SANWA BUSINESS CREDIT CORPORATION
By: /s/ Xxxxxx X. Xxxxx
Vice President
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