Contract
Exhibit
10.1
WAIVER
and SECOND AMENDMENT, dated as of June 21, 2007
(this “Waiver”), executed in connection with the FINANCING
AGREEMENT, dated as of June 8, 2005 (as the same
has heretofore been amended and may hereafter be amended, restated, modified
or
supplemented from time to time, the “Financing Agreement”), among
MTM TECHNOLOGIES, INC., a New York corporation
(“Parent”), each of its subsidiaries that is a party thereto (each of
Parent and each such subsidiary, a “Company” and collectively the
“Companies”), and any other entity that becomes a party thereto as a
borrower and THE CIT GROUP/BUSINESS CREDIT, INC., a New York
corporation (“CIT”), and any other entity becoming a Lender
(collectively, the “Lenders” and each individually as a “Lender”),
and CIT, as Agent for the Lenders (the “Agent”). Terms which
are capitalized in this Waiver and not otherwise defined shall have the meanings
ascribed to such terms in the Financing Agreement.
WHEREAS,
the Companies have requested that the Lenders (i) waive as Events of Default
the
violation by the Companies of the Consolidated Fixed Charge Coverage Ratio
and
the Consolidated Senior Leverage Ratio requirements for the period of four
consecutive fiscal quarters ending on or about Xxxxx 00, 0000, (xx) waive the
breach by the Companies of any representations and warranties set forth in
the
Financing Agreement or any other Loan Documents to which they are a party solely
as a result of the foregoing, (iii) re-establish their Commitment to make
Revolving Loans, pursuant to the Financing Agreement, and (iv) agree to modify
certain terms of the Financing Agreement, and the Lenders have agreed to the
foregoing requests, on the terms and subject to satisfaction of the conditions
contained in this Waiver;
NOW,
THEREFORE, in consideration of the mutual promises contained herein,
and for other good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section
One. Amendment. Effective
as of the date hereof, upon the satisfaction of the conditions precedent set
forth in Section Four hereof, the Financing Agreement is hereby amended as
follows:
(a) Section
1.1. Defined
Terms. Section 1.1 of the Financing Agreement is amended
by adding the term Consulting Charges, and the definition thereof, in the
appropriate alphabetical order, and by deleting the definitions of the terms
Consolidated EBITDA and Consolidated Fixed Charges, and substituting the
following in lieu thereof:
“Consolidated
EBITDA shall mean, for any period, with respect to the Parent and
its consolidated Subsidiaries, other than the Excluded Subsidiaries, all
earnings before all interest, tax obligations and depreciation and amortization
expense for such period, all determined in conformity with GAAP on a basis
consistent with the latest audited financial statements of the Parent, but
excluding the effect of extraordinary and/or nonrecurring gains or losses for
such period and,
to
the extent included in the calculation of earnings for such period, excluding
any Consulting Charges paid during such period.”
“Consolidated
Fixed Charges shall mean, for any period, with respect to the Parent and its
consolidated Subsidiaries, other than the Excluded Subsidiaries, the sum of
(a) all cash interest obligations (including, without limitation, cash
interest obligations in respect of any Investor Obligations, Textron Obligations
and/or Subordinated Debt) paid or due during such period, (b) the amount of
all scheduled fees paid to the Agent and the Lenders during such period,
(c) the amount of principal repaid in cash or scheduled to be repaid but
not paid on Indebtedness (other than the Revolving Loans and any loans made
pursuant to the Textron Loan Agreement) during such period (including, without
limitation, principal repayments in respect of any Investor Obligations and/or
Subordinated Debt, but not including principal repayments in respect of any
Indebtedness that is, by its terms, payable only in stock) provided, that,
cash
payments made in respect of Indebtedness incurred in connection with any
Permitted Acquisition will be excluded from Consolidated Fixed Charges to the
extent that they were made with the proceeds of capital contributions (either
in
the form of equity or Subordinated Debt) and not with the proceeds of Revolving
Loans or other working capital, (d) unfinanced Capital Expenditures
incurred during such period, (e) all cash payments made or due in respect
of any earnout or similar contingent obligations during such period, provided,
that, such cash payments will be excluded from Consolidated Fixed Charges to
the
extent that they were made with the proceeds of capital contributions (either
in
the form of equity or Subordinated Debt) and not with the proceeds of Revolving
Loans or other working capital, (f) all payments made or due in respect of
Capital Leases during such period, and (g) all cash charges incurred during
such
period relating to severance, restructuring and other similar kinds of
expenses. For avoidance of doubt, the calculation of Consolidated
Fixed Charges for any period of determination shall not include any Consulting
Charges due or payable during such period.”
”Consulting
Charges shall mean, for any period, the fees and
disbursements due or payable in cash during such period by the Parent to Xxxx
Xxxxx Associates for the consulting services provided to the Companies by such
consultant.”
(b)
Section
7.2(h). Financial
Reporting. Section 7.2(h) of the Financing Agreement is
amended by (i) deleting clause (v) in its entirety, and by substituting the
following in lieu thereof, and (ii) adding new clauses (vi) and (vii)
thereto, as follows:
“(v)
on
each Business Day, a financial report, in form and substance reasonably
satisfactory to the Agent, which report shall indicate the
2
amount
of
Consolidated Liquidity as of the close of business on the preceding Business
Day, together with a calculation thereof, in reasonable detail.”
“(vi)
on
Friday of each week (or on the following Business Day, if such Friday is not
a
Business Day), a rolling 13 week cash forecast and report, in form and substance
reasonably satisfactory to the Agent, which report shall be updated each week,
through the close of business on the Business Day preceding the date on which
such report is so delivered to the Agent, and which report shall include an
analysis, in reasonable scope and detail, of the preceding week’s variations to
budget.”
“(vii) deliver
to the Agent a copy of each periodic report prepared for the Companies by Xxxx
Xxxxx Associates, no later than the Business Day following the Parent’s receipt
of each such report, which report shall include, without limitation, (I)
initially, an analysis of the methodology employed by the Companies in the
development of their rolling 13 week cash forecast and a discussion of the
recommendations made by Xxxx Xxxxx Associates for the improvement of such
methodology and forecasting, and (II) on an ongoing bi-weekly basis (that is,
every other week), an analysis of the actual performance and results of the
Companies for each month and each rolling 13 week period, a summary of the
variations, if any, between such results and the EBITDA and cash budgets
forecasted for such month and period, and the reasons for such
variations.”
(c) Section
7.3. Financial
Covenants. Section 7.3 of the Financing Agreement is
deleted in its entirety, and the following is substituted in lieu
thereof:
“7.3
Financial Covenants. Until termination of this Financing
Agreement and the full and final payment and satisfaction of all Obligations,
each Company agrees:
(a) Consolidated
EBITDA. To cause the Parent to have Consolidated EBITDA for each
measuring period set forth below of not less than the amount set forth below
opposite such measuring period:
|
measuring
period
|
minimum
Consolidated EBITDA
|
|
|
(i)
|
fiscal
quarter ending on or about June 30, 2007
|
$ 424,000
|
|
(ii)
|
two
fiscal quarters ending on or about September 30, 2007
|
1,358,000
|
3
|
(iii)
|
three
fiscal quarters ending on or about December 31, 2007
|
3,227,000
|
|
(iv)
|
four
fiscal quarters ending on or about March 31, 2008
|
5,096,000
|
|
(b)
|
Consolidated
Fixed Charge Coverage Ratio. To cause the Parent to
maintain a Consolidated Fixed Charge Coverage Ratio for each measuring
period set forth below of not less than the ratio set forth below
opposite
such measuring period:
|
|
measuring
period
|
minimum
Consolidated Fixed Charge Coverage Ratio
|
|
|
(i)
|
fiscal
quarter ending on or about June 30, 2007
|
.17
to 1.00
|
|
(ii)
|
two
fiscal quarters ending on or about September 30, 2007
|
.34
to 1.00
|
|
(iii)
|
three
fiscal quarters ending on or about December 31, 2007
|
.57
to 1.00
|
|
(iv)
|
four
fiscal quarters ending on or about March 31, 2008
|
.68
to 1.00
|
|
(c)
|
Consolidated
Fixed Charges. To cause Parent to incur Consolidated Fixed
Charges for each fiscal quarter set forth below in an aggregate amount
not
greater than the amount set forth below opposite such fiscal
quarter:
|
|
fiscal
quarter ending on or about
|
maximum
Consolidated Fixed Charges
|
|
|
(i)
|
June
30, 2007
|
$2,455,000
|
|
(ii)
|
September
30, 2007
|
1,539,000
|
|
(iii)
|
December
31, 2007
|
1,682,000
|
|
(iv)
|
March
31, 2008
|
1,808,000
|
|
|
(d)
|
Consolidated
Liquidity. To cause the Parent to have
Consolidated Liquidity
at all times of not less than
$3,000,000.”
|
4
Section
Two. Waivers;
Reinstatement of Commitment. The
Companies have advised the Lenders that Parent has (i) failed to maintain a
Consolidated Senior Leverage Ratio for the period of four consecutive fiscal
quarters ended on or about March 31, 2007 of not greater than 4.00 to 1.00,
in
violation of Section 7.3(a) of the Financing Agreement, and (ii) failed to
maintain a Consolidated Fixed Charge Coverage Ratio for the period of four
consecutive fiscal quarters ended on or about March 31, 2007 of not less than
1.00 to 1.00, in violation of Section 7.3(b) of the Financing
Agreement. Each such violation constitutes an Event of Default under
Section 10.1(e) of the Financing Agreement (such Events of Default,
collectively, the “Financial Covenant Defaults”). Effective as
of the date hereof, upon the satisfaction of the conditions precedent set forth
in Section Four hereof, (x) the Lenders hereby waive the Financial Covenant
Defaults and any breach by the Companies of any representations and warranties
set forth in the Financing Agreement or any other Loan Document to which they
are a party solely as a result of the foregoing (each such breach, together
with
the Financial Covenant Defaults, the “Designated Defaults”) as Events of
Default and (y) the Lenders hereby reestablish the Commitment to the Companies
pursuant to, and in accordance with the terms and conditions of, the Financing
Agreement. Nothing contained herein shall constitute a waiver by the
Lenders of any Events of Default other than the Designated Defaults, whether
or
not they have any knowledge thereof, nor shall anything contained herein
constitute a waiver of any future Event of Default
whatsoever. Henceforth, the Lenders shall require strict compliance
by the Companies with all of the terms and provisions contained in the Financing
Agreement.
Section
Three. Representations
and Warranties. To induce the Lenders
to enter into this Waiver, each Company hereby warrants and represents to the
Lenders as follows:
(a) all
of
the representations and warranties contained in the Financing Agreement and
each
other Loan Document to which such Company is a party continue to be true and
correct in all material respects as of the date hereof, as if repeated as of
the
date hereof, except (i) with respect to the absence of the occurrence and
continuation of any Event of Default, as to which the Lenders acknowledge the
occurrence of the Designated Defaults, and (ii) to the extent of changes
resulting from transactions expressly permitted by the Financing Agreement,
this
Waiver or any of the other Loan Documents, or to the extent that such
representations and warranties are expressly made only as of an earlier
date;
(b) the
execution, delivery and performance of this Waiver by such Company is within
its
corporate powers, has been duly authorized by all necessary corporate action,
and such Company has received all necessary consents and approvals, if any
are
required, for the execution and delivery of this Waiver;
(c) upon
the
execution of this Waiver, this Waiver shall constitute the legal, valid and
binding obligation of such Company, enforceable against such Company in
accordance with its terms, except as such enforceability may be limited by
(i)
bankruptcy, insolvency or similar laws affecting creditors’ rights generally and
(ii) general principles of equity;
(d) neither
the execution and delivery of this Waiver, nor the consummation of the
transactions herein contemplated, nor compliance with the provisions hereof
will
(i) violate any law or regulation applicable to any Company, (ii) cause a
violation by any Company of any order or decree of any court or government
instrumentality applicable to it, (iii) conflict with, or result
5
in
the
breach of, or constitute a default under, any indenture, mortgage, deed of
trust, or other material agreement or material instrument to which any Company
is a party or by which it may be bound, (iv) result in the creation or
imposition of any lien, charge, or encumbrance upon any of the property of
any
Company, except in favor of the Lenders, to secure the Obligations, (v) violate
any provision of the Certificate of Incorporation, By-Laws or any capital stock
provisions of any Company, or (vi) be reasonably likely to have a Material
Adverse Effect; and
(e) the
Parent received by wire transfer of funds to its bank account on May 24, 2007
proceeds of the cash equity infusion described in Section Four (d) below in
the
aggregate amount of $4,999,000.28, which proceeds were used by the Parent in
payment of the obligations in the respective approximate amounts and owing
to
the respective obligees set forth on Annex I to this Waiver.
Section
Four. Conditions
Precedent. This Waiver shall become
effective upon the satisfaction of the following conditions
precedent:
(a) the
Agent
shall have received an original of this Waiver, duly executed by all of the
parties hereto other than CIT;
(b) the
Agent
shall have received and reviewed to its satisfaction a copy of the fully
executed waiver of Textron of all events of default existing under the Textron
Loan Agreement;
(c) the
Agent
shall have received and reviewed to its satisfaction a copy of the fully
executed waiver of Columbia Partners, L.L.C. Investment Management and National
Electrical Benefit Fund (collectively, the “Columbia Lenders”) of all
events of default existing under that certain Credit Agreement dated as of
November 23, 2005, by and among the Columbia Lenders, on the one hand, and
Parent, together with each of its subsidiaries that is a party thereto, on
the
other hand;
(d) the
Parent shall have received the proceeds of a cash equity infusion in the
aggregate amount of not less than $4,999,000.28 from Constellation Venture
Capital II, L.P. and/or Pequot Private Equity Fund III, L.P. (or from affiliated
funds of either such entity), and, in conjunction therewith, the Agent and
its
counsel shall have received and reviewed to their reasonable satisfaction all
documents, instruments and agreements executed or delivered in connection with
such equity infusion;
(e) the
Agent
shall have received and reviewed to its satisfaction a draft version of the
audited financial statements of the Parent and its consolidated subsidiaries
for
the fiscal year ended on or about March 31, 2007, together with all accompanying
footnotes, prepared without qualification by the Parent’s independent public
accountants;
(f) the
Parent shall have engaged Xxxx Xxxxx Associates (or shall have continued the
existing engagement of Xxxx Xxxxx Associates) for the sole purpose of assisting
the Parent and the other Companies by providing the analysis described in
Section 7.2(h)(vii) of the Financing Agreement, the Agent shall have received
and reviewed to its satisfaction a copy of the agreement pursuant to which
such
engagement (or the continuation of such existing engagement, as the case may
be)
shall have been accepted, and Xxxx Xxxxx Associates shall have commenced its
work pursuant to such engagement no later than June 29, 2007;
6
(g) the
Agent
shall have received a non-refundable fee in the amount of $25,000 (the
“Fee”), for the pro rata benefit of the Lenders, which shall be fully
earned on the date hereof. The Companies authorize Agent to charge
their loan account with the amount of the Fee; and
(h) except
for the Designated Defaults, no Default or Event of Default, and no event or
development which has had or is reasonably likely to have a Material Adverse
Effect, shall have occurred or be continuing on the date hereof.
Section
Five. General
Provisions
(a) Except
as
herein expressly amended, the Financing Agreement and all other agreements,
documents, instruments and certificates executed in connection therewith, are
ratified and confirmed in all respects and shall remain in full force and effect
in accordance with their respective terms.
(b) This
Waiver embodies the entire agreement between the parties hereto with respect
to
the subject matter hereof and supercedes all prior agreements, commitments,
arrangements, negotiations or understandings, whether written or oral, of the
parties with respect thereto.
(c) This
Waiver, and matters relating hereto and arising herefore, shall be governed
by
and construed in accordance with the internal laws of the State of New York,
without regard to the conflicts of law principals thereof.
(d) This
Waiver may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original, and such counterparts together
shall
constitute one and the same respective agreement.
(Signature
Page Follows)
7
IN
WITNESS WHEREOF, the parties to this Waiver have
signed below to indicate their agreement with the foregoing and their intent
to
be bound thereby.
|
THE
CIT GROUP/BUSINESS CREDIT, INC., as a Lender and as the
Agent
|
|
|
By:
_______________________________________
|
|
|
Name: Xxxxxx
Xxxxxxxxxxx
Title: Vice
President
|
|
|
for
itself and as Borrowing Agent, and as successor by merger with
each
of
MTM Technologies (California), Inc., and MTM Technologies (Texas), Inc. |
|
|
By:________________________________________
|
|
|
Name:
Title:
Senior Vice President and Chief
Financial Officer
|
|
|
MTM
TECHNOLOGIES (US), INC.
|
|
|
By:
_______________________________________
|
|
|
Name:
|
|
|
Title: Senior
Vice President and Chief
Financial Officer
|
|
|
INFO
SYSTEMS, INC.
|
|
|
By:________________________________________
|
|
|
Name:
|
|
|
Title: Senior
Vice President and Chief
Financial Officer
|
|
|
MTM
TECHNOLOGIES (MASSACHUSETTS), LLC
|
|
|
By:
_______________________________________
|
|
|
Name:
|
|
|
Title: Senior
Vice President and Chief
Financial Officer
|
8
ANNEX
I
Schedule
of Payments Made From Proceeds of $5,000,000 Equity Infusion
|
Amount
|
Payee
|
|
$2.2
million
|
Textron
|
|
$600,000
|
Westcon
|
|
$500,000
|
Capatris
|
|
$500,000
|
EMC
|
|
$500,000
|
Cisco
|
|
$200,000
|
Arrow
|
|
$4.5
million
|
TOTAL
|
