Comerica Bank-California Exhibit 10.12
THIRD AMENDMENT TO
REVOLVING LOAN AND SECURITY AGREEMENT
This THIRD AMENDMENT TO REVOLVING LOAN AND SECURITY AGREEMENT is entered
into as of March 24, 2003 (this "Amendment") by and between COMERICA
BANK-CALIFORNIA ("Bank"), a California banking corporation and XXXX, XXXXXX &
ASSOCIATES, INC., a Delaware corporation ("Borrower").
RECITALS
WHEREAS, Borrower and Bank have previously entered into that certain
Revolving Loan and Security Agreement dated June 13, 2002 (as amended, the "Loan
Agreement"); and
WHEREAS, Borrower is requesting modifications to certain financial
covenants, and Bank has agreed to modify certain financial covenants pursuant to
certain terms and conditions, as set forth more completely herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Incorporation by Reference; Definitions. The foregoing Loan Agreement
and the Recitals are incorporated herein by this reference as though set forth
in full herein. Any term not defined herein shall have the meaning given in the
Loan Agreement.
2. Amendment to the Loan Agreement. The Loan Agreement is hereby modified
as set forth below.
2.1 Amendment to Definition "Committed Line". The definition
"Committed Line" is hereby amended by deleting it in its entirety and replacing
it with the following:
"Committed Line" means Twelve Million and 00/100 Dollars
($12,000,000.00), provided, however that commencing June 15, 2003,
"Committed Line" shall mean Ten Million and 00/100 Dollars
($10,000,000.00), further, provided that commencing September 15, 2003,
"Committed Line" shall mean Nine Million and 00/100 Dollars
($9,000,000.00)."
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2.2 Amendment to Definition "Effective Tangible Net Worth". The
definition "Effective Tangible Net Worth" is hereby amended by deleting it in
its entirety and replacing it with the following:
"Effective Tangible Net Worth" means consolidated net worth as
determined in accordance with GAAP consistently applied; plus Subordinated
Debt, if any, less all intangibles, including goodwill, capitalized
organizational and financing costs, Patents, Copyrights, Trademarks,
licenses, subscription lists, trade receivables converted to notes, money
due from Affiliates (including officers, directors, subsidiaries and
commonly held companies), and investments in Persons not one hundred
percent (100%) owned by Borrower; less receivables related to Borrower's
non-qualified savings plan for its vice presidents."
2.3 Amendment to Definition "Termination Date". The definition
"Termination Date" is hereby amended by deleting the term "May 1, 2004" and
replacing it with the term "January 1, 2004".
2.4 Amendment to Section 2.1.1 of the Loan Agreement. Section 2.1.1 of
the Loan Agreement is hereby amended by deleting it in its entirety and
replacing it with the following:
"2.1.1 Borrowing Base. Borrowing Base shall mean an amount equal to
the sum of: (a) Seventy-five percent (75%) of the Net Amount of Eligible
Accounts, provided, however that commencing July 15, 2003 the advance rate
shall be seventy percent (70%) of the Net Amount of Eligible Accounts; less
(b) commissions payable; less (c) payroll taxes withheld; less (d) employee
withholding; less (e) accrued payroll; less (f) accrued payroll taxes; less
(g) accrued vacation and severance pay; less (h) any Availability
Reserves."
2.5 Amendment to Section 2.5 of the Loan Agreement. Section 2.5 of the
Loan Agreement is hereby amended by deleting it in its entirety and replacing it
with the following:
"2.5 Interest. Borrower shall pay interest to Bank on the outstanding
and unpaid principal balance of the Advances made under the Revolving
Facility at a rate per annum equal to the Base Rate; plus one and one-half
percent (1.50%); provided, however that if Bank does not receive the
proposal letter by April 21, 2003 then the outstanding and unpaid principal
balance of the Advances made under the Revolving Facility shall bear
interest at a rate per annum equal to the Base Rate; plus three percent
(3.0%), further, provided that commencing June 15, 2003 Borrower shall pay
interest to Bank on the outstanding and unpaid principal balance of
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the Advances made under the Revolving Facility at a rate per annum equal to
the Base Rate; plus three percent (3%), further, provided that commencing
September 15, 2003 Borrower shall pay interest to Bank on the outstanding
and unpaid principal balance of the Advances made under the Revolving
Facility at a rate per annum equal to the Base Rate; plus five percent
(5%)."
2.6 Amendment to Section 2.5.1 of the Loan Agreement. Section 2.5.1 of
the Loan Agreement is hereby amended by deleting it in its entirety.
2.7 Amendment to Section 2.5.2 of the Loan Agreement. Section 2.5.2 of
the Loan Agreement is hereby amended by deleting it in its entirety. Borrower
acknowledges that it shall not be given the option of LIBOR Advances.
2.8 Amendment to Section 8 of the Loan Agreement. Section 8 of the
Loan Agreement is hereby amended by adding new subsection 8.12 as follows:
"8.12 Cash Flow Budget Report. Borrower shall from time to time, but
not less than bi-weekly, execute and deliver to Bank, a rolling eight (8)
week cash flow budget report, signed by a Responsible Officer in form and
substance acceptable to Bank."
2.9 Amendment to Section 8.3 of the Loan Agreement. Section 8.3 of the
Loan Agreement is hereby amended by adding the following new subsection 8.3.5 as
follows:
"8.3.5 Monthly Financial Statements. As soon as available and in any
event within twenty (20) days after the end of each month, consolidated and
consolidating balance sheets of Borrower and its Subsidiaries as of the end
of such month, and consolidated and consolidating statements of income and
retained earnings of Borrower and its Subsidiaries for such month, and
consolidated and consolidating statements of changes in financial position
of the Borrower and its Subsidiaries for such month, all in reasonable
detail and all prepared in accordance with GAAP consistently applied."
2.10 Amendment to Section 8.3.4 of the Loan Agreement. Section 8.3.4
of the Loan Agreement is hereby amended by deleting it in its entirety and
replacing it with the following:
"8.3.4 Compliance Certificate. Together with the delivery of the
annual, quarterly and monthly financial statements referenced in Sections
8.3.1, 8.3.2 and 8.3.5 of this Agreement, Borrower shall deliver to Lender
a certificate of Borrower's chief
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financial officer or chief accounting officer, in the form of the attached
Exhibit A, (a) setting forth in reasonable detail the calculations required
to establish whether the Borrower was in compliance with (i) the
requirements of Article IX, inclusive; and (ii) the payment of payroll
taxes, on the date of such certificate; and (b) stating whether any Event
of Default exists on the date of such certificate and, if any Event of
Default then exists, setting forth the details thereof and the action which
the Borrower is taking or proposes to take with respect thereto."
2.11 Amendment to Section 8.5 of the Loan Agreement. Section 8.5 of
the Loan Agreement is hereby amended by deleting it in its entirety and
replacing it with the following:
"8.5 Weekly Borrowing Base Certificate. Borrower shall from time to
time, but not less than weekly, execute and deliver to Bank, no later than
the close of business on each Monday of the week for the prior week ending
Saturday, a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Schedule 8.5 hereto, provided, however that each
request for an Advance by Borrower shall include a Borrowing Base
Certificate current as of the day for the Advance."
2.12 Amendment to Section 8.7 of the Loan Agreement. Section 8.7 of
the Loan Agreement is hereby amended by deleting the phrase "an annual" and
replacing it with the phrase "a quarterly".
2.13 Amendment to Article IX of the Loan Agreement. Article IX of the
Loan Agreement is hereby amended by deleting it in its entirety and replacing it
with the following:
"Article IX
FINANCIAL COVENANTS
9.1 Current Ratio. Borrower shall maintain, as of the last day of each
month, a ratio of current assets to current liabilities of at least
0.90:1.00, provided, however that commencing July 1, 2003, Borrower shall
maintain, as of the last day of each month, a ratio of current assets to
current liabilities of at least 1.00:1.00. For purposes of this
calculation, (a) current liabilities shall include the unpaid balance of
the Revolving Facility, including Letter of Credit Obligations, but shall
not include any deferred compensation liabilities; and (b) current assets
shall not include any receivables from Borrower's non-qualified savings
plan for its vice presidents.
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9.2 Minimum Effective Tangible Net Worth. Borrower shall maintain, as
of the last day of each month, Effective Tangible Net Worth of at least
Seventeen Million Five Hundred Thousand and 00/100 Dollars
($17,500,000.00); provided, however that such amount shall increase, on a
cumulative and quarterly basis, by an amount equal to eighty percent (80%)
of net income after taxes in the trailing four (4) fiscal quarter period
(with no deduction for losses).
9.3 Debt to Effective Tangible Net Worth Ratio. Borrower shall
maintain, as of the last day of each month, a ratio of Debt to Effective
Tangible Net Worth of not more than 1.60:1.00.
9.4 Profitability. Borrower shall, (a) not incur for the fiscal
quarter ending March 31, 2003, a net contribution before tax loss in excess
of Four Million Two Hundred Twenty Five Thousand and 00/100 Dollars
(-$4,225,000.00); (b) earn for the fiscal quarter ending June 30, 2003 a
net contribution before tax of at least Two Hundred Eighty Five Thousand
and 00/100 Dollars ($285,000.00); (c) earn for the fiscal quarter ending
September 30, 2003 a net contribution before tax of at least Five Hundred
Thousand and 00/100 Dollars ($500,000.00); and (d) earn for the fiscal
quarter ending December 31, 2003 a net contribution before tax of at least
Eight Hundred Thousand and 00/100 Dollars ($800,000.00).
9.6 Cash Balances and Availability. Borrower and its Subsidiaries
shall maintain a minimum aggregate cash balance with Bank of One Million
Six Hundred Twenty Five Thousand and 00/100 Dollars ($1,625,000.00);
provided, however that such cash balances may constitute up to One Million
and 00/100 Dollars of availability under the Revolving Facility."
2.14 Amendment to Section 10.5 of the Loan Agreement. Section 10.5 of
the Loan Agreement is hereby amended by deleting subsection (c).
3. UCC Terminations. Borrower shall obtain, within ten (10) days of the
date of this Amendment, UCC Termination Statements for the financing statements
filed by (a) Xxxxx Fargo Bank against TKO Personnel; (b) Riverside Bank against
TKI Consulting Inc.; and (c) PNG Telecommunications Inc against TA Acquisition
Corp.
4. Modification Fee. Borrower agrees to pay to Bank a modification fee in
an amount equal to (a) Twenty Five Thousand and 00/100 Dollars ($25,000.00),
which fee shall be fully earned as of and payable on execution of
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this Amendment; (b) a modification fee in the amount of Fifty Thousand and
00/100 Dollars, which fee shall be fully earned as of and payable on June 15,
2003; and (c) a modification fee in the amount of One Hundred Thousand and
00/100 Dollars, which fee shall be fully earned and payable as of September 15,
2003.
5. Conditions Precedent. Bank's consent to this Amendment is subject to
satisfaction of all of the conditions set forth below.
5.1 payment by Borrower of Bank's attorneys' fees and costs incurred
in the preparation of this Amendment and the documents executed pursuant
thereto;
5.2 receipt by Bank of duly executed DOF agreements; and
5.3 such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
6. No Amendment of Other Obligations; No Effect on Collateral. Except as is
otherwise specifically set forth herein or in any document executed in
connection herewith, the Loan Agreement and the Loan Documents are and shall
remain unmodified and in full force and effect. Borrower ratifies and reaffirms
the Obligations, without setoff, defense, or counterclaim, and agrees fully and
faithfully to pay, perform and discharge, as and when payment, performance and
discharge are due, all of the Obligations under the Loan Agreement, as amended
hereby. Nothing herein shall be deemed to affect in anyway the Collateral that
secures the obligations under the Loan Agreement (as modified by this Amendment)
or under any other agreement now or in the future.
7. Conflicts. If any conflict exists between the provisions of the Loan
Documents and the provisions of this Amendment, the provisions of this Amendment
shall control.
8. Ratification of the Guaranties and Security Therefor. By executing this
Amendment below where indicated, Guarantors acknowledge and agree that they have
read and are familiar with, and consent to, all of the terms and conditions of
this Amendment. In light of the foregoing, by executing this Amendment,
Guarantors further confirm and agree that all of the terms and provisions of the
Guaranty and the Guarantor Security Agreement are ratified and reaffirmed, and
that the Guaranty and Guarantor Security Agreement shall and does continue in
full force and effect. Although Bank has informed Guarantors of the terms of
this Amendment, Guarantors understand and agree that Bank has no duty whatsoever
to do so, nor to seek this or any future acknowledgment, consent, or
reaffirmation, and that nothing contained herein is intended to, or shall
create, such a duty on the part of Bank as to any transactions hereafter.
9. Further Assurances. Borrower agrees to make and execute such other
documents and/or take such other action and/or provide such further
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assurances as may be requested by Bank in connection with the Obligations or as
may be necessary or required to effectuate the terms and conditions of this
Amendment and any documents executed in connection herewith.
10. Future Amendments. Neither this Amendment nor any document executed
herein entitles, or implies any consent or agreement to, any further or future
modification of, amendment to, waiver of, or consent with respect to any
provision of the Amendment or the Loan Documents. Any modifications hereto or to
the Loan Documents shall be in writing and signed by the parties.
11. Integration. This Amendment and any documents executed in connection
herewith are integrated agreements, and supersede all negotiations and
agreements regarding the subject matter hereof and thereof, and taken together
with the Loan Documents and any documents executed in connection herewith,
constitute the final agreement of the parties with respect to the subject matter
hereof and thereof.
12. Severability. In the event any one or more of the provisions contained
in this Amendment is held to be invalid, illegal or unenforceable in any
respect, then such provision shall be ineffective only to the extent of such
prohibition or invalidity, and the validity, legality, and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
13. Interpretation. This Amendment and all agreements relating to the
subject matter hereof are the product of negotiation and preparation by and
among each party and its respective attorneys, and shall be construed
accordingly. The parties waive the provisions of California Civil Code ss.1654.
14. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if all
signatures were upon the same instrument. Delivery of an executed counterpart of
the signature page to this Amendment by telefacsimile shall be effective as
delivery of a manually executed counterpart of this Amendment, and any party
delivering such an executed counterpart of the signature page to this Amendment
by telefacsimile to any other party shall thereafter also promptly deliver a
manually executed counterpart of this Amendment to such other party, provided
that the failure to deliver such manually executed counterpart shall not affect
the validity, enforceability, or binding effect of this Amendment.
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IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to
Revolving Loan and Security Agreement to be executed as of the date first above
written.
XXXX, XXXXXX & ASSOCIATES, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxxx
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Title: Vice President and Chief Financial Officer
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COMERICA BANK - CALIFORNIA
/s/ Xxxx X. Xxxxx
----------------------------------------------------
By: Xxxx X. Xxxxx
Its: Assistant Vice President
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ACCEPTED AND AGREED TO:
ICPLANET,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxxxx
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Its: Vice President and Chief Financial Officer
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HUNTINGTON ACQUISITION CORPORATION,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxxxx
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Its: Vice President and Chief Financial Officer
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INTERACTIVE ACQUISITION CORPORATION
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxxxx
--------------------------------------------
Its: Vice President and Chief Financial Officer
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TKO PERSONNEL INC.
a California corporation
By: /s/ Xxxxxx X. Xxxxxxxxxxx
--------------------------------------------
Its: Vice President and Chief Financial Officer
--------------------------------------------
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GROUP-IPEX, INC.
a California corporation
By: /s/ Xxxxxx X. Xxxxxxxxxxx
--------------------------------------------
Its: Vice President and Chief Financial Officer
--------------------------------------------
TKI ACQUISITION CORPORATION
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxxxx
--------------------------------------------
Its: Vice President and Chief Financial Officer
--------------------------------------------
TA ACQUISITION CORPORATION
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxxxx
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Its: Vice President and Chief Financial Officer
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ONSTAFF ACQUISITION CORPORATION
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxxxx
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Its: Vice President and Chief Financial Officer
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