Exhibit 10.1
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AMENDMENT NUMBER THREE TO
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
MIDCOM COMMUNICATIONS INC.,
ADVAL, INC.,
ADVAL DATA CORPORATION,
ADVANCED NETWORK DESIGN,
CEL-TECH INTERNATIONAL CORP.,
AND
PACNET INC.
AND
FOOTHILL CAPITAL CORPORATION
DATED AS OF SEPTEMBER 17, 1997
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AMENDMENT NUMBER THREE TO
LOAN AND SECURITY AGREEMENT
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THIS AMENDMENT NUMBER THREE TO LOAN AND SECURITY AGREEMENT (THIS
"AMENDMENT"), is entered into as of September 17, 1997, by and among FOOTHILL
CAPITAL CORPORATION, a California corporation ("Foothill"), with a place of
business located at 00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000-00000, MIDCOM COMMUNICATIONS INC., a Washington corporation
("Midcom"), with its chief executive office located at 00000 Xxxxxxxxx Xxxxxxx,
Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000, ADVAL, INC., an Oregon corporation
("AdVal"), with its chief executive office located at 000 Xxxxxxx Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000, ADVAL DATA CORPORATION, an Oregon corporation
("AdVal Data"), with its chief executive office located at 000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000, ADVANCED NETWORK DESIGN, a California
corporation ("A.N.D."), with its chief executive office located at 00000
Xxxxxxxxx Xxxxxxxxx, Xx Xxxxxx, Xxxxxxxxxx 00000, CEL-TECH International Corp.,
a Washington Corporation ("Cel-Tech") with its chief executive offices located
at 00000 XX 00xx Xxxx, Xxxxxxxx, Xxxxxxxxxx 00000, and PACNET INC., a Washington
corporation ("PacNet"), with its chief executive office located at 00000
Xxxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000 (collectively, and
jointly and severally, the "Borrowers").
This Amendment is entered into with reference to the following facts:
A. Foothill and the Borrowers have previously entered into that certain
Loan and Security Agreement, dated as of February 27, 1997 (the
"Original Agreement");
B. Foothill and the Borrowers have previously entered into that certain
Amendment Number One to Loan and Security Agreement (the "First
Amendment"), dated as of April 1, 1997 and that certain Amendment
Number Two to Loan and Security Agreement (the "Second Amendment"),
dated as of May 29, 1997 (the Original Agreement, as amended by the
First Amendment and the Second Amendment, is referred to herein as the
"Agreement");
C. The Borrowers have requested that Foothill make certain additional
amendments to the Agreement, inter alia, to extend additional
financing in the amount of up to $8,000,000, as set forth in this
Amendment;
D. Foothill is willing to so amend the Agreement in accordance with the
terms and conditions hereof; and
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E. All capitalized terms used herein and not defined herein shall have
the meanings ascribed to them in the Agreement, as amended hereby.
NOW, THEREFORE, in consideration of the above recitals and the mutual
promises contained herein, Foothill and the Borrowers hereby agree as follows:
1. Amendments to the Agreement.
a. Section 1.1 of the Agreement hereby is amended by adding
the following new defined terms in alphabetical order:
"Gross Accounts" means 100% of the gross amount of all Accounts,
including any unbilled Accounts as calculated in accordance with generally
accepted accounting principles, excluding, however, all credit insurance,
guaranties, or security therefore.
"Line Block Amount" means (a) from the date on which the Term
Loan is first made and until such date as all amounts outstanding under the
Term Loan are repaid in full in cash, the lesser of (i) $10,000,000 and
(ii) the sum of $10,000,000 minus an amount, if any, equal to that portion
of the Borrowing Base composed of Borrowers' Eligible Accounts (and only
that portion of the Borrowing Base composed of Eligible Accounts) in excess
of $12,000,000, and (b) from and after the date on which all amounts
outstanding under the Term Loan are repaid in full in cash, $0.
"Term Loan" means the term loan made pursuant to, and defined in
Section 2.1A hereof.
"Term Loan Commitment Letter" means that certain letter agreement
dated as of August 14, 1997 from Foothill to Borrower concerning the
provision of certain additional financing to Borrower.
"Third Amendment" means that certain Amendment Number Three to
Loan and Security Agreement, dated as of September 17, 1997, between
Foothill and the Borrowers.
"Warrants" means those certain warrants, in form and substance
satisfactory to Foothill and its counsel in their sole discretion,
convertible into and exercisable for 100,000 shares of Midcom's common
stock, par value $.0001 per share, issued to Foothill by Midcom pursuant to
the Term Loan Commitment Letter, and any related documents required by
Foothill and its Counsel.
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b. The following definitions contained in Section 1.1 of the
Agreement hereby are deleted in their entirety and the following hereby are
substituted in lieu thereof:
"Advances" means the advances, made pursuant to, and defined in
Section 2.1(a)
"Average Unused Portion of Facility" means, as of the first day
of any month, the non-negative amount equal to (a) the then Maximum Amount
(giving effect to any increases thereof, if any, that have become effective
before, or that become effective on, such day), minus (b) the sum of (x)
the average Daily Balance of Advances that were outstanding during the
immediately preceding month and (y) the outstanding principal amount of the
Term Loan on such day.
"Loan Documents" means this Agreement, the First Amendment, the
Second Amendment, the Third Amendment, the Disbursement Letter, the Lockbox
Agreements, the Pledge Agreement, the Trademark Security Agreement, any
Mortgages hereafter delivered by any one or more of the Borrowers to
Foothill, the Suretyship Agreement, the Intercreditor Agreements, the
Control Agreements, any note or notes executed by any one or more of the
Borrowers and payable to Foothill, the Term Loan Commitment Letter, the
Warrants, and any other agreement entered into, now or in the future, in
connection with this Agreement.
"Maximum Amount" means, subject to increase as set forth below,
$30,000,000 minus the Line Block Amount. From time to time after the date
on which all amounts outstanding under the Term Loan are repaid in full, in
cash, Borrower may request an increase in the Maximum Amount, on one or
more occasions, in increments of $5,000,000 or an integral multiple
thereof, to an amount not to exceed $50,000,000, such increases to become
effective in each instance, prospectively, subject to the prior or
concurrent satisfaction of the Maximum Amount Increase Conditions.
"Maximum Foothill Amount" means that portion of the Maximum
Amount for which Foothill shall be responsible, exclusive of any
participations with Participants. The Maximum Foothill Amount shall be
equal to the Maximum Amount until such time as Foothill shall obtain one or
more Participants satisfactory to Foothill to provide commitments in
respect hereof on terms and conditions satisfactory to Foothill, at which
time the Maximum Foothill Amount shall be reduced Dollar-for-Dollar by the
amount of commitments so provided by such Participants; provided, however,
that in no event shall the Maximum Foothill Amount be less than the lower
of $15,000,000 and 50% of the Maximum Amount.
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"Obligations" means the Term Loan, the Advances, and all other
loans, debts, principal, interest (including any interest that, but for the
provisions of the Bankruptcy Code, would have accrued), contingent
reimbursement obligations owing to Foothill, premiums (including Early
Termination Premiums), liabilities (including all amounts charged to the
Loan Account pursuant hereto), obligations, fees or Foothill Expenses
(including any fees or expenses that, but for the provisions of the
Bankruptcy Code, would have accrued) lease payments, guaranties, covenants,
and duties owing by Midcom or any other Borrower to Foothill of any kind
description (whether pursuant to or evidenced by the Loan Documents or
pursuant to any other agreement between Foothill and any Borrower, and
irrespective of whether for the payment of money), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including any debt, liability, or obligation owing
from any Borrower to others that Foothill may have obtained by assignment
or otherwise, and further including all interest not paid when due and all
Foothill Expenses that any Borrower is required to pay or reimburse by the
Loan Documents, by law, or otherwise.
c. The following new Section 2.1A is added to the Agreement as
follows:
2.1A TERM LOAN. Foothill has agreed to convert the Overadvance
made pursuant to the Term Loan Commitment Letter to a term loan (the "Term
Loan") to Borrower in the original principal amount of $8,000,000 effective
upon the satisfaction of the conditions set forth in the Third Amendment.
The outstanding principal balance and all accrued and unpaid interest under
the Term Loan shall be due and payable on the earlier or (i) November 1,
1997 or (ii) upon the termination of this Agreement, whether by its terms,
by prepayment, by acceleration, or otherwise. The unpaid principal balance
of the Term Loan may be prepaid in whole or in part without penalty or
premium at any time during the term of this Agreement upon 30 days prior
written notice by Borrower to Foothill. Without limiting anything in the
forgoing, there shall be no Early Termination Premium payable with respect
to the Term Loan at any time.
d. Section 2.1(c) of the Agreement is hereby amended and
restated in its entirety as follows:
(1) Section 2.1(c) of the Agreement:
(c) Foothill shall have no obligation to make Advances hereunder to the
extent they would cause the outstanding Obligations to exceed the lesser of
(i) the Maximum Amount and (ii) the Gross Accounts. In addition, Foothill
shall have no obligation to make Advances hereunder to the extent they
would cause the
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outstanding Obligations to exceed the lesser of (x) the Maximum Foothill
Amount plus the Syndicated Amount and (y) the Gross Accounts.
e. Section 2.2 of the Agreement is amended and restated in its
entirety as follows:
2.2 OVERADVANCES.
(a) If, at any time or for any reason, the aggregate amount
of Obligations with respect to Advances owed by Borrower to Foothill
pursuant to Section 2.1 is greater than either the dollar or percentage
limitations set forth in Section 2.1 (an "Overadvance"), Borrower
immediately shall pay to Foothill, in cash, the amount of such excess to be
used by Foothill to repay Advances outstanding under Section 2.1.
(b) If, at any time or for any reason, the aggregate amount
of all Obligations owed by Borrower to Foothill exceeds the lesser of (i)
the Maximum Amount and (ii) the Gross Accounts, Borrower immediately shall
pay to Foothill, in cash, the amount of such excess to be used by Foothill
to repay Advances outstanding under Section 2.1.
f. Sections 2.3(a), 2.3(b), and 2.3(d) of the Agreement are
hereby amended and restated in their entirety as follows:
(a) Except as provided in Section 2.3(b), (i) the Term Loan shall bear
interest at a per annum rate of 15.00 percent, and (ii) all other
Obligations (except for the Term Loan) shall bear interest at a per annum
rate of the Reference Rate plus 1.00 percentage points.
(b) Default Rate. From and after the occurrence and during the
continuation of an Event of Default, (i) the Term Loan shall bear interest
at a per annum rate equal to 18.00 percent, and (ii) all other Obligations
(except for the Term Loan) shall bear interest at a per annum rate equal to
Reference Rate plus 4.00 percentage points.
(d) Payments. Interest hereunder shall be due and payable, in arrears, on
the first day of each month during the term hereof. Each Borrower hereby
authorizes Foothill to charge, and (unless Foothill receives instructions
from an Authorized Officer regarding alternative means of payment
acceptable to Foothill in respect thereof), Foothill shall charge, without
prior notice to Borrower, such interest, all Foothill Expenses (as and when
incurred), and all installments or other payments due under the Term Loan
or any Loan Document to the Loan Account, which amounts thereafter shall
accrue interest at the rate then applicable to Advances
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hereunder. Any interest not paid when due shall be compounded and shall
thereafter accrue interest at the rate then applicable to Advances
hereunder.
g. The first sentence of Section 2.7 of the Agreement is
amended and restated in its entirety as follows:
Foothill shall maintain an account on its books in the name of
the Borrowers (the "Loan Account") on which the Borrowers will be charged
with all Advances and the Term Loan made by Foothill to the Borrowers or
for the Borrowers' account, including, accrued interest, Foothill Expenses,
and any other payment Obligations of the Borrowers, in accordance with
Section 2.5 and on which the Borrowers will be credited with all payments
received by Foothill from any Borrower or for the Borrower's account,
including all amounts received in the Foothill Account from any Lockbox
Bank.
h. The following new Section 2.8(f) is added to the Agreement
as follows:
(f) Term Loan Commitment Fee. A one time commitment fee of One Hundred
Sixty Thousand Dollars ($160,000), which is earned, in full, upon
Foothill's receipt of a duly executed counterpart to the Term Loan
Commitment Letter.
i. The introductory phrase to Section 3.2 of the Agreement is
amended and restated in its entirety as follows:
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND THE TERM LOAN. The
following shall be conditions precedent to all Advances and the Term Loan
hereunder:
j. The introductory phrase to Article 5 of the Agreement is
amended and restated in its entirety as follows:
In order to induce Foothill to enter into this Agreement, each
Borrower makes the following representations and warranties with respect to
such Borrower or its assets, which shall be true, correct, and complete in
all respects as of the Effective Date, and at and as of the date of making
of each Advance or the Term Loan made thereafter, as though made on and as
of the date of such Advance or the Term Loan, (except to the extent that
such representations and warranties relate solely to an earlier date) and
such representations and warranties shall survive the execution and
delivery of this Agreement:
k. Section 7.18 of the Agreement is hereby amended and restated
in its entirety as follows:
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7.18 USE OF PROCEEDS. Use the proceeds of the Advances and the Term
Loan made hereunder for any purpose other than (a) to pay transactional
costs and expenses incurred in connection with this Agreement, and (b)
thereafter, consistent with the terms and conditions hereof, for its lawful and
permitted corporate purposes.
2. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Foothill that:
(a) The execution, delivery, and performance of this Amendment
and of the Agreement, as amended by this Amendment, are within its corporate
powers, have been duly authorized by all necessary corporate action, and are not
in contravention of any law, rule, or regulation, or any order, judgment,
decree, writ, injunction, or award of any arbitrator, court, or governmental
authority, or of the terms of its charter or bylaws, or of any contract or
undertaking to which it is a party or by which any of its properties may be
bound or affected; and
(b) This Amendment and the Agreement, as amended by this
Amendment, constitute Borrower's legal, valid, and binding obligation,
enforceable against Borrower in accordance with its terms, except as enforcement
may be limited by equitable principles or by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors
rights generally.
3. CONDITIONS PRECEDENT TO AMENDMENT. The satisfaction of each of
the following, on or before the Third Amendment Closing Deadline, unless waived
or deferred by Foothill in its sole discretion, shall constitute conditions
precedent to the effectiveness of this Amendment:
a. Foothill shall have received each of the following
documents, in form and substance satisfactory to Foothill and its counsel, duly
executed, and each such document shall be in full force and effect:
(1) this Amendment; and
(2) the Warrants.
b. Foothill shall have received an opinion of counsel from
counsel to the Borrowers acceptable to Foothill and its counsel.
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c. The representations and warranties in this Amendment, the
Agreement as amended by this Amendment, and the other Loan Documents shall be
true and correct in all respects on and as of the date hereof, as though made on
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
d. No Event of Default or event which with the giving of notice
or passage of time would constitute an Event of Default shall have occurred and
be continuing on the date hereof, no shall result from the consummation of the
transactions contemplated herein;
e. No injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the consummation of the
transactions contemplated herein shall have been issued and remain in force by
any governmental authority against the Borrowers or Foothill; and
f. No material adverse change shall have occurred in the
financial condition of the Borrowers, any guarantor, or in the value of the
Collateral;
g. All other documents and legal matters in connection with the
transactions contemplated by this Amendment shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to Foothill
and its counsel.
4. FURTHER ASSURANCES. Borrower shall execute and deliver all
agreements, documents, and instruments, in form and substance satisfactory to
Foothill, and take all actions as Foothill may reasonably request from time to
time fully to consummate the transactions contemplated under this Amendment and
the Agreement, as amended by this Amendment.
5. PAYMENT OF TERM LOAN COMMITMENT FEE.
a. The Borrowers and Foothill hereby acknowledge that (i) the
Borrower's have executed and delivered a counterpart of the Term Loan Commitment
Letter to Foothill on August 14, 1997, and (ii) Foothill has received such
counterpart and has charged the term loan commitment fee specified therein and
in Section 2.8(f) of the Agreement, as amended by this Amendment, to Borrower's
Loan Account on that date.
6. MISCELLANEOUS.
a. Upon the effectiveness of this Amendment, each reference in
the Agreement to "this Agreement", "hereunder", "herein", "hereof" or words of
like import referring to the Agreement shall mean and refer to the Agreement as
amended by this Amendment.
b. Upon the effectiveness of this Amendment, each
reference in the Loan Documents to the "Loan Agreement", "thereunder",
"therein", "thereof" or words
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of like import referring to the Agreement shall mean and refer to the Agreement
as amended by this Amendment.
c. As used in this Amendment, "Third Amendment Closing
Deadline" means September 17, 1997.
d. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
e. This Amendment may be executed in any number of counterparts
and by different parties on separate counterparts, each of which, when executed
and delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Amendment. Delivery of an
executed counterpart of this Amendment by telefacsimile shall be equally as
effective as delivery of an original executed counterpart of this Amendment. Any
party delivering an executed counterpart of this Amendment by telefacsimile
also shall deliver an original executed counterpart of this Amendment but the
failure to deliver an original executed counterpart shall not affect the
validity, enforceability, and binding effect of this Amendment.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
MIDCOM COMMUNICATIONS INC.,
a Washington corporation
By
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Title: President and CEO
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ADVAL, INC.,
an Oregon corporation
By
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Title: President and CEO
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ADVAL DATA CORPORATION,
an Oregon corporation
By
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Title: President and CEO
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ADVANCED NETWORK DESIGN,
a California corporation
By
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Title: President and CEO
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CEL-TECH INTERNATIONAL CORP.,
a Washington corporation
By
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Title: President and CEO
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PACNET INC.,
a Washington corporation
By
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Title: President and CEO
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FOOTHILL CAPITAL CORPORATION,
a California corporation
By
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Title:
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PACNET INC.,
a Washington corporation
By
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Title:
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FOOTHILL CAPITAL CORPORATION,
a California corporation
By
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Title: Senior Vice President
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