Exhibit 10.12
THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT (this "Amendment"), to LOAN AND SECURITY
AGREEMENT, dated as of October 22, 1997, among GENERAL DATACOMM INDUSTRIES,
INC., GENERAL DATACOMM, INC., GDC FEDERAL SYSTEMS, INC., GDC NAUGATUCK, INC.,
VITAL NETWORK SERVICES, L.L.C. (successor by merger to Vital Network Services,
Inc.) (collectively, the "Borrowers"), the financial institutions from time to
time parties thereto as lenders (the "Lenders"), THE CIT GROUP/BUSINESS CREDIT,
INC., as co-agent (in such capacity, the "Co-Agent") for the Lenders and
TRANSAMERICA BUSINESS CREDIT CORPORATION, as agent (in such capacity, the
"Agent") for the Lenders, is made as of November 20, 1998 among the Borrowers,
the undersigned Lenders and the Agent.
W I T N E S S E T H :
WHEREAS, the Borrowers, the Lenders, the Co-Agent and the
Agent are parties to the Loan and Security Agreement, dated as of October 22,
1997 (as heretofore amended, the "Loan Agreement"; capitalized terms used herein
shall have the meanings assigned to such terms in the Loan Agreement unless
otherwise defined herein); and
WHEREAS, the Borrowers have requested that the Lenders amend
the Loan Agreement to, among other things, adjust certain financial covenants
and other terms and conditions, and the Lenders are agreeable to such requests
on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the parties hereto hereby agree as
follows:
1. Amendments to Loan Agreement. Effective as of September 30,
1998 (in the case of Sections 1(i) and (j) of this Amendment only) and effective
as of November 25, 1998 (in all other cases), and subject to the satisfaction of
the conditions to effectiveness set forth in Section 2 hereof, the Loan
Agreement is hereby amended as follows:
(a) The definition of "Net Cash Proceeds" in
Section 1.1 of the Loan Agreement is amended by deleting "and the sale permitted
under Section 7.2(e)(iii)" from the parenthetical phrase on the sixth line
thereof.
(b) The definition of "Stockholders Equity" in
Section 1.1 of the Loan Agreement is amended by deleting clause (b) from the
last sentence thereof and substituting therefor "(b) up to an aggregate amount
of $4,500,000 of restructuring costs incurred by such Person in its 1998 and
1999 fiscal years in connection with cost reduction initiatives".
(c) Section 1.1 of the Loan Agreement is amended
by adding the following definitions in their proper alphabetical order:
"'Borrowing Base' means an aggregate amount of
Revolving Credit Loans equal to the sum of (a) 80% of
the Eligible Receivables and (b) 50% of the Eligible
Inventory; provided, that in no event shall the
aggregate amount of Revolving Credit Loans
outstanding at any time in respect of Eligible
Inventory exceed the lesser of (i) 50% of the
aggregate outstanding principal balance of all
Revolving Credit Loans and (ii) $7,500,000."
"'Designated Amount' means $5,000,000; provided that,
if the principal amount of the Term Loan has been
prepaid by at least $4,000,000 from Extraordinary
Proceeds on or before March 31, 1999, the Designated
Amount shall be reduced to $0 on the date of such
prepayment."
"'Extraordinary Proceeds' means cash proceeds
received by the Loan Parties from one or more
transactions outside the ordinary course of business,
whether by an equity offering, a sale of fixed or
intellectual property assets or otherwise.
Extraordinary proceeds shall not include proceeds of
the Loans or other Indebtedness, proceeds from the
sale of Inventory or Receivables or proceeds of
Collections. Nothing in this definition shall be
deemed to constitute the consent by, or the
authorization of, the Lenders to the sale of any
assets."
"'Revolving Availability' means the lesser of (a) the
Revolving Credit Limit and (b) the Borrowing Base."
"'Revolving Credit Limit' means $25,000,000."
"'Specified Amount' means (a) $0, if the outstanding
principal amount of the Term Loan has been prepaid by
at least $4,000,000 from Extraordinary Proceeds on or
before December 31, 1998 and (b) $2,000,000, if the
outstanding principal amount of the Term Loan has not
been prepaid by at least $4,000,000 from
Extraordinary Proceeds on or before December 31,
1998; provided that, if the principal amount of the
Term Loan has been prepaid by at least $4,000,000
from Extraordinary Proceeds between January 1, 1999
and March 31, 1999 and no Event of Default exists,
the Specified Amount shall be reduced to $0 on the
date of such prepayment."
(d) Section 2.1(a) of the Loan Agreement is amended
by deleting "$25,000,000" and substituting therefor "the Revolving Credit Limit,
less such reserves set forth in the last sentence of Section 2.1(b)."
(e) Section 2.1(b) of the Loan Agreement is amended
by deleting the last sentence and substituting therefor the following: "Without
limiting the generality of the foregoing, the Agent shall establish (w) a
standing reserve in the amount of $5,000,000 against the Borrowing Base, (x) a
standing reserve in an amount equal to the Designated Amount against the
Revolving Credit Limit, (y) an additional standing reserve against Eligible
Receivables, in an amount from time to time determined by it in good faith, with
respect to the liabilities owing by the Borrowing Base Parties to any Specified
Account Debtor and (z) commencing December 31, 1998, an additional standing
reserve in an amount equal to the Specified Amount against Revolving
Availability."
(f) Section 2.2(c) of the Loan Agreement is amended
by (i) deleting "11.51%" from the last sentence thereof and substituting
therefor "12.51%" and (ii) deleting the table set forth therein and substituting
therefor the following:
"Installment Percentage
1-4 4.5000%
5-8 5.7861%
9-19 6.5286%
20 29.3716%"
(g) Clause (iv) of Section 2.5(b) of the Loan
Agreement is deleted and replaced with the following:
"(iv) the outstanding principal amount of the Loans
shall be immediately prepaid by an amount equal to
(A) 40% of the first $10,000,000 of Extraordinary
Proceeds and 20% of all Extraordinary Proceeds
thereafter and (B) 100% of all Net Cash Proceeds that
do not constitute Extraordinary Proceeds; provided,
that, so long as no Event of Default exists, the
amount of Loans required to be prepaid pursuant to
this clause (iv) shall not exceed $6,000,000 in the
aggregate; and
(v) on or before March 31, 1999, the outstanding
principal amount of the Term Loan shall be prepaid by
at least $4,000,000 from Extraordinary Proceeds
(which prepayment may be accomplished pursuant to
Section 2.5(b)(iv)(A)).
Prepayments of the Loans pursuant to Section
2.5(b)(iv) shall be applied, first, to the Term Loan
and, second, to the outstanding principal amount of
the Revolving Credit Loans. Prepayments of the Term
Loans pursuant to Sections 2.5(b)(iv) and (v) shall
be applied to the installments under the Term Loan in
the inverse order of maturity."
(h) Section 4.1 of the Loan Agreement is amended
by deleting "one percent (1%)" and substituting therefor "two percent (2%)."
(i) Section 8.1 of the Loan Agreement is amended
by deleting "1.5:1" and substituting therefor "1.4:1."
(j) Section 8.2 of the Loan Agreement is amended
and restated as follows:
"SECTION 8.2. Stockholders Equity.
The Stockholders Equity of GDC and its Subsidiaries on the last day of any
fiscal quarter set forth below shall not be less than the amount set forth below
opposite such fiscal quarter:
Fiscal Quarter Ended Stockholders Equity
-------------------- -------------------
September 30, 1998 $67,900,000
December 31, 1998 62,900,000
March 31, 1999 59,500,000
June 30, 1999 57,100,000
September 30, 1999 57,000,000
December 31, 1999 58,000,000
March 31, 2000 59,000,000
June 30, 2000 60,000,000
September 30, 2000 61,000,000
December 31, 2000 62,000,000
March 31, 2001 63,000,000
June 30, 2001 64,000,000
September 30, 2001 65,000,000
December 31, 2001 66,000,000
March 31, 2002 67,000,000
June 30, 2002 68,000,000
September 30, 2002 69,000,000"
(k) Section 9.1 of the Loan Agreement is amended
by (i) deleting the period at the end of clause (l) and substituting therefor ";
or" and (ii) adding at the end of such Section the following new clause:
"(m) The Loan Parties shall not have received
Extraordinary Proceeds of at least $10,000,000 in
cash (net of costs and expenses) during the period
from November 20, 1998 to March 31, 1999."
(l) Schedule 6.1(r) to the Loan Agreement is
deleted and replaced with Annex I attached hereto.
2. Conditions to Effectiveness.
(a) This Amendment shall become effective upon
the Agent's receipt of (i) counterparts of this Amendment, duly executed by the
Borrowers and the undersigned Lenders and duly consented to by the Guarantors,
(ii) resolutions of the Board of Directors of each Borrower, certified by the
Secretary or Assistant Secretary of such Borrower, in form and substance
satisfactory to the Agent, (iii) a certificate of a Responsible Officer
attesting to the matters set forth in Sections 5(a), (b) and (c) of this
Amendment and (iv) an amendment fee of $360,000 in immediately available funds
for the ratable benefit of the Lenders, which fee shall be fully earned and
nonrefundable on the effective date of this Amendment.
3. Conditions Subsequent. On or before November 25, 1998, GDC
shall, and shall cause each of its Subsidiaries to, deliver to the Agent the
following, each of which shall be in form and substance satisfactory to the
Agent (and the failure by GDC to timely deliver or cause to be delivered any of
the following shall constitute an Event of Default):
(a) An amendment to (or an amendment and
restatement of) each Term Note to reflect the changes set forth in Section 1(e)
of this Amendment; and
(b) An amendment to (or an amendment and
restatement of) each Stock Subscription Warrant made by GDC in favor of each
Lender (each, a "Warrant") to provide that the Warrant Price (as defined
therein) is $3.9375 per share, subject to adjustment in accordance with Section
5 thereof.
4. Special Provisions Concerning Term Notes and Warrants.
(a) Pending the satisfaction of the condition
subsequent set forth in Section 3(a) of this Amendment, the parties hereto agree
that if there is any conflict between the terms of the Term Notes and the terms
of the Loan Agreement (as amended hereby), the terms of the Loan Agreement (as
amended hereby) shall control.
(b) Pending the satisfaction of the condition
subsequent set forth in Section 3(b) of this Amendment, the parties hereto agree
that the definition of "Warrant Price" set forth in each Warrant is amended by
deleting "$10.00" and substituting "$3.9375."
5. Representations and Warranties of the Borrowers.
Each of the Borrowers represents and warrants as follows:
(a) Since June 30, 1998, there has occurred no
development, event or change that has had or could reasonably be expected to
have a Material Adverse Effect, except as expressly set forth in the Business
Plan most recently delivered pursuant to Section 7.1(k)(ii) of the Loan
Agreement.
(b) After giving effect to this Amendment, no
Default or Event of Default has occurred and is continuing.
(c) The representations and warranties contained
in Section 6.1 of the Loan Agreement are true and correct in all material
respects on the date hereof as though made on and as of the date hereof, except
(i) to the extent that such representations and warranties expressly relate
solely to an earlier date (in which case such representations and warranties
were true and correct on and as of such earlier date) and (ii) as set forth on
Annex I attached hereto.
(d) This Amendment and the other documents
delivered or to be delivered in connection herewith (together with this
Amendment and the Loan Agreement as amended hereby, the "Amendment Documents")
constitute the legal, valid and binding obligations of such Borrower,
enforceable against such Borrower in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency and other laws
affecting creditors' rights generally and by general principles of equity.
(e) Each Borrower has the power, authority and
legal right to execute, deliver and perform the Amendment Documents to which it
is a party and the transactions contemplated thereby, and has taken all actions
necessary to authorize the execution, delivery and performance of the Amendment
Documents to which it is a party and the transactions contemplated thereby.
(f) No consent of any Person, and no consent,
permit, approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any Governmental Authority is required
in connection with the execution, delivery, performance, validity or
enforceability of this Amendment, the other Amendment Documents and the
transactions contemplated hereby and thereby.
(g) The execution, delivery and performance by
each Borrower of the Amendment Documents to which it is a party will not violate
any Requirement of Law or any contractual obligation of such Borrower.
6. Expenses. The Borrowers shall, jointly and
severally, pay for all of the reasonable costs and expenses incurred by the
Agent and the Lenders in connection with the transactions contemplated by this
Amendment, including, without limitation, the reasonable fees and expenses of
counsel to the Agent and the Lenders.
7. Miscellaneous.
(a) Except as expressly amended herein, all of
the terms and provisions of the Loan Agreement and the other Loan Documents are
ratified and confirmed in all respects and shall remain in full force and
effect.
(b) Upon the effectiveness of this Amendment,
all references in the Loan Documents to the Loan Agreement shall mean the Loan
Agreement as amended by this Amendment and all references in the Loan Agreement
to "this Agreement," "hereof," "herein," or similar terms, shall mean and refer
to the Loan Agreement as amended by this Amendment.
(c) The execution, delivery and effectiveness of
this Amendment shall not, except as expressly provided herein, operate as an
amendment to or waiver of any right, power or remedy of the Agent or the Lenders
under any of the Loan Documents, or constitute an amendment or waiver of any
provision of any of the Loan Documents.
(d) This Amendment may be executed by the parties
hereto individually or in combination, in one or more counterparts, each of
which shall be an original and all of which shall constitute one and the same
agreement. This Amendment may be executed and delivered by telecopier with the
same force and effect as if the same were a fully executed and delivered
original manual counterpart.
(e) This Amendment shall constitute a Loan Document.
8. Acknowledgement of Debt. The Loan Parties hereby
acknowledge that as of November 17, 1998, they are indebted to the Lenders in
the principal amount of $16,488,655.30 under the Loan Documents plus accrued
interest, fees and expenses without defense, setoff or counterclaim.
9. Release. Each Loan Party hereby releases the Agent and the
Lenders and their respective affiliates, officers, directors, agents, employees,
counsel, successors and assigns (collectively, the "Releasee") from any and all
claims, demands, liabilities, obligations, costs and expenses any Loan Party may
now or hereafter have against the Releasee arising under or relating to this
Amendment, the Loan Agreement, the other Loan Documents or otherwise, from the
beginning of time to the date of this Amendment.
10. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective duly authorized
officers as of the date first above written.
BORROWERS
GENERAL DATACOMM INDUSTRIES, INC.
By: /S/ XXXXXX X. XXXXXX
Name: Xxxxxx X. Xxxxxx
Title: Vice President and Treasurer
GENERAL DATACOMM, INC.
By: /S/ XXXXXX X. XXXXXX
Name: Xxxxxx X. Xxxxxx
Title: Vice President and Treasurer
GDC FEDERAL SYSTEMS, INC.
By: /S/ XXXXXX X. XXXXXX
Name: Xxxxxx X. Xxxxxx
Title: Vice President and Treasurer
GDC NAUGATUCK, INC.
By: /S/ XXXXXX X. XXXXXX
Name: Xxxxxx X. Xxxxxx
Title: Vice President and Treasurer
VITAL NETWORK SERVICES, L.L.C.
(successor by merger to Vital Network
Services, Inc.)
By: /S/ XXXXXX X. XXXXXX
Name: Xxxxxx X. Xxxxxx
Title: Vice President and Treasurer
LENDERS
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /S/ XXX XXXXXXXX
Name: Xxx Xxxxxxxx
Title: Senior Vice President
THE CIT GROUP/BUSINESS CREDIT, INC.
By:
Name:
Title:
BANKBOSTON, N.A.
By: /S/ HOPE L. XXXXXX XXXXXX
Name: Hope L. Xxxxxx Xxxxxx
Title: Vice President
AGENT
TRANSAMERICA BUSINESS CREDIT CORPORATION,
as Agent
By: /S/ XXX XXXXXXXX
Name: Xxx Xxxxxxxx
Title: Senior Vice President
Each of the undersigned Guarantors hereby agrees and consents
to this Amendment and agrees that the execution, delivery and performance of
this Amendment do not in any way affect the obligations of such Guarantor under
any Loan Document to which it is a party, all of which obligations are ratified
and confirmed, remain absolute and unconditional and are not subject to any
defense, setoff or counterclaim.
GENERAL DATACOMM LTD.
By: /S/ XXXXXX X. XXXXXX
Name: Xxxxxx X. Xxxxxx
Title: Vice President and Treasurer
GENERAL DATACOMM LIMITED
By: /S/ XXXXXX X. XXXXXX
Name: Xxxxxx X. Xxxxxx
Title: Vice President and Treasurer
GENERAL DATACOMM INTERNATIONAL CORP.
By: /S/ XXXXXX X. XXXXXX
Name: Xxxxxx X. Xxxxxx
Title: Vice President and Treasurer
GENERAL DATACOMM CHINA, LTD.
By: /S/ XXXXXX X. XXXXXX
Name: Xxxxxx X. Xxxxxx
Title: Vice President and Treasurer
DATACOMM RENTAL CORPORATION
By: /S/ XXXXXX X. XXXXXX
Name: Xxxxxx X. Xxxxxx
Title: Vice President and Treasurer
GDC REALTY, INC.
By: /S/ XXXXXX X. XXXXXX
Name: Xxxxxx X. Xxxxxx
Title: Vice President and Treasurer
