EXHIBIT 10.17
LOAN MODIFICATION AGREEMENT
THIS LOAN MODIFICATION AGREEMENT (this "Agreement") is entered into as of
May 7, 2004, by and between XXXXXX TECHNOLOGIES, INC. whose address is 000 Xxxxx
Xxxxx Xxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000 (the "Company") and each of the
Subsidiaries who now or hereafter are parties to this Agreement (individually
and collectively "Borrower") and Silicon Valley Bank (`Lender') whose address is
0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, XX 00000.
1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other indebtedness which may be
owing by Borrower to Lender, Borrower is indebted to Lender pursuant to, among
other documents, an Export-Import Bank Loan and Security Agreement, dated
February 24, 2004 (as may be amended from time to time, the "Loan Agreement").
The Loan Agreement provides for, among other things, an Exim Committed Line in
an amount not to exceed the Maximum Amount Available at any time (the "Exim
Facility"). Hereinafter, all indebtedness owing by Borrower to Lender shall be
referred to as the "Obligations." All capitalized terms used herein and not
otherwise defined shall have the meanings given to such terms in the Loan
Agreement.
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Obligations is
secured by the Collateral as described in the Loan Agreement and the
Intellectual Property Security Agreement of even date therewith from Borrower in
favor of Lender. Additionally, repayment of the Obligations is guaranteed by
pursuant to the Exim Guarantee from the Export-Import Bank of the United States
("Exim") in favor of Lender. Hereinafter, the above-described security documents
and guaranties, together with all other documents securing repayment of the
Obligations shall be referred to as the "Security Documents". Hereinafter, the
Security Documents, together with all other documents evidencing or securing the
Obligations shall be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF PROPOSED TRANSACTIONS. WAIVERS AND OTHER AGREEMENTS.
(a) Pursuant to an Investment Agreement dated May 7, 2004 among Xxxxxx
Holdings, Inc., Quadrangle Capital Partners LP, Quadrangle Select Partners LP,
Quadrangle Capital Partners-A LP, and Xxxxxxx Capital II, L.P. ("the Investment
Agreement"), an investment of approximately $30,000,000 will be made into a
newly formed holding company, Xxxxxx Holdings, Inc., a Delaware corporation
("Holding Company"). Pursuant to an Agreement and Plan of Merger and Share
Exchange among Xxxxxx Holdings, Inc., Parallel Acquisition, Inc., Xxxxxx
Technologies, Inc., Xxxxxxx Capital II, L.P. and Strategic Entrepreneur Fund II,
L.P. dated May 7, 2004 ("Merger Agreement"), Holding Company will acquire all
the outstanding stock of the Company. Pursuant to a Stock Purchase Agreement by
and among Xxxxxx Holdings, Inc., Protek Telecommunications Solutions Limited,
Xxxx X. Xxxxxxxx, Xxxxx Xxxxxxx, Xxx Xxxxxxxxx, Xxxxxxx Xxxxx, Xxxxxxx Xxxxxxx
and Xxxxxxx Xxxxxxxx Xxxxxxxxxx dated May 7, 2004 ("Stock Purchase
Agreement")the Holding Company will acquire all of the outstanding stock of
Protek. The transactions contemplated by the Investment Agreement, Merger
Agreement and Stock Purchase Agreement (the "Transactions")are expected to close
on or before July 31, 2004. The Transactions, unless consented to by Lender,
would violate Section 7.3 of the Loan Agreement. The Company agrees that it will
immediately advise the Lender if for any reason the Transactions do not close on
or before July 31, 2004, and will update Lender thereafter as to any further
change in the anticipated closing date and/or the terms of the Transactions, and
seek a new consent from Bank and Exim to the Transactions. Prior to closing on
the Transactions, Lender must have received from Exim all such consents and
waivers as Lender may require or deem advisable in connection with the
Transactions.
(b) The Company expects to close on an unsecured bridge loan from
Xxxxxxx Capital II, L.P. and Strategic Entrepreneur Fund II, L.P. (the "Bridge
Lenders") in an amount not to exceed $5,100,000 (the "Subordinated Bridge
Loan"). The Subordinated Bridge Loan, unless subordinated to the Exim Facility
would violate Section 7.8 of the Loan Agreement. The Company agrees that it will
immediately advise the Lender if for any reason the Subordinated Bridge Loan
does not close on or before May 15, 2004. Unless otherwise agreed to by Lender,
the documents executed in connection with the Subordinated Bridge Loan will be
in all material respects consistent with the drafts provided to the Lender as of
the date hereof (the "Subordinated Bridge Loan Agreements"). Prior to closing on
the Subordinated Bridge Loan, Lender must have received a subordination
agreement in form and substance satisfactory in all material respects to Lender
and such consents and waivers from Exim as Lender may require or deem advisable
in connection with the Subordinated Bridge Loan.
(c) Borrower is in violation of Section 6.7(a) (Tangible Net Worth) for
the month ending March 31, 2004 (the "Potential Default') and has requested that
the Lender waive such Potential Default and amend the requirements of Section
6.7(a) from and after March 31, 2004. Accordingly, Borrower and Lender agree
that Section 6.7(a) of the Loan Agreement is hereby amended and restated in its
entirety as follows:
(a) Tangible Net Worth. A Tangible Net Worth of at least
$3,000,000, provided, however, that the Lender reserves the right in its
sole, but reasonable discretion, upon not less than fifteen (15) days
prior notice to the Borrower, based upon its review of pro-forma balance
sheets and forecasts for the Borrower on a post Transaction basis, to
reset this Tangible Net Worth covenant from and after the closing of the
Transaction, to an amount not to exceed $3,000,000.
(d) Borrower requests that Lender enter into this agreement to
acknowledge Lender's: (i) consent to the Transaction and the Subordinated Bridge
Loan and the transactions contemplated by the Subordinated Bridge Loan
Documents, and (ii) to waive the Potential Default. Subject to the terms of this
Agreement, Lender hereby consents to the Transactions, the Subordinated Bridge
Loan and waives the Potential Default.
(e) Exhibit D to the Loan Agreement is amended and replaced in its
entirety with Exhibit D attached hereto.
(f) Borrower agrees that notwithstanding anything set forth in any of
the Existing Loan Documents to the contrary, Borrower shall not at any time
borrow, lend, sell, lease, transfer or otherwise dispose of any assets,
including cash, to any Subsidiary or Affiliate of Borrower, including Holding
Company and Protek, except for the $500,000 cash deposit and $1,000,000 working
capital loan made to Protek in accordance with, and contemplated by, the
Investment Agreement, Merger Agreement and Stock Purchase Agreement, and for the
maximum $5,100,000 in borrowings by Borrower expressly contemplated by the
Subordinated Bridge Loan Agreements.
(g) Borrower agrees that notwithstanding anything set forth in any of
the Existing Loan Documents to the contrary, it shall constitute an Event of
Default under the Existing Loan Documents if at any time after the effective
date of the Keep Well Agreement (described in Section 8(b) below), Holding fails
to perform its obligations thereunder, or to own one hundred percent (100%) of
the outstanding stock of Company and Protek.
(h) Company agrees that in addition to the financial information
required to be delivered to Lender under Section 6.2 of the Loan Agreement, it
shall also provide all such information on a consolidated and consolidating
basis with the Holding Company and Protek.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
5. PAYMENT FEES. Borrower shall pay all of Lender's out-of-pocket expenses,
including reasonable legal fees, in connection with this Agreement.
6. NO DEFENSES OF BORROWER. Borrower agrees that it has no defenses against
the obligations to pay any amounts under the Obligations.
7. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Obligations, Lender is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Agreement, the terms of the Existing Loan
Documents remain unchanged and in full force and effect. Lender's agreement to
modifications to the existing Obligations pursuant to this Agreement in no way
shall obligate Lender to make any future modifications to the Obligations.
Nothing in this Agreement shall constitute a satisfaction of the Obligations. It
is the intention of Lender and Borrower to retain as liable parties all makers
and endorsers of Existing Loan Documents, unless the party is expressly released
by Lender in writing. No maker, endorser, or guarantor will be released by
virtue of this Agreement. The terms of this paragraph apply not only to this
Agreement, but also to all subsequent loan modification agreements.
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8. CONDITIONS. The effectiveness of Agreement is conditioned upon:
(a) the Lender's receipt of such written consents and waivers from Exim
as Lender deems necessary and advisable in connection with the transactions
described in this Agreement;
(b) the Lender's receipt of a Keep Well Agreement from the Holding
Company, in form and substance satisfactory to the Lender, pursuant to which the
Holding Company agrees, among other things, to perform all of the Obligations
set forth in the Existing Loan Documents.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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This is executed as of the date first written above.
BORROWER:
Xxxxxx Technologies, Inc.
By: /s/ Xxxxxx Quick
Name: Xxxxxx Quick
Title: President & CEO
Xxxxxx IAC, LLP
By: /s/ Xxxxxx Quick
------------------------------------
Name: Xxxxxx Quick
Title: Manager
DSI, Inc.
By: /s/ Xxxxxx Quick
------------------------------------
Name: Xxxxxx Quick
Title: President & CEO
Xxxxxx Solutions, Inc.
By: /s/ Xxxxxx Quick
------------------------------------
Name: Xxxxxx Quick
Title: President & CEO
LENDER:
SILICON VALLEY BANK
By: /s/ Xxxxxx X. XxXxxxxxxx
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Name: Xxxxxx X. XxXxxxxxxx
Title: Vice President
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