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EXHIBIT 10.45
THIRD AMENDMENT
THIS THIRD AMENDMENT ("Amendment") is entered into as of the 24th day of
November, 1999 by and among Deutsche Financial Services Corporation, as Agent
and a Lender ("Agent") the other Lenders signatories hereto ("Lenders") and
Government Technology Services, Inc. ("Borrower").
RECITALS
Agent, Lenders (and/or their successors by assignment, as applicable) and
Borrower are parties to that certain Second Amended and Restated Business Credit
and Security Agreement dated as of July 28, 1997 (as amended from time to time,
the "Credit Agreement"). Lenders and Agent now desire to amend certain
provisions of the Credit Agreement subject to the terms hereof In connection
with: (i) the purchase by Crestar Bank ("Crestar") of an additional Commitment
in the Total Credit, which shall result in the reduction of Agent's Commitment
in the Total Credit, and (ii) certain other amendments to the Credit Agreement,
as described more fully herein.
NOW, THEREFORE, in consideration of the forgoing premises and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Amendment Effective Date; Settlement. Notwithstanding anything herein to
the contrary, this Amendment shall only become effective (the "Amendment
Effective Date") when (a) the Borrower, the Agent, and each Lender shall have
signed a counterpart hereof (whether the same or different counterparts) and
shall have delivered (including by way of facsimile transmissions) the same to
Agent at its address indicated in the Credit Agreement; and (b) Crestar shall
have delivered to the Agent for the account of the Lenders, an amount equal to
the increase in Crestar's relevant Pro Rata Share of the principal amount of the
outstanding Loans and any accrued and unpaid interest under the Credit
Agreement.
2. Commitments; Pro Rata Shares. Upon the Amendment Effective Date, each
Lender agrees and confirms that its Commitment under the Credit Agreement shall
be as set forth on Exhibit A, attached hereto and incorporated herein, which
Exhibit A shall also amend the Credit Agreement regarding the subject matter
thereof. Each Lender hereby agrees that upon the Amendment Effective Date, its
Commitment and corresponding Pro Rata Share shall be determined in accordance
with Exhibit A hereto.
3. Amendments to Credit Agreement. Upon the Amendment Effective Date, the
Credit Agreement shall be amended as follows:
(i) Credit Facility. The introductory paragraph to Section 3 of the Credit
Agreement is hereby deleted in its entirety and replaced with the following:
"3. Credit Facility. In consideration of Borrower's payment and
performance of its Obligations and subject to the terms and conditions
contained in this Agreement, each Lender agrees, severally but not jointly,
to make Loans to the Borrower from time to time in accordance with the
terms of this Agreement, and Borrower agrees to accept, an aggregate credit
facility of up to:
(i) Thirty Million Dollars ($30,000,000) during the First
Seasonal Period;
(ii) Twenty Million Dollars ($20,000,000) during the Second
Seasonal Period;
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(iii) Fifty Million Dollars ($50,000,000) during the Third
Seasonal Period; and
(iv) Fifty Million Dollars ($50,000,000) during the Fourth
Seasonal Period;
(individually, the 'Total Credit'), on and subject to the terms hereof (the
'Credit Facility')."
(ii) Borrowing Base. Section 3.2 of the Credit Agreement is hereby deleted
in its entirety and replaced with the following:
"3.2 Borrowing Base. On receipt of each Borrowing Base Certificate in
form and substance acceptable to Agent, which shall be delivered with each
Notice of Borrowing and at least weekly (the 'Borrowing Base Certificate'),
Agent will credit Borrower with eighty-five percent (85%) of the net amount
of the Eligible Accounts which are, absent error or other discrepancy,
listed in such Borrowing Base Certificate minus the face amount of all
letters of credit issued or guaranteed by an LC Guarantying Lender, minus
any reserves established pursuant to Section 3.12 hereof (the 'Borrowing
Base'). For purposes hereof, the net amount of Eligible Accounts at any
time shall be the face amount of such Eligible Accounts less any and all
returns, discounts (which may, at Agent's option, be calculated on shortest
terms), credits, rebates, allowances, or excise taxes of any nature at any
time issued, owing claimed by Account Debtors, granted, outstanding, or
payable in connection with such Accounts at such time."
(iii) Interest; Calculation. Section 3.3(a) of the Credit Agreement is
hereby deleted in its entirety and replaced with the following:
"(a) Interest Calculation. Borrower will pay interest on the Daily
Contract Balance (as defined below) at a rate equal to the LIBOR Rate (Reserve
Adjusted) plus one and seventy-five one-hundredths percent (1.75%) per annum.
Commencing with the fiscal quarter of Borrower ending September 30, 1999 and
each quarter thereafter, if Borrower's financial statements delivered to Agent
pursuant to Section 3.11(e)(i) hereof or Borrower's 10Q Reports in the form
delivered to the Securities Exchange Commission, as applicable, for such quarter
indicate that Borrower has breached all of its financial covenants as set forth
in Section 9.3 hereof, then from and after delivery of such financial statements
showing a breach of all of such financial covenants, and provided Borrower is
not in Default hereunder, the rate of interest described above will be increased
to the LIBOR Rate (Reserve Adjusted) plus two and forty-five one-hundredths
percent (2.45%) per annum. Such interest will: (i) be computed based on a 360
day year; (ii) be calculated with respect to each day by multiplying the Daily
Rate (as defined below) by the Daily Contract Balance; and (iii) accrue from the
date Agent authorizes any Electronic Transfer (as defined in Section 3.3(b)
below) or otherwise advances a Loan to or for the benefit of Borrower, until
Agent receives full payment of the Obligations Borrower owes the Lenders in good
funds and Agent applies such payment to Borrower's principal debt in accordance
with the terms of this Agreement. The 'Daily Rate' is the quotient of the
applicable annual rate provided herein divided by 360. The 'Daily Contract
Balance' is the amount of outstanding principal debt which Borrower owes Lenders
on the Loans at the end of each day (including the amount of all Electronic
Transfers authorized) after Agent has credited payments which it has received on
the Loans."
(iv) Administration Fee. Section 3.4(b) of the Credit Agreement is hereby
deleted in its entirety and replaced with the following:
"(b) Administration Fee. Borrower agrees to pay DFS, for DFS' own
account, for its services in acting as Agent hereunder, an annual administration
fee (the 'Administration Fee') in an amount equal to Twenty-Four Thousand
Dollars ($24,000). The Administration Fee shall be payable
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monthly, in arrears, in equal installments of $2000, and due pursuant to the
applicable billing statement. Absent manifest error, once received by DFS, no
Administration Fee shall be refundable by DFS for any reason, including early
termination of this Agreement."
(v) Credit Facility Fee. Section 3.4(d) of the Credit Agreement is hereby
deleted in its entirety and replaced with the following:
"(d) Credit Facility Fee. Borrower agrees to pay Agent for the account
of all Lenders an annual credit facility fee of One Hundred Thousand Dollars
($100,000) (the 'Credit Facility Fee'). The Credit Facility Fee shall be payable
quarterly, in arrears, in equal installments of Twenty-Five Thousand Dollars
($25,000). Once received by DFS, no Credit Facility Fee shall be refundable by
DFS for any reason."
(vi) Unused Line Fee. Section 3.4(e) of the Credit Agreement is
hereby deleted in its entirety and replaced with the following:
"(e) Unused Line Fee. To the extent the unused amount of the Credit
Facility exceeds thirty-three percent (33%) of the Total Credit, Borrower agrees
to pay Agent for the account of all Lenders an unused line fee of twenty-five
one hundredths of one percent (.25%) per annum on the daily average of the
unused amount of the Total Credit during the term of this Agreement and any
renewal term. Such unused line fee shall be payable monthly in arrears and due
pursuant to the applicable billing statement. Such unused amount of the Credit
Facility in any month shall mean the difference between the Total Credit and the
average Daily Contract Balance during such month."
(vii) Section 3.11(e)(vii). Section 3.11(e)(vii) of the Credit Agreement is
hereby deleted in its entirety and replaced with the following:
"(vii) The President or Chief Financial Officer of Borrower will
certify to Agent by the twentieth (20th) day of each calendar month, or more
often if reasonably requested by Agent, that to the best of his knowledge, after
reasonable inquiry, Borrower is in compliance with the Financial Covenants as
set forth in Section 9.3 hereof, in a form acceptable to Agent in its sole
discretion;"
(viii) Section 4.1. Section 4.1 of the Credit Agreement is hereby deleted
in its entirety and replaced with the following:
4.1 Termination. This Agreement will continue in full force and effect
and be non-cancellable for one (1) year from November 30, 1999, (except that it
may be terminated by Agent in the exercise of Agent's and Lender's rights and
remedies upon Default by Borrower) and after the expiration of such one-year
period, shall be subject to one (1) automatic one-year renewal period thereafter
unless at least (x) 120 days, or (y) 90 days (if Borrower has failed to deliver
its audited annual financial statements to Agent under Section 3.11(e)(i) hereof
on or before March 15 in any calendar year), prior to the expiration of such
initial period or any renewal period, any party shall have addressed all other
parties in writing of its intention not to renew this Agreement. Notwithstanding
the foregoing, Borrower may terminate this Agreement prior to such date upon (a)
at least 120 days written notice to Agent; (b) payment to Agent and Lenders of
all Obligations; and (c) payment to Agent for the account of Lenders of an
amount equal to one percent (1.00%) of the Total Credit.
Termination on any date other than the anniversary date will not
entitle Borrower to a refund of any fee. Agent, Lender and/or DFS, as
applicable, shall be entitled to payment of all fees upon Default by Borrower
which would have been payable during the original term of this Agreement (or any
extension thereof) but for such early termination. These accelerated fees
represent liquidated damages
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and are not a penalty. Any such written notice of termination delivered by
Borrower to Agent shall be irrevocable. Borrower may elect to terminate this
Agreement in its entirety only; no section or lending facility may be terminated
singly.
Notwithstanding anything in this Section 4.1 to the contrary, (a) if
Borrower is charged any additional amounts pursuant to Section 3.13 of this
Agreement, and the imposition of such charge (which solely for purposes of the
computation in this sentence shall be treated as additional interest) would have
the effect in the aggregate with all other such additional charges of increasing
the effective interest rate payable pursuant to Section 3.3 of this Agreement by
an amount greater than one-half of one percent (0.50%) per annum, and (b) if
Borrower delivers a copy of an executed commitment from a third party to provide
financing to Borrower at a rate that is one-half of one percent (.5%) per annum
less than the proposed rate payable hereunder after giving effect to such
Section 3.13 increases, then Borrower may terminate this Agreement, in
accordance with the terms of this Agreement, and shall not be liable to Agent
for payment of any of the termination charges referred to in this Section 4.1.
(ix) Capital Expenditures. Section 9.2.9 of the Credit Agreement is hereby
deleted in its entirety and replaced with the following:
"9.2.9 Capital Expenditures. Borrower will not make, or commit to
make, any expenditure for capital improvements (including, without
limitation, capitalized leases) or the acquisition of capital goods in
excess of Five Million Dollars ($5,000,000) during any calendar year."
(x) Financial Covenants. Section 9.3.1 of the Credit Agreement is hereby
deleted in its entirety and replaced with the following:
"9.3.1 Amounts. Borrower agrees that it will:
(a) at all times maintain a Tangible Net Worth plus Subordinated Debt
in the combined amount of not less than the amount shown below for the
period corresponding thereto:
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Period Amount
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Calendar quarter ending 12/31/99 $40,000,000
Calendar quarter ending 3/31/00 $40,000,000
Calendar quarter ending 6/30/00 $40,000,000
Calendar quarter ending 9/30/00 $40,000,000;
(b) at all times maintain a ratio of Debt minus Subordinated Debt to
Tangible Net Worth plus Subordinated Debt of not more than the amount
shown below for the period corresponding thereto:
Period Ratio
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Calendar quarter ending 12/31/99 4.0 to 1.0
Calendar quarter ending 3/31/00 4.0 to 1.0
Calendar quarter ending 6/30/00 4.0 to 1.0
Calendar quarter ending 9/30/00 7.0 to 1.0;
(c) at all times maintain a ratio of Current Assets to current
liabilities of not less than the amount shown below for the period
corresponding thereto:
Period Ratio
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Calendar quarter ending 12/31/99 1.2 to 1.0
Calendar quarter ending 3/31/00 1.2 to 1.0
Calendar quarter ending 6/30/00 1.2 to 1.0
Calendar quarter ending 9/30/00 1.1 to 1.0
(d) for the fiscal year of Borrower ending December 31, 1999, Borrower
shall achieve net income, before giving effect to provisions for income
taxes, of at least One Million Dollars ($1,000,000.00). For the fiscal
year of Borrower ending December 31, 2000, and each fiscal year
thereafter, Borrower shall achieve net income, before giving effect to
provisions for income taxes, of at least Two Million Dollars
($2,000,000.00).
Prior to September 30, 2000, Agent and Borrower shall renegotiate the
above financial covenants for application to any subsequent periods of
this Agreement. If on or prior to September 30, 2000, the parties fail to
execute a written amendment to this Agreement providing for such revised
financial covenants for any subsequent periods of this Agreement, then
the above financial covenants in effect for the calendar quarter ending
June 30, 2000, shall be and remain in effect, until such amendment is
executed and in full force and effect.
For purposes of this paragraph: (i) "Tangible Net Worth" means the book
value of Borrower's assets less liabilities (including as liabilities all
recorded reserves for contingencies and other potential liabilities), excluding
from such assets all Intangibles; (ii) "Intangibles" means and includes
general intangibles (as that term is defined in the UCC); accounts receivable
and advances due from officers, directors, member, owner, employees,
stockholders and affiliates; leasehold improvements net of depreciation;
licenses; good will; prepaid expenses (except for those determined by Agent, in
its sole discretion, not to be Intangible); escrow deposits (except for those
determined by Agent, in its sole discretion, not to be Intangible); covenants
not to compete; the excess of cost over book value of acquired assets; franchise
fees; organizational costs; finance reserves held for recourse obligations;
capitalized research and development
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costs; and such other similar items as DFS may from time to time determine in
DFS' sole discretion; (iii) "Debt" means all of Borrower's liabilities
and indebtedness for borrowed money of any kind and nature whatsoever, whether
direct or indirect, absolute or contingent, and including obligations under
capitalized leases, guaranties or with respect to which Borrower has pledged
assets to secure performance, whether or not direct recourse liability has been
assumed by Borrower; (iv) "Subordinated Debt" means all of Borrower's
Debt which is subordinated to the payment of Borrower's liabilities to the
Lenders by an agreement in form and substance satisfactory to Agent; and (v)
"Current Assets" means Borrower's current assets. The foregoing terms
will be determined in accordance with GAAP consistently applied, and, if
applicable, on a consolidated basis ("Financial Covenants")."
(xi) The following clause is incorporated into the Agreement as Section 9.3.2:
"9.3.2 Waiver Fee If Borrower breaches any of the financial
covenants set forth herein in Section 9.3.1, Lenders may thereupon
request that Borrower pay a fee to Lenders in consideration of Lenders'
agreement to waive the Default caused by such breach."
4. Consent. Borrower has requested that Lenders consent to the
Borrower's purchase of its stock from third-party shareholders of the Borrower.
Lenders hereby consent to the Borrower's purchase of its stock provided that:
(i) the aggregate purchase price of such stock shall not exceed Five Million Two
Hundred Fifty Thousand Dollars ($5,250,000); and (ii) Borrower shall not breach
any financial covenant set forth in Section 9.3.1 herein as a result of
Borrower's payment of the purchase price for such stock.
5. Miscellaneous. Except to the extent specifically amended herein,
all terms and conditions of the Credit Agreement and the other Loan Documents
are hereby ratified and reaffirmed and shall remain in full force and effect.
Capitalized terms used but not defined herein shall have the meanings given them
in the Credit Agreement. Borrower waives notice of Agent's and each Lender's
acceptance of this Amendment. Agent and each Lender reserves all of their
respective rights and remedies under the Credit Agreement and other Loan
Documents.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
GOVERNMENT TECHNOLOGY SERVICES, INC.
By: /S/
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Name:
---------------------------
Title:
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DEUTSCHE FINANCIAL SERVICES CORPORATION,
AS AGENT AND A LENDER
By: /S/
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Name:
---------------------------
Title:
---------------------------
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CRESTAR BANK, A LENDER
By: /S/
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
Date:
---------------------------------
FLEET CAPITAL CORPORATION, A LENDER
By: /S/
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
Date:
---------------------------------
CONSENT AND ACKNOWLEDGMENT
The undersigned Guarantor hereby acknowledges and consents to the terms of
the foregoing Amendment, and does hereby ratify and confirm its Guaranty in all
respects.
FALCON MICROSYSTEMS, INC.
By: /S/
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
Date:
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EXHIBIT A
Lender First Seasonal Second Seasonal Third Seasonal Fourth Seasonal
(Pro Rata Share) Period Commitment Period Commitment Period Commitment Period Commitment
(Feb-Apr) (May-June) (July-Sept) (Oct-Jan)
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DFS $12,600,000 $8,500,000 $21,000,000 $21,000,000
(42.00%)
Crestar $7,600,000 $5,000,000 $12,700,000 $12,700,000
(25.40%)
Fleet $9,800,000 $6,500,000 $16,300,000 $16,300,000
(32.60%)
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Total of $30,000,000 $20,000,000 $50,000,000 $50,000,000
Commitments ========= ========== ========== ========
