EXHIBIT 10.(c)
THIRD AMENDMENT TO LOAN AGREEMENT
THIS THIRD AMENDMENT TO LOAN AGREEMENT (this "Agreement")
dated as of October 21, 1997 is by and between GUARDIAN INTERNATIONAL, INC., a
Nevada corporation ("Borrower"), with its principal place of business at 0000
Xxxxx 00xx Xxxxxxx, Xxxxxxxxx, Xxxxxxx 00000, and XXXXXX FINANCIAL, INC., a
Delaware corporation ("Lender"), with offices at 000 Xxxx Xxxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxx 00000.
WHEREAS, Borrower and Lender are parties to an Amended and
Restated Loan and Security Agreement dated as of May 22, 1997 (the "Loan
Agreement"; all capitalized terms used but not otherwise defined herein shall
have the respective meanings ascribed thereto in the Loan Agreement); and
WHEREAS, Borrower has entered into the Westar Equity Documents
(as herein defined) to which it is a party, copies of which have been delivered
to Lender, and Lender is willing to consent to the execution and delivery of
such documents and to amend the Loan Agreement to give effect to the
transactions consummated pursuant to such documents; and
WHEREAS, the parties hereto wish to amend, or waive compliance
with, certain other provisions of the Loan Agreement on the terms and conditions
set forth herein as of the date first written above (the "Third Amendment
Effective Date").
NOW, THEREFORE, for and in consideration of the terms and
conditions contained herein, and other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, Borrower and Lender
hereby agree as follows:
Section 1. AMENDMENTS.
1.1 AMENDMENT OF SUBSECTION 2.1(A)(2). From and after the
Third Amendment Effective Date, the Loan Agreement is hereby amended by deleting
subsection 2.1(A)(2) in its entirety and inserting the following in substitution
therefor:
(2) "Borrowing Base" means, as of any date of determination,
an amount equal to the lesser of (a) one hundred percent (100%) of
Borrowers' Net Investment in Eligible Contracts included in the
Borrowing Base from time to time pursuant to subsection 2.1(B), or (b)
aggregate MRI in respect of all Eligible Contracts as of the last day
of the then most recently ended month, multiplied by (x) 25, at any
time from and after the Closing Date through the earlier of the date on
which the transactions contemplated by the Westar Equity Documents
shall have been consummated or October 31, 1997, or (y) 24 at any time
thereafter. The Borrowing Base shall be determined from time to time
based on the most recent Borrowing Base Certificate delivered by
Borrower Representative to Lender.
1.2 AMENDMENT OF SUBSECTION 2.3. From and after the Third Amendment
Effective Date, the Loan Agreement is hereby amended by deleting subsection 2.3
in its entirety and inserting the following in substitution therefor:
2.3 FEES. (a) COMMITMENT FEE. As consideration for Lender's
agreement to make the Commitment available to Borrowers hereunder,
Borrowers, jointly and severally, shall pay to Lender a fee (the
"Commitment Fee") in an aggregate amount equal to three-quarters of one
percent (.75%) of the Commitment. The full amount of the Commitment Fee
shall be deemed to have been fully earned by Lender as of the Closing
Date. The Commitment Fee shall be paid in periodic installments on the
date of each advance made under subsection 2.1, each such installment
to be in an amount equal to three-quarters of one percent (.75%) of the
requested amount of such advance. Each Borrower hereby authorizes and
directs Lender to cause such installments to be paid by deducting the
amount thereof from the proceeds of each such advance and retaining the
amount so deducted for Lender's own account. The aggregate Commitment
Fee payable during the term of this Agreement shall equal (a) $112,500,
so long as the Applicable Commitment Amount is $15,000,000, or (b)
$150,000, in the event the Applicable Commitment Amount is increased to
$20,000,000. Any voluntary commitment reductions which may be made by
Borrowers (or by Borrower Representative on behalf of Borrowers)
pursuant to subsection 2.4(C) shall not be given effect in determining
the amount of the Commitment Fee payable hereunder. Any installments of
the Commitment Fee which remain unpaid on the Termination Date shall be
due and payable in full without notice or demand on such date. Any
amounts paid in respect of the Commitment Fee prior to an increase in
the Applicable Commitment Amount from $15,000,000 to $20,000,000 shall
be credited against the remaining amount of the Commitment Fee then
due.
(b) UNUSED LINE FEE. From and after the Third Amendment
Effective Date, Borrowers, jointly and severally, shall pay a fee in an
amount equal to (i) $7,500,000 LESS the sum of the average daily
principal balance of the Loans during the preceding calendar month,
MULTIPLIED BY (ii) one-half of one percent (.50%) per annum. Such fee
is payable monthly in arrears on the first day of the subsequent
calendar month.
1.3 AMENDMENT OF SUBSECTION 4.1(B). From and after the Third Amendment
Effective Date, the Loan Agreement is hereby amended by deleting subsection
4.1(B) in its entirety and inserting the following in substitution therefor:
(B) CAPITALIZATION. The authorized capital stock of each of
the Loan Parties is as set forth on Schedule 4.1(B). Except as set
forth on Schedule 4.1(B), all issued and outstanding shares of capital
stock of each of the Loan Parties are duly authorized and validly
issued, fully paid, nonassessable, free and clear of all Liens (other
than Liens in favor of Lender) and such shares were issued in
compliance with all applicable state and federal laws concerning the
issuance of securities. The capital stock of each of the Loan Parties
is owned by the stockholders and in the
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amounts set forth on Schedule 4.1(B); provided that in the case of New
Guardian, such Schedule identifies the amount of capital stock owned by
Westar, each member of the Xxxxxxxx Group and each other principal
stockholders thereof, and the amount collectively held by the public
stockholders . No shares of the capital stock of any Loan Party, other
than those described above, are issued and outstanding. Except as set
forth on Schedule 4.1(B), there are no preemptive or other outstanding
rights, options, warrants, conversion rights or similar agreements or
understandings for the purchase or acquisition from any Loan Party, of
any shares of capital stock or other securities of any such entity.
1.4 AMENDMENT OF SUBSECTION 5.16. From and after the Third Amendment
Effective Date, the Loan Agreement is hereby amended by deleting subsection 5.16
in its entirety and inserting the following in substitution therefor:
5.16 CUSTODIAN. As of August 1, 1997, Lender will act as
Custodian hereunder. At any time from and after such date, however,
Lender shall have the right at any time to utilize another Custodian to
maintain custody of the Contract Obligor Documents. Each Borrower will,
and will cause each other Loan Party to, deliver all original Contract
Obligor Documents to Lender from time to time pursuant to the
provisions of Exhibit D or, if applicable, to another Custodian from
time to time pursuant to the terms of the applicable Custodial
Agreement, and each Loan Party agrees that at all times prior to such
delivery, such original Contract Obligor Documents shall be held by the
applicable Loan Party in trust for the benefit of Lender. Each Loan
Party agrees not to interfere with any Custodian's performance of its
duties under any Custodial Agreement or to take any action that would
be incon sistent in any way with the terms of Exhibit D or any
Custodial Agreement. All custodial fees, and the costs and expenses of
any Custodian, shall be paid by Borrowers.
1.5 AMENDMENT OF SUBSECTION 6.1. From and after the Third Amendment
Effective Date, the Loan Agreement is hereby amended by deleting subsection 6.1
in its entirety and inserting the following in substitution therefor:
6.1 LIABILITIES TO TANGIBLE NET WORTH. Borrowers shall not at
any time permit the ratio of (a) all Liabilities (excluding
Subordinated Debt approved in accordance with subsection 7.1) of
Borrowers on a consolidated basis, to (b) Tangible Net Worth to exceed
(i) 15.50 to 1.0, as of September 30, 1997, (ii) 3.00 to 1.0, as of the
last day of each month during the period commencing October 1, 1997
through and including September 30, 1998, and (iii) 3.25 to 1.0, as of
the last day of each month thereafter.
1.6 AMENDMENT OF SUBSECTION 6.4. From and after the Third Amendment
Effective Date, the Loan Agreement is hereby amended by deleting subsection 6.4
in its entirety and inserting the following in substitution therefor:
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6.4 ANNUALIZED GROSS ATTRITION RATE. Borrowers shall not at
any time permit the Annualized Gross Attrition Rate, measured as of the
last day of each month, to exceed 8.0%.
1.7 AMENDMENT OF SUBSECTION 6.5. From and after the Third Amendment
Effective Date, the Loan Agreement is hereby amended by deleting subsection 6.5
in its entirety and inserting the following in substitution therefor:
6.5 DEBT SERVICE COVERAGE.
(a) Borrowers shall not permit Debt Service Coverage for the
respective periods set forth below to be less than the amount set forth
below for such period.
PERIOD RATIO
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One Month ended 9/30/97 1.0 to 1.0
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Two Months ended 10/31/97 1.0 to 1.0
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Three Months ended 11/30/97 1.0 to 1.0
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Four Months ended 12/31/97 1.0 to 1.0
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Five Months ended 1/31/98 1.0 to 1.0
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Six Months ended 2/28/98 1.0 to 1.0
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Seven Months ended 3/31/98 1.0 to 1.0
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Eight Months ended 4/30/98 1.25 to 1.0
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Nine Months ended 5/31/98 1.25 to 1.0
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Ten Months ended 6/30/98 1.25 to 1.0
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Eleven Months ended 7/31/98 1.25 to 1.0
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Twelve Months ended 8/31/98 1.25 to 1.0
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(b) Thereafter, Borrowers shall not permit Debt Service
Coverage to be less than (i) 1.25 to 1.0 as of September 30, 1998 for
the twelve month period then ended, and (ii) 1.50 to 1.0 as of the last
day of any month thereafter for the twelve month period then ended.
1.8 AMENDMENT OF SUBSECTION 6.6. From and after the Third Amendment
Effective Date, the Loan Agreement is hereby amended by deleting subsection 6.6
in its entirety and inserting the following in substitution therefor:
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6.6 TANGIBLE NET WORTH. Borrowers shall maintain a Tangible
Net Worth of not less than the respective amounts set forth below as of
the respective measurement dates set forth below:
MEASUREMENT DATE TANGIBLE NET WORTH
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September 30, 1997 $500,000
October 31, 1997 $4,000,000
Last day of each month during
the period from November 1, 1997
through December 31, 1997 $7,250,000
Last day of each month during
the period from January 1, 1998
through March 31, 1998 $7,150,000
Last day of each month during
the period from April 1, 1998
through June 30, 1998 $7,000,000
Last day of each month during
the period from July 1, 1998
through September 30, 1998 $6,850,000
Last day of each month during
the period from October 1, 1998
through December 31, 1998 $6,650,000
Last day of each month during
the period from January 1, 1999
through March 31, 1999 $6,450,000
Last day of each month thereafter $6,400,000
1.9 AMENDMENT OF SUBSECTION 7.1(D). From and after the Third Amendment
Effective Date, the Loan Agreement is hereby amended by deleting subsection
7.1(d) in its entirety and inserting the following in substitution therefor:
(d) Indebtedness in respect of Capital Leases up to $500,000
in the aggregate;
1.10 AMENDMENT OF SUBSECTION 7.5. From and after the Third Amendment
Effective Date, the Loan Agreement is hereby amended by deleting subsection 7.5
in its entirety and inserting the following in substitution therefor:
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7.5 RESTRICTED JUNIOR PAYMENTS. No Borrower will nor will any
Borrower permit any other Loan Party to directly or indirectly declare,
order, pay, make or set apart any sum for any Restricted Junior
Payment, except that: (a) Subsidiaries of any Borrower may make
Restricted Junior Payments with respect to their common stock to the
extent necessary to permit such Borrower to pay the Obligations, to
make Restricted Junior Payments permitted under clauses (b) and (c)
below and to permit such Borrower to pay expenses incurred in the
ordinary course of business; (b) Borrowers may make payments of
interest on any Subordinated Debt permitted pursuant to Section 7.1 as
and when due on a non-accelerated basis in accordance with the terms of
the applicable agreements evidencing or governing such Subordinated
Debt; (c) New Guardian may consummate repurchases of its outstanding
capital stock from its stockholders (other than Westar or members of
the Xxxxxxxx Group) so long as (i) at the time of any such repurchase
and after giving effect thereto (x) Borrowers shall have Availability
of not less than $500,000, and (y) no Default or Event of Default shall
have occurred and be continuing, and (ii) the aggregate amount of such
repurchases does not exceed $100,000; and (d) New Guardian may declare
and pay cash dividends on the Preferred Stock as and when payable
pursuant to the terms of New Guardian's charter and the Westar Equity
Documents, provided that (i) at the time any such dividend is declared
and paid and after giving effect thereto (x) Borrowers shall have Debt
Service Coverage (calculated on the basis of Borrowers' financial
statements for the then most recently ended fiscal month after giving
pro forma effect to the payment of such dividend) of at least the ratio
then required pursuant to subsection 6.5 for the most recently ended
month for which monthly financial statements and a Compliance
Certificate are required to be delivered pursuant to Annex B, and (y)
no Default or Event of Default shall have occurred and be continuing,
and (ii) the aggregate amount of such cash dividends declared and paid
on any payment date therefor shall not exceed the amount required to be
paid as of such date pursuant to the terms of the Westar Equity
Documents as in effect on the Third Amendment Effective Date.
1.11 AMENDMENT OF SUBSECTION 7.6. From and after the Third Amendment
Effective Date, the Loan Agreement is hereby amended by deleting subsection 7.6
in its entirety and inserting the following in substitution therefor:
7.6 RESTRICTION ON FUNDAMENTAL CHANGES. Neither any Borrower
nor any other Loan Party will: (a) enter into any transaction of merger
or consolidation; (b) liquidate, wind-up or dissolve itself (or suffer
any liquidation or dissolution), except that SDI shall cease operations
as promptly as practicable (and, if such operations are not ceased and
SDI is not dissolved on or prior to June 30, 1998, New Guardian shall
execute and deliver a pledge agreement, in form and substance
satisfactory to Lender, pledging all of the issued and outstanding
capital stock of SDI to Lender as additional collateral securing the
Obligations); (c) convey, sell, lease, sublease, transfer or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its business or assets, or issue, sell or dispose
of any of its capital stock or the capital stock of any of its
Subsidiaries, whether now owned or
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hereafter acquired, except that (i) New Guardian may issue and sell
shares of its Class A Common Stock to Westar prior to the Third
Amendment Effective Date in accordance with the terms of the Westar
Equity Documents so long as prior to such sale, New Guardian had
received the written consent of Lender, (ii) New Guardian may issue and
sell shares of its Preferred Stock to Westar after the Third Amendment
Effective Date in accordance with the terms of the Westar Equity
Documents, and (iii) subsequent to the Third Amendment Effective Date,
New Guardian may issue shares of its Preferred Stock to Westar in lieu
of the payment of cash dividends on its Preferred Stock owned by
Westar, or may issue shares of its Class A Common Stock to Westar upon
the conversion of its Preferred Stock held by Westar, in either case so
long as such issuance in lieu of dividends or conversion is consummated
and effected in accordance with the terms of the Westar Equity
Documents; or (d) acquire by purchase or otherwise all or any
substantial part of the business or assets of, or stock or other
evidence of beneficial ownership of, any Person, except that any
Borrower may acquire assets from another Person pursuant to a Bulk
Contract Purchase so long as (i) at the time of any such transaction
and after giving effect thereto, no Default or Event of Default shall
have occurred and be continuing; (ii) the applicable Seller shall have
agreed in writing to be bound by a guarantee or replacement clause
substantially similar to that set forth in Schedule 7.6; and (iii)
Lender shall have completed such due diligence in respect of the
portfolio of Contracts to be acquired pursuant to such Bulk Contract
Purchase (or series of related such transactions) as it may request and
Lender shall have given its prior written consent to the consummation
thereof by the applicable Borrower, such consent not to be unreasonably
withheld or delayed; provided that the requirements of this clause
(iii) need not be satisfied in the case of (A) any such Bulk Contract
Purchase (or series of related such transactions) which is for an
aggregate amount of $250,000 or less, or (B) any such Bulk Contract
Purchase (or series of related such transactions) which is for an
aggregate amount in excess of $250,000 but equal to or less than
$500,000, if the average initial term of the Contracts included in such
Bulk Contract Purchase is 36 months or more.
1.12 AMENDMENT OF SUBSECTION 7.7. From and after the Third Amendment
Effective Date, the Loan Agreement is hereby amended by deleting subsection 7.7
in its entirety and inserting the following in substitution therefor:
7.7 CHANGES RELATING TO SUBORDINATED DEBT, PREFERRED STOCK OR
WESTAR EQUITY DOCUMENTS. Borrowers will not, and will not permit any
other Loan Party to, change or amend the terms of any documents or
instruments evidencing or governing any Subordinated Debt if the effect
of such amendment is to: (a) increase the interest rate on such
Indebtedness; (b) change the dates upon which payments of principal or
interest are due on such Indebtedness; (c) change any event of default
or add any covenant with respect to such Indebtedness; (d) change the
payment provisions of such Indebtedness; (e) change the subordination
provisions thereof; or (f) change or amend any other term if such
change or amendment would materially increase the obligations of the
obligor or confer additional material rights on the holder of such
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Indebtedness in a manner adverse to any Borrower, any other Loan Party,
or Lender. New Guardian will not change any of the terms of the
Preferred Stock as in effect on the Third Amendment Effective Date, nor
shall New Guardian change or amend any of the terms of the Westar
Equity Documents.
1.13 AMENDMENT OF SUBSECTION 8.1(F). From and after the Third Amendment
Effective Date, the Loan Agreement is hereby amended by deleting subsection
8.1(F) in its entirety and inserting the following in substitution therefor:
(F) CHANGE IN OWNERSHIP. (1) The Xxxxxxxx Group shall
collectively cease to (a) own and/or exclusively control twenty-one
percent (21.0%) of the issued and outstanding voting Common Stock of
New Guardian, or (b) have the right to nominate and elect (i) at least
four of the eight members of New Guardian's Board of Directors, at all
times prior to the conversion of the Preferred Stock of New Guardian
owned by Westar to Class A Common Stock of New Guardian, and (ii) at
least three of the nine members of New Guardian's Board of Directors,
at all times after such conversion of Preferred Stock into Class A
Common Stock, provided that (i) such limitations shall not prevent any
member of the Xxxxxxxx Group from transferring all or any part of their
ownership interests in New Guardian's Common Stock (x) to any other
member of the Xxxxxxxx Group, or (y) into any trust established by such
member for estate planning purposes so long as such member retains
exclusive voting control, for his or her lifetime, over all such shares
so placed in trust; and (ii) such limitation shall terminate upon the
completion of a Qualified Public Offering; or (2) Westar shall cease to
have the right to nominate and elect (a) at least two of the eight
members of New Guardian's Board of Directors, at all times prior to the
conversion of the Preferred Stock of New Guardian owned by Westar to
Class A Common Stock of New Guardian, and (b) at least three of the
nine members of New Guardian's Board of Directors, at all times after
such conversion of Preferred Stock into Class A Common Stock; or (3)
the Xxxxxxxx Group and Westar shall cease to have the right to mutually
agree upon, nominate and elect (i) at least two of the eight members of
New Guardian's Board of Directors, at all times prior to the conversion
of the Preferred Stock of New Guardian owned by Westar to Class A
Common Stock of New Guardian, and (ii) at least three of the nine
members of New Guardian's Board of Directors, at all times after such
conversion of Preferred Stock into Class A Common Stock; or (4) any
other Loan Party ceases to be a wholly-owned Subsidiary of New
Guardian; or
1.14 AMENDMENT OF SECTION 8.1. From and after the Third Amendment
Effective Date, Section 8 of the Loan Agreement is hereby further amended by (a)
deleting the period at the end of subsection 8.1(P) and inserting "; or" in
substitution therefor; (b) deleting the period at the end of subsection 8.1(Q)
and inserting "; or" in substitution therefor; and (c) inserting a new
subsection 8.1(R) as follows:
(R) FAILURE TO ISSUE CLASS B COMMON STOCK. New Guardian shall
for any reason fail, on or prior to November 30, 1997, to issue to
Lender, in its capacity as
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a holder of Class B Common Stock, an additional 150,000 shares of Class
B Common Stock (which shares New Guardian is contractually required to
so issue and deliver as of the date hereof), or shall fail to deliver
original stock certificates evidencing such additional shares to
Lender's possession on or prior to such date.
1.15 AMENDMENT OF ANNEX A. (a) From and after the Third Amendment
Effective Date, Annex A to the Loan Agreement is hereby amended by inserting the
following additional defined terms in proper alphabetical order:
"Capital Expenditures" means all expenditures for (including
deposits), or contracts for expenditures with respect to, any fixed
assets or improvements, or for replacements, substitutions or additions
therefor, which have a useful life of more than one year, including the
direct or indirect acquisition of such assets by way of increased
product or service charges, offset items or otherwise.
"Class A Common Stock" means the Class A voting common stock
of New Guardian, $.001 par value per share.
"Class B Common Stock" means the Class B non-voting common
stock of New Guardian, $.001 par value per share.
"Common Stock" means, collectively, the Class A Common Stock
and Class B Common Stock.
"Conversion" means, in respect of any Contract, that the
original Contract Obligor has moved or otherwise vacated the premises
at which the applicable Alarm System is located and a new owner or
occupant of such premises has assumed such original Contract Obligor's
Contract or has entered into a new Contract with a Borrower with
respect to such Alarm System.
"Xxxxxxxx Group" means, collectively, Individual Guarantors,
Xxxxxxx Xxxxxxxx and Xxxxxx Xxxxxxxx and any transferees of any such
Persons to the extent permitted by subsection 8.1(F) of the Agreement.
"Net Attrition" means, for any period, (a)(i) the aggregate
MRI in respect of Contracts disconnecting service during such period,
multiplied by (ii) 24, less (b)(i) the aggregate MRI in respect of any
replacements of such Contracts during such period (by means of Dealer
or Seller replacement during the Replacement Period or the Holdback
Period, as applicable, by Conversion, by MRI increases in respect of
existing Contracts, by recoveries of previously written off MRI or by
new MRI generated by internal sales efforts, multiplied by (ii) 24.
"Preferred Stock" means the Series A 9 3/4% Convertible
Cumulative Preferred Stock of New Guardian in the aggregate amount of
$3,750,000.
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"Third Amendment Effective Date" shall mean October 21, 1997.
"Westar" means Westar Capital, Inc., a Kansas corporation.
"Westar Equity Documents" means, collectively, that certain
Stock Subscription Agreement dated as of October 14, 1997 between New
Guardian and Westar, that certain Registration Rights Agreement dated
as of October 21, 1997 between New Guardian and Westar, that certain
Guardian International, Inc. Stockholders Agreement dated as of October
__, 1997 among New Guardian, Xxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxxx
Xxxxxxxx, Xxxxxx Xxxxxxxx and Westar, and all agreements, instruments
or other documents referred to in any of the foregoing or required
thereby.
(b) From and after the Third Amendment Effective Date, Annex A
to the Loan Agreement is hereby further amended by deleting the defined term
"Annualized Net Attrition Rate" in its entirety and inserting the following in
substitution therefor:
"Annualized Gross Attrition Rate" means, for any period, the
aggregate MRI in respect of Contracts disconnecting service during such
period, net of the aggregate MRI in respect of any replacements of such
Contracts by means of Dealer or Seller replacement during the
Replacement Period or the Holdback Period, as applicable, pursuant to a
Conversion, by MRI increases in respect of existing Contracts or by
recoveries of previously written off MRI. The average gross attrition
rate (expressed as a percentage) as of the last day of any month for
the three month period then ended (any such three month period, a "Test
Period") is equal to:
(a) (i) the aggregate monthly gross attrition (as
defined above) for each month in such Test Period,
DIVIDED BY (ii) three (3),
DIVIDED BY
(b)(i) the aggregate MRI in respect of all Contracts at the end
of each month during the three month period ending on the last
day of the second month in such Test Period, DIVIDED BY (ii)
three (3).
(c) From and after the Third Amendment Effective Date, Annex A
to the Loan Agreement is hereby further amended by deleting the defined terms
"Custodial Agreement" and "Custodian" in their entirety and inserting the
following in substitution therefor:
"Custodial Agreement" means a Custodial Agreement in form and
substance satisfactory to Lender among Borrowers, Lender and a
Custodian (other than Lender) providing for the maintenance of the
Contract Obligor Documents.
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"Custodian" means Lender, as of the Effective Date, or such
other Person designated by Lender and approved by Borrowers (such
approval not to be unreasonably withheld or delayed) to maintain
physical possession of the Contract Obligor Documents and which has
executed and delivered a Custodial Agreement.
(d) From and after the Third Amendment Effective Date, Annex A
to the Loan Agreement is hereby further amended by deleting the defined term
"Debt Service Coverage" in its entirety and inserting the following in
substitution therefor:
"Debt Service Coverage" means, for any period (a) Operating
Cash Flow, DIVIDED BY (b) the sum of (i) Interest Expenses for such
period, PLUS (ii) scheduled payments of principal with respect to all
Indebtedness (including the principal portion of scheduled payments of
Capital Lease obligations) of Borrowers on a consolidated basis, PLUS
(iii) Restricted Junior Payments made by Borrowers in cash during such
period to the extent permitted pursuant to subsection 7.5 of the
Agreement.
(e) From and after the Third Amendment Effective Date, Annex A
to the Loan Agreement is hereby further amended by deleting the defined term
"List of Contracts" in its entirety and inserting the following in substitution
therefor:
"List of Contracts" means each list delivered to Lender and,
if applicable, to Custodian by Borrower Representative with each
Contract or group of Contracts which: (i) identifies each Contract
being delivered by account number, the name of the Contract Obligor,
the total monthly/quarterly/annual recurring service charge on such
Contract and the number of months remaining in the term of such
Contract, and (ii) shows the total number of Contracts and the
aggregate MRI of all such listed Contracts.
(f) From and after the Third Amendment Effective Date, Annex A
to the Loan Agreement is hereby further amended by deleting the defined term
"Loan Documents" in its entirety and inserting the following in substitution
therefor:
"Loan Documents" means the Agreement, the Notes, the
Individual Guaranty, the Pledge Agreement, the Lockbox Agreement(s),
any Custodial Agreement from time to time in effect, and all other
instruments, documents and agreements executed by or on behalf of any
Loan Party and delivered concurrently herewith or at any time hereafter
to or for Lender in connection with the Loans and other transactions
contemplated by the Agreement (including without limitation any such
instruments, documents and agreements delivered at any time pursuant to
Section 2.11 of the Agreement), all as amended, restated, supplemented
or modified from time to time.
(g) From and after the Third Amendment Effective Date, Annex A
to the Loan Agreement is hereby further amended by deleting the defined term
"Operating Cash Flow" in its entirety and inserting the following in
substitution therefor:
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"Operating Cash Flow" means, for any period, (a) EBITDA for
such period; PLUS (b) in respect of any period ending on or prior to
August 31, 1998, up to $150,000 of expenses incurred in connection with
the proposed merger with SPS, to the extent such expenses were deducted
in determining EBITDA for such period; LESS (c) Net Attrition in
respect of all Contracts for such period (if a positive number); LESS
(d) unfinanced Capital Expenditures for such period.
1.16 AMENDMENT OF ANNEX B. From and after the Third Amendment Effective
Date, the Loan Agreement is hereby amended by deleting subparts (H) and (I) of
Annex B in their entirety and inserting the following in substitution therefor:
(H) MONTHLY COLLATERAL REPORTING. As soon as available and in
any event within twenty (20) days after the end of each month, Borrower
Representative will deliver each of the following, all prepared as of
the last day of the preceding month for the period then ended and all
in such form and containing such detail as Lender may specify or
request: (i) a summary aged trial balance of all then-existing Accounts
(with details to be made available upon Lender's request); (ii) an
attrition report reflecting recovery income; (iii) an aging/delinquency
report; (iv) a new business report reflecting purchased Contracts and
internally generated Contracts; (v) a detailed MRI report listing all
Contracts for the applicable period; and (vi) such additional monthly
reports and information as Borrower Representative and Lender shall
mutually agree upon within thirty (30) days following the Third
Amendment Effective Date or, such additional monthly reports and
information as Lender may require upon written notice to Borrower
Representative, if Borrower Representative and Lender are unable after
good faith negotiations to mutually agree upon such additional
reporting within such thirty (30) day period.
(I) BORROWING BASE CERTIFICATES. At least monthly, no later
than twenty (20) days after the last day of each month, or more
frequently as Borrower Representative may elect or Lender may request,
and as promptly as practicable if Availability is less than $500,000,
Borrower Representative will deliver a Borrowing Base Certificate
setting forth the calculation of the Borrowing Base as of such date as
Lender may specify.
1.17 AMENDMENT OF SCHEDULE 4.1(B). From and after the Third Amendment
Effective Date, SCHEDULE 4.1(B) to the Loan Agreement is hereby deleted in its
entirety and shall be replaced by SCHEDULE 4.1(B) attached hereto, which has
been prepared after giving effect to the consummation of the transactions
contemplated by the Westar Equity Documents on the Third Amendment Effective
Date.
1.18 EXHIBIT D. From and after the Third Amendment Effective Date, the
Loan Agreement is hereby amended by adding thereto an Exhibit D, in the form of
Exhibit D attached hereto.
2. WAIVERS. Lender hereby waives all Defaults or Events of
Default arising under (i) Section 6.1 of the Loan Agreement as the result of
Borrowers' failure to maintain a ratio of Senior
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Debt to Tangible Net Worth not in excess of 6.0 to 1.0 during the period
commencing May 31, 1997 through August 31, 1997, (ii) Section 6.5 of the Loan
Agreement as the result of Borrowers' failure to maintain Debt Service Coverage
for the period ended as of August 31, 1997 of not less than 1.0 to 1.0, (iii)
Section 6.6 of the Loan Agreement as the result of Borrower's failure to
maintain Tangible Net Worth of at least $1,500,000 during the period commencing
May 31, 1997 through August 31, 1997, and (iv) Annex B of the Loan Agreement as
the result of Borrowers' late delivery of monthly collateral reporting as
required pursuant to such Annex B for the months ended May 31, 1997 and June 30,
1997, respectively. The consents and waivers set forth in this Section 2 shall
be limited precisely as written and shall not be deemed to (i) be a consent to
any other transaction or of any waiver or modification of any other term or
condition of the Loan Agreement or of any of the other Loan Documents or (ii)
prejudice any right or rights which Lender may now have or may have in the
future under or in connection with the Loan Agreement or any other Loan
Document.
3. CONDITIONS TO EFFECTIVENESS. This Agreement shall become
effective upon satisfaction of the following conditions:
(a) Lender shall have received counterparts of this Agreement
duly executed by Borrowers;
(b) Each of the Westar Equity Documents shall be in form and
substance satisfactory to Lender and shall have been duly executed and
delivered by each Person party thereto (and copies of such
fully-executed documents shall have been delivered to Lender), and all
of the transactions contemplated by such Westar Equity Documents shall
have been fully consummated in accordance with the terms thereof (other
than the issuance of the Preferred Stock thereunder); without
limitation of the foregoing (i) New Guardian shall have issued and sold
shares of its Class A Common Stock to Westar, the cash proceeds of
which shall be at least $3,750,000, and New Guardian shall have
delivered to caused to be delivered to Lender all such cash proceeds
for application to the Loans and other Obligations under the Loan
Agreement; and (ii) Lender, in its capacity as a holder of Class B
Common Stock of New Guardian, shall have given its written consent to
the issuance of the Preferred Stock pursuant to the Westar Equity
Documents;
(c) All of the conditions precedent set forth in the Westar
Equity Documents to the issuance and sale of the Preferred Stock, but
for the passage of time between the issuance and sale of the Class A
Common Stock and such Preferred Stock, shall have been satisfied as of
the Third Amendment Effective Date;
(d) On or as of the Third Amendment Effective Date, New
Guardian shall have filed with the Securities and Exchange Commission
the information memorandum required to enable New Guardian to
authorize, issue and sell the Preferred Stock pursuant to the Westar
Equity Documents and the additional 150,000 shares of Class B Common
Stock required to be issued and delivered to Lender, in its capacity as
a holder of Class B Common Stock;
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(e) Borrowers shall have paid all invoices for attorneys' fees
and disbursements incurred by Lender which are or remain outstanding as
of the Third Amendment Effective Date;
(f) Lender shall have received a certificate duly executed by
the Secretary or Assistant Secretary of New Guardian (a) certifying the
resolutions approving this Agreement, the Westar Equity Documents and
the execution and delivery of all agreements, instruments, certificates
and other documents in connection herewith and therewith; (b)
certifying as to signatures and incumbency of officers executing any
such documents; and (c) certifying that, since May 22, 1997, except as
specifically contemplated by the Westar Equity Documents, there have
been no modifications or amendments to New Guardian's articles of
incorporation or bylaws; in addition to the foregoing, on the earlier
of the date on which the Preferred Stock is issued to Westar or
November 30, 1997, New Guardian shall deliver to Lender (a) a certified
copy of its Articles of Incorporation and all amendments and
supplements thereto, duly certified by the Secretary of State of the
State of Nevada, and (b) a copy of its bylaws and all amendments
thereto, certified by its Secretary or an Assistant Secretary, which
certified documents shall, in each case, contain all the amendments and
modifications which may be required to authorize or reflect the
consummation of the transactions contemplated by the Westar Equity
Documents and the issuance of the additional shares of Class B Common
Stock to Lender as contemplated herein; and
(g) No Default or Event of Default shall exist under the Loan
Agreement, after giving effect to the terms of this Agreement and the
transactions contemplated herein.
4. REPRESENTATIONS AND WARRANTIES OF BORROWERS. In order to
induce Lender to enter into this Agreement, Borrowers represent and warrant to
Lender that:
(a) After giving effect to this Agreement:
(i) No Default or Event of Default has occurred and
is continuing; and
(ii) the representations and warranties of Borrowers
contained in the Loan Documents are true and correct on and as
of the date hereof to the same extent as though made on and as
of the date hereof except to the extent such representations
and warranties specifically relate to an earlier date.
(b) The execution, delivery and performance by Borrowers of
this Agreement and each of the documents and agreements described
herein to which any Borrower is a party, including without limitation
the Westar Equity Documents, is within its corporate powers and have
been duly authorized by all necessary corporate action on the part of
such Borrower, and this Agreement and such documents and agreements are
the legal, valid and
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binding obligation of such Borrower enforceable against it in
accordance with their respective terms.
5. REFERENCE TO AND EFFECT ON THE LOAN AGREEMENT.
5.1. Except as specifically amended above, the Loan Agreement
shall remain in full force and effect and is hereby ratified and confirmed.
5.2. Except as specifically provided herein, the execution,
delivery and effectiveness of this Agreement shall not operate as a waiver of
any right, power or remedy of Lender under the Loan Agreement or any of the
other Loan Documents, or constitute a waiver of any provision of the Loan
Agreement or any of the other Loan Documents. Upon the effectiveness of this
Agreement, each reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," or words of similar import shall mean and be a reference
to the Loan Agreement as amended hereby.
6. MISCELLANEOUS.
6.1 ENTIRE AGREEMENT. This Agreement, including all schedules
and other documents attached hereto or incorporated by reference herein,
constitutes the entire agreement of the parties with respect to the subject
matter hereof and supersedes all other understandings, oral or written, with
respect to the subject matter hereof.
6.2. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed an
original, but all such counterparts shall constitute one and the same
instrument.
6.3. COSTS AND EXPENSES. As provided in Section 9.3 of the
Loan Agreement, Borrowers agree to pay on demand all reasonable fees, costs and
expenses incurred by Lender in connection with the preparation, execution and
delivery of this Agreement.
6.4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
6.5. HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
6.6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon each of the parties hereto and their respective successors and assigns,
except that no Borrower may assign its rights or obligations hereunder without
the written consent of Lender. Without limitation of the foregoing, the parties
hereto acknowledge that, as of the date hereof, New Guardian is the only
Borrower under the Loan Agreement, and that this Agreement shall be binding upon
any Borrowing
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Subsidiary which may become a Borrower under the Loan Agreement at any time
after the date hereof.
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IN WITNESS WHEREOF, this Agreement has been duly executed as
of the day and year first above written.
GUARDIAN INTERNATIONAL, INC.
By:
Title:
XXXXXX FINANCIAL, INC.
By:
Title:
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