EXHIBIT 10 .1
SIXTH LOAN MODIFICATION AGREEMENT
This Sixth Loan Modification Agreement (this "Loan Modification
Agreement") is entered into as of November 2, 2005, and is effective as of
October 28, 2005, by and among (i) SILICON VALLEY BANK, a California-chartered
bank, with its principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx,
Xxxxxxxxxx 00000 and with a loan production office located at 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("Bank") and (ii) GLOBECOMM SYSTEMS INC., a
Delaware corporation with offices at 00 Xxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000
and GLOBECOMM NETWORK SERVICES CORPORATION (formerly NETSAT EXPRESS, INC.), a
Delaware corporation with offices at 00 Xxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000
(jointly and severally, individually and collectively, "Borrower").
1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank,
Borrower is indebted to Bank pursuant to a loan arrangement dated as of
September 15, 2003, evidenced by, among other documents, a certain Loan
and Security Agreement dated as of September 15, 2003 between Borrower
and Bank, as amended from time to time (as amended, the "Loan
Agreement"). Capitalized terms used but not otherwise defined herein
shall have the same meaning as in the Loan Agreement.
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by
the Collateral as described in the Loan Agreement (together with any
other collateral security granted to Bank, 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 CHANGE IN TERMS.
Modifications to Loan Agreement.
--------------------------------
i. Borrower hereby agrees, acknowledges and confirms that
the Exim Agreement is hereby terminated and that no
Advances may be requested by Borrower pursuant to the
Exim Agreement.
ii. The Loan Agreement shall be amended by deleting the
following appearing as Section 1.1 thereof in its
entirety:
" 1.1 LOANS. Silicon will make loans to
Borrower (the "Loans") up to the amounts
(the "Credit Limit") shown on the Schedule,
provided no Default or Event of Default has
occurred and is continuing, and subject to
deduction of any Reserves for accrued
interest and such other Reserves as Silicon
deems proper from time to time. Amounts
borrowed may be repaid and reborrowed during
the term of this Agreement."
and inserting in lieu thereof the following:
" 1.1 LOANS. Silicon will make loans to
Borrower (the "Loans") up to either (i)
prior to the occurrence of an Unrestricted
Cash Event, (a) Twenty Million Dollars
($20,000,000.00), minus (b) the aggregate
amounts then undrawn on all outstanding
letters of credit, or any other
accommodations issued or incurred, or caused
to be issued or incurred by Silicon for the
account and/or benefit of the Borrower, or
(ii) after the occurrence of an Unrestricted
Cash Event, the amounts (the "Credit Limit")
shown on Section 1 of the Schedule, provided
no Default or Event of Default has occurred
and is continuing, and
subject to deduction of any Reserves for
accrued interest and such other Reserves
as Silicon reasonably deems proper from
time to time. Amounts borrowed may be
repaid and reborrowed during the term of
this Agreement."
iii. The Loan Agreement shall be amended by deleting the
following text, appearing in Section 1.5 thereof:
"Each Letter of Credit shall have an expiry
date no later than thirty days prior to the
Maturity Date."
and inserting in lieu thereof the following:
"Each Letter of Credit shall have an expiry
date no later than one hundred eighty days
after the Maturity Date."
iv. The Loan Agreement shall be amended by deleting the
following, appearing as Section 1.6 thereof:
" 1.6 CASH MANAGEMENT SERVICES SUBLIMIT. In
addition to Section 1.5 above, Borrower may
also use up to the amount set forth on the
Schedule for Cash Management Services. Such
aggregate amounts utilized under the Cash
Management Services Sublimit shall at all
times reduce the amount otherwise available
for Loans, letters of credit, foreign
exchange contracts or other credit
accommodations hereunder. Any amounts
Silicon pays on behalf of Borrower or any
amounts that are not paid by Borrower for
any Cash Management Services will be treated
as Loans hereunder and will accrue interest
at the interest rate applicable to Loans."
and inserting in lieu thereof the following:
" 1.6 RESERVED.
v. The Loan Agreement shall be amended by inserting the
following new definition, appearing alphabetically in
Section 8 thereof:
" "Unrestricted Cash Event" occurs at any
time at which Borrower maintains less than
Thirteen Million Five Hundred Thousand
Dollars ($13,500,000.00) in unrestricted and
unencumbered cash with Silicon.
vi. The Loan Agreement shall be amended by deleting the
following text, appearing in the definition of "Eligible
Receivables" in Section 8 thereof:
"(vii) the Receivable must not be owing from
the United States or any department, agency
or instrumentality thereof (unless there has
been compliance, to Silicon's satisfaction,
with the United States Assignment of Claims
Act), (viii) the Receivable must not be
owing from an Account Debtor located outside
the United States (unless pre-approved by
Silicon in its discretion in writing, or
backed by a letter of credit satisfactory to
Silicon, or FCIA insured satisfactory to
Silicon)"
and inserting in lieu thereof the following:
"(vii) the Receivable must not be owing from
the United States or any department, agency
or instrumentality thereof (unless there has
been compliance, to Silicon's satisfaction,
with the United States Assignment of
Claims Act), provided that Receivables
owing from the United States Government,
the United Nations, the World Bank and the
North Atlantic Treaty Organization will be
deemed eligible to the extent that the
amount advanced based upon such
Receivables does not exceed $2,000,000 in
the aggregate, (viii) the Receivable must
not be owing from an Account Debtor
located outside the United States (unless
pre-approved by Silicon in its discretion
in writing, or backed by a letter of
credit satisfactory to Silicon, or FCIA
insured satisfactory to Silicon), provided
that Receivables owing from an Account
Debtor located outside of the United
States will be deemed eligible to the
extent that such Account Debtor is not
located in a country with a Note #7 or a
Note #13 on the Export-Import Bank Country
Limitation Schedule and provided that the
amount advanced based upon such
Receivables does not exceed $2,000,000 in
the aggregate"
vii. The Loan Agreement shall be amended by deleting the
following appearing as Section 1 of the Schedule to the
Loan Agreement:
"1. CREDIT LIMIT
(Section 1.1): An amount not to exceed the
lesser of (A) or (B), below:
(A)
(i) $16,500,000.00 (the "Maximum
Credit Limit"); minus
(ii) the aggregate amounts
outstanding under the Exim Agreement; minus
(iii) the aggregate amounts then
undrawn on all outstanding letters of
credit, foreign exchange contracts, or any
other accommodations issued or incurred, or
caused to be issued or incurred by Silicon
for the account and/or benefit of the
Borrower.
(B)
(i) 80.0% of the amount of the
Borrower's Eligible Receivables; plus;
(ii) 100.0% of the amount of Borrower's
unrestricted cash and unrestricted cash
equivalents maintained in deposit or
investment accounts with Silicon (or SVB
Securities with respect to investment
accounts); minus
(iii) the aggregate amounts then
undrawn on all outstanding letters of
credit, foreign exchange contracts, or any
other accommodations issued or incurred, or
caused to be issued or incurred by Silicon
for the account and/or benefit of the
Borrower.
Silicon may, from time to time, modify the
advance rate(s) set forth herein in its good
faith business judgment upon notice to
Borrower based on changes in collection
experience with respect to the Receivables
or other issues or factors relating to the
Receivables or the Collateral.
LETTER OF CREDIT SUBLIMIT
(Section 1.5): $16,500,000
FOREIGN EXCHANGE CONTRACT/CASH MANAGEMENT
SERVICES SUBLIMIT
(Section 1.6): $10,000,000"
and inserting in lieu thereof the following:
"1. CREDIT LIMIT
(Section 1.1): An amount not to exceed the
lesser of (A) or (B), below:
(A)
(i) $20,000,000.00 (the "Maximum
Credit Limit"); minus
(ii) the aggregate amounts then
undrawn on all outstanding letters of
credit, or any other accommodations issued
or incurred, or caused to be issued or
incurred by Silicon for the account and/or
benefit of the Borrower.
(B)
(i) 80.0% of the amount of the
Borrower's Eligible Receivables; plus;
(ii) 100.0% of the amount of
Borrower's unrestricted cash and
unrestricted cash equivalents maintained in
deposit or investment accounts with Silicon
(or SVB Securities with respect to
investment accounts); minus
(iii) the aggregate amounts then
undrawn on all outstanding letters of
credit, or any other accommodations issued
or incurred, or caused to be issued or
incurred by Silicon for the account and/or
benefit of the Borrower.
Silicon may, from time to time, modify the
advance rate(s) set forth herein in its good
faith business judgment upon notice to
Borrower based on changes in collection
experience with respect to the Receivables
or other issues or factors relating to the
Receivables or the Collateral.
LETTER OF CREDIT SUBLIMIT
(Section 1.5): $20,000,000
viii. Section 2 of the Schedule to the Loan Agreement is
hereby amended by deleting the following text:
"A rate equal to the Prime Rate plus one and
one-half percent (1.5%) per annum."
and inserting in lieu thereof the following:
"A rate equal to the Prime Rate."
ix. Section 3 of the Schedule to the Loan Agreement is
hereby amended by inserting the following text:
"Letter of Credit Fee: Borrower shall pay
Silicon's customary fees and expenses for
the issuance or renewal of Letters of
Credit, including, without limitation, a
Letter of Credit fee of one percent (1.0%)
per annum of the face amount of each Letter
of Credit issued, upon the issuance or
renewal of such Letter of Credit by
Silicon."
x. Section 4 of the Schedule to the Loan Agreement is
hereby amended by deleting the following text:
"October 28, 2005"
and inserting the following in lieu thereof:
"November 1, 2006"
xi. The Loan Agreement shall be amended by deleting the
following appearing as Section 5 of the Schedule to the
Loan Agreement:
"5. FINANCIAL COVENANTS
(Section 5.1): Borrower shall comply with
each of the following covenant(s).
Compliance shall be determined as of the end
of each month:
a. MINIMUM TANGIBLE NET WORTH:
Borrower shall maintain a Tangible Net Worth
of not less than the sum of (i) plus (ii)
below:
(i) $45,000,000 from October 1, 2004 until
the Maturity Date;
(ii) 60% of all consideration received after
the date hereof from proceeds from the
issuance of any equity securities of the
Borrower and/or subordinated debt incurred
by the Borrower and 60% of all quarterly net
profits of Borrower.
b. LIQUIDITY RATIO:
Borrower shall have a Liquidity Ratio of not
less than:
(i) 0.9 to 1.0, from October 1, 2004 through
February 28, 2005; and (ii) 1.0 to 1.0, from
March 1, 2005 and thereafter.
DEFINITIONS. For purposes of the foregoing
financial covenants, the following term
shall have the following meaning:
"Tangible Net Worth" shall mean the excess
of total assets over total liabilities,
determined in accordance with generally
accepted accounting principles, with the
following adjustments:
(A) there shall be excluded from assets: (i)
notes, accounts receivable and other
obligations owing to the Borrower from its
officers or other Affiliates, and (ii) all
assets which would be classified as
intangible assets under generally accepted
accounting principles, including without
limitation goodwill, licenses, patents,
trademarks, trade names, copyrights,
capitalized software and organizational
costs, licenses and franchises
(B) there shall be excluded from
liabilities: all indebtedness which is
subordinated to the Obligations under a
subordination agreement in form specified by
Silicon or by language in the instrument
evidencing the indebtedness which is
acceptable to Silicon in its discretion."
"Liquidity Ratio" shall mean the ratio of
(i) Borrower's unrestricted cash,
unrestricted cash equivalents and net
accounts receivable to (ii) all of
Borrower's obligations and liabilities to
Silicon (including the face amount of
issued, but undrawn, Letters of Credit
issued hereunder, but excluding any
cash-secured letters of credit issued by
Silicon) plus, without duplication, the
aggregate amount of Borrower's total
liabilities determined in accordance with
generally accepted accounting principles
which mature within one (1) year."
and inserting in lieu thereof the following:
"5. FINANCIAL COVENANTS
(Section 5.1): Borrower shall comply with
each of the following covenants. Compliance
shall be determined as of the end of each
quarter:
a. MINIMUM TANGIBLE NET WORTH:
Borrower shall maintain a Tangible Net Worth
of not less than the sum of (i) plus (ii)
below:
(i) $50,000,000 from October 1, 2005 until
the Maturity Date;
(ii) 60% of all consideration received after
the date hereof from proceeds from the
issuance of any equity securities of the
Borrower and/or subordinated debt incurred
by the Borrower and 60% of all quarterly net
profits of Borrower.
b. LIQUIDITY RATIO:
Borrower shall have a Liquidity Ratio of not
less than 0.9 to 1.0.
DEFINITIONS. For purposes of the foregoing
financial covenants, the following terms
shall have the following meaning:
"Liquidity Ratio" shall mean the ratio of
(i) Borrower's unrestricted cash,
unrestricted cash equivalents and net
accounts receivable to (ii) all of
Borrower's obligations and liabilities to
Silicon (including the face amount of
issued, but undrawn, Letters of Credit
issued hereunder, but excluding any
cash-secured letters of credit issued by
Silicon) plus, without duplication, the
aggregate amount of Borrower's total
liabilities determined in accordance with
generally accepted accounting principles
which mature within one (1) year."
"Tangible Net Worth" shall mean the excess
of total assets over total liabilities,
determined in accordance with generally
accepted accounting principles, with the
following adjustments:
(A) there shall be excluded from assets: (i)
notes, accounts receivable and other
obligations owing to the Borrower from its
officers or other Affiliates, and (ii) all
assets which would be classified as
intangible assets under generally accepted
accounting principles, including without
limitation goodwill, licenses, patents,
trademarks, trade names, copyrights,
capitalized software and organizational
costs, licenses and franchises
(B) there shall be excluded from
liabilities: all indebtedness which is
subordinated to the Obligations under a
subordination agreement in form specified by
Silicon or by language in the instrument
evidencing the indebtedness which is
acceptable to Silicon in its discretion."
xii. The Loan Agreement shall be amended by deleting the
following appearing as Section 6 of the Schedule to the
Loan Agreement:
"6. REPORTING.
(Section 5.3):
Borrower shall provide Silicon with the
following:
(a) (i) as soon as available, but no
later than twenty-five (25) days after the
last day of each month, a company prepared
consolidated balance sheet and income
statement covering Borrower's consolidated
operations during the period certified by
Borrower and in a form acceptable to
Silicon; (ii) as soon as available, but no
later than ninety (90) days after the last
day of Borrower's fiscal year, audited
consolidated financial statements prepared
under GAAP, consistently applied, together
with an unqualified opinion on the financial
statements from an independent certified
public accounting firm reasonably acceptable
to Silicon; (iii) within five (5) days of
filing, copies of all statements, reports
and notices made available to Borrower's
security holders or to any holders of
Subordinated Debt and all reports on Form
10-K, 10-Q and 8 K filed with the Securities
and Exchange Commission; and (iv) budgets,
sales projections, operating plans or other
financial information reasonably requested
by Silicon.
(b) Provide Silicon with, as soon as
available, but no later than twenty-five
(25) days following each month, an aged
listing of accounts receivable and accounts
payable by invoice date, in form acceptable
to Silicon, along with a Borrowing Base
Certificate in the form of Exhibit C hereto.
(c) Within twenty-five (25) days after
the last day of each month, Borrower shall
deliver to Silicon with the monthly
financial statements a Compliance
Certificate in the form of Exhibit D
hereto."
and inserting in lieu thereof the following:
"6. REPORTING.
(Section 5.3):
Borrower shall provide Silicon with the
following:
(a) (i) as soon as available, but no
later than thirty (30) days after the last
day of each month, a company prepared
consolidated balance sheet and income
statement covering Borrower's consolidated
operations during the period certified by
Borrower and in a form acceptable to
Silicon; (ii) as soon as available, but no
later than ninety (90) days after the last
day of Borrower's fiscal year, audited
consolidated financial statements prepared
under GAAP, consistently applied, together
with an unqualified opinion on the financial
statements from an independent certified
public accounting firm reasonably acceptable
to Silicon; (iii) within five (5) days of
filing, copies of all statements, reports
and notices made available to Borrower's
security holders or to any holders of
Subordinated Debt and all reports on Form
10-K, 10-Q and 8 K filed with the Securities
and Exchange Commission, together with a
Compliance Certificate in the form attached
hereto as Exhibit D; and (iv) budgets, sales
projections, operating plans or other
financial information reasonably requested
by Silicon.
(b) Provide Silicon with, as soon as
available, but no later than thirty (30)
days following each month, an aged listing
of accounts receivable and accounts
payable by invoice date, in form acceptable
to Silicon, along with a Borrowing Base
Certificate in the form of Exhibit C hereto.
(c) Within thirty (30) days after the
last day of each month, Borrower shall
deliver to Silicon with the monthly
financial statements a Compliance
Certificate in the form of Exhibit D
hereto."
xiii. The Loan Agreement is hereby amended by deleting the
Borrowing Base Certificate attached as Exhibit C
thereto and inserting in lieu thereof the Borrowing
Base Certificate attached as Exhibit C hereto.
xiv. The Loan Agreement is hereby amended by deleting the
Compliance Certificate attached as Exhibit D thereto
and inserting in lieu thereof the Compliance
Certificate attached as Exhibit D hereto.
4. FEES. Borrower shall pay to Bank a modification fee of $200,000.00
which fee shall be due on the date hereof and shall be deemed fully
earned upon Silicon's execution of this Loan Modification Agreement.
Borrower shall reimburse the Bank for all legal fees and expenses
incurred in connection with this amendment to the Existing Loan
Documents.
5. RATIFICATION OF NEGATIVE PLEDGE AGREEMENTS. Borrower hereby ratifies,
confirms, and reaffirms, all and singular, the terms and conditions of
certain Negative Pledge Agreements dated September 15, 2003 and June 2,
2004.
6. RATIFICATION OF PERFECTION CERTIFICATES. Borrower hereby ratifies,
confirms, and reaffirms, all and singular, the terms and disclosures
contained in certain Perfection Certificates dated June 2, 2004 and
acknowledges, confirms and agrees the disclosures and information
provided therein has not changed, as of the date hereof.
7. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
8. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral
granted to the Bank, and confirms that the indebtedness secured thereby
includes, without limitation, the Obligations.
9. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that
Borrower knows of no offsets, defenses, claims, or counterclaims
against the Bank with respect to the Obligations, or otherwise, and
that if Borrower now has, or ever did have, any offsets, defenses,
claims, or counterclaims against the Bank, whether known or unknown, at
law or in equity, all of them are hereby expressly WAIVED.
10. CONTINUING VALIDITY. Borrower understands and agrees that in modifying
the existing Obligations, Bank is relying upon Borrower's
representations, warranties, and agreements, as set forth in the
Existing Loan Documents. Except as expressly modified pursuant to this
Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank's agreement to
make modifications to the existing Obligations pursuant to this Loan
Modification Agreement in no way shall obligate Bank to make any
future modifications to the Obligations. Nothing in this Loan
Modification Agreement shall constitute a satisfaction of the
Obligations. It is the intention of Bank and Borrower to retain as
liable parties all makers of Existing Loan Documents, unless the party
is expressly released by Bank in writing. No maker will be released by
virtue of this Loan Modification Agreement.
11. COUNTERSIGNATURE. This Loan Modification Agreement shall become
effective only when it shall have been executed by Borrower and Bank.
[The remainder of this page is intentionally left blank]
This Loan Modification Agreement is executed as a sealed instrument
under the laws of the Commonwealth of Massachusetts as of the date first written
above.
BORROWER:
GLOBECOMM SYSTEMS INC.
By: /s/ XXXXXX X. XXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxx
Title: VP, CFO
GLOBECOMM NETWORK SERVICES CORPORATION
(formerly NETSAT EXPRESS, INC.
By: /s/ XXXXX X. XXXXXXXXX
--------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Chairman and CEO
BANK:
SILICON VALLEY BANK
By: /s/ XXXXXXX XXXXXXX
--------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: SVP
