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AMENDMENT NUMBER TWO TO
LOAN AND SECURITY AGREEMENT
by and between
MIDCOM COMMUNICATIONS INC.,
ADVAL, INC.,
ADVAL DATA CORPORATION,
ADVANCED NETWORK DESIGN,
CEL-TECH INTERNATIONAL CORP.,
and
PACNET, INC.
and
FOOTHILL CAPITAL CORPORATION
Dated as of May 29, 1997
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AMENDMENT NUMBER TWO TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER TWO TO LOAN AND SECURITY AGREEMENT (this
"Amendment"), is entered into as of May 29, 1997, by and among FOOTHILL CAPITAL
CORPORATION, a California corporation ("Foothill"), with a place of business
located at 00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx
00000-0000, MIDCOM COMMUNICATIONS INC., a Washington corporation ("Midcom"),
with its chief executive office located at 0000 Xxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxxxxx 00000, ADVAL, INC., an Oregon corporation ("AdVal"), with
its chief executive office located at 000 Xxxxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000, ADVAL DATA CORPORATION, an Oregon corporation ("AdVal Data"),
with its chief executive office located at 000 Xxxxxxx Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000, ADVANCED NETWORK DESIGN, a California corporation
("A.N.D."), with its chief executive office located at 00000 Xxxxxxxxx
Xxxxxxxxx, Xx Xxxxxx, Xxxxxxxxxx 00000, CEL-TECH INTERNATIONAL CORP., a
Washington corporation ("Cel-Tech"), with its chief executive office located at
00000 XX 00xx Xxxx, Xxxxxxxx, Xxxxxxxxxx 00000, and PACNET INC., a Washington
corporation ("PacNet"), with its chief executive office located at 0000 Xxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx 00000 (collectively, and jointly and
severally, the "Borrowers").
This Amendment is entered into with reference to the following facts:
A. Foothill and the Borrowers have entered into that certain Loan
and Security Agreement, dated as of February 27, 1997 (the
"Original Agreement");
B. Foothill and the Borrowers have entered into that certain
Amendment Number One to Loan and Security Agreement (the "First
Amendment"), dated as of April 1, 1997, inter alia, to amend the
Original Agreement to extend the Closing Date as set forth in
the First Amendment (the Original Agreement, as amended by the
First Amendment, is referred to herein as the "Agreement");
C. The Borrowers have requested Foothill to make certain
amendments to the Agreement, inter alia, to extend the Closing
Date from May 15, 1997 to May 31, 1997, as set forth in this
Amendment.
D. Foothill is willing to so amend the Agreement in accordance
with the terms and conditions hereof; and
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E. All capitalized terms used herein and not defined herein shall
have the meanings ascribed to them in the Agreement, as
amended hereby.
NOW, THEREFORE, in consideration of the above recitals and the mutual
promises contained herein, Foothill and the Borrowers hereby agree as follows:
1. Amendments to the Agreement.
a. Section 1.1 of the Agreement hereby is amended
by adding the following new defined terms in alphabetical order:
"First Amendment" means that certain Amendment Number
One to Loan and Security Agreement, dated as of April 1, 1997, between Foothill
and the Borrowers.
"Second Amendment" means that certain Amendment Number
Two to Loan and Security Agreement, dated as of May 29, 1997, between Foothill
and the Borrowers.
b. The following definitions contained in Section
1.1 of the Agreement hereby are deleted in their entirety and the following
hereby are substituted in lieu thereof:
"Borrowers' Designated Account Bank" means Key Bank,
whose office is located at 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxxxxxxx
00000-0000, and whose ABA number is 000-000-000.
"Key Bank" means KeyBank National Association, formerly
known as Key Bank of Washington, Inc.
"Loan Documents" means this Agreement, the First
Amendment, the Second Amendment, the Disbursement Letter, the Lockbox
Agreements, the Pledge Agreement, the Trademark Security Agreement, any
Mortgages hereafter delivered by any one or more of the Borrowers to Foothill,
the Suretyship Agreement, the Intercreditor Agreements, the Control Agreements,
any note or notes executed by any one or more of the Borrowers and payable to
Foothill, and any other agreement entered into, now or in the future, in
connection with this Agreement.
C. The following specified provisions of the
Agreement hereby are amended and restated in their entirety as follows:
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(1) Section 3.1(d) of the Agreement:
(d) the Closing Date shall occur on or before May 31, 1997;
(2) Section 3.1(g)(viii) of the Agreement:
viii) the Intercreditor Agreement with respect to Key Bank;
(3) Section 3.1(l) of the Agreement:
(l) Foothill shall have received, within 15 days before the Closing
Date, certificates of status with respect to each Borrower, each dated
on or after April 1, 1997, such certificates to be issued by the
appropriate officer of the jurisdictions in which its failure to be duly
qualified or licensed would have a Material Adverse Change, which
certificates shall indicate that such Borrower is in good standing in
such jurisdictions;
(4) Section 3.1(s) of the Agreement:
(s) Foothill shall have received written notice from the Borrowers
specifying the requested date of such initial Advance, which requested
date shall not be less than 1 day after the date Foothill receives such
notice;
(5) Section 3.1(u) of the Agreement:
(u) [Intentionally Omitted];
(6) Section 3.1(v) of the Agreement:
(v) Foothill shall have received a Certificate of the Chief
Financial Officer of Midcom certifying that all tax returns required to
be filed by each Borrower have been timely filed and all taxes upon each
Borrower or its properties, assets, income, and franchises (including
payroll taxes) have been paid prior to delinquency, except such taxes
that are the subject of a Permitted Protest and as except as disclosed
in, or on an attachment to, such Certificate, the form and substance of
which shall be satisfactory to Foothill and its counsel;
d. Section 3.3 of the Agreement hereby is amended by
adding the following new subsections as follows:
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(b) On a best efforts basis, Borrower will deliver to Foothill such
Collateral Access Agreements in respect of each of the locations set
forth on Schedule 3.1(u) for which a Collateral Access Agreement is
required; and
(c) Within 10 days after the Closing Date, Foothill shall have
received the Intercreditor Agreement with respect to Comdisco, and in
the event that after such 10 day period such Intercreditor Agreement is
not received, Foothill shall create such reserves as it deems
appropriate in its sole discretion;
(d) Within 30 days after the Closing Date, Foothill shall have
received a Certificate of the General Counsel of Midcom and the Chief
Financial Officer of Midcom setting forth its detailed analysis,
calculation, and management's opinion of the taxes identified in Exhibit
A to the Certificate delivered to Foothill pursuant to Section 3.1(v)
which represents liens which now, or with the passage of time may
become, liens which have or may in the future have priority over the
security interests granted to Foothill under the Loan Documents;
e. The first sentence of Section 5.6 of the Agreement is
amended and restated in its entirety as follows:
The chief executive office of such Borrower is located at the
addresses indicated in the introductory paragraph of this Agreement, or
at such other location as set forth in any notice which may from time to
time be delivered to Foothill pursuant to Section 7.19 of this
Agreement, and in respect of which such Borrower has complied with all
applicable requirements of this Agreement.
f. The introductory language preceding the first clause of
the first sentence of the third paragraph of Section 6.3 of the Agreement is
amended and restated in its entirety as follows:
Within 30 Business Days of the end of each month, together with
the financial statements provided in accordance with Section 6.3(a),
such Borrower shall deliver to Foothill
g. The first sentence of Section 6.9 of the Agreement is
amended and restated in its entirety as follows:
Except as disclosed in the Certificate delivered to Foothill
pursuant to Section 3.1(v), all assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or
assessed against any Borrower or any of its
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property shall be paid in full, before delinquency or before the expiration
of any extension period.
h. Section 7.1 of the Agreement hereby is amended by adding the
following new subsection as follows:
(g) Indebtedness incurred in connection with the Permitted Stock
Redemption.
i. Section 7.8 of the Agreement is amended and restated in its
entirety as follows:
(a) Except in connection with a refinancing permitted by Section
7.1(f), prepay, redeem, retire (except for payments of Indebtedness, to the
extent that such Indebtedness is permitted under Section 7.1 hereto, as
such payments become due, whether upon final scheduled maturity or upon
scheduled installment payment dates), defease, purchase, or otherwise
acquire any Indebtedness owing to any third Person, other than the
Obligations in accordance with this Agreement, and (b) directly or
indirectly, amend, modify, alter, increase, or change any of the terms or
conditions of any agreement, instrument, document, indenture, or other
writing evidencing or concerning Indebtedness permitted under Sections
7.1(b), (c), (d), (e), (f) or (g).
j. Schedule 3.1(u) (Collateral Access Agreements) hereby is
amended and replaced in its entirety with the attached revised Schedule 3.1(u),
attached hereto an Exhibit 1 to this Amendment, setting forth each locations
for which a Collateral Access Agreement shall be delivered to Foothill and the
date by which such Collateral Access Agreement shall be delivered.
k. Schedule 6.13 (Inventory and Equipment Locations) hereby is
amended by the addition of the Addendum to Schedule 6.13 which is made a part
thereof and incorporated therein, attached hereto as Exhibit 2 to this
Amendment, setting forth Borrower's new Seattle office location.
2. Representations and Warranties. Borrower hereby represents and
warrants to Foothill that (a) the execution, delivery, and performance of this
Amendment and of the Agreement, as amended by this Amendment, are within its
corporate powers, have been duly authorized by all necessary corporate action,
and are not in contravention of any law, rule, or regulation, or any order,
judgment, decree, writ, injunction, or award or any arbitrator, court, or
governmental authority, or of the terms of its charter or bylaws, or of any
contract or undertaking to which it is a party or by which any of its
properties may be bound or affected, and (b) this Amendment and the Agreement,
as amended by this
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Amendment, constitute Borrower's legal, valid, and binding obligation,
enforceable against Borrower in accordance with its terms.
3. Conditions Precedent to Amendment. The satisfaction of each of the
following, on or before the Second Amendment Closing Deadline, unless waived or
deferred by Foothill in its sole discretion, shall constitute conditions
precedent to the effectiveness of this Amendment:
a. The representations and warranties in this Amendment, the
Agreement as amended by this Amendment, and the other Loan Documents shall be
true and correct in all respects on and as of the date hereof, as though made
on such date (except to the extent that such representations and warranties
relate solely to an earlier date);
b. No Event of Default or event which with the giving of notice or
passage of time would constitute an Event of Default shall have occurred and be
continuing on the date hereof, nor shall result from the consummation of the
transactions contemplated herein;
c. No injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the consummation of the
transactions contemplated herein shall have been issued and remain in force by
any governmental authority against Borrower or Foothill; and
d. All other documents and legal matters in connection with the
transactions contemplated by this Amendment shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to
Foothill and its counsel.
4. Further Assurances. Borrower shall execute and deliver all
agreements, documents, and instruments, in form and substance satisfactory to
Foothill, and take all actions as Foothill may reasonably request from time to
time fully to consummate the transactions contemplated under this Amendment and
the Agreement, as amended by this Amendment.
5. Miscellaneous.
a. Upon the effectiveness of this Amendment, each reference in the
Agreement to "this Agreement", "hereunder", "herein", "hereof" or words of like
import referring to the Agreement shall mean and refer to the Agreement as
amended by this Amendment.
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b. Upon the effectiveness of this Amendment, each reference in the
Loan Documents to the "Loan Agreement", "thereunder", "therein", "thereof" or
words of like import referring to the Agreement shall mean and refer to the
Agreement as amended by this Amendment.
c. As used in this Amendment, "Second Amendment Closing Deadline"
means May 30, 1997.
d. This Amendment shall be governed by and construed in accordance
with the laws of the State of California.
e. This Amendment may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument and any of
the parties hereto may execute this Amendment by signing any such counterpart.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
MIDCOM COMMUNICATIONS INC.
a Washington corporation
By /s/ XXXXXX X. XXXXXXXXXXX
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Title: Executive Vice President-CFO
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ADVAL, INC.,
an Oregon corporation
By
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Title: Treasurer
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ADVAL DATA CORPORATION,
an Oregon corporation
By
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Title: Treasurer
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ADVANCED NETWORK DESIGN,
a California corporation
By
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Title: Treasurer
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XXX-XXXX XXXXXXXXXXXXX CORP.,
a Washington corporation
By
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Title: Treasurer
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PACNET INC.,
a Washington corporation
By
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Title: Treasurer
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FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ BEN SILVER
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Title: Assistant Vice President
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EXHIBIT 1
REVISED SCHEDULE 3.1(u)
TO THE
FOOTHILL LOAN AND SECURITY AGREEMENT
COLLATERAL ACCESS AGREEMENTS
No. Location
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1. 0000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, XX 00000
2. 000 Xxxxxxx Xxxxxxxxxx, Xxxxxxxxxx, XX 00000
3. 00000 XX 00xx Xxxx, Xxxxxxxx, XX 00000
4. The Westin Building, 0000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, XX
5. 000 X. Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx, XX
6. Printers' Square, 000 X. Xxxxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, XX
7. Financial Square, 00 Xxx Xxxx, 0xx Xxxxx, Xxx Xxxx, XX
8. Allianz Financial Center, 0000 Xxxxx Xxxxxx, 0xx Xxxxx, Xxxxxx, XX
9. 00 Xxxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx, XX
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EXHIBIT 2
ADDENDUM TO SCHEDULE 6.13
TO THE
FOOTHILL LOAN AND SECURITY AGREEMENT
LOCATIONS OF INVENTORY AND EQUIPMENT
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Name of Company Locations Comments
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Midcom Communications, Inc. 0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
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