Exhibit 10.3.2
MAXXCOM INC.
- and -
TD CAPITAL
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FIRST AMENDMENT TO
SUBORDINATED DEBENTURE
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March 31, 2002
FIRST AMENDMENT
TO SUBORDINATED DEBENTURE
THIS FIRST AMENDMENT AGREEMENT is made as of the 31st day of March,
0000
X X X X X X X:
MAXXCOM INC., a corporation governed by the laws of
the Province Ontario
(hereinafter called the Corporation")
- and -
TD CAPITAL, a division of The Toronto-Dominion
Bank, a bank to which the Bank Act (Canada) applies
(hereinafter called TD Capital")
RECITALS:
A. The Corporation issued to TD Capital a subordinated debenture (the
Subordinated Debenture") in the original principal amount of
$40,000,000 on July 11, 2001.
B. The parties hereto have agreed to amend the Subordinated Debenture on
the terms and conditions set out herein.
NOW THEREFORE THIS AGREEMENT WITNESSES that, in
consideration of the covenants and agreements herein contained, and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1 - NEW DEFINITIONS
Section 1.1 of the Subordinated Debenture is amended by
adding the following definitions:
First Amendment" means the First Amendment Agreement to this
Debenture made as of March 31,
2002;
Senior Amendment Agreement" means the first amendment
agreement to the Existing Senior Credit Agreement made as of March 31, 2002
between the Borrower, Maxxcom US, certain Subsidiaries of the Borrower and the
Existing Senior Lenders;
MDC Intercreditor Agreement" means the intercreditor
agreement dated as of March 31, 2002 between MDC Corporation Inc., the Senior
Agent for and on behalf of the Senior Lenders, the Agent on its own behalf and
for and on behalf of the Holders, and the Restricted Parties;
MDC Subordinated Debt" means the subordinated loan made by
MDC Corporation Inc. in favour of the Borrower as evidenced by a demand
promissory note dated _______________________, 2002 in the amount of Cdn.
$25,000,000 which bears interest at a rate of 2.5% per annum;
Rights Offering" means the proposed offering to holders of
outstanding common shares of the Borrower of rights to subscribe for
additional common shares of the Borrower at a price per share to be determined
and for gross proceeds not less than $25,000,000 and up to $33,000,000, or any
other equity infusion to the Borrower agreed to between MDC Corporation Inc.
and the Borrower in lieu thereof yielding gross proceeds to the Borrower of
not less than $25,000,000;
SECTION 2 - AMENDED DEFINITIONS
(1) The definition of "CanSubCos" in Section 1.1 of the Subordinated
Debenture is amended to include references to Xxxxxxxx & Partners
Communications Ltd. (an Ontario corporation) and Studiotype Inc. (an
Ontario corporation).
(2) The definition of "Apcos" in Section 1.1 of the Subordinated Debenture
is amended to reflect the change in name of Pavlika Xxxxxxxx Direct,
LLC to Xxxxxxxx Direct, LLC.
(3) Subparagraphs (b) and (d) of the definition of Permitted Payments" in
Section 1.1 of the Subordinated Debenture are deleted and replaced
with the following provision:
(b) the payment by the Borrower to MDC Corporation Inc. of
(i) fees in relation to provision of administrative
services and benefits by MDC Corporation Inc. to the
Borrower, (ii) fees in consideration of services
provided by MDC Corporation Inc. to the Borrower as
needed in connection with mergers and acquisitions
advisory and other services which are provided on arms
length commercial terms and are approved by the
corporate governance committee of the Borrower, and
(iii) interest accruing on the MDC Subordinated Note at
the rate of 2.5% per annum, the aggregate of which
amounts shall not exceed Cdn. $180,000 in any fiscal
year of the Borrower at any time when there has not
occurred an Event of Default or a Pending Event of
Default which is continuing;
(d) [Intentionally Deleted]
SECTION 3 - AMENDMENT TO SENIOR DEBT RATIO COVENANT
Section 4.2.2 of the Subordinated Debenture is deleted and
replaced with the following provision:
4.2.2 For each time period set forth below, the Borrower on a
consolidated basis shall maintain a Senior Debt Ratio of not more
than the ratios set forth below:
Period Ratio
Up to and including March 31, 2002 3.50 to 1.0
From April 1, 2002 to June 30, 2002 3.00 to 1.0
From July 1, 2002 to September 30, 2002 3.00 to 1.0
From October 1, 2002 to December 31, 2002 3.00 to 1.0
From January 1, 2003 to March 31, 2003 3.00 to 1.0
From April 1, 2003 to June 30, 2003 2.50 to 1.0
From July 1, 2003 to September 30, 2003 2.50 to 1.0
From October 1, 2003 to December 31, 2003 2.50 to 1.0
From January 1, 2004 to March 31, 2004 2.50 to 1.0
From April 1, 2004 to June 30, 2004 2.00 to 1.0
From July 1, 2004 to September 30, 2004 2.00 to 1.0
From October 1, 2004 to December 31, 2004 2.00 to 1.0
Thereafter 2.00 to 1.0
SECTION 4 - AMENDMENT TO TOTAL DEBT RATIO COVENANT
Section 4.2.3 of the Subordinated Debenture is deleted and
replaced with the following provision:
4.2.3 During each period noted below, the Borrower on a consolidated
basis shall maintain a Total Debt Ratio of not more than the ratios
set forth below:
Period Ratio
Up to and including March 31, 2002 5.50 to 1.0
From April 1, 2002 to June 30, 2002 5.75 to 1.0
From July 1, 2002 to September 30, 2002 5.25 to 1.0
From October 1, 2002 to December 31, 2002 4.50 to 1.0
From January 1, 2003 to March 31, 2003 4.50 to 1.0
From April 1, 2003 to June 30, 2003 4.50 to 1.0
From July 1, 2003 to September 30, 2003 4.25 to 1.0
From October 1, 2003 to December 31, 2003 4.00 to 1.0
From January 1, 2004 to March 31, 2004 3.75 to 1.0
From April 1, 2004 to June 30, 2004 3.75 to 1.0
From July 1, 2004 to September 30, 2004 3.25 to 1.0
From October 1, 2004 to December 31, 2004 3.25 to 1.0
Thereafter 3.00 to 1.0
SECTION 5 - AMENDMENT TO COVENANT COMPLIANCE
Section 4.2.4 of the Subordinated Debenture is deleted and
replaced with the following provision:
4.2.4 In the event that the Borrower, at any time or for any relevant
period, is in compliance with the covenants as in effect at July 11,
2001 in the Existing Senior Credit Agreement (as such covenants are
amended by the Senior Amendment Agreement) in relation to the
Interest Coverage Ratio, the Senior Debt Ratio and the Total Debt
Ratio (as each term is defined in the Existing Senior Credit
Agreement at July 11, 2001 (as such terms are amended by the Senior
Amendment Agreement), and without regard to any waiver of such
covenants by the Senior Lenders) at such time or for such period, but
not in compliance with any of the covenants set forth in Sections
4.2.1, 4.2.2 and 4.2.3 of this Debenture (as amended by the First
Amendment) at such time or for such period, the Borrower shall, for
all purposes of this Debenture and the other Sub Debt Documents, be
deemed to be in compliance with the covenants set forth in Sections
4.2.1, 4.2.2 and 4.2.3 of this Debenture (as amended by the First
Amendment), as applicable, at such time or for such period.
SECTION 6 - RESTRICTION ON INVESTMENTS, ETC.
Section 4.4.4 of the Subordinated Debenture is amended by
adding the following provision as Section 4.4.4.1A:
4.4.4.1A unless the Senior Debt Ratio (as calculated under the
Existing Senior Credit Agreement) has, at such time, been less than
2.25 to 1 for at least two consecutive fiscal quarters, except where
the Permitted Acquisition is funded solely from the proceeds of any
issuance of equity of the Borrower;
SECTION 7 - ADDITIONAL COVENANT
Section 4.4 of the Subordinated Debenture is amended by
adding the following provision:
4.4.16A make, permit or agree to any amendment, modification,
supplement, replacement or any other change to the terms and
conditions of the MDC Subordinated Debt (or any documentation
relating thereto) or make or permit any payment whatsoever on account
of principal or any other amount under or in connection with the MDC
Subordinated Debt (other than interest on the MDC Subordinated Debt
as permitted under Sections 4.4.14 and 4.4.16 of this Debenture and
Section 3.2 of the MDC Intercreditor Agreement), or purchase,
repurchase, retract, repay, prepay, acquire, redeem or otherwise
retire for value in any manner whatsoever all or any part of the MDC
Subordinated Debt; provided that nothing herein shall prohibit MDC
Corporation Inc. from setting off the principal amount due on the MDC
Subordinated Debt against the subscription price of rights or other
equity of the Borrower acquired by it pursuant to the Rights
Offering.
SECTION 8 - CONSENTS
Subject to the terms and conditions hereof, the Agent, on
its own behalf and on behalf of the Holders, hereby:
(a) consents to the incurrence of the MDC Subordinated Debt
(which shall be treated for purposes of the Debenture as
Permitted Subordinated Debt);
(b) consents to the discontinuance of the businesses and
operations of XxXxxxx Xxxxxx Communications Inc., Bang!Zoom
LLC and E-Telligence LLC; and
(c) consents to the Senior Amendment Agreement.
SECTION 9 - CONTINUING EFFECT OF SUBORDINATED DEBENTURE
Except as amended by this First Amendment Agreement, the
Subordinated Debenture shall remain in full force and effect, without
amendment, and is hereby ratified and confirmed.
SECTION 10 - COUNTERPARTS AND FACSIMILE
This First Amendment Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to
be an original and such counterparts together shall constitute one and the
same agreement. For the purposes of this Section, the delivery of a facsimile
copy of an executed counterpart of this First Amendment Agreement shall be
deemed to be valid execution and delivery thereof.
SECTION 11 - GOVERNING LAW
This First Amendment Agreement shall be governed by and
construed in accordance with the laws of the Province of Ontario, Canada and
the federal laws of Canada applicable therein. The parties hereto irrevocably
and unconditionally submit to the non-exclusive jurisdiction of any court of
the Province of Ontario, Canada sitting in Toronto over any suit, action or
proceeding arising out of or relating to this First Amendment Agreement. Each
party hereto agrees that a final judgment in any such suit, action or
proceeding brought in any such court shall be conclusive and binding upon the
parties hereto, and may be enforced in any other courts to whose jurisdiction
the parties hereto are or may be subject, by suit upon such judgment.
SECTION 12 - INTERPRETATION
Capitalized terms used herein, unless otherwise defined or
indicated herein, have the respective meanings ascribed thereto in the
Subordinated Debenture. This First Amendment Agreement and the Subordinated
Debenture shall be read together and have effect so far as practicable as
though the provisions thereof and the relevant provisions hereof are contained
in one document.
IN WITNESS OF WHICH, the parties have executed this
Agreement.
MAXXCOM INC.
By:____________________________
By:____________________________
TD CAPITAL, a division of The
Toronto-Dominion Bank
By:____________________________
By:____________________________
