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Amendment No. 1 To Loan And Security Agreement

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AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT
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This AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT (this "Amendment") is made as of this 25th day of March, 2003, by and among LASALLE BUSINESS CREDIT, LLC, a Delaware limited liability company (successor-by-merger to LaSalle Business Credit, Inc.), as agent for Standard Federal Bank National Association (the "Lender"), AM COMMUNICATIONS, INC., a Delaware corporation ("AM Communications"), AM BROADBAND SERVICES, INC., a Delaware corporation ("AM Broadband"), SRS COMMUNICATIONS CORPORATION, a Connecticut corporation ("SRS Communications"), AMC SERVICES, INC., a Delaware corporation ("AMC Services"), AM NEX-LINK COMMUNICATIONS, INC., a Delaware corporation ("AM Nex-Link"), and AM TRAINING SERVICES, INC., a Delaware corporation ("AM Training"). AM Communications, AM Broadband, SRS Communications, AMC Services, AM Nex-Link and AM Training are referred to herein individually each as a "Borrower" and collectively as the "Borrowers."


RECITALS


WHEREAS, the Borrowers and the Lender are parties to a certain Loan and Security Agreement, dated as of August 14, 2002 (as amended, modified or supplemented from time to time, including, without limitation, by a certain Forbearance Agreement dated as of December 13, 2002 (as thereafter modified), the "Loan Agreement") pursuant to which the Lender established certain credit facilities on behalf of the Borrowers subject to the terms and conditions contained therein;


WHEREAS, the Borrowers have requested that the Lender make additional Loans available to the Borrowers and amend certain terms and provisions of the Loan Agreement; and


WHEREAS, the Lender is willing to make such additional Loans available to the Borrowers and amend certain terms and provisions of the Loan Agreement on the terms and expressly subject to the conditions set forth herein.


NOW, THEREFORE, based on these premises (which are incorporated hereinafter by this reference), and in consideration of the mutual promises, representations and warranties, covenants and conditions contained herein and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto hereby agree as follows:


1. Definitions. Capitalized terms used herein, and not otherwise defined herein, shall have the meanings assigned to them in the Loan Agreement.


2. Acknowledgment of Obligations.


(a) Each Borrower acknowledges and agrees that: (i) as of the First Amendment Effective Date, the Borrowers are unconditionally liable to the Lender on a joint and several basis under the Loan Agreement, the Notes and each of the Other Agreements, for the payment of the principal amount of the Loans (as described in clause (ii) hereof), plus all accrued and unpaid interest through the First Amendment Effective Date, plus all expenses incurred by the Lender through the First Amendment Effective Date, including, without limitation


reasonable attorneys' fees and expenses, and that, as of the First Amendment Effective Date, the Borrowers have no defenses, counterclaims, deductions, credits, claims or rights of setoff or recoupment with respect to such obligations, and (ii) as of March 19, 2003, the aggregate outstanding principal balance of (A) the Revolving Credit Loans is $6,923,114.64, (B) the Equipment Loans is $91,666.65, (C) Term Loan A is $2,114,444.46 and (D) Term Loan B is $354,166.69.


(b) Each Borrower hereby ratifies and confirms its obligations under the Loan Agreement, the Notes and each of the Other Agreements and hereby acknowledges and agrees that, except as expressly set forth herein, the Loan Agreement, the Notes and each of the Other Agreements remain in full force and effect.


3. Amendments and Modifications. All of the following amendments to the Loan Agreement are effective as of and after the First Amendment Effective Date:


(a) Section 1 of the Loan Agreement is amended by deleting the definitions of "Applicable Margin," "Maximum Loan Limit," "Maximum Revolving Loan Limit," "Net Worth," "Subordinated Debt" and "Term Loans" in their entirety and substituting in lieu thereof the following definitions (in alphabetical order):


"'Applicable Margin' means, at any time, (a) as to Term Loan B, 3.00%,
and (b)(i) as to the Revolving Loans, 1.50% and (ii) as to the
Equipment Loans and Term Loan A, 1.75%; provided, however, that the
respective foregoing percentages in this clause (b) may hereafter
change based upon the following grid, terms and conditions:
Level: Consolidated Funded Applicable Applicable Margin
Debt to Consolidated Margin (Equipment Loans and
EBITDA: (Revolving Loans): Term Loan A):

1 3.6 or more 1.50% 1.75%
2 3.1 to 3.5 1.25% 1.50%
3 3.0 or less 1.00% 1.25%


After September 30, 2003, the Applicable Margin shall (i) be
re-calculated during each fiscal quarter (after Lender's receipt of
Borrowers' financial statements and related certificates for the
immediately preceding fiscal quarter, commencing with the quarter
ending September 30, 2003, which are required to be delivered pursuant
to Subsection 9(c) hereof), based upon the applicable rates in the
above grid corresponding to the Consolidated Funded Debt to
Consolidated EBITDA for the 12 month period ending on the last day of
such immediately preceding quarter, (ii) adjusted (if applicable) as of
the date which is 5 days after Lender's receipt of each such quarterly
statements with such adjustment remaining in effect until any further
adjustment is made under the terms hereof, and (iii) shall be
readjusted to the rates set forth in "Level 1" of the above grid (x) at
any time an Event of Default exists, or (y) if Borrowers fail to
deliver the financial statements or related certificates required to be


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delivered by Borrowers pursuant to Subsection 9(c) hereof (such
adjustment under this clause (y) only to remain in effect during the
period commencing on the date such financial statements and related
certificates were due to be delivered to Lender until 5 days after any
such statements and certificates are actually delivered). Nothing
contained in this definition, including the foregoing clause (iii), is
intended to modify or limit the application of Subsection 4(a)(iii)
hereof, if and when applicable.


'Maximum Loan Limit' shall mean, at any time, an amount equal to the
sum of (i) the Maximum Revolving Loan Limit; (ii) the Reduced Equipment
Loan Limit; and (iii) the outstanding principal balance of the
Equipment Loans (made prior to and after the date hereof), Term Loan A,
Term Loan B, Term Loan C and (after the Term Loan D Effective Date)
Term Loan D.


'Maximum Revolving Loan Limit' shall mean, at any time, an amount equal
to Fourteen Million Dollars ($14,000,000).


'Net Worth' means the shareholders' equity (including retained
earnings), which shall include for purposes hereof (regardless of how
and where shown on the balance sheet of Borrowers) the outstanding
preferred stock of AM Communications (the issuance of which, as of and
after the Closing Date, shall be subject to Subsection 13(d)(v)
hereof), plus the actual amount of any Subordinated Debt received by
Borrowers as contemplated by Section 4(a)(vii) of the First Amendment,
all on a consolidated basis and as determined under GAAP.


'Subordinated Debt' shall mean, collectively, (i) all indebtedness and
other obligations (which shall include, without limitation, principal,
interest, fees and expenses) incurred by any Borrower that is
subordinated to the Liabilities hereunder pursuant to a Subordination
Agreement, including, without limitation, the Hassan Subordinated Debt,
and (ii) the Permitted Advances.


'Term Loans' shall mean, collectively, Term Loan A, Term Loan B, Term
Loan C, Term Loan D and the Equipment Loans."


(b) Section 1 of the Loan Agreement is amended by inserting the following definitions (in their appropriate alphabetical order):


"'Chatham' shall mean Chatham Investment Fund I, LLC.


'Facility Fee' shall have the meaning specified in Subsection 4(c)(ix)
hereof.


'First Amendment' shall mean that certain Amendment No. 1 to Loan and
Security Agreement, dated as of March 25, 2003, among Borrowers and
Lender.


'First Amendment Effective Date' shall mean the 'First Amendment
Effective Date' as defined in the First Amendment.


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'Fixed Rate Fee' shall have the meaning specified in Subsection 4(c)(x)
hereof.


'Forecast' shall mean Borrowers' projections provided to Lender on
March 14, 2003.


'Hassan Subordinated Debt' shall mean all existing and future
indebtedness and obligations (which shall include, without limitation,
principal, interest, fees and expenses) incurred by any Borrower to
Javad K. Hassan.


'Participation Agreement' shall mean that certain Participation
Agreement, dated as of the First Amendment Effective Date, between
Chatham and Lender.


'Reduced Equipment Loan Limit' shall mean Four Hundred Thousand Dollars
($400,000), less the initial amount of all Equipment Loans made after
the First Amendment Effective Date.


'Second Facility Fee' shall have the meaning specified in Subsection
4(c)(xi) hereof.


'Second Fixed Rate Fee' shall have the meaning specified in Subsection
4(c)(xii) hereof.


'Second Success Fee' shall have the meaning specified in Subsection
4(c)(xiii) hereof.


'Subordination Agreement(s)' shall mean, collectively, all written
subordination agreements (which shall be in form and substance
satisfactory to Lender) which heretofore, now or from time to time
hereafter have been or are executed and delivered by or on behalf of
the holders of the Subordinated Debt, including, without limitation,
(i) the Subordination Agreement, dated as of August 14, 2002, among
1401077 Ontario, Ltd., 1418294 Ontario, Ltd., Steven Nickel, Scott
Lochhead, the Borrowers and the Lender, (ii) the Subordination
Agreement, dated as of August 14, 2002, among David P. Sylvestre,
Clifford P. Sylvestre, Edward L. Reynolds, Joanne Sylvestre, Donna M.
Sylvestre, Elizabeth D. Reynolds, the Borrowers and the Lender, (iii)
the Subordination Agreement, dated as of August 14, 2002, among Javad
K. Hassan, the Borrowers and the Lender, (iv) the Johnson Letter
Agreement (as defined in the First Amendment), and (v) the
Subordination Agreement, dated as of the First Amendment Effective
Date, among NeST Technologies Corp. (successor-in-interest to Network
Systems and Technologies (P) Ltd.), NESTRONIX, Inc., the Borrowers and
the Lender, as each of the same may be amended, modified, restated or
supplemented from time to time (including, without limitation, in the
case of the Subordination Agreements described in the foregoing clauses
(i) through (iii), as of the First Amendment Effective Date).


'Success Fee' shall have the meaning specified in Subsection 4(c)(xiv)
hereof.


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'Term Loan C' shall have the meaning specified in Subsection 2(j)
hereof.


'Term Loan D' shall have the meaning specified in Subsection 2(k)
hereof.


'Term Loan D Effective Date' shall mean the date on which Term Loan D
is made by Lender to Borrowers."


(c) Notwithstanding anything to the contrary contained in clause (iv) of the definition of "Eligible Accounts" contained in Section 1 of the Loan Agreement, for the period commencing on the First Amendment Effective Date and ending on May 14, 2003 (the "Modified Eligibility Period"), the Lender agrees that Accounts arising from products sold and/or services rendered by the Borrowers to Account Debtors which are unpaid no more than the lesser of (a) 120 days past the original invoice date or (b) 90 days past the original due date may constitute Eligible Accounts if such Accounts otherwise satisfy the criteria for Eligible Accounts contained in the Loan Agreement; provided, however, that Revolving Loans supported by Eligible Accounts which are unpaid for more than 90 days past the original invoice date or 60 days past the original due date shall at no time exceed Six Hundred Thousand Dollars ($600,000). Upon the expiration of the Modified Eligibility Period and at all times thereafter, the definition of "Eligible Accounts" shall exclude Accounts which are unpaid for more than 90 days past the original invoice date or 60 days past the original due date.


(d) Notwithstanding anything to the contrary contained in the proviso of clause (iv) of the definition of "Eligible Accounts" contained in Section 1 of the Loan Agreement, the Borrowers and Lender agree that, for purposes of the 25% test for cross-aging Accounts, Accounts will be cross-aged on a consolidated basis for all Borrowers rather than on an individual Borrower basis (and, during the Modified Eligibility Period only, such cross-aging shall be based on Accounts aged past the lesser of (A) 120 days from the original invoice date or (B) 90 days from the original due date).


(e) (i) Notwithstanding anything to the contrary contained in Subsection 2(b) of the Loan Agreement, Lender's commitment to make Equipment Loans to Borrowers (having been previously suspended pursuant to the Forbearance Agreement described in the first recital to this Agreement) shall be reinstated as of the date Borrowers' financial statements and related certificates for the quarter ending September 30, 2003 are delivered to Lender if and only if the following conditions precedent (in addition to the other conditions referred to in Subsection 2(b) of the Loan Agreement) shall have been satisfied both before and after giving effect to the funding of each Equipment Loan: (i) the Borrowers' Consolidated EBITDA for the four (4)-month period ending on the last day of the month immediately preceding the date of Lender's receipt of Borrowing Agent's written funding request for each such Equipment Loan shall not have been less than One Million Five Hundred Thousand Dollars ($1,500,000), (ii) Undrawn Availability on such date and on the average for the prior 30 days shall not be less than One Million Dollars ($1,000,000) and (iii) the Lender shall have received a written funding request for such Equipment Loan duly executed by the chief financial officer of Borrowing Agent (which shall be in form and substance satisfactory to the Lender) and shall include his certification that the Borrowers have satisfied all of the conditions precedent contained in this Section 4(e) and the other conditions referred to in Subsection 2(b) of the Loan


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Agreement. Borrowers further confirm that (x) Equipment Loans made after the date hereof shall not exceed the Reduced Equipment Loan Limit and (y) Lender shall have no obligation to make any Equipment Loan at any time if an Event of Default is then outstanding.


(ii) Section 2(b) of the Loan Agreement is further modified to delete the word "Equipment" in the sixth line thereof and replace it with the words "or used motor vehicles."


(f) Notwithstanding anything to the contrary contained in Subsection 2(e)(iv) of the Loan Agreement, the current outstanding principal balance of Term Loan B shall hereafter be repaid in consecutive equal monthly installments of Thirty-One Thousand Two Hundred Fifty Dollars ($31,250) payable on the first day of each month, commencing on the first day of the month immediately following the First Amendment Effective Date, subject to earlier acceleration of the unpaid balance upon the occurrence and during the continuance of an Event of Default as provided in Section 16 of the Loan Agreement or upon termination of the Loan Agreement as provided in Section 10 thereof.


(g) Subsection 2(e) of the Loan Agreement is amended by adding new clauses (v) and (vi) which shall read as follows:


"(v) Term Loan C. Term Loan C shall be repaid in consecutive equal
monthly installments of Forty-One Thousand Six Hundred Sixty-Six and
67/100 Dollars ($41,666.67) payable on the first day of each month,
commencing on May 1, 2003 and continuing on the same day of each
succeeding month; provided, that any remaining outstanding principal
balance of Term Loan C shall be repaid on the last day of the Term,
subject to earlier acceleration upon the occurrence and during the
continuance of an Event of Default as provided in Section 16 or upon
termination of this Agreement as provided in Section 10.


(vi) Term Loan D. Term Loan D shall be repaid in consecutive equal
monthly installments of Thirty-Three Thousand Three Hundred
Thirty-Three and 33/100 Dollars ($33,333.33) payable on the first day
of each month, commencing on the first day of the month immediately
following the Term Loan D Effective Date; provided, that any remaining
outstanding principal balance of Term Loan D shall be repaid on the
last day of the Term, subject to earlier acceleration upon the
occurrence and during the continuance of an Event of Default as
provided in Section 16 or upon termination of this Agreement as
provided in Section 10."


(h) Notwithstanding anything to the contrary contain in Subsection 2(f) of the Loan Agreement, (a) Borrowers' annual mandatory principal prepayments in respect of Excess Cash Flow will be applied to all then outstanding Term Loans, pro rata, in inverse order of their respective maturities, and (b) such mandatory principal prepayments will continue until the date on which all Terms Loans shall have been repaid in full.


(i) Section 2 of the Loan Agreement is amended by adding new Subsections 2(j) and (k) thereof which shall read as follows:


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"(j) Term Loan C. Subject to the terms and conditions of this Agreement
and the Other Agreements, on the First Amendment Effective Date, Lender
shall make a term loan to Borrowers in an amount equal to Two Million
Five Hundred Thousand Dollars ($2,500,000) ('Term Loan C').


(k) Term Loan D. Upon written request from Borrowing Agent after the
First Amendment Effective Date and not less than five (5) Business Days
prior to the date funding thereof is requested to be made, Lender shall
make a term loan to the Borrowers in an amount equal to Two Million
Dollars ($2,000,000) ('Term Loan D') so long as (and only so long as)
the following conditions precedent (all such documents and other items
collectively constituting the 'Term Loan D Conditions Precedent,' and
to be in form and substance satisfactory to Lender) are satisfied (in
Lender's sole judgment):


(i) The amount of Term Loan D is funded to the Lender by
Chatham pursuant to the Participation Agreement, and Chatham
has otherwise complied with its obligations under the
Participation Agreement;


(ii) The date of funding of Term Loan D is on or before
December 31, 2003;


(iii) Term Loan D Note (in the form attached to the First
Amendment as Exhibit B) is duly executed by the Borrowers and
delivered to Lender;


(iv) (A) AM Communications shall have delivered to Chatham a
fully detachable warrant, substantially in the form attached
to the First Amendment Exhibit C-4 (the "Second Chatham
Warrant") to purchase that percentage of the outstanding
equity securities of the AM Communications which, when added
to the percentage of the outstanding equity securities of AM
Communications purchasable upon exercise of the First Chatham
Warrant, equals four and one-half percent (4.5%) of the
outstanding equity securities of AM Communications, and (B) AM
Communications will deliver to Lender a fully detachable
warrant, substantially in the form attached to the First
Amendment as Exhibit C-5 (the "Second Lender Warrant") to
purchase that percentage of the outstanding equity securities
of AM Communications which, when added to the percentage of
the outstanding equity securities of AM Communications
purchasable upon exercise of the First Lender Warrant, equals
one-half percent (0.5%) of the outstanding equity securities
of AM Communications;


(v) The Borrowers' Consolidated EBITDA for the four (4)-month
period ending on the last day of the month immediately
preceding the Lender's receipt of Borrowing Agent's written
funding request for Term Loan D shall not have been less than
One Million Five Hundred Thousand Dollars ($1,500,000);


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(vi) Payment to the Lender of the following fees: (A) the
Second Facility Fee, and (B) the first installment of the
Second Fixed Rate Fee;


(vii) Payment of all outstanding out-of-pocket expenses of
Lender and Chatham incurred by Lender and Chatham in
connection with their respective due diligence and the making
of Term Loan D (including, without limitation, fees and
expenses of counsel to Lender and Chatham);


(viii) Certificate duly executed by the Chief Financial
Officer of the Borrowing Agent whereby the Chief Financial
Officer shall have certified to the Lender, on behalf of the
Borrowers, that the Borrowers have satisfied all of the
conditions precedent contained in this Subsection 2(k);


(ix) Any and all agreements, instruments and documents
required by the Lender to effectuate and implement the
transactions related to the making of Term Loan D (duly
executed, where appropriate, by the Borrowers and such other
parties, as applicable) shall have been delivered to Lender;


(x) Evidence that the execution, delivery and performance of
the Term Loan D Note, the Second Chatham Warrant, the Second
Lender Warrant and Other Agreements referred to in this
Subsection by each Borrower has been duly authorized by all
necessary action, and that no amendment or other modification
to the articles or certificate of incorporation or bylaws of
any Borrower has been made since the First Amendment Effective
Date and that such documents (in the form previously delivered
to the Lender) remain in full force and effect; and


(xi) Written opinion of Archer & Greiner, P.C., counsel to the
Borrowers covering such matters related to Term Loan D, the
Term Loan D Note, the Second Chatham Warrant, the Second
Lender Warrant and the Other Agreements referred to in this
Subsection, and the transactions contemplated hereby and
thereby, as Lender may request."


(j) Notwithstanding anything to the contrary contained in Section 4 of the Loan Agreement, the LIBOR Rate option is permanently terminated and therefore no new LIBOR Rate Loans will be made and no Prime Rate Loans may be converted to LIBOR Rate Loans (it being further acknowledged that no LIBOR Rate Loans are currently outstanding).


(k) Subsection 4(a) of the Loan Agreement is amended by deleting the introductory clause thereof in its entirety and replacing the same with the following:


"Subject to the terms and conditions set forth below, and subject to
subsection (iii) below (if and when applicable), the Revolving Loans,
Equipment Loans, and Term Loans A and B shall bear interest at the per
annum rate set forth in subsection (i) below and Term Loans C and D
shall bear interest at the per annum rate set forth in subsection (vi)
below:"


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(l) Subsection 4(a) of the Loan Agreement is further amended by adding a new clause (vi), which shall read as follows:


"(vi) A per annum rate of interest equal to thirteen and one quarter of
one percent (13.25%) payable in United States Dollars on the first
Business Day of each month in arrears."


(m) Subsection 4(c)(iii) of the Loan Agreement is amended by adding the following sentence to the last line thereof:


"Notwithstanding anything to the contrary contained in this Subsection
4(c)(iii), the Prepayment Fee shall also automatically become due and
be deemed fully-earned by Lender by reason of the termination of the
Lender's commitment to make Revolving Loans which shall automatically
occur (x) if Lender accelerates the Liabilities or Borrowers otherwise
prepay the Liabilities following the occurrence of an Event of Default
or (y) upon the occurrence of any Event of Default described in
subsection 15(g) hereof, without declaration, notice or demand by
Lender regardless of whether Lender, in its discretion, elects to
provide loans following the occurrence of any such Event of Default."


(n) Subsection 4(c)(vii) of the Loan Agreement is amended such that, in addition to Borrowers' obligation to reimburse Lender for all out of pocket costs and expenses incurred by Lender in connection with the activities described in such Subsection, Bor
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