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Amendment No. 2 To Loan And Security Agreement

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Sectors: Telecommunications
Governing Law: Pennsylvania, View Pennsylvania State Laws
Effective Date: May 29, 2003
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AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT
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This AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT (this "Amendment") is made as of this 29th day of May, 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, 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 amend certain terms and provisions of the Loan Agreement; and


WHEREAS, the Lender is willing to 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 Second 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 Second Amendment Effective Date, plus all expenses incurred by the Lender through the Second Amendment Effective Date, including, without limitation reasonable attorneys' fees and expenses, and that, as of the Second 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 May 28, 2003, the aggregate outstanding principal balance of (A) the Revolving Credit Loans is $6,035,133.53, (B) the Equipment Loans is $88,333.31, (C) Term Loan A is $2,090,000.02, (D) Term Loan B is $291,666.69 and (E) Term Loan C is $2,458,333.38.


(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 Second 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" 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 the Revolving Loans
and the Special Advance, 2.50% and (b) as to the Consolidated Term
Loan, 2.75%; provided, however, that the Applicable Margin with respect
to the Revolving Loans shall be reduced by .50% five (5) days after
Lender's receipt of Borrowers' annual audited financial statements for
the fiscal year ending April 3, 2004 so long as (i) no Event of Default
then exists or is reflected by such financial statements and (ii) the
Special Advance and Consolidated Term Loan were previously paid in
full, when due, in accordance with the terms of the Second Amendment.


'Maximum Loan Limit' shall mean, at any time, an amount equal to the
sum of (i) the Maximum Revolving Loan Limit, and (ii) the outstanding
principal balance of the Consolidated Term Loan, 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 Nine Million Dollars ($9,000,000).


'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
and Section 4(a)(ix) of the Second Amendment and remaining unpaid, all
on a consolidated basis and as determined under GAAP.


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'Term Loans' shall mean, collectively, the Consolidated Term Loan, Term Loan C and Term Loan D."


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


"'Participation Agreement' shall mean that certain Participation
Agreement, dated as of the First Amendment Effective Date, between
Chatham and Lender, as amended or otherwise modified from time to time,
including, without limitation, on the Second Amendment Effective Date.


'Second Amendment' shall mean that certain Amendment No. 2 to Loan and
Security Agreement, dated as of May 29, 2003, among Borrowers and
Lender.


'Second Amendment Effective Date' shall mean the `Second Amendment
Effective Date' as defined in the Second Amendment.


'Special Advance' shall have the meaning specified in Subsection 2(l)
hereof.


'Special Advance Maturity Date' shall mean March 31, 2004.


'Specified Over 120-Day Accounts' shall mean all Accounts of Borrowers
that are owing by Post Acquisition Comcast/AT&T or Cox Communications
and unpaid more than 120 days past the original invoice date (as
reflected on the accounts receivable aging report, dated as of April
30, 2003, delivered to Lender by Borrowers), other than the Specified
Cox Accounts.


'Specified Cox Accounts' shall mean those certain Accounts of Borrowers
that are owing by Cox Communications, unpaid more than 120 days past
the original invoice date (as reflected on the accounts receivable
aging report, dated as of April 30, 2003, delivered to Lender by
Borrowers) and specifically described on Schedule 1 to the Second
Amendment."


(c) Notwithstanding anything to the contrary contained in clause (iv) of the definition of "Eligible Accounts" contained in Section 1 of the Loan Agreement, the Borrowers and the Lender agree that (i) 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, and (B) 90 days past the original due date, may constitute Eligible Accounts if such Accounts otherwise satisfy the criteria (other than any applicable aging criteria in such clause (iv)) for Eligible Accounts contained in the Loan Agreement; (ii) the Specified Cox Accounts may constitute Eligible Accounts if such Accounts otherwise satisfy the criteria for Eligible Accounts contained in the Loan Agreement; and (iii) if more than 50% of the aggregate dollar amount of invoices owing by a particular Account Debtor (other than the Specified Cox Accounts) remain unpaid past the earlier of 90 days after the original due dates for such invoices or 120 days after the original issuance dates for such invoices, then all Accounts owing by that Account Debtor shall be deemed ineligible. The accommodations described in the foregoing sentence shall remain in effect until the Special Advance Maturity Date, in the case of clauses (i) and (iii), and June 15, 2003, in the case of clause (ii). Upon the expiration of each such accommodation and at all times thereafter, clause (iv) of the definition of "Eligible Accounts", or any applicable subpart thereof, shall be restored to its original tenor as contained in the Loan Agreement (i.e., without giving effect to any amendments after the Closing Date to clause (iv) of said definition).


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(d) Subsection 2(a)(i) of the Loan Agreement is amended by inserting the following sentence at the end of the last line of the first paragraph thereof:


"Notwithstanding anything to the contrary contained in the Loan
Agreement, the aggregate outstanding principal balance of the Revolving
Loans plus the outstanding principal balance of the Special Advance
shall not at any time exceed the Maximum Revolving Loan Limit."


(e) Notwithstanding anything to the contrary contained in Subsection 2(b) of the Loan Agreement or in the First Amendment, Lender's commitment to make any additional Equipment Loans to Borrowers is hereby terminated.


(f) Borrowers and Lender hereby agree that the aggregate principal balance of the Equipment Loans, Term Loan A and Term Loan B shall be combined into a new reset, consolidated term loan (hereafter, the "Consolidated Term Loan") to be repaid (not withstanding the provisions of Sections 2(e)(ii), (iii) and (iv) of the Loan Agreement) in accordance with the terms of the Consolidated Term Loan Note bearing even date herewith issued by Borrowers to Lender (which is incorporated herein by reference). The foregoing term loan consolidation shall not include any advance of new funds, is not intended to release, extinguish, satisfy or constitute a novation of any outstanding indebtedness of Borrowers to Lender, and shall not impair or modify any provisions of the Loan Agreement relating to Term Loan C or Term Loan D. As soon as reasonably practicable after the Second Amendment Effective Date, the original Notes previously evidencing Term Loan A, Term Loan B and the Equipment Loans will be marked "cancelled" with a notation about being replaced by the Consolidated Term Loan Note and returned to Borrowers or, if one or more such Notes cannot be located, a "lost note(s)" affidavit will be furnished to Borrowers.


(g) Subsection 2(e) of the Loan Agreement is amended by adding a new clause (vii) thereof which shall read as follows:


"(vii) Special Advance. Subject to the mandatory prepayment
requirements of Subsection 2(f)(i) hereof, the Special Advance shall be
repaid in consecutive monthly installments as follows: (A) $50,000 on
the last day of October, November and December 2003 and January 2004,
(B) 25% of the remaining balance thereof (as of February 1, 2004) on
each of February 15, March 1, and March 15, and (C) the remaining
balance on the Special Advance Maturity Date; subject in any event 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. Payments (including
prepayments) on the Special Advance may not be re-borrowed."


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(h) Subsection 2(f)(i) of the Loan Agreement is amended and restated in its entirety as follows:


"(i) Sales of Assets. Except as expressly provided in Subsection 13(d)
and subject to the proviso below, upon receipt of the proceeds of the
sale or other disposition of any Collateral, or if any Collateral is
damaged, destroyed or taken by condemnation in whole or in part, the
proceeds thereof (whether insurance or otherwise) shall be paid by such
Borrower to Lender immediately upon receipt thereof by such Borrower as
a mandatory prepayment of the Term Loans, in such order as determined
by Lender in its sole discretion, such payment to be applied against
the remaining installments of principal in the inverse order of their
maturities until the Term Loans are repaid in full, and then against
the other Liabilities, as determined by Lender in its sole discretion;
provided, however, that (A) the proceeds of the sale of Inventory in
the ordinary course of business, including all collections of Accounts
other than the Specified Over-120 Day Accounts, shall be applied
against the Revolving Loans until the Revolving Loans are repaid in
full, and then against the other Liabilities, as determined by Lender
in its sole discretion, (B) the proceeds of the Specified Over-120 Day
Accounts shall be applied fifty percent (50%) against the Revolving
Loans until the Revolving Loans are repaid in full, and fifty percent
(50%) against the Special Advance (and if received after September 30,
2003, then against the remaining installments of principal of the
Special Advance in the inverse order of their maturities) until the
Special Advance is repaid in full, and then against the other
Liabilities, as determined by Lender in its sole discretion and (C) the
Net Cash Proceeds (as defined in paragraph 3(o)(ii) of the Second
Amendment) of the AMC Services Business shall be applied as follows:
(1) the first $500,000 against the Special Advance (and if received
after October 30, 2003, against the remaining installments of principal
of the Special Advance in the inverse order of their maturities) (2)
the next $100,000 on account of any subordinated indebtedness incurred
under paragraph 4(a)(ix) of the Second Amendment; (3) the next $900,000
against the Revolving Credit Loans; and (4) the remaining amount split
75% against the Special Advance (and if received after October 30,
2003, against the remaining installments of principal of the Special
Advance in the inverse order of their maturities) and 25% against the
Revolving Loans."


(i) Section 2 of the Loan Agreement is amended by adding a new Subsection 2(l) thereof which shall read as follows:


"(l) Special Advance. Subject to the terms and conditions of this
Agreement and the Other Agreements, on the Second Amendment Effective
Date, Lender shall make a special accommodation advance to Borrowers in
an aggregate amount equal to One Million Two Hundred Fifty Thousand
Dollars ($1,250,000) (the `Special Advance'). The proceeds of the
Special Advance shall be used solely for the working capital of
Borrowers."


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(j) Section 4(a) of the Loan Agreement is amended to delete the words "Equipment Loans, and Term Loans A and B" in the second and third lines thereof and replace them with the words "Special Advance and Consolidated Term Loan."


(k) The Prepayment Fee provided for in Section 4(c)(iii) of the Loan Agreement shall be waived as to any and all prepayments of all Loans except to the extent applicable to Term Loan C or Term Loan D.


(l) Subsection 4(c)(vi) of the Loan Agreement is amended by increasing the collateral management fee payable by the Borrowers to the Lender from Six Thousand Dollars ($6,000) per month to Eight Thousand Dollars ($8,000) per month, effective as of the first day of the month immediately following the Second Amendment Effective Date.


(m) Section 4(c)(x) of the Loan Agreement is modified to add the words "with the remaining balance thereof due and payable on the last day of the Term" after the words "successive month" in the seventh line thereof.


(n) Section 10 of the Loan Agreement is amended to delete the words "the date of the third anniversary of the Closing Date" in the second line thereof and replace them with the words "August 14, 2004."


(o) In addition to the other covenants and agreements of the Borrowers contained in the Loan Agreement and the Other Documents, each Borrower covenants and agrees as follows:


(i) The Borrowers will furnish or cause to be furnished to the Lender as soon as practicable after the Second Amendment Effective Date, but in any event, no later than 30 days after the Second Amendment Effective Date, a detailed plan prepared by the Borrowers with the assistance of the Consultant (as defined in the First Amendment) regarding the sale or other
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