Exhibit 10.2
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AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Amendment") is entered into
as of April 9, 1999, by and between U.S.WATS, INC., ("Borrower") and CENTURY
BUSINESS CREDIT CORPORATION ("Lender").
BACKGROUND
Borrower and Lender are parties to a Loan and Security Agreement dated as
of May 11, 1995 (as amended, supplemented or otherwise modified from time to
time, the "Loan Agreement") pursuant to which Lender provides Borrower with
certain financial accommodations.
Borrower has requested that Lender extend the Term of the Loan Agreement
and amend certain other provisions of the Loan Agreement and Lender is willing
to do so on the terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of credit
heretofore or hereafter made to or for the account of Borrower by Lender, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms not otherwise defined herein shall
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have the meanings given to them in the Loan Agreement.
2. Amendment to Loan Agreement. Subject to satisfaction of the conditions
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precedent set forth in Section 3 below, the Loan Agreement is hereby amended as
follows:
(a) Paragraph 1(a) is amended as follows:
(i) the following defined terms are added in the
appropriate alphabetical order:
"Amendment" means the Amendment to Loan and Security Agreement
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dated as of April 9, 1999 between Borrower and Lender.
"Eligible Unbilled Receivables" means those Receivables arising
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from telecommunication services rendered to customers which
would be Eligible Receivables except for the fact that they
have not yet been processed and formatted for billing.
"Interest Rate Margin" means (a) for the period commencing on
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the Closing Date and ending on May 11, 1999, three and three-
quarters percent (3.75%) with respect to all Loans; and (b) for
the period commencing on May 12, 1999 and at all times
thereafter, (i) three percent (3.00%) with respect to all
Revolving Credit Advances made with respect to Eligible
Unbilled
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Receivables and (ii) two and three-quarters percent (2.75%)
with respect to all other Loans.
"Termination Date" means May 10, 2002.
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"Unbilled Receivables Advance Period" means one period of seven
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(7) consecutive business days during each calendar month
occurring prior to December 31, 1999.
"Unbilled Receivables Availability" means the amount of
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Revolving Credit Advances against Eligible Unbilled Receivables
Lender may from time to time during the Unbilled Receivables
Advance Period of this Agreement make available to Borrower up
to twenty five percent (25%) of the net face amount of
Borrower's Eligible Unbilled Receivables.
(ii) the following defined terms are amended in their entirety
to provide as follows:
"Contract Rate" means an interest rate per annum equal to the
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greater of (a) ten percent (10%) or (b) the Prime Rate plus the
applicable Interest Rate Margin.
"Guarantor" means individually Carriers Group, Inc., USWC and
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any other Person who may hereafter guarantee payment or
performance of the whole or any part of the Obligations and
"Guarantors" means collectively all such persons.
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"Guaranty Agreements" means the Guaranty Agreement executed by
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USWC in favor of Lender, the Guaranty Agreement executed by
Carriers Group, Inc. in favor of Lender and any other Guaranty
Agreements executed by any other Guarantor in favor of Lender,
each as may be amended, modified, supplemented or restated from
time to time.
"Guaranty Security Agreement" means collectively the Guarantor
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Security Agreement executed by USWC in favor of Lender and the
Security Agreement executed by Carriers Group, Inc. in favor of
Lender.
"Prime Rate" means the prime commercial lending rate of ▇▇▇▇▇
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Fargo & Co. as publicly announced in San Francisco, California
to be in effect from time to time as its "prime" or "base" rate
of interest and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest
rate of interest actually charged to any particular class or
category of customers. Such rate shall be increased or
decreased as the case may be for each increase or decrease in
said rate in an amount equal to such increase or decrease in
said rate; each change to be effective as of the day of the
change in such rate.
"Senior Management" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇▇ or any other
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individual who is currently involved in the management of
Borrower.
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(b) Paragraph 2(a) is amended in its entirety to provide as follows:
"2. Revolving Credit Advances.
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(a) Subject to the terms and conditions set forth herein and in
the Ancillary Agreements, Lender may, in its sole discretion, make
revolving credit advances (the "Revolving Credit Advances") to
Borrower from time to time during the term of this Agreement which,
in the aggregate at any time outstanding, will not exceed the lesser
of (x) the Maximum Revolving Amount or (y) an amount equal to the
sum of:
(i) Receivables Availability, plus
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(ii) during the Unbilled Receivables Advance Period, the lesser of
(A) $750,000 and (B) Unbilled Receivables Availability, minus
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(iii) such reserves as Lender may reasonably deem proper and
necessary from time to time.
The amount derived from the paragraph 2(a)(y) (i) plus (ii) minus
(iii) shall be referred to as the "Formula Amount"."
(c) Paragraph 3 is amended by adding the following language at the end
thereof:
"Any payments of principal, interest, fees or any other amounts
payable hereunder or under any Ancillary Agreement shall be made
prior to 12:00 noon (New York time) on the due date thereof in
immediately available funds."
(d) A new paragraph 5(b)(vii) is added after the end of paragraph 5(b)(vi)
and provides as follows:
"(vii) Extension Fee. Borrower shall pay Lender a fee in an amount
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equal to one-half of one percent (0.50%) of the Maximum Revolving
Amount, which fee shall be deemed fully earned upon the execution of
the Amendment by Borrower and Lender and shall be payable in equal
monthly installments equal to 1/36/th/ of the Maximum Revolving
Amount commencing on May 11, 1999 and on the first day of each month
thereafter until paid in full or upon earlier termination of this
Agreement."
(e) Paragraph 9 is amended in its entirety to provide as follows:
"9. Collection and Maintenance of Collateral and Records. Lender
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may at any time verify Borrower's Receivables utilizing an audit
control company or any other agent of Lender. Lender or Lender's
designee may notify customers or account debtors, at any time at
Lender's sole discretion, of Lender's security interest in
Receivables, collect them directly and charge the collection costs
and expenses to Borrower's account, but, unless and until Lender
does so or gives Borrower other instructions, Borrower shall collect
all Receivables for Lender, receive all payments thereon for
Lender's
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benefit in trust as Lender's trustee and immediately deliver them to
Lender in their original form with all necessary endorsements or, as
directed by Lender, deposit such payments as directed by Lender
pursuant to paragraphs 22 or 23 hereof. For purposes of determining
the balance of the Loans outstanding, Lender will credit
(conditional upon final collection) all such payments to Borrower's
account upon receipt by Lender of good funds in dollars of the
United States of America in Lender's account, provided, however, for
purposes of computing interest on the Obligations, Lender will
credit (conditional upon final collection) all such payments to
Borrower's account in the case of a payment in the form of federal
funds or other immediately available funds two (2) business days
after receipt by Lender of such funds in dollars of the United
States of America in Lender's account and in the case of payments in
any other form five (5) business days after receipt by Lender of
good funds in dollars of the United States of America in Lender's
account. Any amount received by Lender after 12:00 noon New York
time on any business day shall be deemed received on the next
business day. Promptly after the creation of any Receivables,
Borrower shall provide Lender with schedules describing all
Receivables created or acquired by Borrower and shall execute and
deliver confirmatory written assignments of such Receivables to
Lender, but Borrower's failure to execute and deliver such schedules
or written confirmatory assignments of such Receivables shall not
affect or limit Lender's security interest or other rights in and to
the Receivables. Borrower shall furnish, at Lender's request, copies
of contracts, invoices or the equivalent, and any original shipping
and delivery receipts for all merchandise sold or services rendered
and such other documents and information as Lender may require.
Borrower shall also provide Lender on a monthly (within ten (10)
days after the end of each month) or more frequent basis, as
requested by Lender, a detailed or aged trial balance of all of
Borrower's existing Receivables specifying the names and balances
due for each account debtor and such other information pertaining to
the Receivables as Lender may request. Borrower shall provide Lender
on a monthly (within ten (10) days after the end of each month), or
more frequent basis, as requested by Lender, a summary report of
Borrower's current Inventory, certified as true and accurate by
Borrower's President or Chief Financial Officer, as well as an aged
trial balance of Borrower's existing accounts payable. Borrower
shall provide Lender, as requested by Lender, such other schedules,
documents and/or information regarding the Collateral as Lender may
require."
(f) Paragraph 17 is amended in its entirety to provide as follows:
"17. Term of Agreement. This Agreement shall continue in full force
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and effect until the expiration of the Term; provided, however,
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Lender may terminate at any time upon sixty (60) days notice. The
Termination Date shall be automatically extended for successive
periods of two (2) years each unless Borrower shall have provided
Lender with a written notice of termination, at least sixty (60)
days prior to the expiration of the Termination Date or any renewal
of the Termination Date. Upon any extension of the Termination Date
or any renewal of the Termination Date Borrower shall pay Lender an
extension fee in the amount equal to the
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product of (x) the Maximum Revolving Amount times (y) one percent
(1.0%). Notwithstanding the foregoing, Lender shall release its
security interests after fifteen (15) business days notice upon
payment to it of all Obligations if Borrower shall have (i)
provided Lender with an executed release of any and all claims
which Borrower may have or thereinafter shall have under this
Agreement and (ii) paid to Lender an early payment fee in an
amount equal to the product of (x) fifty percent (50%) of the
average monthly interest (including any minimum loan fees payable
hereunder) payable by Borrower to Lender for the 12 months prior
to this amendment multiplied by (y) the difference between (i)
the number of full months from the Closing Date until the
Termination Date and (ii) the number of full months which have
elapsed from the Closing Date until the date of payment of the
fee hereunder; such fee being intended to compensate Lender for
its costs and expenses incurred in initially approving this
Agreement or extending same. Such early payment fee shall also be
due and payable by Borrower to Lender upon termination of this
Agreement by Lender after the occurrence of an Event of Default.
Notwithstanding the foregoing in the event an early payment
occurs on or after May 11, 2000, the amount of the early payment
fee shall not exceed the lesser of (i) $25,000 or (ii) the amount
determined above."
(g) Paragraph 18(r) is amended in its entirety to provide as follows:
"(r) (i) ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ shall
cease to constitute a majority of Borrower's board of directors
and (ii) Senior Management shall cease to be involved in the
management of Borrower; or"
3. Conditions of Effectiveness. This Amendment shall become effective upon
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satisfaction of each of the following conditions precedent: (i) Lender shall
have received this Amendment in form and substance satisfactory to Lender
executed on behalf of Borrower and consented and agreed to by each of USWC and
Carriers Group, Inc. as Guarantors, (ii) Lender shall have received a copy of
resolutions of the board of directors of Borrower certified by the Secretary of
Borrower, in form and substance satisfactory to Lender, authorizing the
execution, delivery and performance of this Amendment; and (iii) and such other
certificates, instruments, documents, agreements and opinions of counsel as may
be required by Lender or its counsel, each of which shall be in form and
substance satisfactory to Lender.
4. Representations and Warranties. Borrower hereby represents and warrants
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as follows:
(a) This Amendment and the Loan Agreement, as amended hereby,
constitute legal, valid and binding obligations of Borrower and are
enforceable against Borrower in accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, Borrower hereby reaffirms
all covenants, representations and warranties made in the Loan Agreement to
the extent the same are not amended hereby and agree that all such
covenants, representations and warranties shall be deemed to have been
remade as of the effective date of this Amendment.
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(c) No Event of Default or Default has occurred and is continuing or
would exist after giving effect to this Amendment.
(d) Borrower has no defense, counterclaim or offset with respect to the
Loan Agreement.
5. Effect on the Loan Agreement.
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(a) Upon the effectiveness of Section 2 hereof, each reference in the
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Loan Agreement to this Agreement,hereunder, hereof,herein or words of like
import shall mean and be a reference to the Loan Agreement as amended
hereby.
(b) Except as specifically amended herein, the Loan Agreement, and
all other documents, instruments and agreements executed and/or delivered
in connection therewith, shall remain in full force and effect, and are
hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not operate as a waiver of any right, power or remedy of Lender, nor
constitute a waiver of any provision of the Loan Agreement, or any other
documents, instruments or agreements executed and/or delivered under or in
connection therewith.
6. Governing Law. This Amendment shall be binding upon and inure to the
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benefit of the parties hereto and their respective successors and assigns and
shall be governed by and construed in accordance with the laws of the State of
New York.
7. Headings. Section headings in this Amendment are included herein
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for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
8. Counterparts. This Amendment may be executed by the parties hereto in
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one or more counterparts, each of which shall be deemed an original and all of
which when taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year
first written above.
US WATS, INC.
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
CENTURY BUSINESS CREDIT CORPORATION]
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Vice President
CONSENTED AND AGREED TO:
USW CORP.
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
CARRIERS GROUP, INC.
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
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