EXHIBIT 10.39.2
SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT dated as of April
13, 2001 (the "SECOND AMENDMENT"), amends that certain Loan and Security
Agreement dated as of December 31, 1998, as amended by that certain Amendment to
Loan and Security Agreement dated as of June 30, 2000 (as so amended, the "LOAN
AGREEMENT"), between NTFC Capital Corporation, a Delaware corporation (the
"LENDER"), and Startec Global Communications Corporation, a Delaware corporation
(the "BORROWER"), as the successor by merger to Startec Global Communications
Corporation, a Maryland corporation.
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Loan Agreement be amended
pursuant to this Second Amendment to change the financial covenants contained in
Schedule 7.14 of the Loan Agreement as provided for herein, to permit (i) two
loans to Startec Global Operating Company from Allied Capital Corporation in an
aggregate amount of $20,000,000 and (ii) a sale by Startec Global Operating
Company of an undivided interest in its accounts to Allied Capital Corporation
pursuant to that certain Receivables Purchase Agreement dated as of April 13,
2001, between and among Startec Global Operating Company and Startec Global
Licensing Company (the "RECEIVABLES PURCHASE AGREEMENT"), and that the Lender
waive the Events of Default arising out of (i) the payment by the Borrower more
than ten days after its due date of the regularly scheduled loan payments of
principal and interest required by Sections 2.02(b) and (c) of the Loan
Agreement in the amount of $1,253,866.60 (which was due on or before March 1,
2001) and in the amount of $1,253,866.60 (which was due on or before April 1,
2001) (collectively, the "DEFAULTED LOAN PAYMENTS") and (ii) the failure of the
Borrower to comply with the financial covenants required by Section 7.14 and
Schedule 7.14 of the Loan Agreement (as that schedule exists prior to the
Amendment Effective Date (as defined in Section 5.1 below)) for the fiscal
quarter ended December 31, 2000; and
WHEREAS, the Lender is willing to amend the Loan Agreement to change
the financial covenants contained in Schedule 7.14 of the Loan Agreement as
provided for herein, to permit the loans from Allied Capital Corporation to
Startec Global Operating Company in an aggregate amount of $20,000,000 and to
permit a sale by Startec Global Operating Company of an undivided interest in
its accounts to Allied Capital Corporation pursuant to the Receivables Purchase
Agreement in consideration for the payment of a non-refundable amendment fee of
One Hundred Twenty-Five Thousand Dollars ($125,000) (the "AMENDMENT FEE") and to
waive the Events of Defaults caused by (i) the payment by the Borrower of the
Defaulted Loan Payments more than ten days after their respective due dates and
(ii) the failure of the Borrower to comply with the financial covenants required
by Section 7.14 and Schedule 7.14 of the Loan Agreement (as that schedule exists
prior to the Amendment Effective Date) for the fiscal quarter ended December 31,
2000, but only on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the agreements herein contained,
the parties hereto agree as follows:
ARTICLE I
AMENDMENTS TO LOAN AGREEMENT AND CONSENT
1.1 AMENDMENT TO SCHEDULE 7.14 OF THE LOAN AGREEMENT. Effective on, and subject
to the occurrence of, the Amendment Effective Date, Schedule 7.14 of the Loan
Agreement is hereby amended by deleting the text thereof in its entirety and
replacing it with Schedule 7.14 attached to this Second Amendment as EXHIBIT A.
1.2 AMENDMENTS TO SECTION 9.01 OF THE LOAN AGREEMENT.
(a) Effective on, and subject to the occurrence of, the Amendment Effective
Date, Section 9.01 of the Loan Agreement is hereby amended by deleting the text
of clauses (e), (f), (g), (h), (i), (j), and (k) of Section 9.1 in their
entirety and replacing them with the following:
(e) UNDISCHARGED JUDGMENTS. If one or more judgments for the
payment of money has been entered against Borrower or any Subsidiary of
the Borrower in an amount in excess of $500,000, and such judgment or
judgments have remained undischarged and unstayed for a period of
thirty (30) calendar days, unless the validity thereof is contested in
compliance with SECTION 7.07 hereof; or
(f) ATTACHMENTS, ETC. If one or more writs or warrants of
attachment, garnishment, execution, distraint or similar process have
been issued against Borrower or any Subsidiary of the Borrower or any
of their respective properties which have remained undischarged and
unstayed for a period of thirty (30) consecutive days and are not being
contested in compliance with SECTION 7.07 hereof; or
(g) DEFAULT UNDER THIRD PARTY AGREEMENTS. If a default, or
event or condition which with notice or lapse of time or both would
become a default, occurs that gives the creditor the right to
accelerate in respect of any other obligation of Borrower or any
Subsidiary of the Borrower for borrowed money (including lease
obligations) in the amount of $500,000 in the aggregate, or under any
two or more such other obligations of any amount; or
(h) DISSOLUTION; DISCONTINUANCE OF BUSINESS, ETC. Borrower or
any Subsidiary of the Borrower discontinues its usual business as an
integrated provider of voice, data and/or internet services, dissolves,
has its Organizational Document revoked, winds up or liquidates itself
or its business; or
(i) INVOLUNTARY BANKRUPTCY OR RECEIVERSHIP PROCEEDINGS. If a
receiver, custodian, liquidator, or trustee of Borrower or any
Subsidiary of the Borrower or of any substantial part of their
respective property is appointed by the order or decree of any court
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or agency or supervisory authority having jurisdiction; or an order is
entered adjudicating Borrower or any Subsidiary of the Borrower as
bankrupt or insolvent; or any substantial part of the property of
Borrower or any Subsidiary of the Borrower is sequestered by court
order; or a petition is filed against any Borrower or any Subsidiary of
the Borrower under any state or federal bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution,
liquidation, or receivership law of any jurisdiction, whether now or
hereafter in effect; or
(j) VOLUNTARY BANKRUPTCY. If Borrower or any Subsidiary of the
Borrower takes affirmative steps to prepare to file, or files, a
petition in voluntary bankruptcy or to seek relief under any provision
of any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution, or liquidation law of any
jurisdiction, whether now or hereafter in effect, or consents to the
filing of any petition against it under any such law; or
(k) ASSIGNMENTS FOR BENEFIT OF CREDITORS, ETC. If Borrower or
any Subsidiary of the Borrower makes an assignment for the benefit of
creditors, or admits in writing its inability to pay its debts
generally as they become due, or consents to the appointment of a
receiver, trustee, or liquidator of itself or of all or any part of its
properties; or
(b) Effective on, and subject to the occurrence of, the Amendment Effective
Date, Section 9.01 of the Loan Agreement is hereby amended by adding at the end
thereof the following additional clauses:
(q) RECEIVABLES PURCHASE AGREEMENT. The occurrence of an
"Amortization Event" (as such term is defined in the Receivables
Purchase Agreement), or of an event or condition which with notice or
lapse of time or both would become an Amortization Event.
(r) AGREEMENT TO SENIOR NOTE RESTRUCTURING. Borrower shall
have failed to fulfill its obligations under that certain letter
agreement delivered simultaneously with the Second Amendment by
Borrower to Lender, relating to the Senior Note Restructuring, as
defined therein (the "SENIOR NOTE RESTRUCTURING").
1.3 AMENDMENT TO SECTION 10.20 OF THE LOAN AGREEMENT. Effective on, and subject
to the occurrence of, the Amendment Effective Date, Section 10.20 of the Loan
Agreement is hereby amended by deleting in its entirety the first sentence (in
all capital letters) of such section and replacing such sentence with the
following sentence:
"BORROWER HEREBY IRREVOCABLY SUBMITS AND CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN NEW YORK
COUNTY, NEW YORK, FOR ANY SUIT BROUGHT OR ACTION COMMENCED IN
CONNECTION WITH THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, ANY
OF THE OBLIGATIONS, ANY
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COLLATERAL, OR ANY RELATIONSHIP BETWEEN LENDER AND BORROWER,
AND AGREES NOT TO CONTEST OR CHALLENGE VENUE IN ANY SUCH
COURTS. BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT THAT IT MAY DO SO, THE DEFENSE OF INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH ACTION OR PROCEEDING."
1.4 AMENDMENT TO ARTICLE VII OF LOAN AGREEMENT. Effective on, and subject to the
occurrence of, the Amendment Effective Date, Article VII of the Loan Agreement
is hereby amended by adding at the end thereof the following additional clauses:
"7.17 CORPORATE ACTION BY STARTEC GLOBAL COMMUNICATIONS U.K.
LIMITED. Borrower shall deliver evidence that requisite corporate
action necessary to be taken by Startec Global Communications U.K.
Limited has been taken to authorize and ratify the execution and
delivery of its Guaranty Amendment, no later than April 17, 2001, in
form and substance satisfactory to Lender in its sole discretion.
"7.18 ADDITIONAL LEGAL OPINION. Borrower shall deliver an
opinion of counsel on behalf of Startec Global Communications U.K.
Limited no later than April 20, 2001, in form and substance
satisfactory to Lender in its sole discretion."
"7.19 LANDLORD CONSENTS. Borrower shall deliver those consents
listed on EXHIBIT F to this Second Amendment, which such consents the
Borrower shall obtain within 30 days after the date of this Agreement."
"7.20 EXHIBIT F. Borrower shall deliver a fully completed
EXHIBIT F to Lender no later than April 20, 2001, in form and substance
satisfactory to Lender in its sole discretion."
ARTICLE II
LIMITED CONSENTS AND LIMITED WAIVERS OF COVENANTS TO LOAN AGREEMENT
2.1. LIMITED WAIVER OF ARTICLE II (LOANS).
(a) Effective on, and subject to the occurrence of, the Amendment
Effective Date, Section 2.02(d) of ARTICLE II of the Loan Agreement is hereby
waived to the extent, but only to the extent, necessary to permit the Borrower
not to pay the amounts required thereunder as a result of the payment by the
Borrower of the Defaulted Loan Payment more than ten days after its due date.
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2.2. LIMITED CONSENT UNDER ARTICLE VIII (NEGATIVE COVENANTS).
(a) Effective on, and subject to the occurrence of, the Amendment
Effective Date, the Lender consents to (i) the incurrence by Startec Global
Operating Company and Startec Global Licensing Company of the Indebtedness
evidenced under, and in compliance with the terms of, and (ii) the transactions
contemplated by, the Loan Agreement (Secured) dated as of April 13, 2001 (the
"SECURED LOAN AGREEMENT") between and among Startec Global Operating Company and
Startec Global Licensing Company as borrowers and Allied Capital Corporation as
lender and the Loan Agreement (Unsecured) dated as of April 13, 2001 between and
among Startec Global Operating Company and Startec Global Licensing Company as
borrowers and Allied Capital Corporation as lender.
(b) Effective on, and subject to the occurrence of, the Amendment
Effective Date, the Lender consents to (i) the sale of accounts to Allied
Capital Corporation pursuant to the Receivables Purchase Agreement, (ii) the
other transactions contemplated by the Receivables Purchase Agreement and (iii)
the granting of a lien on and security interest in its accounts pursuant to the
Security Agreement dated as of April 13, 2001 between and among Startec Global
Operating Company and Startec Global Licensing Company as grantors and Allied
Capital Corporation as secured party securing the indebtedness incurred under
the Secured Loan Agreement; PROVIDED, HOWEVER, that the interests of Allied
Capital Corporation in such assets sold, and in which it receives a security
interest, shall in each case be limited by the terms of that certain
Intercreditor and Subordination Agreement dated as of April 13, 2001 (the
"INTERCREDITOR AGREEMENT"), between and among Lender, Allied Capital
Corporation, and Startec Global Operating Company.
2.3. LIMITED WAIVER OF ARTICLE IX (EVENTS OF DEFAULT).
(a) Effective on, and subject to the occurrence of, the Amendment
Effective Date, the Lender waives the Event of Default under Section 9.01(a) of
ARTICLE IX of the Loan Agreement caused solely by the payment by the Borrower of
the Defaulted Loan Payments more than ten days after their respective due dates.
(b) Effective on, and subject to the occurrence of, the Amendment
Effective Date, the Lender waives the Event of Default under Section 9.01(c) of
ARTICLE IX of the Loan Agreement caused solely by the failure of the Borrower to
comply with the financial covenants required by Section 7.14 and Schedule 7.14
of the Loan Agreement (as that schedule existed prior to the Amendment Effective
Date) for the fiscal quarter ended December 31, 2000.
ARTICLE III
AFFIRMATIONS
3.1. REAFFIRMATION AND RELEASE.
(a) The Borrower hereby represents, warrants and covenants that (i) the
representations and warranties of the Borrower contained in the Loan Agreement
and the other Loan Documents (as may have been modified by Article 2 of that
certain Amendment to Loan and Security Agreement, dated as of June 30, 2000,
between Borrower and Lender and EXHIBIT 4.07, EXHIBIT
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4.10, EXHIBIT 4.11, EXHIBIT 4.12, EXHIBIT 4.14, EXHIBIT 4.16, EXHIBIT 4.24 and
EXHIBIT 4.30 attached hereto) are true and correct in all material respects with
the same effect as if now made (unless stated to relate solely to an earlier
date, in which case such representations and warranties were true and correct as
of such earlier date), (ii) there has been no Material Adverse Change in the
financial condition or results of operations of Borrower since the date of the
projections previously delivered to Lender on ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇▇) on the date
hereof no Default or Event of Default has occurred and is continuing or exists
(except for (1) the payment by the Borrower of the Defaulted Loan Payments more
than ten days after their respective due dates and (2) the failure of the
Borrower to comply with the financial covenants required by Section 7.14 and
Schedule 7.14 of the Loan Agreement (as that schedule existed prior to the
Amendment Effective Date) for the fiscal quarter ended December 31, 2000), or
will occur or exist after giving effect to this Second Amendment, (iv) the
execution and terms of this Second Amendment have been duly authorized by all
necessary and appropriate corporate action for the Borrower, and (v) the
Borrower's execution of this Second Amendment does not require the consent of or
the giving of notice to any other Person other than those consents which the
Borrower already has obtained.
(b) The Borrower reaffirms that the Loan Agreement, as amended hereby,
and the other Loan Documents to which it is a party are and remain the valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms. The Borrower acknowledges that the
Lender is not waiving, and the Borrower is required to and shall comply with,
the financial covenants for the fiscal quarter ended December 31, 2000, required
by Section 7.14 and Schedule 7.14 of the Loan Agreement in effect on and after
the Amendment Effective Date.
(c) The Borrower hereby acknowledges and stipulates it has no claims or
causes of action against the Lender, and/or its officers, directors, agents,
and/or employees, of any kind whatsoever, and hereby releases the Lender and its
officers, directors, agents, and employees from any and all claims, causes of
action, demands and liabilities of any kind whatsoever, whether direct or
indirect, fixed or contingent, liquidated or non-liquidated, disputed or
undisputed, known or unknown, arising under contract, warranty, tort (including
negligence), strict liability or otherwise, which the Borrower has or may
acquire in the future under any event, circumstance, action, failure to act, or
otherwise from any time prior to, and through, the date of this Second
Amendment, whether relating in any way to the Loan Agreement, any other Loan
Document(s), any Collateral or otherwise.
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ARTICLE IV
CONSIDERATION
4.1. CONSIDERATION. In consideration of Lender's agreement to amend the Loan
Agreement pursuant to this Second Amendment, Borrower shall pay Lender the
Amendment Fee, and grants Lender a warrant for 25,000 shares of Borrower's
common stock at a price equal to the lesser of (i) the closing market price of
the Borrower's common stock on the date hereof or (ii) the closing market price
of the Borrower's common stock on the date that is one day prior to the date of
any public announcement of the Senior Note Restructuring. The warrant granted
hereby shall be evidenced by a form of warrant with terms (including such terms
and conditions pertaining to registration rights and anti-dilution rights) no
less favorable to Lender than those contained in that certain Stock Purchase
Warrant, issued as of June 30, 2000, to Allied Capital Corporation, attached
hereto in the form of EXHIBIT E, together with such opinions of counsel to
Borrower and certificates of Borrower as Lender shall require in its sole
discretion, each of which shall be issued to Lender immediately prior to the
effectiveness of any Senior Note Restructuring.
ARTICLE V
CONDITIONS TO EFFECTIVENESS
5.1. AMENDMENT EFFECTIVE DATE. This Second Amendment shall become effective as
of the date first above written (the "AMENDMENT EFFECTIVE DATE"), when the
Lender shall have received:
(a) $7,500,000, representing payment of (i) the Defaulted Loan Payment
and (ii) the regularly scheduled loan payments of principal and interest
required by Section 2.02(b) and (c) of the Loan Agreement due on or before May
1, 2001, June 1, 2001, July 1, 2001, and August 1, 2001;
(b) counterparts of this Second Amendment duly executed by the Borrower
and the Lender;
(c) counterparts of the First Amendment to the Pledge Agreement dated
as of April 13, 2001 (the "PLEDGE AGREEMENT AMENDMENT"), in the form of EXHIBIT
B to this Second Amendment duly executed by the Borrower and the Lender;
(d) counterparts of the First Amendments to Guaranty Agreements dated
as of April 13, 2001 (the "GUARANTY AMENDMENTS"), in the forms of EXHIBIT C-1
and C-2 to this Second Amendment executed by the respective Guarantors and the
Lender;
(e) counterparts of the Intercreditor Agreement in the form of EXHIBIT
D executed by Startec Global Operating Company and the Lender;
(f) an opinion of counsel to the Borrower satisfactory to Lender it its
sole discretion;
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(g) a certificate and its attachments (the "OFFICERS' CERTIFICATE")
dated the date first above written executed by a Responsible Officer of the
Borrower and a Responsible Officer of each of the Guarantors certifying that the
resolutions attached to the Officers' Certificate are true and correct copies of
all corporate action necessary to be taken by the Borrower and the Guarantors to
authorize the execution and delivery of this Second Amendment, the Pledge
Agreement Amendment, the Guaranty Amendments and the Intercreditor Agreement, as
applicable, and such resolutions remain in full force and effect; and the
Responsible Officers of the Borrower and of each of the Guarantors whose the
names, true signatures and incumbency are set forth therein are authorized to
execute and deliver this Second Amendment, the Pledge Agreement Amendment, the
Guaranty Amendments and the Intercreditor Agreement, as applicable;
(h) the Amendment Fee and confirmation from Lender's counsel that all
fees and expenses of Lender's counsel outstanding on the date hereof have been
paid in full.
(i) The transaction contemplated by the Receivables Purchase Agreement
shall have closed and Allied Capital Corporation shall have advanced $15,000,000
to the Borrower for application to, among other things, the uses provided
herein.
ARTICLE VI
MISCELLANEOUS
6.1. CROSS REFERENCES. References in this Second Amendment to any article or
section are, unless otherwise specified, to such article or section of this
Second Amendment.
6.2. INSTRUMENT PURSUANT TO LOAN AGREEMENT. This Second Amendment is a Loan
Document executed pursuant to the Loan Agreement and shall (unless otherwise
expressly indicated therein) be construed, administered, and applied in
accordance with all of the terms and provisions of the Loan Agreement (including
that it shall be governed by the laws of the State of New York and that the
Borrower shall pay, or demand, all out-of-pocket expenses (including reasonable
attorneys' fees) of the Lender in connection herewith). Any term or provision of
and any modification or waiver effected by this Second Amendment may be modified
in any manner by an instrument in writing executed by the Borrower and the
Lender. Except as expressly amended or waived hereby, all of the
representations, warranties, terms, covenants and conditions of the Loan
Agreement shall remain unmodified and unwaived. The modifications and waiver set
forth herein shall be limited precisely as provided for herein to the provisions
expressly modified or waived herein and shall not be deemed to be an amendment
of, consent to or modification or waiver of any other term or provision of the
Loan Agreement or any other Loan Document or of any transaction or further or
future action on the part of the Borrower or any Guarantor which could require
the consent of the Lender under the Loan Agreement or any other Loan Document.
Unless otherwise defined herein or the context otherwise requires, capitalized
terms used in this Second Amendment, including its preamble and recitals, have
the meanings provided in the Loan Agreement.
6.3. SUCCESSORS AND ASSIGNS. This Second Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
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6.4. COUNTERPARTS. This Second Amendment may be executed by the parties hereto
in several counterparts which shall be executed by the Borrower and the Lender,
as the case may be, all of which shall be deemed to be an original and which
shall constitute together but one and the same agreement.
6.5. EVENT OF DEFAULT. It is understood and agreed that any breach by the
Borrower or any Guarantor of any representation, warranty or covenant contained
herein or the Officers' Certificate shall constitute an Event of Default.
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IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed by the respective officers hereunder duly authorized to
be effective as of the day and year first above written.
BORROWER:
--------
STARTEC GLOBAL
COMMUNICATIONS CORPORATION
BY: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
TITLE: Chief Financial Officer
and Corporate Vice President
----------------------------
LENDER:
------
NTFC CAPITAL CORPORATION
BY: /s/ LI-▇▇▇ ▇▇▇▇
------------------------
TITLE: Portfolio Manager
---------------------
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EXHIBIT A
SCHEDULE 7.14 TO
LOAN AND SECURITY AGREEMENT
FINANCIAL COVENANTS
(a) Except as provided by item (b) to this Schedule 7.14, the Borrower
shall at all times comply with the following financial covenants:
(1) TOTAL SECURED DEBT TO TOTAL CAPITALIZATION. At the time of
each Advance and at the end of each fiscal quarter, the Borrower shall maintain
a ratio of Total Secured Debt to Total Capitalization of not more than .50:1.
For the purposes of that ratio, the following definitions shall apply:
(i) "TOTAL CAPITALIZATION": All equity as shown on
the balance sheet of the Borrower plus all funded Indebtedness
of the Borrower.
(ii) "TOTAL SECURED DEBT": Indebtedness of the
Borrower secured by a Lien on assets of the Borrower,
excluding any Indebtedness secured solely by accounts
receivable.
(2) CASH FLOW COVERAGE RATIO. Commencing with the fiscal
quarter ended June 30, 2002, the Borrower shall maintain at the end of each
fiscal quarter a minimum Cash Flow Coverage Ratio (for the past four fiscal
quarters ending with the end of such fiscal quarter) of at least 1.25:1. For the
purposes of that ratio, "Cash Flow Coverage Ratio" shall mean: at the end of any
fiscal period, the ratio of the Borrower's Cash Flow plus interest income for
the fiscal period to the Borrower's Debt Service for the fiscal period.
(3) MINIMUM REVENUES. The Borrower shall have at the end of
each fiscal quarter shown below "Minimum Revenues" for the fiscal quarter ending
on the date of measurement equal to or greater than the minimum amount for such
fiscal quarter required by the following table:
QUARTER ENDED AMOUNT
------------- ------
March 31, 2001 53,000,000
June 30, 2001 57,000,000
September 30, 2001 60,000,000
December 31, 2001 75,000,000
March 31, 2002 87,000,000
June 30, 2002 97,000,000
QUARTER ENDED AMOUNT
------------- ------
September 30, 2002 103,000,000
December 31, 2002 108,000,000
March 31, 2003 114,000,000
June 30, 2003 120,000,000
September 30, 2003 125,000,000
December 31, 2003 127,000,000
March 31, 2004 131,000,000
June 30, 2004 135,000,000
September 30, 2004 138,000,000
December 31, 2004 142,000,000
The phrase "Minimum Revenues" shall mean the Borrower's
total consolidated revenues for the fiscal quarter ending on the date of
measurement.
(4) MINIMUM EBITDA. The Borrower shall have at the end of each
fiscal quarter shown below EBITDA for the fiscal quarters ending on the date of
measurement equal to or greater than the minimum amount required for such fiscal
quarter by the following table:
QUARTER ENDED AMOUNT
------------- ------
March 31, 2001 (2,500,000)
June 30, 2001 -0-
September 30, 2001 1,000,000
December 31, 2001 5,000,000
March 31, 2002 5,000,000
June 30, 2002 6,000,000
September 30, 2002 7,000,000
December 31, 2002 8,000,000
March 31, 2003 9,000,000
June 30, 2003 11,000,000
September 30, 2003 12,000,000
December 31, 2003 14,000,000
March 31, 2004 16,000,000
June 30, 2004 17,000,000
September 30, 2004 18,000,000
December 31, 2004 20,000,000
(5) Commencing with the fiscal quarter ended December 31,
2000, the Borrower shall have at the end of each fiscal quarter shown below
gross margin for such fiscal quarter not less than the amount required for such
fiscal quarter by the following table:
QUARTER ENDED AMOUNT
------------- ------
March 31, 2001 22%
June 30, 2001 25%
September 30, 2001 25%
December 31, 2001 26%
March 31, 2002 26%
June 30, 2002 26%
September 30, 2002 26%
December 31, 2002 27%
(6) Commencing with the fiscal quarter ended December 31,
2000, the Borrower shall maintain at all times the minimum Cash balance required
for such quarter by the following table:
QUARTER ENDED AMOUNT
------------- ------
March 31, 2001 -0-
June 30, 2001 2,000,000
September 30, 2001 5,000,000
December 31, 2001 5,000,000
March 31, 2002 5,000,000
June 30, 2002 9,000,000
September 30, 2002 8,000,000
December 31, 2002 9,000,000
(b) (i) The Borrower shall not be required to comply with the requirements of
item (a) of this Schedule 7.14, commencing with the fiscal quarter ended March
31, 2001 and ending with the fiscal quarter ended December 31, 2001, if and for
such time as, the following conditions are met:
(1) The Borrower shall have completed the Senior Note
Restructuring on the terms as described in that certain letter
agreement delivered simultaneously with this Second Amendment by
Borrower to Lender, relating to the Senior Note Restructuring.
(2) The Borrower receives on or before August 1, 2001 at least
$5,000,000 from the issuance by it of equity or Subordinated
Indebtedness, the structure of which shall be satisfactory to Lender in
its sole discretion;
(3) The Borrower shall not make capital expenditures
individually or in the aggregate during fiscal year 2001 in excess of
$5,000,000; and
(4) The Borrower shall have at the end of each fiscal quarter
shown below EBITDA for the fiscal quarter ending on the date of
measurement equal to or greater than the minimum amount required for
such fiscal quarter by the following table:
FISCAL QUARTER ENDED MINIMUM EBITDA
-------------------- --------------
March 31, 2001 ($2,500,000)
June 30, 2001 -0-
September 30, 2001 -0-
December 31, 2001 -0-
(ii) If the Borrower fails to satisfy at the time it is to be satisfied
a condition set forth in item (b)(i) of this Schedule 7.14, the
Borrower shall immediately be required to comply with the requirements
of item (a) of this Schedule 7.14 commencing retroactively to the first
day of the fiscal quarter in which the Borrower first failed to comply
with any of the conditions set forth in item (b)(i) of this Schedule
7.14.