Exhibit 10.3.3
MAXXCOM INC.
- and -
TD CAPITAL
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SECOND AMENDMENT TO
SUBORDINATED DEBENTURE
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October 28, 2002
SECOND AMENDMENT
TO SUBORDINATED DEBENTURE
THIS SECOND AMENDMENT AGREEMENT is made as of the 28th day of
October, ▇▇▇▇
▇ ▇ ▇ ▇ ▇ ▇ ▇:
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 in the
original principal amount of $40,000,000 on July 11, 2001, as amended by
the First Amendment Agreement made as of March 31, 2002 (the Subordinated
Debenture").
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:
-Source Transactions" means:
(a) the transfer of all of the assets of e-Source Drive to Web
Marketing LLC to Source Marketing LLC in consideration of
the assumption by Source Marketing LLC of all liabilities of
e-Source Drive to Web Marketing LLC; and
(b) the dissolution of e-Source Drive to Web Marketing LLC
pursuant to the General Corporation Law of the State of
Delaware.
"Interfocus Transactions" means:
(a) the share exchange transaction to be entered into between
Interfocus Group Limited and ▇▇. ▇▇▇▇▇▇▇▇▇▇▇ Zandonati by
which Interfocus Group Limited will acquire all of the
issued and outstanding shares of Interfocus Technology Group
Limited not currently owned by it from Mr. Zandonati in
exchange for the issuance of approximately 7,452 of its
shares and the payment to Mr. Zandonati of (pound)7,000;
(b) the transfer of all of the assets of Interfocus Network
Limited to Interfocus Technology Limited in consideration of
the assumption by Interfocus Technology Limited of all of
the liabilities of Interfocus Network Limited and a
promissory note made by Interfocus Technology Limited to
Interfocus Network Limited for the balance which is
estimated to be approximately (pound)190,000 (the ITL
Promissory Note");
(c) Interfocus Network Limited maintaining its existence under
the Companies Act 1985 (United Kingdom), but owning no
assets (other than the ITL Promissory Note) and carrying on
no business whatsoever;
(d) the transfer of all of the issued and outstanding shares of
Interfocus Technology Limited from Interfocus Technology
Group Limited to Interfocus Group Limited in consideration
of a promissory note made by Interfocus Group Limited to
Interfocus Technology Group Limited in the amount of
approximately (pound)900,000;
(e) the change of name of Interfocus Technology Limited to
Interfocus Networks Limited; and
(f) the change of name of Interfocus Network Limited to
Interfocus Technology Limited".
"Second Amendment" means the Second Amendment Agreement to this
Debenture made as of October 28, 2002;
"Senior Amendment Agreement # 2" means the second amendment agreement
to the Existing Senior Credit Agreement made as of June 30, 2002 between the
Borrower, Maxxcom US, certain Subsidiaries of the Borrower and the Existing
Senior Lenders;
"Senior Amendment Agreement # 3" means the third amendment agreement
to the Existing Senior Credit Agreement made as of October 28, 2002 between
the Borrower, Maxxcom US, certain Subsidiaries of the Borrower and the
Existing Senior Lenders;
SECTION 2 - AMENDED DEFINITIONS
1. The definition of "Acquirecos" in Section 1.1 of the Subordinated
Debenture is amended to delete references to CDI Acquisition Co.
2. The definition of "SanSubCos" in Section 1.1 of the Subordinated
Debenture is amended to reflect the change in name of Cormark ▇▇▇▇▇▇▇
Communication Solutions (Canada) Inc. to Cormark Communications Inc.
and to delete references to News Canada Inc.
3. The definition of "EBITDA" in Section 1.1 of the Subordinated
Debenture is deleted and replaced with the following provision:
"EBITDA" means, with respect to any period and any Person, the
consolidated net income of such Person determined in
accordance with GAAP for such period plus or minus, to the
extent deducted or added in determining such net income,
without duplication:
(a) income taxes paid or payable or refunds received or
receivable in respect of income taxes;
(b) interest paid or payable or received or receivable;
(c) extraordinary gains or losses;
(d) amortization, depreciation and other non-cash
expenses; and
(e) goodwill charges;
provided that, for purposes of calculating EBITDA for any
period:
(f) the EBITDA during such period attributable to any
Permitted Acquisition completed during such period
shall be included on a pro forma basis for such
period, assuming the completion of such Permitted
Acquisition and the incurrence or assumption of any
Debt in connection therewith had occurred on the
first day of such period; and
(g) the EBITDA during such period attributable to any
Subsidiary, or to any assets representing a
business as a going concern, disposed of by the
Borrower or any Subsidiary during the period shall
be excluded on a pro forma basis for such period,
assuming the completion of such disposition had
occurred on the first day of such period;
and provided further that
(h) for the purposes of determining the Total Debt
Ratio, the Senior Debt Ratio and the Interest
Coverage Ratio, there shall be excluded the EBITDA
which would otherwise be attributable to Cormark
Communication Inc. (on a pro forma twelve month
basis) from and after 31 December 2002;
(i) for the purposes of determining the Total Debt
Ratio, the Senior Debt Ratio and the Interest
Coverage Ratio as at 31 December 2002, 31 March
2003, 30 June 2003 and 30 September 2003, that
amount actually incurred by the Borrower on a
consolidated basis for fees, costs, expenses and
charges relating to the rationalization of the
Borrower and the other Restricted Parties incurred
between 1 January 2002 and 31 December 2002 not in
excess of Cdn. $700,000, to the extent deducted in
determining net income in the calculation of EBITDA
for the 12-month period ending 31 December 2002, 31
March 2003, 30 June 2003 or 30 September 2003, as
applicable, shall be added to EBITDA; and
(j) for the purposes of determining the Total Debt
Ratio, the Senior Debt Ratio and the Interest
Coverage Ratio for each fiscal quarter of the
Borrower ending after 31 December 2002, there shall
be added back to EBITDA for the relevant 12-month
period ending on such fiscal quarter end that
amount actually incurred by the Borrower on a
consolidated basis in such 12-month period, for
fees, costs, expenses and charges relating (not in
excess, in the aggregate for all relevant periods,
of Cdn. $500,000) to the negotiation of the
deferral of Earnout Payments required to be paid
during the period from 1 January 2003 to 31
December 2003, to the extent such fees, costs,
expenses and charges were deducted in determining
net income in the calculation of EBITDA for such
12-month period.
4. The definition of "Foreign Opcos" in Section 1.1 of the Subordinated
Debenture is deleted and replaced with the following provision:
"Foreign Opcos" means Interfocus Group Limited, Interfocus Direct
Limited, Interfocus Network Limited, Interfocus Technology
Group Limited (formerly known as Grange Advertising
Limited), Interfocus Technology Limited (formerly known as
Grange Advertising and Marketing Communications Limited) and
Grange USA, Inc. and each other Person in which a
controlling interest is directly or indirectly acquired by
the Borrower from time to time which is not an Acquireco, a
CanSubCo, a ▇▇▇▇▇ or an Opco and "Foreign Opco" means any one
of them.
5. The definition of "Guarantors" in Section 1.1 of the Subordinated
Debenture is amended to include references to Cormark Communications
Inc., ▇▇▇▇▇▇▇▇ & Partners Communications Ltd., ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Inc. and Studiotype Inc., to delete references to News Canada
Inc. and to reflect the change in name of CDI Acquisition Co. to
▇▇▇▇▇▇▇▇ Direct, Inc.
6. The definition of "Apcos" in Section 1.1 of the Subordinated Debenture
is amended to include references to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Bogusky L.A.,
LLC (a Delaware corporation) and to ▇▇▇▇▇▇▇▇ Direct, Inc. (a Delaware
corporation) and to delete references to e-Source Drive to Web
Marketing LLC.
7. Subparagraph (c) of the definition of "Permitted Indebtedness" in
Section 1.1 of the Subordinated Debenture is deleted and replaced
with the following provisions:
(c) all debts, liabilities and obligations of any Restricted
Party under the Existing Senior Credit Agreement, provided
the aggregate maximum principal amount thereof (together
with the maximum principal amount of the indebtedness
described in clause (l) below) does not exceed Cdn.
$90,000,000 or the equivalent in other currencies, or under
any other Senior Credit Agreement which is a replacement
therefor provided that (i) the aggregate maximum principal
amount thereof (together with the maximum principal amount
of the indebtedness described in clause (l) below) does not
exceed Cdn. $90,000,000 or the equivalent in other
currencies, (ii) the maturity date thereof is not earlier
than the maturity date under the Existing Senior Credit
Agreement, (iii) such agreement does not restrict any
scheduled payment of interest or scheduled repayment of
principal of the Obligations (other than during the
continuance of a default thereunder), and (iv) the interest
rate thereon does not exceed a reasonable commercial rate
for comparable senior credit facilities;
8. The definition of "Unrestricted Parties" in Section 1.1 of the
Subordinated Debenture is amended to delete references to Studiotype
Inc. and to ▇▇▇▇▇▇▇▇ & Partners Communications Inc.
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
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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 3.25 to 1.0
From January 1, 2003 to March 31, 2003 3.25 to 1.0
From April 1, 2003 to June 30, 2003 3.25 to 1.0
From July 1, 2003 to September 30, 2003 3.25 to 1.0
From October 1, 2003 to December 31, 2003 3.00 to 1.0
From January 1, 2004 to March 31, 2004 2.75 to 1.0
From April 1, 2004 to June 30, 2004 2.50 to 1.0
From July 1, 2004 to September 30, 2004 2.25 to 1.0
From October 1, 2004 to December 31, 2004 2.25 to 1.0
Thereafter 2.25 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 5.00 to 1.0
From April 1, 2003 to June 30, 2003 5.00 to 1.0
From July 1, 2003 to September 30, 2003 4.75 to 1.0
From October 1, 2003 to December 31, 2003 4.75 to 1.0
From January 1, 2004 to March 31, 2004 4.50 to 1.0
From April 1, 2004 to June 30, 2004 4.25 to 1.0
From July 1, 2004 to September 30, 2004 4.00 to 1.0
From October 1, 2004 to December 31, 2004 4.00 to 1.0
Thereafter 4.00 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 # 3) 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 and all other defined terms
used in such terms are amended by the Senior Amendment Agreement, the
Senior Amendment Agreement # 2 and the Senior Amendment Agreement #
3), 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 and the Second
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 and the Second Amendment), as applicable, at such time or
for such period.
SECTION 6 - ADDITIONAL COVENANT
Section 4.1 of the Subordinated Debenture is amended by
adding the following provision:
4.1.26 use best efforts to obtain agreement to the deferral of
Earnout Payments required to be made by the Borrower in respect of
its fiscal year ending 31 December 2002 on account of any Earnout
Amount under Restricted Party Purchase Agreements in order to permit
compliance with the financial covenants set forth in Sections 4.2.2
and 4.2.3, as such covenants are amended by the Second Amendment, and
provide to the Agent on a quarterly basis a report of the initiatives
undertaken in this regard, the results thereof and, forthwith after
conclusion thereof, any agreements reached in that connection.
SECTION 7 - RESTRICTION ON INVESTMENTS, ETC.
Section 4.4.4.1A of the Subordinated Debenture is deleted
and replaced with the following provision:
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 (i)
where the Permitted Acquisition is funded solely from the proceeds of
any issuance of equity of the Borrower or (ii) where the Permitted
Acquisition is an acquisition (a "Minority Acquisition") of Capital
Stock of a Restricted Party from a Minority Shareholder pursuant to
the applicable Restricted Party Shareholder Agreement and is funded
solely from the proceeds of any issuance of equity of the Borrower,
or (iii) where the Permitted Acquisition is a Minority Acquisition,
the total cash cost of which (together with the total cost of all
other Minority Acquisitions completed in that fiscal year) is less
than Cdn.$5,000,000 in each fiscal year of the Borrower;
SECTION 8 - AMENDMENT FEE
Effective December 9, 2002, the Corporation shall pay to the
Agent on behalf of the Holders an amendment fee equal to $200,000, which shall
be added to the principal amount of the Subordinated Debenture as of December
9, 2002.
SECTION 9 - 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 Senior Amendment Agreement # 3;
(b) acknowledges that the Corporation shall deliver a notice in
writing in the form attached hereto as Schedule _" to the
Agent in accordance with Section 2.1.3 of the Subordinated
Debenture covering the period January 1, 2003 through
December 31, 2003, which notice shall have the effect of
deferring payment of interest on each Interest Payment Date
in such period provided that the notice remains true and
correct on each Interest Payment Date in such period; and
(c) subject to Section 11 of this Second Amendment Agreement,
consents, for all purposes of the Subordinated Debenture, to
the e-Source Transactions and the Interfocus Transactions.
SECTION 10 - CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS SECOND AMENDMENT
AGREEMENT
This Second Amendment Agreement shall become binding on the
Holders only upon satisfaction of the following conditions precedent:
(a) execution and deliver of this Second Amendment Agreement by
the Corporation;
(b) execution and delivery of this Second Amendment Agreement by
TD Capital;
(c) execution and delivery of an amendment to the Intercreditor
Agreement by all applicable parties;
(d) no Event of Default or Pending Event of Default having
occurred and being continuing as at the date of satisfaction
of all of the foregoing conditions precedent;
(e) the Agent having received evidence, reasonably satisfactory
to it, that the Senior Agent and the Senior Lenders have,
for the purposes of the Existing Senior Credit Agreement,
consented to each of the matters set forth in this Second
Amendment Agreement or that such consent is not required
under the Existing Senior Credit Agreement and the Agent
being satisfied with the other amendments to the Existing
Senior Credit Documents made in that connection;
(f) the Agent having received the favourable opinion of Fogler,
▇▇▇▇▇▇▇▇ LLP, Ontario counsel to the Corporation, in
relation to the enforceability of this Second Amendment
Agreement; and
(g) such corporate resolutions, incumbency and other
certificates of the Corporation as the Agent may reasonably
request in connection with this Second Amendment Agreement
and the transactions contemplated hereby;
SECTION 11 - COVENANTS REGARDING THE E-SOURCE TRANSACTIONS AND THE INTERFOCUS
TRANSACTIONS
The Subordinated Debenture is amended by adding the following
provision as Section 4.1A:
4.1A Each of the Restricted Parties, as applicable, shall:
(a) in relation to the e-Source Transactions, deliver
to the Agent:
(i) executed copies of the documentation by
which the assets of e-Source Drive to Web
Marketing LLC were transferred to Source
Marketing LLC and by which Source
Marketing LLC assumed of all liabilities
of e-Source Drive to Web Marketing LLC;
and
(ii) documentation evidencing the dissolution
of e-Source Drive to Web Marketing LLC
pursuant to the General Corporation Law of
the State of Delaware;
(b) in relation to the Interfocus Transactions, deliver
to the Agent:
(i) such acknowledgements and other
documentation by the Restricted Parties as
the Agent may reasonably require in order
to ensure the continued validity and
effectiveness of the Security Documents
following the implementation of the
Interfocus Transactions;
(ii) all such documents and material as the
Agent may require to satisfy itself that
the Interfocus Transactions do not
materially differ from the transactions
approved under the Second Amendment;
(iii) written confirmation of legal counsel in
the United Kingdom as to the effect of the
Interfocus Transactions on any existing
Security Documents of any applicable
Restricted Party together with such other
Security Documents as the Agent may
reasonably require in relation thereto;
(iv) completion, to the satisfaction of the
Agent, of all public filings and
registrations necessary to preserve,
perfect or protect the Security Documents,
the enforceability thereof, the priority
thereof or any filings or registrations
relating thereto;
(v) copies of all material agreements entered
into and delivered in connection with the
transactions contemplated by the
Interfocus Transactions;
(vi) receipt of the favourable opinion of legal
counsel in the United Kingdom to the
Restricted Parties, in form and substance
satisfactory to the Agent, in relation to
the enforceability of any new
documentation, if any, which constitutes
Security Documents delivered in connection
with the Interfocus Transactions; and
(vii) such corporate resolutions, incumbency and
other certificates of each of the
Restricted Parties as the Agent may
require, in form and substance
satisfactory to the Agent, in connection
with the transactions contemplated by the
Interfocus Transactions.
SECTION 12 - CONTINUING EFFECT OF SUBORDINATED DEBENTURE
Except as amended by this Second Amendment Agreement, the
Subordinated Debenture shall remain in full force and effect, without
amendment, and is hereby ratified and confirmed.
SECTION 13 - COUNTERPARTS AND FACSIMILE
This Second 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 Second Amendment Agreement
shall be deemed to be valid execution and delivery thereof.
SECTION 14 - GOVERNING LAW
This Second 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 Second 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 15 - INTERPRETATION
Capitalized terms used herein, unless otherwise defined or
indicated herein, have the respective meanings ascribed thereto in the
Subordinated Debenture. This Second 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:______________________________
SCHEDULE _"
Form of Notice