EXHIBIT 10.1
FIFTH LOAN MODIFICATION AGREEMENT
This Fifth Loan Modification Agreement (this "Loan Modification Agreement")
is entered into as of October 29, 2004, by and among (i) SILICON VALLEY BANK, a
California-chartered bank, with its principal place of business at 0000 Xxxxxx
Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and with a loan production office located
at One Newton Executive Park, Suite 200, 0000 Xxxxxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, doing business under the name "Silicon Valley East"
("Bank") and (ii) GLOBECOMM SYSTEMS INC., a Delaware corporation with offices at
00 Xxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000 and NETSAT EXPRESS, INC., a Delaware
corporation with offices at 00 Xxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000 (jointly
and severally, individually and collectively, "Borrower").
1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank,
Borrower is indebted to Bank pursuant to a loan arrangement dated as of
September 15, 2003, evidenced by, among other documents, a certain Loan and
Security Agreement dated as of September 15, 2003 between Borrower and
Bank, as amended from time to time (as amended, the "Loan Agreement").
Capitalized terms used but not otherwise defined herein shall have the same
meaning as in the Loan Agreement.
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents").
Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Obligations shall be referred to as the
"Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
Modifications to Loan Agreement.
i. Section 4.4 of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
"4.4 COLLECTION OF RECEIVABLES. Borrower shall direct the
Account Debtors to remit all Receivables to Borrower's
lockbox account maintained at Silicon and Silicon shall
transfer such funds to Borrower's operating account at
Silicon."
ii. Section 1 of the Schedule to the Loan Agreement is hereby deleted
in its entirety and replaced with the following:
"1. CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of (A) or
(B), below:
(A)
(i) $16,500,000.00 (the "Maximum Credit Limit");
minus
(ii) the aggregate amounts outstanding under the Exim
Agreement; minus
(iii) the aggregate amounts then undrawn on all
outstanding letters of credit, foreign exchange
contracts, or any other accommodations
issued or incurred, or caused to be issued or
incurred by Silicon for the account and/or benefit of
the Borrower.
(B)
(i) 80.0% of the amount of the Borrower's Eligible
Receivables; plus;
(ii) 100.0% of the amount of Borrower's unrestricted
cash and unrestricted cash equivalents maintained in
deposit or investment accounts with Silicon (or SVB
Securities with respect to investment accounts);
minus
(iii) the aggregate amounts then undrawn on all
outstanding letters of credit, foreign exchange
contracts, or any other accommodations issued or
incurred, or caused to be issued or incurred by
Silicon for the ccount and/or benefit of the
Borrower.
Silicon may, from time to time, modify the advance rate(s)
set forth herein in its good faith business judgment upon
notice to Borrower based on changes in collection experience
with respect to the Receivables or other issues or factors
relating to the Receivables or the Collateral.
LETTER OF CREDIT SUBLIMIT
(Section 1.5): $16,500,000
FOREIGN EXCHANGE CONTRACT/CASH MANAGEMENT SERVICES SUBLIMIT
(Section 1.6): $10,000,000"
iii. Section 2 of the Schedule to the Loan Agreement is hereby amended
by deleting the following text:
"A rate equal to the Prime Rate plus two percent (2.0%) per
annum."
and inserting the following in lieu thereof:
"A rate equal to the Prime Rate plus one and one-half
percent (1.5%) per annum."
iv. Section 2 of the Schedule to the Loan Agreement is hereby amended
by deleting the following text:
"MINIMUM MONTHLY
INTEREST (Section 1.2): $4,000.00"
and inserting the following in lieu thereof:
"MINIMUM MONTHLY
INTEREST (Section 1.2): Not applicable"
v. Section 3 of the Schedule to the Loan Agreement is hereby amended
by deleting the following text:
"Collateral Handling Fee: $1,000.00 ($500.00 when not
borrowing and Borrower has advised Silicon that it has
elected to be on "non-borrowing reporting status" pursuant
to Section 6, below) per month, payable in arrears.
Cancellation Fee:If the Obligations are voluntarily or
involuntarily prepaid or if this Agreement is otherwise
terminated prior to its maturity, the Borrower shall pay to
Silicon a termination fee in the amount equal to $37,500.00,
provided that no such termination fee shall be charged if
the credit facility hereunder is replaced or transferred to
another division of Silicon. The termination fee shall be
due and payable upon prepayment by the Borrower in the case
of voluntary prepayments or upon demand by Silicon in the
event of involuntary prepayment, and if not paid immediately
shall bear interest at a rate equal to the highest rate
applicable to any of the Obligations."
and inserting the following in lieu thereof:
"Collateral Handling Fee: Not applicable.
Cancellation Fee: Not applicable."
vi. Section 4 of the Schedule to the Loan Agreement is hereby amended
by deleting the following text:
"October 31, 2004"
and inserting the following in lieu thereof:
"October 28, 2005"
vii. Section 5 of the Schedule to the Loan Agreement is hereby deleted
in its entirety and replaced with the following:
"5. FINANCIAL COVENANTS
(Section 5.1): Borrower shall comply with each of the
following covenant(s). Compliance shall be determined as of
the end of each month:
A. MINIMUM TANGIBLE NET WORTH:
Borrower shall maintain a Tangible Net Worth of not less
than the sum of (i) plus (ii) below:
(i) $45,000,000 from October 1, 2004 until the Maturity
Date;
(ii) 60% of all consideration received after the date hereof
from proceeds from the issuance of any equity securities of
the Borrower and/or subordinated debt incurred by the
Borrower and 60% of all quarterly net profits of Borrower.
B. LIQUIDITY RATIO:
Borrower shall have a Liquidity Ratio of not less than:
(i) 0.9 to 1.0, from October 1, 2004 through February 28,
2005; and
(ii) 1.0 to 1.0, from March 1, 2005 and thereafter.
DEFINITIONS. For purposes of the foregoing financial
covenants, the following term shall have the following
meaning:
"Tangible Net Worth" shall mean the excess of total assets
over total liabilities, determined in accordance with
generally accepted accounting principles, with the following
adjustments:
(A) there shall be excluded from assets: (i) notes, accounts
receivable and other obligations owing to the Borrower from
its officers or other Affiliates, and (ii) all assets which
would be classified as intangible assets under generally
accepted accounting principles, including without limitation
goodwill, licenses, patents, trademarks, trade names,
copyrights, capitalized software and organizational costs,
licenses and franchises
(B) there shall be excluded from liabilities: all
indebtedness which is subordinated to the Obligations under
a subordination agreement in form specified by Silicon or by
language in the instrument evidencing the indebtedness which
is acceptable to Silicon in its discretion."
"Liquidity Ratio" shall mean the ratio of (i) Borrower's
unrestricted cash, unrestricted cash equivalents and net
accounts receivable to (ii) all of Borrower's obligations
and liabilities to Silicon (including the face amount of
issued, but undrawn, Letters of Credit issued hereunder, but
excluding any cash-secured letters of credit issued by
Silicon) plus, without duplication, the aggregate amount of
Borrower's total liabilities determined in accordance with
generally accepted accounting principles which mature within
one (1) year."
viii. Section 6 of the Schedule to the Loan Agreement is hereby deleted
in its entirety and replaced with the following:
"6. REPORTING.
(Section 5.3):
Borrower shall provide Silicon with the following:
(a) (i) as soon as available, but no later than twenty-five
(25) days after the last day of each month, a company
prepared consolidated balance sheet and income statement
covering Borrower's consolidated operations during the
period certified by Borrower and in a form acceptable to
Silicon; (ii) as soon as available, but no later than ninety
(90) days after the last day of Borrower's fiscal year,
audited consolidated financial statements prepared under
GAAP, consistently applied, together with an unqualified
opinion on the financial statements from an independent
certified public accounting firm reasonably acceptable to
Silicon; (iii) within five (5) days of filing, copies of all
statements, reports and notices made available to Borrower's
security holders or to any holders of Subordinated Debt and
all reports on Form 10-K, 10-Q and 8 K filed with the
Securities and Exchange Commission; and (iv) budgets, sales
projections, operating plans or other financial information
reasonably requested by Silicon.
(b) Provide Silicon with, as soon as available, but no later
than twenty-five (25) days following each month, an aged
listing of accounts receivable and accounts payable by
invoice date, in form acceptable to Silicon, along with a
Borrowing Base Certificate in the form of Exhibit C hereto.
(c) Within twenty-five (25) days after the last day of each
month, Borrower shall deliver to Silicon with the monthly
financial statements a Compliance Certificate in the form of
Exhibit D hereto."
ix. Section 8(1) of the Schedule to the Loan Agreement is hereby
deleted in its entirety and replaced with the following:
"(1) BANKING RELATIONSHIP. In order for Silicon to properly
monitor its loan arrangement with the Borrower, Borrower
shall at all times during the term of this Agreement
maintain all of its depository, operating and securities
accounts in the United States with Silicon (or an affiliate
of Silicon with respect to securities accounts).
Notwithstanding the foregoing, Borrower may maintain the
following deposit accounts with other financial
institutions: (i) deposit accounts exclusively used for
payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of the Borrower's employees
and (ii) a xxxxx cash deposit account containing not more
than $5,000 at any time."
x. The Loan Agreement is hereby amended by adding Exhibit C hereto
as Exhibit C thereto.
xi. The Loan Agreement is hereby amended by adding Exhibit D hereto
as Exhibit D thereto.
4. FEES. Borrower shall pay to Bank a modification fee of $165,000.00 which
fee shall be due on the date hereof and shall be deemed fully earned as of
the date hereof. Borrower shall reimburse the Bank for all legal fees and
expenses incurred in connection with this amendment to the Existing Loan
Documents.
5. RATIFICATION OF NEGATIVE PLEDGE AGREEMENTS. Borrower hereby ratifies,
confirms, and reaffirms, all and singular, the terms and conditions of
certain Negative Pledge Agreements dated September 15, 2003 and June 2,
2004.
6. RATIFICATION OF PERFECTION CERTIFICATES. Borrower hereby ratifies,
confirms, and reaffirms, all and singular, the terms and disclosures
contained in certain Perfection Certificates dated June 2, 2004 and
acknowledges, confirms and agrees the disclosures and information provided
therein has not changed, as of the date hereof.
7. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
8. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral
granted to the Bank, and confirms that the indebtedness secured thereby
includes, without limitation, the Obligations.
9. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that
Borrower knows of no offsets, defenses, claims, or counterclaims against
the Bank with respect to the Obligations, or otherwise, and that if
Borrower now has, or ever did have, any offsets, defenses, claims, or
counterclaims against the Bank, whether known or unknown, at law or in
equity, all of them are hereby expressly WAIVED.
10. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents.
Except as expressly modified pursuant to this Loan Modification Agreement,
the terms of the Existing Loan Documents remain unchanged and in full force
and effect. Bank's agreement to make modifications to the existing
Obligations pursuant to this Loan Modification Agreement in no way shall
obligate Bank to make any future modifications to the Obligations. Nothing
in this Loan Modification Agreement shall constitute a satisfaction of the
Obligations. It is the intention of Bank and Borrower to retain as liable
parties all makers of Existing Loan Documents, unless the party is
expressly released by Bank in writing. No maker will be released by virtue
of this Loan Modification Agreement.
11. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank.
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This Loan Modification Agreement is executed as a sealed instrument under
the laws of the Commonwealth of Massachusetts as of the date first written
above.
BORROWER:
GLOBECOMM SYSTEMS INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
NETSAT EXPRESS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
BANK:
SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By: /s/ Xxxxxxx Xxxxxxxx
--------------------
Name: Xxxxxxx Xxxxxxxx
Title: Vice President
