SECOND AMENDMENT TO FINANCING AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO FINANCING AND SECURITY AGREEMENT
(this "Agreement") is made as of the 2nd day of January, 1998 by
and among ARGUSS HOLDINGS, INC., a Delaware corporation
("Arguss"), WHITE MOUNTAIN CABLE CONSTRUCTION CORP., a Delaware
corporation ("White Mountain"), CONCEPTRONIC, INC., a Delaware
corporation ("Conceptronic"; together with Arguss and White
Mountain, the "Borrowers" and each a "Borrower") and
NATIONSBANK, N.A., a national banking association, its successors
and assigns (the "Lender").
RECITALS
A. The Lender has made certain loans available to the
Borrowers consisting of (i) a term loan to White Mountain and
Arguss (the "White Mountain Borrowers") in the principal amount
of Four Million Two Hundred Fifty Thousand and No/100 Dollars
($4,250,000.00) (the "Facility 1 Loan") to be used to refinance
existing debt of the White Mountain Borrowers, (ii) a line of
credit in favor of the White Mountain Borrowers in the maximum
principal amount of Three Million Five Hundred Thousand and
No/100 Dollars ($3,500,000.00) (the "Facility 2 Loan") to be used
to finance capital expenditures; (iii) a revolving line of credit
in favor of the White Mountain Borrowers in the maximum principal
amount of Four Million and No/100 Dollars ($4,000,000.00)(the
"Facility 3 Loan") to be used for working capital; and (iv) a
credit facility in the amount of One Million Five Hundred
Thousand and No/100 Dollars ($1,500,000.00) (the "Facility 4
Loan") to Arguss and Conceptronic (the "Conceptronic Borrowers")
to be used for working capital.
B. The Loans are governed by that certain Financing and
Security Agreement by and among the Borrowers and the Lender
dated September 11, 1997, which Financing and Security Agreement
has been amended by that certain First Amendment to Financing and
Security Agreement dated October 6, 1997, by and among the
Borrowers and the Lender (the Financing and Security Agreement,
as amended from time to time is hereinafter called, the
"Financing Agreement").
C. All capitalized terms used herein and not otherwise
defined shall have the meanings given to such terms in the
Financing Agreement.
D. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Can-Am Construction, Inc., a
California corporation ("Can-Am"), Arguss and White Mountain have
entered into an Agreement and Plan of Merger (together with any
and all amendments, modifications, and supplements thereto,
restatements thereof, and substitutes therefor, the "Can- Am
Purchase Agreement"), pursuant to which Arguss will acquire Can-
Am by means of a merger of Can-Am with and into White Mountain
so that White Mountain is the sole surviving corporate entity
(the "Can- Am Purchase Transaction").
E. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ Construction of Alaska, Inc., an Alaska corporation
("▇▇▇▇▇▇▇"), Arguss and White Mountain have entered into an
Agreement and Plan of Merger (together with any and all
amendments, modifications, and supplements thereto, restatements
thereof, and substitutes therefor, the "▇▇▇▇▇▇▇ Purchase
Agreement"; together with the Can-Am Purchase Agreement, the
"Purchase Agreements") pursuant to which, Arguss will acquire
▇▇▇▇▇▇▇ by means of a merger of ▇▇▇▇▇▇▇ into White Mountain so
that White Mountain is the sole surviving corporate entity (the
"▇▇▇▇▇▇▇ Purchase Transaction"). In connection with the Can-Am
Purchase Transaction and the ▇▇▇▇▇▇▇ Purchase Transaction
(collectively, the "Purchase Transaction"), the Borrowers have
requested that the Lender (i) increase the Facility 2 Loan from
Three Million Five Hundred Thousand and No/100 Dollars
($3,500,000.00) to Six Million and No/100 Dollars ($6,000,000.00)
to finance new capital expenditures related to non-real estate
fixed assets, (ii) increase the principal amount of the Facility
3 Loan from Four Million and No/100 Dollars ($4,000,000.00) to
Eight Million and No/100 Dollars ($8,000,000.00) to temporarily
finance certain shortfalls in working capital, (iii) make a term
loan ("Facility 5 Loan") in the principal amount of Ten Million
and No/100 Dollars ($10,000,000.00) to finance a portion of the
cost of the Purchase Transaction, (iv) make a term loan
("Facility 6 Loan") in the principal amount of Five Million
Sixteen Thousand Nine Hundred Eleven Dollars and No/100
($5,016,911.00) to finance a portion of the cost of the Purchase
Transaction; and (v) make a term loan ("Facility 7 Loan") in the
principal amount of Two Million Four Hundred Thousand and No/100
Dollars ($2,400,000.00) to refinance existing long-term debt
related to non-real estate fixed assets acquired in the Purchase
Transaction, and the Lender has agreed, on the condition, among
others, that this Agreement be executed and delivered by the
Borrowers.
NOW, THEREFORE, in consideration of the premises, the mutual
agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrowers and the Lender hereby agree as
follows:
1. Recitals. The parties hereto acknowledge and agree
that the above Recitals are true and correct in all respect and
that the same are incorporated herein and made a part hereof by
reference.
2. Defined Terms. From and after the effective date
hereof, the definitions of "Loan", "Loans", "Note" and "Notes"
set forth in Section 1.01 of the Financing Agreement are hereby
amended and restated in their entirety as follows:
"Loan" means a Facility 1 Loan, a Facility 2 Loan, any
Facility 2 Term Loan, a Facility 3 Loan, a Facility 4 Loan,
a Facility 5 Loan, a Facility 6 Loan, or a Facility 7 Loan,
as the case may be, and "Loans" mean the Facility 1 Loan,
the Facility 2 Loan, each Facility 2 Term Loan, the Facility
3 Loan, the Facility 4 Loan, the Facility 5 Loan, the
Facility 6 Loan and the Facility 7 Loan.
"Note" means the Facility 1 Note, the Facility 2 Note,
each Facility 2 Term Note, the Facility 3 Note, the Facility
4 Note, the Facility 5 Note, the Facility 6 Note, or the
Facility 7 Note, as the case may be, and "Notes" mean
collectively the Facility 1 Note, the Facility 2 Note, each
Facility 2 Term Note, the Facility 3 Note, the Facility 4
Note, the Facility 5 Note, the Facility 6 Note, and the
Facility 7 Note, and any other promissory note which may
from time to time evidence the Obligations.
Except as modified hereby Section 1.01 shall remain unchanged.
3. Facility 2 Loan. From and after the effective date
hereof, Section 2.02(a) of the Financing Agreement is amended and
restated in its entirety as follows:
SECTION 2.02 The Facility 2 Loan. (a)The Lender agrees
to lend to the White Mountain Borrowers on a revolving basis
from time to time the maximum principal amount of Six
Million and No/100 Dollars ($6,000,000.00) (the "Facility 2
Loan"). The joint and several obligation of the White
Mountain Borrowers to repay the advances under the Facility
2 Loan shall be evidenced by the White Mountain Borrowers'
Facility 2 Note dated as of January 2, 1998 (the "Facility 2
Note") payable to the Lender in the form attached hereto as
EXHIBIT A-2. Advances under the Facility 2 Loan shall be
converted to one or more term loans (the "Facility 2 Term
Loans" and each a "Facility 2 Term Loan") at the times and
in such amounts as required pursuant to the terms of this
Agreement. At the time of each conversion of principal
outstanding under the Facility 2 Loan to a Facility 2 Term
Loan (each such date being called a "Conversion Date"), the
White Mountain Borrowers shall execute and deliver to the
Lender a Facility 2 Term Note (each a "Facility 2 Term Note"
and collectively, the "Facility 2 Term Notes") payable to
the Lender in the form attached hereto as EXHIBIT A-3. The
White Mountain Borrowers agree that the outstanding
principal amount under the Facility 2 Note shall be
converted into fully amortizing term loans on the earlier of
(i) the date on which the outstanding balance thereof
exceeds Two Million and No/100 Dollars ($2,000,000.00), or
(ii) the date which is six (6) months from the date of the
execution and delivery of the Facility 2 Note or the
immediately preceding Conversion Date. The Facility 2 Note
and each Facility 2 Term Note shall bear interest and shall
be repaid by the White Mountain Borrowers in the manner and
at the times set forth in the Facility 2 Note and each
Facility 2 Term Note, as the case may be.
4. Facility 3 Loan. From and after the effective date
hereof, Section 2.03(a) of the Financing Agreement is amended and
restated in its entirety as follows:
SECTION 2.03 The Facility 3 Loan. (a) The Lender agrees
to lend to the White Mountain Borrowers on a revolving basis
from time to time the maximum principal amount of Eight
Million and No/100 Dollars ($8,000,000.00) (the "Facility 3
Loan"). The joint and several obligation of the White
Mountain Borrowers to repay the advances under the Facility
3 Loan shall be evidenced by the White Mountain Borrowers'
Facility 3 Note dated September 11, 1997, as increased,
amended and restated in its entirety by that certain Amended
and Restated Revolving Promissory Note dated October 6, 1997
from the White Mountain Borrowers in favor of the Lender,
and as further increased, amended and restated in its
entirety by that certain Second Amended and Restated
Revolving Promissory Note dated January 2, 1998 from the
White Mountain Borrowers in favor of the Lender in the
maximum principal amount of Eight Million and No/100 Dollars
($8,000,000.00) (the "Facility 3 Note") payable to the
Lender in the form attached hereto as EXHIBIT A-4. The
Facility 3 Note shall bear interest and shall be repaid by
the White Mountain Borrowers in the manner and at the times
set forth in the Facility 3 Note.
5. Facility 5 Loan, Facility 6 Loan and Facility 7 Loan.
From and after the effective date hereof, the following Sections
are added immediately after Section 2.04 as Sections 2.04.1,
2.04.2 and 2.04.3 of the Financing Agreement:
SECTION 2.04.1 The Facility 5 Loan. (a)The Lender
agrees to lend to the Borrowers and the Borrowers agree to
borrow from the Lender the principal sum of Ten Million and
No/100 Dollars ($10,000,000.00) (the "Facility 5 Loan").
The joint and several obligation of the Borrowers to repay
the Facility 5 Loan shall be evidenced by the Borrowers'
Promissory Note dated January 2, 1998 (the "Facility 5
Note") payable to the Lender in the form attached hereto as
EXHIBIT A-6. The Facility 5 Note shall bear interest and
shall be repaid by the Borrowers in the manner and at the
times set forth in the Facility 5 Note.
(b) The proceeds of the Facility 5 Loan shall be
used by the Borrowers to finance the acquisition of Can-AM
and ▇▇▇▇▇▇▇, and, unless prior written consent of the Lender
is obtained, for no other purpose.
(c) The Borrowers may prepay the principal sum
outstanding on the Facility 5 Loan only in accordance with
the terms of the Facility 5 Note. Sums borrowed and repaid
may not be readvanced.
SECTION 2.04.2 The Facility 6 Loan. (a) The Lender
agrees to lend to the Borrowers and the Borrowers agree to
borrow from the Lender the principal sum of Five Million
Sixteen Thousand Nine Hundred Eleven Dollars and No/100
($5,016,911.00) (the "Facility 6 Loan"). The joint and
several obligation of the Borrowers to repay the Facility 6
Loan shall be evidenced by the Borrowers' Promissory Note
dated January 2, 1998 (the "Facility 6 Note") payable to the
Lender in the form attached hereto as EXHIBIT A-7. The
Facility 6 Note shall bear interest and shall be repaid by
the Borrowers in the manner and at the times set forth in
the Facility 6 Note.
(b) The proceeds of the Facility 6 Loan shall be
used by the Borrowers to finance the acquisition of Can-Am
and ▇▇▇▇▇▇▇, and, unless prior written consent of the Lender
is obtained, for no other purpose.
(c) Sums borrowed and repaid may not be
readvanced.
(d) In addition to the principal payments
required under the Facility 6 Note, the Borrowers shall,
make the following mandatory principal prepayments on the
Facility 6 Note (each a "Facility 6 Mandatory Prepayment"
and collectively, the "Facility 6 Mandatory Prepayments"):
(i) On March 31, 1999, the Borrowers shall
make a payment in the amount of the Excess Cash Flow for
the preceding fiscal year; and
(ii) At the time of the completion of the
sale of all or substantially all of the assets or stock of
Conceptronic, the Borrower shall make a payment in the
amount of Five Million and No/100 Dollars ($5,000,000.00).
The Borrowers shall pay to the Lender on the date of each
Facility 6 Mandatory Prepayment accrued interest to such
date on the amount prepaid. Each Facility 6 Mandatory
Prepayment shall be applied to the balance of the Facility 6
Loan due at maturity and then to principal against the
principal installments in the inverse order of their
maturity. For purposes hereof, "Excess Cash Flow" means for
any annual period of determination thereof, an amount equal
to fifty percent (50%) of the Borrowers' consolidated net
income, plus non-cash charges, less scheduled principal
repayments of long term debt for such period, as shown on
the annual financial statements for the 1998 fiscal year,
furnished to the Lender in accordance with Section 7.01 (a)
of this Agreement; or in the event that the Borrowers fail
to deliver such financial statements to the Lender as and
when required, or the Lender determines in the exercise of
its good faith and reasonable discretion, that such
financial statements do not accurately reflect the
Borrowers' financial position for the period covered, the
Lender shall estimate, in its sole and absolute discretion,
the amount of Excess Cash Flow for such period.
SECTION 2.04.3 The Facility 7 Loan. (a) The Lender
agrees to lend to the Borrowers and the Borrowers agree to
borrow from the Lender the principal sum of Two Million Four
Hundred Thousand and No/100 Dollars ($2,400,000.00) (the
"Facility 7 Loan"). The joint and several obligation of the
Borrowers to repay the Facility 7 Loan shall be evidenced by
the Borrowers' Promissory Note dated January 2, 1998 (the
"Facility 7 Note") payable to the Lender in the form
attached hereto as EXHIBIT A-8. The Facility 7 Note shall
bear interest and shall be repaid by the Borrowers in the
manner and at the times set forth in the Facility 7 Note.
(b) The proceeds of the Facility 7 Loan shall be
used by the Borrowers to finance existing long term debt for
non-real estate assets of Can Am and ▇▇▇▇▇▇▇, and, unless
prior written consent of the Lender is obtained, for no
other purpose.
(c) The Borrowers may prepay the principal sum
outstanding on the Facility 7 Loan only in accordance with
the terms of the Facility 7 Note. Sums borrowed and repaid
may not be readvanced.
6. Fees. In consideration of the Lender's agreement to
make the Loans described in this Agreement, the Borrowers shall
pay the Lender on the date hereof the following fees (the
"Additional Fees"):
(a) A fee in the amount of one quarter of one
percent (1/4%) of the increase in amount of the Facility 2 Loan
($6,250);
(b) A fee in the amount of one quarter of one
percent (1/4%) of the increase in amount of the Facility 3 Loan
($10,000);
(c) A fee in the amount of one percent (1.0%) of
the Facility 5 Loan ($100,000);
(d) A fee in the amount of one half of one percent
(1/2%) for the Facility 6 Loan ($25,845.55) (the "Facility 6 Loan
Fee"); and
(e) A fee in the amount of one quarter of one percent
(1/4%) for the Facility 7 Loan ($6,000).
Prior to the date hereof, the Borrowers have already paid $5,500
of the Additional Fees. The Additional Fees are considered earned
when paid and are not refundable. Notwithstanding the foregoing,
the Lender agrees that if the unpaid principal balance of the
Facility 6 Loan is curtailed by not less than $5,000,000 in
excess of the regularly scheduled principal payments on the
Facility 6 Loan, on or before July 1, 1998, the Lender will
recalculate the Facility 6 Loan Fee as of July 1, 1998, to an
amount equal to one half of one percent (1/2%) of the then
outstanding principal balance and the Lender will promptly return
the amount of the Facility 6 Loan Fee paid in excess of such
amount to the Borrowers.
7. Grant of Security Interest. The Borrowers hereby
assign, pledge and grant to the Lender, and agrees that the
Lender shall have a perfected and continuing security interest
in, and lien on, all assets of acquired by any of the Borrowers
pursuant to the Purchase Transaction, including, without
limitation: (a) Accounts, chattel paper, Equipment, General
Intangibles, Motor Vehicles, documents, instruments and
Inventory, Leases (whether or not designated with initial capital
letters), as those (whether or not designated with initial
capital letters), as those terms are defined in the Uniform
Commercial Code as presently adopted and in effect in the State
and shall also cover, without limitation, any and all property
specifically included in those respective terms in this Agreement
or in the Financing Documents; (b) returned, rejected or
repossessed goods, the sale or lease of which shall have given or
shall give rise to an Account or Chattel Paper; (c) insurance
policies relating to the foregoing; (d) books and records in
whatever media (paper, electronic or otherwise) recorded or
stored, with respect to the foregoing and all Equipment and
General Intangibles necessary or beneficial to retain, access
and/or process the information contained in those books and
records; and (e) cash and non-cash proceeds and products of the
foregoing.
8. Solvency. The Borrowers represent that the fair
saleable value of each Borrower's assets (including goodwill
minus disposition costs) after completion of the Purchase
Transaction exceeds the fair value of its liabilities; no
Borrower is left with unreasonably small capital after the
transactions contemplated by this Agreement; and each Borrower is
able to pay its debts (including trade debts) as they mature.
9. Additional Reporting Requirements. Notwithstanding
anything set forth in the Financing Agreement, the Borrowers
agree to provide the Lender with complete copies of titles of all
motor vehicles and other titled equipment now or hereafter
acquired by any Borrower on a semi-annual basis commencing June
30, 1998.
10. Additional Representations with Respect to Bulk
Transfer. The parties to the Purchase Agreements have each
complied with any and all Laws governing the transfer of all or
substantially all of the assets of Can-Am and ▇▇▇▇▇▇▇, including,
without limitation, any and all bulk transfer laws, so that as of
the date hereof, the assets described in the Purchase Agreements
shall be transferred to White Mountain free from all claims,
Liens, encumbrances, and security interests of any nature whatso
ever, except as otherwise permitted by the Purchase Agreements
and as otherwise disclosed in writing to the Lender.
11. Replacement Notes. EXHIBITS A-2 and A-4 to the
Financing Agreement are being replaced in their entirety with
EXHIBITS A-2 and A-4 attached hereto. The White Mountain
Borrowers shall execute and deliver to the Lender on the date
hereof their Amended and Restated Revolving Promissory Note in
the form of EXHIBIT A-2 attached hereto and incorporated herein
by reference (the "Replacement Facility 2 Note") and their Second
Amended and Restated Replacement Revolving Promissory Note in the
form of EXHIBIT A-4 attached hereto and incorporated herein by
reference (the "Replacement Facility 3 Note") in substitution for
and not satisfaction of, the issued and outstanding Facility 2
Note and Facility 3 Note; and the Replacement Facility 2 Note
shall be the "Facility 2 Note" for all purposes of the Financing
Documents and the Replacement Facility 3 Note shall be the
"Facility 3 Note" for all purposes of the Financing Documents.
The Notes being substituted pursuant to this Agreement shall be
marked "Replaced" and returned to the White Mountain Borrowers
promptly after the execution and delivery of the Replacement
Facility 2 Note and Replacement Facility 3 Note to the Lender.
12. Conditions Precedent. This Agreement shall become
effective on the date the Lender receives the following
documents, each of which shall be satisfactory in form and
substance to the Lender:
(a) The Replacement Facility 2 Note issued and
delivered by the White Mountain Borrowers;
(b) The Replacement Facility 3 Note issued and
delivered by the White Mountain Borrowers;
(c) The Facility 5 Note issued and delivered by the
Borrowers;
(d) The Facility 6 Note issued and delivered by the
Borrowers;
(e) The Facility 7 Note issued and delivered by the
Borrowers;
(f) All documents and instruments (including,
without limitation, UCC-1 and UCC-3 statements) required to be
filed, registered or recorded in order to create, in favor of the
Lender, a perfected Lien in the Collateral (subject only to the
Permitted Liens) in form and in sufficient number for filing,
registration, and recording in each office in each jurisdiction
in which such filings, registrations and recordations are
required, and (b) delivered such evidence as the Lender may deem
satisfactory that all necessary filing fees and all recording and
other similar fees, and all Taxes and other expenses related to
such filings, registrations and recordings will be or have been
paid in full.
(g) A true correct and complete copy of the executed
Purchase Agreements and any and all other agreements, documents
or instruments, previously, now or hereafter executed and
delivered by the Borrower, or any other Person in connection with
the Purchase Agreement Transaction (the "Purchase Agreement
Documents"), together with a certificate signed by the Borrowers
certifying that the Purchase Agreement Documents furnished to the
Lender are true, correct, in full force and effect, the
provisions thereof have not been in any way modified, amended or
waived and the Purchase Agreement Transaction has been effected,
closed and consummated pursuant to, and in accordance with, the
terms and conditions of the Purchase Agreements.
(h) True and complete copies of the Articles of Merger
between White Mountain and Can- Am.
(i) True and complete copies of the Articles of Merger
between White Mountain and ▇▇▇▇▇▇▇.
(j) The favorable opinion of counsel for the Borrowers
satisfactory to the Lender.
(k) Copies of the canceled stock certificates of
▇▇▇▇▇▇▇ and Can-Am from White Mountain.
(l) Such other information, instruments, opinions,
documents, certificates and reports as the Lender may deem
necessary.
13. Counterparts. This Agreement may be executed in any
number of duplicate originals or counterparts, each of which
duplicate original or counterpart shall be deemed to be an
original and all taken together shall constitute one and the same
instrument.
14. Financing Documents; Governing Law; Etc. This
Agreement is one of the Financing Documents defined in the
Financing Agreement and shall be governed and construed in
accordance with the laws of the State of Maryland. The headings
and captions in this Agreement are for the convenience of the
parties only and are not a part of this Agreement.
15. Acknowledgments. The Borrowers hereby confirm to the
Lender the enforceability and validity of each of the Financing
Documents. In addition, the Borrowers hereby agree to the
execution and delivery of this Agreement and the terms and
provisions, covenants or agreements contained in this Agreement
shall not in any manner release, impair, lessen, modify, waive or
otherwise limit the liability and obligations of the Borrowers
under the terms of any of the Financing Documents, except as
otherwise specifically set forth in this Agreement. The
Borrowers issue, remake, ratify and confirm the representations,
warranties and covenants contained in the Financing Documents.
Nothing in this Agreement shall be deemed to waive any defaults
existing under any of the Financing Documents as of the date
hereof.
16. Modifications. This Agreement may not be supplemented,
changed, waived, discharged, terminated, modified or amended,
except by written instrument executed by the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed and delivered under seal by the duly authorized
representatives as of the date and year first written above.
WITNESS/ATTEST: ARGUSS HOLDINGS, INC.
__________________________
By:_____________________________(SEAL)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Financial Officer
WITNESS/ATTEST: WHITE MOUNTAIN CABLE
CONSTRUCTION CORP.
__________________________
By:_____________________________(SEAL)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
WITNESS/ATTEST: CONCEPTRONIC, INC.
__________________________
By:_____________________________(SEAL)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
WITNESS: NATIONSBANK, N.A.
__________________________
By:_____________________________(SEAL)
▇▇▇▇ ▇. Broni
Assistant Vice President
