Exhibit 10.1
AMENDMENT NO. 15 AND WAIVER TO
LOAN AND SECURITY AGREEMENT
AMENDMENT NO. 15 AND WAIVER, dated as of October __, 2002 (this
"Amendment"), to the LOAN AND SECURITY AGREEMENT, dated as of September 30, 1998
(as amended by AMENDMENT NO. 1, dated as of September, 1999, AMENDMENT NO. 2 AND
WAIVER, dated as of September, 1999, AMENDMENT NO. 3, dated as of December 13,
1999, AMENDMENT NO. 4, dated as of January 12, 2000, AMENDMENT NO. 5, dated as
of March 24, 2000, AMENDMENT NO. 6, dated as of May 26, 2000, AMENDMENT NO. 7,
dated as of July 17, 2000, AMENDMENT NO. 8 AND WAIVER, dated as of August 11,
2000, AMENDMENT NO. 9, dated as of March 30, 2001, AMENDMENT NO. 10, dated as of
June 30, 2001, AMENDMENT NO. 11, dated as of December 27, 2001, AMENDMENT NO.
12, dated as of March 27, 2002, AMENDMENT NO. 13 AND WAIVER, dated as of May 20,
2002, and AMENDMENT NO. 14 AND WAIVER, dated as of August 20, 2002, as so
amended, the "Loan and Security Agreement"), between FOOTHILL CAPITAL
CORPORATION, a California corporation ("Foothill") and DYNTEK SERVICES, INC., a
Delaware corporation, formerly known as TEKINSIGHT SERVICES, INC. and successor
by merger to DATA SYSTEMS NETWORK CORPORATION, a Michigan corporation
("Borrower").
Preamble
Pursuant to the Loan and Security Agreement, Foothill established a
revolving line of credit for the benefit of Borrower. Borrower has requested
that Foothill agree and, Foothill has agreed, to certain amendments and waivers
to the Loan and Security Agreement. Accordingly, Borrower and Foothill hereby
agree as follows:
1. Definitions. All capitalized terms used herein which are defined in
the Loan and Security Agreement and not otherwise defined herein are used herein
as defined therein.
2. Amendments.
(a) Section 7.20(a) of the Loan and Security Agreement is hereby
amended and restated in its entirety to read as follows:
"(a) EBITDA: EBITDA, measured at the end
of each calendar quarter, of not less than the required amount set forth in the
following table for the applicable period set forth opposite thereto:
Calendar Quarter Ending: EBITDA
March 31, 2002 $500,000
June 30, 2002 $550,000
September 30, 2002 $(404,800)
December 31, 2002 $404,600
March 31, 2003 $742,900
June 30, 2003 $1,228,250
provided that, thereafter, upon receipt of the financial
projections required to be delivered to Foothill pursuant to Section 6.3 (fifth
paragraph) hereof for each fiscal year, Borrower and Foothill shall negotiate in
good faith to determine the minimum EBITDA as of the end of each calendar
quarter covered by such financial projections and, in the event that Borrower
and Foothill are unable to agree upon the amounts of such EBITDA on or before
the date that is 30 days after the date that Foothill has received such
projections, the EBITDA at the end of each calendar quarter of the fiscal year
covered by such financial projections shall not be less than $1,228,250;" (b)
Section 7.20(b) of the Loan and Security Agreement is hereby amended and
restated in its entirety to read as follows:
"(b) Tangible Net Worth: Tangible Net Worth, measured
at the end of each calendar quarter, of not less than the required amount set
forth in the following table for the applicable period set forth opposite
thereto:
Calendar Quarter Ending: Tangible Net Worth
March 31, 2002 $(21,500,000)
June 30, 2002 $(19,000,000)
September 30, 2002 $(22,868,388)
December 31, 2002 $(23,079,988)
March 31, 2003 $(22,937,388)
June 30, 2003 $(22,241,638)
provided that, thereafter, upon receipt of the financial
projections required to be delivered to Foothill pursuant to Section 6.3 (fifth
paragraph) hereof for each fiscal year, Borrower and Foothill shall negotiate in
good faith to determine the minimum Tangible Net Worth as of the end of each
calendar quarter covered by such financial projections and, in the event that
Borrower and Foothill are unable to agree upon the amounts of such Tangible Net
Worth on or before the date that is 30 days after the date that Foothill has
received such projections, the Tangible Net Worth at the end of each calendar
2
quarter of the fiscal year covered by such financial projections shall not be
less than the required amount set forth in the following table for the
applicable period set forth opposite thereto:
Calendar Quarter Ending: Tangible Net Worth
September 30, 2003 $(21,000,000)
December 31, 2003 $(20,000,000)
March 31, 2004 $(19,000,000);"
(c) Section 7.20(d) of the Loan and Security Agreement is hereby
amended and restated in its entirety to read as follows:
"(d) Interest Coverage Ratio. Interest Coverage Ratio, measured
at the end of each calendar quarter of not less than the required amount set
forth in the following table for the applicable period set forth opposite
thereto:
Calendar Quarter Ending: Interest Coverage Ratio
March 31, 2002 3.0:1.0
June 30, 2002 3.0:1.0
September 30, 2002 (2.25):1.0
December 31, 2002 1.5:1.0
March 31, 2003 2.06:1.0
June 30, 2003 3.41:1:0
provided that, thereafter, upon receipt of the financial
projections required to be delivered to Foothill pursuant to Section 6.3 (fifth
paragraph) hereof for each fiscal year, Borrower and Foothill shall negotiate in
good faith to determine the Interest Coverage Ratio as of the end of each
calendar quarter covered by such financial projections and, in the event that
Borrower and Foothill are unable to agree upon such Interest Coverage Ratio on
or before the date that is 30 days after the date that Foothill has received
such projections, the Interest Coverage Ratio for the applicable period measured
at the end of each calendar quarter of the fiscal year covered by such financial
projections shall not be less than 3:41 to 1:0."
3. Waivers.
(a) Effective as of the Amendment Effective Date (as defined below), and
in reliance upon the representations and warranties of Borrower set forth in the
Loan and Security Agreement, this Amendment and the other Loan Documents,
Foothill hereby waives any Event of Default that would otherwise arise under
Section 8.2 of the Loan and Security Agreement resulting from any noncompliance
by Borrower solely with respect to:
3
(i) the provisions of Section 7.20(a) of the Loan and
Security Agreement by reason of Borrower's failure to maintain EBITDA of at
least $550,000 for the calendar quarter ended June 30, 2002; and
(ii) the provisions of Section 7.20(d) of the Loan and
Security Agreement by reason of Borrower's failure to maintain the Interest
Coverage Ratio of at least 3.0:1.0 for the calendar quarter ended June 30, 2002.
(b) The waivers set forth above shall be specifically limited to the
periods indicated herein and to the matters expressly covered thereby, and shall
not by implication or otherwise limit, impair, constitute a consent to or waiver
of or otherwise affect the rights or remedies of Foothill under the Loan and
Security Agreement or any other Loan Document. Foothill's granting of such
waivers shall not be construed as an indication that any future waiver of
financial covenants or any other provision of the Loan and Security Agreement
will be consented to, it being understood that the granting or denying of any
consent or waiver which may hereafter be requested by Borrower remains in the
sole and absolute discretion of Foothill.
4. Conditions and Covenants. This Amendment shall become effective only
upon the satisfaction in full of the following conditions precedent (the first
date upon which all such conditions have been satisfied being herein called the
"Amendment Effective Date"):
(a) The representations and warranties contained in this Amendment and in
Section 5 of the Loan and Security Agreement and each other Loan Document shall
be correct on and as of the Amendment Effective Date as though made on and as of
such date (except where such representations and warranties relate to an earlier
date in which case such representations and warranties shall be true and correct
as of such earlier date); no Default or Event of Default shall have occurred and
be continuing on the Amendment Effective Date or result from this Amendment
becoming effective in accordance with its terms.
(b) Foothill shall have received two (2) counterparts of this Amendment,
duly executed by Borrower and the Parent.
(c) All legal matters incident to this Amendment shall be reasonably
satisfactory to Foothill and its counsel.
(d) Foothill shall have received a nonrefundable fee of $25,000 in
consideration of the execution and delivery by Foothill of this Amendment.
5. Representations and Warranties. Borrower hereby represents and warrants
to Foothill as follows:
(a) Borrower (i) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and (ii) has all requisite
corporate power, authority and legal right to execute, deliver and perform this
Amendment, and to perform the Loan and Security Agreement, as amended hereby.
4
(b) The execution, delivery and performance of this Amendment by
Borrower, and the performance by Borrower of the Loan and Security Agreement, as
amended hereby (i) have been duly authorized by all necessary corporate action,
(ii) do not and will not contravene its charter or by-laws or any applicable
law, and (iii) except as provided in the Loan Documents, do not and will not
result in the creation of any Lien upon or with respect to any of its respective
properties.
(c) This Amendment and the Loan and Security Agreement, as amended
hereby, constitute the legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with its terms.
(d) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or other Person is required in
connection with the due execution, delivery and performance by Borrower of this
Amendment and the performance by Borrower of the Loan and Security Agreement, as
amended hereby.
(e) The representations and warranties contained in Section 5 of the Loan
and Security Agreement and each other Loan Document are correct on and as of the
Amendment Effective Date as though made on and as of the Amendment Effective
Date (except to the extent such representations and warranties expressly relate
to an earlier date in which case such representations and warranties shall be
true and correct as of such earlier date) and no Default or Event of Default has
occurred and is continuing on and as of the Amendment Effective Date or will
result from this Amendment becoming effective in accordance with its terms.
6. Continued Effectiveness of the Loan and Security Agreement and Loan
Documents. Borrower hereby (i) confirms and agrees that each Loan Document to
which it is a party is, and shall continue to be, in full force and effect and
is hereby ratified and confirmed in all respects except that on and after the
Amendment Effective Date of this Amendment all references in any such Loan
Document to "the Loan and Security Agreement", the "Agreement", "thereto",
"thereof", "therein", "thereunder", "hereunder", "herein", "hereof" or words of
like import referring to the Loan and Security Agreement shall mean the Loan and
Security Agreement as amended by this Amendment, (ii) confirms and agrees that
to the extent that any such Loan Document purports to assign or pledge to
Foothill, or to grant a security interest in or Lien on, any collateral as
security for the obligations of Borrower from time to time existing in respect
of the Loan and Security Agreement and the Loan Documents, such pledge,
assignment and/or grant of the security interest or Lien is hereby ratified and
confirmed in all respects and (iii) confirms that Foothill is authorized, at its
option, without prior notice to Borrower, to charge any fee payable by Borrower
pursuant to Section 4(d) of this Amendment to Borrower's Loan Account.
7. Miscellaneous.
(a) This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which shall be deemed
to be an original but all of which taken together shall constitute one and the
same agreement. Delivery of an executed counterpart of this Amendment by
telefacsimile shall be equally as effective as delivery of an original executed
5
counterpart of this Amendment. Any party delivering an executed counterpart of
this Amendment by telefacsimile also shall deliver an original executed
counterpart of this Amendment, but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability and binding effect of
this Amendment.
(b) Section and paragraph headings herein are included for convenience of
reference only and shall not constitute a part of this Amendment for any other
purpose.
(c) This Amendment shall be governed by and construed in accordance with,
the laws of the State of New York.
(d) Borrower will pay on demand all reasonable fees, costs and expenses
of Foothill in connection with the preparation, execution and delivery of this
Amendment including, without limitation, reasonable fees disbursements and other
charges of Xxxxxxx Xxxx & Xxxxx LLP, counsel to Foothill.
6
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered as of the date set forth on the first
page hereof.
DYNTEK SERVICES, INC.,
a Delaware corporation
By:
----------------------------
Name:
Title:
FOOTHILL CAPITAL CORPORATION,
a California corporation
By:
---------------------------
Name:
Title:
Acknowledged and Agreed upon
as of this ____ day of October, 2002
DYNTEK, INC.,
a Delaware corporation
By:
-----------------------------------
Name:
Title:
