EXHIBIT 10 .1 SIXTH LOAN MODIFICATION AGREEMENT This Sixth Loan Modification Agreement (this "Loan Modification Agreement") is entered into as of November 2, 2005, and is effective as of October 28, 2005, by and among (i) SILICON VALLEY BANK, a California-chartered bank, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at 400 Madison Avenue, New York, New York 10017 ("Bank") and (ii) GLOBECOMM SYSTEMS INC., a Delaware corporation with offices at 45 Oser Avenue, Hauppauge, New York 11788 and GLOBECOMM NETWORK SERVICES CORPORATION (formerly NETSAT EXPRESS, INC.), a Delaware corporation with offices at 45 Oser Avenue, Hauppauge, New York 11788 (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. Borrower hereby agrees, acknowledges and confirms that the Exim Agreement is hereby terminated and that no Advances may be requested by Borrower pursuant to the Exim Agreement. ii. The Loan Agreement shall be amended by deleting the following appearing as Section 1.1 thereof in its entirety: " 1.1 LOANS. Silicon will make loans to Borrower (the "Loans") up to the amounts (the "Credit Limit") shown on the Schedule, provided no Default or Event of Default has occurred and is continuing, and subject to deduction of any Reserves for accrued interest and such other Reserves as Silicon deems proper from time to time. Amounts borrowed may be repaid and reborrowed during the term of this Agreement." and inserting in lieu thereof the following: " 1.1 LOANS. Silicon will make loans to Borrower (the "Loans") up to either (i) prior to the occurrence of an Unrestricted Cash Event, (a) Twenty Million Dollars ($20,000,000.00), minus (b) the aggregate amounts then undrawn on all outstanding letters of credit, 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, or (ii) after the occurrence of an Unrestricted Cash Event, the amounts (the "Credit Limit") shown on Section 1 of the Schedule, provided no Default or Event of Default has occurred and is continuing, and subject to deduction of any Reserves for accrued interest and such other Reserves as Silicon reasonably deems proper from time to time. Amounts borrowed may be repaid and reborrowed during the term of this Agreement." iii. The Loan Agreement shall be amended by deleting the following text, appearing in Section 1.5 thereof: "Each Letter of Credit shall have an expiry date no later than thirty days prior to the Maturity Date." and inserting in lieu thereof the following: "Each Letter of Credit shall have an expiry date no later than one hundred eighty days after the Maturity Date." iv. The Loan Agreement shall be amended by deleting the following, appearing as Section 1.6 thereof: " 1.6 CASH MANAGEMENT SERVICES SUBLIMIT. In addition to Section 1.5 above, Borrower may also use up to the amount set forth on the Schedule for Cash Management Services. Such aggregate amounts utilized under the Cash Management Services Sublimit shall at all times reduce the amount otherwise available for Loans, letters of credit, foreign exchange contracts or other credit accommodations hereunder. Any amounts Silicon pays on behalf of Borrower or any amounts that are not paid by Borrower for any Cash Management Services will be treated as Loans hereunder and will accrue interest at the interest rate applicable to Loans." and inserting in lieu thereof the following: " 1.6 RESERVED. v. The Loan Agreement shall be amended by inserting the following new definition, appearing alphabetically in Section 8 thereof: " "Unrestricted Cash Event" occurs at any time at which Borrower maintains less than Thirteen Million Five Hundred Thousand Dollars ($13,500,000.00) in unrestricted and unencumbered cash with Silicon. vi. The Loan Agreement shall be amended by deleting the following text, appearing in the definition of "Eligible Receivables" in Section 8 thereof: "(vii) the Receivable must not be owing from the United States or any department, agency or instrumentality thereof (unless there has been compliance, to Silicon's satisfaction, with the United States Assignment of Claims Act), (viii) the Receivable must not be owing from an Account Debtor located outside the United States (unless pre-approved by Silicon in its discretion in writing, or backed by a letter of credit satisfactory to Silicon, or FCIA insured satisfactory to Silicon)" and inserting in lieu thereof the following: "(vii) the Receivable must not be owing from the United States or any department, agency or instrumentality thereof (unless there has been compliance, to Silicon's satisfaction, with the United States Assignment of Claims Act), provided that Receivables owing from the United States Government, the United Nations, the World Bank and the North Atlantic Treaty Organization will be deemed eligible to the extent that the amount advanced based upon such Receivables does not exceed $2,000,000 in the aggregate, (viii) the Receivable must not be owing from an Account Debtor located outside the United States (unless pre-approved by Silicon in its discretion in writing, or backed by a letter of credit satisfactory to Silicon, or FCIA insured satisfactory to Silicon), provided that Receivables owing from an Account Debtor located outside of the United States will be deemed eligible to the extent that such Account Debtor is not located in a country with a Note #7 or a Note #13 on the Export-Import Bank Country Limitation Schedule and provided that the amount advanced based upon such Receivables does not exceed $2,000,000 in the aggregate" vii. The Loan Agreement shall be amended by deleting the following appearing as Section 1 of the Schedule to the Loan Agreement: "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 account 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" and inserting in lieu thereof the following: "1. CREDIT LIMIT (Section 1.1): An amount not to exceed the lesser of (A) or (B), below: (A) (i) $20,000,000.00 (the "Maximum Credit Limit"); minus (ii) the aggregate amounts then undrawn on all outstanding letters of credit, 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, 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. 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): $20,000,000 viii. 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 one and one-half percent (1.5%) per annum." and inserting in lieu thereof the following: "A rate equal to the Prime Rate." ix. Section 3 of the Schedule to the Loan Agreement is hereby amended by inserting the following text: "Letter of Credit Fee: Borrower shall pay Silicon's customary fees and expenses for the issuance or renewal of Letters of Credit, including, without limitation, a Letter of Credit fee of one percent (1.0%) per annum of the face amount of each Letter of Credit issued, upon the issuance or renewal of such Letter of Credit by Silicon." x. Section 4 of the Schedule to the Loan Agreement is hereby amended by deleting the following text: "October 28, 2005" and inserting the following in lieu thereof: "November 1, 2006" xi. The Loan Agreement shall be amended by deleting the following appearing as Section 5 of the Schedule to the Loan Agreement: "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." and inserting in lieu thereof the following: "5. FINANCIAL COVENANTS (Section 5.1): Borrower shall comply with each of the following covenants. Compliance shall be determined as of the end of each quarter: a. MINIMUM TANGIBLE NET WORTH: Borrower shall maintain a Tangible Net Worth of not less than the sum of (i) plus (ii) below: (i) $50,000,000 from October 1, 2005 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 0.9 to 1.0. DEFINITIONS. For purposes of the foregoing financial covenants, the following terms shall have the following meaning: "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." "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." xii. The Loan Agreement shall be amended by deleting the following appearing as Section 6 of the Schedule to the Loan Agreement: "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." and inserting in lieu thereof the following: "6. REPORTING. (Section 5.3): Borrower shall provide Silicon with the following: (a) (i) as soon as available, but no later than thirty (30) 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, together with a Compliance Certificate in the form attached hereto as Exhibit D; 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 thirty (30) 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 thirty (30) 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." xiii. The Loan Agreement is hereby amended by deleting the Borrowing Base Certificate attached as Exhibit C thereto and inserting in lieu thereof the Borrowing Base Certificate attached as Exhibit C hereto. xiv. The Loan Agreement is hereby amended by deleting the Compliance Certificate attached as Exhibit D thereto and inserting in lieu thereof the Compliance Certificate attached as Exhibit D hereto. 4. FEES. Borrower shall pay to Bank a modification fee of $200,000.00 which fee shall be due on the date hereof and shall be deemed fully earned upon Silicon's execution of this Loan Modification Agreement. 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. [The remainder of this page is intentionally left blank] 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/ ANDREW C. MELFI -------------------------------------- Name: Andrew C. Melfi Title: VP, CFO GLOBECOMM NETWORK SERVICES CORPORATION (formerly NETSAT EXPRESS, INC. By: /s/ DAVID E. HERSHBERG -------------------------------------- Name: David E. Hershberg Title: Chairman and CEO BANK: SILICON VALLEY BANK By: /s/ MICHAEL MORETTI -------------------------------------- Name: Michael Moretti Title: SVP
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8-K Filing
Globecomm Systems (GCOM) Inactive 8-KEntry into a Material Definitive Agreement
Filed: 8 Nov 05, 12:00am