SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is made as of April __, 1999 by and between LASALLE NATIONAL BANK,
its successors and assigns ("Bank"), WESTELL TECHNOLOGIES, INC. ("WTI"),
WESTELL, INC. ("Westell"), WESTELL INTERNATIONAL, INC. ("International"), AND
CONFERENCE PLUS, INC. ("CPI"). WTI, Westell, International and CPI are
collectively referred to herein as "Borrowers".
BACKGROUND
A. Bank and Borrowers are parties to a Loan and Security Agreement
dated as of October 13, 1998, as amended as of February 24, 1999 (the "Loan
Agreement"), pursuant to which Bank has made loans and advances to Borrowers.
B. Borrowers have informed Bank that WTI desires to enter into a
Securities Purchase Agreement (the "SPA") with certain "Purchasers" (as defined
in the SPA) and, in conjunction therewith (i) to sell and issue to Purchasers
certain "Debentures" and "Warrants" (both as defined in the SPA), and (ii) to
enter into a Registration Rights Agreement (as defined in the SPA) with
Purchasers. Borrowers jointly and severally represent and warrant to Bank that
they have attached hereto, as Exhibit A, true and correct copies of the SPA, the
Warrants, the Debentures and the Registration Rights Agreement (as well as any
other documents or instruments being executed and/or issued in connection
therewith).
C. Borrowers have agreed, as an inducement to Bank entering into this
Amendment, that the obligations of Borrowers to Purchasers under the SPA and
related documents, as well as any security granted to Purchasers by Borrowers
with respect thereto, shall be subject, subordinate and junior to the
Obligations as set forth in the form of Subordination Agreement attached hereto
as Exhibit B (the "Subordination Agreement").
D. Borrowers have requested that the parties enter into this Amendment
in order to make certain modifications to the Loan Agreement in connection with
the execution of the Subordinate Documents (as defined in the Subordination
Agreement).
E. Borrowers have also requested that Bank amend certain of the
financial covenants set forth in the Loan Agreement.
F. Bank is agreeable to making such modifications on the terms and
conditions contained herein.
G. Terms used herein but not defined herein shall have the same
meanings assigned to them in the Loan Agreement.
CLAUSES
NOW, THEREFORE, in consideration of the premises set forth above and
the mutual promises contained in this Amendment, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Borrowers and Bank agree as follows:
SECTION 1 Amendments to Loan Agreement. The Loan Agreement is hereby
amended as follows:
1.1 Section 1.1 of the Loan Agreement is hereby amended by inserting
the following new definitions in their appropriate alphabetical position:
"'Debentures' means those certain 6% Subordinated Convertible
Debentures dated April , 1999 issued by WTI to Purchasers in the
aggregate principal amount of $20,000,000."
"'SPA' means that certain Securities Purchase Agreement dated as of
April , 1999 between WTI and Purchasers."
"'Purchasers' means Castle Creek Technology Partners LLC, Marshall
Capital Management, Inc., and Capital Ventures International.
"'Registration Rights Agreement' means that certain Registration
Rights Agreement dated April , 1999 between WTI and Purchasers."
"'Subordination Agreement' means that certain Subordination Agreement
dated April , 1999 by Purchasers in favor of the Bank."
"'Warrants' means those certain Stock Purchase Warrants dated April ,
1999 issued by WTI to Purchasers."
1.2 The definition of "Permitted Liens" is hereby amended by adding
the following new clause (viii):
"(viii) liens granted to Purchasers in the personal property
assets of WTI, Westell and International to secure (and only secure)
the obligations of WTI under the Debentures and which are subject,
subordinate and junior to the rights of Bank in and to the Collateral
pursuant to the Subordination Agreement."
1.3 Section 6.1(b) of the Loan Agreement is hereby amended and
restated in its entirety as follows:
"6.1 (b) Financial Covenants. Borrowers shall maintain:
(i) a maximum aggregate fiscal year-to-date (net loss)/ minimum net
income (exclusive of extraordinary income and losses) for the interim
periods ending on the dates set forth below in the amounts set forth
below;
End of Period (Net Loss)/Net Income
3/31/99 ($35,000,000)
6/30/99 ($ 5,000,000)
9/30/99 ($ 7,000,000)
12/31/99 ($ 7,500,000)
3/31/00 ($ 9,000,000)
6/30/00 ($ 1,000,000)
9/30/00 ($ 1,500,000)
12/31/00 ($ 2,000,000)
3/31/01 ($ 2,000,000)
6/30/01 $ 1,000,000
9/30/01 $ 2,000,000
12/31/01 $ 3,000,000
3/31/02 $ 4,000,000
6/30/02 $1,000,000
(ii) at all times, a Leverage Ratio of not more than 1.2:1.0, measured
on a monthly basis; and
(iii) at all times, a Current Ratio of not less than 1.8:1.0, measured
on a monthly basis."
1.4 Section 6.1(c) of the Loan Agreement is hereby amended by
inserting the following clause (xv) at the end thereof:
"(xv) All information and notices provided or given by any
Borrowers or any of their Affiliates to Purchasers, simultaneously
with the transmittal thereof to Purchasers."
1.5 Section 7.6 of the Loan Agreement is hereby amended and restated
in its entirety as follows:
"7.6 Material Agreements. If: (a) any Borrower defaults, or a default
or an event of default occurs, under or in the performance of any
material agreement, document or instrument, whether for borrowed money
or otherwise, and such default, breach, or event of default continues
beyond any applicable grace period thereunder and the effect of which
shall be to cause the holder of such obligation, agreement, document
or instrument, or the person to whom such obligation is owed to cause
such obligation to become due prior to its stated maturity or
otherwise accelerated; or (b) there occurs an Event of Failure under
any of the Debentures and any "Holder" (as such term is defined in the
Debentures) delivers to WTI a "Demand Redemption Notice" (as such term
is defined in the Debentures) in accordance with the terms and
provisions of the Debentures."
1.6 Schedule 5.16 of the Loan Agreement is hereby amended and restated
in its entirety in the form of Exhibit C hereto.
SECTION 2 Approval. Bank hereby approves (a) WTI's entering into the
SPA and the Registration Rights Agreement, and (b) WTI's issuance of the
Debentures and the Warrants. Such approval, however, does not extend to any
actions, transactions, circumstances or events which may occur or transpire
after the date hereof pursuant to, under or in connection with any of the
foregoing documents and which may constitute breaches, failures or defaults
under the Loan Agreement.
SECTION 3 Representations and Warranties. To induce Bank to amend the
Loan Agreement and consider making future loans thereunder, Borrowers jointly
and severally represent and warrant to Bank that:
3.1 Compliance with Loan Agreement. On the date hereof, Borrowers are
in compliance with all of the terms and provisions set forth in the Loan
Agreement (as modified by this Amendment) and no Event of Default specified in
Article VII of the Loan Agreement (as modified by this Amendment) nor any event
which, upon notice or lapse of time, or both, would constitute such an Event of
Default, has occurred.
3.2 Representations and Warranties. On the date hereof, the
representations and warranties and covenants set forth in Articles V and VI of
the Loan Agreement (as modified by this Amendment) are true and correct with the
same effect as though such representations and warranties and covenants had been
warranties and covenants expressly related to an earlier date.
3.3 Corporate Authority. Borrowers have full power and authority to
enter into this Amendment, to make the borrowings under the Loan Agreement as
amended by this Amendment, and to incur and perform the obligations provided for
under the Loan Agreement and this Amendment, all of which have been duly
authorized by all proper and necessary corporate action. No consent or approval
of stockholders or of any public authority or regulatory body is required as a
condition to the validity or enforceability of this Amendment.
3.4 Amendment as Binding Agreement. This Amendment constitutes the
valid and legally binding obligation of Borrowers, and is fully enforceable
against Borrowers in accordance with its terms.
3.5 No Conflicting Agreements. The execution and performance by
Borrowers of this Agreement will not (i) violate any provision of law, any order
of any court or other agency of government, or the Articles of Incorporation or
By-Laws of any Borrowers, or (ii) violate any indenture, contract, agreement or
other instrument to which any Borrower is a party, or by which its property is
bound, or be in conflict with, result in a breach of or constitute (with due
notice and/or lapse of time) a default under any such indenture, contract,
agreement or other instrument or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of the property or
assets of any Borrower.
SECTION 4 Conditions Precedent. The agreement by Bank to amend the
Loan Agreement is subject to the following conditions precedent:
4.1 Corporate Authority. Borrowers shall have provided to Bank
certified copies of the unanimous written consent of their respective Boards of
Directors authorizing the execution, delivery and performance by Borrowers of
this Amendment and the agreements, instruments and documents executed in
connection herewith.
4.2 Subordination Agreement. Borrowers and Purchasers shall have
executed and delivered to Bank the Subordination Agreement.
4.3 Stock Pledge Agreement. WTI shall have executed and delivered to
Bank a Stock Pledge Agreement satisfactory to Bank in form and substance,
granting to Bank a lien on and security interest in all of the issued and
outstanding shares of Westell, International, and Schoolhouse Interactive, Inc.
SECTION 5 General Provisions.
5.1 Except as amended by this Amendment, the terms and provisions of
the Loan Agreement shall remain in full force and effect and are in all other
respects ratified and confirmed.
5.2 This Amendment shall be construed in accordance with and governed
by the laws of the State of Illinois.
5.3 This Amendment may be executed in any number of counterparts.
5.4 Borrowers hereby agree to pay all out-of-pocket expenses incurred
by Bank in connection with the preparation, negotiation and consummation of this
Amendment, and all other documents related thereto (whether or not any
borrowings under the Loan Agreement as amended shall be consummated), including,
without limitation, the reasonable fees and expenses of Bank's counsel, and any
filing fees required in connection with the filing of any documents necessary to
consummate the provisions of this Amendment.
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IN WITNESS WHEREOF, Borrowers have caused this Amendment to be duly
executed by their duly authorized officers and Bank has caused this Amendment to
be executed by its duly authorized officer, all as of the day and year first
above written.
WESTELL INTERNATIONAL, INC. WESTELL TECHNOLOGIES, INC.
a Delaware corporation a Delaware corporation
By: By:
Title: Title:
CONFERENCE PLUS, INC. WESTELL, INC.
an Illinois corporation a Delaware corporation
By: By:
Title: Title:
LASALLE NATIONAL BANK
By:
Title: