SECOND AMENDMENT TO
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Second Amendment to Second Amended and Restated Loan and Security Agreement
(this "Second Amendment") is made and entered into this 29th day of September,
1995, by and between EXECUTONE INFORMATION SYSTEMS, INC., a Virginia corporation
("Borrower"), BANK OF AMERICA ILLINOIS, an Illinois banking corporation ("Agent"
and "Lender"), and BANK OF BOSTON CONNECTICUT and FLEET BANK, N.A. ("Lenders");
WHEREAS, Borrower and Lenders (including Continental Bank, an
Illinois banking corporation as the predecessor of Bank of America Illinois) are
parties to a certain Second Amended and Restated Loan and Security Agreement
dated as of August 30, 1994 (the "Loan Agreement"), pursuant to which Lenders
made loans and other financial accommodations to Borrower, as more particularly
described therein;
WHEREAS, the Loan Agreement was amended as of January 1, 1995, by
that First Amendment to the Second Amended and Restated Loan Agreement by and
among the parties hereto;
WHEREAS, Borrower has requested that Lenders agree to further
amend the Loan Agreement; and
WHEREAS, Borrower and Lenders wish to enter into this Second
Amendment in order to memorialize their mutual understanding regarding such
amendments;
NOW, THEREFORE, for and in consideration of the premises and
other good and valuable consideration, the receipt and
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sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Financial Covenants. Sections 5.27, 5.28, 5.30, 5.31, 5.32 and
5.33 are amended to read in their entirety as follows:
5.27 Consolidated Net Worth. Maintain a Consolidated Net Worth as
of the last day of each fiscal quarter of each Fiscal Year as set forth below
without reduction for stock repurchases by Borrower permitted under the terms
hereof, in an amount equal to or greater than the corresponding amount set forth
below opposite each such fiscal quarter:
Fiscal Quarter Amount
- ------------------------------------ -------------
Second Fiscal Quarter of 1995 $49,000,000
Third Fiscal Quarter of 1995 $49,000,000
Fourth Fiscal Quarter of 1995 $50,000,000
First Fiscal Quarter of 1996 $53,000,000
Second Fiscal Quarter of 1996 $55,000,000
Third Fiscal Quarter of 1996 $55,000,000
Fourth Fiscal Quarter of 1996 $55,000,000
For All Fiscal Quarters Ended in 1997 $60,000,000
For All Fiscal Quarters Ended in 1998 $65,000,000
For All Fiscal Quarters Ended in 1999 $70,000,000
5.28 Interest Coverage Ratio. Not permit the ratio of Borrower's consolidated
net earnings before interest expense, provision for Taxes, provision for
restructuring and amortization of intangibles (including goodwill, deferred loan
costs, deferred compensation, start-up costs, and acquisition costs) to interest
expense, as determined at the end of each fiscal quarter of each Fiscal Year set
forth below for the six consecutive month period then ended to be less than the
corresponding ratio set forth below. For purposes of this Section 5.28, (i) net
earnings shall not include any gains on the sale or other disposition of
Investments or
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fixed assets and any extraordinary items of income to the extent that the
aggregate of all such gains and extraordinary items of income exceed the
aggregate of losses on such sale or other disposition and extraordinary items,
and (ii) interest expense shall include, without limitation, implicit interest
expense on Capitalized Leases.
Fiscal Quarter Ratio
- ----------------------------------- ------------
Second Fiscal Quarter of 1995 2.00 to 1.00
Third Fiscal Quarter of 1995 2.25 to 1.00
Fourth Fiscal Quarter of 1995 2.50 to 1.00
Each Fiscal Quarter Ended in 1996
and Thereafter 3.00 to 1.00
5.30 Liabilities to Net Worth Ratio. Not permit the ratio of Borrower's
consolidated total liabilities to Borrower's Consolidated Net Worth, as
determined on the last day of each fiscal quarter set forth below, to exceed the
corresponding ratio set forth below:
Fiscal Quarter Ratio
- ------------------------------------- ------------
Second Fiscal Quarter of 1995 2.25 to 1.00
Third Fiscal Quarter of 1995 2.25 to 1.00
Fourth Fiscal Quarter of 1995 2.25 to 1.00
First Fiscal Quarter of 1996 2.25 to 1.00
Second Fiscal Quarter of 1996 & Each
Fiscal Quarter Ended Thereafter 2.00 to 1.00
5.31 Earnings Before Interest, Taxes and Amortization. Not permit the amount of
Borrower's consolidated net earnings before interest expenses, provision for
Taxes, provision for restructuring and amortization of intangibles (including
goodwill, deferred loan costs, deferred compensation, start-up costs, and
acquisition costs), as determined on the last day of each fiscal quarter during
each Fiscal Year set forth below for the six-month period ending on such date to
be less than the corresponding minimum amount set forth below.
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Fiscal Quarter Amount
- ------------------------------------ ----------
Second Fiscal Quarter of 1995 $3,900,000
Third Fiscal Quarter of 1995 $4,750,000
Fourth Fiscal Quarter of 1995 $5,750,000
Each Fiscal Quarter Ended in 1996
and Thereafter $6,000,000
5.32 Current Ratio. Shall maintain a ratio of aggregate current assets to
aggregate current liabilities, determined as of the last day of each calendar
month ended in 1995, of at least 1.0 to 1.0 and determined as of the last day of
each calendar month ended thereafter, of at least 1.25 to 1.00.
5.33 Fixed Charge Coverage Ratio. Not permit the ratio of Borrower's EBITDA to
the sum of Borrower's (i) interest expense, (ii) Capital Expenditures net of any
purchase money or Capitalized Lease obligations with respect thereto, (iii) any
scheduled principal payments on Indebtedness (including the principal component
of any Capitalized Lease), (iv) restructuring costs and (v) cash Taxes,
determined as at the end of each fiscal quarter during each Fiscal Year set
forth below for the twelve-month period ending on such date to be less than the
corresponding ratio set forth below:
Fiscal Quarter Ratio
- ------------------------------------- ------------
Second Fiscal Quarter of 1995 1.25 to 1.00
Third Fiscal Quarter of 1995 1.20 to 1.00
Fourth Fiscal Quarter of 1995 1.25 to 1.00
First Fiscal Quarter of 1996 1.35 to 1.00
Second Fiscal Quarter of 1996 & Each
Fiscal Quarter Ended Thereafter 1.50 to 1.00
2. No Hostile Take-Over.Borrower shall not directly or indirectly use any
proceeds of Loans to fund all or any part of any hostile take-over or tender
offer.
3. Conditions to Effectiveness of Second Amendment. The obligations of Lenders
to enter
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into this Second Amendment are subject to Borrower's execution and delivery to
Agent of the following documents, each in form and substance satisfactory to
Agent:
a.) Executed copies of this Second Amendment;
b.) A Secretary's Certificate of Borrower certifying (i) that
there have been no amendments to Borrower's Charter or by-laws since August 30,
1994, except as set forth in Borrower's proxy statement dated April 28, 1995,
(ii) that resolutions adopted by Borrower's Board of Directors (attached to such
certificate) authorizing the execution, delivery and performance of this Second
Amendment are in full force and effect and that such resolutions have not been
amended, modified or rescinded since the date of their adoption; (iii) the
incumbency of the officers executing this Second Amendment on behalf of Borrower
and such officers' signatures; and (iv) that Borrower is, as of the date of such
certificate, in good standing in the States of Virginia and Connecticut; and
c.) An amendment fee of $10,000 payable to the
Agent for the ratable benefit of Lenders.
4. Representations and Warranties. To induce Lenders to make the
financial accommodations to Borrower contemplated hereby, Borrower hereby
restates and renews each and every representation and warranty of Borrower set
forth in the Loan Agreement, including, without limitation, in Section 4
thereof, and in each of the Related Agreements to which Borrower is a party or
by which it is bound (except to the extent such representations and warranties
are untrue solely as a result of transactions previously consented to by Lenders
in writing) and hereby further represents and warrants in favor of Lenders as
follows: (a)
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Borrower is duly authorized to execute and deliver this Second Amendment and any
Related Agreements contemplated hereby and is and will continue to be authorized
to obtain the loans contemplated by the Loan Agreement, as amended by this
Second Amendment, and to perform its obligations under the Loan Agreement, as
amended by this Second Amendment, and any Related Agreements contemplated
hereby; (b) the execution, delivery and performance by Borrower of this Second
Amendment and of any Related Agreements contemplated hereby do not and will not
require any consent or approval of any governmental agency or authority or other
Person which has not been obtained and a copy thereof delivered to Lenders; (c)
the execution, delivery and performance by Borrower of this Second Amendment and
any Related Agreements do not and will not conflict with (i) any provisions of
law, (ii) the Charter or bylaws of Borrower, (iii) any agreement binding upon
Borrower or (iv) any court or administrative order or decree applicable to
Borrower, and do not and will not require, or result in, the creation or
imposition of any Lien on any assets of Borrower except as provided in the Loan
Agreement; (d) this Second Amendment and any Related Agreements contemplated
hereby, when duly executed and delivered, will be legal, valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency or other similar laws of general application affecting the
enforcement of creditors' rights or by general principles of equity limiting the
availability of equitable remedies and (e) after giving effect to the execution
and delivery of this Second Amendment and the consummation of the transactions
contemplated hereby, no Event of Default or Unmatured Event of Default has
occurred and is continuing.
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5. Miscellaneous. Except as set forth expressly herein, all terms
of the Loan Agreement and the Related Agreements shall be and remain in full
force and effect and shall constitute the legal, valid, binding and enforceable
obligations of Borrower. To the extent any terms and conditions in any of the
Related Agreements shall contradict or be in conflict with any terms or
conditions of the Loan Agreement, after giving effect to this Second Amendment,
such terms and conditions are hereby deemed modified and amended accordingly to
reflect the terms and conditions of the Loan Agreement as modified and amended
hereby. Each reference to the Loan Agreement in any Related Agreement shall be
deemed to refer the Loan Agreement, as amended by this Second Amendment.
Borrower hereby restates, ratifies and reaffirms each and every term and
condition set forth in the Loan Agreement, as amended hereby, and the Related
Agreements effective as of the date hereof. To induce Lenders to enter into this
Second Amendment and to continue to make Revolving Loans to Borrower under the
Loan Agreement, Borrower hereby acknowledges and agrees that, as of the date
hereof, there exists no right of offset, defense, counterclaim or objection in
favor of Borrower as against Lenders with respect to the Liabilities. This
Second Amendment shall be governed by, and construed in accordance with, the
laws of the State of Illinois and all applicable federal laws of the United
States of America. Borrower agrees to pay on demand all costs and expenses of
Lenders in connection with the preparation, execution, delivery and enforcement
of this Second Amendment and any other Related Agreements executed in connection
herewith, the closing hereof, and any other transactions contemplated hereby,
including the fees and out-of-pocket expenses of Lenders' counsel. In the event
of Borrower's failure to pay such fees on demand, such fees may be charged as
Revolving Loans.
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IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
EXECUTONE INFORMATION SYSTEMS, INC.
By:_______________________________
Name:__________________________
Title:______________________
BANK OF AMERICA ILLINOIS
By:_______________________________
Name:__________________________
Title:______________________
BANK OF BOSTON CONNECTICUT
By:_______________________________
Name:__________________________
Title:______________________
FLEET BANK, N.A.
By:_______________________________
Name:__________________________
Title:______________________
BANK OF AMERICA ILLINOIS, as Agent
By:_______________________________
Name:__________________________
Title:______________________
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