EXHIBIT 10.1
FOURTH AMENDMENT
TO CREDIT AGREEMENT
This FOURTH AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT")
is dated as of May 31, 2002 and entered into by and among ARRIS INTERNATIONAL,
INC., a Delaware corporation (the "COMPANY"), ARRIS INTERACTIVE L.L.C., a
Delaware limited liability company ("ARRIS"), EACH OF COMPANY'S SUBSIDIARIES
LISTED ON THE SIGNATURE PAGES HEREOF (Company, Arris and each such subsidiary
are individually referred to herein as a "BORROWER" and, collectively, on a
joint and several basis, as the "BORROWERS"), THE FINANCIAL INSTITUTIONS LISTED
ON THE SIGNATURE PAGES HEREOF (each individually referred to herein as a
"LENDER" and collectively as "LENDERS"), CREDIT SUISSE FIRST BOSTON, as
syndication agent for Lenders (in such capacity, "SYNDICATION AGENT") and THE
CIT GROUP/BUSINESS CREDIT, INC., as administrative agent and collateral agent
for Lenders (in such capacity, "ADMINISTRATIVE AGENT"), and is made with
reference to that certain Credit Agreement dated as of August 3, 2001, as
amended by that certain First Amendment to Credit Agreement dated as of January
8, 2002 (the "FIRST AMENDMENT"), as supplemented by that certain Acknowledgement
dated as of March 21, 2002, as further amended by that certain Second Amendment
to Credit Agreement dated as of April 17, 2002 and as further amended by that
certain Third Amendment to Credit Agreement dated as of April 24, 2002 (as so
amended, and supplemented as of the date hereof, the "CREDIT AGREEMENT"), by and
among the Borrowers, Lenders, Syndication Agent and Administrative Agent.
Capitalized terms used herein without definition shall have the same meanings
herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, in connection with the redemption of the Senior
Convertible Notes, Borrowers and Lenders desire to amend the Credit Agreement
to, upon completion of a Successful Retirement of Notes (as defined below),
allow Borrowers to use (A) the proceeds from the Keptel Sale and (B) excess cash
from operations to redeem the remaining Convertible Subordinated Notes;
WHEREAS, the Borrowers and Lenders desire to further amend the
Credit Agreement to: (i) reduce the Revolving Loan Commitments to $143,000,000
by terminating the Revolving Loan Commitments of two of the Lenders; (ii) remove
the reserve of $20,000,000 implemented against the Borrowing Base under the
First Amendment in connection with the Cadant Acquisition; (iii) modify the
availability of the Revolving Loan Commitments in connection with Eligible
Inventory; (iv) amend the Cash Management System and (iv) make certain other
amendments as set forth below;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 AMENDMENTS TO SECTION 1: PROVISIONS RELATING TO
DEFINED TERMS
A. Subsection 1.1 of the Credit Agreement is hereby
amended by adding thereto the following definitions, which shall be
inserted in proper alphabetical order:
"ELIGIBLE INVENTORY AMOUNT" means the lesser of (x) 80% of the
orderly liquidation value of each category of Eligible Inventory of
Borrowers set forth i`n the Emerald Appraisal, in each case minus
liquidation costs and (y) $60,000,000.
"FOURTH AMENDMENT" means the Fourth Amendment to this
Agreement dated as of May 31, 2002.
"FOURTH AMENDMENT EFFECTIVE DATE" means the date the Fourth
Amendment to this Agreement became effective in accordance with its
terms.
"INVENTORY INCLUSION REQUIREMENTS" means as of any date, that
(i) at least thirty (30) days prior to such date, Company has provided
written notice to Administrative Agent, requesting the inclusion of the
Eligible Inventory Amount in the Borrowing Base and (ii) an update to
the Emerald Appraisal prepared by Emerald Technology Valuations, LLC or
such other independent third party consultant selected by
Administrative Agent and approved by Requisite Lenders and in form and
substance satisfactory to Administrative Agent, was completed and
delivered to Administrative Agent no more than ninety (90) days prior
to such date.
"REPAID LENDERS" has the meaning assigned to that term in
subsection 2.4A(iii)(a).
"SUCCESSFUL RETIREMENT OF NOTES" shall mean the retirement or
cancellation of Convertible Subordinated Notes in the aggregate
principal amount of $69,000,000 which have been retired or cancelled by
(a) the exchange therefor for or the conversion thereof into Holdings
Common Stock in accordance with the terms of subsection 7.5 hereof, (b)
the refinancing thereof in accordance with the terms of subsection
7.1(ix) hereof or (c) any combination thereof.
B. Subsection 1.1 of the Credit Agreement is hereby
further amended by deleting the definitions of "Borrowing Base",
"Emerald Appraisal" and "Revolving Commitment Termination Date"
therefrom in their entirety and substituting the following therefore:
"BORROWING BASE" means, as of any date of determination, the
amount by which: (a) the sum of (i) eighty five percent (85%) of the
Net Amount of Eligible Accounts, (ii) the lesser of (x) eighty five
percent (85%) of the Net Amount of Eligible Foreign Accounts and (y)
$5,000,000, (iii) the lesser of (x) eighty five (85%) of the Net Amount
of Eligible Canadian Accounts and (y) $3,000,000 and (iv) if as of such
date the
2
Inventory Inclusion Requirements have been satisfied, the Eligible
Inventory Amount exceeds (b) the sum of (i) such reserves (which may
reflect forward-looking industry information provided by independent
third parties) as Administrative Agent may from time to time require in
its reasonable discretion plus (ii) $10,000,000.
"EMERALD APPRAISAL" means the net orderly liquidation analysis
of the inventory of the Borrowers and their respective Subsidiaries
conducted by Emerald Technology Valuations, LLC and delivered to Agents
prior to the Closing Date, in form and substance reasonably
satisfactory to Agents, as such appraisal may be updated by Emerald
Technology Valuations, LLC or such other independent third party
consultant selected by Administrative Agent and approved by Requisite
Lenders from time to time in accordance with subsection 6.12.
"REVOLVING LOAN COMMITMENT TERMINATION DATE" means August 3,
2004; provided, however, that if a Successful Retirement of Notes has
not occurred prior to March 31, 2003, the Revolving Loan Commitment
Termination Date shall be March 31, 2003.
1.2 AMENDMENTS TO SECTION 2: AMOUNTS AND TERMS OF
COMMITMENTS AND LOANS
A. Subsection 2.4A(iii)(a) of the Credit Agreement is
hereby amended by deleting the proviso at the end of such subsection
and substituting therefore the following:
"; provided, further, that notwithstanding anything in this clause (a)
to the contrary, on the Fourth Amendment Effective Date, the Revolving Loan
Commitment of IBM Credit Corporation and Credit Suisse First Boston (the "REPAID
LENDERS") shall be reduced to zero in accordance with the terms of the Fourth
Amendment and no further reduction to the Revolving Loan Commitment of any other
Lender shall occur as a result of the Keptel Sale."
1.3 AMENDMENTS TO SECTION 6: AFFIRMATIVE COVENANTS
A. Subsection 6.12 is hereby amended by deleting
clause (i) of such subsection in its entirety and substituting
therefore the following:
"(i) If an Event of Default or Potential Event of Default
has occurred and is continuing, Holdings shall and shall cause its
Subsidiaries to fully cooperate in the preparation of updates to the
Emerald Appraisal as often as the Administrative Agent shall request in
its discretion."
1.4 AMENDMENTS TO SECTION 7: BORROWERS' NEGATIVE
COVENANTS
A. Subsection 7.5 of the Credit Agreement is hereby
amended by deleting the period at the end of clause (x) and
substituting therefore "; and", and adding the following clause (xi)to
the end thereof:
3
"(xi) So long as (i) a Successful Retirement of Notes has
occurred, (ii) no Event of Default has occurred and is continuing,
(iii) no blockage notice has been delivered in accordance with the
terms of the Convertible Subordinated Note Indenture and (iv) no Loans
are outstanding, Company may use the Net Asset Sale Proceeds from the
Keptel Sale (to the extent such Net Asset Sale Proceeds are not
required to repay Outstanding Revolving Loans of the Repaid Lenders in
accordance with subsection 2.4A(iii)(a)) and cash from the operations
of Holdings and its Subsidiaries to redeem the Convertible Subordinated
Notes in accordance with the terms of the Convertible Subordinated
Notes and the Convertible Subordinated Note Indenture."
B. Subsection 7.6 of the Credit Agreement is hereby
amended by deleting subsection 7.6E in its entirety.
1.5 AMENDMENT TO SCHEDULE 6.10: CASH MANAGEMENT SYSTEM
A. The section under the heading "Amounts held in
Deposit Accounts or Otherwise:" contained in Schedule 6.10 to the
Credit Agreement is hereby amended by (i) deleting the "and" at the end
of subsection (viii) thereof, (ii) by deleting the "." at the end of
subsection (ix) thereof and substituting therefore a ";" and (iii)
adding the following subsection (xi) at the end thereof:
"(xi) amounts maintained on deposit in (A) any
securities account established to hold Cash Equivalents (each
a "SECURITIES ACCOUNT") in accordance with the terms of the
Credit Agreement and approved by Administrative Agent and (B)
any other restricted deposit accounts established to hold
proceeds of any Securities Account (each a "RESTRICTED DEPOSIT
ACCOUNT") in accordance with the terms of the Credit Agreement
and approved by Administrative Agent; provided, however, that
Holdings and each Borrower shall have caused the Loan Party
with such Securities Account or Restricted Deposit Account to
have duly authorized, executed and delivered a Blocked Account
Agreement (as hereinafter defined) in form and substance
satisfactory to the Administrative Agent."
B. The section entitled "Deposits into Master
Disbursement Accounts, Disbursement Accounts, Petty Cash Accounts and
Miscellaneous Accounts" contained in Schedule 6.10 is hereby amended by
deleting such section in its entirety and substituting therefore the
following:
"Deposits into Master Disbursement Accounts, Disbursement
Accounts, Petty Cash Accounts, Miscellaneous Accounts,
Securities Accounts and Restricted Deposit Accounts:
Holdings, Borrowers and their Subsidiaries shall not make any
deposits, and shall not instruct their customers to make
deposits, into the (i) Master Disbursement Accounts other than
(x) proceeds of Loans and (y) amounts transferred from the
Collateral Account, (ii) the Disbursement Accounts, Petty Cash
Accounts, Miscellaneous Accounts and Securities Accounts other
than amounts transferred
4
from the Master Disbursement Accounts and (iii) the Restricted
Deposit Accounts other than amounts transferred from a
Securities Account."
SECTION 2. REPAYMENT OF LOANS AND TERMINATION OF
COMMITMENTS OF IBM CREDIT CORPORATION AND
CREDIT SUISSE FIRST BOSTON.
The Borrowers and Lenders acknowledge and agree that on the
Fourth Amendment Effective Date: (i) the Borrowers shall repay any outstanding
Revolving Loans of IBM Credit Corporation and Credit Suisse First Boston and
(ii) so long as any payment required by the foregoing clause (i) has been
received, (w) the Revolving Loan Commitment of each of IBM Credit Corporation
and Credit Suisse First Boston shall terminate, (x) each of IBM Credit
Corporation and Credit Suisse First Boston shall relinquish its rights (other
than any rights which survive the termination of the Credit Agreement under
subsection 10.10B of the Credit Agreement) under the Credit Agreement, (y)
Credit Suisse First Boston shall resign as Syndication Agent and The CIT
Group/Business Credit, Inc. shall be appointed successor Syndication Agent and
(z) each of IBM Credit Corporation and Credit Suisse First Boston shall be
released from its obligations under the Credit Agreement and shall cease to be a
party thereto.
As of the date hereof, the amount of each Revolving Lender's
Revolving Loan Commitment is set forth opposite its name on Schedule 1 annexed
hereto.
SECTION 3. REMOVAL OF RESERVE ON BORROWING BASE RELATED
TO CADANT ACQUISITION
Lenders hereby acknowledge and agree that Administrative Agent
may remove the reserve of $20,000,000 placed against the Borrowing Base in
connection with the Cadant Acquisition in accordance with the terms of the First
Amendment.
SECTION 4. BORROWERS' REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, Borrowers represent
and warrant to each Lender that the following statements are true, correct and
complete:
A. CORPORATE POWER AND AUTHORITY. Each Borrower has
all requisite corporate power and authority to enter into this
Amendment, and perform its obligations under, the Credit Agreement as
amended by the First Amendment, the Second Amendment, the Third
Amendment and this Amendment (the "AMENDED AGREEMENT").
B. AUTHORIZATION OF AGREEMENTS. The execution and
delivery of this Amendment and the performance of the Amended Agreement
have been duly authorized by all necessary corporate action on the part
of each of the Borrowers.
C. NO CONFLICT. The execution and delivery by
Borrowers of this Amendment and the performance by Borrowers of the
Amended Agreement do not and will not (i) violate any provision of any
law or any governmental rule or regulation
5
applicable to any Borrower or any of their respective Subsidiaries, the
Certificate or Articles of Incorporation or Bylaws or Certificate of
Formation or Operating Agreement, as applicable, of any Borrower or any
of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on any Borrower or any of its
Subsidiaries, (ii) conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any
Contractual Obligation of any Borrower or any of its Subsidiaries,
(iii) result in or require the creation or imposition of any Lien upon
any of the properties or assets of any Borrower or any of its
Subsidiaries (other than Liens created under any of the Loan Documents
in favor of Administrative Agent on behalf of Lenders), or (iv) require
any approval of stockholders or any approval or consent of any Person
under any Contractual Obligation of any Borrower or any of its
Subsidiaries.
D. GOVERNMENTAL CONSENTS. The execution and delivery
by each Borrower of this Amendment and the performance by the Borrowers
of the Amended Agreement and the transactions contemplated by this
Amendment do not and will not require any registration with, consent or
approval of, or notice to, or other action to, with or by, any federal,
state or other governmental authority or regulatory body.
E. BINDING OBLIGATION. This Amendment and the Amended
Agreement have been duly executed and delivered by each Borrower and is
the legally valid and binding obligations of the Borrowers, enforceable
against the Borrowers in accordance with their respective terms, except
as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally or
by equitable principles relating to enforceability.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES
FROM CREDIT AGREEMENT. The representations and warranties contained in
Section 5 of the Credit Agreement are and will be true, correct and
complete in all material respects on and as of the First Amendment
Effective Date to the same extent as though made on and as of that
date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true,
correct and complete in all material respects on and as of such earlier
date.
G. ABSENCE OF DEFAULT. No event has occurred and is
continuing or will result from the consummation of the transactions
contemplated by this Amendment that would constitute an Event of
Default or a Potential Event of Default.
SECTION 5. ACKNOWLEDGEMENT AND CONSENT
Holdings, each Borrower and each Subsidiary Guarantor hereby
acknowledges that such Loan Party has read this Amendment and consents to the
terms hereof and further hereby confirms and agrees that, notwithstanding the
effectiveness of this Amendment, the obligations of such Loan Party under each
of the Loan Documents to which such Loan Party is a party shall not be impaired
and each of the Loan Documents to which such Loan Party is a party are, and
shall continue to be, in full force and effect and are hereby confirmed and
ratified in all respects.
6
Holdings and each Subsidiary Guarantor acknowledges and agrees
that (i) notwithstanding the conditions to effectiveness set forth in this
Amendment, such Loan Party is not required by the terms of the Credit Agreement
or any other Loan Document to consent to the amendments to the Credit Agreement
effected pursuant to this Amendment and (ii) nothing in the Credit Agreement,
this Amendment or any other Loan Document shall be deemed to require the consent
of such Loan Party to any future amendments to the Credit Agreement.
SECTION 6. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
(i) On and after the Fourth Amendment Effective Date,
each reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit Agreement,
and each reference in the other Loan Documents to the "Credit Agreement",
"thereunder", "thereof" or words of like import referring to the Credit
Agreement shall mean and be a reference to the Amended Agreement.
(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein, constitute a waiver of
any provision of, or operate as a waiver of any right, power or remedy of
Administrative Agent or any Lender under, the Credit Agreement or any of the
other Loan Documents.
B. FEES AND EXPENSES. Company acknowledges that all
costs, fees and expenses as described in subsection 10.2 of the Credit
Agreement incurred by Agents and their counsel with respect to this
Amendment and the documents and transactions contemplated hereby shall
be for the account of Borrowers.
C. HEADINGS. Section and subsection headings in this
Amendment are included herein for convenience of reference only and
shall not constitute a part of this Amendment for any other purpose or
be given any substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS; EFFECTIVENESS. This Amendment may be
executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such
7
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and
attached to a single counterpart so that all signature pages are
physically attached to the same document. This Amendment shall become
effective upon (i) receipt by Administrative Agent of an amendment fee
equal to $218,750, to be distributed among each Lender that has
executed and delivered a counterpart of this Amendment (other than
Credit Suisse First Boston and IBM Credit Corporation), in proportion
to the amount of each such Lender's Revolving Loan Exposure to the
aggregate amount of the Revolving Loan Exposure of all such Lenders, in
each case after giving effect to Section 2 of this Amendment and (ii)
the execution of a counterpart hereof by each of the Borrowers, each of
the Subsidiary Guarantors, Holdings and each Lender and receipt by
Company and Administrative Agent of written or telephonic notification
of such execution and authorization of delivery.
[Remainder of page intentionally left blank]
8
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
HOLDINGS: ARRIS GROUP, INC.
By: /s/ Lawrence A. Margolis
-------------------------------------
Name: Lawrence A. Margolis
Title: Vice President, Chief Financial
Officer & Secretary
COMPANY: ARRIS INTERNATIONAL, INC.
By: /s/ Lawrence A. Margolis
-------------------------------------
Name: Lawrence A. Margolis
Title: Executive Vice President, Chief
Financial Officer & Secretary
ARRIS: ARRIS INTERACTIVE L.L.C.
By: /s/ Lawrence A. Margolis
-------------------------------------
Name: Lawrence A. Margolis
Title: Executive Vice President
SUBSIDIARIES OF COMPANY: ANTEC ASSET MANAGEMENT COMPANY
By: /s/ Lawrence A. Margolis
-------------------------------------
Name: Lawrence A. Margolis
Title: President
ANTEC LICENSING COMPANY
By: /s/ Lawrence A. Margolis
-------------------------------------
Name: Lawrence A. Margolis
Title: President
S-1
TEXSCAN CORPORATION
By: /s/ Lawrence A. Margolis
-------------------------------------
Name: Lawrence A. Margolis
Title: Chairman of the Board
ELECTRONIC CONNECTOR CORPORATION OF ILLINOIS
By: /s/ Lawrence A. Margolis
-------------------------------------
Name: Lawrence A. Margolis
Title: Vice President
POWER GUARD, INC.
By: /s/ Lawrence A. Margolis
-------------------------------------
Name: Lawrence A. Margolis
Title: Vice President
ELECTRONIC SYSTEM PRODUCTS INC.
By: /s/ Lawrence A. Margolis
-------------------------------------
Name: Lawrence A. Margolis
Title: Vice President
KEPTEL, INC.
By: /s/ Lawrence A. Margolis
-------------------------------------
Name: Lawrence A. Margolis
Title: Vice President
S-2
SUBSIDIARY GUARANTORS,
for purposes of Section 3 only, TEXSCAN DE MEXICO, S.A. DE C.V.
By: /s/ Lawrence A. Margolis
-------------------------------------
Name: Lawrence A. Margolis
Title: Chairman
KEPTEL DE MEXICO S.A. DE C.V.
By: /s/ Lawrence A. Margolis
-------------------------------------
Name: Lawrence A. Margolis
Title: Chairman
ANTEC INTERNATIONAL CORPORATION
By: /s/ Lawrence A. Margolis
-------------------------------------
Name: Lawrence A. Margolis
Title: Director
S-3
LENDERS: THE CIT GROUP/BUSINESS CREDIT, INC.,
individually and as Administrative Agent
and Collateral Agent
By: /s/ John F. Bohan
---------------------------------------
Name: John F. Bohan
Title: Vice President
S-4
CREDIT SUISSE FIRST BOSTON,
individually and as Syndication Agent
By: /s/ Jay Chall
---------------------------------------
Name: Jay Chall
Title: Director
By: /s/ James P. Morgan
---------------------------------------
Name: James P. Morgan
Title: Director
S-5
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
By: /s/ Clare J. D'Cruz
---------------------------------------
Name: Clare J. D'Cruz
Title: Vice President
S-6
COMERICA BANK
By: /s/ Guy Camerlengo
---------------------------------------
Name: Guy Camerlengo
Title: Assistant Vice President
S-7
CONGRESS FINANCIAL CORPORATION (SOUTHERN)
By: /s/ Morris P. Holloway
---------------------------------------
Name: Morris P. Holloway
Title: Senior Vice President
S-8
FLEET CAPITAL CORPORATION
By: /s/ Douglas Strange
---------------------------------------
Name: Douglas Strange
Title: Vice President
S-9
GMAC COMMERCIAL CREDIT LLC
By: /s/ Joseph A. Klapkowski
---------------------------------------
Name: Joseph A. Klapkowski
Title:
S-10
IBM CREDIT CORPORATION
By: /s/ Thomas S. Curcio
---------------------------------------
Name: Thomas S. Curcio
Title: Manger of Credit
S-11
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Eric Huff
---------------------------------------
Name: Eric Huff
Title: Assistant Vice President
By:
---------------------------------------
Name:
Title:
S-12
SCHEDULE 1
LENDER COMMITMENT PRO RATA SHARE
- ------ ------------------ --------------
The CIT Group/Business Credit, Inc. $ 22,500,000.00 15.7342657343%
American National Bank and Trust
Company of Chicago $ 22,500,000.00 15.7342657343%
Comerica Bank $ 10,000,000.00 6.9930069930%
Congress Financial Corporation
(Southern) $ 25,000,000.00 17.4825174825%
Fleet Capital Corporation $ 22,500,000.00 15.7342657343%
GMAC Commercial Credit LLC $ 22,500,000.00 15.7342657343%
PNC, National Association $ 18,000,000.00 12.5874125874%
================== ==============
$ 143,000,000.00 100%
S-1