FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT"), dated as of
June 1, 1998, is entered into by and between DIGITAL MICROWAVE CORPORATION (the
"COMPANY") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the
"BANK").
RECITALS
A. The Company and the Bank are parties to a Credit Agreement dated as of
June 30, 1997 (the "CREDIT AGREEMENT") pursuant to which the Bank has extended
certain credit facilities to the Company.
B. The Company has requested that the Bank agree to certain amendments of
the Credit Agreement.
C. The Bank is willing to amend the Credit Agreement, subject to the
terms and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. Amendments to Credit Agreement.
(a) Section 1.01 of the Credit Agreement shall be amended as follows:
(i) The definition of "Availability Period" shall be amended
in its entirety to read as follows:
""AVAILABILITY PERIOD": the period commencing on the
date of this Agreement and ending on the date that is the
earlier to occur of (a) August 31, 1998 and (b) the date
on which the Bank's commitment to extend credit hereunder
terminates."
(ii) The definition of "Credit Limit" shall be amended by
deleting therefrom "$20,000,000" and substituting
therefor "$25,000,000";
(iii) The definition of "Final Maturity Date" shall be amended
in its entirety to read as follows:
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""FINAL MATURITY DATE": (a) in respect of any Advances,
August 31, 1998; (b) in respect of any commercial letters
of credit, February 28, 1999; (c) in respect of any
standby letters of credit, September 30, 1999; and (d) in
respect of any Bank Guaranties, September 30, 1999."
(iv) The following new defined terms shall be inserted in
proper alphabetical order:
""BANK GUARANTY": a guaranty issued hereunder by the
Bank or an Offshore Credit Provider for the Borrower's or
an Acceptable Subsidiary's account."
""BANK GUARANTY OUTSTANDING AMOUNT": at any time, the
amount or Equivalent Amount guaranteed pursuant to any
Bank Guaranty but not disbursed thereunder at such time,
plus all amounts paid under any Bank Guaranty by the Bank
or any Offshore Credit Provider which have not yet been
reimbursed, plus any other obligation or liability of the
Borrower or an Acceptable Subsidiary to the Bank or any
Offshore Credit Provider with respect to any Bank
Guaranty."
(b) Section 2.01 of the Credit Agreement shall be amended as follows:
(i) subsection (a) shall be amended by adding a comma after
"Acceptable Subsidiary" at the end of clause (i) thereof,
re-designating clause (iii) as clause (ii), and adding a
new clause (iii) immediately before the period at the end
of such subsection as follows:
"and (iii) cause to be issued Bank Guaranties for the
Borrower's or an Acceptable Subsidiary's account";
(ii) subsection (c) shall be amended by deleting the word
"and" at the end of clause (i) thereof and inserting a
new clause (iii) immediately after the words "letters of
credit" at the end of clause (ii) thereof as follows:
"and (iii) the Bank Guaranty Outstanding Amount of all
Bank Guaranties"; and
(iii) subsection (d) shall be amended by inserting a "(i)"
immediately before the words "the L/C Outstanding
Amounts" and by inserting immediately after the words
"letters of credit" the following:
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"and (ii) the Bank Guaranty Outstanding Amount of all
Bank Guaranties".
(c) Section 2.04(b) of the Credit Agreement shall be amended (i) by
amending clause (ii) to read in its entirety as follows:
"(ii) require drafts payable in dollars or, in the case of a
commercial letter of credit denominated in a Local Currency,
payable in such Local Currency;",
(ii) and by deleting the word "and" at the end of clause (iii), re-designating
clause (iv) as clause (v) and adding a new clause (iv) as follows:
"(iv) be denominated in Dollars or such Local Currency as the
Bank may approve in its sole discretion; and".
(d) Section 2.04(d) of the Credit Agreement shall be amended in its
entirety to read as follows:
"(b) In the event of any request for a drawing under a
commercial letter of credit, the Bank will notify the Borrower.
In the case of letters of credit denominated in dollars, the
Borrower or the applicable Acceptable Subsidiary may, subject to
satisfaction of all conditions to borrowing set forth in this
Agreement, convert the amount of each drawing into a Reference
Rate Advance (which conversion shall be deemed to be a new
Advance). With respect to any unreimbursed drawing of any such
letter of credit which is not converted into a Reference Rate
Advance in whole or in part, because of the Borrower's failure to
satisfy the conditions set forth in Section 4.02 or for any other
reason, the Borrower shall reimburse or cause the applicable
Acceptable Subsidiary to reimburse the Bank prior to 11:00 a.m.
(San Francisco time), on each date that any amount is paid by the
Bank under any commercial letter of credit, in an amount equal to
the amount so paid by the Bank. Such reimbursement obligations
in respect of drawings, if not paid when due, shall bear
interest, payable on demand, from the date of such drawing or
payment, at the Floating Rate plus 2.0%. In the case of letters
of credit denominated in a Local Currency, the Borrower or the
applicable Acceptable Subsidiary shall reimburse the Bank or the
applicable Offshore Credit Provider prior to 11:00 a.m. (local
time) (or such other time as may be provided in the related
Application and Security Agreement or other documentation
governing such letter of credit) in the applicable Local Currency
in an amount so paid by the Bank or the Offshore Credit Provider.
Such reimbursement obligations in respect of drawings, if not
paid when due, shall bear interest, payable on demand, from the
date of such drawing or payment, at the rate set forth in the
related Application and Security Agreement or other documentation
governing such letter of credit or, if no such rate is therein
stated, at the local equivalent of the Reference Rate plus 2.0%."
3
(e) Section 2.05(b) of the Credit Agreement shall be amended by
deleting from clause (i) the words "one year" and substituting therefor the
words "the date which is 13 months", deleting the word "and" at the end of
clause (ii), re-designating clause (iii) as clause (iv) and adding a new clause
(iii) as follows:
"(iii) be denominated in Dollars or such Local Currency as the
Bank may approve in its sole discretion; and".
(f) Section 2.05(d) of the Credit Agreement shall be amended in
its entirety to read as follows:
"(d) In the event of any request for a drawing under a
standby letter of credit, the Bank will notify the Borrower.
In the case of letters of credit denominated in dollars, the
Borrower or the applicable Acceptable Subsidiary may, subject
to satisfaction of all conditions to borrowing set forth in
this Agreement, convert the amount of each drawing into a
Reference Rate Advance (which conversion shall be deemed to be
a new Advance). With respect to any unreimbursed drawing of
any such letter of credit which is not converted into a
Reference Rate Advance in whole or in part, because of the
Borrower's failure to satisfy the conditions set forth in
Section 4.02 or for any other reason, the Borrower shall
reimburse or cause the applicable Acceptable Subsidiary to
reimburse the Bank prior to 11:00 a.m. (San Francisco time),
on each date that any amount is paid by the Bank under any
standby letter of credit, in an amount equal to the amount so
paid by the Bank. Such reimbursement obligations in respect
of drawings, if not paid when due, shall bear interest,
payable on demand, from the date of such drawing or payment,
at the Floating Rate plus 2.0%. In the case of letters of
credit denominated in a Local Currency, the Borrower or the
applicable Acceptable Subsidiary shall reimburse the Bank or
the applicable Offshore Credit Provider prior to 11:00 a.m.
(local time) (or such other time as may be provided in the
related Application and Agreement or other documentation
governing such letter of credit) in the applicable Local
Currency in an amount so paid by the Bank or the Offshore
Credit Provider. Such reimbursement obligations in respect of
drawings, if not paid when due, shall bear interest, payable
on demand, from the date of such drawing or payment, at the
rate set forth in the related Application and Agreement or
other documentation governing such letter of credit or, if no
such rate is therein stated, at the local equivalent of the
Reference Rate plus 2.0%."
(g) The following shall be inserted into the Credit Agreement as
Section 2.07:
"2.07 BANK GUARANTIES. (a) From time to time during the
Availability Period, the Bank may, in its sole discretion,
issue Bank Guaranties to the Borrower and to Acceptable
Subsidiaries. Each Bank Guaranty shall be issued by an
Offshore Credit Provider and pursuant to the laws of the
jurisdiction in which such
4
Offshore Credit Provider is located and subject to any other
applicable law. Each Bank Guaranty shall be issued pursuant
to the terms and conditions hereof and of a Bank standard form
indemnity agreement and any other Bank standard forms for
guaranties executed by the Borrower or the relevant Acceptable
Subsidiary.
(b) Each Bank Guaranty shall:
(i) expire on or before the date which is 13 months after the
date it is issued, but in any event no later than the Final
Maturity Date; and
(ii) be otherwise in form and substance and in favor of
beneficiaries and for purposes satisfactory to the Bank.
(c) The Borrower or the relevant Acceptable Subsidiary shall pay
the Offshore Credit Provider issuance fees and other fees at
the times and in the amounts the Bank advises the Borrower or
the Acceptable Subsidiary from time to time as being
applicable to Bank Guaranties issued for the Borrower's or the
Acceptable Subsidiary's account.
(d) Each payment by the Offshore Credit Provider under a Bank
Guaranty shall be reimbursed by the Borrower or the Acceptable
Subsidiary to the Offshore Credit Provider in the applicable
currency on the date of such payment. Any sum owed to the
Offshore Credit Provider with respect to a Bank Guaranty
issued under this Section which is not paid when due shall, at
the option of the Offshore Credit Provider in each instance,
be deemed to be a Local Currency Advance to the Borrower or
the Acceptable Subsidiary by the Bank or such Offshore Credit
Provider outstanding under the Revolving Facility and shall
thereafter bear interest at the local equivalent of the
Reference Rate.
(e) At the expiration of the Availability Period, the Bank may
require the Borrower to provide cash collateral in the amount
of the Bank Guaranty Outstanding Amount, and, in addition to
any other rights or remedies which the Bank may have under
this Agreement or otherwise, upon the occurrence of an Event
of Default, the Bank may require the Borrower to provide cash
collateral in the amount of the Bank Guaranty Outstanding
Amount."
5
(h) Section 7.01 of the Credit Agreement shall be amended by
deleting the word "and" from the end of subsection (h), re-designating
subsection (i) as subsection (k) and inserting new subsections (i) and (j) as
follows:
"(i) indebtedness not to exceed at any time outstanding
$150,000,000 in the aggregate which is subordinated to the
indebtedness and guaranties in favor of the Bank or any affiliate
of the Bank under this Agreement or any other Credit Document
upon terms and conditions satisfactory to the Bank in its sole
discretion;
(j) without duplication, guaranties and other continent
obligations resulting from or acquired in connection with the
acquisition of MAS Technology in an aggregate amount not to
exceed $10,000,000; and"
(i) Section 7.13 of the Credit Agreement shall be amended in
its entirety to read as follows:
"7.13 QUICK RATIO. The Borrower shall not permit as of the last
day of any fiscal quarter on a consolidated basis the sum of
cash, short-term cash investments, marketable securities not
classified as long-term investments and accounts receivable to be
less than 1.35 times current liabilities (which shall include,
without duplication, the sum of the dollar Equivalent Amount of
all outstanding Advances, the Bank Guaranty Outstanding Amount
and the L/C Outstanding Amount)."
(j) Section 7.15 of the Credit Agreement shall be amended in
its entirety to read as follows:
"7.15 TOTAL LIABILITIES TO TANGIBLE NET WORTH. The Borrower
shall not permit as of the last day of any fiscal quarter on a
consolidated basis (i) the Borrower's total liabilities (which
shall include, without duplication, all guaranties and other
contingent obligations permitted under Section 7.01 and the sum
of the dollar Equivalent Amounts of all outstanding Advances, the
Bank Guaranty Outstanding Amount and the L/C Outstanding Amount)
LESS the then outstanding principal amount of subordinated
indebtedness permitted under subsection 7.01(i) to exceed 0.75
times (ii) its Tangible Net Worth PLUS the then outstanding
principal amount of subordinated indebtedness permitted under
subsection 7.01(i)."
(k) Schedule 2 to Exhibit C of the Credit Agreement (the form
of Compliance Certificate) shall be amended and restated in its entirety to read
in the form of Schedule 2 attached hereto.
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3. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Bank as follows:
(a) No Default or Event of Default has occurred and is continuing.
(b) The execution, delivery and performance by the Company of this
Amendment have been duly authorized by all necessary corporate and other action
and do not and will not require any registration with, consent or approval of,
notice to or action by, any Person (including any governmental authority) in
order to be effective and enforceable. The Credit Agreement as amended by this
Amendment constitutes the legal, valid and binding obligations of the Company,
enforceable against it in accordance with its respective terms, without defense,
counterclaim or offset.
(c) All representations and warranties of the Company contained in
the Credit Agreement are true and correct.
(d) The Company is entering into this Amendment on the basis of its
own investigation and for its own reasons, without reliance upon the Bank or any
other Person.
4. EFFECTIVE DATE. This Amendment will become effective as of the date
first above written (the "EFFECTIVE DATE"), PROVIDED THAT each of the following
conditions precedent is satisfied:
(a) The Bank has received from the Company a duly executed original
(or, if elected by the Bank, an executed facsimile copy) of this Amendment.
(b) The Bank has received from the Company a copy of a resolution
passed by the board of directors of such corporation, certified by the Secretary
or an Assistant Secretary of such corporation as being in full force and effect
on the date hereof, authorizing the execution, delivery and performance of this
Amendment.
5. RESERVATION OF RIGHTS. The Company acknowledges and agrees that the
execution and delivery by the Bank of this Amendment shall not be deemed to
create a course of dealing or otherwise obligate the Bank to forbear or execute
similar amendments under the same or similar circumstances in the future.
6. MISCELLANEOUS.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force and effect
and all references therein to such Credit Agreement shall henceforth refer to
the Credit Agreement as amended by this Amendment. This Amendment shall be
deemed incorporated into, and a part of, the Credit Agreement.
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(b) This Amendment shall be binding upon and inure to the benefit of
the parties hereto and thereto and their respective successors and assigns. No
third party beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by and construed in accordance
with the law of the State of California.
(d) This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts together
shall constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this document (and any other document required
herein) may be delivered by any party thereto either in the form of an executed
original or an executed original sent by facsimile transmission to be followed
promptly by mailing of a hard copy original, and that receipt by the Bank of a
facsimile transmitted document purportedly bearing the signature of the Company
shall bind the Company with the same force and effect as the delivery of a hard
copy original. Any failure by the Bank to receive the hard copy executed
original of such document shall not diminish the binding effect of receipt of
the facsimile transmitted executed original of such document which hard copy
page was not received by the Bank.
(e) This Amendment, together with the Credit Agreement, contains the
entire and exclusive agreement of the parties hereto with reference to the
matters discussed herein and therein. This Amendment supersedes all prior
drafts and communications with respect thereto. This Amendment may not be
amended except in accordance with the provisions of Section 9.05 of the Credit
Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
(g) Company covenants to pay to or reimburse the Bank, upon demand,
for all reasonable costs and expenses (including allocated costs of in-house
counsel) incurred in connection with the development, preparation, negotiation,
execution and delivery of this Amendment, including without limitation
appraisal, audit, search and filing fees incurred in connection therewith.
[Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first above written.
DIGITAL MICROWAVE CORPORATION
By: /s/ CARL A. THOMSEN
-------------------------------------
Name: Carl A. Thomsen
Title: Vice President, Chief Financial
Officer & Secretary
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: /s/ DEBRA STAIGER
-------------------------------------
Name: Debra Staiger
Title: Vice President
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Date: ______________, 199__
For the fiscal quarter/year
ended ______________, 199__
SCHEDULE 2
----------
to the Compliance Certificate
($ in 000's)(1)
Actual Required/Permitted
------ ------------------
1. SECTION 7.13 QUICK RATIO.
-------------------------
The ratio of:
A. the sum of:
(i) cash
---------
PLUS
----
(ii) short-term cash investments
---------
PLUS
----
(iii) marketable securities not
classified as long-term
investments
---------
PLUS
----
(iv) current accounts
receivable
---------
(i)+(ii)+(iii)+(iv) =
---------
B. Current Liabilities(2)
A
--- = Not less than 1.35 to
B --------- 1.00.
---------
- --------------
(1) Determined on a consolidated basis, in accordance with GAAP.
(2) Including, without duplication, the sum of the dollar Equivalent Amount
of all outstanding Advances, the Bank Guaranty Outstanding Amount and the
L/C Outstanding Amount.
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2. SECTION 7.14 MINIMUM TANGIBLE
NET WORTH.
----------
Tangible Net Worth: Not to be less than the sum of:
(i) Total assets --------- A. 90% of consolidated Tangible
Net Worth as of 12/31/96
-------------
LESS PLUS
---- ----
(ii) goodwill, patents, trademarks,
trade names, organization B. 100% of the net proceeds
expense, treasury stock, received from the issuance
unamortized debt discount and of equity after 12/31/96
expense, deferred charges and -------------
other like intangibles and PLUS
monies due from Affiliates ----
other than Subsidiaries of C. up to $20,000,000 in
the Borrower, officers, intangible assets acquired
directors, or shareholders --------- after 12/31/96
-------------
LESS
----
(iii) reserves applicable
thereto
---------
LESS
----
(iv) all liabilities (including
accrued and deferred income
taxes)
---------
(i)-(ii)-(iii)-(iv) = A + B - C =
--------- -------------
--------- -------------
S-2
3. SECTION 7.15 TOTAL LIABILITIES
TO TANGIBLE NET WORTH.
----------------------
The ratio of:
A. (i) Total Liabilities(1) ---------
LESS
----
(ii) Permitted subordinated
indebtedness
---------
(i) + (ii)
---------
B. (i) Tangible Net Worth
(from 2. above)
---------
PLUS
----
(ii) Permitted subordinated
indebtedness
---------
(i) + (ii)
---------
A
--- --------- Not greater than 0.75 to 1.00.
B ---------
4. SECTION 7.16(a)
LOSSES IN TWO
CONSECUTIVE QUARTERS.
---------------------
A. (i) Operating loss
for fiscal quarter --------- Not to exceed 0 if (ii) shows a loss.
just ended ---------
(ii) Operating loss
for the fiscal quarter
immediately preceding
the fiscal quarter just ---------
ended ---------
B. (i) Net loss for
fiscal quarter
just ended --------- Not to exceed 0 if (ii) shows a loss.
---------
(ii) Net loss for the
fiscal quarter
immediately
preceding the
fiscal quarter
just ended ---------
---------
- --------------
(1) Including, without duplication, all guaranties and other contingent
obligations and the sum of the dollar Equivalent Amount of all outstanding
Advances, the Bank Guaranty Outstanding Amount and the L/C Outstanding
Amount.
S-3
5. SECTION 7.16(b)
LOSSES IN ONE QUARTER.
----------------------
Operating loss for fiscal quarter Not to exceed 5% of Tangible Net
just ended --------- Worth as of immediately preceding
--------- fiscal quarter:
Tangible Net Worth
from last quarter's
Compliance Certificate
Item No. 2
---------
x 5%
=
---------
---------
Net loss for fiscal --------- Not to exceed 5% of Tangible
quarter just ended --------- Net Worth as of immediately
preceding fiscal quarter
as computed above:
---------
---------
S-4