- --------------------------------------------------------------------------------
AMENDMENT NUMBER ONE TO
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
COMMUNICATION TELESYSTEMS INTERNATIONAL DBA
WORLDxCHANGE COMMUNICATIONS
-
WXL COMMUNICATIONS, LTD.
CTS TELCOM, INC.
AND
FOOTHILL CAPITAL CORPORATION
DATED AS OF DECEMBER 31, 1997
- --------------------------------------------------------------------------------
AMENDMENT NUMBER ONE TO
LOAN AND SECURITY AGREEMENT
---------------------------
THIS AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT (this
"Amendment"), is entered into as of December 31, 1997, between FOOTHILL CAPITAL
CORPORATION, a California corporation ("Foothill"), with a place of business
located at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California
90025-3333, and COMMUNICATION TELESYSTEMS INTERNATIONAL, dba WORLDxCHANGE
Communications, a California corporation ("WXCC"), with its chief executive
office located at 9999 Willow Creek Road, San Diego, California 92131, WXL
COMMUNICATIONS, LTD., a Canadian corporation ("WXLC"), with its chief executive
office located at 9999 Willow Creek Road, San Diego, California 92131, and CTS
TELCOM, INC., a Florida corporation ("CTST"), with its chief executive office
located at 9999 Willow Creek Road, San Diego, California 92131 (WXCC, WXLC, and
CTST, and each of them, and any one or more of them, jointly and severally,
individually and collectively, "Borrower").
This Amendment is entered into with reference to the following facts:
A. Foothill, as lender, and Borrower heretofore entered into that
certain Loan and Security Agreement, dated as of March 11, 1997,
(herein the "Agreement");
B. On October 17, 1997 Borrower requested Foothill's extension of an
Overadvance to Borrower in excess of the amount otherwise
available under the terms and conditions of the Agreements in the
amount of up to $3,150,000 (the "Requested Overadvance"), and
Foothill extended the Requested Overadvance to Borrower on that
date;
C. Borrower has requested Foothill to amend the Agreement as set
forth in this Amendment, (i) to change the address of Borrower's
chief executive office to the address contained in the first
paragraph hereof, and (ii) increase the Maximum Amount available
thereunder from the existing amount of $25,000,000 to the new
amount of $30,000,000 (the "Line Increase"), (iii) provide for the
incorporation of the Requested Overadvance as an Advance under the
secured credit facilities extended to Borrower under the
Agreement, (iv) provide for the reduction of the Requested
Overadvance, and (v) change certain pricing under the Agreement;
D. Foothill is willing to (i) so amend the Agreement in accordance
with the terms and conditions hereof and (ii) to consent to the
extension and reduction
-1-
of the Requested Overadvance as an Advance under the secured
credit facilities extended to Borrower under the Agreement; and
E. All capitalized terms used herein and not defined herein shall
have the meanings ascribed to them in the Agreement, as amended
hereby.
NOW, THEREFORE, in consideration of the above recitals and the
mutual promises contained herein, Foothill and Borrower hereby agree as follows:
1. AMENDMENTS TO THE AGREEMENT.
a. The reference to Borrower's chief executive
office contained in the initial paragraph to the Agreement, all subsequent
references to Borrower's chief executive office or to Borrower's address
contained in the Agreement, and any reference to Borrower's chief executive
office or to Borrower's address contained in any other Loan Document are
hereby deleted and replaced in their entirety with the following address:
9999 Willow Creek Road, San Diego, California 92131
b. SECTION 1.1 of the Agreement is hereby amended by
adding the following definitions in alphabetical order:
"FIRST AMENDMENT" means that certain Amendment Number One
to Loan and Security Agreement, dated as of December 31, 1997, between
Foothill and Borrower.
"GUARANTY REAFFIRMATION AND CONSENTS" means those certain
guaranty reaffirmations and consents, dated as of December 31, 1997,
between Foothill and the Guarantors.
"PERMITTED OVERADVANCE AMOUNT" means: (a) prior to November
28, 1997, $2,500,000; (b) from November 28, 1997 through December 11,
1997, $2,000,000; (c) from December 12, 1997 through December 25, 1997,
$1,750,000; (d) from December 26, 1997 through January 8, 1998,
$1,000,000; and (e) from and after January 9, 1998, zero dollars;
PROVIDED, HOWEVER, that, at any time prior to the date of any mandatory
reduction in the Permitted Overadvance Amount as set forth above,
Borrower may prepay all or part of the outstanding amount of any
Overadvance and request a reduction in the Permitted Overadvance Amount
in minimum increments of $50,000 without penalty.
c. The following definitions contained in SECTION
1.1 of the Agreement hereby are deleted in their entirety and the following
are hereby substituted in lieu thereof:
-2-
"AVERAGE UNUSED PORTION OF FACILITY" means, as of the
first day of any month: (a) If such day occurs on or prior to December
1, 1997, the non-negative amount equal to (i) $20,000,000, MINUS (ii)
the average Daily Balance of Advances that were outstanding during the
immediately preceding month; and (b) if such day occurs after December
1, 1997, the non-negative amount equal to (i) the then Maximum Amount
(giving effect to any increases thereof elected by Borrower, if any,
that have become effective before, or that become effective on, such
day), MINUS (ii) the average Daily Balance of Advances that were
outstanding during the immediately preceding month; PROVIDED, that,
with respect to any day that is the first day of a month and which day
occurs after December 1, 1997, if the Maximum Amount changed during
the immediately preceding month effective on any day or days other
than the first day of such preceding month, then the calculation of
the Average Unused Portion of Facility as of such first day of the
succeeding month with respect to such immediately preceding month
shall be performed on a weighted basis giving effect to all such
changes that occurred during the immediately preceding month (for
example, by way of illustration and not by way of limitation, if the
Maximum Amount were to be increased effective on April 11, 1998, from
$25,000,000 to $30,000,000, then the calculation of the Average Unused
Portion of Facility for April, 1998, would be 10/30 of the amount that
would be calculated under clause (b) above using $25,000,000 as the
Maximum Amount (except that the average Daily Balance of Advances for
purposes of such calculation would be for the first ten days of April
rather than for the entire month), PLUS 20/30 of the amount that would
be calculated under clause (b) above using $30,000,000 as the Maximum
Amount (except that the average Daily Balance of Advances for purposes
of such calculation would be for the last twenty days of April rather
than for the entire month).
"LOAN DOCUMENTS" means this Agreement, the First
Amendment, the Canadian Security Agreements, the Pledge Agreements,
the Disbursement Letter, the Guarantees, the Guaranty Reaffirmation
and Consents, the Lockbox Agreements, any Mortgages hereafter
delivered by Borrower to Foothill, the Suretyship Agreement, any note
or notes executed by Borrower and payable to Foothill, and any other
agreement entered into, now or in the future, in connection with this
Agreement.
"MAXIMUM AMOUNT" means, subject to adjustment as
hereinafter set forth, $30,000,000. From time to time after the
Closing Date, subject to the prior or concurrent payment of any
applicable fee provided for in SECTION 2.8(c), Borrower may elect to
increase the Maximum Amount, on one or more occasions, in increments
of $1,000,000 or an integral multiple thereof, to an amount not to
exceed $35,000,000, such increases to become effective, in each
instance, prospectively, subject to payment of any applicable fee as
aforesaid, on the date specified in a written notice of such election
received by Foothill from Borrower,
-3-
which specified date shall not be less than 3 Business Days after the
date on which Foothill receives such notice.
"MAXIMUM FOOTHILL AMOUNT" means that portion of the Maximum
Amount for which Foothill shall be responsible, exclusive of any
participations with Participants, which amount is $20,000,000.
d. The initial clause of SECTION 2.1(a) hereby is
amended and restated in its entirety as follows:
2.1 REVOLVING ADVANCES. (a) Subject to the terms and conditions
of this Agreement, Foothill agrees to make advances ("Advances") to
Borrower in an amount at any one time outstanding not to exceed the LEAST
of (i) the Maximum Amount, (ii) the Maximum Foothill Amount PLUS the
Syndicated Amount, and (iii) the Borrowing Base PLUS the then applicable
Permitted Overadvance Amount. For purposes of this Agreement, "Borrowing
Base", as of any date of determination, shall mean the sum of:
e. SECTION 2.2 hereby is amended and restated in its
entirety as follows:
2.2 OVERADVANCES OR OVERLINE AMOUNTS. If, at any time or for
any reason, the amount of Obligations owed by Borrower to Foothill
pursuant to SECTION 2.1 is greater than either the dollar or percentage
limitations set forth in SECTION 2.1 less (without duplication) any
applicable reserves (any such excess, an "Overadvance") by an amount
greater than the then applicable Permitted Overadvance Amount,
immediately shall cause such Overadvance to be eliminated, either by
paying to Foothill, in cash, the amount of such excess to be used by
Foothill to repay Advances outstanding under SECTION 2.1, or by causing
the Borrowing Base to be recomputed, in all respects in accordance with
the terms and provisions of this Agreement, in such fashion as to create
sufficient Availability to eliminate such Overadvance.
f. The following new SECTION 2.8(g) is added to the
Agreement:
(f) OVERADVANCE FEE. On the first day of each month
with respect to which the Permitted Overadvance Amount on any day during
the immediately preceding month was greater than zero, an overadvance fee
(in addition to any interest or other amounts otherwise payable under the
Loan Documents) in the dollar amount equal to the sum of the following
two components:
(i) a daily fee for each day during the
immediately preceding month that the Permitted Overadvance Amount
was greater than
-4-
zero dollars, equal to (a) 1.0% TIMES the applicable Permitted
Overadvance Amount on such day DIVIDED BY (b) 30; PLUS
(ii) a daily fee for each day during the
immediately preceding month that an Overadvance of greater than
10% of the applicable Permitted Overadvance Amount on such day,
equal to (a) 2.0% TIMES the applicable Permitted Overadvance
Amount on such day DIVIDED BY (b) 30; otherwise, zero dollars.
2. CONSENT TO INCORPORATION OF REQUESTED OVERADVANCE IN THE
OBLIGATIONS. Foothill hereby agrees and consents to the incorporation of all
amounts outstanding under the Requested Overadvance as an Obligation under the
Agreement as amended by this Amendment.
3. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents
and warrants to Foothill that (a) the execution, delivery, and performance of
this Amendment and of the Agreement, as amended by this Amendment, are within
its corporate powers, have been duly authorized by all necessary corporate
action, and are not in contravention of any law, rule, or regulation, or any
order, judgment, decree, writ, injunction, or award of any arbitrator, court, or
governmental authority, or of the terms of its charter or bylaws, or of any
contract or undertaking to which it is a party or by which any of its properties
may be bound or affected, and (b) this Amendment and the Agreement, as amended
by this Amendment, constitute Borrower's legal, valid, and binding obligation,
enforceable against Borrower in accordance with its terms.
4. CONDITIONS PRECEDENT TO AMENDMENT. The satisfaction of
each of the following, on or before the First Amendment Closing Deadline, unless
waived or deferred by Foothill in its sole discretion, shall constitute
conditions precedent to the effectiveness of this Amendment:
a. Foothill shall have received a fee payable in
connection with the extension of the Requested Overadvance from October 17, 1997
through October 31, 1997 in the amount of $315,000.00.
b. Foothill shall have received a Line Increase Fee
payable in connection with the increase in the Maximum Amount as provided for in
the Agreement in the amount of $18,194.44.
c. Each of the Guarantors shall have executed and
delivered a Guaranty Reaffirmation and Consent in form and substance
satisfactory to Foothill;
d. Foothill shall have received the consent of each of
its Participants in the secured credit facilities extended to Borrower under the
Agreement to
-5-
the Line Increase and to the incorporation of the principal outstanding under
the Requested Overadvance as Outstandings under the Agreement as amended hereby;
e. The representations and warranties in this
Amendment, the Agreement as amended by this Amendment, and the other Loan
Documents shall be true and correct in all respects on and as of the date
hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date);
f. No Event of Default or event which with the giving
of notice or passage of time would constitute an Event of Default shall have
occurred and be continuing on the date hereof, nor shall result from the
consummation of the transactions contemplated herein;
g. No injunction, writ, restraining order, or other
order of any nature prohibiting, directly or indirectly, the consummation of the
transactions contemplated herein shall have been issued and remain in force by
any governmental authority against Borrower or Foothill; and
h. All other documents and legal matters in connection
with the transactions contemplated by this Amendment shall have been delivered
or executed or recorded and shall be in form and substance satisfactory to
Foothill and its counsel.
5. FURTHER ASSURANCES. Borrower shall execute and deliver all
agreements, documents, and instruments, in form and substance satisfactory to
Foothill, and take all actions as Foothill may reasonably request from time to
time fully to consummate the transactions contemplated under this Amendment and
the Agreement, as amended by this Amendment.
6. MISCELLANEOUS.
a. Upon the effectiveness of this Amendment, each
reference in the Agreement to "this Agreement", "hereunder", "herein", "hereof"
or words of like import referring to the Agreement shall mean and refer to the
Agreement as amended by this Amendment.
b. Upon the effectiveness of this Amendment, each
reference in the Loan Documents to the "Loan Agreement", "thereunder",
"therein", "thereof" or words of like import referring to the Agreement shall
mean and refer to the Agreement as amended by this Amendment.
c. As used in this Amendment, "First Amendment Closing
Deadline" means January 20, 1998.
-6-
d. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
e. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Amendment.
Delivery of an executed counterpart of this Amendment by telefacsimile shall be
equally as effective as delivery of a manually executed counterpart of this
Amendment. Any party delivering an executed counterpart of this Amendment by
telefacsimile also shall deliver a manually executed counterpart of this
Amendment but the failure to deliver a manually executed counterpart shall not
affect the validity, enforceability, and binding effect of this Amendment.
[Remainder of page left intentionally blank]
-7-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed as of the date first written above.
COMMUNICATION TELESYSTEMS
INTERNATIONAL dba WORLDxCHANGE
COMMUNICATIONS,
a California corporation
By /s/ Edward S. Soren
-------------------------------
Title:
----------------------------
WXL COMMUNICATIONS, LTD.,
a Canadian corporation
By /s/ Edward S. Soren
-------------------------------
Title:
----------------------------
CTS TELCOM, INC.,
a Florida corporation
By /s/ Edward S. Soren
-------------------------------
Title:
----------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ Kurt R. Marsden
-------------------------------
Title: Vice President
---------------------------
-8-