AMENDMENT NUMBER SEVEN TO
LOAN AND SECURITY AGREEMENT
This AMENDMENT NUMBER SEVEN TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is entered into as of June 16, 1999, by and 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, on the one hand, and, on the other hand, 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, WORLDxCHANGE COMMUNICATIONS, INC., a
Canadian corporation ("WXC"), with its chief executive office located at 9999
Willow Creek Road, San Diego, California 92131, CTS TELCOM HOLDINGS, INC., a
Delaware corporation ("Holdings"), 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, WXC, Holdings, and CTST,
and each of them, and any one or more of them, jointly and severally,
individually and collectively, "Borrower"), with reference to the following
facts:
A. WHEREAS, Foothill, as lender, and Borrower are parties to that
certain Loan and Security Agreement, dated as of March 11, 1997, as
amended by that certain Amendment Number One to Loan and Security
Agreement, dated as of December 31, 1997, as amended by that certain
Amendment No. Two to the Loan and Security Agreement, dated as of
February 20, 1998, as amended by that certain Amendment Number Three
to Loan and Security Agreement, dated as of April 27, 1998, as amended
by that certain Amendment Number Four to Loan and Security Agreement,
dated as of August 25, 1998, as amended by that certain Amendment
Number Five to Loan and Security Agreement, dated as of December 29,
1998, and as amended by that certain Amendment Number Six to Loan and
Security Agreement, dated as of March 15, 1999 (as so amended and as
otherwise amended, modified, supplemented, renewed, extended, or
restated from time to time, including, without limitation, by this
Amendment the "Loan Agreement");
B. WHEREAS, Borrower has requested Foothill to amend the Loan
Agreement to (i) increase the advance rate for Advances, (ii) increase
the Permitted Capital Expenditure Amount, and (ii) provide for an
Advance to fund, in part, the consideration to be paid by Borrower in
connection with the acquisition of a share in a submarine cable;
C. WHEREAS, Foothill is willing to so amend the Loan Agreement in
accordance with the terms and conditions hereof;
NOW, THEREFORE, in consideration of the above recitals and the mutual
promises contained herein, Foothill and Borrower hereby agree as follows:
1. INITIALLY CAPITALIZED TERMS.
All capitalized terms used herein and not defined herein shall have
the meanings ascribed to them in the Loan Agreement, as amended hereby.
2. AMENDMENTS TO THE LOAN AGREEMENT.
a. SECTION 1.1 of the Loan Agreement hereby is amended by
adding the following defined terms in alphabetical order:
"SEVENTH AMENDMENT means, that certain Amendment Number Seven to
Loan and Security Agreement, dated as of June 16, 1999, between Foothill
and Borrower."
"SOUTHERN CROSS LOAN" means an Advance to fund a portion of the
consideration paid by Borrower for the acquisition of an IRU interest in a
submarine cable from Southern Cross Cables Limited, such Advance to be in
an amount not to exceed the lesser of (a) $1,400,000, and (b) 80% of the
total consideration paid by Borrower for such acquisition.
b. SECTION 1.1 of the Loan Agreement is hereby amended by
deleting the following defined terms:
"BASE PERMITTED CAPITAL EXPENDITURE AMOUNT"
"CARRYOVER AMOUNT"
c. SECTION 1.1 of the Loan Agreement is hereby amended by
deleting the following defined terms in their entirety and replacing them in
their entirety with the defined terms set forth below in alphabetical order:
"DIRECT ACCOUNT DILUTION RESERVE" means, as of any date of
determination by Foothill, which determinations shall not be made more
frequently than monthly without the consent of Borrower unless an Event of
Default has occurred and is continuing, an amount sufficient to reduce
Foothill's advance rate against Direct Accounts by one percentage point
for each percentage point by which Direct Account Dilution is in excess of
five percent (5%).
"LOAN DOCUMENTS means, this Agreement, the Canadian Security
Agreements, the Pledge Agreements, the Disbursement Letter, the Guarantees,
the Tel-Save Intercreditor Agreement, 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."
"REDUCING AMOUNT" means, as of any date of determination thereof,
the sum of (a) $5,000,007.01, as of the Closing Date, reduced cumulatively
on the first and fifteenth day of each calendar month, commencing April 1,
1999, and continuing thereafter on the first and fifteenth day of each
succeeding calendar month, by a bi-monthly reduction of $150,000, PLUS (b)
from and after the making of the Southern
Cross Loan, an amount equal to the Southern Cross Loan.
d. SECTION 1.1 of the Loan Agreement is hereby amended,
effective as of March 31, 1999, by deleting the following defined terms in their
entirety and replacing them in their entirety with the defined terms set forth
below in alphabetical order:
"PERMITTED CAPITAL EXPENDITURE AMOUNT" means (a) $100,000,000 for
Borrower's fiscal year ending September 30, 1999, and (b) an amount equal
to the result of $175,000,000, MINUS the amount of capital expenditures
made by Borrower during Borrower's fiscal year ending September 30, 1999,
for Borrower's fiscal year ending September 30, 2000.
e. CLAUSES (w) AND (x) of the definition of "Borrowing Base"
contained in SECTION 2.1 of the Loan Agreement hereby are amended and restated
in their entirety to read as follows:
(w) eighty-five percent (85%) of the result of the following
calculation: (the amount of Eligible Direct Accounts, LESS the amount, if
any, of the Direct Account Dilution Reserve), PLUS
(x) fifty percent (50%) of Eligible Unbilled Direct Accounts,
PLUS
f. SECTION 7.10 of the Loan Agreement hereby is amended and
restated in its entirety to read as follows:
7.10 CAPITAL EXPENDITURES. (a) Make any capital expenditures in
the aggregate in excess of the Permitted Capital Expenditure Amount during
any fiscal year; or (b) make any capital expenditures (other than capital
expenditures financed with purchase money Indebtedness) at any time unless
Total Availability at such time is equal to or greater than $3,000,000
3. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Foothill that (a) the execution, delivery, and performance of this
Amendment and of the Loan 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 Loan Agreement, as
amended by this Amendment, constitute Borrower's legal, valid, and binding
obligation, enforceable against Borrower in accordance with its terms.
4. TERMINATION OF GUARANTY. Foothill hereby agrees that the
Guarantees executed by each of Roger B. Abbott, Rosalind Abbott, and Edward S.
Soren, shall be terminated.
5. CONDITIONS PRECEDENT TO AMENDMENT. The satisfaction of each of
the following on or before June 25, 1999, shall constitute conditions precedent
to the effectiveness of this Amendment:
a. Foothill shall have received an amendment fee in the amount
of $12,500 in connection herewith;
b. Borrower shall have executed and delivered an officer's
certificate with respect to this Seventh Amendment in form and substance
satisfactory to Foothill;
c. Borrower shall have delivered to Foothill, the Sixth
Amendment, duly executed by Borrower, together with all agreements and documents
entered into or executed in connection therewith;
d. Foothill shall have received the acknowledgment and
agreement of each of its Participants in the secured credit facilities extended
to Borrower under the Agreement to this Amendment;
e. The representations and warranties in this Amendment, the
Loan 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, Foothill, or any of their
Affiliates;
h. The Collateral shall not have declined materially in value
from the values set forth in the most recent appraisals or field examinations
previously done by Foothill; and
i. 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.
6. EFFECT ON LOAN AGREEMENT. The Loan Agreement, as amended hereby,
shall be and remain in full force and effect in accordance with its respective
terms and hereby is ratified and confirmed in all respects. The execution,
delivery, and performance of this Amendment shall not operate as a waiver of or,
except as expressly set forth herein, as an amendment, of any right, power, or
remedy of Foothill under the Loan Agreement, as in effect prior to the date
hereof. The consents contained herein are limited to the specifics hereof,
shall not apply with respect to any facts or occurrences other than those on
which each such consents are based, shall not excuse future non-compliance with
the Loan Agreement or any other Loan Document, (as they may from time to time be
amended), except and only to the extent expressly set forth herein, shall not
operate as a waiver or an amendment of any right, power or remedy of Foothill,
nor as a consent to any further or other matter, under any of the Loan
Documents.
7. FURTHER ASSURANCES. Borrower shall, and shall cause Guarantor
to, 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, to perfect and maintain the perfection and
priority of Foothill's security interests in the Collateral, and to fully
consummate the transactions contemplated under this Amendment and the Loan
Agreement, as amended by this Amendment.
8. MISCELLANEOUS.
a. Upon the effectiveness of this Amendment, each reference in
the Loan Agreement to "this Agreement", "hereunder", "herein", "hereof" or words
of like import referring to the Loan Agreement shall mean and refer to the Loan
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 Loan Agreement shall mean and refer to
the Loan Agreement as amended by this Amendment.
c. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart. Delivery of an executed counterpart of this Amendment by
fax shall be equally as effective as a manually executed counterpart. Any party
delivering any executed counterpart to this Amendment by fax shall also deliver
a manually executed counterpart, but the failure to so deliver a manually
executed counterpart shall not affect the effectiveness or validity hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By:
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Title:
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COMMUNICATION TELESYSTEMS
INTERNATIONAL dba
WORLDxCHANGE COMMUNICATIONS,
a California corporation
By: /s/ Edward S. Soren
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Title: Executive Vice President
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WORLDxCHANGE COMMUNICATIONS,
INC., a Canadian corporation
By: /s/ Edward S. Soren
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Title: President
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CTS TELCOM HOLDINGS, INC.,
a Delaware corporation
By: /s/ Edward S. Soren
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Title: President
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CTS TELCOM, INC.,
a Florida corporation
By: /s/ Edward S. Soren
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Title: President
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