Exhibit 10.1
 
CONSENT AND AMENDMENT
TO
LOAN AND SECURITY AGREEMENT

THIS CONSENT AND AMENDMENT to Loan and Security Agreement (this “Amendment”) is
entered into this ____ day of May 2011 by and between Silicon Valley Bank
(“Bank”), on the one side, and DecisionPoint Systems, Inc., a Delaware
corporation (“DSI”), DecisionPoint Systems Group, Inc., a Delaware corporation
(“DSG”), DecisionPoint Systems CA, Inc., a California corporation (“DSCA”),
DecisionPoint Systems CT, Inc., a Connecticut corporation (“DSCT”) and CMAC,
Inc., a Georgia corporation (“CMAC” and together with DSI, DSG, DSCA and DSCT,
jointly  and severally, the “Borrower”) whose address is 19655 Descartes,
Foothill Ranch, CA  92610, on the other side.
 
Recitals
 
A.           Bank and Borrower have entered into that certain Loan and Security
Agreement dated as of December 15, 2006 (as the same may from time to time be
amended, modified, supplemented or restated, the “Loan Agreement”).
 
B.           Bank has extended credit to Borrower for the purposes permitted in
the Loan Agreement.
 
C.           Borrower has advised Bank of the following:  (i) Comamtech Inc.
(“Comamtech”) is a corporation existing under the Business Corporations Act
(Ontario) (“OBCA”), and 2259736 Ontario Inc. is a wholly-owned subsidiary of
Comamtech and incorporated under the laws of the Province of Ontario, Canada
(“MergerCo”), (ii) DSI intends to enter into a merger with MergerCo (the
“DSI/MergerCo Merger”) to form the Merged Subsidiary which Merged Subsidiary
will continue doing business as an OBCA corporation and as a wholly-owned
subsidiary of Comamtech, (iii) immediately following the DSI/MergerCo Merger,
Comamtech and the Merged Subsidiary will take such action as necessary to become
corporations under the laws of the State of Delaware and (iv) in conjunction
with or after the action taken in subclause (iii) above, Comamtech, the parent
and publicly-traded company, will be renamed DecisionPoint Systems, Inc. and
Merged Subsidiary will be renamed DecisionPoint Systems International Inc.  The
transactions described in subclauses (ii), (iii) and (iv) are herein,
collectively, referred to as the “Comamtech Merger.”  DSI is prohibited from
entering into the Comamtech Merger pursuant to Sections 7.2 and 7.3 of the Loan
Agreement absent the Bank’s prior written consent.
 
D.           Borrower has requested that Bank amend the Loan Agreement, as
herein set forth, and Bank has agreed to the same, but only to the extent, in
accordance with the terms, subject to the conditions and in reliance upon the
representations and warranties set forth herein.
 
 
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Agreement
 
Now, Therefore, in consideration of the foregoing recitals and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
 
1.           Definitions.  Capitalized terms used but not defined in this
Amendment shall have the meanings given to them in the Loan Agreement.
 
2.           Consent and Amendments to Loan Agreement.
 
2.1           Modified Financial Covenants.  Section 6.9 of the Loan Agreement
is hereby amended in its entirety and shall read as follows:
 

6.9           Financial Covenants.

Borrower shall maintain as of the last day of each month, unless otherwise
noted, on a consolidated basis with respect to Borrower and its Subsidiaries:
 
(a)           Liquidity Coverage.  The ratio of (i) unrestricted cash and Cash
Equivalents maintained at Bank or Bank Affiliates plus the Availability Amount
with respect to the Revolving Line to (ii) the outstanding principal amount of
the Term Loan of not less than the following:
 
For the month ending May 31, 2011 (provided that if the Comamtech Merger has not
closed by May 31, 2011, then for the month ending June 30, 2011) and each month
ending thereafter:  1.75 to 1.00.
 
(b)           Profitability.  Commencing with the fiscal quarter ending June 30,
2011 and each fiscal quarter ending thereafter, a minimum positive Adjusted Net
Income of $1.00.  For the purposes of this financial covenant, Adjusted Net
Income means Net Income plus (i) non-cash stock based compensation plus (ii)
expenses relating to the Sigma Transaction and the Comamtech Merger up to an
aggregate maximum amount of $1,500,000 plus (iii) any write down of assets
(totaling approximately $4,500,000 in the aggregate) acquired as part of the
Comamtech Merger, provided that such write down must occur in the fiscal quarter
ending June 30, 2011 and/or the fiscal quarter ending September 30, 2011 and
provided further that such write down cannot exceed $3,000,000 in the aggregate.
 
 
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2.2           Modified Definition of Revolving Line Maturity Date.  The
definition of “Revolving Line Maturity Date” in Section 13.1 of the Loan
Agreement is hereby amended to read as follows:
 
“Revolving Line Maturity Date” is April 30, 2012.
 
2.3           Modified Definition of Term Loan Maturity Date.  The definition of
“Term Loan Maturity Date” in Section 13.1 of the Loan Agreement is hereby
amended to read as follows:
 
“Term Loan Maturity Date” is the earlier of (a) April 30, 2012 or (b) the date
the Revolving Line matures or is otherwise terminated.
 
2.4           Additional Definitions.  The following definitions are hereby
added to Section 13.1 of the Loan Agreement and shall read as follows:

“Comamtech Merger” means that certain series of transactions pursuant to which
(i) DecisionPoint Systems, Inc. will merge with 2259736 Ontario Inc. to form
Merged Subsidiary, (ii) Merged Subsidiary and Comamtech Inc. will each become
corporations organized under the laws of the State of Delaware and (iii) Merged
Subsidiary and Comamtech Inc. will changes their names to DecisionPoint Systems
International Inc. and DecisionPoint Systems, Inc., respectively.

“Sigma Transaction” means that certain transaction in which DecisionPoint
Systems, Inc. (i) executed a Note Purchase Agreement dated approximately May 18,
2011 with Sigma Opportunity Fund II, LLC (“Sigma”), (ii) issued to Sigma a
Senior Subordinated Secured Note in the original principal amount of $4,000,000
and (iii) executed a Security Agreement in favor of Sigma pursuant to which
DecisionPoint Systems, Inc. granted to Sigma a lien on certain of the assets of
DecisionPoint Systems, Inc.

2.5           Modified Compliance Certificate.  The form of Compliance
Certificate, attached as Exhibit E to the Loan Agreement, is amended in its
entirety to read as set forth on Exhibit E attached hereto.

 
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2.6           Consent to Comamtech Merger.  Bank hereby consents to DSI entering
into the Comamtech Merger on the terms previously disclosed to Bank in writing
conditioned upon all of the following occurring:
 
(a)           no Advances based on the Collateral of DSI shall be outstanding
prior to, at the time of and after the effectiveness of any part of the
Comamtech Merger except as otherwise provided below,
 
(b)           at the time of the effectiveness of the DSI/MergerCo Merger, the
cash currently maintained by Comamtech and the cash currently maintained by
MergerCo will be wire transferred to accounts maintained at Bank in the name of
DecisionPoint Systems CA, Inc., and

 
(c)           upon and after the effectiveness of the DSI/MergerCo Merger, no
Advances will be made to DSI or the Merged Subsidiary and no assets of Borrower
(including any Collateral) may be transferred to Comamtech, DSI or the Merged
Subsidiary without the prior written consent of Bank until such time as all of
the following have occurred:
 
(i)           Comamtech and the Merged Subsidiary each becomes a corporation
organized under the laws of the State of Delaware,
 
(ii)          Comamtech and the Merged Subsidiary each becomes a co-Borrower
under the Loan Agreement,
 
(iii)         Comamtech and the Merged Subsidiary each have granted Bank a
first-priority security interest in the respective assets of Comamtech and the
Merged Subsidiary, and Bank has received such evidence as it deems necessary to
confirm the same, and
 
(iv)         Comamtech and the Merged Subsidiary each have executed all such
documents required by Bank in conjunction therewith (including, without
limitation, a Cross-Corporate Guaranty).
 
2.7           Sigma Opportunity Fund II, LLC Subordinated Debt.  Bank
acknowledges that DSI has entered into a Note Purchase Agreement dated
approximately May 18, 2011 with Sigma Opportunity Fund II, LLC (“Sigma”),
pursuant to which DSI issued to Sigma a Senior Subordinated Secured Note in the
original principal amount of $4,000,000 (the “Sigma Note”).  The execution by
DSI of the Note Purchase Agreement and related documents is referred to herein
as the “Sigma Transaction.”  The indebtedness evidenced by the Sigma Note is
guaranteed by DSI’s Subsidiaries (the “Subsidiary Guaranty”).  The indebtedness
evidenced by the Sigma Note, and the obligations, if any, under the Subsidiary
Guaranty, constitute Subordinated Debt (as defined in the Loan Agreement) and
are subject to the terms of that certain Subordination Agreement dated May 18,
2011 and executed by and between Sigma and Bank (the “Sigma Subordination
Agreement”) and acknowledged by each of the Borrowers.  The lien granted by DSI
to Sigma in conjunction with the issuance of the Sigma Note is also subordinated
to the lien in favor of Bank and is subject to the terms of the Sigma
Subordination Agreement.
 
 
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3.           Limitation of Amendments.
 
3.1           The amendments set forth in Section 2, above, are effective for
the purposes set forth herein and shall be limited precisely as written and
shall not be deemed to (a) be a consent to any amendment, waiver or modification
of any other term or condition of any Loan Document, or (b) otherwise prejudice
any right or remedy which Bank may now have or may have in the future under or
in connection with any Loan Document.
 
3.2           This Amendment shall be construed in connection with and as part
of the Loan Documents and all terms, conditions, representations, warranties,
covenants and agreements set forth in the Loan Documents, except as herein
amended, are hereby ratified and confirmed and shall remain in full force and
effect.
 
4.           Representations and Warranties.  To induce Bank to enter into this
Amendment, Borrower hereby represents and warrants to Bank as follows:
 
4.1           Immediately after giving effect to this Amendment (a) the
representations and warranties contained in the Loan Documents are true,
accurate and complete in all material respects as of the date hereof (except to
the extent such representations and warranties relate to an earlier date, in
which case they are true and correct as of such date), and (b) no Event of
Default has occurred and is continuing;
 
4.2           Borrower has the power and authority to execute and deliver this
Amendment and to perform its obligations under the Loan Agreement, as amended by
this Amendment;
 
4.3           The organizational documents of Borrower delivered to Bank on the
Effective Date remain true, accurate and complete and have not been amended
(except to reflect the name change of each Borrower), supplemented or restated
and are and continue to be in full force and effect;
 
4.4           The execution and delivery by Borrower of this Amendment and the
performance by Borrower of its obligations under the Loan Agreement, as amended
by this Amendment, have been duly authorized;
 
4.5           The execution and delivery by Borrower of this Amendment and the
performance by Borrower of its obligations under the Loan Agreement, as amended
by this Amendment, do not and will not contravene (a) any law or regulation
binding on or affecting Borrower, (b) any contractual restriction with a Person
binding on Borrower, (c) any order, judgment or decree of any court or other
governmental or public body or authority, or subdivision thereof, binding on
Borrower, or (d) the organizational documents of Borrower;
 
4.6           The execution and delivery by Borrower of this Amendment and the
performance by Borrower of its obligations under the Loan Agreement, as amended
by this Amendment, do not require any order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by any governmental or public body or authority, or subdivision
thereof, binding on either Borrower, except as already has been obtained or
made; and
 
 
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4.7           This Amendment has been duly executed and delivered by Borrower
and is the binding obligation of Borrower, enforceable against Borrower in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar
laws of general application and equitable principles relating to or affecting
creditors’ rights.
 
5.           Counterparts.  This Amendment may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
 
6.           Effectiveness.  This Amendment shall be deemed effective upon the
due execution and delivery to Bank of this Amendment by each party hereto.
 

[Signature Page Follows]
 
 
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In Witness Whereof, the parties hereto have caused this Amendment to be duly
executed and delivered as of the date first written above.

 
 

BANK BORROWER     Silicon Valley Bank DecisionPoint Systems, Inc.     By: /s/
Derek R. Brunelle By: /s/ Donald W. Rowley Name: Derek R. Brunelle Name: Donald
W. Rowley Title: Dept Team Leader Title: CFO             BORROWER BORROWER    
DecisionPoint Systems Group, Inc. DecisionPoint Systems CA, Inc.     By:
/s/ Donald W. Rowley By: /s/ Donald W. Rowley   Name: Donald W. Rowley 
Name:Donald W. Rowley  Title:  CFO Title: CFO              BORROWER BORROWER    
DecisionPoint Systems CT, Inc. CMAC, Inc     By: /s/ Donald W. Rowley  By:
/s/ Donald W. Rowley  Name: Donald W. Rowley  Name: Donald W. Rowley  Title: CFO
Title: CFO    

 
 
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EXHIBIT E

COMPLIANCE CERTIFICATE
 

TO:  SILICON VALLEY BANK    Date:

FROM: DECISIONPOINT SYSTEMS, INC., DECISIONPOINT SYSTEMS GROUP, INC.,
DECISIONPOINT SYSTEMS CA, INC., DECISIONPOINT SYSTEMS CT, INC. AND CMAC, INC.

 
The undersigned authorized officer of DecisionPoint Systems, Inc., on behalf of
DecisionPoint Systems, Inc. and each of its subsidiaries, CMAC, Inc. and
DecisionPoint Systems Group, Inc. and each of its subsidiaries, DecisionPoint
Systems CA, Inc. and DecisionPoint Systems CT, Inc. (jointly and severally, the
“Borrower”), certifies that under the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the “Agreement”), (1) Borrower is
in complete compliance for the period ending _______________ with all required
covenants except as noted below, (2) there are no Events of Default, (3) all
representations and warranties in the Agreement are true and correct in all
material respects on this date except as noted below; provided, however, that
such materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date, (4) Borrower, and each of its
Subsidiaries, has timely filed all required tax returns and reports, and
Borrower has timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower except as otherwise
permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no
Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Bank.  Attached are the
required documents supporting the certification.  The undersigned certifies that
these are prepared in accordance with generally GAAP consistently applied from
one period to the next except as explained in an accompanying letter or
footnotes.  The undersigned acknowledges that no borrowings may be requested at
any time or date of determination that Borrower is not in compliance with any of
the terms of the Agreement, and that compliance is determined not just at the
date this certificate is delivered.  Capitalized terms used but not otherwise
defined herein shall have the meanings given them in the Agreement.
 
 
Please indicate compliance status by circling Yes/No under “Complies” column.
 
Reporting Covenant
Required
Complies
     
Monthly financial statements with
Compliance Certificate
Monthly within 45 days
Yes   No
Annual financial statement (CPA Audited) + CC
FYE within 180 days
Yes   No
Board Projections
Within 45 days prior to next FY
Yes   No
10-Q, 10-K and 8-K, if applicable
Within 5 days after filing with SEC
Yes   No
Transaction Report
Weekly and with each Advance, but if     no borrowings during the month, then
monthly within 15 days
Yes   No
A/R & A/P Agings and A/R Reconciliations
Monthly within 15 days
Yes   No
Customer Deposit Schedule and Deferred Revenue Report
Monthly within 15 days
Yes   No
 
 
The following Intellectual Property was registered after the Effective Date (if
no registrations, state “None”)
____________________________________________________________________________
 
Financial Covenant
Required
Actual
Complies
       
Maintain on a Monthly Basis (except as provided for below):
     
Minimum Liquidity Ratio
1.75 to 1.00
___ to 1.00
Yes   No
Minimum Profitability (to be measured on a Quarterly basis)
$1.00
$_________
Yes   No

 
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The following financial covenant analysis and information set forth in Schedule
1 attached hereto are true and accurate as of the date of this Certificate.

The following are the exceptions with respect to the certification above:  (If
no exceptions exist, state “No exceptions to note.”)

 

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DecisionPoint Systems, Inc.     BANK USE ONLY         Received by:        
authorized signer   By:       Date:    Name:          Title:      Verified:    
    authorized signer                   Date:         Compliance Status:
Yes          No                    

 

 
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Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

Dated:           ____________________

I.           Minimum Liquidity Ratio (Section 6.9(a))

Required: 
1.75 to 1.00

 
Actual:

A.
Unrestricted cash and Cash Equivalents maintained at Bank and Bank Affiliates
$           
 
B.
Availability Amount of Revolving Line
$           
 
C.
Liquidity (line A plus line B)
$           
 
D.
Outstanding principal amount of Term Loan
$           
 
E.
Liquidity Ratio (line C divided by line D)
 

Is line E equal to or greater than 1.75 to 1.00?
 

  No, not in compliance     Yes, in compliance

 
II.           Profitability (Section 6.9(b)

Required: 
$1.00

Actual:

A.
Net Income
$           
 
B.
Stock Based Compensation
$           
 
C.
Expenses related to the Sigma Transaction and Comamtech Merger (capped at an
aggregate amount of $1,500,000)
$           
 
D.
Write down of assets (totaling approximately $4,500,000) acquired as part of
Comamtech Merger (such write down capped at an aggregate of $3,000,000 and must
occur in fiscal quarter ending June 30, 2011 and/or fiscal quarter ending
September 30, 2011
$           
 
E.
Adjusted Net Income (line A plus line B plus line C plus line D)
$           
 

Is line E equal to or greater than $1.00?
 

  No, not in compliance     Yes, in compliance

 

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