Document:

EX-10.1 WAIVER AND FIRST AMENDMENT TO LOAN AGRMT

 

Exhibit 10.1

Customer No.                    

Loan No.                    

	 	 	 
	RBC Centura

	 	WAIVER AND FIRST AMENDMENT TO 
	

	 	LOAN AGREEMENT 

     THIS WAIVER AND FIRST AMENDMENT TO LOAN AGREEMENT (“Waiver and First
Amendment”), is entered into effective as of November 15, 2004, by and among
VERILINK CORPORATION, a Delaware corporation (“Verilink”) and LARSCOM
INCORPORATED, a Delaware corporation (“Larscom”; Verilink and Larscom are
collectively referred to herein as “Borrower”) and RBC CENTURA BANK (“Bank”).

     A. Bank has extended certain financial accommodations pursuant to that
certain Loan and Security Agreement, dated April 8, 2004 (the “Loan
Agreement”), by and among Verilink, V-X Acquisition Company (“V-X”), XEL
Communications, Inc. (“XEL”) and Bank.

     B. V-X and XEL have been merged into Verilink and no longer exist as
separate entities.

     C. Larscom has become a wholly-owned subsidiary and has agreed to join
Verilink as a “Borrower” under the Loan Agreement.

     D. Verilink has informed Bank that it is currently in default under the
Loan Agreement due to its failure to comply with certain financial maintenance
covenants under Section 6.8 of the Loan Agreement.

     E. Verilink has requested that Bank waive any Events of Default caused by
its failure to be in compliance with the financial maintenance covenants and to
amend the Loan Agreement to change the requirements of those financial
maintenance covenants.

     F. Bank is willing to waive such non-compliance and to amend the terms of
the Loan Agreement upon the terms and conditions set forth herein.

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Bank hereby agree as
follows:

     1. Definitions. Capitalized terms used in this Waiver and First Amendment
and not otherwise defined herein shall have the meanings ascribed to those
terms in the Loan Agreement.

     2. Committed Revolving Line Amendment. As of the date of this Waiver and
First Amendment, the Credit Agreement is amended by deleting the definition of
“Committed Revolving Line” in its entirety and inserting in lieu thereof a new
definition as follows:

     “Committed Revolving Line” means Credit Extensions of up to
$3,500,000.

     3. Financial Statements; Reports; Certificates Amendment. As of the date
of this Waiver and First Amendment, the Loan Agreement is amended by deleting
Section 6.4 in its entirety and inserting in lieu thereof a new Section 6.4 as
follows:

     6.4 Financial Statements; Reports; Certificates.

 

 

               (a) Borrower shall deliver to Bank each and all of the
financial statements, reports, certificates and other
records referenced under this subsection (a) and such other
statements, reports, certificates and records as Bank may
reasonably request from time to time.

                    (i) As soon as available, but in any event within
twenty (20) days after the end of each fiscal month, other
than the last fiscal month in each fiscal quarter, the
timing for which shall coincide with Borrower’s delivery of
the Compliance Certificate, Borrower shall deliver to Bank
an unaudited consolidated balance sheet and a statement of
income, retained earnings, and cash flow prepared in
accordance with GAAP on a basis consistent with Borrower’s
quarterly consolidated financial statements, but excluding
notes thereto, covering Borrower’s consolidated operations
during such period, in a form reasonably acceptable to Bank
and certified by the chief financial officer of Borrower or
such other officer approved by Bank.

                    (ii) As soon as available, but in any event within
twenty (20) days after the end of each fiscal month, (i) a
monthly variance report supplementing the monthly income
statement required to be submitted, showing deviations from
management’s most recent financial plan, and (ii) monthly
sales forecast, pipeline and backlog reports prepared under
normal course of operations.

                    (iii) Beginning with the fiscal year ending July 2,
2004, as soon as available, but in any event within one
hundred twenty (120) days after the end of Borrower’s fiscal
year, Borrower shall deliver to Bank audited consolidated
financial statements of Borrower (including a balance sheet,
an income statement and a statement of retained earnings,
each with the related notes and changes in the financial
position for such year and setting forth in comparative form
the figures for the prior year) prepared in accordance with
GAAP, consistently applied, together with an opinion on such
financial statements that is unqualified or qualified in a
manner acceptable to Bank from an independent certified
public accounting firm reasonably acceptable to Bank,
together with (A) a certificate of the chief financial
officer of Borrower, or other officer approved by Bank,
stating that no default has occurred and is continuing or,
if a default has occurred and is continuing, a statement as
to the nature thereof and the action that Borrower has taken
and proposes to take with respect thereto, (B) in the event
of any change from GAAP in the generally accepted accounting
principles used in the preparation of such financial
statements, a statement of reconciliation conforming such
financial statements to GAAP and (C) notes to the
consolidated financial statements.

                    (iv) If applicable, Borrower shall deliver to Bank
copies of all statements, reports and notices sent or made
available generally by Borrower to its security holders or
to any holders of Subordinated Debt and all reports on Forms
10-K and 10-Q filed with the Securities and Exchange
Commission.

                    (v) Promptly upon receipt of notice thereof, Borrower
shall deliver to Bank a report of any legal actions pending
or threatened against Borrower or any Subsidiary that could
result in damages or costs to Borrower or any Subsidiary of
Fifty Thousand Dollars ($50,000) or more.

                    (vi) Borrower shall deliver to Bank such budgets, sales
projections, operating plans or other financial information
generally prepared by Borrower in the ordinary course of
business as Bank may reasonably request from time to time.

                    (vii) Within twenty (20) days after the last day of
each fiscal quarter, Borrower shall deliver to Bank a report
signed by Borrower, in form reasonably

-2-

 

acceptable to Bank, listing any applications or
registrations that Borrower has made or filed in respect of
any Patents, Copyrights or Trademarks and the status of any
outstanding applications or registrations, as well as any
change in Borrower’s Intellectual Property Collateral,
including, but not limited to, any subsequent ownership
right of Borrower in or to any Trademark, Patent or
Copyright not specified in Exhibits A, B and C to the
Intellectual Property Security Agreement delivered to Bank
by Borrower in connection with this Agreement.

                    (viii) Upon the reasonable request by Bank, which shall
not be unreasonably denied, Borrower shall deliver to Bank
copies of written communications from, to or of Borrower’s
board of directors or, if there is no written record, a
written summary of such communications.

               (b)
On or before the twentieth (20th) calendar day of
each fiscal month, Borrower shall deliver to Bank a
Borrowing Base Certificate dated and signed by a Responsible
Officer (acceptable to the Bank) in substantially the form
of Exhibit D hereto (or such other form as shall be
reasonably required by the Bank) that provides the required
information that is current as of the prior month end,
together with a report showing the aged listings of accounts
receivable and accounts payable as of the prior month end.

               (c) On or before the twentieth (20th) calendar day of
each fiscal month, Borrower shall deliver to Bank for the
last fiscal month a Compliance Certificate signed by a
Responsible Officer (acceptable to the Bank) in
substantially the form of Exhibit E hereto.

               (d) On or prior to the beginning of each fiscal year of
Borrower, Borrower shall deliver to Bank a detailed annual
budget.

               (e) Borrower shall permit Bank directly and through
another person on Bank’s behalf and Bank shall have a right
from time to time hereafter, directly and through another
person on Bank’s behalf, to audit Borrower’s Accounts and
appraise Collateral at Borrower’s expense; provided,
however, that if there has been no Event of Default by
Borrower Bank my exercise this right no more than once per
year.

     4. Primary Depository Amendment. As of the date of this Waiver and First
Amendment, the Loan Agreement is amended by deleting Section 6.7 in its
entirety and inserting in lieu thereof a new Section 6.7 as follows:

Primary Depository. Borrower shall maintain from and after
November 30 2004, its primary operating and depository
accounts with Bank. Borrower shall provide written notice
to Bank of any other accounts held by Borrower or any
Subsidiary not deemed “primary” (“Secondary Accounts”). All
Secondary Accounts shall be transferred to Bank or made
subject to an Account Control Agreement acceptable to Bank,
in its sole discretion, by November 30, 2004.

     5. Financial Covenants Amendment. As of the date of this Waiver and First
Amendment, the Loan Agreement is amended by deleting Section 6.8 in its
entirety and inserting in lieu thereof a new Section 6.8 as follows:

6.8 Financial Covenants. Borrower shall maintain, as of the
last day of each fiscal month unless stated otherwise, and
Borrower shall fully and timely comply with, each

-3-

 

and every one of the financial maintenance covenants set
forth in this Section and others that may be contained in
this Agreement and the other Loan Documents.

               (a) Liquidity Ratio. A ratio of (i) unrestricted cash
and equivalents plus Net Accounts Receivable to (ii) all
Indebtedness to Bank of at least 2.00 to 1.00.

               (b) Tangible Net Worth. Tangible Net Worth of at least
$5,000,000.

               (c) Minimum Adjusted EBITDA. Minimum Adjusted EBITDA
of (i) a loss not exceeding $700,000 for the second fiscal
quarter ending December 31, 2004, (ii) $0 for the three
fiscal months ending January 28, 2005, (iii) $300,000 for
the three fiscal months ending February 25, 2005, (iv)
$500,000 for the three fiscal months ending April 1, 2005,
and (v) $500,000 measured on a rolling three month basis
thereafter.

     6. Adjusted EBITDA Definition Amendment. As of the date of this Waiver
and First Amendment, the Loan Agreement is amended by adding the definition of
“Adjusted EBITDA” to Exhibit A of the Loan Agreement as follows:

“Adjusted EBITDA” Adjusted EBITDA means the total of (i) net
income from continuing operations (excluding extraordinary
gains or losses), and to the extent deducted in determining
net income, (ii) Interest Expense and interest income, (iii)
income taxes, (iv) depreciation, depletion and amortization
expenses, (v) restructuring charges, and (vi) impairments of
intangible assets, including goodwill.

     7. Interest Expense Definition Amendment. As of the date of this Waiver
and First Amendment, the Loan Agreement is amended by adding the definition of
“Interest Expense” to Exhibit A of the Loan Agreement as follows:

“Interest Expense” means for any period for which the amount
thereof is to be determined, the consolidated interest
expense of Borrower and its Subsidiaries, including all
interest on Funded Debt, all amortization of Indebtedness,
all fees payable in connection with the incurrence of such
debt (to the extent included in interest expense), and the
interest portion of any deferred payment obligation, to the
extent required to be reflected on the income statement of
Borrower and its Subsidiaries on a consolidated basis in
accordance with GAAP.

     8. Affirmative Covenant/Real Property Collateral Amendment. As of the
date of this Waiver and First Amendment, the Loan Agreement is amended by
adding the following provision to the Loan Agreement as Section 6.14 as
follows:

6.14. Additional Collateral. Upon the occurrence of an
Event of Default, Borrower shall grant Bank a
second-priority perfected security interest in the real
property (and all buildings, fixtures and improvements
thereon) located at 950 Explorer Boulevard, Huntsville,
Alabama (the “Real Property Collateral”) by executing such
instruments, agreements, documents or other records required
by Bank and taking such actions as may be requested by Bank
to secure and perfect a security interest in the Real
Property Collateral on terms acceptable to Bank, in its sole
discretion. Borrower shall keep and maintain the Real
Property Collateral in good condition and make all needful
and proper repairs, replacements, additions, or improvements
thereto as are reasonably necessary, reasonable wear and
tear excepted. Upon the sale of any portion of the Real
Property Collateral (whether or not an Event of Default has
occurred), Borrower shall immediately deliver to Bank all
proceeds from said sale, which shall be applied towards the
satisfaction of the Obligations.

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     9. Negative Covenant/Real Property Collateral Amendment. As of the date
of this Waiver and First Amendment, the Loan Agreement is amended by adding the
following provision to the Loan Agreement as Section 7.20 as follows:

7.20 Real Property Collateral Encumbrances. Borrower shall
not create, incur, assume or allow any Lien with respect to
the Real Property Collateral or assign or otherwise convey
any right to receive income or permit any of its
Subsidiaries so to do, except as currently exists pursuant
to that certain Mortgage and Security Agreement dated as of
June 30, 2000, Loan Agreement dated as of June 30, 2004,
Mortgage and Security Agreement dated as of December 4, 2000
and Loan Agreement dated as of December 4, 2000, or covenant
to any other person that Borrower in the future will refrain
from creating, incurring, assuming or allowing any Lien with
respect to the Real Property Collateral.

     10. Rights and Remedies Amendment. As of the date of this Waiver and First
Amendment, the Loan Agreement is amended by deleting the first paragraph of
Section 9.1 in its entirety and inserting in lieu thereof a new first paragraph
for Section 9.1 as follows:

9.1. Rights and Remedies upon an Event of Default. If an
Event of Default shall occur under this Agreement, in
addition to any other rights and remedies which may be
available to Bank and without limiting any other rights and
remedies granted to Bank in this Agreement, the other Loan
Documents and at law and in equity, including, without
limitation, the rights and remedies provided to Bank under
the Code, which rights and remedies are fully exercisable by
Bank as and when provided herein and therein, Bank shall
have the rights and remedies set forth below in this Section
9.1, any and all of which it may exercise at its election,
without notice of its election and without demand, except as
otherwise expressly provided below.

     11. Acceleration of Obligations Amendment. As of the date of this Waiver
and First Amendment, the Loan Agreement is amended by deleting Section 9.1(a)
in its entirety and inserting in lieu thereof a new Section 9.1(a) as follows:

(a) Acceleration of Obligations. Bank may, at its option
and by written notice to Borrower, accelerate and declare
immediately due and payable the Obligations, as well as any
of and all of the other indebtedness and obligations owing
under this Agreement and the other Loan Documents that are
not already due hereunder and that are not already due
thereunder. If there is more than one Obligation, Bank may
accelerate and declare immediately due and payable all of
the Obligations, or Bank may from time to time and at any
number of times after the occurrence of an Event of Default,
accelerate and declare immediately due and payable any one
or more of the Obligations as Bank in its discretion elects
to accelerate (provided that upon the occurrence of an Event
of Default described in Section 8 under the heading
“Insolvency”, all Obligations shall become immediately due
and payable without any action by Bank).

     12. Borrower Definition Amendment. As of the date of this Waiver and
First Amendment, the Loan Agreement is hereby amended such that the term
“Borrower” shall hereinafter be deemed to include Larscom, and Larscom shall
hereinafter be a party to the Loan Agreement for all purposes whatsoever.

     13. Joinder Agreement. Larscom hereby agrees to be bound by the Loan
Agreement as a “Borrower” (as such term is defined therein), and shall be
deemed to be a party to, and subject to and bound by, the terms and conditions
of the Loan Agreement.

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     14. Events of Default Waiver. Borrower hereby acknowledges that an Event
of Default existed as of October 1, 2004 under Section 8.2 of the Loan
Agreement. Subject to Section 12.8 of the Loan Agreement and pursuant to
Borrower’s request, Bank hereby waives the Event of Default caused by
Borrower’s failure to maintain compliance with the Tangible Net Worth covenant
as of October 1, 2004. Notwithstanding the above, the waiver set forth herein
is conditioned upon no Event of Default otherwise existing under the Loan
Agreement or other Loan Documents. Borrower acknowledges and agrees that this
waiver is specific to the matters referred to herein and that Bank does not
waive Borrower’s compliance with, or any of its rights with respect to, any of
Borrower’s other obligations to Bank under the Loan Agreement and the other
Loan Documents, all of which Borrower acknowledges, are unaffected by this
waiver. The waiver and amendment of the Tangible Net Worth covenant provided
for in this Waiver and First Amendment shall be effective as of October 1,
2004, but shall be void and of no further force or effect, at Bank’s election
in its sole discretion, if any of the conditions set forth herein are not
satisfied by Borrower in accordance with the terms hereof.

     15. Conditions to Effectiveness. This Waiver and First Amendment shall
become effective as of the date hereof, and the waivers and amendments set
forth herein shall be effective as of the respective dates set forth herein,
when Bank shall have received the following in form and substance satisfactory
to Bank:

               (a) Counterparts of this Waiver and First Amendment executed by and on
behalf of Verilink, Larscom and Bank;

               (b) All fees and expenses payable or reimbursable by Borrower as of the
date hereof, including, without limitation, all costs, fees and expenses of
Bank in connection with the preparation, execution and delivery of this Waiver
and First Amendment and the other instruments and documents to be delivered
pursuant hereto (including the reasonable fees and out-of-pocket expenses of
counsel for Bank with respect thereto); and

               (c) A new commitment fee in the amount of $7,500.

     16. No Additional Waiver; Reaffirmation. Except as otherwise provided
herein, the terms of the Loan Agreement and the other Loan Documents remain in
full force and effect. After giving effect to this Waiver and First Amendment
(and any other waivers and amendments made prior hereto, if any) Borrower
hereby (a) renews and reaffirms all representations and warranties set forth in
the Loan Agreement and the other Loan Documents (subject to any changes therein
expressly permitted by the Loan Agreement and other Loan Documents), and
certifies that all such representations and warranties are true and correct in
all material respects as of the date hereof, (b) certifies that no Event of
Default exists and is continuing under the Loan Agreement, other than as
referred to herein, and that Borrower is in compliance in all material respects
with all obligations under the Loan Agreement and the other Loan Documents, (c)
certifies that the execution, delivery and performance by Borrower of this
Waiver and First Amendment have been duly authorized by all requisite corporate
action on the part of Borrower and will not violate any of Borrower’s articles
of incorporation, bylaws or other organizational documents, and (d) certifies
that this Waiver and First Amendment has been duly executed and delivered by
Borrower, and this Amendment constitutes the legal, valid and binding
obligation of Borrower, enforceable against Borrower in accordance with its
terms. This Waiver and First Amendment shall constitute one of the “Loan
Documents” as defined in the Loan Agreement.

     17. References. All references to the “Loan Agreement,” contained in the
Loan Agreement itself or in any of the other Loan Documents, shall refer to the
Loan Agreement as amended hereby.

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     18. Applicable Law. THIS WAIVER AND FIRST AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
GEORGIA WITHOUT GIVING EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES.

     19. Counterparts and Headings. This Waiver and First Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
instrument. Receipt by Bank of a facsimile copy of an executed signature page
hereof shall constitute receipt by Bank of an executed counterpart of this
Waiver and First Amendment. The headings of this Waiver and First Amendment
are for convenience of reference only, are not part of this Waiver and First
Amendment and are not to affect the construction of, or to be taken into
consideration interpreting, this Waiver and First Amendment.

[SIGNATURES BEGIN ON FOLLOWING PAGE]

-7-

 

     IN WITNESS WHEREOF, the undersigned have executed this Waiver and First
Amendment as of the date first above written.

	 	 	 
	VERILINK CORPORATION

	 	Witness:
	 
	 	 
	By: /s/ C. W. Smith

	 	/s/ A. Tucker
	

	 	

	Name: C. W. Smith

	 	Print Name: A. Tucker
	Title: Vice President and CFO
	 	 
	 
	 	 
	LARSCOM INCORPORATED

	 	Witness:
	 
	 	 
	By: /s/ C. W. Smith

	 	/s/ A. Tucker
	

	 	

	Name: C. W. Smith

	 	Print Name: A. Tucker
	Title: Vice President
	 	 
	 
	 	 
	RBC CENTURA BANK
	 	 
	 
	 	 
	By: /s/ Joseph Singer
	 	 
	

	 	 
	Name: Joseph Singer
	 	 
	Title: Vice President – Georgia Markets
	 	 

-8-EX-10.2 FIRST MODIFICATION OF COMMERCIAL NOTE

 

Exhibit 10.2

Customer No.                    

Loan No.                    

	 	 	 
	RBC Centura

	 	FIRST MODIFICATION OF COMMERCIAL 
	

	 	PROMISSORY NOTE 

     THIS FIRST MODIFICATION OF COMMERCIAL PROMISSORY NOTE (“Modification”) is
made as of November 15, 2004, by and among VERILINK CORPORATION, a Delaware
corporation (“Verilink”) and LARSCOM INCORPORATED, a Delaware corporation
(“Larscom”; Verilink and Larscom are collectively referred to herein as
“Borrower”) and RBC CENTURA BANK (“Bank”).

W I T N E S S E T H:

     WHEREAS, Verilink executed that certain Commercial Promissory Note, dated
April 8, 2004 (the “Note”) payable to Bank in the principal amount of
$5,000,000.00;

     WHEREAS, in connection with the Note, Verilink entered into that certain
Loan and Security Agreement, dated April 8, 2004 (the “Loan Agreement”), by and
among Verilink, V-X Acquisition Company, XEL Communications, Inc. and Bank;

     WHEREAS, the Loan Agreement has been amended as of even date hereof
pursuant to that certain Waiver and First Amendment to Loan Agreement (the
“Waiver and First Amendment”) by and among Verilink, Larscom and Bank;

     WHEREAS, pursuant to the Waiver and First Amendment, Bank has reduced the
Committed Revolving Line from $5,000,000 to $3,500,000; and

     WHEREAS, Borrower and Bank have agreed to modify the Note to set forth
herein and effectuate hereby their agreement in connection with the reduction
in the Committed Revolving Line.

     NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Bank, intending to
be mutually bound do hereby agree as follows:

     1. The principal amount of the Note is hereby changed from the original
amount of $5,000,000.00 specified in the Note to the principal amount of
$3,500,000.00.

     2. Larscom hereby agrees to be bound by the Note as a “Borrower” (as such
term is defined therein), and shall be deemed to be a party to, and subject to
and bound by, the terms and conditions of the Note.

     3. Except as specifically modified herein, all of the terms, conditions,
provisions and obligations as set forth in the Note, as hereby amended, remain
unchanged and Borrower hereby adopts, reaffirms and ratifies the Note as
modified hereby.

 

 

     4. This Modification is not intended to be — nor shall it be deemed or
construed to be  — a novation or release of any indebtedness of Borrower, or a
release of the property securing the Note. Moreover, this Modification shall
not be construed as a release of Borrower from any liability under the Note or
any other documents evidencing or securing the indebtedness of Borrower to
Bank. Borrower hereby expressly acknowledges and affirms Borrower’s liability
under the Note, as amended previously and hereby.

     5. Borrower represents and warrants to Bank that Borrower has no defenses
or rights of set-off to the payment of the indebtedness evidenced by the Note
and Borrower does hereby waive, release and forever abandon any such defenses
or rights of set-off existing on the date hereof.

     6. This Modification shall be binding upon and shall inure to the benefit
of the heirs, successors, successors-in-title or assigns of the parties hereto.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

-2-

 

     IN WITNESS WHEREOF, Borrower and Bank have caused this Modification to be
executed under seal by their respective representatives duly authorized
thereunto, all as of the date first above written.

	 	 	 
	VERILINK CORPORATION

	 	Witness:
	 
	 	 
	By: /s/ C. W. Smith

	 	/s/ A. Tucker
	

	 	

	Name: C. W. Smith

	 	Print Name: A. Tucker
	Title: Vice President and CFO
	 	 
	 
	 	 
	LARSCOM INCORPORATED
	 	 
	 
	 	 
	By: /s/ C. W. Smith

	 	Witness:
	

	 	

	Name: C. W. Smith

	 	Print Name: A. Tucker
	Title: Vice President
	 	 
	 
	 	 
	RBC CENTURA BANK
	 	 
	 
	 	 
	By: /s/ Joseph Singer
	 	 
	

	 	 
	Name: Joseph Singer
	 	 
	Title: Vice President – Georgia Markets

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