WHEN RECORDED, RETURN TO:
Zions First National Bank
Commercial Loan Department
P.O. Box 25822
One South Main Street
Salt Lake City, Utah 84125
Attention: Michael R. Brough
SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement (the "Agreement") is made and
entered into effective this 30th day of June, 2000 (the "Effective Date"), by
and between Evans & Sutherland Computer Corporation, a Utah corporation, whose
address is 600 Komas Drive, Salt Lake City, Utah 84108 ("Borrower"); Evans &
Sutherland, GMBH, a German limited company, Evans & Sutherland, Ltd., a U.K.
public limited company, and Evans & Sutherland Graphics Corporation, a Utah
corporation (collectively "Additional Obligors") and Zions First National Bank,
a national banking association, whose address is P.O. Box 25822, One South Main
Street, Salt Lake City, Utah 84125 ("Lender").
RECITALS
A. Lender and Borrower entered into a Loan Agreement dated March 31, 2000
(the "Loan Agreement"), whereby Lender agreed to make a loan to Borrower in the
original principal amount of Fifteen Million Dollars ($15,000,000.00) (the
"Loan"), which Loan is further evidenced by a Promissory Note dated March 31,
2000 executed by Borrower for the benefit of Lender, and which Promissory Note
is in the original principal amount of $15,000,000.00 (the "Original Note").
B. Borrower's obligations under the Original Note are secured by the
collateral described in the following documents:
(1) A Trust Deed, Assignment of Rents, Security Agreement and
Fixture Filing dated March 31, 2000 executed by Borrower, as "Trustor," to
Lender, as "Trustee", for the benefit of Lender, as "Beneficiary," and which was
recorded in the office of the County Recorder of Salt Lake County, State of
Utah, on March 31, 2000, as Entry No. 7608227 (the "Trust Deed"). The Trust Deed
encumbers Borrower's leasehold interest in real property located in Salt Lake
County, State of Utah, and more particularly described in Exhibit A attached
hereto and incorporated herein by this reference (the "Property");
(2) An Assignment of Leases dated March 31, 2000 entered into
between Borrower, as "Assignor" and Lender, as "Assignee", and which was
recorded in the office of the County Recorder of Salt Lake County, State of
Utah, on March 31, 2000, as Entry No. 7608229 (the "Assignment of Leases"), and
which encumbers the Property; and
(3) An Assignment of Tenant's Interest in Ground Lease for
Security dated March 31, 2000 entered into between Borrower, as "Borrower" and
Lender, as "Lender", and which was recorded in the office of the County Recorder
of Salt Lake County, State of Utah, on March 31, 2000, as Entry No. 7608228 (the
"Assignment of Ground Lease"), and which encumbers the Property.
The Loan Agreement, Original Note, Trust Deed, Assignment of Leases,
Assignment of Ground Lease, and all other documents defined as Loan Documents in
the Loan Agreement, are hereinafter collectively referred to as the "Loan
Documents".
C. On or about May 11, 2000, Lender and Borrower entered into that certain
Modification Agreement and Consent, whereby Lender consented to a particular and
limited waiver of the provisions of Section 5.14 of the Loan Agreement.
D. On or about May 31, 2000. Lender and Borrower entered into that certain
Supplemental Letter of Credit and Reimbursement Agreement (the "LC Agreement")
and a Managed Agency Account Assignment (the "MAA Assignment"), whereby Borrower
could obtain the issuance of letters of credit beyond the amount established in
the Loan Agreement, securing said additional letters of credit with investment
property held by Lender in the Managed Account according to the terms set forth
in said documents.
E. Lender and Borrower now again desire to modify the Loan Documents on the
terms set forth below, which include among other things the assumption of joint
and several liability of Borrower's repayment obligations under the Original
Note (as hereby modified), by the Additional Obligors.
AGREEMENT
In exchange for good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, Borrower, Additional Obligors and
Lender agree as follows:
1. Reaffirmation of the Trust Deed. Borrower and Lender agree and
acknowledge that it was their intention at the time of the execution of the
Trust Deed, that the Trust Deed encumber the Property, and it continues to be
the intention of all parties hereto that the Trust Deed, as amended,
supplemented and extended, continue, without interruption, to encumber the
Property.
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2. Renewal Note. In connection with this Agreement, Borrower and Additional
Obligors agree to execute and deliver to Lender a Renewal and Substitute
Promissory Note in a form and substance acceptable to Lender dated the Effective
Date, in the original principal amount of Fifteen Million Dollars
($15,000,000.00) (the "Renewal Note"), which Renewal Note replaces the Original
Note.
3. Amendment to Loan Agreement. The Loan Agreement is hereby amended as
follows:
(a) Section 1.1.27 of the Loan Agreement shall be deleted in its
entirety and replaced with the following:
1.1.27 "Note" means the Renewal and Substitute Promissory Note dated
June 30, 2000, and executed in connection with the Loan.
(b) Section 2.2, Interest Rate and Payment, of the Loan Agreement
shall be deleted in its entirety and replaced with the following:
2.2 Interest Rate and Payment. The Loan shall be payable on the
date and upon the terms and conditions set forth in the Note.
(c) Section 2.3.2, Quarterly Fees, of the Loan Agreement shall be
deleted in its entirety. A one-time extension fee shall be paid in
accordance with paragraph 8(a) below.
(d) Section 2.6, Letter of Credit Facility, of the Loan Agreement
shall be deleted in its entirety and replaced with the following:
2.6 Letter of Credit Facility. Borrower is authorized to utilize
the Loan for the purpose of obtaining the issuance of one or more
letter(s) of credit by Lender, up to Fifteen Million Dollars
($15,000,000), the full original principal balance of the Loan, for
use in Borrower's business operations. Upon issuance of any letter of
credit and continuing until the cancellation or termination thereof,
Lender shall reserve the amount of the letter of credit from the Loan
proceeds, which reserved amount shall not be available for other
Borrower draws or advances, whether or not any claim is actually made
against the letter of credit. Any amount reserved for a letter of
credit shall not bear interest unless and until any amounts are drawn
thereon and then only to the extent of said draws. In addition to any
fees assessed under the Letter of Credit Reimbursement Agreement to be
executed by Borrower with issuance of any letter of credit, Borrower
shall pay to Lender a fee upon the issuance of any letter of credit
which shall be calculated as follows:
(a) Upon the issuance of any Letter of Credit issued up to
the aggregate amount of the Loan and secured pursuant to the
terms of this Loan Agreement, Borrower shall pay a fee equal to
four percent (4%) per annum of the amount of said letter of
credit.
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(b) Upon the issuance of any Letter of Credit issued by
Lender in the aggregate amount of not more than $6,000,000 in
excess of the $15,000,000 Loan amount, which additional Letter of
Credit is secured by that certain Managed Account Assignment
Agreement dated May 31, 2000 as amended, Borrower shall pay a fee
equal to two percent (2%) per annum of the amount of said Letter
of Credit.
The maturity of any letter of credit issued pursuant to this
Section 2.6 may extend at the election of Borrower up to ninety (90)
days beyond the maturity date of the Loan. However, any such extension
shall not effect any extension upon any other obligation or other
covenant under taken by Borrower in the Loan Documents, except as
specifically set forth in those certain documents executed
concurrently with the issuance of the letter of credit.
(e) Section 5.13, Dividends and Loans, of the Loan Agreement shall be
deleted in its entirety and replaced with the following:
5.13 Dividends and Loans. Borrower shall not (a) declare or pay
any dividends except as are mandatorily required on Borrower's
preferred stock, (b) purchase, redeem, retire or otherwise acquire for
value any of its capital stock now or hereafter outstanding in excess
of $2,000,000.00 for any year, (c) make any distribution of assets to
its stockholders, investors, or equity holders, whether in cash,
assets, or in obligations of Borrower, (d) allocate or otherwise set
apart any sum for the payment of any dividend or distribution on, or
for the purchase, redemption, or retirement of any shares of its
capital stock or equity interests in excess of $2,000,000.00 for any
year, or (e) make any other distribution by reduction of capital or
otherwise in respect of any shares of its capital stock or equity
interests, in excess of $250,000.00. It is expressly agreed upon
between Borrower and Lender that this covenant does not apply to any
distributions or loans made by Borrower to any of the Additional
Obligors.
Borrower shall not make any loans or pay any advances of any
nature whatsoever to any person or entity, except advances in the
ordinary course of business to vendors, suppliers, and contractors. It
is expressly agreed upon between Borrower and Lender that this
covenant does not apply to any distributions or loans made by Borrower
to any of the Additional Obligors.
(f) Based upon Borrower's projected preliminary financial information
which has been disclosed to Lender prior to and in an effort to avoid any
event of default under the Loan Documents, Section 5.15, Net Earnings, of
the Loan Agreement shall be deleted in its entirety and replaced with the
following:
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5.15 Maximum Cumulative Year-to-Date Loss. Borrower shall provide
Lender with evidence satisfactory to Lender that Borrower's maximum
cumulative net year to date operating loss before taxes and
extraordinary gains or other income as of (i) June 30, 2000 is no
greater than $38,500,000, (ii) September 30, 2000 is no greater than
$40,000,000, and (iii) December 31, 2000 is no greater than
$40,000,000.
(g) Based upon Borrower's projected preliminary financial information
which has been disclosed to lender prior to and in an effort to avoid any
default under the Loan Documents, Section 5.16 Net Working Capital, of the
Loan Agreement shall be deleted in its entirety and replaced with the
following:
4. Net Working Capital. Borrower shall achieve and maintain minimum Net
Working Capital at the end of the second, third and fourth calendar quarters of
the year 2000 in the amount of at least $60,000,000. For purposes of this
Section 5.16, net working capital is defined as adjusted current assets less
current liabilities. Adjusted current assets is defined as current assets less
that portion of unbilled costs which exceeds the maximum unbilled costs allowed
in each quarter as shown below, and less all current portions of deferred income
taxes:
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Second Quarter Third Quarter Fourth Quarter
2000 2000 2000
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Maximum Unbilled Costs $70,000,000 $67,500,000 $65,000,000
- ------------------------------ ---------------------------- --------------------------- ----------------------------
5. Inclusion of the Renewal Note in the Indebtedness Secured by the Trust
Deed. The Trust Deed is hereby amended to include in the indebtedness secured by
the Trust Deed, and any other obligations of Borrower under and pursuant to the
Loan Documents, the Renewal Note (which replaces the Original Note).
Specifically, the second paragraph on Page 1 of the Trust Deed is hereby amended
to read in its entirety as follows:
Beneficiary has made a loan to Trustor in the amount of Fifteen
Million Dollars ($15,000,000.00) (the "Loan"). The Loan is evidenced by a
Renewal and Substitute Promissory Note dated June 30, 2000, in the original
principal amount of the Loan (the "Note"). The Loan will be advanced from
time to time under a Loan Agreement between Trustor and Beneficiary dated
the Closing Date (the "Loan Agreement").
6. Amendment to Assignment of Leases. Recital A of the Assignment of Leases
is hereby deleted in its entirety and replaced by the following:
5
Pursuant to the Renewal and Substitute Promissory Note dated June 30,
2000, in which Assignor appears as "Borrower" and Assignee appears as
"Lender" and which is in the original principal amount of Fifteen Million
Dollars ($15,000,000.00) (the "Note"), and pursuant to the Loan Agreement
dated the Closing Date wherein Assignor appears as "Borrower" and Assignee
appears as "Lender" (the "Loan Agreement"), Assignee has loaned the
proceeds of the Note to Assignor.
7. Amendment to Assignment of Ground Lease. Recital A of the Assignment of
Ground Lease is hereby deleted in its entirety and replaced by the following:
Pursuant to the Renewal and Substitute Promissory Note dated June 30,
2000, in which Borrower appears as "Borrower" and Lender appears as
"Lender" and which is in the original principal amount of Fifteen Million
Dollars ($15,000,000.00) (the "Note"), and pursuant to the Loan Agreement
dated the Closing Date wherein Borrower appears as "Borrower" and Lender
appears as "Lender" (the "Loan Agreement"), Assignee has loaned the
proceeds of the Note to Borrower.
8. Amendment to Loan Documents. The Loan Documents are hereby amended as
follows:
(a) Renewal Note. To the extent not otherwise provided in this
Agreement, the Loan Documents are hereby amended to include in the
indebtedness secured by the Collateral for the Loan Documents, and any
other obligations of Borrower under and pursuant to the Loan Documents, the
Renewal Note (which replaces the Original Note). Lender, Borrower and
Additional Obligors agree and acknowledge that the Renewal Note is secured
by the Trust Deed, as amended, supplemented and modified.
(b) Amendments. To the extent not otherwise provided in this
Agreement, the Loan Documents are hereby amended to be consistent with all
of the terms and conditions of this Agreement.
9. Conditions to Loan Modification. This Agreement shall become effective
from and after the satisfaction of each of the following conditions to Lender's
satisfaction:
(a) Prior to or concurrently with the execution of this Agreement,
Borrower shall have paid to Lender a loan extension fee in the amount of
$320,000.00, and an amount equal to all legal fees and expenses incurred by
Lender in connection with this Agreement.
(b) Borrower shall have provided Lender an endorsement to the Title
Policy, which endorsement must be acceptable in form and content to Lender
and Lender's counsel and must provide that (1) the Trust Deed continues to
constitute a first lien against the Property subject only to the exceptions
to title listed on Schedule B - Part I of the Title Policy; and (2) the
Trust Deed, as amended, supplemented and extended, continues to secure the
Renewal Note pursuant to this Agreement.
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(c) Borrower and Additional Obligors shall have executed and delivered
this Agreement and the Renewal Note to Lender and this Agreement has been
recorded in the office of the County Recorder of Salt Lake County, State of
Utah.
10. Clarification of terms "Accounts" and "Inventory". Borrower and Lender
agree and acknowledge that any and all references to the word "accounts" in the
Trust Deed and other Loan Documents was intended and does include all accounts
as defined in the Uniform Commercial Code, including, but not limited to,
accounts receivable of Borrower. Borrower and Lender further agree and
acknowledge that any and all references to the word "inventory" in the Trust
Deed and other Loan Documents was intended and does include all inventory of
Borrower, as defined in the Uniform Commercial Code, including, but not limited
to, all inventory which is not related to the Property, except to the extent
that certain inventory is expressly exempted from the security interest created
in the Loan Documents.
11. Waiver and Release of Claims. Borrower (i) represents that Borrower has
no defenses to or setoffs against any indebtedness or other obligations owning
to Lender or Lender's affiliates, nor claims against Lender or Lender's
affiliates for any matter whatsoever, related or unrelated to any indebtedness
or other obligations owing to Lender or Lender's affiliates, and (ii) releases
Lender and Lender's affiliates from all claims, causes of action, and costs, in
law or equity, existing as of the date of this Agreement, which Borrower has or
may have by reason of any matter of any conceivable kind or character
whatsoever, related or unrelated to any indebtedness or other obligations owing
to Lender or Lender's affiliates, including the subject matter of this
Agreement. This provision shall not apply to claims for performance of express
contractual obligations owing to Borrower by Lender o Lender's affiliates.
12. Survival of Obligations; Continuation of Terms of Loan Documents.
Lender and Borrower agree that the Trust Deed, together with all of Borrower's
obligations thereunder, shall, except to the extent expressly modified by this
Agreement, remain in full force and effect and survive the execution of this
Agreement. Except as expressly modified by this Agreement, all terms and
conditions of the Loan Documents shall continue in full force and effect.
13. Execution of Additional Documents. Borrower hereby agrees to sign such
further and additional documents and instruments as Lender may require to give
full effect to this Agreement.
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14. Representations, Warranties, Covenants and Agreements. Borrower
represents, warrants, and agrees that, except as heretofore communicated to
Lender in writing, the representations, warranties, covenants and agreements of
Borrower contained in the Loan Documents as modified herein (a) are true and
accurate as of the date of this Agreement, (b) are hereby remade and reaffirmed
by Borrower, and (c) are in full force and effect as of the date of this
Agreement, enforceable in accordance with their terms. Borrower further
represents and warrants that Borrower is not in default under any of the terms
and conditions of the Loan Documents, and no conditions exist which, with the
passage of time, the giving of notice, or both, would constitute a default under
the Loan Documents.
15. Defined Terms. Unless otherwise defined in this Agreement, capitalized
terms hereinafter used have the meaning given them in the Loan Agreement.
16. Governing Law. This Agreement and all matters relating to this
Agreement shall be governed exclusively by and construed in accordance with the
applicable laws of the State of Utah.
17. Integrated Agreement and Subsequent Amendment. This Agreement, the Loan
Documents, the Renewal Note, and the other agreements, documents, obligations,
and transactions contemplated by the Loan Agreement and this Agreement
constitute the entire agreement between Lender and Borrower with respect to the
subject matter of the agreements, and may not be altered or amended except by
written agreement signed by Lender and Borrower. PURSUANT TO UTAH CODE SECTION
25-5-4, BORROWER IS NOTIFIED THAT THESE AGREEMENTS ARE A FINAL EXPRESSION OF THE
AGREEMENTS BETWEEN LENDER AND BORROWER AND THESE AGREEMENTS MAY NOT BE
CONTRADICTED BY EVIDENCE OF ANY ALLEGED ORAL AGREEMENT.
DATED: June 30, 2000.
BORROWER
EVANS & SUTHERLAND COMPUTER CORPORATION,
a Utah corporation
By: /s/ Richard J. Gaynor
-----------------------
Richard J. Gaynor
Vice President and Chief Financial Officer
ADDITIONAL OBLIGORS
EVANS & SUTHERLAND, GMBH,
a German limited company
By: /s/ David Janke
-----------------------
David Janke
Its: Managing Director
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EVANS & SUTHERLAND, LTD.,
a U.K. public limited company
By: /s/ Stuart Anderson
-----------------------
Stuart Anderson
Its: Managing Director
EVANS & SUTHERLAND GRAPHICS CORPORATION,
a Utah corporation
By: /s/ Mark McBride
-----------------------
Mark McBride
Its: Secretary
LENDER
ZIONS FIRST NATIONAL BANK,
a national banking association
By: /s/ Michael R. Brough
-----------------------
Michael R. Brough
Vice President
9
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this day of July, 2000,
by Richard J. Gaynor, Vice President and Chief Financial Officer of Evans &
Sutherland Computer Corporation, a Utah corporation.
NOTARY PUBLIC
My Commission Expires: Residing At:
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this day of July, 2000,
by David Janke, Managing Director of Evans & Sutherland, GMBH, a German limited
company.
NOTARY PUBLIC
My Commission Expires: Residing At:
10
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this day of July, 2000,
by Stuart Anderson, Managing Director of Evans & Sutherland, Ltd., a U.K. public
limited company.
NOTARY PUBLIC
My Commission Expires: Residing At:
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this day of July, 2000,
by Mark McBride, Secretary of Evans & Sutherland Graphics Corporation, a Utah
corporation.
NOTARY PUBLIC
My Commission Expires: Residing At:
11
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this day of July, 2000,
by Michael R. Brough, Vice President of Zions First National Bank, a national
banking association.
NOTARY PUBLIC
My Commission Expires: Residing At:
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EXHIBIT A
REAL PROPERTY DESCRIPTION
The real property located in Salt Lake County, State of Utah, and more
particularly described as follows:
[see attached]
A-1