EXHIBIT 10.34
LOAN DOCUMENT MODIFICATION AGREEMENT
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(No. 1 dated as of December 6, 1995)
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LOAN DOCUMENT MODIFICATION AGREEMENT dated as of December 6, 1995 by and
between SUMMAGRAPHICS CORPORATION, a Delaware corporation with its principal
place of business at 8500 Cameron Road, Austin, Texas 78754-3999 (the
"Borrower") and SILICON VALLEY BANK (the "Bank"), a California chartered bank
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with its principal place of business at 3003 Tasman Drive, Santa Clara,
California 95054, and with a loan production office located at Wellesley Office
Park, 45 William Street, Wellesley, MA 02181, doing business under the name
"Silicon Valley East".
1. Reference to Existing Loan Documents.
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Reference is hereby made to that Credit Agreement dated July 18, 1994,
between the Bank and the Borrower (with the attached schedules and exhibits, the
"Credit Agreement") and the Loan Documents referred to therein, including
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without limitation that certain Promissory Note of the Borrower dated July 18,
1994, in the principal amount of $8,000,000 (the "Note"), and the Security
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Documents referred to therein. Unless otherwise defined herein, capitalized
terms used in this Agreement shall have the same respective meanings as set
forth in the Credit Agreement.
2. Effective Date.
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This Agreement shall become effective as of December 6, 1995 (the
"Effective Date"), provided that the Bank shall have received the following on
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or before December 6, 1995 and provided further, however, in no event shall this
Agreement become effective until signed by an officer of the Bank in California.
i. two copies of this Agreement, duly executed by the Borrower;
ii. an amended and restated promissory note in the form enclosed
herewith (the "Amended Note"), duly executed by the Borrower;
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iii. a Warrant to purchase 37,500 shares of your common stock, in the
form furnished to you by the bank (the "Warrant"), duly executed
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by you, a copy of the form of the Warrant is attached hereto as
Exhibit 1;
iv. a Stock Pledge Agreement, duly executed by you, a copy of the
form of the Stock Pledge Agreement is attached hereto as
Exhibit 2;
v. the Borrower shall have executed such UCC-1 forms as the Bank
shall have requested;
vi. Borrower and Harvard Manufacturing Ventures, LLC shall have
executed and entered into the Manufacturing Agreement dated
September 13, 1995 attached hereto as Exhibit 2(vi);
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vii. the favorable opinion of the general counsel of the Borrower,
in form and substance satisfactory to the Bank and its special
counsel;
viii. evidence of the approval by your Board of Directors of this
Agreement, the Amended Note and the Warrant.
Also, as of the Effective Date, the Bank hereby retroactively waives any
Default or Event of Default that may have arisen prior to the Effective Date:
(i) as a result of the failure of the Company to comply with the Obligations; or
(ii) which could have otherwise resulted in an Event of Default. The foregoing
waiver is solely with respect to the aforementioned Events of Default and no
other waiver is hereby extended.
By the signature of its authorized officer below, the Borrower is hereby
representing that, except as modified in Schedule AA attached hereto, the
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representations of the Borrower set forth in the Loan Documents (including those
contained in the Credit Agreement, as amended by this Agreement) are true and
correct as of the Effective Date as if made on and as of such date. In addition,
the Borrower confirms its authorization as to the debiting of its account with
the Bank in the Aggregate amount of $25,000, of which $5,000 shall be debited as
of the Effective Date and an additional $20,000 to be debited on the sixtieth
day thereafter, in order to pay the Bank's facility fee for the period up to and
including the extended Expiry Date. Finally, the Borrower agrees that, as of the
Effective Date, it has no defenses against its Obligations to pay any amounts
under the Credit Agreement, this Agreement and the other Loan Documents.
In consideration for the Bank's agreeing to this Agreement, the Borrower
hereby releases and forever discharges the Bank and its affiliates, officers,
directors, agents, attorneys, employees, successors and assigns of and from all
manner of actions, causes of action, suits, judgments, claims and demands
whatsoever, at law or in equity which have arisen before or as of the Effective
Date whether in connection with the transactions contemplated by the Credit
Agreement, this Agreement or otherwise.
3. Description of Change in Terms.
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As of the Effective Date, the Credit Agreement is modified in the following
respects:
a. As described in Schedule AA hereto which is incorporated herein by
reference.
b. The Credit Agreement and the other Loan Documents are hereby amended
wherever necessary or appropriate to reflect the foregoing changes.
4. Continuing Validity.
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Upon the effectiveness hereof, each reference in each Security Instrument
or other Loan Document to "the Credit Agreement," "thereunder", "thereof",
"therein", or words of like import referring to the Credit Agreement, shall mean
and be a reference to the Credit Agreement, as amended hereby. Except as
specifically set forth above, the Credit Agreement shall remain in full force
and effect and is hereby ratified and confirmed. Each of the other Loan
Documents is in full force and effect and is hereby ratified and confirmed. The
amendments set forth above (i) do not constitute a waiver or modification of any
term, condition or covenant of the Credit
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Agreement or any other Loan Document, other than as expressly set forth herein,
and (ii) shall not prejudice any rights which the Bank may now or hereafter have
under or in connection with the Credit Agreement, as modified hereby, or the
other Loan Documents and shall not obligate the Bank to assent to any further
modifications.
5. Miscellaneous.
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a. This Agreement may be signed in one or more counterparts each of
which taken together shall constitute one and the same document.
b. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
c. THE BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN
ANY ACTION, SUIT, OR PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY
REASON OF THIS LOAN MODIFICATION AGREEMENT, PROVIDED, HOWEVER, THAT IF FOR ANY
REASON LENDER CANNOT AVAIL ITSELF OF THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS, THEN VENUE SHALL LIE IN SANTA CLARA COUNTY, CALIFORNIA.
d. The Borrower agrees to promptly pay on demand all reasonable costs
and expenses of the Bank in connection with the preparation, reproduction,
execution and delivery of this letter amendment and the other instruments and
documents to be delivered hereunder,
[Remainder of page intentionally blank]
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including, upon execution hereof, the reasonable fees and out-of-pocket expenses
of Sullivan & Worcester in the approximate amount of $23,000 (by certified check
or wire transfer), special counsel for the Bank with respect thereto.
IN WITNESS WHEREOF, the Bank and the Borrower have caused this Agreement to
be signed under seal by their respective duly authorized officers as of the date
set forth above.
Sincerely,
SILICON VALLEY EAST, a Division
of Silicon Valley Bank
By: /s/ JAMES MAYNARD
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Name: JAMES MAYNARD
Title: Vice President
SILICON VALLEY BANK
By:
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Name:
Title:
(signed in Santa Clara, CA)
SUMMAGRAPHICS CORPORATION
By: /s/ DAVID G. OSOWSKI
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Name: David G. Osowski
Title: Senior Vice President Finance
Schedule AA
to Loan Document Modification Agreement
between Summagraphics Corporation ("Borrower")
and Silicon Valley Bank ("Bank")
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The Credit Agreement is, effective as of the Effective Date, hereby amended
as follows:
1. Section 1 of the Credit Agreement is hereby restated in its entirety as
follows:
"Section 1. Loan.
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1.1 Amount. During the period July 18, 1994 through the
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Effective Date, the Bank has lent to Borrower certain monies (the "Tranche A
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Loans"). The outstanding aggregate amount of the Tranche A Loans is
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$6,991,430.20. The Borrower has requested the Bank to finance a consultants
feasibility report, the Bank agrees to advance to the Borrower an additional
$50,000, (the "Tranche B Loans," together with the Tranche A Loans shall be
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referred to as the "Loans" or "Extensions of Credit"). All references herein to
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the "Line of Credit Loans" shall instead be a reference to the Loans. The Loans
shall be paid by the Borrower to the Bank pursuant to the terms and conditions
as set forth herein. Except as otherwise payable pursuant to Section 1.4, the
Loans shall be due and payable in full on September 30, 1996 (the "Maturity
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Date").
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1.2 Term Note. The Loans shall be evidenced by and payable with
interest in accordance with the promissory note of Borrower in the form attached
hereto as Exhibit A dated the Effective Date (the "Amended Note"). All
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references herein to the Note shall instead be a reference to the Amended Note.
1.3 Section 1.3 of the Credit Agreement shall be deleted in its
entirety.
1.4 Repayment. The Borrower shall pay the Loans and interest
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thereon in accordance with the following terms:
(i) if the Borrower shall issue Subordinated Debt from time
to time hereafter, then the first $2,000,000 in proceeds thereof
shall be immediately paid to the Bank to reduce the outstanding
Loans;
(ii) Borrower shall each Banking Day pay to the Bank to be
applied to the outstanding Loans: (a) 1% of the total funds
received from the daily collection of all of CAD's third-party
accounts receivable, and (b) 3% of the total funds received from
the daily collection of Summagraphic North America's third-party
accounts receivable, except to the extent CAD is a customer of
the Borrower and the collection has been accounted for and
payment made pursuant to Subsection 1(ii)(a) above;
(iii) In the event of a sale of CAD and/or the Borrower's
output business division (or a substantial portion of the assets
associated with either
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CAD and/or the Borrower's output business division), Borrower
shall immediately:
(a) assign and pledge to the Bank any and all
instruments, documents, or evidence of indebtedness received
in consideration of the sale; and (b) pay to the Bank in the
event of a sale of (x) CAD, 100% of the cash proceeds of
sale net of the reasonable cost of disposition; or (y) the
output business division, 50% of the cash proceeds of sale
net of the reasonable cost of disposition;
(iv) In the event the Borrower proceeds with a sale of its
existing raw material inventory of the SummaJet product line (the
"SJ Inventory") to Salisbury Supply Company ("SSC") under the
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Borrower's manufacturing agreement with Harvard Manufacturing
Ventures LLC ("HMV") dated September 13, 1995, and together with
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SSC the first amendment thereto as shall be agreed to at a future
date, then the Borrower shall pay to the Bank (a) an amount
equal to 40% of the first $500,000 of gross proceeds Borrower
receives from SSC. Borrower may sell SJ Inventory to SSC provided
that at no time shall the amount of SJ Inventory sold to SSC
minus the amount of finished SG Inventory purchased by Borrower
from HMV (the "SJ Balance") exceed $500,000. However, the
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Borrower proceeding with the aforementioned arrangement with SSC
is conditioned upon the Bank receiving the proceeds in the
proportions noted above, from any financing provided by State of
Maryland and entities related to the State of Maryland, to either
the Borrower or SSC for the purpose of financing the purchase of
SJ Inventory from the Borrower and provided further that the Bank
is secure that its Collateral is not impaired by the Borrower's
transactions with SSC or HMV; and
(v) Interest accruing on the Loans as provided in the
Amended Promissory Note, shall be debited from the Borrower's
accounts maintained at the Bank on the thirtieth (30th) day of
each month. Without limiting the foregoing, all Obligations owed
to the Bank shall in any event be satisfied in full by Borrower
on or before September 30, 1996 (the "Maturity Date").
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2. Each of Section 1.5, Section 1.6, Section 1.7 and Section 1.8 of the
Credit Agreement shall be deleted in their entirety.
3. Section 2.1 of the Credit Agreement is hereby restated in its entirety
as follows:
"2.1 Interest Rates.
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(a) The Borrower agrees to pay interest on the unpaid principal
amount of the Loans for each day from and including the Effective Date
to but excluding the date the principal amount of such Loans is due
(whether at maturity, by acceleration or otherwise), at a fluctuating
rate per annum equal to the Prime Rate plus the Applicable Margin (as
defined below) which interest rate shall change when the Prime Rate
shall change. The "Applicable Margin" shall be four (4) percent (4%) per
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annum. Such interest shall be payable monthly in arrears on the last day
of each month commencing
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with the first such date hereafter and when the principal amount of such
Loans is due (whether at maturity, by acceleration or otherwise).
(b) Any overdue principal of the Loans and overdue interest thereon,
shall bear interest (after as well as before judgment), payable on demand,
for each day from and including the date payment was due to but excluding
the date of actual payment, at a fluctuating rate per annum equal to the
rate of interest applicable under Section 2.1(a) immediately prior to the
occurrence of the delinquency."
4. Section 2.4 of the Credit Agreement shall be amended by deleting the
second sentence in its entirety.
5. Section 3.1(b) of the Credit Agreement shall be amended by adding a new
sentence following the phrase "Loan Documents" in the fourth line
thereof, as follows:
"In addition, Borrower agrees to enter into a Stock Pledge Agreement in
favor of the Bank in the form of Exhibit 2 hereto (the "Stock Pledge
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Agreement") and to deliver to the Bank as provided therein certificates
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for such respective number and percentage of the outstanding shares of
stock for each of: (i) CAD Warehouse, Inc.; (ii) Summagraphics, N.V.;
(iii) Summagraphics Europe, N.V.; (iv) Summagraphics Ltd.; and (v)
Summagraphics, GmbH.''
6. Sub-paragraph (b) of Section 5.6 shall be amended by deleting the phrase
"February 28, 1994" in each of the second and fifth lines thereof and
substituting in its place the date "August 31, 1994" and is further
amended by deleting the phrase "nine-month" appearing in the third and
sixth lines thereof and substituting the phrase "3-month."
7. Section 5.17 of the Credit Agreement shall be deleted in its entirety.
8. Subparagraph (a) of Section 6.4 of the Credit Agreement is restated in
its entirety as follows:
"(a) within twenty-five (25) days after the end of each calendar month,
the unaudited, consolidated and consolidating balance sheet and income
statement of Summagraphics North America, which shall include the
results of CAD; within twenty-five (25) days after the end of each
calendar month (45 days with respect to the last month of the first
three fiscal quarters of each fiscal year and 90 days with respect to
the last month of the fiscal year), the unaudited consolidated and
consolidating balance sheet and income statement of the Borrower and its
Significant Subsidiaries (if any) as at the end of, and for, such month
(provided, however, that in the case of financial statements for the
last month of any fiscal quarter, such financial statements shall
include an income statement for such fiscal quarter), accompanied by a
certificate of the chief financial officer of the Borrower (or other
Authorized Officer) to the effect that such financial statements fairly
present the consolidated financial condition of the Borrower and its
significant Subsidiaries (if any) as of the end of such month, and the
consolidated results of their operations for such month, in each case in
accordance with GAAP (except for the absence of footnotes) consistently
applied (subject to normal year-
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end audit adjustments). To the extent that the actual monthly financial
results reported for Summagraphics North America vary by an amount of
10% or more from that of the Borrower's projected revenues and net
profit and loss provided to the Bank by the Borrower on September 13,
1995 and attached hereto as Exhibit 3, then the Borrower shall deliver
to the Bank an explanation of the reasons, effects, and other pertinent
matters in regard to the variance at the time of the delivery of
monthly financial reports.
9. Subparagraph (c) of Section 6.4 of the Credit Agreement shall be
amended by deleting the phrase "monthly" in the first line and
inserting in its place the phrase "quarterly".
10. Subparagraph (d) of Section 6.4 of the Credit Agreement is hereby
restated in its entirety as follows:
"(d) semi-monthly within seven (7) days of each of the fifteenth
day and of the last day of each fiscal month of the Borrower; (i) a
list of the accounts receivable aging for the Borrower; (ii) a
Borrowing Base Certificate signed by the chief financial officer or the
president of the Borrower, or other authorized officer of Borrower, in
each case, as of the end of such period and in such form as the Bank
may prescribe, all in reasonable detail and appropriately completed;
and (iii) a listing of accounts payable."
11. Subparagraph (f) of Section 6.4 of the Credit Agreement is restated in
its entirety as follows:
"(f) a copy of any management letter provided to the Borrower by
the Accountants, promptly following its availability, if any."
12. Section 6.4 of the Credit Agreement is hereby amended by adding a new
sub-paragraph (k) and (l), respectively, as follows:
"(k) The Borrower shall upon the execution hereof and within seven
(7) days following the end of each fiscal quarter of the Borrower
provide the bank with a schedule of names and addresses for each of its
accounts receivable debtors.
(l) On the first Banking Day of each week the Borrower shall
provide the Bank: (i) a report as to the status of its efforts to sell
its assets; and (ii) a rolling six (6) weeks cash flow projection;"
13. Section 6.8 of the Credit agreement is hereby amended by restating in
its entirety the proviso at the end of such section as follows:
"provided, however, the Bank shall not conduct more than one such
inspection of the Borrower's books and records in any fiscal
quarter unless there occurs an Event of Default. Borrower shall
pay for reasonable out-of-pocket cost of such inspection."
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14. Section 6 of the Credit Agreement is hereby amended by adding a Section
6.14, as follows:
"6.14 Daily Reporting. As of the Effective Date, so long as any
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Obligations remain outstanding under this agreement, Borrower shall
provide to Bank reporting satisfactory to assure that the Loans'
reduction is in correct proportion relative to the collections,
pursuant to Section 1.4, which shall include, without limitation,
reports substantially in the form of Exhibit 4 attached hereto,
evidencing the collection of: (i) accounts receivable allocable to CAD;
(ii) the collection of all non-Affiliate accounts receivable of
Summagraphics North America, exclusive of CAD; and (iii) collection
journals.
15. Section 7.4 of the Credit Agreement is hereby restated in its entirety
as follows:
"7.4 Disposition of Assets. Except as provided at Section 1.4(iii)
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the Borrower will not, and will not permit any of its Subsidiaries to,
convey, sell, lease, transfer or otherwise dispose of any of its
property, business or assets (including, without limitation, accounts
receivable and leasehold assets), whether now owned or hereafter
acquired, except: (i) the sale of inventory and of obsolete or worn-out
property, in the ordinary course of business; (ii) the sale of SJ
Inventory, with the Bank receiving a portion of all proceeds received
as provided at Section 1.4(iv), and providing further that the Bank's
security interest shall automatically be deemed released upon its
receipt of such payment, but that unless and until such payments are
received by the Bank it shall retain its security interest in the SJ
Inventory; and (iii) with the written consent of the Bank, which shall
not be unreasonably withheld, the sale or other disposition of any
other property, provided that in the event of the sale of an entire
business division of the Borrower's, the Bank shall immediately receive
cash proceeds of sale net of the reasonable cost of disposition equal
to the greater of $4,000,000 or 50% thereof; except that in the event
of the sale of the Borrower's cutter business division the Bank shall
immediately receive the greater of $3,500,000 or 50% thereof, to be
applied to the repayment of the Loans hereunder."
16. Section 7.5 of the Credit Agreement is hereby amended by deleting
subparagraphs (c) and (d) thereof in their entirety, and by restating
subparagraphs (c) and (d) thereof as follows:
"(c) Purchase Money Indebtedness in an amount not to exceed at any
time $50,000 in the aggregate; provided that, giving effect to the
incurrence of such Purchase Money Indebtedness and to the receipt and
application of the proceeds thereof, no Default or Event of Default
shall have occurred and be continuing.
(d) Subordinated Debt incurred by the Borrower after the date
hereof; provided that the first $2,000,000 of the net proceeds of such
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Subordinated Debt shall immediately be delivered to the Bank to be
applied to the repayment of the Loans hereunder."
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17. Section 7.10 of the Credit Agreement shall be restated in its entirety
as follows:
"Quick Ratio. The Borrower will not permit the Quick Ratio of
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Summagraphics North America at the end of any of the following fiscal
quarters to be less than the ratio set forth below opposite such
quarter:
Fiscal Quarter Ending Quick Ratio
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2/28/96 and thereafter 0.30:1"
18. Section 7.11 of the Credit Agreement shall be restated in its entirety
as follows:
"The Borrower will not permit Net Loss of Summagraphics North
America for any of the following fiscal quarters to be greater than the
amount set forth below opposite such fiscal quarter:
Fiscal Quarter Ending Maximum Net Loss
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2/28/96 $250,000
In addition, Summagraphics North America shall have a minimum Net
Profit of $150,000 for the quarter ending May 31, 1996."
19. Section 7.12 of the Credit Agreement shall be restated in its entirety
as follows:
"The Borrower will not permit the ratio of Total Senior
Liabilities to Tangible Net Worth of Summagraphics North America
to exceed 3.0 to 1 at the end of any fiscal quarter."
20. Section 7.13 of the Credit Agreement is hereby deleted in its entirety.
21. Section 8.1 of the Credit Agreement is hereby amended by adding a new
sub-paragraph (n), as follows:
"(n) the Borrower or any Subsidiary shall experience a Change in
Control, unless otherwise assented to by the Bank in writing."
22. Section 8.2 of the Credit Agreement should be amended by: (a) deleting
subsection (a) thereof; and (b) deleting the phrase "the Line of Credit
Commitment shall be automatically terminated and" beginning in the
tenth line thereof.
23. Section 9.1 of the Credit Agreement shall be amended as follows:
(i) deleting the phrase and the definition for the phrase
"Commitment Expiration Date";
(ii) deleting the phrase and the definition for the phrase
"Current Ratio."
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(iii) deleting the phrase "May 31, 1993" from the definition of
"Financial Statements Date" and substituting the date August 31, 1995.
(iv) deleting the phrase and the definition for the phrase "Letter
of Credit Usage";
(v) deleting the phrase and the definition for the phrase "Line of
Credit Commitment"; and
(vii) deleting the phrase and the definition for the phrase "Rate
Reduction Event".
24. Section 9.1 of the Credit Agreement is hereby amended by inserting the
following new definitions in alphabetical order:
"Borrowing Base" means an amount equal to the sum of (A) 80% of
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all Eligible Domestic Accounts Receivable and (B) 80% of Eligible
International Accounts Receivable.
"CAD" means CAD Warehouse, Inc., a Nevada corporation which is a
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wholly-owned Subsidiary of the Borrower with its principal place
of business at 515 Freeway Drive, Unit D, Macedonia, Ohio 44056.
"Change in Control" shall be deemed to have occurred if (a) any
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"person" or "group" of persons (within the meaning of Rule 13(d)-5
of the Securities and Exchange Commission as in effect on the date
hereof) (but excluding current members of senior management) shall
own, directly or indirectly, beneficially or of record,
outstanding shares of capital stock of the Borrower representing
more than 30% of the aggregate ordinary voting power represented
by the issued and outstanding stock of the Borrower, unless such
ownership interest shall result from the issuance of Subordinated
Debt pursuant to Section 1.4(i) hereof, in which event an amount
no greater than 50% shall be permissible; (b) a majority of the
seats (other than vacancies) on the board of directors of the
Borrower shall at any time be occupied by persons who were neither
nominated nor appointed by the current senior management of the
Borrower nor appointed by directors so nominated or appointed; or
(c) any person or group shall otherwise directly or indirectly
Control (as defined below) the Borrower. For purposes hereof,
"Control" shall mean the possession, directly or indirectly of the
power to direct or cause the direction of the management or
policies of a person or of the Borrower, whether through the
ownership of owning securities, by contract or otherwise.
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"Quick Ratio" means, at any time, all cash and accounts
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receivable, less reserves for doubtful accounts, of Summagraphics
North America determined in accordance with GAAP, divided by the
aggregate of all Current Liabilities.
"Summagraphics North America" means the Borrower and CAD.
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25. There is hereby inserted at the end of Section 10.1 the following new
sentence:
All financial covenants set forth in Section 7.10 through 7.12
shall be measured consistently with Summagraphics North America's
fiscal quarters and based on the internally prepared financial
statements of Summagraphics North America.
26. There is hereby inserted at the end of Section 10.13 a Section 10.14 as
follows:
"All Schedules referenced herein and attached hereto shall be true
and accurate as of the Effective Date and at such other times as
otherwise provided herein."