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Exhibit 10.9
THIRD AMENDMENT TO SECOND AMENDED AND
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RESTATED LOAN AGREEMENT
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THIS THIRD AMENDMENT TO LOAN AGREEMENT is made as of this __ day of
October, 1999, by and between STORAGE COMPUTER CORPORATION, a Delaware
corporation (the "Borrower") and CITIZENS BANK OF MASSACHUSETTS (successor in
interest to State Street Bank and Trust Company), a Massachusetts chartered
trust company (hereinafter referred to as the "Bank").
WHEREAS, the Borrower and the Bank are parties to a Second Amended and
Restated Loan Agreement dated as of November 16, 1998 as amended by the First
Amendment to Second Amended and Restated Loan Agreement dated as of April 30,
1998 and Second Amendment to Second Amended and Restated Loan Agreement dated as
of July 1, 1999 (collectively, the "Loan Agreement"). Capitalized terms used
herein and not otherwise defined shall have the meanings set forth in the Loan
Agreement.
NOW, THEREFORE, in consideration of these premises and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereby amend the Loan Agreement as follows:
Section
AMENDMENT OF SECTION 1.01. Section 1.01 of the Loan Agreement is hereby amended
as follows:
(a) the definition of "Line of Credit" contained in Section
1.01 of the Loan Agreement is amended by deleting the
reference to "Eight Million Seven Hundred Thousand
Dollars ($8,700,000)" and replacing it with "Seven
Million Four Hundred Thousand Dollars ($7,400,000)".
(b) the definition of "Maturity Date" contained in Section
1.01 of the Loan Agreement is hereby amended by
deleting the reference to "January 4, 2000" and
replacing it with the following: "the following,
whichever is applicable: (i) January 4, 2000, (ii)
Sixth Month Extension Date, to the extent the Borrower
has complied with Section 2.11(A), or (iii) One Year
Extension Date, to the extent the Borrower has complied
with Section 2.11(B)"
(c) the definition of "Maximum Line Availability" contained
in Section 1.01 of the Loan Agreement is deleted in its
entirety and
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replaced with the following:
"Maximum Line Availability" shall mean the line of
credit made available to the Borrower under this
Agreement (subject to the proviso at the end of this
definition) in the maximum principal amounts during the
following periods indicated:
Period Maximum Line Availability
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October 1, 1999 through January 2, 2000 $7,400,000
January 3, 2000 up to the Maturity Date $6,800,000
Maturity Date 0
PROVIDED, HOWEVER, (i) the Maximum Line Availability shall
be permanently reduced to $5,995,000 or $4,250,000
respectively, to the extent the Borrower has complied with
Sections 2.11(A) or 2.11(B) hereof and (ii) the Maximum Line
Availability shall be permanently reduced by any proceeds
received by the Borrower or Bank pursuant to Sections
2.01(g) or 5.16 hereof.
(d) the definition of "Loan Documents" contained in Section
1.01 of the Loan Agreement is hereby amended by adding
"Warrants", after the term "Pledge Agreement" in the
fifth line.
(e) the definition of "Note" contained in Section 1.01 of
the Loan Agreement is deleted in its entirety and
replaced with the following:
"Note" shall mean the secured Fourth Amended and
Restated Line of Credit Note in the maximum principal
amount of $7,400,000 dated October __, 1999 issued by
the Borrower to the Bank in form of Exhibit A hereto,
and all extensions, renewals, modifications,
substitutions, replacements and restatements thereof.
(f) the following definitions shall be added to Section
1.01 of the Loan Agreement in the appropriate
alphabetical order:
"Extension Warrant" shall mean the Warrant attached
hereto as EXHIBIT H.
"Initial Warrant" shall mean the Warrant attached
hereto as EXHIBIT G.
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"One Year Extension Date" shall have the meaning set
forth in Section 2.11(B).
"Sixth Month Extension Date" shall have the meaning set
forth in Section 2.11(A).
"Warrants" shall mean the Initial Warrant and Extension
Warrant.
"Working Capital" shall mean current assets (excluding
accounts or notes receivable from affiliates) of the
Borrower and its Subsidiaries less current liabilities
of the Borrower and its Subsidiaries, all as determined
on a consolidated basis in accordance with generally
accepted accounting principles in the United States of
America in effect from time to time.
1. Section AMENDMENT OF ARTICLE II. Article II of the Loan Agreement
is hereby amended as follows:
(a) The last sentence of Section 2.01(g)(iii) of the Loan
Agreement is deleted in its entirety and replaced with
the following:
Within one Business Day after the receipt of Net
Equity Proceeds by the Borrower or any of its
Subsidiaries, the Borrower shall make a prepayment
of the Loan (to be applied as a permanent
reduction of the Maximum Line Availability) in an
amount equal to the sum of (i) 100% of all Net
Equity Proceeds that are received by the Borrower
or any of its Subsidiaries after the date hereof
and that are in excess of $1,405,000 but less than
$4,500,000, plus (ii) 50% of all Net Equity
Proceeds that are received by the Borrower or any
of its Subsidiaries after the date hereof and that
are in excess of $4,499,999. It is understood by
the parties hereto that all Net Equity Proceeds
that are received by the Borrower or any of its
Subsidiaries after the date hereof, and that the
Borrower is not required to prepay to the Bank, as
provided in the immediately preceding sentence of
this Section 2.01(g)(iii), may be retained and
used by the Borrower and/or its Subsidiaries as
working capital.
(b) Section 2.10 of the Loan Agreement is deleted in its
entirety and replaced with the following Sections 2.10,
2.11 and 2.12.
SECTION 2.10. WAIVER AND RESTRUCTURE FEE. The Borrower shall pay the
Bank a $170,000 Waiver and Restructure Fee. Such fee has been earned as of
this date and
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shall be payable as follows: (i) $20,000 to be paid on July 1, 1999 and
(ii) the balance of $150,000 (the "Deferred Fee") shall be payable on the
Maturity Date as the same may be extended from time to time, as provided in
Section 2.11, provided, however, that $25,000 of the Deferred Fee shall be
waived if the Bank is paid $125,000 of such Deferred Fee prior to December
1, 1999. Notwithstanding the foregoing, the entire Deferred Fee (I.E.,
$150,000) shall be immediately due and payable without notice upon the
occurrence of an Event of Default.
SECTION 2.11. MATURITY DATE EXTENSION.
(A) To the extent that on or before December 15, 1999, (i) the
Borrower delivers a written request to the Bank to extend the Maturity
Date, (ii) the Borrower is in compliance with all terms and conditions of
the Loan Documents on the date of such request, (iii) the Borrower delivers
to the Bank a certificate satisfactory to the Bank certifying such
compliance and (iv) the Maximum Line of Availability has been permanently
paid down and reduced to less than $5,995,000, the Maturity Date shall be
extended to June 30, 2000 (the "Sixth Month Extension Date"), as provided
for in the definition of "Maturity Date".
(B) To the extent that on or before December 15, 1999, (i) the
Borrower delivers a written request to the Bank to extend the Maturity
Date, (ii) the Borrower is in compliance with all terms and conditions of
the Loan Documents on the date of such request, (iii) the Borrower delivers
to the Bank a certificate satisfactory to the Bank certifying such
compliance and (iv) the Maximum Line of Availability has been permanently
paid down and reduced to less than $4,250,000, the Maturity Date shall be
extended to January 5, 2001 (the "One Year Extension Date"), as provided
for in the definition of "Maturity Date".
SECTION 2.12. WARRANTS. On or before October __, 1999, the Borrower
agrees to execute and deliver to the Bank, or its nominee, the Warrants.
Section 3. AFFIRMATIVE COVENANTS. Article V of the Loan Agreement is
hereby amended by deleting Sections 5.15 and 5.16 in their
entirety and replacing them with the following:
SECTION 5.15 [ INTENTIONALLY LEFT BLANK ]
SECTION 5.16. ADDITIONAL CAPITAL OR COMPANY SALE. In the event the
Maturity Date is not extended pursuant to Sections 2.11(A) or 2.11(B), on
or before December 16, 1999, the Borrower will provide evidence
satisfactory to the Bank that the Borrower (either through an asset sale or
stock sale) will be sold on or before January 4, 2004, and that such sale
will generate sufficient net proceeds to pay off the Obligations in full.
(i) On or before March 31, 2000 (in the event the Maturity Date is extended
to June 30, 2000 (i.e. the Sixth Month Maturity Date), pursuant to Section
2.11(A)), or (ii) on or before August 31, 2000 (in the event the Maturity
Date is
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extended to January 5, 2001 (i.e. the One Year Extension Date) pursuant to
Section 2.11(B)), the Borrower will provide the Bank evidence satisfactory
to the Bank that the Borrower (either through an asset sale or stock sale)
will be sold on or before the applicable Maturity Date, and that such sale
will generate sufficient net proceeds to pay off the Obligations in full.
Section 4. FINANCIAL COVENANTS. Sections 7.01 and 7.02 of the Loan
Agreement are deleted in their entirety and replaced with
the following:
SECTION 7.01. MINIMUM WORKING CAPITAL RATIO.
(A) Until the Maturity Date has been extended pursuant to Sections
2.11(A) or 2.11(B) hereof, the Borrower will not permit the Working Capital
Ratio, for any of the fiscal months set forth below, to be less than the
respective ratio indicated for such fiscal months:
FISCAL MONTH: WORKING CAPITAL RATIO:
September 1999 1 to 0.92
October 1999 1 to 0.86
November 1999 1 to 0.78
December 1999 1 to 0.82
(B) Upon extension of the Maturity Date pursuant to Sections 2.11(A)
or 2.11(B) hereof, the Borrower will not permit the Working Capital to be
less than the respective amounts indicated for such fiscal months:
FISCAL MONTH: AMOUNT:
December, 1999 $5,400,000
January, 2000 $4,700,000
February, 2000 $3,900,000
March, 2000 $3,200,000
April, 2000 and Thereafter $3,000,000
(C) Upon extension of the Maturity Date pursuant to Sections 2.11(A)
or 2.11(B) hereof, the Borrower shall maintain at all times (a) cash and
cash equivalents of at least $1,500,000 or (b) $1,500,000 of the unused
availability of the Maximum Line Availability.
SECTION 7.02. MAXIMUM NET OPERATING LOSS. Until the Maturity Date has
been extended pursuant to Sections 2.11(A) or 2.11(B) hereof, the Borrower
will not permit its Net Operating Loss, for any of the fiscal periods set
forth below, to be more than the respective amounts indicated for such
fiscal periods:
FISCAL PERIOD: MAXIMUM NET OPERATING LOSS:
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January 1, 1999 through
the end of September 1999 $4,200,000
January 1, 1999 through
the end of October 1999 $4,965,000
January 1, 1999 through
the end of November 1999 $5,930,000
January 1, 1999 through
the end of December 1999 $5,370,000
Section 5. EFFECTIVENESS; CONDITIONS TO EFFECTIVENESS. This Amendment
to Loan Agreement shall become effective upon execution
hereof by the Borrower and the Bank and satisfaction of the
following conditions:
(a) Copies of Resolutions of the Board of Directors of the
Borrower authorizing the execution, delivery and
performance of the Borrower under this Amendment to
Loan Agreement (as well as ratifying the authorization
of execution, delivery and performance of the Security
Documents) certified by a Secretary or an Assistant
Secretary of the Borrower which certificate shall state
that the resolutions are in full force and effect.
(b) Certificate of the Secretary or Assistant Secretary of
the Borrower certifying the name and signatures of the
officers of the Borrower authorized to sign this
Amendment and other documents to be delivered in
connection therewith as well as certifying and
delivering certified articles of incorporation and
by-laws.
(c) Delivery to the Bank of Amended and Restated Revolving
Credit Note, this Amendment and Warrants (and any
related amendments to any stockholders agreement as the
Bank deems necessary).
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(d) Confirmation of the existing guarantees of the
Borrower's Subsidiaries and Xxxxxxxx Xxxxxxxxxx and the
other Security Documents.
(e) Opinions of Borrower's counsel in form and substance
satisfactory to the Bank.
(f) Long Form Good Standing Certificates for Borrower.
Section 6. MISCELLANEOUS.
(a) The Borrower hereby confirms to the Bank that the
representations and warranties of the Borrower set
forth in Article III of the Loan Agreement (as amended
and supplemented hereby) are true and correct as of the
date hereof, as if set forth herein in full.
(b) The Borrower has reviewed the provisions of this
Amendment and all documents executed in connection
therewith or pursuant thereto or incident or collateral
hereto or thereto from time to time and except
otherwise set forth in Section 6(i) below, there is no
Event of Default thereunder, and no condition which,
with the passage of time or giving of notice or both,
would constitute an Event of Default thereunder.
(c) The Borrower agrees that each of the Loan Documents
shall remain in full force and effect after giving
effect to this Amendment. The granting of the liens and
security interests under the Security Documents secure
all the Obligations as may be amended by this
Amendment. The guarantees of the Borrower's
Subsidiaries guarantee all of the Obligations as may be
amended by this Amendment.
(d) This Amendment represents the entire agreement among
the parties hereto relating to this Amendment, and
supersedes all prior understandings and agreements
among the parties relating to the subject matter of
this Amendment. The Borrower waives and releases any
claims it may have against, and forever discharges, the
Bank and its officers, directors, agents, attorneys,
employees, successors and assigns (the "Releases") from
any claims and causes of action arising out of the
transactions referred to or contemplated in any way by
the Loan Documents, and this Amendment or otherwise,
including without limitation, claims or defenses it may
have to the effect that the Releases may have in any
way acted or failed to act in any manner as to cause
injury to
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the Borrower or anyone claiming by or through them.
(e) The Borrower represents and warrants that neither the
execution, delivery or performance by the Borrower of
any of the obligations contained in this Amendment or
in any Bank Document requires the consent, approval or
authorization of any person or governmental authority
or any action by or on account of with respect to any
person or governmental authority.
(f) The Borrower agrees to pay on demand all of the Bank's
reasonable expenses in preparing, executing and
delivering this Amendment, and all related instruments
and documents, including, without limitation, the
reasonable fees and out-of-pocket expenses of the
Bank's special counsel and all travel related expenses
of the Bank in connection with any field audits or
otherwise. This Amendment shall be a Loan Document and
shall be governed by and construed and enforced under
the laws of the Commonwealth of Massachusetts.
(g) The Bank agrees that upon satisfaction in full, in cash
of the Obligations as determined by the Bank, the Bank
shall return to the Borrower any collateral or other
property of the Borrower, at the Borrower's expense.
(h) The Borrower and Bank agree that Exhibits G and H
attached to this Amendment shall be Exhibits to the
Loan Agreement.
(i) The parties hereto acknowledge and agree that the
Borrower has failed to deliver to the Bank certain
documents and items set forth in that post-closing
letter, dated April 30, 1999 (as the same may have been
amended, restated, modified or modified from time to
time, the "Post-Closing Letter Agreement"), by and
between the Borrower and the Lender. The Bank hereby
(a) acknowledges and agrees that all of the obligations
and liabilities of the Borrower under the Post-Closing
Agreement are terminated, and notwithstanding any
provision contained in any of the Loan Documents to the
contrary, neither the Borrower nor any of its
Subsidiaries shall have any further obligation to
deliver to the Bank those items set forth in the
Post-Closing Letter which as of the date hereof, have
not been so delivered to the Bank; and (b) waives any
default or Event of Default under the Loan Documents
which has occurred or may have occurred as a result of
the failure of the Borrower or any of its Subsidiaries
to deliver such items to the Bank.
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[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment to Loan
Agreement under seal as of the date first written above.
STORAGE COMPUTER CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxxxxxx
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Name: Xxxxxxxx X. Xxxxxxxxxx
Title: President
CITIZENS BANK OF MASSACHUSETTS
(as successor in interest to State
Street Bank and Trust Company)
By: /s/ Xxxxxxx Xxxxxx
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Name: Xxxxxxx Xxxxxx
Title: Vice President
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