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EXHIBIT 10.34
AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is entered
into by and among MTI TECHNOLOGY CORPORATION ("Borrower"), SILICON VALLEY BANK
("SVB") and GENERAL ELECTRIC CAPITAL CORPORATION ("GE Capital") as co-lenders,
and SVB, as Servicing Agent for the Lenders. (SVB and GE Capital are sometimes
referred to herein, individually, as "Lender", and collectively, as the
"Lenders".)
Borrower, the Lenders, and Servicing Agent are parties to that certain Loan
and Security Agreement, dated as of July 22, 1998 (as amended, restated,
supplemented, or otherwise modified from time to time, the "Loan Agreement"),
and hereby agree to further amend the Loan Agreement, as follows, effective as
of September 22, 2000. (Capitalized terms used but not defined in this
Amendment, shall have the meanings set forth in the Loan Agreement.)
1. AMENDMENTS TO LOAN AGREEMENT.
a. The definition of "Availability Reserves" in Section 1.1 of the Loan
Agreement hereby is amended and restated in its entirety to read as follows:
"Availability Reserves" shall mean such amounts as the Requisite Lenders
may from time to time establish and revise in their good faith business
judgment, with written notice thereof to Borrower, to reflect (a) any
material increase in dilution with respect to the Accounts or any material
decline in the general creditworthiness of obligors on the Accounts
(including without limitation a credit memo reserve of up to $5,300,000);
and/or (b) events, conditions, contingencies or risks which may
substantially affect either the Collateral or any other property which is
security for the Obligations or its value, or the assets, business or
prospects of Borrower or the security interests and other rights of the
Lenders in the Collateral (including the enforceability, perfection and
priority thereof) and/or (c) Requisite Lenders' good faith belief that any
collateral report or financial information furnished by or on behalf of
Borrower to Lenders was false or misleading in a material respect when made.
b. The definition of "Credit Extension" in Section 1.1 of the Loan
Agreement hereby is amended and restated in its entirety to read as follows:
"Credit Extension" means each Advance, Letter of Credit, Foreign
Exchange Contract, or any other extension of credit by Servicing Agent or
any Lender for the benefit of Borrower hereunder.
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c. The definition of "Requisite Lenders" in Section 1.1 of the Loan
Agreement hereby is amended and restated in its entirety to read as follows:
"Requisite Lenders" means, at any time, Lenders then holding at least
eighty percent (80.0%) of the then aggregate unpaid principal amount of all
Advances then outstanding or, if no Advances are then outstanding, Lenders
then having at least eighty percent (80.0%) of the aggregate Commitments;
provided, however, that in the event there shall be only two (2) Lenders,
then "Requisite Lenders" shall mean both of such Lenders.
d. The definition of "Revolving Maturity Date" in Section 1.1 of the
Loan Agreement hereby is amended and restated in its entirety to read as
follows:
"Revolving Maturity Date" means September 22, 2001.
e. Section 1.1 of the Loan Agreement hereby is amended to add the
following definitions thereto, in proper alphabetical order:
"FX Reserve" is defined in Section 2.1.2.
"Letter(s) of Credit" is defined in Section 2.1.3.
"Quick Assets" is, on any date, the Borrower's consolidated,
unrestricted cash, cash equivalents, net billed accounts receivable and
investments with maturities of less than 12 months determined according to
GAAP.
f. Section 2.1 of the Loan Agreement (including all subsections thereof)
hereby is amended and restated in its entirety to read as follows:
2.1 THE REVOLVING ADVANCES. Subject to and upon the terms and conditions
hereof, and in reliance upon the representations and warranties of Borrower
set forth herein, each Lender severally agrees to make its Commitment
Percentage of Revolving Advances to Borrower up to the amount of the
Committed Revolving Line from time to time until the close of business on
the Business Day immediately preceding the Revolving Maturity Date, in such
sums as Borrower may request, provided that the aggregate principal amount
of all Revolving Advances at any one time outstanding shall not exceed the
result of (a) the lesser of (i) the Committed Revolving Line, and (ii) the
Borrowing Base less any Availability Reserves, minus (b) the sum of (i) the
aggregate amount due and payable to SVB in connection with the Cash
Management Services furnished to Borrower by or through SVB, plus (ii) the
amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit), plus (iii) the FX Reserve. For purposes of
this Agreement, "Borrowing Base" shall mean an amount equal to EIGHTY
PERCENT (80%) of Eligible Accounts, plus up to SIXTY PERCENT (60%) (the
"EMC Percentage Advance Rate") of the "Eligible EMC Payments" (as defined
below). The EMC Percentage Advance Rate shall be subject to revision by
Lenders based on their quarterly review of EMC, including its credit
rating.
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As used above, "Eligible EMC Payments" means the minimum guaranteed
payments ("Minimum EMC Payments") due to Borrower from ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
("EMC") under that certain Asset Purchase Agreement dated February 9, 1996
between Borrower and EMC (the "EMC Agreement").
In the event of any dispute between Borrower and EMC, the amount in
dispute shall be deducted from the "Eligible EMC Payments". In the event
EMC shall assert any right to withhold any Minimum EMC Payment or shall
assert any defense to the payment thereof, then the amount thereof shall be
deducted from "Eligible EMC Payments". In addition, the amount of the
Eligible EMC Payments shall be deemed to be zero if (i) EMC shall fail to
make any Minimum EMC Payment within thirty days after the date due, or (ii)
EMC shall be the subject of any Insolvency Proceeding.
Subject to the terms and conditions of this Agreement and in reliance
upon the representations and warranties set forth herein, amounts borrowed
pursuant to this SECTION 2.1 may be repaid and reborrowed at any time
during the term of this Agreement.
On the Revolving Maturity Date, Borrower promises to pay to Servicing
Agent for the account of each Lender, in lawful money of the United States
of America, the aggregate unpaid principal amount of all Revolving Advances
made by Servicing Agent and Lenders to Borrower. Borrower shall also pay
interest on the aggregate unpaid principal amount of such Advances at the
rates and in accordance with the terms hereof.
The Committed Revolving Line (and all sublines thereof) shall terminate
on the Revolving Maturity Date, at which time all Advances and other
amounts due under this Agreement (except as otherwise expressly specified
herein) and all other Obligations shall be immediately due and payable.
2.1.1 CASH MANAGEMENT SUBLINE. Borrower may use up to $2,250,000
for so-called "Cash Management Services" provided by SVB, which may include
merchant services, direct deposit of payroll, business credit cards, and
check cashing services, identified in the cash management services
agreement between Borrower and SVB related to such services (collectively,
the "Cash Management Services"). Borrower agrees to pay any and all amounts
that are due and payable to Bank in connection with the Cash Management
Services furnished to Borrower by or through Bank. Borrower agrees to
execute and deliver to Bank all standard form applications and agreements,
including without limitation, an indemnification and pledge agreement, of
Bank in connection with the Cash Management Services and, without limiting
any of the terms of such applications and agreements, Borrower will pay all
standard fees and charges of Bank in connection with the credit card
services and, without limiting any of the terms of such applications and
agreements, Borrower will pay all standard fees and charges of Bank in
connection with the Cash Management Services, and all such amounts due and
payable by Borrower for any Cash Management Services may, at SVB's option,
be treated as an Advance by SVB under the Committed Revolving Line. The
Cash Management Services shall terminate on the Revolving Maturity Date.
2.1.2 FOREIGN EXCHANGE CONTRACT; FOREIGN EXCHANGE SETTLEMENT. If
there is availability under the Committed Revolving Line and the Borrowing
Base, then
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Borrower may enter in foreign exchange forward contracts with SVB under
which Borrower commits to purchase from or sell to SVB a set amount of
foreign currency more than 1 business day after the contract date (the
"Foreign Exchange Contracts"). Lender will subtract 10% of each outstanding
Foreign Exchange Contract and apply it to the then extant foreign exchange
reserve (the "FX Reserve"; which reserve shall not exceed $2,000,000); it
being understood and agreed that, at such time as any such Foreign Exchange
Contract is no longer outstanding and SVB does not have any outstanding
obligations thereunder, the F/X Reserve shall be reduced by the 10% of such
Foreign Exchange Contract previously so applied to such F/X Reserve.
The total Foreign Exchange Contracts at any one time may not exceed 10
times the amount of the FX Reserve.
Bank may terminate the Foreign Exchange Contracts if an Event of Default
occurs.
Borrower will execute and deliver all SVB's standard applications and
agreements in connection with Foreign Exchange Contracts and pay all SVB's
standard fees and charges.
2.1.3 LETTERS OF CREDIT. At the request of Borrower and subject to
the terms and conditions of this Agreement, SVB will issue or have issued
letters of credit for the account of Borrower, in each case in form and
substance satisfactory to SVB in its sole discretion (collectively,
"Letters of Credit") not exceeding, in the aggregate, the result of (a) the
lesser of (i) the Committed Revolving Line, and (ii) the Borrowing Base
less any Availability Reserves, minus (b) the sum of (i) the aggregate
amount due and payable to SVB in connection with the Cash Management
Services furnished to Borrower by or through SVB, plus (ii) the outstanding
principal amount of all Advances, plus (iii) the FX Reserve; provided,
however, but the aggregate face amount of outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit) may not exceed
$3,000,000. Each Letter of Credit will expire no later than 180 days after
the Revolving Maturity Date provided Borrower's Letter of Credit
reimbursement obligation is secured by cash on terms acceptable to SVB at
any time after the Revolving Maturity Date if the term of this Agreement is
not extended by the Lenders and Servicing Agent.
Borrower shall pay all bank charges (including charges of SVB) for
the issuance of Letters of Credit, together with such additional fee as
SVB's letter of credit department shall charge in connection with the
issuance of the Letters of Credit. Any payment by SVB under or in
connection with a Letter of Credit shall constitute an Advance by SVB
hereunder on the date such payment is made. Borrower hereby agrees to
indemnify, save, and hold SVB harmless from any loss, cost, expense, or
liability, including payments made by SVB, expenses, and reasonable
attorneys' fees incurred by SVB, arising out of or in connection with any
Letters of Credit; provided, however, that Borrower shall not be obligated
hereunder to indemnify for any such loss, cost, expense, or liability that
is proximately caused by the gross negligence or willful misconduct of SVB.
Borrower agrees to be bound by the regulations and interpretations of the
issuer of any Letters of Credit guarantied by SVB and opened for Borrower's
account or by SVB's interpretations of any Letter of Credit issued by SVB
for Borrower's account, and Borrower understands and agrees that SVB shall
not be liable for any error, negligence,
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or mistake, whether of omission or commission (unless proximately arising
from the gross negligence or willful misconduct of SVB), in following
Borrower's instructions or those contained in the Letters of Credit or any
modifications, amendments, or supplements thereto. Borrower understands
that Letters of Credit may require SVB to indemnify the issuing bank for
certain costs or liabilities arising out of claims by Borrower against such
issuing bank. Borrower hereby agrees to indemnify and hold SVB harmless
with respect to any loss, cost, expense, or liability incurred by SVB under
any Letter of Credit as a result of SVB's indemnification of any such
issuing bank. The provisions of this Agreement, as it pertains to Letters
of Credit, and any other present or future documents or agreements between
Borrower and SVB relating to Letters of Credit are cumulative.
Borrower shall pay SVB a standby Letter of Credit fee (in addition
to the charges, commissions, fees, and costs set forth above) that shall
accrue at a rate equal to 1.75% per annum times the aggegate undrawn amount
of all outstanding standby Letters of Credit during the month preceding the
date such standby Letter of Credit fee is due and payable; provided,
however, that upon the occurrence and during the continuation of an Event
of Default, the standby Letter of Credit fee provided for above shall be
increased to 3 percentage points above the per annum rate otherwise
applicable hereunder.
g. Section 2.2 of the Loan Agreement hereby is amended and restated
in its entirety to read as follows:
2.2 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower under Section 2.1 and Subsections 2.1.1,
2.1.2, and 2.1.3 exceed the lesser of (a) the Commited Revolving Line, and
(b) the Borrowing Base less any Availability Reserves, Borrower shall
immediately pay to Servicing Agent, on behalf of the Lenders, in cash, the
amount of such excess.
h. Section 2.3.1 of the Loan Agreement hereby is amended and
restated in its entirety to read as follows:
2.3.1 INTEREST RATE. Except as set forth in SECTION 2.1.3 AND
SECTION 2.3.2, any Credit Extension shall bear interest on the average
Daily Balance at a rate per annum equal to the Prime Rate plus the
Applicable Margin (as defined below). As used herein, the term "Applicable
Margin" means 1 percentage point; provided, however, that from and after
the date (if ever) that Servicing Agent and the Lenders timely receive
Borrower's unaudited financial statements accurately and correctly
reflecting that Borrower has achieved a positive net profit (determined in
accordance with GAAP) for each of 2 consecutive fiscal quarters (that occur
after the end of Borrower's fiscal year 2000) and if no Default or Event of
Default then exists, the Applicable Margin shall equal 0.50 percentage
point. The foregoing proviso notwithstanding, if any subsequently issued
audited financial statements of Borrower for such relevant periods that are
delivered to Servicing Agent and Lenders hereunder disclose that Borrower
did not, in fact, achieve the positive net profit indicated in the
above-described unaudited financial statements, then the interest rate
automatically shall be retroactively adjusted to the rate that would have
been in effect if the adjustment had not been made.
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i. Section 2.3.2 of the Loan Agreement hereby is amended and
restated in its entirety to read as follows:
2.3.2 DEFAULT RATE. All Obligations (other than Letters of
Credit) shall bear interest, from and after the occurrence, and during the
continuance, of an Event of Default, at a rate equal to three (3)
percentage points above the interest rate applicable immediately prior to
the occurrence of the Event of Default.
j. Section 2.3.3 of the Loan Agreement hereby is amended and
restated in its entirety to read as follows:
2.3.3 PAYMENTS. Interest, Letter of Credit fees, and all other
fees hereunder shall be due and payable on the last day of each month during the
term hereof. Borrower hereby authorizes Servicing Agent to debit any accounts
with Servicing Agent, including, without limitation, Account Number 600415670
for payments of principal and interest due on the Obligations and any other
amounts owing by Borrower to Lenders. Servicing Agent shall notify Borrower of
all debits which Servicing Agent makes against Borrower's accounts. Any such
debits against Borrower's accounts in no way shall be deemed a set-off. Any
interest or Letter of Credit fees not paid when due shall be compounded by
becoming a part of the Obligations, and such interest or Letter of Credit fees
shall thereafter accrue interest at the rate then applicable hereunder.
k. Section 2.3.4 of the Loan Agreement hereby is amended and
restated in its entirety to read as follows:
2.3.4 COMPUTATION. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest and
Letter of Credit fees chargeable under the Loan Documents shall be computed on
the basis of a three hundred sixty (360) day year for the actual number of days
elapsed.
l. Section 6.7 of the Loan Agreement hereby is amended and restated
in its entirety to read as follows:
6.7 PRINCIPAL DEPOSITORY. Borrower shall maintain all of its
operating and investment accounts with SVB; provided, however, that the
investment account of Borrower maintained at CS First Boston existing as of
September 22, 2000 may continue to be maintained at CS First Boston.
m. Section 6.9 of the Loan Agreement hereby is amended and restated
in its entirety to read as follows:
6.9 QUICK RATIO. Borrower will maintain as of the last day of each
month a ratio of Quick Assets to Current Liabilities of at least 1.00 to
1.00.
n. Section 6.12 of the Loan Agreement hereby is amended and
restated in its entirety to read as follows:
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6.12 PROFITABILITY. Borrower shall have a net profit (as determined
in accordance with GAAP) for the fourth fiscal quarter of its fiscal year
2001 and each fiscal quarter thereafter.
o. Section 6.13 of the Loan Agreement hereby is amended and
restated in its entirety to read as follows:
6.13 MAXIMUM NET LOSS. Borrower's maximum net loss (as determined
in accordance with GAAP) shall not exceed: (a) for the second fiscal
quarter of its fiscal year 2001, (i) $2,000,000 before non-cash writeoffs
(in accordance with GAAP), and (ii) $3,000,000 after writeoffs (in
accordance with GAAP); and (b) for the third fiscal quarter of its fiscal
year, $1,000,000.
p. From and after September 22, 2000, the Schedule to Loan and
Security Agreement setting forth the Lenders' respective Commitments and
Commitment Percentages hereby is amended and restated in its entirety to read as
follows:
REVOLVING COMMITMENTS
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Commitment
Lender Commitment Percentage
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Silicon Valley Bank $10,000,000 33 and 1/3%
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GE Capital Commercial
Finance, Inc. $20,000,000 66 and 2/3%
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q. Anything in Section 6.3 of the Loan Agreement to the contrary
notwithstanding, from and after the date (if ever) that the Daily Balance of
Advances outstanding under Section 2.1 of the Loan Agreement exceeds $3,000,000,
Servicing Agent shall have the right, but not the obligation, to require
Borrower to provide (and Borrower hereby agrees to so provide) to Lenders a
Borrowing Base Certificate, together with aged listings of accounts receivable
and accounts payable, as frequently as requested by Servicing Agent in its good
faith business judgment.
r. Exhibit C (Form of Borrowing Base Certificate) attached to the
Loan Agreement hereby is amended and restated in its entirety to read as set
forth in Exhibit C (Form of Borrowing Base Certificate) attached to this
Amendment.
s. Exhibit D (Form of Compliance Certificate) attached to the Loan
Agreement hereby is amended and restated in its entirety to read as set forth in
Exhibit D (Form of Compliance Certificate) attached to this Amendment.
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2. AMENDMENT FEE. In consideration for the Lenders and Servicing Agent
entering into this Amendment, Borrower shall concurrently pay Servicing Agent,
for the benefit of the Lenders, a fee in the amount of $125,000 (of which
$41,250 shall be payable to SVB and $83,750 shall be payable to GE Capital,
which shall be non-refundable and in addition to all interest and other fees
payable to Servicing Agent and the Lenders under the Loan Documents. Servicing
Agent is authorized to charge said fee to Borrower's loan account.
3. REPRESENTATIONS TRUE. Borrower represents and warrants that its fiscal
year 2001 started on April 2, 2000. Borrower represents and warrants to
Servicing Agent and the Lenders that all representations and warranties set
forth in the Loan Agreement, as amended hereby, are true and correct.
4. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Borrower, the applicable
requisite Lenders, and Servicing Agent, and the other written documents and
agreements between or among Borrower, the applicable requisite Lenders, and
Servicing Agent set forth in full all of the representations and agreements of
Borrower, the Lenders, and Servicing Agent with respect to the subject matter
hereof and supersede all prior discussions, representations, agreements and
understandings between or among Borrower, the Lenders, and Servicing Agent with
respect to the subject hereof. Except as herein expressly amended, all of the
terms and provisions of the Loan Agreement, and all other documents and
agreements between or among Borrower, the Lenders, and Servicing Agent shall
continue in full force and effect and the same are hereby ratified and
confirmed.
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This Amendment may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
shall be deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
BORROWER: LENDER:
MTI TECHNOLOGY CORPORATION SILICON VALLEY BANK
By By
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Title Title
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LENDER: SERVICING AGENT:
GENERAL ELECTRIC CAPITAL CORPORATION SILICON VALLEY BANK
By By
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Title Title
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