EXHIBIT 10.4
ADVANCED DEPOSITION TECHNOLOGIES, INC.
Xxxxx Xxxxxxxx Industrial Park
Xxxxxxx, Xxxxxxxxxxxxx 00000
Dated as of: September 23, 0000
Xxxxxxxx Xxxx xx Xxxxxx
Xxx Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Re: Modification No. 3 to Revolving Credit and Term Loan Agreement
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Ladies and Gentlemen:
We refer to the Revolving Credit and Term Loan Agreement, dated as of July
8, 1996 (as from time to time amended and in effect, the "Agreement"), between
Advanced Deposition Technologies, Inc. (the "Borrower") and National Bank of
Canada (the "Lender"). Terms used in this letter of agreement which are not
defined herein, but which are defined in the Agreement, shall have the same
respective meanings herein as therein.
We have requested you (i) to make available a new loan facility in the
amount of $2,000,000 (the "M&E Loan") to enable us to purchase new equipment for
use in our business, and (ii) to make the amendments to the Agreement
necessitated thereby. You have advised us that you are prepared and would be
pleased to provide such loans and to make the amendments so requested by us on
the condition that we join with you in this letter of agreement.
Accordingly, in consideration of these premises, the promises, mutual
covenants and agreements contained in this letter of agreement, and fully
intending to be legally bound by this letter of agreement, we hereby agree with
you as follows:
ARTICLE I
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AMENDMENTS TO AGREEMENT
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Effective as of September 23, 1998 (in this letter of agreement, the
"Modification Date"), the Agreement is amended as follows:
(a) The terms "Agreement" and "Loan Agreement" shall, wherever used in the
Agreement or any of the other Loan Documents, be deemed to also mean and include
any amendments, restatements and modifications thereof.
(b) The term "Loan Documents" shall, wherever used in the Agreement or any
of the other Loan Documents, be deemed to also mean and include Modification No.
3, the M&E Note and all other documents executed and delivered in connection
therewith.
(c) The definition of "Notes" contained in Section 1.1 of the Agreement is
amended to read in its entirety as follows:
"Notes" means, collectively, the Revolving Credit Note, the Term Notes and
the M&E Note.
(d) The term "Obligations" shall, wherever used in the Agreement or any of
the other Loan Documents, be deemed to also mean and include all obligations of
the Borrower to the Lender under or in respect of Modification No. 3 and the M&E
Note.
(e) The following six new definitions are added at the end of Section 1.1
of the Agreement:
"Modification No. 3" means that certain letter agreement dated as of
September 23, 1998 between the Borrower and the Lender, upon the terms
of which the Agreement was further modified and amended.
"Third Modification Date" means September 23, 1998.
"M&E Loan" shall have the meaning set forth in Section 2.2(B).
"M&E Loan Conversion Date" means January 31, 1999.
"M&E Loan Maturity Date" means October 1, 2004.
"M&E Note" shall have the meaning set forth in Section 2.2(B).
(f) The following new Section 2.2(B) is inserted immediately following
Section 2.2(A) of the Agreement:
"2.2(B) M&E Loan.
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2.2.1(B) Upon the terms and subject to the conditions of this
Agreement, and in reliance upon the representations, warranties and covenants of
the Borrower made herein, the Lender agrees to lend to the Borrower, at the
Borrower's request from time to time, from and after the Third Modification Date
and prior to the M&E Loan Conversion Date, a sum not in excess of $2,000,000
(the "M&E Loan") to be evidenced by an M&E
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Note (the "M&E Note") substantially in the form of Exhibit A-4 attached hereto,
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provided that the principal amount of the M&E Loan requested at any time shall
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not exceed 80% of the invoice price of new equipment to be purchased by the
Borrower with the proceeds thereof (less the sum of applicable shipping costs
and sales taxes). In order to permit the Lender to determine the foregoing, the
Borrower shall deliver a copy of the actual invoice to the Lender, along with
evidence of the applicable shipping costs and sales taxes, prior to the making
of any M&E Loan. In addition, the M&E Loan (or any portion thereof) will not be
advanced by the Lender until the Borrower has provided the Lender with
satisfactory evidence that the Lender will have, upon the making of the M&E Loan
(or any portion thereof), a perfected, first-priority security interest in the
equipment purchased with the proceeds of the M&E Loan (or portion thereof).
Notwithstanding the preceding sentence, it is agreed that a perfected, first-
priority security interest in favor of the Lender will not be required on the
date of the first advance of the M&E Loan in the amount of $540,000, so long as
the vendor of the equipment being purchased with the proceeds of said advance,
General Vacuum Engineering, has first delivered to the Lender a letter in or
substantially in the following form:
"To Whom it may Concern:
We agree that all deposits (including, without limitation, a deposit
in the amount of $540,000) shall be completely and immediately refundable
in full in the event machinery on order with General Vacuum Engineering by
Advanced Deposition Technologies, Inc. is not delivered on a timely basis
in accordance with machine specifications. It is agreed that delivery will
be made on or before June, 1999. Furthermore, we agree that National Bank
of Canada has a first-priority security interest with respect to said
deposits and equipment and that we will not interfere in any way whatsoever
with this priority position.
Sincerely yours,
General Vacuum Engineering"
2.2.2(B) The principal of the M&E Loan outstanding on the M&E Loan
Conversion Date shall be payable in sixty (60) consecutive equal monthly
installments, on the first day of each month (or the first Business Day
thereafter, if such day is not a Business Day) commencing on October 1, 1999,
and with the last of such sixty payments to be payable, along with all unpaid
interest thereon, on the M&E Loan Maturity Date.
2.2.3(B) The Borrower may prepay the M&E Loan and the M&E Note in whole or
in part, without premium or penalty, except as otherwise provided in Section
2.3.5, at any time and from time to time upon five (5) days' prior written
notice to the Lender. The principal amount of the M&E Loan so prepaid shall be
at least $100,000 (unless the principal amount of the M&E Loan shall be less
than $100,000, in which event the prepayment may be equal to such unpaid
principal amount) or a multiple of $100,000 in excess of $100,000, provided that
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the Borrower shall also pay accrued
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interest on the principal so prepaid to the date of such prepayment and all fees
and charges payable on or before the date of such prepayment. Prepayments shall
be applied against unpaid installments of principal of the M&E Loan in inverse
order of maturity of such installments. The Borrower shall not be permitted to
reborrow any part of the principal of the M&E Loan so prepaid at any time or
under any circumstances."
(g) The first three lines of Section 2.3.1 of the Agreement are amended to
read in their entirety as follows:
"2.3.1 Revolving Loans shall bear interest at a rate per annum equal to
1% above the Base Rate in effect from time to time; and each of the Term
Loans and the M&E Loan shall bear interest at a rate per annum equal to
1.25% above the Base Rate in effect from time to time;"
(h) The first sentence of Section 5.1(ii) of the Agreement is amended in
its entirety to read as follows:
"The Borrower will use the proceeds of (i) the Revolving Loans and the
Term Loans solely for its working capital needs, and (ii) the M&E Loan
for the purchase of new equipment to the extent permitted herein."
(i) Section 5.15 of the Agreement is amended in its entirety to read as
follows:
"5.15 Senior Indebtedness to Tangible Net Worth. The Borrower will
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not permit the ratio of (i) Senior Indebtedness to (ii) Tangible Net Worth
at any fiscal quarter-end specified below to be more than the ratio
identified below as applicable to such fiscal quarter:
Fiscal Quarter-End Ratio
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For the fiscal quarters
ending on June 30, 1998
and September 30, 1998 2.5 to 1.0
For any fiscal quarter
ending on or after
December 31, 1998
through the Maturity Date 3.0 to 1.0."
(j) The form of M&E Note set forth in Annex A to this Modification No. 3 is
added as Exhibit A-4 to the Agreement.
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ARTICLE II
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REPRESENTATIONS AND WARRANTIES
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The Borrower represents and warrants to you as follows:
(a) Representations in Agreement: Each of the representations and
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warranties made by or on behalf of the Borrower to you in the Agreement or any
other Loan Document, as amended through this letter of agreement, was true and
correct when made and is true and correct on and as of the Modification Date
with the same full force and effect as if each of such representations and
warranties had been made by the Borrower on the date hereof and in this letter
of agreement, except to the extent that such representations and warranties
relate solely to a prior date.
(b) No Events of Default: No Default or Event of Default exists on the
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Modification Date (after giving effect to all of the arrangements and
transactions contemplated by this letter of agreement).
(c) Binding Effect of Documents. This letter of agreement has been duly
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executed and delivered to you by the Borrower and is in full force and effect as
of the date hereof, and the agreements and obligations of the Borrower contained
herein and therein constitute legal, valid, and binding obligations of the
Borrower enforceable against the Borrower in accordance with their respective
terms.
ARTICLE III
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PROVISIONS OF GENERAL APPLICATION
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(a) No Other Changes. Except as otherwise expressly provided by this letter
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of agreement, all of the terms, conditions and provisions of the Agreement and
each of the other Loan Documents remain unaltered. The Agreement and this
letter of agreement shall be read and construed as one agreement. Except to the
extent specifically amended hereby, the provisions of the Agreement shall remain
unmodified, and the Agreement, as amended hereby, is hereby confirmed as being
in full force and effect, and the Borrower hereby ratifies and confirms all of
its agreements and obligations contained therein or in the other Loan Documents.
(b) Governing Law. This letter of agreement is intended to take effect as a
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sealed instrument and shall be deemed to be a contract under the laws of the
Commonwealth of Massachusetts. This letter of agreement and the rights and
obligations of each of the parties hereto shall be governed by and interpreted
and determined in accordance with the laws of the Commonwealth of Massachusetts.
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(c) Binding Effect; Assignment. This letter of agreement shall be binding
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upon and inure to the benefit of each of the parties hereto and their respective
successors in title and assigns.
(d) Counterparts. This letter of agreement may be executed in any number of
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counterparts, but all such counterparts shall together constitute but one and
the same agreement. In making proof of this letter of agreement, it shall not
be necessary to produce or account for more than one counterpart thereof signed
by each of the parties hereto.
(e) Conflict with Other Agreements. If any of the terms of this letter of
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agreement shall conflict in any respect with any of the terms of the Agreement
or any other Loan Document, the terms of this letter of agreement shall be
controlling.
(f) Conditions Precedent. This letter of agreement shall become effective
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as of the Modification Date, but only if:
(i) The Borrower has delivered or caused to be delivered to the Lender
the following instruments and documents, each of which shall be in form and
substance satisfactory to the Lender:
(A) An original M&E Note in the form of Annex A hereto duly signed
on behalf of the Borrower;
(B) Board of directors resolutions, good-standing and legal
existence certificates, an incumbency certificate, and confirmation
that its charter documents and by-laws have not been modified since
July 8, 1996;
(C) A favorable legal opinion from the Borrower's U.S. counsel in
or substantially in the form of the opinion delivered in connection
with the June 18, 1998 Modification No. 2;
(D) An insurance certificate or other evidence of insurance in
scope, content and amount satisfactory to the Lender with respect to
equipment to be purchased with the proceeds of the M&E Loan; and
(E) If an advance is being requested on the Modification Date
under the M&E Loan, then a copy of the invoice for the equipment
proposed to be purchased and any related information which may be
requested by the Lender.
(ii) No material adverse change shall have occurred in the financial
condition of the Borrower in the judgment of the Lender.
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(iii) No material litigation shall be pending or threatened that in
the Lender's judgment would have a material adverse effect upon the
creditworthiness or business of the Borrower.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter of agreement and return
such counterpart to the undersigned, whereupon this letter of agreement, as so
accepted by you, shall become a binding agreement between you and the
undersigned.
Very truly yours,
The Borrower:
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ADVANCED DEPOSITION TECHNOLOGIES, INC.
By: /s/ Xxxxx X. Xxxxxxx
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Title: Chief Executive Officer,
President and Treasurer
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The foregoing agreement is hereby accepted by the undersigned as of
September 23, 1998.
The Lender:
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NATIONAL BANK OF CANADA
By: /s/ Xxxxx Xxxxxxx
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Title: Vice President Manager
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