LOAN DOCUMENT MODIFICAON AGREEMENT
(No. 2: dated as of June 10, 1997)
LOAN DOCUMENT MODIFICATION AGREEMENT dated as of June 10, 1997 by
and between PHOTON TECHNOLOGY INTERNATIONAL, INC., a New Jersey corporation with
its principal place of business at 0 Xxxxxxxx Xxxxx, Xxxxx X, Xxxxx Xxxxxxxxx,
Xxx Xxxxxx 00000, (the "Borrower") and SILICON VALLEY BANK (the "Bank"), a
California chartered bank with its principal place of business at 0000 Xxxxxx
xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000, and with a loan production office located
at Wellesley Office Park, 00 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000,
doing business under the name "Silicon Valley East".
1. Reference to Existing Loan Document
Reference is hereby made to that Loan and Security Agreement,
dates as of June 26, 1996, as amended by Loan Document Modification Agreement
No.1, dated as of November 27, 1996, by and between the Bank and the Borrower
(with the attached schedules and exhibits, the "Loan and Security Agreement")
and the Loan Documents referred to therein, including without limitation that
certain Promissory Note of the Borrower, dated as of June 26, 1996, as amended
and restated by the Amended and Restated Promissory Note, dated as of November
27, 1996, in the principal amount of Two Million Dollars ($2,000,000) (the
"Note"). Unless otherwise defined therein, capitalized terms used in this
Agreement shall have the same respective meanings as set forth in the Loan and
Security Agreement.
2. Effective Date
This Agreement shall become effective as of June 10, 1997 (the
"Effective Date") provided that the Bank shall have received the following on or
before June 15, 1997 and provided further, however, in no event shall this
Agreement become effective until signed by an officer of the Bank of California:
a. two copies of this Agreement, duly executed by the
Borrower:
b. the Consent of Photon Technology International (Canada),
Inc. in the form enclosed, duly executed by such entity;
and
By the signature of its authorized officer below, the borrower is
hereby representing that, except as modified in Schedule A attached hereto, the
representations of the Borrower set forth in the Loan Documents (including those
contained in the Loan and Security Agreement, as amended by this Agreement) are
true and correct as of the Effective Date as if made on and as of such date. The
Borrower also authorizes the debiting of its account in the amount of $5,000 in
payment of the Bank's extension fee in connection herewith, which fee shall be
non-refundable. Finally, the Borrower agrees that, as of the Effective Date, it
has no defenses against its obligations to pay any amounts under the Loan and
Security Agreement and the other Loan Documents.
3. Description of Change in Terms
As of the Effective Date, the Loan and Security Agreement is
modified in the following respects:
a. Section 1.1 of the Loan and Security Agreement is hereby
amended by restating the definition of "Revolving Maturity
Date" in its entirety as follows:
"'Revolving Maturity Date' means October 15, 1997."
b. Section 2.1(b) of the Loan and Security Agreement is
hereby amended by restating in its entirety to read as
follows:
"(b) Inventory Sublimit Advances. Subject to the terms and
conditions of this Agreement, at any time from the date hereof
through February 14, 1997, Borrower may from time to time
request advances (each an "Inventory Sublimit Advance" and
collectively the "Inventory Sublimit Advances") from the Bank
in an aggregate amount not to exceed the lesser of (i) the
Committed Revolving Line minus the then outstanding principal
balance of the Advances of all Letters of Credit (including
drawn but unreimbursed Letters of Credit) or (ii) the
Inventory borrowing Base, provided that the aggregated amount
of outstanding Inventory Sublimit Advances shall not in any
case exceed Three Hundred Thousand Dollars ($300,000). The
proceeds of Inventory Sublimit Advances shall be used only to
finance the purchase of Eligible Inventory. For purposes of
this Agreement, "Inventory Borrowing Base" shall mean through
March 15, 1997 an amount equal to twenty percent (20%) of the
value of Borrower's Eligible Inventory (valued at the lower of
cost or wholesale fair market value).
Interest shall accrue from the date of each Inventory
Sublimit Advance at the rate specified in Section 2.3(a), and
shall be payable monthly for each month through February 1997.
Any Inventory Sublimit Advances that are outstanding as of 1
p.m. Pacific Time on March 14, 1997 will be payable as
follows:
(i) three consecutive monthly payments of
$27,794.10 each on March 15, April 15 and May 15, 1997.
(ii) three consecutive monthly payments of
$48,639.67 each on June 15, July 15 and August 15, 1997,
and a payment of $48,639.69 on September 15, 1997,
provided that the last such payment on September 15, 1997
shall in any event be in an amount sufficient to pay all
Inventory Sublimit Advances and all interest accrued but
unpaid thereon.
When Borrower desires to obtain an Inventory Sublimit
Advance, borrower shall notify Bank (which notice shall be
irrevocable) by facsimile transmission to be received no later
than 3:00 p.m. Pacific time one (1) Business Day before the
day on which the Inventory Sublimit Advance is to be made.
Such notice shall be substantially n the form of Exhibit B
hereto, and shall specifically indicate that the advance being
requested in an Inventory Sublimit Advance. The notice shall
be signed by a Responsible Officer and include a copy of the
invoice for the Inventory which shall be Eligible Inventory,
to be financed."
c. Section 6.14 of the Loan and Security Agreement is hereby
amended by reducing the minimum sum of gross proceeds required for a "Qualified
Offering from "$5,000,000" to $2,000,000."
d. Section 7.9 of the Loan and Security Agreement is hereby
restated in it entirety as follows:
"7.9 Subordinated Debt. The Borrower shall make no
payments of principal in respect of its Subordinated Debt,
including without limitation Subordinated Debt held by ML
Technology Ventures, L.P. (the "ML Debt"), except for,
commencing July 1997, monthly payments of principal in the
amount of $20,000 with respect to the ML Debt."
e. The Compliance Certificate attached to the Loan and Security
Agreement as Exhibit D is hereby restated in its entirety in the form of Exhibit
D hereto.
4. Waiver. The Bank hereby waives any Event of Default arising
solely as a result of the Borrower's failure to comply with the profitability
covenant set for the in Section 6.11 of the Loan and Security Agreement for the
fiscal quarter ending March 31, 1997.
5. Continuing Validity.
Upon the effectiveness hereof, each reference in each Security
Instrument or other Loan Document to "the Loan and Security Agreement",
"thereunder", "thereof", "therein", or words of like import referring to the
Loan and Security Agreement, shall mean and be a reference to the Loan and
Security Agreement, as amended hereby. Except as specifically set forth above,
the Loan and Security 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 or any term, condition or
convenant of the Loan and Security 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 Loan
and Security Agreement, as modified hereby, or the other Loan Documents and
shall not obligate the Bank to assent to any further modifications.
6. Miscellaneous.
a. This Agreement may be signed in one or more
counterparts each of which taken together shall constitute one and the same
documents.
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 JURISDICATION IN THE COMMONEALTH 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 XXXXX COUNTY, CALIFORNIA.
d. The Borrower agrees to promptly pay on demand all costs
and expenses of the Bank in connection with the preparation, reproduction,
execution and delivery of this letter amended and the other instruments and
documents to be delivered hereunder, including the reasonable fees and
out-of-pocket expenses of Xxxxxxxx & Worcester LLP, special councel for the Bank
with respect hereto.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the Bank and the Borrower have caused this
Agreement to be signed under seal by their respective duly officers as of the
date set forth above.
Sincerely,
SILICON VALLEY EAST, a Division
of Silicon Valley Bank
By:___________________________
Name: Xxxx X. Xxxxx
Title: Vice President
SILICON VALLEY BANK
By:___________________________
Name:
Title:
(signed in Santa Clara, CA)
PHOTON TECHNOLOGY INTERNATIONAL, INC.
By:___________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: President and
Chief Executive Officer
SCHEDULE A
Qualifications and Supplements to Prior Representations
None
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: PHOTON TECHNOLOGY INTERNATIONAL, INC.
The undersigned authorized officer of Photon Technology
International, Inc. hereby certifies that in accordance with the terms and
conditions of the Loan and Security Agreement between Borrower and Bank (the
"Agreement"), (i) Borrower is in complete compliance for the period ending
__________ with all required convenants except as noted below and (ii) all
representation and warranties of borrower stated in the Agreement are true and
correct in all material respects as of the date hereof. Attached herewith are
the required documents supporting the above certification. The Officer further
certifies that these are prepared in accordance with the Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes. The Officer
expressly acknowledges that no borrowings may be requested by the Borrower at
any time or date of determination that Borrower is not in compliance with any of
the terms of the Agreement, and that such compliance is determined not just at
the date this certificate is delivered.
Please indicate compliance status by circling Yes/No under
"Complies" column.
Reporting Covenant Required Complies
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
(except for last month FY)
Annual (CPA Audit) FYE within 90 days Yes No
A/R & A/P Agings Monthly within 15 days Yes No
A/R Audit Initial and Semi-Annual Yes No
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain on a Quarter Basis:
Minimum Quick Ratio 0.60:1.0 ____:1.0 Yes No
Minimum Tangible Net Worth $1,900,000 $______ Yes No
(at 9/30/96 plus 100%
of Net Income ($____)
and 80% of net proceeds
from issuance of capital
stock ($______) after
9.30/96)
Total Liabilities less Subordinated 1.7:1.0 ____:1.0 Yes No
Debt, less Deferred Revenues/
Tangible Net Worth
Profitability: Quarterly $1 $_____ Yes No
Capital Expenditures: Annually Not to exceed
$500,000 $______ Yes No
Minimum Cash plus Unutilized 2.0:1.0 _____:1.0 Yes No
Availability Under the Committed
Revolving Line/Outstanding Amount
Under Inventory Sublimit Advances
Comments Regarding Exceptions: See Attached.
Sincerely,
--------------------------------------
SIGNATURE
TITLE
DATE
CONSENT
The undersigned, as a party to a certain Agreement, dated as of
June 26, 1996, as amended by Loan Document Modification agreement No. 1, dated
as of November 27, 1996 (the "Agreement"), by and between the undersigned and
Silicon Valley Bank, hereby consents to the foregoing Loan Document Modification
Agreement (No.2)(the "Amendment") and hereby confirms and agrees that the
Agreement is, and shall continue to be in full force and effect and is hereby
ratified and confirmed in all respects, except that, upon the effectiveness of,
and on and after the date of, said Amendment, each reference in the Agreement to
"the Loan and Security Agreement", "the Credit Agreement", "thereunder",
"thereof", "therein", or words of like import referring to the Loan and Security
Agreement, shall mean and be a reference to the Loan and Security Agreement, as
amended hereby.
PHOTON TECHNOLOGY INTERNATIONAL
(CANADA), INC.
By_________________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
