1
EXHIBIT 10.6
This LOAN MODIFICATION AGREEMENT, dated as of December [18], 1998 (this
"Agreement"), is between GENERAL MAGIC, INC., a Delaware corporation
("Borrower") and SILICON VALLEY BANK ("Bank").
Recitals
A. In addition to any obligations which may be owing by Borrower to Bank,
Borrower is indebted to Bank pursuant to a Loan and Security Agreement, dated
as of December [___], 1997 (as may have been amended to the date hereof, the
"Loan Agreement"). The term "Obligations" and the other terms defined in the
Loan Agreement are used herein with the same meanings unless otherwise defined
herein.
B. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by
the Collateral described in the Loan Agreement and an Intellectual Property
Security Agreement. The foregoing security documents, the Loan Agreement and
all other documents evidencing or securing the Obligations are called the
"Existing Loan Documents" herein.
The parties hereto hereby agree as follows:
1. Amendments.
The Loan Agreement is hereby amended:
(a) To amend and restate in their entirety certain definitions in
Section 1.1, as follows:
"Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as
current liabilities on the consolidated balance sheet of
Borrower and its Subsidiaries, as at such date, including all
Indebtedness that is payable upon demand or within one year from
the date of determination thereof unless such Indebtedness is
renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of
determination, but excluding Subordinated Debt and current
deferred revenues.
"Debt Service Coverage Ratio" means for any fiscal quarter of
Borrower on a consolidated basis, the ratio of (a) the sum of
quarterly net income, quarterly depreciation and amortization,
and quarterly interest expenses minus any income from
capitalized software development to (b) the sum of capital lease
payments due during such quarter, the current portion of long
term debt during such quarter, and quarterly interest expenses.
(b) To amend the defined term "Equipment Availability Date" in
Section 1.1 thereof, to insert the word "End" after the words "Equipment
Availability."
(c) To amend subsection (f) of the definition of "Permitted Liens"
in Section 1.1 thereof, to substitute the word "constituting" before the words
"an Event of Default" with the word "constituting."
-1-
2
(d) To amend and restate in its entirety Exhibit C thereof in the
form attached hereto.
(e) To amend subsection (f) of Section 3.1 thereof, to substitute
the number "2.5" before the word "Section" with the number "2.4."
(f) To amend and restate in its entirety Section 5.2 as follows:
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers,
have been duly authorized, and are not in conflict with nor
constitute a breach of any provision contained in Borrower's
Articles/Certificate of Incorporation or Bylaws, nor will they
constitute an event of default under any material agreement to
which Borrower is a party or by which Borrower is bound, nor is
Borrower in default under any agreement to which it is a party
or by which it is bound, which default could have a Material
Adverse Effect.
(g) To amend and restate in its entirety Section 6.3 as follows:
6.3. Financial Statements, Reports, Certificates. Borrower shall
deliver to Bank: (a) as soon as available, but in any event
within 30 days after the end of each month, a company prepared
consolidated balance sheet and income statement covering
Borrower's consolidated operations during such period, in a form
and certified by an officer of Borrower reasonably acceptable to
Bank; (b) as soon as available, but in any event within 120 days
after the end of Borrower's fiscal year, audited consolidated
financial statements of Borrower prepared in accordance with
GAAP, consistently applied, together with an unqualified opinion
on such financial statements of an independent certified public
accounting firm reasonably acceptable to Bank; (c) within five
days of filing, copies of all reports on Form 10-K, 10-Q and 8-K
filed with the Securities and Exchange Commission and at the
request of Bank, all statements, reports and notices sent or
made available generally by Borrower to its security holders or
to any holders of Subordinated Debt; (d) promptly upon receipt
of notice thereof, a report of any legal actions pending or
threatened against Borrower or any Subsidiary that could result
in damages or costs to Borrower or any Subsidiary of $100,000 or
more; (e) prompt notice of any material change in the
composition of the Intellectual Property Collateral, including,
but not limited to, any subsequent ownership right of the
Borrower in or to any Copyright, Patent or Trademark not
specified in any intellectual property security agreement
between Borrower and Bank or knowledge of an event that
materially adversely effects the value of the Intellectual
Property Collateral; and (f) such budgets, sales projections,
operating plans or other financial information as Bank may
reasonably request from time to time.
Borrower shall deliver to Bank with each of the monthly
financial statements a Compliance Certificate signed by a
Responsible Officer in
-2-
3
substantially the form of Exhibit C hereto, together with,
at any month-end where the outstanding balance of
Borrower's accounts receivable (determined in accordance
with GAAP) exceed $250,000, a detailed accounts receivable
aging as at the end of such month.
(h) To amend and restate in its entirety Section 6.9 as
follows:
6.9 Tangible Net Worth. Borrower shall maintain, as of
the last day of each calendar month, a Tangible Net Worth
of not less than $14,000,000 plus (a) 25% of proceeds (net
of reasonable offering and issuance costs) received by
Borrower after June 22, 1998, with respect to the issuance
of equity securities by Borrower and (b) 25% of cumulative
quarterly net income (not excluding any losses), measured
as of the last fiscal quarter.
(i) To amend and restate in its entirety Section 7.3 as
follows:
7.3 Mergers or Acquisitions. Merge or consolidate, or
permit any of its Subsidiaries to merge or consolidate,
with or into any other business organization, or acquire,
or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of
another Person except (i) such transactions that do not
involve an amount that in the aggregate exceeds $1,000,000
in cash or property (other than equity securities of the
Borrower) during the term of this Agreement; and, in
addition to the transactions permitted under clause (i),
(ii) an acquisition of a single company for a total cash
outlay not to exceed $1,000,000; provided that in the case
of (i) or (ii), Borrower shall be the surviving or
continuing corporation.
2. Corresponding Amendments. The Existing Loan Documents are hereby
amended wherever necessary to reflect the changes described above.
3. No Defenses. Borrower agrees that it has no defenses against the
obligations to pay any amounts under the Obligations.
4. Continuing Validity. Borrower understands and agrees that in
modifying the existing Obligations, Bank is relying upon Borrower's
representations, warranties, and agreements, as set forth in the Existing Loan
Documents. Except as expressly modified pursuant to this Agreement, the terms
of the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Obligations pursuant to this
Agreement in no way shall obligate Bank to make any future modifications to the
Obligations. Nothing in this Agreement shall constitute a satisfaction of the
Obligations. It is the intention of Bank and Borrower to retain as liable
parties all makers and endorsers of Existing Loan Documents, unless the party
is expressly released by Bank in writing. No maker, endorser, or guarantor will
be released by virtue of this Agreement. The terms of this paragraph apply not
only to this Agreement, but also to all subsequent loan modification agreements.
-3-
4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
BORROWER: BANK:
GENERAL MAGIC, INC., SILICON VALLEY BANK
a Delaware corporation
By /s/ XXXXX XXXXXXXXX By [Signature Illegible]
--------------------------------- ------------------------------------
Xxxxx XxXxxxxxx
Title: Sr. VP, Finance and Title: V.P.
Administration and CFO
-4-
5
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: GENERAL MAGIC, INC.
The undersigned authorized officer of ___________________ 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 covenants
except as noted below and (ii) all representations 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 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
Annual (CPA audited) FYE within 120 days Yes No
[10Q and 10K Within 5 days after filing with the SEC] Yes No
A/R Agings Monthly within 30 days Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio 2.00:1.00 ____:1.0 Yes No
Minimum Liquidity Ratio 2.00:1.00 ____:1.0 Yes No
Minimum Tangible Net Worth $14,000,000 Yes No
Plus 25% Equity Proceeds $________ Yes No
Plus 25% Quarterly Net Income $________ Yes NO
Maintain on a Quarterly Basis:
Minimum Debt Service Ratio 1.50:1.00 ____:1.0 Yes No
Maintain at all times:
Liquidity: $12,000,000 $______ Yes No
-1-
6
BANK USE ONLY
Received By: ______________________
Date: ____________________
Reviewed By: ______________________
Compliance Status: Yes/No
COMMENTS REGARDING EXCEPTIONS:
Sincerely,
_________________________ Date: ____________
SIGNATURE
_________________________
TITLE
-2-
