EXHIBIT 10.18
FIRST AMENDMENT
TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "First Amendment") dated as of
February 12, 1998, is made and entered into by and between Xxxx Systems Inc., a
California Corporation ("Borrower"), and UNION BANK OF CALIFORNIA, N.A.
("Bank").
RECITALS:
A. Borrower and Bank are parties to that certain Loan Agreement dated June 19,
1998 (the "Agreement"), pursuant to which Bank agreed to extend credit to
Borrower.
B. Borrower and Bank desire to amend the Agreement subject to the terms and
conditions of this First Amendment.
AGREEMENT:
In consideration of the above recitals and of the mutual covenants and
conditions contained herein, Borrower and Bank agree as follows:
1. DEFINED TERMS. Initially capitalized terms used herein which are not
otherwise defined shall have the meanings assigned thereto in the Agreement.
2. AMENDMENTS TO THE AGREEMENT.
(a) 1.2 Borrowing Base. The first paragraph shall be deleted in its
entirety and replaced with the following:
An amount of the Loan equal to $4,500,000,* evidenced by a Note dated
February 6, 1998 is a revolving loan subject to a borrowing base
("Borrowing Base Loan"). Notwithstanding any other provision of this
Agreement or any other Loan Document, Bank shall not be obligated to
advance funds under the Borrowing Base Loan, if the principal amount of
such Borrowing Base Loan including such advance exceeds 80% of Borrower's
Eligible Accounts plus 85% of Specified Accounts. In no event, however,
shall the aggregate amount of the advances based on Eligible Inventory
exceed, at any time, the sum of $700,000. As a sublimit to the Borrowing
Base Loan, Bank shall issue, for the account of Borrower, one or more
irrevocable, standby letters of credit (individually, an "L/C" and
collectively, the "L/Cs"). All such standby L/Cs shall be drawn on such
terms and conditions as are acceptable to Bank. The aggregate amount
available to be drawn under all outstanding L/Cs and the aggregate amount
of unpaid reimbursement obligations under drawn L/Cs shall not exceed Four
Hundred Thousand Dollars ($400,000) and shall reduce, dollar for dollar,
the maximum amount available under the Borrowing Base Loan. Each L/C shall
be governed by the terms of (and Borrower agrees to execute) Bank's
standard form for standby L/C applications and reimbursement agreements. No
L/C shall expire after June 30, 1998.
(b) 1.2 Borrowing Base. The third paragraph, prior to (a), shall be
deleted in its entirety and replaced with the following:
"The term "Eligible Accounts" means those Accounts, net of finance charges,
which are due and payable within ninety (90) days, or less, from the date
of the invoice, have been validly assigned to Bank and strictly comply with
all of Borrower's warranties and representations to Bank. Eligible Accounts
shall also include those accounts which have extended terms to Borrower's
international distributors evidencing the purchase of parts and supplies in
an amount not to exceed Thirty Five Thousand Dollars ($35,000) provided,
however, the aggregate amount of these accounts shall not exceed Five
Hundred Thousand Dollars ($500,000). Eligible Accounts shall also include
Specified Accounts, which are approved by the Bank in its sole discretion
and are more fully described in Exhibit I herein. Eligible Accounts shall
not include the following:"
(c) 1.3 Eligible Inventory. The section shall be deleted in its entirety
and replaced with the following:
"The term "Eligible Inventory" means inventory owned by Borrower and Xxxx
Group, Inc. and includes: (a) 50% of total purchased inventory of Standard
Desktop Laser Printers plus (b) 40% of total purchased inventory of toner
cartridges plus bulk toner for the toner product line plus (c) 10% of toner
cartridge finished goods for Xxxx Printers plus (d) 25% of the sum of
finished goods inventory, excluding Desktop Laser Printers, plus raw
materials less the general ledger obsolescence reserve, less finished goods
returned, less demonstration inventory, less any finished foods subject to
consignment sales not to exceed $700,000."
(d) 1.5 The Standby Letters of Credit. The last sentence of the paragraph
shall be deleted and replaced with the following:
"No L/C shall expire after June 30, 1998."
(e) 1.7 Guaranty. Delete the entire section and replace with the
following:
"The payment and performance of all obligations of Borrower under the Loan
Documents are and shall be during the term of the Loan guaranteed by:
Xxxxxxx Xxxx, Xxxx Xxxx, and The Dirk Family Trust, in the amount of Eight
Hundred Thousand Dollars ($800,000), and Xxxx Group, Inc. in the amount of
Five Million Dollars ($5,000,000)."
3. EFFECTIVENESS OF THE FIRST AMENDMENT. This First Amendment shall become
effective as of the date hereof when, and only when, Bank shall have received
all of the following, in form and substance satisfactory to Bank:
(a) The counterpart of this First Amendment, duly executed by Borrower;
(b) The Promissory Note, duly executed by Borrower;
(c) The duly executed Continuing Guaranty of Xxxxxxx Xxxx, Xxxx Xxxx, and
The Dirk Family Trust;
(d) Such other documents, instruments or agreements as Bank may reasonably
deem necessary.
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4. RATIFICATION. Except as specifically amended hereinabove, the Agreement
shall remain in full force and effect and is hereby ratified and confirmed.
5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants as
follows:
(a) Each of the representations and warranties contained in the Agreement,
as may be amended hereby, is hereby reaffirmed as of the date hereof, each
as if set forth herein;
(b) The execution, delivery and performance of the First Amendment and any
other instruments or documents in connection herewith are within Borrower's
power, have been duly authorized, are legal, valid and binding obligations
of Borrower, and are not in conflict with the terms of any charter, bylaw,
or other organization papers of Borrower or with any law, indenture,
agreement or undertaking to which Borrower is a party or by which Borrower
is bound or affected;
(c) No event has occurred and is continuing or would result from this
First Amendment which constitutes or would constitute an Event of Default
under the Agreement.
6. GOVERNING LAW. This First Amendment and all other instruments or documents
in connection herewith shall be governed by and construed according to the laws
of the State of California.
7. COUNTERPARTS. This First Amendment may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
WITNESS the due execution hereof as of the date first above written.
XXXX SYSTEMS INC. UNION BANK OF CALIFORNIA, N.A.
By: /s/ Xxxxxxx X. Dirk By: /s/ Xxxxxxxx Xxxxxxx
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Title: CEO Title: Vice President
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By:
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Title:
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