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EXHIBIT 10.25
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND FORBEARANCE AGREEMENT
This First Amendment to Loan and Security Agreement and Forbearance
Agreement (this "Amendment") is entered into as of December 31, 1998, by and
between Comerica Bank-California ("Bank") and General Automation, Inc.
("Borrower").
RECITALS
A. Borrower and Bank are parties to that certain Loan and Security Agreement
dated as of December 18, 1997 (the "Loan Agreement"), as modified by that
certain Modification to Loan & Security Agreement dated as of January 8, 1998
(the "First Modification") and that certain modification to Loan & Security
Agreement dated as of May 28, 1998 (the "Second Modification") (collectively,
the "Loan Documents"). Borrower and Bank desire to amend the terms of the Loan
Documents in accordance with the terms of this Amendment.
B. As of the date hereof, there is due and owing under the Loan Documents the
principal amount of TWO MILLION TWO-HUNDRED THOUSAND AND NO/100 DOLLARS
($2,200,000.00) together with accrued but unpaid interest, attorneys' fees and
costs. Such amount, plus accruing interest and ongoing attorneys' fees and
costs are hereinafter referred to as the "Existing Debt."
C. One or more Events of Default have occurred under the Loan Documents by
virtue of (i) Borrower's failure to comply with the covenants of the Loan
Documents as of certain dates from March 31, 1998 through the date hereof and
(ii) Borrower's failure to make required payments of principal and interest
when due. Such Events of Default entitle Bank to immediately enforce all the
remedies set forth in the Loan Documents. Borrower has asked Bank to forbear
from exercising those remedies as a result of such Events of Default and Bank
has agreed, provided Borrower enters into this Amendment.
NOW, THEREFORE, for good and valuable consideration, the parties agree as
follows:
1. Defined Terms. Capitalized terms not otherwise defined herein shall
have the same meanings as set forth in the Loan Documents.
2. Acknowledgment of Liability. As of the date of this Amendment,
Borrower owes Bank an amount equal to the Existing Debt. Borrower reaffirms all
of its obligations under the Loan Documents and hereby forever waives and
relinquishes any and all claims, offsets or defenses that Borrower may now have
with respect to the payment of sums due and the performance of other
obligations under the Loan Documents. The security interests in the Collateral
granted to Bank under the Loan Agreement remain perfected, first priority liens.
3. Forbearance. Borrower acknowledges that there are existing and
uncured Events of Default under the Loan Documents. Borrower further
acknowledges and agrees that Bank is not in any way agreeing to waive such
Events of Default as a result of this Amendment or the
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performance by the parties of their respective obligations hereunder. Subject to
the conditions contained herein and performance by Borrower all of the terms of
this Amendment after the date hereof, Bank shall, until March 31, 1999 or such
date that there shall occur any further Event of Default, which ever occurs
first, forbear from exercising any remedies that it may have against Borrower
as a result of the occurrence of the Events of Default. Such forbearance does
not apply to any other Event of Default or other failure by Borrower to perform
in accordance with the Loan Documents or this Amendment. This forbearance shall
not be deemed a continuing waiver or forbearance with respect to any Event of
Default of a similar nature that may occur after the date of this Amendment.
4. Amendments to Loan Documents. The Loan Documents are amended as
follows:
a. Section 2.1 is amended in its entirety to read as follows:
"Upon the request of Borrower, made at any time and from time to
time during the term hereof, and so long as no Event of Default has
occurred, Bank shall lend to Borrower an amount equal to the
Borrowing Base; provided, however, that in no event shall Bank be
obligated to make advances to Borrower under this Section 2.1
whenever the Daily Balance exceeds, at any time, either the
Borrowing Base or the sum of TWO MILLION TWO-HUNDRED THOUSAND AND
NO/100 DOLLARS ($2,200,000.00), such amount being referred to herein
as "Overadvance"."
b. Section 6.16(c) is amended to read as follows:
"In addition to the financial statements requested above, Borrower
agrees to provide Bank with the following schedules:
Accounts Receivable Aging on a Monthly Basis.
Accounts Payable Aging on a Monthly Basis.
Borrowing Base Certificates on a Monthly Basis -- for both product
sales and service contracts.
Cash Receipts and Disbursements Analysis, as evidenced by
Borrower's Daily Cash Report in form and substance acceptable to
Bank, on a Daily Basis."
c. Section 6.17(b) is deleted in its entirety.
d. Section 6.17(e) is deleted in its entirety.
e. The following is added to Section 6.17(j):
"Cash Flow on a weekly basis, as delineated on the Daily Cash
Receipts and Disbursement Analysis, will be $1.00 or greater."
5. Overadvance. Borrower acknowledges and agrees that as of the date
of this Amendment, there exists an Overadvance, as defined in the Loan
Agreement, in the amount of
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FIVE-HUNDRED EIGHTY-SEVEN THOUSAND AND NO/100 DOLLARS ($587,000.00) (the
"Overadvance").
6. Reduction of Existing Debt and Overadvance. Commencing January 1,
1999, and continuing thereafter until paid in full, Borrower agrees to remit
monthly payments to the Bank in the amount of $50,000 to retire the principal
amount of the Overadvance. In addition, commencing that date and continuing
thereafter, Borrower agrees to make interest-only payments on the balance of
the Existing Debt, on the terms set forth herein and in the Loan Departments.
7. Fees and Expenses. Borrower agrees to pay to Bank a fee equal to
Twenty-Two Thousand Dollars ($22,000), which fee shall be deemed to be fully
earned, nonrefundable and payable in full as of the date hereof (the "Amendment
Fee"). In addition, as a condition to the effectiveness of this Amendment,
Borrower shall pay to Bank all Bank expenses incurred in connection with the
preparation and negotiation of this Amendment.
8. Representations and Warranties. Borrower represents and warrants that
the Representations and Warranties contained herein and in the Loan Documents
are true and correct as of the date of this Amendment (except such
representations and warranties to be expressly true as of a specific date),
and that no Event of Default except as set forth herein, has occurred.
9. Conditions Precedent. The effectiveness of this Amendment is subject
to the following conditions precedent:
1. Receipt by Bank of the following (each of which shall be in form
and substance satisfactory to Bank and its counsel):
a. this Amendment, and such other agreements and instruments
reasonably requested by Bank pursuant hereto (including such documents as are
necessary to create and perfect Bank's security interest in the Collateral),
each duly executed by Borrower.
b. a certificate of the secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Amendment, in form and substance acceptable to Bank;
2. Receipt by Bank of the Amendment Fee;
3. Texas Micro Inc. ("TMI") shall have affirmed the terms of its
Subordination Agreements with Bank; and shall have waived any defaults of
Borrower existing through the date hereof arising under any agreements or
instruments evidencing the Subordinated Debt;
4. Payment by Borrower of all Bank expenses incurred in the
preparation and negotiation of this Amendment; and
5. Receipt of such other documents, and completion of such other
matters as Bank may reasonably deem necessary or appropriate.
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10. Waiver of Notice and Cure. Borrower acknowledges that an Event (or
Events) of Default occurred under the Loan Documents that, but for this
Amendment, would have entitled Bank to exercise all the remedies available to
Bank under the Loan Documents and applicable law. Borrower waives all notices
of default and rights to cure that are otherwise provided in the Loan Documents
or applicable law, including rights to notice and redemption under California
Uniform Commercial Code sections 9504, 9505 and 9506.
11. Release.
1. Borrower acknowledges that Bank would not enter into this
Amendment without Borrower's assurance that Borrower has no claims against Bank
or any of Bank's officers, directors, employees or agents. Except for the
obligations arising hereafter under this Amendment, Borrower releases Bank and
each of Bank's officers, directors and employees from any known or unknown
claims which Borrower now has against Bank of any nature, including any claims
that Borrower, its successors, counsel, and advisors may in the future discover
they would have now had if they had known facts not now known to them, whether
founded in contract, in tort or pursuant to any other theory of liability,
including but not limited to any claims arising out of or related to the Loan
Documents or the transactions contemplated thereby. Borrower waives the
provisions of California Civil Code section 1542, which states:
A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
2. The provisions, waivers and releases set forth in this section
are binding upon Borrower and Borrower's shareholders, agents, employees,
assigns and successors in interest. The provisions, waivers and releases of this
section shall inure to the benefit of Bank and its agents, employees, officers,
directors, assigns and successors in interest.
3. The provisions of this section shall survive payment in full of
the Obligations, full performance of all the terms of this Amendment and the
Loan Documents, and/or Bank's actions to exercise any remedy available under
the Loan Documents or otherwise.
4. Borrower warrants and represents that Borrower is the sole and
lawful owner of all right, title and interest in and to all of the claims
released hereby and Borrower has not heretofore voluntarily, by operation of
law or otherwise, assigned or transferred or purported to assign or transfer to
any person any such claim or any portion thereof. Borrower shall indemnify and
hold harmless Bank from and against any claim, demand, damage, debt, liability
(including payment of attorneys' fees and costs actually incurred whether or
not litigation is commenced) based on or arising out of any assignment or
transfer.
12. Further Assurances. Borrower will take such other actions as Bank may
reasonably request from time to time to perfect or continue Bank's security
interests in Borrower's property, and to accomplish the objectives of this
Agreement.
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13. Consultation of Counsel. Borrower acknowledges that Borrower has had
the opportunity to be represented by legal counsel of its own choice throughout
all of the negotiations that preceded the execution of this Amendment. Borrower
has executed this Amendment after reviewing and understanding each provision of
this Amendment and without reliance upon any promise or representation of any
person or persons acting for or on behalf of Bank. Borrower further
acknowledges that Borrower and its counsel have had adequate opportunity to
make whatever investigation or inquiry they may deem necessary or desirable in
connection with the subject matter of this Amendment prior to the execution
hereof and the delivery and acceptance of the consideration described herein.
14. Miscellaneous.
1. Successors and Assigns. This Amendment shall be binding upon and
shall inure to the benefit of Borrower and Bank and their respective successors
and assigns; provided, however, that the foregoing shall not authorize any
assignment by Borrower of its rights or duties hereunder.
2. Entire Agreement. This Amendment and the Loan Documents contain
the entire agreement of the parties hereto and supersede any other oral or
written agreements or understandings with respect to the subject matter hereof
and thereof.
3. Course of Dealing; Waivers. No course of dealing on the part of
Bank or its officers, nor any failure or delay in the exercise of any right(s)
by Bank, shall operate as a waiver thereof, and any single or partial exercise
of any such right(s) shall not preclude any later exercise of any such
right(s). Bank's failure at any time to require strict performance by Borrower
of any provision shall not affect any right(s) of Bank thereafter to demand
strict compliance and performance. Any suspension or waiver of a right(s) must
be in writing signed by an officer of Bank.
4. Time is of the Essence. Time is of the essence as to each and
every term and provision of this Amendment and the other Loan Documents.
5. Counterparts. This Amendment may be signed in counterparts and
all of such counterparts when properly executed by the appropriate parties
thereto together shall serve as a fully executed document, binding upon the
parties.
6. Legal Effect. The Loan Documents remain in full force and effect.
If any provision of this Amendment conflicts with applicable law, such
provision shall be deemed severed from this Amendment, and the balance of this
Amendment shall remain in full force and effect.
7. WAIVER OF JURY. BANK AND BORROWER ACKNOWLEDGE AND AGREE THAT THE
TIME AND EXPENSE REQUIRED FOR TRIAL BY JURY EXCEED THE TIME AND EXPENSE
REQUIRED FOR A BENCH TRIAL AND HEREBY WAIVE, TO THE EXTENT PERMITTED BY LAW,
TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON, RELATED TO OR ARISING
OUT OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN
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DOCUMENTS, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY
RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AMENDMENT. EACH PARTY REPRESENTS
AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND
THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.
8. Assignment and Indemnity. Borrower consents to Bank's
assignment of all or any part of Bank's rights under this Amendment and
the Loan Documents. Borrower shall indemnify and defend and hold Bank
and an assignee of Bank's interests harmless from any actions, costs,
losses or expenses (including attorneys' fees) arising out of such
assignment, this Amendment and the Loan Documents.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the first date above written.
GENERAL AUTOMATION, INC.
By:
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Xxxxxx Xxxxxx
Title: Vice President
COMERICA BANK--CALIFORNIA
By: /s/ XXXXXXX X. XXXXX
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Xxxxxxx X. Xxxxx
Title: Chief Financial Officer
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