Exhibit 10.7
Comerica Bank - California
00 Xxxxxxx Xxxxxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
(000) 000-0000
MODIFICATION TO THE REVOLVING LOAN & SECURITY AGREEMENT
This first Modification to a Revolving Loan & Security Agreement (this
"Modification") is entered into by and between SBE, INC. ("Borrowers") and
Comerica Bank-California ("Bank") as of this 17th day of January, 1996, at San
Jose, California.
RECITALS
A. Bank and Borrower have previously entered into or are concurrently
herewith entering into a Revolving Loan & Security Agreement (Accounts &
Inventory) (the "Agreement") dated May 23, 1995.
B. Borrower has requested, and Bank has agreed, to modify the Agreement as
set forth below.
AGREEMENT
For good and valuable consideration, the parties agree as set forth below:
SECTION 1.5 "Borrowing Base" as used in this Agreement means the sum of: (1)
SEVENTY percent (70.00%) of the net amount of Eligible Accounts after deducting
therefrom all payments, adjustments and credits applicable thereto ("Accounts
Receivable Borrowing Base"); and (2) the amount, if any, of the advances against
inventory agreed to be made pursuant to any Inventory Rider ("Inventory
Borrowing Base"), or other rider, amendment or modification to this Agreement,
that may now or hereafter be entered into by Bank and Borrower.
SECTION 1.12 "Eligible Accounts" as used in this Agreement means and includes
those accounts of Borrower which are due and payable within THIRTY (30) days, or
less, from the date of invoice, have been validly assigned to Bank and strictly
comply with all of Borrower's warranties and representations, to Bank; but
Eligible Account shall not include the following: (a) accounts with respect to
which the account debtor is an officer, employee, partner, joint venturer or
agent of Borrower; (b) accounts with respect to which goods are placed on
consignment, guaranteed sale or other terms by reason of which the payment by
the account debtor may be conditional; (c) accounts with respect to which the
account debtor is not a resident of the United States; (d) accounts with respect
to which the account debtor is the United States or any department, agency or
instrumentality of the United States; (e) accounts with respect to which the
account debtor is any State of the United States or any city, county, town,
municipality or division thereof; (f) accounts with respect to which the account
debtor is a subsidiary of, related to, affiliated or has
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common shareholders, officers or directors with Borrower; (g) accounts with
respect to which Borrower is or may become liable to the account debtor for
goods sold or services rendered by the account debtor to Borrower; (h) accounts
not paid by an account debtor within ninety (90) days from the date of invoice;
(i) accounts with respect to which account debtors dispute liability or make any
claim, or have any defense, crossclaim, counterclaim, or offset; (j) accounts
with respect to which any Insolvency Proceeding is filed by or against the
account debtor, or if an account debtor becomes insolvent, falls or goes out of
business; and (k) accounts owed by any single account debtor which exceed twenty
percent (20%) of all of the Eligible Accounts; and (l) accounts with a
particular account debtor on which over twenty-five percent (25%) of the
aggregate amount owing is greater than ninety (90) days from the date of the
invoice. CONCENTRATION ALLOWANCE OF 30% FOR SIEMENS, AOL, AND TANDEM COMPUTERS.
ALLOW 50% ADVANCE RATE ON ELIGIBLE FOREIGN RECEIVABLES FROM NTT (JAPAN) AND
SIEMENS (GERMANY) UP TO $500,000.00 COMBINED TOTAL.
SECTION 2.2 Except as hereinbelow provided, the Credit shall bear interest,
on the Daily Balance owing, at a rate of ONE PERCENT (1.00%) percentage points
per annum above the Base Rate ("the Rate"). The Credit shall bear interest,
from and after the occurrence of an Event of Default and without constituting a
waiver of any such Event of Default, on the Daily Balance owing, at a rate three
(3) percentage points per annum above the Rate. All interest chargeable under
this Agreement that is based upon a per annum calculation shall be computed on
the basis of a three hundred sixty (360) day year for actual days elapsed.
SECTION 6.16B Borrower shall deliver to Bank within thirty (30) days after the
end of each MONTH a CONSOLIDATED balance sheet and profit and loss statement
covering Borrower's operations and deliver to Bank within ninety (90) days after
the end of each of Borrower's fiscal years an ANNUAL UNQUALIFIED CPA AUDITED
statement of financial condition of the Borrower for each such fiscal year,
including but not limited to, a balance sheet and profit and loss statement and
any other report requested by Bank relating to the Collateral and the financial
condition of Borrower, and a certificate signed by an authorized employee of
Borrower to the effect that all reports, statements, computer disk or tape
files, computer printouts, computer runs, or other computer prepared information
of any kind or nature relating to the foregoing or documents delivered or caused
to be delivered to Bank under this subparagraph are complete, correct, and
thoroughly present the financial condition of borrower and that there exists on
the date of delivery to Bank no condition or event which constituted a breach or
Event of Default under this Agreement. BORROWER TO PROVIDE QUARTERLY 10Q
REPORTS WITHIN 45 DAYS OF QUARTER END.
SECTION 6.16C In addition to the financial statements requested above, the
Borrower agrees to provide Bank with the following schedules:
x Accounts Receivable Agings on a WEEKLY basis.
------------
x Accounts Payable Agings on a MONTHLY basis.
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x Summary Distributor Sell-Through Report on a MONTHLY basis.
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x Borrowing Base Certificate on a MONTHLY basis
------------
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SECTION 6.17 Borrower shall maintain at all times the following financial
ratios and covenants on a consolidated and non-consolidated basis:
b. Tangible Effective Net Worth in an amount not less than $7,000,000.00.
d. A quick ratio of cash plus securities plus Receivables to Current
Liabilities of not less than 1.00:1.00.
e. A ratio of Total Liabilities (less debt subordinated to Bank) to
Tangible Effective Net Worth of less than 0.70:1.00.
g. Net Income after taxes of $0.00 with and allowance for $2,000,000.00
loss on first quarter 1996.
INCORPORATION BY REFERENCE. The Agreement as modified hereby and the
Recitals are incorporated herein by this reference.
LEGAL EFFECT. Except as specifically set forth in this Modification, all
of the terms and conditions of the Agreement remain in full force and effect.
INTEGRATION. This is an integrated Modification and supercedes all prior
negotiations and agreements regarding the subject matter hereof. All amendments
hereto must be in writing and signed by the parties.
IN WITNESS WHEREOF, the parties have agreed as of the date first set for
above.
SBE, Inc. Comerica Bank - California
/s/ Xxxxxxx X. Xxxx /s/ Xxxx Xxxx Xxxx
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Xxxxxxx X. Xxxx, Vice President, Xxxx Xxxx Xxxx, Vice President
Chief Financial Officer
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