EXHIBIT 10(i)
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of November 13, 1997,
by and between EIP Microwave, Inc. ("Borrower") whose address is 0000 XxXxxxxxxx
Xxxxx, Xxxxxxxx, XX 00000, and Silicon Valley Bank ("Silicon") whose address is
0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, XX 00000.
1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other obligations which may be
owing by Borrower to Silicon, Borrower is indebted to Silicon pursuant to, among
other documents, a Loan and Security Agreement, dated March 10, 1992 (including
the Schedule thereto), as amended from time to time, (the "Loan Agreement"). The
Loan Agreement provided for, among other things, a Credit Limit in the original
principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) (the
"A/R Facility"). The A/R Facility has been modified pursuant to, among other
documents, a Loan Modification Agreement, dated November 15, 1996, pursuant to
which, among other things, the Credit Limit was decreased to One Hundred Eighty
Five Thousand and 00/100 Dollars ($185,000.00) and further modified by a Loan
Modification Agreement, dated January 15, 1997, pursuant to which, among other
things, the Credit Limit was increased to Five Hundred Thousand and 00/100
Dollars ($500,000.00). Defined terms used but not otherwise defined herein shall
have the same meanings as in the Loan Agreement.
Hereinafter, all obligations owing by Borrower to Silicon shall be referred to
as the "Obligations."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Obligations is
secured by the Collateral as described in the Loan Agreement. Additionally,
repayment of the Obligations shall be guaranteed by Xxxx X. Xxxxxx and Xxx X.
Xxxxxx, individually and as Trustees of the Xxxxxx Family Trust and Xxxx
Xxxxxxxx Xxxxxx and Xxxxx Xxx Xxxxxx, individually and as Trustees of the Xxxxxx
1992 Family Trust (each, a "Guarantor") pursuant to six (6) Unconditional
Guaranty agreements (each, a "Guaranty") to be executed concurrently herewith.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Obligations shall be referred
to as the "Security Documents". Hereinafter, the Security Documents, together
with all other documents evidencing or securing the Obligations shall be
referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. MODIFICATION(S) TO LOAN AGREEMENT (AND SCHEDULE THERETO).
1. The Maturity Date set forth in Section 5.1 is hereby deleted and
replaced with January 31, 1998.
2. The Letter of Credit Sub-Limit set forth in Section 1.1 is hereby
deleted and replaced with "Intentionally Omitted". Accordingly,
Silicon shall no longer issue or cause to issue Letters of Credit
on behalf of Borrower under such facility.
3. The first sentence of Section 1.2 entitled "Interest Rate" is
hereby amended to read in its entirety as follows:
Effective as of the date hereof, a rate equal to the "Prime Rate"
in effect from time to time, plus five (5.00) percentage points
per annum.
4. The paragraph entitled "Financial Covenants (Section 4.1)" is
hereby deleted and replaced with the following:
Borrower will comply with the following covenants.
QUICK ASSET RATIO: Borrower shall maintain, on a monthly
basis, beginning with the month ended October 31, 1997 a
ratio of "Quick Assets" to current liabilities of not less
than 0.40 to 1.00.
TANGIBLE NET WORTH: Borrower shall maintain, on a monthly
basis, beginning with the month ended October 31, 1997, a
tangible net worth of not less than $790,000.00.
DEBT TO TANGIBLE NET WORTH: Borrower shall maintain, on a
monthly basis, beginning with the month ended October 31,
1997, a ratio of total liabilities to tangible net worth of
not more than 2.10 to 1.00.
PROFITABILITY: Borrower shall be profitable (after taxes)
on a monthly basis with an allowance for losses not to
exceed $295,000.00 for the month ended October 31, 1997,
$120,000.00 for the month ending November 30, 1997 and
$215,000.00 for the month ending December 31, 1997.
5. The first paragraph of the section entitled "Credit Limit
(Section 1.1)" is hereby amended to read in its entirety as
follows:
An amount not to exceed the lesser of: (i) $500,000.00 at any one
time outstanding or (ii) 60% of the Net Amount of Borrower's
accounts, which Silicon in its discretion deems eligible for
borrowing.
6. The third paragraph of the section entitled "Credit Limit
(Section 1.1)" is hereby amended in part as follows:
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Accounts owing from account debtors outside the United States
shall be deemed eligible for borrowing; provided that such
accounts are (1) covered by credit insurance satisfactory to
Silicon, less any deductible; or (2) supported by letter(s) of
credit which shall be assigned to Silicon and be acceptable to
Silicon in its sole discretion.
7. Paragraph 2 of the section of the Schedule to the Loan Agreement
entitled "Other Covenants: (Section 4.1)" is hereby deleted and
replaced with the following
Borrower shall at all times comply with the following:
a. Deliver monthly an aged list of accounts receivable and
an aged list of accounts payable, together with a
Borrowing Base Certificate to Silicon, showing invoice
date, payment terms, address listings for each account
debtor and due dates, within ten (10) days after the
end of each month.
b. Deliver to Silicon at the time of each advance and/or
paydown request or if no advance or paydown is
requested, at least once per week, a Daily Transaction
Report.
c. Deliver promptly upon the issuance thereof, copies of
each credit memorandum issued by Borrower exceeding
$1,000.00.
d. Deliver monthly internally prepared financial
statements, together with a compliance certificate to
Silicon, within thirty (30) days after the end of each
month, in form that Silicon shall specify, signed by an
authorized officer of Borrower, certifying that as of
the end of such month Borrower was in full compliance
with all the terms and conditions of the Loan
Agreement.
e. Deliver 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
$100,000.00 or more.
f. Deliver such budgets, sales projections, operating
plans or other financial information as Silicon may
reasonably request from time to time.
g. Silicon shall have the right to perform accounts
receivable audits of Borrower's book and records as
Silicon shall reasonably deem appropriate, however, not
less than on a quarterly basis. Borrower's deposit
account will be debited for the audit expense and a
notification will be mailed to Borrower.
8. The following paragraphs are hereby incorporated into the Loan
Agreement:
LOCKBOX. Borrower shall maintain a lockbox account (the
"Lockbox") with Silicon and shall cause all Borrower's accounts
receivable collections to be remitted directly to the Lockbox.
Silicon will transfer good funds in the Lockbox to a cash
collateral account (the "Cash Collateral Account"). Borrower
hereby grants Silicon a security interest in the Lockbox and Cash
Collateral Account to secure the Obligations. Silicon shall have
exclusive possession, dominion, and control over the Lockbox and
Cash Collateral Account. Borrower may request that funds in the
Cash Collateral Account either be released to Borrower or applied
to pay the Obligations; PROVIDED that each such request shall be
in writing and shall be accompanied by a fully completed Daily
Transaction Report in the form heretofore provided by Silicon to
Borrower and FURTHER PROVIDED that Silicon may at any time and
from time to time in its sole and absolute discretion apply any
and all funds in the Lockbox or Cash Collateral Account toward
payment of the Obligations in such order of priority as shall be
determined by Silicon.
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COLLATERAL ACCOUNT. Borrower shall open and maintain with
Silicon an account (the "Collateral Account") into which all
funds received by Borrower from account debtors shall immediately
be deposited. Borrower shall direct all account debtors to mail
or deliver all checks or other forms of payment for amounts owing
to Borrower to a post office box designated by Silicon, over
which Silicon shall have exclusive and unrestricted access.
Silicon shall collect the mail delivered to such post office box,
open such mail, and endorse and credit all items to the
Collateral Account. Borrower shall direct all account debtors or
other persons owing money to Borrower who make payments by
electronic transfer of funds to wire such funds directly to the
Collateral Account. Borrower shall hold in trust for Silicon all
amounts that Borrower receives despite the directions to make
payments to the post office box or Collateral Account, and
immediately deliver such payments to Silicon in their original
form as received from the account debtor, with proper
endorsements for deposit into the Collateral Account. Borrower
irrevocably authorizes Silicon to transfer to the Collateral
Account any funds that have been deposited into any other
accounts or that Silicon has otherwise received. Borrower shall
not establish or maintain any accounts with any person other than
Silicon except for accounts opened in the ordinary course of
business from which all funds are transferred on a daily basis to
the Collateral Account. Silicon shall have all right, title and
interest in all of the items from time to time in the Collateral
Account and their proceeds. Silicon shall have the right from
time to time in its sole discretion to apply all amounts in the
Collateral Account against outstanding Obligations of Borrower.
At such time, neither Borrower nor any person claiming through
Borrower shall have any right in or control over the use of, or
any right to withdraw any amount from, the Collateral Account,
which shall be under the sole control of Silicon.
COLLATERAL MONITORING FEE. One Thousand ($1,000.00) per month
shall be payable in arrears (prorated for any partial calendar
month at the beginning and termination of this Agreement).
9. Notwithstanding Borrower's existing default under the "Negative
Covenants" section by virtue of Borrower incurring $1,450,000.00
in additional debt without the prior consent of Silicon, Silicon
agrees to waive such default, PROVIDED such additional debt be
subordinated to Silicon on terms and form acceptable to Silicon.
10. The section entitled "Subordinated Debt" is hereby amended to
read in its entirety as follows:
Subordinated Debt shall mean indebtedness which is subordinated
to Silicon, in form and substance acceptable to Silicon and from
the following Creditor: Xxxx X. Xxxxxx and Xxx X. Xxxxxx as
Trustees of the Xxxxxx Family Trust.
B. WAIVER OF COVENANT DEFAULTS.
1. Silicon hereby waives Borrower's existing default under the Loan
Agreement by virtue of Borrower's failure to comply with the
Tangible Net Worth covenant as of the month ended September 30,
1997, the Profitability covenant as of the quarters ended June
30, 1997 and September 30, 1997 and the default which occurred as
a result of Borrower's failure to comply with the Negative
Covenants as described above. Silicon's waiver of Borrower's
compliance of these covenants shall apply only to the foregoing
periods. Accordingly, for the month ended October 31, 1997,
Borrower shall have been in compliance with these covenants, as
amended herein.
Silicon's agreement to waive the above-described default (1) in
no way shall be deemed an agreement by the Silicon to waive
Borrower's compliance with the above-described covenants as of
all other dates and (2) shall not limit or impair the Silicon's
right to demand strict performance of these covenants as of all
other dates and (3) shall not limit or impair the Silicon's right
to demand strict performance of all other covenants as of any
date.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
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5. PAYMENT OF LOAN FEE. Borrower shall pay to Silicon a fee in the amount of
Five Hundred and 00/100 Dollars ($500.00) (the "Loan Fee") plus all
out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees, as of the date hereof, that it has no defenses against the
obligations to pay any amounts due under the Existing Loan Documents.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing Obligations,
Silicon is relying upon Borrower's representations, warranties, and
agreements, as set forth in the Existing Loan Documents. Except as
expressly modified pursuant to this Loan Modification Agreement, the terms
of the Existing Loan Documents remain unchanged and in full force and
effect. Silicon's agreement to modifications to the existing Obligations
pursuant to this Loan Modification Agreement in no way shall obligate
Silicon to make any future modifications to the Obligations. Nothing in
this Loan Modification Agreement shall constitute a satisfaction of the
Obligations. It is the intention of Silicon and Borrower to retain as
liable parties all makers and endorsers of Existing Loan Documents, unless
the party is expressly released by Silicon in writing. No maker, endorser,
or guarantor will be released by virtue of this Loan Modification
Agreement. The terms of this paragraph apply not only to this Loan
Modification Agreement, but also to all subsequent loan modification
agreements.
8. GENERAL WAIVER. In consideration of Silicon entering into this Agreement,
Borrower, releases and forever discharges Silicon from any claim,
liability, obligation, action and cause of action, whether known or unknown
which any of them, or any predecessor of them, now owns or holds by reason
of any matter done, omitted or suffered to be done, prior to the date of
this Agreement. This release runs in favor of Silicon, its parent,
affiliate and subsidiary corporations, participant banks (if any) its
present and former officers, employees, agents, affiliates, and successors
in interest. In furtherance of the release contained in this section,
Borrower waives such rights as might otherwise exist pursuant to California
Civil Code Section 1542, which provides:
"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."
Borrower further warrants, represents and agrees: (i) that it has executed this
Agreement and release with full knowledge of any rights it may have with respect
to Silicon and the other parties released; (ii) that Borrower has received
independent legal advice with respect to the matters set forth above and the
rights and assertive rights arising out of said matters; and (iii) that Borrower
has not relied upon any statement of fact or omission to state a fact by
Silicon, or by any one acting on behalf of Silicon, with respect to the matters
covered by this Agreement and release, and underlying disputes between the
parties, except for those acts represented by Silicon as set forth in this
Agreement.
9. JURY TRIAL WAIVER. Silicon and Borrower hereby waive the right to any jury
trial in any action, proceeding, counterclaim or cause of action brought by
either Silicon or Borrower against the other. (INITIAL HERE _______________)
10. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon Borrower's payment of the Loan Fee and delivery of fully
executed Guaranty agreements by the above-named Guarantors.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: SILICON:
EIP MICROWAVE, INC. SILICON VALLEY BANK
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxxxxx X. Xxxxxxx
------------------------- ------------------------------
Name: Xxxxx X. Xxxxxx Name: Xxxxxxxxx X. Xxxxxxx
Title: President Title: Vice President
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