Exhibit 10.8
SIXTH AMENDMENT TO SECOND AMENDED AND
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RESTATED LOAN AGREEMENT
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THIS SIXTH AMENDMENT TO LOAN AGREEMENT (the "Sixth Amendment") is made as
of this 8th day of May 2000, by and between STORAGE COMPUTER CORPORATION, a
Delaware corporation (the "Borrower") and CITIZENS BANK OF MASSACHUSETTS
(successor in interest to State Street Bank and Trust Company), a Massachusetts
chartered trust company (hereinafter referred to as the "Bank").
WHEREAS, the Borrower and the Bank are parties to a Second Amended and
Restated Loan Agreement dated as of November 16, 1998 as amended by the First
Amendment to Second Amended and Restated Loan Agreement dated as of April 30,
1998, Second Amendment to Second Amended and Restated Loan Agreement dated as of
July 1, 1999, Third Amendment to Second Amended and Restated Loan Agreement
dated as of October 25, 0000, Xxxxxx Xxxxxxxxx to Second Amended and Restated
Loan Agreement dated as of December 22, 1999 and a letter agreement dated as of
April 6, 2000 (collectively, the "Loan Agreement"). Capitalized terms used
herein and not otherwise defined shall have the meanings set forth in the Loan
Agreement.
NOW, THEREFORE, in consideration of these premises and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereby amend the Loan Agreement as follows:
Section 1. Amendment of Section 1.01. Section 1.01 of the Loan Agreement is
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hereby amended as follows:
(a) the definition of "Maturity Date" contained in Section 1.01 of the Loan
Agreement is deleted in its entirety and replaced with the following: "Maturity
Date" shall mean January 2, 2001.
(b) the definition of "Maximum Line Availability" contained in Section 1.01
of the Loan Agreement is deleted in its entirety and replaced with the
following:
"Maximum Line Availability" shall mean the line of credit made
available to the Borrower under this Agreement (subject to the proviso
at the end of this definition) in the maximum principal amounts during
the following periods indicated:
Period Maximum Line Availability
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May 8, 2000 up to the Maturity Date $1,730,000
Maturity Date 0
provided, however, the Maximum Line Availability shall be permanently
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reduced by any proceeds received by the Borrower or Bank pursuant to
Section 2.01(g).
(c) the definition of "Note" contained in Section 1.01 of the Loan
Agreement is deleted in its entirety and replaced with the following:
"Note" shall mean the secured Fifth Amended and Restated Line of
Credit Note in the maximum principal amount of $1,730,000 dated May 8,
2000 issued by the Borrower to the Bank in the form of Exhibit A
hereto, and all extensions, renewals, modifications, substitutions,
replacements and restatements thereof.
(d) the following definitions shall be deleted from Section 1.01 of the
Loan Agreement: "One Year Extension Date", "Sixth Month Extension Date" and
"Three Month Extension Date."
(e) the following definition shall be added to Section 1.01 of the Loan
Agreement in the appropriate alphabetical order:
"Additional Warrants" shall mean the Warrants attached hereto as Exhibit I
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and Exhibit J.
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Section 2. Amendment of Article II. Article II of the Loan Agreement is hereby
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amended as follows:
(a) Sections 2.01(g)(v), 2.02(a), 2.10 and 2.11 of the Loan Agreement are
hereby deleted in their entirety and replaced with the following Sections
2.01(g)(v), 2.02(a), 2.10 and 2.11:
Section 2.01(g)(v). Licensing Proceeds Prepayments. Within ten days of
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receipt, the Borrowers shall pay to the Bank as a prepayment of the Loans to be
applied as a permanent reduction of the Maximum Line Availability an amount
equal to 100% of any net proceeds, including without limitation any royalties or
other payments whether scheduled or otherwise, received from any licensing
agreement entered into by the Borrower or its Subsidiary after May 8, 2000.
Section 2.02(a). Rates of Interest. Through August 31, 2000, the Note
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shall bear interest on the unpaid principal amount thereof at a rate per annum
equal to the Prime Rate plus one percent (1%). After August 31, 2000, the Note
shall bear interest on the unpaid principal amount thereof at a rate per annum
equal to the Prime Rate plus three percent (3%).
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Section 2.10. Waiver and Restructure Fee. The Borrower shall pay to the
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Bank a non-refundable Waiver and Restructure Fee in the aggregate amount of
$200,000, of which (a) $25,000 (the "Initial Fee") will be paid on May 8, 2000;
and (b) the remaining $175,000 (the "Deferred Fee") of which shall be due and
payable in full on the Maturity Date; provided, however, that $25,000 of the
Deferred Fee shall be waived if all outstanding Obligations are paid in full in
cash on or prior to June 30, 2000. Notwithstanding the foregoing, the entire
Deferred Fee (i.e., $175,000) must be paid immediately without notice upon the
occurrence of an Event of Default. As of May 8, 2000, the Deferred Fee is the
only outstanding fee owing by the Borrower to the Bank pursuant to Section 2.10.
Section 2.11. Additional Warrants. On or before May 31, 2000, the
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Borrower agrees to execute and deliver to the Bank, or its nominee, two (2)
Additional Warrants (the "First Additional Warrant" and the "Second Additional
Warrant") to purchase an aggregate of 100,000 shares of Common Stock (as defined
in the Additional Warrants) at a purchase price of $15.00 per share. The First
Additional Warrant shall be to purchase 25,000 shares and shall be exercisable
for a three-year period beginning July 1, 2000. The Second Additional Warrant
shall be to purchase 75,000 shares and shall be exercisable for a three-year
period beginning September 1, 2000 (the "Exercise Date"). The Bank agrees that
in the event that by the Exercise Date the Borrower pays all of the Obligations
in full in cash and the Maximum Live Availability is permanently reduced to zero
the Bank will return the Second Additional Warrant to the Borrower marked
canceled.
Section 3. Affirmative Covenants. Article V of the Loan Agreement is hereby
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amended as follows:
(a) Section 5.16 of the Loan Agreement is deleted in its entirety.
Section 4. Financial Covenants. Article VII of the Loan Agreement is hereby
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amended as follows:
(a) Sections 7.01 and 7.02 of the Loan Agreement are deleted in their
entirety and replaced with the following:
Section 7.01. Minimum Working Capital.
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The Borrower shall maintain at all times Working Capital of at least
$750,000 either in cash or unused Maximum Line Availability.
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Section 7.02. Maximum Net Operating Loss.
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The Borrower will not permit its Net Operating Loss, for any of the
fiscal periods, to be more than $250,000 for each quarter beginning the
quarter ending June 30, 2000.
Section 5. Waiver of Defaults. The Borrower has informed the Bank that Events
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of Default have occurred under the Credit Agreements as a result of the failure
of the Company to observe the following covenants set forth on Schedule 1 hereto
(the "Designated Events of Default"). The Bank hereby waives the Designated
Events of Default solely as of the dates of such defaults. This waiver is
limited as to the Designated Events of Default and shall not (other than as set
forth herein) constitute a modification, amendment or waiver of any other
provision of the Credit Agreements or constitute a course of dealing between the
parties.
Section 6. Conversion of Cash Collateral. The Bank, the Borrower and Xxxxxxxx
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Xxxxxxxxxx hereby agree that the $1,000,000 in cash (the "Cash Collateral")
pledged to the Bank by Xxxxxxxx Xxxxxxxxxx on April 6, 2000 as additional
security for the Obligations (including obligations under the Xxxxxxxxxx
Guaranty) shall be converted on the date hereof by the Bank and applied in the
Bank's discretion to outstanding Obligations.
Section 7. Effectiveness; Conditions to Effectiveness. This Sixth Amendment to
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Loan Agreement shall become effective upon execution hereof by the Borrower and
the Bank and satisfaction of the following conditions:
(a) Delivery to the Bank of (i) this Sixth Amendment, (ii) the Note and
(iii) the Initial Fee.
(b) Confirmation of receipt of $5,820,000 of net proceeds from equity
financing on terms and conditions satisfactory to the Bank, applied against the
Obligations and permanently reducing the Maximum Line Availability.
(c) Delivery to the Bank such other documents as the Bank shall
reasonably require.
Section 8. Post-Closing Covenants. On or before May 31, 2000, the Borrower
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shall provide the Bank with the following documents (the "Conditions"):
(a) Copies of Resolutions of the Board of Directors of the Borrower
authorizing the execution, delivery and performance of the Borrower under this
Sixth Amendment and the Additional Warrants (as well as ratifying the
authorization of execution, delivery and performance of the Security Documents)
certified by a Secretary or an Assistant Secretary of the Borrower which
certificate shall state that the resolutions are in full force and effect.
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(b) Certificate of the Secretary or Assistant Secretary of the Borrower
certifying the name and signatures of the officers of the Borrower authorized to
sign this Sixth Amendment and other documents to be delivered in connection
therewith as well as certifying and delivering certified articles of
incorporation and by-laws.
(c) Delivery to the Bank of the Additional Warrants.
(d) Confirmation of the existing guarantees of the Borrower's
Subsidiaries and Xxxxxxxx Xxxxxxxxxx and the other Security Documents.
(e) Long Form Good Standing Certificates for Borrower.
The Borrower and the Bank agree that if the Borrower fails to meet all of the
Conditions by May 31, 2000 it will be deemed an Event of Default.
Section 9. Miscellaneous.
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(a) The Borrower hereby confirms to the Bank that the representations
and warranties of the Borrower set forth in Article III of the Loan Agreement
(as amended and supplemented hereby) are true and correct as of the date hereof,
as if set forth herein in full.
(b) The Borrower has reviewed the provisions of this Sixth Amendment and
all documents executed in connection therewith or pursuant thereto or incident
or collateral hereto or thereto from time to time and except otherwise set forth
on Schedule 1 attached hereto, there is no Event of Default, and no condition
which, with the passage of time or giving of notice or both, would constitute an
Event of Default.
(c) The Borrower agrees that each of the Loan Documents shall remain in
full force and effect after giving effect to this Sixth Amendment. The granting
of the liens and security interests under the Security Documents secure all the
Obligations as may be amended by this Sixth Amendment. The guarantees of the
Borrower's Subsidiaries guarantee all of the Obligations as may be amended by
this Sixth Amendment.
(d) This Sixth Amendment represents the entire agreement among the
parties hereto relating to this Sixth Amendment, and supersedes all prior
understandings and agreements among the parties relating to the subject matter
of this Sixth Amendment. The Borrower waives and releases any claims it may have
against, and forever discharges, the Bank and its officers, directors, agents,
attorneys, employees, successors and assigns (the "Releases") from any claims
and causes of action arising out of the transactions referred to or contemplated
in any way by the Loan Documents, and this Sixth Amendment or otherwise,
including without limitation, claims or defenses it may have to the effect that
the Releases may have in any way acted or failed to act in any manner as to
cause injury to the Borrower or anyone claiming by or through them.
(e) The Borrower represents and warrants that neither the execution,
delivery or performance by the Borrower of any of the obligations contained in
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this Sixth Amendment or in any Bank Document requires the consent, approval or
authorization of any person or governmental authority or any action by or on
account of with respect to any person or governmental authority.
(f) The Borrower agrees to pay on demand all of the Bank's reasonable
expenses in preparing, executing and delivering this Amendment, and all related
instruments and documents, including, without limitation, the reasonable fees
and out-of-pocket expenses of the Bank's special counsel and all travel related
expenses of the Bank in connection with any field audits or otherwise. This
Sixth Amendment shall be a Loan Document and shall be governed by and construed
and enforced under the laws of the Commonwealth of Massachusetts.
(g) The Bank agrees that upon satisfaction in full, in cash of the
Obligations as determined by the Bank, the Bank shall return to the Borrower any
collateral or other property of the Borrower, at the Borrower's expense.
(h) The Borrower and the Bank agree that Exhibits A, I and J attached to
this Sixth Amendment shall be Exhibits to the Loan Agreement and the Warrants
and Additional Warrants are Loan Documents under the Loan Agreement.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amendment
to Loan Agreement under seal as of the date first written above.
STORAGE COMPUTER CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxxxxxx
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Name: Xxxxxxxx X. Xxxxxxxxxx
Title: President
CITIZENS BANK OF MASSACHUSETTS
(as successor in interest to State Street Bank
and Trust Company)
By: /s/ Xxxxxxx Xxxxxx
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Name: Xxxxxxx Xxxxxx
Title: Senior Vice President
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DESIGNATED EVENTS OF DEFAULT
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Schedule 1
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The Designated Events of Default under the Loan Agreement are as follows:
1. The failure of the Borrower to comply with the financial covenants
contained in Sections 7.01, 7.02 and 7.03 of the Loan Agreement for the months
ended January 31, 2000, February 29, 2000, March 31, 2000 and April 30, 2000.
2. The failure of the Borrower to deliver to the Lender on a timely basis
the Borrower's monthly financial statements for the month ended March 31, 2000,
as required by Section 5.03(b) of the Loan Agreement.
DOCSC\877391.4
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