LOAN MODIFICATION AGREEMENT
(INCORPORATION OF EQUIPMENT LOAN FACILITY)
THIS AGREEMENT is made and entered into this ______ day of May, 1997,
by and between SOFTNET SYSTEMS, INC., a New York Corporation ("Softnet"),
COMMUNICATE DIRECT, INC., an Illinois Corporation ("CDI"), MICROGRAPHIC
TECHNOLOGY CORPORATION, a Delaware Corporation ("MTC"), KANSAS COMMUNICATIONS,
INC., a Kansas Corporation ("KCI") (Softnet, CDI, MTC, and KCI collectively
referred to as "Borrowers") and WEST SUBURBAN BANK ("Bank").
WHEREAS, Borrowers have executed and delivered to Bank a Revolving
Credit Note dated September 15, 1995 (the "Note") in the original principal
amount of $6,500,000.00 in which each of the Borrowers promises to pay to the
order of Bank the principal amount and interest thereon as more specifically
provided in the Note; and
WHEREAS, to secure the repayment of the Borrowers' obligations under
the Note, each of the Borrowers has executed and delivered to Bank a Loan and
Security Agreement dated September 15, 1995 and various other instruments and
documents executed in connection therewith (collectively the "Loan Agreements");
and
WHEREAS, Borrowers and Bank executed a Loan Modification Agreement
dated March 15, 1996 wherein the maximum amount of credit under the Note and the
Loan Agreements was increased to $9,500,000.00 and the Borrowing Base
limitations were modified in accordance with the terms thereof; and
WHEREAS, Borrowers and Bank executed additional Loan Modification
Agreements from time to time which further modified the terms of the Note and
the Loan Agreements; and
WHEREAS, Borrowers have requested that the Loan Agreements be further
modified in order to enable Borrowers to access the credit available thereunder
for purposes of financing equipment which Borrowers will lease to third party
lessees in accordance with the provisions of "price per fiche" agreements by and
between Borrowers and such third party lessees; and
WHEREAS, Bank has agreed to so modify the terms of the Loan Agreements
in accordance with the terms hereof.
NOW, THEREFORE, in consideration of Ten ($10.00) Dollars in hand paid
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. The foregoing recitals are incorporated herein by reference as though
fully set forth. Borrowers represent and warrant that the foregoing
recitals are true and correct.
2. Capitalized terms used herein shall have the meanings set forth in the
Loan Agreements unless the context clearly indicates otherwise.
3. The terms of each of the Loan Agreements are hereby modified to provide as
follows:
A. Additional Defined Terms. The following defined terms are hereby added
to the Loan Agreements:
i. "Equipment Loan" shall mean the credit facility in the amount
of $1,500,000.00 as more particularly described hereinbelow.
The Equipment Loan shall be evidenced by Borrowers' Draw Note
of even date herewith in the principal sum of $1,500,000.00, a
copy of which is attached hereto as Exhibit "A" and
incorporated herein by reference.
ii. "Draw Note" shall mean the Draw Note executed by Borrowers in
favor of Bank in the amount of $1,500,000.00 evidencing the
Equipment Loan.
iii. "Revolving Credit Note" shall mean the Revolving Credit Note
dated September 15, 1995 executed by Borrowers in favor of
Bank in the original amount of $6,500,000.00 (increased to
$9,500,000.00 in accordance with the provisions of the Loan
Modification Agreement dated March 15, 1996).
iv. "Note" shall include, collectively and individually, the Draw
Note and the Revolving Credit Note together with all
modifications, extensions, renewals, and replacements thereof.
v. "Leases" shall mean all leases or other lettings of possession
or use which Borrowers may have previously or may hereafter
enter into, including all amendments, supplements, renewals,
and replacements thereof, with respect to any of the Leased
Equipment, including all rights of Borrowers to receive
payment thereon.
vi. "Leased Equipment" shall mean all Equipment now owned or
hereafter acquired by Borrowers which were or will be
purchased with proceeds of Advances on the Equipment Loan.
vii. In addition to all other categories of property interests set
forth in the Loan Agreements, the term "Collateral" shall also
include the Leases and the Leased Equipment.
B. Basic Terms of the Equipment Loan
i. Maximum Amount/Availability. The maximum aggregate principal
balance of the Equipment Loan shall not at any time exceed
$1,500,000.00 (the "Credit Limit"). Principal which is repaid
may, subject to the terms and conditions hereof, be eligible
for disbursement again. Provided an Event of Default has not
occurred, Borrowers may make any number of draws ("Advances")
per month under the Equipment Loan subject to the terms and
limitations set forth herein and in the other Loan Documents.
Bank will render to Borrowers each month a statement of
Borrowers' account which shall constitute an account stated
and shall be deemed to be correct and accepted by and binding
upon Borrowers unless Bank receives a written notification of
Borrowers' exceptions within thirty (30) days after the date
such statement was rendered to Borrowers.
2
ii. Purpose/Use of Proceeds. Borrowers may utilize and draw
available funds under the Equipment Loan for the sole purpose
of financing Leased Equipment to be leased to third parties by
Borrowers in the ordinary course of Borrowers' business.
Advances will be made available for funding an amount not to
exceed 65% of the list price of each item of Leased Equipment.
Bank reserves the right to physically inspect and approve each
item of Leased Equipment to be financed with proceeds of any
Advance as a condition of making such Advance. All Leases of
Leased Equipment financed with proceeds of Advances hereunder
shall have a term of not more than 36 months. All Advances
under the Equipment Loan shall be subject to Bank's approval
which Bank may provide or withhold in its sole discretion.
Each item of Leased Equipment financed with proceeds of any
Advance shall be free of all other liens, encumbrances, and
other security interests and shall become subject to a
purchase money security interest in favor of Bank, and
Borrowers agree to execute and deliver all instruments,
documents, and financing statements requested from time to
time by Bank in order to evidence and perfect such purchase
money security interest. Borrowers further agree to take any
and all other action reasonably requested by Bank from time to
time in order to notify third parties of
Bank's security interest in such Leased Equipment.
iii. Expiration of Term. The Equipment Loan shall expire on the
Maturity Date, whereupon Bank's obligation to make Advances
thereon shall terminate without notice.
iv. Interest Rate. The rate of interest charged on the outstanding
principal balance during the entire term of the Equipment Loan
shall be the Prime Rate in effect from time to time plus one
(1%) percent per annum. During the term of the Equipment Loan,
changes in the interest rate will take effect
contemporaneously with changes in the Prime Rate on a daily
basis without notice.
v. Repayment Terms. Monthly payments of interest shall be made in
arrears and shall be due and payable on the first (1st) day of
each month until the Equipment Loan is repaid in full. In
addition to monthly interest payments, monthly principal
reduction payments shall be due and payable on the first (1st)
day of each month in an amount equivalent to one thirty-sixth
(1/36) of the original amount of each Advance until repaid in
full. In the event any item of Leased Equipment is sold or
otherwise disposed of by Borrowers, Borrowers shall
immediately repay the Advance attributable to such item of
Leased Equipment. Also, in the event any item of Leased
Equipment ceases to be leased to a third party lessee for a
period of six months, Borrowers shall immediately repay the
Advance attributable to such item of Leased Equipment.
vi. Prepayment. All or part of the principal balance of the
Equipment Loan may be prepaid in whole or in part at any time
without penalty.
vii. Leasing Documentation. Prior to each Advance, Borrowers shall
provide to Bank (a) a true and correct copy of the duly
executed Lease document; (b) an executed collateral assignment
of the Lease document; (c) an executed UCC-1 financing
statement describing the Lease and the item of Leased
Equipment; (d) an acceptance certificate duly executed by the
lessee of the item of Leased Equipment; (e) a delivery and
installation certificate duly executed by the lessee of the
item of Leased Equipment; (f) Borrower's undated letter
instructing the Lessee under the Lease to remit payment
directly to Bank; and (g)
3
any other information requested by Bank, all of which shall be
in form and substance satisfactory to Bank. Borrowers shall
also provide to Bank monthly status reports and such further
documents, schedules, or information as Bank may request,
including but not limited to schedules setting forth names and
addresses of lessees, locations of Leased Equipment, and
payments and maturities with respect to all Leases.
C. Aggregate Credit Limit. The amount of credit available under the
Revolving Credit Note and the Draw Note shall not exceed $11,000,000.00
in the aggregate.
D. Effect on Borrowing Base. The rental streams derived from the Leases of
Leased Equipment financed with proceeds of Advances of the Equipment
Loan shall be excluded from the definition of "Eligible Receivables"
for purposes of determining the Borrowing Base limitations applicable
to the Revolving Credit Note.
The Leased Equipment shall likewise be excluded from the definition of
"Eligible Inventory" for purposes of determining the Borrowing Base
limitations applicable to the Revolving Credit Note.
E. Cross-Collateralization. The Collateral shall secure repayment of both
the Revolving Credit Note and the Draw Note, together with all other
obligations under the Loan Documents.
F. Cross-Default. The cross default clause appearing in Section 14 of each
of the Loan Agreements shall apply to the Draw Note and the Revolving
Credit Note, together with all of the other Loan Documents. Upon the
occurrence of an Event of Default, in addition to all other rights and
remedies of Bank, Bank shall have the right to complete and date
Borrower's letters to the lessees instructing them to remit payments
directly to Bank and to transmit such letters to the lessees, and Bank
shall have the immediate right of possession of the original Lease
documents and shall have the right to enforce all rights of the lessor
thereunder.
G. Maturity Date. The Maturity Date of the Indebtedness evidenced by both
the Revolving Credit Note and the Draw Note shall be July 15, 1998, on
which date all of the Indebtedness shall be immediately due and payable
without notice or grace period.
4. The terms of the Loan Documents (as such term is defined in the Loan
Agreements) are hereby amended and modified to comport with the terms
of this instrument to the extent the terms of any of the Loan Documents
may be otherwise inconsistent with the terms hereof. In all other
respects, the terms and provisions of the Loan Documents shall remain
in full force and effect.
5. Borrowers hereby reaffirm all of the terms, provisions, warranties, and
representations set forth in each of the Loan Agreements and the other
Loan Documents as modified hereby. Without limiting the generality of
the foregoing, each of the Borrowers warrants and represents that no
event of default exists under any of the Loan Agreements or any of the
other Loan Documents and no event has occurred or condition exists
which with the passage of time or the giving of notice would or could
constitute an event of default.
6. Borrowers agree to promptly reimburse Bank for all attorney's fees and
costs incurred by Bank in connection with the negotiation, preparation,
and execution of this instrument.
4
IN WITNESS WHEREOF, the parties have entered into this Loan
Modification Agreement on the date first above written.
SOFTNET SYSTEMS, INC. COMMUNICATE DIRECT, INC.
By: ____________________________ By: ____________________________
Its: ____________________________ Its: ____________________________
Attest: ____________________________ Attest: ____________________________
Its: ____________________________ Its: ____________________________
MICROGRAPHIC TECHNOLOGY KANSAS COMMUNICATIONS, INC.
CORPORATION
By: ____________________________ By: ___________________________
Its: ____________________________ Its: ___________________________
Attest: ____________________________ Attest: ___________________________
Its: ____________________________ Its: ___________________________
WEST SUBURBAN BANK
By: ____________________________
Its: ____________________________
Attest: ____________________________
Its: ____________________________
westsub2\softnteq.lma\051297\cp
................................................................................
STATE OF ILLINOIS )
) SS.
COUNTY OF ______ )
I, the undersigned, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY that ________________________________,
_____________________ of SOFTNET SYSTEMS, INC., a New York Corporation, and
________________________________, _____________________ of said Corporation,
personally known to me to be the same persons whose names are subscribed to the
foregoing instrument as such ____________________ and ____________________,
appeared before me this day in person and severally acknowledged that they
signed and delivered the said instrument as their own free and voluntary act and
as the free and voluntary act of said Corporation; for the uses and purposes
therein set forth. GIVEN under my hand and official seal this ________ day of
______________, 1997.
---------------------------------------
Notary Public
5
STATE OF ILLINOIS )
) SS.
COUNTY OF ______ )
I, the undersigned, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY that ________________________________,
_____________________ of COMMUNICATE DIRECT, INC., an Illinois Corporation, and
_____________________________, ___________________ of said Corporation,
personally known to me to be the same persons whose names are subscribed to the
foregoing instrument as such ____________________ and __________________,
appeared before me this day in person and severally acknowledged that they
signed and delivered the said instrument as their own free and voluntary act and
as the free and voluntary act of said Corporation; for the uses and purposes
therein set forth. GIVEN under my hand and official seal this ________ day of
______________, 1997.
---------------------------------------
Notary Public
STATE OF ILLINOIS )
) SS.
COUNTY OF ______ )
I, the undersigned, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY that ________________________________,
_____________________ of MICROGRAPHIC TECHNOLOGY CORPORATION, a Delaware
Corporation, and ________________________________, ___________________ of said
Corporation, personally known to me to be the same persons whose names are
subscribed to the foregoing instrument as such ____________________ and
_____________________, appeared before me this day in person and severally
acknowledged that they signed and delivered the said instrument as their own
free and voluntary act and as the free and voluntary act of said Corporation;
for the uses and purposes therein set forth. GIVEN under my hand and official
seal this ________ day of ______________, 1997.
---------------------------------------
Notary Public
STATE OF ILLINOIS )
) SS.
COUNTY OF ______ )
I, the undersigned, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY that ________________________________,
_____________________ of KANSAS COMMUNICATIONS, INC., a Kansas Corporation, and
______________________________, ___________________ of said Corporation,
personally known to me to be the same persons whose names are subscribed to the
foregoing instrument as such ____________________ and _______________________,
appeared before me this day in person and severally acknowledged that they
signed and delivered the said instrument as their own free and voluntary act and
as the free and voluntary act of said Corporation; for the uses and purposes
therein set forth. GIVEN under my hand and official seal this ________ day of
______________, 1997.
---------------------------------------
Notary Public
STATE OF ILLINOIS )
) SS.
COUNTY OF ______ )
I, the undersigned, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY that ________________________________,
_____________________ of WEST SUBURBAN BANK, an Illinois Banking Corporation,
personally known to me to be the same person whose name is subscribed to the
foregoing instrument as such ____________________, appeared before me this day
in person and acknowledged that he/she signed and delivered the said instrument
as his/her own free and voluntary act and as the free and voluntary act of said
Corporation; for the uses and purposes therein set forth. GIVEN under my hand
and official seal this ________ day of ______________, 1997.
---------------------------------------
Notary Public
6
