LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of November 7, 1995, by
and between Arizona Instrument Corporation ("Borrower') whose address is ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇, and Silicon Valley Bank ("Bank") whose
address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, an Amended and Restated Loan and Security Agreement (Domestic Loan )
(the "Domestic Loan Agreement") and a Second Amended and Restated Loan and
Security Agreement (Export Loan ) (the "Export Loan Agreement"), both dated
March 15, 1995, as such agreements may be amended from time to time,
(collectively, the "Loan Agreement"). The Domestic Loan Agreement provided for,
among other things, a revolving line of credit in the original amount of One
Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00) (the "Committed
Line"). The Export Loan Agreement provided for, among other things, a revolving
line of credit in the principal amount of One Million Two Hundred Fifty Thousand
and 00/100 Dollars ($1,250,000.00) (the "Export Committed Line"). Concurrently
herewith, Borrower shall execute a Promissory Note, in the original principal
amount of One Million Two Hundred Fifty Thousand and 00/100 Dollars
($1,250,000.00) (the "Term Loan"). Defined terms used but not otherwise defined
shall have the same meaning as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES: Repayment of the Indebtedness is
secured by the Collateral as described in the Loan Agreement and a Collateral
Assignment, Patent Mortgage and Security Agreement. Additionally, repayment of
the Export ~Committed Line is guaranteed by the Export-Import Bank of the United
States (the "Guarantor') pursuant to a Guarantee Agreement (the "Guaranty").
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing payment of the Indebtedness shall be referred
to as the "Security Documents." Hereinafter, the Security Documents, together
with all other documents evidencing or securing the Indebtedness shall be
referred to as the "Existing Loan Documents."
3. DESCRIPTION OF CHANGE IN TERMS:
A. Modification(s) to the Loan Agreement.
1. Section 6.9 entitled "Debt-Net Worth Ratio" is hereby amended, in
its entirety, to read as follows:
Debt-Net Worth Ratio. Borrower shall maintain, on a quarterly basis,
beginning as of the quarter ending December 31, 1995, a ratio of Total
Liabilities less Subordinated Debt to Tangible Net Worth plus
Subordinated Debt of not more than 2.00 to 1.00.
2. Section 6.10 entitled "Tangible Net Worth" is hereby amended, in its
entirety, to read as follows:
Tangible Net Worth. Borrower shall maintain, on a quarterly basis,
beginning with the quarter ending December 31, 1995, a Tangible Net
Worth of not less than Two Million Five Hundred Thousand and 00/100
Dollars ($2,500,000.00).
3. The Section 6.11 entitled "Profitability" is hereby amended, in its
entirety, to read as follows:
Profitability. Borrower shall be profitable, after taxes, on a
quarterly basis, beginning with the quarter ending December 31, 1995.
4. The following Section is hereby incorporated into the Loan
Agreement:
6.14 Debt Service. Borrower shall maintain, on a rolling 12 month
basis, a Debt Service ratio of 1.40 to 1.00, to be tested by Bank on a
quarterly basis.
5.The following definition is hereby added into the Loan Agreement:
"Debt Service" means earnings for the previous 12 months before income
taxes, depreciation and amortization divided by current maturities of
long term debt.
6.The first sentence of the section 2.1 entitled "Advances" in hereby
amended to read as follows:
Subject to the terms and conditions of the Loan Agreement, Bank agrees
to make Advances to Borrower in an aggregate amount not to exceed the
lesser of Committed Line or the Borrowing Base minus an aggregate
reserve amount of at least $400,000.00 under the Committed Line and
Export Committed Line ("Reserve"). Such Reserve shall be only for the
duration of the Term Loan.
B. Modification to Export Loan Agreement.
1. The second paragraph of the Section 6.3 entitled "Financial
Statements, Reports, Certificates" is hereby amended in parts to read
within ten (10) days after the last day of each month (rather each
quarter).
4. CONSISTENT CHANGES. The Existing Loan Documents are amended wherever to
reflect the above-described changes.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that it has no defenses against the obligations to pay any amounts
under the Indebtedness.
6. CONTINUING VALIDITY. Borrower (and each guarantor and ~pledgor signing below)
understands and agrees that in modifying the existing Indebtedness, Bank 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. ~Bank's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
Indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Bank 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.
7. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon Borrowers agreement to:
1 .Execute a Warrant to Purchase Stock ("Warrant") in favor of Bank to
purchase shares of Borrowers Common Stock equal to five percent (5.0%)
of total commitment divided by an exercise price equal to the average
market price of the common stock for the thirty (30) days prior to the
Warrant issue date. Such Warrant shall expire in five (5) years and
shall be subject to Registration Right and Antidilution provisions.
Such Warrant shall be in form and substance acceptable to Bank.
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER:
ARIZONA INSTRUMENT CORPORATION SILICON VALLEY BANK
By:_______________________________ By:____________________________
Name:____________________________ Name:_________________________
Title:_____________________________ Title:__________________________