Exhibit 10.6
FOURTH AMENDMENT TO SECOND AMENDED AND
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RESTATED LOAN AGREEMENT
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THIS FOURTH AMENDMENT TO LOAN AGREEMENT (the "Fourth Amendment") is made as
of this 22nd day of December, 1999, 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 and Third Amendment to Second Amended and Restated Loan Agreement
dated as of October 25, 1999 (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
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is 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 the
following, whichever is applicable: (i) January 4, 2000, or
(ii) Three Month Extension Date, to the extent that the
Borrower has complied with Section 2.11;"
(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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December 22,1999 up to the Maturity Date $6,900,000
Maturity Date 0
provided, however, the Maximum Line Availability shall be
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permanently reduced by any proceeds received by the Borrower or
Bank pursuant to Sections 2.01(g) or 5.16 hereof.
(c) the following definitions shall be added to Section 1.01 of
the Loan Agreement in the appropriate alphabetical order:
"Excess Cash Flow" shall mean, for any period, the sum of
the consolidated net income plus depreciation, amortization
and all non-cash charges of the Borrower and its
Subsidiaries for such period minus Capital Expenditures
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actually paid by the Borrower and its Subsidiaries for such
period minus cash taxes actually paid by the Borrower and
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its Subsidiaries for such period minus cash interest
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actually paid by the Borrower and its Subsidiaries for such
period minus principal payments made to reduce permanently
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the Maximum Line Availability, all as determined in
accordance with generally accepted accounting principles in
the United States in effect from time to time.
"Three Month Extension Date" shall have the meaning
set forth in Section 2.11.
Section 2. Amendment of Article II. Article II of the Loan Agreement is
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hereby amended as follows:
(a) Sections 2.01(g) is amended by adding the following section
(v) at the end:
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(v) Excess Cash Flow Prepayments. Within thirty (30) days after
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the end of each month, commencing with the month ending
January 31, 2000, the Borrower 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 50% of the Excess Cash Flow for such preceding month.
(b) Sections 2.10 and 2.11 of the Loan Agreement is deleted in
their entirety and replaced with the following Sections 2.10
and 2.11:
Section 2.10. Waiver and Restructure Fee. The Borrower shall pay to
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the Bank a non-refundable Waiver and Restructure Fee in the aggregate
amount of $170,000, of which (a) $20,000 has already been paid by the
Borrower to the Bank; and (b) the remaining $150,000 (the "Deferred Fee")
of which shall be due and payable in full on the Maturity Date, as the same
may be extended from time to time, as provided herein. Notwithstanding the
foregoing, the entire Deferred Fee (i.e., $150,000) shall be immediately
due and payable without notice upon the occurrence of an Event of Default.
Section 2.11. Maturity Date Extension. To the extent that on or
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before December 22, 1999, (i) the Borrower delivers a written request to the
Bank to extend the Maturity Date, (ii) the Borrower is in compliance with all
terms and conditions of the Loan Documents on the date of such request, (iii)
the Borrower delivers to the Bank a certificate satisfactory to the Bank
certifying such compliance and (iv) the Maximum Line of Availability has been
permanently paid down and reduced to less than $6,900,001, the Maturity Date
shall be extended to April 2, 2000 (the "Three Month Extension Date"), as
provided for in the definition of "Maturity Date".
Section 3. Affirmative Covenants. Article V of the Loan Agreement is
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hereby amended as follows:
(a) Section 5.03(b) is amended by deleting the phrase "cash
flow" as it appears throughout Section 5.03(b) and inserting
the language "Excess Cash Flow" in its place.
(b) Section 5.16 of the Loan Agreement is deleted in its
entirety and replaced with the following Sections 5.16:
Section 5.16. Additional Capital or Company Sale. In the event the
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Maturity Date is extended to April 2, 2000 (pursuant to Section 2.11
hereof), the Borrower will provide the Bank on or before February 28, 2000
evidence satisfactory to the Bank that the Borrower (either through an
asset sale or stock sale) will be sold on or before the applicable Maturity
Date, and that such sale will generate sufficient net proceeds to pay off
the Obligations in full.
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Section 4. Financial Covenants. Sections 7.01 and 7.02 of the Loan
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Agreement are deleted in their entirety and replaced with the
following:
Section 7.01. Minimum Working Capital Ratio.
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(A) Until the Maturity Date has been extended pursuant to Sections
2.11 hereof, the Borrower will not permit the Working Capital Ratio, for
any of the fiscal months set forth below, to be less than the respective
ratio indicated for such fiscal months:
FISCAL MONTH: WORKING CAPITAL RATIO:
November 1999 1 to 0.78
December 1999 1 to 0.82
(B) Upon extension of the Maturity Date pursuant to Sections
2.11 hereof, the Borrower shall maintain at all times (a) cash
and cash equivalents of at least $750,000 or (b) $250,000 of the
unused availability of the Maximum Line Availability.
Section 7.02. Maximum Net Operating Loss.
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(A) Until the Maturity Date has been extended pursuant to Sections
2.11 hereof, the Borrower will not permit its Net Operating Loss, for any
of the fiscal periods set forth below, to be more than the respective
amounts indicated for such fiscal periods:
FISCAL PERIOD: MAXIMUM NET OPERATING LOSS:
January 1, 1999 through
the end of September 1999 $4,200,000
January 1, 1999 through
the end of October 1999 $4,965,000
January 1, 1999 through
the end of November 1999 $5,930,000
January 1, 1999 through
the end of December 1999 $5,370,000
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(B) Upon extension of the Maturity Date pursuant to Section 2.11
hereof, the Borrower will not permit its Net Operating Loss, for any of
the fiscal periods set forth below, to be more than the respective amounts
indicated for such fiscal periods:
FISCAL PERIOD: MAXIMUM NET OPERATING LOSS:
October 31, 1999 through
the end of December 1999 ($100,000)
January 1, 2000 through
the end of January 2000 ($250,000)
January 1, 2000 through
the end of February 2000 ($525,000)
January 1, 2000 through
the end of March 2000 ($150,000)
Section 5. Effectiveness; Conditions to Effectiveness. This Fourth Amendment
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to Loan Agreement shall become effective upon execution hereof by the
Borrower and the Bank and satisfaction of the following conditions:
(a) Copies of Resolutions of the Board of Directors of the Borrower
authorizing the execution, delivery and performance of the
Borrower under this Fourth Amendment (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.
(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 Fourth 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 (i) this Fourth Amendment and (ii) the
First Amendment to the Extension Warrant (in form and substance
satisfactory to the Bank).
(d) Confirmation of the existing guarantees of the Borrower's
Subsidiaries and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and the other Security
Documents.
(e) Opinion of Borrower's counsel in form and substance satisfactory
to the Bank.
(f) Long Form Good Standing Certificates for Borrower.
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(g) Payment of all outstanding fees of the Bank's special counsel,
▇▇▇▇▇▇▇ Procter & ▇▇▇▇ LLP ("Special Counsel") through the date
of this Fourth Amendment (currently in excess of $10,000) plus
outstanding disbursements for Intercounty Clearance UCC services
(currently in excess of $1,500) which payment shall be made
pursuant to the Bank charging the Borrower's account.
(h) Delivery to the Bank such other documents as the Bank or Special
Counsel shall reasonably require.
Section 6. 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 Fourth
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 in Section 6(i)
below, there is no Event of Default thereunder, and no condition
which, with the passage of time or giving of notice or both,
would constitute an Event of Default thereunder.
(c) The Borrower agrees that each of the Loan Documents shall remain
in full force and effect after giving effect to this Fourth
Amendment. The granting of the liens and security interests
under the Security Documents secure all the Obligations as may
be amended by this Fourth Amendment. The guarantees of the
Borrower's Subsidiaries guarantee all of the Obligations as may
be amended by this Fourth Amendment.
(d) This Fourth Amendment represents the entire agreement among the
parties hereto relating to this Fourth Amendment, and supersedes
all prior understandings and agreements among the parties
relating to the subject matter of this Fourth 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 Fourth 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.
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(e) The Borrower represents and warrants that neither the execution,
delivery or performance by the Borrower of any of the
obligations contained in this Fourth 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 Fourth 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.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment
to Loan Agreement under seal as of the date first written above.
STORAGE COMPUTER CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
CITIZENS BANK OF MASSACHUSETTS
(as successor in interest to State Street Bank
and Trust Company)
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
DOCSC\822664.6
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