FIRST AMENDMENT TO CREDIT AGREEMENT AND LIMITED WAIVER
This FIRST AMENDMENT TO CREDIT AGREEMENT AND LIMITED WAIVER (this
"Amendment") is entered into as of August 13, 1998 by and among DITECH
CORPORATION, a California corporation ("Borrower"), and BANKBOSTON, N.A., a
national banking association ("Lender"), with reference to the following facts:
A. Borrower and Lender are parties to that certain Credit Agreement dated
as of August 20, 1997, by and among the Borrower and the Lender (as amended, the
"Credit Agreement"). The Credit Agreement and all related and supporting
documents collectively are referred to in this Amendment as the "Loan
Documents."
B. One or more Events of Default have occurred under the Loan Documents
by virtue of the Borrower's failure to comply with Sections 6.2(a)-(d) of the
Credit Agreement, and by virtue of Borrower's failure to deliver its audited
financial statements for the fiscal year ended April 30, 1998 as required by
Section 6.1(a)(i). Such Events of Default entitle the Lender immediately to
enforce all the remedies set forth in the Credit Agreement. The Borrower has
asked the Lender to waive compliance with those sections as of certain dates,
and the Lender has agreed, provided the Borrower enters into this Amendment.
NOW, THEREFORE, in consideration of the promises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
1. DEFINED TERMS. Capitalized terms not otherwise defined herein shall
have the same meanings as set forth in the Credit Agreement.
2. WAIVER. Subject to the terms and conditions contained herein and
performance by Borrower of all of the terms of this Amendment, and in reliance
on the representations and warranties of the Borrower set forth herein, the
Lender hereby waives Borrower's obligation to comply with Sections 6.2(a)-(d) of
the Credit Agreement through the date hereof. In addition, the Lender hereby
waives any Event of Default in connection with Borrower's failure to deliver the
financial statements, report and opinion required to be delivered pursuant to
Section 6.1(a)(i), provided Borrower complies with such requirements by August
31, 1998. Without limiting the generality of the provisions of Section 8.1 of
the Credit Agreement, the waiver set forth herein shall be limited precisely as
written and relates solely to the waiver of compliance by the Borrower with
Sections 6.1(a)(i) and 6.2(a)-(d) in the manner and to the extent described
above, and nothing in this Amendment shall be deemed to (i) constitute a waiver
of compliance by the Borrower with Sections 6.1(a)(i) or 6.2(a)-(d) in any other
instance, or (ii) constitute a waiver of any other Event of Default or other
failure by Borrower to perform in accordance with the Loan Documents or this
Amendment, or (iii) prejudice any right or remedy that the Lender may now have
or may have in the future under or in connection with the Credit Agreement or
the Loan Documents.
1
3. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is hereby
amended as follows:
(a) The following defined term in Section 1.1 is amended to read as
follows:
"REVOLVING COMMITMENT": The lesser of (a) Two Million
Dollars ($2,000,000) and (b) the amount of the Borrowing Base, as such
amounts may be reduced pursuant to Section 2.1(d).
(b) The following new defined terms are added to Section 1.1 in their
proper alphabetical order:
"CONSOLIDATED QUICK ASSETS": At any date of determination,
the total cash, marketable securities and accounts receivable of the
Borrower and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED CURRENT LIABILITIES": At any date of
determination, the Consolidated Liabilities which may properly be
classified as current liabilities in accordance with GAAP.
"CONSOLIDATED LIABILITIES": At any date of determination,
the total liabilities of the Borrower and its consolidated Subsidiaries on
a consolidated basis determined in accordance with GAAP (including (i) any
balance sheet liability with respect to a Pension Plan recognized pursuant
to Financial Accounting Standards Board Statements 87 or 88 and (ii) any
withdrawal liability under Section 4201 of ERISA with respect to a
withdrawal from a Multiemployer Plan, as such liability may be set forth in
a notice of withdrawal liability under Section 4219 (and as adjusted from
time to time subsequent to the date of such notice)).
(c) Notwithstanding any provision of the Credit Agreement to the
contrary, but subject to Section 3.2, from and after the effective date of this
Amendment, Borrower shall not request or receive LIBO Rate Loans, and all Loans
shall bear interest on the unpaid principal amount thereof at a rate per annum
equal to the Base Rate plus 0.50%; PROVIDED that subject to Section 3.2, from
and after the first day of the month following Lender's receipt of Borrower's
financial statements and Compliance Certificate delivered pursuant to Section
6.1(a) demonstrating Borrower's achievement of a ratio of Consolidated Debt as
at the end of any fiscal quarter to Consolidated Cash Flow on a rolling four
quarter basis (as specified in Section 6.2(a)), of less than or equal to 3.40 to
1.00, Borrower may, subject to all of the terms and conditions of the Credit
Agreement, request and receive LIBO Rate Loans, and the Loans shall bear
interest at the rates set forth in Sections 2.3(b) and (c).
(d) Section 6.1(a) is amended by replacing the period at the end of
clause (vii)
2
with a semicolon; by inserting the word "and" at the end thereof; and by adding
the following new clause (viii) in its proper alphanumeric order:
(viii) as soon as available, but in any event within
twenty-one (21) days after the end of each calendar month, a copy of the
unaudited consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such period and the related unaudited
consolidated statements of income and retained earnings (or comparable
statement) and changes in financial position and cash flow for such period
and year to date, setting forth in each case in comparative form the
figures as at the end of the previous fiscal year as to the balance sheet
and the figures for the previous corresponding period as to the other
statements, certified by a duly authorized officer of the Borrower as being
fairly stated in all material respects subject to year end and audit
adjustments, all such financial statements to be complete and correct in
all material respects and in accordance with GAAP subject to normal year
end and audit adjustments and the absence of footnotes, applied
consistently throughout the period reflected therein (except as approved by
such accountants and disclosed therein), together with a "backlog" report
of customer orders received for unconditional payment, for which the goods
and/or services ordered have not been shipped or delivered.
(e) Section 6.2(a) is amended to read as follows:
(a) DEBT COVERAGE RATIO. As at the end of any fiscal
quarter of the Borrower commencing with the fiscal quarter ending April 30,
1999, permit the ratio of Consolidated Debt as at the end of such fiscal
quarter to Consolidated Cash Flow for the four fiscal quarters ending on
the last day of such fiscal quarter, to be more than the correlative amount
indicated below:
Quarter Ending Ratio
-------------- -----
April 30, 1999 3.40 : 1.00
July 31, 1999 2.75 : 1.00
October 31, 1999 2.50 : 1.00
January 31, 2000 2.25 : 1.00
April 30, 2000 and thereafter 2.00 : 1.00
(f) Section 6.2(b) is amended to read as follows:
(b) CASH FLOW COVERAGE RATIO. As at the end of any fiscal
quarter of the Borrower, permit the ratio of Consolidated Cash Flow, for
the four
3
quarters ending on any date of determination, to Consolidated Interest
Expense for such four quarters, to be less than the correlative amount
indicated below:
Quarter Ending Ratio
-------------- -----
April 30, 1999 2.75 : 1.00
July 31, 1999 3.50 : 1.00
October 31, 1999 4.25 : 1.00
January 31, 2000 and thereafter 5.00 : 1.00
(g) Section 6.2(c) is amended to read as follows:
(c) FIXED CHARGE COVERAGE RATIO. As at the end of any
fiscal quarter of the Borrower, permit the ratio of (a) the sum of (i)
Consolidated Cash Flow, for the four quarters ending on any date of
determination, MINUS (ii) Consolidated Capital Expenditures for such four
quarters, MINUS (iii) Consolidated Taxes for such four quarters, to (b)
Consolidated Debt Service for such four quarters, to be less than the
correlative amount indicated below:
Quarter Ending Ratio
-------------- -----
April 30, 1999 1.00 : 1.00
July 31, 1999 1.05 : 1.00
October 31, 1999 and thereafter 1.20 : 1.00
(h) Section 6.2(d) is amended to read as follows:
(d) CONSOLIDATED NET INCOME. Commencing with the fiscal
quarter ended April 30, 1999, permit Consolidated Net Income to be less
than $0 for any fiscal quarter of the Borrower.
(i) A new Section 6.2(r) is added to the agreement, which shall read
as follows:
(r) ADJUSTED QUICK RATIO. As at the end of any fiscal quarter
of the Borrower through and including the fiscal quarter ended April 30,
1999, permit the ratio of (a) Consolidated Quick Assets to (b) the sum of
(i) Consolidated Current Liabilities plus (ii) the aggregate principal
amount of outstanding Revolving Loans to be less than 1.20 to 1.00.
4
(j) A new Section 6.2(s) is added to the agreement, which shall read
as follows:
(s) MINIMUM CONSOLIDATED CASH FLOW. Permit Consolidated Cash
Flow for the fiscal quarter ended July 31, 1998 to be less than $200,000.
(k) A new Section 6.2(t) is added to the agreement, which shall read
as follows:
(t) MINIMUM ROLLING 2 QUARTER CASH FLOW. Permit Consolidated
Cash Flow for (i) the two fiscal quarter period ended October 31, 1998 to
be less than $560,000 or (ii) the two fiscal quarter period ended
January 31, 1999 to be less than $985,000.
(l) EXHIBIT C is deleted and replaced with EXHIBIT C hereto.
(m) EXHIBIT D is deleted and replaced with EXHIBIT D hereto.
4. CONDITIONS TO EFFECTIVENESS.
This Amendment shall become effective as of August 13, 1998 (the
"Closing Date"), only upon:
(i) receipt by the Lender from the Borrower of an amendment fee
equal to Forty-Five Thousand Dollars ($45,000), which fee shall be fully
earned and non-refundable;
(ii) receipt by the Lender of the following (each of which shall
be in form and substance satisfactory to the Lender and its counsel):
(a) counterparts of this Amendment duly executed on behalf of
the Borrower and the Lender;
(b) copies of resolutions of the Board of Directors or other
authorizing documents of the Borrower, authorizing the execution and delivery of
this Amendment; and
(iii) completion of such other matters and delivery of such other
agreements, documents and certificates as Lender may reasonably request.
5. REPRESENTATIONS AND WARRANTIES. In order to induce the Lender to
enter into this Amendment, the Borrower represents and warrants to the Lender
that the following statements are true, correct and complete as of the effective
date of this Amendment:
5
(a) CORPORATE POWER AND AUTHORITY. The Borrower has all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "Amended Agreement"). The Articles
of Incorporation and Bylaws of the Borrower have not been amended since the
copies previously delivered to the Lender.
(b) AUTHORIZATION OF AGREEMENTS. The execution and delivery of this
Amendment and the performance by the Borrower of the Amended Agreement have been
duly authorized by all necessary corporate action on the part of the Borrower.
(c) NO CONFLICT. The execution and delivery by the Borrower of this
Amendment do not and will not contravene (i) any law or any governmental rule or
regulation applicable to the Borrower, (ii) the Articles of Incorporation or
Bylaws of the Borrower, (iii) any order, judgment or decree of any court or
other agency of government binding on the Borrower, or (iv) any material
agreement or instrument binding on the Borrower.
(d) GOVERNMENTAL CONSENTS. The execution and delivery by the
Borrower of this Amendment and the performance by the Borrower of the Amended
Agreement do not and will not require any registration with, consent or approval
of, or notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.
(e) BINDING OBLIGATION. This Amendment and the Amended Agreement
have been duly executed and delivered by the Borrower and are the binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their respective terms, except in each case as such enforceability may be
limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or
other similar laws and equitable principles relating to or affecting creditors'
rights.
(f) INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 5.1 of the
Credit Agreement are correct on and as of the effective date of this Amendment
as though made on and as of such date (except to the extent such representations
and warranties expressly refer to an earlier date, in which case they were true
and correct as of such earlier date).
(g) ABSENCE OF DEFAULT. After giving effect to this Amendment, no
event has occurred and is continuing or will result from the consummation of the
transactions contemplated by this Amendment that would constitute an Event of
Default or a Potential Event of Default.
6. MISCELLANEOUS.
(a) REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
6
(i) On and after the Closing Date, each reference in the
Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words
of like import referring to the Credit Agreement, and each reference in the
other Loan Documents to the "Credit Agreement," "thereunder", "thereof" or words
of like import referring to the Credit Agreement, shall mean and be a reference
to the Amended Agreement.
(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of the Lender
under the Credit Agreement or any of the other Loan Documents.
(b) FEES AND EXPENSES. All costs and expenses of the Lender,
including, but not limited to, reasonable attorneys' fees, incurred by the
Lender in the preparation and negotiation of this Amendment constitute costs and
expenses in connection with the amendment and restructuring of the Loan
Documents, and as such are payable by the Borrower in accordance with Section
8.5 of the Credit Agreement.
(c) HEADINGS. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
(d) APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
(e) COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[REMAINDER INTENTIONALLY LEFT BLANK]
7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
DITECH CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Title: VP/CFO
-----------------------------
BANKBOSTON, N.A.,
By: /s/ illegible
-------------------------------
Title: Vice President
-----------------------------
S-1
EXHIBIT C
PRICING GRID
The "APPLICABLE MARGIN" means the variable number of percentage points,
with respect to Base Rate Loans or LIBO Rate Loans, as applicable, as determined
by the Lender with reference to the Borrower's most recent financial statements
and Compliance Certificate, in accordance with the grid set forth below, based
upon the Borrower's ratio of Consolidated Debt as at the end of any fiscal
quarter to Consolidated Cash Flow on a rolling four quarter basis (as specified
in Section 6.2(a)). The effective date of any change in the Applicable Margin
shall be the first day of the month following the Lender's receipt of the
Borrower's financial statements and Compliance Certificate.
Ratio of
Consolidated
Debt to
Consolidated
Cash Flow on
rolling four Applicable Margin Applicable Margin
Level quarter basis for Base Rate Loans for LIBO Rate Loans
----- ------------- ------------------- -------------------
I. GREATER THAN 3.00:1.00 1.00 3.00
II. LESS THAN OR EQUAL 1.00 2.75
TO 3.00:1.00 GREATER
THAN 2.50:1.00
III. LESS THAN OR EQUAL 0.75 2.50
TO 2.50:1.00 GREATER
THAN 2.00:1.00
IV. LESS THAN OR EQUAL 0.50 2.25
TO 2.00:1.00 GREATER
THAN 1.50:1.00
V. LESS THAN OR EQUAL
TO 1.50:1.00 0.25 2.00
C-2
EXHIBIT D
COMPLIANCE CERTIFICATE
1. This Compliance Certificate ("Compliance Certificate") is
executed and delivered by Ditech Corporation, a California corporation (the
"Borrower") to BankBoston, N.A. (the "Lender") pursuant to Section
6.1(a)(iii)(B) of the Credit Agreement dated as of August 20, 1997 between
the Borrower and the Lender. Any terms used herein and not defined herein
shall have the meanings defined in the Credit Agreement. This Compliance
Certificate covers the Borrower's:
Fiscal quarter ended _________, 19__
Fiscal year ended ________, 19__
2. The following paragraphs set forth calculations in
compliance with obligations pursuant to Section 6.2(a), (b), (c), (d), (r),
(s), and (t) of the Credit Agreement, as of the end of the fiscal period set
forth in paragraph 1 hereof.
A. DEBT COVERAGE RATIO (SEC 6.2(a)):
(a) Consolidated Debt $________
(b) Consolidated Cash Flow for the four-quarter
period ending on the last day of the most recently
ended fiscal quarter $________
Ratio (a) to (b) _________
Maximum Permitted Ratio:
Quarter Ending Ratio
-------------- -----
April 30, 1999 3.40 : 1.00
July 31, 1999 2.75 : 1.00
October 31, 1999 2.50 : 1.00
January 31, 2000 2.25 : 1.00
April 30, 2000 and thereafter 2.00 : 1.00
B. CASH FLOW COVERAGE RATIO (SEC 6.2(b)):
(a) Consolidated Cash Flow for the four-quarter
period ending on the last day of the most recently
ended fiscal quarter
$________
(b) Consolidated Interest Expense for the four-quarter
period ending on the last day of the most recently
ended fiscal quarter $________
D-1
Ratio (a) to (b) _________
Minimum Permitted Ratio:
Quarter Ending Ratio
-------------- -----
April 30, 1999 2.75 : 1.00
July 31, 1999 3.50 : 1.00
October 31, 1999 4.25 : 1.00
January 31, 2000 and thereafter 5.00 : 1.00
C. FIXED CHARGE COVERAGE RATIO (SEC 6.2(c)):
(a) $________
(i) Consolidated Cash Flow for the
four-quarter period ending on the
last day of the most recently
ended fiscal quarter $________
(ii) MINUS Consolidated Capital
Expenditures for such period $________
(iii) MINUS Consolidated Taxes
for such period $________
(b) Consolidated Debt Service for such period $_________
Ratio (a) to (b) _________
Minimum Permitted Ratio
Quarter Ending Ratio
-------------- -----
April 30, 1999 1.00 : 1.00
July 31, 1999 1.05 : 1.00
October 31, 1999 and thereafter 1.20 : 1.00
D. CONSOLIDATED NET INCOME (SEC. 6.2(d)):
(a) Consolidated Net Income $________
Required: (Commencing April 30, 1999) (a) GREATER THAN $0
D-2
E. ADJUSTED QUICK RATIO (SEC. 6.2(R):
(a) Consolidated Quick Assets $________
(b)
(i) Consolidated Current Liabilities $_________
(ii) PLUS outstanding Revolving Loans $_________
Ratio (a) to (b) __________
Minimum Permitted Ratio 1.20 : 1.00
F. MINIMUM CONSOLIDATED CASH FLOW (SEC. 6.2(s):
(a) Consolidated Cash Flow for fiscal quarter ended
July 31, 1998 $_________
Required: (a) GREATER THAN $200,000
G. MINIMUM ROLLING 2 QUARTER CASH FLOW (SEC 6.2(T):
(a) Consolidated Cash Flow for 2 quarter period
ended October 31, 1998 $__________
(b) Consolidated Cash Flow for 2 quarter period
ended January 31, 1999 $__________
Required: (a) GREATER THAN $560,000
(b) GREATER THAN $985,000
3. The undersigned has reviewed the terms of the Credit Agreement
and has made, or caused to be made under his/her supervision, a review in
reasonable detail of the transactions and condition of the Borrower and its
Subsidiaries during the fiscal period covered by this Compliance Certificate.
The undersigned does not (either as a result of such review or otherwise)
have any knowledge of the existence as of the date of this Compliance
Certificate of any condition or event that constitutes an Event of Default or
a Potential Event of Default, with the exception set forth below in response
to which the Borrower is taking or proposes to take the following actions (if
none, so state):
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
D-3
4. This Compliance Certificate is executed on _______________, ____
by the Chief Executive Officer, Chief Financial Officer, or Controller of the
Borrower. The undersigned hereby certifies that each and every matter contained
herein is derived from the Borrower's books and records and is, to the best
knowledge of the undersigned, true and correct.
DITECH CORPORATION
a California corporation
By:_______________________________________________
Title:
D-4