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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q/A
Amendment No. 1 to Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the quarterly period ended December 31, 1997
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the transition period from
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Commission File Number 0-22210
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SUMMA FOUR, INC.
(Exact name of registrant as specified in its charter)
Delaware 02-0329497
(State of Incorporation) (IRS Employer Identification Number)
25 Sundial Avenue, Manchester, New Hampshire 03103
(Address of registrant's principal executive office)
(603) 625-4050
(Registrant's telephone number)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practical date.
Common Stock, $.01 par value 6,601,697
Outstanding as of January 24, 1998
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FORM 10-Q/A
PART II
PAGE 14
SUMMA FOUR, INC.
INDEX TO FORM 10-Q
Page(s)
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Part II - Other Information:
Item 6 - Exhibits and Reports on Form 8-K 14
Signature(s) 15
Exhibit No. Description
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10.1 Loan Modification Agreement, dated December 19, 1997, by
and between the Registrant and Fleet National Bank.
10.2 Promissory Note, dated December 19, 1997, by and between
the Registrant and Fleet National Bank.
11.0 Statement Re: Computation of per Share Earnings (1)
27. Financial Data Schedule (1)
(1) Incorporation herein by reference to the Registrant's Form 10-Q for the
Quarter Ended December 31, 1997 filed with the Securities and Exchange
Commission on February 12, 1998.
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FORM 10-Q
PART II
PAGE 15
SIGNATURES
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Pursuant to the requirements of Securities Exchange Act of 1934, the registrant
has duly caused this amendment to the report to be signed on its behalf by the
undersigned thereunto duly authorized.
Summa Four, Inc.
Date: June 19, 1998 /s/ Jeffrey A. Weber
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Jeffrey A. Weber
Vice President and Chief Financial Officer
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EXHIBIT 10.1
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement ("this Agreement") is made as of December
19, 1997 between Summa Four, Inc., a Delaware corporation (the "Borrower") and
Fleet National Bank (successor by merger to Fleet Bank of Massachusetts, N.A.)
(the "Bank"). For good and valuable consideration, receipt and sufficiency of
which are hereby acknowledged, the Borrower and the Bank act and agree as
follows:
1. Reference is made to: (i) that certain letter agreement dated October
15, 1992, (the "Letter Agreement") between the Borrower and Fleet Bank of
Massachusetts N.A., as amended by letter dated July 28, 1993, August 2, 1994,
August 24, 1996 and August 30 1996 (as so amended, the "Letter Agreement"), the
Bank having succeeded to the rights of Fleet Bank of Massachusetts, N.A.
thereunder; (ii) that certain $6,000,000 face principal amount promissory note
dated August 24, 1995 (the "Revolving Note") made by the Borrower and payable to
the order of the Fleet Bank of Massachusetts, N.A. the Bank having succeeded to
the rights of Fleet Bank of Massachusetts, N.A. thereunder; (iii) that certain
Inventory and Accounts Receivable Security Agreement dated October 15, 1992 (the
"IAR Security Agreement") given by the Borrower to the Fleet Bank of
Massachusetts, N.A., the Bank having succeeded to the rights of Fleet Bank of
Massachusetts, N.A. thereunder; and (iv) that certain $6,000,000 face principal
amount promissory note of even date herewith (the "1997 Revolving Note") made by
the Borrower and payable to the Bank. The Letter Agreement, the 1997 Revolving
Note and the IAR Security Agreement are hereinafter collectively referred to as
the "Financing Documents".
2. The Borrower has been in default under the Letter Agreement as at June
30, 1997, by reason of its failure to comply with Section 3.10 (Profitability).
The Bank hereby waives the Borrower's violation of Section 3.10 of the Letter
Agreement as at June 30, l997; provided that (i) the waiver contained in this
sentence will not be deemed to apply to any provision of the Letter Agreement
other than said Section 3.10 and (ji) the waiver contained in this sentence will
not be deemed to apply as at any date other than as at June 30, 1997.
3. The Letter Agreement is hereby amended, effective as of the date hereof:
a. By providing that all references therein to the "Bank" will be deemed to
refer to Fleet National Bank.
b. By deleting in its entirety clause (i) of Section 1.1 of the Letter
Agreement and by substituting the following its stead the following:
"(i) that certain $6,000,000 face principal amount promissory note (the
'1997 Revolving Note') dated
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December 19, 1997 made by the Borrower and payable to the order of the
Bank;"
As a result, all references in the Letter Agreement to a "Revolving Note" will
be deemed to refer to the 1997 Revolving Note.
c. By deleting in its entirety Sections 3.10 of the Letter Agreement and
substituting in its stead the following language:
"3.10 PROFITABILITY". The Borrower's net loss will not exceed
$1,000,000 for the fiscal quarter ending September 30, 1997. The
Borrower's Net Loss will not exceed $750,000 for the fiscal quarter
ending December 31,1997. The Borrower's Net Loss will not exceed
$250,000 for the fiscal quarter ending March 31, 1998. The Borrower
will achieve Net Income of at least $ 1.00 for the fiscal quarter
ending June 30, 1998 and for each fiscal quarter-end thereafter.
d. By deleting in its entirety Section 6.3 and substituting in its stead
the following language:
"6.3 FACILITY FEES. The Borrower will pay to the Bank on the first day
of each month, commencing November 1, 1997 and continuing thereafter,
as long as the within-described revolving loan arrangements are in
effect, and on the Expiration Date, a non-refundable monthly facility
fee payable in arrears, which fee shall be computed at the rate of
one-fourth of one (1/4%) percent per annum of the Maximum Revolving
Amount (appropriately pro-rated for any partial calendar month). In
addition, if the financing arrangements established by this Letter
Agreement are terminated by the Borrower at any time or by the Bank as
the result of the Borrower's default, the Borrower shall forthwith
upon such termination pay to the Bank a sum equal to all of the fees
which would have become due pursuant to the immediately preceding
sentence from the date of such termination through the Expiration
Date. Fees described in this Section 6.3 are in addition to any
balances and fees required by the Bank or any of its affiliates in
connection with any other services made available to the Borrower.
e. By deleting in its entirety the definition of "Expiration Date"
appearing in Section 7.1 of the Letter Agreement and by substituting in its
stead the following:
"'Expiration Date' - September 1, 1998, unless extended by the Bank,
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which extension may be given or withheld by the Bank in its sole
discretion."
f. By deleting in its entirety the definition of "Maximum Revolving Amount"
appearing in Section 7.1 of the Letter Agreement and by substituting in its
stead the following:
"'Maximum Revolving Amount' - Six Million ($6,000,000) Dollars."
As a result, from and after the date hereof; for tile purposes of the Letter
Agreement and the other Financing Documents, the "Expiration Date" will be
deemed to be September 1, 1998.
4. Simultaneously with the execution and delivery of this Agreement, the
Borrower is executing and delivering to the Bank the 1997 Revolving Note, in
substitution for the Revolving Note dated as of August 24,1995. The 1997
Revolving Note is a $6,000,000 promissory note of The Borrower, substantially in
the form attached hereto as Exhibit I. Wherever in any of the Financing
Documents or in any certificate or opinion to be delivered in connection
therewith, reference is made to a "Revolving Note", from and after the date
hereof same wilt be deemed to refer to the 1997 Revolving Note.
5. In order to induce the Bank to enter into this Agreement, the Borrower
further represents and warrants as follows:
a. The execution, delivery and performance of this Agreement and the 1997
Revolving Note have been duly authorized by the Borrower by all necessary
corporate and other action, will not require the consent of any third party and
will not conflict with, violate the provisions of or cause a default or
constitute an event which, with the passage of time or the giving of notice or
both, could cause a default on the part of the Borrower under its charter
documents or by-laws or under any contract, agreement, law, rule, order,
ordinance, franchise, instrument or other document, or result in the imposition
of any lien or encumbrance (except in favor of the Bank) on any property or
assets of the Borrower.
b. The Borrower has duly executed and delivered this Agreement.
c. This Agreement is the legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms.
d. The statements, representations and warranties made in the Letter
Agreement and in the IAR Security Agreement continue to be and/or correct as of
the date hereof; except as amended, updated and/or supplemented by the attached
Supplemental Disclosure Schedule.
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e. Giving effect to the waivers and Amendments contained in this Agreement,
the covenants and agreements of the Borrower contained in the Letter Agreement
and in the IAR Security Agreement have been complied with on and as of the date
hereof.
f. Giving effect to the waivers and amendments contained in this Agreement,
no event which constitutes or which, with notice or lapse of time, or both,
could constitute, an Event of Default (as defined in the Letter Agreement) has
occurred and is continuing.
g. No Material adverse change has occurred in the financial condition of
the Borrower from that disclosed in the quarterly financial statements of the
Borrower as at June 30, 1997, heretofore furnished to the Bank.
5. Except as expressly affected hereby, the Letter Agreement and each of
the other Financing Documents remains in full force and effect as hereto.
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EXHIBIT 10.2
PROMISSORY NOTE
$6,000,000.00 Boston, Massachusetts
December 19, 1991
FOR VALUE RECEIVED, the undersigned Summa Four, Inc., a Delaware
corporation (the "Borrower") hereby promises to pay to the order of FLEET
NATIONAL BANK (the "Bank") the principal amount of Six Million and 001/100
($6,000,000.00) Dollars or such portion thereof as has been advanced by the Bank
and/or its corporate predecessor or may hereafter be advanced by the Bank
pursuant to ss. 1.2 of that certain letter agreement between the Borrower and
Fleet Bank of Massachusetts, N.A., dated October 15, 1992, as amended (as so
amended, the "Letter Agreement") (the Bank having succeeded to the rights of
Fleet Bank of Massachusetts, N.A. thereunder) and remains outstanding from time
to time hereunder ("Principal"), with interest, at the rate hereinafter set
forth, on the daily balance of all unpaid Principal, from the date hereof until
payment in full of all Principal and interest hereunder.
Interest on all unpaid Principal shall be due and payable monthly in
arrears, on the first day of each month, commencing on the first such date after
the advance of any Principal and continuing on the first day of each month
thereafter and on the date of payment of this note in full, at a fluctuating
rate per annum (computed on the basis of a year of three hundred sixty (360)
days for the actual number of days elapsed) which shall at all times (except as
described in the next sentence) be equal to the Prime Rate, as in effect from
time to time (but in no event in excess of the maximum rate permitted by then
applicable law), with a change in the aforesaid rate of interest to become
effective on the same day on which any change in the Prime Rate is effective.
Overdue Principal and, to the extent permitted by law, overdue interest shall
bear interest at a fluctuating rate per annum which at all times shall be equal
to the sum of (i) two (2%) percent per annum PLUS (ii) the per annum rate
otherwise payable under this note (but in no event in excess of the maximum rate
permitted by then applicable law), compounded monthly and payable on demand. As
used herein, "Prime Rate" means the variable rate of interest per annum
designated by the Bank from time to time as its prime rate, it being understood
that such rate is merely a reference rate and does not necessarily represent the
lowest or best rate being charged to any customer. If the entire amount of any
required Principal and/or interest is not paid within ten (10) days after the
same is due, the Borrower shall pay to the Bank a late fee equal to five percent
(5%) of the required payment, provided that such late fee shall be reduced to
three percent (3%) of any required Principal and interest that is not paid
within fifteen (15) days of the date it is due if this note is secured by a
mortgage on an owner-occupied residence of 1-4 units.
All outstanding Principal and all interest accrued thereon shall be due and
payable in full on the first to occur of: (i) an acceleration under ss.5.2 of
the Letter
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Agreement or (ii) September 1, 1998. The Borrower may at any time
and from time to time prepay all or any portion of said Principal, without
premium or penalty. Under certain circumstances set forth in the Letter
Agreement, prepayments of Principal may be required.
Payments of both Principal and interest shall be made, in immediately
available funds, at the office of the Bank located at 75 State Street, Boston,
Massachusetts 02109, or at such other address as the Bank may from time to time
designate.
The undersigned Borrower irrevocably authorizes the Bank to make or cause
to be made, on a schedule attached to this note or on the books of the Bank, at
or following the time of making any Revolving Loan (as defined in the Letter
Agreement) and of receiving any payment of Principal, an appropriate notation
reflecting such transaction and the then aggregate unpaid balance of Principal.
Failure of the Bank to make any such notation shall not, however, affect any
obligation of the Borrower hereunder or under the Letter Agreement. The unpaid
Principal amount of this note, as recorded by the Bank from time to time on such
schedule or on such books, shall constitute presumptive evidence of the
aggregate unpaid principal amount of the Revolving Loans.
The Borrower hereby (a) waives notice of and consents to any and all
advances, settlements, compromises, favors and indulgences (including, without
limitation, any extension or postponement of the time for payment), any and all
receipts, substitutions, additions, exchanges and releases of collateral, and
any and all additions, substitutions and releases of any person primarily or
secondarily liable, (b) waives presentment, demand, notice, protest and all
other demands and notices generally in connection with the delivery, acceptance,
performance, default or enforcement of or under this note, and (c) agrees to
pay, to the extent permitted by law, all costs and expenses, including, without
limitation, reasonable attorneys' fees, incurred or paid by the Bank in
enforcing this note and any collateral or security there for, all whether or not
litigation is commenced.
This note is the Revolving Note referred to in the Letter Agreement. This
note is secured by, and is entitled to the benefit of, the Security Agreement
(as defined in the Letter Agreement). This note is subject to prepayment as set
forth in the Letter Agreement. The maturity of this note may be accelerated upon
the occurrence of an Event of Default, as provided in the Letter Agreement.
THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT BY JURY IN RESPECT OF ANY CLAIM BASED ON THIS NOTE OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS NOTE OR ANY RELATED DOCUMENTS OR OUT OF ANY
COURSE OF
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CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
ANY PERSON. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT
THIS NOTE AND TO MAKE LOANS AS CONTEMPLATED IN THE LETTER AGREEMENT
Executed, as an instrument under seal, as of the day and year first above
written.
CORPORATE SEAL SUMMA FOUR, INC.
ATTEST:
/s/Richard Swee By: /s/Jeffrey A. Weber
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Secretary Name: Jeffrey A. Weber
Title: VP. Finance & CFO
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