CIMdata PLM Industry Summary Online Archive
23 October 2013
Company News
SofTech Completes Sale of its CADRA Product Line
SofTech, Inc. announced that it has completed the previously announced sale of substantially all of the assets of its CADRA product line pursuant to an Asset Purchase Agreement dated August 30, 2013. The transaction included all intellectual property related to the CADRA technology but specifically excluded cash, billed accounts receivable and liabilities other than the deferred maintenance liability associated with CADRA customer maintenance contracts for support services (the “CADRA Sale”).
The aggregate consideration for the CADRA Sale is up to $3.95 million, which is comprised of (i) $3.2 million, $2.88 million of which was paid on the closing date and $320 thousand (representing a 10% holdback) of which will be paid on the one year anniversary of the closing date (subject to any indemnification claims), and (ii) earn-out payments of up to an aggregate $750 thousand over the three-year period subsequent to the closing date, based on 10% of the net revenue generated by the CADRA business, subject to the terms of the Earn-Out Agreement dated August 30, 2013.
In addition, SofTech entered into an agreement on October 17, 2013 with Prides Crossing Capital L.P. and Prides Crossing Capital – A, L.P., its lenders (the “Lenders”). In exchange for consenting to the CADRA Sale and releasing its security interest in the CADRA assets, $1.35 million of the CADRA Sale proceeds will be held in escrow for 30 days by the Lenders while the parties negotiate an amendment to the existing $2.7 million loan agreement (“Loan Agreement”). SofTech exceeded the maximum ratio of debt to earnings before interest, taxes, depreciation and amortization expense for the trailing twelve months ended August 31, 2013, an event of default under the Loan Agreement. The Lenders agreed to a limited conditional waiver of the aforementioned event of default while the parties negotiate an amendment to the Loan Agreement. In the event whereby such an agreement cannot be reached, the Lenders may require full repayment of the outstanding debt.
“For the first time since 1998, the Company’s cash position exceeds its outstanding bank debt,” said Joe Mullaney, SofTech’s CEO. “Our significantly improved financial position will allow us to pursue additional initiatives to increase shareholder value. The proxy statement filed with the SEC seeking shareholder approval for the CADRA Sale details these initiatives and we are very excited about our prospects for profitable revenue growth in the future,” he added.
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