EXHIBIT 10.8(a)
LOAN MODIFICATION AGREEMENT AND WAIVER
This Loan Modification Agreement and Waiver ("this Agreement") is made as
of June 29, 2001 between Sapient Corporation, a Delaware corporation (the
"Borrower") and Fleet National Bank (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
June 30, 2000 (the "Letter Agreement") between the Borrower and the Bank; and
(ii) that certain $5,000,000 face principal amount promissory note dated June
30, 2000 (the "Revolving Note") made by the Borrower and payable to the order of
the Bank. The Letter Agreement and the Revolving Note are hereinafter
collectively referred to as the "Financing Documents".
2. The Bank hereby waives the Event of Default under the Letter
Agreement which would otherwise exist due to the Borrower's failure to comply
with Section 3.10 of the Letter Agreement ("Profitability") for the fiscal
quarter ended March 31, 2001; provided that the waiver contained in this
sentence will not be deemed to apply to any other provisions of any of the
Financing Documents nor to any other fiscal period. The Bank also waives the
Events of Default which would otherwise exist under the Letter Agreement due to
the Borrower's failure to furnish to the Bank, by March 31, 2001, consolidating
financial statements for the Borrower's fiscal year ended December 31, 2000 and
a budget for its fiscal year ending December 31, 2001, all as required by
paragraph (i) of Section 3.6 of the Letter Agreement; provided that the waiver
contained in this sentence will be deemed to apply only to the financial
statements and budget described herein for the specific respective fiscal years
described herein and not to any other provisions of any of the Financing
Documents nor with respect to any other fiscal period.
3. The Letter Agreement is hereby amended, effective as of the
date hereof:
a. By deleting in its entirety Section 3.5 of the Letter
Agreement and by substituting in its stead the following:
"3.5. Conduct of Business. The Borrower will conduct, in the
ordinary course, the business in which it is presently
engaged. The Borrower will not, without the prior written
consent of the Bank, directly or indirectly (itself or through
any Subsidiary) enter into any other lines of business,
businesses or ventures, except for investments in other
business and ventures (the `Other Permitted Ventures') which
will not exceed $10,000,000 per investment nor $25,000,000 in
the aggregate during the term of this letter agreement."
b. By adding to paragraph (ii) of Section 3.6 of the Letter
Agreement, at the end of such paragraph, the following:
"Without limitation of the foregoing, if, as at the end of any
month, the Borrower does not have Liquid Assets of at least
$200,000,000, then the Borrower will provide to the Bank,
within 20 days after the end of such month, a report setting
forth the amount of the Borrower's Liquid Assets
as at the relevant month-end and listing, in detail reasonably
satisfactory to the Bank, the Liquid Assets then owned by the
Borrower."
c. By inserting into the first sentence of paragraph (iii) of
Section 3.6 of the Letter Agreement, immediately after the words "quarterly
financial statement of the Borrower", the following:
"or monthly statement of Liquid Assets"
d. By deleting from the first sentence of Section 3.7 of the
Letter Agreement the words "as at the end of each fiscal quarter of the Borrower
(commencing with June 30, 2000)" and by substituting in their stead the
following:
"at all times"
e. By deleting in their entireties Sections 3.8, 3.9 and 3.10 of
the Letter Agreement and by substituting in their stead the following:
"3.8. Net Worth. The Borrower will maintain at all times a
consolidated Tangible Net Worth which shall not be less than
the then-effective TNW Requirement. As used herein, the `TNW
Requirement' is deemed to be $260,000,000 as at June 30, 2001;
and as at the last day of each fiscal quarter thereafter
(commencing with September 30, 2001) (each, a `Determination
Date') the TNW Requirement will be deemed to become an amount
equal to the sum of (i) that TNW Requirement which had been in
effect on the last day of the immediately preceding fiscal
quarter, plus (ii) 80% of the net proceeds of any equity
securities sold by the Borrower during the fiscal quarter
ending at such Determination Date, plus (iii) 80% of the
consolidated Net Income of the Borrower and Subsidiaries
during said fiscal quarter ending at such Determination Date
(but without giving effect to any Net Income which is less
than zero for any fiscal quarter).
3.9. Quick Ratio. The Borrower will maintain, at all times, a
Quick Ratio of not less than 1.5 to 1. As used herein, `Quick
Ratio', as determined at any date, is the ratio of (x) Net
Quick Assets of the Borrower as at such date to (y) Current
Liabilities of the Borrower and its Subsidiaries (on a
consolidated basis) as at such date.
3.10. Liquid Assets. The Borrower will maintain at all times
Liquid Assets of not less than $150,000,000."
f. By deleting clause (vii) of Section 4.6 of the Letter
Agreement and by substituting in its stead the following:
"(vii) investments in any Subsidiaries now existing or
hereafter created by the Borrower pursuant to Section4.7 below
and/or in Other Permitted Ventures now existing or hereafter
entered into; provided that in any event the Tangible Net
Worth of the Borrower alone (inclusive of its investment in
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any Pledged Securities Subsidiary but exclusive of its
investment in any other Subsidiaries and/or any Other
Permitted Ventures and any debt owed by any Subsidiary and/or
Other Permitted Venture to the Borrower) will not be less than
85% of the consolidated Tangible Net Worth of the Borrower and
Subsidiaries."
g. By deleting from Section 4.7 of the Letter Agreement the words
"in Digital Business Ventures and other investments".
h. By deleting the last sentence of Section 4.9 of the Letter
Agreement.
i. By deleting from the Borrower's notice address contained in
Section 6.6 of the Letter Agreement the words "Xxxxxxx Xxxx, Vice President and
General Counsel" and by substituting in their stead the following:
"Xxxx X. Xxxxx, Senior Vice President and General Counsel"
j. By changing the notice address of the Bank, pursuant to
Section 6.6 of the Letter Agreement, to the following:
"Fleet National Bank
Technology & Communications Group
Mail Stop: XX XX 00000X
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Vice President"
k. By deleting from Section 7.1 of the Letter Agreement the
definition of "Digital Business Ventures" contained therein.
l. 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' - August 31, 2001, unless extended by the
Bank, which extension may be given or withheld by the Bank in
its sole discretion."
m. By inserting into Section 7.1 of the Letter Agreement,
immediately after the definition of "Indebtedness", the following:
"`Liquid Assets' - Such assets of the Borrower and/or of a
Pledged Securities Subsidiary of the Borrower as consist of
cash, cash-equivalents, readily-marketable commercial paper
rated not less than A-1/P-1, and readily-marketable debt
securities rated not less than AA by Standard & Poor's Rating
Service or its equivalent by Xxxxx'x Investors Service, Inc."
n. By inserting into the definition of "Loan Documents" contained
in Section 7.1 of the Letter Agreement, immediately after the words "Revolving
Note", the following:
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", the pledge by the Borrower to the Bank of the outstanding
capital stock of Sapient Securities Corporation"
o. By inserting into the Letter Agreement, immediately after the
definition of "Person", the following:
"`Pledged Securities Subsidiary' - Any Subsidiary of the
Borrower which satisfies both of the following criteria: (i)
such Subsidiary is a Massachusetts `security corporation'
within the meaning of Mass. Gen. Laws, Ch. 63, Section38B, and
(ii) the Bank holds a fully perfected first priority security
interest in all of the outstanding capital stock of such
Subsidiary."
4. The Revolving Note is hereby amended by deleting from the
third paragraph of the text of the Revolving Note the date "June 30, 2001" and
by substituting in its stead the following:
"the Expiration Date (as defined in the Letter Agreement, as
same may be amended from time to time)"
5. Wherever in any Financing Document, or in any certificate or
opinion to be delivered in connection therewith, reference is made to a "letter
agreement" or to the "Letter Agreement", from and after the date hereof same
will be deemed to refer to the Letter Agreement, as amended hereby. All
references in any Financing Document, or in any certificate or opinion to be
delivered in connection therewith, to the Revolving Note will be deemed to refer
to each such instrument as amended pursuant to this Agreement.
6. In order to induce the Bank to enter into this Agreement, the
Borrower agrees to pay, promptly upon receipt of an invoice for same, all costs
and expenses of the Bank (including, without limitation, reasonable attorneys'
fees) incurred or to be incurred in connection with this Agreement or any of the
transactions contemplated hereby.
7. Further, 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 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.
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d. The statements, representations and warranties made
in each of the Financing Documents continue to be correct as of the date hereof;
except as amended, updated and/or supplemented by the attached Supplemental
Disclosure Schedule.
e. The covenants and agreements of the Borrower
contained in any of the Financing Documents have been complied with on and as of
the date hereof.
f. 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 financial
statements of the Borrower heretofore most recently furnished to the Bank.
8. Except as expressly affected hereby, the Letter
Agreement and each of the other Financing Documents remains in full force and
effect as heretofore. Nothing contained herein will be deemed to constitute a
waiver (except the express waivers set forth in Section 2 above) nor a release
of any provision of any of the Financing Documents. Nothing contained herein
will in any event be deemed to constitute an agreement to give a waiver or
release or to agree to any amendment or modification of any provision of any of
the Financing Documents on any other or future occasion.
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Executed, as an instrument under seal, as of the day and year first
above written.
SAPIENT CORPORATION
By:___________________________________
Name:
Title:
Accepted and agreed:
FLEET NATIONAL BANK
By:_____________________________
Name:
Title:
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Exhibit 10.8(a)
SUPPLEMENTAL DISCLOSURE SCHEDULE
Sapient Corporation
Revolving Loan Agreement
Disclosure Schedule 2.1(a)
Jurisdictions in which Borrower is Qualified and List of Subsidiaries:
SAPIENT CORPORATION (A DELAWARE CORPORATION)
California
Colorado
Georgia
Illinois
Massachusetts
New Jersey
New York
Texas
Virginia
SAPIENT SERVICES CORPORATION (A DELAWARE CORPORATION)
HUMAN CODE, INC. (A DELAWARE CORPORATION)
HWT, INC. (A DELAWARE CORPORATION, APPROXIMATELY 56% OWNED BY BORROWER)
SAPIENT AUSTRALIA PTY. LTD. (AN AUSTRALIAN COMPANY)
SAPIENT CANADA INC. (AN ONTARIO CORPORATION)
SAPIENT CORPORATION PRIVATE LIMITED (AN INDIA CORPORATION)
SAPIENT GMBH (A GERMAN CORPORATION)
SAPIENT K.K. (A JAPAN CORPORATION, 88% OWNED BY BORROWER)
SAPIENT LIMITED (A UK LIMITED LIABILITY COMPANY)
SAPIENT SECURITIES CORPORATION (A MASSACHUSETTS CORPORATION)
SCE SAPIENT AND CUNEO LUXEMBOURG S.A. (A LUXEMBOURG COMPANY, 50% OWNED BY
BORROWER, OWNS 100% OF SAPIENT S.P.A., A JOINT VENTURE IN MILAN, ITALY)
THE LAUNCH GROUP AG (A GERMAN CORPORATION)
All companies are wholly-owned, first-tier subsidiaries, unless otherwise noted.
Sapient Corporation
Revolving Loan Agreement
Disclosure Schedule 2.1(b)
List of 5% or greater stockholders (as of April 1, 2001):
Xxxxx X. Xxxxxxxxx (Co-CEO) 17.2%
J. Xxxxxx Xxxxx (Co-CEO) 16.6%
Sapient Corporation
Revolving Loan Agreement
Disclosure Schedule 2.1(e)
Litigation:
Sapient Corporation and Subsidiaries are not a party to any material legal
proceedings.
On June 20, 2001, a private arbitrator awarded a third party approximately $1.3
million in damages against Sapient, including interest and attorneys' fees. This
third party was a subcontractor to Sapient under a contract that Sapient had
signed with a client. The third party had alleged that Sapient had ordered
certain software licenses from the third party for the client's benefit, which
Sapient and the client denied, and was seeking approximately $2.4 million in
damages.
Sapient Corporation
Revolving Loan Agreement
Disclosure Schedule 2.1(i)
Transactions outside the ordinary course since December 31, 2000:
On July 2, 2001, Sapient issued a press release announcing certain
cost-reduction moves, including a reduction in headcount of approximately 390
employees and the consolidation of certain United States office locations.
Sapient will take a restructuring charge of approximately $50 million in
connection with these actions. A copy of the press release is attached as
Attachment A to this Schedule 2.1(i).
Attachment A to Schedule 2.1(i)
MONDAY JULY 2, 9:08 AM EASTERN TIME
PRESS RELEASE
SAPIENT ACCELERATES GLOBAL DELIVERY STRATEGY AND REDUCES HEADCOUNT
RELEASES PRELIMINARY RESULTS
SECOND QUARTER PRO FORMA RESULTS EXPECTED TO BE $0.01 PER SHARE BELOW CONSENSUS
ESTIMATE
CAMBRIDGE, Mass.--(BUSINESS WIRE)--July 2, 2001-- Sapient (NASDAQ: SAPE - news)
reported today that it is intensifying efforts to expand its global distributed
delivery model and drive efficiencies throughout its operations. To achieve
these objectives, Sapient is reducing its headcount by approximately 390 people,
or roughly 14 percent, and plans to substantially increase its operations in
India. Nearly all of the reductions will be in North America, where the company
will also be consolidating office space in some cities. Additionally, the
company announced its intention to exit the game development business.
"The challenges of the economic environment are obvious, but what
might be missed is the long term, underlying shift in what clients expect and
need from their business partners," said Xxxxx X. Xxxxxxxxx, Sapient's
co-chairman and co-chief executive officer. "We believe we are uniquely
positioned to deliver high value business and technology solutions, rapidly and
cost effectively, using a global distributed delivery model. The actions we are
taking today will move us towards the balance we need in order to achieve our
strategy. However, we certainly wish that the environment were stronger so that
we could have accomplished this balance without having to let great people go."
To further the development of its Indian operations, Sapient will relocate
approximately 60 of its experienced consultants to the New Delhi office and
expand its hiring and recruitment efforts in India. "Global distributed
delivery, combined with our expertise in business strategy and user experience,
has been a competitive advantage for us and our clients over the past year,"
said Xxxxxxx X. Xxxxx, Sapient's chief operating officer. "Our New Delhi
operation already comprises more than 250 people, and we have successfully
utilized our talent there to help deliver a number of key client engagements."
Sapient will take a restructuring charge of approximately $50 million, most of
which will be incurred in the third quarter of 2001. The charge will consist of
severance and related expenses from the reduction in workforce, and other costs
related to office space consolidations. The company expects cost savings from
these actions of approximately $13 million in the third quarter, and $60 million
on an annualized basis.
Sapient expects second quarter 2001 revenues of approximately $87 million and a
pro forma loss per diluted share (which excludes amortization of intangibles,
acquisition costs, stock-based compensation charges, and restructuring costs) of
$0.07 per share, compared to consensus estimates of $90 million in revenues and
a pro forma loss of
$0.06 per share. Sapient anticipates that its cash position at the end of the
second quarter will remain above $250 million. The company did not give guidance
for future periods.
Sapient will host a conference call today at 11:00 a.m. (EDT) that will be
broadcast live on the Internet. During the call, Sapient officials will discuss
today's actions and the company's strategy. For webcast registration
information, please go to xxx.xxxxxxx.xxx/xxxxxxxx.xxx. It is advisable to
register at least 15 minutes prior to the call to download and install any
necessary audio software. A re-broadcast of the call will be available from 4:00
p.m. (EDT) today through July 16, 2001 at 11:59 p.m. (EDT) by dialing (800)
475-6701 (within the U.S.) or (000) 000-0000 (outside the U.S.) and entering
passcode 593954 when prompted.
Actual results for second quarter 2001, and further details about the company's
performance and restructuring strategy, will be reported on July 26, 2001.
Sapient will host a call at 4:30 pm (EDT) that day.
About Sapient
Sapient, a leading business and technology consultancy, helps its clients
successfully deploy technology that results in high value, explicit business
outcomes. Founded in 1991, Sapient employs approximately 2,300 people in offices
in Atlanta, Austin, Cambridge (Mass.), Chicago, Dallas, Denver, Dusseldorf,
Houston, London, Los Angeles, Milan, Munich, New Delhi, New York, San Francisco,
Tokyo, Toronto and Washington, D.C. Sapient is included in the Standard & Poor's
(S&P) 500 Index. More information about Sapient can be found at xxx.xxxxxxx.xxx.
This press release contains forward-looking statements, including statements
about expected revenues, earnings, and growth rates that involve a number of
risks and uncertainties. There are a number of factors that could cause actual
events to differ materially from those indicated. Such factors include, without
limitation, the Company's ability to continue to attract and retain high quality
employees, accurately set fees for and timely complete its current and future
client projects, the continued acceptance of the Company's services, the ability
of the Company to manage its growth and projects effectively, and the other
factors set forth in the Company's most recent Form 10-K and its quarterly Forms
10-Q for the current fiscal year, as filed with the SEC.
Sapient is a registered servicemark of Sapient Corporation.
Sapient Corporation
Revolving Loan Agreement
Disclosure Schedule 4.1, 4.2, 4.3, and 4.5
Item 4.1 - Existing Indebtedness
Sapient Corporation and Subsidiaries have only ongoing trade payables and
accrued expenses payable related to ongoing business operations. There is not
formal debt in existence, which related to funding activities or obtaining
working capital.
Sapient does have obligations related to real and tangible personal property,
represented by real estate and equipment leases which exceed one year. These
leases are associated directly with business operations, with the schedule of
payment due dates disclosed in our annual report. A listing of these obligations
is attached.
See also the guarantees referenced in Item 4.3 below.
Item 4.2 - Existing Liens
Sapient is not aware of any existing liens.
Item 4.3 - Existing Guaranties
Sapient has issued standing letters of credit related to leased real estate in
the amount of approximately $3.6 million, which have been issued by the Bank.
Further, Sapient has, in a limited number of circumstances, guaranteed the debts
of certain non-officer employees, related to certain debts. These guarantees are
not material to the business operations of the company, and are further
guaranteed by future employee bonus payments and stock options exercises.
The company has also entered into certain guarantees in the form of performance
bonds related to HWT, Inc. which relate to services contracts entered into
between HWT and certain state government entities. These performance bonds can
be executed by these state agencies in the case of non performance of duties,
which would ultimately result in a financial settlement with Sapient
Corporation. The maximum amount represented by these performance bonds is $1.3
million.
Sapient has also guaranteed certain customer contracts and leases of its
subsidiaries in the ordinary course of business, the amounts of which are not
material individually or in the aggregate.
Item 4.5 - Existing Loans to Officers
There are no outstanding loans to SEC Section 16 officers or members of the
Board of Directors. Loans to other employees typically involve approximately one
hundred employees at any given point in time, with amounts increasing typically
during tax filing deadlines.
