Exhibit 10.11
LOAN MODIFICATION AGREEMENT
This LOAN MODIFICATION AGREEMENT is entered into as of November 31, 1998, by
and between SILICON VALLEY BANK, a California-chartered bank with its principal
place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, XX 00000 and with a loan
production office located at Wellesley Office Park, 00 Xxxxxxx Xxxxxx, Xxxxx
000, Xxxxxxxxx, XX 00000, doing business under the name "Silicon Valley East"
("Bank"), and SONUS NETWORKS, INC., a Delaware corporation with its principal
place of business at 0 Xxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxxxx 00000
("Borrower").
RECITALS
Borrower has borrowed money from Bank pursuant to certain Existing Loan
Documents, as defined below. In consideration of certain financial
accommodations from Bank, and Borrower's continuing obligations under the
Existing Loan Documents, Borrower and Bank agree as follows:
AGREEMENT
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which
may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to,
among other documents, a Loan and Security Agreement dated March 6. 1998
providing for an equipment line of credit in the maximum principal amount of ONE
MILLION FIVE HUNDRED THOUSAND AND NO/100THS DOLLARS ($1,500,000) (the "Loan
Agreement").
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred
to as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured
pursuant to the Loan Agreement. Hereinafter, the Loan Agreement, together with
all other documents securing payment of the Indebtedness, shall be referred to
as the "Existing Loan Documents."
3. DESCRIPTION OF CHANGES IN TERMS.
3.1 Modifications to Definitions. Section 1.1 of the Loan Agreement is
hereby amended by substituting the following definitions for those set forth
therein for the same terms, and in the case of new definitions, by adding those
new definitions to that Section 1.1:
"Advance" or "Advances" means a loan advance under the Committed
Revolving Line.
"Committed Revolving Line" means a credit extension of up to TWO
HUNDRED THOUSAND AND NO/100THS Dollars ($200,000).
"1998-2 Committed Equipment Line" means a credit extension of up to
SEVEN HUNDRED FIFTY THOUSAND AND NO/100THS Dollars ($750,000);
provided, however, that when and if (i) Bank receives Borrower's
1999 budget as approved by Borrower's Board of Directors, and (ii)
Bank verifies, in its reasonable discretion, that the projections in
that budget will be in compliance with Borrower's financial covenant
set forth in Section 6.8 of this Agreement for all of calendar year
1999, then the 1998-2 Committed Equipment Line shall mean a credit
extension of up to TWO MILLION AND NO/100THS Dollars ($2,000,000).
Bank will notify Borrower of the results of its verification within
ten (10) business days after receipt of Borrower's 1999 budget.
"Credit Extension" means each Advance, Equipment Advance, Letter of
Credit, or any other extension of credit by Bank for the benefit of
Borrower hereunder.
"Equipment Advance" has the meaning set forth in Sections 2.1.1 and
2.1.2, as applicable.
"Letter of Credit" means a letter of credit or similar undertaking
issued by Bank pursuant to Section 2.1.3.
"Letter of Credit Reserve" has the meaning set forth in Section
2.1.3.
"Maturity Date" means June 5, 2003.
"Revolving Maturity Date" means NOVEMBER 30, 1999.
3.2 Addition of 1998-2 Equipment Line. Section 2.1.2 is hereby added to
the Loan Agreement as follows:
2.1.2 1998-2 Equipment Line.
(a) In addition to any Equipment Advances made pursuant to Section
2.1.1 of this Agreement, at any time from the date hereof through
JUNE 30, 1999, Borrower may from time to time request advances from
Bank in an aggregate amount not to exceed the lesser of the 1998-2
Committed Equipment Line or ONE MILLION FIVE HUNDRED THOUSAND AND
NO/100THS DOLLARS ($1,500,000) to finance Equipment purchased after
OCTOBER 1,1998 and prior to JULY 1, 1999.
(b) In addition to any Equipment Advances made pursuant to Section
2.1.1 of this Agreement, at any time after JUNE 30, 1999 through
DECEMBER 31, 1999, Borrower may from time to time request advances
from Bank in an aggregate amount not to exceed the 1998-2 Committed
Equipment Line less any advances made under Section 2.1.2(a) of this
Agreement, to finance Equipment purchased after JUNE 1, 1999 and
prior to JANUARY 1, 2000.
(c) The advances under Sections 2.1.2(a) and 2.1.2(b) of this
Agreement (each an "Equipment Advance" and collectively, the
"Equipment Advances") shall not exceed ONE HUNDRED Percent (100%) of
the invoice amount of such equipment approved from time to time by
Bank, excluding taxes, shipping, warranty charges, freight discounts
and installation expense. Software may, however, constitute up to
FIFTY percent (50%) of aggregate Equipment Advances. In order to be
eligible for financing under the 1998-2 Committed Equipment Line,
invoices must be submitted to Bank for financing within sixty (60)
days of invoice date.
(d) Interest shall accrue from the date of each Equipment Advance at
the rate specified in Section 2.2(a), and shall be payable on the
Payment Date of each month through the month in which the applicable
Equipment Advance converts to a term loan as set forth in this
Section 2.1.2(d). Any Equipment Advances made under Section 2.1.2(a)
of this Agreement that are outstanding on JULY 1, 1999 will be
payable in FORTY EIGHT (48) equal monthly installments of principal,
plus all accrued interest, beginning on the Payment Date of each
month commencing JULY 5, 1999 and with the last payment due on JUNE
5, 2003. Any Equipment Advances made under Section 2.1.2(b) of this
Agreement that are outstanding on JANUARY 1, 2000 will be payable in
FORTY TWO (42) equal monthly installments of principal, plus all
accrued interest, beginning on the Payment Date of each month
commencing JANUARY 5, 2000 and with the last payment due on JUNE 5,
2003. Equipment Advances may be prepaid without penalty. Equipment
Advances, once repaid, may not be reborrowed.
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(e) When Borrower desires to obtain an Equipment Advance under this
Section 2.1.2, Borrower shall notify Bank (which notice shall be
irrevocable) by facsimile transmission to be received no later than
3:00 p.m. Pacific time one (1) Business Day before the day on which
the Equipment Advance is to be made. Such notice shall be
substantially in the form of Exhibit B. The notice shall be signed
by a Responsible Officer or its designee and include a copy of the
invoice(s) for the Equipment to be financed.
3.3 Addition of Committed Revolving Line. Section 2.1.3 is hereby added to
the Loan Agreement as follows:
2.1.3 Advances for Letters of Credit.
(a) Subject to the terms and conditions of this Agreement, Bank
agrees to issue or cause to be issued Letters of Credit for the
account of Borrower in an aggregate outstanding face amount not to
exceed the Committed Revolving Line. Borrower's Letter of Credit
reimbursement obligation shall be secured by cash on terms
acceptable to Bank at any time after the Revolving Maturity Date if
the term of this Agreement is not extended by Bank. All Letters of
Credit shall be in form and substance reasonably acceptable to Bank
in its discretion and shall be subject to the terms and conditions
of Bank's form of standard Application and Letter of Credit
Agreement.
(b) Borrower shall pay to Bank a one-time Facility Fee equal to ONE
PERCENT (1.0%), of the face amount of each Letter of Credit when
issued, which fee shall be fully earned and non-refundable upon such
issuance.
(c) The obligation of Borrower to immediately reimburse Bank for
drawings made under Letters of Credit shall be absolute,
unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement and such Letters of
Credit, under all circumstances whatsoever. Borrower shall
indemnify, defend, protect and hold Bank harmless from any loss,
cost, expense or liability, including, without limitation,
reasonable attorneys' fees, arising out of or in connection with any
Letters of Credit.
(d) Borrower may request that Bank issue a Letter of Credit payable
in a currency other than United States Dollars. If a demand for
payment is made under any such Letter of Credit, Bank shall treat
such demand as an Advance to Borrower of the equivalent of the
amount thereof (plus cable charges) in United States currency at the
then prevailing rate of exchange in San Francisco, California, for
sales of that other currency for cable transfer to the country of
which it is the currency.
(e) Upon the issuance of any Letter of Credit payable in a currency
other than United States Dollars, Bank shall create a reserve under
the Committed Revolving Line for letters of credit against
fluctuations in currency exchange rates, in an amount equal to ten
percent (10%) of the face amount of such Letter of Credit (the
"Letter of Credit Reserve"). The amount of such Letter of Credit
Reserve may be amended by Bank from time to time to account for
fluctuations in the exchange rate. The availability of funds under
the Committed Revolving Line shall be reduced by the amount of such
Letter of Credit Reserve for so long as such Letter of Credit
remains outstanding.
(f) The Committed Revolving Line shall terminate on the Revolving
Maturity Date, at which time all Advances under this Section 2.1.3
and
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other amounts due under this Agreement (except as otherwise
expressly specified herein, including without limitation payments
due under Sections 2.1.1 and 2.1.2 of this Agreement) shall be
immediately due and payable.
3.4 Modifications to Interest Rates. Section 2.2(a) of the Loan Agreement
is hereby replaced in its entirety with the following:
(a) Interest Rate. Except as set forth in Section 2.2(b), any
Equipment Advances shall bear interest, on the average daily balance
thereof, at a per annum rate equal to ONE-HALF (0.50) percentage
points above the Prime Rate and any Advances shall bear interest, on
the average daily balance thereof, at a per annum rate equal to the
Prime Rate.
3.5 Modifications to Tangible Net Worth Covenant. Section 6.8 of the Loan
Agreement is hereby replaced in its entirety with the following:
6.8 Tangible Net Worth. Borrower shall maintain, as of the last day
of each calendar month a Tangible Net Worth of not less than the
total of the outstanding principal amount of Equipment Advances,
plus all accrued and unpaid interest arising from Equipment Advances
plus TWO HUNDRED THOUSAND AND NO/100THS Dollars ($200,000).
3.6 Modifications to Compliance Certificate. Exhibit C of the Loan
Agreement is hereby replaced in its entirety with Exhibit C to this Agreement.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described in this Loan Modification
Agreement.
5. NO DEFENSES OF BORROWER. Borrower agrees that as of this date, it has
no defenses against any of the obligations to pay any amounts under the
Indebtedness.
6. CONTINUING VALIDITY. Borrower understands and agrees that (i) in
modifying the Existing Loan Documents, Bank is relying upon Borrower's
representations, warranties and agreements, as set forth in the Existing Loan
Documents, (ii) except as expressly modified pursuant to this Loan Modification
Agreement (including the effects of Section 4 hereof), the Existing Loan
Documents remain unchanged and in full force and effect, (iii) Bank's agreement
to modify the Existing Loan Documents pursuant to this Loan Modification
Agreement shall in no way obligate Bank to make any future modifications to the
Existing Loan Documents, (iv) it is the intention of Bank and Borrower to retain
as liable parties all makers and endorsers of the Existing Loan Documents,
unless a party is expressly released by Bank in writing, (v) no maker, endorser
or guarantor will be released by virtue of this Loan Modification Agreement, and
(vi) the terms of this Section 6 apply not only to this Loan Modification
Agreement but also to all subsequent loan modification agreements, if any.
7. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. The laws of the
Commonwealth of Massachusetts shall apply to this Agreement. BORROWER ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT, OR
PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF
OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER ACCEPTS
JURISDICTION OF THE COURTS AND VENUE IN SANTA XXXXX COUNTY, CALIFORNIA.
BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
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AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
8. EFFECTIVENESS. This Agreement shall become effective only when it shall
have been executed by Borrower and Bank (provided, however, in no event shall
this Agreement become effective until signed by an officer of Bank in
California).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument as of the date first set forth above.
"Borrower" "Bank"
SONUS NETWORKS, INC. SILICON VALLEY BANK, doing business
as SILICON VALLEY EAST
By: /s/ Xxxxx Xxxxxx By:
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Xxxxx Xxxxxx, President Xxxx X. Xxxxxxxxx, VP
SILICON VALLEY BANK
By:
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Title:
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(Signed in Santa Xxxxx County, California)
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