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EXHIBIT 10.X
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of March 4, 1998, by
and between YieldUP International Corporation ("Borrower") whose address is 000
Xxxx Xxxxxx, Xxxxxxxx Xxxx, XX 00000 and Silicon Valley Bank ("Bank") whose
address is 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, XX 00000.
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, an Amended and Restated Loan and Security Agreement, dated
March 5, 1997, as may be amended from time to time, (the "Loan Agreement"). The
Loan Agreement provided for, among other things, a Committed Revolving Line in
the original principal amount of Two Million Dollars ($2,000,000), (the
"Revolving Facility") and a Term Loan in the amended principal amount of Six
Hundred Thirty Thousand Dollars ($630,000) ("Term Loan"). Defined terms used
but not otherwise defined herein shall have the same meanings as in the Loan
Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness
is secured by the Collateral as described in the Loan Agreement and in the
Collateral Assignment, Patent Mortgage and Security Agreement dated March 5,
1997 (the "IP Agreement"). Notwithstanding the foregoing, pursuant to this Loan
Modification Agreement, Bank shall release its security interest under the IP
Agreement in consideration of Borrower executing a Negative Pledge Agreement
stating it shall not pledge its intellectual property to any party without
written permission by Bank.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents." Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness
shall be referred to as the "Existing Loan Documents."
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s)) to Loan Agreement
1. The following terms under Section 1.1 entitled "Definitions"
are hereby amended as follows:
"Committed Revolving Line" means Four Million Dollars
($4,000,000).
"Revolving Maturity Date" means March 3, 1999.
Item "(1)" under "Eligible Accounts" means Accounts with
respect to an account debtor, including Subsidiaries and
Affiliates, whose total obligations to Borrower exceed
twenty-five percent (25%) of all Accounts, to the extent such
obligations exceed the aforementioned percentage, provided
however, (i) a thirty-five percent (35%) concentration limit
is allowed for each of Applied Materials, Intel, Micron, Komag
and Matsushita, or (ii) as otherwise approved in writing by
Bank.
"Eligible Foreign Accounts" are Eligible Accounts for which
the account debtor does not have its principal place of
business in the United States but are: (1) covered by credit
insurance satisfactory to Bank, less any deductible; or (2)
supported by letter(s) of credit acceptable to Bank; or (3)
that Bank approves in writing.
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2. The following terms are hereby incorporated in to Section 1.1
entitled "Definitions":
"EQUIPMENT AVAILABILITY END DATE" is defined in Section 2.1.5.
"EQUIPMENT ADVANCE" is defined in Section 2.1.5.
"COMMITTED EQUIPMENT LINE" means Five Hundred Thousand Dollars
($500,000).
"EQUIPMENT MATURITY DATE" is defined in Section 2.1.5.
"CAPITALIZED PRODUCT DEVELOPMENT COSTS" are all costs
associated with the development of Borrower's product,
including, but not limited to software, that are not recorded
as an expense and have been classified as an asset account.
"CREDIT EXTENSION" is each Advance, Equipment Advance, Letter
of Credit, or any other extension of credit by Bank for
Borrower's benefit.
3. The first sentence in the first paragraph under Section 2.1
entitled "Advances" is hereby amended to read as follows:
Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make Advances to Borrower in an
aggregate amount not to exceed (i) the lesser of (A) the
Committed Revolving Line minus the Cash Management Services
Sublimit or (B) the Borrowing Base, whichever is less, minus
(ii) the amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit).
4. Item "(a)" under Section 2.1.1 entitled "Letters of Credit"
is hereby amended to read as follows:
(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 face amount not to
exceed (i) the lesser of the Committed Revolving Line or the
Borrowing Base minus (ii) the outstanding principal balance of
the Advances minus the Cash Management Sublimit; however, the
face amount of outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit and any Letter of Credit
Reserve) may not exceed $4,000,000. Each such Letter of Credit
shall have an expiry date no later than ninety (90) days after
the Revolving Maturity Date provided that 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 such letters of credit shall be, in form and
substance, acceptable to Bank in its sole discretion and
shall be subject to the terms and condition of Bank's form of
application and letter of credit agreement.
5. The following Section is hereby incorporated into the Loan
Agreement:
2.1.4 CASH MANAGEMENT SERVICES SUBLIMIT.
Borrower may use up to $500,000 for Bank's Cash Management
Services, which may include merchant services, direct deposit
of payroll, business credit card, and check cashing services
identified in various cash management services
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agreements related to such services (the "Cash Management
Services"). All amounts Bank pays for any Cash Management
Services will be treated as Advances under the Committed
Revolving Line.
6. The following Section is hereby incorporated into the Loan
Agreement:
2.1.5 EQUIPMENT ADVANCES.
Through March 4, 1999 (the "Equipment Availability End Date"),
Bank will make advances ("Equipment Advance" and,
collectively, "Equipment Advances") not exceeding the
Committed Equipment Line. The Equipment Advances may only be
used to finance Equipment leasehold improvements and may not
exceed 100% of the invoice amount excluding taxes, shipping,
warranty charges, freight discounts and installation expense.
Interest accrues from the date of each Equipment Advance at
the rate in Section 2.3.1 and is payable monthly, beginning
April 4, 1998, until the Equipment Availability End Date
occurs. Equipment Advances outstanding on the Equipment
Availability End Date are payable in 36 equal monthly
installments of principal, plus accrued interest, beginning on
the 4th of each month following the Equipment Availability End
Date and ending on March 4, 2002 (the "Equipment Maturity
Date"). Equipment Advances when repaid may not be reborrowed.
To obtain an Equipment Advance, Borrower must notify Bank (the
notice is irrevocable) by facsimile no later than 3:00 p.m.
Pacific time 1 Business Day before the day on which the
Equipment Advance is to be made. The notice in the form of
Exhibit B (Payment/Advance Form) must be signed by a
Responsible Officer or designee and include a copy of the
invoice for the Equipment being financed.
7. Section 2.3.1 entitled "Interest Rate" is hereby amended in
its entirety to read as follows:
(a) Any Advances under the Committed Revolving Line shall bear
interest at a rate equal to one and one quarter (1.250)
percentage points above the Prime Rate.
(b) Any Advances under the Term Loan shall bear interest at a
rate equal to two and one quarter (2.250) percentage points
above the Prime Rate.
(c) Any Equipment Advances under the Committed Equipment Line
shall bear interest at a rate equal to one and three quarters
(1.750) percentage points above the Prime Rate.
8. The first sentence in Section 2.7 entitled "Term" is hereby
amended to read as follows:
Except as otherwise set forth herein, this Agreement shall
become effective on the Closing Date and, subject to Section
12.7, shall continue in full force and effect for a term
ending on the later of the Revolving Maturity Date or the Term
Loan Maturity Date or the Equipment Maturity Date.
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9. The certificate of deposit number 8800015809 securing the Term Loan
Advances is hereby no longer required and shall not be a part of the
Collateral.
10. Item "(a)" in the first paragraph under Section 6.3 entitled "Financial
Statements, Reports, Certificates" is hereby amended to read as follows:
. . . (a) at such times as outstanding Obligations exist, as soon as
available, but in an event within thirty (30) days after the end of each
month, a company prepared consolidated balance sheet and income statement
covering Borrower's consolidated operations during such period, certified
by an officer of Borrower reasonably acceptable to Bank; . . .
11. The second paragraph under Section 6.3 entitled "Financial Statements,
Reports, Certificates" is hereby amended to read as follows:
Within twenty (20) days after the last day of each month, Borrower shall
deliver to Bank a Borrowing Base Certificate signed by a Responsible
Officer together with aged listings of accounts receivable and accounts
payable.
12. The fourth paragraph under Section 6.3 entitled "Financial Statements,
Reports, Certificates" is hereby amended to read as follows:
Bank shall have a right from to time hereafter to audit Borrower's
Accounts at Borrower's expense, provided that such audits will be
conducted no more often than once each fiscal year unless an Event of
Default has occurred and is continuing.
13. Section 6.8 entitled "Quick Ratio" is hereby amended in its entirety to
read as follows:
Borrower shall maintain, as of the last day of each calendar month, a
ratio of Quick Assets to Current Liabilities of at least 1.75 to 1.00.
14. Section 6.10 entitled "Tangible Net Worth" is hereby deleted and replaced
with the words, "Intentionally left blank."
15. Section 6.11 entitled "Profitability" is hereby amended in its entirety to
read as follows:
Borrower shall be profitable on a quarterly and an annual basis, provided,
however, Borrower may suffer a loss not to exceed Five Hundred Thousand
Dollars ($500,000) in a maximum of 1 quarter during any fiscal year.
16. Section 6.12 entitled "Minimum Liquidity" is hereby amended in its
entirety to read as follows:
Borrower shall maintain, as of the last calendar day of each month, a
ratio of unrestricted cash (and equivalents) plus net availability under
the Committed Revolving Line divided by Term Loan and Equipment Advances
outstandings of not less than 2.00 to 1.00. If Borrower maintains, for 2
consecutive fiscal quarters, a ratio of earnings after tax less
Capitalized Product Development Costs plus interest, depreciation and
amortization for the specified period on an
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annualized basis to current maturities of long term debt
and capitalized leases, plus interest expense annualized of
at least 1.75 to 1.00 (the "Debt Service Coverage"), then
the Debt Service Coverage shall replace the Liquidity
Coverage.
17. The term "Advances" in the last sentence in Sections 8.4.
8.5 and 8.8 shall be amended to read "Certain Extensions".
18. Borrower shall issue to Bank a warrant to purchase 2,439
shares of Borrower's Common stock, with an initial exercise
price of $10.25 per share. Such warrant shall be on Bank's
form, contain registration rights and antidilution
provisions and shall be for a term of five years.
B. Release of IP Agreement.
1. As an accommodation to Borrower and for good and valuable
consideration, including Bank's agreement to release its
security interest in all of Borrower's Copyrights, Patents and
Trademarks, Bank, with this Loan Modification Agreement, has
agreed to release its security interest in Borrower's
Copyrights, Patents and Trademarks granted under the IP
Agreement. In consideration of such release of security
interest, Borrower shall execute a negative pledge agreement
covering all of Borrower's Copyrights, Patents and Trademarks
(the "Negative Pledge Agreement"). Such Negative Pledge
Agreement shall include Borrower's agreement that it shall not
encumber any of its Copyrights, Patents and Trademarks without
the prior written consent of Bank.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. Borrower shall pay to Bank the sum of fees as
follows: (a) Twenty Thousand Dollars ($20,000) (the "Revolving Loan Fee") plus
(b) One Thousand Two Hundred Fifty Dollars ($1,250) (the "Equipment Advance
Fee") plus (c) all out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing indebtedness, Bank
is relying upon Borrower's representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank's agreement to
modifications to the existing indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the indebtedness. It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker, endorser,
or guarantor will be released by virtue of this Loan Modification Agreement.
The terms of this paragraph apply not only to this Loan Modification Agreement,
but also to all subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon Borrower's payment of the Revolving Loan Fee and the Equipment
Advance Fee.
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This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
YIELDUP INTERNATIONAL CORPORATION SILICON VALLEY BANK
By: /s/ ARHAY K. BHUSHAN By: /s/ XXXXXXX X. XXXX
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Name: ARHAY K. BHUSHAN Name: XXXXXXX X. XXXX
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Title: Exec. V.P. & CFO Title: Vice President
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