1
EXHIBIT 10.14
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of July 19, 1999, by
and between Anda Networks, Inc. ("Borrower") and Silicon Valley Bank ("Bank").
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 February 18, 1999, 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 One Million Dollars ($1,000,000), a Committed Bridge Loan in
the original amount of Seven Hundred Fifty Thousand Dollars ($750,000) and a
Committed Equipment Line in the original amount of Two Hundred Fifty Thousand
Dollars ($250,000). 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.
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. Section 2.1.1 entitled "Committed Bridge Loan" and all the
references thereto, are hereby deleted in their entirety
and replaced by the words "Intentionally Left Blank."
2. Section 2.1.2 Entitled "Equipment Advance" is hereby
amended in its entirety to read as follows:
2.1.2 EQUIPMENT FACILITY #1.
(a) Through December 3, 1999 (the "Equipment Availability
End Date"), Bank will make advances ("Equipment Advance
#1" and, collectively, "Equipment Advances #1") not
exceeding Committed Equipment Line #1. The Equipment
Advances #1 may only be used to finance Equipment,
including computer equipment, office equipment, lab
equipment, test equipment and furniture purchased on or
after 120 days before the date of this Agreement and may
not exceed 100% of the equipment invoice. Software and
used equipment may constitute up to 25% of the aggregate
Equipment Advances #1.
(b) Except as specified in Section 2.3 (a), interest
accrues from the date of each Equipment Advance #1, on the
outstanding principal balance, at a per annum rate of 0.5
of one percentage point above the Prime Rate and is
payable monthly until the Equipment Availability End Date
occurs. Each Equipment Advances #1 is payable in 36 equal
monthly installments of principal, plus accrued interest,
beginning on the last day of each month following the
Equipment Advance #1 and ending on 36th month following
such Equipment Advance #1 (the "Equipment
2
Maturity Date #1"). Equipment Advances #1 when repaid may
not be reborrowed.
(c) To obtain an Equipment Advance #1, 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 #1 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.
3. Section 2.1.4 entitled "Equipment Facility #2" is hereby
incorporated into the Loan Agreement to read as follows:
2.1.4 EQUIPMENT FACILITY #2.
(a) Subject to the terms and conditions of this Agreement,
Bank agrees to lend to Borrower, from time to time prior
to the Commitment Termination Date, equipment advances
(each an "Equipment Advance #2" and collectively the
"Equipment Advances #2") in an aggregate amount not to
exceed the Committed Equipment Line #2. When repaid, the
Equipment Advances #2 may not be re-borrowed. The proceeds
of the Equipment Advances #2 will be used solely to
reimburse Borrower for the purchase of Eligible Equipment.
Each Equipment Advance #2 shall be considered a promissory
note evidencing the amounts due hereunder for all
purposes. Bank's obligation to lend hereunder shall
terminate on the earlier of (i) the occurrence and
continuance of an Event of Default, or (ii) the Commitment
Termination Date. For purposes of this Section, the
minimum amount of each Equipment Advance #2 is $100,000
and the maximum number of Equipment Advances #2 that will
be made is 15.
(b) To obtain an Equipment Advance #2, Borrower will
deliver to Bank a completed supplement in substantially
the form attached as Exhibit E ("Loan Supplement"), and
such additional information as Bank may request at least
five (5) Business Days before the proposed funding date
(the "Funding Date"). On each Funding Date, Bank will
specify in the Loan Supplement for each Equipment Advance
#2, the Basic Rate, the Loan Factor, and the Payment
Dates. If Borrower satisfies the conditions of each
Equipment Advance #2 specified from time to time by Bank,
Bank will disburse such Equipment Advance #2 by internal
transfer to Borrower's deposit account with Bank. Each
Equipment Advance #2 may not exceed 100% of the Original
Stated Cost.
(c) Bank's obligation to lend the undisbursed portion of
the Committed Equipment Line will terminate if, in Bank's
sole discretion, there has been a material adverse change
in the general affairs, management, results of operation,
condition (financial or otherwise) or the prospects of
Borrower, whether or not arising from transactions in the
ordinary course of business, or there has been any
material adverse deviation by Borrower from the most
recent business plan of Borrower presented to and accepted
by Bank prior to the execution of this Agreement.
(d) Principal and Interest Payments On Payment Dates.
Borrower will repay the Equipment Advances #2 on the terms
provided in the Loan Supplement. Borrower will make
payments monthly in advance of principal and accrued
2
3
interest for each Equipment Advance #2 (collectively,
"Scheduled Payments"), on the first Business Day of the
month following the Funding Date (or commencing on the
Funding Date if the Funding Date is the first Business Day
of the month) with respect to such Equipment Advance #2
and continuing thereafter during the Repayment Period on
the first Business Day of each calendar month (each a
"Payment Date"), in an amount equal to the Loan Factor
multiplied by the Loan Amount for such Equipment Advance
#2 as of such Payment Date. All unpaid principal and
accrued interest is due and payable in full on the last
Payment Date with respect to such Equipment Advance #2.
Payments received after 12:00 noon Pacific time are
considered received at the opening of business on the next
Business Day. An Equipment Advance #2 may only be prepaid
in accordance with Sections 2.1.4h and 2.1.4j.
(e) Interest Rate. Borrower will pay interest on the
unpaid principal amount of each Equipment Advance #2 from
the first Payment Date after the Funding Date of such
Equipment Advance #2 until the Equipment Advance #2 has
been paid in full, at the per annum rate of interest equal
to the Basic Rate determined by Bank as of the Funding
Date for each Equipment Advance #2 in accordance with the
definition of the Basic Rate. Any amounts outstanding
during the continuance of an Event of Default shall bear
interest at a per annum rate equal to the Basic Rate plus
five percent (5%). If any change in the law increases
Bank's expenses or decreases its return from the Equipment
Advances #2, Borrower will pay Bank upon request the
amount of such increase or decrease.
(f) Final Payment. On the Maturity Date with respect to
each Equipment Advance #2, Borrower will pay, in addition
to the unpaid principal and accrued interest and all other
amounts due on such date with respect to such Equipment
Advance #2, an amount equal to the Final Payment.
(g) Prepayment Upon an Event of Loss. If any Financed
Equipment is subject to an Event of Loss and Borrower is
required to or elects to prepay the Equipment Advance #2
with respect to such Financed Equipment pursuant to
Section 6.9 then such Equipment Advance #2 shall be
prepaid to the extent and in the manner provided in such
section.
(h) Mandatory Prepayment Upon an Acceleration. If the
Equipment Advances #2 are accelerated following the
occurrence of an Event of Default or otherwise (other than
following an Event of Loss), then Borrower will
immediately pay to Bank (i) all unpaid Scheduled Payments
with respect to each Equipment Advance #2 due prior to the
date of prepayment, (ii) all accrued unpaid interest,
including the default rate of interest, to the date of the
prepayment, (iii) the Final Payment and (iv) all other
sums, if any, that shall have become due and payable with
respect to any Equipment Advance #2.
(i) Permitted Prepayment of Loans. Borrower shall have the
option to prepay all, but not less than all, of the
Equipment Advances #2 advanced by Bank under this
Agreement, provided Borrower (i) provides written notice
to Bank of its election to exercise to prepay the
Equipment Advances #2 at least thirty (30) days prior to
such prepayment, and (ii) pays, on the date of the
prepayment (A) all outstanding principal; (B) all unpaid
accrued interest to the date of the prepayment; and (C)
the Final Payment
3
4
4. Subsection (a) of Section 2.3 entitled "Interest Rate,
Payments" is hereby amended to read as follows:
(a) Interest Rate. (i) Equipment Advances #1 accrue
interest on the outstanding principal balance as specified
in Section 2.1.2; (ii) Equipment Advances #2 accrue
interest on the outstanding principal balance as specified
in Section 2.1.4; and (iii) Advances accrue interest on
the outstanding principal balance at a per annum rate
equal to the Prime Rate. After an Event of Default,
Obligations accrue interest at 5 percentage points above
the rate effective immediately before the Event of
Default. The interest rate increases or decreases when the
Prime Rate changes. Interest is computed on a 360 day year
for the actual number of days elapsed.
5. Section 3.2 entitled "Conditions Precedent to Initial
Advance under the Committed Revolving Line" is hereby
amended to read as follows:
Bank's obligation to make the initial Advance under the
Committed Revolving Line is subject to the conditions
precedent that:
(a) Borrower's first request to activate the Committed
Revolving Line must be prior to September 25, 1999;
(b) Borrower has provided to Bank current borrowing base
certificate;
(c) Bank has completed an audit of Borrower's Accounts,
with results satisfactory to Bank; and
(d) Borrower's payment of an activation fee of $3,500
(which will include the initial Accounts audit fee).
6. Subsection (d) is hereby incorporated into Section 6.2
entitled "Financial Statements, Reports, Certificates," to
read as follows:
(d) Upon initial Advance under the Committed Revolving
Line and within 30 days after the last day of each
quarter, Borrower will deliver to Bank a Compliance
Certificate signed by a Responsible Officer in the form of
Exhibit D.
7. Section 6.8 entitled "Financial Covenants" is hereby
incorporated into the Loan Agreement to read as follows:
Upon initial Advance under the Committed Revolving Line,
Borrower will maintain as of the last day of each quarter:
QUICK RATIO. A ratio of Quick Assets to Current
Liabilities of at least 1.00 to 1.0.
8. Section 6.9 entitled "Loss; Destruction; or Damage" is
hereby incorporated into the Loan Agreement to read as
follows:
Borrower will bear the risk of the Financed
Equipment being lost, stolen, destroyed, or damaged. If
during the term of this Agreement any item of Financed
Equipment becomes obsolete or is lost, stolen, destroyed,
damaged beyond repair, rendered permanently unfit for use,
or seized by a governmental
4
5
authority for any reason for a period equal to at least
the remainder of the term of this Agreement (an "Event of
Loss"), then in each case, Borrower:
(a) prior to the occurrence of an Event of Default, at
Borrower's option, will (i) pay to Bank on account of the
Obligations all accrued interest to the date of the
prepayment, plus all outstanding principal, plus the Final
Payment; or (ii) repair or replace any Financed Equipment
subject to an Event of Loss provided the repaired or
replaced Financed Equipment is of equal or like value to
the Financed Equipment subject to an Event of Loss and
provided further that Bank has a first priority perfected
security interest in such repaired or replaced Financed
Equipment.
(b) during the continuance of an Event of Default, on or
before the Payment Date after such Event of Loss for each
such item of Financed Equipment subject to such Event of
Loss, Borrower will, at Bank's option, pay to Bank an
amount equal to the sum of: (i) all accrued and unpaid
Scheduled Payments (with respect to such Equipment Advance
related to the Event of Loss) due prior to the next such
Payment Date, (ii) all Regularly Scheduled Payments
(including principal and interest), (iii) the Final
Payment plus (iv) all other sums, if any, that shall have
become due and payable, including interest at the Default
Rate with respect to any past due amounts.
(c) On the date of receipt by Bank of the amount specified
above with respect to each such item of Financed Equipment
subject to an Event of Loss, this Agreement shall
terminate as to such Financed Equipment. If any proceeds
of insurance or awards received from governmental
authorities are in excess of the amount owed under this
Section, Bank shall promptly remit to Borrower the amount
in excess of the amount owed to Bank.
9. The following defined terms are hereby amended and/or
incorporated into Section 13.1 entitled "Definitions," to
read as follows:
"BASIC RATE" is, as of the Funding Date, the per annum
rate of interest (based on a year of 360 days) equal to
the sum of (a) the U.S. Treasury note yield to maturity
for a term equal to the Treasury Note Maturity as quoted
in The Wall Street Journal on the day the Loan Supplement
is prepared, plus (b) the Loan Margin.
"COMMITTED EQUIPMENT LINE #1" is a Credit Extension of up
to $750,000.
"COMMITTED EQUIPMENT LINE #2" is a Credit Extension of up
to $750,000.
"COMMITMENT TERMINATION DATE" is March 7, 2000.
"CURRENT LIABILITIES" are the aggregate amount of
Borrower's Total Liabilities which mature within one (1)
year.
"ELIGIBLE EQUIPMENT" is test and laboratory equipment,
test equipment, and, subject to the limitations set forth
below, Other Equipment that complies with all of
Borrower's representations and warranties to Bank and
which is acceptable to Bank in all respects. All Equipment
financed with the proceeds of Equipment Advances may be
new or used.
5
6
"EQUIPMENT" is all present and future machinery,
equipment, tenant improvements, furniture, fixtures,
vehicles, tools, parts and attachments in which Borrower
has any interest.
"EQUIPMENT ADVANCE #1" is defined in Section 2.1.2.
"EQUIPMENT ADVANCE #2" is defined in Section 2.1.4.
"EQUIPMENT AVAILABILITY END DATE" is defined in Section
2.1.2.
"FINAL PAYMENT" is a payment (in addition to and not a
substitution for the regular monthly payments of principal
plus accrued interest) due on the Maturity Date for such
Equipment Advance equal to the Loan Amount for such
Equipment Advance at such time multiplied by the Final
Payment Percentage.
"FINAL PAYMENT PERCENTAGE" is, for each Equipment Advance
#2, 5%.
"FINANCED EQUIPMENT" is defined in the Loan Supplement.
"FUNDING DATE" is any date on which an Equipment Advance
is made to or on account of Borrower.
"LOAN AMOUNT" is the aggregate amount of the Equipment
Advance #2.
"LOAN FACTOR" is the percentage which results from
amortizing the Equipment Advance over the Repayment
Period, using the Basic Rate as the interest rate.
"LOAN MARGIN" is 375 basis points.
"LOAN SUPPLEMENT" is attached as Exhibit E.
"MATURITY DATE" is defined in each Loan Supplement.
"ORIGINAL STATED COST" is (i), the original cost to the
Borrower of the item of new Equipment net of any and all
freight, installation, tax or (ii) the fair market value
assigned to such item of used Equipment by mutual
agreement of Borrower and Bank at the time of making of
the Equipment Advance.
"OTHER EQUIPMENT" is used Equipment and software. Unless
otherwise agreed to by Bank, not more than 25% of the
Equipment financed with the proceeds of each Equipment
Advance shall consist of Other Equipment.
"QUICK ASSETS" is, on any date, the Borrower's
consolidated, unrestricted cash, cash equivalents, net
billed accounts receivable and investments with maturities
of less than 12 months determined according to GAAP.
"REPAYMENT PERIOD" as to the Equipment Advances #2, is 30
months.
"TREASURY NOTE MATURITY" is 36 months.
6
7
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 a fee in the amount of
Five Hundred Dollars ($500) (the "Loan Fee") plus 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 Loan Fee.
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: BANK:
ANDA NETWORKS, INC. SILICON VALLEY BANK
By:____________________________ By:_______________________________
Name:__________________________ Name:_____________________________
Title:_________________________ Title:____________________________
7
8
[SILICON LOGO]
SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: ANDA NETWORKS, INC.
LOAN OFFICER: XXXXXXX XXXXXXX
DATE: JULY 19, 1999
LOAN FEE $500.00
DOCUMENTATION FEE $1,000.00
LEGAL FEE $500.00
TOTAL FEE DUE $2,000.00
=========
PLEASE INDICATE THE METHOD OF PAYMENT:
{ } A CHECK FOR THE TOTAL AMOUNT IS ATTACHED.
{ } DEBIT DDA # __________________ FOR THE TOTAL AMOUNT.
{ } LOAN PROCEEDS
______________________________________________
BORROWER (DATE)
______________________________________________
SILICON VALLEY BANK (DATE)
ACCOUNT OFFICER'S SIGNATURE
8
9
EXHIBIT E
FORM OF LOAN AGREEMENT SUPPLEMENT
LOAN AGREEMENT SUPPLEMENT
LOAN AGREEMENT SUPPLEMENT dated , 199 ("Supplement"), to the Loan and Security
Agreement dated as of February 18, 1999 (the "Loan Agreement) by and between the
undersigned ("Borrower"), and Silicon Valley Bank ("Bank").
Capitalized terms used herein but not otherwise defined herein are used with the
respective meanings given to such terms in the Loan Agreement.
To secure the prompt payment by Borrower of all amounts from time to time
outstanding under the Loan Agreement, and the performance by Borrower of all the
terms contained in the Loan Agreement, Borrower has granted Bank, a first
priority security interest in each item of equipment and other property
described in Annex A hereto, which equipment and other property is deemed to be
additional Financed Equipment and Collateral. The Loan Agreement is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
Annex A (Equipment Schedule) and Annex B (Loan Terms Schedule) are attached
hereto. The proceeds of the Loan should be transferred to Borrower's account
with Bank set forth below:
Bank Name: Silicon Valley Bank
Account No.: ___________________
Borrower hereby certifies that (a) the foregoing information is true and correct
and authorizes Bank to endorse in its respective books and records, the Basic
Rate applicable to the Funding Date of the Loan contemplated in this Loan
Agreement Supplement and the principal amount set forth in the Loan Terms
Schedule; (b) the representations and warranties made by Borrower in the Loan
Agreement are true and correct on the date hereof and will be true and correct
on such Funding Date. No Event of Default has occurred and is continuing under
the Loan Agreement. This Supplement may be executed by Borrower and Bank in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
This Supplement is delivered as of this day and year first above written.
SILICON VALLEY BANK ANDA NETWORKS, INC.
By:_________________________________ By:___________________________________
Name:____________________________ Name:______________________________
Title:___________________________ Title:_____________________________
Annex A - Description of Financed Equipment
Annex B - Loan Terms Schedule
9
10
Annex A
The Financed Equipment being financed with the Equipment Advance which this Loan
Agreement Supplement is being executed is listed below. Upon the funding of such
Equipment Advance, this schedule automatically shall be deemed to be a part of
the Collateral.
10
11
Annex B
LOAN TERMS SCHEDULE #________
Loan Funding Date:_____________ , 199_
Original Loan Amount: $________
Basic Rate: ___________%
Loan Factor: __________%
Scheduled Payment Dates and Amounts*:
One (1) payment of $______ due _____________
_____ payment of $______ due monthly in advance from _____ through _______.
One (1) payment of $______ due _____________
Maturity Date:_________
Final Payment: An additional amount equal to the Final Payment Percentage
multiplied by the Loan Amount then in effect, shall be paid on
the Maturity Date with respect to such Loan.
Stipulated Loss Value: The Loan Amount multiplied by the applicable Stipulated
Loss Value Percentage set forth below.
Payment No. Payment Date Stipulated Loan Value Percentage**
1
2
3
4
...
30...
*/ The amount of each Scheduled Payment will change as the Loan Amount changes.
**/ Each Stipulated Loss Value amount assumes payment of all Scheduled Payments
due on or before the indicated Payment Date.
11
