SILICON VALLEY BANK
AMENDMENT TO LOAN AND SECURITY
AGREEMENT
BORROWER: SYNC RESEARCH, INC.
ADDRESS: 00 XXXXXX
XXXXXX, XXXXXXXXXX 00000
DATED: APRIL 14, 1999
THIS AMENDMENT TO LOAN AGREEMENT is entered into between SILICON VALLEY
BANK ("Silicon") and the borrower named above (the "Borrower").
The Parties agree to amend the Loan and Security Agreement between them,
dated September 18, 1991, as amended by that Extension Agreement dated August
3, 1992, by that Amendment to Loan Agreement dated October 20, 1992, by that
Amendment to Loan Agreement dated August 23, 1993, by that Amendment to Loan
Agreement dated February 10, 1994, by that Amendment to Loan Agreement dated
July 18, 1994, by that Amendment to Loan Agreement dated September 20, 1994,
by that Amendment to Loan and Security Agreement dated August 31, 1995, by
that Amendment to Loan and Security Agreement (the "October 1995 Amendment")
dated October 5, 1995, by that Amendment to Loan Agreement dated July 3,
1996, by that Amendment to Loan and Security Agreement dated October 6, 1996,
by that Amendment to Loan and Security Agreement dated June 10, 1997 and by
that Amendment to Loan and Security Agreement dated as of December 3, 1997
(the "Loan Agreement"), as follows. (Capitalized terms used but not defined
in this Agreement, shall have the meanings set forth in the Loan Agreement.)
1. REVISED SCHEDULE. The Schedule to Loan Agreement is hereby
replaced in its entirety with the Schedule to Loan Agreement as attached
hereto.
2. MODIFICATION TO SECTIONS 2.2 AND 2.2A. Section 2.2 and Section
2.2A of the Loan Agreement are hereby replaced in their entirety with the
following Section 2.2 and Section 2.2A:
"2.2 GRANT OF SECURITY INTEREST IN COLLATERAL. The Borrower grants
Silicon a continuing security interest in all of the Borrower's interest in
the Collateral (as defined below in Section 2.2A) as security for all
Obligations.
2.2A COLLATERAL. The term 'Collateral' as used herein shall mean all of
the Borrower's interest in the types of property described below, whether
now owned or hereafter acquired, and wherever located: (a) All accounts,
contract rights, chattel paper, letters of credit, documents, securities,
money, and instruments, and all other obligations now or in the future
owing to the Borrower; (b) All inventory, goods, merchandise, materials,
raw materials, work in process, finished goods, farm products, advertising,
packaging and shipping materials, supplies, and all other tangible personal
property which is held for sale or lease or furnished under contracts
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of service or consumed in the Borrower's business, and all warehouse
receipts and other documents; and (c) All equipment, including without
limitation all machinery, fixtures, trade fixtures, vehicles, furnishings,
furniture, materials, tools, machine tools, office equipment, computers and
peripheral devices, appliances, apparatus, parts, dies, and jigs; (d) All
general intangibles including, but not limited to, deposit accounts,
goodwill, names, trade names, trademarks and the goodwill of the business
symbolized thereby, trade secrets, drawings, blueprints, customer lists,
patents, patent applications, copyrights, security deposits, loan
commitment fees, federal, state and local tax refunds and claims, all
rights in all litigation presently or hereafter pending for any cause or
claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Borrower against Silicon, all
rights to purchase or sell real or personal property, all rights as a
licensor or licensee of any kind, all royalties, licenses, processes,
telephone numbers, proprietary information, purchase orders, and all
insurance policies and claims (including without limitation credit,
liability, property and other insurance), and all other rights, privileges
and franchises of every kind; (e) All books and records, whether stored on
computers or otherwise maintained; and (f) All substitutions, additions and
accessions to any of the foregoing, and all products, proceeds and
insurance proceeds of the foregoing, and all guaranties of and security
for the foregoing; and all books and records relating to any of the
foregoing. Silicon's security interest in any present or future technology
(including patents, trade secrets, and other technology) shall be subject
to any licenses or rights now or in the future granted by the Borrower to
any third parties in the ordinary course of Borrower's business; provided
that if the Borrower proposes to sell, license or grant any other rights
with respect to any technology in a transaction that, in substance, conveys
a major part of the economic value of that technology, Silicon shall first
be requested to release its security interest in the same, and Silicon may
withhold such release in its discretion."
3. MODIFICATION TO SECTION 3.7. Section 3.7 of the Loan Agreement is
hereby amended in its entirety to read as follows:
"3.7 FINANCIAL CONDITION AND STATEMENTS. All financial statements now or
in the future delivered to Silicon have been, and will be, prepared in
conformity with generally accepted accounting principles and now and in the
future will completely and accurately reflect the financial condition of
the Borrower, at the times and for the periods therein stated. Since the
last date covered by any such statement, there has been no material adverse
change in the financial condition or business of the Borrower. The
Borrower is now and will continue to be solvent. The Borrower will provide
Silicon: (i) within 30 days after the end of each month, a monthly
financial statement prepared by the Borrower, and a Compliance Certificate
in such form as Silicon shall reasonably specify, signed by the Chief
Financial Officer of the Borrower, certifying that as of the end of such
month the Borrower was in full compliance with all of the terms and
conditions of this Agreement, and setting forth calculations showing
compliance with the financial covenants set forth on the Schedule and such
other information as Silicon shall reasonably request #; and (ii) within
120 days following the end of the Borrower's fiscal year, complete annual
financial statements, certified by independent certified public accountants
acceptable to Silicon and accompanied by the unqualified report thereon by
said independent certified public accountants. *
# (AND SUCH INFORMATION SHALL INCLUDE WITHOUT LIMITATION BANK AND BROKERAGE
STATEMENTS OR OTHER EVIDENCE SATISFACTORY TO SILICON REGARDING THE
LIQUIDITY FINANCIAL COVENANT SET FORTH IN THE SCHEDULE TO THIS AGREEMENT)
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* BORROWER SHALL ALSO SUPPLY TO SILICON (i) WITHIN 5 DAYS AFTER THE EARLIER
OF THE DATE THE REPORT 10-Q IS FILED OR IS REQUIRED TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO BORROWER, SUCH 10-Q
REPORT; AND (ii) WITHIN 5 DAYS AFTER THE EARLIER OF THE DATE THE REPORT
10-K IS FILED OR IS REQUIRED TO BE FILED WITH THE SECURITIES EXCHANGE
COMMISSION WITH RESPECT TO BORROWER, SUCH 10-K REPORT."
4. MODIFICATION TO SECTION 4.5. Section 4.5 of the Loan Agreement is
hereby deleted in its entirety and replaced with the following:
"4.5 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At all reasonable times,
and upon one business day notice, Silicon, or its agents, shall have the
right to inspect the Collateral, and the right to audit and copy the
Borrower's accounting books and records and Borrower's books and records
relating to the Collateral. Silicon shall take reasonable steps to keep
confidential all information obtained in any such inspection or audit, but
Silicon shall have the right to disclose any such information to its
auditors, regulatory agencies, and attorneys, and pursuant to any subpoena
or other legal process. The foregoing audits shall be at Silicon's
expense, except that the Borrower shall reimburse Silicon for its
reasonable out of pocket costs for semi-annual accounts receivable audits
by third parties retained by Silicon, and Silicon may debit Borrower's
deposit accounts with Silicon for the cost of such semi-annual accounts
receivable audits (in which event Silicon shall send notification thereof
to the Borrower). Notwithstanding the foregoing, after the occurrence of
an Event of Default all audits shall be at the Borrower's expense."
5. FEE. Borrower shall pay to Silicon a facility fee in the amount
of $15,000 concurrently, which shall be in addition to all interest and all
other amounts payable under the Loan Agreement, and which shall not be
refundable.
6. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon
that all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct.
7. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and the Borrower,
and the other written documents and agreements between Silicon and the
Borrower set forth in full all of the representations and agreements of the
parties with respect to the subject matter hereof and supersede all prior
discussions, representations, agreements and understandings between the
parties with respect to the subject hereof. Except as herein expressly
amended, all of the terms and provisions of the Loan Agreement, as so
amended, and all other documents and agreements between Silicon and the
Borrower shall continue in full force and effect and the same are hereby
ratified and confirmed.
BORROWER: SILICON:
SYNC RESEARCH, INC. SILICON VALLEY BANK
BY /S/ XXXXXXX XXXXXX BY /S/ XXXXX XXXXXXX
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PRESIDENT OR VICE PRESIDENT TITLE VICE PRESIDENT
BY /S/ XXXXXXX X. XXXXXX
-----------------------------
SECRETARY OR ASS'T SECRETARY
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SILICON VALLEY BANK
AMENDED SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: SYNC RESEARCH, INC.
ADDRESS: 00 XXXXXX
XXXXXX, XXXXXXXXXX 00000
DATED: APRIL 14, 1999
CREDIT LIMIT
(Section 1.1): An amount not to exceed (i) $3,000,000 at any one
time outstanding or (ii) 80% of the Net Amount of
Borrower's accounts, which Silicon in its discretion
deems eligible for borrowing.
"Net Amount" of an account means the gross amount
of the account, minus all applicable sales, use,
excise and other similar taxes and minus all
discounts, credits and allowances of any nature
granted or claimed.
Without limiting the fact that the determination
of which accounts are eligible for borrowing is a
matter of Silicon's discretion, the following will
not be deemed eligible for borrowing: accounts
outstanding for more than 90 days from the invoice
date, accounts subject to any contingencies,
accounts owing from any government agency (unless
Borrower completes such assignment of claims
documentation and other documentation that Silicon
determines is necessary or desirable to perfect
and protect the interest of Silicon therein),
accounts owing from an account debtor outside the
United States (unless pre-approved by Silicon in
its discretion, or backed by a letter of credit
satisfactory to Silicon, or FCIA insured
satisfactory to Silicon), accounts owing from one
account debtor to the extent they exceed 25% of
the total eligible accounts outstanding, accounts
owing from an affiliate of Borrower, and accounts
owing from an account debtor to whom Borrower is
or may be liable for goods purchased from such
account debtor or otherwise. In addition, if more
than 50% of the accounts owing from an account
debtor are outstanding more than 90 days from the
invoice date or are otherwise not eligible
accounts, then all accounts owing from that
account debtor will be deemed ineligible for
borrowing.
INTEREST RATE
(Section 1.2): A rate equal to the "Prime Rate" in effect from time
to time plus .50%, per annum, calculated on the basis
of a 360-day year for the actual number of days
elapsed. "Prime Rate" means the rate announced from
time to time by Silicon as its "prime rate;" it is a
base rate upon which other rates charged by Silicon
are based, and it is not necessarily the best rate
available at Silicon. The interest rate applicable to
the Obligations shall change on each date there is a
change in the Prime Rate.
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FACILITY FEE
(Section 1.3): As per the Amendment to Loan Agreement of even date
herewith.
MATURITY DATE
(Section 5.1): APRIL 14, 2000
PRIOR NAMES OF BORROWER
(Section 3.2): TYLINK CORPORATION
TRADE NAMES OF BORROWER
(Section 3.2): NONE
OTHER LOCATIONS AND
ADDRESSES (Section 3.3): 00X XXXXXXXX XXX, XXXXXX, XX 00000
MATERIAL ADVERSE
LITIGATION (Section 3.10): AS SET FORTH IN THE BORROWER'S DECEMBER 31, 1998 10-K
REPORT
NEGATIVE COVENANTS-
EXCEPTIONS (Section 4.6): Without Silicon's prior written consent, Borrower may
do the following, provided that, after giving effect
thereto, no Event of Default has occurred and no
event has occurred which, with notice or passage of
time or both, would constitute an Event of Default,
and provided that the following are done in
compliance with all applicable laws, rules and
regulations: (i) repurchase shares of Borrower's
stock pursuant to employee stock option plans or
other similar plans in an amount not to exceed
$75,000 during any fiscal year of the Borrower and
(ii) repurchase up to 500,000 shares of the
Borrower's stock during the term of this Agreement in
accordance with previously announced Borrower plans
as disclosed to Silicon.
FINANCIAL COVENANTS
(Section 4.1): Borrower shall comply with all of the following
covenants. Compliance shall be determined as of the
end of each month, except as otherwise specifically
provided below:
LIQUIDITY COVENANT Borrower shall maintain cash on hand, cash
equivalents and marketable securities in an amount
not less than $9,000,000, with the understanding that
at least $3,000,000 thereof shall be on deposit with
Silicon at all times.
DEBT TO TANGIBLE
NET WORTH RATIO: Borrower shall maintain a ratio of total liabilities
to tangible net worth of not more than 1.00 to 1.
PROFITABILITY: Borrower shall not incur a loss (after taxes) for the
fiscal quarter ending March 31, 1999 in excess of
$3,000,000; Borrower shall not incur a loss (after
taxes) for the fiscal quarter ending June 30, 1999 in
excess of $1,500,000; Borrower shall not incur a loss
(after taxes) for the fiscal quarter ending September
30, 1999 in excess of $500,000; and, thereafter,
Borrower shall not incur a loss (after taxes) in any
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fiscal quarter. It is understood and agreed that net
losses through the quarter end period of September
30, 1999 may be cumulative.
DEFINITIONS: "Current assets," and "current liabilities" shall
have the meanings ascribed to them in accordance with
generally accepted accounting principles.
"Tangible net worth" means the excess of total assets
over total liabilities, determined in accordance with
generally accepted accounting principles, excluding
however all assets which would be classified as
intangible assets under generally accepted accounting
principles, including without limitation goodwill,
licenses, patents, trademarks, trade names,
copyrights, and franchises.
"Quick Assets" means cash on hand or on deposit in
banks, readily marketable securities issued by the
United States, readily marketable commercial paper
rated "A-1" by Standard & Poor's Corporation (or a
similar rating by a similar rating organization),
certificates of deposit and banker's acceptances, and
accounts receivable (net of allowance for doubtful
accounts).
SUBORDINATED DEBT: "Liabilities" for purposes of the foregoing covenants
do not include indebtedness which is subordinated to
the indebtedness to Silicon under a subordination
agreement in form specified by Silicon or by language
in the instrument evidencing the indebtedness which
is acceptable to Silicon.
OTHER COVENANTS
(Section 4.1): Borrower shall at all times comply with all of the
following additional covenants:
1. BANKING RELATIONSHIP. Borrower shall at all times
maintain its primary banking relationship with
Silicon.
2. MONTHLY BORROWING BASE CERTIFICATE AND LISTING.
Borrower shall provide Silicon with a Borrowing Base
Certificate in such form as Silicon shall specify,
and an aged listing of Borrower's accounts receivable
and accounts payable.
3. INDEBTEDNESS. Without limiting any of the
foregoing terms or provisions of this Agreement,
Borrower shall not in the future incur indebtedness
for borrowed money, except for (i) indebtedness to
Silicon, and (ii) indebtedness incurred in the future
for the purchase price of or lease of equipment in an
aggregate amount not exceeding $250,000 at any time
outstanding.
4. MATERIAL ADVERSE CHANGE EVENT OF DEFAULT. Without
limitation of the terms and conditions of the Loan
Agreement, the occurrence of a material adverse
change in the business, operations, or condition
(financial or otherwise) of the Borrower, or (ii) a
material impairment of the prospect of repayment of
any portion of the Obligations or (iii) a material
impairment of the value or priority of Silicon's
security interests in the Collateral shall constitute
an Event of Default under this Agreement.
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BORROWER:
SYNC RESEARCH, INC.
BY /s/ XXXXXXX XXXXXX
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President or Vice President
BY /s/ XXXXXXX X. XXXXXX
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Secretary or Ass't Secretary
SILICON:
SILICON VALLEY BANK
BY /s/ XXXXX XXXXXXX
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TITLE Vice President
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