EXHIBIT 10.13
LOAN MODIFICATION AGREEMENT
This LOAN MODIFICATION AGREEMENT is entered into as of April 5, 2000, 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 NETWORK ENGINES, INC., a Delaware corporation with its principal
place of business at 00 Xxxxxxxx Xxxxxx, Xxxxxxxx, XX 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 as of November 2,
1998 between Borrower and Bank originally providing for a revolving credit
facility up to a maximum principal amount of THREE HUNDRED THOUSAND AND
NO/100THS DOLLARS ($300,000) and an equipment line facility up to a maximum
principal amount of TWO HUNDRED SIXTY THOUSAND AND NO/100THS DOLLARS ($260,000)
(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:
"Committed Revolving Line" means a credit extension of up to FOUR
MILLION AND NO/100THS Dollars ($4,000,000).
"2000 Committed Equipment Line" means a credit extension of up to TWO
MILLION AND N0/100THS Dollars ($2,000,000).
"Credit Extension" means each Advance, Equipment Advance, 2000
Equipment Advance, Letter of Credit or any other extension of credit
by Bank for the benefit of Borrower hereunder.
"2000 Equipment Advance" has the meaning set forth in Section 2.1.4.
"2000 Equipment Availability End Date" has the meaning set forth in
Section 2.1.4.
"Letter of Credit" means a letter of credit or similar undertaking
issued by Bank pursuant to Section 2.1.3.
"Revolving Maturity Date" means APRIL 4, 2001.
The definition of "Permitted Investment" is amended by adding the
following subparagraph:
(c) the Promissory Note dated November 18, 1999 of Xxxxxxxx X.
Xxxxxxxx payable to the order of the Borrower in the amount of
$90,000.
Subparagraphs (c) and (d) of the definition of "Permitted Liens" are
hereby replaced in their entirety with the following:
(c) Liens (i) upon or in any Equipment acquired or held by Borrower or
any of its Subsidiaries to secure the purchase price of such Equipment
or indebtedness incurred solely for the purpose of financing the
acquisition of such Equipment, or (ii) existing on such Equipment at
the time of its acquisition, provided that the Lien is confined solely
to the property so acquired and improvements thereon, and the proceeds
of such Equipment; and further provided that such liens shall exist as
of April 5, 2000, and, that the aggregate principal amount of the
obligations secured by such liens and the liens in subsection (d) of
this definition, shall not exceed $200,000;
(d) Liens on Equipment leased by Borrower or any Subsidiary pursuant
to an operating lease in the ordinary course of business (including
proceeds thereof and accessions thereto) incurred solely for the
purpose of financing the lease of such Equipment (including Liens
pursuant to leases permitted pursuant to Section 7.1 and Liens arising
from UCC financing statements regarding leases permitted by this
Agreement); provided that such liens shall exist as of April 5, 2000,
and that the aggregate principal amount of the obligations secured by
such liens and the liens in subsection (c) of this definition, shall
not exceed $200,000; and
3.2 Modifications to Revolving Advances. Section 2.1.1(a) of the Loan
Agreement is hereby replaced in its entirety with the following:
2.1.1 Revolving Advances.
(a) Bank will make Advances not exceeding (i) the Committed Revolving
Line or the Borrowing Base, whichever is less minus (ii) the amount of
all outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit). Amounts borrowed under this Section may be repaid
and reborrowed during the term of this Agreement.
3.3 Addition of Letters of Credit. The following Section 2.1.3 is hereby
inserted in the Loan Agreement:
2.1.3 Letters of Credit. Bank will issue or have issued Letters of
Credit for Borrower's account not exceeding (i) the lesser of the
Committed Revolving Line or the Borrowing Base minus (ii) the
outstanding principal balance of the Advances. Each Letter of Credit
will expire no later than 180 days after the Revolving Maturity Date
provided Borrower's Letter of Credit reimbursement obligation is
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.
3.4 Addition of 2000 Equipment Advances. The following Section 2.1.4 is
hereby inserted in the Loan Agreement:
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2.1.4 2000 Equipment Advances.
(a) Subject to and upon the terms and conditions of this Agreement, at
any time from the date hereof through APRIL 4, 2001 (the "2000
Equipment Availability End Date"), Bank agrees to make advances (each
an "2000 Equipment Advance" and collectively, the "2000 Equipment
Advances") to Borrower in an aggregate outstanding amount not to
exceed the 2000 Committed Equipment Line; provided that the total 2000
Equipment Advances made from APRIL 5, 2000 to OCTOBER 4, 2000 shall
not exceed ONE MILLION AND NO/100THS DOLLARS ($1,000,000) and that the
total 2000 Equipment Advances made from OCTOBER 5, 2000 to APRIL 4,
2001 shall not exceed ONE MILLION AND NO/100THS DOLLARS ($1,000,000).
To evidence the 2000 Equipment Advances, Borrower shall deliver to
Bank, at the time of each 2000 Equipment Advance request, an invoice
for the equipment to be purchased or financed. The 2000 Equipment
Advances shall be used only to purchase or finance Equipment and shall
not exceed ONE HUNDRED Percent (100%) of the invoice amount of such
equipment approved from time to time by Bank. Software may, however,
constitute up to THIRTY percent (30%) of aggregate 2000 Equipment
Advances.
(b) Interest shall accrue from the date of each 2000 Equipment Advance
at the rate specified in Section 2.3(a), and shall be payable on the
Payment date for each month through APRIL, 2001, except as otherwise
provided herein. Any 2000 Equipment Advances that are outstanding on
OCTOBER 4, 2000 will be payable in THIRTY-SIX (36) equal monthly
installments of principal, plus all accrued interest, on the Payment
Date of each month commencing NOVEMBER 1, 2000 and ending on OCTOBER
1, 2003. Any 2000 Equipment Advances made after OCTOBER 4, 2000 that
are outstanding on the 2000 Equipment Availability End Date will be
payable in THIRTY-SIX (36) equal monthly installments of principal,
plus all accrued interest, on the Payment Date of each month
commencing MAY 1, 2001 and ending on APRIL 1, 2004. 2000 Equipment
Advances, once repaid, may not be reborrowed.
(c) When Borrower desires to obtain a 2000 Equipment Advance, 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 2000 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. 2000 Equipment Advance requests for Equipment purchased
prior to APRIL 5, 2000 shall be made no later than SIXTY (60) business
days after said date. No 2000 Equipment Advances shall be made on
Equipment purchased after APRIL 5, 2000 more than SIXTY (60) days past
invoice date.
3.5 Modifications to Overadvances. Section 2.2 of the Loan Agreement is
hereby replaced in its entirety by the following:
2.2 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Bank pursuant to Sections 2.1.1 and
2.1.3 of this Agreement is greater than the lesser of (i) the
Committed
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Revolving Line or (ii) the Borrowing Base, Borrower shall immediately
pay to Bank, in cash, the amount of such excess.
3.6 Modifications to Interest Rate. Section 2.3(a) of the Loan Agreement
is hereby replaced in its entirety by the following:
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in Section 2.3(b), any
Advances and Equipment Advances shall bear interest, on the average
daily balance thereof, at a per annum rate equal to ONE (1.0)
percentage point above the Prime Rate, and any 2000 Equipment Advances
shall bear interest, on the average daily balance thereof, at a per
annum rate equal to ONE AND ONE QUARTER (1.25) percentage points above
the Prime Rate.
3.7 Modifications to Financial Reporting Covenants. Section 6.3 of the
Loan Agreement is hereby replaced in its entirety by the following:
6.3 Financial Statements, Reports, Certificates. (i) Borrower shall
deliver to Bank:
(a) as soon as available, but in any event within twenty-five (25)
days after the end of each month, a company prepared consolidated
balance sheet and income statement covering Borrower's consolidated
operations during such period, in a form and certified by an officer
of Borrower reasonably acceptable to Bank;
(b) as soon as available, but in any event within one hundred twenty
(120) days after the end of Borrower's fiscal year, audited
consolidated financial statements of Borrower prepared in accordance
with GAAP, consistently applied, together with an unqualified opinion
on such financial statements of an independent certified public
accounting firm reasonably acceptable to Bank;
(c) if Borrower is a reporting company under the Securities and
Exchange Act of 1934, then within five (5) days of filing, copies of
all statements, reports and notices sent or made available generally
by Borrower to its security holders or to any holders of Subordinated
Debt and all reports on Form 10-K, 10-Q and 8-K filed with the
Securities and Exchange Commission;
(d) promptly upon receipt of notice thereof, a report of any legal
actions pending or threatened against Borrower or any Subsidiary that
could result in damages or costs to Borrower or any Subsidiary of One
Hundred Thousand Dollars ($100,000) or more;
(e) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to
time, and no less frequently than annually, any material changes in
Borrower's operating plans and financial projections.
(f) within twenty-five (25) days after the last day of each month, a
Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged
listings of accounts receivable.
(g) within twenty-five (25) days after the last day of each month,
with the monthly financial statements, and within one hundred twenty
(120) days after the end of Borrower's fiscal year, with the annual
audited financial statements, a Compliance Certificate signed by a
Responsible Officer in substantially the form of Exhibit D hereto.
(ii) Bank shall have a right from time to time hereafter to audit
Borrower's Accounts and Collateral at Borrower's expense, provided
that such audits will be conducted no more often than every twelve
(12) months unless an Event of Default has occurred and is continuing.
Such an audit shall occur within 90 days of APRIL 5, 2000.
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3.8 Modifications to Tangible Net Worth. Section 6.9 of the Loan Agreement
is hereby replaced in its entirety by the following:
6.9 Tangible Net Worth. Borrower shall maintain, as of the last day
of each calendar month commencing APRIL 30, 2000, a Tangible Net Worth
of not less than FIFTEEN MILLION AND NO/100THS Dollars ($15,000,000).
3.9 Modifications to Dispositions. Section 7.1 of the Loan Agreement is
hereby replaced in its entirety by the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than
Transfers: (i) of inventory in the ordinary course of business, (ii)
of non-exclusive licenses and similar arrangements for the use of the
property of Borrower or its Subsidiaries in the ordinary course of
business, (iii) that constitute payment of normal and usual operating
expenses in the ordinary course of business, (iv) of worn-out or
obsolete Equipment, or (v) of Borrower's P6000 product line to
Copernicus, Inc., a corporation wholly-owned by Xxxxxx Xxxxx.
3.10 Modifications to Transactions with Affiliates. Section 7.8 of the
Loan Agreement is hereby replaced in its entirety by the following:
7.8 Transactions with Affiliates. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of
Borrower except for transactions that are in the ordinary course of
Borrower's business, upon fair and reasonable terms that are no less
favorable to Borrower than would be obtained in an arm's length
transaction with a non-affiliated Person, except for the Promissory
Note dated November 18, 1999 of Xxxxxxxx X. Xxxxxxxx payable to the
order of Borrower in the amount of $90,000, and except for the
Transfer of Borrower's P6000 product line to Copernicus, Inc., a
corporation wholly-owned by Xxxxxx Xxxxx.
3.11 Modifications to Intellectual Property Agreements. Section 7.9 of
the Loan Agreement is hereby replaced in its entirety with the following:
7.9 Intellectual Property Agreements. Borrower shall not permit the
inclusion in any material contract to which it becomes a party of any
provisions that could or might in any way prevent the creation of a
security interest in Borrower's rights and interests in any property
included within the definition of the Intellectual Property Assets
acquired under such contracts.
3.12 Modifications to Covenant Default. Section 8.2(b) of the Loan
Agreement is hereby replaced in its entirety with the following:
(b) If Borrower fails or neglects to perform, keep, or observe any
other material term, provision, condition, covenant, or agreement
contained in this Agreement, in any of the Loan Documents, or in any
other present or future agreement between Borrower and Bank and as to
any default under such other term, provision, condition, covenant or
agreement that can be cured, has failed to cure such default within
ten (10) days after the occurrence thereof; provided, however, that if
the default cannot by its nature be cured within the ten (10) day
period or cannot after diligent attempts by Borrower be cured within
such ten (10) day period, and such default is likely to be cured
within a reasonable time, then Borrower shall have an additional
reasonable period (which shall not in any case exceed thirty (30)
days) to attempt to cure such
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default, and within such reasonable time period the failure to have
cured such default shall not be deemed an Event of Default (provided
that no Credit Extensions will be required to be made during such cure
period);
3.13 Modifications to Insolvency. Section 8.5 of the Loan Agreement is
hereby replaced in its entirety with the following:
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is
commenced against Borrower and is not dismissed or stayed within 30
days (provided that no Credit Extensions will be made prior to the
dismissal of such Insolvency Proceeding);
3.14 Addition of Letter of Credit Remedies. The following Section 9.1(j)
is hereby inserted in the Loan Agreement:
(j) Demand that Borrower (i) deposit cash with Bank in an amount equal
to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under
such Letters of Credit, and Borrower shall forthwith deposit and pay
such amounts, and (ii) pay in advance all Letters of Credit fees
scheduled to be paid or payable over the remaining term of the Letters
of Credit;
3.15 Modifications to Exhibits. Exhibits A, C and D of the Loan Agreement
are hereby replaced in their entirety with Exhibits A, C and D to this
Agreement.
4. FEES. Borrower shall pay to Bank facility fees totaling THIRTY
THOUSAND DOLLARS ($30,000) as well as any out-of-pocket expenses incurred by the
Bank through the date hereof, including reasonable attorneys' fees and expenses,
and after the date hereof, all Bank Expenses, including reasonable attorneys'
fees and expenses, as and when they become due.
5. CONDITIONS TO FURTHER ADVANCES. The obligation of Bank to make further
advances to Borrower under the lines is subject to the condition precedent that
Bank shall have received, in form and substance satisfactory to Bank, the
following:
(i) this Loan Modification Agreement duly executed by Borrower;
(ii) payment of the fees and Bank Expenses then due specified in
Section 4 hereof; and
(iii) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
6. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described in this Loan Modification
Agreement.
7. 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.
8. 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 6 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 8 apply not only to this Loan Modification
Agreement but also to all subsequent loan modification agreements, if any.
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9. 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 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.
10. 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": NETWORK ENGINES, INC. "Bank": SILICON VALLEY BANK, doing
business as SILICON VALLEY EAST
By: /s/ Xxxxxxxx X. Xxxxxxxx By: /s/ Xxxxxxx X. Xxxxxx
----------------------------- -----------------------------
Xxxxxxxx X. Xxxxxxxx, President & CEO Xxxxxxx X. Xxxxxx, AVP
SILICON VALLEY BANK
By: /s/ Xxxxxxxx X. Xxxxxxxx
-----------------------------
Xxxxxxxx X. Xxxxxxxx
Title: Assistant Vice President
---------------------------
(Signed in Santa Xxxxx County, California)
EXHIBITS A, C AND D FOLLOW
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EXHIBIT A TO LOAN AND SECURITY AGREEMENT
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trade styles, trade names,
leases, license agreements, franchise agreements, blueprints, drawings, purchase
orders, customer lists, route lists, infringements, claims, computer programs,
computer discs, computer tapes, literature, reports, catalogs, income tax
refunds, payments of insurance and rights to payment of any kind; all rights to
unpatented inventions, know-how, operating manuals, license rights and
agreements and confidential information, now owned or hereafter acquired;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower;
(e) All documents, cash, deposit accounts, securities, investment property,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired;
(f) All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter existing, created,
acquired or held; all trademark and service xxxx rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks; all patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same, including
without limitation the patents and patent applications; all mask work or similar
rights available for the protection of semiconductor chips, now owned or
hereafter acquired; all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing, created, acquired or held; all design rights which may be available to
Borrower now or hereafter existing, created, acquired or held; all claims for
damages by way of past, present and future infringement of any of the rights
included above, with the right, but not the obligation, to xxx for and collect
such damages for said use or infringement of the foregoing; all licenses or
other rights to use any of the foregoing, and all license fees and royalties
arising from such use to the extent permitted by such license or rights; all
amendments, renewals and extensions of any of the foregoing; and
(g) All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds and products thereof, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
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EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: Network Engines, Inc. Bank: Silicon Valley Bank
00 Xxxxxxxx Xxxxxx 0000 Xxxxxx Xxxxx
Xxxxxxxx, XX 00000 Xxxxx Xxxxx, XX 00000
Commitment Amount: $4,000,000
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ____________ $_________
2. Additions (please explain on reverse) $_________
3. TOTAL ACCOUNTS RECEIVABLE $_________
ACCOUNTS RECEIVABLE DEDUCTIONS
4. Amounts over 90 days $_________
5. Balance of 50% over 90 day accounts $_________
6. Concentration Limits $_________
7. Ineligible Foreign Accounts $_________
8. Governmental Accounts $_________
9. Contra Accounts $_________
10. Promotion or Demo Accounts $_________
11. Intercompany/Employee Accounts $_________
12. Other (please explain on reverse) $_________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_________
14. Eligible Accounts (#3 - #13) $_________
15. LOAN VALUE OF ACCOUNTS (80% of #14) $_________
BALANCES
16. Maximum Loan Amount $4,000,000
17. Total Funds Available (Lesser of #16 or #15) $_________
18. Present balance owing on Line of Credit $_________
19. Outstanding under Sublimits ( ) $_________
20. RESERVE POSITIVE (#17 minus #18 and #19) $_________
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement dated as of November 2, 1998, as may be amended from time to
time, between the undersigned and Silicon Valley Bank.
-------------------------------
BANK USE ONLY
Rec'd By: ___________________
Date: _______________________
Reviewed By: ________________
Compliance Status: Yes / No
-------------------------------
COMMENTS:
_______________________________
By: ____________________________
Authorized Signer
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EXHIBIT D
COMPLIANCE CERTIFICATE
Borrower: Network Engines, Inc. Bank: Silicon Valley Bank
00 Xxxxxxxx Xxxxxx 0000 Xxxxxx Xxxxx
Xxxxxxxx, XX 00000 Xxxxx Xxxxx, XX 00000
The undersigned authorized officer of NETWORK ENGINES, INC. hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement dated as of November 2, 1998 between Borrower and Bank, as
may be amended from time to time (the "Agreement"), (i) Borrower is in complete
compliance for the period ending ___________ of all required conditions and
terms except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true, accurate and complete in all material
respects as of the date hereof. Attached herewith are the required documents
supporting the above certification. The Officer further certifies that these
are prepared in accordance with Generally Accepted Accounting Principals (GAAP)
and are consistent from one period to the next except as explained in an
accompanying letter or footnotes. The Officer further expressly acknowledges
Borrower may not request any borrowings at any time or date of determination
that Borrower is not in compliance with any of the terms of the Agreement, and
that such compliance is determined not just at the date this certificate is
delivered.
Please indicate compliance status by circling Yes/No under "Complies" column
Reporting Covenant Required Complies
------------------ -------- --------
Monthly financial statements w/ compliance Monthly within 25 days Yes No
certificate
Annual (CPA Audited) financial statements w/ FYE within 120 days Yes No
compliance certificate
Borrowing base certificate Monthly within 25 days Yes No
A/R agings Monthly within 25 days Yes No
A/R and collateral audit Initial and Annual Yes No
Material revisions to operating plans and Annual Yes No
financial projections
Financial Covenants Required Actual Complies
------------------- -------- ------ --------
MAINTAIN ON A MONTHLY BASIS:
Minimum Quick Ratio - 4/30/00 and thereafter 1.5:1.0 __________:1.0 Yes No
Minimum TNW - 4/30/00 and thereafter $15,000,000 $_____________ Yes No
Comments Regarding Exceptions:
Sincerely,
___________________________________ ---------------------------------------
Signature BANK USE ONLY
Received by: ________________________
___________________________________ Date: _______________________________
TITLE Reviewed by: ________________________
Compliance Status: Yes No
___________________________________ ---------------------------------------
DATE
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