LOAN DOCUMENT MODIFICATION AGREEMENT
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(No. 7; dated as of March 28, 1997)
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LOAN DOCUMENT MODIFICATION AGREEMENT dated as of March 28, 1997 (the
"Agreement") by and between BANYAN SYSTEMS INCORPORATED, a Massachusetts
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corporation with its principal place of business at 000 Xxxxxxxx Xxxx, Xxxxxxxx,
XX 00000 (the "Borrower") and SILICON VALLEY BANK (the "Bank"), a California
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chartered bank with its principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx
Xxxxx, Xxxxxxxxxx 00000, and with a loan production office located at Wellesley
Xxxxxx Xxxx, 00 Xxxxxxx Xxxxxx, Xxxxxxxxx, XX 00000, doing business under the
name "Silicon Valley East".
I. Reference to Existing Loan Documents.
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Reference is hereby made to that Commitment Letter dated May 5, 1992
between the Bank and the Borrower, as previously amended as of May 5, 1993, May
5, 1994, May 5, 1995, January 22, 1996, February 1, 1996 and May 5, 1996 (with
the attached schedules and exhibits, the "Commitment Letter") and the Loan
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Documents referred to therein, including without limitation that certain
Amended and Restated Promissory Note of the Borrower dated May 5, 1996 in the
principal amount of $10,000,000 (the "Note"), and the Security Documents
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referred to therein. Unless otherwise defined herein, capitalized terms used
in this Agreement shall have the same respective meanings as set forth in the
Commitment Letter.
I. Effective Date.
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This Agreement shall become effective as of May 28, 1997 (the "Effective
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Date"), provided that the Bank shall have received the following on or before
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May 30, 1997 and provided further, however, in no event shall this Agreement
become effective until signed by an officer of the Bank in California:
A. two copies of this Agreement, duly executed by the Borrower;
A. a check in the amount of $2,000 to cover the Bank's variance
fee or a letter authorizing the Bank to debit the Borrower's account in such
amount.
By the signature of its authorized officer below, the Borrower is hereby
representing that, except as modified in Schedule A attached hereto, the
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representations of the Borrower set forth in the Loan Documents (including
those contained in the Credit Agreement, as amended by this Agreement) are true
and correct as of the Effective Date as if made on and as of such date.
Finally, the Borrower (and each guarantor, if any, signing below) agrees that,
as of the Effective Date, it has no defenses against its obligations to pay any
amounts under the Credit Agreement and the other Loan Documents.
In addition, the Borrower (a) agrees to furnish to the Bank on or before
April 15, 1997 a duly completed and signed Perfection Certificate in the form
furnished herewith and to cooperate with the Bank in executing such further UCC
financing statements as the Bank may reasonably
request, and (b) agrees to permit the Bank as its agent to conduct an accounts
receivable audit at Borrower's expense on or before April 28, 1997. Borrower
acknowledges that the Bank's failure to receive such a report favorable in
substance to the Bank on or before such date shall constitute an "Event of
Default" hereunder.
I. Modifications to Commitment Letter.
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As of the Effective Date, the Commitment Letter is modified in the following
respects:
A. Numbered paragraph 7 of the Commitment Letter is hereby
restated in its entirety as follows:
"7. The Borrower may not permit the (a) sum of the aggregate unpaid
principal amount of any advances under this Commitment and (b) the
aggregate of (i) all amounts available to be drawn under any letters of
credit issued for the account of the Borrower as provided in Paragraph 8
below (the "Available Letter of Credit Amount"), and (ii) all unreimbursed
drawings under such letters of credit (the sum of (a) and (b), the
"Extensions of Credit"), to exceed at any time an amount equal to either
the sum of $10,000,000 committed by the Bank hereunder (the "Committed
Amount") or the Borrowing Base, whichever is less. If, at any time or for
any reason, the aggregate amount of all Extensions of Credit under this
Commitment is greater than the lesser of the Committed Amount or the
Borrowing Base, the Borrower shall immediately pay to the Bank, in cash,
the amount of such excess.
A. Numbered paragraph 4(c) of Schedule II is hereby amended by
inserting the following language at the beginning of the paragraph:
"(c) provided, however, that such a Compliance Certificate shall also
be required within thirty (30) days of the end of each month with respect
to Borrower's compliance with the Minimum Quick Ratio covenant set forth
in Paragraph 17 of Schedule II"
A. Numbered paragraph 17 of Schedule II is hereby restated in
its entirety as follows:
"17. Quick Ratio. The Borrower will not permit the Quick Ratio to be
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less than 1.5 to 1 at the end of any fiscal month, commencing as of
February 28, 1997."
A. Numbered paragraph 18 of Schedule II (the Minimum
Profitability Covenant) is hereby corrected by substituting the word "not" for
the word "now" appearing in the first line thereof.
"18. Minimum Profitability. The Borrower shall not incur Net Losses
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in any two consecutive fiscal quarters and shall not permit Net Income to
be less than $1.00 in any fiscal year."
A. Schedule III is hereby amended by inserting or restating the
following definitions thereunder in alphabetical order:
"Borrowing Base" means an amount equal to (i) thirty percent (30%) of
Eligible Accounts Receivable plus (ii) thirty percent (30%) of the value
of Eligible Foreign Accounts Receivable, as determined by Bank with
reference to the most recent Borrowing Base Certificate delivered by
Borrower.
"Eligible Accounts Receivable" means those accounts receivable that
arise in the ordinary course of Borrower's business that comply with all
of Borrower's representations and warranties to Bank set forth in Schedule
I. Unless otherwise agreed to by Bank in writing, Eligible Accounts
Receivable shall not include the following:
(a) accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) accounts with respect to an account debtor, fifty percent
(50%) of whose accounts the account debtor has failed to pay within ninety
(90) days of invoice date;
(c) accounts with respect to an account debtor, including
Affiliates, whose total obligations to Borrower exceed twenty-five percent
(25%) of all accounts receivable, to the extent such obligations exceed
the aforementioned percentage, except as approved in writing by Bank;
(d) accounts with respect to which the account debtor does not
have its principal place of business in the United States;
(e) accounts with respect to which the account debtor is a
federal, state, or local governmental entity or any department, agency, or
instrumentality thereof, except for those accounts of the United States or
any department, agency or instrumentality thereof as to which the payee
has assigned its rights to payment thereof to Bank and the assignment has
been acknowledged, pursuant to the Assignment of Claims Act of 1940, as
amended (31 U.S.C. 3727);
(f) accounts with respect to which Borrower is liable to the
account debtor, but only to the extent of any amounts owing to the account
debtor (sometimes referred to as "contra" accounts, e.g. accounts payable,
customer deposits, credit accounts etc.).
(g) accounts generated by demonstration or promotional equipment,
or with respect to which goods are placed on consignment, guaranteed sale,
sale or return, sale on approval, xxxx and hold, or other terms by reason
of which the payment by the account debtor may be conditional;
(h) accounts with respect to which the account debtor is an
Affiliate, officer, employee, or agent of Borrower;
(i) accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion,
that there may be a basis for dispute (but only to the extent of the
amount subject to such dispute or claim), or is subject to any Insolvency
Proceeding, or becomes insolvent, or goes out of business; and
(j) accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or claim),
or is subject to any Insolvency Proceeding, or becomes insolvent, or goes
out of business; and
(k) accounts the collection of which Bank reasonably determines
to be doubtful.
"Eligible Foreign Accounts" means accounts receivable with respect to
which the account debtor does not have its principal place of business in
the United States and that are: (1) covered by credit insurance in form
and amount, and by an insurer satisfactory to Bank less the amount of any
deductible(s) which may be or become owing thereon; or (2) supported by
one or more letters of credit either advised or negotiated through Bank or
in favor of Bank as beneficiary, in an amount and of a tenor, and issued
by a financial institution, acceptable to Bank; or (3) that Bank approves
on a case-by-case basis.
"Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or
proceedings seeking reorganization, arrangement, or other relief.
A. Schedule II to the Commitment Letter is hereby further
amended by restating Exhibit A thereto in its entirety in the form of Exhibit A
hereto.
A. Schedule II to the Commitment Letter is hereby further
amended by restating Exhibit B thereto in its entirety in the form of Exhibit B
hereto.
A. The Commitment Letter and the other Loan Documents are
hereby amended wherever necessary or appropriate to reflect the foregoing
changes.
I. Waiver of Events of Default.
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The Bank hereby waives any and all Events of Default created by the
Borrower's failure to comply with the provisions of Paragraph 17 (Quick Ratio),
Paragraph 18 (Minimum Profitability), Paragraph 19 (Tangible Net Worth) and
Xxxxxxxxx 00 (Xxxxxxxx Xxxxxxx Xxxx) of Schedule II for the fiscal quarter
ending on December 31, 1996.
I. Effective Date.
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This Agreement shall become effective as of the date first set forth above
when the Bank shall have received two copies of this Agreement, duly executed
by the Borrower (provided that in no event shall this Agreement become
effective until signed by an authorized officer of the
Bank in California). By the signature of its authorized officer below, the
Borrower is hereby representing that, as of the date hereof, it has no defenses
against its obligations to pay any amounts under the Commitment Letter and the
other Loan Documents.
I. Continuing Validity.
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Upon the effectiveness hereof, each reference in each Security Instrument
or other Loan Document to "the Commitment Letter", "thereunder", "thereof",
"therein", or words of like import referring to the Commitment Letter, shall
mean and be a reference to the Commitment Letter, as amended hereby. Except as
specifically set forth above, the Commitment Letter shall remain in full force
and effect and is hereby ratified and confirmed. Each of the other Loan
Documents is in full force and effect and is hereby ratified and confirmed.
The modifications set forth above (i) do not constitute a waiver or
modification of any term, condition or covenant of the Commitment Letter or any
other Loan Document, other than as expressly set forth herein, and (ii) shall
not prejudice any rights which the Bank may now or hereafter have under or in
connection with the Commitment Letter, as modified hereby, or the other Loan
Documents, and shall not obligate the Bank to assent to any further
modifications.
I. Miscellaneous.
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A. This Agreement may be signed in one or more counterparts
each of which taken together shall constitute one and the same document.
A. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
A. THE 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 LOAN MODIFICATION AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR
ANY REASON LENDER CANNOT AVAIL ITSELF OF THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS, THEN VENUE SHALL LIE IN SANTA XXXXX COUNTY, CALIFORNIA.
A. The Borrower agrees to promptly pay on demand all costs and
expenses of the Bank in connection with the preparation, reproduction,
execution and delivery of this letter amendment and the other instruments and
documents to be delivered hereunder, including the reasonable fees and out-of-
pocket expenses of Xxxxxxxx & Worcester LLP, special counsel for the Bank with
respect thereto.
IN WITNESS WHEREOF, the Bank and the Borrower have caused this Agreement to
be signed under seal by their respective duly authorized officers as of the
date set forth above.
SILICON VALLEY EAST, a Division
of Silicon Valley Bank
By:_____________________________
Name: Xxxx X. Xxxxxxx
Title: Senior Vice President
SILICON VALLEY BANK
By:______________________________
Name:
Title:
(signed in Santa Clara, CA)
BANYAN SYSTEMS INCORPORATED
By:______________________________
Name:
Title:
EXHIBIT A
TO SCHEDULE II
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: BANYAN SYSTEMS INCORPORATED
The undersigned authorized officer of Banyan Systems Incorporated hereby
certifies that in accordance with the terms and conditions of the Commitment
Letter dated as of June 5, 1992 between Borrower and Bank as amended through
the date hereof (the "Agreement"), (i) Borrower is in complete compliance for
the period ending with all required covenants except as noted
below and (ii) all representations and warranties of Borrower stated in the
Agreement are true and correct 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 Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer expressly acknowledges that no
borrowings may be requested by the Borrower 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
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Quarterly financial statements Quarterly within 45 days Yes No
Compliance Certificate Quarterly within 45 days Yes No
(except for Quick Ratio)
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
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Maintain on a Quarterly Basis:
Minimum Tangible Capital Base $37,500,000 $ _______ Yes No
Maximum Debt/Tangible Net Worth
(less Deferred Revenue). 1.0:1.0 _____:1.0 Yes No
Profitability Quarterly No two $ _______ Yes No
consecutive
loss quarters
Annually $1.00 $ _______ Yes No
Maintain on a Monthly Basis:
Minimum Quick Ratio (less
Deferred Revenue) 1.5:1.0 _____:1.0 Yes No
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
_______________________
Signature
Title
Date::_________________
