AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT
Exhibit 10.1
THIS AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is entered into this 7
day of October, 2005, by and between Silicon Valley Bank (“Bank”) and Sipex Corporation, a Delaware
corporation (“Borrower”) whose address is 000 Xxxxx Xxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxx 00000.
Recitals
A. Bank and Borrower have entered into that certain Loan and Security Agreement dated as of
July 21, 2005,(as the same may from time to time be amended, modified, supplemented or restated,
the “Loan Agreement”).
B. Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.
C. Borrower has requested that Bank amend the Loan Agreement to make certain revisions to the
Loan Agreement as more fully set forth herein.
D. Bank has agreed to so amend certain provisions of the Loan Agreement, but only to the
extent, in accordance with the terms, subject to the conditions and in reliance upon the
representations and warranties set forth below.
Agreement
Now, Therefore, in consideration of the foregoing recitals and other good and
valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to
be legally bound, the parties hereto agree as follows:
1. Definitions. Capitalized terms used but not defined in this Amendment shall have the
meanings given to them in the Loan Agreement.
2. Amendments to Loan Agreement.
2.1 Section 2.1.1 (Revolving Advances). The first sentence of Section 2.1.1 is amended to
read in its entirety as follows: “Bank will make Advances not exceeding the lesser of (i) the
Borrowing Base plus $500,000, and (ii) the Committed Revolving Line, minus the Sublimit Utilization
Amount.”
2.2 Section 2.3 (Interest Rate). The first sentence of Section 2.3 is amended in its entirety
to read as follows: “Advances accrue interest on the outstanding balance at a per annum rate equal
to the Prime Rate plus one percent (1.00%).”
2.3 Section 2.4 (Fees). A new subsection (d) is added as follows: “(d) Collateral Handling
Fee. A collateral handling fee of $500 per month, payable monthly.”
2.4 Section 5.2 (Collateral). The following is added to the end of Section 5.2:
“For any Eligible Account in any Borrowing Base Certificate, all statements made and all
unpaid balances appearing in all invoices, instruments and other documents evidencing such Eligible
Accounts are and shall be true and correct and all such invoices, instruments and other documents,
and all of Borrower’s Books are genuine and in all respects what they purport to be. All sales and
other transactions underlying or giving rise to each Eligible Account shall comply in all material
respects with all applicable laws and governmental rules and regulations. Borrower has no
knowledge of any actual or imminent Insolvency Proceeding of any Account Debtor whose accounts are
an Eligible Account in any Borrowing Base Certificate. To the best of Borrower’s knowledge, all
signatures and endorsements on all documents, instruments, and agreements relating to all Eligible
Accounts are genuine, and all such documents, instruments and agreements are legally enforceable in
accordance with their terms.”
2.5 Section 6.2 (Financial Statements, Reports, Certificates). Section 6.2(b) is
amended in its entirety to read as follows: “Within 30 days after the last day of each month,
Borrower will deliver to Bank (i) monthly company-prepared consolidated financial statements, (ii)
a cash holding report, including account statements detailing investment type and maturity dates,
(iii) a deferred revenue report, and (iv) a Compliance Certificate signed by a Responsible
Officer.”
Section 6.2(d) is amended in its entirety to read as follows: “Promptly, but in any event
within 15 days and 30 days after the last day of each month, Borrower shall provide to Bank (i) a
detailed aging of its accounts receivable and accounts payable, and (ii) a Borrowing Base
Certificate signed by a Responsible Officer.
Section 6.2(e) is amended by replacing the second sentence thereof with the following:
“Such audits will be conducted no more often than every 3 months, with an initial audit of accounts
receivable not later than October 31, 2005, unless an Event of Default or an event which, with
notice or passage of time or both would constitute an Event of Default, has occurred and is
continuing.”
2.6 Section 6.7 (Financial Covenants). Section 6.7 is amended in its entirety to read as
follows:
“(a) Minimum Liquidity Ratio. Borrower will maintain as of the last day of each month, a Liquidity
Ratio of not less than 1.50:1.00. The Liquidity Ratio is calculated as Borrower’s consolidated
Accounts divided by the Obligations.”
“(b) Tangible Net Worth. Borrower will maintain, as of the last day of each quarter set forth
below, a Tangible Net Worth of at least the amount set forth opposite such date.
| Quarter Ending Date | Minimum Tangible Net Worth | |
September 30, 2005 |
$45,565,300 | |
December 31, 2005 |
$38,436,000 | |
March 31, 2006 |
$32,151,200 | |
June 30, 2006 |
$26,113,000 |
2.7 Section 13 (Definitions). The following terms and their respective definitions set forth
in Section 13.1 are amended in their entirety and replaced with the following:
“Account Debtor” is any “account debtor” as defined in the Code with such additions to
such term as may hereafter be made.
“Borrowing Base” is, as determined by Bank from borrower’s most recent Borrowing Base
Certificate, the sum of (a) 70% of Eligible Accounts owing from Chander Electronics, Gold
InsigniaElectronic Co. LTD, Jetronic, Kohmatsu, Lestina International, LSD MCU (HK) Science
and Tech, MFS Technology, Microtek, Princeton Technology, Prohubs, Silicon Applications,
Tomuki Corporation, and AMSC; (b) 80% of Eligible Accounts owing from Avnet Electronics,
Celestica, Dell, Flextronics International, Fuji Electronics, Future Electronics (UK),
Future Electronics (Canada), Future Electronics (Malaysia), Honeywell, IBM, Jabil, Jaco
Electronics, Paradyne Corporation, Philips, Raytheon, Sammex (Scientific Atlanta, Mexico),
Samsung, Sanmina, Toshiba, and (c) a percentage of such other Eligible Accounts as Bank may
approve in its sole discretion; provided however, that Bank may decrease the foregoing
percentages in its good faith business judgment based on events, conditions, contingencies,
or risks, which, as determined by Bank, may adversely affect the Collateral, or in
accordance with the results of the initial field exam and on-going periodic exams.
“Borrowing Base Certificate” is that certain certificate in the form attached hereto
as Exhibit D.
“Eligible Accounts” are Accounts which arise in the ordinary course of Borrower’s
business that meet all Borrower’s representations and warranties with respect to Accounts
in Section 5.2. Bank reserves the right at any time and from time to time after the
Effective Date, to adjust any of the criteria set forth below and to establish new criteria
in its good faith business judgment. Unless Bank agrees otherwise in writing, Eligible
Accounts shall not include:
(a) Accounts that the Account Debtor has not paid within ninety (90) days of invoice
date;
(b) Accounts owing from an Account Debtor, fifty percent (50%) or more of whose
Accounts have not been paid within ninety (90) days of invoice date;
(c) Credit balances over ninety (90) days from invoice date;
(d) Accounts owing from an Account Debtor, including Affiliates, whose total
obligations to Borrower exceed twenty-five (25%) of all Accounts, except for Future
Electronics (Canada, UK and Malaysia), for which such percentage is 40%, for the amounts
that exceed that percentage, unless Bank approves in writing;
(e) Accounts owing from an Account Debtor which does not have its principal place of
business in the United States (other than specific Account Debtors named in the definition
of “Borrowing Base”);
(f) Accounts owing from an Account Debtor which is a federal, state or local
government entity or any department, agency, or instrumentality thereof except for Accounts
of the United States if Borrower has assigned its payment rights to Bank and the assignment
has been acknowledged under the Federal Assignment of Claims Act of 1940, as amended;
(g) Accounts owing from an Account Debtor to the extent that Borrower is indebted or
obligated in any manner to the Account Debtor (as creditor, lessor, supplier or otherwise -
sometimes called “contra” accounts, accounts payable, customer deposits or credit
accounts), with the exception of customary credits, adjustments and/or discounts given to
an Account Debtor by Borrower in the ordinary course of its business;
(h) Accounts for demonstration or promotional equipment, or in which goods are
consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on approval”, “xxxx and
hold”, or other terms if Account Debtor’s payment may be conditional;
(i) Accounts for which the Account Debtor is Borrower’s Affiliate, officer, employee,
or agent;
(j) Accounts in which the Account Debtor disputes liability or makes any claim (but
only up to the disputed or claimed amount), or if the Account Debtor is subject to an
Insolvency Proceeding, or becomes insolvent, or goes out of business;
(k) Accounts for which Bank in its good faith business judgment determines collection
to be doubtful; and
(m) other Accounts Bank deems ineligible in the exercise of its good faith business
judgment.
2.8 Exhibits to the Loan Agreement. Exhibit C (Compliance Certificate) is deleted and
replaced with the form attached hereto as Exhibit A. A new Exhibit D (Borrowing Base Certificate)
is added in the form of Exhibit B hereto.
3. Limitation of Amendments.
3.1 The amendments set forth in Section 2, above, are effective for the purposes set forth
herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any
amendment, waiver or modification of any other term or condition of any Loan Document, or (b)
otherwise prejudice any right or remedy which Bank may now have or may have in the future under or
in connection with any Loan Document.
3.2 This Amendment shall be construed in connection with and as part of the Loan Documents and
all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan
Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full
force and effect.
4. Representations and Warranties. To induce Bank to enter into this Amendment, Borrower
hereby represents and warrants to Bank as follows:
4.1 Immediately after giving effect to this Amendment (a) the representations and warranties
contained in the Loan Documents are true, accurate and complete in all material respects as of the
date hereof (except to the extent such representations and warranties relate to an earlier date, in
which case they are true and correct as of such date), and (b) no Event of Default has occurred and
is continuing;
4.2 Borrower has the power and authority to execute and deliver this Amendment and to perform
its obligations under the Loan Agreement, as amended by this Amendment;
4.3 The organizational documents of Borrower delivered to Bank on the Effective Date remain
true, accurate and complete and have not been amended, supplemented or restated and are and
continue to be in full force and effect;
4.4 The execution and delivery by Borrower of this Amendment and the performance by Borrower
of its obligations under the Loan Agreement, as amended by this Amendment, have been duly
authorized;
4.5 The execution and delivery by Borrower of this Amendment and the performance by Borrower
of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not
contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual
restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or
other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d)
the organizational documents of Borrower;
4.6 The execution and delivery by Borrower of this Amendment and the performance by Borrower
of its obligations under the Loan Agreement, as amended by this Amendment, do not require any
order, consent, approval, license, authorization or validation of, or filing, recording or
registration with, or exemption by any governmental
or public body or authority, or subdivision thereof, binding on either Borrower, except as
already has been obtained or made; and
4.7 This Amendment has been duly executed and delivered by Borrower and is the binding
obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or
other similar laws of general application and equitable principles relating to or affecting
creditors’ rights.
5. Counterparts. This Amendment may be executed in any number of counterparts and all of such
counterparts taken together shall be deemed to constitute one and the same instrument.
6. Effectiveness. This Amendment shall be deemed effective upon (a) the due execution and
delivery to Bank of this Amendment by each party hereto, and (b) Borrower’s payment of a loan fee
in an amount equal to $5,000.
[Signature page follows.]
In Witness Whereof, the parties hereto have caused this Amendment to be duly executed
and delivered as of the date first written above.
| BANK | BORROWER | |||||
| Silicon Valley Bank | Sipex Corporation | |||||
| By: /s/ Xxx Xxxxx | By: /s/ Xxxxx X. Xxxxxx | |||||
Name: Xxx Xxxxx
|
Name: | Xxxxx X. Xxxxxx | ||||
Title: Senior Relationship Manager
|
Title: | Sr. VP Finance & CFO | ||||
| Name: | /s/ Xxxxx Xxxxxxx | |||||
| Title: | CEO | |||||
EXHIBIT A
EXHIBIT C
COMPLIANCE CERTIFICATE
COMPLIANCE CERTIFICATE
TO:
|
SILICON VALLEY BANK 0000 Xxxxxx Xxxxx Xxxxx Xxxxx, XX 00000 |
|
FROM:
|
Sipex Corporation |
The undersigned authorized officer (“Officer”) of Sipex Corporation (“Borrower”) certifies
that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank
(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 in
the Agreement are true and correct in all material respects on this date. In addition, the Officer
certifies that Borrower and each Subsidiary (i) has timely filed all required tax returns and paid,
or made adequate provision to pay, all material taxes, except those being contested in good faith
with adequate reserves under GAAP and (ii) does not have any legal actions pending or threatened
against Borrower or any Subsidiary of which Borrower has not notified Bank in accordance with
Section 6.2 of the Agreement. Attached are the required documents supporting the certifications
contained herein. The Officer certifies that these are prepared in accordance with GAAP
consistently applied from one period to the next except as explained in an accompanying letter or
footnotes. The Officer acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the Agreement, and that
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 | ||||
Compliance Certificate
|
With 10Q, 10K and monthly financial statements | Yes | No | |||
Monthly Financial Statements
|
Monthly within 30 days | Yes | No | |||
10Q, 10K (Audited)
|
Within 5 days of issuance (at 6/30/05, company prepared financial statements. Thereafter, financial statements prepared by outside accountants, until SEC filings are timely made) | Yes | No | |||
A/R and A/P Aging Report
and Borrowing Base
Certificate
|
Semi-monthly within 15 and 30 days | Yes | No | |||
Cash Holding Report and
Deferred Revenue Report
|
Monthly within 30 days | Yes | No | |||
Annual Forecast
|
Annually within 45 days of FYE | Yes | No | |||
1.
Budgets, sales projections, operating plans, or other financial information as Lender may request |
Promptly after Lender requests | Yes | No |
| Financial Covenant | Required | Actual | Complies | |||||||
Maintain (at month end): |
||||||||||
Minimum Liquidity Ratio |
1.5:1.00 | _____:1.00 | Yes | No | ||||||
Maintain (at quarter end): |
||||||||||
Minimum Tangible Net Worth |
$45,565,300 (at | $ | Yes | No | ||||||
| 9/30/05 | ||||||||||
| $38,436,000 (at | ||||||||||
| 12/30/05) | ||||||||||
| $32,151,200 (at | ||||||||||
| 3/31/06) | ||||||||||
| $26,113,000 (at | ||||||||||
| 6/30/06) | ||||||||||
Borrower
has deposit accounts located at the
following institutions only: Silicon Valley
Bank,
following institutions only: Silicon Valley
Bank,
| BANK USE ONLY |
||||
Received by:
|
||||
| AUTHORIZED SIGNER | ||||
Date:
|
||||
Verified:
|
||||
| AUTHORIZED SIGNER |
Date:
|
||||
| Compliance Status: Yes No | ||||
1
EXHIBIT B
EXHIBIT D
BORROWING BASE CERTIFICATE
ACCOUNTS RECEIVABLE |
||||||||
| (1 | ) | Accounts Receivable Book Value as of | $ | |||||
| (2 | ) | Additions (please explain on reverse) | $ | |||||
| (3 | ) | TOTAL ACCOUNTS RECEIVABLE | $ | |||||
| ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication) | ||||||||
| (4 | ) | Amounts over 90 days due | $ | |||||
| (5 | ) | Balance of 50% over 90 day accounts | $ | |||||
| (6 | ) | Credit balances over 90 days | $ | |||||
| (7 | ) | Concentration Limits | $ | |||||
| (8 | ) | Foreign Accounts | $ | |||||
| (9 | ) | Governmental Accounts | $ | |||||
| (10 | ) | Contra Accounts | $ | |||||
| (11 | ) | Promotion or Demo Accounts | $ | |||||
| (12 | ) | Intercompany/Employee Accounts | $ | |||||
| (13 | ) | Disputed Accounts | $ | |||||
| (14 | ) | Deferred Revenue | ||||||
| (15 | ) | Other (please explain on reverse) | $ | |||||
| (16 | ) | TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS | $ | |||||
| (17 | ) | Eligible Accounts (#3 minus #16) | $ | |||||
| (18 | ) | ELIGIBLE AMOUNT OF ACCOUNTS (___% of #17) | $ | |||||
| (19 | ) | N/A | ||||||
| (20 | ) | N/A | ||||||
BALANCES |
||||||||
| (21 | ) | Maximum Loan Amount | $ | |||||
| (22 | ) | Total Funds Available [Lesser of #21 or (#18 plus $500,000)] | $ | |||||
| (23 | ) | Present balance owing on Line of Credit | $ | |||||
| (24 | ) | Outstanding under Sublimits | $ | |||||
| (25 | ) | RESERVE POSITION (#22 minus #23 and #24) | $ | |||||
The undersigned represents and warrants that this is true, complete and correct, and that the
information in this Borrowing Base Certificate complies with the representations and warranties in
the Loan and Security Agreement between the undersigned and Silicon Valley Bank.
| COMMENTS: | ||
By: |
||
| Authorized Signer | ||
Date:
|
||||
| BANK USE ONLY |
||||
Received by:
|
||||
| authorized signer | ||||
Date:
|
||||
Verified:
|
||||
| authorized signer |
Date:
|
||||
| Compliance Status: Yes No | ||||
