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SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
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THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Agreement") is entered into as of February 27, 1997, by and between SILICON
VALLEY BANK, a California-chartered bank ("Bank") with its principal place of
business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and with a loan
production office located at One Central Plaza, 00000 Xxxxxxxxx Xxxx, Xxxxx
000, Xxxxxxxxx, Xxxxxxxx 00000, doing business under the name "Silicon Valley
East" and VISUAL NETWORKS, INC., a Delaware corporation ("Borrower").
RECITALS.
A. Borrower and Bank have entered into that certain Loan and
Security Agreement dated April 5, 1996 (the "Original Loan Agreement"),
pursuant to which Bank has agreed to establish a revolving credit facility (as
the same by be increased from time to time, the "Line of Credit") in favor of
Borrower in the maximum principal amount of One Million Five Hundred Thousand
and No/100 Dollars ($1,500,000.00), which Line of Credit also provided for a
sublimit for equipment advances in an amount not to exceed Two Hundred Fifty
Thousand and No/100 Dollars ($250,000.00) in the aggregate (as the same may be
increased from time to time, the "Committed Equipment Line"). Borrower and
Bank amended the Original Loan Agreement pursuant to the provisions of that
certain First Amendment to Loan and Security Agreement dated as of November 4,
1996 (the "First Amendment"), which First Amendment, among other things,
increased the Line of Credit from the maximum principal amount of One Million
Five Hundred Thousand and No/100 Dollars ($1,500,000.00) to the maximum
principal amount of Three Million and No/100 Dollars ($3,000,000.00) (the
Original Loan Agreement as amended by the First Amendment is hereinafter called
the "Loan Agreement").
B. Borrower has requested that Bank increase the maximum
principal amount available under the Line of Credit from Three Million and
No/100 Dollars ($3,000,000.00) to Three Million Five Hundred Thousand and
No/100 Dollars ($3,500,000.00), extend the maturity date of the Line of Credit,
and modify certain terms and conditions of the Loan Agreement to, among other
things, increase the amount of the Committed Equipment Line from Two Hundred
Fifty Thousand and No/100 Dollars ($250,000.00) to Five Hundred Thousand and
No/100 Dollars ($500,000.00) and Bank has agreed on the condition, among
others, that this Agreement be executed and delivered by Borrower to Bank.
C. Unless otherwise defined herein, capitalized terms used herein
shall have the respective meanings set forth in the Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrower and Bank do hereby agree as follows:
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1. Recitals. The parties hereto acknowledge and agree that the
above Recitals are true and correct in all material respects and that the same
are incorporated herein and made a part hereof by reference.
2. Definitions. From and after the date hereof, the definitions
of "Committed Equipment Line," "Committed Revolving Loan," "Eligible Accounts,"
Revolving Maturity Date" and the "Revolving Promissory Note" set forth in
Section 1.1 of the Loan Agreement are hereby amended and restated in their
entirety as follows:
"Committed Equipment Line" means the maximum aggregate amount
not to exceed Five Hundred Thousand and No/100 Dollars ($5,00,000).
"Committed Revolving Line" shall mean the Committed Revolving
Line in the maximum principal amount of Three Million Five Hundred
Thousand and No/100 Dollars ($3,500,000.00).
"Eligible Accounts" means those accounts 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 Section
5.4; provided, that standards of eligibility may be fixed and revised
from time to time by Bank in Bank's reasonable judgment and upon prior
notification thereof to Borrower in accordance with the provisions
hereof. Unless otherwise agreed to by Bank Eligible Accounts 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 which the account
debtor is an officer, employee, or agent of Borrower;
(d) Accounts 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;
(e) Accounts with respect to which the account
debtor is an Affiliate (other than by virtue of being directly
or indirectly under common ownership or control with Borrower)
of Borrower;
(f) Accounts with respect to which the account
debtor does not have its principal place of business in the
United States and Accounts arising from
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products shipped to or services provided to branches or
offices located in the United States of any account debtor
that does not have its principal place of business in the
United States;
(g) Accounts with respect to which the account
debtor is a federal, state, or local government entity or any
department, agency, or instrumentality thereof;
(h) Accounts with respect to which Borrower is
liable to the account debtor for goods sold or services
rendered by the account debtor to Borrower, but only to the
extent of any amounts owing to the account debtor against
amounts owed to Borrower;
(i) Accounts with respect to an account debtor,
including Subsidiaries and Affiliates, whose total obligations
to Borrower exceed twenty-five percent (25%) of all Accounts,
except with respect to Spring, AT&T and MCI, as to which the
percentage shall be thirty five percent (35%), to the extent
such obligations exceed the aforementioned percentage, except
as approved in writing by Bank;
(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.
"Revolving Maturity Date" means March 6, 1998.
"Revolving Promissory Note" means that certain Second Amended
and Restated Revolving Promissory Note dated as of February __, 1997
in substantially the form of Exhibit E hereto in the maximum principal
amount of Three Million Five Hundred Thousand and No/100 Dollars
($3,500,000.00) from Borrower in favor of Bank, together with all
renewals, amendments, modifications and substitutions therefore.
From and after the date hereof, all references in the Loan Agreement to the
"Committed Equipment Line," "Eligible Accounts," "Committed Revolving Loan,"
"Revolving Maturity Date," and the "Revolving Promissory Note" shall have the
meanings set forth herein.
From and after the date hereof, the following definitions are
added to Section 1.1 of the Loan Agreement:
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"Current Liabilities" means, as of any applicable date,
all amounts that should, in accordance with GAAP, be included
as current liabilities on the balance sheet of Borrower, as at
such date, plus, to the extent not already included therein,
all outstanding Credit Extensions made under this Agreement,
including all Indebtedness that is payable upon demand or
within one year from the date of determination thereof unless
such Indebtedness is renewable or extendible at the option of
Borrower to a date more than one year from the date of
determination, but excluding Subordinated Debt and deferred
revenues.
"Quick Assets" means, as of any applicable date, the
cash, cash equivalents, accounts receivable and investments
with maturities of fewer than ninety (90) days of Borrower all
determined in accordance with GAAP.
Except as previously modified and as modified hereby, Section 1.1 of the Loan
Agreement shall remain unchanged.
3. Advances. Section 2.1 of the Loan Agreement is hereby
amended and restated in its entirety to read as follows:
2.1 Advances. Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make Advances to
Borrower in an aggregate amount not to exceed the Committed
Revolving Line or the Borrowing Base, whichever is less, minus
(ii) the outstanding amount of all Equipment Advances. For
purposes of this Agreement, "Borrowing Base" shall mean an
amount equal to seventy five percent (75%) of Eligible
Accounts. Subject to the terms and conditions of this
Agreement, amounts borrowed pursuant to this Section 2.1 may
be repaid and re borrowed at any time during the term of this
Agreement.
On the Closing Date, Borrower shall execute and deliver to
Bank the Revolving Promissory Note.
Whenever Borrower desires an Advance, Borrower will notify
Bank by facsimile transmission or telephone no later than 3:00
p.m. Washington, D.C. time, on the Business Day that the
Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially
the form of Exhibit B hereto. Bank is authorized to make
Advances under this Agreement, based upon instructions
received from a Responsible Officer, or without instructions
if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank
shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible
Officer, and Borrower shall indemnify and hold Bank harmless
for any damages or loss suffered by Bank as a result of such
reliance. Bank will
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credit the amount of Advances made under this Section 2.1 to
Borrower's deposit account.
The Committed Revolving Line shall terminate on the
Revolving Maturity Date, at which time all Advances under this
Section 2.1 and other amounts due under this Agreement (except
as otherwise expressly specified herein) shall be immediately
due and payable.
From and after the date hereof, all references in the Loan
Agreement to the "Borrowing Base" shall have the meaning set forth herein.
4. Equipment Advances. Section 2.2(a), (b) and (c) of the
Loan Agreement are hereby amended and restated in its entirety to read as
follows:
(a) At any time from the date hereof through December
31, 1997 (the "Equipment Availability End Date"), Borrower may
from time to time request advances (each and "Equipment
Advance" and collectively, the "Equipment Advances") from Bank
in an aggregate amount not to exceed the Committed Equipment
Line. Amounts borrowed pursuant to this Section 2.2 may not
be re advanced.
(b) Equipment Advances shall be made in one of
two tranches. All Equipment Advances made prior to June 30,
1997 (the "Tranche One End Date") shall be evidenced by an
Equipment Term Note (as amended from time to time, "Equipment
Term Note No. 1") to be executed and delivered by Borrower to
Bank in the form of Exhibit F attached hereto. All Equipment
Advances made prior to the Tranche One end Date shall be
governed by and repaid in accordance with the terms of
Equipment Term Note No. 1. All Equipment Advances made after
the Tranche One End Date, but prior to the Equipment
Availability End Date shall be evidenced by an Equipment Term
Note (as amended from time to time, "Equipment Term Note No.
2") to be executed by Borrower and delivered to Bank at the
time of the first Equipment Advance after the Tranche One End
Date in the form of Exhibit G attached hereto. All Equipment
Advances made after the Tranche One End Date shall be governed
by and repaid in accordance with the terms of the Equipment
Term Note No. 2.
(c) Borrower shall deliver to Bank at the time of
each Equipment Advance an invoice for the equipment to be
purchased or for any equipment previously purchased by
Borrower for which a borrowing under this Agreement is
permitted and has not been made. With respect to advances on
Equipment Term Note No. 1, Bank will only finance equipment
purchased on or after December 31, 1996. With respect to
advances on Equipment Term Note No. 2, Bank will only finance
Equipment purchased after June 30, 1997 and on or before the
Equipment Availability End Date. The Equipment Advances shall
be used by Borrower only to purchase equipment and shall not
exceed one hundred percent (100%) of the invoice amount of
such equipment approved from time to time by
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Bank, excluding taxes, shipping, warranty charges, freight
discounts and installation expense. At no time shall Bank
make any Equipment Advances if after giving effect to such
request the aggregate account then outstanding would exceed
the Committed Revolving Line or the Borrowing Base, whichever
is less.
6. Events of Default. In Addition to the Events of
Default set forth in the Loan Agreement, the fault of the Borrower to perform
under this Agreement shall constitute an Event of Default thereunder.From and
after the date hereof, all references in the Loan Agreement to the "Equipment
7. Exhibits. From and after the effective date of this
Agreement Exhibits C, D, E, F and G to the Loan Agreement are replaced in their
entirety with Exhibits C, D, E, F and G attached hereto. Borrower shall
execute and deliver to Bank on the date hereof that certain Second Amended and
Restated Revolving Promissory Note in the form of Exhibit E attached hereto and
incorporated herein by reference (the "Replacement Line of Credit Note") in
substitution for and not satisfaction of, the issued and outstanding Line of
Credit Note, and the Replacemetn Line of Credit Note shall be the "Line of
Credit" for all purposes of the Loan Documents. In addition, Borrower shall
execute and deliver to Bank on the date hereof that certain Replacement
Equipment Term Note 1 of 2 in the form of Exhibit F attached hereto and
incorporated herein by reference (the "Replacement Equipment Term Note No.1")
in substitution for and not satisfaction of, the issued and outstanding
Equipment Term Note No. 1 of 2, and the Replacement Equipment Term Note No. 1,
shall be the "Equipment Term Note No. 1" for all purposes of the Loan
Documents. Neither the Replacement Line of Credit Note nor the Replacement
Equipment Term Note No. 1 shall operate as a novation of any of the Obligations
or nullify, discharge, or release any such obligation or the continuing
contractual relationship of Borrower in accordance with the provisions of the
Loan Documents.Availability End Date" shall have the meaning set forth herein.
8. Conditions Precedent. This Agreement shall
become effective on the date Bank receives the following
documents, each of which shall be satisfactory in form and
substance to Bank.
(a) The Replacement Line of Credit Note:
(b) The Replacement Equipment Term Note
No. 1;
(c) Proof that Borrower has paid costs
and expenses to Bank in connection with this Agreement,
including but not limited to Bank's reasonable attorneys fees,
and
(d) Such other information, instruments,
opinions, documents, certificates and reports as Bank may deem
necessary.
9. Representations. Borrower hereby confirms
that the covenants set forth in Section 5 of the Loan
Agreement as hereby amended, are true and correct as of the
date
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hereof, and that no Event of Default has occurred or is
continuing immediately prior to or upon the execution of this
Agreement.
10. Counterparts. This Agreement may be executed
in any number of duplicate originals or counterparts, each of
which duplicate original or counterpart shall be deemed to be
an original and all taken together shall constitute one and
the same instrument.
11. Loan Documents Governing Law, Etc. This
Agreement is one of the Loan Documents defined in the Loan
Agreement and shall be governed and construed in accordance
with the laws of the State of Maryland. The headings and
captions in this Agreement are for the convenience of the
parties only and are not a part of this Agreement.
12. Acknowledgments. Borrower hereby confirms to
Bank the enforceability and validity of each of the Loan
Documents. In addition, Borrower hereby agrees to the
execution and delivery of this Agreement and the terms and
provisions, covenants or agreements contained in this
Agreement shall not in any manner release, impair, lessen,
modify, waive or otherwise limit the liability and obligations
of Borrower under the terms of any of the Loan Documents,
except as otherwise specifically set forth in this Agreement.
Borrower issues, ratifies and confirms the representations,
warranties and covenants contained in the Loan Documents.
13. Modifications. This Agreement may be not be
supplemented, changed, waived discharge, terminated, modified
or amended, except by written instrument executed by the
parties.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
VISUAL NETWORKS, INC.
By: s/ Xxxxx Xxxxxxxx
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Name: Xxxxx Xxxxxxxx
Title: President and CEO
SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: s/ Xxxxx Tower
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Xxxxx Tower
Vice President
SILICON VALLEY BANK
By:
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Name:
Title:
(Signed in Santa Xxxxx County, California)
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