EXHIBIT 10.1
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement (this "Loan Modification Agreement') is
entered into as of May 8, 2003, by and between SILICON VALLEY BANK, a
California-chartered bank, with its principal place of business at 0000 Xxxxxx
Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and with a lose production office located
at one Xxxxxx Executive Park, Suite 200, 0000 Xxxxxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, doing business under the name "Silicon Valley East"
("Bank") and CAMBRIDGE HEART, INC., a Delaware corporation with offices at Xxx
Xxx Xxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 ("Borrower").
1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of September 26, 2002,
evidenced by, among other documents, (i) a certain Loan and Security Agreement
dated as of September 26, 2002, between Borrower and Bank (as amended from time
to time, the "Loan Agreement"), and (ii) a certain Negative Pledge Agreement
dated as of September 26, 2002 (the "Negative Pledge Agreement"). Capitalized
terms used but not otherwise defined herein shall have the same meaning as in
the Loan Agreement.
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents")
Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Obligations shall be referred to as the "Existing
Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. MODIFICATIONS TO LOAN AGREEMENT.
1. Section 5 (a) of the Schedule to the Loan Agreement is hereby
deleted in its entirety and replaced with the following:
"a. Minimum Tangible Net Worth:
Borrower shall maintain a Tangible Net Worth of not less than the
sum of (i) plus (ii) below:
(i) $4,500,000.00, at September 30, 2002;
$3,000,000.00, at October 31, 2002 through and including
December 31, 2002;
$2,500,000.00, at January 31, 2003 through and including
April 30, 2003;
$3,500,000.00, at May 31, 2003 and thereafter;
(ii) 80% of all consideration received after the date hereof from
proceeds from the issuance of any equity securities of the
Borrower and/or subordinated debt incurred by the Borrower
(other than in connection with the Capitalization Event).
In no event shall the amount of this Minimum Tangible Net
Worth covenant be decreased."
2. Section 5 of the Schedule to the Loan Agreement is hereby amended
by adding the following new financial covenant therein:
"c. Capitalization Event. Borrower shall receive on or before May
31, 2003 at least $3,000,000 in gross cash proceeds from the
issuance of new (issued after May 1, 2003) equity securities of
borrower (the "Capitalization Event")."
B. WAIVER. Borrower acknowledges that it is currently in default
under the Loan Agreement (as Borrower was notified in the Bank's default
letter to Borrower dated April 4, 2003) due to its failure to deliver an
unqualified opinion to its fiscal year 2002 annual audited financial
statements. This being the only default of which Bank is aware, Bank hereby
agrees to waive such default arising from Borrower's failure to deliver
said unqualified opinion provided that the Capitalization Event occurs an
or before May 31, 2003. In the event that the Capitalization Event does not
occur on or before May 31.2003, then Bank's waiver set forth herein shall
be null and void, AB INITIO.
4. FEES. Borrower shall reimburse Bank for all legal fees and expenses
incurred in connection with this amendment to the Existing Loan Documents.
5. RATIFICATION OF NEGATIVE PLEDGE AGREEMENT. Borrower hereby ratifies,
confirms and reaffirms, all and singular, the terms and conditions of the
Negative Pledge Agreement and acknowledges, confirms and agrees that the
Negative Pledge Agreement remains in full force and effect.
6. RATIFICATION OF PERFECTION CERTIFICATE. borrower hereby ratifies, confirms
and reaffirms, all and singular, the terms and disclosures contained in a
certain Perfection Certificate dated as of September 26, 2002 between Borrower
and Bank, and acknowledges, confirms and agrees the disclosures and information
above Borrower provided to Bank in the Perfection Certificate has not changed as
of the date hereof, except as previously disclosed to the Bank in writing.
7. CONSISTENT CHANGES. The Existing Loan Documents arc hereby amended wherever
necessary to reflect the changes described above.
8. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Obligations.
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9. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that
Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever
did have, any offsets, defenses claims, or counterclaims against Bank, whether
known or unknown, at law or in equity. all of them arc hereby expressly WAIVED
and Borrower hereby RELEASES Bank from any liability thereunder.
10. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms or
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Obligations pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Obligations. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Obligations. It is the intention of Bank
and Borrower to retain as liable parties all makers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker will be
released by virtue of this Loan Modification Agreement.
11. JURISDICTION/VENUE. 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 Bank cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Xxxxx County, California.
12. COUNTERSIGNATURE/EFFECTIVENESS. This Loan Modification Agreement shall
become effective only when it shall have been executed by Borrower and Bank.
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This Loan Modification Agreement is executed as a sealed instrument under
the laws of the Commonwealth of Massachusetts as of the date first written
above.
BORROWER:
CAMBRIDGE HEART, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: CFO
BANK:
SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By: /s/ Xxxx X. Xxxxxxxxx
Name: Xxxx X. Xxxxxxxxx
Title: Vice President
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