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EXHIBIT 10.10
AMENDMENT TO LOAN DOCUMENTS
THIS AMENDMENT TO LOAN DOCUMENTS ("Amendment") is made and entered into
as of January 30, 1998 -by and among BROCADE COMMUNICATIONS SYSTEMS, INC.
("Borrower") and IMPERIAL BANK ("Bank").
RECITALS
A. Bank agreed to make loans to Borrower in the maximum principal amount
of $5,500,000.00 ("Commitment"), pursuant to the terms of that certain Security
and Loan Agreement dated June 19, 1997 ("Loan Agreement"), entered into between
Borrower and Bank.
B. Borrower and Bank desire to amend certain provisions of the Loan
Agreement to increase the Facility-B Commitment (as defined in the Loan
Agreement), to modify certain financial covenants and to modify certain other
provisions of the Loan Agreement, all in accordance with the terms of this
Amendment.
C. The Loan Agreement and that certain General Security Agreement dated
as of June 19, 1997, each as executed by Borrower in favor of Bank, together
with all other documents entered into or delivered pursuant to any of the
foregoing, in each case as originally executed or as the same may from time to
time be supplemented, modified or amended are hereinafter collectively referred
to as the "Loan Documents".
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants herein set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and intending to
be legally bound, Borrower and Bank hereby agree to amend the Loan Documents as
follows:
1. DEFINITIONS. Unless otherwise defined herein, all terms defined in
the Loan Agreement have the same meaning when used herein.
2. AMENDMENTS TO LOAN AGREEMENT. The terms of the Loan Agreement are
hereby amended and restated as follows:
a. Section 2 of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
"2. FACILITY-B COMMITMENT. Subject to all the terms and
conditions of this Loan Agreement and prior to the termination of its
commitment as hereinafter provided, Bank hereby agrees to make loans
(each a "Facility-B Loan") to Borrower in such amounts as Borrower shall
request pursuant to this Section 2 at any time prior to December 31,
1998 (the "Facility-B Availability End Date"), in an aggregate,
principal amount not to exceed $3,000,000-00 (the "Facility-B
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Commitment"). If at any time or for any reason, the outstanding
principal amount of the Facility-B Loan Account (as hereinafter defined)
is greater than the Facility-B Commitment, Borrower shall immediately
pay to Bank, in cash, the amount of such excess. Any commitment of Bank,
pursuant to the terms of this Loan Agreement, to make Facility-B Loans
shall expire on the Facility-B Availability End Date, subject to Bank's
right to renew said commitment in its sole and absolute discretion at
Borrower's request. Any such renewal of said commitment shall not be
binding upon Bank unless it is in writing and signed by an officer of
Bank. Facility-B Loans which are repaid by Borrower may not be
reborrowed. Borrower promises to pay to Bank the outstanding unpaid
principal balance (and C accrued unpaid interest thereon) of the
Facility-B Loan Account on the dates set forth below, the final such
date being December 31, 2001 ("Facility-B Maturity Date").
A. FACILITY-B LOANS. The amount of each Facility-B Loan made by Bank to
Borrower hereunder shall be debited to the loan ledger account of Borrower
maintained by Bank for the Facility-B Commitment (herein called the "Facility-B
Loan Account") and Bank shall credit the Facility-B Loan Account with all loan
repayments in respect thereof made by Borrower. When Borrower desires to obtain
a Facility-B Loan, Borrower shall notify Bank (which notice shall be signed by
an officer of Borrower and shall be irrevocable) in accordance with Section 3
hereof, to be received no later than 3:00 p.m. Pacific time one (1) business day
before the day on which the Facility-B Loan is to be made. The notice shall be
signed by an officer of Borrower and contain a detailed schedule of the items
being financed, including copies of paid invoices and serial numbers for the
original equipment, furniture or software to be financed. Facility-B Loans may
only be used to finance equipment, furniture or software purchased by the
Borrower within ninety (90) days of the invoice date for said items and will be
limited to (1) one hundred percent (100%) of the original equipment invoice
amount for such equipment less any taxes, shipping and freight charges or
discounts, warranty charges, installation expenses and other soft costs, (2) one
hundred percent (100%) of the original furniture invoice amount for such
furniture less any taxes, shipping and freight charges or discounts, warranty
charges, installation expenses and other soft costs and (3) eighty-five percent
(85%) of the original software invoice amount for such software less any taxes,
shipping and freight charges or discounts, warranty charges, installation
expenses and other soft costs. Notwithstanding the foregoing, Facility-B Loans
made for the purpose of financing (a) furniture shall be limited to a maximum
aggregate total amount of $250,000.00 and (b) software shall be limited to a
maximum aggregate total amount of $600,000.00.
i. INTEREST PAYMENTS. Borrower promises to pay to Bank from
the date of the advance of the initial Facility-B Loan through the Facility-B
Maturity Date, on or before the last business day of each month, interest on the
average daily unpaid and unamortized principal balance of the Facility-B Loan
Account during the immediately preceding month at a rate of interest equal to
one percent (1.0%) per annum, in excess of the Prime Rate, which shall vary
concurrently with any change in the Prime Rate. Interest shall be computed at
the above rate on the basis of the actual number of days during which the
principal balance of the Facility-B Loan Account is outstanding divided by 360,
which shall for interest computation purposes be considered one (1) year.
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ii. QUARTERLY TERM OUT AND PRINCIPAL PAYMENTS.
(1) FIRST QUARTER TERM OUT. Borrower promises to pay to
Bank (1) the principal balance of the Facility-B Loan Account outstanding on
September 18, 1997, three months from the original loan agreement date (the
"First Quarter Term Out Date"), in thirty-six (36) equal monthly installments of
principal, beginning on October 18, 1997, plus (2) interest computed in
accordance with SECTION 2.A.i hereof.
(2) SECOND QUARTER TERM OUT. Borrower promises to pay to
Bank (1) the principal balance of the Facility-B, Loans made after the First
Quarter Term Out Date through December 31, 1997 (the "2nd Quarter Term Out
Date") in thirty-six (36) equal monthly installments of principal, beginning on
January 30, 1998, plus (2) interest computed in accordance with SECTION 2.A.i
hereof.
(3) THIRD QUARTER TERM OUT. Borrower promises to pay to
Bank (1) the principal balance of the Facility-B Loans made after the 2nd
Quarter Term Out Date through March 31, 1998 (the "3rd Quarter Term Out Date")
in thirty-six (36) equal monthly installments of principal, beginning on April
30, 1998, plus (2) interest computed in accordance with SECTION 2.A.i hereof.
(4) FOURTH QUARTER TERM OUT. Borrower promises to pay to
Bank (1) the principal balance of the Facility-B Loans made after the 3rd
Quarter Term Out Date through June 30, 1998 (the "4th Quarter Term Out Date") in
thirty-six (36) equal monthly installments of principal, beginning on July 31,
1998, plus (2) interest computed in accordance with SECTION 2.A.i hereof.
(5) FIFTH QUARTER TERM OUT. Borrower promises to pay to
Bank (1) the principal balance of the Facility-B Loans made after the 4th
Quarter Term Out Date through September 30, 1998 (the "5th Quarter Term Out
Date") in thirty-six (36) equal monthly installments of principal, beginning on
October 31, 1998, plus (2) interest computed in accordance with SECTION 2.A.i
hereof.
(6) FINAL TERM IN OUT. Borrower promises to pay to Bank
(1) the principal balance of the Facility-B Loans made after the 5th Quarter
Term Out Date through December 31, 1998 (the "Final Term Out Date") in
thirty-six monthly equal monthly installments of principal, beginning on January
31, 1999, plus (2) interest computed in accordance with SECTION 2.A.i hereof."
b. SECTION U.B. of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
"B. Maintain a minimum tangible net worth (meaning all assets,
excluding any value for goodwill, trademarks, patents, copyrights,
organization expense and other similar intangible items, less all
liabilities, plus Subordinated Debt), of not less than $7,000,000.00."
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c. SECTION 14.D. of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
"D. Beginning with the fiscal quarter ending October 31, 1998 and
every quarter thereafter, maintain a minimum cash flow coverage ratio
(meaning for such quarter net income plus depreciation, plus
amortization, divided by the next fiscal quarter's current portion of
long term debt, including the next fiscal quarter's portion of capital
leases due within ninety (90) days), of not less than 1.25 to one
(1.25:1.00)."
d. A NEW SECTION 14J. is hereby added to the Loan Agreement as
follows:
"J. Maintain a maximum ratio of total liabilities (meaning all
liabilities, excluding long term Subordinated Debt) to tangible net
worth (as defined in Section 14.B. hereof) of 1.25 to one (1.25:1.00)."
e. The parenthetical contained in SECTION 17.B. of the Loan
Agreement is hereby amended to include SUBSECTION 14J., for which no cure period
shall exist.
f. EXHIBIT C to the Loan Agreement is hereby deleted in its
entirety and replaced with the EXHIBIT C attached to this Amendment.
3. LOAN FEES. Borrower shall pay Bank, in respect of this Amendment, a
fee in the amount of Five Thousand Six Hundred Twenty-Five Dollars ($5,625.00).
4. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants that
its representations and warranties in the Loan Documents continue to be true and
complete in all material respects as of the date hereof after giving effect to
this Amendment and that the execution, delivery and performance of this
Amendment are duly authorized, do not require the consent or approval of any
governmental body or regulatory authority and are not in contravention of or in
conflict with any law or regulation or any term or provision of any other
agreement entered into by Borrower.
5. CONDITIONS PRECEDENT. The legal effectiveness of this Amendment is
subject to the satisfaction of all of the following conditions precedent prior
to 5:00 p.m. January 30, 1998:
a. EXECUTED AMENDMENT. Bank shall have received this Amendment duty
executed and delivered by Borrower.
b. RESOLUTIONS AND OTHER CORPORATE DOCUMENTS OF BORROWER. Bank shall
have received resolutions of the Board of Directors of Borrower authorizing
Borrower to enter into this Amendment and such other corporate documents as Bank
shall reasonably request.
c. FINANCIAL CONDITION. There shall have occurred no material adverse
change in the financial condition or prospects of Borrower as shown on the most
recent financial statements
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submitted to Bank or disclosed to Bank, respectively, and relied upon by Bank in
entering into this Amendment.
d. NO DEFAULT. There shall have occurred no Event of Default that
remains uncured and is continuing under any of the Loan Documents.
e. PAYMENT OF FEES. Bank shall have received reimbursement from
Borrower of its costs and expenses incurred in connection with this Amendment
and the transactions contemplated hereby, including, without limitation, its
reasonable attorneys' fees and expenses.
f. OTHER DOCUMENTS. Bank shall have received such other documents,
information and items from Borrower as it shall reasonably request.
6. RELEASE AND WAIVER.
a. Borrower hereby acknowledges and agrees that: (1) it has no claim
or cause of action against Bank or any parent, subsidiary or affiliate of Bank,
or any of Bank's officers, directors, employees, attorneys or other
representatives or agents (all of which parties other than Bank being,
collectively, "Bank's Agents") in connection with the Loan Documents, the loans
thereunder or the transactions contemplated therein and herein; (2) it has no
offset or defense against any of its respective obligations, indebtedness or
contracts in favor of Bank; and (3) it recognizes that Bank has heretofore
properly performed and satisfied in a timely manner all of its obligations to
and contracts with Borrower.
b. Although Bank regards its conduct as proper and does not believe
Borrower to have any claim, cause of action, offset or defense against Bank or
any of Bank's Agents in connection with the Loan Documents, the loans thereunder
or the transactions contemplated therein, Bank wishes and Borrower agrees to
eliminate any possibility that any past conditions, acts, omissions, events,
circumstances or matters could impair or otherwise affect any rights, interests,
contracts or remedies of Bank. Therefore, Borrower unconditionally releases and
waives (1) any and all liabilities, indebtedness and obligations, whether known
or unknown, of any kind to Bank or of any of Bank's Agents to Borrower, except
the obligations remaining to be performed by Bank as expressly stated in the
Loan Agreement, this Amendment and the other Loan Documents executed by Bank;
(2) any legal, equitable or other obligations or duties, whether known or
unknown, of Bank or of any of Bank's Agents to Borrower (and any rights of
Borrower against Bank) besides those expressly stated in the Loan Agreement,
this Amendment and the other Loan Documents; (3) any and all claims under any
oral or implied agreement, obligation or understanding with Bank or any of
Bank's Agents, whether known or unknown, which is different from or in addition
to the express terms of the Loan Agreement, this Amendment or any of the other
Loan Documents; and (4) all other claims, causes of action or defenses of any
kind whatsoever (if any), whether known or unknown, which Borrower might
otherwise have against Bank or any of Bank's Agents, on account of any
condition, act, omission, event, contract, liability, obligation, indebtedness,
claim, cause of action, defense, circumstance or matter of any kind whatsoever
which existed, arose or occurred at any time prior to the execution and delivery
of this Amendment or which could arise concurrently with the effectiveness of
this Amendment.
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c. Borrower agrees that it understands the meaning and effect of
Section 1542 of the California Civil Code, which provides:
Section 1542. Certain Claims Not Affected by General Release. A
general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
BORROWER AGREES TO ASSUME THE RISK OF ANY AND ALL UNKNOWN, UNANTICIPATED OR
MISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION, CONTRACTS, LIABILITIES,
INDEBTEDNESS AND OBLIGATIONS WHICH ARE RELEASED BY THIS AMENDMENT IN FAVOR OF
BANK AND BANK'S AGENTS, AND BORROWER HEREBY WAIVES AND RELEASES ALL RIGHTS AND
BENEFITS WHICH IT MIGHT OTHERWISE HAVE UNDER THE AFOREMENTIONED SECTION 1542 OF
THE CALIFORNIA CIVIL CODE WITH REGARD TO THE RELEASE OF SUCH UNKNOWN,
UNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION, CONTRACTS,
LIABILITIES, INDEBTEDNESS AND OBLIGATIONS. TO THE EXTENT (IF ANY) WHICH ANY SUCH
LAWS MAY BE APPLICABLE, BORROWER WAIVES AND RELEASES (TO THE MAXIMUM EXTENT
PERMITTED BY LAW) ANY RIGHT OR DEFENSE WHICH IT MIGHT OTHERWISE HAVE UNDER ANY
OTHER LAW OF ANY APPLICABLE JURISDICTION WHICH MIGHT LIMIT OR RESTRICT THE
EFFECTIVENESS OR SCOPE OF ANY OF ITS WAIVERS OR RELEASES UNDER THIS AMENDMENT.
7. Full Force And Effect; Entire Agreement. Except to the extent
expressly provided in this Amendment, the terms and conditions of the Loan
Agreement and the other Loan Documents shall remain in full force and effect.
This Amendment and the other Loan Documents constitute and contain the entire
agreement of the parties hereto and supersede any and all prior agreements,
negotiations, correspondence, understandings and communications between the
parties, whether written or oral, respecting the subject matter hereof. The
parties hereto further agree that the Loan Documents comprise the entire
agreement of the parties thereto and supersede any and all prior agreements,
negotiations, correspondence, understandings and other communications between
the parties thereto, whether written or oral respecting the extension of credit
by Bank to Borrower and/or its affiliates.
8. Counterparts; Effectiveness. This Amendment may be executed in any
number of counterparts, each of which when so delivered shall be deemed an
original, but all such counterparts taken together shall constitute but one and
the same instrument. Each such agreement shall become effective upon the
execution of a counterpart hereof or thereof by each of the parties hereto and
telephonic notification that such executed counterparts has been received by
Borrower and Bank.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
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IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
to be executed and delivered by its duly authorized officer as of the date first
written above.
BORROWER
BROCADE COMMUNICATIONS SYSTEMS, INC.
a California corporation
By: /s/ B. Xxxx Xxx
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B. Xxxx Xxx
Vice President & Chief Financial Officer
BANK
IMPERIAL BANK
By: /s/ Xxxxxxx X. Le Deit
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Xxxxxxx X. Le Deit
Assistant Vice President
