EXHIBIT 10.10
SECOND MODIFICATION
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TO BUSINESS LOAN/SECURITY AGREEMENT
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THIS SECOND MODIFICATION TO BUSINESS LOAN/SECURITY AGREEMENT ("Second
Modification") is made as of March 31, 1998, by and among MicroStrategy,
Incorporated, having an address at 0000 Xxxxxx Xxxxxxxx Xxxxx, Xxxxx 0000,
Xxxxxx, XX 00000 (the "Debtor"), Xxxxxxx X. Xxxxxx (the "Guarantor") and
NationsBank, N.A., a national banking corporation, having an address at 0000
Xxxxxxxxxx Xxxxx, Xxxxx 000, XxXxxx, XX 00000 (the "Bank").
RECITALS
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1. The Debtor and the Bank entered into a Business Loan/Security
Agreement, dated as of September 30, 1997, which was modified by a
Modification of Business Loan/Security Agreement, dated September
12, 1997 (the "September, 1997, Modification").
2. The Debtor and the Bank amended the Business Loan/Security Agreement
by Modification of Loan Agreement, dated November 25, 1997 (the
"First Modification"). (The Business Loan/Security Agreement, as
amended by the September, 1997 Modification and the First
Modification, is hereinafter called the "Loan Agreement.")
3. To evidence its obligation to repay the Bank's advances under the
Loan Agreement, the Borrower gave Lender a Revolving Promissory
Note, effective as of December 10, 1996, in the face amount of Six
Million, Four Hundred Thousand Dollars ($6,400,000.00), which was
amended by a Note Modification Agreement, dated as of November 25,
1997.
4. The Debtor and the Bank desire further to amend the Loan Agreement
for the following purposes: (1) to increase the maximum amount of
the Revolving Credit from Six Million, Four Hundred Thousand Dollars
($6,400,000.00) to Nine Million, Four Hundred Thousand Dollars
($9,400,000.00); (2) to extend the maturity date of the Revolving
Credit to September 30, 1998; (3) to provide for an increase in the
New Equipment Facility from Two Million Dollars ($2,000,000.00) to
Four Million Dollars ($4,000,000.00); and (4) for the other purposes
hereinafter set forth.
5. The Debtor and the Bank are simultaneously entering into a Second
Amendment to Revolving Note to increase the face amount of the
Revolving Note to Nine Million, Four Hundred Thousand Dollars
($9,400,000.00). (The Revolving Promissory Note, as amended by the
Note Modification Agreement, dated as of November 25, 1997, and as
further amended by the Second Amendment to Revolving Note, is
hereinafter called the "Revolving Note.")
6. The Guarantor is the guarantor under a Substitute Limited Guaranty
of Payment, dated November 25, 1997 (the "Guaranty"), guaranteeing,
subject to certain
limitations as expressed in the Guaranty, the Debtor's obligations
under the Loan Agreement, as amended, including (without limiting
the generality of the foregoing) the Revolving Note, the Equipment
Notes and the Term Promissory Notes.
7. The Guarantor desires to enter into this Second Modification to
evidence the Guarantor's consent to the terms and conditions of this
Second Modification and to confirm that the Guaranty remains in full
force and effect, subject to the limitations as expressed in the
Guaranty, as to all credit extended under the Loan Agreement, as
amended by this Second Modification.
8. Capitalized terms used in this Second Modification and not defined
herein have the meanings ascribed to them in the Loan Agreement.
AGREEMENTS
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IN CONSIDERATION, of the premises, the mutual agreements herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Debtor, the Guarantor
and the Bank hereby agree as follows:
1. In Paragraphs 1(a) and 3(b) of the Loan Agreement, the words "Six
Million, Four Hundred Thousand Dollars ($6,400,000.00)" are deleted
in their entirety and replaced with the words "Nine Million, Four
Hundred Thousand Dollars ($9,400,000.00)."
2. The fifth sentence of Paragraph 3(a) of the Loan Agreement is
deleted in its entirety and replaced with the following:
None of the Applications shall request (and none of the Letters
of Credit shall provide for) any expiry date for the related
Letter of Credit, whether by automatic renewal or otherwise,
later than September 30, 1998, unless agreed to by Bank in
writing.
3. Certain definitions used in the Loan Agreement are modified as
follows:
a. The term "Collateral" includes the additional collateral granted
in the First Modification and any equipment purchased with the
New Equipment Facility, as modified by this Second Amendment.
b. The term "Loan" includes all advances evidenced by the Revolving
Note, as previously modified by Note Modification Agreement,
dated November 25, 1997, and as further modified by the Second
Modification of Revolving Note, and all advances under the New
Equipment Facility, as modified by this Second Amendment.
c. The term "Note" includes the Revolving Note, as previously
modified by Note Modification Agreement, dated November 25,
1997, and as further modified by
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the Second Modification of Revolving Note, and each Equipment
Note issued pursuant to the Loan Agreement or this Second
Amendment. "Equipment Note" includes Term Promissory Notes
issued under the New Equipment Facility.
d. The term "Obligations," as used in the Loan Agreement, includes
the Note, the Loan and the Debtor's obligation to reimburse any
drawing under a Letter of Credit.
4. The maturity date of the Revolving Note is extended to September 30,
1998, as stated in a Second Modification of Revolving Note.
5. The Non-Use Fee of one-quarter of one percent (1/4%) of the Daily
Unused Portion, shall remain in full force and effect, except the
Daily Unused Portion shall be the unused portion of the new
Revolving Credit amount --i.e., the unused portion of Nine Million,
Four Hundred Thousand Dollars ($9,400,000.00).
6. The provisions of the Loan Agreement regarding the New Equipment
Facility (as initially established by the First Modification) are
modified as follows:
a. The aggregate amount of the New Equipment Facility is increased
from Two Million Dollars ($2,000,000.00) to Four Million Dollars
($4,000,000.00), or so much thereof as may be advanced. The New
Equipment Facility is not a revolving loan facility; amounts
heretofore advanced under the New Equipment Facility shall not
be readvanced.
b. Notwithstanding Paragraph 9(c) of the First Modification, the
last day for funding any request under the New Equipment
Facility is extended from May 31, 1998 to September 30, 1998.
c. Paragraph 9 (d) of the First Modification is deleted in its
entirety and replaced with the following: "In no event shall any
New Equipment Facility Note have a maturity date later than
September 30, 2002."
d. In accordance with the Loan Agreement, each advance under the
New Equipment Facility shall be evidenced by a separate Term
Promissory Note. No advance under the New Equipment Facility
shall exceed Eighty Percent (80%) of the cost of the equipment
to be purchased with the proceeds of the advance. Each Term
Promissory Note shall bear interest at the applicable "Floating
Rate" or "Fixed Rate" provided in Paragraph 3 (d) of the Loan
Agreement. Each advance under the New Equipment Facility shall
be conditional on the Bank's receipt of a valid first lien
security interest in the equipment purchased with the proceeds
of the advance. To that end, Debtor grants and regrants to Bank
a security interest in any and all equipment purchased with the
proceeds of the New Equipment Facility. No seller financing
shall be permitted with regard to any equipment purchased with
the proceeds of the New Equipment Facility.
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e. Exhibit "A" to the First Modification, which comprises the form
of Term Promissory Note to be used to evidence the Debtor's
obligation to repay advances under the New Equipment Facility,
is deleted in its entirety and replaces with Exhibit A attached
hereto and made a part hereof.
7. Paragraph 9 (j) of the Loan Agreement is amended by deleting the
first sentence in its entirety and replacing it with the following:
Maintain a consolidated ratio of Debtor's (and its
subsidiaries') "Funded Debt" (as hereinafter defined) to
"EBITDA" (as hereinafter defined) that shall not exceed:
5.0 to 1.0 for the quarter ending March 31, 1998;
4.0 to 1.0 for the quarter ending June 30, 1998;
3.0 to 1.0 for the quarter ending September 30, 1998; or
2.0 to 1.0 for the quarter ending December 31, 1998
(provided that the application of this covenant to the
quarter ending December 31, 1998, shall not be deemed to
extend the maturity date).
8. Xxxxxxxxx 00 (x)(xxx)(X) of the Loan Agreement is amended by
deleting the words "One Million Dollars ($1,000,000.00)" and
replacing them with the words "Five Million Dollars
($5,000,000.00)."
9. A new paragraph 10 (i) is added to the Loan Agreement providing as
follows:
The Debtor (and its subsidiaries) shall not sustain a loss,
calculated on a consolidated basis, of more than Two Hundred and
Fifty Thousand Dollars ($250,000.00) during any quarter.
Paragraph 2 of the September, 1997 Modification, is deleted in its
entirety, and Paragraph 10 (h) of the Loan Agreement is confirmed
and remains in full force and effect.
10. The Debtor confirms its obligations to provide the Bank with
financial reports as provided in the Loan Agreement and agrees
promptly to provide such other or further financial information as
the Bank may reasonably request.
11. The Security Interest in the Collateral granted by the Loan
Agreement shall henceforth secure not only the Obligations under the
Loan Agreement, as hereby modified, but also any other credit that
Bank may extend to the Debtor. To that end, Debtor grants and
regrants to Bank a security interest in the Collateral.
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12. Except as modified by this Second Modification, the Loan Agreement
remains in full force and effect and unmodified. Debtor and the
Guarantor warrant and represent that they have no offsets or
defenses to their obligations under the Loan Agreement, as so
modified.
13. The Guarantor consents to this Second Modification, agrees that this
Second Modification does not impair the Guarantor's liabilities or
obligations under the Guaranty, and confirms that the Guaranty
remains in full force and effect as to all credit extended under the
Loan Agreement as amended this Second Modification, subject to
certain limits expressed in the Guaranty. Without limiting the
generality of the foregoing, the Guarantor acknowledges and agrees
that:
a. the Loan (as herein redefined) and indebtedness evidenced by the
Note (as herein redefined) and the Obligations (as herein
redefined) come within the meaning of the term "Indebtedness" as
defined in the Guaranty; and
b. References in the Guaranty to the Business Loan Security
Agreement or BLSA shall be deemed to refer to the Loan
Agreement, as amended by this Second Amendment; and
c. "Revolving Credit," as used in the Guaranty, refers to the
increased Revolving Credit amount under this Second Amendment --
i.e., Nine Million, Four Hundred Thousand Dollars
($9,400,000.00); and
d. "New Equipment Facility," as used in the Guaranty, refers to the
New Equipment Facility, as increased by this Second Amendment to
an aggregate amount of Four Million Dollars ($4,000,000.00).
The foregoing shall not be deemed to alter the nature of the
Guaranty as a continuing one. The Guaranty shall include any and all
existing new or increased Indebtedness, whether or not presently
contemplated by the Guarantor or the Bank, and whether or not the
same shall be incurred after satisfaction, payment or reduction of
any previous Indebtedness (as defined in the Guaranty).
14. The Debtor promises to pay the Bank a commitment fee of Fifteen
Thousand Dollars ($15,000.00) on the execution of this Second
Amendment. The Debtor promises to pay all costs and expenses
incurred by the Bank in connection with the Bank's review, due
diligence and closing of the transactions contemplated by this
Second Amendment, including attorney's fees (to include outside
counsel's fees, which will not exceed Three Thousand Dollars
($3,000.00)), and any recordation taxes and fees incurred by the
Bank in connection with the negotiation and preparation of all
documents necessary in connection with the transactions contemplated
by this Second Amendment.
15. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO
THIS INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY
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RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM
BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY
BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT
(OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF
PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF
J.A.M.S./ENDISPUTE OR ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE
"SPECIAL RULES" AS SET FORTH BELOW. IN THE EVENT OF ANY
INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY
ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION.
ANY PARTY TO THIS INSTRUMENT, AGREEMENT, OR DOCUMENT MAY BRING AN
ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL
ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT
APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
(i) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE
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COUNTY OF ANY BORROWER'S DOMICILE AT TIME OF THE EXECUTION OF THIS
INSTRUMENT, AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO
WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY
PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN
ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE
COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO
EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60
DAYS.
(ii) RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION
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PROVISION SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY
OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY
WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT, OR DOCUMENT; OR
(II) BE A WAIVER BY THE BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III)
LIMIT THE RIGHT OF THE BANK HERETO (A) TO EXERCISE SELF HELP
REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE
AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN
FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT
LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. THE BANK MAY EXERCISE SUCH SELF HELP RIGHTS,
FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR
ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY
ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT,
AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR
PROVISIONAL OR
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ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY
PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE
MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH
REMEDIES.
IN WITNESS WHEREOF, the undersigned have duly executed this Second
Modification as of the day and year first herein above set forth.
MICROSTRATEGY, INCORPORATED
By:
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Xxxxxxx X. Xxxxxx
President and Chief Executive Officer
NATIONSBANK, N.A.
By:
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Xxxxxx Xxxxxxx
Vice President
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Xxxxxxx X. Xxxxxx
STATE OF VIRGINIA )
) To-wit:
COUNTY/CITY OF__________________________ )
I __________________________, a Notary Public in and for the jurisdiction
aforesaid, do certify that Xxxxxxx X. Xxxxxx, whose name is signed to the
writing above, acknowledged the same before me in my jurisdiction aforesaid.
Given under my hand and seal this _____ day of _____________, 1998.
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Notary Public
My Commission Expires: ____________
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