EXHIBIT 10.1
SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement (this "Loan Modification
Agreement") is entered into as of April 29, 2004, by and among (i) SILICON
VALLEY BANK, a California-chartered bank, with its principal place of business
at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and with a loan 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 (ii) NAVISITE, INC., a Delaware corporation, CLEARBLUE TECHNOLOGIES
MANAGEMENT, INC., a Delaware corporation, AVASTA, INC., a California
corporation, CONXION CORPORATION, a California corporation, and INTREPID
ACQUISITION CORP., a Delaware corporation (jointly and severally, individually
and collectively, "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 May 27, 2003,
evidenced by, among other documents, a certain Accounts Receivable Financing
Agreement dated as of May 27, 2003, as amended by a certain First Loan
Modification Agreement ("First Loan Modification Agreement") dated as of January
30, 2004 (as amended from time to time, the "Loan 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 and the Intellectual Property
Collateral as described in certain Intellectual Property Security Agreements
each dated as of May 27, 2003 (collectively, the "IP Security 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.
Modifications to Loan Agreement.
1. The Loan Agreement shall be amended by deleting Section 2.2
thereof and inserting in lieu thereof the following:
"2.2 ACCEPTANCE OF ACCOUNTS RECEIVABLE. Bank is not
obligated to finance any accounts receivable or the
Placeholder Invoice. Bank may approve any Account
Debtor's credit before agreeing to finance any accounts
receivable. When Bank agrees to finance a receivable or
the Placeholder Invoice, it will extend credit to
Borrower in an amount up to either (a) the result of the
applicable Advance Rate multiplied by the face amount of
the receivable or (b) the result of the applicable
Advance Rate multiplied by value of the Placeholder
Invoice (the "Advance"). Bank may, in its reasonable
discretion, change the percentage of the Advance Rate
for a particular receivable on a case by case basis or
with respect to the Placeholder Invoice. When Bank makes
an Advance, the receivable or the Placeholder Invoice
becomes a "Financed Receivable." All representations and
warranties in Section 6 must be true in all material
respects as of the date of the Invoice Transmittal and
of the Advance and no Event of Default exists or would
occur as a result of the Advance. The aggregate face
amount of all Financed Receivables outstanding at any
time may not exceed the Facility Amount. In addition, at
any time that an Advance is outstanding based upon the
Placeholder Invoice, no other Advances will be made by
Bank hereunder. Any Advances outstanding on the date
which Bank agrees to finance the Placeholder Invoice
shall be repaid prior to Bank making
any Advance based on the Placeholder Invoice (or
otherwise repaid with the proceeds of such Advance).
Although Bank's obligation to make an Advance is
discretionary in each instance, Bank acknowledges that
(subject to verifications and other terms and conditions
provided herein with respect to Account Debtors
generally), it is the usual practice of Bank to finance
accounts receivable due and owing from those Account
Debtors that are Fortune 1000 type companies.
Notwithstanding the foregoing, Bank will not finance the
Placeholder Invoice (and all Advances made based on the
Placeholder Invoice shall be immediately repaid at such
time) in the event that Borrower fails to comply with
the financial covenant set forth in Section 6.3(L)
hereof. If Bank will not finance the Placeholder
Invoice, then Borrower may offer to Bank accounts
receivable for financing as provided under Sections 2.1
and 2.2 hereof."
2. The Loan Agreement shall be amended by deleting Section 3.4
thereof and inserting in lieu thereof the following:
"3.4 COLLATERAL HANDLING FEE. On each Reconciliation
Day, Borrower will pay to Bank a collateral handling fee
equal to 0.25% per month of the average daily Financed
Receivable Balance outstanding during the applicable
Reconciliation Period (the "Collateral Handling Fee");
provided, however, after the occurrence of the
Capitalization Event, the Collateral Handling Fee shall
reduce to 0.15% per month of the average daily Financed
Receivable Balance outstanding during the applicable
Reconciliation Period, to be effective on the first day
of the month following the receipt by Bank of
satisfactory evidence of same from Borrower. After an
Event of Default, the Collateral Handling Fee will
increase an additional 0.25% per month effective
immediately before the Event of Default."
3. The Loan Agreement shall be amended by deleting Section 4.1
thereof and inserting in lieu thereof the following:
"4.1 REPAYMENT ON MATURITY. Borrower will repay each
Advance on the earliest of: (a) payment of the Financed
Receivable in respect which the Advance was made, (b)
the Financed Receivable becomes an Ineligible
Receivable, (c) when any Adjustment is made to the
Financed Receivable (but only to the extent of the
Adjustment if the Financed Receivable is not otherwise
an Ineligible Receivable), (d) the last day of the
Facility Period (including any early termination), (e)
with respect to Advances made based upon accounts
receivable (rather than the Placeholder Invoice), at
such time as the Bank makes any Advance based on the
Placeholder Invoice, or (f) with respect to Advances
made based on the Placeholder Invoice, at any time
Borrower fails to comply with the financial covenant set
forth in Section 6.3(L) hereof. Each payment will also
include all accrued Finance Charges on the Advance and
all other amounts due hereunder."
4. Notwithstanding Section 4.3 of the Loan Agreement to the
contrary, from and after the date of this Loan Modification
Agreement, the Early Termination Fee shall be $150,000.00;
provided, however, that, commencing on October 31, 2004, such
Early Termination Fee shall decrease by $15,000.00 per
quarter, provided further, that the Early Termination Fee
shall be no less than $75,000.00.
5. The Loan Agreement shall be amended by adding the following
new subsection 6.2 (H) after subsection 6.2(G) thereof:
"(H) With respect to the Placeholder Invoice, Borrower
represents and warrants that the value of Borrower's
recurring total monthly revenue (plus, without
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duplication, revenue from any contracts with the New
York State Department of Labor) less professional
services revenue used by Borrower to determine the
amount of the Placeholder Invoice is based upon the best
information available to Borrower and accurately and
fully reflects same."
6. The Loan Agreement shall be amended by deleting the following
text appearing in subsection (A) of Section 6.2 thereof:
"Borrower is not in default under any agreement to which
or by which it is bound."
and inserting in lieu thereof the following:
"Borrower is not in default under any material agreement
to which or by which it is bound."
7. The Loan Agreement shall be amended by deleting subsection (C)
of Section 6.2 thereof in its entirety, and inserting in lieu
thereof the following:
"(C) Except as listed on SCHEDULE C attached hereto,
there are no actions or proceedings pending or, to
Borrower's knowledge, threatened by or against Borrower
or any Subsidiary of Borrower, in excess of: (i) $25,000
on an individual basis, and (ii) $250,000 in the
aggregate."
8. The Loan Agreement shall be amended by deleting subsection (D)
of Section 6.3 thereof in its entirety, and inserting in lieu
thereof the following:
"(D) Borrower shall deliver to Bank: (i) as soon as
available, but no later than thirty (30) days after the
last day of each month, a company prepared consolidated
balance sheet and income statement, prepared under GAAP,
consistently applied, covering Borrower's consolidated
operations during the period, in a form and substance
acceptable to Bank, certified by Borrower; (ii) as soon
as available, but no later than one hundred twenty (120)
days after the end of Borrower's fiscal year, audited
consolidated financial statements prepared under GAAP,
consistently applied, together with an unqualified
opinion (subject to a going concern qualification) on
the financial statements from an independent certified
public accounting firm acceptable to Bank; and (iii)
budgets, sales projections, operating plans or other
financial information Bank reasonably requests in a form
of presentation previously delivered by Borrower to
Bank."
9. The Loan Agreement shall be amended by deleting the definition
of "Advance Rate" appearing in Section 1 thereof and inserting
in lieu thereof the following:
""ADVANCE RATE" is (i) with respect to accounts
receivable, eighty percent (80%), net of Deferred
Revenue and offsets related to each specific Account
Debtor, or such other percentage as Bank establishes
under Section 2.2, and (ii) with respect to the
Placeholder Invoice, eighty-five percent (85.0%) or such
other percentage as Bank establishes under Section 2.2."
10. The Loan Agreement shall be amended by deleting the definition
of "Applicable Rate" appearing in Section 1 thereof and
inserting in lieu thereof the following:
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""APPLICABLE RATE" is a per annum rate equal to the
Prime Rate plus four percent (4.0%); provided, however,
after the occurrence of the Capitalization Event, the
Applicable Rate shall reduce to a per annum rate equal
to the Prime Rate plus one percent (1.0%), to be
effective on the first day of the month following the
receipt by Bank of satisfactory evidence of same from
Borrower."
11. The Loan Agreement shall be amended by deleting the definition
of "Capitalization Event" appearing in Section 1 thereof and
inserting in lieu thereof the following:
""CAPITALIZATION EVENT" is, after April 25, 2004, the
receipt by Borrower of at least (i) $25,000,000.00 in
net cash proceeds from the issuance of new equity of
Borrower, or (ii) $30,000,000.00 in net cash proceeds
from the Borrower incurring Subordinated Debt."
12. The Loan Agreement shall be amended by deleting the definition
of "Facility Amount" appearing in Section 1 thereof and
inserting in lieu thereof the following:
""FACILITY AMOUNT" is Twenty Four Million Dollars
($24,000,000.00)."
13. The Loan Agreement shall be amended by deleting the definition
of "Facility Period" appearing in Section 1 thereof and
inserting in lieu thereof the following:
""FACILITY PERIOD" is the period beginning on this date
and continuing until April 29, 2006, unless the period
is terminated sooner (i) by Bank at any time with notice
to Borrower after the occurrence of an Event of Default,
(ii) by Borrower pursuant to Section 4.3, or (iii) upon
an Event of Default."
14. The Loan Agreement shall be amended by deleting the definition
of "Minimum Finance Charge" appearing in Section 1 thereof and
inserting in lieu thereof the following:
""MINIMUM FINANCE CHARGE" is the amount, as determined
by Bank, for which the Finance Charge would be payable
if the average daily principal amount of all outstanding
Advances during the applicable Reconciliation Period was
(i) for each Reconciliation Period beginning May 2004
through April 2005, $5,000,000.00; (ii) for each
Reconciliation Period beginning May 2005 through October
2005, $3,000,000.00 and (iii) for each Reconciliation
Period beginning November 2005 and thereafter, $0.00."
15. The Loan Agreement shall be amended by deleting the definition
of "Placeholder Invoice" appearing in Section 1 thereof and
inserting in lieu thereof the following:
""PLACEHOLDER INVOICE" is, a written document that is
prepared and delivered by Borrower to Bank requesting an
Advance, based on, for each quarter, three (3) times the
amount of the value (as determined by Borrower, subject
to Section 6.2(H) hereof), of Borrower's recurring total
monthly revenue (plus, without duplication, revenue from
any contracts with the New York State Department of
Labor) less professional services revenue, all as
reviewed and approved by Bank."
4. FEES. Borrower shall pay to Bank a modification fee equal to One Hundred
Twenty Five Thousand Dollars ($125,000.00), which fee shall be deemed fully
earned as of the date hereof and shall be payable as follows (i) $40,000.00 is
due and payable on the date hereof, provided, however, that Borrower has already
paid $20,000.00 of such fee, and (ii) $85,000.00 is payable on the sooner to
occur of (x) April 29, 2005, (y) the occurrence of an Event of Default. The
$85,000.00 fee set forth in the previous sentence supercedes the $60,000.00 fee
set forth in
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Section 4(ii) of the First Loan Modification Agreement. Borrower shall also
reimburse Bank for all legal fees and expenses incurred in connection with this
amendment to the Existing Loan Documents.
5. RATIFICATION OF INTELLECTUAL PROPERTY SECURITY AGREEMENT. Borrower hereby
ratifies, confirms and reaffirms, all and singular, the terms and conditions of
the IP Security Agreement, and acknowledges, confirms and agrees that the IP
Security Agreement contains an accurate and complete listing of all Intellectual
Property Collateral as defined therein. Notwithstanding the terms and conditions
of the Intellectual Property Security Agreement, the Borrower shall not register
any Copyrights or Mask Works in the United States Copyright Office unless it:
(i) has given at least fifteen (15) days' prior written notice to Bank of its
intent to register such Copyrights or Mask Works and has provided Bank with a
copy of the application it intends to file with the United States Copyright
Office (excluding exhibits thereto); (ii) executes a security agreement or such
other documents as Bank may reasonably request in order to maintain the
perfection and priority of Bank's security interest in the Copyrights proposed
to be registered with the United States Copyright Office; and (iii) records such
security documents with the United States Copyright Office contemporaneously
with filing the Copyright application(s) with the United States Copyright
Office. Borrower shall promptly provide to Bank a copy of the Copyright
application(s) filed with the United States Copyright Office, together with
evidence of the recording of the security documents necessary for Bank to
maintain the perfection and priority of its security interest in such Copyrights
or Mask Works. Borrower shall provide written notice to Bank of any application
filed by Borrower in the United States Patent and Trademark Office for a patent
or to register a trademark or service xxxx within 30 days of any such filing.
6. RATIFICATION OF PERFECTION CERTIFICATES. Each Borrower hereby ratifies,
confirms and reaffirms, all and singular, the terms and disclosures contained in
that certain Perfection Certificate dated as of February 13, 2004 between such
Borrower and Bank, and acknowledges, confirms and agrees the disclosures and
information Borrower provided to Bank in such Perfection Certificate has not
changed, as of the date hereof, except as set forth on SCHEDULE 6, attached
hereto, if any.
7. CONSISTENT CHANGES. The Existing Loan Documents are 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.
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 are 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 of
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 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.
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NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE RIGHT TO BRING ANY ACTION
OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE
ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK'S RIGHTS AGAINST THE BORROWER
OR ITS PROPERTY.
12. COUNTERSIGNATURE. 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: BANK:
NAVISITE, INC. SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: Xxx Xxxxxxx By: /s/ Xxxxx Xxxxx
----------- ---------------
Title: Chief Financial Officer and Title: SVP
Treasurer
CLEARBLUE TECHNOLOGIES MANAGEMENT, INC.
By: Xxx Xxxxxxx
-----------
Title: VP Finance and Treasurer
AVASTA, INC.
By: Xxx Xxxxxxx
-----------
Title: VP Finance and Treasurer
CONXION CORPORATION
By: Xxx Xxxxxxx
-----------
Title: CFO and Treasurer
INTREPID ACQUISITION CORP.
By: Xxx Xxxxxxx
-----------
Title: CFO and Treasurer
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