Exhibit 99.1
SILICON VALLEY BANK
AMENDMENT TO LOAN DOCUMENTS
BORROWER: VERSO TECHNOLOGIES, INC.
PROVO PREPAID (DELAWARE) CORP.
XXXXXXXX.XXX SOFTWARE, INC.
XXXXXXX (DELAWARE) CORP.
DATE: MARCH 15, 2005
THIS AMENDMENT TO LOAN DOCUMENTS is entered into between Silicon Valley
Bank ("Silicon") and the borrower named above ("Borrower").
The Parties agree to amend the Loan and Security Agreement between them,
dated December 14, 2001 (as otherwise amended, if at all, the "Loan Agreement"),
as follows, effective as of the date hereof. (Capitalized terms used but not
defined in this Amendment shall have the meanings set forth in the Loan
Agreement.)
1. MODIFIED CREDIT LIMIT. Section 1 of the Schedule to Loan and Security
Agreement is hereby amended and restated in its entirety to read as follows:
1. CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of:
(i) $10,000,000 at any one time
outstanding (the "Maximum Credit
Limit"); or (ii) 75% (an "Advance
Rate") of the amount of the Eligible
Receivables (as defined in Section 8
above).
The foregoing Advance Rate is typically
based upon the quality of the
Borrower's Receivables and attendant
dilution. The quality of Borrower's
Receivables (and other Collateral) is
determined by the results of Silicon's
initial field examination and on-going
periodic examinations and audits. The
foregoing Advance Rate will be reviewed
and modified by Silicon, in its good
faith business judgment, after its
receipt and review of the the results
of the most recently conducted audit
(including that of the Acquired Assets)
by Silicon, or its agents.
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
Notwithstanding the foregoing, the
Maximum Credit Limit shall be
$7,500,000; provided, however, if at
September 30, 2005, the Borrower
achieves actual year to date net income
on a consolidated basis equal to at
least 95% of the projected amount of
year to date net income on a
consolidated basis for such period as
set forth in the Borrower's Fiscal Year
2005 projections (a copy of which has
previously been provided to Silicon)
(the "YTD Net Income Requirement"),
then in such instance the Maximum
Credit Limit shall increase to
$10,000,000.
Notwithstanding the foregoing, the
total outstanding Obligations under
this Loan Agreement and under the Exim
Agreement (as defined below) shall not
at any time exceed $10,000,000 (the
"Overall Credit Limit"); provided,
however, until the Borrower has
satisfied the YTD Net Income
Requirement, if ever, the Overall
Credit Limit shall be $7,500,000.
Loans will be made to each Borrower
based on the Eligible Receivables of
each Borrower, subject to the Maximum
Credit Limit set forth above for all
Loans to all Borrowers combined.
LETTER OF CREDIT SUBLIMIT
(Section 1.5): $2,500,000; provided, however, that the
total Letter of Credit Sublimit shall
not, at any time, exceed $2,500,000 in
the aggregate under this Agreement and
the Exim Agreement.
FOREIGN EXCHANGE
CONTRACT SUBLIMIT: $1,000,000; provided, however, that the
total Foreign Exchange Contract
Sublimit shall not, at any time, exceed
$1,000,000 in the aggregate under this
Agreement and the Exim Agreement.
Borrower may enter into foreign
exchange forward contracts with
Silicon, on its standard forms, under
which Borrower
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
commits to purchase from or sell to
Silicon a set amount of foreign
currency more than one business day
after the contract date (the "FX
Forward Contracts"); provided that (1)
at the time the FX Forward Contract is
entered into Borrower has Loans
available to it under this Agreement in
an amount at least equal to 10% of the
amount of the FX Forward Contract; and
(2) the total FX Forward Contracts at
any one time outstanding may not exceed
10 times the amount of the Foreign
Exchange Contract Sublimit set forth
above; and (3) the total Foreign
Exchange Contract Sublimit shall not,
at any time, exceed $1,000,000. Silicon
shall have the right to withhold, from
the Loans otherwise available to
Borrower under this Agreement, a
reserve (which shall be in addition to
all other reserves) in an amount equal
to 10% of the total FX Forward
Contracts from time to time
outstanding, and in the event at any
time there are insufficient Loans
available to Borrower for such reserve,
Borrower shall deposit and maintain
with Silicon cash collateral in an
amount at all times equal to such
deficiency, which shall be held as
Collateral for all purposes of this
Agreement. Silicon may, in its
discretion, terminate the FX Forward
Contracts at any time that an Event of
Default occurs and is continuing.
Borrower shall execute all standard
form applications and agreements of
Silicon in connection with the FX
Forward Contracts, and without limiting
any of the terms of such applications
and agreements, Borrower shall pay all
standard fees and charges of Silicon in
connection with the FX Forward
Contracts.
CASH MANAGEMENT
SERVICES AND RESERVES: Borrower may use up to $50,000 of Loans
available hereunder for Silicon's Cash
Management Services (as defined below),
including, merchant services, business
credit card, ACH and other services
identified in the cash management
services agreement related to such
service (the "Cash
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
Management Services"). Silicon may, in
its sole discretion, reserve against
Loans which would otherwise be
available hereunder such sums as
Silicon shall determine in its good
faith business judgment in connection
with the Cash Management Services, and
Silicon may charge to Borrower's Loan
account, any amounts that may become
due or owing to Silicon in connection
with the Cash Management Services.
Borrower agrees to execute and deliver
to Silicon all standard form
applications and agreements of Silicon
in connection with the Cash Management
Services, and, without limiting any of
the terms of such applications and
agreements, Borrower will pay all
standard fees and charges of Silicon in
connection with the Cash Management
Services. The Cash Management Services
shall terminate on the Maturity Date.
EXIM AGREEMENT;
CROSS-COLLATERALIZATION;
CROSS-DEFAULT: Silicon and the Borrower are parties to
that certain Loan and Security
Agreement (Exim Program) dated
approximately February 12, 2003 (the
"Exim Agreement"). Both this Agreement
and the Exim Agreement shall continue
in full force and effect, and all
rights and remedies under this
Agreement and the Exim Agreement are
cumulative. The term "Obligations" as
used in this Agreement and in the Exim
Agreement shall include, without
limitation, the obligation to pay when
due all Loans made pursuant to this
Agreement (the "Non-Exim Loans") and
all interest thereon and the obligation
to pay when due all Loans made pursuant
to the Exim Agreement (the "Exim
Loans") and all interest thereon.
Without limiting the generality of the
foregoing, all "Collateral" as defined
in this Agreement and as defined in the
Exim Agreement shall secure all Exim
Loans and all Non-Exim Loans and all
interest thereon, and all other
Obligations. Any Event of Default under
this Agreement shall also constitute an
Event of Default under the Exim
Agreement, and any Event
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
of Default under the Exim Agreement
shall also constitute an Event of
Default under this Agreement. In the
event Silicon assigns its rights under
the Exim Agreement and/or under any
Note evidencing Exim Loans and/or its
rights under this Agreement and/or
under any Note evidencing Non-Exim
Loans, to any third party, including,
without limitation, the Export-Import
Bank of the United States ("Exim
Bank"), whether before or after the
occurrence of any Event of Default,
Silicon shall have the right (but not
any obligation), in its sole
discretion, to allocate and apportion
Collateral to the Agreement and/or Note
assigned and to specify the priorities
of the respective security interests in
such Collateral between itself and the
assignee, all without notice to or
consent of the Borrower.
2. MODIFIED INTEREST RATE. The Interest Rate set forth in Section 2 of the
Schedule to the Loan Agreement is hereby amended in its entirety to read as
follows:
INTEREST RATE (Section 1.2): A rate equal to the "Prime Rate" in
effect from time to time, plus 2.0% per
annum; provided, however, that the
foregoing interest rate shall be
reduced to a rate equal to the "Prime
Rate" in effect from time to time, plus
1.50% per annum as set forth below if
Borrower achieves EBITDA (as defined
below) in excess of $0.00 for two
consecutive fiscal quarters ending
after the date of this Agreement and
for so long as Borrower maintains
EBITDA in excess of $0.00 for each
fiscal quarter ending thereafter. If
Borrower does not maintain EBITDA in
excess of $0.00, the interest rate will
be increased to a rate equal to the
"Prime Rate" in effect from time to
time plus 2.0% per annum.
For purposes hereof, "EBITDA" means, on
a consolidated basis, Borrower's
earnings before interest, taxes,
depreciation and other non-cash
amortization expenses and other
non-cash expenses, determined in
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
accordance with generally accepted
accounting principles, consistently
applied.
Changes in the interest rate based on
the Borrower's EBITDA as provided above
shall go into effect as of the first
day of the month following the month in
which Borrower's financial statements
are received, reviewed and approved by
Silicon. If, based on the Borrower's
EBITDA as shown in Borrower's financial
statements there is to be an increase
in the interest rate, the interest rate
increase may be put into effect by
Silicon as of the first day of the
month closest to the date on which the
financial statements are due, even if
the delivery of the financial
statements is delayed. Notwithstanding
the foregoing, in no event shall an
interest rate reduction go into effect
if, at the date it is to go into
effect, a Default or Event of Default
has occurred and is continuing.
Interest shall be calculated on the
basis of a 360-day year for the actual
number of days elapsed. "Prime Rate"
means the rate announced from time to
time by Silicon as its "prime rate;"
provided that the "Prime Rate" in
effect on any day shall not be less
than 4.25% per annum; it is a base rate
upon which other rates charged by
Silicon are based, and it is not
necessarily the best rate available at
Silicon. The interest rate applicable
to the Obligations shall change on each
date there is a change in the Prime
Rate.
3. MODIFIED COLLATERAL MONITORING FEE. The Collateral Monitoring Fee set
forth in Section 3 of the Schedule to the Loan Agreement is hereby amended in
its entirety to read as follows:
Collateral Monitoring Fee: $1,000, per month, payable in arrears
(prorated for any partial month at the
beginning and at termination of this
Agreement).
4. MODIFIED MATURITY DATE. Section 4 of the Schedule to Loan and Security
Agreement is hereby amended to read as follows:
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
4. MATURITY DATE
(Section 6.1): March ____, 2006 [364 days from the
date of this Amendment].
5. MODIFIED FINANCIAL COVENANTS. Section 5 of the Schedule to Loan
Agreement is hereby amended and restated in its entirety to read as follows:
5. FINANCIAL COVENANTS
(Section 5.1): Borrower shall, on a consolidated basis
except as otherwise specified below,
comply with each of the following
covenant(s). Compliance shall be
determined as of the end of each month,
except as otherwise specifically
provided below:
MINIMUM CASH
ON HAND/MINIMUM
EXCESS AVAILABILITY: At all times through October 31, 2005,
Borrower shall maintain a combination
of a minimum of unrestricted cash (and
cash equivalents) in accounts
maintained at Silicon and Minimum
Excess Availability (as defined below)
of not less than $4,000,000.
MINIMUM CASH
ON HAND: Commencing November 1, 2005 and at all
times thereafter, Borrower shall
maintain a minimum of unrestricted cash
(and cash equivalents) in accounts
maintained at Silicon of not less than
$2,000,000.
MINIMUM TANGIBLE
NET WORTH: Borrower shall maintain a Tangible Net
Worth of not less than the following:
For each of the months ending February
28, 2005 and March 31, 2005:
$21,600,000 plus (i) 75% of all
consideration received after the date
hereof for equity securities and
subordinated debt of the Borrower, plus
(ii) 75% of the Borrower's net income
in each fiscal quarter ending after the
date hereof;
For each of the months ending April 30,
2005, May 31, 2005 and June 30, 2005:
$17,250,000 plus (i) 75% of all
consideration received after the date
hereof
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
for equity securities and subordinated
debt of the Borrower, plus (ii) 75% of
the Borrower's net income in each
fiscal quarter ending after the date
hereof;
For each of the months ending July 31,
2005, August 31, 2005 and September 30,
2005: $14,250,000 plus (i) 75% of all
consideration received after the date
hereof for equity securities and
subordinated debt of the Borrower, plus
(ii) 75% of the Borrower's net income
in each fiscal quarter ending after the
date hereof;
For each of the months ending October
31, 2005, November 30, 2005 and
December 31, 2005: $8,000,000 plus (i)
75% of all consideration received after
the date hereof for equity securities
and subordinated debt of the Borrower,
plus (ii) 75% of the Borrower's net
income in each fiscal quarter ending
after the date hereof; and
For each of the months ending January
31, 2006, February 28, 2006 and March
31, 2006: $7,300,000 plus (i) 75% of
all consideration received after the
date hereof for equity securities and
subordinated debt of the Borrower, plus
(ii) 75% of the Borrower's net income
in each fiscal quarter ending after the
date hereof.
Increases in the Minimum Tangible Net
Worth Covenant based on consideration
received for equity securities and
subordinated debt of the Borrower shall
be effective as of the end of the month
in which such consideration is
received, and shall continue effective
thereafter. Increases in the Minimum
Tangible Net Worth Covenant based on
net income shall be effective on the
last day of the fiscal quarter in which
said net income is realized, and shall
continue effective thereafter. In no
event shall the Minimum Tangible Net
Worth Covenant be decreased.
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
DEFINITIONS. For purposes of the foregoing financial
covenants, the following term shall
have the following meaning:
"Current assets", "current liabilities"
and "liabilities" shall have the
meaning ascribed thereto by generally
accepted accounting principles.
"Minimum Excess Availability" shall
mean the amount equal to the Credit
Limit less the principal amount of
outstanding Loans.
"Tangible Net Worth" shall mean the
excess of total assets over total
liabilities, determined in accordance
with generally accepted accounting
principles, with the following
adjustments:
(A) there shall be excluded from
assets: (i) notes, accounts
receivable and other obligations
owing to Borrower from its
officers or other Affiliates, and
(ii) all assets which would be
classified as intangible assets
under generally accepted
accounting principles, including
without limitation goodwill,
licenses, patents, trademarks,
trade names, copyrights,
capitalized software and
organizational costs, licenses and
franchises
(B) there shall be excluded from
liabilities: all indebtedness
which is subordinated to the
Obligations under a subordination
agreement in form specified by
Silicon or by language in the
instrument evidencing the
indebtedness which is acceptable
to Silicon in its discretion
("Subordinated Debt").
6. PROVO PREPAID (DELAWARE) CORP. AND XXXXXXX (DELAWARE) CORP. Borrower
represents and warrants that each of Provo Prepaid (Delaware) Corp. and Xxxxxxx
(Delaware) Corp. is (i) a wholly-owned subsidiary of Verso Technologies, Inc.,
and (ii) is and will remain throughout the term of the Loan Agreement, inactive
with assets having an aggregate value of no more than $0.00. Borrower covenants
and agrees that while the Loan Agreement is in effect, Borrower shall not
transfer any assets or Collateral to either Provo Prepaid (Delaware) Corp. or
Xxxxxxx (Delaware) Corp.
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
7. MODIFIED DEFINITION OF ELIGIBLE RECEIVABLES REGARDING DAYS OUTSTANDING.
Subclause (i) of the definition of "Eligible Receivables" set forth in Section 8
of the Loan Agreement is hereby amended to read as follows:
(i) the Receivable must not be outstanding for more than 90 days from
its invoice date;
8. FEES. In consideration for Silicon entering into this Agreement,
Borrower shall pay Silicon a fee in the amount of $30,000 as follows: (i)
$22,500, payable concurrently herewith and (ii) $7,500, payable if and when the
Borrower satisfies the YTD Net Income Requirement, which fees shall be
non-refundable and in addition to all interest and other fees payable to Silicon
under the Loan Documents. Silicon is authorized to charge said fees to
Borrower's loan account.
9. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon that
all representations and warranties set forth in the Loan Agreement, as amended
hereby, are true and correct.
10. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and Borrower, and the
other written documents and agreements between Silicon and Borrower set forth in
full all of the representations and agreements of the parties with respect to
the subject matter hereof and supersede all prior discussions, representations,
agreements and understandings between the parties with respect to the subject
hereof. Except as herein expressly amended, all of the terms and provisions of
the Loan Agreement, and all other documents and agreements between Silicon and
Borrower shall continue in full force and effect and the same are hereby
ratified and confirmed.
BORROWER: SILICON:
VERSO TECHNOLOGIES, INC. SILICON VALLEY BANK
BY /s/ Xxxxxx X. Xxxxxxx BY /s/ Xxxxx Xxxxxxxx
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PRESIDENT OR VICE PRESIDENT TITLE RELATIONSHIP MANAGER
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BY /s/ Xxxxx Xxxx
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SECRETARY OR ASS'T SECRETARY
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
BORROWER: BORROWER:
PROVO PREPAID (DELAWARE) CORP. XXXXXXXX.XXX SOFTWARE, INC.
(FKA NACT
TELECOMMUNICATIONS, INC.)
BY /s/ Xxxxxx X. Xxxxxxx BY /s/ Xxxxxx X. Xxxxxxx
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PRESIDENT OR VICE PRESIDENT PRESIDENT OR VICE PRESIDENT
BY /s/ Xxxxx Xxxx BY /s/ Xxxxx Xxxx
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SECRETARY OR ASS'T SECRETARY SECRETARY OR ASS'T SECRETARY
BORROWER:
XXXXXXX (DELAWARE) CORP. (FKA MCK
COMMUNICATIONS, INC.)
BY /s/ Xxxxxx X. Xxxxxxx
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PRESIDENT OR VICE PRESIDENT
BY /s/ Xxxxx Xxxx
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SECRETARY OR ASS'T SECRETARY
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
CONSENT
The undersigned acknowledges that its consent to the foregoing Agreement is
not required, but the undersigned nevertheless does hereby consent to the
foregoing Agreement and to the documents and agreements referred to therein and
to all future modifications and amendments thereto, and any termination thereof,
and to any and all other present and future documents and agreements between or
among the foregoing parties. Nothing herein shall in any way limit any of the
terms or provisions of the Cross-Corporate Continuing Guaranty of the
undersigned, all of which are hereby ratified and affirmed.
CLARENT CANADA LTD.
BY /s/ Xxxxxx X. Xxxxxxx
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TITLE Director
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