Exhibit 10.7.6
SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Agreement")
is entered into as of November 5, 1999, but effective as of October 15, 1999 by
and among SILICON VALLEY BANK, a California-chartered bank ("Bank") with its
principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000
and doing business in Virginia as "Silicon Valley East" with a loan production
office located at 00000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000
and SKY ALLAND RESEARCH, INC., a Maryland corporation ("Sky Alland") and THE
DATA GROUP II, INC., a Maryland corporation (each a "Borrower" and collectively,
the "Borrowers").
RECITALS.
A. The Borrowers and the Bank have entered into that certain Loan and
Security Agreement dated May 28, 1998 (as amended from time to time, the "Loan
Agreement"), pursuant to which the Bank has agreed to establish a line of credit
in the maximum principal amount of Three Million Five Hundred Thousand Dollars
($3,500,000) (the "Committed Revolving Line") and a committed equipment line in
favor of Borrowers (the "Committed Equipment Line") in the maximum principal
amount of Two Million Dollars ($2,000,000).
B. The Borrowers have requested that the Bank (i) increase the maximum
principal amount and extend the maturity of the Committed Revolving Line, and
(ii) amend and restated the Committed Equipment Line, and the Bank has agreed,
on the condition, among others, that this Agreement be executed and delivered by
the Borrowers to the Bank.
C. Unless otherwise defined herein, capitalized terms used herein shall
have the respective meanings set forth in the Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Borrowers and the Bank do hereby agree as follows:
1. RECITALS. The parties hereto acknowledge and agree that the above
Recitals are true and correct in all material respects and that the same are
incorporated herein and made a part hereof by reference.
2. DEFINED TERMS. From and after the date hereof, the definitions of
"Committed Equipment Line", "Committed Revolving Line", "Equipment Note",
"Revolving Maturity Date" and "Revolving Promissory Note" set forth in Section
1.1 of the Loan Agreement are hereby amended and restated in its entirety as
follows:
"Committed Equipment Line" means a credit extension
of up to One Million Dollars ($1,000,000).
"Committed Revolving Line" means a credit extension
of up to Five Million Dollars ($5,000,000).
"Equipment Note" means each of the Second Amended and
Restated Equipment Term Note No. 1 and the Second Amended and
Restated Equipment Term Note No. 2, each dated November 5,
1999 in substantially the form of EXHIBIT F attached hereto in
the maximum principal amount of One Million Dollars
($1,000,000) from the Borrowers in favor of the Bank, and
"Equipment Notes" means collectively the Second Amended and
Restated Equipment Term Note No. 1 and the Second Amended and
Restated Equipment Term Note No. 2, together with all
renewals, amendments, modifications and substitutions
therefor.
"Revolving Maturity Date" means October 13, 2000.
"Revolving Promissory Note" means that certain Fifth
Amended and Restated Revolving Promissory Note dated November
5, 1999 in substantially the form of EXHIBIT E attached hereto
in the maximum principal amount of Five Million Dollars
($5,000,000) from the Borrowers in favor of the Bank, together
with all renewals, amendments, modifications and substitutions
therefore.
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From and after the date hereof, the definition of "Eligible Equipment"
is added to Section 1.1 of the Loan Agreement as set forth below:
"Eligible Equipment" means general purpose computer
equipment, office equipment, test and laboratory equipment,
furnishings, and, subject to the limitations set forth below,
which complies with all of Borrower's representations and
warranties to Bank and which is acceptable to Bank in all
respects.
3. LETTERS OF CREDIT. Section 2.1.1 of the Loan Agreement is amended
and restated in its entirety as follows:
(a) Subject to the terms and conditions of this
Agreement, Bank agrees to issue or cause to be issued Letters
of Credit for the account of one or more of Borrowers in an
aggregate outstanding face amount not to exceed (i) the lesser
of the Committed Revolving Line or the Borrowing Base,
whichever is less, minus (ii) the then outstanding principal
balance of the Advances; PROVIDED that the face amount of
outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit
Reserve) shall not in any case exceed One Million Dollars
($1,000,000). Each Letter of Credit shall have an expiration
date no later than one hundred eighty (180) days after the
Revolving Maturity Date, provided, that Borrowers' Letter of
Credit reimbursement obligations shall be secured by cash on
terms acceptable to bank at any time after the Revolving
Maturity Date, if the term of this Agreement is note extended
by Bank. All Letters of Credit shall be, in form and
substance, acceptable to Bank in its sole discretion and shall
be subject to the terms and conditions of Bank's form of
standard Application and Letter of Credit Agreement.
(b) The joint and several obligation of Borrowers to
immediately reimburse Bank for drawings made under Letters of
Credit shall be absolute, unconditional and irrevocable, and
shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit, under all
circumstances whatsoever. Borrowers shall indemnify, defend,
protect, and hold Bank harmless from any loss, cost, expense
or liability, including, without limitation, reasonable
attorneys' fees, arising out of or in connection with any
Letters of Credit.
(c) Borrowers may request that Bank issue a Letter of
Credit payable in a currency other than United States Dollars.
If a demand for payment is made under any such Letter of
Credit, Bank shall treat such demand as an Advance to
Borrowers of the equivalent of the amount thereof (plus cable
charges) in United States currency at the then prevailing rate
of exchange in San Francisco, California, for sales of that
other currency for cable transfer to the country of which it
is the currency.
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(d) Upon the issuance of any Letter of Credit payable
in a currency other than United States Dollars, Bank shall
create a reserve under the Committed Revolving Line for
Letters of Credit against fluctuations in currency exchange
rates, in an amount equal to ten percent (10%) of the face
amount of such letter of credit. The amount of such reserve
may be amended by Bank from time to time to account for
fluctuations in the exchange rate. The availability of funds
under the Committed Revolving Line shall be reduced by the
amount of such reserve for so long as such Letter of Credit
remains outstanding.
4. EQUIPMENT ADVANCES. Section 2.2 of the Loan Agreement is hereby
amended and restated in its entirety as follows:
(a) At any time from the date hereof through February
28, 2000 (the "Tranche One End Date"), Borrowers may from time
to time request advances to be used solely to reimburse
Borrowers for the purchase of equipment purchased after August
30, 1999 (each, together with the advances described in
subsection (b) below, an "Equipment Advance" and collectively,
the "Equipment Advances") from Bank in an aggregate amount not
to exceed the Committed Equipment Line. Amounts borrowed
pursuant to this Section 2.2(a) may not be readvanced.
All Equipment Advances made prior to the Tranche One
End Date shall be evidenced by an Equipment Term Note
("Equipment Term Note No. 1") to be executed and delivered by
Borrowers to Bank as of the date hereof. All Equipment
Advances prior to the Tranche One End Date shall be repaid in
accordance with the terms of Equipment Term Note No. 1.
(b) At any time from March 1, 2000 through August 31,
2000 (the "Tranche Two End Date"), Borrowers may from time to
time request advances to be used solely to reimburse Borrowers
for the purchase of equipment purchased after January 31, 2000
from Bank in an aggregate amount not to exceed the Committed
Equipment Line. Amounts borrowed pursuant to this Section
2.2(b) may not be readvanced.
All Equipment Advances made after the Tranche One End
Date, but prior to the Tranche Two End Date Two shall be
evidenced by an Equipment Term Note ("Equipment Term Note No.
2") to be executed and delivered by Borrowers to Bank as of
the date hereof. All Equipment Advances shall be repaid in
accordance with the terms of Equipment Term Note No. 2.
(c) Borrowers shall deliver to Bank, at the time of
each Equipment Advance an invoice for the Eligible Equipment
to be purchased. The Equipment Advances shall be used by
Borrowers only to purchase Eligible Equipment and
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shall not exceed ninety percent (90%) of the invoice amount of
such Eligible Equipment approved from time to time by Bank,
excluding taxes, shipping, and installation expense. Software
may, however, constitute up to Two Hundred Fifty Thousand
Dollars ($250,000) of the aggregate Equipment Advances.
(d) Interest shall accrue from the date of each
Equipment Advance at the rate specified in the applicable
Equipment Term Note and shall be payable monthly as provided
therein. Any Equipment Advances that are outstanding on the
Tranche One End Date will be payable in Thirty-Six (36) equal
monthly installments of principal, and accrued interest,
beginning on the first Payment Date of each month following
the Tranche One End Date. Any Equipment Advances that are
outstanding on the Tranche Two End Date will be payable in
Thirty-Six (36) equal monthly installments of principal, and
accrued interest, beginning on the first Payment Date of each
month following the Tranche Two End Date.
(e) When Borrowers desire to obtain an Equipment
Advance, Borrowers shall notify Bank (which notice shall be
irrevocable) by facsimile transmission to be received no later
than 1:00 p.m. Washington, D.C. time one (1) Business Day
before the day on which the Equipment Advance is to be made.
Such notice shall be substantially in the form of EXHIBIT B.
The notice shall be signed by a Responsible Officer and
include a copy of the invoice for the Equipment to be
financed.
5. FINANCIAL COVENANTS. Sections 6.8 through 6.11 of the Loan
Agreement are amended and restated in their entirety as follows:
6.8. QUICK RATIO. Borrowers shall maintain, as of the last day
of each calendar month, a ratio of (i) Quick Assets to (ii) Current
Liabilities less deferred revenue of at least 1.50 to 1.
6.9. [OMITTED]
6.10. TANGIBLE NET WORTH. Borrowers shall maintain as of the
last day of each calendar month, a minimum Tangible Net Worth of not
less than $8,500,000, plus ninety percent (90%) of all earnings of
Borrower for the prior fiscal quarter, plus one hundred percent (100%)
of all equity raised by either Borrower.
6.11 DEBT SERVICE. The Borrowers shall maintain a ratio of (a)
cash, plus Eligible Accounts, less Advances under the Committed
Revolving Line, to (b) the outstanding Equipment Advances of not less
than 1.5 to 1.0 until such time as the Borrowers can maintain a Debt
Service Coverage Ratio of greater than 1.50 to 1.0 for two
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(2) consecutive fiscal quarters whereupon the Borrowers shall at all
times thereafter maintain a Debt Service Coverage Ration equal to
greater than 1.50 to 1.0.
6. EXHIBITS. From and after the date hereof, EXHIBITS C and D to the.
Loan Agreement are placed in their entirety with EXHIBITS C and D attached
hereto.
7. FEES. In consideration of the Bank's agreement to enter into this
Agreement, Borrowers have agreed to pay Bank a non-refundable fee in connection
with the Committed Revolving Line equal to $12,500 and a non-refundable fee in
connection with the Committed Equipment Line equal to $2,500.
8. REPLACEMENT PROMISSORY NOTE. The Revolving Promissory Note
referenced in the Loan Agreement is being replaced in its entirety with EXHIBIT
E attached hereto. The Borrowers shall execute and deliver to the Bank on the
date hereof their Fifth Amended and Restated Revolving Promissory Note in the
form of EXHIBIT E attached hereto and incorporated herein by reference (the
"Replacement Promissory Note"), in substitution for and not satisfaction of, the
issued and outstanding revolving promissory note, and the Replacement Promissory
Note shall be the "Revolving Promissory Note" for all purposes of the Loan
Documents. The promissory note being substituted pursuant to this Agreement
shall be marked "Replaced" and returned to the Borrowers promptly after the
execution and delivery of the Replacement Promissory Note.
9. REPLACEMENT EQUIPMENT NOTES. The Equipment Notes referenced in the
Loan Agreement are being replaced in their entirety with EXHIBIT F attached
hereto. The Borrowers shall execute and deliver to the Bank on the date hereof
their Second Amended and Restated Equipment Term Note No. 1 and their Second
Amended and Restated Equipment Term Note No. 2 in the form of EXHIBIT F attached
hereto and incorporated herein by reference (the "Replacement Equipment Notes"),
in substitution for and not satisfaction of, the issued and
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outstanding equipment term notes, and the Replacement Equipment Notes shall be
the "Equipment Notes" for all purposes of the Loan Documents. The equipment
notes being substituted pursuant to this Agreement shall be marked "Replaced"
and returned to the Borrowers promptly after the execution and delivery of the
Replacement Equipment Notes.
10. CONDITIONS PRECEDENT. This Agreement shall become effective on the
date Bank receives the following documents, each of which shall be satisfactory
in form and substance to Bank:
(a) The fully executed Replacement Promissory Note;
(b) The fully executed Replacement Equipment Notes;
(c) Proof that Borrowers have paid all costs and expenses to
Bank in connection with this Agreement, including but not limited to, Bank's
reasonable attorneys fees; and
(d) Such other information, instruments, opinions, documents,
certificates and reports as Bank may deem necessary.
11. REPRESENTATIONS. Borrowers hereby confirms that the representations
set forth in Section 5 of the Loan Agreement, are true and correct as of the
date hereof, and that no Event of Default has occurred or is continuing
immediately prior to or upon the execution of this Agreement.
12. ADDITIONAL DEFAULTS. In addition to those Events of Default
specifically enumerated in the Loan Agreement if the Borrowers shall fail to
comply with the terms of any covenant or agreement contained herein, such
failure shall constitute an Event of Default and shall entitle the Bank to
exercise all rights and remedies provided in the Notes and the Loan
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Agreement, as well as all other rights and remedies provided to the Bank under
the terms of any of the other Loan Documents.
13. COUNTERPARTS. This Agreement may be executed in any number of
duplicate originals or counterparts, each of which duplicate original or
counterpart shall be deemed to be an original and all taken together shall
constitute one and the same instrument.
14. LOAN DOCUMENTS; GOVERNING LAW; ETC. This Agreement is one of the
Loan Documents defined in the Loan Agreement and shall be governed and construed
in accordance with the laws of the State of Maryland. The headings and captions
in this Agreement are for the convenience of the parties only and are not a part
of this Agreement.
15. ACKNOWLEDGMENTS. The Borrowers hereby confirm to Bank the
enforceability and validity of each of the Loan Documents. In addition, the
Borrowers hereby agree that the execution and delivery of this Agreement and the
terms and provisions, covenants or agreements contained in this Agreement shall
not in any manner release, impair, lessen, modify, waive or otherwise limit the
liability and obligations of Borrowers under the terms of any of the Loan
Documents, except as otherwise specifically set forth in this Agreement.
Borrowers issue, ratify and confirm the representations, warranties and
covenants contained in the Loan Documents.
16. MODIFICATIONS. This Agreement may not be supplemented, changed,
waived, discharged, terminated, modified or amended, except by written
instrument executed by the parties.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
WITNESS/ATTEST: SKY ALLAND RESEARCH, INC.
/s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxxxx (SEAL)
------------------------------ --------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
WITNESS OR ATTEST: THE DATA GROUP, II, INC.
/s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxxxx (SEAL)
------------------------------ --------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
SILICON VALLEY BANK
By: /s/ Xxxx XxXxxxxx
--------------------------
Name: Xxxx XxXxxxxx
Title: Vice President
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EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: Sky Alland Research, Inc. Bank: Silicon Valley Bank
Commitment Amount: $5,000,000
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of $
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2. Additions (please explain on reverse) $
----------------------
3. TOTAL ACCOUNTS RECEIVABLE $
----------------------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $
----------------------
5. Balance of 50% over 90 day accounts $
----------------------
6. Concentration Limits $
----------------------
7. Foreign Accounts $
----------------------
8. Governmental Accounts $
----------------------
9. Contra Accounts $
----------------------
10. Promotion or Demo Accounts $
----------------------
11. Intercompany/Employee Accounts $
----------------------
12. Other (please explain on reverse) $
----------------------
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
----------------------
14. Eligible Accounts (#3 minus #13) $
----------------------
15. Maximum Loan Amount $5,000,000
16. Total Funds Available [Lesser of #15 or 14] $
----------------------
17. Present balance owing on Line of Credit $
----------------------
18. Outstanding under Sublimits (____ ) $
----------------------
19. RESERVE POSITION (#16 minus #17 and #18) $
----------------------
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE FOREGOING IS TRUE, COMPLETE AND
CORRECT, AND THAT THE INFORMATION REFLECTED IN THIS BORROWING BASE CERTIFICATE
COMPLIES WITH THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE LOAN AND
SECURITY AGREEMENT BETWEEN THE UNDERSIGNED AND SILICON VALLEY BANK.
COMMENTS:
BANK USE ONLY
RECEIVED BY:____________________
DATE:________________
REVIEWED BY:____________________
COMPLIANCE STATUS: YES / NO
___________________________________
By: _______________________
Authorized Signer
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EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: SKY ALLAND RESEARCH, INC.
The undersigned authorized officer of SKY ALLAND RESEARCH, INC.
hereby certifies that in accordance with the terms and conditions of the Loan
and Security Agreement between Borrowers and Bank (the "Agreement"), (i)
Borrowers are in complete compliance for the period ending with all
required covenants except as noted below and (ii) all representations and
warranties of Borrowers stated in the Agreement are true and correct in all
material respects as of the date hereof. Attached herewith are the required
documents supporting the above certification. The Officer further certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) and are consistently applied from one period to the next
except as explained in an accompanying letter or footnotes. The Officer
expressly acknowledges that no borrowings may be requested by the Borrowers
at any time or date of determination that Borrowers are not in compliance
with any of the terms of the Agreement, and that such compliance is
determined not just at the date this certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies" column.
REPORTING COVENANT REQUIRED COMPLIES
Monthly financial statements Monthly within 30 days Yes No
Quarterly financial statements Quarterly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R Agings Monthly within 30 days Yes No
Compliance Certificate Monthly within 30 days Yes No
Borrowing Base Certificate Monthly within 30 days Yes No
Collateral Audit Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
Maintain on a Monthly Basis:
Minimum Quick Ratio: 1.50:1.0 _______ Yes No
Minimum Tangible Net Worth: $8,500,000 Yes No
(plus 90% of all quarterly earnings
and 100% of all equity raised)
Debt Service Coverage: 1.50:1.0 __:1.0 Yes No
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======================================================
BANK USE ONLY
Received By:____________________
Date:________________
Reviewed By:____________________
Compliance Status: Yes / No
======================================================
Comments Regarding Exceptions:
Sincerely,
_______________________ Date:_______________
SIGNATURE
_______________________
TITLE
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