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Exhibit 10.4(b)
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Agreement") made as of September 3, 1999, by and between SILICON VALLEY BANK, a
California-chartered bank ("Bank") with its principal place of business at 0000
Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and with a loan production office
located at 0 Xxxxxx Xxxxxxxxx Xxxxxx, Xxxxx 000, 000 Xxxxxxxxxx Xxxx, Xxxxxx,
Xxxxxxxxxxxx 00000 and FREEMARKETS, INC., a corporation organized and in good
standing under the laws of the State of Delaware (the "Borrower").
RECITALS.
A. Borrower and Bank have entered into that certain Loan and Security
Agreement dated February 5, 1999 (as thereafter amended from time to time, the
"Loan Agreement"), pursuant to which Bank has agreed to establish certain loans
in favor of Borrower.
B. Borrower has requested that Bank increase the Committed Revolving
Line described therein, provide a supplemental committed equipment line of
credit and modify certain provisions of the Loan Agreement, and the Bank has
agreed to the foregoing on the condition, among others, that this Agreement be
executed and delivered by Borrower to Bank.
C. Unless otherwise defined herein, capitalized terms used herein shall
have the respective meanings set forth in the Loan Agreement.
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NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrower and 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. Definitions. From and after the date hereof, the definitions of
"Advance", "Advances", Committed Revolving Line", "Eligible Accounts", "Loan
Documents", "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:
"Advance" or "Advances" means a loan advance under
the Committed Revolving Line, the Committed Equipment Line or
the Committed Supplemental Equipment Line.
"Committed Revolving Line" means prior to closing on
the Private Placement, a credit extension of up to Two Million
Dollars ($2,000,000) and after closing on the Private
Placement, a credit extension of up to Five Million Dollars
($5,000,000).
"Eligible Accounts" "Eligible Accounts" means those
Accounts that arise in the ordinary course of Borrower's
business that comply with all of Borrower's representations
and warranties to Bank set forth in Section 5.4. Unless
otherwise agreed to by Bank in writing, Eligible Accounts
shall not include the following:
(a) Accounts that the account debtor has
failed to pay within ninety (90) days of invoice date;
(b) Accounts with respect to an account
debtor, fifty percent (50%) of whose Accounts the account
debtor has failed to pay within ninety (90) days of invoice
date;
(c) Accounts with respect to an account
debtor, including Affiliates, whose total obligations to
Borrower exceed twenty five percent (25%)
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of all Accounts, unless otherwise approved by Bank in writing,
except with respect to General Motors Corporation and United
Technology Corporation, as to which the percentage shall be
fifty percent (50%), to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by
Bank;
(d) Accounts with respect to which the
account debtor does not have its principal place of business
in the United States;
(e) Accounts with respect to which the
account debtor is a federal, state, or local governmental
entity or any department, agency, or instrumentality thereof,
unless the Borrower has taken all steps required by Bank to
comply with the Federal Assignment of Claims Act of 1940 and
any comparable law with respect to state or local government
agencies;
(f) Accounts with respect to which Borrower
is liable to the account debtor, but only to the extent of any
amounts owing to the account debtor (sometimes referred to as
"contra" accounts, e.g. accounts payable, customer deposits,
credit accounts etc.);
(g) Accounts generated by demonstration or
promotional equipment, or with respect to which goods are
placed on consignment, guaranteed sale, sale or return, sale
on approval, xxxx and hold, or other terms by reason of which
the payment by the account debtor may be conditional;
(h) Accounts with respect to which the
account debtor is an Affiliate, officer, employee, or agent of
Borrower;
(i) Accounts with respect to which the
account debtor disputes any material amount of liability or
makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis
for dispute (but only to the extent of the amount subject to
such dispute or claim), or is subject to any Insolvency
Proceeding, or becomes insolvent, or goes out of business; and
(j) Accounts the collection of which Bank
reasonably determines after reasonable inquiry and reasonable
consultation with Borrower to be doubtful.
"Loan Documents" means collectively, this Agreement,
the Negative Pledge Agreement, the Notes, and any other
present or future agreement entered into between Borrower
and/or for the benefit of Bank in connection with this
Agreement, all as amended, extended or restated from time to
time.
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"Note" means the Revolving Promissory Note, an
Equipment Term Note or a Supplemental Equipment Term Note, and
"Notes" means the Revolving Promissory Note, the Equipment
Term Notes and the Supplemental Equipment Term Notes.
"Revolving Maturity Date" means September 2, 2000.
"Revolving Promissory Note" means that certain
Amended and Restated Revolving Promissory Note dated September
3, 1999 in substantially the form of Exhibit E attached hereto
in the maximum principal amount of Five Million Dollars
($5,000,000) from the Borrower in favor of the Bank, together
with all renewals, amendments, modifications and substitutions
therefore.
From and after the date hereof, the following definitions are added to
Section 1.1 of the Loan Agreement:
"Committed Supplemental Equipment Line" means a
credit extension of up to Three Million Dollars ($3,000,000).
"Committed Supplemental Equipment Line Maturity Date"
means September 5, 2003.
"Initial Public Offering" means a public offering of
stock in the Borrower.
"Private Placement" means a private placement that
closes after September 1, 1999 and raises a net amount of not
less than Twenty Five Million Dollars ($25,000,000) and which
closes not later than September 30, 1999.
"Supplemental Equipment Advance" has the meaning set
forth in Section 2.1.3(a).
"Supplemental Equipment Availability End Date One"
has the meaning set forth in Section 2.1.3(a).
"Supplemental Equipment Availability End Date Two"
has the meaning set forth in Section 2.1.3(b).
"Supplemental Equipment Term Note" means one of the
two (2) supplemental equipment term notes now or hereafter
delivered by the Borrower to the Bank in connection with the
Supplemental Committed Equipment Line in substantially the
form of Exhibit G and "Supplemental Equipment Term Notes"
means collectively, the equipment term notes which may now or
hereafter be
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delivered by the Borrower to Bank in connection with the
Supplemental Committed Equipment Line, together with all
renewals, amendments, modifications and substitutions
therefore.
3. The Supplemental Equipment. The following provisions are added to
the Loan Agreement immediately after Section 2.1.2 as Section 2.1.3:
2.1.3 Supplemental Equipment Advances.
(a) Subject to and upon the terms and conditions of
this Agreement, at any time from and after the Private
Placement through March 5, 2000 (the "Supplemental Equipment
Availability End Date One"), Borrower may from time to time
request advances (each together with the advances described in
subsection (b) below, an "Supplemental Equipment Advance" and
collectively, the "Supplemental Equipment Advances") to
Borrower in an aggregate outstanding amount not to exceed the
Committed Supplemental Equipment Line. Amounts borrowed
pursuant to this Section 2.1.3(a) may not be readvanced.
All Supplemental Equipment Advances made prior to the
Supplemental Equipment Availability End Date One shall be
evidenced by a Supplemental Equipment Term Note ("Supplemental
Equipment Term Note No. 1") to be executed and delivered by
the Borrower to Bank on the Closing Date. All Supplemental
Equipment Advances made prior to the Supplemental Equipment
Availability End Date One shall be repaid in accordance with
the terms of Supplemental Equipment Term Note No. 1.
(b) At any time after the Private Placement and March
5, 2000 through September 5, 2000 (the "Supplemental Equipment
Availability End Date Two"), Borrower may from time to time
request Supplemental Equipment Advances from Bank in an
aggregate amount not to exceed the Committed Supplemental
Equipment Line less Supplemental Equipment Advances made under
2.1.3(a) hereof. Amounts borrowed pursuant to this Section
2.1.3(b) may not be readvanced.
All Supplemental Equipment Advances made after the
Supplemental Equipment Availability End Date One, but prior to
the Supplemental Equipment Availability End Date Two shall be
evidenced by a Supplemental Equipment Term Note ("Supplemental
Equipment Term Note No. 2") to be executed and delivered by
Borrower to Bank on the Closing Date. All Supplemental
Equipment Advances made after the Supplemental Equipment
Availability End Date One, but prior to the Supplemental
Equipment Availability End Date Two
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shall be repaid in accordance with the terms of Supplemental
Equipment Term Note No. 2.
(c) Borrower shall deliver to Bank, at the time of
each Supplemental Equipment Advance request, an invoice for
the Equipment to be purchased. The Supplemental Equipment
Advances shall be used only to purchase domestic Equipment
purchased within the past ninety (90) days or thereafter and
shall not exceed One Hundred Percent (100%) of the invoice
amount of such equipment approved from time to time by Bank,
excluding taxes, shipping, warranty charges, freight discounts
and installation expense. Software may, however, constitute up
to twenty-five percent (25%) of aggregate Supplemental
Equipment Advances. At no time shall Bank make any
Supplemental Equipment Advances if after giving effect to such
request the aggregate amount then outstanding would exceed the
Committed Supplemental Equipment Line.
(d) Interest shall accrue from the date of each
Supplemental Equipment Advance at the rate as set forth in the
Supplemental Equipment Term Notes and shall be payable monthly
in accordance with the Supplemental Equipment Term Notes.
(e) Borrower may not prepay any Supplemental
Equipment Advances with less than ten (10) days prior notice
and further provided that any such prepayment is accompanied
by a prepayment fee in the amount of one percent (1.0%) of the
Supplemental Equipment Advance being prepaid.
4. Principal Depository. Section 6.7 of the Loan Agreement is amended
and restated in its entirety as follows:
6.7 Principal Depository. Borrower shall maintain its
principal operating accounts with Bank. Prior to the Initial
Public Offering, Borrower shall at all times maintain not less
than Two Million Five Hundred Thousand Dollars ($2,500,000) in
a money market mutual fund maintained with Bank. From and
after the Initial Public Offering, Borrower shall at all times
maintain not less than Five Million Dollars ($5,000,000) in a
money market mutual fund maintained with Bank.
5. Tangible Net Worth. Section 6.9 of the Loan Agreement is amended and
restated in its entirety as follows:
6.9 Tangible Net Worth. Borrower shall maintain,
tested as of the last day of each calendar month, a Tangible
Net Worth of not less than Eight Million
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Dollars ($8,000,000) through and including August 31, 1999.
From and after September 30, 1999, the Borrower shall maintain
at all times thereafter, Tangible Net Worth in an amount equal
to not less than Twenty Five Million Dollars ($25,000,000).
6. Compliance Certificate. From and after the date hereof, Exhibit D to
the Loan Agreement is replaced in its entirety with Exhibit D attached hereto.
7. Fees. In consideration of the Bank's agreement to enter into this
Agreement Borrower has agreed to pay Bank on the date hereof the following non
refundable fees (the "Fees"):
(a) a commitment fee for the Committed Revolving Line
in the amount of Twelve Thousand Five Hundred Dollars
($12,500);
(b) a success fee for the Committed Revolving Line in
the amount of Twelve Thousand Five Hundred Dollars ($12,500);
(c) a commitment fee for the Committed Supplemental
Equipment Line in the amount of Seven Thousand Five Hundred
Dollars ($7,500); and
(d) a success fee for the Committed Supplemental
Equipment Line in the amount of Seven Thousand Five Hundred
Dollars ($7,500).
8. Conditions Precedent. This Agreement shall not become effective
until Bank receives the following, each of which shall be satisfactory in form
and substance to Bank:
(a) an Amended and Restated Revolving Promissory Note
(the "Restated Note") issued and delivered by the Borrower in
the form attached hereto and incorporated herein by reference,
payable to the order of Bank in the principal amount of Five
Million Dollars ($5,000,000) and otherwise duly completed; and
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(b) proof that Borrower has paid the Fees and all
fees, costs and expenses to Bank in connection with this
Agreement, including but not limited to all Bank's attorneys
fees and expenses; and
(c) such other information, instruments, opinions,
documents, certificates and reports as Bank may deem
necessary.
9. Restated Note. Borrower shall execute and deliver to Bank on the
date hereof the Restated Note, in substitution for and not satisfaction of, the
issued and outstanding revolving promissory note, and the Restated Note shall be
the "Revolving Promissory Note" for all purposes of the Loan Documents.
10. 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.
11. 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 Commonwealth of Pennsylvania. The headings
and captions in this Agreement are for the convenience of the parties only and
are not a part of this Agreement.
12. Acknowledgments. Borrower hereby confirms to Bank the
enforceability and validity of each of the Loan Documents. In addition, Borrower
hereby agrees to 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 Borrower under the terms of any of the Loan Documents,
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except as otherwise specifically set forth in this Agreement. Borrower issues,
ratifies and confirms the representations, warranties and covenants contained in
the Loan Documents, except for such representations and/or warranties which, by
their nature, covered specific facts and events as they existed as of the date
they were originally made under the Loan Agreement, in which case Borrower
issues, ratifies and confirms such representations and/or warranties as of the
date they were originally made under the Loan Agreement.
13. Modifications. This Agreement may not be supplemented, changed,
waived, discharged, terminated, modified or amended, except by written
instrument executed by the parties.
[SIGNATURES ARE ON THE FOLLOWING 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.
FREEMARKETS, INC.
By: /s/ Xxxx X. Xxxxxx
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Name: Xxxx X. Xxxxxx
Title: Chairman, President & CEO
SILICON VALLEY BANK
By: /s/ Ash Lilani
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Ash Lilani, Senior Vice President
SILICON VALLEY BANK
By:
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Name:
Title:
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EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: FREEMARKETS, INC.
The undersigned authorized officer of FREEMARKETS, INC. hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending _____________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower 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 any
accompanying letter or footnotes. The Officer expressly acknowledges that no
borrowings may be requested by the Borrower at any time or date of determination
that Borrower is 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
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Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
Annual Operating Plan & Projections Within 30 days of beginning of fiscal year Yes No
A/R Agings Monthly within 30 days Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
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Maintain on a Monthly Basis:
Minimum Quick Ratio 1.5:1.0 _____:1.0 Yes No
Minimum Debt Service 2.0:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth:
August 31, 1999 $8,000,000 $________ Yes No
September 30, 1999 and
thereafter $25,000,000 $________ Yes No
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BANK USE ONLY
RECEIVED BY:____________________
DATE:________________
REVIEWED BY:____________________
COMPLIANCE STATUS: YES / NO
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COMMENTS REGARDING EXCEPTIONS:
Sincerely,
Date:
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SIGNATURE
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