EXHIBIT 10.3
SILICON VALLEY BANK
AMENDMENT TO LOAN DOCUMENTS
BORROWER(S): MOBILITY ELECTRONICS, INC.
PORTSMITH, INC.
MAGMA, INC.
ADDRESS: 00000 X. XXXXXXXXX XXXXX
XXXXXXXXXX, XXXXXXX 00000-0000
DATE: AUGUST 25, 2003
THIS AMENDMENT TO LOAN DOCUMENTS (THIS "AMENDMENT") is entered into
between SILICON VALLEY BANK ("Bank"), whose address is 0000 Xxxxxx Xxxxx, Xxxxx
Xxxxx, Xxxxxxxxxx 00000, and the borrower(s) named above (individually and
collectively, and jointly and severally, the "Borrower"), whose address is set
forth above.
Bank and Borrower agree to amend the Loan and Security Agreement
between them, dated as of September 27, 2002 (as amended, restated,
supplemented, or otherwise modified from time to time, the "Loan Agreement"), as
set forth herein, 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 (as amended by this Amendment). Bank and Borrower acknowledge that the
Asset Based Terms are currently in effect.
1. LIMITED WAIVER. Bank and Borrower hereby agree that any
failure of Parent (on a consolidated basis) to maintain the minimum Tangible Net
Worth required under Section 5.2 of the Schedule to Loan Agreement solely for
the month ended May 31, 2003 (the "Designated Default") hereby is waived. It is
understood, however, that the foregoing waiver of the Designated Default does
not constitute a waiver of the aforementioned covenant with respect to any other
date or time period, or of any other provision or term of the Loan Agreement or
any related document, nor an agreement to waive in the future such covenant with
respect to any other date or time period or any other provision or term of the
Loan Agreement or any related document.
2. AMENDMENTS TO LOAN AGREEMENT.
(a) The portion of Section 2 of the Schedule to Loan Agreement
that currently reads as follows:
"(ii) while the Asset Based Terms are in effect, the
interest rate shall be a rate equal to the Prime Rate plus
1.25% per annum, except that (A) in the event the Borrower
has a fiscal quarter ending after the date hereof in which
its
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
EBITDA is equal to or greater than zero, then the interest
rate while the Asset Based Terms are in effect shall be
equal to the Prime Rate plus 0.75% per annum, and (B) if,
in a subsequent fiscal quarter EBITDA is less than zero,
then the interest rate shall return to the Prime Rate plus
1.25% per annum"
, hereby is amended and restated in its entirety to read as follows:
"(ii) while the Asset Based Terms are in effect, the
interest rate per annum shall be a rate equal to the Prime
Rate plus 2.00% per annum."
(b) The portion of Section 3 of the Schedule to Loan Agreement
that currently reads as follows:
"Unused Line Fee: In the event, in any fiscal quarter (or
portion thereof at the beginning and
end of the term hereof), the average
daily principal balance of the Advances
outstanding during the month is less
than $10,000,000, Borrower shall pay
Bank an unused line fee (the "Unused
Line Fee") in an amount equal to 0.25%
per annum on the difference between
$10,000,000 and the average daily
principal balance of the Advances
outstanding during the month, computed
on the basis of a 360-day year, which
Unused Line Fee shall be computed and
paid quarterly, in arrears, on the
first day of the following quarter. If
throughout a fiscal quarter the Asset
Based Terms are in effect, then the
Unused Line Fee will not be charged for
such fiscal quarter."
, hereby is amended and restated in its entirety to read as follows:
"Unused Line Fee: Borrower shall pay Bank an unused line
fee (the "Unused Line Fee" as follows:
(a) While the Asset Based
Terms are not in effect: In the event,
in any fiscal quarter (or portion
thereof during which the Asset Based
Terms are not in effect), the average
daily principal balance of the Advances
outstanding during such quarter (or
such portion thereof) is less than
$10,000,000, then the Unused Line Fee
shall be in an amount equal to 0.25%
per annum on the difference between
$10,000,000 and the average daily
principal balance of the Advances
outstanding during such quarter (or
portion thereof), computed on the basis
of a 360-day year, and the Unused Line
Fee shall be computed and paid
quarterly, in arrears, on the first day
of the following quarter.
(b) Solely prior to August
2003, if throughout a fiscal quarter
the Asset Based Terms are in effect,
then the
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
Unused Line Fee will not be charged for
such fiscal quarter under paragraph (a)
above.
(c) From and after August
2003, while the Asset Based Terms are
in effect: In the event, in any month
(or portion thereof during which the
Asset Based Terms are in effect), the
average daily principal balance of the
Advances outstanding during such month
(or portion thereof) is less than
$10,000,000, then the Unused Line Fee
shall be in an amount equal to 0.375%
per annum on the difference of
$10,000,000 minus the average daily
principal balance of the Advances
outstanding during such month (or
portion thereof), computed on the basis
of a 360-day year, and the Unused Line
Fee shall be computed and paid monthly,
in arrears, on the first day of the
following month."
(c) Section 5.2 of the Schedule to Loan Agreement, which
currently reads as follows:
"
5.2 ASSET BASED TERMS
IN EFFECT. During all periods in which the Asset
Based Terms are in effect, Parent (on a
consolidated basis) shall comply with
the following covenant as of the end of
each month:
Minimum Tangible
Net Worth: Parent (on a consolidated basis) shall
maintain a Tangible Net Worth of not
less than the below-defined Applicable
TNW Base Amount, as of the end of each
month. As used herein, the term
"Applicable TNW Base Amount" means:
(a) with respect to the month ending
March 31, 2003, $8,900,000;
(b) with respect to the month ending
April 30, 2003, $8,200,000;
(c) with respect to the month ending
May 31, 2003, $8,200,000;
(d) with respect to the month ending
June 30, 2003, $8,200,000;
(e) with respect to the month ending
July 31, 2003, $8,600,000;
(f) with respect to the month ending
August 31, 2003, $8,600,000;
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
(g) with respect to the month ending
September 30, 2003, $8,600,000;
(h) with respect to the month ending
October 31, 2003, $9,300,000;
(i) with respect to the month ending
November 30, 2003, $9,300,000;
(j) with respect to the month ending
December 31, 2003, $9,300,000; and
(k) with respect to each month
thereafter, such amounts for
succeeding months as are established
by Bank in its good faith business
judgment based on the Additional
Projections (defined below).
Borrower hereby agrees to deliver to
Bank, no later than December 31, 2003
(which is the end of Borrower's Fiscal
Year 2003), a set of annual financial
projections with respect to the
projected financial condition of
Borrower for each month in the
following fiscal year and in such form
and containing such items as the Bank
shall determine are appropriate or
needed by Bank in order for Bank to
establish financial covenant levels for
such following fiscal year), and with
the further understanding that such
projections, individually and in their
totality, must also otherwise be
acceptable to Bank in its discretion
(the "Additional Projections").
Borrower hereby acknowledges and agrees
that: (x) the information in the
Additional Projections as required
above is to be used by the Bank in
order to establish certain financial
covenant levels for later periods
during the term of this Agreement; (y)
such a process introduces uncertainty
as to the amounts required for
Borrower's financial covenant
compliance in the future; and (z)
regardless of any such uncertainty,
however, Borrower knowingly and without
reservation agrees to the foregoing
procedure and fully understands that
Events of Default may arise from
Borrower's non-compliance with such
later-established amounts.
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
Maximum Monthly
Net Loss (After Tax): Parent (on a consolidated basis) shall
not have a net loss (after tax) of more
than $1,250,000 in any month
(commencing with the month ending March
31, 2003).
"
, hereby is amended and restated in its entirety to read as follows:
"
5.2 ASSET BASED TERMS
IN EFFECT. During all periods in which the Asset
Based Terms are in effect, Parent (on a
consolidated basis) shall comply with
the following covenant as of the end of
each month (or such other fiscal period
(if any) expressly specified below):
Minimum Tangible
Net Worth: Parent (on a consolidated basis) shall
maintain, as of the end of each
quarter, a Tangible Net Worth of not
less than the sum of (a) the
below-defined Applicable TNW Base
Amount, plus (b) 50% of all
consideration received on or after
August 1, 2003 for equity securities
and subordinated debt of the Borrower.
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
quarter in which such consideration is
received, and shall continue effective
thereafter. In no event shall the
Minimum Tangible Net Worth Covenant be
decreased (except if and to the extent
arising solely from a corresponding
decrease (if any) in the Applicable TNW
Base Amount from quarter to quarter).
As used herein, the term "Applicable
TNW Base Amount" means:
(a) with respect to the quarter
ending June 30, 2003, $8,200,000;
(b) with respect to the quarter
ending September 30, 2003,
$8,000,000;
(c) with respect to the quarter
ending December 31, 2003,
$8,700,000; and
(d) with respect to each quarter
thereafter, such amounts for
succeeding quarters as are
established by Bank in its good
faith business judgment based on the
Additional Projections (defined
below).
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
Borrower hereby agrees to deliver to
Bank, no later than December 31, 2003
(which is the end of Borrower's Fiscal
Year 2003), a set of annual financial
projections with respect to the
projected financial condition of
Borrower for each month in the
following fiscal year and in such form
and containing such items as the Bank
shall determine are appropriate or
needed by Bank in order for Bank to
establish financial covenant levels for
such following fiscal year), and with
the further understanding that such
projections, individually and in their
totality, must also otherwise be
acceptable to Bank in its discretion
(the "Additional Projections").
Borrower hereby acknowledges and agrees
that: (x) the information in the
Additional Projections as required
above is to be used by the Bank in
order to establish certain financial
covenant levels for later periods
during the term of this Agreement; (y)
such a process introduces uncertainty
as to the amounts required for
Borrower's financial covenant
compliance in the future; and (z)
regardless of any such uncertainty,
however, Borrower knowingly and without
reservation agrees to the foregoing
procedure and fully understands that
Events of Default may arise from
Borrower's non-compliance with such
later-established amounts.
Maximum Monthly
Net Loss (After Tax): Parent (on a consolidated basis) shall
not have a net loss (after tax) of more
than $1,250,000 in any month
(commencing with the month ending March
31, 2003).
"
3. RESERVES; WARRANT.
(a) Without limiting the generality of Item (4) set forth in
Exhibit E to the Loan Agreement, Borrower hereby acknowledges and
reaffirms that the Asset Based Terms are currently in effect and that,
while the Asset Based Terms are in effect, Bank has the right in good
faith to establish and maintain, from time to time, reserves as set
forth in such Item (4) against the amount of Advances, Letters of
Credit, and other financial accommodations otherwise available under
the Loan Agreement.
(b) Without limiting the generality of clause (a) above and
without limiting the Bank's rights and discretion relative to any other
reserves, Borrower and Bank hereby acknowledge and agree that: (i) as
circumstances currently exist, it is the Bank's good faith belief that
a reserve in the amount of $1,500,000 against the amount of Advances,
Letters of Credit, and other financial accommodations otherwise
available under the Loan Agreement is appropriate due to, and
accordingly established and maintained for, negative trends of
Borrower's financial performance against plan and of Collateral
performance (the "Negative Trends Reserve"); (ii) subject to the terms
and conditions
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
hereof, Borrower has requested that Bank, and Bank hereby agrees to,
temporarily reduce the amount of the Negative Trends Reserve (based on
circumstances as they currently exist) from $1,500,000 to $1,000,000
solely for the consecutive-90-day period commencing on August 7, 2003
and ending on November 5, 2003 (the "Temporary Negative Trends Reserve
Reduction"); and (iii) in consideration for Bank entering into this
Amendment (including with respect to the Temporary Negative Trends
Reserve Reduction), on the date of execution and delivery of this
Amendment (the "Target Date") Borrower shall provide Bank with ten-year
warrants to purchase 5,000 shares of common stock of the Parent, at a
price per share equal to the Target Date Designated Price (as defined
herein), on terms acceptable to Bank, all as set forth in the Warrant
to Purchase Stock (the "August 2003 Warrant") and related documentation
(if any) being executed concurrently herewith. The August 2003 Warrant
shall be deemed fully earned on the Target Date, shall be in addition
to all interest and other fees, and shall be non-refundable. As used
herein, the term "Target Date Designated Price" means the average
closing price of one share of the Parent's common stock reported for
the 5 trading days immediately before the Target Date.
4. FEES. In consideration for Bank entering into this Amendment,
Borrower shall issue the August 2003 Warrant and pay Bank a fee of $20,000
concurrently with the execution and delivery of this Amendment, which fee shall
be non-refundable and in addition to all interest and other fees payable to Bank
under the Loan Documents. Bank is authorized to charge said fees to Borrower's
loan account.
5. REPRESENTATIONS TRUE. Borrower represents and warrants to Bank
that all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct.
6. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any
prior written amendments to the Loan Agreement signed by Bank and Borrower, and
the other Loan Documents 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 expressly
amended herein (or as amended and restated in the Loan Documents as expressly
contemplated herein), all of the terms and provisions of the Loan Agreement and
all other Loan Documents shall continue in full force and effect and the same
are hereby ratified and confirmed.
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
7. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same document.
Delivery of an executed counterpart of this Amendment by telefacsimile shall be
equally as effective as delivery of an original executed counterpart of this
Amendment. The foregoing shall apply to each other Loan Document mutatis
mutandis.
Borrower: Bank:
MOBILITY ELECTRONICS, INC. SILICON VALLEY BANK
By_______________________________ By__________________________________
President or Vice President Title_______________________________
Borrower: Borrower:
PORTSMITH, INC. MAGMA, INC.
By_______________________________ By_______________________________
President or Vice President President or Vice President
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SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
CONSENT
The undersigned acknowledges that the undersigned's consent to the
foregoing Amendment is not required, but the undersigned nevertheless does
hereby consent to the foregoing Amendment 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 guaranty, security
agreement, or any other Loan Document of the undersigned, all of which are
hereby ratified and affirmed.
Borrower: Borrower:
Cutting Edge Software, Inc. iGo Direct Corporation, a Delaware
corporation formerly known as IGOC
Acquisition, Inc. and
successor-by-merger to iGo Corporation
By_______________________________
President or Vice President
By_______________________________
President or Vice President
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