Exhibit 10.1
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement (this "Loan Modification Agreement') is
entered into as of March 14, 2003, by and between 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 SONUS NETWORKS, INC., a Delaware corporation with its chief
executive office located at 0 Xxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxxxx 00000
("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 March 25, 2002,
evidenced by, among other documents, a certain Loan and Security Agreement dated
as of March 25, 2002 between Borrower and Bank (as may be amended from time to
time, the "Loan Agreement"). The Loan Agreement established: (i) a working
capital line of credit in favor of Borrower in the maximum principal amount of
Twenty Million Dollars ($20,000,000.00) (the "Committed Revolving Line"), and
(ii) an equipment line of credit in favor of Borrower in the maximum principal
amount of Ten Million Dollars ($10,000,000.00) (the "Committed Equipment Line").
Capitalized terms used but not otherwise defined herein shall have the same
meaning as in the Loan Agreement.
Hereinafter, all indebtedness and obligations owing by Borrower to Bank shall be
referred to as the "Obligations".
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan 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.
A. Modifications to Loan Agreement.
1. The Loan Agreement is hereby amended by deleting the first
sentence of Section 2.1.1(a) and inserting in lieu thereof the
following:
"Bank shall make Advances not exceeding (i) Committed
Revolving Line, MINUS (ii) the amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters
of Credit), MINUS (iii) the FX Reserve, AND MINUS (iv) the
aggregate outstanding Advances hereunder (including any Cash
Management Services)."
2. The Loan Agreement is hereby amended by deleting the first
sentence of Section 2.1.2(a) and inserting in lieu thereof the
following:
"Subject to the availability of Credit Extensions in Section
2.1.1(a), Bank shall issue or have issued Letters of Credit
for Borrower's account not exceeding: (i) the Committed
Revolving Line, MINUS (ii) the outstanding principal balance
of any Advances (including any Cash Management Services),
MINUS (iii) the FX Reserve, MINUS (iv) the amount of all
Letters of Credit (including drawn but unreimbursed Letters
of Credit), PLUS (v) an amount equal to any Letter of Credit
Reserves."
3. Notwithstanding the terms of Section 2.1.5 of the Loan Agreement,
the Borrower hereby acknowledges, confirms and agrees that no new
Equipment Advances shall be made to the Borrower under the
Committed Equipment Line. The outstanding Equipment Advances
shall amortize and be repaid in accordance with the terms of the
Loan Agreement.
4. Section 2.1.6 of the Loan Agreement entitled "Undisbursed Credit
Extensions" shall be renumbered as Section 2.1.7 to appear
immediately following Section 2.1.6 (as described below).
5. The Loan Agreement is hereby amended by incorporating into
Article 2 the following new Section 2.1.6 entitled "Term Loan" to
appear immediately following Section 2.1.5 thereof:
"2.1.6. TERM LOAN.
(a) Through December 31, 2003 (the "Term Loan
Availability End Date"), Bank shall make advances ("Term
Loan Advance" and, collectively, "Term Loan Advances") to
Borrower in an aggregate amount not exceeding the Term Loan.
Expect as provided below, each Term Loan Advance under the
Term Loan shall be made by Bank on the first (1st) day of
the month. Notwithstanding the foregoing, if Borrower
requests a Term Loan Advance on a day other than the first
(1st) day of the month, such Term Loan Advance shall be
deemed to have occurred on and interest shall be calculated
beginning with the first day of such month. Each Term Loan
Advance must be for a minimum amount of One Hundred Thousand
Dollars ($100,000.00).
(b) Interest accrues from the date of each Term Loan
Advance at the per annum rate described in Section 2.3(a),
and shall be payable monthly on the Payment Date of each
month commencing with the initial Payment Date following
each such Term Loan Advance. Each Term Loan Advance shall be
payable in (i) thirty-six (36) equal monthly installments of
principal, PLUS (ii) monthly payments of accrued interest,
beginning on the first Payment Date following such Term Loan
Advance and continuing on each Payment Date thereafter
through the Term Loan Maturity Date applicable to such Term
Loan Advance. Borrower shall have the right to pre-pay Term
Loan Advances without penalty. Term Loan Advances when
repaid may not be reborrowed.
(c) To obtain a Term Loan Advance, Borrower must notify
Bank (the notice is irrevocable) by facsimile no later than
3:00 p.m. Eastern time one (1) Business Day before the day
on which the Term Loan Advance is to be made. The notice in
the form of Exhibit B (Payment/Advance Form) must be signed
by a Responsible Officer or designee."
6. The Loan Agreement is hereby amended by deleting in its entirety
Section 2.2 entitled "Overadvances".
7. The Loan Agreement is hereby amended by deleting the following
text appearing as the first two sentences of Section 2.3(a)
entitled "Interest Rate":
"Advances under the Committed Revolving Line shall accrue
interest on the outstanding principal balance of the
Committed Revolving Line at a per annum rate described on
the INTEREST RATE SUPPLEMENT TO AGREEMENT attached hereto
and incorporated by reference herein. Equipment Advances
under the Committed Equipment Line shall accrue interest on
the outstanding principal balance of the Committed Equipment
Line at a per annum rate equal to the Bank's Prime Rate."
and inserting in lieu thereof the following:
"Advances under the Committed Revolving Line shall accrue
interest on the
outstanding principal balance at a per annum rate equal to
the Bank's Prime Rate. Equipment Advances under the
Committed Equipment Line shall accrue interest on the
outstanding principal balance at a per annum rate equal to
the Bank's Prime Rate. Term Loan Advances under the Term
Loan shall accrue interest on the outstanding principal
balance at a per annum rate equal to the Bank's Prime Rate."
8. The Loan Agreement is hereby amended by incorporating into
Section 2.4 entitled "Fees" the following text to appear
immediately following paragraph (d) thereof:
"(e) UNUSED COMMITTED REVOLVING LINE FACILITY FEE. As
compensation for the Bank's maintenance of sufficient funds
available for such purpose, the Bank shall have earned a fee
for the unused portion of the Committed Revolving Line,
which fee shall be paid quarterly, in arrears, on a calendar
year basis, in a per annum amount equal to 0.25% of the
average unused portion of the Committed Revolving Line (the
"Unused Committed Revolving Line Facility Fee"), as
determined by the Bank. If the Committed Revolving Line is
terminated prior to the end of any quarter, the Unused
Committed Revolving Line Facility Fee for such quarter shall
be equal to 0.25% of the unused portion of the Committed
Revolving Line for such quarter as of the date of the
termination, which fee shall be due and payable by Borrower
on the date of such termination. The Borrower shall not be
entitled to any credit, rebate or repayment of any facility
fee previously earned by the Bank pursuant to this Section
notwithstanding any termination of the within Agreement, or
suspension or termination of the Bank's obligation to make
loans and advances hereunder; and
(f) UNUSED TERM LOAN FACILITY FEE. As compensation for the
Bank's maintenance of sufficient funds available for such
purpose, the Bank shall have earned a fee for the unused
portion of the Term Loan, which fee shall be paid quarterly,
in arrears, on a calendar year basis, in a per annum amount
equal to 0.25% of the average unused portion of the Term
Loan (the "Unused Term Loan Facility Fee"), as determined by
the Bank. If the Term Loan is terminated prior to the end of
any quarter, the Unused Term Loan Facility Fee for such
quarter shall be equal to 0.25% of the unused portion of the
Term Loan for such quarter as of the date of the
termination, which fee shall be due and payable by Borrower
on the date of such termination. In the event that, on or
before May 31, 2003, the Borrower has received Term Loan
Advances in an aggregate amount not less than $5,000,000.00,
the Bank shall waive the Unused Term Loan Facility Fee. The
Borrower shall not be entitled to any credit, rebate or
repayment of any facility fee previously earned by the Bank
pursuant to this Section notwithstanding any termination of
the within Agreement, or suspension or termination of the
Bank's obligation to make loans and advances hereunder."
9. Pursuant to Section 5.9 of the Loan Agreement, the Borrower
hereby acknowledges, confirms and agrees that: (i) all
Obligations of the Borrower under the Loan Agreement (including,
without limitation, those arising under the Term Loan described
herein), as may be amended from time to time, constitute
"Designated Senior Debt" under the BellSouth Debt (as defined in
the Loan Agreement), and (ii) the BellSouth Debt (as defined in
the Loan Agreement) has not and shall not be amended in any
manner which might adversely effect the Bank's interest as a
holder of "Designated Senior Debt", as such term is defined in
the BellSouth Debt as of the Closing Date (as defined in the Loan
Agreement).
10. The Loan Agreement is hereby amended by deleting the following
text appearing as clause (i) in Section 6.2(a) entitled
"Financial Statements, Reports, Certificates", and renumbering
each clause thereafter accordingly:
"(i) as soon as available, but no later than twenty-five
(25) days after the last day of each month, a company
prepared unaudited consolidated balance sheet and unaudited
income statement covering Borrower's consolidated operations
during the period certified by a Responsible Officer and in
a form acceptable to Bank and such financial statements
shall not include notes and shall be subject to year-end and
quarterly adjustments;"
11. The Loan Agreement is hereby amended by deleting paragraphs (b),
(c) and (d) in Section 6.2 entitled "Financial Statements,
Reports, Certificates" and inserting in lieu thereof the
following:
"(b) Within forty-five (45) days after the last day of each
quarter, Borrower shall deliver to Bank a Compliance
Certificate signed by a Responsible Officer in the form of
EXHIBIT D."
12. The Loan Agreement is hereby amended by deleting the following
text appearing as the second sentence of Section 6.6 entitled
"Primary Accounts":
"In addition to the foregoing: (i) on the Closing Date,
Borrower shall maintain or have administered through the
Bank not less than Thirty-Five Million Dollars
($35,000,000.00) in cash or securities, and (ii) at all
times after the Closing Date and prior to the termination of
this Agreement, Borrower shall maintain or have administered
through the Bank not less than Twenty-Five Million Dollars
($25,000,000.00) in cash or securities in excess of that
amount used for Borrower's operations."
and inserting in lieu thereof the following:
"In addition to the foregoing, Borrower shall, at all times
prior to the termination of this Agreement, maintain or have
administered through the Bank not less than Thirty-Five
Million Dollars ($35,000,000.00) in unrestricted cash or
securities in excess of that amount used for Borrower's
operations, of which at least $3,000,000.00 shall at all
times be maintained in Borrower's sweep account (account no.
3300020686) at Bank or a money market account (account no.
3300080864) at Bank."
13. The Loan Agreement is hereby amended by deleting Section 6.7
entitled "Financial Covenants" and inserting in lieu thereof the
following:
"6.7 FINANCIAL COVENANTS. Borrower shall maintain at all
times, to be tested as of the last day of each quarter,
unless otherwise noted:
(a) QUICK RATIO. Borrower shall maintain a ratio of
Quick Assets to Current Liabilities (less Deferred
Revenue), as of the last day of each quarter, of at
least 1.5 to 1.0.
(b) TANGIBLE NET WORTH. Borrower shall maintain at all
times, to be tested as of the last day of each
quarter, a Tangible Net Worth of at least Forty
Million Dollars ($40,000,000.00); PROVIDED THAT such
threshold amount shall be increased by fifty percent
(50%) of the amount of the proceeds received by
Borrower from equity issued by Borrower after
February 24, 2003."
14. The Loan Agreement is hereby amended by deleting the definitions
of "Advance", "Credit Extension", "Deferred Maintenance Revenue"
and "Revolving Maturity Date" appearing in Section 13.1 and
inserting in lieu thereof the following:
"ADVANCE" or "ADVANCES" is a loan advance (or advances)
under the Committed Revolving Line.
"CREDIT EXTENSION" is each Advance (including Cash
Management Services), Equipment Advance, Term Loan Advance,
Letter of Credit, FX Forward Contract or any other extension
of credit by Bank for Borrower's benefit.
"DEFERRED REVENUE" is all amounts received in advance of
performance and not yet recognized as revenue.
"REVOLVING MATURITY DATE" is March 23, 2004.
15. The Loan Agreement is hereby amended by deleting the definitions
of "Borrowing Base", "Eligible Accounts", "Interest Rate
Supplement" and "TNW Threshold" appearing in Section 13.1
thereof.
16. The Loan Agreement is hereby amended by incorporating into
Section 13.1 the following definitions to appear alphabetically
therein:
"TERM LOAN" is a Term Loan Advance or Term Loan Advances of
up to Six Million Seven Hundred Dollars ($6,700,000.00).
"TERM LOAN ADVANCE" is defined in Section 2.1.6.
"TERM LOAN AVAILABILITY END DATE" is defined in Section
2.1.6.
"TERM LOAN MATURITY DATE" is, with respect to each Term Loan
Advance, the thirty-sixth (36th) Payment Date following each
such Term Loan Advance.
17. The Compliance Certificate appearing as EXHIBIT D to the Loan
Agreement is hereby replaced with the Compliance Certificate
attached as EXHIBIT A hereto.
18. The Borrower hereby modifies the Schedule to the Loan Agreement
provided to the Bank on March 25, 2002 to include the information
on the Modification to Schedule attached as EXHIBIT B hereto.
4. FEES. In addition to the fees payable to Bank in accordance with the terms of
the Loan Agreement and this Loan Modification Agreement, Borrower shall pay to
Bank a fee for the renewal of the Committed Revolving Line equal to Fifty
Thousand Dollars ($50,000.00), which fee shall be due and payable on the date
hereof and shall be deemed fully earned as of the date hereof. The 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 NEGATIVE PLEDGE AGREEMENT. Borrower hereby ratifies, confirms
and reaffirms, all and singular, the terms and conditions of a certain Negative
Pledge Agreement dated as of March 25, 2002 between Borrower and Bank, and
acknowledges, confirms and agrees that said Negative Pledge Agreement shall
remain in full force and effect.
6. ADDITIONAL COVENANTS. Borrower shall not, without providing Bank with written
notice within fifteen (15) days thereafter: (i) relocate its chief executive
office, or add any new offices or business locations (unless such new offices or
business locations contain less than Fifty Thousand Dollars ($50,000.00) in
Borrower's assets or property), or (ii) change its jurisdiction of organization,
or (iii) change its organizational structure or type, or (iv) change its legal
name, or (v) change any organizational number (if any) assigned by its
jurisdiction of organization. In addition, the Borrower hereby certifies that no
Collateral is in the possession of any third party bailee (such as at a
warehouse). In the event that Borrower, after the date hereof, intends to store
or otherwise deliver the Collateral to such a bailee, then Borrower shall first
receive, the prior written consent of Bank and such bailee must acknowledge in
writing that the bailee is holding such Collateral for the benefit of Bank.
7. AUTHORIZATION TO FILE. Borrower hereby authorizes Bank to file financing
statements without notice to Borrower, with all appropriate jurisdictions, as
Bank deems appropriate, in order to further perfect or protect Bank's interest
in the Collateral.
8. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
9. 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.
10. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
defenses against the obligations to pay any amounts under the Obligations.
11. 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.
12. RIGHT OF SET-OFF. In consideration of Bank's agreement to enter into this
Loan Modification Agreement, Borrower and any guarantor hereby reaffirm and
hereby grant to Bank, a lien, security interest and right of setoff as security
for all Obligations to Bank, whether now existing or hereafter arising upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Bank or any entity under the
control of Silicon Valley Bank (including a Bank subsidiary) or in transit to
any of them. At any time after the occurrence and during the continuance of an
Event of Default, without demand or notice, Bank may set off the same or any
part thereof and apply the same to any liability or obligation of Borrower and
any guarantor even though unmatured and regardless of the adequacy of any other
collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS
RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE
OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
13. 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.
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.
14. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).
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:
SONUS NETWORKS, INC. SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: /s/ XXXXX X. XXXXX By: /s/ XXXXXXXX X. XXXX
-------------------------------- -----------------------------------
Name: XXXXX X. XXXXX Name: XXXXXXXX X. XXXX
------------------------------ ---------------------------------
Title: VP & CORPORATE CONTROLLER Title: SVP
----------------------------- --------------------------------
SILICON VALLEY BANK
By: /s/ XXXXXX XXXXXX
-----------------------------------
Name: XXXXXX XXXXXX
---------------------------------
Title: AVP
--------------------------------
(signed in Santa Xxxxx County,
California)
EXHIBIT A
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: SONUS NETWORKS, INC.
The undersigned authorized officer of SONUS NETWORKS, INC. certifies
that under 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 in the Agreement are true and
correct in all material respects on this date. Attached are the required
documents supporting the certification. The Officer certifies that these are
prepared in accordance with Generally Accepted Accounting Principles (GAAP)
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer acknowledges that no borrowings
may be requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that 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
------------------ -------- --------
10-Q with CC Quarterly, earlier of 45 days of QE,
or 5 days of filing w/ SEC Yes No
10-K Annually, earlier of 120 days of YE,
or 5 days of filing w/ SEC Yes No
8-K Within 5 days after filing with SEC Yes No
Balance Sheet, Income Statement Annually, w/in 45 days of YE
and Cash Flow projections (and upon revisions approved by BoD) Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ----------------
Minimum Quick Ratio (quarterly) 1.5:1.0 ______:1.0 Yes No
Minimum Tangible Net Worth (quarterly) $40,000,000,
plus 50% of new equity issued $________ Yes No
----------------------------------------
BANK USE ONLY
Received by: ________________________
AUTHORIZED SIGNER
Date: ____________________________
Verified: ___________________________
AUTHORIZED SIGNER
Date: ____________________________
Compliance Status: Yes No
----------------------------------------
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
-----------------------------
SIGNATURE
-----------------------------
TITLE
-----------------------------
DATE
EXHIBIT B
MODIFICATIONS TO SCHEDULE TO LOAN AND SECURITY AGREEMENT
This schedule is furnished in connection with the loan modification agreement by
and between Silicon Valley Bank and Sonus Networks, Inc. that modifies the loan
and security agreement, dated as of March 25, 2002. All of the information
included in the schedule shall be considered confidential information.
SECTION 5.3
LITIGATION
1. GREEN RIVER SYSTEMS, INC. VS. TELECOM TECHNOLOGIES, INC. Has been
settled.
2. XXXXXXXXX ET AL VS. SONUS NETWORKS, INC., XXXXXX X. XXXXX ET AL
filed July 1, 2002 (U.S.D.C., Mass.). Five other complaints that
are essentially identical to the xxxxxxxxx complaint also have
been filed in the district of Massachusetts.
SECTION 5.4
NO MATERIAL DEVIATION IN FINANCIAL STATEMENTS
1. Borrower has submitted to the bank its consolidated financial
statements for its fiscal year ending December 31, 2002.
2. Since December 31, 2002, the borrower has continued to incur
losses, purchased fixed assets and used cash in the operation of
its business. Notwithstanding the foregoing, the borrower
acknowledges and confirms to bank that it is in compliance and
shall continue to maintain compliance with the terms of the loan
and security agreement dated 3/25/02 between borrower and bank,
as amended, including, without limitation, the financial
covenants appearing in section 6.6 and 6.7 thereof.
SECTION 7.5
ENCUMBRANCE
1. Lease agreement between Sonus Networks, Inc. and Unistar Leasing
dated January 21, 2003, for Minolta photocopiers.
