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EXHIBIT 10.9
AMENDED AND RESTATED
SUPPLEMENT
TO THE
LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 21, 1998
BETWEEN
COSINE COMMUNICATIONS, INC. ("BORROWER")
AND
VENTURE LENDING & LEASING II, INC. ("LENDER")
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This Amended and Restated Supplement is a Supplement identified in the
document entitled Loan and Security Agreement dated as of September 21, 1998
between Borrower and Lender. This Supplement amends, restates and replaces in
its entirety the Supplement executed by Borrower and Lender dated as of
September 21, 1998 (the "Prior Supplement"). Exhibits "A" through "E" to the
Prior Supplement shall be deemed attached hereto and made a part hereof without
change; Exhibit "F" to the Prior Supplement shall be deemed replaced in its
entirety by the form of Warrant attached hereto as Exhibit "F". All capitalized
terms used in this Supplement and not otherwise defined in this Supplement have
the meanings ascribed to them in Section 10 of the Loan and Security Agreement,
which is incorporated in its entirety into this Supplement. In the event of any
inconsistency between the provisions of the Loan and Security Agreement and
this Supplement, this Supplement is controlling. Execution of this Supplement
by the Lender and Borrower shall constitute execution of the Loan and Security
Agreement.
In addition to the provisions of the Loan and Security Agreement, the
parties agree as follows:
PART 1 - ADDITIONAL DEFINITIONS:
"COMMITMENT": Lender commits to make Term Loans to Borrower up to the
aggregate, original principal amount of Two Million Dollars ($2,000,000.00);
and Lender commits to make Equipment Loans to Borrower up to the aggregate,
original principal amount of Two Million Five Hundred Thousand Dollars
($2,500,000.00). Subject to the limitations set forth in this Supplement and
the Loan and Security Agreement, a Loan may be advanced as an Equipment Loan,
the proceeds of which shall be used to finance Borrower's acquisition or
carrying of computer, research and development and general purpose office
equipment, and software imbedded in or necessary to the use or operation of
such equipment, or for tenant improvements at premises leased by Borrower. A
Loan may also be advanced as a Term Loan, the proceeds of which shall be used
by Borrower for general working capital purposes. Except to the extent the
remaining Commitment is a lesser amount, each Equipment Loan requested by
Borrower to be made on a single Business Day shall be for a minimum principal
amount of $50,000, and each Term Loan requested by Borrower to be made on a
single Business Day shall be for a minimum principal amount of $250,000 or a
multiple thereof.
"DESIGNATED RATE": The Designated Rate is fixed rate of interest per annum
of (i) seven and one-half percent (7.50%) for each Equipment Loan, and (ii)
seven and three-eighths percent (7.375%) for each Term Loan.
"EQUIPMENT LOAN" means any Loan requested by Borrower and funded by Lender
to finance Borrower's acquisition or carrying of specific items of Equipment,
software or tenant improvements.
"TERM LOAN" means any Loan requested by Borrower and funded by Lender for
general working capital purposes of Borrower, and not to finance the acquisition
or carrying of specific items of Equipment, software or tenant improvements.
"TERMINAL PAYMENT": Each Terminal Payment shall be an amount equal to (i)
ten percent (10%) of the original principal amount of the associated Equipment
Loan, or (ii) seven and one-half percent (7.50%) of the original principal
amount of the associated Term Loan.
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"TERMINATION DATE": The Termination Date is the earlier of (a) the date
Lender may terminate making Loans or extending other credit pursuant to the
rights of Lender under Article 7 of the Agreement, or (b) June 30, 1999.
"THRESHOLD AMOUNT": One Hundred Thousand Dollars ($100,000.00).
PART 2 - ADDITIONAL COVENANTS AND CONDITIONS:
ISSUANCE OF WARRANT TO LENDER. As additional consideration for the making
of the Loans under the Loan and Security Agreement, upon the making of, and as
a condition to, the initial Loan, Lender shall be entitled to receive a warrant
to purchase 20,808 shares of Series A Preferred Stock of Borrower at a per
share exercise price of $8.41; provided that if Series B Preferred Stock of the
Borrower is issued and sold prior to June 30, 1999, then such warrant shall be
exercisable at an initial exercise price equal to the per share price of such
Series B Preferred Stock sold by the Borrower on the closing of such sale, and
for a number of shares of Series B Preferred Stock having an aggregate exercise
price of $175,000.00 (such shares of Series A or Series B Preferred Stock being
"Warrant Shares"). With each availability of the remaining $1 million in Term
Loans, the warrant shall vest, for additional Warrant Shares with a value equal
to $50,000. With each funding of a Term Loan, the warrant shall vest, from time
to time, for additional Warrant Shares with a value equal to 5% of the
principal amount of the Term Loan. The warrant issued under this Agreement
shall be in substantially the form attached hereto as Exhibit "C"; shall be
transferable by Lender, subject to compliance with applicable securities laws;
shall expire on June 30, 2006; and shall include piggy-back registration
rights, "net issuance" provisions, and anti-dilution protections reasonably
satisfactory to Lender and its counsel.
COMPLETION OF DUE DILIGENCE; DISPOSITION OF COMMITMENT FEE. As an
additional condition precedent under Section 4.1 of the Loan and Security
Agreement, Lender shall have completed to its satisfaction its due diligence
review of Borrower's business and financial condition and prospects, and
Lender's credit committee shall have approved the Commitment. If this condition
is not satisfied, Lender shall refund to Borrower the $20,000 commitment fee
previously paid to Lender. Lender agrees that with respect to each Loan
advanced, on the Borrowing Date applicable to such Loan, Lender shall credit
against the payments due from Borrower on such date in respect of such Loan an
amount equal to the product of $20,000 and a fraction the numerator of which is
the principal amount of such Loan and the denominator of which is $4,500,000,
until the aggregate amount of such credits equals but does not exceed $20,000.
CONDITION TO ADVANCES OF LOANS IN EXCESS OF $1MM. The funding of any Loan
subsequent to the first $1,000,000.00 in original principal amount of Loans
advanced shall be at the sole and absolute discretion of Lender based on
Lender's assessment at the time of (i) Borrower's ratio of assets to
liabilities and such other financial ratios as Lender determines appropriate,
or (ii) the amount of equity capital raised by or committed to Borrower or the
status of any corporate partnering arrangements or strategic alliances with
third parties.
LIMITATION ON EQUIPMENT LOANS. Each Equipment Loan shall be in an amount
not to exceed one hundred percent (100%) of the amount paid or payable by
Borrower to a non-affiliated manufacturer, vendor or dealer for an item of
equipment as shown on an invoice therefor (excluding any commissions and any
portion of the payment which relates to the servicing of the equipment and
sales taxes payable by Borrower upon acquisition, and delivery charges);
provided, however, that with respect to any item of Equipment which has either
been owned by Borrower or in service for more than six (6) months as of the
proposed Borrowing Date of the associated Equipment Loan, Lender shall not
advance against such Equipment more than 100% of its book value. Lender
reserves the right to approve each item of Equipment, software and any tenant
improvements proposed by Borrower to be financed with proceeds of an Equipment
Loan. The proceeds of any Equipment Loan used to finance Equipment previously
financed by Silicon Valley Bank shall be used, as necessary, to repay loans
outstanding from Silicon Valley Bank and to discharge such Bank's Liens against
such Equipment.
LIMITATION ON REIMBURSEMENT OF DOCUMENTATION COSTS. Borrower shall
reimburse Lender for all costs and expenses, including without limitation
reasonable attorneys' fees and disbursements expended or incurred by Lender in
connection with (a) the preparation and negotiation of the Loan Documents,
limited to $3,000 which will be deducted from the first funding, (b) the
amendment and enforcement of the Loan Documents, including without limitation
during any workout, attempted workout, and/or in connection with the rendering
of legal advice as to
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Lender's rights, remedies and obligations under the Loan Documents, (c)
collecting any sum which becomes due Lender under any Loan Document.
PART 3 - ADDITIONAL REPRESENTATIONS:
Borrower represents and warrants that as of the Closing Date and each
Borrowing Date:
- Its chief executive office is located at: 0000 Xxxxxx Xxxxxxx,
Xxxxxxx Xxxx, XX.
- Its Equipment is located at: 0000 Xxxxx Xxxxxx, Xxxxxxx, XX. and
- 0000 Xxxxxx Xxxxxxx, Xxxxxxx Xxxx, XX.
- Its Records are located at: 0000 Xxxxxx Xxxxxxx, Xxxxxxx Xxxx,
XX.
- In addition to its chief executive office, Borrower maintains
offices or operates its business at the following locations:
- Other than Its full corporate name, Debtor has conducted business
using the following trade names or fictitious business names:
NONE
PART 4 - AMENDMENTS TO LOAN AND SECURITY AGREEMENT:
AMENDMENT TO SECTION 2.10 AND DEFINITION OF COLLATERAL. Section 2.10
of the Loan and Security Agreement is hereby amended by replacing the last
sentence of such section in its entirety with the following sentence:
"Notwithstanding the foregoing, the security interest granted herein
shall not extend to, and the term "Collateral" shall not include, any
property, rights or licenses to the extent the granting of a security
interest therein (i) would be contrary to applicable law, or (ii) is
prohibited by or would constitute a default under any agreement of
document governing such property, rights or licenses (but only to the
extent such prohibition is enforceable under applicable law."
AMENDMENT TO SECTION 6.1. Section 6.1 of the Loan and Security
Agreement is hereby amended by adding the following new subsection (e) after
subsection (d): "(e) Indebtedness of Borrower arising under any unsecured,
convertible promissory notes, provided that the aggregate outstanding principal
balance of such convertible promissory notes shall at no time exceed
$1,500,000.00:
PART 5 - ADDITIONAL LOAN DOCUMENTS:
Form of Note Exhibit "A"
Form of Borrowing Request Exhibit "B"
Form of Compliance Certificate Exhibit "C"
Form of Grant of Security Interest in Patents Exhibit "D"
Form of Grant of Security Interest in Trademark Exhibit "E"
Form of Warrant Exhibit "F"
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IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Supplement as of October 21, 1998.
BORROWER:
COSINE COMMUNICATIONS, INC.
By: /s/ Xxxxxx Xxxxxxx
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Name: Xxxxxx Xxxxxxx
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Title: CFO
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Address for Notices: Attn: Chief Financial Officer
0000 Xxxxxx Xxxxxxx
Xxxxxxx Xxxx, XX 00000
Fax # (000) 000-0000
LENDER:
VENTURE LENDING & LEASING II, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxxx
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Name: Xxxxxxxx X. Xxxxxxxxx
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Title: President
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Address for Notices: Attn: Chief Financial Officer
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Fax # (000) 000-0000
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