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EXHIBIT 10.7
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of December 1, 1998,
by and between Epiphany Marketing Software, Inc. ("Borrower") and Silicon Valley
Bank ("Bank").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may
be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among
other documents, a Loan and Security Agreement, dated January 9, 1998, as may be
amended from time to time, (the "Loan Agreement"). The Loan Agreement provided
for, among other things, a Committed Line in the original principal amount of
Two Million Dollars ($2,000,000) (the "Revolving Facility") and an Equipment
Committed Line in the original principal amount of One Million Two Hundred Fifty
Thousand Dollars ($1,250,000) (the "Equipment Facility"). Defined terms used but
not otherwise defined herein shall have the same meanings as in the Loan
Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness
is secured by the Collateral as described in the Loan Agreement and an
Intellectual Property Security Agreement, dated January 9, 1998.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Loan Agreement.
1. The following terms are hereby amended and restated in their
entirety or added to Section 1.1 entitled "Definitions" to
read as follows:
"Borrowing Base" means an amount equal to eighty percent
(80%) of Eligible Accounts as determined by Borrower's most
recent borrowing base certificate.
"Committed Line" means One Million Dollars ($1,000,000).
"Debt Service Coverage" means net income plus depreciation,
amortization and interest expense, to current portion of
long term debt plus interest expense, each measured on a
quarterly basis.
Subsection (i) of the definition of "Eligible Accounts" is
hereby amended to read, in its entirety as follows:
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to
Borrower exceed twenty-five percent (25%) of all Accounts,
to the extent such obligations exceed the aforementioned
percentage.
"Non-Revolving Committed Line" means Three Million Dollars
($3,000,000).
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"Non-Revolving Facility" means the facility under which
Borrower may request Bank to issue cash advances, as
specified in Sections 2.3 hereof.
"Non-Revolving Availability Date" means the date that is
fifteen (15) months from the date of this Loan Modification
Agreement.
"Non-Revolving Maturity Date" means the date that is
thirty-six (36) months from the Non-Revolving Availability
Date.
"Payment Date" means the first (1st) calendar day of the
month.
"Revolving Maturity Date" means December 1, 1999.
2. Section 2.1(a) entitled "Advances" is hereby amended and
restated in its entirety to read as follows:
Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make Revolving Advances to
Borrower in an aggregate outstanding amount not to exceed
the Committed Revolving Line or the Borrowing Base,
whichever is less. Subject to the terms and conditions of
this Agreement, amounts borrowed pursuant to this Section
2.1 may be repaid and reborrowed at any time during the term
of this Agreement.
3. Section 2.1.1, 2.1.2 and 2.1.3 are hereby deleted in their
entirety.
4. Section 2.3 entitled "Overadvances" shall now be known as
Section 2.3.1, and the following shall now be known as
Section 2.3:
2.3 Non-Revolving Facility.
(a) Subject to and upon the terms and conditions of this
Agreement, at any time from the date hereof through March 1,
2000 (the "Non-Revolving Availability Date"), Bank agrees to
make advances (each a "Non-Revolving Advance" and
collectively, the "Non-Revolving Advances") to Borrower in
an aggregate outstanding amount not to exceed the
Non-Revolving Committed Line.
(b) Interest shall accrue from the date of each Non-Revolving
Advance at the rate specified in Section 2.4(ii) and shall
be payable monthly on the Payment Date for each month
through the month in which the Non-Revolving Availability
Date falls. Any Non-Revolving Advances that are outstanding
on the Non-Revolving Availability Date will be payable in
thirty-six (36) equal monthly installments of principal,
plus all accrued interest, beginning on the Payment Date of
each month following the Non-Revolving Availability Date and
ending on the Non-Revolving Maturity Date. Non-Revolving
Advances, once repaid, may not be reborrowed.
(c) When Borrower desires to obtain a Non-Revolving Advance,
Borrower shall notify Bank (which notice shall be
irrevocable) by facsimile transmission to be received no
later than 3:00 p.m. Pacific time one (1) Business Day
before the day on which the Non-Revolving 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 or its designee.
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5. Section 2.3.1 entitled "Overadvances" is hereby amended and
restated to read in its entirety as follows:
Subject to the terms set forth in Section 2.1, if at any
time or for any reason, the outstanding principal amount of
Revolving Advances owed by Borrower to Bank pursuant to
Section 2.1, is greater than the lesser of the Committed
Line or the Borrowing Base, Borrower shall immediately pay
to Bank, in cash, the amount of such excess.
6. The following paragraph is hereby incorporated into Section
2.4 entitled "Interest Rates, Payments, and Calculations":
2.4(a)(iii) Non-Revolving Advances. Except as set forth in
Section 2.4(b), all Non-Revolving Advances shall bear
interest, on the average Daily Balance thereof, at a rate
equal to one half of one (0.50) percentage point above the
Prime Rate.
7. Section 6.3 entitled "Financial Statements, Reports,
Certificates" is hereby amended in part to provide that
Borrower's audited fiscal year end financial statements
shall be provided to Bank no later than 120 days (rather
than 90 days) after the end of Borrower's fiscal year.
8. Section 6.7 and all references thereto are hereby deleted in
its entirety.
9. Section 6.8 is hereby deleted and replaced with the
following:
6.8 Minimum Deposits.
Borrower shall maintain on deposit with Bank the lesser of
$4,000,000 or 100% of cash in the form of certificate of
deposits, money market accounts and/or checking accounts.
For any period in which the minimum balance requirement is
not kept, Borrower will pay to Bank a fee calculated at a
rate of one percent (1%) per annum, based on the difference
between the minimum required balance and the actual average
daily balance during the period. The fee will be calculated
quarterly and shall be due within 15 days of each quarter
end.
10. Section 6.9 entitled "Liquidity Coverage" is hereby amended
and restated in its entirety to read:
Borrower shall maintain, as of the last day of each calendar
month, a ratio of (a)(i) unrestricted cash and cash
equivalents plus (ii) 80% of Eligible Accounts minus (iii)
outstanding Revolving Advances of not less than (b)(i) two
(2) times the aggregate outstanding amount of all Equipment
Advances and Non-Revolving Advances under Section 2.2 and
2.3 through the month ending June 30, 1999, then (ii) 1.5
times the aggregate outstanding amount of all Equipment
Advances and Non-Revolving Advances under Section 2.2. and
2.3 through the month ending December 31, 1999, then (iii)
two (2) times the aggregate outstanding amount of all
Equipment Advances and Non-Revolving Advances under Section
2.2. and 2.3, thereafter. Notwithstanding the foregoing, at
such time as Borrower achieves a Debt Service Coverage ratio
of 1.50 to 1.00 for two (2) consecutive quarters, the
Liquidity Coverage shall be replaced by a Debt Service
Coverage ratio of 1.50 to 1.00, measured on a quarterly
basis.
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11. Section 6.10 is hereby deleted and replaced with the
following:
6.10 Quarterly Profitability. Borrower shall achieve
quarterly profits (adjusted for capitalized development
costs) of at least $1.00, provided, however, Borrower may
suffer quarterly losses not to exceed:
$3,200,000 for the quarter ending December 31, 1998;
$3,000,000 for the quarter ending March 31, 1999;
$2,700,000 for the quarter ending June 30, 1999
$1,300,000 for the quarter ending September 30, 1999;
$400,000 for the quarter ending December 31, 1999;
and $200,000 for the quarter ending March 31, 2000.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
5. PAYMENT OF THE LOAN FEE. Borrower shall pay to Bank a fee in the amount
of Five Thousand and 00/100 Dollars ($5,000.00) (the "Loan Fee") plus all
out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor
signing below) agrees that, as of the date hereof, it has no defenses against
the obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing Indebtedness, 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 Indebtedness pursuant to this Loan Modification Agreement in no
way shall obligate Bank to make any future modifications to the Indebtedness.
Nothing in this Loan Modification Agreement shall constitute a satisfaction of
the Indebtedness. It is the intention of Bank and Borrower to retain as liable
parties all makers and endorsers of Existing Loan Documents, unless the party is
expressly released by Bank in writing. No maker, endorser, or guarantor will be
released by virtue of this Loan Modification Agreement. The terms of this
paragraph apply not only to this Loan Modification Agreement, but also to all
subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon Borrower's payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: BANK:
EPIPHANY MARKETING SOFTWARE, INC. SILICON VALLEY BANK
By: /s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxx
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Name: XXXXX XXXXXX Name: Xxxxxx Xxx
Title: CONTROLLER Title: VP
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ADDENDUM TO INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Addendum to Intellectual Property Security Agreement is executed
pursuant to, and is an addendum to, an Intellectual Property Security Agreement,
dated January 9, 1998. This Addendum to Intellectual Property Security Agreement
is presented for recordation as constructive notice that EPIPHANY MARKETING
SOFTWARE, INC. ("Assignor"), with its principal office at 0000 Xxxxxxxx Xxxxx,
Xxxxxxxx Xxxx, XX 00000, is the owner of the intellectual property identified in
the exhibits attached hereto, has granted to SILICON VALLEY BANK ("Assignee"),
with its principal office at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, XX 00000, a
security interest in the intellectual property, and the exclusive rights
comprised in the intellectual property, to secure payment of a debt.
IN WITNESS WHEREOF, Assignor has executed this Addendum to Intellectual Property
Security Agreement as of December 1, 1998.
EPIPHANY MARKETING SOFTWARE, INC.
By: /s/ Xxxxx Xxxxxx
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Name: XXXXX XXXXXX
Title: CONTROLLER
