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Exhibit 10.9
SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement is entered into as of
______________, effective as of __________________, by and between
SYNCHRONICITY, INC., a Massachusetts corporation with its principal place of
business at 000 Xxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxxxxxx 00000 (the "Borrower")
and SILICON VALLEY BANK, a California-chartered bank ("Bank"), with its
principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, XX 00000 and with
a loan production office located at Wellesley Office Park, 00 Xxxxxxx Xxxxxx,
Xxxxx 000, Xxxxxxxxx, XX 00000, doing business under the name "Silicon Valley
East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which
may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a
loan arrangement dated as of February 20, 1998, evidenced by, among other
documents, a certain Loan and Security Agreement dated as of February 20, 1998
between Borrower and Bank (the "Loan Agreement"). The Loan Agreement established
in favor of the Borrower: (i) a working capital line of credit in the maximum
principal amount of Nine Hundred Thousand Dollars ($900,000.00) (the "Committed
Revolving Line"), and (ii) an equipment line of credit in the maximum principal
amount of Three Hundred Fifty Thousand Dollars ($350,000.00) (the "1998
Committed Equipment Line"). Capitalized terms used but not otherwise defined
herein shall have the same meaning as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness".
2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness 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 Indebtedness shall be referred to as the "Existing
Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Loan Agreement.
1. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
"Committed Revolving Line" means a credit
extension of up to One Million Five Hundred
Thousand Dollars ($1,500,000.00).
Notwithstanding the foregoing, the
availability of Advances under the Committed
Revolving Line shall be subject to the
receipt by the Bank of satisfactory results,
in the sole and absolute discretion of the
Bank, of the Initial Audit of Borrower's
Accounts pursuant to Section 6.3 hereof. If
the results of the Initial Audit are not
satisfactory to the Bank for any reason, the
Bank may, at its discretion, reduce the
amount of the Committed Revolving Line, or
not make any Advances hereunder, except
pursuant to terms satisfactory to the Bank."
and inserting in lieu thereof the following:
"Committed Revolving Line" means a credit
extension of up to Two Million Five Hundred
Thousand Dollars ($2,500,000.00).
Notwithstanding the foregoing, the
availability of Advances under the Committed
Revolving
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Line shall be subject to the receipt by the
Bank of satisfactory results, in the sole
and absolute discretion of the Bank, of the
Initial Audit of Borrower's Accounts
pursuant to Section 6.3 hereof. If the
results of the Initial Audit are not
satisfactory to the Bank for any reason, the
Bank may, at its discretion, reduce the
amount of the Committed Revolving Line, or
not make any Advances hereunder, except
pursuant to terms satisfactory to the Bank."
2. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
"Current Liabilities" means, as of any
applicable date, all amounts that should, in
accordance with GAAP, be included as current
liabilities on the consolidated balance
sheet of Borrower, as at such date, plus, to
the extent not already included therein, all
outstanding Credit Extensions made under
this Agreement, including all Indebtedness
that is payable upon demand or within one
year from the date of determination thereof
unless such Indebtedness is renewable or
extendable at the option of Borrower to a
date more than one year from the date of
determination, but excluding Subordinated
Debt.
and inserting in lieu thereof:
"Current Liabilities" means, as of any
applicable date, all amounts that should, in
accordance with GAAP, be included as current
liabilities on the consolidated balance
sheet of Borrower, as at such date, plus, to
the extent not already included therein, all
outstanding Credit Extensions made under
this Agreement, including all Indebtedness
that is payable upon demand or within one
year from the date of determination thereof
unless such Indebtedness is renewable or
extendable at the option of Borrower to a
date more than one year from the date of
determination, but excluding Subordinated
Debt and deferred revenue.
3. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Revolving Maturity Date" means February
19, 2000."
and inserting in lieu thereof:
""Revolving Maturity Date" means February
19, 2001."
4. The Loan Agreement shall be amended by deleting the
following text appearing as paragraph (a) of Section
2.1.3. thereof:
"2.1.3 1999 Equipment Advances.
(a) Subject to and upon the terms and conditions of
this Agreement, at any time through January 15, 2000
(the "1999 Equipment Availability End Date"), Bank
agrees to make Equipment Advances (each an "Equipment
Advance" and
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collectively, the "Equipment Advances") to Borrower
under this Section 2.1.3 in an aggregate outstanding
amount not to exceed the 1999 Committed Equipment
Line. To evidence the Equipment Advances, Borrower
shall deliver to Bank, at the time of each Equipment
Advance request, an invoice for the equipment
purchased. The Equipment Advances under this Section
2.1.3 shall be used only to purchase Equipment 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 only constitute up to Two Hundred Fifty
Thousand Dollars ($250,000.00) of aggregate Equipment
Advances under this Section 2.1.3.
and inserting in lieu thereof the following:
(a) Subject to and upon the terms and conditions of
this Agreement, at any time through August 16, 2000
(the "1999 Equipment Availability End Date"), Bank
agrees to make Equipment Advances (each an "Equipment
Advance" and collectively, the "Equipment Advances")
to Borrower under this Section 2.1.3 in an aggregate
outstanding amount not to exceed the 1999 Committed
Equipment Line. To evidence the Equipment Advances,
Borrower shall deliver to Bank, at the time of each
Equipment Advance request, an invoice for the
equipment purchased. The Equipment Advances under
this Section 2.1.3 shall be used only to purchase
Equipment 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 only constitute up
to Two Hundred Fifty Thousand Dollars ($250,000.00)
of aggregate Equipment Advances under this Section
2.1.3.
5. The Loan Agreement shall be amended by deleting the
following text appearing as the fourth paragraph of
Section 6.3 thereof:
"Bank shall have a right from time to time
hereafter to audit Borrower's Accounts at
Borrower's expense, provided that such
audits will be conducted: (a) no more often
than every twelve (12) months, and (b) only
when either (i) Obligations under the
Committed Revolving Line are outstanding or
(ii) Advances were made during the preceding
twelve (12) month period. Notwithstanding
the foregoing, the Bank shall have the right
to audit Borrower's Accounts at Borrower's
expense at any time after the occurrence of
an Event of Default. The initial Advance
under the Committed Revolving Line shall be
subject to satisfactory results, in the sole
discretion of Bank, of an initial audit (the
"Initial Audit") of Borrower's Accounts."
and inserting in lieu thereof the following:
"Bank shall have a right from time to time
hereafter to audit Borrower's Accounts at
Borrower's expense, provided that such
audits will be conducted: (a) no more often
than every twelve (12) months, and (b) only
when either (i) Obligations under the
Committed Revolving Line are outstanding or
(ii) Advances were made during the preceding
twelve (12) month period. Notwithstanding
the foregoing, the Bank shall have the right
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to audit Borrower's Accounts at Borrower's
expense at any time after the occurrence of
an Event of Default. Any Advance under the
Committed Revolving Line which is in excess
of twenty-five percent (25%) of the
available Borrowing Base or when added to
the aggregate outstanding Advances would
result in the aggregate outstanding Advances
being in excess of twenty-five percent (25%)
of the available Borrowing Base, shall be
subject to satisfactory results, in the sole
discretion of Bank, of an initial audit (the
"Initial Audit") of Borrower's Accounts."
6. The Loan Agreement shall be amended by deleting the
following text appearing as Section 6.10 thereof:
"6.10 Tangible Net Worth. Borrower shall
maintain: (i) as of the last day of each
quarter, a Tangible Net Worth of not less
than Three Million Dollars ($3,000,000.00),
and (ii) on a monthly basis, as of the last
day of all months which are not the last
month of a quarter, a Tangible Net Worth of
not less than Two Million Five Hundred
Thousand Dollars ($2,500,000.00)."
and inserting in lieu thereof the following:
"6.10 Tangible Net Worth. Borrower shall
maintain: (i) as of the last day of each
month through May 31, 2000, a Tangible Net
Worth of not less than Two Million Dollars
($2,000,000.00), and (ii) on a monthly
basis, as of the last day of all months
thereafter beginning on June 30, 2000, a
Tangible Net Worth of not less than the
greater of (a) Five Million Dollars
($5,000,000.00) or (b) the amount raised in
any initial public offering or the next
equity round."
7. The Borrower hereby ratifies, confirms and reaffirms,
all and singular, the terms and conditions of a
certain Negative Pledge Agreement dated as of
February 20, 1998 between Borrower and Bank, and
acknowledges, confirms and agrees that said Negative
Pledge Agreement shall remain in full force and
effect.
8. Bank hereby waives Borrower's existing Default under
the Loan Agreement by virtue of Borrower's failure to
comply with the Adjusted Quick Ratio and Tangible Net
Worth covenants at December 31, 1999. Bank's waiver
of Borrower's compliance of said covenants shall
apply only to the foregoing periods.
Bank's agreement to waive the above-described
compliance (i) shall not be deemed an agreement by
Bank to waive Borrower's compliance with either of
the above-described covenants as of any other dates,
(ii) shall not limit or impair Bank's right to demand
strict performance of either covenant as of any other
dates, and (iii) shall not limit or impair Bank's
right to demand strict performance of all other
covenants as of any date.
9. The Compliance Certificate appearing as EXHIBIT D to
the Loan Agreement is hereby replaced with the
Compliance Certificate attached as EXHIBIT A hereto.
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4. FEES. Borrower shall pay to Bank a fee equal to Five Thousand Dollars
($5,000.00), in connection with the modification of the Committed
Revolving Line, which fee shall be due on the date hereof and shall be
deemed fully earned as of the date hereof, and a fee equal to Two
Thousand Five Hundred Dollars ($2,500.00), in connection with the
modification of the 1999 Committed Equipment Line (the "Equipment Line
Modification Fee"), which fee shall be due on the 1999 Equipment
Availability End Date and shall be deemed fully earned as of the date
hereof. Notwithstanding the foregoing, the Equipment Line Modification
Fee shall be waived by Bank if on, or any time prior to the Equipment
Availability End Date, the aggregate outstanding Equipment Advances
equal at least Two Hundred Fifty Thousand Dollars ($250,000.00) 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 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 Indebtedness.
6. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has
no defenses against the obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower 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 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.
8. JURISDICTION/VENUE. Borrower accepts for itself and in connection with
its properties, unconditionally, the non-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.
9. 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).
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This Second 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:
SYNCHRONICITY, INC. SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By:______________________________ By:___________________________________
Name: Xxxxxx Xxxx Name: Xxxxx X. Xxxxxxxxx
Title: Chief Financial Officer Title: Vice President
SILICON VALLEY BANK
By:___________________________________
Name:_________________________________
Title:________________________________
(signed in Santa Xxxxx County,
California)
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EXHIBIT A
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: SYNCHRONICITY, INC.
The undersigned authorized officer of SYNCHRONICITY, 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 an
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
------------------ -------- --------
Monthly financial statements & CC Monthly within 25 days Yes No
Annual (CPA Audited) FYE within 120 days Yes No
Monthly BBC & A/R Agings Monthly within 25 days Yes No
(when borrowing)
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain:
Quick Ratio (monthly) 1.50:1.0 _____:1.0 Yes No
Tangible Net Worth (monthly) $2,000,000 as of 5/31/00 $_________ Yes No
$5,000,000 or 25% of
the IPO/equity round,
whichever is greater
beginning 6/30/00 and
thereafter
Minimum Liquidity (monthly) 1.50:1.0 _____:1.0 Yes No
OR Minimum Debt Service Coverage 1.25:1.0 _____:1.0 Yes No
COMMENTS REGARDING EXCEPTIONS:
Sincerely,
_______________________ Date:_______________
SIGNATURE
_______________________
BANK USE ONLY
RECEIVED
BY:_________________________
DATE:_______________________
REVIEWED
BY:_________________________
COMPLIANCE STATUS: YES / NO
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