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EXHIBIT #10.16
HARMONIC LIGHTWAVES, INC.
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of September 13, 1996,
by and between Harmonic Lightwaves, Inc. (the "Borrower") whose address is 000
Xxxxxx Xxx, Xxxxxxxxx, XX 00000, and Silicon Valley Bank (the "Lender") whose
address is 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, XX 00000.
1. DESCRIPTION OF EXISTING INDEBTEDNESS Among other indebtedness which may be
owing by Borrower to Lender, Borrower is indebted to Lender pursuant to, among
other documents, a Promissory Note, dated August 26, 1993, in the original
principal amount of One Million and 00/100 Dollars ($1,000,000.00) (the
"Note"). The Note has been modified pursuant to Loan Modification Agreements
dated May 15, 1994, August 15, 1994, October 5, 1994 and September 14, 1995,
pursuant to which, among other things, the principal amount of the Note was
increased to Five Million and 00/100 Dollars ($5,000,000.00). The Note,
together with other promissory notes from Borrower to Lender, is governed by
the terms of a Business Loan Agreement, dated August 26, 1993, between Borrower
and Lender, as such agreement may be amended from time to time (the "Loan
Agreement"). 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 Lender shall be referred to
as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL In connection with the repayment of the
Indebtedness, Borrower has agreed not to further encumber or Pledge any of its
assets pursuant to a Negative Pledge Agreement, being executed concurrently
herewith.
Hereinafter, the above-described security documents, together with all other
documents securing payment 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 Note
1. Payable in one payment of all outstanding principal plus
all accrued unpaid interest on September 12, 1997 (the
"Maturity Date"). In addition, Borrower will pay regular
monthly payments of all accrued unpaid interest due as of
each payment date beginning October 12, 1996, and all
subsequent interest payments are due on the same day of
each month thereafter.
2. The principal amount of the Note is hereby increased to
Ten Million and 00/100 Dollars ($10,000,000.00).
3. The interest rate to be applied to the unpaid principal
balance of the Note shall be at a rate equal to Lender's
Index (as described in the Note) or a LIBOR Interest Rate
equal to 2.000 percentage points in excess of the LIBOR
Base Rate as described in the LIBOR Supplement to Loan
Modification Agreement, attached hereto.
4. The requirement for Borrower to maintain a zero balance
under the Note is hereby deleted in its entirety.
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B. Modification(s) to Loan Agreement.
1. The following paragraphs are hereby incorporated into the
Loan Agreement:
Accounts Receivable and Accounts Payable. At such time
as outstandings under the line of credit facility exceed
Five Million and 00/100 Dollars ($5,000,000.00), Borrower
shall provide to Lender, not later than twenty (20) days
after the end of each month with a Borrowing Base
Certificate and aged lists of accounts receivable and
accounts payable. Semi-annual accounts receivable
audits to be performed by Lender's agent. Borrower's
deposit account will be debited for the audit expense and
a notification will be mailed to Borrower.
Borrowing Base Formula. At such time as outstandings
under the line of credit facility exceed Five Million and
00/100 Dollars ($5,000,000.00), funds shall be advanced
under the line of credit facility according to a
borrowing base formula, as determined by Lender on a
monthly basis, defined as follows: the lesser of (a)
$10,000,000.00 minus the face amount of outstanding
Letters of Credit (including drawn but unreimbursed
Letters of Credit) minus the Foreign Exchange Reserve (as
defined herein) or (b) the sum of (i) eighty percent
(80%) of eligible domestic accounts receivable plus (ii)
eighty percent (80%) of pre-approved foreign accounts
receivable plus (iii) one hundred percent (100%) of
accounts receivable backed by letters of credit, provided
such letters of credit are issued by a bank acceptable to
Lender and in form and substance acceptable to Lender,
minus (iv) the face amount of outstanding Letters of
Credit (including drawn but unreimbursed Letters of
Credit) minus (v) the Foreign Exchange Reserve. Eligible
domestic accounts receivable shall include, but not be
limited to, those accounts outstanding less than 90 days
from the date of invoice, excluding foreign, government,
contra, and intercompany accounts; and exclude accounts
wherein 50% or more of the account is outstanding more
than 90 days from the date of invoice. Foreign accounts
may be eligible if approved by Lender on a case-by-case
basis. Any account which alone exceeds 25% of total
accounts will be ineligible to the extent said account
exceeds 25% of total accounts. Also exclude any credit
balances which are aged past 90 days. Also ineligible
are any accounts which Lender in its sole judgment
excludes for valid credit reasons.
Foreign Exchange Sublimit. Subject to the terms of this
Agreement, as amended from time to time, Borrower may
utilize up to $2,000,000.00 for spot and future foreign
exchange contracts (the "Exchange Contracts"). Borrower
shall not request an Exchange Contract at any time it is
not in compliance with any of the terms of this
Agreement. All Exchange Contracts must provide for
delivery of settlement on or before the Maturity Date.
The limit available at any time shall be reduced by the
following amounts (the "Foreign Exchange Reserve") on
each day (the "Determination Date"): (i) on all
outstanding Exchange Contracts on which delivery is to be
effected or settlement allowed more than two business
days from the Determination Date, 10% of the gross amount
of the Exchange Contracts; plus (ii) on all outstanding
Exchange Contracts on which delivery is to be effected or
settlement allowed within two business days after the
Determination Date, 100% of the gross amount of the
Exchange Contracts. In lieu of the Foreign Exchange
Reserve for 100% of the gross amount of any Exchange
Contract, the Borrower may request that Lender debit
Borrower's bank account with Lender for such amount,
provided Borrower has immediately available funds in such
amounts in its bank account.
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Lender may, in its discretion, terminate the Exchange
Contracts at any time (a) that an Event of Default occurs
or (b) that there is not sufficient availability under
the Note and Borrower does not have available funds in
its bank account to satisfy the Foreign Exchange Reserve.
If Lender terminates the Exchange Contracts, and without
limitation of the FX Indemnity Provisions (as referred to
below), Borrower agrees to reimburse Lender for any and
all fees, costs and expenses relating thereto or arising
in connection therewith.
Borrower shall not permit the total gross amount of all
Exchange Contracts on which delivery is to be effected
and settlement allowed in any two business day period to
be more than $2,000,000.00 nor shall Borrower permit the
total gross amount of all Exchange Contracts to which
Borrower is a party, outstanding at any one time, to
exceed $2,000,000.00.
Borrower shall execute all standard form applications and
agreements of Lender in connection with the Exchange
Contracts, and without limiting any of the terms of such
applications and agreements, Borrower will pay all
standard fees and charges of Lender in connection with
the Exchange Contracts.
Without limiting any of the other terms of this Agreement
or any such standard form applications and agreement of
Lender, Borrower agrees to indemnify Lender and hold
it harmless, from and against any and all claims, debts,
liabilities, demands, obligations, actions, costs and
expenses (including, without limitation, attorneys' fees
of counsel of Lender's choice), of every nature and
description which it may sustain or incur, based upon,
arising out of, or in any way relating to any of the
Exchange Contracts or any transactions relating thereto
or contemplated thereby (collectively referred to as the
"FX Indemnity Provisions").
2. The paragraph entitled "Letter of Credit Sublimit" is
hereby amended, in its entirety, to read as follows:
Letters of Credit. Subject to the terms and conditions
of this Agreement, Lender agrees to issue or cause to be
issued letters of credit for the account of Borrower in
an aggregate face amount not to exceed (i) the lesser of
the $10,000,000.00 or the Borrowing Base Formula minus
(ii) the then outstanding principal balance of the Note
provided that the face amount of outstanding Letters of
Credit (including drawn but unreimbursed Letters of
Credit) shall not in any case exceed Ten Million Dollars
($10,000,000.00). Each such letter of credit shall have
an expiry date no later than one hundred eighty (180)
days after the Maturity Date of the Note. provided that
Borrower's letter of credit reimbursement obligation
shall be secured by cash on terms acceptable to Lender at
any time after the Maturity Date if the term of the
Agreement is not extended by Lender. All such letters of
credit shall be, in form and substance, acceptable to
Lender in its sole discretion and shall be subject to the
terms and conditions of Lender's form of application and
letter of credit agreement.
Borrower shall indemnify, defend, protect and hold Lender
harmless from any loss, cost, expense or liability,
including, without limitation, reasonable attorneys'
fees, arising out of or in connection with any letters of
credit.
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Letter of credit Reimbursement: Reserve. Borrower may
request that Lender issue a letter of credit payable in a
currency other than United States Dollars. If a demand
for payment is made under any such letter of credit,
Lender shall treat such demand as an advance to Borrower
of the equivalent of the amount thereof (plus cable
charges) in United States currency at the then prevailing
rate of exchange in San Francisco, California, for sales
of that other currency for cable transfer to the country
of which it is the currency.
Upon the issuance of any letter of credit payable in a
currency other than United States Dollars, Lender shall
create a reserve (the "Letter of Credit Reserve") under
the Committed Line for letters of credit against
fluctuations in currency exchange rates, in an amount
equal to ten percent (10%) of the face amount of such
letter of credit. The amount of such reserve may be
amended by Lender from time to time to account for
fluctuations in the exchange rate. The availability of
funds under the Note shall be reduced by the amount of
such reserve for so long as such letter of credit remains
outstanding.
3. The paragraph entitled "Financial Covenants" is hereby
amended to read in its entirety as follows:
Borrower shall maintain on a quarterly basis, a minimum
quick ratio of 2.00 to 1.0; a minimum tangible net worth
of $35,000,000.00, plus seventy five percent (75%) of
quarterly profits after taxes (exclusive of losses),
beginning as of October 1, 1996, plus one hundred percent
(100%) of net new equity; and a maximum total debt minus
subordinated debt to tangible net worth plus subordinated
debt ratio of 1.00 to 1.00. Additionally, Borrower shall
achieve profitability on a quarterly basis with allowance
for one quarterly loss, provided such loss does not
exceed $500,000.00.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEES. Borrower shall pay to Lender a fee in the amount of
Fifteen Thousand and 00/100 Dollars ($15,000.00) (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 this date, 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,
Lender 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. Lender's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Lender 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 Lender and Borrower
to retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Lender 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 payment of the Loan Fee.
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This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: LENDER:
HARMONIC LIGHTWAVES, INC. SILICON VALLEY BANK
By: /s/Xxxxx X. Xxxxxxx By: /s/Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxxx Name: Xxxxx X. Xxxxxx
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Title: Chief Financial Officer Title: Vice President
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