1
Exhbit 10.8
FIRST LOAN MODIFICATION AGREEMENT
This First Loan Modification Agreement is entered into as of April 15,
1999, 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 Ks principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx,
XX 00000 and with a loan production office 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 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 "I 998 Committed Equipment
Line"). Capitalized terms used but not se 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 Nine Hundred Thousand Dollars ($900,000.00)."
and inserting in lieu thereof the following:
"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
2
-2-
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 Borrowers 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 ft amount of the Committed
Revolving Line, or not make any Advances hereunder,
except pursuant to terms satisfactory to the Bank."
2. All references to "Committed Equipment Line" in the Loan
Agreement shall mean and refer to the "1998 Committed
Equipment Line".
3. The Loan Agreement shall be amended by deleting the following
text appearing as paragraph (c) in the definition of "Eligible
Accounts" in Section 1.1 thereof
"(c) Accounts with respect to an account debtor,
including Affiliates, whose total obligations to
Borrower exceed twenty-five percent (25%) of all
Accounts to the extent such obligations exceed the
aforementioned percentage, except as approved in writing
by Bank;"
and inserting in lieu thereof the following:
"(c) Accounts with respect to an account debtor,
including Affiliates, whose total obligations to
Borrower exceed thirty-five percent (35%) of all
Accounts to the extent such obligations exceed the
aforementioned percentage, except as approved in writing
by Bank;"
4. The Loan Agreement shall be amended by deleting the following
definition appearing in Section 1.1 thereof.
"Equipment Advance" has the meaning set forth in
Section 2.1.2."
and inserting in lieu thereof the following:
"Equipment Advance" or "Equipment Advances" shall mean
any advance made hereunder pursuant to Section 2.1.2 or
Section 2.1.3 hereof."
5. The Loan Agreement shall be amended by deleting the following
definition appearing in Section 1.1 thereof
"Maturity Data" means, as applicable, the Revolving
Maturity Date or the Equipment Maturity Date."
3
-3-
and inserting in lieu thereof the following:
"Maturity Date" means, as applicable, (i) the Revolving
Maturity Date with respect to Advances pursuant to
Section 2.1.1; (ii) the Equipment Maturity Date for
Equipment Advances pursuant to Section 2.1.2; and (iii)
the 1999 Equipment Maturity Date for Equipment Advances
pursuant to Section 2.1.3."
6. The Loan Agreement shall be amended by inserting the following
definitions immediately after the definition of "Negotiable
Collateral" appearing in Section 1.1 thereof:
"1999 Committed Equipment Line" means a credit extension
of up to Five Hundred Thousand Dollars ($500,000.00).
"1999 Equipment Availability End Date" has the
meaning set forth in Section 2.1.3.
"1999 Equipment Maturity Date" means that date which is
thirty-six (36) months from the 1999 Equipment
Availability End Date."
7. The Loan Agreement shall be amended by deleting em following
definition appearing in Section 1.1 thereof:
"Revolving Maturity Date" means the date which is one
(1) year from the Closing Date."
and inserting in lieu thereof the following:
"Revolving Maturity Date' means February 19, 2000."
8. Section 2.1.2 of the Loan Agreement shall be retitled as "1998
Equipment Advances".
9. There are no outstanding Equipment Advances under the 1998
Committed Equipment Line. No additional Equipment Advances
shall be made to Borrower under Section 2.1.2.
10. The Loan Agreement shall be amended by inserting after Section
2.1.2 thereof the Following new section entitled "1999
Equipment Advances":
"2.1.3 1999 Equipment Advances.
(a) Subject to and upon the terms and Conditions of this
Agreement at any time through _____________________,
2000 (the "1999 Equipment Availability End Date"), Bank
agrees to make Equipment Advances (each an "Equipment
Advance" and
4
-4-
collectively, the "Equipment Advance") 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.
(b) Interest shall accrue from the date of each
Equipment Advance made pursuant to this Section 2.1.3 at
a per annum rate equal to the aggregate of the Prime
Rate, plus One Half of One percent (0.50%), and shall be
payable monthly on the Payment Date of each month
through the month in which the 1999 Equipment
Availability End Date falls. Any Equipment Advances made
pursuant to this Section 2.1.3 that are outstanding on
the 1999 Equipment Availability End 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 1999 Equipment
Availability End Date and ending on the 1999 Equipment
Maturity Date. Equipment Advances, once repaid, may not
be reborrowed.
(c) When Borrower desires to obtain an Equipment
Advance, Borrower shall notify Bank (which notice shall
be irrevocable) by facsimile transmission to be received
no later than 3:00 p.m. Eastern time one (1) Business
Day before the day on which the Equipment 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 and include a copy
of the invoice for the Equipment to be financed."
11. The Loan Agreement shall be amended by deleting the following
text appearing in the first paragraph of Section 6.3 thereof
entitled "Financial Statements, Reports, Certificates":
"(b) as soon as available, but in any event within
ninety (90) days after the end of Borrower's fiscal
year, audited consolidated financial statements of
Borrower prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion
5
-5-
on such financial statements of an independent certified
public accounting firm reasonably acceptable to Bank;"
and inserting in lieu thereof the following:
"(b) as soon as available, but in any event within one
hundred twenty (120) days after the end of Borrower's
fiscal year, audited consolidated financial statements
of Borrower prepared in accordance with GAAP,
consistently applied, together with an unqualified
opinion on such financial statements of an independent
certified public accounting firm reasonably acceptable
to Bank;"
12. The Loan Agreement shall be amended by deleting the following
text appearing as the second paragraph of Section 6.3 thereof:
"Within twenty five (25) days after the last day of each
month (or portion thereof) during which there are any
Advances outstanding under the Committed Revolving Line,
Borrower shall deliver to Bank a Borrowing Base
Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together
with aged listings of accounts receivable provided
however that the Borrowing Base Certificate shall be
delivered only in the event that the Borrower has
requested Advances under the Committed Revolving Line."
and inserting in lieu thereof the following:
"Within in twenty-five (25) days after the last day of
each month with respect to which either (i) Obligations
under the Committed Revolving Line are outstanding, or
(ii) Advances were made, Borrower shall deliver to Bank
a Borrowing Base Certificate signed by a Responsible
Officer in substantially the form of Exhibit C hereto,
together with aged listings of accounts receivable (by
invoice date)."
13. 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 Borrowers Accounts at Borrowers expense, provided
that such audits will be conducted no more often than
once every twelve (12) months unless an Event of Default
has occurred and is continuing with the first such audit
to take place within one hundred eighty (1 80) days of
the Closing Date."
and inserting in lieu thereof the following:
6
-6-
"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."
14. The Loan Agreement shall be amended by deleting the following
text appearing as Sections 6.7, 6.8, 6.9 and 6.10 thereof.
"6.7 Principal Depository. Borrower shall maintain
its principal depository and operating accounts with
Bank.
6.8 Quick Ratio. Borrower shall maintain, as of the last
day of each calendar month, a ratio of Quick Assets to
Current Liabilities of at least 1.50 to 1.0.
6.9 Liquidity Ratio/Debt Service Coverage. Borrower
shall maintain, as of the last day of each calendar
month either (1) a Liquidity Ratio of at least 1.50 to
1.0 or (ii) a Debt Service Coverage Ratio of 1.25 to 1.0
(measured for the preceding calendar quarter).
6.10 Tangible Net Worth. Borrower shall maintain, as of
the last day of each calendar month, a Tangible Net
Worth of not less than One Million Five Hundred Thousand
Dollars ($1,500,000.00)."
and inserting in lieu thereof the following:
"6.7 Principal Depository. Borrower shall maintain its
principal depository and operating accounts with Bank,
which shall include, limitation, a demand deposit
account or money market account with the Bank in the
minimum aggregate amount at all time, of Two Hundred
Fifty Thousand Dollars ($250,000.00).
6.8 Quick Ratio. Borrower shall maintain, as of the last
day of each calendar month, a ratio of Quick Assets to
Current Liabilities of at least 1.50 to 1.0.
6.9 Liquidity Ratio/Debt Service Coverage. Borrower
shall maintain, as of the last day of each calendar
month either (i) a
7
-7-
Liquidity Ratio of at least 1.50 to 1.0 or (ii) a Debt
Service Coverage Ratio of at least 1.25 to 1.0 (measured
for the preceding calendar quarter).
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)."
15. 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.
16. The Borrowing Base Certificate appearing as Exhibit C to the
Loan Agreement is hereby replaced with the Compliance
Certificate attached as Exhibit A hereto.
17. The Compliance Certificate appearing as Exhibit D to the Loan
Agreement is hereby replaced with the Compliance Certificate
attached as Exhibit B hereto.
4. FEE. Borrower shall pay to Bank a modification fee equal to Two Thousand Five
Hundred Dollars ($2,500.00), which fee shall be due 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 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,
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 Borrowers representations,
warranties, and agreements, as set forth in the 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 mod s to the existing Indebtedness pursuant to this Loan Mod 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
8
-8-
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).
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:
SYNCHRONICITY, INC. SILICON VALLEY BANK doing business
a as SILICON VALLEY EAST
By: /s/ Xxxxxx Xxxxxxxx By: ________________________________
__________________________________
Name: ________________________________ Name: ______________________________
Title: _______________________________ Title:______________________________
SILICON VALLEY BANK
By: ________________________________
Name: ______________________________
Title:_______________________________
(signed in Santa Xxxxx
County, California)
9
CORPORATE RESOLUTIONS FOR
AMENDING LOAN ARRANGEMENT
________________________, being the Clerk of SYNCHRONICITY, INC., a corporation
duly organized, validly existing, and in good standing under the laws of the
Commonwealth of Massachusetts, CERTIFIES that the following resolutions were
adopted
CHECK / / at a duly called and conducted meeting of the Directors of said
corporation held on ________________________ at which a quorum was
present and voting throughout.
/ / by the unanimous consent of the Directors of said corporation, the
originals of which consents having been placed with the records of
meetings of Directors of said corporation,
and are in conformity with the Articles of incorporation and By-Laws of said
corporation (each as amended to date) and that each of the following resolutions
presently is in full force and effect without change:
AMENDMENT OF LOAN ARRANGEMENT
RESOLVED, That this corporation amend its loan arrangements) with Silicon
Valley Bank (hereinafter, with any successor, the "Bank") in such
manner as has been or is hereafter discussed and negotiated by and
between the Bank on the one hand and any of the following, acting on
behalf of this corporation, on the other:
Insert title, only, if
Persons to act on behalf of
corporation have titles.
otherwise, insert names.
In connection with the foregoing, each of said officers and/or persons, acting
as described above, is authorized to execute, seal, acknowledge, and deliver in
the name of and on behalf of this corporation such instruments, documents, and
papers which relate thereto as may be appropriate, each in such form and upon
such terms as the officer(s) and/or person(s) so authorized determines, such
execution and delivery to be conclusive of such officer'(s) and/or person' (s)
authority so to act in the name of and on behalf of this corporation.
DELEGATION OF AUTHORITY
RESOLVED, That any one of the officers and/or persons authorized by the
foregoing Resolution, acting singly, may by written instrument
furnished the Bank delegate to any other officer or person the
same authority which is vested singly and individually by said
Resolution in the person(s) or officer(s) so delegating
authority, which written delegation shall be in such form as may
be requested by
10
the Bank and may be subject to such restrictions and limitations as
may be indicated thereon.
CONTINUATION OF AUTHORITY
RESOLVED, That all resolutions and delegations relative to the authority of
any officer or person to act on behalf of this corporation shall
remain in full force and effect until the Bank's receipt of
written notice of the revocation or modification of such
authority from the person signing below as the Clerk of this
corporation or from that person whom the Bank reasonably believes
to be authorized to act in this regard on behalf of this
corporation.
RATIFICATION OF PRIOR TRANSACTIONS
RESOLVED, That all action heretofore taken on behalf of this corporation
and all instruments, documents, and papers heretofore executed in
the name of and on behalf of this corporation concerning this
corporation's relationship with the Bank be, and they hereby are,
approved, adopted, and ratified. This corporation shall
indemnify, defend, and hold the Bank harmless of and from any
loss, liability, or damage the Bank may suffer or incur on
account of this corporation's relationship with the Bank.
REVOCATION OF INCONSISTENT RESOLUTIONS
RESOLVED, That any and all resolutions of this corporation which may be in
conflict with any of the foregoing resolutions be, and they hereby
are, revoked.
RESOLVED, That the resolutions of this corporation's Directors concerning
this corporation's relationship with and borrowing from Silicon
Valley Bank (the "Bank"), with offices at 00 Xxxxxxx Xxxxxx,
Xxxxx 000, Xxxxxxxxx, Xxxxxxxxxxxxx 00000, pursuant to which,
among other things, this corporation may be granting the Bank a
security interest or other collateral in and to, and/or
mortgaging, all or any portion of the assets of this corporation,
be, and said resolutions are hereby approved, adopted, and
incorporated herein by reference.
PERSONS PRESENTLY AUTHORIZED TO ACT
I further certify that the following persons presently are authorized under the
preceding Resolutions to act:
11
Name Title
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
IN WITNESS WHEREOF, I have set my hand and the seal of this corporation on
this _____ day of __________________, 2000.
(Corporate Seal) _________________________________
Clerk
Print Name: _______________________
If the foregoing Resolutions confer authority upon the Clerk, this
Certificate should be confirmed by another officer of the corporation.
CONFIRMED: ___________________________
Print Name: _____________________________
Title: ___________________________________
