Exhibit 10.11
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (the "Agreement") is entered into as
of November 5, 1997, by and between SILICON VALLEY BANK, a California-chartered
bank, with its principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx,
Xxxxxxxxxx 00000 and with a loan production office located at Wellesley Office
Park, 00 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxxxxxx 00000, doing
business under the name "Silicon Valley East" ("Bank") and CENTRA SOFTWARE,
INC., a Delaware corporation with its principal place of business at 000 Xxxxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000 ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1 . DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following definitions:
"Accounts" means all presently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owing to Borrower arising
out of the sale or lease of goods (including, without limitation, the licensing
of software and other technology) or the rendering of services by Borrower,
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower and Borrower's Books relating to any of the foregoing.
"Advance" or "Advances" means a loan advance under the Committed
Revolving Line.
"Affiliate" means, with respect to any Person, any Person that owns or
controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, partners and, for any Person that
is a limited liability company, such Persons, managers and members.
"Bank Expenses" means all reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
and Bank's reasonable attorneys' fees and expenses incurred in amending,
enforcing or defending the Loan Documents, (including fees and expenses of
appeal or review, or those incurred in any Insolvency Proceeding) whether or not
suit is brought.
"Borrower's Books" means all of Borrower's books and records including,
without limitation: ledgers; records concerning Borrower's assets or
liabilities, the Collateral, business operations or
-1-
financial condition; and all computer programs, or tape files, and the
equipment, containing such information.
"Borrowing Base" means (x) prior to the Bridge Maturity Date, an amount
equal to the Committed Revolving Line and, (y) as of, and subsequent to the
Bridge Maturity Date, an amount equal to Seventy Five percent (75%) of Eligible
Accounts, as determined by Bank with reference to the most recent Borrowing Base
Certificate delivered by Borrower.
"Bridge Maturity Date" means the earlier of (i) the date of the closing
of a Capitalization Event, or (ii) February 28, 1998.
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which banks in the State of California are authorized or required to
close.
"Capitalization Event" shall mean the issuance by the Borrower of
equity resulting in the receipt by the Borrower of at least Three Million Five
Hundred Thousand Dollars ($3,500,000.00).
"Closing Date" means the date of this Agreement.
"Code" means the Massachusetts Uniform Commercial Code.
"Collateral" means the property described on EXHIBIT A attached hereto.
"Committed Revolving Line" means a credit extension of up to One
Million Two Hundred and Fifty Thousand Dollars ($1,250,000.00).
"Committed Equipment Line" means a credit extension of up to Five
Hundred Thousand Dollars ($500,000.00).
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Credit Extension" means each Advance, Equipment Advance, or any other
extension of credit by Bank for the benefit of Borrower hereunder.
-2-
"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 and its Subsidiaries, 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 or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Eligible Accounts" means those Accounts that arise in the ordinary
course of Borrower's business that comply with all of Borrower's representations
and warranties to Bank set forth in Section 5.4. Unless otherwise agreed to by
Bank in writing, Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within
ninety (90) days of invoice date;
(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;
(d) Accounts with respect to which the account debtor does not
have its principal place of business in the United States;
(e) Accounts with respect to which the account debtor is a
federal, state, or local governmental entity or any department, agency,
or instrumentality thereof;
(f) Accounts with respect to which Borrower is liable to the
account, but only to the extent of any amounts owing to the account
debtor (sometimes referred to as "contra" accounts, e.g. accounts
payable, customer deposits, credit accounts etc.);
(g) Accounts generated by demonstration or promotional
equipment, or with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, xxxx and hold, or
other terms by reason of which the payment by the account debtor may be
conditional;
(h) Accounts with respect to which the account debtor is an
Affiliate, officer, employee, or agent of Borrower;
(i) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or
claim), or is subject to any Insolvency Proceeding, or becomes
insolvent, or goes out of business; and
(j) Accounts the collection of which Bank reasonably
determines to be doubtful.
-3-
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"Equipment Advance" has the meaning set forth in Section 2.1.2.
"Equipment Availability End Date" has the meaning set forth in
Section 2.1.2.
"Equipment Maturity Date" is defined in Section 2.1.2..
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"Fleet Debt" has the meaning set forth in Section 2.1.2.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the United States Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in which Borrower
has any interest, including merchandise, raw materials, parts, supplies, packing
and shipping materials, work in process and finished products intended for sale
or lease or to be furnished under a contract of service, of every kind and
description now or at any time hereafter owned by or in the custody or
possession, actual or constructive, of Borrower, including such inventory as is
temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
Loan Documents" means, collectively, this Agreement, any note or notes
executed by Borrower and relating to this Agreement, and any other present or
future agreement entered into between Borrower and/or for the benefit of Bank in
connection with this Agreement, all as amended, extended or restated from time
to time.
-4-
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Maturity Date" means the later of (x) the Equipment Maturity Date, (y)
the Revolving Maturity Date, or the (z) the Bridge Maturity Date.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit of which it is a beneficiary, notes, drafts, instruments,
securities, documents of title, and chattel paper.
"Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.
"Payment Date" means the first calendar day of each month commencing on
the first such date after the Closing Date and ending on the Maturity Date;
provided however, with respect to Advances under the Committed Revolving Line,
the "Payment Date" means the first calendar day of each month commencing after
the Bridge Maturity Date and ending on the Maturity Date;
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business; and
(e) Indebtedness secured by Permitted Liens.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any
agency or any State thereof maturing within one (1) year from the date
of acquisition thereof, (ii) commercial paper maturing no more than one
(1) year from the date of creation thereof and currently having the
highest rating obtainable from either Standard & Poor's Corporation or
Xxxxx'x Investors Service, Inc., and (iii) certificates of deposit
maturing no more than one (1) year from the date of investment therein
issued by Bank.
"Permitted Liens" means the following:
-5-
(a) Any Liens existing on the Closing Date and disclosed in
the Schedule or arising under this Agreement or the other Loan
Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings and as to which adequate reserves are
maintained on Borrower's Books in accordance with GAAP, PROVIDED the
same have no priority over any of Bank's security interests;
(c) Liens (i) upon or in any Equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of
such Equipment or indebtedness incurred solely for the purpose of
financing the acquisition of such Equipment, or (ii) existing on such
equipment at the time of its acquisition, PROVIDED that the Lien is
confined solely to the property so acquired and improvements thereon,
and the proceeds of such equipment;
(d) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type
described in clauses (a) through (c) above, PROVIDED that any
extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Quick Assets" means, as of any applicable date, the consolidated cash,
cash equivalents, accounts receivable and investments with maturities of fewer
than 90 days of Borrower determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" means the Bridge Maturity Date, provided,
however, that if Bank has completed an audit of Borrower's Accounts, and such
audit is satisfactory to Bank in its sole and absolute discretion, the Revolving
Maturity Date shall mean one day prior to the date which is one year from the
Closing Date if the Capitalization Event occurs prior to the Bridge Maturity
Date.
"Schedule" means the schedule of exceptions attached hereto, if any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).
"Subsidiary" means with respect to any Person, corporation,
partnership, company association, joint venture, or any other business entity of
which more than fifty percent (50%) of the voting stock or other equity
interests is owned or controlled, directly or indirectly, by such Person or one
or more Affiliates of such Person.
-6-
1.2 ACCOUNTING AND OTHER TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
and determinations made hereunder shall be made in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes and
schedules thereto. The terms "including"/ "includes" shall always be read as
meaning "including (or includes) without limitation", when used herein or in any
other Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1 CREDIT EXTENSIONS. Borrower promises to pay to the order of Bank,
in lawful money of the United States of America, the aggregate unpaid principal
amount of all Credit Extensions made by Bank to Borrower hereunder in accordance
with the terms hereof. Borrower shall also pay interest on the unpaid principal
amount of such Advances at rates in accordance with the terms hereof.
2.1.1 (a) Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make 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.
(b) Whenever Borrower desires an Advance, Borrower will notify
Bank by facsimile transmission or telephone no later than 3:00 p.m. Pacific
time, on the Business Day that the Advance is to be made. Each such notification
shall be promptly confirmed by a Payment/Advance Form in substantially the form
of EXHIBIT B hereto. Bank is authorized to make Advances under this Agreement,
based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank's discretion such
Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer or a designee
thereof, and Borrower shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the amount
of Advances made under this Section 2.1 to Borrower's deposit account.
(c) The Committed Revolving Line shall terminate on the
Revolving Maturity Date, at which time all Advances under this Section 2.1 and
other amounts due under this Agreement (except as otherwise expressly specified
herein) shall be immediately due and payable.
2.1.2 EQUIPMENT ADVANCES.
(a) Subject to and upon the terms and conditions of this
Agreement, at any time from the date hereof through six (6) months from the
Closing Date (the "Equipment Availability End Date"), Bank agrees to make
advances (each an "Equipment Advance" and collectively, the "Equipment
Advances") to Borrower in an aggregate outstanding amount not to exceed the
Committed Equipment Line. The first such Advance shall be to pay in full the
existing indebtedness to Fleet Bank (the "Fleet Debt"). To evidence Equipment
Advances, Borrower shall deliver to Bank, at the time of each Equipment Advance
request, an invoice for the equipment to be purchased. Except for the Fleet
Debt, the Equipment Advances shall be used only to purchase new Equipment and
shall not exceed One Hundred Percent (100%) of the invoice amount of such
equipment approved from time to time by Bank, including taxes, shipping,
training, sales tax, and installation expense. Software may only constitute up
to Twenty Five percent (25%) of aggregate Equipment Advances, exclusive of the
Fleet Debt.
-7-
(b) Interest shall accrue from the date of each Equipment
Advance at a per annum rate equal to One percentage point (1.0%) above the Prime
Rate and shall be payable monthly for each month through the month in which the
Equipment Availability End Date falls. The principal amount of the Fleet Debt
shall be repaid, beginning on the fist Payment Date following the Closing Date,
in twenty-two (22) installments, each of which, except for the last, shall be
equal to $8,862.07. The final payment shall be equal to the remaining balance of
the Fleet Debt. All other Equipment Advances that are outstanding on the
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 the month following the Equipment Availability End Date and ending on
the thirty sixth (36) Payment Date following the Equipment Availability End
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. Pacific 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.
2.2 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Bank pursuant to Section 2.1.1 of this Agreement
is greater than the lesser of (i) the Committed Revolving Line or (ii) the
Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount of
such excess.
2.3 INTEREST RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATE. Except as set forth in Section 2.3(b), any
Advances shall bear interest, on the average daily balance thereof, at a per
annum rate equal to Three Quarters of One percentage point (0.75%) above the
Prime Rate; provided however, subsequent to the Capitalization Event, any
Advances shall bear interest, on the average daily balance thereof, at a per
annum rate equal to One half of One percentage point (0.50%) above the Prime
Rate.
(b) DEFAULT RATE. All Obligations shall bear interest, from
and after the occurrence of an Event of Default, at a rate equal to five (5)
percentage points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.
(c) PAYMENTS. Interest hereunder shall be due and payable on
each Payment Date. Borrower hereby authorizes Bank to debit any accounts with
Bank, including, without limitation, Account Number 3300076253 for payments of
principal and interest due on the Obligations and any other amounts owing by
Borrower to Bank. Bank will notify Borrower of all debits which Bank has made
against Borrower's accounts. Any such debits against Borrower's accounts in no
way shall be deemed a set-off. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(d) COMPUTATION. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
-8-
2.4 CREDITING PAYMENTS. Prior to the occurrence of an Event of Default,
Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item of payment, whether directed to Borrower's deposit account
with Bank or to the Obligations or otherwise, shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment in
respect of the Obligations unless such payment is of immediately available
federal funds or unless and until such check or other item of payment is honored
when presented for payment. Notwithstanding anything to the contrary contained
herein, any wire transfer or payment received by Bank after 12:00 noon Pacific
time shall be deemed to have been received by Bank as of the opening of business
on the immediately following Business Day. Whenever any payment to Bank under
the Loan Documents would otherwise be due (except by reason of acceleration) on
a date that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 FEES. Borrower shall pay to Bank the following:
(a) FACILITY FEE. As compensation for the Bank's maintenance
of sufficient funds available for such purpose, the Bank shall have
earned a Committed Revolving Line Facility Fee (so referred to herein),
which fee shall be paid in advance, in an amount equal to One Half of
One percent (0.50%) of the Committed Revolving Line. The Borrower shall
not be entitled to any credit, rebate or repayment of any Committed
Revolving Line Facility Fee previously earned by the Bank pursuant to
this Section notwithstanding any termination of the within Agreement,
or suspension or termination of the Bank's obligation to make loans and
advances hereunder;
(b) FINANCIAL EXAMINATION AND APPRAISAL FEES. Bank's customary
fees and out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of Collateral and financial analysis
and examination of Borrower performed from time to time by Bank or its
agents;
(c) BANK EXPENSES. Upon demand from Bank, including, without
limitation, upon the date hereof, all Bank Expenses incurred through
the date hereof, including reasonable attorneys' fees and expenses,
and, after the date hereof, all Bank Expenses, including reasonable
attorneys' fees and expenses, as and when they become due.
2.6 ADDITIONAL COSTS. In case any law, regulation, treaty or official
directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by
Borrower or otherwise with respect to the transactions contemplated
hereby (except for taxes on the overall net income of Bank imposed by
the United States of America or any political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against
assets held by, or deposits in or for the account of, or loans by,
Bank; or
-9-
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
2.7 TERM. Except as otherwise set forth herein, this Agreement shall
become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect for a term ending on the Maturity Date.
Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Credit Extensions under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default. Notwithstanding termination of this Agreement, Bank's lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. The obligation of
Bank to make the initial Credit Extension is subject to the condition precedent
that Bank shall have received, in form and substance satisfactory to Bank, the
following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
articles, bylaws, incumbency and resolutions authorizing the execution
and delivery of this Agreement;
(c) a negative pledge agreement covering intellectual
property;
(d) an opinion of Borrower's counsel;
(e) financing statements (Forms UCC-1);
(f) insurance certificate;
(g) payment of the fees and Bank Expenses then due specified
in Section 2.5 hereof;
(h) Certificate of Foreign Qualification (if applicable); and
(i) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
-10-
(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each
Credit Extension requested by Borrower as though made at and as of each
such date, and no Event of Default shall have occurred and be
continuing, or would result from such Credit Extension. The making of
each Credit Extension requested by Borrower shall be deemed to be a
representation and warranty by Borrower on the date of such Credit
Extension as to the accuracy of the facts referred to in this Section
3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower grants and pledges to Bank a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt payment of any and all Obligations
and in order to secure prompt performance by Borrower of each of its covenants
and duties under the Loan Documents. Except as set forth in the Schedule, such
security interest will constitute a valid, first priority security interest in
the presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof, upon the filing
of the Uniform Commercial Code financing statements in the appropriate
governmental offices. Borrower acknowledges that Bank may place a "hold" on any
Deposit Account pledged as Collateral to secure the Obligations. Notwithstanding
termination of this Agreement, Bank's Lien on the Collateral shall remain in
effect for so long as any Obligations are outstanding.
4.2 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower shall from
time to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 RIGHT TO INSPECT. Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. Borrower and each Subsidiary is
a corporation duly existing and in good standing under the laws of its state of
incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which failure to be so qualified and licensed would
have a Material Adverse Effect.
5.2 DUE AUTHORIZATION; NO CONFLICT. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and will not conflict with, and will not constitute a breach of, any
provision contained in Borrower's Certificate of Incorporation or Bylaws, nor
will such execution, delivery and performance constitute an event of default
under any material agreement to which Borrower is a party or by which Borrower
is bound Borrower is not in default under
-11-
any agreement to which it is a party or by which it is bound, which default
could have a Material Adverse Effect.
5.3 NO PRIOR ENCUMBRANCES. Borrower has good and indefeasible title to
the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 BONA FIDE ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide
existing obligations. The service or property giving rise to such Eligible
Accounts has been performed or delivered to the account debtor or to the account
debtor's agent for immediate shipment to and unconditional acceptance by the
account debtor. Borrower has not received notice of actual or imminent
Insolvency Proceeding of any account debtor whose accounts are included in any
Borrowing Base Certificate as an Eligible Account.
5.5 MERCHANTABLE INVENTORY. All Inventory is in all material respects
of good and marketable quality, free from all material defects.
5.6 NAME; LOCATION OF CHIEF EXECUTIVE OFFICE. Except as disclosed in
the Schedule, Borrower has not done business and will not without at least
thirty (30) days prior written notice to Bank do business under any name other
than that specified on the signature page hereof. The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.
5.7 LITIGATION. Except as set forth in the Schedule, there are no
actions or proceedings pending, or, to Borrower's knowledge, threatened by or
against Borrower or any Subsidiary before any court or administrative agency in
which an adverse decision could have a Material Adverse Effect or a material
adverse effect on Borrower's interest or Bank's security interest in the
Collateral.
5.8 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank on or about the Closing Date.
5.9 SOLVENCY. Borrower is able to pay its debts (including trade debts)
as they mature.
5.10 REGULATORY COMPLIANCE. Borrower and each Subsidiary has met the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
-12-
5.11 ENVIRONMENTAL CONDITION. None of Borrower's or any Subsidiary's
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower's knowledge, by previous owners or operators, in the disposal
of, or to produce, store, handle, treat, release, or transport, any hazardous
waste or hazardous substance other than in accordance with applicable law; to
the best of Borrower's knowledge, none of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute; no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and neither Borrower nor any Subsidiary has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or other governmental agency concerning any action or
omission by Borrower or any Subsidiary resulting in the release, or other
disposition of hazardous waste or hazardous substances into the environment.
5.12 TAXES. Borrower and each Subsidiary has filed or caused to be
filed all tax returns required to be filed on a timely basis, and has paid, or
has made adequate provision for the payment of, all taxes reflected therein.
5.13 SUBSIDIARIES Borrower does not own any stock, partnership interest
or other equity securities of any Person, except for Permitted Investments.
5.14 GOVERNMENT CONSENTS. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted.
5.15 FULL DISCLOSURE. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:
6.1 GOOD STANDING. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 GOVERNMENT COMPLIANCE. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could
-13-
have a Material Adverse Effect or a material adverse effect on the Collateral or
the priority of Bank's Lien on the Collateral.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower shall deliver
to Bank: (a) as soon as available, but in any event within twenty five (25) days
after the end of each month, a company prepared consolidated balance sheet and
income statement covering Borrower's consolidated operations during such period,
in a form and certified by an officer of Borrower reasonably acceptable to Bank;
(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 on such financial statements of an independent certified
public accounting firm reasonably acceptable to Bank; (c) promptly upon receipt
of notice thereof, a report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to Borrower or
any Subsidiary of One Hundred Thousand Dollars ($100,000) or more; and (d) such
budgets, sales projections, operating plans or other financial information as
Bank may reasonably request from time to time.
Within twenty five (25) days after the last day of each month,
beginning with the first month after the Bridge Maturity Date, 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.
Within twenty five (25) days after the last day of each month,
beginning with the first month after the Bridge Maturity Date, Borrower shall
deliver to Bank a Compliance Certificate signed by a Responsible Officer in
substantially the form of EXHIBIT D hereto.
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 no
more often than every twelve (12) months unless an Event of Default has occurred
and is continuing.
6.4 INVENTORY; RETURNS. Borrower shall keep all Inventory in good and
marketable condition, free from all material defects. Returns and allowances, if
any, as between Borrower and its account debtors shall be on the same basis and
in accordance with the usual customary practices of Borrower, as they exist at
the time of the execution and delivery of this Agreement. Borrower shall
promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 TAXES. Borrower shall make, and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
such payment if (i) the amount or validity of such payment is contested in good
faith by appropriate proceedings , (ii) Borrower or a Subsidiary, as the case
may be, has established proper reserves (to the extent required by GAAP), and
(iii) no lien other than a Permitted Lien results.
-14-
6.6 INSURANCE.
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against by
other owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as are reasonably satisfactory to Bank. All
such policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. At Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
6.7 PRINCIPAL DEPOSITORY. Borrower shall maintain its principal
depository and operating accounts with Bank.
6.8 QUICK RATIO. As of and subsequent to the Bridge Maturity Date,
Borrower shall maintain, as of the last day of each calendar month, a ratio of
Quick Assets to Current Liabilities of at least 2.0 to 1.0. The Quick Ratio
shall be calculated net of deferred revenue.
6.9 PROFITABILITY. Borrower shall not incur a net loss in excess of
(a) Two Million Dollars ($2,000,000.00) for the first quarter
of calendar year ending 1998; and
(b) One Million Five Hundred Thousand Dollars ($1,500,000.00)
for the second quarter of calendar year ending 1998.
6.10 CAPITALIZATION EVENT. Borrower shall provide the Bank with
evidence, such evidence being satisfactory to the Bank, that Borrower has
completed the Capitalization Event on or before February 28, 1998.
6.11 FURTHER ASSURANCES. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any Credit Extension
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following:
-15-
7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose of
(collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than Transfers: (i) of inventory
in the ordinary course of business, (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; (iii) that constitute payment of normal and usual
operating expenses in the ordinary course of business; or (iv) of worn-out or
obsolete Equipment.
7.2 CHANGES IN BUSINESS, OWNERSHIP, OR MANAGEMENT, BUSINESS LOCATIONS.
Engage in any business, or permit any of its Subsidiaries to engage in any
business, other than the businesses currently engaged in by Borrower and any
business substantially similar or related thereto (or incidental thereto), or
suffer a material change in Borrower's ownership (with the exception of the
initial Capitalization Event) or change in any three (3) of the following
officers from the officers holding such position as of the date hereof:
President, Chief Executive Officer, Chief Financial Officer, Vice President
Development, Vice President Sales & Marketing, and Vice President Operations.
Borrower will not, without at least thirty (30) days prior written notification
to Bank, relocate its chief executive office or add any new offices or business
locations.
7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 INDEBTEDNESS. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 ENCUMBRANCES. Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 DISTRIBUTIONS. Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any capital
stock.
7.7 INVESTMENTS. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a nonaffiliated Person.
7.9 SUBORDINATED DEBT. Make any payment in respect of any Subordinated
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt, or amend any provision
contained in any documentation relating to the Subordinated Debt without Bank's
prior written consent.
7.10 INVENTORY. Store the Inventory with a bailee, warehouseman, or
similar party unless Bank has received a pledge of any warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other
-16-
locations of which Borrower gives Bank prior written notice and as to which
Borrower signs and files a financing statement where needed to perfect Bank's
security interest.
7.11 COMPLIANCE. Become an "investment company" or a company controlled
by an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose; fail
to meet the minimum funding requirements of ERISA; permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral; or permit any
of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 PAYMENT DEFAULT. If Borrower fails to pay, when due, any of the
Obligations;
8.2 COVENANT DEFAULT.
(a) If Borrower fails to perform any obligation under Sections
6.3, 6.6, 6.7, 6.8, 6.9, or 6.10 or violates any of the covenants contained in
Article 7 of this Agreement, or
(b) If Borrower fails or neglects to perform, keep, or observe
any other material term, provision, condition, covenant, or agreement contained
in this Agreement, in any of the Loan Documents, and as to any default under
such other term, provision, condition, covenant or agreement that can be cured,
has failed to cure such default within ten (10) days after the occurrence
thereof; provided, however, that if the default cannot by its nature be cured
within the ten (10) day period or cannot after diligent attempts by Borrower be
cured within such ten (10) day period, and such default is likely to be cured
within a reasonable time, then Borrower shall have an additional reasonable
period (which shall not in any case exceed thirty (30) days) to attempt to cure
such default, and within such reasonable time period the failure to have cured
such default shall not be deemed an Event of Default (provided that no Advances
will be required to be made during such cure period);
8.3 MATERIAL ADVERSE CHANGE. If there (i) occurs a material adverse
change in the business, operations, or condition (financial or otherwise) of the
Borrower, or (ii) is a material impairment of the prospect of repayment of any
portion of the Obligations or (iii) is a material impairment of the value or
priority of Bank's security interests in the Collateral, which is not covered by
adequate insurance;
8.4 ATTACHMENT. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of
-17-
Borrower's assets by the United States Government, or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or governmental
agency, and the same is not paid within ten (10) days after Borrower receives
notice thereof, provided that none of the foregoing shall constitute an Event of
Default where such action or event is stayed or an adequate bond has been posted
pending a good faith contest by Borrower (provided that no Credit Extensions
will be required to be made during such cure period);
8.5 INSOLVENCY. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within 30 days (provided that no
Advances will be made prior to the dismissal of such Insolvency Proceeding);
8.6 OTHER AGREEMENTS. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that could have a Material Adverse Effect;
8.7 SUBORDINATED DEBT. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 JUDGMENTS. If a judgment or judgments for the payment of money in
an amount, individually or in the aggregate, of at least Fifty Thousand Dollars
($50,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of ten (10) days (provided that no Credit Extensions will
be made prior to the satisfaction or stay of such judgment); or
8.9 MISREPRESENTATIONS. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate or writing delivered to Bank by Borrower or any
Person acting on Borrower's behalf pursuant to this Agreement or to induce Bank
to enter into this Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence and during the continuance
of an Event of Default, Bank may, at its election, without notice of its
election and without demand, do any one or more of the following, all of which
are authorized by Borrower:
Declare all Obligations, whether evidenced by this Agreement, by any of the
other Loan Documents, or otherwise, immediately due and payable (provided that
upon the occurrence of an Event of Default described in Section 8.5 all
Obligations shall become immediately due and payable without any action by
Bank);
(a) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
(b) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
-18-
(c) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to
assemble the Collateral if Bank so requires, and to make the Collateral
available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and
maintain possession of the Collateral, or any part of it, and to pay,
purchase, contest, or compromise any encumbrance, charge, or lien which
in Bank's determination appears to be prior or superior to its security
interest and to pay all expenses incurred in connection therewith. With
respect to any of Borrower's premises, Borrower hereby grants Bank a
license to enter such premises and to occupy the same, without charge;
(d) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by
Bank, or (ii) indebtedness at any time owing to or for the credit or
the account of Borrower held by Bank;
(e) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Bank is hereby granted a non-exclusive,
royalty-free license or other right, solely pursuant to the provisions
of this Section 9.1, to use, without charge, Borrower's labels,
patents, copyrights, mask works, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and
selling any Collateral and, in connection with Bank's exercise of its
rights under this Section 9.1, Borrower's rights under all licenses and
all franchise agreements shall inure to Bank's benefit;
(f) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's
premises) as Bank determines is commercially reasonable, and apply the
proceeds thereof to the Obligations in whatever manner or order it
deems appropriate;
(g) Bank may credit bid and purchase at any public sale, or at
any private sale as permitted by law; and
(h) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 POWER OF ATTORNEY. Effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or xxxx of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; and (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the
-19-
Obligations have been fully repaid and performed and Bank's obligation to
provide advances hereunder is terminated.
9.3 ACCOUNTS COLLECTION. Upon the occurrence and during the continuance
of an Event of Default, Bank may notify any Person owing funds to Borrower of
Bank's security interest in such funds and verify the amount of such Account.
Borrower shall collect all amounts owing to Borrower for Bank, receive in trust
all payments as Bank's trustee, and if requested or required by Bank,
immediately deliver such payments to Bank in their original form as received
from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES. If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following: (a)
make payment of the same or any part thereof; (b) set up such reserves under the
Committed Revolving Line as Bank deems necessary to protect Bank from the
exposure created by such failure; or (c) obtain and maintain insurance policies
of the type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
9.5 BANK'S LIABILITY FOR COLLATERAL. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. Bank shall
not bear any risk of loss, damage, or destruction to the Collateral.
9.6 REMEDIES CUMULATIVE. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not expressly set forth herein as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 DEMAND; PROTEST. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, by certified
-20-
mail, postage prepaid, return receipt requested, or by telefacsimile to Borrower
or to Bank, as the case may be, at its addresses set forth below:
If to Borrower Centra Software, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxx
FAX: (000) 000-0000
If to Bank Silicon Valley Bank
00 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xx. Xxxxxx X. Xxxx, Vice President
FAX: (000) 000-0000
with a copy to: Xxxxxx & Xxxxxxxxxx
Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esquire
FAX: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY WAIVER
The laws of the Commonwealth of Massachusetts shall apply to this
Agreement. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
UNCONDITIONALLY, THE NONEXCLUSIVE 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
AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF OF
THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER ACCEPTS JURISDICTION
OF THE COURTS AND VENUE IN SANTA XXXXX COUNTY, CALIFORNIA.
BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE
LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH
PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
-21-
12. GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the respective successors and permitted assigns of each of the
parties; PROVIDED, HOWEVER, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 INDEMNIFICATION. Borrower shall , indemnify, defend, protect and
hold harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 TIME OF ESSENCE. Time is of the essence for the performance of all
obligations set forth in this Agreement.
12.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION. This Agreement cannot be
amended or terminated except by a writing signed by Borrower and Bank. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties hereto with respect to the subject matter of this Agreement,
if any, are merged into this Agreement and the Loan Documents.
12.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 SURVIVAL. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8 CONFIDENTIALITY. In handling any confidential information Bank
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations with Borrower, (ii) to prospective transferees or purchasers of any
interest in the Loans, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower and have delivered a copy to
Borrower, (iii) as required by law, regulations, rule or order, subpoena,
judicial order or similar order, (iv) as may be required in connection with the
examination, audit or similar investigation of Bank, and (v) as Bank may deem
-22-
appropriate in connection with the exercise of any remedies hereunder.
Confidential information hereunder shall not include information that either:
(a) is in the public domain or in the knowledge or possession of Bank when
disclosed to Bank, or becomes part of the public domain after disclosure to
Bank through no fault of Bank; or (b) is disclosed to Bank by a third party,
provided Bank does not have actual knowledge that such third parry is
prohibited from disclosing such information.
12.9 COUNTERSIGNATURE. This Agreement shall become effective only when
it shall have been executed by Borrower and Bank (provided, however, in no event
shall this Agreement become effective until signed by an officer of Bank in
California).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
CENTRA SOFTWARE, INC.
By: /s/ XXXXXXX X. XXXXXXX
-------------------------------
Title: Director of Finance
----------------------------
SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By: /s/ XXXXXX XXXX
------------------------------
Name: XXXXXX XXXX
----------------------------
Title: Vice President
---------------------------
-23-
SILICON VALLEY BANK
By: /s/ XXXXXXXX XXXXXXXX
------------------------------
Name: XXXXXXXX XXXXXXXX
----------------------------
Title: Asst. Vice President
---------------------------
(Signed in Santa Xxxxx County,
California)
-24-
EXHIBIT A
The Collateral shall consist of all right, title and interest of Borrower in and
to the following:
(a) All goods and equipment now owned or hereafter acquired,
including, without limitation, all machinery, fixtures, vehicles
(including motor vehicles and trailers), and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing,
wherever located;
(b) All inventory, now owned or hereafter acquired, including,
without limitation, all merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products
including such inventory as is temporarily out of Borrower's custody or
possession or in transit and including any returns upon any accounts or
other proceeds, including insurance proceeds, resulting from the sale
or disposition of any of the foregoing and any documents of title
representing any of the above, and Borrower's Books relating to any of
the foregoing;
(c) All contract rights and general intangibles now owned or
hereafter acquired, including, without limitation, goodwill, leases,
license agreements, franchise agreements, blueprints, drawings,
purchase orders, customer lists, route lists, claims, literature,
reports, catalogs, income tax refunds, payments of insurance and rights
to payment of any kind;
(d) All now existing and hereafter arising accounts, contract
rights, royalties, license rights and all other forms of obligations
owing to Borrower arising out of the sale or lease of goods, the
licensing of technology or the rendering of services by Borrower,
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to
any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters
of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrower's Books relating to the
foregoing; and
(f) Any and all claims, rights and interests in any of the
above and all substitutions for, additions and accessions to and
proceeds thereof.
Notwithstanding the foregoing, the Collateral shall not be deemed to include any
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; any patents,
trademarks, servicemarks and applications therefor; any trade secret rights,
including any rights to unpatented inventions, know-how, operating manuals,
license rights and agreements and confidential information, now owned or
hereafter acquired; or any claims for damages by way of any past, present and
future infringement of any of the foregoing.
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
---------------
FAX#: (408) TIME:
-------------- ----------
FROM: CENTRA SOFTWARE, INC.
--------------------------------------------------------------------------
BORROWER'S NAME
FROM:
--------------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
--------------------------------------------------------------------------------
AUTHORIZED SIGNATURE
PHONE:
--------------------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT#
---------------------- -----------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE $
PRINCIPAL PAYMENT (ONLY) $
INTEREST PAYMENT (ONLY) $
PRINCIPAL AND INTEREST (PAYMENT) $
OTHER INSTRUCTIONS:
All representations and warranties of Borrower stated in the Loan and
Security Agreement are true, correct and complete in all material respects as of
the date of the telephone request for and Advance confirmed by this Advance
Request; provided, however, that those representations and warranties expressly
referring to another date shall be true, correct and complete in all material
respects as of such date.
BANK USE ONLY:
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
---------------------------
Authorized Requester
-------------------------------
Authorized Signature (Bank)
Phone #
------------------------
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: Centra Software, Inc. Bank: Silicon Valley Bank
Commitment Amount: $1,250,000.00
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ______ $
----------------
2. Additions (please explain on reverse) $
-----------------
3. TOTAL ACCOUNTS RECEIVABLE $
----------------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $
-----------------
5. Balance of 50% over 90 day accounts $
----------------
6. Concentration Limits $
-----------------
7. Foreign Accounts $
-----------------
8. Governmental Accounts $
-----------------
9. Contra Accounts $
-----------------
10. Promotion or Demo Accounts $
----------------
11. Intercompany/Employee Accounts $
-----------------
12. Other (please explain on reverse) $
-----------------
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
----------------
14. Eligible Accounts (#3 minus #13) $
-----------------
15. LOAN VALUE OF ACCOUNTS (75% of #14) $
----------------
BALANCES
16. Maximum Loan Amount $
-----------------
17. Total Funds Available [Lesser of #16 or #15] $
----------------
18. Present balance owing on Line of Credit $
-----------------
19. Outstanding under Sublimits, if any $
-----------------
20. RESERVE POSITION (#17 minus #18 and #19) $
-----------------
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE FOREGOING IS TRUE, COMPLETE AND
CORRECT, AND THAT THE INFORMATION REFLECTED IN THIS BORROWING BASE CERTIFICATE
COMPLIES WITH THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE LOAN AND
SECURITY AGREEMENT BETWEEN THE UNDERSIGNED AND SILICON VALLEY BANK.
COMMENTS:
BANK USE ONLY
Received By:__________________
Date:________________
Reviewed By:_________________
Compliance Status: Yes/No
-------------------------
By:
----------------------
Authorized Signer
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: CENTRA SOFTWARE, INC.
The undersigned authorized officer of Centra Software, 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 h 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 and CC Monthly within 25 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
BBC and A/R Monthly within 25 days Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
Maintain on a Monthly Basis:
Minimum Quick Ratio 2.0:1.0 ____:1.0 Yes No
Profitability:
(a) $2,000,000.00 - 1st quarter 1998; and _______ Yes No
(b) $1,500,000.00 - 2nd quarter 1998. _______ Yes No
Minimum Equity (raised by 2/28/98) $3,500,000.00 _______ Yes No
COMMENTS REGARDING EXCEPTIONS:
Sincerely, BANK USE ONLY
Received By:__________________
_____________________ Date:____________ Date:________________
SIGNATURE Reviewed By:_________________
Compliance Status: Yes/No
_____________________
TITLE
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of June 1, 1998 and
effective as of May 5, 1998, by and between Centra Software, Inc. ("Borrower")
whose address is 000 Xxxxxxx Xxxxxx, Xxxxxxxxx, XX 00000 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, among other
documents, a Loan and Security Agreement, dated November 5, 1997, as may be
amended from time to time, (the "Loan Agreement'). The Loan Agreement provided
for, among other things, a Committed Equipment Line in the original principal
amount of Five Hundred Thousand Dollars ($500,000) (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. Furthermore,
Borrower has agreed not to sell, transfer, assign, mortgage, pledge, lease,
grant a security interest in, or encumber any of its intellectual property as
further described in that certain Negative Pledge Agreement, dated November 5,
1997, by and between Borrower and Bank.
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 first sentence in item "(a)" under Section 2.1.2
entitled "Equipment Advances" is hereby amended to
read as:
Subject to and upon the terms and conditions of this
Agreement, at any time from the date hereof through
November 5, 1998 (the "Equipment Availability End
Date"), Bank agrees to make advances (each an
"Equipment Advance" and collectively, the "Equipment
Advances") to Borrower in an aggregate outstanding
amount not to exceed the Committed Equipment Line.
2. The second and fourth paragraphs under Section 6.3
entitled "Financial Statements, Reports,
Certificates" are hereby deleted.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
1
5. 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.
6. 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 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.
7. JURISDICTION/VENUE. Borrower accepts for itself and in connection with
its properties, unconditionally, the non-exclusive jurisdiction of any state
of 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.
8. 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 of the date first
written above.
BORROWER: BANK:
CENTRA SOFTWARE, INC. SILICON VALLEY BANK, doing
business as SILICON VALLEY EAST
By: /s/ Xxxxxxx X. Xxxxxxx By: /s/Xxxxxx Tsho
---------------------------------- ---------------------------------
Name: XXXXXXX X. XXXXXXX Name: XXXXXX TSHO
-------------------------------- -------------------------------
Title: DIRECTOR OF FINANCE AND ADMIN. Title: VICE PRESIDENT
------------------------------- ------------------------------
SILICON VALLEY BANK
By: /s/Xxxxxxxx X. Xxxxxxxx
---------------------------------
Name: XXXXXXXX X. XXXXXXXX
-------------------------------
Title: ASST. VICE PRESIDENT
------------------------------
(Signed at Santa Xxxxx County, CA)
2
FIRST LOAN MODIFICATION AGREEMENT
This First Loan Modification Agreement is entered into as of December
30, 1998, by and between CENTRA SOFTWARE, INC., a Delaware corporation with its
principal place of business at 000 Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx
00000 ("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 November 5, 1997, evidenced by, among other documents, a
certain Loan and Security Agreement dated as of November 5, 1997 (the "Loan
Agreement"). The Loan Agreement established: (ii) a working capital line of
credit in favor of the Borrower in the maximum principal amount of One Million
Two Hundred Fifty Thousand Dollars ($1,250,000.00) (the "Committed Revolving
Line"), and (ii) an equipment line of credit in favor of the Borrower in the
maximum principal amount of Five Hundred Thousand Dollars ($500,000.00) (the
"1997 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 AND GUARANTIES. 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. MODIFICATIONS TO LOAN AGREEMENT.
1. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Borrowing Base" means (x) prior to the
Bridge Maturity Date, an amount equal to the
Committed Revolving Line and (y) as of, and
subsequent to the Bridge Maturity Date, an
amount equal to Seventy Five percent (75%)
of Eligible Accounts, as determined by Bank
with reference to the most recent Borrowing
Base Certificate delivered by Borrower."
and inserting in lieu thereof the following:
""Borrowing Base" means an amount equal to
Seventy Five percent (75%) of Eligible
Accounts, as determined by Bank with
reference to the most recent Borrowing Base
Certificate delivered by Borrower."
2. 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 Two Hundred
and Fifty Thousand Dollars ($1,250,000.00)."
and inserting in lieu thereof the following:
""Committed Revolving Line" means a credit
extension of up to Seven Hundred Fifty
Thousand Dollars ($750,000.00)."
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
percent (30.0%) 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."
5. All references to "Committed Equipment Line" in the
Loan Agreement shall mean and refer to the "1997
Committed Equipment Line".
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 Six Hundred
Thousand Dollars ($600,000.00).
"1999 Equipment Availability End Date" has
the meaning set forth in Section 2.1.3.
-2-
"1999 Equipment Maturity Date" means
September 30, 2002."
7. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Maturity Date" means the later of (x) the
Equipment Maturity Date, (y) the Revolving
Maturity Date, or (z) the Bridge Maturity
Date."
and inserting in lieu thereof the following:
""Maturity Date" means the later of (x) the
Equipment Maturity Date, (y) the 1999
Equipment Maturity Date, or (z) the
Revolving Maturity Date."
8. The Loan Agreement shall be amended by deleting the
following text appearing as paragraph (a) in the
definition of "Permitted Indebtedness" appearing in
Section 1.1 thereof:
"(a) Indebtedness of Borrower in favor of
Bank arising under this Agreement or any
other Loan Document;"
and inserting in lieu thereof the following:
"(a) Indebtedness of Borrower in favor of
Bank arising under this Agreement or any
other Loan Document and any indebtedness of
Borrower in favor of Bank pertaining to the
leasing of equipment."
9. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Revolving Maturity Date" means the Bridge
Maturity Date, provided, however, that if
Bank has completed an audit of Borrower's
Accounts, and such audit is satisfactory to
Bank in its sole and absolute discretion,
the Revolving Maturity Date shall mean one
day prior to the date which is one year from
the Closing Date if the Capitalization Event
occurs prior to the Bridge Maturity Date."
and inserting in lieu thereof the following:
""Revolving Maturity Date" means December
30,1999."
10. The Loan Agreement shall be amended by inserting the
following definitions immediately after the
definition of "Subsidiary" appearing in Section 1.1
thereof:
""Tangible Net Worth" means as of any
applicable date, the consolidated total
assets of Borrower and its Subsidiaries
MINUS, without duplication, (i) the sum of
any amounts attributable to (a) goodwill,
(b) intangible items such as unamortized
debt discount and expense, patents, trade
and service marks and names, copyrights and
research and development
-3-
expenses except prepaid expenses, and (c)
all reserves not already deducted from
assets, AND (ii) Total Liabilities.
"Total Liabilities" means as of any
applicable date, any date as of which the
amount thereof shall be determined, all
obligations that should, in accordance with
GAAP be classified as liabilities on the
consolidated balance sheet of Borrower,
including in any event all Indebtedness, but
specifically excluding Subordinated Debt."
11. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Bridge Maturity Date" means the earlier of
(i) the date of the closing of a
Capitalization Event, or (ii) February 28,
1998."
12. Section 2.1.2 of the Loan Agreement shall be retitled
as "1997 Equipment Advances".
13. The Loan Agreement shall be amended by inserting
after Section 2.1.2 thereof the following new section
entitled "l999 Equipment Advances":
"2.1.3 1999 EQUIPMENT ADVANCES.
(a) Subject to and upon the terms and conditions of
this Agreement at any time through September 30, 1999
(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 to be purchased. Each invoice submitted at
the time of each Equipment Advance request may not be
more than ninety (90) days past the invoice date in
order to be eligible for an Equipment Advance. The
Equipment Advances 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 twenty-five percent (25%) of aggregate Equipment
Advances.
(b) Notwithstanding the foregoing, Equipment Advances
supported by invoices dated on or after October 1,
1997 through June 30, 1998 shall be permitted but
shall be limited to, in the aggregate, Two Hundred
Fifty Thousand Dollars ($250,000.00). All such
invoices dated on or after October 1, 1997 through
June 30, 1998 must be submitted to the Bank on or
before December 30, 1998 in order to be eligible for
an Equipment Advance hereunder. Any Equipment
Advances supported by invoices dated on or after
October 1, 1997 through June 30, 1998 shall be
payable in thirty-six (36) equal monthly installments
of principal, plus all accrued interest beginning on
the Payment
-4-
Date of each month commencing In January 1999 and
ending on December 30, 2001.
(c) Notwithstanding the foregoing, Equipment Advances
supported by invoices dated on or after July 1, 1998
through September 30, 1998 shall be permitted and
shall be subject to and upon the terms and conditions
of this Agreement. All such invoices dated on or
after July 1, 1998 through September 30, 1998 must be
submitted to the Bank on or before December 30, 1998
in order to be eligible for an Equipment Advance
hereunder. Any Equipment Advances supported by
invoices dated on or after July 1, 1998 through
September 30, 1998 shall be payable in thirty-six
(36) equal monthly installments of principal, plus
all accrued interest, beginning on the Payment Date
of each month commencing in January 1999 and ending
on December 30, 2001.
(d) 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 percent (1.0%), and shall be
payable monthly on the Payment Date of each month
through the month in which the 1999 Equipment
Availability End Date falls. Amounts currently
amortizing under Section 2.1.2 above shall continue
to be repaid as provided in Section 2.1.2 above, and
shall be treated as existing Equipment Advances under
the 1997 Committed Equipment Line. Except as provided
in paragraphs (b) and (c) of this Section 2.1.3, 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 interests 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.
(e) 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."
14. The Loan Agreement shall be amended by deleting the
following text appearing as paragraph (a) of Section
2.3 entitled "Interest Rates, Payments, and
Calculations":
"(a) INTEREST RATE. Except as set forth in
Section 2.3(b), any Advances shall bear
interest on the average daily balance
thereof, at a per annum rate equal to Three
Quarters of One percentage point (0.75%)
above the Prime Rate; provided however,
subsequent to the Capitalization Event, any
Advances shall bear interest on the average
daily balance thereof, at a per annum rate
equal to One half of One percentage point
(0.50%) above the Prime Rate."
-5-
and inserting in lieu thereof the following:
"(a) INTEREST RATE. Except as set forth in
Section 2.3(b), any Advances shall bear
interest, on the average daily balance
thereof, at a per annum rate equal to the
aggregate of the Prime Rate, PLUS One Half
of One percentage point (0.50%)."
15. The Loan Agreement shall be amended by deleting the
following text appearing as section (a) in the first
paragraph of Section 6.3 entitled "Financial
Statements, Reports, Certificates":
"(a) as soon as available. but in any event
within twenty five (25) days after the end
of each month, a company prepared
consolidated balance sheet and income
statement covering Borrower's consolidated
operations during such period, in a form and
certified by an officer of Borrower
reasonably acceptable to Bank;"
and inserting in lieu thereof the following:
"(a) as soon as available, but in any event
within twenty (20) days after the end of
each month through the month ending March
31, 1999, and within twenty-five (25) days
after the end of each month thereafter, a
company prepared consolidated balance sheet
and income statement covering Borrower's
consolidated operations during such period,
in a form and certified by an officer of
Borrower reasonably acceptable to Bank;"
16. The Loan Agreement shall be amended by deleting the
following text appearing as the second paragraph of
Section 6.3 entitled "Financial Statements, Reports,
Certificates":
"Within twenty-five (25) days after the last
day of each month, beginning with the first
month after the Bridge Maturity Date,
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."
and inserting in lieu thereof the following:
"Borrower shall deliver to Bank within
twenty (20) days after the last day of each
month through the month ending March 31,
1999, and within twenty-five (25) days after
the end of each month thereafter, but only
with respect to months which either (i)
Obligations are outstanding, or (ii) Credit
Extensions were made, a Borrowing Base
Certificate signed by a Responsible Officer
in substantially the form of EXHIBIT C
hereto, together with aged listings of
accounts receivable."
-6-
17. The Loan Agreement shall be amended by deleting the
following text appearing as the fourth paragraph of
Section 6.3 entitled "Financial Statements, Reports,
Certificates":
"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 no more often than
every twelve (12) months unless an Event of
Default has occurred and is continuing."
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 no more often than
every twelve (12) months unless an Event of
Default has occurred and is continuing. An
audit of the Borrower's Accounts pursuant to
this Section 6.3 shall be completed and
satisfactory to Bank in its sole and
absolute discretion on or before March 31,
1999."
18. The Loan Agreement shall be amended by deleting the
following text appearing as Sections 6.8, 6.9 and
6.10 thereof:
"6.8 QUICK RATIO. As of and subsequent to
the Bridge Maturity Date, Borrower shall
maintain, as of the last day of each
calendar month, a ratio of Quick Assets to
Current Liabilities of at least 2.0 to 1.0.
The Quick Ratio shall be calculated net of
deferred revenue.
6.9 PROFITABILITY. Borrower shag not incur a
net loss in excess of: (a) Two Million
Dollars ($2,000,000.00) for the first
quarter of calendar year ending 1998; and
(b) One Million Five Hundred Thousand
Dollars ($1,500,000.00) for the second
quarter of calendar year ending 1998.
6.10 CAPITALIZATION EVENT. Borrower shall
provide the Bank with evidence, such
evidence being satisfactory to the Bank,
that Borrower has completed the
Capitalization Event on or before February
28, 1998."
and inserting in lieu thereof the following:
"6.8 ADJUSTED 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: (i) 1.50 to
1.0 as of last day of the month ending
November 30, 1998, (ii) 1.25 to 1.0 as of
last day of each month thereafter through
the month ending February 28, 1999, and
(iii) 1.50 to 1.0 as of the last day of each
month thereafter. The Quick Ratio shall be
calculated net of deferred revenue.
6.9 TANGIBLE NET WORTH. Borrower shall
maintain, as of the last day of each
quarter, a Tangible Net Worth of not less
than the aggregate of (i) One Million Five
Hundred Thousand Dollars ($1,500,000.00),
PLUS
-7-
(ii) thirty percent (30.0%) of the amount of
funds received by Borrower from any new
equity issued by Borrower."
19. The Loan Agreement shall be amended by inserting
after paragraph (b) in Section 8.2 entitled "Covenant
Default" the following new paragraph:
"(c) If the audit of Borrower's Accounts to
be completed on or before March 31, 1999
pursuant to Section 6.3 hereof is not
satisfactory to Bank in its sole and
absolute discretion."
20. The Borrower hereby ratifies, confirms and reaffirms,
all and singular, the terms and conditions of a
certain Negative Pledge Agreement dated as of
November 5, 1997 between Borrower and Bank, and
acknowledges, confirms and agrees that said Negative
Pledge Agreement shall remain in full force and
effect.
21. The Borrowing Base Certificate appearing as EXHIBIT C
to the Loan Agreement is hereby replaced with the
Compliance Certificate attached as EXHIBIT A hereto.
22. 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 Three Thousand
Seven Hundred Fifty Dollars ($3,750.00), which fee shall be due on the date
hereof and shall be deemed fully earned as of the date hereof.
5. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
6. 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.
7. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it is not
aware of any defenses against the obligations to pay any amounts under the
Indebtedness.
8. 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.
9. 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
-8-
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.
10. 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:
CENTRA SOFTWARE, INC. SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: /s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxxxxx
---------------------------- -------------------------------
Name: Xxxxxxx X. Xxxxxxx Name: Xxxx X. Xxxxxxx
-------------------------- -----------------------------
Title: CFO Title: SVP
------------------------- ----------------------------
SILICON VALLEY BANK
By: /s/ XXXXX [IILEGIBLE]
-------------------------------
Name: Xxxxx [Illegible]
-----------------------------
Title: Loan Officer
----------------------------
(signed in Santa Xxxxx County,
California)
-9-
EXHIBIT A
BORROWING BASE CERTIFICATE
Borrower: CENTRA SOFTWARE, INC Bank: Silicon Valley Bank
Commitment Amount: $750,000.00
ACCOUNTS RECEIVABLE
1) Accounts Receivable Book Value as of _________ $
-----------------
2) Additions (please explain on reverse) $
-----------------
3) TOTAL ACCOUNTS RECEIVABLE $
-----------------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4) Amounts over 90 days due $
-----------------
5) Balance of 50% over 90 day accounts $
-----------------
6) Concentration Limits $
-----------------
7) Foreign Accounts $
-----------------
8) Governmental Accounts $
-----------------
9) Contra Accounts $
-----------------
10) Promotion or Demo Accounts $
-----------------
11) Intercompany/Employee Accounts $
-----------------
12) Other (please explain on reverse) $
-----------------
13) TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
-----------------
14) Eligible Accounts (#3 minus #13) $
-----------------
15) LOAN VALUE OF ACCOUNTS (75% of #14) $
-----------------
BALANCES
16) Maximum Loan Amount $
-----------------
17) Total Funds Available [Lesser of #16 or #15] $
-----------------
18) Present balance owing on Line of Credit $
-----------------
19) RESERVE POSITION (#17 minus #18) $
-----------------
THE UNDESIGNED REPRESENTS AND WARRANTS THAT THE FOREGOING IS TRUE, COMPLETE AND
CORRECT, AND THAT THE INFORMATION REFLECTED IN THIS BORROWING BASE CERTIFICATE
COMPLIES WITH THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE LOAN AND
SECURITY AGREEMENT BETWEEN THE UNDERSIGNED AND SILICON VALLEY BANK.
COMMENTS: BANK USE ONLY
Received
By:____________________________
-------------------------- Date:__________________________
Reviewed
By:____________________________
Compliance Status: Yes / No
By:
----------------------
Authorized Signer
EXHIBIT B
COMPLIANCE CERTIFICATE
-10-
TO: SILICON VALLEY BANK
FROM: CENTRA SOFTWARE, INC.
The undersigned authorized officer of CENTRA SOFTWARE, 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 Monthly within 20 days thru 3/31/99; Yes No
within 25 days thereafter
Monthly CC Monthly within 25 days Yes No
Monthly BBC & A/R Agings Monthly within 20 days thru 3/31/99; Yes No
within 25 days thereafter (when borrowing)
Annual (CPA Audited) FYE within 90 days Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
Maintain:
Minimum Adjusted Quick Ratio (monthly) 1.50:1.0 for month end _____:1.0 Yes No
11/30/98; 1.25:1.0 thru
2/28/99; and 1.5:1.0 thereafter
Minimum Tangible Net Worth (quarterly) $1,500,000, plus 30% $_______ Yes No
of new equity
BANK USE ONLY
Received
By:________________________________
Date:______________________________
Reviewed
By:________________________________
Compliance Status: Yes / No
Comments Regarding Exceptions
Sincerely,
Date:
---------------------------------- ------------------
SIGNATURE
---------------------------------
TITLE
-11-
SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement is entered into as of April 12,
1999, by and between CENTRA SOFTWARE, INC., a Delaware corporation with its
principal place of business at 000 Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx
00000 ("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 November 5, 1997, evidenced by, among other documents, a
certain Loan and Security Agreement dated as of November 5, 1997, as affected
and amended by a First Loan Modification Agreement dated December 30, 1998 (as
so amended, the "Loan Agreement"). The Loan Agreement established: (i) a working
capital line of credit in favor of the Borrower in the maximum principal amounts
of Seven Hundred Fifty Thousand Dollars ($750,000.00) (the "Committed Revolving
Line"), and (ii) two equipment lines of credit in favor of the Borrower in the
maximum principal amount of Five Hundred Thousand Dollars ($500,000.00) and Six
Hundred Thousand Dollars ($600,000.00), respectively (the "Equipment Lines").
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 AND GUARANTIES. 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 the insertion
of the following definitions in alphabetical order in
Section 1.1 thereof:
""Bridge Maturity Date" means the earlier of (i) the
date of the closing of a Capitalization Event, or
(ii) May 27, 1999."
""Committed Bridge Line" means a credit extension of
up to One Million Five Hundred Thousand Dollars
($1,500,000.00)."
2. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Capitalization Event" shall mean the
issuance by the Borrower of equity resulting
in the receipt by the Borrower of at least
Three Million Five Hundred Thousand Dollars
($3,500,000.00)."
and inserting in lieu thereof the following:
""Capitalization Event" shall mean the
issuance by the Borrower of equity resulting
in the receipt by the Borrower of at least
Four Million Dollars ($4,000,000.00)."
3. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Credit Extension" means each Advance,
Equipment Advance, or any other extension of
credit by Bank for the benefit of Borrower
hereunder."
and inserting in lieu thereof the following:
""Credit Extension" means each Advance,
Equipment Advance, Bridge Advance, or any
other extension of credit by Bank for the
benefit of Borrower hereunder."
4. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Maturity Date" means the later of (x) the
Equipment Maturity Date, (y) the 1999
Equipment Maturity Date, or (z) the
Revolving Maturity Date."
and inserting in lieu thereof the following:
""Maturity Date" means the later of (w) the
Equipment Maturity Date, (x) the 1999
Equipment Maturity Date, (y) the Revolving
Maturity Date, or (z) the Bridge Maturity
Date."
5. The Loan Agreement shall be amended by inserting
after Section 2.1.3 thereof the following new section
entitled "1999 Bridge Line":
-2-
"2.1.4 1999 BRIDGE LINE
(a) Subject to and upon the terms and conditions of
this Agreement, Bank agrees to make Bridge Advances
(each a "Bridge Advance" and collectively, the Bridge
Advances") to Borrower in an aggregate outstanding
amount not to exceed the Committed Bridge Line.
Bridge Advances, once repaid, may not be reborrowed.
(b) Whenever Borrower desires a Bridge Advance under
the 0000 Xxxxxx Xxxx, Xxxxxxxx will notify Bank by
facsimile transmission or telephone no later than
3:00 p.m. Eastern time, on the Business Day that the
Bridge Advance is to be made. Each such notification
shall be promptly confirmed by a Payment/Advance Form
in substantially the form of EXHIBIT B hereto. Bank
is authorized to make Bridge Advances under this
Agreement, based upon instructions received from a
Responsible Officer or a designee of a Responsible
Officer. Bank shall be entitled to rely on any
telephonic notice given by a person who Bank
reasonably believes to be a Responsible Officer or a
designee thereof, and Borrower shall indemnify and
hold Bank harmless for any damages or loss suffered
by Bank as a result of such reliance. Bank will
credit the amount of Bridge Advances made under this
Section 2.1 to Borrower's deposit account.
(c) The Committed Bridge Line shall terminate on the
Bridge Maturity Date, at which time all Bridge
Advances under this Section 2.1.4 all interest
accrued thereon and all fees and expenses incurred by
the Bank in connection with the Committed Bridge Line
(the "Committed Bridge Line Obligations") shall be
immediately due and payable.
(d) Interest shall accrue from the date of each
Bridge Advance made pursuant to this Section 2.1.4 at
a per annum rate equal to the aggregate of the Prime
Rate, PLUS two percent (2.0%), and shall be payable
monthly on the Payment Date of each month.
6. The Loan Agreement shall be amended by deleting the following
text appearing as the second paragraph of Section 6.3 entitled
"Financial Statements, Reports, Certificates":
"Borrower shall deliver to Bank, within twenty (20)
days after the last day of each month through the
month ending March 31, 1999, and within twenty-five
(25) days after the end of each month thereafter, but
only with respect to months which either (i)
Obligations are outstanding, or (ii) Credit
Extensions were made, a Borrowing Base Certificate
signed by a Responsible Officer in substantially the
form of EXHIBIT C hereto, together
-3-
with aged listings of accounts.""
and inserting in lieu thereof the following:
"Borrower shall deliver to Bank, within twenty (20)
days after the last day of each month through the
month ending March 31, 1999, and within twenty-five
(25) days after the end of each month thereafter, but
only with respect to months which either (i)
Obligations are outstanding, or (ii) Credit
Extensions were made, a Borrowing Base Certificate
signed by a Responsible Officer in substantially the
form of EXHIBIT C hereto, together with aged listings
of accounts, PROVIDED HOWEVER, that the Borrower
shall not be obligated to deliver the foregoing prior
to the Bridge Maturity Date."
7. The Loan Agreement shall be amended by deleting the following
text appearing as the third paragraph of Section 6.3 entitled
"Financial Statements, Reports, Certificates":
"Within twenty five (25) days after the last day of
each month, beginning with the first month after the
Bridge Maturity Date, Borrower shall deliver to Bank
a Compliance Certificate signed by a Responsible
Officer in substantially the form of EXHIBIT D
hereto."
and inserting in lieu thereof the following:
"Within twenty five (25) days after the last day of
each month, beginning with the first month after the
Bridge Maturity Date, Borrower shall deliver to Bank
a Compliance Certificate signed by a Responsible
Officer in substantially the form of EXHIBIT D hereto
PROVIDED HOWEVER, that the Borrower shall not be
obligated to deliver the foregoing prior to the
Bridge Maturity Date."
8. The Loan Agreement shall be amended by deleting the following
text appearing as Sections 6.8 and 6.9 thereof:
"6.8 ADJUSTED 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: (i)
1.50 to 1.0 as of last day of the month ending
November 30, 1998, (ii) 1.25 to 1.0 as of last day of
each month thereafter through the month ending
February 28, 1999, and (iii) 1.50 to 1.0 as of the
last day of each month thereafter. The Quick Ratio
shall be calculated net of deferred revenue.
-4-
6.9 TANGIBLE NET WORTH. Borrower shall maintain, as
of the last day of each quarter, a Tangible Net Worth
of not less than the aggregate of (i) One Million
Five Hundred Thousand Dollars ($1,500,000.00), PLUS
(ii) thirty percent (30.0%) of the amount of funds
received by Borrower from any new equity issued by
Borrower."
and inserting in lieu thereof the following:
"6.8 ADJUSTED QUICK RATIO. Borrower shall maintain,
as of the last day of each calendar month commencing
with the first calendar month following the Bridge
Maturity Date, a ratio of Quick Assets to Current
Liabilities of at least: 1.50 to 1.0. The Quick Ratio
shall be calculated net of deferred revenue.
6.9 TANGIBLE NET WORTH. Borrower shall maintain, as
of the last day of each quarter commencing with the
first calendar quarter following the Bridge Maturity
Date, a Tangible Net Worth of not less than the
aggregate of (i) One Million Three Hundred Thousand
Dollars ($1,300,000.00), PLUS (ii) forty percent
(40.0%) of the amount of funds received by Borrower
from any new equity issued by Borrower."
9. The Loan Agreement shall be amended by inserting the following
text appearing as a new Section 6.10 thereof:
"6.10 CAPITALIZATION EVENT. Borrower shall provide
the Bank with evidence, such evidence being
satisfactory to the Bank, that Borrower has completed
the Capitalization Event on or before May 27, 1999."
10. The Borrower hereby ratifies, confirms and reaffirms, all and
singular, the terms and conditions of a certain Negative
Pledge Agreement dated as of November 5, 1997 between Borrower
and Bank, and acknowledges, confirms and agrees that said
Negative Pledge Agreement shall remain in full force and
effect.
4. FEE. Borrower shall pay to Bank a modification fee equal to Ten Thousand
Dollars ($10,000.00) to access the first $500,000.00 of the 1999 Bridge Line
established pursuant to this Loan Modification Agreement, 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 Loan Documents. In addition, the Borrower
shall pay additional fees equal to (i) Seven Thousand Five Hundred ($7,500.00)
Dollars in the event aggregate Bridge Advances under the Committed Bridge Line
at anytime exceed $500,000.00, and (ii) Eight Thousand Seven Hundred Fifty
($8,750.00) Dollars in the event Bridge Advances under the Committed Bridge Line
at anytime exceed $1,000,000.00. All fees hereunder shall be deemed fully earned
as of the date hereof.
-5-
5. WARRANTS. The Borrower has on this date agreed to issue certain warrants to
the Bank. The issuance of such warrants shall not constitute a waiver of any
defaults now existing or hereafter arising or a consent by the Bank to any
extension of the Bridge Maturity Date.
6. INTELLECTUAL PROPERTY COLLATERAL. The Borrower has on this date granted to
the Bank a security interest in the Borrower's Intellectual Property Collateral
(as such term is defined in the Intellectual Property Security Agreement of even
date by and between the Bank and the Borrower). Notwithstanding anything to the
contrary contained in this Loan Modification Agreement or any of the Existing
Loan Documents, the Bank acknowledges and agrees that the Bank's lien upon the
Intellectual Property Collateral shall be terminated upon (i) repayment in full
of all Bridge Advances and all accrued interest and fees thereon, and (ii)
termination of the 1999 Bridge Line such that the Bank has no further obligation
to make Bridge Advances thereunder.
7. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
8. 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.
9. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it is not
aware of any defenses against the obligations to pay any amounts under the
Indebtedness.
10. 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.
11. 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.
-6-
12. 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:
CENTRA SOFTWARE, INC. SILICON VALLEY BANK, DOING BUSINESS AS
SILICON VALLEY EAST
By: /s/ XXXXXXX X. XXXXXXX By: /s/ XXXX X. XXXXXXX
------------------------- -----------------------------
Name: XXXXXXX X. XXXXXXX Name: XXXX X. XXXXXXX
----------------------- ---------------------------
Title: CFO Title: SVP
---------------------- --------------------------
SILICON VALLEY BANK
By: /s/ XXXXX [ILLEGIBLE]
-----------------------------
Name: Xxxxx [Illegible]
---------------------------
Title: Loan Officer
--------------------------
(signed in Santa Xxxxx County,
California)
-7-
