AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT
Exhibit 10.1
This Amendment No. 2 to Loan and Security Agreement (this “Amendment”) is entered
into this 20th day of April, 2007, by and among Silicon Valley Bank, a California
corporation (“Bank”), and Covad Communications Group, Inc., a Delaware corporation
(“Group”), Covad Communications Company, a California corporation (“Company”), and
NextWeb, Inc., a California corporation (“Nextweb”, together with Company and Group,
individually a “Borrower” and collectively, “Borrowers”). Capitalized terms used herein without
definition shall have the same meanings given them in the Loan Agreement (as defined below).
Recitals
A. Borrowers and Bank have entered into that certain Loan and Security Agreement dated as of
April 13, 2006 (as may be amended, restated, or otherwise modified, the “Loan Agreement”), pursuant
to which the Bank has agreed to extend and make available to Borrowers certain advances of money.
B. Subject to the representations and warranties of Borrowers herein and upon the terms and
conditions set forth in this Amendment, Bank is willing to so amend the Loan Agreement.
agreement
NOW, THEREFORE, in consideration of the foregoing Recitals and intending to be legally bound,
the parties hereto agree as follows:
1. Amendments to Loan Agreement.
1.1 Section 6.7 Financial Covenants. Section 6.7 of the Loan Agreement is amended and restated
in its entirety with the following:
6.7 Financial Covenants.
(a) Borrowers shall maintain, measured as of the last day of each fiscal quarter
during the following periods, on a consolidated basis with respect to Group and its
Subsidiaries, Tangible Net Worth of at least the following:
Period |
Tangible Net Worth | |||
Effective Date through March 31, 2006 |
$ | 40,000,000 | ||
April 1, 2006 through June 30, 2006 |
$ | 35,000,000 | ||
July 1, 2006 through September 30, 2006 |
$ | 20,000,000 | ||
October 1, 2006 through December 31, 2006 |
$ | 10,000,000 | ||
Period |
Tangible Net Worth | |||
January 1, 2007 through March 31, 2007 |
$ | 32,000,000 | ||
April 1, 2007 through June 30, 2007 |
$ | 22,000,000 | ||
July 1, 2007 through September 30, 2007 |
$ | 16,000,000 | ||
October 1, 2007 through December 31, 2007 and each
fiscal quarter thereafter |
$ | 8,000,000 | ||
(b) Borrowers shall maintain, measured as of the last day of each month, on a consolidated
basis with respect to Group and its Subsidiaries:
Liquidity Coverage. A ratio of unrestricted cash and Cash Equivalents plus short term
and long term Investments (each determined according to GAAP) plus 25% of Eligible Accounts to the
outstanding Obligations hereunder of not less than (1) 1.50:1.00 measured as of the last day of
March, June, September and December and (2) 1.25:1.00 measured as of the last day of any other
month.
(c) Capital expenditures (as determined according to GAAP) shall not exceed (1) $30,000,000
for the fiscal year ending 2006, (2) $35,000,000 for the fiscal year ending 2007 and (3)
$35,000,000 for the fiscal year ending 2008; provided however, Fully Funded Capital Expenditures
will be excluded from such calculations.
1.2 Section 6.2(b) Financial Statements, Reports, Certificates. Section 6.2(b) of the Loan
Agreement is amended and restated in its entirety with the following:
(b) [Intentionally Blank]
1.3 The definition of “Revolving Line Maturity Date” in Section 13.1 of the of the Loan
Agreement is amended and restated in its entirety with the following::
“Revolving Line Maturity Date” is April 19, 2009.
1.4 Exhibit D, “Compliance Certificate” of the Loan Agreement is amended and restated in its
entirety and replaced with Exhibit A attached hereto.
2. Borrowers’ Representations And Warranties. Each Borrower represents and warrants
that:
(a) immediately upon giving effect to this Amendment (i) the representations and warranties
contained in the Loan Documents are true, accurate and complete in all material respects as of the
date hereof (except to the extent such representations and warranties relate to an earlier date, in
which case they are true and correct as of such date), and (ii) no Event of Default has occurred
and is continuing;
(b) each Borrower has the corporate power and authority to execute and deliver this Amendment
and to perform its obligations under the Loan Agreement, as amended by this Amendment;
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(c) the certificate of incorporation or articles of incorporation (as applicable), bylaws and
other organizational documents of each Borrower delivered to Bank on the Effective Date remain
true, accurate and complete and have not been amended, supplemented or restated and are and
continue to be in full force and effect;
(d) the execution and delivery by each Borrower of this Amendment and the performance by each
Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly
authorized by all necessary corporate action on the part of each Borrower;
(e) this Amendment has been duly executed and delivered by each Borrower and is the binding
obligation of such Borrower, enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or
other similar laws of general application and equitable principles relating to or affecting
creditors’ rights; and
(f) as of the date hereof, such Borrower has no defenses against the obligations to pay any
amounts under the Obligations. Each Borrower acknowledges that Bank has acted in good faith and
has conducted in a commercially reasonable manner its relationships with such Borrower in
connection with this Amendment and in connection with the Loan Documents.
Each Borrower understands and acknowledges that Bank is entering into this Amendment in
reliance upon, and in partial consideration for, the above representations and warranties, and
agrees that such reliance is reasonable and appropriate.
3. Limitation. The amendments set forth in this Amendment shall be limited precisely
as written and shall not be deemed (a) to be a modification of any other term or condition of the
Loan Agreement or of any other instrument or agreement referred to therein or to prejudice any
right or remedy which Bank may now have or may have in the future under or in connection with the
Loan Agreement or any instrument or agreement referred to therein; or (b) to be a consent to any
future amendment or modification to any instrument or agreement the execution and delivery of which
is consented to hereby. Except as expressly amended hereby, the Loan Agreement shall continue in
full force and effect.
4. Effectiveness. This Amendment shall become effective upon (a) the receipt by Bank
of this Amendment duly executed by Borrowers and reaffirmation of Unconditional Secured Guarantees
executed by each of the Guarantors attached hereto as Exhibit B, (b) receipt by Bank of an
amendment fee equal to $110,000, (c) receipt by Bank of certificates of Borrowers’ good standings
from their respective states of organization and (d) payment by Borrowers of all Bank Expenses
(including all reasonable attorneys’ fees and reasonable expenses) incurred through the date of
this Amendment.
5. Counterparts. This Amendment may be signed in any number of counterparts, and by
different parties hereto in separate counterparts, with the same effect as if
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the signatures to
each such counterpart were upon a single instrument. All counterparts shall be deemed an original
of this Amendment.
6. Integration. This Amendment and any documents executed in connection herewith or
pursuant hereto contain the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior agreements, understandings, offers and negotiations, oral or
written, with respect thereto and no extrinsic evidence whatsoever may be introduced in any
judicial or arbitration proceeding, if any, involving this Amendment; except that any financing
statements or other agreements or instruments filed by Bank with respect to Borrowers shall remain
in full force and effect.
7. Governing Law; Venue. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. Borrowers and Bank each
submit to the exclusive jurisdiction of the State and Federal courts in Santa Xxxxx County,
California.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the
date first written above.
BORROWERS: |
||||
| COVAD COMMUNICATIONS GROUP, INC. | ||||
By
|
/s/ Xxxxxx Xxxxxxx | |||
Name:
|
||||
Title:
|
Acting Chief Financial Officer | |||
| COVAD COMMUNICATIONS COMPANY | ||||
By
|
/s/ Xxxxxx Xxxxxxx | |||
Name:
|
||||
Title:
|
Acting Chief Financial Officer | |||
| NEXTWEB, INC. | ||||
By
|
/s/ Xxxxxx Xxxxxxx | |||
Name: Title: |
Acting Chief Financial Officer |
|||
| BANK: | ||||
| SILICON VALLEY BANK | ||||
By
|
/s/ Xxx Xxxxx | |||
Name:
|
||||
Title:
|
Senior Relationship Manager | |||
Effective Date: April 20, 2007
|
||||
EXHIBIT A
EXHIBIT D
COMPLIANCE CERTIFICATE
TO:
|
SILICON VALLEY BANK | Date: | ||
FROM:
|
COVAD COMMUNICATIONS GROUP, INC. and | |||
| COVAD COMMUNICATIONS COMPANY |
The undersigned authorized officers of COVAD COMMUNICATIONS GROUP, INC. (“Group”), COVAD
COMMUNICATIONS COMPANY (“Company”), and NEXTWEB, INC. (“NextWeb”, together with Company and Group,
each individually a “Borrower” and collectively, “Borrowers”) certify on behalf of the Borrower for
which the authorizing officer in question is signing that under the terms and conditions of the
Loan and Security Agreement among Borrowers and Bank (the “Agreement”), (1) such Borrower is in
complete compliance for the period ending with all required covenants except as
noted below, (2) there are no Events of Default regarding such Borrower, (3) all representations
and warranties in the Agreement regarding such Borrower are true and correct in all material
respects on this date except as noted below; provided, however, that such materiality qualifier
shall not be applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those representations and
warranties expressly referring to a specific date shall be true, accurate and complete in all
material respects as of such date, (4) such Borrower, and each of Group’s Subsidiaries, has timely
filed all required tax returns and reports, and each Borrower has timely paid all foreign, federal,
state and local taxes, assessments, deposits and contributions owed by such Borrower except as
otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have
been levied or claims made against such Borrower or any of Group’s Subsidiaries relating to unpaid
employee payroll or benefits of which such Borrower has not previously provided written
notification to Bank. Attached are the required documents supporting the certification. The
undersigned certify that these are prepared in accordance with generally GAAP consistently applied
from one period to the next except as explained in an accompanying letter or footnotes. The
undersigned acknowledge that no borrowings may be requested at any time or date of determination
that such Borrower is not in compliance with any of the terms of the Agreement, and that compliance
is determined not just at the date this certificate is delivered. Capitalized terms used but not
otherwise defined herein shall have the meanings given them in the Agreement.
Please indicate compliance status by circling Yes/No under “Complies” column.
Reporting Covenant |
Required | Complies | ||||
Monthly CC
|
Monthly within 30 days if any Obligations are outstanding at such time | Yes | No | |||
Annual financial statement (CPA Audited) + XX
|
XXX within 90 days | Yes | No | |||
10-Q, 10-K and 8-K
|
Within 5 days after filing with SEC | Yes | No | |||
Borrowing Base Certificate A/R & A/P Agings
when Advances are requested
|
Monthly within 30 days | Yes | No | |||
1
Financial Covenant |
Required | Actual | Complies | |||
Maintain on a Quarterly Basis: |
||||||
Minimum Tangible Net Worth |
Through 3/31/06 $40,000,000 | |||||
| 4/1/06-6/30/06 $35,000,000 | ||||||
| 7/1/06-9/30/06 $20,000,000 | ||||||
| 10/1/06-12/31/06 $10,000,000 | ||||||
| 1/1/07 3/31/07 $32,000,000 | ||||||
| 4/1/07-6/30/07 $22,000,000 | ||||||
| 7/1/07-9/30/07 $16,000,000 | ||||||
| 10/1/07-12/31/07 and each fiscal | ||||||
| quarter thereafter $8,000,000 | $ | Yes No | ||||
Maintain on a Monthly Basis: |
||||||
Minimum Liquidity Coverage |
1.50:1.00 measured as of the | |||||
| last day of March, June, | ||||||
| September and December | ||||||
| 1.25:1.00 measured as of the | ||||||
| last day of any other month | $ | $ | ||||
Capital Expenditures |
Fiscal year 2006 $30,000,000 | |||||
| Fiscal year 2007 $35,000,000 | ||||||
| Fiscal year 2008 $35,000,000 | $ | $ |
The following financial covenant analys[is][es] and information set forth in Schedule 1
attached hereto are true and accurate as of the date of this Certificate.
The following are the exceptions with respect to the certification above: (If no exceptions
exist, state “No exceptions to note.”)
| COVAD COMMUNICATIONS GROUP, INC. | BANK USE ONLY | |||||||
By
|
Received by: | |||||||
Name:
|
authorized signer | |||||||
Title:
|
Date: | |||||||
| COVAD COMMUNICATIONS COMPANY | ||||||||
By
|
Verified: | |||||||
Name:
|
authorized signer | |||||||
Title:
|
Date: | |||||||
| Compliance Status: Yes No | ||||||||
| NEXTWEB, INC. | ||||||||
By |
||||||||
Name: |
||||||||
Title: |
||||||||
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Schedule 1 to Compliance Certificate
Financial Covenants of Borrowers
Dated:
I. Tangible Net Worth (Section 6.7(a))
Required: $___
Effective Date through March 31, 2006 |
$ | 40,000,000 | ||
April 1, 2006 through June 30, 2006 |
$ | 35,000,000 | ||
July 1, 2006 through September 30, 2006 |
$ | 20,000,000 | ||
October 1, 2006 through December 31, 2006 |
$ | 10,000,000 | ||
January 1, 2007 through March 31, 2007 |
$ | 32,000,000 | ||
April 1, 2007 through June 30, 2007 |
$ | 22,000,000 | ||
July 1, 2007 through September 30, 2007 |
$ | 16,000,000 | ||
October 1, 2007 through December 31, 2007 and each fiscal
quarter thereafter |
$ | 8,000,000 |
Actual:
A. Tangible Net Worth |
$ |
Is line A equal to or greater than the corresponding amount for the quarter referenced above?
___ No, not in compliance
|
___ Yes, in compliance |
II. Liquidity Coverage (Section 6.7(b)
Required: 1.50:1.00 measured as of the last day of March, June, September and December
1.25:1.00 measured as of the last day of any other month
1.25:1.00 measured as of the last day of any other month
Actual:
A. Unrestricted cash and Cash Equivalents |
$ | |||
B. 25% of Eligible Accounts |
$ | |||
C. Short term and long term Investments |
$ | |||
D. Liquidity (line A plus line B plus line C) |
$ | |||
E. Aggregate outstanding Obligations |
$ | |||
F. Liquidity Coverage (line D divided by line E) |
Is line C equal to or greater than 1.50:1:00 or 1.25:1.00, as applicable?
___ No, not in compliance
|
___ Yes, in compliance |
III. Capital Expenditures (Section 6.7(c)
| Required: | $30,000,000 for the fiscal year ending 2006 $35,000,000 for the fiscal year ending 2007 $35,000,000 for the fiscal year ending 2008 Fully Funded Capital Expenditures will be excluded from such calculations. |
Actual:
Is the actual capital expenditures less than the corresponding amount for the quarter referenced
above?
| ___ No, not in compliance | ___ Yes, in compliance |
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EXHIBIT B
Reaffirmation of Unconditional Secured Guaranty
This Reaffirmation of Unconditional Secured Guaranty is entered into as of April 20, 2007, by
each of the undersigned (individually a “Guarantor” and collectively, the “Guarantors”) in favor of
SILICON VALLEY BANK (“Bank”).
Whereas, Guarantors executed and delivered to Bank the Unconditional Secured Guarantees dated
as of April 13, 2006 (the “Guaranty”) with respect to the obligations of Covad Communications
Group, Inc., a Delaware corporation (“Group”), Covad Communications Company, a
California corporation (“Company”), and NextWeb, Inc., a California corporation
(“Nextweb”, together with Company and Group, individually a “Borrower” and collectively,
“Borrowers”) under a Loan and Security Agreement dated as of April 13, 2006 (the “Loan Agreement”)
by and among Borrowers and Bank; and
Whereas, Borrowers and Bank are amending the Loan Agreement pursuant to that certain Amendment
No.2 to the Loan and Security Agreement dated as of the date hereof (“Amendment No. 2”) to, among
other things, increase the Revolving Line Maturity Date from April 13, 2008 to April 19, 2009
(undefined terms herein shall have the meanings provided in the Loan Agreement).
Now therefore, for valuable consideration, receipt of which is acknowledged, each Guarantor
hereby agrees as follows:
1. Reaffirmation of Guaranty. Each Guarantor hereby ratifies and reaffirms its obligations
under its Guaranty and agrees that none of the modifications to the Loan Agreement as set forth in
Amendment No. 2 shall impair such Guarantor’s obligations under its Guaranty or Bank’s rights under
its Guaranty.
2. Continuing Effect and Absence of Defenses. Each Guarantor acknowledges that its Guaranty
is still in full force and effect and that such Guarantor has no defenses, other than actual
payment of the guaranteed obligations, to enforcement of the Guaranty. Each Guarantor waives any
and all defenses to enforcement of the Guaranty that might otherwise be available as a result of
the amendment of the Loan Agreement.
| DIECA COMMUNICATIONS, INC. | ||||
| By: | ||||
| Title: | ||||
| LASER XXXX.XXX, INC. | ||||
| By: | ||||
| Title: |
