LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of January 17, 1997
and is effective as of December 29, 1996, by and between Sierra Semiconductor
Corporation ("Borrower") whose address is 0000 Xxxx Xxxxx, Xxx Xxxx, XX 00000,
and Silicon Valley Bank ("Lender") whose address is 0000 Xxxxxx Xxxxx, Xxxxx
Xxxxx, XX 00000.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
owing by Borrower to Lender, Borrower is indebted to Lender pursuant to, among
other documents, a Promissory Note, dated June 25, 1991, in the original
principal amount of Five Million and 00/100 Dollars ($5,000,000.00) as amended
from time to time (the "Note" and sometime referred to as the "Line"), and a
Promissory Note, dated May 18, 1994, in the original principal amount of Three
Million and 00/100 Dollars ($3,000,000.00) as amended from time to time (the
"Term Loan"). Hereinafter, the Note and the Term Loan shall be referred to
collectively as, the "Notes". Pursuant to a Loan Modification Agreement, dated
July 1, 1996, the principal amount of the Line was increased to Twelve Million
Five Hundred Thousand and 00/100 Dollars ($12,500,000.00). The Notes, together
with other promissory notes from Borrower to Lender, are governed by the terms
of a Business Loan Agreement, dated June 25, 1991, as such agreement may be
amended from time to time, between Borrower and Lender (the "Loan Agreement").
Defined terms used but not otherwise defined herein shall have the same meanings
as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Lender shall be referred to
as the "Indebtedness".
2. In connection with the repayment of the Indebtedness, Borrower has agreed not
to sell, transfer, assign, mortgage, pledge, lease, grant a security interest
in, or encumber any of Borrower's assets without Lender's prior written consent
(which consent shall not be unreasonably withheld) (the "Non-hypothecation
Agreement"). Concurrently herewith, Borrower shall execute an Assignment of
Deposit Account agreement in favor of Lender against Borrower's specific Silicon
Valley Bank Certificates of Deposit.
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 the Note.
1. The principal amount of the Note is hereby decreased
to Ten Million and 00/100 Dollars($10,000,000.00).
2. The paragraph entitled "Payment" is hereby amended in
its entirety to read as follows:
From the date hereof until July 1, 1997 (the
"Maturity Date"), Borrower may request Advances
hereunder on a revolving basis. Prior to each
Advance, Borrower shall comply with the Conditions
Precedent to Each Advance (as described herein).
Following each Advance, Borrower shall pay regular
monthly payments of all accrued unpaid interest on
such Advance beginning February 1, 1997 and all
subsequent interest payments will be due on the same
day of each month thereafter through the earlier to
occur of (i) repayment of the Advance or (ii) the
Maturity Date. The outstanding principal balance of
all Advances plus all accrued interest not yet paid
will be due and payable on the Maturity Date.
Interest on this Note is computed on a 365/360 simple
interest basis; that is, by applying the ratio of the
annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance,
multiplied by the actual number of days the principal
balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place
as Lender may designate in writing. Unless otherwise
agreed or required by applicable law, payments will
be applied first to accrued unpaid interest, then to
principal, and any remaining amount to any unpaid
collection costs and late charges.
Whenever Borrower desires an Advance, Borrower will
notify Lender 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 A hereto. In addition to the foregoing,
Borrower shall comply with the Conditions Precedent
to Each Advance.
3. The following paragraph entitled "Conditions
Precedent to Each Advance" is hereby incorporated
to read as follows:
At any time from the date hereof through July 1,
1997, Borrower may request advances (including
issuing Standby Letters of Credit, Exchange Contracts
and any other extensions of credit for the benefit of
the Borrower) (each an "Advance" and collectively,
the "Advances") from Lender in an aggregate amount
not to exceed Ten Million and 00/100 Dollars
($10,000,000.00). To secure the Advances, Borrower
shall pledge to Lender cash to be held in a Silicon
Valley Bank Certificate of Deposit in an amount equal
to one hundred percent (100%) of each Advance, which
pledge shall remain in effect until Borrower's
obligations under the Note have been satisfied.
Borrower agrees to execute any and all documents
necessary to perfect Lender's security interest
therein.
4. The paragraph entitled "Variable Interest Rate" is
hereby amended in its entirety to read as follows:
VARIABLE INTEREST RATE. The interest rate to be
applied to each Advance under this Note shall be
based on the rate payable under each Certificate of
Deposit pledged to Lender to secure each Advance (the
"Index"). The Index is not necessarily the lowest
rate charged by Lender on its loans and is set by
Lender in its sole discretion. Lender will tell
Borrower the current Index rate of each Advance upon
Borrower's request. Borrower understands that Lender
may make loans based on other rates as well. The
interest rate change will not occur more often than
each time each Index is adjusted by Silicon Valley
Bank. The interest rate to be applied to the unpaid
principal balance of each Advance under this Note
will be at a rate of 3.000 percentage point over such
Index. NOTICE: Under no circumstances will the
interest rate on each Advance under this Note be more
than the maximum rate allowed by applicable law.
B. Modification(s) to Loan Agreement.
1. The paragraph entitled "Financial Covenants" is
hereby amended to read, in its entirety:
Borrower shall maintain, on a quarterly basis,
minimum cash equal to three (3) times the then
current outstanding principal balance of the Term
Loan.
2. The paragraph entitled "Borrowing Base Formula" is
hereby deleted in its entirety.
3. The paragraph entitled "Accounts Receivable and
Accounts Payable" is hereby deleted in its entirety.
4. The provision allowing Borrower to enter into
acquisitions in the section entitled "Negative
Covenants" is amended as follows:
Borrower may enter into acquisitions with other
companies provided the cash expended by such
acquisitions shall not exceed $1,000,000.00, in the
aggregate.
5. Borrower shall deliver to Lender, quarterly
Compliance Certificates prepared by Borrower within
thirty (30) days (rather than 45 days) after the end
of each quarter.
7. The paragraph entitled "Daylight Overdraft" is hereby
deleted in its entirety.
8. The paragraph entitled "Letters of Credit" is hereby
amended in its entirety to read as follows:
Subject to the terms and conditions of this
Agreement, Lender agrees to issue or cause to be
issued Letters of Credit for the account of Borrower
in an aggregate face amount not to exceed Ten Million
and 00/100 Dollars ($10,000,000.00) minus the then
outstanding principal balance of the Note, minus the
Foreign Exchange Reserve; provided that the face
amount of outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit) shall not
in any case exceed Ten Million and 00/100 Dollars
($10,000,000.00). provided that Borrower's Letter of
Credit reimbursement obligation shall be secured by
cash on terms defined herein and in the Assignment of
Deposit Account agreement of even date herewith. Each
such Letter of Credit shall have an expiry date no
later than one hundred eighty (180) days after the
maturity date of the Note. All such Letters of Credit
shall be, in form and substance, acceptable to Lender
in its sole discretion and shall be subject to the
terms and conditions of Lender's form of application
and Letter of Credit agreement.
Borrower shall indemnify, defend and hold Lender
harmless from any loss, cost, expense or liability,
including, without limitation, reasonable attorneys'
fees, arising out of or in connection with any
Letters of Credit.
Borrower may request that Lender issue a Letter of
Credit payable in a currency other than United States
Dollars. If a demand for payment is made under any
such Letter of Credit, Lender shall treat such demand
as an Advance to Borrower of the equivalent of the
amount thereof (plus cable charges) in United States
currency at the then prevailing rate of exchange in
San Francisco, California, for sales of that other
currency for cable transfer to the country of which
it is the currency.
Upon the issuance of any Letter of Credit payable in
a currency other than United States Dollars, Lender
shall create a reserve (the "Letter of Credit
Reserve") under the Note for Letters of Credit
against fluctuations in currency exchange rates, in
an amount equal to ten percent (10%) of the face
amount of such Letter of Credit. The amount of such
reserve may be amended by Bank from time to time to
account for fluctuations in the exchange rate. The
availability of funds under the Note shall be reduced
by the amount of such reserve for so long as such
Letter of Credit remains outstanding.
9. Notwithstanding the foregoing, the aggregate
outstanding under the Note, the Foreign Exchange
Reserve and the Letter of Credit Sublimit shall not
exceed Ten Million and 00/100 Dollars
($10,000,000.00).
X. Xxxxx of Security Interest.
In consideration of, among other things, Lender entering into
this Loan Modification Agreement, Borrower hereby grants to
Lender a security interest in specific Silicon Valley Bank
Certificates of Deposit as referenced in the Assignment of
Deposit Account agreement executed concurrently herewith.
Borrower acknowledges that Lender has given full new value for
Borrower's pledge of the Certificates of Deposit, as described
herein, such new value being Lender's agreement to release its
interest in the Non-hypothecation Agreement between Borrower
and Lender.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. Borrower shall pay to Lender a fee in the amount of Five
Thousand and 00/100 Dollars ($5,000.00) (the "Loan Fee") plus all out-of-pocket
expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that it has no defenses against the obligations to pay any amounts
under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below)
understands and agrees that in modifying the existing Indebtedness, Lender is
relying upon Borrower's representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Lender's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Lender to make any future modifications to
the Indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Lender and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Lender in writing. No maker, endorser,
or guarantor will be released by virtue of this Loan Modification Agreement. The
terms of this paragraph apply not only to this Loan Modification Agreement, but
also to all subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is December
29, 1996 and is conditioned upon Borrower's payment of the Loan Fee and delivery
of, among other things, an executed Assignment of Deposit Account agreement.
This Loan Modification Agreement is executed as of the date first
written above.
Borrower: Lender:
SIERRA SEMICONDUCTOR CORPORATION SILICON VALLEY BANK
By:/s/ Xxxxx X. Xxxxx By:
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Name: Xxxxx X. Xxxxx Name:
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Title: Senior V.P. Finance - CFO Title:
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