EXHIBIT 10.35
SECOND MODIFICATION AGREEMENT
This Second Modification Agreement ("Second Modification") is made as
of November 17, 1997, by and among NETWORK PERIPHERALS INC. a Delaware
corporation ("Borrower"), having its chief executive office at 0000 XxXxxxxx
Xxxxxxxxx, Xxxxxxxx, Xxxxxxxxxx 00000, SUMITOMO BANK OF CALIFORNIA, a California
banking corporation ("Sumitomo"), having its head office at 000 Xxxxxxxxxx
Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx, and each other lender which may hereafter
execute and deliver an instrument of assignment with respect to the Agreement
(defined below) (individually, the "Bank," and collectively, the "Banks") and
Sumitomo, as Agent.
RECITALS
A. Pursuant to a Credit Agreement, dated October 2, 1996, executed by
Borrower and Sumitomo ("Agreement"), Sumitomo extended a revolving line of
credit to Borrower up to $10,000,000.00 ("Line of Credit") with a $5,000,000.00
letter of credit subline. Borrower's obligation to repay advances on the Line of
Credit was evidenced by a Promissory Note, dated the same date as the Agreement,
executed by Borrower, in the principal amount of $10,000,000.00 ("Note"). To
secure the indebtedness of Borrower under the Credit Agreement and Note,
Borrower executed a Security Agreement, dated as of October 2, 1996 ("Security
Agreement").
B. Pursuant to a Modification Agreement ("Modification") dated August
29, 1997, by and among Borrower and Sumitomo, on behalf of itself and as Agent
for the Banks, the Agreement was modified on the terms contained therein.
C. As used herein, the term "Loan Documents" means all documents
described in these Recitals and those documents executed pursuant thereto or in
conjunction therewith.
D. Borrower seeks a further modification of the Agreement and Loan
Documents and Sumitomo is agreeable on the terms set forth below.
TERMS
NOW, THEREFORE, Borrower and Sumitomo agree as follows:
1. Capitalized Terms. Unless otherwise defined herein, capitalized
terms shall have the meanings set forth in the Agreement.
2. Adoption of Recitals. Borrower hereby represents and warrants that
each of the Recitals set forth above are true, accurate and complete.
3. Acknowledgement of Debt. Borrower acknowledges that there are no
claims, demands, offsets or defenses at law or in equity that would defeat or
diminish Sumitomo's right to collect the indebtedness evidenced by the Note and
Agreement and to proceed to enforce the rights and remedies available to
Sumitomo as provided in the Loan Documents or by law.
4. Modification of Loan Documents. The Loan Documents are hereby
supplemented, amended and modified as follows, which terms shall supersede and
prevail over any existing and conflicting provisions thereof:
(a) The following new Section 3.2(f) is added to the
Agreement:
(f) in the event Borrower has not reported a
profitable fiscal quarter on a consolidated basis to Sumitomo commencing with
the fiscal quarter ending September 30, 1997, Borrower shall deposit with
Sumitomo cash collateral, acceptable to Sumitomo in its sole discretion, equal
to or greater than the amount of the Loan or Letter of Credit requested by
Borrower. Such cash collateral shall remain on deposit with Sumitomo until such
time as Borrower reports a profitable fiscal quarter on a consolidated basis to
Sumitomo.
(b) Section 5.7(b) of the Agreement is deleted and replaced
with the following:
(b) Profitability. Except for the annual period
ending December 31, 1997, Borrower shall be profitable on an annual basis and
shall not have a net loss on a consolidated basis in any fiscal quarter as
measured quarterly for that fiscal quarter; provided, however, that for the
fiscal quarter ending December 31, 1997, Borrower may have a net loss on a
consolidated basis of not more than $2,000,000.00; that for the fiscal quarter
ending March 31, 1998, Borrower may have a net loss on a consolidated basis of
not more than $1,250,000.00; and that for the fiscal quarter ending June 30,
1998, Borrower may have a net loss on a consolidated basis of not more than
$650,000.00.
(c) Section 5.7(d) of the Agreement is deleted and replaced
with the following:
(d) Consolidated Tangible Net Worth. Borrower shall
maintain Consolidated Tangible Net Worth of at learnt $35,000,000.O0.
(d) The Loan Documents which recite they are security
instruments shall secure, in addition to any other obligations secured
thereby, the payment and performance by Borrower of all obligations under the
Agreement, the Note and the other Loan Documents, as amended by this Second
Modification, and any
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amendments, modifications, extensions or renewals of the same which are
hereafter agreed to in writing by the parties.
5. Conditions Precedent. Sumitomo's obligation to extend credit to
Borrower pursuant to this Second Modification is subject to the condition
precedent that Borrower strictly complies with the requirement that Borrower
deliver to Sumitomo, in form and substance satisfactory to Sumitomo, the
following documents and other things, duly executed by Borrower or as specified
below:
(a) This Agreement.
(b) Such other evidence as Sumitomo may require, to establish
the consummation of the transactions contemplated hereby, the taking of all
proceedings in connection therewith and u compliance with the conditions set
forth in this Second Modification.
6. Representations and Warranties. Except as previously disclosed to
Sumitomo, Borrower hereby represents and warrants that no default, Event of
Default, breach or failure of condition has occurred or exists, or would exist
with notice or lapse of time, or both, under any of the Loan Documents. Borrower
agrees that all representations and warranties of Borrower in the Agreement and
the other Loan Documents are true and correct as of the date of this Second
Modification, and shall survive the execution of this Second Modification.
7. Governing Law. This Second Modification shall be construed, governed
and enforced in accordance with the laws of the State of California.
8. Interpretation. No provision of this Second Modification is to be
interpreted for or against either Borrower or Sumitomo because that party, or
that party's representative, drafted such provision.
9. Full Force and Effect. Except as set forth herein, all other terms
and conditions of the Loan Documents shall remain in full force and effect,
including provisions on prepayment, late charges, default interest and attorneys
fees.
10. Reaffirmation. Borrower hereby acknowledges, reaffirms and confirms
its obligations under the Loan Documents, as amended and modified by this Second
Modification.
11. Entire Agreement. This Second Modification (and all documents
herein mentioned) and the Loan Documents constitute the entire, complete and
exclusive understanding between the parties regarding the Line of Credit and the
Collateral and may not be modified, amended, or terminated except by a written
agreement signed by the party against whom enforcement is sought. No
modification, change or supplement of the Loan Documents, this
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Second Modification or related agreements shall be binding on Sumitomo unless in
writing signed by a Corporate Officer and Manager of Sumitomo. No waiver or any
event of default shall be construed to be a waiver, acquiescence, or consent to
any preceding or subsequent event of default.
12. Documentation. In addition to the instruments and documents
mentioned or referred to herein, Borrower will, at its own cost and expense,
supply Sumitomo with such other instruments, documents, information and data as
are reasonably necessary for the purposes hereof, all of which shall be in form
and content as reasonably required by Sumitomo.
13. Counterparts. This Second Modification may be executed in multiple
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Second Modification
as of the day and year first above written.
SUMITOMO:
SUMITOMO BANK OF CALIFORNIA,
a California banking corporation
By: /s/ XXXX X. XXXXX
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XXXX X. XXXXX,
Vice President
AGENT:
SUMITOMO BANK OF CALIFORNIA,
a California banking corporation
By: /s/ XXXX X. XXXXX
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XXXX X. XXXXX,
Vice President
BORROWER:
NETWORK PERIPHERAL, INC.,
a Delaware corporation
By: /s/ XXXXXX XXXXX
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XXXXXX XXXXX,
Vice President and Chief Financial Officer
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