LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of February 28, 1996,
by and between Video Broadcasting Corporation (the "Borrower") whose address is
000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000 and Silicon Valley Bank, a
California-chartered bank ("Lender"), 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 Lender, Borrower is indebted to Lender pursuant to, among
other documents, a Promissory Note, dated March 6, 1995, in the original
principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) (the
"Note"). The Note, together with other promissory notes from Borrower to Lender,
is governed by the terms of a Letter Agreement, dated March 6, 1995, between
Borrower and Lender, as such agreement may be amended from time to time (the
"Loan Agreement").
Hereinafter, all indebtedness owing by Borrower to Lender shall be referred to
as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by a Commercial Security Agreement, dated March 6, 1995. Additionally,
and in connection with the repayment of the Indebtedness, Borrower has agreed
with Lender not to further encumber any of its intellectual property, pursuant
to a Negative Pledge Agreement dated March 6, 1995.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing payment 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 Note.
1. Payable in one payment of all outstanding principal plus all
accrued unpaid interest on February 27, 1997. In addition,
Borrower will pay regular monthly payments of all accrued unpaid
interest due as of each payment date beginning March 27, 1996 and
all subsequent interest payments will be due on the same day of
each month thereafter.
B. Modification(s) to Loan Agreement.
1. Numbered paragraph 1, entitled "Profitability" is hereby amended
to read, in its entirety as follows:
For the quarter ending March 31, 1996, Borrower shall not incur a
quarterly loss in excess of $100,000.00; for the quarter ending
June 30, 1996, Borrower shall achieve minimum profits of
$75,000.00; for the quarter ending September 30, 1996, Borrower
shall not incur a loss in excess of $150,000.00; and for the
quarter ending
December 31, 1996, Borrower shall achieve minimum profits of
$150,000.00. Notwithstanding the foregoing, Borrower may not
incur two consecutive quarterly losses.
2. Numbered paragraph 2, entitled "Minimum Equity" is hereby amended
to read, in its entirety:
Borrower shall maintain, on a monthly basis, a minimum tangible
net worth of $875,000.00.
3. Numbered paragraph 3, entitled "Leverage" is hereby amended to
read, in its entirety:
Borrower shall maintain, on a monthly basis, a maximum total debt
to tangible net worth ratio of 1.50 to 1.00.
4. Numbered paragraph 4, entitled "Liquidity" is hereby amended to
read, in its entirety:
Borrower shall maintain, on a monthly basis, a minimum quick
ratio of 1.25 to 1.00.
5. Lender shall conduct an audit of Borrower's books and records,
including, without limitation, Borrower's accounts receivable, at
least once per year. Borrower's deposit account will be debited
for the audit expense and a notification will be mailed to
Borrower.
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 Lender a fee in the amount of Three
Thousand and 00/100 ($3,000.00) (The "Loan Fee").
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of this date, 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. 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 Lender cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall be in Santa Xxxxx County, California.
8. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Lender (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Lender in California).
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: LENDER:
VIDEO BROADCASTING CORPORATION SILICON VALLEY BANK, doing
business as SILICON VALLEY EAST
By: /s/ J. Xxxxxx XxXxxxxxx By:_______________________________________
--------------------------- Name:_____________________________________
Name: J. Xxxxxx XxXxxxxxx Title:____________________________________
Title: Executive Vice Pres.
SILICON VALLEY BANK
By:_______________________________________
Name:_____________________________________
Title:____________________________________
(Signed at Santa Xxxxx County, California)
SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: Video Broadcasting Corporation
LOAN OFFICER: Xxx X'Xxxxxxxx
DATE: April 9, 1996
Loan Fee $3,000.00
FEES DUE $3,000.00
-------- =========
Please indicate the method of payment:
(x) A check for the total amount is attached.
( ) Debit DDA #__________________ for the total amount.
( ) Loan proceeds
/s/ J. Xxxxxx XxXxxxxxx 5/10/96
--------------------------------
Authorized Signer (date)
--------------------------------
Silicon Valley Bank (date)
Account Officer's Signature
[Copy of Video Broadcasting Corp. check]
[Silicon Letterhead]
March 6, 1995
Xx. Xxxxxx XxXxxxxxx
Chief Financial Officer
Video Broadcasting Corporation
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Dear Xx. XxXxxxxxx:
We are pleased to inform you that Silicon Valley Bank, a California-chartered
bank ("Bank") with its principal place of business at 0000 Xxxxxxxx Xxxxx, Xxxxx
Xxxxx, XX 00000 and with a loan production office located at Wellesley Office
Park, 00 Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000 doing business under the
name "Silicon Valley East", has approved a working capital line of credit of
$500,000 for the use of Video Broadcasting Corporation (the "Company") subject
to the following terms and to the Bank's periodic review. Unless renewed, this
line will expire on February 28, 1996. This commitment shall not become
effective unless and until an executed copy of this letter together with all
necessary accompanying documentation as well as the facility fee described below
has been returned to the Bank, which must take place within 21 days from the
date of this letter.
Borrowings under the working capital line shall be secured by a first security
interest in the Company's accounts receivable, inventory, and machinery,
equipment and all other assets and all monies and all other property in our
possession which the Bank may use to pay the Company's obligations.
Borrowings under this line shall bear interest at a rate per annum equal to the
Prime Rate plus 1%. The "Prime Rate" means the rate from time to time announced
and made effective by the Bank as its Prime Rate. The Company's borrowing rate
shall change as the Prime Rate changes. A facility fee of $3,000 as well as any
out-of-pocket expenses incurred by the Bank in connection with establishment of
this credit facility must be paid at the time the documents are returned to the
Bank. All interest will be charged monthly in arrears and will be calculated on
the basis of a 360-day year. The Bank shall be authorized to debit the Company's
principal account or any other account maintained by the Company with the bank
for any principal, interest or fees associated with the Company's credit
facility without prior notice.
The maximum available borrowings under this line will be the lesser of $500,000
or 75% of all of the Company's eligible domestic trade accounts receivable
within 90 days from invoice date, including government receivables to a maximum
of $50,000. A definition of eligible A/R accompanies this letter.
In order to monitor availability, the Bank asks that the Company submit within
15 days of each month-end duplicate Borrowing Base Certificates (BBC), an
accounts receivable aging, duplicate income statements and balance sheets, and
duplicate Certificates of Compliance. The BBC indicates the Company's borrowing
availability and the Certificate of Compliance asks you to confirm that the
Company is in compliance with the financial covenants and asks you to further
represent that you have no knowledge of any impending circumstances which would
take the Company out of compliance. Any advances hereunder or renewal hereof
will be made only if there exists no default
Page Two
under any loan documentation executed by the Company with the Bank. A default is
defined in the (accompanying) Promissory Note dated March 6, 1995.
The Bank reserves the right to have performed from time to time an examination
of the Company's books and records by an agent of the Bank. In no event shall
the Bank perform more than two examinations per annum unless the Company is in
default. The Company agrees to pay for the cost of this examination.
So long as this commitment remains outstanding, the Company agrees to maintain
the following covenants as well as any other covenants listed in the
(accompanying) Promissory Note dated March 6, 1995:
1. Profitability - (Tested Quarterly)
To report no two consecutive loss quarters
Maximum loss/Minimum earnings in Q1 '95 of ($100M).
Minimum earnings in Q2 '95 of $75M.
Maximum loss in Q3 '95 of ($150M).
Minimum earnings in Q4 '95, of $150M.
2. Minimum Equity - (Tested Monthly)
Maintain a minimum Tangible Net Worth (TNW) of $850M through 4/30/95; and $875
thereafter. TNW is defined as Stockholders' Equity plus Subordinated Debt (debt
which is formally subordinated to the Bank) less intangibles (including but not
limited to Goodwill, Capitalized Software and Excess Purchase Costs).
3. Leverage - (Tested Monthly) Maintain a ratio of Total Liabilities less
Subordinated Debt divided by TNW not to exceed 1.6:1 through 4/30/95; and 1.5:1
thereafter.
4. Liquidity - (Tested Monthly) Maintain a minimum Quick Ratio of 1.0:1 through
4/31/95; and 1.25:1 thereafter. Quick Ratio is defined as cash and receivables
divided by current liabilities including any borrowings under this facility.
5. Not directly or indirectly pledge, grant, create or permit to exist any
security interest, lien or other encumbrance upon any of the Company's assets,
including without limitation, the Borrower's Intellectual Property, except in
favor of the Bank.
6. To provide the Bank with duplicate unaudited monthly financial statements
prepared in accordance with generally accepted accounting principles and
duplicate audited annual (consolidated and consolidating) financial statements
certified by public accountants with an unqualified opinion, to be received 25
and 90 days respectively after the close of the period.
7. To provide the Bank with copies of all legal process served upon the Company,
and, at the request of the Bank, to provide the Bank with a copy of the Annual
management letter provided by the Company's auditors.
8. Maintain adequate fire and liability insurance satisfactory to the Bank, a
copy of which shall be forwarded to the Bank.
Page Three
9. Not to participate in any merger or consolidation or to pay any dividends
without the Bank's consent, which consent shall not be unreasonably withheld or
delayed.
10. Not to dispose of any material assets other than in the ordinary course of
business without the Bank's consent, which shall not be unreasonably withheld or
delayed.
11. To file all tax returns and to pay all taxes due.
12. Not to invest in any securities other than money market instruments
acceptable to the Bank.
13. Not to incur indebtedness for borrowed money, except for either a)
indebtedness to Silicon Valley Bank and Barclay's Bank or b) indebtedness
incurred for the purchase or lease of equipment, the aggregate of such
indebtedness for the purchase or lease of such equipment in an aggregate amount
not exceeding $250,000 at any given point in time.
14. Not to be in default of any other loan agreement with any other Bank.
15. To remain a duly organized corporation under the laws of Delaware, and not
to file for protection under the Bankruptcy Code.
16. All reasonable legal fees incurred will be for the account of the Company.
17. To reimburse the Bank for any reasonable expenses incurred by the Bank to
enforce the terms of this obligation.
18. Prior to closing you agree to provide the Bank with Articles of
Incorporation and a Certificate of Good Standing from the appropriate state
authorities.
If the Bank waives any rights under this Agreement, it will not affect any
future action the Bank may wish to take. This Agreement shall be binding upon
any of the Company's successors in interest. The laws of the Commonwealth of
Massachusetts shall apply to this Agreement. THE COMPANY 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 LETTER 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. (INITIAL HERE /s/) BANK AND COMPANY HEREBY WAIVE THE RIGHT TO ANY
JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER BANK OR
COMPANY AGAINST THE OTHER.
It is our understanding that the Company will maintain a reasonable portion of
its excess funds in its Silicon Valley Bank account.
Page Four
This Agreement shall become effective only when it shall have been executed by
the Company and the Bank (provided, however, in no event shall this Agreement
become effective until signed by an officer of the Bank in California).
We are delighted to expand our relationship with Video Broadcasting Corporation
and look forward to many successful years of working together.
Sincerely,
SILICON VALLEY BANK
By: /s/ Xxxxxxxx X. Xxxxxxx
---------------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: AVP/Operations Officer
SILICON VALLEY BANK, doing
business as SILICON VALLEY EAST
By: /s/ Xxxxxxxx Xxxxx
-------------------------------
Name: Xxxxxxxx Xxxxx
Title: Vice President
Agreed and Accepted this 24 day of April, 1995.
By: /s/ Xxxxxxxx Xxxxxxxxx By: /s/ J. Xxxxxx XxXxxxxxx
---------------------------- ----------------------------
Name: Xxxxxxxx Xxxxxxxxx Name: J. Xxxxxx XxXxxxxxx
Title: President Title: Executive Vice President
(initials)
enclosures:
1. Borrowing Base Certificate and Certificate of Compliance
2. Promissory Note
3. Security Documents
4. Account Opening Forms
5. Other ancillary forms and documents
ELIGIBLE DOMESTIC ACCOUNTS RECEIVABLE
"Eligible Domestic Accounts Receivable" means an account receivable owing
to the Company which met the following specifications at the time it came into
existence and continues to meet the same until it is collected in full:
(a) The account is not more than 90 days from the date of the invoice
thereof.
(b) The account arose from the performance of services or an outright sale
of goods by Company, such goods have been shipped to the account debtor, and
Company has possession of, or has delivered to Bank, shipping and delivery
receipts evidencing such shipment.
(c) The account is not subject to any prior assignment, claim, lien, or
security interest, and the Company will not make any further assignment thereof
or create any further security interest therein, nor permit the Company's right
therein to be reached by attachment, levy, garnishment or other judicial
process.
(d) The account is not subject to set-off, credit, allowance or adjustment
by the account debtor, except discount allowed for prompt payment, and the
account debtor has not contested his liability thereon and has not returned any
of the goods from the sale from which the account arose.
(e) The account arose in the ordinary course of Company's business and did
not arise from the performance of services or a sale of goods to a supplier or
employee of the Company.
(f) No notice of bankruptcy or insolvency of the account debtor has been
received by or is known to the Company.
(g) The Bank has not notified the Company that the account or account
debtor is unsatisfactory on the basis of the account debtor's financial
condition, operating performance, or credit history.
(h) Not more than 50% of the aggregate receivables of the account debtor
are over ninety (90) days from invoice.
(i) The aggregate accounts receivables from the account debtor do no exceed
25% of the total Eligible Receivables of the Company; that portion of the
account over the 25% level will be disqualified.
(j) The account debtor is not a Subsidiary of the Company or an officer or
employee of the Company or a Subsidiary.
(k) The account debtor is a person or entity located in the United States
or Canada and the account arose out of services rendered or goods delivered in
the United States or Canada.
