EXHIBIT 10.25
FIRST LOAN MODIFICATION AGREEMENT
This First Loan Modification Agreement is entered into as of March 8, 2000,
by and between NATURAL MICROSYSTEMS CORPORATION, a Delaware corporation with its
chief executive office located at 000 Xxxxxxxx Xxxxxxxxx, Xxxxxxxxxx,
Xxxxxxxxxxxxx ("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 May 14, 1999, evidenced by, among other documents, a
certain Loan and Security Agreement dated as of May 14, 1999 (the "Loan
Agreement"). The Loan Agreement established a working capital line of credit in
favor of the Borrower in the maximum principal amount of Seven Million Five
Hundred Thousand Dollars ($7,500,000.00) (the "Committed Revolving 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. 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 deleting the following
definition appearing in Section 1.1 thereof:
""Credit Extension" means each 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, Letter of Credit,
Exchange Contract, Cash Management Services or any other
extension of credit by Bank for the benefit of Borrower
hereunder."
2. The Loan Agreement shall be amended by deleting the following
definition 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 expenses except prepaid expenses, and (c) all
reserves not already deducted from assets, and (ii) Total
Liabilities; and (iii) Other Assets."
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and inserting in lieu thereof the following:
""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 expenses except prepaid expenses, and (c) all
reserves not already deducted from assets, and (ii) Total
Liabilities; and (iii) Other Assets, and (iv) tax assets,
and (v) security deposits."
3. The Loan Agreement shall be amended by incorporating the
following definitions into Section 1.1 thereof:
"Cash Management Services" are defined in Section 2.1.4.
"Exchange Contract" has the meaning set forth in Section
2.1.3.
"Letter of Credit" means a letter of credit or similar
undertaking issued by Bank pursuant to Section 2.1.2.
"Letter of Credit Reserve" has the meaning set forth in
Section 2.1.2.
"Foreign Exchange Reserve" has the meaning set forth in
Section 2.1.3.
4. The Loan Agreement shall be amended by deleting the following
text appearing as the first sentence of paragraph (a) of Section
2.1.1 entitled "Credit Extensions":
"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."
and inserting in lieu thereof the following:
"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: (i) the
Committed Revolving Line or the Borrowing Base, whichever is
less, minus (ii) the face amount of all outstanding Letters
of Credit (including drawn but unreimbursed Letters of
Credit), minus (iii) the Foreign Exchange Reserve, minus
(iv) the outstanding Cash Management Services, and minus (v)
the aggregate outstanding Advances hereunder."
5. The Loan Agreement shall be amended by inserting after Section
2.1.1 thereof the following new section:
"2.1.2 Letters of Credit.
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(a) Subject to the terms and conditions of this Agreement,
Bank agrees to issue or cause to be issued Letters of Credit
for the account of Borrower in an aggregate outstanding face
amount not to exceed (i) the Committed Revolving Line or the
Borrowing Base, whichever is less, minus (ii) the Foreign
Exchange Reserve, minus (iii) the outstanding Cash
Management Services, and minus (iv) the then outstanding
principal balance of the Advances; provided that the face
amount of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit
Reserve) shall not in any case exceed Seven Million Five
Hundred Thousand Dollars ($7,500,000.00). Each Letter of
Credit shall have an expiry date no later than one hundred
eighty (180) days after the Maturity Date provided that
Borrower's Letter of Credit reimbursement obligation shall
be secured by cash on terms acceptable to Bank at any time
after the Maturity Date if the term of this Agreement is not
extended by Bank. All Letters of Credit shall be, in form
and substance, acceptable to Bank in its sole discretion and
shall be subject to the terms and conditions of Bank's form
of standard Application and Letter of Credit Agreement.
(b) The obligation of Borrower to immediately reimburse
Bank for drawings made under Letters of Credit shall be
absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this
Agreement and such Letters of Credit, under all
circumstances whatsoever. Borrower shall indemnify, defend,
protect, and hold Bank 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.
(c) Borrower may request that Bank 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, Bank 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.
(d) Upon the issuance of any letter of credit payable in a
currency other than United States Dollars, Bank shall create
a reserve (the "Letter of Credit Reserve") under the
Committed Revolving Line 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
Committed Revolving Line shall be reduced by the amount of
such reserve for so long as such letter of credit remains
outstanding."
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6. The Loan Agreement shall be amended by inserting after Section
2.1.2 thereof the following new section:
"2.1.3 Foreign Exchange Contract; Foreign Exchange
Settlements.
(a) Subject to the terms of this Agreement, Borrower may
enter into foreign exchange contracts (the "Exchange
Contracts") not to exceed an aggregate amount of Seven
Million Five Hundred Thousand Dollars ($7,500,000.00) (the
"Contract Limit"), pursuant to which Bank shall sell to or
purchase from Borrower foreign currency on a spot or future
basis. Borrower shall not request any Exchange Contracts at
any time it is out of compliance with any of the provisions
of this Agreement. All Exchange Contracts must provide for
delivery of settlement on or before the Maturity Date. The
amount available under the Committed Revolving Line at any
time shall be reduced by the following amounts (the "Foreign
Exchange Reserve") on any given day (the "Determination
Date"): (i) on all outstanding Exchange Contracts on which
delivery is to be effected or settlement allowed more than
two business days after the Determination Date, 10% of the
gross amount of the Exchange Contracts; plus (ii) on all
outstanding Exchange Contracts on which delivery is to be
effected or settlement allowed within two business days
after the Determination Date, 100% of the gross amount of
the Exchange Contracts.
(b) Bank may, in its discretion, terminate the Exchange
Contracts at any time (i) that an Event of Default occurs or
(ii) that there is no sufficient availability under the
Committed Revolving Line and Borrower does not have
available funds in its bank account to satisfy the Foreign
Exchange Reserve. If Bank terminates the Exchange
Contracts, and without limitation of any applicable
indemnities, Borrower agrees to reimburse Bank for any and
all fees, costs and expenses relating thereto or arising in
connection therewith.
(c) Borrower shall not permit the total gross amount of
all Exchange Contracts on which delivery is to be effected
and settlement allowed in any two business day period to be
more than One Million Dollars ($1,000,000.00) (the
"Settlement Limit") nor shall Borrower permit the total
gross amount of all Exchange Contracts to which Borrower is
a party, outstanding at any one time, to exceed the Contract
Limit. Notwithstanding the above, however, the amount which
may be settled in any two (2) business day period may be
increased above the Settlement Limit up to, but in no event
to exceed, the amount of the Contract Limit under either of
the following circumstances:
(i) if there is sufficient availability under the
Committed Revolving Line in the amount of the Foreign
Exchange Reserve as of each Determination Date,
provided that Bank in advance shall reserve the full
amount of the Foreign Exchange Reserve against the
Committed Revolving Line; or
(ii) if there is insufficient availability under the
Committed Revolving Line, as to settlements within any
two (2) business day period, provided that Bank, in its
sole discretion, may: (A) verify good funds overseas
prior to crediting Borrower's deposit account with Bank
(in the case of Borrower's sale of foreign currency);
or (B) debit Borrower's deposit account with Bank prior
to delivering foreign currency overseas (in the case of
Borrower's purchase of foreign currency).
(d) In the case of Borrower's purchase of foreign
currency, Borrower in advance shall instruct Bank upon
settlement either to treat the settlement amount as an
advance under the Committed Revolving Line, or to debit
Borrower's account for the amount settled.
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(e) Borrower shall execute all standard from applications
and agreements of Bank in connection with the Exchange
Contracts and, without limiting any of the terms of such
applications and agreements, Borrower will pay all standard
fees and charges of Bank in connection with the Exchange
Contracts.
(f) Without limiting any of the other terms of this
Agreement or any such standard form applications and
agreement of Bank, Borrower agrees to indemnify Bank and
hold it harmless, from and against any and all claims,
debts, liabilities, demands, obligations, actions, costs and
expenses (including, without limitation, attorneys' fees of
counsel of Bank's choice), of every nature and description
which it may sustain or incur, based upon, arising out of,
or in any way relating to any of the Exchange Contracts or
any transactions relating thereto or contemplated thereby."
7. The Loan Agreement shall be amended by inserting after Section
2.1.3 thereof the following new section:
"2.1.4 Cash Management Sublimit. Borrower may use up to
Seven Million Five Hundred Thousand Dollars ($7,500,000.00)
for Bank's Cash Management Services, which may include
merchant services, direct deposit of payroll, business
credit card, and check cashing services identified in the
Cash Management Services Agreement (the "Cash Management
Services"). All amounts Bank pays for any Cash Management
Services shall be treated as an Advance under the Committed
Revolving Line."
8. The Loan Agreement shall be amended by deleting the following
text appearing as Section 2.2 entitled "Overadvances":
"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."
and inserting in lieu thereof the following:
"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, 2.1.2, 2.1.3 and 2.1.4 of this Agreement is
greater than: (i) the Committed Revolving Line or the
Borrowing Base, whichever is less, minus (ii) the face
amount of all outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit), minus (iii) the Foreign
Exchange Reserve, and minus (iv) the outstanding Cash
Management Services, Borrower shall immediately pay to Bank,
in cash, the amount of such excess."
9. The Loan Agreement shall be amended by deleting the following
text appearing as paragraph (a) of Section 2.3 entitled "Interest
Rate":
"(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 Bank's Prime Rate plus one percent (1.0%)
per annum."
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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 Bank's Prime Rate, plus one percent (1.0%).
Notwithstanding the foregoing, upon the completion of a
secondary public offering of Borrower's stock, any Advances
shall bear interest (except as set forth in Section 2.3(b)),
on the average daily balance thereof, at a per annum rate
equal to the Bank's Prime Rate."
10. For purposes of the definition of Unused Committed Revolving Line
Facility Fee appearing in Section 2.5(a), all issued but undrawn
Letters of Credit shall be considered "advanced".
11. The Loan Agreement shall be amended by deleting Sections 6.8, 6.9
and 6.10 in their entirety and inserting in lieu thereof the
following:
"6.8 Quick Ratio. Borrower shall maintain, as of the last
day of each calendar month, commencing with the month ending
December 31, 1999, a ratio of Quick Assets to Current
Liabilities of at least 1.25 to 1.0. Notwithstanding the
foregoing, upon the completion of a secondary public
offering of the Borrower's stock, 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.
6.9 Tangible Net Worth. Borrower shall maintain, as of
the last day of each calendar quarter, commencing with the
quarter ending December 31, 1999, a Tangible Net Worth of
not less than the aggregate of: (i) Twenty-Eight Million
Dollars ($28,000,000.00), plus (ii) fifty percent (50%) of
the amount of cash received by Borrower from a public
offering of the Borrower's stock, plus (iii) fifty percent
(50%) of Borrower's quarterly net income.
6.10 Profitability. Borrower shall maintain, on a
quarterly basis: (i) a net loss of no greater than Thirteen
Million Dollars ($13,000,000.00) as of the last day of the
Fourth Quarter of 1999, and (ii) a net loss of no greater
than Three Million Five Hundred Thousand Dollars
($3,500,000.00) as of the last day of the First Quarter of
2000."
12. The Bank hereby consents to Borrower's acquisition of XXXX.xxx.
Except as specifically set forth in the foregoing consent, the
Bank hereby reserves all of its rights and remedies arising under
the Loan Agreement, as amended hereby.
13. The Loan Agreement shall be amended in Section 9.1 entitled
"Rights and Remedies" by incorporating therein immediately after
paragraph (i) the following two paragraphs:
"(j) Demand that Borrower (i) deposit cash with Bank in an
amount equal to the amount of any Letters of Credit
remaining undrawn, as collateral security for the repayment
of any future drawings under such Letters of Credit, and
Borrower shall forthwith deposit and pay such amounts, and
(ii) pay in advance all Letters of Credit fees scheduled to
be paid or payable over the remaining term of the Letters of
Credit; and
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(k) Liquidate any Exchange Contracts not yet settled and
demand that Borrower immediately deposit cash with Bank in
an amount sufficient to cover any losses incurred by Bank
due to liquidation of the Exchange Contracts at the then
prevailing market price."
14. The Borrower hereby ratifies, confirms and reaffirms, all and
singular, the terms and conditions of a certain Negative Pledge
Agreement dated as of May 14, 1999, between Borrower and Bank,
and acknowledges, confirms and agrees that said Negative Pledge
Agreement shall remain in full force and effect.
15. The Borrowing Base Certificate appearing as EXHIBIT C to the Loan
Agreement is hereby replaced with the Borrowing Base Certificate
attached as EXHIBIT A hereto.
16. 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. The Borrower shall reimburse Bank for all legal fees and expenses
incurred in connection with this amendment to the Existing Loan Documents.
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 has no
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 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).
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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:
NATURAL MICROSYSTEMS CORPORATION SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: By:
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Name: Name:
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Title: Title:
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SILICON VALLEY BANK
By:
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Name:
--------------------------------
Title:
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(signed in Santa Xxxxx County,
California)
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