LOAN MODIFICATION AGREEMENT
THIS LOAN MODIFICATION AGREEMENT (this "Agreement") is entered into as
of the date last signed below by and between AXEDA SYSTEMS OPERATING COMPANY,
INC. ("Borrower") whose address is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and SILICON VALLEY BANK ("Lender") whose address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and a loan production office located at One Newton
Executive Park, Suite 200, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other indebtedness which may be
owing by Borrower to Lender, Borrower is indebted to Lender pursuant to, among
other documents, a Loan and Security Agreement, dated June 25, 2003 and a
schedule of terms attached thereto (the "Schedule")(as both may be amended from
time to time, collectively, the "Loan Agreement"). The Loan Agreement provides
for, among other things, a Committed Line in the original principal amount of
Two Million Dollars ($2,000,000) (the "Revolving Facility"). Hereinafter, all
indebtedness owing by Borrower to Lender shall be referred to as the
"Obligations."
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement and an Intellectual Property
Security Agreement dated June 25, 2003. Hereinafter, the above-described
security documents and guaranties, together with all other documents securing
repayment of the Obligations shall be referred to as the "Security Documents".
Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Obligations shall be referred to as the "Existing
Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS. Borrower and Lender have agreed to extend the
maturity of the Revolving Facility, and otherwise modify the Loan Agreement, all
as set forth in this Agreement.
A. Modifications to Revolving Facility.
1. From and after the date hereof, the definition of
"Trigger Event" set forth in Section 8 of the Loan
Agreement, is amended and restated in its entirety as
follows:
"Trigger Event" means the failure of Borrower to
maintain at any time a sum of unencumbered cash plus
Availability equal to or greater than (i) Two Million
Dollars ($2,000,000), or (ii) in the event any
amounts are outstanding for more than five (5) days
in any three month period, Four Million Dollars
($4,000,000).
2. From and after the date hereof, Section 4 of the
Schedule is amended and restated in its entirety as
follows:
4. MATURITY DATE (Section 6.1): June 23, 2005.
3. From and after the date hereof, the Minimum Tangible
Net Worth Covenant set forth in Section 5 of the
Schedule are amended and restated in its entirety as
follows:
Minimum Tangible Net Worth:
Borrower and Guarantor, collectively shall maintain a
minimum Tangible Net Worth, to be tested quarterly,
of not less than the sum of (a) and (b) as follows:
(a) The amount as of the date listed below:
Through - March 31, 2004 $2,500,000;
April 1 - June 30, 2004 $ 500,000;
July 1 - July 31, 2004 $ 1; August 1
- August 31, 2004 ($900,000);
September 1 - September 30, 2004
($500,000); and October 1, 2004 and
thereafter ($1,500,000);
plus
(b) Eighty percent (80%) of the net proceeds
from any issuance by the Borrower or
Guarantor of equity or subordinate debt
after the date hereof.
4. From and after the date hereof, the definition of
Tangible Net Worth set forth in Section 5 of the
Schedule is amended to add a new subparagraph (C) as
follows:
(C ) there shall be excluded from liabilities: all
financing-related liabilities as set out in the
consolidated balance sheet of Axeda Systems Inc. for
the quarter being tested.
5. From and after the date hereof, all references in the
Loan Agreement to the Compliance Certificate shall be
deemed to mean the Compliance Certificate attached
hereto.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. In consideration of Lender's agreement to extend the
Revolving Facility, Borrower shall pay to Lender upon the execution of this
Agreement, a commitment fee in the amount of Ten Thousand Dollars ($10,000) (the
"Loan Fee"), plus all out-of-pocket expenses, including legal fees.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor 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 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
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 Agreement in no way shall obligate Lender to make
any future modifications to the Indebtedness. Nothing in this 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 Agreement. The
terms of this paragraph apply not only to this Agreement, but also to all
subsequent loan modification agreements.
2
8. CONDITIONS. The effectiveness of this Agreement is conditioned upon
Borrower's payment of the Loan Fee and all fees required under Section 5 of this
Agreement.
9. WARRANT. Borrower shall, subject to Board approval from Axeda Systems Inc.,
deliver to Lender a warrant in form and substance acceptable to Lender, to
purchase $20,000 of the common stock of Axeda Systems Inc., at an exercise price
equal to $1.03 per share. Borrower shall use its best efforts to obtain such
Board approval and to deliver such warrant on or before May 20, 2004. In the
event the warrant is not approved and delivered to Lender by May 20, 2004, in
consideration of Lender's agreement to waive the requirement that the warrant be
delivered, Borrower shall on demand, pay Lender a non-refundable fee in the
amount of $40,000.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
3
This Agreement is executed as of the date first written above.
BORROWER: LENDER:
AXEDA SYSTEMS OPERATING COMPANY, INC. SILICON VALLEY BANK
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------ ---------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------- ---------------------
Title: EVP & CFO Title: Vice President
-------------------------------------- ---------------------
The undersigned hereby consent to the modifications to the Indebtedness pursuant
to this Loan Modification Agreement, consents to the terms of Paragraph 9 and
hereby ratifies all the provisions of the Unconditional Guaranty and confirms
that all provisions of that document are in full force and effect.
GUARANTOR:
AXEDA SYSTEMS INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Date: 5/12/04
----------------------- -----------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: EVP & CFO
4