EXHIBIT 10(DD)
THIRD LOAN MODIFICATION AGREEMENT
This Third Loan Modification Agreement (this "Loan Modification Agreement")
is entered into as of April 21, 2001, by and between SILICON VALLEY BANK , a
California-chartered bank, with its principal place of business at ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and with a loan production office located
at Wellesley Office Park, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, doing business under the name "Silicon Valley East" ("Bank") and LTX
CORPORATION, a Massachusetts corporation with its chief executive office located
at LTX Park at ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Borrower").
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness and
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obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank
pursuant to a loan arrangement dated as of October 1, 1999, evidenced by, among
other documents, a certain Loan and Security Agreement dated October 1, 1999
between Borrower and Bank in the original principal amount of Ten Million
Dollars ($10,000,000.00), as amended by a certain Loan Modification Agreement
dated October 30, 2000, as further amended by a certain Second Loan Modification
Agreement dated December 29, 2000 (as amended, the "Loan Agreement").
Capitalized terms used but not otherwise defined herein shall have the same
meaning as in the Loan Agreement.
Hereinafter, all indebtedness and obligations owing by Borrower to Bank shall be
referred to as the "Obligations".
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
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Collateral as described in the Loan Agreement and a certain Intellectual
Property Security Agreement between Borrower and Bank each dated October 1, 1999
(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 Obligations shall be referred to as the "Existing
Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
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Modification(s) to Loan Agreement.
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1. The Loan Agreement shall be amended by deleting the following
text appearing as Section 2.1.1 (a) thereof in its entirety:
"(a) Bank shall make Advances not exceeding (i) the
Committed Revolving Line or the Borrowing Base, whichever is
less, minus (ii) the amount of all outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit),
minus (iii) the FX Reserve, and minus (iv) the amount of
outstanding advances in excess of $5,000,000.00 made under
the A/R Purchase Agreement, but only to the extent not
sufficiently reserved therefore under the EXIM Agreement as
determined by the Borrowing Base Certificate to be delivered
to the Bank. Amounts borrowed under this Section may be
repaid and reborrowed during the term of this Agreement."
and inserting in lieu thereof the following:
"(a) Bank shall make Advances not exceeding (i) the
Committed Revolving Line or the Borrowing Base, whichever is
less, minus (ii) the amount of all outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit),
minus (iii) the FX Reserve. Amounts borrowed under this
Section may be repaid and reborrowed during the term of this
Agreement."
2. The Loan Agreement shall be amended by deleting the following
text appearing as
Section 2.3 (a) thereof in its entirety:
"(a) Interest Rate. Advances accrue interest on the
outstanding principal balance at a per annum rate one half
of one percentage point (0.50%) above the Prime Rate. After
an Event of Default, Obligations accrue interest at three
(3%) percent above the rate effective immediately before the
Event of Default. The interest rate increases or decreases
when the Prime Rate changes. Interest is computed on a 360
day year for the actual number of days elapsed."
and inserting in lieu thereof the following:
"(a) Interest Rate. Advances accrue interest on the
outstanding principal balance at a per annum rate equal to
the Prime Rate. After an Event of Default, Obligations
accrue interest at three (3%) percent above the rate
effective immediately before the Event of Default. The
interest rate increases or decreases when the Prime Rate
changes. Interest is computed on a 360 day year for the
actual number of days elapsed."
3. The Loan Agreement shall be amended by deleting the following
text appearing as Section 6.3 thereof in its entirety:
"6.3 Inventory; Returns. Borrower shall keep all Inventory
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in good and marketable condition, free from material
defects. Returns and allowances between Borrower and its
account debtors shall follow Borrower's customary practices
as they exist at the Closing Date. Borrower must promptly
notify Bank of all returns, recoveries, disputes and claims
that involve more than One Hundred Thousand Dollars
($100,000.00)."
and inserting in lieu thereof the following:
"6.3 Inventory. Borrower shall keep all Inventory in good
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and marketable condition, free from material defects.
Returns and allowances between Borrower and its account
debtors shall follow Borrower's customary practices as they
exist at the Closing Date."
4. The Loan Agreement shall be amended by deleting the following
text appearing as Section 6.6 thereof in its entirety:
"6.6 Primary Accounts. Borrower shall maintain its primary
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depository and operating accounts with Bank."
and inserting in lieu thereof the following:
"6.6 Operating Account. Borrower shall an operating
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account with Bank."
5. The Loan Agreement shall be amended by deleting the following
text appearing as Section 6.7 thereof in its entirety:
"6.7 Financial Covenants. Borrower shall maintain as of
the last day of each quarter, unless otherwise noted:
6.7.1 Quick Ratio. A ratio of Quick Assets to Current
Liabilities of at least
(i) 0.70 to 1.0 for the quarter ending July 31, 1999, (ii)
0.725 to 1.0 for the quarter ending October 31, 1999, (iii)
0.75 to 1.0 for the quarter ending January 31, 2000, (iv)
0.775 to 1.0 for the quarter ending, April 30, 2000, and (v)
0.80 to 1.0 for the quarter ending July 31, 2000 and for
each quarter thereafter.
6.7.2 Tangible Net Worth. A Tangible Net Worth of at least
(i) Fifty Nine Million Dollars ($59,000,000.00) plus (ii)
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seventy five percent (75%) of the sum of (A) the Borrower's
net income earned, as determined in accordance with GAAP,
consistently applied, for each quarter commencing with the
quarter ended July 31, 1999, and (B) all net proceeds
received by the Borrower after the Closing Date as the
result of any (1) issuance of equity by the Borrower or (2)
additional Subordinated Debt incurred by the Borrower.
6.7.3 Profitability. Borrower shall have a minimum net
profit of (i) Two Million Five Hundred Thousand Dollars
($2,500,000.00) for the fiscal quarter ending July 31, 1999,
and (ii) $1.00 for each fiscal quarter of year 2000 and
thereafter. Notwithstanding the foregoing, provided the
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Borrower maintains a cumulative profitability for all of
year 2000, the Borrower may have (i) a quarterly loss during
any quarter not to exceed Five Million Dollars
($5,000,000.00), and (ii) a second quarterly loss in year
2000 in an amount not to exceed Two Million Five Hundred
Thousand Dollars ($2,500,000.00), provided however that in
the event of a loss as set forth in the preceding clause
(ii), no further Credit Extensions shall be made hereunder,
and, provided no other Events of Default have occurred or
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exist, the terms and conditions of this Agreement shall
thereafter be automatically subject to the Bank's CFD
department and the Borrower shall execute such documents,
instruments, and agreements as the Bank may require to
convert this loan arrangement to the CFD Department upon
terms substantially similar to those set forth in documents
previously executed by the Borrower in connection with the
establishment of its loan arrangement dated October 26,
1998."
and inserting in lieu thereof the following:
"6.7 Financial Covenants. Borrower shall maintain as of
the last day of each quarter, unless otherwise noted:
6.7.1 Quick Ratio. A ratio of Quick Assets to Current
Liabilities of at least 1.50 to 1.0."
6.7.2 Tangible Net Worth. A Tangible Net Worth of at least
(i) Three Hundred Ten Million Dollars ($310,000,000.00) plus
----
(ii) seventy five percent (75%) of the sum of (A) the
Borrower's net income earned, as determined in accordance
with GAAP, consistently applied, for each quarter and (B)
all net proceeds received by the Borrower as the result of
any (1) issuance of equity by the Borrower or (2) additional
Subordinated Debt incurred by the Borrower.
6.7.3 Profitability. Borrower shall have no more than two
consecutive cumulative quarterly losses in excess of Thirty
Million Dollars ($30,000,000.00)."
6. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 13.1 thereof:
""Borrowing Base" is (i) eighty percent (80%) of Eligible
Accounts plus (ii)
ninety percent (90%) of Eligible Foreign Accounts, as
determined by Bank from Borrower's most recent Borrowing
Base Certificate."
and inserting in lieu thereof the following:
""Borrowing Base" is eighty percent (80%) of Eligible
Accounts and Eligible Foreign Accounts, as determined by
Bank from Borrower's most recent Borrowing Base
Certificate."
7. The Loan Agreement shall be amended by deleting the following
definition appearing in Section 13.1 thereof:
""Committed Revolving Line" is a Credit Extension of up to
Ten Million Dollars ($10,000,000.00)."
and inserting in lieu thereof the following:
""Committed Revolving Line" is a Credit Extension of up to
Fifteen Million Dollars ($15,000,000.00)."
8. The Loan Agreement shall be amended by deleting the following
definition appearing in Section 13.1 thereof:
""Eligible Foreign Accounts" are Eligible Accounts for which
the account debtor does not have its principal place of
business in the United States but are supported by letter(s)
of credit acceptable to Bank."
and inserting in lieu thereof the following:
""Eligible Foreign Accounts" are Eligible Accounts for which
the account debtor does not have its principal place of
business in the United States but (A) are supported by
letter(s) of credit acceptable to Bank or (B) the account
debtor is: Koninklijke Philips Electronics (Philips
Semiconductor), (ii) Infineon Technologies AG or (iii)
Texas Instruments."
9. The Loan Agreement shall be amended by deleting the following
definition appearing in Section 13.1 thereof:
""Revolving Maturity Date" is March 31, 2001."
and inserting in lieu thereof the following:
""Revolving Maturity Date" is March 31, 2002."
10. The Borrowing Base Certificate appearing as Exhibit C to the Loan
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Agreement is hereby replaced with the Borrowing Base Certificate
attached as Exhibit A hereto.
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11. The Compliance Certificate appearing as Exhibit D to the Loan
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Agreement is hereby replaced with the Compliance Certificate
attached as Exhibit B hereto.
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4. TERMINATION OF AVAILABILITY. Borrower hereby acknowledges and agrees that
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Borrower has no availability to request any advances under the Exim Agreement,
as such Exim Agreement has been terminated on or before the date hereof, except
for those obligations that specifically survive the repayment thereof.
Further, Bank and Borrower each acknowledge and agree that the A/R Purchase
Agreement has been cancelled and terminated and
is of no further force or effect.
5. TERMINATION OF INTELLECTUAL PROPERTY COLLATERAL. Borrower and Bank have
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this day entered into a certain Negative Pledge Agreement (the "Negative Pledge
Agreement") regarding the Borrower's Intellectual Property (as defined in the
Negative Pledge Agreement). The Bank hereby acknowledges and agrees that
Borrower's Intellectual Property is no longer included in the Collateral and
agrees at Borrower's request Bank will take all reasonable steps to terminate
Bank's interest therein. Notwithstanding the foregoing, the Collateral shall
include all accounts, license and royalty fees and other revenues, proceeds, or
income arising out of or relating to any of the Intellectual Property.
6. CONSENT TO CITIZENS BANK LOAN. The Borrower intends to enter into a loan
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arrangement with Citizens Bank of Massachusetts (the "Creditor") and incur debt
to the Creditor as a result thereof (the "Creditor Debt"), which Creditor Debt
will be secured by a first lien on certain deposit accounts and investment
property in the control of the Creditor (the "Creditor Lien"). The incurrence
of the Creditor Debt and the granting of the Creditor Lien are prohibited under
the terms of the Loan Agreement. Bank hereby consents to the incurrence by
Borrower of the Creditor Debt and the granting of the Creditor Lien and waives
any defaults or Events of Default which may occur solely as result of the
Borrower entering into such transaction. Such waiver shall only apply to
foregoing transaction and shall no way be construed as a waiver of any other
terms or conditions of the Loan Agreement.
7. FEES. Borrower shall pay to Bank a modification fee equal to Fifty-Six
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Thousand Two Hundred Fifty Dollars ($56,250.00), which fee shall be due on the
date hereof and shall be deemed fully earned as of the date hereof. The
Borrower shall also reimburse Bank for all legal fees and expenses incurred in
connection with this amendment to the Existing Loan Documents.
8. ADDITIONAL COVENANTS: RATIFICATION OF PERFECTION CERTIFICATE. Borrower
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shall not, without providing the Bank with thirty (30) days prior written
notice: (i) relocate its principal executive office or add any new offices or
business locations or keep any Collateral in any additional locations, or (ii)
change its state of formation, or (iii) change its organizational structure,
(iv) change its legal name, or (v) change any organizational number (if any)
assigned by its state of formation. In addition, the Borrower hereby certifies
that no Collateral is in the possession of any third party bailee (such as at a
warehouse), except for inventory, equipment and test fixtures at vendors which
supply Borrower and consigned systems or component thereof (all in the ordinary
course of Borrower's business). In the event that Borrower, after the date
hereof, intends to store or otherwise deliver the Collateral to such a bailee,
then Borrower shall receive the prior written consent of Bank and such bailee
must acknowledge in writing that the bailee is holding such Collateral for the
benefit of Bank. Borrower hereby ratifies, confirms and reaffirms, all and
singular, the terms and disclosures contained in a certain Perfection
Certificate dated as of October 1, 1999 between Borrower and Bank, and
acknowledges, confirms and agrees the disclosures and information above Borrower
provided to Bank in the Perfection Certificate have not materially changed, as
of the date hereof.
9. AUTHORIZATION TO FILE. Borrower hereby authorizes Bank to file financing
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statements without notice to Borrower, with all appropriate jurisdictions, as
Bank deems appropriate, in order to further perfect or protect Bank's interest
in the Collateral.
10. CONCERNING REVISED ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE. The Borrower
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affirms and reaffirms that notwithstanding the terms of the Security Documents
to the contrary, (i) that the definition of "Code", "UCC" or "Uniform Commercial
Code" as set forth in the Security Documents shall be deemed to mean and refer
to "the Uniform Commercial Code as adopted by The Commonwealth of Massachusetts
(presently, Mass. Gen. Laws. Ch. 106), may be amended and in effect from time to
time and (ii) the Collateral is all assets of the Borrower (with the exception
of Intellectual Property, as set forth in the Loan Agreement). In connection
therewith, the Collateral shall include, without limitation, the following
categories of assets as defined in the Code: goods (including inventory,
equipment and any accessions thereto), instruments (including promissory notes),
documents, accounts (including health-care-insurance receivables, and license
fees), chattel paper (whether tangible or electronic), deposit accounts, letter-
of-credit rights (whether or not the letter of credit is evidenced by a
writing),
commercial tort claims, securities and all other investment property, general
intangibles (including payment intangibles and software), supporting obligations
and any and all proceeds of any thereof, wherever located, whether now owned or
hereafter acquired.
11. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
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wherever necessary to reflect the changes described above.
12. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
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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 Obligations.
13. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
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defenses against the obligations to pay any amounts under the Obligations.
14. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
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existing Obligations, 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 Obligations pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Obligations. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Obligations. 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.
15. RIGHT OF SET-OFF. In consideration of Bank's agreement to enter into this
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Loan Modification Agreement, Borrower and any guarantor hereby reaffirm and
hereby grant to Bank, a lien, security interest and right of setoff as security
for all Obligations to Bank, whether now existing or hereafter arising upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Bank or any entity under the
control of Silicon Valley Bank or in transit to any of them. At any time after
the occurrence and during the continuance of an Event of Default, without demand
or notice, Bank may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower and any guarantor even though unmatured
and regardless of the adequacy of any other collateral securing the loan. ANY
AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT
TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS
RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.
16. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
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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 ▇▇▇▇▇ County, California.
17. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
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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).
[The remainder of this page is intentionally left blank]
This Loan Modification Agreement is executed as of the date first written
above.
("BORROWER")
LTX CORPORATION
By:______________________________________
Name:____________________________________
Title:___________________________________
("BANK")
SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By:______________________________________
Name:____________________________________
Title:___________________________________
SILICON VALLEY BANK
By:______________________________________
Name:____________________________________
Title:___________________________________
(signed in Santa ▇▇▇▇▇ County, California)
EXHIBIT A
BORROWING BASE CERTIFICATE
________________________________________________________________________________
Borrower: LTX Corporation Lender: Silicon Valley Bank
Commitment Amount: $15,000,000.00
________________________________________________________________________________
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ____________________ $ _____________
2. Additions (please explain on reverse) $ _____________
3. TOTAL ACCOUNTS RECEIVABLE $ _____________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $ _____________
5. Balance of 50% over 90 day accounts $ _____________
6. Credit balances over 90 days $ _____________
7. Concentration Limits $ _____________
8. Foreign Accounts (excluding Eligible Foreign Accounts) $ _____________
9. Governmental Accounts $ _____________
10. Contra Accounts $ _____________
11. Promotion or Demo Accounts $ _____________
12. Intercompany/Employee Accounts $ _____________
13. Other (please explain on reverse) $ _____________
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $ _____________
15. Eligible Accounts (#3 minus #14) $ _____________
16. LOAN VALUE OF ACCOUNTS ( 80% of #15) $ _____________
BALANCES
17. Maximum Loan Amount $15,000,000.00
18. Total Funds Available [Lesser of #17 or #16] $ _____________
19. Present balance owing on Line of Credit $ _____________
20. Outstanding under Sublimits $ _____________
21. RESERVE POSITION (#18 minus #19 and #20) $ _____________
The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.
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COMMENTS: BANK USE ONLY
By: ___________________________ Received by: _____________________
Authorized Signer Authorized signer
Date: ____________________________
Verified: ________________________
Authorized signer
Date: ____________________________
Compliance Status: Yes No
3
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EXHIBIT B
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: LTX CORPORATION
The undersigned authorized officer of LTX CORPORATION certifies that
under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the "Agreement"), (i) Borrower is in complete compliance for
the period ending _______________ with all required covenants except as noted
below and (ii) all representations and warranties in the Agreement are true and
correct in all material respects on this date. Attached are the required
documents supporting the certification. The Officer certifies that these are
prepared in accordance with Generally Accepted Accounting Principles (GAAP)
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer acknowledges that no borrowings
may be requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is
determined not just at the date this certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies"
column.
Reporting Covenant Required Complies
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Quarterly financial statements Quarterly within 45 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
10-Q, 10-K and 8-K Within 5 days after filing with SEC Yes No
A/R Agings Monthly within 20 days Yes No
Financial Covenant Required Actual Complies
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Maintain on a Quarterly Basis:
Minimum Quick Ratio 1.50:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth $310,000,000.00* $________ Yes No
Profitability (Maximum Losses) ($**) (________)$ Yes No
*Subject to increase as set forth in Section 6.7.2 of the Agreement.
**See Section 6.7.3 of the Agreement.
Comments Regarding Exceptions: See Attached.
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Sincerely, BANK USE ONLY
_____________________________ Received by: _____________________
Signature Authorized signer
_____________________________
Title Date: ____________________________
_____________________________
Date Verified: ________________________
Authorized signer
Date: ____________________________
Compliance Status: Yes No
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