EXHIBIT 10.3
------------
SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement is executed on January 17,
2001, to be effective as of December 29, 2000, by and between DATAWATCH
CORPORATION, a Delaware corporation with its chief executive office located at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ("Borrower") and
SILICON VALLEY BANK, a California-chartered bank ("Bank"), with its principal
place of business at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and with a loan
production office located at One ▇▇▇▇▇▇ Executive Park, Suite 200, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, 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 March 16, 1999, evidenced by, among other documents, a certain
Amended and Restated Loan and Security Agreement dated as of March 16, 1999 by
and among the Borrower, Personics Corporation, and the Bank, as amended by a
certain First Loan Modification Agreement dated as of December 27, 1999 by
Borrower and Bank (as amended, the "Loan Agreement"). The Loan Agreement
established a working capital line of credit in favor of the Borrower in the
maximum principal amount of One Million Five Hundred Thousand Dollars
($1,500,000.00) (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 "Obligations".
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement, and a certain Intellectual
Property Security Agreement dated as of December 27, 1999 by Borrower in favor
of Bank (the "Intellectual Property Security Agreement") (hereinafter, the Loan
Agreement, as amended hereby, and the Intellectual Property Security Agreement,
together with any other collateral security granted to Bank, 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.
------------------------------
A. Modification(s) to Loan Agreement.
1. The Loan Agreement shall be amended by deleting the
Tangible Net Worth covenants appearing as Section
6.7(a)(ii) and Section 6.7(b)(ii) and inserting in
lieu thereof the following text to appear as Section
6.7(c) thereof:
"(c) Tangible Net Worth. The Borrower shall
maintain, as of the last day of each month,
commencing with the month ending September
30, 2000, a Tangible Net Worth of not less
than Four Million Five Hundred Thousand
Dollars ($4,500,000.00)."
2. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 13.1
thereof:
""EXIM Agreement" shall mean that certain
Export-Import Loan and Security Agreement
dated December 27, 1999 by and between the
Borrower and the Bank."
and inserting in lieu thereof the following:
""EXIM Agreement" shall mean that certain
Export-Import Loan and Security Agreement
dated December 27, 1999 by and between the
Borrower and the Bank, as amended by a
certain First Loan Modification Agreement
(EXIM Line) dated January 17, 2001, as may
be further amended from time to time."
3. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 13.1
thereof:
""Revolving Maturity Date" means December 27, 2000."
and inserting in lieu thereof the following:
""Revolving Maturity Date" means December 31, 2001."
4. The Compliance Certificate appearing as Exhibit D to
the Loan Agreement is hereby replaced with the
Compliance Certificate attached as Exhibit A hereto.
5. The Borrower ratifies, confirms and reaffirms, all
and singular, the terms and conditions of: (i) a
certain Collateral Assignment, Patent Mortgage and
Security Agreement dated as of November 1, 1994 (the
"1994 IP Agreement") between Borrower and Bank, and
acknowledges, confirms and agrees that said
Collateral Assignment, Patent Mortgage and Security
Agreement shall remain in full force and effect, and
(ii) a certain Intellectual Property Security
Agreement dated as of December 27, 1999 (the "1999 IP
Agreement") by Borrower in favor of Bank, and
acknowledges, confirms and agrees that said
Intellectual Property Security Agreement shall remain
in full force and effect.
The Borrower hereby acknowledges, confirms and agrees
that the Collateral under the 1994 IP Agreement and
the Intellectual Property Collateral under the 1999
IP Agreement shall be amended to include, without
limitation, the intellectual property owed by the
Borrower appearing on Exhibit B attached hereto and
made a part hereof.
4. FEE. Borrower shall pay to Bank a fee for the modification of the domestic
line equal to Twelve Thousand Five Hundred Dollars ($12,500.00), 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.
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 Obligations.
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 Obligations.
8. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
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
2
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.
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 ▇▇▇▇▇ 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).
3
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:
DATAWATCH CORPORATION SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------- --------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------- ------------------------------
Title: President Title: SVP
--------------------- -----------------------------
SILICON VALLEY BANK
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
Title: Loan Administrative Team Leader
--------------------------------------
(signed in Santa ▇▇▇▇▇ County, California)
4
EXHIBIT A
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: DATAWATCH CORPORATION
The undersigned authorized officer of DATAWATCH CORPORATION hereby
certifies that in accordance with 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 of Borrower stated in
the Agreement are true and correct in all material respects as of the date
hereof. Attached herewith are the required documents supporting the above
certification. The Officer further certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer expressly acknowledges that no
borrowings may be requested by the Borrower at any time or date of determination
that Borrower is not in compliance with any of the terms of the Agreement, and
that such 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
------------------ -------- --------
Financial Statements & CC Monthly within 35 days* Yes No
Annual (CPA Audited) FYE within 120 days Yes No
10-Q, 10-K and 8-K Within 5 days after filing w/ SEC Yes No
BBC & A/R Agings Monthly within 25 days* Yes No
*when Advances are outstanding or have been requested
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Adjusted Quick Ratio** 1.50:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth $4,500,000(begin 9/30/00) $________ Yes No
**only for months ending January, February, April, May, July, August, October and November
Maintain on a Quarterly Basis:
Minimum Adjusted Quick Ratio 1.75:1.0 _____:1.0 Yes No
================================
BANK USE ONLY
Received By:____________________
Date:________________
Reviewed By:____________________
Compliance Status: Yes / No
================================
Comments Regarding Exceptions:
Sincerely,
_______________________ Date:_______________
SIGNATURE
------------------------
TITLE
5
Exhibit B to Second Loan Modification Agreement
-----------------------------------------------
Trademark: QUETZAL/SC
Status: Pending
Application Number: 821,537
Country: Australia
Owner: Datawatch Corporation
Filed: 28-Jan-2000
Classes: 9
Trademark: QUETZAL/SC
Status: Pending
Application Number: 1,045,423
Country: Canada
Owner: Datawatch Corporation
Filed: 03-Feb-2000
Classes: 9