Exhibit 10.2
FIFTH LOAN MODIFICATION AGREEMENT
This Fifth Loan Modification Agreement (this "Loan Modification
Agreement') is entered into as of May 24, 2006, by and between SILICON VALLEY
BANK, a California corporation, with its principal place of business at ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and with a loan production office
located at One ▇▇▇▇▇▇ Executive Park, Suite 200, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Bank") and VOXWARE, INC., a Delaware corporation with its
chief executive office located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ("Borrower").
1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of December 29, 2003,
evidenced by, among other documents, a certain Loan and Security Agreement dated
as of December 29, 2003, between Borrower and Bank, as amended by a certain
First Loan Modification Agreement dated as of May 28, 2004, by and between
Borrower and Bank, as amended by a certain Second Loan Modification Agreement
dated as of December 8, 2004, by and between Borrower and Bank, as amended by a
certain Third Loan Modification Agreement dated as of November 9, 2005, by and
between Borrower and Bank, and as further amended by a certain Fourth Loan
Modification Agreement dated as of January 20, 2006, but effective as of
December 26, 2005, by and between Borrower and Bank (as amended, the "Loan
Agreement"). Capitalized terms used but not otherwise defined herein shall have
the same meaning as in the Loan Agreement.
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations 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 Obligations shall be referred to as the "Existing
Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. MODIFICATIONS TO LOAN AGREEMENT.
1. The Loan Agreement shall be amended by deleting Section 6.2
entitled "Financial Statements, Reports Certificates" in its
entirety, and inserting in lieu thereof the following:
"6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Deliver to Bank: (i) as soon as available, but no
later than thirty (30) days after the last day of each month, a
company prepared consolidated balance sheet and income statement
covering Borrower's consolidated operations during the period
certified by a Responsible Officer and in a form acceptable to
Bank; (ii) as soon as available, but no later than one hundred
twenty (120) days after the last day of Borrower's fiscal year,
audited consolidated financial statements prepared under GAAP,
consistently applied, together with an unqualified opinion on
the financial statements from an independent certified public
accounting firm acceptable to Bank in its reasonable discretion;
(iii) within five (5) days of delivery, copies of all
statements, reports and notices made available to Borrower's
security holders or to any holders of Subordinated Debt; (iv) in
the event that Borrower becomes subject to the reporting
requirements under the Securities Exchange Act of 1934, as
amended, within five (5) days of filing, all reports on Form
10-K, 10-Q and 8-K filed with the Securities and Exchange
Commission or a link thereto on Borrower's or another website on
the Internet; (v) a prompt report of any legal actions pending
or threatened against Borrower or any of its Subsidiaries that
could result in damages or costs to Borrower or any of its
Subsidiaries of One Hundred Thousand Dollars ($100,000) or more;
(vi) annually, and as requested by Bank, Board approved
financial projections; (vii) prompt notice of an event that
materially and adversely affects the value of the intellectual
property; and (viii) other financial information reasonably
requested by Bank.
In the event the Guarantor Loan Arrangements are terminated for
any reason, such Guarantor shall deliver to Bank: (i) as soon as
available, but no later than thirty (30) days after the last day
of each month, management prepared consolidated balance sheet
and income statement covering Borrower's consolidated operations
during the period certified by a Responsible Officer and in a
form acceptable to Bank, and (ii) as soon as available, but no
later than one hundred twenty (120) days after the last day of
Borrower's fiscal year, audited consolidated financial
statements prepared under GAAP, consistently applied, together
with an unqualified opinion on the financial statements from an
independent certified public accounting firm reasonably
acceptable to Bank.
(b) Within thirty (30) days after the last day of each
month, deliver to Bank with the monthly financial statements, a
duly completed Compliance Certificate signed by a Responsible
Officer setting forth calculations showing compliance with the
financial covenants set forth in this Agreement."
2. The Loan Agreement shall be amended by deleting the amount of
"$25,000.00" appearing in Section 6.5 (Insurance) and inserting
the amount of "$50,000.00" in lieu thereof.
3. The Loan Agreement shall be amended by deleting the following
provision appearing as Section 6.11 thereof :
"6.11 FINANCIAL COVENANTS.
Borrower shall maintain, at all times, to be tested as
of the last day of each month, unless otherwise noted:
(a) ADJUSTED QUICK RATIO. To be tested as of the last day
of each month, beginning with the month ending November 30,
2005, Borrower shall maintain, an Adjusted Quick Ratio of at
least 1.5 to 1.0.
(b) MINIMUM TANGIBLE NET WORTH. Borrower shall maintain
a minimum Tangible Net Worth of: (i) (a) Three Million Two
Hundred Seventy-Five Thousand Dollars ($3,275,000.00) as of the
last day of each month which is not the final month in a
quarter, and (b) Three Million Seven Hundred Fifty Thousand
Dollars ($3,750,000.00) on the last day of each quarter, plus
(ii) beginning on June 30, 2006, and on an annual basis
thereafter, an amount equal to fifty percent (50.0%) of
Borrower's Net Income for the prior year, for any applicable
period, determined in accordance with GAAP."
and inserting in lieu thereof the following:
"6.11 FINANCIAL COVENANTS.
Borrower shall maintain, as of the last day of each
month, unless otherwise noted:
(a) MINIMUM CASH BALANCE. As of the Effective Date, and at
all times thereafter, Borrower shall maintain unrestricted and
unencumbered cash, in accounts
with the Bank or a Bank subsidiary, as directed by Bank, plus
any used portion of Availability Amount, collectively in amount
not less than One Million Five Hundred Thousand Dollars
($1,500,000.00), which shall be tested as of the last day of
each month.
(b) TANGIBLE NET WORTH. Commencing with the month ending
May 31, 2006, and as of the last day of each month thereafter, a
Tangible Net Worth of at least: (i) One Million Six Hundred
Thousand Dollars ($1,600,000.00) (with the exception of the
month ending January 31, 2007, which shall be Seven Hundred
Thousand Dollars ($700,000.00)), plus (ii) on a quarterly basis
beginning with the quarter ending June 30, 2006, an amount
equal to fifty percent (50.0%) of Borrower's Net Income for the
subject quarter, for any applicable period, determined in
accordance with GAAP. As used herein "Net Income" means, as
calculated on a consolidated basis for Borrower for any period
as to any date of determination, the net profit (or loss), after
provision for taxes for such period taken as a single accounting
period"
4. The Loan Agreement shall be amended by deleting the amount of
"$5,000.00" appearing in Section 7.2 (Changes in Business,
Ownership, Management or Business Locations), and inserting the
amount of "$10,000.00" in lieu thereof.
5. The Loan Agreement shall be amended by deleting Section 7.8
entitled "Subordinated Debt" in its entirety, and inserting in
lieu thereof the following:
"7.8 SUBORDINATED DEBT. (a) Make or permit any payment on any
Subordinated Debt, except under the terms of the subordination,
intercreditor, or other similar agreement to which such
Subordinated Debt is subject, or (b) amend any provision in any
document relating to the Subordinated Debt which would increase
the amount thereof or adversely affect the subordination thereof
to Obligations owed to Bank."
6. The Loan Agreement shall be amended by deleting Section 8.7
entitled "Judgments" in its entirety, and inserting in lieu
thereof the following:
"8.7 JUDGMENTS. A judgment or judgments for the payment
of money in an amount, individually or in the aggregate, of at
least Two Hundred Thousand Dollars ($200,000) (not covered by
independent third-party insurance) shall be rendered against
Borrower and shall remain unsatisfied and unstayed for a period
of ten (10) days after the entry thereof (provided that no
Credit Extensions will be made prior to the satisfaction or stay
of such judgment);"
7. The Compliance Certificate appearing as EXHIBIT C to the Loan
and Security Agreement is hereby replaced with the Compliance
Certificate attached as EXHIBIT A hereto.
4. FEES. The Borrower shall also reimburse Bank for all reasonable legal fees
and expenses incurred in connection with this amendment to the Existing Loan
Documents.
5. RATIFICATION OF INTELLECTUAL PROPERTY SECURITY AGREEMENT. Borrower hereby
ratifies, confirms and reaffirms, all and singular, the terms and conditions of
a certain Intellectual Property Security Agreement dated as of December 29,
2003, between Borrower and Bank, and acknowledges, confirms and agrees that said
Intellectual Property Security Agreement contains an accurate and complete
listing, in all material respects, of all Intellectual Property Collateral as
defined in said Intellectual Property Security Agreement, and shall remain in
full force and effect.
6. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
7. 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.
8. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that
Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever
did have, any offsets, defenses, claims, or counterclaims against Bank, whether
known or unknown, at law or in equity, all of them are hereby expressly WAIVED
and Borrower hereby RELEASES Bank from any liability thereunder.
9. 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 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.
10. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank.
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:
VOXWARE, INC. SILICON VALLEY BANK
By: /s/ ▇▇▇▇ Commons By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇ Commons Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Title: Chief Financial Officer Title: Relationship Manager
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The undersigned, VERBEX ACQUISITION CORPORATION, a Delaware corporation
("Guarantor") hereby: (i) ratifies, confirms and reaffirms, all and singular,
the terms and conditions of (A) a certain Unlimited Guaranty of the obligations
of Borrower to Bank dated January 27, 2004 (the "Guaranty"), (B) a certain
Security Agreement by Guarantor in favor of Bank dated January 27, 2004 (the
"Security Agreement");(ii) acknowledges, confirms and agrees that the Guaranty,
and Security Agreement shall remain in full force and effect and shall in no way
be limited by the execution of this Loan Modification Agreement or any other
documents, instruments and/or agreements executed and/or delivered in connection
herewith; and (iii) acknowledges, confirms and agrees that the obligations of
Borrower to Bank under the Guaranty include, without limitation, all Obligations
of Borrower to Bank under the Loan Agreement, as amended by this Loan
Modification Agreement.
VERBEX ACQUISITION CORPORATION
/s/ ▇▇▇▇ Commons
-------------------------------
▇▇▇▇ Commons
Chief Financial Officer
EXHIBIT A
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK Date: ____________________
FROM: VOXWARE, INC.
The undersigned authorized officer of Voxware, Inc. ("Borrower")
certifies that under the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the "Agreement"), (1) Borrower is in complete
compliance for the period ending _______________ with all required covenants
except as noted below, (2) there are no Events of Default, (3) all
representations and warranties in the Agreement are true and correct in all
material respects on this date except as noted below; provided, however, that
such materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date, (4) Borrower, and each of its
Subsidiaries, has timely filed all required tax returns and reports, and
Borrower has timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower except as otherwise
permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no
Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Bank. Attached are the
required documents supporting the certification. The undersigned certifies that
these are prepared in accordance with generally GAAP consistently applied from
one period to the next except as explained in an accompanying letter or
footnotes. The undersigned 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. Capitalized terms used but not otherwise
defined herein shall have the meanings given them in the Agreement. PLEASE
INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
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REPORTING COVENANT REQUIRED COMPLIES
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Monthly financial statements with Monthly within 30 days Yes No
Compliance Certificate
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Annual financial statement (CPA Audited) + ▇▇ ▇▇▇ within 120 days Yes No
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10-Q, 10-K and 8-K Within 5 days after filing with SEC Yes No
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Board approved projections
Annually Yes No
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The following Intellectual Property was registered after the Effective Date (if no registrations, state "None")
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FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
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Minimum Cash Balances $1,600,000.00 $ Yes No
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Minimum Tangible Net Worth $______ * $ Yes No
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* As set forth in Section 6.11(b) of the Agreement
The following financial covenant analys[is][es] and information set
forth in Schedule 1 attached hereto are true and accurate as of the date of this
Certificate.
The following are the exceptions with respect to the certification
above: (If no exceptions exist, state "No exceptions to note.")
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Voxware, Inc. BANK USE ONLY
Received by: _____________________
By:________________________________ AUTHORIZED SIGNER
Name:______________________________ Date: _________________________
Title:_____________________________
Verified: ________________________
AUTHORIZED SIGNER
Date: _________________________
Compliance Status: Yes No
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SCHEDULE 1 TO COMPLIANCE CERTIFICATE
FINANCIAL COVENANTS OF BORROWER
Dated: ____________________
In the event of a conflict between this Schedule and the Loan Agreement, the
terms of the Loan Agreement shall control.
I. TANGIBLE NET WORTH
--------- ----------------------------------------------------------------------------------------------- ------------
A. Aggregate value of total assets of Borrower and $________
--------- ----------------------------------------------------------------------------------------------- ------------
B. Aggregate value of goodwill of Borrower $________
--------- ----------------------------------------------------------------------------------------------- ------------
C. Aggregate value of intangible assets of Borrower $________
--------- ----------------------------------------------------------------------------------------------- ------------
D. Aggregate value of any reserves not already deducted from assets $________
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E. Aggregate value of obligations owing to Borrower from officers or other directors $________
--------- ----------------------------------------------------------------------------------------------- ------------
F. Aggregate value of liabilities of Borrower (including all Indebtedness) $________
and current portion of Subordinated Debt permitted by Bank to be paid by Borrower (but no
other Subordinated Debt)
--------- ----------------------------------------------------------------------------------------------- ------------
G. Value of Subordinated Debt $________
--------- ----------------------------------------------------------------------------------------------- ------------
H. Tangible Net Worth (line A minus line B minus line C minus line D minus line E minus line F, $________
plus line G)
--------- ----------------------------------------------------------------------------------------------- ------------
I Plus, beginning with the quarter ending _________, an amount equal to 50% of the Borrower's
Net Income for the subject quarter
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Is line H equal to or greater than $_____________?
__________ No, not in compliance _________ Yes, in compliance