EXHIBIT 10.26
SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement is entered into as of September 14,
2000, by and between NATURAL MICROSYSTEMS 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 Wellesley Office
Park, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, doing business under
the name "Silicon Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other Obligations 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, as amended by a
certain First Loan Modification Agreement dated March 8, 2000 (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 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 "Obligations".
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. Modification(s) to Loan Agreement.
1. The Loan Agreement shall be amended by deleting the following
definition appearing in Section 1.1 thereof:
""Maturity Date" means one day prior to one year from the
Closing Date."
and inserting in lieu thereof the following:
""Maturity Date" means May 13, 2001."
2. 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%).
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."
and inserting in lieu thereof the following:
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"(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
Bank's Prime Rate."
3. The Loan Agreement shall be amended by deleting Section 6.3
entitled "Financial Statements, Reports, Certificates" and
inserting in lieu thereof the following:
"6.3 Financial Statements, Reports, Certificates. Borrower
shall deliver to Bank: (a) within five (5) days of filing
same quarterly with the Securities and Exchange Commission
(the "SEC"), a company prepared consolidated balance sheet
and income statement covering Borrower's consolidated
operations during such period, in a form and certified by an
officer of Borrower reasonably acceptable to Bank; (b)
within five (5) days of filing same annually with the SEC,
audited consolidated financial statements of Borrower
prepared in accordance with GAAP, consistently applied,
together with an unqualified opinion on such financial
statements of an independent certified public accounting
firm reasonably acceptable to Bank; (c) within five (5) days
of filing, copies of all statements, reports and notices
sent or made available generally by Borrower to its security
holders or to any holders of Subordinated Debt and all
reports on Form 10-K, 10-Q and 8-K filed with the Securities
and Exchange Commission; (d) promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened
against Borrower or any Subsidiary that could result in
damages or costs to Borrower or any Subsidiary of One
Hundred Thousand Dollars ($100,000) or more; (e) within
thirty (30) days of the approval thereof, any budgets or
forecasts or revisions thereto; and (f) such budgets, sales
projections, operating plans or other financial information
as Bank may reasonably request from time to time.
Within fifteen (15) days after the last day of each
quarter during which Advances are requested or outstanding
(excluding Letters of Credit), and in connection with any
Advance (excluding Letters of Credit) (unless a Borrowing
Base Certificate has been provided within the last thirty
(30) days), Borrower shall deliver to Bank a Borrowing Base
Certificate signed by a Responsible Officer in substantially
the form of Exhibit C hereto, together with an aged listing
of accounts receivable (by invoice date).
Borrower shall deliver to Bank with the quarterly
financial statements, within five (5) days of filing same
quarterly with the SEC, a Compliance Certificate signed by a
Responsible Officer in substantially the form of Exhibit D
hereto.
Bank shall have a right from time to time hereafter to
audit Borrower's Accounts at Borrower's expense, provided
that such audits will be conducted no more often than every
twelve (12) months unless an Event of Default has occurred
and is continuing."
4. The Loan Agreement shall be amended by deleting the following
text appearing as Sections 6.8, 6.9 and 6.10 thereof:
"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."
and inserting in lieu thereof the following:
"6.8 Quick Ratio. Borrower shall maintain, as of the last
day of each quarter, a ratio of Quick Assets to Current
Liabilities of at least 2.0 to 1.0.
6.9 [Intentionally Deleted]
6.10 Profitability. Borrower shall maintain, on a
quarterly basis, commencing with the quarter ending
September 30, 2000, an operating profit of not less than One
Dollar ($1.00), which amount shall be exclusive of certain
acquisition costs approved by Bank, which shall include
merger and acquisition costs and goodwill attributed thereto
as referenced on Borrower's Forecast Plan attached hereto as
EXHIBIT E."
5. The Bank hereby consents to Borrower's recent acquisition of
InnoMediaLogic, Inc. 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.
6. The Loan Agreement shall be amended by deleting the following
text appearing as Section 7.3 thereof:
"7.3 Mergers or Acquisitions. Merge or consolidate, or
permit any of its Subsidiaries to merge or consolidate, with
or into any other business organization, or acquire, or
permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of
another Person."
and inserting in lieu thereof the following:
"7.3 Mergers or Acquisitions. Merge or consolidate, or
permit any of its Subsidiaries to merge or consolidate, with
or into any other business
organization, or acquire, or permit any of its Subsidiaries
to acquire, all or substantially all of the capital stock or
property of another Person EXCEPT that such merger,
consolidation or acquisition may occur without the written
consent of the Bank where: (i) there is no Event of Default
then existing hereunder, and (ii) such merger, consolidation
or acquisition will not result, on a prospective basis, in
the breach of any of the covenants, terms and conditions
hereunder, and (iii) such merger, consolidation or
acquisition is in the same or similar line of business as
the Borrower, and (iv) the purchase price for all such
mergers, consolidation and acquisitions (inclusive of any
indebtedness of the acquired company assumed by the Borrower
in connection with the transaction) is not greater than an
aggregate annual amount of Fifty Million Dollars
($50,000,000.00) in cash and/or stock of the Borrower (and
no greater than an aggregate amount of Twenty-Five Million
Dollars ($25,000,000.00) in cash on an annual basis), and
(v) the Borrower is the surviving legal entity, and (vi) no
indebtedness (either direct or contingent) is assumed by the
Borrower in connection with such merger, consolidation or
acquisition with the exception of indebtedness (A) in such
amounts which when added to the purchase price shall not
exceed the limits set forth in clause (iv) of this Section
7.3 and (B) which consists only of trade payables of the
acquired company."
7. 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.
8. 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.
9. The Compliance Certificate appearing as EXHIBIT D to the Loan
Agreement is hereby replaced with the Compliance Certificate
attached as EXHIBIT B hereto.
10. The Borrower's Forecast Plan as it relates to Borrower's
Profitability covenant is hereby incorporated into the Loan
Agreement as EXHIBIT E hereto.
4. FEE. The Borrower shall pay to Bank a modification fee equal to Eighteen
Thousand Seven Hundred Fifty Dollars ($18,750.00), 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 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).
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:____________________________________
Name:_____________________________ Name:__________________________________
Title:____________________________ Title:_________________________________
SILICON VALLEY BANK
By:____________________________________
Name:__________________________________
Title:_________________________________
(signed in Santa ▇▇▇▇▇ County, California)