PROMISSORY NOTE
Borrower: CONDUCTUS, INC.
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Lender: Silicon Valley Bank
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Principal Amount: $1,000,000.00 Initial Rate: 9.250% Date of Note:
December 26, 1996
PROMISE TO PAY. CONDUCTUS, INC. ("Borrower") promises to pay to Silicon
Valley Bank ("Lender"), or order, in lawful money of the United States of
America, the principal amount of One Million & 00/100 Dollars ($1,000,000.00)
or so much as may be outstanding, together with interest on the unpaid
outstanding principal balance of each advance. Interest shall be calculated
from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in accordance with the following payment
schedule:
The Draw Period shall begin as of this date and shall end on June 30, 1997
(the "Draw Period"). Borrower shall pay regular monthly payments of all
accrued unpaid interest due as of each payment date, beginning January 31,
1997 and all subsequent interest payments will be due on the last day of each
month thereafter through the Draw Period. The outstanding principal balance
on June 30,1997 will be payable in thirty (30) even payments of principal
plus interest due as of each payment date, beginning July 31, 1997 and all
subsequent payments of principal plus interest will be due on the last day of
each month thereafter. The final payment, due on December 31, 1999, will be
for all outstanding principal plus all accrued interest not yet paid.
Interest on this Note is computed on a 365/360 simple interest basis; that
is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to accrued unpaid interest, then to principal,
and any remaining amount of any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is Lender's Prime Rate
(the "Index"). This is the rate Lender charges, or would charge, on 90-day
unsecured loans to the most creditworthy corporate customers. This rate may
or may not be the lowest rate available from Lender at any given time. Lender
will tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each time the prime rate
is adjusted by Silicon Valley Bank. The Index currently is 8.250% per annum.
The interest rate to be applied to the unpaid principal balance of this Note
will be at a rate of 1,000 percentage point over the Index, resulting in an
initial rate of 9.250% per annum. NOTICE: Under no circumstances will the
interest rate on this Note be more than the maximum rate allowed by applicable
law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance
charges are earned fully as of the date of the loan and will not be subject
to refund upon early payment (whether voluntary or as a result of default),
except as otherwise required by law. Except for the foregoing, Borrower may
pay without penalty all or a portion of the amount owed earlier than it is
due. Early payments will not, unless agreed to by Lender in writing, relieve
Borrower of Borrower's obligation to continue to make payments of accrued
unpaid interest. Rather, they will reduce the principal balance due.
DEFAULT. Shall have the same meaning as set forth in the Business Loan
Agreement.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to
apply all amounts declared due pursuant to this section, including failure to
pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the variable
interest rate on this Note to 5.000 percentage points over the otherwise
effective interest rate, and (b) add any unpaid accrued interest to principal
and such sum will bear interest therefrom until paid at the rate provided in
this Note (including any increased rate). Lender may hire or pay someone else
to help collect this Note if Borrower does not pay. Borrower also will pay
Lender that amount. This includes, subject to any limits under applicable
law, Lender's reasonable attorneys' fees and Lender's legal expenses whether
or not there is a lawsuit, including reasonable attorneys' fees and Lender's
reasonable legal expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. Borrower also will pay any
court costs, in addition to all other sums provided by
law. This Note has been delivered to Lender and accepted by Lender in the
State of California. If there is a lawsuit, Borrower agrees upon Lender's
request to submit to the jurisdiction of the courts of Santa ▇▇▇▇▇ County,
the State of California. This Note shall be governed by and construed in
accordance with the laws of the State of California.
LINE OF CREDIT. This Note evidences a straight line of credit through the end
of the Draw Period. Once the total amount of principal has been advanced,
Borrower is not entitled to further loan advances. Advances under this Note,
as well as directions for payment from Borrower's accounts, may be requested
orally or in writing by Borrower or by an authorized person. Lender may, but
need not, require that all oral requests be confirmed in writing. Borrower
agrees to be liable for all sums either: (a) advanced in accordance with the
instructions of an authorized person or (b) credited to any of Borrower's
accounts with Lender. The unpaid principal balance owing on this Note at any
time may be evidenced by endorsements on this Note or by Lender's internal
records, including daily computer print-outs. Lender will have no obligation
to advance funds under this Note if: (a) Borrower or any guarantor is in
default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with
the signing of this Note; (b) Borrower ceases doing business or is insolvent;
or (d) Borrower has applied funds provided pursuant to this Note for purposes
other than those authorized by Lender.
ADVANCE RATE. At any time from the date hereof through the end of the Draw
Period, Borrower may request advances (each an "Advance" and collectively, the
"Advances") from Lender up to $1,000,000.00. To evidence the Advances,
Borrower shall deliver to Lender, at the time of each advance request, an
invoice for the equipment purchased from July 1, 1996 through June 30, 1997
or an agreement for the equipment purchased under a lease buy-out agreement.
The Advances shall be used to purchase new equipment and equipment under
existing leases. The advance rate for the equipment purchased shall not
exceed One Hundred Percent (100%) of the Invoice amount of such equipment
approved from time to time by Lender, excluding taxes, shipping and
installation expense. The advances for lease buy-outs shall not exceed
fifty-five (55%) of the fair market value for the equipment purchased and
shall exclude, taxes, shipping and installation expense and shall not exceed
the aggregate of $350,000.00. Software may, however, constitute up to twenty
five percent (25%) of each Advance. Each Advance must be a minimum of
$100,000.00, except the final advance.
BUSINESS LOAN AGREEMENT. This Note is subject to and shall be governed by all
the terms and conditions of the Business Loan Agreement dated August 15,
1994, as may be amended, between Borrower and Lender, which Business Loan
Agreement is incorporated herein by reference.
LOAN FEE. This Note is subject to a loan fee in the amount of Five Thousand
and 00/100 Dollars ($5,000.00) plus all out-of-pocket expenses.
REQUEST TO DEBIT. Borrower will regularly deposit all funds received from its
business activities in accounts maintained by Borrower at Silicon Valley
Bank. Borrower hereby requests and authorizes Lender to debit any of
Borrower's accounts with Lender, specifically, without limitation, Account
Number 0351679270 for payments of principal and interest due on the loan and
any other obligations owing by Borrower to Lender. Lender will notify Borrower
of all debits which Lender makes against Borrower's accounts. Any such debits
against Borrower's accounts in no way shall be deemed a set-off.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person
who signs, guarantees or endorses this Note, to the extent allowed by law,
waive any applicable statute of limitations, presentment, demand for payment,
protest and notice of dishonor. Upon any change in the terms of this Note,
and unless otherwise expressly stated in writing, no party who signs this
Note, whether as maker, guarantor, accommodation maker or endorser, shall be
released from liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan, or release any
party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER HAS READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE NOTE.
BORROWER:
CONDUCTUS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: VP/CFO
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LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of December 26,
1996, by and between Conductus, Inc. (the "Borrower") whose address is ▇▇▇
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"Lender") whose address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which
may be owing by Borrower to Lender, Borrower is indebted to Lender pursuant
to, among other documents, a Promissory Note, dated August 15, 1994, in the
original principal amount of One Million and 00/100 Dollars ($1,000,000.00)
(the "Line"), a Promissory Note, dated August 15, 1994, in the original
principal amount of One Million Five Hundred Thousand and 00/100 Dollars
($1,500,000.00) (the "Term Note"1), a Promissory Note dated March 1, 1996, in
the original principal amount of One Million and 00/100 Dollars
($1,000,000.00) (the "Term Note 2") and being executed concurrently herewith,
a Promissory Note dated December 26, 1996, in the original principal amount
of One Million and 00/100 Dollars ($1,000,000.00) (the "Term Note 3). The
Line has been modified pursuant to Loan Modification Agreements dated August
15, 1995, March 1, 1996, pursuant to which, among other things, the principal
amount of the Line was increased to Two Million and 00/100 Dollars
($2,000,000.00) and further modified by that certain Loan Modification
Agreement dated June 10, 1996. The Term Note 1 has been modified pursuant to
Loan Modification Agreements dated June 20, 1995, pursuant to which, among
other things, the principal amount of the Term Note was increased to Two
Million and 00/100 Dollars ($2,000,000.00) and further modified by that
certain Loan Modification Agreement dated March 1, 1996. The Line, the Term
Note 1, the Term Note 2 and the Term Note 3 shall be collectively referred to
herein as the "Notes". The Notes, together with other promissory notes from
Borrower to Lender, are governed by the terms of a Business Loan Agreement,
dated August 15, 1994, between Borrower and Lender, as such agreement may be
amended from time to time (the "Loan Agreement"). Defined terms used but not
defined herein shall have the same meanings as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Lender shall be referred
to as the "Indebtedness".
2. DESCRIPTION OF COLLATERAL AND GUARANTIES: Repayment of the
Indebtedness is secured by a Commercial Security Agreement, dated August 15,
1994 (the "Security Agreement"). In addition to the foregoing, Borrower has
agreed not to sell, transfer, assign, mortgage, pledge, lease, grant a
security interest in, or encumber any of Borrower's intellectual property.
Hereinafter, the above-described security documents, together with all other
documents securing payment of the Indebtedness shall be referred to as the
"Security Documents". Hereinafter, the Security Documents, together with all
other documents evidencing or securing the Indebtedness shall be referred to
as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. MODIFICATION(S) TO LINE.
1. Notwithstanding a maturity date of February 28, 1997. Lender
agrees on that date to extend the term of Borrower's Line for
an additional year, subject to ongoing compliance with the
terms and conditions set-forth in the Existing Loan
Documents. Borrower shall pay to Lender, one payment of all
outstanding principal plus all accrued unpaid interest on
February 27, 1998. In addition, Borrower will pay regular
monthly payments of all accrued unpaid interest beginning
December 31, 1996, and all subsequent interest payments will
be due on the last day of each month thereafter.
2. The principal amount of the Line is hereby decreased to One
Million and 00/100 Dollars ($1,000,000.00).
B. MODIFICATION(S) TO LOAN AGREEMENT.
1. The paragraph entitled "Financial Covenants" is hereby
amended, in its entirety, to read as follows:
Borrower shall maintain, on a monthly basis, beginning with
the month ending December 31, 1996, a minimum quick ratio of
1.75 to 1.00; a minimum liquidity coverage ratio of 2.00 to
1.00; a minimum Tangible Net Worth of $8,500,000.00; and a
maximum total Debt minus Subordinated Debt to Tangible Net
Worth plus Subordinated Debt ratio of 1.00 to 1.00.
Furthermore, Borrower may incur losses, provided, such losses
shall not exceed $1,500,000.00 for the quarter ending
December 31, 1996; $1,250,000.00 for the quarter ending March
31, 1997; $1,000,000.00 for the quarter ending June 30, 1997;
and $750,000.00 for the quarter ending September 30, 1997.
Borrower shall achieve profitability beginning as of the
quarter ending December 31, 1997, with the allowance of one
quarterly loss per annum, provided such loss does not exceed
$500,000.00.
For calculation purposes, the liquidity coverage ratio shall
mean cash or cash equivalents plus availability under the
Line divided by the sum of outstanding balances under the
Term Note as defined herein.
2. The first sentence of the paragraph entitled "Borrowing Base
Formula" is hereby amended, in its entirety, to read as
follows:
Funds shall be advanced under the Line according to a
borrowing base formula, as determined by Lender, defined as
follows: The less of (i) $1,000,000.00 minus the face amount
of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) or (ii) seventy-five percent
(75%) of eligible accounts receivable minus the face amount
of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit).
3. The defined term "Term Note" shall mean collectively, that
certain Promissory Note dated August 15, 1994, in the
original principal amount of $1,500,000.00, as may be
amended; that certain Promissory Note dated March 1, 1996, in
the original principal amount of $1,000,000.00, as may be
amended; and that certain Promissory Note dated December 26,
1996, in the original principal amount of $1,000,000.00, as
may be amended.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. Borrower shall pay Lender a fee in the amount of
Five Thousand and 00/100 Dollars ($5,000.00) in connection with the Term Note
3 and a fee in the amount of Two Thousand Five Hundred and 00/100 Dollars
($2,500.00) in connection with the Line (collectively the "Loan Fee") plus
all out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor
signing below) agrees that, as of this date, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing Indebtedness,
Lender is relying upon Borrower's representations,
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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, Lender's agreement to modifications to the existing Indebtedness
pursuant to this Loan Modification Agreement in no way shall obligate Lender
to make any future modifications to the Indebtedness. Nothing in this Loan
Modification 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 Loan Modification Agreement. The terms
of this paragraph apply not only to this Loan Modification Agreement, but
also to all subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: LENDER:
CONDUCTUS, INC. SILICON VALLEY BANK
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇▇
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Title: VP/CFO Title: Vice President
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