Exhibit 10.40
Third Modification Agreement, Dated August 18, 1998,
With Sumitomo Bank of California
THIRD MODIFICATION AGREERMENT
This Third Modification Agreement ("Third Modification") is made as of
August 18, 1998, by and among NETWORK PERIPHERALS INC. a Delaware corporation
("Borrower"), having its chief executive office at 1371 McCarthy Boulevard,
Milpitas, California 95035, SUMITOMO BANK OF CALIFORNIA, a California banking
corporation ("Sumitomo"), having its head office at 320 California Street, San
Francisco, California, and each other lender which may hereafter execute and
deliver an instrument of assignment with respect to the Agreement (defined
below) (individually, the "Bank," and collectively, the "Banks") and Sumitomo,
as Agent.
RECITALS
A. Pursuant to a Credit Agreement, dated October 2, 1996, executed by
Borrower and Sumitomo ("Agreement") , Sumitomo extended a revolving line of
credit to Borrower of up to $10,000,000.00 ("Line of Credit") with a
$5,000,000.00 letter of credit subline. Borrower's obligation to repay advances
on the Line of Credit was evidenced by a Promissory Note, dated the same date as
the Agreement, executed by Borrower, in the principal amount of $10,000,000.00
("Note"). To secure the indebtedness of Borrower under the Credit Agreement and
Note, Borrower executed a Security Agreement, dated as of October 2, 1996
("Security Agreement").
B. Pursuant to a Modification Agreement ("Modification") dated August
29, 1997, by and among Borrower and Sumitomo, on behalf of itself and as Agent
for the Banks, the Agreement was modified on the terms contained therein.
C. Pursuant to a Second Modification Agreement ("Second Modification")
dated November 17, 1997, by and among Borrower and Sumitomo, on behalf of itself
and as Agent for the Banks, the Agreement was further modified on the terms
contained therein.
D. As used herein, the term "Loan Documents" means all documents
described in these Recitals and those documents executed pursuant thereto or in
conjunction therewith.
E. Borrower seeks a further modification of the Agreement and Loan
Documents and Sumitomo is agreeable on the terms set forth below.
TERMS
NOW, THEREFORE, Borrower and Sumitomo agree as follows:
1. Capitalized Terms. Unless otherwise defined herein, capitalized
terms shall have the meanings set forth in the Agreement.
2. Adoption of Recitals. Borrower hereby represents and warrants that
each of the Recitals set forth above are true, accurate and complete.
3. Acknowledgement of Debt. Borrower acknowledges that there are no
claims, demands, offsets or defenses at law or in equity that would defeat or
diminish Sumitomo's right to collect the indebtedness evidenced by the Note and
Agreement and to proceed to enforce the rights and remedies available to
Sumitomo as provided in the Loan Documents or by law.
4. Modification of Loan Documents. The Loan Documents are hereby
supplemented, amended and modified as follows, which terms shall supersede and
prevail over any existing and conflicting provisions thereof:
(a) The terms "Commitment Amount", "Letter of Credit Maturity
Date", "Letter of Credit Sublimit" and "Maturity Date" in Section 1.1 of the
Agreement are hereby deleted and replaced with the following:
Commitment Amount. $5,000,000 in the aggregate, or
any lesser amount, including zero, resulting from a
termination or reduction of such amount in accordance with
Section 2.5 or Section 7.2.
Letter of Credit Maturity Date. Means November 30,
1998.
Letter of Credit Sublimit. $2,500,000 in the
aggregate, or any lesser amount, including zero, resulting
from a termination or reduction of such amount in accordance
with Section 2.5 or Section 7.2.
Maturity Date. Means July 31, 1999.
(b) Section 3.2(f) of the Agreement, as modified by the Second
Modification, is deleted and replaced with the following:
(f) Borrower shall deposit with Sumitomo cash
collateral, acceptable to Sumitomo in its sole discretion,
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equal to or greater than the amount of the Loan or Letter of
Credit requested by Borrower. Such cash collateral shall
remain on deposit with Sumitomo until such time as the Loan or
Letter of Credit is repaid in full by Borrower.
(c) Section 5.7 (b) of the Agreement is deleted and replaced
with the following:
(b) Profitability. Borrower shall be profitable on an
annual basis and shall not have a net loss on a consolidated
basis in any fiscal quarter as measured quarterly for that
fiscal quarter; provided, however, that for the fiscal quarter
ending September 30, 1998, Borrower may have a net loss on a
consolidated basis of not more than $1,500,000.00; and that
for the fiscal quarter ending December 31, 1998, Borrower may
have a net loss on a consolidated basis of not more than
$1,000,000.00.
(d) Section 5.7(d) of the Agreement is deleted and replaced
with the following:
(d) Consolidated Tangible Net Worth. Borrower shall
maintain Consolidated Tangible Net Worth of at least
$30,000,000.00.
(e) The following new Section 5.7(f) is added to the
Agreement:
(f) Cash Position. Borrower shall maintain a
consolidated cash position on its balance sheet of at least
$20,000,000.00.
(f) The Loan Documents which recite they are security
instruments shall secure, in addition to any other obligations secured thereby,
the payment and performance by Borrower of all obligations under the Agreement,
the Note and the other Loan Documents, as amended by this Third Modification,
and any amendments, modifications, extensions or renewals of the same which are
hereafter agreed to in writing by the parties.
5. Conditions Precedent. Sumitomo's obligation to extend credit to
Borrower pursuant to this Third Modification is subject to the condition
precedent that Borrower strictly complies with the requirement that Borrower
deliver to Sumitomo, in form and substance satisfactory to Sumitomo, the
following documents and other things by Borrower or as specified below:
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(a) This Agreement.
(b) Such other evidence as Sumitomo may require, to establish
the consummation of the transactions contemplated hereby, the taking of all
proceedings in connection therewith and compliance with the conditions set forth
in this Third Modification.
6. Representations and Warranties. Except as previously disclosed to
Sumitomo, Borrower hereby represents and warrants that no default, Event of
Default, breach or failure of condition has occurred or exists, or would exist
with notice or lapse of time, or both, under any of the Loan Documents. Borrower
agrees that all representations and warranties of Borrower in the Agreement and
the other Loan Documents are true and correct as of the date of this Third
Modification, and shall survive the execution of this Third Modification.
7. Governing of Law. This Third Modification shall be construed,
governed and enforced in accordance with the laws of the State of California.
8. Interpretation. No provision of this Third Modification is to be
interpreted for or against either Borrower or Sumitomo because that party, or
that party's representative, drafted such provision.
9. Full Force and Effect. Except as set forth herein, all other terms
and conditions of the Loan Documents shall remain in full force and effect,
including provisions on prepayment, late charges, default interest and
attorneys' fees.
10. Reaffirmation. Borrower hereby acknowledges, reaffirms and confirms
its obligations under the Loan Documents, as amended and modified by this Third
Modification.
11. Entire Agreement. This Third Modification (and all documents herein
mentioned) and the Loan Documents constitute the entire, complete and exclusive
understanding between the parties regarding the Line of Credit and the
Collateral and may not be modified, amended, or terminated except by a written
agreement signed by the party against whom enforcement is sought. No
modification, change or supplement of the Loan Documents, this Third
Modification or related agreements shall be binding on Sumitomo unless in
writing signed by a Corporate Officer and Manager of Sumitomo. No waiver or any
event of default shall be construed to be a waiver, acquiescence, or consent to
any preceding or subsequent event of default.
12. Documentation. In addition to the instruments and documents
mentioned or referred to herein, Borrower will, at its own cost and expense,
supply Sumitomo with such other instruments, documents, information and data as
are
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reasonably necessary for the purposes hereof, all of which shall be in form and
content as reasonably required by Sumitomo.
13. Counterparts This Third Modification may be executed in multiple
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Third Modification
as of the day and year first above written.
SUMITOMO:
SUMITOMO BANK OF CALIFORNIA,
a California banking corporation
By: \s\ Arne F. Olson
-----------------------------
ARNE F. OLSON,
Vice President
AGENT:
SUMITOMO BANK OF CALIFORNA,
a California banking corporation
By: \s\ Arne F. Olson
-----------------------------
ARNE F. OLSON,
Vice President
BORROWER:
NETWORK PERIPHERALS INC.,
a Delaware corporation
By: \s\ Robert Hersh
-----------------------------
ROBERT HERSH,
Vice President and Chief Financial Officer
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