EXHIBIT 10.1
FIRST LOAN MODIFICATION AGREEMENT
This First Loan Modification Agreement (this "Loan Modification
Agreement") is entered into as of January 30, 2004, by and among (i) SILICON
VALLEY BANK, a California-chartered bank, with its principal place of business
at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production
office located at One Newton Executive Park, Suite 200, 2221 Washington Street,
Newton, Massachusetts 02462, doing business under the name "Silicon Valley East"
("Bank") and (ii) NAVISITE, INC., a Delaware corporation, CLEARBLUE TECHNOLOGIES
MANAGEMENT, INC., a Delaware corporation, AVASTA, INC., a California
corporation, CONXION CORPORATION, a California corporation, INTREPID ACQUISITION
CORP., a Delaware corporation (jointly and severally, individually and
collectively, "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 May 27, 2003,
evidenced by, among other documents, a certain Accounts Receivable Financing
Agreement dated as of May 27, 2003 (as amended from time to time, 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 and the Intellectual Property
Collateral as described in certain Intellectual Property Security Agreements
each dated as of May 27, 2003 (collectively, the "IP Security 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.
Modifications to Loan Agreement.
1. The Loan Agreement shall be amended by deleting
Section 2.1 thereof and inserting in lieu thereof the
following:
"2.1 REQUEST FOR ADVANCES. During the Facility
Period, subject to the terms herein, Borrower may
either offer accounts receivable or the Placeholder
Invoice to Bank and request that the Bank finance
such accounts receivable or the Placeholder Invoice,
if there is not an Event of Default. Borrower will
deliver an Invoice Transmittal for each accounts
receivable it offers. Bank may rely on information on
or with the Invoice Transmittal."
2. The Loan Agreement shall be amended by deleting
Section 2.2 thereof and inserting in lieu thereof the
following:
"2.2 ACCEPTANCE OF ACCOUNTS RECEIVABLE. Bank is
not obligated to finance any accounts receivable or
the Placeholder Invoice. Bank may approve any Account
Debtor's credit before agreeing to finance any
accounts receivable. When Bank agrees to finance a
receivable or the Placeholder Invoice, it will extend
credit to Borrower in an amount up to either (a) the
result of the applicable Advance Rate multiplied by
the face amount of the receivable or (b) the result
of the applicable Advance Rate multiplied by value of
the Placeholder Invoice (the "Advance"). Bank may, in
its reasonable discretion, change the percentage of
the Advance Rate for a particular receivable on a
case by case basis or with respect to the Placeholder
Invoice. When Bank makes an Advance, the receivable
or the Placeholder Invoice becomes a "Financed
Receivable." All representations and warranties in
Section 6 must be true as of the date of the Invoice
Transmittal and of the Advance and no Event of
Default exists or would occur as a result of the
Advance. The aggregate face amount of all Financed
Receivables outstanding at
any time may not exceed the Facility Amount. In
addition, at any time that an Advance is outstanding
based upon the Placeholder Invoice, no other Advances
will be made by Bank hereunder. Any Advances
outstanding on the date which Bank agrees to finance
the Placeholder Invoice shall be repaid prior to Bank
making any Advance based on the Placeholder Invoice
(or otherwise repaid with the proceeds of such
Advance). Although Bank's obligation to make an
Advance is discretionary in each instance, Bank
acknowledges that (subject to verifications and other
terms and conditions provided herein with respect to
Account Debtors generally), it is the usual practice
of Bank to finance accounts receivable due and owing
from those Account Debtors that are Fortune 1000 type
companies. Notwithstanding the foregoing, Bank will
not finance the Placeholder Invoice after May 1, 2004
(and all Advances made based on the Placeholder
Invoice shall be immediately repaid at such time);
provided, however, in the event that Borrower's
Liquidity Ratio is at least 2.0 to 1.0, then Borrower
may continue to offer the Placeholder Invoice for
financing hereunder after May 1, 2004 and Bank may,
in its discretion as further described herein,
continue to finance the Placeholder Invoice. If Bank
will not finance the Placeholder Invoice, then
Borrower may offer to Bank accounts receivable for
financing as provided under Sections 2.1 and 2.2
hereof."
3. The Loan Agreement shall be amended by deleting
Section 3.4 thereof and inserting in lieu thereof the
following:
"3.4 COLLATERAL HANDLING FEE. On each
Reconciliation Day, Borrower will pay to Bank a
collateral handling fee equal to 0.25% per month of
the average daily Financed Receivable Balance
outstanding during the applicable Reconciliation
Period (the "Collateral Handling Fee"); provided,
however, after the occurrence of the Capitalization
Event and provided Borrower's Liquidity Ratio is at
least 2.0 to 1.0, the Collateral Handling Fee shall
reduce to 0.15% per month of the average daily
Financed Receivable Balance outstanding during the
applicable Reconciliation Period, to be effective on
the first day of the month following the receipt by
Bank of satisfactory evidence of same from Borrower;
provided further, however, in the event that, at any
time, the Borrower's Liquidity Ratio shall be less
than 2.0 to 1.0, the Collateral Handling Fee shall
immediately and retroactively (to the beginning of
the applicable Reconciliation Period) increase to
0.25% per month of the average daily Financed
Receivable Balance outstanding during the applicable
Reconciliation Period. After an Event of Default, the
Collateral Handling Fee will increase an additional
0.25% effective immediately before the Event of
Default."
4. The Loan Agreement shall be amended by deleting
Section 4.1 thereof and inserting in lieu thereof the
following:
"4.1 REPAYMENT ON MATURITY. Borrower will repay
each Advance on the earliest of: (a) payment of the
Financed Receivable in respect which the Advance was
made, (b) the Financed Receivable becomes an
Ineligible Receivable, (c) when any Adjustment is
made to the Financed Receivable (but only to the
extent of the Adjustment if the Financed Receivable
is not otherwise an Ineligible Receivable), (d) the
last day of the Facility Period (including any early
termination), (e) with respect to Advances made based
upon accounts receivable (rather than the Placeholder
Invoice), simultaneously with Bank making any Advance
based on the Placeholder Invoice, or (f) with respect
to Advances made based on the Placeholder Invoice,
(i) on May 1, 2004, provided, however, if Borrower's
Liquidity Ratio is at least 2.0 to 1.0 on May 1, 2004
then (ii) on any date after May 1, 2004 in which
Borrower's Liquidity Ratio is less than 2.0 to 1.0,
as measured as of the last day of the month. Each
payment will also include all accrued Finance Charges
on the Advance and all other amounts due hereunder."
5. Notwithstanding Section 4.3 of the Loan Agreement to
the contrary, from and after the date of this Loan
Modification Agreement, the Early Termination Fee
shall be
$100,000.00.
6. The Loan Agreement shall be amended by adding the
following new subsection 6.2 (H) after subsection
6.2(G) thereof:
"(H) With respect to the Placeholder Invoice,
Borrower represents and warrants that the value of
Borrower's recurring total monthly revenue (plus,
without duplication, revenue from any contracts with
the New York State Department of Labor) less
professional services revenue used by Borrower to
determine the amount of the Placeholder Invoice is
based upon the best information available to Borrower
and accurately and fully reflects same."
7. The Loan Agreement shall be amended by adding the
following definitions in Section 1 thereof:
""CAPITALIZATION EVENT" is the receipt by Borrower of
at least $12,000,000.00 in net cash proceeds from (i)
the issuance of new equity of Borrower and/or (ii)
the sale of assets of Borrower, subject to the Bank's
prior written consent, in a transaction or a series
of transactions in any three month period.
"FACILITY PERIOD" is the period beginning on this
date and continuing until January 29, 2006, unless
the period is terminated sooner (i) by Bank at any
time with notice to Borrower after the occurrence of
an Event of Default, (ii) by Borrower pursuant to
Section 4.3, or (iii) upon an Event of Default.
"LIQUIDITY RATIO" is the ratio of (i) Borrower's
unrestricted cash and cash equivalents (acceptable to
Bank in its reasonable discretion), plus 80.0% of
Borrower's Accounts minus the principal amount of all
Obligations outstanding hereunder to (ii) the
principal amount of all Obligations outstanding
hereunder.
"PLACEHOLDER INVOICE" is, a written document that is
prepared and delivered by Borrower to Bank requesting
an Advance, based on, for each month, three (3) times
the amount of the value (as determined by Borrower,
subject to Section 6.2(H) hereof), of Borrower's
recurring total monthly revenue (plus, without
duplication, revenue from any contracts with the New
York State Department of Labor) less professional
services revenue, all as reviewed and approved by
Bank."
8. The Loan Agreement shall be amended by deleting the
definition of "Advance Rate" appearing in Section 1
thereof and inserting in lieu thereof the following:
" "ADVANCE RATE" is (i) with respect to accounts
receivable, eighty percent (80%), net of Deferred
Revenue and offsets related to each specific Account
Debtor, or such other percentage as Bank establishes
under Section 2.2 and (ii) with respect to the
Placeholder Invoice, seventy-five percent (75.0%) or
such other percentage as Bank establishes under
Section 2.2."
9. The Loan Agreement shall be amended by deleting the
definition of "Applicable Rate" appearing in Section
1 thereof and inserting in lieu thereof the
following:
""APPLICABLE RATE" is a per annum rate equal to the
Prime Rate plus four percent (4.0%); provided,
however, after the occurrence of the Capitalization
Event and provided Borrower's Liquidity Ratio is at
least 2.0 to 1.0, the Applicable Rate shall reduce to
a per annum rate equal to the Prime Rate plus one
percent (1.0%), to be effective on the first day of
the month following the receipt by Bank of
satisfactory evidence of same from Borrower; provided
further, however, in the event that, at any time, the
Borrower's
Liquidity Ratio shall be less than 2.0 to 1.0 (as
measured as of the last day of the immediately
preceding month), the Applicable Rate shall
immediately and retroactively (to the beginning of
the applicable Reconciliation Period) increase to a
per annum rate equal to the Prime Rate plus four
percent (4.0%)."
10. The Loan Agreement shall be amended by deleting the
definition of "Facility Amount" appearing in Section
1 thereof and inserting in lieu thereof the
following:
" "FACILITY AMOUNT" is Sixteen Million Dollars
($16,000,000.00); provided, however, after the
occurrence of the Capitalization Event, and provided
Borrower's Liquidity Ratio is at least 2.0 to 1.0 (as
measured as of the last day of the month), the
Facility Amount shall be increased to Twenty Million
Dollars ($20,000,000.00), to be effective ten (10)
business days after Bank has received satisfactory
evidence of same from Borrower; provided further,
however, in the event that, at any time, the
Borrower's Liquidity Ratio shall be less than 2.0 to
1.0, the Facility Amount shall immediately be reduced
to Sixteen Million Dollars ($16,000,000) and upon
such reduction, Borrower shall immediately repay in
cash that portion of all outstanding Advances such
that the aggregate face amount of all Financed
Receivables does not exceed Sixteen Million Dollars
($16,000,000.00).
11. The Loan Agreement shall be amended by deleting the
definition of "Minimum Finance Charge" appearing in
Section 1 thereof and inserting in lieu thereof the
following:
""MINIMUM FINANCE CHARGE" is the amount, as
determined by Bank, for which the Finance Charge
would be payable if the average daily principal
amount of all outstanding Advances during the
applicable Reconciliation Period was (i) for each
Reconciliation Period beginning February 2004 through
January 2005, $4,000,000.00; (ii) for each
Reconciliation Period beginning February 2005 through
July 2005, $3,000,000.00 and (iii) for each
Reconciliation Period beginning August 2005 and
thereafter, $0.00."
4. FEES. Borrower shall pay to Bank a modification fee equal to One
Hundred Ten Thousand Dollars ($110,000.00), which fee shall be deemed fully
earned as of the date hereof and shall be payable as follows (i) $50,000.00 is
payable on the date hereof and (ii) $60,000 is payable on the sooner to occur of
(x) January 30, 2005, (y) the occurrence of an Event of Default. Borrower shall
also reimburse Bank for all legal fees and expenses incurred in connection with
this amendment to the Existing Loan Documents.
5. INTREPID ADVANCES. Notwithstanding anything to the contrary contained
herein, the Borrower may not request any Advances relating to accounts of
Intrepid Acquisition Corp., and recurring total monthly revenue, as used in the
definition of Placeholder Invoice, shall not include any accounts arising or
related to Intrepid Acquisition Corp., until the termination of all UCC
Financing Statements filed against Intrepid Acquisition Corp. in favor of
Interliant, or any related entity.
6. RATIFICATION OF INTELLECTUAL PROPERTY SECURITY AGREEMENT. Borrower
hereby ratifies, confirms and reaffirms, all and singular, the terms and
conditions of the IP Security Agreement, and acknowledges, confirms and agrees
that the IP Security Agreement contains an accurate and complete listing of all
Intellectual Property Collateral as defined therein. Notwithstanding the terms
and conditions of the Intellectual Property Security Agreement, the Borrower
shall not register any Copyrights or Mask Works in the United States Copyright
Office unless it: (i) has given at least fifteen (15) days' prior written notice
to Bank of its intent to register such Copyrights or Mask Works and has provided
Bank with a copy of the application it intends to file with the United States
Copyright Office (excluding exhibits thereto); (ii) executes a security
agreement or such other documents as Bank may reasonably request in order to
maintain the perfection and priority of Bank's security interest in the
Copyrights proposed to be registered with the United States Copyright Office;
and (iii) records such security documents with the United States Copyright
Office contemporaneously with filing the Copyright application(s) with the
United States Copyright Office. Borrower shall promptly provide to Bank a copy
of the Copyright application(s) filed with the United States Copyright Office,
together with evidence of the recording of the security documents necessary for
Bank to maintain the perfection and priority of its security interest in such
Copyrights or Mask Works. Borrower shall provide written notice to Bank of any
application filed by Borrower in the United States Patent Trademark Office for a
patent or to register a trademark or service mark within 30 days of any such
filing.
7. ADDITIONAL COVENANTS: PERFECTION CERTIFICATES. Borrower hereby agrees
to provide the Bank, on or before February 15, 2004, with updates to each of the
Perfection Certificates dated as of May 27, 2003, delivered by each Borrower.
The Bank does not waive any provision of the Loan Agreement with respect to any
of the information to be provided to the Bank in such updates.
8. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
9. 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.
10. 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.
11. 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.
12. JURISDICTION/VENUE. Borrower accepts for itself and in connection with
its properties, unconditionally, the 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 Clara County, California.
NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE RIGHT TO BRING ANY ACTION
OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE
ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK'S RIGHTS AGAINST THE BORROWER
OR ITS PROPERTY.
13. COUNTERSIGNATURE. This Loan Modification Agreement shall become
effective only when it shall have been executed by Borrower and Bank.
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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:
NAVISITE, INC. SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: /s/ Jim Pluntze By: /s/ David Reich
-------------------- ---------------
Title: Chief Financial Officer Title: SVP
and Treasurer
CLEARBLUE TECHNOLOGIES MANAGEMENT, INC.
By: /s/ Jim Pluntze
--------------------
Title: VP Finance and Treasurer
AVASTA, INC.
By: /s/ Jim Pluntze
--------------------
Title: VP Finance and Treasurer
CONXION CORPORATION
By: /s/ Jim Pluntze
--------------------
Title: CFO and Treasurer
INTREPID ACQUISITION CORP.
By: /s/ Jim Pluntze
--------------------
Title: CFO and Treasurer