Document:

exv10w16

 

Exhibit 10.16

LOAN MODIFICATION AGREEMENT

     This Loan Modification Agreement (this “Loan Modification Agreement”) is entered into as of
April 26, 2004, by and between 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 NSI SOFTWARE,
INC., successor by merger with NETWORK SPECIALISTS, INCORPORATED, a Delaware corporation, with
offices at Two Hudson Place, Suite 700, Hoboken, New Jersey 07030 (“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 October 16, 2003, evidenced by, among other documents, a certain Loan and
Security Agreement dated as of October 16, 2003 between Borrower and Bank (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.

Modification to Loan Agreement.

	 	A.	 	Section 1(B)(i) of the Schedule to the Loan Agreement is hereby
amended by deleting the following text appearing therein:
	 
	 	 	 	“(i) 75% of the amount of the Borrower’s Eligible Receivables, exclusive of
Deferred Revenue Offsets and rebate accruals; provided, however, in the
event that Borrower has an Adjusted Quick Ratio (to be tested on a monthly
basis, as of the end of each month) of at least 1.0 to 1.0, then Silicon
will not exclude such Deferred Revenue Offsets or rebate accruals;
minus”
	 
	 	 	 	and substituting the following text therefor:

 

 

	 	 	 	“(i) 75% of the amount of the Borrower’s Eligible Receivables;
minus”
	 
	 	B.	 	Section 3 of the Schedule to the Loan Agreement is hereby
amended by adding the following subsection:
	 
	 	 	 	“Sunbelt Based Borrowings Fee:
	 
	 	 	 	(a) Sunbelt Based Borrowings up to $250,000.00 – No fee;
	 
	 	 	 	(b) Sunbelt Based Borrowings between $250,000.00 and $500,000.00 –
$1,000.00 per month, payable in arrears;
	 
	 	 	 	(c) Sunbelt Based Borrowings between $500,000.00 and $1,000,000.00 –
$2,000.00 per month, payable in arrears.”
	 
	 	C.	 	Sections 5a.(i)(h)-(j) of the Schedule to the Loan Agreement
are hereby amended by deleting same their entirety and substituting the
following therefor:
	 
	 	 	 	“(h) ($1,250,000) at March 31, 2004;

(i) ($2,400,000) at April 30, 2004;

(j) ($3,100,000) at May 31, 2004;”
	 
	 	D.	 	Section 5 of the Schedule to the Loan Agreement is hereby
amended by adding the following Subsection c. after subsection b.
	 
	 	 	 	“c. Capitalization Event.
	 
	 	 	 	Borrower shall, on or after April 7, 2004 but before June 30, 2004, receive
cash proceeds from the issuance of equity securities of the Borrower and/or
subordinated debt incurred by the Borrower in the aggregate amount of at
least $5,000,000.00.”
	 
	 	E.	 	The definitions of “Adjusted Quick Ratio” and “Deferred Revenue
Offsets” set forth in Section 8 of the Loan Agreement are hereby deleted their
entirety.”
	 
	 	F.	 	The definition of “Eligible Receivables” set forth in Section 8
of the Loan Agreement is hereby amended by deleting the following text
appearing therein:
	 
	 	 	 	“(viii) the Receivable must not be owing from an Account Debtor located
outside the United States (unless pre-approved

 

 

	 	 	 	by Silicon in its discretion in writing, or backed by a letter of credit
satisfactory to Silicon, or FCIA insurance satisfactory to Silicon), and”
	 
	 	 	 	and substituting the following text therefor:
	 
	 	 	 	“(viii) the Receivable must not be owing from an Account Debtor located
outside the United States (unless pre-approved by Silicon in its discretion
in writing, or backed by a letter of credit satisfactory to Silicon, or FCIA
insurance satisfactory to Silicon) with the exception of Sunbelt
International, provided that borrowings based upon
Receivables owing from Sunbelt International (“Sunbelt Based Borrowings”)
may not exceed the lesser of (a) twenty (20%) percent of all borrowings
under this Agreement, or (b) $1,000,000.00, and”

4. WAIVER. The Bank hereby waives Borrower’s failure to comply with the “Minimum Tangible
Net Worth” covenant set forth in Section 5.a. of the Schedule to the Loan Agreement for the periods
ended December 31, 2003, January 31, 2004 and February 29, 2004. The Bank’s waiver of Borrower’s
compliance with said foregoing affirmative covenant shall apply only to the foregoing specific
periods.

5. FEES. Borrower shall pay to Bank on the date hereof a fully-earned, non-refundable
modification fee of Three Thousand Dollars ($3,000.00). Borrower shall reimburse Bank for all
legal fees and expenses incurred in connection with this amendment to the Existing Loan Documents.

6. RATIFICATION OF PERFECTION CERTIFICATE. Borrower hereby ratifies, confirms, and
reaffirms, all and singular, the terms and disclosures contained in a certain Perfection
Certificate delivered to the Bank on or about October 16, 2003, and acknowledges, confirms and
agrees the disclosures and information provided therein has not changed, as of the date hereof.

7. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary
to reflect the changes described above.

8. 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.

9. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that Borrower has no
offsets, defenses, claims, or counterclaims against the 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 the Bank,

 

 

whether known or unknown, at law or in equity, all of tem are hereby expressly WAIVED and Borrower
hereby RELEASES the Bank from any liability thereunder.

10. 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.

11. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective only when it
shall have been executed by Borrower and Bank.

[The remainder of this page is intentionally left blank]

 

 

     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:	 	 
	 
	 	 	 	 
	NSI SOFTWARE, INC., successor by merger with  
	NETWORK SPECIALISTS, INCORPORATED
	 
	 	 	 	 
	By:

	 	/s/ S. Craig Huke	 	 
	 

	 	 	 	 
	Name:

	 	S. Craig Huke	 	 
	Title:

	 	Chief Financial Officer	 	 
	 
	 	 	 	 
	BANK:	 	 
	 
	 	 	 	 
	SILICON VALLEY BANK, d/b/a	 	 
	SILICON VALLEY EAST	 	 
	 
	 	 	 	 
	By:

	 	/s/ John V. Atenasoff	 	 
	 

	 	 	 	 
	Name:

	 	John V. Atenasoff	 	 
	Title:

	 	Vice Presidentexv10w17

 

Exhibit 10.17

THIRD LOAN MODIFICATION AGREEMENT

     This Third Loan Modification Agreement (this “Loan Modification Agreement”) is entered into as
of July 21, 2004, by and between 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 NSI SOFTWARE,
INC., successor by merger with NETWORK SPECIALISTS, INCORPORATED, a Delaware corporation with
offices at Two Hudson Place, Suite 700, Hoboken, New Jersey 07030 (“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
agreement dated as of October 16, 2003, evidenced by, among other documents, a certain Loan and
Security Agreement dated as of October 16, 2003 between Borrower and Bank, as amended (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.

Modification to Loan Agreement.

	 	A.	 	Section 5a.(i)(k)-(n) of the Schedule to the Loan Agreement and
Section 5a.(ii)are hereby amended by deleting same their entirety and
substituting the following therefor:
	 
	 	 	 	“(k) ($500,000) at June 30, 2004;

(l) ($2,000,000) at July 31, 2004;

(m) ($3,000,000) at August 31, 2004;

(n) $1,200,000.00 at September 30, 2004
	 
	 	 	 	plus
	 
	 	 	 	(ii) 80% of all consideration received (other than the $3,000,000.00 to be
received on or before September 30, 2004 pursuant to subsection c, below)
from proceeds from the issuance of any equity securities of the Borrower
and/or subordinated debt incurred by the Borrower.”

 

 

	 	B.	 	Section 5 of the Schedule to the Loan Agreement is hereby
amended by deleting Subsection c. thereof in its entirety and substituting the
following therefor:
	 
	 	 	 	“c. Capitalization Event
	 
	 	 	 	Borrower shall, on or after July 1, 2004 but before September 30, 2004,
receive cash proceeds from the issuance of equity securities of the Borrower
and/or subordinated debt incurred by the Borrower in the aggregate amount of
at least $3,000,000.00.”
	 
	 	C.	 	Section 8(4) of the Schedule to the Loan Agreement is hereby
amended by adding the following subsection (c) to the definition of
“Intellectual Property Granting Event” set forth therein:
	 
	 	 	 	“, or (c) until such time as Borrower receives additional cash proceeds from
the issuance of equity securities of the Borrower and/or subordinated debt
incurred by the Borrower in an aggregate amount of at least $10,000,000.00,
the occurrence of an Event of Default under this Agreement.”
	 
	 	D.	 	Subsection (viii) of the definition of “Eligible Receivables”
set forth in Section 8 of the Loan Agreement is hereby amended by deleting same
in its entirety and substituting the following therefor:
	 
	 	 	 	“(viii) the Receivable must not be owing from an Account Debtor located
outside the United States (unless pre-approved by Silicon in its discretion
in writing, or backed by a letter of credit satisfactory to Silicon, or FCIA
insurance satisfactory to Silicon) with the exception of Sunbelt
International, provided that (a) borrowings based upon
Receivables owing from Sunbelt International (“Sunbelt Based Borrowings”)
may not exceed twenty (20%) percent of all borrowings under this Agreement,
(b) borrowings based on Receivables owing from Sunbelt International
plus borrowings based upon Receivables owing from Sunbelt Software,
Inc. may not exceed forty 40% percent of all borrowings under this
Agreement, and (c) Receivables owing from Sunbelt International shall only
be deemed eligible up to $1,000,000.00; and”

4. WAIVER. The Bank hereby waives Borrower’s failure to comply with the Capitalization
Event requirement set forth in Section 5.c. of the Schedule to the Loan Agreement as of June 30.
The Bank’s waiver of Borrower’s compliance with said foregoing affirmative covenant shall apply
only to the foregoing specific period.

5. FEES. Borrower shall pay to Bank on the date hereof a fully-earned, non-refundable
modification fee of Five Thousand Dollars ($5,000.00). Borrower shall reimburse Bank for all legal
fees and expenses incurred in connection with this amendment to the Existing Loan Documents.

 

 

6. RATIFICATION OF PERFECTION CERTIFICATE. Borrower hereby ratifies, confirms, and
reaffirms, all and singular, the terms and disclosures contained in a certain Perfection
Certificate delivered to the Bank on or about October 16, 2003, and acknowledges, confirms and
agrees the disclosures and information provided therein has not changed, as of the date hereof.

7. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary
to reflect the changes described above.

8. 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.

9. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that Borrower has no
offsets, defenses, claims, or counterclaims against the 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 the Bank, whether known or unknown, at law or in equity, all of tem are
hereby expressly WAIVED and Borrower hereby RELEASES the Bank from any liability thereunder.

10. 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.

11. 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:	 	 
	 
	 	 	 	 
	NSI SOFTWARE, INC., successor by merger with
	NETWORK SPECIALISTS, INCORPORATED
	 
	 	 	 	 
	By:

	 	/s/ S. Craig Huke	 	 
	 

	 	 	 	 
	Name:

	 	S. Craig Huke	 	 
	Title:

	 	Chief Financial Officer	 	 
	 
	 	 	 	 
	BANK:	 	 
	 
	 	 	 	 
	SILICON VALLEY BANK, d/b/a	 	 
	SILICON VALLEY EAST	 	 
	 
	 	 	 	 
	By:

	 	/s/ John V. Atenasoff	 	 
	 

	 	 	 	 
	Name:

	 	John V. Atenasoff	 	 
	Title:

	 	Vice President	 	 

 

 

CORPORATE RESOLUTIONS FOR

AMENDING LOAN ARRANGEMENT

Scott
Meyers ____, being the Secretary of NSI SOFTWARE, INC., a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware CERTIFIES that the
following resolutions were adopted

	 	 	 	 	 
	CHECK

ONE

	 	þ
	 	at a duly called and conducted meeting of the Directors of said corporation
held on at which a quorum was present and voting throughout,
	 
	 	 	 	 
	 

	 	o
	 	by the unanimous consent of the Directors of said corporation, the originals of which consents having been
placed with the records of meetings of Directors of said corporation,

and are in conformity with the Certificate of Incorporation and By-Laws of said corporation (each
as amended to date) and that each of the following resolutions presently is in full force and
effect without change:

AMENDMENT OF LOAN ARRANGEMENT

			
	RESOLVED,	 	That this corporation amend its loan arrangements with Silicon Valley Bank (hereinafter,
with any successor, the “Bank”) in such manner as has been or is hereinafter discussed and
negotiated by and between the Bank on the one hand and any of the following, acting on behalf
of this corporation, on the other:

	 	 	 
	Insert title, only, if
Persons to act on behalf
of corporation have titles.
Otherwise, insert names.

	 	S. Craig Huke

Chief Financial Officer

In connection with the foregoing, each of said officers and/or persons, acting as described above,
is authorized to execute, seal, acknowledge, and deliver in the name of and on behalf of this
corporation such instruments, documents, and papers which relate thereto as may be appropriate,
each in such form and upon such terms as the officer(s) and/or person(s) so authorized determines,
such execution and delivery to be conclusive of such officer’(s) and/or person’(s) authority so to
act in the name of and on behalf of this corporation.

DELEGATION OF AUTHORITY

			
	RESOLVED,	 	That any one of the officers and/or persons authorized
by the foregoing Resolutions, acting singly, may by
written instrument furnished the Bank delegate to any
other officer or person the same authority which is
vested singly and individually by said Resolution in
the person(s) or officer(s) so delegating authority,
which written delegation shall be in such form as may
be requested by the Bank and may be subject to such
restrictions and limitations as may be indicated
thereon.

- 1 -

 

CONTINUATION OF AUTHORITY

			
	RESOLVED,	 	That all resolutions and delegations relative to the
authority of any officer or person to act on behalf of
this corporation shall remain in full force and effect
until the Bank’s receipt of written notice of the
revocation or modification of such authority from the
person signing below as the Secretary of this
corporation or from that person whom the Bank
reasonably believes to be authorized to act in this
regard on behalf of this corporation.

RATIFICATION OF PRIOR TRANSACTIONS

			
	RESOLVED,	 	That all action heretofore taken on behalf of this
corporation and all instruments, documents, and papers
heretofore executed in the name of and on behalf of
this corporation concerning this corporation’s
relationship with the Bank be, and they hereby are,
approved, adopted, and ratified. This corporation
shall indemnify, defend, and hold the Bank harmless of
and from any loss, liability, or damage the Bank may
suffer or incur on account of this corporation’s
relationship with the Bank.

REVOCATION OF INCONSISTENT RESOLUTIONS

			
	RESOLVED,	 	That any and all resolutions of this corporation which
may be in conflict with any of the foregoing
resolutions be, and they hereby are, revoked.

			
	RESOLVED,	 	That the resolutions of this corporation’s Directors
concerning this corporation’s relationship with and
borrowing from Silicon Valley Bank (the “Bank”), with
offices at One Newton Executive Park, Suite 200, 2221
Washington Street, Newton, Massachusetts 02462,
pursuant to which, among other things, this
corporation may be granting the Bank a security
interest or other collateral in and to, and/or
mortgaging, all or any portion of the assets of this
corporation, be, and said resolutions are hereby
approved, adopted, and incorporated herein by
reference.

PERSONS PRESENTLY AUTHORIZED TO ACT

I further CERTIFY that the following person are authorized under the preceding Resolutions to act:

	 	 	 
	Name	 	Title
	S. Craig Huke

	 	Chief Financial Officer
	Scott Meyers

	 	Chief Operating Officer

- 2 -

 

     IN WITNESS WHEREOF, I have set my hand and the seal of this corporation on this 20th
day of July, 2004.

	 	 	 	 	 
	     (Corporate Seal)

	 	          /s/ Scott Meyers	 	 
	 

	 	 

Secretary
	 	 
	 

	 	 	 	 
	 

	 	Print Name: Scott Meyers	 	 

     If the foregoing Resolutions confer authority upon the Secretary, this Certificate should be
confirmed by another officer of the corporation.

	 	 	 	 	 	 	 
	 

	 	CONFIRMED:

Print Name:
	 	/s/ S. Craig Huke
 

S. Craig Huke
	 	 
	 

	 	Title:
	 	Chief Financial Officer	 	 

- 3 -

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