PART I: FINANCIAL INFORMATION

EX-10.3 6 p68410exv10w3.txt EX-10.3 EXHIBIT 10.3 SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS BORROWER(S): MOBILITY ELECTRONICS, INC. PORTSMITH, INC. MAGMA, INC. ADDRESS: 17800 N. PERIMETER DRIVE SCOTTSDALE, ARIZONA ###-###-#### DATE: AUGUST 25, 2003 THIS AMENDMENT TO LOAN DOCUMENTS (THIS "AMENDMENT") is entered into between SILICON VALLEY BANK ("Bank"), whose address is 3003 Tasman Drive, Santa Clara, California 95054, and the borrower(s) named above (individually and collectively, and jointly and severally, the "Borrower"), whose address is set forth above. Bank and Borrower agree to amend the Loan and Security Agreement between them, dated as of September 27, 2002 (as amended, restated, supplemented, or otherwise modified from time to time, the "Loan Agreement"), as set forth herein, effective as of the date hereof. Capitalized terms used but not defined in this Amendment, shall have the meanings set forth in the Loan Agreement (as amended by this Amendment). Bank and Borrower acknowledge that the Asset Based Terms are currently in effect. 1. LIMITED WAIVER. Bank and Borrower hereby agree that any failure of Parent (on a consolidated basis) to maintain the minimum Tangible Net Worth required under Section 5.2 of the Schedule to Loan Agreement solely for the month ended May 31, 2003 (the "Designated Default") hereby is waived. It is understood, however, that the foregoing waiver of the Designated Default does not constitute a waiver of the aforementioned covenant with respect to any other date or time period, or of any other provision or term of the Loan Agreement or any related document, nor an agreement to waive in the future such covenant with respect to any other date or time period or any other provision or term of the Loan Agreement or any related document. 2. AMENDMENTS TO LOAN AGREEMENT. (a) The portion of Section 2 of the Schedule to Loan Agreement that currently reads as follows: "(ii) while the Asset Based Terms are in effect, the interest rate shall be a rate equal to the Prime Rate plus 1.25% per annum, except that (A) in the event the Borrower has a fiscal quarter ending after the date hereof in which its 1 SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS EBITDA is equal to or greater than zero, then the interest rate while the Asset Based Terms are in effect shall be equal to the Prime Rate plus 0.75% per annum, and (B) if, in a subsequent fiscal quarter EBITDA is less than zero, then the interest rate shall return to the Prime Rate plus 1.25% per annum" , hereby is amended and restated in its entirety to read as follows: "(ii) while the Asset Based Terms are in effect, the interest rate per annum shall be a rate equal to the Prime Rate plus 2.00% per annum." (b) The portion of Section 3 of the Schedule to Loan Agreement that currently reads as follows: "Unused Line Fee: In the event, in any fiscal quarter (or portion thereof at the beginning and end of the term hereof), the average daily principal balance of the Advances outstanding during the month is less than $10,000,000, Borrower shall pay Bank an unused line fee (the "Unused Line Fee") in an amount equal to 0.25% per annum on the difference between $10,000,000 and the average daily principal balance of the Advances outstanding during the month, computed on the basis of a 360-day year, which Unused Line Fee shall be computed and paid quarterly, in arrears, on the first day of the following quarter. If throughout a fiscal quarter the Asset Based Terms are in effect, then the Unused Line Fee will not be charged for such fiscal quarter." , hereby is amended and restated in its entirety to read as follows: "Unused Line Fee: Borrower shall pay Bank an unused line fee (the "Unused Line Fee" as follows: (a) While the Asset Based Terms are not in effect: In the event, in any fiscal quarter (or portion thereof during which the Asset Based Terms are not in effect), the average daily principal balance of the Advances outstanding during such quarter (or such portion thereof) is less than $10,000,000, then the Unused Line Fee shall be in an amount equal to 0.25% per annum on the difference between $10,000,000 and the average daily principal balance of the Advances outstanding during such quarter (or portion thereof), computed on the basis of a 360-day year, and the Unused Line Fee shall be computed and paid quarterly, in arrears, on the first day of the following quarter. (b) Solely prior to August 2003, if throughout a fiscal quarter the Asset Based Terms are in effect, then the 2 SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS Unused Line Fee will not be charged for such fiscal quarter under paragraph (a) above. (c) From and after August 2003, while the Asset Based Terms are in effect: In the event, in any month (or portion thereof during which the Asset Based Terms are in effect), the average daily principal balance of the Advances outstanding during such month (or portion thereof) is less than $10,000,000, then the Unused Line Fee shall be in an amount equal to 0.375% per annum on the difference of $10,000,000 minus the average daily principal balance of the Advances outstanding during such month (or portion thereof), computed on the basis of a 360-day year, and the Unused Line Fee shall be computed and paid monthly, in arrears, on the first day of the following month." (c) Section 5.2 of the Schedule to Loan Agreement, which currently reads as follows: " 5.2 ASSET BASED TERMS IN EFFECT. During all periods in which the Asset Based Terms are in effect, Parent (on a consolidated basis) shall comply with the following covenant as of the end of each month: Minimum Tangible Net Worth: Parent (on a consolidated basis) shall maintain a Tangible Net Worth of not less than the below-defined Applicable TNW Base Amount, as of the end of each month. As used herein, the term "Applicable TNW Base Amount" means: (a) with respect to the month ending March 31, 2003, $8,900,000; (b) with respect to the month ending April 30, 2003, $8,200,000; (c) with respect to the month ending May 31, 2003, $8,200,000; (d) with respect to the month ending June 30, 2003, $8,200,000; (e) with respect to the month ending July 31, 2003, $8,600,000; (f) with respect to the month ending August 31, 2003, $8,600,000; 3 SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS (g) with respect to the month ending September 30, 2003, $8,600,000; (h) with respect to the month ending October 31, 2003, $9,300,000; (i) with respect to the month ending November 30, 2003, $9,300,000; (j) with respect to the month ending December 31, 2003, $9,300,000; and (k) with respect to each month thereafter, such amounts for succeeding months as are established by Bank in its good faith business judgment based on the Additional Projections (defined below). Borrower hereby agrees to deliver to Bank, no later than December 31, 2003 (which is the end of Borrower's Fiscal Year 2003), a set of annual financial projections with respect to the projected financial condition of Borrower for each month in the following fiscal year and in such form and containing such items as the Bank shall determine are appropriate or needed by Bank in order for Bank to establish financial covenant levels for such following fiscal year), and with the further understanding that such projections, individually and in their totality, must also otherwise be acceptable to Bank in its discretion (the "Additional Projections"). Borrower hereby acknowledges and agrees that: (x) the information in the Additional Projections as required above is to be used by the Bank in order to establish certain financial covenant levels for later periods during the term of this Agreement; (y) such a process introduces uncertainty as to the amounts required for Borrower's financial covenant compliance in the future; and (z) regardless of any such uncertainty, however, Borrower knowingly and without reservation agrees to the foregoing procedure and fully understands that Events of Default may arise from Borrower's non-compliance with such later-established amounts. 4 SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS Maximum Monthly Net Loss (After Tax): Parent (on a consolidated basis) shall not have a net loss (after tax) of more than $1,250,000 in any month (commencing with the month ending March 31, 2003). " , hereby is amended and restated in its entirety to read as follows: " 5.2 ASSET BASED TERMS IN EFFECT. During all periods in which the Asset Based Terms are in effect, Parent (on a consolidated basis) shall comply with the following covenant as of the end of each month (or such other fiscal period (if any) expressly specified below): Minimum Tangible Net Worth: Parent (on a consolidated basis) shall maintain, as of the end of each quarter, a Tangible Net Worth of not less than the sum of (a) the below-defined Applicable TNW Base Amount, plus (b) 50% of all consideration received on or after August 1, 2003 for equity securities and subordinated debt of the Borrower. Increases in the Minimum Tangible Net Worth Covenant based on consideration received for equity securities and subordinated debt of the Borrower shall be effective as of the end of the quarter in which such consideration is received, and shall continue effective thereafter. In no event shall the Minimum Tangible Net Worth Covenant be decreased (except if and to the extent arising solely from a corresponding decrease (if any) in the Applicable TNW Base Amount from quarter to quarter). As used herein, the term "Applicable TNW Base Amount" means: (a) with respect to the quarter ending June 30, 2003, $8,200,000; (b) with respect to the quarter ending September 30, 2003, $8,000,000; (c) with respect to the quarter ending December 31, 2003, $8,700,000; and (d) with respect to each quarter thereafter, such amounts for succeeding quarters as are established by Bank in its good faith business judgment based on the Additional Projections (defined below). 5 SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS Borrower hereby agrees to deliver to Bank, no later than December 31, 2003 (which is the end of Borrower's Fiscal Year 2003), a set of annual financial projections with respect to the projected financial condition of Borrower for each month in the following fiscal year and in such form and containing such items as the Bank shall determine are appropriate or needed by Bank in order for Bank to establish financial covenant levels for such following fiscal year), and with the further understanding that such projections, individually and in their totality, must also otherwise be acceptable to Bank in its discretion (the "Additional Projections"). Borrower hereby acknowledges and agrees that: (x) the information in the Additional Projections as required above is to be used by the Bank in order to establish certain financial covenant levels for later periods during the term of this Agreement; (y) such a process introduces uncertainty as to the amounts required for Borrower's financial covenant compliance in the future; and (z) regardless of any such uncertainty, however, Borrower knowingly and without reservation agrees to the foregoing procedure and fully understands that Events of Default may arise from Borrower's non-compliance with such later-established amounts. Maximum Monthly Net Loss (After Tax): Parent (on a consolidated basis) shall not have a net loss (after tax) of more than $1,250,000 in any month (commencing with the month ending March 31, 2003). " 3. RESERVES; WARRANT. (a) Without limiting the generality of Item (4) set forth in Exhibit E to the Loan Agreement, Borrower hereby acknowledges and reaffirms that the Asset Based Terms are currently in effect and that, while the Asset Based Terms are in effect, Bank has the right in good faith to establish and maintain, from time to time, reserves as set forth in such Item (4) against the amount of Advances, Letters of Credit, and other financial accommodations otherwise available under the Loan Agreement. (b) Without limiting the generality of clause (a) above and without limiting the Bank's rights and discretion relative to any other reserves, Borrower and Bank hereby acknowledge and agree that: (i) as circumstances currently exist, it is the Bank's good faith belief that a reserve in the amount of $1,500,000 against the amount of Advances, Letters of Credit, and other financial accommodations otherwise available under the Loan Agreement is appropriate due to, and accordingly established and maintained for, negative trends of Borrower's financial performance against plan and of Collateral performance (the "Negative Trends Reserve"); (ii) subject to the terms and conditions 6 SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS hereof, Borrower has requested that Bank, and Bank hereby agrees to, temporarily reduce the amount of the Negative Trends Reserve (based on circumstances as they currently exist) from $1,500,000 to $1,000,000 solely for the consecutive-90-day period commencing on August 7, 2003 and ending on November 5, 2003 (the "Temporary Negative Trends Reserve Reduction"); and (iii) in consideration for Bank entering into this Amendment (including with respect to the Temporary Negative Trends Reserve Reduction), on the date of execution and delivery of this Amendment (the "Target Date") Borrower shall provide Bank with ten-year warrants to purchase 5,000 shares of common stock of the Parent, at a price per share equal to the Target Date Designated Price (as defined herein), on terms acceptable to Bank, all as set forth in the Warrant to Purchase Stock (the "August 2003 Warrant") and related documentation (if any) being executed concurrently herewith. The August 2003 Warrant shall be deemed fully earned on the Target Date, shall be in addition to all interest and other fees, and shall be non-refundable. As used herein, the term "Target Date Designated Price" means the average closing price of one share of the Parent's common stock reported for the 5 trading days immediately before the Target Date. 4. FEES. In consideration for Bank entering into this Amendment, Borrower shall issue the August 2003 Warrant and pay Bank a fee of $20,000 concurrently with the execution and delivery of this Amendment, which fee shall be non-refundable and in addition to all interest and other fees payable to Bank under the Loan Documents. Bank is authorized to charge said fees to Borrower's loan account. 5. REPRESENTATIONS TRUE. Borrower represents and warrants to Bank that all representations and warranties set forth in the Loan Agreement, as amended hereby, are true and correct. 6. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior written amendments to the Loan Agreement signed by Bank and Borrower, and the other Loan Documents set forth in full all of the representations and agreements of the parties with respect to the subject matter hereof and supersede all prior discussions, representations, agreements and understandings between the parties with respect to the subject hereof. Except as expressly amended herein (or as amended and restated in the Loan Documents as expressly contemplated herein), all of the terms and provisions of the Loan Agreement and all other Loan Documents shall continue in full force and effect and the same are hereby ratified and confirmed. [remainder of page intentionally left blank; signature page follows] 7 SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS 7. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same document. Delivery of an executed counterpart of this Amendment by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Amendment. The foregoing shall apply to each other Loan Document mutatis mutandis. Borrower: Bank: MOBILITY ELECTRONICS, INC. SILICON VALLEY BANK By_______________________________ By__________________________________ President or Vice President Title_______________________________ Borrower: Borrower: PORTSMITH, INC. MAGMA, INC. By_______________________________ By_______________________________ President or Vice President President or Vice President 8 SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS CONSENT The undersigned acknowledges that the undersigned's consent to the foregoing Amendment is not required, but the undersigned nevertheless does hereby consent to the foregoing Amendment and to the documents and agreements referred to therein and to all future modifications and amendments thereto, and any termination thereof, and to any and all other present and future documents and agreements between or among the foregoing parties. Nothing herein shall in any way limit any of the terms or provisions of the guaranty, security agreement, or any other Loan Document of the undersigned, all of which are hereby ratified and affirmed. Borrower: Borrower: Cutting Edge Software, Inc. iGo Direct Corporation, a Delaware corporation formerly known as IGOC Acquisition, Inc. and successor-by-merger to iGo Corporation By_______________________________ President or Vice President By_______________________________ President or Vice President 9