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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number: 000-21319
LIGHTBRIDGE, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3065140
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
67 South Bedford Street
Burlington, Massachusetts 01803
(Address of principal executive offices, including Zip Code)
(781) 359-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes X No _________
-------
As of August 6, 1998, there were 15,871,347 shares of the registrant's common
stock, $.01 par value, outstanding.
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LIGHTBRIDGE, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets as of December 31, 1997 and June 30, 1998........................... 3
Income Statements for the three months ended June 30, 1997 and June 30, 1998....... 4
Income Statements for the six months ended June 30, 1997 and June 30, 1998......... 5
Statements of Cash Flows for the six months ended June 30, 1997 and June 30, 1998.. 6
Notes to Unaudited Condensed Consolidated Financial Statements..................... 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................................... 8
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................ 18
Item 5. OTHER INFORMATION.................................................................. 18
Item 6. EXHIBITS AND REPORTS ON FORM 8-K................................................... 18
SIGNATURE.................................................................................. 19
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
LIGHTBRIDGE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 15,715,726 $ 13,381,604
Accounts receivable - net 13,213,052 14,733,672
Other current assets 2,885,583 2,950,379
------------ ------------
Total current assets 31,814,361 31,065,655
Property and equipment - net 11,763,013 11,459,062
Goodwill - net 6,286,931 5,179,557
Other assets 2,087,676 2,529,416
------------ ------------
Total assets $ 51,951,981 $ 50,233,690
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 8,164,817 $ 5,743,441
Short-term borrowings and current portion of notes payable 805,205 805,205
Deferred revenues 1,658,406 1,948,811
------------ ------------
Total current liabilities 10,628,428 8,497,457
Other long-term liabilities 823,346 1,057,367
Notes payable 1,397,614 888,823
------------ ------------
Total liabilities 12,849,388 10,443,647
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized;
no shares issued or outstanding at December 31, 1997 and
June 30, 1998, respectively -- --
Common stock, $.01 par value; 60,000,000 shares authorized;
16,492,954 and 16,665,166 shares issued and 15,665,662 and
15,837,874 shares outstanding at December 31, 1997 and
June 30, 1998, respectively 164,929 166,651
Additional paid-in capital 53,660,991 53,975,646
Warrants 598,875 598,875
Accumulated deficit (13,697,239) (13,326,166)
------------ ------------
Total 40,727,556 41,415,006
Less: treasury stock, at cost (1,624,963) (1,624,963)
------------ ------------
Total stockholders' equity 39,102,593 39,790,043
------------ ------------
Total liabilities and stockholders' equity $ 51,951,981 $ 50,233,690
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
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LIGHTBRIDGE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
Three months ended June 30,
------------------------------
1997 1998
---------- -----------
<S> <C> <C>
Revenues:
Transaction services $5,972,765 $ 9,125,612
Software licensing 975,916 3,410,130
Consulting services 2,059,168 2,609,740
---------- -----------
Total revenues 9,007,849 15,145,482
---------- -----------
Cost of revenues:
Transaction services 3,434,131 5,122,507
Software licensing 295,257 895,907
Consulting services 422,146 1,684,528
---------- -----------
Total cost of revenues 4,151,534 7,702,942
---------- -----------
Gross profit 4,856,315 7,442,540
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Operating expenses:
Development 1,350,474 2,429,574
Sales and marketing 1,348,837 1,715,305
General and administrative 976,991 2,968,051
---------- -----------
Total operating expenses 3,676,302 7,112,930
---------- -----------
Income from operations 1,180,013 329,610
Other income (expense):
Interest income 327,425 170,214
Interest expense (83,687) (33,772)
Other non-operating income 24,803 84,311
---------- -----------
Income before provision for income taxes 1,448,554 550,363
Provision for income taxes 550,430 272,100
---------- -----------
Net income $ 898,124 $ 278,263
========== ===========
Basic and diluted earnings per common share $0.06 $0.02
============== ==============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
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LIGHTBRIDGE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
1997 1998
---- ----
<S> <C> <C>
Revenues:
Transaction services $12,001,921 $16,985,333
Software licensing 1,745,265 7,521,062
Consulting services 4,083,502 3,941,903
----------- -----------
Total revenues 17,830,688 28,448,298
----------- -----------
Cost of revenues:
Transaction services 6,920,862 10,119,915
Software licensing 425,935 1,432,313
Consulting services 973,294 2,450,422
----------- -----------
Total cost of revenues 8,320,091 14,002,651
----------- -----------
Gross profit 9,510,597 14,445,647
----------- -----------
Operating expenses:
Development 2,682,213 4,721,671
Sales and marketing 2,604,549 3,671,242
General and administrative 2,122,617 5,775,563
----------- -----------
Total operating expenses 7,409,379 14,168,476
----------- -----------
Income from operations 2,101,218 277,171
Other income (expense):
Interest income 647,241 399,181
Interest expense (191,542) (99,612)
Other non-operating income 15,524 123,333
----------- -----------
Income before provision for (benefit from) income taxes 2,572,441 700,073
Provision for (benefit from) income taxes (93,509) 329,000
Net income $ 2,665,950 $ 371,073
=========== ===========
Basic earnings per common share $ 0.18 $ 0.02
=========== ===========
Diluted earnings per common share $ 0.16 $ 0.02
=========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
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LIGHTBRIDGE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
1997 1998
----------- ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 2,665,950 $ 371,073
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization 1,696,167 3,951,868
Amortization of discount on notes 9,484 18,812
Deferred taxes (863,406) -
Changes in assets and liabilities:
Accounts receivable and other current assets (1,632,744) (1,605,417)
Other assets 93,006 (1,048,621)
Accounts payable and accrued liabilities (1,032,424) (2,421,376)
Deferred revenues 83,528 290,405
Other liabilities - 408,436
------------ ------------
Net cash provided by (used in) operating activities 1,019,561 (34,820)
------------ ------------
Cash Flows From Investing Activities:
Principal payment received for note from officer - 20,000
Purchases of property and equipment (3,494,550) (1,933,661)
Purchase of investments (2,069,323) -
Redemption of investments 1,031,133 -
------------ ------------
Net cash used in investing activities (4,532,740) (1,913,661)
------------ ------------
Cash Flows From Financing Activities:
Payments on notes payable (252,437) (527,603)
Principal payments under capital lease obligations (883,029) (174,415)
Proceeds from issuance of common stock 46,747 316,377
------------ ------------
Net cash used in financing activities (1,088,719) (385,641)
------------ ------------
Net decrease in cash and cash equivalents (4,601,898) (2,334,122)
Cash and cash equivalents, beginning of period 27,900,802 15,715,726
------------ ------------
Cash and cash equivalents, end of period $ 23,298,904 $ 13,381,604
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
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LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements
include the accounts of Lightbridge, Inc. and its subsidiaries (the "Company").
The Company believes that the unaudited condensed consolidated financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the Company's financial
position, results of operations and cash flows at the dates and for the periods
indicated. Although certain information and disclosures normally included in the
Company's annual financial statements have been omitted, the Company believes
that the disclosures are adequate to make the information presented not
misleading. Results of interim periods may not be indicative of results for the
full year or any future periods. These financial statements should be read in
conjunction with the consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997.
2. SIGNIFICANT ACCOUNTING POLICIES:
Software Revenue Recognition
Effective January 1, 1998, the Company adopted the provisions of Statement
of Position 97-2, "Software Revenue Recognition"("SOP 97-2"), which provides
guidance on recognizing revenue on software transactions. The Company's revenue
recognition practices were substantially in compliance with SOP 97-2 at the time
of adoption.
Earnings Per Share
Basic earnings per share is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock.
A reconciliation of the denominators of the basic and diluted earnings per
share computations for income (loss) from continuing operations is shown below:
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
1997 1998 1997 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Shares for basic earnings per share..... 14,629,937 15,798,486 14,620,421 15,752,223
Effect of options and warrants.......... 1,675,038 1,817,393 1,720,780 1,956,880
---------- ---------- ---------- ----------
Shares for diluted earnings per share... 16,304,975 17,615,879 16,341,201 17,709,103
========== ========== ========== ==========
</TABLE>
No adjustments have been made to net income in computing diluted income per
share.
Comprehensive Income
Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." No
items, other than net income, are currently considered elements of comprehensive
income, and accordingly net income and comprehensive income are the same for all
periods presented.
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Reclassifications
Certain reclassifications have been made to the 1997 financial statements
to conform with the 1998 presentation.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE DISCUSSION IN THIS FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THE RESULTS CONTEMPLATED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF A
NUMBER OF FACTORS, INCLUDING (A) THE UNPREDICTABILITY OF FUTURE REVENUES AND
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS, (B) CONTINUING RAPID
CHANGE IN THE TELECOMMUNICATIONS INDUSTRY THAT MAY AFFECT BOTH LIGHTBRIDGE, INC.
AND ITS CUSTOMERS, (C) CUSTOMER CONCENTRATION, (D) UNCERTAINTIES ASSOCIATED WITH
THE ABILITY OF LIGHTBRIDGE, INC. TO DEVELOP NEW PRODUCTS AND TECHNOLOGIES, (E)
MARKET ACCEPTANCE OF NEW PRODUCTS OF LIGHTBRIDGE, INC. AND CONTINUING DEMAND FOR
PRODUCTS OF LIGHTBRIDGE, INC. BY TELECOMMUNICATIONS COMPANIES, (F) THE IMPACT OF
COMPETITIVE PRODUCTS AND PRICING ON BOTH LIGHTBRIDGE, INC. AND ITS CUSTOMERS AND
(G) THE OTHER FACTORS SET FORTH UNDER "ITEM 1A. Risk Factors" IN THE ANNUAL
REPORT ON FORM 10-K OF LIGHTBRIDGE, INC. FOR THE YEAR ENDED DECEMBER 31, 1997.
Information set forth under the heading "ITEM 1A. Risk Factors" in the Annual
Report on Form 10-K of Lightbridge, Inc. for the year ended December 31, 1997
is incorporated as an exhibit to this Form 10-Q. Unless the context otherwise
requires, "Lightbridge" and the "Company" refer collectively to Lightbridge and
its subsidiaries.
CHURNALERT and FRAUDBUSTER are registered trademarks of the Company, and
CUSTOMER ACQUISITION SYSTEM, LIGHTBRIDGE and POPS are trademarks of the Company.
All other trademarks or trade names referred to in this Form 10-Q are the
property of their respective owners.
OVERVIEW
Lightbridge develops, markets and supports a network of integrated products
and services that enable telecommunications carriers to improve their customer
acquisition and retention processes.
In November 1997, the Company acquired all of the outstanding stock of
Coral Systems, Inc. ("Coral") pursuant to an Agreement and Plan of
Reorganization dated as of September 9, 1997 (the "Reorganization Agreement").
The acquisition was effected through a reverse triangular merger (the "Merger")
in which a newly formed subsidiary of Lightbridge was merged with and into Coral
and the surviving corporation became a wholly owned subsidiary of the Company.
Pursuant to the Merger, each of the outstanding shares of Coral's stock was
converted into a fraction of a share of Lightbridge's common stock, determined
as set forth in the Reorganization Agreement. In addition, as a result of the
Merger, all options and warrants to purchase shares of Coral's stock became
exercisable, when vested, to purchase shares of Lightbridge's common stock. As a
result of the Merger, Lightbridge issued 892,073 shares of its common stock for
all of the outstanding shares of Coral's common stock and reserved 114,399
shares of its common stock for Coral's options and warrants. The Merger has been
accounted for using the purchase method, which combines the
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results of Coral from the date of acquisition with those of the Company. As a
result, the Company's results of operations include Coral's results for the
three and six months ended June 30, 1998, but not for the three and six months
ended June 30, 1997. During the three months ended June 30, 1998, the Company
incurred expenses in connection with moving Coral's facilities from Longmont,
Colorado to 320 Interlocken Parkway, Broomfield, Colorado; the move is expected
to be completed in August 1998.
The Company historically has reported its software licensing and consulting
services revenues as a single line item in its income statements. Because
software licensing and consulting services revenues have become more
significant, the Company is, commencing with this Form 10-Q, reporting revenues
and costs of revenues in three components: transaction services, software
licensing and consulting services. See "--Revenues and Costs of Revenues for
Three Months Ended September 30, 1997 and December 31, 1997" below for a table
of revenues and costs of revenues for the last two quarters of the year ended
December 31, 1997 presented on the basis of these three components.
Lightbridge's transaction services revenues are derived primarily from the
processing of applications for qualification of subscribers for wireless
telecommunications services and the activation of service for those subscribers.
Over time, the Company has expanded its offerings from credit evaluation
services to include screening for subscriber fraud, evaluating carriers'
existing accounts, interfacing with carrier and third-party systems and
providing call center services. These services are provided pursuant to
contracts with carriers which specify the services to be utilized and the
markets to be served. The Company's clients are charged on a per transaction
basis. Pricing varies depending primarily on the volume of transactions, the
type and number of other products and services selected for integration with the
services and the term of the contract under which services are provided. The
volume of processed transactions varies depending on seasonal and retail trends,
the success of the carriers utilizing the Company's services in attracting
subscribers and the markets served by the Company for its clients. Revenues are
recognized in the period when the services are performed.
The Company's software licensing revenues consist of revenues attributable
to the licensing of Company's Channel Solutions, Customer Management and Fraud
Management software. The Company began licensing its Channel Solutions software
with the introduction of its POPS product in fiscal 1995. Lightbridge's Channel
Solutions products are designed to assist customers in interfacing with the
Company's systems as well as to perform other point-of-sale and channel
functionality. The Company's Customer Management products are designed to help
carriers analyze their marketplace to improve their business operations. While
the Company's software products are licensed as packaged software products,
each of these products requires customization and integration with other
products and systems to varying degrees. Revenues are recognized when delivery
has occurred and no further significant obligations to the customer for the
software exist. Revenues from software maintenance contracts are recognized
ratably over the term of the maintenance agreement and are included in software
licensing revenue.
The Company's consulting services revenues have been derived principally
from providing consulting for customer acquisition and retention. During the
three months ended June 30, 1998, the Company launched Lightbridge Consulting
Services, which provides business advisory, customization and integration,
deployment, and optimization services in the areas of customer acquisition and
retention, fraud prevention and distribution management. Revenues from
consulting services are generally recognized as the services are performed,
using the percentage-of-completion method, measured by labor hours.
During the second quarter of 1998, the Company continued its efforts to
complete development of in-process technology acquired from Coral. In June 1998,
the Company released FraudBuster 4.2.5, a new version of FraudBuster that
provides certain performance and functional enhancements. As of June 30, 1998,
the Company was continuing to develop two new versions of FraudBuster, one of
which is expected to contain additional performance and functional enhancements
and is currently scheduled to be released in the fourth quarter of 1998, and the
other of which is expected to contain substantial enhancements in performance,
scalability and functionality and is currently scheduled to be released in 1999.
The Company was also continuing to develop a product that is expected to be
complementary to FraudBuster and to contain new subscription fraud detection
tools. This product is currently scheduled to be available in the first quarter
of 1999. Finally, the Company continued its development efforts with respect to
two versions of ChurnAlert, which are currently scheduled to be released in the
third quarter of 1998 and in 1999. The Company has not changed its original
estimates of the costs expected to
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be incurred to complete these projects, although the estimated completion dates
have been delayed. If the Company is unsuccessful in completing these projects,
the Company's business, financial condition, results of operations and cash
flows could be materially adversely affected.
During the three months ended June 30, 1998, Lightbridge hired a senior vice
president of worldwide sales and marketing, consolidated its consulting services
group and named a vice president to head the newly formed group, and hired a new
senior vice president and chief financial officer who has responsibility for
matters such as the Company's financial reporting systems, business measures and
analyses, and relationships with public market analysts and investors.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Transaction services....................... 66.3% 60.3% 67.3% 59.7%
Software licensing......................... 10.8 22.5 9.8 26.4
Consulting services........................ 22.9 17.2 22.9 13.9
----- ----- ----- -----
Total revenues............................ 100.0 100.0 100.0 100.0
----- ----- ----- -----
Cost of revenues:.............................
Transaction services....................... 38.1 33.8 38.8 35.6
Software licensing......................... 3.3 5.9 2.4 5.0
Consulting services........................ 4.7 11.1 5.5 20.3
----- ----- ----- -----
Total cost of revenues.................... 46.1 50.9 46.7 49.2
----- ----- ----- -----
Gross profit.................................. 53.9 49.1 53.3 50.8
----- ----- ----- -----
Operating expenses:
Development................................ 15.0 16.0 15.0 16.6
Sales and marketing........................ 15.0 11.3 14.6 12.9
General and administrative................. 10.8 19.6 11.9 8.6
----- ----- ----- -----
Total operating expenses.................. 40.8 47.0 41.6 49.8
----- ----- ----- -----
Income from operations........................ 13.1 2.2 11.8 1.0
Other income, net............................. 3.0 1.5 2.6 1.5
----- ----- ----- -----
Income before provision for (benefit from)
income taxes............................... 16.1 3.6 14.4 2.5
Provision for (benefit from) income taxes..... 6.1 1.8 (0.1) 1.2
----- ----- ----- -----
Net income.................................... 10.0% 1.8% 15.0% 1.3%
===== ===== ===== =====
</TABLE>
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THREE MONTHS ENDED JUNE 30, 1998 COMPARED
WITH THREE MONTHS ENDED JUNE 30, 1997
REVENUES. Revenues increased by 68.1% to $15.1 million in the three months
ended June 30, 1998 from $9.0 million in the three months ended June 30, 1997.
Transaction services revenues increased by 52.8% to $9.1 million in the three
months ended June 30, 1998 from $6.0 million in the three months ended June 30,
1997, while decreasing as a percentage of total revenues to 60.3% from 66.3%.
The dollar increase in transaction services revenues for the three months ended
June 30, 1998 was primarily due to increased volume of qualification and
activation transactions processed for carrier clients. The decrease in
transaction services revenues as a percentage of total revenues for the three
month period ended June 30, 1998 principally resulted from a greater increase in
software licensing revenues than transaction services revenues for the same
period.
Software licensing revenues increased by 249.4% to $3.4 million in the three
months ended June 30, 1998 from $1.0 million in the three months ended June 30,
1997, while increasing as a percentage of total revenues to 22.5% from 10.8%.
Both the dollar increase and the increase as a percentage of total revenues in
software licensing revenues for the three months ended June 30, 1998 was
principally a result of the increase in revenues attributable to the Company's
Channel Solutions and Fraud Management products and services. The Company's
software licensing revenues during the three months ended June 30, 1998 included
revenues from its Fraud Management software that was installed for a new
international client but had not been fully accepted by the client as of March
31, 1998 and therefore, as described in Item 2 of the Company's Quarterly Report
on Form 10-Q for the three months ended March 31, 1998, was not recognizable
during the three months ended March 31, 1998.
The Company believes that software licensing revenues for the next several
fiscal quarters will be subject to fluctuation and more difficult to anticipate
than the Company's other types of revenues, principally due to the relatively
large dollar costs and relatively lengthy sales cycles of the software licenses.
The sales cycles for domestic software licenses generally extend from three to
six months and may extend as long as twelve months; sales cycles for software
licenses sold to international clients typically are longer. The predictability
of software licensing revenue is further impeded because the Company's licensed
software is a discretionary purchase for most customers. As a result of the
foregoing, a small number of licensing transactions may have a significant
effect on the Company's software licensing revenues for a fiscal quarter.
Consulting services revenues increased by 26.8% to $2.6 million in the three
months ended June 30, 1998 from $2.1 million in the three months ended June 30,
1997, while decreasing as a percentage of total revenues to 17.2% from 22.9%.
The dollar increase in consulting services revenues for the three months ended
June 30, 1998 was principally due to increased demand for the consulting
services offered by the Company. The decrease in consulting services revenue as
a percentage of total revenues for the three months ended June 30, 1998
principally resulted from a greater increase in software licensing revenues than
consulting services revenues for the same period.
In the year ended December 31, 1997, one customer accounted for 29% of the
Company's total revenues. While Lightbridge believes that its relationship with
this customer is good, the Company currently expects that the percentage of the
Company's total revenues for the year ended December 31, 1998 will be
significantly less than for the preceding year, as a result of growth in the
Company's total revenues, the Company's efforts to diversify its customer base
and a decrease in the consulting services utilized by the customer.
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COST OF REVENUES. Cost of revenues consists primarily of personnel costs,
costs of maintaining systems and networks used in processing qualification and
activation transactions (including depreciation and amortization of systems and
networks) and amortization of capitalized software. Cost of revenues may vary
as a percentage of total revenues in the future as a result of a number of
factors, including changes in the mix of transaction services revenues between
revenues from on-line transaction processing and revenues from processing
transactions services through the Company's Teleservices Group and changes in
the mix of total revenues between transaction services revenues, software
licensing revenues and consulting services revenues.
Transaction services cost of revenues increased by 49.2% to $5.1 million in
the three months ended June 30, 1998 from $3.4 million in the three months ended
June 30, 1997, while decreasing as a percentage of total revenues to 33.8% from
38.1%. The increase in transaction services cost of revenues for the three
months ended June 30, 1998 resulted principally from increases in transaction
volume and costs attributable to expansion of the Company's staff and systems
capacity. The decrease in transaction services cost of revenues as a percentage
of total revenues for the three months ended June 30, 1998 principally resulted
from an increase in the number of transactions processed through on-line
processing as opposed to through the teleservices group.
Software licensing cost of revenues increased by 203.4% to $0.9 million in
the three months ended June 30, 1998 from $0.3 million in the three months ended
June 30, 1997, while increasing as a percentage of total revenues to 5.9% from
3.3%. Both the dollar increase and the increase as a percentage of total
revenues in software licensing cost of revenues for the three months ended June
30, 1998 was primarily due to the increased cost of revenues for Fraud
Management products.
Consulting services cost of revenues increased by 299.0% to $1.7 million in
the three months ended June 30, 1998 from $0.4 million in the three months ended
June 30, 1997, while increasing as a percentage of total revenues to 11.1% from
4.7%. Both the dollar increase and the increase as a percentage of total
revenues in consulting services cost of revenues was primarily due to the
increase in consulting staff due to the expansion of the consulting services
group, including both newly hired personnel and personnel reallocated from other
areas of the Company's operations, including sales and marketing, as part of the
establishment of Lightbridge Consulting Services. The Company expects to
continue hiring consulting staff during the three months ending September 30,
1998 and, to a lesser extent, the three months ending December 31, 1998.
The Company expects fluctuations in gross profit may occur primarily due to
fluctuations in revenue generated from the Company's three revenue components,
particularly revenues from software licensing which have historically generated
higher gross profit margins.
DEVELOPMENT. Development expenses include all internal software development
costs and consist primarily of personnel and outside technical services costs
related to developing new products and services, enhancing existing products and
services, and implementing and maintaining new and existing products and
services.
Development expenses increased by 80.0% to $2.4 million in the three months
ended June 30, 1998 from $1.4 million in the three months ended June 30, 1997.
The increase in costs for the three months ended June 30, 1998 resulted
primarily from the addition of engineering personnel necessary to support the
Company's product development plans in connection with the development and
deployment of its fraud management software product, FraudBuster. The Company
expects to continue to increase its engineering and development efforts in order
to continue enhancing its existing products and services, including its
-12-
<PAGE>
Channel Solutions, Churn and Fraud Management products and services, as well as
to develop new products and services.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions and travel expenses of direct sales and marketing
personnel, as well as costs associated with advertising, trade shows and
conferences. Sales and marketing expenses increased by 27.1% to $1.7 million in
the three months ended June 30, 1998 from $1.3 million in the three months ended
June 30, 1997. The increase for the three months ended June 30, 1998 was due to
the addition of direct sales and product marketing personnel, increased
commissions resulting from the higher level of revenues and increased use of
marketing programs. This increase was offset in part by the reallocation of
certain personnel to Lightbridge Consulting Services as well as the allocation
of certain related expenses to consulting services cost of revenues. The
Company expects to continue to invest in sales and marketing efforts in order to
increase its penetration of existing accounts and to add new clients and
markets. The Company currently estimates that sales and marketing expenses will
account for approximately 11% to 12% of the Company's total revenues during the
latter half of 1998, although the actual percentage may vary significantly as
the result of unanticipated fluctuations in the Company's revenues during the
period.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
principally of salaries of administrative, executive, finance and human
resources personnel, fees for outside professional services, and amortization of
goodwill incurred pursuant to the acquisition of Coral. General and
administrative expenses increased by 203.8% to $3.0 million in the three months
ended June 30, 1998 from $1.0 million in the three months ended June 30, 1997.
The increase reflected the amortization of $0.6 million of goodwill attributable
to the Company's acquisition of Coral, certain costs associated with the
integration of Coral and the addition of finance personnel. The increase also
reflected a one-time write-off during the three months ended June 30, 1998 of
approximately $0.1 million relating to fixed assets, including leasehold
improvements and telephone systems, used at Coral's existing facilities in
Longmont, Colorado, that will not deployed at its new facilities in Broomfield,
Colorado, as well as approximately $0.3 million of accruals relating to various
matters, including sales taxes, the allowance for doubtful accounts and costs
attributable to the establishment of foreign subsidiaries in Asia and the United
Kingdom. The Company expects that its general and administrative costs will
decrease on a quarterly basis during the latter half of 1998 due to the
nonrecurring nature of certain of the expenses recorded by the Company during
the three months ended June 30, 1998. The Company will continue, however, to
recognize approximately $0.6 million of goodwill amortization each quarter
through the three months ended December 31, 2001 as a result of the Coral
acquisition.
OTHER INCOME, NET. Other income, net in the three months ended June 30, 1998
consisted predominantly of interest income and expense. Interest expense
consists of interest, commitment fees and other similar fees payable with
respect to the Company's bank lines of credit, subordinated notes and capital
leases. Interest expense remained the same at $0.1 million in the three months
ended June 30, 1998 and 1997. Interest income decreased to $0.2 million in the
three months ended June 30, 1998 from $0.3 million in the three months ended
June 30, 1997 as a result of lower cash balances. The interest income for the
three months ended June 30, 1998 reflected an average rate of return of
approximately 5.6%.
PROVISION FOR (BENEFIT FROM) INCOME TAXES. The Company's effective tax rate
was 49.4% and 38.0% for the three months ended June 30, 1998 and 1997,
respectively. The Company anticipates its effective tax rate to be 47.0% for
the year ended December 31, 1998. The relatively high effective tax rate for
1998 results in part from goodwill attributable to the Company's acquisition of
Coral; the amortization of this goodwill is recognized as an expense for
accounting purposes, but is not deductible for tax purposes. Since the goodwill
attributable to the Coral acquisition will continue to be
-13-
<PAGE>
amortized through the three months ending December 31, 2001, the Company
anticipates that its effective tax rate will continue to be relatively high
during that amortization period and, in particular, estimates that its effective
tax rate for the year ending December 31, 1999 will be between 40% and 42%. The
actual effective tax rate for 1998 and 1999 may vary significantly from the
Company's estimates as the result of a number of factors, including any and all
factors that cause the Company's actual revenues for those years to vary from
the Company's internal estimates.
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
REVENUES. Revenues increased by 59.5% to $28.4 million in the six months
ended June 30, 1998 from $17.8 million in the six months ended June 30, 1997.
Transaction services revenues increased by 41.5% to $17.0 million in the six
months ended June 30, 1998 from $12.0 million in the six months ended June 30,
1997. The increase in transaction services revenues for the six months ended
June 30, 1998 was primarily due to increased volume of qualification and
activation transactions processed for carrier clients.
Software licensing revenues increased by 331.0% to $7.5 million in the six
months ended June 30, 1998 from $1.7 million in the six months ended June 30,
1997. The increase in software licensing revenues for the six months ended June
30, 1998 was principally a result of the increase in revenues attributable to
the Company's Channel Solutions and Fraud Management products and services.
Consulting services revenues decreased by 3.5% to $3.9 million in the six
months ended June 30, 1998 from $4.1 million in the six months ended June 30,
1997. The decrease in consulting services revenues for the six months ended
June 30, 1998 was principally due to a decrease in the consulting services
utilized by the Company's largest client partially offset by an increased demand
for the consulting services provided to other clients of the Company.
COST OF REVENUES. Transaction services cost of revenues increased by 46.2%
to $10.1 million in the six months ended June 30, 1998 from $6.9 million in the
six months ended June 30, 1997. The increase in transaction services cost of
revenues for the six months ended June 30, 1998 resulted principally from
increases in transaction volume and costs attributable to expansion of the
Company's staff and systems capacity.
Software licensing cost of revenues increased by 236.2% to $1.4 million in
the six months ended June 30, 1998 from $0.4 million in the six months ended
June 30, 1997. The increase in software licensing cost of revenues for the six
months ended June 30, 1998 was primarily due to the increased costs of revenues
for Fraud Management products.
Consulting services cost of revenues increased by 151.8% to $2.5 million in
the six months ended June 30, 1998 from $1.0 million in the six months ended
June 30, 1997. The increase in consulting services cost of revenues was
primarily due to the increase in consulting staff due to the expansion of the
consulting services group, including both newly hired personnel and personnel
reallocated from other areas of the Company's operations as part of the
establishment of Lightbridge Consulting Services.
DEVELOPMENT. Development expenses increased by 76.1% to $4.7 million in the
six months ended June 30, 1998 from $2.7 million in the six months ended June
30, 1997. The increase in costs for the six months ended June 30, 1998 resulted
primarily from the addition of engineering personnel necessary to support the
Company's product development plans.
-14-
<PAGE>
SALES AND MARKETING. Sales and marketing expenses increased by 41.0% to $3.7
million in the six months ended June 30, 1998 from $2.6 million in the six
months ended June 30, 1997. The increase for the six months ended June 30, 1998
was due to the addition of direct sales and product marketing personnel,
increased commissions resulting from the higher level of revenues and increased
use of marketing programs, including trade shows. This increase was offset in
part by the reallocation during the three months ended June 30, 1998 of certain
personnel to Lightbridge Consulting Services as well as the allocation of
certain related expenses for those three months to consulting services cost of
revenues.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased by
172.1% to $5.8 million in the six months ended June 30, 1998 from $2.1 million
in the six months ended June 30, 1997. The increase reflected the amortization
of $1.3 million of goodwill and acquired technology attributable to the
Company's acquisition of Coral, certain costs associated with the integration of
Coral and the addition of finance personnel. The increase also reflected (i) a
one-time write-off during the six months ended June 30, 1998 of approximately
$0.1 million relating to fixed assets, including leasehold improvements and
telephone systems, used at Coral's existing facilities in Longmont, Colorado,
that will not be deployed at its new facilities in Broomfield, Colorado, (ii)
write-offs of approximately $0.3 million for bad debts attributable principally
to contracts of Coral that predated the Company's acquisition of Coral and (iii)
accruals of approximately $0.3 million for various matters, including sales
taxes, the Company's allowance for doubtful accounts and costs attributable to
the Company's establishment of foreign subsidiaries in Asia and the United
Kingdom.
OTHER INCOME, NET. Other income, net in the six months ended June 30, 1998
consisted predominantly of interest income and expense. Interest expense
decreased to $0.1 million in the six months ended June 30, 1998 from $0.2
million in the six months ended June 30, 1997. Interest income decreased to
$0.4 million in the six months ended June 30, 1998 from $0.6 million in the six
months ended June 30, 1997 as a result of lower cash balances due to the
investment made in the service delivery infrastructure and computer equipment
for development activities of the business during 1997.
PROVISION FOR (BENEFIT FROM) INCOME TAXES. During the six months ended June
30, 1998 and 1997, the Company's effective tax rate was 47.0% and (3.6)%,
respectively. The Company's effective tax rate in 1997 was affected by the
reversal of its deferred tax valuation allowance and the utilization of certain
tax credits in the quarter ended March 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Prior to its initial public offering, the Company funded its operations
primarily through private placements of equity and debt securities, cash
generated from operations, bank borrowings and equipment financings. In October
1996, the Company consummated an initial public offering in which 4,370,000
shares of the Company's common stock, $.01 par value, were sold at an initial
public offering price of $10.00 per share. The total shares consisted of
3,021,868 shares sold by the Company and 1,348,132 shares sold by selling
shareholders. Proceeds to the Company, net of underwriters' discount and
associated costs, were approximately $27.1 million. These proceeds were used to
repay certain debt obligations of the Company, to repurchase certain shares of
the common stock of the Company and to fund working capital and other general
corporate purposes.
The Company has a $4.0 million working capital line of credit and a $3.0
million equipment line of credit with a bank. The working capital line of
credit is secured by a pledge of the Company's accounts receivable, equipment
and intangible assets, and borrowing availability is based on the amount of
qualifying accounts receivable. Advances under the working capital line of
credit and equipment line of credit bear interest at the bank's prime rate (8.5%
at June 30, 1998). The working line of credit also provides for the issuance of
letters of credit, which reduce the amount that may be borrowed under the line
of credit and are
-15-
<PAGE>
limited to $1,250,000 in the aggregate. At June 30, 1998, there were no
borrowings outstanding under the working capital line of credit and borrowings
of $0.3 million were outstanding under the equipment line of credit. The
Company's agreements with the bank contain covenants that, among other things,
prohibit the declaration or payment of dividends and require the Company to
maintain certain financial ratios which the Company believes are not restrictive
to its business operations. The working capital line of credit expires in June
1999, and the equipment line of credit expires in June 2001.
The Company's capital expenditures in the totalled $0.7 million and $1.9
million, respectively, for the three and six months ended June 30, 1998 and $2.3
million and $3.5 million, respectively, for the three and six months ended June
30, 1997. The capital expenditures during these periods consisted of purchases
of fixed assets, principally for the Company's services delivery infrastructure
and computer equipment for development activities. Capital expenditures during
the three months ended June 30, 1998 included leasehold improvements and other
costs attributable to the relocation of Coral's facilities to Broomfield,
Colorado. The Company expects capital expenditures for the remainder of 1998 to
total approximately $2.3 million, including additional capital expenditures
related to the relocation of Coral's Colorado facilities. The Company leases
its facilities and certain equipment under non-cancelable capital and operating
lease agreements that expire at various dates through December 2002.
During the three months ended June 30, 1998, the Company completed
development of version 1.19 of the Customer Acquisition System ("CAS"), the
Company's transaction processing system. Version 1.19 completed Year 2000
compliance for the core CAS and its front-end access points. The Company
expects that version 1.20 of CAS, which currently is scheduled for release
during the three months ending December 31, 1998, will include Year 2000 support
for third-party interfaces to CAS, such as interfaces with credit bureaus and
billing systems. The Company also continued its testing and modification
efforts relating to its other software products. The Company may be required to
make significant expenditures in connection with the on-going design and testing
of its software-based services and products and interfaces to third-party
systems for Year 2000 compatibility, and any related modifications or other
development work that may be required to cause those services and products to be
Year 2000 compatible. The Company currently estimates that it will spend
approximately $0.3 million on Year 2000 testing and compliance during the latter
half of 1998, although the actual amount of these expenditures may vary
significantly, depending upon the timing and results of testing and integration
activities, including those that require the involvement and cooperation of
third parties. The Company currently is unable to estimate accurately the amount
of expenditures for Year 2000 compliance that may be required in fiscal 1999 and
thereafter, although it currently believes the amount of these expenditures will
not be material.
As of June 30, 1998, the Company had cash and cash equivalents of $13.4
million and working capital of $22.6 million. The Company believes that the
current cash balances and funds available under existing lines of credit will be
sufficient to finance the Company's operations and capital expenditures for at
least the next twelve months.
INFLATION
Although certain of the Company's expenses increase with general inflation in
the economy, inflation has not had a material impact on the Company's financial
results to date.
RECENT ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" and
AICPA Statement of Position No. 97-2,
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<PAGE>
"Software Revenue Recognition." Adoption of these pronouncements has not had a
material effect on reported results of operations or financial position.
However, the future effects of AICPA Statement of Position No. 97-2 on the
Company's results of operations will depend on the nature and terms of the
individual software agreements entered into in future periods.
In June 1997, the Financial Accounting Standards Board released Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 establishes
standards applicable to the manner in which the Company reports information
about operating segments in its annual financial statements commencing with the
Company's fiscal year ending December 31, 1998 and will require that the Company
report selected information about operating segments in subsequent interim
financial reports issued to stockholders.
REVENUES AND COSTS OF REVENUES FOR
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND DECEMBER 31, 1997
As discussed under "-Overview" above, prior to the filing of this Form
10-Q, the Company has reported its software licensing and consulting services
revenues as a single line item in its income statements. The following table
presents the Company's revenues and costs of revenues for the last two quarters
of the year ended December 31, 1997 on the basis of three components--
transaction services, software licensing and consulting services--consistent
with the presentation in the income statements included in this Form 10-Q.
<TABLE>
<CAPTION>
Three months ended
-------------------------------------------
September 30,1997 December 31, 1997
----------------- -----------------
<S> <C> <C>
Revenues:
Transaction services............................... $6,749,506 $ 8,130,089
Software licensing................................. 862,843 3,723,661
Consulting services................................ 1,844,933 1,407,602
----------------- -----------------
Total revenues................................... $9,457,282 $13,261,352
================= =================
Cost of revenues:.....................................
Transaction services............................... $3,754,795 $ 4,859,486
Software licensing................................. 232,358 826,593
Consulting services................................ 397,949 486,796
----------------- -----------------
Total cost of revenues........................... $4,385,102 $ 6,172,875
================= =================
</TABLE>
-17-
<PAGE>
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held a Special Meeting in Lieu of Annual Meeting of
Stockholders on May 28, 1998 at which Andrew I. Fillat and D. Quinn Mills were
re-elected as Class II directors. Messrs. Fillat and Mills each received
11,553,585 votes for re-election and no votes against re-election. A total of
259,382 votes were withheld in each case, and there were no abstentions or
broker non-votes. The other directors of the Company consist of (i) Debora J.
Wilson, who is the sole Class I Director and whose term expires in 2000, and
(ii) Pamela D.A. Reeve and Torrence C. Harder, who are Class III Directors and
whose terms expire in 1999.
Item 5. OTHER INFORMATION
Any stockholder intending to present a proposal at the 1999 Annual Meeting
of Stockholders must submit such proposal to the Company at its offices no later
than December 28, 1998 in order to be considered for inclusion in the proxy
statement relating to that meeting. In addition, in accordance with the
Company's By-Laws, any stockholder wishing to bring an item of business before
the 1999 Annual Meeting of Stockholders must deliver notice of such item of
business to the Company at its offices no later than March 28, 1999, even if
such item is not to be included in the proxy statement relating to that meeting.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
NO. DESCRIPTION
10.1 Loan Modification Agreements dated from August 19, 1996 to June 26,
1998, each amending the Amended and Restated Credit Agreement dated
as of June 18, 1996 between the Company and Silicon Valley Bank,
which Amended and Restated Credit Agreement has been filed with the
Securities and Exchange Commission as Exhibit 10.4 to the Company's
Registration Statement on Form S-1, as amended (File No. 333-6589).
27.1 Financial Data Schedule for the three months ended June 30, 1998
99.1 Information set forth under the heading "ITEM 1A. Risk Factors" in
the Annual Report on Form 10-K of the Company for the year ended
December 31, 1997 is incorporated herein by reference
(b) Reports on Form 8-K
The Company did not file any Current Report on Form 8-K during the three
months ended June 30, 1998.
-18-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LIGHTBRIDGE, INC.
Date: August 14, 1998 By: /s/ Joseph S. Tibbetts, Jr.
---------------------------------------------
Joseph S. Tibbetts, Jr.
Senior Vice President, Finance and
Administration and Chief Financial Officer
(Authorized Officer and Principal Financial
and Accounting Officer)
-19-
<PAGE>
Exhibit 10.1
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of August 19, 1996, by
and between Lightbridge, Inc. ("Borrower") whose address is 281 Winter Street,
Waltham, MA 02154 and Silicon Valley Bank, a California-chartered bank ("Bank"),
with its principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054
and with a loan production office located at Wellesley Office Park, 40 William
Street, Suite 350, Wellesley, MA 02181, doing business under the name "Silicon
Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may
------------------------------------
be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among
other documents, an Amended and Restated Credit Agreement, dated June 18, 1996,
as may be amended from time to time (the "Credit Agreement"). The Credit
Agreement provided for, among other things, a Committed Revolving Line in the
original principal amount of Four Million and 00/100 Dollars ($4,000,000.00), as
evidenced by an Amended and Restated Promissory Note, dated June 18, 1996 (the
"Working Capital Line of Credit Note"), and a Committed Equipment Line in the
original principal amount of Two Million and 00/100 Dollars ($2,000,000.00), as
evidenced by a Promissory Note, dated June 18, 1996 (the "Equipment Line of
Credit Note"). Defined terms used but not otherwise defined herein shall have
the same meanings as in the Credit Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL: Repayment of the Indebtedness is secured by a
-------------------------
Security Agreement dated April 1, 1992, as amended, and a Collateral Assignment
of Trademarks dated October 5, 1994.
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 Credit Agreement.
-----------------------------------
1. Section 6.8 entitled "Quick Ratio" is hereby amended in its
entirety, to read as follows:
Borrower shall maintain, as of the last day of each calendar
month, beginning as of the month ended June 30, 1996, a ratio of
Quick Assets to Current Liabilities of at least 1.00 to 1.00.
2. Section 6.10 entitled "Debt-Net Worth Ratio" is hereby amended in
its entirety, to read as follows:
Borrower shall maintain, as of the last day of each calendar
month, beginning as of the month ended June 30, 1996, a ratio of
Total Liabilities to Tangible Net Worth of not more than 1.50 to
1.00.
For calculation purposes, deferred revenue shall be excluded from
the Quick Ratio and Debt-Net Worth Ratio covenants.
1
<PAGE>
3. Section 6.9 entitled "Tangible Worth Ratio" is hereby amended in
its entirety, to read as follows:
Borrower shall maintain, as of the last day of each fiscal
quarter, a Tangible Net Worth of not less than eighty percent
(80%) of capital raised following Borrower's successful
completion of an initial public offering.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
------------------
wherever necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
-----------------------
defenses against the obligations to pay any amounts under the Indebtedness.
6. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
-------------------
existing Indebtedness, 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 Indebtedness pursuant to this
Loan Modification Agreement in no way shall obligate Bank 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
Bank and Borrower to retain as liable parties all makers and endorsers of
Existing Loan Documents, unless the party is expressly released by Bank 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.
7 JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
------------------
properties, unconditionally, the non-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.
8. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
----------------
only when it shall have been executed by Borrower and Bank (provided. however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).
2
<PAGE>
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
LIGHTBRIDGE, INC. SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: /s/ Kevin Collins By: /s/ Pamela J. Lowe
---------------------- -------------------------
Name: Kevin Collins Name: Pamela Lowe
---------------------- -------------------------
Title: Controller Title: Vice President
---------------------- -------------------------
SILICON VALLEY BANK
By: /s/ Christine Ware
-------------------------
Name: Christine Ware
-------------------------
Title: Vice President
-----------------------
(Signed at Santa Clara County, CA)
3
<PAGE>
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of December 12, 1996,
by and between Lightbridge, Inc. ("Borrower") whose address is 281 Winter
Street, Waltham, MA 02154 and Silicon Valley Bank, a California-chartered bank
("Bank"), with its principal place of business at 3003 Tasman Drive, Santa
Clara, CA 95054 and with a loan production office located at Wellesley Office
Park, 40 William Street, Suite 350, Wellesley, MA 02181, doing business under
the name "Silicon Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may
-------------------------------------
be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among
other documents, an Amended and Restated Credit Agreement, dated June 18, 1996,
as may be amended from time to time (the "Credit Agreement"). The Credit
Agreement provided for, among other things, a Committed Revolving Line in the
original principal amount of Four Million and 00/100 Dollars ($4,000,000.00), as
evidenced by an Amended and Restated Promissory Note, dated June 18, 1996 (the
"Working Capital Line of Credit Note"), and a Committed Equipment Line in the
original principal amount of Two Million and 00/100 Dollars ($2,000,000.00), as
evidenced by a Promissory Note, dated June 18, 1996 (the "Equipment Line of
Credit Note"). Defined terms used but not otherwise defined herein shall have
the same meanings as in the Credit Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL: Repayment of the Indebtedness is secured by a
---------------------------
Security Agreement dated April 1, 1992, as amended, and a Collateral Assignment
of Trademarks dated October 5, 1994.
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 Working Capital Line of Credit Note.
------------------------------------------------------
1. The interest rate to be applied to the unpaid principal balance
of the Working Capital Line of Credit Note is hereby decreased,
effective as of this date, to a rate per annum equal to the Prime
Rate (as defined herein).
B. Modification(s) to Equipment Line of Credit Note.
------------------------------------------------
1. The interest rate to be applied to the unpaid principal balance
of the Equipment Line of Credit Note is hereby decreased,
effective as of this date, to a rate per annum equal to one-
quarter of one percentage point (0.250%) above the Prime Rate (as
defined herein).
C. Modification(s) to Credit Agreement.
-----------------------------------
1. The financial covenants set forth in Section 6.8 entitled "Quick
Ratio", Section 6.10 entitled "Debt-Net Worth Ratio" and Section
6.11 entitled "Liquidity" shall now be maintained by Borrower on
a quarterly basis (rather than monthly), beginning with the
quarter ended September 30, 1996.
1
<PAGE>
2. Section 2.4(a) entitled "Interest Rate" is hereby amended in its
entirety, to read as follows:
Except as set forth in Section 2.4(b), (i) each Advance shall
bear interest, on the average Daily Balance, at a rate equal to
the Prime Rate, and (ii) each Equipment Advance shall bear
interest, on the average Daily Balance, at a rate equal to one-
quarter of one percentage point (0.250%) above the Prime Rate.
3. Section 6.3 entitled "Financial Statements, Reports,
Certificates" is hereby amended in part, as follows:
Borrower shall deliver to Bank: (a) as soon as available, but in
any event within forty-five (45) days after the end of each
fiscal quarter, beginning with the fiscal quarter ended September
30, 1996, a company-prepared consolidated balance sheet and
income statement covering Borrower's consolidated operations
during such period, certified by an officer of Borrower
reasonably acceptable to Bank.
Within forty-five (45) days after the last day of each fiscal
quarter, beginning with the fiscal quarter ended September 30,
1996, Borrower shall deliver to Bank with the quarterly
financial statements a Compliance Certificate signed by a
Responsible Officer.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
------------------
wherever necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
-----------------------
defenses against the obligations to pay any amounts under the Indebtedness.
6. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
-------------------
existing Indebtedness, 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 Indebtedness pursuant to this
Loan Modification Agreement in no way shall obligate Bank 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
Bank and Borrower to retain as liable parties all makers and endorsers of
Existing Loan Documents, unless the party is expressly released by Bank 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.
7 JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
------------------
properties, unconditionally, the non-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.
8. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
----------------
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).
2
<PAGE>
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
LIGHTBRIDGE, INC. SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: /s/ Kevin Collins By: /s/ Pamela J. Lowe
---------------------- -------------------------
Name: Kevin Collins Name: Pamela Lowe
---------------------- -------------------------
Title: Controller Title: Vice President
---------------------- -------------------------
SILICON VALLEY BANK
By: /s/ Christine Ware
-------------------------
Name: Christine Ware
-------------------------
Title: Vice President
-----------------------
(Signed at Santa Clara County, CA)
3
<PAGE>
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of March 5, 1997. by
and between Lightbridge, Inc. ("Borrower") whose address is 261 Winter Street.
Waltham, MA 02154 and Silicon Valley Bank, a California-chartered bank ("Bank"),
with its principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054
and with a loan production office located at Wellesley Office Park, 40 William
Street, Suite 350, Wellesley, MA 02181, doing business under the name "Silicon
Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
-------------------------------------
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, an Amended and Restated Credit Agreement, dated June 18, 1996, as may
be amended from time to time (the "Credit Agreement"). The Credit Agreement
provided for, among other things, a Committed Revolving Line in the original
principal amount of Four Million and 00/100 Dollars ($4,000,000.00), as
evidenced by an Amended and Restated Promissory Note, dated June 18, 1996 (the
"Working Capital Line of Credit Note"), and a Committed Equipment Line in the
original principal amount of Two Million and 00/100 Dollars ($2,000,000.00), as
evidenced by a Promissory Note, dated June 18, 1996 (the "Equipment Line of
Credit Note"). Defined terms used but not otherwise defined herein shall have
the same meanings as in the Credit Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL: Repayment of the Indebtedness is secured by a
-------------------------
Security Agreement dated April 1, 1992, as amended, and a Collateral Assignment
of Trademarks dated October 5, 1994.
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 Credit Agreement
-----------------------------------
1. Section 2.1.2 entitled "Letters of Credit" is hereby incorporated
into the Loan Agreement as follows:
Letters of Credit. Subject to the terms and conditions of this
-----------------
Agreement, Bank agrees to issue or cause to be issued Letters of
Credit for the account of Borrower in an aggregate face amount
not to exceed (i) the lesser of the $4,000,000.00 or the
Borrowing Base minus (ii) the then outstanding principal balance
of the Committed Revolving Line; provided that the face amount of
--------
outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit) shall not in any case exceed One Million Two
Hundred Fifty Thousand and 00/100 Dollars ($1,250,000.00) Each
such Letter of Credit shall have an expiry date no later than one
hundred eighty (180) days after the Maturity Date of the Working
Capital Line of Credit Note provided that Borrower's Letter of
Credit reimbursement obligation shall be secured by cash on terms
acceptable to Bank at any time after the Maturity Date if the
term of the Agreement is not extended by Bank. All such Letters
of Credit shall be, in form and substance, acceptable to Bank in
its sole discretion and shall be subject to the terms and
conditions of Bank's form of application and Letter of Credit
agreement.
1
<PAGE>
Borrower shall indemnity, defend and hold Bank harmless from any
loss, cost, expense or liability, including, without limitation,
reasonable attorneys' fees, arising out of or in connection with
any Letters of Credit.
Borrower may request that Bank issue a Letter of Credit payable
in a currency other than United States Dollars. If a demand for
payment is made under any such Letter of Credit, Bank shall treat
such demand as an Advance to Borrower of the equivalent of the
amount thereof (plus cable charges) in United States currency at
the then prevailing rate of exchange in San Francisco,
California, for sales of that other currency for cable transfer
to the country of which it is the currency.
Upon the issuance of any Letter of Credit payable in a currency
other than United States Dollars, Bank shall create a reserve
(the "Letter of Credit Reserve") under the Working Capital Line
of Credit for Letters of Credit against fluctuations in currency
exchange rates, in an amount equal to ten percent (10%) of the
face amount of such Letter of Credit. The amount of such reserve
may be amended by Bank from time to time to account for
fluctuations in the exchange rate. The availability of funds
under the Working Capital Line of Credit shall be reduced by the
amount of such reserve for so long as such Letter of Credit
remains outstanding.
2. The first sentence of Section 2.1 entitled "Advances" is hereby
amended in its entirety, to read as follows:
Subject to and upon the terms and conditions of this Agreement,
Bank agrees to make Advances to Borrower in an aggregate amount
not to exceed the committed Revolving Line minus the face amount
of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) or the Borrowing Base minus the
face amount of all outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit), whichever is less.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
------------------
wherever necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower agrees that as of this date, it has no
-----------------------
defenses against the obligations to pay any amounts under the Indebtedness.
6. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
-------------------
existing Indebtedness, 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 Indebtedness pursuant to this
Loan Modification Agreement in no way shall obligate Bark 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
Bank and Borrower to retain as liable parties all makers and endorsers of
Existing Loan Documents, unless the party is expressly released by Bank 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.
7. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
------------------
properties, unconditionally, the non-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
2
<PAGE>
itself of the courts of the Commonwealth of Massachusetts, then venue shall lie
in Santa Clara County, California.
8. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
----------------
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).
BORROWER: BANK:
LIGHTBRIDGE, INC. SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: /s/ Kevin Collins By: /s/ Carolyn Macedo
---------------------- -------------------------
Name: Kevin Collins Name: Carolyn Macedo
---------------------- -------------------------
Title: Controller Title: Vice President
---------------------- -------------------------
SILICON VALLEY BANK
By: /s/ Amy Young
-------------------------
Name: Amy Young
-------------------------
Title: AVP
-----------------------
(Signed at Santa Clara County, CA)
3
<PAGE>
FOURTH LOAN MODIFICATION AGREEMENT
This Fourth Loan Modification Agreement is entered into as of June 5, 1997,
by and between Lightbridge, Inc., a Delaware corporation "Borrower") with its
principal place of business at 281 Winter Street, Waltham, MA 02154, and Silicon
Valley Bank, a California-chartered bank ("Bank") with its principal place of
business at 3003 Tasman Drive, Santa Clara, CA 95054 and with a loan production
office located at Wellesley Office Park, 40 William Street, Suite 350,
Wellesley, MA 02181, doing business under the name "Silicon Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among the indebtedness which may
------------------------------------
be owing by Borrower to Lender (collectively, "Indebtedness"), Borrower is
indebted to Lender pursuant to, among other documents, an Amended and Restated
Credit Agreement, dated as of June 18, 1996, as amended and in effect on the
date hereof (as so amended, the "Loan Agreement"). The Loan Agreement provides
for, among other things, a Committed Revolving Line in the original principal
amount of Four Million and 00/100 Dollars ($4,000,000) (the "Committed Revolving
Line"), including a sublimit for Letters of Credit of One Million Two Hundred
Fifty Thousand and 00/100 Dollars ($1,250,000), and a Committed Equipment Line
in the original principal amount of Two Million and 00/100 Dollars ($2,000,000).
Defined terms used herein without definition shall have the meanings ascribed
thereto in the Loan Agreement.
2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured by
-------------------------
the Collateral as described in the Security Agreement and in the Trademarks
Assignment.
Hereinafter, the Loan Agreement, together with all other documents
evidencing or securing the Indebtedness, shall be referred to collectively as
the "Existing Loan Documents."
3. MODIFICATIONS TO LOAN AGREEMENT. The parties hereto agree that the Loan
-------------------------------
Agreement shall be amended as follows:
(a) the definition of "Current Liabilities" in Section 1.1 of the Loan
Agreement is hereby amended by: (1) deleting the fourth fine of said definition
in its entirety; and (ii) inserting in place thereof the following:
"...therein, all outstanding Loans made under...."
(b) The definition of "Loans" in Section 1.1 of the Loan Agreement is
hereby amended by: (i) deleting said definition in its entirety; and (ii)
inserting in place thereof the following:
""Loans" means, collectively, the Advances, Equipment Advances,
Letters of Credit and any other extension of credit by Bank for the
benefit of Borrower hereunder."
1
<PAGE>
(c) The definition of "Revolving Maturity Date" in Section 1.1 of the
Loan Agreement is hereby amended by: (i) deleting the reference to "June 5,
1997" included in said definition; and (ii) inserting in place thereof "June 4,
1998."
(d) Section 6.3 of the Loan Agreement is hereby amended by: (i)
deleting the third line of the second full paragraph of said Section 6.3 in its
entirety; and (ii) inserting in place thereof the following:
" ... Exhibit B hereto, together with an aged listing of accounts
---------
receivable."
(e) Section 6.8 of the Loan Agreement is hereby amended by: (i)
deleting said Section 6.8 in its entirety; and (ii) inserting in place thereof
the following:
"Section 6.8 Quick Ratio. Borrower shall maintain, as of the
-----------
last day of each fiscal quarter, a ratio of Quick Assets to Current
Liabilities of at least 3.00:1.0."
(f) Section 6.9 of the Loan Agreement is hereby amended by: (i)
deleting said Section 6.9 in its entirety; and (ii) inserting in place thereof
the following:
"Section 6.9 Tangible Net Worth. Borrower shall maintain, as of
------------------
the last day of each fiscal quarter, a Tangible Net Worth of at least
$25,000,000."
(g) Section 6 of the Loan Agreement is hereby further amended by: (i)
deleting Sections 6.10, 6.11, 6.12 and 6.13 in their entirety; and (ii)
renumbering the remainder of Section 6 accordingly.
(h) Section 8.2(a) of the Loan Agreement is hereby amended by: (i)
deleting said Section 8.2(a) in its entirety; and (ii) inserting in place
thereof the following:
"(a) If Borrower fails to perform any obligation under Sections
6.3, 6.6, 6.7, 6.8 or 6.9 or violates any of the covenants contained
in Article 7 of this Agreement, or"
(i) Exhibits A, B and C of the Loan Agreement are hereby amended by:
-------------------
(i) by deleting said Exhibits A, B and C in their entirety; and (ii) by
----------
inserting in place thereof Exhibits A, B and C attached to this Fourth Loan
-------------------
Modification Agreement.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
------------------
wherever to reflect the modifications described in Section 3 of this Fourth Loan
Modification Agreement.
2
<PAGE>
5. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
------------------------------
warrants to Bank as follows:
(a) Borrower has adequate corporate power and authority to execute and
deliver this Fourth Loan Modification Agreement and the other documents executed
and/or delivered in connection herewith (collectively, the "Modification
Documents") and to perform its respective obligations hereunder and thereunder,
and under the Existing Loan Documents, as amended hereby. Each of this Fourth
Loan Modification Agreement and the other Modification Documents has been duly
authorized, executed and delivered by Borrower, and does not contravene any law,
rule or regulation applicable to Borrower or any of the terms of its Certificate
of Incorporation or by-laws, or any other indenture, agreement or undertaking to
which Borrower is a party. This Fourth Loan Modification Agreement and the
other Modification Documents effectively amend the Existing Loan Documents in
accordance with the terms hereof and thereof. Borrower's obligations hereunder
and under the other Modification Documents, and under the Loan Agreement and the
other Existing Loan Documents, each as amended hereby and thereby, constitute
legally valid and binding obligations of Borrower enforceable against Borrower
in accordance with their respective terms.
(b) All of the representations and warranties made by Borrower in the
Loan Agreement and the other Loan Documents are true and correct on the date
hereof as if made on and as of the date hereof and are so repeated herein,
except that representations and warranties of financial statements or conditions
as of an earlier date relate solely to such earlier date.
(c) Upon the execution and delivery of this Fourth Loan Modification
Agreement and the satisfaction of the conditions precedent set forth in Section
6 hereof, no Event of Default shall exist and be continuing.
6. CONDITIONS PRECEDENT.
--------------------
(a) The agreements contained herein and the amendments contemplated
hereby shall not be effective unless each of the following conditions precedent
is satisfied:
(1) All of the representations and warranties made by Borrower in
Section 5 hereof shall be true and correct;
(2) Bank shall have received a Facility Fee equal to one-quarter
of one percentage point of the Committed Revolving Line or Ten
Thousand Dollars ($10,000), which fee shall be fully earned and non-
refundable.
(3) Bank shall have received an opinion of Borrower's counsel in
form and substance satisfactory to Bank;
3
<PAGE>
(4) Bank shall have received, in form and substance satisfactory
to Bank, a certificate(s) of the Treasurer of the Borrower as to the
satisfaction of the condition specified in clauses (1), (2) and (3) of
this Section 6(a);
(5) Bank shall have received, in form and substance satisfactory
to Bank, such other documents as Bank shall deem necessary and/or
appropriate.
Upon satisfaction of each of the conditions precedent set forth in this Section
6(a), the agreements contained herein and the amendments contemplated hereby
shall be deemed effective as of the date hereof
(b) From and after the satisfaction of the conditions precedent set
forth in Section 6(a) hereof, Bank's obligations to make any Loans to Borrower
under the Loan Agreement and the other Loan Documents shall be subject to the
additional conditions that (i) all of the representations and warranties made by
Borrower herein, whether directly or incorporated herein by reference, shall be
true and correct immediately prior to the time of the proposed Loan as if made
at and as of such time, except that representations and warranties of financial
statements or conditions as of an earlier date relate solely to such earlier
date, and (ii) no Event of Default, or event or condition which, with notice or
lapse of time, or both, would constitute an Event of Default, would occur after
giving effect to the making of such Loan. From and after the satisfaction of
the conditions precedent set forth in Section 6(a) hereof, each request by
Borrower for a Loan under the Loan Agreement and the other Loan Documents shall
be deemed to be a representation and warranty by Borrower that all of the
conditions precedent in this Section 6(b) have been met.
7. NO DEFENSES OF BORROWER. Borrower agrees that it has no defenses to
-----------------------
the payment of all Obligations, whether under the Loan Agreement, the other Loan
Documents or otherwise.
8. CONTINUING VALIDITY. Borrower understands and agrees that in modifying
-------------------
the Existing Loan Documents, Bank is relying upon Borrower's representations,
warranties and agreements contained in these Modification Documents and in the
Existing Loan Documents. Except as expressly modified pursuant to this Fourth
Loan Modification Agreement, the terms of the Existing Loan Documents remain
unchanged and in full force and effect. Bank's agreement to amend the Existing
Loan Documents pursuant to this Fourth Loan Modification Agreement shall in no
way obligate Bank to make any future amendments or modifications to the Existing
Loan Documents. Nothing in this Fourth Loan Modification Agreement shall
constitute a satisfaction of Borrower's Obligations to Bank. It is the
intention of Bank and Borrower to retain as liable parties all makers and
endorsers of the Existing Loan Documents, unless the party is expressly released
by Bank in writing. No maker, endorser or guarantor will be released by virtue
of this Fourth Loan Modification Agreement.
4
<PAGE>
9. EXPENSES. Borrower agrees to pay to Bank upon demand (a) an amount
--------
equal to any and all out-of-pocket costs or expenses (including legal fees and
disbursements) incurred or sustained by Bank in connection with the preparation
of these Modification Documents and related matters, and (b) from time to time
any and all out-of-pocket costs or expenses (including legal fees and
disbursements) hereafter incurred or sustained by Bank in connection with the
administration of credit extended by Bank to Borrower or the preservation of or
enforcement of Bank's rights under any of the Loan Documents or in respect of
any of Borrower's other obligations to Bank.
10. MISCELLANEOUS. This Fourth Loan Modification Agreement shall be
-------------
considered a "Loan Document" under and as defined in the Loan Agreement. This
Fourth Loan Modification Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts (without giving
effect to the conflicts of law principles thereof), and shall take effect as a
sealed instrument under such laws. Borrower accepts for itself and in
connection with its properties, unconditionally, the non-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 Fourth 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. This Fourth Loan Modification Agreement shall become effective only
when it shall have been executed by Borrower and Bank (provided, however, in no
event shall this Fourth Loan Modification Agreement become effective until
signed by an officer of Bank in California).
IN WITNESS WHEREOF, the parties have caused this Fourth Loan Modification
Agreement to be duly executed and delivered as of the 5th day of June, 1997.
LIGHTBRIDGE, INC.
By: /s/ Pamela D.A. Reeve
-------------------------------------------
Name: Pamela D.A. Reeve
-------------------------------------------
Title: President & Chief Executive Officer
-------------------------------------------
SILICON VALLEY BANK, doing business
as SILICON VALLEY EAST
By: /s/ Pamela Aldsworth
-------------------------------------------
Name: Pamela Aldsworth
-------------------------------------------
Title: Vice President
-------------------------------------------
5
<PAGE>
SILICON VALLEY BANK
By: /s/ Michelle Giannini
-------------------------------------------
Name: Michelle Giannini
-------------------------------------------
Title: AVP
-------------------------------------------
(signed in Santa Clara County, California)
6
<PAGE>
EXHIBIT A
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
FAX#: (408) TIME:
FROM: -------------------------------------------------------------------------
BORROWER'S NAME
FROM: -------------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
- -------------------------------------------------------------------------------
AUTHORIZED SIGNATURE
PHONE: ------------------------------------------------------------------------
FROM ACCOUNT# -------------------------- TO ACCOUNT# --------------------------
===============================================================================
REQUESTED TRANSACTION TYPE: REQUEST DOLLAR AMOUNT
--------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $ ------------------------------
PRINCIPAL PAYMENT (ONLY) $ ------------------------------
INTEREST PAYMENT (ONLY) $ ------------------------------
PRINCIPAL AND INTEREST PAYMENT $ ------------------------------
OTHER INSTRUCTIONS: _____________________________________________________
===============================================================================
All representations and warranties of Borrower stated in the Amended and
Restated Credit Agreement, dated as of June 18, 1996, between Borrower and
Silicon Valley Bank, as amended and in effect as of the date hereof, are true,
correct and complete in all material respects as of the date of the telephone
request for an Advance/Equipment Advance confirmed by this Borrowing
Certificate; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
<PAGE>
===============================================================================
BANK USE ONLY
TELEPHONE REQUEST:
-----------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
------------------------------ --------------------------------
Authorized Requester Phone #
------------------------------ --------------------------------
Received by (Bank) Phone #
-----------------------------------
Authorized Signature (Bank)
===============================================================================
<PAGE>
EXHIBIT B
BORROWING BASE CERTIFICATE
Borrower: Lightbridge, Inc.
Bank: Silicon Valley Bank
Commitment Amount: $4,000,000.00
================================================================================
ACCOUNTS RECEIVABLE:
1. Accounts Receivable Book Value as of ________ $ ___________
2. Additions (please explain on reverse) $ ___________
3. TOTAL ACCOUNTS RECEIVABLE $ ___________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $ ___________
5. Balance of 50% over 90 day accounts $ ___________
6. Concentration Limits $ ___________
7. Foreign Accounts $ ___________
8. Governmental Accounts $ ___________
9. Contra Accounts $ ___________
10. Promotion or Demo Accounts $ ___________
11. Intercompany/Employee Accounts $ ___________
12. Other (please explain on reverse) $ ___________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $ ___________
14. Eligible Accounts (#3 minus # 13) $ ___________
15. loan VALUE OF ACCOUNTS (80% OF #14) $ ___________
INVENTORY $ N/A
16. Inventory Value as of _____________ ___________
$ N/A
17. LOAN VALUE INVENTORY (___% OF # 16) ___________
BALANCES
18. Maximum Loan Amount $ ___________
19. Total Funds Available [Lesser of #18 or (#15 plus #17)] $ ___________
20. Present balance owing on Line of Credit $ ___________
21. Outstanding under Sublimits (Letters of Credit) $ ___________
22. RESERVE POSITION (#19 minus #20 and #21) $ ___________
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Amended and
Restated Credit Agreement, dated as of June 18, 1996, between the undersigned
and Silicon Valley Bank, as amended and in effect on the date hereof.
<PAGE>
COMMENTS:
- -------------------------------
By: ---------------------------
Authorized Signer
------------------------------------
BANK USE ONLY
Received by: __________________
Authorized Signer
Date: _________________________
Verified: ____________________
Authorized Signer
Date: _________________________
------------------------------------
19
<PAGE>
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK ("Bank")
FROM: LIGHTBRIDGE, INC. ("Borrower")
The undersigned authorized officer of Lightbridge, Inc. hereby certifies
that in accordance with the terms and conditions of the Amended and Restated
Credit Agreement dated as of June 18, 1996 between Borrower and Bank, as amended
and in effect on the date hereof (as so amended, the "Agreement"), (i) Borrower
is in complete compliance for the period ending _______________ with all
required covenants except as noted below and (ii) all representations and
warranties of Borrower stated in the Agreement are true and correct in all
material respects as of the date hereof Attached herewith are the required
documents supporting the above certification. The Officer further certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) and are consistently applied from one period to the next
except as explained in an accompanying letter or footnotes. The Officer
expressly acknowledges that no borrowings may be requested by the Borrower at
any time or date of determination that Borrower is not in compliance with any of
the terms of the Agreement, and that such compliance is determined not just at
the date this certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies"
column.
<TABLE>
<CAPTION>
Reporting Covenant Required Complies
- -------------------------------- ------------------- --------
<S> <C> <C>
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 120 days Yes No
A/R Agings Monthly within 25 days Yes No
A/R Audit Annual* Yes No
</TABLE>
<TABLE>
<CAPTION>
Financial Covenant Required Actual Complies
- -------------------------------- ------------------- ------- --------
<S> <C> <C> <C>
Maintain on a Quarterly Basis:
Minimum Quick Ratio 3.00:1.0 ___:1.0 Yes No
Minimum Tangible Net Worth $25,000,000 $______ Yes No
</TABLE>
*So long as Loans are outstanding under the Amended and Restated Credit
Agreement, dated as of June 18, 1996, between Borrower and Bank, as amended and
in effect from time to time.
<PAGE>
Comments Regarding Exceptions: See Attached
Sincerely,
______________________________
Signature
Title:
Date:
------------------------------------
BANK USE ONLY
Received by: __________________
Authorized Signer
Date: _________________________
Verified: ____________________
Authorized Signer
Date: _________________________
Compliance Status: Yes No
------------------------------------
<PAGE>
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of October 15, 1997, by
and between Lightbridge, Inc. ("Borrower") whose address is 67 South Bedford
Street, Burlington, MA 01803 and Silicon Valley Bank, a California-chartered
bank ("Bank"), with its principal place of business at 3003 Tasman Drive, Santa
Clara, CA 95054 and with a loan production office located at Wellesley Office
Park, 40 William Street, Suite 350, Wellesley, MA 02181, doing business under
the name "Silicon Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may
------------------------------------
be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among
other documents, an Amended and Restated Credit Agreement, dated June 18, 1996,
as may be amended from time to time (the "Credit Agreement"). The Credit
Agreement provided for, among other things, a Committed Revolving Line in the
original principal amount of Four Million and 00/100 Dollars ($4,000,000.00), as
evidenced by an Amended and Restated Promissory Note, dated June 18, 1996 (the
"Working Capital Line of Credit Note"), and a Committed Equipment Line in the
original principal amount of Two Million and 00/100 Dollars ($2,000,000.00), as
evidenced by a Promissory Note, dated June 18, 1996 (the "Equipment Line of
Credit Note"). Defined terms used but not otherwise defined herein shall have
the same meanings as in the Credit Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL: Repayment of the Indebtedness is secured by the
-------------------------
Collateral as described in the Security Agreement and in the Trademarks
Assignment as defined in the Loan Agreement.
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 the Equipment Line of Credit Agreement.
---------------------------------------------------------
1. The interest rate to be applied to the unpaid principal balance of
the Equipment Line of Credit Note is hereby decreased, effective as
of the date of this Loan Modification Agreement, to a rate per annum
equal to the Prime Rate, as defined herein.
A. Modification(s) to Credit Agreement.
-----------------------------------
1. Effective as of the date of this Loan Modification Agreement,
Section 2.4(a) entitled "Interest Rate" is hereby amended in its
entirety to read as follows:
Except as set forth in Section 2.4(b), each Advance and each
Equipment Advance shall bear interest at a rate per annum equal to
the Prime Rate.
2. Section 6.3 entitled "Financial Statements, Reports, Certificates"
is hereby amended to require Borrower to provide Bank its interim
consolidated balance sheet and income statement, with a Compliance
Certificate, within thirty (30) days (rather than forty-five (45)
days) after the end of each quarter.
3. Section 6.8 entitled "Quick Ratio" is hereby amended in its entirety
to read as follows:
1
<PAGE>
Effective as of Borrower's fiscal quarter ended September 30, 1997,
Borrower shall maintain, as of the last day of each fiscal quarter,
a ratio of Quick Assets to Current Liabilities of at least 2.00 to
1.00.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
------------------
wherever necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
-----------------------
defenses against the obligations to pay any amounts under the Indebtedness.
6. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
-------------------
existing Indebtedness, 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 Indebtedness pursuant to this
Loan Modification Agreement in no way shall obligate Bank 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
Bank and Borrower to retain as liable parties all makers and endorsers of
Existing Loan Documents, unless the party is expressly released by Bank 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.
7. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
------------------
properties, unconditionally, the non-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.
8. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
----------------
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
LIGHTBRIDGE, INC. SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: /s/ William G. Brown By:
----------------------- -------------------------
Name: William G. Brown Name:
----------------------- -------------------------
Title: Chief Financial Officer Title:
----------------------- -------------------------
SILICON VALLEY BANK
By:
-------------------------
Name:
-------------------------
Title:
-----------------------
(Signed at Santa Clara County, CA)
2
<PAGE>
SIXTH LOAN MODIFICATION AGREEMENT
This Sixth Loan Modification Agreement is entered into as of June 26, 1998,
by and between LIGHTBRIDGE, INC., a Delaware corporation, with its principal
place of business at 67 South Bedford Street, Burlington, Massachusetts 01803
(the "Borrower") and SILICON VALLEY BANK, a California-chartered bank ("Bank"),
with its principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054
and with a loan production office located at Wellesley Office Park, 40 William
Street, Suite 350, Wellesley, MA 02181, doing business under the name "Silicon
Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which may
------------------------------------
be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan
arrangement dated as of June 18, 1996, evidenced by, among other documents, (i)
an Amended and Restated Promissory Note dated June 18, 1996 in the original
principal amount of Four Million Dollars ($4,000,000.00) (the "Working Capital
Note" or "Working Capital Line"), and (ii) a Promissory Note dated June 18, 1996
in the original principal amount of Two Million Dollars ($2,000,000.00) (the
"Equipment Note" or "Equipment Line") (hereinafter, individually and
collectively, the "Notes"). The Notes are governed by the terms and conditions
of a certain Amended and Restated Credit Agreement dated June 18, 1996 between
Borrower and Bank, as amended by certain Loan Modification Agreements dated as
of August 19, 1996, December 12, 1996, March 5, 1997, June 5, 1997, and October
15, 1997 (as amended, the "Loan Agreement"). Capitalized terms used but not
otherwise defined herein shall have the same meaning as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness".
2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured by the
-------------------------
Collateral as described in the Loan Agreement, which includes certain Collateral
defined in (i) a Security Agreement dated April 1, 1992 by Borrower in favor of
Bank, as amended by a First Amendment to Security agreement dated October 5,
1994, and (ii) a Collateral Assignment of Trademarks dated as of October 5, 1994
(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 Indebtedness shall be referred to as the "Existing
Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
------------------------------
A. Modification(s) to Equipment Note.
---------------------------------
1. The maximum principal amount of the Equipment Note is hereby
increased from Two Million Dollars ($2,000,000.00) to Three Million
Dollars ($3,000,000.00).
2. Effective as of October 15, 1997, the interest rate applied to the
unpaid principal balance of the Equipment Line is accruing at a rate
per annum equal to the Prime Rate.
B. Modification(s) to Loan Agreement.
---------------------------------
1. The Loan Agreement shall be amended by deleting the following
definition appearing in Section 1.1 thereof:
"Revolving Maturity Date" means June 5, 1998."
and inserting in lieu thereof the following:
3
<PAGE>
"Revolving Maturity Date" means June 4, 1999."
2. The Loan Agreement shall be amended by deleting the following
definition appearing in Section 1.1 thereof:
"Committed Equipment Line" means Two Million Dollars
($2,000,000.00)."
and inserting in lieu thereof the following:
"Committed Equipment Line" means Three Million Dollars
($3,000,000.00). Notwithstanding the foregoing, the Committed
Equipment Line shall be reduced by the outstanding balance of
Equipment Advances made to Borrower pursuant to Section 2.2
hereof."
3. The Loan Agreement shall be amended by inserting after Section 2.2
thereof entitled Equipment Advances the following new section:
"2.2.A. 1998-2001 Equipment Advances.
----------------------------
(a) Subject to and upon the terms and conditions of this Agreement,
at any time from June 26, 1998 (the "Modification Date") through the
-------
date which is thirty-six (36) months from the Modification Date (the
"Second Equipment Availability End Date"), Bank agrees to make
advances (each an "Equipment Advance" and collectively, the
"Equipment Advances") to Borrower in an aggregate outstanding amount
not to exceed the Committed Equipment Line. To evidence the
Equipment Advance or Equipment Advances, Borrower shall deliver to
Bank, at the time of each Equipment Advance request, an invoice for
the equipment to be purchased. The Equipment Advances shall be used
only to purchase Equipment and shall not exceed One Hundred Percent
(100%) of the invoice amount of such equipment purchased by Borrower
in the ordinary course of business, excluding taxes, shipping,
warranty charges, freight discounts and installation expense.
Software may, however, constitute only up Five Hundred Thousand
Dollars ($500,000.00) of aggregate Equipment Advances.
(b) Interest shall accrue from the date of each Equipment Advance
at the per annum rate equal to the Prime Rate and shall be payable
monthly on the Payment Date. Amounts currently amortizing under
Section 2.2 above shall continue to be repaid as provided in Section
2.2 above, and shall continue to be treated as advances under the
Committed Equipment Line. Any Equipment Advances made pursuant to
this Section 2.2.A that are outstanding on any of the following
dates (the "Amortization Dates"), will be payable in Thirty-Six (36)
equal monthly installments of principal, plus all accrued interest,
beginning on the Payment Date of the month following the applicable
Amortization Date, and ending on the thirty-fifth month thereafter.
The Amortization Dates shall be as follows: (i) the date which is
six (6) months from the Modification Date; (ii) the date which is
twelve (12) months from the Modification Date; (iii) the date which
is eighteen (18) months from the Modification Date; (iv) the date
which is twenty-four (24) months from the Modification Date; (v) the
date which is thirty (30) months from the Modification Date; and
(vi) the date which is thirty-six (36) months from the Modification
Date. Equipment Advances, once repaid, may not be reborrowed.
4
<PAGE>
(c) When Borrower desires to obtain an Equipment Advance, Borrower
shall notify Bank (which notice shall be irrevocable) by facsimile
transmission to be received no later than 3:00 p.m. Pacific time one
(1) Business Day before the day on which the Equipment Advance is to
be made. Such notice shall be substantially in the form of Exhibit
A. The notice shall be signed by a Responsible Officer or its
designee and include a copy of the invoice for the Equipment to be
financed."
4. The Loan Agreement shall be amended by deleting the following text
appearing the second paragraph of Section 6.3 thereof entitled
"Financial Statements, Reports, Certificates":
"Within twenty-five (25) days after the last day of each
month, Borrower shall deliver to Bank a Borrowing Base
Certificate signed by a Responsible Officer in substantially
the form of Exhibit B hereto, together with aged listings of
---------
accounts receivable."
and inserting in lieu thereof the following:
"Within twenty-five (25) days after the last day of each
month, with respect to which either (i) Obligations are
outstanding, (ii) Advances were made, or (iii) Letters of
Credit were issued, Borrower shall deliver to Bank a Borrowing
Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit B hereto, together with aged
---------
listings of accounts receivable."
5. The Loan Agreement shall be amended by deleting in its entirety the
third paragraph of Section 6.3 entitled "Financial Statements,
Reports, Certificates" and inserting in lieu thereof the following:
"Within forty-five (45) days after the last day of each
quarter, Borrower shall deliver to Bank quarterly financial
statements together with a Compliance Certificate signed by a
Responsible Officer in substantially the form of Exhibit C
---------
hereto."
6. The Loan Agreement shall be amended by deleting Section 7.3 thereof
entitled "Mergers or Acquisitions" and inserting in lieu thereof the
following:
"Mergers or Acquisitions. Merge or consolidate, or permit
--------------------------
any of its Subsidiaries to merge or consolidate, with or into
any other business organization, or acquire, or permit any of
its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person without prior
written approval by the Bank."
7. The Compliance Certificate appearing as Exhibit C to the Loan
---------
Agreement is hereby replaced with the Compliance Certificate
attached as Exhibit A hereto.
---------
4. FEE. Borrower shall pay to Bank a modification fee equal to Three Thousand
----
Dollars ($3,000.00) for the Equipment Line, plus Ten Thousand Dollars
($10,000.00) for the Working Capital Line, which fee shall be due on the date
hereof and which shall be deemed fully earned as of the date hereof.
5
<PAGE>
5. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
-------------------
wherever necessary to reflect the changes described above.
6. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
------------------------------
reaffirms all terms and conditions of all secured or other collateral granted to
the Bank, and confirms that the indebtedness secured thereby includes, without
limitation, the Indebtedness.
7. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
-----------------------
defenses against the obligations to pay any amounts under the Indebtedness.
8. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
-------------------
existing Indebtedness, 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 Indebtedness pursuant to this
Loan Modification Agreement in no way shall obligate Bank 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
Bank and Borrower to retain as liable parties all makers and endorsers of
Existing Loan Documents, unless the party is expressly released by Bank in
writing. No maker, endorser, or guarantor will be released by virtue of this
Loan Modification Agreement.
9. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
------------------
properties, unconditionally, the non-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.
10. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
----------------
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).
This Loan Modification Agreement is executed as of the date first written above.
("BORROWER")
LIGHTBRIDGE, INC.
By: /s/ Joseph S. Tibbetts, Jr.
---------------------------
Name: Joseph S. Tibbetts, Jr.
---------------------------
Title: Chief Financial Officer
---------------------------
6
<PAGE>
(BANK)
SILICON VALLEY BANK, doing business as SILICON
VALLEY EAST
By:______________________________________
Name:____________________________________
Title:___________________________________
SILICON VALLEY BANK
By:______________________________________
Name:____________________________________
Title:___________________________________
(signed in Santa Clara County, California)
7
<PAGE>
EXHIBIT A
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: LIGHTBRIDGE, INC.
The undersigned authorized officer of LIGHTBRIDGE, INC. hereby certifies
that in accordance with the terms and conditions of the Loan and Security
Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is in
compliance for the period ending ____________________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer expressly acknowledges that no
borrowings may be requested by the Borrower at any time or date of determination
that Borrower is not in compliance with any of the terms of the Agreement, and
that such compliance is determined not just at the date this certificate is
delivered.
Please indicate compliance status by circling Yes/No under "Complies" column.
<TABLE>
<CAPTION>
Reporting Covenant Required Complies
- ------------------ -------- --------
<S> <C> <C>
Quarterly financial statements and CC Quarterly within 45 days Yes No
Annual (CPA Audited) FYE within 120 days Yes No
BBC and A/R Agings Monthly within 25 days Yes No
(when borrowing)
</TABLE>
<TABLE>
<CAPTION>
Financial Covenant Required Actual Complies
- --------------------------------------- ----------------- -------- --------
<S> <C> <C> <C>
Maintain on a Quarterly Basis:
Minimum Quick Ratio 2.0:1.0 ___:1.0 Yes No
Minimum Tangible Net Worth $25,000,000 $_______ Yes No
</TABLE>
------------------------------
BANK USE ONLY
Received By: _______________
Date: ______________________
Reviewed
By: ________________________
Compliance Status: Yes/No
------------------------------
Comment Regarding Exceptions:
Sincerely, LIGHTBRIDGE, INC.
______________________ Date:_____________
SIGNATURE
______________________
TITLE
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 13,381,604
<SECURITIES> 0
<RECEIVABLES> 14,977,530
<ALLOWANCES> 243,858
<INVENTORY> 0
<CURRENT-ASSETS> 31,065,655
<PP&E> 23,508,381
<DEPRECIATION> 12,049,319
<TOTAL-ASSETS> 50,233,690
<CURRENT-LIABILITIES> 8,497,457
<BONDS> 0
0
0
<COMMON> 166,651
<OTHER-SE> 39,623,392
<TOTAL-LIABILITY-AND-EQUITY> 50,233,690
<SALES> 15,145,482
<TOTAL-REVENUES> 15,145,482
<CGS> 7,702,942
<TOTAL-COSTS> 7,702,942
<OTHER-EXPENSES> 7,112,930
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,772
<INCOME-PRETAX> 550,363
<INCOME-TAX> 272,100
<INCOME-CONTINUING> 278,263
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 278,263
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
