Exhibit 10.16
LOAN AND SECURITY AGREEMENT
iPASS INC.
TABLE OF CONTENTS
Page
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1 ACCOUNTING AND OTHER TERMS............................................ 4
2 LOAN AND TERMS OF PAYMENT............................................. 4
2.1 Promise to Pay.................................................. 4
2.2 Overadvances.................................................... 4
2.3 Interest Rate, Payments......................................... 4
2.4 Fees............................................................ 5
3 CONDITIONS OF LOANS................................................... 5
3.1 Conditions Precedent to Initial Credit Extension................ 5
3.2 Conditions Precedent to all Credit Extensions................... 5
4 CREATION OF SECURITY INTEREST......................................... 5
4.1 Grant of Security Interest...................................... 5
4.2 Authorization of File........................................... 5
5 REPRESENTATIONS AND WARRANTIES........................................ 6
5.1 Due Organization and Authorization.............................. 6
5.2 Collateral...................................................... 6
5.3 Litigation...................................................... 6
5.4 No Material Adverse Change in Financial Statements.............. 6
5.5 Solvency........................................................ 7
5.6 Regulatory Compliance........................................... 7
5.7 Subsidiaries.................................................... 7
5.8 Full Disclosure................................................. 7
6 AFFIRMATIVE COVENANTS................................................. 7
6.1 Government Compliance........................................... 7
6.2 Financial Statements, Reports, Certificates..................... 8
6.3 Inventory; Returns.............................................. 8
6.4 Taxes........................................................... 8
6.5 Insurance....................................................... 8
6.6 Primary Accounts................................................ 9
6.7 Financial Covenants............................................. 9
6.8 Registration of Intellectual Property Rights.................... 9
6.9 Further Assurances.............................................. 10
7 NEGATIVE COVENANTS.................................................... 10
7.1 Dispositions.................................................... 10
7.2 Changes in Business, Ownership, Management or Locations of
Collateral...................................................... 10
7.3 Mergers or Acquisitions......................................... 10
7.4 Indebtedness.................................................... 10
7.5 Encumbrance..................................................... 10
7.6 Distributions; Investments...................................... 11
7.7 Transactions with Affiliates.................................... 11
7.8 Subordinated Debt............................................... 11
7.9 Compliance...................................................... 11
8 EVENTS OF DEFAULT..................................................... 11
8.1 Payment Default................................................. 11
8.2 Covenant Default................................................ 11
8.3 Material Adverse Change......................................... 12
8.4 Attachment...................................................... 12
8.5 Insolvency...................................................... 12
8.6 Other Agreements................................................ 12
8.7 Judgments....................................................... 12
8.8 Misrepresentations.............................................. 12
8.9 Default Under Exim Loan......................................... 12
9 BANK'S RIGHTS AND REMEDIES............................................ 12
9.1 Rights and Remedies............................................. 12
9.2 Power of Attorney............................................... 13
9.3 Accounts Collection............................................. 13
9.4 Bank Expenses................................................... 14
9.5 Bank's Liability for Collateral................................. 14
9.6 Remedies Cumulative............................................. 14
9.7 Demand Waiver................................................... 14
10 NOTICES............................................................... 14
11 CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER........................... 14
12 GENERAL PROVISIONS.................................................... 15
12.1 Successors and Assigns.......................................... 15
12.2 Indemnification................................................. 15
12.3 Time of Essence................................................. 15
12.4 Severability of Provision....................................... 15
12.5 Amendments in Writing, Integration.............................. 15
12.6 Counterparts.................................................... 15
12.7 Survival........................................................ 15
12.8 Confidentiality................................................. 16
12.9 Attorneys' Fees, Costs and Expenses............................. 16
13 DEFINITIONS........................................................... 16
13.1 Definitions..................................................... 16
THIS LOAN AND SECURITY AGREEMENT dated September 4, 2001 between SILICON
VALLEY BANK ("Bank"), whose address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and iPASS INC. ("Borrower"), whose address is ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ provides the terms on which Bank will
lend to Borrower and Borrower will repay Bank. The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement will be construed following
GAAP. Calculations and determinations must be made following GAAP. The term
"financial statements" includes the notes and schedules. The terms "including"
and "includes" always mean "including (or includes) without limitation," in this
or any Loan Document.
2 LOAN AND TERMS OF PAYMENT
2.1 PROMISE TO PAY.
Borrower promises to pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.
2.1.1 REVOLVING ADVANCES.
(a) Bank will make Advances not exceeding the lesser of (A) the Committed
Revolving Line or (B) the Borrowing Base. Amounts borrowed under this Section
may be repaid and reborrowed without penalty or premium during the term of this
Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 12:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. Bank will credit Advances to
Borrower's deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due and remain unpaid beyond the applicable grace period. Bank may rely on any
telephone notice given by a person whom Bank reasonably believes is a
Responsible Officer or designee. Borrower will indemnify Bank for any loss Bank
suffers due to such reliance.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances are immediately payable.
2.2 OVERADVANCES.
If Borrower's Obligations under Section 0 exceed the lesser of either (i)
the Committed Revolving Line or (ii) the Borrowing Base, Borrower must
immediately pay Bank the excess.
2.3 INTEREST RATE, PAYMENTS.
(a) Interest Rate. Advances accrue interest on the outstanding principal
balance at a per annum rate of 1.5 percentage points above the Prime Rate. After
an Event of Default has occurred and while such Event of Default is continuing,
Obligations accrue interest at 5 percent above the rate effective immediately
before the Event of Default. The interest rate increases or decreases when the
Prime Rate changes. Interest is computed on a 360 day year for the actual number
of days elapsed.
(b) Payments. Interest on the outstanding principal amount of the Advances
is payable on the 4th of each month. Bank may debit any of Borrower's deposit
accounts including
Account Number 3300044078 for principal and interest payments owing or any
amounts Borrower owes Bank. Bank will promptly notify Borrower when it debits
Borrower's accounts. These debits are not a set-off. Payments received after
12:00 noon Pacific time are considered received at the opening of business on
the next Business Day. When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and additional fees or interest
accrue.
2.4 FEES.
Borrower will pay:
(a) Facility Fee. A fully earned, non-refundable Facility Fee of $30,000
due on the Closing Date, of which a Good Faith Deposit has been paid to Bank a
in the amount of $10,000 to initiate Bank's due diligence review process; and
(b) Bank Expenses. All Bank Expenses incurred through and after the date
of this Agreement when due and payable in accordance with the terms of this
Agreement.
3 CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION.
Bank's obligation to make the initial Credit Extension is subject to the
condition precedent that (i) Borrower's debt to Comdisco and GATX is formally
subordinated to Bank, and (ii) the Loan Documents are executed by September 10,
2001.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.
Bank's obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 0 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Credit Extension and no Event of Default may have occurred and be continuing, or
result from the Credit Extension. Each Credit Extension is Borrower's
representation and warranty on that date that the representations and warranties
of Section 0 remain true in all material respects.
4 CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower's duties under the Loan Documents. Except for Permitted
Liens, any security interest will be a first priority security interest in the
Collateral. Upon the occurrence and during the continuance of an Event of
Default, Bank may place a "hold" on any deposit account pledged as Collateral.
If this Agreement is terminated, Bank's lien and security interest in the
Collateral will continue until Borrower fully satisfies its Obligations.
4.2 AUTHORIZATION OF FILE.
Borrower authorizes Bank to file financing statements without notice to
Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in
order to perfect or protect Bank's interest in the Collateral.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION.
Borrower and each Subsidiary is duly existing and in good standing in its
state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change. Borrower has not
changed its state of formation or its organizational structure or type or any
organizational number (if any) assigned by its jurisdiction of formation.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which or by which it is
bound in which the default could reasonably be expected to cause a Material
Adverse Change.
5.2 COLLATERAL.
Borrower has good title to the Collateral, free of Liens except Permitted
Liens. Borrower has no other deposit account, other than the deposit accounts
described in the Schedule. The Accounts are bona fide, existing obligations, and
the service or property has been performed or delivered to the account debtor or
its agent for immediate shipment to and unconditional acceptance by the account
debtor. The Collateral is not in the possession of any third party bailee (such
as at a warehouse); except for that certain equipment located at GLOBIX,
Corporation, not to exceed a value of $350,000. In the event that Borrower,
after the date hereof, intends to store or otherwise deliver the Collateral to
such a bailee, then Borrower will provide prior written notice to Bank and such
bailee must acknowledge in writing that the bailee is holding such Collateral
for the benefit of Borrower. Borrower has no actual knowledge of any actual or
imminent Insolvency Proceeding of any account debtor whose accounts are an
Eligible Account in any Borrowing Base Certificate. All Inventory is in all
material respects of good and marketable quality, free from material defects.
Borrower is the sole owner of the Intellectual Property, except for
non-exclusive licenses granted to its customers in the ordinary course of
business. each Patent is valid and enforceable and no part of the Intellectual
Property has been judged invalid or unenforceable, in whole or in part, and no
claim has been made that any part of the Intellectual Property violates the
rights of any third party, except to the extent such claim could not reasonably
be expected to cause a Material Adverse Change.
5.3 LITIGATION.
Except as shown in the Schedule, there are no actions or proceedings
pending or, to the knowledge of Borrower's Responsible Officers, threatened by
or against Borrower or any Subsidiary in which a likely adverse decision could
reasonably be expected to cause a Material Adverse Change.
5.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's
consolidated results of operations. There has not been any material
deterioration in Borrower's consolidated financial condition since the date of
the most recent financial statements submitted to Bank.
5.5 SOLVENCY.
Borrower is able to pay its debts (including trade debts) as they mature.
5.6 REGULATORY COMPLIANCE.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by Borrower or
any Subsidiary or, to Borrower's actual knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each Subsidiary has timely filed all required
tax returns and paid, or made adequate provision to pay, all material taxes,
except those being contested in good faith with adequate reserves under GAAP.
Borrower and each Subsidiary has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted, except where the failure to do so could not reasonably be
expected to cause a Material Adverse Change.
5.7 SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 FULL DISCLOSURE.
No written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading. It
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected and forecasted results.
6 AFFIRMATIVE COVENANTS
Borrower will do all of the following for so long as Bank has an
obligations to lend, or there are outstanding Obligations:
6.1 GOVERNMENT COMPLIANCE.
Borrower will maintain its and all Subsidiaries' legal existence and good
standing in its jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
cause a material adverse effect on Borrower's business or operations. Borrower
will comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, noncompliance with which is reasonably
likely to have a
material adverse effect on Borrower's business or operations or would reasonably
be expected to cause a Material Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower will deliver to Bank: (i) as soon as available, but no later
than 30 days after the last day of each month, a company prepared consolidated
balance sheet and income statement covering Borrower's consolidated operations
during the period certified by a Responsible Officer and in a form acceptable to
Bank; (ii) as soon as available, but no later than 120 days after the last day
of Borrower's fiscal year, audited consolidated financial statements prepared
under GAAP, consistently applied, together with an opinion which is unqualified
or otherwise consented to by Bank on the financial statements from an
independent certified public accounting firm reasonably acceptable to Bank;
(iii) a prompt report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to Borrower or
any Subsidiary of $500,000 or more; (iv) budgets, sales projections, operating
plans or other financial information Bank reasonably requests; and (v) prompt
notice of any material change in the composition of the Intellectual Property,
including any subsequent ownership right of Borrower in or to any Copyright,
Patent or Trademark not shown in any intellectual property security agreement
between Borrower and Bank or knowledge of an event that materially adversely
affects the value of the Intellectual Property.
(b) Within 20 days after the last day of each month, Borrower will deliver
to Bank a Borrowing Base Certificate signed by a Responsible Officer in the form
of Exhibit C, with aged listings of accounts receivable and accounts payable.
(c) Within 30 days after the last day of each month, Borrower will deliver
to Bank with the monthly financial statements a Compliance Certificate signed by
a Responsible Officer in the form of Exhibit D.
(d) Allow Bank to audit Borrower's Collateral at Borrower's expense. Such
audits will be conducted no more often than once every 6 months unless an Event
of Default has occurred and is continuing.
6.3 INVENTORY; RETURNS.
Borrower will keep all Inventory in good and marketable condition, free
from material defects. Returns and allowances between Borrower and its account
debtors will follow Borrower's customary practices as they exist at execution of
this Agreement. Borrower must promptly notify Bank of all returns, recoveries,
disputes and claims, that involve more than $100,000.
6.4 TAXES.
Borrower will make, and cause each Subsidiary to make, timely payment of
all material federal, state, and local taxes or assessments (unless contested in
good faith with adequate reserves under GAAP) and will deliver to Bank, on
demand, appropriate certificates attesting to the payment.
6.5 INSURANCE.
Borrower will keep its business and the Collateral insured for risks and
in amounts, as is customary for company's in Borrower's industry and locale.
Insurance policies will be in a form, with companies, and in amounts that are
customary for company's in Borrower's industry and locale. All property policies
will have a lender's loss payable endorsement showing Bank as an
additional loss payee and all liability policies will show the Bank as an
additional insured and provide that the insurer must give Bank at least 20 days
notice before canceling its policy. At Bank's request, Borrower will deliver
certified copies of policies and evidence of all premium payments. If no Event
of Default has occurred and is continuing, proceeds payable under any casualty
policy will, at Borrower's option, be payable to Borrower to replace the
property subject to the claim, provided that any such replacement property shall
be deemed Collateral in which Bank has been granted a first priority security
interest. If an Event of Default has occurred and is continuing, then, at Bank's
option, proceeds payable under any policy will be payable to Bank on account of
the Obligations
6.6 PRIMARY ACCOUNTS.
Borrower shall maintain its primary operating accounts with Bank. In
addition, Borrower will maintain a majority of the its cash and investments in
accounts maintained or through Bank's investment group.
6.7 FINANCIAL COVENANTS.
Borrower will maintain as of the last day of each month:
(i) QUICK RATIO. A ratio of Quick Assets to Current Liabilities of
at least 1.35 to 1.00.
(ii) PERFORMANCE TO PLAN. Borrower will maintain a rolling three
month average of operating losses (excluding all non-cash stock compensation
expenses) not to exceed the following: $2,945,000 for the month ending June 30,
2001, $2,500,000 for the month ending July 31, 2001, $2,282,000 for the month
ending August 31, 2001, $1,968,000 for the month ending September 30, 2001,
$1,400,000 for the month ending October 31, 2001, $1,015,000 for the month
ending November 31, 2001, $1,000,000 for the month ending December 31, 2001,
$900,000 for the month ending January 31, 2002, $800,000 February 28, 2002,
$600,000 for the month ending March 31, 2002 and $400,000 for the month ending
April 30, 2002, and breakeven thereafter.
(iii) TOTAL REVENUE. Borrower will maintain a rolling three month
average, (tested monthly), of total revenue not less than the following:
$3,035,000 for the month ending June 30, 2001, $3,250,000 for the month ending
July 31, 2001, $3,500,000 for the month ending August 31, 2001, $3,870,000 for
the month ending September 30, 2001, $4,365,000 for the month ending October 31,
2001, $4,720,000 for the month ending November 31, 2001, $4,990,000 for the
month ending December 31, 2001, $5,080,000 for the month ending January 31,
2002, $5,185,000 February 28, 2002, $5,540,000 for the month ending March 31,
2002, $5,900,000 for the month ending April 30, 2002, $6,480,000 for the month
ending May 31, 2002 and $6,385,000 for the month ending June 30, 2002.
6.8 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
Borrower will register with the United States Patent and Trademark Office
or the United States Copyright Office its Intellectual Property material to the
Borrower's business within 30 days of the date of this Agreement, and additional
material Intellectual Property rights developed or acquired including revisions
or additions with any product before the sale or licensing of the product to any
third party.
Except where the failure to do so would not reasonably be expected to
cause a Material Adverse Change, Borrower will (i) protect, defend and maintain
the validity and enforceability of the Intellectual Property and promptly advise
Bank in writing of material infringements known to
Borrower and (ii) not allow any Intellectual Property to be abandoned, forfeited
or dedicated to the public without Bank's written consent.
6.9 FURTHER ASSURANCES.
Borrower will execute any further instruments and take further action as
Bank reasonably requests to perfect or continue Bank's security interest in the
Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
Borrower will not do any of the following without Bank's prior written
consent, which will not be unreasonably withheld, for so long as Bank has an
obligation to lend and there are any outstanding Obligations:
7.1 DISPOSITIONS.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, except for Transfers (i) of Inventory in the ordinary
course of business; (ii) of non-exclusive licenses and similar arrangements for
the use of the property of Borrower or its Subsidiaries in the ordinary course
of business; (iii) of worn-out or obsolete Equipment or (iv) Equipment with a
fair market value of less than $50,000.
7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR LOCATIONS OF COLLATERAL.
Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
thereto or have a material change in its ownership or management of greater than
25% (other than by the sale of Borrower's equity securities in a public offering
and thereafter or to venture capital investors so long as Borrower identifies
the venture capital investors prior to the closing of the investment). Borrower
will not, without at least 10 days prior written notice, relocate its chief
executive office, change its state of formation (including reincorporation),
change its organizational number or name or add any new offices or business
locations (such as warehouses) in which Borrower maintains or stores over
$50,000 in Collateral.
7.3 MERGERS OR ACQUISITIONS.
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where (i) no Event of Default has occurred
and is continuing or would result from such action during the term of this
Agreement and (ii) such transaction would not result in a decrease of more than
25% of Tangible Net Worth. A Subsidiary may merge or consolidate into another
Subsidiary or into Borrower.
7.4 INDEBTEDNESS.
Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5 ENCUMBRANCE.
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so,
except for Permitted Liens, or permit any Collateral not to be subject to the
first priority security interest granted here, subject to Permitted Liens.
7.6 DISTRIBUTIONS; INVESTMENTS.
Directly or indirectly acquire or own any Person, or make any Investment
in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so; or (ii) pay any dividends or make any distribution or
payment or redeem, retire or purchase any capital stock, except for repurchases
of stock from former employees or directors of Borrower under the terms of
applicable repurchase agreements that do not involve cash or stock option
programs that in an aggregate amount not to exceed $50,000 in any fiscal year,
provided that no Event of Default has occurred, is continuing or would exist
after giving effect to the repurchases.
7.7 TRANSACTIONS WITH AFFILIATES.
Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for transactions that are in
the ordinary course of Borrower's business, upon fair and reasonable terms that
are no less favorable to Borrower than would be obtained in an arm's length
transaction with a nonaffiliated Person.
7.8 SUBORDINATED DEBT.
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision respecting the terms of
repayment in any document relating to the Subordinated Debt without Bank's prior
written consent.
7.9 COMPLIANCE.
Undertake as one of its important activities extending credit to purchase
or carry margin stock, or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA; permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a material
adverse effect on Borrower's business or operations or would reasonably be
expected to cause a Material Adverse Change, or permit any of its Subsidiaries
to do so.
8 EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT.
If Borrower fails to pay any of the Obligations within 3 business days
after their due date. During the additional period the failure to cure the
default is not an Event of Default (but no additional Credit Extension will be
made during the cure period);
8.2 COVENANT DEFAULT.
If Borrower does not perform any obligation in Section 6 or violates any
covenant in Section 7 or does not perform or observe any other material term,
condition or covenant in this Agreement, any Loan Documents, or in any agreement
between Borrower and Bank and as to any default under a term, condition or
covenant that can be cured, has not cured the default within 10 days after
Borrower becomes aware thereof, or if the default cannot be cured within 10 days
or cannot be cured after Borrower's attempts within 10 day period, and the
default may be cured within a reasonable time, then Borrower has an additional
period (of not more than 30
days) to attempt to cure the default. During the additional time, the failure to
cure the default is not an Event of Default (but no additional Credit Extensions
will be made during the cure period);
8.3 MATERIAL ADVERSE CHANGE.
If there (i) occurs a material adverse change in the business, operations,
or condition (financial or otherwise) of the Borrower, or (ii) is a material
impairment of the prospect of repayment of the Obligations taken as a whole; or
(iii) is a material impairment of the value (other than as a result of ordinary
wear and tear and and depreciation under ▇▇▇▇ or priority of Bank's security
interests in the Collateral.
8.4 ATTACHMENT.
If any material portion of Borrower's assets is attached, seized, levied
on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within 30 days
after Borrower receives notice. These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no additional Credit
Extensions will be made during the cure period);
8.5 INSOLVENCY.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 45 days (but no additional Credit Extensions will be
made before any Insolvency Proceeding is dismissed);
8.6 OTHER AGREEMENTS.
If there is a default in any agreement between Borrower and a third party
that gives the third party the right to accelerate any Indebtedness exceeding
$250,000 or that could cause a Material Adverse Change;
8.7 JUDGMENTS.
If a money judgment(s) in the aggregate of at least $100,000 is rendered
against Borrower and is unsatisfied and unstayed for 45 days (but no additional
Credit Extensions will be made before the judgment is stayed or satisfied); or
8.8 MISREPRESENTATIONS.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.
8.9 DEFAULT UNDER EXIM LOAN.
A default occurs under the Exim Loan Agreement.
9 BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES.
When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an Event
of Default described in Section 0 occurs all Obligations are immediately due and
payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit under
this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors for
amounts, on terms and in any order that is commercially reasonable and Bank
considers advisable;
(d) Make any payments and do any acts it considers necessary or reasonable
to protect its security interest in the Collateral. Borrower will assemble the
Collateral if Bank requires and make it available as Bank designates. Bank may
enter premises where the Collateral is located, take and maintain possession of
any part of the Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower grants Bank a license to enter and occupy any of its
premises, without charge, to exercise any of Bank's rights or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower it
holds, or (ii) any amount held by Bank owing to or for the credit or the account
of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name,
trade secrets, trade names, Trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Bank's benefit;
and
(g) Dispose of the Collateral according to the Code.
9.2 POWER OF ATTORNEY.
Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name
on any checks or other forms of payment or security; (ii) sign Borrower's name
on any invoice or ▇▇▇▇ of lading for any Account or drafts against account
debtors, (iii) make, settle, and adjust all claims under Borrower's insurance
policies; (iv) settle and adjust disputes and claims about the Accounts directly
with account debtors, for amounts and on terms Bank determines reasonable; and
(v) transfer the Collateral into the name of Bank or a third party as the Code
permits. Bank may exercise the power of attorney to sign Borrower's name on any
documents necessary to perfect or continue the perfection of any security
interest regardless of whether an Event of Default has occurred. Bank's
appointment as Borrower's attorney in fact, and all of Bank's rights and powers,
coupled with an interest, are irrevocable until all Obligations have been fully
repaid and performed and Bank's obligation to provide Credit Extensions
terminates.
9.3 ACCOUNTS COLLECTION.
When an Event of Default occurs and continues, Bank may notify any Person
owing Borrower money of Bank's security interest in the funds and verify the
amount of the Account. Borrower must collect all payments in trust for Bank and,
if requested by Bank, immediately
deliver the payments to Bank in the form received from the account debtor, with
proper endorsements for deposit.
9.4 BANK EXPENSES.
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent in its reasonable judgment. Any amounts paid by Bank
are Bank Expenses and immediately due and payable, bearing interest at the then
applicable rate and secured by the Collateral. No payments by Bank are deemed an
agreement to make similar payments in the future or Bank's waiver of any Event
of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL.
If Bank complies with reasonable banking practices and the Code, it is not
liable for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other person. Borrower bears
all risk of loss, damage or destruction of the Collateral when in Borrower's
possession and control.
9.6 REMEDIES CUMULATIVE.
Bank's rights and remedies under this Agreement, the Loan Documents, and
all other agreements are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank's exercise of one right or remedy is
not an election, and Bank's waiver of any Event of Default is not a continuing
waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver is
effective unless signed by Bank and then is only effective for the specific
instance and purpose for which it was given.
9.7 DEMAND WAIVER.
Borrower waives demand, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
10 NOTICES
All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to the addresses set forth at the beginning of
this Agreement. A party may change its notice address by giving the other party
written notice.
11 CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER
California law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Santa ▇▇▇▇▇ County, California.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES
TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS
COUNSEL.
12 GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights under it without Bank's prior written consent which may be granted or
withheld in Bank's discretion. Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation in all
or any part of, or any interest in, Bank's obligations, rights and benefits
under this Agreement.
12.2 INDEMNIFICATION.
Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against: (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except, in each case, for losses caused by Bank's gross negligence or willful
misconduct.
12.3 TIME OF ESSENCE.
Time is of the essence for the performance of all obligations in this
Agreement.
12.4 SEVERABILITY OF PROVISION.
Each provision of this Agreement is severable from every other provision
in determining the enforceability of any provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION.
All amendments to this Agreement must be in writing and signed by Borrower
and Bank. This Agreement represents the entire agreement about this subject
matter, and supersedes prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement merge into this Agreement and
the Loan Documents.
12.6 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7 SURVIVAL.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 0 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.
12.8 CONFIDENTIALITY.
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the loans (provided, however, Bank shall use
commercially reasonable efforts in obtaining such prospective transferee or
purchasers agreement of the terms of this provision), (iii) as required by law,
regulation, subpoena, or other order, (iv) as required in connection with Bank's
examination or audit and (v) as Bank considers appropriate exercising remedies
under this Agreement. Confidential information does not include information that
either: (a) is in the public domain or in Bank's possession when disclosed to
Bank, or becomes part of the public domain after disclosure to Bank; or (b) is
disclosed to Bank by a third party, if Bank does not know that the third party
is prohibited from disclosing the information.
12.9 ATTORNEYS' FEES, COSTS AND EXPENSES.
In any action or proceeding between Borrower and Bank arising out of the
Loan Documents, the prevailing party will be entitled to recover its reasonable
attorneys' fees and other reasonable costs and expenses incurred, in addition to
any other relief to which it may be entitled.
13 DEFINITIONS
13.1 DEFINITIONS.
In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing, as such definition may be amended from time to time according to the
Code.
"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Committed Revolving Line.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs and
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"BORROWER'S BOOKS" are all Borrower's books and records including ledgers,
records regarding Borrower's assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.
"BORROWING BASE" is the lesser of (i) 75% of Eligible Accounts or (ii)
$4,000,000, as determined by Bank from Borrower's most recent Borrowing Base
Certificate; provided, however, that Bank may in its reasonable discretion lower
the percentage of Eligible Accounts after performing an audit of Borrower's
Collateral.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the California Uniform Commercial Code, as applicable.
"COLLATERAL" is the property described on Exhibit A.
"COMMITTED REVOLVING LINE" is an Advance or Advances of up to $4,000,000.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"COPYRIGHTS" are all copyright rights, applications or registrations and
like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"CREDIT EXTENSION" is each Advance, Exim Advance, or any other extension
of credit by Bank for Borrower's benefit.
"CURRENT LIABILITIES" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year.
"ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5;
but Bank may change eligibility standards by giving Borrower notice. Unless Bank
agrees otherwise in writing, Eligible Accounts will not include:
(a) Accounts that the account debtor has not paid within 90 days of
invoice date;
(b) Accounts for an account debtor, 50% or more of whose Accounts have not
been paid within 90 days of invoice date;
(c) Credit balances over 90 days from invoice date;
(d) Accounts for an account debtor, including Affiliates, whose total
obligations to Borrower exceed 25% of all Accounts, for the amounts that
exceed that percentage, unless the Bank approves in writing;
(e) Accounts for which the account debtor does not have its principal
place of business in the United States;
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality;
(g) Accounts for which Borrower owes the account debtor, but only up to
the amount owed (sometimes called "contra" accounts, accounts payable,
customer deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in which goods
are consigned, sales guaranteed, sale or return, sale on approval, ▇▇▇▇
and hold, or other terms if account debtor's payment may be conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or makes any
claim and Bank believes there may be a basis for dispute (but only up to
the disputed or claimed amount), or if the Account Debtor is subject to an
Insolvency Proceeding, or becomes insolvent, or goes out of business;
(k) Accounts for which Bank reasonably determines collection to be
doubtful.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"EXIM LOAN AGREEMENT" is that certain Export-Import Bank Loan and Security
Agreement, dated July 27, 2001, by and between Borrower and Bank.
"GAAP" is generally accepted accounting principles.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" are proceedings by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INTELLECTUAL PROPERTY" is all of Borrower's:
(a) Copyrights, Trademarks, Patents, and Mask Works including amendments,
renewals, extensions, and all licenses or other rights to use and all license
fees and royalties from the use;
(b) Any trade secrets and any intellectual property rights in computer
software and computer software products now or later existing, created, acquired
or held;
(c) All design rights which may be available to Borrower now or later
created, acquired or held;
(d) Any claims for damages (past, present or future) for infringement of
any of the rights above, with the right, but not the obligation, to ▇▇▇ and
collect damages for use or infringement of the intellectual property rights
above;
All proceeds and products of the foregoing, including all insurance,
indemnity or warranty payments.
"INVENTORY" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"INVESTMENT" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.
"MASK WORKS" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"MATERIAL ADVERSE CHANGE" is defined in Section 0.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"PATENTS" are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Agreement or any other Loan
Document;
(b) Indebtedness existing on the Closing Date and shown on the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business;
(e) Indebtedness secured by Permitted Liens;
(f) Indebtedness outstanding to Phoenix Leasing Incorporated not to exceed
more than 2,000,000 and ▇▇▇▇▇ Fargo Equipment Finance, Inc. not to exceed more
than 3,000,000. or any of their respective successors or assigns;
(g) Indebtedness of Borrower not to exceed more than 1,000,000 to any
Subsidiary and Contingent Obligations of any Subsidiary with respect to
obligations of Borrower (provided that the primary obligations are not
prohibited hereby), and Indebtedness of any Subsidiary to any other Subsidiary
and Contingent Obligations of any Subsidiary with respect to obligations of any
other Subsidiary (provided that the primary obligations are not prohibited
hereby);
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Schedule and existing on the Closing Date;
(b) (i) marketable direct obligations issued or unconditionally guaranteed
by the United States or its agency or any State maturing within 1 year from its
acquisition, (ii) commercial paper maturing no more than 1 year after its
creation and having the highest rating from either Standard & Poor's Corporation
or ▇▇▇▇▇'▇ Investors Service, Inc., and (iii) Bank's certificates of deposit
issued maturing no more than 1 year after issue;
(c) Investments consisting of notes receivable of, or prepaid royalties
and other credit extensions, to customers and suppliers who are not Affiliates,
in the ordinary course of business;
(d) Investments consisting of Borrower's accounts receivable in the
ordinary course of business;
(e) Investments consisting of loans to employees, officers or directors
relating to (i) the purchase of equity securities of Borrower or its
Subsidiaries pursuant to Borrower's employee stock purchase plans or agreements
or (ii) Borrower's compensation or relocation plans or agreements, each as
approved in good faith by Borrower's board of directors; not to exceed $50,000.
(f) Investments in accordance with Borrower's investment policies as
approved in good faith by Borrower's board of directors.
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank's security interests;
(c) Liens upon any equipment or other personal property acquired by
Borrower after the date hereof to secure (i) the purchase price of such
equipment or other personal property or (ii) lease obligations or indebtedness
incurred solely for the purpose of financing the acquisition of such equipment
or other personal property; provided that (A) such Liens are confined solely to
the equipment or other personal property so acquired and the amount secured does
not exceed the acquisition price thereof, and (B) no such Lien shall be created,
incurred, assumed or suffered to exist in favor of Borrower's officers,
directors or shareholders holding five percent (5%) or more of Borrower's Equity
Securities;
(d) Licenses or sublicenses granted in the ordinary course of Borrower's
business and any interest or title of a licensor or under any license or
sublicense, if the licenses and sublicenses permit granting Bank a security
interest;
(e) Leases or subleases granted in the ordinary course of Borrower's
business, including in connection with Borrower's leased premises or leased
property;
(f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
(g) Liens in favor of Bank;
(h) Liens arising from judgments, decrees or attachments in circumstances
not constituting an Event of Default under Section 8.7;
(i) Liens in connection with Subordinated Debt;
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it is
not Bank's lowest rate.
"QUICK ASSETS" is, on any date, the Borrower's consolidated, unrestricted
cash, cash equivalents and net billed accounts receivable determined according
to GAAP.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"REVOLVING MATURITY DATE" is September 4, 2002.
"SCHEDULE" is any attached schedule of exceptions.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in
writing.
"SUBSIDIARY" is for any Person, or any other business entity of which more
than 50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade and service marks and names, Copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, and (ii) Total Liabilities.
"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.
"TRADEMARKS" are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.
BORROWER:
IPass Inc.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------
Title: VP & CFO
BANK:
SILICON VALLEY BANK
By: /s/ ▇▇▇ ▇▇▇▇▇
-----------------------------
Title: SVP
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest in
and to the following:
All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles (as such definitions may be
amended from time to time according to the Code), now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind,;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower (as such definitions may be amended from time
to time according to the Code) whether or not earned by performance, and any and
all credit insurance, insurance (including refund) claims and proceeds,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower;
All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, letter of credit rights, certificates of deposit, instruments
and chattel paper and electronic chattel paper now owned or hereafter acquired
and Borrower's Books relating to the foregoing;
All copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
Notwithstanding the foregoing, the security interest granted herein does
not extend to and the term "Collateral" does not include any (a) intent-to-use
trademark applications or (c) license or contract rights to the extent (i) the
granting of a security interest in it would be contrary to applicable law, or
(ii) that such rights are nonassignable by their terms (but only to the extent
such prohibition is enforceable under applicable law) without consent of the
licensor or other party (but only to the extent such consent has not been
obtained).
EXHIBIT B
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.S.T.
FAX TO: DATE:
--------------------------------------------------------------------------------
/ /LOAN PAYMENT:
IPass Inc.
From Account # To Account #
------------------------ --------------------
(Deposit Account #) (Loan Account #)
Principal $ and/or Interest $
---------------------- ------------------------
All Borrower's representation and warranties in the Loan and Security
Agreement are true, correct and complete in all material respects on the date
of the telephone transfer request for and advance, but those representations
and warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date:
AUTHORIZED SIGNATURE: Phone Number:
------------------------ ----------------
--------------------------------------------------------------------------------
/ / LOAN ADVANCE:
COMPLETE OUTGOING WIRE REQUEST SECTION BELOW IF ALL OR A PORTION OF THE FUNDS
FROM THIS LOAN ADVANCE ARE FOR AN OUTGOING WIRE.
From Account # To Account #
------------------------ --------------------
(Loan Account #) (Deposit Account #)
Amount of Advance $
-----------------------
All Borrower's representation and warranties in the Loan and Security
Agreement are true, correct and complete in all material respects on the date
of the telephone transfer request for and advance, but those representations
and warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date:
AUTHORIZED SIGNATURE: Phone Number:
------------------------ ----------------
--------------------------------------------------------------------------------
OUTGOING WIRE REQUEST
COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE ARE TO
BE WIRED.
Deadline for same day processing is 12:00pm, P.S.T.
Beneficiary Name: Amount of Wire: $
Beneficiary Bank: Account Number:
City and Sate:
Beneficiary Bank Transit (ABA) #: Beneficiary Bank Code
(Swift, Sort, Chip, etc.):
(FOR INTERNATIONAL WIRE ONLY)
Intermediary Bank: Transit (ABA) #:
For Further Credit to:
Special Instruction:
By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).
Authorized Signature: 2nd Signature (If Required):
------------------ ---------------------
Print Name/Title: Print Name/Title:
---------------------- -------------------------------
Telephone # Telephone #
--------------------------- ------------------------------------
Schedule to Loan and Security Agreement
The exact correct corporate name of Borrower is (attach a copy of the
formation documents, e.g., articles, partnership agreement):_________
Borrower's State of formation: _________________________________
Borrower has operated under only the following other names (if none, so
state):
__________________________________________________________________________
All other address at which the Borrower does business are as follows
(attach additional sheets if necessary and include all warehouse
addresses):
__________________________________________________________________________
Borrower has deposit accounts and/or investment accounts located only at
the following institutions:
__________________________________________________________________________
List Acct.
Numbers:_______________________________________________________________
Liens existing on the Closing Date and disclosed to and accepted by Bank
in writing:
__________________________________________________________________________
__________________________________________________________________________
Investments existing on the Closing Date and disclosed to and accepted by
Bank in writing:
__________________________________________________________________________
__________________________________________________________________________
SUBORDINATED DEBT:
Indebtedness on the Closing Date and disclosed to and consented to by Bank
in writing:
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
The following is a list of the Borrower's copyrights (including copyrights
of software) which are registered with the United States Copyright Office.
(Please include name of the copyright and registration number and attach a
copy of the registration):
__________________________________________________________________________
The following is a list of all software which the Borrower sells,
distributes or licenses to others, which is not registered with the United
States Copyright Office. (Please include versions which are not
registered:
__________________________________________________________________________
The following is a list of all of the Borrower's patents which are
registered with the United States Patent Office. (Please include name of
the patent and registration number and attach a copy of the
registration.): __________________________________________________________
The following is a list of all of the Borrower's patents which are pending
with the United States Patent Office. (Please include name of the patent
and a copy of the application.):__________________________________________
The following is a list of all of the Borrower's registered trademarks.
(Please include name of the trademark and a copy of the registration.):
__________________________________________________________________________
Borrower is not subject to litigation which would have a material adverse
effect on the Borrower's financial condition, except the following (attach
additional comments, if needed):
__________________________________________________________________________
__________________________________________________________________________
Tax ID Number ___________________________________________
Organizational Number, if any:______________________________
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: IPass Inc. Bank: Silicon Valley Bank
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Commitment Amount: $4,000,000
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. Credit balances over 90 days $
7. Concentration Limits $
8. Foreign Accounts $
9. Governmental Accounts $
10. Contra Accounts $
11. Promotion or Demo Accounts $
12. Intercompany/Employee Accounts $
13. Other (please explain on reverse) $
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
15. Eligible Accounts (#3 minus #14) $
16. LOAN VALUE OF ACCOUNTS (75% of #15) $
BALANCES
17. Maximum Loan Amount $
18. Total Funds Available [Lesser of #17 or (#16)] $
19. Present balance owing on Line of Credit $
20. Outstanding under Sublimits ( ) $
21. RESERVE POSITION (#18 minus #19 and #20) $
The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.
COMMENTS:
BANK USE ONLY
_____________________
IPass Inc.
Rec'd By:____________
Auth. Signer
By: _______________________________ Date:________________
Authorized Signer
Verified:____________
Auth. Signer
Date:________________
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FROM: iPASS INC.
The undersigned authorized officer of IPass Inc. ("Borrower") certifies
that under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (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 in the Agreement are true and
correct in all material respects on this date. Attached are the required
documents supporting the certification. The Officer certifies that these are
prepared in accordance with Generally Accepted Accounting Principles (GAAP)
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer acknowledges that no borrowings
may be requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is
determined not just at the date this certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements + CC Monthly within 30 days Yes No
Annual (Audited) FYE within 120 days Yes No
A/R & A/P Agings + BBC Monthly within 20 days Yes No
A/R Audit Initial and Semi-Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio 1.35:1.00 _____:1.00 Yes No
Performance to Plan* ** $________ Yes No
Total Revenues *** $________ Yes No
* All non-cash stock compensation expenses
** $2,945,000 for the month ending June 30, 2001, $2,500,000 for the month
ending July 31, 2001, $2,282,000 for the month ending August 31, 2001,
$1,968,000 for the month ending September 30, 2001, $1,400,000 for the
month ending October 31, 2001, $1,015,000 for the month ending November 31,
2001, $1,000,000 for the month ending December 31, 2001, $900,000 for the
month ending January 31, 2002, $800,000 February 28, 2002, $400,000 for the
month ending March 31, 2002 and $600,000 for the month ending April 30,
2002.
** $3,035,000 for the month ending June 30, 2001, $3,250,000 for the month
ending July 31, 2001, $3,500,000 for the month ending August 31, 2001,
$3,870,000 for the month ending September 30, 2001, $4,365,000 for the
month ending October 31, 2001, $4,720,000 for the month ending November 31,
2001, $4,990,000 for the month ending December 31, 2001, $5,080,000 for the
month ending January 31, 2002, $5,185,000 February 28, 2002, $5,540,000 for
the month ending March 31, 2002, $5,900,000 for the month ending April 30,
2002, $6,480,000 for the month ending May 31, 2002 and $6,385,000 for the
month ending June 30, 2002.
Have there been updates to Borrower's intellectual property? Yes / No
Borrower only has deposit accounts located at the following institutions:
_______________________________________________________________________________
COMMENTS REGARDING EXCEPTIONS: See Attached. BANK USE ONLY
Sincerely,
Rec'd By:_____________________
Authorized Signer
IPass Inc. Date:_________________________
_____________________________________ Verified:_____________________
SIGNATURE Authorized Signer
Date:_________________________
_____________________________________
TITLE Compliance Status: Yes No
_____________________________________
DATE
2
[SILICON VALLEY BANK LOGO]
SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: iPASS INC.
LOAN OFFICER: ▇▇▇ ▇▇▇▇▇
DATE: JULY 27, 2001
REVOLVING LOAN FEE $30,000.00
EXIM LOAN FEE 52,500.00
CREDIT REPORT 35.00
UCC SEARCH FEE 200.00
UCC FILING FEE 75.00
INTELLECTUAL PROPERTY FILING FEES 550.00
DOCUMENTATION FEE 1,500.00
AUDIT FEE 2,476.00
GOOD FAITH DEPOSIT RECEIVED [10,000.00]
TOTAL FEE DUE $77,336.00
==========
PLEASE INDICATE THE METHOD OF PAYMENT:
{X} A CHECK FOR THE TOTAL AMOUNT IS ATTACHED.
{ } DEBIT DDA # __________________ FOR THE TOTAL AMOUNT.
{ } LOAN PROCEEDS
BORROWER:
BY: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_________________________________
(AUTHORIZED SIGNER)
/S/ ▇▇▇ ▇▇▇▇▇
____________________________________________________
SILICON VALLEY BANK (DATE)
ACCOUNT OFFICER'S SIGNATURE
INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Intellectual Property Security Agreement is entered into as of
September 4, 2001 by and between SILICON VALLEY BANK ("Bank") and IPass Inc.
("Grantor").
RECITALS
A. Bank has agreed to make certain advances of money and to extend certain
financial accommodation to Grantor (the "Loans") in the amounts and manner set
forth in that certain Loan and Security Agreement and Export-Import Loan and
Security Agreement by and between Bank and Grantor dated July 27, 2001 (as the
same may be amended, modified or supplemented from time to time, the "Loan
Agreement"; capitalized terms used herein are used as defined in the Loan
Agreement). Bank is willing to make the Loans to Grantor, but only upon the
condition, among others, that Grantor shall grant to Bank a security interest in
certain Copyrights, Trademarks, Patents, and Mask Works to secure the
obligations of Grantor under the Loan Agreement.
B. Pursuant to the terms of the Loan Agreement, Grantor has granted to
Bank a security interest in all of Grantor's right, title and interest, whether
presently existing or hereafter acquired, in, to and under all of the
Collateral.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, and intending to be legally bound, as collateral security
for the prompt and complete payment when due of its obligations under the Loan
Agreement, Grantor hereby represents, warrants, covenants and agrees as follows:
AGREEMENT
To secure its obligations under the Loan Agreement, Grantor grants and
pledges to Bank a security interest in all of Grantor's right, title and
interest in, to and under its Intellectual Property Collateral (including
without limitation those Copyrights, Patents, Trademarks and Mask Works listed
on Schedules A, B, C, and D hereto), and including without limitation all
proceeds thereof (such as, by way of example but not by way of limitation,
license royalties and proceeds of infringement suits), the right to ▇▇▇ for
past, present and future infringements, all rights corresponding thereto
throughout the world and all re-issues, divisions continuations, renewals,
extensions and continuations-in-part thereof.
This security interest is granted in conjunction with the security
interest granted to Bank under the Loan Agreement and shall terminate upon (i)
payment of all Obligations under the Loan Agreement and (ii) termination of
Bank's commitment to make Advances to Grantor under the Loan Agreement. The
rights and remedies of Bank with respect to the security interest granted hereby
are in addition to those set forth in the Loan Agreement and the other Loan
Documents, and those which are now or hereafter available to Bank as a matter of
law or equity. Each right, power and remedy of Bank provided for herein or in
the Loan Agreement or any of the Loan Documents, or now or hereafter existing at
law or in equity shall be cumulative and concurrent and shall be in addition to
every right, power or remedy provided for herein and the exercise by Bank of any
one or more of the rights, powers or remedies provided for in this Intellectual
Property Security Agreement, the Loan Agreement or any of the other Loan
Documents, or now or hereafter existing at law or in equity, shall not preclude
the simultaneous or later exercise by any person, including Bank, of any or all
other rights, powers or remedies. Upon termination of Bank's security interests
hereunder, Bank shall promptly execute and deliver to Borrower a release of
Bank's security interests granted hereunder in a form that is recordable at the
United States Patent and Trademark Office or the United States Copyright Office,
as applicable, and is reasonably acceptable to Grantor and its counsel. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which shall constitute but one instrument.
IN WITNESS WHEREOF, the parties have cause this Intellectual Property
Security Agreement to be duly executed by its officers thereunto duly authorized
as of the first date written above.
GRANTOR:
Address of Grantor: IPass Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Title: VP & CFO
Attn:
-----------------------------
BANK:
Address of Bank: SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ Title: SVP
Attn:
-----------------------------
2
EXHIBIT A
Copyrights
Registration/ Registration/
Application Application
Description Number Date
----------- ------------- -------------
EXHIBIT B
Patents
Registration/ Registration/
Application Application
Description Number Date
----------- ------------- -------------
EXHIBIT C
Trademarks
Registration/ Registration/
Application Application
Description Number Date
----------- ------------- -------------
EXHIBIT D
Mask Works
Registration/ Registration/
Application Application
Description Number Date
----------- ------------- -------------
CORPORATE BORROWING RESOLUTION
BORROWER: iPASS INC. BANK: SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
I, THE SECRETARY OR ASSISTANT SECRETARY OF iPASS INC. ("BORROWER"), CERTIFY that
Borrower is a corporation existing under the laws of the State of Delaware.
I certify that at a meeting of Borrower's Directors (or by other authorized
corporate action) duly held the following resolutions were adopted.
It is resolved that ANY ONE of the following officers of Borrower, whose name,
title and signature is below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ President & CEO /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ VP & CFO /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
may act for Borrower and:
BORROW MONEY. Borrow money from Silicon Valley Bank ("Bank").
EXECUTE LOAN DOCUMENTS. Execute any loan documents Bank requires.
GRANT SECURITY. Grant Bank a security interest in any of Borrower's
assets.
NEGOTIATE ITEMS. Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest
and receive cash or otherwise use the proceeds.
LETTERS OF CREDIT. Apply for letters of credit from Bank.
FOREIGN EXCHANGE CONTRACTS. Execute spot or forward foreign exchange
contracts.
ISSUE WARRANTS. Issue warrants for Borrower's stock.
FURTHER ACTS. Designate other individuals to request advances, pay fees
and costs and execute other documents or agreements (including documents
or agreement that waive Borrowers right to a jury trial) they think
necessary to effectuate these Resolutions.
Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.
I certify that the persons listed above are Borrower's officers with the titles
and signatures shown following their names and that these resolutions have not
been modified are currently effective.
CERTIFIED TO AND ATTESTED BY:
X /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------
*Secretary or Assistant Secretary
X
----------------------------------------
* NOTE: In case the Secretary or other certifying officer is designated by
the foregoing resolutions as one of the signing officers, this resolution
should also be signed by a second Officer or Director of Borrower.
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of March 8, 2002, by and
between iPASS Inc. (the "Borrower") and Silicon Valley Bank ("Bank").
1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other Obligations which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, a Loan and Security Agreement, dated September 4, 2001, as may be
amended from time to time (the "Loan Agreement"). The Loan Agreement provides
for, among other things, a Committed Revolving Line in the original principal
amount of Four Million Dollars ($4,000,000). Additionally, Borrower is indebted
to Bank, pursuant to, among other documents, an Export-Import Bank Loan and
Security Agreement dated September 4, 2001, as may be amended from time to time
(the "Exim Agreement"). The Exim Agreement provides for, among other things, an
Exim Committed Line in the original principal amount of Three Million Five
Hundred Thousand Dollars ($3,500,000). Defined terms used but not otherwise
defined herein shall have the same meanings as set forth in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Obligations."
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement and in an Intellectual Property
Security Agreement dated September 4, 2001. Repayment of the obligations under
the Exim Agreement are guaranteed by the Export-Import Bank of the United
States.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Obligations shall be referred
to as the "Security Documents". Hereinafter, the Security Documents, together
with all other documents evidencing or securing the Obligations shall be
referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Loan Agreement.
1. The following is hereby incorporated into the Loan
Agreement to read as follows:
2.1.2 Equipment Advances.
(a) Through December 8, 2002 (the "Equipment
Availability End Date"), Bank will make advances
("Equipment Advance" and, collectively, "Equipment
Advances") not exceeding the Committed Equipment
Line. The Equipment Advances may only be used to
finance or refinance Eligible Equipment purchased on
or after 90 days before the date of each Equipment
Advance and may not exceed 100% of the equipment
invoice. Equipment Advances used to finance or
refinance used Eligible Equipment (i) purchased 90
days before the date of each Equipment Advance may
not exceed 75% of the equipment invoice and (ii)
purchased more than 6 months before the date of each
Equipment Advance, but not more than 12 months may
not exceed 50% of the equipment invoice. All invoices
for used Eligible Equipment must be funded with the
initial Equipment Advance. Other Equipment may
consist of 25% of the aggregate Equipment Advances.
The number of Equipment Advances is limited to 6.
(b) Each Equipment Advance shall amortize immediately
and be payable in 36 equal monthly payments of
principal plus interest beginning on the first day of
the month following each Equipment Advance and
continuing on the first day of each month thereafter.
The final payment due on the applicable Equipment
Maturity Date shall include all outstanding principal
plus all accrued unpaid interest. Equipment Advances
when repaid may not be reborrowed.
(c) To obtain an Equipment Advance, Borrower must
notify Bank (the notice is irrevocable) by facsimile
no later than 12:00 p.m. Pacific time 1 Business Day
before the day on which the Equipment Advance is to
be made. The notice in the form of Exhibit B
(Payment/Advance Form) must be signed by a
Responsible Officer or designee and include a copy of
the invoice for the Equipment being financed.
2. The following is hereby incorporated into the Loan
Agreement to read as follows:
2.1.3 Cash Management Services Sublimit.
Borrower may use up to $4,000,000 for Bank's
Cash Management Services, which may include merchant
services, direct deposit of payroll, business credit
card, and check cashing services identified in
various cash management services agreements related
to such services (the "Cash Management Services").
All amounts Bank pays for any Cash Management
Services will be treated as Advances under the
Committed Revolving Line.
3. The following is hereby incorporated into the Loan
Agreement to read as follows:
2.1.4 Foreign Exchange Sublimit.
If there is availability under the Committed
Revolving Line and the Borrowing Base, then Borrower
may enter in foreign exchange forward contracts with
the Bank under which Borrower commits to purchase
from or sell to Bank a set amount of foreign currency
more than one business day after the contract date
(the "FX Forward Contract"). Bank will subtract 10%
of each outstanding FX Forward Contract from the
foreign exchange sublimit which is a maximum of
$4,000,000 (the "FX Reserve"). The total FX Forward
Contracts at any one time may not exceed 10 times the
amount of the FX Reserve. Bank may terminate the FX
Forward Contracts if an Event of Default occurs.
4. Section 2.2 entitled "Overadvances" is amended to
read as follows:
If Borrower's Obligations under Section 2.1.1, 2.1.3
and 2.1.4 exceed the lesser of either (i) the
Committed Revolving Line or (ii) the Borrowing Base,
Borrower must immediately pay Bank the excess
5. Sub-section (a) of Section 2.3 entitled "Interest
Rate, Payments" is amended in part to provide that
(i) Advances accrue interest on the outstanding
principal balance at a per annum rate of 1.25
percentage points above the Prime Rate effective as
of this date and (ii) Equipment Advances accrue
interest on the outstanding principal balance at a
per annum rate equal 1.25 percentage points above the
Prime Rate.
5. Sub-section (b) of Section 2.3 entitled "Interest
Rate, Payments" is amended in part to provide that
Interest due on Equipment Advances is payable on the
first of each month.
6. Section 6.7 entitled "Financial Covenants" is amended
in its entirety to read as follows:
Borrower will maintain as of the last day of each
month (unless stated otherwise):
(i) Liquidity Coverage. A ratio of unrestricted
cash plus the availability under the
Borrowing Base less the Committed Revolving
Line and the Exim Committed Line divided by
the Committed Equipment Line of not less
than 4.00 to 1.00.
(ii) Revenue Growth. Borrower will achieve
minimum quarterly revenue growth of 7% over
the previous quarter (with December 31, 2001
revenue figure as benchmark).
7. The following terms defined under Section 13.1
entitled "Definitions" are hereby incorporated and/or
amended to read as follows:
"Cash Management Services" are defined in Section
2.1.3.
"Committed Equipment Line" is a Credit Extension of
up to $2,500,000.
"Eligible Equipment" is general purpose computer
equipment, office equipment, test and laboratory
equipment, furnishings residing in the United States
and, subject to the limitations set forth below,
Other Equipment that complies with all of Borrower's
representations and warranties to Bank and which is
acceptable to Bank in all respects. All Equipment
financed with the proceeds of Equipment Advances
shall be new or used Equipment.
"Equipment Advance" is defined in Section 2.1.2.
"Equipment Availability End Date" is defined in
Section 2.1.2.
"Equipment Maturity Date" is a date which is 36
months from the date of each Equipment Advance, not
to exceed December 8, 2005 for the last Equipment
Advance.
"FX Forward Contract" is defined in Section 2.1.4.
"FX Reserve" is defined in Section 2.1.4.
"Other Equipment" is leasehold improvements,
intangible property such as computer software and
transferable software licenses, other soft costs,
including sales tax, freight, maintenance,
installation expense and equipment specifically
designed or manufactured for Borrower, other
intangible property, limited use property and other
similar property.
"Revolving Maturity Date" is March 1, 2003.
8. The defined term "Eligible Accounts" under Section
13.1 entitled "Definitions" is amended to exclude:
(1) Accounts from dotcom companies.
B. Modification(s) to Exim Agreement.
1. The following term under Section 13.1 entitled
"Definitions" is hereby amended to read as follows:
"Exim Maturity Date" is March 1, 2003.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor
signing below) agrees that, as of the date hereof, it has no defenses against
paying any of the Obligations.
6. PAYMENT OF LOAN FEE. Borrower shall pay Bank a fee in the amount of
Twenty Five Thousand Dollars ($25,000) ("Equipment Loan Fee") of which a payment
of $25,000 has been received by Bank; a fee in the amount of Ten Thousand
Dollars ($10,000) ("Revolving Loan Fee") of which a payment of $10,000 has been
received by Bank, and an Exim Loan Fee in the amount of Twenty Six Thousand Two
Hundred Fifty Dollars ($26,250) of which a payment of $26,250 has been received
by Bank, plus all out-of-pocket expenses .
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) 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 Obligations pursuant to this Loan Modification Agreement in no
way shall obligate Bank to make any future modifications to the Obligations.
Nothing in this Loan Modification Agreement shall constitute a satisfaction of
the Obligations. It is the intention of Bank and Borrower to retain as liable
parties all makers and endorsers of Existing Loan Documents, unless the party is
expressly released by Bank in writing. Unless expressly released herein, 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.
9. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon payment of any out-of-pocket expenses.
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: BANK:
iPASS INC. SILICON VALLEY BANK
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------- ----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------- --------------------------------------
Title: VP & CFO Title: SVP
------------------------------------- -------------------------------------
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of August 22, 2002, by and
between iPASS Inc. (the "Borrower") and Silicon Valley Bank ("Bank").
1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other Obligations which may
be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among
other documents, a Loan and Security Agreement, dated September 4, 2001, as may
be amended from time to time (the "Domestic Loan Agreement"). The Domestic Loan
Agreement provides for, among other things, a Committed Revolving Line in the
original principal amount of Four Million Dollars ($4,000,000). Additionally,
Borrower is indebted to Bank, pursuant to, among other documents, an
Export-Import Bank Loan and Security Agreement dated September 4, 2001, as may
be amended from time to time (the "Exim Loan Agreement"). The Exim Loan
Agreement provides for, among other things, an Exim Committed Line in the
original principal amount of Three Million Five Hundred Thousand Dollars
($3,500,000). The Domestic Loan Agreement has been modified pursuant to a Loan
Modification Agreement dated March 8, 2002, pursuant to which, among other
things, a Committed Equipment Line in the original principal amount of Two
Million Five Hundred Thousand Dollars ($2,500,000) was incorporated into the
Domestic Loan Agreement. Hereinafter the Exim Loan Agreement and the Domestic
Loan Agreement shall be referred to collectively as (the "Loan Agreement").
Defined terms used but not otherwise defined herein shall have the same meanings
as set forth in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Obligations."
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by
the Collateral as described in the Loan Agreement and a Intellectual Property
Security Agreement dated September 4, 2001. Repayment of the obligations under
the Exim Agreement are guaranteed by the Export-Import Bank of the United
States.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Obligations shall be referred
to as the "Security Documents". Hereinafter, the Security Documents, together
with all other documents evidencing or securing the Obligations shall be
referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Domestic Loan Agreement.
1. Notwithstanding any to the contrary contained under
Sub Letter (a) under Section 2.1.2 entitled
"Equipment Advances" Borrower may include in the
Equipment Advance made by Bank on August 22, 2002
invoices for used Eligible Equipment dated as far
back as March 18, 2002.
2. For clarification purposes, any and all references to
Section 0 under Section 3.2 entitled "Conditions
Precedent to all Credit Extensions" is hereby amended
to read as Section 5.
B. Modification(s) to Exim Loan Agreement.
1. For clarification purposes, the reference to the
"Amended and Restated Loan and Security Agreement"
under defined term "Domestic Loan Documents" under
Section 13.1 entitled "Definitions" is hereby amended
to read "Loan and Security Agreement dated September
4, 2001" (the "Loan Agreement").
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor
signing below) agrees that, as of the date hereof, it has no defenses against
paying any of the Obligations.
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) 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 Obligations pursuant to this Loan Modification Agreement in no
way shall obligate Bank to make any future modifications to the Obligations.
Nothing in this Loan Modification Agreement shall constitute a satisfaction of
the Obligations. It is the intention of Bank and Borrower to retain as liable
parties all makers and endorsers of Existing Loan Documents, unless the party is
expressly released by Bank in writing. Unless expressly released herein, 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.
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: BANK:
iPASS INC. SILICON VALLEY BANK
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------- ----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------- --------------------------------------
Title: VP AND Chief Financial Officer Title: SVP
------------------------------------- -------------------------------------
[SILICON VALLEY BANK LOGO]
SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: iPASS INC.
LOAN OFFICER: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
DATE: AUGUST 22, 2002
DOCUMENTATION FEE $250.00
TOTAL FEE DUE $250.00
PLEASE INDICATE THE METHOD OF PAYMENT:
{ } A CHECK FOR THE TOTAL AMOUNT IS ATTACHED.
{ } DEBIT DDA # __________________ FOR THE TOTAL AMOUNT.
{X} LOAN PROCEEDS
/S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 8/26/02
---------------------------------
BORROWER (DATE)
/S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 8/26/02
---------------------------------
SILICON VALLEY BANK (DATE)
ACCOUNT OFFICER'S SIGNATURE
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of January 17 ,
2003, by and between iPASS Inc. (the "Borrower") and Silicon Valley Bank
("Bank").
1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other Obligations which
may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to,
among other documents, a Loan and Security Agreement, dated September 4, 2001,
as amended from time to time (the "Loan Agreement"). The Loan Agreement provides
for, among other things, a Committed Revolving Line and Equipment Advances.
Defined terms used but not otherwise defined herein shall have the same meanings
as set forth in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be
referred to as the "Obligations."
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured
by the Collateral as described in the Loan Agreement and in an Intellectual
Property Security Agreement dated September 4, 2001.
Hereinafter, the above-described security documents and guaranties,
together with all other documents securing repayment of the Obligations shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Obligations shall
be referred to as the "Existing Loan Documents."
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Loan Agreement.
1. Section 2.1.1 (a) of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:
"(a) Bank will make Advances as follows: (i) at all times prior
to the Equity Event, not exceeding the lesser of (A) the
Committed Revolving Line or (B) the Borrowing Base and (ii) on
and after the Equity Event, not exceeding the Committed Revolving
Line. Amounts borrowed under this Section may be repaid and
reborrowed during the term of this Agreement."
2. The following is hereby incorporated into the Loan Agreement
immediately after Section 2.1.2 to read as follows:
"2.1.2.A Second Equipment Advances.
(a) Through January 17 , 2004 (the "Second Equipment
Availability End Date"), Bank will make advances
("Second Equipment
1
Advance" and, collectively, "Second Equipment Advances")
not exceeding the Second Committed Equipment Line. The
Second Equipment Advances may only be used to finance or
refinance Eligible Equipment purchased on or after 90
days prior to the date of each Second Equipment Advance
and may not exceed 100% of the amount of the applicable
equipment invoice, provided, however, that Second
Equipment Advances may be used to finance or refinance
used Eligible Equipment: (i) purchased more than 90 (but
less than 179) days prior to the date of the applicable
Second Equipment Advance if such Second Equipment
Advance does not exceed 75% of the applicable equipment
invoice and (ii) purchased more than 6 months but not
more than 12 months, prior to the date of the applicable
Second Equipment Advance, if such Second Equipment
Advance does not exceed 50% of the applicable equipment
invoice. All invoices for Eligible Equipment purchased
before 90 days after the date of the Second Equipment
Advance must be funded with the initial Second Equipment
Advance. Up to 25% of the aggregate Second Equipment
Advances may consist of Other Equipment. The number of
Second Equipment Advances is limited to 6.
(b) Each Second Equipment Advance shall be payable in 36
equal monthly payments of principal plus interest
beginning on the first day of the month following such
Second Equipment Advance and continuing on the first day
of each month thereafter. The final payment due on the
applicable Second Equipment Maturity Date shall include
all outstanding principal plus all accrued unpaid
interest with respect to the applicable Second Equipment
Advance. Second Equipment Advances when repaid may not
be reborrowed.
(c) To obtain a Second Equipment Advance, Borrower must
notify Bank (the notice is irrevocable) by facsimile no
later than 12:00 p.m. Pacific time one Business Day
before the day on which the Second Equipment Advance is
to be made. The notice in the form of Exhibit B
(Payment/Advance Form) must be signed by a Responsible
Officer or designee and include a copy of the invoice
for the Equipment or Other Equipment being financed."
3. Section 2.3 of the Loan Agreement is hereby amended and restated in
its entirety to read as follows:
"2.3 Interest Rate, Payments.
(a) Interest Rate. Obligations hereunder shall accrue interest as
follows:
2
(i) At all times prior to the Equity Event: (1) Advances
accrue interest on the outstanding principal balance
at a per annum rate of 1.00 percentage point above
the Prime Rate (2) Equipment Advances accrue interest
on the outstanding principal balance at a per annum
rate equal 1.25 percentage point above the Prime
Rate; and (3) Second Equipment Advances accrue
interest on the outstanding principal balance at a
per annum rate equal 1.00 percentage point above the
Prime Rate;
(ii) commencing on the first day of the month immediately
following the date of completion of the Equity Event
and at all times thereafter: (1) Advances accrue
interest on the outstanding principal balance at a
per annum rate of 0.50 percentage point above the
Prime Rate (2) Equipment Advances accrue interest on
the outstanding principal balance at a per annum rate
equal 1.25 percentage point above the Prime Rate; and
(3) Second Equipment Advances accrue interest on the
outstanding principal balance at a per annum rate
equal 0.75 percentage point above the Prime Rate; and
(iii) if after the Equity Event Borrower maintains with
Bank or one of its affiliates no less than 50% of its
cash, cash equivalents and other investments (the
"Minimum Invested Funds") then on the first day of
the month following the date in which the Minimum
Invested Funds arrive at Bank or one of its
affiliates and at all times while the Minimum
Invested Funds are maintained at Bank or one of its
affiliates: (1) Advances accrue interest on the
outstanding principal balance at a per annum rate
equal to the Prime Rate (2) Equipment Advances accrue
interest on the outstanding principal balance at a
per annum rate equal 1.25 percentage point above the
Prime Rate; and (3) Second Equipment Advances accrue
interest on the outstanding principal balance at a
per annum rate equal 0.50 percentage point above the
Prime Rate. If Borrower's investments maintained at
Bank or one of its affiliates fall below the Minimum
Invested Funds, at any time during a month, the
applicable interest rate will be increased
retroactively as of the first day of the month of
determination.
After an Event of Default and while such Event of
Default is continuing, Obligations accrue interest at
5.00 percentage points above the rate effective
immediately before the Event of Default. The interest
rate increases or decreases when the Prime Rate
changes. Interest is computed on a 360 day year for
the actual number of days elapsed."
3
(b) Payments. Interest due on the Committed Revolving Line is
payable on the 4th of each month. Bank may debit any of
Borrower's deposit accounts including Account Number
3300044078 for principal and interest payments owing or any
amounts Borrower owes Bank. Bank will promptly notify Borrower
when it debits Borrower's accounts. These debits are not a
set-off. Payments received after 12:00 noon Pacific time are
considered received at the opening of business on the next
Business Day. When a payment is due on a day that is not a
Business Day, the payment is due the next Business Day and
additional fees or interest accrue."
4. Subsections (a), (b) and (c) of Section 6.2 are hereby amended and
restated in their entirety to read as follows:
"(a) Borrower will deliver to Bank: (i) as soon as available, but
no later than 30 days after the last day of each month (45
days after the end of each fiscal quarter after the Equity
Event), a company prepared consolidated balance sheet and
income statement covering Borrower's consolidated operations
during the period certified by a Responsible Officer and in a
form acceptable to Bank; (ii) as soon as available, but no
later than 120 days (90 days after the Equity Event) after the
last day of Borrower's fiscal year, audited consolidated
financial statements prepared under GAAP, consistently
applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting
firm reasonably acceptable to Bank; (iii) a prompt report of
any legal actions pending or threatened against Borrower or
any Subsidiary that could result in damages or costs to
Borrower or any Subsidiary of $100,000 or more; (iv) budgets,
sales projections, operating plans or other financial
information Bank reasonably requests; and (v) prompt notice of
any material change in the composition of the Intellectual
Property, including any subsequent ownership right of Borrower
in or to any Copyright, Patent or Trademark not shown in any
intellectual property security agreement between Borrower and
Bank or knowledge of an event that materially adversely
affects the value of the Intellectual Property. After the
Equity Event, Borrower shall not be required to deliver the
financial statements required under (i) and (ii) above so long
as Bank can obtain the same from the public domain (e.g. the
▇▇▇▇▇ database).
(b) Within 20 days after the last day of each month, Borrower will
deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in the form of Exhibit C, with aged
listings of accounts receivable and accounts payable and
schedule of deferred
4
revenue in form and substance reasonably satisfactory to Bank,
provided, however that after the Equity Event Borrower shall
not be required to deliver to Bank the items set forth in this
subsection (b).
(c) Within 30 days after the last day of each month prior to the
Equity Event and within 45 days after the end of each fiscal
quarter after the Equity Event, Borrower will deliver to Bank
with the monthly (quarterly after an Equity Event) financial
statements a Compliance Certificate signed by a Responsible
Officer in the form of Exhibit D, provided that, as set forth
in subsection (a) above, Borrower shall not be required to
deliver such financial statements if after an Equity Event,
Bank can obtain the same from the public domain (e.g. ▇▇▇▇▇)."
5. Section 6.6 is hereby amended and restated in its entirety to read
as follows:
"6.6 Deposit and Investment Accounts.
Borrower shall maintain its primary operating
accounts with Bank. In addition, Borrower will maintain a
majority of it's cash and investments in accounts maintained
at Bank or one of its affiliates. Furthermore, at all times
after the Equity Event, Borrower shall maintain at Bank or one
of Bank's affiliates cash and investments in an amount of no
less than $30,000,000. Within 10 Business Days of the opening
of any other deposit or investment account, Borrower shall
deliver to Bank fully executed account control agreements in
form and substance reasonably satisfactory to Bank covering
each of Borrower's deposit and investment accounts in order
for Bank to perfect its security interest in all such
accounts."
6. Section 6.7 of the Loan Agreement is hereby amended and restated in
its entirety to read as follows:
"Borrower will maintain as of the last day of each month (unless
stated otherwise):
(i) Liquidity Coverage. At all times prior to the Equity Event, a
Liquidity Ratio of 3.00 to 1.00, provided that after an Equity
Event, Borrower shall not be required to comply with this
Section 6.7(i). Liquidity Ratio shall be calculated as
follows: (A) short term unrestricted cash divided by (B) the
difference of: (y) the sum
5
of (1) the Committed Equipment Line, plus (2) the Second
Committed Equipment Line, minus (z) any principal payments
made by Borrower on account of the Committed Equipment Line
and the Second Committed Equipment Line.
(ii) Minimum Net Profit. Borrower shall achieve minimum quarterly
Net Profit of no less than $1.00.
(iii) Minimum Cash. At all times on or after the date of the Equity
Event, Borrower shall maintain unrestricted cash and cash
equivalents of no less than $50,000,000 at all times."
7. Section 8.9 of the Loan Agreement is hereby deleted in its entirety.
8. The following terms defined under Section 13.1 of the Loan Agreement
are hereby incorporated, in the case of terms that are not otherwise defined in
the Loan Agreement, or amended and restated in their entirety to read as
follows, in the case of terms previously defined in the Loan Agreement:
"Borrowing Base" is the lesser of (i) 80% of Eligible Accounts or
(ii) $10,000,000, as determined by Bank from Borrower's most recent
Borrowing Base Certificate; provided, however, that Bank may lower
the advance percentage after performing an audit of Borrower's
Collateral.
"Committed Revolving Line" is an Advance of up to $10,000,000.
"Credit Extension" is each Advance, Equipment Advance, Second
Equipment Advance, FX Forward Contract, Cash Management Services, or
any other extension of credit by Bank for Borrower's benefit.
"Equity Event" means Borrower's completion of the initial public
offering of Borrower's common stock pursuant to a registration
statement on Form S-1 (or its successor) filed under the Securities
Act of 1933, as amended, resulting in net cash proceeds to Borrower
of no less than $40,000,000.
"Net Profit" is Borrower's net income as defined under GAAP plus,
(i) amortization charges, (ii) depreciation expenses, and (iii) any
non-cash portion of any extraordinary losses.
"Other Equipment" is leasehold improvements, intangible property
such as computer software and transferable software licenses,
Borrower's Equipment located at Borrower's locations outside of the
United States, other soft costs, including sales tax, freight,
maintenance, installation expense and equipment specifically
designed or manufactured for Borrower, other intangible property,
limited use property and other similar property.
6
"Prime Rate" is the greater of: (i) the Bank's most recently
announced "prime rate," even if it is not Bank's lowest rate or (ii)
4.25%.
"Revolving Maturity Date" is January 16, 2004.
"Second Committed Equipment Line" is a Credit Extension of up to
$5,000,000.
"Second Equipment Advance" is defined in Section 2.1.2.A.
"Second Equipment Availability End Date" is defined in Section
2.1.2.A.
"Second Equipment Maturity Date" is the date which is 36 months from
the date of a Second Equipment Advance, not to exceed January 17,
2007 with respect to the last Second Equipment Advance.
9. The definition of Exim Loan Agreement in Section 13.1 of the Loan
Agreement is hereby deleted.
4. PREPAYMENT OF OBLIGATIONS. Borrower shall have the option to prepay
all or a portion of the outstanding Equipment Advances and Second Equipment
Advances made by Bank under the Loan Agreement, provided Borrower (i) provides
written notice to Bank to prepay the applicable Equipment Advances and Second
Equipment Advances, 2 Business Days prior to such prepayment, (ii) any such
prepayment is in a minimum amount of $10,000, and (iii) pays, on the date of the
prepayment (A) all outstanding principal; (B) all unpaid accrued interest to the
date of the prepayment; and (C) all other sums, if any, that shall have become
due and payable hereunder with respect to the applicable Equipment Advances and
Second Equipment Advances. In addition Borrower may repay in full, in cash, all
outstanding Obligations without penalty or premium and immediately after such
repayment the Loan Agreement and related loan documents will terminate (other
than contingent indemnification obligations).
5. EXIM LOAN AGREEMENT. Upon execution of this Loan Modification
Agreement the Export-Import Bank Loan and Security Agreement, dated as of
September 4, 2001, by and between Borrower and Bank (the "Exim Loan Agreement")
shall terminate and any obligations owing by Borrower thereunder shall become
immediately due and payable. Borrower authorizes Bank to charge the Committed
Revolving Line under the Loan Agreement in order to repay all of the outstanding
obligations under the Exim Loan Agreement.
6. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
7. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor
signing below) agrees that, as of the date hereof, it has no defenses against
paying any of the Obligations.
7
8. PAYMENT OF LOAN FEE. Borrower shall pay Bank a fee in the amount of
$37,500 (the "Second Equipment Loan Fee") and a fee in the amount of $47,500
(the "Revolving Loan Fee").
9. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor
signing below) 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 Obligations pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
Obligations. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Obligations. It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. Unless expressly
released herein, 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.
10. CONDITIONS. The effectiveness of this Loan Modification Agreement
is conditioned upon payment of all reasonable out-of-pocket expenses of Bank in
connection with the preparation, negotiation, execution, and delivery of this
Loan Modification Agreement.
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: BANK:
iPASS INC. SILICON VALLEY BANK
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇ Leaf
--------------------------- --------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇▇▇ Leaf
--------------------------- --------------------------
Title: VP & CFO Title: SVP
--------------------------- --------------------------
8
[SILICON VALLEY BANK LOGO]
SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: iPASS INC.
LOAN OFFICER: ▇▇▇▇▇ ▇▇▇▇▇▇ LEAF
DATE: JANUARY __, 2003
REVOLVING LOAN FEE $47,500
EQUIPMENT LOAN FEE $37,500
DOCUMENTATION FEE $
-------------
TOTAL FEE DUE $
=============
PLEASE INDICATE THE METHOD OF PAYMENT:
{ } A CHECK FOR THE TOTAL AMOUNT IS ATTACHED.
{ } DEBIT DDA # __________________ FOR THE TOTAL AMOUNT.
{ } LOAN PROCEEDS
--------------------------------------------------
BORROWER (DATE)
--------------------------------------------------
SILICON VALLEY BANK (DATE)
ACCOUNT OFFICER'S SIGNATURE
1
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FROM: iPASS INC.
The undersigned authorized officer of iPass Inc. ("Borrower") certifies
that under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (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 in the Agreement are true and
correct in all material respects on this date. Attached are the required
documents supporting the certification. The Officer certifies that any attached
financial statements (or statements of Borrower obtained by Bank from the public
domain, e.g. ▇▇▇▇▇) these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) consistently applied from one period to the next
except as explained in an accompanying letter or footnotes. The Officer
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance with respect to certain covenants is determined
not just at the date this certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Interim financial statements + CC Monthly within 30 days (After Yes No
an Equity Event, Quarterly
within 45 days)
Annual (Audited) FYE within 120 days, (90 days Yes No
after Equity Event)
A/R, A/P Deferred Rev. Schedule & BBC (not Monthly within 20 days Yes No
required after Equity Event)
A/R Audit Semi-Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Liquidity Coverage (before Equity Event) 3.00:1.00* _____:1.00 Yes No
Maintain on a Quarterly Basis:
Minimum Profitability $1.00 Yes No
Maintain at all times:
Minimum Cash (after Equity Event) $50,000,000 _________ Yes No
2
Have there been updates to Borrower's intellectual property, if appropriate?
Yes No
Borrower only has deposit accounts located at the following institutions:
___________________
COMMENTS REGARDING EXCEPTIONS: See Attached. BANK USE ONLY
Sincerely,
IPass Inc. Received by:
--------------------------
AUTHORIZED SIGNER
------------------------------------ Date:
SIGNATURE ---------------------------------
------------------------------------ Verified:
TITLE -----------------------------
AUTHORIZED SIGNER
------------------------------------
DATE Date:
---------------------------------
Compliance Status: Yes No
3
BORROWING BASE CERTIFICATE
Borrower: iPass Inc. Lender: Silicon Valley Bank
Commitment Amount: $10,000,000
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of _____ $_____________
2. Additions (please explain on reverse) $_____________
3. TOTAL ACCOUNTS RECEIVABLE $_____________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
a. Amounts over 90 days due $_________
b. Balance of 50% over 90 day accounts $_________
c. Excess 25% Concentration Limit $_________
d. Foreign Accounts $_________
e. Governmental Accounts $_________
f. Contra Accounts $_____________
g. Promotion or Demo Accounts $_________
h. Intercompany/Employee Accounts $_________
i. Dotcom Accounts $_________
j. Other (please explain on reverse) $_________
4. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_____________
5. Eligible Accounts (#3 minus #4) $_________
6. LOAN VALUE OF ACCOUNTS (80% of #15) $_________
BALANCES
7. Maximum Loan Amount $_____________
8. Total Funds Available Lesser of #7 or #6 $_____________
9. Present balance owing on Line of Credit $_____________
10. Outstanding under Sublimits (Cash Mgmt & FX) $_____________
RESERVE POSITION (#7 minus #8 and #9) $_____________
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 Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS: BANK USE ONLY
iPASS INC. Rec'd By:
-----------------
By: AUTH. SIGNER
--------------------------- Date:
Authorized Signer --------------------
Verified:
-----------------
AUTH. SIGNER
Date:
--------------------
1