EXHIBIT 99.1
SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement (this "Loan Modification
Agreement") is entered into as of the Second Loan Modification Effective Date,
by and between SILICON VALLEY BANK, a California corporation with its principal
place of business at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and with a
loan production office located at One Newton Executive Park, Suite 200, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Bank"), and IBASIS, INC., a
Delaware corporation with offices at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ("Borrower").
1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of October 2, 2007,
evidenced by, among other documents, a certain Second Amended and Restated Loan
and Security Agreement dated as of October 2, 2007 between Borrower and Bank, as
modified by a certain First Loan Modification Agreement dated as of April 28,
2008 between Borrower and Bank (as amended, the "Loan Agreement"). Capitalized
terms used but not otherwise defined herein shall have the same meaning as in
the Loan Agreement.
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement and the Intellectual Property
Security Agreement dated December 30, 2002 granted by Borrower in favor of Bank,
as amended and ratified (as so amended and ratified, the "IP Agreement").
Hereinafter, the Loan Agreement and the IP Agreement, 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. Modifications to Loan Agreement.
I.The Loan Agreement shall be amended by inserting the
following definitions appearing alphabetically in Section
13.1 thereof:
""Liquidity" is, on any date of measurement,
Borrower's unrestricted cash at Bank plus the
Availability Amount.
"Second Loan Modification Agreement" is that certain
Second Loan Modification Agreement, by and between
Borrower and Bank, executed as of the Second Loan
Modification Effective Date.
"Second Loan Modification Effective Date" is the date
indicated on the signature page to the Second Loan
Modification Agreement"
II. The Loan Agreement shall be amended by deleting the
following, appearing in Section 2.4(b) thereof, in its
entirety:
"(b) Performance Pricing. Each of the Prime Rate
Margin and the LIBOR Rate Margin shall be adjusted
quarterly and shall be applied on and after the first
day of each such fiscal quarter as follows: for any
fiscal quarter, as of the first day of each such
fiscal quarter: (i) if the Total Funded Debt Ratio
for the immediately preceding fiscal quarter is less
than 1.50:1.00, then the Prime Rate Margin for such
fiscal quarter shall be 0.00% and the LIBOR Rate
Margin for such fiscal quarter shall be 2.25%, and
(ii) if the Total Funded Debt Ratio for the
immediately preceding fiscal quarter is equal to or
greater than 1.50:1.00, then the Prime Rate Margin
for such fiscal quarter shall be 0.50% and the LIBOR
Rate Margin for such fiscal quarter shall be 2.75%."
and inserting in lieu thereof the following
"(b) Performance Pricing. Each of the Prime Rate
Margin and the LIBOR Rate Margin shall be adjusted
quarterly and shall be applied on and after the first
day of each such fiscal quarter as follows: for any
fiscal quarter, as of the first day of each such
fiscal quarter: (i) if the Total Funded Debt Ratio
for the immediately preceding fiscal quarter is less
than 1.50:1.00, then the Prime Rate Margin for such
fiscal quarter shall be 1.00% and the LIBOR Rate
Margin for such fiscal quarter shall be 3.25%, and
(ii) if the Total Funded Debt Ratio for the
immediately preceding fiscal quarter is equal to or
greater than 1.50:1.00, then the Prime Rate Margin
for such fiscal quarter shall be 1.50% and the LIBOR
Rate Margin for such fiscal quarter shall be 3.75%;
provided, however, that for the fiscal quarter
beginning on April 1, 2009 and thereafter, for any
fiscal quarter in which Borrower maintains Liquidity
equal to or greater than $20,000,000 for the entire
fiscal quarter, the above-listed Prime Rate Margins
and LIBOR Margins shall each be reduced by 0.50%."
III. The Loan Modification Agreement shall be amended by
deleting the following, appearing in Section 6.2(a)(i)
thereof, in its entirety:
"(i) as soon as available, and in any event within
thirty (30) days after the end of each month, and
upon each request for a Credit Extension, a
Transaction Report together with such supporting
information as Bank may reasonably request;"
and inserting in lieu thereof the following:
"(i) as soon as available, and in any event within
fifteen (15) days after the end of each month, and
upon each request for a Credit Extension, a
Transaction Report together with such supporting
information as Bank may reasonably request;"
IV. The Loan Modification Agreement shall be amended by
deleting the following, appearing in Section 6.2(a)(ii)
thereof, in its entirety:
"(ii) as soon as available, and in any event within
thirty (30) days after the end of each month, (A)
monthly accounts receivable agings, aged by invoice
date, (B) monthly accounts payable agings, aged by
invoice date, and outstanding or held check
registers, if any, and (C) monthly reconciliations of
accounts receivable agings (aged by invoice date),
transaction reports, deferred revenue report and
general ledger;"
and inserting in lieu thereof the following:
"(ii) as soon as available, and in any event within
fifteen (15) days after the end of each month, (A)
monthly accounts receivable agings, aged by invoice
date, (B) monthly accounts payable agings, aged by
invoice date, and outstanding or held check
registers, if any, and (C) monthly reconciliations of
accounts receivable agings (aged by invoice date),
transaction reports, deferred revenue report and
general ledger;"
V.The Loan Agreement shall be amended by deleting the
following, appearing in Section 6.3(c) thereof, in its
entirety:
"(c) Collection of Accounts. Borrower shall have the
right to collect all Accounts, unless and until a
Default or an Event of Default has occurred and is
continuing. Accounts shall be deposited by Borrower
into a lockbox account, or such other "blocked
account" as Bank may specify, pursuant to a blocked
account agreement in such form as Bank may specify in
its good faith business judgment. Whether or not an
Event of Default has occurred and is continuing,
Borrower shall hold all Payments on, and proceeds of,
Accounts in trust for Bank, and Borrower shall
immediately deliver all such payments and proceeds to
Bank in their original form, duly endorsed, to be
applied to the Obligations pursuant to the terms of
Section 9.4 hereof, provided, however, in the event
no Default or Event of Default has occurred and is
continuing and Borrower maintains unrestricted cash
and Cash Equivalents at Bank plus the Availability
Amount under the Revolving Line of (a) for the period
beginning on the First Modification Execution Date
and ending on May 30, 2008, no less than $10,000,000;
(b) for the period beginning on May 31, 2008 and
ending on August 30, 2008, no less than $15,000,000;
and (c) for the period beginning on August 31, 2008
and thereafter, $20,000,000, then in each case all
Payments on, and proceeds of, Accounts shall be
transferred by Bank to an operating account of
Borrower maintained at Bank."
and inserting in lieu thereof the following:
"(c) Collection of Accounts. Borrower shall have the
right to collect all Accounts, unless and until a
Default or an Event of Default has occurred and is
continuing. Accounts shall be deposited by Borrower
into a lockbox account, or such other "blocked
account" as Bank may specify, pursuant to a blocked
account agreement in such form as Bank may specify in
its good faith business judgment. Whether or not an
Event of Default has occurred and is continuing,
Borrower shall hold all Payments on, and proceeds of,
Accounts in trust for Bank, and Borrower shall
immediately deliver all such payments and proceeds to
Bank in their original form, duly endorsed, to be
applied to the Obligations pursuant to the terms of
Section 9.4 hereof; provided, however, in the event
no Default or Event of Default has occurred and is
continuing, (a) through and including the fiscal
quarter of the Borrower ending March 31, 2009, all
Payments on and proceeds of, Accounts shall be
transferred by Bank to an operating account of
Borrower maintained at Bank; and (b) for the period
beginning on April 1, 2009 and thereafter, at any
time in which Borrower maintains unrestricted cash
and Cash Equivalents at Bank plus the Availability
Amount under the Revolving Line of no less than
$20,000,000, then all Payments on, and proceeds of,
Accounts shall be transferred by Bank to an operating
account of Borrower maintained at Bank."
VI. The Loan Agreement shall be amended by deleting the
following, appearing as Section 6.9(i) thereof, in its
entirety:
"(i) Adjusted Quick Ratio. On a consolidated basis, a
ratio of Quick Assets to Current Liabilities minus
Deferred Revenue of not less than the following
amounts
Period Minimum Adjusted Quick Ratio
Effective Date through March 31, 2008 0.75:1.00
April 1, 2008 through December 31, 2008 0.85:1.00
Thereafter 1.00:1.00"
and inserting in lieu thereof the following:
"(i) Adjusted Quick Ratio. On a consolidated basis, a
ratio of Quick Assets to Current Liabilities minus
Deferred Revenue of not less than the following
amounts
Period Minimum Adjusted Quick Ratio
Effective Date through February 28, 2009 0.80:1.00
March 1, 2009 and thereafter 0.85:1.00"
VII. The Loan Agreement shall be amended by deleting the
following, appearing as Section 6.9(ii), in its entirety:
"(ii) Consolidated EBITDA. Maintain, calculated on a
consolidated basis with each of its Subsidiaries,
measured as of the end of each fiscal quarter, EBITDA
of at least (a) $7,500,000, with respect to the
fiscal quarters ending March 31, 2008 and June 30,
2008, (b) $9,000,000, with respect to the fiscal
quarter ending September 30, 2008, and (c)
$10,000,000, with respect to the fiscal quarter
ending December 31, 2008 and with respect to each
fiscal quarter thereafter."
and inserting in lieu thereof the following:
"(ii) Consolidated EBITDA. Maintain, calculated on a
consolidated basis with each of its Subsidiaries,
measured as of the end of each fiscal quarter, EBITDA
of at least (a) $7,500,000, with respect to the
fiscal quarters ending March 31, 2008 and June 30,
2008, (b) $7,000,000, with respect to the fiscal
quarter ending September 30, 2008, and (c)
$10,000,000, with respect to the fiscal quarter
ending December 31, 2008 and with respect to each
fiscal quarter thereafter."
VIII. The Loan Agreement shall be amended by deleting the
following, appearing as Section 6.9(iii), in its entirety:
"(iii) Borrower Cash Flow. For any fiscal quarter in
which Borrower's unrestricted cash and Cash
Equivalents maintained at Bank plus the Availability
Amount under the Revolving Line is less than
$20,000,000, Borrower shall maintain, calculated on a
consolidated basis with its Existing Domestic
Subsidiaries, Cash Flow of at least (I) for the
fiscal quarter ending December 31, 2007, $1.00 and
(II) for each such fiscal quarter thereafter,
$2,000,000."
and inserting in lieu thereof the following:
"(iii) Liquidity. Maintain, measured as of the last
day of each fiscal month, Liquidity of at least (a)
for the fiscal month ended September 30, 2008 through
and including February 28, 2009, $10,000,000, and (b)
for the fiscal month ending March 31, 2009 and each
fiscal month thereafter, $15,000,000."
IX. The Compliance Certificate appearing as Exhibit C to the
Loan Agreement is hereby replaced with the Compliance
Certificate attached as Exhibit A hereto.
4. CONDITIONS PRECEDENT. Prior to the Second Loan Modification Effective Date,
Borrower shall have delivered to Bank evidence satisfactory to Bank, in its
reasonable discretion, that KPN B.V., a private limited liability company
organized under the laws of the Netherlands ("Creditor"), has agreed to defer,
without causing a default or acceleration, receipt of payments, whether
regularly scheduled or otherwise due and owing or that will become due and
owing, of principal owed by Borrower to Creditor (pursuant to a certain Loan
Agreement, dated as of April 9, 2008, by and between Creditor and Borrower), for
each of the fiscal quarters ending September 30, 2008 and December 31, 2008
until each of the fiscal quarters ending March 31, 2009 and June 30, 2009,
respectively.
5. FEES. Borrower shall pay to Bank a modification fee equal to One Hundred
Twenty-Five Thousand Dollars ($125,000.00), which shall be due on or before the
date hereof and shall be deemed fully earned as of the date hereof. Borrower
shall also reimburse Bank for all legal fees and expenses incurred in connection
with this modification to the Loan Agreement.
6. RATIFICATION OF PERFECTION CERTIFICATE. Borrower hereby ratifies, confirms
and reaffirms, all and singular, the terms and disclosures contained in a
certain Perfection Certificate dated as of October 2, 2007 between Borrower and
Bank, and acknowledges, confirms and agrees the disclosures and information
above Borrower provided to Bank in the Perfection Certificate has not changed,
as of the date hereof.
7. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above. Without limiting the
foregoing, from and after the First Loan Modification Execution Date, each
reference to the phrase "Agreement" in the Loan Agreement or "Loan Agreement" in
any of the other Loan Documents shall mean the Loan Agreement as modified by
this Loan Modification Agreement.
8. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all Existing Loan Documents and all
security or other Collateral granted to the Bank, and confirms that the
indebtedness secured thereby includes, without limitation, the Obligations.
9. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that
Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever
did have, any offsets, defenses, claims, or counterclaims against Bank, whether
known or unknown, at law or in equity, all of them are hereby expressly WAIVED
and Borrower hereby RELEASES Bank from any liability thereunder.
10. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to make modifications to the existing Obligations pursuant to
this Loan Modification Agreement in no way shall obligate Bank to make any
future modifications to the Obligations. Nothing in this Loan Modification
Agreement shall constitute a satisfaction of the Obligations. It is the
intention of Bank and Borrower to retain as liable parties all makers of
Existing Loan Documents, unless the party is expressly released by Bank in
writing. No maker will be released by virtue of this Loan Modification
Agreement.
11. RIGHT OF SET-OFF. In consideration of Bank's agreement to enter into this
Loan Modification Agreement, Borrower hereby reaffirms and hereby grants to
Bank, a lien, security interest and right of set off as security for all
Obligations to Bank, whether now existing or hereafter arising upon and against
all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Bank or any entity under the
control of Bank (including a Bank subsidiary) or in transit to any of them. At
any time after the occurrence and during the continuance of an Event of Default,
without demand or notice, Bank may set off the same or any part thereof and
apply the same to any liability or obligation of Borrower even though unmatured
and regardless of the adequacy of any other collateral securing the Obligations.
ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
12. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER AND JUDICIAL REFERENCE. The
provisions of Section 11 of the Loan Agreement are hereby incorporated herein in
their entirety.
13. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank.
[The remainder of this page is intentionally left blank]
This Loan Modification Agreement is executed as a sealed instrument
under the laws of the Commonwealth of Massachusetts as of the date first written
above.
BORROWER: BANK:
IBASIS, INC. SILICON VALLEY BANK
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------- -------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------- ----------------
Title: CFO Title: Senior Vice President
--- ---------------------
Second Loan Modification Effective Date: September 30, 2008
Each of the undersigned hereby ratifies, confirms and reaffirms, all and
singular, the terms and conditions of each of its Unconditional Guaranty,
Security Agreement, IP Security Agreement (if applicable) and Perfection
Certificate, in each case executed in connection with the Loan Agreement, and
each acknowledges, confirms and agrees that each such document shall remain in
full force and effect and in no way be limited by the execution of this Loan
Modification Agreement, or any other documents, instruments and/or agreements
executed and/or delivered in connection herewith.
IBASIS GLOBAL, INC. IBASIS RETAIL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------- -------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------- ---------------
Title: CFO Title: CFO
--- ---
IBASIS SECURITIES CORPORATION KPN INTERNATIONAL NETWORK
SERVICES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------- ------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------- ---------------
Title: CFO Title: CFO
--- ---
EXHIBIT A
---------
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK Date:
-------------
FROM: IBASIS, INC.
The undersigned authorized officer of IBASIS, INC. ("Borrower") certifies that
under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the "Agreement"), (1) Borrower is in complete compliance for
the period ending _______________ with all required covenants except as noted
below, (2) there are no Events of Default, (3) all representations and
warranties in the Agreement are true and correct in all material respects on
this date except as noted below; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed
all required tax returns and reports, and Borrower has timely paid all foreign,
federal, state and local taxes, assessments, deposits and contributions owed by
Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of
the Agreement, and (5) no Liens have been levied or claims made against Borrower
or any of its Subsidiaries, if any, relating to unpaid employee payroll or
benefits of which Borrower has not previously provided written notification to
Bank. Attached are the required documents supporting the certification. The
undersigned certifies that these are prepared in accordance with GAAP
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The undersigned 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. Capitalized
terms used but not otherwise defined herein shall have the meanings given them
in the Agreement.
Please indicate compliance status by circling Yes/No under "Complies" column.
Reporting Covenant Required Complies
------------------ -------- --------
Quarterly consolidated and consolidating Quarterly within 45 days Yes No
financial statements with
Compliance Certificate
Annual financial statement (CPA Audited) + ▇▇ ▇▇▇ within 120 days Yes No
10-Q, 10-K and 8-K Within 5 days after filing with SEC Yes No
A/R & A/P Agings, Borrowing Base and Transaction Monthly within 30 days Yes No
Reports
Other filings with the SEC or any other regulatory agency Within 10 days after filing Yes No
The following Intellectual Property was registered after the Effective Date and
since the last Compliance Certificate was provided to the Bank (if no
registrations, state "None")
Financial Covenant Required Actual Complies
Maintain:
Minimum Adjusted Quick Ratio (Quarterly) _____:1.0 _____:1.0 Yes No
Minimum Consolidated EBITDA (Quarterly) $_______ $_______ Yes No
Minimum Liquidity (Monthly) $_____ $_____ Yes No
The following financial covenant analyses and information set forth in
Schedule 1 attached hereto are true and accurate as of the date of this
Certificate.
The following are the exceptions with respect to the certification
above: (If no exceptions exist, state "No exceptions to note.")
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
IBASIS, INC. BANK USE ONLY
Received by:
----------------------
By: AUTHORIZED SIGNER
-----------------------------------
Name: Date:
--------------------------------- ---------------------
Title:
-------------------------------- Verified:
----------------------
AUTHORIZED SIGNER
Date:
----------------------
Compliance Status: Yes No
Schedule 1 to Compliance Certificate
------------------------------------
Financial Covenants of Borrower
-------------------------------
Dated: ____________________
I. Adjusted Quick Ratio (Section 6.9(i))
Required: _____:1.00
Actual:
A. Aggregate value of the unrestricted cash and cash equivalents of Borrower and its $
Subsidiaries at Bank --------
B. Aggregate value of the net billed accounts receivable of Borrower and its Subsidiaries $
--------
C. Aggregate value of the Investments with maturities of fewer than 12
months of Borrower and it Subsidiaries $
--------
D. Quick Assets (the sum of lines A through C) $
--------
E. Aggregate value of Obligations to Bank $
--------
F. Aggregate value of liabilities of Borrower and its Subsidiaries
(including all Indebtedness) that matures within one (1)
$
G. Current Liabilities (the sum of lines E and F) $
--------
H. Aggregate value of all amounts received or invoiced by Borrower in advance
of performance under contracts and not yet recognized as revenue $
--------
I Line G minus line H $
--------
J. Adjusted Quick Ratio (line D divided by line I) --------
Is line J equal to or greater than ___:1:00?
No, not in compliance Yes, in compliance
--------- --------
II. Consolidated EBITDA of Borrower and its Subsidiaries (Section 6.9(ii))
Required: $7,000,000 for the quarter ended September 30, 2008; 10,000,000 for each fiscal
quarter thereafter
Actual:
A. Net Income $
--------
B. Interest Expense $
--------
C. Depreciation expense (to the extent deducted from Net Income) $
--------
D. Amortization expense (to the extent deducted from Net Income) $
--------
E. Income Tax Expense $
--------
F. Consolidated EBITDA (line A plus line B plus line C plus line D plus line E $
--------
Is line F equal to or greater than $ ?
-----------------------------------
No, not in compliance Yes, in compliance
--------- --------
III. LIQUIDITY of Borrower (Section 6.9(iii))
Required: $
-----------------
Actual:
A. Unrestricted cash at Bank $
-------
B. Availability Amount $
-------
C. LIQUIDITY (line A plus line B) $
-------
Is line C equal to or greater than $
--------------------------
No, not in compliance Yes, in compliance
--------- --------
