Exhibit 10.16

 

Silicon Valley Bank

 

Amended and Restated Schedule to

 

Loan and Security Agreement

 

Borrower:

 

Netopia, Inc.

Address:

 

6001 Shellmound Street, 4th Floor

Emeryville, CA 94608

Date:

 

as of June 27, 2005 (the “June 2005 Amendment Date”)

 

This Amended and Restated Schedule (this “Schedule”) forms an integral part of
the Loan and Security Agreement, dated June 27, 2002 (as amended, restated,
supplemented, or otherwise modified from time to time (including without
limitation pursuant to the June 2005 Amendment referred to below), the “Loan
Agreement” or “this Agreement”), between Silicon Valley Bank (“Silicon”) and the
borrower named above (“Borrower”), and, effective as of the date hereof, this
Schedule amends and restates in its entirety the prior Schedule to Loan and
Security Agreement, dated June 27, 2002 (as amended, restated, supplemented, or
otherwise modified from time to time prior to the date hereof), between Silicon
and Borrower. This Schedule is the “Amended and Restated Schedule” referred to
in Section 1 of the Amendment to Loan Documents, dated of even date herewith,
between Borrower and Silicon (the “June 2005 Amendment”) relative to the Loan
Agreement. The term “June 2005 Amendment Date” defined above hereby is
incorporated into the Loan Agreement.

 

As used herein, the term “Phase I” means the period commencing on the June 2005
Amendment Date and ending on the day immediately preceding (if ever) the first
date after the June 2005 Amendment Date that Borrower’s Adjusted Quick Ratio (as
defined below in Section 5 of this Schedule) is less than 1.50 : 1.00 (the “AQR
Threshhold”).

 

As used herein, the term “Phase II” means the period from and after the first
date (if ever) after June 2005 Amendment Date that Borrower’s Adjusted Quick
Ratio (as defined below) is less than the AQR Threshhold (even if such Adjusted
Quick Ratio subsequently is greater than or equal to the AQR Threshhold).

 

1.      CREDIT LIMIT

   

(Section 1.1):

  Revolving Loans. Revolving Loans (the “Revolving Loans”) in a total amount at
any time outstanding not to exceed an amount equal to the lesser of (a) or (b)
below (the “Credit Limit”): (a) $10,000,000 (the “Maximum Revolver Limit”); or
(b) the Applicable Formula Amount (as defined below).

 

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    As used herein, the term “Formula Amount” means, as of any date of
determination: (i) if and so long as Phase 1 is and remains in effect, the
Maximum Revolver Limit; and (ii) if and so long as Phase II becomes and remains
in effect, an amount equal to the sum of (A) and (B) below:    

(A) the sum of:

   

(1) 80% (the “Non-Foreign Accounts Advance Rate” and also an “Advance Rate”) of
the amount of Borrower’s Eligible Non-Foreign Accounts (as defined in Section 8
above),

   

plus

   

(2) an amount not to exceed the lowest of:

   

(x) 80% (the “Foreign Accounts Advance Rate” and also an “Advance Rate”) of the
amount of Borrower’s Eligible Foreign Accounts (as defined in Section 8 above);
and

   

(y) 30% of the aggregate amount of all Revolving Loans available under
subclauses (A)(1) and (A)(2) of this clause (ii) of the definition of Formula
Amount; and

   

(z) the Foreign Accounts Sublimit (as defined below).

   

As used herein, the term “Foreign Accounts Sublimit” means, as of any date of
determination and subject to the following proviso: $4,500,000; provided,
however, that the Foreign Accounts Sublimit shall equal Zero Dollars ($-0-)
unless both (1) Borrower is in compliance with Section 4.4(a) with respect to
all Foreign Accounts Collections, and (2) all Foreign Accounts Collections are
deposited, pursuant to Section 4.4(a), into one or more of (x) Borrower’s
operating account maintained at Silicon, (y) Silicon-controlled multi-currency
accounts, or (z) the Cash Collateral Account.

   

plus

   

(B) an amount not to exceed the lowest of:

   

(1) the sum of (i) 50% (the “Pre-Sold Inventory Advance Rate” and also an
“Advance Rate”) of the value of Borrower’s “Pre-Sold Eligible Inventory” (as
defined below) and (ii) 20% (the “Non-Pre-Sold Inventory Advance Rate” and also
an “Advance Rate”) of the value of Borrower’s Eligible Inventory and Eligible
In-Transit Inventory (each as defined in Section 8 above), not consisting of
Pre-Sold Eligible

 

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Inventory, calculated at the lower of cost or market value and determined on a
first-in, first-out basis; and

   

(2) 30% of the aggregate amount of all Revolving Loans available under subclause
(A) of clause (ii) of the definition of Formula Amount; and

   

(3) $4,500,000.

   

For the purposes hereof, the term “Pre-Sold Eligible Inventory” shall mean that
portion of Borrower’s Eligible Inventory and Eligible In-Transit Inventory (each
as defined in Section 8 above) consisting of Borrower’s “Pre-Sold Inventory” (as
defined below). For the purposes hereof, the term “Pre-Sold Inventory” shall
mean Borrower’s Inventory (as defined in Section 8 above) with respect to which
the invoice and other necessary billing documentation have not been submitted to
the applicable Account Debtor in connection with a completed (or contracted for)
sale of goods, rendition of services or licensing of software and which the
Borrower has identified in writing to Silicon as Pre-Sold Inventory and for
which, if requested by Silicon in its discretion, a purchase order (or other
documentation including, without limitation, the original of the purchase order,
satisfactory to Silicon) has been provided to Silicon.

   

Silicon may, from time to time, modify one or more of the Advance Rates, in its
good faith business judgment, upon notice to the Borrower, based on changes in
collection experience with respect to Accounts, its evaluation of the Inventory
or other issues, or factors relating to the Accounts, Inventory or other
Collateral.

    Revolving Loans are “Loans” for all purposes of this Agreement.

Letter of Credit Sublimit

   

(Section 1.6):

 

$5,000,000.

Cash Management

   

Services and Reserves:

  Borrower may use up to $2,000,000 of Revolving Loans available hereunder for
Silicon’s Cash Management Services (as defined below), including, merchant
services, business credit card, ACH and other services identified in the cash
management services agreement related to such service (the “Cash Management
Services”). Silicon may, in its sole discretion, reserve against Revolving Loans
which would otherwise be available hereunder such sums as Silicon shall
determine

 

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    in its good faith business judgment in connection with the Cash Management
Services, and Silicon may charge to Borrower’s Loan account, any amounts that
may become due or owing to Silicon in connection with the Cash Management
Services. Borrower agrees to execute and deliver to Silicon all standard form
applications and agreements of Silicon in connection with the Cash Management
Services, and, without limiting any of the terms of such applications and
agreements, Borrower will pay all standard fees and charges of Silicon in
connection with the Cash Management Services. The Cash Management Services shall
terminate on the Maturity Date, unless the Borrower provides Silicon with cash
collateral in an amount equal to the reserve established for such Cash
Management Services.

Foreign Exchange

   

Contract Sublimit:

 

$1,000,000.

    Borrower may enter into foreign exchange forward contracts with Silicon, on
its standard forms, under which Borrower commits to purchase from or sell to
Silicon a set amount of foreign currency more than one business day after the
contract date (the “FX Forward Contracts”); provided that (1) at the time the FX
Forward Contract is entered into Borrower has Revolving Loans available to it
under this Agreement in an amount at least equal to 10% of the amount of the FX
Forward Contract; (2) the total FX Forward Contracts at any one time outstanding
may not exceed 10 times the amount of the Foreign Exchange Contract Sublimit set
forth above. Silicon shall have the right to withhold, from the Revolving Loans
otherwise available to Borrower under this Agreement, a reserve (which shall be
in addition to all other reserves) in an amount equal to 10% of the total FX
Forward Contracts from time to time outstanding, and in the event at any time
there are insufficient Revolving Loans available to Borrower for such reserve,
Borrower shall deposit and maintain with Silicon cash collateral in an amount at
all times equal to such deficiency, which shall be held as Collateral for all
purposes of this Agreement. Silicon may, in its discretion, terminate the FX
Forward Contracts at any time that an Event of Default occurs and is continuing.
Borrower shall execute all standard form applications and agreements of Silicon
in connection with the FX Forward Contracts, and without limiting any of the
terms of such applications and agreements, Borrower shall pay all standard fees
and charges of Silicon in connection with the FX Forward Contracts.

 

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2.      INTEREST.

   

Interest Rate (Section 1.2):

    All Obligations shall bear interest at a per annum rate equal to the “Prime
Rate” in effect from time to time.     Interest shall be calculated on the basis
of a 360-day year for the actual number of days elapsed. “Prime Rate” means the
rate announced from time to time by Silicon as its “prime rate;” it is a base
rate upon which other rates charged by Silicon are based, and it is not
necessarily the best rate available at Silicon. The interest rate applicable to
the Obligations shall change on each date there is a change in the Prime Rate.

3.      FEES (Section 1.4):

   

Anniversary Fee:

  $35,000, due and payable on the first anniversary of the June 2005 Amendment
Date.

Collateral Monitoring Fee:

  During Phase II, $750, per month, payable in arrears (prorated for any partial
month at the beginning of Phase II and at termination of this Agreement).

Unused Line Fee:

  During Phase II, in the event, in any calendar month (or portion thereof at
the beginning of Phase II and the end of the term hereof), the average daily
principal balance of the Loans outstanding during the month is less than the
amount of the Maximum Revolving Limit, Borrower shall pay Silicon an unused line
fee in an amount equal to 0.25% per annum on the difference between the amount
of the Maximum Revolving Limit and the average daily principal balance of the
Loans outstanding during the month, which unused line fee shall be computed and
paid monthly, in arrears, on the first day of the following month.

4.      MATURITY DATE

   

(Section 6.1):

  The term “Maturity Date” shall mean June 27, 2007.

 

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5.      FINANCIAL COVENANTS

   

(Section 5.1):

  Borrower shall comply with each of the following covenants. Compliance shall
be determined as of the end of each month, except as otherwise specifically
provided below:

Adjusted

   

Quick Ratio:

 

Borrower shall maintain an Adjusted Quick Ratio of not less than 1.25 to 1.

Minimum Tangible

   

Net Worth:

 

Borrower shall maintain a Tangible Net Worth of not less than the following
(unless reset as provided for below):

   

For each month ending after on or after June 30, 2005 through the month ending
August 31, 2005: the TNW Base Amount (as defined below) plus 50% of the
Borrower’s net income in each fiscal quarter ending on or after June 30, 2005.
Increases in the Minimum Tangible Net Worth Covenant based on net income shall
be effective on the last day of the fiscal quarter in which said net income is
realized, and shall continue effective thereafter. In no event shall the Minimum
Tangible Net Worth Covenant be decreased.

   

As used herein, the term “TNW Base Amount” means, as of any date of
determination:

   

(a) $19,000,000 for each of June 2005, July 2005, and August 2005; and

   

(b) $19,000,000 for each month thereafter; unless on or before August 31, 2005,
the Minimum Tangible Net Worth Covenant shall be reset for September 2005 and
each month thereafter based on Borrower’s projected financial statements for
such period, such projected financial statements to have been approved by the
Borrower’s Board of Directors and accepted jointly by Borrower and by Silicon in
their respective discretion, which projected financial statements Borrower
hereby covenants and agrees to deliver to Silicon no later than July 31, 2005.

Definitions.

 

For purposes of the foregoing financial covenants, the following terms shall
have the following meanings:

   

“Adjusted Quick Ratio” shall mean the ratio of (i) Borrower’s unrestricted cash
maintained at Silicon plus cash equivalents maintained at Silicon plus net
Receivables and investments made on behalf

 

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of the Borrower through Silicon’s Investment Product Services Division (“ISP
Division”) to (ii) Borrower’s current liabilities plus the outstanding principal
amount of any Obligations less deferred revenues.

   

“Current assets”, “current liabilities” and “liabilities” shall have the meaning
ascribed thereto by GAAP.

   

“Tangible Net Worth” shall mean the excess of total assets over total
liabilities, determined in accordance with GAAP, with the following adjustments:

   

(A) there shall be excluded from assets: (i) notes, accounts receivable and
other obligations owing to Borrower from its officers or other Affiliates, and
(ii) all assets which would be classified as intangible assets under GAAP,
including without limitation goodwill, licenses, patents, trademarks, trade
names, copyrights, capitalized software and organizational costs, licenses and
franchises

   

(B) there shall be excluded from liabilities: all indebtedness which is
subordinated to the Obligations under a subordination agreement in form
specified by Silicon or by language in the instrument evidencing the
indebtedness which Silicon agrees in writing is acceptable to Silicon in its
good faith business judgment.

6.      REPORTING.

   

(Section 5.3):

        Borrower shall provide Silicon with the following:    

1.      During Phase II, with each request for a Loan and on a minimum weekly
basis, transaction reports and schedules of collections, on Silicon’s standard
form.

   

2.      During Phase II, monthly accounts receivable agings, aged by invoice
date, within fifteen days after the end of each month.

 

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3.      During Phase II, monthly accounts payable agings, aged by invoice date,
and outstanding or held check registers, if any, within fifteen days after the
end of each month.

   

4.      During Phase II, monthly reconciliations of accounts receivable agings
(aged by invoice date), transaction reports, and general ledger, within fifteen
days after the end of each month.

   

5.      During Phase II, monthly perpetual inventory reports for the Inventory
valued on a first-in, first-out basis at the lower of cost or market (in
accordance with GAAP) or such other inventory reports as are requested by
Silicon in its good faith business judgment, all within fifteen days after the
end of each month. Without limiting the generality of the foregoing, such
inventory reports shall contain detailed so-called “sell-through” reports with
respect to Ingram Micro, Tech-Data, and such other distribution-channel
customers of Borrower as Silicon may require.

   

6.      Monthly unaudited financial statements, as soon as available, and in any
event within thirty days after the end of each month.

   

7.      Monthly Compliance Certificates, within thirty days after the end of
each month, in such form as Silicon shall reasonably specify, signed by the
Chief Financial Officer of Borrower, certifying that as of the end of such month
Borrower was in full compliance with all of the terms and conditions of this
Agreement, and setting forth calculations showing compliance with the financial
covenants set forth in this Agreement and such other information as Silicon
shall reasonably request, including, without limitation, a statement that at the
end of such month there were no held checks.

   

8.      Quarterly unaudited financial statements, as soon as available, and in
any event within forty-five days after the end of each fiscal quarter of
Borrower.

   

9.      Annual operating budgets (including income statements, by quarter) for
the upcoming fiscal year of Borrower no later than 90 days prior to the end of
each fiscal year of Borrower (except that such operating budgets for Borrower’s
fiscal year of ending September 30, 2006 shall be due no later than July 31,
2005).

   

10.    Annual financial statements, as soon as available, and in any event
within 120 days following the end of Borrower’s fiscal year, certified by, and
with an unqualified opinion of, independent certified public accountant’s
acceptable to Silicon.

 

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7.      BORROWER INFORMATION:

        Borrower represents and warrants that the information set forth in the
Representations and Warranties of the Borrower dated May 30, 2002, previously
submitted to Silicon (the “Representations”) is true and correct as of the June
2005 Amendment Date.

8.      ADDITIONAL PROVISIONS

       

(1)    Banking Relationship. Borrower shall at all times maintain its primary
banking relationship with Silicon. Without limiting the generality of the
foregoing, Borrower shall at all times maintain not less than 80% of its total
cash and investments on deposit with Silicon, including, without limitation,
investments made through ISP Division. As to any Deposit Accounts and investment
accounts maintained with another institution, Borrower shall cause such
institution to enter into a control agreement in form acceptable to Silicon in
its good faith business judgment in order to perfect Silicon’s first-priority
security interest in said Deposit Accounts and investment accounts.

   

Anything herein to the contrary notwithstanding (but subject to the first
sentence of the immediately preceding paragraph), Borrower shall have no
obligation to cause one or more control agreements (each in form and substance
satisfactory to Silicon in its good faith business judgment) to be executed and
delivered by Wells Fargo Bank with respect to each Deposit Account of Borrower
maintained with Wells Fargo Bank.

   

(2)    Subordination of Inside Debt. All present and future indebtedness of
Borrower to its officers, directors, Domestic Subsidiaries, and shareholders
(“Inside Debt”) shall, at all times, be subordinated to the Obligations pursuant
to a subordination agreement on Silicon’s standard form. Borrower represents and
warrants that there is no Inside Debt presently outstanding, except for Inside
Debt that is the subject of the Intercompany Subordination Agreement and the
following: NONE. Prior to incurring any Inside Debt in the future, Borrower
shall cause the person to whom such Inside Debt will be owed to execute and
deliver to Silicon a subordination agreement on Silicon’s standard form.

   

(3)    Bailee Agreements. Borrower shall cause any bailee or warehouseman at
which Borrower maintains any Collateral and identified in the Representations to
execute and deliver to Silicon

 

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a bailee agreement (in form and substance satisfactory to Silicon) with respect
to all Collateral maintained by Borrower at such bailee or warehouseman.
Borrower hereby covenants that Borrower promptly shall deliver written notice to
Silicon of any Collateral being in the possession of any warehouseman or other
bailee not identified in the Representations. With respect to any Collateral of
Borrower in the possession of any warehouseman or other bailee not identified in
the Representations, Borrower shall, promptly upon Silicon’s request therefor,
deliver to Silicon a bailee agreement (in form and substance satisfactory to
Silicon) duly executed by such warehouseman or other bailee.

   

(4)    Intellectual Property. Borrower has no present maskworks, software,
computer programs and other works of authorship registered with the United
States Copyright Office. Borrower covenants and agrees that it shall not
register any maskworks, software, computer programs or other works of authorship
subject to United States copyright protection with the United States Copyright
Office without first complying with the following: (i) providing Silicon with at
least 15 days prior written notice thereof, (ii) providing Silicon with a copy
of the application for any such registration and (iii) executing and filing such
other instruments, and taking such further actions as Silicon may reasonably
request from time to time to perfect or continue the perfection of Silicon’s
interest in the Collateral, including without limitation the filing with the
United States Copyright Office, simultaneously with the filing by Borrower of
the application for any such registration, of a copy of that certain
Intellectual Property Security Agreement between Borrower and Silicon and dated
June 27, 2002 or a Supplement thereto in form acceptable to Silicon identifying
the maskworks, software, computer programs or other works of authorship being
registered and confirming the grant of a security interest therein in favor of
Silicon.

9. ADDITIONAL PROVISIONS         [RESERVED]

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IN WITNESS WHEREOF, the parties hereto have caused this Schedule to Loan and
Security Agreement to be executed and delivered as of the date first above
written.

 

Borrower:      

Silicon:

NETOPIA, INC.

     

SILICON VALLEY BANK

By  

/s/ Charles Constanti

     

By

 

/s/ Patrick O’Donnell

   

President or Vice President

     

Title

 

Vice President and Relationship Manager

By  

/s/ David A. Kadish

               

Secretary or Assistant Secretary

           

 

Signature Page