EXHIBIT 10.1
SILICON VALLEY BANK
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Borrower: CYPRESS COMMUNICATIONS, INC.
CYPRESS COMMUNICATIONS OPERATING COMPANY, INC.
Address: 00 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Date: March 17, 2004
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is entered into
on the above date between SILICON VALLEY BANK ("Silicon"), whose address is
0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and with a loan production
office located at 0000 Xxxxxxxxx Xxxx, XX, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000
and the borrower(s) named above (jointly and severally, the "Borrower"), whose
chief executive office is located at the above address ("Borrower's Address").
The Schedule to this Agreement (the "Schedule") shall for all purposes be
deemed to be a part of this Agreement, and the same is an integral part of this
Agreement. (Definitions of certain terms used in this Agreement are set forth
in Section 8 below.)
RECITALS
A. Silicon and Borrower have entered into that certain Loan and
Security Agreement dated as of July 12, 2002 (the "Original Closing Date"),
which Loan and Security Agreement was amended by that certain Loan Modification
Agreement dated as of February , 2003 by and between Borrower and Silicon
and by that certain Loan Modification Agreement dated as of September , 2003
by and between Borrower and Silicon (collectively, the "Original Loan
Agreement"). Pursuant to the Original Loan Agreement, Silicon agreed to make
certain loans including, the "Revolving Facility" described therein, and other
financial accommodations to Borrower.
B. Repayment of all indebtedness of Borrower under the Original Loan
Agreement is unconditionally guaranteed by U.S. Realtel, Inc. (the "Guarantor")
pursuant to an Unconditional Guaranty dated as of July 12, 2002 (the
"Guaranty").
C. Borrower has requested and Silicon has agreed pursuant to this
Agreement to (i) to make an Equipment Term Loan to Borrower in the principal
amount of One Million Dollars ($1,000,000), and (ii) amend and restate the
Original Loan Agreement in its entirety.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Silicon and Borrower agree that
the Original Loan Agreement is amended and restated in its entirety as follows:
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1. LOANS.
1.1 LOANS. Silicon will make revolving loans, issue letters of
credit, and provide cash management services to Borrower (the "Revolving Loans")
and make an equipment term loan (the "Equipment Term Loan" and together with the
Revolving Loans, the "Loans"), in amounts determined by Silicon in its good
faith business judgment, up to the amounts (the "Credit Limit") shown on the
Schedule, provided no Default or Event of Default has occurred and is
continuing, and subject to deduction of Reserves for accrued interest and such
other Reserves as Silicon deems proper from time to time in its good faith
business judgment. Amounts advanced under the Revolving Loans, may be repaid
and readvanced from time to time. Advances under the Equipment Term Loan may
not be readvanced.
1.2 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rates shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Silicon's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as the other Loans. Silicon may, in its discretion, charge interest to
Borrower's Deposit Accounts maintained with Silicon.
1.3 OVERADVANCES. Except as set forth in Section 1.6 with respect to
any Permitted Overadvance, if at any time or for any reason the total of all
outstanding Revolving Loans and all other monetary Obligations exceeds the
Credit Limit (an "Overadvance"), Borrower shall immediately pay the amount of
the excess to Silicon, without notice or demand. Without limiting Borrower's
obligation to repay to Silicon the amount of any Overadvance, Borrower agrees to
pay Silicon interest on the outstanding amount of any Overadvance, on demand,
at the Default Rate.
1.4 FEES. Borrower shall pay Silicon the fees shown on the Schedule,
which are in addition to all interest and other sums payable to Silicon and are
not refundable.
1.5 LOAN REQUESTS. To obtain a Loan, Borrower shall make a request
to Silicon by facsimile or telephone. Loan requests received after 12:00 Noon
(Pacific time) will not be considered by Silicon until the next Business Day.
Silicon may rely on any telephone request for a Loan given by a person whom
Silicon believes is an authorized representative of Borrower, and Borrower will
indemnify Silicon for any loss Silicon suffers as a result of that reliance.
1.6 PERMITTED OVERADVANCE/THE PURCHASE TRANSACTION. Some portion or
all of the initial advance under the Revolving Loans was used by Borrower to
close on the acquisition of certain assets (the "Acquired Assets") pursuant to
that certain Asset Purchase Agreement dated on or about May 31, 2002 by and
among Borrower, Intermedia Communications, Inc., Shared Technologies Xxxxxxxxx,
Inc., Shared Technologies Xxxxxxxxx Telecom, Inc., MCI Worldcom Communications,
Inc. and Worldcom, Inc. (as amended from time to time, the "Purchase
Agreement"). In connection with the Purchase Agreement Transaction, Borrower
was permitted to create Overadvances (each a "Permitted Overadvance" and
collectively, the "Permitted Overadvances"), provided that at the time of each
Permitted Overadvance the following conditions are met to Silicon's
satisfaction: (a) no Event of Default or Default shall have occurred and be
continuing; (b) each Permitted Overadvance shall be fully secured by cash on
deposit with and assigned to Silicon and (c) the amount of any Permitted
Overadvance will not cause the maximum principal amount of all Loans to
exceed Ten Million Dollars ($10,000,000).
1.7 LETTERS OF CREDIT. At the request of Borrower, Silicon may, in
its good faith business judgment, issue letters of credit for the account of
Borrower, in form and substance satisfactory to Silicon in its sole discretion
(collectively, "Letters of Credit"). The aggregate face amount of all Letters
of Credit from time to time outstanding shall not exceed the amount shown on the
Schedule (the "Letter of Credit Sublimit"), and shall be reserved against
Revolving Loans with would otherwise be available hereunder, 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. Borrower shall pay all bank charges
(including charges of Silicon) for the issuance of Letters of Credit, together
with such additional fee as Silicon's letter of credit department shall charge
in connection with the issuance of the Letters of Credit. Any payment by Silicon
under or in connection with a Letter of Credit shall constitute a Revolving Loan
hereunder on the date such payment is made. Each Letter of Credit shall have an
expiry date no later than thirty (30) days prior to the Maturity Date. Borrower
hereby agrees to indemnify and hold Silicon harmless from any loss, cost,
expense, or liability, including payments made by Silicon, expenses, and
reasonable attorneys' fees incurred by Silicon arising out of or in connection
with any Letters of Credit. Borrower agrees to be bound by the regulations and
interpretations of the issuer of any Letters of Credit guarantied by Silicon and
opened for Borrower's account or by Silicon's interpretations of any Letter of
Credit issued by Silicon for Borrower's account, and Borrower understands and
agrees that Silicon shall not be liable for any error, negligence, or mistake,
whether of omission or commission, in following Borrower's instructions or those
contained in the Letters of Credit or any modifications, amendments, or
supplements thereto. Borrower understands that Letters of Credit may require
Silicon to
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indemnify the issuing bank for certain costs or liabilities arising out of
claims by Borrower against such issuing bank. Borrower hereby agrees to
indemnify and hold Silicon harmless with respect to any loss, cost, expense, or
liability incurred by Silicon under any Letter of Credit as a result of
Silicon's indemnification of any such issuing bank. The provisions of this Loan
Agreement, as it pertains to Letters of Credit, and any other Loan Documents
relating to Letters of Credit are cumulative.
1.8 CASH MANAGEMENT/ACH SERVICES. Borrower may use up to One Hundred
Thousand Dollars ($100,000) of the Revolving Loans for Lender'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"). Such aggregate amounts utilized under the Cash Management Services
Sublimit will at all times reduce the amount otherwise available to be borrowed
under the Revolving Loans. Any amounts Silicon pays on behalf of Borrower or
any amounts that are not paid by Borrower for any Cash Management Services will
be treated as Loans and will accrue interest at the Prime Rate in effect from
time to time, plus two percent (2.00%) per annum.
1.9 EQUIPMENT TERM LOAN. At the request of Borrower, Silicon will make
equipment term loans to Borrower (the "Equipment Term Loans"), in amounts up to
the Equipment Term Loan Sublimit shown on the Schedule, provided no Default or
Event of Default has occurred and is continuing. Equipment Term Loans shall be
repaid in accordance with the Schedule. The aggregate amount of outstanding
Equipment Term Loans will reduce the amount otherwise available to be borrowed
under the Revolving Loans, prior to and until the Debt Service Coverage Change
Date (as hereinafter defined). From and after the Debt Service Change Date,
the aggregate amount of outstanding Equipment Term Loans will no longer reduce
the amount otherwise available to be borrowed under the Revolving Loans.
1.10 INTER-COMPANY DEBT, CONTRIBUTION. Without implying any limitation
on the joint and several nature of the Obligations, Silicon agrees that
notwithstanding any other provision of this Agreement, the Persons included in
the term "Borrower" may create reasonable inter-company indebtedness between or
among the Persons included in the term "Borrower" with respect to the
allocation of the benefits and proceeds of the Loans and Letters of Credit
under this Agreement. The Persons included in the term "Borrower" agree among
themselves, and Silicon consents to that agreement, that each such Person shall
have rights of contribution from all of the such Persons to the extent such
Person incurs Obligations in excess of the proceeds of the Loans received by,
or allocated to purposes for the direct benefit of, such Person. All such
indebtedness and rights shall be, and are hereby agreed by the Persons included
in the term "Borrower" to be, subordinate in priority and payment to the
indefeasible repayment in full in cash of the Obligations, and, unless Silicon
agrees in writing otherwise, shall not be exercised or repaid in whole or in
part until all of the Obligations have been indefeasibly paid in full in cash.
Each Person included in the term "Borrower" agrees that all of such
inter-company indebtedness and rights of contribution are part of the
Collateral and secure the Obligations. Each Person included in the term
"Borrower" hereby waives all rights of counter claim, recoupment and offset
between or among themselves arising on account of that indebtedness and
otherwise. No Person included in the term "Borrower" shall evidence the
inter-company indebtedness or rights of contribution by note or other
instrument, and shall not secure such indebtedness or rights of contribution
with any lien or security.
1.11 BORROWERS ARE INTEGRATED GROUP.
(i) Each Person included in the term "Borrower" hereby represents and
warrants to Silicon that each of them will derive benefits, directly and
indirectly, from each Letter of Credit and from each Loan, both in their
separate capacity and as a member of the integrated group to which each such
Person belongs and because the successful operation of the integrated group is
dependent upon the continued successful performance of the functions of the
integrated group as a whole, because (i) the terms of the consolidated financing
provided under this Agreement are more favorable than would otherwise would be
obtainable by such Persons individually, and (ii) the additional administrative
and other costs and reduced flexibility associated with individual financing
arrangements which would otherwise be required if obtainable would substantially
reduce the value to such Persons of the financing.
(ii) Each Person included in the term "Borrower" hereby represents and
warrants that all of the representations and warranties contained in this
Agreement are true and correct on and as of the date hereof as if made on and as
of such date, both before and after giving effect to this Agreement, and that no
Event of Default or Default has occurred and is continuing or exists or would
occur or exist after giving effect to this Agreement.
1.12 PRIMARY OBLIGATIONS. The obligations and liabilities of each
Person included in the term "Borrower", as guarantor under this paragraph
shall be primary, direct and immediate, shall not be subject to any
counterclaim, recoupment, set off, reduction or defense based upon any claim
that such Person may have against any one or more of the other Persons included
in the term "Borrower", Silicon and/or any other guarantor and shall not be
conditional or contingent upon pursuit or
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enforcement by Silicon of any remedies it may have against Persons included in
the term "Borrower" with respect to this Agreement, whether pursuant to the
terms thereof or by operation of law. Without limiting the generality of the
foregoing, Silicon shall not be required to make any demand upon any of the
Persons included in the term "Borrower", or to sell the Collateral or otherwise
pursue, enforce or exhaust its or their remedies against the Persons included
in the term "Borrower" or the Collateral either before, concurrently with or
after pursuing or enforcing its rights and remedies hereunder. Any one or more
successive or concurrent actions or proceedings may be brought against each
Person included in the term "Borrower" under this paragraph, either in the same
action, if any, brought against any one or more of the Persons included in the
term "Borrower" or in separate actions or proceedings, as often as Silicon may
deem expedient or advisable. Without limiting the foregoing, it is
specifically understood that any modification, limitation or discharge of any
of the liabilities or obligations of any one or more of the Persons included in
the term "Borrower", any other guarantor or any obligor under any of the
Financing Documents, arising out of, or by virtue of, any bankruptcy,
arrangement, reorganization or similar proceeding for relief of debtors under
federal or state law initiated by or against any one or more of the Persons
included in the term "Borrower", in their respective capacities as borrowers and
guarantors under this paragraph, or under any of the Financing Documents shall
not modify, limit, lessen, reduce, impair, discharge, or otherwise affect the
liability of each Borrower under this paragraph in any manner whatsoever, and
this paragraph shall remain and continue in full force and effect. It is the
intent and purpose of this paragraph that each Person included in the term
"Borrower" shall and does hereby waive all rights and benefits which might
accrue to any other guarantor by reason of any such proceeding, and the Persons
included in the term "Borrower" agree that they shall be liable for the full
amount of the obligations and liabilities under this paragraph regardless of,
and irrespective to, any modification, limitation or discharge of the liability
of any one or more of the Persons included in the term "Borrower", any other
guarantor or any obligor under any of the Loan Documents, that may result from
any such proceedings.
2. SECURITY INTEREST. To secure the payment and performance
of all of the Obligations when due, Borrower hereby grants to Silicon a
security interest in all of the following (collectively, the "Collateral"): all
right, title and interest of Borrower in and to all of the following, whether
now owned or hereafter arising or acquired and wherever located: all Accounts;
all Inventory; all Equipment; all Deposit Accounts; all General Intangibles
(including without limitation all intellectual property); all Investment
Property; all other property; and any and all claims, rights and interests in
any of the above, and all guaranties and security for any of the above, and all
substitutions and replacements for, additions, accessions, attachments,
accessories, and improvements to, and proceeds (including proceeds of any
insurance policies, proceeds of proceeds and claims against third parties) of,
any and all of the above, and all Borrower's books relating to any and all of
the above.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.
In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants, throughout the
term of this Agreement and until all Obligations have been paid and performed
in full:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower is and will continue to
be, duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Borrower is and will continue to be
qualified and licensed to do business in all jurisdiction in which any failure
to do so would result in a Material Adverse Change. The execution , delivery
and performance by Borrower of this Agreement, and all other documents
contemplated hereby (1) have been duly and validly authorized, (ii) are
enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), and (iii) do not violate Borrower's articles or certificate
of incorporation, or Borrower's by-laws, or any law or any material agreement
or instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any agreement or instrument which is binding upon Borrower or its
property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in
the heading to this Agreement is its correct name. Listed in the
Representations are all prior names of Borrower and all of Borrower's present
and prior trade names. Borrower shall give Silicon 30 days' prior written
notice before changing its name or doing business under any other name.
Borrower has complied, and will in the future comply, in all material respects,
with all laws relating to the conduct of business under a fictitious business
name, except where the failure to so comply would not reasonably be expected to
result in a Material Adverse Change.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth
in the heading to this Agreement is Borrower's chief executive office. In
addition, Borrower has places of business only at the locations set forth in the
Representations.
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Borrower will give Silicon at least 30 days prior written notice before opening
any additional place of business or changing its chief executive office,
except that Borrower may maintain sales offices in the ordinary course of
business at which not more than a total of $10,000 fair market value of
Equipment is located.
3.4 TITLE TO COLLATERAL; PERFECTION; PERMITTED LIENS.
(a) Borrower is now, and will at all times in the future be,
the sole owner of all the Collateral, except for items of Equipment which are
leased to Borrower. The Collateral now is and will remain free and clear of any
and all liens, charges, security interests, encumbrances and adverse claims,
except for Permitted Liens. Silicon now has, and will continue to have, a
first-priority perfected and enforceable security interest in all of the
Collateral, subject only to the Permitted Liens, and Borrower will at all times
defend Silicon and the Collateral against all claims of others.
(b) Borrower has set forth in the Representations all of
Borrower's Deposit Accounts, and Borrower will give Silicon five Business Days
advance written notice before establishing any new Deposit Accounts and will
cause the institution where any such new Deposit Account is maintained to
execute and deliver to Silicon a control agreement in form sufficient to perfect
Silicon's security interest in the Deposit Account and otherwise satisfactory to
Silicon in its good faith business judgment. Nothing herein limits any
requirements which may be set forth in the Schedule as to where Deposit Accounts
will be maintained.
(c) In the event that Borrower shall at any time after the
date hereof have any commercial tort claims against others, which it is
asserting or intends to assert, and in which the potential recovery exceeds
$100,000, Borrower shall promptly notify Silicon thereof in writing and provide
Silicon with such information regarding the same as Silicon shall request
(unless providing such information would waive the Borrower's attorney-client
privilege). Such notification to Silicon shall constitute a grant of a security
interest in the commercial tort claim and all proceeds thereof to Silicon, and
Borrower shall execute and deliver all such documents and take all such actions
as Silicon shall request in connection therewith.
(d) Whenever any Equipment or Inventory is located in a
warehouse or other premises in which any third party has an interest, Borrower
shall, whenever requested by Silicon, use its best efforts to cause such third
party to execute and deliver to Silicon, in form acceptable to Silicon, such
waivers and subordinations as Silicon shall specify in its good faith business
judgment. Borrower will keep in full force and effect, and will comply with all
material terms of, any lease of real property where any of the Collateral now or
in the future may be located.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral
in good working condition (ordinary wear and tear excepted), and Borrower will
not use the Collateral for any unlawful purpose. Borrower will immediately
advise Silicon in writing of any material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements now or in the future delivered to Silicon have been, and will be,
prepared in conformity with GAAP and now and in the future will fairly present
the results of operations and financial condition of Borrower, in accordance
with GAAP, at the times and for the periods therein stated. Between the last
date covered by any such statement provided to Silicon and the date hereof,
there has been no Material Adverse Change.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has
timely filed, and will timely file, all required tax returns and reports, and
Borrower has timely paid, and will timely pay, all foreign, federal, state and
local taxes, assessments, deposits and contributions now or in the future owned
by Borrower. Borrower may, however, defer payment of any contested taxes,
provided that Borrower (i) in good faith contests Borrower's obligation to pay
the taxes by appropriate proceedings promptly and diligently instituted and
conducted, (ii) notifies Silicon in writing of the commencement of, and any
material development in, the proceedings, and (iii) posts bonds or takes any
other steps required to keep the contested taxes from becoming a lien upon any
of the Collateral. Borrower is unaware of any claims or adjustments proposed for
any of Borrower's prior tax years which could result in additional taxes
becoming due and payable by Borrower. Borrower has paid, and shall continue to
pay all amounts necessary to fund all present and future pension, profit sharing
and deferred compensation plans in accordance with their terms, and Borrower has
not and will not withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any
such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency.
3.9 COMPLIANCE WITH LAW. Borrower has, to the best of its knowledge,
complied, and will comply, in all material respects, with all provisions of all
foreign, federal, state and local laws and regulations applicable to Borrower,
including, but not
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limited to, those relating a Borrower's ownership of real or personal property,
the conduct and licensing of Borrower's business, and all environmental matters.
3.10 LITIGATION. There is no claim, suit, litigation, proceeding or
investigation pending or (to best of Borrower's knowledge) threatened against
or affecting Borrower in any court or before any governmental agency (or any
basis therefor known to Borrower) which could reasonably be expected to result,
either separately or in the aggregate, in any Material Adverse Change.
Borrower will promptly inform Silicon in writing of any claim, proceeding,
litigation or investigation in the future threatened or instituted against
Borrower involving any single claim of $100,000 or more, or involving
$200,000 or more in the aggregate.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely
for lawful business purposes and may be used in connection with the Purchase
Agreement Transaction. Borrower is not purchasing or carrying any "margin stock"
(as defined in Regulation U of the Board of Governors of the Federal Reserve
System) and no part of the proceeds of any Loan will be used to purchase carry
any "margin stock" or to extend credit to others for the purpose of purchasing
or carrying any "margin stock."
3.12 PURCHASE AGREEMENT TRANSACTION. Silicon has received true and
correct photocopies of the Purchase Agreement and each of the other Purchase
Agreement Documents, executed, delivered and/or furnished on or before the
Original Closing Date in connection with the Purchase Agreement Transaction.
Neither the Purchase Agreement nor any of the other Purchase Agreement Documents
have been modified, changed, supplemented, canceled, amended or otherwise
altered or affected, except as otherwise disclosed to Silicon in writing on or
before the Original Closing Date. The Purchase Agreement Transaction has been
effected, closed and consummated pursuant to, and in accordance with, the terms
and conditions of the Purchase Agreement and with all applicable laws.
4. ACCOUNTS.
4.1 REPRESENTATIONS RELATING TO ACCOUNTS. Borrower represents and
warrants to Silicon as follows: Each Account with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made, (i)
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of services, or the non-exclusive licensing of Intellectual Property,
in the ordinary course of Borrower's business, and (ii) meet the Minimum
Eligibility Requirements set forth in Section 8 below.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE.
Borrower represents and warrants to Silicon as follows: All statements made and
all unpaid balances appearing in all invoices, instruments and other documents
evidencing the Accounts are and shall be true and correct and all such invoices,
instruments and other documents and all of Borrower's books and records are and
shall be genuine and in all respects what they purport to be. All sales and
other transactions underlying or giving rise to each Account shall comply in all
material respects with all applicable laws and governmental rules and
regulations. To the best of Borrower's knowledge, all signatures and
endorsements on all documents, instruments, and agreements relating to all
Accounts are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.
4.3 SCHEDULES AND DOCUMENTS RELATING TO ACCOUNTS. Borrower shall
deliver to Silicon transaction reports and schedules of collections, as provided
in the Schedule, on Silicon's standard forms; provided, however, that Borrower's
failure to execute and deliver the same shall not affect or limit Silicon's
security interest and other rights in all of Borrower's Accounts, nor shall
Silicon's failure to advance or lend against a specific Account affect or limit
Silicon's security interest and other rights therein. If requested by Silicon,
Borrower shall furnish Silicon with copies (or, at Silicon's request, originals)
of all contracts, orders, invoices, and other similar documents, and all
shipping instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Accounts, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also furnish to Silicon an aged accounts receivable trial balance
as provided in the Schedule. In addition, Borrower shall deliver to Silicon, on
its request, the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Accounts, in the same form as received, with all necessary indorsements, and
copies of all credit memos.
4.4 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. 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 Silicon, and Borrower shall immediately deliver all such payments and
proceeds to Silicon in their original form, duly endorsed, to be applied to the
Obligations in such order as Silicon shall determine. All proceeds of Collateral
shall be deposited by Borrower into a lockbox account, or such other "blocked
account" as Silicon may specify, pursuant to a blocked account agreement in such
form as Silicon may specify in its good faith business judgement.
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4.5 REMITTANCE OF PROCEEDS. All proceeds arising from the disposition
of any Collateral shall be delivered, in kind, by Borrower to Silicon in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower, to be applied to the Obligations in
such order as Silicon shall determine; provided that, if no Default or Event of
Default has occurred and is continuing, Borrower shall not be obligated to
remit to Silicon the proceeds of the sale of worn out or obsolete Equipment
disposed of by Borrower in good faith in an arm's length transaction for an
aggregate purchase price of $100,000 or less (for all such transactions in any
fiscal year). Borrower agrees that it will not commingle proceeds of Collateral
with any of Borrower's other funds or property, but will hold such proceeds
separate and apart from such other funds and property and in an express trust
for Silicon. Nothing in this Section limits the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
4.6 DISPUTES. Borrower shall notify Silicon promptly of all disputes
or claims relating to Accounts. Borrower shall not forgive (completely or
partially), compromise or settle any Account for less than payment in full
(than customary credits and discounts given in the ordinary course of
business), or agree to do any of the foregoing, except that Borrower may do so,
provided that: (i) Borrower does so in good faith, in a commercially reasonable
manner, in the ordinary course of business, and in arm's length transactions,
which are reported to Silicon on the regular reports provided to Silicon; (ii)
no Default or Event of Default has occurred and is continuing; and (iii) taking
into account all such discounts, settlements and forgiveness, the total
outstanding Revolving Loans will not exceed the Credit Limit.
4.7 RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower, Borrower
shall promptly determine the reason for such return and promptly issue a credit
memorandum to the Account Debtor in the appropriate amount. In the event any
attempted return occurs after the occurrence and during the continuance of any
Event of Default, Borrower shall hold the returned Inventory in trust for
Silicon, and immediately notify Silicon of the return of the Inventory.
4.8 VERIFICATION. Silicon may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Accounts, by means of mail, telephone or otherwise, either in the name
of Borrower or Silicon or such other name as Silicon may choose.
4.9 NO LIABILITY. Silicon shall not be responsible or liable for any
shortage or discrepancy in, damage to, or loss or destruction of, any goods, the
sale or other disposition of which gives rise to an Account, or for any error,
act, omission, or delay of any kind occurring in the settlement, failure to
settle, collection or failure to collect any Account, or for settling any
Account in good faith for less than the full amount thereof, nor shall Silicon
be deemed to be responsible for any of Borrower's obligations under any contract
or agreement giving rise to an Account. Nothing herein shall, however, relieve
Silicon from liability for its own gross negligence or willful misconduct.
5. ADDITIONAL DUTIES OF BORROWER.
5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply
with the financial and other covenants set forth in the Schedule.
5.2 INSURANCE. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require and that are customary and in accordance with standard
practices for Borrower's industry and locations, and Borrower shall provide
evidence of such insurance to Silicon. All such insurance policies shall name
Silicon as an additional loss payee, and shall contain a lenders loss payee
endorsement in form reasonably acceptable to Silicon. Upon receipt of the
proceeds of any such insurance, Silicon shall apply such proceeds in reduction
of the Obligations as Silicon shall determine in its good faith business
judgment, except that, provided no Default or Event of Default has occurred and
is continuing. Silicon shall release to Borrower insurance proceeds with
respect to Equipment totaling less than $100,000, which shall be utilized by
Borrower for the replacement of the Equipment with respect to which the
insurance proceeds were paid. Silicon may require reasonable assurance that the
insurance proceeds so released will be so used. If Borrower fails to provide or
pay for any insurance, Silicon may, but is not obligated to, obtain the same at
Borrower's expense. Borrower shall promptly deliver to Silicon copies of all
material reports made to insurance companies.
5.3 REPORTS. Borrower, at its expense, shall provide Silicon with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as Silicon shall from time to time specify in
its good faith business judgement.
5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and
on one Business Day's notice, Silicon, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's books and
records. Silicon shall take reasonable steps to keep confidential all
information obtained in any such inspection or audit, but Silicon shall have
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the right to disclose any such information to its auditors, regulatory agencies,
and attorneys, and pursuant to any subpoena or other legal process. The
foregoing inspections and audits shall be at Borrower's expense and the charge
therefor shall be $750 per person per day (or such higher amount as shall
represent Silicon's then current standard charge for the same), plus reasonable
out of pocket expenses.
5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule,
Borrower shall not, without Silicon's prior written consent (which shall be a
matter of its good faith business judgment), do any of the following: (i) merge
or consolidate with another corporation or entity; (ii) acquire any assets,
other than the Acquired Assets, except in the ordinary course of business; (iii)
enter into any other transaction outside the ordinary course of business; (iv)
sell or transfer any Collateral, except for the sale of finished Inventory in
the ordinary course of Borrower's business, and except for the sale of obsolete
or unneeded Equipment in the ordinary course of business; (v) store any
Inventory or other Collateral with any warehouseman or other third party, unless
such Collateral is subject to a lien waiver from such warehouseman or third
party in form and substance satisfactory in all respects to Bank; (vi) sell any
Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent
basis; (vii) make any loans of any money or other assets; (viii) incur any debts
other than Permitted Debt; (ix) guarantee or otherwise become liable with
respect to the obligations of another party or entity; (x) pay or declare any
dividends on Borrower's stock (except) for dividends payable solely in stock of
Borrower); (xi) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of Borrower's stock; (xii) make any change in Borrower's capital
structure which would result in a Material Adverse Change; or (xiii) engage,
directly or indirectly, in any business other than the businesses currently
engaged in by Borrower or reasonably related thereto; or (xiv) dissolve or elect
to dissolve. Transactions permitted by the foregoing provisions of this Section
are only permitted if no Default or Event of Default would occur as a result of
such transaction. Notwithstanding the requirements of Sections 5.5 (ii) or (vii)
above, Borrower may make loans to eBuilding Solutions, Inc. ("ESI") in a maximum
principal amount of Four Hundred Fifty Thousand Dollars ($450,000)(the "ESI
Loans"). Bank further agrees that the indebtedness evidenced by the ESI loans
may be converted by Borrower into equity in ESI.
5.6 LITIGATION COOPERATION. Should any third-party suit or
proceeding be instituted by or against Silicon with respect to any Collateral
or relating to Borrower, Borrower shall, without expense to Silicon, make
available Borrower and its officers, employees and agents and Borrower's books
and records, to the extent that Silicon may deem them reasonably necessary in
order to prosecute or defend any such suit or proceeding.
5.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request
by Silicon, to execute all documents and take all actions, as Silicon, may, in
its good faith business judgment, deem necessary or useful in order to perfect
and maintain Silicon's perfected first-priority security interest in the
Collateral (subject to Permitted Liens), and in order to fully consummate the
transactions contemplated by this Agreement.
6. TERM
6.1 MATURITY DATE. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"), subject to
Section 6.3 below.
6.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three Business Days after
written notice of termination is given to Silicon, or (ii) by Silicon at any
time after the occurrence and during the continuance of an Event of Default,
without notice, effective immediately.
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Maturity Date, or on
any earlier effective date of termination, there are any outstanding Letters of
Credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to 105% of the face amount of all such Letters of Credit plus all
interest, fees and cost due or to become due in connection therewith (as
estimated by Silicon in its good faith business judgment), to secure all of the
Obligations relating to said Letters of Credit, pursuant to Silicon's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Silicon's security interests in all of the Collateral and all
of the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided that
Silicon may, in its sole discretion, refuse to make any further Loans after
termination. No termination shall in any way affect or impair any right or
remedy of Silicon, nor shall any such termination relieve Borrower of any
Obligation to Silicon, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and
termination of this Agreement, Silicon shall promptly terminate
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its financing statements with respect to the Borrower and deliver to Borrower
such other documents as may be required to fully terminate Silicon's security
interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT The occurrence of any of the following events
shall constitute and "Event of Default" under this Agreement, and Borrower shall
give Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect when made or deemed to be made; or
(b) Borrower shall fail to pay when due any Loan or any interest thereon or any
other monetary Obligation; or (c) the Revolving Loans and other Obligations
outstanding at any time shall exceed the Credit Limit; or (d) Borrower shall
fail to comply with any of the financial covenants set forth in the Schedule, or
shall fail to perform any other non-monetary Obligation which by its nature
cannot be cured, or shall fail to permit Silicon to conduct an inspection or
audit as specified in Section 5.4 hereof; or (e) Borrower shall fail to perform
any other non-monetary Obligation, which failure is not cured within five
Business Days after the date due; or (f) any levy, assessment, attachment,
seizure, lien or encumbrance (other than a Permitted Lien) is made on all or any
part of the Collateral which is not cured within 10 days after the occurrence of
the same; or (g) any default or event of default occurs under any obligation
secured by a Permitted Lien, which is not cured within any applicable cure
period or waived in writing by the holder of the Permitted Lien; or (h) Borrower
breaches any material contract or obligation, which has resulted or may
reasonably be expected to result in a Material Adverse Change; or (i)
dissolution, termination of existence, insolvency or business failure of
Borrower; or appointment of a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; or (j) the
commencement of any proceeding against Borrower or any guarantor of any of the
Obligation under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof with in 30 days after the date commenced; or (k) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing, or commencement of
proceedings by any guarantor of any of the Obligations under any bankruptcy or
insolvency law; or (l) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all of
the Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or (m) Borrower makes any payment on account of any indebtedness
or obligation which has been subordinated to the Obligations other than as
permitted in the applicable subordination agreement, or if any Person who has
subordinated such indebtedness or obligations terminates or in any way limits
his subordination agreement; or (n) there shall be a change in the record or
beneficial ownership of an aggregate of more than 25% of the outstanding shares
of stock of Borrower, in one or more transactions, compared to the ownership of
outstanding shares of stock of Borrower in effect on the date hereof, without
the prior written consent of Silicon; or (o) Borrower shall generally not pay
its debts as they become due, or Borrower shall conceal, remove or transfer any
part of its property, with intent to hinder, delay or defraud its creditors, or
make or suffer any transfer of any of its property which may be fraudulent under
any bankruptcy, fraudulent conveyance or similar law; or (p) a Material Adverse
Change shall occur; or (q) Silicon, acting in good faith and in a commercially
reasonable manner, deems itself insecure because of the occurrence of an event
prior to the effective date hereof of which Silicon has knowledge on the
effective date or because of the occurrence of an event on or subsequent to the
effective date. Silicon may cease making any Loans hereunder during any of the
above cure periods, and thereafter if an Event of Default has occurred and is
continuing.
7.2 REMEDIES. Upon the occurrence and during the continuance of any
Event of Default, and at any time thereafter, Silicon, at its option, and
without notice or demand of any kind (all of which are hereby expressly waived
by Borrower), may do any one or more of the following: (a) Cease making Loans or
otherwise extending credit to Borrower under this Agreement or any other Loan
Document; (b) Accelerate and declare all or any part of the Obligations to be
immediately due, payable, and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation; (c) Take possession of any or all of the Collateral wherever it may
be found, and for that purpose Borrower hereby authorizes Silicon without
judicial process to enter onto any of Borrower's premises without interference
to search for, take possession of, keep, store, or remove any of the Collateral,
and remain on the premises or cause a custodian to remain on the premises in
exclusive control thereof, without charge for so long as Silicon deems its
necessary, in its good faith business judgment, in order to complete the
enforcement of its rights under this Agreement or any other agreement; provided,
however, that should Silicon seek to take possession of any of the Collateral by
court process, Borrower hereby irrevocably waives; (i) any bond and any surety
or security relating thereto required by any statue, court rule or otherwise as
an incident to such possession; (ii) any demand for possession prior to the
commencement of any suit or action to recover
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possession thereof; and (iii) any requirement that Silicon retain possession
of, and not dispose of, any such Collateral until after trial or final judgment;
(d) Require Borrower to assemble any or all of the Collateral and make it
available to Silicon at places designated by Silicon which are reasonably
convenient to Silicon and Borrower, and to remove the Collateral to such
locations as Silicon may deem advisable; (e) Complete the processing,
manufacturing or repair of any Collateral prior to a disposition thereof and,
for such purpose and for the purpose of removal, Silicon shall have the right
to use Borrower's premises, vehicles, hoists, lifts, cranes, and other
Equipment and all other property without charge; (f) Sell, lease or otherwise
dispose of any of the Collateral, in its condition at the time Silicon obtains
possession of it or after further manufacturing, processing or repair, at one
or more public and/or private sales, in lots or in bulk, for cash, exchange or
other property, or on credit, and to adjourn any such sale from time to time
without notice other than oral announcement at the time scheduled for sale.
Silicon shall have the right to conduct such disposition on Borrower's premises
without charge, for such time or times as Silicon deems reasonable, or on
Silicon's premises, or elsewhere and the Collateral need not be located at the
place of disposition. Silicon may directly or through any affiliated company
purchase or lease any Collateral at any such public disposition, and if
permissible under applicable law, at any private disposition. Any sale or
other disposition of Collateral shall not relieve Borrower of any liability
Borrower may have if any Collateral is defective as to title or physical
condition or otherwise at the time of sale; (g) Demand payment of, and collect
any Accounts and General Intangibles comprising Collateral and, in connection
therewith, Borrower irrevocably authorizes Silicon to endorse or sign
Borrower's name on all collections, receipts, instruments and other documents,
to take possession of and open mail addressed to Borrower and remove therefrom
payments made with respect to any item of the Collateral or proceeds thereof,
and, in Silicon's good faith business judgment, to grant extensions of time to
pay, compromise claims and settle Accounts and the like for less than face
value; (h) Offset against any sums in any of Borrower's general, special or
other Deposit Accounts and Silicon against any or all of the Obligations; and
(i) Demand and receive possession of any of Borrower's federal and state income
tax returns and the books and records utilized in the preparation thereof or
referring thereto. All reasonable attorneys' fees, expenses, costs, liabilities
and obligations incurred by Silicon with respect to the foregoing shall be
added to and become part of the Obligations, shall be due on demand, and shall
bear interest at a rate equal to the highest interest rate applicable to any of
the Obligations. Without limiting any of Silicon's rights and remedies, from
and after the occurrence and during the continuance of any Event of Default,
the interest rate applicable to the Obligations shall be increased by an
additional four percent per annum (the "Default Rate").
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and
Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least ten days prior to the sale, and, in the case of a public sale,
notice of the sale is published at least five days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m.; (v) Payment of the purchase price
in cash or by cashier's check or wire transfer is required; (vi) With respect to
any sale of any of the Collateral, Silicon may (but is not obligated to) direct
any prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. Silicon shall be free to employ other methods
of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.
7.4 POWER OF ATTORNEY. Upon the occurrence and during the
continuance of any Event of Default, without limiting Silicon's other rights and
remedies, Borrower grants to Silicon an irrevocable power of attorney coupled
with an interest, authorizing and permitting Silicon (acting through any of its
employees, attorneys or agents) at any time; at its option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise, but Silicon agrees
that if it exercises any right hereunder, it will do so in good faith and in a
commercially reasonable manner: (a) Execute on behalf of Borrower any documents
that Silicon may, in its good faith business judgment, deem advisable in order
to perfect and maintain Silicon's security interest in the Collateral, or in
order to exercise a right of Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all other
Loan Documents; (b) Execute on behalf of Borrower, any invoices relating to any
Account, any draft against any Account Debtor and any notice to any Account
Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of
mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien; (c) Take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name of
Borrower upon any instruments, or documents, evidence of payment or Collateral
that may come into Silicon's possession; (d) Endorse all checks and other forms
of remittances received by Silicon; (e) Pay, contest or settle any lien, charge,
encumbrance, security interest and adverse claim in or to any of the Collateral,
or any judgment based thereon, or otherwise take any action to terminate or
discharge the same; (f) Grant extensions of time to pay, compromise claims and
settle Accounts and General Intangibles for less than face value and execute all
releases and other documents in connection therewith; (g) Pay any sums required
on account of Borrower's taxes or to secure the release of any liens therefor,
or both; (h)
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Settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; (i) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrower to give Silicon the same rights of access and other rights with respect
thereto as Silicon has under this Agreement; and (j) Take any action or pay any
sum required of Borrower pursuant to this Agreement and any other Loan
Documents. Any and all reasonable sums paid and any and all reasonable costs,
expenses, liabilities, obligations and attorneys' fees incurred by Silicon with
respect to the foregoing shall be added to and become part of the Obligations,
shall be payable on demand, and shall bear interest at a rate equal to the
highest interest rate applicable to any of the Obligations. In no event shall
Silicon's rights under the foregoing power of attorney or any of Silicon's other
rights under this Agreement be deemed to indicate that Silicon is in control of
the business, management or properties of Borrower.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of
any sale of the Collateral shall be applied by Silicon first to the reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by
Silicon in the exercise of its rights under this Agreement, second to the
interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as Silicon shall determine in its sole discretion.
Any surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to Silicon for any deficiency. If, Silicon, in its
good faith business judgment, directly or indirectly enters into a deferred
payment or other credit transaction with any purchaser at any sale of
Collateral, Silicon shall have the option, exercisable at any time, in its good
faith business judgment, of either reducing the Obligations by the principal
amount of purchase price or deferring the reduction of the Obligations until the
actual receipt by Silicon of the cash therefor, and to the extent Silicon defers
applying the purchase price to the Obligations and receives interest on the
purchase price from such purchaser. Silicon will reduce the amount of the
Obligations by the amount of interest actually received by Silicon.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set
forth in this Agreement, Silicon shall have all the other rights and remedies
accorded a secured party under the California Uniform Commercial Code and under
all other applicable laws, and under any other instrument or agreement now or in
the future entered into between Silicon and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.
8. DEFINITIONS. As used in this agreement, the following
terms have the following meanings:
"Account Debtor" means the obligor on an Account.
"Accounts" means all present and future "accounts" as defined in the
Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all accounts receivable and
other sums owing to Borrower.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Bridge Loan Debt" shall mean indebtedness of U.S. RealTel, Inc. and
Borrower of up to $8,000,000 pursuant to that certain Loan Agreement dated July
16, 2002 by and among U.S. RealTel, Inc., and Borrower (as borrowers), and J.
Xxxxxx Xxxxxxxxxx Trust dated February 26, 1971, an Indiana trust, the Xxxx X.
XxXxxxx Trust dated February 26, 1971, an Illinois trust, the Xxxx X. Xxxxxxxx
Trust dated February 26, 1971, an Indiana trust, Noro-Xxxxxxx Partners V, L.P.,
a Georgia limited partnership and Wakefield Group III, LLC, a North Carolina
limited liability company (as lenders).
"Business Day" means a day on which Silicon is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.
"Collateral" has the meaning set forth in Section 2 above.
"continuing" and "during the continuance of" when used with reference
to a Default or Event of Default means that the Default or Event of Default has
occurred and has not been either waived in writing by Silicon or cured within
any applicable cure period.
"Convertible Notes" shall mean indebtedness of U.S. RealTel, Inc. which
is guaranteed by Borrower of up to $12,000,000 pursuant to U.S. RealTel's 7.5%
convertible notes due July 1, 2009.
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"Debt Service Coverage Change Date" shall mean the first day of the
month after which Borrower has achieved (and Silicon has confirmed that Borrower
has achieved) a Debt Service Coverage Ratio of not less than 1.25 to 1.00 for
the immediately preceding two (2) consecutive quarters.
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"Default Rate" has the meaning set forth in Section 7.2 above.
"Deposit Accounts" means all present and future "deposit accounts" as
defined in the Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all general and
special bank accounts, demand accounts, checking accounts, savings accounts and
certificates of deposit.
"Eligible Accounts" means Accounts and General Intangibles arising in
the ordinary course of Borrower's business from the sale of goods or the
rendition of services, or the non-exclusive licensing of Intellectual Property,
which Silicon, in its good faith business judgment, shall deem eligible for
borrowing. Without limiting the fact that the determination of which Accounts
are eligible for borrowing is a matter of Silicon's good faith business
judgment, the following (the "Minimum Eligibility Requirements") are the minimum
requirements for a Account to be an Eligible Account: (i) the Account must not
be outstanding for more than 90 days from its invoice date (the "Eligibility
Period"), (ii) the Account must not represent progress xxxxxxxx, or be due under
a fulfillment or requirements contract with the Account Debtor, (iii) the
Account must not be subject to any contingencies (including Accounts arising
from sales on consignment, guaranteed sale or other terms pursuant to which
payment by the Account Debtor may be conditional), (iv) the Account must not be
owing from an Account Debtor with whom Borrower has any dispute (whether or not
relating to the particular Account), (v) the Account must not be owing from an
Affiliate of Borrower, (vi) the Account must not be owing from an Account Debtor
which is subject to any insolvency or bankruptcy proceeding, or whose financial
condition is not acceptable to Silicon, or which, fails or goes out of a
material portion of its business, (vii) the Account must not be owing from the
United States or any department, agency or instrumentality thereof (unless there
has been compliance, to Silicon's satisfaction, with the United States
Assignment of Claims Act), (viii) the Account must not be owing from an Account
Debtor located outside the United States or Canada (unless pre-approved by
Silicon in its discretion in writing, or backed by a letter of credit
satisfactory to Silicon, or PCIA insured satisfactory to Silicon), (ix) the
Account must not be owing from an Account Debtor to whom Borrower is or may be
liable for goods purchased from such Account Debtor or otherwise (but, in such
case, the Account will be deemed not eligible only to the extent of any amounts
owed by Borrower to such Account Debtor). Accounts owing from one Account Debtor
will not be deemed Eligible Accounts to the extent they exceed 25% of the total
Accounts outstanding. In addition, if more than 50% of the Accounts owing from
an Account Debtor are outstanding for a period longer than their Eligibility
Period (without regard to unapplied credits) or are otherwise not Eligible
Accounts, then all Accounts owing from that Account Debtor will be deemed
ineligible for borrowing. In addition, prior to including any Accounts acquired
as part of the Acquired Assets as Eligible Accounts, Silicon shall have
completed a satisfactory audit of such Accounts. Silicon may, from time to time,
in its good faith business judgment, revise the Minimum Eligibility
Requirements, upon written notice to Borrower.
"Eligible Inventory" means all Inventory of Borrower held for sale in
the ordinary course of business, valued at the lowest of the net purchase cost
or the lowest bulk market price, provided, however, that at any time that a
Permitted Overadvance occurs and is continuing under this Agreement, the value
of such Inventory shall be determined based upon an appraisal of the Inventory
from an appraiser acceptable to Silicon. Eligible Inventory shall exclude, any
inventory which consists of: (a) any Inventory located outside of the United
States; (b) any Inventory located outside of a state in which Silicon has
properly and unavoidably perfected the Liens of Silicon under this Agreement,
free and clear of all other Liens; (b) any Inventory not in the actual
possession of Borrower, except to the extent provided in subsection (d) below;
(c) any Inventory in the possession of a bailee, warehouseman, consignee or
similar third party, except to the extent that such bailee, warehouseman,
consignee or similar third party has entered into an agreement with Silicon in
which such bailee, warehouseman, consignee or similar third party consents and
agrees to Silicon's Lien on such Inventory and to such other terms and
conditions as may be required by Silicon; (d) any Inventory located on premises
leased or rented to Borrower or otherwise not owned by Borrower, unless Silicon
has received a waiver and consent from the lessor, landlord and/or owner, in
form and substance satisfactory to Silicon; (e) any Inventory the sale or other
disposition of which has given rise to a Eligible Account; (f) work-in-process,
supplies, displays, packaging and promotional materials; (g) any Inventory as to
which Silicon determines in the exercise of its sole and absolute discretion at
any time and in good faith is not in good condition or is defective,
unmerchantable, post-seasonal, slow moving or obsolete; and (h) any Inventory
which in Silicon's good faith business judgment has deemed to be ineligible
because Silicon otherwise considers the collateral value to Silicon to be
impaired or its or their ability to realize such value to be insecure. In the
event of any dispute under the foregoing criteria, as to whether Inventory is,
or has ceased to be, Eligible Inventory, the decision of Silicon shall control.
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"Equipment" means all present and future "equipment" as defined in the
Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all machinery, fixtures,
goods, vehicles (including motor vehicles and trailers), and any interest in
any of the foregoing.
"Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.
"GAAI" means generally accepted accounting principles consistently
applied.
"General Intangibles" means all present and future "general
intangibles" as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all Intellectual Property, payment intangibles, royalties, contract rights,
goodwill, franchise agreements, purchase orders, customer lists, route lists,
telephone numbers, domain names, claims, income tax refunds, security and other
deposits, options to purchase or sell real or personal property, rights in all
litigation presently or hereafter pending (whether in contract, tort or
otherwise), insurance policies (including without limitation key man, property
damage, and business interruption insurance), payments of insurance and rights
to payment of any kind.
"good faith business judgment" means honesty in fact and good faith
(as defined in Section 1201 of the Code) in the exercise of Silicon's business
judgment.
"including" means including (but not limited to).
"Intellectual Property" means all present and future (a) copyrights,
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, (b) trade secret rights, including all rights to
unpatented inventions and know-how, and confidential information; (c) mask work
or similar rights available for the protection of semiconductor chips; (d)
patents, patent applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same; (e) trademarks, servicemarks, trade styles,
and trade names, whether or not any of the foregoing are registered, and all
applications to register and registrations of the same and like protections,
and the entire goodwill of the business of Borrower connected with and
symbolized by any such trademarks; (f) computer software and computer software
products; (g) designs and design rights; (h) technology; (i) all claims for
damages by way of past, present and future infringement of any of the rights
included above; and (j) all licenses or other rights to use any property or
rights of a type described above.
"Inventory" means all present and future "inventory" as defined in the
Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all merchandise, raw
materials, parts, supplies, packing and shipping materials, work in process and
finished products, including without limitation such inventory as is
temporarily out of Borrower's custody or possession or in transit and including
any returned goods and any documents of title representing any of the above.
"Investment Property" means all present and future investment
property, securities, stocks, bonds debentures, debt securities, partnership
interests, limited liability company interests, options, security entitlements,
securities accounts, commodity contracts, commodity accounts, and all financial
assets held in any securities account or otherwise, and all options and
warrants to purchase any of the foregoing, wherever located, and all other
securities of every kind, whether certificated or uncertificated.
"Loan Documents" means, collectively, this Agreement, the
Representations, and all other present and future documents, instruments and
agreements between Silicon and Borrower, including, but not limited to those
relating to this Agreement, and all amendments and modifications thereto and
replacements therefor.
"Material Adverse Change" means any of the following: (i) a material
adverse change in the business, operations, or financial or other condition of
the Borrower, or (ii) a material impairment of the prospect of repayment of any
portion of the Obligations; or (iii) a material impairment of the value or
priority of Silicon's security interests in the Collateral.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, or otherwise, whether arising from an
extension of credit, opening of a letter of credit, banker's acceptance,
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loan, guaranty, indemnification or otherwise, whether direct or indirect
(including, without limitation, those acquired by assignment and any
participation by Silicon in Borrower's debts owing to others), absolute or
contingent, due or to become due, including, without limitation, all interest,
charges, expenses, fees, attorney's fees, expert witness fees, audit fees,
letter of credit fees, collateral monitoring fees, closing fees, facility fees,
termination fees, minimum interest charges and any other sums chargeable to
Borrower under this Agreement or under any other Loan Documents.
"OTHER PROPERTY" means the following as defined in the Code in effect on the
date hereof with such additions to such term as may hereafter be made, and all
rights relating thereto; all present and future "commercial tort claims"
(including without limitation any commercial tort claims identified in the
Representations), "documents", "instruments", "promissory notes", "chattel
paper", "letters of credit", "letter-of-credit rights", "fixtures", "farm
products" and "money"; and all other goods and personal property of every kind,
tangible and intangible, whether or not governed by the California Uniform
Commercial Code.
"PERMITTED DEBT" means: (i) the Loans; (ii) any unsecured indebtedness
arising in the ordinary course of business of Borrowers, including trade
payables, utility costs, payroll and benefit obligations, accrued tax
liabilities and other non-extraordinary accounts payable; (iii) the Bridge Loan
Debt; (iv) the Convertible Notes; and (v) the Seller Debt.
"PERMITTED LIENS" means the following: (i) purchase money security interests
in specific items of Equipment; (ii) leases of specific items of Equipment;
(iii) liens for taxes not yet payable; (iv) additional security interests and
liens consented to in writing by Silicon, which consent may be withheld in its
good faith business judgement; (v) security interests being terminated
substantially concurrently with this Agreement; (vi) liens of materialmen,
mechanics, warehousemen, carriers, or other similar liens arising in the
ordinary course of business and securing obligations which are not delinquent;
(vii) liens incurred in connection with the extension, renewal or refinancing
of the indebtedness secured by liens of the type described above in clauses
(i) or (ii) above, provided that any extension, renewal or replacement lien is
limited to the property encumbered by the existing lien and the principal
amount of the indebtedness being extended, renewed or refinanced does not
increase; (viii) liens in favor of customs and revenue authorities which secure
payment of customs duties in connection with the importation of goods. Silicon
will have the right to require, as a condition to its consent under
subparagraph (iv) above, that the holder of the additional security interest or
lien sign an intercreditor agreement on Silicon's then standard form,
acknowledge that the security interest is subordinate to the security interest
in favor of Silicon, and agree not to take any action to enforce its
subordinate security interest so long as any Obligations remain outstanding,
and that Borrower agree that any uncured default in any obligation secured by
the subordinate security interest shall also constitute an Event of Default
under this Agreement.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"PURCHASE AGREEMENT TRANSACTION" means the asset purchase agreement
transaction contemplated by the provisions of the Purchase Agreement.
"REPRESENTATIONS" means the written Representations and Warranties provided
by Borrower to Silicon referred to in the Schedule.
"RESERVES" means, as of any date of determination, such amounts as Silicon
may from time to time establish and revise in its good faith business
judgement, reducing the amount of Loans, Letters of Credit and other financial
accommodations which would otherwise be available to Borrower under the lending
formula(s) provided in the Schedule: (a) to reflect events, conditions,
contingencies or risks which, as determined by Silicon in its good faith
business judgement, do or may adversely affect (i) the Collateral or any other
property which is security for the Obligations or its value (including without
limitation any increase in delinquencies of Accounts), (ii) the assets,
business or prospects of Borrower or any guarantor of the Obligations, or (iii)
the security interests and other rights of Silicon in the Collateral (including
the enforceability, perfection and priority thereof); or (b) to reflect
Silicon's good faith belief that any collateral report or financial information
furnished by or on behalf of Borrower or any Guarantor to Silicon is or may have
been incomplete, inaccurate or misleading in any material respect; or (c) in
respect of any state of facts which Silicon determines in good faith
constitutes an Event of Default or may, with notice or passage of time or
both, constitute an Event of Default.
"SELLER DEBT" shall mean indebtedness of U.S. RealTel, Inc. and/or Borrower
payable to Worldcom, Inc. and/or any of its subsidiaries and/or affiliates
under the terms of the Purchase Agreement, as amended.
OTHER TERMS. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with GAAP,
consistently applied. All other terms contained in this Agreement, unless
otherwise indicated, shall have the meanings provided by the Code, to the
extent such terms are defined therein.
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9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
wire transfers shall be deemed applied on account of the Obligations on the
day of receipt by Silicon thereof and all checks and other items of payment
received by Silicon (including proceeds of Accounts and payment of the
Obligations in full) shall be deemed applied by Silicon on account of the
Obligations two (2) Business Days after receipt by Silicon. For purposes of the
foregoing, any such funds received after 12:00 Noon (Pacific standard time) on
any day shall be deemed received on the next Business Day. Silicon shall not,
however, be required to credit Borrower's account for the amount of any item of
payment which is unsatisfactory to Silicon in its good faith business
judgment, and Silicon may charge Borrower's loan account for the amount of any
item of payment which is returned to Silicon unpaid.
9.2 APPLICATION OF PAYMENTS. All payments with respect to the Obligations
may be applied, and in Silicon's good faith business judgment reversed and
re-applied, to the Obligations, in such order and manner as Silicon shall
determine in its good faith business judgment.
9.3 CHARGES TO ACCOUNTS. Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon, or charge them to
Borrower's Loan account, in which even they will bear interest at the same rate
applicable to the Loans. Silicon may also, in it discretion, charge any
monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.
9.4 MONTHLY ACCOUNTINGS. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless borrower
notifies Silicon in writing to the contrary within 60 days after such account
is rendered, describing the nature of any alleged errors or omissions.
9.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to Silicon or Borrower at each of the addresses shown in
the heading to this Agreement, or at any other address designated in writing by
one party to the other party. Notices to Silicon shall be directed to the
Commercial Finance Division, to the attention of the Division Manager or the
Division Credit Manager. All notices shall be deemed to have been given upon
delivery in the case of notices personally delivered, or at the expiration of
one Business Day following delivery to the private delivery service, or five
(5) Business Days following the deposit thereof in the United States mail, with
postage prepaid.
9.6 SEVERABILITY. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
9.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Silicon and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. There are
no oral understandings, representations or agreements between the parties which
are not set forth in this Agreement or in other written agreements signed by
the parties in connection herewith.
9.8 WAIVERS; INDEMNITY. The failure of Silicon at any time to times to
require Borrower to strictly comply with any of the provisions of this
Agreement or any other Loan Document shall not waive or diminish any right of
Silicon later to demand and receive strict compliance therewith. Any waiver of
any default shall not waive or diminish any right of Silicon later to demand
and receive strict compliance therewith. Any waiver of any default shall not
waive or affect any other default, whether prior or subsequent, and whether or
not similar. None of the provisions of this Agreement or any other Loan
Document shall be deemed to have been waived by any act or knowledge of Silicon
or its agents or employees, but only by a specific written waiver signed by an
authorized officer of Silicon and delivered to Borrower. Borrower waives the
benefit of all statutes of limitations relating to any of the Obligations or
this Agreement or any other Loan Document, and Borrower waives demand, protest,
notice of protest and notice of default or dishonor, notice of payment and
nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, instrument, account, General Intangible, document or
guaranty at any time held by Silicon on which Borrower is or may in any way be
liable, and notice of any action taken by Silicon, unless expressly required
by this Agreement. Borrower hereby agrees to indemnify Silicon and its
affiliates, subsidiaries, parent, directors, officers, employees, agents, and
attorneys, and to hold them harmless from and against any and all claims,
debts, liabilities, demands, obligations, actions, causes of action, penalties,
costs and expenses (including reasonable attorneys' fees), of every kind, which
they may sustain or incur based upon or arising out of any of the Obligations,
or any relationship or agreement between Silicon and Borrower, or any other
matter, relating to Borrower or the Obligations; provided that this indemnity
shall not extend to damages proximately caused by the indemnitee's own gross
negligence or willful misconduct.
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Notwithstanding any provision in this Agreement to the contrary, the indemnity
agreement set forth in this Section shall survive any termination of this
Agreement and shall for all purposes continue in full force and effect.
9.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Silicon, nor any of
its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Silicon shall be liable for any claims, demands,
losses or damages, of any kind whatsoever, made, claimed, incurred or suffered
by Borrower or any other party through the ordinary negligence of Silicon, or
any of its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Silicon, but nothing herein shall relieve
Silicon from liability for its own gross negligence or willful misconduct.
9.10 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Silicon.
9.11 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.12 ATTORNEYS FEES AND COSTS. Borrower shall reimburse Silicon for
all reasonable attorneys' fees and all filing, recording, search, title
insurance, appraisal, audit, and other reasonable costs incurred by Silicon,
pursuant to, or in connection with, or relating to this Agreement (whether or
not a lawsuit is filed), including, but not limited to, any reasonable
attorneys' fees and costs Silicon incurs in order to do the following: prepare
and negotiate this Agreement and all present and future documents relating to
this Agreement; obtain legal advice in connection with this Agreement or
Borrower; enforce, or seek to enforce, any of its rights; prosecute actions
against, or defend actions by. Account Debtors; commence, intervene in, or
defend any action or proceeding; initiate any complaint to be relieved of the
automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy
claim, third-party claim, or other claim; examine, audit, copy, and inspect any
of the Collateral or any of Borrower's books and records; protect, obtain
possession of, lease, dispose of, or otherwise enforce Silicon's security
interest in, the Collateral; and otherwise represent Silicon in any litigation
relating to Borrower. In satisfying Borrower's obligation hereunder to reimburse
Silicon for attorneys fees, Borrower may, for convenience, issue checks directly
to Silicon's attorneys, Xxxxxxxx Xxxxxxx LLP, but Borrower acknowledges and
agrees that Xxxxxxxx Xxxxxxx LLP is representing only Silicon and not Borrower
in connection with this Agreement. If either Silicon or Borrower files any
lawsuit against the other predicated on a breach of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys' fees, including (but not limited to) reasonable attorneys'
fees and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgement. All attorneys' fees and costs to which
Silicon may be entitled pursuant to this Paragraph shall immediately become part
of Borrower's Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations.
9.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Silicon; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Silicon, and any prohibited
assignment shall be void. No consent by Silicon to any assignment shall release
Borrower from its liability for the Obligations.
9.14 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than
one Person, their liability shall be joint and several, and the compromise of
any claim with, or the release of, any Borrower shall not constitute a
compromise with, or a release of, any other Borrower.
9.15 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower
against Silicon, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other Loan Document, or any other transaction contemplated hereby or thereby or
relating hereto or thereto, or any other matter, cause or thing whatsoever,
occurred, done, omitted or suffered to be done by Silicon, its directors,
officers, employees, agents, accountants or attorneys, shall be barred unless
assorted by Borrower by the commencement of an action or proceeding in a court
of competent jurisdiction by the filing of a complaint within one year after the
first act, occurrence or omission upon which such claim or cause of action, or
any part thereof, is based, and the service of a summons and complaint on an
officer of Silicon, or on any other person authorized to accept service on
behalf of Silicon, within thirty (30) days thereafter. Borrower agrees that such
one-year period is a reasonable and sufficient time for Borrower to investigate
and act upon any such claim or cause of action. The one-year period provided
herein shall not be waived, tolled, or extended except by the written consent of
Silicon in its sole discretion. This provision shall survive any termination of
this Loan Agreement or any other Loan Document.
9.16 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only
used in this Agreement for convenience. Borrower and Silicon acknowledge that
the headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. This Agreement has
been fully reviewed and negotiated between the parties and no uncertainty or
ambiguity
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in any term or provision of this Agreement shall be construed strictly against
Silicon or Borrower under any rule of construction or otherwise.
9.17 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts
and transactions hereunder and all rights and obligations of Silicon and
Borrower shall be governed by the laws of the State of Georgia. As a material
part of the consideration to Silicon to enter into this Agreement, Borrower
(i) agrees that all actions and proceedings relating directly or indirectly to
this Agreement shall, at Silicon's option, be litigated in courts located
within the State of Georgia, provided that if for any reason Silicon can not
avail itself or the courts of Georgia then the exclusive venue therefor shall be
Santa Xxxxx County, California; (ii) consents to the jurisdiction and venue of
any such court and consents to service of process in any such action or
proceeding by personal delivery or any other method permitted by law; and (iii)
waives any and all rights Borrower may have to object to the jurisdiction of
any such court, or to transfer or change the venue of any such action or
proceeding.
9.18 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND SILICON EACH HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY
CONDUCT, ACTS OR OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
SILICON OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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Borrower: Silicon:
CYPRESS COMMUNICATIONS, INC. SILICON VALLEY BANK
By: /s/ XXXX X. XXXXXX By: /s/ Xxxxxxx Xxxxxxxxx
----------------------------- ------------------------------
Name: Xxxx X. Xxxxxx Name:
Title: EVP & CFO Title:
CYPRESS COMMUNICATIONS, OPERATING
COMPANY, INC.
By: /s/ XXXX X. XXXXXX
------------------------
Name: Xxxx X. Xxxxxx
Title: EVP & CFO
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SILICON VALLEY BANK
SCHEDULE TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
BORROWER: CYPRESS COMMUNICATIONS, INC.
CYPRESS COMMUNICATIONS OPERATING COMPANY, INC.
ADDRESS: 00 XXXXXXXX XXXXXX, XXXXX 000
XXXXXXX, XXXXXXX 00000
DATE: MARCH 17, 2004
This Schedule forms an integral part of the Amended and Restated Loan and
Security Agreement between Silicon Valley Bank and the above-borrower of even
date.
--------------------------------------------------------------------------------
1. CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of:
(i) $10,000,000 at any one time outstanding (the
"Credit Limit"); or (ii) or (ii) the sum of (a)
eighty percent (80%) (the "Advance Rate") of the
amount of Borrower's Eligible Accounts and (b) the
lesser of (i) fifty percent (50%) of Eligible
Inventory or (ii) $1,000,000 (both as defined in
Section 8 above).
Silicon may, from time to time, modify the Advance
Rate, in its good faith business judgment, upon
notice to the Borrower, based on changes in
collection experience with respect to Accounts or
other issues or factors relating to the Accounts or
other Collateral.
LETTER OF CREDIT SUBLIMIT
(Section 1.7): One Million Dollars ($1,000,000).
CASH MANAGEMENT SUBLIMIT
(Section 1.8): One Hundred Thousand Dollars ($100,000).
EQUIPMENT TERM LOAN SUBLIMIT
(SECTION 1.9): One Million Dollars ($1,000,000).
SILICON VALLEY BANK AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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===============================================================================
2. INTEREST.
INTEREST RATE (Section 1.2):
Interest on the Revolving Loans shall accrue at
a rate equal to the greater of (a) the Prime
Rate in effect from time to time, plus two
percent (2.0%) per annum or (b) six percent
(6.0%) per annum. Interest shall be calculated
on the basis of a 360-day year for the actual
number of days elapsed.
Interest on all Equipment Term Loans shall bear
interest at a fixed rate equal to the greater of
(a) seven percent (7.0%) per annum or (b) Prime
Rate in effect on the date of such Equipment
Term Loan, plus three percent (3.0%) per annum.
"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):
Loan Fee: Seventy Five Thousand Dollars ($75,000) which
was paid on the Original Closing Date and Fifty
Thousand Dollars ($50,000) which was paid on the
first anniversary of the Original Closing Date.
Collateral Monitoring
Fee: One Thousand Five Hundred Dollars ($1,500) per
month, payable in arrears (prorated for any
partial month at the beginning and at
termination of this Agreement).
Unused Portion Fee: The Borrower shall pay to Silicon a fee
(collectively, the "Unused Line Fees" and
individually, a "Unused Line Fee") in an amount
equal to one quarter of one percent (0.25%) per
annum of the average daily unused and
undisbursed portion of the Credit Limit accruing
during each month. Amounts outstanding under the
Equipment Term Loans from and after the Debt
Service Coverage Change Date shall not be
included in the calculation of the Unused Line
Fee.
The accrued and unpaid portion of the Unused
Line Fee shall be paid by the Borrower to
Silicon on the last day of each month.
SILICON VALLEY BANK AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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commencing on the first such date following the date
hereof, and on the Maturity Date.
Equipment Term
Loan Fee: $5,000 payable on the date of this Agreement, and $5,000
payable on the Debt Service Coverage Change Date.
--------------------------------------------------------------------------------
4. REPAYMENT OF EQUIPMENT TERM LOANS
(Section 1.9):
Borrower may request Equipment Term Loans from the date of
this Agreement through June 30, 2004 (the "Equipment
Availability End Date"), and subject to the limitations on
Revolving Loans set forth herein, Silicon will make
Equipment Term Loans not exceeding the One Million Dollars
($1,000,000).
To obtain an Equipment Term Loan, Borrower will deliver to
Silicon copies of invoices for the Equipment being
financed, and such additional information as Bank may
request at least five (5) Business Days before the
proposed funding date. The Equipment Term Loans may only
be used to finance or refinance Equipment purchased ninety
(90) days before the date of each Equipment Term Loan (the
"Funding Date") and may not exceed one hundred percent
(100%) of the equipment invoice. Up to twenty five percent
(25%) of the Equipment Term Loans may be used to finance
transferable software licenses, leasehold improvements, or
other soft costs, including taxes, shipping, warranty
charges, freight discounts and installation expense. Each
Equipment Term Loan must be for a minimum of One Hundred
Thousand Dollars ($100,000) and the maximum number of
Equipment Term Loans is six (6).
Interest accrues from the Funding Date of each Equipment
Term Loan at the rate set forth in Section 2 of this
Schedule and is payable monthly. Equipment Term Loans are
payable in thirty (30) equal monthly installments of
principal, plus accrued interest, beginning on the first
day of each month (each date being called a "Payment
Date"), after the Funding Payment Date. On the Funding
Date (unless such Funding Date is the first Business Day
of the month) Borrower shall pay to Silicon an amount (the
"Interim Payment") equal the number of days from the
Funding Date until the first Payment Date with respect to
such Equipment Advance.
SILICON VALLEY BANK AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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================================================================================
5. MATURITY DATE
(Section 6.1): July 11, 2004. It being understood and agreed that
the Equipment Term Loans shall be due and payable in
full on such date unless the Maturity Date of the
Revolving Loans is extended.
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6. 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:
MINIMUM TANGIBLE
NET WORTH: Borrower shall maintain a Tangible Net Worth, tested
as of the last day of each month of not less than
$27,000,000, plus fifty percent (50%) of net income
(without regard to any loss) from each year of the
Borrower commencing with the fiscal year ending in
2002.
DEBT SERVICE
COVERAGE RATIO: From and after the Debt Service Coverage Change
Date, Borrower shall maintain a Debt Service Coverage
Ratio, tested as of the last day of each month, of
not less than 1.25 to 1.00.
DEFINITIONS: For purposes of the foregoing financial covenants,
the following term shall have the following meaning:
"Tangible Net Worth" shall mean the excess of
Borrower's 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.
SILICON VALLEY BANK AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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The calculation of Tangible Net Worth shall be based
solely on the non consolidated results of Borrower
i.e. the Tangible Net Worth of any parent,
affiliate or subsidiary of Borrower shall be
excluded from the calculation.
"Debt Service Coverage Ratio" shall mean a ratio of
(1) Borrower's earnings before interest, taxes and
depreciation expense for such period, minus all
Unfunded Capital Expenditures and cash taxes for
the specified period to (ii) current maturities of
long term debt, including all capitalized leases,
plus interest, calculated on a three (3) month
rolling basis.
"Unfunded Capital Expenditures" means all purchases
of fixed assets, long term investments, intangibles
and acquisitions not funded by long term debt or
equity.
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7. REPORTING
(Section 5.3):
Borrower shall provide Silicon with the following:
1. Weekly transaction reports and schedules of
collections, on Silicon's standard form.
2. Monthly accounts receivable agings, aged by
invoice date, within fifteen days after the end
of each month.
3. 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. 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. 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.
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,
SILICON VALLEY BANK AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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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 including a
calculation of the Debt Service Coverage,
including in any periods prior to the Debt
Service Coverage Change Date, 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, balance sheets and cash flow
statements, by month) for the upcoming
fiscal year of Borrower within thirty days
prior to the end of each fiscal year of
Borrower.
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
accountants acceptable to Silicon.
================================================================================
8. BORROWER INFORMATION:
Borrower represents and warrants that the
information set forth in the Representations
and Warranties of the Borrower dated July
11, 2002 previously submitted to Silicon
(the "Representations") is true and correct
as of the date hereof.
================================================================================
9. ADDITIONAL PROVISIONS
1. BANKING RELATIONSHIP. Borrower shall at
all times maintain its primary banking
relationship with Silicon. As to any Deposit
Accounts and investment accounts maintained
with another institution, Borrower shall
cause such institution, within 30 days after
the date of this Agreement, 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.
SILICON VALLEY BANK AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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2. SUBORDINATED OF INSIDE DEBT. All present and future
indebtedness of Borrower to its officers, directors
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 the
following: the Bridge Loans and the Convertible
Notes. 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. INTELLECTUAL PROPERTY SECURITY AGREEMENT. As a
condition precedent to the effectiveness of this
Agreement, the Borrower shall have executed and
delivered an Intellectual Property Security Agreement
(the "IP Security Agreement"), substantially in the
form attached hereto as Exhibit B.
Borrower: Silicon:
CYPRESS COMMUNICATIONS, INC. SILICON VALLEY BANK
By /s/ Xxxx Xxxxxx By /s/ Xxxxxxx Xxxxxxxxx
------------------------------- ------------------------------
Title: Xxxx Xxxxxx Title:
Name: Executive VP and CFO Name:
CYPRESS COMMUNICATIONS OPERATING
COMPANY, INC.
By: /s/ Xxxx Xxxxxx
-------------------------------
Title: Xxxx Xxxxxx
Name: Executive VP and CFO
SILICON VALLEY BANK AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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The undersigned hereby (i) consents to the increase and amendment and
restatement of the Obligations pursuant to the attached Amended and Restated
Loan and Security Agreement, (ii) hereby ratifies all the provisions of the
Guaranty, and (iii) confirms that all provisions of that document are in full
force and effect without offset or defense.
GUARANTOR:
U.S. REALTEL, INC.
By: /s/ Xxxx Xxxxxx Date: 3-17-04
--------------------------------- -----------------
Name: Xxxx Xxxxxx
Title: Executive VP and CFO
