LOAN MODIFICATION AGREEMENT
BETWEEN: Metro One Telecommunications, Inc., an Oregon corporation ("Borrower"),
whose address is 0000 X.X. Xxxxxx Xxxxxx, Xxxxxxxxx, XX 00000
AND: Silicon Valley Bank ("Silicon"), whose address is 0000 Xxxxxx Xxxxx,
Xxxxx Xxxxx, Xxxxxxxxxx 00000;
DATE: March 14 , 1997.
This Loan Modification Agreement is entered into on the above date by
Borrower and Silicon.
1. Background. Borrower entered into a Loan and Security Agreement with
Silicon in March, 1996 (as amended from time to time, the "Loan Agreement").
Capitalized terms used in this Loan Modification Agreement shall, unless
otherwise defined in this Agreement, have the meaning given to such terms in
the Loan Agreement.
Silicon and Borrower are entering into this Agreement to state the terms
and conditions of certain modifications to the Loan Agreement and the
Schedule, as amended prior to the date of this Agreement.
2. Modifications to Loan Agreement and Schedule.
2.1 The Schedule to the Loan Agreement is hereby deleted and replaced
by the Amended and Restated Schedule to Loan and Security Agreement attached
to this Agreement.
2.2 Section 4.5 of the Loan Agreement is deleted and replaced with
the following:
"4.5 Access to Collateral, Books and Records. At all reasonable
times, and upon five business days' written notice, Silicon, or its
agents, shall have the right to inspect the Collateral, and the
right to audit and copy the Borrower's accounting books, records,
ledgers, journals, or registers and the Borrower's books and
records relating to the Collateral, provided that on and after an
Event of Default the five business day period referred to above
shall be reduced to no notice. Silicon shall take reasonable steps
to keep confidential all information obtained in any such
inspection or audit in accordance with Silicon's standard business
practices regarding such information, but Silicon shall have the
right to disclose any such information to its auditors, regulatory
agencies and attorneys, and pursuant to any subpoena or other legal
process. In the event that Silicon is requested or required by oral
questions, interrogatories, requests for information or documents,
subpoenas or other lawful, civil investigative demand or similar
process, to disclose any such confidential information, Silicon
agrees to notify Borrower of any such event or circumstances in a
timely manner. The foregoing audits shall be at Silicon's expense,
except that the
Page 1 - LOAN MODIFICATION AGREEMENT
Borrower shall reimburse Silicon for its reasonable out of pocket
costs for such accounts receivable audits in an amount not to
exceed $1,250 per year. Silicon may debit the Borrower's deposit
accounts with Silicon for the cost of such audits, in which event
Silicon shall send notification thereof to the Borrower."
2.3 The Secured Equipment Term Loan referred to in the Schedule
dated March 15, 1996 is terminated. Borrower shall not have any right to draw
on such Loan.
2.4 Borrower acknowledges and agrees that all Obligations, including
without limitation Borrower's obligation to repay amounts advanced by Silicon
to Borrower on the terms of the Loan Agreement and Schedule as modified by
this Loan Modification Agreement, are secured by all liens and security
interests granted by Borrower to Silicon in the Loan Agreement.
2.5 The amount stated in the third sentence of Section 4.3 of the
Loan Agreement (with respect to insurance proceeds) is hereby increased to
$1,000,000.
3. Conditions Precedent. This Loan Modification Agreement shall not take
effect until Borrower delivers to Silicon a Certified Resolution of Borrower
and such other documents as Silicon shall reasonably require to give effect
to the terms of this Loan Modification Agreement.
4. No Other Modifications. Except as expressly modified by this Loan
Modification Agreement, the terms of the Loan Agreement, as amended prior to
the date of this Loan Modification Agreement, shall remain unchanged and in
full force and effect. Silicon's agreement to modify the Loan Agreement
pursuant to this Loan Modification Agreement shall not obligate Silicon to
make any future modifications to the Loan Agreement or any other loan
document. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of any indebtedness of any Borrower to Silicon. It is the
intention of Silicon and Borrower to retain as liable parties all makers and
endorsers of the Loan Agreement or any other loan document. No maker,
endorser, or guarantor shall be released by virtue of this Loan Modification
Agreement. The terms of this paragraph shall apply not only to this Loan
Modification Agreement, but also to all subsequent loan modification
agreements.
5. Representations and Warranties.
5.1 The Borrower represents and warrants to Silicon that the
execution, delivery and performance of this Agreement are within the
Borrower's corporate powers, and have been duly authorized and are not in
contravention of law or the terms of the Borrower's articles of
incorporation, bylaws or of any undertaking to which the Borrower is a party
or by which it is bound.
5.2 The Borrower understands and agrees that in entering into this
Agreement, Silicon is relying upon the Borrower's representations, warranties
and agreements as set forth in
Page 2 - LOAN MODIFICATION AGREEMENT
the Loan Agreement and other loan documents. Borrower hereby reaffirms all
representations and warranties in the Loan Agreement, all of which are true
as of the date of this Agreement.
Borrower:
METRO ONE TELECOMMUNICATIONS, INC.
By: /s/Xxxxxxx X. Xxxxxxx
-------------------------------
Title: President & CEO
/s/Xxxxxxxx X. Xxxxxxx, Xx.
-------------------------------
SVP & CFO
Silicon:
SILICON VALLEY BANK
By: /s/ Xxxx Xxxx
------------------------------
Title: VP
Page 3 - LOAN MODIFICATION AGREEMENT
AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
Borrower: Metro One Telecommunications, Inc.
Address: 0000 X.X. Xxxxxx Xxxxxx Xxxxxxxxx, XX 00000
Date: March 14, 1997
Secured Accounts Receivable Line of Credit
Credit Limit:
(Section 1.1) An amount not to exceed the lesser of: (i) $3,000,000 at any one
time outstanding; or (ii) the amount of the "Borrowing Base", as
defined below. For purposes of this Schedule, the "Borrowing
Base" shall mean the sum of 80% of the Net Amount of Borrower's
eligible accounts receivable. With respect to Borrower's
accounts, "Net Amount" means the gross amount of the account,
minus all applicable sales, use, excise and other similar taxes
and minus all discounts, credits and allowances of any nature
granted or claimed. During such time as Borrower maintains a
Quick Ratio (defined below) of at least 3.00:1.00, the Secured
Accounts Receivable Line of Credit will not be subject to the
Borrowing Base limitation stated above, but the aggregate
outstanding amount of such Line of Credit shall not exceed
$3,000,000 at any time.
Without limiting the fact that the determination of which
accounts are eligible for borrowing is a matter of Silicon's
discretion, the following shall not be deemed eligible for
borrowing: accounts outstanding for more than 90 days
from the invoice date, accounts subject to any contingencies,
accounts owing from an account debtor outside the United States
(except for approved in writing by Silicon), accounts owing from
governmental agencies, accounts owing from one
account debtor to the extent they exceed 40% of the total
eligible accounts outstanding, accounts owing from an affiliate
of the Borrower, and accounts owing from an account debtor to
whom the Borrower is or may be liable for goods purchased from
such account debtor or otherwise (provided, however, that such
contra accounts involving account debtors in the
telecommunications industry may be allowed if approved in
writing from time to time by Silicon, and provided further that
U.S. West and its subsidiaries are hereby approved as exceptions
to the foregoing exclusion for contra accounts). In addition, if
more than 50% of the accounts owing from an account debtor
are outstanding more than 90 days from the invoice date or are
otherwise not eligible accounts, then all accounts owing from
that account debtor shall be deemed ineligible for borrowing.
Page 1 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
Interest Rate:
(Section 1.2) The interest rate applicable to the Secured Accounts
Receivable Line of Credit shall be a rate equal to the "Prime
Rate" in effect from time to time, plus 0.25% per annum.
Interest calculations shall be made on the basis of a 360-day
year and the actual number of days elapsed. "Prime Rate" means
the rate announced from time to time by Silicon as its "prime
rate"; it is a base rate upon which other rates charged by
Silicon are based, and it is not necessarily the best rate
available at Silicon. The interest rate applicable to the
Obligations shall change on each date there is a change in the
Prime Rate (and such changes will be noted on each invoice or
otherwise communicated to the Borrower).
Commitment Fee:
(Section1.3) .25% per annum of the maximum commitment amount of $3,000,000,
or $7,500, which is fully earned and payable at closing. (Any
Commitment Fee previously paid by the Borrower in connection
with this loan shall be credited against this Fee.)
Unused Line
Fee: .25% per annum of the excess of the maximum commitment amount
of $3,000,000 over the average daily balance of such Line of
Credit. This fee is payable quarterly in arrears.
Maturity Date:
(Section1.3) March 14, 1999, at which time all unpaid principal and accrued
but unpaid interest shall be due and payable.
SECURED EQUIPMENT TERM LOAN
Credit Limit: An amount not to exceed (i) $1,000,000 at any one time
outstanding; or (ii) the amount of the "Equipment Borrowing
Base", as defined below. For purposes of this Schedule, the
"Equipment Borrowing Base" shall mean 50% of the net book
value of equipment purchased by Borrower prior to December 31,
1996, plus 90% of new equipment purchased by Borrower after
December 31, 1996. Silicon shall have no obligation to advance
against taxes, freight charges, installation charges or other
similar amounts relating to Borrower's equipment, whether or
not such amounts are identified on the invoices submitted to
Silicon. Equipment to be included in the Equipment Borrowing
Base must be new equipment, at the time of purchase by
Borrower, owned by Borrower, in good working order, must not
be subject to any liens in favor of any person or entity other
than Silicon, and must be subject to a first priority,
perfected security interest in favor of Silicon. Silicon shall
make advances under this Secured Equipment Term Loan from time
to time, based on invoices and other documentation as shall be
requested by Silicon to support such advances. The Borrower's
indebtedness to Silicon with respect to this Secured Equipment
Term Loan shall be evidenced by this Schedule and the Loan
Agreement, not by a separate promissory note unless required
by Silicon.
Page 2 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
Borrower shall submit to Silicon such invoices, advance
requests and other information, in form acceptable to Silicon,
as Silicon shall reasonably require from time to time.
Silicon shall not have any obligation to make advances on this
Secured Equipment Term Loan after August _____, 1998. Once the
maximum amount of the principal has been advanced under this
Secured Equipment Term Loan, Borrower is no longer entitled to
further advances on this Loan. Borrower shall not be entitled
to reborrow any amount repaid on this Secured Equipment Term
Loan. Advances may be requested in writing by Borrower or an
authorized person. Silicon may, but need not, require that all
oral requests be confirmed in writing. The unpaid principal
balance owing on this Secured Equipment Term Loan at any time
may be evidenced by Silicon's internal records, including
daily computer print-outs (which Silicon shall provide to
Borrower periodically).
Purpose: Borrowers shall use the proceeds of this Secured Equipment Term
Loan to finance the purchase of new equipment.
Interest Rate: The interest rate applicable to the Secured Equipment Term
Loan shall be a rate equal to the "Prime Rate" (as defined
above) in effect from time to time, plus 0.50% per annum.
Interest calculations shall be made on the basis of a 360-day
year and the actual number of days elapsed. The interest rate
applicable to the Obligations shall change on each date there
is a change in the Prime Rate.
Amortization: Borrower shall pay Silicon monthly payments of interest on the
last day of each month commencing March 1997. Commencing on
the last day of September, 1998, Borrower shall pay Silicon 42
equal monthly payments of principal, in the amount necessary
to repay fully the outstanding principal of this Secured
Equipment Term Loan in 42 payments, plus interest calculated
as provided in this Schedule.
Maturity Date: February ____, 2002, at which time all unpaid principal and
accrued but unpaid interest, fees and other charges shall be due
and payable.
Commitment
Fee: $2,500, payable at closing. This fee is fully earned at
closing and is non-refundable. (Any Commitment Fee previously
paid by the Borrower in connection with this loan shall be
credited against this Fee.)
Prior Names of
Borrower: See attached Exhibit B
(Section 3.2)
Page 3 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
Trade Names of
Borrower: See attached Exhibit B
(Section 3.2)
Trademarks of
Borrower: See attached Exhibit B
Other Locations
and Addresses: See attached Exhibit B
(Section 3.3)
Material Adverse
Litigation: See attached Exhibit B
(Section 3.10)
Financial
Covenants:
(Section 4.1) The Borrower shall at all times comply with all of the
following covenants, all of which shall be determined and
measured quarterly in accordance with generally accepted
accounting principles, on a consolidated basis, except as
otherwise stated below:
Tangible Net
Worth: Borrower shall maintain a Tangible Net Worth of not less than
$19,000,000.
Debt to Tangible
Net Worth
Ratio: Borrower shall at all times maintain a ratio of total
liabilities to Tangible Net Worth of not more than 0.75:1.00.
For purposes of this calculation, total liabilities shall
exclude deferred revenues and debt, if any, that has been
subordinated to the Loans in a written subordination agreement
on terms satisfactory to Silicon.
Profitability: Borrower shall not incur any Loss (as defined below) in excess
of $750,000 per quarter. For purposes of this paragraph,
"loss" means net income after taxes, as reported on Borrower's
financial statements.
Quick Ratio: Borrower shall maintain a ratio of Quick Assets (defined
below) to current liabilities less deferred revenue of not
less than 1.50:1.00.
Term Liquidity
Coverage: Borrower shall at all times maintain a minimum term liquidity
coverage of at least 2.0:1.0. "Term liquidity coverage" is
defined as (a) cash + cash equivalents (readily marketable
securities issued by the United States, readily marketable
commercial paper rated "A-I" by Standard & Poors Corporation
or a similar rating by a similar rating organization,
certificates of deposit and banker's acceptances) +
availability under the Secured Accounts Receivable Line of
Credit divided by (b) the outstanding Secured Equipment Term
Loan balance.
Page 4 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
Definitions: "Tangible Net Worth" means stockholders' equity plus debt, if
any, that has been subordinated to the Loans in a written
subordination agreement on terms satisfactory to Silicon, and
accrued interest thereon, less goodwill, patents, capitalized
software costs, deferred organizational costs, tradenames,
trademarks, and all other assets which would be classified as
intangible assets under generally accepted accounting
principles.
"Quick Assets" means cash on hand or on deposit in banks,
readily marketable securities issued by the United States,
readily marketable commercial paper rated "A-I" by Standard &
Poor's Corporation (or a similar rating by a similar rating
organization), certificates of deposit and banker's
acceptances, and accounts receivable (net of allowance for
doubtful accounts).
Other Covenants:
(Section 4.1) Borrower shall at all times comply with all of the following
additional covenants:
Banking Relationship. Borrower and its subsidiaries shall at
all times maintain their primary banking relationship with
Silicon. Neither Borrower nor its subsidiaries shall establish
any deposit accounts of any type with any bank or other
financial institution other than Silicon without Silicon's
prior written consent.
Financial Statements and Reports. The Borrower shall provide
Silicon: (a) within 50 days after the end of each quarter, a
quarterly financial statement (consisting of a income
statement and a balance sheet) prepared by the Borrower in
accordance with generally accepted accounting principles; (b)
within 20 days after the end of each month, an accounts
receivable aging report and an accounts payable aging report,
in such form as Silicon shall reasonably specify; (c) within
20 days after the end of each month, a Borrowing Base
Certificate in the form attached to this Agreement as Exhibit
A, as Silicon may reasonably modify such Certificate from time
to time, signed by the Chief Financial Officer of the
Borrower; (d) within 50 days after the end of each quarter, a
Compliance Certificate in such form as Silicon shall
reasonably specify, signed by the Chief Financial Officer of
the Borrower, setting forth calculations showing compliance
(at the end of each such calendar quarter) with the financial
covenants set forth on the Schedule, and certifying that
throughout such quarter the Borrower was in full compliance
with all other terms and conditions of this Agreement and the
Schedule, and providing such other information as Silicon
shall reasonably request; and (e) within 90 days following the
end of the Borrower's fiscal year, complete annual CPA-audited
financial statements, such audit being conducted by
independent certified public accountants reasonably acceptable
to Silicon, together with an unqualified opinion of such
accountants. If Borrower has maintained a Quick Ratio of at
least 3.00:1.00 throughout any month, the submission of an
accounts payable aging report and a Borrowing Base Certificate
will not be required for that month.
Page 5 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
Conditions to
Closing: Without in any way limiting the discretionary nature of advances
under this Agreement, before requesting any such advance, the
Borrower shall satisfy each of the following conditions:
1. Loan Documents:
Silicon shall have received this Amended and Restated Schedule,
executed by the Borrower, and such other loan documents as
Silicon shall require, each duly executed and delivered by the
parties thereto.
2. Documents Relating
to Authority, Etc.:
Silicon shall have received each of the following in form and
substance satisfactory to it:
(a) Certified Copies of the Articles of Incorporation and
Bylaws of the Borrower;
(b) A Certificate of Good Standing issued by the Secretary of
State of the Borrower's state of incorporation and such other
states as Silicon may reasonably request with respect to the
Borrower;
(c) A certified copy of a Resolution adopted by the Board of
Directors of the Borrower authorizing the execution, delivery
and performance of this Agreement, and any other documents or
certificates to be executed by the Borrower in connection with
this transaction; and
(d) Incumbency Certificates describing the office and
identifying the specimen signatures of the individuals signing
all such loan documents on behalf of the Borrower.
3. Perfection and
Priority of Security:
Silicon shall have received evidence satisfactory to it that
its security interest in the Collateral has been duly
perfected and that such security interest is prior to all
other liens, charges, security interests, encumbrances and
adverse claims in or to the Collateral other than Permitted
Liens, which evidence shall include, without limitation, a
certificate from the Oregon Secretary of State showing the due
filing and first priority of the UCC Financing Statements to
be signed by the Borrower covering the Collateral.
Page 6 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
4. Insurance:
Silicon shall have received evidence satisfactory to it that
all insurance required by this Agreement is in full force and
effect, with loss payee designations and additional insured
designations as required by this Agreement.
5. Other Information:
Silicon shall have received such other statements, opinions,
certificates, documents and information with respect to
matters contemplated by this Agreement as it may reasonably
request, all of which must be acceptable to Silicon.
Silicon shall have conducted an examination of the Borrower's
books, records, ledgers, journals, and registers, as Silicon
may deem necessary, and shall be satisfied with the results of
such examination in its sole discretion.
Silicon and the Borrower agree that the terms of this Schedule
supplement the Loan and Security Agreement between Silicon and the Borrower
and agree to be bound by the terms of this Schedule.
Borrower:
METRO ONE TELECOMMUNICATIONS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------
Title: President & CEO
Silicon: /s/ Xxxxxxxx X. Xxxxxxx, Xx.
-----------------------------
SVP & CFO
SILICON VALLEY BANK
By: /s/ Xxxx Xxxx
----------------------------
Title: VP
Page 7 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
