EXHIBIT 10.9
SILICON VALLEY BANK
LOAN AND SECURITY AGREEMENT
BORROWER: CYPRESS COMMUNICATIONS, INC.
ADDRESS: 00 XXXXXXXX XXXXXX, XXXXX 000
XXXXXXX, XXXXXXX 00000
DATE: JULY 12, 2002
THIS 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.)
1. LOANS.
1.1 LOANS. Silicon will make loans to Borrower (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 Loans, may be repaid and readvanced from time to time.
1.2 INTEREST. All Loans and all other monetary Obligations shall
bear interest at the rate 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 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.
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1.6 PERMITTED OVERADVANCES/THE PURCHASE TRANSACTION. Some portion
or all of the initial advance under the Loans shall be 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
shall be 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).
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 jurisdictions 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 (i) 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. 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.
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(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 owed
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 limited to, those relating to
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
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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 or
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
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
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. Silicon may, in its
good faith business judgment, require that all proceeds of Collateral 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 judgment.
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.
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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 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 judgment.
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
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
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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.
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. If this Agreement is terminated
by Borrower or by Silicon under this Section 6.2 prior to July __, 2003,
Borrower shall pay to Silicon a termination fee in an amount equal to one
percent (1.0%) of the Maximum Credit Limit if such termination occurs after the
Closing Date and prior to January __, 2003 and one half of one percent (.50%)
of the Maximum Credit Limit if such termination occurs after January __, 2003,
but prior to July __, 2003, provided that no termination fee shall be charged
if the credit facility hereunder is replaced with a new facility from another
division of Silicon Valley Bank or from the proceeds of an initial public
offering or other equity event. The termination fee shall be due and payable on
the effective date of termination and thereafter shall bear interest at a rate
equal to the highest rate applicable to any of the Obligations.
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 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 an "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
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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 total 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 Obligations 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 within 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 had no 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 it 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 statute, 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 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,
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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 with
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) 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
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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
__, 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.
"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.
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"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 FCIA 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.
"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.
"GAAP" 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
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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, 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-
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extraordinary accounts payable; (iii) the Bridge Loan Debt; (iv) the
Convertible Notes; (v) the Seller Debt; and (vi) such other indebtedness
described on EXHIBIT ___ attached hereto. [TO BE DETERMINED IF THERE SHALL BE
ANY].
"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 judgment; (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
judgment, 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 judgment, 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.
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.
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
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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 event they will bear interest at the same
rate applicable to the Loans. Silicon may also, in its 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 or
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 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. 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.
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
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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 judgment. 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 asserted 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 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
of 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
-14-
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
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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.
Borrower: Silicon:
CYPRESS COMMUNICATIONS, INC. SILICON VALLEY BANK
By By
------------------------------ --------------------------------
President or Vice President Title
-----------------------------
By
------------------------------
Secretary or Ass't Secretary
-15-
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
-------------------------------------------------------------------------------
SILICON VALLEY BANK
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: CYPRESS COMMUNICATIONS, INC.
ADDRESS: 00 XXXXXXXX XXXXXX, XXXXX 000
XXXXXXX, XXXXXXX 00000
DATE: JULY ____ , 2002
This Schedule forms an integral part of the 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 "Maximum Credit
Limit"); 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.
===============================================================================
2. INTEREST.
INTEREST RATE (Section 1.2):
A rate equal to the "Prime Rate" in
effect from time to time, plus two
percent (2.0%) per annum.
Notwithstanding the foregoing, Silicon
agrees that if Borrower generates
EBITDA equal to or in excess of seventy
percent (70%) of the amounts set forth
in the projections provided to, and
accepted by Silicon, for two (2)
successive calendar quarters, the rate
of interest in effect from time to time
hereunder will be reduced to the Prime
Rate plus one and one quarter percent
(1.25%) per
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
-------------------------------------------------------------------------------
annum. The Prime Rate in effect on any
day shall not be less than four and
three quarter percent (4.75%) per annum.
Interest shall be calculated on the
basis of a 360-day year for the actual
number of days elapsed. "Prime Rate"
means the rate announced from time to
time by Silicon as its "prime rate;"
it is a base rate upon which other
rates charged by Silicon are based,
and it is not necessarily the best
rate available at Silicon. The
interest rate applicable to the
Obligations shall change on each date
there is a change in the Prime Rate.
For purposes hereof, "EBITDA" means
Borrower's earnings before interest,
taxes and depreciation expense for such
period.
===============================================================================
3. FEES (Section 1.4):
Loan Fee: Seventy Five Thousand Dollars ($75,000)
payable concurrently herewith and Fifty
Thousand Dollars ($50,000) payable on
the first anniversary of the 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 Maximum
Credit Limit accruing during each
month. 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, commencing on the first
such date following the date hereof,
and on the Maturity Date.
===============================================================================
4. MATURITY DATE
(Section 6.1): July __, 2004.
===============================================================================
5. FINANCIAL COVENANTS
(Section 5.1):
Borrower shall comply with each of the
following covenants. Compliance shall
be determined as of the end of each
month, except as otherwise specifically
provided below:
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
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MINIMUM TANGIBLE
NET WORTH: Borrower shall maintain a Tangible Net
Worth, tested as of the last day of
each month of not less than $23,000,000,
plus fifty percent (50%) of
consolidated net income (without regard
to any loss) from each year of the
Borrower commencing with the fiscal year
ending in 2002.
DEFINITIONS. For purposes of the foregoing financial
covenants, the following term shall
have the following meaning:
"Tangible Net Worth" shall mean the
excess of total assets over total
liabilities, determined in accordance
with GAAP, with the following
adjustments:
(A) there shall be excluded
from assets: (i) notes, accounts
receivable and other obligations
owing to Borrower from its officers
or other Affiliates, and (ii) all
assets which would be classified as
intangible assets under GAAP,
including without limitation
goodwill, licenses, patents,
trademarks, trade names,
copyrights, capitalized software
and organizational costs, licenses
and franchises
(B) there shall be excluded
from liabilities: all indebtedness
which is subordinated to the
Obligations under a subordination
agreement in form specified by
Silicon or by language in the
instrument evidencing the
indebtedness which Silicon agrees
in writing is acceptable to Silicon
in its good faith business judgment.
===============================================================================
6. REPORTING.
(Section 5.3):
Borrower shall provide Silicon with the
following:
1. 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.
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
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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, certifying
that as of the end of such month
Borrower was in full compliance
with all of the terms and
conditions of this Agreement, and
setting forth calculations showing
compliance with the financial
covenants set forth in this
Agreement and such other
information as Silicon shall
reasonably request, including,
without limitation, a statement
that at the end of such month
there were no held checks.
8. Quarterly unaudited financial
statements, as soon as available,
and in any event within forty-five
days after the end of each fiscal
quarter of Borrower.
9. Annual operating budgets
(including income statements,
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.
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
-------------------------------------------------------------------------------
===============================================================================
7. 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.
===============================================================================
8. 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.
2. SUBORDINATION 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.
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
-------------------------------------------------------------------------------
Borrower: Silicon:
CYPRESS COMMUNICATIONS, INC. SILICON VALLEY BANK
By By
------------------------------ --------------------------------
President or Vice President Title
-----------------------------
By
------------------------------
Secretary or Ass't Secretary
