SILICON VALLEY BANK
QUICKSTART LOAN AND SECURITY AGREEMENT
Borrower: Rhythms NetConections Inc. Address: 00000 Xxxx Xxxxxxxx Xxxxx,
Xxxxx 000
Date: October 29, 1997 Xxx Xxxxx, Xxxxxxxxxx 00000
SILICON'S OFFER TO EXTEND FINANCING ON THE TERMS SET FORTH HEREIN SHALL EXPIRE
IF THIS AGREEMENT
IS NOT EXECUTED BY BORROWER AND RETURNED TO SILICON WITHIN 30 DAYS OF THE ABOVE
DATE.
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 the borrower named above (jointly and severally, the
"Borrower"), whose chief executive office is located at the above address
("Borrower's Address").
1. LOANS. Silicon will make loans to Borrower (the "Loans") in amounts
determined by Silicon in its reasonable business judgment up to the amount (the
"Credit Limit") shown on the Schedule to this Agreement (the "Schedule"),
provided no Event of Default and no event which, with notice or passage of time
or both, would constitute an Event of Default has occurred. All Loans and other
monetary Obligations will bear interest at the rate shown on the Schedule.
Interest will be payable monthly, on the date shown on the monthly billing from
Silicon. Silicon may, in its discretion, charge interest to Borrower's deposit
accounts maintained with Silicon.
2. SECURITY INTEREST. As security for all present and future indebtedness,
guarantees, liabilities, and other obligations, of Borrower to Silicon
(collectively, the "Obligations"), Borrower hereby grants Silicon a continuing
security interest in all of Borrower's interest in the following types of
property, whether now owned or hereafter acquired, and wherever located
(collectively, the "Collateral"): All "accounts," "general intangibles,"
"contract rights," "chattel paper," "documents," "letters of credit,"
"instruments," "deposit accounts," "inventory," "farm products," investment
property," "fixtures" and "equipment," as such terms are defined in Division 9
of the California Uniform Commercial Code in effect on the date hereof, and all
products, proceeds and insurance proceeds of the foregoing.
3. REPRESENTATIONS AND AGREEMENTS OF BORROWER. Borrower represents to Silicon
as follows, and Borrower agrees that the following representations will continue
to be true, and that Borrower will comply with all of the following agreements
throughout the term of this Agreement:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation, is and
will continue to be, duly authorized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. The execution,
delivery and performance by Borrower of this Agreement, and all other documents
contemplated hereby have been duly and validly authorized, and do not violate
any law or any provision of, and are not grounds for acceleration under, any
agreement or instrument which is binding upon Borrower.
3.2 NAME; PLACES OF BUSINESS. The name of Borrower set forth in this
Agreement is its correct name. Borrower shall give Silicon 15 days' prior
written notice before changing its name. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the
locations set forth on the Schedule. Borrower will give Silicon at least 15
days prior written notice before changing its chief executive office or
locating the Collateral at any other location.
3.3 COLLATERAL. Silicon has and will at all times continue to have a
first-priority perfected security interest in all of the Collateral other than
specific equipment. Borrower will immediately advise Silicon in writing of any
material loss or damage to the Collateral.
3.4 FINANCIAL CONDITION AND STATEMENTS. All financial statements now or
in the future delivered to Silicon have been, and will be, prepared in
conformity with generally accepted accounting principles. Since the last date
covered by any such statement, there has been no material adverse change in the
financial condition or business of Borrower. Borrower will provide Silicon:
(i) within 30 days after the end of each month, a monthly financial statement
prepared by Borrower, and such other information as Silicon shall reasonably
request; (ii) within 120 days following the end of Borrower's fiscal year,
complete annual financial statements, certified by independent certified public
accountants acceptable to Silicon and accompanied by the unqualified report
thereon by said independent certified public accountants; and (iii) other
financial information reasonably requested by Silicon from time to time.
3.5 TAXES; COMPLIANCE WITH LAW. Borrower has filed, and will file, when
due, all tax returns and reports required by applicable law, and Borrower has
paid, and will pay, when due, all taxes, assessments, deposits and contributions
now or in the future owed by Borrower. Borrower has complied, and will comply,
in all material respects, with all applicable laws, rules and regulations.
3.6 INSURANCE. Borrower shall at all times insure all of the tangible
personal property Collateral and carry such other business insurance as is
customary in Borrower's industry.
3.7 ACCESS TO COLLATERAL AND BOOKS AND RECORDS. At reasonable times, on
one business day notice, Silicon, or its
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SILICON VALLEY BANK QUICKSTART LOAN AND SECURITY AGREEMENT
agents, shall have the right to inspect the Collateral, and the right to audit
and copy Borrower's books and records.
3.8 OPERATING ACCOUNTS. Borrower shall maintain its primary operating
accounts with Bank.
3.9 ADDITIONAL AGREEMENTS. Borrower shall not, without Silicon's prior
written consent, do any of the following: (i) enter into any transaction
outside the ordinary course of business except for the sale of capital stock to
venture investors, provided that Borrower promptly delivers written notification
to Silicon of any such sale; (ii) sell or transfer any Collateral, except in the
ordinary course of business; (iii) pay or declare any dividends on Borrower's
stock (except for dividends payable solely in stock of Borrower); or (iv)
redeem, retire, purchase or otherwise acquire, directly or indirectly, any of
Borrower's stock other than the repurchase of up to five percent (5%) of
Borrower's then issued stock in any fiscal year from Borrower's employees or
directors pursuant to written agreement with Borrower.
4. TERM. This Agreement shall continue in effect until the maturity date set
forth on the Schedule (the "Maturity Date"). This Agreement may be terminated,
without penalty, 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 of an Event of
Default, without notice, effective immediately. On the Maturity Date or on any
earlier effective date of termination, Borrower shall pay all Obligations in
full, whether or not such Obligations are otherwise then due and payable. No
termination shall in any way affect or impair any security interest or other
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.
5. EVENTS OF DEFAULT AND REMEDIES. The occurrence of any of the following
events shall constitute an "Event of Default" under this Agreement: (a) Any
representation, statement, report or certificate given to Silicon by Borrower or
any of its officers, employees or agents, now or in the future, is untrue or
misleading in a material respect; or (b) Borrower fails to pay when due any Loan
or any interest thereon or any other monetary Obligation; or (c) the total
Obligations outstanding at any time exceed the Credit Limit; or (d) Borrower
fails to perform any other non-monetary Obligation, which failure is not cured
within 5 business days after the date due; or (e) 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 or against 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 (f) a material
adverse change in the business, operations, or financial or other condition of
Borrower. If an Event of Default occurs, Silicon, shall have the right to
accelerate and declare all of the Obligations to be immediately due and payable,
increase the interest rate by an additional four percent per annum, and
exercise all rights and remedies accorded it by applicable law.
6. GENERAL. If any provision of this Agreement is held to be unenforceable,
the remainder of this Agreement shall still continue in full force and effect.
This Agreement and any other written agreements, documents and instruments
executed in connection herewith are the 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 in this Agreement or in other written
agreements signed by the parties in connection this Agreement. The failure of
Silicon at any time to require Borrower to comply strictly with any of the
provisions of this Agreement shall not waive Silicon's right later to demand and
receive strict compliance. Any waiver of a default shall not waive any other
default. None of the provisions of this Agreement may be waived except by a
specific written waiver signed by an officer of Silicon and delivered to
Borrower. The provisions of this Agreement may not be amended, except in a
writing signed by Borrower and Silicon. Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all other reasonable costs incurred by Silicon,
in connection with this Agreement (whether or not a lawsuit is filed). If
Silicon or Borrower files any lawsuit against the other predicated on a breach
of this Agreement, the prevailing party shall be entitled to recover its
reasonable costs and attorneys' fees from the non-prevailing party. Borrower may
not assign any rights under this Agreement without Silicon's prior written
consent. This Agreement shall be governed by the laws of the State of
California.
7. MUTUAL WAIVER OF JULY TRIAL. BORROWER AND SILICON EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY CONDUCT, ACT OR OMISSION OF
SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,
ATTORNEYS OR AFFILIATES;
Borrower:
Rhythms Netconnections Inc.
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By /s/ Xxxx X. Xxxx
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President or Vice President
Silicon:
SILICON VALLEY BANK
By /s/ Xxxx X. Xxxxxxxx
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Title Senior Vice President
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SILICON VALLEY BANK
SCHEDULE TO
QUICKSTART LOAN AND SECURITY AGREEMENT (MASTER)
BORROWER: Rhythms NetConections Inc.
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DATE: October 29, 1997
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This Schedule is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower
("Borrower") of even date.
CREDIT LIMIT (AGGREGATE)
(Section 1): $1,000,000 (includes, without limitation,
Equipment Advances and the Merchant Services and
Business Visa Reserve, if any)
INTEREST RATE (Section l): A rate equal to the "Prime Rate" in effect from
time to time, plus 0.25% 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.
MATURITY DATE (Section 4): April 29, 1999
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OTHER LOCATIONS AND ADDRESSES
(Section 3.2):
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OTHER AGREEMENTS: Borrower also agrees as follows:
1. LOAN FEE. Borrower shall concurrently pay
Silicon a non-refundable Loan Fee in the amount of
$2,500.00
2. BANKING RELATIONSHIP. Borrower shall at all
times maintain its primary banking relationship
with Silicon.
BORROWER: SILICON:
Rhythms NetConnections Inc. SILICON VALLEY BANK
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By /s/ Xxxx X. Xxxx By /s/ Xxxx X. Xxxxxxxx
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PRESIDENT OF VICE PRESIDENT Title Senior Vice President
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SILICON VALLEY BANK
SCHEDULE TO
QUICKSTART LOAN AND SECURITY AGREEMENT (EQUIPMENT ADVANCES)
BORROWER: Rhythms NetConections Inc.
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DATE: October 29, 1997
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This Schedule is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower
("Borrower") of even date.
CREDIT LIMIT (EQUIPMENT)
(Section 1): $ 1,000,000 (such amount to be funded under the
aggregate Credit Limit). Equipment Advances will
be made only on or prior to 4/29/98 (the "Last
Advance Date") and only for the purpose of
purchasing equipment reasonably acceptable to
Silicon. Borrower must provide invoices for the
equipment to Silicon on or before the Last Advance
Date.
INTEREST RATE (Section 1): A rate equal to the "Prime Rate" in effect from
time to time, plus .25% 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.
MATURITY DATE (Section 4): After the Last Advance Date, the unpaid principal
balance of the Equipment Advances shall be repaid
in 36 equal monthly installments of principal,
plus interest, commencing on 5/29/98 and
continuing on the same day of each month
thereafter until the entire unpaid principal
balance of the Equipment Advances and all accrued
unpaid interest have been paid (subject to
Silicon's right to accelerate the Equipment
Advances on an Event of Default).
BORROWER: SILICON:
Rhythms NetConnections Inc. SILICON VALLEY BANK
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BY /s/ Xxxx X. Xxxx BY /s/ Xxxx X. Xxxxxxxx
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PRESIDENT OR VICE PRESIDENT TITLE Senior Vice President
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SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: Rhythms NetConnections Inc.
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ACCOUNT OFFICER: Xxxx Xxxxxxxx
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DATE: October 29, 1997 , 1997
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Loan Fee $ 2,500.00*
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FEES DUE $ 2,500.00
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*Loan fee inclusive of UCC search and filing fees
Please indicate the method of payment:
{ } A check for the total amount is attached.
{X} Debit DDA # 3300060771 for the total amount.
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{ } Loan proceeds
/s/ Xxxx X. Xxxx 11/3/97
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Authorized Signer (Date)
/s/ Xxxx X. Xxxxxxxx 11/4/97
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Silicon Valley Bank (Date)
Account Officer's Signature
