--------------------------------------------------------------------------------
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
METRO ONE TELECOMMUNICATIONS, INC.
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
1 ACCOUNTING AND OTHER TERMS . . . . . . . . . . . . . . . . . . . . . . 4
2 LOAN AND TERMS OF PAYMENT. . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Credit Extensions. . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Overadvances . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Interest Rate, Payments. . . . . . . . . . . . . . . . . . . . . 5
2.4 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3 CONDITIONS OF LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 Conditions Precedent to Initial Credit Extension . . . . . . . . 6
3.2 Conditions Precedent to all Credit Extensions. . . . . . . . . . 6
4 CREATION OF SECURITY INTEREST. . . . . . . . . . . . . . . . . . . . . 6
4.1 Grant of Security Interest . . . . . . . . . . . . . . . . . . . 6
5 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 6
5.1 Due Organization and Authorization . . . . . . . . . . . . . . . 6
5.2 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.3 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.4 No Material Adverse Change in Financial Statements . . . . . . . 7
5.5 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.6 Regulatory Compliance. . . . . . . . . . . . . . . . . . . . . . 7
5.7 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.8 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . 7
6 AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1 Government Compliance. . . . . . . . . . . . . . . . . . . . . . 7
6.2 Financial Statements, Reports, Certificates. . . . . . . . . . . 8
6.3 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.4 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.5 Primary Accounts . . . . . . . . . . . . . . . . . . . . . . . . 9
6.6 Financial Covenants. . . . . . . . . . . . . . . . . . . . . . . 9
6.7 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 9
7 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.1 Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.2 Changes in Business, Ownership, Management or Business
Locations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.3 Mergers or Acquisitions. . . . . . . . . . . . . . . . . . . . . 9
7.4 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.5 Encumbrance. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.6 Distributions; Investments . . . . . . . . . . . . . . . . . . . 10
7.7 Transactions with Affiliates . . . . . . . . . . . . . . . . . . 10
7.8 Subordinated Debt. . . . . . . . . . . . . . . . . . . . . . . . 10
7.9 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.1 Payment Default. . . . . . . . . . . . . . . . . . . . . . . . . 10
8.2 Covenant Default . . . . . . . . . . . . . . . . . . . . . . . . 11
8.3 Material Adverse Change. . . . . . . . . . . . . . . . . . . . . 11
8.4 Attachment . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.5 Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2
8.6 Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . 11
8.7 Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.8 Misrepresentations . . . . . . . . . . . . . . . . . . . . . . . 11
9 BANK'S RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . 12
9.1 Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . 12
9.2 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . 12
9.3 Accounts Collection. . . . . . . . . . . . . . . . . . . . . . . 12
9.4 Bank Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.5 Bank's Liability for Collateral. . . . . . . . . . . . . . . . . 13
9.6 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . 13
9.7 Demand Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . 13
10 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER . . . . . . . . . . . . . . 13
12 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 13
12.2 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 14
12.3 Time of Essence. . . . . . . . . . . . . . . . . . . . . . . . . 14
12.4 Severability of Provision. . . . . . . . . . . . . . . . . . . . 14
12.5 Amendments in Writing, Integration . . . . . . . . . . . . . . . 14
12.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 14
12.7 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
12.8 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . 14
12.9 Effect of Amendment and Restatement. . . . . . . . . . . . . . . 15
12.10 Attorneys' Fees, Costs and Expenses. . . . . . . . . . . . . . . 15
13 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
13.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT dated April 23,
1999, between SILICON VALLEY BANK ("Bank"), whose address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ with a loan production office located at ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇▇. ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ and METRO ONE
TELECOMMUNICATIONS, INC. ("Borrower"), whose address is ▇▇▇▇ ▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇.
RECITALS
A. Bank and Borrower are parties to that certain Loan and Security
Agreements dated March 15, 1996 and June 24, 1998 with Schedules attached
thereto, as amended (collectively, the "Original Agreement").
B. Borrower and Bank desire in this Agreement to set forth their
agreement with respect to a working capital and equipment line loan and to amend
and restate in its entirety without novation the Original Agreement in
accordance with the provisions herein.
AGREEMENT
The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement will be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document. This Agreement shall be construed to
impart upon Bank a duty to act reasonably at all times.
2 LOAN AND TERMS OF PAYMENT
2.1 CREDIT EXTENSIONS.
Borrower will pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.
2.1.1 REVOLVING ADVANCES.
(a) Bank will make Advances not exceeding the lesser of (A) the Committed
Revolving Line or (B) the Borrowing Base. Amounts borrowed under this Section
may be repaid and reborrowed during the term of this Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 3:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. Bank will credit Advances to
Borrower's deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice given by a person whom Bank believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to reliance.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances and other amounts due under this Agreement are
immediately payable.
2.1.2 EQUIPMENT ADVANCES.
(a) Through April 23, 2000 (the "Equipment Availability End Date"), Bank
will make advances ("Equipment Advance" and, collectively, "Equipment Advances")
not exceeding the Committed Equipment
4
Line. The Equipment Advances may only be used to finance (i) new Equipment
purchased on or after 180 days before the date of this Agreement provided that
such Equipment Advances in connection therewith may not exceed 90% of the
equipment invoice less taxes, shipping, warranty charges, freight discounts and
installation expense, and (ii) existing or previously owned Equipment not to
exceed 50% of the net book value for such Equipment. Each Equipment Advance must
be for a minimum of $250,000.
(b) Interest accrues from the date of each Equipment Advance at the rate
in Section 2.3(a). Each Equipment Advance shall be payable in 42 equal monthly
installments of principal, plus accrued interest, beginning on the 1st of each
month following each Equipment Advance and ending on the 1st day of 42nd month
from the first monthly payment (each, the "Equipment Maturity Date"). Equipment
Advances when repaid may not be reborrowed.
(c) To obtain an Equipment Advance, Borrower must notify Bank (the notice
is irrevocable) by facsimile no later than 3:00 p.m. Pacific time 1 Business Day
before the day on which the Equipment Advance is to be made. The notice in the
form of Exhibit B (Payment/Advance Form) must be signed by a Responsible Officer
or designee and include a copy of the invoice for the Equipment being financed.
2.2 OVERADVANCES.
If Borrower's Obligations under (a) Section 2.1.1 exceed the lesser of
either (i) the Committed Revolving Line or (ii) the Borrowing Base, or (b)
Section 2.1.1 plus Section 2.1.2 exceed the Credit Limit, Borrower must
immediately pay Bank the excess.
2.3 INTEREST RATE, PAYMENTS.
(a) Interest Rate. Advances accrue interest on the outstanding principal
balance at a per annum rate equal to the Prime Rate. For Equipment Advances,
Borrower may elect one of the following: (i) a variable rate equal to the Prime
Rate or (ii) a rate equal to 325 basis points above the Treasury ▇▇▇▇ Rate
effective at the time of the Equipment Advance fixed for the duration of the
Equipment Advance. If Borrower elects the fixed option, a Prepayment Fee shall
apply. After an Event of Default, Obligations accrue interest at 5 percent above
the rate effective immediately before the Event of Default. The interest rate
increases or decreases when the Prime Rate changes. Interest is computed on a
360 day year for the actual number of days elapsed.
(b) Payments. Interest due on the Committed Revolving Line is payable on
the 1st of each month. Interest due on the Equipment Advances is payable on the
1st of each month. Bank may debit any of Borrower's deposit accounts including
Account Number ▇▇▇▇▇▇▇▇-70 for principal and interest payments or any amounts
Borrower owes Bank. Bank will notify Borrower when it debits Borrower's
accounts. These debits are not a set-off. Payments received after 12:00 noon
Pacific time are considered received at the opening of business on the next
Business Day. When a payment is due on a day that is not a Business Day, the
payment is due the next Business Day and additional fees or interest accrue.
2.4 FEES.
Borrower will pay:
(a) Facility Fee. A fully earned, non-refundable Facility Fee of $20,000
due on the Closing Date;
(b) An unused Facility Fee of .20% per annum of the unused portion of
the Committed Revolving Line payable quarterly in arrears; and
(c) Bank Expenses. All Bank Expenses (including reasonable attorneys'
fees and expenses) incurred through and after the date of this Agreement, are
payable when due.
5
3 CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSIONS.
Bank's obligation to make the initial Credit Extension is subject to
the condition precedent that it receive the agreements, documents and fees it
requires; and
Borrower shall pay in full any outstanding principal and interest under
loan #1100063990.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.
Bank's obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Advance and no Event of Default may have occurred and be continuing, or result
from the Credit Extension. Each Credit Extension is Borrower's representation
and warranty on that date that the representations and warranties of Section 5
remain true.
4 CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations, and
performance of each of Borrower's duties under the Loan Documents. Except for
Permitted Liens, any security interest will be a first priority security
interest in the Collateral. Bank may place a "hold" on any deposit account
pledged as Collateral. If this Agreement is terminated, Bank's lien and
security interest in the Collateral will continue until Borrower fully satisfies
its Obligations.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION.
Borrower and each Subsidiary is duly existing and, in good standing in
its state of formation and qualified and licensed to do business in, and in
good standing in, any state in which the conduct of its business or its
ownership of property requires, that it be qualified.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which or by which it
is bound in which the default could cause a Material Adverse Change.
5.2 COLLATERAL.
Borrower has good title to the Collateral, free of Liens except property
Liens. The Accounts are bona fide, existing obligations, and the service or
property has been performed or delivered to the account debtor or its agent for
immediate shipment to and unconditional acceptance by the account debtor.
Borrower has no notice of any actual or imminent insolvency proceeding of any
account debtor whose accounts are an Eligible Account in any Borrowing Base
Certificate. All inventory is in all material respects of good and marketable
quality, free from material defects.
6
5.3 LITIGATION.
Except as may otherwise be disclosed to Bank, there are no actions or
proceedings pending or, to Borrower's knowledge, threatened by or against
Borrower or any Subsidiary in which an adverse decision could cause a Material
Adverse Change.
5.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5 SOLVENCY.
The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.
5.6 REGULATORY COMPLIANCE.
Borrower is not an "investment company" or a company "controlled" by
an "investment company" under the Investment Company Act. Borrower is not
engaged as one of its important activities in extending credit for margin
stock (under Regulations G, T and U of the Federal Reserve Board of
Governors). Borrower has complied with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of
which could cause a Material Adverse Change. None of Borrower's or any
Subsidiary's properties or assets has been used by Borrower or any Subsidiary
or, to the best of Borrower's knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous substance other
than legally. Borrower and each Subsidiary has timely filed all required tax
returns and paid, or made adequate provision to pay, all taxes, except those
being contested in good faith with adequate reserves under GAAP. Borrower
and each Subsidiary has obtained all consents, approvals and authorizations
of, made all declarations or filings with, and given all notices to, all
government authorities that are necessary to continue its business as
currently conducted.
5.7 SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 FULL DISCLOSURE.
No representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements contained in the certificates or statements not misleading.
6 AFFIRMATIVE COVENANTS
Borrower will do all of the following:
6.1 GOVERNMENT COMPLIANCE.
Borrower will maintain its and all Subsidiaries' legal existence and good
standing in its jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify could have a material adverse
effect on Borrower's business or operations. Borrower will comply, and have
each Subsidiary comply, with all laws, ordinances and regulations to which it is
subject, noncompliance with which could have a material adverse effect on
Borrower's business or operations or cause a Material Adverse Change.
7
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower will deliver to Bank: (i) within 5 days of filing, copies of
all statements, reports and notices made available to Borrower's security
holders or to any holders of Subordinated Debt and all reports on Form 1O-K,
10-Q and 8-K filed with the Securities and Exchange Commission; (ii) a prompt
report of any legal actions pending or threatened against Borrower or any
Subsidiary that could result in damages or costs to Borrower or any Subsidiary
of $250,000 or more; (iii) budgets, sales projections, operating plans or other
financial information Bank requests.
(b) At such time as Advances become subject to the Borrowing Base and
within 30 days after the last day of each month, Borrower will deliver to Bank a
Borrowing Base Certificate signed by a Responsible Officer in the form of
Exhibit C, with aged listings of accounts receivable and accounts payable.
(c) Borrower will deliver to Bank a Compliance Certificate signed by a
Responsible Officer in the form of Exhibit D, together with its 10Q and 1OK
reports.
(d) Bank has the right to audit Borrower's Collateral at Borrower's
expense, but the audits will be conducted no more often than every year and will
be performed after Closing Date and the cost of such audit shall not exceed
$1,500, unless an Event of Default has occurred and is continuing.
6.3. TAXES.
Borrower will make, and cause each Subsidiary to make, timely payment of
all material federal, state, and local taxes or assessments and will deliver to
Bank, on demand, appropriate certificates attesting to the payment.
6.4 INSURANCE.
Borrower will keep its business and the Collateral insured for risks and
in amounts, as Bank requests. Insurance policies will be in a form, with
companies, and in amounts that are satisfactory to Bank. All property policies
will have a lender's loss payable endorsement showing Bank as an additional loss
payee and all liability policies will show the Bank as an additional insured and
provide that the insurer must give Bank at least 20 days notice before canceling
its policy. At Bank's request, Borrower will deliver certified copies of
policies and evidence of all premium payments. Proceeds payable under any
policy will, at Bank's option, be payable to Bank on account of the Obligations.
Statutory notice regarding insurance.
WARNING
Unless you provide us with evidence of the insurance coverage as required
by our contract or loan agreement, we may purchase insurance at your expense to
protect our interest. This insurance may, but need not, also protect your
interest. If the collateral becomes damaged, the coverage we purchase may not
pay any claim you make or any claim made against you. You may later cancel this
coverage by providing evidence that you have obtained property coverage
elsewhere.
You are responsible for the cost of any insurance purchased by us. The
cost of this insurance may be added to your contract or loan balance. If the
cost is added to your contract or loan balance, the interest rate on the
underlying contract or loan will apply to this added amount. The effective
date of coverage may be the date your prior coverage lapsed or the date you
failed to provide proof of coverage.
This coverage we purchased may be considerably more expensive than
insurance you can obtain on your own and may not satisfy any need for property
damage coverage or any mandatory liability insurance requirements imposed by
applicable law.
8
6.5 PRIMARY ACCOUNTS.
Borrower will maintain its primary operating accounts with Bank.
6.6 FINANCIAL COVENANTS.
Borrower will maintain as of the last day of each quarter:
(i) QUICK RATIO. Quick Ratio. A ratio of Quick Assets to
Current Liabilities minus Deferred Maintenance Revenue plus any outstanding
Revolving Advances which may be considered long term debt under GAAP of at least
1.50 to 1.00.
(ii) DEBT/TANGIBLE NET WORTH RATIO. A ratio of Total
Liabilities less Subordinated Debt to Tangible Net Worth plus Subordinated
Debt of not more than 0.75 to 1.00.
(iii) TANGIBLE NET WORTH. A Tangible Net Worth of at least
$25,000,000 plus 75% of quarterly net income, beginning with the quarter ending
March 31, 1999.
(iv) DEBT SERVICE COVERAGE. A ratio of quarterly net earnings
after tax (before one time merger related expense in one quarter only) plus
interest, depreciation and amortization for the specified period divided by the
sum of interest expense for such a quarter plus 25% of current maturities of
long term debt and capitalized leases of at least 1.50 to 1.00.
(v) PROFITABILITY. Borrower will have a minimum net profit of
$1 for each quarter, except that Borrower may incur one quarterly loss
(pre-approved by Bank) related to Section 7.3 herein, (related to both cash
expenses and non-cash write-downs) provided, however, net income before such
loss would have been greater than $0.
6.7 FURTHER ASSURANCES.
Borrower will execute any further instruments and take further action as
Bank requests to perfect or continue Bank's security interest in the Collateral
or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
Borrower will not do any of the following:
7.1 DISPOSITIONS.
Convoy, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, other than Transfers (i) of Inventory and equipment in
the ordinary course of business; (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; or (iii) of worn-out or obsolete Equipment.
7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Engage in or permit any of its Subsidiaries to engage in any business
other than businesses equivalent to or substantially similar to the business
currently engaged in by Borrower or have a material change in its ownership of
greater than 35%. Borrower will not, without at least 30 days prior written
notice, relocate its chief executive office or add any new offices or business
locations, except for the previously disclosed June relocation of its chief
executive office.
7.3 MERGERS OR ACQUISITIONS.
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock
9
or property of another Person, except where (i) a Subsidiary is merged into
another Subsidiary, (ii) a Subsidiary into Borrower or (ii) an merger related to
a stock transaction, provided Borrower has (a) received prior written consent of
Bank, which such consent may be granted or withheld by Bank's sole discretion
and (b) Borrower has provided to Bank a Compliance Certificate with covenant
analysis prior to such transaction indicating that an Event of Default has not
occurred and is continuing and Borrower is in compliance with all financial
covenants.
7.4 INDEBTEDNESS.
Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5 ENCUMBRANCE.
Create incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest granted
here.
7.6 DISTRIBUTIONS; INVESTMENTS.
Directly or indirectly acquire or own any Person, or make any Investment
in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so. Except as provided in Section 7.3, pay any dividends or
make any distribution or payment or redeem, retire or purchase any capital stock
exceeding 10% of the Borrower's Tangible Net Worth.
7.7 TRANSACTIONS WITH AFFILIATES.
Directly or indirectly enter or permit any material transaction with any
Affiliate except transactions that are in the ordinary course of Borrower's
business, on terms less favorable to Borrower than would be obtained in an arm's
length transaction with a non-affiliated Person.
7.8 SUBORDINATED DEBT.
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent.
7.9 COMPLIANCE.
Become an "investment company" or a company controlled by an "investment
company," under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur, fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could have a material adverse effect on Borrower's business or operations or
cause a Material Adverse Change, or permit any of its Subsidiaries to do so.
8 EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT.
If Borrower fails to pay any of the Obligations when due;
10
8.2 COVENANT DEFAULT.
If Borrower does not perform any obligation in Section 6 or violates any
covenant in Section 7 or does not perform or observe any other material term,
condition or covenant in this Agreement, any Loan Documents, or in any agreement
between Borrower and Bank and as to any default under a term, condition or
covenant that can be cured, has not cured the default within 10 days after it
occurs, or if the default cannot be cured within 10 days or cannot be cured
after Borrower's attempts within 10 day period, and the default may be cured
within a reasonable time, then Borrower has an additional period (of not more
than 30 days) to attempt to cure the default. During additional time, the
failure to cure the default is not an Event of Default (but no Credit Extensions
will be made during the cure period);
8.3 MATERIAL ADVERSE CHANGE.
(i) If there occurs a material impairment in the perfection or
priority of the Bank's security interest in the Collateral or in the value of
such Collateral which is not covered by adequate insurance or (ii) if the
Bank determines, based upon information available to it and in its reasonable
judgment, that there is a reasonable likelihood that Borrower will fail to
comply with one or more of the financial covenants in Section 6 during the
next succeeding financial reporting period.
8.4 ATTACHMENT.
If any material portion of Borrower's assets is attached, seized,
levied on, or comes into possession of a trustee or receiver and the
attachment, seizure or levy is not removed in 10 days, or if Borrower is
enjoined, restrained, or prevented by court order from conducting a material
part of its business or if a judgment or other claim becomes a Lien on a
material portion of Borrower's assets, or if a notice of lien, levy, or
assessment is filed against any of Borrower's assets by any government agency
and not paid within 10 days after Borrower receives notice. These are not
Events of Default if stayed or if a bond is posted pending contest by
Borrower (but no Credit Extensions will be made during the cure period);
8.5 INSOLVENCY.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);
8.6 OTHER AGREEMENTS.
If there is a default in any agreement between Borrower and a third party
that gives the third party the right to accelerate any Indebtedness exceeding
$250,000 or that could cause a Material Adverse Change;
8.7 JUDGMENTS.
If a money judgment(s) in the aggregate of at least $250,000 is rendered
against Borrower and is unsatisfied and unstayed for 10 days (but no Credit
Extensions will be made before the judgment is stayed or satisfied); or
8.8 MISREPRESENTATIONS.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.
11
9 BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES.
When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an Event
of Default described in Section 8.5 occurs all Obligations are immediately due
and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit under
this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take
and maintain possession of any part of the Collateral, and pay, purchase,
contest, or compromise any Lien which appears to be prior or superior to its
security interest and pay all expenses incurred. Borrower grants Bank a
license to enter and occupy any of its premises, without charge, to exercise
any of Bank's rights or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral; and
(g) Dispose of the Collateral according to the Code.
9.2 POWER OF ATTORNEY.
Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's
name an any checks or other forms of payment or security; (ii) sign
Borrower's name on any invoice or ▇▇▇▇ of lading for any Account or drafts
against account debtors, (iii) make, settle, and adjust all claims under
Borrower's insurance policies; (iv) settle and adjust disputes and claims
about the Accounts directly with account debtors, for amounts and on terms
Bank determines reasonable; and (v) transfer the Collateral into the name of
Bank or a third party as the Code permits. Bank may exercise the power of
attorney to sign Borrower's name on any documents necessary to perfect or
continue the perfection of any security interest regardless of whether an
Event of Default has occurred. Bank's appointment as Borrower's attorney in
fact, and all of Bank's rights and powers, coupled with an interest, are
irrevocable until all Obligations have been fully repaid and performed and
Bank's obligation to provide Credit Extensions terminates.
9.3 ACCOUNTS COLLECTION.
When an Event of Default occurs and continues, Bank may notify any Person
owing Borrower money of Bank's security interest in the funds and verify the
amount of the Account. Borrower must collect all payments in trust for Bank and,
if requested by Bank, immediately deliver the payments to Bank in the form
received from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES.
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons Bank may make all or part of the payment or obtain
insurance policies required in Section 6.4, and take
12
any action, under the policies Bank deems prudent. Any amounts paid by Bank
are Bank Expenses and immediately due and payable, bearing interest at the
then applicable rate and secured by the Collateral. No payments by Bank are
deemed an agreement to make similar payments in the future or Bank's waiver
of any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL.
If Bank complies with reasonable banking practices it is not liable
for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act
or default of any carrier, warehouseman, bailee, or other person. Borrower
bears all risk of loss, damage or destruction of the Collateral.
9.6 REMEDIES CUMULATIVE.
Bank's rights and remedies under this Agreement, the Loan Documents, and
all other agreements are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank's exercise of one right or remedy is
not an election, and Bank's waiver of any Event of Default is not a continuing
waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver is
effective unless signed by Bank and then is only effective for the specific
instance and purpose for which it was given.
9.7 DEMAND WAIVER.
Borrower waives demand, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
10 NOTICES
All notice or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to the addresses set forth at the beginning of
this Agreement. A party may change its notice address by giving the other party
written notice.
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Oregon law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts In Washington County, Oregon.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights under it without Bank's prior written consent which may be granted or
withheld in Bank's discretion. Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation in all
or any part of, or any interest in, Bank's obligations, rights and benefits
under this Agreement.
13
12.2 INDEMNIFICATION.
Borrower will indemnify, defend and hold harmless Bank and its
officers, employees, and agents against: (a) all obligations, demands,
claims, and liabilities asserted by any other party in connection with the
transactions contemplated by the Loan Documents; and (b) all losses or Bank
Expenses incurred, or paid by Bank from, following, or consequential to
transactions between Bank and Borrower (including reasonable attorneys fees
and expenses), except for losses caused by Bank's gross negligence or willful
misconduct.
12.3 TIME OF ESSENCE.
Time is of the essence for the performance of all obligations in this
Agreement.
12.4 SEVERABILITY OF PROVISION.
Each provision of this Agreement is severable from every other provision
in determining the enforceability of any provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION.
All amendments to this Agreement must be in writing and signed by
Borrower and Bank. This Agreement represents the entire agreement about this
subject matter, and supersedes prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement merge into
this Agreement and the Loan Documents. UNDER OREGON LAW, MOST AGREEMENTS,
PROMISES AND COMMITMENTS MADE BY THE BANK AFTER OCTOBER 3, 1989 CONCERNING
LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR
HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN
WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY US TO BE ENFORCEABLE.
12.6 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7 SURVIVAL.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.
12.8 CONFIDENTIALITY.
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the loans, (iii) as required by law,
regulation, subpoena, or other order, (iv) as required in connection with Bank's
examination or audit and (v) as Bank considers appropriate exercising remedies
under this Agreement. Confidential information does not include information that
either: (a) is in the public domain or in Bank's possession when disclosed to
Bank, or becomes part of the public domain after disclosure to Bank; or (b) is
disclosed to Bank by a third party, if Bank does not know that the third party
is prohibited from disclosing the information.
14
12.9 EFFECT OF AMENDMENT AND RESTATEMENT.
This Agreement is intended to and does completely amend and restate,
without novation, the Original Agreement. All advances or loans outstanding
under the Original Agreement are and shall continue to be outstanding under
this Agreement. All security interests granted under the Original Agreement
are hereby confirmed and ratified and shall continue to secure all
Obligations under this Agreement.
12.10 ATTORNEYS' FEES, COSTS AND EXPENSES.
In any action or proceeding between Borrower and Bank arising out of the
Loan Documents, the prevailing party will be entitled to recover its reasonable
attorneys' fees and other costs and expenses incurred, in addition to any other
relief to which it may be entitled.
13 DEFINITIONS
13.1 DEFINITIONS.
In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or
lease of goods (including licensing software and other technology) or
provision of services, all credit insurance, guaranties, other security and
all merchandise returned or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing.
"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Committed Revolving Line.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs and
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"BORROWER'S BOOKS" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs
or any equipment containing the information.
"BORROWING BASE" shall mean 80% of Eligible Accounts (the "Standard
Borrowing Base") as determined by Bank from Borrower's most recent Borrowing
Base Certificate. Notwithstanding the foregoing, at such times as the Quick
Ratio exceeds 2.00 to 1.00, Borrowing Base shall mean (i) $2,000,000 (the
"Non-Formula Amount") for up to 14 days plus (ii) 80% of Eligible Accounts.
Within 14 days of an Advance against such Non-Formula Amount, the Advance
shall be either be repaid or be supported by the Standard Borrowing Base. If
Advances exceed the Non-Formula Amount during such period, the entire amount
of outstanding Advances must not exceed the Standard Borrowing Base.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed.
"CAPITALIZED PRODUCT DEVELOPMENT COSTS" are all costs associated with
the development of Borrower's product including, but not limited to software,
that are not recorded as an expense and have been classified as an asset
account.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the Oregon Uniform Commercial Code.
15
"COLLATERAL" is the property described on EXHIBIT A.
"COMMITTED EQUIPMENT LINE" is a Credit Extension of up to $7,500,000,
subject to the Credit Limit.
"COMMITTED REVOLVING LINE" is an Advance of up to $10,000,000, subject to
the Credit Limit.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"CREDIT LIMIT" is Advances or Equipment Advances not to exceed
$15,000,000 in the aggregate.
"CREDIT EXTENSION" is each Advance, Equipment Advance or any other
extension of credit by Bank for Borrower's benefit.
"CURRENT LIABILITIES" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year.
"DEFERRED MAINTENANCE REVENUE" is all amounts received in advance of
performance under maintenance contract and not yet recognized as revenue.
"ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5;
BUT Bank may change eligibility standards by giving Borrower notice. Unless Bank
agrees otherwise in writing, Eligible Accounts will not include:
(a) Accounts that the account debtor has not paid within 90 days of
invoice date;
(b) Accounts for an account debtor, 50% or more of whose Accounts have
not been paid within 90 days of invoice date;
(c) Credit balances over 90 days from invoice date;
(d) Accounts for an account debtor, including Affiliates, whose total
obligations to Borrower exceed 25% of all Accounts, for the amounts that
exceed that percentage, unless the Bank approves in writing except for
those certain Accounts from Wireless affiliates of AT& T, Sprint and
Airtouch, for which the percentage may be 40%;
(e) Accounts for which the account debtor does not have its principal
place of business in the United States;
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality except
for Accounts of the United States if the payee has assigned its payment
rights to Bank and the assignment has been acknowledged under the
Assignment of Claims Act of 1940 (31 U.S.C. 3727);
16
(g) Accounts for demonstration or promotional equipment, or in which
goods are consigned, sales guaranteed, sale or return, sale on approval,
▇▇▇▇ and hold, or other terms if account debtor's payment may be
conditional;
(h) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(i) Accounts in which the account debtor disputes liability or makes any
claim and Bank believes there may be a basis for dispute (but only up to
the disputed or claimed amount), or if the Account Debtor is subject to
an Insolvency Proceeding, or becomes insolvent, or goes out of business;
(j) Accounts for which Bank reasonably determines collection to be
doubtful.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"EQUIPMENT ADVANCE" is defined in Section 2.1.2.
"EQUIPMENT AVAILABILITY END DATE" is defined in Section 2.1.2.
"EQUIPMENT MATURITY DATE" is defined in Section 2.1.2.
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"GAAP" is generally accepted accounting principles.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations
for surety bonds and letters of credit, (b) obligations evidenced by notes,
bonds, debentures or similar instruments, (c) capital lease obligations and
(d) Contingent Obligations.
"INSOLVENCY PROCEEDING" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INVENTORY" is present and future inventory in which Borrower has any
interest including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"INVESTMENT" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.
"MATERIAL ADVERSE CHANGE" is defined in Section 8.3.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including letters of credit and
Exchange Contracts and including interest accruing after Insolvency Proceedings
begin and debts, liabilities, or obligations of Borrower assigned to Bank.
17
"ORIGINAL AGREEMENT" has the meaning set forth in recital paragraph A.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Agreement or any other
Loan Document;
(b) Indebtedness existing on the Closing Date and shown on the Schedule;
(c) Subordinated Debt.
(d) Indebtedness to trade creditors incurred in the ordinary course of
business; and
(e) Indebtedness secured by Permitted Liens.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Schedule and existing on the Closing Date;
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing
within 1 year from its acquisition, (ii) commercial paper maturing no
more than 1 year after its creation and having the highest rating
from either Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors
Service, Inc., and (iii) Bank's certificates of deposit issued
maturing no more than 1 year after issue; and
(c) Investments which do not exceed 10% of Tangible Net Worth.
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, IF they have no priority over
any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower
or its Subsidiaries incurred for financing the acquisition of the Equipment,
or (ii) existing on equipment when acquired, IF the Lien is confined to the
property and Improvements and the proceeds of the equipment.
(d) Leases or subleases and licenses or sublicenses granted in the
ordinary course of Borrower's business and any interest or title of a lessor;
licensor or under any lease or license, IF the leases, subleases, licenses and
sublicenses permit granting Bank a security interest;
(e) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), BUT any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit
corporation, firm, joint stock company, estate, entity or government agency.
"PREPAYMENT FEE" means a fee on any portion of the Equipment Advances
with a fixed interest rate (the "Fixed Obligations") that is paid before the
payment due date. The Prepayment Fee is calculated as follows: First, Bank
determines a "Current Market Rate" based on what the Bank would receive if it
loaned the amount on the prepayment date in a wholesale funding market matching
maturity, principal amount and principal and interest payment dates (such
aggregate payments received being deemed the "Current Market
18
Rate Amount"). Bank, in its sole discretion, may select any wholesale funding
market rate as the Current Market Rate. Second, Bank will take the prepayment
amount and calculate the present value of each principal and interest payment
which, without prepayment, the Bank would have received during term of the Fixed
Obligations using the applicable interest rate set forth in this Agreement. The
sum of the present value calculations is the "▇▇▇▇ to Market Amount". Third, the
Bank will subtract the ▇▇▇▇ to Market Amount from the Current Market Rate
Amount. Any amount greater than zero is the Prepayment Fee.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it
is not Bank's lowest rate.
"QUICK ASSETS" is, on any date, the Borrower's consolidated, unrestricted
cash, cash equivalents, net billed accounts receivable and investments with
maturities of fewer than 12 months determined according to GAAP.
"RESPONSIBLE OFFICER" is each of the Senior Vice President, Operations
and Senior Vice President-Corporate Development, Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"REVOLVING MATURITY DATE" is April 22,2001.
"SCHEDULE" is any attached schedule of exceptions.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (and identified as subordinated by Borrower and Bank).
"SUBSIDIARY" is for any Person, or any other business entity of which
more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates of
the Person.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries MINUS, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade and service marks and names, Copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, AND (ii) Total Liabilities.
"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP,
be classified as liabilities on Borrower's consolidated balance sheet, including
all indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.
"TREASURY ▇▇▇▇ RATE" Treasury Rate is the average weekly yield (of the
week ending figures) in the most recent Federal Reserve Statistical Release on
actively traded U.S. Treasury obligations for 42 months or if a Statistical
Release is not published, the arithmetic average (to the nearest .01%) of the
per annum yields to maturity for each Business Day during the week (ending at
least two Business Days before the determination is made) of all actively traded
marketable United States Treasury fixed interest rate securities with a constant
maturity of, or not more than 30 days longer or shorter than the average life of
the principal and interest payments that are being prepaid (excluding securities
that can be surrendered at face value to pay Federal estate tax, or which
provide for tax benefits to the holder).
19
BORROWER:
Metro One Telecommunications, Inc.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
-------------------------------
Title: SVP & CFO
----------------------------
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Title: President & CEO
----------------------------
BANK:
SILICON VALLEY BANK
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Title: Assistant Vice President
-----------------------------
20
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest
in and to the following:
All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower;
All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrower's Books relating to the foregoing;
All copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
-----------------------------
FAX#: (▇▇▇) ▇▇▇-▇▇▇▇ TIME:
-----------------------------
--------------------------------------------------------------------------------
FROM: Metro One Telecommunications, Inc.
---------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
-------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
-----------------------------------------------------------
PHONE NUMBER:
-------------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT #
---------------------- --------------------------------
REQUESTED TRANSACTION TYPE REQUESTED DOLLAR AMOUNT
-------------------------- -----------------------
PRINCIPAL INCREASE (ADVANCE) $____________________________________________
PRINCIPAL PAYMENT (ONLY) $____________________________________________
INTEREST PAYMENT (ONLY) $____________________________________________
PRINCIPAL AND INTEREST (PAYMENT) $____________________________________________
OTHER INSTRUCTIONS:
-------------------------------------------------------------
--------------------------------------------------------------------------------
All Borrower's representations and warranties in the Amended and Restated Loan
and Security Agreement are true, correct and complete in all material respects
on the date of the telephone request for and Advance confirmed by this Borrowing
Certificate; but those representations and warranties expressly referring to
another date shall be true, correct and complete in all material respects as of
that date.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BANK USE ONLY
TELEPHONE REQUEST:
------------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
------------------------------- -------------------------------
Authorized Requester Phone #
------------------------------- -------------------------------
Received By (Bank) Phone #
------------------------------------
Authorized Signature (Bank)
--------------------------------------------------------------------------------
EXHIBIT C
BORROWING BASE CERTIFICATE
--------------------------------------------------------------------------------
Borrower Metro One Telecommunications, Inc. Bank: Silicon Valley Bank
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Commitment Amount: $10,000,000 ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ____ $________
2. Additions (please explain on reverse) $________
3. TOTAL ACCOUNTS RECEIVABLE $________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $_________
5. Balance of 50% over 90 day accounts $_________
6. Credit balances over 90 days $_________
7. Concentration Limits* $_________
8. Foreign Accounts $_________
9. Governmental Accounts $_________
10. Promotion or Demo Accounts $_________
11. Intercompany/Employee Accounts $_________
12. Other (please explain on reverse) $_________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $________
14. Eligible Accounts (#3 minus #13) $________
15. LOAN VALUE OF ACCOUNTS (80% of #14) $________
* 40% for Wireless affiliates of AT& T, Sprint and
Airtouch
BALANCES
16. Maximum Loan Amount $_________
17. Total Funds Available [Lesser of #16 or #15] $_________
18. Present balance owing on Line of Credit $_________
19. Outstanding under Sublimits (none) $_________
20. RESERVE POSITION (#177 minus #18 and #19) $_________
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THIS IS TRUE, COMPLETE AND CORRECT,
AND THAT THE INFORMATION IN THIS BORROWING BASE CERTIFICATE COMPLIES WITH THE
REPRESENTATIONS AND WARRANTIES IN THE AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT BETWEEN THE UNDERSIGNED AND SILICON VALLEY BANK.
------------------------
COMMENTS: BANK USE ONLY
--------------
Rec'd By:_____________
Auth. Signer
Metro One Telecommunications. Inc. Date:_________________
Verified:_____________
By: Auth. Signer
--------------------------------- Date:_________________
Authorized Signer ______________________
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FROM: METRO ONE TELECOMMUNICATIONS, INC.
The undersigned authorized officer of Metro One Telecommunications, Inc.
("Borrower") certifies that under the terms and conditions of the Amended and
Restated Loan and Security Agreement between Borrower and Bank (the
"Agreement"), (i) Borrower is in complete compliance for the period
ending_________ with all required covenants except as noted below and (ii) all
representations and warranties in the Agreement are true and correct in all
material respects on this date. Attached are the required documents supporting
the certification. The Officer certifies that these are prepared in accordance
with Generally Accepted Accounting Principles (GAAP) consistently applied from
one period to the next except as explained in an accompanying letter or
footnotes. The Officer acknowledges that no borrowings may be requested at any
time or date of determination that Borrower is not in compliance with any of the
terms of the Agreement, and that compliance is determined not just at the date
this certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
----------------- -------- ---------
10-Q, 1O-K and 8-K Within 5 days after filing with SEC Yes No
A/R & A/P Agings* Monthly w/in 30 days Yes No
Borrowing Base Certificate* Monthly w/in 30 days Yes No
Compliance Certificate Together with 10Q & 10K Yes No
* At such time as Advances become subject to the Borrowing Base.
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ---------
Maintain on a Quarterly Basis:
Minimum Quick Ratio (Adjusted) 1.50:1.00 _____:1.00 Yes No
Minimum Debt Service 1.50:1.00 _____:1.00 Yes No
Minimum Tangible Net Worth $25,000,000* $_________ Yes No
Maximum Debt/Tangible Net Worth 0.75:1.00 _____:1.00 Yes No
*plus 75% of quarterly net income,
beginning 3/31/99.
Profitability: Quarterly $_________ Yes No
-------------------------------
COMMENT REGARDING EXCEPTIONS: See Attached. BANK USE ONLY
Received by:__________________
AUTHORIZED SIGNER
Date:_________________________
Verified:_____________________
AUTHORIZED SIGNER
Date:_________________________
Compliance Status: Yes No
-------------------------------
Sincerely,
Metro One Telecommunications, Inc.
----------------------------------------
SIGNATURE
----------------------------------------
TITLE
----------------------------------------
DATE
2