EXHIBIT 10.13
LOAN AGREEMENT
THIS LOAN AGREEMENT is entered into as of October 14, 1997 (this "Loan
Agreement") between METAWAVE COMMUNICATIONS CORPORATION, a Delaware corporation
(herein called "Borrower"), and IMPERIAL BANK (herein called "Bank").
1. COMMITMENT.
A. FACILITY-A COMMITMENT. Subject to all the terms and conditions
of this Loan Agreement and prior to the termination of its commitment as
hereinafter provided, Bank hereby agrees to make loans (each a "Facility-A
Loan") to Borrower, from time to time and in such amounts as Borrower shall
request pursuant to this SECTION 1.A., up to an aggregate principal amount
outstanding under the Facility-A Loan Account (as hereinafter defined) not to
exceed the least of: (a) Eighty percent (80%) of Eligible Accounts (the
"Borrowing Base") or (b) $5,000,000.00 (the "Facility-A Commitment"). If at any
time or for any reason, the outstanding principal amount of the Facility-A Loan
Account is greater than the least of: (x) the Borrowing Base or (y) the
Facility-A Commitment, Borrower shall immediately pay to Bank, in cash, the
amount of such excess. Any commitment of Bank, pursuant to the terms of this
Loan Agreement, to make Facility-A Loans shall expire on the Facility-A Maturity
Date (as hereinafter defined), subject to Bank's right to renew said commitment
in its sole and absolute discretion at Borrower's request. Any such renewal of
said commitment shall not be binding upon Bank unless it is in writing and
signed by an officer of Bank. Provided that no Event of Default (as hereinafter
defined) has occurred and is continuing, all or any portion of the Facility-A
Loans advanced by Bank which are repaid by Borrower shall be available for
reborrowing in accordance with the terms hereof. Borrower promises to pay to
Bank the entire outstanding unpaid principal balance (and all accrued unpaid
interest thereon) of the Facility-A Loan Account on October 14, 1999 ("Facility-
A Maturity Date").
(1) FACILITY-A LOANS. The amount of each Facility-A Loan made by
Bank to Borrower hereunder shall be debited to the loan ledger account of
Borrower maintained by Bank for the Facility-A Commitment (herein called the
"Facility-A Loan Account") and Bank shall credit the Facility-A Loan Account
with all loan repayments in respect thereof made by Borrower. When Borrower
desires to obtain a Facility-A Loan, Borrower shall notify Bank (which notice
shall be signed by an officer of Borrower and shall be irrevocable) in
accordance with SECTION 2 hereof, to be received no later than 3:00 p.m. Pacific
time one (1) Banking Day (as hereinafter defined) before the day on which the
Facility-A Loan is to be made. Facility-A Loans may only be used for working
capital purposes and the issuance of letters of credits.
(a) LETTER OF CREDIT USAGE AND SUBLIMIT. Subject to the
availability of the Facility-A Commitment and in reliance on the representations
and warranties of Borrower set forth herein, at any time and from time to time
from the date hereof through the Banking Day immediately prior to the Facility-A
Maturity Date, Bank shall issue for the account of Borrower such standby and
commercial letters of credit ("Letters of Credit") as Borrower may request,
which request shall be made by delivering to Bank a duly executed letter of
credit application on Bank's standard form; provided, however, that the
outstanding and undrawn amounts under all such Letters of Credit (i) shall not
at any time exceed $3,000,000.00 and (ii) shall be deemed to constitute
Facility-A Loans for the purpose of calculating availability under the
Facility-A Commitment. Unless Borrower shall have deposited with Bank cash
collateral in an amount sufficient to cover all undrawn amounts under each such
Letter of Credit and Bank shall have agreed in writing, no Letter of Credit
shall have an expiration date that is later than the Facility-A Maturity Date.
All Letters of Credit shall be in form and substance acceptable to Bank in its
sole discretion and shall be subject to the terms and conditions of Bank's
application and letter of credit agreement, in the form of EXHIBIT B attached
hereto and incorporated herein by this reference. Borrower will pay any standard
issuance and other fees that Bank notifies Borrower will be charged for issuing
and processing Letters of Credit for Borrower.
(2) LIMITATION ON ADVANCE OF ANY FACILITY-A LOAN.
Notwithstanding any of the provisions contained in SECTION 1.A hereof, prior to
any advance of a Facility-A Loan, a representative of Bank shall have conducted
an audit of Borrower's books and records relating to the Collateral and made
extracts therefrom, and arranged for verification of the Accounts, directly with
the account debtors or otherwise, all with results reasonably satisfactory to
Bank, the cost of such audit of which shall be at Borrower's sole expense. Based
on Bank's review of such audit, and prior to the advance of a
Facility-A Loan in accordance with the terms of SECTION 1.A hereof, Bank may
adjust the Borrowing Base percentage, in its sole and reasonable discretion, as
provided for under SECTION 9.B. hereof.
(3) NON-FORMULA AVAILABILITY. Provided that no Event of Default
has occurred and is continuing, and subject to the availability of the Facility-
A Commitment and in reliance on the representations and warranties of Borrower
set forth herein, at any time from the date hereof through April 30, 1998, Bank
hereby agrees to make Facility-A Loans to Borrower in such amounts as Borrower
shall request pursuant to this SECTION 1.A.(3), in an aggregate principal amount
not to exceed $2,500,000.00 (the "Non-Formula Availability"); provided, however,
that the outstanding amounts under this Non-Formula Availability shall be deemed
to constitute Facility-A Loans for the purpose of calculating availability under
the Facility-A Commitment.
(4) INTEREST PAYMENTS ON FACILITY-A LOANS. Borrower further
promises to pay to Bank from the date of the advance of the initial Facility-A
Loan through the Facility-A Maturity Date, on or before the tenth (10th) day of
each month, interest on the average daily unpaid balance of the Facility-A Loan
Account during the immediately preceding month at a rate of interest equal to
the rate of interest per annum which Bank has announced as its prime lending
rate (the "Prime Rate"), which shall vary concurrently with any change in the
Prime Rate. Interest shall be computed at the above rate on the basis of the
actual number of days during which the principal balance of the Facility-A Loan
Account is outstanding divided by 360, which shall for interest computation
purposes be considered one (1) year.
2. LOAN REQUESTS. Requests for Loans hereunder shall be in writing duly
executed by Borrower in the form of EXHIBIT C attached hereto and incorporated
herein by this reference and shall contain a certification setting forth the
matters referred to in SECTION 1, which shall disclose that Borrower is entitled
to the amount and type of Loan being requested. Bank is hereby authorized to
charge Borrower's deposit account with Bank for all principal and interest due
Bank under this Loan Agreement.
3. DELIVERY OF PAYMENTS. Payment to Bank of all amounts due hereunder
shall be made at its Santa Clara Valley Regional office, or at such other place
as may be designated in writing by Bank from time to time. If any payment date
fall on a day that is not a day that Bank is open for the transaction of
business ("Banking Day"), the payment due date shall be extended to the next
Banking Day.
4. LATE CHARGE. If any interest payment, principal payment or principal
balance payment required hereunder is not received by Bank on or before ten (10)
days from the date in which such payment becomes due, Borrower shall pay to
Bank, a late charge equal to the lesser of (a) five percent (5.0%) of the amount
of such unpaid payment, in addition to said unpaid payment or (b) the maximum
amount permitted to be charged by applicable law, until remitted to Bank;
provided; however, nothing contained in this SECTION 4, shall be construed as
any obligation on the part of Bank to accept payment of any past due payment or
less than the total unpaid principal balance of the Facility-A Loan Account
following the FacilityA Maturity Date. All payments shall be applied first to
any late charges due hereunder, next to accrued interest then payable and the
remainder, if any, to reduce any unpaid principal due under the Facility-A Loan
Account.
5. DEFAULT INTEREST. From and after the Facility-A Maturity Date, or
such earlier date as all sums owing under the Facility-A Loan Account becomes
due and payable by acceleration or otherwise, or upon the occurrence of an Event
of Default, at the option of Bank all sums owing under the Facility-A Loan
Account shall bear interest until paid in full at a rate equal to the lesser of
(a) five percent (5.0%) per annum in excess of the then applicable interest rate
provided for in SECTION 1.A.(3) hereof or (b) the maximum amount permitted to be
charged by applicable law, until all obligations hereunder are repaid in full or
the Event of Default is waived or cured to the satisfaction of Bank, as
applicable.
6. DEFINITIONS. As used in this Loan Agreement and unless otherwise
defined herein, all initially capitalized terms shall have the meanings set
forth on EXHIBIT A attached hereto and incorporated herein by this reference.
7. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Bank: (a) That Borrower is a corporation, duly organized and existing in the
State of its incorporation and the execution, delivery and performance of each
of the Loan Documents are within Borrower's corporate powers, have been duly
authorized and are not in conflict with law or the terms of any charter, by-law
or other incorporation papers, or of any indenture, agreement or undertaking to
which Borrower is a party or by which Borrower is bound or affected; (b)
Borrower is, and at the time the Collateral becomes
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subject to Bank's security interest will be, the true and lawful owner of and
has, and at the time the Collateral becomes subject to Bank's security interest
will have, good and clear title to the Collateral, subject only to Bank's rights
therein and to Permitted Liens; (c) Each Account is, and at the time the Account
comes into existence will be, a true and correct statement of a bona fide
indebtedness incurred by the debtor named therein in the amount of the Account
for either merchandise sold or delivered (or being held subject to Borrower's
delivery instructions) to, or services rendered, performed and accepted by, the
account debtor; (d) That there are and will be no defenses, counterclaims, or
setoffs which may be asserted against the Accounts from time to time represented
by Borrower to be Eligible Accounts, except as permitted in the definition
thereof; (e) Any and all financial information, including information relating
to the Collateral, submitted by Borrower to Bank, whether previously or in the
future, is and will be true and correct in all material respects; (f) There is
no material litigation or other proceeding pending or threatened against or
affecting Borrower, and Borrower is not in default with respect to any order,
writ, injunction, decree or demand of any court or other governmental or
regulatory authority; (g) (i) The consolidated balance sheets of Borrower dated
as of September, 1997, and the related consolidated profit and loss statements
for the fiscal year then ended, copies of which have heretofore been delivered
to Bank by Borrower, and all other statements and data submitted in writing by
Borrower to Bank in connection with Borrower's request for credit are true and
correct, and said balance sheet and profit and loss statement accurately present
the financial condition of Borrower as of the date thereof and the results of
the operations of Borrower for the period covered thereby, and have been
prepared in accordance with GAAP, (ii) since such date, there have been no
material adverse changes in the financial condition of Borrower, and (iii)
Borrower has no knowledge of any material liabilities, contingent or otherwise,
which are not reflected in said balance sheet, and Borrower has not entered into
any special commitments or substantial contracts which are not reflected in said
balance sheet, other than in the ordinary and normal course of its business,
which may have a Material Adverse Effect upon its financial condition,
operations or business as now conducted; (h) Borrower has no material liability
for any delinquent local, state or federal taxes, and, if Borrower has
contracted with any government agency, it has no liability for renegotiation of
profits; and (i) to the best of its knowledge, Borrower, as of the date hereof,
possesses all necessary trademarks, trade names, copyrights, patents, patent
rights, and licenses to conduct its business as now operated, without any known
conflict with valid trademarks, trade names, copyrights, patents, patent rights
and license rights of others.
8. NEGATIVE COVENANTS. Borrower agrees that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or the
commitment of Bank hereunder is in effect, neither Borrower, nor any of its
subsidiaries ("Subsidiaries") will, without the prior written consent of Bank,
which will not be unreasonably withheld:
A. Make any substantial change in the character of its business as
now conducted;
B. Create, incur, assume or permit to exist any Indebtedness other
than loans from Bank except obligations now existing as shown in the financial
statements referenced in SECTION 7.(G)(I), excluding those being refinanced by
Bank, Subordinated Debt and Permitted Indebtedness; or sell or transfer, either
with or without recourse, any accounts or notes receivable or any monies due or
to become due;
C. Create, incur, assume or permit to exist any mortgage, pledge,
encumbrance, lien or charge of any kind (including the charge upon property at
any time purchased or acquired under conditional sale or other title retention
agreement) upon any asset now owned or hereafter acquired by it, other than
Permitted Liens and liens in favor of Bank;
D. Sell, dispose of or grant a security interest in any of the
Collateral other than to Bank (other than the disposing of such Collateral in
the ordinary and normal course of its business as now conducted, such Collateral
which is disposed in connection with the sale of Network Services Division or
other assets which are obsolete or otherwise considered surplus), or execute any
financing statements covering the Collateral in favor of any secured party or
Person other than Bank;
E. Sell, transfer, assign, mortgage, pledge, license (except in the
ordinary and normal course of its business as it is now conducted), lease, grant
a security interest in, or otherwise encumber any of its Intellectual Property;
F. Make any loans or advances to any Person or other entity other
than in the ordinary and normal course of its business as now conducted
(provided that such loans or advances are not made to any Person or entity which
is controlled by or under common control with Borrower);
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G. Purchase or otherwise acquire all or substantially all of the
assets or business of any Person or other entity; or liquidate, dissolve, merge
or consolidate, or commence any proceedings therefore; or, except in the
ordinary and normal course of its business as now conducted, sell (including,
without limitation, the selling of any property or other asset accompanied by
the leasing back of the same) any assets including any fixed assets, any
property, or other assets necessary for the continuance of its business as now
conducted; and
H. Declare or pay any dividend or make any other distribution on any
of its capital stock now outstanding or hereafter issued or purchase, redeem or
retire any of such stock other than in dividends or distributions payable in
Borrower's or any such Subsidiary's capital stock, except for the repurchase of
Borrower's capital stock from officers, directors, employees or consultants of
Borrower upon termination of their employment with or rendering of services to
Borrower.
9. AFFIRMATIVE COVENANTS. Borrower affirmatively covenants that so long
as any loans, obligations or liabilities remain outstanding or unpaid to Bank or
the commitment of Bank hereunder is in effect, it will:
A. Furnish Bank from time to time such financial statements and
information as Bank may reasonably request and inform Bank immediately upon the
occurrence of a material adverse change therein;
B. Notwithstanding the provisions contained in SECTION 1.A.(2)
hereof, permit representatives of Bank to conduct annual audits of Borrower's
books and records relating to the Collateral and make extracts therefrom, with
results satisfactory to Bank, provided that Bank shall use its best efforts to
not interfere with the conduct of Borrower's business, and to the extent
possible to arrange for verification of the Accounts directly with the account
debtors obligated thereon or otherwise, all under reasonable procedures
acceptable to Bank and at Borrower's sole expense. Borrower hereby acknowledges
and agrees that upon completion of any such audit, including any such audit
conducted in accordance with the provisions of SECTION 1.A.(2) hereof, Bank
shall have the right to adjust the Borrowing Base percentage based on its review
of the results of such Collateral audit, if in its reasonable discretion the
Accounts have a lower likelihood of collection than Bank previously believed
prior to such Collateral audit;
C. Promptly notify Bank of any attachment or other material legal
process levied against any of the Collateral and any information received by
Borrower relative to the Collateral, including the Accounts, the account debtors
or other Persons obligated in connection therewith, which may in any way affect
the value of the Collateral or the rights and remedies of Bank in respect
thereto;
D. Reimburse Bank upon demand for any and all legal costs, including
reasonable attorneys' fees, and other expense incurred in collecting any sums
payable by Borrower under the Facility-A Loan Account or any other obligation
secured hereby, enforcing any term or provision of this Loan Agreement or
otherwise or in the checking, handling and collection of the Collateral and the
preparation and enforcement of any agreement relating thereto;
E. Notify Bank of each location and of each office of Borrower at
which records of Borrower relating to the Accounts are kept;
F. Provide, maintain and deliver to Bank policies insuring the
Collateral against loss or damage by such risks and in such amounts, forms and
companies as Bank may require (to the extent customarily maintained by
businesses similar to Borrower) and with loss payable to Bank, and, in the event
Bank takes possession of the Collateral, the insurance policy or policies and
any unearned or returned premium thereon, to the extent necessary to repay any
indebtedness owed to Bank, shall at the option of Bank become the sole property
of Bank, such policies and the proceeds of any other insurance covering or in
any way relating to the Collateral, whether now in existence or hereafter
obtained, being hereby assigned to Bank;
G. In the event the unpaid balance of the Facility-A Loan Account
shall exceed the maximum amount of outstanding loans to which Borrower is
entitled under SECTION 1 hereof, as applicable, Borrower shall immediately pay
to Bank for credit to the Facility-A Loan Account the amount of such excess;
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H. Maintain and preserve all rights, franchises and other authority
adequate and necessary for the conduct of its business and maintain and preserve
its existence in the State of its incorporation and any other state(s) in which
Borrower conducts its business, except with respect to such other state(s), as
the failure to do so would not have a Material Adverse Effect;
I. Maintain public liability, property damage and workers
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses. Borrower shall provide evidence of property
insurance in amounts and types acceptable to Bank, and certificates naming Bank
as a loss payee;
J. Pay and discharge, before the same becomes delinquent and
penalties accrue thereon, all taxes, assessments and governmental charges upon
or against it or any of its properties, and any of its other liabilities at any
time existing, except to the extent and so long as: (1) the same are being
contested in good faith and by appropriate proceedings in such manner as not to
cause any Material Adverse Effect or the loss of any right of redemption from
any sale thereunder; and (2) it shall have set aside on its books reserves
(segregated to the extent required by GAAP);
K. Maintain a standard and modern system of accounting in accordance
with GAAP on a basis consistently maintained; permit Bank's representatives to
have access to, and to examine its properties, books and records at all
reasonable times; provided that Bank shall use its best efforts to not interfere
with the conduct of Borrower's business;
L. Maintain its properties, equipment and facilities in good order
and repair;
M. Prior to allowing any of Borrower's raw materials, work in
process, finished goods inventory and property, plant and equipment to be
transported to or be held at any contract manufacturer, warehouse or other
location (other than with bona fide distributors and retail accounts), Borrower
shall provide notice to Bank and Borrower shall have complied with such filing
and notice requirements as shall, in Bank's opinion, assure Borrower's and
Bank's priority in such property over creditors of such contract manufacturer,
warehouseman or operator of such other location, including, without limitation,
making filings under California Commercial Code (S)2326, providing notice under
California Commercial Code (S)9114 and making filings and publications as
required under California Civil Code (S)3440.1 and (S)3440.5 All such filings,
notices and publications shall be in form and substance satisfactory to Bank.
10. FINANCIAL COVENANTS AND INFORMATION. All financial covenants and
financial information referenced herein shall be interpreted and prepared in
accordance with GAAP as used in the United States of America applied on a basis
consistent with previous years. Compliance with the financial covenants shall
be calculated and monitored on a monthly basis, except as shall be expressly
stated to the contrary. Borrower affirmatively covenants that so long as any
loans, obligations or liabilities remain outstanding or unpaid to Bank or any
commitment is outstanding hereunder, it will, on a consolidated basis:
A. At all times, maintain a Minimum Tangible Net Worth (meaning all
assets, excluding any value for goodwill, trademarks, patents, copyrights,
organization expense and other similar intangible items, less all liabilities,
plus Subordinated Debt) of not less than $6,000,000.00.
B. At all times maintain a Maximum Ratio of Total Liabilities
(meaning all liabilities, excluding Subordinated Debt) to Tangible Net Worth (as
defined in SECTION 10.A. hereof) not to exceed 1.50:1.00;
C. At all times maintain a Minimum Quick Ratio (meaning all cash
plus Accounts divided by current liabilities) of not less than 1.00:1.00;
D. As soon as it is available, but not later than twenty-five (25)
days after and as of the end of each month, deliver to Bank an internally-
prepared financial statement consisting of a balance sheet and profit and loss
statement, in form satisfactory to Bank, and a Compliance Certificate in the
form of EXHIBIT D attached hereto and incorporated herein by this reference,
certified by an officer of Borrower;
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E. As soon as it is available, but not later than one hundred twenty
(120) days after the end of Borrower's fiscal year, deliver to Bank unqualified
copies of Borrower's consolidated financial statements together with changes in
financial position audited by an independent certified public accountant
selected by Borrower but acceptable to Bank;
F. So long as the Facility-A Commitment shall be outstanding or any
amounts remain outstanding and unpaid under the Facility-A Loan Account, as soon
as it is available, but not later than twenty-five (25) days after and as of the
end of each month, deliver to Bank, in such form and detail as Bank may require,
statements showing aging of the Accounts and Borrower's accounts payable,
together with a Borrowing Base Certificate in the form of EXHIBIT E attached
hereto and incorporated herein by this reference, certified by an officer of
Borrower. Notwithstanding the foregoing, as a condition to any request for a
FacilityA Loan, Borrower shall have delivered to Bank said aging statements as
well as a Borrowing Base Certificate covering the most recent month then ended
prior to the date of Borrower's request for an advance for a FacilityA Loan;
G. Upon the reasonable request of Bank, deliver to Bank current
budgets, sales projections, operating plans and other financial exhibits and
information in form and substance satisfactory to Bank; and
H. Upon any officer becoming aware, deliver immediately to Bank
written notice of any pending or threatened litigation claiming, or reasonably
likely to result in, damages against Borrower in an amount in excess of
$150,000.00.
11. LOAN FEE. Borrower has paid, and Bank hereby acknowledges receipt of
a loan fee in the amount of Twenty-five Thousand Dollars ($25,000.00).
12. DEFAULT AND REMEDIES. The occurrence of any one or more of the
following shall constitute an "Event of Default": (a) Default be made in the
payment of any obligation by Borrower under any Loan Document; (b) Except for
any failure to pay as described in clause (a) above, material breach be made in
any warranty, statement, promise, term or condition, contained herein or in any
other Loan Document and the same shall not have been cured to the satisfaction
of Bank within fifteen (15) days after Borrower shall have become aware thereof,
whether by written notice from Bank, or otherwise, (except that no cure period
shall exist for breaches in respect of Borrower's obligations under SECTION 8,
SUBSECTIONS 9.A., 9.B., 9.C., 9.F., 9.G. and 9.H., SUBSECTIONS 10.A., 10.B. and
10.C. of this Loan Agreement, and SECTIONS 1 and 2 of the General Security
Agreement and a cure period of five (5) days shall exist for SUBSECTIONS 9.I.,
10.D., 10.E. and 10.F.); (c) Any statement, warranty or representation made by
Borrower at any time proves materially false; (d) Borrower defaults in the
repayment of any principal of or the payment of any interest on any indebtedness
exceeding in the aggregate principal amount $100K or breaches or violates any
term or provision of any promissory note, loan agreement, mortgage, indenture or
other evidence of such indebtedness pursuant to which amounts outstanding in the
aggregate exceed $2.0M if the effect of such breach is to permit the
acceleration of such indebtedness, whether or not waived by the note holder or
obligee, and such failure shall not have been cured to Bank's satisfaction
within fifteen (15) calendar days after Borrower shall become aware thereof,
whether by written notice from Bank or otherwise, or there has in fact been an
acceleration of such indebtedness; (e) Borrower becomes insolvent or makes an
assignment for the benefit of creditors; (f) Any proceeding be commenced by
Borrower under any bankruptcy, reorganization, arrangement, readjustment of debt
or moratorium law or statute or, any such a proceeding is commenced against
Borrower and is not dismissed or stayed within ten (10) days (provided that no
Loans will be made prior to the dismissal of such proceeding); (g) Any money
judgment, writ of attachment, garnishment, execution or other legal process be
entered against Borrower or issued against any material property of Borrower
which is not fully covered by insurance (subject to reasonable deductibles) and
remains unvacated, unbonded, unstayed or unpaid or undischarged for more than
fifteen (15) days (whether or not consecutive) or in any event later than five
(5) days prior to the date of any proposed sale thereunder, or if any assessment
for taxes against Borrower other than against any of its real property, is made
by the Federal or State government or any department thereof; or (h) Any change
in Borrower's financial condition, prospects or operations which has a Material
Adverse Effect. Upon the occurrence and during the continuance of an Event of
Default, Bank may, at its option and without demand first made and without
notice to Borrower, do any one or more of the following: (i) Terminate its
obligation to make loans to Borrower as provided in SECTION 1 hereof; (ii)
Declare all sums secured hereby immediately due and payable; (iii) Immediately
take possession of the Collateral wherever it may be found, using all legally
permissible means to do so, or require Borrower to assemble the Collateral and
make it available to Bank at a place designated by Bank which is reasonably
convenient to Borrower and
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Bank, and Borrower waives all claims for damages due to or arising from or
connected with any such taking; (iv) Proceed in the foreclosure of Bank's
security interest and sale of the Collateral in any manner permitted by law, or
provided for herein; (v) Sell, lease or otherwise dispose of the Collateral at
public or private sale, with or without having the Collateral at the place of
sale, and upon terms and in such manner as Bank may determine, and Bank may
purchase same at any such sale; (vi) Retain the Collateral in full satisfaction
of the obligations secured thereby to the extent permitted under the Uniform
Commercial Code; (vii) Exercise any remedies of a secured party under the
Uniform Commercial Code; or (viii) Immediately record the IP Security Agreement
with the United States Patent and Trademark Office, the Register of Copyrights
and/or the UCC Division of the California Secretary of State, to perfect Bank's
security interests created and assignment granted in the Intellectual Property
thereunder. Prior to any such disposition, Bank may, at its option, cause any of
the Collateral to be repaired or reconditioned in such manner and to such extent
as Bank may deem advisable, and any sums expended therefor by Bank shall be
repaid by Borrower and secured hereby. Bank shall have the right to enforce one
or more remedies hereunder successively or concurrently, and any such action
shall not estop or prevent Bank from pursuing any further remedy which it may
have hereunder or by law. If a sufficient sum is not realized from any such
disposition of the Collateral to pay all obligations secured by this Loan
Agreement, Borrower hereby promises and agrees to pay Bank any deficiency.
13. RECORDS RETENTION. Borrower authorizes Bank to destroy all invoices,
delivery receipts, reports and other types of documents and records submitted to
Bank in connection with the transactions contemplated herein at any time
subsequent to four (4) months from the time such items are delivered to Bank.
14. ATTORNEYS' FEES. Borrower agrees to reimburse Bank for its reasonable
attorneys' fees and expenses incurred in connection with the negotiation,
preparation, execution and delivery of the Loan Documents.
15. GOVERNING LAW; JUDICIAL REFERENCE.
A. GOVERNING LAW. This Agreement shall be deemed to have been made
in the State of California and the validity, construction, interpretation, and
enforcement hereof, and the rights of the parties hereto, shall be determined
under, governed by, and construed in accordance with the internal laws of the
State of California, without regard to principles of conflicts of law.
B. JUDICIAL REFERENCE.
(1) Other than (a) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (b) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Loan Agreement or the other Loan Documents, which controversy,
dispute or claim is not settled in writing within thirty (30) days after the
"Claim Date" (defined as the date on which a party subject to this Loan
Agreement gives written notice to all other parties that a controversy, dispute
or claim exists), will be settled by a reference proceeding in California in
accordance with the provisions of Section 638 et seq. of the California Code of
Civil Procedure, or their successor section ("CCP"), which shall constitute the
exclusive remedy for the settlement of any controversy, dispute or claim
concerning this Loan Agreement, including whether such controversy, dispute or
claim is subject to the reference proceeding and except as set forth above, the
parties waive their rights to initiate any legal proceedings against each other
in any court or jurisdiction other than the Superior Court in the County where
the real property, if any, is located or Santa Clara County, if none (the
"Court"). The referee shall be a retired Judge of the Court selected by mutual
agreement of the parties, and if they cannot so agree within forty-five (45)
days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his/her representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of Court (or
any subsequently enacted Rule). Each party shall have one peremptory challenge
pursuant to CCP (S) 170.6. The referee shall (x) be requested to set the matter
for hearing within sixty (60) days after the date of selection of the referee
and (y) try any and all issues of law or fact and report a statement of decision
upon them, if possible, within ninety (90) days of the Claim Date. Any decision
rendered by the referee will be final, binding and conclusive and judgement
shall be entered pursuant to CCP (S) 644 in any court in the State of California
having jurisdiction. Any party may apply for a reference proceeding at any time
after thirty (30) days following notice to any other party of the nature of the
controversy, dispute or claim, by filing a petition for a hearing and/or trial.
All discovery
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permitted by this Loan Agreement shall be completed no later than fifteen (15)
days before the first hearing date established by the referee. The referee may
extend such period in the event of a party's refusal to provide requested
discovery for any reason whatsoever, including, without limitation, legal
objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be taken by either party upon seven (7) days written
notice, and request for production or inspection of documents shall be responded
to within ten (10) days after service. All disputes relating to discovery which
cannot be resolved by the parties shall be submitted to the referee whose
decision shall be final and binding upon the parties. Pending appointment of the
referee as provided herein, the Superior Court is empowered to issue temporary
and/or provisional remedies, as appropriate.
(2) Except as expressly set forth in this Loan Agreement, the
referee shall determine the manner in which the reference proceeding is
conducted including the time and place of all hearings, the order of
presentation of evidence, and all other questions that arise with respect to the
course of the reference proceeding. All proceedings and hearings conducted
before the referee, except for trial, shall be conducted without a court
reporter except that when any party so requests, a court reporter will be used
at any hearing conducted before the referee. The party making such a request
shall have the obligation to arrange for and pay for the court reporter. The
costs of the court reporter at the trial shall be borne equally by the parties.
(3) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the
close of the reference proceeding which shall dispose of all of the claims of
the parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
(4) In the event that the enabling legislation which provides
for appointment of a referee is repealed (and no successor statute is enacted),
any dispute between the parties that would otherwise be determined by the
reference procedure herein described will be resolved and determined by
arbitration. The arbitration will be conducted by a retired judge of the Court,
in accordance with the California Arbitration Act, (S) 1280 through (S) 1294.2
of the CCP as amended from time to time. The limitations with respect to
discovery as set forth hereinabove shall apply to any such arbitration
proceeding.
16. MISCELLANEOUS PROVISIONS.
A. Borrower agrees that it will review the products and services
offered by Bank and use its best efforts to establish its primary banking
accounts with Bank, provided, that the products and services offered by Bank are
satisfactory to Borrower.
B. Nothing herein shall in any way limit the effect of the
conditions set forth in any other security or other agreement executed by
Borrower, but each and every condition hereof shall be in addition thereto.
C. No failure or delay on the part of Bank, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof.
D. All rights and remedies existing under this Loan Agreement or any
other Loan Document are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
E. All headings and captions in this Loan Agreement and any related
documents are for convenience only and shall not have any substantive effect.
F. This Loan Agreement may be executed in any number of
counterparts, each of which when so delivered shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. Each
such
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agreement shall become effective upon the execution of a counterpart hereof or
thereof by each of the parties hereto and telephonic notification that such
executed counterparts has been received by Borrower and Bank.
BANK: BORROWER:
IMPERIAL BANK METAWAVE COMMUNICATIONS CORPORATION,
A DELAWARE CORPORATION
By: /s/ James E. Ellison /s/ Vito Palermo
-------------------------------- -------------------------------------
Senior Vice President/Manager Chief Financial Officer and Secretary
LIST OF EXHIBITS AND SCHEDULES
- ------------------------------
EXHIBIT A: Definitions
SCHEDULE 1 TO EXHIBIT A: List of Specific Permitted Indebtedness
SCHEDULE 2 TO EXHIBIT A: List of Specific Permitted Liens
EXHIBIT B: Form of Application and Letter of Credit Agreement
EXHIBIT C: Loan Request Form
EXHIBIT D: Compliance Certificate
EXHIBIT E: Borrowing Base Certificate
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________________________________________________________________________________
________________________________________________________________________________
EXHIBIT A
DEFINITIONS
"ACCOUNTS" means any right to payment for goods sold or leased, or to be
sold or to be leased, or for services rendered or to be rendered no matter how
evidenced, including accounts receivable, contract rights, chattel paper,
instruments, purchase orders, notes, drafts, acceptances, general intangibles
and other forms of obligations and receivables.
"CAPITAL LEASE" means, as to any Person, any lease of any Property by such
Person as lessee that is, or should be in accordance with Financing Accounting
Standards Board Statement No. 13, classified and accounted for as a "capital
lease" on the balance sheet of such Person prepared in accordance with GAAP.
"CAPITAL LEASE OBLIGATION" means, with respect to any Capital Lease, the
amount of the obligation of the lessee thereunder that, in accordance with GAAP,
would appear on a balance sheet of such lessee in respect of such Capital Lease
or otherwise be disclosed in a note to such balance sheet.
"COLLATERAL" means any and all personal property of Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank now has
or hereafter acquires a security interest hereunder (including, without
limitation, the Accounts), or pursuant to the terms of the General Security
Agreement, the Intellectual Property Security Agreement (upon its recordation in
accordance with SECTION 12(VIII) hereof) or otherwise.
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend, letter of credit or other obligation of another,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary
course of business), comade or discounted or sold with recourse by that Person,
or in respect of which that Person is otherwise directly or indirectly liable,
including, without limitation, any such obligation for which that Person is in
effect liable through any agreement (contingent or otherwise) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, capital stock purchases, capital contributions or
otherwise), or to maintain the solvency of the obligor of such obligation, or to
make payment for any products, materials or supplies or for any transportation,
services or lease regardless of the nondelivery or nonfurnishing thereof, in any
such case if the purpose or intent of such agreement is to provide assurance
that such obligation will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in respect thereof. The amount of
any Contingent Obligation of any Person shall be deemed to be an amount equal to
the maximum amount of such Person's liability with respect to the stated or
determinable amount of the primary obligation for which such Contingent
Obligation is incurred or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder).
"ELIGIBLE ACCOUNTS" means such of Borrower's Accounts as Bank in its sole
reasonable discretion shall determine are eligible from time to time; provided,
however, that in no event shall Eligible Accounts include the following:
(1) all domestic and pre-approved international (foreign) Accounts
under which payment is not received within the earlier of (a) 90 days from
the applicable invoice date and (b) 60 days from the applicable payment due
date;
(2) all Accounts against which the account debtor or any other Person
obligated to make payment thereon asserts any defense, offset, counterclaim
or other right to avoid or reduce the liability represented by the
Accounts;
(3) any Accounts if the account debtor or any other Person liable in
connection therewith is insolvent, subject to bankruptcy or receivership
proceedings or has made an assignment for the benefit of creditors or whose
credit standing is unacceptable to Bank and Bank has so notified Borrower;
(4) Accounts with respect to which the account debtor is an officer,
director, shareholder, employee or Subsidiary;
-10-
(5) Accounts due from an account debtor if more than twenty-five
percent (25%) of the aggregate amount of Accounts of such account debtor
have at that time remained unpaid for more than the earlier of (a) ninety
(90) days from the applicable invoice date and (b) sixty (60) days from the
applicable payment due date;
(6) Accounts with respect to international (foreign) transactions
unless (a) such Accounts are insured or covered by a letter of credit in a
manner and form acceptable to the Bank, (b) the account debtors of such
Accounts are foreign companies with sales greater than Five Hundred Million
Dollars ($500,000,000) per year, or (c) Bank shall have otherwise permitted
in writing in its sole and absolute direction;
(7) salesperson's accounts for promotional purposes;
(8) the amount by which the aggregate of all Accounts of an account
debtor exceeds thirty-five percent (35%) of the total accounts receivable
balance;
(9) Accounts where the account debtor is a seller to borrower, to the
extent that a potential offset exists; and
(10) Accounts where the account debtor is a federal governmental
entity, federal agency or instrumentality thereof.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 12.
"FACILITY-A MATURITY DATE" has the meaning set forth in SECTION 1.A.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by the significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GENERAL SECURITY AGREEMENT" means that certain General Security Agreement
(Tangible and Intangible Personal Property) dated of even date herewith, made by
Borrower in favor of Bank.
"INDEBTEDNESS" means, as to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money, including, without limitation,
all of such indebtedness outstanding under this Loan Agreement and any of the
other Loan Documents, (b) all Capital Lease Obligations of such Person, (c) to
the extent of the outstanding indebtedness thereunder, any obligation of such
Person representing an extension of credit to such Person, whether or not for
borrowed money, (d) any obligation of such Person for the deferred purchase
price of Property or services (other than (i) trade or other accounts payable in
the ordinary course of business in accordance with customary industry terms and
(ii) deferred franchise fees), (e) all Contingent Obligations, (f) any
obligation of such Person of the nature described in clauses (a), (b), (c), (d)
or (e) above, that is secured by a Lien on assets of such Person and which is
nonrecourse to the credit of such Person, but only to the extent of the fair
market value of the assets so subject to the Lien, (g) obligations of such
Person arising under acceptance facilities or under facilities for the discount
of accounts receivable of such Person, (h) any obligation of such Person to
reimburse the issuer of any letter of credit issued for the account of such
Person upon which a draw has been made, and (i) any lease having the effect of
indebtedness, whether or not the same shall be treated as such on the balance
sheet of Borrower under GAAP.
"IP SECURITY AGREEMENT" means that certain Collateral Assignment, Patent
Mortgage and Security Agreement executed in blank by Borrower in favor of Bank
to be filed by Bank in accordance with SECTION 12(VIII) hereof.
"INTELLECTUAL PROPERTY" means collectively, all of Borrower's intellectual
property, including, without limitation, the following:
(1) Any and all copyright rights, copyright applications, copyright
registrations and like protections in each work or authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret (collectively, the "Copyrights");
11
(2) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products;
(3) Any and all design rights which may be available to Borrower;
(4) All patents, patent applications and like protections including,
without limitation, improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same (collectively, the "Patents");
(5) Any trademark and servicemark rights, whether registered or not,
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
such trademarks (collectively, the "Trademarks");
(6) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;
(7) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(8) All amendments, renewals and extensions of any of the Copyrights,
Patents or Trademarks; and
(9) All proceeds and products of the foregoing, including, without
limitation, all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
"LIEN" means any mortgage, pledge, security interest, lien or other charge
or encumbrance, including the lien or retained security title of a conditional
vendor, upon or with respect to any property or assets.
"LOAN DOCUMENTS" means this Loan Agreement, the General Security Agreement
and that certain Agreement to Provide Insurance (Real or Personal Property)
dated of even date herewith, each as executed by Borrower in favor of Bank,
together with all other documents entered into or delivered pursuant to any of
the foregoing (including, without limitation, the IP Security Agreement upon its
recordation in accordance with SECTION 12(VIII) hereof), in each case as
originally executed or as the same may from time to time be modified, amended,
supplemented or restated.
"LOANS" means the Facility-A Loans advanced pursuant to SECTION 1.
"MATERIAL ADVERSE EFFECT" means any set of circumstances or events which
(a) has or could reasonably be expected to have any material adverse effect upon
the validity or enforceability of any material provision of any Loan Document,
(b) is or could reasonably be expected to be material and adverse to the
condition (financial or otherwise) or business operations of Borrower, (c)
materially impairs or could reasonably be expected to materially impair the
ability of Borrower, to perform its material Obligations, (d) materially impairs
or could reasonably be expected to materially impair the value or priority of
Bank's security interest in any Collateral or (e) materially impairs or could
reasonably be expected to materially impair the ability of Bank to enforce any
of its legal remedies pursuant to the Loan Documents.
"PERMITTED INDEBTEDNESS" means the following:
(1) indebtedness of Borrower or Indebtedness and Contingent
Obligations of its Subsidiaries in favor of Bank arising under this Loan
Agreement and the other Loan Documents;
(2) the existing Indebtedness and Contingent Obligations disclosed on
SCHEDULE 1 attached hereto and incorporated herein by this reference;
provided that the principal amount thereof is not increased and the terms
thereof are not modified to impose more burdensome terms upon Borrower or
any of its Subsidiaries;
(3) the Subordinated Debt;
(4) extensions, renewals or refinancings of Indebtedness permitted
under this Loan Agreement, other than clause (3) immediately above;
(5) accrued dividends on the preferred stock of Borrower;
(6) interest rate and currency hedging agreements;
(7) guaranties of any Subsidiary's suppliers in connection with the
purchase of supplies in the ordinary course of business;
12
(8) guaranties of lease obligations incurred in the ordinary course
of business and to the extent otherwise permitted hereunder;
(9) Contingent Obligations constituting Permitted Liens; and
(10) the indebtedness referred to in clause (3)(a) of the definition
of Permitted Liens.
"PERMITTED LIENS" means the following:
(1) liens and security interests existing as of this date and
disclosed in SCHEDULE 2 attached hereto and incorporated herein by this
reference;
(2) liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by appropriate
proceedings;
(3) liens and security interests (a) upon or in any equipment
acquired or held by Borrower to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment and in an amount not greater than the purchase price thereof or
(b) existing on such equipment at the time of its acquisition, provided that the
lien and security interest is confined solely to the property so acquired and
improvements thereon, and the proceeds of such equipment;
(4) liens consisting of leases or subleases and licenses and
sublicenses granted to others in the ordinary course of Borrower's business not
interfering in any material respect with the business of Borrower and any
interest or title of a lessor or licensor under any lease or license, as
applicable;
(5) liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons or entities imposed
without action of such parties;
(6) liens incurred or deposits made in the ordinary course of
Borrower's business in connection with worker's compensation, unemployment
insurance, social security and other like laws;
(7) liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
(8) easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
affecting real property not interfering in any material respect with the
ordinary conduct of Borrower's business;
(9) liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(10) liens that are not prior to Bank's security interest which
constitute rights of set-off of a customary nature;
(11) any interest or title of a lessor in equipment subject to any
Capitalized Lease otherwise permitted hereunder; and
(12) any liens arising from the filing of any financing statements
relating to true leases otherwise permitted hereunder.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, firm, joint stock
company, estate, entity or governmental agency.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.
"SUBORDINATED DEBT" means indebtedness of Borrower, the repayment of
principal of which is fully subordinated in time and right of payment to the
Loans, and has been approved in Bank's sole and absolute discretion and in
writing.
13
SCHEDULE 1 TO EXHIBIT A
SPECIFIC PERMITTED INDEBTEDNESS
14
SCHEDULE 2 TO EXHIBIT A
SPECIFIC PERMITTED LIENS
15
EXHIBIT B
FORM OF APPLICATION AND LETTER OF CREDIT AGREEMENT
[TO BE PROVIDED AND ATTACHED BY BANK]
16
EXHIBIT C
LOAN REQUEST FORM
[TO BE PROVIDED AND ATTACHED BY BANK]
17
EXHIBIT D
COMPLIANCE CERTIFICATE
The consolidated financial statements dated as of __________________________ of
METAWAVE COMMUNICATIONS CORPORATION, a Delaware corporation ("Borrower")
attached hereto and submitted to IMPERIAL BANK ("Bank") pursuant to that certain
Loan Agreement dated as of October __, 1997, entered into between Borrower and
Bank (the "Loan Agreement"), are in compliance with all financial covenants
(unless otherwise noted below) as specified in SECTION 10 therein, as follows:
COVENANT: ACTUAL:
A. Minimum Tangible Net Worth of:
-----------------------------
$6,000,000.00
B. Maximum Liabilities to Tangible Net Worth Ratio:
-----------------------------------
1.50 : 1.00 ___________________
C. Minimum Quick Ratio:
-------------------
1.00 : 1.00 ___________________
Exceptions: (if none, so state):
The undersigned authorized officer of Borrower hereby certifies that Borrower is
in complete compliance with the terms and conditions of the Loan Agreement for
the period ending _____________________, ____, and as of the date of this
Compliance Certificate the representations and warranties stated therein are
true, accurate and complete as of the date hereof (except as to those
representations and warranties which specifically reference a particular date
and except as noted above).
The undersigned further certifies that s/he knows of no pending conditions which
may cause an Event of Default (as defined in the Loan Agreement) to exist in the
next thirty (30) days. The required support documents for this certification
are attached and prepared in accordance with GAAP consistently applied.
Date:____________________ METAWAVE COMMUNICATIONS CORPORATION,
a Delaware corporation
18
EXHIBIT E
BORROWING BASE CERTIFICATE
(To be provided and attached by Bank)
19