Document:

Exhibit
10.29

SIXTH AMENDMENT TO OFFICE LEASE

 

                THIS SIXTH AMENDMENT TO OFFICE
BUILDING LEASE (“Sixth Amendment”) is made and entered into as of January 1,
2004, by and between DL FNBC, L.P., a Delaware limited Partnership (“Landlord”),
and FIRST NATIONAL BANK, a national banking association (“Tenant”), with
reference to the following facts:

 

                A. Columbia Centre Associates (the “Original Landlord”) and Tenant’s predecessor in interest, First National Corporation, a
bank holding company, entered into that certain Office Building Lease dated May 14, 1984, as
amended by that certain Lease Modification Agreement dated as of July 30,1993, as amended by that certain
Second Amendment to Lease dated as of February 14, 1995, as amended by that certain Third
Amendment to Office Lease dated as of February 2, 1998, as amended by that certain Fourth
Amendment to Office Lease dated as of January 11,1998, and as amended by that certain Fifth
Amendment to Office Lease dated as of September 1, 2003 (collectively, the “Lease”).

 

                B. Landlord and Tenant desire to
amend the Lease as set forth below. Unless otherwise indicated in this Sixth Amendment, all terms
with initial capital letters used herein and not otherwise defined shall have the same definitions
as the defined terms in the Lease. 

 

                THEREFORE, for good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, Landlord and Tenant hereby
agree to amend the above Lease as follows:

 

                1. Reduction in Premises.
Prior to December 31, 2003, the Premises consisted of approximately 45,863 rentable square feet
on the first three floors of Building. Effective as of January 1, 2004, Tenant vacated Suites 270 and 300 of the Building which comprise approximately 14,499 rentable square feet. Therefore,
effective January 1, 2004, Section 1.4 of the Lease shall be deleted in its entirety and
replaced with the following: “The Premises shall mean Suites 100 and 200 of the Building consisting of
approximately 30,977 rentable square feet as depicted on attached Exhibit “A”.” Exhibit
“A” to the Lease is hereby deleted in its entirety and replaced with the attached Exhibit
“A” to this Sixth Amendment, and all references in the Lease to Exhibit “A” are hereby
amended to mean Exhibit “A” to this Sixth Amendment.

 

                2. Rentable Area. Section
1.5 of the Lease shall be deleted in its entirety and replaced with the
following: “30,977 square feet”.

 

                3. Building Expense Percentage. Section 1.6 of the Lease shall be
deleted in its entirety and replaced with the following: “Tenant’s Percentage
is 5.66%”.

 

                4. Reduced Premises
Commencement Date and Expiration Date.

 

                                a.               Commencement Date. The commencement date for the term of the Premises
(as reduced pursuant to this Sixth Amendment) shall be January 1, 2004.

 

                                b.               Expiration Date. Section 1.10 of the Lease shall be deleted in
its entirety and replaced with the following: “December 31, 2018”.

 

 

1

                                c.               Term. The Term of the Lease
for the Premises (as reduced by this Sixth Amendment) shall begin on January 1,
2004 and end on the Expiration Date (December 31, 2018).

 

                5.               Monthly Base Rent. Sections 1.7, 1.8, 3.1, and 3.2 shall be deleted in
their entirety and replaced with the following as Section 3.1:

 

                “The monthly base rent (“Base Rent”) for Premises shall be as follows:

 

	
  1/1/04 - 12/31/04

  	
   

  	
  $74,344.80
  ($2.40/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/05 - 12/31/05

  	
   

  	
  $76,513.19
  ($2.47/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/06 - 12/31/06

  	
   

  	
  $78,991.35
  ($2.55/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/07 - 12/31/07

  	
   

  	
  $81,159.74
  ($2.62/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/08 - 12/31/08

  	
   

  	
  $83,637.90
  ($2.70/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/09 - 12/31/09

  	
   

  	
  $86,116.06
  ($2.78/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/10 - 12/31/10

  	
   

  	
  $88,594.22
  ($2.86/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  l/l/l 1 - 12/31/11

  	
   

  	
  $91,382.15
  ($2.95/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/12 - 12/31/12

  	
   

  	
  $94,170.08
  ($3.04/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/13 - 12/31/13

  	
   

  	
  $96,958.01
  ($3.13/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/14 - 12/31/14

  	
   

  	
  $99,745.94
  ($3.22/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/15 - 12/31/15

  	
   

  	
  $102,843.64
  ($3.32/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/16 - 12/31/16

  	
   

  	
  $105,941.34
  ($3.42/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/17 - 12/31/17

  	
   

  	
  $109,039.04
  ($3.52/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/18 - 12/31/18

  	
   

  	
  $112,446.51
  ($3.63/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  

                The Base Rent shall be payable
in lawful money of the United States in advance, without notice, demand, deduction or offset,
commencing on January 1, 2004 and continuing on the first day of each calendar month thereafter.”

 

                6.             Right of First Refusal. Section 2.4 of the Lease
is hereby deleted in its entirety and Tenant shall have no right of first refusal
concerning the leasing of any additional space in the Building notwithstanding any contrary provisions
in any of the amendments to the Lease.

 

2

 

                7.             Option To Extend. Section 2.5 of the Lease
shall be deleted in its entirety and replaced with the following:

 

                “Tenant shall have two (2) five (5) year options (each, an “Option”, and
collectively, the “Options”) to extend the Term of this Lease (each, an “Extension”) on the same
terms and conditions as
set forth in this Lease, except the Base Rent shall be adjusted on the first day of each Extension to the “Fair Market Rent” as reasonably determined by Landlord. In
determining the Fair Market Rent Landlord shall consider all relevant factors
including without limitation the then fair market rental, together with tenant
improvement allowances, free rent and other tenant inducements then being
offered to tenants for space of comparable size, quality, condition, and
location in comparable Class A office buildings in downtown San Diego. Each Option
shall be exercised only by written unconditional notice (each, an “Option Notice”) received by Lessor no
sooner than twelve (12) months nor later than nine (9) months before expiration
of the then applicable Term. If Landlord does not timely receive Tenant's Option
Notice of the exercise of an Option in accordance with the preceding sentence,
the Option, and, as applicable, the remaining Option, shall immediately lapse,
and there shall be no further right to extend the then applicable Term. The
Options shall be exercisable by Tenant on the express condition for Landlord's
benefit that Tenant shall not be in breach of default beyond applicable notice
and grace periods at the time of the exercise of the Option or at the
commencement of the applicable Extension. The Options are personal to Tenant,
and, in the event of any transfer of Tenant's interest in this lease or the
Premises (other than subleases for less than one half of the Premises in
accordance with the terms of the Lease) before the permitted exercise of an
Option, the Option shall not be transferred to the transferee but shall instead
automatically lapse. Additionally, the Options may only be exercised for the
entire Premises.

 

                Within sixty (60) days after receipt of Tenant’s Option Notice, Landlord shall advise Tenant of the Fair
Market Rent for the Premises for the Extension term (“Fair Rental Notice”). Tenant, within thirty (30)
days after receipt of the Fair Rental Notice, shall either (i) give Landlord
final binding written notice (“Binding Notice”)
of Tenant's exercise of its Option based on the Fair Market Rent for the
Premises set forth in the Fair Rental Notice, or (ii) if Tenant disagrees with
Landlord's determination, provide Landlord with written notice of rejection
(the “Rejection Notice”). If Tenant timely provides landlord with a
Binding Notice, Landlord and Tenant shall enter into an amendment reflecting
the Fair Market Rent for the Premises as set forth in the Fair Rental Notice.
If Tenant fails to provide Landlord with either a Binding Notice or Rejection
Notice within such 30-day period, or if Tenant timely provides Landlord with a Rejection
Notice, Landlord and Tenant shall work together reasonably to agree upon the
Fair Market Rent for the Premises that shall be paid during the Extension term.
When Landlord and Tenant have agreed upon the Fair Market Rent for the Premises,
such agreement shall be reflected in a written agreement between Landlord and
Tenant and Landlord and Tenant shall enter into an amendment reflecting the
agreed Fair Market Rent for the Premises. If Landlord and Tenant are unable to
agree upon the Fair Market Rent for the Premises within thirty (30) days after
the date Landlord receives the Rejection Notice, Landlord and Tenant shall
attempt to agree in good faith upon a single appraiser to determine the Fair
Market Rent for the Premises for a time period not to exceed five (5) days from
expiration of such 30-day period. If Landlord and Tenant are unable to agree
upon a single appraiser within this five (5) day time period, then Landlord and
Tenant shall each appoint one (1) appraiser not later than fifteen (15) days
after such 5-day timed period. Within ten (10) days thereafter, the two
appointed appraisers shall appoint a third appraiser. If either

 

3

 

Landlord or Tenant fails to appoint its
appraiser within the prescribed time period, the single appraiser appointed
shall determine the Fair Market Rent of the Premises. If both parties fail to
appoint appraisers within the prescribed time periods, the first appraiser
thereafter selected by a party shall determine the Fair Market Rent of the
Premises. Each party shall bear the cost of its own appraiser, and the parties
shall share equally the cost of a single or a third appraiser, if applicable.
Each appraiser shall have at least five (5) years experience in the appraisal
of Class A office buildings in downtown San Diego, California and shall be
a member of one or more professional organizations such as MAI or an
equivalent. If a single appraiser is chosen, then such appraisal shall
determine the Fair Market Rent of the Premises. Otherwise, the Fair Market Rent
of the Premises shall be the arithmetic average of the two of the three
appraisals which are closest in amount, and the third appraisal shall be
disregarded. Landlord and Tenant shall instruct the appraiser(s) to complete
their determination of the Fair Market Rent of the Premises not later than
thirty (60) days before the commencement date for the Extension term; provided,
however, if the Fair Market Rent of the Premises is not determined before the
commencement date for the Extension term, then Tenant shall continue to pay to
Landlord the monthly rent in effect immediately prior to such Extension (the “Temporary Rent”), until the Fair Market Rent of the
Premises is determined. When the Fair Market Rent of the Premises is
determined, Landlord shall deliver notice of that amount to Tenant, and, if the
Fair Market Rent is higher than the Temporary Rent, Tenant shall pay to
Landlord, within ten (10) days after receipt of such notice, the difference
between the Temporary Rent actually paid by Tenant to Landlord and the new
monthly rent determined under this Section 2.5. Conversely, if the Fair
Market Rent is lower than the Temporary Rent, Landlord shall apply the
difference between the Temporary Rent actually paid by Tenant and the new
monthly rent determined under this Section 2.5 as a rental credit toward
Tenant’s next Base Rent due. Notwithstanding the above, Fair Market Rent, as
determined by the single appraiser or the appraisers, shall consider all relevant
factors including, without limitation, the then fair market rental, together
with tenant improvement allowances, free rent and other tenant inducements then
being offered to tenants for space of comparable size, quality, condition, and
location in comparable Class A office buildings in downtown San Diego,
California.”

 

If Tenant timely exercises
the Option, “Term” shall mean, for all purposes under the Lease, the sum of
(a) the Term, as defined under Section 4c. of the Sixth Amendment to
Office Lease, plus (b) the term of the Extension for which the Option has
been exercised.”

 

8.             Building Expense Adjustments  Section 3.3(a)
of the Lease is hereby deleted in its entirety and replaced with the following:

 

“Commencing January 1,
2004, Tenant shall pay Tenant’s Percentage of Building Expenses in excess of
the Building Expenses for calendar base year 2004 (the “Base Year”).
The Base Year Building Expenses shall be calculated to reflect an assumption
that the Building and its assessor’s parcel is fully assessed for real property
tax purposes, and, that the Building is occupied at the greater of
(i) ninety-five percent (95%), or (ii) the actual occupancy of the
Building. During calendar year 2005, Tenant shall not be responsible for paying
Tenant’s Percentage of increases in Controllable Building Expenses (as defined
below) that exceed six percent (6%) of Base Year Controllable Building
Expenses. Commencing calendar year 2006, Tenant’s obligation to pay Tenant’s
Percentage of increases in Controllable Building Expenses

 

 

4

 

shall not increase
by more than six percent (6%) over its share of the prior year’s Controllable Building Expenses. As used herein, the
term “Controllable Building Expenses” shall
mean that portion of Building
Expenses not consisting of costs of insurance premiums (as defined in Section 3.3(d) of the Lease), Real
Property Taxes and Assessments (as defined in Section 9 of this Sixth Amendment, below) and
utilities.”

 

                9. Building Expenses. In Section 3.3(c) of the Lease, Real
Property Taxes and Assessments shall be added to the definition of Building Expenses. “Real Property Taxes and Assessments” shall mean any form of assessment,
license fee, license tax, business license fee, commercial rental tax, levy, charge, improvement bond,
tax, water and sewer rents and charges, utilities and communications taxes and charges or
similar or dissimilar imposition imposed by any authority having the direct power to tax,
including any city, county, state or federal government, or any school, agricultural, lighting,
drainage or other improvement or special assessment district thereof, or any other governmental
charge, general and special, ordinary and extraordinary, foreseen and unforeseen, which may be
assessed against any legal or equitable interest of Landlord in the Premises and the Building.

 

                10. Condition of the Premises. Tenant hereby acknowledges that (i)
Tenant is currently
occupying the Premises pursuant to the terms of the Lease, and therefore Tenant accepts the Premises in their presently
existing, “as-is” condition, and (ii) neither Landlord nor any agent of Landlord has made any
representation or warranty regarding the condition of the Premises or the suitability of the
Premises for the conduct of Tenant’s business.

 

                11. Financial Statements.
Tenant shall deliver to Landlord a complete and accurate set of its published financial statements
(as contained in its 10-K report) for the calendar/fiscal year 2002 concurrently with Tenant’s
delivery to Landlord of an execution original of this Sixth Amendment. Tenant shall also provide
Landlord with a 2003 version of the 10-K report, in a reasonable time-frame following the
compilation of such report.

 

                12. Parking. Section
1.12 of the Lease shall be deleted in its entirety and replaced with the following: “Thirty-one (31)
spaces, of which six (6) shall be reserved spaces for use by Tenant’s customers as shown on the
parking diagram attached hereto as Exhibit A”. The first paragraph of Section 16.2 shall be
deleted in its entirety and replaced with the following:

 

                “Effective January 1, 2004, the
rental rate for each parking space shall be One Hundred Sixty and 00/100 Dollars ($160.00) per
month, subject to increase pursuant to Exhibit “D” to the Lease. Additionally, Tenant shall be
entitled to Tenant’s pro-rata share of visitor and handicapped parking, as may be required by applicable law.”

 

                13. Commission.
Landlord agrees that it is responsible for the payment of a brokerage commission to Newmark of
Southern California, Inc. (“Broker”),
pursuant to a separate agreement between Landlord and Broker. Landlord shall have no
other obligations or liabilities whatsoever with regard to payment of any commission or fees
to any parties in connection with this Sixth Amendment or the Lease to the extent such
parties claim a right to a commission or fees through their dealings with Tenant.
Payment of the commission is expressly conditioned upon execution by both Landlord and Tenant
of this Sixth Amendment. Tenant represents that it has had no dealings with any other
brokers in regards to this Sixth Amendment

 

5

or the Lease other
than Broker. Other than the commission payable to Broker, Landlord and Tenant each represent and warrant to the
other that no broker or finder is entitled to any further commission or finder’s fee resulting from
any action on its part. Each party agrees to indemnify, defend, protect and hold the other
harmless against any claim, loss, damage, cost or liability for any broker’s commission or finder’s fee
asserted as a result of its own act or omission in connection with this transaction. Notwithstanding the
foregoing, under no circumstances shall Broker or any other broker, finder or third party be
deemed to be a third party beneficiary under this Sixth Amendment or the Lease.

 

                14.           Tenant Improvements. Tenant shall have the right, at Tenant’s sole cost
and expense
(except as provided in Section 3.2 of the Work Letter Agreement attached hereto
as Exhibit “B”), to construct Tenant Improvements (as
defined Section 1 of Work Letter Agreement) in accordance with the terms and conditions
set forth in the Work Letter Agreement.

 

                15.           No Other Amendments. The Lease referred to hereinabove and this Sixth Amendment constitute the entire agreement
by and between Landlord and Tenant and supercede any other agreement or representation, written or
oral, that either party may hereinafter assert or allege exist, and the Lease, as hereby modified,
remains in full force, except as amended by this Sixth Amendment, and is hereby ratified and
reaffirmed.

 

                16.           Conflicts. If any conflict between this Sixth Amendment and the
Lease should arise, the terms of this Sixth Amendment shall control.

 

                17.           Successor and Assigns. This Sixth Amendment shall be binding upon and inure to the benefit of the successors and
assigns of the respective parties hereto.

 

                18.           Exhibits. The exhibits attached hereto are incorporated herein
by reference.

 

                19.           Countemarts. This Sixth Amendment may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which shall
together constitute a single instrument.

 

[SIGNATURES ON
FOLLOWING PAGE]

 

6

 

                The parties have executed this
Sixth Amendment as of the date
first written above.

 

	
  LANDLORD:

  	
  TENANT:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  DL FNBC, L.P., a
  Delaware limited partnership

  	
  FIRST NATIONAL
  BANK, a national banking association

  
	
   

  	
   

  	
   

  	
   

  
	
  By: G&I IV
  Investment FNBC Corp., a

  	
   

  	
   

  	
   

  
	
  Delaware
  corporation, Its General

  	
   

  	
   

  	
   

  
	
  Partner

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By :

  	
  /s/ Francis X.
  Tansey

  	
   

  	
  By:

  	
  /s/ Robert M.
  Borgman

  
	
  Name

  	
  FRANCIS X. TANSEY

  	
   

  	
  Name:

  	
  ROBERT M.
  BORGMAN

  
	
  Title:

  	
  PRESIDENT

  	
   

  	
  Title:

  	
  PRESIDENT, FNB.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Victor R.
  Santoro

  
	
   

  	
  Name:

  	
  VICTOR R.
  SANTORO

  
	
   

  	
  Title:

  	
  EVP, CFO FCB

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [Signature of
  two authorized officers of Tenant

  
	
   

  	
  is required.]

  	
   

  	
   

  
							

 

 

7

 

EXHIBIT
“A”

 

DEPICTION
OF PREMISES

 

 

 

	
  

  	
   

  	
  

  
	
  FIRST
  NATIONAL BANK CENTER

  FIRST FLOOR

  	
   

  	
  FIRST
  NATIONAL BANK CENTER

  SECOND FLOOR

  

 

 

	
  [ILLEGIBLE]

  
	
  INITIAL

  
	
   

  
	
  [ILLEGIBLE]

  
	
  INITIAL

  

 

 

EXHIBIT
“A”

 

 

 

 

EXHIBIT “B”

 

WORK LETTER AGREEMENT

 

In connection with
the Sixth Amendment to which this Work Letter Agreement is attached (the “Sixth Amendment”),
and in consideration of the mutual covenants hereinafter contained, Landlord and Tenant agree as follows
(unless otherwise indicated in this Work Letter Agreement, defined terms used herein have the same
definitions as the defined terms used in the Sixth Amendment or the Lease):

 

                1.             TENANT IMPROVEMENTS.
The tenant improvements (the “Tenant Improvements”) for the Premises, which may be
constructed by Tenant at Tenant’s sole cost and expense (except as provided in Paragraph 3.2,
below with respect to the Tenant Improvement Allowance), include all improvements and
fixtures to be constructed in and for the Premises pursuant to the approved Construction
Documents (as defined in Paragraph 2.1, below), including without limitation, all carpet, wall
coverings, millwork, doors, counters and partitions; all demising walls; built-in secretarial
desks, work stations, and credenzas; conference room tables; all corridors and modifications to the
bathrooms in the Premises; all lunchrooms, kitchens, computer rooms, utility rooms and other
special rooms; Tenant’s entry door signs; built-in and movable furniture; and all other tenant
improvements for the Premises. Except to the extent set forth in the immediately preceding
sentence, the Tenant Improvements shall not include and the Tenant Improvement Allowance shall not
be used for items such as Tenant’s equipment, computer systems, and telephones. Tenant
may install non-Tenant Improvement items during the same time period as the construction
of the Tenant Improvements.

 

                2.             PLANS AND SPECIFICATIONS.

 

                2.1.          Space Plan and Construction
Documents. “Construction Documents” means plans and specifications prepared
by Tenant’s Consultants (defined below), and approved by Landlord in its reasonable discretion.
Landlord shall approve or disapprove and Construction Documents submitted to Landlord for
approval within ten (10) business days after receipt of the Construction Documents by Landlord.
Tenant covenants, represents and warrants that the Construction Documents and any future modifications to
the Construction Documents (a) are or shall be consistent and compatible with the Building,
and the Building’s equipment and systems, (b) comply with all applicable codes and ordinances
and regulations of governmental agencies having jurisdiction, (c) comply with all of the
Building’s insurance regulations, and (d) are or shall be in a design build format and in such detail
as/may be reasonably required by Landlord and Landlord’s Consultants (as defined in Paragraph
2.2, below).

 

                2.2           Tenant’s Consultants. Tenant’s space planners,
architects and engineers (collectively, “Tenant’s Consultants”)
shall perform the engineering work, if any, for Tenant’s plumbing, electrical (which may be
performed by Tenant), mechanical, heating, ventilation, air conditioning and structural requirements
(“Engineers”), all of which shall be
subject to Landlord’s
reasonable approval. Tenant’s Consultants shall cooperate with Landlord and Landlord’s space planner, architects,
engineers, construction supervisors, building manager, building manager’s engineers, and other
consultants (collectively, “Landlord’s Consultants”)
to

 

EXHIBIT “B”

Page 1 of 8

 

 

 

 

 

assure that the
Construction Documents are compatible with the plans and specifications for the Building.

 

                2.3.          Changes to Plans. Tenant shall not be permitted to change Construction Documents after Landlord’s approval
thereof without first obtaining Landlord’s consent, which consent shall not be unreasonably
withheld. Landlord shall notify Tenant of its approval or disapproval (with reasons therefor)
within three (3) business days after Tenant’s submittal of the changes.

 

                2.4.          Landlord’s Review. Landlord’s review and approval of
Construction Documents as set forth in this Paragraph 2 shall be for its sole
purpose and shall not imply Landlord’s review of the same, or obligate Landlord to
review the same, for quality, design, compliance with building codes or applicable laws or
other like matters. Accordingly, notwithstanding that Construction Documents are
reviewed by Landlord or Landlord’s Consultants, and notwithstanding any advice or
assistance which may be rendered to Tenant by Landlord or Landlord’s Consultants, Landlord shall
have no liability whatsoever in connection therewith and shall not be responsible for any
omissions or errors contained in Construction Documents. Furthermore, Tenant and Tenant’s
Consultants shall verify, in the field, the dimensions and conditions as shown on the relevant
portions of the plans for the Building, and Tenant and Tenant’s Consultants shall be solely
responsible for the same, and Landlord shall have no responsibility in connection therewith.

 

                2.5.          Permits. Tenant shall be responsible for obtaining and maintaining any necessary governmental approvals and permits,
including applicable building permits and approvals, relating to any Tenant Improvements and
Construction Documents. Tenant agrees that neither Landlord nor Landlord’s Consultants shall
be responsible for obtaining any permits for any proposed Tenant Improvements, and that tenant
shall be solely responsible for obtaining such permits and certificates; provided, however, that
Landlord shall cooperate (without any additional liability, responsibility, cost or expense
to Landlord) with Tenant in executing permit applications and performing other ministerial acts
reasonably necessary to enable Tenant to obtain any such permits or certificates of occupancy.

 

3.     TENANT IMPROVEMENT COSTS/ALLOWANCE.

 

                3.1.          Tenant Improvement Costs. As used herein, the term “Tenant Improvement Costs” shall mean all of the costs to design,
construct and install the Tenant Improvements, including without limitation, the costs
of the following:

 

                                3.1.1.       all design work required to improve the Premises, including without
limitation, space planning, architectural and engineering design and documents,
interior design and documents, graphics design and documents, and the fees of
Tenant’s Consultants;

 

                                3.1.2.       all permits, connection fees, plan
checks, inspections and license fees related to the construction and
installation of Tenant Improvements required in and for the Premises; and

 

 

Page 2 of 8

 

 

 

 

3.1.3.       All other costs related to the construction and installation of the
Tenant Improvements, including, without limitation, the costs of:

(a)           Construction,
installation, modification, delivery and distribution to the Premises of all
HVAC, electrical, plumbing, life safety (other than strobe lights), and sprinkler systems; 

(b)           The cost of installing suite and directory signage
in accordance with Landlord’s criteria; 

(c)           The cost of labor, materials, supplies, contractor’s
overhead, fees and general conditions;

(d)           Demolition and removal of
any existing improvements in the
Premises.

Tenant Improvement Costs shall not include the costs of Tenant’s equipment, computer systems, and telephones which actually constitute or would
normally constitute Tenant’s personal property; such personal property-type items shall not be considered part of the Tenant Improvements. The equipment,
computer systems, and telephones shall
be paid for by Tenant at its sole cost and expense and not out of the Improvement Allowance.

3.2.          Tenant Improvement Allowance. 
Tenant shall be solely responsible for payment on a timely, lien-free basis of the entire Tenant Improvement Costs; provided, however, that Landlord shall contribute for the benefit of Tenant
an allowance of up to, but not exceeding,
Ten and 00/100 Dollars ($10.00) per
rentable square foot (which
Landlord and Tenant agree is
30,977 rentable square feet) of Premises (the “Tenant Improvement Allowance”)
to pay towards the Tenant Improvement Costs. The Tenant Improvement Allowance shall be disbursed in the manner described in Paragraph 3.4, below, and shall be used solely to assist Tenant in the payment
of the Tenant Improvement Costs. All Tenant
Improvements affixed to the building, whether or not
the cost thereof is covered by
the Tenant Improvement Allowance, shall become the property of Landlord upon their installation in
the Premises and shall remain
on the Premises at all times during and upon expiration of the Term. 

3.3.          Excess Costs.  Tenant shall be responsible for all Tenant Improvement Costs
and Tenant shall pay all such costs
directly to the contractor or other
party requesting payment as and when due, provided that nothing contained in this sentence shall be construed to waive Tenant’s right to
receive the Tenant Improvement
Allowance. 

3.4.          Disbursement of Tenant Improvement Allowance.  The Tenant Improvement Allowance shall be
paid upon completion of the Tenant Improvements on the
basis set forth below; provided,
under no circumstances shall Landlord pay any portion of the Tenant Improvement Allowance prior to January 1,
2009. Tenant shall submit to Landlord, from time-to-time during construction of the Tenant Improvements and upon completion of the Tenant Improvements, a written request for
disbursement of all or a portion of the Tenant Improvement Allowance (“Request”). The Request shall include a copy of all bills and
invoices (“Bills and Invoices”) which Tenant has or is required to pay and a certification
from Tenant’s construction
representative and the Selected Contractor (as defined in Paragraph 4.1, below)
that the amount 

 

Page 3 of 8

 

 

 

set forth in the
Request has been paid or is due and owing, together with a copy of appropriate (as determined by Landlord in its
reasonable discretion) conditional and final lien releases and waivers, as applicable for a project in
progress or a completed project, as appropriate, and all other information reasonably requested by
Landlord. Upon Landlord’s (a) receipt of such Bills and Invoices, information, and lien releases and
waivers, (b) Landlord’s determination that no person or entity has, or will have any right to file a
mechanic’s, materialmen’s or design professional’s lien against the Premises, (c)
determination that Substantial Completion (as defined in Paragraph 4.4, below) of the Tenant
Improvements has occurred, and (d) determination that no substandard work exists which
adversely affects the Building systems or the structural or exterior appearance of the Building
or any other tenant’s use of its leased premises in the Building, Landlord shall issue a check
equal to the sum of the Bills and Invoices but not to exceed the remaining amount of the Tenant
Improvement Allowance. Landlord shall have the option to issue all checks issued in
connection with work that has not yet been paid as payable jointly to Tenant and the Selected Contractor
and/or any subcontractors. Notwithstanding the foregoing, under no circumstances
shall Landlord pay any Tenant Improvement Allowance for Tenant Improvements when
Substantial Completion of same occurs after December 31,
2010, and Tenant acknowledges and agrees that it shall be solely responsible for one hundred percent (100%) of all
Tenant Improvement Costs incurred for such Tenant Improvements notwithstanding the possibility that
there exists any unused amount of the Tenant Improvement Allowance. Notwithstanding the foregoing,
Tenant may commence and/or complete the Tenant Improvements to the Premises prior
to January 1, 2009; provided, however, that Landlord shall
reimburse Tenant for such costs incurred in accordance with this Section
3.4 of the Sixth Amendment, up to the amount of the Tenant
Improvement Allowance, but not before January 1, 2009.

 

                                3.5.          No Credit for Unused Portion of the Tenant Improvement
Allowance. Any unused portion of the Tenant Improvement Allowance upon completion
of the Tenant Improvements shall not be refunded to Tenant or credited to the payment
of Base Rent under any circumstances.

 

                4.             CONSTRUCTION OF TENANT IMPROVEMENTS.

 

                                4.1.          Selected Contractor. Tenant
shall competitively bid construction of the Tenant Improvements to contractors which have been
reasonably approved by Landlord. “Selected Contractor”
means the contractor who is reasonably acceptable to Landlord and Tenant. Tenant shall enter into a
construction contract with the Selected Contractor and Tenant shall be solely responsible for the
performance of the work of the Tenant Improvements to be performed by the Selected Contractor and
all Tenant’s Agents (defined below) performing services for the Tenant and/or the Selected Contractor
in accordance with the provisions of this Work Letter Agreement. Tenant shall deliver a copy of
the construction contract to Landlord within three (3)
business days after request by Landlord.

 

                                4.2.          Tenant’s Agents. All
subcontractors, laborers, materialmen and suppliers used by Tenant (such subcontractors, laborers,
materialmen, and suppliers, and the Selected Contractor are referred to collectively herein as “Tenant’s Agents”) must be approved in writing by Landlord, which approval shall not be
unreasonably withheld or delayed.

 

 

Page 4 of 8

 

 

 

                4.3.          Landlord’s General Conditions for Tenant’s Agents and
Tenant Improvement Work. Tenant’s and Tenant’s Agent’s construction of the Tenant Improvements shall comply with the following: (i) the Tenant Improvements shall be
constructed in strict accordance with the approved Construction Documents, (ii) Tenant and
Tenant’s Agents shall not, in any way, interfere with, obstruct, or delay, any other work in
the Building; (iii) Tenant’s Agents shall submit schedules of all work relating to
the Tenant Improvements to Landlord and the Selected Contractor and the Selected Contractor
and Landlord shall, within three (3) business days of receipt thereof, inform Tenant’s
Agents of any reasonable changes which are necessary thereto, and Tenant’s Agents shall adhere to such
corrected schedule; and (iv) Tenant shall abide by all reasonable rules made by Landlord’s Building
contractor or Landlord’s Building manager with respect to the use of freight, loading dock and
service elevators, storage of materials, coordination of work with the contractors of other
tenants, and any other matter in connection with this Work Letter Agreement, including, without
limitation, the construction of the Tenant Improvements; provided such rules shall not be
discriminatorily applied against Tenant nor unreasonably delay Tenant’s construction of the Tenant
Improvement.

 

                4.4.          Requirements of Tenant’s Agents. Each of Tenant’s Agents shall guarantee to Tenant and for the benefit
of Landlord that the portion of the Tenant Improvements for which it is responsible shall be free
from any defects in workmanship and materials for a period of not less than one (1) year from the date of
Substantial Completion thereof. Each of Tenant’s Agents shall be responsible for the
replacement or repair, without additional charge, of all work done or furnished in accordance with its
contract that shall become defective within one (1) year after
the Substantial Completion of the work performed by such contractor or
subcontractors. The correction of such work shall include, without additional
charge, all additional expenses and damages incurred in connection with such
removal or replacement of all or any part of the Tenant Improvements and/or the
Building that may be damaged or disturbed thereby. All such warranties or guarantees as to
materials or workmanship of or with respect to the Tenant Improvements shall be contained in the
construction contract or subcontract and shall be written such that such guarantees or warranties
shall inure to the benefit of both Landlord and Tenant, as their respective interests may appear, and
can be directly enforced by either. Tenant covenants to give to Tenant any assignment or other
assurances which may be necessary to effect such right of direct enforcement. For purposes hereof,
“Substantial
Completion” of the Tenant Improvements shall occur upon the completion of
construction of the Tenant Improvements pursuant to the approved Construction Documents, with
the exception of any punchlist items.

 

                4.5.          Governmental Compliance. Tenant shall cause Tenant’s Agents to construct the Tenant Improvements in
compliance with the following: (i) all state, federal, city or quasi governmental laws, codes,
ordinances and regulations, as each may apply according to the rulings of the controlling public
official, agent or other person; (ii) applicable standards of the American Insurance Association (formerly,
the National Board of Fire Underwriters) and the National Electrical Code; and (iii) building material
manufacturer’s specifications.

 

                4.6.          Supervision/Inspection by Landlord. Landlord shall have the right to inspect construction of the Tenant
Improvements at all times; provided, however, that Landlord’s failure to inspect construction of the
Tenant Improvements shall in no event constitute a waiver of any of Landlord’s rights hereunder nor
shall Landlord’s inspection of the Tenant Improvements constitute Landlord’s approval of the
same. Should Landlord, in good faith,

 

 

 

Page 5 of 8

 

 

 

reasonably
disapprove any portion of the Tenant Improvements, Landlord shall notify Tenant
in writing of
such disapproval and shall specify in reasonable detail the items disapproved; provided, however, that Landlord shall
not disapprove any portion of the Tenant Improvements which have been constructed in accordance
with the approved Construction Documents. Any defects or deviations in, and/or disapproval by
Landlord of, the Tenant Improvements shall be rectified by Tenant at no expense to Landlord,
provided however, that if Landlord determines that a defect or deviation exists or disapproves of
any matter in connection with any portion of the Tenant Improvements and such defect, deviation or
matter might adversely affect the mechanical, electrical, plumbing, heating, ventilating
and air conditioning or life safety systems of the Building, the structure or exterior appearance
of the Building or any other tenant’s use of its leased premises, Landlord may take such action as
Landlord deems reasonably necessary, at Tenant’s expense and without incurring any liability
on Landlord’s part, to correct any such defect, deviation and/or matter, including, without
limitation, causing the cessation of performance of the construction of the Tenant
Improvements until such time as the defect, deviation and/or matter is corrected to Landlord’s
satisfaction. Landlord shall not charge any fee for its inspection of the Tenant Improvement work.

 

                4.7.          Notice of Completion; Copy “As Built” Plans. Within ten (10) days after Substantial Completion of construction of
the Tenant Improvements, Tenant shall cause a Notice of Completion to be recorded in the office of the
Recorder of the County of San Diego in accordance with Paragraph 3093 of the Civil Code of
the State of California or any successor statute, and shall furnish a copy thereof to Landlord
upon such recordation. If Tenant fails to do so, Landlord may execute and file the same on behalf
of Tenant as Tenant’s agent for such purpose, at Tenant’s sole cost and expense. At the
conclusion of construction, (i) Tenant shall cause its Architect and the Selected Contractor (a) to
update the approved Construction Documents as necessary to reflect all changes made to
the approved Construction Documents during the course of construction, (b) to certify to
the best of their knowledge that the “record set” of as built drawings are true and correct, which
certification shall survive the expiration or termination of this Lease, and (c) to deliver to
Landlord two (2) sets of sepias of such as
built drawings within ninety (90) days following issuance of a temporary
certificate of occupancy for the Premises, and (ii) Tenant shall deliver to
Landlord a copy of all warranties, guaranties, and operating manuals and information relating to the
improvements, equipment, and systems in the Premises.

 

                4.8.          Coordination by Tenant’s Agent with Landlord. Upon Tenant’s delivery of the construction contract to Landlord
under Paragraph 4.1 of this Work Letter Agreement, Tenant shall furnish Landlord with a schedule setting
forth the projected date of the Substantial Completion of the Tenant Improvements and choosing the
critical time deadlines for each phase, item or trade relating to the construction of the
Tenant Improvements. Each party shall cooperate with the other to coordinate Tenant’s
construction of the Tenant Improvements such that Tenant can complete the Tenant Improvements in a
timely fashion. In this regard, Tenant’s Consultants, the Selected Contractor and Landlord’s
construction representative shall meet together at reasonable intervals during the
construction of the Tenant Improvements.

 

                4.9.          Construction of Tenant Improvements. Following
Landlord’s approval of the Construction Documents, Tenant’s selection of the Selected
Contractor, Tenant’s obtaining of all applicable permits and governmental approvals,
and Tenant’s compliance with the other

 

 

Page 6 of 8

 

 

 

 

provisions of this
Paragraph 4.9, Tenant shall cause the Tenant Improvements to be diligently and expeditiously constructed by the
Selected Contractor, lien free and asbestos free, in accordance with the approved Construction Documents
and such permits and approvals. If in the reasonable judgment of Landlord the presence of Tenant’s
Agents and the work that is being performed by Tenant’s Agents unreasonably and
materially disrupts tenant improvement or other work being performed by Landlord or others in the
Building, or cause labor difficulties, Landlord shall have the right, on twenty four (24) hours
written notice to Tenant, to order any or all of Tenant’s work to cease for as long as reasonably
required by Landlord.

 

                5.             INSURANCE REQUIREMENTS. During any construction of Tenant Improvements, Tenant shall ensure that
all insurance required by the terms of the Lease are in full force and effect, including, without
limitation, all insurance requirements pursuant to Section 7 of the Work Letter attached to as
Exhibit B to certain Fourth Amendment to Office Lease dated as of January 11, 1998 (as referenced in the Recital A to the Sixth Amendment).

 

                6.             INDEMNITY. Tenant’s indemnities of Landlord as set
forth in the Lease shall also apply with respect to any and all costs, losses, damages, injuries
and liabilities related in any way to any act or omission of Tenant or Tenant’s
Agents, or anyone directly or indirectly employed by any of them, or in connection with Tenant’s
non-payment of any amount arising out of the Tenant Improvements required to be paid by
Tenant. Such indemnities by Tenant shall also apply with respect to any and all costs,
losses, damages, injuries and liabilities related in any way to Landlord’s performance of any
ministerial acts reasonably necessary, (i) to permit Tenant to complete the Tenant Improvements, and (ii)
to enable Tenant to obtain any building permit, temporary certificate of occupancy or
certificate of occupancy for the Premises, except to the extent that such costs, losses, damages, injuries
or liabilities are caused by Landlord’s gross negligence or will misconduct.

 

                7.             MISCELLANEOUS.

 

                7.1.          Clean Up Expenses. Following Substantial Completion
of the Tenant Improvements, Tenant shall, at its cost, be responsible for all clean
up of the interior and exterior to the Premises necessitated by construction of the
Tenant Improvements.

 

                7.2.          Tenant’s Representative. Tenant has designated
Lyndie L. Slack as its sole representative with respect to the matters set forth in the Work
Letter Agreement, who, until further notice to the Landlord, shall have full
authority and responsibility to act on behalf of the Tenant as required in this Work Letter Agreement.

 

                7.3.          Landlord’s Representative. Landlord has designated Glenn Fibiger, Property Manager, as its sole
representative with respect to the matters set forth in this Work Letter Agreement, who, until further
notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as
required in this Work Letter Agreement.

 

                7.4.          Tenant’s Lease Default. Notwithstanding any provision
to the contrary contained in this Lease, if an event of default by Tenant as described
in the Lease, or a default by Tenant under this Work Letter Agreement, has occurred
at any time on or before Substantial Completion of the Tenant Improvements, and such
default remains uncured after the applicable

 

 

Page 7 of 8

 

 

 

 

 

notice and cure
periods under the Lease, then (a) in addition to all other rights and remedies granted to Landlord pursuant to the
Lease, Landlord shall have the right to withhold payment of all or any portion of the Tenant
Improvement Allowance, and/or Landlord may cause the Selected Contractor to cease the construction of the
Tenant Improvements (in which case Tenant shall be responsible for any delay in the Substantial
Completion of the Tenant Improvements caused by such work stoppage and such delay shall not
be a Landlord Delay), and (b) all
other obligations
of Landlord under the terms of this Work Letter Agreement shall be forgiven
until such time as
such default is cured pursuant to the terms of the Lease.

 

 

Page 8 of 8Exhibit
10.1

Silicon
Valley Bank

 

Loan and
Security Agreement

 

	
  Borrower:

  	
   

  	
  COGENT
  COMMUNICATIONS, INC., a Delaware corporation (the “Company”)

  
	
   

  	
   

  	
  COGENT
  COMMUNICATIONS GROUP, INC., a Delaware corporation (the “Parent”)

  
	
   

  	
   

  	
  NETWORK
  EQUIPMENT SOLUTIONS, LLC, a Delaware limited liability
  company (“NES”)

  
	
   

  	
   

  	
  UFO
  GROUP, INC., a Delaware corporation

  
	
   

  	
   

  	
  ALLIED
  RISER COMMUNICATIONS CORPORATION, a Delaware corporation

  
	
   

  	
   

  	
  ALLIED
  RISER OPERATIONS CORPORATION, a Delaware corporation

  
	
   

  	
   

  	
  COGENT
  CANADA HOLDINGS, INC., a Nova Scotia corporation

  
	
   

  	
   

  	
  COGENT
  CANADA, INC., a Canadian Federal corporation; and certain Additional Borrowers added to this Agreement from time to
  time.

  

 

	
  Address for

  all Borrowers

  except NES:

  	
   

  	
  1015 31st Street, NW

  
	
   

  	
   

  	
  Washington, DC 20007

  
	
   

  	
   

  	
   

  
	
  Address

  for NES:

  	
   

  	
  2711 Centerville Road, Suite 400

  
	
   

  	
   

  	
  Wilmington,
  Delaware 19808

  

 

	
  Date:

  	
   

  	
  March 9,
  2005

  

 

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) is entered into on the
above date between SILICON VALLEY BANK (“Silicon”), whose address is 3003
Tasman Drive, Santa Clara, California 95054 and with a loan production office
located at 3353 Peachtree Road, NE, Suite M-10, Atlanta, Georgia 30326 and the
borrowers named above or now or hereafter added to this Agreement (jointly and
severally, the “Borrower”), whose chief executive office is located at one of
the two above addresses (“Borrower’s Address”). 
The Schedule to this Agreement (the “Schedule”) shall for all
purposes be deemed to be a part of this Agreement, and the same is an integral
part of this Agreement.  (Definitions of
certain terms used in this Agreement are set forth in Section 8 below.)

 

 

1.                                      LOANS.

 

1.1  Loans.  Silicon will not make any loans (the “Loans”)
to Borrower until such time as the amount in the Cash Collateral Account when
combined with the amount of the first such Loan actually made under this
Agreement would equal or exceed the Minimum Balance (such date being the “Minimum
Balance Date”).  From and after the
Minimum Balance Date, Silicon will make Loans up to the amounts (the “Credit Limit”)
shown on the Schedule, by advancing funds into the Company’s operating account
at Bank, provided no Default or Event of Default has occurred and is
continuing, and subject to deduction of Reserves for accrued interest and such
other Reserves as Silicon deems proper from time to time in its good faith
business judgment.

 

1.2  Interest.  All
Loans and all other monetary Obligations shall bear interest at the rate shown
on the Schedule, except where expressly set forth to the contrary in this
Agreement.  Interest shall be payable
monthly, on the last day of the month. 
Interest may, in Silicon’s discretion, be charged to Borrower’s
operating account, and the same shall thereafter bear interest at the same rate
as the other Loans.  If at any time there
are insufficient funds in the Borrower’s operating account to pay the
Obligations when due, Silicon may, in its discretion, charge interest to the
Cash Collateral Account.

 

1.3  Overadvances.  If at
any time or for any reason the total of all outstanding Loans and all other
monetary Obligations exceeds the Credit Limit (an “Overadvance”), Borrower
shall immediately pay the amount of the excess to Silicon, without notice or
demand.

 

1.4  Fees. 
Borrower shall pay Silicon the fees shown on the Schedule, which are in
addition to all interest and other sums payable to Silicon and are not
refundable.

 

1.5  Loan Requests.  To
obtain a Loan, Borrower after the Minimum Balance Date shall make a request to
Silicon by facsimile, telephone or electronically.  Loan requests received after 12:00 Noon
(Pacific time) may not be considered by Silicon until the next Business
Day.  Silicon may rely on any telephone
request for a Loan given by a person whom Silicon believes is an authorized
representative of Company, and Borrower will indemnify Silicon for any loss
Silicon suffers as a result of that reliance.

 

1.6  Cash Collateral Account. 
Borrower shall direct the mailing of all Items of Payment from its
Account Debtors to the lock box account maintained with SunTrust Bank, N.A. or
to such other additional or replacement post-office boxes pursuant to the
request of Silicon from time to time (collectively, the “Lockbox”).  Silicon shall have unrestricted and exclusive
access to the Lockbox.  All funds in the
Lockbox shall be forwarded to a bank account to be maintained at Silicon and
from which Silicon alone has power of access and withdrawal (the “Cash
Collateral Account”).  Each deposit into
the Cash Collateral Account shall be made not later than the next Business Day
after the date of receipt of the Items of Payment in the Lockbox.  The Items of Payment shall be deposited in
precisely the form received, except for the endorsements of Borrower where
necessary to permit the collection of any such Items of Payment, Borrower
hereby agreeing to make such endorsement. 
In the event Borrower shall fail to do so, Silicon is hereby authorized
by Borrower to make the endorsement in the name of Borrower.  Borrower will not commingle any Items of
Payment with any of the other funds or property of Borrower, but will hold them
separate and apart in trust and for the account of Silicon.

 

Prior to the Minimum Balance Date, all Items
of Payment or any other funds collected into the Cash Collateral Account up to
Four Million Dollars ($4,000,000) will be held in the Cash Collateral
Account.  On the Minimum Balance Date the
first advance of the Loan and all funds then in the Cash Collateral Account in
an aggregate amount of up to Four Million Dollars ($4,000,000) will be
automatically transferred by Silicon into a separate account maintained with
Silicon or its Affiliates in the name

 

2

 

“Cogent Communications, Inc. Collateral
Account” (the “Assigned Account”). 
Borrower agrees that all sums in the Assigned Account shall constitute
part of the Collateral and may not be withdrawn from the Assigned Account by
Borrower at any time until all Obligations have been repaid in full.  After the Minimum Balance Date, no further
funds will be transferred by Silicon into the Assigned Account and Silicon will
apply the whole or any part of the collected funds credited to the Cash
Collateral Account against the Obligations, the order and method of such
application to be in the sole discretion of Silicon, and the balance, if any,
will be credited to a depository account of Borrower with Silicon.

 

1.7  Letters of Credit.  At
the request of Borrower, Silicon may, in its good faith business judgment,
issue or arrange for the issuance of letters of credit for the account of
Borrower, in each case in form and substance satisfactory to Silicon in its
sole discretion (collectively, “Letters of Credit”).  The aggregate face amount of all Letters of
Credit from time to time outstanding shall not exceed the amount shown on the Schedule (the
“Letter of Credit Sublimit”), and shall be reserved against Loans which would
otherwise be available hereunder, and in the event at any time there are
insufficient Loans available to Borrower for such reserve, Borrower shall
deposit and maintain with Silicon cash collateral in an amount at all times
equal to such deficiency, which shall be held as Collateral for all purposes of
this Agreement for such Letters of Credit until there is no such deficiency at
which time, provided there is no Default or Event of Default such cash will be
returned to Borrower.  Borrower shall pay
all bank charges (including charges of Silicon) for the issuance of Letters of
Credit, together with such additional fee as Silicon’s letter of credit
department customarily charge in connection with the issuance of the Letters of
Credit.  Any payment by Silicon under or
in connection with a Letter of Credit shall constitute a Loan hereunder on the
date such payment is made unless repaid in full on the same Business Day.  Each Letter of Credit shall have an expiry
date no later than thirty (30) days prior to the Maturity Date.  Borrower hereby agrees to indemnify and hold
Silicon harmless from any loss, cost, expense, or liability, including payments
made by Silicon, expenses, and reasonable attorneys’ fees incurred by Silicon
arising out of or in connection with any Letters of Credit.  Borrower agrees to be bound by the
regulations and interpretations of the issuer of any Letters of Credit
guaranteed by Silicon and opened for Borrower’s account or by Silicon’s
interpretations of any Letter of Credit issued by Silicon for Borrower’s
account, and Borrower understands and agrees that Silicon shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following Borrower’s instructions or those contained in the Letters of Credit
or any modifications, amendments, or supplements thereto.  Borrower understands that Letters of Credit
may require Silicon to indemnify the issuing bank for certain costs or
liabilities arising out of claims by Borrower against such issuing bank.  Borrower hereby agrees to indemnify and hold
Silicon harmless with respect to any loss, cost, expense, or liability incurred
by Silicon under any Letter of Credit as a result of Silicon’s indemnification
of any such issuing bank.  The provisions
of this Loan Agreement, as it pertains to Letters of Credit, and any other Loan
Documents relating to Letters of Credit are cumulative.  In the event of any conflict between this
Agreement and the terms of any documents executed in connection with such
Letters of Credit, the terms of such letter of credit documents shall control.

 

1.8  Cash Management/ACH Services.  As
part of the Loans, Borrower may use up to the amount of Cash Management Services
Sublimit as set forth on the Schedule for Silicon’s cash management
services, which may include merchant services, direct deposit of payroll,
business credit card, and check cashing services identified in various cash
management services agreements related to such services (the “Cash Management
Services”).  Such aggregate amounts
utilized under the Cash Management Services Sublimit will at all times reduce
the amount otherwise available to be borrowed under the Loans.  Any

 

3

 

amounts Silicon pays on behalf of Borrower or
any amounts that are not paid by Borrower for any Cash Management Services will
be treated as Loans and will accrue interest pursuant to this Agreement.

 

1.9  Inter-Company Debt, Contribution.  Without implying any limitation on the joint
and several nature of the Obligations, Silicon agrees that, notwithstanding any
other provision of this Agreement, the Persons included in the term “Borrower”
may create reasonable inter-company indebtedness between or among the Persons
included in the term “Borrower” with respect to the allocation of the benefits
and proceeds of the Loans, Letters of Credit and Cash Management Services under
this Agreement.  The Persons included in
the term “Borrower” agree among themselves, and Silicon consents to that
agreement, that each such Person shall have rights of contribution from all of
the such Persons to the extent such Person incurs Obligations in excess of the
proceeds of the Loans received by, or allocated to purposes for the direct
benefit of, such Person.  All such
indebtedness and rights shall be, and are hereby agreed by the Persons included
in the term “Borrower” to be, subordinate in priority and payment to the
repayment in full in cash of the Obligations, and, unless Silicon agrees in
writing otherwise, shall not be exercised or repaid in whole or in part until
all of the Obligations have been paid in full in cash.  Each Person included in the term “Borrower”
agrees that all of such inter-company indebtedness and rights of contribution
are part of the Collateral and secure the Obligations.  Each Person included in the term “Borrower”
hereby waives all rights of counter claim, recoupment and offset between or
among themselves arising on account of that indebtedness and otherwise.  No Person included in the term “Borrower”
shall evidence the inter-company indebtedness or rights of contribution by note
or other instrument, unless the original of each such note or other instrument
will, upon Silicon’s request, be delivered to Silicon, and shall not secure
such indebtedness or rights of contribution with any lien or security.

 

1.10  Borrowers are Integrated Group.

 

(i)                                     Each Person included in the term “Borrower”
hereby represents and warrants to Silicon that each of them will derive
benefits, directly and indirectly, from each Letter of Credit and from each
Loan, both in their separate capacity and as a member of the integrated group
to which each such Person belongs and because the successful operation of the
integrated group is dependent upon the continued successful performance of the
functions of the integrated group as a whole, because (i) the terms of the
consolidated financing provided under this Agreement are more favorable than
would otherwise would be obtainable by such Persons individually, and (ii) the
additional administrative and other costs and reduced flexibility associated
with individual financing arrangements which would otherwise be required if
obtainable would substantially reduce the value to such Persons of the
financing.

 

(ii)                                  Each Person included in the term “Borrower”
hereby represents and warrants that all of the representations and warranties
contained in this Agreement are true and correct on and as of the date hereof
as if made on and as of such date, both before and after giving effect to this
Agreement, and that no Event of Default or Default has occurred and is
continuing or exists or would occur or exist after giving effect to this
Agreement.

 

1.11 Primary
Obligations. The obligations and liabilities of each Person
included in the term “Borrower”, as guarantor under this paragraph shall be
primary, direct and immediate, shall not be subject to any counterclaim,
recoupment, set off, reduction or defense based upon any claim that such Person
may have against any one or more of the other Persons included in the term “Borrower”,
Silicon and/or any other guarantor and shall not be conditional or contingent
upon pursuit or enforcement by

 

4

 

Silicon of any
remedies it may have against Persons included in the term “Borrower” with
respect to this Agreement, whether pursuant to the terms thereof or by
operation of law.  Without limiting the
generality of the foregoing, Silicon shall not be required to make any demand
upon any of the Persons included in the term “Borrower”, or to sell the
Collateral or otherwise pursue, enforce or exhaust its or their remedies
against the Persons included in the term “Borrower” or the Collateral either
before, concurrently with or after pursuing or enforcing its rights and
remedies hereunder.  Any one or more
successive or concurrent actions or proceedings may be brought against each
Person included in the term “Borrower” under this paragraph, either in the same
action, if any, brought against any one or more of the Persons included in the
term “Borrower” or in separate actions or proceedings, as often as Silicon may
deem expedient or advisable.  Without
limiting the foregoing, it is specifically understood that any modification,
limitation or discharge of any of the liabilities or obligations of any one or
more of the Persons included in the term “Borrower”, any other guarantor or any
obligor under any of the Loan Documents, arising out of, or by virtue of, any
bankruptcy, arrangement, reorganization or similar proceeding for relief of
debtors under federal or state law initiated by or against any one or more of
the Persons included in the term “Borrower”, in their respective capacities as
borrowers and guarantors under this paragraph, or under any of the Loan
Documents shall not modify, limit, lessen, reduce, impair, discharge, or
otherwise affect the liability of each Borrower under this paragraph in any
manner whatsoever, and this paragraph shall remain and continue in full force
and effect.  It is the intent and purpose
of this paragraph that each Person included in the term “Borrower” shall and
does hereby waive all rights and benefits which might accrue to any other
guarantor by reason of any such proceeding, and the Persons included in the
term “Borrower” agree that they shall be liable for the full amount of the
obligations and liabilities under this paragraph regardless of, and
irrespective to, any modification, limitation or discharge of the liability of
any one or more of the other Persons included in the term “Borrower”, any other
guarantor or any obligor under any of the Loan Documents, that may result from
any such proceedings.

 

2.                                      SECURITY INTEREST.  To secure the
payment and performance of all of the Obligations when due, Borrower hereby
grants to Silicon a security interest in all of the following (collectively,
the “Collateral”):  all right, title and
interest of Borrower in and to all of the following, whether now owned or
hereafter arising or acquired and wherever located:, all Inventory; all
Equipment; the Senior Silicon Collateral, including, without limitation all
Accounts, all Deposit Accounts; the Assigned Account, the Cash Collateral
Account, all Instruments; all Chattel Paper and Documents; all General
Intangibles (including without limitation all intellectual property); all
Investment Property; all other property; and any and all claims, rights and
interests in any of the above, and all guaranties and security for any of the
above, and all substitutions and replacements for, additions, accessions,
attachments, accessories, and improvements to, and proceeds (including proceeds
of any insurance policies, proceeds of proceeds and claims against third
parties) of, any and all of the above, and all Borrower’s books relating to any
and all of the above, but excluding in each case the Cisco Senior Collateral
and all Proceeds thereof.

 

3.                                      REPRESENTATIONS,
WARRANTIES AND COVENANTS OF BORROWER.

 

In order to induce Silicon to enter into this
Agreement and to make Loans, Borrower represents and warrants to Silicon as
follows, and Borrower covenants that the following representations will
continue to be true, and that Borrower will at all times comply with all of the
following covenants, throughout the term of this Agreement and until all
Obligations (other than any Obligations pursuant to the indemnification
provisions under Section 7.8 of this Agreement, which survive repayment of
the remaining Obligations) have been paid and performed in full:

 

5

 

3.1  Existence and Authority. 
Borrower is and will continue to be, duly organized, validly existing
and in good standing under the laws of the jurisdiction set forth on the first
page of this Agreement.  Borrower is and
will continue to be qualified and licensed to do business in all jurisdictions
in which any failure to do so would result in a Material Adverse Change.  The execution, delivery and performance by
Borrower of this Agreement, and all other documents contemplated hereby: (i)
have been duly and validly authorized; (ii) are enforceable against Borrower in
accordance with their terms (except as enforcement may be limited by equitable
principles and by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to creditors’ rights generally); (iii) do not violate Borrower’s
articles or certificate of incorporation, or Borrower’s by-laws, or any law or
any material agreement or instrument which is binding upon Borrower or its
property; and (iv) do not constitute grounds for acceleration of any material
indebtedness or obligation under any agreement or instrument which is binding
upon Borrower or its property.

 

3.2  Name; Trade Names and Styles.  The
name of each Borrower set forth in the heading to this Agreement is its correct
name.  Listed in the Representations are
all prior names of Borrower and all of Borrower’s present and prior trade names
known to Borrower.  Borrower shall give
Silicon ten (10) days’ prior written notice before changing its name or doing
business under any other name.  Borrower
has complied, and will in the future comply, in all material respects, with all
laws relating to the conduct of business under a fictitious business name,
except where the failure to so comply would not reasonably be expected to
result in a Material Adverse Change.

 

3.3  Place of Business; Location of Collateral.  The
addresses set forth in the heading to this Agreement and in the Representations
is Borrower’s chief executive office.  In
addition, as of the date hereof, Borrower has places of business and Collateral
with a value in excess of $100,000 is located only at the locations set forth
in the Representations.  Borrower will
give Silicon prompt written notice after opening any additional place of business,
changing its chief executive office, or moving any of the Collateral with a
value in excess of $100,000 to a location other than Borrower’s Address or one
of the locations set forth in the Representations, except that Borrower may
maintain places of business in the ordinary course of business at which not
more than $300,000 per location in fair market value of Equipment is located.

 

3.4  Title to Collateral; Perfection; Permitted
Liens.

 

(a) 
Borrower is now, and will at all times in the future be, the sole owner
of all the Collateral, except for items of Equipment which are leased to
Borrower or sales or other transfers of Collateral expressly permitted by this
Agreement.  The Collateral now is and
will remain free and clear of any and all Liens, charges, security interests
and encumbrances, except for Permitted Liens. 
Silicon now has, and will continue to have, a first-priority perfected
and enforceable security interest in all of the Senior Silicon Collateral and a
second priority perfected and enforceable security interest in all of the other
Collateral, subject only to the Permitted Liens [it being understood that at
all times that the Cisco Release Conditions are being met (such times being
called a “Release Period”), Silicon’s lien shall be a first priority perfected
Lien on all of the Collateral, subject only to Permitted Liens] and Borrower
will at all times defend Silicon and the Collateral against all claims of
others, other than those permitted under this Agreement.

 

(b)  Borrower
has set forth in the Representations all of Borrower’s Deposit Accounts, and
Borrower will give Silicon five (5) Business Days advance written notice before
establishing any new Deposit Accounts and at all times after Borrower first
satisfies the Cisco Release Conditions (the “Cisco Release

 

6

 

Compliance Date”), Borrower will cause the
institution where any such new Deposit Account is maintained to execute and
deliver to Silicon a control agreement in form sufficient to perfect Silicon’s
security interest in the Deposit Account and otherwise satisfactory to Silicon
in its good faith business judgment. 
Nothing herein limits any requirements which may be set forth in the Schedule as
to where Deposit Accounts will be maintained.

 

(c)  In
the event that Borrower shall at any time after the date hereof have any
commercial tort claims against others, which it is asserting or intends to
assert, and in which the potential recovery exceeds $1,000,000, Borrower shall
promptly notify Silicon thereof in writing and provide Silicon with such
information regarding the same as Silicon shall reasonably request (unless
providing such information would waive the Borrower’s attorney-client
privilege).  Such notification to Silicon
shall constitute a grant of a security interest in the commercial tort claim
and all proceeds thereof to Silicon, and Borrower shall execute and deliver all
such documents and take all such actions as Silicon shall request in connection
therewith.

 

(d)  Whenever
any Collateral is located upon premises in which any third party other than
Cisco has an interest, Borrower shall, whenever requested by Silicon, use
commercially reasonable efforts to cause such third party to execute and
deliver to Silicon, in form acceptable to Silicon, such waivers and
subordinations as Silicon shall specify in its good faith business judgment.

 

(e)  Borrower
shall notify Silicon promptly of any default or any event which with the giving
of notice or passage of time would constitute a default under the Cisco Credit
Agreement or the Allied Riser Notes.

 

3.5  Maintenance of Collateral.  Borrower will maintain the Collateral in good
working condition (ordinary wear and tear excepted), and Borrower will not use
the Collateral for any unlawful purpose. 
Borrower will promptly advise Silicon in writing of any material loss or
damage to the Collateral.

 

3.6  Books and Records. 
Borrower has maintained and will maintain at Borrower’s Address complete
and accurate books and records, comprising an accounting system in accordance
with GAAP.

 

3.7  Financial Condition, Statements and Reports.  All
financial statements now or in the future delivered to Silicon have been and
will be prepared in conformity with GAAP and now and in the future will fairly
present the results of operations and financial condition of Borrower, in
accordance with GAAP, at the times and for the periods therein stated.  Between the last date covered by any such
statement provided to Silicon and the date hereof, there has been no Material
Adverse Change.

 

3.8  Tax Returns and Payments; Pension
Contributions.  Borrower has filed, and will file when due,
all required federal and state tax returns and reports, and Borrower has paid,
and will pay when due, all foreign, federal, state and local taxes,
assessments, deposits and contributions now or in the future shown thereon to
be owed by Borrower.  Borrower may,
however, defer payment of any contested taxes, provided that Borrower: (i) in
good faith contests Borrower’s obligation to pay the taxes by appropriate
proceedings promptly and diligently instituted and conducted, (ii) notifies
Silicon in writing of the commencement of and any material development in the
proceedings, and (iii) posts bonds or takes any other steps required to keep
the contested taxes from becoming a lien upon any of the Collateral, except and
only to the extent such lien is a Permitted Lien.  Borrower is unaware of any claims or
adjustments proposed for any of Borrower’s prior tax years which could result
in additional taxes in excess of $50,000 becoming due and payable by
Borrower.  Borrower has paid, and shall
continue to pay all amounts necessary to fund all present and future pension,
profit sharing and deferred compensation plans in accordance with their terms,
and Borrower has not and will not withdraw from participation in,

 

7

 

permit partial or complete termination of, or
permit the occurrence of any other event with respect to, any such plan which
could reasonably be expected to result in any material liability of Borrower,
including any material liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency.

 

3.9  Compliance with Law. 
Borrower has, to the best of its knowledge, complied, and will comply,
in all material respects, with all provisions of all foreign, federal, state
and local laws and regulations applicable to Borrower, including, but not
limited to, those relating to Borrower’s ownership of real or personal
property, the conduct and licensing of Borrower’s business, and all
environmental matters, except to the extent that the noncompliance with or the
nonobservance of could not reasonably be expected to cause a Material Adverse
Change.

 

3.10  Litigation.  There
is no claim, suit, litigation, proceeding or investigation pending or (to best
of Borrower’s knowledge) threatened in writing against or affecting Borrower in
any court or before any governmental agency which could reasonably be expected
to result, either separately or in the aggregate, in any Material Adverse
Change.  Borrower will promptly inform
Silicon in writing of any written claim, proceeding, litigation or
investigation in the future threatened in writing or instituted against
Borrower involving any single claim of $100,000 or more, or involving $250,000
or more in the aggregate.

 

3.11  Use of Proceeds.  All
proceeds of all Loans shall be used solely for lawful business purposes.  Borrower is not purchasing or carrying any “margin
stock” (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to
purchase or carry any “margin stock” or to extend credit to others for the
purpose of purchasing or carrying any “margin stock.”  Prior to the Minimum Balance Date, Borrower
will fund all of its working capital needs from sources other than the Cash
Collateral Account or Loans from Silicon.

 

3.12  Material Subsidiaries.  All
Material Domestic Subsidiaries are parties to the Loan Documents.  All Non Material Subsidiaries are listed on Exhibit
B attached hereto.  Company will
promptly notify Silicon if at any time any Non Material Subsidiary becomes a
Material Domestic Subsidiary.

 

3.13  Non Material Subsidiaries.  All Subsidiaries listed on Exhibit C
attached hereto are either in the process of dissolving or are planning to
dissolve (the “Dissolving Subsidiaries”). 
Each Dissolving Subsidiary will file the necessary articles of
dissolution with the jurisdiction of incorporation and provide such evidence to
Silicon within three (3) Business Days of such filing.  Borrower shall not make any loans, transfer
any assets to, or guaranty or otherwise become liable with respect to any
obligation of any Dissolving Subsidiary without the prior written consent of
Silicon.

 

3.14  Material Foreign Subsidiaries.  All Material Foreign Subsidiaries are listed
on Exhibit F attached hereto. 
Borrower will promptly notify Bank upon the creation or acquisition of
any new Material Foreign Subsidiary.  All
Accounts of Material Foreign Subsidiaries now are and will remain free and
clear of any and all Liens, charges, security interests and encumbrances,
except for Permitted Liens.

 

4.                                      ACCOUNTS.

 

4.1  Representations Relating to Accounts.  Borrower represents and warrants to Silicon as follows:  Each Account with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made: (i)
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of services, or the

 

8

 

non-exclusive licensing of Intellectual
Property, in the ordinary course of Borrower’s business, and (ii) meet the
Minimum Eligibility Requirements set forth in Section 8 below.

 

4.2  Representations Relating to Documents and
Legal Compliance.  Borrower represents and warrants to Silicon
as follows:  All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing Eligible Accounts and Eligible Foreign Accounts are and shall be
true and correct and all such invoices, instruments and other documents and all
of Borrower’s books and records are and shall be genuine and in all respects
what they purport to be.  All sales and
other transactions underlying or giving rise to each Eligible Accounts and
Eligible Foreign Account shall comply in all material respects with all
applicable laws and governmental rules and regulations.  To the best of Borrower’s knowledge, all
signatures and endorsements on all documents, instruments, and agreements
relating to all Eligible Accounts and Eligible Foreign Accounts are and shall
be genuine, and all such documents, instruments and agreements are and shall be
legally enforceable in accordance with their terms.

 

4.3  Schedules and Documents relating to Accounts.
 Borrower shall deliver to Silicon transaction reports and schedules of
collections, as provided in the Schedule, on Silicon’s standard forms;
provided, however, that Borrower’s failure to execute and deliver the same
shall not affect or limit Silicon’s security interest and other rights in all
of Borrower’s Accounts, nor shall Silicon’s failure to advance or lend against
a specific Account affect or limit Silicon’s security interest and other rights
therein.  If requested by Silicon,
Borrower shall furnish Silicon with copies (or, at Silicon’s request after the
occurrence of an Event of Default, originals) of all contracts, orders, invoices,
and other similar documents, and all shipping instructions, delivery receipts,
bills of lading, and other evidence of delivery, for any goods the sale or
disposition of which gave rise to such Accounts, and Borrower warrants the
genuineness of all of the foregoing. 
Borrower shall also furnish to Silicon an aged accounts receivable trial
balance as provided in the Schedule.  In
addition, Borrower shall deliver to Silicon, on its request, the originals of
all instruments, chattel paper, security agreements, guarantees and other
documents and property evidencing or securing any Accounts, in the same form as
received, with all necessary indorsements, and copies of all credit memos.

 

4.4  Collection of Accounts.  Borrower shall have the right to collect all
Domestic Accounts, unless and until a Default or an Event of Default has
occurred and is continuing, and all Foreign Accounts.  Whether or not an Event of Default has
occurred and is continuing, Borrower shall hold all payments on and proceeds of
Domestic Accounts in trust for Silicon, and Borrower shall immediately deliver
all such payments and proceeds to Silicon in their original form, duly
endorsed, to be applied to the Obligations in such order as Silicon shall
determine.  Silicon may, in its good faith
business judgment, at any time require that all Domestic Accounts and all
proceeds of Domestic Accounts be segregated from other funds and monies of
Borrower and require that such Domestic Accounts and proceeds be deposited by
Borrower into a lockbox account or, or such other “blocked account” as Silicon
may specify, pursuant to a blocked account agreement in such form as Silicon
may specify in its good faith business judgment.

 

4.5.  Remittance of Proceeds.  All proceeds arising from the disposition of any Domestic Accounts
shall be delivered, in kind, by Borrower to Silicon into an account designated
by Silicon in the original form in which received by Borrower not later than
the following Business Day after receipt by Borrower, to be applied to the Obligations
in such order as Silicon shall determine; provided, if no Default or Event of
Default has occurred and is continuing, and during any period when the Cisco
Release Conditions are not being met (a “Non Release Period”), Borrower shall
not be obligated to remit to Silicon the proceeds of the sale of Equipment
disposed of by Borrower, and provided, further, if no

 

9

 

Default or Event of Default has occurred and
is continuing, and during any Release Period, Borrower shall not be obligated
to remit to Silicon the proceeds of the sale of worn out or obsolete Equipment
disposed of in good faith in an arm’s length transaction for an aggregate
purchase price of Ten Million Dollars ($10,000,000) or less (for all such
transactions in any fiscal year). 
Borrower agrees that it will not commingle proceeds of Accounts with any
of Borrower’s other funds or property, but will at all times hold such Accounts
and proceeds thereof separate and apart from such other funds and property and
in an express trust for Silicon.  Nothing
in this Section limits the restrictions on disposition of Collateral set
forth elsewhere in this Agreement.

 

4.6  Disputes.  Borrower shall notify Silicon promptly of all
disputes or claims relating to Eligible Accounts and Eligible Foreign
Accounts.  Borrower shall not forgive
(completely or partially), compromise or settle any Eligible Accounts and
Eligible Foreign Account for less than payment in full, or agree to do any of
the foregoing, except that Borrower may do so provided that: (i) Borrower does
so in good faith, in a commercially reasonable manner, in the ordinary course
of business, and in arm’s length transactions, which are reported to Silicon on
the regular reports provided to Silicon; (ii) no Default or Event of Default
has occurred and is continuing; and (iii) taking into account all such
discounts, settlements and forgiveness, the total outstanding Loans will not
exceed the Credit Limit.

 

4.7  Returns. 
Provided no Event of Default has occurred and is continuing, if any
Account Debtor returns any Inventory to Borrower, Borrower shall promptly
determine the reason for such return and promptly issue a credit memorandum to
the Account Debtor in the appropriate amount. 
In the event any attempted return occurs after the occurrence and during
the continuance of any Event of Default, Borrower shall hold the returned
Inventory in trust for Silicon, and promptly notify Silicon of the return of
the Inventory.

 

4.8  Verification. 
Silicon may, from time to time, verify directly with the respective
Account Debtors the validity, amount and other matters relating to the
Accounts, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.

 

4.9  No Liability.  Silicon shall not be responsible or liable for any shortage or
discrepancy in, damage to, or loss or destruction of, any goods, the sale or
other disposition of which gives rise to an Account, or for any error, act,
omission, or delay of any kind occurring in the settlement, failure to settle,
collection or failure to collect any Account, or for settling any Account in
good faith for less than the full amount thereof, nor shall Silicon be deemed
to be responsible for any of Borrower’s obligations under any contract or
agreement giving rise to an Account. 
Nothing herein shall, however, relieve Silicon from liability for its
own gross negligence or willful misconduct.

 

4.10  Additional Borrowers.  Company shall promptly notify Silicon at the time that any Person
becomes a Material Domestic Subsidiary, and promptly thereafter (and in any
event within 30 days of such occurrence), cause such Person to (i) become an
Additional Borrower by executing and delivering to Silicon an Additional Borrower
Joinder Supplement or such other document as Silicon shall deem appropriate for
such purpose, (ii) deliver to Silicon copies of all organizational and
authority documents of the types, all in form, content and scope satisfactory
to Silicon and (iii) executing and delivering to Silicon all Loan Documents.

 

5.                                      ADDITIONAL DUTIES OF
BORROWER.

 

5.1  Financial and Other Covenants. 
Borrower shall at all times comply with the financial and other
covenants set forth in the Schedule.

 

10

 

5.2  Insurance. 
Borrower shall at all times insure all of the tangible personal property
Collateral and carry such other business insurance, with insurers reasonably
acceptable to Silicon, in such form and amounts as Silicon determines are
customary and in accordance with standard practices for Borrower’s industry and
locations, and Borrower shall provide evidence of such insurance to
Silicon.  All such insurance policies
shall name Silicon as an additional loss payee, as its interests may appear,
and shall contain a lenders loss payee endorsement in form reasonably
acceptable to Silicon.  Upon receipt of
any proceeds of any such insurance, Silicon shall apply such proceeds in
reduction of the Obligations as Silicon shall determine in its good faith
business judgment, except that, provided no Default or Event of Default has
occurred and is continuing, Silicon shall release to Borrower insurance
proceeds with respect to Equipment totaling less than $100,000, which shall be
utilized by Borrower for the replacement of the Equipment with respect to which
the insurance proceeds were paid. 
Silicon may require reasonable assurance that the insurance proceeds so
released will be so used.  If Borrower
and Cisco fail to provide or pay for any insurance required to be maintained
hereunder, Silicon may, but is not obligated to, obtain the same at Borrower’s
expense.  Borrower shall promptly deliver
to Silicon copies of all material reports made to insurance companies.

 

5.3  Reports. 
Borrower, at its expense, shall provide Silicon with the written reports
set forth in the Schedule, and such other written reports with respect to
Borrower (including budgets, sales projections, operating plans and other
financial documentation), as Silicon shall from time to time specify in its
good faith business judgment.

 

5.4  Access to Collateral, Books and Records.  At
reasonable times during normal business hours, and prior to a Default on not
less than one (1) Business Day’s notice, Silicon, or its agents, shall have the
right to inspect the Collateral during normal business hours, and the right to
audit and copy Borrower’s books and records. 
Silicon shall take reasonable steps to keep confidential all information
obtained in any such inspection or audit, but Silicon shall have the right to
disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process.  Prior to the occurrence of any Default or Event
of Default, Silicon will perform no more than four (4) such inspections and
audits in any calendar year, all of which shall be at Borrower’s expense and
the charge therefor shall be $750 per person per day (or such amount as shall
represent Silicon’s then current standard charge for the same), plus reasonable
out of pocket expenses.

 

5.5  Negative Covenants. 
Except as may be permitted in the Schedule, Borrower shall not, without
Silicon’s prior written consent (which shall be a matter of its good faith
business judgment), do any of the following: (i) merge or consolidate with, or
acquire any assets of (“Acquisition”) another corporation or entity (the “Target”),
unless (a) the Company’s Board of Directors approves such Acquisition (b) the
Target is in a similar line of business; (c) a Borrower is the sole surviving,
controlling corporation; (d) total consideration for all Acquisitions in any
one fiscal year does not exceed twenty (20) percent of the Tangible Net Worth
of the Parent and its subsidiaries immediately prior to the effective date of
such Acquisition; and (e) after giving affect to the Acquisition, the Borrower
will remain in compliance with the covenants set forth in this Agreement on a
pro-forma basis.  Once an Acquisition is
completed the Borrower shall provide Silicon with complete details of the
Acquisition and pro-forma projections to demonstrate continued compliance with
the Loan Documents.  All Targets, other
than Targets which constitute Non Material Subsidiaries, will be required to pledge
all of their assets to secure the Loan (subject to any Permitted Liens) and
will be added as a co-obligors of the Obligations; (ii) enter into any other
transaction outside the ordinary course of business; (iii) sell or transfer any
Accounts or sell or transfer any other Collateral having a value in the
aggregate in excess of $500,000 unless during any

 

11

 

Non Release Period, such sale or transfer is
permitted under the Cisco Agreement or any replacement credit agreement
executed in connection with a Permitted Cisco Refinancing, or except for the
sale of finished Inventory in the ordinary course of Borrower’s business, and
for the sale of obsolete or unneeded Equipment in the ordinary course of
business; (iv) store any Inventory or other Collateral having a value in excess
of $250,000 with any warehouseman or other third party; (v) sell any Inventory
on a sale-or-return, guaranteed sale, consignment, or other contingent basis;
(vi) make any loans of any money or other assets, other than loans (a) in
existence as of the Closing Date, (b) to another Borrower, (c) up to
$10,000,000 in the aggregate to any Material Foreign Subsidiaries in connection
with any Acquisition by such Material Foreign Subsidiaries, which is permitted
under Section 5.5(i), or (d) in the ordinary course of business to any Non
Material Subsidiary; provided, (1) no Default or Event of Default has occurred
and is continuing at such time, (2) the aggregate amount of all additional
loans to Non Material Subsidiaries (excluding loans made pursuant to subpart
(c) above) does not at any time exceed $10,000,000 in the aggregate prior to
the Maturity Date, (3) no additional loans shall be made to any Dissolving
Subsidiaries, and (4) no payments on loans existing on or after the Closing Date
shall be permitted by any Borrower to any Non Material Subsidiary; (vii) incur
any indebtedness for borrowed money outside the ordinary course of business,
other than Subordinated Debt or indebtedness currently existing in connection
with the Cisco Credit Agreement or any Permitted Cisco Refinancing; (viii)
guarantee or otherwise become liable with respect to the obligations of another
Person, other than to another Borrower or in connection with either (a) capital
or operating Leases, or (b) or in the ordinary course of business on behalf of
Non Material Subsidiaries and provided that such guaranties and liabilities are
only in connection with indebtedness of Non Material Subsidiaries which is
either unsecured or secured only by Permitted Liens (including capital or
operating Leases), further provided that the amount of such guarantees and
liabilities pursuant to subsections (a) and (b) does not exceed $60,000,000 in
the aggregate at any time; (ix) pay or declare any dividends on Borrower’s
stock (except for dividends payable solely in stock of Borrower); (x) redeem,
retire, purchase or otherwise acquire, directly or indirectly, any of Borrower’s
stock, except from Cisco; (xi) make any change in Borrower’s capital structure
which would result in a Material Adverse Change; (xii) engage, directly or
indirectly, in any business other than the businesses currently engaged in by
Borrower or reasonably related thereto; (xiii) dissolve or elect to dissolve,
except into a Borrower; or (xiv) amend any of the provisions of the Cisco
Credit Agreement or any document evidencing any Subordinated Debt, in a manner
which could be materially adverse to Silicon. 
Transactions permitted by the foregoing provisions of this Section are
only permitted if no Default or Event of Default would occur as a result of
such transaction.

 

5.6  Litigation Cooperation. 
Should any third-party suit or proceeding be instituted by or against
Silicon with respect to any Collateral or relating to Borrower, Borrower shall,
without expense to Silicon, make available at reasonable times and for
reasonable periods of time Borrower and its officers and employees and Borrower’s
books and records, to the extent that Silicon may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.

 

5.7  Further Assurances. 
Borrower agrees, at its expense, on request by Silicon, to execute all
documents and take all actions, as Silicon, may, in its good faith business
judgment, deem necessary or prudent in order to perfect and maintain Silicon’s
perfected first-priority security interest in the Accounts and Silicon’s
perfected second priority security interest in all other Collateral (subject
only to Permitted Liens), and in order to fully consummate the transactions
contemplated by this Agreement.

 

12

 

6.                                      TERM.

 

6.1  Maturity Date.  This
Agreement shall continue in effect until the maturity date set forth on the Schedule (the
“Maturity Date”), subject to Section 6.3 below.

 

6.2  Early Termination.  This
Agreement may be terminated prior to the Maturity Date as follows: (i) by
Borrower, effective three (3) Business Days after written notice of termination
is given to Silicon; or (ii) by Silicon at any time after the occurrence and
during the continuance of an Event of Default, without notice, effective
immediately.  If this Agreement is
terminated by Borrower or by Silicon under this Section 6.2, Borrower
shall pay to Silicon a termination fee in an amount equal to one percent (1.0%)
of the Credit Limit, provided that no termination fee shall be charged if the
credit facility hereunder is replaced with a new facility from another division
of Silicon Valley Bank.  The termination
fee shall be due and payable on the effective date of termination and
thereafter shall bear interest at a rate equal to the highest rate applicable
to any of the Obligations.

 

6.3  Payment of Obligations.  On
the Maturity Date or on any earlier effective date of termination, Borrower
shall pay and perform in full all Obligations, whether evidenced by installment
notes or otherwise, and whether or not all or any part of such Obligations are
otherwise then due and payable.  Without
limiting the generality of the foregoing, if on the Maturity Date, or on any
earlier effective date of termination, there are any outstanding Letters of
Credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an
amount equal to one hundred percent (100%) of the face amount of all such
Letters of Credit and if requested by Silicon, all interest, fees and cost due
or to become due in connection therewith (as estimated by Silicon in its good
faith business judgment), to secure all of the Obligations relating to said
Letters of Credit, pursuant to a cash pledge agreement satisfactory to Silicon
in all material respects. 
Notwithstanding any termination of this Agreement, all of Silicon’s
security interests in all of the Collateral and all of the terms and provisions
of this Agreement shall continue in full force and effect until all Obligations
have been paid and performed in full; provided that Silicon may in its sole
discretion refuse to make any further Loans after termination.  No termination shall in any way affect or
impair any right or remedy of Silicon, nor shall any such termination relieve
Borrower of any Obligation to Silicon, until all of the Obligations have been
paid and performed in full.  Upon payment
and performance in full of all the Obligations and termination of this
Agreement, Silicon shall promptly terminate its financing statements with
respect to the Borrower and deliver to Borrower such other documents and cash
collateral, if any, as may be required to fully terminate Silicon’s security
interests.

 

7.                                      EVENTS OF DEFAULT AND
REMEDIES.

 

7.1  Events of Default.  The
occurrence of any of the following events shall constitute an “Event of Default”
under this Agreement, and Borrower shall give Silicon immediate written notice
thereof: (a) Any warranty, representation, statement, report or certificate
made or delivered to Silicon by Borrower or any of Borrower’s officers,
employees or agents, now or in the future, shall be untrue or misleading in a
material respect when made or deemed to be made; or (b) Borrower shall fail to
pay within five (5) Business Days of when due any Loan or any interest thereon
or any other monetary Obligation; or (c) the total Loans and other Obligations
outstanding at any time shall exceed the Credit Limit; or (d) Borrower shall
fail to comply with any of the financial covenants set forth in the Schedule,
or shall fail to perform any other non-monetary Obligation which by its nature
cannot be cured, or shall fail to permit Silicon to conduct an inspection or
audit as specified in Section 5.4 hereof; or (e) Borrower shall

 

13

 

fail to perform any other non-monetary
Obligation, which failure is not cured within fifteen (15) Business Days after
the date due; or (f) any levy, assessment, attachment, seizure, lien or
encumbrance (other than a Permitted Lien) is made on all or any part of the
Collateral which is not cured within ten (10) days after the occurrence of the
same; or (g) any event of default occurs under any obligation secured by a
Permitted Lien, including, without limitation, under the Cisco Credit
Agreement, which is not cured within any applicable cure period or waived in
writing by the holder of the Permitted Lien; or (h) Borrower breaches any
material contract or obligation with respect to amounts in excess of
$1,000,000; or (i) dissolution, termination of existence, insolvency or
business failure of Borrower; or appointment of a receiver, trustee or
custodian, for all or any part of the property of, assignment for the benefit
of creditors by, or the commencement of any proceeding by Borrower under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or (j) the commencement of any proceeding against Borrower,
any Guarantor or any Material Foreign Subsidiary under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect,
which is not cured by the dismissal thereof within forty five (45) days after
the date commenced; or (k) revocation or termination of, or limitation or
denial of liability upon, any guaranty of the Obligations by any Guarantor or
any attempt to do any of the foregoing, or commencement of proceedings by any
Guarantor under any bankruptcy or insolvency law; or (l) Borrower makes any
payment on account of any indebtedness or obligation which has been
subordinated to the Obligations other than as permitted in the applicable
subordination agreement, or if any Person who has subordinated such
indebtedness or obligations terminates or in any way limits his subordination
agreement; or (m) if at any time after the date hereof, persons currently
holding shares of stock of Borrower shall (i) at any time prior to a secondary
public offering by any Borrower hold less than 51% of the outstanding shares,
or (ii) at any time after a secondary public offering, hold less than 15% of
the outstanding shares of Borrower; or (n) Borrower shall generally not pay its
debts as they become due, or Borrower, any Guarantor, or any Material Foreign
Subsidiary shall conceal, remove or transfer any part of its property, with
intent to hinder, delay or defraud its creditors, or make or suffer any
transfer of any of its property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or (o) a Material Adverse Change shall
occur.  Silicon may cease making any
Loans hereunder during any of the above cure periods, and thereafter if an
Event of Default has occurred and is continuing, or (p) if a money judgment(s)
in excess of $2,500,000 individually or in the in the aggregate is rendered
against any Borrower and is unsatisfied and unstayed for 10 days.

 

7.2  Remedies.  Upon
the occurrence and during the continuance of any Event of Default, and at any
time thereafter, Silicon, at its option and without notice or demand of any
kind (all of which are hereby expressly waived by Borrower), may do any one or
more of the following: (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other Loan Document; (b) Accelerate and
declare all or any part of the Obligations to be immediately due, payable, and
performable, notwithstanding any deferred or installment payments allowed by
any instrument evidencing or relating to any Obligation; (c) Take possession of
any or all of the Collateral wherever it may be found, and for that purpose
Borrower hereby authorizes Silicon without judicial process to enter onto any
of Borrower’s premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof,
without charge for so long as Silicon deems it necessary, in its good faith
business judgment, in order to complete the enforcement of its rights under
this Agreement or any other agreement; provided, however, that should Silicon
seek to take possession of any of the Collateral by

 

14

 

court process, Borrower hereby irrevocably
waives: (i) any bond and any surety or security relating thereto required by
any statute, court rule or otherwise as an incident to such possession, (ii)
any demand for possession prior to the commencement of any suit or action to
recover possession thereof, and (iii) any requirement that Silicon retain
possession of, and not dispose of, any such Collateral until after trial or
final judgment; (d) Require Borrower to assemble any or all of the Collateral
and make it available to Silicon at places designated by Silicon which are
reasonably convenient to Silicon and Borrower, and to remove the Collateral to
such locations as Silicon may deem advisable; (e) Complete the processing,
manufacturing or repair of any Collateral prior to a disposition thereof and,
for such purpose and for the purpose of removal, Silicon shall have the right
to use Borrower’s premises, vehicles, hoists, lifts, cranes, and other
Equipment and all other property without charge; (f) Sell, lease or otherwise
dispose of any of the Collateral, in its condition at the time Silicon obtains
possession of it or after further manufacturing, processing or repair, at one
or more public and/or private sales, in lots or in bulk, for cash, exchange or
other property, or on credit, and to adjourn any such sale from time to time
without notice other than oral announcement at the time scheduled for
sale.  Silicon shall have the right to
conduct such disposition on Borrower’s premises without charge, for such time
or times as Silicon deems reasonable, or on Silicon’s premises, or elsewhere
and the Collateral need not be located at the place of disposition.  Silicon may directly or through any
affiliated company purchase or lease any Collateral at any such public
disposition, and if permissible under applicable law, at any private
disposition.  Any sale or other
disposition of Collateral shall not relieve Borrower of any liability Borrower
may have if any Collateral is defective as to title or physical condition or
otherwise at the time of sale; (g) Demand payment of, and collect any Accounts
and General Intangibles comprising Collateral and, in connection therewith,
Borrower irrevocably authorizes Silicon to endorse or sign Borrower’s name on
all collections, receipts, instruments and other documents, to take possession
of and open mail addressed to Borrower and remove therefrom payments made with
respect to any item of the Collateral or proceeds thereof, and, in Silicon’s
good faith business judgment, to grant extensions of time to pay, compromise
claims and settle Accounts and the like for less than face value; (h) Offset
against any sums in any of Borrower’s general, special or other Deposit
Accounts with Silicon against any or all of the Obligations; and (i) Demand and
receive possession of any of Borrower’s federal and state income tax returns and
the books and records utilized in the preparation thereof or referring
thereto.  All reasonable attorneys’ fees,
expenses, costs, liabilities and obligations incurred by Silicon with respect
to the foregoing shall be added to and become part of the Obligations, shall be
due on demand, and shall bear interest at a rate equal to the highest interest
rate applicable to any of the Obligations. 
Without limiting any of Silicon’s rights and remedies, from and after
the occurrence and during the continuance of any Event of Default, the interest
rate applicable to the Obligations shall be increased by an additional three
percent (3%) per annum (the “Default Rate”).

 

7.3  Standards for Determining Commercial
Reasonableness.  Borrower and Silicon agree that a sale or
other disposition (collectively, “sale”) of any Collateral which complies with
the following standards will conclusively be deemed to be commercially
reasonable:  (i) Notice of the sale is
given to Borrower at least ten (10) days prior to the sale, and, in the case of
a public sale, notice of the sale is published at least five days before the
sale in a newspaper of general circulation in the county where the sale is to
be conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon in such notices, with or without the Collateral being present; (iv) The
sale commences at any time between 8:00 a.m. and 6:00 p.m.; (v) Payment of the
purchase price in cash or by cashier’s check or wire transfer is required; and
(vi) With respect to any sale of any of the Collateral, Silicon may (but is not
obligated to) direct any prospective purchaser to ascertain

 

15

 

directly from Borrower any and all
information concerning the same.  Silicon
shall be free to employ other methods of noticing and selling the Collateral,
in its discretion, if they are commercially reasonable.

 

7.4  Power of Attorney.  Upon
the occurrence and during the continuance of any Event of Default, without
limiting Silicon’s other rights and remedies, Borrower grants to Silicon an
irrevocable power of attorney coupled with an interest, authorizing and
permitting Silicon (acting through any of its employees, attorneys or agents)
at any time, at its option, but without obligation, with or without notice to
Borrower, and at Borrower’s expense, to do any or all of the following, subject
to the terms of any applicable intercreditor agreement, including with Cisco,
in Borrower’s name or otherwise, but Silicon agrees that if it exercises any
right hereunder, it will do so in good faith and in a commercially reasonable
manner:  (a) Execute on behalf of
Borrower any documents that Silicon may, in its good faith business judgment,
deem advisable in order to perfect and maintain Silicon’s security interest in
the Collateral, or in order to exercise a right of Borrower or Silicon, or in
order to fully consummate all the transactions contemplated under this
Agreement, and all other Loan Documents; (b) Execute on behalf of Borrower, any
invoices relating to any Account, any draft against any Account Debtor and any
notice to any Account Debtor, any proof of claim in bankruptcy, any Notice of
Lien, claim of mechanic’s, materialman’s or other lien, or assignment or
satisfaction of mechanic’s, materialman’s or other lien; (c) Take control in
any manner of any cash or non-cash items of payment or proceeds of Collateral;
endorse the name of Borrower upon any instruments, or documents, evidence of
payment or Collateral that may come into Silicon’s possession; (d) Endorse all
checks and other forms of remittances received by Silicon; (e) Pay, contest or
settle any lien, charge, encumbrance, security interest and adverse claim in or
to any of the Collateral, or any judgment based thereon, or otherwise take any
action to terminate or discharge the same; (f) Grant extensions of time to pay,
compromise claims and settle Accounts and General Intangibles for less than
face value and execute all releases and other documents in connection
therewith; (g) Pay any sums required on account of Borrower’s taxes or to
secure the release of any liens therefor, or both; (h) Settle and adjust, and
give releases of, any insurance claim that relates to any of the Collateral and
obtain payment therefor; (i) Instruct any third party having custody or control
of any books or records belonging to, or relating to, Borrower to give Silicon
the same rights of access and other rights with respect thereto as Silicon has
under this Agreement; and (j) Take any action or pay any sum required of
Borrower pursuant to this Agreement and any other Loan Documents.  Any and all reasonable sums paid and any and
all reasonable costs, expenses, liabilities, obligations and attorneys’ fees
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be payable on demand, and shall bear interest at
a rate equal to the highest interest rate applicable to any of the Obligations.  In no event shall Silicon’s rights under the
foregoing power of attorney or any of Silicon’s other rights under this
Agreement be deemed to indicate that Silicon is in control of the business,
management or properties of Borrower.

 

7.5  Application of Proceeds. 
Subject to the Intercreditor Agreement, all proceeds realized as the
result of any sale of the Collateral shall be applied by Silicon first to the
reasonable costs, expenses, liabilities, obligations and attorneys’ fees
incurred by Silicon in the exercise of its rights under this Agreement, second
to the interest due upon any of the Obligations, and third to the principal of
the Obligations, in such order as Silicon shall determine in its sole
discretion.  Any surplus shall be paid to
Borrower or other persons legally entitled thereto; Borrower shall remain
liable to Silicon for any deficiency. 
If, Silicon, in its good faith business judgment, directly or indirectly
enters into a deferred payment or other credit transaction with any purchaser
at any sale of Collateral, Silicon shall have the option, exercisable at any
time, in its good faith business judgment, of either reducing the Obligations
by

 

16

 

the principal amount of purchase price or
deferring the reduction of the Obligations until the actual receipt by Silicon
of the cash therefor.

 

7.6  Remedies Cumulative.  In
addition to the rights and remedies set forth in this Agreement, Silicon shall
have all the other rights and remedies accorded a secured party under the
California Uniform Commercial Code and under all other applicable laws, and any
Loan Document now or in the future entered into between Silicon and Borrower,
and all of such rights and remedies are cumulative and none is exclusive.  Exercise or partial exercise by Silicon of
one or more of its rights or remedies shall not be deemed an election, nor bar
Silicon from subsequent exercise or partial exercise of any other rights or
remedies.  The failure or delay of Silicon
to exercise any rights or remedies shall not operate as a waiver thereof, but
all rights and remedies shall continue in full force and effect until all of
the Obligations have been fully paid and performed.

 

8.                                      DEFINITIONS.  As used in this
agreement, the following terms have the following meanings:

 

“Account Debtor” means the obligor on
an Account.

 

“Accounts” means all present and
future “accounts” as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all accounts receivable and other sums owing to Borrower.

 

“Additional Borrower” means each
Person that has executed and delivered an Additional Borrower Joinder
Supplement that has been accepted and approved by Silicon, including, but not
limited to, each Material Domestic Subsidiary.

 

“Additional Borrower Joinder Supplement”
means an Additional Borrower Joinder Supplement in substantially the form
attached hereto as Exhibit D, with the blanks appropriately completed
and executed and delivered by the Additional Borrower and accepted by the
Company on behalf of the Borrower.

 

“Advance Rate” means at all times that
both (a) a Release Period exists and (b) Borrower’s unencumbered cash at
Silicon exceeds Fifteen Million Dollars ($15,000,000), eighty five percent
(85%), and at all other times, seventy five percent (75%).

 

“Affiliate” means, with respect to any
Person, any parent or subsidiary of such Person, or any Person controlling,
controlled by or under common control with such Person.

 

“Allied Riser Notes” means those
certain 7.50% Convertible Subordinated Notes due 2007, entered into between
Allied Riser Communications Corporation (“Issuer”) and Wilmington Trust Company
(“Trustee”), dated June 28, 2000.

 

“Business Day” means a day on which
Silicon is open for business.

 

“Cisco” means Cisco Systems Capital
Corporation and any subsequent agent, lender or lenders under the Cisco Credit
Agreement or its replacement.

 

“Cisco Credit Agreement” means that
certain Third Amended and Restated Credit Agreement dated as of July 31,
2003 by and among the Company, Cisco Systems Capital Corporation, as agent, and
the other Lenders named therein, as the same may be modified and amended from
time to time.

 

“Cisco Release Conditions” means such
time after all of the following conditions are satisfied) by Borrower: (i)
Borrower has raised equity, the proceeds of which are used to repay in full
obligations of Borrower under the Cisco Credit Agreement, (ii) all Liens on
Borrower’s assets in favor of Cisco have

 

17

 

been terminated and Silicon has received
evidence (satisfactory to Silicon) that all necessary UCC amendments and other
termination statements and releases of such Liens have been filed or
recorded,  and (iii) Borrower has granted
Silicon a first lien on all assets of Borrower, including without limitation,
the Cisco Senior Collateral.

 

“Cisco Senior Collateral” means networking and
telecommunications equipment and other goods, spare parts, accessories,
software and services which Cisco manufactures, assembles, sells, licenses or
provides, including any such equipment and other goods, spare parts,
accessories, software and services manufactured, assembled, sold, licensed or
provided by Cisco through a vendor, distributor, reseller or other provider
other than Cisco and products manufactured and previously sold by Avanex
Corporation to the Company which were previously financed by Cisco.

 

“Closing Date”
is the date of this Agreement.

 

“Code” means the Uniform Commercial
Code as adopted and in effect in the State of California from time to time.

 

“Collateral” has the meaning set forth
in Section 2 above.

 

“continuing” and “during the
continuance of” when used with reference to a Default or Event of Default
means that the Default or Event of Default has occurred and has not been either
waived in writing by Silicon or cured.

 

“Default” means any event which with
notice or passage of time or both, would constitute an Event of Default.

 

“Default Rate” has the meaning set
forth in Section 7.2 above.

 

“Deposit Accounts” means all present
and future “deposit accounts” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation all general and special bank accounts, demand accounts,
checking accounts, savings accounts and certificates of deposit.

 

“Domestic Accounts” means Accounts
arising from account debtors located in the United States or Canada.

 

“EBITDA” means earnings before
interest, taxes, depreciation, amortization, non-cash deferred compensation
expense, and expenses for restructuring or terminated public or private
offerings.

 

“Eligible Accounts” means Accounts and
General Intangibles arising in the ordinary course of Borrower’s business from
the sale of goods or the rendition of services, or the non-exclusive licensing
of Intellectual Property, which Silicon, in its good faith business judgment,
shall deem eligible for borrowing. 
Without limiting the fact that the determination of which Accounts are
eligible for borrowing is a matter of Silicon’s good faith business judgment,
the following (the “Minimum Eligibility Requirements”) are the minimum
requirements for a Account to be an Eligible Account:  (i) the Account must not be outstanding for
more than the Eligibility Period; (ii) the Account must not represent progress
billings, finance charges or termination billings, or be due under a
fulfillment or requirements contract with the Account Debtor; (iii) the Account
must not be subject to any contingencies (including Accounts arising from sales
on consignment, guaranteed sale or other terms pursuant to which payment by the
Account Debtor may be conditional); (iv) the Account must not be owing from an
Account Debtor with whom Borrower has any dispute (whether or not relating to
the particular Account); (v) the Account must not be owing from an Affiliate of
Borrower; (vi) the Account

 

18

 

must not be owing from an Account Debtor
which is subject to any insolvency or bankruptcy proceeding, or whose financial
condition is not acceptable to Silicon, or which, fails or goes out of a
material portion of its business; (vii) the Account must not be owing from the
United States or any department, agency or instrumentality thereof (unless
there has been compliance, to Silicon’s satisfaction, with the United States
Assignment of Claims Act); (viii) the Account must not be owing from an Account
Debtor located outside the United States or Canada (unless approved by Silicon
in its discretion in writing); and (ix) the Account must not be owing from an
Account Debtor to whom Borrower is liable for goods purchased from such Account
Debtor or otherwise (but, in such case, the Account will be deemed not eligible
only to the extent of any amounts owed by Borrower to such Account
Debtor).  Accounts owing from one Account
Debtor will not be deemed Eligible Accounts to the extent they exceed twenty
five percent (25%) of the total Accounts outstanding.  Reserves that a Borrower has established for
Accounts owed to such Borrower shall not be deemed Eligible Accounts.  In addition, if more than twenty five percent
(25%) of the Accounts owing from an Account Debtor are outstanding for a period
longer than their Eligibility Period (without regard to unapplied credits) or
are otherwise not Eligible Accounts, then all Accounts owing from that Account
Debtor will be deemed ineligible for borrowing; provided, however, at all times
that Borrower’s unencumbered cash at Silicon is greater than $15,000,000 and a
Release Period exists, if more than fifty percent (50%) (rather than 25% as per
the preceding clause of this sentence) of the Accounts owing from an Account
Debtor are outstanding for a period longer than their Eligibility Period (without
regard to unapplied credits) or are otherwise not Eligible Accounts, then all
Accounts owing from that Account Debtor will be deemed ineligible for
borrowing.  Silicon may, from time to
time, in its good faith business judgment, revise the Minimum Eligibility
Requirements, upon written notice to Borrower.

 

“Eligible Foreign Accounts” are
Accounts of a Borrower that otherwise meet the Minimum Eligibility Requirements
except that the Account arises from an Account Debtor located outside the
United States or Canada.

 

“Eligibility Period” means ninety (90)
days from the invoice date for each Account, provided that at any time that
Borrower fails to maintain at least $7,000,000 of unencumbered cash with
Silicon, the Eligibility Period shall mean sixty (60) days from the invoice
date for each Account.

 

“Equipment” means all present and
future “equipment” as defined in the Code in effect on the date hereof with
such additions to such term as may hereafter be made, and includes without
limitation all machinery, fixtures, goods, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing.

 

“Event of Default” means any of the
events set forth in Section 7.1 of this Agreement.

 

“Existing Subsidiaries” means the
Subsidiaries.

 

“Foreign Accounts” means Accounts
arising from account debtors located outside the United States or Canada.

 

“GAAP” means generally accepted
accounting principles in the United States of America.

 

“General Intangibles” means all
present and future “general intangibles” as defined in the Code in effect on
the date hereof with such additions to such term as may hereafter be made, and
includes without limitation all Intellectual Property, payment intangibles,
royalties, contract rights, goodwill, franchise agreements, purchase orders,
customer lists, route lists, telephone numbers, domain names, claims, income
tax refunds, security and other deposits, options to purchase or sell real or
personal

 

19

 

property, rights in all litigation presently
or hereafter pending (whether in contract, tort or otherwise), insurance
policies (including without limitation key man, property damage, and business
interruption insurance), payments of insurance and rights to payment of any
kind.

 

“good faith business judgment” means
honesty in fact and good faith (as defined in Section 1201 of the Code) in
the exercise of Silicon’s business judgment.

 

“Guarantors” is any present or future
guarantor of the Obligations, including Symposium Gamma, Inc., a Delaware
corporation.

 

“including” means including (but not
limited to).

 

“Intellectual Property” means all
present and future (a) copyrights, copyright rights, copyright applications,
copyright registrations and like protections in each work of authorship and
derivative work thereof, whether published or unpublished, (b) trade secret
rights, including all rights to unpatented inventions and know-how, and
confidential information; (c) mask work or similar rights available for the
protection of semiconductor chips; (d) patents, patent applications and like
protections including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of the
same; (e) trademarks, servicemarks, trade styles, and trade names, whether or
not any of the foregoing are registered, and all applications to register and
registrations of the same and like protections, and the entire goodwill of the
business of Borrower connected with and symbolized by any such trademarks; (f)
computer software and computer software products; (g) designs and design
rights; (h) all claims for damages by way of past, present and future
infringement of any of the rights included above; (i) all licenses or other
rights to use any property or rights of a type described above.

 

“Intercreditor Agreement” has the
meaning set forth on the Schedule.

 

“Inventory” means all present and
future “inventory” as defined in the Code in effect on the date hereof with
such additions to such term as may hereafter be made, and includes without
limitation all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products, including without
limitation such inventory as is temporarily out of Borrower’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.

 

“Investment” is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.

 

“Investment Property” means all
present and future investment property, securities, stocks, bonds, debentures,
debt securities, partnership interests, limited liability company interests,
options, security entitlements, securities accounts, commodity contracts,
commodity accounts, and all financial assets held in any securities account or
otherwise, and all options and warrants to purchase any of the foregoing,
wherever located, and all other securities of every kind, whether certificated
or uncertificated.

 

“Item of Payment” means each check,
draft, cash, money, instrument, item, and other remittance in payment or on
account of payment of the Accounts or otherwise with respect to any Collateral,
including, without limitation, cash proceeds of any returned, rejected or
repossessed goods, the sale or lease of which gave rise to an Account, and
other proceeds of Collateral; and “Items of Payment” means the collective
reference to all of the foregoing.

 

“Lien” is a mortgage, lien, deed of
trust, charge, pledge, security interest or any other encumbrance.

 

20

 

“Loan Documents” means, collectively,
this Agreement, the Representations, the Guaranties, the Pledge Agreement, and
all other present and future documents, instruments and agreements between
Silicon and Borrower or any Guarantor, including, but not limited to those
relating to this Agreement, and all amendments and modifications thereto and
replacements therefor.

 

“Material Adverse Change” means any of
the following: (i) a material adverse change in the business, operations, or
financial or other condition of the Borrower, or (iii) a material impairment of
the value or priority of Silicon’s security interests in the Collateral.

 

“Material Domestic Subsidiary” means
any Subsidiary of Borrower organized under the laws of the United States or
Canada that (i) has revenue in excess of One Million Dollars ($1,000,000) in a
fiscal year, (ii) owns assets with a fair market value in excess of One Million
Dollars ($1,000,000), or (iii) is including any of its Accounts as part of
Eligible Accounts or Eligible Foreign Accounts.

 

“Material Foreign Subsidiary” means
any Subsidiary of Borrower organized outside the laws of the United States or
Canada that (i) has revenue in excess of One Million Dollars ($1,000,000) in a
fiscal year, (ii) owns assets with a fair market value in excess of One Million
Dollars ($1,000,000), or (iii) is including any of its Accounts as part of
Eligible Accounts or Eligible Foreign Accounts.

 

“Minimum Balance” means Four Million
Dollars ($4,000,000).

 

“Non Material Subsidiaries” means any
Subsidiary of Borrower which is not required to become a party to this
Agreement pursuant to the requirements of Section 4.10 of this Agreement.

 

“Non Release Period” has the meaning
set forth in Section 4.5 of this Agreement.

 

“Obligations” means all present and
future Loans, advances, debts, liabilities, obligations, guaranties, covenants,
duties and indebtedness at any time owing by Borrower to Silicon, whether
evidenced by this Agreement or any note or other instrument or document,
whether arising from an extension of credit, opening of a letter of credit,
loan, guaranty, indemnification or otherwise, whether direct or indirect, absolute
or contingent, due or to become due, including, without limitation, all
interest, charges, expenses, fees, attorney’s fees, expert witness fees, audit
fees, letter of credit fees, collateral monitoring fees, closing fees, facility
fees, termination fees, minimum interest charges and any other sums, in each
case required to be paid by Borrower under this Agreement or under any other
Loan Documents.

 

“Other Property” means the following
as defined in the Code in effect on the date hereof with such additions to such
term as may hereafter be made, and all rights relating thereto: all present and
future “commercial tort claims” (including without limitation any commercial
tort claims identified in the Representations), “documents”, “instruments”, “promissory
notes”, “chattel paper”, “letters of credit”, “letter-of-credit rights”, “fixtures”,
“farm products” and “money”; and all other goods and personal property of every
kind, tangible and intangible, governed by the Code.

 

“Payment” means all checks, wire
transfers and other items of payment received by Silicon (including proceeds of
Accounts and payment of the Obligations in full) for credit to Borrower’s
outstanding Loans or, if the balance of the Loans have been reduced to zero,
for credit to its Deposit Accounts.

 

“Permitted Cisco Refinancing” means
any refinancing or replacement of the Cisco Credit Agreement (a) for
indebtedness in an amount not to exceed $24,500,000, (b) which is solely
secured by a portion of the Cisco Senior Collateral and the Proceeds thereof
satisfactory to Silicon (it being understood that Silicon may maintain a junior
lien on the portion of Cisco Senior Collateral and Proceeds which secures such
refinancing or replacement of the Cisco Credit Agreement), (c) on terms and
conditions acceptable

 

21

 

to Silicon in its reasonable discretion and
(d) from a lender satisfactory to Silicon in its reasonable discretion.

 

“Permitted Liens” means the following:
(i) purchase money security interests in specific items of real property, fiber
and Equipment; (ii) leases (operating and capital) of real property, fiber and
Equipment; (iii) liens for taxes not yet payable and being contested as
permitted hereunder; (iv) additional security interests and liens consented to
in writing by Silicon, which consent may be withheld in its good faith business
judgment; (v) security interests being terminated substantially concurrently
with this Agreement; (vi) liens of materialmen, mechanics, warehousemen,
carriers, or other similar liens arising in the ordinary course of business and
securing obligations which are not delinquent; (vii) liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; and (viii)
liens on all property, other than liens on the Senior Silicon Collateral, in
favor of Cisco pursuant to the Cisco Credit Agreement or liens on the Senior
Cisco Collateral in favor of any lender or lenders which provide any Permitted
Cisco Refinancing.  Silicon will have the
right to require, as a condition to its consent under subparagraph (iv) above,
that the holder of the additional security interest or lien sign an
intercreditor agreement in form and substance satisfactory to Silicon in its
reasonable discretion, acknowledge that the security interest is subordinate to
the security interest in favor of Silicon, and agree not to take any action to
enforce its subordinate security interest so long as any Obligations remain
outstanding, and that Borrower agree that any uncured default in any obligation
secured by the subordinate security interest shall also constitute an Event of
Default under this Agreement.

 

“Person” means any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated organization,
association, limited liability company, corporation, government, or any agency
or political division thereof, or any other subsidiary.

 

“Pledge Agreement” means that certain
Stock Pledge, Assignment and Security Agreement from the Guarantor in favor of
Silicon.

 

“Proceeds” means all present and
future “proceeds” as defined in the Code in effect on the date hereof.

 

“Release Period” has the meaning set
forth in Section 3.4(a) of this Agreement.

 

“Representations” means the written
Collateral Information Sheet provided by Borrower to Silicon referred to in the
Schedule, as the same may be updated from time to time with the approval of
Silicon.

 

“Reserves” means, as of any date of
determination, such amounts as Silicon may from time to time establish and
revise in its good faith business judgment, reducing the amount of Loans,
Letters of Credit and other financial accommodations which would otherwise be
available to Borrower under the lending formula(s) provided in the Schedule:
(a) to reflect events, conditions, contingencies or risks which, as determined
by Silicon in its good faith business judgment, do or may adversely affect (i)
the Accounts (including without limitation any increase in delinquencies of
Accounts), (ii) the assets or business of Borrower or Guarantors, or (iii) the
security interests and other rights of Silicon in the Collateral (including the
enforceability, perfection and priority thereof); or (b) to reflect Silicon’s
good faith belief that any collateral report or financial information furnished
by or on behalf of Borrower or any Guarantor to Silicon is or may have been
incomplete, inaccurate or misleading in any material respect; or (c) in respect
of any state of facts which Silicon determines in good faith constitutes an
Event of Default or may, with notice or passage of time or both, constitute an
Event of Default.

 

22

 

“Senior Silicon Collateral” means all
Accounts, (ii) all promissory notes or other instruments evidencing obligations
that were originally Accounts, (iii) any supporting obligations for such
Accounts, (iv) any collateral securing such Accounts, notes or supporting
obligations, (v) any contractual rights giving rise to or otherwise relating to
such Account, note or other instrument, (vi) any lockbox accounts and any
blocked account or other deposit account established solely for the purpose of
holding the proceeds of such Accounts or the Loans, no matter where such
accounts may be maintained, including, without limitation, the Lockbox, the
Cash Collateral Account and the Assigned Account and (vii) all Proceeds of the
foregoing.

 

“Streamline Reporting Period” means
any period where: (A) no Default or Event of Default has occurred and is
continuing; and (B) (i) outstanding Loans are less than $1,000,000 or (ii) a
Release Period exists and unencumbered cash at Silicon exceeds $15,000,000.

 

“Subordinated Debt” means indebtedness
incurred by Borrower (up to $200,000,000) subordinated to Borrower’s
indebtedness owed to Silicon and which is reflected in a written agreement in a
manner and form acceptable to Silicon either (i) substantially in the form
attached as Exhibit E or (ii) in such other form as provides for
repayment of such indebtedness to be fully subordinated to the Obligations.

 

“Tangible Net Worth” shall mean the
excess of total assets over total liabilities, determined in accordance with
GAAP, with the following adjustments: (A) there shall be excluded from
assets:  (i) notes, accounts receivable
and other obligations owing to Borrower from its officers or other Affiliates,
and (ii) all assets which would be classified as intangible assets under GAAP,
including without limitation goodwill, licenses, patents, trademarks, trade
names, copyrights, capitalized software and organizational costs, licenses and
franchises; and (B) there shall be excluded from liabilities all Subordinated
Debt.

 

Other Terms.  All
accounting terms used in this Agreement, unless otherwise indicated, shall have
the meanings given to such terms in accordance with GAAP.  All other terms contained in this Agreement,
unless otherwise indicated, shall have the meanings provided by the Code, to
the extent such terms are defined therein.

 

9.                                      GENERAL PROVISIONS.

 

9.1  Interest Computation; Float Charge.  In
computing interest on the Obligations, all Payments received after 12:00 Noon
on any day shall be deemed received on the next Business Day.  In addition, Silicon shall be entitled to
charge Borrower a “float” charge in an amount equal to two (2) Business Days
interest, at the interest rate applicable to the Loans, on all Payments
received by Silicon.  The float charge
for each month shall be payable on the last day of the month.  Silicon shall not, however, be required to
credit Borrower’s account for the amount of any item of payment which is
unsatisfactory to Silicon in its good faith business judgment, and Silicon may
charge Borrower’s loan account for the amount of any item of payment which is
returned to Silicon unpaid.

 

9.2  Application of Payments.  All payments with respect to the Obligations may be applied, and in
Silicon’s good faith business judgment reversed and reapplied, to the
Obligations, in such order and manner as Silicon shall determine in its good
faith business judgment.

 

9.3  Charges to Accounts.  Silicon may, in its discretion, require that Borrower pay monetary
Obligations in cash to Silicon, or charge them to Borrower’s Loan account, in
which event they will bear interest at the same rate applicable to the
Loans.  Silicon may also, in its
discretion, charge any monetary Obligations to Borrower’s Deposit Accounts
maintained with Silicon.

 

23

 

9.4  Monthly Accountings. 
Silicon shall provide Borrower monthly with an account of advances,
charges, expenses and payments made pursuant to this Agreement.  Such account shall be deemed correct,
accurate and binding on Borrower and an account stated (except for reverses and
reapplications of payments made and corrections of errors discovered by
Silicon), unless Borrower notifies Silicon in writing to the contrary within
sixty (60) days after such account is rendered, describing the nature of any
alleged errors or omissions.

 

9.5  Notices.  All
notices to be given under this Agreement shall be in writing and shall be given
either personally or by reputable private delivery service or by regular
first-class mail, or certified mail return receipt requested, addressed to
Silicon or Borrower at each of the addresses shown in the heading to this Agreement,
or at any other address designated in writing by one party to the other
party.  Notices to Silicon shall be
directed to the Commercial Finance Division, to the attention of the Division
Manager or the Division Credit Manager. 
All notices shall be deemed to have been given upon delivery in the case
of notices personally delivered, or at the expiration of one (1) Business Day
following delivery to the private delivery service, or five (5) Business Days
following the deposit thereof in the United States mail, with postage prepaid.

 

9.6  Severability. 
Should any provision of this Agreement be held by any court of competent
jurisdiction to be void or unenforceable, such defect shall not affect the
remainder of this Agreement, which shall continue in full force and effect.

 

9.7  Integration.  This
Agreement and such other written agreements, documents and instruments as may
be executed in connection herewith are the final, entire and complete agreement
between Borrower and Silicon and supersede all prior and contemporaneous
negotiations and oral representations and agreements, all of which are merged
and integrated in this Agreement.  There
are no oral understandings, representations or agreements between the parties
which are not set forth in this Agreement or in other written agreements signed
by the parties in connection herewith.

 

9.8  Waivers; Indemnity.  The
failure of Silicon at any time or times to require Borrower to strictly comply
with any of the provisions of this Agreement or any other Loan Document shall
not waive or diminish any right of Silicon later to demand and receive strict
compliance therewith.  Any waiver of any
default shall not waive or affect any other default, whether prior or
subsequent, and whether or not similar. 
None of the provisions of this Agreement or any other Loan Document
shall be deemed to have been waived by any act or knowledge of Silicon or its
agents or employees, but only by a specific written waiver signed by an
authorized officer of Silicon and delivered to Borrower.  Borrower waives the benefit of all statutes
of limitations relating to any of the Obligations or this Agreement or any
other Loan Document, and Borrower waives demand, protest, notice of protest and
notice of default or dishonor, notice of payment and nonpayment, release,
compromise, settlement, extension or renewal of any commercial paper,
instrument, account, General Intangible, document or guaranty at any time held
by Silicon on which Borrower is or may in any way be liable, and notice of any action
taken by Silicon, unless expressly required by this Agreement. Borrower hereby
agrees to indemnify Silicon and its affiliates, subsidiaries, parent,
directors, officers, employees, agents, and attorneys (each a “Related Party”),
and to hold them harmless from and against any and all claims, debts,
liabilities, demands, obligations, actions, causes of action, penalties, costs
and expenses (including reasonable attorneys’ fees), of every kind, which they
may sustain or incur based upon or arising out of any of the Obligations, or
any relationship or agreement between Silicon and Borrower, or any other
matter, relating to Borrower or the Obligations; provided that this indemnity
shall not extend to damages proximately caused by the indemnitee’s or any Related
Party’s own gross negligence or willful misconduct.

 

24

 

Notwithstanding any provision in this
Agreement to the contrary, the indemnity agreement set forth in this Section shall
survive any termination of this Agreement and shall for all purposes continue
in full force and effect but shall not be an obligation secured by the
Collateral after the termination of this Agreement.

 

9.9  No Liability for Ordinary Negligence. 
Neither Silicon, nor any of its directors, officers, employees, agents,
attorneys or any other Person affiliated with or representing Silicon shall be
liable for any claims, demands, losses or damages, of any kind whatsoever,
made, claimed, incurred or suffered by Borrower or any Guarantor through the
ordinary negligence of Silicon, or any of its directors, officers, employees,
agents, attorneys or any other Person affiliated with or representing Silicon,
but nothing herein shall relieve Silicon or any other such Person from
liability for its own gross negligence or willful misconduct.

 

9.10  Amendment.  The
terms and provisions of this Agreement may not be waived or amended, except in
a writing executed by Borrower and a duly authorized officer of Silicon.

 

9.11  Time of Essence.  Time
is of the essence in the performance by Borrower of each and every obligation
under this Agreement.

 

9.12  Attorneys Fees and Costs. 
Borrower shall reimburse Silicon for all reasonable attorneys’ fees and
all filing, recording, search, title insurance, appraisal, audit, and other
reasonable costs incurred by Silicon, pursuant to, or in connection with, or
relating to this Agreement (whether or not a lawsuit is filed), including, but
not limited to, any reasonable attorneys’ fees and costs Silicon incurs in
order to do the following: prepare and negotiate this Agreement and all present
and future documents relating to this Agreement; obtain legal advice in
connection with this Agreement or Borrower; enforce, or seek to enforce, any of
its rights; prosecute actions against, or defend actions by, Account Debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any probate claim, bankruptcy claim, third-party claim, or other claim;
examine, audit, copy, and inspect any of the Collateral or any of Borrower’s
books and records; protect, obtain possession of, lease, dispose of, or
otherwise enforce Silicon’s security interest in, the Collateral; and otherwise
represent Silicon in any litigation relating to Borrower.  In satisfying Borrower’s obligation hereunder
to reimburse Silicon for attorneys fees, Borrower may, for convenience, issue
checks directly to Silicon’s attorneys, Troutman Sanders LLP, but Borrower
acknowledges and agrees that Troutman Sanders LLP is representing only Silicon
and not Borrower in connection with this Agreement.  If either Silicon or Borrower files any
lawsuit against the other predicated on a breach of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys’ fees, including (but not limited to) reasonable attorneys’
fees and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment.  All attorneys’
fees and costs to which Silicon may be entitled pursuant to this Paragraph
shall immediately become part of Borrower’s Obligations, shall be due on
demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations.  Upon
request of Borrower after payment of such sums, Silicon will provide Borrower
with copies of invoices received for such fees and expenses.

 

9.13  Benefit of Agreement.  The
provisions of this Agreement shall be binding upon and inure to the benefit of
the respective successors, assigns, heirs, beneficiaries and representatives of
Borrower and Silicon; provided, however, that Borrower may not assign or
transfer any of its rights under this

 

25

 

Agreement without the prior written consent
of Silicon, and any prohibited assignment shall be void.  No consent by Silicon to any assignment shall
release Borrower from its liability for the Obligations.

 

9.14  Joint and Several Liability. 
Borrower’s liability is joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.

 

9.15  Limitation of Actions. 
Any claim or cause of
action by Borrower against Silicon, its directors, officers, employees, agents,
accountants or attorneys, based upon, arising from, or relating to this Loan
Agreement, or any other Loan Document, or any other transaction contemplated
hereby or thereby or relating hereto or thereto, or any other matter, cause or
thing whatsoever, occurred, done, omitted or suffered to be done by Silicon,
its directors, officers, employees, agents, accountants or attorneys, shall be
barred unless asserted by Borrower by the commencement of an action or
proceeding in a court of competent jurisdiction by the filing of a complaint
within one (1) year after the first act, occurrence or omission upon which such
claim or cause of action, or any part thereof, is based, and the service of a
summons and complaint on an officer of Silicon, or on any other person
authorized to accept service on behalf of Silicon, within thirty (30) days
thereafter.  Borrower agrees that such
one-year period is a reasonable and sufficient time for Borrower to investigate
and act upon any such claim or cause of action. 
The one-year period provided herein shall not be waived, tolled, or
extended except by the written consent of Silicon in its sole discretion.  This provision shall survive any termination
of this Loan Agreement or any other Loan Document.

 

9.16  Paragraph Headings; Construction. 
Paragraph headings are only used in this Agreement for convenience.  Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable paragraph,
and the headings shall not be used in any manner to construe, limit, define or
interpret any term or provision of this Agreement. This Agreement has been
fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed
strictly against Silicon or Borrower under any rule of construction or
otherwise.

 

9.17  Governing Law;
Jurisdiction; Venue.  This Agreement and all acts and transactions
hereunder and all rights and obligations of Silicon and Borrower shall be
governed by the laws of the State of California.  As a material part of the consideration to
enter into this Agreement, Borrower and Silicon: (i) agrees that all actions
and proceedings relating directly or indirectly to this Agreement shall be
litigated in state or federal courts located within the Commonwealth of
Virginia; (ii) consents to the jurisdiction and venue of any such court and
consents to service of process in any such action or proceeding by personal delivery
or any other method permitted by law; and (iii) waives any and all rights such
party may have to object to the jurisdiction of any such court, or to transfer
or change the venue of any such action or proceeding, provided, however, that
if for any reason either party cannot avail itself of such courts in the
Commonwealth of Virginia, each party accepts jurisdiction of the courts and
venue in Santa Clara, California.

 

9.18  Mutual Waiver of Jury Trial. 
BORROWER AND SILICON EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO,
THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN
SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF SILICON OR BORROWER
OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR

 

26

 

ANY OTHER PERSONS AFFILIATED WITH
SILICON OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE.

 

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

 

27

 

	
  Borrower:

  	
   

  
	
   

  	
   

  
	
  COGENT
  COMMUNICATIONS, INC.

  	
  COGENT CANADA, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/David
  Schaeffer

  	
   

  	
   

  
	
   

  	
  Name:

  	
  By:

  	
  /s/David Schaeffer

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
  NETWORK
  EQUIPMENT SOLUTIONS, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/David
  Schaeffer

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
  Silicon:

  
	
   

  	
   

  
	
  UFO GROUP, INC.,

  	
  SILICON VALLEY BANK

  
	
   

  	
   

  
	
  By:

  	
  /s/David
  Schaeffer

  	
   

  	
   

  
	
   

  	
  Name:

  	
  By:

  	
  /s/William Yang

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
  ALLIED RISER
  COMMUNICATIONS

  CORPORATION

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/David
  Schaeffer

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  ALLIED RISER
  OPERATIONS CORPORATION

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/David
  Schaeffer

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
  COGENT CANADA
  HOLDINGS, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/David
  Schaeffer

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

28

 

Silicon Valley Bank

 

Schedule to

 

Loan and Security Agreement

 

	
  Borrower:

  	
   

  	
  COGENT COMMUNICATIONS, INC., a
  Delaware corporation (the “Company”)

  
	
   

  	
   

  	
  COGENT COMMUNICATIONS GROUP, INC., a
  Delaware corporation (the “Parent”)

  
	
   

  	
   

  	
  NETWORK EQUIPMENT SOLUTIONS, LLC, a
  Delaware limited liability company (“NES”)

  
	
   

  	
   

  	
  UFO GROUP, INC., a Delaware corporation

  
	
   

  	
   

  	
  ALLIED RISER COMMUNICATIONS CORPORATION, a
  Delaware corporation

  
	
   

  	
   

  	
  ALLIED RISER OPERATIONS CORPORATION, a
  Delaware corporation

  
	
   

  	
   

  	
  COGENT CANADA HOLDINGS, INC., a
  Nova Scotia corporation

  
	
   

  	
   

  	
  COGENT CANADA, INC., a
  Canadian Federal corporation; and certain Additional Borrowers added
  to this Agreement from time to time.

  

 

	
  Address for

  all Borrowers

  except NES:

  	
   

  	
  1015 31st Street,
  NW

  
	
   

  	
   

  	
  Washington, DC 20007

  
	
   

  	
   

  	
   

  
	
  Address

  for NES:

  	
   

  	
  2711 Centerville Road, Suite 400

  
	
   

  	
   

  	
  Wilmington, Delaware 19808

  

 

	
  Date:

  	
   

  	
  March 9, 2005

  

 

This Schedule forms an
integral part of the Loan and Security Agreement between Silicon Valley Bank
and the above-borrower of even date.

 

 

	
  1. CREDIT LIMIT

  	
   

  	
   

  
	
  (Section 1.1):

  	
   

  	
  During all Non Release
  Periods, “Credit Limit” shall mean the lesser of: (a) Ten Million Dollars
  ($10,000,000) at any one time outstanding or (b) seventy-five percent (75%)
  of Borrower’s Eligible Accounts (as defined in Section 8 above), plus
  during any period that Borrower maintains not less than $9,000,000 of unencumbered
  cash with Silicon, the lesser of (i) fifty percent (50%) of Borrower’s
  Eligible Foreign Accounts or (ii) $2,000,000.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  During each Release Period
  when Borrower’s unencumbered cash held at Silicon is greater than
  $15,000,000, “Credit Limit” shall mean the lesser of: (a) Ten Million Dollars
  ($10,000,000) at any one time outstanding; or (b) the sum of Five Million
  Dollars ($5,000,000), plus eighty-five percent (85%) of Borrower’s
  Eligible Accounts, plus the lesser of (i) fifty percent (50%) of Borrower’s
  Eligible Foreign Accounts or (ii) $2,000,000.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  During each Release Period
  when Borrower’s unencumbered cash held at Silicon is less than $15,000,000
  but greater than $9,000,000, “Credit Limit” shall mean the lesser of: (a) Ten
  Million Dollars ($10,000,000) at any one time outstanding; or (b) the sum
  seventy-five percent (75%) of Borrower’s Eligible Accounts, plus the
  lesser of (i) fifty percent (50%) of Borrower’s Eligible Foreign Accounts or
  (ii) $2,000,000.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  During each Release Period
  when Borrower’s unencumbered cash held at Silicon is less than $9,000,000,
  “Credit Limit” shall mean the lesser of: (a) Ten Million Dollars
  ($10,000,000) at any one time outstanding, or (b) seventy-five percent (75%)
  of Borrower’s Eligible Accounts.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Silicon may, from time to
  time, modify the Advance Rate, in its good faith business judgment, upon
  notice to the Borrower, based on changes in collection experience with
  respect to Accounts or other issues or factors relating to the Accounts or
  other Collateral.

  

 

30

 

	
  Letter of Credit
  Sublimit

  	
   

  	
   

  
	
  (Section 1.7):

  	
   

  	
  Two Million Dollars
  ($2,000,000)

  
	
   

  	
   

  	
   

  
	
  Cash Management Sublimit

  	
   

  	
   

  
	
  (Section 1.8):

  	
   

  	
  Three Hundred Thousand
  Dollars ($300,000)

  
	
   

  	
   

  	
   

  
	
  2. INTEREST.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Interest Rate (Section 1.2):

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  All Loans and all other
  Obligations shall bear interest at a rate equal to the Prime Rate, plus 1.50%
  per annum. Upon Borrower achieving three (3) consecutive months of positive
  EBITDA and provided positive EBITDA continues to be achieved monthly,
  interest shall be reduced to the Prime Rate, plus 1.00% per annum.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  During each Release Period
  and Borrower’s unencumbered cash held at Silicon is greater than $15,000,000,
  then the Obligations shall bear interest at a rate equal to the Prime Rate
  plus 0.50% per annum.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  All interest shall be
  calculated on the basis of a 360-day year for the actual number of days
  elapsed. “Prime Rate” means the rate announced from time to time by Silicon
  as its “prime rate;” it is a base rate upon which other rates charged by
  Silicon are based, and it is not necessarily the best rate available at
  Silicon. The interest rate applicable to the Obligations shall change on each
  date there is a change in the Prime Rate.

  
	
   

  	
   

  	
   

  
	
  3. FEES (Section 1.4):

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Loan Fee:

  	
   

  	
  $76,500 payable on the
  closing date.

  
	
   

  	
   

  	
   

  
	
  Collateral Monitoring Fee:

  	
   

  	
  $1,000, per month, payable
  in arrears (prorated for any partial month at the beginning and at
  termination of this Agreement), provided that during any Streamline Reporting Period this fee will be waived.

  
	
   

  	
   

  	
   

  
	
  Unused Portion Fee:

  	
   

  	
  The Borrower shall pay to
  Silicon a fee (collectively, the “Unused Line Fees” and individually, a
  “Unused Line Fee”) in an amount equal to three-eighths of one percent
  (0.375%) per annum of the average daily

  

 

31

 

	
   

  	
   

  	
  unused and undisbursed
  portion of the Credit Limit accruing during each month; provided, however,
  that during each Release Period and Borrower’s unencumbered cash held at
  Silicon is greater than $15,000,000, the Unused Line Fee shall be an amount
  equal to one quarter of one percent (0.25%) per annum of the average daily
  unused and undisbursed portion of the Credit Limit accruing during each
  month. The accrued and unpaid portion of the Unused Line Fee shall be paid by
  the Borrower to Silicon on the last day of each month, commencing on the
  first such date following the date hereof, and on the Maturity Date.

  
	
   

  	
   

  	
   

  
	
  4. MATURITY DATE

  	
   

  	
   

  
	
  (Section 6.1):

  	
   

  	
  January 31, 2007.

  
	
   

  	
   

  	
   

  
	
  5. FINANCIAL COVENANTS

  	
   

  	
   

  
	
  (Section 5.1):

  	
   

  	
  Borrower shall comply with
  each of the following covenants. Compliance shall be determined as of the end
  of each month, except as otherwise specifically provided below:

  
	
   

  	
   

  	
   

  
	
  Minimum Unrestricted Cash:

  	
   

  	
  Borrower shall maintain at
  all times Borrower’s unencumbered cash at Silicon of not less than
  $4,000,000.

  
	
   

  	
   

  	
   

  
	
  6. REPORTING.

  	
   

  	
   

  
	
  (Section 5.3):

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Borrower shall provide
  Silicon with the following:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1.

  	
  For Domestic Accounts
  Only: Weekly transaction reports and schedules of collections, on Silicon’s
  standard form.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.

  	
  For Eligible Accounts and
  Eligible Foreign Accounts (if borrowing against Eligible Foreign Accounts):
  Monthly accounts receivable agings, aged by invoice date, within twenty (20)
  days after the end of each month.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.

  	
  For Eligible Accounts and
  Eligible Foreign Accounts (if borrowing against Eligible Foreign Accounts):
  Monthly accounts payable agings, aged by invoice date, and 

  

 

32

 

	
   

  	
   

  	
   

  	
  outstanding or held check
  registers, if any, within twenty (20) days after the end of each month.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4.

  	
  For Domestic Accounts
  Only: Monthly reconciliations of accounts receivable agings (aged by invoice
  date), transaction reports, and general ledger, within twenty (20) days after
  the end of each month.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5.

  	
  Monthly unaudited
  financial statements, as soon as available, and in any event within thirty
  (30) days after the end of each month.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  6.

  	
  Monthly Compliance
  Certificates, within thirty (30) days after the end of each month, in the
  form of Exhibit A, signed by the Chief Financial Officer of Borrower,
  certifying that as of the end of such month whether Borrower was in full
  compliance with all of the terms and conditions of this Agreement, and
  setting forth calculations showing whether Borrower is then in compliance
  with the financial covenants set forth in this Agreement and such other
  information as Silicon shall reasonably request, including, without
  limitation, a statement that at the end of such month there were no held
  checks.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  7.

  	
  Annual operating budgets
  (including income statements, balance sheets and cash flow statements, by
  month) for the upcoming fiscal year of Borrower within thirty (30) days prior
  to the end of each fiscal year of Borrower.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  8.

  	
  Annual financial
  statements, as soon as available, and in any event within one hundred twenty
  (120) days following the end of Borrower’s fiscal year, certified by, and
  with an unqualified opinion of, independent certified public accountants
  acceptable to Silicon.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Streamline Reporting Period

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notwithstanding anything
  to the contrary set forth in this Agreement, during any Streamline Reporting
  Period Borrower shall provide Silicon with
  transaction reports on Silicon’s standard form, including, sales, credit
  memos and collections journals within thirty (30) days after the end of each
  month (rather than weekly as per Section 6(1) above).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Request for Loans. Borrower shall provide Silicon with at
  least fifteen (15) days’ prior written notice (or such lesser

  

 

33

 

	
   

  	
   

  	
  notice as Silicon may
  agree to accept) of Borrower’s desire to have Silicon make any Loan to
  Borrower which causes the principal balance to exceed $1,000,000. Such Loans,
  if any, shall be made in accordance with the terms and conditions of this
  Agreement

  
	
   

  	
   

  	
   

  
	
  7. BORROWER INFORMATION:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Borrower represents and
  warrants that the information set forth in the Collateral Information Sheet
  of the Borrower dated                             ,
  2005 previously submitted to Silicon (the “Representations”) is true and
  correct in all material respects as of the date hereof.

  
	
   

  	
   

  	
   

  
	
  8. ADDITIONAL PROVISIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1.

  	
  Banking Relationship. Borrower shall at all times maintain a banking
  relationship with Silicon. Without limiting the generality of the foregoing,
  Borrower shall, at all times, maintain not less than eighty five percent
  (85%) of its total unrestricted cash and investments on deposit with Silicon.
  From and after the first date on which the Cisco Release Conditions are met,
  as to any Deposit Accounts and investment accounts maintained with another
  institution (other than the lockbox account of Borrower held at SunTrust
  Bank), Borrower shall cause such institution, within thirty (30) days after
  the date of this Agreement, to enter into a control agreement in form
  acceptable to Silicon in its good faith business judgment in order to perfect
  Silicon’s first-priority security interest in said Deposit Accounts and
  investment accounts. On or before the Closing Date Borrower shall cause
  SunTrust Bank to enter into a control agreement in form acceptable to Silicon
  in its good faith business judgment in order to perfect Silicon’s first-

  

 

34

 

	
   

  	
   

  	
   

  	
  priority security interest
  in the lockbox account of Borrower held at SunTrust Bank.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.

  	
  Subordination of Inside Debt. All present and future indebtedness for
  borrowed money of Borrower to its officers, directors and shareholders
  (“Inside Debt”) shall, at all times, be subordinated to the Obligations
  pursuant to a subordination agreement acceptable to Silicon in its reasonable
  discretion. Borrower represents and warrants that there is no Inside Debt
  presently outstanding. Prior to incurring any Inside Debt in the future,
  Borrower shall cause the person to whom such Inside Debt will be owed to
  execute and deliver to Silicon a subordination agreement as described above.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.

  	
  Intercreditor Agreement. As
  a condition precedent to the effectiveness of this Agreement, the Borrower
  shall have caused Cisco Systems Capital Corporation as agent for certain
  lenders under the Cisco Credit Agreement to execute and deliver an
  Intercreditor Agreement (the “Intercreditor Agreement”).

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4.

  	
  Subordination of Allied Riser
  Debt. All
  Obligations hereunder shall be deemed “Designated Senior Debt” for purposes
  of that certain Indenture, dated as of June 28, 2000, between the Issuer and
  the Trustee, as amended from time to time.

  

 

 

[SIGNATURES APPEAR ON THE
FOLLOWING PAGE]

 

35

 

	
  Borrower:

  	
   

  
	
   

  	
   

  	
   

  
	
  COGENT
  COMMUNICATIONS, INC.

  	
  COGENT CANADA,
  INC.

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/David
  Schaeffer

  	
   

  	
  By: 

  	
  /s/David
  Schaeffer

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Name:

  
	
   

  	
  Title:

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  NETWORK
  EQUIPMENT SOLUTIONS, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/David
  Schaeffer

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Silicon:

  
	
   

  	
  Title:

  	
  SILICON VALLEY
  BANK

  
	
   

  	
   

  	
   

  
	
  UFO GROUP, INC.,

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/David
  Schaeffer

  	
   

  	
  By:  

  	
  /s/William Yang

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Name:

  
	
   

  	
  Title:

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  ALLIED RISER
  COMMUNICATIONS

  CORPORATION

  	
   

  
	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/David Schaeffer

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  ALLIED RISER
  OPERATIONS CORPORATION

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/David
  Schaeffer

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  COGENT CANADA
  HOLDINGS, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/David
  Schaeffer

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
											

 

36

 

Exhibit A

 

COMPLIANCE
CERTIFICATE

 

	
  To:

  	
  Silicon Valley Bank

  
	
   

  	
   

  
	
  From:

  	
  Cogent Communications,
  Inc.

  
	
   

  	
  1015 31st Street, NW

  
	
   

  	
  Washington, DC 20007

  

 

The undersigned authorized
officer of Cogent Communications, Inc. (“Company”) certifies on behalf of
Borrower that under the terms and conditions of the 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.  In addition, the
undersigned authorized officer of Borrower certifies that Borrower and each
Subsidiary (i) has timely filed
all required tax returns and paid, or made adequate provision to pay, all
material taxes, except those being contested in good faith with adequate
reserves under GAAP and (ii) does not
have any legal actions pending or threatened against Borrower or any Subsidiary
which Borrower has not previously notified in writing to Bank.  Attached are the required documents
supporting the certification.  In
addition, the undersigned certifies that (1) Borrower and each Subsidiary has timely filed all required tax returns and
paid, or made adequate provision to pay, all material taxes, except those being
contested in good faith with adequate reserves under GAAP and (ii) no liens has
been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits
which Borrower has not previously notified in writing to Bank.  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

  
	
  Financials & Comp. Cert.

  	
   

  	
  Monthly w/in 30 days

  	
   

  	
  YES/NO

  
	
  Reconciliations of Domestic and if applicable,
  Foreign Receivable agings (invoice date)

  	
   

  	
  Monthly w/in 20 days

  	
   

  	
  YES/NO

  
	
  Reconciliations of Domestic and if applicable,
  Foreign A/R agings,

  	
   

  	
  Monthly w/in 20 days

  	
   

  	
  YES/NO

  
	
  Transactions reports, G/L (Domestic Only)

  	
   

  	
  Weekly if not Streamline/Monthly w/in 30 days if
  Streamline

  	
   

  	
  YES/NO

  

 

 

	
  Payables agings

  	
   

  	
  Monthly w/in 20 days

  	
   

  	
  YES/NO

  
	
  Held Checks

  	
   

  	
   

  	
   

  	
  YES/NO

  
	
  If YES, Held Checks Register

  	
   

  	
  Monthly w/in 20 days

  	
   

  	
  YES/NO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Audited Annual Financials

  	
   

  	
  FYE w/in 120 days

  	
   

  	
   

  
	
  YES/NO

  	
   

  	
   

  	
   

  	
   

  
	
  Annual Operating Budget

  	
   

  	
  W/in 30 days prior to FYE

  	
   

  	
   

  
	
  YES/NO

  	
   

  	
   

  	
   

  	
   

  

 

	
  FINANCIAL COVENANT ACTUAL

  	
   

  	
  REQUIRED

  	
   

  	
   

  
	
  Minimum Unencumbered Cash (At all times)

  	
   

  	
  $

  	
  4,000,000

  	
   

  	
  $                 

  
	
   

  	
   

  	
   

  	
   

  	
  Complies?    YES/NO

  
						

 

Terms are defined
in the Schedule to the Loan Agreement, Section 5.1

 

Comments regarding
financial covenants:

 

	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Received:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
						

 

 

Exhibit
B

Non
Material Subsidiaries 

 

	
  COGENT COMMUNICATIONS OF CALIFORNIA, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF ARIZONA, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  ALLIED RISER OF CALIFORNIA, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF CONNECTICUT, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF D.C., INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF FLORIDA, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  ALLIED RISER OF GEORGIA, INC. OF GEORGIA, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF ILLINOIS, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF MARYLAND, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF MASSACHUSETTS, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF MICHIGAN, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF MISSOURI, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF NEW JERSEY, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF NEW YORK, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF OKLAHOMA, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF OHIO, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF PENNSYLVANIA, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF TEXAS, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF UTAH, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF VIRGINIA, INC.

  	
   

  	
  Virginia corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF WASHINGTON, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS OF WISCONSIN, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  FIBER SERVICES OF CANADA, LTD.

  	
   

  	
  Nova Scotia corporation

  
	
   

  	
   

  	
   

  
	
  COGENT EUROPE, SARL

  	
   

  	
  Luxembourg corporation

  

 

 

	
  COGENT COMMUNICATIONS
  FRANCE, SAS

  	
   

  	
  French corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS ESPANA
  S.A.

  	
   

  	
  Spanish corporation

  
	
   

  	
   

  	
   

  
	
  LAMBDANET SWITZERLAND GMBH

  	
   

  	
  Swiss corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS UK LTD.

  	
   

  	
  English corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS BELGIUM SPRL

  	
   

  	
  Belgian corporation

  
	
   

  	
   

  	
   

  
	
  COGENT COMMUNICATIONS NETHERLANDS B.V.

  	
   

  	
  Dutch corporation

  
	
   

  	
   

  	
   

  
	
  C.C.D. COGENT COMMUNICATIONS DEUTSCHLAND, GMBH

  	
   

  	
  German corporation

  
	
   

  	
   

  	
   

  
	
  SYMPOSIUM GAMMA, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT GREAT LAKES COMMUNICATIONS, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT POTOMAC, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  SFX ACQUISITION, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT INTERNET, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  SYMPOSIUM OMEGA, INC.

  	
   

  	
  Delaware corporation

  

 

 

Exhibit
C

 

Dissolving
Subsidiaries

 

 

	
  COGENT GREAT LAKES COMMUNICATIONS, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT POTOMAC, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  SFX ACQUISITION, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  COGENT INTERNET, INC.

  	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  SYMPOSIUM OMEGA, INC.

  	
   

  	
  Delaware corporation

  

 

 

Exhibit
D

 

Form
of Joinder Agreement

 

ADDITIONAL BORROWER JOINDER
SUPPLEMENT

 

THIS ADDITIONAL BORROWER JOINDER SUPPLEMENT (this “Agreement”)
is made this        day of       ,
200 , by and among, COGENT COMMUNICATIONS, INC., a Delaware corporation (“Company”),
the other “Existing Borrowers” (as that term is defined below),                                                     ,
a                                 
corporation (the “Additional Borrower”), and wholly-owned subsidiary of
Company, and SILICON VALLEY BANK, a California chartered bank (the “Bank”).

 

NOW, THEREFORE, for value received the undersigned
agree as follows:

 

1.             Reference is hereby made to the Loan and Security
Agreement dated as of March   , 2005 (as amended, modified,
restated, substituted, extended and renewed at any time and from time to time,
the “Loan Agreement”) by and between the Company, each Person which is included
in the definition of “Borrower” (as that term is defined in the Loan Agreement)
immediately prior to the date of this Agreement (together with Company, the “Existing
Borrowers”), and the Bank.  Capitalized
terms not otherwise defined in this Agreement shall have the meanings given to
them in the Loan Agreement.

 

2.   (a)  The
Additional Borrower and the Existing Borrowers hereby acknowledge, confirm and
agree that on and as of the date of this Agreement the Additional Borrower has
become a “Borrower” (as that term is defined in the Loan Agreement), and, along
with the Existing Borrowers, is included in the definition of “Borrower” under
the Loan Agreement and the other Loan Documents for all purposes thereof, and
as such shall be jointly and severally liable, as provided in the Loan
Documents, for all Obligations thereunder (whether incurred or arising prior
to, on, or subsequent to the date hereof) and otherwise bound by all of the
terms, provisions and conditions thereof.

 

(b)           Without
in any way implying any limitation on any of the provisions of this Agreement,
the Loan Agreement, or any of the other Loan Documents, the Additional Borrower
hereby assigns, pledges and grants to the Bank as security for the Obligations,
and agrees that the Bank shall have a perfected and continuing security
interest in, and Lien on, (i) all of the Additional Borrower’s Collateral,
whether now owned or existing or hereafter acquired or arising, (ii) all
returned, rejected or repossessed goods, the sale or lease of which shall have
given or shall give rise to an account or chattel paper, (iii) all insurance
policies relating to the foregoing, (iv) all books and records in whatever
media (paper, electronic or otherwise) recorded or stored, with respect to the
foregoing and all equipment and general intangibles necessary or beneficial to
retain, access and/or process the information contained in those books and
records, and (v) all cash and non-cash proceeds and products of the
foregoing.  The Additional Borrower
further agrees that the Bank, shall have in respect thereof all of the rights
and remedies of a secured party under the Uniform Commercial Code as well as
those provided in this Agreement, under each of the other Loan Documents and
under

 

 

applicable laws.

 

(c)           Without
in any way implying any limitation on any of the provisions of this Agreement,
the Additional Borrower agrees to execute such financing statements,
instruments, and other documents as the Bank may require.

 

(d)           Without
in any way implying any limitation on any of the provisions of this Agreement,
the Additional Borrower hereby represents
and warrants that all of the representations and warranties contained in the
Loan Documents are true and correct on and as of the date hereof as if made on
and as of such date, both before and after giving effect to this Joinder
Supplement, and that no Event of Default or Default has occurred and is continuing
or exists or would occur or exist after giving effect to this Joinder
Supplement.

 

3.   Each Person
included in the term “Borrower” hereby covenants and agrees with the Bank as
follows:

 

(a)           The Obligations include all present and future
indebtedness, duties, obligations, and liabilities, whether now existing or
contemplated or hereafter arising, of any one or more of the Additional
Borrower or the Existing Borrowers.

 

(b)           Reference in this Agreement to the Loan Agreement and the
other Loan Documents to the “Borrower” or otherwise with respect to any one or
more of the Persons now or hereafter included in the definition of “Borrower”
or “Borrowers” shall mean each and every such Person and any one or more of
such Persons, jointly and severally, unless the context requires otherwise (by
way of example, and not limitation, if only one such Person is the owner of the
real property which is the subject of a mortgage).

 

(c)           Each Person included in the term “Borrower” in the
discretion of its respective management is to agree among themselves as to the
allocation of the benefits of any Credit Extensions, provided, however, that
each such Person be deemed to have represented and warranted to the Bank at the
time of allocation that each benefit and use of proceeds is permitted under the
terms of the Loan Agreement and Loan Documents.

 

(d)           For administrative convenience, each Person included in
the term “Borrower” hereby irrevocably appoints Company as the Borrower’s
attorney-in-fact, with power of substitution (with the prior written consent of
the Bank in the exercise of its sole and absolute discretion), in the name of
Company or in the name of the Borrower or otherwise to take any and all actions
with respect to the this Agreement, the other Loan Documents, the Obligations
and/or the Collateral (including, without limitation, the proceeds thereof) as
Company may so elect from time to time, including, without limitation, actions
to (i) request, any Credit Extensions, apply for and direct the benefits of
Letters of Credits, and direct the Bank to disburse or credit the proceeds of
any Credit Extensions directly to an account of Company, any one or more of
such Persons or otherwise, which direction shall evidence the making of such
Credit Extension and shall constitute the acknowledgement by each such Person
of the receipt of the proceeds of such Credit Extension or the benefit of such
Letter of Credit, (ii) enter into, execute, deliver, amend, modify, restate,
substitute, extend and/or renew this Agreement, any Additional Borrower Joinder
Supplement, any other Loan Documents, security

 

 

agreements, mortgages, deposit
account agreements, instruments, certificates, waivers, letter of credit
applications, releases, documents and agreements from time to time, and (iii)
endorse any check or other item of payment in the name of such Person or in the
name of Company.  The foregoing
appointment is coupled with an interest, cannot be revoked without the prior
written consent of the Bank, and may be exercised from time to time through
Company’ duly authorized officer, officers or other Person or Persons
designated by Company to act from time to time on behalf of Company.

 

(e)           Each Person included in the term “Borrower” hereby
irrevocably authorizes the Bank to make Advances to any one or more of such
Person, and hereby irrevocably authorizes the Bank to issue or cause to be
issued Letters of Credit for the account of any or all of such Persons,
pursuant to the provisions of this Agreement upon the written, oral or
telephone request any one or more of the Persons who is from time to time a
Responsible Officer of a Borrower under the provisions of the most recent
certificate of corporate resolutions and/or incumbency of the Person included
in the term “Borrower” on file with the Bank and also upon the written, oral or
telephone request of any one of the Persons who is from time to time a
Responsible Officer of Company under the provisions of the most recent
certificate of corporate resolutions and/or incumbency for Company on file with
the Bank.

 

(f)            The Bank assumes no responsibility or liability for any
errors, mistakes, and/or discrepancies in the oral, telephonic, written or
other transmissions of any instructions, orders, requests and confirmations
between the Bank and any one or more of the Persons included in the term “Borrower”
or the Bank in connection with any Credit Extension, any Letter of Credit or
any other transaction in connection with the provisions of this Agreement.

 

4.   Without
implying any limitation on the joint and several nature of the Obligations, the
Bank agrees that, notwithstanding any other provision of this Agreement, the
Persons included in the term “Borrower,” may create reasonable inter-company
indebtedness between or among the Borrowers with respect to the allocation of
the benefits and proceeds of any Credit Extension under this Agreement.  The Borrowers agree among themselves, and the
Bank consents to that agreement, that each Borrower shall have rights of contribution
from all of the other Borrowers to the extent such Borrower incurs Obligations
in excess of the proceeds of any Credit Extension received by, or allocated to
purposes for the direct benefit of, such Borrower.  All such indebtedness and rights shall be,
and are hereby agreed by the Borrowers to be, subordinate in priority and
payment to the indefeasible repayment in full in cash of the Obligations, and,
unless the Bank agrees in writing otherwise, shall not be exercised or repaid
in whole or in part until all of the Obligations have been indefeasibly paid in
full in cash.  The Borrowers agree that
all of such inter-company indebtedness and rights of contribution are part of
the Collateral and secure the Obligations. 
Each Borrower hereby waives all rights of counterclaim, recoupment and offset
between or among themselves arising on account of that indebtedness and
otherwise.  Each Borrower shall not
evidence the inter-company indebtedness or rights of contribution by note or
other instrument, and shall not secure such indebtedness or rights of
contribution with any Lien or security. 
Notwithstanding anything contained in this Agreement to the contrary,
the amount covered by each Borrower under the Obligations shall be limited to
an aggregate amount

 

 

(after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Borrower in respect of the Obligations) which, together
with other amounts owing by such Borrowers to the Bank under the Obligations,
is equal to the largest amount that would not be subject to avoidance under any
Insolvency Proceeding or any applicable provisions of any applicable,
comparable state or other laws.

 

5.   (a)                     Each Person included in the
term “Borrower” hereby represents and warrants to the Bank that each of them
will derive benefits, directly and indirectly, from each Credit Extension, both
in their separate capacity and as a member of the integrated group to which
each such Person belongs and because the successful operation of the integrated
group is dependent upon the continued successful performance of the functions
of the integrated group as a whole, because (i) the terms of the consolidated
financing provided under this Agreement are more favorable than would otherwise
would be obtainable by such Persons individually, and (ii) the additional
administrative and other costs and reduced flexibility associated with
individual financing arrangements which would otherwise be required if
obtainable would substantially reduce the value to such Persons of the financing.

 

(b)                    Each Person included in the term
“Borrower” hereby represents and warrants that all of the representations and
warranties contained in the Loan Documents are true and correct on and as of
the date hereof as if made on and as of such date, both before and after giving
effect to this Agreement, and that no Event of Default or Default has occurred
and is continuing or exists or would occur or exist after giving effect to this
Agreement.

 

6.   Guaranty.

 

(a)           Each Person included in the term “Borrower”
hereby unconditionally and irrevocably, guarantees to the Bank:

 

(i)            the due and punctual payment in full (and not merely the
collectibility) by the other Persons included in the term “Borrower” of the
Obligations, including unpaid and accrued interest thereon, in each case when
due and payable, all according to the terms of this Agreement and the other
Loan Documents;

 

(ii)           the due and punctual payment in full (and not merely the
collectibility) by the other Persons included in the term “Borrower” of all
other sums and charges which may at any time be due and payable in accordance
with this Agreement or any of the other Loan Documents;

 

(iii)          the due and punctual performance by the other Persons
included in the term “Borrower” of all of the other terms, covenants and
conditions contained in the Loan Documents; and

 

(iv)          all the other Obligations of the other Persons included in
the term “Borrower”.

 

(b)           The obligations and liabilities of
each Person included in the term “Borrower” as a guarantor under this paragraph
6 shall be absolute and unconditional and

 

 

joint and several, irrespective of the genuineness,
validity, priority, regularity or enforceability of this Agreement or any of
the Loan Documents or any other circumstance which might otherwise constitute a
legal or equitable discharge of a surety or guarantor.  Each Person included in the term “Borrower”
in its capacity as a guarantor expressly agrees that the Bank may, in its sole
and absolute discretion, without notice to or further assent of such Borrower
and without in any way releasing, affecting or in any way impairing the joint
and several obligations and liabilities of such Person as a guarantor
hereunder:

 

(i)            grant extensions or renewals of or with respect to any of
the other Loan Documents;

 

(ii)           effect any release, subordination, compromise or
settlement in connection with this Agreement, or any of the other Loan
Documents;

 

(iii)          agree to the substitution, exchange, release or other
disposition of the Collateral or any part thereof, or any other collateral for
the Obligations or to the subordination of any lien or security interest
therein;

 

(iv)          make advances for the purpose of performing any term,
provision or covenant contained in this Agreement, or any of the other Loan
Documents with respect to which the Borrower shall then be in default;

 

(v)           make future advances pursuant to the Loan Agreement or any
of the other Loan Documents;

 

(vi)          assign, pledge, hypothecate or otherwise transfer the
Obligations, any of the other Loan Documents or any interest therein, all as
and to the extent permitted by the provisions of this Agreement;

 

(vii)         deal in all respects with the other Persons included in the
term “Borrower” as if this paragraph 6 were not in effect;

 

(viii)        effect any release, compromise or settlement with any of the
other Persons included in the term “Borrower”, whether in their capacity as a
Borrower or as a guarantor under this paragraph 6 or any other guarantor; and

 

(ix)           provide debtor-in-possession financing or allow use of
cash collateral in proceedings under any Insolvency Proceeding, it being
expressly agreed by all Persons included in the term “Borrower” that any such
financing and/or use would be part of the Obligations.

 

(c)   The
obligations and liabilities of each Person included in the term “Borrower”, as
guarantor under this paragraph 6 shall be primary, direct and immediate, shall
not be subject to any counterclaim, recoupment, set off, reduction or defense
based upon any claim that such Person may have against any one or more of the
other Persons included in the term “Borrower”, the Bank and/or any other
guarantor and shall not be conditional or contingent upon pursuit or
enforcement by the Bank of any remedies it

 

 

may have against Persons included in the term “Borrower”
with respect to this Agreement, or any of the other Loan Documents, whether
pursuant to the terms thereof or by operation of law.  Without limiting the generality of the
foregoing, the Bank shall not be required to make any demand upon any of the
Persons included in the term “Borrower”, or to sell the Collateral or otherwise
pursue, enforce or exhaust its or their remedies against the Persons included
in the term “Borrower” or the Collateral either before, concurrently with or
after pursuing or enforcing its rights and remedies hereunder.  Any one or more successive or concurrent
actions or proceedings may be brought against each Person included in the term “Borrower”
under this paragraph 6, either in the same action, if any, brought against any
one or more of the Persons included in the term “Borrower” or in separate
actions or proceedings, as often as the Bank may deem expedient or
advisable.  Without limiting the
foregoing, it is specifically understood that any modification, limitation or
discharge of any of the liabilities or obligations of any one or more of the
Persons included in the term “Borrower”, any other guarantor or any obligor
under any of the Loan Documents, arising out of, or by virtue of, any
bankruptcy, arrangement, reorganization or similar proceeding for relief of
debtors under federal or state law initiated by or against any one or more of
the Persons included in the term “Borrower”, in their respective capacities as
borrowers and guarantors under this paragraph 6, or under any of the Loan
Documents shall not modify, limit, lessen, reduce, impair, discharge, or
otherwise affect the liability of each Borrower under this paragraph 6 in any
manner whatsoever, and this paragraph 6 shall remain and continue in full force
and effect.  It is the intent and purpose
of this paragraph 6 that each Person included in the term “Borrower” shall and
does hereby waive all rights and benefits which might accrue to any other
guarantor by reason of any such proceeding, and the Persons included in the
term “Borrower” agree that they shall be liable for the full amount of the
obligations and liabilities under this paragraph 6 regardless of, and
irrespective to, any modification, limitation or discharge of the liability of
any one or more of the Persons included in the term “Borrower”, any other
guarantor or any obligor under any of the Loan Documents, that may result from
any such proceedings.

 

(d)   Each
Person included in the term “Borrower”, as guarantor under this paragraph 6,
hereby unconditionally, jointly and severally, irrevocably and expressly
waives:

 

(i)            presentment
and demand for payment of the Obligations and protest of non-payment;

 

(ii)           notice
of acceptance of this paragraph 6 and of presentment, demand and protest
thereof;

 

(iii)          notice
of any default hereunder or any of the other Loan Documents and notice of all
indulgences;

 

(iv)          notice
of any increase in the amount of any portion of or all of the indebtedness
guaranteed by this paragraph 6;

 

(v)           demand
for observance, performance or enforcement of any of the terms or provisions of
this paragraph 6, or any of the other Loan Documents;

 

 

(vi)          all
errors and omissions in connection with the Bank’s administration of all
indebtedness guaranteed by this paragraph 6;

 

(vii)         any
right or claim of right to cause a marshalling of the assets of any one or more
of the other Persons included in the term “Borrower”;

 

(viii)        any
act or omission of the Bank which changes the scope of the risk as guarantor
hereunder; and

 

(ix)           all
other notices and demands otherwise required by law which such Person may
lawfully waive.

 

(e)   Within ten (10) days following
any request of the Bank so to do, each Person included in the term “Borrower”
will furnish the Bank and such other persons as the Bank may direct with a
written certificate, duly acknowledged stating in detail whether or not any
credits, offsets or defenses exist with respect to this paragraph 6.

 

7.   This
Agreement shall be governed by and construed and enforced in accordance with
the laws of the State of California, without regard to principles of choice of
law.

 

[Signatures Begin on Next Page]

 

 

WITNESS the due execution hereof as of the day and year first written
above.

 

	
  WITNESS:

  	
  ADDITIONAL BORROWER:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  (SEAL)

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  WITNESS:

  	
  COGENT COMMUNICATIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  (SEAL)

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  WITNESS:

  	
  SILICON VALLEY BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  (Seal)

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
						

 

 

Exhibit
E

 

SUBORDINATION
AGREEMENT

 

This Subordination Agreement
(the “Agreement”) is made as of this       day of              ,
200 , by and between SILICON VALLEY BANK, a California-chartered bank with
its principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054,
(the “Bank”) and                                     .
(“Creditor”), a                        
corporation, having its principal place of business at                                                    .

 

Recitals

 

A.           Bank
and                                   
(“Borrower”) have entered into the Loan and Security Agreement between them,
dated as of                                
as such agreement is amended or otherwise modified from time to time (referred
to herein as the “Loan Agreement”), pursuant to which Bank has extended credit
accommodations to Borrower secured by the Collateral (as defined in the Loan
Agreement).

 

B.            Creditor has proposed the extension of a subordinated
credit facility to Borrower in the aggregate principal amount of $                     
(the “Creditor Facility”), which obligations shall also be secured by the
Collateral.

 

C.            In
order to induce Bank to continue to extend the credit accommodations to
Borrower as the Loan Agreement contemplates, Creditor is willing to subordinate
(i) all of Borrower’s indebtedness, liabilities, guarantees and all other
obligations owing to Creditor arising from time to time, including, without
limitation, with respect to the Creditor Facility (collectively the “Subordinated
Debt”) to and in favor of all of Borrower’s indebtedness, liabilities,
guarantees and all other obligations owing to Bank, now existing or hereafter
arising, including without limitation, under the Loan Agreement (the “Senior
Debt”) and (ii) all security interests, liens, encumbrances, ownership
interests and all other interests of similar import of Creditor now in
existence and arising hereafter with respect to any and all property of the
Borrower now in existence or hereafter arising (the “Subordinate Interest”) to
and in favor of the rights and interests of Bank in and to any and all of such
property, in each of the foregoing cases to the extent and as otherwise set
forth herein.

 

Agreement

 

NOW, THEREFORE, THE PARTIES
HERETO HEREBY AGREE AS FOLLOWS:

 

1.            Creditor hereby subordinates its Subordinate Interest
regarding any and all assets and property of the Borrower to and in favor of
Bank.  Further, notwithstanding the
respective dates of attachment or perfection of the Subordinate Interest and
the security interest and lien of Bank, the security interest and lien of Bank
in the assets and property of Borrower granted pursuant to the Loan Agreement
and otherwise arising from time to time in connection with the Senior Debt
shall at all times be prior and superior to the Subordinate Interest.

 

 

2.            On
the terms and conditions set forth herein, Creditor hereby subordinates all
Subordinated Debt in right of payment to and in favor of all Senior Debt.  Nothing herein shall be deemed to
subordinate, waive or restrict the performance of the obligations of Borrower
to issue capital stock of Borrower under any warrants that the Borrower may
have issued to Creditor from time to time.

 

3.            Subject
to and except as set forth in Section 4 below, Creditor will not:  (a) demand or receive from Borrower (and
Borrower will not pay to Creditor) all or any part of the Subordinated Debt, by
way of payment, prepayment, setoff, lawsuit or otherwise; (b) exercise any
right or remedy, or take any enforcement action regarding any property or
assets of Borrower; or (c) commence, or cause to be commenced, prosecute or
participate in any administrative, legal or equitable action against Borrower
or the Collateral, for the longer of such time as any Senior Debt remains
outstanding or any of the Loan Agreement remains effective and not terminated; provided,
however, Creditor may, during the existence and continuance of any
default in respect of the Subordinated Debt, and in accordance with the terms
thereof, take an enforcement or other remedial action with respect to the
Borrower or any of its property on and after the date that is one hundred
eighty (180) days after Creditor has given Bank written notice of its intention
to do any of the foregoing in a letter that specifically references this
section and indicates what actions are contemplated (and with the understanding
that any such written notice may be given during a Blockage Period if Creditor
so desires).

 

4.            (a) Notwithstanding anything to the contrary contained in
Sections 2 and 3 above, but expressly subject to (b) below, Borrower shall be
permitted to make, and Creditor shall be permitted to accept or receive the
following permitted payments (“Permitted Payments”) on the Subordinated Debt:
(i) scheduled repayments of principal when due (as contemplated by the
agreements in effect as of the date hereof) under the Subordinated Debt
facility (as long as the maximum principal amount of the Subordinated Debt in
the aggregate does not exceed $                 ),
(ii) scheduled payments of accrued interest when due under the
Subordinated Debt facility (as contemplated by the agreements in effect as of
the date hereof), (iii) payments of reimbursable expenses, costs and
professional fees and expenses as and when due under the Subordinated Debt
facility (as contemplated by the agreements in effect as of the date hereof),
and (iv) other payments consented to in writing by the Bank.

 

(b)           Notwithstanding
anything to the contrary contained in this Section 4 or elsewhere in this
Agreement, if the Bank delivers to Creditor written notice (a “Blockage Notice”)
which states that either:

 

(i)            a specific default by Borrower involving the payment of
the Senior Debt (a “Payment Default”) has occurred the Loan Agreement and
continues to exist after the giving of any notice, if any is so required, and
the expiration of any applicable grace or cure period, or

 

 

(ii)           a specific default by Borrower not involving the
payment of Senior Debt (a “Non-Payment Default”) has occurred under the Loan
Agreement and continues to exist after the giving of any notice, if any is so
required, and the expiration of any applicable grace or cure period, such
notice to include all such defaults in existence at the time,

 

then, from and after the date of
delivery of any such Blockage Notice, (i) Creditor shall not accept or receive
any payment of any kind of or on account of the Subordinated Debt (including
any Permitted Payment), unless and until the earlier of (A) the time such
Payment Default or Non-Payment Default shall have been cured by Borrower or
waived in writing by Bank, or (B) the expiration of the Blockage Period (as
defined below) for such Blockage Notice, and (ii) Creditor shall disgorge any
Permitted Payments received, for a period not to exceed two (2) months during
the time commencing upon the occurrence of a Payment Default or Non-Payment
Default until the date of receipt by Creditor of such Blockage Notice.

 

As used herein, “Blockage Period” means a period of
time beginning on the date a Blockage Notice is delivered to Creditor and
termination on the earlier to occur of:

 

(1)           180 days following such date; provided that if,
prior to the expiration of such 180-day period, Bank has commenced a judicial
proceeding or non-judicial actions to collect or enforce the Senior Debt or the
collateral for the Senior Debt, or a case or proceeding by or against Borrower
is commenced under the federal Bankruptcy Code or any other insolvency law,
then such period shall be extended during the continuation of such proceedings
and actions under the payment in cash or other property or securities in the
full amount of the allowed claim of the Senior Debt; or

 

(2)           Bank’s written
consent to such termination.

 

In no event shall the Blockage Period during any
period of 365 consecutive days exceed 180 days in the aggregate, whether
pursuant to one (1) Blockage Notice or multiple Blockage Notices; provided,
however, the foregoing limitation shall not apply in the event that prior to
the expiration of such 180 day period Bank has commenced a judicial proceeding
or non-judicial actions to collect or enforce the Senior Debt or a case of proceeding
by or against Borrower is commenced under the federal Bankruptcy Code or any
other insolvency law, then such period shall be extended during the
continuation of such proceedings and actions until the payment in cash or other
property or securities in the full amount of the allowed claim of the Senior
Debt.  After termination of any Blockage
Period pursuant to the conditions specified in (1) or (2) above and until
Creditor’s receipt of a subsequent Blockage Notice from Bank, Creditor shall be
entitled to receive all Permitted Payments.

 

5.            If
Creditor sends the Borrower a notice of default under the Creditor Facility,
Creditor shall use best efforts to promptly deliver a copy of the notice of
default to Bank, but failure to do so shall not, in and of itself, be a breach
of this Agreement nor affect any of Creditor’s rights in respect of the
Subordinated Debt.

 

 

6.            Creditor shall promptly deliver to Bank in the form
received (except for endorsement or assignment by Creditor where required by
Bank) for application to the Senior Debt any payment, distribution, security or
proceeds received by Creditor with respect to the Subordinated Debt other than
in accordance with this Agreement.

 

7.            In the event of Borrower’s
insolvency, reorganization or any case or proceeding under any bankruptcy or
insolvency law or laws relating to the relief of debtors, these provisions
shall remain in full force and effect, and Bank’s claims against Borrower and
the estate of Borrower shall be paid in full before any payment is made to
Creditor.

 

8.            For so long as any of the Senior Debt remains unpaid,
Creditor irrevocably appoints Bank as Creditor’s attorney-in-fact, and grants
to Bank a power of attorney with full power of substitution, in the name of
Creditor or in the name of Bank, for the use and benefit of Bank, without
notice to Creditor, in any bankruptcy, insolvency or similar proceeding
involving Borrower to (i) file the appropriate claim or claims in respect of
the Subordinated Debt on behalf of Creditor if Creditor does not do so prior to
30 days before the expiration of the time to file claims in such proceeding and
(ii) accept or reject any plan of reorganization or arrangement on behalf of
Creditor and otherwise to vote Creditor’s claims in respect of any Subordinated
Debt in any manner that Bank chooses.

 

9.            Creditor shall immediately affix a legend to the
instruments evidencing the Subordinated Debt stating that the instruments are
subject to the terms of this Agreement. 
No amendment of the documents evidencing or relating to the Subordinated
Debt shall directly or indirectly modify the provisions of this Agreement in
any manner which might terminate or impair the subordination of the
Subordinated Debt or the subordination of the security interest or lien that Creditor
may have in any property of Borrower. 
Additionally, no amendment of the documents evidencing the Subordinated
Debt may change the timing or amount of the regularly scheduled payments of
principal and interest without Bank’s consent.

 

10.          All necessary action on the part of the Creditor, its
officers, directors, partners, members and shareholders, as applicable,
necessary for the authorization of this Agreement and the performance of all
obligations of the Creditor hereunder has been taken.  Additionally, the execution, delivery and
performance of and compliance with this Agreement will not result in any
material violation or default of any term of any of the Creditor’s charter,
formation or other organizational documents (such as Articles or Certificate of
Incorporation, bylaws, partnership agreement, operating agreement, etc.).

 

11.          This Agreement shall remain effective
until the later to occur of the repayment in full in cash of the Senior Debt or
the termination of the Loan Agreement. 
If, at any time after payment in full of the Senior Debt any payments of
the Senior Debt must be disgorged by Bank for any reason (including, without
limitation, the bankruptcy of Borrower), this Agreement and the relative rights
and priorities set forth herein shall be reinstated as to all such disgorged
payments as though such payments had not been made and Creditor shall
immediately pay over to Bank all payments received with respect to the
Subordinated Debt to the extent that such payments would have been prohibited
hereunder.  At any time and from time to
time, without notice to Creditor,

 

 

Bank may take such
actions with respect to the Senior Debt as Bank, in its sole discretion, may
deem appropriate, including, without limitation, terminating advances to Borrower,
extending the time of payment, increasing applicable interest rates, renewing,
compromising or otherwise amending the terms of any documents affecting the
Senior Debt and any collateral securing the Senior Debt, and enforcing or
failing to enforce any rights against Borrower or any other person.  Creditor waives the benefits, if any, of any
statutory or common law rule that may permit a subordinating creditor to assert
any defenses of a surety or guarantor, or that may give the subordinating
creditor the right to require a senior creditor to marshal assets, and Creditor
agrees that it shall not assert any such defenses or rights.

 

12.          This Agreement shall bind any
successors or assignees of Creditor and shall benefit any successors or assigns
of Bank.  This Agreement is solely for
the benefit of Creditor and Bank and not for the benefit of Borrower or any
other party.

 

13.          This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one instrument.  This
Agreement shall become effective only when it shall have been executed by
Creditor and Bank.

 

14.          This Agreement shall be governed by and construed in
accordance with the laws of the State of California without giving effect to
conflicts of law principles.  Creditor
and Bank submit to the exclusive jurisdiction of the state and federal courts
located in Santa Clara County, California. 
CREDITOR AND BANK WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREIN.

 

15.          This
Agreement represents the entire agreement with respect to the subject matter
hereof, and supersedes all prior negotiations, agreements and commitments.  Creditor is not relying on any
representations by Bank or Borrower in entering into this Agreement, and
Creditor has kept and will continue to keep itself fully apprised of the
financial and other condition of Borrower. 
This Agreement may be amended only by written instrument signed by
Creditor and Bank.

 

16.          In
the event of any legal action to enforce the rights of a party under this
Agreement, the party prevailing in such action shall be entitled, in addition
to such other relief as may be granted, all reasonable costs and expenses,
including reasonable attorneys’ fees, incurred in such action.

 

17.          Except
as otherwise provided herein, all notices required, contemplated, or permitted
under this Agreement or with respect to the subject matter hereof shall be in
writing, and shall be deemed to have been validly served, given, delivered, and
received upon the earlier of: (i) the first business day after transmission by
facsimile or hand delivery or deposit with an overnight express service or
overnight mail delivery service; or (ii) the third calendar day after deposit
in the United States mails, with proper first class postage prepaid, and shall
be sent to the address set forth above or to such other address as each party
may designate for itself by like notice

 

 

IN WITNESS WHEREOF,
the undersigned have executed this Agreement as of the date first above
written.

 

	
   

  	
  “BANK”

  
	
   

  	
   

  
	
   

  	
  SILICON
  VALLEY BANK

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  “CREDITOR”

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Seen and Agreed:

  
	
   

  	
   

  
	
   

  	
  Borrower:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

Exhibit F

 

Material Foreign Subsidiaries

 

COGENT COMMUNICATIONS
FRANCE, SAS

 

 

COGENT COMMUNICATIONS ESPANA
S.A.

 

 

C.C.D. COGENT COMMUNICATIONS
DEUTSCHLAND, GMBH

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