BUSINESS LOAN AND SECURITY/SUBORDINATION AGREEMENT
$500,000 February 4, 1997
1. PREAMBLE. Business Term Loan and Security/Subordination Agreement by and
between Source Scientific, Inc., a California corporation with its principal
place of business at 0000 Xxxxxxx Xxx, Xxxxxx Xxxxx, Xxxxxxxxxx 00000
("Borrower"), Boston Biomedica, Inc., a Massachusetts corporation with its
principal place of business at 000 Xxxx Xxxxxx, Xxxx Xxxxxxxxxxx, Xxxxxxxxxxxxx,
00000 ("Lender"), Concord Growth Corporation, a California corporation with its
principal place of business at 0000 Xxxx Xxxxxx Xxxxx, Xxxx Xxxx, Xxxxxxxxxx
00000 (the "Subordinated Creditor") with respect to (i) a loan in the original
principal amount of Five Hundred Thousand Dollars ($500,000), as evidenced by a
demand note (the "Note") in such amount from Borrower in favor of Lender of even
date herewith, and (ii) the Subordinated Creditor's agreement to subordinate its
security interest as provided in Section 3 hereof.
2. SECURITY.
a) As security for Borrower's indebtedness and other obligations now or at
any time hereafter owing by Borrower to Lender, whether or not any of such are
liquidated, unliquidated, secured, unsecured, direct, indirect, absolute,
contingent or of any other type, nature or description, including without
limitation those arising under the Note and this Agreement, Borrower hereby
grants Lender a security interest in all of Borrower's present and future right,
title and interest in and to any of the following property, wherever located and
whether now owned or hereafter acquired: All of the Borrower's tangible and
intangible personal property, including without limitation, all inventory,
equipment and other goods, all accounts receivable, notes, drafts, acceptances,
instruments and documents, contract rights, chattel paper, general intangibles,
deposit accounts, books and records, and all cash and non-cash proceeds of the
foregoing in whatever form received, including without limitation insurance
proceeds (the "Collateral"). Any of the foregoing terms which are specifically
defined in the Uniform Commercial Code as in effect in the Commonwealth of
Massachusetts (M.G.L. ch. 106) (the "Massachusetts UCC") shall have the meanings
given therein.
b) Borrower has marketable title to the Collateral, free of all liens and
encumbrances, except those Borrower is granting to Lender herein and except
those listed in Schedule 2(b) hereto, which are subordinate to the interest
granted to the Buyer herein. The Collateral will be kept at all times at
Borrower's principal place of business set forth above.
Borrower shall give Lender prior written notice of any change of any such
address or location of Borrower's property.
3. SUBORDINATION.
a) Notwithstanding the order or time of loans, advances or extensions of
credit made by Lender and the Subordinated Creditor to Borrower, or the order or
time of attachment, or the order, time or manner of perfection, or the order or
time of notice of any purchase money security interest, or the order or time of
the filing or recordation of any document or instrument, or the actual
possession of the Collateral, or other method of perfecting a security interest
in favor of Lender or the Subordinated Creditor in any of the Collateral, and
notwithstanding any conflicting terms or conditions or errors or omissions which
may be contained in any other agreement, instrument, or document, Lender's
security interest in all of the Borrower's inventory, equipment and other goods,
and all cash and non-cash proceeds thereof in whatever form received, including
without limitation insurance proceeds (the "Subordinated Collateral"), has and
shall have priority over the Subordinated Creditor's security interest in the
Subordinated Collateral, and such Subordinated Creditor's security interest in
the Subordinated Collateral is and shall be, in all respects, junior, subject
and subordinate to Lender's security interest therein. The security interest
priorities provided in this Section 3 shall not be altered or otherwise affected
by any amendment, modification, supplement, extension, renewal, restatement or
refinancing of this Agreement or any other agreement, instrument, or document,
nor by any action or inaction which either Lender or the Subordinated Creditor
may take or fail to take in respect of the Subordinated Collateral or any other
collateral security at any time granted to Lender or the Subordinated Creditor.
b) Lender shall have the exclusive right to manage, perform and enforce the
terms of this Agreement with respect to the Subordinated Collateral, to exercise
and enforce all privileges and rights thereunder according to its discretion and
the exercise of its business judgment, including, without limitation, the
exclusive right to take or retake control or possession of the Subordinated
Collateral to hold, prepare for sale, process, sell, lease, dispose of, or
liquidate such Subordinated Collateral. Without the prior written consent of
Lender, the Subordinated Creditor shall not directly or indirectly take any
action against the Subordinated Collateral, including exercising any right of
the Subordinated Creditor may have to foreclose upon, sell, or take possession
of, the Subordinated Collateral, or take any other action inconsistent with
Lender's rights hereunder.
c) Notwithstanding anything to the contrary contained in any other
agreement, instrument, or document, only Lender shall have the right to restrict
or permit, or approve or disapprove, the sale, transfer or other disposition of
the Subordinated Collateral. The Subordinated Creditor will, immediately upon
the request of Lender, release or otherwise terminate its security interest in
the Subordinated Collateral, to the extent such Subordinated Collateral is sold
or otherwise disposed of either by Lender, its representatives, or Borrower,
with the consent of Lender, and the Subordinated Creditor will immediately
deliver such release documents as Lender may require in connection therewith.
The Subordinated Creditor hereby appoints Lender and each of its officers, its
true and lawful attorney and grants to the Lender a power of attorney with full
power of substitution, in the name of such Subordinated Creditor or Lender to
deliver such release documents on such Subordinated Creditor's behalf. Such
power of attorney is coupled with an interest and is irrevocable.
d) Any UCC financing statements filed by the Subordinated Creditor shall be
inscribed with a legend that the security interest of such Subordinated Creditor
is subordinated to the Lender's security interest pursuant to this Agreement.
4. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to and
covenants with Lender as follows:
a) the execution and delivery of this agreement and the Note have been
approved by all required corporate action and do not violate or contravene any
provision of Borrower's corporate charter documents, by-laws or any other
indenture or contract to which Borrower is a party. This Agreement and the Note
are valid, binding and enforceable against Borrower in accordance with their
terms, and no consent of any other party is required in connection with the
execution, delivery, performance or enforceability of this Agreement or the
Note;
b) Borrower has filed all federal, state and other tax and similar returns
required to be filed and has paid or provided for the payment of all taxes and
assessments due thereunder, including all withholding, FICA and franchise taxes,
except as disclosed on Schedule 4(b) hereto;
c) Borrower is duly organized, validly existing and in good standing under
the laws of Borrower's state of formation;
d) any financial statements Borrower has delivered to Lender are true and
correct in all material respects, and unless otherwise noted therein, have been
prepared in accordance with generally accepted accounting principles
consistently applied; and there has occurred no material adverse change in
Borrower's business or financial condition since the date of the most recently
delivered financial statements; and
e) there is no litigation pending or threatened against Borrower, except as
disclosed on Schedule 4(e) hereto.
5. AFFIRMATIVE COVENANTS. So long as any amount is unpaid hereunder, Borrower
will:
a) keep proper books of account in accordance with generally accepted
accounting principles;
b) permit, upon written notice and during normal business hours,
inspections and audits by Lender or by Lender's agents of all books, records and
papers in the custody or control of Borrower or of others relating to the
Collateral or Borrower's financial or business condition, including the making
of copies thereof and abstracts therefrom and inspection and appraisal of any of
Borrower's assets;
c) deliver to Lender financial information in such form and detail and at
such times as are satisfactory to Lender;
d) promptly pay all taxes, assessments and other governmental charges due
from Borrower; provided however, that nothing herein contained shall be
interpreted to require the payment of any such tax so long as its validity is
being contested in good faith and Borrower maintains adequate reserves with
respect to such tax;
e) promptly inform Lender of the commencement of any action, suit,
proceeding or investigation against Borrower, or the making of any counterclaim
against Borrower in any action, suit or proceeding and of all liens and
encumbrances against any of Borrower's property, and of the occurrence of any
default hereunder;
f) pay all indebtedness to Lender and to third parties when due;
g) maintain Borrower's corporate existence, comply with all applicable laws
and regulations and maintain all property useful and necessary in Borrower's
business in good repair and operating condition, ordinary wear and tear
excepted;
h) maintain adequate insurance on the Collateral against fire, theft and
other casualties and shall maintain public liability insurance and insurance
against other risks, all as may be required by law or reasonably required by
Lender, in such form, for such periods and written by such companies as may be
satisfactory to Lender. Such policies shall name Lender as additional insured
and mortgagee/loss payee and shall provide for at least 20 days' written notice
to Lender prior to cancellation. Borrower shall furnish Lender with certificates
of such insurance. If Borrower fails to maintain such insurance, Borrower shall
pay to Lender on the date of each such failure the amount of any insurance
premium costs incurred by Lender; and
i) join with Lender in executing such UCC financing statements as Lender
may request and will pay the cost of filing the same in all public offices where
filing is deemed necessary or desirable by Lender. At Lender 's request from
time to time, Borrower will execute and deliver any and all such further
instruments and documents and take such further actions as Lender may deem
desirable in obtaining the full benefits of this Agreement. Borrower also hereby
authorizes Lender to execute on behalf of Borrower and file UCC financing or
continuation statements with appropriate jurisdictions in order to perfect the
security interests granted herein.
6. NEGATIVE COVENANTS. So long as any amount is unpaid hereunder, Borrower
will not, without Lender's
prior written consent:
a) create, incur, assume or suffer to exist any security interest,
mortgage, pledge, lien or other encumbrance upon any of the Collateral, except
in Lender's favor and except liens for taxes not yet due;
b) sell, convey, lease or transfer any of Borrower's assets other than in
the ordinary course of business, or merge or consolidate with or into any other
company or corporation, except with Lender's written consent;
c) become a guarantor, surety or otherwise become liable for the debts or
other obligations of any person, firm or corporation, except as an endorser of
instruments for the payment of money deposited to Borrower's account for
collection in the ordinary course of business;
d) make any investments in or loans or advances to any other person, firm
or corporation (including, without limitation, loans or advances to Borrower's
officers or employees) except direct obligations of the United States of
America;
e) purchase or retire any of Borrower's capital stock, or pay or declare
any dividends; or
f) change the form in which Borrower conducts its business, the location of
such business, or the nature of the business as conducted by Borrower on the
date of this agreement or fail to maintain its business operation as a going
concern.
7. DEFAULT. In addition to, and not by way of limitation of, any of Lender's
other rights hereunder, the entire unpaid balance of all of Borrower's indeb-
tedness to Lender, whether under this Agreement, the Note or under any other
instrument, document or agreement with Lender, may be declared to be immediately
due and payable at Lender's sole election upon the happening of any one of the
following specified events of default (each an "Event of Default"):
a) Borrower's failure to make any payment when due under the Note or to pay
or perform any other obligation to Lender hereunder or under the Note now
existing or hereafter arising;
b) Borrower's failure to pay any indebtedness to any others within sixty
(60) days of the date due, except where Borrower is reasonably and in good faith
asserting a legal defense in respect of its failure to pay any such indebtedness
when due;
c) if any representation, warranty, statement or certificate made to Lender
by Borrower proves to have been or becomes untrue;
d) any change in the ownership of capital stock of the Borrower which
results in a change of control of the Borrower;
e) with respect to the Borrower, the commencement, whether voluntary or
involuntary, of a case under the United States Bankruptcy Code or any other
proceeding or action seeking reorganization, liquidation, dissolution or other
relief under federal or state bankruptcy or insolvency statutes or similar laws,
or seeking the appointment of a receiver, trustee or custodian for the Borrower
or all or a part of Borrower's assets; or
f) if Borrower makes an assignment for the benefit of creditors, or is
unable to pay Borrower's debts as they mature.
8. ADDITIONAL REMEDIES. Upon demand of payment of all amounts due hereunder,
or upon the occurrence of any Event of Default and at any time thereafter,
Lender shall have all of the rights and remedies of a secured party upon default
under the Massachusetts UCC, in addition to which Lender shall have all of the
following rights and remedies:
a) to sell, lease, or otherwise dispose of any and all of the Collateral in
its then condition following such preparation or processing as Lender deems
advisable. Any sale or other disposition of the collateral may be at public or
private sale upon such terms and in such manner as Lender deems advisable having
due regard to compliance with any statute or regulation which might affect,
limit, or apply to Lender's disposition of the Collateral. It is agreed that ten
(10) days' notice before the time of any proposed sale shall be reasonable
notice, but that no notice need be given if any or all of the Collateral is
perishable or threatened with significant decline in value; and
b) the proceeds of any collection or of any sale of the Collateral shall be
applied toward any of Borrower's obligations to Lender in such order and manner
as Lender determines in Lender's sole discretion. Borrower shall remain liable
to Lender for any deficiency remaining following such applications.
Borrower hereby irrevocably appoints Lender as its true and lawful
attorney-in-fact with full power of substitution to take such actions in the
name of the Borrower or Lender to carry out the terms of this Agreement and to
protect, enforce, preserve or perfect Lender's rights hereunder. Such power of
attorney is irrevocable and shall be deemed to be coupled with an interest.
9. EXPENSES. Borrower agrees that Lender may, at Lender's discretion and from
time to time, discharge any tax, lien or encumbrance on any of the collateral or
take any other action that Lender may deem appropriate to maintain or preserve
any of the collateral. Borrower shall pay to Lender on demand all amounts paid
or incurred by Lender pursuant to this agreement. Borrower will reimburse Lender
promptly for any fees payable to the appropriate public officer to perfect any
lien or other security interest taken to secure any indebtedness created
pursuant hereto, or the premium, not in excess of such filing fee, payable for
insurance in lieu of such filing. Borrower shall pay on demand all of Lender's
expenses, including, without limitation, attorneys' fees and disbursements, and
all expenses which Lender may hereafter incur in connection with the protection
or enforcement of any of Lender's rights against Borrower, any collateral.
Borrower further agrees to indemnify, defend, and hold Lender harmless from and
against any claim brought or threatened against Lender by Borrower and any other
guarantor, endorser of Borrower's obligations, or any other person (as well as
attorneys' fees and expenses in connection therewith) on account of Lender's
relationship with Borrower or any other guarantor or endorser of Borrower's
obligations (each of which may be defended, compromised, settled, or pursued by
Lender with counsel of Lender's selection, but at Borrower's expense. This
indemnification shall survive payment of Borrower's obligations to Lender and/or
any termination, release, or discharge executed by Lender in Borrower's favor.
10. WAIVER, CUMULATIVE REMEDIES. No delay or omission by Lender in exercising
or enforcing any of Lender's rights or remedies shall operate as, or constitute
a waiver thereof. No waiver by Lender of any Event of Default or of any default
under any other agreement shall operate as a waiver of any other default
hereunder or under any other agreement. No exercise of any of Lender's rights
and remedies and no other agreement or transaction of whatever nature entered
into between Borrower and Lender at any time, shall preclude any other exercise
of Lender's rights and remedies. No waiver by Lender of any of Lender's rights
and remedies on any one occasion shall be deemed a waiver on any subsequent
occasion, nor shall it be deemed a continuing waiver. All of Lender's rights and
remedies hereunder, and all of Lender's rights and remedies, power, privileges,
and discretions under any other agreement or transaction are cumulative and not
alternative or exclusive and may be exercised by Lender at such time or times
and in such order of preference as Lender in Lender's sole discretion may
determine.
11. OPINION OF COUNSEL. Simultaneously with the execution hereof, Lender
shall receive an opinion of counsel to the Borrower in form and substance
satisfactory to Lender.
12. MISCELLANEOUS INFORMATION. It is agreed that references to "Lender" shall
mean Boston Biomedica, Inc., its successors and assigns, and references to
"Borrower" or "the undersigned" shall mean Source Scientific, Inc., its
successors and assigns. Borrower will, in manner satisfactory to Lender, furnish
other documentation of a type and in such form as Lender may request from time
to time to further evidence or perfect the agreements contemplated hereby.
13. APPLICABLE LAW/PERSONAL JURISDICTION. This agreement shall be construed
and interpreted in accordance with the laws of the Commonwealth of
Massachusetts, except for the choice of law provisions thereof. Borrower hereby
submits itself to the personal jurisdiction of the federal and state courts in
the Commonwealth of Massachusetts.
[Signature Page to Follow]
IN WITNESS WHEREOF, the Borrower and the Lender have executed this Agree-
ment as of the date first above written.
SOURCE SCIENTIFIC, INC.
By: /S/XXXXXXX X. XXXXXXXX
----------------------
Name: Xxxxxxx X. Xxxxxxxx
Title President
BOSTON BIOMEDICA, INC.
By: /S/XXXXXXX X. XXXXXXXXXX
--------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: President
CONCORD GROWTH CORPORATION
By: /S/X.XXXXXXXX
--------------------------
Name: X. Xxxxxxxx
Title: Vice President
LIST OF SCHEDULES
Schedule 2(b) Existing Liens
Schedule 4(b) - Unpaid Taxes
Schedule 4(e) - Pending Litigation
