EXHIBIT 10.4
FINANCING AGREEMENT
Financing Agreement dated as of November 12, 2003 (this "Agreement")
by and between Integrated Performance Systems Inc., a New York corporation,
with principal executive offices located at 00000 Xxxxx Xxxxxx Xxxxxxx,
Xxxxx 0000, Xxxxxx, Xxxxx 00000 (the "Company"), and SMI Chips Inc.
("Lender").
WHEREAS, Lender desires to loan to the Company, and the Company desires
to borrow from Lender, upon the terms and subject to the conditions of this
Agreement, a Line of Credit funding in the aggregate principal amount of
$6,200,000 (the "Line of Credit");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
I. ESTABLISHMENT OF LINE OF CREDIT
Lender shall establish the Line of Credit for Company in the aggregate
amount of Six Million Two Hundred Thousand And No/100 Dollars ($6,200,000)
subject to the following terms and conditions:
A. Term. The line of Credit shall be made available to the company
for a period of two years after the date of this Agreement, provided that
Lender shall not be required to advance funds if Company is in default of
its obligations pursuant to any Loan Documents, as defined below.
B. Advances to Company. Company shall be permitted to draw down
the Line of Credit in order to borrow against personal property, including
accounts receivable, inventory, and fixed assets of Company or its
subsidiaries (the "Assets"). Lender shall advance at least eighty percent
(80%) of collectable accounts receivable and at least fifty percent (50%) of
the value of inventory and fixed assets, based upon Lender's sole discretion
regarding collectability and value. Subsequent advances shall be made to
Company to finance new purchases of Assets or fund new accounts receivable
on a revolving basis.
C. Loan Documents. Each advance to Company shall be evidenced by a
Note, Security Agreement, and such other documents as Lender may reasonably
require ("Loan Documents"). The Loan Documents shall be in the form, and
shall contain such provisions, as are customarily contained in asset based
lending documents of Legacy Bank of Texas.
D. Financing Costs.
Lender shall be paid the following amounts for providing financing pursuant
to this Agreement:
1. A commitment fee of one percent (1%) of funds advanced shall
be payable upon commencement of each draw down of Advances under the Line
of Credit. However, no commitment fee shall be due for funds advanced on a
revolving basis, other than the commitment fee due upon the initial advance.
2. The interest rate shall be determined to be two percentage
points (2%) in excess of the higher of (i) the prime rate of interest
charged by Legacy Bank, Texas or (ii) the actual interest rate paid
by Lender in funds borrowed by Lender to finance the Line of Credit.
Interest shall be payable as specified in the Loan documents
3. Company shall reimburse Lender for Lender's direct costs
associated with the Line of Credit, including legal fees, appraisal costs,
and collection costs.
II. LENDER REPRESENTATIONS AND WARRANTIES
Lender represents and warrants to and covenants and agrees with the
Company as follows:
A. Lender is (i) an "accredited investor: within the meaning of Rule
501 of Regulation D under the Securities Act, (ii) experienced in making
investments of the kind contemplated by this Agreement, (iii) capable, by
reason of its business and financial experience, of evaluating the relative
merits and risks of any investment in the Line of Credit and (iv) able to
afford the loss of its investment in the Line of Credit.
B. This Agreement has been duly and validly authorized, executed
and delivered by Lender and is a valid and binding agreement of Lender
enforceable against it in accordance with it terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and
except as rights to indemnify and contribution may be limited by federal
or state securities laws or the public policy underlying such laws.
III. THE COMPANY'S REPRESENTATIONS
The Company represents and warrants to Lender that:
A. Organization; Reporting Company Status.
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the state or jurisdiction in which it
is incorporated and is duly qualified as a foreign corporation in all
jurisdictions in which the failure so to qualify would reasonably be
expected to have a material adverse effect on the business, properties,
prospects, condition (financial or otherwise) or results of operations of
the Company or on the consummation of any of the transactions contemplated
by this Agreement (a "Material Adverse Effect").
2. The Company is subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Common Stock is traded on the OTC Bulletin Board service of the National
Association of Securities Dealers, Inc. ("OTCBB") and the Company has not
received any notice regarding, and to its knowledge there is no threat of,
the termination or discontinuance of the eligibility of the Common Stock
for such trading.
B. Authority; Validity and Enforceability. The Company has the
requisite corporate power and authority to enter into the Agreement and Loan
Documents and to perform all of its obligations hereunder and thereunder.
The execution, delivery and performance by the Company of the Agreement and
Loan Documents and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of the Company. The Agreement has
been duly and validly executed and delivered by the Company and constitutes
a valid and binding obligation of the Company enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and except as rights to indemnity
and contribution may be limited by federal or state securities laws or the
public policy underlying such laws. The Loan Documents have been duly and
validly authorized for execution by the Company and, when executed and
delivered by the Company, will be valid and binding obligations of the
Company enforceable against it in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally.
C. Non-contravention. The execution and delivery by the Company of
the Agreement and the consummation by the Company of the other transactions
contemplated hereby and thereby do not, and compliance with the provisions
of this Agreement will not, conflict with, or result in any violation of,
or default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of any
obligation or loss of a material benefit under, or result in the creation of
any Lien upon any of the properties or assets of the Company or any of its
Subsidiaries under, or result in the termination of, or require that any
consent be obtained or any notice be given with respect to (i) the Articles
or Certificate of Incorporation or By-Laws of the Company or the comparable
charter or organizational documents of any of its Subsidiaries, in each case
as amended to the date of this Agreement, (ii) any loan or credit agreement,
Debenture, bond, mortgage, indenture, lease, contract or other agreement,
instrument or permit applicable to the Company or any of its Subsidiaries
or their respective properties or assets or (iii) any Law applicable to,
or any judgment, decree or order of any court or government body having
jurisdiction over, the Company or any of its Subsidiaries or any of their
respective properties or assets ("Law").
D. Approvals. No authorization, approval or consent of any court
or public or governmental authority is required to be obtained by the
Company for the transactions contemplated by this Agreement, except such
authorizations, approvals and consents as have been obtained by the Company
prior to the date hereof.
E. Full Disclosure. There is no fact known to the Company (other
than general economic or industry conditions known to the public generally)
that has not been fully disclosed to the Lender that (i) reasonably could
be expected to have a Material Adverse Effect or (ii) reasonably could be
expected to materially and adversely affect the ability of the Company to
performing its obligations pursuant to the Agreement.
F. Absence of Events of Default. No "Event of Default" (as defined
in any agreement or instrument to which the Company is a party) and no event
which, with notice, lapse of time or both, would constitute an Event of
Default (as so defined), has occurred and is continuing.
G. Interest. The timely payment of interest under the Loan Documents
is not prohibited by the Articles or Certificate of Incorporation or By-Laws
of the Company, in each case as amended to the date of this Agreement, or
any agreement, contract, document or other undertaking to which the Company
is a party.
H. No Misrepresentation. No representation or warranty of the
Company contained in this Agreement or the Loan Documents or any schedule,
annex or exhibit hereto or thereto or any agreement, instrument or
certificate furnished by the Company to Lender pursuant to this Agreement
contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
I. Finder's Fee. There is no finder's fee, brokerage commission
or like payment in connection with the transactions contemplated by this
Agreement for which Lender or Company is liable or responsible.
IV. CONDITIONS TO THE COMPANY'S OBLIGATIONS
Lender understands that the Company's obligation to execute Loan
Documents pursuant to this Agreement is conditioned upon:
A. Delivery by Lender of the Advances pursuant to the Loan Documents.
B. The accuracy of the representations and warranties of Lender
contained in this Agreement (except for representations and warranties
which, by their express terms, speak as of and relate to a specified date,
in which case such accuracy shall be measured as of such specified date)
and the performance by Lender in all material respects of all covenants
and agreements of Lender required to be performed by it pursuant to this
Agreement; and
C. There shall not be in effect any Law or order, ruling, judgment or
writ of any court or public or governmental authority restraining, enjoining
or otherwise prohibiting any of the transactions contemplated by this
Agreement.
V. CONDITIONS TO LENDER'S OBLIGATIONS
The Company understands that Lender's obligation to advance funds
pursuant to this Agreement is conditioned upon:
A. Delivery by the Company of the Loan Documents:
B. The accuracy of the representations and warranties of the Company
contained in this Agreement (except for representations and warranties
which, by their express terms, speak as of and relate to a specified date,
in which case such accuracy shall be measured as of such specified date)
and the performance by the Company in all respects of all covenants and
agreements of the Company required to be performed by it pursuant to this
Agreement;
C. There not having occurred any event or development, and there
being in existence no condition, having or which reasonably and foreseeably
could have a Material Adverse Effect;
D. The Company shall have delivered to Lender reimbursement of
Lender's reasonable out-of-pocket costs and expenses incurred in connection
with the transactions contemplated by this Agreement
E. There shall not be in effect any Law, order, ruling, judgment or
writ of any court or public or governmental authority restraining, enjoining
or otherwise prohibiting any of the transactions contemplated by this
Agreement;
F. The Company shall have obtained all consents, approvals or waivers
from governmental authorities and third persons necessary for the execution,
delivery and performance of the Documents and the transactions contemplated
thereby, all without material cost to the Company;
G. Lender shall have received such additional documents,
certificates, payment, assignments, transfers and other delivers as it or
its legal counsel may reasonably request and as are customary to effect a
closing of the matters herein contemplated.
VI. SURVIVAL; INDEMNIFICATION
A. The representations, warranties and covenants made by each of
the Company and Lender in this Agreement, the Loan Documents, the annexes,
schedules and exhibits hereto and in each instrument, agreement and
certificate entered into and delivered by them pursuant to this Agreement
shall survive and the consummation of the transactions contemplated hereby.
In the event of a breach or violation of any of such representations,
warranties or covenants, the party to whom such representations, warranties
or covenants have been made shall have all rights and remedies for such
breach or violation available to it under the provisions of this Agreement
or otherwise, whether at law or in equity.
B. The Company hereby agrees to indemnify and hold harmless Lender,
its affiliates and their respective officers, directors, partners and
members (collectively, the "Lender Indemnitees") from and against any
and all losses, claims, damages, judgments, penalties, liabilities and
deficiencies (collectively, "Losses") and agrees to reimburse Lender
Indemnitees for all out-of-pocket expenses (including the fees and expenses
of legal counsel), in each case promptly as incurred by Lender Indemnitees
and to the extent arising out of or in connection with:
1. misrepresentation, omission of fact or breach of any
of the Company's representations or warranties contained in this
Agreement, or the annexes, schedules or exhibits hereto or thereto
or any instrument, agreement or certificate entered into or
delivered by the Company pursuant to this Agreement or the Loan
Documents;
2. any failure by the Company to perform any of its
covenants, agreements, undertakings or obligations set forth in
this Agreement or any instrument, certificate or agreement entered
into or delivered by the Company pursuant to this Agreement or the
Loan Documents;
3. the consummation of the transactions contemplated by
this Agreement, the use of any of the proceeds of the Line of
Credit by the Company, the performance by the parties hereto
of their respective obligations hereunder and under the Loan
Documents or any claim, litigation, investigation, proceedings or
governmental action relating to any of the foregoing, whether or
not Lender is a party thereto; or
C. Lender hereby agrees to indemnify and hold harmless the Company,
its Affiliates and their respective officers, directors, partners and
members (collectively, the "Company Indemnitees") from and against any and
all Losses, and agrees to reimburse the Company Indemnitees for all out-of-
pocket expenses (including the fees and expenses of legal counsel), in each
case promptly as incurred by the Company Indemnitees and to the extent
arising out of or in connection with:
1. any misrepresentation, omission of fact or breach of
any of Lender's representations or warranties contained in this
Agreement or the annexes, schedules or exhibits hereto or thereto
or any instrument, agreement or certificate entered into or
delivered by Lender pursuant to this Agreement or the Loan
Documents; or
2. any failure by Lender to perform in any material respect
any of its covenants, agreements, undertakings or obligations
set forth in this Agreement or any instrument, certificate or
agreement entered into or delivered by Lender pursuant to this
Agreement or the Loan Documents.
D. Promptly after receipt by either party hereto seeking
indemnification pursuant to this Article SURVIVAL; INDEMNIFICATION (an
"Indemnified Party") of written notice of any investigation, claim,
proceeding or other action in respect of which indemnification is being
sought (each, a "Claim"), the Indemnified Party promptly shall notify the
party against whom indemnification pursuant to this Article SURVIVAL;
INDEMNIFICATION is being sought (the "Indemnifying Party") of the
commencement thereof, but the omission so to notify the Indemnifying Party
shall not relieve it from any liability that it otherwise may have to the
Indemnified Party except to the extent that the Indemnifying Party is
materially prejudiced and forfeits substantive rights or defenses by reason
of such failure. In connection with any Claim as to which both the
Indemnifying Party and the Indemnified Party are parties, the Indemnifying
Party shall be entitled to assume the defense thereof. Notwithstanding
the assumption of the defense of any Claim by the Indemnifying Party, the
Indemnified Party shall have the right to employ separate legal counsel and
to participate in the defense of such Claim, and the Indemnifying Party
shall bear the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, out-of-pocket costs
and expenses, (y) the Indemnified Party and the Indemnifying Party
reasonably shall have concluded that representation of the Indemnified
Party and the Indemnifying Party by the same legal counsel would not be
appropriate due to actual or, as reasonably determined by legal counsel to
the Indemnified Party, potentially differing interests between such parties
in the conduct of the defense of such Claim, or if there may be legal
defenses available to the Indemnified Party that are in addition to or
disparate from those available to the Indemnifying Party or (z) the
Indemnifying Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of time
after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any
Claim in the same jurisdiction, be liable for the fees and expenses of more
than one firm of legal counsel for the Indemnified Party (together with
appropriate local counsel). The Indemnifying Party shall not, without the
prior written consent of the Indemnified Party (which consent shall not
unreasonably be withheld), settle or compromise any Claim or consent to the
entry of any judgment that does not include an unconditional release of the
Indemnified Party from all liabilities with respect to such Claim or
judgment.
E. In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being asserted by
a third party, the Indemnified Party promptly shall deliver notice of such
claim to the Indemnifying Party.
VII. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Texas, without regard to the conflicts of law
principles of such state.
VIII. SUBMISSION TO JURISDICTION
Each of the parties hereto consents to the exclusive jurisdiction of
the federal courts whose districts encompass any part of the City of Dallas
or the state courts of the State of Texas sitting in the City of Dallas in
connection with any dispute arising under this Agreement. Each party hereto
hereby irrevocably and unconditionally waives, to the fullest extent it may
effectively do so, any defense of an inconvenient forum or improper venue to
the maintenance of such action or proceeding in any such court and any night
of jurisdiction on account of its place of residence or domicile. Each
party hereto irrevocably and unconditionally consents to the service of any
and all process in any such action or proceeding in such courts by the
mailing of copies of such process by registered or certified mail (return
receipt requested), postage prepaid, at its address specified in Article
XIII. Each party hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law.
IX. COUNTERPARTS; EXECUTION
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but both of which counterparts
shall together constitute one and the same instrument. A facsimile
transmission of this signed Agreement shall be legal and binding on both
parties hereto.
X. HEADINGS
The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
XI. SEVERABILITY
In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions
contained herein or therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions, the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
XII. ENTIRE AGREEMENT; REMEDIES, AMENDMENTS AND WAIVERS
This Agreement and the Documents constitute the entire agreement
between the parties hereto pertaining to the subject matter hereof
and supersede all prior agreements, understandings, negotiations and
discussions, whether oral or written, of such parties. No supplement,
modification or waiver of this Agreement shall be binding unless executed
in writing by both parties. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute
a continuing waiver unless otherwise expressly provided.
XIII. NOTICES
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally, or sent by telecopier machine or
by a nationally recognized overnight courier service, and shall be deemed
given when so delivered personally, or by telecopier machine or overnight
courier service as follows:
A. if to the Company, to:
Integrated Performance Systems Inc.
00000 Xxxxx Xxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: 972/000-0000
Facsimile: 972/381-1211
if to the Lender, to:
SMI Chips Inc. .
0000 Xxxxx Xxxxx Xxxxxx Xx.
Xxxxxx, Xxxxx 00000
Telephone: 972/000-0000
Facsimile: 972/233-3501
The Company or Lender may change the foregoing address by notice given
pursuant to this Article XIII.
XIV. ASSIGNMENT
This Agreement shall not be assignable by either of the parties hereto
without the prior written consent of the other party, and any attempted
assignment contrary to the provisions hereby shall be null and void;
provide, however, that Lender may assign its rights and obligations
hereunder, in whole or in part, to any affiliate of Lender and Lender may
assign its rights pursuant to the Loan Documents to any party providing
funds to Lender.
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed and delivered on the date first above written.
Integrated Performance Systems Inc. SMI Chips Inc.
By: __________________________ By: __________________________
D. Xxxxxx Xxxxx, President Xxxx Xxxxxxx, President
