Exhibit 10.5
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is dated as of January 13, 2000 and is between
INTRINSIX CORP., a Massachusetts corporation having its principal place of
business at 00 Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxxxxxx 00000 (the "Borrower")
and BANKBOSTON, N.A., a national bank having an office at 000 Xxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxxxxxx 00000 (the "Lender").
WITNESSETH:
BACKGROUND. The Borrower has requested certain financial accommodations from the
Lender (the "Loans") and the Lender is willing to grant such financial
accommodations upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises herein contained, and each
intending to be legally bound hereby, the parties agree as follows:
ARTICLE 1
DEFINITIONS
As used herein:
1.1 "Accounts," "Chattel Paper," "Contracts," "Documents," "Equipment,"
"Financial Assets," "Fixtures," "General Intangibles," "Goods," "Instruments,"
"Inventory," "Securities," "Securities Accounts," "Security Certificates," and
"Security Entitlements" will have the same respective meanings as are given to
those terms in the Uniform Commercial Code as presently adopted and in effect in
the Commonwealth of Massachusetts.
1.2 "Affiliate" means, as to any Person, each other Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
under common control with, such Person.
1.3 "Agreement" means this Loan and Security Agreement, as the same may from
time to time be amended or supplemented.
1.4 "Assets" means all assets of the Borrower, including without limitation, all
assets that should be classified as assets on a balance sheet of the Borrower or
the Guarantor prepared in accordance with GAAP.
1.5 "Borrowing Base" means, at any time, the amount computed on the Borrowing
Base Certificate most recently delivered to, and accepted by, the Lender in
accordance with this Agreement and equal to the lesser of:
(a) $1,500,000.00; or
(b) Seventy percent (70%) of Eligible Accounts of the Borrower.
1.6 "Borrowing Base Certificate" means a fully-completed certificate prepared by
the Borrower in a form acceptable to the Lender which certifies, among other
things, the various components of the Borrowing Base as set forth in the
definition thereof, and which is certified to be correct and executed by the
President or Chief Financial Officer of the Borrower and delivered to and
accepted by the Lender pursuant to this Agreement.
1.7 "Business Day" means, in respect to any date that is specified in the
Agreement or the Notes to be subject to adjustment in accordance with applicable
Modified Following Business Day Convention, a day on which commercial banks
settle payments in New York.
1.8 "Capital Leases" means capital leases, conditional sales contracts and other
title retention agreements relating to the purchase or acquisition of
Consolidated Capital Assets.
1.9 "Closing" has the meaning given to such term in Section 3.1.
1.10 "Collateral" has the meaning given to such term in Section 4.1.
1.11 "Collateral Documents" means the documents, whether deliverable at or after
the Closing, required under Article 4 and/or requested or required hereafter by
the Lender.
1.12 "Consolidated Assets" means all assets of the Borrower and the Guarantor
including without limitation, all assets that should be classified as assets on
a consolidated balance sheet of the Borrower and the Guarantor prepared in
accordance with GAAP.
1.13 "Consolidated Capital Assets" means Consolidated Assets of the Borrower and
the Guarantor that are required or permitted to be depreciated or amortized in
accordance with GAAP.
1.14 "Consolidated Capital Expenditures" means, for the applicable period, the
aggregate amount of the Borrower's and the Guarantor's expenditures for the
acquisition, construction, improvement, replacement or purchase of Consolidated
Capital Assets, including but not limited to, expenditures under Capital Leases.
1.15 "Consolidated Cash Flow Coverage Ratio" means, for a fiscal year, the ratio
of Consolidated EBITDA minus cash income tax payments minus cash dividends minus
non-financed Consolidated Capital Expenditures to Consolidated Interest Expense
plus Consolidated Current Maturities of Long Term Indebtedness.
1.16 "Consolidated Cash Flow/Leverage Ratio" means, for a fiscal year, the ratio
of Consolidated Liabilities to Consolidated EBITDA.
1.17 "Consolidated Current Maturities of Long Term Indebtedness" means the
principal amount of long term Consolidated Indebtedness maturing within twelve
(12) months from the date of calculation, including but not limited to, amounts
required to be paid during such period under Capital Leases.
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1.18 "Consolidated Earnings" means, at any time, consolidated revenue of the
Borrower and the Guarantor for any fiscal period minus the sum of (i) all
expenses, including without limitation, depreciation, amortization, income taxes
and dividends to shareholders, (ii) extraordinary and non-recurring income and
(iii) income from the sale of Consolidated Capital Assets.
1.19 "Consolidated EBITDA" means, at any time, Consolidated Earnings before
interest and taxes plus the sum of depreciation and amortization each to be
determined on a rolling four (4) quarter basis in accordance with GAAP.
1.20 "Consolidated Indebtedness" means, as to each of the Borrower and the
Guarantor without duplication:
(a) obligations for borrowed money;
(b) obligations representing the deferred purchase price of property or
services (other than accounts payable arising in the ordinary course of the
Borrower's or the Guarantor's business payable on terms customary in the trade);
(c) obligations, whether or not assumed, secured by liens;
(d) obligations which are evidenced by notes, acceptances, letters of
credit, guarantees or other instruments;
(e) obligations under any Capital Leases; and
(f) all Obligations.
1.21 "Consolidated Interest Expense" means, for the applicable period, interest
paid or payable by the Borrower and the Guarantor, including but not limited to,
interest paid or payable on Consolidated Indebtedness determined in accordance
with GAAP.
1.22 "Consolidated Liabilities" means, all liabilities of each of the Borrower
and the Guarantor, including without limitation, all liabilities that should be
classified as liabilities on a consolidated balance sheet of the Borrower and
the Guarantor prepared in accordance with GAAP.
1.23 "Consolidated Net Profit" means, for each of the Borrower and the
Guarantor, net profit to be determined in accordance with GAAP.
1.24 "Eligible Account" means, at any time, an Account that conforms and
continues to conform to the following conditions:
(a) The Account arose from a bona fide outright sale of Goods by the
Borrower or from services performed by the Borrower, and such Goods have been
shipped to the appropriate account debtors or their designees (or the sale has
otherwise been consummated), or the services have been performed for the
appropriate account debtors;
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(b) The Account is based upon an enforceable order or contract, written or
oral, for Goods shipped or held or for services performed, and the same were
shipped, held, or performed in accordance with such order or contract;
(c) The title of the Borrower to the Account and, except as to the account
debtor, to any Goods is absolute and is not subject to any prior assignment,
claim, lien, or security interest, except in favor of the Lender or a Permitted
Lien;
(d) The amount shown on the books of the Borrower and on any invoice or
statement delivered to the Lender is owing to the Borrower, less any partial
payment that has been made thereon by anyone;
(e) The Account shall be eligible only to the extent that it is not
subject to any claim of reduction, counterclaim, setoff, recoupment, or any
claim for credits, allowances, or adjustments by the account debtor because of
returned, inferior, or damaged Goods or unsatisfactory services, or for any
other reason;
(f) The account debtor has not returned or refused to retain, or otherwise
notified the Borrower of any dispute concerning, or claimed nonconformity of,
any of the Goods or services from the sale of which the Account arose;
(g) The Account is not outstanding more than sixty (60) days from the date
of the invoice therefor;
(h) The Account does not arise out of a contract with, or order from, all
account debtor that, by its terms, forbids or makes void or unenforceable the
assignment by the Borrower to the Lender of the Account arising with respect
thereto;
(i) The Borrower has not received any note, trade acceptance, draft, or
other Instrument with respect to, or in payment of, the Account, nor any Chattel
Paper with respect to the Goods giving rise to the Account, unless, if any such
Instrument or Chattel Paper has been received, the Borrower immediately notifies
the Lender and, at the Lender's request, endorses or assigns and delivers the
same to the Lender;
(j) The Borrower has not received any notice of the death of the account
debtor or a partner thereof; nor of the dissolution, termination of existence,
insolvency, business failure, appointment of a receiver for any part of the
property of, assignment for the benefit of creditors by, or the filing of a
petition in bankruptcy or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against, the account debtor. Upon the
receipt by the Borrower of any such notice, it will immediately give the Lender
written advice thereof;
(k) The account debtor is not a Subsidiary or other Affiliate of the
Borrower; and
(l) The Lender has not deemed such account ineligible in its reasonable
discretion.
In the event of any dispute, under the foregoing criteria, about whether
an Account is or has ceased to be an Eligible Account, the reasonable decision
of the Lender shall control.
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1.25 "Event of Default" has the meaning provided in Section 7.1.
1.26 "Excess Cash Flow" means the amount by which (i) Consolidated EBITDA minus
cash income tax payments minus cash dividends minus non-financed Consolidated
Capital Expenditures exceeds (ii) Consolidated Interest Expense plus
Consolidated Current Maturities of Long Term Indebtedness.
1.27 "Financial Statements" means the balance sheets of the Borrower as of
December 31, 1996, December 31, 1997, and December 31, 1998 and statements of
cash flows and income and notes thereto, of the Borrower for such dates,
prepared by Deloitte and Touche to present fairly the financial position and
results of operations of the Borrower at such dates and for such periods in
accordance with GAAP.
1.28 "GAAP" means generally accepted accounting principles applied consistently
with such changes or modifications thereto as may be approved in writing by the
Lender.
1.29 "Guarantor" means Intrinsix Canada Co., a Nova Scotia unlimited company
having its principal place of business at 000 Xxxxxx Xxxxx, Xxxxx X, Xxxxxx,
Xxxxxxx X0X 0X0.
1.30 "Guaranty" means the Guaranty (Unlimited) dated of even date from the
Guarantor in favor of the Lender relating to the Obligations.
1.31 "Intellectual Property" means trademarks, service marks, trade names, trade
styles, logos, goodwill, trade secrets, patents, and licenses acquired under any
statutory, common law or registration process in any state or nation at any
time, or under any agreement executed with any person or entity at any time. The
term "license" refers not only to rights granted by agreement from the owner of
patents, trade marks, service marks and the like, but also to rights granted by
a franchisor under a franchise or similar agreement. The foregoing enumeration
is not intended as a limitation of the meaning of the word "license".
1.32 "Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any government or political subdivision or
agency thereof, or of any court or similar entity established by any thereof.
1.33 "Liabilities" means, all liabilities of the Borrower, including without
limitation, all liabilities that should be classified as liabilities on a
balance sheet of the Borrower prepared in accordance with GAAP.
1.34 "Modified Following Business Day Convention" means the convention for
adjusting any relevant date if it would otherwise fall on a day that is not a
Business Day to the date that will be the first following day that is a Business
Day.
1.35 "Notes" means the Revolving Line of Credit Note and the Term Note.
1.36 "Obligations" is intended to be used in its most comprehensive sense and
means the obligation of the Borrower and the Guarantor:
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(a) to pay the principal of, and interest on, the Notes in accordance with
the terms thereof and to satisfy all other liabilities to the Lender, whether
hereunder or otherwise (including without limitation existing notes or any one
or both of the Borrower or the Guarantor), whether now existing or hereafter
incurred, matured or umatured, direct or contingent, joint or several, including
any extensions, modifications and renewals thereof and substitutions therefor,
including without limitation;
(b) to repay to the Lender all amounts advanced by the Lender hereunder or
otherwise on behalf of the Borrower or the Guarantor, including, but without
limitation, advances under other notes, advances for principal or interest
payments to prior secured parties, mortgagees, or lienors, or for taxes, levies,
insurance, rent, or repairs to, or maintenance or storage of, any of the
Collateral; and
(c) to reimburse the Lender, on demand, for all of the Lender's reasonable
expenses and costs, including without limitation the reasonable fees and
expenses of its counsel, in connection with the preparation, administration,
amendment, modification, or enforcement of this Agreement and the documents
required hereunder, including, without limitation, any proceeding brought, or
threatened, to enforce payment of any of the Obligations referred to in the
foregoing paragraphs (a) and (b).
1.37 "Permitted Liens" means:
(a) liens for taxes, assessments, or similar charges, incurred by the
Borrower or the Guarantor in the ordinary course of business, that are not yet
due and payable;
(b) liens of mechanics, materialmen, warehousemen, carriers, or other like
liens, securing obligations incurred by the Borrower or the Guarantor in the
ordinary course of business that are not yet due and payable;
(c) purchase money liens;
(d) liens created to secure Capital Leases;
(e) liens in favor of the Lender; and
(f) liens set forth on Exhibit 1.37.
1.38 "Person" means any individual, corporation, limited liability company,
partnership, limited liability partnership, association, joint-stock company,
trust, unincorporated organization, joint venture, court, or government or
political subdivision or agency thereof.
1.39 "Records" means correspondence, memoranda, tapes, discs, papers, books and
other documents, or transcribed information of any type, whether expressed in
ordinary or machine readable language.
1.40 "Revolving Line of Credit Note" means the Revolving Line of Credit Note of
the Borrower, of even date, in the original principal amount of $1,500,000.00,
referred to in Section 2.2 hereof.
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1.41 "Subsidiary" means any Affiliate that is directly, or indirectly through
one or more intermediaries, controlled by the Borrower or not less than 50% of
the voting capital stock of which is owned, directly or through one or more
intermediaries, by the Borrower.
1.42 "Term Note" means the Term Note of the Borrower, of even date, in the
original principal amount of $1,200,000.00, referred to in Section 2.3 hereof.
1.43 Accounting terms used and not otherwise defined in this Agreement have the
meanings determined by, and all calculations with respect to accounting or
financial matters unless otherwise provided herein will be computed in
accordance with, GAAP.
ARTICLE 2
THE LOANS
2.1 Disbursement of the Loans.
The Lender will credit the proceeds of the Loans hereunder to the
Borrower's deposit account with the Lender or in accordance with the Borrower's
acceptable instructions from time to time.
2.2 Revolving Line of Credit Note.
Subject to the terms hereof, the Lender agrees to lend the Borrower, from
time to time unti1 May 31, 2001 or the occurrence of an Event of Default,
whichever occurs first, such sums in integral multiples of $1,000.00 as the
Borrower may request, and the Lender may approve, by reasonable same day notice
to the Lender, received by the Lender not later than 2:00 P.M. of such day, but
which shall not exceed, in the aggregate principal amount at any one time
outstanding, the Borrowing Base. The Borrower may borrow, repay without penalty
or premium and reborrow hereunder, from the date of this Agreement until May 31,
2001 or the occurrence of an Event of Default, whichever occurs first. It is the
intention of the parties that the outstanding principal amount of the Note shall
at no time exceed the then existing Borrowing Base, and if, at any time, an
excess shall for any reason exist, the full amount of such excess, together with
accrued and unpaid interest thereon as herein provided, shall be immediately due
and payable in full, except if an excess shall exist due to an adjustment in the
Borrowing Base made by the Lender pursuant to Section 1.24(l), in which case
such excess together with accrued and unpaid interest shall be due and payable
five (5) days after written notice from the Lender.
2.3 Term Note.
(a) Subject to the terms hereof, the Lender agrees to lend to the Borrower
on a term loan basis the amount of $1,200,000.00, the payment terms to be in
accordance with the provisions of the Term Note. The outstanding principal
balance of the Term Note is to be paid in equal monthly installments of
$25,000.00 plus interest. In addition to the monthly payments of principal and
interest required by this Section 2.3(a), the Borrower shall make the payments
required by Section 2.3(b) below. All outstanding indebtedness evidenced by the
Term Note, if not earlier paid, is due and payable on January 15, 2004.
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(b) Commencing forty-five (45) days after the quarterly accounting period
ending on March 31, 2000 and forty-five (45) days after each quarterly
accounting period thereafter (June 30, September 30, December 31 and March 31 of
each year) the Borrower shall pay to the Lender an amount equal to ten percent
(10%) of any Excess Cash Flow.
2.4 Interest Rate and Payments of Interest.
Interest on the principal balance of the Notes from time to time
outstanding will accrue at the rates and in the manner set forth in the Notes,
including that after the occurrence of an Event of Default, the interest rate
under the Notes will be four percent (4.0%) above that which would otherwise be
applicable.
2.5 Payment to the Lender.
The Lender may charge against any deposit account of the Borrower all or
any part of any amount due hereunder, including all payments due under the
Notes.
2.6 Payment Due Dates.
The due dates of all payments required hereunder or under the Notes are
subject to adjustment in accordance with the Modified Following Business Day
Convention.
ARTICLE 3
CONDITIONS PRECEDENT
The obligation of the Lender to make the Loans is subject to the following
conditions precedent:
3.1 Documents Required for the Closing.
The Borrower will have delivered or caused to be delivered to the Lender,
prior to the initial disbursement of Loans (the "Closing"), the following:
(a) The Notes duly executed by the Borrower;
(b) The Guaranty duly executed by the Guarantor;
(c) The Security Agreement between the Lender and the Guarantor of even
date, duly executed by the Guarantor;
(d) The Subordination Agreement (Liens) between the Lender and Gintaris
Subatis, of even date, duly executed by Gintaris Subatis;
(e) The Subordination Agreement (Debt) between the Lender and Gintaris
Subatis, of even date, duly executed by Gintaris Subatis;
(f) The Financial Statements;
(g) The Collateral Documents duly executed by the Borrower;
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(h) The financing statements and other instruments required by Article 4;
(i) A copy, certified as of the date of the Closing, of votes and
resolutions of the board of directors of the Borrower, authorizing the
execution, delivery, and performance of this Agreement, the Notes, the
Collateral Documents, and each other document to be delivered pursuant hereto;
(j) A copy, certified as of the date of the Closing, of votes and
resolutions of the board of directors of the Guarantor, authorizing the
execution, delivery, and performance of the Guaranty and each other document to
be delivered by the Guarantor;
(k) A copy, certified as of the date of the Closing, of the bylaws and/or
memorandum of association for each of the Borrower and the Guarantor;
(l) A certificate (dated the date of the Closing) of the clerk or
secretary of the Borrower as to the incumbency and signatures of the officers of
the Borrower signing this Agreement, the Notes, the Collateral Documents, and
each other document to be delivered pursuant hereto;
(m) A certificate (dated the date of the Closing) of the clerk or
secretary of the Guarantor as to the incumbency and signatures of the officers
of the Guarantor signing the Guaranty and each other document to be delivered by
the Guarantor;
(n) A copy, certified as of the most recent date practicable by the
Secretary of the Commonwealth of Massachusetts, of the Articles of Organization
of the Borrower, and all amendments thereto, together with a certificate (dated
the date of the Closing) of the clerk of the Borrower to the effect that such
Articles of Organization have not been further amended since the date of the
aforesaid certification of the Secretary of the Commonwealth of Massachusetts;
(o) A copy, certified as of the most recent date practicable by the
Province of Nova Scotia, of the Articles of Association of the Guarantor, and
all amendments thereto, together with a certificate (dated the date of the
Closing) of the secretary of the Guarantor to the effect that such Articles of
Association have not been further amended since the date of the aforesaid
certification of the Province of Nova Scotia;
(p) A certificate dated as of the most recent date practicable, issued by
the Secretary of the Commonwealth of Massachusetts as to the legal existence,
Articles of Organization and good legal standing of the Borrower;
(q) A certificate of Industry Canada dated as of the most recent date
practicable, issued by the Province of Nova Scotia as to the legal existence,
Articles of Association and good legal standing of the Guarantor;
(r) Certificates, as of the most recent dates practicable, of the
Secretary of the Commonwealth of Massachusetts and of the secretary of state of
each state in which the Borrower is qualified as a foreign corporation and, if
applicable, of the department of revenue or taxation of each of the foregoing
states, as to the good standing of the Borrower;
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(s) Certificates, as of the most recent dates practicable, of appropriate
authority of each state, province or country in which the Guarantor is qualified
as a foreign corporation and, if applicable, of the department of revenue or
taxation of each of the foregoing states, as to the good standing of the
Guarantor;
(t) A written opinion of Xxxx and Xxxx LLP, legal counsel for the
Borrower, dated the date of the Closing and addressed to the Lender, in form
satisfactory to the Lender; and
(u) A written opinion of legal counsel for the Guarantor, dated the date
of the Closing and addressed to the Lender, in form satisfactory to the Lender.
3.2 Documents Required for Subsequent Disbursements.
At the time of, and as a condition to, any disbursement of any part of the
Loans to be made by the Lender subsequent to the Closing, the Lender may require
the Borrower to deliver to the Lender a certificate, dated the date on which any
such disbursement is to be made, signed by the president of the Borrower, and to
the effect that:
(a) As of the date thereof, no Event of Default has occurred and is
continuing, and no event has occurred and is continuing that, but for the giving
of notice or passage of time or both, would be an Event of Default;
(b) No material adverse change has occurred in the business prospects,
financial condition, or results of operations of the Borrower since the date of
the Financial Statements; and
(c) Each of the representations and warranties contained in Article 5 is
true and correct in all respects as if made on and as of the date of such
disbursement unless it relates to specific date.
3.3 Certain Events.
At the time of, and as a condition to, the Closing and each disbursement
of any part of the Loans to be made by the Lender at or subsequent to the
Closing:
(a) No Event of Default will have occurred and be continuing, and no event
will have occurred and be continuing that, with the giving of notice or passage
of time or both, would be an Event of Default;
(b) No material adverse change will have occurred in the financial
condition, or results of operations of the Borrower since the dates of the
Financial Statements delivered to the Lender; and
(c) All of the Collateral Documents will have remained in full force and
effect.
3.4 Legal Matters.
At the time of the Closing and each subsequent disbursement, all legal
matters incidental thereto will be reasonably satisfactory to Xxxxxx X'Xxxxxxx,
legal counsel to the Lender.
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ARTICLE 4
COLLATERAL SECURITY
4.1 Composition of the Collateral.
The property in which a security interest is granted pursuant to the
provisions of Sections 4.2 and 4.3 is herein collectively called the
"Collateral". The Collateral, together with all other property of the Borrower
of any kind held by the Lender, will stand as one general, continuing collateral
security for all Obligations until all Obligations have been satisfied in full.
4.2 Rights in Property Held by the Lender.
As security for the prompt satisfaction of all Obligations, the Borrower
hereby grants the Lender a lien on and a security interest in, all amounts that
may be owing, from time to time, by the Lender to the Borrower in any capacity,
including, but without limitation, any balance or share belonging to the
Borrower, or any deposit or other account with the Lender, which lien and
security interest will be independent of, and in addition to, any right of
set-off that the Lender has hereunder or otherwise.
4.3 Rights in Property Held Either by the Borrower or by the Lender.
As further security for the prompt satisfaction of all of the Obligations,
the Borrower hereby grants the Lender a lien upon and a continuing security
interest in, all of the following, wherever located, whether now owned or
hereafter acquired, together with all replacements therefor and proceeds
(including, but without limitation, insurance proceeds) and products thereof.
(a) All Inventory;
(b) All Accounts, Contracts, accounts receivable, contract rights, and
Chattel Paper, regardless of whether or not they constitute proceeds of other
Collateral;
(c) All General Intangibles, regardless of whether or not they constitute
proceeds of other Collateral, including, without limitation, all the Borrower's
rights (which the Lender may exercise or not as it in its sole discretion may
determine) to acquire or obtain Goods and/or services with respect to the
manufacture, processing, storage, sale, shipment, delivery or installation of
any of the Collateral;
(d) All rights to payment of any insurance proceeds or awards for damages
in connection with any condemnations or takings of any interest in and to any
real or personal property, wherever located, or any conveyance in lieu thereof;
(e) All products of and accessions to any of the Collateral;
(f) All liens, guaranties, securities, rights, remedies and privileges
pertaining to any of the Collateral, including the right of stoppage in transit;
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(g) All obligations owing to the Borrower of every kind and nature, and
all choses in action;
(h) All tax refunds of every kind and nature to which the Borrower is now
or hereafter may become entitled no matter however arising, including, without
limitation, loss carry back refunds;
(i) All Intellectual Property, goodwill, trade secrets, computer programs,
customer lists, trade names, trademarks and patents;
(j) All Chattel Paper, Documents and Instruments (whether negotiable or
non-negotiable, and regardless of their being attached to Chattel Paper);
(k) All Equipment, including without limitation machinery, furniture,
motor vehicles, Fixtures and all other goods used in the conduct of the business
of the Borrower;
(l) All Securities, Securities Entitlements, Financial Assets, Securities
Accounts and Security Certificates;
(m) All proceeds of Collateral of every kind and nature and in whatever
form, including, without limitation, both cash and non-cash proceeds resulting
or arising from the rendering of services by the Borrower or the sale or other
disposition by the Borrower of the Inventory or other Collateral;
(n) All books and records relating to the conduct of the Borrower's
business including, without in any way limiting the generality of the foregoing,
those relating to its Accounts; and
(o) All deposit accounts maintained by the Borrower with any bank, trust
company, investment firm or fund, or any similar institution or organization.
4.4 Priority of Liens.
The foregoing liens will be first and prior perfected liens, subject to
Permitted Liens.
4.5 Financing Statements.
(a) The Borrower will:
(i) Execute such financing statements (including amendments thereto
and continuation statements thereof) in form satisfactory to the Lender as the
Lender, from time to time, may reasonably request;
(ii) Pay, or reimburse the Lender for paying, all costs and taxes of
filing or recording the same in such public offices as the Lender may designate;
and
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(iii) Take such other steps as the Lender, from time to time, may
reasonably request, including the noting of the Lender's lien on the Collateral
and on any certificates of title therefor, all to perfect, to the satisfaction
of the Lender, the Lender's interest in the Collateral.
(b) In addition to the foregoing, and not in limitation thereof:
(i) A carbon, photographic, or other reproduction of this Agreement
will be sufficient as a financing statement and may be filed in any appropriate
office in lieu thereof; and
(ii) The Borrower hereby appoints the Lender as its attorney-in-fact
(without requiring the Lender to act as such) to execute any financing statement
in the name of the Borrower, and to perform all other acts that the Lender deems
appropriate to perfect and continue its security interest in, and to protect and
preserve, the Collateral. The Lender will provide the Borrower with copies of
all documents executed by the Lender pursuant to this Section.
4.6 Mortgagees', Landlords', and Warehousemen's Waivers.
The Borrower will, within twenty (20) days after any request of the
Lender, use reasonable efforts to cause any mortgagee of real estate owned by
the Borrower, the landlord of premises leased by the Borrower located at 00
Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxxxxxx, and any warehouseman or other bailee
on whose premises any of the Collateral may be located to execute and deliver to
the Lender instruments, in form and substance reasonably satisfactory to the
Lender, by which such mortgagee, landlord or warehouseman or other bailee waives
its rights, if any, in and to all of the Collateral, provided that the failure
to so obtain any such instruments shall not be a default or Event of Default
hereunder as long as the Borrower uses reasonable efforts to obtain such
instruments.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 Original.
To induce the Lender to enter into this Agreement, the Borrower represents
and warrants to the Lender as follows:
(a) The Borrower is a corporation duly organized, validly existing, and in
good standing under the Laws of the Commonwealth of Massachusetts; the Borrower
has no Subsidiaries except the Guarantor and Seva Technologies, Inc.; the
Borrower has the lawful power to own its properties and to engage in the
business it conducts, and is duly qualified and in good standing as a foreign
corporation in the jurisdictions wherein the failure to so qualify would have a
material adverse effect; the states in which the Borrower is qualified to do
business are set forth in Exhibit 5.1(a); and the addresses of all places of
business of the Borrower are as set forth in Exhibit 5.1(a), which may be
amended and/or supplemented from time to time;
(b) The Borrower is not directly or indirectly controlled by, or acting on
behalf of, any Person which is an "Investment Company", within the meaning of
the Investment Company Act of 1940, as amended;
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(c) The Borrower is not in default with respect to any of its existing
material Liabilities, and the making and performance of this Agreement, the
Notes, and the Collateral Documents will not (immediately or with the passage of
time, the giving of notice, or both):
(i) Violate the Articles of Organization or by-laws of the Borrower
or violate any Laws or result in a default under any material contract,
agreement, or instrument to which the Borrower is a party or by which the
Borrower or its property is bound;
(ii) Result in the creation or imposition of any security interest
in, or lien or encumbrance upon, any of the assets of the Borrower, except in
favor of the Lender;
(d) The Borrower has the power and authority to enter into and perform
this Agreement, the Notes, and the Collateral Documents, and to incur the
obligations herein and therein provided for, and has taken all actions necessary
to authorize the execution, delivery, and performance of this Agreement, the
Notes, and the Collateral Documents;
(e) This Agreement, the Notes, and the Collateral Documents are, or when
delivered will be, valid, binding, and enforceable in accordance with their
respective terms;
(f) Except as disclosed in Exhibit 5.1(f) hereto, there is no pending
order, notice, claim, litigation, proceeding, or investigation against or
affecting the Borrower, whether or not covered by insurance, that would
reasonably be expected to adversely affect the financial condition of the
Borrower if adversely determined;
(g) Except as disclosed in Exhibit 5.1(g), the Borrower has good and
marketable title to all of their assets, none of which is subject to any
security interest, encumbrance or lien, or claim of any third Person, except for
Permitted Liens and the liens and security interests created pursuant to Article
4 in favor of the Lender are in all cases first and prior perfected liens
subject to Permitted Liens;
(h) The Financial Statements, including any schedules and notes pertaining
thereto, have been prepared in accordance with GAAP, and fully and fairly
present the financial condition of the Borrower at the dates thereof and the
results of operations for the periods covered thereby, and there has been no
material adverse change in the financial condition or business of the Borrower
from December 31, 1998 to the date hereof;
(i) As of the date hereof, the Borrower has no material Liabilities of any
nature, including, but without limitation, liabilities for taxes and any
interest or penalties relating thereto, except for Indebtedness disclosed on
Exhibit 5.1(i);
(j) Except as otherwise permitted herein, the Borrower has filed all
federal, state, and local tax returns and other reports required by any
applicable Laws to have been filed prior to the date hereof, has paid or caused
to be paid all taxes, assessments, and other governmental charges that are due
and payable prior to the date hereof, and has made adequate provision for the
payment of such taxes, assessments, or other charges accruing but not yet
payable; the Borrower has no knowledge of any deficiency or additional
assessment in connection with any taxes, assessments, or charges not provided
for on its books, unless contesting the same in good faith;
14
(k) Except to the extent that the failure to comply would not interfere
with the conduct of the business of the Borrower, the Borrower has complied with
all applicable Laws with respect to (i) any restrictions, specifications, or
other requirements pertaining to products that it manufactures or sells or to
the services it performs; (ii) the conduct its business; and (iii) the use,
maintenance, and operation of the real and personal properties owned or leased
by it in the conduct of its business;
(l) No representation or warranty by or with respect to the Borrower
contained herein or in any certificate or other document furnished by the
Borrower pursuant hereto contains any untrue statement of a material fact or
omits to state a material fact necessary to make such representation or warranty
not misleading in light of the circumstances under which it was made;
(m) Each consent, approval or authorization of, or filing, registration or
qualification with, any Person required to be obtained or effected by the
Borrower in connection with the execution and delivery of this Agreement, the
Notes, and the Collateral Documents or the undertaking or performance of any
obligation hereunder or thereunder has been duly obtained or effected, except
for filings with the Patent and Trademark Office and Copyright Office;
(n) Except as set forth in Exhibit 5.1(n), all parties to all material
leases, contracts, and other commitments to which the Borrower is a party have
complied with the provisions of such leases, contracts, and other commitments
and no party is in default under any thereof and no event has occurred which,
but for the giving of notice or the passage of time, or both, would constitute a
default;
(o) The Borrower has not made any agreement or taken any action which may
cause anyone to become entitled to a commission or finder's fee as a result of
or in connection with the making of the Loans;
(p) The federal tax returns for the Borrower for all years of operation,
including the year ended December 31, 1998, have been filed with the Internal
Revenue Service and have not been challenged; and
(q) Any Employee Pension Benefit Plan, as defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), of the Borrower
meets, as of the date hereof, the minimum funding standards of 29 U.S.C.A. 1082
(Section 302 of ERISA), and no Reportable Event or Prohibited Transaction, as
defined in ERISA, has occurred with respect to any Employee Benefit Plans, as
defined in ERISA, of the Borrower.
5.2 Survival.
All of the representations and warranties set forth in Section 5.1 will
survive until all Obligations are satisfied in full and there remain no
outstanding commitments hereunder.
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ARTICLE 6
COVENANTS OF THE BORROWER
6.1 Affirmative Covenants.
The Borrower does hereby covenant and agree with the Lender that, so long
as any of the Obligations remain unsatisfied or any commitments hereunder remain
outstanding, it will comply at all times with the following affirmative
covenants:
(a) The Borrower will use the proceeds of the Loans only to pay
Indebtedness and for working capital;
(b) The Borrower will furnish the Lender:
(i) As soon as available, but in any event within forty-five (45)
days after the close of each quarterly accounting period in each fiscal year
(i.e. March 31, June 30, September 30 and December 31): (1) consolidated and
consolidating statements of cash flows of the Borrower and the Guarantor for
such quarter and year to date, (2) consolidated and consolidating income
statements of the Borrower and the Guarantor for such quarter and year to date,
and (3) consolidated and consolidating balance sheets of the Borrower and the
Guarantor as of the end of such quarter, all in reasonable detail, subject to
normal year-end audit adjustments, prepared by the Borrower and the Guarantor
and certified by each of the Borrower's and the Guarantor's Presidents to be
accurate and complete and in comparative form with the corresponding period of
the preceding fiscal year;
(ii) As soon as available, but in any event within one hundred
twenty (120) days after the close of each fiscal year: (1) consolidated and
consolidating statements of cash flows of the Borrower and the Guarantor for
such fiscal year, (2) consolidated and consolidating income statements of the
Borrower and the Guarantor for such fiscal year, and (3) consolidated and
consolidating balance sheets of the Borrower and the Guarantor as of the end of
such fiscal year, all such statements to be in reasonable detail, including all
supporting schedules and comments; the consolidated statements and balance
sheets to be audited by Deloitte and Touche or another independent certified
public accountant selected by the Borrower and the Guarantor and reasonably
acceptable to the Lender, and certified by such accountants to have been
prepared in accordance with GAAP and to present fairly the financial position
and results of operations of the Borrower and the Guarantor; in addition, the
Borrower will obtain from such independent certified public accountants and
deliver to the Lender, within ninety (90) days after the close of each fiscal
year, their written statement that in making the examination necessary to their
certification they have obtained no knowledge of any Event of Default by the
Borrower, or disclosing all Events of Default of which they have obtained
knowledge; the Lender will have the right, from time to time to discuss the
affairs of the Borrower and the Guarantor directly with such independent
certified public accountants after notice to the Borrower and the Guarantor and
opportunity of the Borrower and the Guarantor to be represented at any such
discussions;
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(iii) Contemporaneously with the year end financial report required
by the foregoing paragraph (ii) a copy of the management letters issued to the
Borrower and the Guarantor by Deloitte and Touche or another certified public
accountant selected by the Borrower and the Guarantor and reasonably acceptable
to the Lender;
(iv) Contemporaneously with the financial information required by
the foregoing paragraphs (i) and (ii), a certificate (in the form of Exhibit
6.1(b)(iv) attached hereto) of the chief financial officer or other appointed
officer of each of the Borrower and the Guarantor, reasonably acceptable to the
Lender, in such capacity, stating that they have reviewed the provisions of this
Agreement and that a review of the activities of the Borrower and the Guarantor
during such period, has been made by them or under their supervision, with a
view to determining whether the Borrower and the Guarantor have fulfilled all
their obligations under this Agreement, including all financial covenants, and
that the Borrower and the Guarantor have observed and performed each undertaking
contained in this Agreement and are not in default in the observance or
performance of any of the provisions hereof or, if the Borrower or the Guarantor
will be so in default, specifying all such defaults and events of which they may
have knowledge;
(v) Within fifteen (15) days after the end of each calendar month,
in such form and detail as shall be satisfactory to the Lender, an aging, as of
the end of such month, of (a) the then Eligible Accounts and (b) all other
Accounts of the Borrower certified by the chief financial officer or other
appointed officer of each of the Borrower and the Guarantor, reasonably
acceptable to the Lender, in such capacity, to be complete and correct;
(vi) Within fifteen (15) days after the end of each calendar month
in which any Loans are outstanding (and at any additional time in the discretion
of the Lender or if any material deterioration in the Borrowing Base would be
disclosed thereby), a Borrowing Base Certificate as of the end of such month (or
as of a date not more than three (3) days prior to the date of any such
additional Borrowing Base Certificate). Each Borrowing Base Certificate shall be
effective only as accepted by the Lender (and with such revisions, if any, as
the Lender may require as a condition to such acceptance); and
(vii) Such other financial information reasonably required by the
Lender from time to time;
(c) The Borrower will maintain its Inventory, Equipment, real estate, and
other properties in good condition and repair (normal wear and tear excepted),
and will pay and discharge or cause to be paid and discharged, when due, the
cost of repairs to, or maintenance of, the same, and will pay or cause to be
paid in a timely manner all rental or mortgage payments. The Borrower hereby
agrees that, in the event it fails to pay or cause to be paid any such payment,
it will promptly notify the Lender thereof, and the Lender may, in its
discretion, do so and on demand be reimbursed therefor by the Borrower;
(d) The Borrower will maintain, or cause to be maintained, public
liability insurance and fire and extended coverage insurance on all assets that
are of a character usually insured by corporations engaged in the same or
similar businesses, all in form and amount sufficient to indemnify the Borrower
for 100% of the appraised value of any such asset lost or damaged
17
(subject to any deductible customary in the Borrower's industry) or in an amount
consistent with the amount of insurance generally carried on comparable assets
within the industry and with such insurers as may be satisfactory to the Lender.
The Borrower will cause all such insurance policies to be payable to the Lender
and will deliver the policies of insurance to the Lender. Such policies will
contain a provision whereby they cannot be cancelled except after thirty (30)
days' written notice to the Lender. The Borrower will furnish to the Lender such
evidence of insurance as the Lender may require. The Borrower hereby agrees
that, in the event it fails to pay or cause to be paid the premium on any such
insurance when due, the Lender, in its discretion, may do so and be reimbursed
by the Borrower therefor. The Borrower hereby assigns to the Lender any returned
or unearned premiums that may be due the Borrower upon cancellation by the
insurer of any such policy for any reason whatsoever and direct any such insurer
to pay the Lender any amounts so due. After the occurrence of an Event of
Default, after the Lender determines that the Collateral is at risk, the Lender
is hereby appointed the attorney-in-fact of the Borrower (without requiring the
Lender to act as such) to endorse any check which may be payable to the Borrower
to collect any premiums or the proceeds of such insurance (other than proceeds
of public liability insurance), and any amount so collected may be applied by
the Lender toward satisfaction of any of the Obligations;
(e) The Borrower will pay when due, all taxes, assessments, and charges or
levies imposed upon it or on any of its property or which it is required to
withhold and pay, except where contested in good faith by appropriate
proceedings with adequate reserves therefor having been set aside on its books;
provided, however, that the Borrower will pay or cause to be paid all such
taxes, assessments, charges or levies forthwith whenever foreclosure on any lien
that may have attached (or security therefor) appears imminent;
(f) The Borrower and the Guarantor will maintain at all times a
Consolidated Cash Flow Coverage Ratio equal to or greater than 2.00:1.00 to be
tested on a rolling four (4) quarters basis as of March 31, June 30, September
30 and December 31 of each fiscal year;
(g) The Borrower and the Guarantor will maintain a Consolidated Net Profit
of $200,000.00 for each quarter to be tested quarterly as of March 31, June 30,
September 30 and December 31 of each fiscal year;
(h) The Borrower will, when requested to do so at reasonable times, make
available for inspection by duly authorized representatives of the Lender any of
its books and records and will furnish the Lender any information regarding its
business affairs and financial condition within a reasonable time after written
request therefor;
(i) The Borrower will take all necessary steps to preserve its corporate
existence and franchises which are necessary to the operation of the Borrower's
business and comply with all present and future Laws applicable to it in the
operation of its business, and all material agreements to which it is subject
when the failure to so comply could have a material adverse effect;
(j) The Borrower will collect its Accounts only in the ordinary course of
business;
18
(k) The Borrower will keep accurate and complete Records of its Accounts,
Inventory, and Equipment consistently with sound business practices;
(l) The Borrower will give immediate notice to the Lender of any
litigation or proceeding in which it is a party which may reasonably be expected
to involve liability of the borrower in excess of $100,000.00;
(m) Upon the written request of the Lender, the Borrower will furnish the
Lender with copies of all tax returns filed by the Borrower.
(n) The Borrower will pay when due (or within applicable grace periods)
all of its Indebtedness, except when the amount thereof is being contested in
good faith by appropriate proceedings and with adequate reserves therefor being
set aside on its books. If default be made by the Borrower in the payment of any
principal (or installment thereof) of, or interest on, any such Indebtedness,
the Lender will have the right, in its discretion, to pay such interest or
principal for the account of the Borrower and be reimbursed by the Borrower
therefor;
(o) The Borrower will notify the Lender immediately if it becomes aware of
the occurrence of any Event of Default or of any fact, condition, or event that
only with the giving of notice or passage of time or both, could reasonably
expected to become an Event of Default or if it becomes aware of any material
adverse change in the business prospects, financial condition (including,
without limitation, proceedings in bankruptcy, insolvency, reorganization, or
the appointment of a receiver or trustee), or results of operations of the
Borrower or of the failure of the Borrower to observe any of its undertakings
hereunder or under the Collateral Documents;
(p) The Borrower will notify the Lender thirty (30) days in advance of any
change in the location of any of its places of business or of the establishment
of any new, or the discontinuance of any existing, place of business;
(q) The Borrower will not and will not cause, suffer or permit any
employee benefit plan (as defined in Section 3 of ERISA) of the Borrower to (i)
engage in any "prohibited transaction" or incur any "accumulated funding
deficiencies" as those terms are defined in Sections 302, 406, 1013 and 2003(a)
of ERISA, (ii) terminate any pension plan (as defined in Section 3 of ERISA) in
a manner which could reasonably be expected to result in the imposition of a
lien on its assets pursuant to Section 4068 of ERISA or in a material liability
of the Borrower to participants, beneficiaries or the PBGC or (iii) fail to make
payment when due of all amounts which, under the provisions of any pension plan
(as defined in Section 3 of ERISA) which it is required to pay as contributions
thereto. The Borrower will not establish any new pension or defined benefit plan
or modify any such existing plan for employees subject to ERISA, which plan or
modification provides any benefits based on past service, without the advance
consent of the Lender to the amount of the aggregate past service liability
thereby created; and
(r) The Borrower will maintain all of its primary depository accounts with
the Lender.
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6.2 Negative Covenants.
The Borrower does hereby covenant and agree with the Lender that during
the term of this Agreement, it will comply at all times with the following
negative covenants:
(a) The Borrower will not change its name, enter into any merger,
consolidation, reorganization or recapitalization, or reclassify its capital
stock;
(b) The Borrower will not sell, transfer, lease, or otherwise dispose of
all or (except in the ordinary course of business) any material part of its
Assets except for such Assets which are (i) obsolete or (ii) not useful to the
Borrower;
(c) The Borrower will not sell, lease, transfer, assign, or otherwise
dispose of any of the Collateral, except in the ordinary course of business,
except for Collateral which is (i) obsolete or (ii) not useful to the Borrower;
(d) The Borrower will not mortgage, pledge, grant, or permit to exist a
security interest in, or a lien upon, any of its assets of any kind, now owned
or hereafter acquired, except for Permitted Liens;
(e) The Borrower will not become liable, directly or indirectly, as
guarantor or otherwise for any obligation of any other Person, except (i) for
the endorsement of commercial paper for deposit or collection in the ordinary
course of business and (ii) as a guarantor on a sublease;
(f) The Borrower will not incur, create, assume, or permit to exist any
Liabilities except: (i) the Obligations; (ii) existing Consolidated Indebtedness
listed on Exhibit 5.1(n) to the extent shown on such Exhibit 5.1(n) to be
permitted to exist after the Closing; (iii) trade indebtedness incurred in the
ordinary course of business (provided, however, that the Borrower may not
acquire inventory other than for cash or on open account except as expressly
approved in writing and in advance by the Lender); (iv) obligations for lease
payments for personal property incurred in the ordinary course of business; and
(v) obligations in connection with Permitted Liens;
(g) The Borrower will not declare or pay any cash dividends, or make any
other payment or distribution on account of their capital stock except as
otherwise permitted herein;
(h) The Borrower will not make any assignment or transfer of Accounts;
(i) Except as otherwise permitted herein, the Borrower will not form any
subsidiary after the date hereof, make any investment in (including any
assignment of Inventory or other property), or make any loan in the nature of an
investment to, any Person, except for loans or advances to the Guarantor;
(j) The Borrower will not make any loan or advance to any officer,
shareholder, director, or employee of the Borrower, except for business travel
and similar temporary advances in the ordinary course of business;
20
(k) The Borrower will not purchase or otherwise invest in or hold
securities, nonoperating real estate or other nonoperating assets, except (i) in
the Guarantor and Seva Technologies, Inc., (ii) direct obligations of the United
States of America or the Lender and (iii) investments in an account maintained
with the Lender;
(l) The Borrower will not acquire or agree to acquire any stock in, all or
substantially all of the assets of, any Person;
(m) The Borrower will not (i) issue, redeem, purchase, retire, substitute
or replace any of its capital stock or options pertaining thereto for
consideration in excess of $100,000.00 in the aggregate, or (ii) grant, issue,
purchase or retire for any consideration, any warrant or right pertaining
thereto or other security convertible into any of the foregoing, or permit any
transfer, sale, redemption, retirement, substitution, replacement or other
change in the ownership of the outstanding capital stock of the Borrower;
(n) The Borrower will not prepay any Consolidated Indebtedness, except the
Obligations, or enter into or modify any agreement as a result of which the
terms of payment of any of the foregoing Indebtedness are waived or modified;
(o) The Borrower will not enter into any sale-leaseback transaction;
(p) The Borrower will not furnish the Lender any certificate or other
document that will contain any untrue statement of material fact or that will
omit to state a material fact necessary to make it not misleading in light of
the circumstances under which it was furnished;
(q) The Borrower and the Guarantor will not permit the Consolidated Cash
Flow/Leverage Ratio to exceed 1.40:1.00 to be tested quarterly on a rolling four
(4) quarter basis on March 31, June 30, September 30 and December 31 of each
fiscal year; and
(r) The Borrower will not directly or indirectly apply any part of the
proceeds of the Loan to the purchasing or carrying of any "margin stock" within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System, or any regulations, interpretations, or rulings thereunder.
6.3 Modification of Covenants.
All the covenants set forth in Sections 6.1 and 6.2 of this Agreement are
subject to modification by the Lender if the Borrower completes an initial
public offering.
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ARTICLE 7
DEFAULT
7.1 Events of Default.
The occurrence of any one or more of the following events will constitute
an Event of Default hereunder:
(a) The Borrower shall fail to pay when due any of the Obligations to the
Lender;
(b) The Borrower shall fail to observe or perform any other obligation to
be observed or performed by it hereunder or under any of the Collateral
Documents which failure continues for fifteen (15) days after written notice
from the Lender;
(c) The Borrower shall fail to pay any Consolidated Indebtedness due any
third Persons, and such failure will continue beyond any applicable grace
period, or the Borrower will suffer to exist any other event of default under
any material agreement binding the Borrower;
(d) Any financial statement, representation, warranty, or certificate made
or furnished by or with respect to the Borrower to the Lender in connection with
this Agreement, or as inducement to the Lender to enter into this Agreement, or
in any separate statement or document to be delivered to the Lender hereunder,
shall be materially false, incorrect, or incomplete when made;
(e) The Borrower shall admit its inability to pay its debts as they mature
or will make an assignment for the benefit of itself or any of its creditors;
(f) Proceedings in bankruptcy, or for reorganization of the Borrower or
for the readjustment of any of its debts under the Bankruptcy Code, as amended,
or any part thereof, or under any other Laws, whether state or federal, for the
relief of debtors, now or hereafter existing, shall be commenced against or by
the Borrower and, except with respect to any such proceedings instituted by the
Borrower, will not be discharged within sixty (60) days of their commencement;
(g) A receiver or trustee shall be appointed for the Borrower or for any
substantial part of its assets, or any proceedings will be instituted for the
dissolution or the full or partial liquidation of the Borrower, except with
respect to any such appointments requested or instituted by the Borrower, such
receiver or trustee will not be discharged within sixty (60) days of his
appointment, and except with respect to any such proceedings instituted by the
Borrower, such proceedings will not be discharged within sixty (60) days of
their commencement;
(h) The Borrower shall suffer final judgments for payment of money (in
excess of $100,000.00 in the aggregate) and will not discharge the same within a
period of sixty (60) days unless, pending further proceedings, execution has not
been commenced or, if commenced, has been effectively stayed;
22
(i) A judgment creditor of the Borrower will obtain possession of any
material part of the assets of the Borrower by any means, including (without
implied limitation) levy, distraint, replevin, or self-help;
(j) A default or Event of Default shall have occurred under (i) the
Guaranty or (ii) that certain Security Agreement of even date between the
Guarantor and the Lender; or
(k) The Guarantor shall fail to ratify the Guaranty upon the request of
the Lender.
7.2 Acceleration.
At its option, and at any time, whether immediately or otherwise, the
Lender may, upon the occurrence of any Event of Default, declare all Obligations
immediately due and payable without further action of any kind without notice,
demand or presentment.
ARTICLE 8
THE LENDER'S RIGHTS AND REMEDIES
8.1 The Lender's Rights Upon Default
Upon the occurrence of an Event of Default and at any time thereafter, the
Lender, without presentment, demand, notice, protest or advertisement of any
kind, will have the following rights.
8.2 Account Debtors
Upon the occurrence of an Event of Default and at any time thereafter, (i)
the Lender may notify account debtors, at the Borrower's expense, that the
Collateral has been assigned to the Lender and that payments will be made
directly to the Lender, (ii) upon request of the Lender, the Borrower will
notify such account debtors that their accounts must be paid to the Lender,
(iii) at the request of the Lender, the Borrower will hold all checks, drafts,
cash and other remittances in trust for the Lender and deliver them in kind to
the Lender, and (iv) the Lender will have full power to collect, compromise,
endorse, sell or otherwise deal with the Collateral or proceeds thereof in its
own name or in the name of the Borrower.
8.3 Possession and Foreclosure of Collateral
Upon the occurrence of an Event of Default and at any time thereafter, to
the extent that the Borrower could legally do so, the Lender may, in the
Lender's sole discretion (i) enter onto, occupy and use any premises owned by
the Borrower or in which the Borrower has any interest, (ii) take possession of
all Collateral, (iii) operate and use the Equipment, complete work in process
and sell Inventory without being liable to the Borrower on account of any
losses, damage or depreciation that may occur as a result thereof (so long as
the Lender acts in good faith), and (iv) lease or license the Collateral to any
Person for such purposes. In any event, the Lender may sell, lease, assign and
deliver the whole or any part of the Collateral, at public or private sale, for
cash, upon credit or for future delivery, at such prices and upon such terms as
the Lender deems advisable. The Lender may sell or lease Collateral alone or in
conjunction with other property, real or personal, and allocate the sale
proceeds or leases among the items of Collateral sold
23
without the necessity of the Collateral being present at any such sale, or in
view of prospective purchasers thereof. If notice of sale is legally required,
the Borrower agrees that ten (10) days written notice will be deemed reasonable.
Upon a public sale, the Lender may become the purchaser of the whole or any part
of the Collateral sold, discharged from all claims and free from any right of
redemption. In case of any such sale by the Lender of all or any of the
Collateral on credit, or for future delivery, such Collateral so sold may be
retained by the Lender until the selling price is paid by the purchaser. The
Lender will incur no liability in case of the failure of the purchaser to take
possession and pay for the Collateral so sold. In case of any such failure, the
said Collateral may be resold. Any Collateral remaining unsold after being
offered at public auction may be abandoned or disposed in a commercially
reasonable manner.
In any event, at any time and from time to time the Lender may abandon the
Collateral or any part thereof in a commercially reasonable manner. The Borrower
agrees immediately upon demand to take possession of any and all abandoned
Collateral and to remove it from any location in the possession of or under the
control of the Lender.
8.4 Use of Intellectual Property
Upon the occurrence of an Event of Default and at any time thereafter, the
Lender may (i) use all or any part of the Intellectual Property which the
Borrower now has or may hereafter acquire, and (ii) license such Intellectual
Property to third parties, seek registration of such Intellectual Property in
any state or nation or prosecute pending applications for patent, trademark, or
service marks in the Borrower's name in any state or nation.
8.5 Notification of Default to Third Parties
Upon the occurrence of an Event of Default and at any time thereafter, the
Lender may notify the Borrower's suppliers, account debtors and other third
parties of the default and of any and all decisions made and actions taken by
the Lender with respect to this Agreement, the Obligations or the Collateral,
without liability of any kind, except for actions taken by the Lender in bad
faith or in a grossly negligent manner.
8.6 Assembly of Collateral
Upon the occurrence of an Event of Default and at any time thereafter, the
Lender may require the Borrower to assemble the Collateral in a single location
at a place to be designated by the Lender and make the Collateral at all times
secure and available to the Lender.
8.7 Lien, Set-off.
The Borrower hereby grants to the Lender, a lien, security interest and
right of setoff as security for the Obligations, upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of the Lender. At any time, without demand or notice, the
Lender may set off the same or any part thereof and apply the same to any of the
Obligations even though unmatured and regardless of the adequacy of any other
collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE THE LENDER TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS
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RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
8.8 Exercise of Other Remedies
Upon the occurrence of any Event of Default and at any time thereafter,
the Lender may exercise the remedies of a Lender afforded by the Uniform
Commercial Code and other applicable law or by the terms of any agreement,
including the Collateral Documents, between the Borrower and the Lender.
8.9 Cumulative Rights and Remedies
All rights and remedies of the Lender, whether provided for herein or in
other agreements, instruments or documents or conferred by law, are cumulative
and may be exercised alone or simultaneously.
ARTICLE 9
ATTORNEY-IN-FACT
9.1 Attorney-In-Fact
After the occurrence of an Event of Default, after the Lender determines,
in a commercially reasonable manner, that the Collateral is at risk, the
Borrower hereby irrevocably appoints the Lender, or its designee, as the
Borrower's true and lawful attorney-in-fact, with full power, as follows: (i) to
endorse the name of the Borrower on any assignments, notes, checks, drafts,
money orders, or other instruments of payment for Collateral; (ii) to sign or
endorse the name of the Borrower on any negotiable instrument, invoice, freight
or express xxxx, xxxx of lading, storage or warehouse receipts, drafts,
assignments, verifications and notices in connection with accounts; (iii) to
obtain, adjust, settle and cancel, in the Borrower's name, insurance policies
and to sign the Borrower's name on settlement checks or drafts; (iv) in the
Borrower's name, to do any act which this Agreement requires Borrower to do,
and, (v) to give notice to the United States Post Office to effect changes of
address so that mail addressed to the Borrower may be delivered directly to the
Lender. In exercising this power-of-attorney, the Lender will not be liable to
the extent that it acts in good faith, and does not act in a grossly negligent
manner.
ARTICLE 10
MISCELLANEOUS
10.1 Construction.
The provisions of this Agreement will be in addition to those of the Note,
the Collateral Documents and any other guaranty, pledge or security agreement,
note, or other evidence of liability now or hereafter held by the Lender, all of
which will be construed as complementary to each other. Nothing herein contained
will prevent the Lender from enforcing any or all other guaranty, pledge or
security agreements, notes, or other evidences of liability in accordance with
their respective terms.
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10.2 Further Assurance.
From time to time, the Borrower will execute and deliver to the Lender
such additional documents and will provide such additional information as the
Lender may reasonably require to carry out the terms of this Agreement and be
informed of the status and affairs of the Borrower.
10.3 Enforcement and Waiver by the Lender.
The Lender will have the right at all times to enforce the provisions of
this Agreement and the Collateral Documents in strict accordance with the terms
hereof and thereof, notwithstanding any conduct or custom on the part of the
Lender in refraining from so doing at any time or times. The failure of the
Lender at any time or times to enforce its rights under such provisions,
strictly in accordance with the same, will not be construed as having created a
custom in any way or manner contrary to specific provisions of this Agreement or
as having in any way or manner modified or waived the same. All rights and
remedies of the Lender are cumulative and concurrent and the exercise of one
right or remedy will not be deemed a waiver or release of any other right or
remedy.
10.4 Pledge to the Federal Reserve.
The Lender may at any time pledge all or any portion of its rights under
this Agreement, the Notes and the Collateral Documents to any of the twelve (12)
Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge or enforcement thereof will release the
Lender from its obligations under such documents.
10.5 Usury Laws.
All agreements between the Borrower and the Lender are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the Obligations or otherwise, will the amount paid
or agreed to be paid to the Lender for the use or the forbearance of the
Obligations exceed the maximum permissible under applicable law. As used herein,
the term "applicable law" will mean the law in effect as of the date hereof
provided, however that in the event there is a change in the law which results
in a higher permissible rate of interest, then the Obligations will be governed
by such new law as of its effective date. In this regard, it is expressly agreed
that it is the intent of the Borrower and the Lender in the execution, delivery
and acceptance of the Notes to contract in strict compliance with the laws of
the Commonwealth of Massachusetts from time to time in effect. If, under or from
any circumstances whatsoever, fulfillment of any provision hereof or of any of
the loan documents at the time of performance of such provision will be due,
will involve transcending the limit of such validity prescribed by applicable
law, then the obligation to be fulfilled will automatically by reduced to the
limits of such validity, and if under or from circumstances whatsoever the
Lender should ever receive as interest an amount which would exceed the highest
lawful rate, such amount which would be excessive interest will be applied to
the reduction of principal balance of the Notes and not to the payment of
interest. This provision will control every other provision of all agreements
between the Borrower and the Lender.
10.6 Expenses of the Lender.
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The Borrower will, on demand, reimburse the Lender for all reasonable
expenses, including the reasonable fees and expenses of legal counsel for the
Lender, incurred by the Lender in connection with the preparation,
administration, amendment, modification, or enforcement of this Agreement and
the Collateral Documents and the collection or attempted collection of any of
the Obligations.
10.7 Payments.
All payments will be in lawful money of the United States in immediately
available funds.
10.8 Notices.
Any notices or consents required or permitted by this Agreement will be in
writing and will be deemed delivered if delivered in person or if sent by
certified mail, postage prepaid, return receipt requested, facsimile or
telegraph, as follows, unless such address is changed by written notice
hereunder:
(A) If to the Borrower:
Intrinsix Corp.
00 Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxx, President
With a copy to:
Xxxxx X. Xxxx, Esquire
Xxxx & Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
(B) If to the Lender:
BankBoston, N.A.
000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx, Asst. Vice President
With a copy to:
Xxxx X. Xxxx, Esquire
Xxxxxx X'Xxxxxxx
000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
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10.9 Waiver and Release by the Borrower.
To the maximum extent permitted by applicable Laws, the Borrower:
(a) Waives (i) protest of all commercial paper at any time held by the
Lender on which the Borrower is in any way liable; (ii) except as the same may
herein be specifically granted, notice of acceleration and of intention to
accelerate; and (iii) notice and opportunity to be heard, after acceleration in
the manner provided herein, before exercise by the Lender of the remedies of
self-help, set-off, or of other summary procedures permitted by any applicable
Laws or by any agreement with the Borrower, and, except where required hereby or
by any applicable Laws, notice of any other action taken by the Lender; and
(b) Releases the Lender and its officers, attorneys, agents, and employees
from all claims for loss or damage caused by any act or omission on the part of
any of them except willful misconduct and bad faith or gross negligence.
10.10 Sale to Third Party.
The Lender will have the unrestricted right at any time or from time to
time, and without any other party's consent, to assign all or any portion of its
rights and obligations hereunder to one or more banks or other financial
institutions (each, an "Assignee"), and the Borrower and each other party agree
that they will execute, or cause to be executed, such documents, including
without limitation, amendments to this Agreement and to any other documents,
instruments and agreements executed in connection herewith as the Lender will
deem necessary to effect the foregoing. In addition, at the request of the
Lender and any such Assignee, the Borrower will issue one or more new promissory
notes in the same form as the existing promissory notes, as applicable, to any
such Assignee and, if the Lender has retained any of its rights and obligations
hereunder following such assignment to the Lender, which new promissory notes
will be issued in replacement of, but not in discharge of, the liability
evidenced by the promissory note held by the Lender prior to such assignment and
will reflect the amount of the respective commitments and loans held by such
Assignee and the Lender after giving, effect to such assignment. Upon the
execution and delivery of appropriate assignment documentation, amendments and
any other documentation required by the Lender in connection with such
assignment, and the payment by Assignee of the purchase price agreed to by the
Lender, and such Assignee, such Assignee will be a party to this Agreement and
will have all of the rights and obligations of the Lender hereunder (and under
any and all other guaranties, documents, instruments and agreements executed in
connection herewith) to the extent that such rights and obligations have been
assigned by the Lender pursuant to the assignment documentation between the
Lender and such Assignee, and the Lender will be released from its obligations
hereunder and thereunder to a corresponding extent. The Borrower will not be
required to pay for the preparation of such new documents. The Lender will use
reasonable efforts to provide copies to the Borrower of any such assignment.
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10.11 Participations.
The Lender will have the unrestricted right at any time and from time to
time, and without the consent of or notice to the Borrower or any other party,
to grant to one or more banks or other financial institutions (each a
"Participant") a participating interest in the Lender's obligation to lend
hereunder and/or any or all of the Loan held by the Lender hereunder. In the
event of any such grant by the Lender of a participating interest to a
Participant, whether or not upon notice to the Borrower or any other party, the
Lender will remain responsible for the performance of its obligations hereunder
and the Borrower will continue to deal solely and directly with the Lender in
connection with the Lender's rights and obligations hereunder. The Lender may
furnish any information concerning the Borrower in its possession from time to
time to prospective assignees and Participants, provided that the Lender will
require any such prospective assignee or Participant to agree in writing to
maintain the confidentiality of such information.
10.12 Applicable Law.
This Agreement is entered into and performable in the Commonwealth of
Massachusetts and will be subject to and construed and enforced in accordance
with the laws of the Commonwealth of Massachusetts.
10.13 Binding Effect, Assignment, and Entire Agreement.
This Agreement will inure to the benefit of, and will be binding upon, the
respective successors and permitted assigns of the parties hereto. The Borrower
has no right to assign any of its rights or obligations hereunder without the
prior written consent of the Lender. This Agreement, including the Exhibits
hereto, all of which are hereby incorporated herein by reference, and the
documents executed and delivered pursuant hereto, constitute the entire
agreement between the parties and may be amended only by a writing signed on
behalf of each party.
10.14 Severability.
If any provision of this Agreement will be held invalid under any
applicable Laws, such invalidity will not affect any other provision of this
Agreement that can be given effect without the invalid provision, and, to this
end, the provisions hereof are severable.
10.15 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which will be deemed to be an original, but all of which together will
constitute but one and the same instrument.
10.16 Application of Proceeds
All proceeds received by the Lender hereunder, including without
limitation, insurance proceeds, condemnation proceeds and proceeds received
pursuant to the Lender's exercise of its rights hereunder may be applied to the
Obligations in such order as determined by the Lender.
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10.17 Appraisals/Audits
The Lender may perform, at the Borrower's expense, periodic appraisals of
any of the Assets and the cost of each appraisal will be bourne by the Borrower.
The Lender may perform, at the Borrower's expense, periodic field examinations
and/or audits of the Borrower at any time and the cost of each field examination
and/or audit will be bourne by the Borrower.
10.18 Replacement Documents.
Upon receipt of an affidavit of any officer of the Lender as to the loss,
theft, destruction or mutilation of this Agreement or any other security
document which is not a public record, and, in the case of any such loss, theft,
destruction or mutilation, upon cancellation of this Agreement or other security
document, the Borrower will issue, in lieu thereof, a replacement agreement or
other security document of like tenor.
10.19 WAIVER OF JURY TRIAL.
THE LENDER AND THE BORROWER AGREE THAT THEY, INCLUDING ANY ASSIGNEE OR
SUCCESSOR, WILL NOT SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM,
OR ANY OTHER LITIGATION PROCEDURE BASED UPON, OR ARISING OUT OF, THIS AGREEMENT,
ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP
BETWEEN THEM. NEITHER THE LENDER NOR THE BORROWER WILL SEEK TO CONSOLIDATE ANY
SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THE PROVISIONS OF THIS SECTION HAVE BEEN FULLY DISCUSSED BY THE
LENDER AND THE BORROWER AND THESE PROVISIONS WILL BE SUBJECT TO NO EXCEPTIONS.
THE LENDER AND THE BORROWER AGREE THAT THE PROVISIONS OF THIS SECTION WILL BE
FULLY ENFORCED IN ALL INSTANCES.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as a
sealed instrument as of the day and year first above written.
INTRINSIX CORP.
/s/ Xxxxxx Xxxxxxx By: /s/ Xxx Xxxxx
-------------------------------- ----------------------------------
Witness Xxxxx Xxxxx, President
/s/ Xxxxxx Xxxxxxx By: /s/ Xxxxx Xxxxx
-------------------------------- ----------------------------------
Witness Xxxxx Xxxxx, Treasurer
BANKBOSTON, N.A.
/s/ Xxxxxx Xxxxxxx By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------------- ----------------------------------
Witness Its Duly Authorized Officer
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