EXHIBIT 10-3
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EASTERN BANK
DEMAND LOAN AND SECURITY AGREEMENT
(ALL ASSETS)
DEMAND LOAN AND SECURITY AGREEMENT (ALL ASSETS), dated as of June 4, 2001,
between ASA International Ltd., a Delaware corporation ("International"), ASA
International Ventures, Inc., a Delaware corporation ("Ventures"), ASA Tire
Systems Inc., a Delaware corporation ("Tire"), ASA Legal Systems Inc., a
Delaware corporation ("Legal"), and Khameleon Software Inc., a Delaware
corporation ("Khameleon") (International, Ventures, Tire, Legal and Khameleon
are hereinafter, collectively, referred to as the "Borrower"), and Eastern Bank,
a Massachusetts banking corporation (the "Bank"). The parties hereto hereby
agree as follows:
1. DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. As used in this Agreement, the following terms have the
following meanings (terms defined in the singular to have the same meaning when
used in the plural and vice versa):
"Affiliate" shall mean any person or entity (i) which directly or
indirectly Controls, or is Controlled by or is under common Control
with the Borrower or a subsidiary, (ii) which directly or indirectly
beneficially holds or owns five (5%) percent or more of any class of
voting stock of the Borrower or any subsidiary, or (iii) five (5%)
percent or more of the voting stock of which is directly or indirectly
beneficially owned or held by the Borrower or a subsidiary.
"Accounts" shall mean any right to payment for goods sold or leased or
for services rendered which is not evidenced by an instrument or
chattel paper, whether or not it has been earned by performance.
"Acts" shall have the meaning assigned to such term in Section 12.13.
"Base Rate" shall mean the per annum rate of interest announced from
time to time by Bank, at its offices in Boston, Massachusetts, as its
Base Rate, it being understood that such rate is a reference rate and
not necessarily the lowest rate of interest charged by the Bank.
"Borrowing Base" shall mean the following:
(a) up to eighty (80%) percent of the unpaid face amount of
Qualified Accounts or such other percentage thereof as may from time
to time be fixed by Bank upon notice to Borrower, MINUS
(b) one hundred (100%) percent of the aggregate amount then
undrawn on all letters of credit and acceptances issued pursuant to
this Agreement for the account of Borrower;
but in no event shall the sum of all loans plus the sum of the
aggregate amount undrawn on all letters of credit and acceptances be in
excess of the Credit Limit.
"CMLTD" shall mean the current maturity of long term indebtedness to be
paid during the next twelve-month period, including but not limited to,
amounts required to be paid during such period under capital leases.
"Collateral" shall have the meaning assigned to such term in Section 5.
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"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
of any person or entity, whether through the ownership of voting
securities, by contract or otherwise.
"Credit Limit" means an amount equal to One Million Five Hundred
Thousand ($1,500,000.00) Dollars.
"Debt" means (a) indebtedness or liability for borrowed money; (b)
obligations evidenced by bonds, debentures, notes, or other similar
instruments; (c) obligations for the deferred purchase price of
property or services (including trade obligations); (d) obligations as
lessee under Capital Leases; (e) current liabilities in respect of
unfunded vested benefits under plans covered by ERISA; (f) obligations
under letters of credit; (g) obligations under acceptance facilities;
(h) all guaranties, endorsements (other than for collection or deposit
in the ordinary course of business), and other contingent obligations
to purchase, to provide funds for payment, to supply funds to invest in
any Person or entity, or otherwise to assure a creditor against loss;
and (i) obligations secured by any Liens, whether or not the
obligations have been assumed.
"Debt Service Coverage Ratio" shall mean, during the applicable period,
that quotient equal to (a) the aggregate of (i) EBITDA, minus (ii)
Distributions, minus (iii) taxes actually paid, divided by (b) Fixed
Charges, that is,
EBITDA - Distributions - taxes actually paid
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Fixed Charges
"Distributions" shall mean all payment or distributions to shareholders
in cash or in property other than reasonable salaries, bonuses and
expense reimbursements.
"EBITDA" shall mean, for the applicable period, income from continuing
operations before the payment of interest and taxes, plus depreciation
and amortization, determined in accordance with GAAP.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Equipment" shall have the meaning assigned to such term in Section 5.
"Event of Default" shall have the meaning assigned to such term in
Section 14.01.
"Fixed Charges" shall mean Interest plus CMLTD.
"GAAP" shall mean generally accepted accounting principles.
"Interest" shall mean, for the applicable period, all interest paid or
payable, including, but not limited to, interest paid or payable on
indebtedness and on capital leases, determined in accordance with GAAP.
"Inventory" shall have the meaning assigned to such term in Section 5.
"Letters of Credit"shall have the meaning assigned to such term in
Section 2.04.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien
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(statutory or other), or preference, priority, or other security
agreement or preferential arrangement, charge, or encumbrance of any
kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any financing
lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any
of the foregoing).
"Net Income" means, for any period, the net income (or deficit) of
Borrower determined in accordance with GAAP on a consolidated basis.
"Obligations" shall have the meaning assigned to such term in Section
6.
"Permitted Protests" means the right of the Borrower to protest any
Lien (other than a Lien that secures the Obligations), tax (other than
payroll taxes or taxes that are the subject of a federal or state tax
lien) or rental payment, provided that (x) a reserve with respect to
such liability is established on the books of the Borrower in an amount
that is reasonably satisfactory to the Bank, (y) any such protest is
instituted and diligently prosecuted by the Borrower in good faith, and
(z) the Bank is satisfied that, while such protest is pending, there
will be no impairment of the enforceability, validity or priority of
any of the Liens of the Bank in and to the Collateral.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority, or other entity of whatever nature.
"Plan" means any employee plan subject to Title IV of ERISA maintained
for employees of Borrower, any subsidiary of Borrower or any other
trade or business under common control with Borrower within the meaning
of Section 414(c) of the Internal Revenue Code of 1986 or any
regulations thereunder.
"Qualified Account" shall mean an Account owing to Borrower which met
the following specifications at the time it came into existence and
continues to meet the same until it is collected in full:
(a) The Account is not more than ninety (90) days from the date
of the invoice thereof.
(b) The Account arose from the performance of services or an
outright sale of goods by Borrower, such goods have been shipped to
the account debtor, and Borrower has possession of, or has delivered
to Bank, shipping and delivery receipts evidencing such shipment.
(c) The Account is not subject to any prior assignment, claim,
lien, or security interest, and Borrower will not make any further
assignment thereof or create any further security interest therein,
nor permit Borrower's rights therein to be reached by attachment,
levy, garnishment or other judicial process.
(d) The Account is not subject to set!off, credit, allowance or
adjustment by the account debtor, except discount allowed for prompt
payment and the account debtor has not complained as to his liability
thereon and has not returned any of the goods from the sale of which
the Account arose.
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(e) The Account arose in the ordinary course of Borrower's
business and did not arise from the performance of services or a sale
of goods to a supplier or employee of Borrower.
(f) No notice of bankruptcy or insolvency of the account debtor
has been received by or is known to Borrower.
(g) The Account is not owed by an account debtor whose principal
place of business is outside the United States of America.
(h) The Account is not owed by an entity which is a parent,
brother/sister, subsidiary or affiliate of Borrower.
(i) The account debtor is not located in the State of New Jersey
or in the State of Minnesota, unless Borrower has filed and shall file
all legally required Notice of Business Activities Reports with the
New Jersey Division of Taxation or the Minnesota Department of
Revenue, as the case may be.
(j) The Account is not evidenced by a promissory note.
(k) The Account did not arise out of any sale made on a xxxx and
hold, dating or delayed shipment basis.
(l) The Account does not arise out of a progress billing prior to
completion of the order therefor.
(m) Bank, in its sole discretion, has not, for any reason, deemed
the Account or the account debtor to be unacceptable.
"Receivables" shall have the meaning assigned to such term in Section
5.
"Senior Debt" shall mean any Debt which is not Subordinated Debt.
"Subordinated Debt" shall mean Debt which is expressly stated to be
subordinated or junior in right of payment to Borrower's Obligation to
Bank in a manner and in a form which satisfactory to Bank.
"Tangible Capital Base" shall mean Borrower's Tangible Net Worth plus
its Subordinated Debt.
"Tangible Net Worth" shall mean the sum of Borrower's stockholders'
equity plus Subordinated Debt determined in accordance with GAAP,
consistently applied, subtracting therefrom intangibles. For purposes
of this definition, "intangibles" shall mean software and costs
exceeding net assets acquired.
"Termination Date" shall mean June 30, 2001, or such other date to
which this Agreement is extended pursuant to Section 18.01.
Section 1.02. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP consistent with those applied in the
preparation of the financial statements referred to in Section 8.05, and all
financial data submitted pursuant to this Agreement shall be prepared in
accordance with such principles.
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Section 1.03. Unless otherwise defined in this Agreement, capitalized words
shall have the meanings set forth in the Uniform Commercial Code as in effect in
the Commonwealth of Massachusetts as of the date of this Agreement.
2. LOANS AND OTHER FINANCIAL ACCOMMODATIONS.
Section 2.01. Subject to the terms and provisions of this Agreement, Bank
hereby establishes a discretionary revolving line of credit in Borrower's favor
in the amount of the Credit Limit as determined by Bank from time to time
hereafter. Bank may make such loans to Borrower, based upon such facts and
circumstances existing at the time of the request, as from time to time Bank
elects to make which are secured by Borrower's Inventory, Accounts and all other
Collateral and the proceeds thereof. Without limiting the discretionary nature
of Bank's decision to make loans hereunder, or the demand feature of any loans
that Bank does make hereunder, Borrower agrees that the aggregate unpaid
principal of all loans outstanding at any one time shall not exceed the lesser
of the Borrowing Base or the Credit Limit.
Section 2.02. All such loans shall bear interest and at the option of Bank
shall be evidenced by demand notes in form satisfactory to Bank, but in the
absence of notes shall be conclusively evidenced by the Bank's record of
disbursements and repayments and shall be payable ON DEMAND. Interest will be
charged to Borrower at a fluctuating rate which is the daily equivalent of the
Base Rate in effect from time to time, plus one-half of one (.50%) percent per
annum or at such other rate agreed on from time to time by the parties, upon any
balance owing to Bank at the close of each day and shall be payable monthly in
arrears, on the first day of each month, until the Bank makes demand. The rate
of interest payable by Borrower shall be changed effective as of that date on
which a change in the Base Rate becomes effective. Interest shall be computed on
the basis of the actual number of days elapsed over a year of three hundred
sixty (360) days.
Section 2.03. Borrower hereby authorizes and directs Bank, in Bank's sole
discretion (provided, however, Bank shall have no obligation to do so): (i) to
pay accrued interest as the same becomes due and payable pursuant to this
Agreement or pursuant to any note or other agreement between Borrower and Bank,
and to treat the same as a loan to Borrower, which shall be added to Borrower's
loan balance pursuant to this Agreement; (ii) to charge any of Borrower's
accounts under the control of Bank for accrued interest as it becomes due and
payable pursuant to this Agreement or pursuant to any note or other agreement
between Borrower and Bank; or (iii) apply the proceeds of Collateral, including,
without limitation, payments on Accounts and other payments from sales or lease
of Inventory and any other funds to the loan balance pursuant to this Agreement.
Bank shall promptly notify Borrower of any such charges or applications.
Section 2.04. At the request of the Borrower, and upon the execution of
letter of credit documentation satisfactory to Bank, Bank, within the limits of
the Credit Limit as then computed, may issue letters of credit from time to time
for the account of the Borrower (hereinafter collectively "Letter(s) of
Credit"). The Letters of Credit shall be on terms mutually acceptable to Bank
and the Borrower. A loan in an amount equal to any amount paid by Bank under a
Letter of Credit shall be deemed made to Borrower, without request therefor,
immediately upon any payment by Bank on such Letter of Credit. In connection
with the issuance of any Letter of Credit, Borrower shall pay to Bank a
percentage of the face amount of any Letter of Credit according to the fee
schedule then in effect at Bank, plus transaction fees at Bank's customary
rates, and all other normal and customary fees charged by Bank. Borrower hereby
authorizes and directs Bank, in Bank's sole discretion (provided, however, Bank
shall have no obligation to do so) to pay all such fees and costs as the same
become due and payable and to treat the same as a loan to Borrower, which shall
be added to Borrower's loan balance pursuant to this Agreement. For purposes of
computing the Credit Limit, all Letters of Credit and acceptances shall be
deemed to be loans and in no event shall the sum of all loans plus the sum of
the aggregate amount undrawn on all Letters of Credit and acceptances be in
excess of the Credit Limit.
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Section 2.05. In order to facilitate the borrowing procedures hereunder,
International, Ventures, Tire, Legal and Khameleon each hereby appoint
International as such corporation's duly authorized agent to request, receive
and distribute loans hereunder, and to communicate with Bank with respect
hereto, and International does hereby accept such appointment.
Section 2.06. It is the intention of the parties hereto to comply strictly
with applicable usury laws, if any; accordingly, notwithstanding any provisions
to the contrary in this Agreement or any other documents or instruments executed
in connection herewith, in no event shall this Agreement or such documents or
instruments require or permit the payment, taking, reserving, receiving,
collecting or charging of any sums constituting interest under applicable laws
which exceed the maximum amount permitted by such laws. If any such excess
interest is called for, contracted for, charged, paid, taken, reserved,
collected or received in connection with the Obligations or in any communication
by Bank or any other person to the Borrower or any other person, or in the event
all or part of the principal of the Obligations or interest thereon shall be
prepaid or accelerated, so that under any of such circumstances or under any
other circumstance whatsoever the amount of interest contracted for, charged,
taken, collected, reserved, or received on the amount of principal actually
outstanding from time to time under this Agreement shall exceed the maximum
amount of interest permitted by applicable usury laws, if any, then in any such
event it is agreed as follows: (i) the provisions of this paragraph shall govern
and control, (ii) neither the Borrower nor any other person or entity now or
hereafter liable for the payment of the Obligations shall be obligated to pay
the amount of such interest to the extent such interest is in excess of the
maximum amount of interest permitted by applicable usury laws, if any, (iii) any
such excess which is or has been received notwithstanding this paragraph shall
be credited against the then unpaid principal balance hereof or, if the
Obligations have been or would be paid in full by such credit, refunded to the
Borrower, and (iv) the provisions of this Agreement and the other documents or
instruments executed in connection herewith, and any communication to the
Borrower, shall immediately be deemed reformed and such excess interest reduced,
without the necessity of executing any other document, to the maximum lawful
rate allowed under applicable laws as now or hereafter construed by courts
having jurisdiction hereof or thereof. Without limiting the foregoing, all
calculations of the rate of interest contracted for, charged, taken, collected,
reserved, or received in connection herewith which are made for the purpose of
determining whether such rate exceeds the maximum lawful rate shall be made to
the extent permitted by applicable laws by amortizing, prorating, allocating and
spreading during the period of the full term of the Obligations, including all
prior and subsequent renewals and extensions, all interest at any time
contracted for, charged, taken, collected, reserved or received. The terms of
this paragraph shall be deemed to be incorporated in every Loan Document and
communication relating to the Obligations.
3. BANK'S REPORTS.
After the end of each month, Bank will render to Borrower a statement of
Borrower's loan account with Bank hereunder, showing all applicable credits and
debits. Each statement shall be considered correct and to have been accepted by
Borrower and shall be conclusively binding upon Borrower and Bank in respect of
all charges, debits and credits of whatsoever nature contained therein under or
pursuant to this Agreement, and the closing balance shown therein, unless
Borrower notifies Bank in writing of any discrepancy within forty-five (45) days
from the mailing by Bank to Borrower of any such monthly statement.
4. CAPITAL ADEQUACY.
If after the date hereof, Bank determines that (a) the adoption of any
applicable law, rule, or regulation regarding capital requirements for banks or
bank holding companies or the subsidiaries thereof, (b) any change in the
interpretation or administration of any such law, rule or regulation by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or (c) compliance by Bank or its
holding company with any request or
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directive of any such governmental authority, central bank or comparable agency
regarding capital adequacy (whether or not having the force of law), has the
effect of reducing the return on Bank's capital to a level below that which Bank
could have achieved (taking into consideration Bank's and its holding company's
policies with respect to capital adequacy immediately before such adoption,
change, or compliance and assuming that Bank's capital was fully utilized prior
to such adoption, change, or compliance) but for such adoption, change, or
compliance as a consequence of Bank's commitment to make advances pursuant
hereto by any amount deemed by Bank to be material:
(a) Bank shall promptly, after Bank's determination of such occurrence,
give notice thereof to Borrower; and
(b) Borrower shall pay to Bank as an additional fee from time to time, on
demand, such amount as Bank certified to be the amount that will compensate Bank
for such reduction.
A certificate of Bank claiming entitlement to compensation as set forth
above will be conclusive in the absence of manifest error. Bank shall allocate
such cost increases or reductions in its returns among its customers reasonably
and in good faith and on an equitable basis. Notwithstanding anything to the
contrary contained herein, (i) Borrower shall not have any obligation to pay to
Bank amounts owing under this section for any period which is more than sixty
(60) days prior to the date upon which the request for payment therefor is
delivered to Borrower, and (ii) Bank shall not be entitled to any compensation
described in this section unless, at the time it requests such compensation, it
is the policy or general practice of Bank to request compensation for comparable
costs in similar circumstances under other comparable loan agreements.
Certificates of Bank sent to Borrower from time to time claiming compensation
under this section, stating the reason therefor and setting forth in reasonable
detail the calculation of the additional amount or amounts to be paid to Bank
hereunder shall be conclusive absent manifest error. Such certificate shall
include a written representation that all increases in costs and reductions in
return for which reimbursement is sought have been allocated equitably to all
assets or customers of Bank similarly situated. Notwithstanding the foregoing,
Bank agrees to use reasonable efforts (consistent with legal and regulatory
restrictions) to avoid or to minimize any amounts otherwise payable under this
section. In determining such amounts, Bank may use any reasonable averaging and
attribution methods consistent with the other provisions of this section.
5. SECURITY INTEREST.
Borrower, for valuable consideration, receipt whereof is hereby
acknowledged, hereby grants to Bank a continuing security interest in and to,
and assigns to Bank, the following property of the Borrower, but expressly
excluding those items set forth in Section 5(e) below, wherever located and
whether now owned or hereafter acquired:
(a) all inventory, including all goods, merchandise, raw materials, goods
and work in process, finished goods, and other tangible personal property now
owned or hereafter acquired and held for sale or lease or furnished or to be
furnished under contracts of service or used or consumed in Borrower's business
(all, except those items set forth in Section 5(e) below, hereinafter called the
"Inventory");
(b) all Accounts, contracts, contract rights, notes, bills, drafts,
acceptances, General Intangibles (including without limitation registered and
unregistered tradenames, copyrights, customer lists, goodwill, computer
programs, computer records, computer software, computer data, trade secrets,
trademarks, patents, ledger sheets, files, records, data processing records
relating to any Accounts and all tax refunds of every kind and nature to which
Borrower is now or hereafter may become entitled to, no matter how arising),
Instruments, Documents, Chattel Paper, Securities, Security Entitlements,
Security Accounts, Investment Property, choses in action, and all other debts,
obligations and liabilities in whatever form, owing to Borrower from any person,
firm or corporation or any other legal entity, whether now existing or hereafter
arising, now or hereafter received by or
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belonging or owing to Borrower, for goods sold by it or for services rendered by
it, or however otherwise same may have been established or created, all
guarantees and securities therefor, all right, title and interest of Borrower in
the merchandise or services which gave rise thereto, including the rights of
reclamation and stoppage in transit, all rights to replevy goods, and all rights
of an unpaid seller of merchandise or services (all, except those items set
forth in Section 5(e) below, hereinafter called the "Receivables");
(c) all machinery, Equipment, Fixtures and other Goods whether now owned or
hereafter acquired by the Borrower and wherever located, all replacements and
substitutions therefor or accessions thereto and all proceeds thereof (all,
except those items set forth in Section 5(e) below, hereinafter called the
"Equipment");
(d) all proceeds and products of all of the foregoing in any form,
including, without limitation, all proceeds of credit, fire or other insurance,
and also including, without limitation, rents and profits resulting from the
temporary use of any of the foregoing (which, with Inventory, Receivables and
Equipment are all, except those items set forth in Section 5(e) below,
hereinafter called "Collateral"); and
(e) the foregoing notwithstanding, the security interest granted by
Borrower to Bank shall not include any of Borrower's legal or beneficial
interest in ASA Properties, Inc. ("Properties"), 00 Xxxxx Xxxxxx LLC or ASA
InterPro Smart Time LLC (collectively, the "LLCs") or any of the property or
assets of Properties or the LLCs.
6. OBLIGATIONS SECURED.
The security interest granted hereby is to secure payment and performance
of all debts, liabilities and obligations of Borrower to Bank hereunder and also
any and all other debts, liabilities and obligations of Borrower to Bank of
every kind and description, direct or indirect, absolute or contingent, primary
or secondary, due or to become due, now existing or hereafter arising, whether
or not such obligations are related to the transactions described in this
Agreement, by class, or kind, or whether or not contemplated by the parties at
the time of the granting of this security interest, regardless of how they arise
or by what agreement or instrument they may be evidenced or whether evidenced by
any agreement or instrument, and includes obligations to perform acts and
refrain from taking action as well as obligations to pay money including,
without limitation, all interest, fees, charges, expenses and overdrafts, and
also including, without limitation, all obligations and liabilities which Bank
may incur or become liable for, on account of, or as a result of, any
transactions between Bank and Borrower including any which may arise out of any
letter of credit, acceptance or similar instrument or obligation issued pursuant
to this Agreement (all hereinafter called "Obligations").
7. BORROWER'S PLACES OF BUSINESS, INVENTORY LOCATIONS AND RETURNS POLICY.
Section 7.01. Borrower warrants that Borrower has no places of business
other than that shown at the end of this Agreement, unless other places of
business are listed on Schedule "A", annexed hereto, in which event Borrower
represents that it has additional places of business at those locations set
forth on Schedule "A".
Section 7.02. Borrower's principal executive office and the
office where Borrower keeps its records concerning its accounts, contract rights
and other property, is that shown at the end of this Agreement. All Inventory
presently owned by Borrower is stored at the locations set forth on Schedule
"A".
Section 7.03. Borrower will promptly notify Bank in writing of any change
in the location of any place of business or the location of any Inventory or the
establishment of any new place of
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business or location of Inventory or office where its records are kept which
would be shown in this Agreement if it were executed after such change.
Section 7.04. Borrower represents and warrants that it has described its
returns policy in writing to Bank and that it does now, and will continue to,
apply such policy consistently in the conduct of its business and agrees that it
shall notify Bank in writing before changing its policy or the application
thereof.
8. BORROWER'S ADDITIONAL REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that:
Section 8.01. Each Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
and shall hereafter remain in good standing as a corporation in that state, and
is duly qualified and in good standing in every other state in which it is doing
business, and shall hereafter remain duly qualified and in good standing in
every other state in which the failure to qualify or become licensed could have
a material adverse effect on the financial condition, business or operations of
the Borrower.
Section 8.02. Borrower's exact legal name is as set forth in this Agreement
and Borrower will not undertake or commit to undertake any act which will result
in a change of Borrower's legal name, without giving Bank at least thirty (30)
days' prior written notice of the same.
Section 8.03. The execution, delivery and performance of this Agreement,
and any other document executed in connection herewith, are within the
Borrower's corporate powers, have been duly authorized, are not in contravention
of law or the terms of the Borrower's charter, by!laws or other incorporation
papers, or of any indenture, agreement or undertaking to which the Borrower is a
party or by which it or any of its properties may be bound.
Section 8.04. All charter documents and all amendments thereto of Borrower
have been duly filed and are in proper order. All capital stock issued by
Borrower and outstanding was and is properly issued and all books and records of
Borrower, including but not limited to its minute books, by!laws and books of
account, are accurate and up to date and will be so maintained.
Section 8.05. The balance sheet of the Borrower as at December 31, 1998,
and the related statements of income and retained earnings of the Borrower for
the fiscal year then ended, and the accompanying footnotes, together with the
opinion thereon, of Borrower's independent certified public accountants, and the
interim balance sheet of the Borrower as at July 31, 1999, and the related
statement of income and retained earnings for the seven (7) month period then
ended, copies of which have been furnished to the Bank, are complete and correct
and fairly present the financial condition of the Borrower as at such dates and
the results of the operations of the Borrower for the periods covered by such
statements, all in accordance with GAAP consistently applied (subject to
year-end adjustments in the case of the interim financial statements), and since
December 31, 1998, there has been no material adverse change in the condition
(financial or otherwise), business, or operations of the Borrower. There are no
liabilities of the Borrower, fixed or contingent, which are material but are not
reflected in the financial statements or in the notes thereto, other than
liabilities arising in the ordinary course of business since December 31, 1998.
No information, exhibit, or report furnished by the Borrower to the Bank in
connection with the negotiation of this Agreement contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statement contained therein not materially misleading.
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Section 8.06. With the exception of the leased Equipment set forth on
Schedule "C" annexed hereto, Borrower owns all of the assets reflected in the
most recent of Borrower's financial statements provided to Bank, except assets
sold or otherwise disposed of in the ordinary course of business since the date
thereof, and such assets together with any assets acquired since such date,
including without limitation the Collateral, are free and clear of any Lien,
except (a) the security interests and other encumbrances (if any) listed on
Schedule "B" annexed hereto, (b) those liens permitted pursuant to Section 13.06
of this Agreement, or (c) liens and security interests in favor of Bank.
Section 8.07. To the best of Borrower's knowledge, Borrower has made or
filed all tax returns, reports and declarations relating to any material tax
liability required by any jurisdiction to which it is subject (any tax liability
which may result in a lien on any Collateral being hereby deemed material); has
paid all taxes shown or determined to be due thereon except those being
contested in good faith and which Borrower has, prior to the date of such
contest, identified in writing to Bank as being contested; and has made adequate
provision for the payment of all taxes so contested, so that no lien will
encumber any Collateral, and in respect of subsequent periods.
Section 8.08. Borrower (a) is subject to no charter, corporate or other
legal restriction, or any judgment, award, decree, order, governmental rule or
regulation or contractual restriction which could have a material adverse effect
on its financial condition, business or prospects, and (b) is in compliance with
its charter documents and by!laws, all contractual requirements by which it or
any of its properties may be bound and all applicable laws, rules and
regulations (including without limitation those relating to environmental
protection) other than laws, rules or regulations the validity or applicability
of which it is contesting in good faith or provisions of any of the foregoing
the failure to comply with which cannot reasonably be expected to materially
adversely affect its financial condition, business or prospects or the value of
any Collateral.
Section 8.09. There is no action, suit, proceeding or investigation pending
or, to Borrower's knowledge, threatened against or affecting it or any of its
assets before or by any court or other governmental authority which, if
determined adversely to it, would have a material adverse effect on its
financial condition, business or prospects or the value of any Collateral.
Section 8.10. Borrower is in compliance with ERISA; no Reportable Event has
occurred and is continuing with respect to any Plan; and it has no unfunded
vested liability under any Plan.
9. SALES OF INVENTORY
So long as Borrower is not in default hereunder, Borrower shall have the
right, in the regular course of business, to process and sell Borrower's
Inventory. A sale in the ordinary course of business shall not include a
transfer in total or partial satisfaction of a debt.
10. FINANCING STATEMENTS.
At the request of Bank, Borrower will join with Bank in executing one or
more Financing Statements pursuant to the Uniform Commercial Code or other
notices appropriate under applicable law in form satisfactory to Bank and will
pay the cost of filing the same in all public offices wherever filing is deemed
by Bank to be necessary or desirable. A legible carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement.
11. BORROWER'S REPORTS.
Section 11.01. Borrower will furnish Bank as soon as available, and in
any event within forty-five (45) days after the close of each quarterly period
of its fiscal year, a copy of Borrower's
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Form 10-Q filed with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934.
Section 11.02. Borrower will furnish Bank, annually, as soon as available,
and in any event within one hundred twenty (120) days after the end of each
fiscal year of Borrower, a copy of Borrower's Form 10-K filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934. The financial statements contained in said Form 10-K shall be prepared in
accordance with GAAP, accompanied by an opinion acceptable to Bank by
independent public accountants selected by the Borrower and acceptable to Bank.
Section 11.03. Borrower shall deliver to Bank all documents, as frequently
as indicated below, or at such other times as Bank may request, and all other
documents and information requested by Bank:
DOCUMENT FREQUENCY DUE
-------------------------------------- --------------------------------------
(i) Notice of noncompliance with Immediately upon learning of such
the provisions of this Agreement noncompliance, or if any representation
or warranty contained herein is no
longer true or accurate
-------------------------------------- ---------------------------------------
(ii) Compliance Certificate in the As soon as available and in any event
form annexed hereto as within forty-five (45)days after the
Exhibit 1 close of eachquarterly period of
Borrower's fiscal year
-------------------------------------- ---------------------------------------
Section 11.04. Borrower will promptly, upon receipt thereof, deliver to
Bank, copies of any reports submitted to the Borrower by Borrower's independent
public accountants in connection with the examination of the financial
statements of the Borrower made by such accountants (the so-called "Management
Letter").
Section 11.05. In addition to the foregoing, the Borrower promptly shall
provide Bank with such other and additional information concerning the Borrower,
the Collateral, the operation of the Borrower's business, and the Borrower's
financial condition, including financial reports and statements, as Bank may
from time to time request from the Borrower. All financial information provided
Bank by the Borrower shall be prepared in accordance with GAAP or generally
accepted auditing principles (as applicable) applied consistently in the
preparation thereof and with prior periods to fairly reflect the financial
conditions of the Borrower at the close of, and its results of operations for,
the periods in question.
Section 11.06. Bank agrees to use its best efforts to maintain the
confidentiality of the information obtained by Bank or its agents pursuant to
this Agreement, except when required to disclose such information (a) for
regulatory purposes; (b) pursuant to legal process; (c) to its attorneys,
accountants and auditors; (d) for purposes of selling participations or
interests in the Obligations; or (e) as necessary for the enforcement of the
rights of Bank pursuant to this Agreement.
Section 11.07 Within fifteen (15) calendar days after the end of each month
or on such other more frequent basis as may be required by Bank from time to
time, Borrower shall submit to Bank an aging report in form satisfactory to Bank
showing the amounts due and owing on all Accounts according to Borrower's
records as of the close of such month or such shorter period as may be required
by Bank from time to time, together with such other information as Bank may
require. If Borrower's monthly aging reports are prepared by an accounting
service or other agent,
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Borrower hereby authorizes such service or agent to deliver such aging reports
and any other related documents to Bank.
Section 11.08 Within fifteen (15) days after the end of each month or on
such other more frequent basis as may be required by Bank from time to time,
Borrower shall submit to Bank a Borrowing Base Certificate in a form
satisfactory to Bank showing cash receipts, credit memos, sales, debit memos,
the unpaid loan balances, new borrowing requests and the adjusted loan balance
as of the close of such month or such shorter period as may be required by Bank
from time to time, together with such other information as Bank may require.
12. GENERAL AGREEMENTS OF BORROWER.
Section 12.01. Borrower agrees to keep all the Collateral insured with
coverage and in amounts not less than that usually carried by one engaged in a
like business and in any event not less than that required by Bank with loss
payable to Bank and Borrower, as their interests may appear, hereby appointing
Bank as attorney for Borrower in obtaining, adjusting, settling and canceling
such insurance and endorsing any drafts. As further assurance for the payment
and performance of the Obligations, Borrower hereby assigns to Bank all sums,
including returns of unearned premiums, which may become payable under any
policy of insurance on the Collateral and Borrower hereby directs each insurance
company issuing any such policy to make payment of such sums directly to Bank.
Section 12.02. Bank or its agents have the right to inspect the Collateral
and all records pertaining thereto at intervals to be determined by Bank and
without hindrance or delay.
Section 12.03. Borrower will at all times keep accurate and complete
records of Borrower's Inventory, Accounts and other Collateral, and Bank, or any
of its agents, shall have the right to call at Borrower's place or places of
business at intervals to be determined by Bank, and without hindrance or delay,
to inspect, audit, check, and make extracts from any copies of the books,
records, journals, orders, receipts, correspondence which relate to Borrower's
Accounts, and other Collateral or other transactions, between the parties
thereto and the general financial condition of Borrower and Bank may remove any
of such records temporarily for the purpose of having copies made thereof.
Borrower shall pay to Bank all reasonable audit fees, plus all travel and other
expenses incurred in connection with any such audit. The foregoing
notwithstanding, Bank agrees to keep all such inspected, audited, checked or
extracted information confidential in accordance with the guidelines set forth
in Section 11.06 above.
Section 12.04. Borrower will maintain a standard and modern system of
accounting which enables Borrower to produce financial statements in accordance
with GAAP and maintain records pertaining to the Collateral that contain
information as from time to time may be requested by Bank.
Section 12.05. Borrower will maintain its corporate existence in good
standing and comply with all laws and regulations of the United States or of any
state or states thereof or of any political subdivision thereof, or of any
governmental authority which may be applicable to it or to its business.
Section 12.06. Borrower will pay all real and personal property taxes,
assessments and charges and all franchises, income, unemployment, old age
benefits, withholding, sales and other taxes assessed against it, or payable by
it at such times and in such manner as to prevent any penalty from accruing or
any lien or charge from attaching to its property.
Section 12.07. Bank may in its own name or in the name of others
communicate with account debtors in order to verify with them to Bank's
satisfaction the existence, amount and terms of any Accounts.
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Section 12.08. This Agreement may but need not be supplemented by separate
assignments of Accounts and if such assignments are given the rights and
security interests given thereby shall be in addition to and not in limitation
of the rights and security interests given by this Agreement.
Section 12.09. If any of Borrower's Accounts arise out of contracts with
the United States or any department, agency, or instrumentality thereof,
Borrower will immediately notify Bank thereof in writing and execute any
instruments and take any steps required by Bank in order that all monies due and
to become due under such contracts shall be assigned to Bank and notice thereof
given to the Government under the Federal Assignment of Claims Act.
Section 12.10. Excepting only those leases with customers of Borrower
having a value of not more than Seventy-Five Thousand ($75,000.00) Dollars, if
any of Borrower's Accounts should be evidenced by promissory notes, trade
acceptances, or other instruments for the payment of money, Borrower will
immediately deliver same to Bank, appropriately endorsed to Bank's order and,
regardless of the form of such endorsement, Borrower hereby waives presentment,
demand, notice of dishonor, protest and notice of protest and all other notices
with respect thereto.
Section 12.11. Borrower will promptly pay when due all taxes and
assessments upon the Collateral or for its use or operation or upon this Loan
and Security Agreement, or upon any note or notes evidencing the Obligations,
and will, at the request of Bank, promptly furnish Bank the receipted bills
therefor. At its option, Bank may discharge taxes, liens or security interests
or other encumbrances at any time levied or placed on the Collateral, may pay
for insurance on the Collateral and may pay for the maintenance and preservation
of the Collateral. Borrower agrees to reimburse Bank on demand for any payments
made, or any expenses incurred by Bank pursuant to the foregoing authorization,
and upon failure of the Borrower so to reimburse Bank, any such sums paid or
advanced by Bank shall be deemed secured by the Collateral and constitute part
of the Obligations.
Section 12.12. Borrower will immediately notify Bank upon receipt of
notification of any potential or known release or threat of release of hazardous
materials, hazardous waste, hazardous or toxic substance or oil from any site
operated by Borrower or of the incurrence of any expense or loss in connection
therewith or with the Borrower's obtaining knowledge of any investigation,
action or the incurrence of any expense or loss by any governmental authority in
connection with the assessment, containment or removal of any hazardous material
or oil for which expense or loss the Borrower may be liable. As used herein, the
terms "hazardous waste," "hazardous or toxic substance," "hazardous material" or
"oil" shall have the same meanings as defined and used in any of the following
(the "Acts"): the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq.; the Federal
Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et seq.; the
Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; M.G.L.A. c. 21E
(Massachusetts Oil and Hazardous Material Release Prevention Act); M.G.L.A. c.
21C (Massachusetts Hazardous Waste Management Act); and/or the regulations
adopted and publications promulgated pursuant to any of the Acts, as the same
may be amended from time to time.
Section 12.13. Except for Bank's gross negligence or willful misconduct,
Borrower will indemnify and save Bank harmless from all loss, costs, damage,
liability or expenses (including, without limitation, court costs and reasonable
attorneys' fees) that Bank may sustain or incur by reason of defending or
protecting this security interest or the priority thereof or enforcing the
Obligations, or in the prosecution or defense of any action or proceeding
concerning any matter growing out of or in connection with this Agreement and/or
any other documents now or hereafter executed in connection with this Agreement
and/or the Obligations and/or the Collateral.
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This indemnity shall survive the repayment of the Obligations and the
termination of Bank's agreement to make loans available to Borrower and the
termination of this Agreement.
Section 12.14. At the option of Bank, Borrower will furnish to Bank, from
time to time, within five (5) days after the accrual in accordance with
applicable law of Borrower's obligation to make deposits for F.I.C.A. and
withholding taxes and/or sales taxes, proof satisfactory to Bank that such
deposits have been made as required.
Section 12.15. Should Borrower fail to make any of such deposits or furnish
such proof referred to in Section 12.14 above, then Bank may, in its sole and
absolute discretion, (a) make any of such deposits or any part thereof, (b) pay
such taxes, or any part thereof, or (c) set up such reserves as Bank, in its
judgment, shall deem necessary to satisfy the liability for such taxes. Each
amount so deposited or paid shall constitute an advance under the terms hereof,
repayable on demand with interest, as provided herein, and secured by all
Collateral and any other property at any time pledged by Borrower with Bank.
Nothing herein shall be deemed to obligate Bank to make any such deposit or
payment or set up such reserve and the making of one or more of such deposits or
payments or the setting up of such reserve shall not constitute (i) an agreement
on Bank's part to take any further or similar action, or (ii) a waiver of any
default by Borrower under the terms hereof.
Section 12.16. All advances by Bank to Borrower under this Agreement and
under any other agreement constitute one general revolving fluctuating loan, and
all indebtedness of Borrower to Bank under this and under any other agreement
constitute one general Obligation. Each advance to Borrower hereunder or
otherwise shall be made upon the security of all of the Collateral held and to
be held by Bank. It is distinctly understood and agreed that all of the rights
of Bank contained in this Agreement shall likewise apply, insofar as applicable,
to any modification of or supplement to this Agreement and to any other
agreements between Bank and Borrower. Any default of this Agreement by Borrower
shall constitute, likewise, a default by Borrower of any other existing
agreement with Bank, and any default by Borrower of any other agreement with
Bank shall constitute a default of this Agreement. The entire Obligation of
Borrower to Bank shall become due and payable when payments become due and
payable hereunder upon termination of this Agreement.
Section 12.17. Borrower will, at its expense, upon request of Bank promptly
and duly execute and deliver such documents and assurances and take such actions
as may be necessary or desirable or as Bank may request in order to correct any
defect, error or omission which may at any time be discovered or to more
effectively carry out the intent and purpose of this Agreement and to establish,
perfect and protect Bank's security interest, rights and remedies created or
intended to be created hereunder. Without limiting the generality of the above,
Borrower will join with Bank in executing financing and continuation statements
pursuant to the Uniform Commercial Code or other notices appropriate under
applicable Federal or state law in form satisfactory to Bank and filing the same
in all public offices and jurisdictions wherever and whenever requested by Bank.
Section 12.18. Borrower shall perform any and all further steps requested
by Bank to perfect Bank's security interest in the Collateral.
Section 12.19. Borrower will cause each guarantor of the Obligations to
submit to Bank current personal financial statements in a form satisfactory to
Bank within ninety (90) days after the close of each of Borrower's fiscal years.
Section 12.20. Bank shall be Borrower's main bank of deposit.
Section 12.21. Borrower hereby grants to Bank for a term to commence on the
date of this Agreement and continuing thereafter until all debts and Obligations
of any kind or character owing from Borrower to Bank are fully paid and
discharged, the right to use all premises or places of business which Borrower
presently has or may hereafter have and where any of the Collateral may be
14
located, at a total rental for the entire period of $1.00. Bank agrees not to
exercise the rights granted in this paragraph unless and until Bank determines
to exercise its rights against the Collateral. In connection with the Bank's
exercise of the Bank's rights after the occurrence of an Event of Default, the
Bank may enter upon, occupy and use any premises owned or occupied by the
Borrower, and may exclude the Borrower from such premises or portion thereof as
may have been so entered upon, occupied, or used by the Bank. The Bank shall not
be required to remove any of the Collateral from any such premises upon the
Bank's taking possession thereof, and may render any Collateral unusable to the
Borrower. In no event shall the Bank be liable to the Borrower beyond the rental
specified above for use or occupancy by the Bank of any premises pursuant to
this Agreement.
Section 12.22. Borrower hereby grants to Bank for a term to commence on the
date of this Agreement and continuing thereafter until all debts and Obligations
of any kind or character owed to Bank are fully paid and discharged, a
non!exclusive irrevocable royalty!free license in connection with Bank's
exercise of its rights hereunder, to use, apply or affix any trademark, trade
name logo or the like and to use any patents, in which the Borrower now or
hereafter has rights, which license may be used by Bank upon and after the
occurrence of any one or more of the Events of Default, provided, however, that
such use by Bank shall be suspended if such Events of Default are cured. This
license shall be in addition to, and not in lieu of, the inclusion of all of
Borrower's trademarks, servicemarks, tradenames, logos, goodwill, patents,
franchises and licenses in the Collateral; in addition to the right to use said
Collateral as provided in this paragraph, Bank shall have full right to exercise
any and all of its other rights regarding Collateral with respect to such
trademarks, servicemarks, tradenames, logos, goodwill, patents, franchises and
licenses.
Section 12.23. Any and all deposits (whether demand or time deposits) or
other sums at any time credited by or due from Bank to Borrower shall at all
times constitute additional security for the Obligations and may be set!off
against any Obligations at any time following the occurrence of an Event of
Default or an event which with notice or the lapse of time, or both, would
constitute an Event of Default whether or not they are then due or other
security held by Bank is considered by Bank to be adequate. Any and all
instruments, documents, policies and certificates of insurance, securities,
goods, accounts, choses in action, general intangibles, chattel papers, cash,
property and the proceeds thereof (whether or not the same are Collateral or
proceeds thereof hereunder) owned by Borrower or in which Borrower has an
interest, which now or hereafter are at any time in possession or control of
Bank or in transit by mail or carrier to or from Bank or in the possession of
any third party acting in Bank's behalf, without regard to whether Bank received
the same in pledge, for safekeeping, as agent for collection or transmission or
otherwise or whether Bank had conditionally released the same, shall constitute
additional security for the Obligations and may be applied at any time following
the occurrence of an Event of Default or an event which with notice or the lapse
of time, or both, would constitute an Event of Default, to any Obligations which
are then owing, whether due or not due. Bank shall be entitled to presume, in
the absence of clear and specific written notice to the contrary hereinafter
provided to Bank, that any and all deposits maintained by Borrower with Bank are
general accounts as to which no person or entity other than Borrower has any
legal or equitable interest whatsoever.
Section 12.24. Borrower shall pay to Bank on demand any and all reasonable
and necessary counsel fees and other expenses incurred by Bank in connection
with the preparation, interpretation, enforcement, administration or amendment
of this Agreement, or of any documents relating thereto, and any and all
reasonable and necessary expenses, including, but not limited to, a collection
charge on all Accounts collected, all reasonable and necessary attorneys' fees
and expenses, and all other expenses of like or unlike nature which may be
expended by Bank to obtain or enforce payment of any Account either as against
the account debtor, Borrower, or any guarantor or surety of Borrower or in the
prosecution or defense of any action or concerning any matter growing out of or
connected with the subject matter of this Agreement, the Obligations or the
Collateral or any of Bank's rights or interests therein or thereto, including,
without limiting the generality of the foregoing, any reasonable and necessary
counsel fees or expenses incurred in any bankruptcy or insolvency proceedings
and all reasonable and necessary costs and expenses incurred or paid by Bank in
connection with the
15
administration, supervision, protection or realization on any security held by
Bank for the debt secured hereby, whether such security was granted by Borrower
or by any other person primarily or secondarily liable (with or without
recourse) with respect to such debt, and all reasonable and necessary costs and
expenses incurred by Bank in connection with the defense, settlement or
satisfaction of any action, claim or demand asserted against Bank in connection
with the debt secured hereby, all of which amounts shall be considered advances
to protect Bank's security, and shall be secured hereby. At its option, and
without limiting any other rights or remedies, Bank may at any time pay or
discharge any taxes, liens, security interests or other encumbrances at any time
levied against or placed on any of the Collateral, and may procure and pay any
premiums on any insurance required to be carried by Borrower, and provide for
the maintenance and preservation of any of the Collateral, and otherwise take
any action reasonably deemed necessary to Bank to protect its security, and all
amounts expended by Bank in connection with any of the foregoing matters,
including reasonable and necessary attorneys' fees, shall be considered
Obligations of Borrower and shall be secured hereby.
Section 12.25. Borrower does hereby make, constitute and appoint any
officer or agent of Bank as Borrower's true and lawful attorney!in!fact, with
power to endorse the name of Borrower or any of Borrower's officers or agents
upon any notes, checks, drafts, money orders, or other instruments of payment
(including payments payable under any policy of insurance on the Collateral) or
Collateral that may come into possession of Bank in full or part payment of any
amounts owing to Bank; to sign and endorse the name of Borrower or any of
Borrower's officers or agents upon any invoice, freight or express xxxx, xxxx of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts, and any instrument or
documents relating thereto or to Borrower's rights therein; to give written
notice to such office and officials of the United States Post Office to effect
such change or changes of address so that all mail addressed to Borrower may be
delivered directly to Bank; granting upon Borrower's said attorney full power to
do any and all things necessary to be done in and about the premises as fully
and effectually as Borrower might or could do, and hereby ratifying all that
said attorney shall lawfully do or cause to be done by virtue hereof. Neither
Bank nor the attorney shall be liable for any acts or omissions nor for any
error of judgment or mistake, except for their gross negligence or willful
misconduct. This power of attorney shall be irrevocable for the term of this
Agreement and all transactions hereunder and thereafter as long as Borrower may
be indebted to Bank.
Section 12.26 Although, as above set forth, Bank has a continuing security
interest in all of Borrower's Collateral and in the proceeds thereof, Borrower
will at all times maintain as the minimum security hereunder a Borrowing Base
not less than the aggregate unpaid principal of all loans made hereunder and if
Borrower fails to do so, Borrower will immediately make the necessary reduction
in the unpaid principal amount of said loans so that the loans outstanding
hereunder do not in the aggregate exceed the Borrowing Base.
13. BORROWER'S NEGATIVE COVENANTS. Borrower will not at any time:
Section 13.01 Permit, for the twelve-month period ending on the last day of
any fiscal quarter, its Debt Service Coverage ratio to be less than 1.25 to 1;
Section 13.02 Permit its Tangible Net Worth to be less than Six Million
Eight Hundred Thousand ($6,800,000.00) Dollars as of December 31, 2000, and as
of the last day of each subsequent fiscal quarter, to be less than the amount
required for the prior fiscal year plus seventy-five (75%) percent of Borrower's
net income earned for the prior year after provision for taxes, provided that
there shall be no reduction in the required Tangible Net Worth for losses;
Section 13.03 Permit the ratio of its Debt to Tangible Net Worth to exceed
2.2 to 1 as of March 31, 2001, or on the last day of any quarterly period of
Borrower's fiscal year thereafter;
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Section 13.04 Issue evidence of indebtedness or suffer to exist
indebtedness in addition to the Obligations, except (i) indebtedness for money
borrowed which in the aggregate does not exceed the sum of Twenty-Five Thousand
($25,000.00) Dollars and matures within twelve (12) months of the date of
creation thereof and which is not, according to its terms, extendable or
renewable without the consent of Bank, (ii) indebtedness or liabilities of
Borrower other than for money borrowed, incurred or arising in the ordinary
course of business, or (iii) indebtedness or liabilities of Borrower pursuant to
leases incurred or arising in the ordinary course of business;
Section 13.05 Sell, assign, exchange or otherwise dispose of any of the
Collateral, other than Inventory consisting of (i) scrap, waste, defective goods
and the like; (ii) obsolete goods; (iii) finished goods sold in the ordinary
course of business or any interest therein to any individual, partnership, trust
or other corporation; and (iv) Equipment which is no longer required or deemed
necessary for the conduct of Borrower's business, so long as Borrower receives
therefor a sum substantially equal to such Equipment's fair value;
Section 13.06 Create, permit to be created or suffer to exist any Lien,
upon any of the Collateral or any other property of Borrower, now owned or
hereafter acquired, except: (i) landlords', carriers', warehousemen's,
mechanics' and other similar liens arising by operation of law in the ordinary
course of Borrower's business; (ii) arising out of pledge or deposits under
worker's compensation, unemployment insurance, old age pension, social security,
retirement benefits or other similar legislation; (iii) purchase money Liens
arising in the ordinary course of business (so long as the indebtedness secured
thereby does not exceed the lesser of the cost or fair market value of the
property subject thereto, and such Lien extends to no other property); (iv)
Liens for unpaid taxes that are either (x) not yet due and payable, or (y) the
subject of Permitted Protests; (v) Liens which are the subject of Permitted
Protests; (vi) those Liens and encumbrances set forth on Schedule "B" or
Schedule "C" annexed hereto; and (vii) in favor of Bank;
Section 13.07 Pay any dividends on or make any distribution on account of
any class of Borrower's capital stock in cash or in property (other than
additional shares of such stock), or redeem, purchase or otherwise acquire,
directly or indirectly, any of such stock;
Section 13.08 Without the prior written consent of Bank which shall not be
unreasonably withheld or delayed if Borrower exercises reasonable business
judgment in deciding to make a loan or advance, make any loans or advances to
any non-officer individual, partnership, trust or other corporation, including
without limitation Borrower's directors, officers and employees, except (a)
advances to officers or employees with respect to expenses incurred by them in
the ordinary course of their duties which are properly reimbursable by Borrower;
(b) loans and advances to non-officer employees which do not exceed the sum of
Twenty-Five Thousand ($25,000.00) Dollars; (c) loans to Affiliates which in the
aggregate do not exceed the sum of Two Hundred Fifty Thousand ($250,000.00)
Dollars; and (d) loans or advances to Borrower's President and Chief Executive
Officer;
Section 13.09 Assume, guaranty, endorse or otherwise become directly or
contingently liable in respect of (including without limitation by way of
agreement, contingent or otherwise, to purchase, provide funds to or otherwise
invest in a debtor or otherwise to assure a creditor against loss), any
indebtedness (except guarantees by endorsement of instruments for deposit or
collection in the ordinary course of business and guarantees in favor of Bank)
of any individual, partnership, trust or other corporation;
Section 13.10 (i) Use any loan proceeds to purchase or carry any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) or (ii) invest in or purchase any stock or securities of any
individual, partnership, trust or other corporation except (x) readily
marketable direct obligations of, or obligations guaranteed by, the United
States of America
17
or any agency thereof or (y) time deposits with or certificates of deposit
issued by the Bank; the foregoing prohibition will not be applicable to loans
made by Bank to Borrower pursuant to the Acquisition Line of Credit Agreement of
even date herewith;
Section 13.11 Enter into any lease or other transaction with any
shareholder, officer or affiliate on terms any less favorable than those which
might be obtained at the time from persons who (or entities which) are not such
a shareholder, officer or affiliate;
Section 13.12 Sell, transfer or otherwise dispose of any stock of any
subsidiary of Borrower;
Section 13.13 (a) Merge or consolidate with or into any corporation; (b)
enter into any joint venture or partnership, except in the ordinary course of
business, with any person, firm or corporation; (c) convey, lease or sell all or
any material portion of its property or assets or business to any other person,
firm or corporation, except (i) the sale of Collateral in the ordinary course of
its business, or (ii) the sale of the assets of ASA InterPro Smart Time LLC; or
(d) convey, lease or sell any of its assets to any person, firm or corporation
for less than the fair market value thereof;
Section 13.14 Acquire the stock and/or assets of any corporation or other
entity without first obtaining the prior written consent of Bank; or
Section 13.15 The financial covenants set forth in Section 13.02 and 13.03
are to be tested net of any balance sheet effects of any acquisitions made
during the applicable period with the consent of Bank and such covenants will be
reviewed and restated in connection with any acquisition approved by Bank.
14. DEFAULT.
Section 14.01 Nothing contained in this section, or elsewhere in this
Agreement, shall affect the demand nature of such of the Obligations as are by
their terms, demand obligations, including, without limitation, loans and
advances under this Agreement. The occurrence of an Event of Default shall not
be a prerequisite for the Bank's making demand or requiring payment of such
Obligations.
Upon the occurrence of any one or more of the following events (herein,
"Events of Default"), any and all Obligations of the Borrower to the Bank shall
become immediately due and payable, at the option of the Bank and without notice
or demand. The occurrence of any such Event of Default shall also constitute,
without notice or demand, a default under all other agreements between the Bank
and the Borrower and instruments and papers given the Bank by the Borrower,
whether such agreements, instruments, or papers now exist or hereafter arise,
namely:
(a) The failure by the Borrower to pay upon demand any amount due under
this Agreement.
(b) The failure by the Borrower to pay upon demand (or when due, if not
payable on demand) any other Obligations.
(c) The failure by the Borrower to promptly, punctually and faithfully
perform, or observe any term, covenant or agreement on its part to be performed
or observed pursuant to any of the provisions of this Agreement.
(d) The determination by Bank that any representation or warranty
heretofore, now or hereafter made by the Borrower to Bank, in any documents,
instrument, agreement, or paper was not true or accurate when given in any
material respect.
(e) The occurrence of any event such that any material indebtedness of the
Borrower from any lender other than Bank could be accelerated, notwithstanding
that such acceleration has not taken place.
18
(f) The occurrence of any event which would cause a lien creditor, as that
term is defined in Section 9!301 of the Code, to take priority over loans or
advances made by Bank.
(g) A filing against or relating to the Borrower of (i) a federal tax lien
in favor of the United States of America or any political subdivision of the
United States of America, or (ii) a state tax lien in favor of any state of the
United States of America or any political subdivision of any such state.
(h) The occurrence of any event of default under any agreement between Bank
and the Borrower or instrument or paper given Bank by the Borrower, whether such
agreement, instrument, or paper now exists or hereafter arises (notwithstanding
that Bank may not have exercised its rights upon default under any such other
agreement, instrument or paper).
(i) Any act by, against, or relating to the Borrower, or its property or
assets, which act constitutes the application for, consent to, or sufferance of
the appointment of a receiver, trustee or other person, pursuant to court action
or otherwise, over all, or any part of the Borrower's property.
(j) The granting of any trust mortgage or execution of an assignment for
the benefit of the creditors of the Borrower, or the occurrence of any other
voluntary or involuntary liquidation or extension of debt agreement for the
Borrower; the failure by the Borrower to generally pay the debts of the Borrower
as they mature; adjudication of bankruptcy or insolvency relative to the
Borrower; the entry of an order for relief or similar order with respect to the
Borrower in any proceeding pursuant to Title 11 of the United States Code
entitled "Bankruptcy" (hereinafter the "Bankruptcy Code") or any other federal
bankruptcy law; the filing of any complaint, application, or petition by or
against the Borrower initiating any matter in which the Borrower is or may be
granted any relief from the debts of the Borrower pursuant to the Bankruptcy
Code or any other insolvency statute or procedure; the calling or sufferance of
a meeting of creditors of the Borrower; the meeting by the Borrower of a formal
or informal creditor's committee; the offering by or entering into by the
Borrower of any composition, extension or any other arrangement seeking relief
or extension for the debts of the Borrower, or the initiation of any other
judicial or non!judicial proceeding or agreement by, against or including the
Borrower which seeks or intends to accomplish a reorganization or arrangement
with creditors.
(k) The entry of any judgment(s) against Borrower, which judgment(s) is not
satisfied or appealed from (with execution or similar process stayed) within
thirty (30) days of its entry.
(l) The occurrence of any event or circumstance with respect to the
Borrower such that Bank shall believe in good faith that the prospect of payment
of all or any part of the Obligations or the performance by the Borrower under
this Agreement or any other agreement between Bank and the Borrower is impaired
or there shall occur any material adverse change in the business or financial
condition of the Borrower.
(m) The entry of any court order which enjoins, restrains or in any way
prevents the Borrower from conducting all or any part of its business affairs in
the ordinary course of business.
(n) The service of any process upon Bank seeking to attach by trustee
process any funds of the Borrower on deposit with Bank.
(o) The occurrence of any material uninsured loss, theft, damage or
destruction to any material asset(s) of the Borrower.
(p) Any act by or against, or relating to the Borrower or its assets
pursuant to which any creditor of the Borrower seeks to reclaim or repossess or
reclaims or repossesses all or a portion of the Borrower's assets.
(q) The death, termination of existence, dissolution, or liquidation of the
Borrower, or the ceasing to carry on actively any substantial part of Borrower's
current business.
19
(r) This Agreement shall, at any time after its execution and delivery and
for any reason, cease (i) to create a valid and perfected first priority
security interest in and to the property purported to be subject to this
Agreement; or (ii) to be in full force and effect or shall be declared null and
void, or the validity or enforceability hereof shall be contested by the
Borrower or any guarantor of the Borrower denies it has any further liability or
obligation hereunder.
(s) Any of the following events occur or exist with respect to the Borrower
or any ERISA affiliate: (i) any "prohibited transaction" (as defined in Section
406 of ERISA or Section 4975 of the Internal Revenue Code) involving any Plan;
(ii) any "reportable event" (as defined in Section 4043 of ERISA and the
regulations issued under such Section) shall occur with respect to any Plan;
(iii) the filing under Section 4041 of ERISA of a notice of intent to terminate
any Plan or the termination of any Plan; (iv) any event or circumstance exists
which might constitute grounds entitling the Pension Benefit Guaranty
Corporation (PBGC) to institute proceedings under Section 4042 of ERISA for the
termination of, or for the appointment of a trustee to administer, any Plan, or
the institution by the PBGC of any such proceedings; or (v) partial withdrawal
under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
reorganization, insolvency, or termination of any Multiemployer Plan; and in
each case above, such event or condition, together with all other events or
conditions, if any, could in the opinion of Bank subject the Borrower to any
tax, penalty, or other liability to a Plan, a Multiemployer Plan, the PBGC, or
otherwise.
(t) The occurrence of (i) any of the Events of Default described in
Sections 14.01(e), 14.01(g), 14.01(j), 14.01(k), or 14.01(r), with respect to
any guarantor to Bank of the Obligations, as if such guarantor were the
"Borrower" described therein, or (ii) the failure by any guarantor to Bank of
the Obligations to perform in accordance with the terms of any agreement between
such guarantor and the Bank.
(u) The termination of any guaranty by any guarantor of the Obligations.
15. RIGHTS AND REMEDIES UPON DEFAULT; SET-OFF; EXPENSES; POWER OF ATTORNEY.
Upon the occurrence of an Event of Default or demand by the Bank, the Bank
shall have the following rights and remedies.
Section 15.01 Bank may declare any obligation Bank may have hereunder to be
cancelled, declare all Obligations of Borrower to be due and payable and proceed
to enforce payment of the Obligations and to exercise any and all of the rights
and remedies afforded to Bank by the Uniform Commercial Code or under the terms
of this Agreement or otherwise. In addition, upon the occurrence of an Event of
Default, if Bank proceeds to enforce payment of the Obligations, Borrower shall
be obligated to deliver to Bank cash collateral in an amount equal to the
aggregate amounts then undrawn on all outstanding Letters of Credit or
acceptances issued or guaranteed by Bank for the account of Borrower, and Bank
may proceed to enforce payment of the same and to exercise all rights and
remedies afforded to Bank by the Uniform Commercial Code or under the terms of
this Agreement or otherwise. Upon the occurrence of, and during the continuance
of, an Event of Default, the Borrower, as additional compensation to the Bank
for its increased credit risk, promises to pay interest on all Obligations
(including, without limitation, principal, whether or not past due, past due
interest and any other amounts past due under this Agreement) at a per annum
rate of three (3%) percent greater than the rate of interest then specified in
Section 2.02 of this Agreement.
Section 15.02 Upon the filing of any complaint, application, or petition by
or against the Borrower initiating any matter in which the Borrower is or may be
granted any relief from the debts of the Borrower pursuant to the Bankruptcy
Code, Bank's obligation hereunder shall be canceled immediately, automatically,
and without notice, and all Obligations of the Borrower then outstanding shall
become immediately due and payable without presentation, demand, or notice of
any kind to the Borrower.
20
Section 15.03 Any sale or other disposition of the Collateral may be at
public or private sale upon such terms and in such manner as the Bank deems
advisable, having due regard to compliance with any statute or regulation which
might affect, limit or apply to the Bank's disposition of the Collateral. The
Bank may conduct any such sale or other disposition of the Collateral upon the
Borrower's premises. Unless the Collateral is perishable or threatens to decline
speedily in value, or is of a type customarily sold on a recognized market (in
which event the Bank shall provide the Borrower with such notice as may be
practicable under the circumstances), the Bank shall give the Borrower at least
the greater of the minimum notice required by law or seven (7) days prior
written notice of the date, time and place of any proposed public sale, and of
the date after which any private sale or other disposition of the Collateral may
be made. The Bank may purchase the Collateral, or any portion of it at any such
sale.
Section 15.04. The Bank may require the Borrower to assemble the Collateral
and make it available to the Bank at the Borrower's sole risk and expense at a
place or places which are reasonably convenient to both the Bank and the
Borrower.
Section 15.05. Borrower shall, following the occurrence of an Event of
Default which is continuing, deliver to Bank, daily, a schedule in form and
content satisfactory to Bank describing the invoices issued by Borrower since
the last schedule submitted to Bank. The schedules to be provided under this
subsection are solely for the convenience of Bank in administering this
Agreement and maintaining records of the Collateral. Borrower's failure to
provide Bank with any such schedule shall not affect the security interest of
Bank in such Accounts.
Section 15.06. Within thirty (30) calendar days after the end of each month
or on such other basis as may be required by Bank from time to time, Borrower
shall, following the occurrence of an Event of Default which is continuing,
submit to Bank an accounts payable aging report in form satisfactory to Bank
showing the amounts due and owing on all accounts payable according to
Borrower's records as of the close of such month or such shorter period as may
be required by Bank from time to time, together with such other information as
Bank may require. If Borrower's monthly accounts payable aging reports are
prepared by an accounting service or other agent, Borrower hereby authorizes
such service or agent to deliver such accounts payable aging reports and any
other related documents to Bank.
Section 15.07. From and after the occurrence of an Event of Default which
is continuing, Borrower will immediately, upon receipt of all checks, drafts,
cash and other remittances in payment of any Inventory sold or in payment or on
account of Borrower's accounts, contracts, contract rights, notes, bills,
drafts, acceptances, general intangibles, choses in action and all other forms
of obligations, deliver the same to Bank accompanied by a remittance report in
form specified by Bank. Said proceeds shall be delivered to Bank in the same
form received except for the endorsement of Borrower where necessary to permit
collection of items, which endorsement Borrower agrees to make. Bank will credit
(conditional upon final collection) all such payments against the principal or
interest of any loans secured hereby; provided, however, for the purpose of
computing interest, any items requiring clearance or payment shall not be
considered to have been credited against any loans secured hereby until three
(3) business days after receipt by Bank of any such items. The order and method
of such application shall be in the sole discretion of Bank and any portion of
such funds which Bank elects not to so apply shall be paid over from time to
time by Bank to Borrower. Bank will at all times have the right to require
Borrower (i) to enter into a lockbox arrangement with Bank for the collection of
such remittances and payments, or (ii) to maintain its deposit accounts at Bank
or, in the alternative, at another financial institution which has agreed to
accept drafts drawn on it by Bank under a written depository transfer agreement
with Bank and to block Borrower's account and waive its rights as against such
account.
Section 15.08. Bank may at any time, after the occurrence of an Event of
Default or an event which, with notice or the passage of time or both, would
constitute an Event of Default, notify account debtors that Collateral has been
assigned to Bank and that payments shall be made directly
21
to or as directed by Bank. Upon request of Bank at any time, Borrower will so
notify such account debtors and will indicate on all xxxxxxxx to such account
debtors that their Accounts must be paid directly to or as directed by Bank.
Bank shall 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
Borrower. 16. WAIVER OF JURY TRIAL.
BORROWER AND BANK EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT IT MAY HAVE OR HEREAFTER HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
Borrower hereby certifies that neither Bank nor any of its representatives,
agents or counsel has represented, expressly or otherwise, that Bank would not,
in the event of any such suit, action or proceeding, seek to enforce this waiver
of right to trial by jury. Borrower acknowledges that it has read the provisions
of this Agreement and in particular, this section; has consulted legal counsel;
understands the right it is granting in this Agreement and is waiving in this
section in particular; and makes the above waiver knowingly, voluntarily and
intentionally.
17. CONSENT TO JURISDICTION.
Borrower and Bank agree that any action or proceeding to enforce or arising
out of this Agreement may be commenced in any court of the Commonwealth of
Massachusetts sitting in the county of Suffolk, or in the District Court of the
United States for the District of Massachusetts, and Borrower waives personal
service of process and agrees that a summons and complaint commencing an action
or proceeding in any such court shall be properly served and confer personal
jurisdiction if served by registered or certified mail to Borrower, or as
otherwise provided by the laws of the Commonwealth of Massachusetts or the
United States of America.
18. TERMINATION
Unless renewed in writing, this Agreement shall terminate on the
Termination Date, and all Obligations shall be due and payable in full without
presentation, demand or further notice of any kind, whether or not all or any
part of the Obligations is otherwise due an payable pursuant to the agreement or
instrument evidencing the same. In addition, this Agreement may be terminated at
any time by either party giving written notice of termination to the other
party. The foregoing notwithstanding, unless and until all loans made by the
Bank to the Borrower hereunder and all other Obligations or commitments of the
Bank under which an Obligation could arise, outstanding as of the time of
termination have been paid in full, such termination shall in no way affect the
security interest or other rights and powers herein granted to the Bank, and
until such payment in full the security interest of the Bank in all Inventory,
Accounts and other Collateral of the Borrower, whether existing as of the time
of such termination or thereafter arising, and all rights and powers herein
granted to the Bank in respect thereof shall remain in full force and effect.
Until all of the Obligations of Borrower to Bank have been fully paid and
satisfied and all commitments of the Bank under which an Obligation could arise
have expired, Borrower shall continue to assign Accounts to Bank, turn over all
collections to the Bank in kind and otherwise fully comply with the terms and
conditions of this Agreement as herein provided. Prior to such payment in full
of all of the Obligations of Borrower to Bank, this Agreement shall be a
continuing agreement in every respect.
19. JOINT AND SEVERAL LIABILITY.
Section 19.01. Each Borrower is accepting joint and several liability under
this Agreement in consideration of the financial accommodations to be provided
by Bank under this Agreement, for the mutual benefit, directly and indirectly,
of each Borrower and in consideration of the undertakings of each other Borrower
to accept joint and several liability for the Obligations of each Borrower to
Bank.
22
Section 19.02. Each Borrower, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co!debtor, joint
and several liability with each other Borrower, with respect to the payment and
performance of all of the Obligations of each Borrower to Bank under this
Agreement (including, without limitation, any Obligations arising under this
section), it being the intention of the parties hereto that all the Obligations
of each Borrower to Bank under this Agreement shall be the joint and several
Obligations of each of the Borrowers without preferences or distinction among
them.
Section 19.03. If and to the extent that any of the Borrowers shall fail to
make any payment with respect to any of the Obligations of each Borrower to Bank
under this Agreement, as and when due or to perform any of such Obligations in
accordance with the terms thereof, then in each such event the other Borrower,
under this Agreement will make such payment with respect to, or perform, such
Obligation.
Section 19.04. The Obligations of each Borrower under the provisions of
this section constitute full recourse Obligations of each Borrower enforceable
against each such Borrower to the full extent of its properties and assets,
irrespective of the validity, regularity or enforceability of this Agreement or
any other circumstance whatsoever.
Section 19.05. Each Borrower hereby waives notice of acceptance of its
joint and several liability, notice of any loans made under this Agreement,
notice of any action at any time taken or omitted by Bank under or in respect of
any of the Obligations of each Borrower to Bank under this Agreement, and,
generally, to the extent permitted by applicable law, all demands, notices and
other formalities of every kind in connection with this Agreement. Each Borrower
hereby assents to, and waives notice of, any extension or postponement of the
time for the payment of any of the Obligations of each Borrower to Bank under
this Agreement, the acceptance of any payment of any of such Obligations, the
acceptance of any partial payment thereon, any waiver, consent or other action
or acquiescence by Bank at any time or times in respect of any default by any
Borrower in the performance or satisfaction of any term, covenant, condition or
provision of this Agreement, any and all other indulgences whatsoever by Bank in
respect of any of the Obligations of each Borrower to Bank under this Agreement,
and the taking, addition, substitution or release, in whole or in part, at any
time or times, of any security for any of such Obligations of each Borrower to
Bank or the addition, substitution or release, in whole or in part, of any
Borrower. Without limiting the generality of the foregoing, each Borrower
assents to any other action or delay in acting or failure to act on Bank's part
with respect to the failure by any Borrower to comply with any of its respective
Obligations, including, without limitation, any failure strictly or diligently
to assert any right or to pursue any remedy or to comply fully with applicable
laws or regulations thereunder, which might, but for the provisions of this
section, afford grounds for terminating, discharging or relieving any Borrower,
in whole or in part, from any of its Obligations under this section, it being
the intention of each Borrower that, so long as any of the Obligations under
this Agreement remain unsatisfied, the Obligations of such Borrower under this
section shall not be discharged except by performance and then only to the
extent of such performance. The Obligations of each Borrower under this section
shall not be diminished or rendered unenforceable by any winding up,
reorganization, arrangement, liquidation, reconstruction or similar proceeding
with respect to any other Borrower or Bank. The joint and several liability of
each Borrower under this Agreement shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any other change
whatsoever in the name, membership, constitution or place of formation of any
Borrower or Bank.
Section 19.06. The provisions of this section are made for the benefit
of Bank and Bank's successors and assigns, and may be enforced by Bank in good
faith from time to time against any or all of the Borrowers as often as occasion
therefor may arise and without requirement on Bank's part first to marshal any
of its claims or to exercise any of its rights against any Borrower or to
exhaust any remedies available to Bank against any other Borrower or to resort
to any other source or means of obtaining payment of any of the Obligations
under this Agreement or to elect any other remedy.
23
The provisions of this section shall remain in effect until all of the
Obligations of each Borrower to Bank under this Agreement shall have been paid
in full or otherwise fully satisfied. If at any time, any payment, or any part
thereof, made in respect of any of such Obligations of each Borrower to Bank, is
rescinded or must otherwise be restored or returned by Bank upon the insolvency,
bankruptcy or reorganization of any Borrower, or otherwise, the provisions of
this section will forthwith be reinstated in effect, as though such payment had
not been made.
Section 19.07. Until all Obligations of Borrower to Bank are satisfied,
each Borrower agrees that it shall not have, and hereby expressly waives: (i)
any right to subrogation or indemnification, and any other right to payment from
or reimbursement by any other Borrower, in connection with or as a consequence
of any payment made by any Borrower to Bank, (ii) any right to enforce any right
or remedy which Bank has or may hereafter have against any other Borrower, and
(iii) any benefit of, and any right to participate in (A) any collateral now or
hereafter held by Bank, or (B) any payment to Bank by, or collection by Bank
from any other Borrower. The provisions of this paragraph are made for the
express benefit of each Borrower as well as Bank, and may be enforced
independently by each Borrower or any successor in interest to each Borrower.
20. MISCELLANEOUS.
Section 20.01. No delay or omission on the part of Bank in exercising any
rights shall operate as a waiver of such right or any other right. Waiver on any
one occasion shall not be construed as a bar to or waiver of any right or remedy
on any future occasion. All Bank's rights and remedies, whether evidenced hereby
or by any other agreement, instrument or paper, shall be cumulative and may be
exercised singularly or concurrently.
Section 20.02. Bank is authorized to make loans under the terms of this
Agreement upon the request, either written or oral, in the name of Borrower or
any authorized person whose name appears at the end of this Agreement or of any
of thIe following named person, or persons, from time to time, holding the
following offices of Borrower, President, Treasurer and such other officers and
authorized signatories as may from time to time be set forth in separate banking
and borrowing resolutions.
Section 20.03. This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties hereto; provided,
however, that Borrower may not assign this Agreement or any rights or duties
hereunder without Bank's prior written consent and any prohibited assignment
shall be absolutely void. No consent to an assignment by Bank shall release
Borrower from its Obligations. Bank may assign this Agreement and its rights and
duties hereunder and no consent or approval by Borrower is required in
connection with any such assignment. Bank reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in Bank's rights and benefits hereunder. In connection with any
assignment or participation, Bank may disclose all documents and information
which Bank now or hereafter may have relating to Borrower or Borrower's
business, provided, however, that such disclosure shall be for the limited
purposes of assignment or participation and Bank shall first require that such
potential assignee or participant agree to keep such information confidential in
accordance with the provisions of Section 11.06 above. To the extent that Bank
assigns its rights and obligations hereunder to another party, Bank thereafter
shall be released from such assigned obligations to Borrower and such assignment
shall effect a novation between Borrower and such other party.
Section 20.04. Borrower agrees that any and all loans made by Bank to
Borrower or for its account under this Agreement shall be conclusively deemed to
have been authorized by Borrower and to have been made pursuant to duly
authorized requests therefor on its behalf.
Section 20.05. Paragraph and section headings used in this Agreement
are for convenience only, and shall not effect the construction of this
Agreement. If one or more provisions of this Agreement (or the application
thereof) shall be invalid, illegal or unenforceable in any respect in any
jurisdiction, the same shall not, invalidate or render illegal or unenforceable
such provision (or its
24
application) in any other jurisdiction or any other provision of this Agreement
(or its application). This Agreement is the entire agreement of the parties with
respect to the subject matter hereof and supersedes any prior written or verbal
communications or instruments relating thereto.
Section 20.06. Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other loan document shall
be in writing and (except for financial statements and other informational
documents which may be sent by first-class mail, postage prepaid) shall be
personally delivered or sent by registered or certified mail (postage prepaid,
return receipt requested ), overnight courier, or telefacsimile to Borrower or
to Bank, as the case may be, at its address set forth below:
If to Bank: Eastern Bank
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxx X. X'Xxxxx, Vice President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
If to Borrower: ASA International Ltd.
00 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. All notices or demand sent in accordance with this section shall be
deemed received on the earlier of the date of actual receipt or three (3) days
after the deposit thereof in the mail.
Section 20.07. Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against Bank or Borrower, whether under
any rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by all parties and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish the purposes and
intentions of all parties hereto.
Section 20.08. Each provision of this Agreement shall be severable from
every other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
Section 20.09. This Agreement, together with the other documents and
instruments executed concurrently herewith represent the entire and final
understanding of the parties with respect to the transactions contemplated
hereby and shall not be contradicted or qualified by evidence of any prior,
contemporaneous or subsequent other agreement, oral or written, before the date
hereof.
Section 20.10. This Agreement can only be amended by a writing signed by
both Bank and Borrower.
Section 20.11. The laws of Massachusetts shall govern the construction of
this Agreement and the rights and duties of the parties hereto. This Agreement
shall take effect as a sealed instrument.
25
Witnessed by: EASTERN BANK
________________________ By:/s/Xxxx X. X'Xxxxx
---------------------
Xxxx X. X'Xxxxx, Vice President
Address: 00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
ASA INTERNATIONAL LTD.
ASA INTERNATIONAL VENTURES, INC.
ASA TIRE SYSTEMS INC.
ASA LEGAL SYSTEMS INC.
KHAMELEON SOFTWARE INC.
________________________ By:/s/Xxxxxxxx X. XxXxxxxx
--------------------------
Xxxxxxxx X. XxXxxxxx
Treasurer of each of the above corporations
Address: 00 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000
26
ASA INTERNATIONAL LTD.
----------------------
SCHEDULES
The following Schedules to the within Loan and Security Agreement
(All Assets) are respectively described in the section indicated. Those
Schedules in which no information has been inserted shall be deemed to read
"None".
SCHEDULE "A"
------------
Borrower's Places of Business (ss.7)
Address Property Located At Such Address
------- --------------------------------
SCHEDULE "B"
------------
Other Encumbrances and Liens (ss.8.06(i))
Secured Party or Mortgagee Description of Collateral Payment Terms and Dates
of Maturity
-------------------------- ------------------------- -------------------------
SCHEDULE "C"
------------
Leases (ss.8.06(ii))
Lessor Description of Property Date of Lease and Term Rental Payable
------ ----------------------- ---------------------- --------------
ASA INTERNATIONAL VENTURES, INC.
--------------------------------
SCHEDULES
The following Schedules to the within Loan and Security Agreement (All
Assets) are respectively described in the section indicated. Those Schedules in
which no information has been inserted shall be deemed to read "None".
SCHEDULE "A"
------------
Borrower's Places of Business (ss.7)
Address Property Located At Such Address
------- --------------------------------
SCHEDULE "B"
------------
Other Encumbrances and Liens (ss.8.06(i))
Secured Party or Mortgagee Description of Collateral Payment Terms and Dates
of Maturity
-------------------------- ------------------------- -------------------------
SCHEDULE "C"
Leases (ss.8.06(ii))
Lessor Description of Property Date of Lease and Term Rental Payable
------ ----------------------- ---------------------- --------------
ASA TIRE SYSTEMS INC.
---------------------
SCHEDULES
The following Schedules to the within Loan and Security Agreement (All
Assets) are respectively described in the section indicated. Those Schedules in
which no information has been inserted shall be deemed to read "None".
SCHEDULE "A"
------------
Borrower's Places of Business (ss.7)
Address Property Located At Such Address
SCHEDULE "B"
------------
Other Encumbrances and Liens (ss.8.06(i))
Secured Party or Mortgagee Description of Collateral Payment Terms and Dates
of Maturity
-------------------------- ------------------------- -------------------------
SCHEDULE "C"
------------
Leases (ss.8.06(ii))
Lessor Description of Property Date of Lease and Term Rental Payable
------ ----------------------- ---------------------- --------------
ASA LEGAL SYSTEMS INC.
----------------------
SCHEDULES
The following Schedules to the within Loan and Security Agreement (All
Assets) are respectively described in the section indicated. Those Schedules in
which no information has been inserted shall be deemed to read "None".
SCHEDULE "A"
------------
Borrower's Places of Business (ss.7)
Address Property Located At Such Address
SCHEDULE "B"
------------
Other Encumbrances and Liens (ss.8.06(i))
Secured Party or Mortgagee Description of Collateral Payment Terms and Dates
of Maturity
-------------------------- ------------------------- -----------------------
SCHEDULE "C"
------------
Leases (ss.8.06(ii))
Lessor Description of Property Date of Lease and Term Rental Payable
------ ----------------------- ---------------------- --------------
KHAMELEON SOFTWARE INC.
-----------------------
SCHEDULES
The following Schedules to the within Loan and Security Agreement (All
Assets) are respectively described in the section indicated. Those Schedules in
which no information has been inserted shall be deemed to read "None".
SCHEDULE "A"
------------
Borrower's Places of Business (ss.7)
Address Property Located At Such Address
SCHEDULE "B"
------------
Other Encumbrances and Liens (ss.8.06(i))
Secured Party or Mortgagee Description of Collateral Payment Terms and Dates
of Maturity
-------------------------- ------------------------- -----------------------
SCHEDULE "C"
------------
Leases (ss.8.06(ii))
Lessor Description of Property Date of Lease and Term Rental Payable
------ ----------------------- ---------------------- --------------
EXHIBIT 1
---------
COMPLIANCE CERTIFICATE
----------------------
ASA International Ltd., for itself and as agent for ASA International
Ventures, Inc., ASA Tire Systems Inc., ASA Legal Systems Inc. and Khameleon
Software Inc. (collectively, the "Borrower") hereby certifies to Eastern Bank
("Bank") pursuant to the Loan and Security Agreement (All Assets) between
Borrower and Bank dated June 4, 2001, as may be amended from time to time ("Loan
Agreement"), that:
A. General
1. Capitalized terms not defined herein shall have the meanings set forth
in the Loan Agreement.
2. The Borrower has complied with all the terms, covenants and conditions
to be performed or observed by the Borrower contained in the Loan Agreement and
other documents required to be executed by the Borrower in connection with the
Loan Agreement.
3. Neither on the date hereof nor, if applicable, after giving effect to
the loan made on the date hereof, does there exist an Event of Default or an
event which would with notice or the lapse of time, or both, constitute an Event
of Default.
4. The representations and warranties contained in the Loan Agreement and
in any certificate, document or financial or other statement furnished at any
time thereunder are true, correct and complete in all material respects with the
same effect as though such representations and warranties had been made on the
date hereof, except to the extent that any such representation and warranty
relates solely to an earlier date (in which case such representation and
warranty shall be true, correct and complete on and as of such earlier date).
B. Financial Covenants
As of the date hereof or, for such period as may be designated below, the
computations, ratios and calculations as set forth below in accordance with
Section 13 of the Loan Agreement are true and correct:
1. Debt Service Coverage Ratio - Section 13.01
The cash flow of the Borrower for the preceding twelve-month
period was equal to times ______ the amount of the Borrower's Fixed
Charges for such period, computed as follows:
A. EBITDA ................................$___________
B. Distributions ..........................$___________
C. Taxes actually paid ....................$___________
D. A - B - C = cash flow .................$___________
E. Interest ..............................$___________
F. CMLTD .................................$___________
G. E + F = Fixed Charges .................$___________
H. Ratio of D to G ........................____ to ____
Required: Not less than _____ to 1
2. Minimum Tangible Net Worth- Section 13.02
A. Stockholders' equity ...................___________
B. Intangibles ...........................$___________
C. Debt owing from employees, stockholders
and affiliates .........................$___________
D. A - B - C = Tangible Net Worth ........$___________
Required: Not less than $______________
3. Debt to Worth - Section 13.03
A. Debt ..................................$___________
B. Tangible Net Worth as computed in
Section 3 above ........................$___________
C. Ratio of A to B ......................._____ to ____
Required: Not less than _____ to _____
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of Borrower,
has executed and delivered this Certificate in the name and on behalf of the
Borrower on _________________, _______.
ASA INTERNATIONAL LTD.
By:________________________
