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ADDENDUM TO LOAN AGREEMENT
This Addendum to Loan Agreement ("Agreement") is entered into
and effective as of October 23, 1995 by and between Dense-Pac Microsystems,
Inc., a California corporation ("Borrower"), and Euroventures Benelux II B.V.,
a Netherlands corporation ("Lender").
RECITALS
WHEREAS, Borrower has previously borrowed from Lender the sum
of One Million Eight Hundred Thousand U.S. Dollars ($1,800,000) (the "EB Loan")
pursuant to a Loan Agreement dated as of October 12, 1994, among Borrower,
Lender and Xxxxx X. Xxxxxx (the "1994 Loan Agreement"), and
WHEREAS, in consideration for, among other things, Lender's
agreement to exercise warrants to purchase 900,000 shares of Borrower's Common
Stock for $1,800,000 cash instead of cancellation of the EB Loan, Borrower and
Lender desire to amend and supplement certain terms of the 1994 Loan Agreement
as they relate to the EB Loan.
AGREEMENT
NOW, THEREFORE, it is agreed as follows:
1. AMENDED TERMS OF EB LOAN. The following Sections 1.1,
1.2 and 1.3 hereby amend and supersede Sections 2.1, 2.2 and 2.3, respectively,
of the 1994 Loan Agreement.
1.1. INTEREST. The principal balance from time to
time actually outstanding under the EB Loan shall bear interest, calculated on
a daily basis, including the first day but excluding the last day, based on a
365-day year, at the rate of five percent (5%) per annum, from the effective
date of this Agreement until the EB Loan and all interest thereon is repaid in
full. Interest on the EB Loan prior to the date of this Agreement shall accrue
and be paid in the manner set forth in Section 2.1 of the 1994 Loan Agreement.
Interest shall be paid quarterly, beginning on December 31, 1995. Any interest
not paid when due shall be added to the principal and thereafter bear interest
as principal.
1.2. REPAYMENT. The principal balance of the EB
Loan and all accrued and unpaid interest thereon shall be due and payable on
October 12, 1999 (the "Payment Date"). Borrower may at any time prepay, without
penalty, all or any portion of the EB Loan plus accrued and unpaid interest on
the amount prepaid to the date of such prepayment. Beginning on and after
January 1, 1997, Borrower shall apply the net proceeds from any sale of debt or
equity securities, except for issuances of securities pursuant to employee
benefit plans (whether now in effect or adopted in the
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future) or warrants which are outstanding on the date hereof (including the
warrants referred to in Section 2.1 hereof), to prepay the outstanding interest
and principal of the EB Loan. All payments of the EB Loan and accrued and
unpaid interest shall be in U.S. Dollars.
1.3. APPLICATION OF PAYMENTS. Payments on the EB
Loan shall be applied first to accrued and unpaid interest and then to
principal, and upon such payment interest shall cease to accrue on the
principal so repaid. Payments shall be sent to the Lender at its address set
forth in Section 5.3 hereof or to such other address or bank account as Lender
may from time to time advise Borrower in writing.
2. CERTAIN COVENANTS.
2.1. WARRANT AGREEMENT. Borrower has executed and
delivered to Lender a Warrant Agreement for the purchase of an aggregate of
375,000 shares of Borrower's Common Stock (the "Warrant Agreement"), in form
and content satisfactory to Lender.
2.2. CONSENT AND WAIVER REGARDING ACCOUNTS RECEIVABLE
FINANCING. Lender hereby agrees that Borrower may obtain third party accounts
receivable financing ("AR Financing") and Lender hereby waives the provisions
of Sections 4.3 and 4.4 of the 1994 Loan Agreement as they relate to AR
Financing, provided, however, that the terms of the AR Financing must be
approved in advance by Borrower's Board of Directors and provided further that
the consent and waiver contained herein does not extend to any other
indebtedness or liens otherwise prohibited by the 1994 Loan Agreement.
2.3 SUBORDINATION AGREEMENT. To facilitate AR
Financing, Lender agrees to subordinate its security interest and lien under
the Security Agreement among Lender, Borrower and Xxxxx X. Xxxxxx dated as of
October 12, 1994 (the "Security Agreement") on Borrower's accounts receivable,
contract rights relating thereto, cash, proceeds of inventory and such other
related collateral as such third party shall reasonably require to provide such
financing, so that such third party's security interest and lien in such
collateral shall be prior and superior to Lender's security interest and lien
in such collateral. Lender further agrees to execute and deliver such
subordination and other agreements or documents as Borrower and such third
party shall reasonably request to effect such subordination.
2.4. SECURITY AGREEMENT. The parties hereby reaffirm
the Security Agreement and acknowledge that the security interest created
thereby and evidenced by the financing statements and other documents filed
with public agencies and the like with respect thereto are in full force and
effect. Borrower agrees to execute and file such further documents as Lender
shall reasonably request to preserve Lender's security interest, subject to its
subordination agreement contained in Section 2.3 hereof.
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2.5 LEGAL EXPENSES. Borrower shall reimburse Lender
for all reasonable legal fees and costs incurred by Lender in connection with
this Agreement, the Warrant Agreement and filings under Sections 13 and 16 of
the Securities Exchange Act of 1934 required as a result of the transactions
contemplated hereby and thereby, in an amount not to exceed $5,000.
3. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower
hereby represents and warrants to Lender that:
3.1. Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and has the requisite corporate power and authority to carry on its business as
presently conducted and to carry out the transactions contemplated hereunder.
3.2. All corporate action on the part of Borrower
necessary for the authorization, execution and delivery of this Agreement and
the Warrant Agreement (collectively, the "Loan Documents") and the performance
of all obligations of Borrower under the Loan Documents has been taken.
3.3. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of Borrower is
required in connection with the valid execution and delivery of the Loan
Documents or the performance of Borrower's obligations thereunder, except as
has already been obtained or filed.
3.4. The execution, delivery and performance of the
Loan Documents and the consummation of the transactions contemplated thereby
will not result in any violation of, or default under, any provision of the
Articles of Incorporation or Bylaws of Borrower or any contract, agreement or
instrument to which Borrower is a party or by which it is bound.
3.5. Borrower has sufficient authorized and unissued
shares of Common Stock under its Articles of Incorporation to fulfill
Borrower's obligations under the Warrant Agreement and any other outstanding
rights to acquire Common Stock which are outstanding.
3.6. The shares of Common Stock issuable upon
exercise of the warrants granted pursuant to the Warrant Agreement shall, upon
their issuance in accordance with the terms thereof, be fully paid and
nonassessable.
3.7. The Loan Documents have been duly executed and
delivered by, and constitute valid and binding obligations of, the Borrower,
enforceable against the Borrower in accordance with their respective terms,
except as enforceability may be limited by
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applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or the principles governing the
availability of equitable remedies.
3.8. The Borrower is in material compliance with the
provisions of its Articles of Incorporation, as amended, and its Bylaws, as
amended, and is not in default under or in breach of any material agreement to
which it is a party. The Borrower's business is being conducted in material
compliance with all applicable laws, ordinances, codes, rules and regulations
of any governmental or administrative body, provided, however, that the
Borrower's representation and warranty regarding compliance with any such legal
requirements as they relate to environmental matters is subject to the
Borrower's actual knowledge.
3.9. Except for a lawsuit described in Item 3 of the
Borrower's Form 10-KSB for the year ended February 28, 1995, there is no
pending or, to the best knowledge of the Borrower, threatened action, suit,
litigation or investigation against the Borrower which would have a material
adverse effect on the Borrower, its business or its financial condition. The
Borrower's personal property is not the subject of any attachment, judgment or
other similar lien arising in connection with court proceedings.
3.10. The balance sheets of the Borrower as of
February 28, 1994 and 1995 and the related statements of operations,
stockholders' equity and cash flows for the years then ended, including the
footnotes thereto, as examined and accompanied by the report of Deloitte &
Touche, independent certified accountants, which heretofore have been delivered
to the Lender, are in all material respects in accordance with the books and
records of the Borrower and fairly present the financial position of the
Borrower as at such dates and the results of operations of the Borrower for
such periods, in accordance with generally accepted accounting principles
consistently applied for the periods covered thereby. The balance sheet of the
Borrower as of August 31, 1995 and the related statements of operations,
stockholders' equity and cash flows for the six months then ended, including
the footnotes thereto, which heretofore have been delivered to the Lender, are
in all material respects in accordance with the books and records of the
Borrower and fairly present the financial position of the Borrower as at such
date and the results of operations of the Borrower for such period (subject to
standard year-end adjustments), in each case in accordance with generally
accepted accounting principles consistently applied with prior periods. Since
August 31, 1995 there has been no material adverse change in the Borrower's
financial condition.
3.11. The Borrower has not made any material
misrepresentation to Lender relating to the Loan Documents or the transactions
contemplated thereby and the Borrower has not omitted to state to the Lender
any material fact relating to the Loan
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Documents or the transactions contemplated thereby which is necessary in order
to make the information given by or on behalf of the Borrower to the Lender not
misleading or which if disclosed would reasonably affect the decision of a
person considering making the Loan. No fact, event, condition or contingency
exists or has occurred which has, or in the future can reasonably be expected
to have, a material adverse effect on the business or financial condition of
the Borrower which has not been disclosed to the Lender. For purposes hereof,
any information regarding the Borrower known by or supplied to Xxxxx Xxxxx
shall be deemed to be known by Lender.
4. REPRESENTATIONS OF LENDER. Lender hereby represents
and warrants to Borrower that:
4.1. Lender is a corporation duly organized, validly
existing and in good standing under the laws of the Netherlands and has the
requisite power and authority to execute and deliver the Loan Documents and to
carry out the transactions contemplated thereby.
4.2. The Loan Documents have been duly executed and
delivered by, and constitute valid and binding obligations of, the Lender,
enforceable against the Lender in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally or the principles governing the availability of equitable remedies.
4.3. Lender is an existing shareholder of Borrower
and has received copies of Borrower's Form 10-KSB for the year ended February
28, 1995, Proxy Statement for the 1995 Annual Meeting of Shareholders and Form
10-QSB for the quarter ended August 31, 1995, and such other documents and
information as Lender has requested. Lender has the business experience to
analyze, and net worth sufficient to assume, the risks associated with the
Loan. The Loan is being made solely for Lender's own account for investment
and not for the account of any other person and not for distribution or
assignment.
5. MISCELLANEOUS.
5.1. ENTIRE AGREEMENT. This Agreement, the Warrant
Agreement, the 1994 Loan Agreement and the Security Agreement constitute the
entire agreement between the parties with respect to the subject matter hereof
and any previous agreement between the parties as to such subject matter is
superseded by the foregoing agreements. Except as expressly provided in this
Agreement, the 1994 Loan Agreement and the Security Agreement shall remain in
full force and effect and this Agreement does not amend or affect any of the
terms of the 1994 Loan Agreement or the
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Security Agreement as they relate to the Loan made by Xxxxx X. Xxxxxx.
5.2. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of California as
applied to contracts entirely executed and performed within said state and
without regard to choice of law or conflicts of law principals. Each party
hereto expressly consents to the jurisdiction of the California courts and
agrees that any action relating to or arising or of this Agreement shall be
instituted and prosecuted only in the Municipal or Superior Court of the City
and County of San Francisco. Each party waives any right to a change in venue
and any and all objections to the jurisdiction of the California courts.
5.3. NOTICES. All notices and other communications
pursuant to this Agreement shall be in writing and delivered as set forth
below. Notices shall be delivered personally, either by messenger, air courier
or by telecopy. Notices shall be deemed to have been given, if delivered
personally or by telecopy, on the date of delivery; or if transmitted by air
courier, two (2) business days after the date of delivery to the courier. The
addresses for notices set forth below may be changed by giving written notice
of such change in the manner provided herein for giving notice.
If to Lender to : Euroventures Benelux II B.V.
X. Xxxxxxxxxxx 000
0000 Xxxxxxxx
Xxxxxxx
Attn: Xx. Xxxxx Xxxxx
Xx. Xxxxxx Xxxxxxxxx
Facsimile: 000-000-000-0000
With a copy to:
Xxx X. Xxxxxxx, Esq.
Coblentz, Cahen, XxXxxx & Breyer
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
If to Borrower to: Dense-Pac Microsystems, Inc.
0000 Xxxxxxx Xxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xx. Xxxxx X. Xxxxxx
Facsimile: (000) 000-0000
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With a copy to:
Xxxxx X. Xxxxxx, Esq.
0000 Xxxxx Xxxxxx, Xxxxxx Xxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
5.4. SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provisions
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provisions were so excluded and shall be enforceable in
accordance with the remaining terms.
5.5. AMENDMENT. This Agreement and any provision
hereof may not be amended or terminated except by a statement in writing signed
by the party against whom enforcement of the amendment or termination is
sought.
5.6. SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall inure to the benefit of, and be binding upon, the successors
and assigns of the parties. No party shall be permitted to assign its interest
or obligations under this Agreement without the prior written consent of the
other parties hereto.
5.7. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, and all of
which, when taken together, shall constitute one and the same instrument.
5.8. ATTORNEYS' FEES. In the event of any dispute
concerning the terms or conditions of this Agreement, or in the event Lender is
required to enforce said terms and conditions, the prevailing party in such
dispute or enforcement shall be entitled to recover all of its reasonable
attorneys' fees and costs incurred in connection with said dispute or
enforcement, whether or not litigation is commenced.
5.9. REMEDIES CUMULATIVE. No failure or delay on the
part of Lender in exercising any right, power or privilege under the Loan
Documents, and no course of dealing between the Borrower and Lender shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege under the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
thereunder. The rights, powers and remedies in the Loan Documents expressly
provided are cumulative and not exclusive of any rights, powers or remedies
which Lender would otherwise have. No notice to or demand on the Borrower in
any case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of Lender
to any
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other or further action in any circumstances without notice or demand,
unless such demand or notice is specifically required by the Loan Documents.
5.10. SURVIVAL. All representations and warranties
made in any Loan Documents shall survive the execution and delivery thereof
until the EB Loan has been paid in full.
5.11 DEFINITIONS. Except as otherwise expressly
defined herein, all defined terms used herein shall have the same meanings
given them in the 1994 Loan Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first set forth above.
BORROWER:
DENSE-PAC MICROSYSTEMS, INC.,
A CALIFORNIA CORPORATION
BY: /S/ XXXXX X. XXXXXX
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XXXXX X. XXXXXX
PRESIDENT
LENDER:
EUROVENTURES BENELUX II B.V.
BY: /S/ XXXXX X. XXXXX
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XXXXX X. XXXXX,
MANAGING DIRECTOR
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