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EXHIBIT 10.1(a)
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LOAN AND SECURITY AGREEMENT
AMONG
INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.,
PERCEPTIVE SCIENTIFIC INSTRUMENTS, INC.,
AND
STATSPIN, INC.,
AS BORROWERS, ON THE ONE HAND,
AND
FOOTHILL CAPITAL CORPORATION,
ON THE OTHER HAND
DATED AS OF MAY 5, 1998
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TABLE OF CONTENTS
Page(s)
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1. DEFINITIONS AND CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.3 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.5 Schedules and Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1 Revolving Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.2 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.3 Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.4 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.5 Overadvances; Loan Maximums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.6 Interest: Rates, Payments, and Calculations. . . . . . . . . . . . . . . . . . . . . . 16
2.7 Collection of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.8 Crediting Payments; Application of Collections . . . . . . . . . . . . . . . . . . . . . 18
2.9 Designated Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.10 Maintenance of Loan Account; Statements of Obligations. . . . . . . . . . . . . . . . . 19
2.11 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3. CONDITIONS; TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1 Conditions Precedent to the Initial Advance and the Term Loan. . . . . . . . . . . . . . 20
3.2 Conditions Precedent to all Advances and the Term Loan . . . . . . . . . . . . . . . . . 22
3.3 Condition Subsequent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.4 Term; Automatic Renewal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.5 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.6 Early Termination by Borrowers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.7 Termination Upon Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1 Grant of Security Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.2 Negotiable Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral. . . . . . . . . 24
4.4 Delivery of Additional Documentation Required. . . . . . . . . . . . . . . . . . . . . . 24
4.5 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.6 Right to Inspect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.1 No Encumbrances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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5.2 Eligible Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.3 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.4 Location of Inventory and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.5 Inventory Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.6 Location of Chief Executive Office; FEIN. . . . . . . . . . . . . . . . . . . . . . . . 26
5.7 Due Organization and Qualification; Subsidiaries. . . . . . . . . . . . . . . . . . . . 26
5.8 Due Authorization; No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.9 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.10 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.11 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.12 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.13 Environmental Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.14 Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.1 Accounting System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.2 Collateral Reporting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.3 Financial Statements, Reports, Certificates. . . . . . . . . . . . . . . . . . . . . . . 30
6.4 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.5 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.6 Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.7 Title to Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.8 Maintenance of Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.11 No Setoffs or Counterclaims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.12 Location of Inventory and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.13 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.14 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.15 Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.16 Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.1 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.2 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.3 Restrictions on Fundamental Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.4 Disposal of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.5 Change Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.6 Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.7 Nature of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.8 Prepayments and Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.9 Change of Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.10 Consignments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.11 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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7.12 Accounting Methods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.13 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.14 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.15 Suspension. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.16 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.17 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.18 Change in Location of Chief Executive Office; Inventory and Equipment with Bailees. . . 37
7.19 No Prohibited Transactions Under ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.20 Financial Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.21 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9. FOOTHILL'S RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.1 Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.2 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10. TAXES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11. WAIVERS; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.1 Demand; Protest; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2 Foothill's Liability for Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.3 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.4 Joint Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14. DESTRUCTION OF BORROWERS' DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.1 Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.2 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.3 Section Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.4 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.5 Severability of Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.6 Amendments in Writing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.7 Counterparts; Telefacsimile Execution. . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.8 Revival and Reinstatement of Obligations. . . . . . . . . . . . . . . . . . . . . . . . 51
15.9 Integration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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SCHEDULES AND EXHIBITS
Schedule P-1 Permitted Liens
Schedule 5.7 Subsidiaries
Schedule 5.9 Litigation
Schedule 5.12 ERISA Benefit Plans
Schedule 6.12 Location of Inventory and Equipment
Schedule 7.1 Indebtedness
Schedule 7.6 Guarantees
Exhibit C-1 Form of Compliance Certificate
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (THIS "AGREEMENT"), is entered into
as of May 5, 1998, among FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 00000 Xxxxx Xxxxxx Xxxxxxxxx,
Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000, on the one hand, and
INTERNATIONAL REMOTE IMAGING SYSTEMS, INC., a Delaware corporation ("IRIS"),
with its chief executive office located at 0000 Xxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxxxx 00000, PERCEPTIVE SCIENTIFIC INSTRUMENTS, INC., a Delaware
corporation ("PSI"), with its chief executive office at 0000 Xxxxx Xxxxx
Xxxxxxxxx, Xx. 000, Xxxxxx Xxxx, Xxxxx 00000 and STATSPIN, INC., a
Massachusetts corporation ("StatSpin"), with its chief executive office located
at 00 Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000, on the other hand.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the
following terms shall have the following definitions:
"Account Debtor" means any Person who is or who may
become obligated under, with respect to, or on account of, an Account.
"Accounts" means all currently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
a Person arising out of the sale or lease of goods or the rendition of services
by such Person, irrespective of whether earned by performance, and any and all
credit insurance, guaranties, or security therefor.
"Advances" has the meaning set forth in Section
2.1(a).
"Affiliate" means, as applied to any Person, any
other Person who directly or indirectly controls, is controlled by, is under
common control with or is a director or officer of such Person. For purposes
of this definition, "control" means the possession, directly or indirectly, of
the power to vote 5% or more of the securities having ordinary voting power for
the election of directors or the direct or indirect power to direct the
management and policies of a Person.
"Agreement" has the meaning set forth in the preamble
hereto.
"Authorized Person" means any officer or other
employee of either Borrower.
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"Availability" means, as of the date of
determination, the result of (a) the lesser of the Borrowing Base or the
Maximum Revolving Amount, less (b) the outstanding amount of Advances, less (c)
any deterioration in accounts payable since February 28, 1998; provided that,
if such result is a negative number, Availability shall be zero (0).
"Average Unused Portion of Maximum Amount" means, as
of any date of determination, the difference of $4,000,000 minus the average
Daily Balance of Advances that were outstanding during the immediately
preceding month.
"Bankruptcy Code" means the United States Bankruptcy
Code (11 U.S.C. Section 101 et seq.), as amended, and any successor statute.
"Benefit Plan" means a "defined benefit plan" (as
defined in Section 3(35) of ERISA) for which any Borrower, any Subsidiary of
any Borrower, or any ERISA Affiliate has been an "employer" (as defined in
Section 3(5) of ERISA) within the past six years.
"Borrower" means any one of IRIS, PSI or StatSpin.
"Borrowers' Books" means all of Borrowers' books and
records including: ledgers; records indicating, summarizing, or evidencing
Borrowers' properties or assets (including the Collateral) or liabilities; all
information relating to Borrowers' business operations or financial condition;
and all computer programs, disk or tape files, printouts, runs, or other
computer prepared information.
"Borrowing Base" has the meaning set forth in Section
2.1(a).
"Business Day" means any day that is not a Saturday,
Sunday, or other day on which national banks are authorized or required to
close.
"Change of Control" shall be deemed to have occurred
at such time as: (a) a "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934), directly or indirectly, of more than [20%] of the total voting power
of all classes of stock then outstanding of IRIS entitled to vote in the
election of directors, or (b) StatSpin or PSI ceases to be a wholly-owned
Subsidiary of IRIS.
"Closing Date" means the date of the first to occur
of the making of the initial Advance or the funding of the Term Loan.
"Code" means the California Uniform Commercial Code.
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"Collateral" means each Borrower's right, title, and
interest in each of the following:
(a) Accounts,
(b) Borrowers' Books,
(c) Equipment,
(d) General Intangibles,
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
(h) any money, or other assets of Borrowers that
now or hereafter come into the possession, custody, or control of Foothill, and
(i) the proceeds and products, whether tangible
or intangible, of any of the foregoing, including proceeds of insurance
covering any or all of the Collateral of Borrowers, and any and all Accounts,
Borrowers' Books, Equipment, General Intangibles, Inventory, Investment
Property, Negotiable Collateral, money, deposit accounts, or other tangible or
intangible property resulting from the sale, exchange, collection, or other
disposition of any of the foregoing, or any portion thereof or interest
therein, and the proceeds thereof.
"Collateral Access Agreement" means a landlord
waiver, mortgagee waiver, bailee letter, or acknowledgement agreement of any
warehouseman, processor, lessor, consignee, or other Person in possession of,
having a Lien upon, or having rights or interests in the Equipment or Inventory
of any Borrower, in each case, in form and substance satisfactory to Foothill.
"Collections" means all cash, checks, notes,
instruments, and other items of payment (including, insurance proceeds,
proceeds of cash sales, rental proceeds, and tax refunds).
"Compliance Certificate" means a certificate
substantially in the form of Exhibit C-1 and delivered by the chief accounting
officer of a Borrower to Foothill.
"Copyright Security Agreements" means those certain
Copyright Security Agreements, dated of even date herewith, between IRIS, PSI
and Foothill.
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"Daily Balance" means the amount of an Obligation
owed at the end of a given day.
"deems itself insecure" means that the Person deems
itself insecure in accordance with the provisions of Section 1208 of the Code.
"Default" means an event, condition, or default that,
with the giving of notice, the passage of time, or both, would be an Event of
Default.
"Designated Account" means account number 024-764540
of Borrowers maintained with Borrowers' Designated Account Bank, or such other
deposit account of Borrowers (located within the United States) which has been
designated, in writing and from time to time, by Borrowers to Foothill.
"Designated Account Bank" means City National Bank,
whose office is located at 00000 Xxxxxxx Xxxxxxxxx, Xx. 000, Xxxxxx,
Xxxxxxxxxx, and whose ABA number is 000000000.
"Dilution" means, in each case based upon the
experience of the immediately prior three months, the result of dividing the
Dollar amount of (a) bad debt write-downs, discounts (excluding discounts from
list price that are not included in Accounts), advertising, returns,
promotions, credits, or other dilution with respect to the Accounts of
Borrowers, by (b) Borrowers' Collections (excluding extraordinary items) plus
the Dollar amount of clause (a). In calculating dilution, Accounts that were
never included in Eligible Accounts shall be eliminated.
"Dilution Reserve" means, as of any date of
determination, an amount sufficient to reduce Foothill's advance rate against
Eligible Accounts by one percentage point for each percentage point by which
Dilution is in excess of 5.00%.
"Disbursement Letter" means an instructional letter
executed and delivered by Borrowers to Foothill regarding the extensions of
credit to be made on the Closing Date, the form and substance of which shall be
satisfactory to Foothill.
"Dollars or $" means United States dollars.
"Early Termination Premium" has the meaning set forth
in Section 3.6.
"EBITDA" means, with respect to any period, the sum
(without duplication) of a Person's (i) consolidated net income for such period
(excluding extraordinary gains and losses and excluding non-cash writeoffs of
Intangible Assets); (ii) consolidated interest expense during such period;
(iii) federal and state income tax provision by such Person and its
Subsidiaries during such period which are included in the determination of its
consolidated net income; (iv) such Person's and its Subsidiaries' consolidated
depreciation and
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amortization during such period; calculated in accordance with GAAP and (v)
amortization of common stock and stock option compensation; less such Person's
federal and state income tax benefit.
"Eligible Accounts" means those Accounts created by
IRIS or StatSpin in the ordinary course of business, that arise out of such
Borrower's sale of goods or rendition of services, excluding service contracts
(net of StatSpin warranty accounts, StatSpin warranty reserves per general
ledger, loaner accounts, and rebates), that strictly comply with each and all
of the representations and warranties respecting Accounts made by such Borrower
to Foothill in the Loan Documents; provided, however, that standards of
eligibility may be fixed and revised from time to time by Foothill in
Foothill's reasonable credit judgment. Eligible Accounts shall not include the
following:
(a) Accounts that the Account Debtor has failed
to pay within 90 days of invoice date or Accounts with selling terms of more
than 45 days;
(b) Accounts owed by an Account Debtor or its
Affiliates where 50% or more of all Accounts owed by that Account Debtor (or
its Affiliates) are deemed ineligible under clause (a) above;
(c) Accounts with respect to which the Account
Debtor is Copelco Capital Inc. or an employee, Affiliate, or agent of a
Borrower;
(d) Accounts with respect to which goods are
placed on consignment, guaranteed sale, sale or return, sale on approval, xxxx
and hold, or other terms by reason of which the payment by the Account Debtor
may be conditional;
(e) Accounts that are not payable in Dollars or
with respect to which the Account Debtor: (i) does not maintain its chief
executive office in the United States, or (ii) is not organized under the laws
of the United States or any State thereof, or (iii) is the government of any
foreign country or sovereign state, or of any state, province, municipality, or
other political subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof, unless (y) the Account is
supported by an irrevocable letter of credit satisfactory to Foothill (as to
form, substance, and issuer or domestic confirming bank) that has been
delivered to Foothill and is directly drawable by Foothill, or (z) the Account
is covered by credit insurance in form and amount, and by an insurer,
satisfactory to Foothill;
(f) Accounts in an aggregate amount outstanding
at any time between Borrowers in excess of $250,000 with respect to which the
Account Debtor is either (i) the United States or any department, agency, or
instrumentality of the United States (exclusive, however, of Accounts with
respect to which the relevant Borrower has complied, to the satisfaction of
Foothill, with the Assignment of Claims Act, 31 U.S.C. Section 3727), or (ii)
any State of the United States (exclusive, however, of Accounts owed by any
State that does not have a statutory counterpart to the Assignment of Claims
Act);
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(g) Accounts with respect to which the Account
Debtor is a creditor of any Borrower, has or has asserted a right of setoff,
has disputed its liability, or has made any claim with respect to the Account;
(h) Accounts with respect to an Account Debtor
whose total obligations owing to any Borrower exceed 10% of all Eligible
Accounts of such Borrower (except in the case of Xxxxxx Scientific, Inc. and
Idexx Laboratories, whose total obligations owing to StatSpin exceed 35% and
30% respectively of all Eligible Accounts of StatSpin), to the extent of the
obligations owing by such Account Debtor in excess of such percentage;
(i) Accounts with respect to which the Account
Debtor is subject to any Insolvency Proceeding, or becomes insolvent, or goes
out of business;
(j) Accounts the collection of which Foothill, in
its reasonable credit judgment, believes to be doubtful by reason of the
Account Debtor's financial condition;
(k) Accounts with respect to which the goods giving
rise to such Account have not been shipped and billed to the Account Debtor,
the services giving rise to such Account have not been performed and accepted
by the Account Debtor, or the Account otherwise does not represent a final
sale;
(l) Accounts with respect to which the Account
Debtor is located in the states of Minnesota, Indiana, or West Virginia (or any
other state that requires a creditor to file a Business Activity Report or
similar document in order to bring suit or otherwise enforce its remedies
against such Account Debtor in the courts or through any judicial process of
such state), unless the relevant Borrower has qualified to do business in
Minnesota, Indiana, West Virginia, or such other states, or has filed a Notice
of Business Activities Report with the applicable division of taxation, the
department of revenue, or with such other state offices, as appropriate, for
the then- current year, or is exempt from such filing requirement; and
(m) Accounts that represent progress payments or
other advance xxxxxxxx that are due prior to the completion of performance by a
Borrower of the subject contract for goods or services.
"Equipment" means all of a Person's present and
hereafter acquired machinery, machine tools, motors, equipment, furniture,
furnishings, fixtures, vehicles (including motor vehicles and trailers), tools,
parts, goods (other than consumer goods, farm products, or Inventory), wherever
located, including, (a) any interest of such Person in any of the foregoing,
and (b) all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing.
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"ERISA" means the Employee Retirement Income Security
Act of 1974, 29 U.S.C. Sections 1000 et seq., amendments thereto, successor
statutes, and regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject
to ERISA whose employees are treated as employed by the same employer as the
employees of a Borrower under IRC Section 414(b), (b) any trade or business
subject to ERISA whose employees are treated as employed by the same employer
as the employees of a Borrower under IRC Section 414(c), (c) solely for
purposes of Section 302 of ERISA and Section 412 of the IRC, any organization
subject to ERISA that is a member of an affiliated service group of which a
Borrower is a member under IRC Section 414(m), or (d) solely for purposes of
Section 302 of ERISA and Section 412 of the IRC, any party subject to ERISA
that is a party to an arrangement with a Borrower and whose employees are
aggregated with the employees of such Borrower under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with
respect to any Benefit Plan or Multiemployer Plan, (b) the withdrawal of a
Borrower, any of its Subsidiaries or ERISA Affiliates from a Benefit Plan
during a plan year in which it was a "substantial employer" (as defined in
Section 4001(a)(2) of ERISA), (c) the providing of notice of intent to
terminate a Benefit Plan in a distress termination (as described in Section
4041(c) of ERISA), (d) the institution by the PBGC of proceedings to terminate
a Benefit Plan or Multiemployer Plan, (e) any event or condition (i) that
provides a basis under Section 4042(a)(1), (2), or (3) of ERISA for the
termination of, or the appointment of a trustee to administer, any Benefit Plan
or Multiemployer Plan, or (ii) that may result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of a
Borrower, any of its Subsidiaries or ERISA Affiliates from a Multiemployer
Plan, or (g) providing any security to any Plan under Section 401(a)(29) of the
IRC by a Borrower or its Subsidiaries or any of their ERISA Affiliates.
"Event of Default" has the meaning set forth in
Section 8.
"Existing Lender" means City National Bank.
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the preamble
to this Agreement.
"Foothill Account" has the meaning set forth in
Section 2.7.
"Foothill Expenses" means all: costs or expenses
(including taxes, and insurance premiums) required to be paid by a Borrower
under any of the Loan Documents that are paid or incurred by Foothill; fees or
charges paid or incurred by Foothill in connection with Foothill's transactions
with Borrowers, including, fees or charges for
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photocopying, notarization, couriers and messengers, telecommunication, public
record searches (including tax lien, litigation, and UCC searches and including
searches with the patent and trademark office, the copyright office, or the
department of motor vehicles), filing, recording, publication, appraisal
(including periodic Collateral appraisals); costs and expenses incurred by
Foothill in the disbursement of funds to Borrowers (by wire transfer or
otherwise); charges paid or incurred by Foothill resulting from the dishonor of
checks; costs and expenses paid or incurred by Foothill to correct any default
or enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or any portion thereof,
irrespective of whether a sale is consummated; costs and expenses paid or
incurred by Foothill in examining Borrowers' Books; costs and expenses of third
party claims or any other suit paid or incurred by Foothill in enforcing or
defending the Loan Documents or in connection with the transactions
contemplated by the Loan Documents or Foothill's relationship with Borrowers or
any guarantor; and Foothill's reasonable attorneys fees and expenses incurred
in advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing (including attorneys fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning Borrowers or any guarantor of the Obligations), defending, or
concerning the Loan Documents, irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles
as in effect from time to time in the United States, consistently applied.
"General Intangibles" means all of any Person's
present and future general intangibles and other personal property (including
contract rights, rights arising under common law, statutes, or regulations,
choses or things in action, goodwill, patents, trade names, trademarks,
servicemarks, copyrights, blueprints, drawings, purchase orders, customer
lists, monies due or recoverable from pension funds, route lists, rights to
payment and other rights under any royalty or licensing agreements,
infringement claims, computer programs, information contained on computer disks
or tapes, literature, reports, catalogs, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), other than goods, Accounts, and
Negotiable Collateral.
"Governing Documents" means the certificate or
articles of incorporation, by-laws, or other organizational or governing
documents of any Person.
"Hazardous Materials" means (a) substances that are
defined or listed in, or otherwise classified pursuant to, any applicable laws
or regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity,
or "EP toxicity", (b) oil, petroleum, or petroleum derived substances, natural
gas, natural gas liquids, synthetic gas, drilling fluids, produced waters, and
other wastes associated with the exploration, development, or production of
crude oil, natural gas, or geothermal resources,
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(c) any highly flammable substances or explosives or any radioactive materials,
and (d) asbestos in any form or electrical equipment that contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess of 50
parts per million.
"Indebtedness" means: (a) all obligations of a
Person for borrowed money, (b) all obligations of a Person evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations of a Person in respect of letters of credit, bankers acceptances,
interest rate swaps, or other financial products, (c) all obligations of a
Person under capital leases, (d) all obligations or liabilities of others
secured by a Lien on any property or asset of a Person, irrespective of whether
such obligation or liability is assumed, and (e) any obligation of a Person
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to such Person) any indebtedness, lease,
dividend, letter of credit, or other obligation of any other Person.
"Insolvency Proceeding" means any proceeding
commenced by or against any Person under any provision of the Bankruptcy Code
or under any other bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally
with creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.
"Installation Reserve" means, as of any date of
determination IRIS' reserve to cover the cost of installation of Goods that
have been sold by IRIS but not yet installed which reserve must be acceptable
to Foothill in its reasonable credit judgment.
"Intangible Assets" means, with respect to any
Person, that portion of the book value of all of such Person's assets that
would be treated as intangibles under GAAP, including such Person's deferred
warrants, deferred tax assets and in house developed software.
"Intellectual Property Security Agreements" means
those certain Intellectual Property Security Agreements, dated of even date
herewith, each between a Borrower and Foothill.
"Inventory" means all present and future inventory in
which a Person has any interest, including goods held for sale or lease or to
be furnished under a contract of service and all of such Person's present and
future raw materials, work in process, finished goods, and packing and shipping
materials, wherever located.
"Investment Property" has the meaning set forth in
Section 9115 of the Code.
"Lien" means any interest in property securing an
obligation owed to, or a claim by, any Person other than the owner of the
property, whether such interest shall be based on the common law, statute, or
contract, whether such interest shall be recorded or
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perfected, and whether such interest shall be contingent upon the occurrence of
some future event or events or the existence of some future circumstance or
circumstances, including the lien or security interest arising from a mortgage,
deed of trust, encumbrance, pledge, hypothecation, assignment, deposit
arrangement, security agreement, adverse claim or charge, conditional sale or
trust receipt, or from a lease, consignment, or bailment for security purposes
and also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.
"Loan Account" has the meaning set forth in Section
2.10.
"Loan Documents" means this Agreement, the
Intellectual Property Security Agreements, the Copyright Security Agreements,
the Disbursement Letter, the Lockbox Agreements, any note or notes executed by
any Borrower and payable to Foothill, the Stock Pledge, and any other agreement
entered into, now or in the future, in connection with this Agreement.
"Lockbox Account" shall mean a depositary account
established pursuant to one of the Lockbox Agreements.
"Lockbox Agreements" means those certain Lockbox
Operating Procedural Agreements and those certain Depository Account
Agreements, in form and substance satisfactory to Foothill, each of which is
among a Borrower or Borrowers, Foothill, and one of the Lockbox Banks.
"Lockbox Banks" means City National Bank, or such
other banks as may be agreed to by Foothill and Borrowers from time to time.
"Lockboxes" has the meaning set forth in Section 2.7.
"Material Adverse Change" means (a) a material
adverse change in the business, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of a Borrower, (b) the
material impairment of a Borrower's ability to perform its obligations under
the Loan Documents to which it is a party or of Foothill to enforce the
Obligations or realize upon the Collateral, (c) a material adverse effect on
the value of the Collateral or the amount that Foothill would be likely to
receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral, or (d) a material
impairment of the priority of Foothill's Liens with respect to the Collateral.
"Maximum Amount" means $7,000,000.
"Maximum Revolving Amount" means, as of the date of
determination, the lesser of (i) $4,000,000 and (ii) the difference of
$7,000,000 minus the outstanding principal balance of the Term Loan.
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"Multiemployer Plan" means a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) to which a Borrower, any of its
Subsidiaries, or any ERISA Affiliate has contributed, or was obligated to
contribute, within the past six years.
"Negotiable Collateral" means all of a Person's
present and future letters of credit, notes, drafts, instruments, Investment
Property, security entitlements, securities (including the shares of stock of
Subsidiaries of such Person), documents, personal property leases (wherein such
Person is the lessor), and chattel paper.
"Obligations" means all loans, Advances, debts,
principal, interest (including any interest that, but for the provisions of the
Bankruptcy Code, would have accrued), premiums (including Early Termination
Premiums), liabilities (including all amounts charged to Borrowers' Loan
Account pursuant hereto), obligations, fees, charges, costs, or Foothill
Expenses (including any fees or expenses that, but for the provisions of the
Bankruptcy Code, would have accrued), lease payments, guaranties, covenants,
and duties owing by a Borrower to Foothill of any kind and description (whether
pursuant to or evidenced by the Loan Documents or pursuant to any other
agreement between Foothill and any Borrower, and irrespective of whether for
the payment of money), whether direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter arising, and including any debt,
liability, or obligation owing from a Borrower to others that Foothill may have
obtained by assignment or otherwise, and further including all interest not
paid when due and all Foothill Expenses that a Borrower is required to pay or
reimburse by the Loan Documents, by law, or otherwise.
"Overadvance" has the meaning set forth in Section
2.5.
"Participant" means any Person to which Foothill has
sold a participation interest in its rights under the Loan Documents.
"Pay-Off Letter" means a letter, in form and
substance reasonably satisfactory to Foothill, from Existing Lender respecting
the amount necessary to repay in full all of the obligations of Borrowers owing
to Existing Lender and obtain a termination or release of all of the Liens
existing in favor of Existing Lender in and to the properties or assets of
Borrowers.
"PBGC" means the Pension Benefit Guaranty Corporation
as defined in Title IV of ERISA, or any successor thereto.
"Permitted Liens" means (a) Liens held by Foothill,
(b) Liens for unpaid taxes that either (i) are not yet due and payable or (ii)
are the subject of Permitted Protests, (c) Liens set forth on Schedule P-1, (d)
the interests of lessors under operating leases and purchase money Liens of
lessors under capital leases to the extent that the acquisition or lease of the
underlying asset is permitted under Section 7.21 and so long as the Lien only
attaches to the asset purchased or acquired and only secures the purchase price
of the asset,
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(e) Liens arising by operation of law in favor of warehousemen, landlords,
carriers, mechanics, materialmen, laborers, or suppliers, incurred in the
ordinary course of business of a Borrower and not in connection with the
borrowing of money, and which Liens either (i) are for sums not yet due and
payable, or (ii) are the subject of Permitted Protests, (f) Liens arising from
deposits made in connection with obtaining worker's compensation or other
unemployment insurance, (g) Liens or deposits to secure performance of bids,
tenders, or leases (to the extent permitted under this Agreement), incurred in
the ordinary course of business of a Borrower and not in connection with the
borrowing of money, (h) Liens arising by reason of security for surety or
appeal bonds in the ordinary course of business of a Borrower, and (i) Liens of
or resulting from any judgment or award that would not have a Material Adverse
Change and as to which the time for the appeal or petition for rehearing of
which has not yet expired, or in respect of which a Borrower is in good faith
prosecuting an appeal or proceeding for a review, and in respect of which a
stay of execution pending such appeal or proceeding for review has been
secured.
"Permitted Protest" means the right of a Borrower to
protest any Lien (other than any such Lien that secures the Obligations), tax
(other than payroll taxes or taxes that are the subject of a United States
federal tax lien), or rental payment, provided that (a) a reserve with respect
to such obligation is established on the books of such Borrower in an amount
that is reasonably satisfactory to Foothill, (b) any such protest is instituted
and diligently prosecuted by such Borrower in good faith, and (c) Foothill is
satisfied that, while any such protest is pending, there will be no impairment
of the enforceability, validity, or priority of any of the Liens of Foothill in
and to the Collateral.
"Person" means and includes natural persons,
corporations, limited liability companies, limited partnerships, general
partnerships, limited liability partnerships, joint ventures, trusts, land
trusts, business trusts, or other organizations, irrespective of whether they
are legal entities, and governments and agencies and political subdivisions
thereof.
"Plan" means any employee benefit plan, program, or
arrangement maintained or contributed to by a Borrower or with respect to which
it may incur liability.
"Real Property" means any estates or interests in
real property now owned or hereafter acquired by either Borrower.
"Reference Rate" means the variable rate of interest,
per annum, most recently announced by Norwest Bank Minnesota, National
Association, or any successor thereto, as its "base rate," irrespective of
whether such announced rate is the best rate available from such financial
institution.
"Renewal Date" has the meaning set forth in Section
3.4.
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"Reportable Event" means any of the events described
in Section 4043(c) of ERISA or the regulations thereunder other than a
Reportable Event as to which the provision of 30 days notice to the PBGC is
waived under applicable regulations.
"Retiree Health Plan" means an "employee welfare
benefit plan" within the meaning of Section 3(1) of ERISA that provides
benefits to individuals after termination of their employment, other than as
required by Section 601 of ERISA.
"Solvent" means, with respect to any Person on a
particular date, that on such date (a) at fair valuations, all of the
properties and assets of such Person are greater than the sum of the debts,
including contingent liabilities, of such Person, (b) the present fair salable
value of the properties and assets of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its debts
as they become absolute and matured, (c) such Person is able to realize upon
its properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it
will, incur debts beyond such Person's ability to pay as such debts mature, and
(e) such Person is not engaged in business or a transaction, and is not about
to engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. In computing the amount of contingent liabilities at any time, it
is intended that such liabilities will be computed at the amount that, in light
of all the facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual or matured liability.
"Stock Pledge" means that certain Security
Agreement-Stock Pledge, dated as of even date herewith, executed by PSI in
favor of Foothill, respecting the capital stock of Perceptive Scientific
International, LTD.
"Subordinate Creditor" means Digital Imaging
Technologies, Inc., a Delaware corporation.
"Subordinate Indebtedness" means IRIS' obligations
owed to Subordinate Creditor pursuant to the Subordinated Note.
"Subordinated Note" means that certain $7,000,000,
8 1/2% Senior Subordinated Note Due 2001, dated July 31, 1996, payable by IRIS
to Subordinate Creditor.
"Subsidiary" of a Person means a corporation,
partnership, limited liability company, or other entity in which that Person
directly or indirectly owns or controls the shares of stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors (or appoint other comparable managers) of such corporation,
partnership, limited liability company, or other entity.
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"Supply and Service Revenue" means revenues, net of
deferred income, that arise from the sale of supplies and services related to
IRIS' installed IVD Imaging Systems.
"Tangible Net Worth" means, as of any date of
determination, the difference of (a) a Person's total stockholder's equity;
minus (b) the sum of: (i) all Intangible Assets of such Person, (ii) all of
such Person's prepaid expenses, and (iii) all amounts due to such Person from
Affiliates; plus (c) the Indebtedness evidenced by the Subordinated Note.
"Term Loan" has the meaning set forth in Section 2.3.
"Voidable Transfer" has the meaning set forth in
Section 15.8.
"Year 2000 Compliant" means, with regard to any
Person, that all software in goods produced or sold by, or utilized by and
material to the business operations or financial condition of, such entity are
able to interpret and manipulate data on and involving all calendar dates
correctly and without causing any abnormal ending scenario, including in
relation to dates in and after the Year 2000.
1.2 ACCOUNTING TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes and
schedules thereto. Whenever the term "Borrower" is used in respect of a
financial covenant or a related definition, it shall be understood to mean
Borrowers on a consolidated basis unless the context clearly requires
otherwise.
1.3 CODE. Any terms used in this Agreement that are
defined in the Code shall be construed and defined as set forth in the Code
unless otherwise defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the term "including" is not
limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement refer to
this Agreement as a whole and not to any particular provision of this
Agreement. An Event of Default shall "continue" or be "continuing" until such
Event of Default has been waived in writing by Foothill. Section, subsection,
clause, schedule, and exhibit references are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the Loan Documents to this
Agreement or any of the Loan Documents shall include all alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, and supplements, thereto and thereof, as applicable.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and
exhibits attached to this Agreement shall be deemed incorporated herein by
reference.
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2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVING ADVANCES.
(a) Subject to the terms and conditions of this
Agreement, Foothill agrees to make advances ("Advances") to Borrowers in an
amount outstanding not to exceed at any one time the lesser of (i) the Maximum
Revolving Amount or (ii) the Borrowing Base. For purposes of this Agreement,
"Borrowing Base", as of any date of determination, shall mean the result of:
(x) 85% of Eligible Accounts, less the
amount, if any, of the Dilution Reserve and Installation
Reserve, minus
(z) the aggregate amount of reserves, if
any, established by Foothill under Sections 2.1(b), 6.15 and
10.
(b) Anything to the contrary in Section 2.1(a)
above notwithstanding, Foothill may create reserves against the Borrowing Base
or reduce its advance rates based upon Eligible Accounts without declaring an
Event of Default if it determines that there has occurred a Material Adverse
Change.
(c) Anything to the contrary in this Agreement
notwithstanding, the aggregate outstanding balance of the Advances and the Term
Loan shall not exceed an amount equal to Borrowers' Collections with respect to
Accounts for the immediately preceding 90 day period.
(d) Amounts borrowed pursuant to this Section 2.1
may be repaid and, subject to the terms and conditions of this Agreement,
reborrowed at any time during the term of this Agreement.
2.2 INTENTIONALLY OMITTED.
2.3 TERM LOAN. Foothill has agreed to make a term loan
(the "Term Loan") to Borrowers in the original principal amount of $3,600,000.
The Term Loan shall be repaid in 36 installments of principal in the following
amounts:
MONTH INSTALLMENT AMOUNT
1 through 36 $100,000
Each such installment shall be due and payable on the first day of each month
commencing on the first day of the first month following the Closing Date and
continuing on the first day of each succeeding month until and including the
date on which the unpaid balance of the
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Term Loan is paid in full. Borrowers shall not prepay the Term Loan except in
accordance with Section 3.6 or 2.5. The outstanding principal balance and all
accrued and unpaid interest under the Term Loan shall be due and payable upon
the termination of this Agreement, whether by its terms, by prepayment, by
acceleration, or otherwise. All amounts outstanding under the Term Loan shall
constitute Obligations.
2.4 INTENTIONALLY OMITTED.
2.5 OVERADVANCES; LOAN MAXIMUMS.
(a) If, at any time or for any reason, the amount
of Obligations owed by Borrowers to Foothill pursuant to Section 2.1 is greater
than either the Dollar or percentage limitations set forth in Section 2.1 (an
"Overadvance"), Borrowers immediately upon demand shall pay to Foothill, in
cash, the amount of such excess to be used by Foothill to repay Advances
outstanding under Section 2.1.
(b) If, at any time or for any reason, the amount
of Obligations owed by Borrowers to Foothill pursuant to Section 2.1 plus the
principal balance of the Term Loan is greater than an amount equal to: (i) the
result of multiplying (a) Borrowers' annualized Supply and Service Revenue
based on the most recent fiscal quarter, by (b) the percentage indicated in the
table below opposite the applicable period, less (ii) the amount of IRIS'
warranty reserve:
Period Percentage
-----------------------------------------------------
Closing Date - March 31, 1999 80%
April 1, 1999 - March 31, 2000 70%
April 1, 2000 and thereafter 60%
then, Borrowers immediately shall pay to Foothill, in cash, the amount of such
excess to be used by Foothill to first repay Advances outstanding under Section
2.1, and second toward principal installments due under the Term Loan in
inverse order of maturity without penalty.
(c) If, at any time or for any reason, the
principal balance of the Term Loan is greater than an amount equal to: (i) the
result of multiplying (a) Borrowers' annualized Supply and Service Revenue
based on the most recent fiscal quarter, by (b) by the percentage indicated in
the table below opposite the applicable period, less (ii) the amount of IRIS'
warranty reserve:
Period Percentage
-----------------------------------------------------
Closing Date - March 31, 1999 45%
April 1, 1999 - March 31, 2000 30%
April 1, 2000 and thereafter 15%
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then, Borrowers immediately shall pay to Foothill, in cash, the amount of such
excess to be used by Foothill toward principal installments due under the Term
Loan in inverse order of maturity without penalty.
2.6 INTEREST: RATES, PAYMENTS, AND CALCULATIONS.
(a) Interest Rate. Except as provided in clause
(b) below, (i) all Obligations (except for the Term Loan) shall bear interest
on the Daily Balance at a per annum rate of one percentage point above the
Reference Rate, and (ii) the Term Loan shall bear interest at a per annum rate
of three percentage points above the Reference Rate.
(b) Default Rate. Upon the occurrence and during
the continuation of an Event of Default, (i) all Obligations (except for the
Term Loan) shall bear interest at a per annum rate equal to five percentage
points above the Reference Rate, and (ii) the Term Loan shall bear interest at
a per annum rate equal to seven percentage points above the Reference Rate.
(c) Minimum Interest. In no event shall the rate
of interest chargeable hereunder for any day be less than 7.00% per annum.
Additionally, in no event shall the interest due hereunder in any month be less
than what would be due based on average daily outstanding Obligations of
$3,000,000. To the extent that interest accrued hereunder at the rate set
forth herein would be less than the foregoing minimum daily rate, the interest
rate chargeable hereunder for such day automatically shall be deemed increased
to the minimum rate.
(d) Payments. Interest payable hereunder shall
be due and payable, in arrears, on the first day of each month during the term
hereof. Each Borrower hereby authorizes Foothill, at its option, without prior
notice to such Borrower, to charge such interest, all Foothill Expenses (as and
when incurred), the fees and charges provided for in Section 2.11 (as and when
accrued or incurred), and all installments or other payments due under the Term
Loan or any Loan Document to Borrowers' Loan Account, which amounts thereafter
shall accrue interest at the rate then applicable to Advances hereunder. Any
interest not paid when due shall be compounded and shall thereafter accrue
interest at the rate then applicable to Advances hereunder.
(e) Computation. The Reference Rate as of the
date of this Agreement is 8.50% per annum. In the event the Reference Rate is
changed from time to time hereafter, the applicable rate of interest hereunder
automatically and immediately shall be increased or decreased by an amount
equal to such change in the Reference Rate. All interest and fees chargeable
under the Loan Documents shall be computed on the basis of a 360 day year for
the actual number of days elapsed.
(f) Intent to Limit Charges to Maximum Lawful
Rate. In no event shall the interest rate or rates payable under this
Agreement, plus any other amounts paid in
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connection herewith, exceed the highest rate permissible under any law that a
court of competent jurisdiction shall, in a final determination, deem
applicable. Borrowers and Foothill, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and
manner of payment stated within it; provided, however, that, anything contained
herein to the contrary notwithstanding, if said rate or rates of interest or
manner of payment exceeds the maximum allowable under applicable law, then,
ipso facto as of the date of this Agreement, Borrowers are and shall be liable
only for the payment of such maximum as allowed by law, and payment received
from Borrowers in excess of such legal maximum, whenever received, shall be
applied to reduce the principal balance of the Obligations to the extent of
such excess.
2.7 COLLECTION OF ACCOUNTS. Borrowers shall at all times
maintain lockboxes (the "Lockboxes") and, immediately after the Closing Date,
shall instruct all Account Debtors with respect to the Accounts, General
Intangibles, and Negotiable Collateral of Borrowers to remit all Collections in
respect thereof to such Lockboxes. Borrowers, Foothill, and the Lockbox Banks
shall enter into the Lockbox Agreements, which among other things shall provide
for the opening of a Lockbox Account for the deposit of Collections at a
Lockbox Bank. Each Borrower agrees that all Collections and other amounts
received by such Borrower from any Account Debtor or any other source
immediately upon receipt shall be deposited into a Lockbox Account. No Lockbox
Agreement or arrangement contemplated thereby shall be modified by a Borrower
without the prior written consent of Foothill. Upon the terms and subject to
the conditions set forth in the Lockbox Agreements, all amounts received in
each Lockbox Account shall be wired each Business Day into an account (the
"Foothill Account") maintained by Foothill at a depositary selected by
Foothill.
2.8 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The
receipt of any Collections by Foothill (whether from transfers to Foothill by
the Lockbox Banks pursuant to the Lockbox Agreements or otherwise) immediately
shall be applied provisionally to reduce the Obligations outstanding under
Section 2.1, but shall not be considered a payment on account unless such
Collection item is a wire transfer of immediately available federal funds and
is made to the Foothill Account or unless and until such Collection item is
honored when presented for payment. From and after the Closing Date, Foothill
shall be entitled to charge Borrowers for two Business Days of `clearance' or
`float' at the rate set forth in Section 2.6(a)(i) or Section 2.6(b)(i), as
applicable, on all Collections that are received by Foothill (regardless of
whether forwarded by the Lockbox Banks to Foothill, whether provisionally
applied to reduce the Obligations under Section 2.1, or otherwise). This
across-the-board two Business Day clearance or float charge on all Collections
is acknowledged by the parties to constitute an integral aspect of the pricing
of Foothill's financing of Borrowers, and shall apply irrespective of the
characterization of whether receipts are owned by a Borrower or Foothill, and
whether or not there are any outstanding Advances, the effect of such clearance
or float charge being the equivalent of charging two Business Days of interest
on such Collections. Should any Collection item not be honored when presented
for payment, then Borrowers shall be deemed not to have made such payment, and
interest shall be recalculated accordingly. Anything to the contrary contained
herein notwithstanding, any
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Collection item shall be deemed received by Foothill only if it is received
into the Foothill Account on a Business Day on or before 11:00 a.m. California
time. If any Collection item is received into the Foothill Account on a
non-Business Day or after 11:00 a.m. California time on a Business Day, it
shall be deemed to have been received by Foothill as of the opening of business
on the immediately following Business Day. In the event that Borrowers' Loan
Account has a credit balance, Foothill shall, on each Business Day,
automatically transfer such credit balance to Borrowers' Designated Account so
long as no Event of Default has occurred and is continuing.
2.9 DESIGNATED ACCOUNT. Foothill is authorized to make
the Advances and the Term Loan, under this Agreement based upon telephonic or
other instructions received from anyone purporting to be an Authorized Person,
or without instructions if pursuant to Section 2.6(d). Borrowers agree to
establish and maintain a single Designated Account with the Designated Account
Bank for the purpose of receiving the proceeds of the Advances requested by
Borrowers and made by Foothill hereunder. Unless otherwise agreed by Foothill
and Borrowers, any Advance requested by Borrowers and made by Foothill
hereunder shall be made to the Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF
OBLIGATIONS. At the request of Borrowers, to facilitate and expedite the
administration and accounting processes and procedures of their borrowings
under this Agreement, Foothill has agreed, in lieu of maintaining separate loan
accounts on Foothill's books in the name of each of the Borrowers, that
Foothill shall maintain a single account on its books in the names of all of
the Borrowers (the "Loan Account"). All Advances and the Term Loan made by
Foothill to Borrowers or for Borrower's account, including accrued interest,
Foothill Expenses, and any other payment Obligations of Borrowers shall be made
jointly and severally to the Borrowers and shall be charged to the Loan
Account. In accordance with Section 2.8, the Loan Account will be credited
with all payments received by Foothill from any Borrower or for any Borrowers'
account, including all amounts received in the Foothill Account from any
Lockbox Bank. Each month Foothill shall render one statement regarding the
Loan Account to IRIS on behalf of Borrowers, including principal, interest,
fees, and including an itemization of all charges and expenses constituting
Foothill Expenses owing, and such statements shall be conclusively presumed to
be correct and accurate and constitute an account stated between Borrowers and
Foothill unless, within 30 days after receipt thereof by Borrowers, Borrowers
shall deliver to Foothill written objection thereto describing the error or
errors contained in any such statements. Each Borrower hereby expressly agrees
and acknowledges that Foothill shall have no obligation to account separately
to such Borrower.
2.11 FEES. Borrowers shall pay to Foothill the following
fees:
(a) Commitment Fee. A commitment fee in the
amount of $52,500 which has already been paid by Borrowers;
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(b) Unused Line Fee. On the first day of each
month during the term of this Agreement, an unused line fee in an amount equal
to 0.375% per annum times the Average Unused Portion of the Maximum Amount.
(c) Financial Examination, Documentation, and
Appraisal Fees. Foothill's customary fee of $650 per day per examiner, plus
out-of-pocket expenses for each financial analysis and examination (i.e.,
audits) of Borrowers performed by personnel employed by Foothill; provided,
however, that prior to the occurrence of an Event of Default, Borrowers shall
not be responsible for paying for more than four audits conducted by Foothill
in any 12 month period; and the actual charges paid or incurred by Foothill if
it elects to employ the services of one or more third Persons to perform such
financial analyses and examinations (i.e., audits) of Borrowers or to appraise
the Collateral; and
(d) Servicing Fee. On the first day of each
month during the term of this Agreement, and thereafter so long as any
Obligations are outstanding, a servicing fee in an amount equal to $3,000.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE AND THE
TERM LOAN. The obligation of Foothill to make the initial Advance or to make
the Term Loan is subject to the fulfillment, to the satisfaction of Foothill
and its counsel, of each of the following conditions on or before the Closing
Date:
(a) the Closing Date shall occur on or before May
8, 1998;
(b) Foothill shall have received searches
reflecting the filing of its financing statements and fixture filings;
(c) Foothill shall have received this Agreement
and each of the following documents, duly executed, and each such document
shall be in full force and effect:
(1) the Lockbox Agreements;
(2) the Disbursement Letter;
(3) the Pay-Off Letter, together with
UCC termination statements and other documentation evidencing
the termination by Existing Lender of its Liens in and to the
properties and assets of Borrowers;
(4) the Intellectual Property Security
Agreements and Copyright Security Agreements from each
Borrower; and
(5) the Stock Pledge;
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(d) Foothill shall have received a certificate
from the Secretary of each Borrower attesting to the resolutions of each
Borrower's Board of Directors authorizing its execution, delivery, and
performance of this Agreement and the other Loan Documents to which such
Borrower is a party and authorizing specific officers of such Borrower to
execute the same;
(e) Foothill shall have received copies of each
Borrower's Governing Documents, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary of such Borrower;
(f) Foothill shall have received a certificate of
status with respect to each Borrower, dated within 10 days of the Closing Date,
such certificate to be issued by the appropriate officer of the jurisdiction of
organization of such Borrower, which certificate shall indicate that such
Borrower is in good standing in such jurisdiction;
(g) Foothill shall have received certificates of
status with respect to each Borrower, each dated within 15 days of the Closing
Date, such certificates to be issued by the appropriate officer of the
jurisdictions in which its failure to be duly qualified or licensed would
constitute a Material Adverse Change, which certificates shall indicate that
such Borrower is in good standing in such jurisdictions;
(h) Foothill shall have received a certificate of
insurance, together with the endorsements thereto, as are required by Section
6.10, the form and substance of which shall be satisfactory to Foothill and its
counsel;
(i) Borrower shall have used its best efforts to
obtain such Collateral Access Agreements from lessors, warehousemen, bailees,
and other third persons as Foothill may require;
(j) Foothill shall have received an opinion of
Borrowers' counsel in form and substance satisfactory to Foothill in its sole
discretion;
(k) Foothill shall have received copies of all of
Borrowers' service and supply agreements, and Foothill shall be satisfied with
same;
(l) Foothill shall have received satisfactory
evidence that all of Borrowers' copyrights, trademarks, service marks,
tradenames and patents have been registered in the appropriate filing offices;
(m) after giving effect to the initial Advance
and the Term Loan, Borrowers shall have Availability under Section 2.1(a) of
not less than $500,000;
(n) Foothill shall have received the
original stock certificates evidencing 66% of the issued and outstanding
capital stock of Perceptive Scientific
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International, LTD, together with undated stock powers with respect thereto,
duly executed in blank by PSI, and in form and substance satisfactory to
Foothill, together with such evidence that Foothill shall require that Foothill
has received a first priority perfected Lien in and upon all of such stock;
(o) Foothill shall have received satisfactory
evidence that all tax returns required to be filed by Borrowers have been
timely filed and all taxes upon each Borrower or its properties, assets,
income, and franchises (including real property taxes and payroll taxes) have
been paid prior to delinquency, except such taxes that are the subject of a
Permitted Protest; and
(p) all other documents and legal matters in
connection with the transactions contemplated by this Agreement shall have been
delivered, executed, or recorded and shall be in form and substance
satisfactory to Foothill and its counsel.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND THE TERM
LOAN. The following shall be conditions precedent to all Advances, the Term
Loan hereunder:
(a) the representations and warranties contained
in this Agreement and the other Loan Documents shall be true and correct in all
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);
(b) no Default or Event of Default shall have
occurred and be continuing on the date of such extension of credit, nor shall
either result from the making thereof; and
(c) no injunction, writ, restraining order, or
other order of any nature prohibiting, directly or indirectly, the extending of
such credit shall have been issued and remain in force by any governmental
authority against any Borrower, Foothill, or any of their Affiliates.
3.3 CONDITION SUBSEQUENT.
(a) As a condition subsequent to initial closing
hereunder, Borrowers shall perform or cause to be performed the following (the
failure by Borrowers to so perform or cause to be performed constituting an
Event of Default):
(i) within 30 days of the Closing Date,
deliver to Foothill the certified copies of the policies of
insurance, together with the endorsements thereto, as are
required by Section 6.10, the form and substance of which
shall be satisfactory to Foothill and its counsel.
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(b) PSI's Accounts shall not be included in
Eligible Accounts until such time as Foothill has: (i) completed a financial
analysis and examination of PSI, and (ii) Foothill's credit committee has
approved the inclusion of such Accounts and the terms and conditions thereof.
Foothill shall use its best efforts to satisfy the conditions set forth in the
preceding sentence within 60 days of the date hereof.
3.4 TERM; AUTOMATIC RENEWAL. This Agreement shall become
effective upon the execution and delivery hereof by Borrowers and Foothill and
shall continue in full force and effect for a term ending on the date (the
"Renewal Date") that is three years from the Closing Date and automatically
shall be renewed for successive one year periods thereafter, unless sooner
terminated pursuant to the terms hereof. Either party may terminate this
Agreement effective on the Renewal Date or on any one year anniversary of the
Renewal Date by giving the other party at least 90 days prior written notice.
The foregoing notwithstanding, Foothill shall have the right to terminate its
obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of
this Agreement, all Obligations immediately shall become due and payable
without notice or demand. No termination of this Agreement, however, shall
relieve or discharge Borrowers of Borrowers' duties, Obligations, or covenants
hereunder, and Foothill's continuing security interests in the Collateral shall
remain in effect until all Obligations have been fully and finally discharged
and Foothill's obligation to provide additional credit hereunder is terminated.
If Borrowers have sent a notice of termination pursuant to the provisions of
Section 3.4, but fail to pay the Obligations in full on the date set forth in
said notice, then Foothill may, but shall not be required to, renew this
Agreement for an additional term of one year.
3.6 EARLY TERMINATION BY BORROWERS. The provisions of
Section 3.4 that allow termination of this Agreement by Borrowers only on the
Renewal Date and certain anniversaries thereof notwithstanding, Borrowers have
the option, at any time upon 45 days prior written notice to Foothill, to
terminate this Agreement by paying to Foothill, in cash, the Obligations, in
full, together with a premium (the "Early Termination Premium") equal to the
amount of the following, as applicable: (a) 3.00% of the Maximum Amount if
such termination occurs during the first year after the Closing Date, (b) 2.00%
of the Maximum Amount if such termination occurs during the second year after
the Closing Date, and (c) 1.00% of the Maximum Amount if such termination
occurs during the third year after the Closing Date.
3.7 TERMINATION UPON EVENT OF DEFAULT. If Foothill
terminates this Agreement upon the occurrence of an Event of Default, in view
of the impracticability and extreme difficulty of ascertaining actual damages
and by mutual agreement of the parties as to a reasonable calculation of
Foothill's lost profits as a result thereof, Borrowers shall pay to Foothill
upon the effective date of such termination, a premium in an amount equal to
the Early Termination Premium. The Early Termination Premium shall be presumed
to be the
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amount of damages sustained by Foothill as the result of the early termination
and Borrowers agree that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this Section 3.7 shall
be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Each Borrower hereby
grants to Foothill a continuing security interest in all of such Borrower's
currently existing and hereafter acquired or arising Collateral in order to
secure prompt repayment of any and all Obligations and in order to secure
prompt performance by such Borrower of each of its covenants and duties under
the Loan Documents. Foothill's security interests in the Collateral shall
attach to all Collateral without further act on the part of Foothill or
Borrowers. Anything contained in this Agreement or any other Loan Document to
the contrary notwithstanding, except for the sale of Inventory to buyers in the
ordinary course of business or as otherwise permitted in Section 7.4, no
Borrower has any authority, express or implied, to dispose of any item or
portion of the Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any
Collateral, including proceeds, is evidenced by or consists of Negotiable
Collateral, Borrowers, immediately upon the request of Foothill, shall endorse
and deliver physical possession of such Negotiable Collateral to Foothill.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND
NEGOTIABLE COLLATERAL. At any time that an Event of Default has occurred and
is continuing or Foothill deems itself insecure, Foothill or Foothill's
designee may (a) notify customers or Account Debtors of any Borrower that the
Accounts, General Intangibles, or Negotiable Collateral of such Borrower have
been assigned to Foothill or that Foothill has a security interest therein, and
(b) collect the Accounts, General Intangibles, and Negotiable Collateral of
such Borrower directly and charge the collection costs and expenses to the Loan
Account. Each Borrower agrees that it will hold in trust for Foothill, as
Foothill's trustee, any Collections that it receives and immediately will
deliver said Collections to Foothill in their original form as received by
Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At
any time upon the request of Foothill, Borrowers shall execute and deliver to
Foothill all financing statements, continuation financing statements, fixture
filings, security agreements, pledges, assignments, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents that
Foothill reasonably may request, in form satisfactory to Foothill, to perfect
and continue perfected Foothill's security interests in the Collateral, and in
order to fully consummate all of the transactions contemplated hereby and under
the other the Loan Documents.
4.5 POWER OF ATTORNEY. Each Borrower hereby irrevocably
makes, constitutes, and appoints Foothill (and any of Foothill's officers,
employees, or agents
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designated by Foothill) as such Borrower's true and lawful attorney, with power
to (a) if such Borrower refuses to, or fails timely to execute and deliver any
of the documents described in Section 4.4, sign the name of such Borrower on
any of the documents described in Section 4.4, (b) at any time that an Event of
Default has occurred and is continuing, or Foothill deems itself insecure, sign
such Borrower's name on any invoice or xxxx of lading relating to any Account
of such Borrower, drafts against Account Debtors, schedules and assignments of
Accounts of such Borrower, verifications of Accounts of such Borrower, and
notices to Account Debtors, (c) send requests for verification of Accounts of
such Borrower, (d) endorse such Borrower's name on any Collection item that may
come into Foothill's possession, (e) at any time that an Event of Default has
occurred and is continuing, notify the post office authorities to change the
address for delivery of such Borrower's mail to an address designated by
Foothill, to receive and open all mail addressed to such Borrower, and to
retain all mail relating to the Collateral of such Borrower and forward all
other mail to such Borrower, (f) at any time that an Event of Default has
occurred and is continuing, make, settle, and adjust all claims under such
Borrower's policies of insurance and make all determinations and decisions with
respect to such policies of insurance, and (g) at any time that an Event of
Default has occurred and is continuing, settle and adjust disputes and claims
respecting the Accounts of such Borrower directly with Account Debtors, for
amounts and upon terms that Foothill determines to be reasonable, and Foothill
may cause to be executed and delivered any documents and releases that Foothill
determines to be necessary. The appointment of Foothill as such Borrower's
attorney, and each and every one of Foothill's rights and powers, being coupled
with an interest, is irrevocable until all of the Obligations have been fully
and finally repaid and performed and Foothill's obligation to extend credit
hereunder is terminated.
4.6 RIGHT TO INSPECT. Foothill (through any of its
officers, employees, or agents) shall have the right, from time to time during
normal business hours hereafter to inspect Borrowers' Books and to check, test,
and appraise the Collateral in order to verify Borrowers' financial condition
or the amount, quality, value, condition of, or any other matter relating to,
the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement, each
Borrower makes the following representations and warranties which shall be
true, correct, and complete in all respects as of the date hereof, and shall be
true, correct, and complete in all respects as of the Closing Date, and at and
as of the date of the making of each Advance made thereafter, as though made on
and as of the date of such Advance or Term Loan (except to the extent that such
representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:
5.1 NO ENCUMBRANCES. Each Borrower has good and
indefeasible title to its Collateral, free and clear of Liens except for
Permitted Liens.
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5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts of each
Borrower are bona fide existing obligations created by the sale and delivery of
Inventory or the rendition of services to Account Debtors in the ordinary
course of such Borrower's business, unconditionally owed to such Borrower
without defenses, disputes, offsets, counterclaims, or rights of return or
cancellation. The property giving rise to such Eligible Accounts has been
delivered to the Account Debtor, or to the Account Debtor's agent for immediate
shipment to and unconditional acceptance by the Account Debtor. Borrowers have
not received notice of actual or imminent bankruptcy, insolvency, or material
impairment of the financial condition of any Account Debtor regarding any
Eligible Account.
5.3 EQUIPMENT. All of the Equipment of Borrowers is used
or held for use in Borrowers' business and is fit for such purposes.
5.4 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory
and Equipment of Borrowers are not stored with a bailee, warehouseman, or
similar party (without Foothill's prior written consent) and are located only
at the locations identified on Schedule 6.12 or otherwise permitted by Section
6.12.
5.5 INVENTORY RECORDS. Each Borrower keeps correct and
accurate records itemizing and describing the kind, type, quality, and quantity
of its Inventory, and such Borrower's cost therefor.
5.6 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief
executive office of each Borrower and each Borrower's FEIN is set forth below:
Borrower Chief Executive Office FEIN
-------- ---------------------- ----
IRIS 0000 Xxxx Xxxxxx 00-0000000
Xxxxxxxxxx, XX 00000
StatSpin 00 Xxxxx Xxxxxx 00-0000000
Xxxxxxx, XX 00000
PSI 0000 Xxxxx Xxxxx Xxxxxxxxx, 00-0000000
Xx. 000
Xxxxxx Xxxx, XX 00000
5.7 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each Borrower is duly organized and existing
and in good standing under the laws of the jurisdiction of its incorporation
and qualified and licensed to do business in, and in good standing in, any
state where the failure to be so licensed or qualified reasonably could be
expected to have a Material Adverse Change.
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(b) Set forth on Schedule 5.7, is a complete and
accurate list of each Borrower's direct and indirect Subsidiaries, showing:
(i) the jurisdiction of their incorporation; (ii) the number of shares of each
class of common and preferred stock authorized for each of such Subsidiaries;
and (iii) the number and the percentage of the outstanding shares of each such
class owned directly or indirectly by such Borrower. All of the outstanding
capital stock of each such Subsidiary has been validly issued and is fully paid
and non-assessable.
(c) Except as set forth on Schedule 5.7, no
capital stock (or any securities, instruments, warrants, options, purchase
rights, conversion or exchange rights, calls, commitments or claims of any
character convertible into or exercisable for capital stock) of any direct or
indirect Subsidiary of any Borrower is subject to the issuance of any security,
instrument, warrant, option, purchase right, conversion or exchange right,
call, commitment or claim of any right, title, or interest therein or thereto.
5.8 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by
each Borrower of this Agreement and the Loan Documents to which it is a party
have been duly authorized by all necessary corporate action.
(b) The execution, delivery, and performance by
each Borrower of this Agreement and the Loan Documents to which it is a party
do not and will not (i) violate any provision of federal, state, or local law
or regulation (including Regulations G, T, U, and X of the Federal Reserve
Board) applicable to such Borrower, the Governing Documents of such Borrower,
or any order, judgment, or decree of any court or other Governmental Authority
binding on such Borrower, (ii) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any
material contractual obligation or material lease of such Borrower, (iii)
result in or require the creation or imposition of any Lien of any nature
whatsoever upon any properties or assets of such Borrower, other than Permitted
Liens, or (iv) require any approval of stockholders or any approval or consent
of any Person under any material contractual obligation of such Borrower.
(c) Other than the filing of appropriate
financing statements, fixture filings, and mortgages, the execution, delivery,
and performance by each Borrower of this Agreement and the Loan Documents to
which such Borrower is a party do not and will not require any registration
with, consent, or approval of, or notice to, or other action with or by, any
federal, state, foreign, or other Governmental Authority or other Person.
(d) This Agreement and the Loan Documents to
which any Borrower is a party, and all other documents contemplated hereby and
thereby, when executed and delivered by such Borrower will be the legally valid
and binding obligations of such Borrower, enforceable against such Borrower in
accordance with their respective terms,
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except as enforcement may be limited by equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or limiting
creditors' rights generally.
(e) The Liens granted by each Borrower to
Foothill in and to its properties and assets pursuant to this Agreement and the
other Loan Documents are validly created, perfected, and first priority Liens,
subject only to Permitted Liens.
5.9 LITIGATION. There are no actions or proceedings
pending by or against any Borrower before any court or administrative agency
and no Borrower has any knowledge or belief of any pending, threatened, or
imminent litigation, governmental investigations, or claims, complaints,
actions, or prosecutions involving any Borrower or any guarantor of the
Obligations, except for: (a) ongoing collection matters in which a Borrower is
the plaintiff; (b) matters disclosed on Schedule 5.9; and (c) matters arising
after the date hereof that, if decided adversely to a Borrower, would not have
a Material Adverse Change.
5.10 NO MATERIAL ADVERSE CHANGE. All financial statements
relating to any Borrower or any guarantor of the Obligations that have been
delivered by any Borrower to Foothill have been prepared in accordance with
GAAP (except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and fairly present
such Borrower's (or such guarantor's, as applicable) financial condition as of
the date thereof and such Borrower's results of operations for the period then
ended. There has not been a Material Adverse Change with respect to any
Borrower (or such guarantor, as applicable) since December 31, 1997, the date
of the latest financial statements submitted to Foothill on or before the
Closing Date.
5.11 SOLVENCY. Upon consummation of the financing that is
the subject of this Agreement, each Borrower shall be Solvent. No transfer of
property is being made by any Borrower and no obligation is being incurred by
any Borrower in connection with the transactions contemplated by this Agreement
or the other Loan Documents with the intent to hinder, delay, or defraud either
present or future creditors of any Borrower.
5.12 EMPLOYEE BENEFITS. None of Borrowers, any of their
Subsidiaries, or any of their ERISA Affiliates maintains or contributes to any
Benefit Plan, other than those listed on Schedule 5.12. Each Borrower, each of
its Subsidiaries and each ERISA Affiliate have satisfied the minimum funding
standards of ERISA and the IRC with respect to each Benefit Plan to which it is
obligated to contribute. No ERISA Event has occurred nor has any other event
occurred that may result in an ERISA Event that reasonably could be expected to
result in a Material Adverse Change. None of Borrowers or their Subsidiaries,
any ERISA Affiliate, or any fiduciary of any Plan is subject to any direct or
indirect liability with respect to any Plan under any applicable law, treaty,
rule, regulation, or agreement. None of Borrowers or their Subsidiaries or any
ERISA Affiliate is required to provide security to any Plan under Section
401(a)(29) of the IRC.
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5.13 ENVIRONMENTAL CONDITION. None of Borrowers'
properties or assets has ever been used by any Borrower or, to the best of each
Borrower's knowledge, by previous owners or operators in the disposal of, or to
produce, store, handle, treat, release, or transport, any Hazardous Materials.
None of Borrowers' properties or assets has ever been designated or identified
in any manner pursuant to any environmental protection statute as a Hazardous
Materials disposal site, or a candidate for closure pursuant to any
environmental protection statute. No Lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned or operated by any Borrower. No Borrower has received a
summons, citation, notice, or directive from the Environmental Protection
Agency or any other federal or state governmental agency concerning any action
or omission by any Borrower resulting in the releasing or disposing of
Hazardous Materials into the environment.
5.14 YEAR 2000 COMPLIANCE.
(a) On the basis of a comprehensive inventory,
review and assessment currently being undertaken by each Borrower of such
Borrower's computer applications utilized by such Borrower or contained in
products produced or sold by such Borrower, and upon inquiry made of each
Borrower's material suppliers and vendors, each Borrower's management is of the
considered view that such Borrower, its products, and all such suppliers and
vendors will be Year 2000 Compliant before October 1, 1999.
(b) Each Borrower (i) has undertaken a detailed
inventory, review and assessment of all areas within its business and
operations that could be adversely affected by the failure of such Borrower or
its products to be Year 2000 Compliant on a timely basis, (ii) is developing a
detail plan and timeline for becoming Year 2000 Compliant on a timely basis,
and (iii) to date, is implementing that plan in accordance with that timetable
in all material respects. Each Borrower reasonably anticipates that it will be
Year 2000 Compliant on a timely basis.
6. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, such Borrower shall do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a standard and modern
system of accounting that enables such Borrower to produce financial statements
in accordance with GAAP, and maintain records pertaining to its Collateral that
contain information as from time to time may be requested by Foothill. Such
Borrower also shall keep a modern inventory reporting system that shows all
additions, sales, claims, returns, and allowances with respect to its
Inventory; provided, however, that this does not require Borrower to maintain a
perpetual Inventory system.
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6.2 COLLATERAL REPORTING. Provide Foothill with the
following documents at the following times in form satisfactory to Foothill:
(a) on each Business Day, a sales journal, collection journal, and credit
register since the last such schedule and a calculation of the Borrowing Base
as of such date, (b) on a monthly basis and, in any event, by no later than the
10th day of each month during the term of this Agreement, (i) a detailed
calculation of the Borrowing Base, and (ii) a detailed aging, by total, of such
Borrower's Accounts, together with a reconciliation to the detailed calculation
of the Borrowing Base previously provided to Foothill, (c) on a monthly basis
and, in any event, by no later than the 10th day of each month during the term
of this Agreement, a summary aging, by vendor, of such Borrower's accounts
payable and any book overdraft, (d) on each Business Day, notice of all
returns, disputes, or claims, (e) upon request, copies of invoices in
connection with its Accounts, customer statements, credit memos, remittance
advices and reports, deposit slips, shipping and delivery documents in
connection with its Accounts and for Inventory and Equipment acquired by such
Borrower, purchase orders and invoices, (f) on a quarterly basis, a detailed
list of such Borrower's customers, including such Borrower's Equipment leases,
(g) on a monthly basis, a calculation of the Dilution for the prior month; (h)
on a quarterly basis, Borrowers' Supply and Service Revenue in such detail as
Foothill shall request; (i) upon Foothill's request, Borrowers' electronic
data; and (j) such other reports as to the Collateral or the financial
condition of such Borrower as Foothill may request from time to time. Original
sales invoices evidencing daily sales shall be mailed by such Borrower to each
Account Debtor and, at Foothill's direction after the occurrence of an Event of
Default, the invoices shall indicate on their face that such Borrower's Account
has been assigned to Foothill and that all payments are to be made directly to
Foothill.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver
to Foothill: (a) as soon as available, but in any event within 45 days after
the end of each month during each of such Borrower's fiscal years, a company
prepared balance sheet, income statement, and, commencing with the month of
August 1998, statement of cash flow covering such Borrower's operations during
such period; and (b) as soon as available, but in any event within 90 days
after the end of each of such IRIS's fiscal years, financial statements of IRIS
for each such fiscal year, audited by independent certified public accountants
reasonably acceptable to Foothill and certified, without any qualifications, by
such accountants to have been prepared in accordance with GAAP, together with a
certificate of such accountants addressed to Foothill stating that such
accountants do not have knowledge of the existence of any Default or Event of
Default. Such audited financial statements shall include a balance sheet,
profit and loss statement, and statement of cash flow and, if prepared, such
accountants' letter to management.
Together with the above, IRIS also shall deliver to
Foothill IRIS' Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and Form
8-K Current Reports, and any other filings made by IRIS with the Securities and
Exchange Commission, if any, as soon as the same are filed, or any other
information that is provided by IRIS to its shareholders, and any other report
reasonably requested by Foothill relating to the financial condition of IRIS.
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Each month, together with the financial statements
provided pursuant to Section 6.3(a), IRIS shall deliver to Foothill a
certificate signed by its chief financial officer to the effect that, to the
best of his knowledge: (i) all financial statements delivered or caused to be
delivered to Foothill hereunder have been prepared in accordance with GAAP
(except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and fairly present
the financial condition of Borrowers, (ii) the representations and warranties
of Borrowers contained in this Agreement and the other Loan Documents are true
and correct in all material respects on and as of the date of such certificate,
as though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date), (iii) for
each month that also is the date on which a financial covenant in Section 7.20
is to be tested, a Compliance Certificate demonstrating in reasonable detail
compliance at the end of such period with the applicable financial covenants
contained in Section 7.20, and (iv) on the date of delivery of such certificate
to Foothill there does not exist any condition or event that constitutes a
Default or Event of Default (or, in the case of clauses (i), (ii), or (iii), to
the extent of any non-compliance, describing such non-compliance as to which he
or she may have knowledge and what action Borrowers have taken, is taking, or
propose to take with respect thereto).
Each Borrower shall have issued written instructions
to its independent certified public accountants authorizing them to communicate
with Foothill and to release to Foothill whatever financial information
concerning such Borrower that Foothill may request. Each Borrower hereby
irrevocably authorizes and directs all auditors, accountants, or other third
parties to deliver to Foothill, at such Borrower's expense, copies of such
Borrower's financial statements, papers related thereto, and other accounting
records of any nature in their possession, and to disclose to Foothill any
information they may have regarding such Borrower's business affairs and
financial conditions. Prior to the occurrence of an Event of Default, Foothill
shall notify IRIS telephonically if it intends to contact Borrower's auditors
or accountants.
6.4 TAX RETURNS. Deliver to Foothill copies of each of
such Borrower's future federal income tax returns, and any amendments thereto,
within 30 days of the filing thereof with the Internal Revenue Service.
6.5 INTENTIONALLY OMITTED.
6.6 RETURNS. Cause returns and allowances, if any, as
between such Borrower and its Account Debtors to be on the same basis and in
accordance with the usual customary practices of such Borrower, as they exist
at the time of the execution and delivery of this Agreement. If, at a time
when no Event of Default has occurred and is continuing, any Account Debtor
returns any Inventory to such Borrower, such Borrower promptly shall determine
the
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reason for such return and, if such Borrower accepts such return, issue a
credit memorandum (with a copy to be sent to Foothill) in the appropriate
amount to such Account Debtor. If, at a time when an Event of Default has
occurred and is continuing, any Account Debtor returns any Inventory to such
Borrower, such Borrower promptly shall determine the reason for such return
and, if Foothill consents (which consent shall not be unreasonably withheld),
issue a credit memorandum (with a copy to be sent to Foothill) in the
appropriate amount to such Account Debtor.
6.7 TITLE TO EQUIPMENT. Upon Foothill's request, such
Borrower immediately shall deliver to Foothill, properly endorsed, any and all
evidences of ownership of, certificates of title, or applications for title to
any items of its Equipment.
6.8 MAINTENANCE OF EQUIPMENT. Maintain its Equipment in
good operating condition and repair (ordinary wear and tear excepted), and make
all necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Other than those items
of Equipment that constitute fixtures on the Closing Date, such Borrower shall
not permit any item of its Equipment to become a fixture to real estate or an
accession to other property, and such Equipment shall at all times remain
personal property.
6.9 TAXES. Cause all assessments and taxes, whether
real, personal, or otherwise, due or payable by, or imposed, levied, or
assessed against such Borrower or any of its property to be paid in full,
before delinquency or before the expiration of any extension period, except to
the extent that the validity of such assessment or tax shall be the subject of
a Permitted Protest. Such Borrower shall make due and timely payment or
deposit of all such federal, state, and local taxes, assessments, or
contributions required of it by law, and will execute and deliver to Foothill,
on demand, appropriate certificates attesting to the payment thereof or deposit
with respect thereto. Such Borrower will make timely payment or deposit of all
tax payments and withholding taxes required of it by applicable laws, including
those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state,
and federal income taxes, and will, upon request, furnish Foothill with proof
satisfactory to Foothill indicating that such Borrower has made such payments
or deposits.
6.10 INSURANCE.
(a) At its expense, keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as are ordinarily insured against by
other owners in similar businesses. Such Borrower also shall maintain business
interruption, public liability, product liability, and property damage
insurance relating to such Borrower's ownership and use of the Collateral, as
well as insurance against larceny, embezzlement, and criminal misappropriation.
(b) All such policies of insurance shall be in
such form, with such companies, and in such amounts as may be reasonably
satisfactory to Foothill. All insurance required herein shall be written by
companies which are authorized to do insurance business in the State of
California. All hazard insurance and such other insurance as Foothill shall
specify, shall contain a California Form 438BFU (NS) mortgagee endorsement, or
an equivalent endorsement satisfactory to Foothill, showing Foothill as sole
loss payee thereof,
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and shall contain a waiver of warranties. Every policy of insurance referred
to in this Section 6.10 shall contain an agreement by the insurer that it will
not cancel such policy except after 30 days prior written notice to Foothill
and that any loss payable thereunder shall be payable notwithstanding any act
or negligence of such Borrower or Foothill which might, absent such agreement,
result in a forfeiture of all or a part of such insurance payment. Such
Borrower shall deliver to Foothill certified copies of such policies of
insurance and evidence of the payment of all premiums therefor.
(c) Original policies or certificates thereof
satisfactory to Foothill evidencing such insurance shall be delivered to
Foothill at least 30 days prior to the expiration of the existing or preceding
policies. Borrowers shall give Foothill prompt notice of any loss covered by
such insurance, and Foothill shall have the right to adjust any loss. Foothill
shall have the exclusive right to adjust all losses payable under any such
insurance policies without any liability to Borrowers whatsoever in respect of
such adjustments. Any monies received as payment for any loss under any
insurance policy including the insurance policies mentioned above, shall be
paid over to Foothill to be applied at the option of Foothill either to the
prepayment of the Obligations without premium, in such order or manner as
Foothill may elect, or shall be disbursed to Borrowers. Upon the occurrence of
an Event of Default, Foothill shall have the right to apply all prepaid
premiums to the payment of the Obligations in such order or form as Foothill
shall determine.
(d) Borrowers shall not take out separate
insurance concurrent in form or contributing in the event of loss with that
required to be maintained under this Section 6.10, unless Foothill is included
thereon as named insured with the loss payable to Foothill under a standard
California 438BFU (NS) Mortgagee endorsement, or its local equivalent. Such
Borrower immediately shall notify Foothill whenever such separate insurance is
taken out, specifying the insurer thereunder and full particulars as to the
policies evidencing the same, and originals of such policies immediately shall
be provided to Foothill.
6.11 NO SETOFFS OR COUNTERCLAIMS. Make payments hereunder
and under the other Loan Documents by or on behalf of such Borrower without
setoff or counterclaim and free and clear of, and without deduction or
withholding for or on account of, any federal, state, or local taxes.
6.12 LOCATION OF INVENTORY AND EQUIPMENT. Keep its
Inventory and Equipment only at the locations identified on Schedule 6.12;
provided, however, that Borrowers may amend Schedule 6.12 so long as such
amendment occurs by written notice to Foothill not less than 30 days prior to
the date on which the Inventory or Equipment of Borrowers is moved to such new
location, so long as such new location is within the continental United States,
and so long as, at the time of such written notification, Borrowers provide any
financing statements or fixture filings necessary to perfect and continue
perfected Foothill's security interests in such assets and also provides to
Foothill a Collateral Access Agreement.
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6.13 COMPLIANCE WITH LAWS. Comply with the requirements
of all applicable laws, rules, regulations, and orders of all federal, state or
local governmental authorities, including the Food, Drug, and Cosmetic Act, the
Fair Labor Standards Act and the Americans With Disabilities Act, other than
laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Change.
6.14 EMPLOYEE BENEFITS.
(a) Deliver to Foothill: (i) promptly, and in
any event within 10 Business Days after such Borrower or any of its
Subsidiaries knows or has reason to know that an ERISA Event has occurred that
reasonably could be expected to result in a Material Adverse Change, a written
statement of the chief financial officer of such Borrower describing such ERISA
Event and any action that is being taking with respect thereto by such
Borrower, any such Subsidiary or ERISA Affiliate, and any action taken or
threatened by the IRS, Department of Labor, or PBGC. Such Borrower or such
Subsidiary, as applicable, shall be deemed to know all facts known by the
administrator of any Benefit Plan of which it is the plan sponsor, (ii)
promptly, and in any event within three Business Days after the filing thereof
with the IRS, a copy of each funding waiver request filed with respect to any
Benefit Plan and all communications received by such Borrower, any of its
Subsidiaries or, to the knowledge of such Borrower, any ERISA Affiliate with
respect to such request, and (iii) promptly, and in any event within three
Business Days after receipt by such Borrower, any of its Subsidiaries or, to
the knowledge of such Borrower, any ERISA Affiliate, of the PBGC's intention to
terminate a Benefit Plan or to have a trustee appointed to administer a Benefit
Plan, copies of each such notice.
(b) Cause to be delivered to Foothill, upon
Foothill's request, each of the following: (i) a copy of each Plan (or, where
any such plan is not in writing, complete description thereof) (and if
applicable, related trust agreements or other funding instruments) and all
amendments thereto, all written interpretations thereof and written
descriptions thereof that have been distributed to employees or former
employees of such Borrower or its Subsidiaries; (ii) the most recent
determination letter issued by the IRS with respect to each Benefit Plan; (iii)
for the three most recent plan years, annual reports on Form 5500 Series
required to be filed with any governmental agency for each Benefit Plan; (iv)
all actuarial reports prepared for the last three plan years for each Benefit
Plan; (v) a listing of all Multiemployer Plans, with the aggregate amount of
the most recent annual contributions required to be made by such Borrower or
any ERISA Affiliate to each such plan and copies of the collective bargaining
agreements requiring such contributions; (vi) any information that has been
provided to such Borrower or any ERISA Affiliate regarding withdrawal liability
under any Multiemployer Plan; and (vii) the aggregate amount of the most recent
annual payments made to former employees of such Borrower or its Subsidiaries
under any Retiree Health Plan.
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6.15 LEASES. Pay when due all rents and other amounts
payable under any leases to which such Borrower is a party or by which such
Borrower's properties and assets are bound, unless such payments are the
subject of a Permitted Protest. To the extent that such Borrower fails timely
to make payment of such rents and other amounts payable when due under its
leases, Foothill shall be entitled, in its discretion, to reserve an amount
equal to such unpaid amounts against the Borrowing Base.
6.16 YEAR 2000 COMPLIANCE. Each Borrower will be Year
2000 Compliant by October 1, 1999.
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, such Borrower will not do any of the following:
7.1 INDEBTEDNESS. Create, incur, assume, permit,
guarantee, or otherwise become or remain, directly or indirectly, liable with
respect to any Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and
the Subordinate Indebtedness;
(b) Indebtedness set forth on Schedule 7.1;
(c) Indebtedness secured by Permitted Liens; and
(d) Refinancings, renewals, or extensions of
Indebtedness permitted under clauses (b) and (c) of this Section 7.1 (and
continuance or renewal of any Permitted Liens associated therewith) so long as:
(i) the terms and conditions of such refinancings, renewals, or extensions do
not materially impair the prospects of repayment of the Obligations by
Borrowers, (ii) the net cash proceeds of such refinancings, renewals, or
extensions do not result in an increase in the aggregate principal amount of
the Indebtedness so refinanced, renewed, or extended, (iii) such refinancings,
renewals, refundings, or extensions do not result in a shortening of the
average weighted maturity of the Indebtedness so refinanced, renewed, or
extended, and (iv) to the extent that Indebtedness that is refinanced was
subordinated in right of payment to the Obligations, then the subordination
terms and conditions of the refinancing Indebtedness must be at least as
favorable to Foothill as those applicable to the refinanced Indebtedness.
7.2 LIENS. Create, incur, assume, or permit to exist,
directly or indirectly, any Lien on or with respect to any of its property or
assets, of any kind, whether now owned or hereafter acquired, or any income or
profits therefrom, except for Permitted Liens (including Liens that are
replacements of Permitted Liens to the extent that the original
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Indebtedness is refinanced under Section 7.1(d) and so long as the replacement
Liens only encumber those assets or property that secured the original
Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Enter into any
merger, consolidation, reorganization, or recapitalization, or reclassify its
capital stock, or liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, assign, lease, transfer, or
otherwise dispose of, in one transaction or a series of transactions, all or
any substantial part of its property or assets except as otherwise provided in
Section 7.13(a).
7.4 DISPOSAL OF ASSETS. Sell, lease, assign, transfer,
or otherwise dispose of any of such Borrower's properties or assets other than:
(a) sales of Inventory and leases of rental units to customers in the ordinary
course of such Borrower's business as currently conducted, (b) assignments of
equipment leases to Copelco Capital, Inc. and other equipment lessors, in the
ordinary course of such Borrower's business as presently conducted, and (c) the
sale by IRIS of ineligible foreign Accounts to one or more international
factors in the ordinary course of IRIS' business as presently conducted.
7.5 CHANGE NAME. Change such Borrower's name, FEIN,
corporate structure (within the meaning of Section 9402(7) of the Code), or
identity, or add any new fictitious name.
7.6 GUARANTEE. Except as set forth on Schedule 7.6,
guarantee or otherwise become in any way liable with respect to the obligations
of any third Person except by endorsement of instruments or items of payment
for deposit to the account of such Borrower or which are transmitted or turned
over to Foothill.
7.7 NATURE OF BUSINESS. Make any change in the principal
nature of such Borrower's business.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing
permitted by Section 7.1(d), prepay, redeem, retire, defease, purchase, or
otherwise acquire any Indebtedness owing to any third Person, other than the
Obligations in accordance with this Agreement, and
(b) Directly or indirectly, amend, modify, alter,
increase, or change any of the terms or conditions of any agreement,
instrument, document, indenture, or other writing evidencing or concerning
Indebtedness permitted under Sections 7.1(b), (c), or (d).
7.9 CHANGE OF CONTROL. Cause, permit, or suffer,
directly or indirectly, any Change of Control.
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7.10 CONSIGNMENTS. Consign any Inventory or sell any of
its Inventory on xxxx and hold, sale or return, sale on approval, or other
conditional terms of sale.
7.11 DISTRIBUTIONS. Make any distribution or declare or
pay any dividends (in cash or other property, other than capital stock) on, or
purchase, acquire, redeem, or retire any of such Borrower's capital stock, of
any class, whether now or hereafter outstanding.
7.12 ACCOUNTING METHODS. Modify or change its method of
accounting or enter into, modify, or terminate any agreement currently
existing, or at any time hereafter entered into with any third party accounting
firm or service bureau for the preparation or storage of such Borrower's
accounting records without said accounting firm or service bureau agreeing to
provide Foothill information regarding the Collateral or such Borrower's
financial condition. Such Borrower waives the right to assert a confidential
relationship, if any, it may have with any accounting firm or service bureau in
connection with any information requested by Foothill pursuant to or in
accordance with this Agreement, and agrees that Foothill may contact directly
any such accounting firm or service bureau in order to obtain such information.
7.13 INVESTMENTS. Directly or indirectly make, acquire,
or incur any liabilities (including contingent obligations) for or in
connection with (a) the acquisition of the securities (whether debt or equity)
of, or other interests in, a Person other than IRIS' exercise of its option to
acquire the capital stock of Poly U/A Systems, Inc. with shares of IRIS' common
stock, (b) loans, advances, capital contributions, or transfers of property to
a Person other than among Borrowers, and other than advances, loans, capital
contributions or transfers of property to Perceptive Scientific International,
LTD. whose obligations to Borrowers shall not exceed $500,000 outstanding at
any one time (excluding intercompany accounts that do not include actual
transfers of cash or property), or (c) the acquisition of all or substantially
all of the properties or assets of a Person.
7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly
enter into or permit to exist any material transaction with any Affiliate of
such Borrower except for: (a) transactions that are in the ordinary course of
such Borrower's business, upon fair and reasonable terms, that are fully
disclosed to Foothill, and that are no less favorable to such Borrower than
would be obtained in an arm's length transaction with a non-Affiliate, and (b)
joint product research and development with Poly U/A Systems, Inc. and the
possible acquisition of the capital stock of such corporation by IRIS.
7.15 SUSPENSION. Suspend or go out of a substantial
portion of its business.
7.16 INTENTIONALLY OMITTED.
7.17 USE OF PROCEEDS. Use the proceeds of the Advances
and the Term Loan made hereunder for any purpose other than (i) on the Closing
Date, (y) to repay in full the outstanding principal, accrued interest, and
accrued fees and expenses owing to Existing
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Lender, and (z) to pay transactional costs and expenses incurred in connection
with this Agreement, and (ii) thereafter, consistent with the terms and
conditions hereof, for its lawful and permitted corporate purposes.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE;
INVENTORY AND EQUIPMENT WITH BAILEES. Relocate its chief executive office to a
new location without providing 30 days prior written notification thereof to
Foothill and so long as, at the time of such written notification, such
Borrower provides any financing statements or fixture filings necessary to
perfect and continue perfected Foothill's security interests and also provides
to Foothill a Collateral Access Agreement with respect to such new location.
The Inventory and Equipment of such Borrower shall not at any time now or
hereafter be stored with a bailee, warehouseman, or similar party without
Foothill's prior written consent.
7.19 NO PROHIBITED TRANSACTIONS UNDER ERISA. Directly or
indirectly:
(a) engage, or permit any Subsidiary of such
Borrower to engage, in any prohibited transaction which is reasonably likely to
result in a civil penalty or excise tax described in Sections 406 of ERISA or
4975 of the IRC for which a statutory or class exemption is not available or a
private exemption has not been previously obtained from the Department of
Labor;
(b) permit to exist with respect to any Benefit
Plan any accumulated funding deficiency (as defined in Sections 302 of ERISA
and 412 of the IRC), whether or not waived;
(c) fail, or permit any Subsidiary of such
Borrower to fail, to pay timely required contributions or annual installments
due with respect to any waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of such
Borrower to terminate, any Benefit Plan where such event would result in any
liability of such Borrower, any of its Subsidiaries or any ERISA Affiliate
under Title IV of ERISA;
(e) fail, or permit any Subsidiary of such
Borrower to fail, to make any required contribution or payment to any
Multiemployer Plan;
(f) fail, or permit any Subsidiary of such
Borrower to fail, to pay any required installment or any other payment required
under Section 412 of the IRC on or before the due date for such installment or
other payment;
(g) amend, or permit any Subsidiary of such
Borrower to amend, a Plan resulting in an increase in current liability for the
plan year such that either of such Borrower, any Subsidiary of such Borrower or
any ERISA Affiliate is required to provide security to such Plan under Section
401(a)(29) of the IRC; or
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(h) withdraw, or permit any Subsidiary of such
Borrower to withdraw, from any Multiemployer Plan where such withdrawal is
reasonably likely to result in any liability of any such entity under Title IV
of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of such Borrower, any of its
Subsidiaries or any ERISA Affiliate.
7.20 FINANCIAL COVENANTS. Have IRIS fail to maintain:
(a) Tangible Net Worth. Consolidated Tangible
Net Worth, measured on a fiscal quarter-end basis, of not less than the amount
set forth in the table below as at the fiscal quarter-end indicated:
Fiscal Quarter Ending Minimum Tangible Net Worth
---------------------------------- --------------------------
June 30, 1998 and September 30, 1998 $1,000,000
December 31, 1998 and March 31, 1999 2,000,000
June 30, 1999 and September 30, 1999 2,500,000
December 31, 1999 and March 31, 2000 3,000,000
June 30, 2000 and September 30, 2000 3,500,000
December 31, 2000 and each fiscal 4,000,000
quarter ending thereafter
(b) EBITDA. EBITDA, measured on a trailing four
quarter basis, of not less than the amount set forth in the table below as at
the fiscal quarter-end indicated:
Fiscal Quarter Ending Minimum EBITDA
------------------------------------------- --------------
June 30, 1998 and September 30, 1998 $3,000,000
December 31, 1998 and March 31, 1999 3,500,000
June 30, 1999 and September 30, 1999 4,000,000
December 31, 1999 and March 31, 2000 4,500,000
June 30, 2000 and September 30, 2000 5,000,000
December 31, 2000 and each fiscal 5,500,000
quarter ending thereafter
(c) Minimum Gross Margin. A gross margin of at
least 47% of Supply and Service Revenue.
7.21 CAPITAL EXPENDITURES. Make capital expenditures in
any fiscal year in the aggregate among Borrowers in excess of $1,750,000 for
the fiscal year ending December 31, 1998 and $2,150,000 for each fiscal year
thereafter.
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8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an
event of default (each, an "Event of Default") under this Agreement:
8.1 If Borrowers fail to pay when due and payable or when
declared due and payable, any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the
Bankruptcy Code, would have accrued on such amounts), fees and charges due
Foothill, reimbursement of Foothill Expenses, or other amounts constituting
Obligations);
8.2 If any Borrower fails to perform, keep, or observe
any term, provision, condition, covenant, or agreement contained in this
Agreement, in any of the Loan Documents, or in any other present or future
agreement between such Borrower and Foothill; provided, however, that
Borrowers' failure to perform, keep, or observe the terms of Sections 6.2, 6.3,
6.4, 6.7, 6.8, 6.13 or 6.15 shall not constitute an Event of Default unless
such failure continues for five days or more;
8.3 If there is a Material Adverse Change;
8.4 If any material portion of any Borrower's properties
or assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any third Person and such
attachment, seizure or levy is not released within 15 days of the date thereof;
8.5 If an Insolvency Proceeding is commenced by any
Borrower;
8.6 If an Insolvency Proceeding is commenced against any
Borrower and any of the following events occur: (a) such Borrower consents to
the institution of the Insolvency Proceeding against it; (b) the petition
commencing the Insolvency Proceeding is not timely controverted; (c) the
petition commencing the Insolvency Proceeding is not dismissed within 60
calendar days of the date of the filing thereof; provided, however, that,
during the pendency of such period, Foothill shall be relieved of its
obligation to extend credit hereunder; (d) an interim trustee is appointed to
take possession of all or a substantial portion of the properties or assets of,
or to operate all or any substantial portion of the business of, such Borrower;
or (e) an order for relief shall have been issued or entered therein;
8.7 If any Borrower is enjoined, restrained, or in any
way prevented by court order from continuing to conduct all or any material
part of its business affairs and such injunction or restraint continues for
more than five days;
8.8 If a notice of Lien, levy, or assessment is filed of
record with respect to any of any Borrower's properties or assets by the United
States Government, or any department, agency, or instrumentality thereof, or by
any state, county, municipal, or
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governmental agency, or if any taxes or debts owing at any time hereafter to
any one or more of such entities becomes a Lien, whether xxxxxx or otherwise,
upon any of such Borrower's properties or assets and the same is not paid on
the payment date thereof;
8.9 If a judgment or other claim becomes a Lien or
encumbrance upon any material portion of any Borrower's properties or assets
and such Lien or encumbrance is not discharged or released within 30 days of
the date thereof;
8.10 If there is a default in any agreement relating to
Indebtedness to which any Borrower is a party with one or more third Persons
and such default (a) occurs at the final maturity of the obligations
thereunder, or (b) results in a right by such third Person(s), irrespective of
whether exercised, to accelerate the maturity of such Borrower's obligations
thereunder;
8.11 If any Borrower makes any payment on account of
Indebtedness that has been contractually subordinated in right of payment to
the payment of the Obligations (including the Subordinate Indebtedness), except
to the extent such payment is permitted by the terms of the subordination
provisions applicable to such Indebtedness or the Subordination Agreement;
8.12 If any material misstatement or misrepresentation
exists now or hereafter in any warranty, representation, statement, or report
made to Foothill by any Borrower or any officer, employee, agent, or director
of any Borrower, or if any such material warranty or representation is
withdrawn; or
8.13 If the obligation of a guarantor, if any, under its
guaranty or other third Person under any Loan Document is limited or terminated
by operation of law or by the guarantor or other third Person thereunder, or
any such guarantor or other third Person becomes the subject of an Insolvency
Proceeding.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during
the continuation, of an Event of Default Foothill may, at its election, without
notice of its election and without demand, do any one or more of the following,
all of which are authorized by Borrowers:
(a) Declare all Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable;
(b) Cease advancing money or extending credit to
or for the benefit of Borrowers under this Agreement, under any of the Loan
Documents, or under any other agreement between Borrowers and Foothill;
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(c) Terminate this Agreement and any of the other
Loan Documents as to any future liability or obligation of Foothill, but
without affecting Foothill's rights and security interests in the Collateral
and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly
with Account Debtors for amounts and upon terms which Foothill considers
advisable, and in such cases, Foothill will credit Borrowers' Loan Account with
only the net amounts received by Foothill in payment of such disputed Accounts
after deducting all Foothill Expenses incurred or expended in connection
therewith;
(e) Cause Borrowers to hold all of their returned
Inventory in trust for Foothill, segregate all such returned Inventory from all
other property of any Borrower or in any Borrower's possession and
conspicuously label said returned Inventory as the property of Foothill;
(f) Without notice to or demand upon any Borrower
or any guarantor, make such payments and do such acts as Foothill considers
necessary or reasonable to protect its security interests in the Collateral.
Borrowers agree to assemble the Collateral if Foothill so requires, and to make
the Collateral available to Foothill as Foothill may designate. Each Borrower
authorizes Foothill to enter the premises where the Collateral is located, to
take and maintain possession of the Collateral, or any part of it, and to pay,
purchase, contest, or compromise any encumbrance, charge, or Lien that in
Foothill's determination appears to conflict with its security interests and to
pay all expenses incurred in connection therewith. With respect to any of
Borrowers' owned or leased premises, each Borrower hereby grants Foothill a
license to enter into possession of such premises and to occupy the same,
without charge, for up to 120 days in order to exercise any of Foothill's
rights or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to any Borrower (such notice
being expressly waived), and without constituting a retention of any collateral
in satisfaction of an obligation (within the meaning of Section 9505 of the
Code), set off and apply to the Obligations any and all (i) balances and
deposits of any Borrower held by Foothill (including any amounts received in
the Lockbox Accounts), or (ii) indebtedness at any time owing to or for the
credit or the account of any Borrower held by Foothill;
(h) Hold, as cash collateral, any and all
balances and deposits of any Borrower held by Foothill, and any amounts
received in the Lockbox Accounts, to secure the full and final repayment of all
of the Obligations;
(i) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral. Foothill is hereby granted a license or
other right to use, without charge, any Borrower's labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it
pertains to
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the Collateral, in completing production of, advertising for sale, and selling
any Collateral and each Borrower's rights under all licenses and all franchise
agreements shall inure to Foothill's benefit;
(j) Sell the Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for
cash or on terms, in such manner and at such places (including any Borrower's
premises) as Foothill determines is commercially reasonable. It is not
necessary that the Collateral be present at any such sale;
(k) Foothill shall give notice of the disposition
of the Collateral as follows:
(1) Foothill shall give Borrowers and
each holder of a security interest in the Collateral who has filed with
Foothill a written request for notice, a notice in writing of the time and
place of public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the Collateral, then the
time on or after which the private sale or other disposition is to be made;
(2) The notice shall be personally
delivered or mailed, postage prepaid, to Borrowers as provided in Section 12,
at least five days before the date fixed for the sale, or at least five days
before the date on or after which the private sale or other disposition is to
be made; no notice needs to be given prior to the disposition of any portion of
the Collateral that is perishable or threatens to decline speedily in value or
that is of a type customarily sold on a recognized market. Notice to Persons
other than Borrowers claiming an interest in the Collateral shall be sent to
such addresses as they have furnished to Foothill;
(3) If the sale is to be a public sale,
Foothill also shall give notice of the time and place by publishing a notice
one time at least 5 days before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be held;
(l) Foothill may credit bid and purchase at any
public sale; and
(m) Any deficiency that exists after disposition
of the Collateral as provided above will be paid immediately by Borrowers. Any
excess will be returned, without interest and subject to the rights of third
Persons, by Foothill to Borrowers.
9.2 REMEDIES CUMULATIVE. Foothill's rights and remedies
under this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Foothill shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by
Foothill of one right or remedy shall be deemed an election, and no waiver by
Foothill of any Event of Default shall be deemed a continuing waiver. No delay
by Foothill shall constitute a waiver, election, or acquiescence by it.
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10. TAXES AND EXPENSES.
If any Borrower fails to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or
assets, rents or other amounts payable under such leases) due to third Persons,
or fails to make any deposits or furnish any required proof of payment or
deposit, all as required under the terms of this Agreement, then, to the extent
that Foothill determines that such failure by such Borrower could result in a
Material Adverse Change, in its discretion and without prior notice to
Borrowers, Foothill may do any or all of the following: (a) make payment of
the same or any part thereof; (b) set up such reserves in Borrowers' Loan
Account as Foothill deems necessary to protect Foothill from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type described in Section 6.10, and take any action with respect to such
policies as Foothill deems prudent. Any such amounts paid by Foothill shall
constitute Foothill Expenses. Any such payments made by Foothill shall not
constitute an agreement by Foothill to make similar payments in the future or a
waiver by Foothill of any Event of Default under this Agreement. Foothill need
not inquire as to, or contest the validity of, any such expense, tax, or Lien
and the receipt of the usual official notice for the payment thereof shall be
conclusive evidence that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Each Borrower waives demand,
protest, notice of protest, notice of default or dishonor, notice of payment
and nonpayment, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Foothill on which such Borrower may in any way
be liable.
11.2 FOOTHILL'S LIABILITY FOR COLLATERAL. So long as
Foothill complies with its obligations, if any, under Section 9207 of the Code,
Foothill shall not in any way or manner be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the
value thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person. All risk of loss, damage, or destruction
of the Collateral shall be borne by Borrowers.
11.3 INDEMNIFICATION. Borrowers shall pay, indemnify,
defend, and hold Foothill, each Participant, and each of their respective
officers, directors, employees, counsel, agents, and attorneys-in-fact (each,
an "Indemnified Person") harmless (to the fullest extent permitted by law) from
and against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any
time asserted against, imposed upon, or incurred by any of them in connection
with or as a result of or related to the execution, delivery, enforcement,
performance, and administration (including any of the foregoing
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arising out of the administration of the credit facilities hereunder on a joint
borrowing basis) of this Agreement and any other Loan Documents or the
transactions contemplated herein, and with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document,
or the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event
or circumstance in any manner related thereto (all the foregoing, collectively,
the "Indemnified Liabilities"). Borrowers shall have no obligation to any
Indemnified Person under this Section 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the Obligations.
11.4 JOINT BORROWERS.
(a) Each Borrower agrees that it is jointly and
severally, directly and primarily liable to Foothill for payment in full of all
Obligations, whether for principal, interest or otherwise and that such
liability is independent of the duties, obligations, and liabilities of the
other Borrowers. Foothill may bring a separate action or actions on each, any,
or all of the Obligations against any Borrower, whether action is brought
against the other Borrowers or whether the other Borrowers are joined in such
action. In the event that any Borrower fails to make any payment of any
Obligations on or before the due date thereof, the other Borrowers immediately
shall cause such payment to be made or each of such Obligations to be
performed, kept, observed, or fulfilled.
(b) The Loan Documents are a primary and original
obligation of each Borrower, are not the creation of a surety relationship, and
are an absolute, unconditional, and continuing promise of payment and
performance which shall remain in full force and effect without respect to
future changes in conditions, including any change of law or any invalidity or
irregularity with respect to the Loan Documents. Each Borrower agrees that its
liability under the Loan Documents shall be immediate and shall not be
contingent upon the exercise or enforcement by Foothill of whatever remedies it
may have against the other Borrowers, or the enforcement of any lien or
realization upon any security Foothill may at any time possess. Each Borrower
consents and agrees that Foothill shall be under no obligation (under Section
2899 or 3433 of the California Civil Code or otherwise) to marshal any assets
of any Borrower against or in payment of any or all of the Obligations.
(c) Each Borrower acknowledges that it is
presently informed as to the financial condition of the other Borrowers and of
all other circumstances which a diligent inquiry would reveal and which bear
upon the risk of nonpayment of the Obligations. Each Borrower hereby covenants
that it will continue to keep informed as to the financial condition of the
other Borrowers, the status of the other Borrowers and of all circumstances
which bear upon the risk of nonpayment of the Obligations. Absent a written
request from any Borrower to Foothill for information, such Borrower hereby
waives any and all rights it may have to
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require Foothill to disclose to such Borrower any information which Foothill
may now or hereafter acquire concerning the condition or circumstances of the
other Borrowers.
(d) The liability of each Borrower under the Loan
Documents includes Obligations arising under successive transactions
continuing, compromising, extending, increasing, modifying, releasing, or
renewing the Obligations, changing the interest rate, payment terms, or other
terms and conditions thereof, or creating new or additional Obligations after
prior Obligations have been satisfied in whole or in part. To the maximum
extent permitted by law, each Borrower hereby waives any right to revoke its
liability under the Loan Documents as to future indebtedness, and in connection
therewith, each Borrower hereby waives any rights it may have under Section
2815 of the California Civil Code. If such a revocation is effective
notwithstanding the foregoing waiver, each Borrower acknowledges and agrees
that (a) no such revocation shall be effective until written notice thereof has
been received by Foothill, (b) no such revocation shall apply to any
Obligations in existence on such date (including, any subsequent continuation,
extension, or renewal thereof, or change in the interest rate, payment terms,
or other terms and conditions thereof), (c) no such revocation shall apply to
any Obligations made or created after such date to the extent made or created
pursuant to a legally binding commitment of Foothill in existence on the date
of such revocation, (d) no payment by such Borrower or from any other source
prior to the date of such revocation shall reduce the maximum obligation of the
other Borrowers hereunder, and (e) any payment by such Borrower or from any
source other than Borrowers, subsequent to the date of such revocation, shall
first be applied to that portion of the Obligations as to which the revocation
is effective and which are not, therefore, guaranteed hereunder, and to the
extent so applied shall not reduce the maximum obligation of each Borrower
hereunder.
(e) (i) Each Borrower absolutely,
unconditionally, knowingly, and expressly waives:
(1) (A) notice of acceptance hereof; (B)
notice of any loans or other financial accommodations made or extended
under the Loan Documents or the creation or existence of any
Obligations; (C) notice of the amount of the Obligations, subject,
however, to each Borrower's right to make inquiry of Foothill to
ascertain the amount of the Obligations at any reasonable time; (D)
notice of any adverse change in the financial condition of the other
Borrowers or of any other fact that might increase such Borrower's
risk hereunder; (E) notice of presentment for payment, demand,
protest, and notice thereof as to any instruments among the Loan
Documents; and (F) all notices (except if such notice is specifically
required to be given to Borrowers hereunder or under the Loan
Documents) and demands to which such Borrower might otherwise be
entitled.
(2) its right, under Sections 2845 or
2850 of the California Civil Code, or otherwise, to require Foothill
to institute suit against, or to exhaust any rights and remedies which
Foothill has or may have against, the other Borrowers or
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any third party, or against any Collateral provided by the other
Borrowers, or any third party. In this regard, each Borrower agrees
that it is bound to the payment of all Obligations, whether now
existing or hereafter accruing, as fully as if such Obligations were
directly owing to Foothill by such Borrower. Each Borrower further
waives any defense arising by reason of any disability or other
defense (other than the defense that the Obligations shall have been
fully and finally performed and indefeasibly paid) of the other
Borrowers or by reason of the cessation from any cause whatsoever of
the liability of the other Borrowers in respect thereof.
(3) (A) any rights to assert against
Foothill any defense (legal or equitable), set-off, counterclaim, or
claim which such Borrower may now or at any time hereafter have
against the other Borrowers or any other party liable to Foothill; (B)
any defense, set-off, counterclaim, or claim, of any kind or nature,
arising directly or indirectly from the present or future lack of
perfection, sufficiency, validity, or enforceability of the
Obligations or any security therefor; (C) any defense such Borrower
has to performance hereunder, and any right such Borrower has to be
exonerated, provided by Sections 2819, 2822, or 2825 of the California
Civil Code, or otherwise, arising by reason of: the impairment or
suspension of Foothill's rights or remedies against the other
Borrowers; the alteration by Foothill of the Obligations; any
discharge of the other Borrowers' obligations to Foothill by operation
of law as a result of Foothill's intervention or omission; or the
acceptance by Foothill of anything in partial satisfaction of the
Obligations; (D) the benefit of any statute of limitations affecting
such Borrower's liability hereunder or the enforcement thereof, and
any act which shall defer or delay the operation of any statute of
limitations applicable to the Obligations shall similarly operate to
defer or delay the operation of such statute of limitations applicable
to such Borrower's liability hereunder.
(ii) Until such time as all Obligations have been
fully, finally, and indefeasibly paid in full, in cash, each Borrower hereby
absolutely, unconditionally, knowingly, and expressly postpones: (1) any right
of subrogation such Borrower has or may have as against the other Borrowers
with respect to the Obligations; (2) any right to proceed against the other
Borrowers or any other Person, now or hereafter, for contribution, indemnity,
reimbursement, or any other suretyship rights and claims, whether direct or
indirect, liquidated or contingent, whether arising under express or implied
contract or by operation of law, which such Borrower may now have or hereafter
have as against the other Borrowers with respect to the Obligations; and (3)
any right to proceed or seek recourse against or with respect to any property
or asset of the other Borrowers.
(iii) WITHOUT LIMITING THE GENERALITY OF ANY OTHER
WAIVER OR OTHER PROVISION SET FORTH IN THIS SECTION 11.4, EACH BORROWER HEREBY
ABSOLUTELY, KNOWINGLY, UNCONDITIONALLY, AND EXPRESSLY WAIVES AND AGREES NOT TO
ASSERT ANY AND ALL BENEFITS OR DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER
ANY ONE OR MORE OF CALIFORNIA CIVIL CODE SECTIONS 2799,
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2808, 2809, 2810, 2815, 2819, 2820, 2821, 2822, 2825, 2839, 2845, 2848, 2849,
AND 2850, CALIFORNIA UNIFORM COMMERCIAL CODE SECTIONS 3116, 3118, 3119, 3419,
3605, 9504, 9505, AND 9507, AND CHAPTER 2 OF TITLE 14 OF PART 4 OF DIVISION 3
OF THE CALIFORNIA CIVIL CODE.
(f) Each Borrower consents and agrees that,
without notice to or by such Borrower, and without affecting or impairing the
liability of such Borrower hereunder, Foothill may, by action or inaction:
(i) compromise, settle, extend the
duration or the time for the payment
of, or discharge the performance of,
or may refuse to or otherwise not
enforce the Loan Documents, or any
part thereof, with respect to the
other Borrowers;
(ii) release the other Borrowers or grant
other indulgences to the other
Borrowers in respect thereof; or
(iii) release or substitute any guarantor,
if any, of the Obligations, or
enforce, exchange, release, or waive
any security for the Obligations or
any guaranty of the Obligations, or
any portion thereof.
(g) Foothill shall have the right to seek
recourse against each Borrower to the fullest extent provided for herein, and
no election by Foothill to proceed in one form of action or proceeding, or
against any party, or on any obligation, shall constitute a waiver of
Foothill's right to proceed in any other form of action or proceeding or
against other parties unless Foothill has expressly waived such right in
writing. Specifically, but without limiting the generality of the foregoing,
no action or proceeding by Foothill under the Loan Documents shall serve to
diminish the liability of any Borrower thereunder except to the extent that
Foothill finally and unconditionally shall have realized indefeasible payment
by such action or proceeding.
(h) The Obligations shall not be considered
indefeasibly paid for purposes of this Section 11.4 unless and until all
payments to Foothill are no longer subject to any right on the part of any
person, including any Borrower, any Borrower as a debtor in possession, or any
trustee (whether appointed pursuant to 11 U.S.C., or otherwise) of any
Borrower's assets to invalidate or set aside such payments or to seek to recoup
the amount of such payments or any portion thereof, or to declare same to be
fraudulent or preferential. Upon such full and final performance and
indefeasible payment of the Obligations, Foothill shall have no obligation
whatsoever to transfer or assign its interest in the Loan Documents to any
Borrower. In the event that, for any reason, any portion of such payments to
Foothill is set aside or restored, whether voluntarily or involuntarily, after
the making thereof, then the obligation intended to be satisfied thereby shall
be revived and continued in full force and
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effect as if said payment or payments had not been made, and each Borrower
shall be liable for the full amount Foothill is required to repay plus any and
all costs and expenses (including attorneys' fees and attorneys' fees incurred
pursuant to 11 U.S.C.) paid by Foothill in connection therewith.
Borrowers and each of them warrant and agree that each of the
waivers and consents set forth herein are made after consultation with legal
counsel and with full knowledge of their significance and consequences, with
the understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Borrowers
otherwise may have against other Borrowers, the Lender Group or others, or
against Collateral. If any of the waivers or consents herein are determined to
be contrary to any applicable law or public policy, such waivers and consents
shall be effective to the maximum extent permitted by law.
12. NOTICES.
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 Foothill, as the case may be, at its address set forth below:
IF TO BORROWERS: C/O INTERNATIONAL REMOTE
IMAGING SYSTEMS, INC.
0000 Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. XxXxxxxx,
Vice President and
Chief Financial Officer
Fax No. 000.000.0000
WITH COPIES TO: XXXX XXXXXXX & XXXXXXXXXXX LLP
00000 Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxxxx, Esq.
Fax No. 000.000.0000
IF TO FOOTHILL: FOOTHILL CAPITAL CORPORATION
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Business Finance Division
Manager
Fax No. 000.000.0000
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WITH COPIES TO: BUCHALTER, NEMER, FIELDS & YOUNGER
000 Xxxxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Fax No. 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 demands sent in accordance with this Section 12,
other than notices by Foothill in connection with Sections 9504 or 9505 of the
Code, shall be deemed received on the earlier of the date of actual receipt or
3 days after the deposit thereof in the mail. Each Borrower acknowledges and
agrees that notices sent by Foothill in connection with Sections 9504 or 9505
of the Code shall be deemed sent when deposited in the mail or personally
delivered, or, where permitted by law, transmitted by telefacsimile or other
similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE
RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING
HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER
COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH BORROWER
AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT
EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
13. EACH BORROWER AND FOOTHILL HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE
LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
OR STATUTORY CLAIMS. EACH BORROWER AND FOOTHILL REPRESENTS THAT THEY HAVE
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING
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CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWERS' DOCUMENTS.
All documents, schedules, invoices, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by Foothill
four months after they are delivered to or received by Foothill, unless
Borrowers request, in writing, the return of said documents, schedules, or
other papers and makes arrangements, at Borrowers' expense, for their return.
15. GENERAL PROVISIONS.
15.1 EFFECTIVENESS. This Agreement shall be binding and
deemed effective when executed by Borrowers and Foothill.
15.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind
and inure to the benefit of the respective successors and assigns of each of
the parties; provided, however, that no Borrower may assign this Agreement or
any rights or duties hereunder without Foothill's prior written consent and any
prohibited assignment shall be absolutely void. No consent to an assignment by
Foothill shall release the assigning Borrower from its Obligations. Foothill
may assign this Agreement and its rights and duties hereunder and no consent or
approval by Borrowers is required in connection with any such assignment.
Foothill reserves the right to sell, assign, transfer, negotiate, or grant
participations in all or any part of, or any interest in Foothill's rights and
benefits hereunder. In connection with any such assignment or participation,
Foothill may disclose all documents and information which Foothill now or
hereafter may have relating to any Borrower or any Borrower's business. To the
extent that Foothill assigns its rights and obligations hereunder to a third
Person, Foothill thereafter shall be released from such assigned obligations to
Borrowers and such assignment shall effect a novation between Borrowers and
such third Person.
15.3 SECTION HEADINGS. Headings and numbers have been set
forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each section applies equally to this entire
Agreement.
15.4 INTERPRETATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against Foothill
or Borrowers, 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.
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15.5 SEVERABILITY OF PROVISIONS. 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.
15.6 AMENDMENTS IN WRITING. This Agreement can only be
amended by a writing signed by both Foothill and Borrowers.
15.7 COUNTERPARTS; TELEFACSIMILE EXECUTION. This
Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
shall be deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed counterpart
of this Agreement by telefacsimile shall be equally as effective as delivery of
an original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability,
and binding effect of this Agreement.
15.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the
incurrence or payment of the Obligations by any Borrower or any guarantor of
the Obligations or the transfer by either or both of such parties to Foothill
of any property of either or both of such parties should for any reason
subsequently be declared to be void or voidable under any state or federal law
relating to creditors' rights, including provisions of the Bankruptcy Code
relating to fraudulent conveyances, preferences, and other voidable or
recoverable payments of money or transfers of property (collectively, a
"Voidable Transfer"), and if Foothill is required to repay or restore, in whole
or in part, any such Voidable Transfer, or elects to do so upon the reasonable
advice of its counsel, then, as to any such Voidable Transfer, or the amount
thereof that Foothill is required or elects to repay or restore, and as to all
reasonable costs, expenses, and attorneys fees of Foothill related thereto, the
liability of Borrowers or such guarantor automatically shall be revived,
reinstated, and restored and shall exist as though such Voidable Transfer had
never been made.
15.9 INTEGRATION. This Agreement, together with the other
Loan Documents, reflects the entire understanding of the parties with respect
to the transactions
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contemplated hereby and shall not be contradicted or qualified by any other
agreement, oral or written, before the date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in Los Angeles, California.
INTERNATIONAL REMOTE IMAGING
SYSTEMS, INC., a Delaware corporation
By /s/ XXXXXX X. XxXXXXXX
--------------------------------------
Title: Vice-President, Finance and
Administration and Chief
Financial Officer
PERCEPTIVE SCIENTIFIC INSTRUMENTS,
INC., a Delaware corporation
By /s/ XXXXXX X. XxXXXXXX
--------------------------------------
Title: Vice-President and Chief
Financial Officer
STATSPIN, INC.,
a Massachusetts corporation
By /s/ XXXXXX X. XxXXXXXX
--------------------------------------
Title: Vice-President and Chief
Financial Officer
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ XXXXX XXXXX
--------------------------------------
Title: AVP
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