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EXHIBIT 10.2
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of June 18, 1999 and is made by and
between SUPERCONDUCTOR TECHNOLOGIES, INC., a Delaware corporation (the
"Borrower"), and PNC BANK, NATIONAL ASSOCIATION ("Bank").
WITNESSETH:
WHEREAS, Borrower has requested Bank to provide a revolving credit
facility to Borrower in an aggregate principal amount not to exceed
$2,500,000.00; and
WHEREAS, the revolving credit facility shall be used for general and
corporate working capital purposes; and
WHEREAS, Bank is willing to provide such credit upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, covenant and agree as follows:
1. CERTAIN DEFINITIONS
1.1 Certain Definitions.
In addition to words and terms defined elsewhere in this
Agreement, the following words and terms shall have the following meanings,
respectively, unless the context hereof clearly requires otherwise:
Accounts shall mean all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
Affiliate as to any Person shall mean any other Person (i) which
directly or indirectly controls, is controlled by, or is under common control
with such Person, (ii) which beneficially owns or holds 15% or more of any class
of the voting or other equity interests of such Person, or (iii) 15% or more of
any class of voting interests or other equity interests of which is beneficially
owned or held, directly or indirectly, by such Person. Control, as used in this
definition, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, including
the power to elect a majority of the directors or trustees of a corporation or
trust, as the case may be.
Agreement shall mean this Credit Agreement, as the same may be
supplemented or amended from time to time, including all schedules and exhibits.
Annual Statements shall have the meaning assigned to that term
in Section 5.1.8.1.
Authorized Officer shall mean those individuals, designated by
written notice to Bank from Borrower, authorized to execute notices, reports and
other documents on behalf of Borrower required hereunder. The Borrower may amend
such list of individuals from time to time by giving written notice of such
amendment to Bank.
Base Rate shall mean the interest rate per annum announced from
time to time by Bank at its Principal Office as its then prime rate, which rate
may not be the lowest rate then being charged commercial borrowers by Bank.
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Borrower shall mean Superconductor Technologies, Inc., a
corporation organized and existing under the laws of the State of Delaware.
Borrower's Books shall mean all of Borrower's books and records
including, without limitation: ledgers, records concerning Borrower's assets or
liabilities, business operations or financial condition; and all computer
programs, or tape files and the equipment containing such information.
Borrowing Base means an amount equal to (I) eighty percent (80%)
of Eligible Accounts PLUS (II) $500,000 until December 31, 1999, after which the
Borrowing Base shall be as set forth in (i) above.
Borrowing Date shall mean, with respect to any Revolving Credit
Loan, the date for the making thereof, which shall be a Business Day.
Business Day shall mean any day other than a Saturday or Sunday
or a legal holiday on which commercial banks are authorized or required to be
closed for business in Pittsburgh, Pennsylvania.
Cash Flow from Operations for any period of determination shall
mean (i) the sum of net income, depreciation, amortization, other non-cash
charges to net income, interest expense and income tax expense minus (ii)
non-cash credits to net income, in each case of Borrower for such period
determined and in accordance with GAAP.
Closing Date shall mean June 18, 1999 or, the date upon which
all the conditions specified in Section 7 have been satisfied or waived.
Collateral shall mean the UCC Collateral and the Intellectual
Property Collateral.
Commitment shall mean an extension of credit in an amount of up
to Two Million Five Hundred Thousand Dollars ($2,500,000).
Commitment Fee shall have the meaning assigned to that term in
Section 2.2.
Consideration shall mean with respect to any Permitted
Acquisition, the aggregate of (i) the cash paid by Borrower, directly or
indirectly, to the seller in connection therewith, (ii) the Indebtedness
incurred or assumed by Borrower, whether in favor of the seller or otherwise and
whether fixed or contingent, (iii) any Guaranty given or incurred by any Person
in connection therewith, and (iv) any other consideration given or obligation
incurred by Borrower in connection therewith.
Dollar, Dollars, U.S. Dollars and the symbol $ shall mean lawful
money of the United States of America.
Eligible Accounts means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in the Security Agreement;
provided, that standards of eligibility may be fixed and revised from time to
time by Bank in Bank's reasonable judgment, in accordance with Bank policy and
upon notification thereof to Borrower in accordance with the provisions hereof.
Unless otherwise agreed to by Bank in writing, Eligible Accounts shall not
include the following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within ninety (90)
days of invoice date;
(c) Accounts with respect to an account debtor, including
Affiliates, whose total obligations to Borrower exceed twenty percent (20%) of
all Accounts, except with respect to account debtors that have been approved by
Bank in writing to exceed the aforementioned percentage;
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(d) Accounts with respect to which the account debtor does not
have its principal place of business in the United States;
(e) Accounts with respect to which the account debtor is a
federal, state, or local governmental entity or any department, agency, or
instrumentality thereof, except for those Accounts of the United States or any
department, agency or instrumentality thereof as to which the payee has assigned
its rights to payment thereof to Bank and the assignment has been acknowledged,
pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. 3727);
(f) Accounts with respect to which Borrower is liable to the
account debtor, but only to the extent of any amounts owing to the account
debtor (sometimes referred to as "contra" accounts, e.g. accounts payable,
customer deposits, credit accounts etc.);
(g) Accounts generated by demonstration or promotional
equipment, or 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;
(h) Accounts with respect to which the account debtor is an
Affiliate, officer, employee, or agent of Borrower;
(i) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business; and
(j) Accounts the collection of which Bank reasonably determines
after inquiry and consultation with Borrower to be doubtful.
Environmental Complaint shall mean any written complaint setting
forth a cause of action for personal or property damage or natural resource
damage or equitable relief, order, notice of violation, citation, request for
information issued pursuant to any Environmental Laws by an Official Body,
subpoena or other written notice of any type relating to, arising out of, or
issued pursuant to, any of the Environmental Laws or any Environmental
Conditions, as the case may be.
Environmental Conditions shall mean any conditions of the
environment, including the workplace, the ocean, natural resources (including
flora or fauna), soil, surface water, groundwater, any actual or potential
drinking water supply sources, substrata or the ambient air, relating to or
arising out of, or caused by, the use, handling, storage, treatment, recycling,
generation, transportation, release, spilling, leaking, pumping, emptying,
discharging, injecting, escaping, leaching, disposal, dumping, threatened
release or other management or mismanagement of Regulated Substances resulting
from the use of, or operations on, any Property.
Environmental Laws shall mean all federal, state, local and
foreign Laws and regulations, including permits, licenses, authorizations,
bonds, orders, judgments, and consent decrees issued, or entered into, pursuant
thereto, relating to pollution or protection of human health or the environment
or employee safety in the workplace.
ERISA shall mean the Employee Retirement Income Security Act of
1974, as the same may be amended or supplemented from time to time, and any
successor statute of similar import, and the rules and regulations thereunder,
as from time to time in effect.
Event of Default shall mean any of the events described in
Section 8.1 and referred to therein as an "Event of Default."
Expiration Date shall mean, with respect to the Revolving Credit
Commitment, July 1, 2000.
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Financial Projections shall have the meaning assigned to that
term in Section 5.1.8.2.
GAAP shall mean generally accepted accounting principles as are
in effect from time to time, subject to the provisions of Section 1.3, and
applied on a consistent basis both as to classification of items and amounts.
Guaranty of any Person shall mean any obligation of such Person
guaranteeing or in effect guaranteeing any liability or obligation of any other
Person in any manner, whether directly or indirectly, including any agreement to
indemnify or hold harmless any other Person, any performance bond or other
suretyship arrangement and any other form of assurance against loss, except
endorsement of negotiable or other instruments for deposit or collection in the
ordinary course of business.
Historical Statements shall have the meaning assigned to that
term in Section 5.1.8(i).
Indebtedness shall mean, as to any Person at any time, any and
all indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of: (i) borrowed money, (ii)
amounts raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii) reimbursement obligations (contingent or
otherwise) under any letter of credit, currency swap agreement, interest rate
swap, cap, collar or floor agreement or other interest rate management device,
(iv) any other transaction (including forward sale or purchase agreements,
capitalized leases and conditional sales agreements) having the commercial
effect of a borrowing of money entered into by such Person to finance its
operations or capital requirements (but not including trade payables and accrued
expenses incurred in the ordinary course of business which are not represented
by a promissory note or other evidence of indebtedness and which are not more
than sixty (60) days past due), or (v) any Guaranty of Indebtedness for borrowed
money.
Ineligible Security shall mean any security which may not be
underwritten or dealt in by member banks of the Federal Reserve System under
Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as
amended.
Insolvency Proceeding shall mean, with respect to any Person,
(a) a case, action or proceeding with respect to such Person (i) before any
court or any other Official Body under any bankruptcy, insolvency,
reorganization or other similar Law now or hereafter in effect, or (ii) for the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or similar official) of Borrower or otherwise
relating to the liquidation, dissolution, winding-up or relief of such Person,
or (b) any general assignment for the benefit of creditors, composition,
marshaling of assets for creditors, or other, similar arrangement in respect of
such Person's creditors generally or any substantial portion of its creditors;
undertaken under any Law.
Intellectual Property Collateral shall mean all of the property
described in the Intellectual Property Security Agreement.
Interim Statements shall have the meaning assigned to that term
in Section 5.1.8.1.
Internal Revenue Code shall mean the Internal Revenue Code of
1986, as the same may be amended or supplemented from time to time, and any
successor statute of similar import, and the rules and regulations thereunder,
as from time to time in effect.
Labor Contracts shall mean all employment agreements, employment
contracts, collective bargaining agreements and other material agreements among
Borrower and its employees.
Law shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree or award of any Official Body.
Lien shall mean any mortgage, deed of trust, pledge, lien,
security interest, charge or other encumbrance or security arrangement of any
nature whatsoever, whether voluntarily or involuntarily given,
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including any conditional sale or title retention arrangement, and any
assignment, deposit arrangement or lease intended as, or having the effect of,
security and any filed financing statement or other notice of any of the
foregoing (whether or not a lien or other encumbrance is created or exists at
the time of the filing).
Loan Documents shall mean this Agreement, the Warrant, the Note,
the Intellectual Property Security Agreement, the Security Agreement, and any
other instruments, certificates or documents delivered or contemplated to be
delivered hereunder or thereunder or in connection herewith or therewith, as the
same may be supplemented or amended from time to time in accordance herewith or
therewith, and Loan Document shall mean any of the Loan Documents.
Loan Request shall have the meaning given to such term in
Section 2.3.
Material Adverse Change shall mean any set of circumstances or
events which (a) has or could reasonably be expected to have any material
adverse effect whatsoever upon the validity or enforceability of this Agreement
or any other Loan Document, (b) is or could reasonably be expected to be
material and adverse to the business, properties, assets, financial condition,
results of operations or prospects of Borrower taken as a whole, (c) impairs
materially or could reasonably be expected to impair materially the ability of
Borrower taken as a whole to duly and punctually pay or perform its
Indebtedness, or (d) impairs materially or could reasonably be expected to
impair materially the ability of Bank, to the extent permitted, to enforce their
legal remedies pursuant to this Agreement or any other Loan Document.
Note shall mean the Revolving Credit Note.
Notices shall have the meaning assigned to that term in Section
8.7.
Obligation shall mean any obligation or liability of Borrower or
Bank, howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, now or hereafter existing, or due or to become due,
under or in connection with this Agreement, the Note or any other Loan Document.
Official Body shall mean any national, federal, state, local or
other government or political subdivision or any agency, authority, bureau,
central bank, commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
Intellectual Property Security Agreement shall mean the
Intellectual Property Security Agreement in substantially the form of Exhibit A
executed and delivered by Borrower to Bank.
Permitted Acquisitions shall have the meaning assigned to such
term in Section 7.2.6.
Permitted Investments shall mean:
(a) direct obligations of the United States of America or any
agency or instrumentality thereof or obligations backed by the full faith and
credit of the United States of America maturing in twelve (12) months or less
from the date of acquisition;
(b) commercial paper maturing in 270 days or less rated not
lower than A-1, by Standard & Poor's or P-1 by Xxxxx'x Investors Service, Inc.
on the date of acquisition; and
(c) demand deposits, time deposits or certificates of deposit
maturing within one year in commercial banks whose obligations are rated A-1, A
or the equivalent or better by Standard & Poor's on the date of acquisition.
(d) any investments permitted by Borrower's investment policy,
as amended from time to time, provided that such investment policy has been
approved by Bank;
(e) investments consisting of the endorsement of negotiable
instruments for deposit or
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collection or similar transactions in the ordinary course of business;
(f) investments accepted in connection with transactions
permitted by Section 7.2.7;
(g) investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers and
in settlement of delinquent obligations of, and other disputes with, customers
or suppliers arising in the ordinary course of business; and
(h) deposit accounts of Borrower in which Bank has a Lien prior
to any other lien.
Permitted Liens shall mean:
(a) Liens for taxes, assessments, or similar charges, incurred
in the ordinary course of business and which are either not yet due and payable
or being contested in good faith or Borrower maintains such reserves or other
appropriate provisions as shall be required by GAAP and pays all such taxes,
assessments or charges forthwith upon the commencement of proceedings to
foreclose any such Lien;
(b) Pledges or deposits made in the ordinary course of business
to secure payment of workmen's compensation, or to participate in any fund in
connection with workmen's compensation, unemployment insurance, old-age pensions
or other social security programs;
(c) Liens of mechanics, materialmen, warehousemen, carriers, or
other like Liens, securing obligations incurred in the ordinary course of
business and Liens of landlords securing obligations to pay lease payments that
are not in default;
(d) Good-faith pledges or deposits made in the ordinary course
of business to secure performance of bids, tenders, contracts (other than for
the repayment of borrowed money) or leases, not in excess of the aggregate
amount due thereunder, or to secure statutory obligations, or surety, appeal,
indemnity, performance or other similar bonds required in the ordinary course of
business;
(e) Encumbrances consisting of zoning restrictions, easements or
other restrictions on the use of real property, none of which materially impairs
the use of such property or the value thereof, and none of which is violated in
any material respect by existing or proposed structures or land use;
(f) Liens, security interests and mortgages in favor of Bank;
(g) Liens on property leased by Borrower under capital and
operating leases permitted in Section 7.2.15 securing obligations of Borrower to
the lessor under such leases;
(h) Any Lien existing on the date of this Agreement and
described on Schedule 1, provided that the principal amount secured thereby is
not hereafter increased, and no additional assets become subject to such Lien;
(i) Purchase Money Security Interests, provided that the
aggregate amount of loans and deferred payments secured by such Purchase Money
Security Interests shall not exceed $3,500,000 (excluding for the purpose of
this computation any loans or deferred payments secured by Liens described on
Schedule 1); and
(j) The following, (A) if the validity or amount thereof is
being contested in good faith by appropriate and lawful proceedings diligently
conducted so long as levy and execution thereon have been stayed and continue to
be stayed or (B) if a final judgment is entered and such judgment is discharged
within thirty (30) days of entry, and in either case they do not affect the
Collateral or, in the aggregate, materially impair the ability of Borrower to
perform its Obligations hereunder or under the other Loan Documents:
(k) Claims, Liens or encumbrances upon, and defects of title to,
real or personal property other than the Collateral, including any attachment of
personal or real property or other legal process prior to adjudication of a
dispute on the merits; or
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(l) Liens resulting from final judgments or orders described in
Section 8.1.6; or
(m) Leases or subleases and licenses or sublicenses granted in
the ordinary course of Borrower's business and any interest or title of a
lessor, licensor under any lease or license subject to the limitations found in
Sections 7.2.1, 7.2.7 and 7.2.15 hereof.
Person shall mean any individual, corporation, partnership,
limited liability company, association, joint-stock company, trust,
unincorporated organization, joint venture, government or political subdivision
or agency thereof, or any other entity.
Plan shall mean at any time an employee pension benefit plan
which is covered by Title IV of ERISA or is subject to the minimum funding
standards under Section 412 of the Internal Revenue Code.
PNC Bank shall mean PNC Bank, National Association, its
successors and assigns.
Potential Default shall mean any event or condition which with
notice, passage of time or a determination by Bank would constitute an Event of
Default.
Principal Office shall mean the main banking office of Bank in
Pittsburgh, Pennsylvania.
Prior Security Interest shall mean a valid and enforceable
perfected first-priority security interest under the Uniform Commercial Code in
the UCC Collateral which is subject only to Liens for taxes not yet due and
payable to the extent such prospective tax payments are given priority by
statute or Purchase Money Security Interests as permitted hereunder.
Property shall mean all real property, both owned and leased, of
Borrower.
Purchase Money Security Interest shall mean Liens upon tangible
personal property securing loans to Borrower or deferred payments by such
Borrower for the purchase of such tangible personal property.
Quick Assets shall mean, as of any applicable date, the cash,
cash equivalents, accounts receivable and investments with maturities of fewer
than 90 days of Borrower.
Regulated Substances shall mean any substance, including any
solid, liquid, semisolid, gaseous, thermal, thoriated or radioactive material,
refuse, garbage, wastes, chemicals, petroleum products, by-products, coproducts,
impurities, dust, scrap, heavy metals, defined as a "hazardous substance,"
"pollutant," "pollution," "contaminant," "hazardous or toxic substance,"
"extremely hazardous substance," "toxic chemical," "toxic waste," "hazardous
waste," "industrial waste," "residual waste," "solid waste," "municipal waste,"
"mixed waste," "infectious waste," "chemotherapeutic waste," "medical waste," or
"regulated substance" or any related materials, substances or wastes as now or
hereafter defined pursuant to any Environmental Laws, ordinances, rules,
regulations or other directives of any Official Body, the generation,
manufacture, extraction, processing, distribution, treatment, storage, disposal,
transport, recycling, reclamation, use, reuse, spilling, leaking, dumping,
injection, pumping, leaching, emptying, discharge, escape, release or other
management or mismanagement of which is regulated by the Environmental Laws.
Regulation U shall mean Regulation U, T, or X as promulgated by
the Board of Governors of the Federal Reserve System, as amended from time to
time.
Revolving Credit Loans shall mean collectively and Revolving
Credit Loan shall mean separately all Revolving Credit Loans or any Revolving
Credit Loan made by Bank to Borrower pursuant to Section 2.1.
Revolving Credit Note shall mean the Revolving Credit Note of
Borrower in the form of Exhibit B evidencing the Revolving Credit Loans together
with all amendments, extensions, renewals, replacements, refinancings or
refundings thereof in whole or in part.
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Revolving Facility Usage shall mean at any time the sum of the
Revolving Credit Loans outstanding.
Section 20 Subsidiary shall mean the Subsidiary of the bank
holding company controlling any Bank, which Subsidiary has been granted
authority by the Federal Reserve Board to underwrite and deal in certain
Ineligible Securities.
Security Agreement shall mean the Security Agreement in
substantially the form of Exhibit C executed and delivered by Borrower to Bank.
Shares shall have the meaning assigned to that term in the
Warrant.
Standard & Poor's shall mean Standard & Poor's Ratings Services,
a division of The XxXxxx-Xxxx Companies, Inc.
Subsidiary of any Person at any time shall mean (i) any
corporation or trust of which 50% or more (by number of shares or number of
votes) of the outstanding capital stock or shares of beneficial interest
normally entitled to vote for the election of one or more directors or trustees
(regardless of any contingency which does or may suspend or dilute the voting
rights) is at such time owned directly or indirectly by such Person or one or
more of such Person's Subsidiaries, (ii) any partnership of which such Person is
a general partner or of which 50% or more of the partnership interests is at the
time directly or indirectly owned by such Person or one or more of such Person's
Subsidiaries, or (iii) any limited liability company of which such Person is a
member or of which 50% or more of the limited liability company interests is at
the time, directly or indirectly owned by such Person or one or more of such
Person's Subsidiaries.
Tangible Net Worth shall mean as of any date of determination
total stockholders' equity less intangible assets of Borrower as of such date
determined in accordance with GAAP.
UCC Collateral shall mean the property of Borrower in which
security interests are to be granted under the Security Agreement.
Uniform Commercial Code shall have the meaning assigned to that
term in Section 5.1.15.
Warrant shall mean a warrant in favor of Bank to purchase
securities of Borrower substantially in the form of Exhibit D.
1.2 Construction.
Unless the context of this Agreement otherwise clearly requires,
the following rules of construction shall apply to this Agreement and each of
the other Loan Documents:
1.2.1 Number; Inclusion.
References to the plural include the singular, the plural, the
part and the whole; "or" has the inclusive meaning represented by the phrase
"and/or," and "including" has the meaning represented by the phrase "including
without limitation";
1.2.2 Documents Taken as a Whole.
The words "hereof," "herein," "hereunder," "hereto" and similar
terms in this Agreement or any other Loan Document refer to this Agreement or
such other Loan Document as a whole and not to any particular provision of this
Agreement or such other Loan Document;
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1.2.3 Headings.
The section and other headings contained in this Agreement or
such other Loan Document and the Table of Contents (if any), preceding this
Agreement or such other Loan Document are for reference purposes only and shall
not control or affect the construction of this Agreement or such other Loan
Document or the interpretation thereof in any respect;
1.2.4 Implied References to this Agreement.
Article, section, subsection, clause, schedule and exhibit
references are to this Agreement or other Loan Document, as the case may be,
unless otherwise specified;
1.2.5 Persons.
Reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are permitted by
this Agreement or such other Loan Document, as the case may be, and reference to
a Person in a particular capacity excludes such Person in any other capacity;
1.2.6 Modifications to Documents.
Reference to any agreement (including this Agreement and any
other Loan Document together with the schedules and exhibits hereto or thereto),
document or instrument means such agreement, document or instrument as amended,
modified, replaced, substituted for, superseded or restated;
1.2.7 From, To and Through.
Relative to the determination of any period of time, "from"
means "from and including," "to" means "to but excluding," and "through" means
"through and including"; and
1.2.8 Shall; Will.
References to "shall" and "will" are intended to have the same
meaning.
1.3 Accounting Principles.
Except as otherwise provided in this Agreement, all computations
and determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP; provided, however, that all accounting terms
used in Section 7.2 [Negative Covenants] (and all defined terms used in the
definition of any accounting term used in Section 7.2 shall have the meaning
given to such terms (and defined terms) under GAAP as in effect on the date
hereof applied on a basis consistent with those used in preparing the Annual
Statements referred to in Section 5.1.8.1 [Historical Statements]. In the event
of any change after the date hereof in GAAP, and if such change would result in
the inability to determine compliance with the financial covenants set forth in
Section 7.2 based upon Borrower's regularly prepared financial statements by
reason of the preceding sentence, then the parties hereto agree to endeavor, in
good faith, to agree upon an amendment to this Agreement that would adjust such
financial covenants in a manner that would not affect the substance thereof, but
would allow compliance therewith to be determined in accordance with Borrower's
financial statements at that time.
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2. REVOLVING CREDIT FACILITY
2.1 Revolving Credit Commitment.
Subject to the terms and conditions hereof and relying upon the
representations and warranties herein set forth, Bank agrees to make Revolving
Credit Loans to Borrower at any time or from time to time on or after the date
hereof to the Expiration Date in an aggregate outstanding amount not to exceed
the Commitment or the Borrowing Base, whichever is less. Within such limits of
time and amount and subject to the other provisions of this Agreement, Borrower
may borrow, repay and reborrow pursuant to this Section 2.1.
2.2 Commitment Fees.
Accruing from the date hereof until the Expiration Date,
Borrower agrees to pay to Bank, as consideration for such Bank's Commitment
hereunder, a nonrefundable commitment fee (the "Commitment Fee") equal to 0.625%
per annum (computed on the basis of a year of 360 days) on the average daily
difference between the amount of (i) the Commitment and the (ii) the sum of
Revolving Credit Loans outstanding. All Commitment Fees shall be payable in
arrears on the first Business Day of each quarter after the date hereof and on
the Expiration Date or upon acceleration of the Note.
2.3 Revolving Credit Loan Requests.
Except as otherwise provided herein, Borrower may from time to
time prior to the Expiration Date request Bank to make Revolving Credit Loans,
by delivering to Bank, not later than 10:00 a.m., Pittsburgh time, one (1)
Business Day prior to the proposed Borrowing Date a duly completed request
therefor substantially in the form of Exhibit E or a request by telephone
immediately confirmed in writing by letter, facsimile or telex in such form
(each, a "Loan Request"), it being understood that Bank may rely on the
authority of any individual making such a telephonic request without the
necessity of receipt of such written confirmation. Each Loan Request shall be
irrevocable and shall specify (i) the proposed Borrowing Date; (ii) the
aggregate amount of the proposed Revolving Credit Loans, which shall be in
integral multiples of $100,000.
2.4 Revolving Credit Note.
The Obligation of Borrower to repay the aggregate unpaid
principal amount of the Revolving Credit Loans made to it by Bank, together with
interest thereon, shall be evidenced by a Revolving Credit Note dated the
Closing Date payable to the order of Bank in a face amount equal to the
Commitment.
2.5 Use of Proceeds.
The proceeds of the Revolving Credit Loans shall be used for
general and corporate working capital purposes and in accordance with Section
7.1.10 [Use of Proceeds].
3. INTEREST RATE, PAYMENT
3.1 Interest Rate.
Except as set forth in Section 3.2.1, Revolving Credit Loans
shall bear interest, on the average daily balance thereof, at a fluctuating rate
per annum (computed on the basis of a year of 360 days) equal to the Base Rate
plus 1%, such interest rate to change automatically from time to time effective
as of the effective date of each change in the Base Rate.
3.2 Interest After Default.
To the extent permitted by Law, upon the occurrence of an Event
of Default and until such time such Event of Default shall have been cured or
waived:
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3.2.1 Obligations.
Each Obligation hereunder if not paid when due shall bear
interest at a rate per annum equal to the sum of the rate of interest applicable
under the Revolving Credit Loans plus an additional 3% per annum from the time
such Obligation becomes due and payable and until it is paid in full.
3.2.2 Acknowledgment.
The Borrower acknowledges that the increase in rates referred to
in this Section 3.2 reflects, among other things, the fact that such Revolving
Credit Loans or other amounts have become a substantially greater risk given
their default status and that Bank is entitled to additional compensation for
such risk; and all such interest shall be payable by Borrower upon demand by
Bank.
4. PAYMENTS
4.1 Payments.
All payments and prepayments to be made in respect of principal,
interest, Commitment Fees or other fees or amounts due from Borrower hereunder
shall be payable prior to 11:00 a.m., Pittsburgh time, on the date when due
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived by Borrower, and without set-off, counterclaim or other
deduction of any nature, and an action therefor shall immediately accrue. Such
payments shall be made to Bank at the Principal Office in U.S. Dollars and in
immediately available funds. The Bank's statement of account, ledger or other
relevant record shall, in the absence of manifest error, be conclusive as the
statement of the amount of principal of and interest on the Revolving Credit
Loans and other amounts owing under this Agreement and shall be deemed an
"account stated."
4.2 Interest Payment Dates.
Interest on Revolving Credit Loans shall be due and payable in
arrears on the first Business Day of each month after the date hereof and on the
Expiration Date or upon acceleration of the Note. Interest on the principal
amount of each Revolving Credit Loan or other monetary Obligation shall be due
and payable on demand after such principal amount or other monetary Obligation
becomes due and payable (whether on the stated maturity date, upon acceleration
or otherwise).
4.3 Voluntary Prepayments.
4.3.1 Right to Prepay.
The Borrower shall have the right at its option from time to
time to prepay the Revolving Credit Loans in whole or part without premium or
penalty.
Whenever Borrower desires to prepay any part of the Revolving
Credit Loans, it shall provide a prepayment notice to Bank by 1:00 p.m. at least
one (1) Business Day prior to the date of prepayment of Revolving Credit Loans
setting forth the following information:
(a) the date, which shall be a Business Day, on which the
proposed prepayment is to be made;
(b) the total principal amount of such prepayment, which shall
not be less than $100,000.
All prepayment notices shall be irrevocable. The principal
amount of the Revolving Credit Loans for which a prepayment notice is given,
together with interest on such principal amount, shall be due and payable on the
date specified in such prepayment notice as the date on which the proposed
prepayment is to be made.
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5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties.
Borrower represents and warrants to Bank as follows:
5.1.1 Organization and Qualification.
Borrower is a corporation duly organized, validly existing and
in good standing under the laws of Delaware. Borrower has the lawful power to
own or lease its properties and to engage in the business it presently conducts
or proposes to conduct. Borrower is duly licensed or qualified and in good
standing in each jurisdiction listed on Schedule 5.1.1 and in all other
jurisdictions where the property owned or leased by it or the nature of the
business transacted by it or both makes such licensing or qualification
necessary.
5.1.2 Capitalization and Ownership.
The authorized capital stock of Borrower consists of 30,000,000
shares of common stock and 2,000,000 of preferred stock of which 7,737,216
shares of common stock and 168,751 shares of Preferred Stock are issued and
outstanding and are owned as indicated on Schedule 5.1.2. All of the outstanding
shares have been validly issued and are fully paid and nonassessable. There are
no options, warrants or other rights outstanding to purchase any such shares
except as indicated on Schedule 5.1.2.
5.1.3 Power and Authority.
Borrower has full power to enter into, execute, deliver and
carry out this Agreement and the other Loan Documents to which it is a party, to
incur the Indebtedness contemplated by the Loan Documents and to perform its
Obligations under the Loan Documents to which it is a party, and all such
actions have been duly authorized by all necessary proceedings on its part.
5.1.4 Validity and Binding Effect.
This Agreement has been duly and validly executed and delivered
by Borrower, and each other Loan Document which Borrower is required to execute
and deliver on or after the date hereof will have been duly executed and
delivered by Borrower on the required date of delivery of such Loan Document.
This Agreement and each other Loan Document constitutes, or will constitute,
legal, valid and binding obligations of Borrower which is or will be a party
thereto on and after its date of delivery thereof, enforceable against Borrower
in accordance with its terms, except to the extent that enforceability of any of
such Loan Document may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforceability of creditors'
rights generally or limiting the right of specific performance.
5.1.5 No Conflict.
Other than as set forth on Schedule 5.1.5, neither the execution
and delivery of this Agreement or the other Loan Documents by Borrower nor the
consummation of the transactions herein or therein contemplated or compliance
with the terms and provisions hereof or thereof by any of them will conflict
with, constitute a default under or result in any breach of (i) the terms and
conditions of the certificate of incorporation, bylaws or other organizational
documents of Borrower or (ii) any Law or any material agreement or instrument or
order, writ, judgment, injunction or decree to which Borrower is a party or by
which it is bound or to which it is subject, or result in the creation or
enforcement of any Lien, charge or encumbrance whatsoever upon any property (now
or hereafter acquired) of Borrower (other than Liens granted under the Loan
Documents).
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5.1.6 Litigation.
There are no actions, suits, proceedings or investigations
pending or, to the knowledge of Borrower, threatened against Borrower at law or
equity before any Official Body which individually or in the aggregate could
reasonably be expected to result in any Material Adverse Change. Borrower is not
in violation of any order, writ, injunction or any decree of any Official Body
which could reasonably be expected to result in any Material Adverse Change.
5.1.7 Title to Properties.
The real property owned or leased by Borrower is described on
Schedule 5.1.7. Borrower has good and marketable title to or valid leasehold
interest in all properties, assets and other rights which it purports to own or
lease or which are reflected as owned or leased on its books and records, free
and clear of all Liens and encumbrances except Permitted Liens, and subject to
the terms and conditions of the applicable leases. All leases of property are in
full force and effect without the necessity for any consent which has not
previously been obtained upon consummation of the transactions contemplated
hereby.
5.1.8 Financial Statements.
5.1.8.1 Historical Statements. The Borrower has
delivered to Bank copies of its audited year-end financial statements for and as
of the end of the fiscal year ended December 31, 1998 (the "Annual Statements").
In addition, Borrower has delivered to Bank copies of its unaudited interim
financial statements for the fiscal year to date and as of the end of the fiscal
quarter ended March 31, 1999 (the "Interim Statements") (the Annual and Interim
Statements being collectively referred to as the "Historical Statements"). The
Historical Statements were compiled from the books and records maintained by
Borrower's management, are correct and complete and fairly represent the
consolidated financial condition of Borrower as of their dates and the results
of operations for the fiscal periods then ended and have been prepared in
accordance with GAAP consistently applied, subject (in the case of the Interim
Statements) to normal year-end audit adjustments.
5.1.8.2 Financial Projections. The Borrower has
delivered to Bank financial projections of Borrower for the period of calendar
year 1999 derived from various assumptions of Borrower's management (the
"Financial Projections"). The Financial Projections represent a reasonable range
of possible results in light of the history of the business, present and
foreseeable conditions and the intentions of Borrower's management. The
Financial Projections accurately reflect the liabilities of Borrower upon
consummation of the transactions contemplated hereby as of the Closing Date.
5.1.8.3 Accuracy of Financial Statements. Borrower does
not have any liabilities, contingent or otherwise, or forward or long-term
commitments that are not disclosed in the Historical Statements or in the notes
thereto, and except as disclosed therein there are no unrealized or anticipated
losses from any commitments of Borrower which could reasonably be expected to
cause a Material Adverse Change. Since December 31, 1998, no Material Adverse
Change has occurred.
5.1.9 Use of Proceeds; Margin Stock; Section 20 Subsidiaries.
5.1.9.1 General.
Borrower intends to use the proceeds of the Revolving Credit
Loans in accordance with Section 2.5.
5.1.9.2 Margin Stock.
Borrower does not engage or intend to engage principally, or as
one of its important activities, in the business of extending credit for the
purpose, immediately, incidentally or ultimately, of purchasing or carrying
margin stock (within the meaning of Regulation U). No part of the proceeds of
any Revolving Credit Loan has been or will be used, immediately, incidentally or
ultimately, to purchase or carry any margin stock or to extend credit to
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others for the purpose of purchasing or carrying any margin stock or to refund
Indebtedness originally incurred for such purpose, or for any purpose which
entails a violation of or which is inconsistent with the provisions of the
regulations of the Board of Governors of the Federal Reserve System. Borrower
does not hold or intend to hold margin stock in such amounts that more than 25%
of the reasonable value of the assets of Borrower is or will be represented by
margin stock.
5.1.9.3 Section 20 Subsidiaries.
Borrower does not intend to use and shall not use any portion of
the proceeds of the Revolving Credit Loans, directly or indirectly (i) knowingly
to purchase any Ineligible Securities from a Section 20 Subsidiary during any
period in which such Section 20 Subsidiary makes a market in such Ineligible
Securities, (ii) knowingly to purchase during the underwriting or placement
period Ineligible Securities being underwritten or privately placed by a Section
20 Subsidiary, or (iii) to make payments of principal or interest on Ineligible
Securities underwritten or privately placed by a Section 20 Subsidiary and
issued by or for the benefit of Borrower or any Affiliate of Borrower.
5.1.10 Full Disclosure.
Neither this Agreement nor any other Loan Document, nor any
certificate, statement, agreement or other documents furnished to Bank in
connection herewith or therewith, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under which they
were made, not misleading (it being recognized by Bank that the projections and
forecasts provided by Borrower are not to be viewed as facts and that actual
results during the period or periods covered by any such projections and
forecasts may differ from the projected or forecasted results). There is no fact
known to Borrower which materially adversely affects the business, property,
assets, financial condition, results of operations or prospects of Borrower
which has not been set forth in this Agreement or in the certificates,
statements, agreements or other documents furnished in writing to Bank prior to
or at the date hereof in connection with the transactions contemplated hereby.
5.1.11 Taxes.
All federal, state, local and other tax returns required to have
been filed with respect to Borrower have been filed, and payment or adequate
provision has been made for the payment of all taxes, fees, assessments and
other governmental charges which have or may become due pursuant to said returns
or to assessments received, except to the extent that such taxes, fees,
assessments and other charges are being contested in good faith by appropriate
proceedings diligently conducted and for which such reserves or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made. There are no agreements or waivers extending the statutory period of
limitations applicable to any federal income tax return of Borrower for any
period.
5.1.12 Consents and Approvals.
Except for the filing of financing statements in the state and
county filing offices, no consent, approval, exemption, order or authorization
of, or a registration or filing with, any Official Body or any other Person is
required by any Law or any agreement in connection with the execution, delivery
and carrying out of this Agreement and the other Loan Documents by Borrower.
5.1.13 No Event of Default; Compliance with Instruments.
No event has occurred and is continuing and no condition exists
or will exist after giving effect to the borrowings or other extensions of
credit to be made on the Closing Date under or pursuant to the Loan Documents
which constitutes an Event of Default or Potential Default. Other than as set
forth in Schedule 5.1.13, Borrower is not in violation of (i) any term of its
certificate of incorporation, bylaws, or other organizational documents or (ii)
any material agreement or instrument to which it is a party or by which it or
any of its properties may be subject or bound where such violation could
reasonably be expected to constitute a Material Adverse Change.
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5.1.14 Patents, Trademarks, Copyrights, Licenses, Etc.
Borrower owns or possesses all the material patents, trademarks,
service marks, trade names, copyrights, licenses, registrations, franchises,
permits and rights necessary to own and operate its properties and to carry on
its business as presently conducted and planned to be conducted by Borrower,
without known possible, alleged or actual conflict with the rights of others.
All material patents, trademarks, service marks, trade names, copyrights,
licenses, registrations, franchises and permits of Borrower are listed and
described in the Intellectual Property Security Agreement.
5.1.15 Security Interests.
The Liens and security interests granted to Bank pursuant to the
Intellectual Property Security Agreement, and the Security Agreement in the
Collateral constitute and will continue to constitute Prior Security Interests
under the Uniform Commercial Code as in effect in each applicable jurisdiction
(the "Uniform Commercial Code") or other applicable Law entitled to all the
rights, benefits and priorities provided by the Uniform Commercial Code or such
Law. Upon the filing of financing statements relating to said security interests
in each office and in each jurisdiction where required in order to perfect the
security interests described above, and recordation of the Intellectual Property
Security Agreement in the United States Patent and Trademark Office and United
States Copyright Office, as applicable, all such action as is necessary or
advisable to establish such rights of Bank will have been taken, and there will
be upon execution and delivery, the Intellectual Property Security Agreement,
and the Security Agreement, such filings and such taking of possession, no
necessity for any further action in order to preserve, protect and continue such
rights, except the filing of continuation statements with respect to such
financing statements within six months prior to each five-year anniversary of
the filing of such financing statements. All filing fees and other reasonable
expenses in connection with each such action have been or will be paid by
Borrower.
5.1.16 Insurance.
All insurance policies and other bonds to which Borrower is a
party are valid and in full force and effect. No notice has been given or claim
made and no grounds exist to cancel or avoid any of such policies or bonds or to
reduce the coverage provided thereby. Such policies and bonds provide adequate
coverage from reputable and financially sound insurers in amounts sufficient to
insure the assets and risks of Borrower in accordance with prudent business
practice in the industry of Borrower.
5.1.17 Compliance with Laws.
Borrower are in compliance in all material respects with all
applicable Laws (other than Environmental Laws which are specifically addressed
in Section 5.1.22 Environmental Matters) in all jurisdictions in which Borrower
is presently or will be doing business except where the failure to do so could
reasonably be expected to constitute a Material Adverse Change.
5.1.18 Material Contracts; Burdensome Restrictions.
Other than as set forth on Schedule 5.1.18, all material
contracts of Borrower are valid, binding and enforceable upon Borrower and each
of the other parties thereto in accordance with their respective terms, and
there is no default thereunder, to Borrower's knowledge, with respect to parties
other than Borrower. Borrower is not bound by any contractual obligation, or
subject to any restriction in any organization document, or any requirement of
Law which could result in a Material Adverse Change.
5.1.19 Investment Companies; Regulated Entities.
Borrower is not an "investment company" registered or required
to be registered under the Investment Company Act of 1940 or under the "control"
of an "investment company" as such terms are defined in the Investment Company
Act of 1940 and shall not become such an "investment company" or under such
"control."
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Borrower is not subject to any other Federal state statute or regulation
limiting its ability to incur Indebtedness for borrowed money.
5.1.20 Intentionally Omitted.
5.1.21 Employment Matters.
Borrower is in compliance with the Labor Contracts and all
applicable federal, state and local labor and employment Laws including those
related to equal employment opportunity and affirmative action, labor relations,
minimum wage, overtime, child labor, medical insurance continuation, worker
adjustment and relocation notices, immigration controls and worker and
unemployment compensation, where the failure to comply would constitute a
Material Adverse Change. To Borrower's knowledge, there are no outstanding
grievances, arbitration awards or appeals therefrom arising out of the Labor
Contracts or current or threatened strikes, picketing, handbilling or other work
stoppages or slowdowns at facilities of Borrower which in any case would
constitute a Material Adverse Change.
5.1.22 Environmental Matters.
(a) Borrower has not received any Environmental Complaint from
any Official Body or private Person alleging that Borrower or any prior or
subsequent owner of any of the Property is a potentially responsible party under
the Comprehensive Environmental Response, Cleanup and Liability Act, 42 U.S.C.
Section 9601, et seq., and Borrower has no reason to believe that such an
Environmental Complaint might be received. There are no pending or, to
Borrower's knowledge, threatened Environmental Complaints relating to Borrower
or, to any Borrower's knowledge, any prior or subsequent owner of any of the
Property pertaining to, or arising out of, any Environmental Conditions.
(b) There are no circumstances at, on or under any of the
Property that constitute a breach of or non-compliance in any material respect
with any of the Environmental Laws, and there are no past or present
Environmental Conditions at, on or under any of the Property or, to Borrower's
knowledge, at, on or under adjacent property, that prevent compliance in any
material respect with the Environmental Laws at any of the Property.
(c) Neither any of the Property nor any structures,
improvements, equipment, fixtures, activities or facilities thereon or
thereunder contain or use Regulated Substances except in compliance in all
material respects with Environmental Laws. There are no processes, facilities,
operations, equipment or other activities at, on or under any of the Property,
or, to Borrower's knowledge, at, on or under adjacent property, that currently
result in the release or threatened release of Regulated Substances onto any of
the Property, except to the extent that such releases or threatened releases are
not a material breach of or otherwise not a violation of the Environmental Laws.
(d) There are no aboveground storage tanks, underground storage
tanks or underground piping associated with such tanks, used for the management
of Regulated Substances at, on or under any of the Property that (a) do not
have, to the extent required by Environmental Laws, a full operational secondary
containment system in place, and (b) are not otherwise in compliance with all
Environmental Laws. To Borrower's knowledge, there are no abandoned underground
storage tanks or underground piping associated with such tanks, previously used
for the management of Regulated Substances at, on or under any of the Property
that have not either been closed in place in accordance with Environmental Laws
or removed in compliance with all applicable Environmental Laws and no
contamination associated with the use of such tanks exists on any of the
Property that is not in compliance with Environmental Laws.
(e) Borrower has all material permits, licenses, authorizations,
plans and approvals necessary under the Environmental Laws for the conduct of
its business as presently conducted. Borrower has submitted all material
notices, reports and other filings required by the Environmental Laws to be
submitted to an Official Body which pertain to past and current operations on
any of the Property.
(f) All past and present on-site generation, storage,
processing, treatment, recycling, reclamation, disposal or other use or
management of Regulated Substances at, on, or under any of the Property and
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all off-site transportation, storage, processing, treatment, recycling,
reclamation, disposal or other use or management of Regulated Substances have
been done in accordance, in all material respects with the Environmental Laws.
5.1.22 Year 2000. Borrower has reviewed the areas within its
business and operations which could be adversely affected by, and has developed
or is developing a program to address on a timely basis, the risk that certain
computer applications used by Borrower may be unable to recognize and perform
properly date-sensitive functions involving dates prior to and after December
31, 1999 (the "Year 2000 Problem"). The Year 2000 Problem will not result in any
Material Adverse Change.
5.1.23 ERISA. Borrower does not have any employee benefit
arrangements subject to the provisions of ERISA and has not in the past, nor
does it currently have set up for the benefit of Borrower's employees, any Plan.
6. CONDITIONS OF LENDING
The obligation of Bank to make Revolving Credit Loans hereunder is
subject to the performance by Borrower of its Obligations to be performed
hereunder at or prior to the making of any such Revolving Credit Loans and to
the satisfaction of the following further conditions:
6.1 First Loans.
On the Closing Date:
6.1.1 Officer's Certificate.
The representations and warranties of Borrower contained in
Section 5 and in each of the other Loan Documents shall be true and accurate on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of such date (except representations and
warranties which relate solely to an earlier date or time, which representations
and warranties shall be true and correct on and as of the specific dates or
times referred to therein), and Borrower shall have performed and complied with
all covenants and conditions hereof and thereof, no Event of Default or
Potential Default shall have occurred and be continuing or shall exist; and
there shall be delivered to Bank a certificate of Borrower, dated the Closing
Date and signed by the Chief Executive Officer, President or Chief Financial
Officer of Borrower, to each such effect.
6.1.2 Secretary's Certificate.
There shall be delivered to Bank a certificate dated the Closing
Date and signed by the Secretary or an Assistant Secretary of Borrower,
certifying as appropriate as to:
(a) all action taken by Borrower in connection with this
Agreement and the other Loan Documents;
(b) the names of the officer or officers authorized to sign this
Agreement and the other Loan Documents and the true signatures of such officer
or officers and specifying the Authorized Officers permitted to act on behalf of
Borrower for purposes of this Agreement and the true signatures of such
officers, on which Bank may conclusively rely; and
(c) copies of its organizational documents, including its
certificate of incorporation and bylaws, as in effect on the Closing Date
certified by the appropriate state official where such documents are filed in a
state office together with certificates from the appropriate state officials as
to the continued existence and good standing of Borrower in each state where
organized or qualified to do business and a bring-down certificate by facsimile
dated the Closing Date.
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6.1.3 Delivery of Loan Documents.
The Note, the Intellectual Property Security Agreement, and the
Security Agreement shall have been duly executed and delivered to Bank, together
with all appropriate financing statements and appropriate stock powers and
certificates evidencing the Shares.
6.1.4 Opinion of Counsel.
There shall be delivered to Bank a written opinion of Wilson,
Sonsini, Xxxxxxxx and Xxxxxx, counsel for Borrower (who may rely on the opinions
of such other counsel as may be acceptable to Bank), dated the Closing Date and
in form and substance satisfactory to Bank and its counsel:
(a) as to the matters set forth in Exhibit I; and
(b) as to such other matters incident to the transactions
contemplated herein as Bank may reasonably request.
6.1.5 Legal Details.
All legal details and proceedings in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be in form and substance satisfactory to Bank and counsel for Bank, and Bank
shall have received all such other counterpart originals or certified or other
copies of such documents and proceedings in connection with such transactions,
in form and substance satisfactory to Bank and said counsel, as Bank or said
counsel may reasonably request.
6.1.6 Payment of Fees.
The Borrower shall have paid or caused to be paid to Bank to the
extent not previously paid all commitment and other fees accrued through the
Closing Date and the costs and expenses for which Bank are entitled to be
reimbursed.
6.1.7 Officer's Certificate Regarding MACs.
Since December 31, 1998, no Material Adverse Change shall have
occurred; prior to the Closing Date, there shall have been no material change in
the management of Borrower; and there shall have been delivered to Bank a
certificate dated the Closing Date and signed by the Chief Executive Officer,
President or Chief Financial Officer of Borrower to each such effect.
6.1.8 No Violation of Laws.
The making of the Revolving Credit Loans shall not contravene
any Law applicable to Borrower or Bank.
6.1.9 No Actions or Proceedings.
No action, proceeding, investigation, regulation or legislation
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, this Agreement, the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby or which, in
Bank's sole discretion, would make it inadvisable to consummate the transactions
contemplated by this Agreement or any of the other Loan Documents.
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6.1.10 Insurance Policies; Certificates of Insurance;
Endorsements.
Borrower shall have delivered evidence acceptable to Bank that
adequate insurance in compliance with Section 7.1.3 [Maintenance of Insurance]
is in full force and effect and that all premiums then due thereon have been
paid, together with a certified copy of Borrower's casualty insurance policy or
policies evidencing coverage satisfactory to Bank, with additional insured,
mortgagee and lender loss payable special endorsements attached thereto in form
and substance satisfactory to Bank and its counsel naming Bank as additional
insured, mortgagee and lender loss payee.
6.1.11 Filing Receipts.
Bank shall have received (1) copies of all filing receipts and
acknowledgments issued by any governmental authority to evidence any recordation
or filing necessary to perfect the Lien of Bank on the Collateral or other
satisfactory evidence of such recordation and filing and (2) evidence in a form
acceptable to Bank that such Lien constitutes a Prior Security Interest in favor
of Bank and a valid and perfected first priority Lien.
6.1.12 Landlord's Waiver.
Borrower shall have delivered, or undertaken its best efforts to
deliver, an executed Landlord's Waiver in substantially the form of Exhibit F
from the lessor for each leased Collateral location, as listed on Schedule A to
the Security Agreement.
6.1.13 Warrant.
Bank shall have received the Warrant, duly executed by Borrower;
6.1.14 Amendment
Bank shall have received a duly executed amendment to the
current investor/registration rights agreement providing Bank with registration
rights for the shares issuable upon exercise of the Warrant.
6.1.15 Equity Funding
Bank shall have received all documents it may reasonably request
evidencing the equity funding to be closed prior to, concurrently with, or soon
after the Closing Date.
6.2 Each Additional Revolving Credit Loan.
At the time of making any Revolving Credit Loans other than
Revolving Credit Loans on the Closing Date and after giving effect to the
proposed extensions of credit: the representations and warranties of Borrower
contained in Section 5 and in the other Loan Documents shall be true on and as
of the date of such additional Revolving Credit Loan with the same effect as
though such representations and warranties had been made on and as of such date
(except representations and warranties which expressly relate solely to an
earlier date or time, which representations and warranties shall be true and
correct on and as of the specific dates or times referred to therein) and
Borrower shall have performed and complied with all covenants and conditions
hereof; no Event of Default or Potential Default shall have occurred and be
continuing or shall exist; the making of the Revolving Credit Loans shall not
contravene any Law applicable to Borrower or Bank; and Borrower shall have
delivered to Bank a duly executed and completed Loan Request as the case may be.
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7. COVENANTS
7.1 Affirmative Covenants.
Borrower covenants and agrees that until payment in full of the
Revolving Credit Loans, and interest thereon, satisfaction of all of Borrower's
other Obligations under the Loan Documents and termination of the Commitments,
Borrower shall comply at all times with the following affirmative covenants:
7.1.1 Preservation of Existence, Etc.
Borrower shall maintain its legal existence as a corporation and
its license or qualification and good standing in each jurisdiction in which its
ownership or lease of property or the nature of its business makes such license
or qualification necessary, except as otherwise expressly permitted in Section
7.2.6 [Liquidations, Mergers, Etc.] and where the failure to do so could not
reasonably expected to result in a Material Adverse Change.
7.1.2 Payment of Liabilities, Including Taxes, Etc.
Borrower shall duly pay and discharge all liabilities to which
it is subject or which are asserted against it, promptly as and when the same
shall become due and payable, including all taxes, assessments and governmental
charges upon it or any of its properties, assets, income or profits, prior to
the date on which penalties attach thereto, except to the extent that such
liabilities, including taxes, assessments or charges, are being contested in
good faith and by appropriate and lawful proceedings diligently conducted and
for which such reserve or other appropriate provisions, if any, as shall be
required by GAAP shall have been made, but only to the extent that failure to
discharge any such liabilities would not result in any additional liability
which would adversely affect to a material extent the financial condition of
Borrower or which would affect the Collateral, provided that Borrower will pay
all such liabilities forthwith upon the commencement of proceedings to foreclose
any Lien which may have attached as security therefor.
7.1.3 Maintenance of Insurance.
Borrower shall insure its properties and assets against loss or
damage by fire and such other insurable hazards as such assets are commonly
insured (including fire, extended coverage, property damage, workers'
compensation, public liability and business interruption insurance) and against
other risks (including errors and omissions) in such amounts as similar
properties and assets are insured by prudent companies in similar circumstances
carrying on similar businesses, and with reputable and financially sound
insurers, including self-insurance to the extent customary, all as reasonably
determined by Bank. At the request of Bank, Borrower shall deliver to Bank (x)
on the Closing Date and annually thereafter an original certificate of insurance
signed by Borrower's independent insurance broker describing and certifying as
to the existence of the insurance on the Collateral required to be maintained by
this Agreement and the other Loan Documents, together with a copy of the
endorsement described in the next sentence attached to such certificate and (y)
from time to time a summary schedule indicating all insurance then in force with
respect to Borrower. Such policies of insurance shall contain special
endorsements, in form and substance acceptable to Bank, which shall (i) specify
Bank as an additional insured, mortgagee and lender loss payee as its interests
may appear, with the understanding that any obligation imposed upon the insured
(including the liability to pay premiums) shall be the sole obligation of
Borrower and not that of the insured, (ii) provide that the interest of Bank
shall be insured regardless of any breach or violation by Borrower of any
warranties, declarations or conditions contained in such policies or any action
or inaction of Borrower or others insured under such policies, (iii) provide a
waiver of any right of the insurers to set off or counterclaim or any other
deduction, whether by attachment or otherwise, (iv) provide that any and all
rights of subrogation which the insurers may have or acquire shall be, at all
times and in all respects, junior and subordinate to the prior payment in full
of the Indebtedness hereunder and that no insurer shall exercise or assert any
right of subrogation until such time as the Indebtedness hereunder has been paid
in full and the Commitments have terminated, (v) provide, except in the case of
public liability insurance and workmen's compensation insurance, that all
insurance proceeds for losses of less than $500,000 shall be adjusted with and
payable to Borrower and that all insurance proceeds for losses of $500,000 or
more shall be adjusted with and payable to Bank, (vi) include effective waivers
by the insurer of all claims for insurance premiums against Bank, (vii) provide
that no cancellation of such
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policies for any reason (including non-payment of premium) nor any change
therein shall be effective until at least thirty (30) days after receipt by Bank
of written notice of such cancellation or change, (viii) be primary without
right of contribution of any other insurance carried by or on behalf of any
additional insureds with respect to their respective interests in the
Collateral, and (ix) provide that inasmuch as the policy covers more than one
insured, all terms, conditions, insuring agreements and endorsements (except
limits of liability) shall operate as if there were a separate policy covering
each insured. Borrower shall notify Bank promptly of any occurrence causing a
material loss or decline in value of the Collateral and the estimated (or
actual, if available) amount of such loss or decline. Any monies received by
Bank constituting insurance proceeds or condemnation proceeds may, at the option
of Bank, (i) be applied by Bank to the payment of the Revolving Credit Loans in
such manner as Bank may reasonably determine, or (ii) be disbursed to Borrower
on such terms as are deemed appropriate by Bank for the repair, restoration
and/or replacement of property in respect of which such proceeds were received.
7.1.4 Maintenance of Properties and Leases.
Borrower shall maintain in good repair, working order and
condition (ordinary wear and tear excepted) in accordance with the general
practice of other businesses of similar character and size, all of those
properties useful or necessary to its business, and from time to time, Borrower
will make or cause to be made all appropriate repairs, renewals or replacements
thereof.
7.1.5 Maintenance of Intellectual Property Collateral.
Borrower shall maintain in full force and effect all patents,
trademarks, service marks, trade names, copyrights, licenses, franchises,
permits and other authorizations necessary for the ownership and operation of
its properties and business in accordance with prudent business practices as
determined by Borrower and if the failure so to maintain the same would
constitute a Material Adverse Change.
7.1.6 Visitation Rights.
Subject to Borrower's reasonable security and confidentiality
requirements, Borrower shall permit any of the officers or authorized employees
or representatives of Bank to visit and inspect any of its properties and to
examine and make excerpts from its books and records and discuss its business
affairs, finances and accounts with its officers, all in such detail and at such
times and as often as Bank may reasonably request, provided that Bank shall
provide Borrower with reasonable notice prior to any visit or inspection,
provided, further that such inspections shall be limited to twice per fiscal
year so long as no Event of Default has occurred.
7.1.7 Keeping of Records and Books of Account.
Borrower shall maintain and keep proper books of record and
account which enable Borrower to issue financial statements in accordance with
GAAP and as otherwise required by applicable Laws of any Official Body having
jurisdiction over Borrower, and in which full, true and correct entries shall be
made in all material respects of all its dealings and business and financial
affairs.
7.1.8 Intentionally Omitted.
7.1.9 Compliance with Laws.
Borrower shall comply with all applicable Laws, including all
Environmental Laws, in all respects, provided that it shall not be deemed to be
a violation of this Section 7.1.9 if any failure to comply with any Law would
not result in fines, penalties, remediation costs, other similar liabilities or
injunctive relief which in the aggregate would constitute a Material Adverse
Change.
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7.1.10 Use of Proceeds.
The Loan Parties will use the proceeds of the Revolving Credit
Loans only for (i) general corporate purposes and for working capital, (ii) to
finance Permitted Acquisitions, or (iii) to repay and terminate Indebtedness
outstanding under that certain credit facility with Silicon Valley Bank.
7.1.11 Further Assurances.
Borrower shall, from time to time, at its reasonable expense,
faithfully preserve and protect Bank's Lien on and Prior Security Interest in
the Collateral as a continuing first priority perfected Lien, subject only to
Permitted Liens, and shall do such other acts and things as Bank in its sole
discretion may deem necessary or advisable from time to time in order to
preserve, perfect and protect the Liens granted under the Loan Documents and to
exercise and enforce its rights and remedies thereunder with respect to the
Collateral.
7.1.12 Principal Depository. After the Closing Date, Borrower
shall maintain its principal operating accounts with Bank. There shall be no
minimum balance requirements. Borrower shall set up a lock box arrangement with
Bank for the receipt of Accounts and Borrower agrees to execute all
documentation required by Bank for that purpose.
7.1.13 New Equity. Borrower shall receive a new equity infusion
[from the issuance of Series D Preferred Stock] of not less than $2,000,000 on
or before August 1, 1999.
7.2 Negative Covenants.
Borrower covenants and agrees that until payment in full of the
Revolving Credit Loans and interest thereon, satisfaction of all of Borrower's
other Obligations hereunder and termination of the Commitments, Borrower shall
comply with the following negative covenants:
7.2.1 Indebtedness.
Borrower shall not at any time create, incur, assume or suffer
to exist any Indebtedness, except the following ("Permitted Indebtedness"):
(a) Indebtedness under the Loan Documents;
(b) Existing Indebtedness as set forth on Schedule 7.2.1
(including any extensions or renewals thereof, provided there is no increase in
the amount thereof or other significant change in the terms thereof unless
otherwise specified on Schedule 7.2.1;
(c) Capitalized and operating leases as and to the extent
permitted under Section 7.2.15 [Capital Expenditures and Leases];
(d) Indebtedness secured by Purchase Money Security Interests
and for the purchase of certain equipment (with the consent of Bank) not
exceeding $3,500,000 including amounts allowed under (b) and (c) above;
(e) Indebtedness to trade creditors and with respect to surety
bonds and similar obligations incurred in the ordinary course of business;
(f) Indebtedness secured by Permitted Liens;
(g) Other Indebtedness not otherwise permitted hereunder not
exceeding $250,000 in the aggregate outstanding at any time; and
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(h) Extensions, modifications, amendments, refinancings and
restatements of any of the Permitted Indebtedness listed above, provided that
the principal amount thereof is not increased or the terms thereof are not
modified to impose more burdensome terms upon Borrower.
7.2.2 Liens.
Borrower shall not at any time create, incur, assume or suffer
to exist any Lien on any of its property or assets, tangible or intangible, now
owned or hereafter acquired, or agree or become liable to do so, except
Permitted Liens.
7.2.3 Guaranties.
Borrower shall not at any time, directly or indirectly, become
or be liable in respect of any Guaranty, or assume, guarantee, become surety
for, endorse or otherwise agree, become or remain directly or contingently
liable upon or with respect to any obligation or liability of any other Person.
7.2.4 Loans and Investments.
Borrower shall not at any time make or suffer to remain
outstanding any loan or advance to, or purchase, acquire or own any stock,
bonds, notes or securities of, or any partnership interest (whether general or
limited) or limited liability company interest in, or any other investment or
interest in, or make any capital contribution to, any other Person, or agree,
become or remain liable to do any of the foregoing, except:
(a) trade credit extended on usual and customary terms in the
ordinary course of business;
(b) advances to employees to meet expenses incurred by such
employees in the ordinary course of business and loans to employees, officers
and directors relating to the purchase of equity securities of Borrower pursuant
to its employee stock purchase plan or agreements approved by Borrower's Board
of Directors, but not in excess of an aggregate total of $250,000;
(c) Permitted Investments; and
(d) loans and investments, other than those set forth in (i)
through (iii) above which in the aggregate do not exceed $500,000 per annum.
7.2.5 Dividends and Related Distributions.
Other than dividend obligations to holders of preferred stock,
Borrower shall not make or pay, or agree to become or remain liable to make or
pay, any dividend or other distribution of any nature (whether in cash,
property, securities or otherwise) on account of or in respect of its shares of
capital stock, partnership interests or limited liability company interests on
account of the purchase, redemption, retirement or acquisition of its shares of
capital stock (or warrants, options or rights therefor), partnership interests
or limited liability company interests. Borrower may pay cash dividends so long
as an Event of Default does not exist after giving effect to such payment.
7.2.6 Liquidations, Mergers, Consolidations, Acquisitions.
Borrower shall not dissolve, liquidate or wind-up its affairs,
or become a party to any merger or consolidation, or acquire by purchase, lease
or otherwise all or substantially all of the assets or capital stock of any
other Person, provided that
Borrower may acquire, whether by purchase or by merger, (A) all
of the ownership interests of another Person or (B) substantially all of assets
of another Person or of a business or division of another Person (each an
"Permitted Acquisition") up to an aggregate amount of $1,000,000, provided that
each of the following requirements is met:
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(a) if Borrower is acquiring the ownership interests in such
Person, such Person shall execute such documentation as Bank may reasonably
require to join this Agreement on or before the date of such Permitted
Acquisition;
(b) Borrower, such Person and its owners, as applicable, shall
grant Liens in the assets of or acquired from and stock or other ownership
interests in such Person and execute such documentation as Bank may reasonably
require on or before the date of such Permitted Acquisition;
(c) the board of directors or other equivalent governing body of
such Person shall have approved such Permitted Acquisition and, if Borrower
shall use any portion of the Revolving Credit Loans to fund such Permitted
Acquisition, Borrower also shall have delivered to Bank written evidence of the
approval of the board of directors (or equivalent body) of such Person for such
Permitted Acquisition,
(d) the business acquired, or the business conducted by the
Person whose ownership interests are being acquired, as applicable, shall be
substantially the same as one or more line or lines of business conducted by
Borrower or reasonably related thereto and shall comply with Section 7.2.10
[Continuation of or Change in Business],
(e) no Potential Default or Event of Default shall exist
immediately prior to and after giving effect to such Permitted Acquisition,
(f) Borrower shall demonstrate that it shall be in compliance
with the covenants contained in Sections 7.2.16, 7.2.17, 7.2.18 and 7.2.19 after
giving effect to such Permitted Acquisition (including in such computation
Indebtedness or other liabilities assumed or incurred in connection with such
Permitted Acquisition but excluding income earned or expenses incurred by the
Person, business or assets to be acquired prior to the date of such Permitted
Acquisition) by delivering at least five (5) Business Days prior to such
Permitted Acquisition a certificate in the form of Exhibit G evidencing such
compliance.
(g) the Consideration paid by Borrower for all Permitted
Acquisitions made during the current fiscal year Borrower shall not exceed
$1,000,000 and the aggregate of the Consideration paid by Borrower for such
Permitted Acquisition and all other Permitted Acquisitions made between the
Closing Date and the date of such Permitted Acquisition shall not exceed
$1,000,000; and
(h) Borrower shall deliver to Bank at least five (5) Business
Days after such Permitted Acquisition copies of any agreements entered into or
proposed to be entered into by Borrower in connection with such Permitted
Acquisition and shall deliver to Bank such other information about such Person
or its assets as Borrower may reasonably require.
(i) for Permitted Acquisitions in excess of $1,000,000, Borrower
must obtain the prior written consent of Bank.
7.2.7 Dispositions of Assets or Subsidiaries.
Borrower shall not sell, convey, assign, lease, abandon or
otherwise transfer or dispose of, voluntarily or involuntarily, any of its
properties or assets, tangible or intangible (including sale, assignment,
discount or other disposition of accounts, contract rights, chattel paper,
equipment or general intangibles with or without recourse or of capital stock,
shares of beneficial interest, partnership interests or limited liability
company interests), except:
(a) transactions involving the sale of inventory in the ordinary
course of business;
(b) any sale, transfer or lease of assets in the ordinary course
of business which are no longer necessary or required in the conduct of
Borrower's business;
(c) any sale, transfer or lease of assets in the ordinary course
of business which are replaced by substitute assets acquired or leased within
the parameters of Section 7.2.15 [Capital Expenditures and Leases],
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provided such substitute assets are subject to Bank's Prior Security Interest;
(d) any sales, transfers or leases of assets, other than those
specifically excepted pursuant to clauses (a) through (c) above, which in the
aggregate do not exceed $500,000 per year and any other sales or leases of
assets which are approved by Bank; or
(e) transfers of nonexclusive licenses of Borrower in the
ordinary course of business if such transfer does not result in Bank's
reasonable opinion, in a material reduction in the value of Bank's Intellectual
Property Collateral and such transfer does not cause a Material Adverse Change.
Notwithstanding the foregoing, Borrower shall not transfer its nonexclusive
licenses to Illinois Superconductor, Conductis, SCT or SSI without Bank's prior
written consent.
7.2.8 Affiliate Transactions.
Borrower shall not enter into or carry out any material
transaction (including purchasing property or services from or selling property
or services to any Affiliate of Borrower or other Person) unless such
transaction is not otherwise prohibited by this Agreement, is entered into in
the ordinary course of business upon fair and reasonable arm's-length terms and
conditions which are fully disclosed to Bank and is in accordance with all
applicable Law.
7.2.9 Subsidiaries, Partnerships and Joint Ventures.
Borrower shall not own or create directly or indirectly any
Subsidiaries other than (i) any Subsidiary which has joined this Agreement as
Guarantor on the Closing Date; and (ii) any Subsidiary formed after the Closing
Date which joins this Agreement as a Guarantor, provided that Bank shall have
consented to such formation and joinder and that such Subsidiary and Borrower,
as applicable, shall grant and cause to be perfected first priority Liens to
Bank for the benefit of Bank in the assets held by, and stock of or other
ownership interests in, such Subsidiary. Borrower shall not become or agree to
(1) become a general or limited partner in any general or limited partnership,
(2) become a member or manager of, or hold a limited liability company interest
in, a limited liability company.
7.2.10 Continuation of or Change in Business.
Borrower shall not engage in any business other than the
manufacture and marketing of wireless component products and HTS related
products or a business reasonably related thereto, substantially as conducted
and operated by Borrower during the present fiscal year, and Borrower shall not
permit any material change in such business.
7.2.11 Intentionally Omitted.
7.2.12 Fiscal Year.
Borrower shall not change its fiscal year from its current
fiscal year without giving Bank prior written notice.
7.2.13 Intentionally omitted
7.2.14 Changes in Organizational Documents.
Borrower shall not amend in any respect its certificate of
incorporation (including any provisions or resolutions relating to capital
stock), by-laws or other organizational documents without providing at least ten
(10) calendar days' prior written notice to Bank and, in the event such change
would cause a Material Adverse Change, obtaining the prior written consent of
Bank.
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7.2.15 Capital Expenditures and Leases.
Borrower shall not make any payments exceeding $2,500,000 in the
aggregate in any fiscal year on account of the purchase or lease of any assets
which if purchased would constitute fixed assets or which if leased would
constitute a capitalized lease, or any payments exceeding $333,000 in the
aggregate in any fiscal year on account of the rental or lease of real or
personal property of any other Person which does not constitute a capitalized
lease, and all such capital expenditures and leases shall be made under usual
and customary terms and in the ordinary course of business.
7.2.16 Maximum Leverage Ratio.
Borrower shall not at any time permit the ratio of total
liabilities of Borrower to Tangible Net Worth to exceed 0.75:1 at all times.
7.2.17 Maximum Loss and Minimum Profitability.
Borrower shall not permit the loss for any one quarter to exceed
the amount set forth for the period specified below:
Quarter Ending Loss Amount
-------------- -----------
March 31, 1999 ($2,700,000)
June 30, 1999 ($2,450,000)
September 30, 1999 ($1,850,000)
December 31, 1999 ($850,000)
Thereafter, Borrower shall not permit any two consecutive quarter losses.
7.2.18 Minimum Tangible Net Worth.
The Borrower shall not at any time permit Tangible Net Worth to
be less than the following amounts during the following periods:
Period Amount
------ ------
Closing Date through June 29, 1999 $5,800,000
June 30, 1999 - September 29, 1999 $6,550,000
September 30, 1999 - December 30, 1999 $5,200,000
December 31, 1999 - March 30, 1999 $4,800,000
Thereafter $4,800,000 plus 100% of new
equity and 75% of net income
The above requirements shall automatically increase by 100% of any new equity
raised prior to December 31, 1999 in excess of $3,000,000. The covenant includes
the equity infusion of $2,900,000 which occurred prior to the Closing Date.
7.2.19 Minimum Quick Ratio.
Borrower shall not at any time permit the ratio of Quick Assets
to current liabilities to be less than 0.60:1.0, from the Closing Date through
June 29, 1999; 0.95:1 from June 30, 1999 through September 29, 1999; 0.90:1 from
September 30, 1999 through December 30, 1999; 0.80:1 from December 31, 1999
through March 30, 2000 and 1.00:1 thereafter.
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7.3 Reporting Requirements.
Borrower covenants and agrees that until payment in full of the
Loans and interest thereon, satisfaction of all of Borrower's other Obligations
hereunder and under the other Loan Documents and termination of the Commitments,
Borrower will furnish or cause to be furnished to Bank:
7.3.1 Monthly Financial Statements.
As soon as available and in any event within twenty (20)
calendar days after the end of each calendar month, Borrower's financial
statements, consisting of a balance sheet as of the end of such month and
related statements of income, stockholders' equity and cash flows for the month
then ended and the fiscal year through that date, all in reasonable detail and
certified (subject to normal year-end adjustments) by the Chief Executive
Officer, President or Chief Financial Officer of Borrower as having been
prepared in accordance with GAAP, consistently applied, and setting forth in
comparative form the respective financial statements for the corresponding date
and period in the previous fiscal year.
7.3.2 Quarterly Financial Statements.
As soon as available and in any event within forty-five (45)
calendar days after the end of each of the first three fiscal quarters in each
fiscal year, financial statements of Borrower, consisting of a balance sheet as
of the end of such fiscal quarter and related statements of income,
stockholders' equity and cash flows for the fiscal quarter then ended and the
fiscal year through that date, all in reasonable detail and certified (subject
to normal year-end audit adjustments) by the Chief Executive Officer, President
or Chief Financial Officer of Borrower as having been prepared in accordance
with GAAP, consistently applied, and setting forth in comparative form the
respective financial statements for the corresponding date and period in the
previous fiscal year and Borrower shall also deliver all reports filed on form
10-Q filed with the Securities and Exchange Commission.
7.3.3 Annual Financial Statements.
As soon as available and in any event within ninety (90) days
after the end of each fiscal year of Borrower, financial statements of Borrower
consisting of a balance sheet as of the end of such fiscal year, and related
statements of income, stockholders' equity and cash flows for the fiscal year
then ended, all in reasonable detail and setting forth in comparative form the
financial statements as of the end of and for the preceding fiscal year, and
certified by independent certified public accountants of nationally recognized
standing satisfactory to Bank and Borrower shall deliver all reports filed on
Form 10-K with the Securities and Exchange Commission. The certificate or report
of accountants shall be free of qualifications (other than any consistency
qualification that may result from a change in the method used to prepare the
financial statements as to which such accountants concur) and shall not indicate
the occurrence or existence of any event, condition or contingency which would
materially impair the prospect of payment or performance of any covenant,
agreement or duty of Borrower under any of the Loan Documents. Borrower shall
deliver with such financial statements and certification by its accountants a
letter of such accountants to Bank substantially (i) to the effect that, based
upon their ordinary and customary examination of the affairs of Borrower,
performed in connection with the preparation of such consolidated financial
statements, and in accordance with generally accepted auditing standards, they
are not aware of the existence of any condition or event which constitutes an
Event of Default or Potential Default or, if they are aware of such condition or
event, stating the nature thereof and confirming Borrower's calculations with
respect to the certificate to be delivered pursuant to Section 7.3.4
[Certificate of Borrower] with respect to such financial statements and (ii) to
the effect that Bank is intended to rely upon such accountant's certification of
the annual financial statements and that such accountants authorize Borrower to
deliver such reports and certificate to Bank on such accountants' behalf.
7.3.4 Certificate of Borrower.
Concurrently with the financial statements of Borrower furnished
to Bank pursuant to Sections 7.3.2 [Quarterly Financial Statements] and 7.3.3
[Annual Financial Statements], a certificate of Borrower signed by the Chief
Executive Officer, President or Chief Financial Officer of Borrower, in the form
of Exhibit G, to the effect that, except as described pursuant to Section 7.3.5
[Notice of Default], (i) the representations and
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warranties of Borrower contained in Section 5 and in the other Loan Documents
are true on and as of the date of such certificate with the same effect as
though such representations and warranties had been made on and as of such date
(except representations and warranties which expressly relate solely to an
earlier date or time) and Borrower have performed and complied with all
covenants and conditions hereof, (ii) no Event of Default or Potential Default
exists and is continuing on the date of such certificate and (iii) containing
calculations in sufficient detail to demonstrate compliance as of the date of
such financial statements with all financial covenants contained in Section 7.2
[Negative Covenants].
7.3.5 Notice of Default.
Promptly after any officer of Borrower has learned of the
occurrence of an Event of Default or Potential Default, a certificate signed by
the Chief Executive Officer, President or Chief Financial Officer of Borrower
setting forth the details of such Event of Default or Potential Default and the
action which Borrower proposes to take with respect thereto.
7.3.6 Notice of Litigation.
Promptly after the commencement thereof, notice of all actions,
suits, proceedings or investigations before or by any Official Body or any other
Person against Borrower which relate to the Collateral, involve a claim or
series of claims in excess of $250,000 or which if adversely determined would
constitute a Material Adverse Change.
7.3.7 Certain Events.
Written notice to Bank:
(a) at least thirty (30) calendar days prior thereto, with
respect to any proposed sale or transfer of assets pursuant to Section 7.2.7(d),
(b) within the time limits set forth in Section 7.2.14 [Changes
in Organizational Documents], any amendment to the organizational documents of
Borrower; and
(c) at least thirty (30) calendar days prior thereto, with
respect to any change in Borrower's locations from the locations set forth in
Schedule 1 to the Security Agreement.
7.3.8 Budgets, Forecasts, Other Reports and Information.
Promptly upon their becoming available to Borrower:
(a) the annual budget and any forecasts or projections of
Borrower, to be supplied not later than thirty (30) days prior to commencement
of the fiscal year to which any of the foregoing may be applicable,
(b) any reports including management letters submitted to
Borrower by independent accountants in connection with any annual, interim or
special audit,
(c) any reports, notices or proxy statements generally
distributed by Borrower to its stockholders on a date no later than the date
supplied to such stockholders,
(d) regular or periodic reports, including Forms 10-K, 10-Q and
8-K, registration statements and prospectuses, filed by Borrower with the
Securities and Exchange Commission,
(e) a copy of any order in any proceeding to which Borrower is a
party issued by any Official Body, and
(f) such other reports and information as Bank may from time to
time reasonably request.
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The Borrower shall also notify Bank promptly of the enactment or adoption of any
Law which may result in a Material Adverse Change.
7.3.9 Borrowing Base Certificate. Within twenty (20) days after
the last day of each month, Borrower shall deliver to Bank a Borrowing Base
Certificate signed by a responsible officer in substantially the form of Exhibit
H hereto together with aged listings of accounts receivable and accounts
payable.
8. DEFAULT
8.1 Events of Default.
An Event of Default shall mean the occurrence or existence of
any one or more of the following events or conditions (whatever the reason
therefor and whether voluntary, involuntary or effected by operation of Law):
8.1.1 Payments Under Loan Documents.
The Borrower shall fail to pay any principal of any Revolving
Credit Loan (including scheduled installments, mandatory prepayments or the
payment due at maturity), or shall fail to pay any interest on any Revolving
Credit Loan or any other amount owing hereunder or under the other Loan
Documents after such principal, interest or other amount becomes due in
accordance with the terms hereof or thereof;
8.1.2 Breach of Warranty.
Any representation or warranty made at any time by Borrower
herein or by Borrower in any other Loan Document, or in any certificate, other
instrument or statement furnished pursuant to the provisions hereof or thereof,
shall prove to have been false or misleading in any material respect as of the
time it was made or furnished;
8.1.3 Breach of Negative Covenants or Visitation Rights.
Borrower shall default in the observance or performance of any
covenant contained in Section 7.1.6 [Visitation Rights] or Section 7.2 [Negative
Covenants];
8.1.4 Breach of Other Covenants.
Borrower shall default in the observance or performance of any
other covenant, condition or provision hereof or of any other Loan Document and
such default shall continue unremedied for a period of ten (10) Business Days
after any officer of Borrower becomes aware of the occurrence thereof (such
grace period to be applicable only in the event such default can be remedied by
corrective action of Borrower as determined by Bank in its sole discretion);
8.1.5 Defaults in Other Agreements or Indebtedness.
A default or event of default shall occur at any time under the
terms of any other agreement involving borrowed money or the extension of credit
or any other Indebtedness under which Borrower may be obligated as a borrower or
guarantor in excess of $250,000 in the aggregate, and such breach, default or
event of default consists of the failure to pay (beyond any period of grace
permitted with respect thereto, whether waived or not) any indebtedness when due
(whether at stated maturity, by acceleration or otherwise) or if such breach or
default permits or causes the acceleration of any indebtedness (whether or not
such right shall have been waived) or the termination of any commitment to lend;
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8.1.6 Final Judgments or Orders.
Any final judgments or orders for the payment of money in excess
of $250,000 in the aggregate shall be entered against Borrower by a court having
jurisdiction in the premises, which judgment is not discharged, vacated, bonded
or stayed pending appeal within a period of thirty (30) days from the date of
entry;
8.1.7 Loan Document Unenforceable.
Any of the Loan Documents shall cease to be legal, valid and
binding agreements enforceable against the party executing the same or such
party's successors and assigns (as permitted under the Loan Documents) in
accordance with the respective terms thereof or shall in any way be terminated
(except in accordance with its terms) or become or be declared ineffective or
inoperative or shall in any way be challenged or contested or cease to give or
provide the respective Liens, security interests, rights, titles, interests,
remedies, powers or privileges intended to be created thereby;
8.1.8 Uninsured Losses; Proceedings Against Assets.
There shall occur any material uninsured damage to or loss,
theft or destruction of any of the Collateral in excess of $250,000 or the
Collateral or Borrower's assets are attached, seized, levied upon or subjected
to a writ or distress warrant; or such come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors and the
same is not cured within thirty (30) days thereafter;
8.1.9 Notice of Lien or Assessment.
A notice of Lien or assessment in excess of $250,000 which is
not a Permitted Lien is filed of record with respect to all or any part of
Borrower's assets by the United States, or any department, agency or
instrumentality thereof, or by any state, county, municipal or other
governmental agency, or any taxes or debts owing at any time or times hereafter
to any one of these becomes payable and the same is not paid within thirty (30)
days after the same becomes payable;
8.1.10 Insolvency.
Borrower ceases to be solvent or admits in writing its inability
to pay its debts as they mature;
8.1.11 Intentionally Omitted.
8.1.12 Cessation of Business.
Borrower ceases to conduct its business as contemplated, except
as expressly permitted under Section 7.2.6 [Liquidations, Mergers, Etc.] or
7.2.7 or 7.2.10, or Borrower is enjoined, restrained or in any way prevented by
court order from conducting all or any material part of its business and such
injunction, restraint or other preventive order is not dismissed within thirty
(30) days after the entry thereof;
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8.1.13 Change of Control.
(a) Any person or group of persons (within the meaning of
Sections 13(d) or 14(a) of the Securities Exchange Act of 1934, as amended)
shall have acquired beneficial ownership of (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under said Act) 30% or
more of the voting capital stock of Borrower (with the exception of the Xxxxxxx
Company and Wilmington Securities); or (ii) within a period of twelve (12)
consecutive calendar months, individuals who were directors of Borrower on the
first day of such period shall cease to constitute a majority of the board of
directors of Borrower;
8.1.14 Involuntary Proceedings.
A proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect of
Borrower in an involuntary case under any applicable bankruptcy, insolvency,
reorganization or other similar law now or hereafter in effect, or for the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or similar official) of Borrower for any substantial
part of its property, or for the winding-up or liquidation of its affairs, and
such proceeding shall remain undismissed or unstayed and in effect for a period
of thirty (30) consecutive days or such court shall enter a decree or order
granting any of the relief sought in such proceeding; or
8.1.15 Voluntary Proceedings.
Borrower shall commence a voluntary case under any applicable
bankruptcy, insolvency, reorganization or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator
(or other similar official) of itself or for any substantial part of its
property or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or shall take any
action in furtherance of any of the foregoing.
8.2 Consequences of Event of Default.
8.2.1 Events of Default Other Than Bankruptcy, Insolvency or
Reorganization Proceedings.
If an Event of Default specified under Sections 8.1.1 through
8.1.13 shall occur and be continuing, Bank shall be under no further obligation
to make Revolving Credit Loans and Bank may, by written notice to Borrower,
declare the unpaid principal amount of the Notes then outstanding and all
interest accrued thereon, any unpaid fees and all other Indebtedness of Borrower
to Bank hereunder and thereunder to be forthwith due and payable, and the same
shall thereupon become and be immediately due and payable to Bank for the
benefit of Bank without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived.
8.2.2 Bankruptcy, Insolvency or Reorganization Proceedings.
If an Event of Default specified under Section 8.1.14
[Involuntary Proceedings] or 8.1.15 [Voluntary Proceedings] shall occur, Bank
shall be under no further obligations to make Revolving Credit Loans hereunder
and the unpaid principal amount of the Revolving Credit Loans then outstanding
and all interest accrued thereon, any unpaid fees and all other Indebtedness of
Borrower to Bank hereunder and thereunder shall be immediately due and payable,
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived; and
8.2.3 Suits, Actions, Proceedings.
If an Event of Default shall occur and be continuing, and
whether or not Bank shall have accelerated the maturity of Revolving Credit
Loans pursuant to any of the foregoing provisions of this Section 8.2, Bank, if
owed any amount with respect to the Revolving Credit Loans, may proceed to
protect and enforce its rights by suit in equity, action at law and/or other
appropriate proceeding, whether for the specific performance of any
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covenant or agreement contained in this Agreement or the other Loan Documents,
including as permitted by applicable Law the obtaining of the ex parte
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of Bank; and
8.2.4 Application of Proceeds.
From and after the date on which Bank has taken any action
pursuant to this Section 8.2 and until all Obligations of Borrower have been
paid in full, any and all proceeds received by Bank from any sale or other
disposition of the Collateral, or any part thereof, or the exercise of any other
remedy by Bank, shall be applied as follows:
(a) first, to reimburse Bank for out-of-pocket costs, expenses
and disbursements, including reasonable attorneys' and paralegals' fees and
legal expenses, incurred by Bank in connection with realizing on the Collateral
or collection of any Obligations of any of Borrower under any of the Loan
Documents, including advances made by Bank or any one of them or Bank for the
reasonable maintenance, preservation, protection or enforcement of, or
realization upon, the Collateral, including advances for taxes, insurance,
repairs and the like and reasonable expenses incurred to sell or otherwise
realize on, or prepare for sale or other realization on, any of the Collateral;
(b) second, to the repayment of all Indebtedness then due and
unpaid of Borrower to Bank incurred under this Agreement or any of the other
Loan Documents, whether of principal, interest, fees, expenses or otherwise, in
such manner as Bank may determine in its discretion; and
(c) the balance, if any, as required by Law.
8.2.5 Other Rights and Remedies.
In addition to all of the rights and remedies contained in this
Agreement or in any of the other Loan Documents Bank shall have all of the
rights and remedies of a secured party under the Uniform Commercial Code or
other applicable Law, all of which rights and remedies shall be cumulative and
non-exclusive, to the extent permitted by Law. Bank may exercise all
post-default rights granted to Bank under the Loan Documents or applicable Law.
8.3 Notice of Sale.
Any notice required to be given by Bank of a sale, lease, or
other disposition of the Collateral or any other intended action by Bank, if
given ten (10) days prior to such proposed action, shall constitute commercially
reasonable and fair notice thereof to Borrower.
8.4 No Implied Waivers; Cumulative Remedies; Writing Required.
No course of dealing and no delay or failure of Bank in
exercising any right, power, remedy or privilege under this Agreement or any
other Loan Document shall affect any other or future exercise thereof or operate
as a waiver thereof, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such a right, power, remedy or
privilege preclude any further exercise thereof or of any other right, power,
remedy or privilege. The rights and remedies of Bank under this Agreement and
any other Loan Documents are cumulative and not exclusive of any rights or
remedies which they would otherwise have. Any waiver, permit, consent or
approval of any kind or character on the part of Bank of any breach or default
under this Agreement or any such waiver of any provision or condition of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing.
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8.5 Reimbursement and Indemnification of Bank by Borrower; Taxes.
The Borrower agrees unconditionally upon demand to pay or
reimburse to Bank and to save Bank harmless against (i) liability for the
payment of all reasonable out-of-pocket costs, expenses and disbursements
(including fees and expenses of counsel (including allocated costs of staff
counsel) for Bank except with respect to (a) and (b) below), incurred by Bank
(a) in connection with the administration and interpretation of this Agreement,
and other instruments and documents to be delivered hereunder, (b) relating to
any amendments, waivers or consents pursuant to the provisions hereof, (c) in
connection with the enforcement of this Agreement or any other Loan Document, or
collection of amounts due hereunder or thereunder or the proof and allowability
of any claim arising under this Agreement or any other Loan Document, whether in
bankruptcy or receivership proceedings or otherwise, and (d) in any workout or
restructuring or in connection with the protection, preservation, exercise or
enforcement of any of the terms hereof or of any rights hereunder or under any
other Loan Document or in connection with any foreclosure, collection or
bankruptcy proceedings, or (ii) all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against Bank, in its capacity as such, in any way relating to or arising out of
this Agreement or any other Loan Documents or any action taken or omitted by
Bank hereunder or thereunder, provided that Borrower shall not be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (A) if the same results from
Bank's gross negligence or willful misconduct, or (B) if Borrower was not given
notice of the subject claim and the opportunity to participate in the defense
thereof, at its expense (except that Borrower shall remain liable to the extent
such failure to give notice does not result in a loss to Borrower), or (C) if
the same results from a compromise or settlement agreement entered into without
the consent of Borrower, which shall not be unreasonably withheld. Borrower
agrees unconditionally to pay all stamp, document, transfer, recording or filing
taxes or fees and similar impositions now or hereafter determined by Bank to be
payable in connection with this Agreement or any other Loan Document, and
Borrower agrees unconditionally to save Banks harmless from and against any and
all present or future claims, liabilities or losses with respect to or resulting
from any omission to pay or delay in paying any such taxes, fees or impositions.
8.6 Holidays.
Whenever payment of a Revolving Credit Loan to be made or taken
hereunder shall be due on a day which is not a Business Day such payment shall
be due on the next Business Day and such extension of time shall be included in
computing interest and fees, except that the Loans shall be due on the Business
Day preceding the Expiration Date if the Expiration Date is not a Business Day.
Whenever any payment or action to be made or taken hereunder (other than payment
of the Loans) shall be stated to be due on a day which is not a Business Day,
such payment or action shall be made or taken on the next following Business Day
and such extension of time shall not be included in computing interest or fees,
if any, in connection with such payment or action.
8.7 Notices.
All notices, requests, demands, directions and other
communications (as used in this Section 8.7, collectively referred to as
"notices") given to or made upon any party hereto under the provisions of this
Agreement shall be by telephone or in writing (including telex or facsimile
communication) unless otherwise expressly permitted hereunder and shall be
delivered or sent by telex or facsimile to the respective parties at the
addresses and numbers set forth under their respective names on Schedule 8.7
hereof or in accordance with any subsequent unrevoked written direction from any
party to the others. All notices shall, except as otherwise expressly herein
provided, be effective (a) in the case of telex or facsimile, when received, (b)
in the case of hand-delivered notice, when hand-delivered, (c) in the case of
telephone, when telephoned, provided, however, that in order to be effective,
telephonic notices must be confirmed in writing no later than the next day by
letter, facsimile or telex, (d) if given by mail, four (4) days after such
communication is deposited in the mail with first-class postage prepaid, return
receipt requested, and (e) if given by any other means (including by air
courier), when delivered; provided, that notices to Bank shall not be effective
until received.
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8.8 Severability.
The provisions of this Agreement are intended to be severable. If
any provision of this Agreement shall be held invalid or unenforceable in whole
or in part in any jurisdiction, such provision shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without in
any manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.
8.9 Governing Law.
This Agreement shall be deemed to be a contract under the Laws
of the Commonwealth of Pennsylvania and for all purposes shall be governed by
and construed and enforced in accordance with the internal laws of the
Commonwealth of Pennsylvania without regard to its conflict of laws principles.
8.10 Prior Understanding.
This Agreement and the other Loan Documents supersede all prior
understandings and agreements, whether written or oral, between the parties
hereto and thereto relating to the transactions provided for herein and therein,
including any prior confidentiality agreements and commitments.
8.11 Duration; Survival.
All representations and warranties of Borrower contained herein
or made in connection herewith shall survive the making of Revolving Credit
Loans and shall not be waived by the execution and delivery of this Agreement,
any investigation by Bank, the making of Loans, or payment in full of the Loans.
All covenants and agreements of the Borrower contained in Sections 7.1
[Affirmative Covenants], 7.2 [Negative Covenants] and 7.3 [Reporting
Requirements] herein shall continue in full force and effect from and after the
date hereof and until termination of the Commitments and payment in full of the
Loans. All covenants and agreements of Borrower contained herein relating to the
payment of principal, interest, premiums, additional compensation or expenses
and indemnification, including those set forth in the Notes, Section 4
[Payments] and 8.5 [Reimbursement of Bank by Borrower; Etc.], shall survive
payment in full of the Loans and termination of Commitment.
8.12 Successors and Assigns.
(a) This Agreement shall be binding upon and shall inure to the
benefit of Bank, Borrower and their respective successors and assigns, except
that Borrower may assign or transfer any of its rights and Obligations hereunder
or any interest herein. Bank may make assignments of or sell participations in
all or any part of the Revolving Credit Loans made by it to one or more banks or
other entities.
8.13 Exceptions.
The representations, warranties and covenants contained herein
shall be independent of each other, and no exception to any representation,
warranty or covenant shall be deemed to be an exception to any other
representation, warranty or covenant contained herein unless expressly provided,
nor shall any such exceptions be deemed to permit any action or omission that
would be in contravention of applicable Law.
8.14 CONSENT TO FORUM; WAIVER OF JURY TRIAL.
EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY AND THE UNITED
STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA, AND WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH
PARTY AT THE ADDRESSES PROVIDED FOR IN SECTION 8.7 AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH PARTY
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WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST
IT AS PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE. BORROWER AND BANK HEREBY WAIVE TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED
TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE COLLATERAL TO THE FULL EXTENT
PERMITTED BY LAW.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.
ATTEST: SUPERCONDUCTOR TECHNOLOGIES, INC.
/s/ Xxxxx X. Xxxxx, Xx. By: /s/ M. Xxxxx Xxxxxx
Secretary Title: President, Chief Executive Officer
Superconductor Technologies, Inc
[Seal]
PNC BANK, NATIONAL ASSOCIATION
By: Xxxxxxx Xxxx
Title: Vice President
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EXHIBIT A
INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Intellectual Property Security Agreement (the "Agreement") is made
as of June 18, 1999 by and between Superconductor Technologies, Inc., a Delaware
corporation ("Grantor"), and PNC Bank, National Association, a national banking
association ("Secured Party").
RECITALS
A. Secured Party has agreed to lend to Grantor certain funds (the
"Loan"), and Grantor desires to borrow such funds from Secured Party pursuant to
the terms of a Credit Agreement dated as of the date hereof, between Grantor and
Secured Party (the "Credit Agreement").
B. In order to induce Secured Party to make the Loan, Grantor has agreed
to grant a first priority security interest in certain intangible property to
Secured Party for the benefit of Secured Party for purposes of securing the
obligations of Grantor to Secured Party.
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. Grant of Security Interest. As collateral security for the prompt and
complete payment and performance of all of Grantor's obligations and liabilities
of every nature, now or hereafter existing, under or arising out of or in
connection with the Credit Agreement or otherwise, and all extensions or
renewals thereof, whether for principal, interest, fees, expenses, indemnities
or otherwise, whether voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party as a preference,
fraudulent transfer or otherwise (all such obligations and liabilities being the
"Underlying Debt"), and all obligations of every nature of Grantor now or
hereafter existing under this Agreement (all such obligations, together with the
Underlying Debt, being the "Secured Obligations"), Grantor hereby assigns,
transfers, conveys and grants to Secured Party, a first priority security
interest, as security, in and to Grantor's entire right, title and interest in,
to and under the following (all of which shall collectively be called the
"Intellectual Property Collateral"):
(a) Any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof that is created by Grantor, whether published or
unpublished and whether or not the same also constitutes a trade secret, now or
hereafter existing, created, acquired or held, including without limitation
those set forth on Exhibit A attached hereto (collectively, the "Copyrights");
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to Grantor
now or hereafter existing, created, acquired or held;
(d) All patents, patent applications and like protections
including without limitation improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same, including without
limitation the patents and patent applications set forth on Exhibit B attached
hereto (collectively, the "Patents");
(e) Any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Grantor connected with
and symbolized by such trademarks, including without limitation those set forth
on Exhibit C attached hereto (collectively, the "Trademarks");
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(f) Right to the proceeds (excluding attorneys' and other
professional and expert fees and expenses) arising from any and all claims for
damages by way of past, present and future infringement of any of the rights
included above, with the right, but not the obligation, to xxx on behalf of and
collect such damages for said use or infringement of the intellectual property
rights identified above;
(g) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(h) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(i) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
Notwithstanding the foregoing, the security interest herein
shall not extend to and the term "Intellectual Property Collateral" shall not
include any contracts, permits or licenses to the extent the granting of a
security interest therein (i) would be contrary to applicable law or (ii) any
contracts or licenses of Borrower, or any permits of Borrower, if and to the
extent such contract, license or permit contains restrictions on assignments and
the creation of any liens, or under which such an assignment or lien would cause
a default to occur under such contract, license or permit (other than to the
extent that any such term would be rendered ineffective pursuant to Section
9-318(4) of the Uniform Commercial Code of any relevant jurisdiction or any
other applicable law, including the Bankruptcy Code, or principles of equity);
provided that immediately upon the ineffectiveness, lapse or termination of any
such provision, the Intellectual Property Collateral shall include, and Borrower
shall be deemed to have granted a security interest in, all such rights and
interests as if such provision had never been in effect; provided further in all
cases that the Intellectual Property Collateral shall include any proceeds of
the foregoing.
2. Authorization and Request. Grantor authorizes and requests that
the Register of Copyrights and the Commissioner of Patents and
Trademarks record this security agreement.
3. Covenants and Warranties. Grantor represents, warrants,
covenants and agrees as follows:
(a) Grantor is now the sole owner of the Intellectual Property
Collateral, except for non-exclusive licenses granted by Grantor to its
customers in the ordinary course of business;
(b) Other than as set forth in schedule 3 hereto, performance of
this Agreement does not conflict with or result in a breach of any agreement to
which Grantor is party or by which Grantor is bound.
(c) During the term of this Agreement, Grantor will not transfer
or otherwise encumber any interest in the Intellectual Property Collateral,
except for non-exclusive licenses as permitted under Section 7.2.7(e) of the
Credit Agreement;
(d) Each of the Patents is valid and enforceable, and no part of
the Intellectual Property Collateral has been judged invalid or unenforceable,
in whole or in part, and no claim has been made that any part of the
Intellectual Property Collateral violates the rights of any third party;
(e) Grantor shall promptly advise Secured Party of any change in
the composition of the Intellectual Property Collateral, including but not
limited to any subsequent ownership right of the Grantor in or to any Trademark,
Patent or Copyright not specified in this Agreement;
(f) In accordance with its prudent business judgment, Grantor
shall (i) protect, defend and maintain the validity and enforceability of the
Trademarks, Patents and Copyrights, (ii) use its best efforts to detect
infringements of the Trademarks, Patents and Copyrights and promptly advise
Secured Party in writing of material infringements detected and (iii) not allow
any Trademarks, Patents or Copyrights to be abandoned, forfeited or
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dedicated to the public without the written consent of Secured Party, which
shall not be unreasonably withheld.
(g) Grantor shall promptly register with the United States
Copyright Office (i) any software material to the business of Grantor developed
or acquired by Grantor hereafter from time to time in connection with any
product developed or acquired for sale or licensing and (ii) any major revisions
or upgrades to such software, if not so already registered, and shall, from time
to time, execute and file such other instruments, and take such further actions
as Secured Party may reasonably request from time to time to perfect or continue
the perfection of Secured Party's interest in the Intellectual Property
Collateral;
(h) This Agreement creates in favor of Secured Party a valid
security interest in the Intellectual Property Collateral in the United States
listed on the Exhibits hereto securing the payment and performance of the
obligations evidenced by the Credit Agreement and the Notes, and upon the filing
of the UCC financing statements in the appropriate jurisdictions and making the
filings referred to in clause (i) below, a perfected first priority security
interest in such collateral;
(i) Except for, and upon, the filing with the United States
Patent and Trademark office with respect to the Patents and Trademarks and the
Register of Copyrights with respect to the Copyrights necessary to perfect the
security interests created hereunder, and except for the filing of the UCC
financing statements, and except as has been already made or obtained, no
authorization, approval or other action by, and no notice to or filing with, any
U.S. governmental authority or U.S. regulatory body is required either (i) for
the grant by Grantor of the security interest granted hereby or for the
execution, delivery or performance of this Agreement by Grantor in the U.S. or
(ii) for the perfection in the United States or the exercise by Secured Party of
its rights and remedies hereunder;
(j) All information heretofore, herein or hereafter supplied to
Secured Party by or on behalf of Grantor with respect to the Intellectual
Property Collateral is accurate and complete in all material respects.
(k) Grantor shall not enter into any agreement that would impair
or conflict with Grantor's obligations hereunder without Secured Party's prior
written consent, which consent shall not be unreasonably withheld. Grantor shall
not permit the inclusion in any contract to which it becomes a party of any
provisions that could or might in any way prevent the creation of a security
interest in Grantor's rights and interests in any property included within the
definition of the Intellectual Property Collateral acquired under such
contracts, except that certain contracts may contain anti-assignment provisions
that could in effect prohibit the creation of a security interest in such
contracts, and except that Grantor shall not be prohibited from granting
non-exclusive licenses, or entering into marketing and distribution agreements
in the normal course of its business.
(l) Upon any executive officer of Grantor obtaining actual
knowledge thereof, Grantor will promptly notify Secured Party in writing of any
event that materially adversely affects the value of the Intellectual Property
Collateral, the ability of Grantor to dispose of any Intellectual Property
Collateral or the rights and remedies of Secured Party in relation thereto,
including the levy of any legal process against any of the Intellectual Property
Collateral.
4. Secured Party's Rights. Secured Party shall have the right, but not
the obligation, to take, at Grantor's sole expense, any actions that Grantor is
required under this Agreement to take but which Grantor fails to take, after
fifteen (15) days' notice to Grantor. Grantor shall reimburse and indemnify
Secured Party for all reasonable costs and reasonable expenses incurred in the
reasonable exercise of its rights under this Section 4.
5. Inspection Rights. Subject to the Grantor's reasonable security and
confidentiality requirements, Grantor hereby grants to Secured Party and its
employees, representatives and agents the right to visit, during reasonable
hours, any of Grantor's plants and facilities that manufacture, install or store
products (or that have done so during the prior six-month period) that are sold
utilizing any of the Intellectual Property Collateral, and to inspect the
products and quality control records relating thereto as often as may be
reasonably requested, but not more than once in each calendar quarter if no
Event of Default has occurred.
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6. Further Assurances; Attorney in Fact.
(a) On a continuing basis, Grantor will, subject to any prior
licenses, encumbrances and restrictions and prospective licenses, make, execute,
acknowledge and deliver, and file and record in the proper filing and recording
places in the United States, all such instruments, including appropriate
financing and continuation statements and collateral agreements and filings with
the United States Patent and Trademark Office and the Register of Copyrights,
and take all such action as may reasonably be deemed necessary or advisable, or
as reasonably requested by Secured Party, to perfect Secured Party's security
interest in all Copyrights, Patents and Trademarks and otherwise to carry out
the intent and purposes of this Agreement, or for assuring and confirming to
Secured Party the grant or perfection of a security interest in all Intellectual
Property Collateral.
(b) Grantor hereby irrevocably appoints Secured Party as
Grantor's attorney-in-fact, with full authority in the place and stead of
Grantor and in the name of Grantor, from time to time in Secured Party's
discretion, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including:
(i) To modify, in its sole discretion, this Agreement
without first obtaining Grantor's approval of or signature to such modification
by amending Exhibit A, Exhibit B and Exhibit C, thereof, as appropriate, to
include reference to any right, title or interest in any Copyrights, Patents or
Trademarks acquired by Grantor after the execution hereof or to delete any
reference to any right, title or interest in any Copyrights, Patents or
Trademarks in which Grantor no longer has or claims any right, title or
interest; and
(ii) To file, in its sole discretion, one or more
financing or continuation statements and amendments thereto, relative to any of
the Intellectual Property Collateral without the signature of Grantor where
permitted by law.
7. Events of Default. The occurrence of any of the following shall
constitute an Event of Default under this Agreement:
(a) An Event of Default occurs under the Credit Agreement; or
(b) Grantor breaches any warranty or agreement made by Grantor
in this Agreement and, as to any breach that is capable of cure, Grantor fails
to cure such breach within ten (10) days of the occurrence of such breach.
8. Remedies. Upon the occurrence and continuance of an Event of Default,
Secured Party shall have the right to exercise all the remedies of a secured
party under the California Uniform Commercial Code, including without limitation
the right to require Grantor to assemble the Intellectual Property Collateral
and any tangible property in which Secured Party has a security interest and to
make it available to Secured Party at a place designated by Secured Party.
Secured Party shall have a nonexclusive, royalty free license to use the
Copyrights, Patents and Trademarks to the extent reasonably necessary to permit
Secured Party to exercise its rights and remedies upon the occurrence and during
the continuation of an Event of Default. Grantor will pay any reasonable
expenses (including reasonable attorneys' fees) incurred by Secured Party in
connection with the exercise of any of Secured Party's rights hereunder,
including without limitation any expense incurred in disposing of the
Intellectual Property Collateral. All of Secured Party's rights and remedies
with respect to the Intellectual Property Collateral shall be cumulative.
9. Indemnity. Grantor agrees to defend, indemnify and hold harmless
Secured Party, each of its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement, and
(b) all losses or reasonable expenses in any way suffered, incurred, or paid by
Secured Party as a result of or in any way arising out of, following or
consequential to transactions between Secured Party and Grantor, whether under
this Agreement or otherwise (including without limitation reasonable attorneys'
fees and reasonable expenses), except for losses
39
40
arising from or out of Secured Party's gross negligence or willful misconduct.
10. Reassignment. At such time as Grantor shall completely satisfy all
of the Secured Obligations, Secured Party shall execute and deliver to Grantor
all deeds, assignments and other instruments as may be necessary or proper to
revest in Grantor full title to the property assigned hereunder, subject to any
disposition thereof which may have been made by Secured Party pursuant hereto.
11. Course of Dealing. No course of dealing, nor any failure to
exercise, nor any delay in exercising any right, power or privilege hereunder
shall operate as a waiver thereof.
12. Amendments. This Agreement may be amended only by a written
instrument signed by both parties hereto.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute the same instrument.
14. Governing Law and Jurisdiction. This Agreement shall be governed by
the laws of the Commonwealth of Pennsylvania, without regard for choice of law
provisions. Grantor and Secured Party consent to the exclusive jurisdiction of
any state court located in Allegheny County or federal court located in the
Western District of Pennsylvania.
15. Waiver of Jury Trial. Each party hereto hereby agrees to waive its
respective rights to a jury trial of any claim or cause of action based upon or
arising out of this agreement. The scope of this waiver is intended to be all
encompassing of any and all disputes that may be filed in any court and that
relate to the subject matter of this transaction, including without limitation
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims. Each party hereto acknowledges that this waiver is a
material inducement for each such party to enter into a business relationship
that each such party has already relied on this waiver in entering into this
agreement ant that each such party will continue to rely on this waiver in their
related future dealings. Each party hereto further warrants and represents that
each such party has reviewed this waiver with its legal counsel, and that each
such party knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. This waiver is irrevocable, meaning that it may
not be modified either orally or in writing, and this waiver shall apply to any
subsequent amendments, renewals, supplements or modifications to this agreement.
In the event of litigation, this Agreement may be filed as a written consent to
a trial by the court.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
Address of Grantor: Grantor:
000 Xxxx Xxxxx, Xxxxx X SUPERCONDUCTOR TECHNOLOGIES, INC.
Xxxxx Xxxxxxx, XX 00000
By: /s/ M. Xxxxx Xxxxxx
Attn: Xxxxx X. Xxxxx
Title: President, Chief Executive Officer
Address of Secured Party: Secured Party:
0000 Xxxxxxxxx Xxxxx, Xxxxx 000 PNC BANK, NATIONAL ASSOCIATION
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxx By: Xxxxxxx Xxxx
Title: Vice President
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EXHIBIT B
REVOLVING CREDIT NOTE
$ 2,500,000 Pittsburgh, Pennsylvania
June 18, 1999
FOR VALUE RECEIVED, the undersigned, SUPERCONDUCTOR TECHNOLOGIES, INC.,
a Delaware corporation (herein called the "Borrower"), hereby promises to pay to
the order of PNC BANK, NATIONAL ASSOCIATION (the "Bank") the lesser of (i) the
principal sum of Two Million Five Hundred Thousand U.S. Dollars (U.S. $
2,500,000), or (ii) the aggregate unpaid principal balance of all Revolving
Credit Loans made by the Bank to the Borrower pursuant to Section 2.1 of the
Credit Agreement dated as of June 18, 1999, between the Borrower, and Bank (the
"Credit Agreement"), whichever is less, payable on the Expiration Date.
The Borrower shall pay interest on the unpaid principal balance hereof
from time to time outstanding from the date hereof at the rate or rates per
annum specified by the Borrower as provided in the Credit Agreement.
Upon the occurrence and during the continuation of an Event of Default,
the Borrower shall pay interest on the entire principal amount of the then
outstanding Revolving Credit Loans evidenced by this Revolving Credit Note at a
rate per annum equal to 300 hundred basis points (3% per annum) above the rate
of interest otherwise applicable with respect to such loans. Such interest rate
will accrue before and after any judgment has been entered.
Interest on this Revolving Credit Note will be payable at the times
which shall be determined in accordance with the provisions of the Credit
Agreement.
If any payment or action to be made or taken hereunder shall be stated
to be or become due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day and such extension of
time shall be included in computing interest or fees, if any, in connection with
such payment or action.
Subject to the provisions of the Credit Agreement, payments of both
principal and interest shall be made without setoff, counterclaim or other
deduction of any nature at the office of the Bank located at 000 Xxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000, in lawful money of the United States of
America in immediately available funds.
This Note is the Revolving Credit Note referred to in, and is entitled
to the benefits of, the Credit Agreement and other Loan Documents, including the
representations, warranties, covenants, conditions, security interests or Liens
contained or granted therein. The Credit Agreement among other things contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayment, in certain circumstances, on account of
principal hereof prior to maturity upon the terms and conditions therein
specified.
All capitalized terms used herein shall, unless otherwise defined
herein, have the same meanings given to such terms in the Credit Agreement.
Except as otherwise provided in the Credit Agreement, the Borrower
waives presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note and the Credit Agreement.
This Note shall bind the Borrower and its successors and assigns, and
the benefits hereof shall inure to the benefit of the Bank and its successors
and assigns. All references herein to the "Borrower" and the "Bank" shall be
deemed to apply to the Borrower and the Bank, respectively, and their respective
successors and assigns.
This Note and any other documents delivered in connection herewith and
the rights and obligations of the parties hereto and thereto shall for all
purposes be governed by and construed and enforced in accordance with the
internal laws of the State of Pennsylvania without giving effect to its
conflicts of law principles.
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IN WITNESS WHEREOF, the undersigned has executed this Note by its duly
authorized officers with the intention that it constitute a sealed instrument.
SUPERCONDUCTOR TECHNOLOGIES, INC.
By: /s/ M. Xxxxx Xxxxxx
Title: President, Chief Executive
Officer
[Seal]
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EXHIBIT C
SECURITY AGREEMENT
This Security Agreement (this "Agreement") is entered into as of June
18, 1999, by and between Superconductor Technologies, Inc., a Delaware
corporation (the "Borrower"), and PNC Bank, National Association (the "Bank").
PRELIMINARY STATEMENTS
A. Borrower and Bank have entered into a Credit Agreement of even date
herewith (said Credit Agreement, as it may hereafter be amended from time to
time, being the "Credit Agreement," the terms defined therein and not otherwise
defined herein being used herein as therein defined), pursuant to which Bank has
made certain commitments, subject to the terms and conditions set forth in the
Credit Agreement, to extend certain credit facilities to Borrower.
B. It is a condition precedent to the initial extensions of credit by
Bank under the Credit Agreement that Borrower shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Bank to make the Loans under the Credit Agreement and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower hereby agrees with Bank as follows:
1. Grant of Security. Borrower hereby assigns to the Bank and hereby
grants to Bank, a security interest in all of Borrower's right, title and
interest in and to the property described on Exhibit A attached hereto, whether
now or hereafter existing or in which Borrower now has or hereafter acquires an
interest and wherever the same may be located (the "Collateral"); provided,
however, that the security interest herein shall not extend to and shall not
include any contracts, permits or licenses to the extent the granting of a
security interest therein (i) would be contrary to applicable law or (ii) any
contracts or licenses of Borrower, or any permits of Borrower, if and to the
extent such contract, license or permit contains restrictions on assignments and
the creation of any liens, or under which such an assignment or lien would cause
a default to occur under such contract, license or permit (other than to the
extent that any such term would be rendered ineffective pursuant to Section
9-318(4) of the Uniform Commercial Code of any relevant jurisdiction or any
other applicable law, including the Bankruptcy Code, or principles of equity);
provided that immediately upon the ineffectiveness, lapse or termination of any
such provision, the Collateral shall include, and Borrower shall be deemed to
have granted a security interest in, all such rights and interests as if such
provision had never been in effect; provided further in all cases that the
Intellectual Property Collateral shall include any proceeds of the foregoing.
2. Security for Obligations. This Agreement secures, and the Collateral
is collateral security for, the prompt payment or performance in full when due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise, of all obligations and liabilities of every nature of
Borrower to Bank, now or hereafter existing, under or arising out of or in
connection with the Credit Agreement or any other Loan Documents, and all
extensions or renewals thereof, whether for principal, interest, fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Bank as a preference,
fraudulent transfer or otherwise (all such obligations and liabilities being the
"Underlying Debt"), and all obligations of every nature of Borrower now or
hereafter existing under this Agreement (all such obligations, together with the
Underlying Debt, being the "Secured Obligations").
3. Borrower Remains Liable. Anything contained herein to the contrary
notwithstanding, (a)
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Borrower shall remain liable under any contracts and agreements included in the
Collateral, to the extent set forth therein, to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by Bank of any of its rights hereunder shall not
release Borrower from any of its duties or obligations under the contracts and
agreements included in the Collateral, and (c) Bank shall not have any
obligation or liability under any contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Bank be obligated to perform
any of the obligations or duties of Borrower thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
4. Representations and Warranties. Borrower represents and warrants as
follows:
(a) Ownership of Collateral. Except as set forth in Schedule 4
hereto and except for the security interest created by this Agreement and the
Permitted Liens, Borrower owns the Collateral free and clear of any lien,
mortgage, security interest, legal or equitable charge, pledge, deed of trust or
other encumbrance. Except as set forth in Schedule 4 hereto and except such as
may have been filed in favor of Bank relating to this Agreement and the
Permitted Liens, no effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any filing or
recording office.
(b) Location of Equipment and Inventory. All of the Equipment
and Inventory is, as of the date hereof, located at the places specified in
Schedule 1 annexed hereto.
(c) Office Locations. The chief place of business, the chief
executive office and the office where Borrower keeps its records regarding its
Accounts is, and has been for the four month period preceding the date hereof,
located at 000 Xxxx Xxxxx, Xxxxx X, Xxxxx Xxxxxxx, XX 00000-0000.
(d) Fictitious Names. Borrower does not do any business under
any trade-name or fictitious business name.
(e) Governmental Authorizations. No authorization, approval or
other action by, and no notice to or filing with any governmental authority or
regulatory body is required for either (i) the grant by Borrower of the security
interest granted hereby or for the execution, delivery or performance of this
Agreement by Borrower or (ii) the perfection of or the exercise by Bank of its
rights and remedies hereunder, other than such actions and filings as have
already been taken.
(f) Enforceability. Except for and upon the filing of the
financing statements required to perfect the Bank's security interest hereunder,
and except for and upon the filings contemplated by the Intellectual Property
Security Agreement, to the extent such perfection can be effected by such
filings, all actions necessary to ensure the validity and enforceability of
Bank's Lien on the Collateral, including as against any bona fide purchaser for
value, have been duly taken.
(g) Other Information. All information heretofore, herein or
hereafter supplied to Bank by or on behalf of Borrower with respect to the
Collateral is (or, as to hereafter supplied information, will be) accurate and
complete in all material respects, and with respect to such information prepared
by a third party, to the best knowledge of Borrower, such information is
accurate and complete in all material respects.
5. Further Assurances.
(a) Borrower agrees that from time to time, at its expense,
Borrower will promptly execute and deliver all further instruments and
documents, and take all further action that may be reasonably necessary in order
to perfect and protect any security interest granted or purported to be granted
hereby or to enable Bank to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing, Borrower will: (i) if any Account shall be evidenced by a promissory
note or other instrument (excluding checks), having a face value in excess of
Fifty Thousand Dollars ($50,000) deliver and pledge to Bank hereunder such note
or instrument, duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Bank; (ii)
execute and file such financing or continuation statements, or amendments
thereto, or such other instruments or notices, as may be necessary or desirable,
or as Bank may request, in order to perfect and preserve the security interests
granted or purported to be granted hereby;
46
(iii) at any reasonable time subject to Borrower's reasonable security and
confidentiality requirements, exhibit the Collateral to and allow inspection of
the Collateral by Bank, or persons designated by Bank in accordance with the
terms of the Credit Agreement but not more than once in each calendar quarter if
no Event of Default has occurred; and (iv) at Bank's request, appear in and
defend any action or proceeding that may affect Borrower's title to or Bank's
security interest in all or any part of the Collateral.
(b) Borrower hereby authorizes Bank to file, register or record
such documents as may be appropriate to protect Bank's security interest in the
Collateral, relative to all or any part of the Collateral without the signature
of Borrower. Borrower agrees that a carbon, photographic or other reproduction
of this Agreement or of a financing statement signed by Borrower shall be
sufficient as a financing statement and may be filed as a financing statement in
any and all jurisdictions.
(c) Borrower will furnish to Bank from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Bank may reasonably request, all in
reasonable detail.
6. Covenants of Borrower. Borrower shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral where
violation is reasonably likely to have a material adverse effect on Bank's
rights in the Collateral or the value of the Collateral or Bank's ability to
foreclose on the Collateral;
(b) notify Bank of any change in Borrower's name, identity or
corporate structure within 15 days of such change;
(c) give Bank 30 days' prior written notice of any change in
Borrower's chief place of business, chief executive office or residence;
(d) if Bank gives value to enable Borrower to acquire rights in
or the use of any Collateral (as specified in writing by Bank to Borrower at the
time of the giving of such value), use such value for such purposes; and
(e) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Collateral,
except to the extent the validity thereof is being contested in good faith or
failure to make payment thereof would not materially adversely affect Bank's
rights in the Collateral; provided that Borrower shall in any event pay such
taxes, assessments, charges, levies or claims not later than five days prior to
the date of any proposed sale under any judgment, writ or warrant of attachment
entered or filed against Borrower or any of the Collateral as a result of the
failure to make such payment.
7. Special Covenants With Respect to Equipment and Inventory. Borrower
shall:
(a) other than "mobile goods" (as defined in the Pennsylvania
Uniform Commercial Code) keep the Equipment and Inventory at the places
specified on Schedule 1 annexed hereto or, upon 30 days' prior written notice to
Bank, at such other places in jurisdictions where all action that may be
reasonably necessary in order to perfect and protect any security interest
granted or purported to be granted hereby, or to enable Bank to exercise and
enforce its rights and remedies hereunder, with respect to such Equipment and
Inventory shall have been taken;
(b) cause the Equipment to be maintained and preserved in good
condition, repair and working order, ordinary wear and tear excepted, and in
accordance with any manufacturer's manual, and shall forthwith, or, in the case
of any loss or damage to any of the Equipment when subsection (c) of Section 8
is not applicable, as quickly as practicable after the occurrence thereof, make
or cause to be made all repairs, replacements and other improvements in
connection therewith that are necessary or desirable to such end except to the
extent Borrower has determined that such Equipment is not materially important
to the conduct of its business. Borrower
47
shall promptly furnish to Bank a statement respecting any material loss or
damage to any of the Equipment;
(c) keep correct and accurate records of the Inventory, in
accordance with good business practices, including itemizing Borrower's cost
therefor and (where applicable) the current list prices for the Inventory; and
(d) f any Inventory is in possession or control of any of
Borrower's agents or processors, upon the occurrence of an Event of Default,
instruct such agent or processor to hold all such Inventory for the account of
Bank and subject to the instructions of Bank.
8. Insurance.
(a) Borrower shall, at its own expense, maintain insurance with
respect to the Equipment and Inventory in which it has an interest in such
amounts, against such risks, in such form and with such insurers as is customary
for similarly situated businesses. Such insurance shall include, without
limitation, property damage insurance and liability insurance. Each policy shall
in addition name the Borrower and Bank as insured parties thereunder (without
any representation or warranty by or obligation upon Bank) as their interests
may appear and have attached thereto a loss payable clause reasonably acceptable
to Bank that shall (i) contain an agreement by the insurer that if an Event of
Default has occurred, any loss thereunder shall be payable to Bank
notwithstanding any action, inaction or breach of representation or warranty by
Borrower, (ii) provide that there shall be no recourse against Bank for payment
of premiums or other amounts with respect thereto, and (iii) provide that at
least 30 days' prior written notice of cancellation or of lapse shall be given
to Bank by the insurer. Borrower shall, if so requested by Bank, deliver to Bank
original or duplicate policies of such insurance and, as often as Bank may
reasonably request (but no more frequently than once per year, unless there is a
change in the policy or the insurer), a report of a reputable insurance broker
with respect to such insurance. Further, Borrower shall, at the request of Bank,
duly execute and deliver instruments of assignment of such insurance policies to
comply with the requirements of Section 5(a) and cause the respective insurers
to acknowledge notice of such assignment.
(b) Payments for claims issued by any liability insurance
maintained by Borrower pursuant to this Section 8 may be paid directly to the
Person who shall have incurred liability covered by such insurance. In case of
any loss involving damage to Equipment or Inventory when subsection (c) of this
Section 8 is not applicable, Borrower shall make or cause to be made the
necessary repairs to or replacements of such Equipment or Inventory, and any
proceeds of insurance maintained by Borrower pursuant to this Section 8 shall be
paid to Borrower as reimbursement for the costs of such repairs or replacements.
(c) Upon (i) the occurrence and during the continuation of any
Event of Default or (ii) the actual or constructive loss (in excess of $100,000
per occurrence) of any Equipment or Inventory, all insurance payments in respect
of such Equipment or Inventory shall be paid to and applied by Bank as specified
in Section 18.
9. Special Covenants with respect to Accounts and Related Contracts.
(a) Borrower shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Accounts and Related Contracts at the location specified in Section 4 or, upon
30 days' prior written notice to Bank, at such other location in a jurisdiction
where all action that may be reasonably necessary in order to perfect and
protect any security interest granted or purported to be granted hereby, or to
enable Bank to exercise and enforce its rights and remedies hereunder, with
respect to such Accounts and Related Contracts shall have been taken. Borrower
will hold and preserve such records and, subject to the terms of the Credit
Agreement, will permit representatives of Bank, during normal business hours and
subject to reasonable prior notice and Borrower's reasonable security and
confidentiality requirements, to inspect and make abstracts from such records,
and Borrower agrees to render to Bank, at Borrower's reasonable cost and
expense, such clerical and other assistance as may be reasonably requested with
regard thereto; provided that such inspections shall take place no more than
once in each calendar quarter, so long as no Event of Default has occurred.
Promptly upon the request of Bank, Borrower shall deliver to Bank complete and
correct copies of each Related Contract.
(b) Borrower shall, for not less than 3 years from the date on
which such Account arose, maintain (i) complete records of each Account,
including records of all payments received, credits granted and
48
merchandise returned, and (ii) all material documentation relating thereto.
(c) Except as otherwise provided in this subsection (c),
Borrower shall continue to collect, at its own expense, all amounts due or to
become due Borrower under the Accounts and Related Contracts. In connection with
such collections, Borrower may take such action as Borrower or Bank may deem
necessary or advisable to enforce collection of amounts due or to become due
under the Accounts; provided, however, that Bank shall have the right at any
time, upon the occurrence and during the continuation of an Event of Default, to
notify the Account Debtors or obligors under any Accounts of the assignment of
such Accounts to Bank, and to direct such Account Debtors or obligors to make
payment of all amounts due or to become due to Borrower thereunder directly to
Bank, to notify each person maintaining a lockbox or similar arrangement to
which Account Debtors or obligors under any Accounts have been directed to make
payment to remit all amounts representing collections on checks and other
payment items from time to time sent to or deposited in such lock box or other
arrangement directly to Bank and, upon such notification and at the expense of
Borrower, to enforce collection of any such Accounts and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as Borrower might have done. After receipt by Borrower of the notice from
Bank referred to in the proviso to the preceding sentence, (i) all amounts and
proceeds (including checks and other instruments) received by Borrower in
respect of the Accounts and the Related Contracts shall be received in trust for
the benefit of Bank hereunder, shall be segregated from other funds of Borrower
and shall be forthwith paid over or delivered to Bank in the same form as so
received (with any necessary endorsement) to be held as cash Collateral and
applied as provided by Section 18, and (ii) Borrower shall not adjust, settle or
compromise the amount or payment of any Account, or release wholly or partly any
Account Debtor or obligor thereof, or allow any credit or discount thereon. If
the Event of Default giving rise to the exercise of such remedies by Bank shall
be cured or waived, then Bank shall reinstate the Borrower's collection rights
with respect to such Accounts.
10. Reserved.
11. Reserved.
12. License of Patents, Trademarks, Copyrights, etc. Borrower hereby
assigns, transfers and conveys to Bank, for the benefit of Bank, effective upon
the occurrence of any Event of Default, the irrevocable, nonexclusive right and
license to use all trademarks, trade names, copyrights, patents or technical
processes owned or used (to the extent that Borrower has the right to assign
such property not owned by it) by Borrower that relate to the Collateral and any
other collateral granted by Borrower as security for the Secured Obligations,
together with any goodwill associated therewith, all to the extent necessary to
enable Bank to use, possess and realize on the Collateral for the benefit of
Bank and to enable any successor or assign to enjoy the benefits of the
Collateral. This right and license shall inure to the benefit of all successors,
assigns and transferees of Bank and its successors, assigns and transferees,
whether by voluntary conveyance, operation of law, assignment, transfer,
foreclosure, deed in lieu of foreclosure or otherwise. Such right and license is
granted free of charge, without requirement that any monetary payment whatsoever
be made to Borrower.
13. Transfers and Other Liens. Borrower shall not:
(a) except to the extent permitted in the Credit Agreement,
sell, assign (by operation of law or otherwise) or otherwise dispose of any of
the Collateral; or
(b) except for the security interest created by this Agreement,
and except to the extent permitted in the Credit Agreement, create or suffer to
exist any Lien upon or with respect to any of the Collateral to secure the
indebtedness or other obligations of any Person.
15. Bank Appointed Attorney-in-Fact. Borrower hereby irrevocably
appoints Bank as Borrower's attorney-in-fact, with full authority in the place
and stead of Borrower and in the name of Borrower, Bank or otherwise, from time
to time in Bank's discretion to take any action and to execute any instrument
that Bank may reasonably deem necessary to accomplish the purposes of this
Agreement, including, without limitation: (a) to sign and file on behalf of
Borrower any financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral; (b) to receive, endorse and
collect any drafts or instruments; (c) upon the occurrence and during the
continuation of an Event of Default, to obtain and adjust insurance required to
be
49
maintained by Borrower or paid to Bank pursuant to Section 8; (d) upon the
occurrence and during the continuation of an Event of Default, to ask, demand,
collect, xxx for, recover, compound, receive and give acquittance and receipts
for monies due and to become due under or in respect of any of the Collateral;
(e) upon the occurrence and during the continuation of an Event of Default, to
receive, endorse and collect any documents and chattel paper in connection with
clauses (a) and (c) above; (f) upon the occurrence and during the continuation
of an Event of Default, to file any claims or take any action or institute any
proceedings that Bank may deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of Bank with respect to any
of the Collateral; (g) upon the occurrence and during the continuation of an
Event of Default, to pay or discharge taxes or liens levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Bank in its
reasonable discretion, any such payments made by Bank to become obligations of
Borrower to Bank, due and payable immediately without demand; (h) upon the
occurrence and during the continuation of an Event of Default, to sign and
endorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications and
notices in connection with Accounts and other documents relating to the
Collateral; and (i) upon the occurrence and during the continuation of an Event
of Default, generally to sell, transfer, pledge, make any agreement with respect
to or otherwise deal with any of the Collateral as fully and completely as
though Bank were the absolute owner thereof for all purposes, and to do, at
Bank's option and Borrower' expense, at any time or from time to time, all acts
and things that Bank reasonably deems necessary to protect, preserve or realize
upon the Collateral and Bank's security interest therein in order to effect the
intent of this Agreement, all as fully and effectively as Borrower might do.
15. Bank May Perform. If Borrower fails to perform any agreement
contained herein, Bank may itself perform, or cause performance of, such
agreement, and the reasonable expenses of Bank incurred in connection therewith
shall be payable by Borrower under Section 19.
16. Standard of Care. The powers conferred on Bank hereunder are solely
to protect its interest and the interest of Banks in the Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the exercise
of reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, and other non-waivable
duties imposed by applicable law, Bank shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral. Bank shall be deemed
to have exercised reasonable care in the custody and preservation of Collateral
in its possession if such Collateral is accorded treatment substantially equal
to that which Bank accords its own property.
17. Remedies. If any Event of Default shall have occurred and be
continuing, Bank may exercise in respect of the Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "Code") (whether
or not the Code applies to the affected Collateral), and also may (a) require
Borrower to, and Borrower hereby agrees that it will at its expense and upon
request of Bank forthwith, assemble all or part of the Collateral as directed by
Bank and make it available to Bank at a place to be designated by Bank that is
reasonably convenient to both parties, (b) enter onto the property where any
Collateral is located and take possession thereof with or without judicial
process, (c) prior to the disposition of the Collateral, store, process, repair
or recondition the Collateral or otherwise prepare the Collateral for
disposition in any manner to the extent Bank deems appropriate, (d) take
possession of Borrower's premises or place custodians in exclusive control
thereof, remain on such premises and use the same and any of Borrower's
equipment for the purpose of completing any work in process, taking any actions
described in the preceding clause (c) and collecting any Secured Obligation, and
(e) without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of Bank's
offices or elsewhere, for cash, on credit or for future delivery, at such time
or times and at such price or prices and upon such other terms as Bank may deem
commercially reasonable. Bank may be the purchaser of any or all of the
Collateral at any such sale and Bank shall be entitled, for the purpose of
bidding and making settlement or payment of the purchase price for all or any
portion of the Collateral sold at any such public sale, to use and apply any of
the Secured Obligations as a credit on account of the purchase price for any
Collateral payable by Bank at such sale. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right on the part of
Borrower, and Borrower hereby waives (to the extent permitted by applicable law)
all rights of redemption, stay and/or appraisal which it now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted. Borrower agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to Borrower of (i) the time and place
of any public sale or (ii) the time after
50
which any private sale is to be made shall constitute reasonable notification.
Bank shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. Bank may adjourn any public or private sale from time
to time by announcement at the time and place fixed there for, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Borrower hereby waives any claims against Bank arising by reason of
the fact that the price at which any Collateral may have been sold at such a
private sale was less than the price which might have been obtained at a public
sale, even if Bank accepts the first offer received and does not offer such
Collateral to more than one offeree, provided Bank acted in a commercially
reasonable manner. If the proceeds of any sale or other disposition of the
Collateral are insufficient to pay all the Secured Obligations, Borrower shall
be liable to the maximum extent permitted by applicable law for the deficiency
and the fees of any attorneys employed by Bank to collect such deficiency.
18. Application of Proceeds. Except as expressly provided elsewhere in
this Agreement, all proceeds received by Bank in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral may
in the discretion of Bank, be held by Bank for the benefit of Bank as Collateral
for, and/or then, or at any other time thereafter, applied in full or in part by
Bank against, the Secured Obligations in the following order of priority:
FIRST: To the payment of all reasonable costs and expenses of such sale,
collection or other realization, including reasonable compensation to Bank and
its agents and counsel, and all other expenses, liabilities and advances made or
incurred by Bank in connection therewith, and all amounts for which Bank is
entitled to indemnification hereunder and all advances made by Bank hereunder
for the account of Borrower, and to the payment of all reasonable costs and
expenses paid or incurred by Bank in connection with the exercise of any right
or remedy hereunder, all in accordance with Section 19;
SECOND: To the payment of all other Secured Obligations (for the ratable
benefit of the holders thereof) in such order as Bank shall elect; and
THIRD: To the payment to or upon the order of Borrower, or to whosoever
may be lawfully entitled to receive the same or as a court of competent
jurisdiction may direct, of any surplus then remaining from such proceeds.
19. Indemnity and Expenses.
(a) Borrower agrees to indemnify Bank and Banks from and against
any and all claims, losses and liabilities in any way relating to, growing out
of or resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Bank's gross
negligence or willful misconduct as finally determined by a court of competent
jurisdiction.
(b) Borrower will pay to Bank upon demand the amount of any and
all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Bank may incur in connection with
(i) the administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any of
the Collateral, (iii) the exercise or enforcement of any of the rights of Bank
hereunder, or (iv) the failure by Borrower to perform or observe any of the
provisions hereof.
20. Amendments, etc. No amendment or waiver of any provision of this
Agreement, or consent to any departure by Borrower here from, shall in any event
be effective unless the same shall be in writing and signed by Bank, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given.
21. Notices. All notices and other communications provided for hereunder
shall be in writing (including telegraph, telex or facsimile communication) and
mailed or telegraphed or telexed or sent by facsimile or delivered, if to
Borrower or Bank, at its address set forth on the signature pages hereof; or, as
to each party, at such other address as shall be designated by such party in a
written notice to the other parties. All such notices and communications shall
be effective three (3) Business Days after deposit in the U.S. mail, postage
prepaid, when sent by telex or sent by facsimile, or when delivered,
respectively.
51
22. Failure or Indulgence Not Waiver. Remedies Cumulative. No failure or
delay on the part of Bank in the exercise of any power, right or privilege
hereunder shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude any other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
23. Severability. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
24. Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
25. Governing Law; Terms. This Agreement shall be governed by and shall
be construed and enforced in accordance with the internal laws of the State of
Pennsylvania, except as required by mandatory provision of law and except to the
extent that the validity or perfection of the security interest hereunder or
remedies hereunder in respect of any particular collateral are governed by the
laws of a jurisdiction other than that State of Pennsylvania. Unless otherwise
defined herein or in the Credit Agreement, terms used in Division 9 of the
Pennsylvania Uniform Commercial Code are used herein as therein defined.
26. Consent to Jurisdiction. All judicial proceedings brought against
any party hereto arising out of or relating to this agreement shall be brought
in any state court in Allegheny County or federal court of competent
jurisdiction in the Western District of the State of Pennsylvania, and by
execution and delivery of this agreement each such party accepts for itself and
in connection with its properties, generally and unconditionally, the exclusive
jurisdiction of the aforesaid courts and waives any defense of forum non
conveniens and irrevocably agrees to be bound by any judgment rendered thereby
in connection with this agreement.
27. Waiver of Jury Trial. Each party hereto hereby waives its respective
rights to a jury trial of any claim or cause of action based upon or arising out
of this Agreement. The scope of this waiver is intended to be all encompassing
of any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including without limitation contract
claims, tort claims, breach of duty claims, and all other common law and
statutory claims. Each party hereto acknowledges that this waiver is a material
inducement for each such party to enter into a business relationship, that each
such party has already relied on this waiver in its related future dealings.
Each party hereto further warrants and represents that each has reviewed this
waiver with its legal counsel, and that each knowingly and voluntarily waives
its jury trial rights following consultation with legal counsel. this waiver is
irrevocable, meaning that it may not be modified either orally or in writing,
and this waiver shall apply to any subsequent amendments, renewals, supplements
or modifications to this Agreement. In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.
28. Counterparts. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached
52
from multiple separate counterparts and attached to a single counterpart so that
all signature pages are physically attached to the same document.
IN WITNESS WHEREOF, Borrower and Bank have caused this Agreement to be
duly executed and delivered by their respective officers there unto duly
authorized as of the date first written above.
SUPERCONDUCTOR TECHNOLOGIES, INC.
By: /s/ M. Xxxxx Xxxxxx
Title: President, Chief Executive
Officer
Notice Address:
000 Xxxx Xxxxx, Xxxxx X
Xxxxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxx
BANK:
PNC BANK, NATIONAL ASSOCIATION
By: Xxxxxxx Xxxx
Title: Vice President
Notice Address:
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxx
53
EXHIBIT A
SECURITY AGREEMENT
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located (any and all such
equipment, parts and accessions being the "Equipment");
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above (all such
inventory, accessions and products being the "Inventory");
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, service marks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, tax
refunds, payments of insurance, rights to receive dividends, distributions,
cash, instruments and other property in respect of or exchange for pledged
shares or other equity interests, and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's books
relating to any of the foregoing (any and all such accounts, contract rights,
royalties, license rights and other forms of obligations being the "Accounts,"
and any and all such credit insurance, guaranties and security agreements being
the "Related Contracts");
(e) All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and
(g) Borrower's books relating to any of the foregoing, and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
Notwithstanding the foregoing, the security interest herein shall not
extend to and shall not include any contracts, permits or licenses to the extent
the granting of a security interest therein (i) would be contrary to applicable
law or (ii) any contracts or licenses of Borrower, or any permits of Borrower,
if and to the extent such contract, license or permit contains restrictions on
assignments and the creation of any liens, or under which such an assignment or
lien would cause a default to occur under such contract, license or permit
(other than to the extent that any such term would be rendered ineffective
pursuant to Section 9-318(4) of the Uniform Commercial Code of any relevant
jurisdiction or any other applicable law, including the Bankruptcy Code, or
principles of equity); provided that immediately upon the ineffectiveness, lapse
or termination of any such provision, the Collateral shall include, and Borrower
shall be deemed to have granted a security interest in, all such rights and
interests as if such provision
54
had never been in effect; provided further in all cases that the Intellectual
Property Collateral shall include any proceeds of the foregoing.
55
EXHIBIT D
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: SUPERCONDUCTOR TECHNOLOGIES, INC.,
a Delaware corporation
Number of Shares: 62,500
Class of Stock: Common
Initial Exercise Price: $3.00
Issue Date: June 18, 1999
Expiration Date: June 18, 2004
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, PNC BANK, NATIONAL ASSOCIATION ("Holder")
is entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth herein
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth of this Warrant.
ARTICLE 1. EXERCISE
1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 0, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
Section 0, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 0.
1.3 No Rights As Shareholder. This Warrant does not entitle Holder to
any voting rights as a shareholder of the Company prior to the exercise hereof.
1.4 Fair Market Value. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid by the Company.
In all other circumstances, such fees and expenses shall be paid by Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
56
1.6 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at Holder's expense shall execute and deliver, in lieu of this
Warrant, a new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
1.7.1 "Acquisition". For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2 Assumption of Warrant. Upon the closing of any Acquisition
the successor entity shall assume the obligations of this Warrant, and this
Warrant shall be exercisable for the same securities, cash, and property as
would be payable for the Shares issuable upon exercise of the unexercised
portion of this Warrant as if such Shares were outstanding on the record date
for the Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
1.7.3 Nonassumption. If upon the closing of any Acquisition the
successor entity does not assume the obligations of this Warrant and the Holder
has not otherwise exercised this Warrant in full, then the unexercised portion
of this Warranty shall be deemed to have been automatically converted pursuant
to Section 1.2 and thereafter the Holder shall participate in the Acquisition on
the same terms as other holders of the same class of securities of the Company.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 0
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 No Impairment. The Company shall not, by amendment of its Articles
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the
57
provisions of this Article 2 and in taking all such action as may be necessary
or appropriate to protect Holder's rights under this Article against impairment.
If the Company takes any action affecting the Shares or its common stock other
than as described above that adversely affects Holder's rights under this
Warrant, the Warrant Price shall be adjusted downward and the number of Shares
issuable upon exercise of this Warrant shall be adjusted upward in such a manner
that the aggregate Warrant Price of this Warrant is unchanged.
2.5 Fractional Shares. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the fractional interest by the fair market value of a full Share.
2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents and
warrants to the Holder as follows:
All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall use
commercially reasonable efforts to give Holder (1) at least 20 days prior
written notice of the date on which a record will be taken for such dividend,
distribution, or subscription rights (and specifying the date on which the
holders of common stock will be entitled thereto) or for determining rights to
vote, if any, in respect of the matters referred to in (c) and (d) above; (2) in
the case of the matters referred to in (c) and (d) above at least 20 days prior
written notice of the date when the same will take place (and specifying the
date on which the holders of common stock will be entitled to exchange their
common stock for securities or other property deliverable upon the occurrence of
such event); and (3) in the case of the matter referred to in (e) above, the
same notice as is given to the holders of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company
agrees that the Shares or, if the Shares are convertible into common stock of
the Company, such common stock, shall be subject to the registration rights set
forth on Exhibit A, if attached.
ARTICLE 4. MISCELLANEOUS.
58
4.1 Term; Notice of Expiration. This Warrant is exercisable, in whole or
in part, at any time and from time to time on or before the Expiration Date set
forth above.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or Holder
represents that it has complied with Rule 144(d) and (e) in reasonable detail,
the selling broker represents that it has complied with Rule 144(f), and the
Company is provided with a copy of Holder's notice of proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 0, Holder
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
4.5 Notices. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys' Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to its
principles regarding conflicts of law.
59
"COMPANY"
SUPERCONDUCTOR TECHNOLOGIES, INC.
By: /s/ M. Xxxxx Xxxxxx
---------------------------------
Name: M. Xxxxx Xxxxxx
-------------------------------
Title: President, Chief Executive
Officer
