Exhibit 10.5
EQUIPMENT AND COMMERCIAL
REVOLVING LINE OF CREDIT AGREEMENT
This Equipment and Commercial Revolving Line of Credit Agreement (the
"Agreement") is dated as of September 30, 2001 and entered into by and between
HITTITE MICROWAVE CORPORATION, a Delaware corporation with a principal place of
business at 00 Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxxxxxxx 00000 (the "BORROWER")
and CITIZENS BANK OF MASSACHUSETTS, successor by merger to USTrust (together
with its successors and assigns the "Bank"), a Massachusetts bank with a
principal place of business at 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000.
WHEREAS, on July 18, 1997, USTrust extended to the Borrower a revolving
line of credit facility in the amount of One Million ($1,000,000.00) Dollars as
set forth in a Credit Agreement dated July 18, 1997, which agreement has been
amended on various occasions, most recently by a Fourth Amendment to Credit
Agreement and Ratification of Loan Documents - Revolving Line dated February 26,
2001;
WHEREAS, on October 28, 1998, USTrust extended to the Borrower an equipment
line of credit in the amount of Seven Hundred Fifty Thousand and 00/100 Dollars
($750,000.00) for the purchase of equipment as set forth in a Credit Agreement
dated October 28, 1998, which agreement has been amended on various occasions,
most recently by a Fifth Amendment to Credit Agreement and Ratification of Loan
Documents dated August 1, 2001;
WHEREAS, the Borrower has requested that the Bank increase the revolving
line of credit to Four Million ($4,000,000.00) Dollars; (ii) extend the Maturity
Date of the revolving line of credit to May 31, 2003, and (iii) extend the
Conversion Date of the $4,000,000.00 Equipment Line of Credit from September 30,
2001 to May 31, 2002, and subject to the terms and conditions hereof, the Bank
has agreed, and, in connection with the foregoing, the parties have agreed to
consolidate the foregoing agreements into one credit agreement and re-document
the related agreements and promissory notes;
NOW THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following
terms have the following meanings (terms defined in the singular to have the
same meaning when used in the plural and vice versa):
"AFFILIATE" or "AFFILIATES" means a person or entity which is a parent,
subsidiary or brother/sister corporation of or a person or entity who or which
owns or holds a significant ownership interest in or in which a significant
ownership interest is owned or held by, the Borrower, or is, directly or
indirectly, controlled by, or is under common control with, the Borrower.
"CAPITAL LEASES" means capital leases, conditional sales contracts and
other title retention agreements relating to the purchase or acquisition of
capital assets.
"COLLATERAL" means all property which is subject or is to be subject to the
Liens granted by the Loan Documents.
"COMMITMENT" means the Bank's obligation to make Loans to the Borrower
pursuant to Sections 2.011 and 2.012 in the amount referred to therein.
"COST OF FUNDS RATE" means the per annum rate of interest for the term
selected by the Borrower which Lender is presumed to pay or is offering to pay,
for wholesale liabilities, adjusted for reserve requirements and such other
requirements as may be imposed by federal, state or local government and
regulatory agencies as determined and announced by Citizens Financial Group or
its successors.
"DEFAULT" means any of the events specified in Section 8.01, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"DIVIDENDS" means, for the applicable period, the aggregate of all amounts
paid or payable (without duplication) as dividends, distributions or other owner
withdrawals with respect to Borrower's shares of stock, whether now or hereafter
outstanding and includes any purchase, redemption or other retirement of any
shares of the Borrower's stock, directly or indirectly through a Subsidiary of
the Borrower or otherwise and includes return of capital by the Borrower to its
shareholders.
"EQUIPMENT CREDIT" shall have the meaning assigned to such term in Section
2.012.
"EVENT OF DEFAULT" means any of the events specified in Section 8.01,
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"GAAP" or "Generally Accepted Accounting Principles" shall mean generally
accepted accounting principles as defined by controlling pronouncements of the
Financial Accounting Standards Board, as amended or supplemented from time to
time.
"INDEBTEDNESS" means, as to any Person, all obligations, contingent or
otherwise, that in accordance with GAAP should be classified as liabilities upon
such Person's balance sheet or to which reference should be made by footnotes
thereto, but in any event including (1) indebtedness or liability for borrowed
money or for the deferred purchase price of property or services (including
trade obligations); (2) obligations as lessee under any Capital Leases, as such
term is defined by the Financial Accounting Standards Board; (3) current
liabilities in respect of unfunded vested benefits under any Plan as defined in
the Employee Retirement Income Security Act of 1974; (4) obligations under
letters of credit issued for the account of any Person; (5) all guaranties,
endorsements (other than for collection or deposit in the ordinary course of
business), and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any Person, or otherwise to assure a
creditor against loss; and (6) obligations secured by any Lien on property owned
by the Person, whether or not the obligations have been assumed.
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"LIEN" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any land or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing).
"LOAN OR LOANS" shall have the meaning assigned to such term in Section
2.011 and 2.012.
"LOAN DOCUMENTS" means this Agreement, the Revolving Credit Note, the
Master Equipment Promissory Note, the Equipment Installment. Note(s), the
Security Agreement, the UCC Financing Statement(s) and all other related
documents and instruments executed and delivered by Borrower to the Bank and all
of even date herewith, and all extensions and modifications thereof, and all
amendments and supplements thereto.
"NOTES" shall mean the Revolving Credit Note, the Master Equipment
Promissory Note and the Equipment Installment Notes, as defined in Sections
2.011 and 2.012.
"OBLIGATIONS" means all the Borrower's Indebtedness to the Bank and all of
the Borrower's other liabilities to the Bank of every kind, nature and
description, direct or indirect, secured or unsecured, joint, several, joint and
several, absolute or contingent, due or to become due, now existing or hereafter
arising, regardless of how such Indebtedness or liability arises or by what
agreement or instrument it may be evidenced, or whether evidenced by any
agreement or instrument, including, but not limited, to the Loans, any other
Indebtedness or liability of the Borrower under this Agreement or any other Loan
Document or under any other financing agreement between the Bank and the
Borrower, including the obligation to reimburse the Bank for any draws under
letters of credit issued or to be issued for the account of the Borrower, and
all amounts owing by the Borrower to the Bank by reason of purchases made by the
Borrower and financed by the Bank which amounts, whether or not matured and
whether or not disputed, may be charged to the Borrower's account hereunder,
with or without prior notice to the Borrower, and all obligations of the
Borrower to the Bank to perform acts or refrain from taking any action. Without
limiting the generality of the foregoing, the term "Obligations" shall include
all obligations evidenced by the Notes and by a promissory note dated March 5,
2001 in the original principal amount of $1,047,665.00; a promissory note dated
October 2, 2000 in the original principal amount of $952,335.00; a promissory
note dated May 18, 2000 in the original principal amount of $ 406,677.00; a
promissory note dated January 12, 2000 in the original principal amount of
$320,147.00; a promissory note dated June 29, 1999 in the original principal
amount of $554,000.00; a promissory note dated December 16, 1998 in the original
principal amount of $257,455.00; a promissory note dated October 28, 1998 in the
original principal amount of $740,722.49; and a promissory note dated October
28, 1998 in the original principal amount of $211,715.00. "Other Bank Documents"
shall have the meaning assigned to such term in Section 8.01.
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"PERSON" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority, or other entity of whatever nature.
"PRIME RATE" shall mean the rate of interest announced by Bank from time
to time as the Citizens Bank Prime Rate, it being understood that such rate
is a reference rate and not necessarily the lowest fate of interest charged
by the Bank. The rate of interest payable hereunder shall be changed
effective as of that day on which a change in the Prime Rate becomes
effective. In the event the Bank ceases to publish a Prime Rate, then the
term Prime Rate shall mean the Bank's prime rate or then announced base rate,
which in each case most closely approximates the Prime Rate. Interest will be
computed on the basis of a 360-day year for the actual number of days elapsed.
"REVOLVING CREDIT" shall have the meaning assigned to such term in Section
2.011.
"REVOLVING CREDIT NOTE" shall have the meaning assigned to such term in
Section 2.012.
"REVOLVING PERIOD" shall have the meaning assigned to such term in
Section 2.03.
"SECURITY AGREEMENT" shall have the meaning assigned to such term in
Section 3.01.
"SUBORDINATED DEBT" means all indebtedness of the Borrower to
shareholders of the Borrower which has been subordinated to the Obligations
by subordination agreements prepared by or otherwise approved by the Bank in
writing.
"SUBSIDIARY" or "SUBSIDIARIES" means, as to any Person, a corporation of
which shares of stock having ordinary voting power (other than stock having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation are at the time
owned, or the management of which is otherwise controlled, directly, or
indirectly through one or more intermediaries, or both, by such Person.
"TANGIBLE NET WORTH" means the excess of total assets over total
liabilities, total assets and total liabilities each to be determined in
accordance with Generally Accepted Accounting Principles consistent with those
applied in the preparation of the financial statements referred to in Sections
5.08(1) and (2) excluding, however, from the determination of total assets all
assets which would be classified as intangible assets under generally accepted
accounting principles, including, without limitation, goodwill, patents,
trademarks, trade names, copyrights, franchises, and intangibles, and excluding
the value of leasehold improvements and other leasehold assets.
"TERMINATION DATE" in the case of the Revolving Credit means May 31, 2003,
unless extended as provided hereafter. The Bank may extend the term of the
Revolving Credit for periods of one year, commencing on June 1, 2003 and on the
same day of each year thereafter. It shall, however, be in the sole discretion
of the Bank as to whether to grant any such extension and the failure of the
Bank to do so shall be based solely on such reasons as the Bank deems proper.
"TOTAL LIABILITIES" means total Indebtedness determined in accordance with
Generally Accepted Accounting Principles (GAAP).
SECTION 1.02. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with that
applied in the
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preparation of the financial statements referred to in Section 4.04, and all
financial data submitted pursuant to this Agreement shall be prepared in
accordance with such principles, except interim financial data may be subject to
year-end adjustments.
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
SECTION 2.011. REVOLVING CREDIT. The Bank shall, from time to time,
prior to the Termination Date, make loans to the Borrower under and pursuant to
the terms of the Revolving Credit Note of even date (the "Revolving Credit
Note"), as it may be extended or renewed, substituted or replaced, in an
aggregate amount not to exceed Four Million ($4,000,000.00) Dollars (the
"Revolving Credit"). The loans made pursuant to this section and Section 2.012
shall be known as the "Loan" or "Loans", as the context requires or permits.
SECTION 2.012. EQUIPMENT CREDIT. The Bank shall, from time to time, prior
to May 31, 2002 (the "Conversion Date"), make equipment loans to the Borrower
("Equipment Credit") in an aggregate amount not to exceed Four Million
($4,000,000.00) Dollars, with the Equipment Credit evidenced by a Master
Equipment Promissory Note. Each advance under the Equipment Credit shall reduce
the availability under the Master Equipment Promissory Note. Not later than the
Conversion Date (or earlier, for all or any portion of outstanding advances, at
the Borrower's election), the remaining outstanding balance of the Master
Equipment Promissory Note shall termed out for a period of not more than Sixty
(60) months, said term to be selected by the Borrower. Advances which are termed
out shall be evidenced by a separate commercial promissory note (each an
"Equipment Installment Note" and collectively the "Equipment Installment Notes")
in a form substantially identical to Exhibit A-1. Amounts borrowed prior to the
Conversion Date which have not been termed out prior to the Conversion Date and
which have been repaid prior to the Conversion Date shall be available for
reborrowing up to the Conversion Date, but not thereafter.
The Borrower shall be entitled to borrow up to 80% percent of the retail
invoice cost of new equipment purchased with the Loans pursuant to the Equipment
Credit, with the Bank to have a first lien on all such equipment.
SECTION 2.02. NOTICE AND MANNER OF BORROWING. The Borrower shall give
the Bank notice prior to 12:00 p.m. with respect to the Revolving Credit and
with respect to the Equipment Credit two (2) Business Days written notice either
in accordance with the terms hereof or via facsimile (effective upon receipt) of
a request for any Loan.
SECTION 2.03. INTEREST.
(a) The Borrower shall pay interest to the Bank on the outstanding
and unpaid principal amount of the Loans made under the Revolving Credit, at a
floating rate per annum equal to the aggregate of (i) Prime Rate minus (ii) one
half (0.50 %) Percent. Any principal amount not paid when due (at maturity, by
acceleration, or otherwise) shall bear interest thereafter until paid at a rate
equal to four (4%) percentage points greater than the rate which would otherwise
be applicable (the "DEFAULT RATE").
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(b) The Borrower shall pay interest only for advances made under
the Equipment Credit for the period prior to the Conversion Date, or, at such
earlier time as the Borrower elects, if Borrower elects to term out all or a
portion of the advances under the Equipment Credit prior to the Conversion Date.
Effective on the Conversion Date, or earlier, for such portions of the Equipment
Credit as the Borrower elects to term out earlier, the outstanding balance shall
be repaid over up to sixty (60) months, at an interest rate, at the election of
the Borrower, of either (1) a floating rate of interest equal to the Prime Rate
in effect from time to time (the "Prime Rate Option"); or (ii) a fixed rate for
the term of the Equipment Installment Note equal to the aggregate of (i) the
Bank's Cost of Funds Rate plus (ii) 200 basis points (the "COST OF FUNDS
OPTION").
After acceleration or maturity, interest shall accrue and be payable at a
rate of interest equal to four (4%) percent higher than would otherwise be in
effect for each and all of the Notes. Interest shall be calculated on a 360 day
year for the actual days elapsed.
SECTION 2.04. BORROWING BASE. The term "Borrowing Base" as used herein
shall mean the aggregate of:
(i) Eighty (80%) percent of the unpaid face amount of
Qualified Accounts (as defined below) (the product of the
aforesaid calculation being the "Eligible Account
Availability"); and
(ii) the lesser of (1) Fifty (50%) percent of the lower of cost
or market value of all Eligible Inventory (as defined
below), not to exceed, in any event, $2,000,000.00; or (2)
Fifty (50%) of the Eligible Account Availability
("Eligible Inventory Availability").
By way of example, if Qualified Accounts are $2,000,000.00 and Eligible
Inventory is $8,000,000.00, the Borrower, would have Eligible Account
Availability of $1,600,000.00 (80% of $2,000,000.00) and Eligible Inventory
Availability of $800,000.00 (50% of $1,600,000.00) for a Borrowing Base of
$2,400,000.00.
The aforesaid advance rates are subject to review and modification upon
determination by the Bank, after its field examination(s), that the quality of
the accounts or Eligible Inventory require, in the Bank's sole discretion,
adjustment.
Whenever the outstanding principal balance of all loans under the Revolving
Credit exceed the Borrowing Base, Borrower shall immediately pay to Bank the
excess of the outstanding principal balance of the Revolving Credit loans over
the Borrowing Base.
SECTION 2.05. REVOLVING CREDIT LIMIT. The term "Revolving Credit Limit"
as used herein shall mean an amount equal to the lesser of (i) Four Million
($4,000,000.00) Dollars or (ii) the Borrowing Base.
SECTION 2.06. PAYMENT. Borrower hereby authorizes and directs Bank, in
Bank's sole discretion (provided, however, Bank shall have no obligation to do
so) to charge any of Borrower's accounts under the control of Bank if the
Borrower has failed to timely pay any
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amount due hereunder or after the occurrence of an Event of Default or demand.
Bank shall promptly notify Borrower of any such charges or applications.
SECTION 2.07. PREPAYMENTS. The Borrower may at anytime prepay without
premium or penalty while a variable rate of interest is in effect and shall pay
such prepayment fees as is provided in the Notes when a fixed rate is in effect.
SECTION 2.08. DEFINITION OF QUALIFIED ACCOUNT. The term "Qualified
Account", as used herein, means an account, as such term is defined by the
Massachusetts UCC (hereinafter an "Account") owing to Borrower which met the
following specifications at the time it came into existence and continues to
meet the same until it is collected in full:
(a) The Account is not more than sixty (60) days past due nor more
than ninety (90) days past invoice date;
(b) The Account arose from the performance of services or an
outright sale of goods by Borrower, such goods have been shipped to the account
debtor, and Borrower has possession of, or has delivered to Bank, shipping and
delivery receipts evidencing such shipment;
(c) The Account is not subject to any prior assignment, claim,
lien, or security interest, and Borrower will not make any further assignment
thereof or create any further security interest therein, nor permit Borrower's
rights therein to be reached by attachment, levy, garnishment or other judicial
process;
(d) The Account is net of set-offs, credits, allowances or
adjustments by the account debtor, and the account debtor has not disputed its
liability thereon and has not returned any of the goods from the sale of which
the Account arose;
(e) The Account arose in the ordinary course of Borrower's business
and did not arise from the performance of services or a sale of goods to a
supplier or employee of the Borrower;
(f) No notice of bankruptcy or insolvency of the account debtor has
been received by or is known to the Borrower;
(g) The Account is not owed by an account debtor which is a foreign
corporation or whose principal place of business is outside the United States of
America unless FCIA insured or backed by a letter of credit, except in the
Bank's sole and absolute discretion;
(h) The Account is not owed by an entity which is a parent,
brother/sister, subsidiary or affiliate of Borrower;
(i) The Account is not evidenced by a promissory note, unless such
note has been delivered to the Bank;
(j) The Account did not arise out of any sale made on a xxxx and
hold, dating or delayed shipment basis;
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(k) The Account is not owed by a governmental agency or entity of
any kind; or
(l) Bank, in accordance with its credit policies, has deemed the
Account to be otherwise unacceptable for any reason;
PROVIDED THAT if, at any time Twenty (20%) percent or more of the aggregate
amount of the Accounts due from any account debtor are more than ninety (90)
days past due or more than one hundred twenty (120) days past the invoice date,
none of the Accounts (then existing or hereafter or thereafter arising) due from
such account debtor shall be deemed to be Qualified Accounts until such time as
less than Twenty (20%) percent of the Accounts due from such account debtor are
(as a result of actual payments received thereon) more than ninety (90) days
past due more or one hundred twenty (120) days past the invoice date. Accounts
payable by Borrower to an account debtor shall be netted against Accounts due
from such account debtor and the difference (if positive) shall constitute
Qualified Accounts from such account debtor for purposes of determining the
Borrowing Base (notwithstanding paragraph (d) above). Characterization of any
Account due from an account debtor as a Qualified Account shall not be deemed a
determination by Bank as to its actual value nor in any way obligate Bank to
accept any Account subsequently arising from such account debtor to be, or to
continue to deem such Account to be, a Qualified Account. It is Borrower's
responsibility to determine the credit-worthiness of account debtors and all
risks concerning the same and collection of Accounts are with Borrower; and all
Accounts whether or not Qualified Accounts constitute Collateral.
The Bank, in its sole discretion, may, on a case by case basis, by written
notice, waive one or more of the specifications enumerated above required of a
Qualified Account, provided however, a waiver of a specification or requirement
in one instance shall not be deemed a waiver of any other specification nor a
waiver of said specification or requirement on any other occasion.
SECTION 2.10. ELIGIBLE INVENTORY. The term "Eligible Inventory", as used
herein, means Borrower's raw materials and finished goods which are initially
and at all times until sold: new and unused (except, with Bank's written
approval, used equipment held for sale or lease), in first-class condition,
merchantable and saleable through normal trade channels; at a location which has
been identified in writing to Bank; subject to a perfected security interest in
favor of Bank; owned by Borrower free and clear of any lien except in favor of
Bank; not held by any distributor; not obsolete; not scrap, waste, defective
goods and the like; have been produced by Borrower in accordance with the
Federal Fair Labor Standards Act of 1938, as amended, and all rules, regulations
and orders promulgated thereunder; not stored with a bailee, warehouseman or
similar party unless Bank has given its prior written consent thereto and
Borrower has caused each such bailee, warehouseman or similar party to issue and
deliver to Bank warehouse receipts in Bank's name for such Inventory; and have
not been designated by Bank, in accordance with its normal credit policies, as
unacceptable for any reason by notice to Borrower. No work in process shall be
included in Eligible Inventory. Inventory that is being shipped overseas and is
"on the water" will be deemed Eligible Inventory provided that, prior to
shipment of such inventory, the Bank is furnished with the specifics of such
inventory and evidence that property and casualty insurance is in place for such
inventory in such form as the Bank reasonably requires and names the Bank as
loss payee.
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SECTION 2.11. BANK'S REPORTS. After the end of each month, Bank may
render to Borrower a statement regarding Borrower's loan account under the
Revolving Credit with Bank hereunder. Each statement and the information
contained therein shall be considered correct and to have been accepted by
Borrower and, in the absence of manifest error, shall be conclusively binding
upon Borrower in respect of all charges, debits and credits of whatsoever nature
contained therein under or pursuant to this Agreement, and the closing balance
shown therein, unless Borrower notifies Bank in writing of any discrepancy
within twenty (20) days from the mailing by Bank to Borrower of any such monthly
statement.
SECTION 2.12. LETTERS OF CREDIT. At the request of the Borrower, and
upon the execution of letter of credit documentation satisfactory to Bank, Bank,
within the limits of the Borrowing Base, as then computed and also within the
limits of the Revolving Credit Limit shall issue letters of credit and/or
acceptances from time to time for the account of the Borrower (hereinafter
collectively "Letter(s) of Credit"). The Letters of Credit shall be on terms
mutually acceptable to Bank and the Borrower. A loan in an amount equal to any
amount paid by Bank under a Letter of Credit shall be deemed made to Borrower,
without request therefor, immediately upon any payment by Bank on such Letter of
Credit. In connection with the issuance of any Letter of Credit, Borrower shall
pay to Bank a percentage of the face amount of any Letter of Credit according to
the fee schedule then in effect at Bank, plus transaction fees at Bank's
customary rates, and all other normal and customary fees charged by Bank.
Borrower hereby authorizes and directs Bank, in Bank's sole discretion
(provided, however, Bank shall have no obligation to do so) to pay all such fees
and costs as the same become due and payable and to treat the same as a loan to
Borrower, which shall be added to Borrower's loan balance pursuant to this
Agreement. For purposes of computing the Revolving Credit, all Letters of Credit
and one hundred (100%) percent of acceptances shall be deemed to be Loans.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01. CONDITION PRECEDENT TO LOANS. The agreement of the Bank
(at its discretion) to make the initial Loans (and all subsequent Loans) to the
Borrower is subject to the condition precedent that the Bank shall have received
on or before the day of such Loan each of the following in form and substance
satisfactory to the Bank and its counsel:
(1) NOTE(S). The Note(s) executed and delivered by the Borrower;
(2) SECURITY AGREEMENT. A Security Agreement (All Assets) duly executed by
the Borrower (the "Security Agreement"), together with acknowledgment
copies of the Financing Statements (UCC-1) duly filed under the
Uniform Commercial Code from all jurisdictions necessary or, in the
opinion of the Bank, desirable to perfect a first priority security
interest and evidence satisfactory to the Bank indicating that no
party claims an interest in any of the collateral identified in the
Security Agreement.
(3) OTHER DOCUMENTS. Such other and further documents, agreements and
instruments as the Bank or Bank's counsel deems appropriate or
necessary.
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SECTION 3.02. CONDITIONS PRECEDENT TO ALL LOANS. The agreement of the
Bank (at its discretion) to make each Loan (including the initial Loan) shall be
subject to the further conditions precedent that on the date of such Loan:
(1) The following statements shall be true and upon request by the Bank,
the Bank shall have received a certificate signed by duly authorized
officers of the Borrower, dated the date of such Loan, stating that:
(a) The Borrower's representations and warranties contained in
Article IV of this Agreement and in the Security Agreement and
the other Loan Documents are correct on and as of the date of
such Loan as though made on and as of such date;
(b) No Default or Event of Default has occurred and is continuing, or
would result from such Loan or other event has occurred which
would constitute an Event of Default but for the requirement that
notice be given or time elapse or both; and
(c) There has been no material adverse change in the assets,
liabilities, financial condition or business of the Borrower
since the date of their, financial statements most recently
delivered to the Bank.
(2) Each request for a Loan under the Equipment Credit shall be
accompanied by a xxxx of sale, certificate of title or other
certificate of ownership (including the executed application to add a
lien holder), if applicable, an executed Installment Note, a separate
security agreement, to the extent deemed necessary or appropriate by
the Bank, and UCC-1 financing statements, if requested by the Bank,
and such other documents as may reasonably be required by Bank or its
counsel (including executed application(s) to add the Bank as a lien
holder in the case of motor vehicles; and
(3) The Bank shall have received such other approvals, opinions,
assurances or documents as the Bank may reasonably request from the
Borrower.
ARTICLE IV
REPRESENTATION AND WARRANTIES
The Borrower represents and warrants to the Bank that:
SECTION 4.01. INCORPORATION, GOOD STANDING, AND DUE QUALIFICATION. The
Borrower is a corporation duly incorporated, validly existing, and in good
standing under the laws of The Commonwealth of Massachusetts; has the corporate
power and authority to own its assets and to transact the business in which it
is now engaged or proposed to be engaged in; and is duly qualified as a foreign
corporation and in good standing under the laws of each other jurisdiction in
which such qualification is required.
SECTION 4.02. CORPORATE POWER AND AUTHORITY. The execution, delivery,
and performance by the Borrower of the Loan Documents to which it is a party
have been duly
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authorized by all necessary corporate action and do not and will not (1) require
any consent or approval of the stockholders of such corporation; (2) contravene
such corporation's charter or bylaws; (3) violate any provision of any law,
rule, regulation (including, without limitation, Regulation U of the Board of
Governors of the Federal Reserve System), order, writ, judgment, injunction,
decree, determination, or award presently in effect having applicability to such
corporation; (4) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease, or
instrument to which such corporation is a party or by which it or its properties
may be bound or affected; (5) result in, or require, the creation or imposition
of any Lien upon or with respect to any of the properties now owned or hereafter
acquired by such corporation, except as provided in this Agreement; and (6)
cause such corporation to be in default under any such law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award or any such
indenture, agreement, lease, or instrument.
SECTION 4.03. LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and each
of the other Loan Documents when delivered under this Agreement will be, legal,
valid, and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency, and other
similar laws affecting creditors' rights generally.
SECTION 4.04. FINANCIAL STATEMENTS OF THE BORROWER. The financial
statements of the Borrower for the fiscal year then ended, and the accompanying
footnotes, and the interim balance sheet and the related statement of income and
retained earnings for the period then ended, copies of which have been furnished
to the Bank, are complete and correct and fairly present the financial condition
of the Borrower as at such dates and the results of the operations of the
Borrower for the periods covered by such statements, all in accordance with GAAP
consistently applied (subject to year-end adjustments in the case of the interim
financial statements), and since the date through which the financial statements
cover, there has been no material adverse change in the condition (financial or
otherwise), business, or operations of the Borrower. There are no liabilities of
the Borrower, fixed or contingent, which are material but are not reflected in
the financial statements or in the notes thereto, other than liabilities arising
in the ordinary course of business. No information, exhibit, or report furnished
by the Borrower to the Bank in connection with the negotiation of this Agreement
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statement contained therein not materially
misleading.
SECTION 4.05. OTHER AGREEMENTS. The Borrower is not a party to any
indenture, loan, or credit agreement, or to any lease or other agreement or
instrument, or subject to any charter or corporate restriction which could have
a material adverse effect on the business, properties, assets, operations, or
conditions, financial or otherwise, of the Borrower, or the ability of the
Borrower to carry out its obligations under the Loan Documents to which it is a
party. The Borrower is not in default in any respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which it is
a party.
SECTION 4.06. LITIGATION. There is no pending or, to the Borrowers
knowledge, threatened, action or proceeding against or affecting the Borrower
before any court,
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governmental agency, or arbitrator which may, in any one case or in the
aggregate, materially adversely affect the financial condition, operations,
properties, or business of the Borrower or the ability of the Borrower to
perform each of its obligations under the Loan Documents.
SECTION 4.07. NO DEFAULTS ON OUTSTANDING JUDGMENTS OR ORDERS. The
Borrower has satisfied all judgments and is not in default with respect to any
judgment, writ, injunction, decree, rule, or regulation of any court,
arbitrator, or federal, state, municipal, or other governmental authority,
commission, board, bureau, agency, or instrumentality, domestic or foreign.
SECTION 4.08. OWNERSHIP AND LIENS. The Borrower has title to, or valid
leasehold interests in, all of its properties and assets, real and personal,
including the properties and assets and leasehold interests reflected and the
financial statements referred to in Section 4.04 (other than any properties or
assets disposed of in the ordinary course of business), and none of the
properties and assets owned by the Borrower and none of its interests are
subject to any Lien, except such as may be permitted pursuant to Section 6.01 of
this Agreement.
SECTION 4.09. SUBSIDIARIES AND OWNERSHIP OF STOCK. There is currently
one subsidiaries as set forth on Schedule 4.09. Except for said subsidiary, the
Borrower has no investments in the stock or securities of any other corporation,
firm, trust or other entity. The Borrower will promptly give the Bank notice of
the formation or acquisition of any additional subsidiaries
SECTION 4.10. OPERATION OF BUSINESS. The Borrower possesses all
licenses, permits, franchises, patents, copyrights, trademarks, and trade names,
or rights thereto, to conduct its business substantially now as conducted and as
presently proposed to be conducted, and the Borrower is not in violation of any
rights of others with respect to any of the foregoing.
SECTION 4.11. TAXES. The Borrower has filed all income tax returns,
excise tax returns and other tax returns (federal, state, and local) required to
be filed and have paid all taxes, assessments, and governmental charges and
levies thereon to be due, including interest and penalties. To the best of
Borrower's knowledge, no audit or investigation is presently being conducted
with regard to any tax return or tax obligation of the Borrower.
SECTION 4.12. ERISA. No employee pension benefit plan or other plan
(within the meaning of Section 3(2) of the Employees Retirement Income Security
Act of 1974, as amended ("ERISA")) which is or was sponsored at any time since
June 30, 1984, by the Borrower or any member of a controlled group of
corporations within the meaning of Section 414(b) of the Internal Revenue Code
of 1954, as amended (the "Code"), or any member of a group of commonly
controlled trades or businesses (whether or not incorporated) within the meaning
of Section 414(c) of the Code of which the Borrower is a member ("Plan"): (i)
has incurred an "accumulated funding deficiency" (within the meaning of Section
302(a)(2) of ERISA or which could result in a liability of Borrower (which
liability could materially affect the financial condition Of the Borrower) under
Section 409 of ERISA or Section 4975 of the Code or pursuant to any agreement or
statute with respect to liabilities incurred by any person under such sections.
No material liability to the Pension Benefit Guaranty Corporation ("PBGC"), to a
Plan, or to any participant in or beneficiary of a Plan has been
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or, to the present knowledge of Borrower, is expected to be incurred with
respect to any Plan by the Borrower and there has been no event or conditions
which presents a risk of termination of any Plan by PBGC.
SECTION 4.13. HAZARDOUS MATERIAL. Neither the Borrower nor any person
for whose conduct the Borrower is legally responsible has ever:
(a) owned, occupied, or operated a site or vessel on which any
hazardous materials or oil was or is stored, transported, or
disposed of (the terms site, vessel, and hazardous materials or
oil respectively being used in this Agreement shall be deemed to
have the meanings given those terms in M.G.L. c. 21E), except in
compliance with all laws, ordinances and regulations pertaining
thereto; or
(b) directly or indirectly transported, or arranged for the transport
of any hazardous materials or oil, except in compliance with all
laws, ordinances and regulations pertaining thereto; or
(c) caused or been legally responsible for any release or threat of
release of any hazardous materials or oil; or
(d) received notification from any federal, state, or other
governmental authority of any potential or known release or
threat of release of any hazardous material or oil from any site
or vessel owned, occupied, or operated by the Borrower or any
person for whose conduct the Borrower is responsible, and/or of
the occurrence of any expense or loss by such governmental
entity.
SECTION 4.14. LABOR DISPUTES AND ACTS OF GOD. Neither the business nor
the properties of the Borrower have been affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy, or other casualty
(whether or not covered by insurance) materially and adversely affecting such
business or properties or the operation of the Borrower.
SECTION 4.15. COMPLIANCE. The Borrower has not violated, nor is the
Borrower in violation of, any applicable law or regulation, which violation
would have a material and adverse effect on the business or operations of the
Borrower or any order, judgment, or decree. The Borrower is not a party to any
contract or other agreement, or subject to any restrictions under its charter
documents, by-laws or other corporate instrument, or subject to any order,
judgment, rule, regulation, or decree of any court or governmental authority,
which materially and adversely affects its business, properties, assets or
financial condition or which restricts or otherwise limits its incurring of the
Loan or its performance and observance of its Obligations. Neither the execution
and delivery by the Borrower nor the compliance by Borrower with the terms and
conditions of this Agreement, or any Loan Document to which the Borrower is a
party, conflicts or will conflict with constitutes or will constitute a default
under, or results or will result in any violation if, the charter documents or
By-laws of the Borrower, any award of any arbitrator, any law, any order,
judgment, rule, regulation or decree of any court or governmental
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authority, or any agreement or instrument to which the Borrower is a party or
any of its property is subject; nor does the same result nor will it result in
the creation of imposition of any Lien upon any of its property except the Liens
created by this Agreement or any other Loan Document.
SECTION 4.16. NO CHANGE OF NAME. The Borrower has never changed its
name.
SECTION 4.17. FEDERAL / STATE CONTRACTS. The Borrower has no material
contracts or orders to provide goods or services to, and there are no material
account receivables due to the Borrower from the United States government or any
state government or any subdivision or agency thereof.
SECTION 4.18. OFFICERS, DIRECTORS AND SHAREHOLDERS. The officers,
directors and stockholders of the Borrower are as set forth on Schedule 4.18
annexed hereto and upon any changes or additions, the Borrower will promptly
notify the Bank in writing.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as the Notes or any of them shall remain unpaid or the Bank shall
have any commitment under this Agreement, the Borrower will:
SECTION 5.01. MAINTENANCE OF EXISTENCE. Preserve and maintain its
corporate existence and good standing in the jurisdiction of its incorporation,
and qualify and remain qualified as a foreign corporation in each jurisdiction
in which such qualification is required.
SECTION 5.02. MAINTENANCE OF RECORDS. Keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Borrower,
including complete records of all accounts (as defined in the Massachusetts
Uniform Commercial Code) of the Borrower.
SECTION 5.03. MAINTENANCE OF PROPERTIES/FRANCHISES. Maintain, keep, and
preserve all of its properties (tangible and intangible) necessary or useful in
the proper conduct of its business in good working order and condition, ordinary
wear and tear excepted. Borrower shall maintain in full force and effect all
rights, franchises, patents, licenses, permits and privileges necessary for the
proper conduct of its business.
SECTION 5.04. CONDUCT OF BUSINESS. Continue, and cause each Subsidiary
and Affiliate to continue, to engage in an efficient and economical manner in a
business of the same general type as conducted by it on the date of this
Agreement.
SECTION 5.05. MAINTENANCE OF INSURANCE. Maintain insurance with
financially sound and reputable insurance companies or associations in such
amounts and covering such risks as the Bank shall require and as are usually
carved by companies engaged in the same or a similar business and similarly
situated, which insurance may provide for reasonable deductibility from coverage
thereof.
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SECTION 5.06. COMPLIANCE WITH LAWS. Comply in all material respects with
applicable laws, rules, regulations, and orders, such compliance to include,
without limitation, paying before the same become delinquent all taxes,
assessments, and governmental charges imposed upon it or upon its property,
noncompliance with which would have a material and adverse effect on the
business and operations of the Borrower.
SECTION 5.07. RIGHT OF INSPECTION. At any reasonable time and from time
to time, upon at least three business days notice to the Borrower (or one day
after an Event of Default, while such Event of Default is continuing), permit
the Bank or any agent or representative thereof to examine and make copies of
and abstracts from the records and books of account of, and visit the properties
of, the Borrower and any Subsidiary or Affiliate, and to discuss the affairs,
finances, and accounts of the Borrower and any Subsidiary or Affiliate with any
of their respective officers and directors and the Borrower's or an Affiliate's
independent accountants. In addition to the foregoing, from time to time, as
deemed necessary by the Bank, in the Bank's discretion, field examinations by
the Bank's auditors may be conducted, and the actual, reasonable costs and
expenses of the such field examinations shall be borne by the Borrower;
provided, however, prior to an Event of Default, the Borrower shall not be
required to pay for more than one field examination in any calendar year. After
an Event of Default, the Bank may conduct such field examinations at such
frequency as the Bank, in its reasonable discretion, deems necessary or
appropriate with the Borrower to pay for all actual, reasonable costs and
expenses of all such field examinations.
SECTION 5.08. REPORTING REQUIREMENTS. Furnish to the Bank:
(1) QUARTERLY FINANCIAL STATEMENTS. (i) As soon as available and, in any
event, within forty-five (45) days after the end of every fiscal
quarter, company prepared balance sheets and income statements,
noting, without limitation, all assets and liabilities, of the
Borrower as of the end of such quarter and retained earnings of the
Borrower, which in the case of each quarter's financial statements
shall be certified by the President or Treasurer of the Borrower as
being true, accurate and complete and fairly presenting the financial
condition of the Borrower;
(2) ANNUAL FINANCIAL STATEMENTS. As soon as available and, in any event,
within one hundred. twenty (120) days after the end of each fiscal
year of the Borrower, the financial statements of the Borrower,
including, without limitation, a balance sheet of the Borrower as of
the end of such fiscal year and a statement of income and retained
earnings of the Borrower for such fiscal year, and a statement of
change in financial position of the Borrower for such fiscal year, all
in reasonable detail and stating in comparative form the respective
figures for the corresponding date and period in the prior fiscal year
prepared in accordance with GAAP consistently applied and audited by
independent certified public accountants selected by the Borrower and
approved by the Bank, which approval shall not be unreasonably
withheld, and certified by the President or Treasurer of the Borrower.
Copies of all management reports furnished to the Borrower from the
Borrower's accountants shall also be furnished to the Bank;
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(3) QUARTERLY COMPLIANCE CERTIFICATES. Within fifteen (15) days after the
end of each quarter, a Covenant Compliance Certificate in the form of
Exhibit 5.08(3) or such other form as the Bank requires.
(4) RECEIVABLES AGINGS. Within forty-five (45) days after the end of each
quarter, receivables agings in such form as the Bank reasonably
requests.
(5) BORROWING BASE CERTIFICATES. Within five (5) days after the end of
each month during which any sums are outstanding under Revolving
Credit, a Borrowing Base certificate in the form of Exhibit 5.08(5) or
such other form as the Bank requires.
(6) NOTICE OF LITIGATION. Promptly after the commencement thereof, notice
of all actions, suits, and proceedings before any court or
governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting the Borrower or any
Subsidiary or Affiliate, which, if determined adversely to the
Borrower or any Subsidiary or Affiliate, could have a material adverse
effect on the financial condition, properties, or operations of the
Borrower or any Subsidiary or Affiliate. Any suit seeking in excess of
One Hundred Thousand Dollars ($100,000.00) shall be deemed material
for notice purposes;
(7) NOTICE OF DEFAULTS AND EVENTS OF DEFAULT. As soon as possible and in
any event within ten (10) days after the occurrence of each Default or
Event of Default, a written notice setting forth the details of such
Default or Event of Default and the action which is proposed to be
taken by the Borrower with respect thereto;
(8) QUARTERLY BACKLOG SCHEDULE. Within fifteen (15) days after the end of
each quarter, a Backlog Schedule in such form as the Bank requires;
and
(9) GENERAL INFORMATION. Such other information respecting the condition
or operations, financial or otherwise of the Borrower and any
Subsidiary or Affiliate, as the Bank may, from time to time,
reasonably request, including, without limitation, annually, current
equipment lists, financial statements and tax returns.
SECTION 5.09. DEFERRED COMPENSATION PAYMENTS. Pay or cause to be paid
when due all amounts necessary to fund in accordance with their terms all such
deferred compensation plans, whether now in existence or hereafter created, and
the Borrower will not withdraw from participation in, permit the termination or
partial termination of, or permit the occurrence of any other event with respect
to, any deferred compensation plan maintained for the benefit of its employees
under circumstances that could result in liability to the Pension Guaranty
Corporation, or any of its successors or assigns, or to the entity which
provides funds for such deferred compensation plan.
SECTION 5.10. ADDITIONAL DOCUMENTS. From time to time, execute and
deliver to the Bank all such other and further instruments or documents and take
or cause to be taken all such other and further action as the Bank may
reasonably request in order to effect and confirm or vest more securely in the
Bank all rights contemplated in this Agreement.
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SECTION 5.11. USE OF PROCEEDS. The proceeds of the Revolving Credit are
to be used only for working capital needs of the Borrower. The proceeds of the
Equipment Loan are to be used only for the equipment needs of the Borrower.
SECTION 5.12. BANK ACCOUNTS. During the period any Loan is
outstanding, the Borrower shall maintain all primary bank and operating
accounts, (including checking accounts) with the Bank.
ARTICLE VI
NEGATIVE COVENANTS
So long as the Notes, or any of them, shall remain unpaid or the Bank shall
have any commitment under this Agreement, the Borrower will not:
SECTION 6.01. LIENS. Create, incur, assume, or suffer to exist, or
permit any Subsidiary or Affiliate to create, incur, assume, or suffer to exist,
any Lien upon or with respect to any of its properties, now owned or hereafter
acquired, except:
(1) Liens in favor of the Bank;
(2) Liens for taxes or assessments or other government charges or levies
if not yet due and payable or, if due and payable, if they are being
contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained.
(3) Purchase money security interests in equipment financed by vendors,
provided that the aggregate of all purchase money financings shall not
exceed Two Million ($2,000,000.00) Dollars.
(4) Deposits or pledges made in connection with, or to secure payment of,
workmen's compensation, unemployment insurance, old age pensions or
other social security; liens in respect of judgments or awards to the
extent such judgments or awards are otherwise permitted hereunder;
(5) Encumbrances in the nature of zoning restrictions, easements, and
rights or restrictions of record on the use of real property which do
not materially detract from the value of such property or impair its
use in the business of the owner or lessee;
(6) Liens (other than judgments and awards) created by or resulting from
any litigation or legal proceeding, provided the execution or other
enforcement thereof is effectively stayed and the claims secured
thereby are being actively contested in good faith by appropriate
proceedings satisfactory to the Bank; and
(7) Liens arising by operation of law to secure landlords, lessors or
renters under leases or rental agreements made in the ordinary course
of business and confined to the premises or property rented.
- 17 -
SECTION 6.02. MERGERS, ETC. WITHOUT THE CONSENT OF THE BANK. Merge or
consolidate with, or sell, assign, lease, or otherwise dispose of (whether in
one transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to any Person, or acquire all
or substantially all of the assets or the business of any Person, or permit any
Subsidiary or Affiliate to do so, except that (1) any Subsidiary or Affiliate
may merge into or transfer assets to the Borrower, and (2) any Subsidiary or
Affiliate may merge into or consolidate with or transfer assets to any other
Subsidiary or Affiliate.
SECTION 6.03. ADDITIONAL INDEBTEDNESS. Except (1) for indebtedness
secured by the liens permitted under Section 6.01; and (2) indebtedness to
vendors from capitalized leases and/or to suppliers of inventory, which
indebtedness shall not exceed One Million ($1,000,000.00) Dollars in the
aggregate, issue evidence of Indebtedness or create, assume, become contingently
liable for, or suffer to exist Indebtedness in addition to indebtedness to the
Bank; provided, however, that the Borrower may incur trade payables which are
incurred or arise in the ordinary course of the Borrower's business.
SECTION 6.04. SECURITY INTERESTS. Notwithstanding anything to the
contrary contained herein, grant to any party, other than the Bank, a security
interest in any assets of the Borrower, and/or any Affiliate or Subsidiary,
except as permitted in 6.01.
SECTION 6.05. GUARANTIES, ETC. Assume, guarantee, endorse, or otherwise
be or become directly or contingently responsible or liable, or permit any
Subsidiary to assume, guarantee, endorse, or otherwise be: or become directly or
contingently responsible or liable (including, but not limited to, an agreement
to purchase any obligation, stock, assets, goods, or services, or to supply or
advance any funds, assets, goods, or services, or to maintain or cause such
Person to maintain a minimum working capital or net worth, or otherwise to
assure the creditors of any Person against loss) for obligations of any Person,
except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.
SECTION 6.06. TRANSACTION WITH AFFILIATES. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or,
the rendering of any service, with any Affiliate or Subsidiary, or permit any
Subsidiary or Affiliate to enter into any transaction, including, without
limitation, the purchase, sale, or exchange of property or the rendering of any
service, with any Affiliate or Subsidiary, except in the ordinary course of and
pursuant to the reasonable requirements of the Borrower's or such Subsidiary's
or Affiliate's business and upon fair and reasonable terms no less favorable to
the Borrower or such Subsidiary or Affiliate than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate or Subsidiary.
SECTION 6.07. DIVIDENDS. Declare or pay any Dividends to shareholders;
or purchase, redeem, retire,. or otherwise acquire for value any of its capital
stock now or hereafter outstanding; or make any distribution of assets to its
shareholders as such whether in cash, assets, or obligations of the Borrower; or
allocate or otherwise set apart any sum for the payment of any dividend or
distribution on or for the purchase, redemption, or retirement of, any shares of
its capital stock; or make any other distribution by reduction of capital or
otherwise in respect of any shares of its capital stock; except that (1) the
Borrower may declare and
- 18 -
deliver dividends and make distributions payable solely in common stock of the
Borrower; and (2) such other Dividends as the Borrower deems appropriate
provided that the payment of such Dividends does not cause the Borrower to be in
default of any of its covenants hereunder and that no default has occurred,
which with the passage of time or the giving of notice; or both, could result in
an Event of Default hereunder.
SECTION 6.08. CHANGE OF NAME OR LOCATION. Change its name or conduct its
business under any trade name or style other than as hereinabove set forth or
change its chief executive office, places of business or the present locations
of its assets or records relating thereto from those address(es) hereinabove set
forth.
SECTION 6.11. MANAGEMENT, CAPITAL STRUCTURE. Make or consent to a
material change in the ownership or capital structure of the Borrower, which
results in Xx. Xxxxxx Xxxxxx ceasing to be actively involved in management of
the business or, prior to an underwritten public offering of securities of the
Borrower, results in Xx. Xxxxxx Xxxxxx ceasing to own at least Fifty-one (51%)
percent of the common stock of the Borrower.
ARTICLE VII
FINANCIAL COVENANTS
SECTION 7.01. DEBT COVERAGE RATIO. Borrower shall maintain a Minimum
Debt Service Coverage Ratio of 1.25 to 1 on a rolling four (4) quarters basis.
For purposes of this Agreement, the term "Debt Service Coverage Ratio" shall
mean: earnings before interest and taxes, plus depreciation, plus principal
amortization, minus unfinanced capital expenditures minus Dividends minus cash
taxes divided by interest expenses plus current maturities of long term
Indebtedness (including Capital Leases).
SECTION 7.02. MINIMUM TANGIBLE NET WORTH. Borrower shall maintain a
minimum Tangible Net Worth of at least Seventeen Million ($17,000,000.00)
Dollars.
SECTION 7.03. MAXIMUM INDEBTEDNESS TO TANGIBLE NET WORTH. Borrower
shall maintain a Total Indebtedness to Tangible Net Worth ratio of not more than
0.75 to 1.0.
The foregoing requirements shall be measured in accordance with GAAP and
monitored quarterly by the financial statements required to be delivered by
Section 5.08(2).
EVENTS OF DEFAULT
SECTION 8.01. EVENTS OF DEFAULT. RIGHTS AND REMEDIES UPON DEFAULT.
(a) Upon the occurrence of any one or more of the following events
(herein, each an "Event of Default") Bank may decline to make any or all further
loans hereunder or under any other agreements with Borrower, and any and all
Obligations of the Borrower to Bank shall become immediately due and payable, at
the option of Bank without notice or demand:
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(i) The failure of the Borrower to pay the principal of, or
interest on, any promissory note now or hereafter executed
and delivered by the Borrower to the Bank within five (5)
days of when due;
(ii) Any representation or warranty made or deemed made by the
Borrower in this Agreement, by the Borrower in any of the
Loan Documents, or in connection with any Loan Document,
shall prove to have been incorrect in any material respect
on or as of the date made or deemed made;
(iii) The Borrower shall fail to perform or observe any material
term, covenant, or agreement contained in any Loan
Document (other than payments of any promissory note) on
the part of each of them to be performed or observed, and
fail to cure within fifteen (15) days of written notice;
(iv) The Borrower shall (a) fail to pay any material
indebtedness for borrowed money (other than the Notes) of
such party, or a subsidiary, as the case may be, or any
interest or premium thereon, when due (whether by
scheduled maturity, required prepayment, acceleration,
demand, or otherwise), (whether or not related to this
transaction or owed to the Bank or another person) or (b)
fail to perform or observe any material term, covenant, or
condition on its part to be performed or observed under
any agreement or instrument relating to any such
indebtedness, when required to be performed or observed
and such failure continues beyond any applicable grace
period, if the effect of such failure to perform or
observe is to accelerate, or to permit the acceleration
after the giving of notice or passage of time, or both, of
the maturity of such indebtedness, if such failure to
perform or observe has not been waived by the holder of
such indebtedness; or any such indebtedness shall be
declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment),
prior to the stated maturity thereof. For purposes of this
subsection material indebtedness shall be deemed to mean
indebtedness in excess of $25,000.00;
(v) The Borrower (a) shall generally not, or shall be unable
to, or shall admit in writing its inability to pay its
debts as such debts become due; or (b) shall make an
assignment for the benefit of creditors, petition or apply
to any tribunal for the appointment of a custodian,
receiver, or trustee for it or a substantial part of its
assets; or (c) shall commence any proceeding under any
bankruptcy, reorganization, arrangements, readjustment of
debt, dissolution, or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or (d)
shall have any such petition or application filed or any
such proceeding commenced against it in
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which an order for relief is entered or adjudication or
appointment is made; or (e) by any act or omission shall
indicate its consent to, approval of, or acquiescence in
any such petition, application, or proceeding, or order
for relief, or the appointment of a custodian, receiver,
or trustee for all or any substantial part of its
properties; or (f) shall suffer any such custodianship,
receivership, or trusteeship to continue undischarged for
a period of thirty (30) days;
(vi) One or more judgments, decrees, or orders for the payment
of money shall be rendered against the Borrower and such
judgments, decrees, or orders shall continue unsatisfied
and in effect for a period of ten (10) days without being
vacated, discharged, satisfied, or stayed or bonded
pending appeal;
(vii) The service of any process on the Bank seeking to attach
by trustee process any assets of the Borrower held by the
Bank;
(viii) The Borrower shall fail to perform or observe any material
term, covenant or agreement contained in documents
evidencing, securing or accompanying this Agreement and/or
any and all other Obligations, whether now existing or
made hereafter, of the Borrower, whether as maker,
guarantor or endorser or otherwise, to the Bank, (all
documents evidencing such obligations being the "Other
Bank Documents") and failure to cure within the applicable
grace period, or, if no grace period is specified, then
within ten (10) days of written notice;
(ix) Any levy, seizure, attachment, execution or similar
process shall be issued or levied or a filing against or
relating to the Borrower of (A) a federal tax lien in
favor of the United States of America or any political
subdivision of the United States of America, or (B) a
state tax lien in favor of any state of the United States
of America or any political subdivision of any such state
on any of the property of the Borrower, which remains
undischarged for ten (10) days or the entry of any
judgment(s) against Borrower, which judgment(s) is not
satisfied or appealed from (with execution or similar
process stayed) within thirty (30) days of its entry; or
(x) The Borrower shall dissolve or liquidate, or be dissolved
or liquidated, or cease to legally exist, or, if a
corporation or partnership, merge or consolidate, or be
merged or consolidated with or into any other corporation;
(xi) The Bank believes that any material adverse change in the
assets, liabilities, financial condition or business of
the Borrower shall have occurred since the date of any
financial statements delivered
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to the Bank before or after the date of this Note or the
Bank believes in good faith that the prospect of payment
of any obligation or the performance of any agreement of
the Borrower is impaired or the Bank deems itself
insecure;
(xii) Any security agreement or mortgage now or hereafter
delivered, or security interest granted, by or in
connection with this Agreement or any other loan document
by the Borrower (including this Agreement) shall at any
time after its execution and delivery and for any reason
cease (a) to create a valid and perfected first priority
security interest in and to the property purported to be
subject to such security agreement or mortgage or (b) to
be in full force and effect or shall be declared null and
void, or the validity or enforceability thereof shall be
contested by the Borrower shall deny it has any further
liability or obligation under the relevant security
agreement, or mortgage or the Borrower shall fail to
perform any of its material obligations under the relevant
security agreement or mortgage or other loan document; or
(xiii) The Borrower moves its principal banking and/or borrowing
relationship to a bank other than the Bank.
Upon the occurrence of an Event of Default, Bank may declare any obligation
Bank may have hereunder to be canceled, declare all Obligations of Borrower to
be due and payable and proceed to enforce payment of the Obligations and to
exercise any and all of the rights and remedies afforded to Bank by the Uniform
Commercial Code or under the terms of this Agreement or otherwise. The
occurrence of any such Event of Default shall also constitute, without notice or
demand, a default under all other agreements between Bank and the Borrower,
whether individually or jointly with others and all other instruments and papers
given Bank by the Borrower, whether such agreements, instruments, or papers now
exist or hereafter arise. In addition, upon the occurrence of an Event of
Default, if Bank proceeds to enforce payment of the Obligations, Borrower shall
be obligated to deliver to Bank cash collateral in an amount equal to the
aggregate amounts then undrawn on all outstanding Letters of Credit or
acceptances issued or guaranteed by Bank for the account of Borrower, and Bank
may proceed to enforce payment of the same and to exercise all rights and
remedies afforded to Bank by the Uniform Commercial Code or under the terms of
this Agreement or otherwise. Upon the occurrence of, and during the continuance
of, an Event of Default, the Borrower, as additional compensation to the Bank
for its increased credit risk, promises to pay interest on all Obligations
(including, without limitation, principal, whether or not past due, past due
interest and any other amounts past due under this Agreement) at the Default
Rate.
(b) Upon (i) the filing of any complaint, application, or petition
by or against the Borrower initiating any matter in which the Borrower is or may
be granted any relief from the debts of the Borrower pursuant to the Bankruptcy
Code, or (ii) the filing of any involuntary petition which is not dismissed
within sixty (60) days of filing, the Bank's obligation hereunder shall be
canceled immediately, automatically, and without notice, and all Obligations of
the
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Borrower then outstanding shall become immediately due and payable without
presentation, demand, or notice of any kind to the Borrower.
(c) Any sale or other disposition of the Collateral maybe at public
or private sale upon such terms and in such manner as the Bank deems advisable,
having due regard to compliance with any statute or regulation which might
affect, limit or apply to the Bank's disposition of the Collateral. The Bank may
conduct any such sale or other disposition of the Collateral upon the Borrower's
premises. Unless the Collateral is perishable or threatens to decline speedily
in value, or is of a type customarily sold on a recognized market (in which
event the Bank shall provide the Borrower with such notice as may be practicable
under the circumstances), the Bank shall give the Borrower at least the greater
of the minimum notice required by law or seven (7) days prior written notice of
the date, time and place of any proposed public sale, and of the date after
which any private sale or other disposition of the Collateral may be made. The
Bank may purchase the Collateral, or any portion of it at any such sale.
(d) In connection with the Bank's exercise of the Bank's rights
after the occurrence of an Event of Default, the Bank may enter upon, occupy and
use any premises owned or occupied by the Borrower, and may exclude the Borrower
from such premises or portion thereof as may have been so entered upon,
occupied, or used by the Bank. The Bank shall not be required to remove any of
the Collateral from any such premises upon the Bank's taking possession thereof,
and may render any Collateral unusable to the Borrower. In no event shall the
Bank be liable to the Borrower for use or occupancy by the Bank of any premises
pursuant to this Agreement.
(e) Upon (i) the filing of any complaint, application, or petition
by or against the Borrower initiating any matter in which the Borrower is or may
be granted any relief from the debts of the Borrower pursuant to the Bankruptcy
Code; (ii) the filing of any involuntary petition; (iii) the filing of any
federal or state tax lien; or (iv) the appointment of a receiver, without regard
to any permitted cure or grace period, the Bank shall be automatically and
immediately relieved from being required to make any additional Loans or to
advance additional funding of any kind or nature, without any notice of any kind
to the Borrower, unless and until such matters are discharged or satisfied in
the Bank's sole judgment, and without prejudice to any and all of the Bank's
other rights and remedies under this Agreement.
SECTION 8.02. CROSS-DEFAULT. It is acknowledged and agreed that a
default (a) hereunder shall also constitute a default under all Other Bank
Documents and any and all loans from the Bank to the Borrower, whether or not
related to this transaction and (b) under any of the Other Bank Documents
(whether or not related to this transaction) shall also constitute a default
hereunder.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. AMENDMENTS, ETC. No amendment, modification, termination,
or waiver of any provision of any Loan Document to which the Borrower is a
party, nor consent to any departure by the Borrower from any Loan Document to
which it is a party, shall in any event
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be effective unless the same shall be in writing and signed by the Bank, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose given.
SECTION 9.02. NOTICES, ETC. Unless otherwise specified herein, all
notices and other communications provided for under this Agreement and under the
other Loan Documents to which the Borrower are a party shall be in writing and
mailed via certified mail, return receipt requested, or by a national overnight
courier company or hand delivered, if to the Borrower at 00 Xxxxxxxxx Xxxxx,
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000, Attention: Xx. Xxxxxx Xxxxxx, with a copy
thereof to Xxxxxx X. Xxxxxxxx III, Esquire, and Xxxxxxxxx Xxxxxx, Esquire, both
of Xxxxxx, Xxxx & Xxxxxxx, Xxx Xxxxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000; and
if to the Bank, at its address at 000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx
00000, Attention: Xxxxxx X. Xxxxx, Vice President, with a copy thereof to
Xxxxxxx X. Xxxxx, Esquire, Xxxxxx & Xxxxx LLP, 0 Xxxxxxxxxx Xxxx, Xxxxxxxxx,
Xxxxxxxxxxxxx 00000; and as to each party, at such other address as shall be
designated by such party in a written notice to the other party complying as to
delivery with the terms of this Section 9.02. All such notices and communication
shall be effective when deposited in the mail, addressed as aforesaid, except
that notices to the Bank shall not be effective until received by the Bank.
SECTION 9.03. CONSENT. The Borrower may take any action herein
prohibited or omit to perform any act required to be performed by the Borrower
if the Borrower shall obtain the Bank's prior written consent to each such
action, or omission to act. No waiver on the Bank's part on any one occasion
shall be deemed a waiver on any other occasion. The Bank shall not be deemed to
have waived any of its rights hereunder unless such waiver shall be in writing
and duly signed by an authorized officer of the Bank.
SECTION 9.04. NO WAIVER; REMEDIES. No failure on the part of the Bank to
exercise, and no delay in exercising, any right, power, or remedy under any Loan
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under any Loan Document preclude any other or further
exercise of any other right, power or remedy in the Loan Documents and all such
rights, powers and remedies are cumulative and not exclusive of any remedies
provided bylaw. The Bank shall not be required to have recourse to any
collateral before enforcing its rights or remedies against the Borrower. The
Borrower hereby waives presentment and protest of any instrument and any notice
thereof.
THE BORROWER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION IN
WHICH IT MAY BE A PARTY, WHETHER ARISING OUT OF, UNDER, OR BY REASON OF THIS
AGREEMENT OR ANY LOAN DOCUMENT OR ANY OTHER TRANSACTION HEREUNDER OR BY REASON
OF ANY OTHER CAUSE OR DISPUTE OF ANY KIND OR NATURE WHATSOEVER BETWEEN IT OR
THEM AND THE BANK.
SECTION 9.05. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Borrower, and the Bank and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of it's rights under any Loan Document to which the Borrower is a party without
the prior written consent of the Bank.
SECTION 9.06. COSTS, EXPENSES, AND TAXES. Borrower shall pay to Bank on
demand any and all reasonable counsel fees and other expenses incurred by Bank
in connection
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with the preparation, interpretation, enforcement, or amendment of this
Agreement, or of any documents relating thereto, and any and all expenses,
including, but not limited to, all attorneys' fees and expenses, and all other
expenses of like or unlike nature which may be expended by Bank or in the
prosecution or defense of any action or concerning any matter growing out of or
connected with the subject matter of this Agreement, the Obligations or the
Collateral or any of Bank's rights or interests therein or thereto, including,
without limiting the generality of the foregoing, any reasonable counsel fees or
expenses incurred in any bankruptcy or insolvency proceedings and all costs and
expenses incurred or paid by Bank in connection with the administration
supervision, protection or realization on any security held by Bank for the debt
secured hereby, whether such security was granted by Borrower or by any other
person primarily or secondarily liable (with or without recourse) with respect
to such debt, and all costs and expenses incurred by Bank in connection with the
defense, settlement or satisfaction of any action, claim or demand asserted
against Bank in connection with the debt secured hereby, all of which amounts
shall be considered advances to protect Bank's security, and shall be secured
hereby. In addition, the Borrower shall pay any and all stamp and other taxes
and fees payable or determined to by payable in connection with the execution,
delivery, filing and recording of any of the Loan Documents and the other
documents to be delivered under any such Loan Documents, and agrees to save the
Bank harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees.
SECTION 9.07. RIGHT OF SETOFF. Upon the occurrence and during the
continuance of any Event of Default, the Bank is hereby authorized at any time
and from time to time, without notice to the Borrower (any such notice being
expressly waived by the Borrower), to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Bank to or for the credit or the
account of the Borrower against any and all of the obligations of the Borrower
now or hereafter existing under this Agreement or the Notes or any other Loan
Document, irrespective of whether or not the Bank shall have made any demand
under this Agreement or the Notes or such other Loan Document and although such
obligations may be unmatured. The Bank agrees promptly to notify the Borrower
after any such setoff and application, provided that the failure to give such
notice shall not affect the validity of such setoff and application. The rights
of the Bank under this Section 9.07. are in addition to other rights and
remedies (including, without limitation, other rights of setoff) which the Bank
may have. Any and all instruments, documents, policies and certificates of
insurance, securities, goods, accounts, choses in action, general intangibles,
chattel papers, cash, property and the proceeds thereof (whether or not the same
are Collateral or proceeds thereof hereunder) owned by Borrower or in which
Borrower has an interest, which now or hereafter are at any time in possession
or control of Bank or in transit by mail or carrier to or from Bank or in the
possession of any third party acting in Bank's behalf, without regard to whether
Bank received the same in pledge, for safekeeping, as agent for collection or
transmission or otherwise or whether Bank had conditionally released the same,
shall constitute additional security for the Obligations and may be applied at
any time following the occurrence of an Event of Default or an event which with
notice or the lapse of time, or both, would constitute an Event of Default, to
any Obligations which are then owing, whether due or not due. Bank shall be
entitled to presume, in the absence of clear and specific written notice to the
contrary hereinafter provided by Borrower to Bank, that any and all deposits
maintained by Borrower with Bank are general accounts as to which no person or
entity other than Borrower has any legal or equitable interest whatsoever.
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SECTION 9.08. GOVERNING LAW. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of The Commonwealth of
Massachusetts.
SECTION 9.09. SEVERABILITY OF PROVISIONS. Any provision of any Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Documents or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 9.10. HEADINGS. Article and Section headings in the Loan
Documents are included in such Loan Documents for the convenience of reference
only and shall not constitute a part of the applicable Loan Documents for any
other purpose.
SECTION 9.11. WAIVER. The Borrower hereby waives notice of nonpayment,
demand, presentment, protest and notice thereof with respect to any and all
instruments, notice of acceptance hereof, notice of loans or advances made,
credit extended, collateral received or delivered, or any other action taken in
reliance hereon, and all other demands and notices of any description, except
such as are expressly provided for herein. No delay or omission on Bank's part
in exercising any right, remedy or option shall operate as a waiver or such or
any other right, remedy or option or of any default.
SECTION 9.12. TERMINATION. This Agreement shall continue to be fully
operative until all transactions entered into, rights hereunder or interest
created or Obligations incurred have been fully disposed of, concluded or
liquidated. The security interests, Liens and rights granted to Bank hereunder
shall continue in full force and effect until all Obligations have been
satisfied.
SECTION 9.13. AUTHORITY. The Bank is authorized to make loans under the
terms of this Agreement upon the request, either written or oral, in the name of
Borrower of any officer identified in Schedule 4.18 or other persons, from time
to time, holding the offices of President, Treasurer or Chief Financial officer
and such other officers and authorized signatories as may from time to time be
set forth in separate banking and borrowing resolutions.
IN WITNESS WHEREOF, the parties have executed or caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written and shall take effect as a sealed instrument.
HITITTE MICROWAVE CORPORATION
By: /s/ Xxxxxx Xxxxxx
-------------------------------------------
Name: Xx. Xxxxxx Xxxxxx
President and Treasurer
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CITIZENS BANK OF MASSACHUSETTS
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxx, Vice President
THE COMMONWEALTH OF MASSACHUSETTS
Middlesex, ss. October 19, 2001
Then personally appeared Xx. Xxxxxx Xxxxxx, President and Treasurer of
Hittite Microwave Corporation, known to me, and acknowledged the foregoing to be
his duly authorized and free act and deed as President and Treasurer and the
free act and d ed of Hittite Microwave Corporation.
/s/ Xxxxxxx Xxxxxxxxxxx
-------------------------------------------
Notary Public
My commission expires: Feb 8, 2002
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