RBS CITIZENS, N.A. LOAN AND SECURITY AGREEMENT
EXHIBIT
10.1
RBS
CITIZENS, N.A.
PREAMBLE.
This Loan and Security Agreement is entered into June 30, 2008 by and between
iCAD, INC., a Delaware corporation with a principal place of business at 00
Xxxx
Xxxxx Xxxx, Xxxxxx, Xxx Xxxxxxxxx 00000 (the “Borrower”), and RBS CITIZENS,
N.A., a national banking association with a banking office at 00 Xxxxx Xxxxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000 (the Bank”). Capitalized terms used herein shall
have the meanings ascribed to them in this Agreement, or if not defined herein,
in the other Loan Documents (as defined herein).
1. SECURITY
INTEREST. The Borrower, for valuable consideration, receipt whereof is hereby
acknowledged, hereby grants to the Bank, as secured party hereunder, a
continuing security interest in and to, and assigns to Bank, all assets of
the
Borrower (other than Intellectual Property Rights as defined hereinafter),
wherever located and whether now owned or hereafter acquired, including, without
limitation, the following:
(a) all
inventory, including all goods, merchandise, raw materials and work in process,
finished goods, and other tangible personal property now owned or hereafter
acquired and held for sale or lease or furnished or to be furnished under
contracts of service or used or consumed in Borrower’s business (all hereinafter
called the “Inventory”);
(b) all
accounts (as defined in Article 9 of the Uniform Commercial Code, hereinafter
“Accounts”), contracts, contract rights, notes, bills, drafts, acceptances,
general intangibles (including without limitation customer lists, goodwill,
computer programs, computer records, computer software, computer data, ledger
sheets, files, records, data processing records relating to any Accounts and
all
tax refunds of every kind and nature to which Borrower is now or hereafter
may
become entitled to, no matter how arising, (but excluding Intellectual Property
Rights), instruments, documents, chattel paper (whether tangible or electronic)
deposit accounts, cash, letter of credit rights (whether or not the letter
of
credit is evidenced by a writing), securities, security entitlements, security
accounts, investment property, supporting obligations, choses in action,
commercial tort claims, and all other debts, obligations and liabilities in
whatever form, owing to Borrower from any person, firm or corporation or any
other legal entity, whether now existing or hereafter arising, now or hereafter
received by or belonging or owing to Borrower, for goods sold by it or for
services rendered by it, or however otherwise same may have been established
or
created, all guarantees and securities therefor, all right, title and interest
of Borrower in the merchandise or services which gave rise thereto, including
the rights of reclamation and stoppage in transit, all rights to replevy goods,
and all rights of an unpaid seller of merchandise or services (all hereinafter
called the “Receivables”);
(c) all
machinery, equipment, fixtures and other goods (as defined in Article 9 of
the
Uniform Commercial Code) whether now owned or hereafter acquired by the Borrower
and wherever located, all replacements and substitutions therefor or accessions
thereto and all proceeds thereof (all hereinafter called the “Equipment”);
and
(d) all
proceeds and products of all of the foregoing in any form, including, without
limitation, all proceeds of credit, fire or other insurance, and also including,
without limitation, rents and profits resulting from the temporary use of any
of
the foregoing (which, with Inventory, Receivables and Equipment are all
hereinafter called “Collateral”).
Notwithstanding
anything contained in this Section 1 to the contrary, the Borrower is not hereby
granting to Bank a security interest in and to Intellectual Property Rights.
For
purposes of this Agreement, “Intellectual Property Rights” shall mean any and
all intellectual property rights and industrial property rights arising under
statutory or common law, contract or otherwise, and whether or not perfected,
including all: (a) patents and patent applications and all patent applications
hereafter filed, including any continuation, continuation-in-part, division,
provisional or any substitute applications, any patent issued with respect
to
such patent applications, any reissue, reexamination, renewal or extension
(including any supplemental patent certificate) of any such patent, and any
confirmation patent or registration patent or patent of addition based upon
any
such patent, and all foreign counterparts of any of the foregoing, (b) rights
associated with works of authorship, including copyrights, moral rights,
copyright applications, copyright registrations, and rights to prepare
derivative works, (c) rights relating to trade secrets and confidential
information, (d) rights in trademarks, trademark applications, service marks,
service xxxx applications, trade names. Logos, symbols and the like, including
all goodwill therein; (e) divisions, continuations, renewals, reissues and
extensions of the foregoing (and to the extent applicable) now existing,
hereafter filed, issued or acquired; and (f) rights analogous to those set
forth
in this “Intellectual Property Rights” definition and in any and all proprietary
rights relating to the foregoing in any jurisdiction throughout the world,
including all rights to xxx for past present and future
infringement.
2. OBLIGATIONS
SECURED. The security interest granted hereby is to secure payment and
performance of all debts, liabilities and obligations of Borrower to Bank under
this Agreement, the Note, and any other documents, instruments and agreements
executed and or delivered in connection with this Agreement (as amended,
restated, supplemented or modified from time to time, the “Loan Documents”),
including without limitation thereof, any obligations which may arise out of
any
Letter of Credit or similar instrument or obligation issued or caused to be
issued for the account of Borrower under this Agreement or a related Application
and Agreement for Letter of Credit (all hereinafter called
“Obligations”).
3. BORROWER’S
PLACES OF BUSINESS, INVENTORY LOCATIONS AND RETURNS POLICY. Borrower warrants
that Borrower has no places of business other than that recited in the Preamble
to this Agreement, unless other places of business are listed on Schedule
“A”,
annexed
hereto, in which event Borrower represents that it has additional places of
business at those locations set forth on Schedule
“A”.
Borrower’s
principal executive office and the office where Borrower keeps its records
concerning its accounts, contract rights and other property, is that shown
at
the end of this Agreement. All Inventory presently owned by Borrower is stored
at the locations set forth on Schedule
“A”.
Borrower
will promptly notify Bank in writing of any change in the location of any place
of business or the location of any Inventory or the establishment of any new
place of business or location of Inventory or office where its records are
kept
which would be shown in this Agreement if it were executed after such
change.
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Borrower
represents and warrants that it has described its returns policy in writing
to
Bank (and annexed hereto as Schedule
B)
and
that it does now, and will continue to, apply such policy consistently in the
conduct of its business and agrees that it shall notify Bank in writing before
changing its policy or the application thereof in any material
respect.
4. BORROWER’S
ADDITIONAL REPRESENTATIONS AND WARRANTIES.
Borrower
represents and warrants that:
(a) Borrower
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Delaware and shall hereafter remain in good standing as
a
corporation in that state, and is duly qualified and in good standing in New
Hampshire and in every other state in which it is doing business, and shall
hereafter remain duly qualified and in good standing in every other state in
which the failure to qualify or become licensed could have a material adverse
effect on the financial condition, business or operations of the
Borrower.
(b) Borrower’s
exact legal name is iCAD, Inc.
(c) The
organizational identification number of the Borrower is as set forth on
Schedule
“C”
annexed
hereto.
(d) The
execution, delivery and performance of this Agreement, and any other document
executed in connection herewith, are within the Borrower’s corporate powers,
have been duly authorized, are not in contravention of law or the terms of
the
Borrower’s charter, by-laws or other incorporation papers, or of any indenture,
agreement or undertaking to which the Borrower is a party or by which it or
any
of its properties may be bound.
(e) The
Articles of Organization and all amendments thereto of Borrower have been duly
filed and are in proper order. All capital stock issued by Borrower and
outstanding was and is properly issued and all books and records of Borrower,
including but not limited to its minute books, by-laws and books of account,
are
accurate and up to date and will be so maintained.
(f) Borrower
owns or has rights to (as applicable) all of the assets reflected in the most
recent of Borrower’s financial statements provided to Bank, except assets sold
or otherwise disposed of in the ordinary course of business since the date
thereof, and such assets together with any assets acquired since such date,
including without limitation the Collateral, are free and clear of any lien,
pledge, security interest, charge, mortgage or encumbrance of any nature
whatsoever, except the Permitted Encumbrances.
(g) Except
as
disclosed in any filing with the Securities and Exchange Commission (the “SEC”),
Borrower has made or filed all tax returns, reports and declarations relating
to
any material tax liability required by any jurisdiction to which it is subject
(any tax liability which may result in a lien on any Collateral being hereby
deemed material); has paid all taxes shown or determined to be due thereon
except those being contested in good faith, by appropriate proceedings and
which
Borrower has, in accordance with generally accepted accounting principles
(“GAAP”) established a reserve for the payment thereof (a “Payment
Reserve”).
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(h) Borrower
(i) is subject to no charter, corporate or other legal restriction, or any
judgment, award, decree, order, governmental rule or regulation or contractual
restriction which could have a material adverse effect on its financial
condition or business, and (ii) is in compliance with its charter documents
and
by-laws, all contractual requirements by which it or any of its properties
may
be bound and all applicable laws, rules and regulations (including without
limitation those relating to environmental protection) other than laws, rules
or
regulations or provision of any of the foregoing, the failure to comply with
which cannot reasonably be expected to materially adversely affect its financial
condition or business, or the value of any material part of the
Collateral.
(i) There
is
no action, suit, proceeding or investigation pending or, to Borrower’s
knowledge, threatened against or affecting it or any of its assets before or
by
any court or other governmental authority which, if determined adversely to
it,
would have a material adverse effect on its financial condition or business
or
the value of any material part of the Collateral.
(j) Borrower
is in compliance with ERISA; no Reportable Event has occurred and is continuing
with respect to any Plan; and it has no unfunded vested liability under any
Plan. The word “Plan” as used in this Agreement means any employee plan subject
to Title IV of the Employee Retirement Income Security Act of 1974 (“ERISA”)
maintained for employees of Borrower, any subsidiary of Borrower or any other
trade or business under common control with Borrower within the meaning of
Section 414(c) of the Internal Revenue Code of 1986 or any regulations
thereunder.
(k)
Borrower has issued certain Convertible Notes pursuant to Note Purchase
Agreements dated June 20, 2006 and September 19, 2006 (the “Convertible Notes”)
to those persons described in Schedule
D
hereto
(the “Convertible Noteholders”). The Borrower shall cause each of the
Convertible Noteholders to: (i) subordinate the Convertible Notes to the
Obligations as a condition to the Bank’s undertakings hereunder, and (ii)
convert the Convertible Notes to capital stock of the Borrower on or before
October 15, 2008.
(l)
Annexed as Schedule
E
hereto
is a listing of all of the Borrower’s subsidiaries as of the date of this
Agreement, together with a summary of the capital stock of each of such
subsidiaries.
5. LOANS
AND
OTHER FINANCIAL ACCOMMODATIONS.
(a) From
time
to time upon Borrower’s request, so long as the sum of the aggregate principal
amount of all loans outstanding and the requested loan does not exceed the
lesser of (i) the Borrowing Base, or (ii) the Credit Limit, Bank shall make
such
requested loan, provided that there has not occurred an Event of Default or
an
event which, with giving of notice or the passage of time or both, would
constitute an Event of Default (a “Default”). At any time that Borrower is in
compliance with the Special Conditions (as defined below), Borrower shall not
be
subject to a restriction as to availability of credit based upon the Borrowing
Base. The “Special Conditions” are as follows: (x) Borrower’s Adjusted EBITDA
(as defined in Section 15(b)) for the most recently completed fiscal quarter
was
greater than or equal to $1,250,000.00, (y) the Total Funded Debt to Adjusted
EBITDA Ratio as of such fiscal quarter was not less than 1.50:1.0, and (z)
there
is no continuing Default or Event of Default at the time of the loan request.
The “Total Funded Debt to Adjusted EBITDA” ratio as of any fiscal quarter shall
mean the ratio of Borrower’s Funded Debt as of the last day of such fiscal
quarter (excluding, for the period from the date hereof through and including
October 15, 2008 only, Convertible Notes subordinated to the Obligations) to
its
Adjusted EBITDA for the trailing twelve months ending on the last day of such
fiscal quarter; provided that for the purpose of calculating the Total Funded
Debt to Adjusted EBITDA ratio for the fiscal quarter ended June 30, 2008,
Adjusted EBITDA shall mean EBITDA for the trailing 6 months times 2. “Funded
Debt” means, at any time, the outstanding amount of all indebtedness incurred on
account of borrowed money (including issued and outstanding Letters of Credit)
at such time.
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(b) All
loans
shall bear interest and at the option of the Bank shall be evidenced by and
repayable in accordance with a revolving note drawn to the order of Bank
substantially the form of Exhibit
1
hereto
(the “Note”), as the same may hereafter be amended, supplemented or restated
from time to time and any note or notes issued in substitution therefor, but
in
the absence of the Note shall be conclusively evidenced by Bank’s records of
loans and repayments.
Interest
with respect to Prime Rate Loans (as defined in Rider
A
to the
Note), will be charged to Borrower at a fluctuating rate which is the daily
equivalent to a rate equal to the aggregate of the Prime Rate (as defined in
Rider
A
to the
Note), and one-half (0.50%) percent per annum, upon any balance owing to Bank
at
the close of each day and shall be payable (i) on the first day of each month
in
arrears; (ii) on termination of this Agreement pursuant to Section 21 hereof;
(iii) on acceleration of the time for payment of the Obligations pursuant to
Section 16 hereof; and (iv) on the date the Obligations are paid in full. The
rate of interest payable by Borrower shall be changed effective as of that
date
in which a change in the Prime Rate becomes effective.
Interest
with respect to LIBOR Rate Loans (as defined in Rider
A
to the
Note) will be charged to Borrower at a rate which is the equivalent to the
Adjusted LIBOR Rate (as defined in Rider
A
to the
Note) plus the LIBOR Rate Margin (as defined in Rider
A
to the
Note), upon any balance owing to the Bank at the close of each day and shall
be
payable on the Interest Payment Date (as defined in Rider
A
to the
Note).
All
payments hereunder shall be made in lawful money of the United States of America
to Bank, or as Bank directs, without set-off, counterclaim or
deduction.
(c) The
term
“Borrowing Base” as used herein shall mean the sum of the
following:
(i) Eighty
(80.0%) percent of the unpaid face amount of Qualified Accounts, PLUS
(ii) One
hundred (100.0%) percent of Borrower’s cash (representing collected funds) on
deposit with the Bank; MINUS
(iii) one
hundred (100.0%) percent of the aggregate amount then undrawn on all Letters
of
Credit issued pursuant to this Agreement for the account of the
Borrower;
but
in no
event shall the sum of all loans plus the sum of the aggregate amount undrawn
on
all Letters of Credit and acceptances be in excess of the Credit
Limit.
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As
used
in this Agreement, the term “Commercial Letters of Credit” shall mean a letter
of credit issued to support the purchase by Borrower of Inventory prior to
its
transport to one of Borrower’s places of business that provides that all draws
thereunder must require presentation of customary documentation in form and
substance satisfactory to Bank and reflecting passage to Borrower of title
to
first quality Inventory conforming to Borrower’s contract with the seller
thereof.
(d) The
term
“Credit Limit” as used herein shall mean an amount equal to Five Million and
00/100 ($5,000,000.00) Dollars, and the term “Letter of Credit Sublimit” shall
mean a portion of the Credit Limit in an amount equal to One Million and 00/100
($1,000,000.00) Dollars.
(e) Borrower
hereby authorizes and directs Bank, in Bank’s sole discretion (provided,
however, Bank shall have no obligation to do so): (i) to pay accrued interest
as
the same becomes due and payable pursuant to this Agreement, and to treat the
same as a loan to Borrower, which shall be added to Borrower’s loan balance
pursuant to this Agreement; and (ii) to charge any of Borrower’s accounts under
the control of Bank for any payments due under this Agreement. Bank shall
promptly notify Borrower of any such charges or applications.
(f) The
Borrowing Base formula set forth above is intended solely for monitoring
purposes. The making of loans, advances, and credits by Bank to the Borrower
in
excess of the above described Borrowing Base formula is for the benefit of
the
Borrower and does not affect the Obligations of Borrower hereunder; all such
loans constitute Obligations and must be repaid by Borrower in accordance with
the terms of this Agreement.
(g) 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 Credit Limit and Letter
of Credit Sublimit as then computed, shall issue letters of credit from time
to
time for the account of the Borrower (collectively “Letters of Credit”). The
Letters of Credit shall be on terms mutually acceptable to Bank and Borrower,
and no Letter of Credit shall have an expiration date later than the sooner
to
occur of (i) twelve (12) months from the date of issuance of the subject Letter
of Credit, or (ii) the Termination Date. 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 Standby Letter of Credit, Borrower shall
pay to Bank in advance of issuance of each Letter of Credit, an issuance fee
in
the amount of one and three-quarter (1.75%) percent per annum times the face
amount of such Letter of Credit plus transaction fees at the customary rates
charged by Bank and all other normal and customary fees charged by Bank, and
in
the case of trade Letters of Credit Borrower shall pay to Bank transaction
fees
at the customary rates charged by Bank and all other normal and customary fees
charged by Bank. Borrower hereby authorizes and directs Bank, in Bank’s sole
discretion (provided, however, Bank shall have no obligation to do so) to pay
all such fees and costs as the same become due and payable and to treat the
same
as a loan to Borrower, which shall be added to Borrower’s loan balance pursuant
to this Agreement. For purposes of computing the Credit Limit, all Letters
of
Credit shall be deemed to be loans.
(h) Borrower
shall pay to Bank the principal amount of all loans as follows:
(i) Borrowing
Base Exceeded.
At any
time when the Borrowing Base is applicable, whenever the outstanding principal
balance of all loans exceed the Borrowing Base, Borrower shall immediately
pay
to Bank the excess of the outstanding principal balance of the loans over the
Borrowing Base.
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(ii) Payment
in Full on Termination.
On
termination of this Agreement, pursuant to Section 21 or acceleration of the
Obligations pursuant to Section 16, Borrower shall pay to Bank the entire
outstanding principal balance of all loans and shall deliver to Bank cash
collateral in an amount equal to the aggregate of amounts then undrawn on all
outstanding Letters of Credit issued pursuant to this Agreement for the account
of the Borrower.
(i) Bank
may,
at any time and from time to time, in its reasonable judgment establish reserves
against the Accounts of the Borrower. The amount of such reserves shall be
subtracted from Qualified Accounts when calculating the amount of the Borrowing
Base.
(j)
Borrowing
Procedures.
Borrower shall submit a Notice of Borrowing in the form of Exhibit
2
hereto
(a “Notice of Borrowing”) with respect to: (i) each request for a new loan, (ii)
to convert a LIBOR Rate Loan to a Prime Rate Loan or to a LIBOR Rate Loan of
a
different tenor, or (iii) to convert a Prime Rate Loan to a LIBOR Rate Loan.
Each Notice of Borrowing with respect to a new or conversion LIBOR Rate Loan
shall be made not less than 3 or more than 5 Business Days before the date
of
advance, and each Notice of Borrowing with respect to a new or conversion Prime
Rate Loan shall be made at least 1 Business Day before the date of advance.
In
the absence of a new Notice of Borrowing, any existing LIBOR Rate Loan shall
automatically be continued as a LIBOR Rate Loan at the then applicable Adjusted
LIBOR Rate and in an amount equal to the principal amount of the expiring LIBOR
Rate Loan less
any
Principal Repayment Amount made by Borrower; provided, however,
that no
portion of the outstanding principal amount of a LIBOR Rate Loan may be
continued as a LIBOR Rate Loan when any Event of Default has occurred and is
continuing.
(k) In
addition to all other sums payable hereunder, the Borrower shall pay the Bank
a
fee equal to one-quarter of one (0.25%) percent of the difference between:
(i)
the Credit Limit and (ii) the average amount of the principal balance of loans
outstanding plus amounts undrawn on all outstanding Letters of Credit for each
quarterly period this Agreement is in effect. Such fee shall be payable
quarterly in arrears.
(l)
In
addition to all other sums payable hereunder, the Borrower shall pay the Bank
a
closing fee in the amount of $16,000.00, which shall be due and payable and
deemed to be fully earned and non-refundable as of the date of this
Agreement.
6. DEFINITION
OF QUALIFIED ACCOUNT. The term “Qualified Account”, as used herein, means 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 outstanding more than ninety (90) days from the date of the
invoice thereof.
(b) The
Account arose from the performance of services or an outright sale of goods
by
Borrower, such goods have been shipped to the account debtor (including shipment
by any national delivery service), and Borrower has possession of shipping
and
delivery receipts evidencing such shipment.
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(c) The
Account is not subject to any prior
assignment, claim, lien, or security interest, and Borrower will not make any
further assignment thereof or create any further security interest therein,
nor
permit Borrower’s rights therein to be reached by attachment, levy, garnishment
or other judicial process.
(d) The
Account is not subject to set-off, credit, allowance or adjustment by the
account debtor, except discount allowed for prompt payment and the account
debtor has not complained as to his liability thereon and has not returned
any
of the goods from the sale of which the Account arose.
(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 whose principal place of business
is
outside the United States of America, unless (i) covered by credit insurance
in
form and issued by an insurer reasonably acceptable to the Bank, (ii) backed
by
a letter of credit in form and by an issuer acceptable to the Bank, or (ii)
the
account debtor has an investment grade US public debt rating from a recognized
rating service, or investment grade rating equivalent for non-US companies.
(h) The
Account is not owed by an entity which is a parent, subsidiary or affiliate
of
Borrower.
(i) The
account debtor is not located in the State of New Jersey or in the State of
Minnesota (or any other state that requires an entity to file a business
activity report or similar document in order to bring suit or otherwise enforce
its remedies against an account debtor in the courts or through any judicial
process of such state), unless (i) Borrower has filed and shall file all legally
required Notice of Business Activities Reports with the New Jersey Division
of
Taxation or the Minnesota Department of Revenue, as the case may be; or (ii)
Borrower is exempt from such filing requirement.
(j) Not
applicable.
(k) The
Account is not evidenced by a promissory note.
(l) The
Account did not arise out of any sale made on a xxxx and hold, dating or delayed
shipment basis, until such time as the goods have in fact been shipped to the
account debtor or as the account debtor has instructed.
(m) The
Account does not arise out of a progress billing prior to completion of the
order therefor.
(n) Bank,
in
accordance with its normal credit policies, has not deemed the Account to be
unacceptable for any reason.
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PROVIDED
THAT if at any time fifty (50.0%) percent or more of the aggregate amount of
the
Accounts due from any account debtor are unpaid in whole or in part more than
ninety (90) days from the respective dates of invoice, none of the Accounts
due
from such account debtor shall be deemed to be Qualified Accounts until such
time as less than fifty (50.0%) percent of Accounts due from such account debtor
are (as a result of actual payments received thereon) no more than ninety (90)
days from the date of invoice; Accounts payable by Borrower to an account debtor
shall be netted against Accounts due from and credits due from Borrower to
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) or (e) 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 creditworthiness 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.
7. Not
Applicable.
8. BANK’S
REPORTS. After the end of each month, Bank will render to Borrower a statement
of Borrower’s loan account with Bank hereunder, showing all applicable credits
and debits. Each statement shall be considered correct and to have been accepted
by Borrower and shall be conclusively binding upon Borrower 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 sixty (60) days
from
the mailing by Bank to Borrower of any such monthly statement.
9. CONDITIONS
OF LENDING.
(a) The
obligation of Bank to make the initial loan hereunder or issuing or causing
to
be issued the initial Letter of Credit hereunder shall be subject to the
condition precedent that Bank shall have received all of the following, each
in
form and substance satisfactory to Bank:
(i) This
Agreement, properly executed on behalf of Borrower.
(ii) The
Note
drawn to the order of Bank in the face amount of the Credit Limit.
(iii) A
true
and correct copy of any and all leases pursuant to which Borrower is leasing
any
real property.
(iv) Current
searches of appropriate filing offices showing that (A) no state or federal
tax
liens have been filed and remain in effect against Borrower, (B) no financing
statements have been filed and remain in effect against Borrower, except those
financing statements relating to liens set forth on Schedule
“E”,
the
liens of the secured lender to be paid with the proceeds of the initial loan
and
those financing statements filed by the Bank, and (C) the Bank has duly filed
all financing statements necessary to perfect the security interests granted
hereunder, to the extent the security interests are capable of being perfected
by filing.
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(v) A
certificate of the Secretary or an Assistant Secretary of the Borrower,
certifying as to (A) the resolutions of the directors and, if required, the
shareholders of Borrower, authorizing the execution, delivery and performance
of
this Agreement and related documents, (B) the Articles of Organization and
By-Laws of Borrower, and (C) the signatures of the officers or agents of
Borrower authorized to execute and deliver this Agreement and other instruments,
agreements and certificates, including loan requests, on behalf of
Borrower.
(vi) A
current
certificate issued by the Secretary of State of the state of the Borrower’s
incorporation, certifying that Borrower is in compliance with all corporate
organizational requirements of such state.
(vii) Evidence
that Borrower is duly licensed or qualified to transact business in New
Hampshire and Ohio and in all jurisdictions where the character of the property
owned or leased or the nature of the business transacted by it makes such
licensing or qualification necessary, except where the failure to so qualify
would not have a material adverse effect on the Borrower or its
business.
(viii) An
opinion of counsel to the Borrower as to authorization of the transaction and
enforceability of the Loan Documents, addressed to Bank.
(ix) Certificates
of the insurance required hereunder, with all hazard insurance containing a
lender’s loss payable endorsement in favor of Bank.
(x) Intentionally
omitted.
(xi) Subordination
agreements, properly executed by each of the Borrower’s Convertible Noteholders,
in form and substance satisfactory to Bank.
(xii) A
negative pledge with respect to its Intellectual Property Rights in the form
of
the Negative Pledge Agreement annexed as Exhibit
3.
(xiii) Payment
of the fees due through the date of the initial loan and expenses incurred
by
Bank through such date required to be paid by Borrower pursuant to this
Agreement.
(xiv) An
initial Borrowing Base Certificate in support of Borrower’s initial loan request
which indicates that the Borrower has the necessary loan availability to pay
all
existing secured lenders.
(xv) Such
other documents, instruments and agreements as Bank in its sole discretion
may
require.
(b) The
obligation of Bank to make each loan and to issue each Letter of Credit shall
be
subject to the further conditions precedent on such date:
(i) the
representations and warranties contained in Sections 3 and 4 hereof are correct
on and as of the date of such loan or the issuance of a Letter of Credit, as
the
case may be, as though made on and as of such date, except to the extent that
such representations and warranties relate solely to an earlier date;
and
-10-
(ii) no
event
has occurred and is continuing, or would result from such loan or issuance
of
such Letter of Credit, as the case may be, which constitutes a Default or an
Event of Default.
11. COLLECTIONS;
SET OFF; DEPOSIT ACCOUNTS; NOTICE OF ASSIGNMENT; EXPENSES; POWER OF ATTORNEY.
(a) Borrower
shall maintain its primary operating accounts with the Bank and will, upon
receipt of all checks, drafts, cash and other remittances in payment of any
Inventory or Equipment sold or in payment or on account of Borrower’s
Receivables, deposit the same in the Borrower’s operating account with the Bank.
(b) At
any
time during the continuance of an Event of Default or immediately upon the
service upon Bank of any trustee writ or attachment, without demand or notice,
Bank may set off any deposit accounts with Bank, or any part thereof and apply
the same to any liability or Obligations of Borrower even though unmatured
and
regardless of the adequacy of any other collateral securing the Obligations.
ANY
AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT
TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING
ITS
RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF
BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.
(c) Bank
may
at any time, during the continuance of an Event of Default, notify account
debtors that Collateral has been assigned to Bank and that payments shall be
made directly to or as directed by Bank. Upon request of Bank at any time during
the continuance of an Event of Default, Borrower will so notify such account
debtors and will indicate on all xxxxxxxx to such account debtors that their
Accounts must be paid directly to or as directed by Bank. Upon request of Bank
at any time during the continuance of an Event of Default, Bank shall have
full
power to collect, compromise, endorse, sell or otherwise deal with the
Collateral or proceeds thereof in its own name or in the name of Borrower.
-11-
(d) Borrower
shall pay to Bank on demand any and all reasonable counsel fees and other
expenses incurred by Bank in connection with the preparation, enforcement,
administration or amendment of this Agreement, or of any documents relating
thereto, and any and all expenses, including, but not limited to, a collection
charge on all Accounts collected, all attorneys’ fees and expenses, and all
other expenses of like or unlike nature which may be expended by Bank to obtain
or enforce payment of any Account either as against the account debtor,
Borrower, or any guarantor or surety of Borrower or in the prosecution or
defense of any action or concerning any matter growing out of or connected
with
the subject matter of this Agreement, the Obligations or the Collateral or
any
of Bank’s rights or interests therein or thereto, including, without limiting
the generality of the foregoing, any reasonable 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. At its option, and without limiting any other rights or remedies, Bank
may at any time pay or discharge any taxes, liens, security interests or other
encumbrances at any time levied against or placed on any of the Collateral,
and
may procure and pay any premiums on any insurance required to be carried by
Borrower, and provide for the maintenance and preservation of any of the
Collateral, and otherwise take any action reasonably deemed necessary to Bank
to
protect its security, and all amounts expended by Bank in connection with any
of
the foregoing matters, including reasonable attorneys’ fees, shall be considered
Obligations of Borrower and shall be secured hereby.
(e) Borrower
does hereby make, constitute and appoint any officer or agent of Bank as
Borrower’s true and lawful attorney-in-fact, with power, during the continuance
of an Event of Default: (i) to endorse the name of Borrower or any of Borrower’s
officers or agents upon any notes, checks, drafts, money orders, or other
instruments of payment (including payments payable under any policy of insurance
on the Collateral) or Collateral that may come into possession of Bank in full
or part payment of any amounts owing to Bank; and (ii) to sign and endorse
the
name of Borrower or any of Borrower’s officers or agents upon any invoice,
freight or express xxxx, xxxx of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications and notices in connection with
Accounts, and any instrument or documents relating thereto or to Borrower’s
rights therein; granting upon the Bank full power to do any and all things
necessary to be done in and about the premises as fully and effectually as
Borrower might or could do, and hereby ratifying all that said attorney shall
lawfully do or cause to be done by virtue hereof. Neither Bank nor the attorney
shall be liable for any acts or omissions nor for any error of judgment or
mistake, except for their gross negligence or willful misconduct. This power
of
attorney shall be irrevocable for the term of this Agreement and all
transactions hereunder and thereafter as long as Borrower may be indebted to
Bank.
12. FINANCING
STATEMENTS. A legible carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement. Borrower hereby
irrevocably authorizes Bank at any time and from time to time to file in any
Uniform Commercial Code jurisdiction any initial financing statements and
amendments thereto that (a) indicate the Collateral (i) as all assets of
Borrower (other than Intellectual Property Rights) or words of similar effect,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Uniform Commercial Code of such
jurisdiction, or (ii) as being of an equal or lesser scope or with greater
detail, and (b) contain any other information required by the Uniform Commercial
Code for the sufficiency or filing office acceptance of any financing statement
or amendment. Borrower agrees to furnish any such information as Bank may
require to file any such financing statement promptly upon request from the
Bank.
-12-
13. BORROWER’S
REPORTS.
(a) Within
thirty (30) calendar days after the end of each month, Borrower shall submit
to
Bank an aging report in form satisfactory to Bank showing the amounts due and
owing on all Accounts according to Borrower’s records as of the close of such
month, together with such other information as Bank may require; provided that
if there are no loans outstanding under this Agreement, such aging report shall
be submitted on a quarterly basis, within forty-five (45) days of the end of
each quarter; and further provided that if Borrower is in compliance with the
Special Conditions, no aging report shall be necessary until such time as
Borrower is no longer in compliance with the Special Conditions. If Borrower’s
aging reports are prepared by an accounting service or other agent, Borrower
hereby authorizes such service or agent to deliver such aging reports and any
other related documents to Bank.
(b) Borrower
shall deliver to Bank all documents, as frequently as indicated below, or at
such other times as Bank may reasonably request, and all other documents and
information requested by Bank:
|
DOCUMENT
|
FREQUENCY
DUE
|
||
|
(i)
|
A
Borrowing Base Certificate
|
Monthly
within 30 days of month end if borrowing; quarterly within 45 days
of
quarter end if not borrowing; not required while Borrower is in
compliance
with Special Conditions
|
|
|
(ii)
|
Projections
of Borrower’s balance sheet, statement of profit and loss and cash flow
for the next succeeding fiscal year broken down on a quarterly
basis
|
Annually,
within 45 days of the beginning of each fiscal year of
Borrower
|
|
|
(iii)
|
Notice
of noncompliance with the provisions of this Agreement
|
Immediately
upon learning of such noncompliance, or if any representation or
warranty
contained herein is no longer true or
accurate
|
-13-
|
(iv)
|
Compliance
Certificate in the form annexed hereto as Exhibit
3
|
At
the time of submission of annual and quarterly financial statements
|
(c) Borrower
will furnish Bank copies of each form 10-K and 10-Q at the time of submission
of
such forms to the SEC.
(d) In
addition to the foregoing, the Borrower promptly shall provide Bank with such
other and additional information concerning the Borrower, the Collateral, the
operation of the Borrower’s business, and the Borrower’s financial condition,
including financial reports and statements, as Bank may from time to time
reasonably request from the Borrower. All financial information provided Bank
by
the Borrower shall be prepared in accordance with generally accepted accounting
or auditing principles (as applicable) applied consistently in the preparation
thereof and with prior periods to fairly reflect the financial conditions of
the
Borrower at the close of, and its results of operations for, the periods in
question.
14. GENERAL
AGREEMENTS OF BORROWER.
(a) Borrower
agrees to keep all the Collateral insured with coverage and in amounts not
less
than that usually carried by one engaged in a like business, with loss payable
to Bank and Borrower, as their interests may appear, hereby appointing Bank
as
attorney for Borrower in obtaining, adjusting, and settling such insurance
and
endorsing any drafts, at any time during the continuance of an Event of Default.
As further assurance for the payment and performance of the Obligations,
Borrower hereby assigns to Bank all sums, including returns of unearned
premiums, which may become payable under any policy of insurance on the
Collateral and Borrower hereby directs each insurance company issuing any such
policy to make payment of such sums directly to Bank and Borrower; provided
that, in the absence of a continuing Event of Default, Bank will agree that
casualty insurance proceeds of $500,000.00 or less shall be released to Borrower
without condition for repair or replacement of Borrower’s property. With respect
to casualty insurance proceeds in excess of $500,000.00, Bank will authorize
release of such proceeds to Borrower on a commercially reasonable basis provided
(i) there is no continuing Event of Default, (ii) such proceeds are adequate
to
repair, replace or restore the property, together with any of Borrower’s own
available funds, (iii) such repair, replacement or restoration can be completed
within a commercially reasonable period of time, and (iv) Borrower promptly
undertakes the repair, replacement or restoration of such property.
(b) Bank
or
its agents have the right to inspect the Collateral and all records pertaining
thereto and the books and financial records of the Borrower at intervals to
be
determined by Bank and without hindrance or delay at reasonable times and on
reasonable notice to Borrower. In the absence of an Event of Default, Bank
anticipates that it shall not conduct more than 2 such examinations in any
calendar year, and Bank will not charge Borrower for more than one such
examination in any calendar year. At any time during the continuance of an
Event
of Default, Bank shall also have the right to obtain from time to time at the
sole cost and expense of Borrower an appraisal of the Collateral by an appraiser
acceptable to Bank.
-14-
(c) Borrower
will maintain a system of accounting which enables Borrower to produce financial
statements in accordance with GAAP.
(d) Borrower
will maintain its corporate existence in good standing and comply with all
laws
and regulations of the United States or of any state or states thereof or of
any
political subdivision thereof, or of any governmental authority which may be
applicable to it or to its business, except where the failure to be so qualified
or in good standing could not reasonably be expected to result in a material
adverse effect on (a) the Collateral, business operations or financial condition
of Borrower, (b) the ability of Borrower to perform its Obligations under the
Loan Documents, (c) the validity or enforceability of any of the Loan Documents,
or (d) the rights, remedies, powers and privileges of Bank under any of the
Loan
Documents (“Material Adverse Effect”).
(e) Borrower
will pay all real and personal property taxes, assessments and charges and
all
franchises, income, unemployment, old age benefits, withholding, sales and
other
taxes assessed against it, or payable by it at such times and in such manner
as
to prevent any penalty from accruing or any lien or charge from attaching to
its
property, (“Property Charges”), unless such Property Charges are being contested
by Borrower through appropriate proceedings and for which Borrower has
established a Payment Reserve.
(f) During
the continuance of a Default or an Event of Default, and in the course of any
field examination in accordance with the Bank’s customary examination
procedures, Bank may in its own name or in the name of others communicate with
account debtors in order to verify with them to Bank’s satisfaction the
existence, amount and terms of any Accounts.
(g) If
any of
Borrower’s Accounts arise out of contracts with the United States or any
department, agency, or instrumentality thereof, Borrower will immediately notify
Bank thereof in writing and execute any instruments and take any steps required
by Bank in order that all monies due and to become due under such contracts
shall be assigned to Bank and notice thereof given to the Government under
the
Federal Assignment of Claims Act.
(h) If
any of
Borrower’s Accounts should be evidenced by promissory notes, trade acceptances,
or other instruments for the payment of money, Borrower will immediately deliver
same to Bank, appropriately endorsed to Bank’s order.
(i) If
any
goods are at any time in the possession of a warehouseman, processor or other
bailee, Borrower shall promptly notify Bank thereof and, if requested by Bank,
shall promptly obtain an acknowledgment from such bailee, in form and substance
reasonably satisfactory to Bank, that the bailee holds such Collateral for
the
benefit of Bank and shall act upon the instructions of Bank, without the further
consent of Borrower. Bank agrees with Borrower that Bank shall not give any
such
instructions unless an Event of Default has occurred and is continuing or would
occur after taking into account any action by Borrower with respect to any
bailee.
(j) If
Borrower is at any time a beneficiary under a letter of credit now or hereafter
issued in favor of Borrower, Borrower shall promptly notify Bank thereof and,
at
the request and option of Bank, Borrower shall, pursuant to an agreement in
form
and substance reasonably satisfactory to Bank, either (i) arrange for the issuer
and any confirmer of such letter of credit to consent to an assignment to Bank
of the proceeds of any drawing under the letter of credit, or (ii) arrange
for
Bank to become the transferee beneficiary of the letter of credit, with Bank
agreeing, in each case, that the proceeds of any drawing under the letter of
credit are to be applied in the same manner as any other payment on an
Account.
-15-
(k) If
Borrower shall at any time hold or acquire a commercial tort claim, Borrower
shall immediately notify Bank in a writing signed by Borrower of the brief
details thereof and grant to Bank in such writing a security interest therein,
and in the proceeds thereof, all upon the terms of this Agreement, with such
writing to be in form and substance satisfactory to Bank.
(l) Unless
being contested by Borrower by appropriate proceedings and with a Payment
Reserve, Borrower will promptly pay when due all taxes and assessments upon
the
Collateral or for its use or operation or upon this Agreement, or upon any
note
or notes evidencing the Obligations, and will, at the request of Bank, promptly
furnish Bank the receipted bills therefor. If such charges are not promptly
paid
or contested with appropriate proceeding and Payment Reserve, Bank may discharge
taxes, liens or security interests or other encumbrances at any time levied
or
placed on the Collateral, may pay for insurance on the Collateral and may pay
for the maintenance and preservation of the Collateral. Borrower agrees to
reimburse Bank on demand for any payments made, or any expenses incurred by
Bank
pursuant to the foregoing authorization, and upon failure of the Borrower so
to
reimburse Bank, any such sums paid or advanced by Bank shall be deemed secured
by the Collateral and constitute part of the Obligations.
(m) Borrower
will immediately notify Bank upon receipt of notification of any potential
or
known release or threat of release of hazardous materials, hazardous waste,
hazardous or toxic substance or oil from any site operated by Borrower or of
the
incurrence of any expense or loss in connection therewith or with the Borrower’s
obtaining knowledge of any investigation, action or the incurrence of any
expense or loss by any governmental authority in connection with the assessment,
containment or removal of any hazardous material or oil for which expense or
loss the Borrower may be liable. As used herein, the terms “hazardous waste,”
“hazardous or toxic substance,” “hazardous material” or “oil” shall have the
same meanings as defined and used in any of the following (the “Acts”): the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
42
USC Sections 9601-9657, as amended by the Superfund Accounts and Reauthorization
Act of 1986; the Federal Resource Conservation and Recovery Act, 42 USC Sections
6901 et
seq.;
the
Hazardous Materials Transportation Act, 49 USC Sections 1801 et
seq.;
the
Toxic Substances Control Act, 15 USC Sections 2601 et
seq.;
the
Federal Water Pollution Control Act, 33 USC Sections 1251 et
seq.;
the
Clean Air Act, 42 USC Sections 741 et
seq.;
the
Clean Water Act, 33 USC Section 701; the Safe Drinking Water Act, 42 USC
Sections 300(f)-300(j); and/or the regulations adopted and publications
promulgated pursuant to any of the Acts or pursuant to applicable state laws,
as
the same may be amended from time to time.
(n) Except
for Bank’s gross negligence or willful misconduct, Borrower will indemnify and
save Bank harmless from all loss, costs, damage, liability or expenses
(including, without limitation, court costs and reasonable attorneys’ fees) that
Bank may sustain or incur by reason of defending or protecting this security
interest or the priority thereof or enforcing the Obligations, or in the
prosecution or defense of any action or proceeding concerning any matter growing
out of or in connection with this Agreement and/or any other documents now
or
hereafter executed in connection with this Agreement and/or the Obligations
and/or the Collateral. This indemnity shall survive the repayment of the
Obligations and the termination of Bank’s agreement to make loans available to
Borrower and the termination of this Agreement.
-16-
(o) At
the
option of Bank, Borrower will furnish to Bank, from time to time, within five
(5) days after the accrual in accordance with applicable law of Borrower’s
obligation to make deposits for F.I.C.A. and withholding taxes and/or sales
taxes, proof satisfactory to Bank that such deposits have been made as
required.
(p) Should
Borrower fail to make any of such deposits required by (o) above, then Bank
may,
in its sole and absolute discretion, (a) make any of such deposits or any part
thereof, or (b) set-up such reserves as Bank, in its judgment, shall deem
necessary to satisfy the liability for such taxes. Each amount so deposited
or
paid shall constitute an advance under the terms hereof, repayable on demand
with interest, as provided herein, and secured by all Collateral and any other
property at any time pledged by Borrower with Bank. Nothing herein shall be
deemed to obligate Bank to make any such deposit or payment or set-up such
reserve and the making of one or more of such deposits or payments or the
setting-up of such reserve shall not constitute (i) an agreement on Bank’s part
to take any further or similar action, or (ii) a waiver of any default by
Borrower under the terms hereof.
(q) All
advances by Bank to Borrower under this Agreement and the Loan Documents
constitute one general revolving fluctuating loan, and all indebtedness of
Borrower to Bank under this Agreement and the other Loan Documents constitute
one general Obligation. Each advance to Borrower hereunder or otherwise shall
be
made upon the security of all of the Collateral held and to be held by Bank.
It
is understood and agreed that all of the rights of Bank contained in this
Agreement and the Loan Documents shall likewise apply, insofar as applicable,
to
any modification of or supplement to this Agreement or any of the Loan
Documents. The entire Obligation of Borrower to Bank shall become due and
payable upon termination of this Agreement.
(r) Borrower
hereby grants to Bank the right to use all premises or places of business which
Borrower presently has or may hereafter have and where any of the Collateral
may
be located. Bank agrees not to exercise the rights granted in this paragraph
unless and until Bank determines to exercise its rights against the Collateral
after an Event of Default.
(s) Borrower
will, at its expense, upon request of Bank promptly and duly execute and deliver
such documents and assurances and take such actions as Bank may reasonably
deem
to be necessary in order to correct any defect, error or omission which may
at
any time be discovered or to more effectively carry out the intent and purpose
of this Agreement and to establish, perfect and protect Bank’s security
interest, rights and remedies created or intended to be created hereunder.
Without limiting the generality of the above, Borrower will join with Bank
in
executing financing and continuation statements pursuant to the Uniform
Commercial Code or other notices appropriate under applicable Federal or state
law in form reasonably satisfactory to Bank and filing the same in all public
offices and jurisdictions which Bank reasonably determines are necessary to
perfect its security interest in the Collateral. Borrower shall perform any
and
all further reasonable steps as may be reasonably requested by Bank to perfect
or maintain perfection of Bank’s security interest in the
Collateral.
(t) Borrower
hereby grants to Bank for a term to commence on the date of this Agreement
and
continuing thereafter until the Obligations are fully paid and discharged,
a
non-exclusive irrevocable royalty-free license in connection with Bank’s
disposition of tangible personal property hereunder after the occurrence of
an
Event of Default, to use, apply or affix any trademark, trade name logo or
the
like and to use any patents, in which the Borrower now or hereafter has rights,
which license may be used by Bank in connection with such disposition of
Collateral.
-17-
15. BORROWER’S
NEGATIVE COVENANTS. Borrower will not at any time:
(a) (Current
Ratio)
permit
the ratio of its current assets to its current liabilities (each as computed
in
accordance with GAAP) to be less than 1.20:1.0 at any quarter end; provided
that
convertible notes shall be excluded from current liabilities for purposes of
calculation of this covenant through October 15, 2008;
(b) (Adjusted
EBITDA)
permit
its Adjusted EBITDA to be less than $500,000.00 for any fiscal quarter. Adjusted
EBITDA shall mean, for each fiscal quarter, Borrower’s earnings before gross
interest expense, depreciation, amortization, SFAS 123R stock option expense
and
income tax expense;
(c) (Capital
Expenditures)
during
any fiscal year of Borrower, make, directly or indirectly, capital expenditures
in an aggregate amount greater than $1,000,000.00;
(d) (Minimum
Cash on Deposit)
permit,
at any time, its minimum cash balances of collected funds on deposit with the
Bank to be less than the lesser of (i) $6,000,000.00 or (ii) 85.0% of Borrower’s
total cash and cash equivalents at such time;
(e) Not
applicable;
(f) Not
applicable;
(g) (Disposition
of Collateral)
sell,
assign, exchange or otherwise dispose of any of the Collateral, other than
(1)
Inventory consisting of (i) scrap, waste, defective goods and the like; (ii)
obsolete goods; and (iii) finished goods sold in the ordinary course of
business; and (2) Equipment which is no longer required or deemed necessary
for
the conduct of Borrower’s business, so long as Borrower receives therefor a sum
substantially equal to such Equipment’s fair value;
-18-
(h) (Liens)
create,
permit to be created or suffer to exist any lien, encumbrance or security
interest of any kind (“Lien”) upon any of the Collateral, except: (i)
landlords’, carriers’, warehousemen’s, mechanics’ and other similar liens
arising by operation of law in the ordinary course of Borrower’s business; (ii)
arising out of pledge or deposits under worker’s compensation, unemployment
insurance, old age pension, social security, retirement benefits or other
similar legislation; (iii) purchase money Liens (and capital leases) arising
in
the ordinary course of business for the purchase of Equipment (so long as the
indebtedness secured thereby does not exceed the lesser of the cost or fair
market value of the property subject thereto, and such Lien extends to no other
property); (iv) Liens for unpaid taxes that are either (x) not yet due and
payable, or (y) are subject of permitted protests; (v) Liens which are the
subject of permitted protests; (vi) those Liens and encumbrances set forth
on
Schedule
“E”
annexed
hereto; and (vii) in favor of Bank (collectively, the “Permitted Encumbrances”).
The term “permitted protests”, as used herein, means the right of the Borrower
to protest any Lien (other than a Lien that secures the Obligations), tax (other
than payroll taxes or taxes that are the subject of a federal or state tax
lien)
or rental payment, provided that (x) a Payment Reserve has been established
by
Borrower, (y) any such protest is instituted and diligently prosecuted by the
Borrower in good faith, and (z) the Bank is satisfied that, while such protest
is pending, there will be no impairment of the enforceability, validity or
priority of any of the Liens of the Bank in and to the Collateral;
(i) (Dividends)
pay any
dividends on or make any distribution on account of any class of Borrower’s
capital stock in cash or in property, or redeem, purchase or otherwise acquire,
directly or indirectly, any of such stock, if there is a continuing Default
or
Event of Default, or if the making of such payment would result in a Default
or
Event of Default under this Agreement;
(j) (Loans)
make any
loans or advances to any individual, partnership, trust or other corporation
in
excess of $50,000.00 outstanding at any time, including without limitation
Borrower’s directors, officers and employees, except advances to officers or
employees with respect to expenses incurred by them in the ordinary course
of
their duties which are properly reimbursable by Borrower;
(k) (Guarantees)
assume,
guaranty, endorse or otherwise become directly or contingently liable in respect
of (including without limitation by way of agreement, contingent or otherwise,
to purchase, provide funds to or otherwise invest in a debtor or otherwise
to
assure a creditor against loss), any indebtedness (except guarantees by
endorsement of instruments for deposit or collection in the ordinary course
of
business and guarantees in favor of Bank) of any individual, partnership, trust
or other corporation;
-19-
(l) (Investments)
(i) use
any loan proceeds to purchase or carry any “margin stock” (as defined in
Regulation
U of the
Board of Governors of the Federal Reserve System) or (ii) invest in or purchase
any stock or securities of any individual, partnership, trust or other
corporation except (x) readily marketable direct obligations of, or obligations
guaranteed by, the United States of America or any agency thereof or (y) time
deposits with or certificates of deposit issued by the Bank, or (z) Permitted
Acquisitions. For purposes hereof, a Permitted Acquisition means the acquisition
of the assets or ownership of the equity of a company which meets the following
criteria: (1) no Default or Event of Default under the Loan Documents shall
be
continuing either before or giving effect to the acquisition, (2) the Borrower
(and all subsidiaries on a consolidated basis) shall be in compliance with
the
financial covenants contained in Sections 15(a), 15(b), 15(c) and 15(d) both
before and on a pro forma basis after giving effect to the acquisition, (3)
the
sum of the Borrower’s availability under the Borrowing Base, plus its cash and
cash equivalents both before and after the acquisition (including any loans
made
in connection therewith) shall be at least $1,000,000.00, (4) the total cost
or
purchase price of such acquisition shall be $4,000,000.00 or less unless the
acquisition has been approved in advance by the Bank, (5) the business acquired
must be in substantially the same business as the Borrower or a line of business
directly related thereto, (6) the acquisition shall have been approved by the
board of directors (or similar board) of both the Borrower and the other
company, (7) the Borrower shall be the surviving entity following such
acquisition and shall have suffered no change in control resulting from such
acquisition, (8) if the acquired company remains as a US subsidiary of the
Borrower, such subsidiary shall execute a guaranty of the Obligations and a
security agreement and form of double negative pledge as security for such
guaranty, and if the acquired company is a foreign subsidiary of the Borrower,
the Borrower shall execute a pledge of 65% of such company’s equity capital and
voting control, and (9) as of the time of acquisition of such company, such
company is not a party to any material pending or threatened litigation. The
acquisition of CAD Sciences, Inc. by Borrower has been approved by the Bank
and
is a Permitted Acquisition.
(m) (Transactions
with Affiliates)
enter
into any lease or other transaction with any shareholder, officer or affiliate
on terms any less favorable than those which might be obtained at the time
from
persons who (or entities which) are not such a shareholder, officer or
affiliate;
(n) (Subsidiaries)
sell,
transfer or otherwise dispose of any stock of any subsidiary of Borrower, other
than the stock of Qualia Acquisition Corp.;
(o) (Mergers,
Consolidations or Sales)
(i)
merge or consolidate with or into any corporation, unless Borrower is the
surviving entity and remains in compliance with all provisions of this
Agreement, after giving effect to such merger; (ii) enter into any joint venture
or partnership with any person, firm or corporation; (iii) convey, lease or
sell
all or any material portion of its property or assets or business to any other
person, firm or corporation, except for the sale of Inventory in the ordinary
course of its business; or (iv) convey, lease or sell any of its assets to
any
person, firm or corporation for less than the fair market value
thereof;
(p) (Change
in Legal Status)
(i)
change its name, its place of business or, if more than one, chief executive
office, or its mailing address or organizational identification number if it
has
one, or (ii) change its type of organization, jurisdiction or organization
or
other legal structure, without, in each case, giving Bank at least 30 days
advance notice thereof. If the Borrower does not have an organizational
identification number and later obtains one, the Borrower shall forthwith notify
the Bank of such organizational identification number.
-20-
For
purposes of this section, the following additional definitions shall
apply:
“affiliate”
shall mean any person or entity (i) which directly or indirectly controls,
or is
controlled by or is under common control with the Borrower or a subsidiary,
(ii)
which directly or indirectly beneficially holds or owns ten (10.0%) percent
or
more of any class of voting stock of the Borrower or any subsidiary, or (iii)
ten (10.0%) percent or more of the voting stock of which is directly or
indirectly beneficially owned or held by the Borrower or a subsidiary; “capital
assets” shall mean assets that, in accordance with GAAP, are required or
permitted to be depreciated or amortized on the Borrower’s balance sheet;
“capital expenditures” shall mean but not be limited to amounts paid during such
fiscal year for capital assets or capital leases and shall include, in the
case
of a purchase, the entire purchase price and, in the case of a capital lease
(but not an operating lease), the entire rental for the term; “capital leases”
shall mean capital leases, conditional sales contracts and other title retention
agreements relating to the purchase or acquisition of capital assets; “control”
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of any person or entity,
whether through the ownership of voting securities, by contract or otherwise;
“indebtedness” shall mean (i) all liabilities for borrowed money, for the
deferred purchase price of property or services, and under leases which are
or
should be, under GAAP, recorded as capital leases, in respect of which a person
or entity is directly or indirectly, absolutely or contingently liable as
obligor, guarantor, endorser or otherwise, or in respect of which such person
or
entity otherwise assures a creditor against loss, (ii) all liabilities of the
type described in (i) above which are secured by (or for which the holder has
an
existing right, contingent or otherwise, to be secured by) any lien upon
property owned by such person or entity, whether or not such person or entity
has assumed or become liable for the payment thereof, and (iii) all other
liabilities or obligations which would, in accordance with GAAP, be classified
as liabilities of such person or entity; “interest” shall mean, for the
applicable period, all interest paid or payable, including, but not limited
to,
interest paid or payable on indebtedness and on capital leases, determined
in
accordance with GAAP.
16. EVENTOF
DEFAULT; RIGHTS AND REMEDIES AFTER DEFAULT.
(a) During
the continuance of a Default or an Event of Default, Bank may decline to make
any or all further loans or issue Letters of Credit hereunder or under any
applicable Application and Agreement for Letters of Credit. “During the
continuance of”, as used herein, shall mean after the occurrence of a Default or
an Event of Default which has not been cured to the Bank’s satisfaction or
waived by the Bank. The occurrence of any of the following events or
circumstances shall be an “Event of Default”:
(i) The
failure by the Borrower to pay when due any principal, interest, fees, costs,
and expenses due pursuant to this Agreement, in each case, within five (5)
days
of when due.
(ii) The
failure by the Borrower to perform the Obligations or maintain any of the
covenants described in Sections 11(a) and 15 hereof.
(iii) The
failure by the Borrower to timely perform, or observe any term, covenant or
agreement on its part to be performed or observed pursuant to any of the
provisions of this Agreement, other than those described in Sections 11(a)
and
15, or in any other agreement with Bank which is not remedied within the earlier
of (i) thirty (30) days after notice thereof by Bank to Borrower, or (ii) the
date Borrower was required to give notice to Bank pursuant to Section 13
hereof.
-21-
(iv) The
determination by Bank that any representation or warranty heretofore, now or
hereafter made by the Borrower to Bank, in any documents, instrument, agreement,
or paper delivered in connection with this Agreement or the Loan Documents
was
not true or accurate when given in any material respect.
(v) The
occurrence of any event such that any material indebtedness of the Borrower
from
any lender other than Bank could be accelerated, notwithstanding that such
acceleration has not taken place.
(vi) The
occurrence of any event which would cause a lien creditor, as that term is
defined in Section 9-102 of the Uniform Commercial Code, to take priority over
advances made by Bank.
(vii) 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.
(viii) The
occurrence of any event of default under any agreement between Bank and the
Borrower or instrument or paper given Bank by the Borrower, whether such
agreement, instrument, or paper now exists or hereafter arises (notwithstanding
that Bank may not have exercised its rights upon default under any such other
agreement, instrument or paper).
(ix) Any
act
by, against, or relating to the Borrower, or its property or assets, which
act
constitutes the application for, consent to, or sufferance of the appointment
of
a receiver, trustee or other person, pursuant to court action or otherwise,
over
all, or any part of the Borrower’s property.
(x) The
granting of any trust mortgage or execution of an assignment for the benefit
of
the creditors of the Borrower, or the occurrence of any other voluntary or
involuntary liquidation or extension of debt agreement for the Borrower; the
failure by the Borrower to generally pay the debts of the Borrower as they
mature; adjudication of bankruptcy or insolvency relative to the Borrower;
the
entry of an order for relief or similar order with respect to the Borrower
in
any proceeding pursuant to Title 11 of the United States Code entitled
“Bankruptcy” (hereinafter the “Bankruptcy Code”) or any other federal Bankruptcy
law; the filing of any complaint, application, or petition by or against the
Borrower initiating any matter in which the Borrower is or may be granted any
relief from the debts of the Borrower pursuant to the Bankruptcy Code or any
other insolvency statute or procedure; provided that, with respect to any such
involuntary proceeding which is being contested by Borrower, such involuntary
proceeding shall remain undismissed or undischarged for a period of 60 days;
the
calling or sufferance of a meeting of creditors of the Borrower; the meeting
by
the Borrower of a formal or informal creditor’s committee; the offering by or
entering into by the Borrower of any composition, extension or any other
arrangement seeking relief or extension for the debts of the Borrower, or the
initiation of any other judicial or non-judicial proceeding or agreement by,
against or including the Borrower which seeks or intends to accomplish a
reorganization or arrangement with creditors.
-22-
(xi) The
final
non-appealable entry of any judgment(s) against Borrower, in excess of
$500,000.00 in the aggregate, which judgment(s) is not covered by insurance
where the insurer has not denied liability with respect to such judgment and
which is not satisfied or appealed from (with execution or similar process
stayed) within thirty (30) days of its entry.
(xii) The
loss
or revocation of any license, permit, governmental or administrative regulatory
approval now held or hereafter acquired which is material to Borrower's business
and which could reasonably be expected to have an adverse financial impact
on
Borrower of $500,000.00 or more which is not cured within thirty (30)
days.
(xiii) The
entry
of any court, governmental or administrative order or ruling which enjoins,
restrains or in any way prevents the Borrower from conducting all or any
material part of its business affairs in the ordinary course of business, which
order is not terminated within fifteen (15) days of its issuance.
(xiv) Intentionally
omitted.
(xv) Xxxxxxx
Xxxxxxx-Xxxxx or Xxxxxxx Xxxxx shall cease to function for Borrower in the
capacity in which she or he serves, or a similar capacity and that a substitute
reasonably satisfactory to Bank has not been retained within 120
days.
(xvi) The
occurrence of any uninsured loss, theft, damage or destruction to any material
asset(s) of the Borrower in an amount in excess of $500,000.00 in the
aggregate.
(xvii) Any
act
by or against, or relating to the Borrower or its assets pursuant to which
any
creditor of the Borrower reclaims or repossesses $500,000.00 or more in the
aggregate of the Borrower’s assets.
(xviii) The
termination of existence, dissolution, or liquidation of the Borrower, or the
ceasing to carry on actively any substantial part of the Borrower’s current
business.
(xix) 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, subject to Permitted Encumbrances, in and to the property purported
to
be subject to this Agreement; or (B) to be in full force and effect or shall
be
declared null and void, or the validity or enforceability hereof shall be
contested by the Borrower or any guarantor of the Borrower denies it has any
further liability or obligation hereunder.
(xx) Any
of
the following events occur or exist with respect to the Borrower or any ERISA
affiliate: (A) any “prohibited transaction” (as defined in Section 406 of ERISA
or Section 4975 of the Internal Revenue Code) involving any Plan; (B) any
“reportable event” (as defined in Section 4043 of ERISA and the regulations
issued under such Section) shall occur with respect to any Plan; (C) The filing
under Section 4041 of ERISA of a notice of intent to terminate any Plan or
the
termination of any Plan; (D) any event or circumstance exists which might
constitute grounds entitling the Pension Benefit Guaranty Corporation (PBGC)
to
institute proceedings under Section 4042 of ERISA for the termination of, or
for
the appointment of a trustee to administer, any Plan, or the institution by
the
PBGC of any such proceedings; (E) or partial withdrawal under Section 4201
or
4204 of ERISA from a Multiemployer Plan or the reorganization, insolvency,
or
termination of any Multiemployer Plan; and in each case above, such event or
condition, together with all other events or conditions, if any, could in the
opinion of Bank subject the Borrower to any tax, penalty, or other liability
to
a Plan, a Multiemployer Plan, the PBGC, in excess of $500,000 in the
aggregate.
-23-
Upon
the
occurrence of an Event of Default, the Bank may declare any obligation the
Bank
may have hereunder to be cancelled, declare all Obligations of the 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 the Bank by the
Uniform Commercial Code or under the terms of this Agreement or otherwise.
In
addition, upon the occurrence of an Event of Default, if the Bank proceeds
to
enforce payment of the Obligations, the Borrower shall be obligated to deliver
to the Bank cash collateral in an amount equal to the aggregate amounts then
undrawn on all outstanding Letters of Credit issued by Bank for the account
of
Borrower. During the continuance of an Event of Default, if requested by the
Bank, the Borrower, as additional compensation to the Bank for its increased
credit risk, promises to pay interest on all Obligations (including, without
limitation, principal, whether or not past due, past due interest and any other
amounts past due under this Agreement) at a per annum rate of two (2.0%) percent
greater than the rate of interest then specified in Section 5 of this
Agreement.
(b) Upon
the
filing of any complaint, application, or petition by or against the Borrower
initiating any matter in which the Borrower is or may be granted any relief
from
the debts of the Borrower pursuant to the Bankruptcy Code, Bank’s obligation
hereunder shall be canceled immediately, automatically, and without notice,
and
all Obligations of the Borrower then outstanding shall become immediately due
and payable without presentation, demand, or notice of any kind to the
Borrower.
(c) Any
sale
or other disposition of the Collateral after an Event of Default may be at
public or private sale upon such terms and in such manner as the Bank deems
advisable, having due regard to compliance with any statute or regulation which
might affect, limit or apply to the Bank’s disposition of the Collateral. The
Bank may conduct any such sale or other disposition of the Collateral upon
the
Borrower’s premises. Unless the Collateral is perishable or threatens to decline
speedily in value, or is of a type customarily sold on a recognized market
(in
which event the Bank shall provide the Borrower with such notice as may be
practicable under the circumstances), the Bank shall give the Borrower at least
the greater of the minimum notice required by law or ten (10) 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 public
sale.
(d) If
the
Bank sells any of the Collateral on credit, the Borrower will be credited only
with payments actually made by the purchaser of such Collateral and received
by
the Bank. If the purchaser fails to pay for the Collateral, the Bank may re-sell
the Collateral and the Borrower shall be credited with the proceeds of the
sale.
-24-
(e) 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.
(f) Upon
the
occurrence of any Event of Default, the Bank may require the Borrower to
assemble the Collateral and make it available to the Bank at the Borrower’s sole
risk and expense at a place or places which are reasonably convenient to both
the Bank and the Borrower.
17. STANDARDS
FOR EXERCISING REMEDIES. To the extent that applicable law imposes duties on
Bank to exercise remedies in a commercially reasonable manner, Borrower
acknowledges and agrees that it is not commercially unreasonable for Bank (a)
to
fail to incur expenses reasonably deemed significant by Bank to prepare
Collateral for disposition or otherwise to complete raw material or work in
process into finished goods or other finished products for disposition, (b)
to
fail to obtain third party consents for access to Collateral to be disposed
of,
or to obtain or, if not required by other law, to fail to obtain governmental
or
third party consents for the collection or disposition of Collateral to be
collected or disposed of, (c) to fail to exercise collection remedies against
account debtors or other persons obligated on Collateral or to remove liens
or
encumbrances on or any adverse claims against Collateral, (d) to exercise
collection remedies against account debtors and other persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (e) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral
is
of a specialized nature, (f) to contact other persons, whether or not in the
same business as Borrower, for expressions of interest in acquiring all or
any
portion of the Collateral, (g) to hire one or more professional auctioneers
to
assist in the disposition of Collateral, whether or not the Collateral is of
a
specialized nature, (h) to dispose of the Collateral by utilizing Internet
sites
that provide for the auction of assets of the types included in the Collateral
or that have the reasonable capability of doing so, or that match buyers and
sellers of assets, (i) to dispose of assets in wholesale rather than retail
markets, (j) to disclaim disposition warranties specifically to disclaim any
warranties of title or the like, (k) to purchase insurance or credit
enhancements to insure Bank against risks of loss, collection or disposition
of
Collateral or to provide to Bank a guaranteed return from the collection or
disposition of Collateral, or (l) to the extent deemed appropriate by Bank,
to
obtain the services of other brokers, investment bankers, consultants and other
professionals to assist Bank in the collection or disposition of any of the
Collateral. Borrower acknowledges that the purpose of this section is to provide
non-exhaustive indications of what actions or omissions by Bank would not be
commercially unreasonable in Bank’s exercise of remedies against the Collateral
and that other actions or omissions by Bank shall not be deemed commercially
unreasonable solely on account of not being indicated in this section. Without
limitation upon the foregoing, nothing contained in this section shall be
construed to grant any rights to Borrower or to impose any duties on Bank that
would not have been granted or imposed by this Agreement or by applicable law
in
the absence of this section.
18. PROCESSING
AND SALES OF INVENTORY. So long as Borrower is not in default hereunder,
Borrower shall have the right, in the regular course of business, to process
and
sell Borrower’s Inventory. A sale in the ordinary course of business shall not
include a transfer in total or partial satisfaction of a debt.
-25-
19. WAIVER
OF
JURY TRIAL. BORROWER AND BANK EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE OR HEREAFTER HAVE TO A TRIAL BY
JURY
IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS
AGREEMENT. Borrower hereby certifies that neither Bank nor any of its
representatives, agents or counsel has represented, expressly or otherwise,
that
Bank would not, in the event of any such suit, action or proceeding, seek to
enforce this waiver of right to trial by jury. Borrower acknowledges that Bank
has been induced to enter into this Agreement by, among other things, this
waiver. Borrower acknowledges that it has read the provisions of this Agreement
and in particular, this section; has consulted legal counsel; understands the
right it is granting in this Agreement and is waiving in this section in
particular; and makes the above waiver knowingly, voluntarily and
intentionally.
20. CONSENT
TO JURISDICTION. Borrower and Bank agree that any action or proceeding to
enforce or arising out of this Agreement may be commenced in any court of the
Commonwealth of Massachusetts sitting in the counties of Suffolk or Middlesex,
or in the District Court of the United States for the District of Massachusetts,
and Borrower waives personal service of process and agrees that a summons and
complaint commencing an action or proceeding in any such court shall be properly
served and confer personal jurisdiction if served by registered or certified
mail to Borrower, or as otherwise provided by the laws of the Commonwealth
of
Massachusetts or the United States of America.
21. TERMINATION.
(a) Unless
renewed in writing, this Agreement shall terminate on June 30, 2009 (the
“Termination Date”), and all Obligations shall be due and payable in full
without presentation, demand, or further notice of any kind, whether or not
all
or any part of the Obligations is otherwise due and payable pursuant to the
agreement or instrument evidencing same. Bank may terminate this Agreement
immediately and without notice upon the occurrence of an Event of Default.
Notwithstanding the foregoing or anything in this Agreement or elsewhere to
the
contrary, the security interest, Bank’s rights and remedies hereunder and
Borrower’s Obligations and liabilities hereunder shall survive any termination
of this Agreement and shall remain in full force and effect until all of the
Obligations outstanding, or contracted or committed for (whether or not
outstanding), shall be finally and irrevocably paid in full. No Collateral
shall
be released or financing statement terminated until such final and irrevocable
payment in full of the Obligations, as described in the preceding
sentence.
(b) In
the
event that Bank continues to make loans hereunder after the Termination Date
without a written extension of such Termination Date or after the occurrence
of
an Event of Default, all such loans: (i) shall be made in the sole and absolute
discretion of Bank; and (ii) shall, together with all other Obligations, be
payable thereafter ON DEMAND.
-26-
22. MISCELLANEOUS.
(a) No
delay
or omission on the part of Bank in exercising any rights shall operate as a
waiver of such right or any other right. Waiver on any one occasion shall not
be
construed as a bar to or waiver of any right or remedy on any future occasion.
All Bank’s rights and remedies, whether evidenced hereby or by any other
agreement, instrument or paper, shall be cumulative and may be exercised
singularly or concurrently.
(b) Bank
is
authorized to make loans under the terms of this Agreement upon the request,
either written or oral, in the name of Borrower or any authorized person whose
name appears at the end of this Agreement or of any of the following named
person, or persons, from time to time, holding the following offices of
Borrower, President, Treasurer and such other officers and authorized
signatories as may from time to time be set forth in separate resolutions.
Any
request for a loan which is not accompanied by a Notice of Borrowing shall
be
deemed a request for a Prime Rate Loan.
(c) This
Agreement shall bind and inure to the benefit of the respective successors
and
assigns of each of the parties hereto; provided,
however,
that
Borrower may not assign this Agreement or any rights or duties hereunder without
Bank’s prior written consent and any prohibited assignment shall be absolutely
void. No consent to an assignment by Bank shall release Borrower from its
Obligations. Bank may assign this Agreement and its rights and duties hereunder
with the consent of Borrower, unless there is a continuing Event of Default
in
which case no consent shall be required in connection with any such assignment.
Bank reserves the right to grant participations in all or any part of, or any
interest in Bank’s rights and benefits hereunder. In connection with any
assignment or participation, Bank may disclose all documents and information
which Bank now or hereafter may have relating to Borrower or Borrower’s
business. To the extent that Bank assigns its rights and obligations hereunder
to another party, Bank thereafter shall be released from such assigned
obligations to Borrower and such assignment shall effect a novation between
Borrower and such other party.
(d) Borrower
agrees that any and all loans made by Bank to Borrower or for its account under
this Agreement pursuant to this Agreement shall be conclusively deemed to have
been authorized by Borrower.
(e) Unless
otherwise defined in this Agreement, capitalized words shall have the meanings
set forth in the Uniform Commercial Code as in effect in the Commonwealth of
Massachusetts as of the date of this Agreement.
(f) Paragraph
and section headings used in this Agreement are for convenience only, and shall
not effect the construction of this Agreement. If one or more provisions of
this
Agreement (or the application thereof) shall be invalid, illegal or
unenforceable in any respect in any jurisdiction, the same shall not, invalidate
or render illegal or unenforceable such provision (or its application) in any
other jurisdiction or any other provision of this Agreement (or its
application). This Agreement is the entire agreement of the parties with respect
to the subject matter hereof and supersedes any prior written or verbal
communications or instruments relating thereto.
(g) Unless
otherwise provided in this Agreement, all notices or demands by any party
relating to this Agreement or any other loan document shall be in writing and
(except for financial statements and other informational documents which may
be
sent by first-class mail, postage prepaid) shall be personally delivered or
sent
by registered or certified mail (postage prepaid, return receipt requested
),
overnight courier, or telefacsimile to Borrower or to Bank, as the case may
be,
at its address set forth below:
-27-
|
If
to Bank:
|
RBS
CITIZENS, N.A.
|
|
00
Xxxxx Xxxxxx
|
|
|
Xxxxxx,
Xxxxxxxxxxxxx 00000
|
|
|
Attn:
Xxxxxxxx Xxxxxxx
|
|
|
Telephone:
(000) 000-0000
|
|
|
Telecopier:
(000) 000-0000
|
|
|
If
to Borrower:
|
iCAD,
INC.
|
|
00
Xxxx Xxxxx Xxxx
|
|
|
Xxxxxx,
Xxx Xxxxxxxxx 00000
|
|
|
Attn:
Xxxxxxx Xxxxxxx-Xxxxx
|
|
|
Telephone:
(000) 000-0000
|
|
|
Telecopier: (000)
000-0000
|
The
parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.
All
notices or demand sent in accordance with this section shall be deemed received
on the earlier of the date of actual receipt or three (3) days after the deposit
thereof in the mail.
(h) Bank
shall have no obligation to maintain any electronic records or any documents,
schedules, invoices, agings or any other paper delivered to Bank by Borrower
in
connection with this Agreement or any other agreement for more than four (4)
months after receipt of the same by Bank.
(i) Neither
this Agreement nor any uncertainty or ambiguity herein shall be construed or
resolved against Bank or Borrower, whether under any rule of construction or
otherwise. On the contrary, this Agreement has been reviewed by all parties
and
shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of all parties
hereto.
(j) Each
provision of this Agreement shall be severable from every other provision of
this Agreement for the purpose of determining the legal enforceability of any
specific provision.
(k) This
Agreement, together with the other documents and instruments executed
concurrently herewith represent the entire and final understanding of the
parties with respect to the transactions contemplated hereby and shall not
be
contradicted or qualified by evidence of any prior, contemporaneous or
subsequent other agreement, oral or written, before the date
hereof.
(l) This
Agreement can only be amended by a writing signed by both Bank and
Borrower.
(m) The
laws
of Massachusetts shall govern the construction of this Agreement and the rights
and duties of the parties hereto. This Agreement shall take effect as a sealed
instrument.
-28-
WITNESS
our hands and seals as of this 30th day of June, 2008.
|
Witnessed
by:
|
iCAD,
INC.
|
||
|
/s/Xxxxxxx
Xxxxxx
|
By:
|
/s/
Xxxxxxx Xxxxxxx-Xxxxx
|
|
|
Xxxxxxx-Xxxxxxx-Xxxxx,
Chief Financial Officer
|
|||
|
|
Address:
00 Xxxx Xxxxx Xxxx
|
||
|
Xxxxxx, Xxx Xxxxxxxxx 00000
|
|||
|
Witnessed
by:
|
RBS
CITIZENS, N.A.
|
||
|
/s/Xxxxx
Xxxxxxx
|
By:
|
/s/Xxxxxxxx
X. Xxxxxxx
|
|
|
Xxxxxxxx
X. Xxxxxxx, Senior Vice President
|
|||
|
Address:
00 Xxxxx Xxxxxx
|
|||
|
Xxxxxx, Xxxxxxxxxxxxx
00000
|
|||
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