1
EXHIBIT 10.30
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
CONGRESS FINANCIAL CORPORATION (NEW ENGLAND)
AS LENDER
AND
CENTENNIAL TECHNOLOGIES, INC.
AS BORROWER
DATED: AUGUST ____, 1997
2
TABLE OF CONTENTS
Page
----
1. DEFINITIONS.................................................................1
2. CREDIT FACILITIES...........................................................9
2.1 Revolving Loans........................................................9
2.2 Equipment Acquisition Facility..........................................9
2.3 Term Loan.............................................................10
2.4 Availability Reserves.................................................10
3. INTEREST AND FEES..........................................................11
3.1 Interest..............................................................11
3.2 Closing Fee...........................................................11
3.3 Servicing Fee.........................................................11
3.4 Unused Line Fee.......................................................12
4. CONDITIONS PRECEDENT.......................................................12
4.1 Conditions Precedent to Initial Loans.................................12
4.2 Conditions Precedent to All Loans.....................................13
5. GRANT OF SECURITY INTEREST.................................................14
5.1 Collateral.............................................................14
6. COLLECTION AND ADMINISTRATION..............................................15
6.1 Borrower's Loan Account...............................................15
6.2 Statements............................................................15
6.3 Collection of Accounts................................................15
6.4 Payments..............................................................16
(i)
3
6.5 Authorization to Make Loans...........................................16
6.6 Use of Proceeds.......................................................17
7. COLLATERAL REPORTING AND COVENANTS.........................................17
7.1 Collateral Reporting..................................................17
7.2 Accounts Covenants....................................................17
7.3 Inventory Covenants...................................................19
7.4 Equipment Covenants...................................................19
7.5 Power of Attorney.....................................................20
7.6 Right to Cure.........................................................20
7.7 Access to Premises....................................................21
8. REPRESENTATIONS AND WARRANTIES.............................................21
8.1 Corporate Existence, Power and Authority; Subsidiaries................21
8.2 Financial Statements; No Material Adverse Change......................21
8.3 Chief Executive Office; Collateral Locations..........................22
8.4 Priority of Liens; Title to Properties................................22
8.5 Tax Returns...........................................................22
8.6 Litigation............................................................22
8.7 Compliance with Other Agreements and Applicable Laws..................23
8.8 Bank Accounts.........................................................23
8.9 Environmental Compliance..............................................23
8.10 Employee Benefits....................................................24
8.11 Accuracy and Completeness of Information.............................24
8.12 Survival of Warranties; Cumulative...................................25
9. AFFIRMATIVE AND NEGATIVE COVENANTS.........................................25
9.1 Maintenance of Existence..............................................25
(ii)
4
9.2 New Collateral Locations..............................................25
9.3 Compliance with Laws, Regulations, Etc................................25
9.4 Payment of Taxes and Claims...........................................26
9.5 Insurance.............................................................27
9.6 Financial Statements and Other Information............................27
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc...............28
9.8 Encumbrances..........................................................29
9.9 Indebtedness..........................................................29
9.10 Loans, Investments, Guarantees, Etc..................................29
9.11 Dividends and Redemptions............................................30
9.12 Transactions with Affiliates.........................................30
9.13 Additional Bank Accounts.............................................30
9.14 Working Capital......................................................31
9.15 Adjusted Net Worth...................................................31
9.16 Bank Accounts........................................................31
9.17 Costs and Expenses...................................................31
9.18 Continuing Consulting Agreement......................................32
9.19 Further Assurances...................................................32
10. EVENTS OF DEFAULT AND REMEDIES............................................32
10.1 Events of Default....................................................32
10.2 Remedies.............................................................34
11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW..............36
11.1 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver..................................................36
11.2 Waiver of Notices....................................................37
11.3 Amendments and Waivers...............................................37
11.4 Waiver of Counterclaims..............................................37
(iii)
5
11.5 Indemnification......................................................37
12. TERM OF AGREEMENT; MISCELLANEOUS..........................................38
12.1 Term.................................................................38
12.2 Notices..............................................................39
12.3 Partial Invalidity...................................................39
12.4 Successors...........................................................40
12.5 Entire Agreement.....................................................40
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Exhibit B Equipment Loan Promissory Note
Schedule 8.4 Existing Liens
Schedule 8.7 Compliance with Agreements
Schedule 8.8 Bank Accounts
Schedule 9.7 Permitted Investment Dispositions
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Existing Loans, Advances and Guarantees
(iv)
6
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated August ___, 1997 is entered into
by and between Congress Financial Corporation (New England), a Massachusetts
corporation ("Lender") and Centennial Technologies, Inc., a Delaware corporation
("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain
financing arrangements with Borrower pursuant to which Lender may make loans and
provide other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement. All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural unless the
context otherwise requires. All references to Borrower and Lender pursuant to
the definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. The
word "including" when used in this Agreement shall mean "including, without
limitation". An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Lender, if such Event of Default is capable of being
cured as determined by Lender. Any accounting term used herein unless otherwise
defined in this Agreement shall have the meanings customarily given to such term
in accordance with GAAP. For purposes of this Agreement, the following terms
shall have the respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1
7
1.2 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: (a) the difference between: (i) the aggregate net book value of all
assets of such Person and its subsidiaries, calculating the book value of
inventory for this purpose on a first-in-first-out basis, after deducting from
such book values all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and amortization)
and (ii) the aggregate amount of the indebtedness and other liabilities of such
Person and its subsidiaries (including tax and other proper accruals) plus (b)
indebtedness of such Person and its subsidiaries which is subordinated in right
of payment to the full and final payment of all of the Obligations on terms and
conditions acceptable to Lender.
1.3 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time establish and revise
in good faith reducing the amount of Revolving Loans which would otherwise be
available to Borrower under the lending formula(s) provided for herein: (a) to
reflect events, conditions, contingencies or risks which, as determined by
Lender in good faith, (i) do adversely affect or have a reasonable likelihood of
adversely affecting the Collateral or any other property which is security for
the Obligations or its value or the security interests and other rights of
Lender in the Collateral (including the enforceability, perfection and priority
thereof), (ii) have a reasonable likelihood of resulting in or causing a
material adverse change in the assets, business or prospects of Borrower or any
Obligor or (b) to reflect Lender's good faith belief that any collateral report
or financial information furnished by or on behalf of Borrower or any Obligor to
Lender is or may have been incomplete, inaccurate or misleading in any material
respect or (c) in respect of any state of facts which Lender determines in good
faith constitutes an Event of Default or may, with notice or passage of time or
both, constitute an Event of Default.
1.4 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.5 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.6 "Change in Control" shall be deemed to have occurred at such time
as a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined
in Rule 13d--3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than 20% of the total voting power of all classes of stock
then outstanding of Borrower entitled to vote in the election of directors,
provided that any disposition of stock in connection with the currently pending
litigation disclosed in the Information Certificate shall not be deemed to be a
change in control.
1.7 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.8 "Dilution" shall mean for any period the ratio of (i) the aggregate
amount of reductions of Accounts other than as a result of payments in cash
during such period to (ii) the aggregate amount of total sales during such
period.
2
8
1.9 "Eligible Accounts" shall mean Accounts created by Borrower which
are and continue to be acceptable to Lender based on the criteria set forth
below. In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than ninety (90) days after
the date of the original invoice for them;
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect
to such Accounts is located in the United States of America, or, at Lender's
option, if either: (i) the account debtor has delivered to Borrower an
irrevocable letter of credit issued or confirmed by a bank satisfactory to
Lender and payable only in the United States of America and in U.S. dollars,
sufficient to cover such Account, in form and substance satisfactory to Lender
(as determined by Lender in good faith) and, if required by Lender, the original
of such letter of credit has been delivered to Lender or Lender's agent and the
issuer thereof notified of the assignment of the proceeds of such letter of
credit to Lender, or (ii) such Account is subject to credit insurance payable to
Lender issued by an insurer and on terms and in an amount acceptable to Lender
(as determined by Lender in good faith), or (iii) such Account is otherwise
acceptable in all respects to Lender (as determined by Lender in good faith)
(subject to such lending formula with respect thereto as Lender may determine);
(f) such Accounts do not consist of progress xxxxxxxx, xxxx and
hold invoices or retainage invoices, except as to xxxx and hold invoices, if
Lender shall have received an agreement in writing from the account debtor, in
form and substance satisfactory to Lender, confirming the unconditional
obligation of the account debtor to take the goods related thereto and pay such
invoice;
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff against such
Accounts (but the portion of the Accounts of such account debtor in excess of
the amount at any time and from time to time owed by Borrower to such account
debtor or claimed owed by such account debtor may be deemed Eligible Accounts);
3
9
(h) there are no facts, events or occurrences which would impair
(as determined by Lender in good faith) the validity, enforceability or
collectability of such Accounts or reduce the amount payable or delay payment
thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer or management
employee of the account debtor with respect to such Accounts is an officer,
employee or agent of or affiliated with Borrower directly or indirectly by
virtue of family membership, ownership, control, management or otherwise;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Lender (as determined by Lender in good faith);
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition;
(m) such Accounts of a single account debtor or its affiliates do
not constitute more than twenty (20%) percent of all otherwise Eligible Accounts
or with respect to Bay Networks, thirty-five (35%) percent of all otherwise
Eligible Accounts (but the portion of the Accounts not in excess of such
percentage may be deemed Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has
Accounts unpaid more than ninety (90) days after the date of the original
invoice for them which constitute more than fifty (50%) percent of the total
Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the credit limit with respect to such
account debtors as determined by Lender, in good faith, from time to time (but
the portion of the Accounts not in excess of such credit limit may be deemed
Eligible Accounts); and
(p) such Accounts are owed by account debtors deemed creditworthy
at all times by Lender, as determined by Lender, in good faith.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
4
10
1.10 "Eligible Equipment" shall mean Equipment acquired by Borrower
after the date hereof, which is in new and unused condition, located at
Borrower's premises and acceptable to Lender in all respects (as determined by
Lender in good faith). General criteria for Eligible Equipment may be
established and revised from time to time by Lender in Lender's good faith
judgment. In determining such acceptability Lender may, but need not, rely on
reports furnished to Lender by Borrower, but reliance thereon by Lender from
time to time shall not be deemed to limit Lender's right to revise standards of
eligibility at any time, in good faith. In general, except in Lender's
discretion, Eligible Equipment shall not include (a) Equipment at the premises
of third parties or subject to a security interest or lien in favor of any third
parties, (b) Equipment which is not subject to Lender's perfected security
interest, (c) fixtures, (d) defective Equipment or (e) Equipment not used or
usable in the ordinary course of Borrower's business as presently conducted;
provided, however, any Equipment which would otherwise be deemed Eligible
Equipment at locations which are not owned and operated by Borrower may
nevertheless be considered Eligible Equipment if Lender shall have received an
agreement in writing, in form and substance satisfactory to Lender, from the
owner and/or operator of such location, as the case may be, pursuant to which
such owner and/or operator, if required by Lender: (i) acknowledges the first
priority lien of Lender on such Equipment, (ii) agrees to waive any and all
claims such owner and/or operator may, at any time, have against such Equipment
and (iii) grants to Lender the right to enter and remain on the premises in
order to exercise Lender's rights and remedies on terms acceptable to Lender.
Any Equipment which Lender determines to be ineligible or unacceptable for
purposes of the lending formula shall nevertheless be and remain at all times
part of the Collateral.
1.11 "Environmental Laws" shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses, permits
(including conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between Borrower and any
governmental authority (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials. The term "Environmental Laws" includes (i) the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Federal Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal
Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal Solid
Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws, and (iii) any
common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Materials.
5
11
1.12 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.13 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m)
or 414(o) of the Code.
1.14 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.15 "Equipment Loans" shall mean the loans made by Lender to Borrower
as provided in Section 2.2 hereof.
1.16 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.17 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of (i) the amount of
the Revolving Loans available to Borrower as of such time based on the
applicable lending formulas multiplied by the Net Amount of Eligible Accounts
and the Value of Eligible Inventory, as determined by Lender, and subject to the
sublimits and Availability Reserves from time to time established by Lender
hereunder and (ii) the Revolving Loan Limit, minus (b) the sum of: (i) the
amount of all then outstanding and unpaid Revolving Loans, plus (ii) the
aggregate amount of all trade payables of Borrower which are more than sixty
(60) days past due as of such time plus (iii) the amount of checks issued by
Borrower to pay trade payables which are more than sixty (60) days past due as
of such time, but not yet sent and the book overdraft of Borrower.
1.18 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by
Borrower or any Obligor in connection with this Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
1.19 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 9.14 and 9.15 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
6
12
1.20 "Hard Cost of Eligible Equipment" shall mean the price paid by
Borrower for Eligible Equipment excluding any and all "soft costs", as
determined by Lender, including, without limitation, shipping, engineering,
labor, installation, setup, testing and software costs and expenses and further
excluding all commissions, fees and sales, excise and other taxes.
1.21 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.22 "Information Certificate" shall mean the Information Certificate
of Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.23 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.24 "Investment Property" shall mean all of Borrower's now owned and
hereafter existing or acquired securities, financial assets, securities
accounts, securities entitlements and all other investment property of
whatsoever kind or nature, wherever located, including, without limitation,
securities issued to Borrower by any subsidiary of Borrower.
1.25 "Loans" shall mean the Revolving Loans and the Term Loan and the
Equipment Loan.
1.26 "Maximum Credit" shall mean the amount of $7,000,000.
1.27 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, available or claimed with
respect thereto.
1.28 "Obligations" shall mean any and all Revolving Loans, the Term
Loan, Equipment Loans and all other obligations, liabilities and indebtedness of
every kind, nature and description owing by Borrower to Lender and/or Lender's
affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this
7
13
Agreement or after the commencement of any case with respect to Borrower under
the United States Bankruptcy Code or any similar statute (including the payment
of interest and other amounts which would accrue and become due but for the
commencement of such case, whether or not such amounts are allowed or allowable
in whole or in part in such case), whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, and however acquired by Lender.
1.29 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrower.
1.30 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.31 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including any corporation which elects
subchapter S status under the Internal Revenue Code of 1986, as amended),
limited liability company, limited liability partnership, business trust,
unincorporated association, joint stock corporation, trust, joint venture or
other entity or any government or any agency or instrumentality or political
subdivision thereof.
1.32 "Prime Rate" shall mean the rate from time to time publicly
announced by CoreStates Bank, N.A., or its successors, at its office in
Philadelphia, Pennsylvania, as its prime rate, whether or not such announced
rate is the best rate available at such bank.
1.33 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.34 "Revolving Loan Limit" shall mean the amount of $4,100,000.
1.35 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.36 "Term Loan" shall mean the term loan made by Lender to Borrower as
provided for in Section 2.3 hereof.
1.37 "Working Capital" shall mean as to any Person, at any time, in
accordance with GAAP, on a consolidated basis for such Person and its
subsidiaries (if any), the amount equal to the difference between: (a) the
aggregate net book value of all current assets of such Person and its
subsidiaries (as determined in accordance with GAAP), calculating the book value
of inventory for this purpose on a first-in-first-out basis, and (b) all current
liabilities of such Person and its subsidiaries (as determined in accordance
with GAAP), provided, that, as to Borrower, for
8
14
purposes of Section 9.14, the liabilities of Borrower and its subsidiaries to
Lender under this Agreement shall not be considered current liabilities (whether
or not classified as current liabilities in accordance with GAAP).
2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to and upon the terms and conditions contained herein,
Lender agrees to make Revolving Loans to Borrower from time to time in amounts
requested by Borrower up to the amount equal to the lesser of the Revolving Loan
Limit or the sum of:
(i) seventy (70%) percent of the Net Amount of Eligible
Accounts, less
(ii) any Availability Reserves.
(b) Lender may, in its good faith discretion, from time to time,
upon not less than five (5) days prior notice to Borrower, (i) reduce the
lending formula with respect to Eligible Accounts to the extent that Lender
determines in good faith that: (A) Dilution with respect to Borrower's Accounts
has increased in any material respect or may be reasonably anticipated to
increase in any material respect above historical levels, or (B) the general
creditworthiness of account debtors has declined materially. In determining
whether to reduce the lending formula, Lender may consider events, conditions,
contingencies or risks which are also considered in determining Eligible
Accounts or in establishing Availability Reserves. In addition to and without
limiting the generality of the foregoing, to the extent that Dilution with
respect to Borrower's Accounts exceeds 10%, the foregoing advance rate will be
reduced in increments of 5%.
(c) Except in Lender's discretion, the aggregate amount of the
Loans outstanding at any time shall not exceed the Maximum Credit. In the event
that the outstanding amount of any component of the Loans, or the aggregate
amount of the outstanding Loans exceed the amounts available under the lending
formulas, the sublimits for Equipment Loans set forth in Section 2.2(d) or the
Maximum Credit, as applicable, such event shall not limit, waive or otherwise
affect any rights of Lender in that circumstance or on any future occasions and
Borrower shall, upon demand by Lender, which may be made at any time or from
time to time, immediately repay to Lender the entire amount of any such
excess(es) for which payment is demanded.
2.2 Equipment Acquisition Facility.
(a) Subject to, and upon the terms and conditions contained herein,
Lender agrees to make Equipment Loans to Borrower from time to time, up to the
amount equal seventy (70%) percent of the Hard Cost of Eligible Equipment
acquired with such Equipment Loan, provided that the aggregate outstanding
principal amount of all Equipment Loans shall not exceed $2,000,000.
9
15
(b) Each Equipment Loan requested by Borrower hereunder shall be in
a minimum amount of $50,000. Each request by Borrower for an Equipment Loan
shall be accompanied by copies of all purchase orders, invoices and other
documentation relating to the Eligible Equipment to be purchased with the
proceeds of such Equipment Loan, including a list and description of the
Eligible Equipment (by model, make, manufacturer, serial no. (if available)
and/or such other identifying information as may be required by Lender) and such
other information and documents as may be requested by Lender. The making of the
initial Equipment Loan shall be subject to the conditions precedent set forth in
Sections 4.1 and 4.2 and the requirements of this Section. Each subsequent
Equipment Loan will be subject to the conditions precedent in Section 4.2, the
requirements of this Section and after the first $500,000 in principal amount of
Equipment Loans, each additional Equipment Loan shall be subject to Borrower
having demonstrated that as of the last day of the month preceding such request
the Borrower's average net operating income (calculated before taxes, interest
expense, extraordinary and unusual items and income or loss attributable to
minority interests in affiliates) plus depreciation and amortization (to the
extent deducted in determining net operating income) for the prior three
consecutive months or portion thereof commencing with the Borrower's fiscal
month ending in August 1997 exceeds $100,000.00. Each Equipment Loan shall be
(a) evidenced by an Equipment Loan Promissory Note substantially in the form
attached as Exhibit B hereto, completed, executed and delivered by Borrower to
Lender (in a manner satisfactory to Lender) prior to the making of any Equipment
Loan or by the records and loan accounts maintained by Lender; (b) repaid,
together with interest and other amounts, in accordance with this Agreement, the
Equipment Loan Promissory Note, and the other Financing Agreements and (c)
secured by a first priority and only security interest on the acquired Equipment
and by all the other Collateral. Borrower shall deliver to Lender upon request
evidence of full payment for all Eligible Equipment acquired with the proceeds
of an Equipment Loan and the absence of liens thereon. The principal amount of
each Equipment Loan shall be repaid in equal consecutive monthly payments,
payable on the first day of each calendar month, commencing on the first such
day to occur after the date each such Loan is made. The principal amount shall
be amortized over a forty-eight (48) month period and the outstanding principal
balance thereof and all accrued and unpaid interest, fees and charges shall be
due and payable on the first to occur of (a) the election of Lender upon and
following an Event of Default and (b) the date of termination or nonrenewal of
this Agreement. Interest on the Equipment Loans shall be computed and paid in
accordance with Section 3.1 hereof.
2.3 Term Loan. Lender is making a Term Loan to Borrower in the original
principal amount of $900,000.00. The Term Loan is (a) evidenced by a Term
Promissory Note in such original principal amount duly executed and delivered by
Borrower to Lender concurrently herewith; (b) to be repaid, together with
interest and other amounts, in accordance with this Agreement, the Term
Promissory Note, and the other Financing Agreements and (c) secured by all of
the Collateral.
2.4 Availability Reserves. All Revolving Loans otherwise available to
Borrower pursuant to the lending formulas under Section 2.1 hereof shall be
subject to a permanent Availability Reserve established on the date hereof of
$500,000 and to Lender's continuing right to establish and revise additional
Availability Reserves. Availability Reserves serve to reduce
10
16
the Borrower's borrowing availability under Section 2.1 hereof and are not
subtracted from the Revolving Loan Limit, so that if in fact borrowing
availability under Section 2.1, net of Availability Reserves, equals or exceeds
the Revolving Loan Limit, the Borrower may borrow up to the Revolving Loan
Limit.
3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the rate of one and three
quarters (1.75%) percent per annum in excess of the Prime Rate, except that, at
Lender's option, without notice, Borrower shall pay to Lender interest at the
rate of four and three quarters (4.75%) percent per annum in excess of the Prime
Rate: (i) on the non-contingent Obligations for (A) the period from and after
the date of termination or non-renewal hereof until such time as Lender has
received full and final payment of all such Obligations (notwithstanding entry
of any judgment against Borrower), and (B) the period from and after the date of
the occurrence of an Event of Default for so long as such Event of Default is
continuing as determined by Lender and (ii) on the Revolving Loans at any time
outstanding in excess of the amounts available to Borrower under Section 2
(whether or not such excess(es), arise or are made with or without Lender's
knowledge or consent and whether made before or after an Event of Default).
(b) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the first day of the month
after any change in such Prime Rate is announced. The increase or decrease shall
be based on the Prime Rate in effect on the last day of the month in which any
such change occurs. All interest accruing hereunder on and after an Event of
Default or termination or non-renewal hereof shall be payable on demand. In no
event shall charges constituting interest payable by Borrower to Lender exceed
the maximum amount or the rate permitted under any applicable law or regulation,
and if any part or provision of this Agreement is in contravention of any such
law or regulation, such part or provision shall be deemed amended to conform
thereto.
3.2 Commitment Fee. Borrower has previously paid to Lender a commitment
fee in the amount of $100,000, which was fully earned with the Borrower's
acceptance of the Lender's commitment letter dated July 18, 1997.
3.3 Servicing Fee. Borrower shall pay to Lender monthly a servicing fee
in an amount equal to $1,000 in respect of Lender's services for each month (or
part thereof) while this Agreement remains in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on the date hereof and on the first day of each month
hereafter.
11
17
3.4 Unused Line Fee. Borrower shall pay to Lender monthly an unused
line fee at a rate equal to one half of one (.5%) percent per annum calculated
upon the amount by which Revolving Loan Limit exceeds the average daily
principal balance of the outstanding Revolving Loans while this Agreement is in
effect and for so long thereafter as any of the Obligations are outstanding
provided that for any month that the average daily principal balance of the
outstanding Revolving Loans is less than $1,500,000 the unused line fee shall
equal one (1.00%) percent per annum calculated as aforesaid, which fee shall be
payable on the first day of each month in arrears.
4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans. Each of the following is a
condition precedent to Lender making the initial Loans:
(a) Lender shall have received, in form and substance satisfactory
to Lender, all releases, terminations and such other documents as Lender may
request to evidence and effectuate the termination by the existing lender or
lenders to Borrower of their respective financing arrangements with Borrower and
the termination and release by it or them, as the case may be, of any interest
in and to any assets and properties of Borrower and each Obligor, duly
authorized, executed and delivered by it or each of them, including, but not
limited to, (i) UCC termination statements for all UCC financing statements
previously filed by it or any of them or their predecessors, as secured party
and Borrower or any Obligor, as debtor and (ii) satisfactions and discharges of
any mortgages, deeds of trust or deeds to secure debt by Borrower or any Obligor
in favor of such existing lender or lenders, in form acceptable for recording in
the appropriate government office;
(b) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property which
is intended to be security for the Obligations or the liability of any Obligor
in respect thereof, subject only to the security interests and liens permitted
herein or in the other Financing Agreements;
(c) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be satisfactory in
form and substance to Lender, and Lender shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or governmental authorities;
(d) no material adverse change shall have occurred in the assets,
business or prospects of Borrower since the date of Lender's latest field
examination and no change or event shall have occurred which would impair the
ability of Borrower or any Obligor to perform its obligations hereunder or under
any of the other Financing Agreements to which it is a party or of Lender to
enforce the Obligations or realize upon the Collateral;
12
18
(e) Lender shall have completed a field review of the Records and
such other information with respect to the Collateral as Lender may require to
determine the amount of Revolving Loans available to Borrower, the results of
which shall be satisfactory to Lender, not more than three (3) business days
prior to the date hereof;
(f) Lender shall have received, in form and substance satisfactory
to Lender, all consents, waivers, acknowledgments and other agreements from
third persons which Lender may deem necessary or desirable in order to permit,
protect and perfect its security interests in and liens upon the Collateral or
to effectuate the provisions or purposes of this Agreement and the other
Financing Agreements, including acknowledgments by lessors, mortgagees and
warehousemen of Lender's security interests in the Collateral, waivers by such
persons of any security interests, liens or other claims by such persons to the
Collateral and agreements permitting Lender access to, and the right to remain
on, the premises to exercise its rights and remedies and otherwise deal with the
Collateral;
(g) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(h) the Excess Availability as determined by Lender, as of the date
hereof, shall be not less than $1,000,000.00 after giving effect to the initial
Loans made or to be made and Letter of Credit Accommodations issued or to be
issued in connection with the initial transactions hereunder;
(i) Lender shall have received, in form and substance reasonably
satisfactory to Lender, such opinion letters of counsel to Borrower with respect
to the Financing Agreements and such other matters as Lender may request; and
(j) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans. Each of the following is an
additional condition precedent to Lender making Loans to Borrower, including the
initial Loans and any future Loans:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan or providing each such
Letter of Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no event or condition which, with notice or
passage of time or both, would constitute an Event of Default, shall exist or
have occurred and be
13
19
continuing on and as of the date of the making of such Loan or providing each
such Letter of Credit Accommodation and after giving effect thereto.
5. GRANT OF SECURITY INTEREST
5.1 Collateral. To secure payment and performance of all Obligations,
Borrower hereby grants to Lender a continuing security interest in, a lien upon,
and a right of set off against, and hereby assigns to Lender as security, the
following property and interests in property of Borrower, whether now owned or
hereafter acquired or existing, and wherever located (collectively, the
"Collateral"):
(a) Accounts;
(b) all present and future contract rights, general intangibles
(including tax and duty refunds, registered and unregistered patents,
trademarks, service marks, copyrights, trade names, applications for the
foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer
lists, licenses, whether as licensor or licensee, chooses in action and other
claims and existing and future leasehold interests in equipment, real estate and
fixtures), chattel paper, documents, instruments, securities and other
investment property, letters of credit, bankers' acceptances and guaranties;
(c) all present and future monies, securities, credit balances,
deposits, deposit accounts and other property of Borrower now or hereafter held
or received by or in transit to Lender or its affiliates or at any other
depository or other institution from or for the account of Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and all
present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including (a)
rights and remedies under or relating to guaranties, contracts of suretyship,
letters of credit and credit and other insurance related to the Collateral, (b)
rights of stoppage in transit, replevin, repossession, reclamation and other
rights and remedies of an unpaid vendor, lienor or secured party, (c) goods
described in invoices, documents, contracts or instruments with respect to, or
otherwise representing or evidencing, Accounts or other Collateral, including
returned, repossessed and reclaimed goods, and (d) deposits by and property of
account debtors or other persons securing the obligations of account debtors;
(d) Inventory;
(e) Equipment;
(f) Investment Property;
(g) Records; and
(h) all products and proceeds of the foregoing, in any form,
including insurance proceeds and all claims against third parties for loss or
damage to or destruction of any or all of the foregoing.
14
20
6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans and other
Obligations and the Collateral, (b) all payments made by or on behalf of
Borrower and (c) all other appropriate debits and credits as provided in this
Agreement, including fees, charges, costs, expenses and interest. All entries in
the loan account(s) shall be made in accordance with Lender's customary
practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be presumed correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrower a written statement as
provided above, the balance in Borrower's loan account(s) shall be presumptive
evidence of the amounts due and owing to Lender by Borrower.
6.3 Collection of Accounts.
(a) Borrower shall establish and maintain, at its expense, blocked
accounts or lockboxes and related blocked accounts (in either case, "Blocked
Accounts"), as Lender may specify, with such banks as are acceptable to Lender
into which Borrower shall promptly deposit and direct its account debtors to
directly remit all payments on Accounts and all payments constituting proceeds
of Inventory or other Collateral in the identical form in which such payments
are made, whether by cash, check or other manner. The banks at which the Blocked
Accounts are established shall enter into an agreement, in form and substance
satisfactory to Lender, providing that all items received or deposited in the
Blocked Accounts are the property of Lender, that the depository bank has no
lien upon, or right to setoff against, the Blocked Accounts, the items received
for deposit therein, or the funds from time to time on deposit therein and that
the depository bank will wire, or otherwise transfer, in immediately available
funds, on a daily basis, all funds received or deposited into the Blocked
Accounts to such bank account of Lender as Lender may from time to time
designate for such purpose ("Payment Account"). Borrower agrees that all
payments made to such Blocked Accounts or other funds received and collected by
Lender, whether on the Accounts or as proceeds of Inventory or other Collateral
or otherwise shall be the property of Lender.
(b) For purposes of calculating the amount of the Loans available
to Borrower, such payments will be applied (conditional upon final collection)
to the Obligations on the business day of receipt by Lender of immediately
available funds in the Payment Account provided such payments and notice
thereof are received in accordance with Lender's usual and customary practices
as in effect from time to time and within sufficient time to credit Borrower's
loan account on such day, and if not, then on the next business day. For the
purposes of calculating interest on the Obligations, such payments or other
funds received will be applied
15
21
(conditional upon final collection) to the Obligations two (2) business day(s)
following the date of receipt of immediately available funds by Lender in the
Payment Account provided such payments or other funds and notice thereof are
received in accordance with Lender's usual and customary practices as in effect
from time to time and within sufficient time to credit Borrower's loan account
on such day, and if not, then on the next business day.
(c) Borrower and all of its subsidiaries, directors, employees or
agents shall, acting as trustee for Lender, receive, as the property of Lender,
any monies, checks, notes, drafts or any other payment relating to and/or
proceeds of Accounts or other Collateral which come into their possession or
under their control and immediately upon receipt thereof, shall deposit or cause
the same to be deposited in the Blocked Accounts, or remit the same or cause the
same to be remitted, in kind, to Lender. In no event shall the same be
commingled with Borrower's own funds. Borrower agrees to reimburse Lender on
demand for any amounts owed or paid to any bank at which a Blocked Account is
established or any other bank or person involved in the transfer of funds to or
from the Blocked Accounts arising out of Lender's payments to or indemnification
of such bank or person. The obligation of Borrower to reimburse Lender for such
amounts pursuant to this Section 6.3 shall survive the termination or
non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Lender may designate from time
to time. Lender may apply payments received or collected from Borrower or for
the account of Borrower (including the monetary proceeds of collections or of
realization upon any Collateral) to such of the Obligations, whether or not then
due, in such order and manner as Lender determines. At Lender's option, all
principal, interest, fees, costs, expenses and other charges provided for in
this Agreement or the other Financing Agreements may be charged directly to the
loan account(s) of Borrower. Borrower shall make all payments to Lender on the
Obligations free and clear of, and without deduction or withholding for or on
account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts,
fees, deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment of,
any of the Obligations, Lender is required to surrender or return such payment
or proceeds to any Person for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall be reinstated and continue and this
Agreement shall continue in full force and effect as if such payment or proceeds
had not been received by Lender. Borrower shall be liable to pay to Lender, and
does hereby indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans
based upon telephonic or other instructions received from an officer of Borrower
or other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans hereunder shall
specify the date on which the requested advance is to be made or established
(which day shall be a business day) and the amount of the requested Loan.
16
22
Requests received after 11:00 a.m. Boston, Massachusetts time on any day shall
be deemed to have been made as of the opening of business on the immediately
following business day. All Loans under this Agreement shall be conclusively
presumed to have been made to, and at the request of and for the benefit of,
Borrower when deposited to the credit of Borrower or otherwise disbursed or
established in accordance with the instructions of Borrower or in accordance
with the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the
Loans provided by Lender to Borrower hereunder only for: (a) payments to each of
the persons listed in the disbursement direction letter furnished by Borrower to
Lender on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or provided
by Lender to Borrower pursuant to the provisions hereof shall be used by
Borrower only for general operating, working capital and other proper corporate
purposes of Borrower not otherwise prohibited by the terms hereof. None of the
proceeds will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin security or for the purposes of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any margin
security or for any other purpose which might cause any of the Loans to be
considered a "purpose credit" within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System, as amended.
7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Borrower shall provide Lender with the
following documents in a form satisfactory to Lender: (a) on a regular basis as
required by Lender, a schedule of Accounts, sales made, credits issued and cash
received; (b) on a monthly basis or more frequently as Lender may request,
agings of accounts payable, (c) upon Lender's request, (i) copies of customer
statements and credit memos, remittance advices and reports, and copies of
deposit slips and bank statements, (ii) copies of shipping and delivery
documents, (iii) copies of purchase orders, invoices and delivery documents for
Inventory and Equipment acquired by Borrower and (iv) perpetual inventory
reports and inventory reports by category; (d) agings of accounts receivable on
a weekly basis or more frequently as Lender may request; and (e) such other
reports as to the Collateral as Lender shall request from time to time. If any
of Borrower's records or reports of the Collateral are prepared or maintained by
an accounting service, contractor, shipper or other agent, Borrower hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Lender and to follow Lender's
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrower shall notify Lender promptly of: (i) any material
delay in Borrower's performance of any of its obligations to any account debtor
or the assertion of any claims, offsets, defenses or counterclaims by any
account debtor, or any disputes with account debtors, or any settlement,
adjustment or compromise thereof, (ii) all material adverse
17
23
information relating to the financial condition of any account debtor and (iii)
any event or circumstance which, to Borrower's knowledge would cause Lender to
consider any then existing Accounts as no longer constituting Eligible Accounts.
No credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor without Lender's consent,
except in the ordinary course of Borrower's business in accordance with
practices and policies previously disclosed to Lender. So long as no Event of
Default exists or has occurred and is continuing, Borrower shall settle, adjust
or compromise any claim, offset, counterclaim or dispute with any account
debtor. At any time that an Event of Default exists or has occurred and is
continuing, Lender shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with account
debtors or grant any credits, discounts or allowances.
(b) Without limiting the obligation of Borrower to deliver any
other information to Lender, Borrower shall promptly report to Lender any return
of Inventory by any one account debtor if the inventory so returned in such case
has a value in excess of $10,000. At any time that Inventory is returned,
reclaimed or repossessed, the Account (or portion thereof) which arose from the
sale of such returned, reclaimed or repossessed Inventory shall not be deemed an
Eligible Account. In the event any account debtor returns Inventory when an
Event of Default exists or has occurred and is continuing, Borrower shall, upon
Lender's request, (i) hold the returned Inventory in trust for Lender, (ii)
segregate all returned Inventory from all of its other property, (iii) dispose
of the returned Inventory solely according to Lender's instructions, and (iv)
not issue any credits, discounts or allowances with respect thereto without
Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to Lender in
accordance with this Agreement and except for credits, discounts, allowances or
extensions made or given in the ordinary course of Borrower's business in
accordance with practices and policies previously disclosed to Lender, (iv)
there shall be no setoffs, deductions, contras, defenses, counterclaims or
disputes existing or asserted with respect thereto except as reported to Lender
in accordance with the terms of this Agreement, (v) none of the transactions
giving rise thereto will violate any applicable State or Federal laws or
regulations, all documentation relating thereto will be legally sufficient under
such laws and regulations and all such documentation will be legally enforceable
in accordance with its terms.
(d) Lender shall have the right at any time or times, in Lender's
name or in the name of a nominee of Lender, to verify the validity, amount or
any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Borrower shall deliver or cause to be delivered to Lender, with
appropriate endorsement and assignment, with full recourse to Borrower, all
chattel paper and instruments which Borrower now owns or may at any time acquire
immediately upon Borrower's receipt thereof, except as Lender may otherwise
agree.
18
24
(f) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account debtors
that the Accounts have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors to make
payment of Accounts directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable for its failure to collect or enforce
the payment thereof nor for the negligence of its agents or attorneys with
respect thereto and (iv) take whatever other action Lender may deem necessary or
desirable for the protection of its interests. At any time that an Event of
Default exists or has occurred and is continuing, at Lender's request, all
invoices and statements sent to any account debtor shall state that the Accounts
and such other obligations have been assigned to Lender and are payable directly
and only to Lender and Borrower shall deliver to Lender such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as Lender may require.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
physical count of the Inventory at any time or times as Lender may request on or
after an Event of Default, and promptly following such physical inventory shall
supply Lender with a report in the form and with such specificity as may be
reasonably satisfactory to Lender concerning such physical count; (c) Borrower
shall not remove any Inventory from the locations set forth or permitted herein,
without the prior written consent of Lender, except for sales of Inventory in
the ordinary course of Borrower's business and except to move Inventory directly
from one location set forth or permitted herein to another such location; (d)
Borrower shall produce, use, store and maintain the Inventory with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with applicable laws (including the requirements of
the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto); (e) Borrower assumes all responsibility
and liability arising from or relating to the production, use, sale or other
disposition of the Inventory; (f) Borrower shall not sell Inventory to any
customer on approval, or any other basis which entitles the customer to return
or may obligate Borrower to repurchase such Inventory; (g) Borrower shall keep
the Inventory in good and marketable condition; and (h) Borrower shall not,
without prior written notice to Lender (which notice will be sufficient if it
describes the transactions that the Borrower intends to enter into and, if such
notice is given, Borrower need not notify Lender of each shipment it receives),
acquire or accept any Inventory on consignment or approval.
7.4 Equipment Covenants. With respect to the Equipment: (a) upon
Lender's request, Borrower shall, at its expense, at any time or times as Lender
may reasonably request with respect to Equipment, deliver or cause to be
delivered to Lender written reports or appraisals as to the Equipment in form,
scope and methodology acceptable to Lender and by an appraiser
19
25
acceptable to Lender; (b) Borrower shall keep the Equipment in good order,
repair, running and marketable condition (ordinary wear and tear excepted); (c)
Borrower shall use the Equipment with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity with all
applicable laws; (d) the Equipment is and shall be used in Borrower's business
and not for personal, family, household or farming use; (e) Borrower shall not
remove any Equipment from the locations set forth or permitted herein, except to
the extent necessary to have any Equipment repaired or maintained in the
ordinary course of the business of Borrower or to move Equipment directly from
one location set forth or permitted herein to another such location and except
for the movement of motor vehicles used by or for the benefit of Borrower in the
ordinary course of business; (f) the Equipment is now and shall remain personal
property and Borrower shall not permit any of the Equipment to be or become a
part of or affixed to real property; and (g) Borrower assumes all responsibility
and liability arising from the use of the Equipment.
7.5 Power of Attorney. Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name,
to: (a) at any time an Event of Default or event which with notice or passage of
time or both would constitute an Event of Default exists or has occurred and is
continuing (i) demand payment on Accounts or other proceeds of Inventory or
other Collateral, (ii) enforce payment of Accounts by legal proceedings or
otherwise, (iii) exercise all of Borrower's rights and remedies to collect any
Account or other Collateral, (iv) sell or assign any Account upon such terms,
for such amount and at such time or times as the Lender deems advisable, (v)
settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, (vii) prepare, file and sign Borrower's name on any proof
of claim in bankruptcy or other similar document against an account debtor,
(viii) notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender, and open and dispose of all
mail addressed to Borrower, and (ix) do all acts and things which are necessary,
in Lender's determination, to fulfill Borrower's obligations under this
Agreement and the other Financing Agreements and (b) at any time to (i) take
control in any manner of any item of payment or proceeds thereof, (ii) have
access to any lockbox or postal box into which Borrower's mail is deposited,
(iii) endorse Borrower's name upon any items of payment or proceeds thereof and
deposit the same in the Lender's account for application to the Obligations,
(iv) endorse Borrower's name upon any chattel paper, document, instrument,
invoice, or similar document or agreement relating to any Account or any goods
pertaining thereto or any other Collateral, (v) sign Borrower's name on any
verification of Accounts and notices thereof to account debtors and (vi) execute
in Borrower's name and file any UCC financing statements or amendments thereto.
Borrower hereby releases Lender and its officers, employees and designees from
any liabilities arising from any act or acts under this power of attorney and in
furtherance thereof, whether of omission or commission, except as a result of
Lender's own gross negligence or wilful misconduct as determined pursuant to a
final non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, (a) cure any default by
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied
20
26
on or existing with respect to the Collateral and (c) pay any amount, incur any
expense or perform any act which, in Lender's judgment, is necessary or
appropriate to preserve, protect, insure or maintain the Collateral and the
rights of Lender with respect thereto. Lender may add any amounts so expended to
the Obligations and charge Borrower's account therefor, such amounts to be
repayable by Borrower on demand. Lender shall be under no obligation to effect
such cure, payment or bonding and shall not, by doing so, be deemed to have
assumed any obligation or liability of Borrower. Any payment made or other
action taken by Lender under this Section shall be without prejudice to any
right to assert an Event of Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Lender, at
the cost and expense of Borrower, (a) Lender or its designee shall have complete
access to all of Borrower's premises during normal business hours and after
notice to Borrower, or at any time and without notice to Borrower if an Event of
Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including the Records, and (b) Borrower shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender may
request, and (c) use during normal business hours such of Borrower's personnel,
equipment, supplies and premises as may be reasonably necessary for the
foregoing and if an Event of Default exists or has occurred and is continuing
for the collection of Accounts and realization of other Collateral.
8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans by Lender to
Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower is
a corporation duly organized and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on Borrower's financial condition,
results of operation or business or the rights of Lender in or to any of the
Collateral. The execution, delivery and performance of this Agreement, the other
Financing Agreements and the transactions contemplated hereunder and thereunder
are all within Borrower's corporate powers, have been duly authorized and are
not in contravention of law or the terms of Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
its property are bound. This Agreement and the other Financing Agreements
constitute legal, valid and binding obligations of Borrower enforceable in
accordance with their respective terms. Borrower does not have any subsidiaries
except as set forth on the Information Certificate.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower which have been or may hereafter be delivered by
Borrower to Lender have
21
27
been prepared in accordance with GAAP and fairly present the financial condition
and the results of operation of Borrower as at the dates and for the periods set
forth therein. Except as disclosed in any interim financial statements furnished
by Borrower to Lender prior to the date of this Agreement, there has been no
material adverse change in the assets, liabilities, properties and condition,
financial or otherwise, of Borrower, since the date of the most recent financial
statements furnished by Borrower to Lender prior to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of Borrower and Borrower's Records concerning Accounts are located only
at the address set forth below and its only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in the
Information Certificate, subject to the right of Borrower to establish new
locations in accordance with Section 9.2 below. The Information Certificate
correctly identifies any of such locations which are not owned by Borrower and
sets forth the owners and/or operators thereof and to the best of Borrower's
knowledge, the holders of any mortgages on such locations.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral as such may be obtained by the filing of financing
statements in accordance with the UCC or by possession and in the filing of the
Trademark Security Agreement and Patent Collateral Assignment and Security
Agreement with the U.S. Patent and Trademark Office, subject only to the liens
indicated on Schedule 8.4 hereto and the other liens permitted under Section 9.8
hereof. Borrower has good and marketable title to all of its properties and
assets subject to no liens, mortgages, pledges, security interests, encumbrances
or charges of any kind, except those granted to Lender and such others as are
specifically listed on Schedule 8.4 hereto or permitted under Section 9.8
hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be filed
by it (without requests for extension except as previously disclosed in writing
to Lender). All information in such tax returns, reports and declarations is
complete and accurate in all material respects, except with respect to the
Borrower's 1994 tax return for which Borrower will file an amended return.
Borrower has paid or caused to be paid all taxes due and payable or claimed due
and payable in any assessment received by it, except taxes the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to Borrower and with respect to which adequate reserves have been
set aside on its books. Adequate provision has been made for the payment of all
accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate,
there is no present investigation by any governmental agency pending, or to the
best of Borrower's knowledge threatened, against or affecting Borrower, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Borrower's knowledge threatened, against
Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against Borrower
would result in any material adverse change in the assets, business or prospects
of Borrower or would impair the ability of
22
28
Borrower to perform its obligations hereunder or under any of the other
Financing Agreements to which it is a party or of Lender to enforce any
Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws. Except as set
forth on Schedule 8.7 hereto, Borrower is not in default in any material respect
under, or in violation in any material respect of any of the terms of, any
agreement, contract, instrument, lease or other commitment to which it is a
party or by which it or any of its assets are bound and Borrower is in
compliance in all material respects with all applicable provisions of laws,
rules, regulations, licenses, permits, approvals and orders of any foreign,
Federal, State or local governmental authority.
8.8 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth on Schedule 8.8 hereto, subject to the
right of Borrower to establish new accounts in accordance with Section 9.13
below.
8.9 Environmental Compliance.
(a) Except as set forth on Schedule 8.9 hereto, Borrower has not
generated, used, stored, treated, transported, manufactured, handled, produced
or disposed of any Hazardous Materials, on or off its premises (whether or not
owned by it) in any manner which at any time violates any applicable
Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder and the operations of Borrower complies in all material
respects with all Environmental Laws and all licenses, permits, certificates,
approvals and similar authorizations thereunder.
(b) Except as set forth on Schedule 8.9 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person nor is any pending or
to the best of Borrower's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
Borrower or the release, spill or discharge, threatened or actual, of any
Hazardous Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any
other environmental, health or safety matter, which affects Borrower or its
business, operations or assets or any properties at which Borrower has
transported, stored or disposed of any Hazardous Materials.
(c) Borrower has no material liability (contingent or otherwise) in
connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.
(d) Borrower has all licenses, permits, certificates, approvals or
similar authorizations required to be obtained or filed in connection with the
operations of Borrower under any Environmental Law and all of such licenses,
permits, certificates, approvals or similar authorizations are valid and in full
force and effect.
23
29
8.10 Employee Benefits.
(a) Borrower has not engaged in any transaction in connection with
which Borrower or any of its ERISA Affiliates could be subject to either a civil
penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section
4975 of the Code, including any accumulated funding deficiency described in
Section 8.10(c) hereof and any deficiency with respect to vested accrued
benefits described in Section 8.10(d) hereof.
(b) No liability to the Pension Benefit Guaranty Corporation has
been or is expected by Borrower to be incurred with respect to any employee
benefit plan of Borrower or any of its ERISA Affiliates. There has been no
reportable event (within the meaning of Section 4043(b) of ERISA) or any other
event or condition with respect to any employee pension benefit plan of Borrower
or any of its ERISA Affiliates which presents a risk of termination of any such
plan by the Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which Borrower or any
of its ERISA Affiliates is required under Section 302 of ERISA and Section 412
of the Code to have paid under the terms of each employee benefit plan as
contributions to such plan as of the last day of the most recent fiscal year of
such plan ended prior to the date hereof, and no accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, exists with respect to any employee benefit plan, including any penalty
or tax described in Section 8.10(a) hereof and any deficiency with respect to
vested accrued benefits described in Section 8.10(d) hereof.
(d) The current value of all vested accrued benefits under all
employee benefit plans maintained by Borrower that are subject to Title IV of
ERISA does not exceed the current value of the assets of such plans allocable to
such vested accrued benefits, including any penalty or tax described in Section
8.10(a) hereof and any accumulated funding deficiency described in Section
8.10(c) hereof. The terms "current value" and "accrued benefit" have the
meanings specified in ERISA.
(e) Neither Borrower nor any of its ERISA Affiliates is or has ever
been obligated to contribute to any "multiemployer plan" (as such term is
defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.
8.11 Accuracy and Completeness of Information. All information
furnished by or on behalf of Borrower in writing to Lender in connection with
this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate is true and correct in all material respects on the date as of which
such information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading. No event or
circumstance has occurred which has had or could reasonably be expected to have
a material adverse affect on the business, assets or prospects of Borrower,
which has not been fully and accurately disclosed to Lender in writing.
24
30
8.12 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.
9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently or proposed to be
conducted. Borrower shall give Lender thirty (30) days prior written notice of
any proposed change in its corporate name, which notice shall set forth the new
name and Borrower shall deliver to Lender a copy of the amendment to the
Certificate of Incorporation of Borrower providing for the name change certified
by the Secretary of State of the jurisdiction of incorporation of Borrower as
soon as it is available.
9.2 New Collateral Locations. Borrower may open any new location
provided Borrower (a) gives Lender thirty (30) days prior written notice of the
intended opening of any such new location and (b) executes and delivers, or
causes to be executed and delivered, to Lender such agreements, documents, and
instruments as Lender may deem reasonably necessary or desirable to protect its
interests in the Collateral at such location, including UCC financing
statements.
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrower shall, at all times, comply in all material respects
with all laws, rules, regulations, licenses, permits, approvals and orders
applicable to it and duly observe all requirements of any Federal, State or
local governmental authority, including the Employee Retirement Security Act of
1974, as amended, the Occupational Safety and Health Act of 1970, as amended,
the Fair Labor Standards Act of 1938, as amended, and all statutes, rules,
regulations, orders, permits and stipulations relating to environmental
pollution and employee health and safety, including all of the Environmental
Laws.
(b) Borrower shall establish and maintain, at its expense, a system
or program to assure and monitor its continued compliance with all Environmental
Laws in all of its operations, which system shall include annual reviews of such
compliance by employees or agents of Borrower who are familiar with the
requirements of the Environmental Laws. Copies of all environmental surveys,
audits, assessments, feasibility studies and results of remedial investigations
shall be promptly furnished, or caused to be furnished, by Borrower to Lender.
25
31
Borrower shall take prompt and appropriate action to respond to any
non-compliance with any of the Environmental Laws and shall regularly report to
Lender on such response.
(c) Borrower shall give both oral and written notice to Lender
immediately upon Borrower's receipt of any notice of, or Borrower's otherwise
obtaining knowledge of, (i) the occurrence of any event involving the release,
spill or discharge, threatened or actual, of any Hazardous Material or (ii) any
investigation, proceeding, complaint, order, directive, claims, citation or
notice with respect to: (A) any non-compliance with or violation of any
Environmental Law by Borrower or (B) the release, spill or discharge, threatened
or actual, of any Hazardous Material or (C) the generation, use, storage,
treatment, transportation, manufacture, handling, production or disposal of any
Hazardous Materials or (D) any other environmental, health or safety matter,
which affects Borrower or its business, operations or assets or any properties
at which Borrower transported, stored or disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever
Lender reasonably determines that there is non-compliance, or any condition
which requires any action by or on behalf of Borrower in order to avoid any
material non-compliance, with any Environmental Law, Borrower shall, at Lender's
request and Borrower's expense: (i) cause an independent environmental engineer
acceptable to Lender to conduct such tests of the site where Borrower's
non-compliance or alleged non-compliance with such Environmental Laws has
occurred as to such non-compliance and prepare and deliver to Lender a report as
to such non-compliance setting forth the results of such tests, a proposed plan
for responding to any environmental problems described therein, and an estimate
of the costs thereof and (ii) provide to Lender a supplemental report of such
engineer whenever the scope of such non-compliance, or Borrower's response
thereto or the estimated costs thereof, shall change in any material respect.
(e) Borrower shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including reasonable attorneys' fees and legal expenses)
directly or indirectly arising out of or attributable to the use, generation,
manufacture, reproduction, storage, release, threatened release, spill,
discharge, disposal or presence of a Hazardous Material, including the costs of
any required or necessary repair, cleanup or other remedial work with respect to
any property of Borrower and the preparation and implementation of any closure,
remedial or other required plans. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Borrower shall duly pay and discharge
all taxes, assessments, contributions and governmental charges upon or against
it or its properties or assets, except for taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Borrower shall be liable for any tax or penalties imposed on
Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added
26
32
and deemed part of the Loans, provided, that, nothing contained herein shall be
construed to require Borrower to pay any income or franchise taxes attributable
to the income of Lender from any amounts charged or paid hereunder to Lender.
The foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
9.5 Insurance. Borrower shall, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated. Said policies
of insurance shall be reasonably satisfactory to Lender as to form, amount and
insurer. Borrower shall furnish certificates, policies or endorsements to Lender
as Lender shall require as proof of such insurance, and, if Borrower fails to do
so, Lender is authorized, but not required, to obtain such insurance at the
expense of Borrower. All policies shall provide for at least thirty (30) days
prior written notice to Lender of any cancellation or reduction of coverage and
that Lender may act as attorney for Borrower in obtaining, and at any time an
Event of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrower shall cause Lender to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrower shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by Borrower or any of its affiliates. At
its option, Lender may apply any insurance proceeds received by Lender at any
time to the cost of repairs or replacement of Collateral and/or to payment of
the Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations.
9.6 Financial Statements and Other Information.
(a) Borrower shall keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in relation
to the Collateral and the business of Borrower and its subsidiaries (if any) in
accordance with GAAP and Borrower shall furnish or cause to be furnished to
Lender: (i) within thirty (30) days after the end of each fiscal month, monthly
unaudited consolidated financial statements, and, if Borrower has any
subsidiaries, unaudited consolidating financial statements (including in each
case balance sheets, statements of income and loss, statements of cash flow, and
statements of shareholders' equity), all in reasonable detail, fairly presenting
the financial position and the results of the operations of Borrower and its
subsidiaries as of the end of and through such fiscal month and (ii) within
ninety (90) days after the end of each fiscal year, audited consolidated
financial statements and, if Borrower has any subsidiaries, audited
consolidating financial statements of Borrower and its subsidiaries (including
in each case balance sheets, statements of income and loss, statements of cash
flow and statements of shareholders' equity), and the accompanying notes
thereto, all in reasonable detail, fairly presenting the financial position and
the results of the operations of Borrower and its subsidiaries as of the end of
and for such fiscal year, together with the unqualified opinion of independent
certified public accountants, which accountants shall be an
27
33
independent accounting firm selected by Borrower and reasonably acceptable to
Lender, that such financial statements have been prepared in accordance with
GAAP, and present fairly the results of operations and financial condition of
Borrower and its subsidiaries as of the end of and for the fiscal year then
ended.
(b) Borrower shall promptly notify Lender in writing of the details
of (i) any loss, damage, investigation, action, suit, proceeding or claim
relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in Borrower's
business, properties, assets, goodwill or condition, financial or otherwise and
(ii) the occurrence of any Event of Default or event which, with the passage of
time or giving of notice or both, would constitute an Event of Default.
(c) Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which Borrower
sends to its stockholders generally and copies of all reports and registration
statements which Borrower files with the Securities and Exchange Commission, any
national securities exchange or the National Association of Securities Dealers,
Inc.
(d) Borrower shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrower, as Lender may, from time to time, reasonably
request. Lender is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business of Borrower to any
court or other government agency or to any participant or assignee or
prospective participant or assignee. Borrower hereby irrevocably authorizes and
directs all accountants or auditors to deliver to Lender, at Borrower's expense,
copies of the financial statements of Borrower and any reports or management
letters prepared by such accountants or auditors on behalf of Borrower and to
disclose to Lender such information as they may have regarding the business of
Borrower. Any documents, schedules, invoices or other papers delivered to Lender
may be destroyed or otherwise disposed of by Lender one (1) year after the same
are delivered to Lender, except as otherwise designated by Borrower to Lender in
writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
shall not, directly or indirectly, (a) merge into or with or consolidate with
any other Person or permit any other Person to merge into or with or consolidate
with it (although Borrower may merge any wholly owned subsidiary of Borrower
into the Borrower upon prior notice to Lender), or (b) sell, assign, lease,
transfer, abandon or otherwise dispose of any stock or indebtedness to any other
Person or any of its assets to any other Person (except for (i) sales of
Inventory in the ordinary course of business, (ii) the disposition of worn-out
or obsolete Equipment or Equipment no longer used in the business of Borrower so
long as (A) any proceeds are paid to Lender for application to the Obligations,
in the discretion of the Lender, and (B) such sales do not involve Equipment
having an aggregate fair market value in excess of $50,000 for all such
Equipment disposed of in any fiscal year of Borrower and (iii) the dispositions
of certain investments as set forth on Schedule 9.7), or (c) form or acquire any
subsidiaries, or (d) wind up, liquidate or dissolve or (e) agree to do any of
the foregoing.
28
34
9.8 Encumbrances. Borrower shall not create, incur, assume or suffer to
exist any security interest, mortgage, pledge, lien, charge or other encumbrance
of any nature whatsoever on any of its assets or properties, including the
Collateral, except: (a) liens and security interests of Lender; (b) liens
securing the payment of taxes, either not yet overdue or the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to Borrower and with respect to which adequate reserves have been
set aside on its books; (c) non-consensual statutory liens (other than liens
securing the payment of taxes) arising in the ordinary course of Borrower's
business to the extent: (i) such liens secure indebtedness which is not overdue
or (ii) such liens secure indebtedness relating to claims or liabilities which
are fully insured and being defended at the sole cost and expense and at the
sole risk of the insurer or being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower, in each case prior to
the commencement of foreclosure or other similar proceedings and with respect to
which adequate reserves have been set aside on its books; (d) zoning
restrictions, easements, licenses, covenants and other restrictions affecting
the use of real property which do not interfere in any material respect with the
use of such real property or ordinary conduct of the business of Borrower as
presently conducted thereon or materially impair the value of the real property
which may be subject thereto; (e) purchase money security interests in Equipment
(including capital leases) and purchase money mortgages on real estate not to
exceed $500,000 in the aggregate at any time outstanding so long as such
security interests and mortgages do not apply to any property of Borrower other
than the Equipment or real estate so acquired, and the indebtedness secured
thereby does not exceed the cost of the Equipment or real estate so acquired, as
the case may be; and (f) the security interests and liens set forth on Schedule
8.4 hereto.
9.9 Indebtedness. Borrower shall not incur, create, assume, become or
be liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except: (a) the Obligations; (b) trade obligations and normal
accruals in the ordinary course of business not yet due and payable, or with
respect to which the Borrower is contesting in good faith the amount or validity
thereof by appropriate proceedings diligently pursued and available to Borrower,
and with respect to which adequate reserves have been set aside on its books;
(c) purchase money indebtedness (including capital leases) to the extent not
incurred or secured by liens (including capital leases) in violation of any
other provision of this Agreement; and (d) the indebtedness set forth on
Schedule 9.9 hereto; provided, that, (i) Borrower may only make regularly
scheduled payments of principal and interest in respect of such indebtedness in
accordance with the terms of the agreement or instrument evidencing or giving
rise to such indebtedness as in effect on the date hereof, (ii) Borrower shall
not, directly or indirectly, (A) amend, modify, alter or change the terms of
such indebtedness or any agreement, document or instrument related thereto as in
effect on the date hereof, or (B) redeem, retire, defease, purchase or otherwise
acquire such indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose, and (iii) Borrower shall furnish to Lender all notices or
demands in connection with such indebtedness either received by Borrower or on
its behalf, promptly after the receipt thereof, or sent by Borrower or on its
behalf, concurrently with the sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. Borrower shall not, directly
or indirectly, make any loans or advance money or property to any person, or
invest in (by capital contribution,
29
35
dividend or otherwise) or purchase or repurchase the stock or indebtedness or
all or a substantial part of the assets or property of any person, or guarantee,
assume, endorse, or otherwise become responsible for (directly or indirectly)
the indebtedness, performance, obligations or dividends of any Person or agree
to do any of the foregoing, except: (a) the endorsement of instruments for
collection or deposit in the ordinary course of business; (b) investments in:
(i) short-term direct obligations of the United States Government, (ii)
negotiable certificates of deposit issued by any bank satisfactory to Lender,
payable to the order of the Borrower or to bearer and delivered to Lender, and
(iii) commercial paper rated A1 or P1; provided, that, as to any of the
foregoing, unless waived in writing by Lender, Borrower shall take such actions
as are deemed necessary by Lender to perfect the security interest of Lender in
such investments and (c) the loans, advances and guarantees set forth on
Schedule 9.10 hereto; provided, that, as to such loans, advances and guarantees,
(i) Borrower shall not, directly or indirectly, (A) amend, modify, alter or
change the terms of such loans, advances or guarantees or any agreement,
document or instrument related thereto, or (B) as to such guarantees, redeem,
retire, defease, purchase or otherwise acquire the obligations arising pursuant
to such guarantees, or set aside or otherwise deposit or invest any sums for
such purpose, and (ii) Borrower shall furnish to Lender all notices or demands
in connection with such loans, advances or guarantees or other indebtedness
subject to such guarantees either received by Borrower or on its behalf,
promptly after the receipt thereof, or sent by Borrower or on its behalf,
concurrently with the sending thereof, as the case may be.
9.11 Dividends and Redemptions. Borrower shall not, directly or
indirectly, declare or pay any dividends on account of any shares of any class
of capital stock of Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of capital stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing.
9.12 Transactions with Affiliates. Borrower shall not, directly or
indirectly, (a) purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any officer, director, agent or other person
affiliated with Borrower, except in the ordinary course of and pursuant to the
reasonable requirements of Borrower's business and upon fair and reasonable
terms no less favorable to the Borrower than Borrower would obtain in a
comparable arm's length transaction with an unaffiliated person or (b) make any
payments of management, consulting or other fees for management or similar
services, or of any indebtedness owing to any officer, employee, shareholder,
director or other person affiliated with Borrower except reasonable compensation
to officers, employees and directors for services rendered to Borrower in the
ordinary course of business.
9.13 Additional Bank Accounts. Borrower shall not, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Blocked Accounts and the accounts set forth in Schedule 8.8 hereto, except:
(a) as to any new or additional Blocked Accounts and other such new or
additional accounts which contain any Collateral or proceeds thereof, with the
prior written consent of Lender and subject to such conditions thereto as Lender
may establish and (b)
30
36
as to any accounts used by Borrower to make payments of payroll, taxes or
other obligations to third parties, after prior written notice to Lender.
9.14 Working Capital. Borrower shall, at all times, maintain Working
Capital of not less than $880,000. The foregoing amount may be reduced on a
dollar for dollar basis for the write-off during the six month period following
the date hereof of Inventory of the Borrower held by the Borrower on the date
hereof as shown in the financial statements of the Borrower delivered pursuant
to Section 9.6 hereof provided that the total amount of such reduction does not
exceed $400,000 (the "Permitted Inventory Adjustment")
9.15 Adjusted Net Worth. Borrower shall, at all times, maintain
Adjusted Net Worth of not less than $23,700,000. The foregoing amount may be
reduced on a dollar for dollar basis for (a) the Permitted Inventory Adjustment
and (b) the write-off during the six month period following the date hereof of
the Borrower's investments held by Borrower on the date hereof provided that the
total amount of the reduction attributable to such investments does not exceed
$2,000,000.
9.16 Compliance with ERISA.
(a) Borrower shall not with respect to any "employee benefit plans"
maintained by Borrower or any of its ERISA Affiliates: (i) terminate any of such
employee benefit plans so as to incur any liability to the Pension Benefit
Guaranty Corporation established pursuant to ERISA, (ii) allow or suffer to
exist any prohibited transaction involving any of such employee benefit plans or
any trust created thereunder which would subject Borrower or such ERISA
Affiliate to a tax or penalty or other liability on prohibited transactions
imposed under Section 4975 of the Code or ERISA, (iii) fail to pay to any such
employee benefit plan any contribution which it is obligated to pay under
Section 302 of ERISA, Section 412 of the Code or the terms of such plan, (iv)
allow or suffer to exist any accumulated funding deficiency, whether or not
waived, with respect to any such employee benefit plan, (v) allow or suffer to
exist any occurrence of a reportable event or any other event or condition which
presents a material risk of termination by the Pension Benefit Guaranty
Corporation of any such employee benefit plan that is a single employer plan,
which termination could result in any liability to the Pension Benefit Guaranty
Corporation or (vi) incur any withdrawal liability with respect to any
multiemployer pension plan.
(b) As used in this Section 9.16, the terms "employee benefit
plans", "accumulated funding deficiency" and "reportable event" shall have the
respective meanings assigned to them in ERISA, and the term "prohibited
transaction" shall have the meaning assigned to it in Section 4975 of the Code
and ERISA.
9.17 Costs and Expenses. Borrower shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in
31
37
respect hereof and thereof, including: (a) all costs and expenses of filing or
recording (including Uniform Commercial Code financing statement filing taxes
and fees, documentary taxes, intangibles taxes and mortgage recording taxes and
fees, if applicable); (b) all insurance premiums, appraisal fees and search
fees; (c) costs and expenses of remitting loan proceeds, collecting checks and
other items of payment, and establishing and maintaining the Blocked Accounts,
together with Lender's customary charges and fees with respect thereto; (d)
costs and expenses of preserving and protecting the Collateral; (e) costs and
expenses paid or incurred in connection with obtaining payment of the
Obligations, enforcing the security interests and liens of Lender, selling or
otherwise realizing upon the Collateral, and otherwise enforcing the provisions
of this Agreement and the other Financing Agreements or defending any claims
made or threatened against Lender arising out of the transactions contemplated
hereby and thereby (including preparations for and consultations concerning any
such matters); (f) all out-of-pocket expenses and costs heretofore and from time
to time hereafter incurred by Lender during the course of periodic field
examinations of the Collateral and Borrower's operations, plus a per diem charge
at the rate of $600 per person per day for Lender's examiners in the field and
office; and (g) the reasonable fees and disbursements of counsel (including
legal assistants) to Lender in connection with any of the foregoing.
9.18 Continuing Consulting Agreement. Borrower will continue to retain
and Xxx Xxxx will continue to consult to the Borrower for a period of not less
than six months following the last to occur of the dates when a new chief
executive officer and chief financial officer commence full time employment at
the Borrower.
9.19 Further Assurances. At the request of Lender at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or cause
to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans
contained herein are satisfied. In the event of such request by Lender, Lender
may, at its option, cease to make any further Loans until Lender has received
such certificate and, in addition, Lender has determined that such conditions
are satisfied. Where permitted by law, Borrower hereby authorizes Lender to
execute and file one or more UCC financing statements signed only by Lender.
10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more
of the following events are referred to Event of Default", and collectively as
"Events of Default": herein individually as an "
(a) (i) Borrower fails to pay when due any of the Obligations or
(ii) Borrower fails to perform any of the covenants contained in Sections 9.3,
9.6, 9.10, 9.12, 9.13 and 9.16 of this Agreement and such failure shall continue
for ten (10) days; provided, that, such ten (10) day
32
38
period shall not apply in the case of: (A) any failure to observe any such
covenant which is not capable of being cured at all or within such ten (10) day
period or which has been the subject of a prior failure within a six (6) month
period or (B) an intentional breach by Borrower of any such covenant or (iii)
Borrower fails to perform any of the terms, covenants, conditions or provisions
contained in this Agreement or any of the other Financing Agreements other than
those described in Sections 10.1(a)(i) and 10.1(a)(ii) above;
(b) any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(c) any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) any judgment for the payment of money is rendered against
Borrower or any Obligor in excess of $50,000 in any one case or in excess of
$100,000 in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against Borrower or
any Obligor or any of their assets, provided, that with respect to an attachment
on assets other than Accounts, cash or bank accounts of the Borrower in an
amount less than $50,000 for which there is sufficient Excess Availability to
create an Availability Reserve in the amount of such attachment, so long as
Borrower uses diligent efforts to cause such attachment to be dismissed such
attachment shall not constitute an Event of Default unless it is not dismissed
within ninety (90) days;
(e) Borrower or any Obligor, which is a partnership, limited
liability company, limited liability partnership or a corporation, dissolves or
suspends or discontinues doing business;
(f) Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against Borrower or any Obligor or all or any part of its
properties and such petition or application is not dismissed within thirty (30)
days after the date of its filing or Borrower or any Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
33
39
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or any Obligor or for all or any part of its
property; or
(i) any default by Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money owing to
any person other than Lender, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, in any case
in an amount in excess of $50,000, which default continues for more than the
applicable cure period, if any, with respect thereto, or any default by Borrower
or any Obligor under any material contract, lease, license or other obligation
to any person other than Lender, which default continues for more than the
applicable cure period, if any, with respect thereto;
(j) any Change in Control of Borrower;
(k) the indictment or threatened indictment of Borrower or any
Obligor under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against Borrower or any Obligor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of Borrower or such Obligor;
(l) there shall be a material adverse change in the business,
assets or prospects of Borrower or any Obligor after the date hereof; or
(m) there shall be a continuing, uncured event of default under any
of the other Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by Borrower or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
34
40
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrower, at Borrower's expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrower and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Lender. If notice of disposition of Collateral is
required by law, ten (10) days prior notice by Lender to Borrower designating
the time and place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrower waives any other notice. In the event
Lender institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrower waives the posting of any bond
which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrower shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including reasonable attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or reduce the lending formulas or amounts of Revolving Loans
available to Borrower and/or (ii) terminate any provision of this Agreement
providing for any future Loans to be made by Lender to Borrower.
(e) Borrower acknowledges and agrees that each and every Event
of Default described above shall be of equal weight and significance, and
equally and fully shall allow Lender to exercise its rights and remedies
hereunder. Borrower acknowledges and agrees that
35
41
each such Event of Default has been a material inducement for Lender to enter
into this Agreement and that Lender would be irreparably harmed if Lender, in
any way, were unable to exercise its rights and remedies on the basis that
certain Events of Default (for example, Events of Default not relating to
payment) were of less weight or significance than certain other Events of
Default (for example, Events of Default relating to payment).
11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the Commonwealth of
Massachusetts (without giving effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Superior Court of Suffolk County and any
appellate court of the Commonwealth of Massachusetts and the United States
District Court for the District of Massachusetts and waive any objection based
on venue or forum non- conveniens with respect to any action instituted therein
arising under this Agreement or any of the other Financing Agreements or in any
way connected with or related or incidental to the dealings of the parties
hereto in respect of this Agreement or any of the other Financing Agreements or
the transactions related hereto or thereto, in each case whether now existing or
hereafter arising, and whether in contract, tort, equity or otherwise, and agree
that any dispute with respect to any such matters shall be heard only in the
courts described above (except that Lender shall have the right to bring any
action or proceeding against Borrower or its property in the courts of any other
jurisdiction which Lender deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against Borrower or its
property).
(c) Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails, or,
at Lender's option, by service upon Borrower in any other manner provided under
the rules of any such courts. Within thirty (30) days after such service,
Borrower shall appear in answer to such process, failing which Borrower shall be
deemed in default and judgment may be entered by Lender against Borrower for the
amount of the claim and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW
36
42
EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE. BORROWER AND LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY AND THAT BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether
in tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions if the Lender constituting gross negligence or
willful misconduct. In any such litigation, Lender shall be entitled to the
benefit of the rebuttable presumption that it acted in good faith and with the
exercise of ordinary care in the performance by it of the terms of this
Agreement.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Lender may elect to give shall entitle Borrower
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any
provision hereof shall be amended, modified, waived or discharged orally or by
course of conduct, but only by a written agreement signed by an authorized
officer of Lender, and as to amendments, as also signed by an authorized officer
of Borrower. Lender shall not, by any act, delay, omission or otherwise be
deemed to have expressly or impliedly waived any of its rights, powers and/or
remedies unless such waiver shall be in writing and signed by an authorized
officer of Lender. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Lender of any right, power and/or
remedy on any one occasion shall not be construed as a bar to or waiver of any
such right, power and/or remedy which Lender would otherwise have on any future
occasion, whether similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to
interpose any claims, deductions, setoffs or counterclaims of any nature (other
then compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Lender, and
its directors, agents, employees and counsel, harmless from and against any and
all losses, claims, damages, liabilities, costs or expenses imposed on, incurred
by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened
37
43
related to the negotiation, preparation, execution, delivery, enforcement,
performance or administration of this Agreement, any other Financing Agreements,
or any undertaking or proceeding related to any of the transactions contemplated
hereby or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the fees and expenses of
counsel unless it is determined by a final and non-appealable judgment or court
order binding on such indemnified person that the losses were the result of acts
or omissions of the indemnified person constituting gross negligence or wilful
misconduct. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in this Section may be unenforceable because it violates any
law or public policy, Borrower shall pay the maximum portion which it is
permitted to pay under applicable law to Lender in satisfaction of indemnified
matters under this Section. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date three (3) years
from the date hereof (the "Renewal Date"), and from year to year thereafter,
unless sooner terminated pursuant to the terms hereof. Lender or Borrower may
terminate this Agreement and the other Financing Agreements effective on the
Renewal Date or on the anniversary of the Renewal Date in any year by giving to
the other party at least sixty (60) days prior written notice; provided, that,
this Agreement and all other Financing Agreements must be terminated
simultaneously. Upon the effective date of termination or non-renewal of the
Financing Agreements, Borrower shall pay to Lender, in full, all outstanding and
unpaid Obligations and shall furnish cash collateral to Lender in such amounts
as Lender determines are reasonably necessary to secure Lender from loss, cost,
damage or expense, including attorneys' fees and legal expenses, in connection
with any contingent Obligations and checks or other payments provisionally
credited to the Obligations and/or as to which Lender has not yet received final
and indefeasible payment. Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrower for such purpose. Interest shall be due until and including the next
business day, if the amounts so paid by Borrower to the bank account designated
by Lender are received in such bank account later than 12:00 noon, Boston,
Massachusetts time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
38
44
(c) If for any reason this Agreement is terminated prior to
the end of the then current term or renewal term of this Agreement, in view of
the impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof due to Lender's agreement to defer payment of fees
that would otherwise be charged at the inception of this Agreement, Borrower
agrees to pay to Lender, upon the effective date of such termination, an early
termination fee in the amount set forth below if such termination is effective
in the period indicated:
Amount Period
------ ------
(i) 5% of Maximum Credit From the date hereof to and including the first
anniversary of the date hereof
(ii) 1 1/2% of Maximum Credit From the day after the first anniversary of the
date hereof to and including the second
anniversary of the date hereof
(iii) 1% of Maximum Credit From the day after the second anniversary of the
date hereof to and including the third
anniversary of the date hereof.
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Lender does not exercise its right to terminate this Agreement, but elects, at
its option, to provide financing to Borrower or permit the use of cash
collateral under the United States Bankruptcy Code. The early termination fee
provided for in this Section 12.1 shall be deemed included in the Obligations.
12.2 Notices. All notices, requests and demands hereunder shall be
in writing and (a) made to Lender at its address set forth below and to Borrower
at its chief executive office set forth below, or to such other address as
either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver the
next business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held
to be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to
39
45
be invalid or unenforceable and the rights and obligations of the parties shall
be construed and enforced only to such extent as shall be permitted by
applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and
any other document referred to herein or therein shall be binding upon and inure
to the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans or any other interest
herein to another financial institution or other person, in which event, the
assignee or participant shall have, to the extent of such assignment or
participation, the same rights and benefits as it would have if it were the
Lender hereunder, except as otherwise provided by the terms of such assignment
or participation.
12.5 Entire Agreement. This Agreement, the other Financing
Agreements, any supplements hereto or thereto, and any instruments or documents
delivered or to be delivered in connection herewith or therewith represents the
entire agreement and understanding concerning the subject matter hereof and
thereof between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to
be duly executed as of the day and year first above written.
LENDER BORROWER
CONGRESS FINANCIAL CORPORATION CENTENNIAL TECHNOLOGIES, INC.
(NEW ENGLAND)
By: __________________________ By: __________________________________
Name: ____________________ Name: ____________________________
Title:____________________ Title:____________________________
Address: Chief Executive Office:
Xxx Xxxx Xxxxxx Xxxxxx 0 Xxxxx Xxxx
Xxxxxx, XX 00000 Xxxxxxxxxx, XX 00000
40
46
EXHIBIT A
INFORMATION CERTIFICATE
(SEE ATTACHED)
1
47
SCHEDULE 8.4
EXISTING LIENS
Lienholder Covered Assets Amount Indebtedness Secured Interest
---------- -------------- ------ ------------ ----------------
Maturity Rate
-------- ----
1
48
SCHEDULE 8.8
BANK ACCOUNTS
Bank Name and Address Account Number Type of Account
BankBoston 551-06632 Checking/Operating
Xxxxxx Brothers 834-62173-11 Investments
BankBoston 551-06645 Payroll
1
49
SCHEDULE 8.9
ENVIRONMENTAL MATTERS
None
1
50
SCHEDULE 9.10
EXISTING LOANS, ADVANCES AND GUARANTEES
Terms
Type of Obligation Obligor Amount Maturity Date Interest Rate
Debenture Century
Electronics
Manufacturing,
Inc.
Loan Century
Electronics
Manufacturing,
Inc.
1
