Exhibit 10.18
DEMAND LINE OF CREDIT
LOAN AND SECURITY AGREEMENT
THIS DEMAND LINE OF CREDIT LOAN AND SECURITY AGREEMENT, dated May 30,
1997, by and between VIVID TECHNOLOGIES, INC., a Delaware corporation
duly qualified in Massachusetts and with a principal place of
business in Woburn, Massachusetts (the "Borrower") and BANKBOSTON,
N.A., a national banking association with its head office in Boston,
Massachusetts (the "Lender"), successor by merger with BAYBANK, N.A.
W I T N E S S E T H:
BACKGROUND. The Borrower has requested the Lender to lend it up to
$5,000,000.00 on a revolving loan basis (the "Loan"). The Lender is
willing to accommodate the Borrower's requests upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises herein contained,
and each intending to be legally bound hereby, the parties agree as
follows:
ARTICLE 1. DEFINITIONS
As used herein:
1.01 "Accounts," "Chattel Paper," "Contracts," "Documents,"
"Equipment," "Fixtures," "General Intangibles," "Goods,"
"Instruments," and "Inventory" shall have the same respective
meanings as are given to those terms in the Uniform Commercial Code
as presently adopted and in effect in the Commonwealth of
Massachusetts.
1.02 "Advance(s)" means the Lender's Loan advances to the Borrower
under this Agreement to reimburse the Borrower for amounts paid or to
be paid by the Borrower for Goods.
1.03 "Affiliate" means, as to any Person, each other Person that
directly, or indirectly through one or more intermediaries, controls,
or is controlled by, or under common control with, such Person or is
a related entity (including, but not limited to, partnerships, joint
ventures, joint stock companies, corporations) to the Borrower.
1.04 "Agreement" means this Demand Line of Credit Loan and Security
Agreement, as the same may from time to time be amended or
supplemented.
1.05 "Availability Date" means February 28, 1998. The Availability
Date may be extended by the Lender at its sole discretion.
1.06 "Borrowing Availability" means the amount which is equal at any
given time to the total of (1) the Borrowing Base, less (2) the
aggregate amount of all Advances then outstanding together with
interest at the Rate, as defined in Section 2.05 hereof.
1.07 "Borrowing Base" means a maximum credit availability of
$5,000,000.00, pursuant to the Loan. At no time shall the Borrowing
Base exceed $5,000,000.00.
1.08 "Business Day" means any day other than a Saturday, Sunday, or
other day on which commercial banks in Boston, Massachusetts are
authorized or required to close pursuant to Massachusetts or Federal
laws; if the day relates to a LIBOR Loan, LIBOR Interest Period or
notice with respect to a LIBOR Loan, "Business Day" shall mean a day
on which dealings in U. S. Dollar deposits are also carried on in the
London interbank market and banks are open for business in London on
which the Federal Reserve Bank of New York is open for business.
1.09 "Closing" has the meaning given to such term in Section 3.01.
1.10 "Collateral" has the meaning given to such term in Section 4.01.
1.11 "Collateral Documents" means the UCC Financing Statements
specified in Section 3.01(C) and the documents, whether deliverable
at or after the Closing, required under Article 4.0.
1.12 "Current Assets" means, at any time, all assets that should in
accordance with GAAP, be classified as current assets on a balance
sheet of the Borrower and its Subsidiary.
1.13 "Current Liabilities" means, at any time, all Indebtedness that
should, in accordance with GAAP, be classified as current liabilities
on a consolidated balance of the Borrower and its Subsidiary.
1.14 "Current Ratio" means, at any time, Current Assets divided by
Current Liabilities.
1.15 "Event of Default" has the meaning provided in Section 7.01.
1.16 "Financial Statements" means (1) the consolidated balance sheet
of the Borrower and its Subsidiary as of September 30, 1996, and
consolidated statements of income, stockholders' equity, and changes
in financial position, and notes thereto, of the Borrower for the
year ended on such date, certified as to the year ended September 30,
1996 by a CPA acceptable to Lender; and (2) as to the first quarter
of the 1997 fiscal year ended December 31, 1996, the consolidated
balance sheet of the Borrower and its Subsidiary and consolidated
statements of income, stockholders' equity, and changes in financial
position, and notes thereto, of the Borrower prepared and certified
by the treasurer to present fairly the consolidated financial
position and results of operations of the Borrower at such dates and
for such periods in accordance with GAAP.
1.17 "GAAP" means generally accepted accounting principles applied
consistently with such changes or modifications thereto as may be
approved in writing by the Lender.
1.18 "Indebtedness" means, as to the Borrower or any Subsidiary, all
items of indebtedness, obligation or liability whether matured or
unmatured, liquidated or unliquidated, direct or contingent, joint or
several, including, but without limitation:
(A) All indebtedness guarantied, directly or indirectly, in any
manner, or endorsed (other than for collection or deposit in the
ordinary course of business) or discounted with recourse;
(B) All indebtedness in effect guarantied, directly or
indirectly, through agreements, contingent or otherwise: (1) to
purchase such indebtedness; or (2) to purchase, sell, or lease (as
lessee or lessor) property, products, materials, or supplies or to
purchase or sell services, primarily for the purpose of enabling the
debtor to make payment of such indebtedness or to insure the owner of
the indebtedness against loss; or (3) to supply funds to, or in any
other manner invest in, the debtor;
(C) All indebtedness secured by (or for which the holder of
such indebtedness has a right, contingent or otherwise, to be secured
by) any mortgage, deed of trust, pledge, lien, security interest, or
other charge or encumbrance upon property owned or acquired subject
thereto, whether or not the liabilities secured thereby have been
assumed; and
(D) All indebtedness incurred as the lessee of Goods or
services under leases that, in accordance with GAAP, should not be
reflected on the lessee's balance sheet.
1.19 "Intellectual Property" means trademarks, service marks, trade
names, trade styles, logos, goodwill, trade secrets, patents,
copyrights and licenses acquired under any statutory, common law or
registration process in any state or nation at any time, or under any
agreement executed with any person or entity at any time. The term
"license" refers not only to rights granted by agreement from the
owner of patents, trademarks, service marks and the like, but also to
rights granted by a franchiser under a franchise or similar
agreement. The foregoing enumeration is not intended as a limitation
of the meaning of the word "license". A complete list of all of the
Borrower's Intellectual Property registrations, claims, filings, or
pending applications for any of the foregoing, wherever registered,
claimed or filed showing the place of filing, the registration,
claim, filing or application number and date is attached hereto as
Exhibit 1.19.
1.20 "Landlord's Consent and Waiver" means that certain Landlord's
Consent and Waiver, a copy of which is attached hereto as Exhibit
1.20, executed by the Borrower and to be duly recorded or filed for
the benefit of the Lender, as from time to time supplemented or
amended.
1.21 "Laws" means all ordinances, statutes, rules, regulations,
orders, injunctions, writs, or decrees of any government or political
subdivision or agency thereof, or of any court or similar entity
established by any thereof.
1.22 "LIBOR" means the London Interbank Offered Rate.
1.23 "LIBOR Interest Period" means, with respect to any LIBOR Loan,
the period commencing on the date such loan is made and ending, as
the Borrower may select pursuant to Section 2.05 of this Agreement,
7, 30, 60, 90 or 180 days thereafter; provided, however, that:
(a) no LIBOR Interest Period may extend beyond the
Availability Date;
(b) if a LIBOR Interest Period would end on a day that is
not a Business Day, such LIBOR Interest Period shall be extended to
the next Business Day unless such Business Day would fall in the next
calendar month, in which event such LIBOR Interest Period shall end
on the immediately preceding Business Day.
1.24 "LIBOR Loan" means any Advance for which the Borrower makes a
Rate Selection of a LIBOR Rate.
1.25 "LIBOR Rate" means the rate of interest determined by the Lender
to be the prevailing rate per annum at which deposits in U.S. dollars
are offered to the Lender in the interbank Eurodollar market in which
it regularly participates on or about 10:00 A.M. (Boston time) at
least three (3) Business Days before the effective date of the Rate
Selection as set forth in Section 2.05 in an amount approximately
equal to the principal amount of the Advance to which the selected
LIBOR Interest Period is to apply for a period of time approximately
equal to such LIBOR Interest Period.
1.26 "Letter of Credit" means any irrevocable letter of credit
payable in the United States or at the issuing bank, subject to
Uniform Customs and Practice for Documentary Credits (1993 Revisions)
(UCP 500) issued for the benefit of Borrower.
1.27 "Net Sales" means for the applicable period, all proceeds from
the sale of goods and services by the Borrower in the ordinary course
of the Borrower's business, net of fees, commissions, freight charges
and other allowances, adjustments, credits, or similar charges.
1.28 "Note" means the promissory note referred to in Section 2.03.
1.29 "Obligations" is intended to be used in its most comprehensive
sense and means all the obligations of the Borrower to the Lender of
every kind and description, whether direct or indirect, absolute or
contingent, primary or secondary, joint or several, due or to become
due, now existing or hereafter arising or acquired and whether by way
of loan, discount, letter of credit, lease or otherwise, including
without limitation, the following obligations:
(A) To pay the principal of, and interest on, the Note in
accordance with the terms thereof and to satisfy all other
liabilities to the Lender, whether hereunder or otherwise, whether
now existing or hereafter incurred, matured or unmatured, direct or
contingent, joint or several, including any extensions,
modifications, renewals thereof and substitutions therefor;
(B) To repay to the Lender all amounts advanced by the Lender
hereunder or otherwise on behalf of the Borrower, including, but
without limitation, advances for principal or interest payments to
prior secured parties, mortgagees, or lienors, or for taxes, levies,
insurance, rent, or repairs to, or maintenance or storage of, any of
the Collateral;
(C) To perform and observe all covenants, agreements and
undertakings of the Borrower pursuant to the terms and conditions of
this Agreement, the Collateral Documents or any other agreement or
instrument now or hereafter delivered to the Lender by the Borrower;
and
(D) To reimburse the Lender, on demand, for all of the Lender's
expenses and costs, including without limitation the reasonable fees
and expenses of its counsel, in connection with the preparation,
administration, amendment, modification, or enforcement of this
Agreement and the documents required hereunder, including, without
limitation, any proceeding brought, or threatened, to enforce payment
or performance of any of the obligations referred to in the foregoing
paragraphs (A), (B) and (C).
1.30 "Operating Account" means the account opened by Borrower at the
offices of the Lender, Account #▇▇▇▇▇▇▇▇, used for the purposes of
disbursement and repayment of the Loan as set out in Sections 2.01
and 2.06.
1.31 "Permitted Liens" means:
(A) Liens for taxes, assessments, or similar charges, incurred
in the ordinary course of business, that are not yet due and payable;
(B) Pledges or deposits made in the ordinary course of business
to secure payment of worker's compensation, or to participate in any
fund in connection with worker's compensation, unemployment
insurance, old-age pensions, or other social security programs;
(C) Liens of mechanics, materialmen, warehousemen, carriers, or
other like liens, securing obligations incurred in the ordinary
course of business that are not yet due and payable;
(D) Good faith pledges or deposits made in the ordinary course
of business to secure performance of bids, tenders, contracts (other
than for the repayment of borrowed money) or leases, not in excess of
ten percent (10%) of the aggregate amount due thereunder, or to
secure statutory obligations, or surety, appeal, indemnity,
performance, or other similar bonds required in the ordinary course
of business;
(E) Encumbrances consisting of zoning restrictions, easements,
or other restrictions on the use of real property, none of which
materially impairs the use of such property by the Borrower in the
operation of its business, and none of which is violated in any
material respect by existing or proposed structures or land use;
(F) Liens in favor of the Lender, including, but not limited to
the Lender's first priority security interest on a certain telephone
system as more particularly described on Exhibit 1.31, attached
hereto and made a part hereof;
(G) Existing liens set forth or described on Exhibit 1.31,
attached hereto and made a part hereof;
(H) Purchase money security interests granted to secure not
more than seventy-five per cent (75%) of the purchase price of
assets, the purchase of which does not violate this Agreement or any
instrument required hereunder; and
(I) The following, if the validity or amount thereof is being
contested in good faith by appropriate and lawful proceedings, so
long as levy and execution thereon have been stayed and continue to
be stayed and they do not, in the aggregate, materially detract from
the value of the property of the Borrower or any Subsidiary, or
materially impair the use thereof in the operation of its business:
(1) Claims or liens for taxes, assessments, or charges due
and payable and subject to interest or penalty;
(2) Claims, liens and encumbrances upon, and defects of
title to, real or personal property, including any attachment of
personal or real property or other legal process prior to
adjudication of a dispute on the merits;
(3) Claims or liens of mechanics, materialmen,
warehousemen, carriers, or other like liens; and
(4) Adverse judgments on appeal.
1.32 "Person" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
joint venture, court, or government or political subdivision or
agency thereof.
1.33 "Prime Rate Loan" means any Advance for which the Borrower makes
a Rate Selection of the Prime Rate.
1.34 "Records" means correspondence, memoranda, tapes, disks,
diskettes, papers, books and other documents, or transcribed
information of any type, whether expressed in ordinary or machine-
readable language.
1.35 "Stockholders' Equity" means, at any time the aggregate of
Subordinated Indebtedness, plus the sum of the following accounts set
forth on a consolidated balance sheet of the Borrower and its
Subsidiary prepared in accordance with GAAP: (A) the par or stated
value of all outstanding capital stock; (B) capital surplus; and (C)
retained earnings.
1.36 "Subordinated Indebtedness" means all Indebtedness incurred at
any time by the Borrower or any Subsidiary, the repayment of which is
subordinated to the Loan in form and manner satisfactory to the
Lender and includes, without limitation, any notes, bonds,
debentures, or other debts of Borrower to its officers, directors or
stockholders. All existing Subordinated Indebtedness is so specified
in Exhibit 1.36.
1.37 "Subsidiary" means any Affiliate that is directly, or indirectly
through one or more intermediaries, controlled by the Borrower or not
less than 50% of the voting capital stock of which is owned, directly
or through one or more intermediaries, by the Borrower.
1.38 "Tangible Net Worth" means, at any time, Stockholders' Equity,
less the sum of:
(A) Any surplus resulting from any write-up of assets
subsequent to December 31, 1996;
(B) The value of goodwill, including any amounts, however
designated on a consolidated balance sheet of the Borrower and its
Subsidiary, representing the excess of the purchase price paid for
assets or stock acquired over the value assigned thereto on the books
of the Borrower;
(C) The value of Patents, trademarks, trade names, copyrights
and licenses;
(D) Any amount at which shares of capital stock of the Borrower
appear as an asset on the Borrower's balance sheet;
(E) Loans and advances to stockholders, directors, officers, or
employees;
(F) Deferred expenses; and
(G) Any other amount in respect of an intangible that should be
classified as an asset on a consolidated balance sheet of the
Borrower and its Subsidiary in accordance with GAAP.
1.39 "Total Liabilities" means, at any time, all Indebtedness that
should, in accordance with GAAP, be classified as liabilities on a
consolidated balance of the Borrower and its Subsidiary.
1.40 Accounting. Accounting terms used and not otherwise defined in
this Agreement have the meanings determined by, and all calculations
with respect to accounting or financial matters unless otherwise
provided herein shall be computed in accordance with, GAAP.
ARTICLE 2. THE LOAN
2.01 Disbursement of the Loan.
Advances shall only be made upon the written request of the
Borrower. The Borrower may make requests for Advances by facsimile
transmissions to the Lender. The Lender will credit the proceeds of
the Loan to the Operating Account.
2.02 General Terms.
Subject to the terms hereof, the Lender will lend the Borrower,
from time to time until the Availability Date or until such time as
the Lender makes demand on the Note, whichever occurs first, such
sums in integral multiples of $10,000.00 as the Borrower may request
by written notice to the Lender as set forth herein, but which sums
shall not exceed, in the aggregate principal amount at any one time
outstanding, Five Million and 00/100 Dollars ($5,000,000.00). The
Borrower may borrow, repay and reborrow hereunder, from the date of
this Agreement until the Availability Date or such time as the Lender
makes demand on the Note, whichever occurs first.
2.03 The Note.
The Loan shall be evidenced by a note in the form attached
hereto as Exhibit 2.03, payable on demand, but in any event due and
payable on the first Business Day after the Availability Date.
2.04 The Facility Fee.
In consideration of the Loan, from and after the date of this
Agreement up to and including the Availability Date, the Borrower
shall pay the Lender a facility fee of one-quarter of one percent
(0.25%) on the average daily Borrowing Availability during each
fiscal quarter or portion thereof. The facility fee shall be
payable, without demand, on the last day of each fiscal quarter
commencing June 30, 1997. The Borrower shall make payment of the
facility fee by wire transfer, certified check or by authorizing the
Lender to withdraw readily available funds from the Operating
Account.
2.05 Interest Rate and Payments of Interest.
(A) Except as otherwise provided in Section 2.05(B), interest
on the principal balance of the Loan from time to time outstanding
until the Availability Date or demand, whichever first occurs, shall
be determined as follows:
(1) The Borrower shall have the right to select any of the
interest rates (the "Rate") set forth below to be used in computing
the rate of interest to be paid with respect to each Advance. Such
rate shall be selected in advance by the Borrower by written notice
to the Lender, specifying the date and amount of the requested
Advance, the rate selected, the effective date of such selection, and
in the case of a LIBOR Loan, the LIBOR Interest Period (the "Rate
Selection"). The Borrower may not designate more than one Rate
Selection for incremental portions of an Advance. The Rate Selection
must be received by the Lender not less than three (3) Business Days
prior to the effective date of the Rate Selection. Each Rate
Selection shall be irrevocable.
The Borrower shall have the option to elect a new Rate
Selection for a LIBOR Loan by giving written notice of such election
to the Lender received no later than 10:00 a.m. (Boston time) on that
date which is three (3) Business Days before the end of the then
applicable LIBOR Interest Period. If the Borrower does not provide
the Lender in writing with a new Rate Selection within the applicable
time limits specified herein, the Borrower shall be deemed to have
elected to convert such LIBOR Loan into a Prime Rate Loan as of the
last day of the then current LIBOR Interest Period. Notwithstanding
the foregoing, the Borrower may not select a LIBOR Interest Period
that would end, but for the provisions of the definition of LIBOR
Interest Period, after the Availability Date.
Pursuant to the foregoing paragraph, the Borrower
shall select from the following rates of interest:
(a) A floating rate equal to the Prime
Rate in effect from time to time as such rate
shall change from time to time. As used herein,
"Prime Rate" means the rate of interest published
internally and so designated by the Lender from
time to time. Each time the Prime Rate shall
change, the interest rate shall change
contemporaneously with such change in the Prime
Rate.
(b) A rate equal to the LIBOR 7-day
index rate plus two and one-quarter percent
(2.25%).
(c) A rate equal to the LIBOR 30-day
index rate plus two and one-quarter percent
(2.25%).
(d) A rate equal to the LIBOR 60-day
index rate plus two and one-quarter percent
(2.25%).
(e) A rate equal to the LIBOR 90-day
index rate plus two and one-quarter percent
(2.25%).
(f) A rate equal to the LIBOR 180-day
index rate plus two and one-quarter percent
(2.25%).
Each Advance subject to a Rate Selection under clause
(a) above shall be subject to repayment at the Borrower's option at
any time in whole or in part in increments of $10,000 plus accrued
interest to the prepayment date without penalty. If the Borrower
prepays all or any portion of an Advance made hereunder to which a
LIBOR Rate applies prior to the last day of the LIBOR Interest Period
selected for such Advance, the Borrower shall, immediately upon the
Lender's request, pay as a prepayment fee an amount calculated by the
Lender which reimburses the Lender for any loss incurred by the
Lender upon reinvestment of the balance of the Advance at a rate less
than the LIBOR Rate, plus any administrative costs incurred by the
Lender in connection therewith. The prepayment fee shall be paid to
the Lender in immediately available funds. The prepayment fee is not
intended as a penalty, but is to compensate the Lender for the
favorable credit terms and other financial accommodations extended to
the Borrower by the Lender.
(2) After the occurrence of an Event of Default, the
Availability Date or demand, if any, interest shall be paid at a Rate
equal to four percent (4%) above the Prime Rate in effect from time
to time after the first to occur of an Event of Default, the
Availability Date, or demand.
(B) It is the intention of the parties hereto to conform
strictly to applicable usury laws as in effect, from time to time,
during the term of the Loan. Accordingly, if any transaction or
transactions contemplated hereby would be usurious under applicable
law (including the laws of the United States of America, or of any
other jurisdiction whose laws may be applicable), then, in that
event, notwithstanding anything to the contrary in this Agreement or
any other agreement entered into in connection with this Agreement,
it is agreed as follows: (1) the provisions of this Section 2.05(B)
shall govern and control; (2) the aggregate of all interest under
applicable law that is contracted for, charged, or received under
this Agreement or under any of the other aforesaid agreements or
otherwise in connection with this Agreement shall under no
circumstances exceed the maximum amount of interest allowed by
applicable law, and any excess shall be promptly credited to the
Borrower by the Lender (or, if such consideration shall have been
paid in full, such excess shall be promptly refunded to the Borrower
by the Lender); (3) neither the Borrower nor any person or entity now
or hereafter liable in connection with this Agreement shall be
obligated to pay the amount of such interest to the extent that it is
in excess of the maximum interest permitted by the applicable usury
laws; and (4) the effective rate of interest shall be ipso facto
reduced to the Highest Lawful Rate hereinafter defined. All sums
paid, or agreed to be paid, to the Lender for the use, forbearance,
and detention of the indebtedness of the Borrower to the Lender
shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full term of the Note
until payment is made in full so that the actual rate of interest
does not exceed the Highest Lawful Rate in effect at any particular
time during the full term thereof. The maximum lawful interest rate,
if any, referred to in this Section 2.05(B) that may accrue pursuant
to this Agreement is referred to herein as the "Highest Lawful Rate".
If at any time the Rate exceeds the Highest Lawful Rate, the rate of
interest to accrue pursuant to this Agreement shall be limited,
notwithstanding anything to the contrary in this Agreement, to the
Highest Lawful Rate, but any subsequent reductions in the Prime Rate
shall not reduce the interest to accrue pursuant to this Agreement
below the Highest Lawful Rate until the total amount of interest
accrued pursuant to this Agreement equals the amount of interest that
would have accrued if a varying rate per annum equal to the Rate had
at all times been in effect. If the total amount of interest paid or
accrued pursuant to this Agreement under the foregoing provisions is
less than the total amount of interest that would have accrued if a
varying rate per annum equal to the Rate had at all times been in
effect, then the Borrower agrees to pay to the Lender an amount equal
to the difference between (a) the lesser of (i) the amount of
interest that would have accrued if the Highest Lawful Rate had at
all times been in effect, or (ii) the amount of interest that would
have accrued if a varying rate per annum equal to the Rate had at all
times been in effect, and (b) the amount of interest accrued in
accordance with the other provisions of this Agreement.
2.06 Payment to the Lender.
Interest, computed as specified in Section 2.05 above, shall be
calculated on the basis of a 360-day year, counting the actual number
of days elapsed, and shall be payable in arrears as follows:
Interest on any Advance or portion thereof for which the Borrower
selected a rate based on the Prime Rate shall be payable on the last
day of each month. Interest on any Advance or portion thereof for
which the Borrower selects a rate based on an LIBOR Interest Period
shall be payable on the last day of the applicable LIBOR Interest
Period.
An account shall be maintained on the books of the Lender which
shall be designated as Borrower's "Loan Account," in which account a
record will be kept of all loans made by the Lender to the Borrower
under or pursuant to the Note and all payments thereon. All payments
due thereunder will first be credited to accrued but unpaid interest
and the balance to principal, except that if an Event of Default
continues beyond any applicable grace period or a demand is made for
payment, the Lender may apply amounts thereafter received to
principal and/or interest in whatever order it deems appropriate. If
more than one interest rate is applicable, such payments will be
applied as aforesaid and pro rata in relation to the increments of
principal to which such rates apply.
The Lender shall send the Borrower statements of all amounts
paid or due hereunder, which statements shall be considered correct
and conclusively binding on the Borrower unless the Borrower notifies
the Lender to the contrary within thirty (30) days of its receipt of
any statement that it deems to be incorrect. Alternatively, at its
sole discretion, the Lender may charge any other deposit account of
the Borrower or demand payment against the statements.
Nothing in this Section 2.06 shall operate to alter the demand
nature of the Loan or otherwise to reduce, diminish or impair the
Lender's cumulative rights and remedies.
ARTICLE 3. CONDITIONS PRECEDENT
The obligation of the Lender to make the Loan is subject to the
following conditions precedent:
3.01 Documents Required for the Closing.
The Borrower shall have delivered to the Lender, prior to the
initial Advance (the "Closing"), the following:
(A) The Note duly executed by the Borrower, in the form
attached hereto as Exhibit 2.03;
(B) The Financial Statements;
(C) The UCC Financing Statements and other instruments required
by Article 4.0;
(D) The fully executed Landlord's Consent and Waiver, in the
form attached hereto as Exhibit 1.20;
(E) A copy, certified as of the date of the Closing, of
resolutions of the board of directors of the Borrower, authorizing
the execution, delivery, and performance of this Agreement, the Note,
the Collateral Documents, and each other document to be delivered
pursuant hereto or in connection herewith;
(F) A copy, certified as of the date of the Closing, of the
Borrower's bylaws;
(G) A certificate of the corporate secretary or assistant
secretary of the Borrower, dated the date of the Closing, as to the
incumbency and signatures of the officers of the Borrower signing
this Agreement, the Note, the Collateral Documents, and each other
document to be delivered pursuant hereto;
(H) A copy, certified as of the most recent date practicable by
the Secretary of the State of Delaware, of the Certificate of
Incorporation of the Borrower, and all amendments thereto, together
with a certificate (dated the date of the Closing) of the corporate
secretary or assistant secretary of the Borrower to the effect that
such Certificate of Incorporation has not been further amended since
the date of the aforesaid certification of the Secretary of the State
of Delaware;
(I) Certificates of legal existence (long form) and good
standing dated as of the most recent date practicable, issued by the
Secretary of the State of Delaware and Secretary of the Commonwealth
of Massachusetts as to the legal existence and good standing of the
Borrower, together with a certificate (dated the date of the Closing)
of the corporate secretary or assistant secretary of the Borrower to
the effect that nothing has occurred since issuance of the
Certificates of Legal Existence and Good Standing that would prevent
either the Secretary of the State of Delaware of the Secretary of the
Commonwealth of Massachusetts from issuing updated Certificates;
(J) Certificates, as of the most recent dates practicable, of
the Secretary of the State of Delaware and the Secretary of the
Commonwealth of Massachusetts and of the secretary of state of each
other state in which the Borrower is qualified as a foreign
corporation and, if applicable, of the department of revenue or
taxation of each of the foregoing states, as to the good standing of
the Borrower, together with a certificate (dated the date of the
Closing) of the corporate secretary or assistant secretary of the
Borrower to the effect that nothing has occurred since issuance of
the Certificates of Good Standing that would prevent the respective
Departments of Revenue from issuing updated Certificates;
(K) A certificate, dated the date of the Closing, signed by the
president or a vice president of the Borrower and to the effect that:
(1) The representations and warranties set forth in
Section 5.01 are true as of the date of the Closing; and
(2) No Event of Default hereunder, and no event which,
with the giving of notice or passage of time or both, would become
such an Event of Default, has occurred as of such date;
(L) Copies of all documents evidencing the terms and conditions
of any debt specified as Subordinated Indebtedness on Exhibit 1.36
and fully executed Subordination Agreements with respect to such
Subordinated Indebtedness in form and substance satisfactory to
Lender; and
(M) A certificate of insurance as required by Section 6.01(D).
3.02 Documents Required for Advances.
At the time of, and as a condition to, any Advance subsequent to
the Closing, the Lender may require the Borrower to deliver to the
Lender a certificate, dated the date on which any such Advance is to
be made, signed by the president or a vice president of the Borrower,
and to the effect that
(1) As of the date thereof, no Event of Default has occurred
and is continuing, and no event has occurred and is continuing that,
but for the giving of notice or passage of time or both, would be an
Event of Default;
(2) No material adverse change has occurred in the business
prospects, financial condition, or results of operations of the
Borrower or any Subsidiary since the date of the Financial
Statements; and
(3) Each of the representations and warranties contained in
Section 5.01 is true and correct in all respects as if made on and as
of the date of such disbursement.
3.03 Certain Events.
At the time of, and as a condition to, the Closing and each
Advance to be made by the Lender at or subsequent to the Closing:
(A) No Event of Default shall have occurred and be continuing,
and no event shall have occurred and be continuing that, with the
giving of notice or passage of time or both, would be an Event of
Default;
(B) No material adverse change shall have occurred in the
business prospects, financial condition, or results of operations of
the Borrower or any Subsidiary since the dates of the Financial
Statements; and
(C) All of the Collateral Documents shall have remained in full
force and effect.
3.04 Legal Matters.
At the time of the Closing and each subsequent Advance, all
legal matters incidental thereto shall be satisfactory to Bowditch &
▇▇▇▇▇, LLP, legal counsel to the Lender.
ARTICLE 4. COLLATERAL SECURITY
4.01 Composition of the Collateral.
The property in which a security interest is granted pursuant to
the provisions of Sections 4.02 and 4.03 is herein collectively
called the "Collateral". The Collateral, together with all other
property of the Borrower of any kind held by the Lender, shall stand
as one general, continuing collateral security for all Obligations
and may be retained by the Lender until all Obligations have been
satisfied in full.
4.02 Rights in Property Held by the Lender.
As security for the prompt satisfaction of all Obligations, the
Borrower hereby assigns, transfers, and sets over to the Lender all
of its right, title, and interest in and to, and grants the Lender a
lien on and a security interest in, all amounts that may be owing,
from time to time, by the Lender to the Borrower in any capacity,
including, but without limitation, any balance or share belonging to
the Borrower, or any deposit or other account with the Lender, which
lien and security interest shall be independent of, and in addition
to, any right of set-off that the Lender has under Section 8.07 or
otherwise.
4.03 Rights in Property Held Either by the Borrower or by the
Lender.
As further security for the prompt satisfaction of all of the
Obligations, the Borrower hereby assigns to the Lender all of its
right, title and interest in and to, and grants the Lender a lien
upon and a continuing security interest in, all of the following,
wherever located, whether now owned or hereafter acquired, together
with all replacements therefor, accessions thereto, and proceeds
(including, but without limitation, insurance proceeds) and products
thereof:
(A) All Inventory with the sole exception of the two fully
working prototype systems located at the Borrower's facility at ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, and further described as
follows:
Horizontal System Prototype Vertical System Prototype
Part # 10004-10001 Part # 10004-10001 VR
Model: H1 Model: VDS-1
Serial #: P002 Serial #: V001
(B) All Accounts, including but not limited to, Contracts,
accounts receivable, contract rights, and Chattel Paper, regardless
of whether or not they constitute proceeds or products of other
Collateral;
(C) All General Intangibles, regardless of whether or not they
constitute proceeds or products of other Collateral, including,
without limitation, all the Borrower's rights (which the Lender may
exercise or not as it in its sole discretion may determine) to
acquire or obtain Goods and/or services with respect to the
manufacture, processing, storage, sale, shipment, delivery or instal
lation of any of the Borrower's Inventory or other Collateral;
(D) All products of and accessions to any of the Collateral;
(E) All liens, guaranties, securities, rights, remedies and
privileges pertaining to any of the Collateral, including the right
of stoppage in transit;
(F) All obligations owing to the Borrower of every kind and
nature, and all choses in action;
(G) All tax refunds of every kind and nature to which the
Borrower is now or hereafter may become entitled no matter however
arising, including, without limitation, loss carryback refunds;
(H) All Intellectual Property, goodwill, trade secrets,
computer programs, customer lists, trade names, trademarks,
copyrights and patents;
(I) All Chattel Paper, Documents and Instruments (whether
negotiable or non-negotiable, and regardless of their being attached
to Chattel Paper);
(J) All Equipment, including without limitation machinery,
furniture, motor vehicles, Fixtures and all other Goods used in the
conduct of the business of the Borrower;
(K) All proceeds of Collateral of every kind and nature and in
whatever form, including, without limitation, both cash and non-cash
proceeds resulting or arising from the rendering of services by the
Borrower or the sale or other disposition by the Borrower of the
Inventory or other Collateral;
(L) All books, Records, computer disks, diskettes, electronic
data and other information relating to the conduct of the Borrower's
business including, without in any way limiting the generality of the
foregoing, those relating to its Accounts; and
(M) All deposit accounts maintained by the Borrower with any
bank, trust company, investment firm or fund, or any similar
institution or organization.
4.04 Priority of Liens.
The foregoing liens shall be first and prior liens except for
Permitted Liens.
4.05 UCC Financing Statements.
(A) The Borrower will:
(1) Execute such UCC financing statements (including
amendments thereto and continuation statements thereof) in form
satisfactory to the Lender as the Lender, from time to time, may
specify;
(2) Pay, or reimburse the Lender for paying, all costs and
taxes of filing or recording the same in such public offices as the
Lender may designate; and
(3) Take such other steps as the Lender, from time to
time, may direct, including the noting of the Lender's lien on the
Collateral and on any certificates of title therefor, all to perfect
to the satisfaction of the Lender the Lender's interest in the
Collateral.
(B) In addition to the foregoing, and not in limitation
thereof:
(1) A carbon, photographic, or other reproduction of this
Agreement shall be sufficient as a UCC financing statement and may be
filed in any appropriate office in lieu thereof; and
(2) To the extent lawful, the Borrower hereby appoints the
Lender as its attorney-in-fact (without requiring the Lender to act
as such) to execute any UCC financing statement in the name of the
Borrower, and to perform all other acts that the Lender deems
appropriate to perfect and continue its security interest in, and to
protect and preserve, the Collateral.
4.06 Mortgagees', Landlords', and Warehousemen's Waivers.
The Borrower will, within twenty (20) days after any request of
the Lender, cause any mortgagee of real estate owned by the Borrower,
any landlord of premises leased by the Borrower, and any warehouseman
or other bailee on whose premises any of the Collateral may be
located to execute and deliver to the Lender instruments, in form and
substance satisfactory to the Lender, by which such mortgagee,
landlord or warehouseman or other bailee waives its rights, if any,
in and to all Goods composing a part of the Collateral.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
5.01 Original.
To induce the Lender to enter into this Agreement, the Borrower
represents and warrants to the Lender as follows:
(A) The Borrower is a corporation duly organized, validly
existing, and in good standing under the Laws of the State of
Delaware and is duly qualified to do business in the Commonwealth of
Massachusetts; the Borrower has no Subsidiaries other than the
Subsidiary named in Exhibit 5.01(A); each Subsidiary is a corporation
duly organized, validly existing, and in good standing under the Laws
of its jurisdiction of incorporation, all as set forth in Exhibit
5.01(A); the Borrower and Subsidiary have the lawful power to own
their properties and to engage in the businesses they conduct, and
each is duly qualified and in good standing as a foreign corporation
in the jurisdictions wherein the nature of the business transacted by
it or property owned by it makes such qualification necessary; the
states in which the Borrower and the Subsidiary are qualified to do
business are set forth in Exhibit 5.01(A) or otherwise disclosed to
the Lender in writing; the percentage of the Borrower's ownership of
the outstanding stock of the Subsidiary is as listed in Exhibit
5.01(A); the addresses of all places of business of the Borrower and
its Subsidiary are as set forth in Exhibit 5.01(A) or otherwise
disclosed to the Lender in writing; neither the Borrower nor the
Subsidiary has changed its name, been the surviving corporation in a
merger, acquired any business, or changed its principal executive
office within five (5) years and one (1) month prior to the date
hereof except as set forth in Exhibit 5.01(A); and all of the
authorized, issued, and outstanding shares of capital stock of each
Subsidiary are owned by the Borrower;
(B) Neither the Borrower nor any Subsidiary is directly or
indirectly controlled by, or acting on behalf of, any Person which is
an "Investment Company", within the meaning of the Investment Company
Act of 1940, as amended;
(C) Neither the Borrower nor any Subsidiary is in default with
respect to any of its existing Indebtedness, and the making and
performance of this Agreement, the Note, and the Collateral Documents
will not (immediately or with the passage of time, the giving of
notice, or both):
(1) violate the Certificate of Incorporation or by-laws of
the Borrower or any Subsidiary, or violate any Laws or result in a
default under any contract, agreement, or instrument to which the
Borrower or any Subsidiary is a party or by which the Borrower or any
Subsidiary or its property is bound; or
(2) result in the creation or imposition of any security
interest in, or lien or encumbrance upon, any of the assets of the
Borrower or any Subsidiary except in favor of the Lender;
(D) The Borrower has the power and authority to enter into and
perform this Agreement, the Note, and the Collateral Documents, and
to incur the obligations herein and therein provided for, and has
taken all actions necessary to authorize the execution, delivery, and
performance of this Agreement, the Note, and the Collateral
Documents;
(E) This Agreement, the Note, and the Collateral Documents are,
or when delivered will be, valid, binding, and enforceable in
accordance with their respective terms;
(F) Except as disclosed in Exhibit 5.01(F) hereto, there is no
pending order, notice, claim, litigation, proceeding, or
investigation against or affecting the Borrower or any Subsidiary,
whether or not covered by insurance, that would in the aggregate
involve the payment of $10,000.00 or more or would otherwise
materially or adversely affect the financial condition or business
prospects of the Borrower or any Subsidiary if adversely determined;
(G) The Borrower and its Subsidiary have good and marketable
title to all of their assets, none of which is subject to any
security interest, encumbrance or lien, or claim of any third Person
except for Permitted Liens;
(H) The Financial Statements, including any schedules and notes
pertaining thereto, have been prepared in accordance with GAAP, and
fully and fairly present the financial condition of the Borrower and
its Subsidiary at the dates thereof and the results of operations for
the periods covered thereby, and there have been no material adverse
changes in the consolidated financial condition or business of the
Borrower and its Subsidiary from September 30, 1996, to the date
hereof;
(I) As of the date hereof, the Borrower and its Subsidiary have
no material Indebtedness of any nature, including, but without
limitation, liabilities for taxes and any interest or penalties
relating thereto except to the extent reflected (in a footnote or
otherwise) and reserved against in the consolidated balance sheet
dated September 30, 1996 included in the Financial Statements or as
disclosed in, or permitted by, this Agreement; and the Borrower does
not know or have reasonable ground to know of any basis for the
assertion against it or any Subsidiary of any claim or litigation
related to such Indebtedness as of the date of the Closing except as
disclosed on Exhibit 5.01(F) or otherwise disclosed to the Lender in
writing;
(J) Except as otherwise permitted herein, the Borrower has
filed all federal, state, and local tax returns and other reports
required by any applicable Laws to have been filed prior to the date
hereof, has paid or caused to be paid all taxes, assessments, and
other governmental charges that are due and payable prior to the date
hereof, and has made adequate provision for the payment of such
taxes, assessments, or other charges accruing but not yet payable;
the Borrower has no knowledge of any deficiency or additional
assessment in a materially important amount in connection with any
taxes, assessments, or charges not provided for on its books;
(K) Except to the extent that the failure to comply would not
materially interfere with the conduct of the business of the Borrower
or any Subsidiary, the Borrower and its Subsidiary have each complied
with all applicable Laws with respect to (1) any restrictions,
specifications, or other requirements pertaining to products that it
manufactures or sells or to the services it performs; (2) the conduct
of its business; and (3) the use, maintenance, and operation of the
real and personal properties owned or leased by it in the conduct of
its business;
(L) No representation or warranty by or with respect to the
Borrower or any Subsidiary contained herein or in any certificate or
other document furnished by the Borrower or any Subsidiary pursuant
hereto contains any untrue statement of a material fact or omits to
state a material fact necessary to make such representation or
warranty not misleading in light of the circumstances under which it
was made;
(M) Each consent, approval or authorization of, or filing,
registration or qualification with, any Person required to be
obtained or effected by the Borrower, any Subsidiary, or any
guarantor in connection with the execution and delivery of this
Agreement, the Note, and the Collateral Documents or the undertaking
or performance of any obligation hereunder or thereunder has been
duly obtained or effected;
(N) There is no Indebtedness of the Borrower or any Subsidiary:
(1) for money borrowed, or (2) under any security agreement, mortgage
or agreement covering the lease by the Borrower or any Subsidiary as
lessee of real or personal property except as reflected in the
Financial Statements or as described in Exhibit 5.01(N);
(O) Except as described in Exhibit 5.01(O), attached hereto, or
otherwise disclosed to the Lender in writing, (a) neither the
Borrower nor any Subsidiary has any material leases, contracts, or
commitments of any kind (including, without limitation, employment
agreements; collective bargaining agreements; powers of attorney;
distribution arrangements; licenses, patents, copyrights, trademarks,
service marks or license agreements; contracts for future purchase
or delivery of Goods or rendering of services; bonuses, pension, and
retirement plans; or accrued vacation pay, insurance, and welfare
agreements); (b) to the best of Borrower's knowledge, all parties to
all such material leases, contracts, and other commitments to which
the Borrower or any Subsidiary is a party have complied with the
provisions of such leases, contracts, and other commitments; and (c)
to the best of Borrower's knowledge, no party is in default under any
term thereof and no event has occurred which, but for the giving of
notice or the passage of time, or both, would constitute a default;
(P) The Borrower has not made any agreement or taken any action
which may cause anyone to become entitled to a commission or finder's
fee as a result of or in connection with the making of the Loan;
(Q) The Borrower's consolidated federal tax returns for all
years of operation, including the year ended September 30, 1996, have
been filed with the Internal Revenue Service and have not been
challenged;
(R) Any Employee Pension Benefit Plans, as defined in the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), of the Borrower and each Subsidiary meet, as of the date
hereof, the minimum funding standards of 29 U.S.C.A. 1082 (Section
302 of ERISA), and no Reportable Event or Prohibited Transaction, as
defined in ERISA, has occurred with respect to any Employee Benefit
Plans, as defined in ERISA, of the Borrower or any Subsidiary;
(S) The liens and security interests created pursuant to
Sections 4.02 and 4.03 are and will be at the Closing in all cases
first and prior liens except for Permitted Liens;
(T) Except as shown on Exhibit 1.19, Borrower has no patent
claims, trademark or copyright registrations or other filings or
applications protecting its Intellectual Property in any
jurisdiction; and
(U) The Borrower is in full compliance with all of its tenant
obligations under that certain Commercial Lease dated December 19,
1995 between the Borrower and ▇▇▇▇▇▇▇▇ Properties Management, Inc.;
the Landlord's Consent and Waiver dated as of April 4, 1996 among the
Borrower, ▇▇▇▇▇▇▇▇ Properties Management, Inc. and the Lender is in
full force and effect; and the Borrower knows of no default under the
Commercial Lease.
5.02 Survival.
All of the representations and warranties set forth in Section
5.01 shall survive until all Obligations are satisfied in full and
there remain no outstanding commitments hereunder.
ARTICLE 6. COVENANTS OF THE BORROWER
6.01 Affirmative Covenants.
The Borrower does hereby covenant and agree with the Lender
that, so long as any of the Obligations remain unsatisfied or any
commitments hereunder remain outstanding, it will comply, or if
appropriate cause its Subsidiary to comply, at all times with the
following affirmative covenants:
(A) The Borrower will use the proceeds of the Loan for working
capital purposes and will furnish the Lender such evidence as it may
reasonably require with respect to such use;
(B) The Borrower will furnish the Lender:
(1) As soon as available, but in any event within thirty
(30) days after the close of each month in each fiscal year: (a) a
statement of stockholders' equity and a statement of changes in
financial position of the Borrower for such month; (b) an income
statement of the Borrower for such month; and (c) a balance sheet of
the Borrower as of the end of such month--all in reasonable detail,
subject to normal year-end audit adjustments and certified by the
Borrower's president or chief financial officer to have been prepared
in accordance with GAAP;
(2) As soon as available, but in any event within one
hundred twenty (120) days after the close of each fiscal year: (a) a
consolidated statement of stockholders' equity and a consolidated
statement of changes in financial position of the Borrower and its
Subsidiary for such fiscal year; (b) consolidated and consolidating
income statements of the Borrower and its Subsidiary for such fiscal
year; and (c) consolidated and consolidating balance sheets of the
Borrower and its Subsidiary as of the end of such fiscal year--all
such statements to be in reasonable detail, including all supporting
schedules and comments; the consolidated statements and balance
sheets to be audited by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or another independent
certified public accountant selected by Borrower and acceptable to
the Lender, and certified by such accountants to have been prepared
in accordance with GAAP and to present fairly the consolidated
financial position and results of operations of the Borrower and its
Subsidiary; in addition, the Borrower will obtain from such
independent certified public accountants and deliver to the Lender,
within one hundred twenty (120) days after the close of each fiscal
year, their written statement that in making the examination
necessary to their certification they have obtained no knowledge of
any Event of Default by the Borrower, or disclosing all Events of
Default of which they have obtained knowledge (it being understood
and agreed by the Lender that in making their examination, such
accountants shall not be required to go beyond the bounds of
generally accepted auditing procedures for the purpose of certifying
financial statements); the Lender shall have the right, from time to
time to discuss the affairs of the Borrower directly with such
independent certified public accountants after notice to the Borrower
and opportunity of the Borrower to be represented at any such
discussions;
(3) Contemporaneously with each monthly and year-end
financial report required by the foregoing paragraphs (1) and (2), a
certificate of the president or chief financial officer of the
Borrower stating that he has individually reviewed the provisions of
this Agreement and that a review of the activities of the Borrower
during such year or monthly period, as the case may be, has been made
by him or under his supervision, with a view to determining whether
the Borrower has fulfilled all its obligations under this Agreement,
and that, to the best of his knowledge, the Borrower has observed and
performed each undertaking contained in this Agreement and is not in
default in the observance or performance of any of the provisions
hereof or, if the Borrower shall be so in default, specifying all
such defaults and events of which he may have knowledge;
(4) Promptly after the sending or making available or
filing of the same, copies of all reports, proxy statements, and
financial statements that the Borrower or any successor Person sends
or makes available to its stockholders and all registration
statements and reports that the Borrower or any successor Person
files with the Securities and Exchange Commission;
(5) Within thirty (30) days after the end of each calendar
month, in such form and detail as shall be satisfactory to the
Lender, an aging, as of the end of such month, of Accounts of the
Borrower certified by the president or controller of the Borrower to
be complete and correct;
(6) As soon as available, but in any event within one
hundred twenty (120) days after the close of each fiscal year:
financial and operating projections for the next fiscal year--all
such projections to contain such detail and to be in such form as the
Lender may request, and to include all supporting schedules and
comments, and to be certified by the president or controller of the
Borrower to be complete;
(7) Upon the Lender's request, from time to time, copies
of any or all agreements, contracts, or commitments referred to in
Section 5.01(O) hereof;
(C) The Borrower will maintain its Inventory, Equipment, real
estate, and other properties in good condition and repair (normal
wear and tear excepted), and will pay and discharge or cause to be
paid and discharged, when due, the cost of repairs to, or maintenance
of, the same, and will pay or cause to be paid in a timely manner all
rental or mortgage payments due on such real estate. The Borrower
hereby agrees that, in the event it fails to pay or cause to be paid
any such payment, it will promptly notify the Lender thereof, and the
Lender may, in its discretion, do so and on demand be reimbursed
therefor by the Borrower;
(D) The Borrower and its Subsidiary will maintain, or cause to
be maintained, public liability insurance (subject to a maximum of
$10,000.00 in deductibles for each entity) and fire and extended
coverage insurance on all assets that are of a character usually
insured by corporations engaged in the same or similar businesses,
all in form and amount sufficient to indemnify the Borrower or
Subsidiary for 100% of the appraised value of any such asset lost or
damaged (subject to any deductible customary in the Borrower's or
Subsidiary's industry) or in an amount consistent with the amount of
insurance generally carried on comparable assets within the industry
and with such insurers as may be satisfactory to the Lender. The
Borrower and its Subsidiary will cause all such insurance policies to
contain a standard mortgage clause and to be payable to the Lender as
its interest may appear, to deliver the policies of insurance to the
Lender, and, in the case of all policies of insurance carried for the
benefit of the Borrower or any Subsidiary by any lessee, sublessee,
subtenant, or other party having rights to occupy or use the mortgage
property or any part thereof or interest therein under any lease,
sublease, or other agreement (whether oral, written, or otherwise
evidenced), to cause all such policies to be payable to the Lender as
its interest may appear. Such policies shall contain a provision
whereby they cannot be cancelled except after ten (10) days' written
notice to the Lender. The Borrower will furnish to the Lender such
evidence of insurance as the Lender may require. The Borrower hereby
agrees that, in the event it or any Subsidiary fails to pay or cause
to be paid the premium on any such insurance when due, the Lender, in
its discretion, may do so and be reimbursed by the Borrower therefor.
The Borrower and each Subsidiary hereby assign to the Lender any
returned or unearned premiums that may be due the Borrower or any
Subsidiary upon cancellation by the insurer of any such policy for
any reason whatsoever and direct any such insurer to pay the Lender
any amounts so due. Provided, however, that the Lender will pay to
the Borrower or the appropriate Subsidiary any such returned or
unearned premiums within five (5) days after the receipt thereof if
there has not occurred and be continuing an Event of Default
hereunder. The Lender is hereby appointed the attorney-in-fact of
the Borrower and each Subsidiary (without requiring the Lender to act
as such) to endorse any check which may be payable to the Borrower or
any Subsidiary to collect any premiums or the proceeds of such
insurance (other than proceeds of public liability insurance), and
any amount so collected may be applied by the Lender toward
satisfaction of any of the Obligations if an Event of Default has
occurred and is continuing. If the Lender receives any proceeds from
insurance in the absence of an Event of Default, it shall remit such
proceeds to the Borrower or such Subsidiary within three (3) Business
Days after the Lender's receipt of such proceeds;
(E) The Borrower and its Subsidiary will each pay or cause to
be paid when due, all taxes, assessments, and charges or levies
imposed upon it or on any of its property or which it is required to
withhold and pay except where contested in good faith by appropriate
proceedings with adequate reserves therefor having been set aside on
its books; provided, however, that the Borrower and each Subsidiary
shall pay or cause to be paid all such taxes, assessments, charges or
levies forthwith whenever foreclosure on any lien that may have
attached (or security therefor) appears imminent;
(F) The Borrower shall permit the representatives of the Lender
to make reasonable physical inspections at any time during normal
business hours of the Collateral and of the Borrower's facilities,
activities, books and Records, and cause its officers and employees
to give full cooperation and assistance in connection therewith, so
that Lender can determine whether the Borrower has maintained the
Borrowing Base at no less than the principal amount of the Loan
outstanding; the cost of such inspections shall be paid for by
Borrower as an additional amount due under the Loan;
(G) The Borrower and its Subsidiary will each take all
necessary steps to preserve its corporate existence and franchises
and comply with all present and future Laws applicable to it in the
operation of its business, and all material agreements to which it is
subject;
(H) The Borrower and its Subsidiary will each collect its
Accounts and sell its Inventory only in the ordinary course of
business;
(I) The Borrower and its Subsidiary will each keep accurate and
complete Records of its Accounts, Inventory, and Equipment consistent
with sound business practices;
(J) The Borrower and its Subsidiary will each give prompt
notice to the Lender of (1) any litigation or proceeding in which it
is a party if an adverse decision therein would require it to pay
more than $10,000.00 or deliver assets the value of which exceeds
such sum (whether or not the claim is considered to be covered by
insurance); and (2) the institution of any other suit or proceeding
involving it that might materially and adversely affect its
operations, financial condition, property, or business prospects;
(K) Within ten (10) days after the filing thereof, the Borrower
will furnish the Lender with copies of federal income tax returns
filed by the Borrower. The Borrower will cause the full amount of
each federal and other income tax refund (including any interest
component thereof) received by the Borrower to be applied as an
immediate repayment or partial repayment of the Loan;
(L) The Borrower and its Subsidiary will each pay when due (or
within applicable grace periods) all of its other Indebtedness due
third Persons except when the amount thereof is being contested in
good faith by appropriate proceedings and with adequate reserves
therefor being set aside on its books; provided, however, that no
payment shall be made in respect to Subordinated Indebtedness except
in strict compliance with all of the terms of subordination thereof
theretofore approved in writing by the Lender. If default be made by
the Borrower or any Subsidiary in the payment of any principal (or
installment thereof) of, or interest on, any such Indebtedness, the
Lender shall have the right, in its discretion, to pay such interest
or principal for the account of the Borrower or such Subsidiary and
be reimbursed by the Borrower or such Subsidiary therefor;
(M) The Borrower and its Subsidiary will each notify the Lender
immediately if it becomes aware of the occurrence of any Event of
Default or of any fact, condition, or event that only with the giving
of notice or passage of time or both, could become an Event of
Default or if it becomes aware of any material adverse change in the
business prospects, financial condition (including, without
limitation, proceedings in bankruptcy, insolvency, reorganization, or
the appointment of a receiver or trustee), or results of operations
of the Borrower, a Subsidiary, or any guarantor or of the failure of
the Borrower or any Subsidiary to observe any of their respective
undertakings hereunder or under the Collateral Documents;
(N) The Borrower and its Subsidiary will each notify the Lender
thirty (30) days in advance of any change in the location of any of
its places of business or of the establishment of any new, or the
discontinuance of any existing, place of business;
(O) The Borrower and its Subsidiary will each (1) fund any of
its Employee Pension Benefit Plans in accordance with no less than
the minimum funding standards of 29 U.S.C.A. 1082 (Section 302 of
ERISA); (2) furnish the Lender, promptly after the filing of the
same, with copies of any reports or other statements filed with the
United States Department of Labor or the Internal Revenue Service
with respect to any such Plan; and (3) promptly advise the Lender of
the occurrence of any Reportable Event or Prohibited Transaction with
respect to any Employee Benefit Plan;
(P) With respect to Letters of Credit:
(1) The Borrower shall require that each Letter of Credit
issued for its benefit shall provide that one of the required
documents for the first payment under the Letter of Credit shall be a
copy of an assignment of proceeds executed by the Borrower (the
beneficiary of the Letter of Credit) in favor of the Lender; said
assignment shall be for the full amount of the Letter of Credit and
shall provide that all payments under the Letter of Credit shall be
made to the Operating Account;
(2) The Borrower will take all necessary and advisable
steps to ensure that the Letter of Credit will be delivered to the
paying or confirming bank and that said paying or confirming bank
shall be authorized to retain the Letter of Credit on behalf of the
Lender, which is the assignee of the proceeds thereof;
(3) In the event that the Borrower is unable to obtain the
assignment of the Letter of Credit in accordance with subparagraphs
(1) and (2) above, the Borrower shall arrange in writing (with a copy
to the Lender) with the account party under the Letter of Credit that
the issuer of said Letter of Credit include therein a provision to
the effect that payment under said Letter of Credit shall be
negotiated only at the Lender's counters or, alternatively, that
payment shall be made only to the Operating Account;
(Q) The Borrower shall require payment of all Accounts in U.S.
Dollars or in such other form or currency as is acceptable to the
Lender;
(R) So long as any Obligations are outstanding, the Borrower
shall maintain its primary depository accounts with the Lender; and
(U) The Borrower shall maintain:
(1) A Current Ratio, tested at the end of each fiscal
quarter, of not less than 1.5:1.0; and
(2) A ratio of Total Liabilities to Tangible Net Worth,
tested at the end of each fiscal quarter, of not more than 1.0:1.0.
6.02 Negative Covenants.
The Borrower does hereby covenant and agree with the Lender
that, so long as any of the Obligations remain unsatisfied or any
commitments hereunder remain outstanding, it will comply, or if
appropriate cause its Subsidiary to comply, at all times with the
following negative covenants, unless the Lender shall otherwise have
agreed in writing:
(A) Neither the Borrower nor any Subsidiary will change its
name, enter into any merger, reorganization or recapitalization, or
reclassify its capital stock without at least thirty (30) days'
advance written notice to the Lender; provided, however, in no event
shall any such merger, reorganization or recapitalization reduce or
result in the reduction of the Borrower's Net Worth as of March 31,
1997;
(B) Neither the Borrower nor any Subsidiary will sell,
transfer, lease, or otherwise dispose of all or (except in the
ordinary course of business) any material part of its assets;
(C) Neither the Borrower nor any Subsidiary will sell, lease,
transfer, assign, or otherwise dispose of any of the Collateral
except in the ordinary course of business;
(D) Neither the Borrower nor any Subsidiary will sell or
otherwise dispose of, or for any reason cease operating, any of its
divisions, franchises, or lines of business;
(E) Neither the Borrower nor any Subsidiary will mortgage,
pledge, grant, or permit to exist a security interest in, or a lien
upon, any of its assets of any kind, now owned or hereafter acquired,
except for Permitted Liens, liens of the Collateral Documents, and
existing liens listed on Exhibit 5.01(N) to the extent shown on
Exhibit 1.31 to be permitted to exist after the Closing;
(F) Neither the Borrower nor any Subsidiary will become liable,
directly or indirectly, as guarantor or otherwise for any obligation
of any other Person, except for the endorsement of commercial paper
for deposit or collection in the ordinary course of business;
(G) Neither the Borrower nor any Subsidiary will incur, create,
assume, or permit to exist any Indebtedness except: (1) the Loan;
(2) existing Indebtedness listed on Exhibit 5.01(N) to the extent
shown on Exhibit 1.31 to be permitted to exist after the Closing; (3)
trade indebtedness incurred in the ordinary course of business
(provided, however, that neither the Borrower nor any Subsidiary may
acquire inventory other than for cash or on open account except as
expressly approved in writing and in advance by the Lender); (4)
contingent Indebtedness permitted by Section 6.02(F); (5) operating
lease obligations incurred in the normal course of business under the
current lease arrangement; (6) Indebtedness secured by Permitted
Liens; and (7) Subordinated Indebtedness;
(H) The Borrower shall not declare, pay or set apart any funds
for the payment of any dividends (other than dividends payable in
shares of the Borrower's stock) on any class of shares of the
Borrower's stock, or apply any of its funds, property or assets to,
or set apart any funds, property or assets for, the purchase,
redemption or other retirement of, or make any other distribution, by
reduction of capital or otherwise, in respect of any class of shares
of the Borrower's stock, or with respect to any other funds or assets
without the prior written consent of the Lender;
(I) Neither the Borrower nor any Subsidiary will form any
subsidiary, make any investment in (including any assignment of
Inventory or other property), or make any loan in the nature of an
investment to, any Person, other than investments of the Borrower in
the Subsidiary listed on Exhibit 5.01(A);
(J) Neither the Borrower nor any Subsidiary will make payments
on account of the purchase or lease of consolidated fixed assets
that, in the aggregate, in any fiscal year (commencing with the
current fiscal year) will exceed the depreciation taken or to be
taken with respect to consolidated fixed assets during such year; as
used in this paragraph, the term "lease" means a lease reflected on a
consolidated balance sheet of the Borrower and its Subsidiary or a
lease that should be so reflected under GAAP;
(K) Neither the Borrower nor any Subsidiary will purchase or
otherwise invest in or hold securities, nonoperating real estate, or
other nonoperating assets except: (1) direct obligations of the
United States of America, or of a bank with assets of not less than
$50,000,000.00 or other investments approved in advance in writing by
the Lender; (2) the present investment in any such assets held as of
September 30, 1996 and reflected in the Financial Statements; and (3)
operating assets that hereafter become nonoperating assets;
(L) Neither the Borrower nor any Subsidiary will transfer,
purchase or redeem, or permit any subsidiary to transfer or purchase,
any shares of the Borrower's capital stock unless such transfer,
purchase or redemption is effected solely from the proceeds of and
within a reasonable time after the issuance to third parties by the
Borrower or its subsidiary of capital stock which is in addition to
the capital stock of the Borrower or its subsidiary, as the case may
be, outstanding on the date of this Agreement;
(M) Neither the Borrower nor any Subsidiary will prepay any
Subordinated Indebtedness, Indebtedness for borrowed money except the
Obligations, or Indebtedness secured by any of its assets (except the
Obligations), or enter into or modify any agreement as a result of
which the terms of payment of any of the foregoing Indebtedness are
waived or modified;
(N) Neither the Borrower nor any Subsidiary will enter into any
sale-leaseback transaction;
(O) Neither the Borrower nor any Subsidiary will acquire or
agree to acquire any stock in, or all or substantially all of the
assets of, any Person, without at least thirty (30) days' advance
written notice to the Lender;
(P) Neither the Borrower nor any Subsidiary will furnish the
Lender any certificate or other document that will contain any untrue
statement of material fact or that will omit to state a material fact
necessary to make it not misleading in light of the circumstances
under which it was furnished;
(Q) Neither the Borrower nor any Subsidiary will directly or
indirectly apply any part of the proceeds of the Loan to the
purchasing or carrying of any "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System,
or any regulations, interpretations, or rulings thereunder;
(R) The Borrower shall make no payments of principal, interest,
or of any other amounts under any Subordinated Indebtedness until all
amounts outstanding under the Loan ("Senior Debt") have been paid in
full; in the event of the dissolution or winding up of the Borrower's
business affairs, the Subordinated Indebtedness shall at all times be
subordinated to the Senior Debt. At such time as there shall exist
any Subordinated Indebtedness, the Borrower shall obtain from the
subordinated creditor a written undertaking affirming this covenant;
(S) During the term of the Loan, the Borrower shall not make
any advances to any stockholder, Affiliate or related entity
(including but not limited to, partnerships, joint ventures, joint
stock companies, corporations, parent companies or subsidiaries)
except that the Borrower may use Loan proceeds to fund its wholly
owned British subsidiary, Vivid Technologies UK Ltd.;
(T) Neither the Borrower nor any Subsidiary shall utilize the
Loan for the purpose of servicing any of the Borrower's pre-existing
or future indebtedness unrelated to the Loan; and
(U) The Borrower shall not incur a net operating loss for any
two (2) consecutive fiscal quarters or in any fiscal year.
ARTICLE 7. DEFAULT
7.01 Events of Default.
The occurrence of any one or more of the following events shall
constitute an Event of Default hereunder:
(A) The Borrower or any guarantor shall fail to pay when due
any of its Obligations to pay money to the Lender;
(B) The Borrower or any guarantor or Subsidiary shall fail to
observe or perform any of its Obligations other than payment of money
to be observed or performed by it hereunder, under any of the
Collateral Documents or otherwise, and such failure shall continue
for five (5) days after (1) notice of such failure from the Lender;
or (2) the Lender is notified of such failure or should have been so
notified pursuant to the provisions of Section 6.01(N), whichever is
earlier;
(C) The Borrower or any Subsidiary shall fail to pay any
Indebtedness due any third Persons, and such failure shall continue
beyond any applicable grace period, or the Borrower or any Subsidiary
shall suffer to exist any other event of default under any agreement
binding the Borrower or any Subsidiary;
(D) Any financial statement, representation, warranty, or
certificate made or furnished by or with respect to the Borrower or
any guarantor or Subsidiary to the Lender in connection with this
Agreement, or as inducement to the Lender to enter into this
Agreement, or in any separate statement or document to be delivered
to the Lender hereunder, shall be materially false, incorrect, or
incomplete when made;
(E) The Borrower or any guarantor or Subsidiary shall admit its
inability to pay its debts as they mature or shall make an assignment
for the benefit of itself or any of its creditors;
(F) Proceedings in bankruptcy, or for reorganization of the
Borrower or any Subsidiary, or for the readjustment of any of their
respective debts under the Bankruptcy Code, as amended, or any part
thereof, or under any other Laws, whether state or federal, for the
relief of debtors, now or hereafter existing, shall be commenced
against or by the Borrower or any guarantor or Subsidiary and, except
with respect to any such proceedings instituted by the Borrower,
guarantor or a Subsidiary, shall not be discharged within ninety
(90) days of their commencement;
(G) A receiver or trustee shall be appointed for the Borrower
or any guarantor or Subsidiary or for any substantial part of their
respective assets, or any proceedings shall be instituted for the
dissolution or the full or partial liquidation of the Borrower or any
guarantor or Subsidiary, and except with respect to any such
appointments requested or instituted by the Borrower, any guarantor
or a Subsidiary, such receiver or trustee shall not be discharged
within ninety (90) days of his appointment, and except with respect
to any such proceedings instituted by the Borrower, a guarantor or a
Subsidiary, such proceedings shall not be discharged within ninety
(90) days of their commencement, or the Borrower or any guarantor or
Subsidiary shall discontinue business or materially change the nature
of its business, or the Collateral becomes, in the reasonable
judgment of the Lender, insufficient in value to satisfy the
Obligations, or the Lender otherwise reasonably finds itself insecure
as to the prompt and punctual payment and discharge of the
Obligations;
(H) The Borrower or any guarantor or Subsidiary shall suffer
final judgments for payment of money aggregating in excess of
$10,000.00 and shall not discharge the same within a period of ninety
(90) days unless, pending further proceedings, execution has not been
commenced or, if commenced, has been effectively stayed;
(I) A judgment creditor of the Borrower or any guarantor or
Subsidiary shall obtain possession of any of the Collateral by any
means, including (without implied limitation) levy, distraint,
replevin, or self-help; or
(J) Any obligee of Subordinated Indebtedness shall fail to
comply with the subordination provisions of the instruments
evidencing such Subordinated Indebtedness.
7.02 Acceleration.
At its option, and at any time, whether immediately or
otherwise, the Lender may, upon the occurrence of any Event of
Default, declare all Obligations of the Borrower or guarantor to the
Lender immediately due and payable without further action of any kind
and without notice, demand or presentment.
7.03 Demand Nature of Obligations.
The enumeration of the non-exclusive list of Events of Default
in no way modifies the demand nature of the Obligations. The
occurrence of any one or more Events of Default may cause the Lender
(i) to make demand for payment and performance of all Obligations,
(ii) to cease making advances under the Loan, and (iii) to exercise
its cumulative rights and remedies. The Borrower acknowledges that
in so acting the Lender shall be deemed to be acting in a
commercially reasonable manner and in good faith. The Borrower
acknowledges that the occurrence of an Event of Default is not a
condition or prerequisite to the Lender making demand for payment or
performance of any of the Obligations.
ARTICLE 8. THE LENDER'S RIGHTS AND REMEDIES
8.01 The Lender's Rights Upon Default.
Upon demand on the Note or the occurrence of an Event of Default
and at any time thereafter, the Lender, without presentment, demand,
notice, protest or advertisement of any kind, will have the rights
set forth in this Article.
8.02 Account Debtors.
Upon demand on the Note or the occurrence of an Event of Default
and at any time thereafter, the Lender may notify account debtors, at
the Borrower's expense, that the Collateral has been assigned to the
Lender and that payments shall be made directly to the Lender. Upon
request of the Lender, the Borrower will notify such account debtors
that their accounts must be paid to the Lender. Upon demand on the
Note or the occurrence of an Event of Default and at all times
thereafter, the Borrower will hold all checks, drafts, cash and other
remittances in trust for the Lender and deliver them in kind to the
Lender. The Lender shall have full power to collect, compromise,
endorse, sell or otherwise deal with the Collateral or proceeds
thereof in its own name or in the name of the Borrower.
8.03 Possession and Foreclosure of Collateral.
Upon demand or the occurrence of an Event of Default and at any
time thereafter, the Lender shall have the following rights and
remedies, which rights and remedies are cumulative and not exclusive:
(i) to the extent that the Borrower could legally do so, the Lender
may enter onto, occupy and use any premises owned by the Borrower or
in which the Borrower has any interest; (ii) the Lender may take
possession of all or any Collateral; (iii) in the Lender's sole
discretion, the Lender may operate and use the Borrower's equipment,
complete work in process and sell inventory without being liable to
the Borrower on account of any losses, damage or depreciation that
may occur as a result thereof (so long as the Lender acts in good
faith); and (iv) the Lender may lease or license the Collateral to
any Person for such purposes.
In any event, the Lender may sell, lease, assign and deliver the
whole or any part of the Collateral, at public or private sale, for
cash, upon credit or for future delivery, at such prices and upon
such terms as the Lender deems advisable. The Lender may sell or
lease Collateral alone or in conjunction with other property, real or
personal, and allocate the sale proceeds or leases among the items of
Collateral sold without the necessity of the Collateral being present
at any such sale, or in view of prospective purchasers thereof. If
notice of sale is legally required, the Borrower agrees that five (5)
days oral notice shall be deemed reasonable. Upon such sale, the
Lender may become the purchaser of the whole or any part of the
Collateral sold, discharged from all claims and free from any right
of redemption. In case of any such sale by the Lender of all or any
of the Collateral on credit, or for future delivery, such Collateral
so sold may be retained by the Lender until the selling price is paid
by the purchaser. The Lender shall incur no liability in case of the
failure of the purchaser to take possession and pay for the
Collateral so sold. In case of any such failure, the said Collateral
may be resold. Any Collateral remaining unsold after being offered
at public auction may be abandoned or disposed of for no
consideration in such manner as the Lender deems appropriate.
In any event, at any time and from time to time the Lender may
abandon the Collateral or any part thereof. The Borrower agrees
immediately upon demand to take possession of any and all abandoned
Collateral and to remove it from any location in the possession of or
under the control of the Lender.
8.04 Use of Intellectual Property.
Upon demand on the Note or the occurrence of an Event of Default
and at any time thereafter, the Lender may use all or any part of the
Borrower's Intellectual Property which the Borrower now has or may
hereafter acquire. The Lender may license such Intellectual Property
to third parties, seek registration of such Intellectual Property in
any state or nation or prosecute pending applications for patents,
copyrights, trademarks, or service marks in the Borrower's name in
any state or nation.
8.05 Notification of Default to Third Parties.
Upon demand on the Note or the occurrence of an Event of Default
and at any time thereafter, the Lender may notify the Borrower's
suppliers, account debtors and other third parties of the default and
of any and all decisions made and actions taken by the Lender with
respect to this Agreement, the Obligations or the Collateral, without
liability of any kind.
8.06 Assembly of Collateral.
Upon demand on the Note or the occurrence of an Event of Default
and at any time thereafter, the Lender may require the Borrower to
assemble the Collateral in a single location at a place to be
designated by the Lender and make the Collateral at all times secure
and available to the Lender.
8.07 Right of Set-Off.
Upon demand on the Note or the occurrence of any Event of
Default and at any time thereafter, the Lender may, and is hereby
authorized by the Borrower, at any time and from time to time, to the
fullest extent permitted by applicable Laws, without advance notice
to the Borrower (any such notice being expressly waived by the
Borrower), set-off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and
any other indebtedness at any time owing by the Lender to, or for the
credit or the account of, the Borrower against any or all of the
Obligations of the Borrower or any guarantor, now or hereafter
existing, whether or not such Obligations have matured and
irrespective of whether the Lender has exercised any other rights
that it has or may have with respect to such Obligations, including
without limitation any acceleration rights. The Lender agrees
promptly to notify the Borrower after any such set-off and
application, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of
the Lender under this Section 8.07 are in addition to the other
rights and remedies (including, without limitation, other rights of
set-off) which the Lender may have.
8.08 Exercise of Other Remedies.
Upon demand on the Note or the occurrence of any Event of
Default and at any time thereafter, the Lender may exercise the
remedies of a Lender afforded by the Uniform Commercial Code and
other applicable law or by the terms of any agreement between the
Borrower and the Lender.
8.09 Cumulative Rights and Remedies.
All rights and remedies of the Lender, whether provided for
herein or in other agreements, instruments or documents or conferred
by law, are cumulative and may be exercised alone or simultaneously.
ARTICLE 9. ATTORNEY-IN-FACT
9.01 Attorney-In-Fact.
Upon demand on the Note or the occurrence of an Event of Default
and at all times thereafter, the Borrower hereby irrevocably appoints
the Lender, or its designee, as the Borrower's true and lawful
attorney-in-fact, with full power as follows: (1) to endorse the
name of the Borrower on any assignments, notes, checks, drafts, money
orders, or other instruments of payment for Collateral; (2) to sign
or endorse the name of the Borrower on any negotiable instrument,
invoice, freight or express ▇▇▇▇, ▇▇▇▇ of lading, storage or
warehouse receipts, drafts, assignments, verifications and notices in
connection with Accounts; (3) to obtain, adjust, settle and cancel,
in the Borrower's name, insurance policies as required by Section
6.01(D) and to sign the Borrower's name on settlement checks or
drafts; (4) in the Borrower's name, to do any act which this
Agreement requires Borrower to do, and, (5) to give notice to the
United States Post Office to effect changes of address so that mail
addressed to the Borrower may be delivered directly to the Lender.
In exercising this power-of-attorney, the Lender shall not be liable
to the extent that it acts in good faith.
ARTICLE 10. MISCELLANEOUS
10.01 Construction.
The provisions of this Agreement shall be in addition to those
of any security agreement, note, or other evidence of liability now
or hereafter held by the Lender, all of which shall be construed as
complementary to each other. To the extent that there appears any
conflicts between and among the documents, the order of precedence in
their construction shall be (1) the Note, (2) this Agreement and (3)
other ancillary agreements and documents presented at Closing.
Nothing herein contained shall prevent the Lender from enforcing any
or all other security agreements, notes, or other evidences of
liability in accordance with their respective terms.
10.02 Further Assurance.
From time to time, the Borrower will execute and deliver to the
Lender such additional documents and will provide such additional
information as the Lender may reasonably require to carry out the
terms of this Agreement and be informed of the status and affairs of
the Borrower.
10.03 Enforcement and Waiver by the Lender.
The Lender shall have the right at all times to enforce the
provisions of this Agreement and the Collateral Documents in strict
accordance with the terms hereof and thereof, notwithstanding any
conduct or custom on the part of the Lender in refraining from so
doing at any time or times. The failure of the Lender at any time or
times to enforce its rights under such provisions, strictly in
accordance with the same, shall not be construed as having created a
custom in any way or manner contrary to specific provisions of this
Agreement or as having in any way or manner modified or waived the
same. All rights and remedies of the Lender are cumulative and
concurrent and the exercise of one right or remedy shall not be
deemed a waiver or release of any other right or remedy.
10.04 Expenses of the Lender.
The Borrower will, on demand, reimburse the Lender for all
expenses, including the reasonable fees and expenses of legal counsel
for the Lender, incurred by the Lender in connection with the
preparation, administration, amendment, modification, or enforcement
of this Agreement and the Collateral Documents and the collection or
attempted collection of any of the Obligations.
10.05 Notices.
Any notices or consents required or permitted by this Agreement
shall be in writing and shall be deemed delivered if delivered in
person or if sent by certified mail, postage prepaid, return receipt
requested, facsimile or telegraph, as follows, unless such address is
changed by written notice hereunder:
(A) If to the Borrower:
Vivid Technologies, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
Brown, Rudnick, Freed & Gesmer
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(B) If to the Lender:
BankBoston, N.A.
7 New England Executive Park
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Vice President
and to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esquire
Bowditch & ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
10.06 Waiver and Indemnification by the Borrower.
To the maximum extent permitted by applicable Laws, the
Borrower:
(A) Waives (1) protest of all commercial paper at any time held
by the Lender on which the Borrower is in any way liable; (2) except
as the same may herein be specifically granted, notice of
acceleration and of intention to accelerate; and (3) notice and
opportunity to be heard, after acceleration in the manner provided in
Section 7.02, before exercise by the Lender of the remedies of self-
help, set-off, or of other summary procedures permitted by any
applicable Laws or by any agreement with the Borrower, and, except
where required hereby or by any applicable Laws, notice of any other
action taken by the Lender; and
(B) Indemnifies the Lender and its officers, attorneys, agents,
and employees from all claims for loss or damage caused by any act or
omission on the part of any of them except willful misconduct.
10.07 Participation.
Notwithstanding any other provision of this Agreement, the
Borrower understands that the Lender may at any time enter into
participation agreements with one or more participating banks whereby
the Lender will allocate certain percentages of its commitment to
them. The Borrower acknowledges that, for the convenience of all
parties, this Agreement is being entered into with the Lender only
and that its obligations under this Agreement are undertaken for the
benefit of, and as an inducement to, any such participating bank as
well as the Lender, and the Borrower hereby grants to each such
participating bank, to the extent of its participation in the Loan,
the right to set off deposit accounts maintained by the Borrower with
such bank.
10.08 Applicable Law.
This Agreement is entered into and performable in the
Commonwealth of Massachusetts and shall be subject to and construed
and enforced in accordance with the laws of the Commonwealth of
Massachusetts.
10.09 Binding Effect, Assignment, and Entire Agreement.
This Agreement shall inure to the benefit of, and shall be
binding upon, the respective successors and permitted assigns of the
parties hereto. The Borrower has no right to assign any of its
rights or obligations hereunder without the prior written consent of
the Lender. This Agreement, including the Exhibits hereto, all of
which are hereby incorporated herein by reference, and the documents
executed and delivered pursuant hereto, constitute the entire
agreement between the parties and may be amended only by a writing
signed on behalf of each party.
10.10 Severability.
If any provision of this Agreement shall be held invalid under
any applicable Laws, such invalidity shall not affect any other
provision of this Agreement that can be given effect without the
invalid provision, and, to this end, the provisions hereof are
severable.
10.11 Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as a sealed instrument as of the day and year first above
written.
VIVID TECHNOLOGIES, INC.
/s/ ▇▇▇▇▇ ▇. Aldo By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Witness ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
BANKBOSTON, N.A.
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Witness ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Vice President
COMMONWEALTH OF MASSACHUSETTS
Middlesex, ss May 30, 1997
Then personally appeared ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President of Vivid
Technologies, Inc., and acknowledged the foregoing to be the free act
and deed of said Vivid Technologies, Inc., before me.
/s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 6/26/97
Notary Public
My Commission Expires: January 1, 2004
EXHIBIT 1.19
BORROWER'S INTELLECTUAL PROPERTY
1. Patent No. 5,319,547 for "Device and Method for Inspection of
Baggage and Other Objects".
2. Patent No. 5,490,218 for "Device and Method for Inspection of
Baggage and Other Objects".
EXHIBIT 1.20
FORM OF LANDLORD'S CONSENT AND WAIVER
EXHIBIT 1.31
PERMITTED INDEBTEDNESS, PERMITTED LIENS
1. Security interest granted to BAA plc with respect to two working
baggage inspection prototype systems, as more fully described as
follows:
Horizontal System Prototype Vertical System Prototype
Part #10004-10001 Part #10004-10001 VR
Model: H1 Model: VDS-1
Serial #: P002 Serial #: V001
2. Security interest granted to LDI Corporation with respect to
Lease #07433 and certain computer equipment, pursuant to lease
dated 7/19/94 between LDI Corporation, as lessor, and Vivid
Technologies, Inc., as lessee.
3. Security interest granted to Hewlett-Packard Company with
respect to Financing Agreement #414469041 and certain computer
hardware and equipment pursuant to lease dated 7/28/95 between
Hewlett-Packard Co., as lessor and Vivid Technologies Co., as
lessee.
EXHIBIT 1.36
EXISTING SUBORDINATED INDEBTEDNESS
EXHIBIT 2.03
DEMAND LINE OF CREDIT NOTE
$5,000,000.00 Framingham, Massachusetts
May 30, 1997
FOR VALUE RECEIVED, VIVID TECHNOLOGIES, INC., a Delaware
corporation with its principal place of business at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ (the "Borrower"), promises to pay to BAYBANK,
N.A. (the "Lender"), or order, ON DEMAND, at the Lender's branch
office at 7 New England Executive Park, Burlington, Massachusetts,
the principal sum of FIVE MILLION AND 00/100 DOLLARS ($5,000,000.00)
(or such lesser amount as may have been advanced to the Borrower from
time to time hereunder), in lawful money of the United States of
America, with interest from the date of advancement thereof on the
unpaid balance at the rate and in the manner hereinafter provided.
This Note evidences indebtedness for one or more advances to the
Borrower's order pursuant to a Demand Line of Credit Loan and
Security Agreement dated of even date herewith by and between the
Borrower and the Lender, the terms, conditions and provisions of
which are incorporated herein by reference, as the same may from time
to time be amended (the "Agreement"). No reference to the Agreement
nor any provision thereof shall affect or impair the absolute and
unconditional obligation of the Borrower to pay the principal of and
interest on this Note as herein provided. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in
the Agreement.
The unpaid principal balance of this Note from time to time
outstanding shall bear interest at the rate per annum selected by the
Borrower pursuant to Section 2.05 of the Agreement. Interest shall
be computed on the basis of the actual number of days elapsed over a
year assumed to have 360 days.
Principal and interest hereunder shall be payable in accordance
with the applicable provisions of Section 2.06 of the Agreement. All
indebtedness evidenced by this Note, if not sooner paid, shall in any
event be due and payable on February 28, 1998 (the "Maturity Date"),
without further notice or demand.
Prepayment of this Note shall be governed by the applicable
provisions of Section 2.05 of the Agreement.
The Borrower may borrow, repay and reborrow the principal
hereunder prior to the Maturity Date in accordance with the terms of
the Agreement, provided (i) there has been no occurrence of an Event
of Default or (ii) the Lender has not made demand on the Borrower.
Each payment made hereunder shall be applied first to interest
then due on the unpaid balance of principal and then to principal.
Upon expiration of any applicable grace period, overdue payments of
principal (whether at stated maturity, by acceleration or otherwise)
and, to the extent permitted by law, overdue interest, shall bear
interest, compounded monthly and payable on demand in immediately
available funds, at a rate per annum equal to four percent (4.00%)
above the Prime Rate, fully floating; provided that if such interest
exceeds the maximum amount permitted to be paid under applicable law,
then such interest shall be reduced to such maximum permitted amount.
If a payment of principal or interest due hereunder is not made
within ten (10) days of its due date, the Borrower will also pay on
demand in addition thereto a late charge equal to five percent
(5.00%) of the amount of such payment.
The indebtedness evidenced by this Note is secured as set forth
in the Agreement.
Any deposits or other sums at any time credited by or due from
the holder to the Borrower or any endorser or guarantor hereof and
any securities or other property of the Borrower or any endorser or
guarantor hereof at any time in the possession or custody of the
holder may at all times be held and treated as collateral security
for the payment of this Note and any and all other liabilities
(direct or indirect, absolute or contingent, sole, joint or several,
secured or unsecured, due or to become due, now existing or hereafter
arising) of any such maker to the holder. Upon the occurrence of an
Event of Default, the holder may apply or set-off such deposits or
other sums against such liabilities at any time.
The Borrower and each guarantor, endorser or other person now
or hereafter liable for the payment of any of the indebtedness
evidenced by this Note, severally agree, by making, guaranteeing or
endorsing this Note or by making any agreement to pay any of the
indebtedness evidenced by this Note, to waive presentment for
payment, protest and demand, notice of protest, demand and or
dishonor and nonpayment of this Note, and consents, on one or more
occasions, without notice or further assent (a) to the substitution,
exchange or release of the collateral securing this Note or any part
thereof at any time, (b) to the acceptance or release by the holder
or holders hereof at any time of any additional collateral or
security for or other guarantors of this Note, (c) to the
modification or amendment, at any time, and from time to time, of
this Note, the Agreement, or any instrument securing this Note at the
request of any person liable hereon, (d) to the granting by the
holder hereof of any extension of the time for payment of this Note
or for the performance of the agreements, covenants and conditions
contained in this Note, the Agreement, or any other instrument
securing this Note, at the request of any person liable hereon, and
(e) to any and all forbearances and indulgences whatsoever. Such
consent shall not alter or diminish the liability of any person.
The Borrower agrees to pay all expenses and costs, including
reasonable attorneys' fees and costs of collection, which may be
incurred by the holder hereof in connection with the enforcement of
any obligations hereunder, including without limitation
representation of the holder in any bankruptcy or insolvency
proceedings in which the Borrower is a party in interest.
IN WITNESS WHEREOF, the Borrower has executed this Note by its
duly authorized officer as an instrument under seal as of the day and
year first written above.
VIVID TECHNOLOGIES, INC.
__________________________ By:________________________________
Witness ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
__________________________ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Witness ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Treasurer
EXHIBIT 5.01(A)
CORPORATE BORROWER AND SUBSIDIARY INFORMATION
Vivid Technologies, Inc. (Delaware corporation)
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Vivid Technologies UK, Ltd. (UK company)
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Vivid Technologies UK, Ltd. is
100% owned by Vivid Technologies, Inc.
EXHIBIT 5.01(F)
PENDING LITIGATION
NONE
EXHIBIT 5.01(N)
EXISTING INDEBTEDNESS
1. Obligations to BAA Plc in connection with two baggage inspection
systems - Model H1, Serial #P002 and Model VDS-1, Serial #V001.
2. Obligations to LDI Corporation in connection with Lease #07433
and certain computer equipment.
3. Obligations to Hewlett-Packard Company in connection with
Financing Agreement #414469041.
EXHIBIT 5.01(O)
MATERIAL LEASES, CONTRACTS, COMMITMENTS
1. Commercial Lease between ▇▇▇▇▇▇▇▇ Properties Management, Inc.
and Vivid Technologies, Inc. dated December 19, 1995.
2. License and Technology Agreement dated as of June 22, 1989
between Hologic, Inc. and Vivitech, Inc.
3. Management Services Agreement between Hologic, Inc. and
Vivitech, Inc. dated as of June 22, 1989.
4. Vivid Technologies, Inc. has a verbal agreement with its
subsidiary, Vivid Technologies UK Ltd., pursuant to which Vivid
Technologies, Inc. pays for certain administration, marketing,
sales and customer support activities performed on behalf of
Vivid Technologies, Inc. in Europe.
5. Series A and Series B Preferred Stock Purchase Agreement.
6. Series C and Series D Preferred Stock Purchase Agreement.
7. Purchase Agreement dated as of April 20, 1994 between Vivid
Technologies, Inc. and BAA, Plc.