EXHIBIT 10.26
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REVOLVING CREDIT AND TERM LOAN AGREEMENT
among
MFIC CORPORATION
and
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NATIONAL BANK OF CANADA
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Dated February 28, 2000
TABLE OF CONTENTS
Section Page
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1. DEFINITIONS AND RULES OF INTERPRETATION............................1
ss.1.1. Definitions..............................................1
ss.1.2. Rules of Interpretation.................................10
2. THE LOANS.........................................................11
ss.2.1. Commitment to Make Revolving Credit Loans...............11
ss.2.2. Unused Line Fee.........................................11
ss.2.3. The Revolving Credit Note...............................12
ss.2.4. Interest on Revolving Credit Loans......................12
ss.2.5. Requests for Revolving Credit Loans.....................12
ss.2.6. Maturity................................................12
ss.2.7. Mandatory Repayments of Revolving Credit Loans..........12
ss.2.8. Commitment to Make Term Loan............................13
ss.2.9. The Term Note...........................................13
ss.2.10. Interest on Term Note...................................13
ss.2.11. Repayment of Term Loan..................................13
ss.2.12. Optional Prepayments of Term Loan.......................13
3. CERTAIN GENERAL PROVISIONS........................................13
ss.3.1. Commitment Fee..........................................13
ss.3.2. Funds for Payments......................................14
ss.3.3. Computations............................................14
ss.3.4. Additional Costs, Etc. .................................14
ss.3.5. Capital Adequacy........................................15
ss.3.6. Certificate.............................................16
ss.3.7. Interest After Default..................................16
4. COLLATERAL SECURITY...............................................16
5. REPRESENTATIONS AND WARRANTIES....................................16
ss.5.1. Corporate Authority; Etc. ..............................16
ss.5.2. Governmental Approvals..................................17
ss.5.3. Title to Properties; Leases.............................17
ss.5.4. Financial Statements....................................17
ss.5.5. No Material Changes, Etc. ..............................18
ss.5.6. Franchises, Patents, Copyrights, Etc. ..................18
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ss.5.7. Litigation..............................................18
ss.5.8. No Materially Adverse Contracts, Etc. ..................18
ss.5.9. Compliance With Other Instruments, Laws, Etc. ..........18
ss.5.10. Tax Status..............................................19
ss.5.11. No Event of Default.....................................19
ss.5.12. Holding Company and Investment Company Acts.............19
ss.5.13. Absence of UCC Financing Statements, Etc. ..............19
ss.5.14. Setoff, Etc. ...........................................19
ss.5.15. Certain Transactions....................................19
ss.5.16. Employee Benefit Plans; Multiemployer Plans;
Guaranteed Pension Plans................................19
ss.5.17. Regulations U and X.....................................20
ss.5.18. Environmental Compliance................................20
ss.5.19. Subsidiaries............................................20
ss.5.20. Lease Summaries.........................................21
ss.5.21. Loan Documents..........................................21
6. AFFIRMATIVE COVENANTS OF THE BORROWER.............................21
ss.6.1. Punctual Payment........................................21
ss.6.2. Maintenance of Office...................................21
ss.6.3. Records and Accounts....................................21
ss.6.4. Financial Statements, Certificates and Information......21
ss.6.5. Notices.................................................23
ss.6.6. Existence; Maintenance of Properties....................24
ss.6.7. Insurance...............................................25
ss.6.8. Taxes...................................................25
ss.6.9. Inspection of Properties and Books......................25
ss.6.10. Compliance with Laws, Contracts, Licenses, and Permits..26
ss.6.11. Use of Proceeds.........................................26
ss.6.12. Bank Accounts...........................................26
ss.6.13. Cash Management.........................................26
ss.6.14. Further Assurances......................................27
7. CERTAIN NEGATIVE COVENANTS OF THE BORROWER AND ITS SUBSIDIARIES...27
ss.7.1. Restrictions on Indebtedness............................27
ss.7.2. Restrictions on Liens, Etc. ............................28
ss.7.3. Restrictions on Investments.............................29
ss.7.4. Merger, Consolidation...................................29
ss.7.5. Sale and Leaseback......................................29
ss.7.6. Compliance with Environmental Laws......................29
ss.7.7. Distributions. Corporation Action.......................30
ss.7.8. Subsidiaries............................................30
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ss.7.9. Fiscal Year.............................................30
ss.7.10. Loans and Advances......................................30
ss.7.11. Terms of Subordinated Indebtedness......................30
8. FINANCIAL COVENANTS OF THE BORROWER...............................31
ss.8.1. Consolidated Tangible Net Worth.........................31
ss.8.2. Liabilities to Worth (Leverage) Ratio...................31
ss.8.3. Consolidated Net Income.................................31
ss.8.4. Minimum Debt Service....................................32
ss.8.5. Maximum Capital Expenditures............................32
ss.8.6. Minimum Availability Covenant...........................32
9. CLOSING CONDITIONS................................................32
ss.9.1. No Material Adverse Change..............................32
ss.9.2. Financial Statements....................................32
ss.9.3. Landlord Waivers........................................32
ss.9.4. Corporate Structure.....................................33
ss.9.5. No Default or Event of Default..........................33
ss.9.6. Litigation..............................................33
ss.9.7. Evidence of Insurance...................................33
ss.9.8. Compliance with Law.....................................33
ss.9.9. Certified Copies of Organization Documents..............33
ss.9.10. By-laws; Resolutions....................................33
ss.9.11. Incumbency Certificate; Authorized Signers..............34
ss.9.12. Environmental Review....................................34
ss.9.13. Employment; Product Liability...........................34
ss.9.14. Validity of Liens.......................................34
ss.9.15. Officer's Certificates..................................34
ss.9.16. Opinion of Counsel Concerning Organization and
Loan Documents .........................................35
ss.9.17. Equity Infusion.........................................35
ss.9.18. Subordinated Debt.......................................35
ss.9.19. Loan Documents..........................................35
ss.9.20. Borrowing Base Report...................................35
ss.9.21. Payment of Fees.........................................35
ss.9.22. Minimum Day One Availability............................35
ss.9.23. Cash Management.........................................35
ss.9.24. Additional Documents....................................35
10. CONDITIONS TO ALL BORROWINGS......................................35
ss.10.1. Representations True; No Event of Default...............36
ss.10.2. No Legal Impediment.....................................36
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ss.10.3. Governmental Regulation.................................36
ss.10.4. Proceedings and Documents...............................36
11. EVENTS OF DEFAULT; ACCELERATION; ETC. ............................36
ss.11.1. Events of Default and Acceleration......................36
ss.11.2. Termination of Revolving Credit.........................39
ss.11.3. Remedies................................................39
ss.11.4. Distribution of Collateral Proceeds.....................39
12. SETOFF............................................................40
13. EXPENSES..........................................................40
14. INDEMNIFICATION...................................................41
15. SURVIVAL OF COVENANTS, ETC. ......................................41
16. ASSIGNMENT AND PARTICIPATION......................................42
ss.16.1. Assignments.............................................42
ss.16.2. Participations..........................................42
ss.16.3. Pledge by Lender........................................42
ss.16.4. No Assignment by Borrower...............................42
ss.16.5. Disclosure..............................................42
17. NOTICES, ETC. ....................................................42
18. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE................43
19. HEADINGS..........................................................43
20. COUNTERPARTS......................................................43
21. ENTIRE AGREEMENT, ETC. ...........................................44
22. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS....................44
23. CONSENTS, AMENDMENTS, WAIVERS, ETC. ..............................44
24. SEVERABILITY......................................................44
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EXHIBITS
A. Form of Revolving Credit Note
B. Form of Revolving Credit Loan Request
C. Form of Term Note
D. Form of Compliance Certificate
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SCHEDULES
5.7 Litigation
5.15 Certain Transactions
5.16 Employee Benefit Plans
5.18 Hazardous Substances and Underground Tanks
5.19 Subsidiaries
6.13 Demand Deposit/Checking Accounts
6.7 Insurance
7.1 Outstanding Indebtedness
7.2 Outstanding Liens
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REVOLVING CREDIT AND TERM LOAN AGREEMENT
This REVOLVING CREDIT AND TERM LOAN AGREEMENT is made as of the 28th day
of February, 2000, by and among MFIC CORPORATION (the "Borrower"), a Delaware
corporation with its principal executive offices at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and NATIONAL BANK OF CANADA, a Canadian chartered bank (the
"Lender") with a place of business at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇.
1. DEFINITIONS AND RULES OF INTERPRETATION.
ss.1.1. Definitions. The following terms shall have the meanings set forth
in this ss.1 or elsewhere in the provisions of this Agreement referred to below:
Accounts. "Accounts" as defined in the UCC and also all accounts
receivable and other forms of obligations and rights to payment for credit
extended for goods sold or leased, or services rendered.
Agreement. This Revolving Credit and Term Loan Agreement, including the
Schedules and Exhibits hereto, all as modified, amended, supplemented or
restated.
Applicable Margin. The per annum rates set forth below for the following
Loans
Facility Applicable Margin
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Revolving Credit Loans 0.50%
Term Loan 0.75%
Availability. The lesser of (a) or (b), below.
(a) The Revolving Credit Ceiling
(b) (i) Eighty-five percent (85%) of the Borrower's Eligible
Accounts.
plus
(ii) the lesser of:
(A) Fifty percent (50%) of the Borrower's Eligible
Inventory; or
(B) One Million Five Hundred Thousand and NO/100
Dollars ($1,500,000.00).
Balance Sheet Date. December 31, 1999.
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Borrower. As defined in the preamble hereto.
Business Day. Any day, other than a Saturday or Sunday, or legal holiday
on which banking institutions in Boston, Massachusetts are open for the
transaction of banking business.
Capital Expenditures. All Capitalized Leases and all expenditures made by
the Borrower or any of its Subsidiaries which are capitalized or are required to
be capitalized on the Consolidated balance sheet of the Borrower and its
Subsidiaries in accordance with Generally Accepted Accounting Principles.
Capitalized Leases. Leases under which the Borrower or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are capitalized or are required to be capitalized on the
balance sheet of the lessee or obligor in accordance with Generally Accepted
Accounting Principles.
Change In Control. Shall mean the occurrence of any of the following:
(a) The acquisition, by any group of persons (within the
meaning of the Securities Exchange Act of 1934, as amended) or
by any person, of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission) of 50%
or more of the issued and outstanding capital stock of the
Borrower having the right, under ordinary circumstances, to
vote for the election of directors of the Borrower.
(b) (i) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ shall cease, for any reason other
than his death or disability, to serve as the Chairman of the
Borrower's Board of Directors, or (ii) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
shall cease to serve as the Chairman of the Borrower's Board
of Directors as a result of his death or disability, unless
within ninety (90) days after such occurrence, the Borrower
shall have entered into an employment agreement with a person
to succeed ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, which person is experienced in
the Borrower's industry and in performing the duties performed
by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ for the Borrower, and has been approved
by a majority of the then Board of Directors of the Borrower,
and is otherwise reasonably satisfactory to the Lender.
Closing Date. The first date on which the conditions set forth in ss.9
and ss.10 have been satisfied and any Loans are to be made.
Code. The Internal Revenue Code of 1986 and the rules and regulations
thereunder, collectively as the same may be supplemented or amended and in
effect from time to time.
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Collateral. All assets of the Borrower and its active Subsidiaries,
whenever acquired. "Collateral" includes, without limitation, all Accounts,
Inventory, Equipment, Investment Property and General Intangibles.
Consolidated or consolidated. With reference to any term defined herein,
shall mean that term as applied to the accounts of the Borrower and its
Subsidiaries, consolidated in accordance with Generally Accepted Accounting
Principles.
Consolidated EBITDA. With respect to any fiscal period, the result
(determined with respect to the same period and without duplication) of the
following: (a) Consolidated Net Income (or Deficit); plus (b) depreciation,
amortization, and other noncash items included as an expense of the Borrower and
its Subsidiaries in the determination of Consolidated Net Income (or Deficit);
plus (c) all taxes included as an expense of the Borrower and its Subsidiaries
in the determination of Consolidated Net Income (or Deficit); plus (d) interest
included as an expense of the Borrower and its Subsidiaries in the determination
of Consolidated Net Income (or Deficit).
Consolidated Intangible Assets At any date, those assets of the Borrower
and its Subsidiaries, that, in accordance with Generally Accepted Accounting
Principles, should be classified as intangible assets on a Consolidated balance
sheet of the Borrower and its Subsidiaries, including such items as goodwill,
the purchase price of acquired assets in excess of the fair market value
thereof, unamortized debt discount and expense, trademarks, trade names, service
marks, brand names, copyrights, patents and licenses, and rights with respect to
the foregoing; all amounts representing any write-up in the book value of any
assets of the Borrower resulting from a revaluation thereof; to the extent not
already deducted, all reserves; the value of any minority interests in
Subsidiaries; and/or the aggregate amount of all loans made by the Borrower or
any Subsidiary to any officer, employee, or shareholder of the Borrower or any
Subsidiary.
Consolidated Net Income (or Deficit). With respect to any fiscal period,
the consolidated net income (or deficit) of the Borrower and its Subsidiaries,
after deduction of all expenses, taxes, and other proper charges, determined in
accordance with Generally Accepted Accounting Principles.
Consolidated Tangible Net Worth. With respect to any fiscal period, (i)
the difference between (x) the Borrower's Consolidated Total Assets and (y) the
Borrower's Consolidated Total Liabilities, plus (z) the Borrower's Subordinated
Indebtedness, less (ii) the book value of the Borrower's Consolidated Intangible
Assets, all calculated in accordance with Generally Accepted Accounting
Principles.
Consolidated Total Assets. At any date, all assets of the Borrower and its
Subsidiaries that, in accordance with Generally Accepted Accounting Principles,
should be classified as assets on a Consolidated balance sheet of the Borrower
and its Subsidiaries.
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Consolidated Total Liabilities. At any date, all liabilities of the
Borrower and its Subsidiaries that, in accordance with Generally Accepted
Accounting Principles, should be classified as liabilities on the Consolidated
balance sheet of the Borrower and its Subsidiaries, including, in all events,
all Indebtedness of the Borrower and its Subsidiaries, whether or not so
classified.
Debt Service Charges. With respect to any fiscal period, the sum of (a)
the expenses of the Borrower for such period for interest payable with respect
to Indebtedness for borrowed money, plus (b) current maturities of long term
indebtedness paid or payable during such period, all as determined in accordance
with Generally Accepted Accounting Principles.
Default. See ss.11.1.
Distribution. The declaration or payment of any dividend on or in respect
of any shares of any class of capital stock of the Borrower, other than
dividends payable solely in shares of common stock of the Borrower; the
purchase, redemption, or other retirement of any shares of any class of capital
stock of the Borrower, directly or indirectly by the Borrower through a
Subsidiary of the Borrower or otherwise; the return of capital by the Borrower
to its shareholders as such; or any other distribution on or in respect of any
shares of any class of capital stock of the Borrower.
Dollars or $. Dollars in lawful currency of the United States of America.
Drawdown Date. The date on which any Loan is made or is to be made.
Eligible Accounts. Those of the Borrower's Accounts in which the Lender
has a valid and perfected first priority security interest and which the Lender
deems eligible for borrowing, but excluding, without limitation, each of the
following Accounts, unless otherwise mutually agreed by the Lender and the
Borrower:
(1) Any Account which has been outstanding for more than ninety (90)
days from the invoice date.
(2) Any Account which is owed by any account debtor if fifty percent
(50%) or more of the Accounts due from such account debtor exceed the
limitations on eligibility described in Subparagraph (a), above.
(3) Any which, when aggregated with all of the accounts of that
account debtor, exceeds thirty-five percent (35%) of the then aggregate of
Eligible Accounts.
(4) Any Account to the extent that the subject account debtor claims
any offset, chargeback, or contra or is otherwise disputed.
(5) Any Account as to which the principal place of business of the
subject account debtor is not within the continental United States unless
(x) such account
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is insured by credit insurance satisfactory to the Lender; or (y) such
account is secured by a letter of credit or sight draft (in each case, the
terms, conditions and issuer of which are satisfactory to the Lender) and
which sight draft shall be collaterally assigned to the Lender.
(6) Any Account which arises out of any sale made on a basis other
than upon terms usual to the business of the Borrower.
(7) Any Account which arises out of a finance charge due to the
Borrower.
(8) Any Account which is owed by any Subsidiary or other affiliated
entity or Person.
(9) Any Account as to which the account debtor has filed a petition
for relief under the federal Bankruptcy Code or made an assignment for the
benefit of creditors; or if any petition or other application for relief
under the Bankruptcy Code has been filed against the account debtor; or if
the account debtor has failed, suspended its business operations, become
insolvent, or suffered a receiver or trustee to be appointed for any of
its assets or affairs; or if the account debtor is generally not paying
its debts as they become due.
(10) Any Account which is on a sale and return, sale on approval,
consignment, or any other repurchase or return basis.
(11) Any Account which is on a ▇▇▇▇-and-hold basis for which the
Borrower has not received written authorization from the account debtor to
hold the asset which the subject of the Account.
(12) Any Account as to which the Lender reasonably believes the
collection of such Account is insecure or that such Account may not be
paid by reason of the account debtor's financial inability to pay.
(13) Any Account as to which the account debtor is the United States
of America or any department, agency, or instrumentality thereof, unless
the Borrower assigns its right to payment of such Account to the Lender in
accordance with the terms of the Assignment of Claims Act of 1940, as
amended (31 U.S.C. ss.3727).
(14) Any other Account which the Lender, in its reasonable
discretion, deems ineligible for borrowing.
Eligible Inventory. Such of the Borrower's raw material and finished goods
inventory in which the Lender has a valid and perfected first priority security
interest, which is not obsolete or unmerchantable, and as the Lender from time
to time deems eligible for borrowing in its reasonable discretion. Eligible
Inventory shall be valued at the lower of cost (calculated on a "first-in
first-out" (FIFO) basis) or market value.
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Employee Benefit Plan. Any employee benefit plan within the meaning of
ss.3(3) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate, other than a Multiemployer Plan.
Environmental Laws. Any and all applicable foreign, federal, state and
local environmental, health or safety statutes, laws, regulations, rules, and
ordinances (whether now existing or hereafter enacted or promulgated), of all
governmental agencies, bureaus or departments which may now or hereafter have
jurisdiction over the Borrower or any of its Subsidiaries and all applicable
judicial and administrative and regulatory decrees, judgments and orders
relating to injury to, or the protection of, real or personal property or human
health or the environment, including, without limitation, all requirements
pertaining to reporting, licensing, permitting, investigation, remediation and
removal of emissions, discharges, releases or threatened releases of Hazardous
Substances, whether solid, liquid or gaseous in nature, into the environment or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of such Hazardous Substances.
Equipment. "Equipment" as defined in the UCC and all motor vehicles,
rolling stock, machinery, office equipment, plant equipment, tools, dies, molds,
store fixtures, furniture, and other goods, property, and assets which are used
and/or were purchased for use in the operation or furtherance of the Borrower's
business and any and all accessions and additions thereto and substitutions
therefor.
ERISA. The Employee Retirement Income Security Act of 1974 and the rules
and regulations thereunder, collectively as the same may be supplemented or
amended and in effect from time to time.
ERISA Affiliate. Any Person which is treated as a single employer with the
Borrower under ss.414 of the Code.
ERISA Reportable Event. A reportable event (other than a reportable event
described in Subsections 4043(b)(2)-(4) and 4043(b)(6)-(9), which do not require
a thirty (30) day notice to the PBGC) with respect to a Guaranteed Pension Plan
within the meaning of ss.4043 of ERISA and the regulations promulgated
thereunder as to which the requirement of notice has not been waived.
Event of Default. See ss.11.1.
General Intangibles. "General Intangibles" as defined in the UCC and also
all: rights to payment for credit extended; deposits; amounts due to the
Borrower; credit memoranda in favor of the Borrower; warranty claims; tax
refunds and abatements; insurance refunds and premium rebates; all means and
vehicles of investment or hedging, including, without limitation, options,
warrants, and futures contracts; records; customer lists; telephone numbers;
goodwill; causes of action; judgments; payments under any settlement or other
agreement; literary rights; rights to performance; royalties; license and/or
franchise fees; rights of admission; licenses; franchises; license agreements,
including all rights of the Borrower to enforce same; permits, certificates of
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convenience and necessity, and similar rights granted by any governmental
authority; patents, patent applications, patents pending, and other intellectual
property; internet addresses and domain names; developmental ideas and concepts;
proprietary processes; blueprints, drawings, designs, diagrams, plans, reports,
and charts; catalogs; manuals; technical data; computer software programs
(including the source and object codes therefor), computer records, computer
software, rights of access to computer record service bureaus, service bureau
computer contracts, and computer data; tapes, disks, semi-conductors chips and
printouts; trade secrets rights, copyrights, mask work rights and interests, and
derivative works and interests; user, technical reference, and other manuals and
materials; trade names, trademarks, service marks, and all goodwill relating
thereto; applications for registration of the foregoing; and all other general
intangible property of the Borrower in the nature of intellectual property;
proposals; cost estimates, and reproductions on paper, or otherwise, of any and
all concepts or ideas, and any matter related to, or connected with, the design,
development, manufacture, sale, marketing, leasing, or use of any or all
property produced, sold, or leased, by the Borrower or credit extended or
services performed, by the Borrower, whether intended for an individual customer
or the general business of the Borrower, or used or useful in connection with
research by the Borrower.
Generally Accepted Accounting Principles or GAAP. Principles that are (i)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to time
and (ii) consistently applied with past financial statements of the Borrower
adopting the same principles; provided that in each case referred to in this
definition of "Generally Accepted Accounting Principles" a certified public
accountant would, insofar as the use of such accounting principles is pertinent,
be in a position to deliver an unqualified opinion (other than a qualification
regarding changes in Generally Accepted Accounting Principles) as to financial
statements in which such principles have been properly applied.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of ss.3(2) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Hazardous Substances. Any substance (i) the presence of which requires or
may hereafter require notification, investigation or remediation under any
Environmental Law; (ii) which is or becomes defined as a "hazardous waste,"
hazardous material" or "hazardous substance" or "controlled industrial waste" or
"pollutant" or "contaminant" under any present or future Environmental Law or
amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
et seq.) and any applicable local statutes and the regulations promulgated
thereunder; (iii) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of any foreign country, the United States, any state
of the United States, or any political subdivision thereof to the extent any of
the foregoing has or
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had jurisdiction over the Company; or (iv) without limitation, which contains
gasoline, diesel fuel or other petroleum products, asbestos or polychlorinated
biphenyls ("PCB's").
Indebtedness. All obligations, contingent and otherwise, that in
accordance with Generally Accepted Accounting Principles should be classified
upon the Consolidated balance sheet of the Borrower and the Borrower's
Subsidiaries as liabilities, or to which reference should be made by footnotes
thereto, including in any event and whether or not so classified: (a) all
obligations for borrowed money or other extensions of credit whether or not
secured or unsecured, absolute or contingent, including, without limitation,
unmatured reimbursement obligations with respect to letters of credit or
guarantees issued for the account of or on behalf of the Borrower and its
Subsidiaries and all obligations representing the deferred purchase price of
property, other than accounts payable arising in the ordinary course of
business, (b) all obligations evidenced by bonds, notes, debentures or other
similar instruments; (c) all liabilities secured by any mortgage, pledge,
security interest, lien, charge, or other encumbrance existing on property owned
or acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; and (d) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others or
otherwise, including any obligations with respect to puts, swaps, and other
similar undertakings, any obligation to supply funds to or in any manner to
invest in, directly or indirectly, the debtor, to purchase indebtedness, or to
assure the owner of indebtedness against loss, through an agreement to purchase
goods, supplies, or services for the purpose of enabling the debtor to make
payment of the indebtedness held by such owner or otherwise, and the obligations
to reimburse the issuer in respect of any letters of credit; and (e) that
portion of all obligations arising under Capital Leases that is required to be
capitalized on the consolidated balance sheet of the Borrower and its
Subsidiaries.
Inventory. "Inventory" as defined in the UCC and all goods, wares,
merchandise, raw materials, work in process, finished goods, and all packaging,
advertising, and shipping materials and documents related to any of the
foregoing, and all labels and other names or marks affixed or to be affixed
thereto for identifying or selling the same, and other personal property of
every description held for sale or lease or furnished or to be furnished under a
contract of sale or service, or used or consumed or to be used or consumed in
the Borrower's business.
Investment Property. Has the meaning given that term in the UCC.
Investments. All expenditures made and all liabilities and commitments
incurred (contingently or otherwise) for the purchase or acquisition of capital
stock, partnership interests, or equity interests or securities, or Indebtedness
of, or for loans, advances, capital contributions or transfers of property to,
or in respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person.
Lender. As defined in the preamble hereto.
Liabilities. All indebtedness, obligations and liabilities of the Borrower
and its Subsidiaries to the Lender, individually or collectively, under this
Agreement or any of the other
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Loan Documents or in respect of any of the Loans or the Notes or other
instruments at any time evidencing any thereof, whether existing on the date of
this Agreement or arising or incurred hereafter, direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law of
otherwise.
Loan Documents. This Agreement, the Notes, the Security Documents and
other instruments, documents and agreements executed in connection therewith, as
each may be modified, amended, supplemented or restated.
Loans. The Revolving Credit Loans and the Term Loan to be made by the
Lender hereunder.
Maturity Date. February 28, 2003 or such earlier date on which the Loans
shall become due and payable pursuant to the terms hereof.
Microfluidics. Shall mean Microfluidics Corporation, a Delaware
corporation which is a wholly-owned Subsidiary of the Borrower.
Multiemployer Plan. Any multiemployer plan within the meaning of ss.3(37)
of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate.
Note(s). The Revolving Credit Note and the Term Note.
Outstanding. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by ss.4002 of ERISA
and any successor entity or entities having similar responsibilities.
Permitted Liens. Liens, security interests and other encumbrances
permitted by ss.7.2.
Person. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Prime Rate. The annual rate of interest publicly announced from time to
time by the Lender in the United States as its "Prime Rate."
Real Estate. All real property at any time owned or leased (as lessee or
sublessee) by the Borrower or any of its Subsidiaries.
Revolving Credit Ceiling. $4,000,000.00.
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Revolving Credit Loans. Revolving credit loans made or to be made by the
Lender to the Borrower pursuant to ss.2.
Revolving Credit Note. See ss.2.3.
SEC. The Securities and Exchange Commission.
Security Documents. All security agreements, mortgages, pledge agreements
and other instruments, documents, and agreements from the Borrower and/or any
Subsidiary, granting a lien, security interest or other right in favor of the
Lender in any asset of the Borrower or its Subsidiaries to secure the
Liabilities, whether such agreements now exist or hereafter arise.
Subordinated Indebtedness. Indebtedness in favor Lake Shore Industries,
Inc., a Michigan corporation in the principal amount of $300,000.00 which is
expressly subordinated in right of payment, in form and on terms approved by the
Lender in writing, to the prior payment in full of the Loans.
Subsidiary. Any corporation, association, partnership, trust, or other
business entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes or controlling interests) of the outstanding Voting Interests.
Term Loan. The Term Loan made or to be made by the Lender to the Borrower
pursuant to ss.2.9.
Term Note. See Section 2.10, below.
UCC. The Uniform Commercial Code as enacted in The Commonwealth of
Massachusetts, as such may be supplemented or amended and in effect from time to
time.
Voting Interests. Stock or similar ownership interests, of any class or
classes (however designated), the holders of which are at the time entitled, as
such holders, (a) to vote for the election of a majority of the directors (or
persons performing similar functions) of the corporation, association,
partnership, trust or other business entity involved, or (b) to control, manage,
or conduct the business of the corporation, partnership, association, trust,
limited liability company, limited liability partnership or other business
entity involved.
ss.1.2. Rules of Interpretation.
(1) A reference to any document or agreement shall include
such document or agreement as amended, modified or
supplemented from time to time in accordance with its
terms and the terms of this Agreement.
(2) The singular includes the plural and the plural includes
the singular.
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(3) A reference to any law includes any amendment or
modification to such law.
(4) A reference to any Person includes its permitted
successors and permitted assigns.
(5) Accounting terms not otherwise defined herein have the
meanings assigned to them by Generally Accepted
Accounting Principles.
(6) The words "include", "includes" and "including" are not
limiting.
(7) All terms not specifically defined herein or by
Generally Accepted Accounting Principles, which terms
are defined in the UCC, have the meanings assigned to
them therein.
(8) Reference to a particular "ss." refers to that section
of this Agreement unless otherwise indicated.
(9) The words "herein", "hereof", "hereunder" and words of
like import shall refer to this Agreement as a whole and
not to any particular section or subdivision of this
Agreement.
2. THE LOANS.
Subpart A - The Revolving Credit Loans.
ss.2.1. Commitment to Make Revolving Credit Loans. Subject to the terms
and conditions set forth in this Agreement, the Lender agrees to lend to the
Borrower, and the Borrower may borrow, repay, and reborrow from time to time
between the Closing Date and the Maturity Date upon notice by the Borrower to
the Lender given in accordance with ss.2.5, such sums as are requested by the
Borrower (each a "Revolving Credit Loan"), provided, that the sum of the
Outstanding amount of the Revolving Credit Loans (after giving effect to all
amounts requested) shall not at any time exceed Availability. Each request for a
Revolving Credit Loan hereunder shall constitute a representation and warranty
by the Borrower that the conditions set forth in ss.9 and ss.10, in the case of
the initial Revolving Credit Loan, and ss.10, in the case of all other Revolving
Credit Loans, have been satisfied on the date of such request.
ss.2.2. Unused Line Fee. The Borrower agrees to pay to the Lender, an
unused line fee calculated at the rate of one-quarter of one percent (.25%) per
annum on the average daily amount by which the Revolving Credit Ceiling exceeds
the Outstanding amount of Revolving Credit Loans during each calendar quarter or
portion thereof from the date hereof to the Maturity Date. The Unused Line Fee
shall be payable quarterly in arrears on the first Business Day of each calendar
quarter for the immediately preceding calendar quarter commencing on the first
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such date following the date hereof, with a final payment on the Maturity Date
or any earlier date on which the Lender's commitment to make Revolving Credit
Loans shall terminate.
ss.2.3. The Revolving Credit Note. The Revolving Credit Loans shall be
evidenced by the promissory note of the Borrower in substantially the form of
Exhibit A hereto (the "Revolving Credit Note"), dated as of the Closing Date and
completed with appropriate insertions. The Revolving Credit Note shall be
payable to the order of the Lender in the principal amount of Four Million and
No/100 Dollars ($4,000,000.00).
ss.2.4. Interest on Revolving Credit Loans.
(1) The outstanding principal balance of the Revolving Credit Loans
shall bear interest at a rate equal to the aggregate of the Prime Rate
plus the Applicable Margin.
(2) The Borrower shall pay interest on each Revolving Credit Loan in
arrears on the first day of each month, commencing April 1, 2000.
ss.2.5. Requests for Revolving Credit Loans. The Borrower shall give to
the Lender telephonic notice (confirmed in writing in the form of Exhibit B
hereto) of each Revolving Credit Loan requested hereunder. Each such notice
shall be irrevocable and binding on the Borrower and shall obligate the Borrower
to accept the Revolving Credit Loan requested from the Lender on the proposed
Drawdown Date.
Notices for any Revolving Credit Loans shall be furnished to the Lender no
later than 1:30 p.m. (Boston time) on the Business Day on which such proposed
Drawdown Date has been requested. Each such notice shall specify (i) the
principal amount of the Revolving Credit Loan requested and (ii) the proposed
Drawdown Date of such Revolving Credit Loan. Subject to the terms and conditions
of this Agreement, the Lender will make such Revolving Credit Loan by the end of
that Business Day.
ss.2.6. Maturity. The Borrower promises to pay on the Maturity Date, and
there shall become absolutely due and payable on the Maturity Date, all of the
Revolving Credit Loans Outstanding on such date, together with any and all
accrued and unpaid interest thereon.
ss.2.7. Mandatory Repayments of Revolving Credit Loans. (a) If at any time
the aggregate Outstanding principal balance of the Revolving Credit Loans
exceeds Availability, then the Borrower shall immediately pay the amount of such
excess to the Lender for application to the Revolving Credit Loans.
(b) On each Business Day, the Borrower shall cause all proceeds of
the Collateral and from any other assets or source to be directed to a lockbox,
blocked account, or other recipient over which the Lender has control, with such
proceeds to be applied against the then Outstanding principal balance of the
Revolving Credit
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Loans; provided, however, for purposes of the calculation of interest on the
unpaid principal balance of the Revolving Credit Loans, such payment shall be
deemed to have been made two (2) Business Days after such transfer.
Subpart B - The Term Loan.
ss.2.8. Commitment to Make Term Loan. Subject to the terms and conditions
set forth in this Agreement, the Lender agrees to make, and the Borrower shall
borrow, on the Closing Date the sum of $475,000.00 (the "Term Loan").
ss.2.9. The Term Note. The Term Loan shall be evidenced by the promissory
note of the Borrower, substantially in the form of Exhibit C hereto (the "Term
Note"), dated as of the Closing Date and completed with appropriate insertions.
ss.2.10. Interest on Term Note.
The Outstanding principal balance of the Term Loan shall bear interest
from the period commencing with the Drawdown Date thereof at a rate equal to the
aggregate of the Prime Rate plus the Applicable Margin. The Borrower shall pay
interest on the Outstanding principal balance of the Term Loan in arrears on the
first day of each month, commencing April 1, 2000.
ss.2.11. Repayment of Term Loan. The Outstanding principal balance of the
Term Note shall be payable in thirty-five (35) consecutive monthly installments,
the first of which shall be due on the first (1st) day of April, 2000, and the
subsequent of which shall be due on the same day of each calendar month
thereafter. Each of the monthly installments, except the last, shall be in the
principal sum of $7,917.00. In all events and under all circumstances, unless
sooner paid or accelerated, the then unpaid principal balance of the Term Note
and all accrued and unpaid interest thereon, and all unpaid costs and expenses
shall be due and payable on the Maturity Date.
ss.2.12. Optional Prepayments of Term Loan.
The Borrower shall have the right, at its election, to repay the
Outstanding amount of the Term Loan, as a whole or in part, at any time without
penalty or premium. No prepayment hereunder shall postpone the date for, or
reduce the amount of, any subsequent payment under the Term Loan. Any portion of
the Term Loan which is prepaid may not be reborrowed.
3. CERTAIN GENERAL PROVISIONS.
ss.3.1. Commitment Fee. The Borrower agrees to pay to the Lender on the
Closing Date a Commitment Fee in the amount of $22,375.00. The Commitment Fee is
nonrefundable, and the Borrower shall not be entitled to any credit, rebate or
repayment of the Commitment Fee notwithstanding any termination or suspension of
the Lender's obligation to fund all or any portion of the Loans.
ss.3.2. Funds for Payments.
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(1) All payments of principal, interest, commitment fees, closing
fees and any other amounts due hereunder or under any of the other Loan
Documents shall be made to the Lender, at its head office at ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other location that the
Lender may from time to time designate, in each case in immediately
available funds.
(2) All payments by the Borrower hereunder and under any of the
other Loan Documents shall be made without setoff or counterclaim and free
and clear of and without deduction for any taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, compulsory loans, restrictions or
conditions of any nature now or hereafter imposed or levied by any
jurisdiction or any political subdivision thereof or taxing or other
authority therein unless the Borrower is compelled by law to make such
deduction or withholding. If any such obligation is imposed upon the
Borrower with respect to any amount payable by it hereunder or under any
of the other Loan Documents, the Borrower will pay to the Lender, on the
date on which such amount is due and payable hereunder or under such other
Loan Document, such additional amount in Dollars as shall be necessary to
enable the Lender to receive the same net amount which the Lender would
have received on such due date had no such obligation been imposed upon
the Borrower. The Borrower will deliver promptly to the Lender
certificates or other valid vouchers for all taxes or other charges
deducted from or paid with respect to payments made by the Borrower
hereunder or under such other Loan Document.
ss.3.3. Computations. All computations of interest on the Loans and of
other fees payable by the Borrower to the extent applicable shall be based on a
360-day year and paid for the actual number of days elapsed. Any change in
interest rates hereunder resulting from a change in the Prime Rate shall become
effective as of the day on which such change in the Prime Rate becomes
effective. Whenever a payment hereunder or under any of the other Loan Documents
becomes due on a day that is not a Business Day, the due date for such payment
shall be extended to the next succeeding Business Day, and interest shall accrue
during such extension. The Outstanding amount of the Loans as reflected on the
Lender's records from time to time shall be considered correct and binding on
the Borrower and shall be prima facie evidence of the Outstanding amount owing
and unpaid to the Lender, unless within ten (10) Business Days after receipt by
the Lender from Borrower of any notice of such Outstanding amount, the Borrower
shall notify the Lender to the contrary.
ss.3.4. Additional Costs, Etc. If any present or future applicable law,
which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to the Lender by any central bank or other fiscal, monetary or
other authority (whether or not having the force of law), shall:
(1) subject the Lender to any prospective tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Agreement, the other Loan
-14-
Documents or the Loans (other than taxes based upon or measured by the
income or profits of the Lender); or
(2) prospectively materially change the basis of taxation (except
for changes in taxes on income or profits) of payments to the Lender of
the principal of or the interest on any Loans or any other amounts payable
to the Lender under this Agreement or the other Loan Documents; or
(3) prospectively impose or increase or render applicable (other
than to the extent specifically provided for elsewhere in this Agreement)
any special deposit, reserve, assessment, liquidity, capital adequacy or
other similar requirements (whether or not having the force of law)
against assets held by, or deposits in or for the account of, or loans by,
or commitments of an office of the Lender; or
(4) prospectively impose on the Lender any other conditions or
requirements with respect to this Agreement, the other Loan Documents, the
Loans, or any class of loans or commitments of which any of the Loans
forms a part.
and the result of any of the foregoing is
(1) to increase the cost to the Lender of making, funding,
issuing, renewing, extending or maintaining any of the
Loans; or
(2) to reduce the amount of principal, interest or other
amount payable to such Lender hereunder on account of
the Loans; or
(3) to require such Lender to make any payment or to forego
any interest or other sum payable hereunder, the amount
of which payment or foregone interest or other sum is
calculated by reference to the gross amount of any sum
receivable or deemed received by the Lender from the
Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by the Lender
at any time and from time to time and as often as the occasion therefor may
arise, pay to the Lender such additional amounts as will be sufficient to
compensate the Lender for such prospective additional cost, reduction, payment
or foregone interest or other sum.
ss.3.5. Capital Adequacy. If any present or future law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) or the interpretation thereof by a court or governmental authority with
appropriate jurisdiction affects the amount of capital required or expected to
be maintained by the Lender or any corporation controlling the Lender and the
Lender determines that the amount of capital required to be maintained by it is
increased by or based upon the existence of the Loans made or deemed to be made
pursuant hereto, then the Lender may notify the Borrower of such fact, and the
Borrower shall pay to the Lender from time to time on demand, as an additional
fee payable hereunder, such amount as the Lender shall determine in good faith
and certify in a notice to the Borrower to be an amount that will
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adequately compensate the Lender in light of these circumstances for its
increased costs of maintaining such capital.
ss.3.6. Certificate. A certificate setting forth any additional amounts
payable pursuant to ss.ss.3.4 or 3.5 and a brief explanation of such amounts
which are due and the manner in which such amounts were calculated, submitted by
the Lender to the Borrower, shall be prima facie evidence that such amounts are
due and owing unless within ten (10) Business Days after receipt by the Borrower
of such certificate, the Borrower shall notify the Lender to the contrary.
ss.3.7. Interest After Default. Following the occurrence of an Event of
Default, principal and (to the extent permitted by applicable law) interest on
the Loans and all other amounts payable hereunder or under any of the other Loan
Documents, at the option of the Lender, shall bear interest payable on demand at
a rate per annum equal to the aggregate of the applicable interest rates for the
subject Loans plus three percent (3.0%) per annum.
4. COLLATERAL SECURITY. The Liabilities shall be secured by a perfected
first priority security interest to be held by the Lender (subject only to
Permitted Liens) in the Collateral.
5. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to
the Lender as follows.
ss.5.1. Corporate Authority; Etc.
(1) Incorporation; Good Standing. The Borrower and Microfluidics
each (i) is a corporation, validly existing and in good standing under the
laws of the State of Delaware, (ii) has all requisite power to own its
property and conduct its business as now conducted and as presently
contemplated, and (iii) is in good standing as a foreign corporation and
is duly authorized to do business in each jurisdiction where Collateral is
located and in each other jurisdiction where such qualification is
necessary.
(2) Authorization. The execution, delivery and performance of this
Agreement and the other Loan Documents to which the Borrower and
Microfluidics is to become a party and the transactions contemplated
hereby and thereby (i) are within the authority of such Person, (ii) have
been duly authorized by all necessary proceedings, (iii) do not and will
not conflict with or result in any breach or contravention of any
provision of law, statute, rule, regulation or agreement to which such
Person is subject or any judgment, order, writ, injunction, license or
permit applicable to such Person, and (iv) do not and will not conflict
with any provision of such Person's organization documents or other
charter documents or bylaws of, or any agreement or other instrument
binding upon, such Person.
(3) Enforceability. The execution and delivery of this Agreement and
the other Loan Documents to which the Borrower and Microfluidics is or is
to become a party will result in valid and legally binding obligations of
such Person enforceable
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against such Person in accordance with the respective terms and provisions
hereof and thereof, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors' rights and except to the
extent that availability of the remedy of specific performance or
injunctive relief is subject to the discretion of the court before which
any proceeding therefor may be brought.
ss.5.2. Governmental Approvals. The execution, delivery and performance by
the Borrower of this Agreement and the other Loan Documents to which the
Borrower and Microfluidics is or is to become a party and the transactions
contemplated hereby and thereby do not require the approval or consent of, or
filing with, any governmental agency or authority other than those already
obtained and the filing of related financing statements in the appropriate
records office with respect thereto.
ss.5.3. Title to Properties; Leases. The Borrower and its Subsidiaries own
all of the assets reflected in the Consolidated balance sheet of the Borrower as
at the Balance Sheet Date or acquired since that date (except property and
assets sold or otherwise disposed of in the ordinary course of business since
that date), and such assets are not subject to any mortgages, leases,
conditional sales agreements, title retention agreements, liens or other
encumbrances except Permitted Liens.
ss.5.4. Financial Statements. The following financial statements have been
furnished to the Lender:
(1) A Consolidated balance sheet of the Borrower and its
Subsidiaries as of the Balance Sheet Date, and a Consolidated statement of
income for the fiscal year then ended, accompanied by an auditor's report
prepared without qualification by the Borrower's independent certified
public accountant (except that the Lender acknowledges that the auditor's
opinion for fiscal year 1998 notes a "going concern" qualification. Such
balance sheet and statement of income have been prepared in accordance
with Generally Accepted Accounting Principles and fairly present the
financial condition of the Borrower as at the close of business on the
date thereof and the results of operations for the fiscal year then ended.
There are no contingent liabilities of the Borrower or any of its
Subsidiaries as of such date involving material amounts, known to the
officers of the Borrower or any of its Subsidiaries not disclosed in said
balance sheet and the related notes thereto.
(2) A Consolidated balance sheet, a Consolidated statement of income
and a Consolidated statement of cash flow of the Borrower and its
Subsidiaries for each of the fiscal quarters of the Borrower ended since
the Balance Sheet Date certified by Borrower's chief financial officer to
have been prepared in accordance with Generally Accepted Accounting
Principles consistent with those used in the preparation of the annual
audited statements delivered pursuant to paragraph (a) above and to fairly
present the financial condition of the Borrower and its Subsidiaries as at
the close of business on the dates thereof and the results of operations
for the fiscal quarters then ended (subject to
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year-end adjustments). There are no contingent liabilities of the Borrower
or any of its Subsidiaries as of such dates involving material amounts,
known to the officers of the Borrower or any of its Subsidiaries, not
disclosed in such balance sheets and the related notes thereto.
ss.5.5. No Material Changes, Etc. Since the Balance Sheet Date, there has
occurred no materially adverse change in the financial condition or business of
the Borrower or its Subsidiaries as shown on or reflected in the Consolidated
balance sheet of the Borrower as of the Balance Sheet Date, or the Consolidated
statement of income for the fiscal year then ended, other than changes in the
ordinary course of business that have not had any materially adverse effect
either individually or in the aggregate on the business or financial condition
of the Borrower or its Subsidiaries.
ss.5.6. Franchises, Patents, Copyrights, Etc. The Borrower and its
Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, and rights in respect of the foregoing, adequate
for the conduct of its business substantially as now conducted without known
conflict with any rights of others.
ss.5.7. Litigation. Except as disclosed on Schedule 5.7, there are no
actions, suits, proceedings or investigations of any kind pending or, to the
knowledge of the Borrower, threatened against the Borrower or any of its
Subsidiaries before any court, tribunal or administrative agency or board that,
if adversely determined, might, either in any case or in the aggregate,
materially adversely affect the properties, assets, financial condition or
business of the Borrower or its Subsidiaries or materially impair the right of
the Borrower and its Subsidiaries to carry on business substantially as now
conducted by them, or result in any substantial liability not adequately covered
by insurance, or for which adequate reserves are not maintained on the balance
sheet of the Borrower, or which question the validity of this Agreement or any
of the other Loan Documents, or any action taken or to be taken pursuant hereto
or thereto.
ss.5.8. No Materially Adverse Contracts, Etc. Neither the Borrower nor any
of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or is
expected in the future to have a materially adverse effect on the business,
assets or financial condition of the Borrower or its Subsidiaries. Neither the
Borrower nor any of its Subsidiaries is a party to any contract or agreement
that has or is expected, in the judgment of the Borrower's officers, to have any
materially adverse effect on the business of the Borrower or its Subsidiaries.
ss.5.9. Compliance With Other Instruments, Laws, Etc. Neither the Borrower
nor any of its Subsidiaries is in violation of any provision of its charter or
other organization documents, by-laws, or any agreement or instrument to which
it may be subject or by which it or any of its properties may be bound or any
decree, order, judgment, statute, license, rule or regulation, in any of the
foregoing cases in a manner that could result in the imposition of substantial
penalties or materially and adversely affect the financial condition, properties
or business of the Borrower and its Subsidiaries.
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ss.5.10. Tax Status. The Borrower and its Subsidiaries (a) has made or
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, (b) has paid
or will pay before becoming delinquent all taxes and other governmental
assessments and charges shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and by appropriate
proceedings and (c) has set aside on its books provisions reasonably adequate
for the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Borrower know of no basis for any such claim.
ss.5.11. No Event of Default. No Default or Event of Default has occurred
and is continuing.
ss.5.12. Holding Company and Investment Company Acts. Neither the Borrower
nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of
a "holding company", or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is it an
"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940.
ss.5.13. Absence of UCC Financing Statements, Etc. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry, or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
in, any Collateral or rights thereunder.
ss.5.14. Setoff, Etc. The Collateral and the rights of the Lender with
respect to the Collateral are not subject to any setoff, claims, withholdings or
other defenses. The Borrower is the owner of the Collateral free from any lien,
security interest, encumbrance and, to the knowledge of the Borrower, any other
claim or demand, except for Permitted Liens.
ss.5.15. Certain Transactions. Except as disclosed on Schedule 5.15, none
of the officers, trustees, directors, or employees of the Borrower or any of its
Subsidiaries is presently a party to any transaction with the Borrower or any of
its Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
trustee, director or such employee or any corporation, partnership, trust or
other entity in which any officer, trustee, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
ss.5.16. Employee Benefit Plans; Multiemployer Plans; Guaranteed Pension
Plans. Neither the Borrower nor any ERISA Affiliate maintains or contributes to
any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan other
than as set forth in Schedule 5.16 hereof.
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ss.5.17. Regulations U and X. No portion of any Loan is to be used for the
purpose of purchasing or carrying any "margin security" or "margin stock" as
such terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224.
ss.5.18. Environmental Compliance. Except as disclosed on Schedule 5.18,
to the best of the Borrower's knowledge
(1) the operations of the Borrower and each of the Subsidiaries
comply with all applicable Environmental Laws;
(2) none of the operations of the Borrower or any of the
Subsidiaries is the subject of any judicial or administrative proceeding
alleging the violation of any Environmental Laws;
(3) none of the operations of the Borrower or any of the
Subsidiaries is the subject of any federal or state investigation
evaluating whether the Borrower or any of the Subsidiaries disposed of any
hazardous or toxic waste, substance or constituent at any site that may
require remedial action, or any federal or state investigation evaluating
whether any remedial action is needed to respond to a release of any
hazardous or toxic waste, substance or constituent into the environment;
(4) neither the Borrower nor any of the Subsidiaries has filed any
notice under any federal or state law indicating past or present
treatment, storage or disposal of a hazardous waste or reporting a spill
or release of a hazardous or toxic waste, substance or constituent into
the environment;
(5) neither the Borrower nor any of the Subsidiaries has any
material contingent liability of which the Borrower has knowledge or
reasonably should have knowledge in connection with any release of any
hazardous or toxic waste, substance or constituent into the environment,
nor has the Borrower or any of the Subsidiaries received any notice,
letter or other indication of potential liability arising from the
disposal of any hazardous or toxic waste, substance or constituent into
the environment.
ss.5.19. Subsidiaries. (a) Schedule 5.19 sets forth all of the
Subsidiaries of the Borrower. The Borrower or a Subsidiary is the owner, free
and clear of all liens and encumbrances, of all of the issued and outstanding
capital stock of each Subsidiary. All shares of such stock have been validly
issued and are fully paid and nonassessable and no rights to subscribe to any
additional shares have been granted, and no options, warrants, or similar rights
are outstanding.
ss.5.20. Lease Summaries. The Borrower has delivered to the Lender true,
accurate and complete copies of all leases of any Real Estate to which the
Borrower or any Subsidiary is a party (either as lessor or lessee).
-20-
ss.5.21. Loan Documents. All of the representations and warranties of the
Borrower and any Subsidiary made in the other Loan Documents or any document or
instrument delivered to the Lender or the Lenders pursuant to or in connection
with any of such Loan Documents are true and correct in all material respects.
6. AFFIRMATIVE COVENANTS OF THE BORROWER. The Borrower covenants and
agrees that, so long as any Liability is Outstanding or the Lender has any
obligation to make any Loan:
ss.6.1. Punctual Payment. The Borrower will duly and punctually pay or
cause to be paid the principal and interest on the Loans and all interest, fees
and other Liabilities provided for in this Agreement, all in accordance with the
terms of this Agreement and the Notes, as well as all other sums owing pursuant
to the Loan Documents.
ss.6.2. Maintenance of Office. The Borrower will maintain its chief
executive office in Newton, Massachusetts, or at such other place in the United
States of America as the Borrower shall designate upon not less than forty five
(45) days prior written notice to the Lender.
ss.6.3. Records and Accounts. The Borrower will (a) keep, and cause each
of its Subsidiaries to keep, true and accurate records and books of account in
which full, true and correct entries will be made in accordance with Generally
Accepted Accounting Principles and (b) maintain adequate accounts and reserves
for all taxes (including income taxes), depreciation and amortization of its
properties and the properties of its Subsidiaries, contingencies, and other
reserves.
ss.6.4. Financial Statements, Certificates and Information. The Borrower
will deliver to the Lender:
(1) As soon as practicable, but in any event not later than ninety
(90) days after the end of each fiscal year of the Borrower, the
Borrower's Form 10K filed with the SEC and the audited Consolidated
balance sheet of the Borrower and its Subsidiaries at the end of such
year, and the related audited Consolidated statements of earnings and cash
flows for such year, each setting forth in comparative form the figures
for the previous fiscal year and all such statements to be in reasonable
detail, prepared in accordance with Generally Accepted Accounting
Principles, and accompanied by an auditor's report prepared without
qualification by the Borrower's independent certified public accountant,
Deloitte & Touche, LLP (or any successor thereto as determined by the
Borrower's stockholders, which successor must be reasonably acceptable to
the Lender), together with the notes accompanying the financial statements
and a written statement from such accountants to the effect that they have
read a copy of this Agreement, and that, in making the examination
necessary to said certification, they have obtained no knowledge of any
Default or Event of Default, or, if such accountants shall have obtained
knowledge of any then existing Default or Event of Default they shall
disclose in such statement any such Default or Event of Default.
-21-
(2) As soon as practicable, but in any event not later than forty-five
(45) days after the end of each of the Borrower's fiscal quarters, copies of the
unaudited Consolidated balance sheet of the Borrower and its Subsidiaries as of
the end of such quarter, and the related unaudited Consolidated statements of
income and cash flow for such quarter and that portion of the Borrower's fiscal
year then elapsed, the Borrower's Form 10Q filed with the SEC, all in reasonable
detail and prepared in accordance with Generally Accepted Accounting Principles,
together with a certification by the principal financial or accounting officer
of the Borrower that the information contained in such financial statements
fairly presents the financial position of the Borrower and its Subsidiaries on
the date thereof (subject to year-end adjustments) and that no Default or Event
of Default then exists (or if a Default or Event of Default then exists,
specifying the nature thereof).
(3) (i) As soon as practicable, but in any event, not later than thirty
(30) days after the end of each month, copies of the unaudited Consolidated
balance sheet of the Borrower and its Subsidiaries as of the end of such month,
and the related unaudited Consolidated statements of income and cash flow for
such month and that portion of the Borrower's fiscal year then elapsed; and
(ii) As soon as practicable, but in any event, not later than
twenty-one (21) days after the end of each month, copies of the Borrower's sales
journals, cash receipts journal, accounts receivable aging, inventory listing,
accounts payable aging, bank recapitulation report and reconciliation report,
all of the foregoing and all in reasonable detail and prepared in accordance
with Generally Accepted Accounting Principles, together with a certification by
the principal financial or accounting officer of the Borrower that the
information contained in such financial statements fairly presents the financial
position of the Borrower and its Subsidiaries on the date thereof (subject to
year-end adjustments).
(4) Simultaneously with the delivery of the financial statements referred
to in subsections (a) and (b), above, a statement in the form of Exhibit D
hereto signed by the Borrower's Chief Financial Officer and (i) setting forth in
reasonable detail computations evidencing compliance with the covenants
contained in ss.ss.8.1 through 8.6 and (if applicable) reconciliations to
reflect changes in Generally Accepted Accounting Principles since the Balance
Sheet Date, and (ii) confirming the existence/non-existence of any Event of
Default.
(5) On each Business Day, a Borrowing Base Report (as of the then
immediately prior Business Day) in such form as from time to time may be
satisfactory to the Lender, which shall include, among other things, the
previous day's invoiced sales and cash receipts together with corresponding
borrowings and payments under the Revolving Credit Loans.
-22-
(6) Contemporaneously with the filing or mailing thereof, copies of all
material of a financial nature filed with the SEC or sent to the stockholders of
the Borrower.
(7) Contemporaneously with the Borrower's receipt thereof, copies of all
accountants' management letters.
(8) As soon as practicable, but in any event not later than thirty (30)
days prior to the end of each fiscal year, a budget consisting of monthly
projections of the financial condition and results of operations of the Borrower
and its Subsidiaries for the following fiscal year, including, but not limited
to, a projected balance sheet, statement of operations, statement of cash flows
and statement of changes in stockholders' equity for such fiscal year.
(9) From time to time such other financial data and information as the
Lender may reasonably request.
ss.6.5. Notices.
(1) Defaults. The Borrower will promptly notify, and will cause each of
its Subsidiaries to promptly notify, the Lender in writing of the occurrence of
any Default or Event of Default. If any Person shall give any notice or take any
other action in respect of a claimed default (whether or not constituting an
Event of Default) under this Agreement or under any note, evidence of
indebtedness, indenture or other obligation to which or with respect to which
the Borrower or any of its Subsidiaries is a party or obligor, whether as
principal or surety, and such default would permit the holder of such note or
obligation or other evidence of indebtedness to accelerate the maturity thereof,
which acceleration would have a material adverse effect on the Borrower, the
Borrower shall forthwith give written notice thereof to the Lender, describing
the notice or action and the nature of the claimed default.
(2) Environmental Events. The Borrower will promptly give notice, and will
cause each of its Subsidiaries to promptly give notice, to the Lender (i) of any
violation of any Environmental Law that the Borrower or any of its Subsidiaries
reports in writing or is reportable by such Person in writing to any federal,
state or local environmental agency and (ii) upon becoming aware thereof, of any
inquiry, proceeding, investigation, or other action, including a notice from any
agency of potential environmental liability, or any federal, state or local
environmental agency or board, that in either case involves any Real Estate or
has the potential to materially affect the assets, liabilities, financial
condition or operations of the Borrower, any Subsidiary or the Lender's security
interests pursuant to the Security Documents.
(3) Notification of Claims against Collateral. The Borrower will, and will
cause each of its Subsidiaries, immediately upon becoming aware thereof, to
notify the Lender in writing of any setoff, claims (including, with respect to
any Real Estate,
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environmental claims), withholdings or other defenses to which any of the
Collateral, or the rights of the Lender with respect to the Collateral, are
subject.
(4) Notice of Litigation and Judgments. The Borrower will, and will cause
each of its Subsidiaries to, give notice to the Lender in writing of any
litigation or proceedings threatened or any pending litigation and proceedings
affecting the Borrower or any of its Subsidiaries or to which the Borrower or
any of its Subsidiaries is or is to become a party involving an uninsured claim
against the Borrower or any of its Subsidiaries or that could reasonably be
expected to have a materially adverse effect on the Borrower and stating the
nature and status of such litigation or proceedings. The Borrower will, and will
cause each of its Subsidiaries to, give notice to the Lender, in writing, in
form and detail satisfactory to the Lender, of any judgment not covered by
insurance, final or otherwise, against the Borrower or any of its Subsidiaries.
ss.6.6. Existence; Maintenance of Properties.
(1) The Borrower will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence, and the existence of
Microfluidics as Delaware corporations. Except with respect to MediControl
Corp., which the Borrower intends to dissolve, the Borrower will do or cause to
be done all things necessary to preserve and keep in full force all of its
rights and franchises and those of its Subsidiaries. The Borrower (i) will cause
all of its properties and those of its Subsidiaries (except with respect to
MediControl Corp.) used or useful in the conduct of its business or the business
of its Subsidiaries to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment, (ii) will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Borrower may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times, and (iii) will, and will cause each of its Subsidiaries
(except with respect to MediControl Corp.) to, continue to engage primarily in
the businesses now conducted by it and in related businesses.
(2) The Borrower shall:
(1) keep the Collateral in good order and repair (ordinary
reasonable wear and tear and insured casualty excepted).
(2) not suffer or cause the waste or destruction of any material
part of the Collateral.
(3) not use any of the Collateral in violation of any policy of
insurance thereon.
(4) not sell, lease, or otherwise dispose of any of the
Collateral, other than the following:
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(1) unless disposition is made in the ordinary course of
Borrower's business and the proceeds are delivered to
the Lender for repayment of the Liabilities and/or if
such Collateral is replaced by the Borrower with newer
assets
(2) the disposal of Equipment which is obsolete, worn out,
or damaged beyond repair, which Equipment is replaced to
the extent necessary to preserve or improve the
operating efficiency of the Borrower.
(3) the turning over to the Lender of all proceeds of the
Collateral as provided for herein and in the other Loan
Documents.
ss.6.7. Insurance. Schedule 6.7 sets forth all presently existing
insurance maintained by the Borrower and any Subsidiary. The Borrower, and to
the extent applicable, any Subsidiary, will maintain insurance on all Collateral
as required by the Loan Documents, including, without limitation, naming the
Lender as loss payee on all such policies, and will maintain with respect to its
other properties, and will cause each of its Subsidiaries to maintain with
financially sound and reputable insurers, insurance with respect to such
properties and its business against such casualties and contingencies as shall
be in accordance with the general practices of businesses engaged in similar
activities in similar geographic areas and in amounts, containing such terms, in
such forms and for such periods as may be reasonable and prudent. The Lender
shall not require a collateral assignment of any life insurance policies on any
Person.
ss.6.8. Taxes. The Borrower and any Subsidiary will duly pay and
discharge, or cause to be paid and discharged, before the same shall become
overdue, all taxes, assessments and other governmental charges imposed upon it
and its real properties, sales and activities, or any part thereof, or upon the
income or profits therefrom, as well as all claims for labor, materials, or
supplies.
ss.6.9. Inspection of Properties and Books. (a) Upon one (1) day's notice
to the Borrower, the Borrower and any Subsidiary shall permit the Lender or any
of the Lender's other designated representatives to visit during regular
business hours and inspect any of the properties of the Borrower or any of its
Subsidiaries to examine the books of account of the Borrower and its
Subsidiaries (and to make copies thereof and extracts therefrom) and to discuss
the affairs, finances and accounts of the Borrower and its Subsidiaries with,
and to be advised as to the same by, its officers, all at such reasonable times
and intervals as the Lender may reasonably request.
(b) Without limiting the rights of the Lender under ss.6.9(a),
above, prior to the occurrence of an Event of Default, the Borrower shall permit
the Lender, at the Borrower's expense, (i) to undertake one (1) commercial
finance examination every ninety (90) days (for which the charge to be paid by
the Borrower shall be $550.00 per day, but shall not exceed $15,000.00 in any
calendar year, plus expenses); (ii) to obtain appraisals of any of the
Borrower's
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or any Subsidary's assets in form and substance and by appraisers
satisfactory to the Lender. Upon the occurrence of an Event of Default, the
Lender may conduct such field examinations of the Borrower and any Subsidiary at
such times as the Lender in its discretion deems appropriate and at the
Borrower's sole cost and expense.
ss.6.10. Compliance with Laws, Contracts, Licenses, and Permits. The
Borrower will comply with, and will cause each of its Subsidiaries to comply
with (a) all applicable laws and regulations now or hereafter in effect wherever
its business is conducted, including all Environmental Laws, (b) the provisions
of their corporate charters and other charter documents and by-laws, (c) all
agreements and instruments to which such Person is a party or by which such
Person or any of such Person's properties may be bound and (d) all applicable
decrees, orders, and judgments except for violations which, in the aggregate, do
not have a material adverse effect on the business, operations, properties,
assets, or financial condition of the Borrower and its Subsidiaries. If at any
time while any Liability is Outstanding or the Lender has any obligation to make
Loans hereunder, any authorization, consent, approval, permit or license from
any officer, agency or instrumentality of any government shall become necessary
or required in order that the Borrower may fulfill any of its obligations
hereunder, the Borrower will promptly take or cause to be taken all reasonable
steps within the power of the Borrower to obtain such authorization, consent,
approval, permit or license and furnish the Lender with evidence thereof.
ss.6.11. Use of Proceeds. The Borrower will use the proceeds of the Loans
solely to refinance existing Indebtedness to Comerica and for working capital
purposes.
ss.6.12. Bank Accounts. To permit the Lender to monitor the financial
performance of the Borrower and each of the Borrower's Subsidiaries, the
Borrower shall, and shall cause each of its Subsidiaries to, maintain all of its
deposit accounts with the Lender.
ss.6.13. Cash Management.
(1) The Borrower shall establish and maintain a lockbox arrangement
with the Lender (the "Lockbox") on terms and conditions satisfactory to
the Lender.
(2) Attached hereto as Exhibit 6.13 is a schedule of all present
checking or other demand daily deposit accounts maintained by the Borrower
or any Subsidiary other than the deposit account to be established with
the Lender pursuant to ss.6.12 above. The Borrower shall provide the
Lender with a blocked account agreement or controlled disbursement account
agreement with such depository institutions at which such accounts are
maintained, each of which agreements shall be satisfactory to the Lender
(the "Blocked Accounts").
(3) On each Business Day, the Borrower shall cause all proceeds of
the Collateral (including, without limitation, the proceeds in the Blocked
Accounts) and from any other assets or source to be directed to the
Lockbox to be applied against the then Outstanding principal balance of
the Revolving Credit Loans in accordance with ss.2.7(b) above.
-26-
ss.6.14. Further Assurances. The Borrower will cooperate with, and will
cause each of its Subsidiaries to cooperate with the Lender and execute such
further instruments and documents as the Lender shall reasonably request to
carry out to their satisfaction the transactions contemplated by this Agreement
and the other Loan Documents.
7. CERTAIN NEGATIVE COVENANTS OF THE BORROWER AND ITS SUBSIDIARIES. The
Borrower covenants and agrees that, so long as any Liability is Outstanding or
the Lender has any obligation to make any Loans:
ss.7.1. Restrictions on Indebtedness. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness other
than:
(1) Indebtedness to the Lender arising under any of the Loan
Documents;
(2) current liabilities of the Borrower or its Subsidiaries incurred
in the ordinary course of business but not incurred through (i) the
borrowing of money, or (ii) the obtaining of credit except for credit on
an open account basis customarily extended and in fact extended in
connection with normal purchases of goods and services;
(3) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the
extent that payment therefor shall not at the time be required to be made
in accordance with the provisions of ss.6.8;
(4) Indebtedness in respect of judgments or awards that have been in
force for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which the Borrower
shall at the time in good faith be prosecuting an appeal or proceedings
for review and in respect of which a stay of execution shall have been
obtained pending such appeal or review;
(5) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the ordinary
course of business; and
(6) Indebtedness existing on the date of this Agreement and listed
and described on Schedule 7.1 hereto; and
(7) Indebtedness or commitments to incur any Indebtedness not in
excess of $200,000.00 in any fiscal year for Capital Expenditures in
accordance with the provisions of ss.8.5 below; and
(8) Subordinated Indebtedness; and
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(9) Indebtedness to finance the acquisition of Equipment leases and
conditional sales contracts, provided that such Indebtedness shall not
exceed $50,000.00 in the aggregate outstanding at any time.
ss.7.2. Restrictions on Liens, Etc. The Borrower will not, and will not
permit any of its Subsidiaries to, (a) create or incur or suffer to be created
or incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its property or
assets of any character whether now owned or hereafter acquired, or upon the
income or profits therefrom; (b) transfer any of its property or assets or the
income or profits therefrom for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors; (c) acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device or arrangement; (d) suffer to exist
for a period of more than thirty (30) days after the same shall have been
incurred any Indebtedness or claim or demand against it that if unpaid might by
law or upon bankruptcy or insolvency, or otherwise, be given any priority
whatsoever over its general creditors; or (e) sell, assign, pledge or otherwise
transfer any accounts, contract rights, general intangibles, chattel paper or
instruments, with or without recourse; provided that the Borrower and any
Subsidiary of the Borrower may create or incur or suffer to be created or
incurred or to exist:
(1) liens on properties to secure taxes, assessments
and other government charges or claims for labor,
material or supplies in respect of obligations not
overdue;
(2) deposits or pledges made in connection with, or to
secure payment of, workmen's compensation,
unemployment insurance, old age pensions or other
social security obligations;
(3) liens on properties in respect of judgments or
awards, the Indebtedness with respect to which is
permitted by ss.7.1(d);
(4) liens of carriers, warehousemen, mechanics and
materialmen, and other like liens on properties in
existence less than 40 days from the date of
creation thereof in respect of obligations not
overdue;
(5) encumbrances on properties consisting of
easements, rights of way, zoning restrictions,
restrictions on the use of real property and
defects and irregularities in the title thereto,
landlord's or lessor's liens under leases to which
the Borrower or a Subsidiary of the Borrower is a
party, and other minor liens or encumbrances none
of which interferes materially with the use of the
property affected in the ordinary conduct of the
business of the Borrower and its
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Subsidiaries, which defects do not individually or
in the aggregate have a materially adverse effect
on the business of the Borrower individually or of
the Borrower and its Subsidiaries on a
Consolidated basis.
(6) presently outstanding liens listed on Schedule 7.2
hereto;
(7) liens in favor of the Lender under the Loan
Documents;
(8) purchase money liens to secure Indebtedness
permitted by ss.7.1(g); provided that such liens
shall not extend to any Collateral other than the
property which is the subject of the Capital
Expenditure; and
(9) liens to secure the Indebtedness permitted by
ss.7.1(i); provided that such liens shall not
extend to any Collateral other than the property
which is being financed by such Indebtedness.
ss.7.3. Restrictions on Investments. The Borrower will not, and will not
permit any of its Subsidiaries to, make or permit to exist or to remain
outstanding any Investments.
ss.7.4. Merger, Consolidation. Except as permitted by the Lender in
writing, the Borrower will not, and will not permit any of its Subsidiaries to,
become a party to any merger or consolidation, or agree to or effect any asset
acquisition or disposition or stock acquisition or disposition (other than the
acquisition or disposition of assets in the ordinary course of business
consistent with past practices) except (i) the merger or consolidation of one or
more of the Subsidiaries of the Borrower with and into the Borrower, or (ii) the
merger or consolidation of two or more Subsidiaries of the Borrower.
ss.7.5. Sale and Leaseback. The Borrower will not, and will not permit any
of its Subsidiaries to, enter into any arrangement, directly or indirectly,
whereby the Borrower or any Subsidiary of the Borrower shall sell or transfer
any property owned by it in order then or thereafter to lease such property or
lease other property that the Borrower or any Subsidiary of the Borrower intends
to use for substantially the same purpose as the property being sold or
transferred.
ss.7.6. Compliance with Environmental Laws. The Borrower will not, and
will not permit any of its Subsidiaries to, do any of the following: (a) use any
of the Real Estate or any portion thereof as a facility for the handling,
processing, storage or disposal of Hazardous Substances, (b) cause or permit to
be located on any of the Real Estate any underground tank or other underground
storage receptacle for Hazardous Substances except in full compliance with
Environmental Laws, (c) generate or dispose of any Hazardous Substances on any
of the Real Estate except in full compliance with Environmental Laws, or (d)
conduct any activity at any Real Estate or use any Real Estate in any manner so
as to cause a release.
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ss.7.7. Distributions. Corporation Action. The Borrower will not
(1) make any Distributions, except as permitted by the Lender in
writing;
(2) own, redeem, retire, purchase, or acquire any of the Borrower's
capital stock.
ss.7.8. Subsidiaries.
(1) The Borrower shall not acquire, form, or otherwise invest in any
Subsidiary, without the prior written consent of the Lenders, which shall
not be unreasonably withheld. Without limiting the foregoing, the Borrower
acknowledges that the Lender's consent may be conditioned upon, among
other things, the Lender's receipt of a guaranty by such Subsidiary of the
Borrower's Liabilities, and a security interest in the Subsidiary's
capital stock and assets in order to secure the Liabilities.
(2) Neither Microfluidics Corporation nor MediControl Corp. shall
(i) have any significant assets, nor shall the Borrower transfer any
assets to either of Microfluidics Corporation or MediControl Corp., and
(ii) engage in any business operations or activities, except that with
respect to MediControl Corp., MediControl Corp. may only engage in
activities related to its dissolution or winding-up. Notwithstanding the
provisions of subclause (i) above, to the extent that, as of the Closing
Date, Microfluidics Corporation shall possess any assets, the Borrower
shall cause all such assets to be transferred to the Borrower as soon as
practicable after the Closing Date.
ss.7.9. Fiscal Year. The fiscal year of the Borrower and its Subsidiaries
presently ends on December 31 of each year. The Borrower and its Subsidiaries
shall not change their fiscal year end without furnishing prior written notice
thereof to, and first obtaining the consent of, the Lenders, which consent shall
not be unreasonably withheld or delayed.
ss.7.10. Loans and Advances. The Borrower will not and will not permit any
of its Subsidiaries to, make any loans or advances to any Person. Without
limiting the generality of the foregoing, the Borrower will not make any loans
or advances to any Subsidiary, including, without limitation, Microfluidics
Corporation or MediControl Corp.
ss.7.11. Terms of Subordinated Indebtedness. Neither the Borrower nor its
Subsidiaries shall:
(1) effect or permit any changes in or amendment to (i) the terms by
which any Subordinated Indebtedness purports to be subordinated to the
payment and performance of the Liabilities or (ii) the terms relating to
the repayment of any Subordinated Indebtedness; or
(2) directly or indirectly make any payment of any principal of or
in redemption, retirement, or repurchase of any Subordinated Indebtedness,
except as
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permitted pursuant to the Subordination Agreement by and among the Lender,
the Borrower and Lake Shore Industries, Inc.
8. FINANCIAL COVENANTS OF THE BORROWER. The Borrower covenants and agrees
that, so long as any Liability is Outstanding or the Lender has any obligation
to make any Loans:
ss.8.1. Consolidated Tangible Net Worth. The Borrower shall maintain a
Consolidated Tangible Net Worth equal to or greater than the following as of the
dates indicated below:
----------------------------------------------------------------------------
Fiscal 2000 Fiscal 2001 Fiscal ▇▇▇▇
----------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇ $ Amount Quarter End $ Amount Quarter End $ Amount
----------------------------------------------------------------------------
3/31/00 2,750,000 3/31/01 3,300,000 3/31/02 3,850,000
----------------------------------------------------------------------------
6/30/00 2,850,000 6/30/01 3,400,000 6/30/02 3,950,000
----------------------------------------------------------------------------
9/30/00 2,950,000 9/30/01 3,500,000 9/30/02 4,050,000
----------------------------------------------------------------------------
12/31/00 3,200,000 12/31/01 3,750,000 12/31/02 4,300,000
----------------------------------------------------------------------------
ss.8.2. Liabilities to Worth (Leverage) Ratio. The Borrower shall not
permit the ratio of (a)(i) Consolidated Total Liabilities less (ii) Subordinated
Indebtedness, to (b) Consolidated Tangible Net Worth to be greater than the
following as of the dates indicated below:
--------------------------------------------------------------------------
Fiscal 2000 Fiscal 2001 Fiscal ▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇ Ratio Quarter Ratio Quarter End Ratio
End
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3/31/00 2.0 : 1.0 3/31/01 1.75 : 1.0 3/31/02 1.50 : 1.0
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6/30/00 2.0 : 1.0 6/30/01 1.75 : 1.0 6/30/02 1.50 : 1.0
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9/30/00 2.0 : 1.0 9/30/01 1.75 : 1.0 9/30/02 1.50 : 1.0
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12/31/00 1.75 : 1.0 12/31/01 1.50 : 1.0 12/31/02 1.50 : 1.0
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ss.8.3. Consolidated Net Income. The Borrower shall achieve Consolidated
Net Income (or Deficit) measured annually, as follows:
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December 31, 2000 December 31, 2001 December 31, 2002
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$150,000 $150,000 $150,000
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ss.8.4. Minimum Debt Service. The Borrower shall not permit the ratio of
Consolidated EBITDA to Debt Service Charges, measured quarterly on a rolling
four (4) quarter basis, to be less than the following on the following dates:
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--------------------------------------------------------------------------
Fiscal 2000 Fiscal 2001 Fiscal ▇▇▇▇
--------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇ Ratio Quarter Ratio Quarter Ratio
End End
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3/31/00 1.5 : 1.0 3/31/01 1.75 : 1.0 3/31/02 2.0 : 1.0
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6/30/00 1.5 : 1.0 6/30/01 1.75 : 1.0 6/30/02 2.0 : 1.0
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9/30/00 1.5 : 1.0 9/30/01 2.0 : 1.0 9/30/02 2.0 : 1.0
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12/31/00 1.75 : 1.0 12/31/01 2.0 : 1.0 12/31/02 2.0 : 1.0
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ss.8.5. Maximum Capital Expenditures. The Borrower shall not make or incur
Capital Expenditures in any fiscal year in excess of $200,000.00 in the
aggregate.
ss.8.6. Minimum Availability Covenant. The Borrower shall at all times,
commencing on the first (1st) after the Closing Date, maintain excess
Availability of at least $100,000.00 until such time that the annual financial
statements which Borrower is required to provide to Lender in accordance with
the provisions of ss.6.4(a) hereof, reflect that the Borrower has achieved a net
profit for the previous fiscal year, commencing with the financial statements
required to be delivered as of the end of the Borrower's fiscal year 2000.
9. CLOSING CONDITIONS. The obligations of the Lender to make the Revolving
Credit Loan and the Term Loan shall be subject to satisfaction of the following
conditions precedent:
ss.9.1. No Material Adverse Change. There shall have occurred no material
adverse change in the assets, business, operations, properties, financial
condition or prospects of the Borrower or any of its Subsidiaries, including,
without limitation, no material changes to the Borrower's projected 1999 fiscal
year end results. The Lender and the Borrower acknowledge that the auditor's
opinion for fiscal year 1998 notes a "going concern" qualification which will
note constitute a material adverse change for the purposes of this section.
ss.9.2. Financial Statements. The Lender shall have received the
Borrower's most recent interim reviewed and unaudtited financial statements
which shall be acceptable to the Lender. The Lender shall have received
satisfactory evidence that as of the Closing Date, the Borrower and its
Subsidiaries are in compliance with the provisions of ss.ss.8.1 through 8.6 on a
pro forma basis.
ss.9.3. Landlord Waivers. Unless waived by the Lender, the Lender shall
have received waivers (each in form reasonably satisfactory to the Lender) by
each of the Borrower's landlords and warehouses.
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ss.9.4. Corporate Structure. The Lender shall be satisfied in all respects
with the legal structure and capitalization of the Borrower and its Subsidiaries
and all documentation relating thereto.
ss.9.5. No Default or Event of Default. No Default or Event of Default
shall then exist.
ss.9.6. Litigation. There shall be no material, pending or threatened
litigation or proceeding involving the Borrower or any of its Subsidiaries
which, in the judgment of the Lender, could have a material adverse effect on
the Borrower or any of its Subsidiaries or the ability of the Borrower or its
Subsidiaries to perform their obligations under the Loan Documents, and no
judgment, order, injunction or other similar injunction or other similar
restraint prohibiting any of the transactions contemplated hereby shall exist.
ss.9.7. Evidence of Insurance. The Lender shall have received evidence, in
form, scope and substance and with such insurance carriers, satisfactory to the
Lender, for all insurance policies required under any of the Loan Documents,
naming the Lender as loss payee or mortgagee, as applicable.
ss.9.8. Compliance with Law. The Lender shall be satisfied that (i) the
Borrower and each of its Subsidiaries has obtained all material and appropriate
authorizations and approvals of all governmental authorities required for the
due execution, delivery and performance by such Person of each of the Loan
Documents to which it is or will be a party and for the perfection of or the
exercise by the Lender of its respective rights and remedies under the Loan
Documents and (ii) the Loans as well as all other transactions contemplated
hereby, shall be in material compliance with, and shall have obtained all
material and appropriate approvals pertaining to, all applicable laws, rules,
regulations and orders, including, without limitation, all governmental,
environmental, corporate laws, ERISA laws, securities laws, retiree health
benefits, workers' compensation and other requirements, regulations and laws and
shall not contravene any charter, by-law, debt instrument or other material
agreement of Borrower and its Subsidiaries.
ss.9.9. Certified Copies of Organization Documents. The Lender shall have
received from the Borrower and each of its Subsidiaries, a copy, certified as of
a recent date by the appropriate officer of the State in which such Person is
organized to be true and complete, of the corporate charter and any other
organization documents of such Person as in effect on such date of
certification. The Borrower and each of its Subsidiaries shall furnish evidence
satisfactory to the Lender that they are each duly qualified and in good
standing in each jurisdiction in which it owns or leases property or in which
the conduct of its business requires it to so qualify.
ss.9.10. By-laws; Resolutions. All action on the part of the Borrower
necessary for the valid execution, delivery and performance by the Borrower of
this Agreement and the other Loan Documents to which it is or is to become a
party, and all action on the part of Microfluidics necessary for the valid
execution, delivery and performance by it of the other Loan Documents to which
it is a party, shall have been duly and effectively taken, and evidence thereof
satisfactory to the Lender shall have been provided to the Lender. The Lender
shall have received from the Borrower and Microfluidics a true copy of such
Person's by-laws and the resolutions adopted by
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such Person's board of directors authorizing the transactions described herein,
certified by its secretary as of a recent date to be true and complete.
ss.9.11. Incumbency Certificate; Authorized Signers. The Lender shall have
received from the Borrower and Microfluidics, an incumbency certificate, dated
as of the Closing Date, signed by a duly authorized officer of such Person and
giving the name and bearing a specimen signature of each individual who shall be
authorized: (a) to sign, in the name and on behalf of such Person, each of the
Loan Documents to which such Person is or is to become a party; (b) to make
requests for Loans; and (c) to give notices and to take other action on behalf
of the Person under the Loan Documents.
ss.9.12. Environmental Review. The Lender shall have received a
certificate from the Borrower that, to the best of its knowledge, Borrower and
its direct and indirect subsidiaries (a) are in compliance in all material
respects with all applicable environmental, health and safety statutes and
regulations, (b) are not subject to any federal or state investigation
evaluating whether any remedial action is needed to respond to a release of any
toxic or hazardous waste or substance into the environment, and (c) have no
material contingent liability in connection with any past or present treatment,
storage, recycling, disposal or release or threatened release, at any location,
of any toxic or hazardous waste or proposed environmental, health safety laws or
regulations.
ss.9.13. Employment; Product Liability. The Lender shall be satisfied with
the Borrower's and its Subsidiaries' product liability, labor and union matters.
ss.9.14. Validity of Liens. The Security Documents shall be effective to
create in favor of the Lender a legal, valid and enforceable first (except for
Permitted Liens entitled to priority under applicable law) security interest in
the Collateral. All filings, recordings, deliveries of instruments and other
actions necessary or desirable in the opinion of the Lender to protect and
preserve such security interests shall have been duly effected. The Lender shall
have received evidence thereof in form and substance satisfactory to the Lender.
ss.9.15. Officer's Certificates.
(1) The Lender shall have received a solvency certificate from the
Borrower's Chief Financial Officer in form satisfactory to the Lender.
(2) The Lender shall have received a certificate from the Borrower's
Chief Financial Officer and stating that the representations and
warranties made by the Borrower to the Lender in the Loan Documents are
true and complete as of the date of such Certificate, and that no event
has occurred, or failed to occur, which occurrence or which failure
constitutes, or which, solely with the passage of time or the giving of
notice (or both) would constitute, an Event of Default.
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ss.9.16. Opinion of Counsel Concerning Organization and Loan Documents.
The Lender shall have received a favorable opinion addressed to the Lender and
dated as of the Closing Date, in form and substance satisfactory to the Lender
from Attorneys ▇▇▇▇▇▇ & Hannah, LLP.
ss.9.17. Equity Infusion. The Lender shall have received evidence
satisfactory to the Lender that the Borrower has received at least $250,000.00
of equity capital on terms and conditions satisfactory to the Lender.
ss.9.18. Subordinated Debt. The Lender shall have received evidence
satisfactory to the Lender that (i) the Borrower has converted $500,000.00 of
existing subordinated Indebtedness in favor of Lake Shore Industries, Inc. into
equity of the Borrower, and (ii) the Lender, the Borrower and Lake Shore
Industries, Inc. shall have entered into a subordination agreement with respect
to the remaining Subordinated Debt in the amount of $300,000.00, which shall be
in form and substance satisfactory to the Lender.
ss.9.19. Loan Documents. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto and, shall be in full
force and effect and shall be in form and substance satisfactory to the Lender.
ss.9.20. Borrowing Base Report. The Lender shall have received a Borrowing
Base Report as of the Business Day immediately preceding the Closing Date and
otherwise in compliance with the provisions of ss.6.4(e).
ss.9.21. Payment of Fees. The Borrower shall have paid to the Lender the
Commitment Fee pursuant to ss.3.1 as well as all costs and expenses incurred by
the Lender in connection with the establishment of the credit facilities
contemplated hereby (including the fees and expenses of counsel to the Lender).
ss.9.22. Minimum Day One Availability. After giving effect to the first
loan under the Revolving Credit, the Borrower shall have excess Availability of
at least $300,000.00.
ss.9.23. Cash Management. The Lender and the Borrower shall have
established a lockbox arrangement and other cash management procedures,
including establishment of blocked account agreements or controlled disbursement
accounts, all on terms and conditions satisfactory to the Lender.
ss.9.24. Additional Documents. The Borrower shall have provided such
additional instruments and documents to the Lender and the Lender's counsel may
have requested, including, without limitation, the Guaranty and Security
Agreement by Microfluidics and a pledge by the Borrower of its stock in
Microfluidics.
10. CONDITIONS TO ALL BORROWINGS. The obligations of the Lender to make
any Loan, whether on or after the Closing Date, shall also be subject to the
satisfaction of the following conditions precedent:"
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ss.10.1. Representations True; No Event of Default. Each of the
representations and warranties of the Borrower and its Subsidiaries, to the
extent applicable, contained in this Agreement, the other Loan Documents or in
any document or instrument delivered pursuant to or in connection with this
Agreement shall be true as of the date as of which they were made and shall also
be true at and as of the time of the making of such Loan, with the same effect
as if made at and as of that time (except to the extent of changes resulting
from transactions contemplated and permitted by this Agreement and the other
Loan Documents and changes occurring in the ordinary course of business that
singly or in the aggregate are not materially adverse, and except to the extent
that such representations and warranties relate expressly to an earlier date)
and no Default or Event of Default shall have occurred and be continuing. The
Lender shall have received a certificate of the Borrower signed by an authorized
officer of the Borrower to such effect.
ss.10.2. No Legal Impediment. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of the Lender would make it illegal for the Lender to make such Loan.
ss.10.3. Governmental Regulation. The Lender shall have received such
statements in substance and form reasonably satisfactory to the Lender as the
Lender shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.
ss.10.4. Proceedings and Documents. All proceedings in connection with the
transactions contemplated by this Agreement, the other Loan Documents and all
other documents incident thereto shall be satisfactory in substance and in form
to the Lender's counsel, and the Lender and such counsel shall have received all
information and such counterpart originals or certified or other copies of such
documents as the Lender may reasonably request.
11. EVENTS OF DEFAULT; ACCELERATION; ETC.
ss.11.1. Events of Default and Acceleration. If any of the following
events ("Events of Default" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice or lapse of time, "Defaults") shall
occur:
(1) the Borrower shall fail to pay any principal of or interest on
any of the Loans or any other sums due hereunder or under any of the other
Loan Documents when the same shall become due and payable, whether at the
stated date of maturity or any accelerated date of maturity or at any
other date fixed for payment;
(2) the Borrower shall fail to promptly, punctually, faithfully
perform, discharge, or comply with any covenant or Liability not otherwise
described in ss.11(a) above and included in any of the following
provisions hereof: ss.6.7, ss.6.13, ss.7.10, ss.7.11; ss.ss.8.1 through
8.6, inclusive.
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(3) the Borrower or any of its Subsidiaries shall fail to promptly,
punctually, faithfully perform, discharge, or comply with any covenant or
Liability not otherwise described in ss.11(a) and ss.11(b) within thirty
(30) days from the date that the Borrower or any of its Subsidiaries was
required to perform, discharge, or comply with such covenant or Liability.
(4) any representation or warranty of the Borrower or any of its
Subsidiaries in this Agreement or any of the other Loan Documents or in
any other document or instrument delivered pursuant to or in connection
with this Agreement is determined by the Lender to have been false in any
material respect upon the date when made or deemed to have been made or
repeated;
(5) the Borrower or any of its Subsidiaries shall fail to pay at
maturity, or within any applicable period of grace, any obligation for
borrowed money or credit received or in respect of any Capitalized Leases,
or fail to observe or perform any term, covenant or agreement contained in
any agreement by which it is bound, evidencing or securing borrowed money
or credit received or in respect of any Capitalized Leases for such period
of time as would permit (assuming the giving of appropriate notice if
required) the holder or holders thereof or of any obligations issued
thereunder to accelerate the maturity thereof or the Borrower or any of
its Subsidiaries shall fail to observe or perform any term, covenant, or
agreement contained in any material contract to which the Borrower is a
party for such period of time as would permit any party to such material
contract (assuming the giving of appropriate notice if required) to
terminate such material contract;
(6) the Borrower or any of its Subsidiaries shall make an assignment
for the benefit of creditors, or admit in writing its inability to pay or
generally fail to pay its debts as they mature or become due, or shall
petition or apply for the appointment of a trustee or other custodian,
liquidator or receiver of the Borrower or any of its Subsidiaries or of
any substantial part of the assets of the Borrower or any of its
Subsidiaries or shall commence any case or other proceeding relating to
the Borrower or any of its Subsidiaries under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution
or liquidation or similar law of any jurisdiction, now or hereafter in
effect, or shall take any action to authorize or in furtherance of any of
the foregoing, or if any such petition or application shall be filed or
any such case or other proceeding shall be commenced against the Borrower
or any of its Subsidiaries and the Borrower or any of its Subsidiaries
shall indicate its approval thereof, consent thereto or acquiescence
therein;
(7) The filing of any case or other proceeding against the Borrower
or any of the Subsidiaries under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
or similar law of any jurisdiction, now or hereafter in effect and such
case or proceeding is not discharged or dismissed within ninety (90) days
of its commencement; a decree or order is entered appointing any such
trustee, custodian, liquidator or receiver or adjudicating the Borrower or
any of its Subsidiaries bankrupt or insolvent, or approving a petition in
any such case or other
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proceeding, or a decree or order for relief is entered in respect of the
Borrower or any Subsidiary of the Borrower, in an involuntary case under
federal bankruptcy laws as now or hereafter constituted;
(8) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty days, whether or not consecutive, any
uninsured final judgment against the Borrower or any of its Subsidiaries
that, with other outstanding uninsured final judgments, undischarged,
against the Borrower or any of its Subsidiaries exceeds in the aggregate
$75,000.00;
(9) if any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded or any action at law, suit or in equity or other
legal proceeding to cancel, revoke or rescind any of the Loan Documents
shall be commenced by or on behalf of the Borrower or any of its
Subsidiaries, or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall make a determination
that, or issue a judgment, order, decree or ruling to the effect that, any
one or more of the Loan Documents is illegal, invalid or unenforceable in
accordance with the terms thereof;
(10) with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and the Lender shall have determined
in its reasonable discretion that such event reasonably could be expected
to result in liability of the Borrower or any of its Subsidiaries to the
PBGC on such Guaranteed Pension Plan in an aggregate amount exceeding
$50,000.00 and (i) such event in the circumstances occurring reasonably
could constitute grounds for the termination of such Guaranteed Pension
Plan by the PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer such Guaranteed Pension Plan; or
(ii) a trustee shall have been appointed by the United States District
Court to administer such Plan; or (iii) the PBGC shall have instituted
proceedings to terminate such Guaranteed Pension Plan;
(11) the Borrower or any of its Subsidiaries shall be indicted for a
federal crime, a punishment for which could include the forfeiture of any
assets of the Borrower or such Subsidiaries;
(12) there shall have occurred any material adverse change, as
determined by the Lender in good faith, in or to the assets, liabilities,
financial condition, business operations, or prospects of the Borrower and
its Subsidiaries, taken as a whole, or to any industry in which the
Borrower and its Subsidiaries derives a substantial portion of their
revenues; or
(13) A Change in Control shall have occurred;
then, and in any such event, so long as the same may be continuing, the Lender
at its option may declare all amounts owing with respect to this Agreement, the
Notes and the other Loan Documents to be, and they shall thereupon forthwith
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby
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expressly waived by the Borrower; provided that in the event of any Event of
Default specified in ss.11.1(f) or 11.1(g), all such amounts shall become
immediately due and payable automatically and without any requirement of notice
from the Lender.
ss.11.2. Termination of Revolving Credit. If any one or more Events of
Default specified in ss.11.1(f) or ss.11.1(g) shall occur, the Lender shall be
relieved of all obligations to make Revolving Credit Loans to the Borrower. If
any other Event of Default shall have occurred and be continuing, or if on any
Drawdown Date the conditions precedent to the making of the Loans to be made on
such Drawdown Date are not satisfied, the Lender may by notice to the Borrower,
terminate its agreement to make Revolving Credit Loans, and upon such notice
being given the Lender's agreement to make Revolving Credit Loans shall
terminate immediately and the Lender shall be relieved of all further
obligations to make Revolving Credit Loans. No termination of the credit
hereunder shall relieve the Borrower of any of the Liabilities or any of its
existing obligations to the Lender arising under other agreements or
instruments.
ss.11.3. Remedies. In case any one or more of the Events of Default shall
have occurred and be continuing, and whether or not the Lender shall have
accelerated the maturity of the Loans pursuant to ss.11.1, the Lender, if owed
any amount with respect to the Loans may proceed, to protect and enforce its
rights and remedies under this Agreement, the Notes or any of the other Loan
Documents by suit in equity, action at law or other appropriate proceeding,
whether for the specific performance of any covenant or agreement contained in
this Agreement and the other Loan Documents or any instrument pursuant to which
the Liabilities to the Lender are evidenced, including to the full extent
permitted by applicable law the obtaining of the appointment of a receiver, and,
if such amount shall have become due, by declaration or otherwise, proceed to
enforce the payment thereof or any other legal or equitable right of the Lender.
No remedy herein conferred upon the Lender or the holder of any Note is intended
to be exclusive of any other remedy and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or any other provision
of law.
ss.11.4. Distribution of Collateral Proceeds. In the event that, following
the occurrence or during the continuance of any Default or Event of Default, the
Lender, as the case may be, receives any monies in connection with the
enforcement of any of the Security Documents, or otherwise with respect to the
realization upon any of the Collateral, such monies shall be turned over to the
Lender and distributed by the Lender for application as follows:
(1) First, to the payment of, or (as the case may be) the
reimbursement of, the Lender for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Lender in connection with the collection of such monies
by the Lender, for the exercise, protection or enforcement by the Lender
of all or any of the rights, remedies, powers and privileges of the Lender
under this Agreement or any of the other Loan Documents or in respect of
the Collateral or in support of any provision of adequate indemnity to the
Lender against any taxes or liens which by law shall have, or may have,
priority over the rights of the Lender to such monies;
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(2) Second, to all other Liabilities in such order or preference as
the Lender may determine;
(3) Third, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Lender of all of the Liabilities,
to the payment of any obligations required to be paid pursuant to
ss.9-504(1)(c) of the Uniform Commercial Code of the Commonwealth of
Massachusetts; and
(4) Fourth, the excess, if any, shall be returned to the Borrower or
to such other Persons as are entitled thereto.
12. SETOFF. The Borrower and each of its Subsidiaries grant to the Lender,
as security for the full and punctual payment and performance of the
Liabilities, a continuing lien on and security interest in all securities or
other property belonging to the Borrower or any of its Subsidiaries now or
hereafter held by the Lender, or any of its affiliates, and in all deposits
(general or special, time or demand, provisional or final) and other sums
credited by or due from the Lender to the Borrower or any of its Subsidiaries or
subject to withdrawal by the Borrower or any of its Subsidiaries; and regardless
of the adequacy of any collateral or other means of obtaining repayment of the
Liabilities, the Lender or any of its affiliates are hereby authorized at any
time and from time to time, without notice to the Borrower or any of its
Subsidiaries (any such notice being expressly waived by each of them) and to the
fullest extent permitted by law, to set off and apply such deposits and other
sums against their respective Liabilities, whether or not the Lender shall have
accelerated the Liabilities as provided for herein and although such Liabilities
may be contingent or unmatured.
13. EXPENSES. The Borrower agrees to pay (a) the reasonable costs of
producing and reproducing this Agreement, the other Loan Documents and the other
agreements and instruments mentioned herein, (b) any taxes (including any
interest and penalties in respect thereto) payable by the Lender (other than
taxes based upon the Lender's net income), including any recording, mortgage,
documentary or intangibles taxes in connection with the Loan Documents, or other
taxes payable on or with respect to the transactions contemplated by this
Agreement, including any taxes payable by the Lender after the Closing Date (the
Borrower hereby agreeing to indemnify the Lender with respect thereto), (c) all
appraisal fees, engineer's fees, and the reasonable fees, expenses and
disbursements of the Lender's counsel or any local counsel to the Lender
incurred in connection with the preparation, administration or interpretation of
the Loan Documents and amendments, modifications, approvals, consents or waivers
hereto or hereunder, (d) the fees, expenses and disbursements of the Lender
incurred by the Lender in connection with the preparation, administration or
interpretation of the Loan Documents and other instruments mentioned herein, (e)
all reasonable out-of-pocket expenses (including reasonable attorneys' fees and
costs and the fees and costs of appraisers, engineers, investment bankers or
other experts retained by any Lender in connection with any such enforcement
proceedings) incurred by any Lender in connection with (i) the enforcement of or
preservation of rights under any of the Loan Documents against the Borrower or
any of its Subsidiaries or the administration thereof and (ii) any litigation,
proceeding or dispute whether
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arising hereunder or otherwise, in any way related to any Lender's relationship
with the Borrower or any of its Subsidiaries and (f) all reasonable fees,
expenses and disbursements of the Lender incurred in connection with UCC
searches, UCC filings or mortgage recordings. The covenants of this ss.13 shall
survive payment or satisfaction of payment of amounts owing with respect to the
Notes.
14. INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless
the Lender from and against any and all claims, actions and suits whether
groundless or otherwise, and from and against any and all liabilities, losses,
damages and expenses of every nature and character arising out of this Agreement
or any of the other Loan Documents or the transactions contemplated hereby
including, without limitation, (a) any actual or proposed use by the Borrower or
any of its Subsidiaries of the proceeds of any of the Loans, (b) any actual or
alleged infringement of any patent, copyright, trademark, service ▇▇▇▇ or
similar right of the Borrower or any of its Subsidiaries comprised in the
Collateral, (c) the Borrower's or any of its Subsidiaries' entering into or
performing this Agreement or any of the other Loan Documents or (d) with respect
to the Borrower and its Subsidiaries and their respective properties and assets,
the violation of any Environmental Law, the Release or threatened Release of any
Hazardous Substances or any action, suit, proceeding or investigation brought or
threatened with respect to any Hazardous Substances (including, but not limited
to claims with respect to wrongful death, personal injury or damage to
property), in each case including, without limitation, the reasonable fees and
disbursements of counsel and allocated costs of internal counsel incurred in
connection with any such investigation, litigation or other proceeding; provided
however that the Lender shall not be entitled to indemnification if a court of
competent jurisdiction finally determines (all appeals having been exhausted or
waived) that the Lender acted in bad faith, with willful misconduct or gross
negligence. In litigation, or the preparation therefor, the Lender shall be
entitled to select their own counsel and, in addition to the foregoing
indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses
of such counsel. If, and to the extent that the obligations of the Borrower
under this ss.14 are unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment in satisfaction of such obligations
which is permissible under applicable law. The provisions of this ss.14 shall
survive the repayment of the Liabilities and the termination of the obligations
of the Lender hereunder.
15. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations
and warranties made herein, in the Notes, in any of the other Loan Documents or
in any documents or other papers delivered by or on behalf of the Borrower or
any of its Subsidiaries pursuant hereto shall be deemed to have been relied upon
by the Lender, notwithstanding any investigation heretofore or hereafter made by
any of them, and shall survive the making by the Lender of any of the Loans, as
herein contemplated, and shall continue in full force and effect so long as any
amount due under this Agreement or the Notes or any of the other Loan Documents
remains Outstanding or the Lender has any obligation to make any Loans. The
indemnification obligations of the Borrower provided herein and the other Loan
Documents shall survive the full repayment of amounts due and the termination of
the obligations of the Lenders hereunder and thereunder to the extent provided
herein and therein. All statements contained in any certificate or other paper
delivered to the Lender at any time by or on behalf of the Borrower
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or any of its Subsidiaries pursuant hereto or in connection with the
transactions contemplated hereby shall constitute representations and warranties
by the Borrower or such Subsidiary hereunder.
16. ASSIGNMENT AND PARTICIPATION.
ss.16.1. Assignments. This Agreement shall be binding upon the Borrower
and the Borrower's representatives, successors, and assigns and shall enure to
the benefit of the Lender and the Lender's successors and assigns provided,
however, no trustee or other fiduciary appointed with respect to the Borrower
shall have any rights hereunder. The Lender may in connection with any bulk sale
by any of (i) the Lender, (ii) its parent or (ii) any affiliate of the Lender,
of any loan portfolio of which the Facilities are a part, without the prior
written consent of the Borrower, assign and sell its rights with respect to and
delegate its obligations under this Agreement and the Facilities, in whole or in
part. In the event that the Lender assigns or transfers its rights under this
Agreement, the assignee shall thereupon succeed to and become vested with all
rights, powers, privileges, and duties of the Lender hereunder and the Lender
shall thereupon be discharged and relieved from its duties and obligations
hereunder.
ss.16.2. Participations. The Lender may assign and sell certain of its
rights to another Lender or to grant participations therein to any institutional
lender or institutional investor, without the prior written consent of the
Borrower, as long as the Lender remains the lead bank and continues to serve as
the relationship agent with the Borrower.
ss.16.3. Pledge by Lender. The Lender may at any time pledge all or any
portion of its interest and rights under this Agreement (including all or any
portion of its Note) to any of the twelve Federal Reserve Lenders organized
under ss.4 of the Federal Reserve Act, 12 U.S.C. ss.341. No such pledge or the
enforcement thereof shall release the pledgor Lender from its obligations
hereunder or under any of the other Loan Documents.
ss.16.4. No Assignment by Borrower. The Borrower shall not assign or
transfer any of its rights or obligations under any of the Loan Documents
without the prior written consent of each of the Lenders.
ss.16.5. Disclosure. The Borrower agrees that in addition to disclosures
made in accordance with standard banking practices any Lender may disclose
information obtained by such Lender pursuant to this Agreement to assignees or
participants and potential assignees or participants hereunder.
17. NOTICES, ETC. Except as otherwise expressly provided in this
Agreement, all notices and other communications made or required to be given
pursuant to this Agreement, the Note or the other Loan Documents shall be in
writing and shall be delivered in hand, mailed by United States registered or
certified first class mail, postage prepaid, sent by overnight courier, or sent
by telegraph, telecopy, telefax or telex and confirmed by delivery via courier
or postal service, addressed as follows:
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(1) if to the Borrower, at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief Financial Officer
(Telecopier: ▇▇▇- ▇▇▇-▇▇▇▇), or at such other address for notice as the
Borrower shall last have furnished in writing to the Person giving the
notice, with a copy to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esquire, ▇▇▇▇▇▇ & Hannah, LLP,
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (Telecopier:
617-345-7050); and
(2) if to the Lender, at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: Mr. A. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President and Manager
(Telecopier: 617-350-7677), or such other address for notice as the Lender
shall last have furnished in writing to the Borrower, with a copy to ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, Esquire, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (Telecopier: 617-723-6831).
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
18. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE. THIS AGREEMENT AND
EACH OF THE OTHER LOAN DOCUMENTS (EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN) ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND
SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF SUCH COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF
LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH
OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH
SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN ss.20. THE
BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
19. HEADINGS. The captions in this Agreement are for convenience of
reference only and shall not define or limit the provisions hereof.
20. COUNTERPARTS. This Agreement and any amendment hereof may be executed
in several counterparts and by each party on a separate counterpart, each of
which when so executed and delivered shall be an original, and all of which
together shall constitute one instrument. In proving this Agreement it shall not
be necessary to produce or account for more than one such counterpart signed by
the party against whom enforcement is sought.
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21. ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents
executed in connection herewith or therewith express the entire understanding of
the parties with respect to the transactions contemplated hereby. Neither this
Agreement nor any term hereof may be changed, waived, discharged or terminated,
except as provided in ss.23.
22. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS. THE BORROWER HEREBY
WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT
OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTE OR ANY OF THE OTHER
LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT TO THE EXTENT EXPRESSLY
PROHIBITED BY LAW, THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER AGAINST NATIONAL BANK OF CANADA (AND NOT ITS SUCCESSORS AND ASSIGNS) IN
ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. THE BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE, LENDER OR
ATTORNEY OF THE LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDER
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND
(B) ACKNOWLEDGES THAT THE LENDER HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS TO WHICH IT IS PARTY BY, AMONG OTHER THINGS, THE
WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.
23. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as otherwise expressly
provided in this Agreement, any consent or approval required or permitted by
this Agreement may be given, and any term of this Agreement or of any other
instrument related hereto or mentioned herein may be amended, and the
performance or observance by the Borrower of any terms of this Agreement or such
other instrument or the continuance of any Default or Event of Default may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of the Lender.
No waiver shall extend to or affect any obligation not expressly waived or
impair any right consequent thereon. No course of dealing or delay or omission
on the part of the Lender in exercising any right shall operate as a waiver
thereof or otherwise be prejudicial thereto. No notice to or demand upon the
Borrower shall entitle the Borrower to other or further notice or demand in
similar or other circumstances.
24. SEVERABILITY. The provisions of this Agreement are severable, and if
any one clause or provision hereof shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or unenforceability
shall affect only such clause or provision, or part thereof, in such
jurisdiction, and shall not in any manner affect such clause or provision in any
other jurisdiction, or any other clause or provision of this Agreement in any
jurisdiction.
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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a
sealed instrument as of the date first set forth above.
MFIC CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman and CEO
NATIONAL BANK OF CANADA, A Canadian
Chartered Bank
By: /s/ A. ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
Name: A. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Vice President
-45-
