EXHIBIT 10.II
Silicon Valley Bank
Loan and Security Agreement
Borrower: PARLEX CORPORATION, a Massachusetts corporation
Address: Xxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Borrower: PARLEX DYNAFLEX CORPORATION, a California corporation
Address: Xxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Borrower: POLY-FLEX CIRCUITS, INC., a Rhode Island corporation
Address: 00 Xxxxxx Xxxxx
Xxxxxxxx, Xxxxx Xxxxxx 00000
Date: June 11, 2003
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK, a California-chartered bank, with its principal place
of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and with a
loan production office located at One Newton Executive Park, Suite 200,
0000 Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 ("Silicon") and the
borrowers named above (jointly and severally, individually and
collectively, "Borrower"), with offices located at the above address
("Borrower's Address"). The Schedule to this Agreement (the "Schedule")
shall for all purposes be deemed to be part of this Agreement, and the same
are integral parts of this Agreement. (Definitions of certain terms used
in this Agreement are set forth in Section 8 below.)
1. LOANS.
1.1 Loans. Silicon will make loans to Borrower (the "Loans") up to
the amounts (the "Credit Limit") shown on the Schedule, provided no Default
or Event of Default has occurred and is continuing, and subject to
deduction of any Reserves for accrued interest and such other Reserves as
Silicon deems proper from time to time. Amounts borrowed may be repaid
and reborrowed during the term of this Agreement.
1.2 Interest. All Loans and all other monetary Obligations shall
bear interest at the rate shown on the Schedule, except where expressly set
forth to the contrary in this Agreement. Interest shall be payable
monthly, on the last day of the month. Interest may, in Silicon's
discretion after the occurrence of a Default, be charged to Borrower's loan
account, and the same shall thereafter bear interest at the same rate as
the other Loans. Silicon may also, in its discretion, charge interest to
Borrower's Deposit Accounts maintained with Silicon.
1.3 Overadvances. If at any time or for any reason the total of
all outstanding Loans and all other Obligations exceeds the Credit Limit
(an "Overadvance"), Borrower shall immediately pay the amount of the excess
to Silicon, without notice or demand. Without limiting Borrower's
obligation to repay to Silicon on demand the amount of any Overadvance,
Borrower agrees to pay Silicon interest on the outstanding amount of any
Overadvance, on demand, at a rate equal to the interest rate which would
otherwise be applicable to the Overadvance, plus an additional two percent
(2%) per annum.
Silicon Valley Bank Schedule to Loan and Security Agreement
1.4 Fees. Borrower shall pay Silicon the fees shown on the
Schedule, which are in addition to all interest and other sums payable to
Silicon and are not refundable.
1.5 Letters of Credit. In addition to Section 1.6 and Section 1.7,
at the request of Borrower, Silicon shall, provided no Default or Event of
Default has then occurred and is continuing, issue or arrange for the
issuance of letters of credit for the account of Borrower, in each case in
form and substance satisfactory to Silicon in its sole discretion
(collectively, "Letters of Credit"). The aggregate face amount of all
outstanding Letters of Credit from time to time (plus all Silicon exposure
under any foreign exchange contracts and Cash Management Services) shall
not exceed the amount shown on the Schedule (the "Letter of Credit
Sublimit"), and shall be reserved against Loans which would otherwise be
available hereunder. Borrower shall pay all bank charges (including
charges of Silicon) for the issuance of Letters of Credit, together with
such additional fee as Silicon's letter of credit department shall charge
in connection with the issuance of the Letters of Credit. Any payment by
Silicon under or in connection with a Letter of Credit shall constitute a
Loan hereunder on the date such payment is made. Each Letter of Credit
shall have an expiry date no later than thirty days prior to the Maturity
Date. Borrower hereby agrees to indemnify, save, and hold Silicon harmless
from any loss, cost, expense, or liability, including payments made by
Silicon, expenses, and reasonable attorneys' fees incurred by Silicon
arising out of or in connection with any Letters of Credit. Borrower
agrees to be bound by the regulations and reasonable interpretations of the
issuer of any Letters of Credit guarantied by Silicon and opened for
Borrower's account or by Silicon's interpretations of any Letter of Credit
issued by Silicon for Borrower's account, and Borrower understands and
agrees that Silicon shall not be liable for any error, negligence, or
mistake, whether of omission or commission, in following Borrower's
instructions or those contained in the Letters of Credit or any
modifications, amendments, or supplements thereto. Borrower understands
that Letters of Credit may require Silicon to indemnify the issuing bank
for certain costs or liabilities arising out of claims by Borrower against
such issuing bank. Borrower hereby agrees to indemnify and hold Silicon
harmless with respect to any loss, cost, expense, or liability incurred by
Silicon under any Letter of Credit as a result of Silicon's indemnification
of any such issuing bank. The provisions of this Loan Agreement, as it
pertains to Letters of Credit, and any other present or future documents or
agreements between Borrower and Silicon relating to Letters of Credit are
cumulative.
1.6 Foreign Exchange Sublimit. In addition to Section 1.5 and
Section 1.7, Borrower may use up to the amount set forth on the Schedule in
connection with foreign exchange forward contracts with Silicon under which
Borrower commits to purchase from or sell to Silicon a set amount of
foreign currency more than one business day after the contract date (the
"FX Contract"). Silicon shall subtract up to a maximum of 10% of the
amount of each outstanding FX Contract from the foreign exchange sublimit
(the "FX Reserve"). Silicon may terminate the FX Contracts if an Event of
Default occurs.
1.7 Cash Management Services Sublimit. In addition to Section 1.5
and Section 1.6 above, Borrower may also use up to the amount set forth on
the Schedule for Cash Management Services. Such aggregate amounts utilized
under the Cash Management Services Sublimit shall at all times reduce the
amount otherwise available for Loans, letters of credit, foreign exchange
contracts or other credit accommodations hereunder. Any amounts Silicon
pays on behalf of Borrower or any amounts that are not paid by Borrower for
any Cash Management Services will be treated as Loans hereunder and will
accrue interest at the interest rate applicable to Loans.
1.8 Designation of Agent. Each Borrower hereby designates Parlex
Corporation, a Massachusetts corporation (the "Agent") as the agent of that
Borrower to discharge the duties and responsibilities of the Agent as
provided herein.
1.9 Operation of Agreement. (a) Except as otherwise permitted by
Silicon, loans hereunder shall be requested solely by the Agent as agent
for each Borrower.
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Silicon Valley Bank Schedule to Loan and Security Agreement
(b) Any Loan which may be made by Silicon under this
Agreement and which is directed to the Agent is received by the Agent in
trust for that Borrower who is intended to receive such Loan. The Agent
shall distribute the proceeds of any such Loan solely to that Borrower.
Each Borrower shall be directly indebted to Silicon for each Loan
distributed to any Borrower by the Agent, together with all accrued
interest thereon, as if that amount had been advanced directly by Silicon
to a Borrower (whether or not the subject Loan was based upon the accounts
and/or inventory or other assets of the Borrower which actually received
such distribution), in addition to which each Borrower shall be liable to
Silicon for all Obligations under this Agreement, whether or not the
proceeds of the Loan are distributed to any particular Borrower.
(c) Silicon shall have no responsibility to inquire as to the
distribution of Loans made by Silicon through the Agent as described
herein.
1.10 Loans Directly to Borrower. (a) If, for any reason, and at any
time during the term of this Agreement,
(i) any Borrower, including the Agent, as agent for
each Borrower, shall be unable to, or prohibited from carrying out the
terms and conditions of this Agreement (as determined by Silicon in
Silicon's sole and absolute discretion); or
(ii) Silicon deems it inexpedient (in Silicon's sole and
absolute discretion) to continue making Loans to or for the account of any
particular Borrower, or to channel such loans and Loans through the Agent,
then Silicon may make Loans directly to such Borrower as Silicon determines
to be expedient, which Loans may be made without regard to the procedures
otherwise included in this Article 1.
(b) In the event that Silicon determines to forgo the
procedures included herein pursuant to which Loans are to be channeled
through the Agent, then Silicon may designate one or more Borrower to
fulfill the financial and other reporting requirements otherwise imposed
herein upon the Agent.
(c) Each Borrower shall remain liable to Silicon for the
payment and performance of all Obligations (which payment and performance
shall continue to be secured by all Collateral) notwithstanding any
determination by Silicon to cease making Loans to or for the benefit of any
Borrower.
1.11 Continuation of Authority of Agent. The authority of the Agent
to request Loans on behalf of, and to bind, each Borrower, shall continue
unless and until Silicon acts as provided in Section 1.10, above, or
Silicon actually receives:
(a) written notice of: (i) the termination of such authority,
and (ii) the subsequent appointment of a successor Agent, which notice is
executed by the respective Presidents of each Borrower (other than the
President of the Agent being replaced) then eligible for borrowing under
this Agreement; and
(b) written notice from the successor Agent (i) accepting
such appointment; (ii) acknowledging that the removal and appointment has
been effected by the respective Presidents of each Borrower eligible for
borrowing under the within Agreement; and (iii) acknowledging that from and
after the date of appointment, the newly appointed Agent shall be bound by
the terms hereof, and that as used herein, the term "Agent" shall mean and
include the newly appointed Agent.
1.12 Indemnification. With the exception of any claim in which
final judgment has been rendered against Silicon by a court of competent
jurisdiction in which Silicon has been found to have acted in a grossly
negligent manner and/or in bad faith, the Agent and each Borrower
respectively shall indemnify, defend, and save and hold Silicon harmless
from and against any liabilities, claims, demands, expenses, or losses made
against or suffered by Silicon on
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Silicon Valley Bank Schedule to Loan and Security Agreement
account of, or arising out of, this Agreement, Silicon's reliance upon Loan
requests made by the Agent, or any other action taken by Silicon hereunder
or under any of Silicon's various agreements with the Agent and/or any
Borrower and/or any other Person arising under this Agreement.
1.13 Sale/Leaseback. In addition to any other conditions precedent
set forth in this Agreement, Silicon will not make any Loans hereunder or
provide any other financial accommodations to, or for the benefit of,
Borrower unless and until Borrower enters into a sale/leaseback transaction
with respect to certain real property owned by Borrower located at Xxx
Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxxxx and 00 Xxxxxx Xxxxx, Xxxxxxxx, Xxxxx
Island (the" Sale/Leaseback Transaction"). The Sale/Leaseback Transaction
shall be on terms reasonably acceptable to Silicon and shall provide
Borrower cash proceeds of at least $8,000,000. Borrower shall also use its
best efforts to cause such purchaser/lessor of the real property to enter
into an agreement with Silicon in accordance with Section 3.4 hereof.
2. SECURITY INTEREST.
2.1 Security Interest. To secure the payment and performance of
all of the Obligations when due, and the performance of each of the
Borrower's duties under this Agreement and all documents executed in
connection herewith, Borrower hereby grants to Silicon a continuing
security interest in all of Borrower's interest in the following, whether
now owned or hereafter acquired, and wherever located: All Inventory,
Equipment, Payment Intangibles, Letter-of-Credit Rights, Supporting
Obligations, Receivables, and General Intangibles, including, without
limitation, all of Borrower's Intellectual Property, all of Borrower's
Deposit Accounts, and all money, and all property now or at any time in the
future in Silicon's possession (including claims and credit balances), and
all proceeds (including proceeds of any insurance policies, proceeds of
proceeds and claims against third parties), all products and all books and
records related to any of the foregoing (all of the foregoing, together
with all other property in which Silicon may now or in the future be
granted a lien or security interest, is referred to herein, collectively,
as the "Collateral"). The security interest granted herein shall be a
first priority security interest in the Collateral. After the occurrence
of a Default, Silicon may place a "hold" on any Deposit Account pledged as
collateral. Borrower is not a party to, nor is bound by, any material
license or other material agreement with respect to which the Borrower is
the licensee that prohibits or otherwise restricts Borrower from granting a
security interest in Borrower's interest in such license or agreement or
any other property. Without prior consent from Silicon, Borrower shall not
enter into, or become bound by, any such license or agreement which is
reasonably likely to have a material impact on Silicon's business or
financial condition. Borrower shall take such steps as Silicon reasonably
requests to obtain the consent of, or waiver by, any Person whose consent
or waiver is necessary for all such licenses or contract rights to be
deemed "Collateral" and for Silicon to have a security interest in it that
might otherwise be restricted or prohibited by law or by the terms of any
such license or agreement, whether now existing or entered into in the
future. If Borrower shall at any time, acquire a commercial tort claim with
a reasonable value, in Borrower's good faith estimation, or $10,000 or
more, Borrower shall promptly notify Silicon in a writing signed by
Borrower of the brief details thereof and grant to Silicon in such writing
a security interest therein and in the proceeds thereof, all upon the terms
of this Agreement, with such writing to be in form and substance reasonably
satisfactory to Silicon.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Silicon to enter into this Agreement and to make
Loans, Borrower represents and warrants to Silicon as follows, and Borrower
covenants that the following representations will continue to be true, and
that Borrower will at all times comply with all of the following covenants:
3.1 Corporate Existence and Authority. Borrower, if a corporation,
is and will continue to be, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Borrower
is and will continue to be qualified and licensed to do business in all
jurisdictions in which any failure to do so would have a material adverse
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Silicon Valley Bank Schedule to Loan and Security Agreement
effect on Borrower. The execution, delivery and performance by Borrower of
this Agreement, and all other documents contemplated hereby (i) have been
duly and validly authorized, (ii) are enforceable against Borrower in
accordance with their terms (except as enforcement may be limited by
equitable principles and by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to creditors' rights generally), (iii)
do not violate Borrower's articles or certificate of incorporation,
Borrower's by-laws, or any law or any material agreement or instrument
which is binding upon Borrower or its property, and (iv) do not constitute
grounds for acceleration of any material indebtedness or obligation under
any material agreement or instrument which is binding upon Borrower or its
property.
3.2 Name; Trade Names and Styles. The name of Borrower set forth
in the heading to this Agreement is its correct name. Listed on the
Schedule are all prior names of Borrower and all of Borrower's present and
prior trade names. Borrower shall give Silicon 30 days' prior written
notice before changing its name or doing business under any other name.
Borrower has complied, and will in the future comply, with all laws
relating to the conduct of business under a fictitious business name.
3.3 Place of Business; Location of Collateral. The address set
forth in the heading to this Agreement is Borrower's chief executive
office. In addition, Borrower has places of business at the locations set
forth on the Schedule. Collateral is only located at Borrower's chief
executive office or the locations set forth in the Schedule. Borrower
will give Silicon at least 30 days prior written notice before opening any
additional place of business, changing its chief executive office, changing
its state of formation or moving any of the Collateral to a location other
than Borrower's Address or one of the locations set forth on the Schedule.
3.4 Title to Collateral; Permitted Liens. Borrower is now, and
will at all times in the future be, the sole owner of all the Collateral,
except for items of Equipment which are leased by Borrower. The Collateral
now is and will remain free and clear of any and all liens, charges,
security interests, encumbrances and adverse claims, except for Permitted
Liens. Silicon now has, and will continue to have, a first-priority
perfected and enforceable security interest in all of the Collateral,
subject only to the Permitted Liens, provided that Silicon files (and
continues) such financing statements as may be necessary, and Borrower will
at all times defend Silicon and the Collateral against all claims of
others. None of the Collateral now is or will be affixed to any real
property in such a manner, or with such intent, as to become a fixture.
Borrower is not and will not become a lessee under any real property lease
pursuant to which the lessor may obtain any rights in any of the Collateral
and no such lease now prohibits, restrains, impairs or will prohibit,
restrain or impair Borrower's right to remove any Collateral from the
leased premises. Whenever any Collateral is located upon premises in which
any third party has an interest (whether as owner, mortgagee, beneficiary
under a deed of trust, lien or otherwise), Borrower shall, whenever
requested by Silicon, use its best efforts to cause such third party to
execute and deliver to Silicon, in form acceptable to Silicon, such waivers
and subordinations as Silicon shall specify, so as to ensure that Silicon's
rights in the Collateral are, and will continue to be, superior to the
rights of any such third party. Borrower will keep in full force and
effect, and will comply with all the terms of, any lease of real property
where any of the Collateral now or in the future may be located. All of
Borrower's subsidiaries' assets are now and will hereafter remain free and
clear of any and all liens, charges, security interests, encumbrances and
adverse claims, other than Permitted Liens.
3.5 Maintenance of Collateral. Borrower will maintain the
Collateral in good working condition, and Borrower will not use the
Collateral for any unlawful purpose. Borrower will immediately advise
Silicon in writing of any material loss or damage to the Collateral.
3.6 Books and Records. Borrower has maintained and will maintain
at Borrower's address complete and accurate books and records, comprising
an accounting system in accordance with generally accepted accounting
principles.
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Silicon Valley Bank Schedule to Loan and Security Agreement
3.7 Financial Condition, Statements and Reports. All financial
statements now or in the future delivered to Silicon have been, and will
be, prepared in conformity with generally accepted accounting principles
and now and in the future will be true and correct in all material
respects, at the times and for the periods therein stated. Between the
last date covered by any such statement provided to Silicon and the date
hereof, there has been no material adverse change in the financial
condition or business of Borrower. Borrower is now and will continue to be
solvent.
3.8 Tax Returns and Payments; Pension Contributions. Borrower has
timely filed, and will timely file, all tax returns and reports required by
foreign, federal, state and local law, and Borrower has timely paid, and
will timely pay, all foreign, federal, state and local taxes, assessments,
deposits and contributions now or in the future owed by Borrower. Borrower
may, however, defer payment of any contested taxes, provided that Borrower
(i) in good faith contests Borrower's obligation to pay the taxes by
appropriate proceedings promptly and diligently instituted and conducted,
(ii) notifies Silicon in writing of the commencement of, and any material
development in, any proceedings relating to an amount in controversy of not
less than $25,000, and (iii) posts bonds or takes any other steps required
to keep the contested taxes from becoming a lien upon any of the
Collateral. Borrower is unaware of any claims or adjustments proposed for
any of Borrower's prior tax years which could result in additional taxes
becoming due and payable by Borrower. Borrower has paid, and shall
continue to pay all amounts necessary to fund all present and future
pension, profit sharing and deferred compensation plans in accordance with
their terms, and Borrower has not and will not withdraw from participation
in, permit partial or complete termination of, or permit the occurrence of
any other event with respect to, any such plan which could result in any
liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll
service providing for the automatic deposit of all payroll taxes payable by
Borrower.
3.9 Compliance with Law. Borrower has complied, and will comply,
in all material respects, with all provisions of all foreign, federal,
state and local laws and regulations relating to Borrower, including, but
not limited to, those relating to Borrower's ownership of real or personal
property, the conduct and licensing of Borrower's business, and all
environmental matters.
3.10 Litigation. Except as disclosed in the Schedule, there is no
claim, suit, litigation, proceeding or investigation pending or (to best of
Borrower's knowledge) threatened by or against or affecting Borrower in any
court or before any governmental agency (or any basis therefor known to
Borrower) which may result, either separately or in the aggregate, in any
material adverse change in the financial condition or business of Borrower,
or in any material impairment in the ability of Borrower to carry on its
business in substantially the same manner as it is now being conducted.
Borrower will promptly inform Silicon in writing of any claim, proceeding,
litigation or investigation in the future threatened or instituted by or
against Borrower involving any single claim of $100,000 or more, or
involving $250,000 or more in the aggregate.
3.11 Use of Proceeds. All proceeds of all Loans shall be used
solely for working capital purposes. Borrower is not purchasing or
carrying any "margin stock" (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) and no part of the proceeds of any
Loan will be used to purchase or carry any "margin stock" or to extend
credit to others for the purpose of purchasing or carrying any "margin
stock."
3.12 Indebtedness. Except as shown on the Schedule hereto, Borrower
shall not create, incur, assume, or be liable for any indebtedness for
money borrowed, or permit any of Borrower's subsidiaries to do so.
Notwithstanding the foregoing, Borrower's subsidiaries, Parlex (Shanghai)
Circuit Co., Ltd. and Parlex (Shanghai) Interconnect Products Co., Ltd.,
may incur indebtedness (provided such indebtedness is not guaranteed by any
Borrower except as set forth in Section 5.5(ix)) of not more than
US$8,000,000 in the aggregate.
4. RECEIVABLES.
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Silicon Valley Bank Schedule to Loan and Security Agreement
4.1 Representations Relating to Receivables. Borrower represents
and warrants to Silicon as follows: Each Receivable with respect to which
Loans are requested by Borrower shall, on the date each Loan is requested
and made, (i) represent an undisputed bona fide existing unconditional
obligation of the Account Debtor created by the sale, delivery, and
acceptance of goods or the rendition of services in the ordinary course of
Borrower's business, and (ii) meet the Minimum Eligibility Requirements set
forth in Section 8 below.
4.2 Representations Relating to Documents and Legal Compliance.
Borrower represents and warrants to Silicon as follows: All statements
made and all unpaid balances appearing in all invoices, instruments and
other documents evidencing the Receivables are and shall be true and
correct and all such invoices, instruments and other documents and all of
Borrower's books and records are and shall be genuine and in all respects
what they purport to be, and all signatories and endorsers have the
capacity to contract. All sales and other transactions underlying or
giving rise to each Receivable shall fully comply with all applicable laws
and governmental rules and regulations. All signatures and endorsements on
all documents, instruments, and agreements relating to all Receivables are
and shall be genuine, and all such documents, instruments and agreements
are and shall be legally enforceable in accordance with their terms.
4.3 Schedules and Documents Relating to Receivables. Borrower
shall deliver to Silicon transaction reports and loan requests, schedules
and assignments of all Receivables, and schedules of collections, all on
Silicon's standard forms; provided, however, that Borrower's failure to
execute and deliver the same shall not affect or limit Silicon's security
interest and other rights in all of Borrower's Receivables, nor shall
Silicon's failure to advance or lend against a specific Receivable affect
or limit Silicon's security interest and other rights therein. In the event
Borrower has elected to be on "non-borrowing reporting status" (see Section
6 of the Schedule), Borrower shall furnish Silicon with a Loan request at
least thirty (30) days prior to the requested funding date. Otherwise,
Loan requests received after 12:00 Noon will not be considered by Silicon
until the next Business Day. Upon five (5) days prior written notice,
Borrower shall furnish Silicon with copies (or, at Silicon's request after
the occurrence of an Event of Default, originals) of all contracts, orders,
invoices, and other similar documents, and all original shipping
instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Receivables, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also furnish to Silicon an aged accounts receivable trial
balance in such form and at such intervals as Silicon shall reasonably
request. In addition, Borrower shall deliver to Silicon the originals of
all instruments, chattel paper, security agreements, guarantees and other
documents and property evidencing or securing any Receivables, immediately
upon receipt thereof and in the same form as received, with all necessary
indorsements, all of which shall be with recourse. Borrower shall also
provide Silicon with copies of all credit memos within two days after the
date issued.
4.4 Collection of Receivables. Borrower shall cause the Account
Debtors to remit all Receivables to Silicon and Silicon shall hold all
payments on, and proceeds of, Receivables in a lockbox account, or such
other "blocked account" as Silicon may specify, pursuant to a blocked
account agreement in such form as Silicon may specify. All such payments
on, and proceeds of, Receivables shall be applied to the Obligations in
such order as Silicon shall determine. Silicon or its designee may, at any
time, notify Account Debtors that the Receivables have been assigned to
Silicon.
4.5. Remittance of Proceeds. All proceeds arising from the
disposition of any Collateral shall be delivered, in kind, by Borrower to
Silicon in the original form in which received by Borrower not later than
the following Business Day after receipt by Borrower, to be applied to the
Obligations in such order as Silicon shall determine; provided that, if no
Default or Event of Default has occurred, Borrower shall not be obligated
to remit to Silicon the proceeds of the sale of worn out or obsolete
equipment disposed of by Borrower in good faith in an arm's length
transaction for an aggregate purchase price of $100,000 or less (for all
such transactions in any fiscal year). Borrower agrees that it will not
commingle proceeds of Collateral with any of Borrower's other funds or
property, but will hold such proceeds separate and apart from such other
funds and property and in an express trust for Silicon. Nothing in this
Section 4.5 limits the restrictions on disposition of Collateral set forth
elsewhere in this Agreement.
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Silicon Valley Bank Schedule to Loan and Security Agreement
4.6 Disputes. Borrower shall notify Silicon promptly of all
disputes or claims relating to Receivables relating to an amount in
controversy of not less than $50,000. Borrower shall not forgive
(completely or partially), compromise or settle any Receivable for less
than payment in full, or agree to do any of the foregoing, except that
Borrower may do so, provided that: (i) Borrower does so in good faith, in a
commercially reasonable manner, in the ordinary course of business, and in
arm's length transactions, which are reported to Silicon on the regular
reports provided to Silicon; (ii) no Default or Event of Default has
occurred and is continuing; and (iii) taking into account all such
discounts settlements and forgiveness, the total outstanding Loans will not
exceed the Credit Limit. Silicon may, at any time after the occurrence of
an Event of Default and the expiration of any cure or grace periods
relating thereto, settle or adjust disputes or claims directly with Account
Debtors for amounts and upon terms which Silicon considers advisable in its
reasonable credit judgment and, in all cases, Silicon shall credit
Borrower's Loan account with only the net amounts received by Silicon in
payment of any Receivables.
4.7 Returns. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower with a
value in excess of $75,000 in the ordinary course of its business, Borrower
shall promptly determine the reason for such return and promptly issue a
credit memorandum to the Account Debtor in the appropriate amount (sending
a copy to Silicon, if requested). In the event any attempted return occurs
after the occurrence of any Event of Default and the expiration of any cure
or grace periods relating thereto, Borrower shall (i) hold the returned
Inventory in trust for Silicon, (ii) segregate all returned Inventory from
all of Borrower's other property, (iii) conspicuously label the returned
Inventory as Silicon's property, and (iv) immediately notify Silicon of the
return of any Inventory, specifying the reason for such return, the
location and condition of the returned Inventory, and on Silicon's request
deliver such returned Inventory to Silicon.
4.8 Verification. Silicon may, from time to time, verify directly
with the respective Account Debtors the validity, amount and other matters
relating to the Receivables, by means of mail, telephone or otherwise,
either in the name of Borrower or Silicon or such other name as Silicon may
choose.
4.9 No Liability. Silicon shall not under any circumstances be
responsible or liable for any shortage or discrepancy in, damage to, or
loss or destruction of, any goods, the sale or other disposition of which
gives rise to a Receivable, or for any error, act, omission, or delay of
any kind occurring in the settlement, failure to settle, collection or
failure to collect any Receivable, or for settling any Receivable in good
faith for less than the full amount thereof, nor shall Silicon be deemed to
be responsible for any of Borrower's obligations under any contract or
agreement giving rise to a Receivable. Nothing herein shall, however,
relieve Silicon from liability for its own gross negligence or willful
misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 Financial and Other Covenants. Borrower shall at all times
comply with the financial and other covenants set forth in the Schedule.
5.2 Insurance. Borrower shall, at all times insure all of the
tangible personal property Collateral and carry such other business
insurance, with insurers reasonably acceptable to Silicon, in such form and
amounts as Silicon may reasonably require, and Borrower shall provide
evidence of such insurance to Silicon, so that Silicon is satisfied that
such insurance is, at all times, in full force and effect. All such
insurance policies shall name Silicon as an additional loss payee, and
shall contain a lenders loss payee endorsement in form reasonably
acceptable to Silicon. Upon receipt of the proceeds of any such insurance,
Silicon shall apply such proceeds in reduction of the Obligations as
Silicon shall determine in its sole discretion, except that, provided no
Default or Event of Default has occurred and is continuing, Silicon shall
release to Borrower insurance proceeds with respect to any loss totaling
less than $250,000, which shall be utilized by Borrower for the repair or
replacement of the items with respect to which the insurance proceeds were
paid. Silicon may require reasonable assurance that the insurance proceeds
so released will be so used. If Borrower fails to
8
Silicon Valley Bank Schedule to Loan and Security Agreement
provide or pay for any insurance, Silicon may, but is not obligated to,
obtain the same at Borrower's expense. Borrower shall promptly deliver to
Silicon copies of all reports made to insurance companies.
5.3 Reports. Borrower, at its expense, shall provide Silicon with
the written reports set forth in the Schedule, and such other written
reports with respect to Borrower (including budgets, sales projections,
operating plans and other financial documentation), as Silicon shall from
time to time reasonably specify.
5.4 Access to Collateral, Books and Records. At reasonable times,
and on one Business Day's notice, Silicon, or its agents, shall have the
right to inspect the Collateral, and the right to audit and copy Borrower's
books and records. Silicon shall keep such information confidential in
accordance with Section 9.20 hereof. The foregoing inspections and audits
shall be at Borrower's expense and the charge therefor shall be $750 per
person per day (or such higher amount as shall represent Silicon's then
current standard charge for the same), plus reasonable out of pocket
expenses. Borrower will not enter into any agreement with any accounting
firm, service bureau or third party to store Borrower's books or records at
any location other than Borrower's Address, without prior notice to
Silicon. Borrower waives the benefit of any accountant-client privilege or
other evidentiary privilege precluding or limiting the disclosure,
divulgence or delivery of any of its books and records (except that
Borrower does not waive any attorney-client privilege).
5.5 Negative Covenants. Except as may be permitted in the
Schedule, Borrower shall not, without Silicon's prior written consent which
shall not be unreasonably withheld, do any of the following:
(i) merge or consolidate with another corporation or
entity;
(ii) acquire any assets, except in the ordinary course
of business, provided, however, that the Borrower
may invest in (a) direct obligations of the United
States of America having a maturity of one year or
less from the date of investment; (b) investment
grade bonds; (c) any other such security for the
purpose of obtaining 10-K's and other financial
reports, provided that such investment does not
exceed One Thousand ($1,000.00) Dollars; (d) the
Parlex Shanghai joint venture, Parlex Dynaflex
Corporation and in Parlex Asia Pacific Limited in
an amount not to exceed $1,000,000 in the aggregate
during the term of this Agreement.
(iii) enter into any other transaction outside the
ordinary course of business;
(iv) sell or transfer any Collateral, except for (a) the
sale of finished Inventory in the ordinary course
of Borrower's business, (b) for the sale of
obsolete or unneeded Equipment in the ordinary
course of business, or (c) the sale of any other
assets, provided that the net book value thereof
does not exceed $100,000 in any fiscal year;
(v) store any Inventory or other Collateral with any
warehouseman or other third party;
(vi) sell any Inventory on a sale-or-return, guaranteed
sale, consignment, or other contingent basis;
(vii) make any loans of any money or other assets,
provided, however; that (a) the Borrower may make
advances to its affiliates, including its officers
and directors, with respect to expenses incurred by
such affiliates, which expenses are reimbursable by
the Borrower and directly related to the conduct of
the Borrower's business; and (b) the Borrower may
make loans to Parlex Shanghai in an amount not to
exceed $1,000,000 outstanding at any time during
the term of this Agreement.
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Silicon Valley Bank Schedule to Loan and Security Agreement
(viii) incur any debts outside the ordinary course of
business;
(ix) guarantee or otherwise become liable with respect
to the obligations of another party or entity
(excepting any guarantee for the indebtedness of
Parlex (Shanghai) Interconnect Products Co., Inc.
in an amount not to exceed $5,000,000 in the
aggregate);
(x) pay or declare any dividends on Borrower's stock
(except for dividends payable solely in stock of
Borrower), unless specifically consented to by
Silicon in writing;
(xi) redeem, retire, purchase or otherwise acquire,
directly or indirectly, any of Borrower's stock;
(xii) make any change in Borrower's capital structure
which would have a material adverse effect on
Borrower or on the prospect of repayment of the
Obligations; or
(xiii) dissolve or elect to dissolve. Transactions
permitted by the foregoing provisions of this
Section 5.5 are only permitted if no Default or
Event of Default would occur as a result of such
transaction. Notwithstanding the foregoing,
Borrower shall be permitted to enter into the
Sale/Leaseback Transaction.
5.6 Litigation Cooperation. Should any third-party suit or
proceeding be instituted by or against Silicon with respect to any
Collateral or in any manner relating to Borrower, Borrower shall, without
expense to Silicon, make available Borrower and its officers, employees and
agents and Borrower's books and records, to the extent that Silicon may
deem them reasonably necessary in order to prosecute or defend any such
suit or proceeding.
5.7 Further Assurances. Borrower agrees, at its expense, on
request by Silicon, to execute all documents and take all actions, as
Silicon may deem reasonably necessary in order to perfect and maintain
Silicon's perfected security interest in the Collateral, and in order to
fully consummate the transactions contemplated by this Agreement.
6. TERM.
6.1 Maturity Date. This Agreement shall continue in effect until
the maturity date set forth on the Schedule (the "Maturity Date"); provided
that the Maturity Date may be extended upon written agreement of the
parties hereto.
6.2 Payment of Obligations. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and
whether or not all or any part of such Obligations are otherwise then due
and payable. Without limiting the generality of the foregoing, if on the
Maturity Date, or on any earlier effective date of termination, there are
any outstanding Letters of Credit issued by Silicon or issued by another
institution based upon an application, guarantee, indemnity or similar
agreement on the part of Silicon, then on such date Borrower shall provide
to Silicon cash collateral in an amount equal to the face amount of all
such Letters of Credit plus all interest, fees and cost due or to become
due in connection therewith, to secure all of the Obligations relating to
said Letters of Credit, pursuant to Silicon's then standard form cash
pledge agreement. Notwithstanding any termination of this Agreement, all
of Silicon's security interests in all of the Collateral and all of the
terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the discretion of
Silicon, Silicon may, in its sole discretion, refuse to make any further
Loans after termination. No termination shall in any way affect or impair
any right or remedy of Silicon, nor shall any such termination relieve
Borrower of any Obligation to Silicon, until all of the Obligations have
been paid and performed in full. Upon payment and performance in full of
all the Obligations,
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Silicon Valley Bank Schedule to Loan and Security Agreement
Silicon shall promptly deliver to Borrower termination statements, requests
for reconveyances and such other documents as may be required to fully
terminate Silicon's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 Events of Default. The occurrence of any of the following
events shall constitute an "Event of Default" under this Agreement, and
Borrower shall give Silicon immediate written notice thereof:
(i) any warranty, representation, statement, report or
certificate made or delivered to Silicon by
Borrower or any of Borrower's officers, employees
or agents, now or in the future, shall be untrue or
misleading in a material respect as of the time
when made, delivered or certified; or
(ii) Borrower shall fail to pay when due any Loan or any
interest thereon or any other monetary Obligation;
or
(iii) the total Loans and other Obligations outstanding
at any time shall exceed the Credit Limit for one
(1) or more days after receipt of notice therefor;
or
(iv) Borrower shall fail to comply with any of the
financial covenants set forth in the Schedule or
shall fail to perform any other non-monetary
Obligation which by its nature cannot be cured; or
(v) Borrower shall fail to perform any other non-
monetary Obligation, which failure is not cured
within ten (10) Business Days after notice hereof
is provided to Borrower; or
(vi) any levy, assessment, attachment, seizure, lien or
encumbrance (other than a Permitted Lien) is made
on all or any part of the Collateral which is not
cured or bonded over within twenty (20) days after
the occurrence of the same, or immediately upon the
service of process upon Silicon seeking to attach
by trustee, mesne or other process, any of
Borrower's funds on deposit with, or assets of the
Borrower in the possession of, Silicon; or
(vii) any default or event of default occurs under any
obligation secured by a Permitted Lien, which is
not cured within any applicable cure period or
waived in writing by the holder of the Permitted
Lien; or
(viii) Borrower breaches any material contract or
obligation, which has or may reasonably be expected
to have a material adverse effect on Borrower's
business or financial condition; or
(ix) dissolution, termination of existence, insolvency
or business failure of Borrower; or appointment of
a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit
of creditors by, or the commencement of any
proceeding by Borrower under any reorganization,
bankruptcy, insolvency, arrangement, readjustment
of debt, dissolution or liquidation law or statute
of any jurisdiction, now or in the future in
effect; or
(x) the commencement of any proceeding against Borrower
or any guarantor of any of the Obligations under
any reorganization, bankruptcy, insolvency,
arrangement,
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Silicon Valley Bank Schedule to Loan and Security Agreement
readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction, now or in the
future in effect, which is not cured by the
dismissal thereof within 45 days after the date
commenced; or
(xi) revocation or termination of, or limitation or
denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the
foregoing, or commencement of proceedings by any
guarantor of any of the Obligations under any
bankruptcy or insolvency law; or
(xii) revocation or termination of, or limitation or
denial of liability upon, any pledge of any
certificate of deposit, securities or other
property or asset of any kind pledged by any third
party to secure any or all of the Obligations, or
any attempt to do any of the foregoing, or
commencement of proceedings by or against any such
third party under any bankruptcy or insolvency law;
or
(xiii) Borrower defaults under any agreement evidencing
any indebtedness in excess of $100,000 to any third
party; or
(xiv) Borrower makes any payment on account of any
indebtedness or obligation which has been
subordinated to the Obligations other than as
permitted in the applicable subordination
agreement, or
(xv) there shall be a change in the record or beneficial
ownership of outstanding shares of stock of
Borrower, in one or more transactions, compared to
the ownership of outstanding shares of stock of
Borrower in effect on the date hereof, which
results in a change of voting control of Borrower,
without prior written consent of Silicon; or
(xvi) Borrower shall generally not pay its debts as they
become due, or Borrower shall conceal, remove or
transfer any part of its property, with intent to
hinder, delay or defraud its creditors, or make or
suffer any transfer of any of its property which
may be fraudulent under any bankruptcy, fraudulent
conveyance or similar law; or
(xvii) there shall be (a) a material impairment in the
perfection or priority of Silicon's security
interest in the Collateral or in the value of such
Collateral; (b) a material adverse change in the
business, operations or condition (financial or
otherwise) of the Borrower; (ci) a material
impairment of the prospect of repayment of any
portion of the Obligations; or (d) Silicon
determines, based upon information available to it
and in its reasonable judgment, that there is
substantial likelihood that Borrower shall fail to
comply with one or more of the financial covenants
in Section 5.1 during the next succeeding financial
reporting period; or
(xviii) Borrower shall breach any term of the IP Security
Agreement or the Warrant.
7.2 Remedies. Upon the occurrence of any Event of Default (after
the expiration of any cure or grace period relating thereto), and at any
time thereafter until and unless such Event of Default is cured, Silicon,
at its option, and without notice or demand of any kind (all of which are
hereby expressly waived by Borrower), may do any one or more of the
following:
(i) cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document
or agreement;
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Silicon Valley Bank Schedule to Loan and Security Agreement
(ii) accelerate and declare all or any part of the
Obligations to be immediately due, payable, and
performable, notwithstanding any deferred or
installment payments allowed by any instrument
evidencing or relating to any Obligation;
(iii) take possession of any or all of the Collateral
wherever it may be found, and for that purpose
Borrower hereby authorizes Silicon without judicial
process to enter onto any of Borrower's premises
without interference to search for, take possession
of, keep, store, or remove any of the Collateral,
and remain on the premises or cause a custodian to
remain on the premises in exclusive control
thereof, without charge for so long as Silicon
deems it reasonably necessary in order to complete
the enforcement of its rights under this Agreement
or any other agreement; provided, however, that
should Silicon seek to take possession of any of
the Collateral by Court process, Borrower hereby
irrevocably waives: (a) any bond and any surety or
security relating thereto required by any statute,
court rule or otherwise as an incident to such
possession; (b) any demand for possession prior to
the commencement of any suit or action to recover
possession thereof; and (c) any requirement that
Silicon retain possession of, and not dispose of,
any such Collateral until after trial or final
judgment;
(iv) require Borrower to assemble any or all of the
Collateral and make it available to Silicon at
places designated by Silicon which are reasonably
convenient to Silicon and Borrower, and to remove
the Collateral to such locations as Silicon may
deem advisable;
(v) complete the processing, manufacturing or repair of
any Collateral prior to a disposition thereof and,
for such purpose and for the purpose of removal,
Silicon shall have the right to use Borrower's
premises, vehicles, hoists, lifts, cranes,
equipment and all other property without charge;
(vi) sell, lease or otherwise dispose of any of the
Collateral, in its condition at the time Silicon
obtains possession of it or after further
manufacturing, processing or repair, at one or more
public and/or private sales, in lots or in bulk,
for cash, exchange or other property, or on credit,
and to adjourn any such sale from time to time
without notice other than oral announcement at the
time scheduled for sale. Silicon shall have the
right to conduct such disposition on Borrower's
premises without charge, for such time or times as
Silicon deems reasonable, or on Silicon's premises,
or elsewhere and the Collateral need not be located
at the place of disposition. Silicon may directly
or through any affiliated company purchase or lease
any Collateral at any such public disposition, and
if permissible under applicable law, at any private
disposition. Any sale or other disposition of
Collateral shall not relieve Borrower of any
liability Borrower may have if any Collateral is
defective as to title or physical condition or
otherwise at the time of sale;
(vii) demand payment of, and collect any Receivables and
General Intangibles comprising Collateral and, in
connection therewith, Borrower irrevocably
authorizes Silicon to endorse or sign Borrower's
name on all collections, receipts, instruments and
other documents, to take possession of and open
mail addressed to Borrower and remove therefrom
payments made with respect to any item of the
Collateral or proceeds thereof, and, in Silicon's
sole discretion, to grant extensions of time to
pay, compromise claims and settle Receivables and
the like for less than face value;
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Silicon Valley Bank Schedule to Loan and Security Agreement
(viii) offset against any sums in any of Borrower's
general, special or other Deposit Accounts with
Silicon; and
(ix) demand and receive possession of any of Borrower's
federal and state income tax returns and the books
and records utilized in the preparation thereof or
referring thereto.
All reasonable attorneys' fees, expenses, costs, liabilities and
obligations incurred by Silicon with respect to the foregoing shall be
added to and become part of the Obligations, shall be due on demand, and
shall bear interest at a rate equal to the highest interest rate applicable
to any of the Obligations. Without limiting any of Silicon's rights and
remedies, from and after the occurrence of any Event of Default, the
interest rate applicable to the Obligations shall be increased by an
additional two percent (2%) per annum.
7.3 Standards for Determining Commercial Reasonableness. Borrower
and Silicon agree that a sale or other disposition (collectively, "sale")
of any Collateral which complies with the following standards will
conclusively be deemed to be commercially reasonable: (i) Notice of the
sale is given to Borrower at least seven days prior to the sale, and, in
the case of a public sale, notice of the sale is published at least seven
days before the sale in a newspaper of general circulation in the county
where the sale is to be conducted; (ii) Notice of the sale describes the
collateral in general, non-specific terms; (iii) The sale is conducted at a
place designated by Silicon, with or without the Collateral being present;
(iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m Boston,
Massachusetts time; (v) Payment of the purchase price in cash or by
cashier's check or wire transfer is required; (vi) With respect to any sale
of any of the Collateral, Silicon may (but is not obligated to) direct any
prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. Silicon shall be free to employ other
methods of noticing and selling the Collateral, in its discretion, if they
are commercially reasonable.
7.4 Power of Attorney. Upon the occurrence of any Event of Default
and after expiration of any cure or grace periods relating thereto, without
limiting Silicon's other rights and remedies, Borrower grants to Silicon an
irrevocable power of attorney coupled with an interest, authorizing and
permitting Silicon (acting through any of its employees, attorneys or
agents) at any time, at its option, but without obligation, with or without
notice to Borrower, and at Borrower's expense, to do any or all of the
following, in Borrower's name or otherwise, but Silicon agrees to exercise
the following powers in a commercially reasonable manner:
(i) execute on behalf of Borrower any documents that
Silicon may, in its sole discretion, deem advisable
in order to perfect and maintain Silicon's security
interest in the Collateral, or in order to exercise
a right of Borrower or Silicon, or in order to
fully consummate all the transactions contemplated
under this Agreement, and all other present and
future agreements;
(ii) execute on behalf of Borrower any document
exercising, transferring or assigning any option to
purchase, sell or otherwise dispose of or to lease
(as lessor or lessee) any real or personal property
which is part of the Collateral;
(iii) execute on behalf of Borrower, any invoices
relating to any Receivable, any draft against any
Account Debtor and any notice to any Account
Debtor, any proof of claim in bankruptcy, any
Notice of Lien, claim of mechanic's, materialman's
or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien;
(iv) take control in any manner of any cash or non-cash
items of payment or proceeds of Collateral; endorse
the name of Borrower upon any instruments, or
documents, evidence of payment or Collateral that
may come into Silicon's possession;
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Silicon Valley Bank Schedule to Loan and Security Agreement
(v) endorse all checks and other forms of remittances
received by Silicon;
(vi) pay, contest or settle any lien, charge,
encumbrance, security interest and adverse claim in
or to any of the Collateral, or any judgment based
thereon, or otherwise take any action to terminate
or discharge the same;
(vii) grant extensions of time to pay, compromise claims
and settle Receivables and General Intangibles for
less than face value and execute all releases and
other documents in connection therewith;
(viii) pay any sums required on account of Borrower's
taxes or to secure the release of any liens
therefor, or both;
(ix) settle and adjust, and give releases of, any
insurance claim that relates to any of the
Collateral and obtain payment therefor;
(x) instruct any third party having custody or control
of any books or records belonging to, or relating
to, Borrower to give Silicon the same rights of
access and other rights with respect thereto as
Silicon has under this Agreement; and
(xi) take any action or pay any sum required of Borrower
pursuant to this Agreement and any other present or
future agreements. Any and all reasonable sums
paid and any and all reasonable costs, expenses,
liabilities, obligations and attorneys' fees
incurred by Silicon with respect to the foregoing
shall be added to and become part of the
Obligations, shall be payable on demand, and shall
bear interest at a rate equal to the highest
interest rate applicable to any of the Obligations.
In no event shall Silicon's rights under the
foregoing power of attorney or any of Silicon's
other rights under this Agreement be deemed to
indicate that Silicon is in control of the
business, management or properties of Borrower.
Notwithstanding the foregoing, in the event such Event of Default is
cured or remedied, such power of attorney granted shall hereby expire.
7.5 Application of Proceeds. All proceeds realized as the result
of any sale of the Collateral upon an Event of Default and following the
expiration of any grace or cure periods relating thereto shall be applied
by Silicon first to the reasonable costs, expenses, liabilities,
obligations and attorneys' fees incurred by Silicon in the exercise of its
rights under this Agreement, second to the interest due upon any of the
Obligations, and third to the principal of the Obligations, in such order
as Silicon shall determine in its sole discretion. Any surplus shall be
paid to Borrower or other Persons legally entitled thereto; Borrower shall
remain liable to Silicon for any deficiency. If, Silicon, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, Silicon
shall have the option, exercisable at any time, in its sole discretion, of
either reducing the Obligations by the principal amount of purchase price
or deferring the reduction of the Obligations until the actual receipt by
Silicon of the cash therefor.
7.6 Remedies Cumulative. In addition to the rights and remedies
set forth in this Agreement, Silicon shall have all the other rights and
remedies accorded a secured party under the Massachusetts Uniform
Commercial Code and under all other applicable laws, and under any other
instrument or agreement now or in the future entered into between Silicon
and Borrower, and all of such rights and remedies are cumulative and none
is exclusive. Exercise or partial exercise by Silicon of one or more of
its rights or remedies shall not be deemed an election, nor bar Silicon
from subsequent exercise
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Silicon Valley Bank Schedule to Loan and Security Agreement
or partial exercise of any other rights or remedies. The failure or delay
of Silicon to exercise any rights or remedies shall not operate as a waiver
thereof, but all rights and remedies shall continue in full force and
effect until all of the Obligations have been fully paid and performed.
8. DEFINITIONS.
As used in this Agreement, the following terms have the following
meanings:
"Account Debtor" means the obligor on a Receivable.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent
or subsidiary of such Person, or any Person controlling, controlled by or
under common control with such Person.
"Business Day" means any day which is neither a Saturday or a Sunday
nor a legal holiday on which banks are authorized or required to be closed
in Boston, Massachusetts.
"Cash Management Services" means Silicon's cash management services,
direct deposit of payroll, business credit card, and check cashing services
as may be further identified in the various cash management services
agreements related to such Cash Management Services.
"Code" means the Uniform Commercial Code as adopted and in effect in
the Commonwealth of Massachusetts from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
"Credit Limit" has the meaning set forth in Section 1.1 above.
"Default" means any event which with notice or passage of time or
both, would constitute an Event of Default.
"Deferred Revenue" is all amounts received in advance of performance
under contracts and not yet recognized as revenue.
"Deposit Account" has the meaning set forth in Section 9-102 of the
Code.
"Eligible Receivables" means Receivables arising in the ordinary
course of Borrower's business from the sale of goods or rendition of
services in which Silicon has a first priority perfected lien, which
Silicon, in its good faith business judgment, shall deem eligible for
borrowing, based on such considerations as Silicon may from time to time
deem appropriate. Without limiting the fact that the determination of
which Receivables are eligible for borrowing is a matter of Silicon's good
faith business judgment, the following (the "Minimum Eligibility
Requirements") are the minimum requirements for a Receivable to be an
Eligible Receivable, and:
(i) the Receivable must not be outstanding for more
than 90 days from its invoice date,
(ii) the Receivable must not represent milestone or
progress xxxxxxxx, be due under a fulfillment or
requirements contract with the Account Debtor or
represent Deferred Revenue,
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Silicon Valley Bank Schedule to Loan and Security Agreement
(iii) the Receivable must not be subject to any
contingencies (including Receivables arising from
sales on consignment, guaranteed sale or other
terms pursuant to which payment by the Account
Debtor may be conditional, except as may otherwise
be acceptable to Silicon in its discretion),
(iv) the Receivable must not be owing from an Account
Debtor with whom the Borrower has any dispute
(whether or not relating to the particular
Receivable, but only to the extent of the amount in
dispute),
(v) the Receivable must not be owing from an Affiliate
of Borrower,
(vi) the Receivable must not be owing from an Account
Debtor which is subject to any insolvency or
bankruptcy proceeding, or whose financial condition
is not acceptable to Silicon in its good faith
business judgment, or which, fails or goes out of a
material portion of its business,
(vii) the Receivable must not be owing from the United
States or any department, agency or instrumentality
thereof (unless there has been compliance with the
United States Assignment of Claims Act),
(viii) the Receivable must not be owing from an Account
Debtor located outside the United States (unless
(a) pre-approved by Silicon in its discretion in
writing, (b) foreign credit insurance (satisfactory
to Silicon in all respects) is obtained for such
Receivable listing the Bank as an additional
insured and such other endorsements as Silicon may
reasonably require, or (c) backed by a letter of
credit issued by a financial institution reasonably
satisfactory to Silicon, or FCIA insured reasonably
satisfactory to Silicon), and
(ix) the Receivable must not be owing from an Account
Debtor to whom Borrower is or may be liable for
goods purchased from such Account Debtor or
otherwise. Receivables owing from one Account
Debtor will not be deemed Eligible Receivables to
the extent they exceed 25% of the total Receivables
outstanding. In addition, if more than 50% of the
Receivables owing from an Account Debtor are
outstanding more than 90 days from their invoice
date (without regard to unapplied credits) or are
otherwise not eligible Receivables, then all
Receivables owing from that Account Debtor will be
deemed ineligible for borrowing. Silicon may, from
time to time, in its discretion, revise the Minimum
Eligibility Requirements, upon written notice to
the Borrower.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods
and other tangible personal property (other than Inventory) of every kind
and description used in Borrower's operations or owned by Borrower and any
interest in any of the foregoing, and all attachments, accessories,
accessions, replacements, substitutions, additions or improvements to any
of the foregoing, wherever located.
"Event of Default" means any of the events set forth in Section 7.1
of this Agreement.
"General Intangibles" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, rights to payment for credit
extended, amounts due to Borrower, credit memoranda in favor of Borrower,
warranty claims, causes of action, corporate or other business
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Silicon Valley Bank Schedule to Loan and Security Agreement
records, deposits, Deposit Accounts, inventions, designs, drawings,
blueprints, patents, patent applications, trademarks and the goodwill of
the business symbolized thereby, names, trade names, trade secrets,
goodwill, copyrights, registrations, licenses, franchises, customer lists,
security and other deposits, rights in all litigation presently or
hereafter pending for any cause or claim (whether in contract, tort or
otherwise), and all judgments now or hereafter arising therefrom, all
claims of Borrower against Silicon, rights to purchase or sell real or
personal property, rights as a licensor or licensee of any kind, royalties,
telephone numbers, proprietary information, purchase orders, and all
insurance policies and claims (including without limitation life insurance,
key man insurance, credit insurance, liability insurance, property
insurance and other insurance), tax refunds and claims, computer programs,
discs, tapes and tape files, claims under guaranties, security interests or
other security held by or granted to Borrower, all rights to
indemnification and all other intangible property of every kind and nature
(other than Receivables).
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease
(including without limitation all raw materials, work in process, finished
goods and goods in transit), and all materials and supplies of every kind,
nature and description which are or might be used or consumed in Borrower's
business or used in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such goods, merchandise or other
personal property, and all warehouse receipts, documents of title and other
documents representing any of the foregoing.
"Letter-of-Credit Rights" means all letter-of-credit rights
including, without limitation, "letter-of-credit rights" as defined in the
Code and also any right to payment or performance under a letter of credit,
whether or not the beneficiary has demanded or is at the time entitled to
demand payment or performance.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at
any time owing by Borrower to Silicon, whether evidenced by this Agreement
or any note or other instrument or document, including, without limitation,
the Borrower's obligations pursuant to the IP Security Agreement and the
Warrant, whether arising from an extension of credit, opening of a letter
of credit, banker's acceptance, foreign exchange contracts, loan, Cash
Management Services, guaranty, indemnification or otherwise, whether direct
or indirect (including, without limitation, those acquired by assignment
and any participation by Silicon in Borrower's debts owing to others),
absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, attorney's fees, expert
witness fees, audit fees, letter of credit fees, collateral monitoring
fees, closing fees, facility fees, termination fees, minimum interest
charges and any other sums chargeable to Borrower under this Agreement or
under any other present or future instrument or agreement between Borrower
and Silicon.
"Payment Intangibles" means all payment intangibles including,
without limitation, "payment intangibles" as defined in the Code and also
any general intangible under which the Account Debtor's primary obligation
is a monetary obligation.
"Permitted Liens" means the following:
(i) purchase money security interests in, or leases of,
specific items of Equipment existing on the date
hereof and described on the Schedule;
(ii) for future purchase money financing, purchase
money security interests in, or leases of, specific
items of Equipment in an amount not to exceed
$1,000,000 in the aggregate for each calendar year;
(iii) liens for taxes not yet payable;
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Silicon Valley Bank Schedule to Loan and Security Agreement
(iv) additional security interests and liens consented
to in writing by Silicon, which consent shall not
be unreasonably withheld;
(v) security interests being terminated substantially
concurrently with this Agreement;
(vi) liens of materialmen, mechanics, warehousemen,
carriers, or other similar liens arising in the
ordinary course of business and securing
obligations which are not delinquent;
(vii) liens arising out of pledges or deposits under
workmen's compensation, unemployment insurance, old
age pension, social security, retirement benefits
or other similar legislation;
(viii) liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured
by liens of the type described above in clauses (i)
or (ii) above, provided that any extension, renewal
or replacement lien is limited to the property
encumbered by the existing lien and the principal
amount of the indebtedness being extended, renewed
or refinanced does not increase;
(ix) liens in favor of customs and revenue authorities
which secure payment of customs duties in
connection with the importation of goods; and
(x) liens arising hereunder.
Silicon will have the right to require, as a condition to its consent under
subsection (iv) above, that the holder of the additional security interest
or lien sign an intercreditor agreement on Silicon's then standard form,
acknowledge that the security interest is subordinate to the security
interest in favor of Silicon, and agree not to take any action to enforce
its subordinate security interest so long as any Obligations remain
outstanding, and that Borrower agree that any uncured default in any
obligation secured by the subordinate security interest shall also
constitute an Event of Default under this Agreement.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, government, or any agency or political division thereof, or
any other entity.
"Receivables" means all of Borrower's now owned and hereafter
acquired accounts (whether or not earned by performance), accounts
receivable, health-care insurance receivables, rights to payment, letters
of credit, contract rights, chattel paper, instruments, securities,
securities accounts, investment property, documents and all other forms of
obligations at any time owing to Borrower, all guaranties and other
security therefor, all merchandise returned to or repossessed by Borrower,
and all rights of stoppage in transit and all other rights or remedies of
an unpaid vendor, lienor or secured party.
"Reserves" means, as of any date of determination, such amounts as
Silicon may from time to time establish and revise in good faith reducing
the amount of Loans, Letters of Credit and other financial accommodations
which would otherwise be available to Borrower under the lending formula(s)
provided in the Schedule: (a) to reflect events, conditions, contingencies
or risks which, as determined by Silicon in good faith, do or may affect
(i) the Collateral or any other property which is security for the
Obligations or its value (including without limitation any increase in
delinquencies of Receivables), (ii) the assets, business or prospects of
Borrower or any Guarantor, or (iii) the security interests and other rights
of Silicon in the Collateral (including the enforceability, perfection and
priority thereof); or (b) to reflect Silicon's good faith belief that any
collateral report or financial information furnished by or on behalf of
Borrower or any guarantor to Silicon is or may have been incomplete,
inaccurate or misleading in any material respect;
19
Silicon Valley Bank Schedule to Loan and Security Agreement
or (c) in respect of any state of facts which Silicon determines in good
faith constitutes an Event of Default or may, with notice or passage of
time or both, constitute an Event of Default.
"Supporting Obligations" means all supporting obligations including,
without limitation, "supporting obligations" as defined in the Code and
also any letter-of-credit right or secondary obligation which supports the
payment or performance of an account, chattel paper, a document, a general
intangible, an instrument, or investment property.
"Warrant" means that certain Warrant to Purchase Stock of even date
herewith granted by Parlex Corporation to Silicon.
Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in
accordance with generally accepted accounting principles, consistently
applied. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
9. GENERAL PROVISIONS.
9.1 Interest Computation. In computing interest on the
Obligations, all checks, wire transfers and other items of payment received
by Silicon (including proceeds of Receivables and payment of the
Obligations in full) shall be deemed applied by Silicon on account of the
Obligations two Business Days after receipt by Silicon of immediately
available funds, and, for purposes of the foregoing, any such funds
received after 12:00 Noon on any day shall be deemed received on the next
Business Day. Silicon shall not, however, be required to credit Borrower's
account for the amount of any item of payment which is unsatisfactory to
Silicon in its commercially reasonable business judgment and Silicon may
charge Borrower's loan account for the amount of any item of payment which
is returned to Silicon unpaid.
9.2 Application of Payments. All payments with respect to the
Obligations may be applied, and in Silicon's commercially reasonable
business judgment reversed and re-applied, to the Obligations, in such
order and manner as Silicon shall determine in its sole discretion.
9.3 Charges to Accounts. Silicon may, in its discretion, require
that Borrower pay monetary Obligations in cash to Silicon, or charge them
to Borrower's Loan account, in which event they will bear interest at the
same rate applicable to the Loans. Silicon may also, in its discretion,
charge any monetary Obligations to Borrower's Deposit Accounts maintained
with Silicon.
9.4 Monthly Accountings. Silicon shall provide Borrower monthly
with an account of advances, charges, expenses and payments made pursuant
to this Agreement. Absent manifest error, such account shall be deemed
correct, accurate and binding on Borrower and an account stated (except for
reverses and reapplications of payments made and corrections of errors
discovered by Silicon), unless Borrower notifies Silicon in writing to the
contrary within forty-five (45) days after each account is rendered,
describing the nature of any alleged errors or omissions.
9.5 Notices. All notices to be given under this Agreement shall be
in writing and shall be given either personally or by reputable private
delivery service or by regular first-class mail, or certified mail return
receipt requested, addressed to Silicon or Borrower at the addresses shown
in the heading to this Agreement, or at any other address designated in
writing by one party to the other party. Notices to Silicon shall be
directed to the Commercial Finance Division, to the attention of the
Division Manager or the Division Credit Manager. All notices shall be
deemed to have been given upon delivery in the case of notices personally
delivered, or at the expiration of one Business Day following delivery to
the private delivery service, or two Business Days following the deposit
thereof in the United States mail,
20
Silicon Valley Bank Schedule to Loan and Security Agreement
with postage prepaid. In addition, Silicon shall endeavor to provide a
copy of any notice given to Borrower to Xxxxxx X. Xxxxxxx, Esq., Kutchin &
Xxxx, P. C., 000 Xxxxxxx Xxxxxx, Xxxxxx, XX 00000.
9.6 Severability. Should any provision of this Agreement be held
by any court of competent jurisdiction to be void or unenforceable, such
defect shall not affect the remainder of this Agreement, which shall
continue in full force and effect.
9.7 Integration. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Silicon and
supersede all prior and contemporaneous negotiations and oral
representations and agreements, all of which are merged and integrated in
this Agreement. There are no oral understandings, representations or
agreements between the parties which are not set forth in this Agreement or
in other written agreements signed by the parties in connection herewith.
9.8 Waivers. The failure of Silicon at any time or times to
require Borrower to strictly comply with any of the provisions of this
Agreement or any other present or future agreement between Borrower and
Silicon shall not waive or diminish any right of Silicon later to demand
and receive strict compliance therewith. Any waiver of any default shall
not waive or affect any other default, whether prior or subsequent, and
whether or not similar. None of the provisions of this Agreement or any
other agreement now or in the future executed by Borrower and delivered to
Silicon shall be deemed to have been waived by any act or knowledge of
Silicon or its agents or employees, but only by a specific written waiver
signed by an authorized officer of Silicon and delivered to Borrower.
Borrower waives demand, protest, notice of protest and notice of default or
dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension or renewal of any commercial paper, instrument,
account, General Intangible, document or guaranty at any time held by
Silicon on which Borrower is or may in any way be liable, and notice of any
action taken by Silicon, unless expressly required by this Agreement.
9.9 No Liability for Ordinary Negligence. Neither Silicon, nor any
of its directors, officers, employees, agents, attorneys or any other
Person affiliated with or representing Silicon shall be liable for any
claims, demands, losses or damages, of any kind whatsoever, made, claimed,
incurred or suffered by Borrower or any other party through the ordinary
negligence of Silicon, or any of its directors, officers, employees,
agents, attorneys or any other Person affiliated with or representing
Silicon, but nothing herein shall relieve Silicon from liability for its
own gross negligence or willful misconduct.
9.10 Amendment. The terms and provisions of this Agreement may not
be waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Silicon.
9.11 Time of Essence. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.12 Attorneys Fees and Costs. Borrower shall reimburse Silicon for
all reasonable attorneys' fees and all filing, recording, search, title
insurance, appraisal, audit, and other reasonable costs incurred by
Silicon, pursuant to, or in connection with, or relating to this Agreement
(whether or not a lawsuit is filed), including, but not limited to, any
reasonable attorneys' fees and costs Silicon incurs in order to do the
following: prepare and negotiate this Agreement and the documents relating
to this Agreement; obtain legal advice in connection with this Agreement or
Borrower; enforce, or seek to enforce, any of its rights; prosecute actions
against, or defend actions by, Account Debtors; commence, intervene in, or
defend any action or proceeding; initiate any complaint to be relieved of
the automatic stay in bankruptcy; file or prosecute any probate claim,
bankruptcy claim, third-party claim, or other claim; examine, audit, copy,
and inspect any of the Collateral or any of Borrower's books and records;
protect, obtain possession of, lease, dispose of, or otherwise enforce
Silicon's security interest in, the Collateral; and otherwise represent
Silicon in any litigation
21
Silicon Valley Bank Schedule to Loan and Security Agreement
relating to Borrower. In satisfying Borrower's obligation hereunder to
reimburse Silicon for attorneys fees, Borrower may, for convenience, issue
checks directly to Silicon's attorneys, Xxxxxx & Xxxxxxxxxx, LLP, but
Borrower acknowledges and agrees that Xxxxxx & Xxxxxxxxxx, LLP is
representing only Silicon and not Borrower in connection with this
Agreement. If either Silicon or Borrower files any lawsuit against the
other predicated on a breach of this Agreement, Silicon, if the prevailing
party, shall be entitled to recover its reasonable costs and attorneys'
fees, including (but not limited to) reasonable attorneys' fees and costs
incurred in the enforcement of, execution upon or defense of any order,
decree, award or judgment. All attorneys' fees and costs to which Silicon
may be entitled pursuant to this Section 9.12 shall immediately become part
of Borrower's Obligations, shall be due on demand fifteen (15) days after
receipt by Borrower of written notice therefor, and shall bear interest at
a rate equal to the highest interest rate applicable to any of the
Obligations if not paid within fifteen (15) days of receipt of written
notice therefor.
9.13 Benefit of Agreement. The provisions of this Agreement shall
be binding upon and inure to the benefit of the respective successors,
assigns, heirs, beneficiaries and representatives of Borrower and Silicon;
provided, however, that Borrower may not assign or transfer any of its
rights under this Agreement without the prior written consent of Silicon,
and any prohibited assignment shall be void. No consent by Silicon to any
assignment shall release Borrower from its liability for the Obligations.
9.14 Joint and Several Liability. If Borrower consists of more than
one Person, their liability shall be joint and several, and the compromise
of any claim with, or the release of, any Borrower shall not constitute a
compromise with, or a release of, any other Borrower.
9.15 Limitation of Actions. Any claim or cause of action by
Borrower against Silicon, its directors, officers, employees, agents,
accountants or attorneys, based upon, arising from, or relating to this
Loan Agreement, or any other present or future document or agreement, or
any other transaction contemplated hereby or thereby or relating hereto or
thereto, or any other matter, cause or thing whatsoever, occurred, done,
omitted or suffered to be done by Silicon, its directors, officers,
employees, agents, accountants or attorneys, shall be barred unless
asserted by Borrower by the commencement of an action or proceeding in a
court of competent jurisdiction by the filing of a complaint within the
earlier to occur of (i) one year after the discovery by Borrower of or (ii)
two years after the occurrence of, the first act, occurrence or omission
upon which such claim or cause of action, or any part thereof, is based,
and the service of a summons and complaint on an officer of Silicon, or on
any other person authorized to accept service on behalf of Silicon, within
thirty (30) days thereafter. Borrower agrees that such period is a
reasonable and sufficient time for Borrower to investigate and act upon any
such claim or cause of action. The period provided herein shall not be
waived, tolled, or extended except by the written consent of Silicon in its
sole discretion. This provision shall survive any termination of this Loan
Agreement or any other present or future agreement.
9.16 Right of Set-Off. Borrower and any guarantor hereby grant to
Silicon a lien, security interest, and right of setoff as security for all
Obligations to Silicon, whether now existing or hereafter arising upon and
against all deposits, credits, collateral and property, now or hereafter in
the possession, custody, safekeeping, or control of Silicon or any entity
under the control of Silicon Valley Bank or in transit to any of them. At
any time after the occurrence and during the continuance of an Event of
Default, without demand or notice, Silicon may set off the same or any part
thereof and apply the same to any liability or obligation of Borrower and
any guarantor then due and regardless of the adequacy of any other
collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE SILICON TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO
SUCH DEPOSITS, CREDITS, OR OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR,
ARE HEREBY KNOWINGLY, VOLUNTARILY, AND IRREVOCABLY WAIVED.
9.17 Section Headings; Construction. Section headings are only used
in this Agreement for convenience. Borrower and Silicon acknowledge that
the headings may not describe completely the subject matter of the
applicable section, and the headings shall not be used in any manner to
construe, limit, define or interpret any term or provision
22
Silicon Valley Bank Schedule to Loan and Security Agreement
of this Agreement. The term "including", whenever used in this Agreement,
shall mean "including (but not limited to)". This Agreement has been fully
reviewed and negotiated between the parties and no uncertainty or ambiguity
in any term or provision of this Agreement shall be construed strictly
against Silicon or Borrower under any rule of construction or otherwise.
9.18 Governing Law; Jurisdiction; Venue. This Agreement and all
acts and transactions hereunder and all rights and obligations of Silicon
and Borrower shall be governed by the laws of the Commonwealth of
Massachusetts. As a material part of the consideration to Silicon to enter
into this Agreement, Borrower (i) agrees that all actions and proceedings
relating directly or indirectly to this Agreement shall, at Silicon's
option, be litigated in state or federal courts located within
Massachusetts; (ii) consents to the jurisdiction and venue of any such
court and consents to service of process in any such action or proceeding
by personal delivery or any other method permitted by law; and (iii) waives
any and all rights Borrower may have to object to the jurisdiction of any
such court, or to transfer or change the venue of any such action or
proceeding, provided, however, that if for any reason Silicon cannot avail
itself of such courts in the Commonwealth of Massachusetts, Borrower
accepts jurisdiction of the courts and venue in Santa Clara, California.
9.19 Mutual Waiver of Jury Trial. Borrower and Silicon each hereby
waive the right to trial by jury in any action or proceeding based upon,
arising out of, or in any way relating to, this Agreement or any other
present or future instrument or agreement between Silicon and Borrower, or
any conduct, acts or omissions of Silicon or Borrower or any of their
directors, officers, employees, agents, attorneys or any other persons
affiliated with Silicon or Borrower, in all of the foregoing cases, whether
sounding in contract or tort or otherwise.
9.20 Confidentiality. In handling any confidential information,
Silicon shall exercise the same degree of care that it exercises for its
own proprietary information, but disclosure of information may be made:
(i) to Silicon's subsidiaries or affiliates in connection with their
present or prospective business relations with Borrower; (ii) to
prospective transferees or purchasers of any interest in the Loans; (iii)
as required by law, regulation, subpoena, or other order; (iv) as required
in connection with Silicon's examination or audit; and (v) as reasonably
appropriate in exercising Silicon's remedies under this Agreement.
Confidential information does not include information that either: (a) is
in the public domain or in Silicon's possession when disclosed to Silicon,
or becomes part of the public domain after disclosure to Silicon (through
no act or omission of Silicon); or (b) is disclosed to Silicon by a third
party, which third party is not under any non-disclosure obligation.
23
Silicon Valley Bank Schedule to Loan and Security Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the date first above written.
Borrower:
PARLEX CORPORATION
By: /s/ Xxxxx X. Xxxxxx
-----------------------
Name: Xxxxx X. Xxxxxx
Title: President
PARLEX DYNAFLEX CORPORATION
By: /s/ Xxxxx X. Xxxxxx
-----------------------
Name: Xxxxx X. Xxxxxx
Title: President
POLY-FLEX CIRCUITS, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------------
Name: Xxxxx X. Xxxxxx
Title: Treasurer
Silicon:
SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By: /s/ Xxxxx Xxxxxxxxx
-----------------------
Name: Xxxxx Xxxxxxxxx
Title: Vice President
24
Silicon Valley Bank
Schedule to
Loan and Security Agreement
Borrower: PARLEX CORPORATION, a Massachusetts corporation
Address: Xxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Borrower: PARLEX DYNAFLEX CORPORATION, a California corporation
Address: Xxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Borrower: POLY-FLEX CIRCUITS, INC., a Rhode Island corporation
Address: 00 Xxxxxx Xxxxx
Xxxxxxxx, Xxxxx Xxxxxx 00000
Date: June 11, 2003
This Schedule forms an integral part of the Loan and Security Agreement
between Silicon Valley Bank and the above-borrower of even date.
=======================================================================
1. Credit Limit
(Section 1.1): An amount not to exceed the lesser of (A) or (B),
below:
(A)
(i) $10,000,000.00 (the "Maximum Credit Limit"); minus
(ii) the aggregate amounts of all Loans (including Cash
Management Services), then undrawn outstanding Letters of
Credit, the FX Reserve, or any other accommodations issued or
incurred, or caused to be issued or incurred by Silicon for the
account and/or benefit of the Borrower.
(B)
(i) 80.0% of the amount of Borrower's Eligible Receivables
(as defined in Section 8 above); minus
(ii) the aggregate amounts of all Loans (including Cash
Management Services), then undrawn outstanding Letters of
Credit, the FX Reserve, or any other accommodations issued or
incurred, or caused to be issued or incurred by Silicon for the
account and/or benefit of Borrower.
Silicon may, from time to time, modify the advance rate(s) set forth herein
in its good faith business judgment upon notice to Borrower based on
changes in collection experience with respect to the Receivables or other
issues or factors relating to the Receivables or the Collateral.
Letter of Credit/FX Reserve/Cash Management Services Sublimit
(Section 1.5, 1.6, 1.7): $1,000,000
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Silicon Valley Bank Schedule to Loan and Security Agreement
=======================================================================
2. Interest.
Interest Rate (Section 1.2):
A rate equal to the Prime Rate (as defined below) plus 0.75% per
annum. Interest shall be calculated on the basis of a 360-day year for the
actual number of days elapsed "Prime Rate" is the greater of (i) 4.0% or
(ii) the rate announced from time to time by Silicon as its "prime rate;"
it is a base rate upon which other rates charged by Silicon are based, and
it is not necessarily the best rate available at Silicon. The interest
rate applicable to the Obligations shall change on each date there is a
change in the Prime Rate. Notwithstanding the foregoing, upon Borrower's
achievement of two (2) consecutive quarters of positive net income, the
interest rate hereunder shall be reduced to the Prime Rate (as defined
above) plus 0.25% per annum. Such reduction in the interest rate shall be
effective immediately upon receipt by Silicon of sufficient evidence of
such achievement of positive net income. Notwithstanding the foregoing,
such reduction in the interest rate shall be effective no later than the
day upon which Borrower files a second consecutive quarterly statement on
Form 10-Q indicating positive net income.
=======================================================================
3. Fees (Section 1.4):
Initial Loan Fee: $37,500.00 payable concurrently herewith.
Supplemental Loan Fee: A fully earned as of the date hereof, non-
refundable annual fee of $37,500.00 due on the earlier to occur of (i)
acceleration of the Obligations after an Event of Default hereunder or (ii)
June 10, 2004.
Collateral Handling Fee: $1,500.00 ($500.00 when not borrowing and
Borrower has advised Silicon that it has elected to be on "non-borrowing
reporting status" pursuant to Section 6, below) per month, payable in
arrears. Notwithstanding the foregoing, if Borrower maintains at least
$2,000,000.00 on deposit with Silicon at all times during any month in a
separate non-interest bearing account (the "Compensating Balances Account")
other than the Borrower's operating account, no Collateral Handling Fee
shall be due hereunder, for the prior month.
Unused Line Fee: In the event, in any calendar month (or portion
thereof at the beginning and end of the term hereof), the average daily
principal balance of the Loans outstanding during the month is less than
the amount of the Maximum Credit Limit, Borrower shall pay Silicon an
unused line fee in an amount equal to 0.25% per annum on the difference
between the amount of the Maximum Credit Limit and the average daily
principal balance of the Loans outstanding during the month, which unused
line fee shall be computed and paid monthly, in arrears, on the first day
of the following month. Notwithstanding the foregoing, if Borrower
maintains at least $2,000,000.00 on deposit with Silicon at all times in
the Compensating Balances Account, no Unused Line Fee shall be due
hereunder.
Cancellation Fee: If the Obligations are voluntarily or
involuntarily prepaid or if this Agreement is otherwise terminated prior to
June 10, 2004, the Borrower shall pay to Silicon a termination fee of
$100,000. If the Obligations are voluntarily or involuntarily prepaid or
if this Agreement is otherwise terminated after June 10, 2004 but prior to
the Maturity Date, Borrower shall pay to Silicon a termination fee of
$50,000. Notwithstanding the foregoing, no such termination fee shall be
charged if the credit facility hereunder is replaced or transferred to
another division of Silicon. The termination fee shall be due and payable
upon prepayment by the Borrower in the case of voluntary
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Silicon Valley Bank Schedule to Loan and Security Agreement
prepayments or upon demand by Silicon in the event of involuntary
prepayment, and if not paid immediately shall bear interest at a rate equal
to the highest rate applicable to any of the Obligations.
=======================================================================
4. Maturity Date
(Section 6.1): June 10, 2005
=======================================================================
5. Financial Covenants
(Section 5.1): Borrower shall comply with each of the following
covenant(s). Compliance shall be determined as of the end of each month,
except as otherwise specifically provided below:
a. Minimum EBITDA:
Borrower shall have EBITDA of no less than ($100,000) for the month
ending May 31, 2003.
b. Fixed Charge Coverage:
Borrower shall maintain, tested on a rolling three month basis, a
Minimum Fixed Charge Coverage of at least: (a) 1.00 to 1.00
from June 30, 2003 through August 31, 2003, and (b) 1.20 to 1.00 from
September 1, 2003 and thereafter.
c. Minimum Cash or Excess Availability:
Borrower shall at all times maintain $750,000 in (i) cash deposits
maintained at Silicon, and/or (ii) excess "availability" under this
Agreement (net of Loans, Letters of Credit or other indebtedness
under this Agreement), as determined by Silicon based upon the Credit
Limit restrictions set forth in Section 1 above).
Definitions. For purposes of the foregoing financial covenants, the
following term shall have the following meaning:
"EBITDA" means Borrower's consolidated earnings before
interest, taxes, depreciation and amortization in accordance with GAAP.
"Minimum Fixed Charge Coverage" means the ratio of (i) EBITDA
to (ii) payments of indebtedness (including interest payments to be made in
connection with this Agreement and any subordinated indebtedness), plus
interest expense, cash dividends, cash taxes, capital lease payments and
unfinanced capital expenditures for the period.
=======================================================================
6. Reporting.
(Section 5.3):
Borrower shall provide Silicon with the following:
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Silicon Valley Bank Schedule to Loan and Security Agreement
1. Weekly (monthly, if no amounts are outstanding under this
Agreement and Borrower has advised Silicon in writing that it has elected
to be on "non-borrowing reporting status"), and upon each loan request,
borrowing base certificates and transaction reports.
2. Monthly accounts payable agings, aged by invoice date, and
outstanding or held check registers, if any, within fifteen (15) days after
the end of each month.
3. Monthly Receivable agings, aged by invoice date, and receivable
reconciliations, within fifteen (15) days after the end of each month.
4. Monthly unaudited financial statements, as soon as available,
and in any event within thirty (30) days after the end of each month.
5. Monthly Compliance Certificates, within thirty (30) days after
the end of each month, in such form as Silicon shall reasonably specify,
signed by the Chief Financial Officer of Borrower, certifying that as of
the end of such month Borrower was in full compliance with all of the terms
and conditions of this Agreement, and setting forth calculations showing
compliance with the financial covenants set forth in this Agreement and
such other information as Silicon shall reasonably request, including,
without limitation, a statement that at the end of such month there were no
held checks.
6. Annual operating budgets (including income statements, balance
sheets and cash flow statements, by month) for the upcoming fiscal year of
Borrower within thirty (30) days prior to the end of each fiscal year of
Borrower.
7. Annual financial statements, as soon as available, and in any
event within ninety (90) days following the end of Borrower's fiscal year,
together with an unqualified opinion on the financial statements from an
independent certified public accounting firm reasonably acceptable to
Silicon.
8. Such additional reports and information as Silicon may
reasonably from time to time specify.
Borrower may elect to be on "non-borrowing reporting status" if
Borrower notifies Silicon in writing that it so elects and there are no
Loans or other Obligations outstanding hereunder. After Borrower has
notified Silicon of its intention to be on "non-borrower reporting status",
as further set forth in Section 4.3 of this Agreement, Borrower must
provide Silicon at least 30 days prior written notice of its intention to
borrow.
=======================================================================
7. Borrower Information:
Prior Names of
Borrower
(Section 3.2): See Perfection Certificates of even date herewith
4
Silicon Valley Bank Schedule to Loan and Security Agreement
Prior Trade
Names of Borrower
(Section 3.2): See Perfection Certificates of even date herewith
Existing Trade
Names of Borrower
(Section 3.2): See Perfection Certificates of even date herewith
Other Locations and
Addresses (Section 3.3): See Perfection Certificates of even date
herewith
Material Adverse
Litigation (Section 3.10): None
=======================================================================
8. Other Covenants
(Section 5.1): Borrower shall at all times comply with all of the
following additional covenants:
(1) Banking Relationship. In order for Silicon to properly monitor
its loan arrangement with the Borrower, Borrower shall at all times
maintain all of its domestic deposit accounts, operating accounts and
securities accounts with Silicon (or an affiliate of Silicon with respect
to securities accounts ).
(2) Subordination of Inside Debt. All present and future
indebtedness of the Borrower to its officers, directors and shareholders
shall be referred to as ("Inside Debt"). Borrower warrants and represents
that there is no Inside Debt presently outstanding. Prior to incurring any
Inside Debt in the future, Borrower shall cause the person to whom such
Inside Debt will be owed to execute and deliver to Silicon a subordination
agreement on Silicon's standard form.
(3) Subordination Agreements. Borrower warrants and represents
that it is not presently indebted to any third party for borrowed money.
Prior to incurring any future indebtedness, Borrower shall cause each
creditor to execute and deliver to Silicon a subordination agreement on
Silicon's standard form subordinating to the Obligations the indebtedness
of Borrower to any such creditor.
(4) Intellectual Property Security Agreement. As a condition
precedent to the effectiveness of this Agreement, Borrower shall have
executed and delivered to Silicon an Intellectual Property Security
Agreement (the "IP Security Agreement") on form reasonably satisfactory to
Silicon.
5
Silicon Valley Bank Schedule to Loan and Security Agreement
PARLEX CORPORATION
By: /s/ Xxxxx X. Xxxxxx
-----------------------
Name: Xxxxx X. Xxxxxx
Title: President
PARLEX DYNAFLEX CORPORATION
By: /s/ Xxxxx X. Xxxxxx
-----------------------
Name: Xxxxx X. Xxxxxx
Title: President
POLY-FLEX CIRCUITS, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------------
Name: Xxxxx X. Xxxxxx
Title: Treasurer
Silicon:
SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By: /s/ Xxxxx Xxxxxxxxx
-----------------------
Name: Xxxxx Xxxxxxxxx
Title: Vice President
6
