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EXHIBIT 10.1
BUSINESS LOAN AGREEMENT
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This Business Loan Agreement (this "Agreement") is entered into by and
between Comerica Bank-California ("Bank") and Sipex Corporation, a Massachusetts
corporation ("Borrower") as of this 1st day of June, 2000, at Bank's
headquarters office at 333 West Santa Clara Street, San Jose, California 95113:
1. LOANS TO BORROWER. Bank and Borrower agree that any loans which Bank in
its sole discretion has made or may now or hereafter make to Borrower (sometimes
hereinafter collectively referred to as the "Loan") shall be subject to the
terms and conditions of this Agreement unless otherwise agreed to in writing by
Bank and Borrower. In the event there are contradictions between the provisions
of this Agreement and any other written agreement with the Bank, this Agreement
shall prevail. Loan shall be subject to the terms and conditions of this
Agreement, promissory notes) executed in connection herewith and/or previously
or subsequently executed, and all amendments, renewals and extensions thereof
(singularly or collectively, the "Note"), and all those certain security
agreements and/or such other security or other documents as Bank has required or
may now or hereafter require in connection with the Loan (collectively, the
"Loan Documents").
2. LEGAL EFFECT. This Agreement supplements the terms and conditions of
the Loan Documents. Except as otherwise specified herein, all terms used in this
Agreement shall have the same meaning as given in the Note and/or Loan Documents
which are incorporated herein by this reference. Any and all terms used in this
Agreement, the Note and/or the Loan Documents shall be construed and defined in
accordance with the meaning and definition of such term under and pursuant to
the California Uniform Commercial Code, as amended. Except as specifically
modified hereby, all of the terms and conditions of the Note and/or the Loan
Documents shall remain in full force and effect.
3. INTEREST RATE; PAYMENT TERMS: LOAN FEES. The principal and interest on
the Loan shall be payable on the terms set forth in the Note and/or the Loan
Documents. If applicable, a loan fee in the sum of Twenty Five Thousand and
No/100 Dollars ($25 000.00) shall be paid concurrently with the execution of
this Agreement. In addition, Borrower shall pay such additional loan fees from
time to time in the future as agreed between Bank and Borrower.
4. SECURITY. As security for Borrower's obligations to Bank under this
Agreement, the Note and/or the Loan Documents and all other indebtedness and
liabilities whatsoever of Borrower to Bank, whether direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter arising,
evidenced by the Note and/or the Loan Documents (collectively, the
"Indebtedness"), Borrower hereby grants to Bank, prior to or simultaneously with
the borrowing hereunder, a continuing security interest of first priority in all
accounts receivable, inventory, and intangibles and all proceeds thereof, and in
all collateral provided to Bank pursuant to any security agreement and/or all
collateral that is delivered to Bank and/or which Bank possesses and all
proceeds thereof, (collectively, the "Collateral").
5. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower represents and
warrants to Bank that as of the date of acceptance of this Agreement, the Note
and/or the Loan Documents,
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as of the date of borrowing hereunder and at all times the Loan or any other
Indebtedness are outstanding hereunder:
(a) If Borrower is a corporation, Borrower is duly organized, validly
existing and in good standing under the laws of the state of its incorporation;
if a partnership, Borrower is duly organized and validly existing under the
partnership agreement and the applicable laws of the state in which the
partnership is formed or exists or if a limited liability company, Borrower is
duly organized and validly existing under the operating agreement and the
applicable laws of the state in which the limited liability company is formed;
(b) Borrower has the legal power and authority, to own its properties
and assets and to carry out its business as now being conducted; it is qualified
to do business in every jurisdiction wherein such qualification is necessary; it
has the legal power and authority to execute and perform this Agreement, the
Note and/or the Loan Documents to borrow money in accordance with its terms, to
execute and deliver this Agreement, the Note and the Loan Documents, and to do
any and all other things required of it hereunder; and this Agreement, the Note
and all the Loan Documents, when executed on behalf of Borrower by its duly
authorized officers, partners or members, as the case may be, shall be its valid
and binding obligations legally enforceable in accordance with their terms;
(c) The execution, delivery and performance of this Agreement, the
Note and/or the Loan Documents and the borrowings hereunder and thereunder (i)
have been duly authorized by all requisite corporate, partnership or company
action; (ii) do not require governmental approval; (iii) will not result (with
or without notice and/or the passage of time) in any conflict with or breach or
violation of or default under, any provision of law, the articles of
incorporation, articles of organization, operating agreement, bylaws or
partnership agreement of Borrower, any provision of any indenture, agreement or
other instrument to which Borrower is a party, or by which it or any of its
properties or assets are bound; and (iv) will not result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of Borrower;
(d) The balance sheet of Borrower as provided to Bank in connection
herewith and the related statement of income of Borrower provided to Bank for
the period ended December 31, 1999, fairly present the financial condition of
Borrower in accordance with generally accepted accounting principles ("GAAP")
consistently applied; and from the date thereof to the date hereof, there has
been no material adverse change in such condition or operations; and
(e) There is not pending nor, to the best of Borrower's knowledge,
threatened, any litigation, proceeding or governmental investigation which could
materially and adversely affect its business or its ability to perform its
obligations, pay the Indebtedness and/or comply with the covenants set forth
herein and/or in the Note and/or the other Loan Documents.
6. AFFIRMATIVE COVENANTS. Until the Indebtedness is paid in full, Borrower
covenants and agrees to do the following:
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(a) Furnish to Bank within thirty (30) days after the end of each
quarter, a copy of Borrower's "10-Q" report. Within ninety (90) days of the end
of each of Borrower's fiscal years, furnish to Bank statements of the financial
condition of Borrower for each such fiscal year, including but not limited to, a
balance sheet, profit and loss statement, statement of cash flow, and
projections for Borrower's next 12 month operating period. Said annual
statements shall be prepared by the Borrower's current certified public
accountant, an independent certified public accountant selected by Borrower and
acceptable to Bank on an audited basis, and shall include a Management Letter.
(b) In addition to the financial statements requested above, Borrower
agrees to provide Bank with the following schedules in a form acceptable to
Bank:
X Accounts Receivable Aging Reports on a monthly basis
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X Accounts Payable Aging Reports on a monthly basis
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Job Progress Reports on a basis; and
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Inventory Reports on a basis
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on a basis
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(c) Promptly inform Bank of the occurrence of any default or event of
default as defined in the Note and/or the Loan Documents (hereinafter referred
to as "Default") or of any event which could have a materially adverse effect
upon Borrower's business, properties, financial condition or ability to comply
with its obligations hereunder, including without limitation its ability to pay
the Indebtedness;
(d) Furnish such other information as Bank may reasonably request;
(e) Keep in full force and effect its own corporate, company or
partnership existence in good standing; continue to conduct and operate its
business substantially as presently conducted and operated and maintain and
protect all franchises and trade names and preserve all the remainder of its
property used or useful in the conduct of its business and keep the same in good
repair and condition;
(f) Comply with the financial covenants set forth in Addendum A,
attached hereto and made a part hereof;
(g) Maintain a standard and modern system of accounting in accordance
with GAAP consistently applied with ledger and account cards and/or computer
tapes and computer disks, computer printouts and computer records pertaining to
the Collateral which contain information as may from time to time be requested
by Bank, not modify or change its method of accounting without the written
consent of Bank first obtained, permit Bank and any of its employees, officers,
or agents, upon demand, during Borrower's usual business hours, or the usual
business hours of any third person having control thereof, to have access to and
examine all of Borrower's records relating to the Collateral, Borrower's
financial condition and the results
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of Borrower's operations and in connection therewith, permit Bank or any of its
agents, employees, or officer to copy and make extracts therefrom;
(h) Maintain Borrower's same place of business or chief executive
office or residence as indicated below, and not relocate said address without
giving Bank 30 days prior written notice;
(i) Maintain insurance with such insurers in such amounts and of a
type satisfactory to Bank, with Bank to be designated as the payee of any such
insurance policies under a payee/secured lender clause acceptable to Bank; and
(j) Keep all of its principal bank accounts with Bank and shall notify
the Bank immediately in writing of the existence of any other bank account,
deposit account, or any other account into which money can be deposited. Bank
acknowledges that funds in the amount of $36,750,000 may be held at and pledged
to Union Bank of Switzerland.
(k) On a continuing basis from the date of this Agreement until the
Indebtedness is paid in full and the Borrower has performed all of its other
obligations hereunder, the Borrower represents and agrees that:
(1) There are not and will not be Hazardous Materials (as later
defined) on, in or under any real or personal property ("Property") now or at
anytime owned, occupied or operated by the Borrower which in any manner violate
any Environmental Law (as later defined).
(2) The Borrower shall promptly conduct all investigations,
testing and other actions necessary to clean up and remove all Hazardous
Materials on or affecting the Property in accordance with every Environmental
Law.
(3) The Borrower shall defend, indemnify and hold harmless the
Bank, its employees, agents, officers, shareholders and directors from and
against any and all claims, damages, fines, expenses, liabilities or causes of
action of whatever kind, including without limit consultant fees, legal expenses
and reasonable attorneys' fees, suffered by any of them as a direct or indirect
result of any actual or asserted violation of any Environmental Law.
(4) Upon ten days notice to the Borrower (except in an
emergency), the Bank may (but is not obligated to) enter on the Property or take
such other actions as it deems appropriate to inspect, test for, clean up,
remove or minimize the impact of any Hazardous Materials upon the Bank's receipt
of any notice from any source asserting the existence of any Hazardous Materials
in violation of any Environmental Law. All costs and expenses so incurred by the
Bank, including without limit consultant fees, legal expenses and reasonable
attorneys' fees, shall be payable by the Borrower upon demand.
(5) The provisions of this section shall survive the repayment of
the Indebtedness, the satisfaction of all other obligations of Borrower to the
Bank, the discharge or termination by the Bank of any lien or security interest
from Borrower, and the foreclosure of or exercise of rights as to any collateral
given to the Bank.
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(6) "Hazardous Materials" mean all of the following: any
asbestos, petroleum, petroleum byproducts, flammable explosives, or radioactive
materials or any hazardous or toxic materials as defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. Sections 9601 et seq.) or in any other Environmental Law.
(7) "Environmental Law" means any federal, state, local or other
law, ordinance, statute, directive, rule, order or regulation on object of which
is to regulate or improve health, safety or the environment.
7. NEGATIVE COVENANTS. Borrower shall not, without Bank's prior written
consent, do any of the following:
(a) Grant a security interest in or permit a lien, claim or
encumbrance upon any of the Collateral to any person, association, firm,
corporation, entity, governmental agency or instrumentality;
(b) Permit any levy, attachment or restraint to be made affecting any
of Borrower's assets;
(c) Permit any judicial officer or assignee to be appointed or to take
possession of any or all of Borrower's assets;
(d) Other than sales of inventory in the ordinary course of Borrower's
business, to sell, lease or otherwise dispose of, move, or transfer, whether by
sale or otherwise, any of Borrower's assets exceeding One Million Five Hundred
Thousand Dollars ($1,500,000);
(e) Change its name, business structure, corporate identity or
structure; add any new fictitious name, liquidate, merge or consolidate with or
into any other business organization where Borrower is not the surviving entity;
(f) Move or relocate any collateral except in the ordinary course of
Borrower's business;
(g) Acquire any other business organization. Such consent will not be
unreasonably withheld by Bank;
(h) Enter into any transaction not in the usual course of Borrower's
business;
(i) Make any investment in securities greater than Five Million
Dollars ($5,000,000) of any person, association, firm, entity or corporation
other than securities of the United States of America;
(j) Make any change in Borrower's financial structure or in any of its
business objects, purposes or operations which would adversely affect the
ability of Borrower to pay its obligations;
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(k) Incur any debt outside the ordinary course of Borrower's business
in excess of $5,000,000 on an aggregate basis;
(l) Make any advance or loan greater than One Million Five Hundred
Thousand Dollars ($1,500,000) on an aggregate basis except in the ordinary
course of Borrower's business;
(m) Make loans, advances or extensions of credit to any person greater
than $1,500,000.00 on an aggregate basis, except for sales on open account and
otherwise in the ordinary course of business;
(n) Guaranty or otherwise, directly or indirectly, in any way be or
become responsible for obligations of any other person other than subsidiaries
of Borrower, whether by agreement to purchase the indebtedness of any other
person, agreement for the furnishing of funds to any other person through the
furnishing of goods, supplies or services, by way of stock purchase, capital
contribution, advance or loan, for the purpose of paying and discharging (or
causing the payment or discharge of) the indebtedness of any other person, or
otherwise, except for the endorsement of negotiable instruments by Borrower in
the ordinary course of business for deposit or collection;
(o) Allow any fact, condition or event to occur or exist with respect
to any employee, pension or profit sharing plan established or maintained by it
which might constitute grounds for termination of any such plan or for the court
appointment of a trustee to administer any such plan;
8. DEFAULT. The terms "Default" or "Event of Default", as used herein,
shall have the meaning given in the Note and/or the Loan Documents. In addition,
the parties agree that any one or more of the following events shall constitute
a default by Borrower under this Agreement, the Note and/or the Loan Documents:
(a) If Borrower fails or neglects to perform, keep or observe any
term, provision, condition, covenant, agreement, warranty or representation
contained in this Agreement, the Note, the Loan Documents or any other present
or future agreement between Borrower and Bank;
(b) If any material representation, statement, report or certificate
made or delivered by Borrower, or any of its officers, employees or agents to
Bank is not true and correct;
(c) If Borrower fails to pay when due and payable or declared due and
payable, all or any portion of the Indebtedness (whether or principal, interest,
taxes, reimbursement of Bank expenses, or otherwise);
(d) If there is a material impairment of the prospect of repayment of
all or any portion of Borrower's obligations, including without limitation the
Indebtedness or a material impairment of the value or priority of Bank's
security interest in the collateral;
(e) If all or any of Borrower's assets are affected, become subject to
a writ or distress warrant, or are levied upon, or come into the possession of
any judicial officer or
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assignee and the same are not released, discharged or bonded against within ten
(10) days thereafter;
(f) If any insolvency proceeding is filed or commenced by or against
Borrower without being dismissed within ten (10) days thereafter;
(g) If any bankruptcy or other proceeding is filed or commenced by or
against Borrower for its reorganization, dissolution or liquidation without
being dismissed within ten (10) days of its commencement;
(h) If Borrower is enjoined, restrained or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
(i) If a notice of lien, levy or assessment is filed of record with
respect to any or all of Borrower's assets by the United States Government, or
any department, agency or instrumentality thereof, or by any state, county,
municipal or other government agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a lien, whether inchoate
or otherwise, upon any or all of the Borrower's assets and the same is not paid
on the payment date thereof;
(j) If a judgment or other claim becomes a lien or encumbrance upon
any or all of Borrower's assets and the same is not satisfied, dismissed or
bonded against within ten (10) days thereafter;
(k) If Borrower's records are prepared and kept by an outside computer
service bureau at the time this Agreement, the Note and/or the Loan Documents
are entered into or during the term of this Agreement, the Note and/or the Loan
Documents, such an agreement with an outside service bureau is entered into, and
at any time thereafter, without first obtaining the written consent of Bank,
Borrower terminates, modifies, amends or changes its contractual relationship
with said computer service bureau or said computer service bureau fails to
provide Bank with any requested information or financial data pertaining to
Bank's Collateral, Borrower's financial condition or the results of Borrower's
operations;
(l) If Borrower permits a default in any material agreement to which
Borrower is a party with third parties so as to result in an acceleration of the
maturity of Borrower's indebtedness to others, whether under any indenture,
agreement or otherwise;
(m) If Borrower makes any payment on account of indebtedness which has
been subordinated to Borrower's obligations to Bank, including without
limitation the Indebtedness;
(n) If any material misrepresentation exists now or thereafter in any
warranty or representation made to Bank by any officer or director of Borrower,
or if any such warranty or representation is withdrawn by any officer or
director;
(o) If any party subordinating its claims to that of Bank's or any
guarantor of Borrower's obligations terminates its subordination or guaranty,
becomes insolvent or an insolvency proceeding is commenced by or against any
such subordinating party or guarantor;
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(p) If Borrower is an individual and Borrower dies;
(q) If any reportable event, which the Bank determines constitutes
grounds for the termination of any deferred compensation plan by the Pension
Benefit Guaranty Corporation or for the appointment by the appropriate United
States District Court of a trustee to administer any such plan, shall have
occurred and be continuing thirty (30) days after written notice of such
determination shall have been given to Borrower by Bank, or any such Plan shall
be terminated within the meaning of Title IV of the Employment Retirement Income
Security Act ("ERISA"), or a trustee shall be appointed by the appropriate
United States District Court to administer any such plan, or the Pension Benefit
Guaranty Corporation shall institute proceedings to terminate any plan and in
case of any event described in this Section 8, the aggregate amount of the
Borrower's liability to the Pension Benefit Guaranty Corporation under Sections
4062, 4063 or 4064 of ERISA shall exceed five percent (5%) of Borrower's
Tangible Effective Net Worth.
Bank shall not be obligated to make advances to Borrower during any cure
period provided for in Sections 8(e), 8(f), 8(j), and 8(q) above.
9. RIGHTS AND REMEDIES. The parties have agreed as follows with respect
to Bank's rights and remedies upon Default:
(a) Bank shall have all rights and remedies available hereunder and
under the Note and the Loan Documents and under applicable law;
(b) Bank may at its option without notice, accelerate the Indebtedness
and declare all Indebtedness to be due, owing and payable in full;
(c) Bank may at its option without notice, cease advancing money or
extending credit to or for the benefit of Borrower under this Agreement or any
other agreement between Borrower and Bank.
(d) No Default (as defined in this Agreement, the Note and/or the Loan
Documents) shall be waived by Bank except in writing and a waiver of any Default
shall not be a waiver of any other default or of the same default on a future
occasion;
(e) No single or partial exercise of any right, power or privilege
hereunder, or any delay in the exercise hereof, shall preclude other or further
exercise of the rights of the parties under this Agreement, the Note and/or the
Loan Documents; and
(f) No forbearance on the part of Bank in enforcing any of its rights
under this Agreement, the Note and/or the Loan Documents nor any renewal,
extension or rearrangement of any payment or covenant to be made or performed by
Borrower hereunder shall constitute a waiver of any of the terms of this
Agreement, the Note, and/or the Loan Documents, or of any such right.
10. CROSS-DEFAULT. A Default under this Agreement shall also be a Default
under the Note and the Loan Documents, and vice versa. A Default under this
Agreement, the Note and/or the Loan Documents shall also be a Default under
every other note and other agreement between Bank and Borrower, and vice versa.
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11. CROSS-COLLATERAL. Any Collateral for this Agreement, the Note and/or
the Loan Documents shall also be Collateral for any other obligations owing by
Borrower to Bank. Notwithstanding the above, (i) to the extent that any portion
of the Indebtedness is a consumer loan, that portion shall not be secured by any
deed of trust or mortgage on or other security interest in any of the
undersigned's principal dwelling or in any of the undersigned's real property
which is not a purchase money security interest as to that portion, unless
expressly provided to the contrary in another place, or (ii) if the undersigned
(or any of them) has (have) given or give(s) Bank a deed of trust or mortgage
covering real property, that deed of trust or mortgage shall not secure this
Note or any other indebtedness of the undersigned (or any of them), unless
expressly provided to the contrary in another place.
12. SURVIVAL OF COVENANTS. AGREEMENTS. REPRESENTATIONS AND WARRANTIES. All
covenants, agreements, representations and warranties (a) previously made
(except as specifically subsequently modified); (b) made in connection herewith
or with the Note and/or the Loan Documents and/or any document contemplated
hereby; or (c) executed hereafter (unless such document expressly states that
this Agreement does not apply thereto) shall survive the borrowing hereunder and
thereunder and the repayment in full of the Note and/or the Loan Documents and
any amendments, renewals or extensions thereof and shall be deemed to have been
relied upon by Bank. All statements contained in any certificate or other
document delivered to Bank at any time by or on behalf of Borrower shall
constitute representations and warranties by Borrower.
13. MISCELLANEOUS. The parties agree to the following miscellaneous terms:
(a) This Agreement, the Note and the Loan Documents shall be governed
by California law, without regard for the effect of conflict of laws;
(b) Borrower agrees that it will pay all out of pocket costs of Bank
and expenses (including, without limitation, Bank's attorneys' fees and costs
and/or fees, transfer charges and costs of Bank's in-house counsel) in
connection with the preparation of this Agreement, the Note and/or the Loan
Documents and/or the documents contemplated hereby and the closing of the Loan
which are not covered by the loan fee;
(c) This Agreement, the Note and/or the Loan Documents shall inure to
the benefit of and shall be binding upon the parties hereto and their respective
successors and assigns; provided, however, that Borrower shall not assign or
transfer its right or obligations under this Agreement, the Note and/or the Loan
Documents without the prior written consent of Bank;
(d) Borrower acknowledges that Bank may provide information regarding
Borrower and the Loan to Bank's parent, subsidiaries and affiliates and service
providers, and
(e) This Agreement is an integrated agreement and supersedes all prior
negotiations and agreements regarding the subject matter hereof. Any amendments
hereto shall be in writing and be signed by all parties hereto.
14. JURY WAIVER. THE BORROWER AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO
TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT
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MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO
CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR
MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION
REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS
AGREEMENT OR THE INDEBTEDNESS.
IN WITNESS WHEREOF, the parties have executed this Business Loan Agreement
as of the date first set forth above.
Address of Borrower: Borrower:
233 South Hillview Drive Sipex Corporation
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Milpitas, CA 95035 By: /s/ Frank R. DiPietro
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Title: EXE Vice President
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By:
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Title:
--------------------------
Comerica Bank-California
("Bank")
By:
-----------------------------
Title:
--------------------------
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ADDENDUM A TO BUSINESS LOAN AGREEMENT
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(FINANCIAL COVENANTS)
1. DEFINITIONS RELATING TO FINANCIAL COVENANTS.
CASH FLOW as used in this Agreement means for any applicable period of
determination, the net income (as later defined) (after deduction for income
taxes and other taxes of Borrower or its subsidiaries, determined by reference
to income or profits of Borrower or its subsidiaries) for such period, plus, to
the extent deducted in computation of such net income, the amount of
depreciation and amortization expense and the amount of deferred tax liability
during such period, all as determined in accordance with GAAP. For Borrower and
its subsidiaries, the applicable period of determination will be N/A , beginning
with the period from N/A to ___________.
CASH FLOW COVERAGE RATIO means the ratio, as of any applicable period
of determination, the numerator of which is net income plus depreciation plus
amortization plus (or minus) the increase (or decrease) in the deferred tax
liability minus dividends and S-Draws, if an S-Corp, at the greater of actual
draws or net income times the highest prevailing personal tax rate, and the
denominator of which is the current portion of long term debt plus the current
portion of capital lease payments for the same period of determination.
CURRENT ASSETS as used in this Agreement means, as of any applicable
date of determination, all unrestricted cash, CD's or marketable securities,
non-affiliated accounts receivable, United States Government securities and/or
claims against the United States Government, and inventories (held for sale in
the ordinary course of business) of Borrower and its subsidiaries.
CURRENT LIABILITIES as used in this Agreement means, as of any
applicable date of determination, (i) all liabilities of Borrower or its
subsidiaries that should be classified as current in accordance with GAAP,
including, without limitation, any portion of the principal of the Indebtedness
under this Agreement, the Note and/or the Loan Documents classified as current,
plus (ii) to the extent not otherwise included, all liabilities of Borrower to
any of its affiliates (including officers, directors, shareholders, subsidiaries
and commonly held companies), whether or not classified as current in accordance
with GAAP unless same shall be the long term portion of Subordinated Debt (as
defined below).
CURRENT RATIO as used in this Agreement means, as of an applicable
date of determination, Current Assets divided by Current Liabilities.
DEBT shall mean, as of any applicable date of determination, all items
of indebtedness, obligation or liability of a person, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities in
accordance with GAAP excepting such liabilities as shall be Subordinated Debt
(as defined below).
FIXED CHARGES as used in this Agreement means, as of any applicable
period of determination, with respect to Borrower and its subsidiaries, the sum,
without duplication, of (a)
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all interest paid or payable during such period by Borrower or its subsidiaries
on debt of such person; plus (b) all payments of principal or other sums paid or
payable during such period by such person with respect to Debt having a final
maturity more than one year from the date of creation of such Debt; plus (c) all
debt discount and expense amortized or required to be amortized during such
period by such person; plus (d) the maximum amount of all rents and other
payments paid or required to be paid by such person during such period under any
lease or other contract or arrangement providing for use of real or personal
property in respect of which such person is obligated as a lessee, user or
obligor; plus (e) all dividends and other distributions paid or payable by
Borrower (including S-Draws, if applicable, as per the Cash Flow Coverage Ratio
above) or its subsidiaries or otherwise accumulating during such period on any
capital stock of Borrower or its subsidiaries; plus (f) all loans or other
advances made by Borrower or its subsidiaries during such period to any
affiliate of such person. The applicable period of determination will be N/A ,
beginning with the period from N/A to __________.
NET INCOME shall mean the net income (or loss) of a person for any
period determined in accordance with GAAP but, however, excluding:
(a) any gains or losses on the sale or other disposition, not in the
ordinary course of business, of investments or fixed or capital assets, and any
taxes on the excluded gains and any tax deductions or credits on account on any
excluded losses; and
(b) in the case of the Borrower, net earnings of any person in which
Borrower has an ownership interest, unless such net earnings shall have actually
been received by Borrower in the form of cash distributions.
QUICK ASSETS as used in this Agreement means, as of any applicable
date of determination, unrestricted cash, CD's or marketable securities and net
accounts receivable arising from the sale of goods and services, and United
States Government securities and/or claims against the United States Government
of Borrower and its subsidiaries.
QUICK RATIO as used in this Agreement means, as of an applicable date
of determination, Quick Assets divided by Current Liabilities, excluding
subordinated debt.
TANGIBLE EFFECTIVE NET WORTH as used in this Agreement means Tangible
Net Worth as of any applicable date of determination, increased by the long term
portion of Subordinated Debt (as defined below), if any, of Borrower or its
subsidiaries and decreased by the following: Subscription lists, organization
expenses, trade accounts receivable converted to notes, and money due to
Borrower or its subsidiaries from affiliates (including officers, directors,
subsidiaries and commonly held companies).
TANGIBLE NET WORTH as used in this Agreement means, as of any
applicable date of determination, the excess of:
(a) the net book value of all assets of Borrower and its subsidiaries
(other than patents, patent rights, trademarks, trade names, franchises,
copyrights, licenses, goodwill, and similar intangible assets) after all
appropriate deductions in accordance with GAAP (including, without limitation,
reserves for doubtful receivables, obsolescence, depreciation and amortization),
minus
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<PAGE> 13
(b) all Total Liabilities of Borrower and its subsidiaries.
TOTAL LIABILITIES as used in this Agreement means, as of any
applicable date, the total of all items of indebtedness, obligation or liability
which, in accordance with GAAP consistently applied, would be included in
determining the total liabilities of Borrower or its subsidiaries, including,
without limitation, (a) all obligations secured by any mortgage, pledge,
security interest or other lien on property owned or acquired, whether or not
the obligations secured thereby shall have been assumed; (b) all obligations
which are capitalized lease obligations; and (c) all guaranties, endorsements or
other contingent or surety obligations with respect to the indebtedness of
others, whether or not reflected on the balance sheets of Borrower or its
subsidiaries, including, without limitation, any obligation to furnish funds,
directly or indirectly through the purchase of goods, supplies, services, or by
way of stock purchase, capital contribution, advance or loan or any obligation
to enter into a contract for any of the foregoing.
TOTAL LIABILITIES TO TANGIBLE EFFECTIVE NET WORTH RATIO means, as of
any applicable date, Total Liabilities divided by Tangible Effective Net Worth.
SUBORDINATED DEBT as used in this Agreement means indebtedness of
Borrower to third parties which has been subordinated to all Indebtedness owing
by Borrower to Bank pursuant to a subordination agreement in form and content
satisfactory to Bank.
WORKING CAPITAL as used in this Agreement means, as of any applicable
date of determination, Current Assets less Current Liabilities.
2. FINANCIAL COVENANTS. Borrower shall maintain the following financial
ratios and covenants on a consolidated and non-consolidated basis, which shall
be monitored on a Quarterly basis, except as noted below.
(a) Working Capital: Intentionally Omitted ________________;
(b) Tangible Effective Net Worth in an amount not less than
$104,000.00 increasing to $113,000.00 at December 31, 2000 and then increasing
to $129,000.00 at December 31, 2001;
(c) A ratio of Current Assets to Current Liabilities of not less than
Intentionally Omitted; (d) A ratio of Quick Assets to Current
Liabilities:1.30;1.00 ______________;
(e) A ratio of Total Liabilities (less Subordinated Debt as defined
herein) to Tangible Effective Net Worth: Intentionally Omitted ______________;
(f) A Cash Flow Coverage Ratio: Intentionally Omitted _____________;
(g) Net income after taxes or S-Draws as per Cash Flow Coverage
Ratio: Intentionally Omitted ___________________________________________;
(h) Profitability: Intentionally Omitted _________________;
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<PAGE> 14
(i) Fixed Charge Ratio: INTENTIONALLY OMITTED _________________;
(j) MAINTAIN A LEVEL OF ADVANCES WHICH WOULD NOT EXCEED AN AGGREGATE
IN EXCESS OF EIGHTY PERCENT (80%) OF BORROWER'S ACCOUNTS RECEIVABLE, AS SUCH
ADVANCES ARE EVIDENCED BY THAT CERTAIN MASTER REVOLVING NOTE DATED OF EVEN DATE
HEREWITH.
All financial covenants shall be computed in accordance with GAAP
consistently applied except as otherwise specifically set forth in this
Agreement. All monies due from affiliates (including officers, directors and
shareholders) shall be excluded from Borrower's assets for all purposes
hereunder.
-14-
<PAGE> 15
MASTER REVOLVING NOTE
Variable Rate-Maturity Date-Obligatory Advances
(Business and Commercial Loans Only)
<TABLE>
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AMOUNT NOTE DATE MATURITY DATE TAX IDENTIFICATION #
$10,000,000.00 June 01, 2000 June 01, 2002 04-6135748
--------------------------------------------------------------------------------------------------------------
</TABLE>
On the Maturity Date, as stated above, for value received, the undersigned
promise(s) to pay to the order of Comerica Bank -- California ("Bank"), at any
office of the Bank in the State of California, ________________________________
Dollars (U.S.) (or that portion o t advance by the Bank and not repaid as later
provided) with interest until maturity, whether by acceleration or otherwise, or
an Event of Default, as later defined, at a per annum rate equal to the Bank's
base rate from time to time in effect minus 0.500% per annum and after that at
a rate equal to the rate of interest otherwise prevailing under this Note plus
3% per annum (but in no event in excess of the maximum rate permitted by law).
The Bank's "base rate" is that annual rate of interest so designated by the Bank
and which is changed by the Bank from time to time. Interest rate changes will
be effective for Interest computation purposes as and when the Bank's base rate
changes. Interest shall be calculated on the basis of a 360-day year for the
actual number of days the principal Is outstanding. Accrued Interest on this
Note shall be payable on the 1st day of each month commencing July 01, 2000 ,
until the Maturity Date when all amounts outstanding under this note shall be
due an payable in full. If the frequency of interest payments is not otherwise
specified, accrued interest on this Note shall be payable monthly on the first
day of each month. If any payment of principal or interest under this Note shall
be payable on a day other than a day on which the Bank is open for business,
this payment shall be extended to the next succeeding business day and interest
shall be payable at the rate specified in this Note during this extension. A
late payment charge equal to 5% of each late payment may be charged on any
payment not received by the Bank within 10 calendar days after the payment due
date, but acceptance of payment of this charge shall not waive any Default under
this Note.
The principal amount payable under this Note shall be the sum of all advances
made by the Bank to or at the request of the undersigned, less principal
payments actually received in cash by the Bank. The books and records of the
Bank shall be the best evidence of the principal amount and the unpaid interest
amount owing at any time under this Note and shall be conclusive absent manifest
error. No interest shall accrue under this Note until the date of the first
advance made by the Bank; after that Interest on all advances shall accrue and
be computed on the principal balance outstanding from time to time under this
Note until the same is paid in full.
This Note and any other indebtedness and liabilities of any kind of the
undersigned (or any of them) to the Bank, and any and all modifications,
renewals or extensions of it, whether joint or several, contingent or absolute,
now existing or later arising, and however evidenced (collectively
"Indebtedness" are secured by and the Bank is granted a security interest in all
items deposited in any account of any of the undersigned with the Bank and by
all proceeds of these items (cash or otherwise), all account balances of any of
the undersigned from time to time with the Bank, by all property of any of the
undersigned from time to time in the possession of the Bank and by any other
collateral, rights and properties described in each and every deed of trust,
mortgage, security agreement, pledge, assignment and other security or
collateral agreement which has been, or will at any time(s) later be, executed
by any (or all) of the
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<PAGE> 16
undersigned to or for the benefit of the Bank (collectively "Collateral").
Notwithstanding the above, (i) to the extent that any portion of the
Indebtedness is a consumer loan, that portion shall not be secured by any deed
of trust or mortgage on or other security interest in any of the undersigned's
principal dwelling or any of the undersigned's real property which is not a
purchase money security interest as to that portion, unless expressly provided
to the contrary in another place, or (iii) if the undersigned (or any of them)
has (have) given or give(s) Bank a deed of trust or mortgage covering real
property, that deed of trust or mortgage shall not secure this Note or any other
indebtedness of the undersigned (or any of them), unless expressly provided to
the contrary in another place.
If the undersigned (or any of them) or any guarantor under a guaranty of all or
part of the Indebtedness ("guarantor") (i) fall(s) to pay any of the
indebtedness when due, by maturity, acceleration or otherwise, or fall(s) to pay
any indebtedness owing on a demand basis upon demand; or (ii) fails(s) to comply
with any of the terms or provisions of any agreement between the undersigned (or
any of them) or any such guarantor and the Bank; or (iii) become(s) insolvent or
the subject of a voluntary or involuntary proceeding In bankruptcy, or a
reorganization, arrangement or creditor composition proceeding, (if a business
entity) cease(s) doing business as a going concern, (if a natural person) die(s)
or become(s) incompetent, (if a partnership) dissolve(s) or any general partner
of it dies, becomes incompetent or becomes the subject of a bankruptcy
proceeding or (if a corporation of a limited liability company) is the subject
of a dissolution, merger or consolidation; or (a) if any warranty or
representation made by any of the undersigned or any guarantor In connection
with this Note or any of the Indebtedness shall be discovered to be untrue or
Incomplete; or (b) if there is any termination, notice of termination, or breach
of any guaranty, pledge, collateral assignment or subordination agreement
relating to all or any part of the indebtedness; or (c) if there is any failure
by any of the undersigned or any guarantor to pay when due any of its
indebtedness (other than to the Bank) or in the observance or performance of any
term, covenant or condition in any document evidencing, securing or relating to
such indebtedness; or (d) if the Bank deems itself insecure believing that the
prospect of payment of this Note or any of the indebtedness is impaired or shall
fear deterioration, removal or waste of any of the Collateral; or (e) if there
is filed or issued a levy or writ of attachment or garnishment or other like
judicial process upon the undersigned (or any of them) or any guarantor or any
of the Collateral, including without limit, any accounts of the undersigned (or
any of them) or any guarantor with the Bank, then the Bank, upon the occurrence
of any of these events (each a "Default", may at its option and without prior
notice to the undersigned (or any of them), declare any or all of the
indebtedness to be immediately due and payable (notwithstanding any provisions
contained in the evidence of it to the contrary), cease advancing money or
extending credit to or for the benefit of the undersigned under this Note or any
other agreement between the undersigned and Bank, terminate this Note as to any
future liability or obligation of Bank, but without affecting Bank's rights and
security interests in any Collateral and the Indebtedness of the undersigned to
Bank, sell or liquidate all or any portion of the Collateral, set off against
the indebtedness any amounts owing by the Bank to the undersigned (or any of
them), charge interest at the default rate provided In the document evidencing
the relevant Indebtedness and exercise any one or more of the rights and
remedies granted to the Bank by any agreement with the undersigned (or any of
them) or given to it under applicable law. In addition, if this Note is secured
by a deed of trust or mortgage covering real property, then the trustor or
mortgagor shall not mortgage or pledge the mortgaged premises as security for
any other Indebtedness or obligations. This Note, together with all other
-16-
<PAGE> 17
indebtedness secured by said deed of trust or mortgage, shall become due and
payable immediately, without notice, at the option of the Bank, (a) if said
trustor or mortgagor shall mortgage or pledge the mortgaged premises for any
other indebtedness or obligations or shall convey, assign or transfer the
mortgaged premises by deed, installment sale contract instrument, or (b) if the
title to the mortgaged premises shall become vested in any other person or party
In any manner whatsoever, or (c) if there is any disposition (through one or
more transactions) of legal or beneficial title to a controlling Interest of
said trustor or mortgagor. All payments under this Note shall be in Immediately
available United States funds, without setoff or counterclaim.
If this Note is signed by two or more parties (whether by all as makers or by
one or more as an accommodation party or otherwise), the obligations and
undertakings under this Note shall be that of all and any two or more jointly
and also of each severally. This Note shall bind the undersigned, and the
undersigned's respective heirs, personal representatives, successors and
assigns.
The undersigned waive(s) presentment, demand, protest, notice of dishonor,
notice of demand or intent to demand, notice of acceleration, or intent to
accelerate, and all other notices and agree(s) that no extension or Indulgence
to the undersigned (or any of them) or release, substitution or nonenforcement
of any security, or release or substitution of any of the undersigned, any
guarantor or any other party, whether with or without notice, shall affect the
obligations of any of the undersigned. The undersigned waive(s) all defenses or
right to discharge available under Section 3-605 of the California Uniform
Commercial Code and waive(s) all other suretyship defenses or right to
discharge. The undersigned agree(s) that the Bank has the right to sell; assign,
or grant participations, or any interest, in any or all of the Indebtedness, and
that, in connection with this right, but without limiting its ability to make
other disclosures to the full extent allowable, the Bank may disclose all
documents and information which the Bank now or later has relating to the
undersigned or the indebtedness. The undersigned agree(s) that the Bank may
provide information relating to the Note or to the undersigned to the Bank's
parent, affiliates, subsidiaries and service providers.
The undersigned agree(s) to reimburse the holder or owner of this Note for any
and all costs and expenses (including without limit, court costs, legal expenses
and reasonable attorney fees, whether inside or outside counsel is used, whether
or not suit is instituted and, if suit is Instituted, whether at the trial court
level, appellate level, in a bankruptcy, probate or administrative proceeding or
otherwise) incurred in collecting or attempting to collect this Note or incurred
in any other matter or proceeding relating to this Note.
The undersigned acknowledge(s) and agree(s) that there are no contrary
agreements, oral or written, establishing a term of this Note and agree(s) that
the terms and conditions of this Note may not be amended, waived or modified
except in a writing signed by an officer of the Bank expressly stating that the
writing constitutes an amendment, waiver or modification of the terms of this
Note. As used in this Note, the word "undersigned" means, Individually and
collectively, each maker, accommodation party, indorser and other party signing
this Note in a similar capacity. If any provision of this Note is unenforceable
to whole or part for any reason, the remaining provisions shall continue to be
effective. THIS NOTE IS MADE IN THE STATE OF CALIFORNIA AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE
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<PAGE> 18
WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES.
The maximum interest rate shall not exceed the highest applicable usury ceiling.
THE UNDERSIGNED AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED, EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY
AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY
IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANYWAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS.
This Note is subject to the Terms and Conditions of that certain Business Loan
Agreement dated of even date herewith.
INITIAL HERE /s/ FD
---------
Sipex Corporation
By: /s/ Frank DiPietro its: EXE VP
-----------------------------------------------------------------
SIGNATURE OF TITLE
By: its:
-----------------------------------------------------------------
SIGNATURE OF TITLE
By: its:
-----------------------------------------------------------------
SIGNATURE OF TITLE
By: its:
-----------------------------------------------------------------
SIGNATURE OF TITLE
<TABLE>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
STREET ADDRESS CITY STATE (COUNTRY) ZIP CODE
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------ -------------------------------------------------------------
For Bank Use Only CCAR #
------------------------------------------------------------ -------------------------------------------------------------
<S> <C> <C> <C> <C>
------------------------------- ---------------------------- -------------------------------------------------------------
Loan Officer Initials Loan Group Name Obligor(s) Name
PK San Francisco Metro Sipex Corporation
------------------------------- ---------------------------- -------------------------------------------------------------
------------------------------- ---------------------------- ------------------ ------------------- ----------------------
Loan Officer I.D. No. Loan Group No. Obligor # Note # Amount
48351 95742 $10,000,000.00
------------------------------- ---------------------------- ------------------ ------------------- ----------------------
</TABLE>
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<PAGE> 19
LIBOR/COST OF FUNDS
ADDENDUM TO MASTER REVOLVING NOTE
This Addendum to Master Revolving Note (this "Addendum").is entered into as
of this 1st day of June, 2000, by and between Comerica Bank-California ("Bank")
and Sipex Corporation ("Borrower"). This Addendum supplements the terms of the
Master Revolving Note of even date herewith.
1. DEFINITIONS.
a. ADVANCE. As used herein, "ADVANCE" means a borrowing requested by
Borrower and made by Bank under the Note, including a LIBOR Option Advance
and/or a Base Rate Option Advance.
b. BUSINESS DAY. As used herein, "BUSINESS DAY" means any day except a
Saturday, Sunday or any other day designated as a holiday under Federal or
California statute or regulation.
c. LIBOR. As used herein, "LIBOR" means the rate per annum (rounded upward
if necessary, to the nearest whole 1/8 of 1%) and determined pursuant to the
following formula:
LIBOR = Base LIBOR
-------------------------------
100% - LIBOR Reserve Percentage
(1) "Base LIBOR" means the rate per annum determined by Bank at which
deposits for the relevant LIBOR Period would be offered to Bank
in the approximate amount of the relevant LIBOR Option Advance in
the inter-bank LIBOR market selected by Bank, upon request of
Bank at 10:00 a.m. California time, on the day that is the first
day of such LIBOR Period.
(2) "LIBOR Reserve Percentage" means the reserve percentage
prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for "Eurocurrency Liabilities" (as
defined in Regulation D of the Federal Reserve Board, as
amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable LIBOR Period.
d. LIBOR BUSINESS DAY. As used herein, "LIBOR business day" means a
Business day on which dealings in Dollar deposits may be carried out in the
interbank LIBOR market.
e. LIBOR period. As used herein, "LIBOR Period" means, with respect to a
LIBOR Option Advance:
(1) initially, the period commencing on, as the case may be, the date
the Advance is made or the date on which the Advance is converted
to a LIBOR Option Advance, and continuing for, in every case, a
period of from sixty to three hundred sixty five days thereafter
so long as the LIBOR Option is quoted for such period in the
applicable interbank LIBOR market, as such period is selected by
Borrower in the notice of
-19-
<PAGE> 20
Advance as provided in the Note or in the notice of conversion as
provided in this Addendum; and
(2) thereafter, each period commencing on the last day of the next
preceding LIBOR Period applicable to such LIBOR Option Advance
and continuing for, in every case, a period of from sixty to
three hundred sixty five days thereafter so long as the LIBOR
Option is quoted for such period in the applicable interbank
LIBOR market, as such period is selected by Borrower in the
notice of continuation as provided in this Addendum.
f. COST OF FUNDS: As used herein, "COST OF FUNDS" means the rate
determined by Bank, in its sole discretion, from time to time as its cost of
funds, as such rate may change from time to time.
g. As used herein, "COST OF FUNDS PERIOD" means a period commencing on a
Business Day, and continuing for, in every case, a period which is in excess of
one year (e.g. 366 days), as designated by Borrower, during which all or a
portion of the outstanding principal balance of the Note bears interest
determined in relation to Bank's COST OF FUNDS, provided that:
(1) In any COST OF FUNDS PERIOD would end on day that is not a
Business Day then such COST OF FUNDS Period shall be extended to
the next succeeding Business Day; and
(2) NO COST OF FUNDS Period shall extend beyond the Maturity Date of
the Note.
h. NOTE: As used herein, "NOTE" means the Master Revolving Note of even
date herewith.
i. REGULATION D. As used herein, "REGULATION D" means Regulation D of the
Board of Governors of the Federal Reserve System as amended or supplemented from
time to time.
j. REGULATORY DEVELOPMENT. As used herein, "REGULATORY DEVELOPMENT" means
any or all of the following: (i) any change in any law, regulation or
interpretation thereof by any public authority (whether or not having the force
of law); (ii) the application of any existing law, regulation or the
interpretation thereof by any public authority (whether or not having the force
of law); and (iii) compliance by Bank with any request or directive (whether or
not having the force of law) of any public authority.
2. INTEREST RATE OPTIONS. Borrower shall have the following options regarding
the interest rate to be paid by Borrower on Advances under the Note:
a. A rate equal to Two and 25/100 percent (2.250%) above Bank's LIBOR,
(the "LIBOR Option"), which LIBOR Option shall be in effect during the relevant
LIBOR Period; or
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<PAGE> 21
b. A rate equal to TWO AND 25/100 percent (2.250%) above Banks COST OF
FUNDS, (the "COST OF FUNDS" Option), which COST OF FUNDS Option shall be in
effect during the relevant COST OF FUNDS Period; or
c. A rate equal to ZERO AND 5/10 percent (0.500 %) below the "Base Rate"
as referenced in the Note and quoted from time to tire by Bank as such rate may
change from time to time (the "Base Rate Option").
3. LIBOR OPTION ADVANCE. The minimum LIBOR Option Advance will not be less
than ONE MILLION AND NO/100 Dollars ($1,000,000.00) for any LIBOR Option
Advance.
4. PAYMENT OF INTEREST ON LIBOR OPTION ADVANCES. Interest on each LIB OR Option
Advance shall be payable pursuant to the terms of the Note. Interest on such
LIBOR Option Advance shall be computed on the basis of a 360-day year and shall
be assessed for the actual number of days elapsed from the first day of the
LIBOR Period applicable thereto but not including the last day thereof.
5. BANK'S RECORDS RE: LIBOR OPTION ADVANCES. With respect to each LIBOR
Option Advance, Bank is hereby authorized to note the date, principal amount,
interest rate and LIBOR Period applicable thereto and any payments made thereon
on Bank's books and records (either manually or by electronic entry) and/or on
any schedule attached to the Note, which notations shall be prima facie evidence
of the accuracy of the information noted.
6. COST OF FUNDS OPTION ADVANCE. The minimum COST OF FUNDS option advance will
be not less than ONE MILLION AND NO/100 for any COST OF FUNDS Option Advance.
7. PAYMENT OF COST OF FUNDS OPTION. Interest on each COST OF FUNDS Option
Advance shall be payable pursuant to the terms of the Note. Interest on such
COST OF FUNDS Option Advance shall be computed on the basis of a 360-day year
and shall be assessed for the actual number of days elapsed from the first day
of the COST OF FUNDS Period applicable thereto but not including the last day
thereof.
8. SELECTION/CONVERSION OF INTEREST RATE OPTIONS. At the time any Advance is
requested under the Note and/or Borrower wishes to select the LMOR or COST OF
FUNDS Option for all or a portion of the outstanding principal balance of the
Note, and at the end of each LIBOR or COST OF FUNDS Period, Borrower shall give
Bank notice specifying (a) the interest rate option selected by Borrower; (b)
the principal amount subject thereto; and (c) if the LIBOR or COST OF FUNDS
Option is selected, the length of the applicable LIBOR or COST OF FUNDS Period.
Any such notice may be given by telephone so long as, with respect to each LIBOR
or COST OF FUNDS Option selected by Borrower, (i) Bank receives written
confirmation from Borrower not later than three (3) LIBOR Business Days after
such telephone notice is given; and (ii) such notice is given to Bank prior to
10:00 a.m., California time, on the first day of the LIBOR or COST OF FUNDS
Period. For each LIBOR or COST OF FUND Option requested hereunder, Bank will
quote the applicable fixed LIBOR or COST OF FUNDS Rate to Borrower at
approximately 10:00 a.m., California time, on the first day of the LIBOR or COST
OF FUNDS Period. If Borrower does not immediately accept the rate quoted by
Bank, any subsequent acceptance by Borrower shall be subject to a
redetermination of the rate by Bank; provide,
-21-
<PAGE> 22
however, that if Borrower fails to accept any such quotation as given, then the
quoted rate shall appear and Bank shall have no obligation to permit a LIBOR or
COST OF FUNDS Option to be selected on such day. If no specific designation of
interest is made at the time any Advance is requested under the Note or at the
end of any LIBOR or COST OF FUNDS Period, Borrower shall be deemed to have
selected the Base Rate Option for such Advance or the principal amount to which
such LIBOR or COST OF FUNDS Period applied. At any time the LIBOR or COST OF
FUNDS Option is in effect, Borrower may, at the end of the applicable LIBOR or
COST OF FUNDS Period, convert to the Base Rate Option. At any time the Base
Rate Option is in effect, Borrower may convert to the LIBOR or COST OF FUNDS
OPTION, and shall designate a LIBOR or COST OF FUNS Period.
9. DEFAULT INTEREST RATE. From and after the maturity date of the Note, or such
earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of the Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to three percent (3.00%)
above the rate of interest from time to time applicable to the Note.
10. PREPAYMENT. Bank is not under any obligation to accept any prepayment of
any LIBOR or COST OF FUNDS Option Advance except as described below or as
required under applicable law. Borrower may prepay a Base Rate Option Advance at
any time, without paying any Prepayment Amount, as defined below. Borrower may
prepay an LIBOR or COST OF FUNDS Option Advance in increments of Five Hundred
Dollars ($500.00), prior to the end of the LIBOR or COST OF FUNDS Period, as
long as (i) Bank is provided written notice of such prepayment at least five (5)
LIBOR or COST OF FUNDS Business Days prior to the date thereof (the "Prepayment
Date"); and (ii) Borrower pays the Prepayment Amount. The notice of prepayment
shall contain the following information: (a) the Prepayment Date; and (b) the
LIBOR or COST OF FUNDS Option Advance which will be prepaid. On the Prepayment
Date, Borrower shall pay to Bank, in addition to any other amount that may then
be due on the Note, the Prepayment Amount Bank, in its sole discretion, may
accept any prepayment of a LIBOR or COST OF FUNDS Option Advance even if not
required to do so under the Note and may deduct from the amount to be applied
against the LIBOR or COST OF FUNDS Option Advance any other amounts required to
be paid as part of the Prepayment Amount.
The Prepaid Principal Amount (as defined below) will be applied to the
LIBOR or COST OF FUNDS Option Advance being prepaid as Bank, shall determine in
its sole discretion.
If Bank exercises its right to accelerate the payment of the Note prior to
maturity based upon an Event of Default under the Note, Borrower shall pay to
Bank, in addition to any other amounts that may then be due on the Note, on the
dated, specified by Bank as the Prepayment Date, the Prepayment Amount.
Bank's determination of the Prepayment Amount shall be conclusive in
the absence of obvious error or fraud. If requested in writing by Borrower, Bank
shall provide Borrower a written statement specifying the Prepayment Amount.
The following (the "Prepayment Amount") shall be due and payable in full on
the Prepayment Date:
-22-
<PAGE> 23
a. If the principal amount of the LIBOR or COST OF FUNDS Option
Advance being prepaid exceeds Seven Hundred Fifty Thousand Dollars ($750,000),
then the Prepayment Amount is the sum of (i) the amount of the principal balance
of the LIBOR or COST OF FUNDS Option Advance which Borrower has elected to
prepay or the amount of the principal balance of the LIBOR or COST OF FUNDS
Option Advance which Bank has required Borrower to prepay because of
acceleration, as the case may be (the "Prepaid Principal Amount"); (ii) interest
accruing on the Prepaid Principal Amount up to, but not including, the
Prepayment Date; (iii) Five Hundred Dollars ($500.00); plus (iv) the present
value, discounted at the Reinvestment Rates (as defined below) of the positive
amount by which (A) the interest Bank would have earned had the Prepaid
Principal Amount not been paid prior to the end of the LIBOR or COST OF FUNDS
Period at the Note's interest rate exceeds (B) the interest Bank would earn by
reinvesting the Prepaid Principal Amount at the Reinvestment Rates.
b. If the principal amount of tile LIBOR or COST OF FUNDS Option
Advance being prepaid is Seven Hundred Fifty Thousand Dollars ($750,000) or
less, then the Prepayment Amount is the sum of (i) the principal amount of the
LIBOR or COST OF FUNDS Option Advance which Borrower has elected to prepay or
the principal amount of the LIBOR or COST OF FUNDS Option Advance which Bank has
required Borrower to prepay because of acceleration due to an Event of Default
under the Note, as the case maybe (the "Prepaid Principal Amount"); (ii)
interest accruing on the Prepaid Principal Amount up to, but not including, the
Prepayment Date; plus (iii) an amount equal to two percent (2%) of the Prepaid
Principal Amount.
"Reinvestment Rates" mean the per annum rates of interest equal to one half
percent (1/2%) above the rates of interest reasonably determined by Bank to be
in effect not more than seven (7) days prior to the Prepayment Date in the
secondary market for United States Treasury Obligations in amount(s) and with
maturity(ies) which correspond (as closely as possible) to the LIBOR or COST OF
FUNDS Option Advance being prepaid.
BY INITIALING BELOW, BORROWER,ACKNOWLEDGE(S) AND AGREE(S) THAT: (A) THERE
IS NO RIGHT TO PREPAY ANY LIBOR OPTION ADVANCE OR ANY COST OF FUNDS OPTION
ADVANCE, IN WHOLE OR IN PART, WITHOUT PAYING THE PREPAYMENT AMOUNT, EXCEPT AS
OTHERWISE REQUIRED UNDER APPLICABLE LAW; (B) BORROWER SHALL BE LIABLE FOR
PAYMENT OF THE PREPAYMENT AMOUNT IF BANK EXERCISES ITS RIGHT TO ACCELERATE
PAYMENT OF ANY LIBOR OPTION ADVANCE AS PART OR ALL OF THE (OBLIGATIONS OWING
UNDER THE NOTE, INCLUDING WITHOUT LIMITATION, ACCELERATION UNDER A DUE-ON-SALE
PROVISION; (C) BORROWER WAIVES ANY RIGHTS UNDER SUCCESSOR STATUTE; AND (D) BANK
HAS MADE EACH LIB,OR OPTION ADVANCE PURSUANT TO THE NOTE IN RELIANCE ON THESE
AGREEMENTS.
-----------------------
BORROWER'S INITIALS
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<PAGE> 24
11. HOLD HARMLESS AND INDEMNIFICATION. Borrower agrees to indemnify Bank and to
hold Bank harmless from, and to reimburse Bank on demand for, all losses and
expenses which Bank sustains or incurs as a result of (i) any payment of a LIBOR
or COST OF FUNDS Option Advance prior to the last day of the applicable LIBOR or
COST OF FUNDS Period for any reason, including, without limitation, termination
of the Note, whether pursuant to this Addendum or the occurrence of an Event of
Default; (ii) any termination of a LIBOR or COST OF FUNDS Period prior to the
date it would otherwise end in accordance with this Addendum; or (iii) any
failure by Borrower, for any reason, to borrow any portion of a LIBOR or COST OF
FUNDS Option Advance.
12. FUNDING LOSSES. The indemnification and hold harmless provisions set forth
in this Addendum shall include, without limitation, all losses and expenses
arising from interest and fees that Bank pays to lenders of funds it obtains in
order to fund the loans to Borrower on the basis of the LIBOR or COST OF FUNDS
Option(s) and all losses incurred in liquidating or re-deploying deposits from
which such funds were obtained and loss of profit for the period after
termination. A written statement by Bank to Borrower of such losses and expenses
shall be conclusive and binding, absent manifest error, for all purposes. This
obligation shall survive the termination of this Addendum and the payment of the
Note.
13. REGULATORY DEVELOPMENTS OR OTHER CIRCUMSTANCES RELATING TO ILLEGALITY OR
IMPRACTICALITY OF LIBOR. If any Regulatory Development or other circumstances
relating to the interbank Euro-dollar markets shall, at any time, in Bank's
reasonable determination, make it unlawful or impractical for Bank to fund or
maintain, during any LIBOR or COST OF FUNDS Period, to determine or charge
interest rates based upon LIBOR or COST OF FUNDS, Bank shall give notice of such
circumstances to Borrower and:
(i) In the case of a LIBOR or COST OF FUNDS Period in progress,
Borrower shall, if requested by Bank, promptly pay any interest
which had accrued prior to such request and the date of such
request shall be deemed to be the last day of the term of the
LIBOR or COST OF FUNDS Period; and
(ii) No LIBOR or COST OF FUNDS Period may be designated thereafter
until Bank determines that such would be practical.
14. ADDITIONAL COSTS. Borrower shall pay to Bank from time to time, upon Bank's
request, such amounts as Bank determines are needed to compensate Bank for any
costs it incurred which are attributable to Bank having made or maintained a
LIBOR or COST OF FUNDS Option Advance or to Bank's obligation to make a LIBOR
Option Advance, or any reduction in any amount receivable by Bank hereunder with
respect to any LIBOR or COST OF FUNDS Option or such obligation (such increases
in costs and reductions in amounts receivable being herein called "ADDITIONAL
COSTS"), resulting from any Regulatory Developments, which (i) change the basis
of taxation of any amounts payable to Bank hereunder with respect to taxation of
any amounts payable to Bank hereunder with respect to any LIBOR or COST OF FUNDS
Option Advance (other than taxes imposed on the overall net income of Bank for
any LIBOR or COST OF FUNDS Option Advance by the jurisdiction where Bank is
headquartered or the jurisdiction where Bank extends the LIBOR or COST OF FUNDS
Option Advance; (ii) impose or modify any reserve, special deposit, or similar
requirements relating to any extensions of credit or other
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<PAGE> 25
assets of, or any deposits with or other liabilities of, Bank (including any
LIBOR or COST OF FUNDS Option Advance or any deposits referred to in the
definition of LIBOR or COST OF FUNDS); or (iii) impose any other condition
affecting this Addendum (or any of such extension of credit or liabilities).
Bank shall notify Borrower of any event occurring after the date hereof which
entitles Bank to compensation pursuant to this paragraph as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation. Determinations by Bank for purposes of this paragraph, shall be
conclusive, provided that such determinations are made on a reasonable basis.
15. LEGAL EFFECT. Except as specifically modified hereby, all of the terms and
conditions of the Note remain in full force and effect.
IN WITNESS WHEREOF, the parties have agreed to the foregoing as of the date
first set forth above.
Sipex Corporation COMERICA BANK-CALIFORNIA
By: /s/ Frank R. DiPietro By:
------------------------------- ----------------------------------
Philip Koblis
Corporate Banking Officer
Title: EXE VP
----------------------------
By:
-------------------------------
Title:
----------------------------
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<PAGE> 26
SECURITY AGREEMENT
------------------
As of June 01, 2000 , for value received, the undersigned ("Debtor") grants
to COMERICA BANK-CALIFORNIA ("Bank"), a CALIFORNIA banking corporation, a
continuing security interest in the Collateral (as defined below) to secure
payment when due, whether by stated maturity, demand acceleration or otherwise,
of all existing and future indebtedness ("Indebtedness") to the Bank of Sipex
Corporation ("Borrower") and/or Debtor. Indebtedness includes without limit any
and all obligations or liabilities of the Borrower and/or Debtor to the Bank,
whether absolute or contingent, direct or indirect, voluntary or involuntary,
liquidated or unliquidated, joint or several known or unknown; any and all
obligations or liabilities for which the Borrower and/or Debtor would otherwise
be liable to he Bank were it not for the invalidity or unenforceability of them
by reason of any bankruptcy, insolvency or other Law, or for any other reason;
any and all amendments, modifications, renewals and/or extensions of any of the
above; all costs incurred by Bank in establishing, determining, continuing, or
defending the validity or priority of its security interest, or in pursuing its
rights and remedies under this Agreement or under any other agreement between
Bank and Borrower and or Debtor or in connection with any proceeding involving
Bank as a result of any financial accommodation to Borrower and/or Debtor; and
all other costs of collecting indebtedness, including without limit attorney
fees. Debtor agrees to pay Ban all such costs incurred by the Bank, immediately
upon demand, and until paid all costs shall bear interest at the highest per
annum rate applicable to any of the Indebtedness, but not in excess of the
maximum rate permitted by law. Any reference in this Agreement to attorney fees
shall be deemed a reference to reasonable fees, costs, and expenses of both
in-house and outside counsel and paralegals, whether or not a suit or action is
instituted and to court costs if a suit or action is instituted, and whether
attorney fees or court costs are incurred at the trial court level, on appeal,
in a bankruptcy, administrative or probate proceeding or otherwise.
1. Collateral shall mean all of the following property Debtor now or later
owns or has an interest in, wherever located:
o all Accounts Receivable (for purposes of this Agreement, "Accounts
Receivable" consists of all accounts, general intangibles, chattel paper,
contract rights, deposit accounts, documents and instruments),
o all Inventory,
o specific items listed below and/or on attached Schedule A, if any, is/are
also included in Collateral:
o all goods, instruments, documents, policies and certificates of insurance,
deposits, money or other property (except real property which is not a
fixture) which are now or later in possession of Bank, or as to which Bank
now or later controls possession by documents or otherwise, and
o all additions, attachments, accessions, parts replacements, substitutions,
renewals, interest, dividends, distributions, rights of any kind (including
but not limited to stock splits, stock rights, voting and preferential
rights), products, and proceeds of or pertaining to the above including,
without limit, cash or other property which were proceeds and are recovered
by a bankruptcy trustee or otherwise as a preferential transfer by Debtor.
2. Warranties, Covenants and Agreements. Debtor warrants, covenants and
agrees as follows:
2.1 Debtor shall furnish to Bank, in form and at intervals as Bank
may request, any information Bank may reasonably request and
allow Bank to examine, inspect, and copy any of Debtor's books
and records. Debtor shall, at the request of Bank, mark its
records and the Collateral to clearly indicate the security
interest of Bank under this Agreement.
2.2 At the time any Collateral becomes, or is represented to be,
subject to a security interest in favor of Bank, Debtor shall
be deemed to have warranted that (a) Debtor is the lawful
owner of the Collateral and has the right and authority to
subject it to a security interest granted to Bank; (b) none of
the Collateral is subject to any security interest other than
that in favor of Bank and there
<PAGE> 27
are no financing statements on file, other than in favor of
Bank; and (c) Debtor acquired its rights in the Collateral
in the ordinary course of its business.
2.3 Debtor will keep the Collateral free at all times from all
claims, liens, security interests and encumbrances other than
those in favor of Bank. Debtor will not, without the prior
written consent of Bank, sell, transfer or lease, or permit to
be sold, transferred or leased, any or all of the Collateral,
except (where inventory is pledged as Collateral) for
Inventory in the ordinary course of its business and will not
return any Inventory to its supplier. Bank or its
representatives may at all reasonable times inspect the
Collateral and may enter upon all premises where the
Collateral is kept or might be located.
2.4 Debtor will do all acts and will execute or cause to be
executed all writings requested by Bank to establish, maintain
and continue a perfected and first security interest of Bank
in the Collateral. Debtor agrees that Bank has no obligation
to acquire or perfect any lien on or security interest in any
asset(s), whether realty or personalty, to secure payment of
the Indebtedness, and Debtor is not relying upon assets in
which the Bank may have a lien or security interest for
payment of the Indebtedness.
2.5 Debtor will pay within the time that they can be paid without
interest or penalty all taxes, assessments and similar charges
which at any time are or may become a lien, charge, or
encumbrance upon any Collateral, except to the extent
contested in good faith and bonded in a manner satisfactory to
Bank. If Debtor fails to pay any of these taxes, assessments,
or other charges in the time provided above, Bank has the
option (but not the obligation) to do so and Debtor agrees to
repay it amounts so expended by Bank immediately upon demand,
together with interest at the highest lawful default rate
which could be charged by Bank on any Indebtedness.
2.6 Debtor will keep the Collateral in good condition and will
protect it from loss, damage, or deterioration from any cause.
Debtor has and will maintain at all times (a) with respect to
the Collateral, insurance under an "all risk" policy against
fire and other risks customarily insured against, and (b)
public liability insurance and other insurance as may be
required by law o reasonably required by Bank, all of which
insurance shall be in amount, form and content, and written by
companies as may be satisfactory to Bank, containing a
lender's loss payable endorsement acceptable to Bank. Debtor
will deliver to Bank immediately upon demand evidence
satisfactory to Bank that the required insurance has been
procured. If Debtor fails to maintain satisfactory insurance,
Bank has the option (but not the obligation) to do so and
Debtor agrees to repay all amounts so expended by Bank
immediately upon demand, together with interest a the highest
lawful default rate which could be charged by Bank on any
Indebtedness.
2.7 If Accounts Receivable are pledged as Collateral under this
Agreement, then on each occasion on which Debtor evidences to
Bank the account balances on and the nature and extent of the
Accounts Receivable, Debtor shall be deemed to have warranted
that except as otherwise indicated (a) each of those Accounts
Receivable is valid and enforceable without performance by
Debtor of an act; (b) each of those account balances are in
fact owing, (c) there are no setoffs, recoupments, credits,
contra accounts, counterclaims or defenses against any of
those Accounts Receivable, (d) as to any Accounts Receivable
represented by a note, trade acceptance, draft or other
instrument or by any chattel paper or document, the same have
been endorsed and/or delivered by Debtor to Bank, (e) Debtor
has not received with respect to any Account Receivable, any
notice of the death of the related account debtor, nor of the
dissolution, liquidation, termination of existence,
insolvency, business failure, appointment of a receiver for,
assignment for the benefit of creditors by, or filing of a
petition in bankruptcy by or against, the account debtor, and
(f) as to each Account Receivable, the account debtor is not
an affiliate of Debtor, the United States of America or any
department, agency or instrumentality of it, or a citizen or,
resident of any jurisdiction outside of the Unite States.
Debtor will do all acts and will execute all writings'
requested by Bank to perform, enforce performance of, and
collect all Accounts Receivable. Debtor shall neither account
debtors or by other methods acceptable to Bank.
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<PAGE> 28
2.8 Debtor at all times shall be in strict compliance with all
applicable laws, including without limit any laws, ordinances,
directives, orders, statutes, or regulations an object of
which is to regulate or improve health, safety, or the
environment ("Environmental Laws").
2.9 If marketable securities are pledged as Collateral under this
Agreement and if at any time the outstanding principal balance
of the Indebtedness exceeds _________________ of the value of
the Collateral, as such value is determined from time to time
by Bank (herein called the "Margin Requirement"), Debtor shall
immediately pay or cause to be paid to Bank an amount
sufficient to reduce the Indebtedness such that the remaining
principal outstanding thereunder is equal to or less than the
Margin Requirement. Bank shall apply payments made under this
paragraph in payment of the Indebtedness in such order and
manner of application as Bank in its sole discretion elects.
In the alternative, Debtor may provide or cause to be provided
to Bank additional collateral in the form of cash or other
property acceptable to Bank and with a value, as determined by
Bank, that when added to the Collateral will constitute
compliance with the Margin Requirement.
2.10 If Bank, acting in its sole discretion, redelivers Collateral
to Debtor or Debtor's designee for the purpose of (a) the
ultimate sale or exchange thereof; or (b) presentation,
collection, renewal, or registration of transfer thereof; or
(c) loading, unloading, storing, shipping, transshipping,
manufacturing, processing or otherwise dealing with it
preliminary to sale or exchange; such redelivery shall be in
trust for the benefit of Bank and shall not constitute a
release of Bank's security interest in it or in the proceeds,
or products of it unless Bank specifically so agrees in
writing. If Debtor requests any such redelivery, Debtor will
deliver with such request a duly executed financing statement
in form and substance satisfactory to Bank. Any proceeds of
Collateral coming into Debtor's possession as a result of any
such redelivery shall be held in trust for Bank and
immediately delivered to Bank for application on the
Indebtedness. Bank may (in its sole discretion) deliver any or
all of the Collateral to Debtor, and such delivery by Bank
shall discharge Bank from all liability or responsibility for
such Collateral. Bank, at its option, may require delivery of
any Collateral to Bank at any time with such endorsements or
assignments of the Collateral as Bank may request.
2.11 At any time and without notice, Bank may, as to Collateral
other than Equipment, Fixtures or Inventory, (a) cause any or
all of such Collateral to be transferred to its name or to the
name of its nominees; (b) receive or collect by legal
proceedings or otherwise all dividends, interest, principal
payments and other sums and all other distributions at any
time payable or receivable on account of such Collateral, and
hold the same as Collateral, or apply the same to the
Indebtedness, the manner and distribution of the application
to be in the sole discretion of Bank; (c) enter into any
extension, subordination, reorganization, deposit, merger or
consolidation agreement or any other agreement relating to or
affecting such Collateral, and deposit or surrender control of
such Collateral, and accept other property in exchange for
such Collateral and hold or apply the property or money so
received pursuant to this Agreement.
2.12 Bank may assign any of the indebtedness and any or all of the
Collateral to its assignee, who then shall have with respect
to Collateral so delivered all the rights and powers of Bank
under this Agreement, and after that Bank shall be fully
discharged from all liability and responsibility with respect
to Collateral so delivered.
Debtor delivers this Agreement based solely on Debtor's
independent investigation of (or decision not to investigate)
the financial condition of Borrower and is not relying on any
information furnished by Bank. Debtor assumes full
responsibility for obtaining any further information
concerning the Borrower's financial condition, the status of
the Indebtedness or any other matter which the undersigned may
deem necessary or appropriate now or later. Debtor waives any
duty on the part of Bank, and agrees that Debtor is not
relying upon nor expecting Bank to disclose to Debtor any fact
now or later known by Bank, whether relating to the operations
or condition of Borrower, the existence, liabilities or
financial condition of any guarantor of the Indebtedness, the
occurrence of any default with respect to the Indebtedness, or
otherwise, notwithstanding any
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<PAGE> 29
effect such fact may have upon Debtor's risk or Debtor's
rights against Borrower. Debtor knowingly accepts the full
range of risk encompassed in this Agreement, which risk
includes without limit the possibility that Borrower may
incur Indebtedness to Bank after the financial condition of
Borrower, or Borrower's ability to pay debts as they mature,
has deteriorated.
2.14 Debtor shall defend, indemnify and hold harmless Bank, its
employees, agents, shareholders, affiliates, officers, and
directors from and against any and all claims, damages, fines,
expenses, liabilities or causes of action of whatever kind,
including without limit consultant fees, legal expenses, and
attorney fees, suffered by any of them as a direct or indirect
result of any actual or asserted violation of any law,
including, without limit, Environmental Laws, or of any
remediation relating to any property required by any law,
including without limit Environmental Laws.
3. Collection of Proceeds.
3.1 Debtor agrees to collect and enforce payment of all Collateral
until Bank shall direct Debtor to the contrary. Immediately
upon notice to Debtor by Bank and at all times after that,
Debtor agrees to fully and promptly cooperate and assist Bank
in the collection and enforcement of all Collateral and to
hold in trust for Bank all payments received in connection
with Collateral and from the sale, lease or other disposition
of any Collateral, all rights by way of suretyship or guaranty
and all rights in the nature of a Lien or security interest
which Debtor now or Later has regarding Collateral.
Immediately upon and after such notice, Debtor agrees to (a)
endorse to Bank and immediately deliver to Bank all payments
received on Collateral or from the sale, lease or other
disposition of any Collateral or arising from any other rights
or interests of Debtor in the Collateral, in the form received
by Debtor without commingling with any other funds, and (b)
immediately deliver to Bank all property in Debtor's
possession or later coming into Debtor's possession through
enforcement of Debtor's rights or interests in the Collateral.
Debtor irrevocably authorizes Bank or any Bank employee or
agent to endorse the name of Debtor upon any checks or other
items which are received in payment for any Collateral, and to
do any and all things necessary in order to reduce these items
to money. Bank shall have no duty as to the collection or
protection of Collateral or the proceeds of it, nor as to the
preservation of any related rights, beyond the use of
reasonable care in the custody and preservation of Collateral
in the possession of Bank. Debtor agrees to take all steps
necessary to preserve rights against prior parties with
respect to the Collateral. Nothing in this Section 3.1 shall
be deemed a consent by Bank to any sale, lease or other
disposition of any Collateral.
3.2 If Accounts Receivable are pledged as Collateral, this Section
3.2 shall be applicable and Debtor agrees that immediately
upon Bank's request (whether or not any Event of Default
exists) the indebtedness shall be on a "remittance basis" as
follows: Debtor shall at its sole expense establish and
maintain (and Bank, at Bank's option, may establish and
maintain at Debtor's expense): (a) an United States Post
Office lock box (the "Lock Box"), to which Bank shall have
exclusive access and control. Debtor expressly authorizes
Bank, from time to time, to remove contents from the Lock Box,
for disposition in accordance with this Agreement. Debtor
agrees to notify all account debtors and other parties
obligated to Debtor that all payments made to Debtor (other
than payments by electronic funds transfer) shall be remitted,
for the credit of Debtor, to the Lock Box, and Debtor shall
include a like statement on all invoices; and (b) a
non-interest bearing deposit account with Bank which shall be
titled as designated by Bank (the "Cash Collateral Account")
to which Bank shall have exclusive access and control. Debtor
agrees to notify all account debtors and other parties
obligated to Debtor that all payments made to Debtor by
electronic funds transfer shall be remitted to the Cash
Collateral Account, and Debtor, at Bank's request, shall
include a like statement on all invoices. Debtor shall execute
all documents and authorizations as required by Bank to
establish and maintain the Lock Box and the Cash Collateral
Account.
3.3 If Accounts Receivable are pledged as Collateral, this Section
3.3 shall be applicable, and all items or amounts which are
remitted to the Lock Box, to the Cash Collateral Account, or
otherwise delivered by or for the benefit of Debtor to Bank on
account of partial or full payment of, or with respect to, any
Collateral shall, at Bank's option, (i) be applied to the
payment of the indebtedness,
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<PAGE> 30
whether than due or not, in such order or at such time of
application as Bank may determine in its sole discretion, or,
(ii) be deposited to the Cash Collateral Account.
processing or item or its exercise of any other rights or
remedies under this Agreement, including without limitation
indirect, special or consequential damages, loss of revenues
or profits, or any claim, demand or action by any third party
arising out of or in connection with the processing of items
or the exercise of any other rights or remedies under this
Agreement. Debtor agrees to indemnify and hold Bank harmless
from and against all such third party claims, demands or
actions, and all related expenses or liabilities, including,
without limitation, attorney fees.
4. Defaults, Enforcement and Application of Proceeds
4.1 Upon the occurrence of any of the following events (each an
"Event of Default"), Debtor shall be in default under this
Agreement:
(a) Any failure to pay the Indebtedness or any other
indebtedness when due, or such portion of it as may be
due, by acceleration or otherwise; or
(b) Any failure or neglect to comply with, or breach of
or default under, any term of this Agreement, or any
other agreement or commitment between Borrower,
Debtor, or any guarantor of any of the Indebtedness
("Guarantor") and Bank; or
(c) Any warranty, representation, financial statement, or
other information made, given or furnished to Bank by
or on behalf of Borrower, Debtor, or any Guarantor
shall be, or shall prove to have been, false or
materially misleading when made, given, or furnished;
or
(d) Any loss, theft, substantial damage or destruction to
or of any Collateral, or the issuance or filing of
any attachment, levy, garnishment or the commencement
of any proceeding in connection with any Collateral
or of any other judicial process of, upon or in
respect of Borrower, Debtor, any Guarantor, or any
Collateral; or
(e) Sale or other disposition by Borrower, Debtor, or any
Guarantor of any substantial portion of its assets or
property or voluntary suspension of the transaction of
business by Borrower, Debtor, or any Guarantor, or
death, dissolution, termination of existence, merger,
consolidation, insolvency, business failure, or
assignment for the benefit of creditors of or by
Borrower, Debtor, or any Guarantor; or commencement of
any proceedings under any state or federal bankruptcy
or insolvency laws or laws for the relief of debtors
by or against Borrower, Debtor, or any Guarantor; or
the appointment of a receiver, trustee, court
appointee, sequestrator or otherwise, for all or any
part of the property of Borrower, Debtor, or any
Guarantor; or
(f) Bank deems the margin of Collateral insufficient or
itself insecure, in good faith believing that the
prospect of payment of the Indebtedness or
performance of this Agreement is impaired or shall
fear deterioration, removal, or waste of Collateral.
4.2 Upon the occurrence of any Event of Default, Bank may at its
discretion and without prior notice to Debtor declare any or
all of the Indebtedness to be immediately due and payable, and
shall have and may exercise any one or more of the following
rights and remedies:
(a) Exercise all the rights and remedies upon default, in
foreclosure and otherwise, available to secured
parties under the provisions of the Uniform
Commercial Code and other applicable law;
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<PAGE> 31
(b) Institute legal proceedings to foreclose upon the
lien and security interest granted by this Agreement,
to recover judgment for all amounts then due and
owing as Indebtedness, and to collect the same out of
any Collateral or the proceeds of any sale of t;
(c) Institute legal proceedings for the sale, under the
judgment or decree of any court of competent
jurisdiction, of any or all Collateral; and/or
(d) Personally or by agents, attorneys, or appointment of a
receiver, enter upon any premises where Collateral may
then be located, and take possession of all or any of
it and/or render it unusable; and without being
responsible for loss or damage to such Collateral,
hold, operate, sell, lease, or dispose of all or any
Collateral at one or more public or private to sales,
leasings or other dispositions, at places and times
and on terms and conditions as Bank may deem fit,
without any previous demand or advertisement; and
except as provided in this Agreement, all notice of
sale, lease or other disposition, and advertisement,
and other notice or demand, any right or equity of
redemption, and any obligation of a prospective
purchaser or lessee to inquire as to the power an
authority of Bank to sell, lease, or otherwise dispose
of the Collateral or as to the application by Bank of
the proceeds of sale or otherwise, which would
otherwise be required by, or available to Debtor
under, applicable law are expressly waived by Debtor
to the fullest extent permitted.
At any sale pursuant to this Section 4.2, whether
under the power of sale, by virtue of judicial
proceedings or otherwise, it shall not be necessary
for Bank or a public officer under order of a court
to have present physical or constructive possession
of Collateral to be sold. The recitals contained in
any conveyances and receipts made and given by Bank
or the public officer to any purchaser at any sale
made pursuant to this Agreement shall, to the extent
permitted by applicable law, conclusively establish
the truth and accuracy of the matters stated
(including, without limit, as to the amounts of the
principal of and interest on the indebtedness, the
accrual and nonpayment of it and advertisement and
conduct of the sale); and all prerequisites to the
sale shall be presumed to have been satisfied and
performed. Upon any sale of any Collateral, the
receipt of the officer making the sale under judicial
proceedings or of Bank shall be sufficient discharge
to the purchaser for the purchase money, and the
purchaser shall not be obligated to see to the
application of the money. Any sale of any Collateral
under this Agreement shall be a perpetual bar against
Debtor with respect to that Collateral.
4.3 Debtor shall at the request of Bank, notify the account
debtors or obligors of Banks security interest in the
Collateral and direct payment of it to Bank. Bank may, itself,
upon the occurrence of any Event of Default so notify and
direct any account debtor or obligor.
4.4 The proceeds of any sale or other disposition of Collateral
authorized by this Agreement shall be applied by Bank first
upon all expenses authorized by the Uniform Commercial Code
and all reasonable attorney fees and legal expenses incurred
by Bank; the balance of the proceeds of the sale or other
disposition shall be applied in the payment of the
indebtedness, first to interest, then to principal, then to
remaining indebtedness and the surplus, if any, shall be paid
over to Debtor or to such other person(s) as may be entitled
to it under applicable law. Debtor shall remain liable for any
deficiency, which it shall pay to Bank immediately upon
demand.
4.5 Nothing in this Agreement is intended, nor shall it be
construed, to preclude Bank from pursuing any other remedy
provided by law for the collection of the Indebtedness or for
the recovery of any other sum to which Bank may be entitled
for the breach of this Agreement by Debtor. Nothing in this
Agreement shall reduce or release in any way any rights or
security interests of Bank contained in any existing agreement
between Borrower, Debtor, or any Guarantor and Bank.
4.6 No waiver of default or consent to any act Debtor shall be
effective unless in writing and signed by an authorized
officer of Bank. No waiver of any default or forbearance on
the part of Bank in
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<PAGE> 32
enforcing any of its rights under this Agreement shall
operate as waiver of any other default or of the same
default on a future occasion or of any rights.
4.7 Debtor irrevocably appoints Bank or any agent of Bank (which
appointment is coupled with an interest) the true and lawful
attorney of Debtor (with full power of substitution) in the
name, place and stead of, and at the expense of, Debtor:
(a) to demand, receive, sue for, and give receipts of
acquittances for any moneys due or to become due on any
Collateral and to endorse any item representing any
payment on or proceeds of the Collateral;
(b) to execute and file in the name of and on behalf of
Debtor all financing statements or other filings
deemed necessary or desirable by Bank to evidence,
perfect, or continue the security interests granted
in this Agreement; and
(c) to do and perform any act on behalf of Debtor permitted
or required under this Agreement.
4.8 Upon the occurrence of an Event of Default, Debtor also
agrees, upon request of Bank, to assemble the Collateral and
make it available to Bank at any place designated by Bank
which is reasonably convenient to Bank and Debtor.
5. Miscellaneous.
5.1 Until Bank is advised in writing by Debtor to the contrary,
all notices, requests and demands required under this
Agreement or by law shall be given to, or made upon, Debtor at
the first address indicated in Section 5.15 below.
5.2 Debtor will give Bank not less than 90 days prior written
notice of all contemplated changes in Debtor's name, chief
executive office location, and/or location of any Collateral,
but the giving of this notice shall not cure any Event of
Default caused by this change.
5.3 Bank assumes no duty of performance or other responsibility
under any contracts contained within the Collateral.
5.4 Bank has the right to sell, assign, transfer, negotiate or
grant participations or any interest in, any or all of the
Indebtedness and any related obligations, including without
limit this Agreement. In connection with the above, but
without limiting its ability to make other disclosures to the
full extent allowable, Bank may disclose all documents and
information which Bank now or later has relating to Debtor,
the Indebtedness or this Agreement, however obtained. Debtor
further agrees that Bank may provide information relating to
this Agreement or relating to Debtor to the Bank's parent,
affiliates, subsidiaries, and service providers.
5.5 In addition to Bank's other rights, any indebtedness owing
from Bank to Debtor can be set off and applied by Bank on any
Indebtedness at any time(s) either before or after maturity or
demand without notice to anyone.
5.6 Debtor waives any right to require the Bank to: (a) proceed
against any person or property; (b) give notice of the terms,
time and place of any public or private sale of personal
property security held from Borrower or any other person, or
otherwise comply with the, provisions of Section 9-504 of the
Uniform Commercial Code; or (c) pursue any other remedy in the
Bank's power. Debtor waives notice of acceptance of this
Agreement and presentment, demand, protest, notice of protest;
dishonor, notice of dishonor, notice of default, notice of
intent to accelerate or demand payment of any indebtedness,
any and all other notices to which the undersigned might
otherwise be entitled, and diligence in collecting any
Indebtedness, and agree(s) that the Bank may, once or
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<PAGE> 33
any number of times, modify the terms of any Indebtedness,
compromise, extend, increase, accelerate, renew or forbear to
enforce payment of any or all Indebtedness, or permit Borrower
to incur additional Indebtedness, all without notice to Debtor
and without affecting in any Manner the unconditional
obligation of Debtor under this Agreement. Debtor
unconditionally and irrevocably waives each and every defense
and setoff of any nature which, under principles of guaranty
or otherwise, would operate to impair or diminish in any way
the obligation of Debtor under this Agreement, and
acknowledges that such waiver is by this reference
incorporated into each security agreement, collateral
assignment, pledge and/or other document from Debtor now or
later securing the Indebtedness, and acknowledges that as of
the date of this Agreement no such defense or setoff exists.
5.7 Debtor waives any and all rights (whether by subrogation,
indemnity, reimbursement, or otherwise) to recover from
Borrower any amounts paid or the value of any Collateral given
by Debtor pursuant to this Agreement.
5.8 In the event that applicable law shall obligate Bank to give
prior notice to Debtor of any action to be taken under this
Agreement, Debtor agrees that a written notice given to Debtor
at least five days before the date of the act shall be
reasonable notice of the act and, specifically, reasonable
notification of the time and place of any public sale or of
the time after which any private sale, lease, or other
disposition is to be made, unless a shorter notice period is
reasonable under the circumstances. A notice shall be deemed
to be given under this Agreement when delivered to Debtor or
when placed in an envelope addressed to Debtor and deposited,
with postage prepaid, in a post office or official depository
under the exclusive care and custody of the United States
Postal Service or delivered to an overnight courier. The
mailing shall be by overnight courier, certified, or first
class mail.
5.9 Notwithstanding any prior revocation, termination, surrender,
or discharge of this Agreement in whole or in part, the
effectiveness of this Agreement shall automatically continue
or be reinstated in the event that any payment received or
credit given by Bank in respect of the Indebtedness is
returned, disgorged, or rescinded under any applicable law,
including, without limitation, bankruptcy or insolvency laws,
in which case this Agreement, shall be enforceable against
Debtor as if the returned, disgorged, or rescinded payment or
credit had not been received or given by Bank, and whether or
not Bank relied upon this payment or credit or changed its
position as a consequence of it. In the event of continuation
or reinstatement of this Agreement, Debtor agrees upon demand
by Bank to execute and deliver to Bank those documents which
Bank determines are appropriate to further evidence (in the
public records or otherwise) this continuation or
reinstatement, although the failure of Debtor to do so shall
not affect in any way the reinstatement or continuation.
5.10 This Agreement and all the rights and remedies of Bank under
this Agreement shall inure to the benefit of Bank's successors
and assigns and to any other holder who derives from Bank
title to or an interest in the Indebtedness or any portion of
it, and shall bind Debtor and the heirs, legal
representatives, successors, and assigns of Debtor. Nothing in
this Section 5.10 is deemed a consent by Bank to any
assignment by Debtor.
5.11 If there is more than one Debtor, all undertakings, warranties
and covenants made by Debtor and all rights, powers and
authorities given to or conferred upon Bank are made or given
jointly and severally.
5.12 Except as otherwise provided in this Agreement, all terms in
this Agreement have the meanings assigned to them in Division
9 (or, absent definition in Division 9, in any other Division)
of the Uniform commercial Code, as of the date of this
Agreement. "Uniform Commercial Code" means the California
Uniform Commercial Code, as amended.
5.13 No single or partial exercise, or delay in the exercise, of
any right or power under, this Agreement, shall preclude other
or further exercise of the rights and powers under this
Agreement. The
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<PAGE> 34
unenforceability of any provision of this Agreement shall not
affect the enforceability of the remainder of this Agreement.
This Agreement constitutes the entire agreement of Debtor and
Bank with respect to the subject matter of this Agreement. No
amendment or modification of this Agreement shall be effective
unless the same shall be in writing and signed by Debtor and an
authorized officer of Bank. This Agreement shall be governed by
and construed in accordance with the internal laws of the State
of California, without regard to conflict of laws principles.
5.14 To the extent that any of the Indebtedness is payable upon
demand, nothing contained in this Agreement shall modify the
terms and conditions of that Indebtedness nor shall anything
contained in this Agreement prevent Bank from making demand,
without notice and with or without reason, for immediate
payment of any or all of that Indebtedness at any time(s),
whether or not an Event of Default has occurred.
5.15 Debtor's chief executive office is located and shall be
maintained at
233 South Hillview Drive
----------------------------------------------------------------
STREET ADDRESS
Milpitas CA 95035
----------------------------------------------------------------
CITY STATE ZIP CODE COUNTY
If Collateral is located at other than the chief executive
office, such Collateral is located and shall be maintained.
----------------------------------------------------------------
STREET ADDRESS
----------------------------------------------------------------
CITY STATE ZIP CODE COUNTY
Collateral shall be maintained only at the locations
identified in this Section 5.15.
5.16 A carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement under the Uniform
Commercial Code and may be filed by Bank in any filing office.
5.17 This Agreement shall be terminated only by the filing of a
termination statement in accordance with the applicable
provisions of the Uniform Commercial Code, but the obligations
contained in Section 2.14 of this Agreement shall survive
termination.
6. DEBTOR AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PART , AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF
THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT
WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING
THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS
AGREEMENT OR THE INDEBTEDNESS.
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<PAGE> 35
7. Special Provisions Applicable to this Agreement. (*None, if left blank)
DEBTOR: Sipex Corporation
------------------------------------
DEBTOR NAME TYPED/PRINTED
By: /s/ Frank DiPietro
----------------------------------------
SIGNATURE OF
Its: EXE VP
--------------------------------------
TITLE (If applicable)
By:
----------------------------------------
SIGNATURE OF
Its:
---------------------------------------
TITLE (If applicable)
By:
----------------------------------------
SIGNATURE OF
Its:
---------------------------------------
TITLE (If applicable)
Borrower(s):
Sipex Corporation
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