the
default could reasonably be expected to cause a Material Adverse Change.
5.2
COLLATERAL.
BORROWER HAS GOOD TITLE TO THE
COLLATERAL, FREE OF LIENS EXCEPT PERMITTED LIENS.
BORROWER HAS NO DEPOSIT
ACCOUNT, OTHER THAN THE DEPOSIT ACCOUNTS WITH BANK AND DEPOSIT ACCOUNTS
DESCRIBED IN THE PERFECTION CERTIFICATE DELIVERED TO BANK IN CONNECTION
HEREWITH.
THE COLLATERAL IS NOT IN THE POSSESSION OF ANY THIRD PARTY BAILEE
(SUCH AS A WAREHOUSE), UNLESS BORROWER HAS COMPLIED WITH THE PROVISIONS OF THIS
SECTION 5.2 WITH RESPECT THERETO.
EXCEPT AS HEREAFTER DISCLOSED TO BANK IN
WRITING BY BORROWER, NONE OF THE COMPONENTS OF THE COLLATERAL SHALL BE
MAINTAINED AT LOCATIONS OTHER THAN AS PROVIDED IN THE PERFECTION CERTIFICATE.
IN THE EVENT THAT BORROWER, AFTER THE DATE HEREOF, INTENDS TO STORE OR
OTHERWISE DELIVER ANY PORTION OF THE COLLATERAL TO A BAILEE, THEN BORROWER WILL
FIRST RECEIVE THE WRITTEN CONSENT OF BANK AND SUCH BAILEE MUST ACKNOWLEDGE IN
WRITING THAT THE BAILEE IS HOLDING SUCH COLLATERAL FOR THE BENEFIT OF BANK. ALL
INVENTORY IS IN ALL MATERIAL RESPECTS OF GOOD AND MARKETABLE QUALITY, FREE FROM
MATERIAL DEFECTS.
BORROWER IS THE SOLE OWNER OF THE INTELLECTUAL PROPERTY,
EXCEPT FOR NON-EXCLUSIVE LICENSES GRANTED TO ITS CUSTOMERS IN THE ORDINARY
COURSE OF BUSINESS.
EACH PATENT IS VALID AND ENFORCEABLE AND NO PART OF THE
INTELLECTUAL PROPERTY HAS BEEN JUDGED INVALID OR UNENFORCEABLE, IN WHOLE OR IN
PART, AND NO CLAIM HAS BEEN MADE THAT ANY PART OF THE INTELLECTUAL PROPERTY
VIOLATES THE RIGHTS OF ANY THIRD PARTY {EXCEPT TO THE EXTENT SUCH CLAIM COULD
NOT REASONABLY BE EXPECTED TO CAUSE A MATERIAL ADVERSE CHANGE.
5.3
LITIGATION.
EXCEPT AS SHOWN IN THE PERFECTION
CERTIFICATE, AS OF THE DATE HEREOF, THERE ARE NO ACTIONS OR PROCEEDINGS PENDING
OR, TO THE KNOWLEDGE OF BORROWER'S RESPONSIBLE OFFICERS OR LEGAL COUNSEL,
THREATENED BY OR AGAINST BORROWER OR ANY SUBSIDIARY IN WHICH AN ADVERSE DECISION
COULD REASONABLY BE EXPECTED TO CAUSE A MATERIAL ADVERSE CHANGE.
5.4
NO MATERIAL DETERIORATION IN FINANCIAL
STATEMENTS.
ALL CONSOLIDATED FINANCIAL STATEMENTS FOR BORROWER AND ANY
SUBSIDIARY DELIVERED TO BANK FAIRLY PRESENT IN ALL MATERIAL RESPECTS BORROWER'S
CONSOLIDATED FINANCIAL CONDITION AND BORROWER'S CONSOLIDATED RESULTS OF
OPERATIONS AS OF THE DATES AND FOR THE PERIODS SPECIFIED.
4
THERE HAS NOT BEEN ANY MATERIAL DETERIORATION IN BORROWER'S CONSOLIDATED
FINANCIAL CONDITION SINCE THE DATE OF THE MOST RECENT FINANCIAL STATEMENTS
SUBMITTED TO BANK.
5.5
SOLVENCY.
THE FAIR SALABLE VALUE OF
BORROWER'S ASSETS (INCLUDING GOODWILL MINUS DISPOSITION COSTS) EXCEEDS THE FAIR
VALUE OF ITS LIABILITIES; AND BORROWER IS ABLE TO PAY ITS DEBTS (INCLUDING TRADE
DEBTS) AS THEY MATURE.
5.6
REGULATORY COMPLIANCE.
BORROWER IS NOT AN
"INVESTMENT COMPANY" OR A COMPANY "CONTROLLED" BY AN "INVESTMENT COMPANY" UNDER
THE INVESTMENT COMPANY ACT OF 1940.
BORROWER IS NOT ENGAGED AS ONE OF ITS
IMPORTANT ACTIVITIES IN EXTENDING CREDIT FOR MARGIN STOCK (UNDER REGULATIONS X,
T AND U OF THE FEDERAL RESERVE BOARD OF GOVERNORS).
BORROWER HAS COMPLIED IN
ALL MATERIAL RESPECTS WITH THE FEDERAL FAIR LABOR STANDARDS ACT.
BORROWER HAS
NOT VIOLATED ANY LAWS, ORDINANCES OR