Document:

Exhibit

10.2

 

VASTERA, INC.

 

LOAN AND SECURITY AGREEMENT

 

 

 

TABLE OF

CONTENTS

 

	

  1.

  	

  DEFINITIONS AND

  CONSTRUCTION

  
	

   

  	

   

  
	

   

  	

  1.1

  	

  Definitions

  
	

   

  	

   

  	

   

  
	

   

  	

  1.2

  	

  Accounting

  Terms

  
	

   

  	

   

  	

   

  
	

  2.

  	

  LOAN AND TERMS OF PAYMENT

  
	

   

  	

   

  
	

   

  	

  2.1

  	

  Credit

  Extensions

  
	

   

  	

   

  	

   

  
	

   

  	

  2.4

  	

  Crediting

  Payments

  
	

   

  	

   

  	

   

  
	

   

  	

  2.5

  	

  Fees

  
	

   

  	

   

  	

   

  
	

   

  	

  2.6

  	

  Term

  
	

   

  	

   

  	

   

  
	

  3.

  	

  CONDITIONS

  OF LOANS

  
	

   

  	

   

  
	

   

  	

  3.1

  	

  Conditions

  Precedent to Initial Credit Extension

  
	

   

  	

   

  	

   

  
	

   

  	

  3.2

  	

  Conditions

  Precedent to All Credit Extensions

  
	

   

  	

   

  	

   

  
	

  4.

  	

  CREATION OF SECURITY

  INTEREST

  
	

   

  	

   

  
	

   

  	

  4.1

  	

  Grant of Security Interest

  
	

   

  	

   

  	

   

  
	

   

  	

  4.2

  	

  Delivery

  of Additional Documentation Required

  
	

   

  	

   

  	

   

  
	

   

  	

  4.3

  	

  Right to

  Inspect

  
	

   

  	

   

  	

   

  
	

  5.

  	

  REPRESENTATIONS AND

  WARRANTIES

  
	

   

  	

   

  
	

   

  	

  5.1

  	

  Due Organization and

  Qualification

  
	

   

  	

   

  	

   

  
	

   

  	

  5.2

  	

  Due Authorization; No

  Conflict

  
	

   

  	

   

  	

   

  
	

   

  	

  5.3

  	

  Collateral

  
	

   

  	

   

  	

   

  
	

   

  	

  5.4

  	

  Intentionally

  Omitted

  
	

   

  	

   

  	

   

  
	

   

  	

  5.5

  	

  Name; Location

  of Chief Executive Office

  
	

   

  	

   

  	

   

  
	

   

  	

  5.6

  	

  Litigation

  
	

   

  	

   

  	

   

  
	

   

  	

  5.7

  	

  No

  Material Adverse Change in Financial Statements

  
	

   

  	

   

  	

   

  
	

   

  	

  5.8

  	

  Solvency, Payment of Debts

  
	

   

  	

   

  	

   

  
	

   

  	

  5.9

  	

  Compliance with

  Laws and Regulations

  
	

   

  	

   

  	

   

  
	

   

  	

  5.10

  	

  Subsidiaries

  
	

   

  	

   

  	

   

  
	

   

  	

  5.11

  	

  Government

  Consents

  
	

   

  	

   

  	

   

  
	

   

  	

  5.12

  	

  Inbound

  Licenses

  
	

   

  	

   

  	

   

  
	

   

  	

  5.13

  	

  Full Disclosure

  
	

   

  	

   

  	

   

  
	

  6.

  	

  AFFIRMATIVE

  COVENANTS

  

 

i

 

	

   

  	

  6.1

  	

  Good Standing

  and Government Compliance

  
	

   

  	

   

  	

   

  
	

   

  	

  6.2

  	

  Financial

  Statements, Reports, Certificates

  
	

   

  	

   

  	

   

  
	

   

  	

  6.3

  	

  Inventory;

  Returns

  
	

   

  	

   

  	

   

  
	

   

  	

  6.4

  	

  Taxes

  
	

   

  	

   

  	

   

  
	

   

  	

  6.5

  	

  Insurance

  
	

   

  	

   

  	

   

  
	

   

  	

  6.6

  	

  Primary

  Depository

  
	

   

  	

   

  	

   

  
	

   

  	

  6.7

  	

  Financial

  Covenants

  
	

   

  	

   

  	

   

  
	

   

  	

  6.8

  	

  Intentionally omitted

  
	

   

  	

   

  	

   

  
	

   

  	

  6.9

  	

  Further

  Assurances

  
	

   

  	

   

  	

   

  
	

  7.

  	

  NEGATIVE

  COVENANTS

  
	

   

  	

   

  
	

   

  	

  7.1

  	

  Dispositions

  
	

   

  	

   

  	

   

  
	

   

  	

  7.2

  	

  Change in Business, Control, Name or

  Jurisdiction of Incorporation.

  
	

   

  	

   

  	

   

  
	

   

  	

  7.3

  	

  Mergers

  or Acquisitions

  
	

   

  	

   

  	

   

  
	

   

  	

  7.4

  	

  Indebtedness

  
	

   

  	

   

  	

   

  
	

   

  	

  7.5

  	

  Encumbrances

  
	

   

  	

   

  	

   

  
	

   

  	

  7.6

  	

  Distributions

  
	

   

  	

   

  	

   

  
	

   

  	

  7.7

  	

  Investments

  
	

   

  	

   

  	

   

  
	

   

  	

  7.8

  	

  Transactions with

  Affiliates

  
	

   

  	

   

  	

   

  
	

   

  	

  7.9

  	

  Subordinated

  Debt

  
	

   

  	

   

  	

   

  
	

   

  	

  7.10

  	

  Inventory

  and Equipment

  
	

   

  	

   

  	

   

  
	

   

  	

  7.11

  	

  Compliance

  
	

   

  	

   

  	

   

  
	

   

  	

  7.12

  	

  Negative Pledge Agreements

  
	

   

  	

   

  	

   

  
	

  8.

  	

  EVENTS OF

  DEFAULT

  
	

   

  	

   

  
	

   

  	

  8.1

  	

  Payment Default

  
	

   

  	

   

  	

   

  
	

   

  	

  8.2

  	

  Covenant

  Default

  
	

   

  	

   

  	

   

  
	

   

  	

  8.3

  	

  Material

  Adverse Change

  
	

   

  	

   

  	

   

  
	

   

  	

  8.4

  	

  Attachment

  
	

   

  	

   

  	

   

  
	

   

  	

  8.5

  	

  Insolvency

  
	

   

  	

   

  	

   

  
	

   

  	

  8.6

  	

  Other

  Agreements

  
	

   

  	

   

  	

   

  
	

   

  	

  8.7

  	

  Subordinated

  Debt

  

 

ii

 

	

   

  	

  8.8

  	

  Judgments

  
	

   

  	

   

  	

   

  
	

   

  	

  8.9

  	

  Misrepresentations

  
	

   

  	

   

  	

   

  
	

   

  	

  8.10

  	

  Guaranty

  
	

   

  	

   

  	

   

  
	

  9.

  	

  BANK’S

  RIGHTS AND REMEDIES

  
	

   

  	

   

  
	

   

  	

  9.1

  	

  Rights

  and Remedies

  
	

   

  	

   

  	

   

  
	

   

  	

  9.2

  	

  Power of

  Attorney

  
	

   

  	

   

  	

   

  
	

   

  	

  9.3

  	

  Accounts

  Collection

  
	

   

  	

   

  	

   

  
	

   

  	

  9.4

  	

  Bank Expenses

  
	

   

  	

   

  	

   

  
	

   

  	

  9.5

  	

  Bank’s Liability for

  Collateral

  
	

   

  	

   

  	

   

  
	

   

  	

  9.6

  	

  Remedies

  Cumulative

  
	

   

  	

   

  	

   

  
	

   

  	

  9.7

  	

  Demand; Protest

  
	

   

  	

   

  	

   

  
	

  10.

  	

  NOTICES

  
	

   

  	

   

  
	

  11.

  	

  CHOICE OF

  LAW AND VENUE; JURY TRIAL WAIVER

  
	

   

  	

   

  
	

  12.

  	

  GENERAL

  PROVISIONS

  
	

   

  	

   

  
	

   

  	

  12.1

  	

  Successors

  and Assigns

  
	

   

  	

   

  	

   

  
	

   

  	

  12.2

  	

  Indemnification

  
	

   

  	

   

  	

   

  
	

   

  	

  12.3

  	

  Time of Essence

  
	

   

  	

   

  	

   

  
	

   

  	

  12.4

  	

  Severability of Provisions

  
	

   

  	

   

  	

   

  
	

   

  	

  12.5

  	

  Amendments in Writing, Integration

  
	

   

  	

   

  	

   

  
	

   

  	

  12.6

  	

  Counterparts

  
	

   

  	

   

  	

   

  
	

   

  	

  12.7

  	

  Survival

  
	

   

  	

   

  	

   

  
	

   

  	

  12.8

  	

  Confidentiality

  

 

iii

 

This Loan And Security Agreement (this

“Agreement”)

is entered into as of July 30, 2002, by and between Comerica Bank-California (“Bank”) and Vastera, Inc.,  a Delaware corporation (“Borrower”).

 

RECITALS

 

Borrower wishes to

obtain credit from time to time from Bank, and Bank desires to extend credit to

Borrower.  This Agreement sets forth the

terms on which Bank will advance credit to Borrower, and Borrower will repay

the amounts owing to Bank.

 

AGREEMENT

 

The parties agree

as follows:

 

1.                                      Definitions

And Construction.

 

1.1          Definitions.  As used in this Agreement, the

following terms shall have the definitions set forth on Exhibit A.

 

1.2          Accounting

Terms.  All

accounting terms not specifically defined on Exhibit A shall be construed in

accordance with GAAP and all calculations shall be made in accordance with

GAAP.  The term “financial statements”

shall include the accompanying notes and schedules.

 

2.                                      Loan And

Terms Of Payment.

 

2.1          Credit Extensions.

 

(a)           Borrower promises

to pay to Bank, in lawful money of the United States of America, the aggregate

unpaid principal amount of all Credit Extensions made by Bank to Borrower,

together with interest on the unpaid principal amount of such Credit Extensions

at rates in accordance with the terms hereof.

 

(b)           Revolving Advances.

 

(i)            Subject to and

upon the terms and conditions of this Agreement (1) Borrower may request

Advances from time to time in an aggregate outstanding principal amount not to

exceed on any date the lesser of (A) the maximum principal amount of the

Committed Revolving Line or (B) the Borrowing Base as of such date, and (2)

amounts borrowed pursuant to this Section 2.1(b) may be repaid and reborrowed

at any time prior to the Revolving Maturity Date, at which time all Advances

under this Section 2.1(b) shall be immediately due and payable.  Borrower may prepay at any time, in whole or

in part, any Advances without penalty or premium.

 

(ii)           Whenever Borrower

desires an Advance, Borrower will notify Bank by facsimile transmission or

telephone no later than 3:00 p.m. Eastern Standard Time, on the Business Day

that the Advance is to be made.  Each

such notification shall be promptly confirmed by a Payment/Advance Form in

substantially the form of Exhibit C. 

Bank is

 

1

 

authorized to make Advances under this Agreement,

based upon instructions received from a Responsible Officer or a designee of a

Responsible Officer, or without instructions if in Bank’s discretion such

Advances are necessary to meet Obligations which have become due and remain

unpaid.  Bank shall be entitled to rely

on any telephonic notice given by a person who Bank reasonably believes to be a

Responsible Officer or a designee thereof, and Borrower shall indemnify and

hold Bank harmless for any damages or loss suffered by Bank as a result of such

reliance.  Bank will credit the amount

of Advances made under this Section 2.1(b) to Borrower’s deposit account.

 

(iii)         As a condition

precedent to the initial Advance, Bank shall, upon prior notice to Borrower,

conduct an audit of Borrower’s Accounts, at Borrower’s expense, the results of

which must be satisfactory to Bank.

 

(c)           Equipment

Advances.

 

(i)            Subject to and

upon the terms and conditions of this Agreement, at any time from the date

hereof through the Tranche A Availability End Date and the Tranche B

Availability End Date, as applicable, Bank agrees to make Advances to Borrower

in two tranches, Tranche A and Tranche B (each an “Equipment Advance”

and collectively, the “Equipment

Advances”).  Borrower may

request Equipment Advances under Tranche A at any time from the date hereof

through the earlier to occur of (a) the Tranche A Availability End Date and (b)

the termination of Bank’s obligation to advance money pursuant to Section

9.1(b).  Borrower may request Equipment

Advances under Tranche B at any time from the day following the Tranche A Availability

End Date through the earlier to occur of (a) the Tranche B Availability End

Date and (b) the termination of Bank’s obligation to advance money pursuant to

Section 9.1(b).  The aggregate

outstanding principal amount of Tranche A Equipment Advances and Tranche B

Equipment Advances, shall not at any time exceed the maximum principal amount

of the Committed Equipment Line.  Each

Equipment Advance shall not exceed 100% of the invoiced amount of new Equipment

and software approved by Bank from time to time, excluding taxes, shipping,

warranty charges, freight discounts and installation expense (“Permitted Equipment”),

which Permitted Equipment Borrower shall have purchased within 90 days prior to

the date of the corresponding Equipment Advance.  The aggregate amount of all Equipment Advances allocated to the

financing of software, taxes, shipping, warranty charges, freight discounts and

installation expenses (“Software

Advances”) shall be limited to $500,000.

 

(ii)           Interest shall

accrue from the date of each Equipment Advance at the rate specified in Section

2.3(a), and shall be payable monthly in arrears commencing on the 30th(1) day

of the month immediately following such Equipment Advance and continuing on the

like day of each month thereafter.

 

(1)           Tranche A Equipment Advances. In addition to monthly

interest payments, the principal amount with respect to any Equipment Advances

that are outstanding under Tranche A on the Tranche A Availability End Date

shall be repaid in 30 equal monthly installments of principal, beginning on the

30th day of the month following the Tranche A Availability End Date, and

continuing on the like day of each month thereafter

 

(1) The day of the month

on which this Agreement is dated.

 

2

 

through the

Equipment Maturity Date, at which time all amounts due in connection with

Tranche A Equipment Advances made under this Section 2.1(c) shall be

immediately due and payable.

 

(2)           Tranche B Equipment Advances. Any Equipment

Advances that are outstanding under Tranche B on the Tranche B Availability End

Date shall be due and payable in 24 equal monthly installments of principal,

beginning on the 30th day of the month following the Tranche B

Availability End Date, and continuing on the like day of each month thereafter

through the Equipment Maturity Date, at which time all amounts due in

connection with Tranche B Equipment Advances made under this Section 2.1(c)

shall be immediately due and payable.

 

(iii)         Equipment Advances,

once repaid, may not be reborrowed. 

Borrower may prepay any Equipment Advances at any time, in whole or in

part, without penalty or premium.

 

(iv)          When Borrower

desires to obtain an Equipment Advance, Borrower shall notify Bank (which

notice shall be irrevocable) by facsimile transmission to be received no later

than 3:00 p.m. Eastern Standard Time three (3) Business Days before the day on

which the Equipment Advance is to be made. 

Such notice shall be substantially in the form of Exhibit C.  The notice shall be signed by a Responsible

Officer or its designee and include a copy of the invoice for any Equipment to

be financed.

 

(d)           Term

Loan.

 

(i)            Subject

to and upon the terms and conditions of this Agreement, on the date hereof Bank

shall make a single Credit Extension to Borrower in an amount not to exceed $4,100,000

(the “Term Loan”)

to pay off all Indebtedness owed by Borrower under the PNC Bank Loan Documents.

 

(ii)           Interest

on the Term Loan shall accrue from the date hereof at the rate specified in

Section 2.3(a), and shall be payable in arrears monthly commencing on August

30th(2), 2002 and continuing on the like day of each month through the Term

Loan Maturity Date.

 

(iii)         In

addition to monthly payments of interest as provided in (ii) above, the

principal balance of the Term Loan shall be repaid in 23 equal monthly

installments of principal, beginning on August 30, 2002, and continuing on the

like day of each month thereafter through the Term Loan Maturity Date, at which

time all amounts due in connection with the Term Loan shall be immediately due

and payable.

 

(iv)          No further Advances

or drawdowns under the Term Loan shall be permitted.

 

(e)           Letter of Credit Usage.  Subject to the availability under the

Committed Revolving Line and in reliance on the representations and warranties

of Borrower set forth herein, at any time and from time to time from the date

hereof through the Business Day

 

(2) The day of the month on which this Agreement is

dated.

 

3

 

immediately prior to the Revolving Maturity Date, Bank

shall issue for the account of Borrower such standby letters of credit (each, a

“Letter of Credit”

and collectively, “Letters

of Credit”) as Borrower may request, not to exceed the aggregate

amount of $2,500,000, which request shall be made by delivering to Bank a duly

executed letter of credit application on Bank’s standard form substantially

similar to Exhibit F attached hereto; provided, however, that the outstanding

and undrawn amounts under all such Letters of Credit which are not cash

collateralized shall be deemed to constitute Advances for the purpose of

calculating availability under the Revolving Facility.  Unless Borrower shall have deposited with

Bank cash collateral in an amount sufficient to cover all undrawn amounts under

each such Letter of Credit and Bank shall have agreed in writing, no Letter of

Credit shall have an expiration date that is later than the earlier of

(i) one year after the date of its issuance or (ii) the fifth

Business Day prior to the Revolving Maturity Date.  All Letters of Credit shall be in form and substance acceptable

to Bank in its sole discretion and shall be subject to the terms and conditions

of Bank’s form application and letter of credit agreement.  Borrower will pay any standard issuance and

other fees that Bank notifies Borrower will be charged for issuing and

processing Letters of Credit for Borrower, including, without limitation, a

letter of credit fee in an amount equal to 1.5% on a per annum basis multiplied

by the face amount of each Letter of Credit, payable quarterly in arrears.

 

(f)            Voluntary Reductions of Commitment.

 

(i)            Voluntary Reductions.  Upon

two Business Days’ written notice to Bank, Borrower may from time to time

voluntarily permanently reduce the Committed Revolving Line.  Each voluntary reduction shall be in a

minimum amount of $2,000,000 or, if greater than $2,000,000, in integral

multiples of $1,000,000.

 

(ii)           Effect of Reductions.  Simultaneously with each voluntary permanent reduction of the

Committed Revolving Line, Borrower shall make a payment of the outstanding

Advances equal to the excess, if any, of (A) the aggregate principal

amount of the outstanding Advances and the face amount of any outstanding and

undrawn Letters of Credit which are not cash collateralized over (B) the

maximum principal amount of the Committed Revolving Line, as so reduced.  Notice of a reduction, once given, shall be

irrevocable.  All such reductions shall

be without penalty or premium.

 

2.2          Overadvances.  If

the aggregate amount of the outstanding Advances exceeds the lesser of the

maximum principal amount of the Committed Revolving Line or the Borrowing Base

at any time, Borrower shall immediately pay to Bank, in cash, the amount of

such excess.

 

4

 

2.3          Interest

Rates, Payments, and Calculations.

 

(a)           Interest

Rates.

 

(i)            Advances.  Except

as set forth in Section 2.3(b), the Advances shall bear interest, on the

outstanding daily balance thereof, at a rate per annum equal to the Prime Rate.

 

(ii)           Equipment Advances.  Except

as set forth in Section 2.3(b), the Equipment Advances shall bear interest, on

the outstanding daily balance thereof, at a rate per annum equal to 0.50% above

the Prime Rate.

 

(iii)         Term

Loan.  Except

as set forth in Section 2.3(b), the Term Loan shall bear interest, on the

outstanding daily balance thereof, at a rate per annum equal to 0.50% above the

Prime Rate.

 

(b)           Late Fee; Default Rate.  If

any payment due hereunder is not made within ten days after the date such

payment is due, Borrower shall pay Bank a late fee equal to the lesser of

(i) 5% of the amount of such unpaid amount or (ii) the maximum amount

permitted to be charged under applicable law. 

All Obligations shall bear interest, from and after the occurrence and

during the continuance of an Event of Default, at a rate equal to five

percentage points above the interest rate applicable immediately prior to the

occurrence of the Event of Default.

 

(c)           Payments. 

Bank shall, at its option and with prior notice to Borrower, charge such

interest, all Bank Expenses, and all Periodic Payments that Borrower fails to

pay when due against any of Borrower’s deposit accounts or against the

Committed Revolving Line, in which case those amounts shall thereafter accrue

interest at the rate then applicable hereunder.  Any interest not paid when due shall be compounded by becoming a

part of the Obligations, and such interest shall thereafter accrue interest at

the rate then applicable hereunder.

 

(d)           Computation.  In

the event the Prime Rate is changed from time to time hereafter, the applicable

rate of interest hereunder shall be increased or decreased, effective as of the

day the Prime Rate is changed, by an amount equal to such change in the Prime

Rate.  All interest chargeable under the

Loan Documents shall be computed on the basis of a 360 day year for the actual

number of days elapsed.

 

2.4          Crediting

Payments.  Prior to the occurrence of an

Event of Default, Bank shall credit a wire transfer of funds, check or other

item of payment to such deposit account or Obligation as Borrower

specifies.  After the occurrence of an

Event of Default, the receipt by Bank of any wire transfer of funds, check, or

other item of payment shall be immediately applied to conditionally reduce

Obligations, but shall not be considered a payment on account unless such

payment is of immediately available federal funds or unless and until such

check or other item of payment is honored when presented for payment.  Notwithstanding anything to the contrary

contained herein, any wire transfer or payment received by Bank after 12:00

noon Pacific time shall be deemed to have been received by Bank as of the

opening of business on the immediately following Business Day.  Whenever any payment to Bank under the Loan

 

5

 

Documents would otherwise be due (except by reason of

acceleration) on a date that is not a Business Day, such payment shall instead

be due on the next Business Day, and additional fees or interest, as the case

may be, shall accrue and be payable for the period of such extension.

 

2.5          Fees.  Borrower shall pay to Bank the

following:

 

(a)           Facility Fee.  On

the Closing Date, a Facility Fee equal to $32,500, which shall be

nonrefundable;

 

(b)           Unused Fee. 

Beginning on September 30, 2002, and continuing on the last day of each

calendar quarter thereafter until the Revolving Maturity Date and on the

Revolving Maturity Date, the Borrower shall pay an unused fee (the “Unused Fee”) to Bank,

in arrears, at an annual rate of thirty-seven and one-half basis points

(0.375%) on the average daily unused portion of the Committed Revolving Line

during the calendar quarter or period then ended.  The Unused Fee shall be computed on the basis of the year of 365

or 366 days, as the case may be, and paid on the actual number of days

elapsed.  The Unused Fee shall be

calculated from the Closing Date.

 

(c)           Letter of Credit Fees.  Letter of Credit Fees in accordance with Section 2.1(e).

 

(d)           Bank Expenses.  On

the Closing Date, all reasonable costs and expenses incurred by the Bank in

connection with the Closing of the facilities evidenced by this Agreement,

including reasonable attorneys’ fees and expenses and, after the Closing Date,

all Bank Expenses incurred after the Closing Date, including reasonable

attorneys’ fees and expenses, as and when they become due.

 

2.6          Term.  This Agreement shall become

effective on the Closing Date and, subject to Section 12.7, shall continue in

full force and effect so long as any Credit Extension shall be available and

for so long as any Letters of Credit are outstanding or available to be

requested hereunder, and until payment in full of the Obligations.

 

3.                                      Conditions Of

Loans.

 

3.1          Conditions

Precedent to Initial Credit Extension.  The obligation of Bank to make

the initial Credit Extension is subject to the condition precedent that Bank

shall have received, in form and substance satisfactory to Bank, the following:

 

(a)           this Agreement;

 

(b)           an officer’s

certificate of Borrower with respect to incumbency and resolutions authorizing

the execution and delivery of this Agreement;

 

(c)           financing

statements (Form UCC-1) with respect to the security interests granted to Bank

by Borrower and Guarantors;

 

(d)           negative pledge

agreements executed by Borrower and Guarantors;

 

6

 

(e)           pledge agreements

executed by Borrower and Vastera International, together with delivery of stock

certificates and stock powers in blank, or arrangements satisfactory to Bank

for the transfer of such stock certificates from PNC Bank to Bank;

 

(f)            agreement to

provide insurance;

 

(g)           evidence of

insurance, satisfactory to Bank, showing Bank as loss payee;

 

(h)           the Guaranty

Agreement and Guarantor Security Agreement executed by Vastera Solution

Services and Vastera International;

 

(i)            payment of the

fees and Bank Expenses then due specified in Section 2.5;

 

(j)            current financial

statements in accordance with Section 6.2;

 

(k)           a payoff letter in

form and substance acceptable to Bank with respect to the obligations owed

under the PNC Loan Facility;

 

(l)            such other

documents, and completion of such other matters, as Bank may reasonably deem

necessary or appropriate.

 

3.2          Conditions

Precedent to All Credit Extensions.  The obligation of Bank to make

each Credit Extension, including the initial Credit Extension, is further

subject to the following conditions:

 

(a)           timely receipt by

Bank of the Payment/Advance Form as provided in Section 2.1; and

 

(b)           the representations

and warranties contained in Section 5 shall be true and correct in all material

respects on and as of the date of such Payment/Advance Form and on the

effective date of each Credit Extension as though made at and as of each such

date (except to the extent of changes resulting from transactions contemplated

by or permitted by this Agreement or the other Loan Documents and changes

occurring in the ordinary course of business that singly or in the aggregate

are not materially adverse and to the extent that such representations and warranties

relate expressly to an earlier date), and no Default or Event of Default shall

have occurred and be continuing, or would exist after giving effect to such

Credit Extension (provided, however, that those representations and warranties

expressly referring to another date shall be true, correct and complete in all

material respects as of such date).  The

making of each Credit Extension shall be deemed to be a representation and

warranty by Borrower on the date of such Credit Extension as to the accuracy of

the facts referred to in this Section 3.2.

 

7

 

4.                                      Creation

Of Security Interest.

 

4.1          Grant of

Security Interest.  Borrower grants and pledges to

Bank a continuing security interest in all presently existing and hereafter

acquired or arising Collateral to secure prompt repayment of any and all

Obligations and to secure prompt performance by Borrower of each of its

covenants and duties under the Loan Documents. 

Except as set forth in the Schedule, such security interest constitutes

a valid, first priority security interest in the presently existing Collateral,

and will constitute a valid, first priority security interest in later-acquired

Collateral; provided, however, that

such priority shall be subject only to Liens described in clause (l) of the

definition of Permitted Liens. 

Notwithstanding any termination, Bank’s Lien on the Collateral shall

remain in effect for so long as any Obligations are outstanding.

 

4.2          Delivery of

Additional Documentation Required.  Borrower shall from time to time

execute and deliver to Bank, at the request of Bank, all Negotiable Collateral,

all financing statements and other documents that Bank may reasonably request,

in form satisfactory to Bank, to perfect and continue perfected Bank’s security

interests in the Collateral and in order to fully consummate all of the

transactions contemplated under the Loan Documents.

 

4.3          Right to

Inspect.  Bank (through any of its

officers, employees, or agents) shall have the right, upon reasonable prior

notice, from time to time during Borrower’s usual business hours but no more

than twice a year (unless an Event of Default has occurred and is continuing),

to inspect Borrower’s Books and to make copies thereof in order to verify

Borrower’s financial condition.

 

5.                                      Representations

And Warranties.

 

Borrower

represents and warrants as follows:

 

5.1          Due

Organization and Qualification.  Borrower and each Subsidiary is a

corporation duly existing under the laws of its state of incorporation and

qualified and licensed to do business in any state in which the conduct of its

business or its ownership of property requires that it be so qualified, except

where the failure to do so could not reasonably be expected to cause a Material

Adverse Effect.

 

5.2          Due

Authorization; No Conflict.  The execution, delivery, and

performance of the Loan Documents are within Borrower’s powers, have been duly

authorized, and are not in conflict with nor constitute a breach of any

provision contained in Borrower’s Articles of Incorporation or Bylaws, nor will

they constitute an event of default under any material agreement by which

Borrower is bound.  Borrower is not in

default under any agreement by which it is bound, which default could have a

Material Adverse Effect.

 

5.3          Collateral.  Borrower has good title to the

Collateral, free and clear of Liens, except for Permitted Liens.  The Eligible Accounts are bona fide existing

obligations.  The property giving rise

to such Eligible Accounts has been delivered to the account debtor or its agent

for immediate shipment to and unconditional acceptance by the account

debtor.  Borrower has not received

notice of actual or imminent Insolvency Proceeding of any account debtor whose accounts

are included in any Borrowing Base Certificate as an Eligible Account.  All Inventory is in all material respects of

good and marketable quality, free from all material defects, except for

Inventory for which adequate reserves have been made.

 

8

 

5.4          Intentionally

Omitted.

 

5.5          Name;

Location of Chief Executive Office.  Except as disclosed in the

Schedule, Borrower has not done business under any name other than that

specified on the signature page hereof. 

The chief executive office of Borrower is located at the address

indicated in Section 10 hereof.

 

5.6          Litigation.  Except as set forth in the

Schedule, there are no actions or proceedings pending by or against Borrower or

any Subsidiary before any court or administrative agency in which a likely

adverse decision could reasonably be expected to have a Material Adverse

Effect, or a material adverse effect on Borrower’s interest, or Bank’s security

interest, in the Collateral.

 

5.7          No Material

Adverse Change in Financial Statements.  All consolidated financial

statements related to Borrower and any Subsidiary that are delivered by

Borrower to Bank fairly present in all material respects Borrower’s

consolidated financial condition as of the date thereof and Borrower’s

consolidated results of operations for the period then ended.  There has not been a material adverse change

in the consolidated financial condition of Borrower since the date of the most

recent financial statements submitted to Bank.

 

5.8          Solvency, Payment

of Debts.  Borrower is generally able to pay

its debts (including trade debts) as and when they mature; the fair saleable

value of Borrower’s assets (including goodwill minus disposition costs) exceeds

the fair value of its liabilities; and Borrower is not left with unreasonably

small capital after the transactions contemplated by this Agreement.

 

5.9          Compliance

with Laws and Regulations.  To the best of the Borrower’s

knowledge, Borrower and each of its Subsidiaries have met the minimum funding

requirements of ERISA with respect to any employee benefit plans subject to

ERISA.  To the best knowledge of

Borrower, no event has occurred resulting from Borrower’s failure to comply

with ERISA that is reasonably likely to result in Borrower’s incurring any

liability that could have a Material Adverse Effect.  Borrower is not an “investment company” or a company “controlled” by an “investment company”

within the meaning of the Investment Company Act of 1940.  Borrower is not engaged principally, or as

one of the important activities, in the business of extending credit for the

purpose of purchasing or carrying margin stock (within the meaning of

Regulations T and U of the Board of Governors of the Federal Reserve System).  Borrower has complied in all material

respects with all the provisions of the Federal Fair Labor Standards Act.  Borrower is in compliance with all

applicable environmental laws, regulations and ordinances except where the

failure to comply is not reasonably likely to have a Material Adverse

Effect.  Borrower has not violated any

statutes, laws, ordinances or rules applicable to it, violation of which could

have a Material Adverse Effect. 

Borrower and each Subsidiary have filed or caused to be filed, except

for any extensions properly filed, all tax returns required to be filed, and

have paid, or have made adequate provision for the payment of, all taxes

reflected therein except those being contested in good faith with adequate

reserves under GAAP.

 

5.10        Subsidiaries.  Borrower does not own any stock,

partnership interest or other equity securities of any Person, except for

Permitted Investments.

 

9

 

5.11        Government

Consents.  Borrower and each Subsidiary have

obtained all consents, approvals and authorizations of, made all declarations

or filings with, and given all notices to, all governmental authorities that

are necessary for the continued operation of Borrower’s business as currently conducted,

except where the failure to do so could not reasonably be expected to cause a

Material Adverse Effect.

 

5.12        Inbound

Licenses.  Except as disclosed on the

Schedule, Borrower is not a party to, nor is bound by, any license or other

agreement that prohibits or otherwise restricts Borrower from granting a

security interest in Borrower’s interest in such license or agreement or any

other property and which accounts for 20% or more of Borrower’s revenue or is

otherwise material to Borrower’s business.

 

5.13        Full

Disclosure.  No representation, warranty or

other statement made by Borrower in any certificate or written statement

furnished to Bank taken together with all such certificates and written

statements furnished to Bank contains any untrue statement of a material fact

or omits to state a material fact necessary in order to make the statements

contained in such certificates or statements not misleading, it being

recognized by Bank that the projections and forecasts provided by Borrower in

good faith and based upon reasonable assumptions are not to be viewed as facts

and that actual results during the period or periods covered by any such

projections and forecasts may differ from the projected or forecasted results.

 

6.                                      Affirmative

Covenants.

 

Borrower covenants

that, until payment in full of all outstanding Obligations, and for so long as

Bank may have any commitment to make a Credit Extension hereunder, Borrower

shall do all of the following:

 

6.1          Good

Standing and Government Compliance.  Borrower shall maintain its and

each of its Subsidiaries’ corporate existence in its jurisdiction of

incorporation and maintain qualification in each jurisdiction in which the

failure to so qualify could have a Material Adverse Effect.  Borrower shall meet, and shall cause each

Subsidiary to meet, the minimum funding requirements of ERISA with respect to

any employee benefit plans subject to ERISA. 

Borrower shall comply, and shall cause each Subsidiary to comply, with

all statutes, laws, ordinances and government rules and regulations to which it

is subject, and shall maintain, and shall cause each of its Subsidiaries to

maintain, in force all licenses, approvals and agreements, the loss of which or

failure to comply with which could have a Material Adverse Effect, or a

material adverse effect on the Collateral or the priority of Bank’s Lien on the

Collateral.

 

6.2          Financial

Statements, Reports, Certificates.  Borrower shall deliver to

Bank:  (a) as soon as available, but no

later than the earlier to occur of 45 days after the end of each fiscal quarter

or 5 days after filing of a Form 10-Q for such quarter with the Securities and

Exchange Commission, a company prepared consolidated balance sheet and income

statement covering Borrower’s consolidated operations during such period, in a

form acceptable to Bank and certified by a Responsible Officer; (b) as soon as

available, but no later than the earlier to occur of 90 days after the end of

each fiscal year of Borrower or 5 days after filing of a Form 10-K for such

fiscal year with the Securities and Exchange Commission, audited consolidated

financial statements of Borrower prepared in accordance with GAAP, consistently

applied,

 

10

 

together with an opinion which is unqualified or

otherwise consented to in writing by Bank on such financial statements of an

independent certified public accounting firm reasonably acceptable to Bank; (c)

if applicable, copies of all statements, reports and notices sent or made

available generally by Borrower to its security holders or to any holders of

Subordinated Debt and all reports on Forms 10-K and 10-Q filed with the

Securities and Exchange Commission; (d) promptly upon receipt of notice

thereof, a report of any legal actions pending or threatened against Borrower

or any Subsidiary that could result in damages or costs to Borrower or any

Subsidiary of $500,000 or more; (e) such budgets, sales projections, operating

plans or other financial information generally prepared by Borrower in the

ordinary course of business as Bank may reasonably request from time to time;

and (f) upon request by Bank, a report signed by Borrower, in form

reasonably acceptable to Bank, listing any applications or registrations that

Borrower has made or filed in respect of any Patents, Copyrights or Trademarks

and the status of any outstanding applications or registrations, as well as any

material change in Borrower’s Patents, Copyrights, or Trademarks.

 

(a)           If there are

Advances or Letters of Credit outstanding, within 30 days after the last day of

each month, Borrower shall deliver to Bank a Borrowing Base Certificate signed

by a Responsible Officer in substantially the form of Exhibit D hereto,

together with aged listings of accounts receivable and accounts payable.

 

(b)           No later than the

earlier to occur of 45 days after the last day of each fiscal quarter or 5 days

after filing of a Form 10-Q for such quarter with the Securities and Exchange

Commission, Borrower shall deliver to Bank with its quarterly financial

statements a Compliance Certificate signed by a Responsible Officer in

substantially the form of Exhibit E hereto.

 

(c)           Bank shall have a

right from time to time hereafter to audit Borrower’s Accounts and appraise

Collateral at Borrower’s expense, provided that such audits will be conducted

no more often than once every 12 months unless an Event of Default has occurred

and is continuing.

 

6.3          Inventory;

Returns.  Borrower shall keep all Inventory

in good and marketable condition, free from all material defects except for

Inventory for which adequate reserves have been made.  Returns and allowances, if any, as between Borrower and its

account debtors shall be on the same basis and in accordance with the usual

customary practices of Borrower, as they exist on the Closing Date.  Borrower shall promptly notify Bank of all

returns and recoveries and of all disputes and claims involving more than

$100,000.

 

6.4          Taxes.  Borrower shall make, and cause

each Subsidiary to make, due and timely payment or deposit of all material

federal, state, and local taxes, assessments, or contributions required of it

by law, including, but not limited to, those laws concerning income taxes,

F.I.C.A., F.U.T.A. and state disability, and will execute and deliver to Bank,

on demand, proof satisfactory to Bank indicating that Borrower or a Subsidiary

has made such payments or deposits and any appropriate certificates attesting

to the payment or deposit thereof; provided that Borrower or a Subsidiary need

not make any payment if the amount or validity of such payment is contested in

good faith by appropriate proceedings and is reserved against (to the extent

required by GAAP) by Borrower.

 

11

 

6.5          Insurance.

 

(a)           Borrower, at its

expense, shall keep the Collateral insured against loss or damage by fire,

theft, explosion, sprinklers, and all other hazards and risks, and in such

amounts, as ordinarily insured against by other owners in similar businesses

conducted in the locations where Borrower’s business is conducted on the date

hereof.  Borrower shall also maintain

liability and other insurance in amounts and of a type that are customary to

businesses similar to Borrower’s.

 

(b)           All such policies

of insurance shall be in such form, with such companies, and in such amounts as

reasonably satisfactory to Bank.  All

policies of property insurance shall contain a lender’s loss payable

endorsement, in a form satisfactory to Bank, showing Bank as an additional loss

payee, and all liability insurance policies shall show Bank as an additional

insured and specify that the insurer must give at least 30 days notice to Bank

before canceling its policy for any reason. 

Upon Bank’s request, Borrower shall deliver to Bank certified copies of

the policies of insurance and evidence of all premium payments.  If no Event of Default has occurred and is

continuing, proceeds payable under any casualty policy will, at Borrower’s

option, be payable to Borrower to replace the property subject to the claim,

provided that any such replacement property shall be deemed Collateral in which

Bank has been granted a first priority security interest.  If an Event of Default has occurred and is

continuing, all proceeds payable under any such policy shall, at Bank’s option,

be payable to Bank to be applied on account of the Obligations.

 

6.6          Primary

Depository.  Borrower shall open an operating

account with Bank on or before the Closing and maintain such an account with

Bank thereafter.  From and after the

date 30 days after the Closing, Borrower shall maintain its primary depository

and operating accounts with Bank.

 

6.7          Financial

Covenants.  Borrower shall at all times

maintain:

 

(a)           Modified Quick Ratio.  A

ratio of Quick Assets to Current Liabilities less Deferred Revenue of at least

2.00 to 1.00 tested for compliance at the end of each calendar  quarter.

 

(b)           Total Liabilities/Tangible Net Worth Ratio.  A ratio of Total Liabilities to Tangible

Net Worth of not more than 1.50 to 1.00.

 

(c)           Quarter Pro-Forma Income/(Loss).  A

Pro-Forma Income/(Loss) in an amount of not more than ($1,500,000) for the

three months ending September 30, 2002; and $0.00 for the three months ending

December 31, 2002 and thereafter, measured quarterly.

 

6.8          Intentionally omitted.

 

6.9          Further

Assurances.  At any time and from time to time

Borrower shall execute and deliver such further instruments and take such

further action as may reasonably be requested by Bank to effect the purposes of

this Agreement.

 

12

 

7.                                      Negative

Covenants.

 

Borrower covenants

and agrees that, so long as any credit hereunder shall be available and until

payment in full of the outstanding Obligations or for so long as Bank may have

any commitment to make any Credit Extensions, Borrower will not do any of the

following without Bank’s prior written consent, which shall not be unreasonably

withheld, conditioned or delayed:

 

7.1          Dispositions.  Convey, sell, lease, transfer or

otherwise dispose of (collectively, to “Transfer”), or permit any of its Subsidiaries

to Transfer, all or any part of its business or property, other than Permitted

Transfers.

 

7.2          Change in

Business, Control, Name or Jurisdiction of Incorporation.  Engage in any business, or permit

any of its Subsidiaries to engage in any business, other than or reasonably

related or incidental to the businesses currently engaged in by Borrower.  Borrower will not have a Change in Control

and will not, without 30 days’ prior written notification to Bank, relocate its

chief executive office, its principal place of business, any office in which it

maintains books or records relating to Collateral owned by it or any office or

facility at which Collateral owned by it is located, or change its jurisdiction

of incorporation, its corporate name or any trade name used to identify it in

the conduct of its business or the ownership of its properties, or its federal

taxpayer identification number.

 

7.3          Mergers or

Acquisitions.  Merge or consolidate, or permit

any of its Subsidiaries to merge or consolidate, with or into any other Person

(other than mergers or consolidations of a Subsidiary into another Subsidiary

or into Borrower), or acquire, or permit any of its Subsidiaries to acquire,

all or substantially all of the capital stock or property of another Person

except Permitted Acquisitions.

 

7.4          Indebtedness.  Create, incur, assume or be or

remain liable with respect to any Indebtedness, or permit any Subsidiary so to

do, other than Permitted Indebtedness.

 

7.5          Encumbrances.  Create, incur, assume or allow

any Lien with respect to any of its property, or assign or otherwise convey any

right to receive income, including the sale of any Accounts, or permit any of

its Subsidiaries so to do, except for Permitted Liens, or covenant to any other

Person that Borrower in the future will refrain from creating, incurring,

assuming or allowing any Lien with respect to any of Borrower’s property.

 

7.6          Distributions.  Pay any dividends or make any

other distribution or payment on account of or in redemption, retirement or

purchase of any capital stock, except that Borrower may repurchase the stock of

former employees pursuant to stock repurchase agreements as long as an Event of

Default does not exist prior to such repurchase or would not exist after giving

effect to such repurchase.

 

7.7          Investments.  Directly or indirectly acquire or

own, or make any Investment in or to any Person, or permit any of its Subsidiaries

so to do, other than Permitted Investments.

 

13

 

7.8          Transactions

with Affiliates.  Directly or indirectly enter into

or permit to exist any material transaction with any Affiliate of Borrower

except for transactions that are in the ordinary course of Borrower’s business,

upon fair and reasonable terms that are no less favorable to Borrower than

would be obtained in an arm’s length transaction with a non-affiliated Person.

 

7.9          Subordinated

Debt.  Make any payment in respect of

any Subordinated Debt, or permit any of its Subsidiaries to make any such

payment, except in compliance with the terms of such Subordinated Debt, or

amend any provision contained in any documentation relating to the Subordinated

Debt without Bank’s prior written consent, other than (a) refinancings

with respect to which the Indebtedness owed by Borrower or any of it

Subsidiaries is not changed and (b) payment of accrued and unpaid interest

of Permitted Indebtedness, provided that such payment is not prohibited under

the terms of a subordination agreement or other intercreditor agreement with

the Bank.

 

7.10        Inventory

and Equipment.  Store the Inventory or the

Equipment with a bailee, warehouseman, or similar party unless Bank has

received a pledge of the warehouse receipt covering such Inventory.  Except for Inventory sold in the ordinary

course of business and except for such other locations as Bank may approve in

writing, Borrower shall keep the Inventory and Equipment only at the locations

set forth in Section 10 and the Schedule, and at such other locations of which

Borrower gives Bank prior written notice and as to which Borrower signs and

files a financing statement where needed to perfect Bank’s security interest.

 

7.11        Compliance.  Become or be controlled by an “investment company,”

within the meaning of the Investment Company Act of 1940, or become principally

engaged in, or undertake as one of its important activities, the business of

extending credit for the purpose of purchasing or carrying margin stock, or use

the proceeds of any Credit Extension for such purpose.  Fail to meet the minimum funding

requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as

defined in ERISA, to occur, fail to comply with the Federal Fair Labor

Standards Act or violate any law or regulation, which violation could

reasonably be expected to have a Material Adverse Effect, or a material adverse

effect on the Collateral or the priority of Bank’s Lien on the Collateral, or

permit any of its Subsidiaries to do any of the foregoing.

 

7.12        Negative

Pledge Agreements.  Make or enter into any agreement (other than

with the Bank) for the benefit of any Person not to grant Liens, except for

such agreements existing on the date hereof and set forth on the Schedule, or

permit the inclusion in any contract to which it becomes a party of any

provisions that could restrict or invalidate the creation of a security

interest in Borrower’s rights and interests in any Collateral.

 

8.                                      Events Of Default.

 

Any one or more of

the following events shall constitute an Event of Default by Borrower under

this Agreement:

 

8.1          Payment

Default.  If Borrower fails to pay any of

the Obligations and such failure continues for 5 calendar days or more after

the due date, provided that within such 5-day

 

14

 

cure period, the failure to pay shall not be deemed an

Event of Default, but no Credit Extensions will be made;

 

8.2          Covenant

Default.  If Borrower fails to perform any

obligation under Article 6 or violates any of the covenants contained in

Article 7 of this Agreement, or fails or neglects to perform or observe any

other material term, provision, condition, covenant contained in this

Agreement, in any of the Loan Documents, or in any other present or future

agreement between Borrower and Bank and as to any default under such other

term, provision, condition or covenant that can be cured, has failed to cure

such default within ten days after Borrower receives notice thereof or any

officer of Borrower becomes aware thereof; provided, however, that if the

default cannot by its nature be cured within the ten day period or cannot after

diligent attempts by Borrower be cured within such ten day period, and such

default is likely to be cured within a reasonable time, then Borrower shall

have an additional reasonable period (which shall not in any case exceed 30

days) to attempt to cure such default, and within such reasonable time period

the failure to have cured such default shall not be deemed an Event of Default

but no Credit Extensions will be made;

 

8.3          Material

Adverse Change.  If there occurs a Material

Adverse Effect;

 

8.4          Attachment.  If any material portion of

Borrower’s assets is attached, seized, subjected to a writ or distress warrant,

or is levied upon, or comes into the possession of any trustee, receiver or

person acting in a similar capacity and such attachment, seizure, writ or

distress warrant or levy has not been removed, discharged or rescinded within

ten days, or 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, or if a judgment or other claim becomes a lien or encumbrance upon any

material portion of Borrower’s assets, or if a notice of lien, levy, or

assessment is filed of record with respect to any of Borrower’s assets by the

United States Government, or any department, agency, or instrumentality

thereof, or by any state, county, municipal, or governmental agency, and the

same is not paid within ten days after Borrower receives notice thereof,

provided that none of the foregoing shall constitute an Event of Default where

such action or event is stayed or an adequate bond has been posted pending a

good faith contest by Borrower (provided that no Credit Extensions will be

required to be made during such cure period);

 

8.5          Insolvency.  If Borrower becomes insolvent, or

if an Insolvency Proceeding is commenced by Borrower, or if an Insolvency

Proceeding is commenced against Borrower and is not dismissed or stayed within

60 days (provided that no Credit Extensions will be made prior to the dismissal

of such Insolvency Proceeding);

 

8.6          Other

Agreements.  If there is a default in any

agreement to which Borrower is a party with a third party or parties resulting

in a right by such third party or parties, whether or not exercised, to

accelerate the maturity of any Indebtedness in an amount in excess of $500,000

or that could have a Material Adverse Effect;

 

8.7          Subordinated

Debt.  If Borrower makes any payment on

account of Subordinated Debt, except to the extent the payment is allowed under

any subordination agreement entered into with Bank;

 

15

 

8.8          Judgments.  If a judgment or judgments

excluding any judgments which are fully covered by insurance for the payment of

money in an amount, individually or in the aggregate, of at least $1,000,000

shall be rendered against Borrower and shall remain unsatisfied and unstayed

for a period of 30 days (provided that no Credit Extensions will be made prior

to the satisfaction or stay of the judgment); or

 

8.9          Misrepresentations.  If any material misrepresentation

or material misstatement exists now or hereafter in any warranty or

representation set forth herein or in any certificate delivered to Bank by any

Responsible Officer pursuant to this Agreement or to induce Bank to enter into this

Agreement or any other Loan Document.

 

8.10        Guaranty. 

If any guaranty of all or a portion of the Obligations ceases for any

reason to be in full force and effect, or, subject to any applicable cure,

notice or grace period, any guarantor fails to perform any obligation under any

guaranty of all or a portion of the Obligations, or any guarantor revokes or

purports to revoke any guaranty of the Obligations, or any material

misrepresentation or material misstatement exists now or hereafter in any warranty

or representation set forth in any guaranty of all or a portion of the

Obligations or in any certificate delivered to Bank in connection with such

guaranty.

 

9.                                      Bank’s Rights

And Remedies.

 

9.1          Rights and

Remedies.  Upon the occurrence and during

the continuance of an Event of Default, Bank may, at its election, without

notice of its election and without demand, do any one or more of the following,

all of which are authorized by Borrower:

 

(a)           Declare all

Obligations, whether evidenced by this Agreement, by any of the other Loan

Documents, or otherwise, immediately due and payable (provided that upon the

occurrence of an Event of Default described in Section 8.5, all Obligations

shall become immediately due and payable without any action by Bank);

 

(b)           Cease advancing

money or extending credit to or for the benefit of Borrower under this

Agreement or under any other agreement between Borrower and Bank;

 

(c)           Settle or adjust

disputes and claims directly with account debtors for amounts, upon terms and

in whatever order that Bank reasonably considers advisable;

 

(d)           Make such payments

and do such acts as Bank considers necessary or reasonable to protect its

security interest in the Collateral. 

Borrower agrees to assemble the Collateral if Bank so requires, and to

make the Collateral available to Bank as Bank may designate.  Borrower authorizes Bank to enter the

premises where the Collateral is located, to take and maintain possession of

the Collateral, or any part of it, and to pay, purchase, contest, or compromise

any encumbrance, charge, or lien which in Bank’s determination appears to be

prior or superior to its security interest and to pay all expenses incurred in

connection therewith.  With respect to

any of Borrower’s owned premises, Borrower hereby grants Bank a license to

enter into possession of such premises and to occupy the same, without charge,

in order to exercise any of Bank’s rights or remedies provided herein, at law,

in equity, or otherwise;

 

16

 

(e)           Set off and apply

to the Obligations any and all (i) balances and deposits of Borrower held

by Bank, or (ii) indebtedness at any time owing to or for the credit or

the account of Borrower held by Bank;

 

(f)            Ship, reclaim,

recover, store, finish, maintain, repair, prepare for sale, advertise for sale,

and sell (in the manner provided for herein) the Collateral.  Bank is hereby granted a license or other

right, solely pursuant to the provisions of this Section 9.1, to use, without

charge, Borrower’s labels, patents, copyrights, rights of use of any name,

trade secrets, trade names, trademarks, service marks, and advertising matter,

or any property of a similar nature, as it pertains to the Collateral, in

completing production of, advertising for sale, and selling any Collateral and,

in connection with Bank’s exercise of its rights under this Section 9.1,

Borrower’s rights under all licenses and all franchise agreements shall inure

to Bank’s benefit;

 

(g)           Sell the Collateral

at either a public or private sale, or both, by way of one or more contracts or

transactions, for cash or on terms, in such manner and at such places

(including Borrower’s premises) as Bank determines is commercially reasonable,

and apply any proceeds to the Obligations in whatever manner or order Bank

deems appropriate;

 

(h)           Bank may credit bid

and purchase at any public sale; and

 

(i)            Any deficiency

that exists after disposition of the Collateral as provided above will be paid

immediately by Borrower.

 

9.2          Power of

Attorney.  Effective only upon the

occurrence and during the continuance of an Event of Default, Borrower hereby

irrevocably appoints Bank (and any of Bank’s designated officers, or employees)

as Borrower’s true and lawful attorney to: 

(a) send requests for verification of Accounts or notify account debtors

of Bank’s security interest in the Accounts; (b) endorse Borrower’s name on any

checks or other forms of payment or security that may come into Bank’s

possession; (c) sign Borrower’s name on any invoice or bill of lading relating

to any Account, drafts against account debtors, schedules and assignments of

Accounts, verifications of Accounts, and notices to account debtors; (d)

dispose of any Collateral; (e) make, settle, and adjust all claims under and

decisions with respect to Borrower’s policies of insurance; (f) settle and

adjust disputes and claims respecting the accounts directly with account

debtors, for amounts and upon terms which Bank determines to be reasonable; (g)

to modify, in its sole discretion, any intellectual property security agreement

entered into between Borrower and Bank without first obtaining Borrower’s

approval of or signature to such modification by amending Exhibits A, B, and C,

thereof, as appropriate, to include reference to any right, title or interest

in any Copyrights, Patents or Trademarks acquired by Borrower after the

execution hereof or to delete any reference to any right, title or interest in

any Copyrights, Patents or Trademarks in which Borrower no longer has or claims

to have any right, title or interest; and (h) to file, in its sole discretion,

one or more financing or continuation statements and amendments thereto,

relative to any of the Collateral; provided Bank may exercise such power of

attorney to sign the name of Borrower on any of the documents described in

Section 4.2 regardless of whether an Event of Default has occurred.  The appointment of Bank as Borrower’s

attorney in fact, and each and every one of Bank’s rights and powers, being

coupled with an interest, is irrevocable

 

17

 

until all of the Obligations have been fully repaid

and performed and Bank’s obligation to provide advances hereunder is

terminated.

 

9.3          Accounts

Collection.  Upon the occurrence and during

the continuance of an Event of Default, Bank may notify any Person owing funds

to Borrower of Bank’s security interest in such funds and verify the amount of

such Account.  Upon the occurrence and

during the continuance of an Event of Default, Borrower shall collect all

amounts owing to Borrower for Bank, receive in trust all payments as Bank’s

trustee, and immediately deliver such payments to Bank in their original form

as received from the account debtor, with proper endorsements for deposit.

 

9.4          Bank

Expenses.  If Borrower fails to pay any

amounts or furnish any required proof of payment due to third persons or

entities, as required under the terms of this Agreement, then Bank may do any

or all of the following after reasonable notice to Borrower:  (a) make payment of the same or any part

thereof; (b) set up such reserves under the Revolving Facility as Bank deems

necessary to protect Bank from the exposure created by such failure; or (c)

obtain and maintain insurance policies of the type discussed in Section 6.5 of

this Agreement, and take any action with respect to such policies as Bank deems

prudent.  Any amounts so paid or

deposited by Bank shall constitute Bank Expenses, shall be immediately due and

payable, and shall bear interest at the then applicable rate hereinabove

provided, and shall be secured by the Collateral.  Any payments made by Bank shall not constitute an agreement by

Bank to make similar payments in the future or a waiver by Bank of any Event of

Default under this Agreement.

 

9.5          Bank’s

Liability for Collateral.  So long as Bank complies with

reasonable banking practices and Section 9-207 of the UCC, Bank shall not in

any way or manner be liable or responsible for:  (a) the safekeeping of the Collateral; (b) any loss or damage

thereto occurring or arising in any manner or fashion from any cause; (c) any

diminution in the value thereof; or (d) any act or default of any carrier,

warehouseman, bailee, forwarding agency, or other person whomsoever.  All risk of loss, damage or destruction of

the Collateral shall be borne by Borrower.

 

9.6          Remedies

Cumulative.  Bank’s rights and remedies under

this Agreement, the Loan Documents, and all other agreements shall be

cumulative.  Bank shall have all other

rights and remedies not inconsistent herewith as provided under the UCC, by

law, or in equity.  No exercise by Bank

of one right or remedy shall be deemed an election, and no waiver by Bank of

any Event of Default on Borrower’s part shall be deemed a continuing waiver.  No delay by Bank shall constitute a waiver,

election, or acquiescence by it.  No

waiver by Bank shall be effective unless made in a written document signed on

behalf of Bank and then shall be effective only in the specific instance and

for the specific purpose for which it was given.

 

9.7          Demand;

Protest.  Borrower waives demand, protest,

notice of protest, notice of default or dishonor, notice of payment and

nonpayment, notice of any default, nonpayment at maturity, release, compromise,

settlement, extension, or renewal of accounts, documents, Instruments, Chattel

Paper, and guarantees at any time held by Bank on which Borrower may in any way

be liable.

 

18

 

10.                               Notices.

 

Unless otherwise

provided in this Agreement, all notices or demands by any party relating to

this Agreement or any other agreement entered into in connection herewith shall

be in writing and (except for financial statements and other informational

documents which may be sent by first-class mail, postage prepaid) shall be

personally delivered or sent by a recognized overnight delivery service,

certified mail, postage prepaid, return receipt requested, or by telefacsimile

to Borrower or to Bank, as the case may be, at its addresses set forth below:

 

	

  If to Borrower:

  	

   

  	

  Vastera, Inc.

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  45025 Aviation Drive,

  Suite 300

  
	

   

  	

   

  	

  Dulles, Virginia 20166

  
	

   

  	

   

  	

  Attn:  Philip Balsamo, Chief Financial Officer

  
	

   

  	

   

  	

  Telephone:  (703) 661-9006

  
	

   

  	

   

  	

  Facsimile:  (703) 661-8497

  
	

   

  	

   

  	

   

  
	

  With a copy to:

  	

   

  	

  Vastera,

  Inc.

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  45025 Aviation Drive, Suite 300

  
	

   

  	

   

  	

  Dulles, Virginia 20166

  
	

   

  	

   

  	

  Attn:  Brian

  D. Henderson, Vice President

  
	

   

  	

   

  	

  Corporate and Legal Affairs

  
	

   

  	

   

  	

  Telephone: 

  (703) 661-9006

  
	

   

  	

   

  	

  Facsimile: 

  (703) 661-8497

  
	

   

  	

   

  	

   

  
	

  If to Bank:

  	

   

  	

  Comerica Bank-California

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  9920 South La Cienega

  Boulevard, Suite 1401

  
	

   

  	

   

  	

  Inglewood, CA 90301

  
	

   

  	

   

  	

  Attn:  Manager

  
	

   

  	

   

  	

  Facsimile:  (310) 338-6110

  
	

   

  	

   

  	

   

  
	

  With a copy to:

  	

   

  	

  Comerica Bank-California

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  11921 Freedom Drive, Suite 920

  
	

   

  	

   

  	

  Reston, VA 20190

  
	

   

  	

   

  	

  Attn:  Peter

  Gibson

  
	

   

  	

   

  	

  Telephone: 

  (703) 464-7228

  
	

   

  	

   

  	

  Facsimile: 

  (703) 467-9308

  

 

The parties hereto

may change the address at which they are to receive notices hereunder, by

notice in writing in the foregoing manner given to the other.

 

19

 

11.                               Choice

Of Law And Venue; Jury Trial Waiver.

 

This Agreement

shall be governed by, and construed in accordance with, the internal laws of

the State of California, without regard to principles of conflicts of law.  Each of Borrower and Bank hereby submits to

the exclusive jurisdiction of the state and Federal courts located in the

County of Santa Clara, State of California. 

BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY

TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE

LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING

CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW

OR STATUTORY CLAIMS.  EACH PARTY RECOGNIZES

AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT

TO ENTER INTO THIS AGREEMENT.  EACH

PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL

COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS

FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

 

12.                               General

Provisions.

 

12.1        Successors

and Assigns.  This Agreement shall bind and

inure to the benefit of the respective successors and permitted assigns of each

of the parties; provided, however, that neither this Agreement nor any rights

hereunder may be assigned by Borrower without Bank’s prior written consent,

which consent may be granted or withheld in Bank’s sole discretion.  Bank shall have the right without the

consent of or notice to Borrower to sell, transfer, negotiate, or grant

participation in all or any part of, or any interest in, Bank’s obligations,

rights and benefits hereunder.

 

12.2        Indemnification.  Borrower shall defend, indemnify

and hold harmless Bank and its officers, employees, and agents against:  (a) all obligations, demands, claims, and

liabilities claimed or asserted by any other party in connection with the

transactions contemplated by this Agreement; and (b) all losses or Bank

Expenses in any way suffered, incurred, or paid by Bank as a result of or in

any way arising out of, following, or consequential to transactions between

Bank and Borrower whether under this Agreement, or otherwise (including without

limitation reasonable attorneys fees and expenses), except for losses caused by

Bank’s gross negligence or willful misconduct.

 

12.3        Time of

Essence.  Time is of the essence for the

performance of all obligations set forth in this Agreement.

 

12.4        Severability

of Provisions.  Each provision of this Agreement

shall be severable from every other provision of this Agreement for the purpose

of determining the legal enforceability of any specific provision.

 

12.5        Amendments in Writing,

Integration.  All amendments to or terminations of this

Agreement must be in writing.  All prior

agreements, understandings, representations, warranties, and negotiations

between the parties hereto with respect to the subject matter of this

Agreement, if any, are merged into this Agreement and the Loan Documents.

 

20

 

12.6        Counterparts.  This Agreement may be executed in

any number of counterparts and by different parties on separate counterparts,

each of which, when executed and delivered, shall be deemed to be an original,

and all of which, when taken together, shall constitute but one and the same

Agreement.

 

12.7        Survival.  All covenants, representations

and warranties made in this Agreement shall continue in full force and effect

so long as any Obligations remain outstanding. 

The obligations of Borrower to indemnify Bank with respect to the

expenses, damages, losses, costs and liabilities described in Section 12.2

shall survive until all applicable statute of limitations periods with respect

to actions that may be brought against Bank have run.

 

12.8        Confidentiality.  In handling any confidential

information Bank and all employees and agents of Bank shall exercise the same

degree of care that Bank exercises with respect to its own proprietary

information of the same types to maintain the confidentiality of any non-public

information thereby received or received pursuant to this Agreement except that

disclosure of such information may be made (i) to the subsidiaries or

affiliates of Bank in connection with their present or prospective business

relations with Borrower, (ii) to prospective transferees or purchasers of

any interest in the Loans, provided that they have entered into a comparable

confidentiality agreement in favor of Borrower and have delivered a copy to

Borrower, (iii) as required by law, regulations, rule or order, subpoena,

judicial order or similar order, (iv) as may be required in connection with the

examination, audit or similar investigation of Bank and (v) as Bank may

determine in connection with the enforcement of any remedies hereunder.  Confidential information hereunder shall not

include information that either:  (a) is

in the public domain or in the knowledge or possession of Bank when disclosed

to Bank, or becomes part of the public domain after disclosure to Bank through

no fault of Bank; or (b) is disclosed to Bank by a third party, provided Bank

does not have actual knowledge that such third party is prohibited from

disclosing such information.

 

In Witness Whereof, the parties

hereto have caused this Agreement to be executed as of the date first above

written.

 

	

   

  	

  Vastera,

  Inc.

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  Title:

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  Comerica

  Bank-California

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  Title:

  	

   

  	

   

  
					

 

21

 

Exhibit A

 

DEFINITIONS

 

“Accounts” means all presently

existing and hereafter arising accounts, contract rights, and all other forms

of obligations owing to Borrower arising out of the sale or lease of goods

(including, without limitation, the licensing of software and other technology)

or the rendering of services by Borrower, whether or not earned by performance,

and any and all credit insurance, guaranties, and other security therefor, as

well as all merchandise returned to or reclaimed by Borrower and Borrower’s

Books relating to any of the foregoing.

 

“Advance” or “Advances” means a

cash advance or cash advances under the Revolving Facility.

 

“Affiliate” means,

with respect to any Person, any Person that owns or controls directly or

indirectly such Person, any Person that controls or is controlled by or is

under common control with such Person, and each of such Person’s senior

executive officers, directors, and partners.

 

“Bank Expenses” means

all:  reasonable costs or expenses

(including reasonable attorneys’ fees and expenses) incurred in connection with

the administration and enforcement of the Loan Documents;  reasonable Collateral audit fees; and Bank’s

reasonable attorneys’ fees and expenses incurred in amending, enforcing or

defending the Loan Documents (including fees and expenses of appeal), incurred

before, during and after an Insolvency Proceeding, whether or not suit is

brought.

 

“Borrower’s Books”

means all of Borrower’s books and records including:  ledgers; records concerning Borrower’s assets or liabilities, the

Collateral, business operations or financial condition; and all computer

programs, or tape files, and the equipment, containing such information.

 

“Borrowing Base”

means, at any date, an amount equal to 80% of Eligible Accounts, as determined

by Bank as of such date with reference to the most recent Borrowing Base

Certificate delivered by Borrower.

 

“Business Day” means

any day that is not a Saturday, Sunday, or other day on which banks in the

State of California are authorized or required to close.

 

“Capitalized Lease” means

any lease of property by Borrower or a Subsidiary of Borrower, as lessee, which

would be capitalized in accordance with GAAP.

 

“Capitalized Lease Obligations”

means the amount of the obligations of Borrower and its Subsidiaries under

Capitalized Leases which would be shown as a liability of Borrower or such

Subsidiary in accordance with GAAP.

 

“Cash Equivalents”

means (a) securities issued or fully guaranteed or insured by the United States

government or any agency thereof maturing not more than six (6) months from the

date of acquisition; (b) certificates of deposit, time deposits, repurchase

agreements, reverse

 

 

repurchase agreements, or

bankers’ acceptances, having in each case a tenor of not more than six (6)

months, issued by the Lenders, any affiliate of the Lenders or any U.S.

commercial bank or any branch or agency of any non-U.S. bank licensed to

conduct business in the United States having combined capital and surplus of

not less than $250,000,000; (c) commercial paper of any issuer rated at least

a-1 by Standard & Poor’s Rating Group, a division of McGraw-Hill Companies,

or P-1 by Moody’s Investors Service Inc. and in either case having a tenor of

not more than three (3) months; provided,

however, that only those Cash Equivalents with maturities not to

exceed 90 days shall be included in the definition of “Quick Assets”.

 

“Change of Control”

means within a period of twelve (12) consecutive calendar months (i) (a)

together with individuals who were directors of Borrower on the first day of

such period (b) individuals whose election by Borrower’s Board of Directors or

whose nomination by shareholders of Borrower was approved by a majority of

Borrower’s Board of Directors then still in office who were either directors at

the beginning of such period or whose election or nomination for election was

previously so approved, collectively shall cease to constitute a majority of

the board of directors of Borrower, or (ii) a Person or group of Persons acting

in concert and who is not (a) an Existing Shareholder or (b) an Affiliate of

shareholders of Borrower on the first day of such period or (c) a Person who is

eligible to report their ownership of capital stock of Borrower on Form 13G

filed with the Securities and Exchange Commission shall acquire thirty percent

(30%) or more of the issued and outstanding capital stock of Borrower on a

fully diluted basis, taking into account all issued and outstanding stock

options and warrants to purchase capital stock.

 

“Chattel Paper” means any “chattel

paper,” as such term is defined in Section 9105(1)(b) of the UCC, now owned or

hereafter acquired by Borrower or in which Borrower now holds or hereafter

acquires an interest.

 

“Closing Date” means

the date of this Agreement.

 

“Collateral” means the

property described on Exhibit B attached hereto and all Negotiable Collateral

to the extent not described on Exhibit B, except to the extent any such

property or rights (i) are nonassignable by their terms without the

consent of the licensor thereof or another party (but only to the extent such

prohibition on transfer is enforceable under applicable law, including, without

limitation, Section 9318(4) of the UCC), or (ii) the granting of a

security interest therein is contrary to applicable law or the terms of the

agreement pursuant to which the rights or property is acquired, provided that

upon the cessation of any such restriction or prohibition, such property shall

automatically become part of the Collateral.

 

“Committed Equipment Line”

means credit extensions of up to $5,000,000.

 

“Committed Revolving Line”

means a credit extension of up to $10,000,000.

 

“Contingent Obligation”

means, as applied to any Person, any direct or indirect liability, contingent

or otherwise, of that Person with respect to (i) any indebtedness, lease,

dividend, letter of credit or other obligation of another, including, without

limitation, any such obligation directly or indirectly guaranteed, endorsed,

co-made or discounted or sold with recourse by that Person, or in respect of

which that Person is otherwise directly or indirectly liable; (ii) any

obligations

 

2

 

with respect to undrawn

letters of credit issued for the account of that Person; and (iii) all

obligations arising under any interest rate, currency or commodity swap

agreement, interest rate cap agreement, interest rate collar agreement, or

other agreement or arrangement designated to protect a Person against

fluctuation in interest rates, currency exchange rates or commodity prices;

provided, however, that the term “Contingent Obligation” shall not include

endorsements for collection or deposit in the ordinary course of business.  The amount of any Contingent Obligation

shall be deemed to be an amount equal to the stated or determined amount of the

primary obligation in respect of which such Contingent Obligation is made or,

if not stated or determinable, the maximum reasonably anticipated liability in

respect thereof as determined by such Person in good faith; provided, however,

that such amount shall not in any event exceed the maximum amount of the

obligations under the guarantee or other support arrangement.

 

“Copyrights” means any

and all copyright rights, copyright applications, copyright registrations and

like protections in each work or authorship and derivative work thereof,

whether published or unpublished and whether or not the same also constitutes a

trade secret, now or hereafter existing, created, acquired or held.

 

“Credit Extension”

means each Advance, Equipment Advance, or any other extension of credit by Bank

for the benefit of Borrower hereunder.

 

“Current Liabilities”

means, as of any applicable date, all amounts that should, in accordance with

GAAP, be included as current liabilities on the consolidated balance sheet of

Borrower and its Subsidiaries, as at such date, plus, to the extent not already

included therein, that portion of outstanding Credit Extensions made under this

Agreement that constitutes a current liability under GAAP.

 

“Daily Balance” means

the amount of the Obligations owed at the end of a given day.

 

“Default” means an

event where with the passage of time or the giving of notice would be an Event

of Default.

 

“Deferred Revenue”

means all amounts received in advance of performance under maintenance

contracts and not yet recognized as revenue.

 

“Deposit Accounts” means any “deposit

account” as such term is defined in Section 9105(e) of the UCC, and should

include, without limitation, any demand, time, savings passbook or like

account, now or hereafter maintained by or for the benefit of Borrower, or in

which Borrower now holds or hereafter acquires any interest, with a bank,

savings and loan association, credit union or like organization (including

Bank) and all funds and amounts therein, whether or not restricted or

designated for a particular purpose.

 

“Eligible Accounts”

means those Accounts that arise in the ordinary course of Borrower’s business

that comply with all of Borrower’s representations and warranties to Bank set

forth in Section 5.3; provided, that Bank may change the standards of

eligibility by giving Borrower 30 days prior written notice.  Unless otherwise agreed to by Bank, Eligible

Accounts shall not include the following:

 

(a) Accounts that

the account debtor has failed to pay within 90 days of invoice date;

 

3

 

(b) Accounts with

respect to an account debtor, 25% of whose Accounts the account debtor has

failed to pay within 90 days of invoice date;

 

(c) Accounts with

respect to which the account debtor is an officer, employee, or agent of

Borrower;

 

(d) Accounts with

respect to which goods are placed on consignment, guaranteed sale, sale or

return, sale on approval, bill and hold, or other terms by reason of which the

payment by the account debtor may be conditional;

 

(e) Accounts

(other than Accounts of Ford Motor Company) with respect to which the account

debtor is an Affiliate of Borrower;

 

(f) Accounts with

respect to which the account debtor does not have its principal place of

business in the United States, except for Eligible Foreign Accounts;

 

(g) Accounts with

respect to which the account debtor is the United States or any department,

agency, or instrumentality of the United States;

 

(h) Accounts with

respect to which Borrower is liable to the account debtor for goods sold or

services rendered by the account debtor to Borrower, but only to the extent of

any amounts owing to the account debtor against amounts owed to Borrower;

 

(i) Accounts

with respect to an account debtor, including Subsidiaries and Affiliates, whose

total obligations to Borrower exceed 20% of all Accounts, to the extent such

obligations exceed the aforementioned percentage, except as approved in writing

by Bank;

 

(j) Accounts with

respect to which the account debtor disputes liability or makes any claim with

respect thereto as to which Bank believes, in its sole discretion, that there

may be a basis for dispute (but only to the extent of the amount subject to

such dispute or claim), or is subject to any Insolvency Proceeding, or becomes

insolvent, or goes out of business; and

 

(k) Accounts the

collection of which Bank reasonably determines after inquiry and consultation

with Borrower to be doubtful.

 

“Eligible Foreign Accounts”

means Accounts with respect to which the account debtor does not have its

principal place of business in the United States and that (i) are

supported by one or more letters of credit in an amount and of a tenor, and

issued by a financial institution, acceptable to Bank, or (ii) that Bank

approves on a case-by-case basis.

 

“Equipment” means all

present and future machinery, equipment, tenant improvements, furniture,

fixtures, vehicles, tools, parts and attachments in which Borrower has any

interest.

 

“Equipment Advance” or

“Equipment Advances”

has the meaning set forth in Section 2.1(c).

 

“Equipment Line” means

a Credit Extension of up to $5,000,000.

 

4

 

“Equipment Maturity Date”

means July 30, 2005.

 

“ERISA” means the

Employee Retirement Income Security Act of 1974, as amended, and the

regulations thereunder.

 

“Event of Default” has

the meaning assigned in Article 8.

 

“Existing Shareholder”

means a holder of the Borrower’s capital stock as of the date hereof.

 

“GAAP” means generally

accepted accounting principles as in effect from time to time in the United

States.

 

“Guarantor”  means each Subsidiary of Borrower in

existence on the Closing Date and each Person which becomes a Subsidiary of

Borrower on and after the Closing Date.

 

“Guarantor Security Agreement”

means a Guarantor Security Agreement in the form of Exhibit F hereto, together

with all extensions, renewals, amendments, supplements, substitutions and

replacements thereof and thereto.

 

“Guaranty Agreement”

means a Guaranty Agreement in the form of Exhibit G hereto, together with all

extensions, renewals, amendments, supplements, substitutions and replacements

thereof and thereto.

 

“Indebtedness” means

(a) all indebtedness for borrowed money or the deferred purchase price of

property or services, including without limitation reimbursement and other

obligations with respect to surety bonds and letters of credit, (b) all

obligations evidenced by notes, bonds, debentures or similar Instruments, (c)

all capital lease obligations and (d) all Contingent Obligations.

 

“Insolvency Proceeding”

means any proceeding commenced by or against any person or entity under any

provision of the United States Bankruptcy Code, as amended, or under any other

bankruptcy or insolvency law, including assignments for the benefit of creditors,

formal or informal moratoria, compositions, extension generally with its

creditors, or proceedings seeking reorganization, arrangement, or other relief.

 

“Instruments” means any “instrument,”

as such term is defined in Section 9105(1)(i) of the UCC now owned or hereafter

acquired by Borrower or in which Borrower now holds or hereafter acquires any

interest, including, without limitation, all notes, certificated securities,

and other evidences of indebtedness, other than instruments that constitute, or

are a part of a group of writings that constitute, Chattel Paper.

 

“Inventory” means all

present and future inventory in which Borrower has any interest, including

merchandise, raw materials, parts, supplies, packing and shipping materials,

work in process and finished products intended for sale or lease or to be

furnished under a contract of service, of every kind and description now or at

any time hereafter owned by or in the custody or possession, actual or

constructive, of Borrower, including such inventory as is temporarily out of

its custody or possession or in transit and including any returns upon any

accounts or other

 

5

 

proceeds, including

insurance proceeds, resulting from the sale or disposition of any of the

foregoing and any documents of title representing any of the above, and

Borrower’s Books relating to any of the foregoing.

 

“Investment” means any

beneficial ownership of (including stock, partnership interest or other

securities) any Person, or any loan, advance or capital contribution to any

Person.

 

“IRC” means the

Internal Revenue Code of 1986, as amended, and the regulations thereunder.

 

“Lien” means any

mortgage, lien, deed of trust, charge, pledge, security interest or other

encumbrance.

 

“Loan Documents”

means, collectively, this Agreement, any note or notes executed by Borrower,

and any other agreement entered into between Borrower and Bank in connection

with this Agreement, all as amended or extended from time to time.

 

“Loan Party” means

Borrower and each Guarantor.

 

“Material Adverse Effect”

means a material adverse effect on (i) the business operations or

condition (financial or otherwise) of Borrower and its Subsidiaries taken as a

whole or (ii) the ability of Borrower to repay the Obligations or

otherwise perform its obligations under the Loan Documents as and when

required.

 

“Negotiable Collateral”

means all of Borrower’s present and future letters of credit of which it is a

beneficiary, notes, drafts, Instruments, securities, documents of title, and

Chattel Paper, and Borrower’s Books relating to any of the foregoing.

 

“Net Income” means, for any applicable period, the aggregate of all

amounts which, in accordance with GAAP, would be included as net income (or net

loss (including any extraordinary losses)) on a consolidated statement of

income of Borrower and its Subsidiaries for such period.

 

“Obligations” means

all debt, principal, interest, Bank Expenses and other amounts owed to Bank by

Borrower pursuant to this Agreement or any other Loan Document, whether

absolute or contingent, due or to become due, now existing or hereafter

arising, including any interest that accrues after the commencement of an

Insolvency Proceeding and including any debt, liability, or obligation owing from

Borrower to others that Bank may have obtained by assignment or otherwise.

 

“Patents” means all

patents, patent applications and like protections including without limitation

improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part

of the same.

 

“Periodic Payments”

means all installments or similar recurring payments that Borrower may now or

hereafter become obligated to pay to Bank pursuant to the terms and provisions

of any instrument, or agreement now or hereafter in existence between Borrower

and Bank.

 

6

 

“Permitted Acquisitions”

means acquisitions of all or substantially all of the stock or assets of other

entities for aggregate cash consideration (including assumed liabilities) not

exceeding $10,000,000 for all acquisitions that take place after the date

hereof through the Revolving Maturity Date, provided that (a) Borrower has

provided to Bank copies of Borrower’s due diligence in connection with such acquisitions,

including historical financial statements for the acquisition target and pro

forma consolidating projections (the “Pro Forma Projections”), (b) the Pro

Forma Projections confirm that Borrower will be in compliance, on a pro forma

basis, with Section 6.7 prior to the applicable acquisitions and for at least

the two reporting periods immediately following the applicable acquisitions,

and (c) each target company must be in the same line of business as Borrower.

 

“Permitted Indebtedness”

means:

 

(a) Indebtedness

of Borrower or any Subsidiary in favor of Bank arising under this Agreement or

any other Loan Document;

 

(b) Indebtedness

existing on the Closing Date and disclosed in the Schedule;

 

(c) trade payables

incurred in the ordinary course of business;

 

(d) Indebtedness

secured by a lien described in clause (l) of the defined term “Permitted Liens;”

 

(e) Subordinated

Debt,

 

(f) Indebtedness

of Borrower or any Subsidiary in favor of the Borrower or any wholly-owned

Subsidiary of the Borrower (and provided such wholly-owned Subsidiary, if it is

a domestic Subsidiary, has entered into a Guaranty Agreement and a Guarantor

Security Agreement with the Administrative Agent); provided, however, that

loans in favor of foreign Subsidiaries (excluding the loans in favor of foreign

Subsidiaries as of the date hereof and set forth in the Schedule, and extensions and refinancings thereof which do not

increase the principal amount of such indebtedness as of the date of such

extension or refinancing) shall not exceed $5,000,000 in the aggregate at any

time outstanding; and

 

(g) additional

unsecured indebtedness of the Borrower and its Subsidiaries not to exceed in

the aggregate $1,000,000 at any time outstanding.

 

“Permitted Investment”

means:

 

(a) Investments

existing on the Closing Date disclosed in the Schedule;

 

(b) (i) Marketable

direct obligations issued or unconditionally guaranteed by the United States of

America or any agency or any State thereof maturing within one year from the

date of acquisition thereof, (ii) commercial paper maturing no more than

one year from the date of creation thereof and currently having rating of at

least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s

Investors Service, (iii) Bank’s certificates of deposit maturing no more

than one year from the date of investment therein, and (iv) Bank’s money market

accounts;

 

7

 

(c) Repurchases of

stock from former employees or directors of Borrower under the terms of

applicable repurchase agreements in an aggregate amount not to exceed $100,000

in the aggregate in any fiscal year, provided that no Event of Default has

occurred, is continuing or would exist after giving effect to the repurchases;

 

(d) Investments

accepted in connection with Permitted Transfers;

 

(e) loans

permitted under clause (f) of the definition of “Permitted Indebtedness”;

 

(f) Investments

consisting of (i) travel advances and employee relocation loans and other

employee loans and advances in the ordinary course of business, and (ii) loans

to employees, officers or directors relating to the purchase of equity

securities of Borrower or its Subsidiaries pursuant to employee stock purchase

plan agreements approved by Borrower’s Board of Directors;

 

(g) Investments

(including debt obligations) received in connection with the bankruptcy or

reorganization of customers or suppliers and in settlement of delinquent

obligations of, and other disputes with, customers or suppliers arising in the

ordinary course of Borrower’s business;

 

(h) Permitted

Acquisitions;

 

(i) Interest rate

protection or hedge instruments;

 

(j) Loans

permitted under clause (f) of the definition of Permitted Indebtedness;

 

(k) Investments consisting of notes receivable of, or prepaid royalties

and other credit extensions, to customers and suppliers who are not Affiliates,

in the ordinary course of business, provided that this subparagraph (j) shall

not apply to Investments of Borrower in any Subsidiary;

 

(l) Joint ventures

or strategic alliances in the ordinary course of Borrower’s business consisting

of the non-exclusive licensing of technology, the development of technology or

the providing of technical support, provided that any cash Investments by

Borrower do not exceed $100,000 in the aggregate in any fiscal year; and

 

(m) Investments in

Subsidiaries for the purpose of financing Permitted Acquisitions.

 

“Permitted Liens”

means Liens (a) for current taxes and assessments not yet due and payable, (b),

if any, reflected on or in the notes to the most recent balance sheet of

Borrower delivered to the Bank on or prior to the Closing Date, (c) if any,

specified on the Schedule, (d) securing the payment of taxes or charges of

Governmental Authorities not yet delinquent or being contested in good faith by

appropriate proceeding, for which adequate reserves are maintained in

accordance with GAAP provided the same have no priority over any of the Bank’s

security interests; (e) securing claims or demands of materialmen, mechanics,

carriers, warehousemen, landlords and other like Persons, imposed without

action of such parties, provided that the payment thereof is not yet past due

or for which adequate reserves are maintained in accordance with GAAP; (f)

incurred or deposits made in the ordinary course of Borrower’s business in

connection with worker’s compensation, unemployment insurance, social security

and other like laws; (g) in the nature of non-exclusive licenses and

sublicenses of

 

8

 

intellectual property

granted to Persons in the ordinary course of business; (h) arising from

judgments, decrees or attachments to the extent and only so long as such

judgment, decree or attachment has not caused or resulted in an Event of

Default; (i) in favor of customs and revenue authorities arising as a matter of

law to secure payment of customs duties in connection with the importation of

goods; (j) which constitute rights of set-off of a customary nature or bankers’

liens with respect to amounts on deposit, whether arising by operation of law

or by contract, in connection with arrangements entered into with banks in the

ordinary course of business; (k) in favor of lessors of tangible personal

property arising under operating leases, provided that such Liens are limited

to the leased property, any improvements made thereto and the proceeds thereof;

(l) to secure (x) purchase money security interests, as the that term is

defined in the UCC, in property that secures the indebtedness that was incurred

to acquire the property or (y) Capitalized Lease Obligations; (m) securing

interest hedge agreements; (n) deposits or other temporary cash

investments to secure trade contracts and operating leases; (o) on real estate

consisting of easements, rights of way, zoning restrictions and restrictions on

the use of real property; or (p) in favor of or approved by the Bank.

 

“Permitted Transfer”

means the conveyance, sale, lease, transfer or disposition by Borrower or any

Subsidiary of:

 

(a) Inventory in

the ordinary course of business;

 

(b) licenses and

similar arrangements for the use of the property of Borrower or its

Subsidiaries in the ordinary course of business;

 

(c) surplus,

worn-out or obsolete Equipment;

 

(d) Investments

permitted under Section 7.7; and

 

(e) other assets

of Borrower or its Subsidiaries which do not in the aggregate exceed $100,000.

 

“Person” means any

individual, sole proprietorship, partnership, limited liability company, joint

venture, trust, unincorporated organization, association, corporation,

institution, public benefit corporation, firm, joint stock company, estate,

entity or governmental agency.

 

“PNC Bank Loan Documents”

means that certain Amended and Restated Loan Agreement dated as of May 15, 2001

among the Borrower, PNC Bank, National Association and the Bank (the “PNC Loan Agreement”)

and the Loan Documents (as such term is defined in the PNC Loan Agreement)

referenced therein.

 

“PNC Loan Facility”

means that certain equipment loan facility provided by PNC Bank, National

Association and the Bank to Borrower evidenced by the PNC Bank Loan Documents.

 

“Prime Rate” means the

variable rate of interest, per annum, most recently announced by Bank, as its “prime rate,” whether

or not such announced rate is the lowest rate available from Bank.

 

9

 

“Pro-Forma Income/(Loss)”

means Net Income, plus interest expense, plus taxes, plus non-cash charges

(including depreciation, amortization, stock-based compensation, research and

development related charges and one-time restructuring charges), plus cash

restructuring charges (not to exceed $5,000,000 in the aggregate from the date

hereof through the Revolving Maturity Date), less interest income, less

one-time or non-recurring revenue.

 

“Quick Assets” means,

at any date as of which the amount thereof shall be determined, the

unrestricted cash and Cash Equivalents, net billed trade accounts receivable

and investments with maturities not to exceed 90 days, of Borrower determined

in accordance with GAAP.

 

 “Responsible Officer” means each of the Chief

Executive Officer, the Chief Operating Officer, the Chief Financial Officer and

the Controller of Borrower.

 

“Revolving Facility”

means the facility under which Borrower may request Bank to issue Advances, as

specified in Section 2.1(b) hereof.

 

“Revolving Maturity Date”

means July 30, 2004.

 

“Schedule” means the

schedule of exceptions attached hereto, if any.

 

“Subordinated Debt”

means any debt incurred by Borrower that is subordinated to the debt owing by

Borrower to Bank on terms reasonably acceptable to Bank (and identified as

being such by Borrower and Bank).

 

“Subsidiary” means any

corporation or partnership in which (i) any general partnership interest

or (ii) more than 50% of the stock of which by the terms thereof ordinary

voting power to elect the Board of Directors, managers or trustees of the

entity, at the time as of which any determination is being made, is owned by

Borrower, either directly or through an Affiliate.

 

“Tangible Net Worth”

means at any date as of which the amount thereof shall be determined, the sum

of the capital stock and additional paid-in capital plus retained earnings (or

minus accumulated deficit) of Borrower and its Subsidiaries minus intangible

assets, net of amortization, on a consolidated basis determined in accordance

with GAAP.

 

“Term Loan” has the

meaning assigned in Section 2.1(d)(i).

 

“Term Loan Maturity Date”

means June 30, 2004.

 

“Total Liabilities”

means at any date as of which the amount thereof shall be determined, all

obligations that should, in accordance with GAAP be classified as liabilities

on the consolidated balance sheet of Borrower, including in any event

contingent liabilities and all Indebtedness.

 

“Trademarks” means any

trademark and servicemark rights, whether registered or not, applications to

register and registrations of the same and like protections, and the entire

goodwill of the business of Borrower connected with and symbolized by such

trademarks.

 

“Tranche A” has the

meaning set forth in Section 2.1(c)(i).

 

10

 

“Tranche B” has the

meaning set forth in Section 2.1(c)(i).

 

“Tranche A  Availability End Date”

means January 30, 2003.

 

“Tranche B Availability End Date”

means July 30, 2003.

 

“Tranche A Equipment Advance”

means any Equipment Advance(s) made under Tranche A.

 

“Tranche B Equipment Advance”

means any Equipment Advance(s) made under Tranche B.

 

“UCC” means the

Uniform Commercial Code as the same may from time to time be in effect in the

State of California; provided, however, in the event that, by reason of

mandatory provisions of law, any or all of the attachment, perfection or

priority of the Secured Party’s security interest in any collateral is governed

by the Uniform Commercial Code as in effect in a jurisdiction other than the State

of California, the term “UCC” shall mean the Uniform Commercial Code (including

the Articles thereof) as in effect at such time in such other jurisdiction for

purposes of the provisions hereof relating to such attachment, perfection or

priority and for purposes of definitions related to such provisions.  Notwithstanding anything contained herein to

the contrary, the parties intend that the terms used herein which are defined

in the UCC have, at all times, the broadest and most inclusive meanings possible.  Accordingly, if the UCC shall in the future

be amended or held by a court to define any term used herein more broadly or

inclusively than the UCC in effect on the date of this Agreement, then such

term, as used herein, shall be given such broadened meaning.  If the UCC shall in the future be amended or

held by a court to define any term used herein more narrowly, or less

inclusively, than the UCC in effect on the date of this Agreement, such

amendment or holding shall be disregarded in defining terms used in this

Agreement.

 

11

 

DEBTOR                                               VASTERA,

INC.

 

SECURED

PARTY:                             COMERICA

BANK-CALIFORNIA

 

Exhibit B

 

COLLATERAL DESCRIPTION ATTACHMENT 

TO LOAN AND SECURITY AGREEMENT

 

All personal

property of Debtor of every kind, whether presently existing or hereafter

created, written, produced or acquired, including, but not limited to:  (a) all accounts (including

health-care-insurance receivables), chattel paper (including tangible and

electronic chattel paper), deposit accounts, documents (including negotiable

documents), equipment (including all accessions and additions thereto), general

intangibles (including payment intangibles and software), goods (including

fixtures), instruments (including promissory notes), inventory (including all

goods held for sale or lease or to be furnished under a contract of service,

and including returns and repossessions), investment property (including

securities and securities entitlements), letter of credit rights, money, and

all of Debtor’s books and records with respect to any of the foregoing, and the

computers and equipment containing said books and records; and (b) any and all

cash proceeds and/or noncash proceeds of any of the foregoing, including,

without limitation, insurance proceeds, and all supporting obligations and the

security therefor or for any right to payment. 

Notwithstanding the foregoing, the Collateral shall not include any

copyrights, patents, trademarks, servicemarks, and applications therefore and

licenses thereto, now owned or hereafter acquired or created, or any claims for

damages by way of any past, present and future infringement of any of the

foregoing (collectively, the “Intellectual Property”); provided, however, that

the Collateral shall include all accounts and general intangibles that consist

of rights to payment from the sale, licensing or disposition of all or any part

of, or rights in, the Intellectual Property (the “Rights to Payment”).  Notwithstanding the foregoing, if a judicial

authority (including a U.S. Bankruptcy Court) holds that a security interest in

the underlying Intellectual Property is necessary to have a security interest

in the Rights to Payment, then the Collateral shall automatically, and

effective July 30, 2002, include the Intellectual Property only to the extent

necessary to permit perfection of Secured Party’s security interest in the

Rights to Payment.  All terms above have the meanings

given to them in the California Uniform Commercial Code, as amended or

supplemented from time to time, including revised Division 9 of the Uniform

Commercial Code-Secured Transactions, added by Stats. 1999, c.991 (S.B. 45),

Section 35, operative July 1, 2001.

 

 

 

Exhibit C

 

LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM

 

LOAN

PAYMENT/ADVANCE TELEPHONE REQUEST FORM

DEADLINE FOR SAME

DAY PROCESSING IS 3:00 P.M., E.S.T., 3 BUSINESS DAYS PRIOR TO ADVANCE

TO:         [               ]                                                                                                                                              DATE:

FAX #:  [               ]                                                                                                                                               TIME:

 

	

  FROM:   VASTERA, INC.

  
	

  CLIENT

  NAME (BORROWER)

  
	

  REQUESTED

  BY: 

  
	

  AUTHORIZED

  SIGNER’S NAME

  
	

   

  
	

  AUTHORIZED

  SIGNATURE: 

  
	

   

  
	

  PHONE

  NUMBER: 

  
	

   

  
	

  FROM

  ACCOUNT #      

  	

  TO

  ACCOUNT # 

  
	

   

  	

   

  
	

  REQUESTED

  TRANSACTION TYPE

  	

  REQUEST

  DOLLAR AMOUNT

  
	

   

  	

  $

  
	

  PRINCIPAL

  INCREASE (ADVANCE)

  	

  $

  
	

  PRINCIPAL

  PAYMENT (ONLY)

  	

  $

  
	

  INTEREST

  PAYMENT (ONLY)

  	

  $

  
	

  PRINCIPAL

  AND INTEREST (PAYMENT)

  	

  $

  
	

   

  
	

  OTHER

  INSTRUCTIONS: 

  
	

   

  
	

  All

  representations and warranties of Borrower stated in the Loan and Security

  Agreement are true, correct and complete in all material respects as of the

  date of the telephone request for an Advance confirmed by this Borrowing

  Certificate; provided, however, that those representations and warranties

  expressly referring to another date shall be true, correct and complete in

  all material respects as of such date. 

  

  

 

	

  BANK

  USE ONLY

  
	

  TELEPHONE

  REQUEST:

  
	

   

  
	

  The

  following person is authorized to request the loan payment transfer/loan

  advance on the advance designated account and is known to me.

  
	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Authorized

  Requester

  	

  Phone

  #

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Received

  By (Bank)

  	

  Phone

  #

  
	

   

  	

   

  
	

   

  	

   

  
	

  Authorized

  Signature (Bank)

  
						

 

1

 

Exhibit D

 

BORROWING BASE CERTIFICATE

 

Borrower:  Vastera, Inc.                                                                                                                       Lender:  Comerica Bank-California

 

Commitment Amount:  $10,000,000

 

	

  ACCOUNTS RECEIVABLE

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

  1.

  	

  Accounts Receivable

  Book Value as of 

  	

   

  	

  $

  
	

   

  	

  2.

  	

  Additions (please explain

  on reverse)

  	

   

  	

  $

  
	

   

  	

  3.

  	

  TOTAL ACCOUNTS

  RECEIVABLE

  	

   

  	

  $

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  ACCOUNTS RECEIVABLE

  DEDUCTIONS (without duplication)

  	

   

  	

   

  
	

   

  	

  4.

  	

  Amounts over 90 days

  due

  	

  $

  
	

   

  	

  5.

  	

  Balance of 25% over 90

  day accounts

  	

  $

  
	

   

  	

  6.

  	

  Concentration Limits

  	

  $

  
	

   

  	

  7.

  	

  Foreign Accounts

  	

  $

  
	

   

  	

  8.

  	

  Governmental Accounts

  	

  $

  
	

   

  	

  9.

  	

  Contra Accounts

  	

  $

  
	

   

  	

  10.

  	

  Demo Accounts

  	

  $

  
	

   

  	

  11.

  	

  Intercompany/Employee

  Accounts

  	

  $

  
	

   

  	

  12.

  	

  Other (please explain

  on reverse)

  	

  $

  
	

   

  	

  13.

  	

  TOTAL ACCOUNTS

  RECEIVABLE DEDUCTIONS

  	

  $

  
	

   

  	

  14.

  	

  Eligible Accounts (#3

  minus #13)

  	

  $

  
	

   

  	

  15.

  	

  LOAN VALUE OF ACCOUNTS

  (80% of #14)

  	

  $

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  BALANCES

  	

   

  	

   

  	

   

  
	

   

  	

  16.

  	

  Maximum Loan Amount

  	

   

  	

  $

  
	

   

  	

  17.

  	

  Total Funds Available

  [Lesser of #16 or #15]

  	

   

  	

  $

  
	

   

  	

  18.

  	

  Present balance owing

  on Line of Credit

  	

   

  	

  $

  
	

   

  	

  19.

  	

  Outstanding under

  Sublimits (Letters of Credit)

  	

   

  	

  $

  
	

   

  	

  20.

  	

  RESERVE POSITION (#17

  minus #18 and #19)

  	

   

  	

  $

  
								

 

The

undersigned represents and warrants that the foregoing is true, complete and

correct, and that the information reflected in this Borrowing Base Certificate

complies with the representations and warranties set forth in the Loan and Security

Agreement between the undersigned and Comerica Bank-California.

 

	

  Vastera, Inc.

  
	

   

  
	

  By:

  	

   

  	

   

  
	

   

  	

  Authorized Signer

  
				

 

1

 

Exhibit E

 

COMPLIANCE CERTIFICATE

 

TO:         COMERICA BANK-CALIFORNIA

 

FROM:   VASTERA, INC.

 

The undersigned

authorized officer of [BORROWER] hereby certifies that in accordance with the

terms and conditions of the Loan and Security Agreement between Borrower and

Bank (the “Agreement”),

(i) Borrower is in complete compliance for the period ending                 with all required covenants,

including without limitation Section 6.7, except as noted below and

(ii) all representations and warranties of Borrower stated in the

Agreement are true and correct in all material respects as of the date hereof.  Attached herewith are the required documents

supporting the above certification.  The

Officer further certifies that these are prepared in accordance with Generally

Accepted Accounting Principles (GAAP) and are consistently applied from one

period to the next except as explained in an accompanying letter or footnotes.

 

Please

indicate compliance status by circling Yes/No under “Complies”

column.

 

	

  Reporting

  Covenant

  	

   

  	

  Required

  	

   

  	

  Complies

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Quarterly financial statements

  	

   

  	

  Quarterly no later than

  earlier of 45 days or 5 days after filing 10-Q

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  Annual (CPA Audited)

  	

   

  	

  FYE no later than

  earlier of 90 days or 5 days after filing 10-K

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  10K and 10Q

  	

   

  	

  (as applicable)

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  A/R & A/P Agings, Borrowing Base Cert.

  	

   

  	

  Monthly within 30 days

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  A/R Audit

  	

   

  	

  Initial and Annual

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  IP Report

  	

   

  	

  Upon request

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  

 

	

  Financial

  Covenant

  	

   

  	

  Required

  	

   

  	

  Actual

  	

   

  	

  Complies

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Maintain on a Monthly  Basis:

  	

   

  	

   

  	

   

  	

  :1.00

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  Minimum Modified Quick Ratio

  	

   

  	

  2.00:1.00

  	

   

  	

  $

  	

          

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  Minimum Ratio of Total Liabilities to Tangible Net

  Worth

  	

   

  	

  1.50:1.00

  	

   

  	

  $

  	

          

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  Minimum/Maximum Quarterly Pro-Forma Income/(Loss)

  	

   

  	

  ($1,500,000) [for the

  quarter ended 9/30]

  $0.00 [beginning quarter ending 12/31/02 and thereafter]

  	

   

  	

  $

  	

   

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  

 

 

	

  Comments

  Regarding Exceptions: 

  See Attached.

  	

   

  	

  BANK

  USE ONLY

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Received by:

  	

   

  
	

  Sincerely,

  	

   

  	

  AUTHORIZED

  SIGNER

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Date:

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Verified:

  	

   

  
	

  SIGNATURE

  	

   

  	

  AUTHORIZED

  SIGNER

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Date:

  	

   

  
	

  TITLE

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Compliance Status

  	

  Yes

  	

  No

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  DATE

  	

   

  	

   

  
									

 

1

 

SCHEDULE

OF EXCEPTIONS

 

Permitted

Indebtedness  (Exhibit A)

 

Permitted

Investments  (Exhibit A)

 

Permitted Liens  (Exhibit A)

 

Prior Names  (Section 5.5)

 

Litigation  (Section 5.6)

 

1

 

CORPORATE

RESOLUTIONS TO BORROW

 

Borrower:               Vastera, Inc.

 

I, the undersigned

officer of Vastera,

Inc. (the “Corporation”),

Hereby Certify that

the Corporation is organized and existing under and by virtue of the laws of

the State of Delaware.

 

I Further Certify that attached

hereto as Attachments 1 and 2 are true and complete copies of the Articles of

Incorporation, as amended, and the Restated Bylaws of the Corporation, each of

which is in full force and effect on the date hereof.

 

I Further Certify that at a

meeting of the Directors of the Corporation, duly called and held, at which a

quorum was present and voting (or by other duly authorized corporate action in

lieu of a meeting), the following resolutions were adopted.

 

Be It Resolved, that any one (1)

of the following named officers, employees, or agents of this Corporation,

whose actual signatures are shown below:

 

	

  NAMES

  	

   

  	

  POSITION

  	

   

  	

  ACTUAL SIGNATURES

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

acting for and on behalf

of this Corporation and as its act and deed be, and they hereby are, authorized

and empowered:

 

Borrow

Money.  To borrow from

time to time from Comerica Bank-California (“Bank”), on such terms as may be agreed

upon between the officers, employees, or agents of the Corporation and Bank,

such sum or sums of money as in their judgment should be borrowed, without

limitation, including such sums as are specified in that certain Loan and

Security Agreement dated as of July 30, 2002, (the “Loan Agreement”).

 

Execute

Documents.  To execute

and deliver to Bank the Loan Agreement and any other agreement entered into

between Corporation and Bank in connection with the Loan Agreement, all as

amended or extended from time to time (collectively, with the Loan Agreement,

the “Loan Documents”),

and also to execute and deliver to Bank one or more renewals, extensions,

modifications, refinancings, consolidations, or substitutions for the Loan

Documents, or any portion thereof.

 

1

 

Grant

Security.  To grant a

security interest to Bank in the Collateral described in the Loan Documents,

including a pledge of the stock of all subsidiaries of the Corporation, which

security interest shall secure all of the Corporation’s Obligations, as

described in the Loan Documents.

 

Negative Pledge on Intellectual

Property.  To execute

a negative pledge agreement with Bank with respect to the Corporation’s

intellectual property.

 

Negotiate

Items.  To draw,

endorse, and discount with Bank all drafts, trade acceptances, promissory

notes, or other evidences of indebtedness payable to or belonging to the

Corporation or in which the Corporation may have an interest, and either to

receive cash for the same or to cause such proceeds to be credited to the

account of the Corporation with Bank, or to cause such other disposition of the

proceeds derived therefrom as they may deem advisable.

 

Letters

of Credit; Foreign Exchange.  To

execute letters of credit applications, foreign exchange agreements and other

related documents pertaining to Bank’s issuance of letters of credit and

foreign exchange contracts.

 

Further

Acts.  In the case of

lines of credit, to designate additional or alternate individuals as being

authorized to request advances thereunder, and in all cases, to do and perform

such other acts and things, to pay any and all fees and costs, and to execute

and deliver such other documents and agreements as they may in their discretion

deem reasonably necessary or proper in order to carry into effect the

provisions of these Resolutions.

 

Be It Further Resolved, that any

and all acts authorized pursuant to these resolutions and performed prior to

the passage of these resolutions are hereby ratified and approved, that these

Resolutions shall remain in full force and effect and Bank may rely on these

Resolutions until written notice of their revocation shall have been delivered

to and received by Bank.  Any such

notice shall not affect any of the Corporation’s agreements or commitments in

effect at the time notice is given.

 

I Further Certify that the

officers, employees, and agents named above are duly elected, appointed, or

employed by or for the Corporation, as the case may be, and occupy the

positions set forth opposite their respective names; that the foregoing

Resolutions now stand of record on the books of the Corporation; and that the

Resolutions are in full force and effect and have not been modified or revoked

in any manner whatsoever.

 

In Witness Whereof, I have

hereunto set my hand on               

,       and attest that the

signatures set opposite the names listed above are their genuine signatures.

 

	

   

  	

  CERTIFIED AND ATTESTED

  BY:

  
	

   

  	

   

  
	

   

  	

  X

  	

   

  

 

2

 

COMERICA BANK-CALIFORNIA

Member

FDIC

 

ITEMIZATION

OF AMOUNT FINANCED

DISBURSEMENT

INSTRUCTIONS

(Revolver)

 

Name(s):

 Vastera, Inc.                                                                                Date:   July 30, 2002

 

$10,000,000                                                                                    credited

to deposit account No. 1891929323 when Advances are requested or disbursed to

Borrower by cashiers check or wire transfer

 

Amounts paid to

others on your behalf:

 

$                                                                                                                                          to

Comerica Bank-California for Loan Fee

 

$                                                                                                                                          to

Comerica Bank-California for Closing Fee

 

$                                                                                                                                          to

Comerica Bank-California for accounts receivable audit (estimate)

 

$                                                                                                                                          to

Bank counsel fees and expenses

 

$                                                                                                                                          to                  

 

$                                                                                                                                          to                  

 

$10,000,000                                                                                    TOTAL

(AMOUNT FINANCED)

 

Upon consummation of this

transaction, this document will also serve as the authorization for Comerica

Bank-California to disburse the loan proceeds as stated above.

 

	

   

  	

   

  	

   

  	

   

  
	

  Signature

  	

   

  	

  Signature

  	

   

  

 

1

 

COMERICA

BANK-CALIFORNIA

Member

FDIC

 

ITEMIZATION

OF AMOUNT FINANCED

DISBURSEMENT

INSTRUCTIONS

(Equipment

Loan)

 

Name(s):  Vastera,

Inc.                                                                                                                Date:   July 30, 2002

 

$5,000,000                                                                                          credited

to deposit account No. 1891929323 when Advances are requested or disbursed to

Borrower by cashiers check or wire transfer

 

Amounts paid to

others on your behalf:

 

$                                                                                                                                          to

Comerica Bank-California for Loan Fee

 

$                                                                                                                                          to

Comerica Bank-California for Closing Fee

 

$                                                                                                                                          to

Comerica Bank-California for accounts receivable audit (estimate)

 

$                                                                                                                                          to

Bank counsel fees and expenses

 

$                                                                                                                                          to                 

 

$                                                                                                                                          to                 

 

$5,000,000                                                                                          TOTAL

(AMOUNT FINANCED)

 

Upon consummation of this

transaction, this document will also serve as the authorization for Comerica

Bank-California to disburse the loan proceeds as stated above.

 

	

   

  	

   

  	

   

  
	

  Signature

  	

   

  	

   

  	

   

  	

  Signature

  
					

 

1

 

COMERICA

BANK-CALIFORNIA

Member

FDIC

 

ITEMIZATION

OF AMOUNT FINANCED

DISBURSEMENT

INSTRUCTIONS

(Term

Loan)

 

Name(s):  Vastera,

Inc.                                                                                                                Date:   July

30, 2002

 

$                                                                                                                                                                                          credited

to deposit account No. 1891929323 when Advances are requested or disbursed to

Borrower by cashiers check or wire transfer

 

Amounts paid to

others on your behalf:

 

$                                                                                                                                                                                          to

Comerica Bank-California for Loan Fee

 

$                                                                                                                                                                                          to

Comerica Bank-California for Closing Fee

 

$                                                                                                                                                                                          to

Comerica Bank-California for accounts receivable audit (estimate)

 

$                                                                                                                                                                                          to

Bank counsel fees and expenses

 

$4,100,000                                                                                                                                          to

PNC Bank, NA

 

$                                                                                                                                                                                          to                   

 

$4,100,000                                                                                                                                          TOTAL

(AMOUNT FINANCED)

 

Upon consummation of this

transaction, this document will also serve as the authorization for Comerica

Bank-California to disburse the loan proceeds as stated above.

 

	

   

  	

   

  	

   

  
	

   

  	

  Signature

  	

   

  	

  Signature

  
				

 

1

 

AGREEMENT TO PROVIDE INSURANCE

 

	

  TO:

  	

  COMERICA

  BANK-CALIFORNIA

  	

  Date:  July 30, 2002

  
	

   

  	

  920 South La Cienega

  Boulevard, MC 4604

  	

   

  
	

   

  	

  Inglewood, CA 90301

  	

  Borrower:  VASTERA, INC.

  

 

In consideration

of a loan in the amount of $19,100,000 secured by all tangible personal

property including inventory and equipment.

 

I/We agree to

obtain adequate insurance coverage to remain in force during the term of the

loan.

 

I/We also agree to

advise the below named agent to add Comerica Bank-California as lender’s loss

payable on the new or existing insurance policy, and to furnish Bank at above

address with a copy of said policy/endorsements and any subsequent renewal

policies.

 

I/We understand

that the policy must contain:

 

1.             Fire and extended coverage in an

amount sufficient to cover:

 

(a)           The amount of the

loan, OR

 

(b)           All existing encumbrances, whichever

is greater,

 

But not in excess

of the replacement value of the improvements on the real property.

 

2.             Lender’s “Loss Payable” Endorsement

Form 438 BFU in favor of Comerica Bank-California, or any other form acceptable

to Bank.

 

INSURANCE

INFORMATION

 

	

   

  	

  Insurance Co./Agent

  	

  Telephone No.:

  
	

   

  	

   

  
	

   

  	

  Agent’s Address:

  	

   

  
	

   

  	

   

  
	

   

  	

  Signature of Obligor:

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  Signature of Obligor:

  	

   

  	

   

  
						

 

	

  FOR BANK USE ONLY

  
	

   

  
	

  INSURANCE VERIFICATION:

  Date:

  
	

   

  
	

  Person Spoken to:

  
	

   

  
	

  Policy Number:

  
	

   

  
	

  Effective From:

  	

  To:

  
	

   

  	

   

  
	

  Verified by:

  

 

1

 

	

  COMERICA BANK-CALIFORNIA

  	

   

  
	

   

  	

  AUTOMATIC

  DEBIT AUTHORIZATION

  

 

 

	

  To:  Comerica

  Bank-California

  
	

   

  
	

  Re:  Loan #

  
	

   

  
	

  You

  are hereby authorized and instructed to charge account No. 1891929323 in the

  name of VASTERA, INC. for principal and interest payments due on above

  referenced loan as set forth below and credit the loan referenced above.

  
	

   

  
	

                  Debit each

  interest payment as it becomes due according to the terms of the note and any

  renewals or amendments thereof.

  
	

   

  
	

                  Debit each principal payment is at becomes due according

  to the terms of the note and any renewals or amendments thereof.

  
	

   

  
	

  This

  Authorization is to remain in full force and effect until revoked in writing.

  

 

	

  Borrower Signature

  	

   

  	

  Date

  July 30, 2002

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  

 

 

	

  SIGNATURE AUTHORIZATION

  	

   

  	

   

  	

   

  
	

  To:

  	

  Comerica

  Bank-California

  	

  Address:

  	

  9920 South La Cienega

  Blvd., Suite 636

  
	

   

  	

  Lending Services

  	

   

  	

  Inglewood, CA 90301

  
							

 

This Authorization

is in reference to that certain Credit Terms and Conditions, Loan Agreement or

Credit Agreement (“Agreement”)

executed by the undersigned borrower (“Borrower”) concerning a loan or loans from

Comerica Bank-California (“Bank”)

to Borrower.  Each individual signing

below hereby certifies that he/she has been authorized by Borrower to designate

certain individuals who are employees or agents of Borrower to perform such

acts as are contemplated by and in furtherance of the Agreement.

 

The individuals

named below, any one acting alone, are hereby authorized and appointed for and

on behalf of Borrower from time to time to do any of the following:

 

(1)                                  To

request advances of credit under the Agreement and to effect repayment of any

credit outstanding under the Agreement.

 

(2)                                  To

execute and deliver assignments, borrowing certificates, instruments,

schedules, reports, invoices, bills, shipping documents and such other

documents or certificates as may be necessary or appropriate under the

Agreement or any other agreement or instrument relating thereto or delivered in

connection therewith;

 

(3)                                  To

transfer and endorse to Bank in payment of Borrower’s obligations to Bank any

checks, drafts, notes or other instruments payable to Borrower; and

 

(4)                                  To

do or perform any and all other acts or matters in any way relating to any or

all of the foregoing.

 

The undersigned

individuals each further certifies that the specimen signatures below are the

genuine signatures of the individuals designated herein and that their

signatures shall be binding on Borrower until Bank receives written notice of

termination if the authority of any such designated individuals.

 

1

 

	

  Dated:

  	

   

  
	

   

  	

   

  
	

  VASTERA, INC.

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  By:

  	

   

  	

   

  
	

   

  	

   

  
	

  Name:

  	

   

  	

   

  
	

   

  	

   

  
	

  Title:

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  By:

  	

   

  	

   

  
	

   

  	

   

  
	

  Name:

  	

   

  	

   

  
	

   

  	

   

  
	

  Title:

  	

   

  	

   

  
	

   

  	

   

  
	

  (Authorized Individuals and Specimen Signatures on

  Next Page)

  	

   

  
									

 

2

 

Authorized

Individuals and Specimen Signatures:

 

	

  Name (Typed or Printed)

  	

   

  	

  Signature

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  or

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  or

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  or

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  or

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  or

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  or

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  or

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  or

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  or

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  or

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  or

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  or

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  or

  

 

3Execution Copy

 

EXHIBIT 10.29

 

MODIFICATION AGREEMENT

 

This

Modification Agreement (“Agreement”)

is made as of May 15, 2002, by and among Citizens Bank of Massachusetts, a

Massachusetts banking corporation (“Citizens”), on the one hand, and UFP

Technologies, Inc., a Delaware corporation (“UFP”), Moulded Fibre Technology, Inc., a

Maine corporation (“MFT”),

Simco Industries, Inc., a Michigan corporation (“SII”) and Simco Automotive Trim, Inc., a

Michigan corporation (“SAT”

and together with UFP, MFT and SII, collectively, “Borrowers”), on the

other.

 

WHEREAS,

Citizens and the Borrowers are parties to that certain Revolving Line of

Credit, Acquisition Line of Credit, Term Loan and Mortgage Loan Agreement dated

as of June 4, 2001 (as modified, amended or restated from time to time,

including hereby and pursuant to that certain Modification and Waiver Agreement

dated as of May 1, 2002, the “Loan Agreement”), and certain documents executed in

connection therewith and relating thereto, pursuant to which Citizens made

certain credit facilities available to the Borrowers.  Capitalized terms used but not otherwise defined herein shall

have the meanings set forth in the Loan Agreement;

 

WHEREAS, at

Borrowers’ request, Citizens provides automated clearinghouse services to the

Borrowers, and the Borrowers and Citizens may have executed documents in

connection therewith;

 

WHEREAS,

Borrowers have requested modifications to the financial covenants set forth in

the Loan Agreement and certain other amendments to the Loan Agreement, and

Citizens has agreed to accommodate such request upon the terms and conditions

set forth herein.

 

NOW,

THEREFORE, in consideration of the agreements contained herein and for other

good and valuable consideration, the receipt and sufficiency of which are

hereby acknowledged, Citizens and Borrowers agree as follows:

 

1.             Amendment to Definitions.  Section 1.1 of the Loan Agreement is hereby

amended by replacing the existing definitions of “Maximum Acquisition Loan

Credit” and “Tangible Net Worth”, and adding the new defined term “Total

Liabilities” as follows:

 

“Maximum Acquisition Loan Credit” means $4,000,000 minus (a)

$500,000 plus (b) such additional amounts Lender, in its sole and

unfettered discretion, deems appropriate as a reserve against automated

clearinghouse overdrafts by the Borrower.

 

“Tangible Net Worth” shall mean for any period, on a consolidated

basis, the excess of the Borrower’s assets over the Borrower’s liabilities, minus

goodwill, all as determined in accordance with GAAP.

 

“Total Liabilities” shall mean for any period, on a consolidated basis,

the sum of all amounts (determined in accordance with GAAP) that are listed as

liabilities on the Borrower’s financial statements for such period.”

 

 

2.             ACH Matters.  Notwithstanding anything in any documents

related to the delivery by Citizens to the Borrowers of automated clearinghouse

services, the Borrowers acknowledge that the Lender’s maximum obligation with

respect to such services is hereby reduced from $1,000,000 to $500,000.  To the extent that amounts provided in

connection with such services by the Lender are not reimbursed immediately upon

demand by the Borrowers, the Borrowers hereby authorize the Lender to make

advances and disburse proceeds of Acquisition Loans to so reimburse the

Lender.  Amounts so disbursed shall

constitute Obligations, shall be secured by all of the liens, security

interests, mortgages and other encumbrances granted in and evidenced by the

Loan Agreement and the other Loan Documents and shall be deemed to be repaid by

any payments made by the Borrowers prior to application of any such payments to

any other Obligations, regardless of how such payments may be designated by the

Borrowers.  Borrowers agree to execute,

within seven days after request by Citizens, such documentation regarding the

delivery of automated clearinghouse services as Citizens may request.

 

3.             Elimination of Unused Facility

Fee.  Section 2.6 of the Loan

Agreement, and any corresponding provision in any Note or other Loan Document

relating to the imposition of an unused facility fee upon the Borrowers, are

hereby deleted in their entirety.

 

4.             Additional Reporting Obligations.  Section 7.1(b) of the Loan Agreement is

hereby amended by the replacement of subsection (ii) thereof and the addition

of new subsection (vii) as follows:

 

“(ii)         (A) within 30 days after the end of each month, an

updated accounts receivable aging report and inventory summary, and, for each

month other than December, a profit and loss statement, statement of cash flow

and balance sheet (prepared on a consolidated basis) for each such month, and

(B) on or before Wednesday of each week, a borrowing base certificate for the

period ending the last business day of the preceding week, each of the

foregoing in form and substance satisfactory to the Lender;

 

(vii)         within 30 days after

the end of each fiscal quarter of each of the Borrower’s fiscal years, reports

from the Borrower’s senior management and from the management consultant

described in Section 7.1(t) hereof, which reports shall compare, in such detail

as the Lender may reasonably request, the results of the Borrower’s performance

for the quarter and portion of the year then ended against the performance for

such period as projected in the business plan provided to the Lender.  Such reports shall also contain estimates,

including details as to assumptions made in preparing such estimates, as to the

Borrower’s ability to meet the performance projected in such business plan for

future fiscal quarters.”

 

5.             Other Amendments to Reporting

Obligations.  Section 7.1(b) of the

Loan Agreement is hereby further amended as follows: (a) the phrase “45 days”

is replaced with “30 days” in subsection (i) thereof; (b) subsection (iv)

thereof is deleted in its entirety; and (c) the phrase “90 days” is replaced

with “60 days” in subsections (iii) and (v) thereof.

 

6.             Amendment to Financial Covenants.  Sections 7.1(m), (n) and (o) of the Loan

Agreement are hereby replaced in their entirety with the following:

 

2

 

“m.          Debt Service Coverage Ratio.  The Borrower shall not permit its Debt

Service Coverage Ratio to be less than 1.0 to 1.0 (i) at any time during the

second, third and fourth quarters of Borrower’s fiscal year 2002, to be tested

as of the last day of each fiscal quarter, beginning with June 30, 2002, and

(ii) on a cumulative basis for the entirety of Borrower’s fiscal year 2002, to

be tested as of December 31, 2002.

 

n.             Minimum EBITDA.  The Borrower shall maintain EBITDA, tested

as of the last day of each fiscal quarter, of not less than: (i) $900,000 for

the second quarter of Borrower’s fiscal year 2002 and $1,300,000 for that

portion of the Borrower’s fiscal year ending June 30, 2002; (ii) $800,000 for

the third quarter of Borrower’s fiscal year 2002 and $2,100,000 for that

portion of the Borrower’s fiscal year ending September 30, 2002; and (iii)

$1,000,000 for the fourth quarter of Borrower’s fiscal year 2002 and $3,100,000

for the Borrower’s fiscal year 2002.

 

o.             Net Worth Ratio.  The Borrower shall maintain a ratio of Total

Liabilities to Tangible Net Worth, tested as of the last day of each fiscal

quarter, of not greater than: (i) 3.9 to 1.0 as of the end of the second

quarter of Borrower’s fiscal year 2002; (ii) decreasing thereafter to 3.8 to

1.0 as of the end of the third quarter of Borrower’s fiscal year 2002; and

(iii) decreasing thereafter to 3.7 to 1.0 as of the end of the Borrower’s

fiscal year 2002.”

 

7.             Covenant Regarding Business Plan.  Section 7.1 of the Loan Agreement is hereby

amended by the addition of the following as new subsection (s):

 

“s.           The Borrower shall

deliver to the Lender, on or before December 15, 2002, a business plan for the

Borrower’s fiscal year 2003, which plan shall be satisfactory to Lender, in its

sole and absolute discretion.  The

business plan shall include, without limitation: (i) for such fiscal year, on a

consolidated basis, monthly and year-to-date projected profit and loss

statements, cash flow statements, balance sheets, and collateral values

throughout the year; (ii) a proposed ratio for the financial covenant set forth

in Section 7.1(m) for such fiscal year, to be tested quarterly on a rolling

four-quarter basis; (iii) proposed thresholds for the financial covenant set

forth in Section 7.1(n) for such fiscal year, to be tested on a quarterly basis

for the quarter and, cumulatively, for the portion of such fiscal year then

ended; and (iv) a proposed ratio for the financial covenant set forth in

Section 7.1(o) for such fiscal year, to be tested quarterly.  The Borrower acknowledges that such proposed

ratios and thresholds must be satisfactory to the Lender, in its sole and

absolute discretion.”

 

8.             Covenant Regarding Management

Consultant.  Section 7.1 of the Loan

Agreement is hereby amended by the addition of the following as new subsection

(t):

 

“t.            The Borrower shall

continue to retain The O’Connor Group, Inc. (“O’Connor”), or such other

management consultant as shall be reasonably acceptable to the Lender, as a

management consultant to advise the Borrower in its restructuring efforts

 

3

 

upon terms of

engagement that include authorization to participate in meetings with the

Lender and to answer questions of the Lender concerning the Borrower’s restructuring

efforts and financial performance.  The

Borrower acknowledges that it has complete authority and discretion to

terminate the engagement of O’Connor or any replacement management consultant

and to select a replacement, subject only to the Lender’s ability to approve

the suitability any such replacement. 

The Borrower agrees to cooperate with O’Connor or any such replacement

consultant and make available such employees and information as O’Connor or

such replacement consultant shall deem necessary to rendering its advice.  The Borrower agrees that it is solely

responsible for the payment of all fees and expenses of O’Connor or any

replacement consultant.”

 

9.             Events of Default.  Section 8.1(n) of the Loan Agreement is

hereby replaced in its entirety with the following and Section 8.1(p) is hereby

added to the Loan Agreement as follows:

 

“n.           The Borrower

breaches or otherwise fails to perform any of its obligations under that

certain Modification and Waiver Agreement dated as of May 1, 2002 (the “May 1st

Modification Agreement”), or if any representation or warranty made by the

Borrower in connection with the May 1st Modification Agreement shall

be, or be discovered to have been, false or misleading in any material respect

when made; or

 

p.             The Borrower

breaches or otherwise fails to perform any of its obligations under that

certain Modification Agreement dated as of May 15, 2002 (the “May 15th

Modification Agreement”), or if any representation or warranty made by the

Borrower in connection with the May 15th Modification Agreement

shall be, or be discovered to have been, false or misleading in any material

respect when made.”

 

10.           Bankruptcy Matters.  The following is added to the Loan Agreement

as new Section 14:

 

“Section 14.         Bankruptcy

Matters.

 

In consideration of the agreements of the Lender hereunder and under

the other Loan Documents, the Borrowers agree that, in the event that one or

more of the Borrowers files for relief under Title 11 of the United States Code

(“Bankruptcy Code”)

or is otherwise subject to an order for relief under the Bankruptcy Code:

 

a.             Each of the

Borrowers irrevocably consents to entry of an order granting relief from all

stays, including the automatic stay imposed by Section 362 of the Bankruptcy

Code, so as to permit the Lender to foreclose upon the liens, security

interests, mortgages and other encumbrances granted to it in the Loan Documents

and to exercise any and all other rights and remedies of the Lender under this

Agreement, the Loan Documents, or at law or in equity, and each of the

Borrowers hereby irrevocably waives any right to object to such relief.  The Borrowers specifically acknowledge that

“cause” exists for such relief within the meaning of Section 362(d)(1) of the

Bankruptcy Code;

 

4

 

b.             Each of the

Borrowers waives any right to seek a surcharge of the Lender’s collateral for

the credit facilities evidenced by the Loan Documents under Section 506(c) of

the Bankruptcy Code or any other provision of applicable law;

 

c.             Each of the

Borrowers hereby waives its right to the exclusivity provided under Section

1121 of the Bankruptcy Code and acknowledges that “cause” exists for

termination of the exclusivity period. 

Each of the Borrowers agrees not to oppose any motion filed by the

Lender to terminate the exclusivity period in order to file and seek

acceptances of a plan of reorganization; and

 

d.             Each of the

Borrowers waives any right to seek an order under Section 363, 364, 1129, or

any other provision of the Bankruptcy Code, imposing liens or security

interests of senior or equal priority with the liens, security interests,

mortgages and other encumbrances granted to the Lender in the Loan Documents.

 

Nothing contained in this Section shall be deemed to limit or restrict

the Lender’s right to seek under the Bankruptcy Code any relief that the Lender

may deem appropriate against any of the Borrowers, and in particular, the

Lender shall be free to seek the dismissal or conversion of any case filed by

any of the Borrowers, the appointment of a trustee or examiner, and relief from

the automatic stay.”

 

11.           Conditions Precedent.  The effectiveness of this Agreement is

subject to: (a) payment by the Borrowers of a modification fee in the amount of

$62,500.00 (which amount includes a fee payable with respect to prior

modifications and waivers granted by Citizens in the amount of $25,000.00; (b)

payment by the Borrowers of the accrued but unpaid fees and expenses incurred

by Citizens in connection with the negotiation, preparation, administration and

enforcement of this Agreement and the Loan Documents, including, without

limitation, reasonable attorneys’ fees and costs in the amount of $2500.00; and

(c) receipt by Citizens of fully-executed counterpart originals of this Agreement

and such additional agreements, instruments, certificates, opinions and other

documents as Citizens may reasonably request, each of which shall be in form

and substance satisfactory to Citizens and its counsel.

 

12.           Ratification of Obligations.  The Borrowers each acknowledge and agree

that: (a) they are jointly and severally liable for all Obligations; (b) the

Obligations are the valid and binding joint and several obligations of the

Borrowers, enforceable against the Borrowers (and each of them) in accordance

with the terms of the Loan Agreement and the other Loan Documents; (c) none of

them has any defenses, offsets, or counterclaims to the full and immediate

repayment of the Obligations; (d) except as amended hereby or waived herein,

the Loan Agreement, the Loan Documents and each provision thereof are hereby

ratified and confirmed in every respect; (e) the liens, security interests,

mortgages and other encumbrances granted to Citizens by Borrowers in the Loan

Documents remain valid, binding, perfected and enforceable in accordance with

the terms thereof; (f) the advance of any Acquisition Loans is and shall remain

in the sole and absolute discretion of Citizens; and (g) the aggregate amount

of the Obligations as of May 15, 2002, exclusive of attorneys’ fees and other

costs of collection, was $15,410,312.00 in principal.

 

5

 

13.           Confirmation of Representations

and Warranties.  To induce Citizens

to enter into this Agreement, Borrowers jointly and severally affirm and

restate as of the date thereof and hereof each of their respective

representations and warranties contained in the Loan Documents.

 

14.           Additional Representations and

Warranties.  Borrowers jointly and

severally represent and warrant to Citizens that:

 

a)             the execution, delivery and

performance of this Agreement: (i) have been duly authorized by all requisite

corporate action by the Borrowers; (ii) do not require the consent of any party

(including, without limitation, any stockholders or creditors of Borrowers);

(iii) will not (A) violate any law or regulation or the charters or by-laws of

the Borrowers, (B) violate any order of any court, tribunal or governmental

agency binding on the Borrowers or any of their properties, or (C) violate or constitute

(after due notice or lapse of time or both) a default under any indenture,

agreement, license or other instrument or contract to which any of the

Borrowers is a party or by which the Borrowers or any of their properties are

bound;  and (iv) do not require any

filing or registration with, or any permit, license, consent or approval of,

any governmental agency or regulatory authority; and

 

b)            no Event of Default (or “Event of

Default” as defined in any of the Loan Documents other than the Loan Agreement)

has occurred and is continuing, nor has any event occurred and is currently

continuing that, with the passage of time or the giving of notice, would

constitute an Event of Default or such an “Event of Default”.

 

15.           Release.  While Borrowers have acknowledged and agreed

that they do not have any defenses, offsets, or counterclaims to the

unconditional repayment of the Obligations, Borrowers nevertheless jointly and

severally release, acquit and forever discharge and waive any and all actions,

claims, counterclaims, defenses, causes of action, suits, covenants, contracts,

offsets, demands, and agreements whatsoever, and all rights thereunder and

thereto, of every name and nature, both in law and in equity (collectively, “Claims”), they may

have arising out of or relating to the Loan Agreement or the other Loan

Documents, which they now have or have ever had or may have by reason of any

cause or matter occurring on or prior to the date hereof, whether known or

unknown, against Citizens and/or its affiliates, their successors and assigns,

and all their current and former officers, directors, agents, attorneys,

representatives and employees, and their successors and assigns (collectively,

the “Released Parties”),

including, without limitation, any Claims based in whole or in part on fraud,

mistake, duress, usury, misrepresentation, or any so-called “lender liability”

theories and any Claims that relate, directly or indirectly, to (a) the making

or administration of the credit facilities evidenced by the Loan Documents, (b)

any covenants, agreements, duties, or obligations set forth in the Loan

Documents, (c) the actions or omissions of any of the Released Parties in

connection with the initiation or continuing exercise of any right or remedy of

Citizens contained in the Loan Documents or at law or in equity, (d) lost

profits, (e) loss of business opportunity, (f) increased financing costs, (g)

increased legal or administrative fees, or (h) damages to business reputation.

 

16.           General.

 

a)             This Agreement may be executed in

multiple counterparts, each of which will be deemed an original, but all of

which together will constitute one and the same instrument.

 

6

 

b)            This Agreement may be amended only

by a writing executed by all parties hereto.

 

c)             This Agreement and the Loan

Documents represent the entire agreement between the parties hereto concerning

the subject matter hereof, and supercede all prior oral and written agreements

concerning the subject matter hereof.

 

d)            This Agreement and all terms and

conditions hereof shall be binding upon the Borrowers, their successors and

assigns, and shall inure to the benefit of Citizens and its successors and

assigns.

 

e)             Each of the parties hereto

acknowledge and agree that it has freely and voluntarily read and understands

the terms of this Agreement and has been represented and advised by counsel of

its own selection in the negotiation, execution, and delivery thereof.

 

f)             This Agreement exhibit shall be

executed in duplicate originals, with one original being retained by the

Borrowers and Citizens.

 

g)            This Agreement may be executed in

counterparts, each of which shall constitute an original, and which together

shall constitute a single agreement.

 

h)            A facsimile signature on this

Agreement shall be deemed for all purposes to be as effective as an original

signature.

 

i)              In the event of a conflict between

this Agreement, on the one hand, and the Loan Documents, on the other, this

Agreement shall control.

 

j)              This Agreement shall be governed

by and construed in accordance with the provisions of Section 10 of the Loan

Agreement.

 

[Remainder of page intentionally left blank;

signature page follows]

 

7

 

This Agreement

is executed under seal as of the date first above written.

 

 

	

  CITIZENS:

  	

   

  	

  BORROWERS:

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Citizens

  Bank of Massachusetts

  	

   

  	

  UFP

  Technologies, Inc.

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  By:

  	

   /s/ 

  Fred Manning

  	

   

  	

   

  	

  By:

  	

   /s/ 

  Ronald J. Lataille

  	

   

  
	

   

  	

  Fred Manning

  	

   

  	

   

  	

  Ronald J.

  Lataille

  	

   

  
	

   

  	

  Senior Vice

  President

  	

   

  	

   

  	

  Vice

  President and CFO

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  Moulded

  Fibre Technology, Inc.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  By:

  	

   /s/ 

  Ronald J. Lataille

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  Ronald J.

  Lataille

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  Treasurer

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  Simco

  Industries, Inc.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  By:

  	

   /s/ 

  Ronald J. Lataille

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  Ronald J. Lataille

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  Treasurer

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  Simco

  Automotive Trim, Inc.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  By:

  	

   /s/ 

  Ronald J. Lataille

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  Ronald J.

  Lataille

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  Treasurer

  	

   

  
							

 

8

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