Exhibit 10.9
------------------------------------------------------------
AMENDED AND RESTATED
LOAN AGREEMENT
Dated as of May 1, 2002
BETWEEN
BOSTON ACOUSTICS, INC.
AND
CITIZENS BANK OF MASSACHUSETTS
-------------------------------------------------------------
AMENDED AND RESTATED
LOAN AGREEMENT
--------------
THIS AMENDED AND RESTATED LOAN AGREEMENT is made as of May 1, 2002,
between BOSTON ACOUSTICS, INC., a Massachusetts corporation (the "Borrower")
having its principal place of business and chief executive office at 300 Jubilee
Drive, Peabody, Massachusetts 01960, and CITIZENS BANK OF MASSACHUSETTS (the
"Lender"), having an office at 28 State Street, Boston, Massachusetts 02109.
WHEREAS, the Borrower and State Street Bank and Trust Company, as
predecessor to the Lender, entered into that certain Loan Agreement dated as of
June 13, 1997 (the "Existing Credit Agreement");
WHEREAS, the Borrower and the Lender desire to amend and restate the
Existing Credit Agreement as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto hereby agree that the Existing Credit
Agreement shall be amended and restated effective as of May 1, 2002 to read in
its entirety as follows:
SECTION 1. DEFINITIONS.
-----------
1.1 Definitions. As used herein, the following terms shall have
-----------
the following meanings:
"Affiliate" means, with reference to any person, (including an
individual, a corporation, a partnership, a trust, any trade or business and any
governmental agency or instrumentality), (i) any director, officer or employee
of that person, (ii) any other person controlling, controlled by or under direct
or indirect common control of that person, (iii) any other person directly or
indirectly holding 10% or more of any class of the capital stock or other equity
interests (including options, warrants, convertible securities and similar
rights) of that person and (iv) any other person with respect to which such
person holds, directly or indirectly, 10% or more of any class of capital stock
or other equity interests (including options, warrants, convertible securities
and similar rights). For purposes of Section 5.1(v) hereof, "Affiliate" means,
within the meaning of Section 414 of the Code, (i) any member of a controlled
group of corporations which includes the Borrower, (ii) any trade or business,
whether or not incorporated, under common control with the Borrower, (iii) any
member of an affiliated service group which includes the Borrower, and (iv) any
member of a group treated as a single employer by regulation.
"Agreement" means this Amended and Restated Loan Agreement, including
the Exhibits hereto, as originally executed, or if this Agreement is amended,
varied or supplemented from time to time, as so amended, varied or supplemented.
-1-
"B/A's" means any bankers' acceptance with the Lender.
"Business Day" means any day on which the head office of the Lender is
open for transactions of all of its normal and customary business, and with
respect to Libor Loans, any day which is also a day for trading by and between
banks in United States dollar deposits in the London interbank market in which
the Lender customarily participates.
"Closing Date" means May 1, 2002.
"Code" means the Internal Revenue Code of 1986 and the rules and
regulations thereunder, as amended.
"Current Assets" means the current assets of the Borrower and its
Subsidiaries, as determined on a consolidated basis in accordance with GAAP.
"Current Liabilities" means the current liabilities of the Borrower and
its Subsidiaries, as determined on a consolidated basis in accordance with GAAP,
and including, in any event, all Loans, Letters of Credit and B/As made or
issued for working capital purposes outstanding at the applicable time of
reference.
"Default" means an event or condition that, but for the requirement
that time elapse or notice be given, or both, would constitute an Event of
Default.
"Encumbrances" shall have the meaning set forth in Section 5.6.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder.
"Event of Default" shall have the meaning set forth in Section 6.1.
"GAAP" means generally accepted accounting principles consistently
applied.
"Indebtedness" with respect to any person means and includes, without
duplication, (i) all items which, in accordance with GAAP, would be included as
a liability on the balance sheet of such person, (ii) the face amount of all
banker's acceptances and of all letters of credit issued by any bank for the
account of such person and all drafts drawn thereunder, (iii) the total amount
of all indebtedness secured by any Encumbrance to which any property or asset of
such person is subject, whether or not the indebtedness secured thereby shall
have been assumed, and (iv) the total amount of all indebtedness and obligations
of others which such person has directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business),
discounted with recourse or agreed (contingently or otherwise) to purchase or
repurchase or otherwise acquire, including, without limitation, any agreement
(a) to advance or supply funds to such other person to maintain working capital,
equity capital,
-2-
net worth or solvency, or (b) otherwise to assure or hold harmless such other
person against loss in respect of its obligations.
"Initial Financial Statement" shall have the meaning set forth in
Section 3.5.
"Insolvent" or "Insolvency" means that there shall have occurred one or
more of the following events with respect to a person: death; dissolution;
liquidation; termination of existence; "insolvent" or "insolvency" within the
meaning of the United States Bankruptcy Code or other applicable statute; such
person's inability to pay its debts as they come due or failure to have adequate
capital to conduct its business; such person's failure to have assets having a
fair saleable value net of any cost to dispose of such assets in excess of the
amount required to pay the probable liability on its then existing debts
(including unmatured, unliquidated and contingent debts); appointment of a
receiver of any part of the property of, execution of a trust mortgage or an
assignment for the benefit of creditors by, or the filing of a petition in
bankruptcy or the commencement of any proceedings under any bankruptcy or
insolvency laws or any laws relating to the relief of debtors, readjustment of
indebtedness or reorganization of debtors by or against such person, or the
offering of a plan to creditors or such person for composition or extension,
except for an involuntary proceeding commenced against such person which is
dismissed within 45 days after the commencement thereof without the entry of an
order for relief or the appointment of a trustee.
"Interest Charges" means, for any period, without duplication, all
interest and all amortization of debt discount and expense (including commitment
fees and similar expenses) on any particular Indebtedness for which such
calculations are being made, all as determined in accordance with GAAP.
"Interest Period" means, as to any Libor Loan, the period, the
commencement and duration of which shall be determined in accordance with
Section 2.4.1, provided that if any such Interest Period would otherwise end on
--------
a day which is not a Business Day for Libor Rate purposes, such Interest Period
shall end on the Business Day next preceding or next succeeding such day as
determined by the Lender in accordance with its usual practices and notified to
the Borrower at the beginning of such Interest Period.
"Letters of Credit" means letters of credit in the form customarily
issued by the Lender as standby or documentary or commercial letters of credit,
issued by the Lender at the request and for the account of the Borrower.
"Libor Loan Rate" means an annual rate of interest for an Interest
Period equal to the Libor Rate in effect on the first day of such Interest
Period plus the fixed rate spread set forth below which is applicable to the
Borrower on the day of any Notice of Borrowing or Conversion (based upon the
Borrower's ratio of Total Liabilities to Tangible Net Worth on the last day of
the fiscal quarter immediately preceding such Interest Period, as evidenced by
the financial statements required to be delivered by the Borrower pursuant to
Section 5.1(i):
-3-
Total Liabilities/ Libor Loan
Tangible Net Worth Fixed Rate Spread
------------------ -----------------
greater than 1.5 to 1.0 1.25%
greater than 1.0 to 1.0 but
less than or equal to 1.5 to
1.0 1.00%
greater than 0.75 to 1.0 but
less than or equal to 1.0 to
1.0 0.75%
less than or equal to 0.75 to
1.0 0.50%
"Libor Loans" means, in relation to any Interest Period, any portion of
the principal amount of any Revolving Loans on which the Borrower elects
pursuant to Section 2.4 to pay interest at a rate determined by reference to the
Libor Rate.
"Libor Rate" means, with respect to any Interest Period, in the case of
any Libor Loan, the annual rate per annum (rounded upward, if necessary, to the
nearest 1/32 of one percent) as determined by the Lender on the basis of the
offered rates for deposits in U.S. dollars, for a period of time comparable to
such Interest Period, which appear on the Telerate page 3750 as of 10:00 a.m.
(Boston time) (or as soon thereafter as practicable) on the second Business Day
prior to the first day of such Interest Period, provided, however, that if the
-------- -------
rate described above does not appear on the Telerate System on any applicable
interest determination date, the Libor Rate shall be the annual rate of interest
(rounded upward as described above, if necessary) determined by the Lender at or
before 10:00 a.m. (Boston time) (or as soon thereafter as practicable) on the
second Business Day prior to the first day of such Interest Period, to be the
annual rate of interest at which deposits of U.S. dollars are offered to the
Lender by prime banks in whatever London interbank market may be selected by the
Lender in its sole discretion, acting in good faith, at or about the time of
determination and in accordance with the usual practice in such market for
delivery on the first day of such Interest Period in immediately available funds
and having a maturity equal to such Interest Period in an amount equal (as
nearly as may be) to the amount of such Libor Loan. Each such determination by
the Lender shall be conclusive.
"Loan" means a loan made to the Borrower by the Lender pursuant to
Section 2 hereof, and "Loans" means all of such loans, collectively.
"Loan Documents" means, collectively, this Agreement (including,
without limitation, the agreements and other instruments listed or described in
the Closing Checklist attached hereto as Exhibit E), the Note, the Letters of
---------
Credit (and all letter of
-4-
credit applications relating thereto) and any other agreements, instruments or
documents referred to herein or therein and/or delivered in connection herewith,
and all schedules, exhibits and annexes thereto.
"Maturity Date" means July 1, 2005.
"Net Income" means the pre-tax gross revenues of the Borrower and its
Subsidiaries for the period in question, less all expenses and other proper
charges, all determined on a consolidated basis in accordance with GAAP but in
any event, excluding from Net Income (without duplication): (i) any gain or
loss, amortization or deduction arising from any write-up of assets, except to
the extent inclusion thereof shall be approved in writing by the Lender; (ii)
earnings of any Subsidiary accrued prior to the date it became a Subsidiary;
(iii) the net earnings of any business entity (other than a Subsidiary) in which
the Borrower or any of its Subsidiaries has an ownership interest, except to the
extent such net earnings shall have actually been received by the Borrower or
such Subsidiaries in the form of cash distributions; (iv) any gains or losses on
the sale or other disposition of investments or fixed or capital assets; (v) the
proceeds of any life insurance policy; (vi) any deferred or other credit
representing any excess of the equity of any Subsidiary at the date of
acquisition thereof over the amount invested in such Subsidiary; and (vii) any
reversal of any contingency reserve, except to the extent that provision for
such contingency reserve shall be made from income arising during such period.
"Note" means the Revolving Credit Note.
"Notice of Borrowing, Continuation or Conversion" shall have the
meaning set forth in Section 2.4.1.
"Obligations" means any and all obligations of the Borrower or any of
its Subsidiaries to the Lender of every kind and description, direct or
indirect, absolute or contingent, primary or secondary, due or to become due,
now existing or hereafter arising, regardless of how they arise or by what
agreement or instrument they may be evidenced or whether evidenced by any
agreement or instrument, and includes obligations to perform acts and to refrain
from acting as well as obligations to pay money.
"Participant" shall have the meaning set forth in Section 7.
"Person" or "person" means any individual, corporation, limited
liability company, partnership, limited liability partnership, trust, trade,
business and governmental agency and instrumentality.
"Plans" means, collectively, each "employee pension benefit plan" and
each "employee welfare benefit Plan" (each as defined in ERISA) maintained by
the Borrower or any of its Affiliates (as defined in the last sentence of the
definition thereof).
-5-
"Prime Rate" means the annual rate of interest announced and made
effective by the Lender from time to time, at the principal office of the
Lender, as its prime rate.
"Prime Rate Loans" means any Revolving Loans (or any portion thereof)
as to which the interest rate is the Prime Rate.
"Restricted Payments" means (i) any cash or property dividend,
distribution, or other payment, direct or indirect, to any Person who now or in
the future may hold an equity interest in the Borrower or any of its
Subsidiaries, whether evidenced by a security or not; and (ii) any payment on
account of the purchase, redemption, retirement or other acquisition of any
capital stock of the Borrower or any of its Subsidiaries, or any other payment
or distribution made in respect thereof, either directly or indirectly.
"Revolving Credit Maximum Amount" means $25,000,000.
"Revolving Credit Note" shall have the meaning set forth in Section
2.1.1.
"Revolving Loan" shall have the meaning set forth in Section 2.1.1.
"Revolving Loan Account" means the account on the books of the Lender
in which will be recorded Revolving Loans made by the Lender to the Borrower
pursuant to this Agreement, payments made on such Revolving Loans and other
appropriate debits and credits as provided by this Agreement.
"Stated Amount" means, with respect to each Letter of Credit
outstanding at any given time, the maximum amount then available to be drawn
thereunder (without regard to whether any conditions to drawing could then be
met).
"Subsidiary" means any corporation, association, joint stock company,
business trust or other similar organization of which 50% or more of the
ordinary voting power for the election of a majority of the members of the board
of directors or other governing body of such entity is held or controlled by a
Borrower or a Subsidiary of a Borrower; or any other such organization the
management of which is directly or indirectly controlled by a Borrower or a
Subsidiary of a Borrower through the exercise of voting power or otherwise; or
any joint venture, whether incorporated or not, in which a Borrower has a 50%
ownership interest or any other entity which would be consolidated with the
Borrower in presenting its financial statements in accordance with GAAP.
"Tangible Net Worth" means the amount which is equal to the net worth
of the Borrower and its Subsidiaries computed on a consolidated basis in
accordance with GAAP and with inventory and cost of goods sold determined on a
"first in, first out" basis, and minus (i) the book value, net of applicable
reserves, of all intangible assets of the Borrower and its Subsidiaries,
including, without limitation, goodwill, trademarks, trade names, copyrights,
patents and any similar rights and unamortized debt discount and expense, (ii)
intercompany accounts with Affiliates (including receivables due from
-6-
Affiliates), unless existing on the date of the Initial Financial Statement, or
created thereafter in the ordinary course of business, consistent with past
practices, (iii) to the extent not otherwise approved in advance by Lender, any
write up in the book value of any asset of the Borrower and its Subsidiaries
resulting from revaluation thereof after the date of the Initial Financial
Statement, (iv) the value, if any, attributable to any capital stock of the
Borrower or its Subsidiaries held in treasury, and (v) the value, if any,
attributable to any notes or subscriptions receivable due from stockholders in
respect of capital stock.
"Taxes" means, any and all taxes (including, without limitation,
income, receipts, franchise, ad valorem or excise taxes, transfer or gains taxes
or fees, use taxes, withholding, payroll or minimum taxes) imposed on, or
otherwise payable by, or for which responsibility for payment, withholding or
collection lies with, the Borrower or any of its Subsidiaries by any
governmental authority, federal, state or otherwise, including any taxes imposed
on any of the Borrower's direct or indirect Subsidiaries or other Affiliates for
which the Borrower or any of its Subsidiaries may be liable under applicable law
or by agreement to which the Borrower or any of its Subsidiaries is a party or
by which it is bound or subject to, and including, but not limited to, any
interest, penalties or additions to tax with respect thereto.
"Total Liabilities" means, at any date as of which the amount thereof
shall be determined, all obligations of the Borrower and its Subsidiaries that
should, as determined on a consolidated basis in accordance with GAAP, be
classified as liabilities on the balance sheet of the Borrower and its
Subsidiaries, including, in any event, all Indebtedness of the Borrower and its
Subsidiaries.
"Unused Commitment" for any period of time means the difference for
each day during such period between the Revolving Credit Maximum Amount in
effect and the sum of the principal amount of Revolving Loans actually
outstanding hereunder and the Stated Amount of all outstanding Letters of
Credit.
SECTION 2. REVOLVING LOANS.
----------------
2.1 Revolving Loans.
---------------
2.1.1 Upon the terms and subject to the conditions of this
Agreement, and in reliance upon the representations, warranties and covenants of
the Borrower made herein, the Lender agrees to make loans ("Revolving Loans") to
the Borrower at the Borrower's request from time to time, from and after the
date hereof and prior to the Maturity Date, provided that the principal amount
of Revolving Loans outstanding at any time, plus the aggregate Stated Amount of
Letters of Credit outstanding at such time, plus the aggregate amount of any
unreimbursed draws under outstanding Letters of Credit, plus the total amount of
B/A's outstanding at such time, shall not exceed the Revolving Credit Maximum
Amount, and provided, further, that at the time the Borrower requests a
-7-
Revolving Loan and after giving effect to the making thereof there has not
occurred and is not continuing any Default or Event of Default. The Borrower
agrees that it shall be an Event of Default hereunder if at any time the debit
balance of the Revolving Loan Account, plus the aggregate Stated Amount of
Letters of Credit outstanding at any time, plus the aggregate amount of
unreimbursed draws under outstanding Letters of Credit at such time, plus the
total amount of B/A's outstanding at such time, shall exceed the Revolving
Credit Maximum Amount unless the Borrower shall, upon notice of such excess from
the Lender, promptly pay cash to the Lender to be credited to the Revolving Loan
Account in such amount as shall be necessary to eliminate the excess. Each
Revolving Loan shall be in a minimum amount of $100,000 or an integral multiple
thereof. The Revolving Loans shall be evidenced by an Amended and Restated
Revolving Credit Note (the "Note") in the form of Exhibit A hereto.
2.1.2 Subject to the provisions of Section 2.5, the Borrower
may prepay outstanding Revolving Loans and the Note in whole or in part at any
time without premium or penalty. Amounts so paid in respect of the Revolving
Loans and the Note and other amounts may be borrowed and reborrowed from time to
time as provided in Section 2.1.1. On the Revolving Credit Maturity Date, the
Borrower shall repay all outstanding Revolving Loans and the Note, together with
all unpaid interest thereon and all fees and other amounts due hereunder.
2.2. Letters of Credit. Upon the terms and subject to the
conditions of this Agreement, and in reliance upon the representations,
warranties and covenants of the Borrower made herein, the Lender agrees to
issue, to the extent permitted by law and the Uniform Customs Practices of the
International Chamber of Commerce governing Letters of Credit (Publication No.
500 or any successor thereto), Letters of Credit upon the application of the
Borrower during the period from the date hereof to one (1) month prior to the
Maturity Date; provided that the aggregate Stated Amount of Letters of Credit
outstanding at any time, plus the aggregate amount of all unreimbursed draws
under such outstanding Letters of Credit, shall not at any time (i) exceed
$2,500,000 less the total amount of B/A's outstanding at such time, or (ii)
cause the principal amount of Revolving Loans outstanding at such time (after
taking into account such Stated Amount and all such unreimbursed draws and the
total amount of B/A's outstanding at such time) to exceed the Revolving Credit
Maximum Amount; and provided, further, that at the time the Borrower requests
the issuance of a Letter of Credit and after giving effect to the issuance
thereof, there has not occurred and is not continuing any Default or Event of
Default. All Letters of Credit shall have a stated expiration date not to exceed
one year and shall, in any event, expire not later than the date which is one
(1) month prior to the Maturity Date. Amounts drawn under the Letters of Credit
shall become immediately due and payable by the Borrower to the Lender. Without
limiting the foregoing, if any Letter of Credit would by its terms expire after
the Maturity Date, the Borrower shall, on the Maturity Date, cause another
letter of credit issued by another bank to be substituted therefor or cause
another bank satisfactory to the Lender to indemnify the Lender to its
satisfaction against any and all liabilities and obligations in respect to such
Letter of Credit and, in such event, this Agreement and the other Loan Documents
shall continue in
-8-
full force and effect until all of the Obligations under any such Letters of
Credit have been paid in full to the Lender. In order to evidence such Letters
of Credit, the Borrower shall enter into, with the Lender, such agreements and
execute such instruments and documents as the Lender customarily requires in
like transactions.
2.2.A. Bankers' Acceptances.
--------------------
2.2.A(i). Upon the terms and subject to the
conditions of this Agreement, and in reliance upon the representations,
warranties and covenants of the Borrower made herein, the Lender agrees to
issue, to the extent permitted by law, B/A's upon the application of the
Borrower during the period from the date hereof to one (1) month prior to the
Maturity Date; provided that the aggregate amount of B/A's outstanding for the
account of the Borrower (after giving effect to the B/A requested) shall not at
any time (i) exceed $2,500,000 less the Stated Amount of all Letters of Credit
outstanding at such time and less the aggregate amount of all unreimbursed draws
under such outstanding Letters of Credit, or (ii) cause the principal amount of
the Revolving Loans outstanding at such time, plus the aggregate Stated Amount
of Letters of Credit then outstanding, plus the aggregate amount of all
unreimbursed draws under such Letters of Credit, to exceed the Revolving Credit
Maximum Amount; and provided, further, that at the time the Borrower requests
the issuance of a B/A and after giving effect to the issuance thereof, there has
not occurred and is not continuing any Default or Event of Default. All B/A's
shall have a stated expiration date of less than 180 days and shall in any event
expire not later than the date which is one (1) month prior to the Maturity
Date.
2.2.A(ii). Amounts due to the Lender in respect to
B/A's upon the maturity thereof or the payment by the Lender of any draft
pursuant thereto shall become immediately due and payable by the Borrower to the
Lender, and may be added to the Revolving Loan Account as Revolving Loans as of
the date funds are advanced under such B/A and shall be immediately due and
payable upon the maturity of the Note.
2.2.B The Borrower shall enter into, with the Lender, such
agreements and execute such instruments and documents as the Lender customarily
requires in like transactions. The Borrower hereby acknowledges and agrees that
its president and vice president are each authorized to sign applications for
the issuance of B/A's and that the execution and submission thereof to the
Lender by any such officer for the account of the Borrower shall be for the
benefit and liability hereunder of the Borrower.
2.3 Interest and Fees.
-----------------
2.3.1 Interest on any Revolving Loans shall be calculated and
due and payable based upon the following interest rate alternatives:
(i) In the absence of any election by the Borrower under clause
(ii) below, either initially with respect to any Revolving
Loan or at the expiration of the applicable Interest Period
under such clause (ii) below, such Revolving
-9-
Loans shall bear interest at a rate per annum equal to the
Prime Rate in effect from time to time, with interest thereon
being payable monthly in arrears on the last Business Day of
each month. Any change in the Prime Rate shall result in a
change on the same day in the rate of interest to accrue from
and after such day on the unpaid balance of principal of the
Revolving Loans bearing interest with reference to the Prime
Rate.
(ii) In the manner and subject to the provisions set forth in
Sections 2.1, 2.4 and 2.5, so long as no Default or Event of
Default has occurred and is then continuing, the Borrower may
elect from time to time prior to the Maturity Date to have all
or a portion of the unpaid principal amount of any Revolving
Loan bear interest during any particular Interest Period
applicable to Libor Loans at the Libor Rate and be treated as
a Libor Loan, with interest, in all cases, being due and
payable in arrears on the last Business Day of each month and
on the last day of the applicable Interest Period, provided,
that any such portion of any Loan shall be in an amount not
less than $100,000 or an integral multiple thereof.
The rates of interest set forth above shall apply before an Event of Default.
After an Event of Default pursuant to Section 6 of this Agreement, interest
shall accrue on the balance hereof at a rate equal to four percent (4%) per
annum above the highest rate that would otherwise apply to amounts outstanding
hereunder.
2.3.2 The Borrower shall pay to the Lender a commitment fee,
payable monthly in arrears on the last Business Day of each month, equal to
one-eighth of one percent (0.125%) per annum of the Unused Commitment during the
preceding month.
2.3.3 The Borrower shall pay to the Lender: (i) for issuance
of Letters of Credit (a) a fee equal to the greater of 1% per annum of the face
amount of each standby Letter of Credit or such minimum fee for each such Letter
of Credit as may be generally in effect from time to time, and (b) a fee equal
to the greater of 1% of the face amount of each documentary Letter of Credit or
such minimum fee for each such Letter of Credit as may be generally in effect
from time to time, and (ii) for issuance of B/A's a fee equal to the greater of
1% per annum of the face amount of each B/A or such minimum fee for each such
B/A as may be generally in effect from time to time; plus, in the case of
Letters of Credit and B/A's, such transactional fees and charges as are
customarily charged by the Lender.
2.3.4 The Borrower authorizes the Lender to charge to the
Revolving Loan Account or to any deposit account which the Borrower may maintain
with the Lender the principal, interest, fees, charges, taxes and expenses
provided for in this Agreement or any other document executed or delivered in
connection herewith.
2.3.5 If, after the date hereof, the Lender shall have
determined that the adoption of any applicable law, rule, regulation, guideline,
directive or request (whether
-10-
or not having the force of law) regarding capital requirements for banks or bank
holding companies, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the Lender with any of the foregoing imposes or increases a requirement by
the Lender to allocate capital resources to the Lender's commitment to make
Revolving Loans or issue Letters of Credit which has or would have the effect of
reducing the return on the Lender's capital to a level below that which the
Lender could have achieved (taking into consideration the Lender's then existing
policies with respect to capital adequacy and assuming full utilization of the
Lender's capital) but for such adoption, change or compliance by any amount
deemed by the Lender to be material, then: (i) the Lender shall promptly after
its determination of such occurrence give notice thereof to the Borrower; and
(ii) to the extent that the costs of such increased capital requirements are not
reflected in the Prime Rate, the Borrower and the Lender shall thereafter
attempt to negotiate in good faith, within 30 days following the date the
Borrower receives such notice, an adjustment payable hereunder that will
adequately compensate the Lender in light of the circumstances. If the Lender
and the Borrower are unable to agree to such adjustment within 30 days following
the date upon which the Borrower receives such notice, then commencing on the
date of such notice (but no earlier than the effective date of any such
increased capital requirement), the fees payable hereunder shall increase by an
amount that will, in the Lender's reasonable determination, provide adequate
compensation. The provisions of this Section 2.3.5 shall be applied to the
Borrower so as not to discriminate against the Borrower vis-a-vis other
customers of the Lender.
2.3.6 Anything hereinbefore to the contrary notwithstanding,
if any present or future applicable law (which expression, as used in this
Agreement, includes statutes and rules and regulations thereunder and
interpretations thereof by any competent court or by any governmental or other
regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time heretofore or hereafter made upon or otherwise issued
to the Lender by any central bank or other fiscal, monetary or other authority,
whether or not having the force of law) shall (i) subject the Lender to any tax,
levy, impost, duty, charge, fee, deduction or withholding of any nature with
respect to this Agreement, the maximum amount of the Revolving Loans or Letters
of Credit or the payment to the Lender of any amounts due to it hereunder, or
(ii) materially change the basis of taxation of payments to the Lender of the
principal or the interest on or any other amounts payable to the Lender
hereunder, or (iii) impose or increase or render applicable any special or
supplemental special deposit or reserve or similar requirements or assessment
against assets held by, or deposits in or for the account of, or any liabilities
of, or loans by an office of the Lender in respect of the transactions
contemplated herein, or (iv) impose on the Lender any other conditions or
requirements with respect to this Agreement, the Revolving Credit Maximum
Amount, the Letters of Credit or any Revolving Loan, and the result of any of
the foregoing is (A) to increase the cost to the Lender of making, funding or
maintaining all or any part of the Revolving Loans or the Letters of Credit, or
(B) to reduce the amount of principal, interest or other amount
-11-
payable to the Lender hereunder, or (C) to require the Lender to make any
payment or to forego any interest or other sum payable hereunder, the amount of
which payment or foregoing interest or other sum is calculated by reference to
the gross amount of any sum receivable or deemed received by the Lender from the
Borrower hereunder, then, and in each such case not otherwise provided for
hereunder, the Borrower will, upon demand made by the Lender accompanied by
calculations thereof in reasonable detail, pay to the Lender such additional
amounts as will be sufficient to compensate the Lender for such additional cost,
reduction, payment or foregoing interest or other sum, provided that the
foregoing provisions of this sentence shall not apply in the case of any
additional cost, reduction, payment or foregoing interest or other sum resulting
from any taxes charged upon or by reference to the overall net income, profits
or gains of the Lender.
2.4 Loan Requests.
-------------
2.4.1 All requests under this Agreement for Revolving Loans or
for a conversion of the interest rate applicable to any Revolving Loan (or
portion thereof) under Section 2.3 above to a rate of a different type or for a
continuation of a Revolving Loan (or a portion thereof) at an interest rate of
the same type for an additional Interest Period, shall be made by the Borrower
by telecopy or telephone (each such request to be irrevocable), with any such
request by telephone to be immediately followed by a written confirmation
thereof by the Borrower substantially in the form attached hereto as Exhibit C
(each a "Notice of Borrowing, Continuation or Conversion"), specifying (a) the
amount of the requested advance or portion of outstanding principal into which
the type of interest rate requested is to be converted or continued, (b) the
requested borrowing or interest rate conversion or continuation date, (c)
whether the requested advance or affected principal portion is to be treated as
a Libor Loan, and (d) if the requested advance or affected principal portion is
to be in whole or in part a Libor Loan, the length of the requested Interest
Period for such advance or principal portion as applicable (which must be, in
the case of Libor Loans, for one, two, three, six or nine months, provided,
however, that no Interest Period shall extend beyond the Maturity Date, and
provided, further, that if any such written confirmation differs in any material
respect from the action taken by the Lender, the records of the Lender shall be
conclusive absent manifest error.
2.4.2 Each Notice of Borrowing, Continuation or Conversion
must be delivered to an officer of the Lender no later than 11:00 a.m. Boston
time, (a) 2 Business Days prior to the requested advance, continuation or
conversion date, in the case of Libor Loans, or (b) on the requested advance,
continuation or conversion date, in the case of Prime Rate Loans. If the
Borrower does not request that an existing Libor Loan be maintained as a Libor
Loan at least 2 Business Days prior to the end of the Interest Period applicable
to such Loan, in accordance with the procedure set forth herein, then the
Borrower shall be deemed to have requested that such Loan be converted into a
Prime Rate Loan.
2.5 Libor Loan Provisions.
---------------------
-12-
2.5.1 The Lender shall promptly notify the Borrower upon
determining any Libor Rate. Each such notice shall be conclusive and binding
upon the Borrower. If, with respect to any Interest Period, the Lender is unable
to determine the Libor Rate relating thereto, or adverse or unusual conditions
in or changes in applicable law relating to the London interbank market make it
illegal or, in the reasonable judgment of the Lender, impracticable, to fund
therein the amount of the requested Libor Loan or make the projected Libor Rate
unreflective of the actual costs of funds therefor to the Lender, or if it shall
become unlawful for the Lender to charge interest on the Loans on a Libor Rate
basis, then in any of the foregoing events the Lender shall so notify the
Borrower and interest will be calculated and payable in respect of such
projected Interest Period (and thereafter for so long as the conditions referred
to in this sentence shall continue) by reference to the Prime Rate in accordance
with Section 2.3.1(i).
2.5.2 In the event the Lender shall incur any loss, cost or
expense as a result of:
(i) any payment, prepayment of or election to change the interest
rate applicable to any principal of a Libor Loan on a date
other than the last day of any Interest Period applicable
thereto, or
(ii) any failure by the Borrower to borrow or convert into any
Libor Loan on the date or in the amount specified in a Notice
of Borrowing, Continuation or Conversion, or
(iii) any increase in the cost to the Lender of making Libor Loans
(including without limitation costs associated with increases
in taxes, with reserves required by law or regulation, or with
any other governmental assessments, in connection with Libor
Loans),
then in any such event the Borrower shall pay to the Lender such amount or
amounts as shall be sufficient (in the reasonable opinion of the Lender) to
compensate the Lender fully for such loss, cost or expense, such compensation to
include, without limitation, an amount equal to the excess, if any, of (a) the
amount of interest that would have accrued on the principal amount so paid,
prepaid or converted or not borrowed for the period from the date of such
payment, prepayment or conversion to the last day of the Interest Period for
such Revolving Loan or, in the case of a failure to borrow, for the entire
Interest Period for such Revolving Loan, commencing on the date of such failure
to borrow, at the applicable rate of interest for such Revolving Loan provided
for herein, over (b) the amount of interest (as reasonably determined by the
Lender) the Lender would have been offered in the London interbank market for
dollar deposits of amounts comparable to such principal amount at a maturity
comparable to said period.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
------------------------------
The Borrower represe~tc, warrants and covenants as follows:
-13-
3.1 Organization and Qualification. The Borrower and each of its
Subsidiaries (i) is, with respect to the Borrower, a corporation duly organized,
validly existing and in good standing under the laws of The Commonwealth of
Massachusetts, and with respect to the Borrower's Subsidiaries, is a corporation
duly organized, validly existing and in good standing (or the jurisdictional
equivalents thereof), in its respective jurisdiction of organization as set
forth on Exhibit B hereto; (ii) has all requisite corporate power and authority
to own its property and conduct its business as now conducted and as presently
contemplated; and (iii) is duly qualified and in good standing in each
jurisdiction (which jurisdictions are listed on Exhibit B hereto) where the
nature of its properties or its business (present or proposed) requires such
qualification. Since the date of the Initial Financial Statement, the Borrower
has continued to engage in substantially the same business as that in which it
was then engaged and is engaged in no unrelated business.
3.2 Corporate Authority; Valid Obligations; Approvals. The execution,
delivery and performance of the Loan Documents and the transactions and other
documents contemplated hereby and thereby are within the Borrower's corporate
authority, have been authorized by all necessary corporate proceedings on the
part of the Borrower, and do not and will not contravene any provision of law,
its charter document or its by-laws, or contravene any provisions of, or
constitute a Default or Event of Default hereunder or a default under any other
agreement, instrument, judgment, order, decree, permit, license or undertaking
binding upon or applicable to the Borrower or any of its properties, or result
in the creation, other than in favor of the Lender, of any mortgage, pledge,
security interest, lien, encumbrance or charge upon any of the properties or
assets of the Borrower. The Loan Documents have been duly executed and delivered
and constitute the legal, valid and binding obligations of the Borrower
enforceable in accordance with their terms. The execution, delivery and
performance of the Loan Documents and the transactions and other documents
contemplated hereby and thereby do not require any approval or consent of, or
filing or registration with, any person.
3.3 Title to Properties; Absence of Liens. The Borrower and each of its
Subsidiaries has good and marketable title to all of its properties, assets and
rights of every name and nature now purported to be owned by it, which
properties, assets and rights include all those necessary to permit the Borrower
and such Subsidiaries to conduct its business as such business was conducted on
the date of the Initial Financial Statement, free from all liens, charges and
encumbrances whatsoever except for insubstantial and immaterial defects in title
and liens, charges or encumbrances permitted under Section 5.6.
3.4 Compliance. The Borrower and each of its Subsidiaries (i) has all
necessary permits, approvals, authorizations, consents, licenses, franchises,
registrations and other rights and privileges (including without limitation
patents, trademarks, trade names and copyrights) to allow it to own and operate
its business without any violation of law or the rights of others, (ii) is duly
authorized, qualified and licensed under and in compliance with all applicable
laws, regulations, authorizations and orders of public authorities
-14-
(including, without limitation, laws relating to hazardous materials, hazardous
waste, oil, and protection of the environment and laws relating to ERISA or to
employee benefit plans generally, and the jurisdictional equivalents thereof),
and (iii) has performed all obligations required to be performed by it under,
and is not in default under or in violation of, its charter or by-laws, or any
agreement, lease, mortgage, note, bond, indenture, license or other instrument
or undertaking to which it is a party or by which any of it or any of its
properties are bound, except for any such violations or failures to comply under
clauses (i) through (iii) above which, individually or in the aggregate, would
not have a material adverse effect on the business, condition (financial or
otherwise), results of operations or assets of the Borrower or the Borrower and
its Subsidiaries taken as a whole, and neither the Borrower nor any of its
Subsidiaries has received any notice by any governmental authority or third
party with respect to the generation, storage, or disposal or release or threat
of release of hazardous substances, hazardous materials, or oil, or with respect
to any violation of any federal, state or local environmental, health or safety
statute or regulation.
3.5 Financial Statements. The Borrower has furnished to the Lender its
audited consolidated balance sheet as of March 31, 2001 and the related audited
consolidated statements of income and stockholders' equity and cash flows for
the year then ended, which were prepared in accordance with GAAP, certified by
independent certified public accountants acceptable to the Lender and fairly
present the consolidated financial position of the Borrower as at the close of
business on such date and the results of its operations for the year then ended.
The Borrower has also furnished to the Lender its unaudited consolidated balance
sheet as of December 31, 2001 and the related unaudited consolidated statements
of income and stockholders' equity and cash flows for the three quarters then
ended (collectively, such audited and unaudited financial statements are
referred to as the "Initial Financial Statement"). At the date hereof, the
Borrower and its Subsidiaries have no material Indebtedness or other
liabilities, whether accrued, absolute, contingent or otherwise, and whether due
or to become due, that are not set forth on the Initial Financial Statement or
on Exhibit B hereto. Since the respective dates of the Initial Financial
Statement there have been no material adverse changes, individually or in the
aggregate, in the assets, liabilities, financial condition or business of the
Borrower or the Borrower and its Subsidiaries taken as a whole, except as set
forth on Exhibit B hereto.
3.6 Events of Default; Solvency. As of the date of this Agreement, no
Default or Event of Default exists and the Borrower is not, and immediately
after giving effect to the consummation of the Revolving Loans will not be,
Insolvent.
3.7 Taxes. The Borrower and each of its Subsidiaries has filed all
federal, state and other tax returns required to be filed for all Taxes, and has
paid (or has established adequate reserves in accordance with GAAP for the
payment of) all Taxes, assessments and other such governmental charges due from
the Borrower have been fully paid. Neither the Borrower nor any of its
Subsidiaries has executed any waiver that would have the effect of extending the
applicable statute of limitations in respect of any Tax.
-15-
3.8 Labor Relations; Litigation. Neither the Borrower nor any of its
Subsidiaries is engaged in any unfair labor practice and, except as set forth on
Exhibit B attached hereto, there is no litigation, proceeding, governmental
investigation (administrative or judicial) or labor dispute, pending or, to the
best knowledge of the Borrower, threatened against the Borrower or any of its
Subsidiaries, which, if decided adversely to the Borrower or such Subsidiary,
could have a materially adverse effect on the business, properties or condition
(whether financial or otherwise) of the Borrower or the Borrower and its
Subsidiaries taken as a whole or on the ability of the Borrower to perform its
obligations under this Agreement or any other agreement or document contemplated
hereby, nor is any substantial basis for any such litigation or labor dispute
known to exist.
3.9 Restrictions on the Borrower. Neither the Borrower nor any of its
Subsidiaries is party to or bound by any contract, agreement or instrument, nor
subject to any charter or other corporate restriction which will, under current
or foreseeable conditions, materially and adversely affect its business,
property, assets, operations or conditions, financial or otherwise.
3.10 Contracts with Affiliates, Etc. Except as disclosed on Exhibit B
attached hereto, and except for agreements or transactions (in each case) in the
ordinary course of business and on an arm's-length basis, neither the Borrower
nor any of its Subsidiaries is a party to or otherwise bound by any agreements,
instruments or contracts (whether written or oral) with any Affiliate, except
for any such agreement, instrument or contract (other than an agreement,
instrument or contract with respect to Indebtedness for borrowed money) as would
not materially and adversely affect the condition (financial or otherwise),
properties, business or results of operations of the Borrower or the Borrower
and its Subsidiaries taken as a whole.
3.11 Disclosure. No representations and warranties made by the Borrower
in this Agreement, any other Loan Document or in any other agreement,
instrument, document, certificate, statement or letter furnished to the Lender
by or on behalf of the Borrower, and no other factual information heretofore or
contemporaneously furnished by or on behalf of the Borrower to the Lender, in
connection with any of the transactions contemplated by any of the Loan
Documents contains (as of the date given) any untrue statement of fact or omits
to state a fact necessary in order to make the statements contained therein not
misleading in any material respect in light of the circumstances in which they
are made. Except as disclosed herein or in the Initial Financial Statement or in
the other Loan Documents, there is no fact known to the Borrower which
materially adversely affects, or which would in the future materially adversely
affect, the business, condition (financial or otherwise), results of operations
or assets of the Borrower or the Borrower and its Subsidiaries taken as a whole.
3.12 Subsidiaries. As of the date hereof, the Borrower and its
Subsidiaries have no Subsidiaries, except as disclosed on Exhibit B attached
hereto.
SECTION 4. CONDITIONS OF LOANS.
-------------------
-16-
4.1 Conditions to Initial Revolving Loan, Letter of Credit and B/A.
The obligation of the Lender to make the initial Revolving Loan and to issue the
initial Letter of Credit and B/A is subject to the fulfillment to the
satisfaction of the Lender on the date hereof of the following conditions
precedent:
4.1.1 Receipt by the Lender of all of the agreements, documents,
instruments, certificates and opinions listed or described on the Closing
Checklist attached hereto as Exhibit E, in form and substance satisfactory to
the Lender, and duly executed and delivered by the parties thereto, along with
such additional instruments, certificates, opinions and other documents as the
Lender shall reasonably request.
4.1.2 The representations and warranties contained herein shall be
true and accurate on and as of the date hereof, the Borrower shall have
performed and complied with all covenants and conditions required herein to be
performed or complied with by it prior to the making of such Revolving Loan, and
no Default or Event of Default shall be continuing or result from the Revolving
Loans to be made on the date hereof or the transactions contemplated hereby.
4.2 Conditions to all Loans, Letters of Credit and B/A's. The
obligation of the Lender to make any Revolving Loan and to issue any Letter of
Credit or B/A is subject to the fulfillment to the satisfaction of the Lender
immediately prior to or contemporaneously with each such Loan of each of the
following conditions: (i) the representations and warranties contained herein or
otherwise made in writing by or on behalf of the Borrower pursuant hereto or in
connection with the transactions contemplated hereby shall be true and correct
in all material respects at the time of each such Loan (except for
representations and warranties limited as to time or with respect to a specific
event) with and without giving effect to the Loan to be made at such time and
the application of the proceeds thereof, (ii) no Default or Event of Default
shall be continuing or result from such Loan, (iii) no material adverse change
in the condition (financial or otherwise), business or properties of the
Borrower shall have occurred since the date of the Initial Financial Statement,
and (iv) no change in applicable law or regulation shall have occurred as a
consequence of which it shall have become and continue to be unlawful for the
Lender or the Borrower to perform any of its respective agreements or
obligations under any Loan Document to which it is a party.
SECTION 5. COVENANTS.
---------
During the term of this Agreement and so long as any Obligation of the
Borrower in respect of any Loan remains outstanding, the Borrower hereby
covenants to the Lender that:
5.1 Financial Statements and Other Reporting Requirements. The
-----------------------------------------------------
Borrower shall furnish to the Lender:
-17-
(i) as soon as available to the Borrower, but in any event
within 90 days after each fiscal year-end, the 10-K Annual Report of
the Borrower filed with the Securities and Exchange Commission, which
shall include the consolidated balance sheet of the Borrower as at the
end of, and related consolidated statements of income, retained
earnings and cash flow for, such year prepared in accordance with GAAP
and certified by independent certified public accountants satisfactory
to the Lender that such statements present fairly the consolidated
financial position of the Borrower prepared in accordance with GAAP
applied in a manner consistent with the Borrower's past practices; and
concurrently with such Annual Report and financial statements, if in
the opinion of such accountants a Default or Event of Default exists, a
written statement by such accountants that, in the making of the audit
necessary for their report and opinion upon such financial statements,
they have obtained knowledge of such Default or Event of Default, and
they shall disclose in such written statement the nature and status
thereof;
(ii) as soon as available to the Borrower, but in any event
within 45 days after the end of each fiscal quarter of each fiscal year
of the Borrower, the 10-Q Quarterly Report of the Borrower filed with
the Securities and Exchange Commission, which shall include the
consolidated balance sheet of the Borrower as at the end of, and
related consolidated statements of income, retained earnings and cash
flow for, the portion of the year then ended and for the quarter then
ended, prepared in accordance with GAAP (with the exception of
footnotes) applied in a manner consistent with the audited financial
statements required by clause (i) above (subject to normal year-end
audit adjustments, none of which shall be materially adverse) and
certified pursuant to the report to be delivered to the Lender under
clause (iv) of this Section 5.1;
(iii) promptly as they become available, copies of all such
financial statements, proxy material and reports as the Borrower shall
send to or make generally available to stockholders and promptly as
they become available, but in any event within 5 days after the filing
thereof, copies of all regular and periodic reports filed by the
Borrower or any of its Subsidiaries with any securities exchange or
with the Securities and Exchange Commission or any governmental
authority succeeding to any or all of the functions of said Commission,
and promptly as they become available, a copy of each report (including
any so-called management letters) submitted to the Borrower by
independent certified public accountants in connection with each annual
audit of the books of the Borrower by such accountants or in connection
with any interim audit thereof pertaining to any phase of the business
of the Borrower;
(iv) concurrently with each delivery of financial statements
pursuant to clause (i) and clause (ii) of this Section 5.1, a chief
financial officer's report in substantially the form of Exhibit D
hereto, and including, without limitation, computations in reasonable
detail evidencing compliance with the covenants contained in Sections
5.16, 5.17 and 5.18;
-18-
(v) promptly after obtaining knowledge of the existence
thereof, notice of (a) the occurrence of any event which constitutes a
Default or Event of Default, together with the nature and duration
thereof and the action proposed to be taken with respect thereto, (b)
the occurrence of any condition or event with respect to the Borrower
or any Subsidiary or Affiliate which could be expected to constitute a
material adverse change in or to have a material adverse effect on the
business, properties or condition (financial or otherwise) of the
Borrower or any of its Subsidiaries, together with the nature and
duration thereof and the action proposed to be taken with respect
thereto, (c) any litigation or any investigative proceedings of a
governmental agency or authority commenced or threatened against the
Borrower, any Subsidiary or Affiliate or any Plan which could be
expected to have a material adverse effect on the business, properties
or condition (financial or otherwise) of the Borrower, or the issuance
of any judgment, award, decree, order or other determination in or
relating to any such litigation or proceedings, (d) the occurrence of a
reportable event (as defined in ERISA) or any communications to, or
receipt of communications from, the PBGC, the United States Department
of Labor or the IRS by the Borrower or any Affiliate relating to any
Plan, along with copies of all such communications, (e) the adoption by
the Borrower of any stock option or executive compensation plan,
whether or not subject to ERISA, and any Plan subject to ERISA, or the
substantial modification of any such plan, along with the vesting and
funding schedules and other principal provisions thereof, and (f) any
communications given or received by the Borrower or any Subsidiary in
any way relating to compliance with, any violation or potential
violation of, or any potential liability under, any environmental law
or regulation (including those relating to pollution control, hazardous
materials and hazardous wastes), along with copies of all such
communications; and
(vi) from time to time, such other financial data and
information about the Borrower and/or any of its Subsidiaries as the
Lender may reasonably request.
5.2 Conduct of Business. The Borrower will, and will cause each of its
Subsidiaries to, maintain its corporate existence, continue to have a fiscal
year ending on the last Saturday of March of each year (unless otherwise agreed
to by the Lender) and remain or engage in substantially the same business as
that in which it is now engaged, and will duly observe and comply with all
applicable laws and all requirements of any governmental authorities relative to
it, its assets or to the conduct of its business, including laws relating to the
environment, pollution control, hazardous materials and hazardous waste (except
where the failure to observe and comply with such laws or requirements would not
materially and adversely affect the condition (financial or otherwise),
properties, business, or results of operations of the Borrower or the Borrower
and its Subsidiaries, taken as a whole, or the ability of the Borrower to
perform its obligations to the Lender) and will maintain and keep in full force
and effect all licenses and permits necessary to the proper conduct of its
business.
-19-
5.3 Maintenance and Insurance; Deposit Accounts. The Borrower will, and
will cause each of its Subsidiaries to, maintain and keep its properties in good
repair, working order and condition so that its business may be properly and
advantageously conducted at all times, and will comply with the provisions of
all material Leases to which it is a party or under which it occupies property
so as to prevent any material loss or forfeiture thereof or thereunder. The
Borrower at all times will, and will cause each of its Subsidiaries to, maintain
insurance with such insurance companies, in such amounts against such hazards
and liabilities and for such purposes as is customary in the industry for
companies of established reputation engaged in the same or similar businesses
and owning or operating similar properties. Upon request of the Lender from time
to time, the Borrower shall furnish to the Lender certificates or other evidence
satisfactory to the Lender of compliance with the foregoing insurance
provisions. The Borrower will, and will cause each of its Subsidiaries to,
maintain its primary deposit accounts with the Lender.
5.4 Taxes. The Borrower will, and will cause each of its Subsidiaries
to, pay or cause to be paid all taxes, assessments or governmental charges on or
against it or its properties prior to such taxes becoming delinquent, except for
any tax, assessment or charge which is being contested in good faith by proper
legal proceedings and with respect to which adequate reserves have been
established and are being maintained, provided that no enforcement action to
enforce a lien has been commenced against the Borrower or any such Subsidiary
with respect to any such tax, assessment or charge which is material in amount.
5.5 Limitation of Indebtedness. Except with the prior written consent
of the Lender, the Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist, or in any manner
become or be liable directly or indirectly with respect to, any Indebtedness
except: (i) the Obligations; (ii) Indebtedness for borrowed money existing on
the date of this Agreement and described on Exhibit B hereto or in the Initial
Financial Statement; (iii) Indebtedness on open account for the purchase price
of services, materials and supplies incurred by the Borrower or any such
Subsidiary in the ordinary course of business (not as a result of borrowing), so
long as all of such open account Indebtedness shall be promptly paid and
discharged when due or in conformity with customary trade terms and practices,
except for any such open account Indebtedness which is being contested in good
faith by the Borrower or any such Subsidiary and as to which adequate reserves
required by GAAP have been established and are being maintained and (iv)
Indebtedness expressly permitted by Section 5.8 hereof.
5.6 Restrictions on Liens. Without the Lender's prior written consent,
the Borrower will not, and will not permit any of its Subsidiaries to, create,
incur, assume or suffer to exist any mortgage, pledge, security interest, lien
or other charge or encumbrance, including the lien or retained security title of
a conditional vendor, ("Encumbrances") upon or with respect to any property or
assets, real or personal, of the Borrower or any such Subsidiary, or assign or
otherwise convey any right to receive income, except:
-20-
(i) Encumbrances existing on the date of this Agreement and
set forth on Exhibit B hereto;
(ii) Encumbrances in favor of the Lender;
(iii) liens for taxes, fees, assessments and other
governmental charges to the extent that payment of the same is not
required in accordance with the provisions of Section 5.4; or
(iv) liens incurred or deposits made in the ordinary course
of the Borrower's business in connection with workers' compensation,
unemployment insurance, social security and other similar laws, or
liens of mechanics, laborers, materialmen, carriers and warehousemen
arising by operation of law to secure payment for labor, materials,
supplies or services incurred in the ordinary course of Borrower's
business, but only if the payment thereof is not at the time required
and such liens do not, individually or in the aggregate, materially
detract from the value or limit the use of any property subject
thereto.
5.7 Mergers, Acquisitions and Purchases and Sales of Assets. The
Borrower will not, and will not permit any of its Subsidiaries to, (i)
consolidate or merge with or into any other corporation or other entity, (ii)
acquire the assets or stock of any entity, other than in connection with
acquisitions of interests in other corporations or business entities engaged in
the same business as that in which the Borrower is now engaged or in a
reasonable extension or expansion thereof (either through the purchase of assets
or capital stock or otherwise); provided, that (a) the aggregate amount of all
such acquisitions shall not exceed $500,000, (b) the properties and assets
acquired in connection with such acquisitions shall be free from all liens,
charges and encumbrances whatsoever, and (c) immediately prior to and after
giving effect to such acquisition, no Default or Event of Default shall exist,
or (iii) sell, lease, transfer or otherwise dispose of or discount any portion
of its assets (including any note, instrument or account), other than the sale
of finished goods and the disposition of scrap, waste and obsolete items in the
ordinary course of business. Any acquisition having an aggregate purchase price
in excess of $500,000 (in one or a series of transactions) shall be subject to
the prior written approval by the Lender, which such approval the Lender may
give, withhold or condition in its sole discretion.
5.8 Investments and Loans. The Borrower will not, and will not permit
any of its Subsidiaries to, make or have outstanding at any time any investments
in or loans to any other person, whether by way of advance, guaranty, extension
of credit, capital contribution, purchase of stocks, notes, bonds or other
securities or evidences of Indebtedness, or acquisition of limited or general
partnership interests or interests in any limited liability company, other than:
(i) in direct obligations of the United States of America, maturing within one
year of their issuance; (ii) in time certificates of deposit or repurchase
agreements, maturing within one year of their issuance, from banks or other
financial institutions in the United States having capital, surplus and
undivided profits in
-21-
excess of $200,000,000; (iii) in short-term commercial paper carrying the
highest rating by Moody's or Standard and Poor's rating services and issued by
corporations headquartered in the United States, in currency of the United
States; (iv) in shares of money-market mutual funds having assets in excess of
$100,000,000 and substantially all of the assets of which consist of investments
referred to in clauses (i) through (iii), inclusive, above; (v) advances to
employees for business related expenses to be incurred in the ordinary course of
business and consistent with past practices in an amount not to exceed $150,000
in the aggregate outstanding at any one time, provided that no such advances to
any single employee shall exceed $100,000 in the aggregate; (vi) loans to
employees from time to time in an aggregate principal amount not in excess of
$2,500,000 at any time outstanding for the purpose of permitting such employees
to exercise stock options pursuant to the Borrower's duly adopted stock option
plan; (vii) loans or other investments by the Borrower in its Subsidiaries,
provided that such loans and investments shall not exceed (x) $100,000 to any
such Subsidiary at any time outstanding, and (y) $250,000 to all such
Subsidiaries at any time outstanding, in each case without the prior written
approval of the Lender; and (viii) investments in addition to those permitted by
this Section 5.8 and disclosed on Exhibit B attached hereto.
5.9 Restricted Payments The Borrower shall not, directly or
indirectly (through any Affiliate or Subsidiary or otherwise), and shall not
permit any of its Subsidiaries to, declare, pay or make any Restricted Payment
other than (i) regular compensation and bonuses paid to employees of the
Borrower and its Subsidiaries in the ordinary course of business and consistent
with past practices, (ii) dividends in respect of, or repurchases of, the
Borrower's or any Subsidiaries' common stock, provided that, (x) no Default or
Event of Default exists or would occur by reason of the taking of such action,
(y) with respect to any stock repurchase by the Borrower or any Subsidiary, the
Borrower shall have furnished to the Lender a pro forma financial statement and
covenant compliance certificate evidencing compliance with all financial
covenants after giving effect to such repurchase, and (z) the Borrower shall
maintain its existing dividend policy as in effect on the Closing Date, and
(iii) any Subsidiary of the Borrower may pay dividends to the Borrower.
5.10 ERISA Compliance.
None of the Borrower or its Affiliates, any Plan and any fiduciary
thereof shall (i) engage in any "prohibited transaction" or incur, whether or
not waived, any "accumulated funding deficiency" (both as defined in ERISA and
the Code), (ii) fail to satisfy any additional funding requirements set forth in
Section 412 of the Code and Section 302 of ERISA, or (iii) terminate or withdraw
from participation in any Plan in a manner which could result in the imposition
of a lien on any property of, or impose a substantial withdrawal liability on,
the Borrower or any of its Affiliates or Subsidiaries. The Borrower and its
Affiliates and each Plan shall comply in all material respects with ERISA.
-22-
5.11 Inspection by the Lender; Books and Records. The Borrower will,
and will cause each of its Subsidiaries to, permit the Lender or its designees,
at any reasonable time and from time to time, to visit and inspect the
properties of the Borrower and its Subsidiaries, to examine and make copies of
the books and records of the Borrower and to discuss the affairs, finances and
accounts of the Borrower and its Subsidiaries with appropriate officers. The
Borrower and its Subsidiaries will keep adequate books and records of account in
which true and complete entries will be made reflecting all of its business and
financial transactions, and such entries will be made in accordance with GAAP
and applicable law.
5.12 Use of Proceeds. The Borrower may use the proceeds of the Loans
solely for (i) its working capital needs, (ii) treasury stock purchases to the
extent permitted by Section 5.9 hereof, (iii) the issuance of Letters of Credit
and B/A's, and (iv) acquisitions to the extent permitted by Section 5.7 or
otherwise approved by the Lender. No portion of any Loans shall be used for the
purpose of purchasing or carrying any "margin security" or "margin stock" as
such terms are used in Regulations G, U or X of the Board of Governors of the
Federal Reserve System.
5.13 Transactions with Affiliates. The Borrower will not, directly or
indirectly, and will not permit its Subsidiaries to, enter into any transaction
with any Affiliate except in the ordinary course of business on terms that are
no less favorable to the Borrower or such Subsidiary than those which might be
obtained at the time in a comparable arm's-length transaction with any person
who is not an Affiliate.
5.14 No Amendments to Certain Documents. The Borrower will not, and
will not permit its Subsidiaries to, at any time cause or permit any of the
Redemption Agreement, the charter or other incorporation documents or by-laws of
the Borrower or such Subsidiary to be modified, amended or supplemented in any
respect whatever, without the express prior written agreement, consent or
approval of the Lender, except for immaterial changes which could not adversely
affect the Lender or its rights hereunder.
5.15 Subsidiaries. The Borrower shall give the Lender written notice
of the formation after the date hereof of any Subsidiary, and agrees that it
shall cause any such Subsidiary to engage in the business of conducting branches
or divisions of the business now conducted by the Borrower or holding any of the
property of the Borrower. The Borrower will, at the direction of the Lender,
cause each such Subsidiary which is organized under the laws of the United
States to become a party to this Agreement and to such of the other Loan
Documents as the Lender shall require.
5.16 Leverage. The Borrower will not permit the ratio of (i) Total
Liabilities to (ii) Tangible Net Worth as at any fiscal quarter-end, commencing
with the fiscal quarter ended March 31, 2002, to be more than 1.25 to 1.0.
5.17 Profitability. The Borrower will not permit (a) its Net Income
for the fiscal quarter ended December 31, 2001 to be less than $500,000; or (b)
its Net Income during
-23-
any four consecutive fiscal quarters (as determined at the end of each fiscal
quarter for the four quarters then ending), commencing with the fiscal quarter
ended March 31, 2002 to be less than $1,500,000.
5.18 Current Ratio. The Borrower will not permit the ratio of (i) its
Current Assets, to (ii) its Current Liabilities as at any fiscal quarter-end,
commencing with the fiscal quarter ended March 31, 2002, to be less than 1.50 to
1.0.
SECTION 6. EVENTS OF DEFAULT; ACCELERATION.
6.1 The following shall constitute events of default (individually,
an "Event of Default"):
(i) default in the payment, when due or payable, of any Obligation
for the payment of money; or
(ii) default in the performance or observance of or compliance with
(i) any of the provisions of Sections 2 (other than the payment of principal and
interest), 5.1, 5.5 through 5.9, inclusive, 5.11 through 5.18, inclusive, of
this Agreement, or (ii) any term or condition of the Note (other than the
payment of principal and interest on the Note), or (iii) any other covenant or
condition of this Agreement, any other Loan Document or any other Obligation not
listed previously in this Section, and such default continues for more than 15
days; or
(iii) any representation or warranty at any time made by or on behalf
of the Borrower and its Subsidiaries in any Loan Document or otherwise shall
prove to have been false in any material respect upon the date when made or
deemed to have been made; or
(iv) the occurrence of any default under any agreement, note or other
instrument evidencing or relating to any obligation of the Borrower or any of
its Subsidiaries to any other person or entity for the payment of $200,000 or
more; or
(v) issuance of an injunction which might have a material adverse
effect on the condition (financial or otherwise), properties, business or
results of operations of the Borrower or the Borrower and its Subsidiaries taken
as a whole, or attachment which in the aggregate exceeds $200,000 in value,
against the Borrower or any of its Subsidiaries, any property of the Borrower or
any of its Subsidiaries or any endorser, guarantor or surety for any Obligation
which is not dismissed or bonded, to the satisfaction of the Lender, within 30
days after its issuance;
(vi) calling of a meeting of creditors, formation or appointment of a
committee of creditors or liquidating agents or offering of a composition or
extension to creditors by, for or with the consent or acquiescence of any of the
Borrower or any of its Subsidiaries or any endorser, guarantor or surety for any
Obligation;
-24-
(vii) Insolvency of the Borrower or any of its Subsidiaries or any
endorser, guarantor or surety for any Obligation;
(viii) any money judgment or judgments aggregating in excess of
$200,000 are entered against the Borrower or any of its Subsidiaries or any
endorser, guarantor or surety for any Obligation (except to the extent fully
covered by insurance and the insurance carrier has not reserved the right to
disallow such claim), and shall continue unsatisfied and in effect for a period
of 30 days, provided that the total cost of any bond applied in order to procure
a stay of execution in any such litigation shall not exceed $25,000; or
(ix) any Loan Document, or any covenant, agreement or obligation
contained therein or evidenced thereby, shall cease in any material respect to
be legal, valid, binding or enforceable in accordance with its terms, or shall
be cancelled, terminated, revoked or rescinded; or
(x) any action at law, suit in equity or other legal proceeding to
cancel, revoke or rescind any Loan Document shall be commenced by or on behalf
of the Borrower, any of its Subsidiaries or any other person bound thereby, or
by any court or any other governmental or regulatory authority or agency of
competent jurisdiction; or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall make a determination that,
or shall issue a judgment, order, decree or ruling to the effect that, any one
or more of the Loan Documents, or any one or more of the obligations of any
Borrower or any other person under any one or more of the Loan Documents, are
illegal, invalid or unenforceable in any material respect in accordance with the
terms thereof; or
(xi) any default or event of default shall occur and be continuing
under the Redemption Agreement.
6.2 If an Event of Default shall occur and be continuing, the Lender
may, at its option, (i) declare any or all of the Obligations of the Borrower to
the Lender to be immediately due and payable without further notice or demand,
whereupon the same shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower, (ii) limit, suspend or terminate the Borrowers' right to borrow
hereunder, and (iii) exercise any rights and remedies under this Agreement and
law; provided that in the event of any Event of Default specified in Sections
6.1(vi) or 6.1(vii), all Obligations shall become immediately due and payable
automatically and without any requirement of notice from the Lender or action by
the Lender.
SECTION 7. SET OFF; PARTICIPATIONS.
-25-
Any deposits or other sums at any time credited by or due from the
Lender to the Borrower may, without notice (any such notice being expressly
waived hereby) and to the fullest extent permitted by law and without regard to
any source of payment whatsoever, at any time during the continuance of an Event
of Default, be applied to or set off against Obligations on which the Borrower
is primarily liable and may at or after the maturity thereof be applied to or
set off against Obligations on which the Borrower is secondarily liable.
The Borrower invites any financing institution which may consider
investing or participating in the Loans (each such financing institution being
referred to in this Section as a "Participant") to rely upon all of the
representations, warranties, covenants and other provisions of this Agreement,
the Note and the other agreements, instruments and documents referred to herein
or contemplated hereby in making such investment or participation and agrees
that its becoming a Participant in the Loans shall constitute an acceptance of
such offer and shall make the Participant a creditor of the Borrower. Any
Participant may exercise the rights of set-off given to the Lender in this
Section 7 with respect to any outstanding indebtedness of the Borrower to such
Participant hereunder.
SECTION 8. GENERAL.
-------
8.1 Written Notices. Any notices, expressly required by this Agreement
to be in writing, to any party hereto shall be deemed to have been given when
delivered by hand, when sent by telecopier, when delivered to any overnight
delivery service freight pre-paid or 3 days after deposit in the mails, postage
prepaid, and addressed to such party at its address given at the beginning of
this Agreement or at any other address specified in writing. Written notices to
the Borrower shall be sent to the attention of Fred E. Faulkner, Jr., President,
with a copy to Donald S. Burnham, Esq., Peabody & Arnold, LLP, 50 Rowes Wharf,
Boston, Massachusetts 02110, and written notices to the Lender shall be sent to
the attention of David Keller, Vice President, with a copy to Philip A. Herman,
Esq., Goulston & Storrs, P.C., 400 Atlantic Avenue, Boston, Massachusetts
02110-3333. Any notice, unless otherwise specified, may be given orally or in
writing.
8.2 No Waivers. No failure or delay by the Lender in exercising any
right, power or privilege hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and not exclusive of any rights or
remedies otherwise provided by law.
8.3 Further Assurances. The Borrower shall do, make, execute and deliver
all such additional and further acts, things, assurances, and instruments as the
Lender may reasonably require more completely to vest in and assure to the
Lender its rights hereunder and under the other Loan Documents and to carry into
effect the provisions and intent of this Agreement and the other Loan Documents.
-26-
8.4 Governing Law. This Agreement and the other Loan Documents shall be
deemed to be contracts made under seal and shall be construed in accordance with
and governed by the laws of The Commonwealth of Massachusetts (without regard to
conflicts of laws rules). Any legal action or proceeding arising out of or
relating to this Agreement or any Obligation may be instituted in the courts of
The Commonwealth of Massachusetts or of the United States of America for the
District of Massachusetts, and the Borrower hereby irrevocably submits to the
jurisdiction of each such court in any such action or proceeding; provided,
however, that the foregoing shall not limit the Lender's rights to bring any
legal action or proceeding in any other appropriate jurisdiction.
8.5 Expenses, Taxes and Indemnification.
(a) The Borrower will pay and indemnify and hold the Lender harmless
against all taxes (other than taxes on the income of the Lender), charges and
expenses of every kind or description, including without limitation attorneys'
fees and expenses and the costs and expenses of field audits and commercial
finance exams, reasonably incurred or expended by the Lender in connection with
or in any way related to the Lender's relationship with the Borrower, whether
hereunder or otherwise, except that the Lender shall be responsible for its
attorneys' fees incurred or expended in connection with the preparation,
execution and delivery of this Agreement.
(b) The Borrower shall absolutely and unconditionally indemnify and
hold the Lender harmless against any and all claims, demands, suits, actions,
causes of action, damages, losses, settlement payments, obligations, costs,
expenses and all other liabilities whatsoever which shall at any time or times
be incurred or sustained by the Lender or by any of its shareholders, directors,
officers, employees, subsidiaries, affiliates or agents (except any of the
foregoing incurred or sustained as a result of the gross negligence or willful
misconduct of the Lender) on account of, or in relation to, or in any way in
connection with, associated with or ancillary to this Agreement, the other Loan
Documents and the other documents executed or delivered in connection herewith,
and the arrangements or transactions contemplated therein, whether or not all or
any of the transactions contemplated by, associated with or ancillary to this
Agreement or any of such documents are ultimately consummated.
8.6 Amendments, Waivers, Etc. This Agreement, the Note and the other
Loan Documents and any provision hereof or thereof may be waived, discharged or
terminated only by an instrument in writing signed by the Lender and may be
amended only by an instrument in writing signed by the Borrower and the Lender.
8.7 Binding Effect of Agreement. This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Lender and their respective
successors and assigns. The Lender may sell, assign or otherwise transfer all or
any portion of its right, title and interest in, and its obligations under, this
Agreement, the Loans made and to be made hereunder, or grant participations in
its right, title and interest herein and therein. The Borrower may not assign or
transfer its rights or obligations hereunder.
-27-
8.8 Computation of Interest and Fees, Etc. Interest, fees and charges
shall be computed daily on the basis of a year of 360 days and paid for the
actual number of days for which due. If the due date for any payment of
principal is extended by operation of law, interest shall be payable for such
extended time. If any payment required by this Agreement becomes due on a day on
which banks in Boston, Massachusetts are required or permitted by law or an
appropriate authority to remain closed, such payment may be made on the next
succeeding day on which such banks are open, and such extension shall be
included in computing interest in connection with such payment. All payments
required of the Borrower hereunder or under the Note shall be made in lawful
money of the United States of America in federal or other funds immediately
available to the recipient thereof at the prescribed place of payment.
8.9 Entire Agreement; Miscellaneous. This Agreement, including the
exhibits hereto, sets forth the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein, and supersedes
all prior agreements, promises, covenants, arrangements, communications,
representations, warranties, whether oral or written, by any officer, employee
or representative of any party hereto. The captions for the sections of this
Agreement are for ease of reference only and are not an integral part of this
Agreement. This Agreement may be signed in any number of counterparts with the
same effect as if the signatures hereto and thereto were upon the same
instrument. The provisions of this Agreement are severable, and if any of these
provisions shall be held by any court of competent jurisdiction to be
unenforceable, such holdings shall not affect or impair any other provision
hereof.
8.10 WAIVER OF JURY TRIAL. THE BORROWER HEREBY IRREVOCABLY WAIVES TRIAL
BY JURY IN ANY JURISDICTION AND IN ANY COURT WITH RESPECT TO, IN CONNECTION
WITH, OR ARISING OUT OF THIS AGREEMENT, THE OBLIGATIONS, OR ANY INSTRUMENT OR
DOCUMENT DELIVERED PURSUANT HERETO OR THERETO, OR ANY CLAIM OR DISPUTE HOWSOEVER
ARISING, BETWEEN THE BORROWER AND THE LENDER. THIS WAIVER SHALL BE EFFECTIVE FOR
EACH DOCUMENT EXECUTED BY THE BORROWER OR THE LENDER AND DELIVERED TO THE LENDER
OR THE BORROWER, AS THE CASE MAY BE, WHETHER OR NOT SUCH DOCUMENT SHALL CONTAIN
A WAIVER OF JURY TRIAL. THE BORROWER FURTHER ACKNOWLEDGES THAT ALL DOCUMENTS
DELIVERED BY THE LENDER OR THE BORROWER ARE SUBJECT TO THIS WAIVER OF JURY TRIAL
AS TO ANY ACTION THAT MAY BE BROUGHT AS TO ANY OF SUCH DOCUMENTS, AND
-28-
CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE.
WITNESS the execution hereof under seal on the day and year first above
written.
BOSTON ACOUSTICS, INC.
By: /s/ Debra A. Ricker-Rosato
---------------------------------
Name: Debra A. Ricker-Rosato
Title: Vice President-Finance
CITIZENS BANK OF MASSACHUSETTS
By: /s/ Michael G. McAuliffe
---------------------------------
Name: Michael G. McAuliffe
Title: Vice President
-29-