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EXHIBIT 10.9
VOICETEK CORPORATION
19 Alpha Road
Chelmsford, MA 01824
September 21, 1994
Fleet Bank of Massachusetts, N.A.
75 State Street
Boston, MA 02109
Gentlemen:
This letter agreement will set forth certain understandings between
Voicetek Corporation, a Massachusetts corporation (the "Borrower") and Fleet
Bank of Massachusetts, N.A. (the "Bank") with respect to Revolving Loans
(hereinafter defined) to be made by the Bank to the Borrower and with respect
to letters of credit which may hereafter be issued by the Bank for the account
of the Borrower. In consideration of the mutual promises contained herein and in
the other documents referred to below, and for other good and valuable
consideration, receipt and sufficiency of which are hereby acknowledged, the
Borrower and the Bank agree as follows:
I. AMOUNTS AND TERMS
1.1. Reference to Documents. Reference is made to (i) that certain
$1,000,000 principal amount promissory note (the "Revolving Note") of even date
herewith made by the Borrower and payable to the order of the Bank, (ii) that
certain Inventory, Accounts Receivable and Intangibles Security Agreement and
that certain Supplementary Security Agreement - Security Interest in Goods and
Chattels, each of even date herewith, from the Borrower to the Bank
(collectively, the "Security Agreement"), and (iii) assignments and notices of
assignment (collectively, the "Intellectual Property Assignments") from the
Borrower to the Bank relating to the Borrower's registered trademarks, patents
and copyrights, if any.
1.2. The Borrowing; Revolving Note. Subject to the terms and conditions
hereinafter set forth, the Bank will make loans ("Revolving Loans") to the
Borrower, in such amounts as the Borrower may request, at the Principal Office
of the Bank on any Business Day prior to the first to occur of (i) the
Expiration Date, or (ii) the earlier termination of the within-described
revolving financing arrangements pursuant to Section 5.2 or Section 6.7;
provided, however, that (1) the aggregate principal amount of Revolving Loans
outstanding shall at no time exceed the Maximum Revolving Amount (hereinafter
defined) and (2) the Aggregate Bank Liabilities (hereinafter defined) shall at
no time exceed the Borrowing Base (hereinafter defined). Within such limits, and
subject to the terms and conditions hereof, the Borrower may
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obtain Revolving Loans, repay Revolving Loans and obtain Revolving Loans again
on one or more occasions. The Revolving Loans shall be evidenced by the
Revolving Note and interest thereon shall be payable at the times and at the
rate provided in the Revolving Note. Overdue principal of the Revolving Loans
and, to the extent permitted by law, overdue interest shall bear interest at a
fluctuating rate per annum which at all times shall be equal to the sum of (i)
two (2%) percent per annum plus (ii) the per annum rate otherwise payable under
the Revolving Note (but in no event in excess of the maximum rate from time to
time permitted by then applicable law), compounded monthly and payable on
demand. The Borrower hereby irrevocably authorizes the Bank to make or cause to
be made, on a schedule attached to the Revolving Note or on the books of the
Bank, at or following the time of making each Revolving Loan and of receiving
any payment of principal, an appropriate notation reflecting such transaction
and the then aggregate unpaid principal balance of the Revolving Loans. The
amount so noted shall constitute presumptive evidence as to the amount owed by
the Borrower with respect to principal of the Revolving Loans. Failure of the
Bank to make any such notation shall not, however, affect any obligation of the
Borrower or any right of the Bank hereunder or under the Revolving Note. All
payments of interest, principal and any other sum payable hereunder and/or under
the Revolving Note shall be made to the Bank at its Principal Office, in
immediately available funds. All payments received by the Bank after 2:00 p.m.
on any day shall be deemed received as of the next succeeding Business Day. All
monies received by the Bank shall be applied first to fees, charges, costs and
expenses payable to the Bank under this letter agreement, the Revolving Note
and/or any of the other Loan Documents, next to interest then accrued on account
of any Revolving Loans or letter of credit reimbursement obligations and only
thereafter to principal of the Revolving Loans and letter of credit
reimbursement obligations. All interest and fees payable hereunder and/or under
the Revolving Note shall be calculated on the basis of a 360-day year for the
actual number of days elapsed.
1.3. Repayment; Renewal. The Borrower shall repay in full all Revolving
Loans and all interest thereon upon the first to occur of: (i) the Expiration
Date or (ii) an acceleration under Section 5.2(a) following an Event of Default.
The Borrower may repay, at any time, without penalty or premium, the whole or
any portion of any Revolving Loan. In addition, if at any time the Borrowing
Base is in an amount which is less than the then outstanding Aggregate Bank
Liabilities, the Borrower will forthwith prepay so much of the Revolving Loans
as may be required (or arrange for the termination of such letters of credit as
may be required) so that the Aggregate Bank Liabilities will not exceed the
Borrowing Base. The Bank may, at its sole discretion, renew the financing
arrangements described in this letter agreement by extending the Expiration Date
in a writing signed by the Bank and accepted by the Borrower. Neither the
inclusion in this letter agreement or elsewhere of covenants relating to periods
of time after the Expiration Date, nor any other provision hereof, nor any
action
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(except a written extension pursuant to the immediately preceding sentence),
non-action or course of dealing on the part of the Bank will be deemed an
extension of, or agreement on the part of the Bank to extend, the Expiration
Date.
1.4. Advances and Payments. The proceeds of all Revolving Loans shall be
credited by the Bank to a general deposit account maintained by the Borrower
with the Bank. The proceeds of each Revolving Loan will be used by the Borrower
solely for working capital purposes and, in the ordinary course, for other
general corporate purposes.
The Bank may charge any general deposit account of the Borrower at the
Bank with the amount of all payments of interest, principal and other sums due,
from time to time, under this letter agreement and/or the Revolving Note and/or
with respect to any letter of credit; and will thereafter notify the Borrower of
the amount so charged. The failure of the Bank so to charge any account or to
give any such notice shall not affect the obligation of the Borrower to pay
interest, principal or other sums as provided herein or in the Revolving Note or
with respect to any letter of credit.
Whenever any payment to be made to the Bank hereunder or under the
Revolving Note or with respect to any letter of credit shall be stated to be due
on a day which is not a Business Day, such payment may be made on the next
succeeding Business Day, and interest payable on each such date shall include
the amount thereof which shall accrue during the period of such extension of
time. All payments by the Borrower hereunder and/or in respect of the Revolving
Note and/or with respect to any letter of credit shall be made net of any
impositions or taxes and without deduction, set-off or counterclaim,
notwithstanding any claim which the Borrower may now or at any time hereafter
have against the Bank.
1.5. Letters of Credit. The Bank may, from time to time, in its sole
discretion issue one or more letters of credit for the account of the Borrower;
provided that at the time of such issuance and after giving effect thereto the
Aggregate Bank Liabilities will in no event exceed the lesser of (i) $1,000,000
or (ii) the then effective Borrowing Base. Any such letter of credit will be
issued for such fee and upon such terms and conditions as may be agreed to by
the Bank and the Borrower at the time of issuance. The Borrower hereby
authorizes the Bank, without further request from the Borrower, to cause the
Borrower's liability to the Bank for reimbursement of funds drawn under any such
letter of credit to be repaid from the proceeds of a Revolving Loan to be made
hereunder, unless such liability has been otherwise paid from any other source
made available by the Borrower to the Bank. The Borrower hereby irrevocably
requests that such Revolving Loans be made.
1.6. Conditions to Advance. Prior to the making of the initial
Revolving Loan or the issuance of any letter of credit
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hereunder, the Borrower shall deliver to the Bank duly executed copies of this
letter agreement, the Security Agreement, the Intellectual Property Assignments,
the Revolving Note and the documents and other items listed on the Closing
Agenda delivered herewith by the Bank to the Borrower, all of which, as well as
all legal matters incident to the transactions contemplated hereby, shall be
satisfactory in form and substance to the Bank and its counsel.
Without limiting the foregoing, any Revolving Loan or letter of credit
issuance (including the initial Revolving Loan or letter of credit issuance) is
subject to the further conditions precedent that on the date on which such
Revolving Loan is made or such letter of credit is issued (and after giving
effect thereto):
(a) All statements, representations and warranties of the Borrower made
in this letter agreement and/or the Security Agreement shall continue to be
correct in all material respects as of the date of such Revolving Loan or the
date of issuance of such letter of credit, as the case may be.
(b) All covenants and agreements of the Borrower contained herein
and/or in any of the other Loan Documents shall have been complied with in all
material respects on and as of the date of such Revolving Loan or the date of
issuance of such letter of credit, as the case may be.
(c) No event which constitutes, or which with notice or lapse of time
or both would constitute, an Event of Default shall have occurred and be
continuing.
(d) No material adverse change shall have occurred in the financial
condition of the Borrower from that disclosed in the financial statements then
most recently furnished to the Bank.
Each request by the Borrower for any Revolving Loan or letter of credit
issuance, and each acceptance by the Borrower of the proceeds of any Revolving
Loan or delivery of a letter of credit, will be deemed a representation and
warranty by the Borrower that at the date of such Revolving Loan or the date of
issuance of such letter, as the case may be, and after giving effect thereto all
of the conditions set forth in the foregoing clauses (a)-(d) of this Section
1.6 will be satisfied. Each request for a Revolving Loan or letter of credit
issuance will be accompanied by a borrowing base certificate on a form
satisfactory to the Bank, executed by the chief financial officer of the
Borrower, unless such a certificate shall have been previously furnished
setting forth the Borrowing Base as at a date not more than 30 days prior to
the date of the requested borrowing.
II. REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties. In order to induce the Bank to
enter into this letter agreement and to make Revolving
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Loans hereunder and/or issue letters of credit hereunder, the Borrower warrants
and represents to the Bank as follows:
(a) The Borrower is a corporation duly organized, validly existing and
in good standing under the laws of Massachusetts. The Borrower has full
corporate power to own its property and conduct its business as now conducted
and as contemplated to be conducted, to grant the security interests
contemplated by the Security Agreement and the Intellectual Property Assignments
and to enter into and perform this letter agreement and the other Loan
Documents. The Borrower is duly qualified to do business and in good standing in
each jurisdiction in which the Borrower maintains any facility, sales office,
warehouse or other location and in each other jurisdiction where such
qualification is required by the nature of the Borrower's business (except any
such other jurisdiction in which failure so to qualify would not, singly or in
the aggregate with all other such failures, have a material adverse effect on
the Borrower), all such jurisdictions in which the Borrower is so qualified
being listed on item 2.1(a) of the attached Disclosure Schedule. At the date
hereof, the Borrower has no Subsidiaries. The Borrower is not a member of any
partnership or joint venture.
(b) At the date of this letter agreement, all of the outstanding
capital stock of the Borrower is owned, of record and beneficially, as set forth
on item 2.1(b) of the attached Disclosure Schedule.
(c) The execution, delivery and performance by the Borrower of this
letter agreement and each of the other Loan Documents have been duly authorized
by all necessary corporate and other action and do not and will not:
(i) violate any provision of, or require any filings (other than
filings under the Uniform Commercial Code), registration, consent or
approval under, any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to the Borrower;
(ii) violate any provision of the charter or By-laws of the
Borrower, or result in a breach of or constitute a default or require
any waiver or consent under any indenture or loan or credit agreement
or any other material agreement, lease or instrument to which the
Borrower is a party or by which the Borrower or any of its properties
may be bound or affected or require any other consent of any Person; or
(iii) result in, or require, the creation or imposition of any
lien, security interest or other encumbrance (other than in favor of
the Bank), upon or with respect to any of the properties now owned or
hereafter acquired by the Borrower.
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(d) This letter agreement and each of the other Loan Documents has been
duly executed and delivered by the Borrower and each is a legal, valid and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its respective terms.
(e) Except as described in item 2.1(e) of the attached Disclosure
Schedule, there are no actions, suits, proceedings or investigations pending or,
to the knowledge of the Borrower, threatened by or against the Borrower before
any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which could hinder or prevent the
consummation of the transactions contemplated hereby or call into question the
validity of this letter agreement or any of the other Loan Documents or any
action taken or to be taken in connection with the transactions contemplated
hereby or thereby or which in any single case or in the aggregate might result
in any material adverse change in the business, prospects, condition, affairs or
operations of the Borrower.
(f) Except as described in item 2.1(f) of the attached Disclosure
Schedule, the Borrower is not in violation of any term of its charter or Bylaws
as now in effect. Except as described in item 2.1(f) of the attached Disclosure
Schedule, the Borrower is not in material violation of any term of any mortgage,
indenture or judgment, decree or order, or any other instrument, contract or
agreement to which it is a party or by which any of its property is bound.
(g) The Borrower has filed all federal, state and local tax returns,
reports and estimates required to be filed by the Borrower. All such filed
returns, reports and estimates are proper and accurate and the Borrower has paid
all taxes, assessments, impositions, fees and other governmental charges
required to be paid in respect of the periods covered by such returns, reports
or estimates. No deficiencies for any tax, assessment or governmental charge
have been asserted or assessed, and the Borrower knows of no material tax
liability or basis therefor.
(h) The Borrower is in compliance with all requirements of law,
federal, state and local, and all requirements of all governmental bodies or
agencies having jurisdiction over it, the conduct of its business, the use of
its properties and assets, and all premises occupied by it, failure to comply
with any of which could (singly or in the aggregate with all other such
failures) have a material adverse effect upon the assets, business, financial
condition or prospects of the Borrower. Without limiting the foregoing, the
Borrower has all the franchises, licenses, leases, permits, certificates and
authorizations needed for the conduct of its business and the use of its
properties and all premises occupied by it, as now conducted, owned and used.
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(i) The management-generated financial statements of the Borrower as at
December 31, 1993 and the management-generated statements as at June 30, 1994,
each heretofore delivered to the Bank, are complete and accurate in all material
respects and fairly present the financial condition of the Borrower as at the
respective dates thereof and for the periods covered thereby, except that
management-generated statements do not have footnotes and thus do not present
the information which would normally be contained in footnotes to financial
statements. The Borrower has no liability, contingent or otherwise, not
disclosed in the aforesaid financial statements or in any notes thereto that
could materially affect the financial condition of the Borrower. Since December
31, 1993, there has been no material adverse development in the business,
condition or prospects of the Borrower and the Borrower has not entered into any
transaction other than in the ordinary course.
(j) The principal place of business and chief executive offices of the
Borrower are located at 19 Alpha Road, Chelmsford, MA 01824 (the "Premises").
All of the books and records of the Borrower are located at the Premises. Except
as described in item 2.1(j) of the attached Disclosure Schedule, no assets of
the Borrower are located at any other address; provided that items of inventory
and equipment of the Borrower with an aggregate value not in excess of $100,000
may be located off-site, such items being in the possession of the Borrower's
salesmen and/or customers and used for demonstration, evaluation and testing
purposes. Said item 2.1(j) of the attached Disclosure Schedule sets forth the
names and addresses of all record owners of the Premises.
(k) The Borrower owns or has a valid right to use all of the patents,
licenses, copyrights, trademarks, trade names and franchises ("Intellectual
Property") now being used or necessary to conduct its business, all of which are
described on Item 2.1(k) of the attached Disclosure Schedule. None of the
Intellectual Property owned by the Borrower is represented by a registered
copyright, trademark, patent or other federal or state registration, except as
shown on said Item 2.1(k). To the best of the Borrower's knowledge, the conduct
of the Borrower's business as now operated does not conflict with valid patents,
licenses, copyrights, trademarks, trade names or franchises of others in any
manner that could materially adversely affect the business, prospects, assets or
condition, financial or otherwise, of the Borrower.
(1) To the best of the Borrower's knowledge, none of the executive
officers or key employees of the Borrower is subject to any agreement in favor
of anyone other than the Borrower which limits or restricts that person's right
to engage in the type of business activity conducted or proposed to be conducted
by the Borrower or which grants to anyone other than the Borrower any rights in
any inventions or other ideas susceptible to legal protection developed or
conceived by any such officer or key employee.
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(m) The Borrower is not a party to any contract or agreement which now
has or, as far as can be foreseen by the Borrower at the date hereof, may have a
material adverse effect on the financial condition, business, prospects or
properties of the Borrower.
III. AFFIRMATIVE COVENANTS AND REPORTING REQUIREMENTS
Without limitation of any covenants and agreements contained in the
Security Agreement or elsewhere, the Borrower agrees that so long as the
financing arrangements contemplated hereby are in effect or any Revolving Loan
or any of the other Obligations shall be outstanding or any letter of credit
issued hereunder shall be outstanding:
3.1. Legal Existence; Qualification; Compliance. The Borrower will
maintain (and will cause each Subsidiary of the Borrower to maintain) its
corporate existence and good standing in the jurisdiction of its incorporation.
The Borrower will qualify to do business and will remain qualified and in good
standing (and the Borrower will cause each Subsidiary of the Borrower to qualify
and remain qualified and in good standing) in each jurisdiction where the
Borrower or such Subsidiary, as the case may be, maintains any facility, sales
office, warehouse or other location and in each other jurisdiction in which the
failure so to qualify could (singly or in the aggregate with all other such
failures) have a material adverse effect on the financial condition, business or
prospects of the Borrower or any such Subsidiary. The Borrower will comply (and
will cause each Subsidiary of the Borrower to comply) with its charter documents
and by-laws and, in all material respects, with all contractual requirements by
which it or any of its properties may be bound. The Borrower will comply with
(and will cause each Subsidiary of the Borrower to comply with) all applicable
laws, rules and regulations (including, without limitation, ERISA and those
relating to environmental protection) other than (i) laws, rules or regulations
the validity or applicability of which the Borrower or such Subsidiary shall be
contesting in good faith by proceedings which serve as a matter of law to stay
the enforcement thereof and (ii) those laws, rules and regulations the failure
to comply with any of which could not (singly or in the aggregate) have a
material adverse effect on the financial condition, business or prospects of the
Borrower or any such Subsidiary.
3.2. Maintenance of Property; Insurance. The Borrower will maintain and
preserve (and cause each Subsidiary of the Borrower to maintain and preserve)
all of its properties in good working order and condition, ordinary wear and
tear excepted, making all necessary repairs thereto and replacements thereof.
The Borrower will maintain all such insurance as may be required under the
Security Agreement and will also maintain, with financially sound and reputable
insurers, insurance with respect to its property and business against such
liabilities, casualties and contingencies and of such types and in such amounts
as shall be
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reasonably satisfactory to the Bank from time to time and in any event all such
insurance as may from time to time be customary for companies conducting a
business similar to that of the Borrower in similar locales.
3.3. Payment of Taxes and Charges. The Borrower will pay and discharge
(and will cause each Subsidiary of the Borrower to pay and discharge) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or property, including, without limitation, taxes, assessments, charges
or levies relating to real and personal property, franchises, income,
unemployment, old age benefits, withholding, or sales or use, prior to the date
on which penalties would attach thereto, and all lawful claims (whether for any
of the foregoing or otherwise) which, if unpaid, might give rise to a lien upon
any property of the Borrower or any such Subsidiary, except any of the foregoing
which is being contested in good faith and by appropriate proceedings which
serve as a matter of law to stay the enforcement thereof and for which the
Borrower has established and is maintaining adequate reserves. The Borrower will
pay, and will cause each of its Subsidiaries to pay, in a timely manner, all
lease obligations, all trade debt, purchase money obligations, equipment lease
obligations and all of its other Indebtedness. The Borrower will perform and
fulfill all covenants and agreements under any leases of real estate, agreements
relating to purchase money debt, equipment leases and other material contracts.
The Borrower will maintain in full force and effect, and comply with the terms
and conditions of, all permits, permissions and licenses necessary or desirable
for its business.
3.4. Accounts. The Borrower will maintain its principal depository and
operating accounts with the Bank.
3.5. Conduct of Business. The Borrower will conduct, in the ordinary
course, the business in which it is presently engaged. The Borrower will not,
without the prior written consent of the Bank, directly or indirectly enter into
any other lines of business, businesses or ventures.
3.6. Reporting Requirements. The Borrower will furnish to the Bank:
(i) Within 90 days after the end of each fiscal year of the
Borrower, a copy of the annual audit report for such fiscal year for
the Borrower, including therein consolidated and consolidating balance
sheets of the Borrower and Subsidiaries as at the end of such fiscal
year and related consolidated and consolidating statements of income,
stockholders' equity and cash flow for the fiscal year then ended. The
annual consolidated financial statements shall be certified by Coopers
& Lybrand or other independent public accountants selected by the
Borrower and reasonably acceptable to the Bank, such certification to
be in such form as is generally recognized as "unqualified" (provided,
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however, that the Borrower's financial statements as at December 31,
1993 and for the fiscal year then ended may be subject to a "going
concern" qualification).
(ii) Within 30 days after the end of each month, consolidated and
consolidating balance sheets of the Borrower and its Subsidiaries and
related consolidated and consolidating statements of income and
stockholders' equity and cash flow, unaudited but prepared in
accordance with generally accepted accounting principles consistently
applied (except that such monthly statements need not contain
footnotes) and certified as accurate (subject to normal year-end audit
adjustments, which shall not be material) by the chief financial
officer of the Borrower, such balance sheets to be as at the end of
such month and such statements of income and stockholders' equity and
cash flow to be for such month and for the year to date, in each case
together with a comparison to budget.
(iii) At the time of delivery of each annual and monthly statement
of the Borrower, a certificate executed by the chief financial officer
of the Borrower stating that he or she has reviewed this letter
agreement and the other Loan Documents and has no knowledge of any
default by the Borrower in the performance or observance of any of the
provisions of this letter agreement or of any of the other Loan
Documents or, if he or she has such knowledge, specifying each such
default and the nature thereof. Each financial statement given as at
the end of any fiscal quarter of the Borrower will also set forth the
calculations necessary to evidence compliance with Sections 3.7-3.9.
(iv) Monthly, within 15 days after the end of each month, (A) an
aging report in form satisfactory to the Bank covering all Receivables
of the Borrower outstanding as at the end of such month, and (B) a
certificate of the chief financial officer of the Borrower setting
forth the Borrowing Base as at the end of such month, all in form
reasonably satisfactory to the Bank.
(v) Promptly after receipt, a copy of all audits or reports
submitted to the Borrower by independent public accountants in
connection with any annual, special or interim audits of the books of
the Borrower and any letter of comments directed by such accountants to
the management of the Borrower.
(vi) As soon as possible and in any event within five days after
the occurrence of any Event of Default or any event which, with the
giving of notice or passage of time or both, would constitute an Event
of Default, the statement of the Borrower setting forth details of each
such Event of Default or event and the action which the Borrower
proposes to take with respect thereto.
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(vii) Promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, to which the Borrower or any Subsidiary of the
Borrower is a party.
(viii) Promptly upon filing any registration statement or listing
application (or any supplement or amendment to any registration
statement or listing application) with the Securities and Exchange
Commission ("SEC") or any successor agency or with any stock exchange
or with the National Association of Securities Dealers quotations
system, a copy of same.
(ix) If the Borrower becomes a publicly-traded company, a copy of
each periodic or current report filed with the SEC or any successor
agency and each annual report, proxy statement and other communication
sent to shareholders or other securityholders generally, such copy to
be provided to the Bank promptly upon such filing with the SEC or such
communication with shareholders or securityholders, as the case may be.
(x) Promptly upon applying for, or being granted, a federal or
state registration for any copyright, trademark or patent or purchasing
any registered copyright, trademark or patent, written notice to the
Bank describing same, together with all such documents as may be
required to give the Bank a fully perfected first priority security
interest in each such copyright, trademark or patent.
(xi) Promptly after the Borrower has knowledge thereof, written
notice of any development or circumstance which may reasonably be
expected to have a material adverse effect on the Borrower or its
business, properties, assets, Subsidiaries or condition, financial or
otherwise.
(xii) Promptly upon request, such other information respecting the
financial condition, operations, Receivables, inventory, machinery or
equipment of the Borrower or any Subsidiary as the Bank may from time
to time reasonably request.
3.7. Debt to Worth. The Borrower will maintain as at the end of each
fiscal quarter (commencing with its results as at June 30, 1994) on a
consolidated basis a Leverage Ratio of not more than the following: not more
than 2.5 to 1 as at each of June 30, 1994 and September 30, 1994; and not more
than 1.25 to 1 as at December 31, 1994 and as at the end of each fiscal quarter
thereafter. As used herein, "Leverage Ratio" means, as at any date when same is
to be determined, the ratio of (x) the outstanding Senior Liabilities of the
Borrower and/or its Subsidiaries to (y) the Borrower's consolidated Capital
Base.
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3.8. Net Worth. The Borrower will maintain as at the end of each fiscal
quarter (commencing with its results as at June 30, 1994) a consolidated Capital
Base of not less than the then effective Capital Base Requirement. The Capital
Base Requirement is deemed to have been $900,000 as at March 31, 1994; and as at
the last day of each fiscal quarter thereafter (beginning with June 30, 1994)
the Capital Base Requirement will be deemed to become an amount equal to the sum
of: (i) the Capital Base Requirement in effect on the last day of the
immediately preceding fiscal quarter, plus (ii) 75% of the net proceeds of any
equity securities sold by the Borrower during the fiscal quarter then ended and
75% of the proceeds of any Subordinated Debt issued by the Borrower and/or its
Subsidiaries during such fiscal quarter (nothing contained herein being deemed
to approve the issuance of any such Subordinated Debt), plus (iii) 75% of the
consolidated Net Income of the Borrower and Subsidiaries during said fiscal
quarter then ended (but without giving effect to any Net Income which is less
than zero for any fiscal quarter).
3.9. Profitability. The Borrower will achieve quarterly Net Income of
at least $100,000 for each fiscal quarter, commencing with its results for the
fiscal quarter ended June 30, 1994. The Borrower will achieve annual Net Income
of at least $500,000 for its fiscal year ending December 31, 1994 and for each
fiscal year thereafter.
3.10. Books and Records. The Borrower will maintain (and cause each of
its Subsidiaries to maintain) complete and accurate books, records and accounts
which will at all times accurately and fairly reflect all of its transactions in
accordance with generally accepted accounting principles consistently applied.
The Borrower will, at any reasonable time and from time to time upon reasonable
notice and during normal business hours (and at any time and without any
necessity for notice following the occurrence of an Event of Default), permit
the Bank, and any agents or representatives thereof, to examine and make copies
of and take abstracts from the records and books of account of, and visit the
properties of the Borrower and any of its Subsidiaries, and to discuss its
affairs, finances and accounts with its managers, officers or directors and
independent accountants, all of whom are hereby authorized and directed to
cooperate with the Bank in carrying out the intent of this Section 3.10. Each
financial statement of the Borrower hereafter delivered pursuant to this letter
agreement will be complete and accurate in all material respects and will fairly
present the financial condition of the Borrower as at the date thereof and for
the periods covered thereby.
3.11. Subordination Agreements. Prior to the Bank making the first
Revolving Loan, the Borrower will obtain, and will thereafter maintain in full
force and effect, a subordination agreement from each holder of Subordinated
Debt, such agreements to be in form and substance satisfactory to the Bank.
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3.12. Deleted prior to execution.
IV. NEGATIVE COVENANTS.
Without limitation of any covenants and agreements contained in the
Security Agreement or elsewhere, the Borrower agrees that so long as the
financing arrangements contemplated hereby are in effect or any Revolving Loan
or any of the other Obligations shall be outstanding or any letter of credit
issued hereunder shall be outstanding:
4.1. Indebtedness. The Borrower will not create, incur, assume or
suffer to exist any Indebtedness (nor allow any of its Subsidiaries to create,
incur, assume or suffer to exist any Indebtedness), except for:
(i) Indebtedness owed to the Bank, including, without
limitation, the Indebtedness represented by the Revolving Note and any
Indebtedness in respect of letters of credit issued by the Bank;
(ii) Indebtedness of the Borrower or any Subsidiary for taxes,
assessments and governmental charges or levies not yet due and payable;
(iii) unsecured current liabilities of the Borrower or any
Subsidiary (other than for money borrowed or the deferred purchase
price of property) incurred upon customary terms in the ordinary course
of business;
(iv) purchase money Indebtedness (including, without
limitation, Indebtedness in respect of capitalized equipment leases)
owed to equipment vendors and/or lessors for equipment purchased or
leased by the Borrower for use in the Borrower's business, provided
that the total of Indebtedness permitted under this clause (iv) plus
presently-existing equipment financing permitted under clause (v) of
this Section 4.1 will not exceed $250,000 in the aggregate outstanding
at any one time;
(v) other Indebtedness existing at the date hereof, but only
to the extent set forth on item 4.1 of the attached Disclosure
Schedule; and
(vi) any guaranties or other contingent liabilities expressly
permitted pursuant to Section 4.3.
4.2. Liens. The Borrower will not create, incur, assume or suffer to
exist (nor allow any of its Subsidiaries to create, incur, assume or suffer to
exist) any mortgage, deed of trust,
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pledge, lien, security interest, or other charge or encumbrance (including the
lien or retained security title of a conditional vendor) of any nature
(collectively, "Liens"), upon or with respect to any of its property or assets,
now owned or hereafter acquired, except that the foregoing restrictions shall
not apply to:
(i) Liens for taxes, assessments or governmental charges or
levies on property of the Borrower or any of its Subsidiaries if the
same shall not at the time be delinquent or thereafter can be paid
without interest or penalty;
(ii) Liens imposed by law, such as carriers', warehousemen's
and mechanics' liens and other similar Liens arising in the ordinary
course of business for sums not yet due or which are being contested in
good faith and by appropriate proceedings which serve as a matter of
law to stay the enforcement thereof and as to which adequate reserves
have been made;
(iii) pledges or deposits under workmen's compensation laws,
unemployment insurance, social security, retirement benefits or similar
legislation;
(iv) Liens in favor of the Bank;
(v) Liens in favor of equipment vendors and/or lessors
securing purchase money Indebtedness to the extent permitted by clause
(iv) of Section 4.1; provided that no such Lien will extend to any
property of the Borrower other than the specific items of equipment
financed; or
(vi) other Liens existing at the date hereof, but only to the
extent and with the relative priorities set forth on item 4.2 of the
attached Disclosure Schedule.
Nothing contained in this Section 4.2 will in any event be deemed to prohibit
non-capitalized operating leases of equipment used in the Borrower's business.
4.3. Guaranties. The Borrower will not, without the prior written
consent of the Bank, assume, guarantee, endorse or otherwise become directly or
contingently liable (including, without limitation, liable by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in any debtor or otherwise to assure any creditor
against loss) in connection with any indebtedness of any other Person (nor will
it permit any Subsidiary to do so), except (i) guaranties by endorsement for
deposit or collection in the ordinary course of business and (ii) guaranties
existing at the date hereof and described on item 4.3 of the attached Disclosure
Schedule.
4.4. Dividends. The Borrower will not, without the prior written
consent of the Bank, make any distributions to its
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shareholders, pay any dividends (other than dividends payable solely in capital
stock of the Borrower) or redeem, purchase or otherwise acquire, directly or
indirectly any of its capital stock; provided, however, that during fiscal 1994
the Borrower may expend up to $250,000 to redeem shares of its capital stock in
transactions incidental to the conversion of Subordinated Debt into equity.
4.5. Loans and Advances. The Borrower will not make (and will not permit
any Subsidiary to make) any loans or advances to any Person, including, without
limitation, the Borrower's directors, officers and employees, except advances to
such directors, officers or employees with respect to expenses incurred by them
in the ordinary course of their duties and advances against salary, all of which
advances will not exceed, in the aggregate, $100,000 outstanding at any one
time.
4.6. Investments. The Borrower will not, without the Bank's prior
written consent, invest in, hold or purchase any stock or securities of any
Person (nor will the Borrower permit any of its Subsidiaries to invest in,
purchase or hold any such stock or securities) except (i) readily marketable
direct obligations of, or obligations guarantied by, the United States of
America or any agency thereof, (ii) other investment grade debt securities,
(iii) mutual funds, the assets of which are primarily invested in items of the
kind described in the foregoing clauses (i) and (ii) of this Section 4.6, (iv)
deposits with or certificates of deposit issued by the Bank and any other
obligations of the Bank or the Bank's parent, (v) deposits in any other bank
organized in the United States having capital in excess of $100,000,000, and
(vi) investments in Subsidiaries to the extent, if any, from time to time
expressly permitted by the Bank.
4.7. Subsidiaries; Acquisitions. The Borrower will not, without the
prior written consent of the Bank, form or acquire any Subsidiary or make any
other acquisition of the stock of any other Person or of all or substantially
all of the assets of any other Person. The Borrower will not become a partner in
any partnership.
4.8. Merger. The Borrower will not, without the prior written consent
of the Bank, merge or consolidate with any Person, or sell, lease, transfer or
otherwise dispose of any material portion of its assets (whether in one or more
transactions), other than sale of inventory in the ordinary course.
4.9. Affiliate Transactions. The Borrower will not, without prior
written consent of the Bank, enter into any transaction, including, without
limitation, the purchase, sale or exchange of any property or the rendering of
any service, with any affiliate of the Borrower, except in the ordinary course
of and pursuant to the reasonable requirements of the Borrower's business and
upon fair and reasonable terms no less favorable to the Borrower than would be
obtained in a comparable arms'-length
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transaction with any Person not an affiliate; provided that nothing in this
Section 4.9 shall be deemed to prohibit the payment of salary or other similar
payments to any officer or director of the Borrower at a level consistent with
the salary and other payments being paid at the date of this letter agreement
and heretofore disclosed in writing to the Bank, nor to prevent the hiring of
additional officers at a salary level consistent with industry practice, nor to
prevent reasonable periodic increases in salary. For the purposes hereof,
"affiliate" means any Person which, directly or indirectly, controls or is
controlled by or is under common control with the Borrower; any officer or
director or former officer or director of the Borrower; any Person owning of
record or beneficially, directly or indirectly, 5% or more of any class of
capital stock of the Borrower or 5% or more of any class of capital stock or
other equity interest having voting power (under ordinary circumstances) of any
of the other Persons described above; and any member of the immediate family of
any of the foregoing. "Control" means possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of any
Person, whether through ownership of voting equity, by contract or otherwise.
4.10. Change of Address, etc. The Borrower will not change its name or
legal structure, nor will the Borrower move its chief executive office or
principal place of business from the address described in the first sentence of
Section 2.1(j) above, nor will the Borrower remove any books or records from
such address, nor will the Borrower keep any Collateral (other than items of
inventory and equipment with an aggregate value not in excess of $100,000 which
may be located off-site in the possession of salesmen and/or customers, such
items being used for demonstration, evaluation and testing purposes) at any
location other than the Premises without, in each instance, giving the Bank at
least 30 days' prior written notice and providing all such financing statements,
certificates and other documentation as the Bank may request in order to
maintain the perfection and priority of the security interests granted or
intended to be granted pursuant to the Security Agreement. The Borrower will not
change its fiscal year or methods of financial reporting (except that as of
January 1, 1994 the Borrower is no longer capitalizing certain intangibles of a
type which it had previously capitalized) unless, in each instance, prior
written notice of such change is given to the Bank and prior to such change the
Borrower enters into amendments to this letter agreement in form and substance
satisfactory to the Bank in order to preserve unimpaired the rights of the Bank
and the obligations of the Borrower hereunder.
4.11. Hazardous Waste. Except as provided below, the Borrower will not
dispose of or suffer or permit to exist any hazardous material or oil on any
site or vessel owned, occupied or operated by the Borrower or any Subsidiary of
the Borrower, nor shall the Borrower store (or permit any Subsidiary to store)
on any site or vessel owned, occupied or operated by the Borrower or any such
Subsidiary, or transport or arrange the transport of, any hazardous material or
oil (the terms "hazardous material", "oil", "site" and "vessel", respectively,
being used herein with
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the meanings given those terms in Mass. Gen. Laws, Ch. 21E or any comparable
terms in any comparable statute in effect in any other relevant jurisdiction).
The Borrower shall provide the Bank with written notice of (i) the intended
storage or transport of any hazardous material or oil by the Borrower or any
Subsidiary of the Borrower, (ii) any potential or known release or threat of
release of any hazardous material or oil at or from any site or vessel owned,
occupied or operated by the Borrower or any Subsidiary of the Borrower, and
(iii) any incurrence of any expense or loss by any government or governmental
authority in connection with the assessment, containment or removal of any
hazardous material or oil for which expense or loss the Borrower or any
Subsidiary of the Borrower may be liable. Notwithstanding the foregoing, the
Borrower and its subsidiaries may use, store and transport, and need not notify
the Bank of the use, storage or transportation of, (x) oil in reasonable
quantities, as fuel for heating of their respective facilities or for vehicles
or machinery used in the ordinary course of their respective businesses and (y)
hazardous materials that are solvents, cleaning agents or other materials used
in the ordinary course of the respective business operations of the Borrower and
its Subsidiaries, in reasonable quantities, as long as in any case the Borrower
or the Subsidiary concerned (as the case may be) has obtained and maintains in
effect any necessary governmental permits, licenses and approvals, complies with
all requirements of applicable federal, state and local law relating to such
use, storage or transportation, follows the protective and safety procedures
that a prudent business person conducting a business the same as or similar to
that of the Borrower or such Subsidiary (as the case may be) would follow, and
disposes of such materials (not consumed in the ordinary course) only through
licensed providers of hazardous waste removal services.
4.12. No Margin Stock. No proceeds of any Revolving Loan shall be used
directly or indirectly to purchase or carry any margin security.
4.13. Subordinated Debt. The Borrower will not directly or indirectly
make any optional or voluntary prepayment or purchase of Subordinated Debt nor
modify, alter or add any provisions with respect to any Subordinated Debt.
Further, the Borrower will not make any payment in respect of Subordinated Debt
in violation of the subordination agreement relating thereto. In any event, the
Borrower will not make any payment on account of Subordinated Debt if any Event
of Default then exists or would result from such payment. Notwithstanding the
foregoing, nothing contained in this Section will be deemed to prevent the
Borrower from converting Subordinated Debt into equity.
V. DEFAULT AND REMEDIES
5.1. Events of Default. The occurrence of any one of the following
events shall constitute an Event of Default hereunder:
(a) The Borrower shall fail to make any payment of principal of or
interest on the Revolving Note on or before the
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date when due; or the Borrower shall fail to pay when due any amount owed to the
Bank in respect of any letter of credit now or hereafter issued by the Bank; or
(b) Any representation or warranty of the Borrower contained herein
shall at any time prove to have been incorrect in any material respect when made
or any representation or warranty made by the Borrower in writing in connection
with the execution and delivery of this letter agreement or in connection with
any Revolving Loan or letter of credit shall at any time prove to have been
incorrect in any material respect when made; or
(c) The Borrower shall default in the performance or observance of any
agreement or obligation under any of Sections 3.1, 3.3, 3.6, 3.7, 3.8 or 3.9 or
Article IV; or
(d) The Borrower shall default in the performance of any other term,
covenant or agreement contained in this letter agreement and such default shall
continue unremedied for 30 days after notice thereof shall have been given to
the Borrower; or
(e) Any default on the part of the Borrower or any Subsidiary of the
Borrower shall exist, and shall remain unwaived or uncured beyond the expiration
of any applicable notice and/or grace period, under any other contract or
agreement now existing or hereafter entered into with or for the benefit of the
Bank (or any affiliate of the Bank); or
(f) Any default shall exist and remain unwaived or uncured with respect
to any Indebtedness of the Borrower or any Subsidiary of the Borrower in excess
of $100,000 in aggregate principal amount or with respect to any instrument
evidencing, guaranteeing, securing or otherwise relating to any such
Indebtedness, or any such Indebtedness shall not have been paid when due,
whether by acceleration or otherwise, or shall have been declared to be due and
payable prior to its stated maturity, or any event or circumstance shall occur
which permits, or with the lapse of time or giving of notice or both would
permit, the acceleration of the maturity of any such Indebtedness by the holder
of holders thereof; or
(g) The Borrower shall be dissolved, or the Borrower or any Subsidiary
of the Borrower shall become insolvent or bankrupt or shall cease paying its
debts as they mature or shall make an assignment for the benefit of creditors,
or a trustee, receiver or liquidator shall be appointed for the Borrower or any
Subsidiary of the Borrower or for a substantial part of the property of the
Borrower or any such Subsidiary, or bankruptcy, reorganization, arrangement,
insolvency or similar proceedings shall be instituted by or against the Borrower
or any such Subsidiary under the laws of any jurisdiction (except for an
involuntary proceeding filed against the Borrower or any Subsidiary of the
Borrower which is dismissed within 60 days following the institution thereof);
or
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(h) Any attachment, execution or similar process shall be issued or
levied against any of the property of the Borrower or any Subsidiary and such
attachment, execution or similar process shall not be paid, stayed, released,
vacated or fully bonded within 10 days after its issue or levy; or
(i) Any final uninsured judgment in excess of $50,000 shall be entered
against the Borrower or any Subsidiary of the Borrower by any court of competent
jurisdiction; or
(j) The Borrower or any Subsidiary of the Borrower shall fail to meet
its minimum funding requirements under ERISA with respect to any employee
benefit plan (or other class of benefit which the PBGC has elected to insure) or
any such plan shall be the subject of termination proceedings (whether voluntary
or involuntary) and there shall result from such termination proceedings a
liability of the Borrower or any Subsidiary of the Borrower to the PBGC which in
the reasonable opinion of the Bank may have a material adverse effect upon the
financial condition of the Borrower or any such Subsidiary; or
(k) The Security Agreement or any other Loan Document shall for any
reason (other than due to payment in full of all amounts secured or evidenced
thereby or due to discharge in writing by the Bank) not remain in full force and
effect; or
(1) The security interests and liens of the Bank in and on any of the
Collateral shall for any reason (other than due to payment in full of all
amounts secured thereby or due to written release by the Bank) not be fully
perfected liens and security interests, subject in priority only to the matters
set forth in Section 4.2 above; or
(m) At any time, 50% or more of the outstanding shares of any class of
equity securities of the Borrower shall be owned by any Person or by any "group"
(as defined in the Securities Exchange Act of 1934, as amended, and the
regulations thereunder), other than by a Person who is a stockholder of the
Borrower at the date hereof or a group consisting solely of such Persons.
5.2. Rights and Remedies on Default. Upon the occurrence of any Event
of Default, in addition to any other rights and remedies available to the Bank
hereunder or otherwise, the Bank may exercise any one or more of the following
rights and remedies (all of which shall be cumulative):
(a) Declare the entire unpaid principal amount of the Revolving Note
then outstanding, all interest accrued and unpaid thereon and all other amounts
payable under this letter agreement, and all other Indebtedness of the Borrower
to the Bank, to be forthwith due and payable, whereupon the same shall become
forthwith due and payable, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived by the Borrower.
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(b) Terminate the revolving financing arrangements provided for by this
letter agreement.
(c) Exercise all rights and remedies hereunder, under the Revolving
Note, under the Security Agreement, under the Intellectual Property Assignments
and under each and any other agreement with the Bank; and exercise all other
rights and remedies which the Bank may have under applicable law.
5.3. Set-off. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, the Bank is hereby authorized at any time or
from time to time, without presentment, demand, protest or other notice of any
kind to the Borrower or to any other Person, all of which are hereby expressly
waived, to set off and to appropriate and apply any and all deposits and any
other Indebtedness at any time held or owing by the Bank or any affiliate
thereof to or for the credit or the account of the Borrower against and on
account of the obligations and liabilities of the Borrower to the Bank under
this letter agreement or otherwise, irrespective of whether or not the Bank
shall have made any demand hereunder and although said obligations, liabilities
or claims, or any of them, may then be contingent or unmatured and without
regard for the availability or adequacy of other collateral. As further security
for the obligations, the Borrower also grants to the Bank a security interest
with respect to all its deposits and all securities or other property in the
possession of the Bank or any affiliate of the Bank from time to time, and, upon
the occurrence of any Event of Default, the Bank may exercise all rights and
remedies of a secured party under the Uniform Commercial Code.
5.4. Letters of Credit. Without limitation of any other right or remedy
of the Bank, (i) if an Event of Default shall have occurred and the Bank shall
have accelerated the Revolving Loans or (ii) if this letter agreement and/or the
revolving financing arrangements described herein shall have expired or shall
have been earlier terminated by either the Bank or the Borrower for any reason,
the Borrower will forthwith deposit with, the Bank in cash a sum equal to the
total of all then undrawn amounts of all outstanding letters of credit issued by
the Bank for the account of the Borrower.
VI. MISCELLANEOUS
6.1. Costs and Expenses. The Borrower agrees to pay on demand all
reasonable costs and expenses (including, without limitation, reasonable legal
fees) of the Bank in connection with the preparation, execution and delivery of
this letter agreement, the Security Agreement, the Revolving Note and all other
instruments and documents to be delivered in connection with Any Revolving Loan
or any letter of credit issued hereunder and any amendments or modifications of
any of the foregoing, as well as the reasonable costs and expenses (including,
without limitation, the reasonable fees and expenses of legal counsel) incurred
by the Bank in connection with preserving, enforcing or exercising,
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upon default, any rights or remedies under this letter agreement, the Security
Agreement, the Revolving Note and all other instruments and documents delivered
or to be delivered hereunder or in connection herewith, all whether or not legal
action is instituted. In addition, the Borrower shall be obligated to pay any
and all stamp and other taxes payable or determined to be payable in connection
with the execution and delivery of this letter agreement, the Security
Agreement, the Revolving Note and all other instruments and documents to be
delivered in connection with any Obligation. Any fees, expenses or other charges
which the Bank is entitled to receive from the Borrower under this Section shall
bear interest from the date of any demand therefor until the date when paid at a
rate per annum equal to the sum of (i) two (2%) percent plus (ii) the per annum
rate otherwise payable under the Revolving Note (but in no event in excess of
the maximum rate permitted by then applicable law).
6.2. Capital Adequacy. If the Bank shall have determined that the
adoption or phase-in after the date hereof of any applicable law, rule or
regulation regarding capital requirements for banks or bank holding companies,
or any change therein after the date hereof, 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 Bank with any request or directive of such entity regarding
capital adequacy (whether or not having the force of law) has or would have the
effect of reducing the return on the Bank's capital with respect to the
Revolving Loans, the within-described revolving loan facility and/or letters of
credit issued for the account of the Borrower to a level below that which the
Bank could have achieved (taking into consideration the Bank's policies with
respect to capital adequacy immediately before such adoption, phase-in, change
or compliance and assuming that the Bank's capital was then fully utilized) but
for such adoption, phase-in, change or compliance by any amount deemed by the
Bank to be material: (i) the Bank shall promptly after its determination of such
occurrence give notice thereof to the Borrower; and (ii) the Borrower shall pay
forthwith to the Bank as an additional fee such amount as the Bank certifies to
be the amount that will compensate it for such reduction with respect to the
Revolving Loans, the within-described revolving loan facility and/or such
letters of credit.
A certificate of the Bank claiming compensation under this Section
shall be conclusive in the absence of manifest error. Such certificate shall set
forth the nature of the occurrence giving rise to such compensation, the
additional amount or amounts to be paid to it hereunder and the method by which
such amounts were determined. In determining such amounts, the Bank may use any
reasonable averaging and attribution methods. No failure on the part of the Bank
to demand compensation on any one occasion shall constitute a waiver of its
right to demand such compensation on any other occasion and no failure on the
part of the Bank to deliver any certificate in a timely manner shall in
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any way reduce any obligation of the Borrower to the Bank under this Section.
6.3. Facility Fees. With respect to the Revolving Loans, the Borrower
is paying to the Bank at the date of this letter agreement, a non-refundable
facility fee of $10,000. The fee described in this Section is in addition to any
balances and fees required by the Bank or any of its affiliates in connection
with any other services made available to the Borrower.
6.4. Other Agreements. The provisions of this letter agreement are not
in derogation or limitation of any obligations, liabilities or duties of the
Borrower under any of the other Loan Documents or any other agreement with or
for the benefit of the Bank. No inconsistency in default provisions between this
letter agreement and any of the other Loan Documents or any such other agreement
will be deemed to create any additional grace period or otherwise derogate from
the express terms of each such default provision. No covenant, agreement or
obligation of the Borrower contained herein, nor any right or remedy of the
Bank contained herein, shall in any respect be limited by or be deemed in
limitation of any inconsistent or additional provisions contained in any of the
other Loan Documents or any such other agreement.
6.5. Governing Law. This letter agreement and the Revolving Note shall
be governed by, and construed and enforced in accordance with, the laws of The
Commonwealth of Massachusetts.
6.6. Addresses for Notices, etc. All notices, requests, demands and
other communications provided for hereunder shall be in writing and shall be
mailed or delivered to the applicable party at the address indicated below:
If to the Borrower:
Voicetek Corporation
19 Alpha Road
Chelmsford, MA 01824
Attention: Sheldon Dinkes, President
If to the Bank:
Fleet Bank of Massachusetts, N.A.
High Technology Group
75 State Street
Boston, MA 02109
Attention: Catherine M. Bruton, Vice President
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communications shall be deemed delivered on the earlier of (i) the date received
or (ii) the date of delivery, refusal or non-delivery indicated on the return
receipt if deposited in the United States mails,
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sent postage prepaid, certified or registered mail, return receipt requested,
addressed as aforesaid.
6.7. Binding Effect; Assignment; Termination. This letter agreement shall
be binding upon the Borrower, its successors and assigns and shall inure to the
benefit of the Borrower and the Bank and their respective permitted successors
and assigns. The Borrower may not assign this letter agreement or any rights
hereunder without the express written consent of the Bank. The Bank may, in
accordance with applicable law, from time to time assign or grant participations
in this letter agreement, the Revolving Loans, the Revolving Note and/or the
letters of credit issued hereunder. The Borrower may terminate this letter
agreement and the financing arrangements made herein by giving written notice of
such termination to the Bank; provided that no such termination will release or
waive any of the Bank's rights or remedies or any of the Borrower's obligations
under this letter agreement or any of the other Loan Documents unless and until
the Borrower has paid in full the Revolving Loans and all interest thereon and
all fees and charges payable in connection therewith and all letters of credit
issued hereunder have been terminated.
6.8. Consent to Jurisdiction. The Borrower irrevocably submits to the
non-exclusive jurisdiction of any Massachusetts court or any federal court
sitting within The Commonwealth of Massachusetts over any suit, action or
proceeding arising out of or relating to this letter agreement and/or the
Revolving Note. The Borrower irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of venue
of any such suit, action or proceeding brought in such a court and any claim
that any such suit, action or proceeding has been brought in an inconvenient
forum. The Borrower agrees that final judgment in any such suit, action or
proceeding brought in such a court shall be enforced in any court of proper
jurisdiction by a suit upon such judgment, provided that service of process in
such action, suit or proceeding shall have been effected upon the Borrower in
one of the manners specified in the following paragraph of this Section 6.8 or
as otherwise permitted by law.
The Borrower hereby consents to process being served in any suit, action
or proceeding of the nature referred to in the preceding paragraph of this
Section 6.8 either (i) by mailing a copy thereof by registered or certified
mail, postage prepaid, return receipt requested, to it at its address set forth
in Section 6.6 or (ii) by serving a copy thereof upon it at its address set
forth in Section 6.6.
6.9. Severability. In the event that any provision of this letter
agreement or the application thereof to any Person, property or circumstances
shall be held to any extent to be invalid or unenforceable, the remainder of
this letter agreement,
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and the application of such provision to Persons, properties or circumstances
other than those as to which it has been held invalid and unenforceable, shall
not be affected thereby, and each provision of this letter agreement shall be
valid and enforced to the fullest extent permitted by law.
VII. DEFINED TERMS
7.1. Definitions. In addition to terms defined elsewhere in this letter
agreement, as used in this letter agreement, the following terms have the
following respective meanings:
"Aggregate Bank Liabilities" - At any time, the sum of (i) the
principal amount of all Revolving Loans then outstanding, plus (ii) all
then undrawn amounts of letters of credit issued by the Bank for the
account of the Borrower, plus (iii) all amounts then drawn on any such
letter of credit which at said date shall not have been reimbursed to
the Bank by the Borrower.
"Borrowing Base" - At any time, the sum of (1) the product of
(x) the then applicable Receivables Advance Percentage times (y) the
aggregate principal amount of the Qualified Receivables of the Borrower
then outstanding, plus (2) 65% of the aggregate principal amount of the
Other Acceptable Foreign Receivables then outstanding; provided that
the amount contributed to Borrowing Base pursuant to this clause (2)
shall never exceed 10% of the then total Borrowing Base.
"Business Day" - Any day which is not a Saturday, nor a
Sunday nor a public holiday under the laws of the United States of
America or The Commonwealth of Massachusetts applicable to a national
bank.
"Capital Base" - At any time, the sum of (i) the consolidated
Tangible Net Worth of the Borrower and Subsidiaries then existing plus
(ii) the principal amount of Subordinated Debt of the Borrower then
outstanding (nothing contained herein being deemed to authorize the
incurrence of any additional Subordinated Debt).
"Collateral" - All property now or hereafter owned by the
Borrower or in which the Borrower now or hereafter has any interest
which is described as "Collateral" in the Security Agreement or in
Section 7.2(b) below.
"ERISA" - The Employee Retirement Income Security Act of
1974, as amended.
"Expiration Date" - August 1, 1995, unless extended by the
Bank, which extension may be given or withheld by the Bank in its sole
discretion.
-24-
25
"Indebtedness" - All obligations of a Person, whether current or
long-term, senior or subordinated, which in accordance with generally accepted
accounting principles would be included as liabilities upon such Person's
balance sheet at the date as of which Indebtedness is to be determined, and
shall also include guaranties, endorsements (other than for collection in the
ordinary course of business) or other arrangements whereby responsibility is
assumed for the obligations of others, whether by agreement to purchase or
otherwise acquire the obligations of others, including any agreement, contingent
or otherwise, to furnish funds through the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.
"Liabilities" - All Indebtedness of a Person which would be properly
includable in liabilities as shown on a balance sheet of such Person prepared in
accordance with generally accepted accounting principles.
"Loan Documents" - Each of this letter agreement, the Revolving Note,
the Security Agreement, the Intellectual Property Assignments, and each other
instrument, document or agreement evidencing, securing, guaranteeing or relating
in any way to any of the Revolving Loans or any of the letters of credit issued
hereunder, all whether now existing or hereafter arising or entered into.
"Maximum Revolving Amount" - At any date as of which same is to be
determined, the amount by which (x) $1,000,000 exceeds (y) the sum of (i) all
then undrawn amounts of letters of credit issued by the Bank for the account of
the Borrower plus (ii) all amounts then drawn on any such letter of credit which
at said date shall not have been reimbursed to the Bank by the Borrower.
"Net Income" (or "Net Loss") - The book net income (or book net loss,
as the case may be) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with
generally accepted accounting principles consistently applied.
"Obligation" - As defined in the Security Agreement.
"Other Acceptable Foreign Receivables" - Receivables owed to the
Borrower by account debtors not located in the United States which do not
constitute Qualified Receivables; provided that each such Other Acceptable
Foreign Receivable meets all of the following criteria: (a) the relevant account
debtor has been specifically approved for this purpose in writing by the
Bank, which approval may be given, withheld or revoked by the Bank in its
discretion; (b) such Receivable shall arise out of a bona fide sale in the
ordinary course of the Borrower's business made to a customer of the Borrower
which is not a Subsidiary of the
-25-
26
Borrower or otherwise controlled by the Borrower; (c) such Receivable shall
remain unpaid no more than 60 days after the date of invoice of the relevant
sale; and (d) such Receivable satisfies all of the requirements to be a
"Qualified Receivable" set forth in the last sentence of the definition of
"Qualified Receivable" below (other than clause (ix) of such sentence).
"PBGC" - The Pension Benefit Guaranty Corporation or any successor
thereto.
"Person" - An individual, corporation, partnership, joint venture,
trust or unincorporated organization, or a government or any agency or political
subdivision thereof.
"Principal Office" - The principal place of business of the Bank, now
located at 75 State Street, Boston, MA 02109.
"Qualified Receivables" - Only those Receivables of the Borrower which
arise out of bona fide sales made to customers of the Borrower (which customers
are located in the United States and are not Subsidiaries of or otherwise
controlled by the Borrower) in the ordinary course of the Borrower's business
and which remain unpaid no more than 90 days past the respective dates of
invoice of such sales, the payment of which is not in dispute. (Notwithstanding
the foregoing, any Receivable owed by a customer of the Borrower which is not
located in the United States will also be deemed to be a Qualified Receivable if
both of the following conditions are satisfied: (i) such Receivable meets all of
the requirements of this definition other than the location of such customer and
(ii) payment of such Receivable is secured by a letter of credit or credit
insurance with terms satisfactory to the Bank and issued by a bank or other
credit enhancer satisfactory to the Bank.) Unless the Bank in its sole
discretion otherwise determines with respect to any Receivable, a Receivable
which would otherwise be a Qualified Receivable shall be deemed not to be a
Qualified Receivable (i) if the Bank does not have a fully perfected first
priority security interest in such Receivable; (ii) if such Receivable is not
free and clear of all adverse interests in favor of any Person other than the
Bank; (iii) if such Receivable is subject to any deduction, off-set, contra
account, counterclaim or condition; (iv) if a field examination made by the Bank
fails to confirm that such Receivable exists and satisfies all of the criteria
set forth herein to be a Qualified Receivable; (v) if such Receivable
is not invoiced within such period of time as is consistent with the Borrower's
normal practices at the date hereof; (vi) if the customer or account debtor has
disputed liability or made any claim with respect to the Receivable or the
merchandise covered thereby or with respect to any other Receivable due from
said customer to the Borrower; (vii) if the customer or account debtor has filed
a petition
-26-
27
for bankruptcy or any other application for relief under the Bankruptcy Code or
has effected an assignment for the benefit of creditors, or if any petition or
any other application for relief under the Bankruptcy Code has been filed
against said customer or account debtor, or if the customer or account debtor
has suspended business, become insolvent, ceased to pay its debts as they become
due, or had or suffered a receiver or trustee to be appointed for any of its
assets or affairs; (viii) if the customer or account debtor has failed to pay
other Receivables so that an aggregate of 25% of the total Receivables owing to
the Borrower by such customer or account debtor has been outstanding for more
than 90 days past their respective due dates; (ix) if such Receivable is owed by
the United States government or any agency or department thereof (unless
assigned to the Bank under the Federal Assignment of Claims Act); or (x) if the
Bank believes, in its judgment, that collection of such Receivable is insecure
or that it may not be paid by reason of financial inability to pay or otherwise,
or that such Receivable is not for any reason suitable for use as a basis for
borrowing hereunder.
"Receivables" - All of the Borrower's present and future accounts,
accounts receivable and notes, drafts, acceptances and other instruments
representing or evidencing a right to payment for goods sold or for services
rendered.
"Receivables Advance Percentage" - 65%; provided that if at any time
during its fiscal year ending December 31, 1994 the Borrower achieves
year-to-date cumulative Net Income of more than $500,000 (as evidenced to the
Bank by monthly financial statements delivered pursuant to Section 3.6 above),
the Receivables Advance Percentage will automatically be deemed increased to
75%, effective upon the receipt by the Bank of the financial statements
evidencing such year-to-date cumulative Net Income.
"Senior Liabilities" - All Liabilities of the Borrower and/or any
Subsidiary of the Borrower which do not constitute Subordinated Debt.
"Subordinated Debt" - Any Indebtedness of the Borrower which is
expressly subordinated, pursuant to a subordination agreement in form and
substance satisfactory to the Bank, to all Indebtedness now or hereafter owed by
the Borrower to the Bank.
"Subsidiary" - Any corporation or other entity of which the Borrower
and/or any of its Subsidiaries, directly or indirectly, owns, or has the right
to control or direct the voting of, fifty (.50%) percent or more of the
outstanding capital stock or other ownership interest having general voting
power (under ordinary circumstances).
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28
"Tangible Net Worth" - An amount equal to the total assets of
any Person (excluding (i) the total intangible assets of such Person
and (ii) any assets representing amounts due from any officer or
employee of such Person or from any Subsidiary of such Person) minus
the total liabilities of such Person. Total intangible assets shall be
deemed to include, but shall not be limited to, the excess of cost over
book value of acquired businesses accounted for by the purchase method,
formulae, trademarks, trade names, patents, patent rights and deferred
expenses (including, but not limited to, unamortized debt discount and
expense, organizational expense, capitalized software costs and
experimental and development expenses).
Any defined term used in the plural preceded by the definite article
shall be taken to encompass all members of the relevant class. Any defined term
used in the singular preceded by "any" shall be taken to indicate any number of
the members of the relevant class.
7.2. Security Agreement. (a) The Borrower acknowledges and agrees that
the "Obligations" described in and secured by the Security Agreement, include,
without limitation, all of the obligations of the Borrower under the Revolving
Note and/or this letter agreement and/or with respect to any letter of credit
which may be issued by the Bank for the account of the Borrower.
(b) The Security Agreement is hereby modified to provide as follows:
(i) That the "Collateral" subject thereto includes, without
limitation and in addition to the collateral described therein, all
of the Borrower's files, books and records (including, without
limitation, all electronically recorded data) all whether owned or
existing or hereafter acquired, created or arising. The Borrower
hereby grants to the Bank a security interest in all such
Collateral in order to secure the full and prompt payment and
performance of all of the obligations.
(ii) That, upon the occurrence of any Event of Default (as
defined in Section 5.1 of this letter agreement), the Bank may, at
any time, notify account debtors that the Collateral has been
assigned to the Bank and that payments by such account debtors
shall be made directly to the Bank. At any time after the
occurrence of an Event of Default, the Bank may collect the
Borrower's Receivables, or any of same, directly from account
debtors and may charge the collection costs and expenses to the
Borrower.
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29
This letter agreement is executed, as an instrument under seal, as of
the day and year first above written.
Very truly yours,
VOICETEK CORPORATION
By /s/ Sheldon Dinkes
-------------------
Its President
Accepted and agreed:
FLEET BANK OF MASSACHUSETTS, N.A.
By /s/ Catherine Bruton
--------------------------
Its VP
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30
DISCLOSURE SCHEDULE
Item 2.1(a) Jurisdictions in which Borrower is qualified
Item 2.1(b) Stock ownership
Item 2.1(e) Litigation
Item 2.1(f) Existing contractual violations, etc.
Item 2.1(j) Location of Collateral; record owners of Premises
Item 2.1(k) Intellectual Property
Item 4.1 Existing Indebtedness
Item 4.2 Existing Liens
Item 4.3 Existing Guaranties
31
Disclosure Schedule
Item 2. l(a): Jurisdictions in which Borrower is qualified
California
New York
Pennsylvania
Item 2. 1 (b): Stock Ownership
(see list attached as Exhibit 2.1(b))
Item 2. 1 (e): Litigation
Pentagram Software Corporation commenced an action against the
Company in Norfolk Superior Court, Massachusetts, Civil Action
No. 92-00873 on April 16, 1992. The claim arose out of a Product
Development Agreement effective January 29, 1990 between the
Company and Pentagram under which Pentagram was to act as a
subcontractor to the Company for certain work to be provided by
the Company under the GTE Mobile Communications contract
discussed in the next paragraph. The action sought damages for
breach of contract and quantum meruit recovery for additional
services allegedly provided in the total amount of $230,000, as
well as multiple damages and attorneys fees under M.G.L. c. 93A.
In March of 1994, the parties agreed to dismiss the action and
executed a settlement agreement, pursuant to which the Company
agreed to pay a total of $115,000.00 in settlement of the matter,
payable in installments as follows: (i) $40,000 was paid upon the
execution of the Agreement for Judgment; (ii) $25,000.00 was paid
on or before April 15, 1994; and (iii) one payment of $25,000.00
was paid on or before July 15, and (iv) one additional payment
will be made on or before October 15, 1994. From and after March
7, 1994, interest will accrue on the outstanding balance at a
rate of 4% per annum.
Item 2. 1 (j): Location of Collateral
19 Alpha Road
Chelmsford, Massachusetts 01824
Record Owner: Teachers Realty Corporation
32
Item 2. 1(k): Intellectual Property
(see list attached as Exhibit 2. 1 (k))
Item 4. 1: Existing Indebtedness
None other than Subordinated Debt.
Item 4.2: Existing Liens
None.
Item 4.3: Existing Guaranties
None.
33
RECAPITALIZATION PROPOSAL
Pre Note Share Adjustment
Conversion Common STK Common Stock Assuming
Outstanding on as if Ownership % Equivalents Reallocation of
Common Stk Notes, Interest converted After Based or New Existing Comm
Equival. Ownership % & Stk Divdends basis Conversion Ownership % Stk Equival.
----------- ------------ --------------- ------------ ----------- ------------- ----------------
Coming 150,058 1.78% $ 96,040.53 444,977 2.006% 169,541 19,483
EG & G 4,244,280 50.23% $2,189,113.79 10,966,570 49.447% 4,178,381 -65,899
Kearsarge 748,195 8.85% $ 375,726.54 1,901,969 8.576% 724,670 -23,525
LPP Partners 131,028 1.55% 131,028 0.591% 49,923 -81,105
Geneva Partners $ 341,111.04 1,047,477 4.723% 399,100 399,100
MTDC 255,209 3.02% $ 263,742.75 1,065,105 4.802% 405,816 150,607
Nynex 257,143 3.04% 257,143 1.159% 97,974 -159,169
Pioneer 599,409 7.09% $ 178,678,28 1,148,091 5.177% 437,435 -161,974
Providence Ptrs 113,027 1.34% 113,027 0.510% 43,064 -69,963
Sherman Wolf 482,042 5.70% $ 241,217.81 1,222,769 5.513% 465,888 -16,154
Wood Investment 23,207 0.27% $ 25,000.00 99,977 0.451% 38,092 14,885
Common Stk 10,155 0.12% 10,155 0.046% 3,869 -6,286
Employee Pool 1,436,552 17.00% 3,770,000 16.999% 1,436,552 0
Total 8,450,205 99.99% $3,710,630.74 22,178,288 100.000% 8,450,305
34
Exhibit 2.1 (k)
EXHIBIT A
PATENTS
Patent Description Registration No. Issue Date
------------------ ---------------- ----------
Method of and Apparatus 4,573,140 3-30-83
for Voice Communication
Storage and Forwarding
with Simultaneous Access
to Multiple Users
Voice Switched Gain 4,980,908 5-30-89
Control for Voice
Communication Equipment
Connected to Telephone
Lines
Apparatus for Controlling 4,663,777 12-17-84
Digital Voice Recording and
Playback Over Telephone
Lines and Adapted for Use
with Standard Host
Computers
TRADEMARKS
Marks with Federal Registration
Marks Registration No. Date Use
VTK No. 1,402,968 12-9-85 10-1-84
VOICETEK No. 1,428,182 12-6-85 11-1-81
Marks with Pending Applications
Marks Control/Serial No. Use
None