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Exhibit 10.03
CONCORD COMMUNICATIONS, INC.
33 Boston Post Road West
Marlborough, MA 01752
June 9, 1997
Fleet National Bank
75 State Street
Boston, MA 02109
Gentlemen:
This letter agreement will set forth certain understandings between
Concord Communications, Inc., a Massachusetts corporation (the "Borrower") and
Fleet National Bank (the "Bank") with respect to Term Loans (hereinafter
defined) to be made by the Bank to 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 REFERENCES TO DOCUMENTS. Reference is made to (i) that certain $
1,000,000 face principal amount promissory note (the "Term Note") of even date
herewith made by the Borrower and payable to the order of the Bank, and (ii)
that certain Security Agreement of even date herewith from the Borrower to the
Bank (the "Security Agreement").
1.2. The BORROWING; TERM NOTE. Subject to the terms and conditions
hereinafter set forth, the Bank will make one or more loans (the "Term Loans")
to the Borrower, as the Borrower may request, on any Business Day prior to the
first to occur of (i) December 31, 1997 or (ii) the earlier termination of the
within-described term loan facility pursuant to (section) 5.2 or (section)6.7.
A Term Loan shall be made, not more than once per calendar quarter (except that
more than one Term Loan may be made in any calendar quarter provided that each
additional Term Loan in any one calendar quarter is in an amount of at least
$250,000), in order to finance costs of Qualifying Equipment acquired by the
Borrower within the 90 days preceding the request for such Term Loan and/or
Qualifying Software/Engineering Costs incurred by the Borrower within the 90
days preceding such request, each such Term Loan to be in such amount as may be
requested by the Borrower; provided that (i) no Term Loan will be made after
December 31, 1997; (ii) the aggregate original principal amounts of all Term
Loans will not exceed $1,000,000; and (iii) no Term Loan will be in an amount
in excess of the sum of (1) 90% of the invoiced actual costs of the property
constituting the items of Qualifying Equipment with respect to which such Term
Loan is made (excluding taxes, shipping, software, installation charges,
training fees and other "soft costs"), PLUS (2) 90% of the Qualifying
Software/Engineering Costs with respect to which such Term Loan is made
(provided that the Qualifying Software/Engineering Costs which can be used to
support Term Loans may not exceed $300,000 in the aggregate). Prior to the
making of
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each Term Loan, and as a precondition thereto, the Borrower will provide the
Bank with: (i) invoices supporting the costs of the relevant Qualifying
Equipment (and, if relevant, invoices supporting the Qualifying
Software/Engineering Costs); (ii) such evidence as the Bank may reasonably
require showing that the Qualifying Equipment (and any software the purchase of
which is included within Qualifying Software/Engineering Costs) has been
delivered to and installed at the Borrower's Marlborough, MA premises, has
become fully operational, has been paid for by the Borrower and is owned by the
Borrower free of all liens and interests of any other Person (other than the
security interest of the Bank pursuant to the Security Agreement); (iii)
supplements to the Security Agreement and related Uniform Commercial Code
financing statements reflecting the relevant Qualifying Equipment with respect
to which such Term Loan is being made and partial releases from Silicon Valley
Bank relating to such Qualifying Equipment (all of the foregoing to be in form
and substance satisfactory to the Bank); and (iv) evidence satisfactory to the
Bank that the Qualifying Equipment is fully insured against casualty loss, with
insurance naming the Bank as secured party and first loss payee. The Term Loans
will be evidenced by the Term Note. Interest on the Term Loans shall be payable
at the times and at the rate provided for in the Term Note. Overdue principal of
any Term Loan 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 Term 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 Term Note or on the books of the Bank,
at or following the time of making each Term Loan and of receiving any payment
of principal, an appropriate notation reflecting such transaction and the then
aggregate unpaid principal balance of the Term Loans. The amount so noted shall
constitute presumptive evidence as to the amount owed by the Borrower with
respect to principal of the Term 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 Term Note.
1.3. PRINCIPAL REPAYMENT OF TERM LOANS. The Borrower shall repay
principal of the Term Loans in 36 equal consecutive monthly installments,
commencing on January 30, 1998 and continuing on the last Business Day of each
month thereafter. Each such monthly installment of principal shall be in an
amount equal to 1/36th of the aggregate principal amount of the Term Loans
outstanding at the close of business on December 31, 1997. In any event, the
then outstanding principal balance of the Term Loans and all interest then
accrued but unpaid thereon shall be due and payable in full on the December 29,
2000. The Borrower may prepay, at any time or from time to time, without premium
or penalty, the whole or any portion of any Term Loan; provided that each such
principal prepayment shall be accompanied by payment of all interest under the
Term Note accrued but unpaid to the date of payment. Any partial prepayment of
principal of the Term Loans will be applied to installments of principal of the
Term Loans thereafter coming due in inverse order of normal maturity. Amounts
repaid or prepaid with respect to the Term Loans are not available for
reborrowing.
1.4. ADVANCES AND PAYMENTS. The proceeds of all Term Loans shall be
credited by the Bank to a general deposit account maintained by the Borrower
with the Bank. The proceeds of
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each Term Loan will be used by the Borrower solely for acquisition of Qualifying
Equipment and/or for payment of Qualifying Software/Engineering Costs.
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 Term Note; 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 Term Note.
Whenever any payment to be made to the Bank hereunder or under the Term
Note 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 Term Note 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. All payments of
interest, principal and any other sum payable hereunder and/or under the Term
Note shall be made to the Bank, in immediately available funds, at its office at
75 State Street, Boston, MA 02109 or to such other address as the Bank may from
time to time direct. 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 Term Note and/or any of the
other Loan Documents, next to interest then accrued on account of any Term Loans
and only thereafter to principal of the Term Loans. All interest and fees
payable hereunder and/or under the Term Note shall be calculated on the basis of
a 360-day year for the actual number of days elapsed.
1.5. CONDITIONS TO ADVANCE. Prior to the making of the initial Term
Loan, the Borrower shall deliver to the Bank duly executed copies of this letter
agreement, the Security Agreement, the Term 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 Term Loan (including the initial
Term Loan) is subject to the further conditions precedent that on the date on
which such Term Loan is made (and after giving effect thereto):
(a) All statements, representations and warranties of the Borrower
made in this letter agreement (other than in Subsection 2. 1 (b) below) and/or
in the Security Agreement shall continue to be correct in all material respects
as of the date of such Term Loan.
(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 Term Loan.
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(c) No event which constitutes, or which with notice or lapse of
time or both could 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 Term Loan, and each acceptance by
the Borrower of the proceeds of any Term Loan, will be deemed a representation
and warranty by the Borrower that at the date of such Term Loan and after giving
effect thereto all of the conditions set forth in the foregoing clauses (a)-(d)
of this sec.1.5 will be satisfied.
II. REPRESENTATIONS AND WARRANTIES
2.1. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to
enter into this letter agreement and to make Term Loans 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 The Commonwealth of Massachusetts. The
Borrower has full corporate power to own its property and conduct its business
as now conducted and as proposed to be conducted, to grant the security
interests contemplated by the Security Agreement 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 other jurisdiction in
which the Borrower maintains any plant, office, warehouse or other facility and
in each other jurisdiction where 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, all such
jurisdictions being listed on item 2.1(a) of the attached Disclosure Schedule.
At the date hereof, the Borrower has no Subsidiaries, except as shown on said
item 2. 1 (a) of the attached Disclosure Schedule. The Borrower is not a member
of any partnership or joint venture.
(b) At the date of this letter agreement, all of the outstanding
shares of capital stock of the Borrower is owned, of record and/or beneficially,
as set forth on item 2.1(b) of the attached Disclosure Schedule. The provisions
of sec.1.5 above will not be deemed to require the updating of the
representation made in the immediately preceding sentence.
(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 as a prerequisite to
effectiveness any filing (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 recently in effect having applicability to the
Borrower;
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(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.
(d) This letter agreement and each of the other Loan Documents
delivered herewith 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 on 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 or any Subsidiary 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 may result in any material adverse change in the business,
prospects, condition, affairs or operations of the Borrower or any Subsidiary.
(f) The Borrower is not in violation of any term of its charter or
by-laws as now in effect. Neither the Borrower nor any Subsidiary of the
Borrower is in material violation of any term of any mortgage, indenture or
judgment, decree or order, or any other material instrument, contract or
agreement to which it is a party or by which any of its property is bound.
(g) The Borrower has filed (and has caused each of its
Subsidiaries to file) all federal, foreign, state and local tax returns, reports
and estimates required to be filed by the Borrower and/or by any such
Subsidiary. All such filed returns, reports and estimates are proper and
accurate and the Borrower or the relevant Subsidiary 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 (and each Subsidiary of the
Borrower is in compliance) with all requirements of law, federal, foreign, 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
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effect upon the assets, business, financial condition or prospects of the
Borrower or any such Subsidiary. Without limiting the foregoing, the Borrower
has all of the material 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 and
as proposed to be conducted, owned and used.
(i) The audited financial statements of the Borrower and Subsidiaries
as at December 31, 1996 and the management-generated unaudited statements of the
Borrower and Subsidiaries as at March 31, 1997, each heretofore delivered to the
Bank, are complete and accurate and fairly present the financial condition of
the Borrower and Subsidiaries as at the respective dates thereof and for the
periods covered thereby, except that the management-generated statements do not
have footnotes and thus do not present the information which would normally be
contained in footnotes to financial statements and are subject to normal
year-end adjustments, which shall not be material. Neither the Borrower nor any
of the Borrower's Subsidiaries has any 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, 1996, there has been no material adverse development in the business,
condition or prospects of the Borrower, and the Borrower has not entered into
any material transaction other than in the ordinary course.
(j) The principal place of business and chief executive offices of the
Borrower are located at 33 Boston Post Road West, Marlborough, MA 01752 (the
"Premises"). None of the Collateral will be kept at any other address. 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 material
patents, licenses, copyrights, trademarks, trade names and franchises now being
used or necessary to conduct its business. 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 or assets or condition, financial
or otherwise, of the Borrower.
(l) 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
materially 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.
(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.
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III. AFFIRMATIVE COVENANTS AND REPORTING REQUIREMENTS
Without limitation of any other covenants and agreements contained
herein or elsewhere, the Borrower agrees that so long as the financing
arrangements contemplated hereby are in effect or all or any portion of any Term
Loan or any of the other Obligations 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 other jurisdiction where the
Borrower or such Subsidiary, as the case may be, maintains any plant, office,
warehouse or other facility and in each other jurisdiction where 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. 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 appropriate
proceedings and as to which adequate reserves are maintained 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 and its Subsidiaries taken as a
whole.
3.2. MAINTENANCE OF PROPERTY; INSURANCE. The Borrower will maintain and
preserve (and will cause each Subsidiary of the Borrower to maintain and
preserve) all of its fixed assets used in its business in good working order and
condition, 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
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 and for
which the Borrower has established and is maintaining adequate reserves. The
Borrower will pay, and will cause each of its Subsidiaries to
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pay, in a timely manner, all material lease obligations, material trade debt,
material purchase money obligations and material equipment lease obligations;
provided that the Borrower will not be deemed to be required by this sentence to
pay any such lease obligations, trade debt, purchase money obligations or
equipment lease obligations (other than any Indebtedness to the Bank) if the
Borrower is contesting same in good faith, so long as, in each such case,
adequate reserves have been established and are maintained and the Borrower's
nonpayment is not jeopardizing any assets or rights material to the Borrower's
business. The Borrower will perform and fulfill all material covenants and
agreements under any material leases of real estate, material agreements
relating to purchase money debt, material equipment leases and other material
contracts; provided that the Borrower will not be deemed to be required by this
sentence to perform or fulfill any such covenants or agreements (other than
agreements with the Bank) if the Borrower is contesting same in good faith, so
long as, in each such case, adequate reserves have been established and are
maintained and the Borrower's nonperformance is not jeopardizing any assets or
rights material to the Borrower's business. 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 an operating account 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
(itself or through any Subsidiary) enter into any other unrelated lines of
business, businesses or ventures.
3.6. REPORTING REQUIREMENTS. The Borrower will furnish to the Bank
(or cause to be furnished 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 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".
(ii) Within 45 days after the end of each fiscal quarter
of the Borrower, consolidated and consolidating balance sheets of the
Borrower and Subsidiaries and related consolidated and consolidating
statements of income and cash flow, unaudited but complete and accurate
and prepared in accordance with generally accepted accounting
principles consistently applied fairly presenting the financial
condition of the Borrower and Subsidiaries as at the dates thereof and
for the periods covered thereby (except that such quarterly statements
need not contain footnotes) and certified as accurate by the chief
financial officer of the Borrower, such balance sheets to be as at the
end of such fiscal quarter and such statements of income and cash flow
to be for such fiscal quarter
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and for the year to date, in each case together with a comparison to
budget and a comparison to the results for the corresponding fiscal
period of the immediately prior fiscal year.
(iii) At the time of delivery of each annual or quarterly
financial 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) 3.7-3.10.
(iv) 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.
(v) As soon as possible and in any event within five days
after the occurrence of any Default or Event of Default, the statement
of the Borrower setting forth details of each such Default or Event of
Default and the action which the Borrower proposes to take with respect
thereto.
(vi) 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.
(vii) Promptly upon filing any registration statement or
listing application, a copy of same.
(viii) If the Borrower at any time has a class of securities
which is publicly traded, a copy of each periodic or current report of
the Borrower filed with the SEC or any successor agency and each annual
report, proxy statement and other communication sent by the Borrower 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.
(ix) Promptly after the Borrower has knowledge thereof,
written notice of any development or circumstance which would have a
material adverse effect on the Borrower or its business, properties,
assets, Subsidiaries or condition, financial or otherwise.
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(x) 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. CAPITAL BASE. The Borrower will maintain, as at the end of
each fiscal quarter (commencing with December 31, 1997), a consolidated Capital
Base of not less than the then-effective Capital Base Requirement. As used
herein, the "Capital Base Requirement" will be $5,000,000 as at December 31,
1997; and as at the last day of each fiscal quarter of the Borrower thereafter
(beginning with March 31, 1998) the Capital Base Requirement will be deemed to
become an amount equal to the sum of: (i) that Capital Base Requirement which
had been in effect on the last day of the immediately preceding fiscal quarter,
PLUS (ii) 75% of the 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).
3.8. LIQUIDITY. The Borrower will maintain as at the end of each
fiscal quarter of Borrower (commencing with December 31, 1997), a ratio of (x)
the Net Quick Assets of the Borrower and its Subsidiaries on a consolidated
basis to (y) the Adjusted Current Liabilities of the Borrower and its
Subsidiaries on a consolidated basis, which ratio shall be not less than 1.5 to
1.
3.9. LEVERAGE RATIO. The Borrower will maintain as at the last day
of each fiscal quarter of the Borrower (commencing with December 31, 1997) on a
consolidated basis a Leverage Ratio of not more than 1.0 to 1. As used herein,
"Leverage Ratio" means the ratio of (x) Adjusted Senior Debt of the Borrower and
Subsidiaries to (y) Capital Base of the Borrower.
3.10. PROFITABILITY. The Borrower's results for its fiscal quarter
ended March 31, 1997 will not show a consolidated quarterly Operating Loss in
excess of $1,500,000. The Borrower will not incur a consolidated quarterly
Operating Loss in excess of $750,000 for its fiscal quarter ending June 30,
1997, nor a consolidated quarterly Operating Loss in excess of $250,000 for its
fiscal quarter ending September 30, 1997. The Borrower will achieve an Operating
Profit of at least $ 1.00 for its fiscal quarter ending December 31, 1997 and
for each fiscal quarter thereafter.
3.11. BOOKS AND RECORDS. The Borrower will maintain (and will 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 prior 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
officers, directors
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and/or independent accountants, all of whom are hereby authorized and directed
to cooperate with the Bank in carrying out the intent of this (section) 3.11.
Each financial statement of the Borrower hereafter delivered pursuant to this
letter agreement will be complete and accurate and will fairly present the
financial condition of the Borrower as at the date thereof and for the periods
covered thereby.
3.12. LANDLORD'S WAIVER. Prior to the making of the first Term Loan,
the Borrower will obtain, and will thereafter maintain in effect at all times,
waivers from the owners of all premises in which any Collateral is located, such
waivers to be in form and substance satisfactory to the Bank.
3.13. SUBORDINATION. Prior to the making of the first Term Loan, the
Borrower will obtain, and will thereafter maintain in effect at all times,
subordination agreements in form and substance satisfactory to the Bank
providing for full subordination of all of the obligations (if any) of the
Borrower listed on item 4.1 of the attached Disclosure Schedule, other than
capitalized leases.
3.14. ADDITIONAL EQUITY. During the period May 1, 1997- January 31,
1998, the Borrower will receive not less than $7,000,000 as the proceeds of new
equity capital sold by the Borrower. Prior to the making of the first Term Loan,
the Borrower will demonstrate to the Bank that it has received written
commitments (in form and substance reasonably satisfactory to the Bank) for the
purchase of such equity capital by Persons reasonably satisfactory to the Bank.
IV. NEGATIVE COVENANTS
Without limitation of any other covenants and agreements contained
herein or elsewhere, the Borrower agrees that so long as the financing
arrangements contemplated hereby are in effect or all or any portion of any Term
Loan or any of the other Obligations 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 Term Note;
(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 for purchase money Indebtedness
with respect to fixed assets) 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
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equipment purchased or leased by the Borrower subsequent to the date of this
letter agreement for use in the Borrower's business, provided that the total of
Indebtedness permitted under this clause (iv) plus presently-existing equipment
financing (and renewals and replacements) permitted under clause (v) of this
(section) 4.1 will not exceed $1,000,000 in the aggregate outstanding at any one
time;
(v) other Indebtedness (not described in any of clauses
(i)-(iv) above) existing at the date hereof, but only to the extent set forth on
item 4.1 of the attached Disclosure Schedule and any renewals or refinancing
thereof so long as (A) the principal amount of such Indebtedness is not
increased and (B) the sum of (1) the equipment financing permitted under this
clause (v) plus (2) new financing permitted pursuant to clause (iv) above does
not exceeded $ 1,000,000 in the aggregate; 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, 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 or are being contested in good faith and by appropriate proceedings
and as to which adequate reserves are maintained;
(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 are maintained;
(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 and any renewals and
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extensions thereof, provided that no such renewal or extension will encumber
property of the Borrower not so encumbered at the date of this letter agreement.
Without limitation of the foregoing, the Borrower covenants and agrees
that it will not enter into (and represents and warrants that it is not now a
party to or subject to) any agreement or understanding with any Person other
than the Bank which could prohibit or restrict in any manner the right of the
Borrower to grant Liens on its assets to the Bank.
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) (and will not permit any of its Subsidiaries so to assume,
guaranty or become directly or contingently liable) in connection with any
indebtedness of any other Person, 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 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.
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 loans and 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 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
any Subsidiaries now existing or hereafter created by the Borrower pursuant to
4.7 below; provided that in any event the Tangible Net Worth of the Borrower
alone (exclusive of its investment in Subsidiaries and any debt owed by any
Subsidiary to the Borrower) will not be less than 90% of the consolidated
Tangible Net Worth of the Borrower and Subsidiaries.
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4.7. SUBSIDIARIES; ACQUISITIONS. The Borrower will not, without the
prior written consent of the Bank, form or acquire any Subsidiary (other than
overseas sales and marketing Subsidiaries) 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 (i) sale of inventory in the ordinary course, or (ii)
sale or other disposition of items of used equipment which are not included
within the Collateral.
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 transaction with any Person not an
affiliate; provided that nothing in this (section) 4.9 shall be deemed to
restrict 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 of this letter
agreement, "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
corporate name or legal structure, nor will the Borrower change its chief
executive offices or principal place of business from the address described in
(section) 2.1(j) above, nor will the Borrower remove any books or records from
such address, nor will the Borrower keep any Collateral 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 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
reasonably satisfactory to the Bank in order to preserve unimpaired the rights
of the Bank and the obligations of the Borrower hereunder.
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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 the meanings given those terms in Mass. Gen. Laws, 21 E
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 safe procedures that
a prudent businessperson 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 Term 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 or
modify, alter or add any provisions with respect to payment of Subordinated
Debt. In any event, the Borrower will not make any payment of any principal of
or interest on any Subordinated Debt at any time when there exists, or if there
would result therefrom, any Default or Event of Default hereunder.
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 Term Note on or before the date when due; or
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(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 connection with any
Term Loan 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, 3.9 or
3.10 or any provision of 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,
agreement or undertaking 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 Subordinated Debt of the Borrower or with respect to any instrument
evidencing, guaranteeing or otherwise relating to any such Subordinated Debt, or
any such Subordinated Debt 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 the giving of notice or both would permit,
the acceleration of the maturity of any Subordinated Debt by the holder or
holders thereof; or
(g) Any default shall exist and remain unwaived or uncured with respect
to any other Indebtedness of the Borrower or any Subsidiary of the Borrower for
borrowed money or representing the deferred purchase price of the property 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 in excess of $100,000 in aggregate
principal amount 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 the giving of notice or both would permit, the acceleration of
the maturity of any such Indebtedness by the holder of holders thereof, or
(h) 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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(i) Any attachment, execution or similar process shall be issued or
levied against any 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
(j) Any final uninsured judgment in excess of $100,000 shall be
entered against the Borrower or any Subsidiary of the Borrower by any court of
competent jurisdiction; or
(k) 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 each case, 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
(1) 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
(m) The security interest and liens of the Bank in and on any of the
Collateral covered or intended to be covered by the Security Agreement shall for
any reason (other than written release by the Bank) not be fully perfected liens
and security interests; or
(n) If, at any time, more than 50% of any class of voting stock of the
Borrower shall be held, of record and/or beneficially, by any Person or by any
"group" (as defined in the Securities Exchange Act of 1934, as amended, and the
regulations thereunder) other than any Person listed on item 5. 1 (n) of the
attached Disclosure Schedule or a group consisting of such Persons; or
(o) If John A. Blaeser shall be any reason cease to be an executive
officer of the Borrower actively involved in the management of the Borrower; or
(p) If any prospective purchaser of equity, as described in (section)
3.14 above, shall fail to purchase such equity as required under its respective
commitment or any such commitment shall terminate for any reason without a
purchase of the equity covered by such commitment; or
(q) There shall occur any other material adverse change in the
conditions (financial or otherwise), operations, properties, assets, liabilities
or earnings of the Borrower.
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):
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(a) Declare the entire unpaid principal amount of the Term 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.
(b) Terminate the arrangements for Term Loans provided for by this
letter agreement.
(c) Exercise all rights and remedies hereunder, under the Security
Agreement, under the Term Note 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 anytime 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 without regard for the availability or adequacy of
other collateral. As security for the Obligations, the Borrower 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.
VI. MISCELLANEOUS
6.1. COSTS AND EXPENSES. The Borrower agrees to pay, on demand and
delivery of a Bank Certificate therefor, all costs and expenses (including,
without limitation, reasonable legal fees) reasonably incurred by the Bank in
connection with the preparation, execution and delivery of this letter
agreement, the Security Agreement, the Term Note and all other instruments and
documents to be delivered in connection with any Term Loan and any amendments or
modifications of any of the foregoing, as well as the costs and expenses
(including, without limitation, the reasonable fees and expenses of legal
counsel) reasonably incurred by the Bank in connection with preserving,
enforcing or exercising, upon default, any rights or remedies under this letter
agreement, the Security Agreement, the Term 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 Term Note and all other instruments and documents to
be delivered in connection with any Obligation. Any fees,
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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 2% per annum plus
the per annum rate otherwise payable under the Term 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 Term
Loans and/or the within-described term loan facilities 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 Term Loans and/or the within-described term loan facilities.
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 reduce any
obligation of the Borrower to the Bank under this Section.
6.3. FACILITY FEE. With respect to the Term Loans, the Borrower is
paying to the Bank, at the date of execution and delivery of this letter
agreement a non-refundable facility fee in the amount of $7,500. 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 now or
hereafter 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
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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 Term 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:
Concord Communications, Inc.
33 Boston Post Road West
Marlborough, MA 01752
Attention: Gary Haroian, Chief Financial Officer
If to the Bank:
Fleet National Bank
High Technology Group
75 State Street
Boston, MA 02109
Attention: Kimberly Martone, 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, 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 Term Loans and/or the Term Note.
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
Term Loans and all interest thereon and all fees and charges payable in
connection therewith.
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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 Term
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 it 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 other-wise
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) 6.4 (as such address may be changed from time to
time pursuant to said (section) 6.4) or (ii) by serving a copy thereof upon it
at its address set forth in (section) 6.6 (as such address may be changed from
time to time pursuant to said (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, 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:
"Adjusted Current Liabilities" - As determined at any time, all Current
Liabilities of the Borrower and/or any Subsidiary of the Borrower then
outstanding, other than any such Current Liabilities which constitute
discretionary reserves (meaning, for this purpose, only that those amounts
reserved by the Borrower on its balance sheet which are in excess of the amounts
required to be so reserved in accordance with generally accepted accounting
principles) or the current portion of Deferred Revenue.
"Adjusted Senior Debt" - As determined at any time, all Indebtedness of
the Borrower and/or any Subsidiary of the Borrower then outstanding, other than
(i) any such Indebtedness which constitutes Subordinated Debt, and (ii) any such
Indebtedness which constitutes Deferred Revenue.
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"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 such
Subordinated Debt).
"Cash-Equivalents" Each of the following:(i) readily marketable direct
obligations of, or obligations guarantied by, the United States of America or
any agency thereof and entitled to the full faith and credit of the United
States of America, (ii) demand deposits with the Bank or with any other
commercial bank chartered by the United States or by any state and having
undivided capital and surplus of not less than $1,000,000,000, or (iii)
interests in mutual funds, substantially all of the assets of which shall be
governmental obligations of the type described in clause (i) of this sentence.
"Collateral" - All property now or hereafter owned by the Borrower or
in which the Borrower now or hereafter has any interest which is now or
hereafter described as "Collateral" in the Security Agreement.
"Current Liabilities" - As to any Person, all liabilities of such
Person which are properly shown as current liabilities on a balance sheet of
such Person prepared in accordance with generally accepted accounting principles
consistently applied, including, without limitation, all capitalized lease
payments and fixed payments and prepayments of, and sinking fund payments with
respect to, Indebtedness required to be made within one year from the date of
determination.
"Default" - Any event or circumstance which, with the passage of time
or the giving of notice or both, could become an Event of Default under this
letter agreement.
"Deferred Revenue" - Any liabilities of the Borrower and/or any
Subsidiary which represent sums actually received by the Borrower or such
Subsidiary under a software maintenance contract and which, in accordance with
generally accepted accounting principles, are properly shown as "deferred
revenue" on a balance sheet of the Borrower prepared consistently with the
Borrower's audited balance sheet as at December 31, 1995.
"ERISA" - The Employee Retirement Income Security Act of 1974, as
amended.
"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
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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.
"Loan Documents" - Each of this letter agreement, the Term Note, the
Security Agreement and each other instrument, document or agreement evidencing,
securing, guaranteeing or relating in any way to any of the Term Loans, all
whether now existing or hereafter arising or entered into.
"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 n accordance with
generally accepted accounting principles consistently applied.
"Net Quick Assets" - Such current assets of the Borrower as consist of
cash, Cash Equivalents, readily-marketable securities and Receivables (less an
allowance for bad debt consistent with the Borrower's prior experience).
"Obligations" - All Indebtedness, covenants, agreements, liabilities
and obligations, now existing or hereafter arising, made by the Borrower with or
for the benefit of the Bank or owed by the Borrower to the Bank in any capacity.
"Operating Profit" - For any fiscal period, the consolidated Net Income
(or, if applicable, the consolidated Net Loss, expressed as a negative number)
of the Borrower and Subsidiaries for such fiscal period, PLUS, without
duplication of any item (i) all federal and state income taxes (but not taxes in
the nature of an AD VALOREM property tax or a sales or excise tax) paid or
accrued with respect to such fiscal period and actually deducted on the
consolidated books of the Borrower for the purposes of computation of
consolidated Net Income (or consolidated Net Loss, as the case may be) for the
fiscal period involved, and (ii) the amount of the provision for depreciation
and/or amortization recognized by the Borrower and actually deducted on the
consolidated books of the Borrower for the purposes of computation of
consolidated Net Income (or consolidated Net Loss, as the case may be) for the
fiscal period involved. If for any fiscal period the result of the calculation
described in the immediately preceding sentence is a negative number, such
result shall be referred to as the "Operating Loss" for such fiscal period.
"PBGC" - The Pension Benefit Guaranty Corporation or any successor
thereto.
"Person" - An individual, corporation, partnership, limited liability
company, joint venture, trust or unincorporated organization, or a government or
any agency or political subdivision thereof.
"Premises" - As defined in Subsection 2.10).
"Qualifying Equipment" - Equipment (including furniture and fixtures,
but not including prepackaged software) purchased by the Borrower after January
1, 1997 for use in the Borrower's business which meets all of the following
criteria: (i) such equipment consists of one of the items
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shown on the Equipment List heretofore delivered by the Borrower to the Bank or
has otherwise been approved by the Bank for use in supporting a Term Loan, (ii)
each item of such equipment has been delivered to and installed at the Premises
and has become fully operational, (iii) the Borrower has paid in full for each
item of such equipment and holds title to same, free of all interests and claims
of any other Person (other than the security interest of the Bank), and (iv) the
Bank has a fully perfected first security interest in such equipment.
"Qualifying Software/Engineering Costs" - Amounts (not in excess of
$300,000 in the aggregate) incurred and paid by the Borrower to third parties on
or after January 1, 1997 representing the costs of software and/or engineering
relating to the installation and/or operation of any of the Qualifying
Equipment.
"Receivables" - As to any Person, all of such Person's present and
future accounts receivable for goods. sold or for services rendered.
"SEC" - The Securities and Exchange Commission or any successor
thereto.
"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).
"Tangible Net Worth" - An amount equal to the total assets of any
Person (excluding (i) the total intangible assets of such Person, (ii) any
minority interests in Subsidiaries and (iii) 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.
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This letter agreement is executed, as an instrument under seal, as of
the day and year first above written.
Very truly yours,
CONCORD COMMUNICATIONS, INC.
By: /s/ Gary E. Haroian
-------------------------------
Name: Gary E. Haroian
Title: Vice President, CFO
Accepted and agreed:
FLEET NATIONAL BANK
By: /s/ Kimberly Marks
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Its Vice President
By: /s/ Thomas W. Daires
------------------------------
Its Senior Vice President