Exhibit 10.8
BROWN BROTHERS HARRIMAN & CO. 59 WALL STREET
BUSINESS ESTABLISHED 1616 NEW YORK, N.Y. 10005
PRIVATE BANKERS (212) 483-1818
August 31, 1998
TERMS AND CONDITIONS
BORROWER: Predictive Systems, Inc. (the "Borrower")
LENDER: Brown Brothers Harriman & Co. ("BBH&Co.")
FACILITY: $5,000,000 secured demand loan
PURPOSE: Working capital financing; primarily accounts
receivable
TERM: Demand - EXCEPT that absent either: (a) a breach of
the Financial or Operating Guidelines outlined herein,
or (b) an event of default as described in the secured
promissory note, or (c) any material adverse change,
the Borrower will be given a 90 day notification
period prior to a demand by BBH&Co. for repayment.
ADVANCES: Advances to be made available against a borrowing base
comprised of 80% of eligible accounts receivable which
shall be defined to exclude: (i) accounts subject to
disputes or claims (ii) accounts with one half or more
of the total balance 90 days from the date of invoice
and (iii) the amount due from Tribeca Software that
exceeds $500,000
INTEREST RATE: Borrower may elect either one or more of the following
options:
(i) floating rate at BBH&Co. Base Rate plus
50 basis points, or
(ii) fixed rate for 30, 60, or 90 days at LIBOR
plus 325 basis points
The interest rate will be reduced by 50 basis points
beginning upon the date of receipt by BBH&Co. of
Borrower's balance sheet indicating Tangible Net Worth
(as defined below) greater than or equal to $2,500,000.
COLLATERAL: Collateral to include but not be limited to:
(i) senior perfected liens and security
interests in all of the Borrower's
present and future assets and proceeds
thereof, to be evidenced by BROWN
BROTHERS HARRIMAN CO. BBH&Co. General
Security Agreement and appropriate WCC-I
filings
(ii) Tribeca Software, Inc.'s guaranty of
Borrower's indebtedness to BBH&Co. to
be supported by BBH&Co. General Security
Agreement
SET UP FEE: $15,000 due upon acceptance of this proposal.
OWNERSHIP: No change in control of the Borrower without the
prior written consent of BBH&Co.
FINANCIAL GUIDELINES: Financial guidelines to include, but not be limited to:
(i) minimum Tangible Net Worth at any time,
total equity less intangibles and less
the total amount due from Tribeca
Software, Inc. ("Tangible Net Worth") not
to fall below the sum of (a) $1,400,000
and (b) 50% of net income subsequent to
August 1, 1998
(ii) maximum leverage ratio: at any time,
total funded debt divided by Tangible Net
Worth not to exceed 2.5:1.0
OPERATING GUIDELINES: Specific details to be agreed; operating guidelines to
include but not be limited to:
(i) no additional liens for borrowed money
(ii) no material adverse change
(iii) maintenance of adequate levels of key man
life insurance for both Ron Pettengill
and Robert Belau
REPORTING REQUIREMENTS: Specific details to be agreed; reporting requirements
to include but not be limited to:
(i) annual reviewed financial statements and
monthly internal financial statements
(ii) monthly borrowing base certificate
substantially in the form of Exhibit I
(attached)
(iii) periodic review of accounts receivable
by BBH&Co.
(iv) other information relating to the
Borrower as BBH&Co. may reasonably
request
OUT OF POCKET All reasonable out of pocket expenses relating to the
EXPENSES: establishment and monitoring of the credit facility to
be for the account of the Borrower; such expenses to
include, but not be limited to, legal and accounting.
OTHER CONDITIONS: Specific details to be agreed; other conditions to
include but not be limited to:
(i) BBH&Co. to remain primary bank of account
for Borrower's cash management and
operational needs
(ii) Borrower to provide evidence that BBH&Co.
has been named loss payee on all
appropriate insurance policies
BROWN BROTHERS HARRIMAN & CO.
Accepted and Agreed:
Predictive Systems, Inc.
By: /s/ Ronald Pettengill
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Title: CEO
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Date: 7/23/98
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SECURED PROMISSORY NOTE
(PLEDGE OF COLLATERAL)
$5,000,000.00 Date: August 31, 1998
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Name of Maker: Predictive Systems, Inc.
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Address of Maker: 145 Hudson Street
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New York, NY 10013
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State of Incorporation (if applicable):
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Partnership Certificate Filed With (if applicable)
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Due On: Demand, subject to Payee's Line Letter and associated terms and
Conditions dtd. 8/31/98
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Interest Payable on: Last day of each month
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FOR VALUE RECEIVED the Maker promises to pay on the due date set forth
above, to the order of BROWN BROTHERS HARRIMAN & CO. ("Payee") at its office at
59 Wall Street, New York, New York 10005, the face amount hereof. Interest on
the balance from time to time outstanding shall accrue at the rate of * % per
annum, and shall be payable as set forth above. *As further described in the
Terms and Conditions Letter dtd.
8/31/98.
All advances pursuant to this Note and all repayments of principal due
hereunder shall be endorsed by the Payee on the schedule on the reverse side
hereof, or any continuation of such schedule attached hereto and denominated a
part hereof. Said endorsement on such schedule by an authorized agent of the
Payee shall be conclusive evidence of the unpaid balance due on this Note.
The indebtedness evidenced hereunder, as well as all other indebtedness
now or hereafter owing by the Maker to the Payee ("Obligation(s)") is secured by
certain collateral more fully described in the annexed Schedule "A", together
with all the Maker's personal property now or hereafter existing or acquired, of
any type or description, including but not limited to inventory, documents of
title covering any inventory, equipment, accounts, contract rights, general
intangibles (including tax refunds, instruments, investment securities, chattel
paper, notes, drafts, acceptances and all bank balances of the undersigned
("Collateral") which the Maker has pledged, deposited and delivered to the Payee
and granted to the Payee a security interest in.
The rate of interest hereunder is based upon the Payee's present base
rate of _____ per annum (the "Base Rate"). In the event of an increase or
decrease in the Base Rate, then the rate of interest hereunder shall be
automatically increased or decreased to the same extent and on the same day as
any increase or decrease in the Base Rate. Post-maturity or post-demand (as the
case may be) interest shall accrue and be payable at 120% of the rate payable on
the due date or demand, compound from said date to the date of actual payment.
Maker affirms and certifies that the Obligation evidenced by this Note
was not and will not be incurred for the purposes of purchasing, carrying or
trading in securities as defined in the Federal Reserve Board's Regulation T,
except in compliance with said Regulation.
In no contingency or event whatsoever shall the interest rate charged
hereunder exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such a court determines that the Payee has received interest
hereunder in excess of said highest permissible rate, Payee shall promptly
refund such excess interest to Maker.
So long as the Obligations are not in default, the Maker shall have the
right to vote any shares of stock included in the Collateral on all corporate
questions and the Payee shall, if required, execute due and timely proxies in
favor of the Maker to this end.
The Maker warrants and represents that there are no restrictions upon
the transfer of the Collateral, other than may appear on the face of the
certificates, and that the Maker has the right to pledge the Collateral free of
any encumbrances and without obtaining the consents of the other shareholders.
In the event that, prior to repayment of the Obligations, any stock dividend,
reclassification, readjustment or other change is declared or made in the
capital structure of any issuer of the Collateral, all new, substituted and
additional shares or other securities issued to Maker by reason of any such
change shall be delivered to Payee in kind to be held by the Payee under the
terms of this agreement in the same manner as all other Collateral. The Payee
may at any time, without notice to the Maker, transfer to and/or register in
Payee's name, or in the name of Payee's nominee, any or all of the Collateral.
In the event that it becomes necessary, in Payee's opinion, to comply
with any Federal of State law or regulation or to make or file any registration
thereunder in order for Payee to exercise any of its rights hereunder, Maker
expressly agrees to do or will cause to be done all acts and prepare and execute
all documents necessary to effect such compliance or registration, and to bear
all costs in connection therewith. Make agrees to indemnify and to hold Payee
harmless from and against any claim or liability caused by any untrue statement
of material fact, or omission to state a material fact, as may be required in
any registration statement or prospectus; or caused by a failure to register or
comply with any such law or regulation. The Maker shall pay any and all
expenses, including
reasonable attorney' fees incurred by Payee in registering the Collateral, or in
securing an exemption for any such registration.
The Payee shall have no responsibility of any kind, nature or
description to arrange for the redelivery of the Collateral or any part thereof
to any issuer or transfer agent in order to preserve or maintain any conversion
or dividend rights with respect thereto; the Payee's only obligation being to
maintain physical possession or control thereof. The Payee agrees to comply with
any request received by it from Maker with respect to conversion,
reclassification, or the like of the Collateral, to the extent that such
instructions are not inconsistent with the intents and purposes hereof. Upon
payment and performance of all Obligations the Payee shall, at the request of
the Maker, redeliver to the Collateral to the Maker.
Upon the occurrence of any of the following events of default, to wit:
the non-payment when due of any Obligation; the failure of the Maker forthwith,
upon demand, or to make payments on account as may be agreed in any of the
Obligations; the death, failure in business, dissolution or termination of
existence of the Maker of any endorser, guarantor or surety of any Obligation
(hereinafter referred to as "Obligor(s)"); any petition for relief under the
Bankruptcy Code being filed by or against any Obligor or any proceedings in
bankruptcy, or under any Acts of Congress relating to the relief of debtors,
being commenced for the relief or readjustment of any indebtedness of any
Obligor either through reorganization, composition, extension or otherwise (all
of which petitions shall be without prejudice at the Payee's right to move in
the bankruptcy court for adequate protection, relief from the automatic stay,
and for any other relief relating to the preservation of the Collateral) which
is not stayed or dismissed within 30 days; the making by any Obligor of an
assignment for the benefit of creditors or for taking advantage by any of the
same of any insolvency law; any seizure, vesting or intervention by or under
authority of a government, by which the management of any Obligor is displaced
or its authority in the conduct of its business is curtailed; the appointment of
any receiver of any property of any Obligor; the attachment or distraint of any
of the Collateral or of same becoming subject at any time to any mandatory court
order or other legal process; the failure of any Obligor to perform any of its
duties as specified in any agreement(s) with respect to the Obligations; the
expulsion or suspension of any Obligor from membership in any national
securities association or any national securities exchange or other organized
exchange, or any clearing association; the admission in writing by any Obligor
of inability to pay its debts generally as they become due; the commencement of
any proceedings against any Obligor under Article 51 or 52 of the New York Civil
Practice Law and Rules (as heretofore or hereafter amended); the Pension Benefit
Guaranty Corporation shall commence proceedings (including proceedings under
ss.4042 of the Employee Retirement Income Security Act of 1974) to terminate any
employee pension benefit plan of the Maker; any misstatement or false statement
of any Obligor in connection with any agreement between any Obligor and the
Payee has been made; then in such event the Maker shall immediately be liable
without notice and shall pay on demand all Obligations (whether or not otherwise
due), together with all collection costs and expenses, including reasonable
attorneys' fees, in connection with the collection of such indebtedness.
Payee shall have the rights and remedies of a secured party under the
Uniform Commercial Code. Further, upon the occurrence of any Event of Default,
all Obligations shall automatically become due and payable without notice and
Payee's commitment to make further loans or extensions of credit or other
financial accommodations to the Maker shall thereupon automatically and without
notice be terminated. In addition thereto, the Maker further agrees that (i) in
the event notice is necessary under applicable law, written notice mailed to the
Maker at the address then reflected in Payee's records 5 business days prior to
the date of public sale of any of the Collateral or prior to the date after
which private sale or nay other disposition of the Collateral will be made shall
constitute reasonable notice, but notice given in any other reasonable manner or
at any other time shall be sufficient; (ii) in the event of the sale or other
disposition of any Collateral, Payee may apply the net proceeds thereof first to
the satisfaction of Payee's reasonable attorneys' fees, legal expenses, and
other costs and expenses incurred in connection with Payee's taking, re-taking,
holding, preparing for sale, and selling of the Collateral; then to repayment of
principal and interest on the Obligations, with the Maker remaining liable for
any deficiency; (iii) without precluding any other methods of sale, the sale of
Collateral shall have been made in a commercially reasonable manner if conducted
in conformity with reasonable commercial practices of banks disposing of similar
property, but in any event Payee may sell on such terms as Payee may choose,
without assuming any credit risk and without any obligation to advertise or give
notice of any kind; and (iv) Payee may require the Maker to assemble Collateral,
taking all necessary or appropriate action to preserve and keep in good
condition; and make such available to Payee at a place and time convenient to
both parties; all at the expense of the Maker. To the extent permitted under
applicable law, full power and authority is hereby given Payee to sell, assign,
and deliver all or any part of the Collateral, at any time at any brokerage
board, or at public or private sale, at Payee's option, and no delay on Payee's
part in exercising any power of sale or any other rights or options hereunder,
and no notice or demand, which may be given to or made upon the Maker by Payee
with respect to any power or sale or other right or option hereunder, shall
constitute a waiver thereof, or limit or impair Payee's rights to take any
action or to exercise any power of sale and any other rights hereunder, without
notice or demand, or prejudice Payee's rights as against the Maker in any
respect. Payee may be a purchaser, free from any right of redemption (which the
Maker hereby expressly waives and releases) at any public or private sale of
Collateral. Should such net proceeds be inadequate to pay all the Obligations,
the Maker agrees to pay the Payee on demand any balance that may be due to the
Payee.
The Maker recognizes that the Payee may be unable to effect a public
sale of all or part of the Collateral by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, as now or hereafter in
effect, or applicable Blue Sky or other state securities law, as now or
hereinafter in effect, but may be compelled to one or more private sales to a
restricted group of purchasers who will be obliged to agree, among other things,
to acquire the Collateral for their own account, for investment and not with a
view to the distribution or resale thereof. The Maker agrees that private sales
so made may be at prices and other terms less favorable to the Payee than if
such Collateral were sold at public sales, and that the Payee has no obligation
to delay sale of any such Collateral for the period of time necessary to permit
the issuer of the Collateral, even if such issuer would agree, to register the
Collateral for public sale under any such applicable securities laws. The Maker
agrees that private sales made under the foregoing circumstances shall be deemed
to have been made in a commercially reasonable manner.
The Maker at the request of the Payee will sign and deliver to the
Payee a security agreement or a trust receipt or other writing, together with
financing statement(s) or a statement of trust receipt financing or other
writing, covering any Collateral in order to comply with or to enable the Payee
to obtain the benefits of the Uniform Commercial Code or any other similar
statute now or hereafter enacted, of New York or of any other jurisdiction where
the Collateral may at any agreement relating to the Maker or to any property of
the Maker, and the Maker agrees that without written consent of the Payee the
Maker will not enter into any security agreement which creates a security
interest in any category of the Maker's personal property generally (as
distinguished from any specific items thereof) in any after-acquired property
other than accessions and fixtures. The rights of the Payee specified herein
shall be in addition to those previously or otherwise created or existing. The
Maker agrees to use every effort and to take every action that may be necessary
or appropriate to enable the Payee to enforce, protect and preserve its rights
and interests hereunder, hereby granting unto the Payee, as the Maker's
attorney-in-fact, full power and authority to take any and all such action,
either in the name of the Payee or in the name of the Maker as the Payee may in
its sole discretion determine.
The Maker authorizes the Payee, with or without notice to the Maker, to
cause to be transferred or registered at the expense of the Maker any of the
Collateral into the name of the Payee or its nominee and to receive any income
derived therefrom and to hold such income as security for any of the Obligations
or apply it upon principal or interest due on any such Obligations. The Maker
will execute and deliver to the Payee such consents, endorsements, assignments
and stock powers as may appear to the Payee proper to further the negotiability
of any of the Collateral and will pay the expenses and charge of so furthering
negotiability. The Payee may at any time demand, sue for, collect or make any
compromise of settlement with reference to the Collateral as the Payee in its
sole discretion may determine. Any bonds or other obligations of or guaranteed
by the United States Government constituting part of the Collateral may be
pledged by the Payee (either alone or so mingled with other securities) to
secure deposits or other obligations of the Payee, whether or not such deposits
or other obligations be in excess of the Obligations.
The Maker agrees that the Payee assumes no responsibility for the
correctness, validity, genuineness or sufficiency of the instruments, documents
and/or chattel paper constituting the Collateral, or for the existence,
character, quantity, quality, condition, weight, packing, value or delivery of
any goods specified in any such documents. The Payee shall not be required to
take any steps necessary to preserve any rights against prior parties to any of
the Collateral. The Maker hereby waives presentment, notice of dishonor and
protest of all instruments evidencing or included in the Obligations and the
Collateral. The Maker will keep the Collateral adequately covered by insurance
satisfactory to the Payee,, and will assign the policies or certificates of
insurance to the Payee, or make the loss or adjustment payable to the Payee, at
the option of the Payee; and the Maker will furnish to the Payee evidence of
acceptance by the insurers of such assignment. Should the Maker fail to effect
and maintain such insurance, the Payee may do so for the account of the Maker.
No failure on the part of Payee to exercise, and no delay in exercising
any right, power of remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise by Payee of any right, power of remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power of remedy.
If any provision hereof is held invalid or unenforceable, the remainder
and the application of such provision to other parties or circumstances will not
be affected thereby, the provisions being severable in any such instance.
In any litigation hereunder, all Obligors hereby waive trial by jury
and waive the right to interpose any defense based upon any Statute of
Limitations or any claim of laches. Each Obligor hereby consents to the in
personam jurisdiction of the Courts of New York State, and the United States
District Court, the Southern District of New York in connection with any claim
arising hereunder. In the event that any action is commenced hereunder in any
such court, service of process may be made on any Obligor by mailing a copy of
the Summons to said party at its address then reflected in Payee's records.
This Note shall be governed by the laws of the State of New York.
All Obligors hereby forever waive presentment, demand, protest, notice
of protest and notice of dishonor of this Note and consent without notice to any
and all extensions of time or terms of payment including any compromise or
settlement thereof.
Predictive Systems, Inc.
By: /s/ Ronald Pettengill
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Name: Ronald Pettengill
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Title: CEO
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By: /s/ Robert Belau
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Name: Robert Belau
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Title: President
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ENDORSEMENT
FOR VALUE RECEIVED each of the undersigned endorsers assent to all of
the terms and conditions of the within Note and hereby forever waive
presentment, demand, protest, notice of protest, and notice of dishonor of the
within Note, and trial by jury, and the undersigned and each of them guarantees
the payment of said Note when due and consents without notice to any and all
extensions of time or terms of payment, and the release or substitution, or
failure to perfect a security interest in any collateral made, agreed to or
granted to or by the Payee.
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SCHEDULE "A"
LIST OF COLLATERAL
ALL PERSONAL PROPERTY AND FIXTURES OF THE DEBTOR, WHETHER NOW EXISTING
OR HEREAFTER ARISING AND WHEREVER LOCATED, OF EVERY KIND AND DESCRIPTION,
TANGIBLE OR INTANGIBLE, INCLUDING WITHOUT LIMITATION ALL GOODS, INCLUDING
WITHOUT LIMITATION EQUIPMENT AND INVENTORY; ACCOUNTS; CONTRACT RIGHTS;
DOCUMENTS, INCLUDING WITHOUT LIMITATION BILLS OF LADING, DOCK WARRANTS, DOCK
RECEIPTS, WAREHOUSE RECEIPTS AND OTHER DOCUMENTS OF TITLE; CHATTEL PAPERS;
GENERAL INTANGIBLES, INCLUDING WITHOUT LIMITATION TAX REFUNDS, DUTY DRAWBACKS
AND PROCEEDS OF INSURANCE AS TO ANY PROPERTY OF THE DEBTOR DESCRIBED HEREIN;
INSTRUMENTS, INCLUDING WITHOUT LIMITATION LETTERS OF CREDIT NAMING DEBTOR AS
BENEFICIARY; THE BALANCE OF EVERY DEPOSIT ACCOUNT; ALL SECURITIES, OPTIONS,
FUTURES CONTRACTS AND OTHER ASSETS DUE FROM OR HELD WITH ANY BANK, BROKER OR
DEPOSITORY INSTITUTION; MONEY; COMMODITIES; CREDITS, CLAIMS, DEMANDS AND
SECURITY INTERESTS ARISING IN FAVOR OF THE DEBTOR AND ANY OTHER PROPERTY, RIGHTS
AND INTERESTS OF THE DEBTOR; AND ALL CASH AND NON-CASH PROCEEDS, PRODUCTS AND
ACCESSIONS FROM THE SALE, LIQUIDATION OR DISPOSITION OF ANY OF THE FOREGOING.