Exhibit 10.5
CENTENNIAL TECHNOLOGIES, INC.
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▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
November 20, 1998
Fleet National Bank
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Gentlemen:
This letter agreement will set forth certain understandings between
Centennial Technologies, Inc., a Delaware corporation (the "Borrower") and Fleet
National Bank (the "Bank") with respect to Revolving Loans and Term Loans (each
as hereinafter defined) which may be made by the Bank to the Borrower and with
respect to letters of credit which may hereafter be issued by the Bank for the
account of the Borrower. In consideration of the mutual promises contained
herein and in the other documents referred to below, and for other good and
valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Bank agree as follows:
I. AMOUNTS AND TERMS
1.1. REFERENCE TO DOCUMENTS. Reference is made to (i) that certain
$3,500,000 face principal amount revolving promissory note (the "Revolving
Note") of even date herewith made by the Borrower and payable to the order of
the Bank, (ii) that certain $1,500,000 face principal amount term promissory
note (the "Term Note") of even date herewith made by the Borrower and payable to
the order of the Bank, (iii) that certain Inventory, Accounts Receivable and
Intangibles Security Agreement and that certain Supplementary Security Agreement
- Security Interest in Goods and Chattels, each of even date herewith, from the
Borrower to the Bank (collectively, the "Security Agreement"), and (iv)
collateral assignments and notices of collateral assignment (collectively, the
"Intellectual Property Security Agreements") from the Borrower to the Bank
relating to the Borrower's registered trademarks, patents and copyrights, if
any.
1.2. REVOLVING LOANS; REVOLVING NOTE. Subject to the terms and conditions
hereinafter set forth, the Bank will make loans ("Revolving Loans") to the
Borrower, in such amounts as the Borrower may request, on any Business Day prior
to the first to occur of (i) the Expiration Date, or (ii) the earlier
termination of the within-described revolving financing arrangements pursuant to
Section 5.2 or Section 6.6; provided, however, that (1) the aggregate principal
amount of Revolving Loans outstanding shall at no time exceed the Maximum
Revolving
Amount (hereinafter defined) and (2) the Aggregate Revolving Bank Liabilities
(hereinafter defined) shall at no time exceed the Borrowing Base (hereinafter
defined). Within such limits, and subject to the terms and conditions hereof,
the Borrower may obtain Revolving Loans, repay Revolving Loans and obtain
Revolving Loans again on one or more occasions. The Revolving Loans shall be
evidenced by the Revolving Note and interest thereon shall be payable at the
times and at the rate provided for in the Revolving Note. Overdue principal of
the Revolving Loans and, to the extent permitted by law, overdue interest shall
bear interest at a fluctuating rate per annum which at all times shall be equal
to the sum of (i) four (4%) percent per annum plus (ii) the per annum rate
otherwise payable under the Revolving Note (but in no event in excess of the
maximum rate from time to time permitted by then applicable law), compounded
monthly and payable on demand. The Borrower hereby irrevocably authorizes the
Bank to make or cause to be made, on a schedule attached to the Revolving Note
or on the books of the Bank, at or following the time of making each Revolving
Loan and of receiving any payment of principal, an appropriate notation
reflecting such transaction and the then aggregate unpaid principal balance of
the Revolving Loans. The amount so noted shall constitute PRIMA FACIE evidence
as to the amount owed by the Borrower with respect to principal of the Revolving
Loans. Failure of the Bank to make any such notation shall not, however, affect
any obligation of the Borrower or any right of the Bank hereunder or under the
Revolving Note.
1.3. REPAYMENT; RENEWAL OF REVOLVING LOAN FACILITY. The Borrower shall
repay in full all Revolving Loans and all interest thereon upon the first to
occur of: (i) the Expiration Date, or (ii) an acceleration under Section 5.2(a)
following an Event of Default. The Borrower may repay at any time, without
penalty or premium, the whole or any portion of any Revolving Loan. In addition,
if at any time the Borrowing Base is in an amount which is less than the then
outstanding Aggregate Revolving Bank Liabilities, the Borrower will forthwith
prepay so much of the Revolving Loans as may be required (or arrange for
termination of such letters of credit as may be required) so that the Aggregate
Revolving Bank Liabilities will not exceed the Borrowing Base. The Bank may, at
its sole discretion, renew the revolving financing arrangements described in
this letter agreement by extending the Expiration Date in a writing signed by
the Bank and accepted by the Borrower. Neither the inclusion in this letter
agreement or elsewhere of covenants relating to periods of time after the
Expiration Date, nor any other provision hereof, nor any action (except a
written extension pursuant to the immediately preceding sentence), non-action or
course of dealing on the part of the Bank will be deemed an extension of, or
agreement on the part of the Bank to extend, the Expiration Date.
1.4. TERM LOANS; TERM NOTE. In addition to the foregoing, subject to the
terms and conditions hereinafter in this letter agreement set forth, the Bank
will make one or more loans (the "Term Loans") to the Borrower in an aggregate
principal amount not to exceed $1,500,000. A Term Loan shall be made, no more
than once per month (except that more than one Term Loan may be made in any
month provided that each additional Term Loan in any one month is in an amount
of at least $100,000), in order to finance costs of Qualifying Equipment
acquired by the Borrower within the 30 days preceding the request for such Term
Loan (except that the first Term Loan may include the costs of Qualifying
Equipment acquired by the Borrower more than 30 days prior thereto but not more
than 45 days prior to the date of this letter agreement), each such Term Loan to
be in such amount as may be requested by the Borrower; provided that (i) no
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Term Loan will be made after the earlier of (A) October 31, 1999, or (B) the
earlier termination of the within-described term loan facility pursuant to
Section 5.2 or Section 6.6; (ii) the aggregate original principal amounts of
all Term Loans will not exceed $1,500,000; and (iii) no Term Loan will be in
an amount more than 80% of the invoiced actual costs of the tangible 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"). Prior to the making of 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; (ii) such
evidence as the Bank may reasonably require showing that the Qualifying
Equipment has been delivered to and installed at the Borrower's Wilmington,
MA premises, has become fully operational, has been paid for by the Borrower
(or will be promptly so paid for from the proceeds of such Term Loan) 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) Uniform Commercial Code financing statements, if needed,
reflecting the relevant Qualifying Equipment with respect to which such Term
Loan is being made; 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. 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 PRIMA FACIE 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.
1.5. PRINCIPAL REPAYMENT OF TERM LOANS. The Borrower shall repay
principal of the Term Loans in 36 equal consecutive monthly installments,
commencing on November 1, 1999 and continuing on the first day of each month
thereafter. Each such monthly installment of principal shall be in an amount
equal to 1/36th of the aggregate principal amounts of the Term Loans
outstanding at the close of business on October 31, 1999. In any event, the
then outstanding principal balance of all Term Loans and all interest then
accrued but unpaid thereon shall be due and payable in full on October 1,
2002. 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 which
constitutes a Floating Rate Term Loan; provided that on the date of such
prepayment the Borrower pays all interest under the Term Note accrued on such
Floating Rate Term Loan (or the portion thereof so prepaid) but unpaid to the
date of payment. Subject to Section 1.8, the Borrower may prepay all or any
portion of any Term Loan which is a COF Loan; provided that (i) the Borrower
gives the Bank not less than two (2) Business Days' prior written notice of
its intent so to prepay, (ii) the Borrower pays all interest on each Term
Loan (or portion thereof) so prepaid accrued to the date of prepayment, (iii)
any voluntary prepayment with respect to any such COF Loan (if less than the
then outstanding principal balance of such COF Loan) shall be in a principal
amount of at least $100,000 and (iv) the Borrower shall forthwith pay all
amounts owing to the Bank pursuant to the provisions of Section 1.8. 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
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order of normal maturity. Amounts repaid or prepaid with respect to the Term
Loans are not available for reborrowing.
1.6. INTEREST RATE FOR TERM LOANS. Except as otherwise provided below in
this Section 1.6 or in the last sentence of Section 1.7, interest on the Term
Loans will be payable at a rate per annum (the "Floating Rate") which shall
at all times be equal to the sum of (i) three-quarters of one percent (0.75%)
per annum PLUS (ii) the Prime Rate as in effect from time to time, with a
change in such rate of interest to become effective on each day when a change
in the Prime Rate becomes effective.
Subject to the provisions of this Section 1.6, the Borrower may borrow
any Term Loan as a COF Loan or may convert to a COF Loan all or any portion
of any COF Loan then outstanding as a Floating Rate Term Loan; provided that
in no event will the amount so borrowed as a COF Loan on any one date be less
than $250,000 nor will the amount so converted to a COF Loan on any one date
be less than $250,000. If the Borrower desires such a borrowing of a COF Loan
or such a conversion of all or any portion of a Floating Rate Term Loan to a
COF Loan, the Borrower will notify the Bank of same not less than two
Business Days prior to the proposed borrowing or conversion and will request
that the Bank offer with respect to the relevant Term Loan (or portion
thereof) a rate of interest which shall be fixed (subject to adjustment as
provided in this letter agreement) for the period (a "Fixed Rate Period")
commencing on the date of such borrowing or conversion and ending on the
final maturity date of the relevant Term Loan (or such portion proposed to be
so converted, as the case may be). Following such request for a fixed rate,
the Bank will endeavor to offer a proposed COF Interest Rate for the relevant
Term Loan to be borrowed or converted (or such portion proposed to be so
converted, as the case may be) at a rate determined as provided below and
under conditions determined by the Bank, in its sole discretion. The Borrower
may elect to accept such offer in the manner and within the time period
specified in such offer. Any such election shall be irrevocable on the part
of the Borrower and any failure by the Borrower to borrow a Term Loan after
electing a fixed rate will be deemed a prepayment in full of such Term Loan
for the purposes of Section 1.8. Upon such election, the interest rate payable
with respect to the relevant Term Loan (or such portion proposed to be so
converted as the case may be) shall be fixed (subject to adjustment as
provided in this letter agreement) for the relevant Fixed Rate Period and at
the rate communicated by the Bank for this purpose as its proposed COF
Interest Rate. Any proposed COF Interest Rate offered under this paragraph
with respect to any Term Loan (or any such portion thereof) will be a rate
per annum equal to the sum of (i) 3.5% per annum PLUS (ii) the COF Rate for
the applicable Fixed Rate Period (expressed as a per annum rate); provided,
however that the COF Interest Rate shall in no event exceed the maximum rate
permitted by applicable law.
The Borrower shall not have any claim against the Bank with respect to
computation of any proposed COF Interest Rate. If the Borrower is dissatisfied
with any proposed COF Interest Rate, the Borrower's sole remedy with respect
thereto shall be not to accept such proposed COF Interest Rate within the
applicable time period, and thus to cause interest on the relevant Term Loan to
continue to be payable at the Floating Rate. Notwithstanding the foregoing
provisions hereof, the Bank need not offer a proposed COF Interest Rate for any
period of time with respect to which the Bank, in its reasonable discretion,
determines that there are no recognized sources of
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funding available to it for such time period or principal amount or that the
cost of funds with respect thereto would be unreasonably high or if there then
exists any Default or Event of Default.
1.7. INTEREST PAYMENTS ON TERM LOANS. The Borrower will pay interest on the
principal amount of the Term Loans outstanding from time to time, from the date
hereof until payment of the Term Loans and the Term Note in full and the
termination of this letter agreement. Interest on all Term Loans will be payable
monthly in arrears on the first day of each month. In any event, interest on the
Term Loans shall also be paid on the date of payment of the Term Loans in full.
Interest on Floating Rate Term Loans shall be payable at the Floating Rate. The
rate of interest payable on any COF Loan will be the COF Interest Rate
applicable thereto. In any event, overdue principal of any Term Loan and, to the
extent permitted by law, overdue interest on any Term Loan shall bear interest
at a rate per annum which at all times shall be equal to the sum of (i) four
(4%) percent per annum PLUS (ii) the Prime Rate, compounded monthly and payable
on demand.
1.8. PREPAYMENT OF COF LOANS. The following provisions of this Section 1.8
shall be effective only with respect to COF Loans: As to any COF Loan, at
any time when the Bank in its reasonable discretion determines that current
market conditions can accommodate a prepayment request, the Borrower shall
have the right (subject to the payment of the yield maintenance fee described
below) to prepay such COF Loan. If, due to acceleration of the Term Note or
due to voluntary or mandatory repayment or prepayment or due to any other
reason, the Bank receives payment of all or any portion of any installment of
a COF Loan prior to the regularly scheduled due date for such installment,
the Borrower shall, upon demand and receipt of a Bank Certificate from the
Bank with respect thereto, pay forthwith to the Bank a yield maintenance fee
in an amount computed as follows: The current rate for United States Treasury
securities (bills on a discounted basis shall be converted to a bond
equivalent) with a maturity date closest to the regularly scheduled due date
of the COF Loan installment (or portion thereof) so prepaid shall be
subtracted from the "cost of funds" component of the fixed rate for the
relevant COF Loan. If the result is zero or a negative number, there shall be
no yield maintenance fee. If the result is a positive number, then the
resulting percentage shall be multiplied by the amount of the principal
balance being prepaid. The resulting amount shall be divided by 360 and
multiplied by the number of days remaining until the regularly scheduled due
date of the COF Loan installment (or portion thereof) so prepaid. Said amount
shall be reduced to present value calculated by using the number of days
remaining until the regularly scheduled due date of the COF Loan installment
(or portion thereof) so prepaid and by using the above-referenced United
States Treasury security rate as the discount rate. The resulting amount
shall be the yield maintenance fee due to the Bank upon prepayment of the
applicable COF Loan. Any acceleration of a COF Loan due to an Event of
Default will give rise to a yield maintenance fee calculated with the respect
to such COF Loan on the date of such acceleration in the same manner as
though the Borrower had exercised a right of prepayment at that date, such
yield maintenance fee being due and payable at that date.
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1.9. INCREASED COSTS; CAPITAL ADEQUACY.
(i) If the adoption, effectiveness or phase-in, after the date hereof,
of any applicable law, rule or regulation, or any change therein, or
any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by the
Bank with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency:
(A) shall subject the Bank to any Imposition or other charge with
respect to any COF Loan or the Bank's agreement to make COF
Loans, or shall change the basis of taxation of payments to the
Bank of the principal of or interest on any COF Loan or any other
amounts due under this letter agreement in respect of COF Loans
or the Bank's agreement to make or maintain COF Loans (except for
changes in the rate of tax on the over-all net income of the
Bank); or
(B) shall impose, modify or deem applicable any reserve, special
deposit, deposit insurance or similar requirement (including,
without limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System), against assets of,
deposits with or for the account of, or credit extended by, the
Bank or shall impose on the Bank any other condition affecting
any COF Loans or the Bank's agreement to make COF Loans
and the result of any of the foregoing is to increase the cost to the
Bank of making or maintaining any COF Loan or to reduce the amount of
any sum received or receivable by the Bank under this letter agreement
and/or the Term Note and/or with respect to any COF Loan by an amount
deemed by the Bank to be material, then, upon demand by the Bank and
receipt of a Bank Certificate from the Bank with respect thereto, the
Borrower shall pay to the Bank such additional amount or amounts as
the Bank certifies to be necessary to compensate the Bank reasonably
for such increased cost or reduction in amount received or receivable.
(ii) If the Bank shall have determined that the adoption,
effectiveness 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 after the date hereof 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 any Loan, any letter of credit and/or any
Foreign Exchange Contract or with respect to any of its agreements
hereunder to make Loans (all such Loans, whether or not subject to any
COF
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Interest Rate), issue letters of credit and issue Foreign Exchange
Contracts 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, effectiveness, phase-in,
change or compliance and assuming that the Bank's capital was then
fully utilized) by any amount deemed by the Bank to be material: (A)
the Bank shall promptly after its determination of such occurrence
deliver a Bank Certificate with respect thereto to the Borrower; and
(B) the Borrower shall pay to the Bank as an additional fee from time
to time on demand such amount as the Bank certifies to be the amount
that will reasonably compensate for such reduction.
(iii) A Bank Certificate of the Bank claiming compensation under this
Section 1.9 shall be deemed PRIMA FACIE correct. Such certificate
shall set forth the nature of the occurrence giving rise to such
claim for compensation, the additional amount or amounts to be paid
to the Bank hereunder and the method by which such amounts are
determined. In determining any such amount, the Bank may use any
reasonable averaging and attribution methods.
(iv) 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 Bank Certificate in a timely manner shall in any
way reduce any obligation of the Borrower to the Bank under this
Section 1.9.
1.10. ADVANCES AND PAYMENTS. The proceeds of all Loans shall be credited
by the Bank to a general deposit account maintained by the Borrower with the
Bank. The proceeds of each Revolving Loan will be used by the Borrower solely
for (i) working capital purposes and (ii) to fund investments in, or to form
partnerships with, suppliers or other businesses complementary with the
Borrower's business; provided that (1) all such investments and partnerships
shall be subject to the restrictions contained in Sections 4.6 and 4.7 below,
and (2) the aggregate amount advanced pursuant to this clause (ii) shall not
exceed $500,000 without the prior written consent of the Bank, which consent
shall not be unreasonably withheld. The proceeds of each Term Loan will be
used by the Borrower solely to pay or reimburse acquisition costs of
Qualifying Equipment.
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 when same
are due, from time to time, under this letter agreement and/or any Note and/or
with respect to any letter of credit; and will thereafter notify the Borrower of
the amount so charged. The failure of the Bank so to charge any account or to
give any such notice shall not affect the obligation of the Borrower to pay
interest, principal or other sums as provided herein or in any Note or with
respect to any letter of credit.
Whenever any payment to be made to the Bank hereunder or under any Note or
with respect to any letter of credit shall be stated to be due on a day which is
not a Business Day, such
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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 any Note and/or with respect to any letter of credit shall be made
net of any impositions or taxes and without deduction, set-off or counterclaim,
notwithstanding any claim which the Borrower may now or at any time hereafter
have against the Bank. All payments of interest, principal and any other sum
payable hereunder and/or under any Note and/or with respect to any letter of
credit shall be made to the Bank, in lawful money of the United States in
immediately available funds, at its office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ or at 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, any Note and/or any of the other Loan Documents
and/or with respect to any letter of credit, next to interest then accrued on
account of any Loans or letter of credit reimbursement obligations and only
thereafter to principal of the Loans and letter of credit reimbursement
obligations, being applied against the Loans and/or such obligations in such
order as the Borrower may designate (and, failing such designation, being
applied first against the letter of credit reimbursement obligations, next
against the Revolving Loans and thereafter against installments of the Term
Loans in inverse order of normal maturity). All interest and fees payable
hereunder and/or under any Note shall be calculated on the basis of a 360-day
year for the actual number of days elapsed.
1.11. LETTERS OF CREDIT. At the Borrower's request, the Bank may, from time
to time, in its reasonable discretion issue one or more letters of credit for
the account of the Borrower; provided that at the time of such issuance and
after giving effect thereto the Aggregate Revolving Bank Liabilities will in no
event exceed the lesser of (i) $3,500,000 or (ii) the then effective Borrowing
Base. Any such letter of credit will be issued for such fee and upon such terms
and conditions as may be agreed to by the Bank and the Borrower at the time of
issuance. The Borrower hereby authorizes the Bank, without further request from
the Borrower, to cause the Borrower's liability to the Bank for reimbursement of
funds drawn under any such letter of credit to be repaid from the proceeds of a
Revolving Loan to be made hereunder. The Borrower hereby irrevocably requests
that such Revolving Loans be made.
1.12. FOREIGN EXCHANGE CONTRACTS. Subject to the terms and conditions
hereof, the Bank will from time to time, at the Borrower's request, provide to
the Borrower one or more forward contracts ("Foreign Exchange Contracts") for
the purchase by the Borrower of foreign currency from the Bank; provided that
(i) each such Foreign Exchange Contract will be at such pricing as the Bank and
the Borrower may agree at the time of execution of such Foreign Exchange
Contract, (ii) the documentation for each such Foreign Exchange Contract will be
in such form as is then customarily used by the Bank for transactions of this
type, (iii) the Foreign Exchange Contracts will be used by the Borrower to
minimize its exposure to the fluctuation of the value of those foreign
currencies in which payments are expected to be made to the Borrower by
customers or in which the Borrower is required to make payments to suppliers,
(iv) the United States Dollar equivalent of all amounts subject to the Foreign
Exchange Contracts will not exceed $2,000,000 in the aggregate, with a maximum
two-day settlement requirement of $300,000, and (v) no such Foreign Exchange
Contract will provide
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for delivery of currency after that date which is the earlier of (a) November
1, 1999 or (b) 90 days after the date of issuance of such Foreign Exchange
Contract. The Bank agrees that the Borrower may make payment for any Foreign
Exchange Contract by means of an advance under this letter agreement, all of
which advances will be deemed Revolving Loans for all purposes of this letter
agreement, will be subject to the terms of this letter agreement (including,
without limitation, the limitations set forth in the first sentence of
Section 1.2 and the conditions to advance set forth in Section 1.13 below) and
will be evidenced by the Revolving Note; provided, however, that any
Revolving Loan made pursuant to this sentence will be repaid by the Borrower
promptly following the settlement date or earlier termination of the Foreign
Exchange Contract to which same relates.
1.13. CONDITIONS TO ADVANCE. Prior to the making of the initial Loan
hereunder or the issuance of any letter of credit hereunder or the issuance
of any Foreign Exchange Contract, the Borrower shall deliver to the Bank duly
executed copies of this letter agreement, the Security Agreement, the
Intellectual Property Security Agreements, the Revolving Note, 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 reasonably
satisfactory in form and substance to the Bank and its counsel.
Without limiting the foregoing, any Loan or letter of credit issuance or
the issuance of any Foreign Exchange Contract (including the initial Loan or
letter of credit issuance or Foreign Exchange Contract issuance) is subject
to the further conditions precedent that on the date on which such Loan is
made or such letter of credit or Foreign Exchange Contract is issued (and
after giving effect thereto):
(a) All statements, representations and warranties of the Borrower made
in this letter agreement and/or the Security Agreement shall continue to be
correct in all material respects as of the date of such Loan or issuance of
such letter of credit or Foreign Exchange Contract, as the case may be.
(b) All covenants and agreements of the Borrower contained herein and/or
in any of the other Loan Documents shall have been complied with in all
material respects on and as of the date of such Loan or issuance of such
letter of credit or Foreign Exchange Contract, as the case may be.
(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 Loan or for the issuance of a
letter of credit or a Foreign Exchange Contract, and each acceptance by the
Borrower of the proceeds of any Loan or
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delivery of a letter of credit or a Foreign Exchange Contract, will be deemed
a representation and warranty by the Borrower that at the date of such Loan
or letter of credit issuance or Foreign Exchange Contract issuance, as the
case may be, and after giving effect thereto all of the conditions set forth
in the foregoing clauses (a)-(d) of this Section 1.13 will be satisfied. Each
request for a Revolving Loan or letter of credit issuance will be accompanied
by a borrowing base certificate on a form reasonably satisfactory to the
Bank, executed by the chief financial officer of the Borrower, unless such a
certificate shall have been previously furnished setting forth the Borrowing
Base as at a date not more than 30 days prior to the date of the requested
borrowing or the requested letter of credit issuance, as the case may be.
II. REPRESENTATIONS AND WARRANTIES
2.1. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter
into this letter agreement and to make Loans hereunder and/or issue letters of
credit hereunder and/or issue Foreign Exchange Contracts, 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 Delaware. The Borrower has full corporate power
to own its property and conduct its business as now conducted and as
contemplated to be conducted, to grant the security interests contemplated by
the Security Agreement and the Intellectual Property 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 Massachusetts
and in each other jurisdiction in which the Borrower maintains any facility,
sales office or warehouse 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, as at the date of this letter agreement, 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, no Person was known to own, of
record or beneficially, 5% or more of any class of outstanding capital stock of
the Borrower, except as set forth on item 2.1(b) of the attached Disclosure
Schedule. The Borrower owns 100% of the outstanding capital stock of each
Subsidiary.
(c) The execution, delivery and performance by the Borrower of this letter
agreement and each of the other Loan Documents have been duly authorized by all
necessary corporate and other action and do not and will not:
(i) violate any provision of, or require any filings (other than
filings under the Uniform Commercial Code), registration, consent or
approval under, any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to the Borrower;
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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 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 Material
Subsidiary of the Borrower before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
could materially 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 other instrument provided for or
contemplated by this letter agreement or any of the other Loan Documents or any
action taken or to be taken in connection with the transactions contemplated
hereby or thereby or which in any single case or in the aggregate might result
in any material adverse change in the business, prospects, condition, affairs or
operations of the Borrower or any such Material Subsidiary.
(f) Neither the Borrower nor any of its Material Subsidiaries is in
violation of any term of its charter or by-laws as now in effect. Neither the
Borrower nor any Material Subsidiary of the Borrower is in material violation of
any term of any mortgage, indenture or judgment, decree or order, or any other
instrument, contract or agreement to which it is a party or by which any of its
property is bound.
(g) Except as disclosed on item 2.1(g) of the attached Disclosure Schedule,
the Borrower has filed (and has caused each Material Subsidiary of the Borrower
to file) all federal, foreign, state and local tax returns, reports and
estimates required to be filed by the Borrower or by any such Material
Subsidiary. Except as disclosed on said item 2.1(g), all such filed returns,
reports and estimates are proper and accurate and the Borrower (or the Material
Subsidiary concerned, as the case may be) 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. Except as
disclosed on said item 2.1(g), no deficiencies for any tax, assessment or
governmental charge have been asserted or assessed, and the Borrower knows of no
material tax liability or basis therefor.
(h) The Borrower is in compliance with (and each Material Subsidiary of the
Borrower is in compliance with) all requirements of law, federal, state and
local, and all
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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 which could (singly or in the
aggregate with all other such failures) have a material adverse effect upon the
assets, business, financial condition or prospects of the Borrower or any such
Material Subsidiary. Without limiting the foregoing, the Borrower and each such
Material Subsidiary has all the franchises, licenses, leases, permits,
certificates and authorizations needed for the conduct of its business and the
use of its properties and all premises occupied by it, as now conducted, owned
and used and as planned to be conducted, owned and used.
(i) The audited financial statements of the Borrower as at March 31, 1998
and the management-generated financial statements of the Borrower as at
September 30, 1998, each heretofore delivered to the Bank, fairly present the
financial condition of the Borrower as at the date thereof and for the period
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. Neither the Borrower nor any of
the Borrower's Subsidiaries has any liability, contingent or otherwise, not
disclosed in the aforesaid March 31, 1998 financial statements or in the notes
thereto that could materially affect the financial condition of the Borrower.
Since March 31, 1998, except as set forth on item 2.1(i) of the attached
Disclosure Schedule, there has been no material adverse development in the
business or condition of the Borrower, and the Borrower has not entered into any
transaction other than in the ordinary course.
(j) The principal place of business and chief executive offices of the
Borrower are located at ▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. All of the books and
records of the Borrower are located at said address. Except as described on item
2.1(j) of the attached Disclosure Schedule, no assets of the Borrower are
located at any other address. Said item 2.1(j) of the attached Disclosure
Schedule sets forth the names and addresses of all record owners of each of the
premises where any material amount of Collateral is located.
(k) The Borrower owns or has a valid right to use all of the patents,
licenses, copyrights, trademarks, trade names and franchises ("Intellectual
Property") now being used or necessary to conduct its business, all of which are
described on item 2.1(k) of the attached Disclosure Schedule. None of the
Intellectual Property owned by the Borrower is represented by a registered
copyright, trademark, patent or other federal or state registration, except as
shown on said item 2.1(k). To the best knowledge of the Borrower, 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 or any
of its Material Subsidiaries is subject to any agreement in favor of anyone
other than the Borrower (or such Material Subsidiary, as the case may be) which
limits or restricts that person's right to engage in the type of business
activity conducted or proposed to be conducted by the Borrower (or such Material
Subsidiary, as the case may be) or which grants to anyone other than the
Borrower (or such Material Subsidiary, as the case may be) any rights in any
inventions or other
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ideas susceptible to legal protection developed or conceived by any such officer
or key employee.
(m) Neither the Borrower nor any of its Material Subsidiaries is 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 or any such
Material Subsidiary.
(n) The Borrower has reviewed the financial reporting, manufacturing,
testing and labeling equipment and management information system software which
it uses in its business for "Year 2000" compliance and has determined that such
software will continue to function in the manner intended without interruption
of service or other difficulty resulting from the "Year 2000 problem". The
Borrower will, at the request of the Bank, provide such reports and such other
information as the Bank may reasonably request in order to evidence such Year
2000 compliance.
III. AFFIRMATIVE COVENANTS AND REPORTING REQUIREMENTS
Without limitation of any covenants and agreements contained in the
Security Agreement or elsewhere, the Borrower agrees that so long as the
financing arrangements contemplated hereby are in effect or any Revolving Loan
or any Term Loan or any of the other Obligations shall be outstanding or any
letter of credit issued hereunder or any Foreign Exchange Contract issued
hereunder shall be outstanding:
3.1. LEGAL EXISTENCE; QUALIFICATION; COMPLIANCE. The Borrower will
maintain (and will cause each Material Subsidiary of the Borrower to
maintain) its corporate existence and good standing in the jurisdiction of
its incorporation. The Borrower will remain qualified to do business and in
good standing in Massachusetts. The Borrower will qualify to do business and
remain qualified and in good standing (and will cause each Material
Subsidiary of the Borrower to qualify and remain qualified and in good
standing) in each other jurisdiction where the Borrower or such Material
Subsidiary, as the case may be, maintains any plant, sales office, warehouse
or other facility and in each other jurisdiction in which the failure so to
qualify could (singly or in the aggregate with all other such failures) have
a material adverse effect on the financial condition, business or prospects
of the Borrower or any such Material Subsidiary. The Borrower will comply
(and will cause each Material Subsidiary of the Borrower to comply) with its
charter documents and by-laws. The Borrower will comply with (and will cause
each Material Subsidiary of the Borrower to comply with) all applicable laws,
rules and regulations (including, without limitation, ERISA) other than (i)
laws, rules or regulations the validity or applicability of which the
Borrower or such Material Subsidiary shall be contesting in good faith by
proceedings which serve as a matter of law to stay the enforcement thereof
and (ii) those laws, rules and regulations the failure to comply with any of
which could not (singly or in the aggregate) have a material adverse effect
on the financial condition, business or prospects of the Borrower or any such
Material Subsidiary. In addition, and without limitation of the foregoing,
the Borrower will comply (and will cause each Subsidiary of the Borrower,
whether or not a
-13-
Material Subsidiary, to comply) with all applicable laws, rules and regulations
relating to environmental protection.
3.2. MAINTENANCE OF PROPERTY; INSURANCE. The Borrower will maintain and
preserve (and will cause each Material Subsidiary of the Borrower to maintain
and preserve) all of its properties 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 (and will cause each Material Subsidiary of
the Borrower to 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 (or such Material Subsidiary, as
the case may be) in similar locales.
3.3. PAYMENT OF TAXES AND CHARGES. The Borrower will pay and discharge
(and will cause each Material 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 Material Subsidiary, except any of the foregoing which is being
contested in good faith and by appropriate proceedings which serve as a
matter of law to stay the enforcement thereof and for which the Borrower has
established and is maintaining adequate reserves. The Borrower will pay, and
will cause each of its Material Subsidiaries to pay, in a timely manner, all
lease obligations, all material trade debt, material purchase money
obligations, equipment lease obligations and all of its other material
Indebtedness. The Borrower will perform and fulfill (and will cause each of
its Material Subsidiaries to perform and fulfill) all material covenants and
agreements under any leases of real estate, agreements relating to material
purchase money debt, equipment leases and other material contracts. The
Borrower will (and will cause each of its Material Subsidiaries to) 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 (and will cause each of its
Material Subsidiaries to maintain) its principal depository and operating
accounts with the Bank. Notwithstanding the immediately preceding sentence, the
Borrower and its Subsidiaries may maintain accounts with other banks; provided
that the total amount on deposit with such other banks will at no time exceed
25% of the aggregate amount then held by the Borrower and its Subsidiaries in
all bank accounts.
3.5. CONDUCT OF BUSINESS. The Borrower will conduct (and will cause each of
its Material Subsidiaries to conduct), in the ordinary course, the business in
which it is presently engaged or lines of business reasonably related thereto.
The Borrower will not, without the prior
-14-
written consent of the Bank (which consent shall not be unreasonably withheld),
directly or indirectly (itself or through any Subsidiary), enter into any other
lines of business, businesses or ventures not reasonably related to the business
conducted at the date hereof.
3.6. REPORTING REQUIREMENTS. The Borrower will furnish to the Bank:
(i) Within 90 days after the end of each fiscal year of the Borrower,
a copy of the annual audit report for such fiscal year for the Borrower,
including therein consolidated and consolidating balance sheets of the
Borrower and Subsidiaries as at the end of such fiscal year and related
consolidated and consolidating statements of income, stockholders' equity
and cash flow for the fiscal year then ended. The annual consolidated
financial statements shall be certified by 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
its Subsidiaries and related consolidated and consolidating statements of
income and cash flow, unaudited but prepared in accordance with generally
accepted accounting principles fairly presenting the financial condition of
the Borrower as at the dates thereof and for the periods covered thereby
(except that such quarterly statements need not contain footnotes) and
certified as such (subject to normal year-end audit adjustments, which
shall not be material) by the chief financial officer or Vice President of
Finance of the Borrower, such balance sheets to be as at the end of each
such fiscal quarter and such statements of income and cash flow to be for
such fiscal quarter and for the fiscal year to date.
(iii) Within 30 days after the end of each month, consolidated and
consolidating balance sheets of the Borrower and its Subsidiaries (domestic
operations only) and related consolidated and consolidating statements of
income, unaudited but prepared in accordance with generally accepted
accounting principles fairly presenting the financial condition of the
Borrower as at the dates thereof and for the periods covered thereby
(except that such monthly statements need not contain footnotes) and
certified as such (subject to normal year-end audit adjustments, which
shall not be material) by the chief financial officer or Vice President of
Finance of the Borrower, such balance sheets to be as at the end of each
such month and such statements of income to be for such month and for the
fiscal year to date.
(iv) At the time of delivery of each annual, quarterly or monthly
statement of the Borrower, a certificate executed by the chief financial
officer or Vice President of Finance 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 such certificate given as at the end
of any fiscal
-15-
quarter shall also set forth the calculations necessary to evidence
compliance with Sections 3.7-3.10 (to the extent then applicable).
(v) Monthly, within 15 days after the end of each month, (A) an aging
report in form satisfactory to the Bank covering all Receivables of the
Borrower outstanding as at the end of such month and (B) a certificate of
the chief financial officer or Vice President of Finance of the Borrower
setting forth the Borrowing Base as at the end of such month, all in form
reasonably satisfactory to the Bank. Notwithstanding the provisions of the
immediately preceding sentence, the Borrower may omit the delivery of the
aforesaid aging report and Borrowing Base certificate as at the end of any
month if there are no Revolving Loans outstanding or letters of credit
issued for the account of the Borrower outstanding at the end of such
month; provided that if the Borrower omits such delivery as at the end of
any month the Borrower will provide to the Bank a current Receivables aging
and Borrowing Base certificate prior to requesting any Revolving Loan or
letter of credit issuance.
(vi) 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
"management letter" prepared by such accountants.
(vii) Should any securities of the Borrower be publicly traded or if
registration of such securities is being sought, the Borrower will furnish
to the Bank, promptly upon same becoming available, one copy of each
financial statement, report, notice or proxy statement sent by the Borrower
to stockholders or the holders of debt securities generally, and of each
regular or periodic report and any registration statement, prospectus or
listing application filed by the Borrower with the National Association of
Securities Dealers, any securities exchange or the Securities and Exchange
Commission or any successor agency.
(viii) As soon as possible and in any event within five days after the
Borrower has knowledge or notice of the occurrence of any Event of Default
or any event which, with the giving of notice or passage of time or both,
would constitute an Event of Default, the statement of the Borrower setting
forth details of such Event of Default or event and the action which the
Borrower proposes to take with respect thereto.
(ix) 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. The
Borrower will also give written notice to the Bank promptly upon the
occurrence of any material adverse development in any then-existing
litigation involving the Borrower or any such Subsidiary.
(x) Promptly upon applying for (or upon any Guarantor applying for),
or being granted (or any Guarantor being granted), a federal or state
registration for any copyright, trademark or
-16-
patent or purchasing any registered copyright, trademark or patent, written
notice to the Bank describing same, together with all such documents as may
be required in order to give the Bank a fully perfected first priority
security interest in each such copyright, trademark or patent.
(xi) Promptly after the Borrower has knowledge thereof, written notice
of any development or circumstance which may reasonably be expected to have
a material adverse effect on the Borrower or its business, properties,
assets, Material Subsidiaries or condition, financial or otherwise.
(xii) Promptly upon request, such other information respecting the
financial condition, operations, Receivables, inventory, machinery or
equipment of the Borrower or any Subsidiary as the Bank may from time to
time reasonably request.
3.7. DEBT TO WORTH. The Borrower will maintain as at the end of each fiscal
quarter of the Borrower (commencing with September 30, 1998) on a consolidated
basis a Leverage Ratio of not more than 1.0 to 1. As used herein, the "Leverage
Ratio", as determined at any date, means the ratio of (x) the total Indebtedness
of the Borrower and/or any of its Subsidiaries, taken on a consolidated basis,
outstanding at such date to (y) the then consolidated Tangible Net Worth of the
Borrower and Subsidiaries.
3.8. LIQUIDITY. The Borrower will maintain as at the end of each fiscal
quarter of the Borrower (commencing September 30, 1998) a ratio of (x) Net Quick
Assets to (y) Adjusted Current Liabilities, which ratio shall be not less than
1.25 to 1.
3.9. PROFITABILITY. The Borrower will achieve annual consolidated Net
Income of at least $1.00 for its fiscal year ending March 31, 1999. Moreover,
the Borrower will achieve consolidated Net Income of not less than $1.00 for
each 12-month period ending as at the end of any fiscal quarter of the Borrower
(commencing with June 30, 1999).
3.10. DEBT SERVICE COVERAGE RATIO. The Borrower will maintain as at the end
of each fiscal quarter of the Borrower (commencing with its results as at March
31, 1999) on a consolidated basis a Debt Service Coverage Ratio of not less than
1.2 to 1. As used herein, "Debt Service Coverage Ratio", as determined as at any
date, means the ratio of (x) Adjusted EBITDA of the Borrower and Subsidiaries
for the 12-month period ending at such date to (y) the sum of (i) all principal
of Indebtedness (including, without limitation, the principal component of any
capitalized leases) paid or required to be paid by the Borrower and/or any of
its Subsidiaries during such 12-month period to the extent that, on the date
when paid or required to be paid, such principal constituted current maturities
of long-term debt PLUS (ii) all interest on Indebtedness (including, without
limitation, the interest component of any capitalized leases) paid or required
to pay or accrued by the Borrower and/or any of its Subsidiaries during such
12-month period. As used herein, "interest" includes all fees and other charges
payable with respect to any letters of credit now or hereafter issued by any
Person for the account of the Borrower and/or any of its Subsidiaries. As used
herein, "Adjusted EBITDA" for any fiscal period means the result of (x) the
consolidated EBITDA of the Borrower and Subsidiaries for such fiscal period
MINUS (y) all state and federal taxes actually paid by the Borrower and/or any
of its Subsidiaries during such
-17-
fiscal period. Notwithstanding the foregoing, the Borrower need not comply
with this Section 3.10 at any time when no Term Loan is outstanding and the
within-described facility for Term Loans is no longer in effect.
3.11. BOOKS AND RECORDS. The Borrower will maintain (and cause each of
its Material Subsidiaries to maintain) complete and accurate books, records
and accounts which will at all times accurately and fairly reflect all of its
transactions in accordance with generally accepted accounting principles
consistently applied. The Borrower will, at any reasonable time and from time
to time upon reasonable notice and during normal business hours (and at any
time and without any necessity for notice following the occurrence and during
the continuance 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 Material Subsidiaries, and to discuss its affairs,
finances and accounts with its managers, officers or directors and
independent accountants, all of whom are hereby authorized and directed to
cooperate with the Bank in carrying out the intent of this Section 3.11. The
Bank agrees that it will not exercise its rights of examination and
visitation under the immediately preceding sentence more than twice in any
given fiscal year unless a Default or Event of Default shall have occurred
and be then continuing. 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 Loan the Borrower
will obtain, and will thereafter maintain in effect at all times, waivers from
the owners of all premises in which any material amount of Collateral is
located, such waivers to be in form and substance satisfactory to the Bank.
3.13. MATERIAL SUBSIDIARIES. If the Borrower acquires a Material Subsidiary
or if any Subsidiary of the Borrower becomes a Material Subsidiary, the Borrower
will promptly notify the Bank of same. Promptly following the Material
Subsidiary Date for any such Subsidiary, the Borrower will obtain from the
relevant Material Subsidiary (if it is a Domestic Material Subsidiary) and
deliver to the Bank (i) a guaranty by such Domestic Material Subsidiary of the
obligations of the Borrower under this letter agreement, the Notes and the other
Loan Documents, (ii) security agreements granting to the Bank a security
interest in all assets of such Domestic Material Subsidiary, together with all
filings needed to perfect such security interest and appropriate landlord's
waivers, (iii) certificates of appropriate governmental authorities as to the
legal existence, qualification and good standing of such Domestic Material
Subsidiary, (iv) a Secretary's Certificate as to such Domestic Material
Subsidiary's charter documents and by-laws, the incumbency and signatures of
such Domestic Material Subsidiary's officers, and the resolutions of such
Domestic Material Subsidiary's Board of Directors (and, if necessary,
stockholders) approving the aforesaid guaranty and security agreements, and (v)
an opinion of such Domestic Material Subsidiary's counsel as to the Domestic
Material Subsidiary's legal existence, qualification and good standing, such
Domestic Material Subsidiary's legal capacity, due corporate approval of the
guaranty and the security agreements, enforceability of the guaranty and the
security agreements in accordance with their respective terms, no need for third
-18-
party consents, no breach of other agreements, orders or decrees or of
applicable laws, no litigation, perfection of security interest and other
matters, all of the documents described in clauses (i)-(v) of this sentence to
be satisfactory in form and substance to the Bank. As used herein, a "Domestic
Material Subsidiary" is any Material Subsidiary which (i) is incorporated under
the laws of any state or other political subdivision of the United States, (ii)
has its chief executive offices within the United States, (iii) has a principal
place of business within the United States, and/or (iv) has any material amount
of assets within the United States.
IV. NEGATIVE COVENANTS
Without limitation of any covenants and agreements contained in the
Security Agreement or elsewhere, the Borrower agrees that so long as the
financing arrangements contemplated hereby are in effect or any Revolving Loan
or any Term Loan or any of the other Obligations shall be outstanding or any
letter of credit issued hereunder shall be outstanding or any Foreign Exchange
Contract shall be outstanding:
4.1. INDEBTEDNESS. The Borrower will not create, incur, assume or suffer to
exist any Indebtedness (nor allow any of its Material 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 Notes and any Indebtedness in respect of
letters of credit issued by the Bank;
(ii) Indebtedness of the Borrower or any Material Subsidiary for
taxes, assessments and governmental charges or levies not yet due and
payable;
(iii) unsecured current liabilities of the Borrower or any Material
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 equipment purchased or leased by the Borrower
for use in the Borrower's business, provided that the total of Indebtedness
permitted under this clause (iv) plus presently-existing equipment
financing permitted under clause (v) of this Section 4.1 will not exceed
$500,000 in the aggregate outstanding at any one time, unless the Bank
consents in writing to a higher amount, such consent not to be unreasonably
withheld;
(v) other Indebtedness existing at the date hereof, but only to the
extent set forth on Item 4.1 of the attached Disclosure Schedule; and
(vi) any guaranties or other contingent liabilities expressly
permitted pursuant to Section 4.3.
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4.2. LIENS. The Borrower will not create, incur, assume or suffer to exist
(nor allow any of its Material 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:
(i) Liens for taxes, assessments or governmental charges or levies on
property of the Borrower or any of its Material Subsidiaries if the same
shall not at the time be delinquent or thereafter can be paid without
interest or penalty;
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar Liens arising in the ordinary course of
business for sums not yet due or which are being contested in good faith
and by appropriate proceedings which serve as a matter of law to stay the
enforcement thereof and as to which adequate reserves have been made;
(iii) pledges or deposits under workmen's compensation laws,
unemployment insurance, social security, retirement benefits or similar
legislation;
(iv) Liens in favor of the Bank;
(v) Liens in favor of equipment vendors and/or lessors securing
purchase money Indebtedness to the extent permitted by clause (iv) of
Section 4.1; provided that no such Lien will extend to any property of the
Borrower or any Material Subsidiary 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.
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 Material 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) currently
existing guaranties 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 (which consent shall not be unreasonably withheld), 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;
provided, however, that the Borrower may, without being deemed to be in
violation of this Section 4.4, issue and repurchase its securities,
including, without limitation, the adoption of shareholder rights plans,
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stock splits and reverse stock splits and stock repurchases so long as at the
time of any such action and after giving effect thereto (1) no Default or Event
of Default then exists or would result therefrom and (2) the total cash
expenditures for purposes referred to in this PROVISO will not, without the
prior written consent of the Bank (which consent shall not be unreasonably
withheld), exceed (i) $2,000,000 in the aggregate during the term of this letter
agreement for stock repurchases (such stock repurchases to be permitted if and
only if at the time of each such stock repurchase and after giving effect
thereto the Borrower has a Net Cash Balance (defined below) of at least
$5,000,000) nor (ii) $500,000 for all other purposes during the term of this
letter agreement. As determined at any time, the Borrower's "Net Cash Balance"
is the result of (i) the Borrower's total cash and cash-equivalents at such
time, MINUS (ii) the aggregate principal amount of Revolving Loans then
outstanding.
4.5. LOANS AND ADVANCES. The Borrower will not make any loans or
advances (and will not permit any of its Subsidiaries to make any loans or
advances) to any Person, including, without limitation, the Borrower's
directors, officers and employees without the prior written consent of the
Bank (such consent not to be unreasonably withheld), except (i) advances to
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
will not exceed, in the aggregate, $200,000 outstanding at any one time; and
(ii) loans to Subsidiaries; provided that the total of (1) all loans made to
Subsidiaries after the date hereof, PLUS (2) all amounts expended for
acquisitions as described in Section 4.7 below, PLUS (3) all other amounts
invested in Subsidiaries after the date hereof will not exceed $250,000.
4.6. INVESTMENTS. The Borrower will not, without the Bank's prior
written consent (which consent will not be unreasonably withheld), invest in,
hold or purchase any stock or securities of any Person (nor will the Borrower
permit any of its Subsidiaries to invest in, purchase or hold any such stock
or securities) except (i) readily marketable direct obligations of, or
obligations guarantied by, the United States of America or any agency
thereof, (ii) other investment grade debt securities, (iii) mutual funds, the
assets of which are primarily invested in items of the kind described in the
foregoing clauses (i) and (ii) of this Section 4.6, (iv) deposits with or
certificates of deposit issued by the Bank and any other obligations of the
Bank or the Bank's parent, (v) deposits with or certificates of deposit
issued by any United States commercial bank having more than $100,000,000 in
capital, (vi) investments in any Subsidiaries now existing or hereafter
created by the Borrower pursuant to Section 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, (vii) stock repurchases expressly permitted
under Section 4.4 above and investments expressly permitted by the second
sentence of Section 1.10 above, and (viii) other existing investments
described in Item 4.6(viii) of the attached Disclosure Schedule.
4.7. SUBSIDIARIES; ACQUISITIONS. The Borrower will not, without the prior
written consent of the Bank (which consent will not be unreasonably withheld),
form or acquire any Subsidiary or make (directly or indirectly) any other
acquisition of the stock of any Person or of all or substantially all of the
assets of any other Person, except as otherwise expressly permitted
-21-
by Section 1.10, Section 4.4 and Section 4.6. The Borrower will not become a
partner in any partnership (and will not permit any Subsidiary to do so) if
the result of such partnership is that any Person other than the Borrower (or
such Subsidiary, as the case may be) has the power to incur any Indebtedness
on behalf of the Borrower (or such Subsidiary, as the case may be) or to
encumber or dispose of any assets of the Borrower (or such Subsidiary, as the
case may be).
4.8. MERGER. The Borrower will not (and will not permit any of its Material
Subsidiaries to) merge or consolidate with any Person or sell, lease, transfer
or otherwise dispose of any material portion of its assets (whether in one or
more transactions), other than sale of inventory in the ordinary course and the
disposal of obsolete or surplus equipment in the ordinary course.
4.9. AFFILIATE TRANSACTIONS. The Borrower will not (and will not permit
any of its Material Subsidiaries to) 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 (or such Material Subsidiary's business, as the case may
be) and upon fair and reasonable terms no less favorable to the Borrower (or
such Material Subsidiary, as the case may be) 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 prohibit the
payment of salary or other similar payments to any officer or director of the
Borrower or any Material Subsidiary 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, nor to prevent payments to any
officer or director in accordance with a duly authorized employee
compensation plan or any severance rights plans which would lead to the
payments upon a change in control of the Borrower, nor to prevent reasonable
increases in amounts payable under any such employee compensation plans
and/or severance rights plans. 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 name or
legal structure, nor will the Borrower move its chief executive offices or
principal place of business from the address described in the first sentence
of Section 2.1(j) above, nor will the Borrower remove any books or records
from such address, nor will the Borrower keep any of its Collateral at any
location other than as described in said Section 2.1(j) 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
-22-
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 satisfactory to the
Bank in order to preserve unimpaired the rights of the Bank and the
obligations of the Borrower hereunder. Without limitation of the foregoing,
the Borrower will not make any change in its current capital structure except
as expressly permitted by Section 4.4 without the prior written consent of
the Bank, such consent not to be unreasonably withheld.
4.11. HAZARDOUS WASTE. Except as provided below, the Borrower will not
dispose of (or permit any Subsidiary to 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, Ch. 21E or any comparable terms in any
comparable statute in effect in any other relevant jurisdiction). The Borrower
shall provide the Bank with written notice of (i) the intended storage or
transport of any hazardous material or oil by the Borrower or any Subsidiary of
the Borrower, (ii) any potential or known release or threat of release of any
hazardous material or oil at or from any site or vessel owned, occupied or
operated by the Borrower or any Subsidiary of the Borrower, and (iii) any
incurrence of any expense or loss by any government or governmental authority in
connection with the assessment, containment or removal of any hazardous material
or oil for which expense or loss the Borrower or any Subsidiary of the Borrower
may be liable. Notwithstanding the foregoing, the Borrower and its Subsidiaries
may use, store and transport, and need not notify the Bank of the use, storage
or transportation of, (x) oil in reasonable quantities, as fuel for heating of
their respective facilities or for vehicles or machinery used in the ordinary
course of their respective businesses and (y) hazardous materials that are
solvents, cleaning agents or other materials used in the ordinary course of the
respective business operations of the Borrower and its Subsidiaries, in
reasonable quantities, as long as in any case the Borrower or the Subsidiary
concerned (as the case may be) has obtained and maintains in effect any
necessary governmental permits, licenses and approvals, complies with all
requirements of applicable federal, state and local law relating to such use,
storage or transportation, follows the protective and safety procedures that a
prudent 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 Loan shall be used directly or
indirectly to purchase or carry any margin security.
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:
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(a) The Borrower shall fail to make any payment of principal of or interest
on the Revolving Note or the Term Note on or before the date when due and such
failure shall continue uncured for two Business Days after such due date; or the
Borrower shall fail to pay when due any amount owed to the Bank with respect to
any letter of credit or any Foreign Exchange Contract now or hereafter issued by
the Bank and such failure shall continue uncured for two Business Days after
such due date; or
(b) Any representation or warranty of the Borrower contained herein shall
at any time prove to have been incorrect in any material respect when made or
any representation or warranty made by the Borrower in connection with any Loan
or any letter of credit or any Foreign Exchange Contract 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, 3.7, 3.8, 3.9 or 3.10
or Article IV; or
(d) The Borrower shall fail to perform or observe any agreement or
obligation under Section 3.6 and such failure shall continue uncured for 10
days; or
(e) 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
(f) 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
(g) Any default shall exist and remain unwaived or uncured with respect to
any Indebtedness of the Borrower or any Material Subsidiary of the Borrower in
excess of $1,000,000 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 $1,000,000 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 then currently permits
the acceleration of the maturity of any such Indebtedness by the holder or
holders thereof; or
(h) The Borrower shall be dissolved, or the Borrower or any Material
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 Material Subsidiary of the Borrower or for a substantial part of
the property of the Borrower or any such Material Subsidiary, or bankruptcy,
reorganization, arrangement, insolvency or similar proceedings shall be
instituted by or against the Borrower or any such Material Subsidiary under the
laws of any jurisdiction (except for an involuntary
-24-
proceeding filed against the Borrower or any Material Subsidiary of the Borrower
which is dismissed within 60 days following the institution thereof); or
(i) Any attachment, execution or similar process relating to a sum in
excess of $50,000 shall be issued or levied against any of the property of the
Borrower or any Material Subsidiary and such attachment, execution or similar
process shall not be paid, stayed, released, vacated or fully bonded within 30
days after its issue or levy; or
(j) Any final uninsured judgment (other than a final judgment in the
litigation disclosed on Item 2.1(e) of the attached Disclosure Schedule) in
excess of $250,000 shall be entered against the Borrower or any Material
Subsidiary of the Borrower by any court of competent jurisdiction and shall
remain unpaid or unstayed for 30 days; 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
the reasonable opinion of the Bank may have a material adverse effect upon the
financial condition of the Borrower or any such Subsidiary; or
(l) The Security Agreement, any Guaranty 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 any event of default shall exist under any Guaranty; or
(m) The security interests and liens of the Bank in and on any of the
Collateral covered or intended to be covered by the Security Agreement and/or
any of the Guarantors' Security Agreements shall for any reason (other than
written release by the Bank or due to any failure by the Bank to file
appropriate continuation statements or other failure by the Bank to perfect or
maintain perfection not resulting from the Borrower's or any Guarantor's failure
to deliver any documents or take any action requested by the Bank for this
purpose) 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 by one or more of the Persons listed on item
5.1(n) of the attached Disclosure Schedule; or
(o) Either or both of ▇▇▇▇▇▇▇ ▇▇▇▇ and/or ▇▇▇▇▇▇ ▇▇▇▇ shall for any reason
not be an executive officer of the Borrower actively involved in the management
of the Borrower, unless promptly replaced as such executive officer by another
individual of similar expertise and experience and reasonably acceptable to the
Bank (and this clause will then become applicable to each such other
individual); provided that the Bank will waive so much (and only so much) of
this clause as requires the replacement executive officer to be reasonably
acceptable to the Bank
-25-
as long as one of ▇▇▇▇▇▇▇ ▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇ remains an executive officer of
the Borrower actively involved in the management 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):
(a) Declare the entire unpaid principal amounts of the Revolving Note and
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 revolving financing arrangements, the Term Loan facility,
the letter of credit facility and the facility for Foreign Exchange Contracts
provided for by this letter agreement.
(c) Exercise all rights and remedies hereunder, under the Revolving Note,
under the Term Note, under the Security Agreement, under the Intellectual
Property Security Agreements, under the Guaranties (if any), under the
Guarantors' Security Agreements (if any) and under each and any other agreement
with the Bank; and exercise all other rights and remedies which the Bank may
have under applicable law.
5.3. SET-OFF. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, the Bank is hereby authorized at any time or
from time to time, without presentment, demand, protest or other notice of any
kind to the Borrower or to any other Person, all of which are hereby expressly
waived, to set off and to appropriate and apply any and all deposits and any
other Indebtedness at any time held or owing by the Bank or any affiliate
thereof to or for the credit or the account of the Borrower against and on
account of the obligations and liabilities of the Borrower to the Bank under
this letter agreement or otherwise, irrespective of whether or not the Bank
shall have made any demand hereunder and although said obligations, liabilities
or claims, or any of them, may then be contingent or unmatured and without
regard for the availability or adequacy of other collateral. As further security
for the Obligations, the Borrower also grants to the Bank a security interest
with respect to all its deposits and all securities or other property in the
possession of the Bank or any affiliate of the Bank from time to time, and, upon
the occurrence of any Event of Default, the Bank may exercise all rights and
remedies of a secured party under the Uniform Commercial Code. ANY AND ALL
RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO
ANY OTHER COLLATERAL WHICH SECURES ANY OF THE OBLIGATIONS PRIOR TO THE EXERCISE
BY THE BANK OF ITS RIGHT OF SET-OFF UNDER THIS SECTION ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.
-26-
5.4. LETTERS OF CREDIT. Without limitation of any other right or remedy of
the Bank, (i) if an Event of Default shall have occurred and the Bank shall have
accelerated the Revolving Loans or (ii) if this letter agreement and/or the
revolving financing arrangements described herein shall have expired or shall
have been earlier terminated by either the Bank or the Borrower for any reason,
the Borrower will forthwith deposit with the Bank in cash a sum equal to the
total of all then undrawn amounts of all outstanding letters of credit issued by
the Bank for the account of the Borrower.
5.5. SHAREHOLDER LITIGATION. Notwithstanding anything in the Loans
Documents to the contrary, any order, judgment, lien, settlement or other action
arising out of the securities litigation listed on item 2.1(e) of the attached
Disclosure Schedule shall not constitute an Event of Default, so long as (i)
same was fully reserved for on the books of the Borrower at the date of this
letter agreement and (ii) no violation of any of the financial covenants
(Sections 3.7-3.10) results therefrom.
VI. MISCELLANEOUS
6.1. COSTS AND EXPENSES. The Borrower agrees to pay on demand all costs and
expenses (including, without limitation, reasonable legal fees) of the Bank in
connection with the preparation, execution and delivery of this letter
agreement, the Security Agreement, the Revolving Note, the Term Note and all
other instruments and documents to be delivered in connection with any Loan or
letter of credit issued hereunder or any Foreign Exchange Contract 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) 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 Revolving Note, 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 Revolving Note, the Term Note
and all other instruments and documents to be delivered in connection with any
Obligation. Unless disputed in good faith, any fees, expenses or other charges
which the Bank is entitled to receive from the Borrower under this Section shall
bear interest from that date which is 30 days after the date of any demand
therefor until the date when paid at a rate per annum equal to the sum of (i)
four (4%) percent PLUS (ii) the per annum rate otherwise payable under the
Revolving Note (but in no event in excess of the maximum rate permitted by then
applicable law).
6.2. COMMITMENT FEES. The Borrower agrees to pay to the Bank with respect
to the within arrangements for Revolving Loans, on the last day of each calendar
quarter (commencing on December 31, 1998) as long as the within-described
revolving loan arrangements are in effect and on the Expiration Date or date of
earlier termination of such Revolving Loan arrangements, a non-refundable
commitment fee computed quarterly in arrears on the daily average unused portion
of the Bank's total revolving commitment during the calendar quarter (or partial
calendar quarter) then ended. Such commitment fee will be payable at a rate of
0.5% per annum based on
-27-
such unused portion of the Bank's total revolving commitment and will be
appropriately prorated for any partial calendar quarter. As used herein, the
Bank's "total revolving commitment" will be deemed to be $3,500,000 and the
"unused portion" on any day means that amount by which (x) said $3,500,000
exceeds (y) the total of (1) the aggregate principal amounts of the Revolving
Loans outstanding at that day and (2) the then total undrawn amounts of all
letters of credit issued hereunder and then outstanding, whether such excess
results from the Bank not making Revolving Loans or issuing letters of credit up
to said $3,500,000 amount, from the repayment of Revolving Loans or the
termination of letters of credit or from any other circumstance. In addition, if
the within-described revolving financing arrangements are cancelled or
terminated prior to the end of any calendar quarter by the Borrower for any
reason or by the Bank due to the Borrower's default, the Borrower shall
forthwith upon such cancellation or termination pay to the Bank a sum equal to
all of the commitment fees which would have become due, absent such cancellation
or termination, pursuant to the immediately preceding three sentences with
respect to the period beginning on the date of such cancellation or termination
and continuing through the end of such calendar quarter, assuming, for the
purposes of this calculation, that no Revolving Loans or letters of credit would
be outstanding during such period. Fees described in this Section are 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.
6.3. OTHER AGREEMENTS. The provisions of this letter agreement are not in
derogation or limitation of any obligations, liabilities or duties of the
Borrower under any of the other Loan Documents or any other agreement with or
for the benefit of the Bank. No inconsistency in default provisions between this
letter agreement and any of the other Loan Documents or any such other agreement
will be deemed to create any additional grace period or otherwise derogate from
the express terms of each such default provision. No covenant, agreement or
obligation of the Borrower contained herein, nor any right or remedy of the Bank
contained herein, shall in any respect be limited by or be deemed in limitation
of any inconsistent or additional provisions contained in any of the other Loan
Documents or in any such other agreement.
6.4. GOVERNING LAW. This letter agreement and the Notes shall be governed
by, and construed and enforced in accordance with, the laws of The Commonwealth
of Massachusetts.
6.5. 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:
Centennial Technologies, Inc.
▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Secretary, Treasurer and General Counsel
-28-
If to the Bank:
Fleet National Bank
High Technology Division
Mail Code: MA OF D07A
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, 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 effective two (2) days after deposit in the United
States mails, if sent postage prepaid, certified or registered mail, return
receipt requested, addressed as aforesaid. If any such notice, request, demand
or other communication is hand delivered, same shall be effective upon receipted
delivery.
6.6. 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 Loans, the Notes and/or any letters of credit
issued hereunder; provided that the Bank will not make such an assignment to any
Person whom the Bank knows to be a direct competitor of the Borrower. Without
limitation of the foregoing generality,
(i) The Bank may at any time pledge all or any portion of its rights
under the Loan Documents (including any portion of any Note) to any of the
12 Federal Reserve Banks organized under Section 4 of the Federal Reserve
Act, 12 U.S.C. Section 341. No such pledge or the enforcement thereof shall
release the Bank from its obligations under any of the Loan Documents.
(ii) The Bank shall have the unrestricted right at any time and from
time to time, and without the consent of or notice to the Borrower, to
grant to one or more banks or other financial institutions (each, a
"Participant") participating interests in the Bank's obligation to lend
hereunder and/or any or all of the Loans held by the Bank hereunder. In the
event of any such grant by the Bank of a participating interest to a
Participant, whether or not upon notice to the Borrower, the Bank shall
remain responsible for the performance of its obligations hereunder and the
Borrower shall continue to deal solely and directly with the Bank in
connection with the Bank's rights and obligations hereunder. The Bank may
furnish any information concerning the Borrower in its possession from time
to time to prospective assignees and Participants; provided that the Bank
shall
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require any such prospective assignee or Participant to agree in writing to
maintain the confidentiality of such information to the same extent as the
Bank would be required to maintain such confidentiality.
The Borrower may terminate this letter agreement and the financing
arrangements made herein by giving written notice of such termination to the
Bank, together with the payment described in the penultimate sentence of
Section 6.2; 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 all Loans and all interest thereon and all fees and
charges payable in connection therewith and all letters of credit issued
hereunder have been terminated.
6.7. 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 any
Note. The Borrower irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of venue
of any such suit, action or proceeding brought in such a court and any claim
that any such suit, action or proceeding has been brought in an inconvenient
forum. The Borrower agrees that final judgment in any such suit, action or
proceeding brought in such a court shall be enforced in any court of proper
jurisdiction by a suit upon such judgment, provided that service of process
in such action, suit or proceeding shall have been effected upon the Borrower
in one of the manners specified in the following paragraph of this Section 6.7
or as otherwise permitted by law.
The Borrower hereby consents to process being served in any suit, action
or proceeding of the nature referred to in the preceding paragraph of this
Section 6.7 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 6.5 or (ii) by serving a copy thereof upon it at its address
set forth in Section 6.5.
6.8. 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.
6.9. REPLACEMENT NOTE. Upon receipt of an affidavit of an officer of the
Bank as to the loss, theft, destruction or mutilation of any Note or of any
other Loan Document which is not of public record and, in the case of any such
mutilation, upon surrender and cancellation of such Note or other Loan Document,
the Borrower will issue, in lieu thereof, a replacement Note or other Loan
Document in the same principal amount (as to any Note) and in any event of like
tenor.
6.10. USURY. All agreements between the Borrower and the Bank are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of
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maturity of the Notes or otherwise, shall the amount paid or agreed to be
paid to the Bank for the use or the forbearance of the Indebtedness
represented by any Note exceed the maximum permissible under applicable law.
In this regard, it is expressly agreed that it is the intent of the Borrower
and the Bank, in the execution, delivery and acceptance of the Notes, to
contract in strict compliance with the laws of The Commonwealth of
Massachusetts. If, under any circumstances whatsoever, performance or
fulfillment of any provision of any of the Notes or any of the other Loan
Documents at the time such provision is to be performed or fulfilled shall
involve exceeding the limit of validity prescribed by applicable law, then
the obligation so to be performed or fulfilled shall be reduced automatically
to the limits of such validity, and if under any circumstances whatsoever the
Bank should ever receive as interest an amount which would exceed the highest
lawful rate, such amount which would be excessive interest shall be applied
to the reduction of the principal balance evidenced by the Notes and not to
the payment of interest. The provisions of this Section 6.10 shall control
every other provision of this letter agreement and of each Note.
6.11. WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY MUTUALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS LETTER AGREEMENT, ANY NOTE OR ANY OTHER LOAN DOCUMENTS OR OUT OF ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS
OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO
ENTER INTO THIS LETTER AGREEMENT AND TO MAKE LOANS AS CONTEMPLATED HEREIN.
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" - All Current Liabilities of the Borrower
and/or any of its Subsidiaries, taken on a consolidated basis, other than those
Current Liabilities (not in excess of $1,200,000 in the aggregate) which
represent accrued liabilities of the Borrower in connection with certain claims
made by plaintiffs in a class action securities litigation filed as IN RE
WEBSECURE, INC.
"Aggregate Revolving Bank Liabilities" - At any time, the sum of (i) the
principal amount of all Revolving Loans then outstanding, PLUS (ii) all then
undrawn amounts of letters of credit issued by the Bank for the account of the
Borrower, PLUS (iii) all amounts then drawn on any such letter of credit which
at said date shall not have been reimbursed to the Bank by the Borrower.
"Bank Certificate" - A certificate signed by an officer of the Bank
setting forth any additional amount required to be paid by the Borrower to
the Bank pursuant to Section 1.8 or Section 1.9 of this letter agreement,
which certificate shall be submitted by the Bank to the Borrower in
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connection with each demand made at any time by the Bank upon the Borrower with
respect to any such additional amount, and each such certificate shall, save for
manifest error, constitute PRIMA FACIE evidence of the additional amount
required to be paid by the Borrower to the Bank upon each demand. A claim by the
Bank for all or any part of any additional amount required to be paid by the
Borrower may be made before and/or after the end of the period of time to which
such claim relates or during which such claim has arisen and before and/or after
any payment hereunder to which such claim relates. Each Bank Certificate shall
set forth in reasonable detail the basis for and the calculation of the claim to
which it relates.
"Borrowing Base" - At any time, 80% of the aggregate principal amount of
the Qualified Receivables of the Borrower then outstanding.
"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 Expenditures" - All acquisitions of machinery, equipment, land,
leaseholds, buildings, leasehold improvements and all other expenditures for
purposes which are considered to be fixed assets under generally accepted
accounting principles consistently applied. When a fixed asset is acquired by a
lease which is required to be capitalized pursuant to generally accepted
accounting principles, the amount required to be capitalized pursuant thereto
shall be considered to be a Capital Expenditure in the year such asset is first
leased.
"COF Interest Rate" - As to any COF Loan for any period of time, that per
annum rate of interest which is determined by the Bank to represent the sum of
(i) the COF Rate applicable to the relevant period of time for the relevant
principal amount as amortized over such period of time PLUS (ii) 3.5% per annum.
"COF Loan" - All or any portion of a Term Loan which bears interest at a
COF Interest Rate.
"COF Rate" - As to any principal amount and for any period of time, that
per annum rate of interest which the Bank is required to pay, or is offering to
pay, for wholesale liabilities of a similar principal amount and for a similar
period of time, adjusted for reserve requirements and for such other
requirements as may from time to time be imposed by federal, state or local
governmental and/or regulatory agencies, all as determined from time to time in
its sole discretion by the Bank's treasury group.
"Collateral" - All of the following: (i) property now or hereafter owned by
the Borrower or in which the Borrower now or hereafter has any interest which is
described as "Collateral" in the Security Agreement or in Subsection 7.2(b)
below, and (ii) all property now or hereafter owned by any Guarantor or in which
such Guarantor now or hereafter has any interest which is described as
"Collateral" in any of the Guarantors' Security Agreements.
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"Current Liabilities" - All liabilities of the Borrower and/or any of its
Subsidiaries which are properly shown as current liabilities on a consolidated
balance sheet of the Borrower prepared in accordance with generally accepted
accounting principles consistently applied, including, without limitation, all
capitalized lease payments and fixed prepayments of, and sinking fund payments
with respect to, Indebtedness required to be made within one year from the date
of determination. "Current Liabilities" shall also and in any event be deemed to
include the Revolving Loans.
"Default" - Any event or circumstance which, with the passage of time or
the giving of notice or both, could become an Event of Default.
"Domestic Material Subsidiary" - As defined in Section 3.13.
"EBITDA" - For any fiscal period, the consolidated Net Income (or
consolidated Net Loss, expressed as a negative number) of the Borrower and its
Subsidiaries for such 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
period and actually deducted on the consolidated books of the Borrower for the
purposes of computation of such consolidated Net Income (or such consolidated
Net Loss, as the case may be) for the fiscal period involved, (ii) the
consolidated Interest Expense paid or accrued by the Borrower and/or any of its
Subsidiaries for such fiscal period and actually deducted on the consolidated
books of the Borrower for the purposes of computation of such consolidated Net
Income (or such consolidated Net Loss, as the case may be) for the fiscal period
involved, and (iii) the amount of the provision for depreciation and/or
amortization expense actually deducted on the consolidated books of the Borrower
for the purposes of computation of such consolidated Net Income (or such
consolidated Net Loss, as the case may be) for the period involved.
"ERISA" - The Employee Retirement Income Security Act of 1974, as amended.
"Event of Default" - As defined in Section 5.1 of this letter agreement.
"Expiration Date" - October 1, 1999, unless extended by the Bank, which
extension may be given or withheld by the Bank in its sole discretion.
"Floating Rate" - As defined in Section 1.6 of this letter agreement.
"Floating Rate Term Loan" - All or any portion of a Term Loan which bears
interest calculated by reference to the Prime Rate.
"Foreign Exchange Contract" - As defined in Section 1.12 of this letter
agreement.
"Guaranties" - Collectively, each of the guaranties (if any) from time to
time given by any Domestic Material Subsidiary pursuant to Section 3.13.
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"Guarantors" - Collectively, each of the Domestic Material Subsidiaries
which gives, or is required to give, a Guaranty pursuant to Section 3.13.
"Guarantors' Security Agreements" - Collectively, each of the security
agreements (if any) from time to time given by any Domestic Material Subsidiary
pursuant to Section 3.13.
"Impositions" - All present and future taxes, levies, duties, impositions,
deductions, charges and withholdings applicable to the Bank with respect to any
COF Loan, excluding, however, any taxes imposed directly on the Bank's income
and any franchise taxes imposed on it by the jurisdiction under the laws of
which the Bank is organized or any political subdivision thereof.
"Indebtedness" - The total of all obligations of a Person, whether current
or long-term, senior or subordinated, which in accordance with generally
accepted accounting principles would be included as liabilities upon such
Person's balance sheet at the date as of which Indebtedness is to be determined,
and shall also include guaranties, endorsements (other than for collection in
the ordinary course of business) or other arrangements whereby responsibility is
assumed for the obligations of others, whether by agreement to purchase or
otherwise acquire the obligations of others, including any agreement, contingent
or otherwise, to furnish funds through the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.
"Interest Expense" - With respect to any period of computation thereof, the
gross interest expense of the Borrower and its Subsidiaries, including, without
limitation, (i) the amortization of debt discounts, (ii) the amortization of all
fees (including, without limitation, fees payable in respect of any swap
agreement or other hedging agreement and any letters of credit) payable in
connection with the incurrence of Indebtedness to the extent included in
interest expense, and (iii) the portion of any liabilities incurred in
connection with capital leases allocable to interest expense, all determined on
a consolidated basis in accordance with generally accepted accounting principles
applied on a consistent basis.
"Loan" - Any Revolving Loan or any Term Loan.
"Loan Documents" - Each of this letter agreement, the Revolving Note, the
Term Note, the Security Agreement, the Intellectual Property Security
Agreements, any Guaranties, any Guarantors' Security Agreements and each other
instrument, document or agreement evidencing, securing, guaranteeing or relating
in any way to any of the Loans or to any of the letters of credit issued
hereunder or to any Foreign Exchange Contract issued hereunder, all whether now
existing or hereafter arising or entered into.
"Material Subsidiary" - Collectively, (i) Centennial Technologies
International Limited and (ii) any Subsidiary of the Borrower, now existing or
hereafter created or arising, as to which a Material Subsidiary Date occurs at
any time after the date of this letter agreement, without regard to any
subsequent change in the assets or revenues of such Subsidiary.
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"Material Subsidiary Date" - As to each Subsidiary of the Borrower, now
existing or hereafter created or arising, that date on which either or both of
the following shall occur: (i) the total assets of such Subsidiary (valued in
accordance with generally accepted accounting principles consistently applied)
are equal to or greater than 5% of the total consolidated assets (valued in
accordance with generally accepted accounting principles consistently applied)
of the Borrower and Subsidiaries and/or (ii) the net revenues (exclusive of any
extraordinary items) of such Subsidiary for any fiscal quarter are equal to or
greater than 5% of the total consolidated net revenues (exclusive of any
extraordinary items) of the Borrower and Subsidiaries for such fiscal quarter.
"Maximum Revolving Amount" - At any date as of which same is to be
determined, the amount by which (x) $3,500,000 exceeds (y) the sum of (i) all
then undrawn amounts of letters of credit issued by the Bank for the account of
the Borrower plus (ii) all amounts then drawn on any such letter of credit which
at said date shall not have been reimbursed to the Bank by the Borrower.
"Net Income" (or "Net Loss") - The book net income (or book net loss, as
the case may be) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with
generally accepted accounting principles consistently applied.
"Net Quick Assets" - Such current assets of the Borrower as consist of
cash, cash-equivalents and Receivables (less an allowance for bad debt
consistent with the Borrower's prior experience).
"Notes" - Collectively, the Revolving Note and the Term Note.
"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.
"PBGC" - The Pension Benefit Guaranty Corporation or any successor thereto.
"Person" - An individual, corporation, limited liability company,
partnership, joint venture, trust, or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Qualified Receivables" - Only those Receivables of the Borrower which
arise out of BONA FIDE sales made to customers of the Borrower (which customers
are located in the United States and are unrelated to the Borrower) in the
ordinary course of the Borrower's business and which remain unpaid no more than
90 days past the respective invoice dates of such Receivables, the payment of
which is not in dispute. (Notwithstanding the provisions of the immediately
preceding sentence, the Borrower may include within Qualified Receivables any
Receivable which meets all of the criteria set forth in this definition to be a
Qualified Receivable except that the relevant customer is located outside the
United States; provided that such Receivable is
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covered by credit insurance in form and substance satisfactory to the Bank and
issued by a credit insurer satisfactory to the Bank.) Subject to the immediately
preceding sentence, any Receivable which would otherwise be a Qualified
Receivable shall be deemed not to be a Qualified Receivable (i) if the Bank does
not have a fully perfected first priority security interest in such Receivable;
(ii) if such Receivable is not free and clear of all adverse interests in favor
of any other Person; (iii) if such Receivable is subject to any deduction,
off-set, contra account, counterclaim or condition; (iv) if a field examination
made by the Bank fails to confirm that such Receivable exists and satisfies all
of the criteria set forth herein to be a Qualified Receivable; (v) if such
Receivable is not properly invoiced at the date of sale; (vi) if the customer or
account debtor has disputed liability or made any claim with respect to the
Receivable or the merchandise covered thereby or with respect to any other
Receivable due from said customer to the Borrower; (vii) if the customer or
account debtor has filed a petition for bankruptcy or any other application for
relief under the Bankruptcy Code or has effected an assignment for the benefit
of creditors, or if any petition or any other application for relief under the
Bankruptcy Code has been filed against said customer or account debtor, or if
the customer or account debtor has suspended business, become insolvent, ceased
to pay its debts as they become due, or had or suffered a receiver or trustee to
be appointed for any of its assets or affairs; (viii) if the customer or account
debtor has failed to pay other Receivables so that an aggregate of 25% of the
total Receivables owing to the Borrower by such customer or account debtor has
been outstanding for more than 90 days; (ix) if such Receivable is owed by the
United States government or any agency or department thereof (unless assigned to
the Bank under the Federal Assignment of Claims Act); or (x) if the Bank
reasonably believes that collection of such Receivable is insecure or that it
may not be paid by reason of financial inability to pay or otherwise, or that
such Receivable is not for any reason suitable for use as a basis for borrowing
hereunder.
"Qualifying Equipment" - Equipment purchased by the Borrower within 30 days
prior to the date of the Term Loan borrowing relating thereto (or 45 days prior
to the date of this letter agreement in the case of the first Term Loan) for use
in the Borrower's business which meets all of the following criteria: (i) such
equipment consists of one of the items 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 Borrower's Wilmington, MA premises and has
become fully operational, (iii) the Borrower has paid in full for each item of
such equipment (or will promptly pay for same from the proceeds of the relevant
Term Loan) 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.
"Receivables" - All of the Borrower's present and future accounts, accounts
receivable and notes, drafts, acceptances and other instruments representing or
evidencing a right to payment for goods sold or for services rendered.
"Subsidiary" - Any corporation or other entity of which the Borrower and/or
any of its Subsidiaries, directly or indirectly, owns, or has the right to
control or direct the voting of, fifty (50%) percent or more of the outstanding
capital stock or other ownership interest having general voting power (under
ordinary circumstances).
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"Tangible Net Worth" - An amount equal to the total assets of any Person
(excluding (i) the total intangible assets of such Person and (ii) any assets
representing amounts due from any officer, employee or other affiliate of such
Person) minus the total liabilities of such Person. Total intangible assets
shall be deemed to include, but shall not be limited to, the excess of cost over
book value of acquired businesses accounted for by the purchase method,
formulae, trademarks, trade names, patents, patent rights and deferred expenses
(including, but not limited to, unamortized debt discount and expense,
organizational expense, capitalized software costs and experimental and
development expenses).
Any defined term used in the plural preceded by the definite article shall
be taken to encompass all members of the relevant class Any defined term used
in the singular preceded by "any" shall be taken to indicate any number of the
members of the relevant class.
7.2. SECURITY AGREEMENT. (a) The Borrower acknowledges and agrees that the
"Obligations" described in and secured by the Security Agreement include,
without limitation, all of the obligations of the Borrower under the Revolving
Note, the Term Note and/or this letter agreement, as well as all obligations of
the Borrower in respect of any letters of credit now or hereafter issued by the
Bank for the account of the Borrower and/or in respect of any Foreign Exchange
Contract.
(b) The Security Agreement is hereby modified to provide as follows:
(i) That the "Collateral" subject thereto includes, without limitation
and in addition to the Collateral described therein, all of the Borrower's
files, books and records (including, without limitation, all electronically
recorded data) all whether now owned or existing or hereafter acquired, created
or arising. The Borrower hereby grants to the Bank a security interest in all
such Collateral in order to secure the full and prompt payment and performance
of all of the Obligations.
(ii) That, upon the occurrence of any Event of Default, the Bank may,
at any time, without further notice to the Borrower, notify account debtors that
the Collateral has been assigned to the Bank and that payments by such account
debtors shall be made directly to the Bank. At any time after the occurrence of
an Event of Default, the Bank may collect the Borrower's Receivables, or any of
same, directly from account debtors and may charge the collection costs and
expenses to the Borrower.
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This letter agreement is executed, as an instrument under seal, as of the
day and year first above written.
Very truly yours,
CENTENNIAL TECHNOLOGIES, INC.
By
-----------------------------------------
Name:
Title:
Accepted and agreed:
FLEET NATIONAL BANK
By
-----------------------------
Its
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DISCLOSURE SCHEDULE
Item 2.1(a) Jurisdictions in which Borrower is qualified; Subsidiaries
Item 2.1(b) 5% Stock ownership
Item 2.1(e) Litigation
Item 2.1(g) Tax Filings
Item 2.1(i) Transactions not in ordinary course
Item 2.1(j) Record owners of premises in which Collateral is located
Item 2.1(k) Intellectual Property
Item 4.1 Existing Indebtedness
Item 4.2 Existing Liens
Item 4.3 Existing Guaranties
Item 4.6(viii) Existing Investments
Item 5.1(n) Permitted 50% Stockholders