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EXHIBIT 10.17
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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT BANKBOSTON, N.A.
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Date: July 1, 1999
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made between
BANKBOSTON, N.A. (hereinafter, the "LENDER"), a national banking
association with offices at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and
MCK COMMUNICATIONS, INC. (THE "AGENT" OR "MCK COMMUNICATIONS"), a
Nevada corporation with its principal executive offices at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, and MCK TELECOMMUNICATIONS INC. ("MCK
TELECOMMUNICATIONS"), a Canadian company with its principal executive
offices at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇
(hereinafter, MCK Communications and MCK Telecommunications shall be
referred to herein, individually and collectively, as the "BORROWER")
in consideration of the mutual covenants contained herein and benefits to be
derived herefrom. This Amended and Restated Loan and Security Agreement amends
and restates a certain Loan and Security Agreement dated February 23, 1998
between Borrower and Lender, as amended by a certain First Amendment to Loan and
Security Agreement dated as of April 30, 1999. All capitalized terms shall have
the meaning ascribed to them in EXHIBIT 9-13 hereto.
W I T N E S S E T H:
ARTICLE 1 - AGENTED LOAN ARRANGEMENT
1-1. DESIGNATION OF AGENT. Each Borrower hereby designates MCK
Communications as the agent of that Borrower to discharge the duties and
responsibilities of the Agent as provided herein.
1-2. OPERATION OF LOAN ARRANGEMENT. (a) Except as otherwise provided in
this Article, loans and advances hereunder shall be requested solely by the
Agent as agent for each Borrower.
(b) Confirmatory assignments of accounts and accounts receivable and
remittances on accounts and accounts receivable for each Borrower shall be
provided to the Lender or otherwise directed in accordance with the Lender's
reasonable instructions given from time to time to the Agent.
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(c) Any advance which may be made by the Lender under the Loan
Arrangement and which is directed to the Agent is received by the Agent in trust
for that Borrower who is intended to receive such advance. The Agent shall
distribute the proceeds of any such advances solely to the Borrower. Each
Borrower shall be directly indebted to the Lender for each advance distributed
to that Borrower by the Agent, together with all accrued interest thereon, as if
that amount had been advanced directly by the Lender to that Borrower (whether
or not the subject advance was based upon the accounts and/or inventory or other
assets of the Borrower which actually received such distribution), in addition
to which each Borrower shall be obligated to the Lender in that amount on
account of that Borrower's respectively having guarantied the Liabilities.
(d) The Lender shall have no responsibility to inquire as to the
distribution of loans and advances made by the Lender through the Agent as
described herein.
1-3. LOANS DIRECTLY TO BORROWER. (a) If, for any reason, and at any time
during the term of the within Agreement,
(i) any Borrower, including the Agent, as agent for the
Borrowers, shall be unable to, or prohibited from carrying out the terms
and conditions of the within Agreement (as determined by the Lender in the
Lender's sole and absolute discretion); or
(ii) the Lender deems it inexpedient (in the Lender's sole and
absolute discretion) to continue making loans and advances to or for the
account of any particular Borrower, or to channel such loans and advances
through the Agent,
then the Lender may make loans and advances directly to such Borrower as the
Lender determines to be expedient, which loans or advances may be made without
regard to the procedures otherwise included in this Article 1.
(b) In the event that the Lender determines to forgo the procedures
included herein pursuant to which loans and advances are to be channeled through
the Agent, then the Lender may designate one or more Borrower to fulfil the
financial and other reporting requirements otherwise imposed herein upon the
Agent.
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(c) Each Borrower shall remain liable to the Lender for the payment and
performance of all Liabilities (which payment and performance shall continue to
be secured by all collateral security granted by each Borrower) notwithstanding
any determination by the Lender to cease making loans or advances to or for the
benefit of any Borrower.
1-4. CONTINUATION OF AUTHORITY OF AGENT. The authority of the Agent to
request loans on behalf of, and to bind, the Borrowers, shall continue unless
and until the Lender acts as provided in Section 1-3, above, or the Lender
actually receives:
(a) written notice of: (i) the termination of such authority, and
(ii) the subsequent appointment of a successor Agent, which notice is
signed by the respective Presidents of each Borrower (other than the
President of the Agent being replaced) then eligible for borrowing under
the within Agreement; and
(b) written notice from such successive Agent (i) accepting such
appointment; (ii) acknowledging that such removal and appointment has been
effected by the respective Presidents of such Borrowers eligible for
borrowing under the within Agreement; and (iii) acknowledging that from and
after the date of such appointment, the newly appointed Agent shall be
bound by the terms hereof, and that as used herein, the term "Agent" shall
mean and include the newly appointed Agent.
1-5. INDEMNIFICATION. The Agent and each Borrower respectively shall
indemnify, defend, and save and hold the Lender harmless from and against any
liabilities, claims, demands, expenses, or losses made against or suffered by
the Lender on account of, or arising out of, the Loan Arrangement, the Lender's
reliance upon loan requests made by the Agent, or any other action taken by the
Lender hereunder or under any of the Lender's various agreements with the Agent
and/or any Borrower and/or any other person arising under the loan arrangement
contemplated herein except for any liability, claim, demand, expense, or loss as
to which a final judicial determination is made and from which no appeal is
available (in a proceeding in which the Lender has had an opportunity to be
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heard) that the Lender had acted in a grossly negligent manner or in actual bad
faith.
ARTICLE 2 - THE LINES OF CREDIT.
2-1. ESTABLISHMENT OF REVOLVING CREDIT. (a) The Lender hereby establishes a
Two Million Dollar revolving line of credit (hereinafter, the "REVOLVING
CREDIT") in the Borrower's favor pursuant to which the Lender, subject to,
and in accordance with, the within Agreement, shall make loans and advances
and otherwise provide financial accommodations to and for the account of
the Borrower. The amount of the Revolving Credit shall be determined by the
Lender by reference to Availability (as defined herein). All loans made by
the Lender under this Agreement, and all of the Borrower's other
Liabilities (as defined below) to the Lender under or pursuant to this
Agreement, are payable as provided herein.
(b) Availability shall be based upon Borrowing Base Certificates
furnished as provided in Section 5-3, below.
(c) The proceeds of borrowings under the Revolving Credit shall be
used solely for working capital purposes and the issuance of letters of
credit on behalf of Borrower.
2-2. ESTABLISHMENT OF EQUIPMENT LINE. (a) The Lender hereby establishes a
non-revolving line of credit (hereinafter, the "EQUIPMENT LINE") in the
Borrower's favor pursuant to which the Lender, subject to and in accordance
with the within Agreement, shall make loans and advances and otherwise
provide financial accommodations to and for the account of the Borrower.
The amount of the Equipment Line shall be equal to the Equipment Line
Availability (as defined below), as determined by the Lender from time to
time hereafter.
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(b) As used herein, the term "EQUIPMENT LINE AVAILABILITY" refers at
any time to the lesser of (i) or (ii), below:
(i) Five Hundred Thousand Dollars ($500,000.00).
(ii) Eighty percent (80%) of Equipment approved from time to time
by Lender, excluding taxes, shipping, warranty charges, freight discounts,
installation expense, and software.
(c) At the time of each advance request under the Equipment Line,
Agent shall deliver to Lender, an invoice for the Equipment to be
purchased.
(d) The proceeds of borrowings under the Equipment Line shall be used
solely to purchase Equipment to be used in the operation of Borrower's
business.
(e) The Lender shall not be required to make any loans or advances
under the Equipment Line after September 30, 1999 (the "EQUIPMENT LINE
AVAILABILITY END DATE"). The outstanding balance of the Equipment Line on
the Equipment Line Availability End Date shall be repaid as provided in
Sections 2-5 and 2-6.
2-3. PROCEDURES UNDER REVOLVING CREDIT AND EQUIPMENT LINE. The Agent may
request loans and advances under the Revolving Credit and the Equipment Line
from time to time hereunder, in each instance in accordance with such procedures
as may from time to time be acceptable to the Lender.
2-4. THE MASTER NOTES. The obligation to repay loans and advances under the
Revolving Credit and the Equipment Line, with interest as provided herein, shall
be evidenced by certain notes (hereinafter, collectively referred to as the
"MASTER NOTE", and individually as the "REVOLVING CREDIT MASTER NOTE" and the
"EQUIPMENT LINE MASTER NOTE", respectively) in the form executed by the Borrower
this date. Neither the original nor a copy of the Master Note shall be required,
however, to establish or prove any Liability. In the event that the Master Note
is ever lost, mutilated, or destroyed, the Borrower shall execute a replacement
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thereof and deliver such replacement to the Lender upon execution by Lender of
the Lender's standard lost note indemnity agreement.
2-5. PAYMENT OF LOAN ACCOUNTS.
(a) REVOLVING CREDIT. The Borrower may repay all or any portion of
the principal balance of the Revolving Credit from time to time prior to
the termination of the Revolving Credit (as to which, see Article 8,
below). The Borrower, without notice or demand from the Lender, shall pay
the Lender that amount, from time to time, which is necessary so that the
principal balance of the Revolving Credit does not exceed Availability. The
Borrower shall pay interest accruing on the principal balance of the
Revolving Credit in accordance with Section 2-6 hereof. The Borrower shall
repay the then entire unpaid balance of the Revolving Credit on the
Revolving Credit Termination Date (as to which, see Article 8 below).
(b) EQUIPMENT LINE. Beginning on the first day of the month following
the Equipment Line Availability End Date, and continuing on the first day
of every calendar month thereafter, the Borrower shall make thirty-six (36)
monthly payments of (i) principal, which payments shall be computed by the
Lender based upon (A) the then outstanding principal balance of the
Equipment Line, and (B) an amortization schedule of thirty-six (36) months,
plus (ii) interest on the outstanding principal balance. The Borrower,
without notice or demand from the Lender, shall pay the Lender that amount,
from time to time, which is necessary so that the principal balance of the
Equipment Line does not exceed the Equipment Line Availability. The final
payment shall be equal to the principal amount outstanding, together with
all other amounts outstanding under the Equipment Line. Any principal
prepayments shall be applied to principal payments due under the Equipment
Line in the inverse order of maturity. Notwithstanding the foregoing, the
Borrower shall repay all then outstanding amounts under the Equipment Line
on the Equipment Line Termination Date (as to which, see Article 8 below).
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2-6. INTEREST.
(a) REVOLVING CREDIT. The unpaid principal balance of the Revolving
Credit shall bear interest, until repaid (calculated based upon a 360-day
year and actual days elapsed), at the Lender's Base Rate (defined below).
Following the occurrence of any Event of Default (and whether or not the
Lender exercises the Lender's rights on account thereof), all loans and
advances made under the Revolving Credit shall bear interest at a rate
which is the aggregate of that provided for above, plus three (3.0%)
percent per annum. Accrued interest under the Revolving Credit shall be
payable (i) monthly in arrears on the first day of each month, or, if such
day is not a business day, then the first business day of such month, and
(ii) on the Revolving Credit Termination Date (defined below).
(b) EQUIPMENT LINE. The unpaid principal balance of the Equipment
Line shall bear interest, until repaid (calculated based upon a 360-day
year and actual days elapsed), at the per annum rate equal to the aggregate
of Lender's Base Rate (defined below), PLUS One-Half of One percent
(0.50%). Following the occurrence of any Event of Default (and whether or
not the Lender exercises the Lender's rights on account thereof), all loans
and advances made under the Equipment Line shall bear interest at a rate
which is the aggregate of that provided for above, plus three (3.0%)
percent per annum. Accrued interest under the Equipment Line shall be
payable (i) monthly in arrears on the first day of each month, or, if such
day is not a business day, then the first business day of such month, and
(ii) on the Equipment Line Termination Date (defined below).
2-7. FACILITY FEE. The Lender shall have earned an Facility Fee
(hereinafter, the "FACILITY FEE") in an amount equal to Five Thousand and 00/100
Dollars ($5,000.00). The Borrower shall not be entitled to any credit, rebate or
repayment of the Facility Fee notwithstanding any termination of this Agreement
or suspension or termination of the Lender's obligation to make loans and
advances hereunder.
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ARTICLE 3 - GRANT OF SECURITY INTEREST
3-1. GRANT OF SECURITY INTEREST. To secure the Borrower's prompt, punctual,
and faithful performance of all and each of the Borrower's Liabilities, the
Borrower hereby grants to the Lender a continuing security interest in and to,
and assigns to the Lender, the following, and each item thereof, whether now
owned or now due, or in which the Borrower has an interest, or hereafter
acquired, arising, or to become due, or in which the Borrower obtains an
interest, and all products, Proceeds, substitutions, and accessions of or to any
of the following (all of which, together with any other property in which the
Lender may in the future be granted a security interest, is referred to herein
as the "COLLATERAL"):
(a) All Accounts and Accounts Receivable.
(b) All Inventory.
(c) All Contract Rights.
(d) All General Intangibles.
(e) All Equipment.
(f) All Goods.
(g) All Fixtures.
(h) All Chattel Paper.
(i) All books, records, and information relating to the Collateral
and/or to the operation of the Borrower's business, and all rights of
access to such books, records, and information, and all property in which
such books, records, and information are stored, recorded, and maintained.
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(j) All Instruments, Documents of Title, Documents, policies and
certificates of insurance, Securities, deposits, deposit accounts,
impressed accounts, compensating balances, money, cash, or other property;
(k) All insurance proceeds, refunds, and premium rebates, including,
without limitation, proceeds of fire and credit insurance, whether any of
such proceeds, refunds, and premium rebates arise out of any of the
foregoing ((a) - (j)) or otherwise.
(l) All liens, guaranties, rights, remedies, and privileges
pertaining to any of the foregoing including the right of stoppage in
transit.
3-2. EXTENT AND DURATION OF SECURITY INTEREST. The within grant of a
security interest is in addition to, and supplemental of, any security interest
previously granted by the Borrower to the Lender and shall continue in full
force and effect applicable to all Liabilities until all Liabilities have been
paid and/or satisfied in full and the security interest granted herein is
specifically terminated in writing by a duly authorized officer of the Lender.
ARTICLE 4 - GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce the Lender to establish the loan arrangement contemplated herein
and to make loans and advances and to provide financial accommodations under the
Revolving Credit and the Equipment Line each of which loans shall be deemed to
have been made in reliance thereupon the Borrower, in addition to all other
representations, warranties, and covenants made by the Borrower in any other
Loan Document, makes those representations, warranties, and covenants included
in the within Agreement.
4-1. DUE ORGANIZATION - CORPORATE AUTHORIZATION - NO CONFLICTS. (a) MCK
Communications presently is and shall hereafter remain in good standing as
a Nevada corporation and is and shall hereafter remain duly qualified and
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in good standing in every other State in which, by reason of the nature or
location of MCK Communications' assets or operation of MCK Communications'
business, such failure to qualify or be in good standing may have a
material adverse affect on MCK Communications' business.
(b) MCK Telecommunications presently is and shall hereafter remain in
good standing as a corporation formed under the laws of the Province of
Alberta, Canada and is and shall hereafter remain duly qualified and in
good standing in every other State in the United States in which, by reason
of the nature or location of MCK Telecommunications' assets or operation of
MCK Telecommunications' business, such failure to qualify or be in good
standing may have a material adverse affect on MCK Telecommunications'
business.
(c) The Borrower has all requisite corporate power and authority to
execute and deliver to the Lender all and singular the Loan Documents to
which the Borrower is a party and has and will hereafter retain all
requisite corporate power to perform all and singular the Liabilities.
(d) The Loan Documents have been duly executed and delivered by
Borrower and are the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms.
4-2. MAINTAIN ACCOUNTS. To permit the Lender to monitor the Borrower's
financial performance and condition, the Borrower shall maintain at all times
all of the Borrower's primary depository and operating accounts with the Lender.
4-3. INTELLECTUAL PROPERTY. (a) The Borrower owns and possesses, or has the
right to use, all patents, industrial designs, trademarks, trade names,
trade styles, brand names, service marks, logos, copyrights, trade secrets,
know-how, confidential information, and other intellectual or proprietary
property of any third Person necessary for the Borrower's conduct of the
Borrower's business.
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(b) The conduct by the Borrower of the Borrower's business does not,
to the knowledge of the Borrower, infringe on the patents, industrial
designs, trademarks, trade names, trade styles, brand names, service marks,
logos, copyrights, trade secrets, know-how, confidential information, or
other intellectual or proprietary property of any third Person.
(c) All patents, trademarks, copyrights, and other intellectual
property owned or used by the Borrower are listed on EXHIBIT 4-3, annexed
hereto.
4-4. INSURANCE POLICIES. (a) EXHIBIT 4-4, annexed hereto, is a schedule of
all insurance policies owned by the Borrower or under which the Borrower is the
named insured. Each of such policies is in full force and effect. Neither the
issuer of any such policy (to the Borrower's knowledge) nor the Borrower is in
default or violation of any such policy.
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(b) The Borrower shall have and maintain at all times insurance
covering such risks, in such amounts, containing such terms, in such form, for
such periods, and written by such companies as may be reasonably satisfactory to
the Lender. All insurance carried by the Borrower shall provide for a minimum of
thirty (30) days' written notice of cancellation to the Lender and all such
insurance which covers the Collateral shall include an endorsement in favor of
the Lender, which endorsement shall provide that the insurance, to the extent of
the Lender's interest therein, shall not be impaired or invalidated, in whole or
in part, by reason of any act or neglect of the Borrower or by the failure of
the Borrower to comply with any warranty or condition of the policy. In the
event of the failure by the Borrower to maintain insurance as required herein,
the Lender, at its option, may obtain such insurance, provided, however, the
Lender's obtaining of such insurance shall not constitute a cure or waiver of
any Event of Default occasioned by the Borrower's failure to have maintained
such insurance. The Borrower shall furnish to the Lender certificates or other
evidence satisfactory to the Lender regarding compliance by the Borrower with
the foregoing insurance provisions.
(c) The Borrower shall advise the Lender of each claim or claims in
excess of $250,000.00, in the aggregate, made by the Borrower under any policy
of insurance which covers the Collateral and will permit the Lender, at the
Lender's option in each instance, to the exclusion of the Borrower, to conduct
the adjustment of each such claim The Borrower hereby appoints the Lender as the
Borrower's attorney in fact to obtain, adjust, and settle any insurance
described in this section and to endorse in favor of the Lender any and all
drafts and other instruments with respect to such insurance. The within
appointment, being coupled with an interest, is irrevocable until this Agreement
is terminated by a written instrument executed by a duly authorized officer of
the Lender. The Lender shall not be liable on account of any exercise pursuant
to said power except for any exercise in actual willful misconduct and bad
faith. Prior to the occurrence of an Event of Default, the Lender may apply any
insurance proceeds in excess of $500,000.00 against the Liabilities, whether or
not such have matured, in such order of application as the Lender may determine.
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After the occurrence of an Event of Default, the Lender may apply insurance
proceeds of any amount against the Liabilities.
(d) The Borrower shall maintain at all times those policies of
insurance now or hereafter obtained by the Borrower and assigned to the Lender.
4-5. LICENSES. EXHIBIT 4-5, annexed hereto, is a schedule of all material
license, distributor, franchise, and similar agreements issued to, or to which
the Borrower is a party, with the exception of any licenses conveyed in
connection with goods sold by the Borrower in the ordinary course of business.
Each of such agreements is in full force and effect. The Borrower is not in
default or violation of any such agreement and the Borrower has not received any
notice or threat of cancellation of any such agreement.
4-6. LITIGATION. There is not presently pending or threatened by or against
the Borrower any suit, action, proceeding, or investigation which, if determined
adversely to the Borrower, would have a material adverse effect upon the
Borrower's financial condition or ability to conduct its business as such
business is presently conducted or is contemplated to be conducted in the
foreseeable future. The Borrower shall promptly notify the Lender of the
commencement of any suit, action, proceeding, or investigation brought against
the Borrower.
4-7. ADDITIONAL ASSURANCES. The Borrower shall execute and deliver to the
Lender such instruments, documents, and papers, and shall do all such things
from time to time hereafter as the Lender may request to carry into effect the
provisions and intent of this Agreement and to comply with all applicable
statutes and laws.
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4-8. ADEQUACY OF DISCLOSURE. (a) All financial statements furnished to the
Lender by the Borrower have been prepared in accordance with GAAP
consistently applied and present fairly the condition of the Borrower at
the date(s) thereof and the results of operations and cash flows for the
period(s) covered. There has been no change in the financial condition,
results of operations, or cash flows of the Borrower since the date(s) of
such financial statements, other than changes in the ordinary course of
business, which changes have not been materially adverse, either singularly
or in the aggregate.
(b) No document, instrument, agreement, or paper now or hereafter
given the Lender by or on behalf of the Borrower or any guarantor of the
Liabilities in connection with the Lender's execution of the within
Agreement contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary in order to make
the statements therein not misleading. There is no fact known to the
Borrower which has, or which, in the foreseeable future could have, a
material adverse effect on the financial condition of the Borrower or any
such guarantor which has not been disclosed in writing to the Lender.
ARTICLE 5 - FINANCIAL AND OTHER REPORTING REQUIREMENTS/ FINANCIAL COVENANTS.
5-1. MAINTAIN RECORDS. The Borrower shall at all times:
(a) Keep proper books of account, in which full, true, and accurate
entries shall be made of all of the Borrower's transactions, all in
accordance with GAAP applied consistently with prior periods to fairly
reflect the financial condition of the Borrower at the close of, and its
results of operations for, the periods in question.
(b) Retain independent certified public accountants who are
reasonably satisfactory to the Lender and instruct such accountants to
fully cooperate with, and be available to, the Lender to discuss the
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Borrower's financial performance, financial condition, operating results,
controls, and such other matters, within the scope of the retention of such
accountants, as may be raised by the Lender.
(c) Not change the Borrower's fiscal year without the Lender's prior
written consent, which shall not be unreasonably withheld.
(d) Not change the Borrower's taxpayer identification number.
5-2. ACCESS TO RECORDS. The Borrower shall accord the Lender and the
Lender's representatives with access from time to time as the Lender and such
representatives may require to all properties owned by or over which the
Borrower has control. The Lender, and the Lender's representatives, shall have
the right, and the Borrower will permit the Lender and such representatives from
time to time as the Lender and such representatives may request, upon reasonable
notice, and during normal business hours(except after the occurrence of an Event
of Default), to examine, inspect, copy, and make extracts from any and all of
the Borrower's books, records, electronically stored data, papers, and files.
The Borrower shall make all of the Borrower's copying facilities available to
the Lender.
5-3. MONTHLY REPORTS; BORROWING BASE CERTIFICATE; ACCOUNTS RECEIVABLE
AGING. Provided that amounts are outstanding under the Revolving Credit, the
Borrower shall provide the Lender with a Borrowing Base Certificate (in such
form as the Lender may specify from time to time) together with a detailed
accounts receivable aging at such time or times as the Lender may request, but
not less frequently than monthly, within thirty (30) days of the close of the
subject month.
5-4. QUARTERLY REPORTS. Quarterly, for each fiscal quarter of the Borrower
(including the last fiscal quarter) within forty-five (45) days of the close of
the subject fiscal quarter, the Borrower shall furnish the Lender with a balance
sheet, income statement, and Statement of Cash Flow. Such financial information
shall include a comparison of the current year to date information with the
original projections for the subject period, and with the financial information
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for the same period for the previous year. The Borrower shall also provide the
Lender, on a quarterly basis, with copies of all financial information and
materials delivered to the Board of Directors of the Borrower, which relate
primarily to the financial operations of the Borrower, during the subject fiscal
quarter.
5-5. ANNUAL REPORTS. (a) Annually, within ninety (90) days following the
end of the Borrower's fiscal year, the Borrower shall furnish the Lender
with an original signed counterpart of the Borrower's annual audited
financial statement, which statement shall have been prepared by, and bear
the unqualified opinion of, the Borrower's independent certified public
accountants (i.e. said statement shall be "certified" by such accountants).
Such annual statement shall include, at a minimum (with comparative
information for the then prior fiscal year) a balance sheet, income
statement and statement of cash flow. Upon the Lender's request, the
Borrower shall also provide the Lender with any letter delivered to the
Borrower by its certified public accountant with such certified public
accountant's recommendations to the Borrower.
(b) The Borrower shall also provide the Lender, prior to the close of
the Borrower's fiscal year end, with a management prepared pro forma
balance sheet, income statement and cash flow statement, broken down by
quarter for the following fiscal year. Such pro forma financial statement
shall also be provided to the Lender within ten (10) days of any
Board-approved change in the information provided therein.
5-6. ADDITIONAL REPORTS. The Borrower shall deliver to the Lender within
five (5) days of filing, copies of all statements, reports and notices sent or
made available generally by the Borrower to its security holders or to any
holders of Subordinated Debt.
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5-7. OFFICERS' CERTIFICATES. The Borrower shall cause the Borrower's Chief
Financial Officer or President to provide a Certificate with those quarterly,
and annual statements to be furnished pursuant to this Agreement, which
Certificate shall:
(a) Indicate that the subject statement was prepared in accordance
with GAAP consistently applied, and presents fairly the financial condition
of the Borrower at the close of, and the results of the Borrower's
operations and cash flows for, the period(s) covered, subject, however to
usual year end adjustments.
(b) Indicate either that (i) no Event of Default has occurred or (ii)
if such an event has occurred, its nature (in reasonable detail) and the
steps (if any) being taken or contemplated by the Borrower to be taken on
account thereof.
(c) Include calculations concerning the Borrower's compliance (or
failure to comply) at the date of the subject statement with each of the
financial performance covenants included in Section 5-10, below.
5-8. ADDITIONAL FINANCIAL INFORMATION. In addition to the foregoing, the
Borrower promptly shall provide the Lender with such other and additional
information concerning the Borrower, the operation of the Borrower's business,
and the Borrower's financial condition, including original counterparts of
financial reports and statements, as the Lender may from time to time request
from the Borrower.
5-9. AUDITS. The Lender may from time to time but not more often than
annually prior to the occurrence of an Event of Default, conduct commercial
finance audits of the Borrower's books and records (in each event, at the
Borrower's expense).
5-10. FINANCIAL PERFORMANCE COVENANTS; COMPLIANCE CERTIFICATE. The Borrower
shall observe and comply with those financial performance covenants set
- 17 -
18
forth on EXHIBIT 5-10, annexed hereto, which shall be tested on a monthly or
quarterly basis (except as provided in EXHIBIT 5-10). The Borrower shall provide
the Lender with a Compliance Certificate (so referred to herein) indicating the
status of the financial performance requirements, within thirty (30) days of the
close of each month and within forty-five (45) days of the close of each fiscal
quarter, as applicable. The Compliance Certificate shall be in form of
presentation acceptable to the Lender.
ARTICLE 6 - NEGATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of the
outstanding Liabilities or for so long as Lender may have any commitment to make
any loans or advances, Borrower will not do any of the following:
6-1. DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose of
(collectively, a "Transfer"), all or any part of its business or property, other
than Transfers: (i) of inventory in the ordinary course of business, (ii) of
non-exclusive licenses and similar arrangements for the use of the property of
Borrower in the ordinary course of business; (iii) that constitute payment of
normal and usual operating expenses in the ordinary course of business;; or (iv)
of worn-out or obsolete equipment.
6-2. CHANGES IN BUSINESS. Engage in any business, other than the businesses
currently engaged in by Borrower and any business substantially similar or
related thereto (or incidental thereto).
6-3. DIVIDENDS OR INVESTMENTS. The Borrower shall not, without the prior
written consent of the Lender:
(a) Pay any cash dividend or make any other distribution in respect
of any class of the Borrower's capital stock.
(b) Own, redeem, retire, purchase, or acquire any of the Borrower's
capital stock, except pursuant to Stock Purchase Agreements been the
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19
Borrower and certain employees, up to a maximum amount of $250,000.00 per
year, in the aggregate.
(c) Invest in or purchase any stock or securities or rights to
purchase any such stock or securities, of any corporation or other entity.
(d) Merge or consolidate or be merged or consolidated with or into
any other corporation or other entity.
(e) Consolidate any of the Borrower's operations with those of any
other corporation or other entity.
(f) Organize or create any Related Entity.
(g) Subordinate any debts or obligations owed to the Borrower by any
third party to any other debts owed by such third party to any other
Person.
6-4. LOANS. (a) The Borrower shall not make any loans or advances to, nor
acquire the Indebtedness of, any Person, other than advance payments made to the
Borrower's suppliers in the ordinary course or to the Borrower's employees for
travel and related expenses.
(b) The Borrower shall not become indebted to any Person for borrowed
money other than the Lender, except for (i) trade indebtedness incurred in
the ordinary course of business, and (ii) subordinated indebtedness
consented to by the Lender in writing.
6-5. TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a nonaffiliated Person.
- 19 -
20
ARTICLE 7 - EVENTS OF DEFAULT.
The occurrence of any event described in this Article 7 respectively shall
constitute an "EVENT OF DEFAULT" herein. Upon the occurrence of any Event of
Default described in Section 7-9, any and all Liabilities shall become due and
payable at the option of Lender, without any further act on the part of the
Lender. Upon the occurrence of any Event of Default, or the entry of any order
for relief with respect to the Borrower under the Bankruptcy Code, any and all
Liabilities of the Borrower to the Lender shall become immediately due and
payable, at the option of the Lender and without notice or demand. At the option
of Lender, the occurrence of any Event of Default shall also constitute, without
notice or demand, a default under all other agreements between the Lender and
the Borrower and instruments and papers given the Lender by the Borrower,
whether such agreements, instruments, or papers now exist or hereafter arise.
7-1. FAILURE TO PAY REVOLVING CREDIT OR THE EQUIPMENT LINE. The failure by
the Borrower to pay any amount when due under the Revolving Credit or the
Equipment Line, or any other Liability.
7-2. FAILURE TO PERFORM COVENANT OR LIABILITY. The failure by the Borrower
to promptly, punctually, faithfully and timely perform or discharge, or to
comply with, any covenant to or with the Lender or any Liability.
7-3. MISREPRESENTATION. The determination by the Lender that any
representation or warranty at any time made by the Borrower to the Lender, was
not true or complete when given.
7-4. ACCELERATION OF OTHER DEBT. The occurrence of any event such that any
Indebtedness of the Borrower to any creditor other than the Lender in excess of
$25,000.00 has been accelerated.
7-5. DEFAULT UNDER OTHER AGREEMENTS. The occurrence of any breach or
default under any agreement (a) between the Lender and the Borrower or
instrument
- 20 -
21
or paper given the Lender by the Borrower, whether such agreement, instrument,
or paper now exists or hereafter arises (notwithstanding that the Lender may not
have exercised its rights upon default under any such other agreement,
instrument or paper), or (b) the occurrence of any event of default (after the
expiration of any applicable grace or cure periods) in the Borrower's agreements
with Summit Partners.
7-6. CASUALTY LOSS; NON-ORDINARY COURSE SALES. The occurrence of any (a)
uninsured loss, theft, damage, or destruction of or to any material portion of
the Borrower's assets, or (b) sale (other than sales in the ordinary course of
business) of any material portion of the Borrower's assets.
7-7. JUDGMENT; RESTRAINT OF BUSINESS. (a) The service of process upon the
Lender seeking to attach, by trustee, mesne, or other process, any of the
Borrower's funds on deposit with, or assets of the Borrower in the
possession of, the Lender.
(b) The entry of any judgment against the Borrower, which judgment is
not satisfied (if a money judgment) or appealed from (with execution or
similar process stayed) within thirty (30) days of its entry.
(c) The entry of any order or the imposition of any other process
having the force of law, the effect of which is to restrain in any material
way the conduct by the Borrower of its business in the ordinary course.
7-8. BUSINESS FAILURE. Any act by, against, or relating to the Borrower, or
its property or assets, which act constitutes the application for, consent to,
or sufferance of the appointment of a receiver, trustee, or other person,
pursuant to court action or otherwise, over all, or any part of the Borrower's
property; the granting of any trust mortgage or execution of an assignment for
the benefit of the creditors of the Borrower, or the occurrence of any other
voluntary or involuntary liquidation or extension of debt agreement for the
Borrower; or the offering by or entering into by the Borrower of any
composition,
- 21 -
22
extension, or any other arrangement seeking relief from or extension of the
debts of the Borrower, or the initiation of any other judicial or non-judicial
proceeding or agreement by, against, or including the Borrower which seeks or
intends to accomplish a reorganization or arrangement with creditors (however,
it shall not be an Event of Default hereunder until the earlier of (x) the entry
of an order for relief against the Borrower, or (y) the expiration of thirty
(30) days without dismissal of such complaint, application, or petition if such
complaint, application or petition filed against the Borrower was not filed by
or at the direction of the Borrower or any related entity, and is being
diligently contested).
7-9. BANKRUPTCY. The failure by the Borrower to generally pay the debts of
the Borrower as they mature; adjudication of bankruptcy or insolvency relative
to the Borrower; the entry of an order for relief or similar order with respect
to the Borrower in any proceeding pursuant to The Bankruptcy Code or any other
federal bankruptcy law; the filing of any complaint, application, or petition by
or against the Borrower initiating any matter in which the Borrower is or may be
granted any relief from the debts of the Borrower pursuant to the Bankruptcy
Code or any other insolvency statute or procedure (however, it shall not be an
Event of Default hereunder until the earlier of (x) the entry of an order for
relief against the Borrower, or (y) the expiration of thirty (30) days without
dismissal of such complaint, application, or petition if such complaint,
application or petition filed against the Borrower was not filed by or at the
direction of the Borrower or any related entity, and is being diligently
contested).
7-10. CHANGE IN CONTROL. Any change in the ownership of the capital stock
of the Borrower such that those Persons who, at the execution of the within
Agreement, Control the Borrower, no longer so Control the Borrower.
ARTICLE 8 - TERM OF AGREEMENT.
8-1. TERMINATION OF REVOLVING CREDIT AND EQUIPMENT LINE.
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23
(a) REVOLVING CREDIT. Unless demand is sooner made by the Lender upon
or after the occurrence of an Event of Default hereunder, the term of the
Borrower's ability to request new loans or advances under the Revolving
Credit shall be terminated and all Liabilities under the Revolving Credit
shall be immediately due and payable in full upon the sooner of (the
"REVOLVING CREDIT TERMINATION DATE"): (i) the entry of any order for relief
with respect to the Borrower under the Bankruptcy Code, or (ii) April 13,
2000.
(b) EQUIPMENT LINE. Unless demand is sooner made by the Lender upon
or after the occurrence of an Event of Default hereunder, the Equipment
Line shall be terminated and all Liabilities under the Equipment Line shall
be immediately due and payable in full upon the sooner of (the "EQUIPMENT
LINE TERMINATION DATE"): (i) the entry of any order for relief with respect
to the Borrower under the Bankruptcy Code, or (ii) September 30, 2002.
8-2. All amounts borrowed or advanced upon the Revolving Credit shall be
repaid as provided in Sections 2-5 and 2-6, and as otherwise provided hereunder.
8-3. All amounts borrowed or advanced upon the Equipment Line shall be
repaid as provided in Sections 2-5 and 2-6, and as otherwise provided hereunder.
8-4. The within Agreement shall continue in full force and effect
applicable to all Liabilities until all Liabilities have been paid and/or
satisfied in full and the within Agreement is specifically terminated in writing
by a duly authorized officer of the Lender.
ARTICLE 9 - GENERAL.
9-1. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Borrower and the Borrower's representatives, successors, and assigns and shall
enure to the benefit of the Lender and the Lender's successors and assigns
PROVIDED, HOWEVER, no trustee or other fiduciary appointed with respect to the
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24
Borrower shall have any rights hereunder. In the event that the Lender assigns
or transfers its rights under this Agreement, the assignee shall thereupon
succeed to and become vested with all rights, powers, privileges, and duties of
the Lender hereunder and the Lender shall thereupon be discharged and relieved
from its duties and obligations hereunder.
9-2. SEVERABILITY. Any determination that any provision of this Agreement
or any application thereof is invalid, illegal, or unenforceable in any respect
in any instance shall not affect the validity, legality, or enforceability of
such provision in any other instance, or the validity, legality, or
enforceability of any other provision of this Agreement.
9-3. AMENDMENTS; COURSE OF DEALING. This Agreement and the other Loan
Documents incorporate all discussions and negotiations between the Borrower and
the Lender, either express or implied, concerning the matters included herein
and in such other instruments, any custom, usage, or course of dealings to the
contrary notwithstanding. No such discussions, negotiations, custom, usage, or
course of dealings shall limit, modify, or otherwise affect the provisions
thereof. No failure by the Lender to give notice to the Borrower of the
Borrower's having failed to observe and comply with any warranty or covenant
included in any Loan Document shall constitute a waiver of such warranty or
covenant or the amendment of the subject Loan Document.
9-4. POWER OF ATTORNEY. In connection with all powers of attorney included
in this Agreement, the Borrower hereby grants unto the Lender full power to do
any and all things necessary or appropriate in connection with the exercise of
such powers as fully and effectually as the Borrower might or could do, which
power of attorney SHALL ONLY BE EFFECTIVE UPON THE OCCURRENCE OF AN EVENT OF
DEFAULT, hereby ratifying all that said attorney shall do or cause to be done by
virtue of this Agreement. No power of attorney set forth in this Agreement shall
be affected by any disability or incapacity suffered by the Borrower and each
shall survive the same. All powers conferred upon the Lender by this Agreement,
being coupled with an interest, shall be irrevocable until this Agreement is
terminated.
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25
9-5. LENDER'S COSTS AND EXPENSES. The Borrower shall pay on demand all
Costs of Collection and all reasonable expenses of the Lender in connection with
the preparation, execution, and delivery of this Agreement, and any and all
documents, instruments and agreements delivered to the Lender in connection
herewith, whether evidencing the Liabilities, or granting the Lender certain
rights with respect to the Borrower, or its shares of stock, and of any Loan
Documents, whether now existing or hereafter arising, and all other reasonable
expenses which may be incurred by the Lender in preparing or amending this
Agreement and all other agreements, instruments, and documents related thereto,
or otherwise incurred with respect to the Liabilities. The Borrower specifically
authorizes the Lender to pay all such fees and expenses and in the Lender's
discretion, to add such fees and expenses to the Loan Account.
9-6. COPIES AND FACSIMILES. This Agreement and all documents which relate
thereto, which have been or may be hereinafter furnished the Lender may be
reproduced by the Lender by any photographic, microfilm, xerographic, digital
imaging, or other process, and the Lender may destroy any document so
reproduced. Any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made in the
regular course of business).
9-7. MASSACHUSETTS LAW. This Agreement and all rights and obligations
hereunder, including matters of construction, validity, and performance, shall
be governed by the laws of The Commonwealth of Massachusetts.
9-8. CONSENT TO JURISDICTION. The Borrower agrees that any legal action,
proceeding, case, or controversy against the Borrower with respect to any Loan
Document may be brought in the Superior Court of Suffolk County Massachusetts or
in the United States District Court, District of Massachusetts, sitting in
Boston, Massachusetts, as the Lender may elect in the Lender's sole discretion.
By execution and delivery of this Agreement, the Borrower, for itself and in
respect of its property, accepts, submits, and consents generally and
unconditionally, to the jurisdiction of the aforesaid courts.
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26
9-9. INDEMNIFICATION. The Borrower shall indemnify, defend, and hold the
Lender and any employee, officer, or agent of the Lender (each, an "INDEMNIFIED
PERSON") harmless of and from any claim brought or threatened against any
Indemnified Person by the Borrower, any guarantor or endorser of the
Liabilities, or any other Person (as well as from attorneys' reasonable fees and
expenses in connection therewith) on account of the Lender's relationship with
the Borrower or any other guarantor or endorser of the Liabilities (each of
which may be defended, compromised, settled, or pursued by the Indemnified
Person with counsel of the Lender's selection, but at the expense of the
Borrower) other than any claim as to which a final determination is made in a
judicial proceeding (in which the Lender and any other Indemnified Person has
had an opportunity to be heard), which determination includes a specific finding
that the Indemnified Person seeking indemnification had acted in a grossly
negligent manner or in actual bad faith. The within indemnification shall
survive payment of the Liabilities and/or any termination, release, or discharge
executed by the Lender in favor of the Borrower.
9-10. AGREEMENT CONTROLLING. The Loan Documents shall be construed and
interpreted in a harmonious manner, provided, however, in the event of any
inconsistency between the provisions of the within Agreement and any other Loan
Document, the provisions of the within Agreement shall govern and control.
9-11. CONFIDENTIALITY. Lender shall maintain the confidentiality of any
non-public information received pursuant to this Agreement, provided, however,
that disclosure of such information may be made: (i) to the subsidiaries or
affiliates of Lender, (ii) to prospective transferees or purchasers of the
Loans, provided that they have entered into a comparable confidentiality
agreement in favor of Borrower and have delivered a copy to Borrower, (iii) as
required by law, regulations, rule or order, subpoena, judicial order or similar
order, (iv) as may be required in connection with the examination, audit or
similar investigation of Lender, and (v) as may be appropriate in connection
with the exercise of any remedies hereunder. Confidential information hereunder
shall not include information that either: (a) is in the public domain or in the
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27
knowledge or possession of Lender when disclosed to Lender, or becomes part of
the public domain after disclosure to Lender through no fault of Lender; or (b)
is disclosed to Lender by a third party, provided Lender does not have actual
knowledge that such third party is prohibited from disclosing such information.
9-12. RIGHT OF SET-OFF. Any and all deposits or other sums at any time
credited by or due to the undersigned from the Lender and any cash, securities,
instruments or other property of the undersigned in the possession of the
Lender, whether for safekeeping or otherwise (regardless of the reason the
Lender or the Participant had received the same) shall at all times constitute
security for all Liabilities and for any and all obligations of the undersigned
to the Lender, and may be applied or set off against the Liabilities and against
the obligations of the undersigned to the Lender including, without limitation,
those arising hereunder, at any time after such are then due.
9-13. WAIVERS. (a) The Borrower (and all guarantors, endorsers, and
sureties of the Liabilities) make each of the waivers included in Subsection
(b), below, knowingly, voluntarily, and intentionally, and understands that the
Lender, in entering into the financial arrangements contemplated hereby and in
providing loans and other financial accommodations to or for the account of the
Borrower as provided herein, whether not or in the future, is relying on such
waivers.
(b) THE BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND SURETY
RESPECTIVELY WAIVES THE FOLLOWING:
(i) Except as otherwise specifically required hereby, notice of
non-payment, demand, presentment, protest and all forms of demand and
notice, both with respect to the Liabilities.
(ii) Except as otherwise specifically required hereby, the right to
notice and/or hearing prior to the Lender's exercising of the Lender's
rights upon default.
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28
(iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN
WHICH THE LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS
INITIATED BY OR AGAINST THE LENDER OR IN WHICH THE LENDER IS JOINED AS A
PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT
OF, ANY RELATIONSHIP AMONGST OR BETWEEN THE BORROWER OR ANY OTHER PERSON
AND THE LENDER (AND THE LENDER LIKEWISE WAIVES THE RIGHT TO A JURY IN ANY
TRIAL OF ANY SUCH CASE OR CONTROVERSY).
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29
9-14. DEFINITIONS. All capitalized terms herein shall have the meaning
attributed thereto in EXHIBIT 9-14 herein.
("BORROWER")
MCK COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
---------------------------------------
Print Name: ▇▇▇▇ ▇▇▇▇▇
-------------------------------
Title: CFO
------------------------------------
MCK TELECOMMUNICATIONS INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
---------------------------------------
Print Name: ▇▇▇▇ ▇▇▇▇▇
-------------------------------
Title: CFO
------------------------------------
("LENDER")
BANKBOSTON, N.A.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Title: Vice President
------------------------------------
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30
EXHIBITS
The following Exhibits to this Loan and Security Agreement are respectively
described in the Section indicated below. Those schedules for which no
information has been inserted or provided shall be deemed to read "None."
Exhibit 4-3 - Intellectual Property ss.4-3
Exhibit 4-4 - Insurance Policies ss.4-4
Exhibit 4-5 - Licenses ss.4-5
Exhibit 5-10 - Financial Covenants ss.5-10
Exhibit 9-14 - Definitions ss.9-14
31
EXHIBIT 5-10
FINANCIAL COVENANTS
1. LEVERAGE RATIO. The Borrower shall not permit, as of the last day of each
month, the ratio computed by dividing (A) Borrower's Unsubordinated
Liabilities (as defined herein), by (B) the Borrower's Tangible Capital
Base (as defined herein), to be greater than 0.75 to 1.0.
2. QUICK RATIO. The Borrower shall not permit, as of the last day of each
month, the ratio computed by dividing (A) Borrower's Quick Assets (as
defined herein), by (B) the Borrower's Current Liabilities (as defined
herein), to be less than 2.0 to 1.0.
3. NET INCOME/LOSS. The Borrower shall show a minimum net profit (maximum
loss) as described below: (i) during Fiscal Year 1999, a maximum cumulative
loss of $300,000.00, which shall be tested on the last day of the fourth
quarter of such fiscal year, (ii) during Fiscal Year 2000, a minimum net
profit of $1.00 for each two quarter period, which shall be tested on a
rolling consecutive quarter basis, and (iii) during Fiscal Year 2000, a
minimum net profit of $1.00 for such fiscal year, which shall be tested on
the last day of fourth quarter of such fiscal year.
4. CASH FLOW COVERAGE RATIO. The Borrower shall maintain, to be tested as of
the last day of each quarter, commencing with the last day of the third
quarter of Fiscal Year 1999, the ratio computed by dividing (A) Borrower's
EBITDA minus cash taxes (measured for the preceding two (2) quarters), by
(B) Borrower's Consolidated Total Debt Service (measured for the quarter
ending on the test date, PLUS the Borrower's projected
32
Consolidated Total Debt Service for the quarter beginning after the test
date), of not less than 1.50 to 1.0.
33
EXHIBIT 9-14
DEFINITIONS
As herein used, the following terms have the following meanings or are
defined in the section of the within Agreement so indicated:
"ACCEPTABLE ACCOUNTS": (a) Such of the Borrower's Accounts and Accounts
Receivable (as defined below) as arise in the ordinary course of the
Borrower's business for goods sold and/or services rendered by the
Borrower, which Accounts and Accounts Receivable have been determined
by the Lender to be satisfactory and have been earned by performance
and are owed to the Borrower by such of the Borrower's trade customers
as the Lender determines to be satisfactory, in the Lender's sole
discretion in each instance.
(b) The following is a partial listing of those types of
accounts or accounts receivable which are not Acceptable Accounts:
(i) Any which is more than 90 days past invoice date as
shown on the agings of the Borrower's accounts receivable furnished
the Lender from time to time (each of which agings shall be prepared
in accordance with generally accepted auditing standards).
(ii) Any Account with an Account Debtor, which, when
aggregated with all of the accounts of that Account Debtor, exceeds
20% of the then aggregate of Acceptable Accounts.
(iii) Any which arises out of the sale by the Borrower of
goods consigned or delivered to the Borrower or to the Account Debtor
on sale or return terms (whether or not compliance has been made with
Section 2-326 of the Uniform Commercial Code).
(iv) Any which arises out of any sale made on a basis other
than upon terms usual to the business of the Borrower.
34
(v) Any which arises out of any sale made on a "▇▇▇▇ and
hold," dating, a pre-billed basis, or delayed shipping basis.
(vi) Any which is owed by any governmental entity, or any
Account Debtor whose principal place of business is not within the
continental United States or the District of Columbia, or any which is
pre-approved by Lender in writing (other than ▇▇▇▇ Canada).
(vii) Any which is owed by any Related Entity.
(viii) Any as to which the Account Debtor holds or is
entitled to any claim, counterclaim, set off, or chargeback, but only
up to the amount of such claim, counterclaim, set off, or chargeback.
(ix) Any which is evidenced by a promissory note.
(x) Any which is due and payable to the Borrower in more
than thirty (30) days from invoice.
(xi) Any which is owed by any person employed by, or a
salesperson of, the Borrower.
(xii) Any which is owned by non-corporate entity.
(xii) Any which the Lender in its sole discretion considers
unacceptable for any reason.
"ACCOUNTS" and "ACCOUNTS RECEIVABLE" include, without limitation,
"accounts" as defined in the UCC, and also all: accounts, accounts
receivable, credit card receivables, notes, drafts, acceptances, and
other forms of obligations and receivables and rights to payment for
credit extended and for goods sold or leased, or services rendered,
whether or not yet earned by performance; all "contract rights" as
formerly defined in the UCC; all Inventory which gave rise thereto,
and all rights associated with such Inventory, including the right
35
of stoppage in transit; all reclaimed, returned, rejected or
repossessed Inventory (if any) the sale of which gave rise to any
Account.
"ACCOUNT DEBTOR": has the meaning given that term in the UCC.
"AFFILIATE": means, with respect to any two Persons, a relationship in
which (a) one holds, directly or indirectly, not less than Twenty Five
Percent (25%) of the capital stock, beneficial interests, partnership
interests, or other equity interests of the other; or (b) one has,
directly or indirectly, Control of the other; or (c) not less than
Twenty Five Percent (25%) of their respective ownership is directly or
indirectly held by the same third Person.
"AGENT": means MCK Communications.
"AVAILABILITY": refers at any time to the lesser of (i) or (ii), below,
where:
(i) Is up to the result of the following:
(A) Two Million Dollars and No Cents ($2,000,000.00).
MINUS
(B) The then unpaid principal balance of the Revolving Credit.
MINUS
(C) The aggregate amounts then undrawn on all outstanding
Letters of Credit issued or incurred, or caused to be issued
or incurred, by the Lender for the account and/or the
benefit of the Borrower.
(ii) Is up to the result of the following:
36
(A) 80.0% of the face amount (determined by the Lender in the
Lender's sole discretion) of each of the Borrower's
Acceptable Accounts (as defined below), all as determined by
the Lender in its sole discretion
MINUS
(B) The then unpaid principal balance of the Revolving Credit.
MINUS
(C) The aggregate amounts then undrawn on all outstanding
Letters of Credit issued or incurred, or caused to be issued
or incurred, by the Lender for the account and/or the
benefit of the Borrower, or advanced under corporate credit
cards.
"BANKRUPTCY CODE": Title 11, U.S.C., as amended from time to time.
"BASE RATE": The higher of (a) the annual rate of interest announced from
time to time by the Lender at its head office in Boston, Massachusetts
as its "Base Rate" and (b) one half of one percent (1/2%) above the
overnight federal funds effective rate as published by the Board of
Governors of the Federal Reserve System, as in effect from time to
time. Any change in such Base Rate shall be effective, for purposes of
the calculation of interest due hereunder, when made effective
generally by the Lender.
"BORROWER": is defined in the Preamble.
"BUSINESS DAY": any day other than (a) a Saturday, Sunday; (b) a day on
which the Lender is not open to the general public to conduct
business; or (c) a day on which banks in ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇
generally are not open to the general public for the purpose of
conducting commercial banking business.
"CAPITAL LEASE": any lease which may be capitalized in accordance with
GAAP.
"CHATTEL PAPER": has the meaning given that term in the UCC.
"COLLATERAL": is defined in Section 3-1.
"COMPLIANCE CERTIFICATE": is defined in Section 5-10.
"CONSOLIDATED TOTAL DEBT SERVICE": shall mean, for any fiscal period with
respect to the Borrower and its Affiliates, the sum of (a)
Consolidated Total Interest Expense for such period, PLUS (b) any and
all mandatory or required payments of principal in respect of
Indebtedness of the Borrower and its Affiliates made or required to be
made in such period.
"CONSOLIDATED TOTAL INTEREST EXPENSE": shall mean, for any period, the
aggregate amount of interest required to be paid or accrued by the
Borrower and its Affiliates during such period on all Indebtedness of
the Borrower and its Affiliates outstanding during all or any part of
such period, whether such interest was or is required to be reflected
as an item of expense or capitalized, including payments consisting of
interest in respect of any Capital Lease, and including commitment
fees, agency fees, facility fees, and other fees or expenses in
connection with the borrowing of money.
"CONTRACT RIGHTS": includes, without limitation, "contract rights" as now
of formerly defined in the UCC and also any right to payment under a
contract not yet earned by performance and not evidenced by an
instrument or Chattel Paper.
"CONTROL": Person(s) shall be deemed to Control another Person if such
Person(s) directly or indirectly possess the power to direct or
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cause the direction of the management and policies of such other
Person, whether through ownership of voting securities, by contract,
or otherwise.
"COSTS OF COLLECTION" includes, without limitation, all attorneys'
reasonable fees and reasonable out-of-pocket expenses incurred by the
Lender's attorneys, and all reasonable costs incurred by the Lender in
the administration of the Liabilities and/or the Loan Documents,
including, without limitation, reasonable costs and expenses
associated with travel on behalf of the Lender, which costs and
expenses are directly related to or in respect of the Lender's:
administration and management of the Liabilities; negotiation,
documentation, and amendment of any Loan Document; or efforts to
preserve, protect, collect, or enforce the Liabilities, and/or the
Lender's Rights and Remedies and/or any of the Lender's rights and
remedies against or in respect of any guarantor or other person liable
in respect of the Liabilities (whether or not suit is instituted in
connection with such efforts). The Costs of Collection are
Liabilities, and at the Lender's option may bear interest at the
highest post-default rate which the Lender may charge the Borrower
hereunder as if such had been lent, advanced, and credited by the
Lender to, or for the benefit of, the Borrower.
"CURRENT LIABILITIES": the total of all indebtedness of the Borrower which
properly may be classified as current liabilities in accordance with
GAAP, plus any Liabilities under the Revolving Credit and the
Equipment Line.
"DEBT": the aggregate amount of indebtedness of the Borrower which may be
classified as "liabilities" in accordance with GAAP.
"DOCUMENTS": has the meaning given that term in the UCC.
"DOCUMENTS OF TITLE": has the meaning given that term in the UCC.
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"EBITDA": shall mean earnings before interest taxes depreciation and
amortization, as defined in accordance with GAAP.
"ENCUMBRANCE": each of the following:
(a) security interest, mortgage, pledge, hypothecation, lien,
attachment, or charge of any kind (including any agreement to give any
of the foregoing); conditional sale or other title retention
agreement; sale of accounts receivable or chattel paper; or other
arrangement pursuant to which any Person is entitled to any preference
or priority with respect to the property or assets of another Person
or the income or profits of such other Person or which constitutes an
interest in property to secure an obligation; each of the foregoing
whether consensual or non-consensual and whether arising by way of
agreement, operation of law, legal process or otherwise.
(b) The filing of any financing statement under the UCC or
comparable law of any jurisdiction.
"EQUIPMENT" includes, without limitation, "equipment" as defined in the
UCC, and also all motor vehicles, rolling stock, machinery, office
equipment, plant equipment, tools, dies, molds, store fixtures,
furniture, and other goods, property, and assets which are used and/or
were purchased for use in the operation or furtherance of the
Borrower's business, and any and all accessions, additions thereto,
and substitutions therefor.
"EQUIPMENT LINE": is defined in Section 2-2.
"EQUIPMENT LINE AVAILABILITY": is defined in Section 2-2.
"EQUIPMENT LINE AVAILABILITY END DATE": is defined in Section 2-2.
"EQUIPMENT LINE TERMINATION DATE": is defined in Article 8.
"ERISA": the Employee Retirement Security Act of 1974, as amended.
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"ERISA AFFILIATE": any Person which is under common control with the
Borrower within the meaning of Section 4001 of ERISA or is part of a
group which includes the Borrower and which would be treated as a
single employer under Section 414 of the Internal Revenue Code of
1986, as amended.
"EVENTS OF DEFAULT": is defined in Article 7.
"FACILITY FEE": is defined in Section 2-7.
"FIXTURES": has the meaning given that term in the UCC.
"GAAP": principles which are consistent with those promulgated or adopted
by the Financial Accounting Standards Board and its predecessors (or
successors) in effect and applicable to that accounting period in
respect of which reference to GAAP is being made.
"GENERAL INTANGIBLES" includes, without limitation, "general intangibles"
as defined in the UCC; and also all: rights to payment for credit
extended; deposits; amounts due to the Borrower; credit memoranda in
favor of the Borrower; warranty claims; tax refunds and abatements;
insurance refunds and premium rebates; all means and vehicles of
investment or hedging, including, without limitation, options,
warrants, and futures contracts; records; customer lists; telephone
numbers; goodwill; causes of action; judgments; payments under any
settlement or other agreement; literary rights; rights to performance;
royalties; license and/or franchise fees; rights of admission;
licenses; franchises; license agreements, including all rights of the
Borrower to enforce same; permits, certificates of convenience and
necessity, and similar rights granted by any governmental authority;
patents, patent applications, patents pending, and other intellectual
property; developmental ideas and concepts; proprietary processes;
blueprints, drawings, designs, diagrams, plans, reports, and charts;
catalogs; manuals; technical data; computer software programs
(including the source and object
41
codes therefor), computer records, computer software, rights of access
to computer record service bureaus, service bureau computer contracts,
and computer data; tapes, disks, semi-conductors chips and printouts;
trade secrets rights, copyrights, mask work rights and interests, and
derivative works and interests; user, technical reference, and other
manuals and materials; trade names, trademarks, service marks, and all
good will relating thereto; applications for registration of the
foregoing; and all other general intangible property of the Borrower
in the nature of intellectual property; proposals; cost estimates, and
reproductions on paper, or otherwise, of any and all concepts or
ideas, and any matter related to, or connected with, the design,
development, manufacture, sale, marketing, leasing, or use of any or
all property produced, sold, or leased, by the Borrower or credit
extended or services performed, by the Borrower, whether intended for
an individual customer or the general business of the Borrower, or
used or useful in connection with research by the Borrower.
"GOODS": has the meaning given that term in the UCC.
"INDEBTEDNESS": all indebtedness and obligations of or assumed by any
Person: (i) in respect of money borrowed (including any indebtedness
which is non-recourse to the credit of such Person but which is
secured by an Encumbrance on any asset of such Person) or evidenced by
a promissory note, bond, debenture or other written obligation to pay
money; (ii) for the payment, deferred for more than Thirty (30) days,
of the purchase price of goods or services (other than current trade
liabilities of such Person incurred in the ordinary course of business
and payable in accordance with customary practices); (iii) in
connection with any Letters of Credit or acceptance transaction
(including, without limitation, the face amount of all letters of
credit and acceptances issued for the account of such Person or
reimbursement on account of which such Person would be obligated);
(iv) in connection with the sale or discount of accounts receivable or
chattel paper of the Borrower; (v) on account of deposits or advances;
and (vi) as lessee under Capital Leases. "Indebtedness"
42
of any Person shall also include: (x) Indebtedness of others secured
by an Encumbrance on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; (y) Any guaranty, endorsement,
suretyship or other undertaking pursuant to which that Person may be
liable on account of any obligation of any third party; and (z) the
Indebtedness of a partnership or joint venture in which such Person is
a general partner or joint venturer.
"INDEMNIFIED PERSON": is defined in Section 9-9.
"INSTRUMENTS": has the meaning given that term in the UCC.
"INVENTORY" includes, without limitation, "inventory" as defined in the UCC
and also all: packaging, advertising, and shipping materials related
to any of the foregoing, and all names or marks affixed or to be
affixed thereto for identifying or selling the same; Goods held for
sale or lease or furnished or to be furnished under a contract or
contracts of sale or service by the Borrower, or used or consumed or
to be used or consumed in the Borrower's business; Goods of said
description in transit: returned, repossessed and rejected Goods of
said description; and all documents (whether or not negotiable) which
represent any of the foregoing.
"LEASE": any lease or other agreement, no matter how styled or structured,
pursuant to which the Borrower is entitled to the use or occupancy of
any space.
"LIEN": any Encumbrance as defined herein.
"LENDER": is defined in Preamble.
"LETTERS OF CREDIT": any Letters of Credit procured by the Lender for the
account of the Borrower.
"LIABILITIES" includes, without limitation, all and each of the following,
whether now existing or hereafter arising:
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(a) Any and all direct and indirect liabilities, debts, and
obligations of the Borrower to the Lender, each of every kind, nature,
and description.
(b) Each obligation to repay any loan, advance, indebtedness,
note, obligation, overdraft, or amount now or hereafter owing by the
Borrower to the Lender (including all future advances whether or not
made pursuant to a commitment by the Lender), whether or not any of
such are liquidated, unliquidated, primary, secondary, secured,
unsecured, direct, Indirect, absolute, contingent, or of any other
type, nature, or description, or by reason of any cause of action
which the Lender may hold against the Borrower.
(c) All notes and other obligations of the Borrower now or
hereafter assigned to or held by the Lender, each of every kind,
nature, and description.
(d) All interest, fees, and charges and other amounts which may
be charged by the Lender to the Borrower and/or which may be due from
the Borrower to the Lender from time to time.
(e) All costs and expenses incurred or paid by the Lender in
respect of any agreement between the Borrower and the Lender or
instrument furnished by the Borrower to the Lender (including, without
limitation, Costs of Collection, attorneys' reasonable fees, and all
court and litigation costs and expenses).
(f) Any and all covenants of the Borrower to or with the Lender
and any and all obligations of the Borrower to act or to refrain from
acting in accordance with any agreement between the Borrower and the
Lender or instrument furnished by the Borrower to the Lender.
44
"LINES OF CREDIT": individually and collectively, the Revolving Credit and
the Equipment Line.
"LOAN ACCOUNT": the account maintained on Lender's books in which a record
will be kept of all loans and advances hereunder and payments thereon,
and all calculations of interest fees or other costs as provided
hereunder.
"LOAN DOCUMENTS": the within Agreement, each instrument and document
executed and/or delivered in connection with the arrangements
contemplated hereby, as each may be amended from time to time.
"MASTER NOTE": is defined in Section 2-4.
"NET INCOME": is defined as the Borrower's net profit, after taxes,
computed in accordance with GAAP.
"NET WORTH": is defined as stockholders equity (or deficit) determined in
accordance with GAAP.
"OFFICER'S CERTIFICATE": is defined in Section 5-7.
"PERSON": any natural person, and any corporation, trust, partnership,
joint venture, or other enterprise or entity.
"PROCEEDS": include, without limitation, "Proceeds" as defined in the UCC
(defined below), and each type of property described in Section 3-1,
above.
"QUICK ASSETS": shall mean Borrower's cash and cash equivalents acceptable
to the Lender, plus Accounts which are quick assets in accordance with
GAAP.
"RECEIPTS": all cash, cash equivalents, checks, and credit card slips and
receipts as arise out of the sale of the Collateral.
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"RECEIVABLES COLLATERAL": the Borrower's Accounts, Accounts Receivable,
Contract Rights, General Intangibles, Chattel Paper, Instruments,
Documents of Title, Documents, Securities, letters of credit for the
benefit of the Borrower, and bankers' acceptances held by the
Borrower, and any rights to payment.
"RELATED ENTITY": refers to (a) any Affiliate; and (b) any corporation,
trust, partnership, joint venture, or other enterprise which: is a
parent, brother-sister, subsidiary, or affiliate, of the Borrower;
could have such enterprise's tax returns or financial statements
consolidated with the Borrower's; could be a member of the same
controlled group of corporations (within the meaning of Section
1563(a)(1), (2) and (3) of the Internal Revenue Code of 1986, as
amended from time to time) of which the Borrower is a member; Controls
or is Controlled by the Borrower or any Affiliate of the Borrower.
"REQUIREMENT OF LAW": as to any Person: (a)(i) all statutes, rules,
regulations, orders, or other requirements having the force of law and
(ii) all court orders and injunctions, arbitrator's decisions, and/or
similar rulings, in each instance ((i) and (ii)) of or by any federal,
state, municipal, and other governmental authority, or court,
tribunal, panel, or other body which has or claims jurisdiction over
such Person, or any property of such Person, or of any other Person
for whose conduct such Person would be responsible; (b) that Person's
charter, certificate of incorporation, articles of organization,
and/or other organizational documents, as applicable; and (c) that
Person's by-laws and/or other instruments which deal with corporate or
similar governance, as applicable.
"REVOLVING CREDIT": is defined in Section 2-1.
"REVOLVING CREDIT TERMINATION DATE": is defined in Article 8.
"SECURITIES": has the meaning given that term in the UCC.
46
"SUBORDINATED DEBT": all Indebtedness of the Borrower to any Person other
than the Lender, which Indebtedness is specifically subordinated to
the Liabilities, and which Indebtedness is approved by the Lender.
"TANGIBLE CAPITAL BASE": is defined as Tangible Net Worth plus Subordinated
Debt, plus deferred dividends.
"TANGIBLE NET WORTH": is defined as Net Worth (as defined herein), less
capitalized software and any other asset deemed by the Lender to be
intangible.
"TRANSFER" is defined in Section 6-1.
"UCC": the Uniform Commercial Code as presently in effect in Massachusetts
(Mass. Gen. Laws, Ch. 106).
"UNSUBORDINATED LIABILITIES": shall be defined as Debt less Subordinated
Debt.