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FLEXIINTERNATIONAL SOFTWARE, INC.
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April 30, ▇▇▇▇
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Gentlemen:
This letter agreement will set forth certain understandings between
FlexiInternational Software, Inc., a Delaware corporation (the "Borrower") and
Fleet National Bank (the "Bank") with respect to Revolving Loans (hereinafter
defined) to be made by the Bank to the Borrower and with respect to letters of
credit which may hereafter be issued by the Bank for the account of the
Borrower. In consideration of the mutual promises contained herein and in the
other documents referred to below, and for other good and valuable
consideration, receipt and sufficiency of which are hereby acknowledged, the
Borrower and the Bank agree as follows:
I. AMOUNTS AND TERMS
1.1. Reference to Documents. Reference is made to (i) that certain
$2,000,000 face principal amount promissory note (the "Revolving Note") of even
date herewith made by the Borrower and payable to the order of the Bank, and
(ii) that certain Accounts Receivable Security Agreement of even date herewith
from the Borrower to the Bank (the "Security Agreement").
1.2. The Borrowing; Revolving Note. Subject to the terms and conditions
hereinafter set forth, the Bank will make loans ("Revolving Loans") to the
Borrower, in such amounts as the Borrower may request, on any Business Day prior
to the first to occur of (i) the Expiration Date, or (ii) the earlier
termination of the within-described revolving financing arrangements pursuant to
Section 5.2 or Section 6.7; provided, however, that (1) the aggregate principal
amount of Revolving Loans outstanding shall at no time exceed the Maximum
Revolving Amount (hereinafter defined) and (2) the Aggregate Bank Liabilities
(hereinafter defined) shall at no time exceed the Borrowing Base (hereinafter
defined). Within such limits, and subject to the terms and conditions hereof,
the Borrower may 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) two (2%) percent per annum plus (ii) the per annum rate
otherwise payable
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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 written demand. The Borrower hereby irrevocably authorizes the Bank to make
or cause to be made, on a schedule attached to the Revolving Note or on the
books of the Bank, at or following the time of making each Revolving Loan and of
receiving any payment of principal, an appropriate notation reflecting such
transaction and the then aggregate unpaid principal balance of the Revolving
Loans. The amount so noted shall constitute presumptive evidence as to the
amount owed by the Borrower with respect to principal of the Revolving Loans.
Failure of the Bank to make any such notation shall not, however, affect any
obligation of the Borrower or any right of the Bank hereunder or under the
Revolving Note. All payments of interest, principal and any other sum payable
hereunder and/or under the Revolving Note shall be made to the Bank, in
immediately available funds, at its office at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other address as the Bank may from time to time direct in writing.
All payments received by the Bank after 2:00 p.m. on any day shall be deemed
received as of the next succeeding Business Day. All monies received by the Bank
shall be applied first to fees, charges, costs and expenses payable to the Bank
under this letter agreement, the Revolving Note and/or any of the other Loan
Documents, next to interest then accrued on account of any Revolving Loans or
letter of credit reimbursement obligations and only thereafter to principal of
the Revolving Loans and letter of credit reimbursement obligations. All interest
and fees payable hereunder and/or under the Revolving Note shall be calculated
on the basis of a 365-day year for the actual number of days elapsed.
1.3. Repayment; Renewal. The Borrower shall repay in full all Revolving
Loans and all interest thereon upon the first to occur of: (i) the Expiration
Date or (ii) an acceleration under Section 5.2(a) following an Event of Default.
The Borrower may repay, at any time, without penalty or premium, the whole or
any portion of any Revolving Loan. In addition, if at any time the Borrowing
Base is in an amount which is less than the then outstanding Aggregate Bank
Liabilities, the Borrower will forthwith prepay so much of the Revolving Loans
as may be required (or arrange for the termination of such letters of credit as
may be required) so that the Aggregate Bank Liabilities will not exceed the
Borrowing Base. The Bank may, at its sole discretion, renew the financing
arrangements described in this letter agreement by extending the Expiration Date
in a writing signed by the Bank and accepted by the Borrower. Neither the
inclusion in this letter agreement or elsewhere of covenants relating to periods
of time after the Expiration Date, nor any other provision hereof, nor any
action (except a written extension pursuant to the immediately preceding
sentence), non-action or course of dealing on the part of the Bank will be
deemed an extension of, or agreement on the part of the Bank to extend, the
Expiration Date.
1.4. Advances and Payments. The proceeds of all Revolving Loans shall
be credited by the Bank to a general deposit account maintained by the Borrower
with
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the Bank. The proceeds of each Revolving Loan will be used by the Borrower
solely for working capital purposes.
The Bank may charge any general deposit account of the Borrower (other
than any payroll account, fiduciary account or other account as to which the
Bank is prohibited by applicable law or regulations from exercising any right of
set-off) at the Bank with the amount of all payments of interest, principal and
other sums due, from time to time, under this letter agreement and/or the
Revolving Note and/or with respect to any letter of credit; and will thereafter
notify the Borrower of the amount so charged. The failure of the Bank so to
charge any account or to give any such notice shall not affect the obligation of
the Borrower to pay interest, principal or other sums as provided herein or in
the Revolving Note or with respect to any letter of credit.
Whenever any payment to be made to the Bank hereunder or under the
Revolving Note or with respect to any letter of credit shall be stated to be due
on a day which is not a Business Day, such payment may be made on the next
succeeding Business Day, and interest payable on each such date shall include
the amount thereof which shall accrue during the period of such extension of
time. All payments by the Borrower hereunder and/or in respect of the Revolving
Note and/or with respect to any letter of credit shall be made net of any
impositions or taxes and without deduction, set-off or counterclaim,
notwithstanding any claim which the Borrower may now or at any time hereafter
have against the Bank.
1.5. Letters of Credit. At the Borrower's request, the Bank may, from
time to time, in its sole discretion issue one or more letters of credit for the
account of the Borrower; provided that at the time of such issuance and after
giving effect thereto the Aggregate Bank Liabilities will in no event exceed the
lesser of (i) $2,000,000 or (ii) the then effective Borrowing Base. Any such
letter of credit will be issued for such fee and upon such terms and conditions
as may be agreed to by the Bank and the Borrower at the time of issuance. The
Borrower hereby authorizes the Bank, without further request from the Borrower,
to cause the Borrower's liability to the Bank for reimbursement of funds drawn
under any such letter of credit to be repaid from the proceeds of a Revolving
Loan to be made hereunder. The Borrower hereby irrevocably requests that such
Revolving Loans be made.
1.6. Conditions to Advance. Prior to the making of the initial
Revolving Loan or the issuance of any letter of credit hereunder, the Borrower
shall deliver to the Bank duly executed copies of this letter agreement, the
Security Agreement, the Revolving Note and the documents and other items listed
on the Closing Agenda delivered herewith by the Bank to the Borrower, all of
which, as well as all legal matters incident to the transactions contemplated
hereby, shall be satisfactory in form and substance to the Bank and its counsel.
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Without limiting the foregoing, any Revolving Loan or letter of credit
issuance (including the initial Revolving Loan or letter of credit issuance) is
subject to the further conditions precedent that on the date on which such
Revolving Loan is made or such letter of credit is issued (and after giving
effect thereto):
(a) All statements, representations and warranties of the Borrower made
in this letter agreement shall continue to be correct in all material respects
as of the date of such Revolving Loan or the date of issuance of such letter of
credit, as the case may be.
(b) All covenants and agreements of the Borrower contained herein
and/or in any of the other Loan Documents shall have been complied with in all
material respects on and as of the date of such Revolving Loan or the date of
issuance of such letter of credit, as the case may be.
(c) No event which constitutes, or which with notice or lapse of time
or both could constitute, an Event of Default shall have occurred and be
continuing.
Each request by the Borrower for any Revolving Loan or for the issuance
of any letter of credit, and each acceptance by the Borrower of the proceeds of
any Revolving Loan or delivery of a letter of credit, will be deemed a
representation and warranty by the Borrower that at the date of such Revolving
Loan or the date of issuance of such letter of credit, as the case may be, and
after giving effect thereto all of the conditions set forth in the foregoing
clauses (a)-(c) of this Section 1.6 will be satisfied. Each request for a
Revolving Loan or letter of credit issuance will be accompanied by a borrowing
base certificate on a form satisfactory to the Bank, executed by the chief
financial officer of the Borrower, unless such a certificate shall have been
previously furnished setting forth the Borrowing Base as at a date not more than
30 days prior to the date of the requested borrowing 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 Revolving Loans hereunder and/or
issue letters of credit hereunder, the Borrower warrants and represents to the
Bank as follows:
(a) The Borrower is a corporation duly organized, validly existing and
in good standing under the laws of Delaware. The Borrower has full corporate
power to own its property and conduct its business as now conducted, to grant
the security interests contemplated by the Security Agreement and to enter into
and perform this letter agreement and the other Loan Documents. The Borrower is
duly qualified to do business and is in good standing in Connecticut and is also
duly qualified to do
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business in and is in good standing in each other jurisdiction in which the
Borrower maintains any facility, sales office, warehouse or other location, and
in each other jurisdiction where the failure so to qualify could (singly or in
the aggregate with all other such failures) have a material adverse effect on
the financial condition, business or prospects of the Borrower, all such
jurisdictions being listed on item 2.1(a) of the attached Disclosure Schedule.
At the date hereof, the Borrower has no Subsidiaries, except as shown on said
item 2.1(a) of the attached Disclosure Schedule. The Borrower is not a member of
any partnership or joint venture.
(b) At the date of this letter agreement, all of the outstanding
capital stock of the Borrower is owned, of record and beneficially, as set forth
on item 2.1(b) of the attached Disclosure Schedule.
(c) The execution, delivery and performance by the Borrower of this
letter agreement and each of the other Loan Documents have been duly authorized
by all necessary corporate and other action and do not and will not:
(i) violate any provision of, or require any filings (other
than filings under the Uniform Commercial Code), registration, consent
(other than such consent of the Connecticut Development Authority as
has been previously obtained) or approval under, any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or
award presently in effect having applicability to the Borrower;
(ii) violate any provision of the charter or by-laws of the
Borrower, or result in a breach of or constitute a default or require
any waiver or consent under any indenture or loan or credit agreement
or any other material agreement, lease or instrument to which the
Borrower is a party or by which the Borrower or any of its properties
may be bound or affected or require any other consent (other than such
consent of the Connecticut Development Authority as has been previously
obtained) 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
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knowledge of the Borrower, threatened by or against the Borrower or any
Subsidiary of the Borrower before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
could hinder or prevent the consummation of the transactions contemplated hereby
or call into question the validity of this letter agreement or any of the other
Loan Documents or any action taken or to be taken in connection with the
transactions contemplated hereby or thereby or which in any single case or in
the aggregate might result in any material adverse change in the business,
prospects, condition, affairs or operations of the Borrower or any Subsidiary.
Notwithstanding the foregoing, nothing contained in this SubSection 2.1(e) will
be deemed to require disclosure of any civil action or administrative proceeding
which seeks monetary damages only, such monetary damages being less than
$100,000.
(f) The Borrower is not in violation of any term of its charter or
by-laws as now in effect. Neither the Borrower nor any Subsidiary of the
Borrower is in material violation of any term of any mortgage, indenture or
judgment, decree or order, or any other instrument, contract or agreement to
which it is a party or by which any of its property is bound.
(g) The Borrower has filed (and has caused each of its Subsidiaries to
file) all federal, state and local tax returns, reports and estimates required
to be filed by the Borrower and/or by any such Subsidiary. All such filed
returns, reports and estimates are proper and accurate and the Borrower or the
relevant Subsidiary has paid all taxes, assessments, impositions, fees and other
governmental charges required to be paid in respect of the periods covered by
such returns, reports or estimates. No deficiencies for any tax, assessment or
governmental charge have been asserted or assessed, and the Borrower knows of no
material tax liability or basis therefor.
(h) The Borrower is in compliance (and each Subsidiary of the Borrower
is in compliance) with all requirements of law, federal, state and local, and
all requirements of all governmental bodies or agencies having jurisdiction over
it, the conduct of its business, the use of its properties and assets, and all
premises occupied by it, failure to comply with any of which could (singly or in
the aggregate with all other such failures) have a material adverse effect upon
the assets, business, financial condition or prospects of the Borrower or any
such Subsidiary. Without limiting the foregoing, the Borrower has all the
franchises, licenses, leases, permits, certificates and authorizations needed
for the conduct of its business and the use of its properties and all premises
occupied by it, as now conducted, owned and used.
(i) The audited financial statements of the Borrower as at December 31,
1995 and the management-generated statements of the Borrower as at December 31,
1996, each heretofore delivered to the Bank, are complete and accurate and
fairly present the financial condition of the Borrower as at the respective
dates thereof and
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for the periods covered thereby, except that the management-generated statements
do not have footnotes and thus do not present the information which would
normally be contained in footnotes to financial statements. The Borrower has no
liability, contingent or otherwise, not disclosed in the aforesaid financial
statements or in any notes thereto that could materially affect the financial
condition of the Borrower. Since December 31, 1996, there has been no material
adverse development in the business, condition or prospects of the Borrower, and
the Borrower has not entered into any transaction other than in the ordinary
course.
(j) The principal place of business and chief executive offices of the
Borrower are located at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Premises"). 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 the Premises.
(k) The Borrower owns or has a valid right to use all of the patents,
licenses, copyrights, trademarks, trade names and franchises now being used to
conduct its business. The conduct of the Borrower's business as now operated
does not conflict with valid patents, licenses, copyrights, trademarks, trade
names or franchises of others in any manner that could materially adversely
affect the business, prospects, assets or condition, financial or otherwise, of
the Borrower.
(l) None of the executive officers or key employees of the Borrower is
subject to any agreement in favor of anyone other than the Borrower which limits
or restricts that person's right to engage in the type of business activity
conducted or proposed to be conducted by the Borrower or which grants to anyone
other than the Borrower any rights in any inventions or other ideas susceptible
to legal protection developed or conceived by any such officer or key employee;
provided that the foregoing provisions of this SubSection 2.1(l) will not be
deemed to apply to -any agreement unless enforcement of same would have a
material adverse effect on the Borrower's business.
(m) The Borrower is not a party to any contract or agreement which now
has or, as far as can be foreseen by the Borrower at the date hereof, may have a
material adverse effect on the financial condition, business, prospects or
properties of the Borrower even if the Borrower were to perform its obligations
under such contract or agreement.
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
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arrangements contemplated hereby are in effect or any Revolving Loan or any of
the other Obligations shall be outstanding or any letter of credit issued
hereunder shall be outstanding:
3.1. Legal Existence; Qualification; Compliance. The Borrower will
maintain (and will cause each Subsidiary of the Borrower to maintain) its
corporate existence and good standing in the jurisdiction of its incorporation.
The Borrower will remain qualified to do business and in good standing in
Connecticut. The Borrower will also qualify to do business and will remain
qualified and in good standing (and the Borrower will cause each Subsidiary of
the Borrower to qualify and remain qualified and in good standing) in each other
jurisdiction where the Borrower or such Subsidiary, as the case may be,
maintains any facility, sales office, warehouse or other location and in each
other jurisdiction in which the failure so to qualify could (singly or in the
aggregate with all other such failures) have a material adverse effect on the
financial condition, business or prospects of the Borrower or any such
Subsidiary. The Borrower will comply (and will cause each Subsidiary of the
Borrower to comply) with its charter documents and by-laws. The Borrower will
comply with (and will cause each Subsidiary of the Borrower to comply with) all
applicable laws, rules and regulations (including, without limitation, ERISA and
those relating to environmental protection) other than (i) laws, rules or
regulations the validity or applicability of which the Borrower or such
Subsidiary shall be contesting in good faith by proceedings which serve as a
matter of law to stay the enforcement thereof and (ii) those laws, rules and
regulations the failure to comply with any of which could not (singly or in the
aggregate) have a material adverse effect on the financial condition, business
or prospects of the Borrower or any such Subsidiary.
3.2. Maintenance of Property; Insurance. The Borrower will maintain and
preserve (and will cause each Subsidiary of the Borrower to maintain and
preserve) all of its fixed assets in good working order and condition, making
all necessary repairs thereto and replacements thereof. The Borrower will
maintain, with financially sound and reputable insurers, insurance with respect
to its property and business against such liabilities, casualties and
contingencies and of such types and in such amounts as shall be reasonably
satisfactory to the Bank from time to time and in any event all such insurance
as may from time to time be customary for companies conducting a business
similar to that of the Borrower in similar locales.
3.3. Payment of Taxes and Charges. The Borrower will pay and discharge
(and will cause each Subsidiary of the Borrower to pay and discharge) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or property, including, without limitation, taxes, assessments, charges
or levies relating to real and personal property, franchises, income,
unemployment, old age benefits, withholding, or sales or use, prior to the date
on which penalties would attach thereto, and all lawful claims (whether for any
of the foregoing or otherwise) which, if unpaid, might give rise to a lien upon
any property of the Borrower or any
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such Subsidiary, except any of the foregoing which is being contested in good
faith and by appropriate proceedings which serve as a matter of law to stay the
enforcement thereof and for which the Borrower has established and is
maintaining adequate reserves. The Borrower will pay, and will cause each of its
Subsidiaries to pay, in a timely manner, all material lease obligations, all
material trade debt, material purchase money obligations, material equipment
lease obligations and all of its other material Indebtedness; provided that
nothing contained in this sentence will be deemed to require the Borrower or any
such Subsidiary to pay any such lease obligations, trade debt, purchase money
obligations, equipment lease obligations or other Indebtedness so long as the
Borrower is disputing in good faith its obligation to pay same under
circumstances in which no material property or interest of the Borrower is
jeopardized by such non-payment and in which the Borrower has established and is
maintaining adequate reserves. For the purpose of the immediately preceding
sentence, Indebtedness and other obligations will not be considered "material"
unless any such Indebtedness or obligations (together with all related
Indebtedness and obligations) exceed $ 100,000 in amount or unless the failure
to pay same could cause the Borrower or any Subsidiary to incur a loss in excess
of $ 100,000. The Borrower will perform and fulfill all material covenants and
agreements under any material leases of real estate, material agreements
relating to purchase money debt, material equipment leases and other material
contracts; provided that nothing contained in this sentence will be deemed to
require the Borrower to perform or fulfill any such covenants or agreements so
long as the Borrower is disputing in good faith its obligation to perform or
fulfill same under circumstances in which no material property or interest of
the Borrower is jeopardized by such nonperformance or nonfulfillment and in
which the Borrower has established and is maintaining adequate reserves. For the
purpose of the immediately preceding sentence, no lease, agreement or other
contract will be considered "material" unless the failure to perform same could
cause the Borrower or any Subsidiary to incur a loss in excess of $100,000. The
Borrower will maintain in full force and effect, and comply with the terms and
conditions of, all permits, permissions and licenses necessary or desirable for
its business.
3.4. Accounts. The Borrower will maintain its principal depository and
operating accounts with the Bank.
3.5. Conduct of Business. The Borrower will conduct, in the ordinary
course, the business in which it is presently engaged. The Borrower will not,
without the prior written consent of the Bank, directly or indirectly (itself or
through any Subsidiary) enter into any other lines of business, businesses or
ventures, outside the field of software publishing and related businesses.
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3.6. Reporting Requirements. The Borrower will furnish to the Bank:
(i) Within 120 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 stockholders' equity and cash
flow, unaudited but complete and accurate and prepared in accordance
with generally accepted accounting principles consistently applied
fairly presenting the financial condition of the Borrower as at the
dates thereof and for the periods covered thereby (except that such
quarterly statements need not contain footnotes) and certified as
accurate (subject to normal year-end audit adjustments, which shall not
be material) by the chief financial officer of the Borrower, such
balance sheets to be as at the end of such fiscal quarter and such
statements of income and stockholders' equity and cash flow to be for
such fiscal quarter and for the year to date, in each case together
with a comparison to budget.
(iii) At the time of delivery of each annual or quarterly
statement of the Borrower, a certificate executed by the chief
financial officer of the Borrower stating that he or she has reviewed
this letter agreement and the other Loan Documents and has no knowledge
of any default by the Borrower in the performance or observance of any
of the provisions of this letter agreement or of any of the other Loan
Documents or, if he or she has such knowledge, specifying each such
default and the nature thereof. Each financial statement given as at
the end of any fiscal quarter of the Borrower will also set forth the
calculations necessary to evidence compliance with Sections 3.7-3.9.
(iv) Monthly, within 15 days after the end of each month, (A)
an aging report in form satisfactory to the Bank covering all
Receivables of the Borrower outstanding as at the end of such month,
and (B) a certificate of the chief financial officer of the Borrower
setting forth the Borrowing Base as at the end of such month, all in
form reasonably satisfactory to the Bank.
(v) Promptly after receipt, a copy of all audits or reports
submitted to the Borrower by independent public accountants in
connection with any
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annual, special or interim audits of the books of the Borrower and any
"management letter" from the Borrower's accountants to the management
of the Borrower.
(vi) As soon as possible and in any event within five days
after the Borrower knows of (or reasonably should have known 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 each
such Event of Default or event and the action which the Borrower
proposes to take with respect thereto; provided that, in describing
said action which the Borrower proposes to take, the Borrower will not
be required to disclose any confidential information if such disclosure
would destroy an attorney-client privilege otherwise applicable to such
information.
(vii) Promptly after the Borrower knows of (or reasonably
should have known of) 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; provided, however, that nothing contained in this clause (vii)
will be deemed to require notice of any civil action or administrative
proceeding which seeks monetary damages only, such monetary damages
being less than $ 100,000.
(viii) Promptly upon filing any registration statement or
listing application (or any supplement or amendment to any registration
statement or listing application) with the Securities and Exchange
Commission ("SEC") or any successor agency or with any stock exchange
or with the National Association of Securities Dealers quotations
system, a copy of same.
(ix) If the Borrower becomes a publicly-traded company, a copy
of each periodic or current report filed with the SEC or any successor
agency and each annual report, proxy statement and other communication
sent to shareholders or other securityholders generally, such copy to
be provided to the Bank promptly upon such filing with the SEC or such
communication with shareholders or securityholders, as the case may be.
(x) Promptly after the Borrower has knowledge thereof, written
notice of any development or circumstance which may reasonably be
expected to have a material adverse effect on the Borrower or its
business, properties, assets, Subsidiaries or condition, financial or
otherwise.
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(xi) Promptly upon request, such other information respecting
the financial condition, operations or Receivables of the Borrower or
any Subsidiary as the Bank may from time to time reasonably request.
3.7. Net Worth. The Borrower will maintain as at the end of each fiscal
quarter (commencing with its results as at March 31, 1997) a consolidated
Tangible Net Worth of not less than the then-effective Tangible Net Worth
Requirement. As used herein, the Tangible Net Worth Requirement will be deemed
to be $3,000,000 as at March 31, 1997, $1,500,000 as at June 30, 1997 and
$1,000,000 as at September 30, 1997. Effective as at December 31, 1997, the
Tangible Net Worth Requirement will be deemed to be the sum of (i) $1,000,000,
plus (ii) 75% of the net proceeds of any equity securities sold by the Borrower
during the period April 1 - December 31, 1997, plus (iii) 75% of the quarterly
consolidated Net Income achieved by the Borrower for each of the two fiscal
quarters ended September 30, 1997 and December 31, 1997 (but without giving
effect to any Net Income which is less than zero for any such fiscal quarter).
As at March 31, 1998 and as at the last day of each fiscal quarter thereafter
(March 31, 1998 and each such subsequent fiscal quarter-end being hereinafter
referred to as a "Determination Date"), the Tangible Net Worth Requirement will
be deemed to become an amount equal to the sum of: (i) that Tangible Net Worth
Requirement which had been in effect at the last day of the immediately
preceding fiscal quarter, plus (ii) 75% of the net proceeds of any equity
securities sold by the Borrower during the fiscal quarter ending at such
Determination Date, plus (iii) 75% of the consolidated Net Income of the
Borrower and Subsidiaries during the fiscal quarter ending at such Determination
Date (but without giving effect to any Net Income which is less than zero for
any fiscal quarter).
3.8. Profitability. The Borrower will not incur a quarterly Adjusted
Net Loss in excess of $500,000 for its fiscal quarter ending September 30, 1997.
The Borrower will achieve quarterly Adjusted Net Income of at least $500,000 for
its fiscal quarter ending December 31, 1997 and for each fiscal quarter
thereafter. The Borrower will not incur an annual Adjusted Net Loss in excess of
$ 1,000,000 for its fiscal year ending December 31, or for any fiscal year
thereafter.
3.9. Liquidity. The Borrower will maintain as at the end of each fiscal
quarter of Borrower (commencing with March 31, 1997) a Quick Ratio which shall
be not less than the then-effective Required Minimum Quick Ratio. As used
herein, "Quick Ratio" means the ratio of (x) Net Quick Assets of the Borrower
and Subsidiaries to (y) consolidated Current Liabilities of the Borrower and
Subsidiaries. The "Required Minimum Quick Ratio" will at all times be 1.75 to 1;
provided that (A) if the Borrower delivers to the Bank pursuant to clause (ii)
of Section 3.6 quarterly financial statements showing that the Borrower has
achieved for any fiscal quarter ending after the date of this letter agreement
consolidated quarterly Adjusted Net Income From Operations of not less than $
1.00, then the Required Minimum Quick Ratio to be in effect as at each
subsequent fiscal quarter-end will be deemed reduced
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to 1.5 to 1, and (B) if the Borrower delivers to the Bank pursuant to clause
(ii) of Section 3.6 quarterly financial statements showing that the Borrower has
achieved for any two consecutive fiscal quarters ending after the date of this
letter agreement consolidated quarterly Adjusted Net Income From Operations of
not less than $ 1,000,000, then the Required Minimum Quick Ratio to be in effect
as at each subsequent fiscal quarter-end will be deemed further reduced to 1.25
to 1.
3.10. Books and Records. The Borrower will maintain (and will cause
each of its Subsidiaries to maintain) complete and accurate books, records and
accounts which will at all times accurately and fairly reflect all of its
transactions in accordance with generally accepted accounting principles
consistently applied. The Borrower will, at any reasonable time and from time to
time upon reasonable notice and during normal business hours (and at any time
and without any necessity for notice following the occurrence of an Event of
Default), permit the Bank, and any agents or representatives thereof, to examine
and make copies of and take abstracts from the records and books of account of,
and visit the properties of the Borrower and any of its Subsidiaries, and to
discuss its affairs, finances and accounts with its officers, directors and/or
independent accountants, all of whom are hereby authorized and directed to
cooperate with the Bank in carrying out the intent of this Section 3.10. Unless
an Event of Default has occurred and is continuing, the Bank will make
reasonable efforts to minimize any interference with the Borrower's operations
which could result from an inspection contemplated by the immediately preceding
sentence and to comply with reasonable security requirements which may be
established by the Borrower. 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.
3.11. Landlord's Waiver. Prior to the Bank making the first Revolving
Loan, the Borrower will obtain, and will thereafter maintain in effect at all
time, waivers from the owners of all premises in which records relating to any
material amount of Collateral are located, such waivers to be in form and
substance satisfactory to the Bank.
IV. NEGATIVE COVENANTS
Without limitation of any covenants and agreements contained in the
Security Agreement or elsewhere, the Borrower agrees that so long as the
financing arrangements contemplated hereby are in effect or any Revolving Loan
or any of the other Obligations shall be outstanding or any letter of credit
issued hereunder shall be outstanding:
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4.1. Indebtedness. The Borrower will not create, incur, assume or
suffer to exist any Indebtedness (nor allow any of its Subsidiaries to create,
incur, assume or suffer to exist any Indebtedness), except for:
(i) Indebtedness owed to the Bank, including, without
limitation, the Indebtedness represented by the Revolving Note and any
Indebtedness in respect of letters of credit issued by the Bank;
(ii) Indebtedness of the Borrower or any Subsidiary for taxes,
assessments and governmental charges or levies not yet due and payable;
(iii) unsecured current liabilities of the Borrower or any
Subsidiary (other than for money borrowed or 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 (x) the Indebtedness permitted under this clause
(iv), plus (y) presently-existing equipment financing permitted under
clause (vi) of this Section 4.1, plus (z) the principal component of
any lease permitted by the last sentence of Section 4.8 below will not
exceed $ 1,500,000 in the aggregate outstanding at any one time;
(v) up to $750,000 in Indebtedness owed to the Connecticut
Development Authority; provided that same is fully subordinated to the
Borrower's obligations to the Bank by instruments satisfactory in form
and substance to the Bank;
(vi) other Indebtedness existing at the date hereof, but only
to the extent set forth on item 4.1 of the attached Disclosure
Schedule; and
(vii) any guaranties or other contingent liabilities expressly
permitted pursuant to Section 4.3.
4.2. Liens. The Borrower will not create, incur, assume or suffer to
exist (nor allow any of its Subsidiaries to create, incur, assume or suffer to
exist) any mortgage, deed of trust, pledge, lien, security interest, or other
charge or encumbrance (including the lien or retained security title of a
conditional vendor) of any nature (collectively, "Liens"), upon or with respect
to any of its property or assets, now owned or hereafter acquired, except that
the foregoing restrictions shall not apply to:
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(i) Liens for taxes, assessments or governmental charges or
levies on property of the Borrower or any of its Subsidiaries if the
same shall not at the time be delinquent or thereafter can be paid
without interest or penalty;
(ii) Liens imposed by law, such as carriers', warehousemen's
and mechanics' liens and other similar Liens arising in the ordinary
course of business for sums not yet due or which are being contested in
good faith and by appropriate proceedings which serve as a matter of
law to stay the enforcement thereof and as to which adequate reserves
have been made;
(iii) pledges or deposits under workmen s compensation laws,
unemployment insurance, social security, retirement benefits or similar
legislation;
(iv) Liens in favor of the Bank;
(v) Liens in favor of equipment vendors and/or lessors
securing purchase money Indebtedness to the extent permitted by clause
(iv) of Section 4.1 and any sale-leaseback financing specifically
permitted by the last sentence of Section 4.8; provided that no such
Lien will extend to any property of the Borrower other than the
specific items of equipment financed;
(vi) existing Liens in favor of the Connecticut Development
Authority securing the Indebtedness described in clause (v) of
Section 4.1; provided that such Liens are fully subordinated to the
Security Agreement by instruments satisfactory in form and substance to
the Bank; or
(vii) 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.
Without limitation of the foregoing, the Borrower will not enter into
any agreement with any Person other than the Bank which would have the effect of
prohibiting the Borrower from granting liens on any of its assets.
4.3. Guaranties. The Borrower will not, without the prior written
consent of the Bank, assume, guarantee, endorse or otherwise become directly or
contingently liable (including, without limitation, liable by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in any debtor or otherwise to assure any creditor
against loss) (and will not permit any of its Subsidiaries so to assume,
guaranty or become directly or contingently liable) in connection with any
indebtedness of any other Person, except (i) guaranties by endorsement for
deposit or collection in the ordinary course of business, (ii) guaranties
existing at the date hereof and described on item 4.3 of the
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attached Disclosure Schedule, and (iii) guaranties of loans to foreign nationals
in connection with travel to the United States to become employees of the
Borrower and guaranties of other loans which may be incurred by employees of the
Borrower in connection with relocation expenses; provided that the sum of (1)
the principal amount guarantied as described in this clause (iii), plus (2) the
principal amount of all loans and advances made by the Borrower or any
Subsidiary as described in Section 4.5 below will not exceed $250,000 in the
aggregate outstanding at any one time.
4.4. Dividends. The Borrower will not, without the prior written
consent of the Bank, make any distributions to its shareholders, pay any
dividends (other than dividends payable solely in capital stock of the Borrower)
or redeem, purchase or otherwise acquire, directly or indirectly any of its
capital stock; provided that so long as no Default or Event of Default then
exists or would result therefrom, the Borrower may expend up to $500,000 in the
aggregate per fiscal year to repurchase stock of the Borrower from employees who
are leaving the Borrower's employ. For the purpose of the immediately preceding
sentence, compliance with each of Sections 3.7 and 3.9 will be measured
both as at the most recent fiscal quarter-end and as at the date of each such
repurchase, whether or not same is a fiscal quarter-end.
4.5. Loans and Advances. The Borrower will not make (and will not
permit any Subsidiary to make) any loans or advances to any Person, including,
without limitation, the Borrower's directors, officers and employees; provided
that the Borrower may make advances to directors, officers or employees with
respect to expenses incurred by them in the ordinary course of their duties and
advances against salary, loans to foreign nationals in connection with travel to
the United States to become employees of the Borrower and other loans to
employees in connection with relocation expenses, so long as the sum of (1) the
principal amount of all loans and advances made pursuant to this Section 4.5
plus (2) the principal amount of all loans guarantied as described in clause
(iii) of Section 4.3 will not exceed, in the aggregate, $250,000 outstanding at
any one time.
4.6. Investments. The Borrower will not, without the Bank's prior
written consent, invest in, hold or purchase (other than the repurchase of the
Borrower's stock to the extent expressly permitted by Section 4.4 above) any
stock or securities of any Person (nor will the Borrower permit any of its
Subsidiaries to invest in, purchase or hold any such stock or securities) except
(i) readily marketable direct obligations of, or obligations guarantied by, the
United States of America or any agency thereof, (ii) other investment grade debt
securities, (iii) mutual funds, the assets of which are primarily invested in
items of the kind described in the foregoing clauses (i) and (ii) of this
Section 4.6, (iv) deposits with or certificates of deposit issued by the Bank
and any other obligations of the Bank or the Bank's parent, (v) deposits in any
other bank organized in the United States having capital in excess of $
100,000,000, (vi) deposits in foreign banks to the extent required for the
business of any foreign Subsidiaries, and (vii) investments in any Subsidiaries
now existing or hereafter created by the
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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.
4.7. Subsidiaries; Acquisitions. The Borrower will not form or acquire
any Subsidiary or make any other acquisition of the stock of any other Person or
of all or substantially all of the assets of any other Person, unless, in each
case, the Borrower gives prior written notice thereof to the Bank and, in each
case, after giving effect to such transaction the Borrower is in compliance with
each of Section 3.7, Section 3.8 and Section 3.9 and with clause (vii) of
Section 4.6, compliance with Sections 3.7, 3.8 and 3.9 being determined
for this purpose both as at the most recent quarter-end and on a pro forma basis
as at the date of the proposed transaction, whether or not a fiscal quarter-end.
The Borrower will not become a partner in any partnership.
4.8. Merger. The Borrower will not, without the prior written consent
of the Bank, merge or consolidate with any Person, or sell, lease, transfer or
otherwise dispose of (subject to the next sentence) any material portion of its
assets (whether in one or more transactions), other than sale of inventory in
the ordinary course. Notwithstanding the immediately preceding sentence, the
Borrower may engage in sale-and-leaseback transactions involving the sale and
leasing back of existing equipment; provided that the sum of (x) the principal
component of any such lease, plus (y) the purchase money Indebtedness permitted
by clause (iv) of Section 4.1, plus (2) presently-existing equipment financing
permitted under clause (vi) of Section 4.1 will not exceed $ 1,500,000 in the
aggregate outstanding at any one time.
4.9. Affiliate Transactions. The Borrower will not, without prior
written consent of the Bank, enter into any transaction, including, without
limitation, the purchase, sale or exchange of any property or the rendering of
any service, with any affiliate of the Borrower, except in the ordinary course
of and pursuant to the reasonable requirements of the Borrower's business and
upon fair and reasonable terms no less favorable to the Borrower than would be
obtained in a comparable arms'-length transaction with any Person not an
affiliate; provided that nothing in this Section 4.9 shall be deemed to prohibit
the payment of salary or other similar payments to any officer or director of
the Borrower at a level consistent with the salary and other payments being paid
at the date of this letter agreement and heretofore disclosed in writing to the
Bank, nor to prevent the hiring of additional officers at a salary level
consistent with industry practice, nor to prevent reasonable periodic increases
in salary. For the purposes 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
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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. Nothing contained in this Section 4.9 will be
deemed to prevent the Borrower from granting stock options to officers and
employees nor from issuing stock upon the exercise of such options.
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 Collateral at any location other
than the Premises without, in each instance, giving the Bank at least 30 days'
prior written notice and providing all such financing statements, certificates
and other documentation as the Bank may reasonably request in order to maintain
the perfection and priority of the security interests granted or intended to be
granted pursuant to the Security Agreement. The Borrower will not change its
fiscal year or methods of financial reporting unless, in each instance, prior
written notice of such change is given to the Bank and prior to such change the
Borrower enters into amendments to this letter agreement in form and substance
satisfactory to the Bank in order to preserve unimpaired the rights of the Bank
and the obligations of the Borrower hereunder.
4.11. Hazardous Waste. Except as provided below, the Borrower will not
dispose of or suffer or permit to exist any hazardous material or oil on any
site or vessel owned, occupied or operated by the Borrower or any Subsidiary of
the Borrower, nor shall the Borrower store (or permit any Subsidiary to store)
on any site or vessel owned, occupied or operated by the Borrower or any such
Subsidiary, or transport or arrange the transport of, any hazardous material or
oil (the terms "hazardous material", "oil", "site" and "vessel", respectively,
being used herein with the meanings given those terms in Mass. Gen. Laws, Ch. 21
E or any comparable terms in any comparable statute in effect in any other
relevant jurisdiction). The Borrower shall provide the Bank with written notice
of (i) the intended storage or transport of any hazardous material or oil by the
Borrower or any Subsidiary of the Borrower, (ii) any known release or known
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)
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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 Revolving 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:
(a) The Borrower shall fail to make any payment of principal of or
interest on the Revolving Note on or before the date when due; or the Borrower
shall fail to pay when due any amount owed to the Bank in respect of any letter
of credit now or hereafter issued by the Bank; or
(b) Any representation or warranty of the Borrower contained herein
shall at any time prove to have been incorrect in any material respect when made
or any representation or warranty made by the Borrower in connection with any
Revolving Loan or letter of credit shall at any time prove to have been
incorrect in any material respect when made; or
(c) The Borrower shall default in the performance or observance of any
agreement or obligation under any of Sections 3.1, 3.3, 3.6, 3.7, 3.8 or
3.9 or Article IV; or
(d) The Borrower shall default in the performance of any other term,
covenant or agreement contained in this letter agreement and such default shall
continue unremedied for 30 days after written notice thereof shall have been
given to the Borrower; or
(e) Any default on the part of the Borrower or any Subsidiary of the
Borrower shall exist, and shall remain unwaived or uncured beyond the expiration
of any applicable notice and/or grace period, under any other contract,
agreement or undertaking now existing or hereafter entered into with or for the
benefit of the Bank (or any affiliate of the Bank); or
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(f) Any default shall exist and remain unwaived or uncured with respect
to any other Indebtedness of the Borrower or any Subsidiary of the Borrower in
respect of borrowed money in excess of $ 100,000 in aggregate principal amount
or with respect to any instrument evidencing, guaranteeing, securing or
otherwise relating to any such Indebtedness, or any such Indebtedness in respect
of borrowed money in excess of $ 100,000 in aggregate principal amount shall not
have been paid when due, whether by acceleration or otherwise, or any event or
circumstance shall occur which permits, or with the lapse of time or the giving
of notice or both would permit, the acceleration of the maturity of any such
Indebtedness in respect of borrowed money by the holder or holders thereof; or
(g) The Borrower shall be dissolved, or the Borrower or any Subsidiary
of the Borrower shall become insolvent or bankrupt or shall cease paying its
debts generally as they mature or shall make an assignment for the benefit of
creditors, or a trustee, receiver or liquidator shall be appointed for the
Borrower or any Subsidiary of the Borrower or for a substantial part of the
property of the Borrower or any such Subsidiary, or bankruptcy, reorganization,
arrangement, insolvency or similar proceedings shall be instituted by or against
the Borrower or any such Subsidiary under the laws of any jurisdiction (except
for an involuntary proceeding filed against the Borrower or any Subsidiary of
the Borrower which is dismissed within 60 days following the institution
thereof); or
(h) Any attachment, execution or similar process shall be issued or
levied against any of the property of the Borrower or any Subsidiary and such
attachment, execution or similar process shall not be paid, stayed, released,
vacated or fully bonded within 30 days after its issue or levy; or
(i) Any final uninsured judgment in excess of $100,000 shall be entered
against the Borrower or any Subsidiary of the Borrower by any court of competent
jurisdiction and shall remain unpaid for 30 days after such entry, unless same
is bonded off or effectively stayed within such 30-day period and remains stayed
thereafter until reversed, vacated or paid; or
(j) The Borrower or any Subsidiary of the Borrower shall fail to meet
its minimum funding requirements under ERISA with respect to any employee
benefit plan (or other class of benefit which the PBGC has elected to insure) or
any such plan shall be the subject of termination proceedings (whether voluntary
or involuntary) and there shall result from such termination proceedings a
liability of the Borrower or any Subsidiary of the Borrower to the PBGC which in
the reasonable opinion of the Bank may have a material adverse effect upon the
financial condition of the Borrower or any such Subsidiary; or
(k) The Security Agreement or any other Loan Document shall for any
reason (other than due to payment in full of all amounts secured or evidenced
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thereby or due to discharge in writing by the Bank) not remain in full force and
effect; or
(l) The security interests and liens of the Bank in and on any of the
Collateral shall for any reason (other than due to payment in full of all
amounts secured thereby or due to written release by the Bank) not be fully
perfected liens and security interests; or
(m) At any time, 50% or more of the outstanding shares of any class of
equity securities of the Borrower shall be owned by any Person or by any "group"
(as defined in the Securities Exchange Act of 1934, as amended, and the
regulations thereunder), other than by one or more of the Persons listed on item
5.1(m) of the attached Disclosure Schedule.
5.2. Rights and Remedies on Default. Upon the occurrence of any Event
of Default, in addition to any other rights and remedies available to the Bank
hereunder or otherwise, the Bank may exercise any one or more of the following
rights and remedies (all of which shall be cumulative):
(a) Declare the entire unpaid principal amount of the Revolving Note
then outstanding, all interest accrued and unpaid thereon and all other amounts
payable under this letter agreement, and all other Indebtedness of the Borrower
to the Bank, to be forthwith due and payable, whereupon the same shall become
forthwith due and payable, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived by the Borrower.
(b) Terminate the revolving financing arrangements provided for by this
letter agreement.
(c) Exercise all rights and remedies hereunder, under the Revolving
Note, under the Security Agreement 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 and during the continuance 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 (other than payroll accounts, fiduciary accounts or other
accounts as to which the Bank is prohibited by applicable law or regulation from
exercising its right of set-off) 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
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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 (other than payroll accounts, fiduciary accounts or
other accounts as to which the Bank is prohibited by applicable law or
regulation from taking a security interest) 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 and during the continuance of any Event of Default, the
Bank may exercise with respect to such deposits, securities or other property in
the possession of the Bank or any affiliate of the Bank all rights and remedies
of a secured party under the Uniform Commercial Code.
5.4. Letters of Credit. Without limitation of any other right or remedy
of the Bank, (i) if an Event of Default shall have occurred and the Bank shall
have accelerated the Revolving Loans or (ii) if this letter agreement and/or the
revolving financing arrangements described herein shall have expired or shall
have been earlier terminated by either the Bank or the Borrower for any reason,
the Borrower will forthwith deposit with the Bank in cash a sum equal to the
total of all then undrawn amounts of all outstanding letters of credit issued by
the Bank for the account of the Borrower.
VI. MISCELLANEOUS
6.1. Costs and Expenses. The Borrower agrees to pay on demand all costs
and expenses (including, without limitation, reasonable legal fees) of the Bank
in connection with the preparation, execution and delivery of this letter
agreement, the Security Agreement, the Revolving Note and all other instruments
and documents to be delivered in connection with any Revolving Loan or any
letter of credit issued hereunder and any amendments or modifications of any of
the foregoing, as well as the 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
and all other instruments and documents delivered or to be delivered hereunder
or in connection herewith, all whether or not legal action is instituted or
whether or not the transaction closes, or any loan is made or letter of credit
issued. In addition, the Borrower shall be obligated to pay any and all stamp
and other taxes payable or determined to be payable in connection with the
execution and delivery of this letter agreement, the Security Agreement, the
Revolving Note and all other instruments and documents to be delivered in
connection with any Obligation. Any fees, expenses or other charges which the
Bank is entitled to receive from the Borrower under this Section shall bear
interest from the date of any demand therefor until the date when paid at a rate
per
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annum equal to the per annum rate otherwise payable under the Revolving Note
(but in no event in excess of the maximum rate permitted by then applicable
law).
6.2. Capital Adequacy. If the Bank shall have determined that the
adoption or phase-in after the date hereof of any applicable law, rule or
regulation regarding capital requirements for banks or bank holding companies,
or any change therein after the date hereof, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by the Bank with any request or directive of such entity regarding
capital adequacy (whether or not having the force of law) has or would have the
effect of reducing the return on the Bank's capital with respect to the
Revolving Loans, the within-described revolving loan facility and/or letters of
credit issued for the account of the Borrower to a level below that which the
Bank could have achieved (taking into consideration the Bank's policies with
respect to capital adequacy immediately before such adoption, phase-in, change
or compliance and assuming that the Bank's capital was then fully utilized) but
for such adoption, phase-in, change or compliance by any amount deemed by the
Bank to be material: (i) the Bank shall promptly after its determination of such
occurrence give notice thereof to the Borrower; and (ii) the Borrower shall pay
forthwith to the Bank as an additional fee such amount as the Bank certifies to
be the amount that will compensate it for such reduction with respect to the
Revolving Loans, the within-described revolving loan facility and/or such
letters of credit.
A certificate of the Bank claiming compensation under this Section
shall be conclusive in the absence of manifest error. Such certificate shall set
forth the nature of the occurrence giving rise to such compensation, the
additional amount or amounts to be paid to it hereunder and the method by which
such amounts were determined. In determining such amounts, the Bank may use any
reasonable averaging and attribution methods. No failure on the part of the Bank
to demand compensation on any one occasion shall constitute a waiver of its
right to demand such compensation on any other occasion and no failure on the
part of the Bank to deliver any certificate in a timely manner shall in any way
reduce any obligation of the Borrower to the Bank under this Section.
6.3. Facility Fees. With respect to the within arrangements for
Revolving Loans, the Borrower will pay to the Bank, on the last day of each
calendar quarter (commencing with March 31, 1997) and on the Expiration Date or
date of earlier termination of the within-described revolving loan facility, a
non-refundable quarterly facility fee, payable in arrears, equal to $2,500 for
each calendar quarter (appropriately pro-rated for any partial calendar
quarter). In addition, if the within-described revolving financing arrangements
are terminated by the Borrower for any reason or by the Bank as the result of
the Borrower's default, the Borrower shall forthwith upon such termination pay
to the Bank a sum equal to all of the fees which would have become due pursuant
to the immediately preceding sentence from
-23-
24
the date of such termination through the Expiration Date. The 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.
6.4. Other Agreements. The provisions of this letter agreement are not
in derogation or limitation of any obligations, liabilities or duties of the
Borrower under any of the other Loan Documents or any other agreement with or
for the benefit of the Bank. No inconsistency in default provisions between this
letter agreement and any of the other Loan Documents or any such other agreement
will be deemed to create any additional grace period or otherwise derogate from
the express terms of each such default provision. No covenant, agreement or
obligation of the Borrower contained herein, nor any right or remedy of the Bank
contained herein, shall in any respect be limited by or be deemed in limitation
of any inconsistent or additional provisions contained in any of the other Loan
Documents or any such other agreement.
6.5. Governing Law. This letter agreement and the Revolving Note shall
be governed by, and construed and enforced in accordance with, the laws of The
Commonwealth of Massachusetts.
6.6. Addresses for Notices, etc. All notices, requests, demands and
other communications provided for hereunder shall be in writing and shall be
mailed or delivered to the applicable party at the address indicated below:
If to the Borrower:
FlexiInternational Software, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
If to the Bank:
Fleet National Bank
High Technology Group
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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 deemed delivered on the earlier of (i) the date received
or (ii) the date of delivery,
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25
refusal or non-delivery indicated on the return receipt if deposited in the
United States mails, sent postage prepaid, certified or registered mail, return
receipt requested, addressed as aforesaid.
6.7. Binding Effect; Assignment; Termination. This letter agreement
shall be binding upon the Borrower, its successors and assigns and shall inure
to the benefit of the Borrower and the Bank and their respective permitted
successors and assigns. The Borrower may not assign this letter agreement or any
rights hereunder without the express written consent of the Bank. The Bank may,
in accordance with applicable law, from time to time assign or grant
participation in this letter agreement, the Revolving Loans, the Revolving Note
and/or the letters of credit issued hereunder. The Borrower may terminate this
letter agreement and the financing arrangements made herein by giving written
notice of such termination to the Bank together with payment of the sum
described in the second sentence of Section 6.3; provided that no such
termination will release or waive any of the Bank's rights or remedies or any of
the Borrowers obligations under this letter agreement or any of the other Loan
Documents unless and until the Borrower has paid in full the Revolving Loans and
all interest thereon and all fees and charges payable in connection therewith
and all letters of credit issued hereunder have been terminated.
6.8. Consent to Jurisdiction. The Borrower irrevocably submits to the
non-exclusive jurisdiction of any Massachusetts court or any federal court
sitting within The Commonwealth of Massachusetts over any suit, action or
proceeding arising out of or relating to this letter agreement and/or the
Revolving Note. The Borrower irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of venue
of any such suit, action or proceeding brought in such a court and any claim
that any such suit, action or proceeding has been brought in an inconvenient
forum. The Borrower agrees that final judgment in any such suit, action or
proceeding brought in such a court shall be enforced in any court of proper
jurisdiction by a suit upon such judgment, provided that service of process in
such action, suit or proceeding shall have been effected upon the Borrower in
one of the manners specified in the following paragraph of this Section 6.8 or
as otherwise permitted by law.
The Borrower hereby consents to process being served in any suit,
action or proceeding of the nature referred to in the preceding paragraph of
this Section 6.8 either (i) by mailing a copy thereof by registered or certified
mail, postage prepaid, return receipt requested, to it at its address set forth
in Section 6.6 (as such address may be changed from time to time pursuant to
said Section 6.6) or (ii) by serving a copy thereof upon it at its address set
forth in Section 6.6 (as such address may be changed from time to time pursuant
to said Section 6.6).
6.9. Severability. In the event that any provision of this letter
agreement or the application thereof to any Person, property or circumstances
shall be held to any
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26
extent to be invalid or unenforceable, the remainder of this letter agreement,
and the application of such provision to Persons, properties or circumstances
other than those as to which it has been held invalid and unenforceable, shall
not be affected thereby, and each provision of this letter agreement shall be
valid and enforced to the fullest extent permitted by law.
VII. DEFINED TERMS
7.1. Definitions. In addition to terms defined elsewhere in this letter
agreement, as used in this letter agreement, the following terms have the
following respective meanings:
"Adjusted Net Income" - For any fiscal period, the result: of the
consolidated Net Income (or consolidated Net Loss, as the case may be, expressed
as a negative number) of the Borrower and Subsidiaries for such period plus the
total increase (or minus the total decrease, if applicable) during such fiscal
period in the amount representing the Borrower's Capitalized Software
Development Costs. If the amount determined in accordance with the immediately
preceding sentence for any fiscal period is less than zero, such amount will be
referred to as the Borrower's "Adjusted Net Loss" for such fiscal period.
"Adjusted Net Income From Operations" - For any fiscal period, the
Adjusted Net Income of the Borrower, but exclusive of interest income,
extraordinary gains and any other items of non-operating income.
"Aggregate Bank Liabilities" - At any time, the sum of (i) the
principal amount of all Revolving Loans then outstanding, plus (ii) all then
undrawn amounts of letters of credit issued by the Bank for the account of the
Borrower, plus (iii) all amounts then drawn on any such letter of credit which
at said date shall not have been reimbursed to the Bank by the Borrower.
"Borrowing Base" - As determined at any date, 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.
"Capitalized Software Development Costs" - As at any date, the
Borrower's capitalized software development costs as shown on the Borrower's
balance sheet as at such date, such balance sheet to be prepared and presented
in accordance with generally accepted accounting principles and in a manner
consistent with the Borrower's balance sheet as at December 31, 1995 heretofore
furnished to the Bank.
-26-
27
"Collateral" - All property which is described as "Collateral" in the
Security Agreement.
"Current Liabilities" - All amounts properly shown as "current
liabilities" on a consolidated balance sheet of the Borrower prepared in
accordance with generally accepted accounting principles and in a manner
consistent with the Borrower's balance sheet as at December 31, 1995 heretofore
furnished to the Bank, and 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.
Further, and without limitation of the foregoing, "Current Liabilities" will in
any event be deemed to include the Revolving Loans. Notwithstanding the
foregoing, "Current Liabilities" will not be deemed to include any liabilities
which constitute Deferred Revenue.
"Default" - Any event or circumstance which, with the passage of time
or the giving of notice or both, could become an Event of Default.
"Deferred Revenue" - Any liabilities of the Borrower which represent
sums actually received or contracted to be received by the Borrower under
software maintenance contracts or licenses or with respect to consulting
services and which, in accordance with generally accepted accounting principles
consistently applied, are properly shown as "deferred revenue" on the Borrower's
balance sheet.
"ERISA" - The Employee Retirement Income Security Act of 1974, as
amended.
"Expiration Date" - June 1, 1998, unless extended by the Bank, which
extension may be given or withheld by the Bank in its sole discretion.
"Indebtedness" - All obligations of a Person, whether current or
long-term, senior or subordinated, which in accordance with generally accepted
accounting principles would be included as liabilities upon such Person's
balance sheet at the date as of which Indebtedness, is to be determined, and
shall also include guaranties, endorsements (other than for collection in the
ordinary course of business) or other arrangements whereby responsibility is
assumed for the obligations of others, whether by agreement to purchase or
otherwise acquire the obligations of others, including any agreement, contingent
or otherwise, to furnish funds through the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.
"Loan Documents" - Each of this letter agreement, the Revolving Note,
the Security Agreement, and each other instrument, document or agreement
evidencing, securing, guaranteeing or relating in any way to any of the
Revolving Loans or any of the letters of credit issued hereunder, all whether
now existing or hereafter arising or entered into.
-27-
28
"Maximum Revolving Amount" - At any date as of which same is to be
determined, the amount by which (x) $2,000,000 exceeds (y) the sum of (i) all
then undrawn amounts of letters of credit issued by the Bank for the account of
the Borrower plus (ii) all amounts then drawn on any such letter of credit which
at said date shall not have been reimbursed to the Bank by the Borrower.
"Net Income" (or "Net Loss") - The book net income (or book net loss,
as the case may be) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with
generally accepted accounting principles consistently applied.
"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).
"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, 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 or services rendered (including, without
limitation, software license fees and expense reimbursement payable by
customers) 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. For the purpose of the immediately preceding sentence, a foreign
customer will be deemed "located in the United States" if its corporate parent
is located in the United States and if such corporate parent guaranties the
Receivable in question by a guaranty in form and substance satisfactory to the
Bank. The Bank will also include in Qualified Receivables a Receivable which
meets all of the criteria set forth in the first and last sentences of this
definition other than the location of the customer, if such Receivable is
secured by a letter of credit issued by a financial institution satisfactory to
the Bank, such letter of credit to be in form and substance satisfactory to the
Bank. Unless the Bank in its sole discretion otherwise determines with respect
to any Receivable, a Receivable which would otherwise be a Qualified Receivable
shall be deemed not to be a Qualified Receivable (i) if the Bank does not have a
fully perfected first priority security interest in such Receivable; (ii) if
such Receivable is not free and clear of all
-28-
29
adverse interests in favor of any Person other than the Bank; (iii) if such
Receivable is subject to any deduction, off-set, contra account, counterclaim or
condition; provided, however, that if the relevant deduction, offset, contra
account, counterclaim or condition relates to less than 25% of the principal
amount of such Receivable, then only the amount subject to such deduction,
off-set, contra account, counterclaim or condition will be deemed excluded from
Qualified Receivables by this clause (iii) and the balance of such Receivable
will not be deemed so excluded by this clause (iii); (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; provided, however, that if such
dispute relates to less than 25% of the principal amount of such Receivable,
then only the amount so disputed will be deemed excluded from Qualified
Receivables by this clause (vi) and the balance of such Receivable will not be
deemed so excluded by this clause (vi); (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 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 (ix) 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.
"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).
"Tangible Net Worth" - An amount equal to the total assets of any
Person (excluding (i) the total intangible assets of such Person and (ii) any
assets representing amounts due from any officer or employee of such Person or
from any Subsidiary of such Person) minus the total liabilities of such Person.
Total intangible assets shall be deemed to include, but shall not be limited to,
the excess of cost over book value of acquired businesses accounted for by the
purchase method, formulae, trademarks, trade names, patents, patent rights and
deferred expenses (including, but
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30
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.
This letter agreement is executed, as an instrument under seal, as of
the day and year first above written.
Very truly yours,
FLEXIINTERNATIONAL SOFTWARE, INC.
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: CEO
Accepted and agreed:
FLEET NATIONAL BANK
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Its Senior Vice President
By: /s/ [illegible]
--------------------------------
Its VP
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DISCLOSURE SCHEDULE
Item 2.1(a) Jurisdictions in which Borrower is qualified;
Subsidiaries
Item 2.1(b) Stock ownership
Item 2.1(e) Litigation
Item 2.1(j) Location of Collateral; record owners of Premises
Item 4.1 Existing Indebtedness
Item 4.2 Existing Liens
Item 4.3 Existing Guaranties
Item 5.1(m) Permitted 50% stockholders
-31-
32
SCHEDULE 2.1(a)
JURISDICTIONS QUALIFIED; SUBSIDIARIES
The Company is duly qualified to do business as a foreign corporation
and is in good standing in the State of Connecticut, New Jersey and
Massachusetts and in every other jurisdiction in which the failure to so qualify
would have a material or adverse effect on the operations or financial condition
of the Company.
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33
SCHEDULE 2.1(b)
LIST OF STOCKHOLDERS
Number of Number of
Shares of Shares of
Number of Series A Series B
Common Preferred Preferred
Name Shares Stock Stock Series C
---- ------ ----- ----- --------
▇▇▇▇▇, ▇▇▇▇▇▇, R. 1,455,000 --- --- ---
▇▇▇▇▇, ▇▇▇▇▇▇▇▇, V. 1,020,000 --- --- ---
▇▇▇▇▇▇▇, ▇▇▇▇▇, W. 1,566,666 --- --- ---
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ 226,500* --- --- ---
Menlo Ventures VI, L.P. 32,868 1,724,138 88,889 914,066
Menlo Entrepreneurs Fund 493 25,862 13,333 13,711
VI, ▇.▇.
▇▇▇▇▇▇ Capital Fund III 16,434 862,069 444,445 457,269
Limited Partnership
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ 150,000 172,414 --- ---
▇▇▇▇, ▇▇▇▇ 316,500 --- --- ---
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, H. 4,500 --- --- ---
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 37,500 --- --- ---
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ 37,500 --- --- ---
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 76,667 --- --- ---
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 20,000 --- --- ---
▇▇▇▇▇▇, ▇▇▇▇ ▇. 5,000 --- --- ---
Homestead, Ltd. 30,000 --- --- ---
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 1,000 --- --- ---
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 500 --- --- ---
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 20,000 --- --- ---
▇▇▇▇▇-▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 150 --- --- ---
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34
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 30,000 --- --- ---
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 200 --- --- ---
▇▇▇▇▇▇, ▇▇▇ ▇. 20,000 --- --- ---
Comdisco, Inc. --- --- 125,000 ---
▇▇▇▇▇▇ ▇▇▇▇ SBIC, L.P. --- --- --- 2,984,848
Amerindo Technology 200,000 --- --- ---
Growth Fund II, Inc.
▇▇▇▇▇▇ Master Trust 500,000 --- --- ---
Board of Pension 300,000 --- --- ---
Commissioners of City of Los
Angeles
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ Flexi 1,000,000 --- --- ---
Investors, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇ ▇. and ▇▇▇▇▇▇▇▇ ▇. 220,000 --- --- ---
▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ 10,000 --- --- ---
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 100,000 --- --- ---
▇▇▇, P.H. 166,670 --- --- ---
▇▇▇▇▇, ▇▇▇▇▇▇▇, M. --- --- --- 45,455
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 10,000 --- --- ---
▇▇▇▇▇▇, ▇▇▇▇▇▇ 1,000 --- --- ---
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 180 --- --- ---
▇▇▇▇▇, ▇▇▇▇ 12,500 --- --- ---
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 1,500 --- --- ---
JAFCO JS-2 Investment 28,520 --- --- ---
Enterprise Partnership
JAFCO R-2 Investment 24,813 --- --- ---
Enterprise Partnership
Japan Associated Finance Co., 13,334 --- --- ---
Ltd.
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35
U.S. Information Technology 266,666 --- --- ---
Investment Enterprise
Partnership
▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital Partners 16,872 --- 1,341,333 468,978
V, L.P.
*The Company is currently of the view that ▇▇. ▇▇▇▇▇▇▇▇ is the holder only of
193,000 shares of Common Stock. Discussions between the Company and ▇▇.
▇▇▇▇▇▇▇▇ concerning this issue are ongoing.
-35-
36
SCHEDULE 2.1(e)
LITIGATION
None.
-36-
37
SCHEDULE 2.1(j)
LOCATION OF COLLATERAL; RECORD OWNER OF PREMISES
Collateral Location:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Record Owner:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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38
SCHEDULE 4.1
EXISTING INDEBTEDNESS
Connecticut Development Authority (second priority) security interest
in Collateral (as such term is defined in the Security Agreement, made as of the
1st day of August, 1995, by and between Flexilnternational Software, Inc. and
the Connecticut Development Authority) to secure the payment of a loan in the
amount of $750,000.
Agreement dated June 9, 1995 by and between Comdisco, Inc. and
Flexilnternational Software, Inc. for the purchase of certain equipment in the
amount of $112,859.83, which equipment was leased back to the company pursuant
to Equipment Schedule VL-2 dated as of May 23, 1995 to the Master Lease
Agreement dated as of June 28, 1994 between the parties.
Indebtedness to Leasing Technologies, Inc. of up to $1,000,000 for
equipment purchases.
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39
SCHEDULE 4.2
EXISTING LIENS
1. In favor of Comdisco, Inc. for equipment.
2. In favor of Sanwa Leasing Corporation for equipment.
3. In favor of AT&T Capital Leasing for equipment.
4. In favor of Leasing Technologies, Inc. for equipment.
5. In favor of Connecticut Development Authority for accounts
(subordinated to lien in favor of Fleet National Bank).
6. In favor of IBM Credit Corporation for equipment.
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40
SCHEDULE 4.3
EXISTING GUARANTIES
None.
-40-
41
SCHEDULE 5.1(a)
PERMITTED 50% STOCKHOLDERS
1. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
2. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
3. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
4. Menlo Ventures VI, L.P.
5. Primus Capital Fund III Limited Partnership
6. ▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital Partners V, L.P.
7. ▇▇▇▇▇▇ ▇▇▇▇ SBIC, L.P.
8. ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
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