EXHIBIT 10.23
CREDIT AGREEMENT
[Line of Credit Loans]
THIS CREDIT AGREEMENT, dated as of July 18, 1994 by and between
SUMMAGRAPHICS CORPORATION, a Delaware corporation with its principal place of
business at 00 Xxxxxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxxx 00000 (the "Borrower") and
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SILICON VALLEY BANK, a California-chartered bank, with its principal place of
business at 0000 Xxxxxxxx Xxxxx. Xxxxx Xxxxx, Xxxxxxxxxx 00000, with a loan
production office located at Wellesley Office Park. 00 Xxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxxxxxx 00000 doing business under the name Silicon Valley East
(the "Bank").
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Section 1 Line of Credit Loans.
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1.1 Amount. Subject to and upon the terms and conditions set forth below,
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the Bank agrees to make loans (each a "Line of Credit Loan" and collectively the
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"Line of Credit Loans") to the Borrower under this Section 1.1 from time to time
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to and including January 10, 1996 (the "Commitment Expiration Date"), unless
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earlier terminated pursuant to Section 1.6, in an aggregate principal amount not
to exceed at any one time outstanding the sum of $8,000,000 (the "Line of Credit
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Commitment"), subject to the limitation set forth in Section 1.4. Within the
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limit of the Line of Credit Commitment, the Borrower may borrow, repay and
reborrow at any time or from time to time until the Commitment Expiration Date,
or the termination of the Line of Credit Commitment, whichever occurs earlier.
1.2 Line of Credit Note. The Line of Credit Loans shall be evidenced by
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and payable with interest in accordance with the note of the Borrower in the
form of attached Exhibit A, dated today's date (the "Note").
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1.3 Requests For Line of Credit Loans. Whenever the Borrower desires to
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obtain a Line of Credit Loan, it shall notify the Bank by telex, telecopy or
telephone received no later than 1:00 p.m. (Boston time) one Banking Day before
the day on which the requested Line of Credit Loan is to be made. Such notice
shall specify the effective date and the amount of such Loan. Each such notice
(a "Notice of Borrowing") shall be irrevocable and shall be immediately followed
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by a written Borrowing Certificate by the Borrower substantially in the form of
attached Exhibit G, provided, if such written confirmation differs in any
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material respect from the action taken by the Bank, the records of the Bank
shall control absent manifest error. The Bank shall make such Line of Credit
Loan by crediting its amount in immediately available funds to the Borrower's
regular deposit account with the Bank.
1.4 Borrowing Base. The Borrower shall not permit, or request any advance
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or the issuance of any Letter of Credit hereunder that would cause, the sum of
(a) the aggregate unpaid principal amount of all Line of Credit Loans under the
Line of Credit Commitment, (b) the aggregate Letter of Credit Usage and (c) the
aggregate amount of all banker's acceptances created for the account of the
Borrower as provided in Section 1.8 below (the sum of (a), (b) and (c), the
"Extensions of Credit"), to exceed at any time an amount equal to the lesser of
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(i) the Commitment or (ii) the sum of (A) 80% of all Eligible Domestic Accounts
Receivable and (8) 80% of Eligible International Accounts Receivable
(collectively. the "Borrowing Base"). If at any time the aggregate principal
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amount of all Extensions of Credit exceeds the Borrowing Base, the Borrower
shall, on the next Banking Day, prepay such excess principal amount together
with accrued interest thereon at the applicable rate, and if such excess is not
eliminated thereby, the Borrower shall also pledge to the Bank an amount by
which the aggregate Extensions of Credit exceed the Borrowing Base, in a manner
acceptable to the Bank.
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1.5 Maturity Date of Line of Credit Loans. All Line of Credit Loans shall
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mature and the total unpaid principal amount thereof shall be due and payable on
the Commitment Expiration Date. at which time all amounts advanced under this
Section 1 shall be immediately due and payable.
1.6 Termination of Commitment. The Borrower, upon (a) at least two (2)
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Banking Days' prior written notice to the Bank and (b) the repayment in full of
the outstanding principal balance of the Line of Credit Loans (and accrued
interest thereon) and the payment in full of any expenses or other fees owed by
the Borrower to the Bank under or pursuant to this Agreement, may elect to
permanently terminate the Line of Credit Commitment.
1.7 Letters of Credit. The Borrower may use up to $5,000,000 of the Line
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of Credit Commitment for Letters of Credit to be issued by the Bank, provided
that in each case (a) the Borrower executes and delivers a letter of credit
application and reimbursement agreement satisfactory to the Bank and complies
with any conditions to the issuance of such Letter of Credit (including payment
of any applicable fees); (b) the Bank has approved the form of such Letter of
Credit; (c) such Letter of Credit bears an expiration date not later than the
Commitment Expiration Date; and (d) the conditions set forth in Sections 4.2 and
4.3 shall have been satisfied as of the date of the issuance of the Letter of
Credit.
1.8 Banker's Acceptances. Subject to the requirements set forth below, the
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Borrower may use the available Line of Credit Commitment by requesting that the
Bank accept the Borrower's time drafts (payable up to 90 days after sight), and
discount such drafts at the applicable interest rate. The aggregate outstanding
amount of all acceptances so created by the Bank may not exceed $3,000,000 at
any time. As a condition to the creation and discount of any acceptance by the
Bank: (i) the Borrower shall have executed and delivered an acceptance credit
agreement satisfactory in form and substance to the Bank (an "Acceptance
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Agreement), and shall have complied with any conditions to the creation of such
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acceptance (including the payment of any acceptance commission and the
satisfaction of any additional collateral requirements) set forth therein; (ii)
such acceptance shall be an Eligible Acceptance (as defined in Section 9.1
below); (iii) the maturity date of such acceptance may not occur later than the
Commitment Expiration Date unless the Bank otherwise agrees in writing; and (iv)
the conditions set forth in Sections 4.2 and 4.3 below shall have been satisfied
as of the date of the creation of such acceptance.
Section 2 Interest Rates; Payments and Optional Prepayments.
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2.1 Interest Rates.
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(a) The Borrower agrees to pay interest on the unpaid principal amount of
each Line of Credit Loan for each day from and including the date such Line of
Credit Loan was made to but excluding the date the principal amount of such Line
of Credit Loan is due (whether at maturity, by acceleration or otherwise), at a
fluctuating rate per annum equal to the Prime Rate plus the Applicable Margin
(as defined below) which interest rate shall change when the Prime Rate shall
change. The "Applicable Margin" shall be three-quarters of one percent (3/4%)
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per annum, provided, however, that effective upon, and after the occurrence of a
Rate Reduction Event, the Applicable Margin, shall be one-half of one percent
(1/2%) per annum. Such interest shall be payable monthly in arrears on the last
day of each month commencing with the first such date hereafter and when the
principal amount of such Line of Credit Loan is due (whether at maturity, by
acceleration or otherwise).
(b) Any overdue principal of any such Line of Credit Loan and, to the
extent permitted by law, overdue interest thereon. shall, at the Bank's option,
bear interest (after as well as before judgment), payable on demand. for each
day from and including the date payment was due to but excluding the date of
actual payment, at a fluctuating rate per annum equal to four (4)
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percentage points above the rate of interest applicable under Section 2.1
(a) immediately prior to the occurrence of the delinquency.
2.2 Manner and Place of Payment. All payments under this Agreement or
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otherwise in respect of the Borrower Loans shall be made not later than 2:00
p.m. (Boston Time) on the date when due and shall be made in immediately
available funds at the Office of the Bank or by the Borrower's check drawn on
the depository account(s) maintained by the Borrower with the Bank payable to
the Bank or its order. All payments shall be made without setoff, counterclaim,
withholding or reduction of any kind whatsoever. Borrower will regularly deposit
some portion of funds received from its business activities in accounts
maintained by the Borrower at the Office of the Bank. Borrower hereby requests
and authorizes the Bank to debit any of Borrower's accounts with the Bank,
specifically, without limitation, Account Number 00000000-70, for payments of
interest due on the Line of Credit Loans and any other obligations owing by the
Borrower to the Bank. The Bank will notify the Borrower of all debits which the
Bank makes against the Borrower's accounts. Any such debits against the
Borrower's accounts shall in no way be deemed a set-off.
2.3 Payments Due on Saturdays. Sundays and Holidays. Whenever any payment
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to be made hereunder or under the Note shall be due on a day which is not a
Banking Day, such payment may be made on the next succeeding Banking Day, and
such extension of time shall be included in computing any interest or fees due.
2.4 Optional Prepayments. The Borrower shall have the right to prepay the
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Line of Credit Loans in whole or in part, without premium or penalty, at any
time and from time to time, provided that at the time of the prepayment in full
of the Line of Credit Loans, the Borrower shall pay all interest accrued on the
amount prepaid. Principal amounts repaid or prepaid under the Line of Credit
Note or the Line of Credit Commitment may be reborrowed by the Borrower subject
to the terms hereof.
2.5 Capital Requirements. If the Bank shall determine that the adoption or
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implementation of any applicable law, rule, regulation or treaty regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the Bank (or its applicable lending office) with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on capital of the Bank or any Person controlling the
Bank (a "Parent") as a consequence of its obligations hereunder to a level below
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that which the Bank (or its Parent) could have achieved but for such adoption,
change or compliance (taking into consideration its policies with respect to
capital adequacy by an amount deemed by the Bank to be material, then from time
to time, within 15 days after demand by the Bank the Borrower shall pay to the
Bank such additional amount or amounts as will compensate the Bank for such
reduction. A statement of the Bank claiming compensation under this Section and
setting forth the additional amount or amounts to be paid to it hereunder shall
be conclusive absent manifest error; provided that the determination thereof is
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made on a reasonable basis.
Section 3 Security.
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3.1 Security Interests. (a) The Borrower agrees to grant to the Bank a
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security interest in, and a lien on, all right, title and interest of the
Borrower in and to all assets of the Borrower and to enter into a Security
Agreement in favor of the Bank in the form of Exhibit B hereto (the "Security
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Agreement") in order to secure payment and performance of the Borrower's
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obligations to the Bank under this Agreement, the Note and the other Loan
Documents.
(b) In addition, the Borrower agrees to enter into a Copyright Mortgage in
favor of the Bank in the form of Exhibit C hereto (the "Copyright Mortgage") and
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a collateral assignment of patents
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Assignment") in order further to secure payment and performance of the
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Borrower's obligations to the Bank under this Agreement, the Note and the other
Loan Documents.
Section 4 Conditions Precedent.
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The Bank shall not be obligated to make any of the Extensions of Credit to
the Borrower hereunder until the following conditions have been satisfied (in no
event later than August 15, 1994):
4.1 Agreement, the Note and the Security Instruments. This Agreement, the
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borrowings hereunder. the Note, the Security Instruments and all transactions
contemplated by this Agreement and the Security Instruments shall have been duly
authorized by the Borrower. The Borrower shall have duly executed and delivered
to the Bank this Agreement, the Note and the Security Instruments to the Bank in
form and substance reasonably satisfactory to the Bank and its counsel .
4.2 No Default. On the date hereof and on the date of the making of each
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Extension of Credit, no Default or Event of Default shall have occurred and be
continuing.
4.3 Correctness of Representations. On the date hereof and on the date of
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each Extension of Credit. all representations and warranties made by the
Borrower in Section 5 below or any other material representation and warranty
otherwise in writing in connection herewith shall be true and correct in all
material respects with the same effect as though such representations and
warranties had been made on and as of today's date, except that representations
and warranties expressly limited to a certain date shall be true and correct as
of that date.
4.4 Opinion of Counsel for the Borrower. On the date hereof, the Bank
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shall have received the favorable opinion of the general counsel of the
Borrower, in form and substance satisfactory to the Bank and its counsel.
4.5 Filing of Financing Statements. etc. On or before the making of any
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Extensions of Credit, the Borrower shall have promptly executed and delivered to
the Bank financing statements, and other appropriate documentation relating to
the security interests and rights granted pursuant to the Security Instruments.
and the Bank shall have duly and promptly recorded or filed the same in such
manner and in such places as is required by law (including pursuant to the UCC)
to establish, preserve, protect, and perfect such security interests and rights;
and all taxes, fees and other charges in connection with the execution, delivery
and filing of this Agreement and such financing statements and other appropriate
documentation shall have been duly paid.
4.6 Supporting Documents. On or before the date hereof, there shall have
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been delivered to the Bank the following supporting documents:
(a) legal existence and corporate good standing certificates with respect
to the Borrower dated as of a recent date issued by the appropriate Secretary of
State or other officials;
(b) certificates dated as of a recent date with respect to the due
qualification of the Borrower to do business in each jurisdiction where the
failure to be so qualified would have a Material Adverse Effect, issued by the
Secretary of State of each such jurisdiction;
(c) copies of the corporate charters of the Borrower, certified by the
appropriate Secretary of State or other officials, as in effect on the date
hereof;
(d) a certificate of the Secretary or Assistant Secretary of the Borrower
certifying as to (i) the By-Laws of the Borrower as in effect on the date
hereof; (ii) the incumbency and signatures of the officers of the Borrower who
have executed any documents in connection with
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the transactions contemplated by this Agreement; and (iii) the resolutions of
the Board of Directors and, to the extent required by law, the shareholders. of
the Borrower authorizing the execution. delivery and performance of this
Agreement and the making of the Line of Credit hereunder, and the execution and
delivery of the Note; and
(e) all other information and documents which the Bank or its counsel may
reasonably request in connection with the transactions contemplated by this
Agreement.
4.7 Commitment Fee. The Borrower shall have paid to the Bank a non-
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refundable commitment fee in the amount of $30.000 and the Bank's reasonable
expenses (including reasonable attorney's fees) in connection herewith.
4.8 Compliance and Borrowing Base Certificates. The Borrower shall have
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furnished to the Bank a Compliance Certificate in the form of attached Exhibit E
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appropriately completed and signed by the chief financial officer of the
Borrower or other duly authorized officer of the Borrower as to whose authority
the Bank has been given notice (an "Authorized Officer), and to the extent the
Borrower is requesting an Extension of Credit on the date hereof, a Borrowing
Base Certificate in the form of Exhibit F hereto appropriately completed and
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signed by the chief financial officer, president of the Borrower or other
Authorized Officer, each of which certificates shall reflect compliance by the
Borrower with the requirements of this Agreement.
4.9 Accounts Receivable Audit. The Bank shall have received the results of
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an accounts receivable audit satisfactory to the Bank in all reasonable
respects.
4.10 Legal Matters All documents and legal matters incident to the
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transactions contemplated by this Agreement shall be reasonably satisfactory to
Xxxxxxxx & Worcester, special counsel for the Bank.
Each borrowing hereunder shall constitute a representation and warranty by
the Borrower to the Bank that all of the conditions specified in this Section 4
have been complied with as of the time of any such Extension of Credit.
Section 5 Representations and Warranties.
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In order to induce the Bank to enter into this Agreement and to make the
contemplated Extensions of Credit, the Borrower hereby represents and warrants
as follows (except to the extent qualified by supplemental disclosure set forth
on Schedule A hereto) and the following representations and warranties as so
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qualified shall survive the execution and delivery of this Agreement and the
Note:
5.1 Corporate Status. The Borrower is a duly organized and validly
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existing corporation in good standing under the laws of the jurisdiction of its
incorporation and is duly qualified or licensed as a foreign corporation in good
standing in each jurisdiction in which the failure to do so would have a
Material Adverse Effect.
5.2 No Violation. Neither the execution, delivery or performance of this
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Agreement or any other Loan Document, nor consummation of the contemplated
transactions will (i) contravene any law, statute, rule or regulation to which
the Borrower or any of its Subsidiaries is subject or any judgment, decree,
franchise, order or permit applicable to the Borrower or any of its
Subsidiaries, or (ii) conflict or be inconsistent with or result in any breach
of, or constitute a default under, or result in or require the creation or
imposition of any Lien (other than the lien created by the Security Instruments)
upon any of the property or assets of the Borrower or any of its Subsidiaries
pursuant to, any Contractual Obligation of the Borrower or any of its
Subsidiaries, or (iii) violate any provision of the corporate charter or by-laws
of the Borrower or any of its Subsidiaries.
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5.3 Corporate Power and Authority. The execution, delivery and performance
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of this Agreement and the other Loan Documents are within the corporate powers
of the Borrower and have been duly authorized by all necessary corporate action.
5.4 Enforceability. This Agreement and each other Loan Document
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constitutes a valid and binding obligation of the Borrower enforceable against
the Borrower in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
subject to general principles of equity, whether applied in a court of equity or
at law.
5.5 Governmental Approvals. No order, permission. consent, approval,
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license, authorization, registration or validation of, or filing with, or
exemption by, any Governmental Authority is required to authorize, or is
required in connection with, the execution, delivery and performance of this
Agreement or any other Loan Document by the Borrower. or the taking of any
action contemplated hereby or thereby, except for the filing of UCC-1 financing
statements in the appropriate UCC filing offices listed on the Perfection
Certificate (as defined in the Security Agreement) and the filing of the
Copyright Mortgage and the Patent and Trademark Assignment and except as further
disclosed in Schedule A.
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5.6 Financial Statements. (a) The Borrower has furnished the Bank with
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complete and correct copies of the audited consolidated balance sheet of the
Borrower and its Subsidiaries as of the Financial Statements Date. and the
related audited consolidated statements of income and of cash flows for the
fiscal year of the Borrower and its Subsidiaries ended on such date, examined by
the Accountants. Such financial statements (including the related schedules and
notes) fairly present the consolidated financial condition of the Borrower and
its Subsidiaries as of the Financial Statements Date. and the consolidated
results of their operations and their consolidated cash flows for the fiscal
year then ended.
(b) The Borrower has furnished the Bank with complete and correct copies of
the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as
of February 28, 1994, and the related consolidated statements of income and of
cash flows for the 9-month period ended on such date. Such financial statements
(including the related schedules and notes) fairly present the consolidated
financial condition of the Borrower and its Subsidiaries as of February 28,
1994, and the consolidated results of their operations and their consolidated
cash flows for the 9-month period ended on such date (subject to normal year-end
audit adjustments).
(c) Neither the Borrower nor any of its Subsidiaries has any material
liabilities, contingent or otherwise, including liabilities for taxes or any
unusual forward or long-term commitments or any Guarantee, which are not
disclosed by or included in the financial statements referenced in subparagraphs
(a) and (b) above or in the accompanying notes and there are no unrealized or
anticipated losses from any unfavorable commitments of the Borrower or any of
its Subsidiaries which may have a Material Adverse Effect. During the period
from the Financial Statements Date to the date hereof: (i) there has been no
sale, transfer or other disposition by the Borrower of any material part of its
business or property and no purchase or other acquisition of any business or
property (including any capital stock of any Person) material in relation to the
financial condition of the Borrower at the Financial Statements Date; and (ii)
except as described in Schedule A the Borrower has not made a Restricted
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Payment, or agreed or committed to make a Restricted Payment.
(d) All the above-referenced financial statements (including the related
schedules and notes) have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by the
Accountants and disclosed therein and, in the case of interim financial
statements, subject to normal year-end adjustments and the absence of footnotes
and schedules).
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5.7 No Material Change. Since the Financial Statements Date there has been
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no development or event, nor to the best knowledge of the Borrower, any
prospective development or event, which has had or could have a Material Adverse
Effect.
5.8 Litigation. There are no actions, suits or proceedings pending or
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threatened against or affecting the Borrower or any of its Subsidiaries before
any Governmental Authority, which in any one case or in the aggregate, if
determined adversely to the interests of the Borrower or any Subsidiary thereof,
would have a Material Adverse Effect.
5.9 Compliance with Other Instruments; Compliance with Law. Neither the
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Borrower nor any Subsidiary thereof is in default under (a) any Contractual
Obligation, where such default could have a Material Adverse Effect. or (b) the
terms of any Contractual Obligation relating to any Indebtedness of the Borrower
or a Significant Subsidiary. Neither the Borrower nor any Subsidiary thereof is
in default and or in violation of any applicable statute, rule, writ,
injunction, decree, order or regulation of any Governmental Authority having
jurisdiction over the Borrower or any Subsidiary thereof which default or
violation would have a Material Adverse Effect.
5.10 Subsidiaries. The Borrower has no Subsidiaries except as set forth on
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Schedule A as attached as of the date first set forth above or as may be
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amended and supplemented from time to time.
5.11 Investment Borrower Status: Limits on Ability to Incur Indebtedness.
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The Borrower is not an "investment company" or a company "controlled by" an
investment company within the meaning of the Investment Company Act of 1940, as
amended. The Borrower is not subject to regulation under any Federal or State
statute or regulation which limits its ability to incur Indebtedness .
5.12 Title to Property. The Borrower has good and marketable title to all
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of its properties and assets, including the properties and assets reflected in
the balance sheet of the Borrower as of the Financial Statements Date, except
such as have been disposed of since that date in the ordinary course of
business, and none of such properties or assets is subject to any Lien except
for (a) Permitted Liens, or (b) a defect in title or other claim other than
defects and claims that, in the aggregate, would have no Material Adverse
Effect. The Borrower enjoys peaceful and undisturbed possession under all leases
necessary in any material respect for the operation of its properties and
assets, none of which contains any unusual or burdensome provisions which might
materially affect or impair such properties or assets. All such leases are valid
and subsisting and are in full force and effect.
5.13 ERISA. The Borrower and each member of the Controlled Group have
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fulfilled their obligations under the minimum funding standards of ERISA and the
Code with respect to each Plan and are in compliance in all material respects
with the presently applicable provisions of ERISA and the Code, and have not
incurred any liability to the PBGC or a Plan under Title IV of ERISA (other than
to make contributions or premium payments in the ordinary course).
5.14 Taxes. All tax returns of the Borrower and its Subsidiaries required
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to be filed with the U.S. Internal Revenue Service or other state and local
taxing authorities located in the United States (collectively, "U.S. Taxing
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Authorities") have been timely filed, all taxes, fees and other governmental
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charges (other than those being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate reserves
have been established and, in the case of ad valorem taxes or betterment
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assessments, no proceedings to foreclose any lien with respect thereto have been
commenced and, in all other cases, no notice of lien has been filed or other
action taken to perfect or enforce such lien) shown thereon which are payable
have been paid. The charges and reserves on the books of the Borrower and its
Subsidiaries for all income and other taxes are adequate, and the Borrower knows
of no additional assessment or any basis therefor. As of the date of this
Agreement, the Federal income tax returns
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of the Borrower and its Subsidiaries have not been audited within the last three
years, all prior audits have been closed, and there are no unpaid assessments,
penalties or other charges arising from such prior audits.
5.15 Environmental Matters. (a) The Borrower and each of its Subsidiaries
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have obtained all Governmental Approvals that are required for the operation of
its business under any Environmental Law, except where the failure to so obtain
a Governmental Approval would not have a Material Adverse Effect.
(b) The Borrower and each of its Subsidiaries are in compliance with all
terms and conditions of all required Governmental Approvals and are also in
compliance with all terms and conditions of all applicable Environmental Laws,
noncompliance with which would have a Material Adverse Effect.
(c) There is no civil, criminal or administrative action, suit, demand,
claim, hearing, notice of violation, investigation, proceeding, notice or demand
letter pending or, to the best knowledge of the Borrower threatened against the
Borrower or any Subsidiary thereof relating in any way to the Environmental Laws
which if adversely determined would have a Material Adverse Effect, and there is
no Lien of any private entity or Governmental Authority against any property of
the Borrower or any Significant Subsidiary thereof relating in any way to the
Environmental Laws.
(d) There has been no claim, complaint, notice or request for information
received by the Borrower with respect to any site listed on the National
Priority List promulgated pursuant to the Comprehensive Environmental Response.
Compensation, and Liability Act ("CERCLA"), 42 USC (S) 9601 et sea., or any
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state list of sites requiring investigation or cleanup with respect to
contamination by Hazardous Substances.
(e) To the best of the Borrower's knowledge, there has been no release or
threat of release of any Hazardous Substance at any Borrower Property which
would likely result in liability being imposed upon the Borrower or any
Subsidiary thereof, which liability would have a Material Adverse Effect.
5.16 Intellectual Property. Schedule A lists all of the copyrights,
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patents, trademarks and similar rights (Intellectual Property) owned by the
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Borrower and its Subsidiaries as of the date hereof, together with information,
where applicable, as to registration number, filing date, record owner and
remaining life. Except as set forth in Schedule A, the Borrower or a Subsidiary
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thereof is the absolute owner of all right, title and interest in the
Intellectual Property, free and clear of all Liens in favor of other Persons
with full right to pledge, sell, assign. transfer and grant a security interest
therein. The Borrower owns or possesses such Intellectual Property and similar
rights necessary for the conduct of its business as now conducted, without any
known conflict with the rights of others which would have a Material Adverse
Effect. No Subsidiary owns Intellectual Property which is necessary for the
conduct of the Borrower's business.
5.17 Borrowing Base. Giving effect to any Extensions of Credit to be made
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as of the date hereof under this Agreement, the aggregate amount of all
Extensions of Credit under this Agreement does not exceed the Borrowing Base on
the date hereof.
5.18 Bank Accounts. Etc. All depository, disbursement and other accounts
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maintained by the Borrower with any financial institution, and all institutions
that have issued certificates of deposit or similar evidences of Indebtedness to
the Borrower thereof, are listed in Schedule A to this Agreement or (in the case
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of any accounts established after the date hereof) in a writing to the Bank.
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Section 6 Affirmative Covenants.
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The Borrower covenants and agrees that for so long as this Agreement is in
effect and until the Extensions of Credit, together with all interest thereon
and all other Obligations of the Borrower to the Bank are paid or satisfied in
full:
6.1 Maintenance of Existence. The Borrower will maintain its existence and
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comply with all applicable statutes, rules and regulations and to remain duly
qualified as a foreign corporation, licensed and in good standing in each
jurisdiction where such qualification or licensing is required by the nature of
its business, the character and location of its property, business. or the
ownership or leasing of its property, except where such noncompliance or failure
to so qualify would not have a Material Adverse Effect, and the Borrower will
maintain its properties in good operating condition, and continue to engage in
the same line of business as currently conducted or one reasonably related
thereto.
6.2 Taxes and Other Liens. The Borrower will, and will cause each of its
----- --- ----- ------
Subsidiaries to, pay when due all taxes, assessments, governmental charges or
levies imposed by U.S. Taxing Authorities which, if unpaid. might become a Lien
against the Borrower or such Subsidiary or on its property, except liabilities
being contested in good faith and by proper proceedings, as to which adequate
reserves are maintained on the books of the Borrower or its Subsidiaries, in
accordance with GAAP.
6.3 Insurance. The Borrower will maintain insurance with financially sound
----------
and reputable insurance companies in such amounts and against such risks as is
usually carried by owners of similar businesses and properties in the same
general areas in which the Borrower operate, provided that in any event the
Borrower shall maintain or cause to be maintained (a) insurance against
casualty, loss or damage covering all property and improvements of the Borrower
in amounts and in respect of perils usually carried by owners of similar
businesses and properties in the same general areas in which Borrower operates;
(b) comprehensive general liability insurance against claims for bodily injury,
death or property damage; and (c) workers' compensation insurance to the extent
required by applicable law. In the case of policies referenced in clauses (a)
and (b) above, all such insurance shall (i) name the Bank as a loss payees and
an additional insured as its interests may appear; (ii) provide that no
termination, cancellation or material reduction in the amount or material
modification to the extent of coverage shall be effective until at least 30 days
after receipt by the Bank of notice thereof; and (iii) be reasonably
satisfactory in all other respects to the Bank.
6.4 Financial Statements. Etc. The Borrower will furnish to the Bank:
--------- ----------- ----
(a) within thirty-five (35) days after the end of each calendar month (45
days with respect to the last month of the first three fiscal quarters of each
fiscal year and 90 days with respect to the last month of the fiscal year), the
unaudited consolidated balance sheet and income statement of the Borrower and
its Significant Subsidiaries (if any) as at the end of, and for, such month
(provided, however, that in the case of financial statements for the last month
of any fiscal quarter, such financial statements shall include an income
statement for such fiscal quarter), accompanied by a certificate of the chief
financial officer of the Borrower (or other Authorized Officer) to the effect
that such financial statements fairly present the consolidated financial
condition of the Borrower and its Significant Subsidiaries (if any) as of the
end of such month, and the consolidated results of their operations for such
month, in each case in accordance with GAAP (except for the absence of
footnotes) consistently applied (subject to normal year-end audit adjustments);
(b) within ninety (90) days after the last day of each fiscal year of the
Borrower, the audited consolidated balance sheet and income statement and
statement of cash flows of the Borrower and its Subsidiaries as at and for the
fiscal year then ended, certified by the Accountants
-10-
(the substance of such report to be reasonably satisfactory to the Bank),
together with a certificate of the chief financial officer or other Authorized
Officer of the Borrower to the effect that such financial statements fairly
present the consolidated financial condition of the Borrower and its
Subsidiaries as of the end of such fiscal year, and the consolidated results of
their operations for such fiscal year, in each case in accordance with GAAP. The
Borrower shall indicate on said financial statements all Guarantees or material
and unusual forward or long-term commitments made by the Borrower or any
Subsidiary thereof;
(c) at the time of the delivery of the monthly and yearly financial
statements required by Sections 6.4(a) and 6.4(b) above. a Compliance
Certificate signed by the chief financial officer, the president or other
Authorized Officer of the Borrower in the form attached to this Agreement as
Exhibit E, appropriately completed;
---------
(d) within twenty-five (25) days after the end of each fiscal month of the
Borrower, (i) a list of the accounts receivable aging for the Borrower as of the
end of such month in such form as the Bank may prescribe, all in reasonable
detail. Provided, however, that the receivables aging for the last month of
--------- --------
any fiscal quarter shall be net of inter-company receivables, and (ii) a
Borrowing Base Certificate signed by the chief financial officer, the president
or other Authorized Officer of the Borrower in the form attached to this
Agreement as Exhibit F, appropriately completed;
---------
(e) promptly upon the mailing thereof to the shareholders of the Borrower
generally, copies of all financial statements, reports, proxy statements and
other materials;
(f) promptly upon request by the Bank, copies of any management letter
provided by the Accountants, provided that the Borrower shall promptly advise
the Bank in the event the Borrower receives any such letter;
(g) promptly upon the filing thereof by the Borrower with the SEC (and in
any event within five (5) days of such filing), copies of any registration
statements and reports on Forms 10-K, 10-Q and 8-K (or their equivalents if such
forms no longer exist);
(h) promptly upon becoming aware of any litigation or other proceeding
against the Borrower or any Subsidiary thereof that may have a Material Adverse
Effect, notice thereof;
(i) within thirty (30) days after the beginning of each fiscal year of the
Borrower (commencing with fiscal year 1996), a copy of the operating budget,
including, without limitation, projections of the anticipated cash flow of the
Borrower for such fiscal year and a statement of the assumptions on which such
budget was prepared; and
(j) promptly following the request of the Bank, such further information
concerning the business, affairs and financial condition or operations of the
Borrower as the Bank may reasonably request.
6.5 Notice of Default. As soon as practicable, and in any event, within
------ -- -------
three (3) Banking Days of becoming aware of the existence of any condition or
event which constitutes a Default, the Borrower will provide the Bank with
written notice specifying the nature and period of existence thereof and what
action the Borrower is taking or proposes to take with respect thereto.
6.6 Environmental Matters.
---------------------
(a) The Borrower and each of its Subsidiaries shall comply with all terms
and conditions of all applicable Governmental Approvals and all applicable
Environmental Laws, except where failure to comply would not have a Material
Adverse Effect.
-11-
(b) The Borrower shall promptly notify the Bank should the Borrower become
aware of:
(i) any spill, release, or threat of release of any Hazardous Substance at
or from any Borrower Property or by any Person for whose conduct the Borrower or
any Subsidiary thereof is responsible, to the extent the Borrower is required by
Environmental Laws to report such to any Governmental Authority;
(ii) any action or notice with respect to a civil, criminal or
administrative action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter pending or threatened against
the Borrower or any Subsidiary thereof relating in any way to the Environmental
Laws, or any Lien of any Governmental Authority or any other Person against any
Borrower Property relating in any way to the Environmental Laws;
(iii) any claim made or threatened by any Person against the Borrower or
any Subsidiary thereof or any property of the Borrower or any Subsidiary thereof
relating to damage, contribution, cost recovery compensation, loss or injury
resulting from any Hazardous Substance pertaining to such property or the
business or operations of the Borrower or such Subsidiary; and
(iv) any occurrence or condition on any real property adjoining or in the
vicinity of any Borrower Property known to the officers or supervisory personnel
of the Borrower or any Subsidiary thereof or other employees having
responsibility for the compliance by the Borrower or any Subsidiary thereof with
Environmental Laws, without any independent investigation, which does cause, or
could cause, such Borrower Property, or any part thereof, to contain Hazardous
Substances in violation of any Environmental Laws, or which does cause, or could
cause, such Borrower Property to be subject to any restrictions on the
ownership, occupancy, transferability or use thereof by the Borrower or any
Subsidiary thereof.
(c) The Borrower will, and will cause each of its Significant Subsidiaries
to, at its own cost and expense, and within such period as may be required by
applicable law or regulation, initiate all remedial actions and thereafter
diligently prosecute such action as shall be required by law for the cleanup of
such Borrower Property, including all removal, containment and remedial actions
in accordance with all applicable Environmental Laws and shall further pay or
cause to be paid, at no expense to the Bank, all cleanup, administrative, and
enforcement costs of applicable Government Authorities which may be asserted
against such Borrower Property, provided, however, the Borrower may delay
initiating and prosecuting such remedial actions if (i) it is contesting such
requirements in good faith by appropriate proceedings; (ii) adequate reserves
have been established; (iii) no criminal liability or punitive damages would
result therefrom; and (iv) no Liens have been or are reasonably anticipated to
be imposed on Borrower Property as a result thereof.
6.7 ERISA Information. If and when the Borrower or any member of the
----- -----------
Controlled Group (a) gives or is required to give notice to the PBGC of any
"reportable event" (as defined in Section 4043 of ERISA) with respect to any
Plan which might constitute grounds for a termination of such Plan under Title
IV of ERISA, or knows that the plan administrator of any Plan has given or is
required to give notice of any such reportable event, (b) receives notice of
complete or partial withdrawal liability under Title IV of ERISA or (c) receives
notice from the PBGC under Title IV of ERISA of an intent to terminate or
appoint a trustee to administer the Plan, the Borrower shall in each such
instance promptly furnish to the Bank a copy of any such notice.
6.8 Inspection. The Borrower will, upon the request of the Bank, permit a
-----------
representative of the Bank (including any field examiner or auditor retained by
the Bank) to inspect and make copies of the Borrower's books and records, and to
discuss its affairs, finances and
-12-
accounts with its officers and designated employees and, with your
participation, the Accountants, at such reasonable times and as often as the
Bank may reasonably request and cause each of its Significant Subsidiaries which
becomes a party to this Agreement to do so, provided, however, until an Event of
Default occurs and is continuing. the Bank shall not conduct more than two
inspections of the Borrower's books and records between the date hereof and
the Commitment Expiration Date fiscal year.
6.9 Use of Proceeds. The Borrower shall use the proceeds of the
--- -- ---------
borrowings under the Line of Credit Note for the general business purposes of
the Borrower; provided that the initial advance under the Note may be used to
repay Indebtedness of the Borrower to Bank of New York incurred prior to the
date hereof. Without limiting the foregoing, no part of such proceeds will be
used for the purpose of purchasing or carrying any "margin security" as such
term is defined in Regulation U of the Board of Governors of the Federal Reserve
System.
6.10 Further Assurances. The Borrower will execute and deliver to the Bank
------- -----------
any writings and do all things necessary, effectual or reasonably requested by
the Bank to carry into effect the provisions and intent of this Agreement or any
other Loan Document.
6.11 Depository Accounts. The Borrower shall maintain an operating deposit
---------- ---------
account at the offices of the Bank, and shall deposit some portion of its excess
cash with the Bank in either a demand deposit account, a money market deposit
account, or certificates of deposit, or a combination thereof.
6.12 Subsidiaries. The Borrower shall immediately notify the Bank of the
------------
organization of any additional foreign or domestic Subsidiaries of the Borrower
after the date hereof. The Bank may require that any such additional Significant
Subsidiaries become parties to any of the Loan Documents as guarantors or
sureties and/or that the Borrower pledge the stock of any such additional
Significant Subsidiaries as collateral for the Obligations of the Borrower.
6.13 Intellectual Property. The Borrower will promptly inform the Bank of
------------ --------
all applications filed by the Borrower for trademarks and copyrights and of all
trademarks, patents and copyrights granted or issued on or after the date of
this Agreement, and, upon the request of the Bank, will promptly execute and
deliver such forms of conditional assignment, mortgage, pledge and similar
documents as the Bank may reasonably require so as to ensure that the security
interests granted pursuant to the Security Instruments extend to and are
perfected in respect of such additional trademarks, patents and copyrights.
Section 7 Negative Covenants.
--------- -------- ---------
The Borrower covenants and agrees that for so long as this Agreement is in
effect and until the Extensions of Credit, together with all interest thereon
and all other Obligations of the Borrower to the Bank are paid or satisfied in
full, without the prior written consent of the Bank:
7.1 ERISA. The Borrower will not permit any Plan maintained by the
-----
Borrower or by any member of a "Controlled Group" (ERISA (Section) 210(c) or
ERISA 3210(d)) of which the Borrower is a member to: (a) engage in any
"prohibited transaction" (ERISA (Section) 2003(c)); (b) fail to report to the
Bank a "reportable event" (ERISA (Section) 4043) within 30 days after its
occurrence or as to any reportable event as to which the 30-day notice period
requirement of Section 4043(b) of Title IV of ERISA has been waived by the PBGC,
within 30 days of such time as the Borrower is requested to notify the PBGC of
such reportable event; (c) incur any accumulated funding deficiency" (ERISA
(Section) 302); (d) terminate its existence at any time in a manner which could
result in the imposition of a Lien on the property of the Borrower or any
Subsidiary thereof; or (e) fail to report to the Bank any "complete withdrawal"
or "partial withdrawal" by the Borrower or an affiliate from a "multiemployer
plan" (ERISA (Sections) 4203, 4205, and 4001, respectively). The quoted
terms are defined in the respective sections of ERISA cited above.
-13-
7.2 Transactions with Affiliates. The Borrower will not, and will not
------------ ---- ----------
permit any of its Significant Subsidiaries to, directly or indirectly, pay any
funds to or for the account of, make any Investment in, lease, sell, transfer or
otherwise dispose of any assets, tangible or intangible, or engage in any
transaction in connection with any joint enterprise or other joint arrangement
with, any Affiliate of the Borrower, unless such transaction is otherwise
permitted under this Agreement, or is in the ordinary course of the Borrower's
or such Significant Subsidiary's business, and is upon fair and reasonable terms
no less favorable to the Borrower or such Significant Subsidiary than those that
could be obtained in a comparable arm's length transaction with a Person not an
Affiliate.
7.3 Consolidation Merger or Acquisition. The Borrower will not, and will
------------- ------ -- -----------
not permit any Significant Subsidiaries to. merge or consolidate with or into
any other Person, or make any acquisition of the business of any other Person
unless it obtains the prior written consent of the Bank; Provided that any
--------
Significant Subsidiary may merge into Borrower or any wholly-owned Significant
Subsidiary of the Borrower, provided, further, however, the Borrower or any
Significant Subsidiary may merge with or acquire another party without the prior
written consent of the Bank as long as (a) the Borrower or the Significant
Subsidiary is the surviving party, (b) the other party is engaged in the same or
in a related line of business, (c) not more than one-half of the senior
management positions of the Borrower change as a result thereof and (d) no Event
of Default has occurred and is continuing or would arise as a result of such
merger, consolidation or acquisition.
7.4 Disposition of Assets. The Borrower will not, and will not permit any
----------- -- -------
of its Subsidiaries to, convey, sell, lease, transfer or otherwise dispose of
any of its property, business or assets (including, without limitation, accounts
receivable and leasehold assets), whether now owned or hereafter acquired,
except.
(a) obsolete, excess or worn out property disposed of in the ordinary
course of business;
(b) the sale or other disposition of any property in the ordinary course of
business, Provided that the aggregate book value of all assets (other than
--------
inventory) so sold or disposed of in any period of twelve consecutive months
shall not exceed 10% of the consolidated total assets of the Borrower and its
Subsidiaries as at the beginning of such twelve month period; and
(c) the sale of inventory in the ordinary course of business.
7.5 Indebtedness. The Borrower will not create, incur, assume or suffer to
-------------
exist any Indebtedness, except:
(a) Indebtedness payable to the Bank;
(b) existing Indebtedness, including Subordinated Debt, if any, listed on
Schedule A hereto;
-------- -
(c) Purchase Money Indebtedness; provided that, giving effect to the
--------
incurrence of such Purchase Money Indebtedness and to the receipt and
application of the proceeds thereof, no Default shall have occurred and be
continuing; and
(d) Subordinated Debt incurred by the Borrower after the date hereof;
provided that, giving effect to the incurrence of such Subordinated Debt and to
--------
the receipt and application of the proceeds thereof, no Default shall have
occurred and be continuing.
7.6 Liens. The Borrower will not create, incur, assume or suffer to exist
------
any Lien on any of its properties or assets, except the following (collectively,
"Permitted Liens"):
--------- -----
-14-
(a) Liens for taxes (i) not delinquent or (ii) being contested in good
faith and by proper proceedings, as to which adequate reserves are maintained on
the books of the Borrower in accordance with GAAP;
(b) carriers', warehousemen's. mechanics', materialmen's or similar liens
imposed by law incurred in the ordinary course of business in respect of
obligations not overdue, or being contested in good faith and by proper
proceedings and as to which adequate reserves with respect thereto are
maintained on-the books of the Borrower in accordance with GAAP;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other types of social security legislation;
(d) security deposits made to secure the performance of leases, licenses
and statutory obligations incurred in the ordinary course of business;
(e) Liens in favor of the Bank;
(f) existing Liens. if any, listed on Schedule A hereto; provided that no
-------- - --------
such Lien is spread to cover any additional property after the date hereof, and
that the amount of the Indebtedness secured thereby is not increased; and
(g) Purchase Money Security Interests securing Purchase Money Indebtedness
permitted under Section 7.5(c) above.
7.7 Restricted Payments. The Borrower will not declare or make any
---------- --------
Restricted Payment, except upon ten (10) days prior written notice to the Bank
and only as long as no Default or Event of Default has occurred and is
continuing or is can be reasonably anticipated to occur as a result thereof.
7.8 Investments. The Borrower will not, and will not permit any of its
------------
Significant Subsidiaries to, make, maintain or acquire any Investment in any
Person other than:
(a) Investments of the type falling within the Investment Guideline
attached hereto as Schedule B which have been approved by the Borrower's Board
-------- -
of Directors;
(b) additional forms of Investment approved through amendments to the
Investment Guidelines hereafter approved by the Borrower's Board of Directors,
subject to the prior written approval of the Bank, which approval shall not be
unreasonably withheld;
(c) certificates of deposit, eurodollar time deposits, commercial paper or
any other obligations of the Bank or of any other bank or trust company
organized or licensed to conduct a banking business under the laws of the United
States or any State thereof and which has (or which is a Subsidiary of a bank
holding company which has) publicly traded debt securities rated A or higher by
Standard & Poor's Corporation or A-2 or higher by Xxxxx'x Investors Service,
Inc.;
(d) stock or obligations issued to the Borrower or any Subsidiary thereof
in settlement of claims against others by reason of an event of bankruptcy or a
composition or the readjustment of debt or a reorganization of any debtors of
the Borrowers or such Subsidiary;
(e) loans or advances to officers and employees of the Borrower not
exceeding in aggregate principal amount of $1,500,000 at any one time
outstanding during fiscal year 1995 and $500,000 during fiscal year 1996 and
thereafter;
-15-
(f) investments by the Borrower in its Subsidiaries, and Investments by
such Subsidiaries in the Borrower; provided that the sum of (i) the aggregate
--------
amount of all Investments made after the date hereof by the Borrower in its
Subsidiaries and (ii) the outstanding aggregate amount of any Indebtedness of
any Subsidiary of the Borrower that is Guaranteed by Borrower, may not exceed
$1,000.000 at any time, provided further, however, nothing herein shall prohibit
the Borrowers from converting Indebtedness of a Subsidiary to equity of such
Subsidiary; and
(g) Investments by the Borrower in joint ventures or partnerships with
third parties, provided that such joint venture or partnership is engaged in the
same or a related line of business and provided that the sum of (i) the
aggregate amount of all Investments made or committed to be made after the date
hereof by the Borrowers in such joint ventures or partnerships and (b) the
outstanding aggregate amount of any Indebtedness of such joint venture or
partnership that is guaranteed pursuant to clause (i) of this subparagraph (e),
may not exceed $2,500,000 at any time.
7.9 Sale and Leaseback. The Borrower shall not, except upon 14 days prior
---- --- ----------
written notice to the Bank, enter into any arrangement. directly or indirectly,
whereby it shall sell or transfer any property owned by it in order to lease
such property or lease other property that the Borrower intends to use for
substantially the same purpose as the property being sold or transferred .
7.10 Current Ratio. The Borrower will not permit the Current Ratio at the
------- ------
end of any of the following fiscal months to be less than the ratio set forth
below opposite such month:
Minimum
Fiscal Month Ending Current Ratio
------------------- -------------
5/31/94 1.0 to 1
and thereafter
7.11 Minimum Profitability. The Borrower will not permit Net Loss for
------- --------------
any of the following fiscal quarters to be greater than the amount set forth
opposite such fiscal quarter:
Fiscal Quarters Ending Maximum Net Loss
---------------------- ----------------
5/31/94 $ 1 00,000
8/31/94 $1,000,000
11/30/94 and thereafter $ 100,000
In addition, the Borrower shall not incur Net Losses in any two consecutive
fiscal quarters.
7.12 Leverage. The Borrower will not permit the ratio of Total Senior
---------
Liabilities to Tangible Net Worth at the end of any of the following fiscal
months to be greater than the ratio set forth below opposite such fiscal month:
Maximum
Fiscal Month Ending Permitted Ratio
------------------- ---------------
5/31/94 through 1/31/95 2.0 to 1
2/28/95 and thereafter 1.8 to 1
7.13 Tangible Net Worth. The Borrower will not permit its Tangible Net
-------- --- -----
Worth at the end of any fiscal month to be less than the amount set forth below
opposite such fiscal month:
-16-
Minimum
Fiscal Month Tangible Net Worth
------------ ------------------
5/31/94 through 1/31/95 $9,000,000
2/28/95 and thereafter $9,750,000
7.14 Receivables from Subsidiaries. The Borrower will not permit
----------- ---- -------------
receivables from its Subsidiaries which are not Significant Subsidiaries at the
end of any fiscal quarter to exceed $4,500,000 in the aggregate.
Section 8 Events of Default.
------- - ------ -- --------
8.1 Events of Default. The occurrence of any of the following events shall
------ -- -------
be an "Event of Default" hereunder:
(a) The Borrower shall default in the due and punctual payment of
principal or interest on the Note, or shall default in the payment of any other
amount due under any Loan Document; or
(b) Any representation, warranty or statement made herein or in any
other Loan Document, or in any certificate or statement furnished pursuant to or
in connection herewith or therewith, shall prove to be incorrect, misleading or
incomplete in any material respect on the date as of which made or deemed made:
or
(c) The Borrower shall default in the performance or observance of any
term, covenant or agreement on its part to be performed or observed pursuant to
Sections 7.3, and 7.10 through 7.13; or
(d) The Borrower shall default in the performance or observance of any
term, covenant or agreement on its part to be performed or observed pursuant to
any of the provisions of this Agreement or any other Loan Document (other than
those referred to in paragraphs 8.1(a) through 8.1(c) above) and such default
shall continue unremedied for a period of twenty (20) days after the occurrence
of such default; or
(e) Any obligation of the Borrower or any Significant Subsidiary
thereof in respect of any Indebtedness (other than the Note) or any Guarantee in
an aggregate amount in excess of $300,000 shall be declared to be or shall
become due and payable prior to the stated maturity thereof, or such
Indebtedness or Guarantee shall not be paid as and when the same becomes due and
payable, or there shall occur and be continuing any default under any
instrument, agreement or evidence of indebtedness relating to any such
Indebtedness the effect of which is to permit the holder or holders of such
instrument, agreement or evidence of indebtedness, or a trustee, agent or other
representative on behalf of such holder or holders, to cause such Indebtedness
to become due prior to its stated maturity provided, however, the aforementioned
circumstance shall not constitute an Event of Default as long as (i) the
Borrower is contesting the Indebtedness in good faith by proper proceedings;
(ii) adequate reserves have been established and are maintained; and (iii)
assuming that the Borrower would be required to pay such Indebtedness in full
without setoff or counterclaim, the Borrower would at all times continue to be
in compliance with the provisions of Sections 7.10 through 7.13 above; or
(f) The Borrower or a Significant Subsidiary thereof shall (i) apply
for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Bankruptcy Code, (iv) file
a petition seeking to take advantage of any other law relating to
-17-
bankruptcy, insolvency, reorganization, winding-up. or composition or
readjustment of debts. (v) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under the Bankruptcy Code, or (vi) take any corporate action
for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application
or consent of the Borrower or any Significant Subsidiary thereof in any court of
competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution
or winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of the
Borrower or such Significant Subsidiary or of all or any substantial part of its
assets, or (iii) similar relief in respect of the Borrower or such Significant
Subsidiary under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, and such proceeding or case
shall continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed and in
effect, for a period of 60 days; or an order for relief against the Borrower or
such Significant Subsidiary shall be entered in an involuntary case under the
Bankruptcy Code; or
(h) Any of the events and circumstances described in subparagraphs
(f) and (9), which if involving or relating to the Borrower or a Significant
Subsidiary would constitute an Event of Default under such subparagraphs, occur
with respect to a Subsidiary which is not a Significant Subsidiary, and (i) such
---
occurrence has resulted in a Material Adverse Effect; or (ii) in the reasonable
judgment of the Bank such occurrence can be reasonably anticipated to result in
a Material Adverse Effect or Event of Default.
(i) A judgment or judgments for the payment of money in excess of
$300,000 (net of insurance proceeds) in the aggregate shall be rendered against
the Borrower and any such judgment or judgments shall not have been vacated,
discharged, stayed or bonded pending appeal within thirty (30) days from the
entry thereof; or
(j) The Borrower or any member of the Controlled Group shall fail to
pay when due an amount or amounts aggregating in excess of $300,000 which it is
obligated to pay to the PBGC or to a Plan under Title IV of ERISA; or a notice
of intent to terminate a Plan or Plans having aggregate Unfunded Liabilities in
excess of $300,000 shall be filed under Title IV of ERISA by the Borrower or any
member of the Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any such Plan or
Plans or a proceeding shall be instituted by a fiduciary of any such Plan or
Plans against the Borrower or any member of the Controlled Group to enforce
Sections 515 or 421 9(c)(5) of ERISA; or a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that any such
Plan or Plans must be terminated; or there shall occur a complete or partial
withdrawal form, or a default, within the meaning of Section 421 9(c)(5) of
ERISA, with respect to, one or more Multiemployer Plans which could cause the
Borrower or one or more members of the Controlled Group to incur a current
payment obligation in excess of $300,000; or
(k) The Borrower or any Significant Subsidiary thereof shall default
in the performance or observance of any term, covenant or agreement on its part
to be performed or observed pursuant to any of the provisions of any agreement
with the Bank or any instrument delivered in favor of the Bank (other than, in
either case, a Loan Document), and such default shall continue unremedied beyond
the grace period (if any) provided for therein; or
(l) Any Security Instrument shall, as a result of any action or
failure to act on the part of the Borrower, cease for any reason to be in full
force and effect or shall cease to be
-18-
effective to grant a perfected security interest in the collateral described in
such Security Instrument with the priority stated to be granted thereby; or
(m) Borrower shall make any payment on account of the Subordinated
Debt identified in Schedule A and additional Subordinated Debt hereinafter
-------- -
incurred. except to the extent such payment is expressly permitted by Section
7.7 or under any subordination agreement entered into with the Bank.
8.2 Remedies Upon an Event of Default. If any Event of Default shall
-------- ---- -- ----- -- --------
have occurred and be continuing, the Bank may (a) declare the Line of Credit
Commitment terminated (whereupon the Line of Credit Commitment shall be
terminated) and/or (b) declare the principal amount then outstanding of, and the
accrued interest on, the Note and commitment fees and all other amounts payable
hereunder and under the Note to be forthwith due and payable, whereupon such
amounts shall be and become immediately due and payable, without notice
(including, without limitation, notice of intent to accelerate), presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by the Borrower; provided that in the case of the occurrence of
--------
an Event of Default with respect to the Borrower referred to in clauses 8.1 (f)
and 8.1(9) of Section 8.1, the Line of Credit Commitment shall be automatically
terminated and the principal amount then outstanding of, and the accrued
interest on, the Note and commitment fees and all other amounts payable
hereunder and under the Note shall be and become automatically and immediately
due and payable, without notice (including, without limitation, notice of intent
to accelerate), presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrower.
Section 9 Definitions.
------- - ------------
9.1 Certain Definitions.
------- ------------
"Accountants" means KPMG Peat Marwick, or another accounting firm of
-----------
national reputation or other certified public accountants selected by the
Borrower and approved by the Bank.
"Affiliate" means, with respect to any specified Person (the
---------
"Specified Person"), any Person directly or indirectly controlling, controlled
----------------
by or under direct or indirect common control with, the Specified Person and,
without limiting the generality of the foregoing, includes (i) any director or
officer of the Specified Person or any Affiliate of the Specified Person, (ii)
any such director's or officer's parent, spouse, child or child's spouse (a
"relative"), (iii) any group acting in concert, of one or more such directors,
--------
officers, relatives or any combination thereof (a "group"), (iv) any Person
-----
controlled by any such director, officer, relative or group in which any such
director, officer, relative or group beneficially owns or holds 5% or more of
any class of voting securities or a 5% or greater equity or profits interest and
(v) any Person or group which beneficially owns or holds 5% or more of any class
of voting securities or a 5% or greater equity or profits interest in the
Specified Person. For the purposes of this definition, the term "control" when
used with respect to any Specified Person means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Specified Person, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" shall mean this Credit Agreement.
----------
"Applicable Margin" shall have the meaning set forth in Section 2.1.
---------- ------
"Banking Day" shall mean any day, excluding Saturday and Sunday and
-----------
excluding any other day which in the Commonwealth of Massachusetts or the State
of California is a legal holiday or a day on which banking institutions are
authorized by law to close.
"Borrowing Base" shall have the meaning specified in Section 1.4.
--------------
-19-
"Borrower Property" means any real property owned, occupied or operated by the
-------- --------
Borrower or any of its Subsidiaries which is located in the United States.
"Code" means the Internal Revenue Code of 1986, as amended, or any successor
----
statute.
"Collateral" shall have the meaning given that term in the Security Agreement.
----------
"Commitment Expiration Date" shall have the meaning specified in Section 1.1.
---------- ---------- ----
"Contractual Obligation" means, as to any Person, any provision of any
----------- ----------
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Controlled Group" means all members of a controlled group of corporations and
---------- -----
all trades or businesses (whether or not incorporated) under common control
which. together with the Borrower, are treated as a single employer under
Section 414 of the Code.
"Copyright Mortgage" shall mean the meaning set forth in Section 3.1 (b).
--------- --------
"Current Assets" means, at any time, assets of the Borrower at such
------- ------
time, on a non-consolidated basis, that would be classified as current assets in
accordance with GAAP, including without limitation, cash and inventory (but in
no event in excess of $10,500,000 in net book value, of inventory) and
receivables.
"Current Liabilities" means, at any time. all liabilities of the Borrower at
------- -----------
such time, on a nonconsolidated basis. that would be classified as current
liabilities in accordance with GAAP, including, without limitation, all
Indebtedness of the Borrower payable on demand or maturing within one year of
such time, or renewable at the option of the Borrower for a period of not more
than one year from such time, and all serial maturity and periodic or
installment payments on any Indebtedness, to the extent such payments are
required to be made within one year from such time.
"Current Ratio" means, at any time, all Current Assets divided by the
------- -----
aggregate of all Current Liabilities at such time.
"Default" means any condition or event that constitutes an Event of
-------
Default or that with the giving of notice or lapse of time or both would, unless
cured or waived, become an Event of Default.
"Eligible Acceptance" means an acceptance (i) against the liability
-------- ----------
for which the Bank is not required to maintain reserves under Regulation D of
the Board of Governors of the Federal Reserve System in effect from time to
time, or under any other law or regulation, and (ii) which is eligible for
discount by Federal Reserve Banks.
"Eligible Domestic Accounts Receivable" means an account receivable
-------- -------- -------- ----------
owing to the Borrower which met the following specifications at the time it came
into existence and continues to meet the same until it is collected in full:
(a) The original stated maturity of the account is not more than 90
days after the invoice date thereof, and the account (regardless of its stated
maturity date) does not remain unpaid more than 90 days after such invoice date.
(b) The account arose from the performance of services or an outright
sale of goods by Borrower, such goods have been shipped to the account debtor,
and Borrower has possession of, or has delivered to Bank. shipping and delivery
receipts evidencing such shipment or performance of services.
-20-
(c) The account is owned solely by the Borrower, and is not subject to
any assignment, claim, lien, or security interest. other than a security
interest in favor of the Bank.
(d) The account is not subject to set-off, credit, allowance or
adjustment by the account debtor, except discount allowed for prompt payment:
the account is not one as to which the account debtor disputes liability or
makes any claim with respect thereto or as to which the Bank believes. in its
sole reasonable discretion, that there is a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or which involves an
account debtor subject to any insolvency proceeding, or becomes insolvent, or
goes out of business.
(e) The account arose in the ordinary course of Borrower's business
and did not arise from the performance of services or a sale of goods to a
supplier or employee of the Borrower.
(f) No notice of bankruptcy or insolvency of the account debtor has
been received by or is known to the Borrower.
(g) The Borrower has pledged any instrument or chattel paper
evidencing the account to the Bank pursuant to the provisions of the Security
Agreement.
(h) Not more than 50% of the aggregate receivables of the account
debtor have remained unpaid for a period of more than ninety (90) days from the
invoice date.
(i) The aggregate accounts receivables from the account debtor
(including its Subsidiaries and any other Affiliates which are known as such by
any member of senior management of the Borrower) do not exceed 25% of the total
Eligible Accounts Receivable of the Borrower; that portion of the account over
the 25% level will be disqualified.
(j) The account does not relate to goods placed on consignment,
guaranteed sale, sale or return, sale on approval, xxxx and hold, or other terms
by reason of which the payment by the account debtor may be conditional.
(k) The account debtor is not a Subsidiary, officer, employee, agent
of the Borrower or any other Affiliate of the Borrower who is known as such by a
member of senior management of the Borrower.
(i) The account debtor is not a Governmental Authority.
(m) The Borrower does not owe any amounts to the account debtor for
goods sold, services rendered or otherwise; to the extent that any amounts are
so owed, the accounts of such account debtor in an amount equal to the amounts
owed by the Borrower to the account debtor shall be disqualified.
(n) The Bank has not notified the Borrower that the Bank has
determined that an account or account debtor is unsatisfactory for credit
reasons (which determination shall not be made unreasonably).
(o) The account debtor is a person or entity located in the United
States or Canada and the account arose out of services rendered or goods
delivered in the United States or Canada.
"Eligible International Accounts Receivable" means an account receivable owing
-------- ------------- -------- ----------
to the Borrower which met the requirements set forth in clauses (a) through (n)
for Eligible Domestic
-21-
Accounts Receivable and also the following specifications at the time
it came into existence and continues to meet the same until it is collected in
full:
(a) The account debtor is a Person located outside the United States
and the account arose out of services rendered or goods delivered outside the
United States: and
(b) The obligations of the account debtor under such account are
supported either (i) by a transferable commercial letter of credit or standby
letter of credit issued for the account of the account debtor and for the
benefit of the Borrower by a bank or other financial institution approved by the
Bank in writing, that (A) is payable in the United States. (B) provides for the
full payment to the Borrower or its transferee of such account receivable,
either (x) upon shipment of goods or the provision of services and upon
presentation of documentation that such goods have been shipped or that such
services have been provided, or (y) upon default in payment of such account
receivable in accordance with its terms, and (C) has been delivered and pledged
to the Bank; or (ii) by insurance covering such obligations with terms that have
been approved by the Bank in writing and underwritten by an insurer that has
been approved by the Bank in writing. The Bank reserves the right in its sole
discretion to disapprove a bank, other financial institution or insurer (even if
previously approved) by notice to the Borrower, provided, however, such
disapproval shall not apply to accounts receivable previously included in the
Borrowing Base but only to accounts receivable arising after the effective date
of the notice of disapproval.
"Environmental Laws" means all federal. state, local and foreign laws,
------------- ----
and all regulations, notices or demand letters issued, promulgated or entered
thereunder, relating to pollution or protection of the environment and to
occupational health and safety, including, without limitation, laws relating to
emissions, discharge-s, releases or threatened releases of pollutants,
contaminants, chemicals, or Hazardous Substances into the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use. treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals or Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974,
-----
as amended, or any successor statutes.
"Event of Default" has the meaning set forth in Section 8.1.
----- -- -------
"Extension of Credit" shall have the meaning set forth in Section 1.4.
--------- -- ------
"Financial Statements Date" means May 31, 1993.
--------- ---------- ----
"GAAP" means accounting principles generally accepted in the United
----
States applied on a consistent basis.
"Governmental Approvals" shall mean any authorization, consent, order,
------------ ---------
approval, license, lease, ruling, permit, tariff, rate, certification,
validation, exemption, filing or registration by or with, or notice to, any
Governmental Authority.
"Governmental Authority" shall mean any federal, state, municipal or
----------------------
other governmental department, commission, board, bureau, agency, court,
tribunal or other instrumentality, domestic or foreign, and any arbitrator.
"Guarantee by any Person means any obligation, contingent or
---------
otherwise, of such Person directly or indirectly guaranteeing any Indebtedness
or other obligation of any other Person and, without limiting the generality Gf
the foregoing, any obligation, direct or indirect, contingent or otherwise of
such Person (a) to purchase or pay (or advance or supply funds for the purchase
or
-22-
payment of) such Indebtedness or other obligation (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or (b) entered into for the
purpose of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided that the term Guarantee shall
--------
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Substances" shall mean all hazardous and toxic substances,
--------- ----------
wastes or materials, hydrocarbons (including naturally occurring or man-made
petroleum and hydrocarbons), flammable explosives, urea formaldehyde insulation.
radioactive materials. biological substances, PCBs, pesticides, herbicides and
any other kind and/or type of pollutants, or contaminates and/or any other
similar substances or materials which, because of toxic, flammable, explosive,
corrosive, reactive, radioactive or other properties that may be hazardous to
human health or the environment, are included under or regulated by any
Environmental Laws.
"Indebtedness" of any Person at any date shall mean, la) all
-------------
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (excluding current trade liabilities Incurred in
the ordinary course of business and payable in accordance with customary
practices, but including any class of capital stock of such Person with fixed
payment obligations or with redemption at the option of the holder), or which is
evidenced by a note, bond, debenture or similar instrument, (b) all obligations
of such Person under leases that should be treated as capitalized leases in
accordance with GAAP, (c) all obligations of such Person in respect of
acceptances issued or created for the account of such Person, and all
reimbursement obligations (contingent or otherwise) of such Person in respect of
any letters of credit issued for the account of such Person, and (d) all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof.
"Intellectual Property" shall have the meaning specified in Section
------------ ---------
5.16.
"Investments" means, with respect to any Person (the "Investor"), (a)
-----------
any investment by the Investor in any other Person, whether by means of share
purchase, capital contribution, purchase or other acquisition of a partnership
or joint venture interest, loan, time deposit, demand deposit or otherwise and
(b) any Guarantee by the Borrower of any Indebtedness or other obligation of any
other Person.
"Letter of Credit" means any commercial letter of credit or standby
------ -- ------
letter of credit issued by the Bank for the account of the Borrower as provided
in this Agreement.
"Letter of Credit Usage" means, at any time. the aggregate at such
------ -- ------ -----
time of (a) the maximum amount then available to be drawn under all outstanding
Letters of Credit, and (b) all then unreimbursed drawings under any Letters of
Credit.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, encumbrance, lien (statutory or other). or preference, priority or
other security agreement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any lease
that should be capitalized in accordance with GAAP, and the filing of a
financing statement under the Uniform Commercial Code or comparable law of any
jurisdiction), together with any renewal or extension thereof.
"Line of Credit Commitment" shall have the meaning specified in
---- -- ------ ----------
Section 1.1.
"Line of Credit Loans" shall have the meaning specified in Section
---- -- ------ -----
1.1.
-23-
"Loan Documents" means, collectively, this Agreement, the Note. the
---- ---------
Financing Statements, the Security Instruments, and all other agreements and
instruments that are from time to time executed in connection with this
Agreement, as each of such agreements and instruments may be amended, modified
or supplemented from time to time.
"Material Adverse Effect" means a material adverse effect on (a) the
-------- ------- ------
business, operations, property, condition (financial or otherwise) or prospects
of the Borrower, (b) the ability of the Borrower to perform its obligations
under this Agreement, the Note or any of the other Loan Documents, (c) the
validity or enforceability of this Agreement, the Note or any of the other Loan
Documents, or the rights or remedies of the Bank hereunder or thereunder. or (d)
the right of the Bank to enforce the payment of accounts against account debtors
in any particular state.
"Multiemployer Plan" means at any time an employee pension benefit
------------- -----
plan within the meaning of Section 4001 (a)(3) of ERISA to which the Borrower or
any member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions. including for these purposes any Person which ceased to be a
member of the Controlled Group during such five year period.
"Net Income" or "Net Loss" for any period in respect of which the
--- ------ --- ----
amount thereof shall be determined, shall mean the aggregate of the consolidated
net income (or net loss) after taxes for such period (taken as a cumulative
whole) of the Borrower and its Significant Subsidiaries (if any), determined in
accordance with GAAP.
"Obligations" shall have the meaning given the term "Secured
-----------
Obligations" in the Security Agreement.
"Office of the Bank" shall mean the banking office of the Bank located
------ -- --- ----
at 0000 Xxxxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000, or such other location of
which the Bank shall notify the Borrower.
"Patent and Trademark Assignment shall have the meaning set forth in
------ --- --------- ----------
Section 3.1 (b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall have the meaning set forth in Section 7.6.
--------- ------
"Person" shall mean and include any individual, firm, corporation,
------
trust or other unincorporated organization or association or other enterprise or
any government or political subdivision, agency, department or instrumentality
thereof.
"Plan" means any employee pension benefit plan which is covered by
----
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code and is either (a~ maintained by the Borrower or any member of the
Controlled Group for employees of the Borrower or any member of the Controlled
Group or (b) maintained pursuant to a collective bargaining agreement or any
other arrangement under which more than one employer makes contributions and to
which the Borrower or any member of the Controlled Group is then making or
accruing an obligation to make contributions or has within the preceding five
plan years made contributions .
"Prime Rate" shall mean the per annum rate of interest from time to
----------
time announced and made effective by the Bank as its Prime Rate (which rate may
or may not be the lowest rate available from the Bank at any given time).
-24-
"Purchase Money Indebtedness" shall mean Indebtedness incurred to
-------- ----- ------------
finance the acquisition of assets or the cost of improvements on real property
or leaseholds, in each case in an amount not in excess of the lesser of (a) the
purchase price or acquisition cost of said assets or the cost of said
improvements and (b) the fair market value of said assets or said improvements
on the date of acquisition of said assets or contract for said improvements.
"Purchase Money Security Interest" shall mean (a) a security interest
--------------------------------
securing Purchase Money Indebtedness, which security interest applies solely to
the particular assets acquired with the Purchase Money Indebtedness that said
Purchase Money Security Interest secures, and (b) the renewal, extension and
refunding of such Purchase Money Indebtedness in an amount not exceeding the
amount thereof remaining unpaid immediately prior to such renewal, extension or
refunding.
"Rate Reduction Event" means an event that occurs when the following
---- --------- -----
conditions are satisfied:
(a) the Borrower shall, in any two consecutive fiscal quarters
commencing with the fiscal quarter ending May 31, 1994, have Net Income (on a
non-consolidated basis) in excess of One Dollar ($1.00) for each of such
quarters; and
(b) the Borrower shall have furnished to the Bank financial statements
of the Borrower (on a non-consolidated basis) demonstrating satisfaction of the
condition referred to in clause (a) above. Once a Rate Reduction Event occurs,
------ ---
the reduced rate shall remain in effect until the Commitment Expiration Date.
"Restricted Payment" means, with respect to the Borrower, (a) any
---------- -------
dividend or other distribution on any shares of capital stock of the Borrower
(except dividends payable solely in shares of capital stock or rights to acquire
capital stock of the Borrower, (b) any payment on account of the purchase,
redemption, retirement or acquisition of (i) any shares of the capital stock of
the Borrower or (ii) any option, warrant, convertible security or other right to
acquire shares of the capital stock of the Borrower, other than, in either case,
payments made solely to the Borrower, and (c) any required or optional payment
of any principal of, or premium [or interest] on, or any required or optional
purchase, redemption or other retirement or other acquisition of any
Subordinated Debt.
"SEC" means the Securities and Exchange Commission.
---
"Security Agreement" shall have the meaning set forth in Section
-------- ---------
3.1 (a).
"Security Instruments" means, collectively. the Security Agreement,
-------- -----------
the Copyright Mortgage, the Patent and Trademark Assignment, and each other
instrument or agreement that purports to secure the Obligations of the Borrower
to the Bank.
"Significant Subsidiary" means any Subsidiary of the Borrower which is
----------- ----------
organized under the laws of, or has its principal place of business in, a state
or commonwealth of the United States.
"Subordinated Debt" means Indebtedness of the Borrower that is
------------ ----
subordinated to the Indebtedness of the Borrower owing to the Bank either (a)
pursuant to a subordination agreement in form and substance satisfactory to the
Bank between the Bank and the holder(s) of such Indebtedness, or (b) pursuant to
the terms thereof, where the Bank has confirmed in writing that such terms are
satisfactory to it.
"Subsidiary" means, with respect to any Person, any corporation or
----------
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board
-25-
of directors or other Persons performing similar functions are at the time
directly or indirectly owned by such Person.
"Tangible Net Worth" means, at any time, the consolidated
-------- --- -----
stockholders' equity of the Borrower and its Significant Subsidiaries. if any.
at such time determined in accordance with GAAP, less all assets that are
----
reflected on the consolidated balance sheet of the Borrower at such time that
would be treated as intangibles under GAAP (including. but not limited, to
goodwill, capitalized software development costs and excess purchase costs as
well as all inter-company notes receivable and all Investments in Subsidiaries),
plus all then outstanding Subordinated Debt and all inter-company trade
----
receivables.
"Total Senior Liabilities" means, at any time, the consolidated
----- ------ -----------
liabilities of the Borrower and its Significant Subsidiaries, if any, at such
time, determined in accordance with GAAP, less all then outstanding Subordinated
----
Debt.
"UCC" shall have the meaning given such term in the Security
---
Agreement.
"Unfunded Liabilities" means, with respect to any Plan, at any time.
-------- -----------
the amount (if any) by which (a) the present value of all benefits under such
Plan exceeds (b) the fair market value of all Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plan, but only to the extent that such excess represents a potential liability
of the Borrower or any member of the Controlled Group to the PBGC or such Plan
under Title IV of ERISA.
Section 10 Miscellaneous.
------- -- --------------
10.1 Accounting Terms and Definitions. Unless otherwise specified
---------- ----- --- ------------
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be delivered hereunder shall be prepared, in accordance with GAAP;
provided that if any change in GAAP in itself materially affects the calculation
--------
of any financial covenant in this Agreement, the Borrower may by notice to the
Bank. or the Bank may by notice to the Borrower, require that such covenant
thereafter be calculated in accordance with GAAP as in effect, and applied by
the Borrower, immediately before such change in GAAP occurs. If such notice is
given, the compliance certificates delivered pursuant to Section 6.4(c) after
such change occurs shall be accompanied by reconciliations of the difference
between the calculation set forth therein and a calculation made in accordance
with GAAP as in effect from time to time after such change occurs. To enable the
ready determination of compliance with the covenants set forth in this
Agreement, the Borrower will not change the date on which its fiscal year or any
of its fiscal quarters end without the prior consent of the Bank.
10.2 Amendments. Etc. No amendment or waiver of any provision of this
----------- ---
Agreement or the Note, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Bank and the Borrower and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
10.3 Notices. Etc. All notices and other communications provided for
-------- ---
hereunder shall be in writing and shall be delivered by hand, by a nationally
recognized commercial overnight delivery service, by certified, return receipt
requested. first class mail or by telecopy, delivered, addressed or transmitted,
if to the Borrower, at its address at 00 Xxxxxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxxx
00000, Attention Xxxxx Xxxxxxx, Telecopy No. (000) 000-0000 with a copy to the
Borrower at 0000 Xxxxxxx Xxxx. Xxxxxx, Xxxxx 00000, Attention: Xxxxx Xxxxxxx and
Xxxxxxxx Xxxxxxx, Telecopy No. (000) 000-0000; and if to the Bank, at its
address at Wellesley Office Park, 00 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx
00000, Attention: Xxxxx X. Xxxxxxx, Assistant Vice President, Telecopy No. (617)
431-9906; or, as to each party. at such other address as shall be
-26-
designated by such party in a written notice to the other party. All such
notices and communications shall be deemed effective. (a) in the case of hand
deliveries. when delivered; (b) in the case of an overnight delivery service, on
the next Banking Day after being placed in the possession of such delivery
service, with delivery charges prepaid: (c) in the case of mail, upon delivery
of the signed receipt to the sender; and (d) in the case of telecopy notices,
when electronic indication of receipt is received, except that notices to the
Bank pursuant to the provisions of Section 1.6 shall not be effective until
received by the Bank.
10.4 No Waiver; Remedies. No failure on the part of the Bank to
-- ------- ---------
exercise, and no delay in exercising, any right hereunder or under the Note
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder or under the Note preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
10.5 Right of Set-off. (a) Upon the occurrence and during the
----- -- --------
continuance of any Event of Default, the Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special. time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Bank to
or for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement and
the Note, irrespective of whether or not the Bank shall have made any demand
hereunder and although such obligations may be contingent or unmatured.
(b) The Bank agrees promptly to notify the Borrower after any such
set-off and application, provided that the failure to give such notice shall not
--------
affect the validity of such set-off and application. The rights of the Bank
under this Section 10.5 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Bank may have.
10.6 Expenses; Indemnification. (a) The Borrower shall pay on demand
--------- ---------------
(i) the reasonable fees and disbursements of counsel to the Bank in connection
with the preparation of this Agreement and the preparation or review of each
agreement, opinion, certificate and other document referred to in or delivered
pursuant hereto; (ii) all reasonable out-of-pocket costs and expenses of the
Bank in connection with the administration of this Agreement and the other Loan
Documents, and any waiver or amendment of any provision hereof or thereof,
including without limitation, the reasonable fees and disbursements of counsel
for the Bank, and of any field examiner or auditor retained by the Bank as
contemplated in Section 6.8; and (iii) if any Event of Default occurs, all
reasonable costs and expenses incurred by the Bank, including the reasonable
fees and disbursements of counsel to the Bank, and of any appraisers,
environmental engineers or consultants, or investment banking firms retained by
the Bank in connection with such Event of Default or collection, bankruptcy,
insolvency and other enforcement proceedings related thereto. The Borrower
agrees to pay, indemnify and hold the Bank harmless from, any and all recording
and filing fees, and any and all liabilities with respect to, or resulting from
any delay in paying, stamp, excise or other taxes, if any, which may be payable
or determined to be payable in connection with the execution and delivery of or
the consummation or administration of any of the transactions contemplated by,
or any amendment, supplement or modification of, or any waiver or consent under
or in respect of, this Agreement or the other Loan Documents, or any documents
delivered pursuant hereto or thereto.
(b) The Borrower agrees to indemnify the Bank and its officers and
directors and hold the Bank and its officers and directors harmless from and
against any and all liabilities, losses. damages, costs and expenses of any kind
(including, without limitation, the reasonable fees and disbursements of counsel
for the Bank in connection with any investigative, administrative or judicial
proceeding initiated by a third party and involving the Bank in any way, whether
as a party defendant, a deponent or as a source of records and information,
which may be incurred by the Bank, relating to or arising out of this Agreement
or any other Loan Document, or the existence of
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any Hazardous Substance on, in, or under any Borrower Property, or any violation
of any applicable Environmental Laws for which the Borrower or any Subsidiary
thereof has any liability or which occurs upon any Borrower Property, or the
imposition of any Lien under any Environmental Laws, provided that the Bank
--------
shall not have the right to be indemnified hereunder for its own gross
negligence or willful misconduct as determined by a court of competent
jurisdiction.
(c) The agreements in this Section 10.6 shall survive the repayment of
the Note, and all other amounts payable under this Agreement and the other Loan
Documents.
10.7 Binding Effect. This Agreement shall become effective when it
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shall have been executed by the Borrower and the Bank (provided. however, in no
event shall any Extension of Credit be available until this Agreement is signed
by an officer of the Bank in California) and thereafter shall be binding upon
and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Bank. The Bank may assign to any financial institution all or any
part of, or any interest (undivided or divided) in, the Bank's rights and
benefits under this Agreement or the Note, and to the extent of that assignment
such assignee shall have the same rights and benefits against the Borrower
hereunder as it would have had if such assignee were the Bank making the Line of
Credit Loans hereunder.
10.8 Severability. Any provision of this Agreement which is
-------------
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction .
10.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
--------- ---
IN ACCORDANCE WITH, THE LAWS Of THE COMMONWEALTH Of MASSACHUSETTS.
10.10 WAIVER Of JURY TRIAL. THE BANK AND THE BORROWER AGREE THAT
------ -- ---- -----
NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING OUT
OF, THIS AGREEMENT, ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR
THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY
SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE
BANK AND THE BORROWER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS.
NEITHER THE BANK NOR THE BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER
THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.
10.11 VENUE, CONSENT TO SERVICE OF PROCESS. THE BORROWER ACCEPTS FOR
------ ------- -- ------- -- --------
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE Of CALIFORNIA OR THE COMMONWEALTH OF MASSACHUSETTS IN
ANY ACTION, SUIT OR PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY
REASON OF THIS AGREEMENT, THE NOTE, ANY OTHER LOAN DOCUMENT, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL
JUDGMENT RENDERED BY ANY SUCH COURT IN ANY SUCH ACTION, SUIT OR PROCEEDING IN
WHICH IT SHALL HAVE BEEN SERVED WITH PROCESS IN THE MANNER HEREINAFTER PROVIDED,
SUBJECT TO EXERCISE AND EXHAUSTION OF ALL RIGHTS OF APPEAL AND TO THE EXTENT
THAT IT MAY LAWFULLY DO SO, WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION,
AS A DEFENSE OR OTHERWISE, IN SUCH ACTION, SUIT OR PROCEEDING ANY CLAIMS THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT,
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THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION.
THAT THE ACTION, SUIT OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT
THE VENUE THEREOF IS IMPROPER, AND AGREES THAT PROCESS MAY BE SERVED UPON IT IN
ANY SUCH ACTION, SUIT OR PROCEEDING IN THE MANNER PROVIDED BY CHAPTER 223A OF
THE GENERAL LAWS OF MASSACHUSETTS, RULE 4 OF THE MASSACHUSETTS RULES OF CIVIL
PROCEDURE OR RULE 4 OF THE FEDERAL RULES OF CIVIL PROCEDURE.
10.12 Headings. Section headings in this Agreement are included herein
---------
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
10.13 Counterparts. This Agreement may be signed in one or more
------------
counterparts each of which shall constitute an original and all of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.,
SUMMAGRAPHICS CORPORATION
By: /s/ Xxxxxxxx Xxxxxxx
-----------------------------
Name:
Title: Assistant Treasurer
SILICON VALLEY EAST, a Division of
Silicon Valley Bank
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxx
Title: Asst. Vice President
SILICON VALLEY BANK
By: /s E. Guiels
-----------------------------
Name: E. Guiels
Title: Operations Officer
(Signed at Santa Clara,
California)
Schedule A to the Credit Agreement
Restricted Payments - reference 5.6(c) -- the Borrower has retired $2.5 million
of Subordinated Debt since the Financial Statements Date
Subsidiaries -- reference 5.10 -- See list below
Taxes -- reference 5.14 -- the Borrower is currently undergoing a federal income
tax audit by the Internal Revenue Service for the fiscal year ended May 31,
1991. No Material Adverse Effect is anticipated.
Intellectual Property - reference 5.16 See attachment A. The Borrower also owns
a 50% interest in U.S. Patent #4,839,634 in the name of More, et al. The
interest is not transferable without the approval of the owner of the other 50%
interest.
Existing Indebtedness--reference 7.5
(b) capital lease obligations (at 6/30/94)--$835k
(c) letters of credit (at 7/18/94) $423K
Existing Liens - reference 7.6(f) -- See Liens identified in Perfection
Certificate search
List of Subsidiaries:
Summagraphics, N.V.
Corporation organized under the laws of and headquartered in Belgium.
European manufacturing and distribution company.
Summagraphics Europe, N.V.
Corporation organized under the laws of and headquartered in Belgium.
European sales company.
Summagraphics, Ltd.
Corporation organized under the laws of and headquartered in Belgium.
Provides repair and support services to European customers.
Summagraphics, Gmbh.
Corporation organized under the laws of and headquartered in Germany.
German sales company.
