1
EXHIBIT 10.15
EXCHANGE APPLICATIONS, INC.
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
December 22, 0000
Xxxxx Xxxxxxxx Xxxx
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Gentlemen:
This letter agreement will set forth certain understandings between
Exchange Applications, Inc., a Delaware corporation (the "Borrower") and Fleet
National Bank (the "Bank") with respect to Revolving Loans (hereinafter defined)
to be made by the Bank to the Borrower and with respect to letters of credit
which may hereafter be issued by the Bank for the account of the Borrower. In
consideration of the mutual promises contained herein and in the other documents
referred to below, and for other good and valuable consideration, receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Bank agree as
follows:
I. AMOUNTS AND TERMS
1.1. REFERENCE TO DOCUMENTS. Reference is made to (i) that certain
$2,000,000 face principal amount promissory note (the "Revolving Note") of even
date herewith made by the Borrower and payable to the order of the Bank, (ii)
that certain Inventory, Accounts Receivable and Intangibles Security Agreement
and that certain Supplementary Security Agreement -Security Interest in Goods
and Chattels, each of even date herewith, from the Borrower to the Bank
(collectively, the "Security Agreement"), and (iii) assignments and notices of
assignment (collectively, the "Intellectual Property Assignments") from the
Borrower to the Bank relating to the Borrower's registered trademarks, patents
and copyrights, if any.
1.2. THE BORROWING; REVOLVING NOTE. Subject to the terms and conditions
hereinafter set forth, the Bank will make loans ("Revolving Loans") to the
Borrower, in such amounts as the Borrower may request, on any Business Day prior
to the first to occur of (i) the Expiration Date, or (ii) the earlier
termination of the within-described revolving financing arrangements pursuant to
ss.5.2 or ss.6.7; provided, however, that (1) the aggregate principal amount of
Revolving Loans outstanding shall at no time exceed the Maximum Revolving Amount
(hereinafter defined) and (2) the Aggregate Bank Liabilities (hereinafter
defined) shall at no time exceed the Borrowing Base (hereinafter defined).
Within such limits, and subject to the terms and conditions hereof, the Borrower
may obtain Revolving Loans, repay Revolving Loans and obtain Revolving Loans
again on one or more occasions. The Revolving Loans shall be evidenced by the
Revolving Note and interest thereon shall be payable at the times and at the
rate provided for in the Revolving Note. Overdue principal of the Revolving
Loans and, to the extent permitted by law, overdue interest shall bear interest
at a fluctuating rate per annum which at all times shall be equal to the
2
sum of (i) four (4%) percent per annum plus (ii) the per annum rate otherwise
payable under the Revolving Note (but in no event in excess of the maximum rate
from time to time permitted by then applicable law), compounded monthly and
payable on demand. The Borrower hereby irrevocably authorizes the Bank to make
or cause to be made, on a schedule attached to the Revolving Note or on the
books of the Bank, at or following the time of making each Revolving Loan and of
receiving any payment of principal, an appropriate notation reflecting such
transaction and the then aggregate unpaid principal balance of the Revolving
Loans. The amount so noted shall constitute presumptive evidence as to the
amount owed by the Borrower with respect to principal of the Revolving Loans.
Failure of the Bank to make any such notation shall not, however, affect any
obligation of the Borrower or any right of the Bank hereunder or under the
Revolving Note. All payments of interest, principal and any other sum payable
hereunder and/or under the Revolving Note shall be made to the Bank, in lawful
currency of the United States in immediately available funds, at its office at
00 Xxxxx Xxxxxx, Xxxxxx, XX 00000 or to such other address as the Bank may from
time to time direct. All payments received by the Bank after 2:00 p.m. on any
day shall be deemed received as of the next succeeding Business Day. All monies
received by the Bank shall be applied first to fees, charges, costs and expenses
payable to the Bank under this letter agreement, the Revolving Note and/or any
of the other Loan Documents, next to interest then accrued on account of any
Revolving Loans or letter of credit reimbursement obligations and only
thereafter to principal of the Revolving Loans and letter of credit
reimbursement obligations. All interest and fees payable hereunder and/or under
the Revolving Note shall be calculated on the basis of a 360-day year for the
actual number of days elapsed.
1.3. REPAYMENT; RENEWAL. The Borrower shall repay in full all Revolving
Loans and all interest thereon upon the first to occur of: (i) the Expiration
Date or (ii) an acceleration under ss.5.2(a) following an Event of Default. The
Borrower may repay, at any time, without penalty or premium, the whole or any
portion of any Revolving Loan. In addition, if at any time the Borrowing Base is
in an amount which is less than the then outstanding Aggregate Bank Liabilities,
the Borrower will forthwith prepay so much of the Revolving Loans as may be
required (or arrange for the termination of such letters of credit as may be
required) so that the Aggregate Bank Liabilities will not exceed the Borrowing
Base. The Bank may, at its sole discretion, renew the financing arrangements
described in this letter agreement by extending the Expiration Date in a writing
signed by the Bank and accepted by the Borrower. Neither the inclusion in this
letter agreement or elsewhere of covenants relating to periods of time after the
Expiration Date, nor any other provision hereof, nor any action (except a
written extension pursuant to the immediately preceding sentence), non-action or
course of dealing on the part of the Bank will be deemed an extension of, or
agreement on the part of the Bank to extend, the Expiration Date.
1.4. ADVANCES AND PAYMENTS. The proceeds of all Revolving Loans shall be
credited by the Bank to a general deposit account maintained by the Borrower
with the Bank. The proceeds of each Revolving Loan will be used by the Borrower
solely for working capital purposes.
3
The Bank may charge any general deposit account of the Borrower at the Bank
with the amount of all payments of interest, principal and other sums due, from
time to time, under this letter agreement and/or the Revolving Note and/or with
respect to any letter of credit; and will thereafter notify the Borrower of the
amount so charged. The failure of the Bank so to charge any account or to give
any such notice shall not affect the obligation of the Borrower to pay interest,
principal or other sums as provided herein or in the Revolving Note or with
respect to any letter of credit.
Whenever any payment to be made to the Bank hereunder or under the
Revolving Note or with respect to any letter of credit shall be stated to be due
on a day which is not a Business Day, such payment may be made on the next
succeeding Business Day, and interest payable on each such date shall include
the amount thereof which shall accrue during the period of such extension of
time. All payments by the Borrower hereunder and/or in respect of the Revolving
Note and/or with respect to any letter of credit shall be made net of any
impositions or taxes and without deduction, set-off or counterclaim,
notwithstanding any claim which the Borrower may now or at any time hereafter
have against the Bank.
1.5. LETTERS OF CREDIT. At the Borrower's request, the Bank will, from
time to time, subject to the conditions set forth in Section 1.6 issue one or
more letters of credit for the account of the Borrower; provided that at the
time of such issuance and after giving effect thereto (1) the Aggregate Letter
of Credit Liabilities will in no event exceed $800,000 and (2) the Aggregate
Bank Liabilities will in no event exceed the lesser of (i) $2,000,000 or (ii)
the then effective Borrowing Base. Any such letter of credit will be issued for
issuance and /or commitment fees as may be agreed upon by the Bank and the
Borrower at the time of issuance and will be governed by the Bank's then
customary documentation for similar credits. The Borrower hereby authorizes the
Bank, without further request from the Borrower, to cause the Borrower's
liability to the Bank for reimbursement of funds drawn under any such letter of
credit to be repaid from the proceeds of a Revolving Loan to be made hereunder.
The Borrower hereby irrevocably requests that such Revolving Loans be made.
1.6. CONDITIONS TO ADVANCE. Prior to the making of the initial Revolving
Loan or the issuance of any letter of credit hereunder, the Borrower shall
deliver to the Bank duly executed copies of this letter agreement, the Security
Agreement, the Intellectual Property Assignments, the Revolving Note and the
documents and other items listed on the Closing Agenda delivered herewith by the
Bank to the Borrower, all of which, as well as all legal matters incident to the
transactions contemplated hereby, shall be satisfactory in form and substance to
the Bank and its counsel.
Without limiting the foregoing, any Revolving Loan or letter of credit
issuance (including the initial Revolving Loan or letter of credit issuance) is
subject to the further conditions precedent that on the date on which such
Revolving Loan is made or such letter of credit is issued (and after giving
effect thereto):
4
(a) All statements, representations and warranties of the Borrower made
in this letter agreement and/or in the Security Agreement shall continue to be
correct in all material respects as of the date of such Revolving Loan or the
date of issuance of such letter of credit, as the case may be.
(b) All covenants and agreements of the Borrower contained herein and/or
in any of the other Loan Documents shall have been complied with in all material
respects on and as of the date of such Revolving Loan or the date of issuance of
such letter of credit, as the case may be.
(c) No event which constitutes, or which with notice or lapse of time or
both could constitute, an Event of Default shall have occurred and be
continuing.
(d) No material adverse change shall have occurred in the financial
condition of the Borrower from that disclosed in the financial statements then
most recently furnished to the Bank.
Each request by the Borrower for any Revolving Loan or for the issuance of
any letter of credit, and each acceptance by the Borrower of the proceeds of any
Revolving Loan or delivery of a letter of credit, will be deemed a
representation and warranty by the Borrower that at the date of such Revolving
Loan or the date of issuance of such letter of credit, as the case may be, and
after giving effect thereto all of the conditions set forth in the foregoing
clauses (a)-(d) of this ss.1.6 will be satisfied. Each request for a Revolving
Loan or letter of credit issuance will be accompanied by a borrowing base
certificate on a form satisfactory to the Bank, executed by the chief financial
officer of the Borrower, unless such a certificate shall have been previously
furnished setting forth the Borrowing Base as at a date not more than 30 days
prior to the date of the requested borrowing or the requested letter of credit
issuance, as the case may be.
II. REPRESENTATIONS AND WARRANTIES
2.1. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter
into this letter agreement and to make Revolving Loans hereunder and/or issue
letters of credit hereunder, the Borrower warrants and represents to the Bank as
follows:
(a) The Borrower is a corporation duly organized, validly existing and
in good standing under the laws of Delaware. The Borrower has full corporate
power to own its property and conduct its business as now conducted, to grant
the security interests contemplated by the Security Agreement and the
Intellectual Property Assignments and to enter into and perform this letter
agreement and the other Loan Documents. The Borrower is duly qualified to do
business and is in good standing in Massachusetts and is also duly qualified to
do business in and is in good standing in each other jurisdiction in which the
Borrower maintains any facility, sales office, warehouse or other location, and
in each other jurisdiction where the failure so to qualify could (singly or in
the aggregate with all other such failures) have a material adverse effect on
the financial condition, business or prospects of the Borrower, all such
jurisdictions being listed on item 2.1(a) of the attached Disclosure Schedule.
At the date hereof, the Borrower has no
5
Subsidiaries, except as shown on said item 2.1(a) of the attached Disclosure
Schedule. The Borrower is not a member of any partnership or joint venture.
(b) At the date of this letter agreement, all of the outstanding capital
stock of the Borrower is owned, of record and beneficially, as set forth on item
2.1(b) of the attached Disclosure Schedule.
(c) The execution, delivery and performance by the Borrower of this
letter agreement and each of the other Loan Documents have been duly authorized
by all necessary corporate and other action and do not and will not:
(i) violate any provision of, or require any filings (other than
filings under the Uniform Commercial Code), registration, consent or
approval under, any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to the Borrower;
(ii) violate any provision of the charter or by-laws of the
Borrower, or result in a breach of or constitute a default or require any
waiver or consent under any indenture or loan or credit agreement or any
other material agreement, lease or instrument to which the Borrower is a
party or by which the Borrower or any of its properties may be bound or
affected or require any other consent of any Person, except for such
consents as shall have been duly obtained and are in full force and effect
as of the date hereof; or
(iii) result in, or require, the creation or imposition of any lien,
security interest or other encumbrance (other than in favor of the Bank),
upon or with respect to any of the properties now owned or hereafter
acquired by the Borrower.
(d) This letter agreement and each of the other Loan Documents has been
duly executed and delivered by the Borrower and each is a legal, valid and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its respective terms.
(e) Except as described on item 2.1(e) of the attached Disclosure
Schedule, there are no actions, suits, proceedings or investigations pending or,
to the knowledge of the Borrower, threatened by or against the Borrower or any
Subsidiary before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which could hinder or
prevent the consummation of the transactions contemplated hereby or call into
question the validity of this letter agreement or any of the other Loan
Documents or any action taken or to be taken in connection with the transactions
contemplated hereby or thereby or which in any single case or in the aggregate
might result in any material adverse change in the business, prospects,
condition, affairs or operations of the Borrower or any Subsidiary.
(f) The Borrower is not in violation of any term of its charter or
by-laws as now in effect. Neither the Borrower nor any Subsidiary of the
Borrower is in material violation of any
6
term of any mortgage, indenture or judgment, decree or order, or any other
instrument, contract or agreement to which it is a party or by which any of its
property is bound.
(g) The Borrower has filed (and has caused each of its Subsidiaries to
file) all federal, state and local tax returns, reports and estimates required
to be filed by the Borrower and/or by any such Subsidiary. All such filed
returns, reports and estimates are proper and accurate and the Borrower or the
relevant Subsidiary has paid all taxes, assessments, impositions, fees and other
governmental charges required to be paid in respect of the periods covered by
such returns, reports or estimates. No deficiencies for any tax, assessment or
governmental charge have been asserted or assessed, and the Borrower knows of no
material tax liability or basis therefor.
(h) The Borrower is in compliance (and each Subsidiary of the Borrower
is in compliance) with all requirements of law, federal, state and local, and
all requirements of all governmental bodies or agencies having jurisdiction over
it, the conduct of its business, the use of its properties and assets, and all
premises occupied by it, failure to comply with any of which could (singly or in
the aggregate with all other such failures) have a material adverse effect upon
the assets, business, financial condition or prospects of the Borrower or any
such Subsidiary. Without limiting the foregoing, the Borrower has all the
franchises, licenses, leases, permits, certificates and authorizations needed
for the conduct of its business and the use of its properties and all premises
occupied by it, as now conducted, owned and used.
(i) The audited financial statements of the Borrower as at December 31,
1996 and the management-generated statements of the Borrower as at September 30,
1997, each heretofore delivered to the Bank, are complete and accurate and
fairly present the financial condition of the Borrower as at the respective
dates thereof and for the periods covered thereby, except that the
management-generated statements do not have footnotes and thus do not present
the information which would normally be contained in footnotes to financial
statements. The Borrower has no liability, contingent or otherwise, not
disclosed in the aforesaid financial statements or in any notes thereto that
could materially affect the financial condition of the Borrower. Since December
31, 1996, there has been no material adverse development in the business,
condition or prospects of the Borrower, and the Borrower has not entered into
any material transaction other than in the ordinary course and except as set
forth on item 2.1(i).
(j) The principal place of business and chief executive offices of the
Borrower are located at 000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000 (the "Premises").
All of the books and records of the Borrower are located at said address. Except
as described on item 2.1(j) of the attached Disclosure Schedule, no assets of
the Borrower are located at any other address. Said item 2.1(j) of the attached
Disclosure Schedule sets forth the names and addresses of all record owners of
the Premises.
(k) The Borrower owns or has a valid right to use all of the patents,
licenses, copyrights, trademarks, trade names and franchises ("Intellectual
Property") now being used to conduct its business, all of which are described on
item 2.1(k) of the attached Disclosure Schedule. None of the Intellectual
Property owned by the Borrower is represented by a
7
registered copyright, trademark, patent or other federal or state registration,
except as shown on said item 2.1(k). To the Borrower's best knowledge, the
conduct of the Borrower's business as now operated does not conflict with valid
patents, licenses, copyrights, trademarks, trade names or franchises of others
in any manner that could materially adversely affect the business, prospects,
assets or condition, financial or otherwise, of the Borrower.
(l) None of the executive officers or key employees of the Borrower is
subject to any agreement in favor of anyone other than the Borrower which limits
or restricts that person's right to engage in the type of business activity
conducted or proposed to be conducted by the Borrower or which grants to anyone
other than the Borrower any rights in any inventions or other ideas susceptible
to legal protection developed or conceived by any such officer or key employee.
(m) The Borrower is not a party to any contract or agreement which now
has or, as far as can be foreseen by the Borrower at the date hereof, may have a
material adverse effect on the financial condition, business, prospects or
properties of the Borrower.
III. AFFIRMATIVE COVENANTS AND REPORTING REQUIREMENTS
Without limitation of any covenants and agreements contained in the
Security Agreement or elsewhere, the Borrower agrees that so long as the
financing arrangements contemplated hereby are in effect or any Revolving Loan
or any of the other Obligations shall be outstanding or any letter of credit
issued hereunder shall be outstanding:
3.1. LEGAL EXISTENCE; QUALIFICATION; COMPLIANCE. The Borrower will
maintain (and will cause each Subsidiary of the Borrower to maintain) its
corporate existence and good standing in the jurisdiction of its incorporation.
The Borrower will remain qualified to do business and in good standing in
Massachusetts. Further, the Borrower will qualify to do business and will remain
qualified and in good standing (and the Borrower will cause each Subsidiary of
the Borrower to qualify and remain qualified and in good standing) in each other
jurisdiction where the Borrower or such Subsidiary, as the case may be,
maintains any facility, sales office, warehouse or other location and in each
other jurisdiction in which the failure so to qualify could (singly or in the
aggregate with all other such failures) have a material adverse effect on the
financial condition, business or prospects of the Borrower or any such
Subsidiary. The Borrower will comply (and will cause each Subsidiary of the
Borrower to comply) with its charter documents and by-laws. The Borrower will
comply with (and will cause each Subsidiary of the Borrower to comply with) all
applicable laws, rules and regulations (including, without limitation, ERISA and
those relating to environmental protection) other than (i) laws, rules or
regulations the validity or applicability of which the Borrower or such
Subsidiary shall be contesting in good faith by proceedings which serve as a
matter of law to stay the enforcement thereof and (ii) those laws, rules and
regulations the failure to comply with any of which could not (singly or in the
aggregate) have a material adverse effect on the financial condition, business
or prospects of the Borrower or any such Subsidiary.
8
3.2. MAINTENANCE OF PROPERTY; INSURANCE. The Borrower will maintain and
preserve (and will cause each Subsidiary of the Borrower to maintain and
preserve) all of its fixed assets in good working order and condition, making
all necessary repairs thereto and replacements thereof. The Borrower will
maintain all such insurance as may be required under the Security Agreement and
will also maintain, with financially sound and reputable insurers, insurance
with respect to its property and business against such liabilities, casualties
and contingencies and of such types and in such amounts as shall be reasonably
satisfactory to the Bank from time to time and in any event all such insurance
as may from time to time be customary for companies conducting a business
similar to that of the Borrower in similar locales.
3.3. PAYMENT OF TAXES AND CHARGES. The Borrower will pay and discharge
(and will cause each Subsidiary of the Borrower to pay and discharge) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or property, including, without limitation, taxes, assessments, charges
or levies relating to real and personal property, franchises, income,
unemployment, old age benefits, withholding, or sales or use, prior to the date
on which penalties would attach thereto, and all lawful claims (whether for any
of the foregoing or otherwise) which, if unpaid, might give rise to a lien upon
any property of the Borrower or any such Subsidiary, except any of the foregoing
which is being contested in good faith and by appropriate proceedings which
serve as a matter of law to stay the enforcement thereof and for which the
Borrower has established and is maintaining adequate reserves. The Borrower will
pay, and will cause each of its Subsidiaries to pay, in a timely manner, all
lease obligations, all trade debt, purchase money obligations, equipment lease
obligations and all of its other material Indebtedness. The Borrower will
perform and fulfill all material covenants and agreements under any leases of
real estate, agreements relating to purchase money debt, equipment leases and
other material contracts. The Borrower will maintain in full force and effect,
and comply with the terms and conditions of, all permits, permissions and
licenses necessary or desirable for its business.
3.4. ACCOUNTS. The Borrower will maintain its principal depository and
operating accounts with the Bank.
3.5. CONDUCT OF BUSINESS. The Borrower will conduct, in the ordinary
course, the business in which it is presently engaged. The Borrower will not,
without the prior written consent of the Bank, directly or indirectly (itself or
through any Subsidiary) enter into any other lines of business, businesses or
ventures materially different from those conducted by the Borrower at the date
of this letter agreement.
3.6. REPORTING REQUIREMENTS. The Borrower will furnish to the Bank:
(i) Within 120 days after the end of each fiscal year of the
Borrower, a copy of the annual audit report for such fiscal year for the
Borrower, including therein consolidated and consolidating balance sheets
of the Borrower and Subsidiaries as at the end of such fiscal year and
related consolidated and consolidating statements of income, stockholders'
equity and cash flow for the fiscal year then ended. The annual
9
consolidated financial statements shall be certified by independent public
accountants selected by the Borrower and reasonably acceptable to the Bank,
such certification to be in such form as is generally recognized as
"unqualified".
(ii) Within 45 days after the end of each fiscal quarter of the
Borrower, consolidated and consolidating balance sheets of the Borrower and
its Subsidiaries and related consolidated and consolidating statements of
income and stockholders' equity and cash flow, unaudited but complete and
accurate and prepared in accordance with generally accepted accounting
principles consistently applied fairly presenting the financial condition
of the Borrower as at the dates thereof and for the periods covered thereby
(except that such quarterly statements need not contain footnotes) and
certified as accurate (subject to normal year-end audit adjustments, which
shall not be material) by the chief financial officer of the Borrower, such
balance sheets to be as at the end of such fiscal quarter and such
statements of income and stockholders' equity and cash flow to be for such
fiscal quarter and for the fiscal year to date, in each case together with
a comparison to budget.
(iii) Within 30 days after the end of each month, consolidated and
consolidating balance sheets of the Borrower and its Subsidiaries and
related consolidated and consolidating statements of income and
stockholders' equity and cash flow, unaudited but complete and accurate and
prepared in accordance with generally accepted accounting principles
consistently applied fairly presenting the financial condition of the
Borrower as at the dates thereof and for the periods covered thereby
(except that such monthly statements need not contain footnotes) and
certified as accurate (subject to normal year-end audit adjustments, which
shall not be material) by the chief financial officer of the Borrower, such
balance sheets to be as at the end of such month and such statements of
income and stockholders' equity and cash flow to be for such month and for
the fiscal year to date, in each case together with a comparison to budget.
(iv) At the time of delivery of each annual or quarterly statement
of the Borrower, a certificate executed by the chief financial officer of
the Borrower stating that he or she has reviewed this letter agreement and
the other Loan Documents and has no knowledge of any default by the
Borrower in the performance or observance of any of the provisions of this
letter agreement or of any of the other Loan Documents or, if he or she has
such knowledge, specifying each such default and the nature thereof. Each
financial statement given as at the end of any fiscal quarter of the
Borrower will also set forth the calculations necessary to evidence
compliance with ss.ss.3.7-3.10.
(v) Monthly, within 10 days after the end of each month, (A) an
aging report in form satisfactory to the Bank covering all Receivables of
the Borrower outstanding as at the end of such month, and (B) a certificate
of the chief financial officer of the Borrower setting forth the Borrowing
Base as at the end of such month, all in form reasonably satisfactory to
the Bank.
10
(vi) Promptly after receipt, a copy of all audits or reports
submitted to the Borrower by independent public accountants in connection
with any annual, special or interim audits of the books of the Borrower and
any "management letter" prepared by any such accountants.
(vii) As soon as possible and in any event within five days of the
occurrence of any Event of Default or any event which, with the giving of
notice or passage of time or both, would constitute an Event of Default,
the statement of the Borrower setting forth details of each such Event of
Default or event and the action which the Borrower proposes to take with
respect thereto.
(viii) Promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
to which the Borrower or any Subsidiary of the Borrower is a party.
(ix) Promptly upon filing any registration statement or listing
application (or any supplement or amendment to any registration statement
or listing application) with the Securities and Exchange Commission ("SEC")
or any successor agency or with any stock exchange or with the National
Association of Securities Dealers quotations system, a copy of same.
(x) If the Borrower becomes a publicly-traded company, a copy of
each periodic or current report filed with the SEC or any successor agency
and each annual report, proxy statement and other communication sent to
shareholders or other securityholders generally, such copy to be provided
to the Bank promptly upon such filing with the SEC or such communication
with shareholders or securityholders, as the case may be.
(xi) Promptly upon applying for, or being granted, a federal or
state registration for any copyright, trademark or patent or purchasing any
registered copyright, trademark or patent, written notice to the Bank
describing same, together with all such documents as may be required to
give the Bank a fully perfected first priority security interest in each
such copyright, trademark or patent.
(xi) Promptly after the Borrower has knowledge thereof, written
notice of any development or circumstance which may reasonably be expected
to have a material adverse effect on the Borrower or its business,
properties, assets, Subsidiaries or condition, financial or otherwise.
(xii) Promptly upon request, such other information respecting the
financial condition, operations, Receivables, inventory, machinery or
equipment of the Borrower or any Subsidiary as the Bank may from time to
time reasonably request.
11
3.7. DEBT TO WORTH. The Borrower will maintain as at the end of each
fiscal quarter (commencing with its results as at December 31, 1997) on a
consolidated basis a Leverage Ratio of not more than 1.0 to 1. As used herein,
"Leverage Ratio" means, as at any date when same is to be determined, the ratio
of (x) all Indebtedness of the Borrower and/or its Subsidiaries then outstanding
to (y) the Borrower's then consolidated Tangible Net Worth.
3.8. NET WORTH. The Borrower will maintain as at the end of each fiscal
quarter (commencing with its results as at December 31, 1997) a consolidated
Tangible Net Worth of not less than $3,750,000.
3.9. PROFITABILITY. The Borrower will not incur a consolidated quarterly
Net Loss in excess of $425,000 for its fiscal quarter ending December 31, 1997.
For each period of two consecutive fiscal quarters thereafter (commencing with
the six months ending March 31, 1998), the Borrower will achieve consolidated
Net Income of not less than $1.00.
3.10. LIQUIDITY. The Borrower will maintain as at the end of each fiscal
quarter of Borrower (commencing with its results as at December 31, 1997) a
ratio of Net Quick Assets to Current Liabilities, which ratio shall be not less
than 1.75 to 1.
3.11. BOOKS AND RECORDS. The Borrower will maintain (and will cause each
of its Subsidiaries to maintain) complete and accurate books, records and
accounts which will at all times accurately and fairly reflect all of its
transactions in accordance with generally accepted accounting principles
consistently applied. The Borrower will, at any reasonable time and from time to
time upon reasonable notice and during normal business hours (and at any time
and without any necessity for notice following the occurrence of an Event of
Default), permit the Bank, and any agents or representatives thereof, to examine
and make copies of and take abstracts from the records and books of account of,
and visit the properties of the Borrower and any of its Subsidiaries, and to
discuss its affairs, finances and accounts with its officers, directors and/or
independent accountants, all of whom are hereby authorized and directed to
cooperate with the Bank in carrying out the intent of this ss.3.11. Each
financial statement of the Borrower hereafter delivered pursuant to this letter
agreement will be complete and accurate and will fairly present the financial
condition of the Borrower and its Subsidiaries as at the date thereof and for
the periods covered thereby.
3.12. LANDLORD'S WAIVER. Prior to the Bank making the first Revolving
Loan, the Borrower will obtain, and will thereafter maintain in effect at all
times, waivers from the owners of all premises in which any material amount of
Collateral is located, such waivers to be in form and substance satisfactory to
the Bank.
12
IV. NEGATIVE COVENANTS
Without limitation of any covenants and agreements contained in the
Security Agreement or elsewhere, the Borrower agrees that so long as the
financing arrangements contemplated hereby are in effect or any Revolving Loan
or any of the other Obligations shall be outstanding or any letter of credit
issued hereunder shall be outstanding:
4.1. INDEBTEDNESS. The Borrower will not create, incur, assume or suffer
to exist any Indebtedness (nor allow any of its Subsidiaries to create, incur,
assume or suffer to exist any Indebtedness), except for:
(i) Indebtedness owed to the Bank, including, without limitation,
the Indebtedness represented by the Revolving Note and any Indebtedness in
respect of letters of credit issued by the Bank;
(ii) Indebtedness of the Borrower or any Subsidiary for taxes,
assessments and governmental charges or levies not yet due and payable;
(iii) unsecured current liabilities of the Borrower or any
Subsidiary (other than for money borrowed or for purchase money
Indebtedness with respect to fixed assets) incurred upon customary terms in
the ordinary course of business;
(iv) purchase money Indebtedness (including, without limitation,
Indebtedness in respect of capitalized equipment leases) owed to equipment
vendors and/or lessors for equipment purchased or leased by the Borrower
for use in the Borrower's business, provided that the total of Indebtedness
permitted under this clause (iv) plus presently-existing equipment
financing permitted under clause (v) of this ss.4.1 will not exceed
$750,000 in the aggregate outstanding at any one time;
(v) other Indebtedness existing at the date hereof, but only to the
extent set forth on item 4.1 of the attached Disclosure Schedule; and
(vi) any guaranties or other contingent liabilities expressly
permitted pursuant to ss.4.3.
4.2. LIENS. The Borrower will not create, incur, assume or suffer to
exist (nor allow any of its Subsidiaries to create, incur, assume or suffer to
exist) any mortgage, deed of trust, pledge, lien, security interest, or other
charge or encumbrance (including the lien or retained security title of a
conditional vendor) of any nature (collectively, "Liens"), upon or with respect
to any of its property or assets, now owned or hereafter acquired, except that
the foregoing restrictions shall not apply to:
13
(i) Liens for taxes, assessments or governmental charges or levies
on property of the Borrower or any of its Subsidiaries if the same shall
not at the time be delinquent or thereafter can be paid without interest or
penalty;
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar Liens arising in the ordinary course of
business for sums not yet due or which are being contested in good faith
and by appropriate proceedings which serve as a matter of law to stay the
enforcement thereof and as to which adequate reserves have been made;
(iii) pledges or deposits under workmen's compensation laws,
unemployment insurance, social security, retirement benefits or similar
legislation;
(iv) Liens in favor of the Bank;
(v) Liens in favor of equipment vendors and/or lessors securing
purchase money Indebtedness to the extent permitted by clause (iv) of
ss.4.1; provided that no such Lien will extend to any property of the
Borrower other than the specific items of equipment financed; or
(vi) other Liens existing at the date hereof, but only to the extent
and with the relative priorities set forth on item 4.2 of the attached
Disclosure Schedule.
4.3. GUARANTIES. The Borrower will not, without the prior written consent
of the Bank, assume, guarantee, endorse or otherwise become directly or
contingently liable (including, without limitation, liable by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in any debtor or otherwise to assure any creditor
against loss) (and will not permit any of its Subsidiaries so to assume,
guaranty or become directly or contingently liable) in connection with any
indebtedness of any other Person, except (i) guaranties by endorsement for
deposit or collection in the ordinary course of business and (ii) guaranties
existing at the date hereof and described on item 4.3 of the attached Disclosure
Schedule.
4.4. DIVIDENDS. The Borrower will not, without the prior written consent
of the Bank, make any distributions to its shareholders, pay any dividends
(other than dividends payable solely in capital stock of the Borrower) or
redeem, purchase or otherwise acquire, directly or indirectly any of its capital
stock, except that the Borrower may repurchase its common stock for a nominal
price per share pursuant to restricted stock purchase agreements between the
Borrower and its employees, provided (i) such repurchases shall not exceed
$50,000 in the aggregate during the term of the revolving facility described
herein, as such term may be extended from time to time, (ii) no default or Event
of Default exists at the time of such repurchase, and (iii) immediately prior to
and after giving effect to such repurchases, the Borrower is in compliance with
xx.xx. 3.7, 3.8 and 3.10 (compliance with each of said Sections being determined
for this purpose as at the date of such repurchase, even if not a fiscal quarter
end).
14
4.5. LOANS AND ADVANCES. The Borrower will not make (and will not permit
any Subsidiary to make) any loans or advances to any Person, including, without
limitation, the Borrower's directors, officers and employees, except advances to
such directors, officers or employees with respect to expenses incurred by them
in the ordinary course of their duties and advances against salary, all of which
advances will not exceed, in the aggregate, $250,000 outstanding at any one
time.
4.6. INVESTMENTS. The Borrower will not, without the Bank's prior written
consent, invest in, hold or purchase any stock or securities of any Person (nor
will the Borrower permit any of its Subsidiaries to invest in, purchase or hold
any such stock or securities) except (i) readily marketable direct obligations
of, or obligations guarantied by, the United States of America or any agency
thereof, (ii) other investment grade debt securities, (iii) mutual funds, the
assets of which are primarily invested in items of the kind described in the
foregoing clauses (i) and (ii) of this ss.4.6, (iv) deposits with or
certificates of deposit issued by the Bank and any other obligations of the Bank
or the Bank's parent, (v) deposits in any other bank organized in the United
States having capital in excess of $100,000,000, and (vi) investments in any
Subsidiaries now existing or hereafter created by the Borrower pursuant to
ss.4.7 below; provided that in any event the Tangible Net Worth of the Borrower
alone (exclusive of its investment in Subsidiaries and any debt owed by any
Subsidiary to the Borrower) will not be less than 90% of the consolidated
Tangible Net Worth of the Borrower and Subsidiaries.
4.7. SUBSIDIARIES; ACQUISITIONS. The Borrower will not, without the prior
written consent of the Bank, form or acquire any Subsidiary or make any other
acquisition of the stock of any other Person or of all or substantially all of
the assets of any other Person. The Borrower will not become a partner in any
partnership.
4.8. MERGER. The Borrower will not, without the prior written consent of
the Bank, merge or consolidate with any Person, or sell, lease, transfer or
otherwise dispose of any material portion of its assets (whether in one or more
transactions), other than sale of inventory in the ordinary course.
4.9. AFFILIATE TRANSACTIONS. The Borrower will not, without prior written
consent of the Bank, enter into any transaction, including, without limitation,
the purchase, sale or exchange of any property or the rendering of any service,
with any affiliate of the Borrower, except in the ordinary course of and
pursuant to the reasonable requirements of the Borrower's business and upon fair
and reasonable terms no less favorable to the Borrower than would be obtained in
a comparable arms'-length transaction with any Person not an affiliate; provided
that nothing in this ss.4.9 shall be deemed to prohibit the payment of salary,
bonuses or other similar payments to any officer or director of the Borrower at
a level consistent with the salary and other payments being paid at the date of
this letter agreement and heretofore disclosed in writing to the Bank, nor to
prevent the hiring of additional officers at a salary level consistent with
industry practice, nor to prevent reasonable periodic increases in salary and
bonus. For the purposes of this letter agreement, "affiliate" means any Person
which, directly or indirectly, controls or is controlled by
15
or is under common control with the Borrower; any officer or director or former
officer or director of the Borrower; any Person owning of record or
beneficially, directly or indirectly, 5% or more of any class of capital stock
of the Borrower or 5% or more of any class of capital stock or other equity
interest having voting power (under ordinary circumstances) of any of the other
Persons described above; and any member of the immediate family of any of the
foregoing. "Control" means possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of any Person,
whether through ownership of voting equity, by contract or otherwise.
4.10. CHANGE OF ADDRESS, ETC. The Borrower will not change its name or
legal structure, nor will the Borrower move its chief executive offices or
principal place of business from the address described in the first sentence of
ss.2.1(j) above, nor will the Borrower remove any books or records from such
address, nor will the Borrower keep any Collateral at any location other than
the Premises without, in each instance, giving the Bank at least 30 days' prior
written notice and providing all such financing statements, certificates and
other documentation as the Bank may request in order to maintain the perfection
and priority of the security interests granted or intended to be granted
pursuant to the Security Agreement. The Borrower will not change its fiscal year
or methods of financial reporting unless, in each instance, prior written notice
of such change is given to the Bank and prior to such change the Borrower enters
into amendments to this letter agreement in form and substance satisfactory to
the Bank in order to preserve unimpaired the rights of the Bank and the
obligations of the Borrower hereunder.
4.11. HAZARDOUS WASTE. Except as provided below, the Borrower will not
dispose of or suffer or permit to exist any hazardous material or oil on any
site or vessel owned, occupied or operated by the Borrower or any Subsidiary of
the Borrower, nor shall the Borrower store (or permit any Subsidiary to store)
on any site or vessel owned, occupied or operated by the Borrower or any such
Subsidiary, or transport or arrange the transport of, any hazardous material or
oil (the terms "hazardous material", "oil", "site" and "vessel", respectively,
being used herein with the meanings given those terms in Mass. Gen. Laws, Ch.
21E or any comparable terms in any comparable statute in effect in any other
relevant jurisdiction). The Borrower shall provide the Bank with written notice
of (i) the intended storage or transport of any hazardous material or oil by the
Borrower or any Subsidiary of the Borrower, (ii) any known release or known
threat of release of any hazardous material or oil at or from any site or vessel
owned, occupied or operated by the Borrower or any Subsidiary of the Borrower,
and (iii) any incurrence of any expense or loss by any government or
governmental authority in connection with the assessment, containment or removal
of any hazardous material or oil for which expense or loss the Borrower or any
Subsidiary of the Borrower may be liable. Notwithstanding the foregoing, the
Borrower and its Subsidiaries may use, store and transport, and need not notify
the Bank of the use, storage or transportation of, (x) oil in reasonable
quantities, as fuel for heating of their respective facilities or for vehicles
or machinery used in the ordinary course of their respective businesses and (y)
hazardous materials that are solvents, cleaning agents or other materials used
in the ordinary course of the respective business operations of the Borrower and
its Subsidiaries, in reasonable quantities, as long as in any case the Borrower
or the Subsidiary concerned (as the case may be) has obtained and maintains in
effect any necessary governmental permits, licenses
16
and approvals, complies with all requirements of applicable federal, state and
local law relating to such use, storage or transportation, follows the
protective and safety procedures that a prudent businessperson conducting a
business the same as or similar to that of the Borrower or such Subsidiary (as
the case may be) would follow, and disposes of such materials (not consumed in
the ordinary course) only through licensed providers of hazardous waste removal
services.
4.12. NO MARGIN STOCK. No proceeds of any Revolving Loan shall be used
directly or indirectly to purchase or carry any margin security.
V. DEFAULT AND REMEDIES
5.1. EVENTS OF DEFAULT. The occurrence of any one of the following events
shall constitute an Event of Default hereunder:
(a) The Borrower shall fail to make any payment of principal of or
interest on the Revolving Note on or before the date when due; or the Borrower
shall fail to pay when due any amount owed to the Bank in respect of any letter
of credit now or hereafter issued by the Bank; or
(b) Any representation or warranty of the Borrower contained herein
shall at any time prove to have been incorrect in any material respect when made
or any representation or warranty made by the Borrower in connection with any
Revolving Loan or letter of credit shall at any time prove to have been
incorrect in any material respect when made; or
(c) The Borrower shall default in the performance or observance of any
agreement or obligation under any of sections 3.1, 3.3, 3.6, 3.7, 3.8, 3.9 or
3.10 or Article IV; or
(d) The Borrower (or any Subsidiary of the Borrower, as applicable)
shall default in the performance of any other term, covenant or agreement
contained in this letter agreement or in any foreign exchange contract or letter
of credit agreement entered into with the Bank (or any affiliate of the Bank)
and such default shall continue unremedied for 30 days after notice thereof
shall have been given to the Borrower; or
(e) Any default shall exist and remain unwaived or uncured with respect
to any other Indebtedness of the Borrower or any Subsidiary of the Borrower in
excess of $100,000 in aggregate principal amount or with respect to any
instrument evidencing, guaranteeing, securing or otherwise relating to any such
Indebtedness, or any such Indebtedness in excess of $100,000 in aggregate
principal amount shall not have been paid when due, whether by acceleration or
otherwise, or shall have been declared to be due and payable prior to its stated
maturity, or any event or circumstance shall occur which permits, or with the
lapse of time or the giving of notice or both would permit, the acceleration of
the maturity of any such Indebtedness by the holder of holders thereof; or
17
(f) The Borrower shall be dissolved, or the Borrower or any Subsidiary
of the Borrower shall become insolvent or bankrupt or shall cease paying its
debts as they mature or shall make an assignment for the benefit of creditors,
or a trustee, receiver or liquidator shall be appointed for the Borrower or any
Subsidiary of the Borrower or for a substantial part of the property of the
Borrower or any such Subsidiary, or bankruptcy, reorganization, arrangement,
insolvency or similar proceedings shall be instituted by or against the Borrower
or any such Subsidiary under the laws of any jurisdiction (except for an
involuntary proceeding filed against the Borrower or any Subsidiary of the
Borrower which is dismissed within 60 days following the institution thereof);
or
(g) Any attachment, execution or similar process shall be issued or
levied against any of the property of the Borrower or any Subsidiary and such
attachment, execution or similar process shall not be paid, stayed, released,
vacated or fully bonded within 10 days after its issue or levy; or
(h) Any final uninsured judgment in excess of $100,000 shall be entered
against the Borrower or any Subsidiary of the Borrower by any court of competent
jurisdiction; or
(i) The Borrower or any Subsidiary of the Borrower shall fail to meet
its minimum funding requirements under ERISA with respect to any employee
benefit plan (or other class of benefit which the PBGC has elected to insure) or
any such plan shall be the subject of termination proceedings (whether voluntary
or involuntary) and there shall result from such termination proceedings a
liability of the Borrower or any Subsidiary of the Borrower to the PBGC which in
the reasonable opinion of the Bank may have a material adverse effect upon the
financial condition of the Borrower or any such Subsidiary; or
(j) The Security Agreement or any other Loan Document shall for any
reason (other than due to payment in full of all amounts secured or evidenced
thereby or due to discharge in writing by the Bank) not remain in full force and
effect; or
(k) The security interests and liens of the Bank in and on any of the
Collateral shall for any reason (other than due to payment in full of all
amounts secured thereby or due to written release by the Bank) not be fully
perfected liens and security interests; or
(l) At any time, 50% or more of the outstanding shares of any class of
equity securities of the Borrower shall be owned by any Person or by any "group"
(as defined in the Securities Exchange Act of 1934, as amended, and the
regulations thereunder), other than by one or more of the Persons listed on item
5.1(l) of the attached Disclosure Schedule; or
(m) Xxxxxx X. Xxxxxxx shall for any reason not be an executive officer
of the Borrower actively involved in the management of the Borrower.
5.2. RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of any Event of
Default, in addition to any other rights and remedies available to the Bank
hereunder or otherwise, the
18
Bank may exercise any one or more of the following rights and remedies (all of
which shall be cumulative):
(a) Declare the entire unpaid principal amount of the Revolving Note
then outstanding, all interest accrued and unpaid thereon and all other amounts
payable under this letter agreement, and all other Indebtedness of the Borrower
to the Bank, to be forthwith due and payable, whereupon the same shall become
forthwith due and payable, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived by the Borrower.
(b) Terminate the revolving financing arrangements provided for by this
letter agreement.
(c) Exercise all rights and remedies hereunder, under the Revolving
Note, under the Security Agreement, under the Intellectual Property Assignments
and under each and any other agreement with the Bank; and exercise all other
rights and remedies which the Bank may have under applicable law.
5.3. SET-OFF. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of any Event of Default, the Bank is
hereby authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to the Borrower or to any other Person, all
of which are hereby expressly waived, to set off and to appropriate and apply
any and all deposits and any other Indebtedness at any time held or owing by the
Bank or any affiliate thereof to or for the credit or the account of the
Borrower against and on account of the obligations and liabilities of the
Borrower to the Bank under this letter agreement or otherwise, irrespective of
whether or not the Bank shall have made any demand hereunder and although said
obligations, liabilities or claims, or any of them, may then be contingent or
unmatured and without regard for the availability or adequacy of other
collateral. As further security for the Obligations, the Borrower also grants to
the Bank a security interest with respect to all its deposits and all securities
or other property in the possession of the Bank or any affiliate of the Bank
from time to time, and, upon the occurrence of any Event of Default, the Bank
may exercise all rights and remedies of a secured party under the Uniform
Commercial Code. ANY AND ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS
OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES ANY OF THE
OBLIGATIONS PRIOR TO THE EXERCISE BY THE BANK OF ITS RIGHT OF SET-OFF UNDER THIS
SECTION ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
5.4. LETTERS OF CREDIT. Without limitation of any other right or remedy
of the Bank, (i) if an Event of Default shall have occurred and the Bank shall
have accelerated the Revolving Loans or (ii) if this letter agreement and/or the
revolving financing arrangements described herein shall have expired or shall
have been earlier terminated by either the Bank or the Borrower for any reason,
the Borrower will forthwith deposit with the Bank in cash a sum equal
19
to the total of all then undrawn amounts of all outstanding letters of credit
issued by the Bank for the account of the Borrower.
VI. MISCELLANEOUS
6.1. COSTS AND EXPENSES. The Borrower agrees to pay on demand all costs
and expenses (including, without limitation, reasonable legal fees) of the Bank
in connection with the preparation, execution and delivery of this letter
agreement, the Security Agreement, the Revolving Note and all other instruments
and documents to be delivered in connection with any Revolving Loan or any
letter of credit issued hereunder and any amendments or modifications of any of
the foregoing, as well as the costs and expenses (including, without limitation,
the reasonable fees and expenses of legal counsel) incurred by the Bank in
connection with preserving, enforcing or exercising, upon default, any rights or
remedies under this letter agreement, the Security Agreement, the Revolving Note
and all other instruments and documents delivered or to be delivered hereunder
or in connection herewith, all whether or not legal action is instituted. In
addition, the Borrower shall be obligated to pay any and all stamp and other
taxes payable or determined to be payable in connection with the execution and
delivery of this letter agreement, the Security Agreement, the Revolving Note
and all other instruments and documents to be delivered in connection with any
Obligation. Any fees, expenses or other charges which the Bank is entitled to
receive from the Borrower under this Section shall bear interest from the date
of any demand therefor until the date when paid at a rate per annum equal to 4%
per annum plus the per annum rate otherwise payable under the Revolving Note
(but in no event in excess of the maximum rate permitted by then applicable
law).
6.2. CAPITAL ADEQUACY. If the Bank shall have determined that the
adoption or phase-in after the date hereof of any applicable law, rule or
regulation regarding capital requirements for banks or bank holding companies,
or any change therein after the date hereof, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by the Bank with any request or directive of such entity regarding
capital adequacy (whether or not having the force of law) has or would have the
effect of reducing the return on the Bank's capital with respect to the
Revolving Loans, the within-described revolving loan facility and/or letters of
credit issued for the account of the Borrower to a level below that which the
Bank could have achieved (taking into consideration the Bank's policies with
respect to capital adequacy immediately before such adoption, phase-in, change
or compliance and assuming that the Bank's capital was then fully utilized) but
for such adoption, phase-in, change or compliance by any amount deemed by the
Bank to be material: (i) the Bank shall promptly after its determination of such
occurrence give notice thereof to the Borrower; and (ii) the Borrower shall pay
forthwith to the Bank as an additional fee such amount as the Bank certifies to
be the amount that will compensate it for such reduction with respect to the
Revolving Loans, the within-described revolving loan facility and/or such
letters of credit.
A certificate of the Bank claiming compensation under this Section shall be
conclusive in the absence of manifest error. Such certificate shall set forth
the nature of the occurrence giving
20
rise to such compensation, the additional amount or amounts to be paid to it
hereunder and the method by which such amounts were determined. In determining
such amounts, the Bank may use any reasonable averaging and attribution methods.
No failure on the part of the Bank to demand compensation on any one occasion
shall constitute a waiver of its right to demand such compensation on any other
occasion and no failure on the part of the Bank to deliver any certificate in a
timely manner shall in any way reduce any obligation of the Borrower to the Bank
under this Section.
6.3. FACILITY FEES. With respect to the within arrangements for Revolving
Loans, the Borrower will pay to the Bank, at the time of execution and delivery
of this letter agreement and on the first day of each calendar quarter
thereafter (commencing January 2, 1998), a non-refundable quarterly facility fee
of $2,500.00 per calendar quarter (appropriately pro-rated for any partial
calendar quarter), payable in advance. In addition, if the within-described
revolving financing arrangements are terminated by the Borrower for any reason
or by the Bank as the result of the Borrower's default, the Borrower shall
forthwith upon such termination pay to the Bank a sum equal to all of the fees
which would have become due pursuant to the immediately preceding sentence from
the date of such termination through the Expiration Date. The fees described in
this Section are in addition to any balances and fees required by the Bank or
any of its affiliates in connection with any other services now or hereafter
made available to the Borrower.
6.4. OTHER AGREEMENTS. The provisions of this letter agreement are not in
derogation or limitation of any obligations, liabilities or duties of the
Borrower or any Subsidiary of the Borrower under any of the other Loan Documents
or under any foreign exchange contract or letter of credit agreement with or for
the benefit of the Bank (or any affiliate of the Bank). No inconsistency in
default provisions between this letter agreement and any of the other Loan
Documents or any such other agreement will be deemed to create any additional
grace period or otherwise derogate from the express terms of each such default
provision. No covenant, agreement or obligation of the Borrower contained
herein, nor any right or remedy of the Bank contained herein, shall in any
respect be limited by or be deemed in limitation of any inconsistent or
additional provisions contained in any of the other Loan Documents or any such
other agreement.
6.5. GOVERNING LAW. This letter agreement and the Revolving Note shall be
governed by, and construed and enforced in accordance with, the laws of The
Commonwealth of Massachusetts.
6.6. ADDRESSES FOR NOTICES, ETC. All notices, requests, demands and other
communications provided for hereunder shall be in writing and shall be mailed or
delivered to the applicable party at the address indicated below:
If to the Borrower:
Exchange Applications, Inc.
21
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X'Xxxxx, Chief Financial Officer
If to the Bank:
Fleet National Bank
High Technology Group
00 Xxxxx Xxxxxx, Xxxx Stop: MABOF04M
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx, Vice President
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communications shall be deemed delivered on the earlier of (i) the date received
or (ii) the date of delivery, refusal or non-delivery indicated on the return
receipt if deposited in the United States mails, sent postage prepaid, certified
or registered mail, return receipt requested, addressed as aforesaid.
6.7. BINDING EFFECT; ASSIGNMENT; TERMINATION. This letter agreement shall
be binding upon the Borrower and the Bank and their respective successors and
assigns and shall inure to the benefit of the Borrower and the Bank and their
respective permitted successors and assigns. The Borrower may not assign this
letter agreement or any rights hereunder without the express written consent of
the Bank. The Bank may, in accordance with applicable law, from time to time
assign or grant participations in this letter agreement, the Revolving Loans or
the Revolving Note. Without limitation of the foregoing generality,
(i) The Bank may at any time pledge all or any portion of its
rights under the Loan Documents (including any portion of the
Revolving Note) to any of the 12 Federal Reserve Banks
organized under Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge or the enforcement thereof
shall release the Bank from its obligations under any of the
Loan Documents.
(ii) The Bank shall have the unrestricted right at any time and
from time to time, and without the consent of or notice to
the Borrower, to grant to one or more banks or other
financial institutions (each, a "Participant") participating
interests in the Bank's obligation to lend hereunder and/or
any or all of the Revolving Loans held by the Bank hereunder.
In the event of any such grant by a Bank of a participating
interest to a Participant, whether or not upon notice to the
Borrower, the Bank shall remain responsible for the
performance of its obligations hereunder and the Borrower
shall continue to deal solely and directly with the Bank in
connection with the Bank's rights and obligations hereunder.
The Bank
22
may furnish any information concerning the Borrower in its
possession from time to time to prospective assignees and
Participants; provided that the Bank shall require any such
prospective assignee or Participant to agree in writing to
maintain the confidentiality of such information to the same
extent as the Bank would be required to maintain such
confidentiality.
The Borrower may terminate this letter agreement and the financing arrangements
made herein by giving written notice of such termination to the Bank, provided
that no such termination will release or waive any of the Bank's rights or
remedies or any of the Borrower's obligations under this letter agreement or any
of the other Loan Documents unless and until the Borrower has paid in full the
Revolving Loans and all interest thereon and all fees and charges payable in
connection therewith.
6.8. CONSENT TO JURISDICTION. The Borrower irrevocably submits to the
non-exclusive jurisdiction of any Massachusetts court or any federal court
sitting within The Commonwealth of Massachusetts over any suit, action or
proceeding arising out of or relating to this letter agreement and/or the
Revolving Note. The Borrower irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of venue
of any such suit, action or proceeding brought in such a court and any claim
that any such suit, action or proceeding has been brought in an inconvenient
forum. The Borrower agrees that final judgment in any such suit, action or
proceeding brought in such a court shall be enforced in any court of proper
jurisdiction by a suit upon such judgment, provided that service of process in
such action, suit or proceeding shall have been effected upon the Borrower in
one of the manners specified in the following paragraph of this ss.6.8 or as
otherwise permitted by law.
The Borrower hereby consents to process being served in any suit, action or
proceeding of the nature referred to in the preceding paragraph of this ss.6.8
either (i) by mailing a copy thereof by registered or certified mail, postage
prepaid, return receipt requested, to it at its address set forth in ss.6.6 (as
such address may be changed from time to time pursuant to said ss.6.6) or (ii)
by serving a copy thereof upon it at its address set forth in ss.6.6 (as such
address may be changed from time to time pursuant to said ss.6.6).
6.9. SEVERABILITY. In the event that any provision of this letter
agreement or the application thereof to any Person, property or circumstances
shall be held to any extent to be invalid or unenforceable, the remainder of
this letter agreement, and the application of such provision to Persons,
properties or circumstances other than those as to which it has been held
invalid and unenforceable, shall not be affected thereby, and each provision of
this letter agreement shall be valid and enforced to the fullest extent
permitted by law.
6.10. REPLACEMENT NOTE. Upon receipt of an affidavit of an officer of the
Bank as to the loss, theft, destruction or mutilation of the Revolving Note or
of any other Loan Document which is not of public record and, in the case of any
such mutilation, upon surrender and cancellation of such Revolving Note or other
Loan Document, the Borrower will issue, in lieu thereof, a
23
replacement Revolving Note or other Loan Document in the same principal amount
(as to the Revolving Note) and in any event of like tenor.
6.11. USURY. All agreements between the Borrower and the Bank are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the Revolving Note or otherwise, shall the
amount paid or agreed to be paid to the Bank for the use or the forbearance of
the Indebtedness represented by the Revolving Note exceed the maximum
permissible under applicable law. In this regard, it is expressly agreed that it
is the intent of the Borrower and the Bank, in the execution, delivery and
acceptance of the Revolving Note, to contract in strict compliance with the laws
of The Commonwealth of Massachusetts. If, under any circumstances whatsoever,
performance or fulfillment of any provision of the Revolving Note or any of the
other Loan Documents at the time such provision is to be performed or fulfilled
shall involve exceeding the limit of validity prescribed by applicable law, then
the obligation so to be performed or fulfilled shall be reduced automatically to
the limits of such validity, and if under any circumstances whatsoever the Bank
should ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal balance evidenced by the Revolving Note and not to
the payment of interest. The provisions of this Section 6.11 shall control every
other provision of this letter agreement and of the Revolving Note.
6.12. WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY MUTUALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS LETTER AGREEMENT, THE REVOLVING NOTE OR ANY OTHER LOAN DOCUMENTS OR OUT OF
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE
BANK TO ENTER INTO THIS LETTER AGREEMENT AND TO MAKE THE REVOLVING LOANS AS
CONTEMPLATED HEREIN.
VII. DEFINED TERMS
7.1. DEFINITIONS. In addition to terms defined elsewhere in this letter
agreement, as used in this letter agreement, the following terms have the
following respective meanings:
"Aggregate Bank Liabilities" - At any time, the sum of (i) the principal
amount of all Revolving Loans then outstanding, PLUS (ii) all then undrawn
amounts of letters of credit issued by the Bank for the account of the Borrower,
PLUS (iii) all amounts then drawn on any such letter of credit which at said
date shall not have been reimbursed to the Bank by the Borrower.
"Aggregate Letter of Credit Liabilities" - At any time, the sum of (i) all
then undrawn amounts of letters of credit issued by the Bank for the account of
the Borrower, PLUS (ii) all
24
amounts then drawn on any such letter of credit which at said date shall not
have been reimbursed to the Bank by the Borrower.
"Borrowing Base" - As determined at any date, 75% of the aggregate
principal amount of the Qualified Receivables of the Borrower then outstanding.
"Business Day" - Any day which is not a Saturday, nor a Sunday nor a public
holiday under the laws of the United States of America or The Commonwealth of
Massachusetts applicable to a national bank.
"Collateral" - All property now or hereafter owned by the Borrower or in
which the Borrower now or hereafter has any interest which is described as
"Collateral" in the Security Agreement or in ss.7.2(b) below.
"Current Liabilities" - All Indebtedness of the Borrower and/or any of its
Subsidiaries which would properly be shown as current liabilities on a
consolidated balance sheet of the Borrower prepared consistently with the
financial statements and projections furnished by the Borrower to the Bank prior
to the date of this letter agreement.
"ERISA" - The Employee Retirement Income Security Act of 1974, as amended.
"Expiration Date" - August 31, 1998, unless extended by the Bank, which
extension may be given or withheld by the Bank in its sole discretion.
"Indebtedness" - All obligations of a Person, whether current or long-term,
senior or subordinated, which in accordance with generally accepted accounting
principles would be included as liabilities upon such Person's balance sheet at
the date as of which Indebtedness, is to be determined, and shall also include
guaranties, endorsements (other than for collection in the ordinary course of
business) or other arrangements whereby responsibility is assumed for the
obligations of others, whether by agreement to purchase or otherwise acquire the
obligations of others, including any agreement, contingent or otherwise, to
furnish funds through the purchase of goods, supplies or services for the
purpose of payment of the obligations of others.
"Loan Documents" - Each of this letter agreement, the Revolving Note, the
Security Agreement, the Intellectual Property Assignments and each other
instrument, document or agreement evidencing, securing, guaranteeing or relating
in any way to any of the Revolving Loans or any of the letters of credit issued
hereunder, all whether now existing or hereafter arising or entered into.
"Maximum Revolving Amount" - At any date as of which same is to be
determined, the amount by which (x) $2,000,000 exceeds (y) the then-existing
Aggregate Letter of Credit Liabilities.
25
"Net Income" (or "Net Loss") - The book net income (or book net loss, as
the case may be) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with
generally accepted accounting principles applied consistently with the
projections heretofore furnished to the Bank by the Borrower.
"Net Quick Assets" - Such current assets of the Borrower as consist of
cash, cash-equivalents and Receivables (less an allowance for bad debt
consistent with the Borrower's prior experience).
"Obligations" - All Indebtedness, covenants, agreements, liabilities and
obligations, now existing or hereafter arising, made by the Borrower or any
Subsidiary of the Borrower with or for the benefit of the Bank or owed by the
Borrower to the Bank relating to this letter agreement, any letter of credit
agreement or any foreign exchange contract.
"PBGC" - The Pension Benefit Guaranty Corporation or any successor thereto.
"Person" - An individual, corporation, company, partnership, joint venture,
trust or unincorporated organization, or a government or any agency or political
subdivision thereof.
"Qualified Receivables" - Only those Receivables of the Borrower which
arise out of BONA FIDE sales made to customers of the Borrower (which customers
are located in the United States and are unrelated to the Borrower) in the
ordinary course of the Borrower's business and which remain unpaid no more than
90 days past the respective invoice dates of such Receivables, the payment of
which is not in dispute. Unless the Bank in its sole discretion otherwise
determines with respect to any Receivable, a Receivable which would otherwise be
a Qualified Receivable shall be deemed not to be a Qualified Receivable (i) if
the Bank does not have a fully perfected first priority security interest in
such Receivable; (ii) if such Receivable is not free and clear of all adverse
interests in favor of any Person other than the Bank; (iii) if such Receivable
is subject to any deduction, off-set, contra account, counterclaim or condition;
(iv) if a field examination made by the Bank fails to confirm that such
Receivable exists and satisfies all of the criteria set forth herein to be a
Qualified Receivable; (v) if such Receivable is not properly invoiced at the
date of sale; (vi) if the customer or account debtor has disputed liability or
made any claim with respect to the Receivable or the merchandise covered thereby
or with respect to any other Receivable due from said customer to the Borrower;
(vii) if the customer or account debtor has filed a petition for bankruptcy or
any other application for relief under the Bankruptcy Code or has effected an
assignment for the benefit of creditors, or if any petition or any other
application for relief under the Bankruptcy Code has been filed against said
customer or account debtor, or if the customer or account debtor has suspended
business, become insolvent, ceased to pay its debts as they become due, or had
or suffered a receiver or trustee to be appointed for any of its assets or
affairs; (viii) if the customer or account debtor has failed to pay other
Receivables so that an aggregate of 25% of the total Receivables owing to the
Borrower by such customer or account debtor has been outstanding for more than
90 days past their respective due dates; (ix) if such Receivable is owed by the
United States government or any agency or department thereof (unless assigned to
the Bank under the Federal Assignment of Claims Act); or (x) if the Bank
26
reasonably believes that collection of such Receivable is insecure or that it
may not be paid by reason of financial inability to pay or otherwise, or that
such Receivable is not for any reason suitable for use as a basis for borrowing
hereunder.
"Receivables" - All of the Borrower's present and future accounts, accounts
receivable and notes, drafts, acceptances and other instruments representing or
evidencing a right to payment for goods sold or for services rendered.
"Subsidiary" - Any corporation or other entity of which the Borrower and/or
any of its Subsidiaries, directly or indirectly, owns, or has the right to
control or direct the voting of, fifty (50%) percent or more of the outstanding
capital stock or other ownership interest having general voting power (under
ordinary circumstances).
"Tangible Net Worth" - An amount equal to the total assets of any Person
(excluding (i) the total intangible assets of such Person and (ii) any assets
representing amounts due from any officer or employee of such Person or from any
Subsidiary of such Person) minus the total liabilities of such Person. Total
intangible assets shall be deemed to include, but shall not be limited to, the
excess of cost over book value of acquired businesses accounted for by the
purchase method, formulae, trademarks, trade names, patents, patent rights and
deferred expenses (including, but not limited to, unamortized debt discount and
expense, organizational expense, capitalized software costs and experimental and
development expenses).
Any defined term used in the plural preceded by the definite article shall
be taken to encompass all members of the relevant class. Any defined term used
in the singular preceded by "any" shall be taken to indicate any number of the
members of the relevant class.
7.2. SECURITY AGREEMENT. (a) The Borrower acknowledges and agrees that
the "Obligations" described in and secured by the Security Agreement include,
without limitation, all of the obligations of the Borrower under the Revolving
Note and/or this letter agreement and/or with respect to any letter of credit
which may be issued by the Bank for the account of the Borrower.
(b) The Security Agreement is hereby modified to provide as follows:
(i) That the "Collateral" subject thereto includes, without
limitation and in addition to the Collateral described therein, all of the
Borrower's files, books and records (including, without limitation, all
electronically recorded data) all whether now owned or existing or
hereafter acquired, created or arising. The Borrower hereby grants to the
Bank a security interest in all such Collateral in order to secure the full
and prompt payment and performance of all of the Obligations.
(ii) That, upon the occurrence of any Event of Default (as defined
in ss.5.1 of this letter agreement), the Bank may, at any time, notify
account debtors that the Collateral has been assigned to the Bank and that
payments by such account debtors shall
27
be made directly to the Bank. At any time after the occurrence of an Event of
Default, the Bank may collect the Borrower's Receivables, or any of same,
directly from account debtors and may charge the collection costs and expenses
to the Borrower.
28
This letter agreement is executed, as an instrument under seal, as of
the day and year first above written.
Very truly yours,
EXCHANGE APPLICATIONS, INC.
By: Xxxx X. X'Xxxxx
------------------------------
Name: Xxxx X. X'Xxxxx
Title: Chief Financial Officer
Accepted and agreed:
FLEET NATIONAL BANK
By: ???????? ??????
------------------------------
Its VP
By: ???????? ??????
------------------------------
Its ARP
29
PROMISSORY NOTE
$2,000,000.00 Boston, Massachusetts
December 22, 1997
FOR VALUE RECEIVED, the undersigned Exchange Applications, Inc., a Delaware
corporation (the "Borrower") hereby promises to pay to the order of FLEET
NATIONAL BANK (the "Bank") the principal amount of Two Million and 00/100
($2,000,000.00) Dollars or such portion thereof as may be advanced by the Bank
pursuant to ss.1.2 of that certain letter agreement of even date herewith
between the Bank and the Borrower (the "Letter Agreement") and remains
outstanding from time to time hereunder ("Principal"), with interest, at the
rate hereinafter set forth, on the daily balance of all unpaid Principal, from
the date hereof until payment in full of all Principal hereunder.
Interest on all unpaid Principal shall be due and payable monthly in
arrears, on the first day of each month, commencing on the first such date after
the advance of any Principal and continuing on the first day of each month
thereafter and on the date of payment of this note in full, at a fluctuating
rate per annum (computed on the basis of a year of three hundred sixty (360)
days for the actual number of days elapsed) which shall at all times be equal to
the sum of (i) three-quarters of one (0.75%) percent plus annum plus (ii) the
Prime Rate as in effect from time to time (but in no event in excess of the
maximum rate permitted by then applicable law). A change in the aforesaid rate
of interest shall become effective on the same day on which any change in the
Prime Rate is effective. Overdue Principal and, to the extent permitted by law,
overdue interest shall bear interest at a fluctuating rate per annum which at
all times shall be equal to the sum of (i) four (4%) percent per annum plus (ii)
the per annum rate otherwise payable under this note (but in no event in excess
of the maximum rate permitted by then applicable law), compounded monthly and
payable on demand. As used herein, "Prime Rate" means the variable rate of
interest per annum designated by the Bank from time to time as its prime rate,
it being understood that such rate is merely a reference rate and does not
necessarily represent the lowest or best rate being charged to any customer. If
the entire amount of any required Principal and/or interest is not paid within
ten (10) days after the same is due, the Borrower shall pay to the Bank a late
fee equal to five percent (5%) of the required payment, provided that such late
fee shall be reduced to three percent (3%) of any required Principal and
interest that is not paid within fifteen (15) days of the date it is due if this
note is secured by a mortgage on an owner-occupied residence of 1-4 units.
All outstanding Principal and all interest accrued thereon shall be due and
payable in full on the first to occur of: (i) an acceleration under ss.5.2 of
the Letter Agreement or (ii) August 31, 1998. The Borrower may at any time and
from time to time prepay all or any portion of said Principal, without premium
or penalty. Under certain circumstances set forth in the Letter Agreement,
prepayments of Principal may be required.
30
Payments of both Principal and interest shall be made, in lawful currency
of the United States in immediately available funds, at the office of the Bank
located at 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, or at such other
address as the Bank may from time to time designate.
The undersigned Borrower irrevocably authorizes the Bank to make or cause
to be made, on a schedule attached to this note or on the books of the Bank, at
or following the time of making any Revolving Loan (as defined in the Letter
Agreement) and of receiving any payment of Principal, an appropriate notation
reflecting such transaction and the then aggregate unpaid balance of Principal.
Failure of the Bank to make any such notation shall not, however, affect any
obligation of the Borrower hereunder or under the Letter Agreement. The unpaid
Principal amount of this note, as recorded by the Bank from time to time on such
schedule or on such books, shall constitute presumptive evidence of the
aggregate unpaid principal amount of the Revolving Loans.
The Borrower hereby (a) waives notice of and consents to any and all
advances, settlements, compromises, favors and indulgences (including, without
limitation, any extension or postponement of the time for payment), any and all
receipts, substitutions, additions, exchanges and releases of collateral, and
any and all additions, substitutions and releases of any person primarily or
secondarily liable, (b) waives presentment, demand, notice, protest and all
other demands and notices generally in connection with the delivery, acceptance,
performance, default or enforcement of or under this note, and (c) agrees to
pay, to the extent permitted by law, all costs and expenses, including, without
limitation, reasonable attorneys' fees, incurred or paid by the Bank in
enforcing this note and any collateral or security therefor, all whether or not
litigation is commenced.
This note is the Revolving Note referred to in the Letter Agreement. This
note is secured by, and is entitled to the benefit of, the Security Agreement
(as defined in the Letter Agreement). This note is subject to prepayment as set
forth in the Letter Agreement. The maturity of this note may be accelerated upon
the occurrence of an Event of Default, as provided in the Letter Agreement.
THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED ON THIS NOTE OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY RELATED DOCUMENTS OR OUT OF
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF ANY PERSON. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE
BANK TO ACCEPT THIS NOTE AND TO MAKE THE REVOLVING LOANS AS CONTEMPLATED IN THE
LETTER AGREEMENT.
-2-
31
Executed, as an instrument under seal, as of the day and year first above
written.
CORPORATE SEAL EXCHANGE APPLICATIONS, INC.
ATTEST:
By: /s/ Xxxx X. X'Xxxxx
--------------------------- ------------------------------
Secretary Name: Xxxx X. X'Xxxxx
Title: Chief Financial Officer
-3-
32
EXHIBIT 10.15
June 24th, 1998
Mr. Xxxx X'Xxxxx
Chief Financial Officer
Exchange Applications, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Dear Xxxx:
Reference is hereby made to the Letter Agreement (the "Agreement") dated
December 22, 1997, by and between Exchange Applications, Inc. ("Borrower" or the
"Company") and Fleet National Bank (the "Bank"). I am pleased to inform you that
we have approved the renewal your $2,000,000 line of credit from through May
30th, 1999.
The Borrower has informed the Bank that for the fourth fiscal quarter ended
December 30, 1997 it is in violation of "Section 3.9 Profitability" with a loss
for the quarter of $857,000, compared to a requirement that losses do not exceed
$425,000. In addition, the Borrower is in violation of the requirement to
achieve at least $1.00 for the two consecutive quarters ended March 31, 1998;
net losses for the two consecutive quarters ended March 31, 1998 totaled
$1,242,000. The Borrower has requested a waiver of these two Profitability
violations.
The Bank hereby waives the Borrower's violation of Section 3.9 as described
above. This waiver is for the specific time period detailed above only and does
not amend in any manner any other terms of the Agreement. This change will
become effective upon our receipt of a countersigned copy of this letter.
The Borrower has informed the Bank that it wishes to revise certain financial
covenants for the fiscal quarter ending June 30, 1998 and thereafter,
specifically:
- TANGIBLE NET WORTH (SECTION 3.8): We have revised this covenant by setting the
minimum base at $5,500,000 as of June 30, 1998. In addition, there will be a
step-up added to the base which is defined as 80% of new equity raised and
subordinated debt raised on or after June 30, 1998 and 80% of Net Income
earned beginning with the quarter ending June 30, 1998.
- PROFITABILITY (SECTION 3.9): We have revised the definition of this covenant
such that Profitability must exceed $1.00 for the fiscal year ending December
31, 1998. We have revised the quarterly requirements as shown below:
--------------------------------------------------------------------
Quarter ending June 30, 1998 $500,000 maximum losses
--------------------------------------------------------------------
Quarter ending September 30, 1998 $500,000 maximum losses
--------------------------------------------------------------------
Each quarter thereafter $1.00 minimum profit
--------------------------------------------------------------------
- LIQUIDITY (SECTION 3.10): We have revised this covenant so that the Borrower
must report a ratio that is equal to or exceeds 1.50:1.00 for the quarter
ending June 30, 1998 and thereafter.
33
These changes are for the specific time period detailed above only and do not
amend in any manner any other terms of the Agreement. These changes will become
effective upon our receipt of a countersigned copy of this letter.
Xxxx, we are pleased to continue our relationship with Exchange Applications
and look forward to expanding it in the future.
Sincerely,
Agreed and Accepted:
/s/ Xxxxxxx Xxxxxxx By: /s/ Xxxx X. X'Xxxxx
--------------------------- -------------------------
Xxxxxxx Xxxxxxx Xxxx X. X'Xxxxx
Vice President Title: Vice President/CFO
High Technology Division Date: June 30, 1998
34
ALLONGE TO PROMISSORY NOTE
The maturity date of the attached Promissory Note dated December 22, 1997 for
$2,000,000 is hereby extended to May 30, 1999 from August 31, 1998. The
interest rate shall remain at Prime +3/4%.
This Allonge will be governed by the terms and conditions of the Letter
Agreement between Exchange Application, Inc. (the "Borrower") dated December
22, 1997 and Fleet National Bank (the "Bank"), referred to as the "Agreement".
Nothing herein shall be deemed to constitute a waiver, release or amendment of
any terms of the Agreement.
/s/ Xxxxxx Xxxxxxxxxx /s/ Xxxx X. X'Xxxxx
---------------------------------- ----------------------------------
Witness Xxxx X. X'Xxxxx
Chief Financial Officer
Exchange Applications, Inc.
/s/ Xxxxxxx Xxxxxxx
---------------------------------- ----------------------------------
Witness Xxxxxxx Xxxxxxx
Vice President
Fleet National Bank
