EXHIBIT 10.1
SECOND AMENDED AND RESTATED SECURED
ADVANCE FACILITY LOAN AGREEMENT
This SECOND AMENDED AND RESTATED SECURED ADVANCE FACILITY LOAN AGREEMENT
(the "Agreement") is entered into as of this 1st day of July, 1998, by and
between XYVISION, INC., a Delaware corporation with its principal office at 00
Xxx Xxxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 (the "Borrower"), and Xxxxxxx
X. Xxxxxx as trustee of the Tudor Trust u/d/t August 11, 1986, with an address
of 000 Xxxxx Xxxxxxx Xxxxx, 0xx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000 (the
"Lender"). WHEREAS, the Borrower and the Lender were parties to a Secured
Advance Facility Loan Agreement dated June 30, 1992 (the "Original Agreement");
WHEREAS, the Original Agreement was amended and restated pursuant to an Amended
and Restated Secured Advance Facility Loan Agreement dated September 28, 1993
(the "Amended and Restated Agreement");
WHEREAS, the Amended and Restated Agreement was further amended pursuant
to the First Amendment thereto dated December 3, 1993; the Second Amendment
thereto dated February 29, 1996; the Third Amendment thereto dated May 31,
1996; the Fourth Amendment thereto dated November 22, 1996; and the Fifth
Amendment thereto dated November 10, 1997 (as so amended, the "Current
Agreement");
WHEREAS, the Borrower and the Lender desire to amend and restate the
Current Agreement, including an increase in the loan amount to $13,500,000, all
as hereinafter set forth in this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and with the specific intent to
be bound hereby, the Borrower and the Lender hereby agree to amend and restate
the Current Agreement as follows:
I. DEFINITIONS
Each reference in this Agreement to the following terms shall be deemed to
have the following meanings:
1.1. Accountants. Xxxxxx Xxxxxx, Xxxxxx Xxxxxxxx and Xxxxx Xxxxxx of the
firm of Xxxxxxxxx, Codran & Co., which has a principal place of business at 000
Xxxxx Xxxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000.
1.2. (Intentionally Deleted).
1.3. Adequate Protection Claim. The Lender's administrative expense claim
under Section 507(b) of the Bankruptcy Code, referred to in Section 5. The
Adequate Protection Claim shall equal the amount, if any, by which
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the value of the Lender's collateral has declined, as a result of the
Borrower's use of cash collateral during any Chapter 11 proceeding under the
Bankruptcy Code, below the outstanding amount of the Liabilities, whether the
Liabilities are Pre-Petition Claims or DIP Loans or otherwise, on the earlier
of the date that the Adequate Protection Claim is allowed under the Bankruptcy
Code or the date that an order is entered confirming a plan of reorganization
for the Borrower.
1.4. Advances. Advances by the Lender made pursuant to Section 2 of this
Agreement.
1.5.
1.6. Bankruptcy Code. Title 11 of the United States Code.
1.7.
1.8. Default. Each of the following events is hereby defined as and is
declared to be and to constitute a "Default" without further notice by the
Lender to the Borrower:
(a) Failure by the Borrower to make payments within ten days of the due
date of any Liability.
(b) Failure to perform or observe the covenants, agreements or
conditions of the Borrower contained (i) in Section 11 of this
Agreement, (ii) in any other section of this Agreement after the
expiration of thirty (30) days from the receipt by the Borrower of
written notice from the Lender that an event giving rise to grounds for
such a Default has occurred, (iii) in the Secured Promissory Note, after
the expiration of any applicable cure period or (iv) in the Security
Agreement, after the expiration of any applicable cure period.
(c) If any representation or warranty of the Borrower herein or in any
certificate delivered hereunder shall prove to have been false in any
material respect upon the date when made.
(d) Default shall be made by the Borrower in the performance of any
other covenant or agreement contained in any agreement or instrument
that results in the acceleration of the maturity of any indebtedness to
others of Borrower under such agreement or instrument.
1.9. DIP Loans. Loans made by the Lender to the Borrower after the
Borrower files a petition under Chapter 11 of the Bankruptcy Code or if the
Borrower is filed involuntarily into a case under Chapter 11 of the Bankruptcy
Code.
1.10. Facility Fee Stock. The Four Hundred Thousand (400,000) fully paid
and non-assessable shares of Common Stock of the Borrower issued to the Lender
under the Original Agreement as a fee for establishing the Loan.
1.11.
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1.12. Financing Statements. Uniform Commercial Code financing statements,
substantially in the form attached hereto as Exhibit 4.1, covering all of the
now-existing or after-acquired property of the Borrower.
1.13. First Advance. The advance of Five Hundred Thousand Dollars
($500,000.00) in United States funds to the Borrower by the Lender on the
Original Closing Date.
1.14. GAAP. Generally accepted accounting principles. 1.15. Indebtedness.
For any party, (a) all indebtedness or other obligations of such party that in
accordance with GAAP would be reflected on the balance sheet of such party as a
liability; (b) all indebtedness or other obligations of any other party, the
payment or collection of which such party has guaranteed (except by reason of
endorsement for collection in the ordinary course of business) or in respect of
which such party is liable, contingently or otherwise, including, without
limitation, liable by way of agreement to purchase, to provide funds for
payment, to supply funds to or otherwise to invest in such other party, or
otherwise to assure a creditor against loss; (c) all indebtedness or other
obligations of any other party for borrowed money or for the deferred purchase
price of property or services secured by (or for which the holder of such
indebtedness has an existing right, contingent or otherwise, to be secured by)
any mortgage, or other encumbrance upon or in property (including, without
limitation, accounts and contract rights) owned by such party whether or not
such party has assumed or become liable for the payment of such indebtedness or
obligations; and (d) capitalized lease obligations of such party.
1.16. Insolvency Proceedings. The (i) filing by a party of a petition or
request for liquidation, reorganization, arrangement, adjudication as a
bankrupt, relief as a debtor, or other relief under the bankruptcy, insolvency
or similar laws of the United States of America or any state or territory
thereof or any foreign jurisdiction now or hereafter in effect; (ii) making by
a party of a general assignment for the benefit of creditors; (iii) consent by
a party to the appointment of a receiver or trustee, including, without
limitation, a "custodian" as defined in the Bankruptcy Code for a party or any
of its assets; (iv) execution by a party of a consent to any other type of
insolvency proceeding (under the Bankruptcy Code or otherwise) or any formal or
informal proceeding for the dissolution or liquidation of, or settlement of
claims against or winding up of affairs of a party; (v) the appointment of a
receiver, trustee, custodian or officer performing similar functions,
including, without limitation, a "custodian" as defined in the Bankruptcy Code,
for a party or any of its assets, or (vi) the filing against a party of a
request or petition for liquidation, reorganization, arrangement, adjudication
as a bankrupt or similar laws of the United States of America, any state or
territory thereof, or any foreign jurisdiction now or hereafter in effect, or
of any other type of insolvency proceeding (under the Bankruptcy Code or
otherwise) or any formal or informal proceeding for the dissolution or
liquidation of, settlement of claims against or winding up of affairs of a
party.
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1.17. Liabilities. All amounts advanced and unpaid under this Agreement,
the accrued and unpaid interest on such amounts and any and all other expenses
or charges due from the Borrower to the Lender under this Agreement and the
Secured Promissory Note.
1.18.
1.19. Maximum Loan Amount. Thirteen Million Five Hundred Thousand Dollars
($13,500,000.00).
1.20. Minimum Draw. The minimum amount of any Advance under this Agreement
shall be Fifty Thousand Dollars ($50,000.00).
1.21. Minimum Partial Payment Amount. The minimum amount of any partial
prepayment under this Agreement shall be One Hundred Thousand Dollars
($100,000.00).
1.22. Original Closing Date. The date of consummation of the First Advance
under the Original Agreement.
1.23. Permitted Indebtedness. All of the following:
(a) Indebtedness owing to the Lender;
(b) Indebtedness incurred in favor of trade creditors and in the
ordinary course of business and not outstanding more than 180 days;
and
(c) Indebtedness existing on the date hereof and fully described in
Schedule 1.23 hereto.
1.24. Pre-Petition Claim. All amounts advanced and unpaid under this
Agreement as of the date of the filing of a voluntary or involuntary case in
which the Borrower is named as the debtor under the Bankruptcy Code, together
with the accrued and unpaid interest on such amounts and any and all other
expenses or charges due from the Borrower to the Lender under this Agreement.
1.25. Secured Promissory Note. The amended and restated secured promissory
note in the amount of Thirteen Million Five Hundred Thousand Dollars
($13,500,000.00) executed by the Borrower and delivered to the Lender on or
about the date hereof.
1.26. Security Agreement. The Sixth Amended and Restated Security
Agreement, dated November 10, 1997, executed by the Borrower and delivered to
the Lender as security for the Secured Promissory Note, as it may be further
amended from time to time hereafter.
1.27. Warrants. The warrants described in Section 3.5 of this Agreement.
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1.28. Intellectual Property Assignment. The Fifth Amended Assignment of
Patents and Trademarks, dated November 10, 1997, executed by the Borrower and
delivered to the Lender as security for the Secured Promissory Note, as it may
be further amended from time to time.
II. THE LOAN
2.1. Loan. Subject to the terms and conditions set forth herein and prior
to any Default hereunder and so long as no Insolvency Proceedings have
commenced against the Borrower, the Lender agrees that it may lend to the
Borrower and the Borrower agrees that it may borrow and repay from time to time
amounts not to exceed the Maximum Loan Amount (the "Loan").
2.2. Interest. Amounts advanced to the Borrower by the Lender under this
Agreement shall bear interest, payable as set forth in Section 3.2 of this
Agreement, from the date of each such Advance on the unpaid principal balance
thereof until paid in full at a rate of thirteen percent (13%) per annum;
provided, however, that from and after December 3, 1993, all of the unpaid
principal balance outstanding from time to time shall bear interest at the rate
of ten percent (10%) per annum; provided, further, that from and after May 31,
1996, all of the unpaid principal balance outstanding from time to time shall
bear interest at the rate of eight percent (8%) per annum; provided, further,
that from and after November 10, 1997, all of the unpaid principal balance
outstanding from time to time shall bear interest at six percent (6%) per
annum; and provided, further, that from and after December 1, 1997, all of the
unpaid principal balance outstanding from time to time shall bear interest at
eight percent (8%) per annum.
2.3.
2.4. Advances. The Lender agrees to make Advances to the Borrower upon the
Borrower's request, as set forth herein, provided that lending shall be made at
all times at the Lender's discretion, and provided that the Lender does not
intend to make all or part of any Advance requested by the Borrower which would
cause the aggregate principal balance of unpaid Advances made under this
Agreement to exceed the Maximum Loan Amount. Notwithstanding anything to the
contrary herein, if the Lender lends to the Borrower amounts in excess of the
Maximum Loan Amount, such amounts shall be deemed amounts advanced under this
Agreement and shall constitute a portion of the Loan. 2.5. Requests For
Advances. The Borrower may at any time, and from time to time, request Advances
from the Lender in amounts not less than the Minimum Draw, unless at the time
the Advance is requested the difference between the aggregate principal amount
of unpaid Advances then outstanding and the Maximum Loan Amount is less than
the Minimum Draw, in which event the Borrower may request Advances in
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an aggregate amount which is less than the Minimum Draw. All requests for
Advances shall be made by the Borrower to the Lender or an Accountant in
writing; the Borrower may deliver any such written request for an Advance by
telecopy transmission.
IIA. THE LETTERS OF CREDIT OBLIGATIONS
2A.1. Letter of Credit Issuance. At Borrower's request, as of the
September 18, 1997, the Lender has caused Fleet National Bank (the "Bank") to
issue a letter of credit in the face amount of $444,600 (the "Letter of
Credit") to TASC, Inc. (the "Landlord"). In connection with the issuance of the
Letter of Credit, the Lender has entered into a letter of credit application
and reimbursement agreement with the Bank (the "Reimbursement Agreement") under
which the Lender has agreed to reimburse the Bank for all amounts drawn by the
Landlord under the Letter of Credit.
2A.2. Borrower's Reimbursement Obligations to Lender. Borrower hereby
agrees to pay to Lender, immediately upon demand by Lender, any and all amounts
irrevocably paid by Lender to the Bank under the Reimbursement Agreement
including, without limitation, the amount of any collateral which is, from time
to time, pledged by the Lender to secure its obligations under the
Reimbursement Agreement and which is applied by the Bank to the Lender's
obligations.
2A.3. Payment of Reimbursement Obligations. Amounts payable by the
Borrower to the Lender under Section 2A.2 shall bear interest from the date of
Lender's demand under that Section, until paid in full, at the rate applicable
from time to time to the principal balance of Advances under the Agreement
pursuant to Section 2.2 hereof.
2A.4. Reimbursement Obligations Constitute Liabilities. The Borrower
confirms and agrees that its obligations under Section 2A.2 and Section 2A.3
constitute Liabilities under the Agreement secured by the Security Agreement
and by the Assignment of Patents and Trademarks, dated as of November 10, 1997,
between the Borrower and the Lender.
III. PAYMENTS
3.1. Scheduled Principal Payment. Except as provided in Sections 5.2 and
8, all Liabilities shall be paid in full on March 31, 2001, unless declared due
and payable earlier by the Lender as set forth herein.
3.2. Scheduled Interest Payments. Interest accrued shall be due and
payable annually in arrears on the first day of each calendar year except that
interest for December 1997 shall be payable with interest for calendar year
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1998 on January 1, 1999. For the period from December 1, 1997 to January 1,
1999, interest shall be paid in shares of Common Stock of the Borrower (the
"Common Stock"). For each calendar year thereafter, Lender shall have the
option to receive the interest in cash or in shares of Common Stock provided
that with respect to each year's interest, Lender must elect cash or shares of
Common Stock no later than June 30 of such year. The number of shares issuable
in payment of interest shall be determined by dividing accrued interest for the
applicable period by the fair market value of the Common Stock as of the end of
each period determined based on the average fair market value of the Common
Stock on the last ten business days of each calendar quarter ending during such
calendar year. "Fair market value" shall be deemed to equal the mean between
the low bid and high asked prices of the Common Stock as quoted on the OTC
Bulletin Board display service operated by the National Association of
Securities Dealers, Inc., or the closing market price of the Common Stock on a
national securities exchange or the Nasdaq National Market on each applicable
trading day, whichever is applicable, or if none of these are applicable, as
shall be reasonably determined in good faith by the Board of Directors of the
Borrower. If interest is payable in shares of Common Stock, Borrower shall
deliver such shares to Lender on or before January 15 of the year following its
accrual. Cash interest payments shall be sent by wire transfer to an account
specified by Lender.
3.3. Prepayment. The Borrower may from time to time prepay any amount
outstanding under this Agreement or the Secured Promissory Note, in whole or in
part, without premium or penalty, by wire transfer to the Loan Account;
provided, however, that any such partial prepayment shall be made in an
aggregate amount of not less than the Minimum Partial Payment Amount, and that
payments in excess of the Minimum Partial Payment Amount shall only be an
integral multiple thereof.
3.4. Additional Facility Fee. As inducement for the Lender to enter into
this Agreement, the Borrower shall issue to the Lender, upon execution of this
Agreement, a warrant for the purchase of 3,000,000 shares of Common Stock of
the Borrower at an exercise price equal to $.25 per share for a term of 10
years, substantially in the form attached to this Agreement as Exhibit 3.4.
3.5. Warrants. As further consideration for the Loan, the Borrower has
issued to the Lender certain warrants to purchase Common Stock for the
Borrower. Of the warrants originally issued by the Borrower, the following
Warrants remain unexercised, issued and outstanding:
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Issue Date Number of Shares Price Per Share
-------------------- ------------------ -------------------
Warrant December 3, 1993 500,000 $.19 per share
(Unnumbered)
Warrant #8 December 31, 1993 200,000 $.22 per share
Warrant #9 March 31, 1994 200,000 $.19 per share
Warrant #10 June 30, 1994 20,000 $ .20
Warrant #11 September 30, 1994 200,000 $.50 per share
Warrant #12 March 31, 1995 200,000 $.50 per share
Warrant #14 June 30, 1995 200,000 $.53 per share
Warrrant #15 September 30, 1995 200,000 $.47 per share
Warrant #16 December 31, 1995 325,000 $.41 per share
Warrant #21 June 13, 1996 6,725,000 $.18 per share
Warrant #24 February 29, 1996 200,000 $.18 per share
Warrant #26 June 13, 1996 2,32,500 $.18 per share
Warrant #27 November 10, 1997 10,000,000 $.16 per share
3.6. Investment Representation. The Lender is acquiring the shares of
Common Stock of the Borrower issuable to it under this Agreement for its own
account for investment purposes only and not with a view to, or for sale in
connection with, any distribution thereof. The Lender understands that the
shares of Common Stock of the Borrower issuable to it under this Agreement (i)
will not be registered under the Securities Act of 1933 at the time of their
issuance, (ii) may not be sold or transferred unless they are subsequently
registered under such Act or an exemption from registration is then available,
and (iii) will bear a restrictive legend to this effect.
IV. SECURITY AND GUARANTEE
As security for the full and timely payment of the principal and interest
on the Secured Promissory Note and the Liabilities, whether now existing or
hereafter arising:
4.1. Security Agreement. The Borrower has duly executed and delivered to
Lender the Security Agreement and Financing Statements covering all of the now
existing or after-acquired property of the Borrower, as more fully described
therein.
4.2. Recording. The Borrower shall, at its cost and expense, cause all
instruments and documents given as security pursuant to the Security Agreement,
including the Financing Statements, to be duly recorded and/or filed in all
places necessary, in the opinion of the Lender to perfect and protect the
security interest of the Lender in the property covered thereby.
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V. USE OF PROCEEDS
5.1. Ordinary Course of Business. The Borrower agrees that the Advances
will be used in the ordinary course of the Borrower's business.
5.2. Use of Cash Collateral. The Lender agrees that in the event the
Borrower files a petition under Chapter 11 of the Bankruptcy Code, or in the
event the Borrower is filed involuntarily into a case under Chapter 11 of the
Bankruptcy Code, that the Borrower may continue, after the date that an order
for relief is entered in any such case, to use all proceeds arising from the
Borrower's collection or disposition of property of the Borrower in which the
Lender holds an unavoidable, perfected security interest, including proceeds
thereof and property constituting cash collateral, as defined by Section 363(a)
of the Bankruptcy Code. The Lender's consent to the Borrower's continued use of
such property is conditioned upon (a) absence of a Default under this Agreement
(other than one described in Section 1.7(d)) and (b) the entry by the United
States Bankruptcy Court with jurisdiction over the Chapter 11 case of the
Borrower of a cash collateral order having at least the following provisions
(and no provisions in conflict therewith) providing the Lender with adequate
protection of its interest in the Borrower's property, consisting of (i) the
Adequate Protection Claim; (ii) a post-petition replacement lien under Section
361 of the Bankruptcy Code to secure the Pre-Petition Claim on all property of
the Borrower acquired post-petition; and (iii) timely payment of interest
payments due under Sections 2.2 and 3.2 hereof and the Secured Promissory Note.
The Lender's consent to the Borrower's use of its cash collateral shall
terminate if the cash collateral order is revoked or modified in a way which
causes it not to meet the requirements set forth herein.
VI. CLOSING
6.1. Closing. The execution and delivery of this Agreement and the other
documents to be delivered in connection with this Agreement shall take place at
the offices of Xxxx and Xxxx, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx on June
26, 1998 or at such other place and time as the parties in writing shall agree.
VII. CONDITIONS PRECEDENT
The obligation of the Lender to make the Loan, and each Advance
thereunder, is subject to the satisfaction of the following conditions
precedent.
7.1. Secured Promissory Note. The Lender shall have received a duly
executed and delivered Secured Promissory Note in a form substantially similar
to that attached hereto as Exhibit 7.1(A).
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7.2. Documents. The Lender shall have received all instruments and
documents required to be delivered pursuant to Article IV, and the same shall
be in full force and effect.
7.3. Warrant. The Lender shall have received a warrant to purchase Common
Stock of the Borrower as described in Section 3.4.
7.4. Representations and Warranties. All representations and warranties
of the Borrower contained herein shall be true and correct.
7.5. No Event of Default. There shall exist no Default and no condition,
event or act which, with notice or lapse of time or both, would constitute a
Default.
7.6. Corporate Form. The Lender shall have received:
(a) Corporate Existence. A certificate of corporate existence certified
as of a recent date by the Secretary of State of the State of Delaware.
(b) Incumbency. A certificate of the Secretary of the Borrower as of a
recent date, as to identity, incumbency and signatures of its officers.
(c) Resolution. A certificate of the Secretary of the Borrower, as of a
recent date, as to the corporate resolutions authorizing the borrowing
by the Borrower and the execution and delivery of this Agreement, the
Security Agreement and the Secured Promissory Note.
VIII. POST-PETITION LENDING
If the Borrower files a petition under Chapter 11 of the Bankruptcy Code
or if the Borrower is filed involuntarily into a case under Chapter 11 of the
Bankruptcy Code, the Lender agrees to make DIP Loans to the Borrower from time
to time in amounts that when aggregated with the Advances do not exceed the
Maximum Loan Amount on the same terms set forth in Section 2 provided the
following terms and conditions are met. The Borrower shall not be in Default
under this Agreement (other than one described in Section 1.7(d)); the United
States Bankruptcy Court with jurisdiction over the Chapter 11 case of the
Borrower shall have issued an order under Section 364(c) of the Bankruptcy Code
authorizing the DIP Loans, and providing for (i) a post-petition security
interest to secure the DIP Loans in all of the Borrower's post-petition assets
on the same terms and conditions as the security interest securing the Advances
subject only to the Lender's pre-petition lien and pari passu with the Lender's
adequate protection lien referenced in Article V; (ii) priority over any or all
administrative expenses of the kind specified in Section 503(b) or 507(b) of
the Bankruptcy Code, other than fees owed to the United States Trustee under 28
U.S.C. 1930 and the allowed fees and expense reimbursement of professionals
retained by the Borrower and any official Committees appointed for creditors of
the Borrower in such a Chapter 11 case; and (iii) timely payment of interest
payments on the DIP Loans as provided in Sections 2.2 and 3.2 hereof and the
Secured
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Promissory Note; the conditions to the Lender's consent to the Borrower's use
of its cash collateral under Section 5.2 shall have been met; the Borrower
shall be continuing to operate its business in the ordinary course as a debtor
in possession under Chapter 11 of the Bankruptcy Code; no trustee shall have
been appointed under Chapter 11 of the Bankruptcy Code; and the Borrower shall
not be subject to a case under Chapter 7 of the Bankruptcy Code.
IX. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
9.1. Corporate Authority.
(a) Incorporation; Good Standing. The Borrower (i) is a corporation duly
organized, existing and in good standing under the laws of the State of
its incorporation; (ii) has all requisite corporate power to own its
property and conduct its business as now conducted and as presently
contemplated; and (iii) is in good standing as a foreign corporation
and is duly authorized to do business in each jurisdiction where the
nature of its properties or its business requires such qualification.
(b) Authorization. The execution, delivery and performance of this
Agreement, the Secured Promissory Note, the Security Agreement
(together, the "Loan Documents") and the transactions contemplated
hereby (i) are within the corporate authority of the Borrower, (ii)
have been authorized by proper corporate proceedings and (iii) will not
contravene any provision of law, its Certificate of Incorporation or
By-Laws or any other agreement, instrument or undertaking binding upon
the Borrower. Each of the Loan Documents constitutes the legal, valid
and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms.
9.2. Governmental Approvals. The execution, delivery and performance of
this Agreement, the Secured Promissory Note and the Security Agreement and the
transactions between the parties hereto contemplated hereby and thereby do not
require any approval or consent of, or filing with, any governmental agency or
authority, other than the filing of Financing Statements and any required
assignment of security interest with the applicable governmental offices.
9.3. Title to Properties; Absence of Liens. The Borrower has good and
valid title to all properties, assets and rights of every name and nature now
purported to be owned by it free from all defects, liens, charges and
encumbrances whatsoever, except as set forth in Schedule 9.3 hereof.
9.4. No Default. The Borrower is not in default in any material respect
under any material contract, agreement or obligation, which default could
result in a significant impairment of the ability of the Borrower to fulfill
its obligations hereunder or a significant impairment of its financial position
or business, except as set forth on Schedule 9.4 attached hereto.
9.5. Litigation. There is no litigation, proceeding or governmental
investigation pending, or to the knowledge of its officers, threatened against
the Borrower that will adversely affect the ability of the Borrower to
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perform its obligations hereunder, that is likely to affect the Lender's
security interest in the Collateral (as defined in the Security Agreement), or
that if determined adversely to the Borrower is reasonably likely to have a
material adverse effect on the financial condition or business of the Borrower
or result in any material liability on the part of the Borrower nor is there
any basis in fact therefor known to the Borrower, except as set forth in
Schedule 9.5 attached hereto.
9.6. Financial Condition. The unaudited consolidated balance sheet of the
Borrower dated as of December 31, 1997 and the unaudited statements of
operations, cash flows and stockholders' equity of the Borrower for and as of
the end of the period ending on that date, including any related notes (the
"Financial Statements"), that were heretofore furnished to the Lender, are
true, correct and complete in all material respects and fairly present in all
material respects the financial condition of the Borrower as of the date of
each such statement and have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the period
involved. Other than as reflected in such Financial Statements and except for
liabilities incurred in the ordinary course of business since the date thereof,
the Borrower has no Indebtedness that is or would be material to the financial
condition of the Borrower, nor any material unrealized or unanticipated losses
from any commitments.
9.7. Compliance with Law. The Borrower is not in violation of any
applicable federal, state or local law, rule or regulation or any writ, order
or decree, which violation would have a material adverse effect on the
business, assets or financial condition of the Borrower. The Borrower has not
received notice of any violation of any federal, state or local environmental
law, rule or regulation or assertion that the Borrower has any obligation to
clean up or contribute to the cost of cleaning up any waste or pollutants.
9.8. Payment of Taxes. The Borrower has properly prepared and filed or
caused to be properly prepared and filed all federal, state and local tax
returns that are required to be filed and has paid all taxes shown thereon to
be due and all other taxes, assessments and governmental charges or levies
imposed upon the Borrower and its subsidiaries, their income or profits or any
properties belonging to the Borrower. No extensions of any statute of
limitations are in effect with respect to any tax liability of the Borrower or
any subsidiary of the Borrower. No deficiency assessment or proposed adjustment
of the federal income taxes of the Borrower or any subsidiary of the Borrower
is pending and the Borrower has no knowledge of any proposed liability of a
substantial nature for any tax to be imposed upon any of its properties or
assets. No federal income tax returns of the Borrower or its subsidiaries have
been examined by the Internal Revenue Service.
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9.9. ERISA. The Borrower has never established or maintained an employee
pension benefit plan as defined under Section 3(2)(A) of the Employee
Retirement Income Security Act of 1974, as amended and in effect on the date
hereof, other than its Employee Stock Ownership Plan and Trust and its 401(K)
savings plan. The Borrower is current on all obligations under such plans.
9.10. Insurance. The Borrower maintains in force fire, casualty,
comprehensive liability and other insurance covering its properties and
business that is adequate and customary for the type and scope of its
properties and business.
9.11. Patents, Copyrights, etc. Schedule 9.12 hereof sets forth a true,
correct and complete list and, where appropriate, a description of, all
patents, copyrights, trademarks, trade names and service marks that are
material to the conduct of the Borrower's business as now or as proposed to be
conducted (the "Intellectual Property"). The Borrower owns or has the full
right to use all Intellectual Property. The Borrower has received no notice of,
and has no knowledge of any basis for, a claim against it that any of its
operations, activities, products or publications infringes on any patent,
trademark, trade name, copyright or other property rights of a third party, or
that it is illegally or otherwise using the trade secrets, formulae or any
property rights of others. The Borrower has no disputes with or claims against
any third party for infringement by such third party of any Intellectual
Property.
X. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that from the date hereof and as long as
any indebtedness is outstanding hereunder:
10.1. Notices. It will promptly notify the Lender in writing of the
occurrence of any act, event or condition which constitutes or which after
notice or lapse of time, or both, would constitute a Default hereunder.
10.2. Financial Statements. It will furnish to the Lender:
(a) Within 90 days after the end of each fiscal year, the consolidated balance
sheet of the Borrower, as at the end of, and the related consolidated
statements of earnings and of changes in financial position for, such year
reported upon by independent certified public accountants, together with a
written statement by the accountants certifying such financial statements to
the effect that in the course of the audit upon which their certification of
such financial statements was based (but without any special or additional
audit procedures for the purpose), they obtained knowledge of no condition or
event relating to financial matters which constitutes a Default under this
Agreement, or, if such accountants shall have obtained in the course of such
audit knowledge of any Default, they shall disclose
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in such written statement the nature and period of existence thereof, it being
understood that such accountant shall be under no liability, directly or
indirectly, to the Lender for failure to obtain knowledge of any such Default;
(b) Upon written request of Lender, a quarterly report showing any
variance from the operating budget to actual results of operations and a
monthly statement of profit and loss. Such report shall be accompanied by a
narrative explaining the variances;
(c) Annually, a copy of Borrower's operating budget for the ensuing fiscal
year, and upon request of Lender, the Borrower's cash flow projections set up
on a monthly basis;
(d) From time to time such other financial data and information as the
Lender may reasonably request; and
(e) The financial statements referred to above in this Section 10.2 shall
be prepared in accordance with GAAP.
10.3. Corporate Existence; Maintenance of Properties. It will do or cause
to be done all things necessary to preserve and keep in full force and effect
its corporate existence, rights and franchises and to operate the Borrower's
business in conformity with all applicable laws and regulations. It will cause
all of its properties used or useful in the conduct of its business to be
maintained and kept in good condition, repair and working order and supplied
with all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Borrower may be necessary
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in this
Section 10.3 shall prevent the Borrower from discontinuing the operation and
maintenance of any of its properties if such discontinuance is, in the judgment
of the Borrower, desirable in the conduct of its or their business and not
disadvantageous in any material respect to the Lender.
10.4. Insurance. It will maintain, with financially sound and reputable
insurance companies, funds or underwriters insurance of the kinds covering the
risks and in the relative proportionate amounts usually carried by companies
conducting business similar to that of the Borrower.
10.5. Taxes. It will pay or cause to be paid all taxes, assessments or
governmental charges on or against it or its properties prior to the time when
they become delinquent; provided that this covenant shall not apply to any tax,
assessment or charge which is being in good faith contested and with respect to
which adequate reserves have been established and are being maintained in
accordance with generally accepted accounting principles.
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10.6. Expenses. It will reimburse the Lender for all reasonable
out-of-pocket expenses, including but not limited to, the reasonable fees and
costs of special counsel for the Lender and other reasonable attorneys' fees
and costs, incurred or expended in connection with the enforcement of any
obligations of the Borrower under this Agreement, the Secured Promissory Note
or the Security Agreement.
10.7. Certain Taxes. It will pay any documentary stamp taxes or similar
excise taxes which may at any time be determined to be payable by the Lender
with respect to the execution and delivery of this Agreement or the note issued
hereunder and indemnify the Lender against any expense or liability resulting
from any nonpayment or delay in the payment of any such tax.
10.8. Further Assurances. It will execute and deliver to the Lender such
further instruments, provide it with such further data and information and take
such further action as it may reasonably request or as may be necessary or
desirable further to effect the purposes of this Agreement.
10.9. Inspection. It will permit during reasonable business hours any
person designated by the Lender to visit and inspect its properties, corporate
books and financial records and to discuss its affairs, finances and accounts
and those of its Subsidiaries with its officers and employees as often as the
Lender may reasonably request.
10.10. Legal Expenses. It will pay the legal fees and out-of-pocket
expenses of the Lender's counsel incurred in connection with the preparation,
execution and delivery of the Loan Documents.
XI. NEGATIVE COVENANTS
The Borrower covenants and agrees that from the date hereof, and as long
as any Liability is outstanding hereunder, except with the written consent of
the Lender:
11.1. Dividends. The Borrower will pay no dividends either in cash or kind
on any class of its capital stock nor make any distribution (other than in
kind) on account of its stock, nor redeem, repurchase or otherwise acquire
directly or indirectly any of its stock; provided, however, that the Borrower
shall be entitled to pay, to the extent permitted by the applicable provisions
of the Delaware General Corporation Law, the dividends to which the holders of
the outstanding shares of Series B Preferred Stock are entitled in accordance
with the terms of the Borrower's Certificate of Incorporation, as amended to
date.
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11.2. Loans. The Borrower will not make any loans or advances to any
individual, firm or corporation, including without limitation its officers and
employees; provided, however, that it may make advances to its employees,
including its officers, with respect to reasonable business expenses incurred
by such employees which expenses are reimbursable by it.
11.3. Purchase of Securities. The Borrower will not invest in or purchase
any stock or securities of any individual, firm or corporation other than U.S.
Government obligations with a maturity not greater than one (1) year on
certificates of deposits with banks having a principal office within the United
States.
11.4. Merger. The Borrower will not merge or consolidate or be merged or
consolidated with or into any other corporation.
11.5. Sale of Assets. The Borrower will not sell or dispose of any of its
assets except in the ordinary and usual course of its business; provided,
however, that the Borrower may sell or otherwise dispose of assets not in
excess of Two Hundred and Fifty Thousand Dollars ($250,000.00) (cumulatively)
in any fiscal year. Such value is to be determined as the greater of "book" or
"market" value at the time of the asset disposition. Notwithstanding the
foregoing, nothing herein shall prohibit or be applied to limit the Borrower
from exchanging or trading in old equipment toward the purchase of new
equipment.
11.6. Other Security Interests. The Borrower will not grant or suffer to
exist any security interest in, or mortgage of, any of its properties or
assets, except for liens set forth in Schedule 9.3 attached hereto and except
for the granting of a purchase money security interest on specific items of new
equipment acquired by Borrower.
11.7. Not To Engage in Other Business. The Borrower will not engage in
any business other than the business in which it is currently engaged or a
business reasonably allied thereto.
11.8. Capital Expenditures. The Borrower will not in any fiscal year make
or incur any obligation to make any expenditures for the acquisition of or
improvements or addition to any real property, machinery, equipment, fixtures
or furniture, by purchase or by lease purchase agreement or option, the
aggregate cost or annual rental of which is in excess of Six Hundred Thousand
Dollars ($600,000.00), exclusive of such fixed assets to be acquired with the
proceeds of the Loan or any part thereof.
11.9. Indebtedness. The Borrower will not create, incur, assume or suffer
to exist any Indebtedness other than Permitted Indebtedness.
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11.10.
XII. DEFAULTS BY BORROWER AND REMEDIES
12.1 Acceleration. Upon the occurrence of a Default, the Lender may by
notice in writing to the Borrower declare the principal of all Advances then
remaining unpaid and the interest accrued thereon and all other Liabilities of
the Borrower hereunder immediately due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby
expressly waived.
12.2 Suits for Enforcement. In case any one or more Defaults shall occur
and be continuing, the Lender may proceed to protect and enforce its rights or
remedies either by suit in equity or by action at law, or both, whether for the
specific performance of any covenant, agreement or other provision contained
herein, in the Secured Promissory Note or in any document or instrument
delivered in connection with or pursuant to this Agreement, or to enforce the
payment of the Secured Promissory Note or any other legal or equitable right or
remedy.
12.3. Rights and Remedies Cumulative. No right or remedy herein conferred
upon the Lender is intended to be exclusive of any other right or remedy
contained herein, in the Secured Promissory Note or in any instrument or
document delivered in connection with or pursuant to this Agreement, and every
such right or remedy shall be cumulative and shall be in addition to every
other such right or remedy contained herein and therein or now or hereafter
existing at law or in equity or by statute, or otherwise.
12.4. Rights Not Waived. No course of dealing between the Borrower and the
Lender, nor any failure on the part of the Lender to complain of any action or
non-action on the part of the Borrower, no matter how long the same may
continue, shall ever be deemed to be a waiver by the Lender of any of its
rights hereunder. Further, no waiver by the Lender at any time of any of the
provisions hereof shall be construed as a waiver of any of the other provisions
hereunder, or a waiver at any subsequent time of the same provision. The
consent or approval by the Lender to or of any action by the Borrower requiring
the Lender's consent or approval shall not waive or render unnecessary the
Lender's consent or approval to or of any subsequent similar act by the
Borrower.
XIII. DEFAULT BY LENDER
13.1.
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XIV. GENERAL
14.1. Notice. Except as expressly provided herein, all notices required or
permitted to be given hereunder shall be in writing and sent certified mail as
follows:
(a) To the Lender:
Tudor Trust
000 Xxxxx Xxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
with a copy to:
Xxxxxx Xxxxxx, Esq.
Xxxxx, Xxxx & Xxxxx
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
and
Xxxxxxx X. Xxxxx, Esq.
Simon, Xxxxxxxx & Xxxxxx
0000 Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
(b) To the Borrower
Xyvision, Inc.
00 Xxx Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000-0000
with a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxx and Xxxx
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
14.2. Successors and Assigns. The obligations of the Borrower hereunder
shall be binding upon its successors and assigns (but such reference is not
intended as a consent to any assignment not specifically permitted by the
Lender) and shall inure to the benefit of the successors and assigns of the
Lender.
14.3. Term. The term of this Agreement shall be until all of the
Borrower's indebtedness to the Lender, or its assignee, is paid in full.
14.4. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts and shall
constitute an agreement under seal.
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14.5. Entire Agreement. This Agreement together with the other Loan
Documents and the Warrants referred to in Section 3.5 constitute the entire
understanding and agreement between the parties with respect to the subject
matter hereof and thereof and supersede all prior agreements and
understandings, whether written or oral, between the parties with respect to
such subject matter.
14.6. Confirmation of Security. The Borrower confirms and agrees that all
of the Liabilities constitute "Obligations" as defined in the Security
Agreement, constitute "Secured Obligations" as defined in the Intellectual
Property Agreement and are secured pursuant to the terms of the Security
Agreement and the Intellectual Property Assignment.
Witnessed: XYVISION, INC.
------------------------------- By: -----------------------------
------------------------------- -------------------------------
Xxxxxxx Xxxxxx as trustee of
the Tudor Trust u/d/t
August 11, 1986 and not
individually
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