<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
X Quarterly Report Pursuant to Section 13 or 15(d)
----- of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 30, 1996 or
Transition Report Pursuant to Section 13 or 15(d)
----- of the Securities Exchange Act of 1934
For the Transition Period from to
----------- ----------
COMMISSION FILE NUMBER 0-28182
-------
TRANSITION SYSTEMS, INC.
------------------------
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2887598
------------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
ONE BOSTON PLACE, BOSTON, MASSACHUSETTS 02108
---------------------------------------------
(Address of principal executive offices)
(Zip Code)
(617) 723-4222
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES NO X
----- -----
<TABLE>
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<CAPTION>
OUTSTANDING AT
--------------
CLASS APRIL 30, 1996
----- --------------
<S> <C>
COMMON STOCK, 16,631,514
$.01 PAR VALUE SHARES
NON-VOTING COMMON STOCK, 356,262
$.01 PAR VALUE SHARES
</TABLE>
<PAGE> 2
TRANSITION SYSTEMS, INC.
FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 30, 1996
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of
March 30, 1996 (unaudited) and September 30, 1995 .................. 3
Consolidated Statements of Operations for the Three and
Six Months Ended March 30, 1996 and 1995 (unaudited) ............... 4
Consolidated Statements of Cash Flows for the Six
Months Ended March 30, 1996 and 1995 (unaudited) ................... 5
Notes to Interim Consolidated Financial Statements ................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ................................ 7
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ................ 11
ITEM 5. OTHER INFORMATION .................................................. 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................................... 14
SIGNATURES ..................................................................... 15
</TABLE>
2
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TRANSITION SYSTEMS, INC.
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
MARCH 30, SEPTEMBER 30,
1996 1995
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,949,292 $ 3,843,711
Short-term investments - 7,323,628
Accounts receivable, net 10,866,783 11,550,959
Other current assets 1,916,963 866,882
Deferred income taxes 1,559,585 1,666,236
------------- -----------
Total current assets 17,292,623 25,251,416
------------- -----------
Property and equipment, net 1,025,000 1,015,403
Capitalized software costs, net 1,428,760 1,462,264
Intangible assets, net 3,393,635 7,994
------------- -----------
Total assets $ 23,140,018 $27,737,077
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 845,164 $ 693,094
Accrued expenses 5,433,148 4,023,044
Accounts payable - affiliates 2,011 9,335
Income taxes payable 99,179 1,284,000
Deferred revenue 5,245,989 5,034,776
Revolving line of credit 5,000,000 -
Current portion of long-term debt 4,000,000 -
------------- -----------
Total current liabilities 20,625,491 11,044,249
------------- -----------
Subordinated debt 9,605,461 -
Term loan 30,000,000 -
Deferred income taxes 501,030 501,030
------------- -----------
Total liabilities $ 60,731,982 $11,545,279
------------- -----------
Commitments
Series A non-voting preferred stock 19,059,027 -
Series B convertible preferred stock 32,746,961 -
Series C non-voting convertible preferred stock 1,352,280 -
Stockholders' equity:
Common stock 313,666 300,600
Non-voting common stock warrant 394,539 -
Treasury stock (109,857,203) (1,470,950)
Additional paid-in capital 766,793 -
Retained earnings 17,631,973 17,362,148
------------- -----------
Total stockholders' equity (90,750,232) 16,191,798
------------- -----------
Total liabilities
and stockholders' equity $ 23,140,018 $27,737,077
============= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
TRANSITION SYSTEMS, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
---------------------------- ----------------------------
March 30, March 25, March 30, March 25,
1996 1995 1996 1995
-------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Software and implementation $ 5,223,000 $ 4,039,000 $ 9,630,000 $ 6,938,000
Maintenance 2,295,000 1,837,000 4,446,000 3,497,000
----------- ----------- ----------- -----------
Total revenues 7,518,000 5,876,000 14,076,000 10,435,000
----------- ----------- ----------- -----------
Cost of Revenues:
Software and implementation 1,852,000 1,465,000 3,508,000 2,919,000
Maintenance 714,000 476,000 1,522,000 1,026,000
Research and development 820,000 583,000 1,628,000 1,292,000
Sales and marketing 1,133,000 890,000 2,021,000 1,724,000
General and administrative 679,000 614,000 1,226,000 1,170,000
Compensation charge 3,024,000 - 3,024,000 -
----------- ----------- ----------- -----------
Total operating expenses 8,222,000 4,028,000 12,929,000 8,131,000
----------- ----------- ----------- -----------
Income (loss) from operations (704,000) 1,848,000 1,147,000 2,304,000
Interest income 61,000 136,000 209,000 167,000
Interest expense (828,000) - (828,000) -
Amortization of capitalized financing costs (71,000) - (71,000) -
----------- ----------- ----------- -----------
Income (loss) before income taxes (1,542,000) 1,984,000 457,000 2,471,000
Income tax provision (benefit) (632,000) 872,000 188,000 1,067,000
=========== =========== =========== ===========
Net income (loss) $ (910,000) $ 1,112,000 $ 269,000 $ 1,404,000
=========== =========== =========== ===========
Pro forma net income per share $ (0.07) $ 0.08 $ 0.02 $ 0.10
=========== =========== =========== ===========
Pro forma weighted average common
shares outstanding 13,886,129 13,886,129 13,886,129 13,886,129
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
TRANSITION SYSTEMS, INC.
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<CAPTION>
Six Months Ended
-----------------------------
March 30, March 24,
1996 1995
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income 269,825 1,403,541
Adjustments to reconcile net income to net cash provided by
operating activities:
Deferred income taxes 106,651 (351,100)
Depreciation and amortization 639,526 699,490
Amortization of capitalized recapitalization costs 70,687 -
Compensation charge in connection with the recapitalization 3,023,964 -
Compensation charge related to options 13,059 -
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 684,176 (93,851)
(Increase) in other current assets (1,050,081) (33,486)
Increase (decrease) in accounts payable 152,070 (520,033)
Increase (decrease) in accrued expenses 1,410,104 (431,962)
Increase (decrease) in income taxes payable (1,184,821) 930,557
(Decrease) in due to affiliates (7,324) (27,658)
Increase (decrease) in deferred revenue 211,213 284,923
------------ ----------
Net cash provided by operating activities 4,339,049 1,860,421
Cash flows provided by (used by) investing activities:
Sales and maturities of long-term investments - 325,749
Sales and maturities of short-term investments 7,323,628 1,395,658
Purchase of short-term investments - (4,041,754)
Purchase of property and equipment (263,334) (174,400)
Additions to capitalized software costs (349,999) (349,998)
Additions to intangible assets (1,750) -
------------ ----------
Net cash provided by (used by) investing activities 6,708,545 (2,844,745)
Cash flows provided by (used by) financing activities:
Proceeds from issuance of debt 49,605,461 -
Payment of principal on term loan (1,000,000) -
Net proceeds from issuance of preferred stock 53,158,268 -
Purchase of common stock (111,410,217) -
Payment of fees related to recapitalization (3,336,227) -
Excercise of options 766,800 -
Warrant 394,539 -
Equity issuance costs (120,637) -
------------ ----------
Net cash provided by (used by) financing activities (11,942,013) -
Net decrease in cash and cash equivalents (894,419) (984,324)
Cash and cash equivalents - beginning of period 3,843,711 5,616,180
------------ ----------
Cash and cash equivalents - end of period 2,949,292 4,631,856
============ ==========
Supplemental information:
Income taxes paid 454,924 682,062
Interest paid - -
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
TRANSITION SYSTEMS, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, and have been prepared by the Company
without audit. In the opinion of management, the accompanying consolidated
financial statements contain all adjustments, consisting only of those of a
normal recurring nature, necessary for a fair presentation of the Company's
financial position, results of operation and cash flows at the dates and for the
periods indicated. While the Company believes that the disclosures presented are
adequate to make the information not misleading, these financial statements
should be read in conjunction with the audited consolidated financial statements
for the year ended September 30, 1995 which are contained in the Company's
Registration Statement on Form S-1, File No. 333-01758, as declared effective by
the Securities and Exchange Commission on April 17, 1996. The results of
operations for the three and six months ended March 30, 1996 are not necessarily
indicative of the results to be expected for the entire year ending September
30, 1996. The Company changed its fiscal year end from the last Saturday of
September of each year, to September 30. The change is effective commencing with
the quarter ending June 30, 1996. In the future, quarters will end on December
31, March 31, June 30, and September 30.
2. COMPUTATION OF PRO FORMA EARNINGS PER SHARE
The pro forma net income per common share is computed based upon the weighted
average number of common shares and common equivalent shares outstanding after
giving effect to the Recapitalization. Common equivalent shares are included in
the per share calculations where the effect of their inclusion would be
dilutive. In accordance with the Securities and Exchange Commissions Staff
Accounting Bulletin No. 83 ("SAB 83") all common and common equivalent shares
and other potentially dilutive instruments, including stock options, warrants
and preferred stock issued during the twelve-month period to the filing date of
the Company's Registration Statement for its initial public offering have been
included in the calculation as if they were outstanding for all periods
presented. The common equivalent shares for stock options were determined using
the treasury stock method at an assumed initial public offering price of $17.50
per share.
3. SUBSEQUENT EVENTS
On April 18, 1996 the Company completed an initial public offering of 6,900,000
shares of its common stock which generated net proceeds of approximately $114.5
million. The proceeds were used to redeem $20.6 million of Series A Preferred
Stock, to repay the $34.7 million outstanding principal amount and accrued
interest under the secured term loan facility, to repay the $10.3 million
outstanding principal amount and accrued interest under the senior subordinated
notes and to repay the $5.1 million outstanding principal amount and accrued
interest under the Company's revolving credit facility.
On April 26, 1996 the Company entered into a $25 million unsecured revolving
line of credit with a bank group led by NationsBank, N.A. as agent and as
lender. The new credit facility contains covenants setting minimum net worth,
maximum leverage ratio and minimum net income requirements for the Company.
There have been no amounts drawn on this line.
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
--------------------------------------------------------------------------
OPERATIONS
----------
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that may contribute
to such difference include those listed under "Risk Factors" in the Company's
Registration Statement on Form S-1, File No. 333-01758, as declared effective by
the Securities and Exchange Commission on April 17, 1996.
The following information should be read in conjunction with the consolidated
financial statements included herein and the notes thereto.
OVERVIEW
- - --------
The Company provides integrated clinical and financial decision support systems
to hospitals, integrated delivery systems and other health care institutions.
The Company was founded in 1985 to apply management control techniques to the
health care delivery process, with the objective of improving quality and
lowering costs.
The Company has experienced a seasonal pattern in its operating results, in
which the first quarter of each fiscal year typically has the lowest revenue and
net income, frequently lower than the last quarter of the previous fiscal year,
and the fourth quarter typically has the highest revenue and net income. While
the Company has taken steps to moderate this seasonal pattern, there can be no
assurance that it will eliminate the seasonality of its operating results.
The Company's revenues are derived from sales of software licenses and related
implementation services and of software maintenance. Software and implementation
revenue are generally accounted for using the percentage of completion method
based principally upon progress and performance as measured by achievement of
contract milestones. Software maintenance fees, which are generally received
annually in advance, are recorded as deferred revenue on the Company's balance
sheet and are recognized as revenue ratably over the life of the contract.
RESULTS OF OPERATION
- - --------------------
REVENUES
The Company's total revenues increased 28% to $7.5 million for the three months
ended March 30, 1996 from $5.9 million for the same period in the prior year.
For the six months ended March 30, 1996 total revenues increased 35% to $14.1
million from $10.4 million for the same six month period in the prior year.
Software and implementation revenue increased 29% to $5.2 million for the three
months ended March 30, 1996 from $4.0 million for the same period in the prior
year, and increased 39% to $9.6 million for the six months ended March 30, 1996
from $6.9 million for the same period in the prior year. The Company attributes
the growth in software and implementation revenue to increased demand from both
new and existing customers, for the Transition II products for use on, AS/400
and UNIX platforms. Maintenance revenue increased 25% to $2.3 million for the
three months ended March 30, 1996 from $1.8 million for the same period in the
prior year, and increased 27% to $4.5 million for the six months ended March
30, 1996 from $3.5 million for the same period in the prior year. The growth in
maintenance revenue is attributable to the growth in the Company's installed
base.
7
<PAGE> 8
COST OF REVENUE
Cost of software and implementation revenue consists primarily of the cost of
third-party software that is resold by the Company or included in the Company's
product , personnel costs, the cost of related benefits, travel and living
expenses, costs of materials and other costs related to the installation and
implementation of the Company's products, and amortization of capitalized
software development costs. Cost of maintenance revenue consists primarily of
maintenance costs associated with the third-party software included in the
Company's products and personnel costs incurred in providing maintenance and
technical support services to the Company's customers.
Cost of software and implementation revenue increased 26% to $1.9 million for
the three months ended March 30, 1996 from $1.5 million for the same period in
the prior year, and increased 20% to $3.5 million for the six months ended March
30, 1996 from $2.9 million for the same period in the prior year. The increase
in cost of software and implementation revenue was primarily due to a net
increase of eight persons in the Company's implementation staff. In addition,
the royalty cost associated with third-party software has increased due to a
greater proportion of revenue generated from the AS/400, UNIX, and Clinical ABCs
products, which have a higher content of third party software. Cost of
maintenance revenue increased 50% to $0.7 million for the three months ended
March 30, 1996 from $0.5 million for the same period in the prior year, and
increased 48% to $1.5 million for the six months ended March 30, 1996 from $1.0
million for the same period in the prior year. The increase was attributable
primarily to higher third-party software maintenance costs incurred in the first
year of a multi-year fixed fee software maintenance agreement. In addition the
Company had a net increase in support staff of two persons.
RESEARCH AND DEVELOPMENT
Research and development expense increased 41% to $0.8 million for the three
months ended March 30, 1996 from $0.6 million for the same period in the prior
year, and increased 26% to $1.6 million for the six months ended March 30, 1996
from $1.3 million for the same period in the prior year. The increase was
primarily due to a net increase of nine persons in the Company's research and
development staff, principally to support the further development of its AS/400
and UNIX products, its Transition II for the Integrated Delivery System product
and its Clinical ABCs products.
SALES AND MARKETING
Sales and marketing expense increased 27% to $1.1 million for the three months
ended March 30, 1996 from $0.9 million for the same period in the prior year,
and increased 17% to $2.0 million for the six months ended March 30, 1996 from
$1.7 million for the same period in the prior year. The increase was primarily
attributable to the Company's investment in marketing collateral and
presentation materials to provide further sales support. In addition, a portion
of the increase is the result of higher commission expense associated with
higher software and implementation revenue.
8
<PAGE> 9
GENERAL AND ADMINISTRATIVE
General and administrative expense increased 11% to $0.7 million for the three
months ended March 30, 1996 from $0.6 million for the same period in the prior
year, and increased 5% to $1.2 million for the six months ended March 30, 1996
from $1.1 million for the same period in the prior year. The increase was
primarily due to additional costs incurred in connection with the January 1996
Recapitalization and in preparation for becoming a public company.
OTHER OPERATING EXPENSES
Other operating expenses for the three and six months ended March 30, 1996
included a non-cash compensation charge of $3.0 million arising from the
acquisition by the Company, in connection with the January 1996
Recapitalization, of shares of Common Stock issued to certain executive officers
pursuant to the exercise of options.
NET INTEREST INCOME (EXPENSE)
During the six months ended March 30, 1996 the Company had $0.6 million in net
interest expense compared to $0.2 million of net interest income for the same
period in the prior year. The increase in interest expense was due to an
increase in debt outstanding associated with the Recapitalization of the Company
in January 1996.
PROVISION FOR INCOME TAXES
The Company recorded an income tax benefit for the three months ended March 30,
1996 resulting from the loss before taxes due to the compensation charge in the
quarter. The Company's effective income tax rate decreased to 41% from 43% for
the six months ended March 30, 1996 compared to the same period in the prior
year. The decrease is due to certain provisions taken in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
Cash and cash equivalents decreased to $3.0 million at March 30, 1996 from $11.2
million at September 30, 1995. The decrease is attributable primarily to the
repurchase by the Company of shares of its common stock in the Recapitalization.
On January 24, 1996, the Company repurchased from New England Medical Center,
Inc. and the other stockholders of the Company 87.4% of the shares of common
stock then issued and outstanding on a fully diluted basis for an aggregate
purchase price of approximately $111.4 million. The principal purpose of this
transaction was to provide liquidity for the existing stockholders of the
Company while permitting them to retain a substantial ownership interest in the
Company. The transaction has been accounted for by the Company as a leveraged
recapitalization. To finance the repurchase of these shares, the Company issued
to Warburg, Pincus Ventures, L.P. and NationsBanc Investment Corporation (NIC)
shares of Preferred Stock for an aggregate of $55.0 million. The Company also
issued to NIC senior subordinated notes in the aggregate principal amount of
$10.0 million and a related warrant, and made borrowings of $40.0 million under
a secured credit facility provided by a syndicate of banks led by an affiliate
of NIC. The outstanding balance of these borrowings was repaid in full and all
outstanding Series A Non-Voting Preferred Stock was redeemed upon the closing of
the Company's initial public offering.
9
<PAGE> 10
On April 18, 1996 the Company completed its initial public offering of
6,900,000 shares of its common stock which generated net proceeds of
approximately $114.5 million. The proceeds were used to redeem $20.6 million of
Series A Preferred Stock, to repay the $34.7 million outstanding principal
amount and accrued interest under the secured term loan facility, to repay the
$10.3 million outstanding principal amount and accrued interest under the
senior subordinated notes and to repay the $5.1 million outstanding principal
amount and accrued interest under the Company's revolving credit facility.
On April 26, 1996 the Company entered into a $25 million unsecured revolving
line of credit with a bank group led by NationsBank, N.A. as agent and as
lender. The new credit facility contains covenants setting minimum net worth,
maximum leverage ratio and minimum net income requirements for the Company.
There have been no amounts drawn on this line. Advances under the revolving line
of credit bear interest, at the Company's election, either at a "base rate" or
at a "eurodollar rate." The base rate is a floating rate equal to the greater of
(a) the prime rate or (b) the federal funds effective rate plus one-half of one
percent (.50%). The eurodollar rate is equal to the sum of (x) a rate determined
by reference to the then-current interbank offered rate for dollar-denominated
eurodollar deposits, with certain adjustments, plus, (y) one percent (1.0%).
The Company believes that its cash flows from operations and amounts available
under its new credit facility will be sufficient to finance the Company's
operations and planned capital expenditures for at least the next twelve months.
There can be no assurance, however, that the Company will not require additional
financing during that time or thereafter.
10
<PAGE> 11
TRANSITION SYSTEMS, INC.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.*
At a Special Meeting of Stockholders duly called and adjourned on
January 18, 1996 and reconvened on January 22, 1996, the Company's stockholders
voted on the following matters:
(i) to amend the Company's Articles of Organization to, among other
things, authorize and set forth the terms of the Company's Common Stock,
Non-Voting Common Stock, Series A Non-Voting Preferred Stock, Series B
Convertible Preferred Stock, and Series C Non-Voting Convertible Preferred
Stock;
(ii) in connection with the recapitalization of the Company effected on
January 24, 1996, (a) to approve an amendment to a Recapitalization Agreement
with WP Ventures and each of the stockholders of the Company pursuant to which
the Company repurchased 28,592,404 shares of Common Stock from New England
Medical Center, Inc. ("NEMC") and the other stockholders of the Company for an
aggregate purchase price of approximately $111.4 million; (b) to enter into a
Joinder Agreement with Warburg Pincus Ventures, L.P. ("WP Ventures"),
NationsBanc Investment Corporation ("NIC") and NEMC, providing for, among other
things, the addition of NIC as a party to the Recapitalization Agreement and
the assignment to NIC of certain of WP Ventures' rights and delegation to NIC
of certain of WP Ventures' obligations under the Recapitalization Agreement;
(c) in order to finance the repurchase of shares, to issue to WP Ventures and
NIC an aggregate of 20,000 shares of Series A Non-Voting Preferred Stock,
33,612 shares of Series B Convertible Preferred Stock and 1,388 shares of
Series C Non-Voting Convertible Preferred Stock, in each case at a purchase
price of $1,000 per share, for an aggregate purchase price of $55.0 million,
and to issue to NIC senior subordinated notes and a warrant to purchase 297,928
shares of Non-Voting Common Stock for an aggregate purchase price of $10.0
million; and (d) to take all necessary actions in connection with such
recapitalization, including the reserving of authorized but unissued shares of
the Company's capital stock, and registering, qualifying or exempting from
registration or qualifying the offer, sale and issuance of such shares;
(iii) also in connection with the recapitalization of the Company
effected on January 24, 1996, (a) to enter into a secured Credit Agreement with
NationsBanc, N.A., as agent and lender, and the other lenders party thereto (the
"Banks"), providing for, among other things, a term loan to the Company in the
amount of $35.0 million and a revolving credit facility under which the Company
may borrow up to the maximum aggregate principal amount at any time outstanding
of $15.0 million; (b) to enter into certain agreements necessary to grant to the
banks a security interest in all assets of the Company; and (c) to take all
necessary actions in connection with such Credit Agreement; and
11
<PAGE> 12
(iv) also in connection with the recapitalization of the Company
effected on January 24, 1996, to enter into a Subordinated Note and Warrant
Purchase Agreement with NIC, providing for, among other things, the issuance to
NIC of a senior subordinated promissory note and related warrant for an
aggregate purchase price of $10.0 million and to take all necessary actions in
connection with such Subordinated Note and Warrant Purchase Agreement.
The holders of 24,382,000 of the 28,390,000 then outstanding shares of
the Company's Common Stock were present at the meeting. The holder of 23,380,000
shares voted to adopt the foregoing votes and the holder of 1,002,000 shares
abstained.
At a Special Meeting of Stockholders in Lieu of Annual Meeting duly
called and adjourned on April 2, 1996 and reconvened on April 3, 1996, the
Company's stockholders voted on the following matters:
(i) to amend the Company's Articles of Organization to: (a)
increase the number of authorized shares of Common Stock to
30,000,000; (b) increase the number of authorized shares of
Non-Voting Common Stock to 1,000,000; and (c) authorize
1,000,000 shares of undesignated Preferred Stock, par value
$.01 per share;
(ii) to further amend and restate the Company's Articles of
Organization to: (a) eliminate and delete all references to
all authorized shares of the Company's Series A Non-Voting
Preferred Stock, Series B Convertible Preferred Stock and
Series C Non-Voting Convertible Preferred Stock, all of the
outstanding shares of which will be redeemed or converted into
shares of the Company's Common Stock or Non-Voting Common
Stock upon the closing of the initial public offering of the
Common Stock to be effected pursuant to the Company's
Registration Statement on Form S-1, File No. 333-01758; (b)
change the fiscal year of the Company to the twelve-month
period ending September 30; and (c) restate the Articles of
Organization to consolidate all previous Amendments;
(iii) to amend and restate the By-Laws of the Company;
(iv) to approve and adopt the Amended and Restated 1995 Incentive
and Non-Statutory Stock Option Plan;
(v) to approve and adopt the Transition Systems, Inc. Employee
Stock Purchase Plan; and
(vi) to fix the number of directors of the Company for the ensuing
year at five and to elect the following persons directors of
the Company, each as a member of the class of directors set
forth opposite his name, and each to serve for a term
continuing until the annual meeting of stockholders held
during the calendar year set forth opposite his name and until
his successor is duly elected and
12
<PAGE> 13
<TABLE>
qualified:
<CAPTION>
<S> <C> <C>
Class I: Robert S. Hillas 1997
Allen F. Wise 1997
Class II: Peter W. Van Etten 1998
Patrick T. Hackett 1998
Class III: Robert F. Raco 1999
</TABLE>
Holders of 631,260 shares of Common Stock and all of the shares of
Series B Convertible Preferred Stock, voting as a single class, and the holders
of all of the shares of Series B Convertible Preferred Stock, voting
separately, voted by proxy to approve the votes relating to the Articles of
Amendment as described in (i) above.
Holders of 631,260 shares of Common Stock and all of the shares of
Series B Convertible Preferred Stock, voting as a single class, holders of all
of the shares of Series A Non-Voting Preferred Stock, holders of all of the
shares of Series B Convertible Preferred Stock and holders of all of the shares
of Series C Non-Voting Convertible Preferred Stock, each class voting
separately, voted by proxy to approve the votes relating to the Amended and
Restated Articles of Organization as described in (ii) above.
Holders of 631,260 shares of Common Stock and all of the shares of
Series B Convertible Preferred Stock, voting as a single class, and holders of
all of the shares of Series B Convertible Preferred Stock, voting separately,
voted by proxy to approve the votes relating to the Amended and Restated
By-Laws.
Holders of 631,260 shares of Common Stock and all of the shares of
Series B Convertible Preferred Stock, voting as a single class, voted by proxy
to approve the votes relating to the Amended and Restated 1995 Incentive and
Non-Statutory Stock Option Plan.
Holders of 631,260 shares of Common Stock and all of the shares of
Series B Convertible Preferred Stock, voting as a single class, voted by proxy
to approve the votes relating to the Employee Stock Purchase Plan.
Holders of 631,260 shares of Common Stock and all of the shares of
Series B Convertible Preferred Stock, voting as a single class, voted by proxy
for the election of each of the above-listed directors.
- - -------------
* The number of shares of Common Stock referred to in this Item 4 has
been adjusted in each case to give effect to a 334-for-1 stock split in
the form of a stock dividend effective on April 4, 1996.
13
<PAGE> 14
ITEM 5. OTHER INFORMATION.
The Company changed its fiscal year end from the last Saturday of
September of each year to September 30. The change is effective commencing with
the quarter ending June 30, 1996. In the future, quarters will end on December
31, March 31, June 30 and September 30.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- - ------ -----------
10.1 Credit Agreement dated April 26, 1996 between the Company and
NationsBank, N.A. as Agent and the Lenders party thereto
(Exhibits B through I and all Schedules omitted)
11.1 Computation of Per Share Earnings
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Transition Systems, Inc.
(Registrant)
Dated: May 31, 1996 /s/ Robert F. Raco
--------------------------------------------
Robert F. Raco
President, Chief Executive Officer
(principal executive officer)
Dated: May 31, 1996 /s/ Robert E. Kinney
--------------------------------------------
Robert E. Kinney
Chief Financial Officer
(principal financial and accounting officer)
15
<PAGE> 16
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- - ------ -----------
10.1 Credit Agreement dated April 26, 1996 between the Company and
NationsBank, N.A. as Agent and the Lenders party thereto
(Exhibits B through I and all Schedules omitted)
11.1 Computation of Per Share Earnings
27.1 Financial Data Schedule
<PAGE> 1
Exhibit 10.1
CREDIT AGREEMENT
by and among
TRANSITION SYSTEMS, INC.
as Borrower,
NATIONSBANK, N.A.,
as Agent and as Lender
and
THE LENDERS PARTY HERETO FROM TIME TO TIME
April 26, 1996
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Terms...................................... 1
1.1. Definitions....................................................... 1
1.2. Rules of Interpretation........................................... 22
ARTICLE II
The Revolving Credit Facility.............................. 23
2.1. Revolving Loans................................................... 23
2.2. Payment of Interest............................................... 24
2.3. Payment of Principal.............................................. 25
2.4. Non-Conforming Payments........................................... 25
2.5. Revolving Notes................................................... 26
2.6. Pro Rata Payments................................................. 26
2.7. Reductions........................................................ 26
2.8. Conversions and Elections of Subsequent
Interest Periods.................................................. 27
2.9. Fees.............................................................. 27
2.10. Deficiency Advances............................................... 28
2.11. Use of Proceeds................................................... 29
ARTICLE III
Guaranties................................................. 29
3.1. Facility Guaranty................................................. 29
3.2. Further Assurances................................................ 29
ARTICLE IV
Yield Protection and Illegality............................ 29
4.1. Additional Costs.................................................. 29
4.2. Suspension of Loans............................................... 31
4.3. Illegality........................................................ 31
4.4. Compensation...................................................... 32
4.5. Alternate Loan and Lender......................................... 33
4.6. Taxes............................................................. 33
ARTICLE V
Conditions to Making Loans................................. 35
5.1. Conditions of Initial Advance..................................... 35
5.2. Conditions of All Revolving Loans................................. 38
ARTICLE VI
Representations and Warranties............................. 38
6.1. Corporate Existence and Power; Subsidiaries....................... 39
6.2. Corporate Authorization; No Contravention......................... 40
6.3. Governmental Authorization........................................ 40
<PAGE> 3
6.4. Binding Effect.................................................... 40
6.5. Capitalization.................................................... 40
6.6. Financial Information............................................. 41
6.7. Absence of Certain Changes........................................ 42
6.8. Litigation; Loss Contingencies.................................... 42
6.9. No Default or Breach.............................................. 43
6.10. Material Contracts................................................ 43
6.11. Related Party Agreements.......................................... 43
6.12. Environmental Compliance.......................................... 43
6.13. Compliance with Law............................................... 44
6.14. Title to Properties............................................... 44
6.15. Taxes............................................................. 44
6.16. Employee Matters.................................................. 44
6.17. Intellectual Property............................................. 45
6.18. Insurance......................................................... 46
6.19. Books and Records................................................. 46
6.20. Investment Company; Government Regulations........................ 46
6.21. Disclosure........................................................ 46
6.22. Broker's, Finder's or Similar Fees................................ 47
6.23. Solvency Matters.................................................. 47
ARTICLE VII
Affirmative Covenants...................................... 47
7.1. Financial Reports, Etc............................................ 47
7.2. Maintain Properties............................................... 49
7.3. Existence, Qualification, Etc..................................... 49
7.4. Regulations and Taxes............................................. 49
7.5. Insurance, Proceeds of Insurance and
Condemnation...................................................... 50
7.6. True Books........................................................ 50
7.8. Observe all Laws.................................................. 50
7.9. Governmental Licenses............................................. 51
7.10. Covenants Extending to Other Persons.............................. 51
7.11. Officer's Knowledge of Default.................................... 51
7.12. Suits or Other Proceedings........................................ 51
7.13. Notice of Discharge of Hazardous Material or
Environmental Complaint........................................... 51
7.14. Environmental Compliance.......................................... 51
7.15. Indemnification................................................... 52
7.16. Further Assurances................................................ 52
7.17. Employee Benefit Plans............................................ 52
7.18. Continued Operations.............................................. 53
7.19. New Subsidiaries.................................................. 53
7.20. Compliance with Material Contracts. ............................. 54
ARTICLE VIII
Negative Covenants......................................... 55
8.1. Financial Covenants............................................... 55
ii
<PAGE> 4
8.2. Acquisitions...................................................... 55
8.3. Liens............................................................. 56
8.4. Indebtedness...................................................... 57
8.5. Capital Expenditures.............................................. 58
8.6. Transfer of Assets................................................ 58
8.7. Investments....................................................... 58
8.8. Merger or Consolidation........................................... 59
8.9. Restricted Payments............................................... 59
8.10. Transactions with Affiliates...................................... 59
8.11. Compliance with ERISA............................................. 60
8.12. Fiscal Year....................................................... 61
8.13. Dissolution, Etc.................................................. 61
8.14. Limitations on Sales and Leasebacks............................... 61
8.15. Negative Pledge Clauses........................................... 61
ARTICLE IX
Events of Default and Acceleration......................... 61
9.1. Events of Default................................................. 61
9.2. Agent to Act...................................................... 65
9.3. Cumulative Rights................................................. 65
9.4. No Waiver......................................................... 65
9.5. Allocation of Proceeds............................................ 66
ARTICLE X
The Agent.................................................. 66
10.1. Appointment....................................................... 66
10.2. Attorneys-in-fact................................................. 67
10.3. Limitation on Liability........................................... 67
10.4. Reliance.......................................................... 67
10.5. Notice of Default................................................. 68
10.6. No Representations................................................ 68
10.7. Indemnification................................................... 68
10.8. Lender............................................................ 69
10.9. Resignation....................................................... 69
10.10. Sharing of Payments, Etc.......................................... 70
10.11. Fees.............................................................. 70
ARTICLE XI
Miscellaneous.............................................. 70
11.1. Assignments and Participations.................................... 70
11.2. Notices........................................................... 72
11.3. Setoff............................................................ 74
11.4. Survival.......................................................... 74
11.5. Expenses.......................................................... 74
11.6. Amendments........................................................ 75
11.7. Counterparts...................................................... 76
11.8. Termination....................................................... 76
11.9. Indemnification; Limitation of Liability.......................... 76
11.10. Severability...................................................... 77
11.11. Entire Agreement.................................................. 77
iii
<PAGE> 5
11.12. Agreement Controls................................................ 77
11.13. Usury Savings Clause.............................................. 78
11.14. GOVERNING LAW; WAIVER OF JURY TRIAL............................... 78
11.15. Confidentiality................................................... 79
11.16. Termination of Prior Credit Facilities............................ 80
EXHIBIT A
Applicable Commitment Percentages............................. A-1
EXHIBIT B
Form of Assignment and Acceptance.............................. B-1
EXHIBIT C
Notice of Appointment (or Revocation) of Authorized
Representative..................................... C-1
EXHIBIT D
Form of Borrowing Notice....................................... D-1
EXHIBIT E
Form of Facility Guaranty for Material Subsidiaries............ E-1
EXHIBIT F
Form of Interest Rate Selection Notice......................... F-1
EXHIBIT G
Form of Revolving Note......................................... G-1
EXHIBIT H
Forms of Opinions of Borrower's Counsel........................ H-1
EXHIBIT I
Compliance Certificate.............................. I-1
SCHEDULES
Schedule 6.1(a) Foreign Qualifications
Schedule 6.1(b) Subsidiaries and Ownership Interests
Schedule 6.2(c) Non-Contravention
Schedule 6.3 Government Authorizations
Schedule 6.5 Capitalization
Schedule 6.6(a) Undisclosed Liabilities
Schedule 6.7 Certain Changes
Schedule 6.8 Litigation
iv
<PAGE> 6
Schedule 6.9 Defaults
Schedule 6.11 Related Party Agreements
Schedule 6.13 Compliance with Law
Schedule 6.16 Employee Matters
Schedule 6.17 Intellectual Property
Schedule 6.18 Insurance
Schedule 8.3 Permitted Liens
v
<PAGE> 7
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of April 26, 1996 (this "Agreement"),
is made by and among TRANSITION SYSTEMS, INC., a Massachusetts corporation
having its principal place of business in Boston, Massachusetts (the
"Borrower"), NATIONSBANK, N.A., a national banking association organized and
existing under the laws of the United States, in its capacity as a Lender
("NationsBank"), and EACH OTHER FINANCIAL INSTITUTION EXECUTING AND DELIVERING A
SIGNATURE PAGE HERETO and each other financial institution which may hereafter
execute and deliver an instrument of assignment with respect to this Agreement
pursuant to Section 12.1 (hereinafter such financial institutions may be
referred to individually as a "Lender" or collectively as the "Lenders"), and
NATIONSBANK, N.A., a national banking association organized and existing under
the laws of the United States, in its capacity as agent for the Lenders (in such
capacity, and together with any successor agent appointed in accordance with the
terms of Section 11.9, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lenders make available to
the Borrower a revolving credit facility in the principal amount of $25,000,000,
the proceeds of which are to be used for general corporate purposes and
permitted Acquisitions; and
WHEREAS, the Lenders are willing to make the revolving credit facility
available to the Borrower upon the terms and conditions set forth herein.
NOW, THEREFORE, the Borrower, the Lenders and the Agent hereby agree as
follows:
ARTICLE I
Definitions and Terms
1.1. Definitions. For the purposes of this Agreement, in addition to
the definitions set forth above, the following terms shall have the respective
meanings set forth below:
"Acquisition" means the acquisition of (i) a controlling equity
interest in another Person (including the purchase of an option,
warrant or convertible or similar type security to acquire such a
controlling interest at the time it becomes exercisable by the holder
thereof), whether by purchase of such equity interest or upon exercise
of an option or warrant for, or conversion of securities into, such
equity interest, or (ii) assets of another Person which constitute all
or substantially all of the assets of such Person or of a line or lines
of business conducted by such Person.
<PAGE> 8
"Advance" means any borrowing under the Revolving Credit Facility
consisting of a Base Rate Loan or a Eurodollar Rate Loan.
"Affiliate" means any Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is
under common control with the Borrower; or (ii) which beneficially owns
or holds 10% or more of any class of the outstanding voting stock
(calculated after giving effect to the conversion of all owned capital
stock convertible into voting stock of the Borrower) of the Borrower;
or (iii) of which 10% or more of any class of its outstanding voting
stock (or in the case of a Person which is not a corporation, 10% or
more of its equity interest) is beneficially owned or held by the
Borrower. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of
voting stock, by contract or otherwise.
"Applicable Commitment Percentage" means, with respect to each
Lender at any time, a fraction, the numerator of which shall be such
Lender's Revolving Credit Commitment and the denominator of which shall
be the Total Revolving Credit Commitment, which Applicable Commitment
Percentage for each Lender as of the Closing Date is as set forth in
Exhibit A; provided, however, that the Applicable Commitment Percentage
of each Lender shall be increased or decreased to reflect any
assignments to or by such Lender effected in accordance with Section
12.1.
"Applicable Unused Fee" means three-tenths of one percent (.30%)
per annum.
"Applicable Usage Fee" means one-fourth of one percent (.25%) per
annum.
"Articles of Organization" means the articles of organization of
the Borrower, as amended and in effect on the date hereof.
"Asset Disposition" means any voluntary disposition, whether by
sale, lease or transfer, other than as permitted under Section 8.6
hereof, of (a) any or all of the assets of the Borrower or its
Subsidiaries, and (b) any of the capital stock, or securities or
investments exchangeable, exercisable or convertible for or into, or
otherwise entitling the holder to receive, any of the capital stock of
any Subsidiary (other than a disposition to a Guarantor).
"Assignment and Acceptance" shall mean an Assignment and Acceptance in
the form of Exhibit B (with blanks appropriately filled in) delivered
to the Agent in connection with an
2
<PAGE> 9
assignment of a Lender's interest under this Agreement pursuant to
Section 11.1.
"Authorized Representative" means any of the President or any Vice
President of the Borrower or, with respect to financial matters, the
chief financial officer or controller of the Borrower, or any other
Person expressly designated by the Board of Directors of the Borrower
(or the appropriate committee thereof) as an Authorized Representative
of the Borrower, as set forth from time to time in a certificate in the
form of Exhibit C.
"Base Rate" means the per annum rate of interest equal to the
greater of (i) the Prime Rate or (ii) the Federal Funds Effective Rate
plus one-half of one percent (.50%). Any change in the Base Rate
resulting from a change in the Prime Rate or the Federal Funds
Effective Rate shall become effective as of 12:01 A.M. of the Business
Day on which each such change occurs. The Base Rate is a reference rate
used by Agent in determining interest rates on certain loans and is not
intended to be the lowest rate of interest charged on any extension of
credit to any debtor.
"Base Rate Loan" means a Loan for which the rate of interest is
determined by reference to the Base Rate.
"Board" means the Board of Governors of the Federal Reserve System
(or any successor body).
"Borrower's Account" means a demand deposit account number
1366210022506 or any successor account with the Agent, which may be
maintained at one or more offices of the Agent or an agent of the
Agent.
"Borrower's Software" has the meaning given such term in Section
6.17 hereof.
"Borrowing Notice" means the notice delivered by an Authorized
Representative in connection with an Advance under the Revolving Credit
Facility in the form of Exhibit D.
"Business Day" means, (i) with respect to any Base Rate Loan, any
day which is not a Saturday, Sunday or a day on which banks in the
States of New York, Massachusetts and Texas are authorized or obligated
by law, executive order or governmental decree to be closed and, (ii)
with respect to any Eurodollar Rate Loan, any day which is a Business
Day, as described above, and on which the relevant international
financial markets are open for the transaction of business contemplated
by this Agreement in London, England, New York, New York, Boston,
Massachusetts and Charlotte, North Carolina.
3
<PAGE> 10
"Business Unit" means the assets constituting the business or a
division or operating unit thereof of any Person.
"Capital Expenditures" means, with respect to the Borrower and its
Subsidiaries, for any period the sum of (without duplication) (i) all
expenditures (whether paid in cash or accrued as liabilities) by the
Borrower or any Subsidiary during such period for items that would be
classified as "property, plant or equipment" or comparable items on the
consolidated balance sheet of the Borrower and its Subsidiaries,
including without limitation all transactional costs incurred in
connection with such expenditures provided the same have been
capitalized, excluding, however, the amount of any Capital Expenditures
paid for with proceeds of casualty insurance as evidenced in writing
and submitted to the Agent together with any compliance certificate
delivered pursuant to Section 7.1(a) or (b), and (ii) with respect to
any Capital Lease entered into by the Borrower or its Subsidiaries
during such period, the present value of the lease payments due under
such Capital Lease over the term of such Capital Lease applying a
discount rate equal to the interest rate provided in such lease (or in
the absence of a stated interest rate, that rate used in the
preparation of the financial statements described in Section 7.1(a)),
all the foregoing in accordance with GAAP applied on a Consistent
Basis.
"Capital Leases" means all leases which have been or should be
capitalized in accordance with GAAP as in effect from time to time
including Statement No. 13 of the Financial Accounting Standards Board
and any successor thereof.
"Closing Date" means the date as of which this Agreement is
executed by the Borrower, the Lenders and the Agent and on which the
conditions set forth in Section 5.1 have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute thereto and any regulations promulgated thereunder.
"Commission" means the Securities and Exchange Commission or any
successor thereto.
"Common Stock" means, collectively, the Voting Common Stock and the
Non-Voting Common Stock.
"Consistent Basis" in reference to the application of GAAP means
the accounting principles observed in the period referred to are
comparable in all material respects to those applied in the preparation
of the audited financial statements of the Borrower referred to in
Section 6.6(a).
4
<PAGE> 11
"Consolidated EBITDA" means, with respect to the Borrower and its
Subsidiaries for any Four-Quarter Period ending on the date of
computation thereof, the sum of, without duplication, (i) Consolidated
Net Income, (ii) Consolidated Interest Expense, (iii) taxes on income,
(iv) amortization and (v) depreciation, all determined on a
consolidated basis in accordance with GAAP applied on a Consistent
Basis.
"Consolidated Indebtedness" means all Indebtedness for Money
Borrowed of the Borrower and its Subsidiaries, all determined on a
consolidated basis.
"Consolidated Interest Expense" means, with respect to any period
of computation thereof, the gross interest expense of the Borrower and
its Subsidiaries, including without limitation (i) the current
amortized portion of debt discounts to the extent included in gross
interest expense, (ii) the current amortized portion of all fees
(including fees payable in respect of any Swap Agreement) payable in
connection with the incurrence of Indebtedness to the extent included
in gross interest expense and (iii) the portion of any payments made in
connection with Capital Leases allocable to interest expense, all
determined on a consolidated basis in accordance with GAAP applied on a
Consistent Basis.
"Consolidated Lease Payments" means the gross amount of all lease
or rental payments, whether or not characterized as rent, of the
Borrower and its Subsidiaries, excluding payments in respect of Capital
Leases constituting Indebtedness, all determined on a consolidated
basis in accordance with GAAP applied on a Consistent Basis.
"Consolidated Leverage Ratio" means, as of the date of computation
thereof, the ratio of (i) Consolidated Indebtedness (determined as at
such date without including in such determination the stated amount of
issued and outstanding shares of Preferred Stock) to (ii) Consolidated
EBITDA (for the Four-Quarter Period ending on (or most recently ended
prior to) such date).
"Consolidated Net Income" means, for any period of computation
thereof, the gross revenues from operations of the Borrower and its
Subsidiaries (including payments received by the Borrower and its
Subsidiaries of interest income and dividends and distributions made in
the ordinary course of their businesses by Persons in which investment
is permitted pursuant to this Agreement), less all operating and
non-operating expenses (other than other expenses related to
extraordinary events, all of which shall be excluded from the
calculation of Consolidated Net Income) of the Borrower and its
Subsidiaries including taxes on income, all determined on a
consolidated basis in accordance with GAAP applied on a Consistent
Basis; but excluding (for all purposes other than
5
<PAGE> 12
compliance with Section 8.1(a) hereof) as income: (i) net gains on the
sale, conversion or other disposition of capital assets, (ii) net gains
on the acquisition, retirement, sale or other disposition of capital
stock and other securities of the Borrower or its Subsidiaries, (iii)
net gains on the collection of proceeds of life insurance policies,
(iv) any write-up of any asset, and (v) any other net gain or credit of
an extraordinary nature as determined in accordance with GAAP applied
on a Consistent Basis; provided, however, there shall be excluded from
such determination charges and expenses incurred during the fiscal
quarter ending March 30, 1996 with respect to the exercise of certain
stock options in an aggregate principal amount not to exceed $3,023,964
and incurred during the fiscal quarter ending June 30, 1996 with
respect to capitalized expenditures in an aggregate amount not to
exceed $3,750,000 previously incurred in connection with the Borrower's
recapitalization pursuant to the Recapitalization Agreement and
provided further, however, that to the extent the amount of all
software research and development costs accounted for as Capital
Expenditures during the Four-Quarter Period ending on any Determination
Date exceeds the amortization of such research and development Capital
Expenditures for such Four-Quarter Period, such excess shall be treated
as an expense and deducted from gross revenue in the calculation of
Consolidated Net Income for the fiscal quarter ending on such
Determination Date.
"Consolidated Net Worth" means, as of any date on which the amount
thereof is to be determined, Consolidated Shareholders' Equity minus
(without duplication of deductions in respect of items already deducted
in arriving at surplus and retained earnings) all reserves (other than
contingency reserves not allocated to any particular purpose),
including without limitation reserves for depreciation, depletion,
amortization, obsolescence, deferred income taxes, insurance and
inventory valuation, all as determined on a consolidated basis in
accordance with GAAP applied on a Consistent Basis; provided, however,
there shall be excluded from such determination charges and expenses
incurred during the fiscal quarter ending March 30, 1996 with respect
to the exercise of certain stock options in an aggregate principal
amount not to exceed $3,023,964 and incurred during the fiscal quarter
ending June 30, 1996 with respect to capitalized expenditures in an
aggregate amount not to exceed $3,750,000 previously incurred in
connection with the Borrower's recapitalization pursuant to the
Recapitalization Agreement.
"Consolidated Shareholders' Equity" means, as of any date on which
the amount thereof is to be determined, the sum of the following in
respect of the Borrower and its Subsidiaries (determined on a
consolidated basis and excluding any upward adjustment after the
Closing Date due to revaluation of assets): (i) the stated amount of
issued and outstanding
6
<PAGE> 13
share capital and (without duplication) the stated amount of issued and
outstanding shares of Preferred Stock, plus (ii) the amount of
additional paid-in capital and retained earnings (or, in the case of a
deficit, minus the amount of such deficit), plus (iii) the amount of
any foreign currency translation adjustment (if positive, or, if
negative, minus the amount of such translation adjustment), minus (iv)
the stated amount of any (except under clause (i) above) treasury
stock, all as determined in accordance with GAAP applied on a
Consistent Basis.
"Contingent Obligation" of any Person means all contingent
liabilities required (or which, upon the creation or incurring thereof,
would be required) to be included in the financial statements
(including footnotes) of such Person in accordance with GAAP applied on
a Consistent Basis, including Statement No. 5 of the Financial
Accounting Standards Board, all Rate Hedging Obligations and any
obligation of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly,
including obligations of such Person however incurred:
(1) to purchase such Indebtedness or other obligation or
any property or assets constituting security therefor;
(2) to advance or supply funds in any manner (i) for the
purchase or payment of such Indebtedness or other obligation, or
(ii) to maintain a minimum working capital, net worth or other
balance sheet condition or any income statement condition of the
primary obligor;
(3) to grant or convey any Lien on any property or assets of
such Person to secure payment of such Indebtedness or other
obligation;
(4) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the
owner or holder of such Indebtedness or obligation of the ability
of the primary obligor to make payment of such Indebtedness or
other obligation; or
(5) otherwise to assure the owner of the Indebtedness or
such obligation of the primary obligor against loss in respect
thereof.
"Contractual Obligation" means, with respect to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other
instrument to which such Person is a party or by which any of its
property is bound.
7
<PAGE> 14
"Cost of Acquisition" means, with respect to any Acquisition, as at
the date of entering into any agreement therefor, the sum of the
following (without duplication): (i) the value of the capital stock,
warrants or options to acquire capital stock of the Borrower or any
Subsidiary to be transferred in connection therewith, (ii) any cash or
other property (excluding property described in clause (i)) and the
unpaid principal amount of any debt instrument given as consideration,
(iii) any Indebtedness assumed by the Borrower or its Subsidiaries in
connection with such Acquisition, and (iv) out of pocket transaction
costs for the services and expenses of attorneys, accountants and other
consultants incurred in effecting such a transaction, and other similar
transaction costs so incurred. For purposes of determining the Cost of
Acquisition for any transaction, (A) the capital stock of the Borrower
shall be valued (I) at its market value as reported on the NASDAQ
National Market System with respect to shares that are freely
tradeable, and (II) with respect to shares that are not freely
tradeable, as determined by the Board of Directors of the Borrower and,
if requested by the Agent, determined to be a reasonable valuation by
the independent public accountants referred to in Section 7.1(a)
hereof, (B) the capital stock of any Subsidiary shall be valued as
determined by the Board of Directors of such Subsidiary and, if
requested by the Agent, determined to be a reasonable valuation by the
independent public accountants referred to in Section 7.1(a) hereof,
and (C) with respect to any Acquisition accomplished pursuant to the
exercise of options or warrants or the conversion of securities, the
Cost of Acquisition shall include both the cost of acquiring such
option, warrant or convertible security as well as the cost of exercise
or conversion.
"Default" means any event or condition which, with the giving or
receipt of notice or lapse of time or both, would constitute an Event
of Default hereunder.
"Default Rate" means (i) with respect to each Eurodollar Rate Loan,
until the end of the Interest Period applicable thereto, a rate of two
percent (2%) above the Eurodollar Rate applicable to such Loan, and
thereafter at a rate of interest per annum which shall be two percent
(2%) above the Base Rate, (ii) with respect to Base Rate Loans, at a
rate of interest per annum which shall be two percent (2%) above the
Base Rate and (iii) in any case, the maximum rate permitted by
applicable law, if lower.
"Determination Date" means the last day of each fiscal quarter of
the Borrower.
"Dollars" and the symbol "$" means dollars constituting legal
tender for the payment of public and private debts in the United States
of America.
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<PAGE> 15
"Eligible Securities" means the following obligations and any other
obligations previously approved in writing by the Agent:
(a) Government Securities;
(b) obligations of any corporation organized under the laws
of any state of the United States of America or under the laws of
any other nation, payable in Dollars in the United States of
America, expressed to mature not later than 90 days following the
date of issuance thereof and rated in an investment grade rating
category by S&P and Moody's;
(c) interest bearing demand or time deposits issued by any
Lender or certificates of deposit maturing within one year from
the date of issuance thereof and issued by a bank or trust company
organized under the laws of the United States or of any state
thereof having capital surplus and undivided profits aggregating
at least $400,000,000 and being rated "A-3" or better by S&P and
"A" or better by Moody's;
(d) Repurchase Agreements;
(e) Municipal Obligations; or
(f) shares of mutual funds which invest in obligations
described in paragraphs (a) through (e) above, the shares of which
mutual funds are at all times rated "AAA" by S&P.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA, other than a Multiemployer Plan,
which (i) is maintained for employees of the Borrower or is assumed by
the Borrower in connection with any Acquisition or any of its ERISA
Affiliates or (ii) has at any time been maintained for the employees of
the Borrower or any current or former ERISA Affiliate.
"Employee Stock Purchase Plan" means the 1996 Employee Stock
Purchase Plan, or any other employee stock purchase plan approved by
the Board of Directors of the Borrower.
"Environmental Laws" means, collectively, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, the Superfund Amendments and Reauthorization Act of 1986, the
Resource Conservation and Recovery Act, the Toxic Substances Control
Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as
amended, any other "Superfund" or "Superlien" law or any other federal,
or applicable state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating
9
<PAGE> 16
to, or imposing liability or standards of conduct concerning, any
Hazardous Material.
"Equity Offering" means a public or private offering of equity
securities (including, without limitation, any security or investment
not constituting Indebtedness exchangeable, exercisable or convertible
for or into, or otherwise entitling the holder to receive, equity
securities) of the Borrower or any Subsidiary (other than securities
issued to the Borrower or another Subsidiary).
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute and all rules
and regulations promulgated thereunder.
"ERISA Affiliate", as applied to the Borrower, means any Person or
trade or business which is a member of a group which is under common
control with the Borrower, who together with the Borrower, is treated
as a single employer within the meaning of Section 414(b) and (c) of
the Code.
"Eurodollar Rate Loan" means a Loan for which the rate of interest
is determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means the interest rate per annum calculated
according to the following formula:
Eurodollar = Interbank Offered Rate + 1.00%
----------------------
Rate 1- Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means, for any day, that percentage
(expressed as a decimal) which is in effect from time to time under
Regulation D, or any successor regulation, as the maximum reserve
requirement (including any basic, supplemental, emergency, special, or
marginal reserves) applicable with respect to Eurocurrency liabilities
as that term is defined in Regulation D (or against any other category
of liabilities that includes deposits by reference to which the
interest rate of Eurodollar Rate Loans is determined), whether or not
the Agent or any Lender has any Eurocurrency liabilities subject to
such requirements, without benefits of credits or proration, exceptions
or offsets that may be available from time to time to the Agent or any
Lender. The Eurodollar Rate shall be adjusted automatically on and as
of the effective date of any change in the Eurodollar Reserve
Percentage.
"Event of Default" means any of the occurrences set forth as such
in Section 9.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
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<PAGE> 17
"Facility Guaranty" means each Guaranty Agreement between one or
more Guarantors and the Agent for the benefit of the Lenders in the
form of Exhibit E hereto, delivered as of the Closing Date and
otherwise pursuant to Section 7.19, guaranteeing all of the Obligations
as the same may be amended, modified or replaced.
"Federal Funds Effective Rate" means, for any day, the rate per
annum (rounded upward to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers on such day, as published by the Federal Reserve Bank of New
York on the Business Day next succeeding such day, provided that (a) if
such day is not a Business Day, the Federal Funds Effective Rate for
such day shall be such rate on such transactions on the next preceding
Business Day, and (b) if no such rate is so published on such next
succeeding Business Day, the Federal Funds Effective Rate for such day
shall be the average rate quoted to the Agent on such day on such
transaction as determined by the Agent.
"Fiscal Year" means the fiscal period of the Borrower and its
Subsidiaries commencing on the Sunday immediately following the last
Saturday in September of each calendar year and ending on the last
Saturday in September of the subsequent calendar year.
"Foreign Benefit Law" means any applicable statute, law, ordinance,
code, rule, regulation, order or decree of any foreign nation or any
province, state, territory, protectorate or other political subdivision
thereof regulating, relating to, or imposing liability or standards of
conduct concerning, any Employee Benefit Plan.
"Foreign Subsidiary" means any Subsidiary which is incorporated in
any jurisdiction other than any state of the United States of America
or the District of Columbia.
"Four-Quarter Period" means a period of four full consecutive
fiscal quarters of the Borrower and its Subsidiaries, taken together as
one accounting period.
"GAAP" or "Generally Accepted Accounting Principles" means
generally accepted accounting principles, being those principles of
accounting set forth in pronouncements of the Financial Accounting
Standards Board, the American Institute of Certified Public Accountants
or which have other substantial authoritative support and are
applicable in the circumstances as of the date of a report.
"Government Securities" means direct obligations of, or obligations
the timely payment of principal and interest on
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<PAGE> 18
which are fully and unconditionally guaranteed by, the United States of
America.
"Governmental Authority" shall mean any Federal, state,
municipal, national or other governmental department, commission,
board, bureau, agency or instrumentality or political subdivision
thereof or any entity or officer exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
any government or any court, in each case whether associated with a
state of the United States, the United States, or a foreign entity or
government.
"Guaranties" means all obligations of the Borrower or any
Subsidiary directly or indirectly guaranteeing, or in effect
guaranteeing, any Indebtedness or other obligation of any other Person.
"Guarantors" means, at any date, all Material Subsidiaries that are
required to be parties to a Facility Guaranty at such date.
"Hazardous Material" means and includes any hazardous, toxic or
dangerous waste, substance or material, the generation, handling,
storage, disposal, treatment or emission of which is subject to any
Environmental Law.
"Indebtedness" means with respect to any Person, without
duplication, all Indebtedness for Money Borrowed, all indebtedness of
such Person for the acquisition of property, all indebtedness secured
by any Lien on the property of such Person whether or not such
indebtedness is assumed, all liabilities of such Person by way of
endorsements (other than for collection or deposit in the ordinary
course of business), all Contingent Obligations, that portion of
obligations with respect to Capital Leases and other items which in
accordance with GAAP is required to be classified as a liability on a
balance sheet; but excluding all accounts payable in the ordinary
course of business so long as payment therefor is due within one year;
provided that in no event shall the term Indebtedness include surplus
and retained earnings, lease obligations (other than pursuant to
Capital Leases), reserves for deferred income taxes and investment
credits or other deferred credits or reserves, and deferred
compensation arrangements consistent with past practice.
"Indebtedness for Money Borrowed" means with respect to any Person,
without duplication, all indebtedness (including all principal, accrued
interest and fees with respect thereto) in respect of money borrowed,
including without limitation all Capital Leases and the deferred
purchase price of any property or asset, evidenced by a promissory
note, bond, debenture or similar written obligation for the payment of
money (including
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<PAGE> 19
conditional sales or similar title retention agreements), other than
trade payables incurred in the ordinary course of business.
"Initial Public Offering" means an initial underwritten offering to
the public of shares of the Borrower's Common Stock pursuant to an
effective registration thereof with the Commission which results in Net
Proceeds to the Borrower of at least $60,000,000.
"Intellectual Property" has the meaning given to such term in
Section 6.17 hereof.
"Interbank Offered Rate" means, with respect to any Eurodollar Rate
Loan for the Interest Period applicable thereto, the average (rounded
upward to the nearest one-one hundredth (1/100) of one percent) per
annum rate of interest determined by the office of the Agent then
determining such rate (each such determination to be conclusive and
binding) as of two Business Days prior to the first day of such
Interest Period, as the effective rate at which deposits in immediately
available funds in Dollars are being, have been, or would be offered or
quoted by the Agent to major banks in the applicable interbank market
for Eurodollar deposits at any time during the Business Day which is
the second Business Day immediately preceding the first day of such
Interest Period, for a term comparable to such Interest Period and in
the amount of the Eurodollar Rate Loan.
"Interest Period" means, for each Eurodollar Rate Loan, a period
commencing on the date such Eurodollar Rate Loan is made or converted
and ending, at the Borrower's option, on the date one, two, three or
six months thereafter as notified to the Agent by the Authorized
Representative three (3) Business Days prior to the beginning of such
Interest Period; provided, that,
(i) if the Authorized Representative fails to notify the
Agent of the length of an Interest Period three (3) Business Days
prior to the first day of such Interest Period, the Loan for which
such Interest Period was to be determined shall be deemed to be a
Base Rate Loan as of the first day thereof;
(ii) if an Interest Period for a Eurodollar Rate Loan would
end on a day which is not a Business Day, such Interest Period
shall be extended to the next Business Day (unless such extension
would cause the applicable Interest Period to end in the
succeeding calendar month, in which case such Interest Period
shall end on the next preceding Business Day);
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<PAGE> 20
(iii) any Interest Period which begins on the last Business
Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of a
calendar month;
(iv) no Interest Period shall extend past the Revolving
Credit Termination Date for Revolving Credit Loans; and
(v) there shall not be more than five (5) Interest Periods in
effect on any day.
"Interest Rate Selection Notice" means the written notice delivered
by an Authorized Representative in connection with the election of a
subsequent Interest Period for any Eurodollar Rate Loan or the
conversion of any Eurodollar Rate Loan into a Base Rate Loan or the
conversion of any Base Rate Loan into a Eurodollar Rate Loan, in the
form of Exhibit F.
"Investors" means Warburg, Pincus Ventures, L.P. and any other
Person to which any of the rights and obligations of Warburg, Pincus
Ventures, L.P. under the Recapitalization Agreement are assigned and
delegated pursuant to the terms of the Recapitalization Agreement.
"Lending Office" means, as to each Lender, the Lending Office of
such Lender designated on the signature pages hereof or in an
Assignment and Acceptance or such other office of such Lender (or of an
affiliate of such Lender) as such Lender may from time to time specify
to the Authorized Representative and the Agent as the office by which
its Loans are to be made and maintained.
"Lien" means any interest in property securing any obligation owed
to, or a claim by, a Person other than the owner of the property,
whether such interest is based on the common law, statute or contract,
and including but not limited to the lien or security interest arising
from a mortgage, encumbrance, pledge, security agreement, conditional
sale or trust receipt or a lease, consignment or bailment for security
purposes. For the purposes of this Agreement, the Borrower and any
Subsidiary shall be deemed to be the owner of any property which it has
acquired or holds subject to a conditional sale agreement, financing
lease, or other arrangement pursuant to which title to the property has
been retained by or vested in some other Person for security purposes.
"Loan" or "Loans" means any of the Revolving Loans made under the
Revolving Credit Facility.
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<PAGE> 21
"Loan Documents" means this Agreement, the Notes, the Facility
Guaranties and all other instruments and documents heretofore or
hereafter executed or delivered to or in favor of any Lender or the
Agent in connection with the Loans made and transactions contemplated
under this Agreement, as the same may be amended, supplemented or
replaced from the time to time.
"Management Stock Options" means options to purchase Voting Common
Stock granted pursuant to the 1995 Incentive and Non-Statutory Stock
Option Plan, or any other stock option plan approved by the Board of
Directors of the Borrower.
"Material Adverse Effect" means a material adverse effect (a) on
the business, properties, operations or condition, financial or
otherwise, of the Borrower and its Subsidiaries taken as a whole or (b)
on the ability of any party to the Loan Documents to perform, or of the
Agent to enforce, the obligations of such Person under the Loan
Documents to which it is a party.
"Material Contracts" means any contract, agreement or commitment of
the Borrower or any Subsidiary the expiration or termination of which
would be reasonably likely to result in a Material Adverse Effect.
"Material Subsidiary" means, as of any date of determination, any
direct or indirect Subsidiary of the Borrower which (a) has total
assets of at least $2,000,000 (calculated as of the most recent fiscal
period with respect to which the Agent shall have received financial
statements required to be delivered pursuant to Sections 7.1(a) or (b)
(or if such determination shall be made prior to delivery of such
financial statements, then calculated with respect to the Fiscal Year
end financial statements referenced in Section 6.6(a) hereof) (the
"Required Financial Information")) or (b) has net income for any Four
Quarter Period equal to or greater than 5% of Consolidated Net Income
(calculated for the most recent period for which the Agent has received
the Required Financial Information); provided, however, that
notwithstanding the foregoing, the term "Material Subsidiaries" shall
mean Subsidiaries of the Borrower that together with the Borrower have
assets equal to not less than 95% of the consolidated total assets of
the Borrower and its Subsidiaries (calculated as described above) and
net income of not less than 95% of Consolidated Net Income (calculated
as described above); provided further that if more than one combination
of the Borrower and its Subsidiaries satisfies such threshold, then
those Subsidiaries so determined to be "Material Subsidiaries" shall be
specified by the Borrower, but in any instance relating to the
obligation of a Material Subsidiary to deliver a Facility Guaranty, the
term "Material Subsidiary" shall include only those Foreign
Subsidiaries
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<PAGE> 22
which are not prohibited or materially restricted by the laws of its
jurisdiction of organization from executing, delivering and performing
a guaranty of its parent company's obligations.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Borrower or any ERISA
Affiliate is making, or is accruing an obligation to make,
contributions or has made, or been obligated to make, contributions
within the preceding six (6) years.
"Municipal Obligations" means general obligations issued by, and
supported by the full taxing authority of, any state of the United
States of America or of any municipal corporation or other public body
organized under the laws of any such state which are rated in the
highest investment rating category by both S&P and Moody's.
"Net Proceeds" means cash proceeds received by the Borrower from an
Initial Public Offering as and when received, net of all legal,
accounting, banking and underwriting fees and expenses, commissions,
discounts and other issuance expenses incurred in connection therewith
and all taxes required to be paid or accrued as a consequence of such
issuance.
"Non-Voting Common Stock" means the non-voting common stock, $.01
par value, of the Borrower designated as its "NonVoting Common Stock."
"Note Purchase Agreement" means that certain Subordinated Note and
Warrant Purchase Agreement dated as of January 24, 1996 between the
Borrower and the NationsBanc Investment Corporation and pursuant to
which certain 13.0% Subordinated Notes and the Warrant were issued.
"Notes" means, collectively, the Revolving Notes.
"Obligations" means the obligations, liabilities and Indebtedness
of the Borrower with respect to (i) the principal and
interest on the Loans as evidenced by the Notes, (ii) all liabilities
of Borrower to any Lender which arise under a Swap Agreement, and (iii)
the payment and performance of all other obligations, liabilities and
Indebtedness of the Borrower to the Lenders or the Agent hereunder,
under any one or more of the other Loan Documents or with respect to
the Loans.
"Outstandings" means, as of any date of determination, the
aggregate principal amount of all Revolving Loans then outstanding and
all interest accrued thereon.
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<PAGE> 23
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor thereto.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of
ERISA or Section 412 of the Code and which is or was maintained for
employees of the Borrower or any ERISA Affiliate.
"Permitted Liens" shall have the meaning given to such term in
Section 8.3 hereof.
"Person" means an individual, partnership, corporation, trust,
unincorporated organization, association, joint venture or a government
or agency or political subdivision thereof.
"Preferred Stock" means, collectively, the Series A Preferred
Stock, the Series B Preferred Stock and the Series C Preferred Stock.
"Prime Rate" means the rate of interest per annum announced
publicly by the Agent as its prime rate from time to time. The Prime
Rate is not necessarily the best or the lowest rate of interest offered
by the Agent.
"Principal Office" means the office of the Agent at NationsBank,
N.A., Independence Center, 15th Floor, NC1 001- 15-04, Charlotte, North
Carolina 28255, Attention: Ms. Lori McIntosh, Agency Services, or such
other office and address as the Agent may from time to time designate.
"Principal Office Lease" means that certain Sublease Agreement
dated as of March 17, 1992 between the Borrower and Ernst & Young.
"Prior Credit Facilities" means that certain Credit Agreement dated
as of January 24, 1996 among the Borrower, the Lenders and the Agent
and the term loan and revolving credit facilities provided thereunder,
together with all notes and other loan documents executed in connection
therewith.
"Recapitalization Agreement" means that certain Recapitalization
Agreement dated as of December 8, 1995, as amended January 23, 1996,
among the Borrower, the Investors and certain holders of equity
interests in the Borrower without giving effect to any subsequent
amendment, revision or supplement.
"Regulation D" means Regulation D of the Board as the same may be
amended or supplemented from time to time.
"Regulatory Change" means any change effective after the Closing
Date in United States federal or state laws or
17
<PAGE> 24
regulations (including Regulation D and capital adequacy regulations)
or foreign laws or regulations or the adoption or making after such
date of any interpretations, directives or requests applying to a class
of banks, which includes any of the Lenders, under any United States
federal or state or foreign laws or regulations (whether or not having
the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof or compliance
by any Lender with any request or directive regarding capital adequacy,
whether or not having the force of law, and whether or not failure to
comply therewith would be unlawful and whether or not published or
proposed prior to the date hereof.
"Repurchase Agreement" means a repurchase agreement entered into
with any financial institution whose unsecured and unsubordinated debt
obligations or commercial paper are rated "A" by both S&P and Moody's
or "A-1" by S&P and "P-1" by Moody's.
"Required Lenders" means, as of any date, Lenders on such date
having Credit Exposures (as defined below) aggregating at least 66-2/3%
of the aggregate Credit Exposures of all the Lenders on such date. For
purposes of the preceding sentence, the amount of the "Credit Exposure"
of each Lender shall be equal to the aggregate principal amount of the
Loans owing to such Lender plus the aggregate unutilized amounts of
such Lender's Revolving Credit Commitment; provided that, for the
purpose of this definition only, if any Lender shall have failed to
fund its Applicable Commitment Percentage of any Advance, the Revolving
Credit Commitment of such Lender shall be deemed reduced by the amount
it so failed to fund for so long as such failure shall continue and
such Lender's Credit Exposure attributable to such failure shall be
deemed held by any Lender making more than its Applicable Commitment
Percentage of such Advance to the extent it covers such failure.
"Requirements of Law" means, with respect to a Person, the charter
and bylaws or other organizational or governing documents of such
Person, and any law, treaty, rule, regulation, right, privilege,
qualification, license or franchise or final and nonappealable
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property is subject or pertaining to any or all of the
transactions contemplated or referred to herein.
"Restricted Payment" means (a) any dividend or other distribution,
direct or indirect, paid on account of any shares of any class of stock
of the Borrower or any Subsidiary (other than those payable or
distributable solely to the Borrower) now or hereafter outstanding,
including without
18
<PAGE> 25
limitation the Series A Preferred Stock, the Series B Preferred Stock,
the Series C Preferred Stock and the Common Stock, except a dividend
payable solely in shares of a class of stock to the holders of that
class; (b) any redemption, conversion, exchange, retirement or similar
payment, purchase or other acquisition for value, direct or indirect
(any of the foregoing, a "Capital Stock Purchase Event"), of any shares
of any class of stock of the Borrower or any Subsidiary now or
hereafter outstanding, including without limitation the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock and the Common Stock, other than (i) payments not in excess of
$250,000 in any Fiscal Year made in connection with the exercise by the
Borrower of any repurchase or first refusal rights that it may have to
repurchase shares of Voting Common Stock issued pursuant to the
exercise of Management Stock Options or employee stock options, (ii)
any Capital Stock Purchase Event the proceeds of which are payable or
distributable solely to the Borrower or any Guarantor from a
Subsidiary, (iii) any Capital Stock Purchase Event payable solely in
capital stock of the Borrower and (iv) cash payments made in respect of
fractional shares resulting from any such permitted exchange or
conversion or exercise of the Warrant; and (c) any payment made to
retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire shares of any class of stock of the
Borrower now or hereafter outstanding, other than payments made solely
in capital stock of the Borrower.
"Revolving Credit Commitment" means, with respect to each Lender,
the obligation of such Lender to make Revolving Loans to the Borrower
up to an aggregate principal amount at any one time outstanding equal
to such Lender's Applicable Commitment Percentage of the Total
Revolving Credit Commitment.
"Revolving Credit Outstandings" means, as of any date of
determination, the aggregate principal amount of all Revolving Loans
then outstanding and all interest due thereon.
"Revolving Credit Facility" means the facility described in Article
II hereof providing for Loans to the Borrower by the Lenders in the
aggregate principal amount of the Total Revolving Credit Commitment.
"Revolving Credit Termination Date" means (i) April 26, 1999 or
(ii) such earlier date of termination of Lenders' obligations pursuant
to Section 9.1 upon the occurrence of an Event of Default, or (iii)
such date as the Borrower may voluntarily and permanently terminate the
Revolving Credit Facility by payment in full of all Revolving Credit
Outstandings.
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<PAGE> 26
"Revolving Loan" means any borrowing pursuant to an Advance
under the Revolving Credit Facility in accordance with Article II.
"Revolving Notes" means, collectively, the promissory notes of the
Borrower evidencing Revolving Loans executed and delivered to the
Lenders as provided in Section 2.5 substantially in the form of Exhibit
G, with appropriate insertions as to amounts, dates and names of
Lenders.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder.
"Series A Preferred Stock" means the Series A Non-Voting Preferred
Stock, $.01 par value per share, of the Borrower.
"Series B Preferred Stock" means the Series B Convertible Preferred
Stock, $.01 par value per share, of the Borrower.
"Series C Preferred Stock" means the Series C Convertible Preferred
Stock, $.01 par value per share, of the Borrower.
"Single Employer Plan" means any employee pension benefit plan
covered by Title IV of ERISA in respect of which the Borrower or any
Subsidiary is an "employer" as described in Section 4001(b) of ERISA
and which is not a Multiemployer Plan.
"Subsidiary" means any corporation or other entity in which more
than 50% of its outstanding voting stock or more than 50% of all equity
interests is owned directly or indirectly by the Borrower and/or by one
or more of the Borrower's Subsidiaries.
"Termination Event" means: (i) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder (unless the
notice requirement has been waived by applicable regulation); or (ii)
the withdrawal of the Borrower or any ERISA Affiliate from a Pension
Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA or was deemed such under Section
4063 of ERISA; or (iii) the termination of a Pension Plan, the filing
of a notice of intent to terminate a Pension Plan or the treatment of a
Pension Plan amendment as a termination under Section 4041 of ERISA; or
(iv) the institution of proceedings to terminate a Pension Plan by the
PBGC; or (v) any other event or condition which would constitute
grounds under Section 4042(a) of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; or
20
<PAGE> 27
(vi) the partial or complete withdrawal of the Borrower or any ERISA
Affiliate from a Multiemployer Plan; or (vii) the imposition of a Lien
pursuant to Section 412 of the Code or Section 302 of ERISA; or (viii)
any event or condition which results in the reorganization or
insolvency of a Multiemployer Plan under Section 4241 or Section 4245
of ERISA, respectively; or (ix) any event or condition which results in
the termination of a Multiemployer Plan under Section 4041A of ERISA or
the institution by the PBGC of proceedings to terminate a Multiemployer
Plan under Section 4042 of ERISA.
"Total Revolving Credit Commitment" means a principal amount equal
to $25,000,000, as reduced from time to time in accordance with Section
2.7.
"Treasury Regulations" means the final and temporary regulations of
the U.S. Department of the Treasury promulgated under the Code.
"TSI International" means Transition Systems International, Inc., a
Massachusetts corporation.
"TSI Virgin Islands" means TSI, Virgin Islands Foreign Sales
Corporation, a Virgin Islands (United States) corporation.
"UCC" means the Uniform Commercial Code of the State of New York,
as amended or supplemented from time to time.
"Unfunded Vested Accrued Benefits" means, with respect to any Plan
at any time, the amount (if any) by which (a) the present value of all
vested nonforfeitable benefits under such Plan exceeds (b) the fair
market value of all Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plan.
"Voting Common Stock" means the voting common stock, $.01 par
value, of the Borrower designated as its "Common Stock."
"Warrant" means that certain Non-Voting Common Stock Purchase
Warrant dated as of January 24, 1996 by the Borrower in favor of
NationsBanc Investment Corporation, granting the right to purchase up
to 892 shares of the Class B Common Stock.
"Welfare Plans" has the meaning given to such term in Section
7.16(b) hereof.
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1.2. Rules of Interpretation.
(a) All accounting terms not specifically defined herein shall
have the meanings assigned to such terms and shall be interpreted in
accordance with GAAP applied on a Consistent Basis;
(b) Each term defined in Article 1 or 9 of the UCC shall have
the meaning given therein unless otherwise defined herein, except to
the extent that the Uniform Commercial Code of another jurisdiction is
controlling, in which case such terms shall have the meaning given in
the Uniform Commercial Code of the applicable jurisdiction;
(c) The headings, subheadings and table of contents used
herein or in any other Loan Document are solely for convenience of
reference and shall not constitute a part of any such document or
affect the meaning, construction or effect of any provision thereof;
(d) Except as otherwise expressly provided, references herein
to articles, sections, paragraphs, clauses, annexes, appendices,
exhibits and schedules are references to articles, sections,
paragraphs, clauses, annexes, appendices, exhibits and schedules in or
to this Agreement;
(e) All definitions set forth herein or in any other Loan
Document shall apply to the singular as well as the plural form of such
defined term, and all references to the masculine gender shall include
reference to the feminine or neuter gender, and vice versa, as the
context may require;
(f) When used herein or in any other Loan Document, words such
as "hereunder", "hereto", "hereof" and "herein" and other words of like
import shall, unless the context clearly indicates to the contrary,
refer to the whole of the applicable document and not to any particular
article, section, subsection, paragraph or clause thereof;
(g) References to "including" means including without limiting
the generality of any description preceding such term;
(h) All dates and times of day specified herein shall refer to
such dates and times at Charlotte, North Carolina.
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ARTICLE II
The Revolving Credit Facility
2.1. Revolving Loans.
(a) Commitment. Subject to the terms and conditions of this
Agreement, each Lender severally agrees to make Advances to the Borrower under
the Revolving Credit Facility from time to time from the Closing Date until the
Revolving Credit Termination Date on a pro rata basis as to the total borrowing
requested by the Borrower on any day determined by such Lender's Applicable
Commitment Percentage up to but not exceeding the Revolving Credit Commitment of
such Lender, provided, however, that the Lenders will not be required and shall
have no obligation to make any such Advance (i) so long as a Default or an Event
of Default has occurred and is continuing or (ii) if the Agent has accelerated
the maturity of any of the Notes as a result of an Event of Default; provided
further, however, that immediately after giving effect to each such Advance, the
aggregate principal amount of Revolving Loans then outstanding shall not exceed
the Total Revolving Credit Commitment. Within such limits, the Borrower may
borrow, repay and reborrow under the Revolving Credit Facility on any Business
Day from the Closing Date until, but (as to borrowings and reborrowings) not
including, the Revolving Credit Termination Date; provided, however, that (y) no
Revolving Loan that is a Eurodollar Rate Loan shall be made which has an
Interest Period that extends beyond the Stated Termination Date and (z) each
Revolving Loan that is a Eurodollar Rate Loan may, subject to the provisions of
Sections 2.3 and 2.7, be repaid only on the last day of the Interest Period with
respect thereto unless such payment is accompanied by the additional payment, if
any, required by Section 4.4.
(b) Amounts. Except as otherwise permitted by the Lenders from
time to time, the aggregate principal amount of the Revolving Loans outstanding
shall not exceed at any time the Total Revolving Credit Commitment, and, in the
event there shall be outstanding any such excess, the Borrower shall immediately
make such payments and prepayments as shall be necessary to comply with this
restriction. Each Revolving Loan hereunder and each conversion under Section
2.8, shall be in an amount of at least $700,000 or any integral multiple of
$100,000 in excess thereof.
(c) Advances. (i) An Authorized Representative shall give the Agent (1)
at least three (3) Business Days' irrevocable written notice by telefacsimile
transmission of a Borrowing Notice or Interest Rate Selection Notice (as
applicable) with appropriate insertions, effective upon receipt, of each
Revolving Loan that is a Eurodollar Rate Loan (whether representing an
additional Advance hereunder or the conversion of borrowing hereunder from Base
Rate Loans to Eurodollar Rate Loans) prior to 11:30 A.M. and (2) irrevocable
written notice by telefacsimile transmission of a
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Borrowing Notice or Interest Rate Selection Notice (as applicable) with
appropriate insertions, effective upon receipt, of each Revolving Loan that is a
Base Rate Loan (whether representing an additional Advance hereunder or the
conversion of borrowing hereunder from Eurodollar Rate Loans to Base Rate Loans)
prior to 11:30 A.M. on the day of such proposed Revolving Loan. Each such notice
shall specify the amount of the borrowing, the type of Revolving Loan (Base Rate
or Eurodollar Rate), the date of borrowing and, if a Eurodollar Rate Loan, the
Interest Period to be used in the computation of interest. Notice of receipt of
such Borrowing Notice or Interest Rate Selection Notice, as the case may be,
together with the amount of each Lender's portion of an Advance requested
thereunder, shall be provided by the Agent to each Lender by telefacsimile
transmission with reasonable promptness, but (provided the Agent shall have
received such notice by 11:30 A.M.) not later than 2:00 P.M. on the same day as
the Agent's receipt of such notice.
(ii) Not later than 3:30 P.M. on the date specified for each borrowing
under this Section 2.1, each Lender shall, pursuant to the terms and subject to
the conditions of this Agreement, make the amount of the Advance or Advances to
be made by it on such day available by wire transfer to the Agent in the amount
of its pro rata share, determined according to such Lender's Applicable
Commitment Percentage of the Revolving Loan or Revolving Loans to be made on
such day. Such wire transfer shall be directed to the Agent at the Principal
Office and shall be in the form of Dollars constituting immediately available
funds. The amount so received by the Agent shall, subject to the terms and
conditions of this Agreement, promptly be made available to the Borrower on the
date so specified by delivery of the proceeds thereof to the Borrower's Account
or otherwise as shall be directed in the applicable Borrowing Notice by the
Authorized Representative and reasonably acceptable to the Agent.
(iii) The Borrower shall have the option to elect the duration of the
initial and any subsequent Interest Periods and to convert the Revolving Loans
in accordance with Section 2.8. Eurodollar Rate Loans and Base Rate Loans may be
outstanding at the same time, provided, however, there shall not be outstanding
at any one time Eurodollar Rate Loans having more than five (5) different
Interest Periods. If the Agent does not receive a Borrowing Notice or an
Interest Rate Selection Notice giving notice of election of the duration of an
Interest Period or of conversion of any Loan to or continuation of a Loan as a
Eurodollar Rate Loan by the time prescribed by Section 2.1(c) or 2.8 hereof, the
Borrower shall be deemed to have elected to convert such Revolving Loan to (or
continue such Revolving Loan as) a Base Rate Loan until the Borrower notifies
the Agent in accordance with Section 2.8 hereof.
2.2. Payment of Interest. (a) The Borrower shall pay interest to the
Agent for the account of each Lender on the outstanding and unpaid principal
amount of each Revolving Loan made
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by such Lender for the period commencing on the date of such Revolving Loan
until such Revolving Loan shall be paid, continued or converted, as applicable,
at the then applicable Base Rate for Base Rate Loans or applicable Eurodollar
Rate for Eurodollar Rate Loans, as designated by the Authorized Representative
pursuant to Section 2.1; provided, however, that if any amount due under this
Agreement shall not be paid when due (at maturity, by acceleration or
otherwise), all amounts outstanding hereunder shall bear interest at the Default
Rate while such past due amount remains unpaid.
(b) Interest on each Revolving Loan shall be computed on the basis of a
year of 360 days and calculated in each case for the actual number of days
elapsed. Interest on each Revolving Loan shall be paid, without duplication, (i)
quarterly in arrears on the last Business Day of each March, June, September and
December, commencing June 28, 1996 for each Base Rate Loan, (ii) on the last day
of the applicable Interest Period for each Eurodollar Rate Loan and, if such
Interest Period extends for more than three (3) months, at intervals of three
(3) months after the commencement of such Interest Period and (iii) upon payment
in full of the principal amount of such Revolving Loan.
2.3. Payment of Principal. The principal amount of each Revolving Loan
shall be due and payable to the Agent for the benefit of each Lender in full on
the Revolving Credit Termination Date, or earlier as specifically provided
herein. The principal amount of any Base Rate Loan may be prepaid in whole or in
part at any time without penalty or premium, provided the Borrower gives the
Agent notice of such prepayment by telecopy at or prior to 11:00 A.M. on the
date of such prepayment. The principal amount of any Eurodollar Rate Loan may be
prepaid only at the end of the applicable Interest Period unless the Borrower
shall pay to the Agent for the account of the Lenders the additional amount, if
any, required under Section 4.4. All prepayments of Revolving Loans made by the
Borrower shall be in the amount of $700,000 or any integral multiple of $100,000
in excess thereof, or the amount equal to all Revolving Credit Outstandings, or
such other amount as necessary to comply with Section 2.1(b) or Section 2.7.
2.4. Non-Conforming Payments. (a) Each payment of principal (including
any prepayment) and payment of interest and fees, and any other amount required
to be paid to the Lenders with respect to the Revolving Loans, shall be made to
the Agent at the Principal Office, for the account of each Lender, in Dollars
and in immediately available funds before 12:30 P.M. on the date such payment is
due. The Agent may, but shall not be obligated to, debit the amount of any such
payment which is not made by such time to any ordinary deposit account, if any,
of the Borrower with the Agent with notice to the Borrower of such debit.
(b) The Agent shall deem any payment made by or on behalf of the
Borrower hereunder that is not made both in Dollars and in
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immediately available funds and prior to 12:30 P.M. to be a non-conforming
payment. Any such payment shall not be deemed to be received by the Agent until
the later of (i) the time such funds become available funds and (ii) the next
Business Day. Any non-conforming payment may constitute or become a Default or
Event of Default. Interest shall continue to accrue on any principal as to which
a non-conforming payment is made until the later of (x) the date such funds
become available funds or (y) the next Business Day at the Default Rate from the
date such amount was due and payable.
(c) In the event that any payment hereunder or under the Revolving
Notes becomes due and payable on a day other than a Business Day, then such due
date shall be extended to the next succeeding Business Day unless provided
otherwise under clause (ii) of the definition of "Interest Period"; provided
that interest shall continue to accrue during the period of any such extension
and provided further, that in no event shall any such due date be extended
beyond the Revolving Credit Termination Date.
2.5. Revolving Notes. Revolving Loans made by each Lender shall be
evidenced by the Revolving Note payable to the order of such Lender in the
amount of its Revolving Credit Commitment, which Revolving Note shall be dated
the Closing Date or a later date pursuant to an Assignment and Acceptance and
shall be duly completed, executed and delivered by the Borrower.
2.6. Pro Rata Payments. Except as otherwise provided herein, (a) each
payment on account of the principal of and interest on the Revolving Loans and
the fees described in Section 2.9 shall be made to the Agent for the account of
the Lenders pro rata based on their Applicable Commitment Percentages, (b) all
payments to be made by the Borrower for the account of each of the Lenders on
account of principal, interest and fees, shall be made without diminution,
setoff, recoupment or counterclaim, and (c) the Agent will promptly distribute
to the Lenders in immediately available funds payments received in fully
collected, immediately available funds from the Borrower.
2.7. Reductions. The Borrower shall, by notice from an Authorized
Representative, have the right from time to time but not more frequently than
once each calendar month, upon not less than three (3) Business Days' written
notice to the Agent, effective upon receipt, to reduce the Total Revolving
Credit Commitment. The Agent shall give each Lender, within one (1) Business Day
of receipt of such notice, telefacsimile notice, or telephonic notice (confirmed
in writing), of such reduction. Each such reduction shall be in the aggregate
amount of $3,000,000 or any integral multiple of $1,000,000 in excess thereof,
or the entire remaining Total Revolving Credit Commitment, and shall permanently
reduce the Total Revolving Credit Commitment by the amount of such reduction.
Each reduction of the Total Revolving Credit Commitment shall be accompanied by
payment of the Revolving Loans to the extent that the principal amount of
Revolving Loans then outstanding exceeds
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the Total Revolving Credit Commitment after giving effect to such reduction,
together with accrued and unpaid interest on the amounts prepaid. No such
reduction shall result in the payment of any Eurodollar Rate Loan other than on
the last day of the Interest Period of such Eurodollar Rate Loan unless such
prepayment is accompanied by amounts due, if any, under Section 4.4.
2.8. Conversions and Elections of Subsequent Interest Periods. Provided
that no Default or Event of Default shall have occurred and be continuing and
subject to the limitations set forth below, the Borrower may:
(a) upon delivery, effective upon receipt, of a properly completed
Interest Rate Selection Notice to the Agent on or before 11:30 A.M. on any
Business Day, convert all or a part of any Eurodollar Rate Loan to a Base Rate
Loan on the last day of the Interest Period for such Eurodollar Rate Loan; and
(b) upon delivery, effective upon receipt, of a properly completed
Interest Rate Selection Notice to the Agent on or before 11:30 A.M. on the date
that is three (3) Business Days prior to the date of such election or
conversion:
(i) elect a subsequent Interest Period for all or a portion
of any Eurodollar Rate Loan to begin on the last day of the then
current Interest Period for such Eurodollar Rate Loan; and
(ii) convert any Base Rate Loan to a Eurodollar Rate Loan on
any Business Day.
Each election and conversion pursuant to this Section 2.8 shall be
subject to the limitations on Eurodollar Rate Loans set forth in the definition
of "Interest Period" herein and in Sections 2.1, 2.3 and Article V. The Agent
shall give written notice to each Lender of such notice of election or
conversion prior to 4:00 P.M. on the day such notice of election or conversion
is received. All such continuations or conversions of Loans shall be effected
pro rata based on the Applicable Commitment Percentages of the Lenders.
2.9. Fees.
(a) Unused Fee. For the period beginning on the Closing Date and
ending on the Revolving Credit Termination Date, the Borrower agrees to pay to
the Agent, for the pro rata benefit of the Lenders based on their Applicable
Commitment Percentages, an unused fee equal to the Applicable Unused Fee
multiplied by the average daily amount by which (i) the Total Revolving Credit
Commitment exceeds (ii) the principal amount of Revolving Loans outstanding.
Such fees shall be due in arrears on the last Business Day of each March, June,
September and December commencing June 28, 1996 to and on the Revolving Credit
Termination Date.
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Notwithstanding the foregoing, so long as any Lender fails to make available any
portion of its Revolving Credit Commitment when requested, such Lender shall not
be entitled to receive payment of its pro rata share of such fee for so long as
such Lender shall not have made available such portion. Such fee shall be
calculated on the basis of a year of 360 days for the actual number of days
elapsed.
(b) Usage Fee. For each fiscal quarter during which the Agent
determines that the average daily principal amount of Revolving Loans
outstanding during such quarter ("Quarterly Average Revolving Loans") equals or
exceeds fifty percent (50%) of the Total Revolving Credit Commitment, the
Borrower agrees to pay to the Agent, for the pro rata benefit of the Lenders
based on their Applicable Commitment Percentages, a usage fee equal to the
Applicable Usage Fee multiplied by the Quarterly Average Revolving Loans for
such fiscal quarter. Such fees shall be due in arrears on the third Business Day
following the fiscal quarter for which such usage fee shall apply.
Notwithstanding the foregoing, so long as any Lender fails to make available any
portion of its Revolving Credit Commitment when requested, such Lender shall not
be entitled to receive payment of its pro rata share of such fee for so long as
such Lender shall not have made available such portion. Such fee shall be
calculated on the basis of a year of 360 days for the actual number of days
elapsed.
2.10. Deficiency Advances. No Lender shall be responsible for any
default of any other Lender in respect to such other Lender's obligation to make
any Loan nor shall the Revolving Credit Commitment of any Lender hereunder be
increased as a result of such default of any other Lender. Without limiting the
generality of the foregoing, in the event any Lender shall fail to advance funds
to the Borrower as herein provided, the Agent may in its discretion, but shall
not be obligated to, advance under the Revolving Note in its favor as a Lender
all or any portion of such amount or amounts (each, a "deficiency advance") and
shall thereafter be entitled to payments of principal of and interest on such
deficiency advance in the same manner and at the same interest rate or rates to
which such other Lender would have been entitled had it made such advance under
its Revolving Note; provided that, upon payment to the Agent from such other
Lender of the entire outstanding amount of each such deficiency advance,
together with accrued and unpaid interest thereon, from the most recent date or
dates interest was paid to the Agent by the Borrower on each Revolving Loan
comprising the deficiency advance at, for the first three days such deficiency
advance shall be outstanding, the interest rate per annum for overnight
borrowing by the Agent from the Federal Reserve Bank, and thereafter at the Base
Rate, then such payment shall be credited against the applicable Revolving Note
of the Agent in full payment of such deficiency advance and
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the Borrower shall be deemed to have borrowed the amount of such deficiency
advance from such other Lender as of the most recent date or dates, as the case
may be, upon which any payments of interest were made by the Borrower thereon.
2.11. Use of Proceeds. The proceeds of the Loans made pursuant to the
Revolving Credit Facility hereunder shall be used by the Borrower (a) for
general corporate purposes and (b) to finance Acquisitions permitted hereunder.
ARTICLE III
Guaranties
3.1. Facility Guaranty. The Borrower will cause each of its Material
Subsidiaries to deliver as of the Closing Date and as required pursuant to
Section 8.19 hereof a Facility Guaranty jointly and severally guaranteeing all
of the Borrower's Obligations.
3.2. Further Assurances. At the request of the Agent, the Borrower will
cause its Subsidiaries to execute, by its duly authorized officers, alone or
with the Agent, any certificate, instrument, statement or document, or to
procure any such certificate, instrument, statement or document, or to take such
other action (and pay all connected costs) which the Agent reasonably deems
necessary from time to time to create, continue or preserve the Guaranty in
favor of the Agent contemplated hereby and by the other Loan Documents.
ARTICLE IV
Yield Protection and Illegality
4.1. Additional Costs. (a) The Borrower shall promptly pay to the Agent
for the account of a Lender from time to time, without duplication, such amounts
as such Lender may reasonably determine to be necessary to compensate it for any
costs incurred by such Lender which it determines are attributable to its making
or maintaining any Loan or its obligation to make any Loans hereunder, or any
reduction in any amount receivable by such Lender under this Agreement or the
Notes in respect of any of such Loans, including reductions in the rate of
return on a Lender's capital (such increases in costs and reductions in amounts
receivable and returns being herein called "Additional Costs"), resulting from
any Regulatory Change which: (i) changes the basis of taxation of any amounts
payable to such Lender under this Agreement or the Notes in respect of any of
such Loans (other than taxes imposed on or measured by the income, revenues or
assets); or (ii) imposes or modifies any reserve, special deposit, or similar
requirements relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of, such Lender (other than any such reserve,
deposit or requirement reflected in the Eurodollar
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Reserve Percentage, Prime Rate, Federal Funds Effective Rate or the Interbank
Offered Rate, in each case computed in accordance with the respective
definitions of such terms set forth in Section 1.1); or (iii) has or would have
the effect of reducing the rate of return on capital of any such Lender to a
level below that which the Lender could have achieved but for such Regulatory
Change (taking into consideration such Lender's policies with respect to capital
adequacy); or (iv) imposes any other condition adversely affecting the Agent or
the Lenders under this Agreement or the Notes (or any of such extensions of
credit or liabilities). Each Lender will notify the Authorized Representative
and the Agent of any event occurring after the Closing Date which would entitle
it to compensation pursuant to this Section 4.1(a) as promptly as practicable
after it obtains knowledge thereof and determines to request such compensation.
(b) Without limiting the effect of the foregoing provisions of this
Section 4.1, in the event that, by reason of any Regulatory Change, any Lender
either (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
the Lender which includes deposits by reference to which the interest rate on
Eurodollar Rate Loans is determined as provided in this Agreement or a category
of extensions of credit or other assets of any Lender which includes Eurodollar
Rate Loans or (ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then, if the Lender so
elects by notice to the other Lenders, the obligation hereunder of such Lender
to make, and to convert Base Rate Loans into, Eurodollar Rate Loans that are the
subject of such restrictions shall be suspended until the date such Regulatory
Change ceases to be in effect and the Borrower shall, on the last day(s) of the
then current Interest Period(s) for outstanding Eurodollar Rate Loans convert
such Eurodollar Rate Loans into Base Rate Loans; provided, however, that the
suspension of such obligation and the conversion of any Eurodollar Rate Loans
into Base Rate Loans shall apply only to any Lender who is affected by such
restrictions and who has provided such notice to the other Lenders, and the
obligation of the other Lenders to make, and to convert Base Rate Loans into,
Eurodollar Rate Loans shall not be affected by such restrictions. In the event
that the obligation of some, but not all, of the Lenders to make, or to convert
Base Rate Loans into, Eurodollar Rate Loans is suspended, then any request by
the Borrower during the pendency of such suspension for a Eurodollar Rate Loan
shall be deemed a request for such Eurodollar Rate Loan from the Lender(s) not
subject to such suspension and for a Base Rate Loan from the Lender(s) who are
subject to such suspension, in each case in the respective amounts based on the
Lenders' respective Applicable Commitment Percentages.
(c) Determinations by any Lender for purposes of this Section 4.1
of the effect of any Regulatory Change on its costs of making or maintaining, or
being committed to make Loans hereunder,
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or the effect of any Regulatory Change on amounts receivable by any Lender in
respect of Loans, and of the additional amounts required to compensate the
Lender in respect of any Additional Costs, shall be made taking into account
such Lender's policies, or the policies of the parent corporation of such
Lender, as to the allocation of capital, costs and other items and shall be
conclusive absent manifest error. The Lender requesting such compensation shall
furnish to the Authorized Representative and the Agent within one hundred eighty
(180) days of the incurrence of any Additional Costs for which compensation is
sought an explanation of the Regulatory Change and calculations, in reasonable
detail, setting forth such Lender's determination of any such Additional Costs.
No Lender or any parent corporation shall be entitled to receive reimbursement
for costs incurred more than one hundred eighty (180) days prior to such
delivery.
4.2. Suspension of Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any interest rate for
any Eurodollar Rate Loan for any Interest Period, the Agent determines (which
determination made on a reasonable basis shall be conclusive absent manifest
error) that:
(a) quotations of interest rates for the relevant deposits
referred to in the definition of "Eurodollar Rate" in Section 1.1 are
not being provided in the relevant amounts or for the relevant
maturities for purposes of determining the rate of interest for such
Eurodollar Rate Loan as provided in this Agreement; or
(b) the relevant rates of interest referred to in the definition
of "Interbank Offered Rate" in Section 1.1 upon the basis of which the
Eurodollar Rate for such Interest Period is to be determined do not
adequately reflect the cost to the Lenders of making or maintaining
such Eurodollar Rate Loan for such Interest Period.
then the Agent shall give the Authorized Representative prompt notice thereof,
and so long as such condition remains in effect, the Lenders shall be under no
obligation to make Eurodollar Rate Loans that are subject to such condition, or
to convert Base Rate Loans into Eurodollar Rate Loans, and the Borrower shall on
the last day(s) of the then current Interest Period(s) for outstanding
Eurodollar Rate Loans, as applicable, convert such Eurodollar Rate Loans into
Base Rate Loans, if available hereunder. The Agent shall give the Authorized
Representative notice describing in reasonable detail any event or condition
described in this Section 4.2 promptly following the determination by the Agent
that the availability of Eurodollar Rate Loans is, or is to be, suspended as a
result thereof and shall also promptly notify the Authorized Representative when
such suspension has terminated.
4.3. Illegality. Notwithstanding any other provision of this Agreement,
in the event that it becomes unlawful for any Lender to
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honor its obligation to make or maintain Eurodollar Rate Loans hereunder, then
such Lender shall promptly notify the Borrower thereof (with a copy to the
Agent) and such Lender's obligation to make or continue Eurodollar Rate Loans,
or to convert Base Rate Loans into Eurodollar Rate Loans, shall be suspended
until such time as such Lender may again make and maintain Eurodollar Rate
Loans, and such Lender's outstanding Eurodollar Rate Loans shall be converted
into Base Rate Loans in accordance with Section 2.8 or earlier if required by
applicable law. The conversion of any Eurodollar Rate Loans into Base Rate Loans
shall apply only to any Lender who is affected by such restrictions and who has
provided the notice described above, and the obligation of the other Lenders to
make, and to convert Base Rate Loans into, Eurodollar Rate Loans shall not be
affected by such restrictions. In the event that the obligation of some, but not
all, of the Lenders to make, or to convert Base Rate Loans into, Eurodollar Rate
Loans is so suspended, then any request by the Borrower during the pendency of
such suspension for a Eurodollar Rate Loan shall be deemed a request for such
Eurodollar Rate Loan from the Lender(s) not subject to such suspension and for a
Base Rate Loan from the Lender(s) who are subject to such suspension, in each
case in the respective amounts based on the Lenders' respective Applicable
Commitment Percentages.
4.4. Compensation. The Borrower shall promptly pay to each Lender, upon
the request of such Lender, such amount or amounts as shall be sufficient (in
the reasonable determination of Lender) to compensate it for any loss, cost or
expense incurred by it (including without limitation any interest paid or other
expense incurred by such Lender on funds borrowed or otherwise obtained by it to
make or carry its Eurodollar Rate Loans and any loss sustained or expense
incurred by such Lender in connection with the liquidation or reemployment of
deposits or other funds acquired by it to make or carry its Eurodollar Rate
Loans) as a result of:
(a) any payment, prepayment or conversion of a Eurodollar Rate
Loan on a date other than the last day of the Interest Period for such
Eurodollar Rate Loan, including without limitation any conversion
required pursuant to Sections 4.1, 4.2 or 4.3; or
(b) any failure by the Borrower to borrow a Eurodollar Rate Loan
on the date for such borrowing specified in the relevant Borrowing
Notice or Interest Rate Selection Notice under Article II hereof.
provided, such loss shall in no event include the failure to earn the Applicable
Margin. A determination of a Lender as to the amounts payable pursuant to this
Section 4.4 shall be conclusive, provided that such determinations are made on a
reasonable basis. The Lender requesting compensation under this Section 4.4
shall promptly furnish to the Authorized Representative and the Agent
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calculations in reasonable detail setting forth such Lender's determination of
the amount of such compensation.
4.5. Alternate Loan and Lender. In the event any Lender suspends the
making of any Eurodollar Rate Loan pursuant to this Article IV (herein a
"Restricted Lender"), the Restricted Lender's Applicable Commitment Percentage
of any Eurodollar Rate Loan shall bear interest at the Base Rate or the
Eurodollar Rate for which the suspension does not apply, as selected by
Borrower, until the Restricted Lender once again makes available the applicable
Eurodollar Rate Loan. Notwithstanding the provisions of Section 2.2(b), interest
shall be payable to the Restricted Lender at the time and manner as paid to
those Lenders making available Eurodollar Rate Loans.
4.6. Taxes. (a) All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future excise, stamp
or other taxes, fees, duties, levies, imposts, charges, deductions, withholdings
or other charges of any nature whatsoever imposed by any taxing authority, but
excluding (i) franchise taxes, (ii) any taxes (other than withholding taxes)
that would not be imposed but for a connection between a Lender or the Agent and
the jurisdiction imposing such taxes (other than a connection arising solely by
virtue of the activities of such Lender or the Agent pursuant to or in respect
of this Agreement or any other Loan Document), (iii) any taxes imposed on or
measured by any Lender's assets, net income, receipts or branch profits, and
(iv) any taxes arising after the Closing Date solely as a result of or
attributable to a Lender changing its designated lending office after the date
such Lender becomes a party hereto (such non-excluded items being collectively
called "Taxes"). In the event that any withholding or deduction from any payment
to be made by the Borrower hereunder is required in respect of any Taxes
pursuant to any applicable law, rule or regulation, then the Borrower will
(x) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(y) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
(z) pay to the Agent for the account of each Lender such
additional amount or amounts as is necessary to ensure that the net
amount actually received by each Lender will equal the full amount such
Lender would have received had no such withholding or deduction been
required.
If any such Taxes shall be or become applicable after the date of this Agreement
to such payments by the Borrower to a Lender, such Lender shall use reasonable
efforts to make, fund, or maintain the
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Loan or Loans, as the case may be, through another lending office located in
another jurisdiction so as to reduce, to the fullest extent possible, the
Borrower's liability hereunder, if the making, funding or maintenance of such
Loan or Loans through such other office does not, in the reasonable judgment of
the Lender, materially affect the Lender of such Loan. If the Borrower is
required to make any additional payment to a Lender pursuant to this Section
4.6, and any such Lender receives, or is entitled to receive, a credit against,
remission for, or repayment of, any tax paid or payable by it in respect of, or
calculated with reference to, the Taxes giving rise to such payment, such Lender
shall, within a reasonable time after it receives such credit, relief, remission
or repayment, reimburse the Borrower the amount of any such credit, relief,
remission or repayment.
(b) Prior to the date that any Lender or participant organized under
the laws of a jurisdiction outside the United States becomes a party hereto,
such Person shall deliver to the Borrower and the Agent such certificates,
documents or other evidence, as required by the Code or Treasury Regulations
issued pursuant thereto, properly completed, currently effective and duly
executed by such Lender or participant establishing that payments to it
hereunder and under the Notes are (i) not subject to United States Federal
backup withholding tax and (ii) not subject to United States Federal withholding
tax under the Code because such payment is either effectively connected with the
conduct by such Lender or participant of a trade or business in the United
States or totally exempt from United States Federal withholding tax by reason of
the application of the provisions of a treaty to which the United States is a
party or such Lender is otherwise exempt. Any Lender that fails to provide such
certificates or forms that it is required to provide under this Section 4.6(b)
shall not be entitled to the benefits of this Section 4.6 and, to the extent
required by law, the Borrower shall be entitled to deduct from, and pay to the
applicable taxing authority, taxes from the payments made by the Borrower to
such Lender. The Lenders shall, from time to time, complete, execute and deliver
such updates or extensions or renewals or replacements of those forms,
certificates and documents as may be necessary to continue or maintain any such
exemption.
(c) If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent, for the account of the
respective Lender, the required receipts or other required documentary evidence,
the Borrower shall indemnify the Lenders for any incremental Taxes, interest or
penalties that may become payable by any Lender as a result of any such failure.
For purposes of this Section 4.6, a distribution hereunder by the Agent or any
Lender to or for the account of any Lender shall be deemed a payment by or on
behalf of the Borrower.
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ARTICLE V
Conditions to Making Loans
5.1. Conditions of Initial Advance. The obligation of the Lenders to
make the initial Advance under the Revolving Credit Facility is subject to the
conditions precedent that:
(a) the Agent shall have received on the Closing Date, in form and
substance satisfactory to the Agent and Lenders, the following:
(i) executed originals of each of this Agreement, the Notes
and the other Loan Documents, together with all schedules and
exhibits thereto;
(ii) the favorable written opinion or opinions with respect
to the Loan Documents and the transactions contemplated thereby of
special counsel to the Borrower dated the Closing Date, addressed
to the Agent and the Lenders and reasonably satisfactory to Smith
Helms Mulliss & Moore, L.L.P., special counsel to the Agent,
substantially in the form of Exhibit H hereto;
(iii) a certificate from the Borrower dated the Closing Date
and signed by the Clerk or an Assistant Clerk of the Borrower
certifying (A) that the attached are true, correct and complete
copies of (1) the Articles of Organization and bylaws of the
Borrower, and (2) votes of the shareholders of the Borrower
approving the execution delivery and performance of this
Agreement, the other Loan Documents and the transactions
contemplated thereby, and that all such documents and agreements
are in full force and effect, and (B) as to the incumbency and
specimen signature of each officer of the Borrower executing this
Agreement, the other Loan Documents and any other document
delivered in connection herewith on behalf of the Borrower;
(iv) a certificate issued as of a recent date by the
Secretary of The Commonwealth of Massachusetts as to the due
existence and good standing of the Borrower and a certificate
issued from the Department of Revenue of The Commonwealth of
Massachusetts as to the tax good standing of the Borrower;
(v) appropriate certificates of qualification to do
business, good standing and, where appropriate, authority to
conduct business under assumed name, issued in respect of the
Borrower as of a recent date by the Secretary of State or
comparable official of the State of California and the Territory
of Guam;
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(vi) notice of appointment of the initial Authorized
Representative(s);
(vii) certificate of the Borrower by an Authorized
Representative dated the Closing Date demonstrating compliance
with the financial covenants contained in Sections 8.1(a) through
8.1(d) as of the Closing Date, substantially in the form of
Exhibit I;
(viii) evidence of all insurance required by the Loan
Documents;
(ix) an initial Borrowing Notice, if any, and, if elected by
the Borrower, Interest Rate Selection Notice;
(x) evidence that all fees payable by the Borrower on the
Closing Date to the Agent and the Lenders have been paid in full;
and
(xi) copies of all cross-receipts between the Borrower and
the underwriter of the Initial Offering;
(xii) payoff letter with funding instructions from the holder
of the 13.0% Subordinated Notes together with copies of such notes
marked "cancelled";
(xiii) payoff letter with funding instructions from the
lenders under the Prior Credit Facilities;
(xiv) evidence that the Securities and Exchange Commission
has declared effective the registration made on Form S-1; and
(xv) such other documents, instruments, certificates and
opinions as the Agent or any Lender may reasonably request on or
prior to the Closing Date in connection with the consummation of
the transactions contemplated hereby;
(b) Each of the following shall have occurred or be true and the Agent
shall have received a certificate of the Chief Financial Officer of the Borrower
as to the truth or accuracy thereof:
(i) The Initial Public Offering shall have been consummated;
(ii) All Indebtedness incurred in connection with the Note
Purchase Agreement shall have been paid in full in cash and all of the
13.0% Subordinated Notes issued thereunder shall have been cancelled;
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(iii) The Prior Credit Facilities shall have been paid in full and
terminated;
(iv) all of the Preferred Stock shall have been redeemed or
converted into Common Stock in accordance with its terms;
(v) The representations and warranties of the Borrower and the
Subsidiaries set forth in Article VI of the Credit Agreement and in
each of the other Loan Documents shall be true and correct in all
material respects;
(vi) Other than as set forth on Schedule 6.8 hereto, there is not
any action, suit, investigation or proceeding pending or threatened in
any court or before any arbitrator or governmental instrumentality that
could reasonably be expected to have a material adverse effect on the
financings contemplated hereby or the Borrower or its business,
operations or prospects; and
(vii) The Borrower shall be in compliance with all existing
financial and material contractual obligations before and immediately
after giving effect to the financings contemplated hereby, except where
the failure to comply could not, in the Agent's reasonable judgment,
have a Material Adverse Effect;
(c) In the good faith judgment of the Agent and the Lenders:
(i) There shall not have occurred in the Agent's reasonable
judgment a material adverse change in the business, assets, revenues,
operations, conditions (financial or otherwise) or prospects of the
Borrower and its Subsidiaries taken as a whole since December 31, 1995
or in the assumptions, facts or information contained in the financial
statements, budgets, projections or pro forma balance sheets most
recently delivered to the Agent by the Borrower;
(ii) There shall not have occurred and be continuing since March
7, 1996 a material adverse change in the market for syndicated credit
facilities similar in nature to the facilities provided hereunder or a
material disruption of, or a material adverse change in, financial,
banking or capital market conditions, in each case as determined by the
Agent in its reasonable discretion;
(iii) The corporate capital and ownership structure (including
Articles of Organization and by-laws), shareholders agreements (if
any), management equity
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interests and management contracts of the Borrower and its subsidiaries
shall be reasonably satisfactory; and
(iv) The Borrower's Registration Statement on Form S-1 filed in
connection with the Initial Public Offering is in satisfactory form and
content and has been declared effective.
5.2. Conditions of All Revolving Loans. The obligations of the Lenders
to make any Revolving Loans subsequent to the Closing Date are subject to the
satisfaction of the following conditions:
(a) the Agent shall have received a Borrowing Notice if required
by Article II;
(b) the representations and warranties of the Borrower and the
Subsidiaries set forth in Article VI and in each of the other Loan
Documents shall be true and correct in all material respects on and as
of the date of such Advance with the same effect as though such
representations and warranties had been made on and as of such date,
except (i) to the extent such representations and warranties refer to
schedules, such representations and warranties shall be true and
correct in all material respects as of the date of delivery of those
schedules most recently delivered pursuant to Section 7.1(d) hereof,
(ii) to the extent that such representations and warranties expressly
relate to an earlier date and (iii) that the financial statements
referred to in Section 6.6(a) shall be deemed to be those financial
statements most recently delivered to the Agent and the Lenders
pursuant to Section 7.1;
(c) at the time of (and after giving effect to) each Advance, no
Default or Event of Default shall have occurred and be continuing; and
(d) immediately after giving effect to a Revolving Loan, the
aggregate principal balance of all outstanding Revolving Loans for each
Lender shall not exceed such Lender's Revolving Credit Commitment.
ARTICLE VI
Representations and Warranties
The Borrower represents and warrants with respect to itself and to its
Subsidiaries (which representations and warranties shall survive the delivery of
the documents mentioned herein and the making of Loans), as follows:
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6.1. Corporate Existence and Power; Subsidiaries.
(a) The Borrower. The Borrower (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts, (ii) has full corporate power and authority to
own, lease and operate its assets, properties and business and to conduct the
business in which it is currently, or is currently proposed to be, engaged,
(iii) has full corporate power and authority to execute and deliver this
Agreement and each other Loan Document to which it is a party and to perform its
obligations hereunder and thereunder, and (iv) is duly licensed or qualified as
a foreign corporation to do business in all jurisdictions in which the nature of
the business conducted by it or the character or location of the properties
owned or leased by it makes such licensing or qualifications necessary, except
as set forth on Schedule 6.1(a) attached hereto or where the failure to be so
licensed or qualified would not have a Material Adverse Effect.
(b) Subsidiaries. Schedule 6.1(b) hereto sets forth a list of all
Subsidiaries of the Borrower and all ownership interests held by the Borrower or
any Subsidiary in any other Person. All of the outstanding shares of capital
stock of, or other ownership interests in, each such Subsidiary are owned,
directly or indirectly through another Subsidiary, by the Borrower, and, except
as set forth on Schedule 6.1(b) hereto, there are no outstanding subscriptions,
warrants, options, calls, commitments, or other rights or agreements to which
the Borrower, any of its Subsidiaries or any of their shareholders is bound
relating to the issuance, sale or redemption of any shares of capital stock, or
other ownership interests in, any such Subsidiary and no shares of capital stock
or other ownership interests in any such Subsidiary are reserved for any
purpose. Each Subsidiary (i) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction indicated on Schedule
6.1(b) hereto, (ii) has full corporate power and authority to own, lease and
operate its assets, properties and business and to conduct the business in which
it is currently, or currently proposed to be, engaged, (iii) has full corporate
power and authority to execute and deliver all Loan Documents to which it is or
will be a party and to perform its obligations thereunder, and (iv) is duly
licensed or qualified as a foreign corporation in all jurisdictions in which the
nature of the business conducted by it or the character or location of the
properties owned or leased by it makes such licensing or qualifications
necessary, except where the failure to be so licensed or qualified would not
have a Material Adverse Effect. As of the Closing Date, and upon the
consummation of the transactions contemplated hereby and by the other Loan
Documents, all outstanding shares of capital stock of each Subsidiary have been
duly authorized, validly issued, and fully paid and are nonassess-able, and are
owned, directly or indirectly, by the Borrower free and clear of any Lien except
those in favor of the Agent for the benefit of the Lenders created pursuant to
the Loan Documents. No
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shares of capital stock of any such Subsidiary were issued in violation of any
preemptive rights relating thereto.
6.2. Corporate Authorization; No Contravention. The execution, delivery
and performance by the Borrower and its Subsidiaries of this Agreement and each
other Loan Document to which any of them is or will be a party and of the
transactions contemplated hereby and thereby, (a) have been duly authorized by
all necessary corporate action, (b) do not contravene the terms of the charter
documents or bylaws of the Borrower or any such Subsidiary, and (c) except as
set forth on Schedule 6.2(c) hereto, will not violate, conflict with or result
in any breach or contravention of, or the creation of any Lien under, any
material contractual obligation of the Borrower or any of its Subsidiaries or
any Requirement of Law applicable to the Borrower or any of its Subsidiaries.
6.3. Governmental Authorization. No approval, consent, compliance,
exemption, authorization or other action by, or notice to, or filing with, any
Governmental Authority or any other Person in respect of any Requirement of Law
which has not already been obtained, performed or made, and no waiting period
under any Requirement of Law which has not heretofore lapsed, is necessary or
required in connection with the execution, delivery or performance before the
Closing Date by, or the enforcement against, the Borrower and its Subsidiaries
of this Agreement and the other Loan Documents or the transactions contemplated
hereby or thereby, except for such approvals, consents, compliance, exemptions,
authorizations or actions, notices or filings as are set forth on Schedule 6.3
hereto.
6.4. Binding Effect. This Agreement and each of the other Loan
Documents to which the Borrower or any of its Subsidiaries is a party will, upon
the due execution and delivery thereof by the Borrower or such Subsidiary,
constitute the legal, valid and binding obligation of the Borrower or such
Subsidiary enforceable against the Borrower or such Subsidiary in accordance
with their respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity relating to enforceability.
6.5. Capitalization. All outstanding shares of capital stock of the
Borrower have been duly authorized. Except for the Warrant and as set forth on
Schedule 6.5 hereto, there are no outstanding subscriptions, warrants, options,
calls, commitments or other rights (preemptive or otherwise) or agreements to
which the Borrower or, to the knowledge of the Borrower, any shareholder is
bound relating to the issuance, sale or redemption of shares of Common Stock,
Preferred Stock or other securities of the Borrower, and no shares of capital
stock or other securities of the Borrower are reserved for any purpose other
than issuance in connection with
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the Employee Stock Purchase Plan or the exercise of any Management Stock
Options, employee stock options or the Warrant.
6.6. Financial Information.
(a) Financial Statements. The Borrower has delivered to the Agent
and the Lenders (i) the audited consolidated balance sheets of the Borrower and
its consolidated Subsidiaries as at September 30, 1995, September 24, 1994 and
September 25, 1993, and the audited consolidated statements of operations, cash
flows and changes of stockholders' equity of the Borrower and its consolidated
Subsidiaries for the years then ended and (ii) the unaudited consolidated
balance sheet of the Borrower and its consolidated Subsidiaries as at December
30, 1995 and the unaudited consolidated statements of operations, cash flows,
and changes of stockholders' equity for each of the three months then ended (the
financial statements described in clauses (i) and (ii) are referred to
collectively as the "Financial Statements"). The Financial Statements fairly
present the financial position of the Borrower and its Subsidiaries on a
consolidated basis as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended in accordance with GAAP
applied on a consistent basis, subject, in the case of the unaudited financial
statement as at and for the three months ended December 30, 1995, to such
year-end adjustments which would not result in a Material Adverse Effect. The
Financial Statements have been prepared from the books and records of the
Borrower which accurately and fairly reflect, in all material respects, the
consolidated financial condition of the Borrower and its Subsidiaries as at the
dates thereof and their consolidated results of operations and cash flows for
the periods indicated. Except for indebtedness being incurred in connection with
the Loan Documents and for current liabilities incurred in the ordinary course
of business consistent with past practices (and not materially different in type
or amount), the Borrower and its Subsidiaries have no material liabilities or
obligations of any nature, whether accrued, absolute, contingent or otherwise,
whether due or to become due, whether properly reflected under GAAP as a
liability or a charge or reserve against an asset or equity account, and whether
or not the amount thereof is readily ascertainable, as of the date hereof which
are not otherwise reflected on the Borrower's balance sheets as at September 30
and December 30, 1995, including the notes thereto, or on Schedule 6.6(a)
attached hereto.
(b) Pro Forma Balance Sheet. The Pro Forma Balance Sheet was
prepared in a manner consistent with the audited consolidated balance sheet of
the Borrower and its Subsidiaries dated December 30, 1995 and in accordance with
GAAP, subject to such year-end adjustments which would not result in a Material
Adverse Effect.
(c) Projections. The Projections delivered on January 24, 1996
(including the assumptions contained therein) have
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been prepared by the Borrower in good faith taking into effect the past
operations of the Borrower and the other transactions contemplated by the Prior
Credit Facilities, the Note Purchase Agreement and the Recapitalization
Agreement.
6.7. Absence of Certain Changes. Except as set forth on Schedule 6.7
attached hereto or as contemplated hereby or by the other Loan Documents, since
September 30, 1995, the Borrower and its Subsidiaries have conducted their
business in all material respects in the ordinary course consistent with past
practices and there has not been (a) any event or change which would be
reasonably expected to have a Material Adverse Effect, (b) any issuance by the
Borrower or any of its Subsidiaries of any shares of capital stock, bonds or
other securities, (c) any declaration, setting aside or payment of any dividend
or other distribution with respect to the capital stock of the Borrower or any
of its Subsidiaries, (d) any borrowing or incurrence of liabilities, except
borrowings under its existing loan agreements in the ordinary course consistent
with past practices, (e) any changes by the Borrower or any of its Subsidiaries
in their accounting principles, practices or methods, (f) any sale, assignment,
pledge, mortgage or transfer of any of the assets, or cancellation of any debts
or claims, by the Borrower or any of its Subsidiaries, except in the ordinary
course consistent with past practices, (g) any payment, loan or advance of any
amount to or at the request of, or sale, transfer or lease of any properties or
assets of the Borrower or any of its Subsidiaries to, or the entering of any
agreement, arrangement or transaction with, any officer, director or employee or
affiliate of the Borrower or any of its Subsidiaries, or any business or entity
in which any such person or entity has any direct or indirect interest, or (h)
any development or combination of developments of which management of the
Borrower or any of its Subsidiaries has knowledge which would be reasonably
likely to result in an issuance of a qualified auditor's opinion with respect to
the Borrower's annual financial statements.
6.8. Litigation; Loss Contingencies. Except as set forth in Schedule
6.8 hereto, there are no legal actions, suits, proceedings, claims or disputes
pending, or to the knowledge of the Borrower threatened, at law, in equity, in
arbitration or before any Governmental Authority against or, to the Borrower's
knowledge, directly affecting the Borrower or any of its Subsidiaries (a) with
respect to this Agreement or any of the other Loan Documents, or any of the
transactions contemplated hereby or thereby, or (b) which, if adversely
determined, would have a Material Adverse Effect. No injunction, writ, temporary
restraining order, decree or order of any nature has been issued by any court or
other Governmental Authority purporting to enjoin or restrain the execution,
delivery or performance of this Agreement or any of the other Loan Documents.
There are no material "loss contingencies" (as defined in Statement of Financial
Accounting Standards No. 5 issued by the Financial Accounting Standards Board in
March 1975 ("FAS 5")), which would be required by FAS 5 to be disclosed or
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accrued in consolidated financial statements of the Borrower were such financial
statements prepared at the time this representation and warranty is made or
deemed made.
6.9. No Default or Breach. No default or event has occurred and is
continuing or would result from the consummation of the transactions
contemplated hereunder and under the other Loan Documents which constitutes or,
with the giving of notice or passage of time or both, would constitute an Event
of Default (as hereinafter defined). Except as set forth on Schedule 6.9
attached hereto, after giving effect to the transactions contemplated hereby and
by the other Loan Documents, neither the Borrower nor any of its Subsidiaries
nor, to the best of the Borrower's knowledge, with respect to any Material
Contract, any other party thereto, is or will be in default under or with
respect to any Contractual Obligation in any respect, which, individually or
together with all such defaults, could have a Material Adverse Effect.
6.10. Material Contracts. Each Material Contract is, and after giving
effect to the consummation of the transactions contemplated hereby and by the
other Loan Documents will be, in full force and effect in accordance with the
terms thereof, except to the extent any such Material Contract expires or
terminates in accordance with its terms as in effect on the Closing Date.
6.11. Related Party Agreements. Except as set forth on Schedule 6.11
hereto or as disclosed on the other schedules hereto, neither the Borrower nor
any of its Subsidiaries is a party to any contract, agreement or commitment (a)
with any director, officer or shareholder of the Borrower (both before and after
giving effect to the transactions contemplated hereby and by the other Loan
Documents), or, (b) to the Borrower's knowledge, with any Person in which any
such director, officer or shareholder has any direct or indirect interest.
6.12. Environmental Compliance. The properties and operations of the
Borrower and its Subsidiaries are in compliance in all material respects with
all applicable Environmental Laws, and there is no release or threatened release
of Hazardous Materials by the Borrower or, to the Borrower's knowledge, any
other Person at, under or about any properties operated by the Borrower which
could reasonably be expected to interfere with the continued operation of such
properties or materially impair the fair saleable value thereof. Neither the
Borrower nor any of its Subsidiaries has received any written notice of any
violation, alleged violation, non-compliance, liability or potential liability
regarding environmental matters or compliance with Environmental Laws with
regard to any of its properties or the operations conducted in connection
therewith, nor does the Borrower nor any of its Subsidiaries have knowledge or
reason to believe that any action, claim or proceeding is being threatened.
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6.13. Compliance with Law.
(a) Conduct of Business. Except as set forth on Schedule 6.13
attached hereto, the Borrower and its Subsidiaries have conducted their business
so as to comply with, and are in compliance with, all Requirements of Law,
except where the failure to so comply would not have a Material Adverse Effect.
(b) Licenses. The Borrower and its Subsidiaries have all permits,
certificates, licenses, approvals and other authorizations required by any
Governmental Authority in connection with the operation of their business,
except where the failure to obtain such requirements would not have a Material
Adverse Effect.
6.14. Title to Properties. The Borrower and each of its Subsidiaries
has good, marketable and legal title to, or a valid leasehold interest in, its
properties and assets, including those reflected on the consolidated balance
sheet of the Borrower and its Subsidiaries as at December 30, 1995, except for
assets disposed of since the date of such balance sheet in the ordinary course
of business.
6.15. Taxes. All Tax returns required to be filed on or prior to the
date hereof by the Borrower and its Subsidiaries with all taxing authorities
have been filed. All such returns are true and correct in all material respects.
The Borrower and its Subsidiaries have either paid or made provisions (subject
in the case of periods ending after September 30, 1995 to normal year-end
adjustments which are consistent with past practices and would not result in a
Material Adverse Effect) for all Taxes shown as due on such returns, and for all
other Taxes the non-payment of which could be reasonably expected to have a
Material Adverse Effect.
6.16. Employee Matters.
(a) List of Agreements. Except as shown on Schedule 6.16 hereto,
there are no agreements between the Borrower or any of its Subsidiaries and any
of their employees, consultants, officers and directors, or any other persons
performing services for the Borrower or such Subsidiary, relating to their
employment by or performance of services for the Borrower or such Subsidiary or
their compensation therefor, other than employment agreements with employees
terminable at will or on less than 60 days prior notice.
(b) ERISA Matters. Neither the Borrower nor any of its
Subsidiaries maintains or contributes to, nor has the Borrower or any such
Subsidiary (or any person or entity under "common control" with the Borrower, as
"common control" is defined in ERISA) heretofore maintained or contributed to
any "employee pension benefit plan" as defined in Section 3(2) of ERISA. The
Borrower has delivered to the Agent true copies of all Welfare Plans, and all of
such Welfare Plans and the administration thereof comply in all material
respects with the requirements of ERISA, the Code and
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all other Requirements of Law applicable thereto and the Borrower has received
no notice from any Governmental Authority of any failure to so comply which
failure has not been cured. All reports and returns with respect to the Welfare
Plans required to be filed with any Governmental Authority have been timely
filed. Each Welfare Plan that is a "group health plan" (as such term is defined
in Section 5000(b)(1) of the Code) has been administered and operated in all
material respects in compliance with the applicable requirements of Sections 601
through 607 of ERISA and Section 4980B(f) of the Code. The execution and
delivery of this Agreement and each of the other Loan Documents and the
consummation of the transactions contemplated hereby and thereby will not result
in any prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Code or any other violation of ERISA or any other
Requirement of Law related thereto.
(c) Labor Organizations. Except as set forth on Schedule 6.16
hereto, neither the Borrower nor any of its Subsidiaries is party to any
collective bargaining agreement with any labor union or similar organization,
nor does the Borrower or any of its Subsidiaries know of any such organization
which represents or claims to represent, is currently soliciting union
authorization cards from, or intends to organize, any of the employees of the
Borrower or any of its Subsidiaries.
6.17. Intellectual Property. The Borrower and its Subsidiaries
own, or have a license or otherwise have the right to use, in all jurisdictions
in which they carry on business, all patents (including all applications,
renewals, reissues, extensions, divisions, continuations and extensions
thereof), trademarks (including both registered and unregistered trademarks and
applications therefor), service marks, trade names, copyrights (including all
registrations, renewals, modifications and extensions thereof), and know-how and
trade secrets of material importance to the conduct of their business as
currently conducted (collectively, the "Intellectual Property"), without
violating or conflicting with the rights of others. Schedule 6.17 hereto lists
(a) all patents, all registered and material unregistered trademarks, service
marks and trade names and all registered copyrights, and all applications for
any of the foregoing that are owned by the Borrower or any of its Subsidiaries
and (b) all third parties who are licensed by the Borrower to distribute, market
or resell the Borrower's software products. Except as set forth on Schedule 6.17
hereto, none of the Intellectual Property is subject to any Lien other than
Permitted Liens. To the knowledge of the Borrower, the software currently
marketed by the Borrower (the "Borrower Software") does not infringe or violate
the patent, copyright, trademark, trade
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name service mark or trade secret rights of any other Person. To the knowledge
of the Borrower, no claim of any Person is pending or threatened to the effect
that any Borrower Software infringes upon or conflicts with any such rights of
any such Person. To the knowledge of the Borrower, no Person is infringing or
violating any patent, copyright, trademark, trade name service mark or trade
secret rights relating to any Borrower Software or any licensing agreement with
respect to the use of the Borrower Software. Except as set forth on Schedule
6.17 hereto, to the knowledge of the Borrower, no Person is using the Borrower
Software except pursuant to a license agreement with the Borrower. Except as set
forth on Schedule 6.17 hereto, each officer or technical employee of the
Borrower or any Subsidiary has executed and delivered to the Borrower a
confidentiality agreement in favor of the Borrower, substantially in form of one
of the agreements attached to Schedule 6.17 hereto.
6.18. Insurance. The properties and the conduct of the business of
the Borrower and its Subsidiaries are insured in such amounts and against such
risks and losses as are set forth on Schedule 6.18 attached hereto.
6.19. Books and Records. The books and records of the Borrower and
its Subsidiaries, including the minutes of director and shareholder meetings,
consents or actions, are accurate, current and complete in all material
respects.
6.20. Investment Company; Government Regulations. Both before and
after giving effect to the transactions contemplated by the Loan Documents,
neither the Borrower, any of its Subsidiaries nor any Person controlling,
controlled by or under common control with the Borrower or any such Subsidiary
is an "investment company" within the meaning of the Investment Company Act of
1940, as amended; provided, however, that no representation is made with respect
to whether Warburg, Pincus Ventures, L.P. is an investment company under such
act. Neither the Borrower nor any of its Subsidiaries is subject to regulation
under the Public Utility Holding Borrower Act of 1935, as amended, the Federal
Power Act, the Interstate Commerce Act, or any federal or state statute or
regulation limiting its ability to incur Indebtedness. Neither the Borrower nor
any of its Subsidiaries is engaged principally or as one of its activities in
the business of extending credit for the purpose of "purchasing" or "carrying"
any "margin stock" (as each such term is defined or used in Regulations G and U
of the Board of Governors of the Federal Reserve System). No part of the
Purchase Price will be used for purchasing or carrying margin stock or for any
purpose which violates, or which would be inconsistent with, the provisions of
Regulations G, T, U or X of such Board of Governors.
6.21. Disclosure.
(a) This Agreement and Other Loan Documents. This Agreement and
the other Loan Documents (including any and all schedules and exhibits thereto),
and all other documents and certificates furnished to the Agent by the Borrower
or its Subsidiaries on or prior to the Closing did not and do not contain any
untrue statement of a material fact or omit, to the extent such agreements,
documents and certificates are taken as a whole, to
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state a material fact necessary in order to make the statements contained herein
or therein, in the light of the circumstances under which they were made, not
misleading.
(b) Material Adverse Effect. There is no fact known to the
Borrower or any of its Subsidiaries which the Borrower has not disclosed to the
Agent in writing that has had or could be reasonably expected to have a Material
Adverse Effect.
6.22. Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby or by the other Loan Documents based
on any agreement, arrangement or understanding with the Borrower or any of its
Subsidiaries or any action taken by the Borrower or any of its Subsidiaries.
6.23. Solvency Matters. After giving effect to the consummation of
the transactions contemplated by this Agreement and the other Loan Documents and
in each case determined on a consolidated basis, (a) the fair value of the
assets of the Borrower (both at fair valuation and at present fair saleable
value) will be greater than the total amount of liabilities, including,
contingent and unliquidated liabilities, of the Borrower, (b) the Borrower will
be able to pay all of its liabilities as they mature, and (c) the Borrower will
not have unreasonably small capital with which to carry on its business. In
computing the amount of contingent or unliquidated liabilities at any time, such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
ARTICLE VII
Affirmative Covenants
Until the Obligations have been paid and satisfied in full, and this
Agreement has been terminated in accordance with the terms hereof, unless the
Required Lenders shall otherwise consent in writing, the Borrower will, and
where applicable will cause each Subsidiary to:
7.1. Financial Reports, Etc. (a) As soon as practical and in any
event within 90 days after the end of each Fiscal Year of the Borrower, deliver
or cause to be delivered to the Agent and each Lender (i) consolidated and, if
there are any Material Subsidiaries, consolidating balance sheets of the
Borrower and its Subsidiaries as at the end of such Fiscal Year, and the notes
thereto, and the related consolidated and, if there are any Material
Subsidiaries, consolidating statements of income, stockholders' equity and cash
flows, and the respective notes thereto, for such Fiscal Year, setting forth
(other than for consolidating statements) comparative financial statements for
the
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preceding Fiscal Year, all prepared in accordance with GAAP applied on a
Consistent Basis and containing, with respect to the consolidated financial
statements, opinions of Coopers & Lybrand, L.L.P., or other such independent
certified public accountants selected by the Borrower and approved by the Agent,
which are unqualified as to the scope of the audit performed and as to the
"going concern" status of the Borrower and without any exception not reasonably
acceptable to the Lenders, and (ii) a certificate of an Authorized
Representative demonstrating compliance with Sections 8.1(a) through 8.1(d),
which certificate shall be in the form of Exhibit I;
(b) as soon as practical and in any event within 45 days after the end
of each fiscal quarter (except the last fiscal quarter of the Fiscal Year),
deliver to the Agent and each Lender (i) consolidated and, if there are any
Material Subsidiaries, consolidating balance sheets of the Borrower and its
Subsidiaries as at the end of such fiscal quarter, and the related consolidated
and, if there are any Material Subsidiaries, consolidating statements of income,
stockholders' equity and cash flows for such fiscal quarter and for the period
from the beginning of the then current Fiscal Year through the end of such
reporting period, and accompanied by a certificate of an Authorized
Representative to the effect that such financial statements present fairly the
financial position of the Borrower and its Subsidiaries as of the end of such
fiscal period and the results of their operations and the changes in their
financial position for such fiscal period, in conformity with the standards set
forth in Section 6.6(a) hereof with respect to interim financial statements, and
(ii) a certificate of an Authorized Representative containing computations for
such quarter comparable to that required pursuant to Section 7.1(a)(ii);
(c) together with each delivery of the financial statements required by
Section 7.1(a)(i), deliver to the Agent and each Lender a letter from the
Borrower's accountants specified in Section 7.1(a)(i) stating that in performing
the audit necessary to render an opinion on the financial statements delivered
under Section 7.1(a)(i), they obtained no knowledge of any Default or Event of
Default by the Borrower in the fulfillment of the terms and provisions of this
Agreement insofar as they relate to financial matters (which at the date of such
statement remains uncured); or if the accountants have obtained knowledge of
such Default or Event of Default, a statement specifying the nature and period
of existence thereof;
(d) together with each delivery of the financial statements required by
Section 7.1(b), deliver to the Agent and each Lender revised schedules to this
Agreement reflecting all changes thereto through the end of the fiscal quarter
to which such financial statements relate;
(e) promptly upon their becoming available to the Borrower, the
Borrower shall deliver to the Agent and each Lender a copy of
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(i) all regular or special reports or effective registration statements which
the Borrower or any Subsidiary shall file with the Commission or any securities
exchange, (ii) any proxy statement distributed by the Borrower or any Subsidiary
to its shareholders, bondholders or the financial community in general, and
(iii) any management letter or other report submitted to the Borrower or any
Subsidiary by independent accountants in connection with any annual, interim or
special audit of the Borrower or any Subsidiary;
(f) not later than the last Business Day of each Fiscal Year, deliver
to the Agent and each Lender a capital and operating expense budget and
consolidated financial projections for the Borrower and its Subsidiaries for the
next Fiscal Year;
(h) promptly, from time to time, deliver or cause to be delivered to
the Agent and each Lender such other information regarding Borrower's and any
Subsidiary's operations, business affairs and financial condition as the Agent
or such Lender may reasonably request.
The Agent and the Lenders are hereby authorized to deliver a copy of
any such financial or other information delivered hereunder to the Lenders (or
any affiliate of any Lender) or to the Agent, to any Governmental Authority
having jurisdiction over the Agent or any of the Lenders pursuant to any written
request therefor or in the ordinary course of examination of loan files, or to
any other Person who shall acquire or consider the assignment of, or acquisition
of any participation interest in, any Obligation permitted by this Agreement.
7.2. Maintain Properties. Maintain all properties necessary to its
operations in good working order and condition, make all needed repairs,
replacements and renewals to such properties, and maintain free from Liens
(other than Permitted Liens) all trademarks, trade names, patents, copyrights,
trade secrets, know-how, and other intellectual property and proprietary
information (or adequate licenses thereto), in each case as are reasonably
necessary to conduct its business as currently conducted or as contemplated
hereby, all in accordance with customary and prudent business practices.
7.3. Existence, Qualification, Etc. Except as otherwise expressly
permitted under Section 8.8, do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and all material rights
and franchises, and maintain its license or qualification to do business as a
foreign corporation and good standing in each jurisdiction in which its
ownership or lease of property or the nature of its business makes such license
or qualification necessary, except where the failure to so qualify would not
have a Material Adverse Effect.
7.4. Regulations and Taxes. Comply in all material respects with or
contest in good faith all statutes and governmental
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regulations and pay all taxes, assessments, governmental charges, claims for
labor, supplies, rent and any other obligation which, if unpaid, would become a
Lien against any of its properties except liabilities being contested in good
faith by appropriate proceedings diligently conducted and against which adequate
reserves acceptable to the Borrower's independent certified public accountants
have been established.
7.5. Insurance, Proceeds of Insurance and Condemnation. (a) Keep all of
its insurable properties adequately insured at all times with responsible
insurance carriers against loss or damage by fire and other hazards to the
extent and in the manner as are prudent when considered in light of the
Borrower's properties and businesses, (b) maintain general public liability
insurance at all times with responsible insurance carriers against liability on
account of damage to persons and property having such limits, deductibles,
exclusions, co-insurance and other provisions providing coverages that are
prudent when considered in light of the Borrower's properties and businesses,
such insurance policies to be in form reasonably satisfactory to the Agent, and
(c) maintain insurance under all applicable workers' compensation laws (or in
the alternative, maintain required reserves if self-insured for workers'
compensation purposes).
7.6. True Books. Keep true books of record and account in which full,
true and correct entries will be made of all of its dealings and transactions,
and set up on its books such reserves as may be required by GAAP with respect to
doubtful accounts and all taxes, assessments, charges, levies and claims and
with respect to its business in general, and include such reserves in interim as
well as year-end financial statements.
7.7. Right of Inspection. Permit any Person designated by any Lender or
the Agent to visit and inspect any of the properties, corporate books and
financial reports of the Borrower or any Subsidiary and to discuss its affairs,
finances and accounts with its principal officers and independent certified
public accountants, all at reasonable times, at reasonable intervals and with
reasonable prior notice to an Authorized Representative; provided, however, that
prior to the occurrence and continuance of an Event of Default, the costs
associated with all such visits and inspections by a Lender shall be borne by
such Lender and the costs associated with such visits and inspections by the
Agent, in excess of one visit and inspection each calendar year (the reasonable
costs with respect to which shall be borne by the Borrower) shall be borne by
the Agent. After the occurrence and during the continuation of an Event of
Default, all costs associated with such visits and inspections by the Agent or
any Lender shall be borne by the Borrower.
7.8. Observe all Laws. Conform to and duly observe in all material
respects all laws, rules and regulations and all other valid requirements of any
Governmental Authority with respect to
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the conduct of its business, except where the failure to do so would not have a
Material Adverse Effect.
7.9. Governmental Licenses. Obtain and maintain all licenses, permits,
certifications and approvals of all applicable Governmental Authorities as are
required for the conduct of its business as currently conducted, except where
the failure to do so would not have a Material Adverse Effect.
7.10. Covenants Extending to Other Persons. Cause each of its
Subsidiaries to do with respect to itself, its business and its assets, each of
the things required of the Borrower in Sections 7.2 through 7.9, and 7.19
inclusive.
7.11. Officer's Knowledge of Default. Upon any senior executive officer
of the Borrower obtaining knowledge of any Default or Event of Default hereunder
or under any other obligation of the Borrower or any Subsidiary to any Lender,
cause such officer or an Authorized Representative to reasonably promptly notify
the Agent of the nature thereof, the period of existence thereof, and what
action the Borrower or such Subsidiary proposes to take with respect thereto.
7.12. Suits or Other Proceedings. Upon any Authorized Representative of
the Borrower obtaining knowledge of any litigation or other proceedings being
instituted against the Borrower or any Subsidiary by any Person, including
without limitation any Governmental Authority, or any attachment, levy,
execution or other process being instituted against any assets of the Borrower
or any Subsidiary, making a claim or claims in an aggregate amount greater than
$1,000,000 not otherwise covered by insurance, reasonably promptly deliver to
the Agent written notice thereof stating the nature and status of such
litigation, dispute, proceeding, levy, execution or other process.
7.13. Notice of Discharge of Hazardous Material or Environmental
Complaint. Promptly provide to the Agent true, accurate and complete copies of
any and all notices, complaints, orders, directives, claims, or citations
received by the Borrower or any Subsidiary relating to any (a) violation or
alleged violation by the Borrower or any Subsidiary of any applicable
Environmental Law; (b) release or threatened release by the Borrower or any
Subsidiary, or at any facility or property owned or leased or operated by the
Borrower or any Subsidiary, of any Hazardous Material, except where occurring
legally; or (c) liability or alleged liability of the Borrower or any Subsidiary
for the costs of cleaning up, removing, remediating or responding to a release
of Hazardous Materials.
7.14. Environmental Compliance. If the Borrower or any Subsidiary shall
receive any letter, notice, complaint, order, directive, claim or citation
alleging that the Borrower or and Subsidiary has violated any Environmental Law
or is liable for the
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costs of cleaning up, removing, remediating or responding to a release of
Hazardous Materials, the Borrower shall, within the time period permitted by the
applicable Environmental Law or the Governmental Authority responsible for
enforcing such Environmental Law, remove or remedy, or cause the applicable
Subsidiary to remove or remedy, such violation or release or satisfy such
liability, except where the failure to do so is not reasonably likely to result
in a Material Adverse Effect or unless (a) the applicability of the
Environmental Law, (b) the fact of such violation, (c) its liability or (d) the
remediation of such violation proposed by any Governmental Authority is being
contested by the Borrower or the applicable Subsidiary by appropriate
proceedings diligently conducted and all reserves with respect thereto as may be
required under GAAP, if any, have been established.
7.15. Indemnification. Without limiting the generality of Section 12.9,
the Borrower hereby agrees to indemnify and hold the Agent and the Lenders, and
their respective officers, directors, employees and agents, harmless from and
against any and all claims, losses, penalties, liabilities, damages and expenses
(including assessment and cleanup costs and reasonable attorneys' fees and
disbursements) incurred by them and arising directly or indirectly from, out of
or by reason of (a) the violation of any Environmental Law by the Borrower or
any Subsidiary or with respect to any property owned, operated or leased by the
Borrower or any Subsidiary or (b) the handling, storage, treatment, emission or
disposal of any Hazardous Materials by or on behalf of the Borrower or any
Subsidiary or on or with respect to property owned or leased or operated by the
Borrower or any Subsidiary. Payment of amounts due pursuant to this Section 7.15
shall be made immediately upon written demand by the Agent or any Lender. The
Borrower shall not be liable under this Section 7.15 for any such amounts
arising solely as a result of the gross negligence or willful misconduct of any
indemnified party. The provisions of this Section 7.15 shall survive repayment
of the Obligations, occurrence of the Revolving Credit Termination Date and
expiration or termination of this Agreement.
7.16. Further Assurances. At the Borrower's cost and expense, upon
request of the Agent, duly execute and deliver or cause to be duly executed and
delivered, to the Agent such further instruments, documents, certificates,
financing and continuation statements, and do and cause to be done such further
acts that may be reasonably necessary or advisable in the reasonable opinion of
the Agent to carry out more effectively the provisions and purposes of this
Agreement and the other Loan Documents.
7.17. Employee Benefit Plans.
(a) With reasonable promptness, and in any event within thirty
(30) days thereof, give notice to the Agent of (a) the establishment of
any new Employee Benefit Plan (which notice shall include a copy of
such plan), (b) the commencement of
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contributions to any Employee Benefit Plan to which the Borrower or any
of its ERISA Affiliates was not previously contributing, (c) any
material increase in the benefits of any existing Employee Benefit
Plan, (d) each funding waiver request filed with respect to any
Employee Benefit Plan and all communications received or sent by the
Borrower or any ERISA Affiliate with respect to such request and (e)
the failure of the Borrower or any ERISA Affiliate to make a required
installment or payment under Section 302 of ERISA or Section 412 of the
Code by the due date;
(b) Promptly and in any event within fifteen (15) days of
becoming aware of the occurrence or forthcoming occurrence of any (a)
Termination Event or (b) nonexempt "prohibited transaction," as such
term is defined in Section 406 of ERISA or Section 4975 of the Code, in
connection with any Pension Plan or any trust created thereunder,
deliver to the Agent a notice specifying the nature thereof, what
action the Borrower or any ERISA Affiliate has taken, is taking or
proposes to take with respect thereto and, when known, any action taken
or threatened by the Internal Revenue Service, the Department of Labor
or the PBGC with respect thereto; and
(c) With reasonable promptness but in any event within fifteen
(15) days deliver to the Agent copies of (a) any unfavorable
determination letter from the Internal Revenue Service regarding the
qualification of an Employee Benefit Plan under Section 401(a) of the
Code, (b) all notices received by the Borrower or any ERISA Affiliate
of the PBGC's intent to terminate any Pension Plan or to have a trustee
appointed to administer any Pension Plan, (c) each Schedule B
(Actuarial Information) to the annual report (Form 5500 Series) filed
by the Borrower or any ERISA Affiliate with the Internal Revenue
Service with respect to each Pension Plan and (d) all notices received
by the Borrower or any ERISA Affiliate from a Multiemployer Plan
sponsor concerning the imposition or amount of withdrawal liability
pursuant to Section 4202 of ERISA. The Borrower will notify the Agent
in writing within five (5) Business Days of the Borrower or any ERISA
Affiliate obtaining knowledge or reason to know that the Borrower or
any ERISA Affiliate has filed or intends to file a notice of intent to
terminate any Pension Plan under a distress termination within the
meaning of Section 4041(c) of ERISA.
7.18. Continued Operations. Continue at all times to conduct its
business and engage principally in the same line or lines of business
substantially as heretofore conducted.
7.19. New Subsidiaries. Within thirty (30) days of the acquisition or
creation of any Subsidiary, cause to be delivered to the Agent for the benefit
of the Lenders each of the following:
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(a) if such Subsidiary is a Material Subsidiary, a Facility
Guaranty executed by such Material Subsidiary substantially in the form
of Exhibit E;
(b) an opinion of counsel to the Subsidiary dated as of the date
of delivery of the Facility Guaranty and addressed to the Agent and the
Lenders, in form and substance reasonably acceptable to the Agent
(which opinion may include assumptions and qualifications of similar
effect to those contained in the opinions of counsel delivered pursuant
to Section 5.1(a)), to the effect that (such opinion paragraphs to be
in the form of and to the extent set forth in the opinions delivered
pursuant to Section 5.1(a)(ii) hereof, where applicable):
(A) such Subsidiary is duly organized, validly existing and
in good standing in the jurisdiction of its formation, has the
requisite power and authority to own its properties and conduct
its business as then owned and then conducted and proposed to be
conducted; and
(B) the execution, delivery and performance of the Facility
Guaranty described in this Section 7.19 to which such Subsidiary
is a signatory have been duly authorized by all requisite
corporate or partnership action (including any required
shareholder or partner approval), each of such agreements has
been duly executed and delivered and constitutes the valid and
binding agreement of such Subsidiary, enforceable against such
Subsidiary in accordance with its terms, subject to the effect of
any applicable bankruptcy, moratorium, insolvency, reorganization
or other similar law affecting the enforceability of creditors'
rights generally and to the effect of general principles of
equity (whether considered in a proceeding at law or in equity);
(c) current copies of the charter documents, including
partnership agreements and certificate of limited partnership, if
applicable, and bylaws of such Subsidiary, minutes of duly called and
conducted meetings (or duly effected consent actions) of the Board of
Directors, partners, or appropriate committees thereof (and, if
required by such charter documents, bylaws or by applicable law, of the
shareholders) of such Subsidiary authorizing the actions and the
execution and delivery of documents described in this Section 7.19.
7.20. Compliance with Material Contracts. Comply with the terms of all
Material Contracts except to the extent (i) such noncompliance could not
reasonably be expected to have and does not have a Material Adverse Effect and
(ii) any such Material Contract expires or terminates in accordance with its
terms as in effect on the Closing Date.
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ARTICLE VIII
Negative Covenants
Until the Obligations have been paid and satisfied in full, and this
Agreement has been terminated in accordance with the terms hereof, unless the
Required Lenders shall otherwise consent in writing, the Borrower will not, nor
will it permit any Subsidiary to:
8.1. Financial Covenants.
(a) Consolidated Net Worth. Permit Consolidated Net Worth to be
less than (i) $51,795,059 at and from the Closing Date to but not
including the last day of each succeeding fiscal quarter of the
Borrower and (ii) at all times thereafter, adjusted as of each
Determination Date, the sum of (A) the amount of Consolidated Net Worth
required to be maintained pursuant to this Section 8.1(a) during the
fiscal quarter of the Borrower immediately preceding the fiscal quarter
ending on such Determination Date (or, with respect to the fiscal
quarter in which the Closing Date occurs, during the period commencing
on the Closing Date to but not including the last day of such fiscal
quarter), plus (B) 75% of Consolidated Net Income for the fiscal
quarter of the Borrower ending on such Determination Date (including
within "Consolidated Net Income" certain items otherwise excluded, as
provided for in the definition of "Consolidated Net Income"), plus (C)
50% of the aggregate amount of all increases in the stated capital and
additional paid in capital accounts of the Borrower resulting from an
Equity Offering or other capital investments consummated during the
fiscal quarter of the Borrower ending on such Determination Date.
(b) Consolidated Leverage Ratio. Permit the Consolidated Leverage
Ratio to be greater than 2.50 to 1.00 for the Four-Quarter Period ended
on any Determination Date.
(c) Consolidated Net Income. Permit the Consolidated Net Income
for any two consecutive fiscal quarters, measured as of each
Determination Date, to be less than $1.00.
8.2. Acquisitions. Consummate, or enter into any agreement, contract,
binding commitment or other arrangement providing for, any Acquisition, or take
any action to solicit the tender of securities or proxies in respect thereof in
order to effect any Acquisition, unless (i) the Person to be (or whose assets
are to be) acquired does not oppose such Acquisition and the line or lines of
business of the Person to be acquired are substantially the same as one or more
line or lines of business conducted by the Borrower and its Subsidiaries, (ii)
no Default or Event of Default shall exist immediately prior to and after giving
effect to such
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Acquisition and the Borrower shall have furnished to the Agent (A) pro forma
historical financial statements as of the end of the most recently completed
Fiscal Year of the Borrower and most recent interim fiscal quarter, if
applicable giving effect to such Acquisition and (B) a certificate in the form
of Exhibit I prepared on a historical pro forma basis giving effect to such
Acquisition, which certificate shall demonstrate that no Default or Event of
Default would exist immediately prior to and after giving effect thereto, (iii)
the Cost of Acquisition with respect to such Acquisition shall not exceed
$10,000,000, and (iv) after giving effect to such Acquisition, the aggregate
Costs of Acquisition incurred in any Fiscal Year (on a noncumulative basis, with
the effect that amounts not incurred in any Fiscal Year may not be carried
forward to a subsequent period) shall not exceed $15,000,000.
8.3. Liens. Incur, create or permit to exist any Lien, charge or other
encumbrance of any nature whatsoever with respect to any property or assets now
owned or hereafter acquired by the Borrower or any Subsidiary, other than the
following (all of which shall be collectively referred to as "Permitted Liens"):
(a) Liens existing as of the date hereof as set forth in Schedule
8.3 hereto;
(b) Liens imposed by law for taxes, assessments or charges of any
Governmental Authority for claims not yet due or which are being
contested in good faith by appropriate proceedings diligently
conducted, and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with GAAP;
(c) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law or
created in the ordinary course of business and in existence less than
90 days from the date of creation thereof for amounts not yet due or
which are being contested in good faith by appropriate proceedings
diligently conducted, and with respect to which adequate reserves or
other appropriate provisions are being maintained in accordance with
GAAP;
(d) Liens incurred or deposits made in the ordinary course of
business (including, without limitation, surety bonds and appeal bonds)
in connection with workers' compensation, unemployment insurance and
other types of social security benefits or to secure the performance of
tenders, bids, leases, contracts (other than for the repayment of
Indebtedness), statutory obligations and other similar obligations or
arising as a result of progress payments under government contracts;
(e) easements (including reciprocal easement agreements and
utility agreements), rights-of-way, covenants, consents,
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reservations, encroachments, variations and zoning and other
restrictions, charges or encumbrances (whether or not recorded), which
do not interfere materially with the ordinary conduct of the business
of the Borrower or any Subsidiary and which do not materially detract
from the value of the property to which they attach or materially
impair the use thereof to the Borrower or any Subsidiary; and
(f) purchase money Liens to secure Indebtedness permitted under
Section 8.4(d) and incurred to purchase fixed assets, provided such
Indebtedness represents not more than 75% of the purchase price of such
assets as of the date of purchase thereof and no property other than
the assets so purchased secures such Indebtedness.
(g) Liens on assets acquired in an Acquisition permitted under
Section 8.2 hereof so long as such Liens (i) are not incurred in
contemplation of such Acquisition and (ii) do not extend to any assets
other than the assets being acquired in such Acquisition.
8.4. Indebtedness. Incur, create, assume or permit to exist any
Indebtedness of the Borrower, howsoever evidenced, except:
(a) Indebtedness existing as of the date hereof and as set forth
in the consolidated balance sheet of the Borrower and its Subsidiaries
dated as of December 30, 1995 or on Schedule 6.6(a) and any extension,
renewal or refinancing thereof that does not increase the principal
amount thereof or interest rate payable thereon from that existing
immediately prior to such extension, renewal or refinancing; provided,
however, that none of the instruments and agreements evidencing or
governing such Indebtedness shall be amended, modified or supplemented
after the Closing Date to change any terms of subordination, repayment
or interest payable thereon or rights of conversion, put, exchange or
other rights from such terms and rights as in effect on the Closing
Date;
(b) Indebtedness owing to the Agent or any Lender in connection
with this Agreement, any Note or other Loan Document;
(c) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(d) purchase money Indebtedness described in Section 8.3(f) not to
exceed an aggregate outstanding amount at any time of $500,000;
(e) additional unsecured Indebtedness for Money Borrowed not
otherwise covered by clauses (a) through (e) above, provided that the
aggregate outstanding principal amount of
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all such other Indebtedness permitted under this clause (f) shall in no
event exceed $2,000,000 at any time;
(f) Indebtedness of a Person acquired in an Acquisition permitted
under Section 8.2 hereof so long as (i) such Indebtedness is not
incurred in contemplation of such Acquisition, (ii) neither the
Borrower nor any Subsidiary (other than the Person being acquired or a
Subsidiary of the Person being acquired) is liable for or assumes such
Indebtedness and such Indebtedness is, and continues after such
Acquisition to be, non-recourse to the Borrower and all Subsidiaries
(other than the Person acquired or a subsidiary of such Person) and
(iii) the aggregate principal amount of all such Indebtedness does not
exceed $4,000,000; and
(g) Indebtedness constituting part of the Cost of Acquisition of
any Acquisition permitted hereunder.
8.5. Capital Expenditures. Make or become committed to make Capital
Expenditures which exceed $2,000,000 in the aggregate in any Fiscal Year of the
Borrower (on a noncumulative basis, with the effect that amounts not expended in
any Fiscal Year may not be carried forward to a subsequent period).
8.6. Transfer of Assets. Sell, lease, transfer or otherwise dispose of
any assets of Borrower or any Subsidiary other than (a) dispositions of
inventory or sales or licensing of software in the ordinary course of business,
(b) dispositions of assets of the Borrower or any Subsidiary to a wholly owned
domestic Material Subsidiary which has delivered all documents required under
Section 7.19 hereof, or by any Subsidiary to the Borrower (c) dispositions of
equipment, inventory or other assets (in addition to dispositions thereof
permitted under clause (a) above) which, in the aggregate during any Fiscal
Year, have a fair market value or book value, whichever is less, of $500,000 or
less and are not replaced by similar assets having at least equivalent value,
(d) dispositions of equipment which is replaced by equipment of equal or greater
utility and value within thirty (30) days of the date of disposition thereof,
(e) dispositions of property that is substantially worn, damaged, obsolete or,
in the judgment of the Borrower, no longer best used or useful in its business
or that of any Subsidiary, (f) transfers of assets necessary to give effect to
merger or consolidation transactions permitted by Section 8.8, and (g) the
disposition of Eligible Securities in the ordinary course of management of the
investment portfolio of the Borrower and its Subsidiaries.
8.7. Investments. Purchase, own, invest in or otherwise acquire,
directly or indirectly, any stock or other securities, or make or permit to
exist any interest whatsoever in any other Person or permit to exist any loans
or advances to any Person, except that Borrower may maintain investments or
invest in:
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(a) securities of any Person acquired in an Acquisition permitted
hereunder;
(b) Eligible Securities;
(c) investments existing as of the date hereof and as set forth in
Schedule 6.1(b);
(d) accounts receivable arising and trade credit granted in the
ordinary course of business and any securities received in satisfaction
or partial satisfaction thereof in connection with accounts of
financially troubled Persons to the extent reasonably necessary in
order to prevent or limit loss;
(e) loans and advances to and investments in Subsidiaries which
are Guarantors;
(f) loans and advances to Subsidiaries who are not Guarantors
provided (i) the aggregate principal amount of such loans and advances
shall not exceed $500,000 and (ii) all evidence of such Indebtedness,
including any promissory notes, shall be pledged to the Agent for the
benefit of the Lenders;
(g) loans and advances to employees of the Borrower in the
ordinary course of business not in excess of $100,000 in aggregate
principal amount outstanding at any time; or
(h) investments in or contributions to Employee Benefit Plans
required under any such plans as in effect on the Closing Date or as
required under ERISA or the Code or the fiduciary standards thereunder.
8.8. Merger or Consolidation. (a) Consolidate with or merge into any
other Person, or (b) permit any other Person to merge into it, or (c) liquidate,
wind-up or dissolve or sell, transfer or lease or otherwise dispose of all or a
substantial part of its assets (other than sales permitted under Section 8.6
hereof) provided, however, (i) any Subsidiary of the Borrower may merge or
transfer all or substantially all of its assets into or consolidate with the
Borrower or any wholly owned domestic Material Subsidiary of the Borrower which
has delivered all documents required under Section 7.19 hereof, and (ii) any
other Person may merge into or consolidate with the Borrower or any Subsidiary
and any Subsidiary may merge into or consolidate with any other Person in order
to consummate an Acquisition permitted by Section 8.2 hereof.
8.9. Restricted Payments. Make any Restricted Payment or apply or set
apart any of their assets therefor or agree to do any of the foregoing.
8.10. Transactions with Affiliates. Enter into any transaction after
the Closing Date, including, without limitation, the purchase, sale, lease or
exchange of property, real or
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personal, or the rendering of any service, with any Affiliate of the Borrower,
except (a) that such Persons may render services to the Borrower or its
Subsidiaries for compensation at the same rates generally paid by Persons
engaged in the same or similar businesses for the same or similar services, (b)
that the Borrower or any Subsidiary may render services to such Persons for
compensation at the same rates generally charged by the Borrower or such
Subsidiary (c) in either case in the ordinary course of business and upon terms
no less favorable to the Borrower (or any Subsidiary) than would be obtained in
a comparable arm's-length transaction with a Person not an Affiliate of the
Borrower and (d) the Borrower may make Restricted Payments to any Affiliate of
the Borrower that are permitted under Section 8.9 hereto.
8.11. Compliance with ERISA. With respect to any Pension Plan, Employee
Benefit Plan or Multiemployer Plan:
(a) permit the occurrence of any Termination Event which would
result in a liability on the part of the Borrower or any ERISA
Affiliate to the PBGC; or
(b) permit for a period of thirty (30) or more consecutive days
the present value of all benefit liabilities under all Pension Plans to
exceed the current value of the assets of such Pension Plans allocable
to such benefit liabilities; or
(c) permit any accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code) to exist with respect
to any Pension Plan, whether or not waived, for a period in excess of
twelve (12) consecutive months; or
(d) fail to make any contribution or payment to any Multiemployer
Plan which the Borrower or any ERISA Affiliate may be required to make
under any agreement relating to such Multiemployer Plan, or any law
pertaining thereto; or
(e) engage, or permit any Borrower or any ERISA Affiliate to
engage, in any prohibited transaction under Section 406 of ERISA or
Sections 4975 of the Code for which a civil penalty pursuant to Section
502(i) of ERISA or a tax pursuant to Section 4975 of the Code may be
imposed; or
(f) permit the establishment of any Employee Benefit Plan
providing post-retirement welfare benefits or establish or amend any
Employee Benefit Plan which establishment or amendment could result in
liability to the Borrower or any ERISA Affiliate or increase the
obligation of the Borrower or any ERISA Affiliate to a Multiemployer
Plan which liability or increase, individually or together with all
similar liabilities and increases, is in excess of $200,000; or
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(g) fail, or permit the Borrower or any ERISA Affiliate to fail,
to establish, maintain and operate each Employee Benefit Plan in
compliance in all respects with the provisions of ERISA, the Code, all
applicable Foreign Benefit Laws and all other applicable laws and the
regulations and interpretations thereof, except where the failure to do
so would not have a Material Adverse Effect.
8.12. Fiscal Year. Change its Fiscal Year.
8.13. Dissolution, Etc. Wind up, liquidate or dissolve (voluntarily or
involuntarily) or commence or suffer any proceedings seeking any such winding
up, liquidation or dissolution, except in connection with (a) the dissolution or
liquidation of a Subsidiary in which all proceeds thereof are paid to the
Borrower and (b) a merger or consolidation permitted pursuant to Section 8.8.
8.14. Limitations on Sales and Leasebacks. Enter into any arrangement
with any Person providing for the leasing by the Borrower or any Subsidiary of
real or personal property, whether now owned or hereafter acquired in a related
transaction or series of related transactions, which has been or is to be sold
or transferred by the Borrower or any Subsidiary to such Person or to any other
Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of the Borrower or any
Subsidiary.
8.15. Negative Pledge Clauses. Enter into any agreement with any Person
other than the Agent and the Lenders pursuant to this Agreement or any other
Loan Documents which prohibits or limits the ability of any of the Borrower or
any Subsidiary to create, incur, assume or suffer to exist any Lien upon any of
its property, assets or revenues, whether now owned or hereafter acquired,
provided that the Borrower and any Subsidiary may enter into such an agreement
in connection with property acquired with the proceeds of purchase money
Indebtedness permitted hereunder.
ARTICLE IX
Events of Default and Acceleration
9.1. Events of Default. If any one or more of the following events
(herein called "Events of Default") shall occur for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
Governmental Authority), that is to say:
(a) if default shall be made in the due and punctual payment of
the principal of any Loan or other Obligation, when and as the same
shall be due and payable whether pursuant to
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any provision of Article II, at maturity, by acceleration or otherwise;
or
(b) if default shall be made in the due and punctual payment of
any amount of interest on any Loan or other Obligation or of any fees
or other amounts payable to any of the Lenders or the Agent pursuant to
the Loan Documents on the date on which the same shall be due and
payable and such default shall continue for three (3) or more Business
Days; or
(c) if default shall be made in the performance or observance of
any covenant set forth in Section 7.7, 7.11, 7.12, 7.19 or Article
VIII; or
(d) if a default shall be made in the performance or observance
of, or shall occur under, any covenant, agreement or provision
contained in this Agreement or the Notes (other than as described in
clauses (a), (b) or (c) above) and such default shall continue for
thirty (30) or more days after the earlier of receipt of notice of such
default by the Authorized Representative from the Agent or a senior
executive officer of the Borrower becomes aware of such default, or if
a default shall be made in the performance or observance of, or shall
occur under, any covenant, agreement or provision contained in any of
the other Loan Documents (beyond any applicable grace period, if any,
contained therein) or in any instrument or document evidencing or
creating any obligation, guaranty, or Lien in favor of the Agent or any
of the Lenders or delivered to the Agent or any of the Lenders in
connection with or pursuant to this Agreement or any of the
Obligations, or if any Loan Document ceases to be in full force and
effect (other than by reason of any action by the Agent), or if without
the written consent of the Lenders, this Agreement or any other Loan
Document shall be disaffirmed or shall terminate, be terminable or be
terminated or become void or unenforceable for any reason whatsoever
(other than in accordance with its terms in the absence of default or
by reason of any action by the Lenders or the Agent); or
(e) if a default shall occur, which is not waived, (i) in the
payment of any principal, interest, premium or other amount with
respect to any Indebtedness (other than the Loans and other
Obligations) of the Borrower or any Subsidiary in an amount not less
than $1,000,000 in the aggregate outstanding, or (ii) in the
performance, observance or fulfillment of any term or covenant
contained in any agreement or instrument under or pursuant to which
such Indebtedness may have been issued, created, assumed, guaranteed or
secured by the Borrower or any Subsidiary, and such default shall
continue for more than the period of grace, if any, therein specified,
or such default shall permit the holder of any such Indebtedness (or
any agent or trustee acting on behalf of one or more holders) to
accelerate the maturity thereof; or
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(f) if any representation, warranty or other statement of fact
contained in any Loan Document or in any writing, certificate, report
or statement at any time furnished to the Agent or any Lender by or on
behalf of the Borrower or any Material Subsidiary pursuant to or in
connection with any Loan Document, or otherwise, shall be false or
misleading in any material respect when given; or
(g) if the Borrower or any Material Subsidiary shall be unable to
pay its debts generally as they become due; file a petition to take
advantage of any insolvency statute; make an assignment for the benefit
of its creditors; commence a proceeding for the appointment of a
receiver, trustee, liquidator or conservator of itself or of the whole
or any substantial part of its property; file a petition or answer
seeking liquidation, reorganization or arrangement or similar relief
under the federal bankruptcy laws or any other applicable law or
statute; or
(h) if a court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee,
liquidator or conservator of the Borrower or any Material Subsidiary or
of the whole or any substantial part of its properties and such order,
judgment or decree continues unstayed and in effect for a period of
sixty (60) days, or approve a petition filed against the Borrower or
any Material Subsidiary seeking liquidation, reorganization or
arrangement or similar relief under the federal bankruptcy laws or any
other applicable law or statute of the United States of America or any
state, which petition is not dismissed within sixty (60) days; or if,
under the provisions of any other law for the relief or aid of debtors,
a court of competent jurisdiction shall assume custody or control of
the Borrower or any Material Subsidiary or of the whole or any
substantial part of its properties, which control is not relinquished
within sixty (60) days; or if there is commenced against the Borrower
or any Material Subsidiary any proceeding or petition seeking
reorganization, arrangement or similar relief under the federal
bankruptcy laws or any other applicable law or statute of the United
States of America or any state which proceeding or petition remains
undismissed for a period of sixty (60) days; or if the Borrower or any
Material Subsidiary takes any action to indicate its consent to or
approval of any such proceeding or petition; or
(i) if (i) any judgment where the amount not covered by
insurance (or the amount as to which the insurer denies liability) is
in excess of $500,000 is rendered against the Borrower or any
Subsidiary, or (ii) there is any attachment, injunction or execution
against any of the Borrower's or Subsidiaries' properties for any
amount in excess of $500,000 in the aggregate; and such judgment,
attachment, injunction or
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execution remains unpaid, unstayed, undischarged, unbonded or
undismissed for a period of sixty (60) days; or
(j) if the Borrower or any Material Subsidiary shall, other than
(i) in the ordinary course of business (as determined by past
practices), (ii) in connection with any asset sale permitted under
Section 8.6 hereof or (iii) (with respect only to a Material
Subsidiary) as a result of a merger permitted under Section 8.8 hereof,
suspend all or any part of its operations material to the conduct of
the business of the Borrower or any Material Subsidiary for a period of
more than sixty (60) days; or
(k) if the Borrower or any Material Subsidiary shall breach any
of the material terms or conditions of any Swap Agreement and such
breach shall continue beyond any grace period, if any, relating thereto
pursuant to the terms of such agreement, or if the Borrower or any
Material Subsidiary shall disaffirm or seek to disaffirm any such Swap
Agreement or any of its obligations thereunder; or
(l) other than as a result of any public Equity Offering, cause,
suffer or permit any Person or group of Persons acting in concert, to
own or control, directly or indirectly, more than 30% of the
outstanding securities of the Borrower having voting rights in the
election of directors, in each case to be determined on a fully diluted
basis and taking into account any outstanding securities or contract
rights exercisable, exchangeable or convertible into equity interests,
including without limitation the Series B Preferred Stock, the Series C
Preferred Stock, the Non-Voting Common Stock, any shares of Common
Stock which may be issued in connection with the exercise of Management
Stock Options and the Warrant;
(m) during any period of up to 24 consecutive months, commencing
after the Closing Date, cause, suffer or permit individuals who at the
beginning of such 24 month period were directors of the Borrower
(together with any new director whose election by the Borrower's Board
of Directors or whose nomination for election by the Borrower's
shareholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved) to cease for any reason to constitute a
majority of the directors of the Borrower then in office;
(n) cause, suffer or permit for a period of one (1) year
following the Closing Date, Warburg, Pincus Ventures, L.P. to own or
control directly less than 1% of the outstanding securities of the
Borrower having voting rights in the
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election of directors, determined as provided in clause (i) above; and
(o) cease to retain at least two of the following four
individuals, Robert F. Raco, Christine Shapleigh, Donald Cook and
Thomas Zajac, as executive officers of the Borrower.
then, and in any such event and at any time thereafter, if such Event of Default
or any other Event of Default shall have not been waived, any or all of the
following actions may be taken: (i) the Agent (A) with the consent of the
Required Lenders, may, and at the direction of the Required Lenders shall,
declare any obligation of the Lenders to make further Revolving Loans
terminated, whereupon the obligation of each Lender to make further Revolving
Loans hereunder shall terminate immediately, and (B) the Agent shall at the
direction of the Required Lenders, at their option, declare by notice to the
Borrower any or all of the Obligations to be immediately due and payable, and
the same, including all interest accrued thereon and all other obligations of
the Borrower to the Agent and the Lenders, shall forthwith become immediately
due and payable without presentment, demand, protest, notice or other formality
of any kind, all of which are hereby expressly waived, anything contained herein
or in any instrument evidencing the Obligations to the contrary notwithstanding;
provided, however, that notwithstanding the above, if there shall occur an Event
of Default under clause (g) or (h) above, then the obligation of the Lenders to
make Revolving Loans shall automatically terminate and any and all of the
Obligations shall be immediately due and payable without the necessity of any
action by the Agent or the Required Lenders or notice to the Agent or the
Lenders; and (ii) the Agent and each of the Lenders shall have all of the rights
and remedies available under each of the Loan Documents or under any applicable
law.
9.2. Agent to Act. In case any one or more Events of Default shall
occur and not have been waived, the Agent may, and at the direction of the
Required Lenders shall, proceed to protect and enforce their 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 or in
any other Loan Document, or to enforce the payment of the Obligations or any
other legal or equitable right or remedy.
9.3. Cumulative Rights. No right or remedy herein conferred upon the
Lenders or the Agent is intended to be exclusive of any other rights or remedies
contained herein or in any other Loan Document, 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.
9.4. No Waiver. No course of dealing between the Borrower and any
Lender or the Agent or any failure or delay on the part of
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any Lender or the Agent in exercising any rights or remedies under any Loan
Document or otherwise available to it shall operate as a waiver of any rights or
remedies and no single or partial exercise of any rights or remedies shall
operate as a waiver or preclude the exercise of any other rights or remedies
hereunder or of the same right or remedy on a future occasion.
9.5. Allocation of Proceeds. If an Event of Default has occurred and
not been waived, and the maturity of the Notes has been accelerated pursuant to
this Article IX, all payments received by the Agent hereunder, in respect of any
principal of or interest on the Obligations or any other amounts payable by the
Borrower hereunder, shall be applied by the Agent in the following order:
(a) amounts due to the Lenders pursuant to Sections 2.9 and 11.5;
(b) amounts due to the Agent pursuant to Section 10.11;
(c) payments of interest on Loans to be applied for the ratable
benefit of the Lenders;
(d) payments of principal of Loans to be applied for the ratable
benefit of the Lenders;
(e) amounts due to the Lenders pursuant to Sections 7.15 and 11.9;
(f) payments of all other amounts due under any of the Loan
Documents, if any, to be applied for the ratable benefit of the
Lenders; and
(g) any surplus remaining after application as provided for
herein, to the Borrower or otherwise as may be required by applicable
law.
ARTICLE X
The Agent
10.1. Appointment. Each Lender hereby irrevocably designates and
appoints NationsBank as the Agent for the Lenders under this Agreement, and each
of the Lenders hereby irrevocably authorizes NationsBank as the Agent for such
Lender, to take such action on its behalf under the provisions of this Agreement
and the other Loan Documents and to exercise such powers as are expressly
delegated to the Agent by the terms of this Agreement and such other Loan
Documents, together with such other powers as are reasonably incidental thereto.
The Agent shall not have any duties or responsibilities, except those expressly
set forth herein, or any fiduciary relationship with any of the Lenders, and no
implied covenants, functions, responsibilities, duties, obligations or
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liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent.
10.2. Attorneys-in-fact. The Agent may execute any of its duties under
the Loan Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Agent shall not be responsible to the Lenders for the negligence, gross
negligence or willful misconduct of any agents or attorneys-in-fact selected by
it with reasonable care.
10.3. Limitation on Liability. Neither the Agent nor any of its
officers, directors, employees, agents or attorneys-in-fact shall be liable to
the Lenders for any action lawfully taken or omitted to be taken by it or them
under or in connection with the Loan Documents except for its or their own gross
negligence or willful misconduct. Neither the Agent nor any of its affiliates
shall be responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by the Borrower, any Guarantor or
any officer or representative thereof contained in any Loan Document, or in any
certificate, report, statement or other Document referred to or provided for in
or received by the Agent under or in connection with any Loan Document, or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of any Loan Document, or for any failure of the Borrower or any Guarantor to
perform its obligations under any Loan Document, or for any recitals,
statements, representations or warranties made, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of any collateral. The
Agent shall not be under any obligation to any of the Lenders to ascertain or to
inquire as to the observance or performance of any of the terms, covenants or
conditions of any Loan Document on the part of the Borrower or any Guarantor or
to inspect the properties, books or records of the Borrower or its Subsidiaries
or any other Guarantor.
10.4. Reliance. The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any Note, writing, resolution, notice, consent
certificate, affidavit, letter, cablegram, telegram, telefacsimile or telex
message, statement, order or other Document or conversation reasonably believed
by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower), independent
accountants and other experts selected by the Agent. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless an
Assignment shall have been filed with and accepted by the Agent. The Agent shall
be fully justified in failing or refusing to take any action under this
Agreement unless it shall first receive advice or concurrence of the Lenders or
the Required Lenders as provided in this Agreement or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be
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incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under the Loan Documents in accordance with a request of the Required
Lenders, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all present and future holders
of the Notes.
10.5. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender, the Authorized
Representative or the Borrower referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that the Agent receives such a notice, the Agent shall
promptly give notice thereof to the Lenders. The Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Required Lenders; provided that, unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Event of
Default as it shall deem advisable in the best interests of the Lenders.
10.6. No Representations. Each Lender expressly acknowledges that
neither the Agent nor any of its affiliates has made any representations or
warranties to it and that no act by the Agent hereafter taken, including any
review of the affairs of the Borrower, its Subsidiaries or any other Guarantor,
shall be deemed to constitute any representation or warranty by the Agent to any
Lender. Each Lender represents to the Agent that it has, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it has deemed appropriate, made its own appraisal of and
investigation into the financial condition, creditworthiness, affairs, status
and nature of the Borrower and each Guarantor and made its own decision to enter
into this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under the Loan Documents and to make such investigation as it deems necessary to
inform itself as to the status and affairs, financial or otherwise, of the
Borrower, its Subsidiaries and any other Guarantor. Except for notices, reports
and other documents expressly required to be furnished to the Lenders by the
Agent hereunder, the Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the affairs,
financial condition or business of the Borrower, its Subsidiaries and any other
Guarantor which may come into the possession of the Agent or any of its
affiliates.
10.7. Indemnification. Each of the Lenders agree to indemnify the Agent
in its capacity as such (to the extent not
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reimbursed by the Borrower or any Guarantor and without limiting any obligations
of the Borrower or any Guarantor to do so), ratably according to the respective
principal amount of the Notes held by them (or, if no Notes are outstanding,
ratably in accordance with their respective Applicable Commitment Percentages as
then in effect) from and against any and all liabilities, obligations, losses
(excluding any losses suffered by the Agent as a result of Borrower's failure to
pay any fee owing to the Agent), damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may at
any time (including without limitation at any time following the payment of the
Notes) be imposed on, incurred by or asserted against the Agent in any way
relating to or arising out of any Loan Document or any other Document
contemplated by or referred to therein or the transactions contemplated thereby
or any action taken or omitted by the Agent under or in connection with any of
the foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or willful misconduct. The agreements in this subsection shall
survive the payment of the Obligations and the termination of this Agreement.
10.8. Lender. The Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Borrower and
any Guarantor as though it were not the Agent hereunder. With respect to its
Loans made or renewed by it and any Note issued to it, the Agent shall have the
same rights and powers under this Agreement as any Lender and may exercise the
same as though it were not the Agent, and the terms "Lender" and "Lenders"
shall, unless the context otherwise indicates, include the Agent in its
individual capacity.
10.9. Resignation. If the Agent shall resign as Agent under this
Agreement, then the Required Lenders may appoint, with the consent, so long as
there shall not have occurred and be continuing a Default or Event of Default,
of the Borrower, which consent shall not be unreasonably withheld, a successor
Agent for the Lenders, which successor Agent shall be a commercial bank
organized under the laws of the United States or any state thereof, having a
combined surplus and capital of not less than $500,000,000, whereupon such
successor Agent shall succeed to the rights, powers and duties of the former
Agent and the obligations of the former Agent shall be terminated and canceled,
without any other or further act or deed on the part of such former Agent or any
of the parties to this Agreement; provided, however, that the former Agent's
resignation shall not become effective until such successor Agent has been
appointed and has succeeded of record to all right, title and interest in any
collateral held by the Agent; provided, further, that if the Required Lenders
and, if applicable, the Borrower cannot agree as to a successor Agent within
ninety (90) days after such resignation, the Agent shall appoint a successor
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Agent which satisfies the criteria set forth above in this Section 10.9 for a
successor Agent and the parties hereto agree to execute whatever documents are
necessary to effect such action under this Agreement or any other Document
executed pursuant to this Agreement; provided, however, that in such event all
provisions of the Loan Documents, shall remain in full force and effect. After
any retiring Agent's resignation hereunder as Agent, the provisions of this
Article X shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.
10.10. Sharing of Payments, Etc. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, set-off, counterclaim or
otherwise, obtain payment with respect to its Obligations (other than pursuant
to Article IV) which results in its receiving more than its pro rata share of
the aggregate payments with respect to all of the Obligations (other than any
payment pursuant to Article IV), then (a) such Lender shall be deemed to have
simultaneously purchased from the other Lenders a share in their Obligations so
that the amount of the Obligations held by each of the Lenders shall be pro rata
and (b) such other adjustments shall be made from time to time as shall be
equitable to insure that the Lenders share such payments ratably; provided,
however, that for purposes of this Section 10.10 the term "pro rata" shall be
determined with respect to the Revolving Credit Commitment of each Lender and to
the Total Revolving Credit Commitments after subtraction in each case of
amounts, if any, by which any such Lender has not funded its share of the
outstanding Loans and Obligations. If all or any portion of any such excess
payment is thereafter recovered from the Lender which received the same, the
purchase provided in this Section 10.10 shall be rescinded to the extent of such
recovery, without interest. The Borrower expressly consents to the foregoing
arrangements and agrees that each Lender so purchasing a portion of the other
Lenders' Obligations may exercise all rights of payment (including, without
limitation, all rights of set-off, banker's lien or counterclaim) with respect
to such portion as fully as if such Lender were the direct holder of such
portion.
10.11. Fees. The Borrower agrees to pay to the Agent, for its
individual account, an annual Agent's fee as from time to time agreed to by the
Borrower and Agent in writing.
ARTICLE XI
Miscellaneous
11.1. Assignments and Participations. (a) At any time after the Closing
Date each Lender may, with the prior consent of the Agent and the Borrower,
which consents shall not be unreasonably withheld, assign to one or more banks
or financial institutions all or a portion of its rights and obligations under
the Loan Documents (including, without limitation, all or a portion of any Note
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payable to its order); provided, that (i) each such assignment shall be of a
constant and not a varying percentage of the assigning Lender's rights and
obligations under the Revolving Credit Facility, (ii) for each assignment
involving the issuance and transfer of a Note, the assigning Lender shall
execute an Assignment and Acceptance and the Borrower hereby agrees to execute a
replacement Note to give effect to the assignment, (iii) the minimum aggregate
amount of a Revolving Credit Commitment which shall be assigned is $5,000,000,
(iv) such assignee shall have an office located in the United States, and (v) no
consent of the Borrower or the Agent shall be required in connection with any
assignment by a Lender to another Lender or to an affiliate of any Lender. Upon
such execution, delivery, approval and acceptance, from and after the effective
date specified in each Assignment and Acceptance, (x) the assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
or under any such Note have been assigned or negotiated to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
and a holder of such Note and (y) the assignor thereunder shall, to the extent
that rights and obligations hereunder or under such Note have been assigned or
negotiated by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under this Agreement. Any Lender who
makes an assignment shall pay to the Agent a one-time administrative fee of
$3,500 which fee shall not be reimbursed by the Borrower.
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) the assignment made
under such Assignment and Acceptance is made under such Assignment and
Acceptance without recourse; (ii) such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of the Borrower or its Subsidiaries or any other Guarantor or the
performance or observance by the Borrower of any of its obligations under any
Loan Document or any other instrument or Document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements delivered pursuant to Section
6.6 or Section 7.1, as the case may be, and such other Loan Documents and other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Agent, such assigning
Lender or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under any Loan Document; (v) such assignee appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under the Loan Documents as are delegated to the Agent by
the terms hereof and thereof, together with such powers as are reasonably
incidental thereto; and (vi) such assignee agrees that
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it will perform in accordance with their terms all of the obligations which by
the terms of the Loan Documents are required to be performed by it as a Lender
and a holder of such Notes.
(c) The Agent shall maintain at its address referred to herein a copy
of each Assignment and Acceptance delivered to and accepted by it.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender, the Agent shall give prompt notice thereof to Borrower.
(e) Nothing herein shall prohibit any Lender from pledging or
assigning, without notice to or consent of the Borrower and without the payment
of the administrative fee referred to in Section 11.1(a), any Note to any
Federal Reserve Bank in accordance with applicable law.
(f) Each Lender may sell participations at its expense to one or more
banks or other entities as to all or a portion of its rights and obligations
under this Agreement; provided, that (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any Note issued to it for the
purpose of this Agreement, (iv) such participations shall be of a constant and
not a varying percentage of the selling Lender's rights and obligations under
the Revolving Credit Facility, and shall be in an aggregate minimum amount of
$3,000,000, (v) the Borrower, the Agent and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and with regard to any and all
payments to be made under this Agreement; provided, that the participation
agreement between a Lender and its participants may provide that such Lender
will obtain the approval of such participant prior to such Lender's agreeing to
any amendment or waiver of any provisions of any Loan Document which would (A)
extend the maturity of any Note, (B) reduce the interest rates hereunder or (C)
increase the Revolving Credit Commitment, and (vi) the sale of any such
participations which require Borrower to file a registration statement with the
Commission or under the securities regulations or laws of any state shall not be
permitted.
(g) The Borrower may not assign any rights, powers, duties or
obligations under this Agreement or the other Loan Documents without the prior
written consent of all the Lenders.
11.2. Notices. Any notice shall be conclusively deemed to have been
received by any party hereto and be effective (i) on the day on which delivered
(including hand delivery by commercial courier service) to such party (against
receipt therefor), (ii) on the date of receipt at such address, telefacsimile
number or telex number as may from time to time be specified by such party in
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written notice to the other parties hereto or otherwise received), in the case
of notice by telegram, telefacsimile or telex, respectively (where the receipt
of such message is verified by return), (iii) on the Business Day after deposit
with a national overnight delivery service or (iv) on the fifth Business Day
after the day on which mailed, if sent prepaid by certified or registered mail,
return receipt requested, in each case delivered, transmitted or mailed, as the
case may be, to the address, telex number or telefacsimile number, as
appropriate, set forth below or such other address or number as such party shall
specify by notice hereunder:
(a) if to the Borrower:
Transition Systems, Inc.
One Boston Place
27th Floor
Boston, Massachusetts 02108
Attention: Robert E. Kinney,
Chief Financial Officer
Telephone: (617) 723-4222
Telefacsimile: (617) 723-8700
with a copy to:
Warburg, Pincus Ventures, L.P.
466 Lexington Avenue
New York, New York 10017
Attention: Patrick T. Hackett, Managing Director
Telephone: (212) 878-9405
Telefacsimile: (212) 878-9361
(b) if to the Agent:
NationsBank, N.A.
Independence Center
15th Floor, NC1 001-15-04
Charlotte, North Carolina 28255
Attention: Ms. Lori McIntosh
Telephone: (704) 388-1108
Telefacsimile: (704) 386-9923
with a copy to:
NationsBank
Technology Corporate Finance
901 Main Street, 67th Floor
Dallas, Texas 75202
Attention: Yousuf Omar
Senior Vice President
Telephone: (214) 508-9074
Telefacsimile: (214) 508-0980
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(c) if to the Lenders:
At the addresses set forth on the signature pages
hereof and on the signature page of each Assignment
and Acceptance.
11.3. Setoff. The Borrower agrees that the Agent and each Lender shall
have a Lien for all the Obligations of the Borrower upon all deposits or deposit
accounts, of any kind, or any interest in any deposits or deposit accounts
thereof, now or hereafter pledged, mortgaged, transferred or assigned to the
Agent or such Lender or otherwise in the possession or control of the Agent or
such Lender (other than for safekeeping) for any purpose for the account or
benefit of the Borrower and including any balance of any deposit account or of
any credit of the Borrower with the Agent or such Lender, whether now existing
or hereafter established, hereby authorizing the Agent and each Lender at any
time or times with prior notice to the Borrower (or with or without prior notice
to the Borrower during the continuance of an Event of Default) to apply such
balances or any part thereof to such of the Obligations of the Borrower to the
Lenders then past due and in such amounts as they may elect, and whether or not
the collateral or the responsibility of other Persons primarily, secondarily or
otherwise liable may be deemed adequate. For the purposes of this paragraph, all
remittances and property shall be deemed to be in the possession of the Agent or
such Lender as soon as the same may be put in transit to it by mail or carrier
or by other bailee.
11.4. Survival. All covenants, agreements, representations and
warranties made herein shall survive the making by the Lenders of the Loans and
the execution and delivery to the Lenders of this Agreement and the Notes and
shall continue in full force and effect so long as any of Obligations remain
outstanding or any Lender has any commitment hereunder or the Borrower has
continuing obligations hereunder unless otherwise provided herein. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and permitted assigns of such party and all
covenants, provisions and agreements by or on behalf of the Borrower which are
contained in the Loan Documents shall inure to the benefit of the successors and
permitted assigns of the Lenders or any of them.
11.5. Expenses. The Borrower agrees (a) to pay or reimburse the Agent
for all its reasonable out-of-pocket costs and expenses incurred in connection
with the preparation, negotiation and execution of, and any amendment,
supplement or modification to, any of the Loan Documents (including due
diligence expenses and travel expenses relating to closing), and the
consummation of the transactions contemplated thereby, including the reasonable
fees and disbursements of counsel to the Agent, (b) to pay or reimburse the
Agent and the Lenders for all their costs and expenses incurred in connection
with the enforcement or preservation of any rights under the Loan Documents,
including the reasonable fees and
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disbursements of their counsel and (c) to pay, indemnify and hold the Agent and
the Lenders harmless from any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any failure to pay or delay in
paying, documentary, stamp, excise and other similar taxes, if any, which may be
payable or determined to be payable in connection with the execution and
delivery of any of the Loan Documents, or consummation of any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
any Loan Document.
11.6. Amendments. No amendment, modification or waiver of any provision
of any Loan Document and no consent by the Lenders to any departure therefrom by
the Borrower or any Guarantor shall be effective unless such amendment,
modification or waiver shall be in writing and signed by the Agent, shall have
been approved by the Required Lenders through their written consent, and the
same shall then be effective only for the period and on the conditions and for
the specific instances and purposes specified in such writing; provided,
however, that, no such amendment, modification or waiver
(i) which changes, extends or waives any provision of
Section 2.6, Section 10.9 or this Section 11.6, the amount of or
the due date of any scheduled principal installment of or the
rate of interest payable on or fees payable with respect to any
Obligation, which changes the definition of Required Lenders,
which permits an assignment by the Borrower or any Guarantor of
its Obligations under any Loan Document, which reduces the
required consent of the Lenders provided hereunder, which
increases, decreases (other than pursuant to the express terms
hereof) or extends (other than pursuant to the express terms
hereof) the Revolving Credit Commitment of any Lender, or the
Total Revolving Credit Commitment, or which waives any condition
to the making of any Loan, shall be effective unless in writing
and signed by each of the Lenders; or
(ii) which releases the obligation of any Guarantor under
any Facility Guaranty shall be effective unless with the written
consent of each of the Lenders; or
(iii) which affects the rights, privileges, immunities or
indemnities of the Agent shall be effective unless in writing and
signed by the Agent.
Notwithstanding any provision of the other Loan Documents to the contrary, as
between the Agent and the Lenders, execution by the Agent shall not be deemed
conclusive evidence that the Agent has obtained the written consent of the
Required Lenders. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances, except as otherwise expressly provided herein. No delay or
omission on any Lender's or the Agent's part in exercising
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any right, remedy or option shall operate as a waiver of such or any other
right, remedy or option or of any Default or Event of Default.
11.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such fully-executed counterpart.
11.8. Termination. The termination of this Agreement shall not affect
any rights of the Borrower, the Lenders or the Agent or any obligation of the
Borrower, the Lenders or the Agent, arising prior to the effective date of such
termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into or rights created or obligations incurred
prior to such termination have been fully disposed of, concluded or liquidated
and the Obligations arising prior to or after such termination have been
irrevocably paid in full. The rights granted to the Agent for the benefit of the
Lenders under the Loan Documents shall continue in full force and effect,
notwithstanding the termination of this Agreement, until all of the Obligations
have been paid in full after the termination hereof (other than Obligations in
the nature of continuing indemnities or expense reimbursement obligations not
yet due and payable, which shall continue) or the Borrower has furnished the
Lenders and the Agent with an indemnification satisfactory to the Agent and each
Lender with respect thereto. All representations, warranties, covenants, waivers
and agreements contained herein shall survive termination hereof until payment
in full of the Obligations unless otherwise provided herein. Notwithstanding the
foregoing, if after receipt of any payment of all or any part of the
Obligations, any Lender is for any reason compelled to surrender such payment to
any Person because such payment is determined to be void or voidable as a
preference, impermissible setoff, a diversion of trust funds or for any other
reason, this Agreement shall continue in full force and the Borrower shall be
liable to, and shall indemnify and hold such Lender harmless for, the amount of
such payment surrendered until such Lender shall have been finally and
irrevocably paid in full. The provisions of the foregoing sentence shall be and
remain effective notwithstanding any contrary action which may have been taken
by the Lenders in reliance upon such payment, and any such contrary action so
taken shall be without prejudice to the Lenders' rights under this Agreement and
shall be deemed to have been conditioned upon such payment having become final
and irrevocable.
11.9. Indemnification; Limitation of Liability. In consideration of the
execution and delivery of this Agreement by the Agent and each Lender and the
extension of credit under the Loans, the Borrower hereby indemnifies, exonerates
and holds the Agent and each Lender and each of their respective officers,
directors, employees, agents and advisors (collectively, the "Indemnified
Parties") free and harmless from and against any and
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all claims, actions, causes of action, suits, losses, costs, liabilities and
damages, and expenses incurred in connection therewith (irrespective of whether
any such Indemnified Party is a party to the action for which indemnification
hereunder is sought), including reasonable attorneys' fees and disbursements
(collectively, the "Indemnified Liabilities") that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of, or in connection with the execution,
delivery, enforcement, performance or administration of this Agreement and the
other Loan Documents, or any transaction financed or to be financed in whole or
in part, directly or indirectly, with the proceeds of any Loan, whether or not
such action is brought against the Agent or any Lender, the shareholders or
creditors of the Agent or any Lender or an Indemnified Party or an Indemnified
Party is otherwise a party thereto and whether or not the transactions
contemplated herein are consummated, except to the extent such claim, damage,
loss, liability or expense is found in a final, non-appealable judgment by a
court of competent jurisdiction to have resulted from such Indemnified Party's
gross negligence or willful misconduct, and if and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Borrower hereby
agrees to make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities which is permissible under applicable law. The
Borrower agrees that no Indemnified Party shall have any liability (whether
direct or indirect, in contract or tort or otherwise) to it, any of its
Subsidiaries, any Guarantor, or any security holders or creditors thereof
arising out of, related to or in connection with the transactions contemplated
herein, except to the extent that such liability is found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct; provided,
however, in no event shall any Indemnified Party be liable for consequential,
indirect or special, as opposed to direct, damages.
11.10. Severability. If any provision of this Agreement or the other
Loan Documents shall be determined to be illegal or invalid as to one or more of
the parties hereto, then such provision shall remain in effect with respect to
all parties, if any, as to whom such provision is neither illegal nor invalid,
and in any event all other provisions hereof shall remain effective and binding
on the parties hereto.
11.11. Entire Agreement. This Agreement, together with the other Loan
Documents, constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all previous proposals, negotiations,
representations, commitments and other communications between or among the
parties, both oral and written, with respect thereto.
11.12. Agreement Controls. In the event that any term of any of the
Loan Documents other than this Agreement conflicts with any
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express term of this Agreement, the terms and provisions of this Agreement shall
control to the extent of such conflict.
11.13. Usury Savings Clause. Notwithstanding any other provision
herein, the aggregate interest rate charged under any of the Notes, including
all charges or fees in connection therewith deemed in the nature of interest
under applicable law shall not exceed the Highest Lawful Rate (as such term is
defined below). If the rate of interest (determined without regard to the
preceding sentence) under this Agreement at any time exceeds the Highest Lawful
Rate (as defined below), the outstanding amount of the Loans made hereunder
shall bear interest at the Highest Lawful Rate until the total amount of
interest due hereunder equals the amount of interest which would have been due
hereunder if the stated rates of interest set forth in this Agreement had at all
times been in effect. In addition, if when the Loans made hereunder are repaid
in full the total interest due hereunder (taking into account the increase
provided for above) is less than the total amount of interest which would have
been due hereunder if the stated rates of interest set forth in this Agreement
had at all times been in effect, then to the extent permitted by law, the
Borrower shall pay to the Agent an amount equal to the difference between the
amount of interest paid and the amount of interest which would have been paid if
the Highest Lawful Rate had at all times been in effect. Notwithstanding the
foregoing, it is the intention of the Lenders and the Borrower to conform
strictly to any applicable usury laws. Accordingly, if any Lender contracts for,
charges, or receives any consideration which constitutes interest in excess of
the Highest Lawful Rate, then any such excess shall be cancelled automatically
and, if previously paid, shall at such Lender's option be applied to the
outstanding amount of the Loans made hereunder or be refunded to the Borrower.
As used in this paragraph, the term "Highest Lawful Rate" means the maximum
lawful interest rate, if any, that at any time or from time to time may be
contracted for, charged, or received under the laws applicable to such Lender
which are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
11.14. GOVERNING LAW; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.
(a) THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND
CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE
INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW
YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION
AND DELIVERY OF
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THIS AGREEMENT, THE BORROWER EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF
JURISDICTION OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH
SUIT, ACTION OR PROCEEDING, AND THE BORROWER HEREBY IRREVOCABLY SUBMITS
GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN
ANY SUCH SUIT, ACTION OR PROCEEDING.
(b) THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE BY
PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR
CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF THE BORROWER
PROVIDED IN SECTION 11.2 HEREOF, OR BY ANY OTHER METHOD OF SERVICE
PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW
YORK.
(c) NOTHING CONTAINED IN SUBSECTIONS (A) OR (B) HEREOF SHALL
PRECLUDE THE AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE
COURTS OF ANY JURISDICTION WHERE THE BORROWER OR ANY OF THE BORROWER'S
PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY
THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, THE BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY
WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO
THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER
COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER
APPLICABLE LAW.
(d) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
OR REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE
BE DELIVERED IN CONNECTION THEREWITH, THE BORROWER, THE AGENT AND THE
LENDERS HEREBY AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY
SUCH ACTION OR PROCEEDING.
11.15. Confidentiality. Each Lender agrees that it will use its
reasonable best efforts to keep confidential and to cause any representative
designated under Section 7.7 to keep confidential any information from time to
time supplied to it by the Borrower or any Subsidiary; provided, however, that
nothing herein shall affect the disclosure of any such information to: (i) the
extent such Lender in good faith believes is required by statute, rule,
regulation or judicial process, (ii) counsel for such Lender or to its
accountants, (iii) bank or insurance examiners or auditors or comparable
persons, (iv) any representative or affiliate of such Lender, (v) any other
Lender, or any assignee, transferee or participant, or any potential assignee,
transferee or participant, of all or any portion of any
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Lender's rights under this Agreement or the Notes who is notified of the
confidential nature of the information and agrees to be bound by this provision
or provisions reasonably comparable hereto, or (vi) any other Person in
connection with any litigation to which any one or more of the Lenders is a
party. Each Lender agrees it will use all confidential information exclusively
for the purpose of evaluating, monitoring, selling, protecting or enforcing its
Loans. Without affecting any other rights of the Borrower and each Subsidiary,
each Lender acknowledges that the Borrower shall be entitled to seek the
remedies of injunction, specific performance and other equitable relief for any
breach of the provisions of this Section 11.15.
11.16. Termination of Prior Credit Facilities. The parties hereto
acknowledge and agree that as of the Closing Date the Prior Credit Facilities
and all commitments and obligations to lend thereunder are terminated, except
for such terms and provisions thereof which by their terms survive any such
termination.
[Signatures on following pages]
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be made, executed and delivered by their duly authorized officers as of the day
and year first above written.
TRANSITION SYSTEMS, INC.
By: /s/ Robert E. Kinney
---------------------------------
Name: Robert E. Kinney
Title: Chief Financial Officer
NATIONSBANK, N.A.,
as Agent for the Lenders
By: /s/ Yousuf Omar
---------------------------------
Name: Yousuf Omar
Title: Senior Vice President
CREDIT AGREEMENT
Signature page 1 of 4
<PAGE> 88
NATIONSBANK, N.A.
By: /s/ Yousuf Omar
------------------------------------
Name: Yousuf Omar
Title: Senior Vice President
Lending Office:
Independence Center
NC1 001-15-04
Charlotte, North Carolina 28255
Attention: Ms. Lori McIntosh
Telephone: (704) 388-1108
Telefacsimile: (704) 386-9923
Wire Transfer Instructions:
NationsBank, N.A.
ABA# 053000196
Account No.: 1366210022506
Reference: Transition Systems, Inc.
Attention: Ms. Lori McIntosh
CREDIT AGREEMENT
Signature page 2 of 4
<PAGE> 89
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Oscar Jazdowski
-------------------------------------
Name: Oscar Jazdowski
Title: Director
Lending Office:
100 Federal Street
Boston, Massachusetts 02110
Attention: Mike Walker
Telephone: (617) 434-9625
Telefacsimile: (617) 434-9821
Wire Transfer Instructions:
The First National Bank of Boston
ABA# 011-000-390
Account No.: _____________________
Reference: Transition Systems, Inc.
Attention: Mike Walker
CREDIT AGREEMENT
Signature page 3 of 4
<PAGE> 90
FLEET BANK OF MASSACHUSETTS, N.A.
By: /s/ Catherine M. Bruton
-------------------------------------
Name: Catherine M. Bruton
Title: Vice President
Lending Office:
75 State Street
Boston, Massachusetts 02109
Attention: Susan Koulouris
Telephone: (617) 346-1851
Telefacsimile: (617) 346-1633
Wire Transfer Instructions:
Fleet Bank of Massachusetts, N.A.
ABA# 011-000-138
Account No.: 1510350
Account Name: Incoming Loan Process
Reference: Transition Systems, Inc.
Attention: Agent Bank
CREDIT AGREEMENT
Signature page 4 of 4
<PAGE> 91
EXHIBIT A
Applicable Commitment Percentages
<TABLE>
<CAPTION>
Lender Revolving Applicable
- - ------ Credit Commitment
Commitment Percentage
---------- ----------
<S> <C> <C>
NationsBank, N.A. $10,000,000 40.0%
The First National
Bank of Boston $ 7,500,000 30.0%
Fleet Bank of $ 7,500,000 30.0%
Massachusetts, N.A. -----------
$25,000,000
</TABLE>
A-1
<PAGE> 1
Exhibit 11.1
TRANSITION SYSTEMS, INC.
<TABLE>
COMPUTATION OF PRO FORMA EARNINGS PER SHARE
<CAPTION>
March 30, 1996 March 25, 1995
-------------- --------------
<S> <C> <C>
For the three month period ended:
Net income ....................................... $ (910,000) $ 1,112,000
Pro forma common stock outstanding (1) ........... 10,087,776 10,087,776
Cheap stock (2) .................................. 3,500,425 3,500,425
Warrants ......................................... 297,928 297,928
Pro forma weighted average number of common shares
and common equivalent shares outstanding ....... 13,886,129 13,886,129
Pro forma net income per share ................... $ (0.07) $ 0.08
For the six months ended:
Net income ....................................... $ 269,000 $ 1,404,000
Pro forma common stock outstanding (1) ........... 10,087,776 10,087,776
Cheap stock (2) .................................. 3,500,425 3,500,425
Warrants ......................................... 297,928 297,928
Pro forma weighted average number of common shares
and common equivalent shares outstanding ....... 13,886,129 13,886,129
Pro forma net income per share ................... $ 0.02 $ 0.10
<FN>
(1) Gives effect to the Recapitalization. See "Certain Transactions - Recapitalization." See
notes 2 and 13 of Notes to Consolidated Financial Statements included in the Company's
Registration Statement on Form S-1, File No. 333-01758, as declared effective by the
Securities and Exchange Commission on April 17, 1996.
(2) Calculated in accordance with the Securities and Exchange Commission Staff Accounting
Bulletin No. 83 ("SAB 83") except that common stock issuable upon conversion of the
preferred stock is included in pro forma common stock outstanding and excluded from cheap
stock.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-30-1996
<EXCHANGE-RATE> 1
<CASH> 2,949
<SECURITIES> 0
<RECEIVABLES> 12,129
<ALLOWANCES> 1,262
<INVENTORY> 0
<CURRENT-ASSETS> 1,917
<PP&E> 3,717
<DEPRECIATION> 2,692
<TOTAL-ASSETS> 23,140
<CURRENT-LIABILITIES> 20,626
<BONDS> 0
<COMMON> 314
19,059
34,099
<OTHER-SE> (91,064)
<TOTAL-LIABILITY-AND-EQUITY> 23,140
<SALES> 0
<TOTAL-REVENUES> 14,076
<CGS> 0
<TOTAL-COSTS> 5,030
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 75
<INTEREST-EXPENSE> 619
<INCOME-PRETAX> 457
<INCOME-TAX> 188
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 269
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
