<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1998 Commission File Number 0-13617
LIFELINE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2537528
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
640 MEMORIAL DRIVE
Cambridge, Massachusetts 02139
(Address of principal executive offices) (Zip Code)
(617) 679-1000
(Registrant's telephone number, including area code)
__________________
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common stock $0.02 par value
----------------------------
(Title of Class)
Indicate by check mark whether the registrant (i) 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 (ii) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
Number of shares outstanding of this issuer's class of common stock as of July
31, 1998: 5,825,781
<PAGE>
LIFELINE SYSTEMS, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets - June 30, 1998
and December 31, 1997 3
Consolidated Statements of Income and Comprehensive
Income - Three and six months ended June 30, 1998 and 1997 4
Consolidated Statements of Cash Flows - Six months
ended June 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6-7
ITEM 2.
Management's Discussion and Analysis of Results of
Operations and Financial Condition 8-13
PART II. OTHER INFORMATION
ITEM 4.
Submission of Matters to a Vote of Security Holders 14
ITEM 5.
Other Information 14
ITEM 6.
Exhibits and Reports on Form 8-K 14
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<PAGE>
LIFELINE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,125 $ 2,019
Short-term investments 7,608 5,850
Accounts receivable, net 6,405 7,406
Inventories 1,329 1,375
Net investment in sales-type leases 1,499 1,444
Other current assets 1,065 1,045
Deferred income taxes 2,498 2,209
--------- ---------
Total current assets 24,529 21,348
Property and equipment, net 16,760 15,435
Goodwill, net 150 192
Net investment in sales-type leases 5,277 4,641
Other assets 653 653
--------- ---------
Total assets $ 47,369 $ 42,269
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,467 $ 1,352
Accrued expenses 3,397 1,954
Accrued payroll and payroll taxes 1,426 1,753
Accrued income taxes 507 229
Deferred revenues 699 714
Product warranty and other current liabilities 738 702
Accrued restructuring charge 1,877 2,324
--------- ---------
Total current liabilities 10,111 9,028
Deferred income taxes 3,181 2,136
Deferred compensation 1,213 975
Other non-current liabilities 294 413
Commitments
Stockholders' equity:
Common stock, $.02 par value, 20,000,000 shares authorized,
6,416,329 shares issued at June 30, 1998 and 6,375,750 shares
issued at December 31, 1997 128 128
Additional paid-in capital 16,618 16,340
Retained earnings 20,045 17,449
--------- ---------
36,791 33,917
Less: treasury stock at cost, 592,548 shares at June 30, 1998
and December 31, 1997 (4,028) (4,028)
Note receivable - officer (100) (100)
Cumulative translation adjustment (93) (72)
--------- ---------
Total stockholders' equity 32,570 29,717
--------- ---------
Total liabilities and stockholders' equity $ 47,369 $ 42,269
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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LIFELINE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(In thounsands except for per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------- -----------------
1998 1997 1998 1997
--------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues
Services $ 9,490 $ 7,771 $18,500 $15,120
Net product sales 6,193 6,192 11,797 12,110
Finance and rental income 334 280 672 569
------- ------- ------- -------
Total revenues 16,017 14,243 30,969 27,799
------- ------- ------- -------
Costs and expenses
Cost of services 5,511 4,226 10,611 8,156
Cost of sales 1,733 1,551 3,219 3,361
Selling, general and administrative 6,087 6,167 12,253 12,136
Research and development 400 459 775 888
------- ------- ------- -------
Total costs and expenses 13,731 12,403 26,858 24,541
------- ------- ------- -------
Income from operations 2,286 1,840 4,111 3,258
------- ------- ------- -------
Other income (expense)
Interest income 149 186 256 348
Interest expense (15) (1) (26) (3)
------- ------- ------- -------
Total other income, net 134 185 230 345
------- ------- ------- -------
Income before income taxes 2,420 2,025 4,341 3,603
Provision for income taxes 969 799 1,745 1,422
------- ------- ------- -------
Net income 1,451 1,226 2,596 2,181
Other comprehensive income, net of tax
Foreign currency translation adjustments (23) 16 (13) 1
------- ------- ------- -------
Comprehensive income $ 1,428 $ 1,242 $ 2,583 $ 2,182
======= ======= ======= =======
Net income per weighted average share:
Basic $0.25 $0.21 $0.45 $0.38
===== ===== ===== =====
Diluted $.023 $0.20 $0.41 $0.35
===== ===== ===== =====
Weighted average shares:
Basic 5,812 5,715 5,804 5,708
======= ======= ======= =======
Diluted 6,217 6,239 6,260 6,248
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
LIFELINE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
----------------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,596 $ 2,181
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,976 1,895
Deferred compensation 238 201
Deferred income taxes 756 330
Changes in operating assets and liabilities:
Accounts receivable 978 (249)
Inventories 46 (454)
Net investment in sales-type leases (691) (639)
Prepaid expenses, other current assets and other assets (20) 67
Accounts payable, accrued expenses and other liabilities 1,159 632
Income taxes payable 281 342
Accrued restructuring charge (447) -
------- -------
Net cash provided by operating activities 6,872 4,306
------- -------
Cash flows from investing activities:
Purchases of investments (4,735) (6,663)
Sales and maturities of investments 2,977 5,512
Additions to property and equipment (3,272) (4,495)
------- -------
Net cash used in investing activities (5,030) (5,646)
------- -------
Cash flows from financing activities:
Principal payments under capital lease obligations (6) (4)
Proceeds from issuance of common stock 278 278
Purchase of treasury stock - (522)
Issuance of treasury stock - 8
Repayment of note receivable, officer - 250
------- -------
Net cash provided by financing activities 272 10
------- -------
Effect of foreign exchange on cash (8) 27
------- -------
Net increase (decrease) in cash and cash equivalents 2,106 (1,303)
Cash and cash equivalents at beginning of period 2,019 3,030
------- -------
Cash and cash equivalents at end of period $ 4,125 $ 1,727
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
LIFELINE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The information furnished has been prepared from the accounts without audit.
In the opinion of the Company, the accompanying consolidated financial
statements contain all adjustments necessary, consisting only of those of a
normal recurring nature, to present fairly its consolidated financial
position as of June 30, 1998 and the consolidated results of its operations
and cash flows for the six months ended June 30, 1998 and 1997.
While the Company believes that the disclosures presented are adequate to make
the information not misleading, these statements should be read in conjunction
with the consolidated financial statements and the related notes included in
the Company's Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission on March 19, 1998 for the year ended December 31, 1997.
Certain amounts in the prior year have been reclassified from selling,
general, and administrative expenses to cost of services to conform to the
current presentation.
The results of operations for the three and six month periods ended June 30,
1998 are not necessarily indicative of the results expected for the full year.
2. Details of certain balance sheet captions are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- -----------
<S> <C> <C>
Inventories:
Purchased parts and assemblies $ 677 $ 827
Work-in-process 383 391
Finished goods 269 157
-------- --------
$ 1,329 $ 1,375
======== ========
Property and equipment:
Equipment $ 11,127 $ 10,410
Furniture and fixtures 688 659
Equipment leased to others 8,365 7,195
Equipment under capital leases 1,035 1,035
Leasehold improvements 751 751
Capital in progress 9,643 8,319
-------- --------
31,609 28,369
Less: accumulated depreciation
and amortization (14,849) (12,934)
-------- --------
$ 16,760 $ 15,435
======== ========
</TABLE>
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. The calculation of per share earnings is as follows:
<TABLE>
<CAPTION>
(In thousands except per share figures)
Three months ended Six months ended
June 30, June 30,
------------------- -----------------
1998 1997 1998 1997
--------- ------ ------- ------
<S> <C> <C> <C> <C>
Basic:
- ------
Net income $1,451 $1,226 $2,596 $2,181
Weighted average common shares outstanding 5,812 5,715 5,804 5,708
Net income per share, basic $ 0.25 $ 0.21 $ 0.45 $ 0.38
====== ====== ====== ======
Diluted:
- --------
Net income for calculating diluted earnings per share $1,451 $1,226 $2,596 $2,181
Weighted average common shares outstanding 5,812 5,715 5,804 5,708
Common stock equivalents 405 524 456 540
------ ------ ------ ------
Total weighted average shares 6,217 6,239 6,260 6,248
Net income per share, diluted $ 0.23 $ 0.20 $ 0.41 $ 0.35
====== ====== ====== ======
</TABLE>
4. In June, 1997, the Financial Accounting Standards Board issued Statement No.
131 ("SFAS" 131), "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131, which supersedes Statement No. 14, "Financial
Reporting for Segments of a Business Enterprise," changes the way public
companies report information about segments. SFAS 131, which is based on
management's approach to segment reporting, includes requirements to report
segment information quarterly and entity-wide disclosures about products and
services, major customers, and the material countries in which the entity
holds assets and reports revenues. SFAS 131 is effective for fiscal years
beginning after December 15, 1997. Restatement for earlier years is required
for comparative purposes unless impracticable. In addition, SFAS 131 need
not be applied to interim periods in the initial year; however, in
subsequent years, interim period information must be presented on a
comparative basis. The Company does not believe that the adoption of SFAS
131 will have a material impact on financial statement disclosures.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
This and other reports, proxy statements, and other communications to
stockholders, as well as oral statements by the Company's officers or its
agents, may contain forward-looking statements within the meaning of Section 21E
of the Securities Exchange Act of 1934, as amended, with respect to, among other
things, the Company's future revenues, operating income, or earnings per share.
Without limiting the foregoing, the words "believes," "anticipates," "plans,"
"expects," and similar expressions are intended to identify forward-looking
statements. There are a number of factors of which the Company is aware that
may cause the Company's actual results to vary materially from those forecast or
projected in any such forward-looking statement. These factors include, without
limitation, those set forth below under the caption "Certain Factors That May
Affect Future Results." The Company's failure to successfully address any of
these factors could have a material adverse effect on the Company's future
results of operations.
RESULTS OF OPERATIONS
Total revenues for the quarter ended June 30, 1998 were $16.0 million, a 12%
increase over total revenues of $14.2 million for the quarter ended June 30,
1997. For the six months ended June 30, 1998, total revenues were $31.0
million, up 11% over revenues of $27.8 million during the same period in 1997.
Service revenues grew 22% to $9.4 million and $18.5 million for the three and
six months ended June 30, 1998, respectively. Service revenues represented 60%
of the Company's year to date total revenues, reflecting the Company's strategy
of growing the service business. The Company is now monitoring approximately
216,000 subscribers as of June 30, 1998, 23% more than the nearly 176,000
subscribers monitored at June 30, 1997. The Company's ability to sustain the
current level of service revenue growth depends on its ability to expand the
market for its personal response services, convert community hospital programs
to service provided by the Company and increase its focus on referral
development and innovative partner relationships in new channels of
distribution. The Company believes that the high quality of its services and
its commitment to providing caring and rapid response to the at-risk elderly and
physically challenged will be a factor in enabling the Company to meet this
challenge.
Net product revenues for the second quarter of 1998 remained consistent with the
second quarter of 1997 at $6.2 million. For the six months ended June 30, 1998,
net product revenues decreased slightly to $11.8 million from $12.1 million
for the six months ended June 30, 1997. Product sales continue to decline as a
result of the Company's strategy of providing the hardware as part of the
monthly service fee to support the transition to a service oriented business.
As a result, the Company expects continued declining product sales in future
periods as it continues packaging products and services into a single service
offering.
Finance and rental income, representing revenue earned from the Company's
portfolio of sales-type leases, increased 19% for the second quarter of 1998 to
$334,000, from $280,000 for the same period last year. For the six months ended
June 30, 1998, finance and rental income rose 18% to $672,000 as compared to
$569,000 for the six months ended June 30, 1997. The increase is a result of
the continued growth of the Company's internally managed and funded leasing
program. The Company
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<PAGE>
believes that the retention of new leases in its own portfolio will result in an
increase in finance income for the remainder of 1998.
Cost of services, as a percentage of service revenues, was 58% for the second
quarter of 1998 as compared to 54% for the second quarter of 1997. For the six
months ended June 30, 1998, cost of services was 57% of year to date service
revenues, as compared to 54% for the same period last year. Cost of services
remains high due to investments in personnel and additional costs of employee
retention and recruiting initiatives. These additional costs are associated
with the planned shut down of the Company's current corporate headquarters'
monitoring facility due to its upcoming corporate relocation. The Company is
also incurring higher costs associated with continued systems enhancements to
support the Company's current service infrastructure pending the introduction of
its approximately $12 million new call center platform. Through June 30, 1998,
the Company has invested nearly $8.9 million towards this new platform. These
expenditures are not expected to have a material impact on 1998 results of
operations since the platform is expected to begin to be placed in service in
late 1998. However, cost of services in future years is expected to be impacted
by the depreciation of these investments.
Cost of sales was 28% of net product sales for the three months ended June 30,
1998, compared with 25% for the same period a year ago. For the six months ended
June 30, 1998, cost of sales was 27% of year-to-date product revenues, as
compared to 28% for the six months ended June 30, 1997. The Company will
continue to focus on reducing its product costs for the balance of 1998.
Selling, general, and administrative expenses decreased as a percentage of total
revenues to 38% for the second quarter of 1998 as compared to 43% during the
second quarter of 1997. For the six months ended June 30, 1998 selling,
general, and administrative expenses decreased to 40% of total revenues as
compared to 44% of total revenues for the first six months of 1997. The
improvement in selling, general, and administrative expenses is mainly due to
the Company effectively reducing such costs in 1998, coupled with the minor
reduction in work force taken with the one-time reorganization charge in the
fourth quarter of 1997 and a significant decrease in amortization expense
because of the write-off of goodwill, also reflected in the reorganization
charge in the fourth quarter of 1997.
Research and development expenses were 2.5% of total revenues for the quarter
and six months ended June 30, 1998 as compared to 3% of total revenues for the
quarter and six months ended June 30, 1997. Research and development efforts
are focused on ongoing product improvements and developments. The Company
expects to maintain these expenses at approximately a consistent percentage of
total revenues for the remainder of 1998.
The Company's effective tax rate was 40.2% for the six months ended June 30,
1998 compared to 39.5% for the six months ended June 30, 1997. The increase in
the Company's rate was mainly due to the decrease of tax exempt interest income
from the Company's marketable securities portfolio.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1998, the Company's portfolio of cash, cash
equivalents, and investments increased $3.9 million to $11.7 million at June 30,
1998 from $7.9 million at December 31, 1997. The increase was mainly
attributable to profitable operations of $5.6 million. The Company also
experienced a significant increase in its accounts payable and accrued expenses,
primarily as a result of the timing of expenditures related to the development
of additional monitoring capacity, systems support, and sales and marketing
initiatives. These cash flows were in part offset by continued purchases of
property and equipment of $3.3 million in the first six months of 1998. These
purchases were associated with the continued development of the Company's new
response center platform at its primary monitoring facility, Company-owned
equipment provided directly to customers under comprehensive service agreements
and to subscribers not serviced by local Lifeline programs, and expenditures
associated with the Company's anticipated move to a new corporate facility.
In 1998, the Company expects to use a significant amount of its cash and
marketable securities as it continues to invest approximately $12 million in its
new response center platform. The Company has invested nearly $8.9 million
through June 30, 1998 and anticipates it will spend the remaining balance in
1998 as it continues to develop a flexible, scaleable, and fault tolerant
response center platform at its primary monitoring facility to support its
growing subscriber base.
In April, 1998, the Company secured a $10.0 million line of credit. This credit
agreement contains a number of covenants, including requirements that the
Company maintain certain levels of financial performance and capital structure,
limitations on the Company's capital and other expenditures, and restrictions on
the Company's capacity to secure additional debt financing. This line of credit
matures on June 30, 2004, and no amounts were outstanding as of June 30, 1998.
In November, 1997, the Company entered into a ten-year lease for an 84,000
square foot facility in Framingham, MA for its corporate headquarters. The
Company expects to occupy this new facility beginning in early 1999. Annual
rental payments under the lease approximate $775,000. The lease contains two
five-year options to renew at the end of the initial lease term. The Company is
currently evaluating possible alternatives for its existing lease. The Company
has spent approximately $300,000 through June 30, 1998 for capital expenditures
associated with the move and expects to spend an additional $2.2 million for
capital expenditures in 1998.
In July, 1998, the Company's Board of Directors adopted a Shareholder Rights
Plan in which common stock purchase rights will be distributed as a dividend at
the rate of one Right for each share of the Company's Common Stock outstanding
as of the close of business on August 3, 1998. This plan was adopted as a means
of deterring possible coercive or unfair takeover tactics and to prevent a
potential acquirer from gaining control of the company without offering a fair
price to all of the Company's shareholders. Unless the Rights are redeemed or
exchanged earlier, they will expire on July 24, 2008.
In January, 1997, the Company's Board of Directors approved the repurchase of up
to 100,000 shares of the Company's common stock from time to time in the open
market for general corporate purposes. Of the 100,000 shares approved, the
Company repurchased 60,700 shares through July, 1997, all of which were
repurchased from the Company's Chief Executive Officer. No additional shares
were purchased in the second quarter of 1998.
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<PAGE>
The Company expects that funding requirements for operations and in support of
future growth are expected to be met primarily from operating cash flow,
existing cash, and marketable securities. The Company expects these sources
will be sufficient to finance the cash needs of the Company through 1998
including the continued investment in its new response center platform, the 1998
move to its new corporate headquarters, the 1998 requirements of its internally
funded lease financing program, potential acquisitions, stock repurchases, and
other investments in support of its current business.
In June, 1997, the Financial Accounting Standards Board issued Statement No. 131
("SFAS" 131), "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131, which supersedes Statement No. 14, "Financial Reporting
for Segments of a Business Enterprise," changes the way public companies report
information about segments. SFAS 131, which is based on management's approach
to segment reporting, includes requirements to report segment information
quarterly and entity-wide disclosures about products and services, major
customers, and the material countries in which the entity holds assets and
reports revenues. SFAS 131 is effective for fiscal years beginning after
December 15, 1997. Restatement for earlier years is required for comparative
purposes unless impracticable. In addition, SFAS 131 need not be applied to
interim periods in the initial year; however, in subsequent years, interim
period information must be presented on a comparative basis. The Company does
not believe that the adoption of SFAS 131 will have a material impact on
financial statement disclosures.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The following important factors, among others, could cause actual results to
differ materially from those indicated by forward-looking statements made in
this Quarterly Report on Form 10-Q and presented elsewhere by management from
time to time.
The Company's results are partially dependent on its ability to develop services
and products that keep pace with continuing technological changes, evolving
industry standards, changing subscriber preferences and new service and product
introductions by the Company's competitors. Lifeline's future success will
depend on its ability to enhance its existing services and products (including
accessories), to introduce new service and product offerings to meet and adapt
to changing customer requirements and emerging technologies on a timely basis
and to offer such products and services at competitive prices. There can be no
assurance that Lifeline will be successful in identifying, developing,
manufacturing or marketing new services and products or enhancing its existing
services and products on a timely basis or that Lifeline will be able to offer
such services and products at competitive prices. Also, there can be no
assurance that services, products or technologies developed by others will not
render Lifeline's services or products noncompetitive or obsolete.
The Company is in the process of developing its new call center platform and may
experience risks and uncertainties associated with the development of new
information technology. These include the risks that such development effort
may not be completed on schedule, or at all, or within budget, or that future
developments in information technology will render the Company's system non-
competitive; the risks that the Company does not realize the intended benefits
from the new system, once completed; and the uncertainty associated with the
substantial commitment of funds to the development effort, including the risks
that the Company will have available significantly less cash to finance its
operations, other capital expenditures and future growth, including
acquisitions.
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<PAGE>
The Company anticipates moving to new corporate headquarters beginning in early
1999. The new facility is approximately 20 miles from the Company's current
headquarters. There can be no assurance that the move will not have a material
adverse effect on the Company's business, financial condition or results of
operations, and the Company is actively addressing potential issues.
The Company's growth is dependent on its ability to increase the number of
subscribers served by its monitoring centers. The Company's ability to continue
to increase service revenue is a key factor in its long-term growth, and there
can be no assurance that the Company will be able to do so. The Company's
failure to increase service revenue could have a material adverse effect on the
Company's business, financial condition, or results of operations.
The Company's equipment sales have continued to decline as a result of the
Company's strategy of combining service and hardware offerings to support the
transition to a service oriented business. There can be no assurance that
service revenue will increase at a rate sufficient to offset the expected
decrease in equipment sales.
The Company may expand its operations through the acquisition of additional
businesses. There can be no assurance that the Company will be able to
identify, acquire or profitably manage additional businesses or successfully
integrate any acquired businesses into the Company without substantial expenses,
delays or other operational or financial problems. In addition, acquisitions
may involve a number of special risks, including diversion of management's
attention, failure to retain key acquired personnel, unanticipated events,
contingent liabilities and amortization of acquired intangible assets. There can
be no assurance that the acquired businesses, if any, will achieve anticipated
revenues or earnings.
The Company sells a significant portion of its products to healthcare providers
which establish their own Lifeline programs. These healthcare providers
typically rent, rather than sell, the Lifeline products to subscribers and
accordingly following such time as a product is no longer used by a subscriber,
it is returned to the healthcare provider and becomes available for rent to
another subscriber. As a result of this use and reuse of the Company's
products, sales of such products are dependent on growth in the number of
subscribers and on the ability of the Company to encourage its healthcare
provider customers to replace their existing inventory by continuing to enhance
its products with new features.
The Company's monitoring operations are concentrated principally in its
corporate headquarters facility. Although the Company believes that it has
constructed safeguards to protect against system failures, the disruption of
service at its monitoring facility, whether due to telephone or electrical
failures, earthquakes, fire, the 1998 move to new corporate headquarters, or
other similar events or for any other reason, could have a material adverse
effect on the Company's business, financial condition, or results of operations.
The Company believes that its future success will also depend in large part upon
its ability to attract and retain key personnel, and there can be no assurance
that the Company will be successful in attracting and retaining such personnel.
In particular, the Company believes that its move to new headquarters in early
1999 may result in employee resignations and is actively addressing this
possibility.
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<PAGE>
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. This could result in
computer programs that have date-sensitive software recognizing a date using
"00" as the year 1900 rather than the year 2000. Such errors could cause a
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
The Company has implemented a formal Year 2000 program to determine the extent
of its own Year 2000 exposures. As part of this program, through June 30, 1998
the Company made further progress in determining whether any of its operating
systems (including its call center platform), products, equipment and machinery
need modifications or replacement to be in compliance with the Year 2000.
However, at this time, the Company still needs to complete its systematic
assessment and testing of all its systems, products, equipment and machinery to
determine compliance. The Company has designed its new call center platform to
be in compliance with the Year 2000.
In addition, the Company has not yet completed its assessment of whether third
parties with whom the Company has material relationships are Year 2000
compliant. The Company has initiated formal communications with such third
parties to determine the extent to which the Company is vulnerable to those
third parties' failure to resolve their own Year 2000 issue. Accordingly, the
Company has not yet determined its Year 2000 compliance expense and related
potential effect on the Company's earnings, and has not yet determined whether a
contingency plan is necessary.
There can be no assurance at this point in the process that the cost of
modifying or replacing its systems, products, equipment and machinery and of
developing and implementing contingency plans in the event such modifications
and replacements have not been completed or made and the Year 2000 problems of
third parties with whom the Company has material relationships have not been
remedied, would not have a material adverse effect on the Company's business,
financial condition or results of operations.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of the Company was held on May 20, 1998. The
stockholders of the Company elected members of the Board of Directors, approved
an amendment to the Company's Articles of Organization increasing the authorized
number of shares of Common Stock from 10,000,000 to 20,000,000, and ratified the
selection of PricewaterhouseCoopers LLP as the Company's auditors for 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON STOCK
---------------------------------------------------------
BROKER
FOR AGAINST ABSTAINED NON-VOTES
--------- ------- --------- ---------
<S> <C> <C> <C> <C>
Susan S. Bailis 5,411,279 - 21,987 -
Carolyn C. Roberts 5,410,579 - 21,687 -
Gordon C. Vineyard, M.D. 5,411,870 - 21,346 -
Amendment to Articles of Organization 5,177,269 239,774 16,223 -
Selection of PricewaterhouseCoopers LLP 5,423,098 7,400 2,768 -
</TABLE>
ITEM 5. OTHER INFORMATION
Persons named in the Company's proxy for the 1999 Annual Meeting of Stockholders
will have discretionary authority to vote on any matter proposed by a
stockholder for consideration at the 1999 Annual Meeting that is not included in
the Company's proxy statement relating to such meeting if the Company has not
received notice of such proposal by February 25, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K - No reports on Form 8-K were filed for the three
months ended June 30, 1998. A Form 8-K was filed on August 5, 1998.
(b) Exhibits - The Exhibits which are filed with this Report or which are
incorporated herein by reference are set forth in the Exhibit Index
which appears on page 16 hereof.
-14-
<PAGE>
LIFELINE SYSTEMS, INC.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
August 12, 1998 LIFELINE SYSTEMS, INC.
- --------------- ----------------------
Date Registrant
/s/ Ronald Feinstein
-----------------------
Ronald Feinstein
Chief Executive Officer
/s/ Dennis M. Hurley
-----------------------
Dennis M. Hurley
Vice President of Finance and
Administration, Principal Financial
and Accounting Officer
-15-
<PAGE>
EXHIBIT INDEX
The following designated exhibits are, as indicated below, either filed herewith
or have heretofore been filed with the Securities and Exchange Commission under
the Securities Act of 1933 or the Securities and Exchange Act of 1934 and are
referred to and incorporated herein by reference to such filings.
<TABLE>
<CAPTION>
SEC DOCUMENT
EXHIBIT NO. EXHIBIT REFERENCE
- ------------- ------------------------------------- ---------------------
<C> <S> <C>
EXHIBIT 3. ARTICLES OF INCORPORATION AND BY-LAWS
3.4 Articles of Amendment of Lifeline
Systems, Inc.
EXHIBIT 4. INSTRUMENTS DEFINING THE RIGHTS OF
SECURITY HOLDERS
4.2 Shareholder Rights Plan 8-K dated August 5, 1998
dated July 24, 1998
EXHIBIT 10. MATERIAL CONTRACTS
10.51 Revolving Line of Credit between State
Street Bank and Trust Company and the
Registrant, dated April 22, 1998
10.52 First amendment to lease agreement
between Registrant and Bishop/Clark
Associates Limited Partnership
dated June 30, 1998
</TABLE>
-16-
<PAGE>
Exhibit 3.4 FEDERAL IDENTIFICATION
NO. 04-2537528
-------------------
The Commonwealth of Massachusetts
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(GENERAL LAWS, CHAPTER 156B, SECTION 72)
We, Ronald Feinstein , "President/*****
----------------------------------------------------------
and Norman B. Asher , "Clerk/*********
----------------------------------------------------------
of Lifeline Systems, Inc.
----------------------------------------------------------------------------
(Exact name of corporation)
located at 640 Memorial Drive, Cambridge, MA 02139
--------------------------------------------------------------------
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered:
Article #3
- --------------------------------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)
of the Articles of Organization were duly adopted at a meeting held on May 20,
------
1998, by vote of:
--
4,902,377 shares of Common Stock of 5,803,096 shares
- --------- ------------------------------ ---------
(type, class & series, if any)
outstanding.
shares of of shares
- --------- ------------------------------ ---------
(type, class & series, if any)
outstanding and
shares of of shares
- --------- ------------------------------ ---------
(type, class & series, if any)
outstanding.
/1/ -- being at least a majority of each type, class or series outstanding and
entitled to vote thereon:/ or /2/ **********************************************
********************************************************************************
series of stock whose rights are adversely affected thereby:
VOTED: To increase the authorized shares of Common Stock.
* Delete the inapplicable words. ** Delete the inapplicable clause.
/1/ For amendments adopted pursuant to Chapter 156B. Section 70.
/2/ For amendments adopted pursuant to Chapter 156B. Section 71.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only of separate 8 1/2 x
11 sheets of paper with a left margin of at least 1 inch. Additions to more than
one article may be made on a single sheet so long as each article requiring each
addition is clearly indicated.
<PAGE>
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: None Common: 10,000,000 $0.02
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: None Preferred: None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Change the total authorized to:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: None Common: 20,000,000 $0.02
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: None Preferred: None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: ______________________________.
SIGNED UNDER THE PENALTIES OF PERJURY, this 28th day of May, 1998.
/s/ Ronald Feinstein Ronald Feinstein *President/******
- --------------------------------------------------
/s/ Norman B. Asher Norman B. Asher *Clerk/******
- --------------------------------------------------
*DELETE THE INAPPLICABLE WORDS
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(GENERAL LAWS, CHAPTER 156B, SECTION 72)
___________________________________________________________
___________________________________________________________
I hereby approve the within Articles of Amendment and, the
filing fee in the amount of $10,000,00 having been paid,
said articles are deemed to have been filed with me this
28th day of May 1998.
Effective date: ___________________________________________
/s/ William Francis Galvin
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Norman B. Asher, Esq.
----------------------------------------------------
c/o Hale and Dorr LLP
60 State Street
----------------------------------------------------
Boston, MA 02109
----------------------------------------------------
<PAGE>
Exhibit 10.51
REVOLVING CREDIT AGREEMENT
--------------------------
Dated as of April 22, 1998
between
LIFELINE SYSTEMS, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
Section 1. Definitions......................................................................... 1
1.1 Certain Definitions.......................................................... 1
1.2 Accounting Terms............................................................. 10
1.3 Rules of Interpretation...................................................... 10
Section 2. Loans............................................................................... 11
2.1 Revolving Credit Loans....................................................... 11
2.3 Conversion of Loans to a Different Type...................................... 11
2.4 Notes........................................................................ 12
2.5 Maturity..................................................................... 12
2.6 Termination or Reduction of Commitments...................................... 12
Section 3. Notice and Manner of Borrowing or Conversions of Loans.............................. 13
Section 4. Interest Rates; Fees; Payments...................................................... 14
4.1 Interest Rates............................................................... 14
4.2 Facility Fee................................................................. 15
4.3 Minimum and Maximum Amounts.................................................. 16
4.4 Computations................................................................. 16
4.5 Manner and Place of Payment.................................................. 16
4.6 Indemnity.................................................................... 17
4.7 Changed Circumstances; Illegality............................................ 17
4.8 Increased Costs.............................................................. 18
4.9 Capital Requirements......................................................... 19
4.10 Payments Due on Saturdays, Sundays and Holidays.............................. 19
4.11 Prepayments.................................................................. 20
Section 5. Conditions Precedent................................................................ 20
5.1 Conditions to Initial Loans.................................................. 20
5.2 Conditions Precedent to all Loans............................................ 22
Section 6. Representations and Warranties...................................................... 23
6.1 Corporate Status............................................................. 23
6.2 No Violation................................................................. 23
6.3 Corporate Power and Authority................................................ 24
6.4 Enforceability............................................................... 24
6.5 Consents or Approvals........................................................ 24
6.6 Financial Statements......................................................... 24
6.7 No Material Change........................................................... 25
6.8 Litigation................................................................... 25
6.9 Compliance with Other Instruments; Compliance with Law....................... 25
6.10 Subsidiaries................................................................. 25
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
6.11 Investment Company Status; Limits on Ability to Incur
Indebtedness................................................................................. 25
6.12 Title to Property............................................................................ 26
6.13 ERISA........................................................................................ 26
6.14 Taxes........................................................................................ 26
6.15 Environmental Matters........................................................................ 27
6.16 Intellectual Property........................................................................ 27
6.17 Disclosure................................................................................... 27
6.18 Defaults..................................................................................... 28
Section 7. Affirmative Covenants.................................................................................. 28
7.1 Use of Proceeds.............................................................................. 28
7.2 Conduct of Business; Maintenance of Existence................................................ 28
7.3 Compliance with Laws......................................................................... 28
7.4 Insurance.................................................................................... 28
7.5 Financial Statements, Etc.................................................................... 29
7.6 Notice of Default............................................................................ 30
7.7 Environmental Matters........................................................................ 30
7.8 Taxes and Other Liens........................................................................ 31
7.9 ERISA Information............................................................................ 31
7.10 Inspection................................................................................... 31
7.11 Further Assurances........................................................................... 31
Section 8. Negative Convenants.................................................................................... 32
8.1 Transactions with Affiliates................................................................. 32
8.2 Consolidation, Merger or Acquisition......................................................... 32
8.3 Disposition of Assets........................................................................ 33
8.4 Indebtedness................................................................................. 33
8.5 Guarantees................................................................................... 34
8.6 Liens........................................................................................ 34
8.7 Restricted Payments.......................................................................... 35
8.8 Investments.................................................................................. 35
8.9 Sale and Leaseback........................................................................... 36
8.10 ERISA........................................................................................ 36
8.11 Fiscal Year.................................................................................. 37
Section 9. Financial Covenants.................................................................................... 37
9.1 Net Income................................................................................... 37
9.2 Current Ratio................................................................................ 37
9.3 Leverage Ratio............................................................................... 37
Section 10. Events of Default...................................................................................... 37
10.1 Events of Default............................................................................ 37
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
10.2 Remedies Upon an Event of Default.............................. 39
Section 11. General.................................................................. 40
11.1 Amendments, Etc................................................ 40
11.2 Notices, Etc................................................... 40
11.3 No Waiver; Remedies............................................ 40
11.4 Right of Set-off............................................... 40
11.5 Expenses; Indemnification...................................... 41
11.6 Successors and Assigns......................................... 42
11.7 Severability................................................... 42
11.8 Confidentiality................................................ 42
11.9 Governing Law.................................................. 43
11.10 Waiver of Jury Trial........................................... 43
11.11 Venue, Consent to Service of Process........................... 43
11.12 Headings....................................................... 44
11.13 Counterparts................................................... 44
</TABLE>
EXHIBITS
A-1 - Revolving Credit Note
A-2 - Convertible Revolving Credit Note
B - Notice of Borrowing or Conversion
C - Compliance Certificate
SCHEDULES
A Disclosure Schedule
-iii-
<PAGE>
REVOLVING CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of April 22, 1998 by and among LIFELINE
SYSTEMS, INC., a Massachusetts corporation (the "Borrower"), having its
--------
principal place of business and chief executive office at 640 Memorial Drive,
Cambridge, Massachusetts 02139 and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company with its head office at 225 Franklin Street, Boston,
Massachusetts 02110 (the "Bank").
----
WHEREAS, the Borrower has requested the Bank to extend credit to the
Borrower in the form of loans and the Bank is willing to extend such credit upon
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions.
-----------
1.1 Certain Definitions. The following terms are used herein
-------------------
with the meanings assigned to them below:
"Accountants" shall mean Coopers and Lybrand L.L.P, or another accounting
-----------
firm of national reputation or other certified public accountants selected by
the Borrower and approved by the Bank.
"Adjusted Current Assets" shall mean, as of any applicable date, Current
-----------------------
Assets minus (i) the aggregate amount of any and all Prepaids and (ii) the
-----
aggregate amount of any Deferred Income Taxes.
"Affected Loans" shall have the meaning set forth in Section 4.8.
--------------
"Affiliate" shall mean, with respect to any specified Person (the
---------
"specified person"), any Person directly or indirectly controlling, controlled
----------------
by or under direct or indirect common control with, the specified person and,
without limiting the generality of the foregoing, includes (i) any director or
officer of the specified person or any Affiliate of the specified person, (ii)
any such director's or officer's parent, spouse, child or child's spouse (a
"relative"), (iii) any group acting in concert, of one or more such directors,
officers, relatives or any combination thereof (a "group"), (iv) any Person
controlled by any such director, officer, relative or group in which any such
director, officer, relative or group beneficially owns or holds 5% or more of
any class of voting securities or a 5% or greater equity or profits interest and
(v) any Person or group which beneficially owns or holds 5% or more of any class
<PAGE>
of voting securities or a 5% or greater equity or profits interest in the
specified person. For the purposes of this definition, the term "control" when
used with respect to any specified person means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such specified person, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" shall mean this Revolving Credit Agreement.
---------
"Applicable Margin" shall mean as of any date, with respect to Loans which
-----------------
are Fixed Rate Loans or LIBOR Rate Loans, the applicable percentage set forth
below opposite the applicable Leverage Ratio in effect at such date, provided
--------
however that during the period from the Closing Date through and including the
date on which quarterly financial statements are delivered for the fiscal
quarter ending March 31, 1998, the Applicable Margin for Fixed Rate Loans and
LIBOR Rate Loans shall be 0.75%.
Fixed Rate or LIBOR
-------------------
Leverage Ratio Rate Loans
-------------- ----------
greater than or equal to 1.00:1.00 1.25%
less than 1.00:1.00 and greater than or
equal to 0.75:1.00 1.00%
less than 0.75:1.00 0.75%
"Banking Day" shall mean any day, excluding Saturday and Sunday and
-----------
excluding any other day which in The Commonwealth of Massachusetts is a legal
holiday or a day on which banking institutions are authorized by law to close.
"Borrower" shall mean Lifeline Systems, Inc., a Massachusetts corporation.
--------
"Borrower Property" shall mean any real property owned, occupied, or
-----------------
operated by the Borrower or any of its Subsidiaries.
"Closing Date" shall mean the first date on which the conditions set forth
------------
in Section 5.1 have been satisfied or waived and any Loans are to be made
hereunder.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
----
successor statute.
"Commitments" shall mean the Revolving Credit Commitment and the
-----------
Convertible Revolving Credit Commitment.
-2-
<PAGE>
"Contractual Obligation" shall mean, as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Controlled Group" shall mean all members of a controlled group of the
----------------
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
"Convertible Revolving Credit Availability Expiration Date" shall have the
---------------------------------------------------------
meaning set forth in Section 2.2.
"Convertible Revolving Credit Commitment" shall have the meaning set forth
---------------------------------------
in Section 2.2.
"Convertible Revolving Credit Loan" shall have the meaning set forth in
---------------------------------
Section 2.2.
"Convertible Revolving Credit Maturity Date" shall mean June 30, 2004.
------------------------------------------
"Convertible Revolving Credit Note" shall have the meaning set forth in
---------------------------------
Section 2.4.
"Current Assets" shall mean, as of any application date, all amounts that
--------------
should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of the Borrower and any Subsidiaries at such date.
"Current Liabilities" shall mean, as of any applicable date, all amounts
-------------------
that should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of the Borrower and any Subsidiaries, at such date.
"Default" shall mean any condition or event that constitutes an Event of
-------
Default or that with the giving of notice or lapse of time or both would, unless
cured or waived, become an Event of Default.
"Deferred Income Taxes" shall mean liabilities of the Borrower and its
---------------------
Subsidiaries in respect of taxes that have been deferred in accordance with
GAAP.
"Environmental Laws" shall mean all federal, state, local and foreign laws,
------------------
and all regulations, notices or demand letters issued, promulgated or entered
thereunder, relating to pollution or protection of the environment and to
occupational health and safety, including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or Hazardous Substances into the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage,
-3-
<PAGE>
disposal, transport or handling of pollutants, contaminants, chemicals or
Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended, or any successor statues.
"Event of Default" shall have the meaning set forth in Section 10.1.
----------------
"Fixed Rate" shall mean with respect to any Fixed Rate Loan for any
----------
Interest Period, the interest rate per annum equal to the rate per annum quoted
by the Bank from time to time to its commercial customers generally as its "cost
of funds" rate.
"Fixed Rate Loan" shall mean at any time any Loan bearing interest at a
---------------
rate determined with reference to the Fixed Rate.
"GAAP" shall mean accounting principles generally accepted in the United
----
States applied on a consistent basis.
"Governmental Approval" shall mean any authorization, consent, order,
---------------------
approval, license, lease, ruling, permit, tariff, rate, certification,
validation, exemption, filing or registration by or with, or notice to, any
Governmental Authority.
"Governmental Authority" shall mean any federal, state, municipal or other
----------------------
governmental department, commission, board, bureau, agency, court, tribunal or
other instrumentality, domestic or foreign, and any arbitrator.
"Guarantee" by any Person shall mean any obligation, contingent or
---------
otherwise, of such Person directly or indirectly guaranteeing any Indebtedness
or other obligation of any other Person and, without limiting the generality of
the foregoing, any obligation, direct or indirect, contingent or otherwise of
such Person (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation (whether arising by virtue
of partnership arrangements, by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (b) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term Guarantee shall
--------
not include endorsements for collection or deposit in the ordinary course
of business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Substances" shall mean all hazardous and toxic substances,
--------------------
wastes or materials, hydrocarbons (including naturally occurring or man-made
petroleum and hydrocarbons), flammable explosives, urea formaldehyde insulation,
radioactive materials, biological substances, PCBs, pesticides and any other
kind and/or type of
-4-
<PAGE>
pollutants, or contaminates and/or any other similar substances or materials
which, because of toxic, flammable, explosive, corrosive, reactive, radioactive
or other properties that may be hazardous to human health or the environment,
are included under or regulated by any Environmental Laws.
"Indebtedness" of any Person at any date shall mean, (a) all indebtedness
------------
of such Person for borrowed money or for the deferred purchase price of property
or services (excluding current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices, but including
any class of capital stock of such Person with fixed payment obligations or with
redemption at the option of the holder) or which is evidenced by a note, bond,
debenture or similar instrument, (b) all obligations of such Person under leases
that should be treated as capitalized leases in accordance with GAAP, (c) all
obligations of such Person in respect of acceptances issued or created for the
account of such Person, and all reimbursement obligations (contingent or
otherwise) of such Person in respect of any letters of credit issued for the
account of such Person to the extent not secured by cash and without duplication
of any underlying Indebtedness, (d) all liabilities secured by any Lien on any
property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof, and (e) without duplication,
all Guaranties.
"Initial Financial Statements" shall have the meaning set forth in Section
----------------------------
6.6.
"Initial Financial Statements Date" shall mean December 31, 1997.
---------------------------------
"Intellectual Property" shall have the meaning specified in Section 6.16.
---------------------
"Interest Period" shall mean (i) with respect to each LIBOR Rate Loan, the
---------------
period commencing on the date of the making or continuation of or conversion to
such LIBOR Rate Loan and ending ninety (90), one hundred twenty (120) or three
hundred sixty (360) days thereafter, as the Borrower may elect in the applicable
Notice of Borrowing or Conversion; and (ii) with respect to each Fixed Rate
Loan, the period commencing on the date of the making or continuation of or
conversion to such Fixed Rate Loan and ending one (1), two (2), three (3), four
(4) or five (5) years thereafter, as the Borrower may elect in the applicable
Notice of Borrowing or Conversion; provided that:
--------
(i) any Interest Period (other than an Interest Period determined
pursuant to clause (iii) below) that would otherwise end on a day that is
not a Business Day shall be extended to the next succeeding Business Day
unless such Business Day falls in the next calendar month, in which case
such Interest Period shall end on the immediately preceding Business Day;
(ii) any Interest Period that 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
-5-
<PAGE>
the end of such Interest Period) shall, subject to clause (iii) below, end
on the last Business Day of a calendar month;
(iii) any Interest Period that would otherwise end after the
Convertible Revolving Credit Maturity Date or the Revolving Credit Maturity
Date, as the case may be, shall end on the applicable maturity date; and
(iv) notwithstanding clause (iii) above, no Interest Period shall
have a duration of less than one month, and if any Interest Period
applicable to a Loan would be for a shorter period, such Interest Period
shall not be available hereunder.
"Intangibles" shall mean all "general intangibles" (as defined in the
-----------
Uniform Commercial Code) now owned or hereafter acquired by the Debtor,
including, without limitation, all (a) obligations or indebtedness owing to
(other than Accounts) from whatever source arising, (b) patent licenses,
patents, trademark licenses, trademark, rights in intellectual property,
goodwill, trade names, service marks, trade secrets, copyrights, permits and
licenses, (c) inventions, processes, production methods, proprietary
information, know-how and trade secrets used or useful in the business of the
Debtor, (d) licenses or user or other agreements granted to the Debtor with
respect to any of the items described in clause (b) or (c) above, (e)
information, customer lists, identification of suppliers, data, plans,
blueprints, specifications, designs, drawings, recorded knowledge, surveys, test
reports, manuals, materials standards, catalogs, computer and automatic
machinery software and programs and the like pertaining to the business of the
Debtor, (f) sales data, and other information relating to sales or service of
products now or hereafter manufactured, (g) accounting information and all media
in which or on which any of the information or knowledge or data or records may
be recorded or stored and all computer programs used for the compilation or
printout of such information, knowledge, records or data, (h) causes of action,
claims and warranties now or hereafter owned or acquired by the Debtor in
respect of any of the items listed above and (i) tax refunds to which the Debtor
is entitled.
"Investments" shall mean, with respect to any Person (the "Investor"), any
-----------
investment by the Investor in any other Person, whether by means of share
purchase, capital contribution, purchase or other acquisition of a partnership
or joint venture interest, loan, deposit or otherwise, and the making of any
commitment or acquisition of any option to make an Investment.
"Leverage Ratio" shall mean as of the end of any fiscal quarter of the
--------------
Borrower the ratio of Total Liabilities to Tangible Net Worth as of the end of
such fiscal quarter.
"LIBOR Rate Loan" shall mean any Loan bearing interest at a rate determined
---------------
with reference to the LIBOR Rate.
-6-
<PAGE>
"LIBOR Rate" shall mean, with respect to any LIBOR Loan for any Interest
----------
Period, the rate of interest determined by the Lender to be the prevailing rate
per annum at which deposits in U.S. Dollars are offered to the Lender by
first-class banks in the interbank LIBOR market in which it regularly
participates on or about 10:00 a.m. (Boston time) two Banking Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the LIBOR Loan to which such Interest Period is to apply for
a period of time approximately equal to such Interest Period.
"LIBOR Reserve Percentage" shall mean for any Interest Period, the
------------------------
aggregate of the maximum reserve percentages (including any marginal, special,
emergency or supplemental reserves), expressed as a decimal, established by the
Board of Governors of the Federal Reserve System and any other banking
authority, domestic or foreign, to which the Bank is subject with respect to
"Eurocurrency Liabilities" (as defined in regulations issued from time to time
by such Board of Governors). The LIBOR Reserve Percentage shall be adjusted
automatically on and as of the effective date of any change in any such reserve
percentage.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any lease
that should be capitalized in accordance with GAAP, and the filing of a
financial statement under the UCC or comparable law of any jurisdiction),
together with any renewal or extension thereof.
"Loans" shall mean the Revolving Credit Loans and the Convertible Revolving
-----
Credit Loans.
"Loan Documents" shall mean, collectively, this Agreement, the Notes and
--------------
all other agreements and instruments that are from time to time executed in
connection with this Agreement, as each of such agreements and instruments may
be amended, modified or supplemented from time to time.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
-----------------------
business, operations, properties or condition (financial or otherwise) of the
Borrower or any of its Subsidiaries, (b) the ability of the Borrower to perform
its obligations under this Agreement, the Notes or any of the other Loan
Documents or (c) the validity or enforceability of this Agreement, the Notes or
any of the other Loan Documents.
"Maximum Rate" shall have the meaning set forth in Section 4.1(d).
------------
"Multiemployer Plan" shall mean at any time an employee pension benefit
------------------
plan within the meaning of Section 4001(a)(3) of ERISA to which the Borrower or
any member of the Controlled Group is then making or accruing an obligation to
make contributions or has within
-7-
<PAGE>
the preceding five plan years made contributions, including for these purposes
any Person which ceased to be a member of the Controlled Group during such five
year period.
"Net Income" or "Net Loss" for any period in respect of which the amount
---------- --------
thereof shall be determined, shall mean the aggregate of the consolidated net
income (or net loss) before taxes for such period of the Borrower, determined in
accordance with GAAP.
"Notes" shall mean the Revolving Credit Note and the Convertible Revolving
-----
Credit Note.
"Notice of Borrowing or Conversion" shall mean the notice, substantially in
---------------------------------
the form of Exhibit B hereto, to be given by the Borrower to the Bank to request
a Revolving Credit Loan or a Convertible Revolving Credit Loan or to convert an
outstanding Loan of one Type into a Loan of another Type, in accordance with
Section 3.
"Obligations" shall mean all obligations of the Borrower to the Bank of
-----------
every kind and nature under or in connection with this Revolving Credit
Agreement, the Notes or the other Loan Documents whether such obligations are
now existing or hereafter incurred or created, joint or several, direct or
indirect, absolute or contingent, due or to become due, matured or unmatured,
liquidated or unliquidated, arising by contract, operation of law or otherwise,
including, without limitation, (a) all principal of an interest (including,
without limitation, any interest which accrued after the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Borrower) on any advance or Loan to the Borrower under, or
the Notes issued by the Borrower pursuant to, this Agreement; (b) all other
amounts (including, without limitation, any fees or expenses) payable by the
Borrower under the Loan Documents; and (c) any renewals, refinancings or
extensions of any of the foregoing.
"Office of the Bank" shall mean the banking office of the Bank located at
------------------
225 Franklin Street, Boston, MA 02110 or such other location of which the Bank
shall notify the Borrower.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall have the meaning set forth in Section 8.6.
---------------
"Person" shall mean and include any individual, firm, corporation, trust or
------
other unincorporated organization or association or other enterprise or any
government or political subdivision, agency, department or instrumentality
thereof.
"Plan" means any employee pension benefit plan which is covered by Title IV
----
of ERISA or subject to the minimum funding standards under Section 412 of the
Code and is either (a) maintained by the Borrower or any member of the
Controlled Group for employees
-8-
<PAGE>
of the Borrower or any member of the Controlled Group or (b) maintained pursuant
to a collective bargaining agreement or any other arrangement under which more
than one employer makes contributions and to which the Borrower or any member of
the Controlled Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions.
"Post-Default Rate" shall mean with respect to any Loan, the rate of
-----------------
interest per annum equal to 3% above the interest rate otherwise applicable to
such Loan at the applicable time.
"Prepaids" shall mean prepaid expenses of the Borrower and its Subsidiaries
--------
as determined in accordance with GAAP.
"Prime Rate" shall mean the per annum rate of interest from time to time
----------
announced and made effective by the Bank as its Prime Rate (which rate may or
may not be the lowest rate available from the Bank at any given time).
"Prime Rate Loan" shall mean at any time the principal amount of the Loans
---------------
which bears interest at a rate based on the Prime Rate.
"Prohibited Transaction" means any "prohibited transaction" as defined in
----------------------
ERISA or the Code.
"Purchase Money Indebtedness" means Indebtedness incurred to finance the
---------------------------
acquisition of assets or the cost of improvements on real property or
leaseholds, in each case in an amount not in excess of the purchase or
acquisition cost of said assets or the cost of said improvements on the date of
the acquisition of said assets or contract for said improvements.
"Responsible Officer" shall mean the Chief Executive Officer, the President
-------------------
or the Chief Financial Officer of the Company.
"Restricted Payment" shall mean (a) any dividend or other distribution,
------------------
whether in cash or property in respect of any shares of capital stock of the
Borrower or (b) any purchase, redemption, retirement or acquisition for value of
(i) any shares of the capital stock of the Borrower or any of its Subsidiaries
or (ii) any option, warrant, convertible security or other right to acquire
shares of the capital stock of the Borrower.
"Revolving Credit Commitment" shall have the meaning specified in Section
---------------------------
2.1.
"Revolving Credit Loans" shall have the meaning set forth in Section 2.1.
----------------------
"Revolving Credit Maturity Date" shall mean June 30, 1999.
------------------------------
"Revolving Credit Note" shall have the meaning set forth in Section 2.4.
---------------------
-9-
<PAGE>
"SEC" means the Securities and Exchange Commission.
---
"Stated Rate" shall have the meaning set forth in Section 4.1(d).
-----------
"Subsidiary" shall mean, with respect to any Person, any corporation or
----------
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other Persons
performing similar functions are at the time directly or indirectly owned by
such Person.
"Tangible Net Worth" shall mean, at any date as of which the amount thereof
------------------
is to be determined, all assets that should, in accordance with GAAP, be
classified as assets on the consolidated balance sheet of the Borrower, minus
-----
(i) Total Liabilities at such date and (ii) all Intangibles.
"Total Liabilities" shall mean, at any time, the consolidated liabilities
-----------------
of the Borrower and its Subsidiaries at such time and (without duplication) any
Guaranties of the Borrower and its Subsidiaries, determined in accordance with
GAAP.
"Type" shall mean a Prime Rate Loan, a Fixed Rate Loan or a LIBOR Rate
----
Loan.
"Wholly-owned Subsidiary" shall mean, as to any Person, a Subsidiary of
-----------------------
such Person all of whose outstanding shares of capital stock (except directors'
qualifying shares) are owned directly or indirectly by such Person.
1.2 Accounting Terms. Unless otherwise specified herein, all
----------------
accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all financial
statements and certificates and reports as to financial matters required to be
delivered hereunder shall be prepared, in accordance with GAAP; provided that if
--------
any change in GAAP in itself materially affects the calculation of any financial
covenant in this Agreement, the Borrower may by notice to the Bank, or the Bank
may by notice to the Borrower, require that such covenant thereafter be
calculated in accordance with GAAP as in effect, and applied by the Borrower,
immediately before such change in GAAP occurs. If such notice is given, the
compliance certificates delivered pursuant to Section 7.5(c) after such change
occurs shall be accompanied by reconciliations of the difference between the
calculation set forth therein and a calculation made in accordance with GAAP as
in effect from time to time after such change occurs.
1.3 Rules of Interpretation.
-----------------------
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented and in effect from
time to time in accordance with its terms and the terms of this Agreement.
-10-
<PAGE>
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any Person includes its permitted successors and
permitted assigns.
(d) The words "include", "includes" and "including" are not limiting.
(e) The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Agreement as a whole and not to any particular
section or subdivision of this Agreement.
(f) All terms not specifically defined herein or by GAAP, which terms
are defined in the Uniform Commercial Code as in effect in the Commonwealth
of Massachusetts, shall have the meanings assigned to them in such Code.
Section 2. Loans.
-----
2.1 Revolving Credit Loans. Upon the terms and subject to
----------------------
conditions set forth herein, and in reliance upon the representations,
warranties and covenants of the Borrower herein, the Bank agrees to make loans
(each a "Revolving Credit Loan" and collectively the "Revolving Credit Loans")
--------------------- ----------------------
to the Borrower for the account of the Borrower at the Borrower's request from
time to time from and after the Closing Date and prior to the Revolving Credit
Maturity Date in an aggregate principal amount not to exceed at any one time
outstanding the sum of Five Million Dollars ($5,000,000) (the "Revolving Credit
----------------
Commitment"), as the same may be reduced or terminated pursuant to the
- ----------
provisions hereof; provided that the sum of all outstanding Revolving Credit
--------
Loans shall not at any time exceed the Revolving Credit Commitment. Within the
foregoing limits and subject to the terms and conditions hereof, the Borrower
may borrow, repay and reborrow Revolving Credit Loans at any time or from time
to time until the Revolving Credit Maturity Date.
2.2 Convertible Revolving Credit Loans. Upon the terms and subject
----------------------------------
to conditions set forth herein, and in reliance upon the representations,
warranties and covenants of the Borrower herein, the Bank agrees to make loans
(each a "Convertible Revolving Credit Loan" and collectively the "Convertible
--------------------------------- -----------
Revolving Credit Loans") to the Borrower for the account of the Borrower at the
- ----------------------
Borrower's request from time to time from and after October 1, 1998 and prior to
June 30, 1999 (the "Convertible Revolving Credit Availability Expiration Date")
---------------------------------------------------------
in an aggregate principal amount not to exceed at any one time outstanding the
sum of Five Million Dollars ($5,000,000) (the "Convertible Revolving Credit
----------------------------
Commitment"), as the same may be reduced or terminated pursuant to the
- ----------
provisions hereof; provided that the sum of all outstanding Convertible
--------
Revolving Credit Loans shall not at any time exceed the Convertible Revolving
Credit Commitment; provided further that, it shall be a condition to the making
----------------
of any Convertible Revolving Credit Loans that no Event of Default shall have
occurred prior to October 1, 1998; and provided further, that any unpaid
----------------
principal balance of
-11-
<PAGE>
Convertible Revolving Credit Loans outstanding as of the Convertible Revolving
Credit Availability Expiration Date will be payable in sixty (60) equal monthly
installments of principal plus accrued interest thereon, beginning on the first
date of each month following the Convertible Revolving Credit Availability
Expiration Date. Within the foregoing limits and subject to the terms and
conditions hereof, the Borrower may borrow, repay and reborrow Convertible
Revolving Credit Loans at any time or from time to time until the Convertible
Revolving Credit Availability Expiration Date.
2.3 Conversion of Loans to a Different Type. Upon the terms and
---------------------------------------
subject to the conditions of this Agreement, the Borrower may convert all or any
part of any outstanding Loan of one Type into a Loan of a different Type on any
Banking Day (which in the case of a conversion of a LIBOR Rate Loan or a Fixed
Rate Loan shall, subject to the provisions of Sections 4.6 and 4.11 be the last
day of the Interest Period applicable to such Loan). The Borrower shall give
the Bank prior notice of each such conversion (which notice shall be effective
upon receipt) in accordance with Section 3.
2.4 Notes. The Revolving Credit Loans shall be evidenced by the
-----
promissory note of the Borrower in the form attached hereto as Exhibit A-1,
----------
dated the date hereof (the "Revolving Credit Note") and shall be payable with
---------------------
interest in accordance with Section 4 below. The Convertible Revolving Credit
Loans shall be evidenced by the promissory note of the Borrower in the form
attached hereto as Exhibit A-2, dated the date hereof (the "Convertible
----------- -----------
Revolving Credit Note") and shall be payable with interest in accordance with
- ---------------------
Section 4 below.
2.5 Maturity. On the Revolving Credit Maturity Date, all Revolving
--------
Credit Loans shall mature and the Borrower shall pay in full the unpaid
principal balance of all Revolving Credit Loans, together with all unpaid
interest thereon and all fees and other amounts due with respect thereto. On
the Convertible Revolving Credit Maturity Date, all Convertible Revolving Credit
Loans shall mature and the Borrower shall pay in full the unpaid principal
balance of all Convertible Revolving Credit Loans, together with all unpaid
interest thereon and all fees and other amounts due with respect thereto.
2.6 Termination or Reduction of Commitments.
---------------------------------------
(a) The Revolving Credit Commitment shall terminate on the Revolving
Credit Maturity Date. Subject to the provisions hereof, the Borrower,
upon three (3) Banking Days' prior written notice to the Bank and the
repayment in full of the outstanding principal balance of the Revolving
Credit Loans (and accrued interest thereon) and the payment in full of any
expenses or other fees associated with the Revolving Credit Commitment owed
by the Borrower to the Bank under or pursuant to this Agreement, may elect
at any time to terminate in full the Revolving Credit Commitment
permanently. No such termination may be reinstated. The Borrower may also,
upon three (3) Banking Days' prior written notice to the Bank, permanently
-12-
<PAGE>
reduce the Revolving Credit Commitment in integral multiples of $500,000.
No such reduction may be reinstated.
(b) The Convertible Revolving Credit Commitment shall terminate on the
Convertible Revolving Credit Maturity Date. Subject to the provisions
hereof, the Borrower, upon three (3) Banking Days' prior written notice to
the Bank and the repayment in full of the outstanding principal balance of
the Convertible Revolving Credit Loans (and accrued interest thereon) and
the payment in full of any expenses or other fees associated with the
Convertible Revolving Credit Commitment owed by the Borrower to the Bank
under or pursuant to this Agreement, may elect at any time to terminate in
full the Convertible Revolving Credit Commitment permanently. No such
termination may be reinstated. The Borrower may also, upon three (3)
Banking Days' prior written notice to the Bank, permanently reduce the
Convertible Revolving Credit Commitment in integral multiples of $500,000.
No such reduction may be reinstated.
Section 3. Notice and Manner of Borrowing or Conversions of Loans.
------------------------------------------------------
(a) Whenever the Borrower desires to obtain a Loan or to convert an
outstanding Loan from one Type to another Type, the Borrower shall give the
Bank a written Notice of Borrowing or Conversion (or a telephonic notice
promptly confirmed by a written Notice of Borrowing or Conversion), which
Notice shall be irrevocable and which must be received no later than 12:00
p.m. Boston time on the date (i) which is the same Banking Day on which the
requested Loan is to be made or continued as or converted to a Prime Rate
Loan, and (ii) which is three Banking Days before the day on which the
request Loan is to be made or continued as or converted to a LIBOR Rate
Loan or a Fixed Rate Loan. Such Notice of Borrowing or Conversion shall
specify (i) whether such Loan is to be a Revolving Credit Loan or a
Convertible Revolving Credit Loan; (ii) the effective date and amount of
each Loan or portion thereof requested to be made, continued or converted,
subject to the terms and conditions hereof, (iii) the interest rate option
requested to be applicable thereto, and (iv) subject to the provisions of
the definition of the term "Interest Period", the duration of the
applicable Interest Period, if any (which, in the case of a LIBOR Rate Loan
or a Fixed Rate Loan shall be identical to the Interest Period for which
the Bank has quoted a LIBOR Rate or a Fixed Rate, as the case may be, in
accordance with subsection (b) below). If such Notice fails to specify the
interest rate option to be applicable to the requested Loan, then the
Borrower shall be deemed to have requested a Prime Rate Loan. If the
written confirmation of any telephonic notification differs in any material
respect from the action taken by the Bank, the records of the Bank shall
control absent manifest error.
(b) Upon request of the Borrower received by the Bank no later than
11:00 a.m., Boston time, on the date on which the Borrower must submit its
Notice of Borrowing or Conversion with respect to a Loan which is requested
to be a LIBOR Rate Loan or a Fixed Rate Loan pursuant to subsection (a)
above, the Bank shall, on or
-13-
<PAGE>
before 11:30 a.m. Boston time on such Banking Day, quote a LIBOR Rate or a
Fixed Rate, as the case may be, unless the Bank notifies the Borrower that
the Bank is not making LIBOR Rate Loans or Fixed Rate Loans available at
such time to its commercial customers and therefore declines to quote the
requested rate.
(c) Subject to the provisions of the definition of the term "Interest
Period" herein, the duration of each Interest Period shall be as specified
in the applicable Notice of Borrowing or Conversion. If the Bank receives a
Notice of Borrowing or Conversion after the time specified in subsection
(a) above, such Notice shall not be effective. If the Bank does not receive
an effective Notice of Borrowing or Conversion with respect to an
outstanding LIBOR Rate Loan or Fixed Rate Loan requesting the continuation
or conversion of such outstanding Loan, or if, when such Notice must be
given prior to the end of the Interest Period applicable to such
outstanding Loan, the Borrower shall fail to satisfy any of the conditions
hereof, the Borrower shall be deemed to have elected to convert such
outstanding Loan in whole into a Prime Rate Loan on the last day of the
then current Interest Period with respect thereto.
Section 4. Interest Rates; Fees; Payments.
-------------------------------
4.1 Interest Rates.
--------------
(a) The Borrower agrees to pay interest on the unpaid principal
amount of each Loan for each day from and including the date such Loan is
made to but excluding the date the principal of such Loan is paid in full
at the following rates per annum:
(i) for Prime Rate Loans, at a rate per annum equal to
the Prime Rate;
(ii) for LIBOR Rate Loans, at a rate per annum equal to
the LIBOR Rate plus the Applicable Margin;
(iii) for Fixed Rate Loans, at a rate per annum equal to
the Fixed Rate plus the Applicable Margin.
The Applicable Margin and the Leverage Ratio shall be determined
as of the end of each fiscal quarter of the Borrower based upon the
quarterly financial statements to be delivered pursuant to Section 7.5 and
any change in the Applicable Margin shall not be effective until the
delivery of such financial statements, provided, however, if the Borrower
-----------------
has failed to deliver such financial statements as required by Section 7.5,
the Leverage Ratio shall be deemed to be greater than 1.00:1.00 for
purposes of determining the Applicable Margin, until such time as the
Borrower delivers such financial statements reflecting a different Leverage
Ratio.
-14-
<PAGE>
(b) Notwithstanding the foregoing, if an Event of Default shall occur,
then at the option of the Bank, the unpaid balance of Loans shall bear interest,
at a rate per annum equal to the Post-Default Rate, until such Event Default is
cured or waived, and any other amount payable hereunder which is not paid in
full when due shall bear interest, at a rate per annum equal to the Post-Default
Rate, until the sooner to occur of (i) the date upon which all Obligations to
the Bank have been paid in full and the Commitments have been terminated, or
(ii) the date upon which such Event of Default is cured or waived.
(c) Accrued interest on each Prime Rate Loan shall be payable monthly
in arrears on the first day of each month. Accrued interest on each LIBOR Rate
Loan and Fixed Rate Loan shall be payable at the end of the Interest Period
therefor, or if such Interest Period is longer than ninety (90) days, at
intervals of ninety (90) days in arrears on the first day of the succeeding
ninety (90) day period, and interest on all Loans shall be payable in any event
upon the payment, prepayment or conversion thereof, but only on the principal so
paid or prepaid or converted; provided that interest payable pursuant to Section
--------
4.1(b) during the pendency of an Event of Default shall be payable from time to
time on demand of the Bank; and provided further that the Convertible Revolving
----------------
Credit Loan shall also be subject to the terms and conditions contained in
Section 2.2 of this Agreement. Promptly after the determination of any interest
rate provided for herein or any change in such rate permitted hereunder, the
Bank shall notify the Borrower thereof.
(d) So long as the Bank shall be required under regulations of the
Board of Governors of the Federal Reserve System (or any other banking
authority, domestic or foreign, to which the Bank is subject) to maintain
reserves with respect to liabilities or assets consisting of or including
"Eurocurrency Liabilities" (as defined in regulations issued from time to time
by such Board of Governors), the Borrower shall pay to the Bank additional
interest on the unpaid principal amount of each LIBOR Loan made by the Bank from
the date of such Loan until such principal amount is paid in full, at an
interest rate per annum equal at all times to the remainder (rounded upwards, if
necessary, to the next higher 1/100 of 1%) obtained by subtracting (i) the LIBOR
Rate for the Interest Period for such LIBOR Loan from (ii) the rate obtained by
dividing such LIBOR Rate by a percentage equal to 100% minus the LIBOR Reserve
Percentage of the Bank for such Interest Period. The Bank shall determine such
additional interest and notify the Borrower, and such additional interest shall
be payable on each date on which interest is payable on such LIBOR Loan.
(e) Notwithstanding the foregoing provisions of this Section 4.1, if
at any time the rate of interest set forth in subparagraph (a) above (the
"Stated Rate") exceeds the maximum non-usurious interest rate permissible for
-----------
the Bank to charge commercial borrowers under applicable law (the "Maximum
-------
Rate"), the rate of interest charged on the Loans by the Bank hereunder shall be
- ----
limited to the Maximum Rate. In the event
-15-
<PAGE>
the Bank ever receives, collects or applies as interest any sum in excess
of the Maximum Rate, such excess amount shall be applied to the reduction
of the principal balance of the Loans or to other amounts (other than
interest) payable hereunder, and if no such principal is then outstanding,
such excess or part thereof remaining shall be paid to the Borrower.
4.2 Facility Fee.
------------
(a) The Borrower shall pay to the Bank a facility fee, computed on a
daily basis and payable quarterly in arrears on the first Banking Day of
each quarter and on the Revolving Credit Maturity Date, in an amount equal
to one-quarter of one percent (.25%) per annum of (x) the excess of (i) the
Revolving Credit Commitment on each day during such just completed calendar
quarter over (ii) the outstanding principal balance of all Revolving Credit
Loans on each day during such just completed calendar quarter.
(b) From and after October 1, 1998 to June 30, 1999, the Borrower
shall pay to the Bank a facility fee, computed on a daily basis and payable
quarterly in arrears on the first Banking Day of each quarter and on the
Convertible Revolving Credit Maturity Date, in an amount equal to one-
quarter of one percent (.25%) per annum of (x) the excess of (i) the
Convertible Revolving Credit Commitment on each day during such just
completed calendar quarter over (ii) the outstanding principal balance of
all Convertible Revolving Credit Loans on each day during such just
completed calendar quarter.
4.3 Minimum and Maximum Amounts. Each borrowing, conversion and
---------------------------
prepayment of principal of Revolving Credit Loans of Convertible Revolving
Credit Loans which are LIBOR Rate Loans of Fixed Rate Loans shall be in an
aggregate principal amount equal to $500,000 or a larger multiple of $100,000
or, if less, the aggregate outstanding balance of the LIBOR Rate or Fixed Rate
Loan to be rolled over, (conversions or prepayments of Revolving Credit Loans or
Convertible Revolving Credit Loans of different Types or, in the case of LIBOR
Rate Loans or Fixed Rate Loans, having different Interest Periods, at the same
time hereunder shall be deemed separate conversions and prepayments for
purposes of the foregoing, one for each Type or Interest Period); provided that
--------
any conversion, payment or prepayment in full of the Loans may be in the
aggregate outstanding principal amount thereof; and provided further that at no
--------
time shall there be greater than five (5) LIBOR Rate Loans or Fixed Rate Loans
outstanding.
4.4 Computations. All interest and fees shall be computed daily on
------------
the basis of a year of 360 days and actual days elapsed (including the first day
but excluding the last day) occurring in the period for which payable.
-16-
<PAGE>
4.5 Manner and Place of Payment. All payments under this Agreement
---------------------------
shall be made not later than 2:00 p.m. (Boston Time) on the date when due and
shall be made in immediately available funds at the Office of the Bank or by the
Borrower's check drawn on the depositary accounts(s) maintained by the Borrower
with the Bank payable to the Bank or its order. All payments by the Borrower
hereunder and under any of the other Loan Documents shall be made without
set-off or counterclaim and free and clear of and without deduction for any
taxes, levies, imposts, duties, charges, fees, deductions, withholdings,
restrictions or conditions of any nature now or hereafter imposed or levied by
any jurisdiction or any political subdivision thereof or taxing or other
authority therein unless the Borrower is compelled by law to make such deduction
or withholding. If any such obligation is imposed upon the Borrower with respect
to any amount payable by its hereunder or under any of the other Loan Documents,
the Borrower will pay to the Bank such additional amount in U.S. Dollars as
shall be necessary to enable the Bank to receive the same net amount which the
Bank would have received on such due date had no such obligation been imposed
upon the Borrower. The Borrower will deliver promptly to the Bank certificates
or other valid vouchers or other evidence of payment reasonably satisfactory to
the Bank for all taxes (other than taxes based on the Bank's income) or other
charges deducted from or paid with respect to payments made by the Borrower
hereunder or under such other Loan Document. The Bank may, and the Borrower
hereby authorizes the Bank to, debit the amount of any payment not made by such
time to the demand deposit accounts of the Borrower with the Bank.
4.6 Indemnity. If the Borrower for any reason (including, without
---------
limitation, pursuant to Sections 4.7, 4.8, 4.11 and 10.2 hereof) makes any
payment of principal with respect to any LIBOR Loan or a Fixed Rate Loan on any
day other than the last day of an Interest Period applicable to such LIBOR Loan
or Fixed Rate Loan, or fails to borrow or continue or convert to a LIBOR Loan or
a Fixed Rate Loan after giving a Notice of Borrowing or Conversion thereof
pursuant to Section 3, or fails to prepay a LIBOR Loan or a Fixed Rate Loan
after having given notice thereof, the Borrower shall pay to the Bank any amount
required to compensate the Bank for any additional losses, costs or expenses
which it reasonably incurs as a result of such payment or failure, including,
without limitation, any loss (including loss of anticipated profits), costs or
expense incurred by reason of the liquidation or re-employment of deposits or
other funds required by the Bank to fund or maintain such LIBOR Loan or Fixed
Rate Loan. The Borrower shall pay such amount upon presentation by the Bank of a
statement setting forth the amount and the Bank's calculation thereof pursuant
hereto, which statement shall be deemed true and correct absent manifest error.
4.7 Changes Circumstances; Illegality.
---------------------------------
(a) Notwithstanding any other provision of this Agreement, in the
event that:
(i) on any date on which the LIBOR Rate would otherwise be
set the Bank shall have determined in good faith (which
determination
-17-
<PAGE>
shall be final and conclusive) that adequate and fair means
do not exist for ascertaining the LIBOR rate, or
(ii) at any time the Bank shall have determined in good faith
(which determination shall be final and conclusive) that:
(A) the making or continuation of or conversion of any Loan to, a
LIBOR Loan has been made impracticable or unlawful by (1) the occurrence of
a contingency that materially and adversely affects the interbank LIBOR
market or (2) compliance by the Bank in good faith with any applicable law
or governmental regulation, guideline or order or interpretation or change
thereof by any governmental authority charged with the interpretation or
administration thereof or with any request or directive of any such
governmental authority (whether or not having the force of law); or
(B) the LIBOR Rate shall no longer represent the effective cost to
the Bank for U.S. dollar deposits in the interbank market for deposits in
which it regularly participates;
then, and in any such event, the Bank shall forthwith so notify the Borrower
thereof. Until the Bank notifies the Borrower that the circumstances giving rise
to such notice no longer apply, the obligation of the Bank to allow selection by
the Borrower of the Type of Loan affected by the contingencies described in this
Section (herein called "Affected Loans") shall be suspended. If at the time the
--------------
Bank so notifies the Borrower, the Borrower has previously given the Bank a
Notice of Borrowing or Conversion with respect to one or more Affected Loans but
such Loans have not yet gone into effect, such notification shall be deemed to
be a request for Prime Rate Loans.
(b) In the event of a determination of illegality pursuant to
subsection (a) above, the Borrower shall, with respect to the outstanding
Affected Loans, pay all interest thereon and any amounts required to be
paid pursuant to Section 4.7, on such date as shall be specified in such
notice (which shall not be earlier than the date such notice is given) and,
subject to the conditions of this Agreement, convert such Affected Loans
into Prime Rate Loans.
4.8 Increased Costs. In case any change in law, regulation, treaty or
---------------
official directive or the interpretation or application thereof by any court or
by any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law) adopted or
issued after the date hereof:
(i) subjects the Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder
by the Borrower or otherwise with respect to the
transactions
-18-
<PAGE>
contemplated hereby (except for taxes on the
overall net income of the Bank imposed by the
United States of America or any political
subdivision thereof), or
(ii) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar
requirement against assets held by, or deposits in
or for the account of, or loans by, the Bank
(other than as provided in Section 4.1(d) and
other than such requirements as are already
included in the determination of the LIBOR Rate),
or
(iii) imposes upon the Bank any other condition with
respect to its obligations or performance under
this Agreement,
and the result of any of the foregoing, in the Bank's reasonable judgement, is
to increase the cost to the Bank, reduce the income receivable by the Bank or
impose any expense upon the Bank with respect to any Loans or its obligations
under this Agreement, the Bank shall notify the Borrower thereof. The Borrower
agrees to pay to the Bank the amount of such increase in cost, reduction in
income or additional expense as and when such cost, reduction or expense is
incurred or determined, upon presentation by the Bank of a statement in the
amount and setting forth in reasonable detail the Bank's calculation thereof and
the assumptions upon which such calculation was based, which statement shall be
deemed true and correct absent manifest error. In determining such amount, the
Bank may use any reasonable averaging and attribution methods. Notwithstanding
the foregoing, the Bank may not charge the Borrower for any costs, reductions or
expenses described above that have been incurred earlier than ninety (90) days
prior to the date the Bank notifies the Borrower of such costs, reductions or
expenses.
4.9 Capital Requirements. If after the date hereof the Bank
--------------------
determines that (i) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies, or
any change in the interpretation or application thereof by any governmental
authority charged with the administration thereof, or (ii) compliance by the
Bank or its parent bank holding company with any guideline, request or directive
of any such entity adopted or issued after the date hereof regarding capital
adequacy (whether or not having the force of law) has, in the Bank's reasonable
judgment, the effect of reducing the return on the Bank's or such holding
company's capital as a consequence of the Bank's Commitments to make Loans
hereunder to a level below that which the Bank or such holding company could
have achieved but for such adoption, change or compliance (taking into
consideration the Bank's or such holding company's current policies with respect
to capital adequacy) by any amount reasonably deemed by the Bank to be material,
then the Bank shall notify the Borrower thereof. The Borrower agrees to pay to
the Bank the amount of such reduction of return on capital as and when such
reduction is determined, payable within 90 days after presentation by the Bank
of a statement in the amount and setting forth in reasonable detail the Bank's
calculation thereof and the assumptions upon which such calculation was
-19-
<PAGE>
based (which statement shall be deemed true and correct absent manifest error)
unless within such 90 day period the Borrower shall have prepaid in full all
Obligations, in which event no amount shall be payable to the Bank under this
Section 4.9. In determining such amount, the Bank may use any reasonable
averaging and attribution methods. Notwithstanding the foregoing, the Bank may
not charge the Borrower for any reductions described above that have been
incurred earlier than ninety (90) days prior to the date the Bank notifies the
Borrower of such reductions.
4.10 Payments Due on Saturdays, Sundays and Holidays. Whenever any
-----------------------------------------------
payment to be made hereunder or under the Notes shall be due on a day which is
not a Banking Day, such payment may be made on the next succeeding Banking Day
(subject to the definition of the term "Interest Period"), and such extension of
time shall be included in computing any interest or fees due.
4.11 Prepayments.
-----------
(a) Subject to the provisions of Section 2.6, Section 3 and Section
4.6, the Borrower shall have the right to prepay the Loans in whole or in
part and to convert Loans of one Type into another Type, without premium or
penalty, at any time and from time to time, provided that (i) at the time
--------
of any such prepayment, the Borrower shall pay all interest accrued on the
amount prepaid; (ii) the Borrower shall give the Bank three (3) Banking
Days notice of prepayment of any Fixed Rate Loan or LIBOR Rate Loan, (iii)
LIBOR Rate Loans and Fixed Rate Loans may be converted into Prime Rate
Loans only on the last day of an Interest Period thereof; and (iv) the Bank
shall be paid, at the time of any prepayment of a LIBOR Rate Loan or Fixed
Rate Loan that is being prepaid on other than the last day of an Interest
Period therefor, the amount provided for in Section 4.6.
(b) if at any time the outstanding principal balance of the
Revolving Credit Loans exceeds the Revolving Credit Commitment, or the
Convertible Revolving Credit Loans exceeds the Convertible Revolving Credit
Commitment the Borrower shall immediately pay the amount of any such excess
to the Bank for application to the Revolving Credit Loans or Convertible
Revolving Credit Loans, as the case may be.
Section 5. Conditions Precedent.
--------------------
5.1 Conditions to Initial Loans. The obligation of the Bank to
---------------------------
make the initial Revolving Credit Loan and initial Convertible Revolving Credit
Loan is subject to the satisfaction of the following conditions precedent on or
prior to the Closing Date.
(a) This Agreement and the Notes. This Agreement, the borrowings
----------------------------
hereunder, the Notes and all transactions contemplated by this Agreement
shall have been duly authorized by the Borrower. The Borrower shall have
duly executed and
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<PAGE>
delivered to the Bank this Agreement and the Notes to the Bank in form and
substance satisfactory to the Bank and its counsel.
(b) No Default. On the date hereof and on the Date of making each Loan,
----------
no Default or Event of Default shall have occurred and be continuing.
(c) Correctness of Representations. On the Closing Date and on the date
------------------------------
of each Extension of Credit, all representations and warranties made by the
Borrower in Section 6 below or otherwise in writing in connection herewith or
otherwise shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on and as of
the date of such Loan, except that representations and warranties expressly
limited to a certain date shall be true and correct in all material respects as
of that date and subject to changes arising from transactions expressly
permitted hereunder.
(d) Performance of Covenants. The Borrower shall have performed,
------------------------
satisfied or complied with all covenants and conditions to be performed,
satisfied or complied with by the Borrower hereunder and under the other Loan
Documents on or prior to the Closing Date.
(e) Opinion of Counsel for the Borrower. On the Closing Date, the Bank
-----------------------------------
shall have received the favorable opinion of counsel to the Borrower, in form
and substance reasonably satisfactory to the Bank and its counsel.
(f) Approvals. On the Closing Date and on the date of each Loan, all
---------
necessary consents, approvals, licenses, permissions, registrations or
validations of any Governmental Authority or any other Person required for the
execution, delivery, performance or carrying out of the provisions of this
Agreement and the Notes, or for the validity or enforceability of the
obligations incurred thereunder, shall have been obtained and shall be in full
force and effect and copies thereof certified by a duly authorized officer of
the Borrower to such effect shall have been delivered to the Bank.
(g) Supporting Documents. On or before the Closing Date, there shall have
--------------------
been delivered to the Bank the following supporting documents:
(i) legal existence and corporate good standing certificates with
respect to the Borrower dated as of a recent date issued by the
appropriate Secretary of State or other official;
(ii) certificates dated as of a recent date with respect to the due
qualification of the Borrower to do business in each jurisdiction
where the failure to be so qualified would have a Material
-21-
<PAGE>
Adverse Effect, issued by the Secretary of State of each such
jurisdiction;
(iii) copy of the corporate charter of the Borrower certified by the
appropriate Secretary of State or other official, as of a
recent date, including all amendments thereto;
(iv) a certificate of the Secretary or Assistant Secretary of the
Borrower certifying as to the applicable (a) By-Laws, as in
effect on the date hereof, including all amendments thereto;
(b) the incumbency and signatures of the Responsible Officers
of such Person who have executed any documents in connection
with the transactions contemplated by this Agreement; and (c)
the resolutions of the Board of Directors of such Person
authorizing the execution, delivery and performance of Loan
Documents to which such Person is a party and identifying the
Responsible Officers authorized to execute and deliver and
take all other actions contemplated by this Agreement; and
(v) all other information and documents which the Bank or its
counsel may reasonably request in connection with the
transactions contemplated by this Agreement.
(h) Compliance Certificate. The Borrower shall have furnished to the Bank
----------------------
a Compliance Certificate in the form of attached Exhibit C appropriately
---------
completed and signed by a Responsible Officer of the Borrower with respect to
the fiscal quarter ending December 31, 1997, which shall reflect compliance by
the Borrower with the requirements of this Credit Agreement as of the date
hereof.
(i) Litigation. No litigation, arbitration, proceeding or investigation
----------
shall be pending or, to the knowledge of the Borrower, threatened against the
Borrowers or any Subsidiaries thereof which, in the sole judgement of the Bank,
might have a Material Adverse Effect.
(j) Termination of Existing Credit Facility. The Bank shall have received
---------------------------------------
reasonable evidence that the Borrower's existing credit facility with
BankBoston, N.A. has been terminated.
(k) Legal Matters. All documents and legal matters incident to the
-------------
transactions contemplated by this Agreement shall be reasonably satisfactory to
Sullivan & Worcester LLP, special counsel for the Bank.
-22-
<PAGE>
(l) Financial Statements. Prior to the Closing Date, the Bank shall
--------------------
have received complete and correct copies of the audited consolidated
balance sheet of the Borrower as of December 31, 1997, and the related
audited consolidated statements of income and of cash flows for the twelve-
month period ended on such date, examined by the Accountants.
5.2 Conditions Precedent to all Loans. The obligation of the Bank to
---------------------------------
make any Revolving Credit Loan or any Convertible Revolving Credit Loan,
including the initial Revolving Credit Loans, or continue or convert Loans to
Loans of another Type, is further subject to the following conditions:
(a) timely receipt by the Bank of a Notice of Borrowing or Conversion
with respect to any Loan;
(b) the outstanding Revolving Credit Loans and Convertible Revolving
Credit Loans do not and, after giving effect to any requested Loan, will
not exceed the limitations set forth in Sections 2.1 and 2.2 hereof;
(c) the representations and warranties contained in Section 6 shall
be true and accurate in all material respects on and as of the date of such
Notice of Borrowing or Conversion and on the effective date of the making,
continuation or conversion of each Loan as though made at and as of each
such date (except to the extent that such representations and warranties
expressly relate to an earlier date or have become inaccurate due to
transactions expressly permitted hereunder);
(d) no Default or Event of Default shall have occurred and be
continuing at the time of and immediately after the making of such
requested Loan;
(e) the resolutions referred to in Section 5.1(g)(iv)(c) shall remain
in full force and effect; and
(f) no change shall have occurred in any law or regulation or
interpretation thereof that, in the opinion of counsel for the Bank, would
make it illegal or against the policy of any governmental agency or
authority for the Bank to make Loans hereunder.
The making, continuation or conversion of each Loan shall be deemed to be a
representation and warranty by the Borrower on the date of the making,
continuation or conversion of such Loan as to the accuracy of the facts
referred to in subsection (c) of this Section 5.2 and of the satisfaction of all
of the conditions set forth in this Section 5.2.
Section 6. Representations and Warranties.
-----------------------------
-23-
<PAGE>
In order to induce the Bank to enter into this Agreement and to make the
contemplated Extensions of Credit, the Borrower hereby represents and warrants
as follows and the following representations and warranties shall survive the
execution and delivery of this Agreement and the Notes:
6.1 Corporate Status.
----------------
The Borrower is a duly organized and validly existing corporation in good
standing under the laws of its jurisdiction of incorporation as set forth on
Schedule A hereto and is duly qualified or licensed as a foreign corporation in
- ----------
good standing in each jurisdiction in which the failure to do so would have a
Material Adverse Effect.
6.2 No Violation. Neither the execution, delivery or performance of
------------
this Agreement or any other Loan Document, nor the consummation of the
contemplated transactions will contravene any law, statute, rule or regulation
to which the Borrower is subject or any judgment, decree, franchise, order or
permit applicable to the Borrower, or will conflict or be inconsistent with or
will result in any breach of, or constitute a default under, or result in or
require the creation or imposition of any Lien upon any of the property or
assets of the Borrower having an aggregate book value of $100,000 or more
pursuant to, any Contractual Obligation of the Borrower, or violate any
provision of the corporate charter by-laws of the Borrower.
6.3 Corporate Power and Authority. The Borrower has all requisite
-----------------------------
corporate power to own its property and conduct its business as currently
conducted. The execution, delivery and performance of this Agreement and the
other Loan Documents are within the corporate powers of the Borrower and have
been duly authorized by all necessary corporate action.
6.4 Enforceability. This Agreement and each other Loan Document
--------------
constitutes valid and binding obligations of the Borrower enforceable against
the Borrower in accordance with its terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally and subject to general principles of
equity, whether applied in a court of equity or at law.
6.5 Consents or Approvals. No order, permission, consent, approval,
---------------------
license, authorization, registration or validation of, or filing with, or
exemption by, any Governmental Authority or any other Person is required to
authorize, or is required in connection with, the execution, delivery and
performance of this Agreement or any other Loan Document by the Borrower, or the
taking of any action contemplated hereby or thereby.
6.6 Financial Statements.
--------------------
-24-
<PAGE>
(a) The Borrower has furnished the Bank with complete and correct
copies of (a) its audited consolidated balance sheet as of the Initial
Financial Statements Date, its related consolidated statements of income
and of cash flows for the twelve-month period ended on such date, audited
and certified by the Accountants (the "Initial Financial Statements").
----------------------------
Such Initial Financial Statements (including the related schedules and
notes) fairly present the consolidated financial condition of the Borrower
as of the Initial Financial Statements Date, and the consolidated results
of its operations and its consolidated cash flows for the twelve month
period ended on such date.
(b) All the above-referenced financial statements (including the
related schedules and notes) have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as approved by
the Accountants and disclosed therein).
(c) At the date hereof, the Borrower does not have any Indebtedness
or other material liabilities, debts or obligations, whether accrued,
absolute, contingent or otherwise, and whether due or to become due,
including, but not limited to, liabilities or obligations on account of
taxes or other governmental charges, that are not set forth in the
financial statements referred to in subparagraph (a) above or on Schedule A
----------
hereto.
(d) The Borrower has and, after giving effect to the Loans, will
have, assets (both tangible and intangible) having a fair saleable value
in excess of the amount required to pay the probable liability on its then-
existing debts (whether matured or unmatured, liquidated or unliquidated,
fixed or contingent); the Borrower has and will have access to adequate
capital for the conduct of its business and the discharge of its debts
incurred in connection therewith as such debts mature; the Borrower was not
insolvent immediately prior to the making of the Loans and immediately
after giving effect thereto, the Borrower will not be insolvent.
6.7 No Material Change. Except as set forth in Schedule A, since the
------------------ ----------
Initial Financial Statements Date, there have been no changes in the assets,
liabilities, financial condition or business of the Borrower other than changes
in the ordinary course of business which will not have a Material Adverse
Effect.
6.8 Litigation. There are no actions, suits or proceedings pending
----------
or to Borrower's knowledge, threatened against or affecting the Borrower of any
of its Subsidiaries which in any one case or in the aggregate, if determined
adversely to the interests of such party, could reasonably be anticipated to
have a Material Adverse Effect.
6.9 Compliance with Other Instruments; Compliance with Law. The
------------------------------------------------------
Borrower is not in default under any Contractual Obligation (including any
Contractual Obligation relating to any Indebtedness of the Borrower) where such
default could reasonably
-25-
<PAGE>
be anticipated to have a Material Adverse Effect. The Borrower is not in default
and or in violation of any applicable statute, rule, writ, injunction, decree,
order or regulation of any Governmental Authority having jurisdiction over the
Borrower which default or violation could reasonably be anticipated to have a
Material Adverse Effect.
6.10 Subsidiaries. The Borrower does not have any Subsidiaries except as
------------
set forth on attached Schedule A.
----------
6.11 Investment Company Status; Limits on Ability to Incur Indebtedness.
------------------------------------------------------------------
The Borrower is not an "investment company" or a company "controlled by" an
investment company within the meaning of the Investment Company Act 1940, as
amended. The Borrower is not subject to regulation under any Federal or State
statute or regulation which limits its ability to incur Indebtedness. No portion
of any Loan shall be used for purchasing or carrying, any "margin security" or
"margin stock" as such terms are used in Regulations G, U or X of the Board of
Governor's of the Federal Reserve System.
6.12 Title to Property. The Borrower has good and marketable title to all
-----------------
of its properties and assets as of the Initial Financial Statements Date, except
such as have been disposed of since that date in the ordinary course of business
and none of such properties or assets is subject to any Lien except for (a)
Permitted Liens, of (b) a defect in title or other claim other than defects and
claims that, in the aggregate, would have no Material Adverse Effect. The
Borrower enjoys peaceful and undisturbed possession under all leases necessary
in any material respect for the operation of its properties and assets and no
material default exists under such leases (after taking into account applicable
cure periods under said leases). To Borrower's knowledge, all such leases are
valid and subsisting and are in full force and effect.
6.13 ERISA. Each Borrower and each of its Affiliates are in compliance in
-----
all material respects with ERISA and the provisions of the Code applicable to
the Plans; no Borrower nor any Affiliate of a Borrower has engaged in a
Prohibited Transaction which would subject any Borrower, any Affiliate of a
Borrower or any Plan to a material tax or penalty imposed on a Prohibited
Transaction; no Plan has incurred any "accumulated funding deficiency" (as
defined in ERISA); except as set forth in the Initial Financial Statements, the
aggregate fair market value of all assets of the Plans which are single-employer
plans is at least equal to the aggregate present value of all accrued benefits
under such Plans, both as determined in the most recent actuarial reports for
such Plans using the actuarial assumptions used for funding purposes therein; no
Borrower nor any Affiliate of a Borrower has incurred any liability to the PBGC
over and above premiums required by law; and no Borrower nor any Affiliate of a
Borrower has terminated any Plan in a manner which could result in the
imposition of a Lien on the property of any Borrower or any Affiliate of a
Borrower.
6.14 Taxes. All tax returns of the Borrower required to be filed have been
-----
timely filed, all material taxes, fees and other governmental charges (other
than those being contested in good faith by appropriate proceedings diligently
conducted and with respect to
-26-
<PAGE>
which adequate reserves have been established and, in the case of ad valorem
-- -------
taxes or betterment assessments, no proceedings to foreclose any lien with
respect thereto have been commenced and, in all other cases, no notice of lien
has been filed or, to Borrower's knowledge; other action taken to perfect or
enforce such lien) shown thereon which are payable have been paid. The charges
and reserves on the books of the Borrower for all income and other taxes are
adequate, and the Borrower knows of no additional assessment or any basis
therefor. Except as disclosed in Schedule A, the Federal income tax returns of
the Borrower have not been audited within the last three years, all prior audits
have been closed, and there are no unpaid assessments, penalties or other
charges arising from such prior audits.
6.15 Environmental Matters.
---------------------
(a) The Borrower has obtained all Governmental Approvals that are
required for the operation of its business under any Environmental Law,
except where the failure to so obtain a Governmental Approvals would not
have a Material Adverse Effect.
(b) The Borrower is in compliance with all terms and conditions of
all required Governmental Approvals and is also in compliance with all
terms and conditions of all applicable Environmental Laws, noncompliance
with which would have a Material Adverse Effect.
(c) To Borrower's knowledge, there is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter pending or, to the
knowledge of the Borrower threatened against the Borrower relating in any
way to the Environmental Laws, and there is, no Lien of any private entity
or Governmental Authority against any property of the Borrower relating in
any way to the Environmental Laws which is reasonably likely to result in a
Material Adverse Effect.
(d) There has been no claim, complaint, notice, or request for
information received by the Borrower with respect to any site listed on the
National Priority List promulgated pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA") 42 USC
------
(S)(S) 9601 et seq or any state list of sites requiring investigation or
-- ---
cleanup with respect to contamination by Hazardous Substances.
(e) To the best of the Borrower's knowledge, there has been no
release or threat of release of any Hazardous Substance at any Borrower
Property which would likely result in liability being imposed upon the
Borrower, which liability would have a Material Adverse Effect.
6.16 Intellectual Property. The Borrower owns or licenses such
---------------------
copyrights, patents, trademarks and similar rights ("Intellectual Property") as
---------------------
are necessary for the conduct
-27-
<PAGE>
of its business as now conducted, without any known conflict with the rights of
others which would have a Material Adverse Effect. Following the occurrence and
during the continuance of an Event of Default, the Borrower shall, upon the
request of the Bank, make reasonably diligent efforts to prepare and deliver to
the Bank a reasonably detailed listing of all of such Intellectual Property,
provided that nothing herein shall require the registration of any such
Intellectual Property.
6.17 Disclosure. No representation or warranty made by the
----------
Borrower in this Agreement or any other Loan Document and no document or
information furnished to the Bank by or on behalf of or at the request of the
Borrower in connection with any of the transactions contemplated by this
Agreement and the other Loan Documents contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances in
which they are made except as may hereafter occur as a result of transactions
expressly permitted hereunder.
6.18 Defaults. As of the date of this Agreement, no Default or
--------
Event of Default exists.
Section 7. Affirmative Covenants.
---------------------
The Borrower covenants and agrees that for as long as this Agreement is in
effect and until the Notes, together with all interest thereon and all other
Obligations of the Borrower to the Bank are paid or satisfied in full:
7.1 Use of Proceeds. The proceeds of the Loans shall be used
---------------
by the Borrower solely for the purposes of supporting expansion investments and
working capital needs. Without limiting the foregoing, no part of the proceeds
of any Loan will be used for the purpose of purchasing or carrying any "margin
security" as such term is defined in Regulation U of the Board of Governors of
the Federal Reserve System.
7.2 Conduct of Business; Maintenance of Existence. The
---------------------------------------------
Borrower will continue to engage in the business in which it is engaged and
maintain its existence and comply with all applicable statues, rules and
regulations and remain duly qualified as a foreign corporation, licensed and in
good standing in each jurisdiction where such qualification or licensing is
required by the nature of its business, the character and location of its
property, business, or the ownership or leasing of its property, except where
such noncompliance or failure to so qualify would not have a Material Adverse
Effect, and the Borrower will maintain its properties in good operating
condition, and continue to conduct its business as presently conducted.
7.3 Compliance with Laws. The Borrower will comply with all
--------------------
applicable laws, ordinances, rules, regulations and requirements of Governmental
Authorities, except
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<PAGE>
where the necessity of compliance therewith is being contested in good faith by
appropriate proceedings and except where the failure so to comply would not have
a Material Adverse Effect.
7.4 Insurance. The Borrower will maintain insurance with financially
---------
sound and reputable insurance companies in such amounts and against such risks
as determined by the Borrower's senior management from time to time to be
appropriate based upon the exercise of their reasonable business judgement,
provided that in any event the Borrower shall maintain or cause to be maintained
(a) insurance against casualty, loss or damage covering all property and
improvements of the Borrower in amounts and in respect of perils usually carried
by owners of similar businesses and properties in the same general areas in
which the Borrower operates, including, but not limited to, federally required
flood insurance; (b) comprehensive general liability insurance against claims
for bodily injury, death or property damage; and (c) workers' compensation
insurance to the extent required by applicable law.
7.5 Financial Statements, Etc. The Borrower will furnish to the Bank:
-------------------------
(a) within forty-six (46) days after the end of each of the first
three fiscal quarters of each fiscal year, the unaudited consolidated
balance sheet and income statement and statement of cash flows of the
Borrower and any Subsidiaries as at and for the period ended on the last
day of such fiscal quarter;
(b) within ninety-one (91) days after the last of each fiscal year of
the Borrower, the audited consolidated balance sheet and income statement
and statement of cash flows of the Borrower and any Subsidiaries as at and
for the fiscal year then ended, certified by the Accountants (the substance
of such report to be reasonably satisfactory to the Bank) and a certificate
of a Responsible Officer of the Borrower to the effect that such financial
statements fairly present the consolidated financial condition of the
Borrower and any Subsidiaries as of the end of such fiscal year and the
consolidated results of their operations for such fiscal year, in each case
in accordance with GAAP;
(c) within forty-six (46) days after the last of each fiscal quarter
of the Borrower (except in the case of the fourth quarter, in which case
such certificate will be furnished within ninety-one (91) days of the end
of such quarter), a Compliance Certificate signed by a Responsible Officer
of the Borrower in the form attached to this Agreement as Exhibit C,
---------
appropriately completed which report shall note any change in the Leverage
Ratio which would warrant an adjustment to the Applicable Margin.
(d) within ninety-one (91) days after the last day of each fiscal
year of the Borrower, an annual business plan for the next fiscal year
complied by the management of the Borrower; including, without limitation,
projections of the anticipated income
-29-
<PAGE>
and cash flow of the Borrower for such fiscal year and a statement of the
assumptions on which such plan was prepared;
(e) copies of any management letter provided by the Accountants to
the Borrower;
(f) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports, proxy
statements and other materials;
(g) promptly upon the filing thereof by the Borrower with the SEC
(and in any event within five (5) days of such filing), copies of any
registration statements and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents if such forms no longer exist);
(h) promptly upon becoming aware of any litigation or other
proceeding against the Borrower or any of its Subsidiaries that could
reasonably be expected to have a Material Adverse Effect, notice thereof;
and
(i) promptly following the request of the Bank, such further
information concerning the business, affairs and financial condition or
operations of the Borrower and any Subsidiaries as the Bank may reasonably
request.
7.6 Notice of Default. As soon as practicable, and in any event,
-----------------
within three (3) Banking Days of becoming aware of the existence of any
condition or event which constitutes an Event of Default, the Borrower will
provide the Bank with written notice specifying the nature and period of
existence thereof and what action the Borrower is taking or proposes to take
with respect thereto.
7.7 Environmental Matters.
---------------------
(a) The Borrower shall comply with all terms and conditions of all
applicable Governmental Approvals and all applicable Environmental Laws,
except where failure to comply would not have a Material Adverse Effect.
(b) The Borrower shall promptly notify the Bank should the Borrower
become aware of:
(i) any spill, release, or threat of release of any Hazardous
Substance at or from any Borrower Property or by any Person
for whose conduct the Borrower is responsible, to the extent
the Borrower is required by Environmental Laws to report
such to any Governmental Authority;
-30-
<PAGE>
(ii) any action or notice with respect to a civil,
criminal or administrative action, suit, demand,
claim, hearing, notice of violation,
investigation, proceeding, notice or demand
letter pending or threatened against the
Borrower relating in any way to the
Environmental Laws, or any Lien of any
Governmental Authority or any other Person
against any Borrower Property relating in any
way to the Environmental Laws;
(iii) any claim made or threatened by any Person
against the Borrower or any property of the
Borrower relating to any material damage,
contribution, cost recovery compensation, loss
or injury resulting from any Hazardous Substance
pertaining to such property or the business or
operations of the Borrower; and
(iv) any occurrence or condition on any real property
adjoining any Borrower Property known to the
officers or supervisory personnel of the
Borrower or other employees having
responsibility for the compliance by the
Borrower with Environmental Laws, without any
independent investigation, which does cause, or
could cause, such Borrower Property, or any part
thereof, to contain Hazardous Substances in
material violation of any Environmental Laws, or
which does cause, or could cause, such Borrower
Property to be subject to any material
restrictions on the ownership, occupancy,
transferability or use thereof by the Borrower.
7.8 Taxes and Other Liens. The Borrower will pay when due
---------------------
all taxes, assessments, governmental charges or levies, or claims for labor,
supplies, rent and other obligations made against it which, if unpaid, might
become a Lien against the Borrower on its property, except liabilities being
contested in good faith and by proper proceedings, as to which adequate reserves
are maintained on the books of the Borrower in accordance with GAAP.
7.9 ERISA Information. If and when the Borrower or any
-----------------
member of the Controlled Group (a) gives or is required to give notice to the
PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with
respect to any Plan which might constitute grounds for a termination of such
Plan under Title IV of ERISA, or knows that the plan administrator of any Plan
has given or is required to give notice of any such reportable event, (b)
receives notice of complete or partial withdrawal liability under Title IV of
ERISA or (c) receives notice from the PBGC under Title IV of ERISA of an intent
to terminate or appoint a trustee to administer the Plan, the Borrower shall in
each such instance promptly furnish to the Bank a copy of any such notice.
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<PAGE>
7.10 Inspection. The Borrower will permit a representative of the
----------
Bank (including any field examiner or auditor retained by the Bank) to inspect
and make copies of the Borrower's books and records, and to discuss its affairs,
finances and accounts with its officers and accountants, at such reasonable
times and places and as often as the Bank may reasonably request, provided that,
so long as no Event of Default has occurred and is continuing, upon two (2)
Banking Days prior notice from the Bank and not more frequently than twice in
any twelve-month period.
7.11 Further Assurances. The Borrower will execute and deliver to
------------------
the Bank any writings and do all things necessary, effectual or reasonably
requested by the Bank to carry into effect the provisions and intent of this
Agreement or any other Loan Document.
Section 8. Negative Covenants.
------------------
The Borrower covenants and agrees that for so long as this Agreement is in
effect and until the Notes, together with all interest thereon and all other
Obligations of the Borrower to the Bank are paid or satisfied in full, without
the prior written consent of the Bank:
8.1 Transactions with Affiliates. The Borrower will not, and will
----------------------------
not permit any of their Subsidiaries to, directly or indirectly, enter into any
transaction with any Affiliate (including without limitation any purchase, sale
or lease) except (i) transactions in the ordinary course of business on terms
that are no less favorable to the Borrower than those which might be obtained at
the time in a comparable arm's-length transaction with any Person who is not an
Affiliate and (ii) employment contracts and incentive plans with senior
management of Borrower entered into in the ordinary course of business and
consistent with prudent business practices. Notwithstanding the foregoing, the
Borrower will not, and will not permit any Subsidiary to, directly or
indirectly, pay any management, consulting, overhead, indemnity, guarantee or
other similar fee or charge to any Affiliate.
8.2 Consolidation Merger or Acquisition. Except for a "Permitted
-----------------------------------
Acquisition" as defined below, the Borrower shall not merge or consolidate with
or into any other Person, or make any acquisition of the business or a
substantial portion of the assets of any other Person except: (i) any Subsidiary
of the Borrower may merge into the Borrower or any Wholly-owned Subsidiary of
the Borrower; (ii) Investments to the extent permitted by Section 8.8 hereof.
For purposes hereof a "Permitted Acquisition" is an acquisition which
satisfies the following requirements:
(a) if it involves a merger or consolidation, the Borrower shall
be the surviving party;
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(b) at the time of such acquisition no Default or Event of Default
shall have occurred and be continuing;
(c) no Default or Event of Default or violation of any covenant under
this Agreement shall arise or be reasonably anticipated to arise as a
result of such acquisition, which the Borrower shall confirm by furnishing
to the Bank at least ten (10) days prior to the closing date for such
acquisition pro forma financial statements reasonably satisfactory to the
--- -----
Agent giving effect to such acquisition; and
(d) the target of such acquisition must be engaged in a line of
business similar to the then current businesses of the Borrower or its
Subsidiaries.
Notwithstanding anything to the contrary herein, the prior written consent
of the Bank shall be required for (a) any individual acquisition involving cash
consideration (including assumption of indebtedness) in excess of $2,000,000 and
(b) any acquisition during any fiscal year of the Borrower to the extent that
the aggregate cash consideration (including assumption of indebtedness) for
acquisitions made during such year (giving effect to the proposed acquisition)
exceeds $5,000,000.
8.3 Disposition of Assets. The Borrower shall not convey, sell,
---------------------
lease, transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, accounts receivable and leasehold assets),
whether now owned or hereafter acquired, except for (i) obsolete, worn out or
surplus property disposed of in the ordinary course of business (with standard
discounts); (ii) the sale or lease of inventory in the ordinary course of
business; and (iii) property, business or assets having an aggregate value of
less than $300,000 in any fiscal year. In addition, the Borrower may upon thirty
(30) days notice to the Bank, transfer certain assets (but in no event existing
Accounts) to existing or newly formed Subsidiaries for tax planning or other
business purposes, provided, however, any such transfer shall be subject to the
written consent by the Bank which shall not be unreasonably withheld or delayed,
provided, however, the Bank may require as condition to such consent that such
Subsidiary become a Borrower hereunder or a guarantor of the Obligations of the
Borrower.
8.4 Indebtedness. The Borrower shall not create, incur, assume or
------------
suffer to exist any Indebtedness, except:
(a) Indebtedness payable to the Bank;
(b) existing Indebtedness, including the Indebtedness listed on
Schedule A hereto and renewals and refinancings thereof, but not any
----------
increase in the principal amounts thereof; and
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<PAGE>
(c) Indebtedness for taxes, assessments or governmental charges to
the extent that payment therefor shall at the time not be required to be
made in accordance with Section 7.8;
(d) current liabilities on open account for the purchase price of
services, materials and supplies incurred by any Borrower in the ordinary
course of business (not as a result of borrowing), so long as all of such
open account Indebtedness shall be promptly paid and discharged when due or
in conformity with customary trade terms and practices, except for any such
open account Indebtedness which is being contested in good faith by the
Borrower, as to which adequate reserves required by GAAP have been
established and are being maintained and as to which no Lien has been
placed on any property of the Borrower or any of its Subsidiaries;
(e) Guarantees permitted under Section 8.5 hereof; and
(f) Purchase Money Indebtedness and capital lease obligations of the
Borrower and its Subsidiaries in an aggregate amount not to exceed
$1,000,000 at any one time outstanding; provided that, after giving effect
--------
to the incurrence of such Purchase Money Indebtedness and capital lease
obligations and to the receipt and application of the proceeds thereof, no
Event of Default shall have occurred and be continuing.
8.5 Guarantees. Neither the Borrower nor any of its Subsidiaries
----------
shall create, incur, assume, guarantee or be or remain liable with respect to
any Guarantees other than (i) Guarantees existing on the date of this Agreement
and disclosed on Schedule A hereto, (ii) Guarantees resulting from the
----------
endorsement of negotiable instruments for deposit or collection in the ordinary
course of business and (iii) Guarantees in connection with the Purchase Money
Indebtedness or capital lease obligations permitted under Section 8.4(f).
8.6 Liens. The Borrower shall not create, incur, assume or suffer to
-----
exist any Lien on any of its properties or assets, except the following
(collectively, "Permitted Liens"):
---------------
(a) Liens for taxes, fees, assessments and other governmental charges
not delinquent or being contested in good faith and by proper proceedings,
as to which adequate reserves are maintained on the books of the Borrower
in accordance with GAAP;
(b) carriers', warehousemen's, landlords', mechanics', materialmen's
or similar liens imposed by law incurred in the ordinary course of
business in respect of obligations not overdue, or being contested in good
faith and by proper proceedings and as to which adequate reserves with
respect thereto are maintained on the books of the Borrower in accordance
with GAAP;
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<PAGE>
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other types of social security legislation;
(d) security deposits made to secure the performance of leases,
licenses, contracts and statutory obligations incurred in the ordinary
course of business;
(e) Liens in favor of the Bank;
(f) existing Liens, if any, listed on Schedule A hereto; provided
---------- --------
that no such Lien is spread to cover any additional property after the
date hereof, and that the principal amount of the Indebtedness secured
thereby is not increased;
(g) Liens securing Indebtedness permitted under Section 8.4(f),
provided that (I) each such Lien is given solely to secure the purchase
price of such property, does not extend to any other property and is given
at the time of acquisition of the property, and (II) the Indebtedness
secured thereby does not exceed the lesser of the cost of such property and
its fair market value at the time of acquisition; and
(h) Liens consisting of easements, rights-of-way, zoning restrictions
and other similar Liens affecting real property which do not materially
interfere with the Borrower's intended use thereof or with the ordinary
conduct of the Borrower's business.
8.7 Restricted Payments. The Borrower shall not declare, make or pay
-------------------
any Restricted Payment other than;
(i) dividends payable solely in common stock of the Borrower
to its stockholders;
(ii) dividends paid by any Subsidiary of the Borrower to the
Borrower or any of its Wholly-Owned Subsidiaries; and
(iii) as long as no Event of Default has occurred and is
continuing or could reasonably be expected to arise
therefrom, the repurchase of up to 39,300 shares of the
Borrower's common stock at a price not in excess of their
value as of a recent trading date pursuant to a repurchase
program previously approved by the Borrower's Board of
Directors.
8.8 Investments. The Borrower shall not make, maintain or acquire
-----------
any Investment in any Person other than:
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<PAGE>
(a) marketable obligations issued or guaranteed by the United States of
America having a maturity of one year or less from the date of purchase;
(b) certificates of deposit, eurodollar time deposits, commercial paper or
any other obligations of the Bank or of any other bank or trust company
organized or licensed to conduct a banking business under the laws of the United
States or any State thereof and which has (or which is a Subsidiary of a bank
holding company which has) publicly traded debt securities rated A or higher by
Standard & Poor's Corporation or A-2 or higher by Moody's Investors Service,
Inc.);
(c) commercial paper with maturities of not more than 90 days having the
highest rating then given by Moody's Investors Services, Inc. or Standard &
Poor's Corporation;
(d) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in subparagraph (a) above entered
into with the Bank or any of the banks referred to in subparagraph (b) above;
(e) shares in money market mutual funds substantially all the assets of
which are comprised of securities and other obligations of the types described
in subparagraphs (a) through (d) above;
(f) (i) depository accounts at the Bank; and (ii) depository accounts
maintained at other banks;
(g) stock or obligations issued to the Borrower or any Subsidiary thereof
in settlement of claims against others by reason of an event of bankruptcy or a
composition or the readjustment of debt or a reorganization of any debtor of the
Borrower or such Subsidiary;
(h) currently existing Investments set forth on Schedule A;
----------
(i) loans to employees of the Borrower in an aggregate amount not to
exceed at any time $250,000 in any individual case or $500,000 in the aggregate;
(j) transfers of certain assets to Subsidiaries to the extent permitted
under the last sentence of Section 8.3; and
(k) investments in accordance with the Borrower's investment policy as
approved by the Board of Directors of the Borrower, a copy of which has been
previously furnished to the Bank.
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<PAGE>
8.9 Sale and Leaseback. The Borrower shall not enter into any
------------------
arrangement, directly or indirectly, whereby it shall sell or transfer any
property owned by it in order to lease such property or lease other property
that the Borrower intends to use for substantially the same purpose as the
property being sold or transferred (a "Sale and Leaseback Transaction")
provided, however, as long as no Event of Default has occurred and is continuing
or could reasonably be expected to arise therefrom, the Borrower may enter into
a Sale and Leaseback Transaction as long as the aggregate sale price of property
sold in such transactions does not exceed $500,000.
8.10 ERISA. The Borrower will not permit any Plan maintained by the
-----
Borrower or by any member of the Controlled Group to: (a) engage in any
Prohibited Transaction; (b) fail to report to the Bank a "reportable event"
(ERISA (S)4043) within 30 days after its occurrence or as to any reportable
event as to which the 30-day notice period requirement of Section 4043(b) of
Title IV of ERISA has been waived by the PBGC, within 30 days of such time as
the Borrower is requested to notify the PBGC of such reportable event; (c) incur
any "accumulated funding deficiency" (ERISA (S)302); (d) terminate its existence
at any time in a manner which could result in the imposition of a Lien on the
property of the Borrower or any Subsidiary thereof; or (e) fail to report to the
Bank any "complete withdrawal" or "partial withdrawal" by the Borrower or an
affiliate from a "multiemployer plan" (ERISA (S)(S)4203,4205, and 4001,
respectively). The quoted terms are defined in the respective sections of ERISA
cited above.
8.11 Fiscal Year. The Borrower shall not change its fiscal year
-----------
without the prior written consent of the Bank.
Section 9. Financial Covenants.
-------------------
The Borrower covenants and agrees that so long as this Agreement is in
effect and until the Notes, together with all interest thereon and all other
Obligations of the Borrower to the Bank are paid or satisfied in full:
9.1 Net Income. The Borrower will not permit Net Income as of the
----------
end of any fiscal quarter to be less than the respective amounts set forth
below: (i) for the fiscal quarter ending March 31, 1998, Seven Hundred Fifty
Thousand Dollars ($750,000); and (ii) for each fiscal quarter ending thereafter,
One Million Dollars ($1,000,000).
9.2 Current Ratio. The Borrower will not permit the ratio of its
-------------
Adjusted Current Assets to its Current Liabilities to be less than (i) 1.00 to
1.00 as of the end of any fiscal quarter, commencing with the quarter ending
March 31, 1998, through the quarter ending December 31, 1998; (ii) 1.50 to 1.00
as of the end of any fiscal quarter, commencing with the quarter ending March
31, 1999 and for each quarter ending thereafter.
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<PAGE>
9.3 Leverage Ratio. The Borrower will not permit its Leverage
--------------
Ratio to be less than 1.00 to 1.00 as of the end of any fiscal quarter,
commencing with the quarter ending March 31, 1998 and for each quarter ending
thereafter.
Section 10. Events of Default.
-----------------
10.1 Events of Default. The occurrence of any of the following
-----------------
events shall be an "Event of Default" hereunder:
----------------
(a) The Borrower shall default (i) in the due and punctual
payment of principal of any Loan; or (ii) in the payment of interest on any
Loan or in the payment of any other amount due under any Loan Document and
such Default shall continue for more than five (5) Banking Days after such
payment was due; or
(b) Any representation, warranty or statement of the Borrower
made herein or in any other Loan Document, or in any certificate or
statement furnished pursuant to or in connection herewith or therewith,
shall prove to be incorrect, misleading or incomplete in any material
respect on the date as of which made or deemed made except as a result of
transactions expressly permitted hereunder; or
(c) The Borrower shall default in the performance or observance
of any term, covenant or agreement on its part to be performed or observed
pursuant to Sections 7.1, 7.2, 7.6, 8 and 9 hereof; or
(d) The Borrower shall default in the performance or observance
of any term, covenant or agreement on its part to be performed or observed
pursuant to any of the provisions of this Agreement or any other Loan
Document (other than those referred to in paragraphs (a) through (c) above)
and such default shall continue unremedied for a period of thirty (30) days
(or in case of defaults under Sections 7.5 and 7.10, ten (10) days) after
the occurrence of such Default; or
(e) Any obligation of the Borrower in respect of any
Indebtedness (other than the Notes) in excess of $250,000 or any Guarantee
in excess of $250,000 shall be declared to be or shall become due and
payable prior to the stated maturity thereof, or such Indebtedness or
Guarantee shall not be paid as and when the same becomes due and payable,
or there shall occur and be continuing unremedied beyond the applicable
cure and/or grace period any default under any instrument, agreement or
evidence of indebtedness relating to any such Indebtedness the effect of
which is to permit the holder or holders of such instrument, agreement or
evidence of indebtedness, or a trustee, agent or other representative on
behalf of such holder or holders, to cause such Indebtedness to become due
prior to its stated maturity; or
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<PAGE>
(f) The Borrower shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary case
under the Bankruptcy Code, (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Bankruptcy Code, or (vi) take any corporate action
for the purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the application or
consent of the Borrower in any court of competent jurisdiction, seeking (i) its
liquidation, reorganization, dissolution or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Borrower or of all or any substantial
part of its assets, or (iii) similar relief in respect of the Borrower under any
law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect, for a period of
60 days; or an order for relief against the Borrower shall be entered in an
involuntary case under the Bankruptcy Code; or
(h) A judgment or judgments for the payment of money in excess of $250,000
(net of insurance proceeds) in the aggregate shall be rendered against the
Borrower and any such judgment or judgments shall not have been vacated,
discharged, stayed or bonded pending appeal within thirty(30) days from the
entry thereof; or
(i) The Borrower or any member of the Controlled Group shall fail to pay
when due an amount or amounts aggregating in excess of $250,000 which it is
obligated to pay to the PBGC or to a Plan under Title IV of ERISA; or a notice
of intent to terminate a Plan or Plans having aggregate Unfunded Liabilities in
excess of $250,000 shall be filed under Title IV of ERISA by the Borrower or any
member of the Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any such Plan or
Plans or a proceeding shall be instituted by a fiduciary of any such Plan or
Plans against the Borrower or any member of the Controlled Group to enforce
Sections 515 or 4219(c)(5) of ERISA; or a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that any such
Plan or Plans must be terminated; or there shall occur a complete or partial
withdrawal form, or a default, within the meaning of Section 4219(c)(5) of
ERISA, with respect to, one or more Multiemployer Plans which could cause the
Borrower or one or more members of the Controlled Group to incur a current
payment obligation in excess of $250,000; or
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<PAGE>
(j) The Borrower shall default in the performance or observance
of any material term, covenant or agreement on their part to be
performed or observed pursuant to any of the provisions of any
agreement with the Bank or any instrument delivered in favor of the
Bank (other than, in either case, a Loan Document), and such default
shall continue unremedied beyond the grace and/or cure period (in any)
provided for therein.
10.2 Remedies Upon an Event of Default. If any Event of Default
---------------------------------
shall have occurred and be continuing, the Bank may by notice (a) declare the
Commitments terminated (whereupon the Commitments shall be terminated) and/or
(b) declare the principal amount then outstanding of, and the accrued interest
on, the Loans and facility fees and all other amounts payable hereunder and
under the Notes to be forthwith due and payable, whereupon such amounts shall be
and become immediately due and payable, without further notice, including,
without limitation, notice of intent to accelerate, presentment, demand, protest
or other formalities of any kind, all of which are hereby expressly waived by
the Borrower; provided that in the case of the occurrence of an Event of Default
--------
with respect to the Borrower referred to in clauses (f) and (g) of Section 10.1,
the Commitments shall be automatically terminated and the principal amount then
outstanding of and the accrued interest on the Loans and commitment fees and all
other amounts payable hereunder and under the Notes shall be and become
automatically and immediately due and payable, without notice (including,
without limitation, notice of intent to accelerate), presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Borrower.
Section 11. General.
-------
11.1 Amendments, Etc. No amendment or waiver of any provision of
---------------
this Agreement, the Notes or any other Loan Document, nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Bank and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
11.2 Notices, Etc. All notices and other communications provided
------------
for hereunder shall be in writing and shall be delivered by hand, by a
nationally recognized commercial overnight delivery service, by first class
certified or registered mail, postage prepaid or by telecopy, delivered,
addressed or transmitted, if to the Borrower, at its address set forth at the
beginning of this Agreement, Attention: Dennis M. Hurley, Chief Financial
Officer, Telecopy No. 617-679-1386, with a copy to Hale and Dorr LLP, 60 State
Street, Boston, Massachusetts 02109 Attention: Jeffrey A. Stein, Esq., Telecopy
No. 617-526-5000, and if to the Bank, at its address set forth in the beginning
of this Agreement, Attention: Rosemarie Moeller, Vice President, Telecopy No.
(617) 664-4176, with a copy to Sullivan & Worcester LLP, One Post Office Square,
Boston, Massachusetts 02109, Attention: Dennis J. White Esq., Telecopy No.
(617) 338-2880; or, as to each party, at such other address as shall
-40-
<PAGE>
be designated by such party in a written notice to the other party. All such
notices and communications shall be deemed effective, (a) in the case of hand
deliveries, when delivered; (b) in the case of an overnight delivery service, on
the next Banking Day after being placed in the possession of such delivery
service, with delivery charges prepaid; (c) in the case of mail, five days after
deposit in the postal system, first class certified or registered mail, postage
prepaid; and (d) in the case of telecopy notices, when electronic indication of
receipt is received, except that notices to the Bank pursuant to the provisions
of Section 2.4 shall not be effective until received by the Bank.
11.3 No Waiver; Remedies. No failure on the part of the Bank to
-------------------
exercise, and no delay in exercising, any right hereunder or under the Notes
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder or under the Notes preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
11.4 Right of Set-off.
----------------
(a) Upon the occurrence and during the continuance of any Event
of Default, the Bank is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by the Bank to or
for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement
and the Notes, irrespective of whether or not the Bank shall have made any
demand hereunder and although such obligations may be contingent or
unmatured.
(b) The Bank agrees promptly to notify the Borrower after any
such set-off and application, provided that the failure to give such notice
--------
shall not affect the validity of such set-off and application. The rights
of the Bank under this Section 11.4 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Bank may have.
11.5 Expenses; Indemnification.
-------------------------
(a) The Borrower shall pay on demand (i) the reasonable fees and
disbursements of counsel to the Bank in connection with the preparation of
this Agreement and the preparation or review of each agreement, opinion,
certificate and other document referred to in or delivered pursuant hereto;
(ii) all reasonable out-of-pocket costs and expenses of the Bank in
connection with the administration of this Agreement and the other Loan
Documents, and any waiver or amendment of any provision hereof or thereof,
including without limitation, the reasonable fees and disbursements of
counsel for the Bank; and (iii) if any Event of Default occurs and is
continuing, all reasonable costs and expenses incurred by the Bank,
including the
-41-
<PAGE>
reasonable fees and disbursements of counsel to the Bank, and of any
appraisers, environmental engineers or consultants, or investment banking
firms retained by the Bank in connection with such Event of Default or
collection, bankruptcy, insolvency and other enforcement proceedings
related thereto. The Borrower agrees to pay, indemnify and hold the Bank
harmless from, any and all recording and filing fees, and any and all
liabilities with respect to, or resulting from any delay in paying, stamp,
excise or other taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of or the
consummation or administration of any of the transactions contemplated by,
or any amendment, supplement or modification of, or any waiver or consent
under or in respect of, this Agreement or the other Loan Documents, or any
documents delivered pursuant hereto or thereto.
(b) The Borrower agrees to indemnify the Bank and its officers and
directors and hold the Bank and its officers and directors harmless from
and against any and all liabilities, losses, damages, reasonable costs and
expenses of any kind (including, without limitation, the reasonable fees
and disbursements of counsel for the Bank in connection with any
investigative, administrative or judicial proceeding initiated by a third
party, whether or not the Bank shall be designated a party thereto) which
may be incurred by the Bank, relating to or arising out of this Agreement
or any other Loan Document, or the existence of any Hazardous Substance on,
in, or under any Borrower Property, or any violation of any applicable
Environmental Laws for which the Borrower has any liability or which occurs
upon any Borrower Property, or the imposition of any Lien under any
Environmental Laws, provided that the Bank shall not have the right to be
--------
indemnified hereunder for its own bad faith, gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
(c) The agreements in this Section 11.5 shall survive the repayment
of the Notes, and all other amounts payable under this Agreement and the
other Loan Documents.
11.6 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors and
assigns except that the Borrower may not assign their rights or obligations
hereunder or under the Notes without the prior written consent of the Bank. The
Bank may assign a portion of its rights and obligations under this Agreement and
the Notes (or grant a participation therein) to any other bank or financial
institution with assets in excess of $500,000,000, provided, however, that the
--------
Bank shall at all times remain the agent bank with respect to this Credit
Agreement. The Borrower agrees that each assignee shall be entitled to the
benefits of Sections 4.6 through 4.11 with respect to its assigned interest,
provided that no assignee shall be entitled to receive any greater amount
- --------
pursuant to such Sections than the Bank would have been entitled to receive in
respect of the amount of the assigned interest transferred by it to such
assignee had no such transfer occurred. The Bank may furnish any information
concerning the Borrower in
-42-
<PAGE>
the possession of the Bank from time to time to assignees and participants
(including prospective assignees and participants).
11.7 Severability. Any provision of this Agreement which is
------------
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
11.8 Confidentiality. The Bank will endeavor in good faith to
---------------
maintain the confidentiality of any non-public information relating to the
Borrower which has been identified in writing as confidential on the information
itself or otherwise (the "Confidential Information") and, except as provided
below, will exercise the same degree of care that the Bank exercises with
respect to its own proprietary information to prevent the unauthorized
disclosure of the Confidential Information to third parties. Confidential
Information shall not include information that either: (a) is in the public
domain through no fault of the Bank; or (b) is disclosed to the Bank by a third
party, provided the Bank does not have actual knowledge that such third party is
prohibited from disclosing such information. The terms of this Section shall not
apply to disclosure of Confidential Information by the Bank that is, in the good
faith opinion of the Bank, compelled by laws, regulations, rules, orders or
legal process or proceedings or is disclosed to: (a) any party, including a
prospective participant, who has signed a confidentiality agreement containing
terms substantially similar to those contained herein; (b) legal counsel,
examiners, auditors and directors of the Bank and examiners, auditors and
investigators having regulatory authority over the Bank; or (c) any party in
connection with the exercise of remedies by the Bank after default in the
performance of the Borrower's obligations to the Bank.
11.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REGARD TO CONFLICTS OF LAWS RULES).
11.10 WAIVER OF JURY TRIAL. THE BANK AND THE BORROWER AGREE THAT
--------------------
NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING OUT
OF, THIS AGREEMENT, ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR
THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY
SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE
BANK AND THE BORROWER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS,
NEITHER THE BANK NOR THE BORROWER HAS AGREED WITH OR REPRESENTED
-43-
<PAGE>
TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN
ALL INSTANCES.
11.11 VENUE; CONSENT TO SERVICE OF PROCESS. THE BORROWER ACCEPTS FOR
------------------------------------
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT OR
PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
AGREEMENT, THE NOTES, ANY OTHER LOAN DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT RENDERED
BY ANY SUCH COURT IN ANY SUCH ACTION, SUIT OR PROCEEDING IN WHICH SHALL HAVE
BEEN SERVED WITH PROCESS IN THE MANNER HEREINAFTER PROVIDED, SUBJECT TO EXERCISE
AND EXHAUSTION OF ALL RIGHTS OF APPEAL AND TO THE EXTENT THAT IT MAY LAWFULLY DO
SO, WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR
OTHERWISE, IN SUCH ACTION, SUIT OR PROCEEDING ANY CLAIMS THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT ITS PROPERTY IS
EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE ACTION, SUIT OR
PROCEEDING IS BROUGHT IN AN INCOVENIENT FORUM OR THAT THE VENUE THEREOF IS
IMPROPER, AND AGREES THAT PROCESS MAY BE SERVED UPON IT IN ANY SUCH ACTION, SUIT
OR PROCEEDING IN THE MANNER PROVIDED BY CHAPTER 223A OF THE GENERAL LAWS OF
MASSACHUSETTS, RULE 4 OF THE MASSACHUSETTS RULES OF CIVIL PROCEDURE OR RULE 4 OF
THE FEDERAL RULES OF CIVIL PROCEDURE.
11.12 Headings. Section headings in this Agreement are included
--------
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
11.13 Counterparts. This Agreement may be signed in one or more
------------
counterparts each of which shall constitute an original and all of which taken
together shall constitute one and the same instrument.
[REMINDER OF PAGE INTENTIONALLY LEFT BLANK]
-44-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
LIFELINE SYSTEMS, INC.
By:
__________________________
Dennis M. Hurley
Vice President of Finance and
Chief Financial Officer
STATE STREET BANK AND TRUST
COMPANY
By:
__________________________
Rosemarie A. Moeller
Vice President
-45-
<PAGE>
Exhibit A-1
-----------
REVOLVING CREDIT NOTE
$5,000,000 April 22, 1998
For value received, the undersigned corporation (hereafter referred to as
the "Borrower") promises to pay to STATE STREET BANK AND TRUST COMPANY, 225
--------
Franklin Street, Boston, Massachusetts 02110-2804 (the "Bank"), or to its order,
----
the lesser of Five Million Dollars ($5,000,000) or the outstanding principal
amount of Revolving Credit Loans (as defined in the Credit Agreement referred to
below) advanced by the Bank to the Borrower pursuant to the Credit Agreement, on
the Revolving Credit Maturity Date, together with interest on the principal
amount hereof from time to time outstanding at the rates and at the times
provided in the Credit Agreement.
This promissory note evidences borrowings of Revolving Credit Loans under,
is subject to the terms and conditions of and has been issued by the Borrower
pursuant to that certain Credit Agreement of even date herewith by and between
the Borrower and the Bank (as the same may be further amended, modified or
supplemented from time to time, the "Credit Agreement"), and is subject to
------ ---------
optional and mandatory prepayment as provided therein, and is entitled to the
benefits thereof and of the other Loan Documents referred to therein.
All capitalized terms used in this Note and not otherwise defined herein
shall have the same meanings herein as in the Credit Agreement.
Upon the occurrence and during the continuance of any Event of Default, at
the option of the Bank, the principal amount then outstanding of and the accrued
interest on the advances under this Note and all other amounts payable under
this Note shall become immediately due and payable, in the manner and with the
effect provided in the Credit Agreement.
The Bank shall keep a record of the amount, the Type and the date of the
making of each Revolving Credit Loan pursuant to the Credit Agreement and each
payment of principal with respect thereto by maintaining a computerized or other
record of such information, which computerized or other record, and the
printouts thereof, shall constitute prima facie evidence of the accuracy of the
----- -----
information so maintained.
The undersigned agrees to pay all reasonable costs and expenses of the Bank
(including, without limitation, the reasonable fees and expenses of attorneys)
in connection with the enforcement of this Note and the other Loan Documents and
the preservation of its rights hereunder and thereunder.
No delay or omission on the part of the Bank in exercising any right
hereunder shall operate as a waive of such right or of any other right of the
Bank, nor shall any delay, omission or waiver on any one occasion be deemed a
bar to or waiver of the same or any other
<PAGE>
right on any future occasion. The Borrower and every endorser or guarantor of
this Note regardless of the time, order or place of signing waives presentment,
demand, protest and notices of every kind and assents to any one or more
extensions or postponements of the time of payment or any other indulgences, to
any substitutions, exchanges or releases of collateral for this Note, and to the
additions or releases of any other parties or persons primarily or secondarily
liable.
THE BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE
TO A JURY TRIAL IN ANY SUIT, ACTION OR PROCEEDING WHICH ARISES OUT OF OR BY
REASON OF THIS NOTE, ANY LOAN DOCUMENT (AS DEFINED IN THE CREDIT AGREEMENT), OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
BY ITS EXECUTION AND DELIVERY OF THIS NOTE, THE BORROWER ACCEPTS FOR ITSELF
AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT OR
PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS NOTE,
ANY LOAN DOCUMENT (AS DEFINED IN THE CREDIT AGREEMENT), OR THE TRANSACTIONS
CONTEMPLATED HEREBY, IN ADDITION TO ANY OTHER COURT IN WHICH SUCH ACTION, SUIT
OR PROCEEDING MAY BE BROUGHT, IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL
JUDGMENT RENDERED BY ANY SUCH COURT IN ANY SUCH ACTION, SUIT OR PROCEEDING IN
WHICH IT SHALL HAVE BEEN SERVED WITH PROCESS IN THE MANNER HEREINAFTER PROVIDED,
SUBJECT TO EXERCISE AND EXHAUSTION OF ALL RIGHTS OF APPEAL AND TO THE EXTENT
THAT IT MAY LAWFULLY DO SO, WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION,
AS A DEFENSE OR OTHERWISE, IN SUCH ACTION, SUIT OR PROCEEDING ANY CLAIMS THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT ITS PROPERTY
IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE ACTION, SUIT OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS
IMPROPER, AND AGREES THAT PROCESS MAY BE SERVED UPON IT IN ANY SUCH ACTION, SUIT
OR PROCEEDING IN THE MANNER PROVIDED BY CHAPTER 223A OF THE GENERAL LAWS OF
MASSACHUSETTS, RULE 4 OF THE MASSACHUSETTS RULES OF CIVIL PROCEDURE OR RULE 4 OF
THE FEDERAL RULES OF CIVIL PROCEDURE.
<PAGE>
ALL RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE GOVERNED BY THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS (WITHOUT REGARD TO CONFLICTS OF LAWS RULES) AND
THIS NOTE SHALL BE DEEMED TO BE UNDER SEAL.
LIFELINE SYSTEMS, INC.
By:_________________________
Name:
Title:
<PAGE>
Exhibit A-2
-----------
CONVERTIBLE REVOLVING LOAN NOTE
$5,000,000 April 22, 1998
For value received, the undersigned corporation (hereafter referred to as
the "Borrower") promises to pay to STATE STREET BANK AND TRUST COMPANY, 225
--------
Franklin Street, Boston, Massachusetts 02110-2804 (the "Bank"), or to its order,
----
the lesser of Five Million Dollars ($5,000,000) or the outstanding principal
amount of Convertible Revolving Credits Loans (as defined in the Credit
Agreement referred to below) advanced by the Bank to the Borrower pursuant to
the Credit Agreement, payable at the times and in accordance with the
requirements of the Credit Agreement, together with interest on the principal
amount hereof from time to time outstanding at the rates and at the times
provided in the Credit Agreement.
This promissory note evidences borrowings of the Convertible Revolving Loan
under, is subject to the terms and conditions of and has been issued by the
Borrower pursuant to that certain Credit Agreement, of even date herewith, by
and between the Borrower and the Bank (as the same may be further amended,
modified or supplemented from time to time, the "Credit Agreement"), and is
----------------
subject to optional and mandatory prepayment as provided therein, and is
entitled to the benefits thereof and of the other Loan Documents referred to
therein.
All capitalized terms used in this Note and not otherwise defined herein
shall have the same meanings herein as in the Credit Agreement.
Upon the occurrence and during the continuance of any Event of Default, at
the option of the Bank, the principle amount then outstanding of and the accrued
interest on the advances under this Note and all other amounts payable under
this Note shall become immediately due and payable, in the manner and with the
effect provided in the Credit Agreement.
The Bank shall keep a record of the amount, the Type and the date of the
making of each Convertible Revolving Loan pursuant to the Credit Agreement and
each payment of principal with respect thereto by maintaining a computerized or
other record of such information, which computerized or other record, and the
printouts thereof, shall constitute prima facie evidence of the accuracy of the
----- -----
information so maintained.
The undersigned agrees to pay all reasonable costs and expenses of the Bank
(including, without limitation, the reasonable fees and expenses of attorneys)
in connection with the enforcement of this Note and the other Loan Documents and
the preservation of its rights hereunder and thereunder.
No delay or omission on the part of the Bank in exercising any right
hereunder shall operate as a waiver of such right or of any other right of the
Bank, nor shall any delay,
<PAGE>
omission or waiver on any one occasion be deemed a bar to or waiver of the same
or any other right on any future occasion. The Borrower and every endorser or
guarantor of this Note regardless of the time, order or place of signing
waives presentment, demand, protest and notices of every kind and assents to
any one or more extensions or postponements of the time of payment or any other
indulgences, to any substitutions, exchanges or releases of collateral for this
Note, and to the additions or releases of any other parties or persons primarily
or secondarily liable.
THE BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE
TO A JURY TRIAL IN ANY SUIT, ACTION OR PROCEEDING WHICH ARISES OUT OF OR BY
REASON OF THIS NOTE, ANY LOAN DOCUMENT (AS DEFINED IN THE CREDIT AGREEMENT), OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
BY ITS EXECUTION AND DELIVERY OF THIS NOTE, THE BORROWER ACCEPTS FOR ITSELF
AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT OR
PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS NOTE,
ANY LOAN DOCUMENT (AS DEFINED IN THE CREDIT AGREEMENT), OR THE TRANSACTIONS
CONTEMPLATED HEREBY, IN ADDITION TO ANY OTHER COURT IN WHICH SUCH ACTION, SUIT
OR PROCEEDING MAY BE BROUGHT, IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL
JUDGMENT RENDERED BY ANY SUCH COURT IN ANY SUCH ACTION, SUIT OR PROCEEDING IN
WHICH IT SHALL HAVE BEEN SERVED WITH PROCESS IN THE MANNER HEREINAFTER PROVIDED,
SUBJECT TO EXERCISE AND EXHAUSTION OF ALL RIGHTS OF APPEAL AND TO THE EXTENT
THAT IT MAY LAWFULLY DO SO, WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION,
AS A DEFENSE OR OTHERWISE, IN SUCH ACTION, SUIT OR PROCEEDING ANY CLAIMS THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT ITS PROPERTY
IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE ACTION, SUIT OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS
IMPROPER, AND AGREES THAT PROCESS MAY BE SERVED UPON IT IN ANY SUCH ACTION, SUIT
OR PROCEEDING IN THE MANNER PROVIDED BY THE CHAPTER 223A OF THE GENERAL LAWS OF
MASSACHUSETTS, RULE 4 OF THE MASSACHUSETTS RULES OF CIVIL PROCEDURE OR RULE 4
OF THE FEDERAL RULES OF CIVIL PROCEDURE.
<PAGE>
ALL RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE GOVERNED BY THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS (WITHOUT REGARD TO CONFLICTS OF LAWS RULES) AND
THIS NOTE SHALL BE DEEMED TO BE UNDER SEAL.
LIFELINE SYSTEMS, INC.
By:_________________________
Name:
Title:
<PAGE>
Exhibit B
---------
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Re: Credit Agreement dated as of April , 1998 (the "Agreement")
-----------------------------------------------------------
Ladies and Gentlemen:
Pursuant to Section 3 of the Agreement, the undersigned hereby confirms its
request made on ____________, ___ for [(a Revolving Credit Loan/Convertible
Revolving Credit Loan)* in the amount of $____________ to be advanced on ______,
___. Said Loan shall be a [Prime Rate] [Fixed Rate] [LIBOR Rate] Loan.]**
[The Interest Period applicable to said Loan will be [_____ days,]*** [____
years]****
[Said Loan represents a conversion of the [Prime Rate] [Fixed Rate] [LIBOR
Rate] Loan in the same amount made on __________, ___]*****
All of the conditions set forth in Section 5 of the Agreement have been
satisfied with respect to the Loan requested hereby; the representations and
warranties contained or referred to in Section 6 of the Agreement are true and
accurate on and as of the effective date of the Loan as though made at and as of
such date (except to the extent that such representations and warranties
expressly relate to an earlier date); and no Default or Event of Default has
occurred and is continuing or will result from the Loan.
LIFELINE SYSTEMS, INC.
By: _____________________
Title:
Date: __________________
________________________
* Indicate whether Loan is to be a Revolving Credit Loan or Convertible
Revolving Credit Loan.
** Indicate Type of Loan.
*** Indicate days duration of Interest Period for LIBOR Rate Loan.
**** Indicate years duration of Interest Period for Fixed Rate Loan.
***** To be inserted in any request for a conversion.
<PAGE>
Exhibit C
---------
COMPLIANCE CERTIFICATE
----------------------
TO: State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
The undersigned Responsible Officer of Lifeline Systems, Inc., a Delaware
corporation (the "Borrower") hereby certifies with respect to the Credit
--------
Agreement dated as of April __,1998 between State Street Bank and Trust Company
(the "Bank") and the Borrower, as amended through the date hereof (the "Credit
---- ------
Agreement"), that (a) the Borrower has been in complete compliance for the
- ---------
period from _/_/__ to _/_/__ (the "Applicable Initial Financial Statements
---------------------------------------
Date") with the covenants of the Borrower contained therein, as demonstrated
- ----
below, and (b) no Default or Event of Default has occurred and is continuing as
of the date hereof, except, in either case, as noted below. All capitalized
terms used herein and not otherwise defined shall have the meanings prescribed
therefor in the Credit Agreement.
COVENANT REQUIRED ACTUAL AS OF
______ __, 19__
Financial Statements Quarterly for the first three
quarters of each fiscal year,
w/in 46 days; and annually w/in
[91] days
All documents filed with Within 5 days after filing
SEC
Current Ratio (quarterly) Quarter __.__:1
Ending Ratio ($__________to
------ -----
$___________)
3/31/98 1.00:1.00
through
12/31/99
3/31/99 and 1.50:1.00
each fiscal
quarter
thereafter
<PAGE>
Leverage Ratio (Total Quarter ___.___:1.00
Liabilities to Tangible Net Ending Ratio ($____to $____)
------ -----
Worth)(quarterly)
3/31/98 and 1.00:1.00
each fiscal
quarter
thereafter
Net Income (quarterly Quarter Net $_______________
Jeffrey A.Stein, Esq. Ending Income
------ ------
3/31/98 $750,000
6/30/98 $1,000,000
and each
fiscal
quarter
thereafter
Comments Regarding Exceptions:
Attached hereto are financial statements as of and for the fiscal [quarter]
[year] ended on the applicable initial financial statements date, which have
been certified by the [undersigned] [Accountants] as required by the Credit
Agreement.
[_] The Leverage Ratio has changed so as to warrant an adjustment in the
Applicable Margin from __% to __%. (check if applicable)
Submitted by:
_____________________
Name:________________
Title:_______________
Date:________________
<PAGE>
Schedule A
----------
Disclosure Schedule
-------------------
[To be completed by the Company]
<PAGE>
EXHIBIT 10.52
FIRST AMENDMENT OF LEASE
THIS FIRST AMENDMENT OF LEASE (the "Amendment") is hereby entered into as
of the 30th day of June, 1998 by Bishop/Clark Associates Limited Partnership and
Bishop 108 Associates Limited Partnership (collectively, the "Landlord") and
Lifeline Systems, Inc. (the "Tenant").
WITNESSETH:
WHEREAS, reference is hereby made to that certain Lease, dated as of
November 17, 1997 (the "Lease") entered into by and between the Landlord and the
Tenant; and
WHEREAS, any capitalized term used and not defined herein shall have the
meaning set forth in the Lease.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and notwithstanding anything
contained in the Lease to the contrary, the Landlord and Tenant hereby agree as
follows:
1. The Landlord and the Tenant hereby approve the following:
a. Integrated Builders (the "Contractor") is hereby approved as the
contractor to construct the Base Building Improvements and Tenant
Work; and
b. the construction contract dated as of April 20, 1998, which has
been entered into by the Contractor and the Landlord for the Base
Building Improvements (the "Base Building Contract") is hereby
approved; and
c. The Base Building Plans and Specifications described on Exhibit A
attached hereto which have been signed by the Landlord and the
Tenant are hereby approved; and
d. The site plan described on Exhibit A attached hereto which has
been signed by the Landlord and the Tenant is hereby approved as
constituting the Alternate 1 Site Plan and the description of the
Alternate 1 Site Plan Work in substitution for the site plan
described in the Lease as constituting the Alternate 1 Site Plan
and the section of the Architect's Memorandum described in the
Lease as constituting the description of the Alternate 1 Site
Plan Work.
2. The Landlord and the Tenant no longer desire to have the Guaranteed
Site Plan and the Guaranteed Site Plan Work performed in the event that the
Alternate 1 Site Plan is not approved by the Planning Board of the Town.
Instead, the Landlord and the Tenant agree that the Landlord shall perform the
site work shown on the Alternate 1 Site Plan which receives the
<PAGE>
approval of the Planning Board and, if the Planning Board requires that changes
be made to the Alternate 1 Site Plan, the Landlord agrees to perform the site
work with the changes required by the Planning Board provided that the Landlord
and the Tenant also agree to such changes. All references in the Lease to the
Guaranteed Site Plan and the Guaranteed Site Plan Work are hereby deleted
without substitution therefor except for the following sections of the Lease
which are amended as follows:
(a) Section 16.8 of the Lease is hereby amended to read as follows:
"Substantial Completion" shall be deemed to occur when Landlord has
received a Certificate of Occupancy for the Building and a certificate
from the architect who has been overseeing the Work certifying that
the Work (except for the Alternate 1 Site Plan Work) has been
substantially completed. A punch list shall be developed by Landlord
and Tenant, and all punch list items shall be completed to the
reasonable satisfaction of Tenant within 30 days of Substantial
Completion subject to force majeure and Tenant Delays (except for the
Alternate 1 Site Plan Work which the Landlord agrees to have completed
within a reasonable time after receiving final approval of the
Alternate 1 Site Plan from the Planning Board and after the appeal
period for such approval has run without any appeal being filed or
with all appeals which were filed having been dismissed without any
further right of appeal).
(b) The second and third sentences in Section 16.9 of the Lease are hereby
amended to read as follows:
"Tenant Delay" shall mean any delay in the Work caused, directly or
indirectly, by any act or omission of Tenant or anyone acting by or on
behalf of Tenant (including, without limitation, any architect or
engineer in his or her capacity of working for Tenant). If a delay in
the Work is caused by Landlord and Tenant, only the portion of such
delay attributable to the Tenant shall constitute a Tenant Delay.
3. The Landlord and the Tenant hereby waive the date set forth in Section
16.4 of the Lease for the approval of the final Base Building Plans and
Specification and the dates set forth in Section 16.5 for the selection and
approval of the contractor and the contract.
4. The Tenant agrees to deliver to the Landlord on or before August 3,
1998 for the Landlord's approval final Tenant Work Plans and Specifications
which comply with all applicable laws and are of sufficient detail to satisfy
the requirements of the building inspector of the Town for the issuance of a
building permit. The Tenant agrees to deliver to the Landlord on or before
August 21, 1998 a construction contract for the Tenant Work in accordance with
the letter agreement with Contractor attached hereto as Exhibit B, which does
not provide for any work which cannot reasonably be completed by the Scheduled
Completion Date and which
2
<PAGE>
contract has been signed by the Contractor and shall be executed by
Landlord.(the "Tenant Work Contract").
5. Section 16.6.1 of the Lease is hereby amended to read as follows:
16.6 Payment of Costs.
---------------
16.6.1 Payment of Costs of Work. For all of the Work, the Landlord and
-------------------------
Tenant agree to share the cost as follows:
(i) for all out-of-pocket costs and expenses incurred by Landlord to third
parties for the architectural work, engineering work, construction and
installation of the Base Building Improvements, the Landlord shall pay
all such costs and expenses except that:
(A) the Landlord shall pay up to a maximum aggregate amount of One
Hundred Sixty Thousand Dollars ($160,000.00) for all design work,
architectural work and engineering work performed in connection
with the Base Building Work and the Alternate 1 Site Plan Work
(including, without limitation, all such work done by DiMella
Shaffer), which aggregate maximum amount shall be increased by
the amount of the fees, if any, incurred in connection with the
modification to Alternate 1 Site Plan required by the Framingham
Board, and the Tenant shall pay all amounts above such maximum
aggregate amount; and
(B) the Tenant shall pay all such costs and expenses due to any and
all change orders to the Base Building Plans and Specifications,
from and after the date hereof, which are done at the request of
Tenant, done in response to any changes which must be made in the
Base Building Plans and Specifications because of the Tenant Work
Plans and Specifications, or done in response to any changes made
by the Tenant in the Tenant Work Plans and Specifications.
Changes to the Base Building Plans and Specifications prior to
the date hereof shall be paid for in accordance with Paragraph C
below; and
(C) Landlord and Tenant confirm and agree that Landlord is
responsible for the cost of completing the work shown on the Base
Building Plans and Specifications and Alternate 1 Site Plan (as
modified pursuant to Section 2 hereof) to the extent such work is
within the scope of Base Building Work described in the August
29, 1997 Schedule and the Architect's Memorandum (and the Plans
referred to therein) (such August 29, 1997 Schedule and
Architect's Memorandum being attached hereto as Exhibit C and the
Base Building Work described therein and on the Plan referred
3
<PAGE>
to in the Architect's Memorandum being referred to as "Landlord's
Share of Base Building Work"), and that Tenant is responsible for
the cost, if any, of completing the work shown on the Base
Building Plans and Specifications and Alternate 1 Site Plan (as
modified pursuant to Section 2 hereof) to the extent such work is
beyond the scope of Landlord's Share of Base Building Work (such
cost, if any, for which Tenant is responsible being referred to
herein as the "Cost Difference). The Landlord and the Tenant
agree to use reasonable and good faith efforts to determine any
Cost Difference. Notwithstanding the foregoing, if, on or before
September 30, 1998, the Landlord and the Tenant have not agreed
in writing on the amount of any Cost Difference, then either
party may have any Cost Difference determined by a court of
competent jurisdiction, but failure to agree on any Cost
Difference shall not be cause for Landlord to fail to complete
and pay for the Work (subject to adjustment, if applicable, after
such determination), and failure of Tenant to pay for any
disputed amount prior to agreement or judicial determination
shall not constitute a default hereunder;
(ii) for all out-of-pocket costs and expenses incurred by Landlord to
third parties for the construction and installation of the Tenant
Work (other than the Work described in (iii) below), the Landlord
shall pay up to a maximum aggregate amount of One Million Six Hundred
Eighty-Eight Thousand Four Hundred and 00/100 Dollars ($1,688,400.00)
("Tenant's Allowance"). The Tenant shall pay any and all costs and
expenses of the Tenant Work which are in excess of the Tenant's
Allowance (including, without limitation, all costs and expenses for
all design work, architectural work and engineering work performed in
connection with the Tenant Work); and
(iii) payment for all Work to be done in connection with the heating,
ventilating and air conditioning system shall be governed by the
provisions of the letter, a copy of which is attached hereto as
Schedule D.
6. Section 16.9.2 of the Lease is hereby amended to add the following
sentence at the start of that section: "As used in this Lease, the term
"Scheduled Completion Date" shall mean the date which is one hundred twenty
(120) days after the last to occur of the following, as said date may be
extended for Tenant Delays: (1) the date upon which the Tenant delivers to the
Landlord for the Landlord's approval final Tenant Work Plans and Specifications
which comply with all applicable laws, are of sufficient detail to satisfy the
requirements of the building inspector of the Town for the issuance of a
building permit, and are reasonably satisfactory to the Landlord; and (2) the
date upon which the Tenant delivers to the Landlord the Tenant Work Contract.
4
<PAGE>
7. The term "Scheduled Completion Date" is hereby substituted in place of
"September 1, 1998" in Section 16.9.2 of the Lease and elsewhere in the Lease.
The Landlord and the Tenant agree to memorialize in writing the calendar date
for the Scheduled Completion Date, the Substantial Completion Date and Outside
Date (as those terms are defined below) promptly after those calendar dates can
be determined.
8. The Landlord and the Tenant hereby delete all of the Permit
Performance Dates set forth in Section 16.9.3 without substitution therefor.
Landlord represents to Tenant that it has obtained an unconditional building
permit from the Town of Framingham for the Base Building Work (other than the
Base Building Work which is to be governed by the Alternate 1 Site Plan) and
that it has filed the Alternate 1 Site Plan with the Town of Framingham Planning
Board for Site Plan Approval under the Framingham Zoning By-Law.
9. As used in Section 16.9.4 of the Lease and elsewhere in the Lease, the
term "Substantial Completion Date" shall mean the date which is sixty (60) days
after the Scheduled Completion Date as such date may be extended for force
majeure and Tenant Delays.
10. As used in Section 16.9.5 of the Lease and elsewhere in the Lease, the
"Outside Date" shall mean the date which is one hundred eighty (180) days after
the Scheduled Completion Date as such date may be extended for Tenant Delays.
11. The definition of "Term Commencement Date" set forth in Section 1.1 of
the Lease is hereby deleted in its entirety. The Landlord and the Tenant hereby
agree that the "Term Commencement Date" is November 1, 1998 and the Tenant shall
commence paying Rent to the Landlord on the Term Commencement Date even though
the Landlord will not be able to deliver possession of the Leased Premises to
the Tenant on the Term Commencement Date because the Work will be under
construction. If the Landlord fails to achieve Substantial Completion by the
Scheduled Completion Date, then Tenant shall not be obliged to pay any Base Rent
or Additional Rent for each day after the Scheduled Completion Date that
Substantial Completion is not achieved (the "Free Rent Period"), and, if and
when applicable, Tenant shall be entitled to its remedies set forth in Section
16.9.4, 16.9.5 and 16.9.6 of the Lease. If a delay in achieving Substantial
Completion by the Scheduled Completion Date is caused by the Landlord and the
Tenant, only the portion of such delay attributable to the Landlord shall be
included in the Free Rent Period.
12. The Lease, as amended by this Amendment, is hereby ratified and
confirmed and is in full force and effect.
5
<PAGE>
In Witness Whereof, the parties hereto have executed this Amendment under
seal as of the date first written above.
LANDLORD: TENANT:
BISHOP/CLARK ASSOCIATES LIFELINE SYSTEMS, INC.
LIMITED PARTNERSHIP
By: BISHOP/CLARK CORPORATION
the sole General Partner
By: /s/ Donald A. Levine By: /s/ Dennis M. Hurley
---------------------------- -----------------------
Donald A. Levine, President Dennis M. Hurley
Vice President of Finance
BISHOP 108 ASSOCIATES LIMITED
PARTNERSHIP
By: BISHOP 108 CORPORATION
the sole General Partner
By: /s/ Donald A. Levine
----------------------------
Donald A. Levine, President
CONSENTED TO:
GUARANTORS:
/s/ Donald A. Levine
----------------------------
Donald Levine, individually
/s/ Lewis Heafitz
----------------------------
Lewis Heafitz, individually
/s/ Neal Shalom
----------------------------
Neal Shalom, individually
6
<PAGE>
EXHIBIT A
Plans prepared by DiMella Shaffer Associates, Inc.
Drawings:
<TABLE>
<CAPTION>
Number Drawing Title Date Issued Issued for
Construction
<S> <C> <C> <C>
D1.1 First Floor Demolition Plan 2/12/98 4/24/98
D1.2 Second Floor Demolition Plan 2/12/98 4/24/98
D1.3 Roof Demolition Plan 2/12/98 4/24/98
D4.1 Exterior Demolition (Demolition Drawing) 2/12/98 4/24/98
D6.1 Demolition Wall Sections 4/24/98 4/24/98
A1.1 First Floor Plan 2/12/98 4/24/98
A1.2 Second Floor Plan 2/12/98 4/24/98
A1.3 Roof Plan 2/12/98 4/24/98
A2.1 Enlarged Bathroom Plans 2/12/98 4/24/98
A2.2 Enlarged Bathroom Interior Elevations 2/12/98 4/24/98
A3.1 First Floor RCP 2/12/98 4/24/98
A3.2 Second Floor RCP 2/12/98 4/24/98
A4.1 Exterior Elevations 2/12/98 4/24/98
A6.1 Wall Section at Porch 2/12/98 4/24/98
A6.2 Wall Section (Typical) 2/12/98 4/24/98
A6.3 Wall Section 2/12/98 4/24/98
A6.4 Wall Section (South Elevation) 2/12/98 Deleted
A6.5 New Elevator & Stair #3 2/12/98
A6.6 Existing Stair Numbers 1 & 2 2/12/98
A6.7 Stair #4 & Skylight Plan, Sections & Details 2/12/98
A7.1 Exterior Details 2/12/98 4/24/98
A7.3 Exterior Details 2/12/98 4/24/98
A10.1 Window Schedule 2/12/98 4/24/98
A10.2 Partitions Schedule 2/12/98 4/24/98
</TABLE>
Note: Drawings A6.5, A6.6 & A6.7 are included in the Base Building contract but
will be issued as part of the tenant fit up package.
<PAGE>
<TABLE>
<CAPTION>
Number Drawing Title Date Issued Issued for
Construction
<S> <C> <C> <C>
S-1 Part Plans, Sections, Details & General Notes 2/12/98 4/24/98
S-2 Part Plans & Notes 2/12/98 4/24/98
S-3 Sections & Details 2/12/98 4/24/98
S-4 Sections & Details 4/24/98 4/24/98
M1 First Floor Mechanical Layout 2/12/98 4/24/98
M2 Second Floor Mechanical Layout 2/12/98 4/24/98
M3 Mechanical Specifications & Diagrams 2/12/98 4/24/98
M4 Mechanical Details 2/12/98 4/24/98
P-1 First Floor Plumbing Demolition Plan 2/12/98 4/24/98
P-2 Second Floor Plumbing Layout 2/12/98 4/24/98
P-3 First Floor New Plumbing Layout 2/12/98 4/24/98
P-4 Second Floor New Plumbing Layout 2/12/98 4/24/98
E-1 First Floor Electrical Demolition Plan 2/12/98 4/24/98
E-2 Second Floor Electrical Demolition Plan 2/12/98 4/24/98
E-3 First Floor New Electrical Layout 2/12/98 4/24/98
E-4 Second Floor New Electrical Layout 2/12/98 4/24/98
E-5 Demolition Notes & Legend 2/12/98 4/24/98
E-6 Notes, Legend, Fixture Schedule & Detail 2/12/98 4/24/98
E-7 Legend, Fixture, Schedule & Detail 2/12/98 4/24/98
Addendum's:
- ----------
A1.1 First Floor Plan 2/20/98
A1.2 Second Floor Plan 2/20/98
A3.1 First Floor RCP 2/20/98
A4.1 Exterior Elevations 2/20/98
A6.1 Wall Sections at Porch 2/20/98
M-1 First Floor Mechanical Layout 2/25/98
M-2 Second Floor Mechanical Layout 2/25/98
A4.1 Exterior Elevations 3/3/98
SKB-1 Exterior Elevations 3/3/98
A4.1 Exterior Elevations 3/30/98
</TABLE>
<TABLE>
<CAPTION>
Revisions to the contract pending change estimates Revised Dates
- --------------------------------------------------------------------------------
<S> <C>
P-3 First Floor Plumbing Layout (for HVAC revisions) 6/16/98
P-4 Second Floor Plumbing Layout (for HVAC revisions) 6/16/98
E-3 First Floor Electrical (for HVAC revisions) 6/10/98
E-4 Second Floor Electrical (for HVAC revisions) 6/10/98
E-5 Panel Schedules and Riser 6/10/98
</TABLE>
<PAGE>
Plans prepared by others:
MECHANICAL - HVAC by Joe Nahas, PB
These drawings replace drawings M1 through M4 previously issued by Q&W
Associates, Inc.
<TABLE>
<CAPTION>
Number Drawing Title Issued for
Construction
<S> <C> <C>
M-1 First Floor Plan - HVAC 6/30/98
M-2 Second Floor Plan - HVAC 6/30/98
M-3 Boiler Room Plan - HVAC 6/30/98
M-4 Mechanical Equipment Schedules 6/30/98
M-5 Detail Sheet 6/30/98
FIRE PROTECTION DRAWINGS by Lynco Fire Protection, Inc.
A1.1 First Floor Sprinkler Plan 12/12/97
A1.2 Second Floor Sprinkler Plan 12/12/97
FIRE PROTECTION DRAWINGS by Q&W Associates, Inc.
Those drawings replace A1.1 and A1.2 issued by Lynco Fire Protection, Inc.
FP-1 First Floor Sprinkler Plan 6/10/98
FP-2 Second Floor Sprinkler Plan 6/10/98
CIVIL ENGINEERING by BSC Group, Inc.
1 of 3 Existing Conditions Plan 5/28/98
2 of 3 Grading and Utility Plan 5/28/98
3 of 3 Site Construction Details 5/28/98
LANDSCAPE DESIGN by Leonard Designs Associates
L-1 Landscape Plan 6/4/98
</TABLE>
<PAGE>
EXHIBIT B
---------
LETTER AGREEMENT WITH INTEGRATED BUILDERS
<PAGE>
INTREGRATED BUILDERS
1515 WASHINGTON STREET
BRAINTREE, MASSACHUSETTS 02184
June 26, 1998
Bishop/Clark Associates
Bishop 108 Associates
145 Rosemary Street
Needham, MA 02194
Lifeline Systems, Inc.
640 Memorial Drive
Cambridge, MA 02139
Re: 108 Clark Street, Framingham, MA
--------------------------------
Gentlemen:
Reference is made to the Agreement between Bishop/Clark Associates and Bishop
108 Associates as Owner and Integrated Builders as Contractor for Lifeline
Systems, Inc. Base Building Work at 108 Clark Street, Framingham, MA, dated
April 20, 1998 (the "Base Building Contract").
The undersigned Integrated Builders agrees with Owner and Lifeline Systems,
Inc. ("Lifeline") that it will enter into a contract with Owner substantially in
the form of the Base Building Contract, for the tenant finish work at the
building at 108 Clark Street, for a fixed price contract sum to be determined
(as described below), which sum shall include a contractor's fee of no greater
than 6%.
Contractor agrees that it will promptly obtain (and in any event within two
weeks of receipt of applicable plans and specifications) at least two
competitive bids from subcontractors on all elements of the work, will provide
such bids to Owner and Lifeline, and will work cooperatively with Owner and
Lifeline to finalize the Tenant Finish Work Contract as aforesaid.
Sincerely,
INTEGRATED BUILDERS
By:_______________________
<PAGE>
EXHIBIT C
---------
COPY OF AUGUST 29 SCHEDULE AND ARCHITECT'S MEMORANDUM
<PAGE>
[LETTERHEAD DIMELLA - SHAFFER]
MEMORANDUM
TO: Levco
ATTN: C. Kibbee
FROM: F. DiMella/John Becker
DATE: November 10, 1997
PROJECT: 108 Clark St. Framingham, MA
Additional Description of Base Building work per letter of intent dated August
29, 1997 and per the following conceptual plans prepared by DiMella Shaffer
Associates dated as follows:
L - 1.0 Guaranteed Site Plan November 5, 1997
L - 1.1 Site Plan- Alternate November 5, 1997
A - 1.1 First Floor Plan November 10, 1997
A - 1.2 Second Floor Plan November 10, 1997
A - 4.0 Elevations October 20, 1997
A - 5.0 Clark Street View October 20, 1997
The Base Building improvements which are part of the Guaranteed Site Plan
include:
Site Improvements (as indicated on L - 1.0 Guaranteed Site Plan):
1. Parking areas re-graded and re-paved with base coat and final coat.
Striping per site plan.
2. Restored curb cut on Bishop Street to provide for loading access from Bishop
Street onto the Bishop Street/Clark Street parcel. Closed off existing curb
cuts on Lawrence Street with the exception of two accesses.
3. New parking areas on the Bishop Street/Clark Street parcel, the 104 Clark
Street parcel and the 108 Clark Street parcel.
<PAGE>
November 10, 1997
Page 2
4. Sloped granite curbing at parking lots, including entry drive, landscaped
islands, and separations of paved areas from building. Granite curbing will
include flush curbs at locations necessary for handicapped access.
5. Concrete entry walks at primary and secondary building entries.
6. Main and secondary entrances handicapped accessible.
7. Upgraded site lighting to satisfy Lifeline Systems Inc. (LSI) and as
required by the Town of Framingham.
8. Receiving dock at the Clark Street side of the building, accessed from the
Bishop Street/Clark Street parcel, to include overhead door facing east,
truck level loading (by lowering the service drive to achieve floor level
dock), stairs from grade to dock with an access door adjacent to overhead
door, all necessary concrete retaining walls, space adjacent to service bay
for a dumpster, +/-8'-0" high screen enclosure of dock. Interior vestibule
room with double door. Exact location, dimensions and configuration of
receiving dock to be determined in final design phase of work.
9. Grade level shipping door at the Clark Road side of building to include
overhead door and adjacent access door with interior vestibule room with
double door. A walkway will be provided to the existing adjacent paved
parking area.
10. Landscaped grounds to be developed per mutual agreement and per requirements
of the Town of Framingham.
[LOGO OF DIMELLA - SHAFFER]
<PAGE>
November 10, 1997
Page 3
East, South and West Building Facades:
Improvements generally as indicated on drawings including new insulated glass
windows throughout and metal panels (where shown) in painted aluminum frames,
new EIFS system over existing metal panels and other surfaces as indicated,
painted brick in areas indicated, and new roof cap throughout.
North Facade:
1. Removal of entire first and second floor exterior wall on the Lawrence street
side of building between stairwells including the loading dock enclosure. A
new exterior wall with EIFS finish, as indicated on drawings, shall be
constructed flush with the outside face of the existing stairwells with first
floor slab, second floor structure, roof, "entry porch" area, new glass and
aluminum double door vestibule and new glazing throughout. Site re-grading as
required to install new exterior wall, provide an accessible entry and
functional parking lot.
2. New glass entry doors at the existing service elevator entrance.
3. New EIFS finish over existing brick on stair wells and service elevator.
Interior Atrium and stair:
1. New atrium space shall include floor opening of shape and size indicated with
new stair. Construction and detailing shall be the equivalent of LSI stair at
Memorial Drive facility.
Elevators:
1. New passenger elevator shall be 2500# with standard cab finish in location
chosen by LSI.
2. Service elevator to be renovated to meet code requirements.
Roof:
1. New EPDM roof
2. New skylights. Base building includes approximately 225 sf of skylight to be
constructed of standard size Wasco or equal skylights. Final quantity and
location of skylights to be determined from final space plan.
[LOGO OF DIMELLA - SHAFFER]
<PAGE>
November 10, 1997
Page 4
Plumbing:
1. Lavatory improvements include accessibility requirements per ADA,
replacement or covering of existing wall and floor tile with new tile, new
lavatory counters and fixtures, new or renovated toilet partitions, new
ceilings, lighting and accessories.
HVAC:
1. 320 Tons of cooling capacity from roof top cooling tower and water cooled
chiller.
2. New gas steam boiler and new or reconditioned steam to water heat exchanger.
3. Reconditioning or replacement of existing fan coil units as required to
provide no fewer than 17 fan coil units of approximately 7000 - 8000 cfm
capacity each. Should Owner elect to replace any units, Owner shall review
size and location of new units with tenant to coordinate such selection to
the maximum extent possible with tenant HVAC requirements.
4. Reduction in air volumes from existing fan coil units (through pulley and
belt changes), if required by LSI.
5. Removal of existing perimeter baseboard at second floor and relocation of
existing perimeter baseboard at first floor to accommodate new studs and
insulation. Perimeter hot water loop serving baseboard shall be available
for tie in to tenant fit up HVAC work.
6. Approximately 8000 cfm tempered ventilation air (or a lessor amount, if
required by tenant's fit up HVAC work) shall be provided to within 5' of
existing or replacement fan coil units along with associate relief system.
7. Energy management control system to fan coil units only. Replacement of any
defective existing controls.
8. Removal of existing branch ductwork and diffusers and cleaning of all
remaining ductwork including main trunk lines.
[LOGO OF DIMELLA - SHAFFER]
<PAGE>
November 10, 1997
Page 5
In addition to the above, the Base Building improvements which are part of the
Site Plan Alternate I shall include the following:
Site Improvements (as indicated on L - 1.1 Site Plan Alternate I):
1. Existing parking areas re-graded and re-paved with base coat and final coat.
Striping per site plan.
2. New parking areas on the Bishop Street/Clark Street parcel, the 104 Clark
Street parcel and the 108 Clark Street parcel.
3. New curb cuts for new main entry, secondary entries and service entries
along Lawrence and Clark Streets, plus closing of curb cuts along Lawrence
Street.
4. Sloped granite curbing at parking lots, including entry drive, landscaped
islands, and separations of paved areas from building. Granite curbing will
include flush curbs at locations necessary for handicapped access.
5. Additional upgraded site lighting to satisfy LSI and as required by the Town
of Framingham.
6. Grade level shipping bay at the Clark Road side of building. Receiving dock
at the Clark Street side of the building, accessed from Clark Street, to
included overhead door facing west, truck level loading (by lowering the
service drive to achieve floor level dock), stairs from grade to dock with
an access door adjacent to overhead door, all necessary concrete retaining
walls, space adjacent to service bay for a dumpster, +/-8'-0" high screen
enclosure of dock. Interior vestibule room with double door. Exact location,
dimensions and configuration of receiving dock to be determined in final
design phase of work.
7. Shipping and Receiving paved area along the majority of the Clark Street
facade.
8. Additional landscaped grounds to be developed per mutual agreement and per
requirements of the Town of Framingham.
It is the intent that necessary Town approvals can be obtained for Final Permit
site improvements prior to the construction schedule date for installation of
Early Permit site improvements. However, should such approvals be delayed, the
Owner and Lifeline shall arrange to coordinate installation of Final Permit
site improvements at a later date.
[LOGO OF DIMELLA - SHAFFER]
<PAGE>
November 10, 1997
Page 6
Uses
A subsequent application for building permit will be filed for tenant
improvements to the building for the anticipated occupancy by Lifeline Systems
Inc. This occupancy will be for the following approximate breakdown of uses (as
a percentage of the gross areas of the building including pro-rated
circulation):
Offices, including a call monitoring center of
approximately 7000 sf staffed by approximately
30 employees on a 24- hour basis: 52%
Research and Development: 8%
Light assembly, storage: 33%
Food Services: 2%
Building services, equip rooms: 5%
---
Total 100%
Based upon our review of floor plan drawings depicting Denison's prior occupancy
of the property which were made available to us by the Owner of the property, it
appears that Denison's prior occupancy of the building was for office and
research and development uses with office uses occupying in excess of 52% of the
total area.
[LOGO OF DIMELLA - SHAFFER]
<PAGE>
LIFELINE SYSTEMS, INC.
108 Clark Street, Framingham
ALLOCATION BETWEEN BASE BUILDING AND TENANT WORK
------------------------------------------------
August 29, 1997
---------------
<TABLE>
<CAPTION>
ITEM/DESCRIPTION Base Tenant COMMENTS
- ---------------- ---- ------ --------
Bldg. Work
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Site Improvements:
Resurface with new asphalt and stripe X
parking area with minimum 300 spaces.
- ---------------------------------------------------------------------------------------------------------------------------------
New entrance to building off of Lawrence X
Road with appropriate mutually agreed
identity.
- ---------------------------------------------------------------------------------------------------------------------------------
Sloped granite curbing at parking areas,
island and to set off landscaped area. X
- ---------------------------------------------------------------------------------------------------------------------------------
Landscape grounds to 1st class working X
environment with adequate screening of
industrial building along abutting property
line.
- ---------------------------------------------------------------------------------------------------------------------------------
Upgrade building lighting to provide X
adequate lighting in parking areas.
- --------------------------------------------------------------------------------------------------------------------------------
Building Facade:
Cover or replace (2nd floor) metal panels X
with high quality "Dryvit" or equal finish.
- ---------------------------------------------------------------------------------------------------------------------------------
New main entrance on Lawrence Rd. side X
of building consisting of 2 story
"greenhouse style" atrium. Incorporated in
mutually agreeable location.
- ---------------------------------------------------------------------------------------------------------------------------------
Minor restoration (i.e. paint) to 1st story X
brick.
- ---------------------------------------------------------------------------------------------------------------------------------
Glazing:
2nd story - New thermal pane fixed glass X
incorporating at minimum 50% of wall
area.
- ---------------------------------------------------------------------------------------------------------------------------------
Replace 1st floor glass to meeting current X
energy code requirements.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[LOGO OF FALLON HINES & O'CONNOR INC.]
<PAGE>
Lifeline Systems, 108 Clark St. Bldg.
Allocation - Base Bldg/Tenant Work
August 29, 1997
Page 2
<TABLE>
<CAPTION>
ITEM/DESCRIPTION Base Tenant COMMENTS
- ---------------- ---- ------ --------
Bldg. Work
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Window Treatments:
Allowance for treating new installed X
windows.
- --------------------------------------------------------------------------------------------------------------------------
Roof: X
New skylight with minimal coverage equal
to 33% of a column bay area, in central
building location.
- ---------------------------------------------------------------------------------------------------------------------------
Replace 30 year old roof with new
membrane roof. X
- ----------------------------------------------------------------------------------------------------------------------------
Stairway:
New central stairway at mutually agreed X
location.
- ----------------------------------------------------------------------------------------------------------------------------
Building Systems:
HVAC capacity - capable of providing one X
ton of cooling for every 350SF/area.
- ----------------------------------------------------------------------------------------------------------------------------
HVAC distribution - VAV boxes provided X If existing VAV boxes prove to be unacceptably
throughout space. noisy for a first class office use, then the cost to
remedy will be split equally between Landlord and
Tenant.
- ----------------------------------------------------------------------------------------------------------------------------
Duct run-out from boxes X
- ----------------------------------------------------------------------------------------------------------------------------
Automatic temperature controls; one X
thermostat per box
- ----------------------------------------------------------------------------------------------------------------------------
HVAC energy management system capable X
of providing direct digital control to
roof top units.
- ----------------------------------------------------------------------------------------------------------------------------
Air Balancing and Commissioning X
- ----------------------------------------------------------------------------------------------------------------------------
Elevators:
Provide new 2500# elevator in mutually X
agreed location
- ----------------------------------------------------------------------------------------------------------------------------
Renovate or abandon existing freight X
elevator as required.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
[LOGO OF FALLON HINES & O'CONNOR INC.]
<PAGE>
Lifeline Systems, 108 Clark St. Bldg.
Allocation - Base Bldg/Tenant Work
August 29, 1997
Page 3
<TABLE>
<CAPTION>
ITEM/DESCRIPTION Base Tenant COMMENTS
- ---------------- ---- ------ --------
Bldg. Work
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Electrical:
Power from main switch to existing panels X
and any owner provided HVAC equipment
- ---------------------------------------------------------------------------------------------------------------------------------
Circuit distribution from panels to X
receptacles, lighting and tenant equipment
- ---------------------------------------------------------------------------------------------------------------------------------
Emergency exit lighting as required. X
- ---------------------------------------------------------------------------------------------------------------------------------
Lighting fixtures X
- ---------------------------------------------------------------------------------------------------------------------------------
Telephone and Data Cables X
- ---------------------------------------------------------------------------------------------------------------------------------
Electric meter to building X
- ---------------------------------------------------------------------------------------------------------------------------------
Fire Protection:
Modifications to existing sprinkler heads
and zones to fire alarm panel. X
- ---------------------------------------------------------------------------------------------------------------------------------
Fire Alarm Panel capable to suit tenant X
requirements.
- ---------------------------------------------------------------------------------------------------------------------------------
Plumbing:
New boiler system to handle building X
heating requirements
- ---------------------------------------------------------------------------------------------------------------------------------
Lavatory improvements to meet all building X
codes
- ---------------------------------------------------------------------------------------------------------------------------------
Cosmetic improvements in existing toilet X
cores to mutually agreed level of finish
- ---------------------------------------------------------------------------------------------------------------------------------
Kitchens, shower facilities, additional X
bathrooms
- ---------------------------------------------------------------------------------------------------------------------------------
Loading Docks:
One railboard height loading bay and X
overhead door at mutually agreed location
to include dock seals and load leveler
- ---------------------------------------------------------------------------------------------------------------------------------
One grade level loading bay with overhead X
door located in mutually agreed area.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[LOGO OF FALLON HINES & O'CONNOR INC.]
<PAGE>
Lifeline Systems, 108 Clark St. Bldg.
Allocation - Base Bldg./Tenant Work
August 29, 1997
Page 4
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
One compactor bar location with concrete X
pad
- --------------------------------------------------------------------------------------------------------------------------------
One concrete pad in secured (fenced) area X
for tenant generator located in mutually
agreed area
- --------------------------------------------------------------------------------------------------------------------------------
Tenant Improvements:
Interior demolition of walls, removal and X
dead end/make safe of any existing
electrical, fire protection, existing
equipment, piping, etc. per Tenant's fit-up
plans
- --------------------------------------------------------------------------------------------------------------------------------
Floor prepared and ready for carpet X
- --------------------------------------------------------------------------------------------------------------------------------
Exterior walls and window sills finished X
with gypsum board
- --------------------------------------------------------------------------------------------------------------------------------
Ceilings, interior walls, doors X
- --------------------------------------------------------------------------------------------------------------------------------
Cafeteria server X
- --------------------------------------------------------------------------------------------------------------------------------
Security System X
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[LOGO OF FALLON HINES & O'CONNOR INC.]
<PAGE>
EXHIBIT D
---------
COPY OF HVAC LETTER
<PAGE>
BISHOP 108 ASSOCIATES, Limited Partnership
John Gugliotta
Vice President Operations
Lifeline Systems
617-679-1361/fax679-1384
RE: HVAC Systems
Framingham Facility
Dear John,
Per our conversation yesterday, I am confirming our offer to assume all
responsibility for the redesign and installation of a new Heat Pump HVAC system
in the building at 106 Clark Street. We will assume this responsibility for a
charge of $500,000.00, Five Hundred Thousand Dollars to be paid by Lifeline
Systems, which may at Lifeline's election be a charge against the Tenant
Allowance under the Lease.
Bishop Clarks Responsibility for this payment will be as follows:
1. Pay for all Engineering expense for the redesign of plans.
2. Install approximately 60-65 heat pump units with all necessary duct
distribution for Lifeline tenant wall layout including diffusers.
3. Remove all existing air handlers and assorted unnecessary piping and
ductwork.
4. Supply and install all new piping, pipe insulation and condensate
piping for new heat pump system.
5. Reuse the existing cooling tower and boiler room tower sump. The heat
exchanger will be upgraded as necessary for heat pump requirement.
6. Install a new energy management system by Honeywell or equal that has
digital Control.
7. Install new wiring for the new system and upgraded panels and
disconnects for the HVAC units.
8. Install new boiler in boiler room to accommodate water tempering to
operate the heat pump system.
9. Supply and install fresh air supply, vent fans and exhaust piping for
new system.
10. Install new roof mounted fresh air handlers as required per code for
tenant occupancy requirements.
11. Install vestibule heaters and misc. heaters as required.
Exclusions:
1. All computer room HVAC requirements and engineering.
2. All equipment and engineering for kitchen/cafe heating, exhaust or cooling
requirements.
3. Any redesign by Lifeline systems that requires additional heat pump units.
Accepted and Acknowledged By: Date: June 30, 1998
- ------------------------------------------ ------------------------------
John Gugliotta Vice Pres. Lifeline Systems Charles Kibbee for Bishop 108
AssociatesLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,125
<SECURITIES> 7,608
<RECEIVABLES> 6,594
<ALLOWANCES> 189
<INVENTORY> 1,329
<CURRENT-ASSETS> 24,529
<PP&E> 31,609
<DEPRECIATION> 14,849
<TOTAL-ASSETS> 47,369
<CURRENT-LIABILITIES> 10,111
<BONDS> 0
0
0
<COMMON> 128
<OTHER-SE> 36,663
<TOTAL-LIABILITY-AND-EQUITY> 47,369
<SALES> 11,797
<TOTAL-REVENUES> 30,969
<CGS> 3,219
<TOTAL-COSTS> 13,830
<OTHER-EXPENSES> 13,028
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26
<INCOME-PRETAX> 4,341
<INCOME-TAX> 1,745
<INCOME-CONTINUING> 2,596
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,596
<EPS-PRIMARY> .45
<EPS-DILUTED> .41
</TABLE>
