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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1999
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Commission file number 0-19960
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DATAWATCH CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 02-0405716
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
900 Chelmsford Street, Tower 3, 5th Floor, Massachusetts 01851
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (978) 441-2200
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Title of Class: Common Stock $.01 par value
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Sec.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [ X ]
Aggregate market value of voting stock held by non-affiliates: $23,801,172
(computed by reference to the last sales price of such common stock on December
15, 1999 as reported in the National Association of Security Dealers
consolidated trading index).
Number of shares of common stock outstanding at December 15, 1999: 9,189,113
Documents Incorporated By Reference
Registrant intends to file a definitive Proxy Statement pursuant to Regulation
14A within 120 days of the end of the fiscal year ended September 30, 1999.
Portions of such Proxy Statement are incorporated by reference in Part III of
this report.
<PAGE>
PART I
ITEM 1. BUSINESS
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GENERAL
DATAWATCH CORPORATION (the "Company" or "Datawatch") is a provider of
Enterprise Reporting, Report Mining and Service Center software products that
help organizations increase productivity, reduce costs and gain competitive
advantages. Datawatch products are used in more than 20,000 companies,
institutions and government agencies worldwide.
The Company was founded in 1985 to design, manufacture and market computer
workstations and peripherals that conform to the U.S. government's TEMPEST
security standard. With the end of the Cold War and subsequent decline in demand
for defense-oriented products, the Company exited the TEMPEST market in 1993 and
focused its attention on commercial software. Through a series of acquisitions,
the Company assembled a diverse portfolio of popular software applications,
including Monarch(TM), netOctopus(TM), VIREX(R) and Quetzal(TM)/Q-Support(TM).
In October, 1997, Datawatch divested its Apple Macintosh software products
(VIREX and netOctopus) in order to concentrate on the Windows/Intel platform.
The Company is a Delaware corporation, with executive offices located at
900 Chelmsford Street, Lowell, Massachusetts 01851 and the Company's telephone
number is (978) 441-2200.
PRODUCTS
Datawatch is best known for its popular report mining application called
Monarch(TM). More than 300,000 copies of Monarch have been sold, with localized
versions in English, French, German and Japanese. Monarch lets users extract and
manipulate data from ASCII report files produced on any mainframe, midrange,
client/server or PC system. The Company's Redwing(TM) product lets users extract
text and tables from Adobe PDF documents.
Datawatch also participates in the emerging market for enterprise
reporting software. Monarch|ES(TM) is a configurable enterprise reporting
solution that lets organizations deliver reports electronically via their
network. Reports are stored in a secure repository and brought to life on screen
to support queries and analyses.
Monarch|ES Web extends the system to support browser-based report
retrieval via the Worldwide Web. Monarch|ES Report Publisher supports automated
delivery of reports via MAPI-compliant email.
The Company's Monarch Data Pump product is a unique data replication and
migration tool that offers a shortcut for populating and refreshing data marts
and data warehouses, and for migrating legacy data into new applications.
Datawatch also participates in the market for service center software. The
Company's Quetzal/Q-Support help desk and asset management software is a market
leader in Europe, with the largest installed base among products that compete in
the internal help desk market. Quetzal/Q-Support is recognized for its advanced
service level management capabilities, integrated change management features,
business process automation tools and unique user-interface that promotes
ease-of-use and ease-of-learning.
Quetzal|SC(TM), introduced in December, 1998, is a major new release of
the Company's Quetzal/Q-Support software. Quetzal|SC's advanced architecture
gives it strong performance and scalability. The product was designed to handle
up to 50,000 calls per hour, and can be scaled to support as few as two users
running on an xBASE file server, hundreds of users running on an NT server, or
thousands of users running on powerful Unix servers. Quetzal|SC integrates with
popular network management tools such as CA-Unicenter, Tivoli
<PAGE>
Management Edition and BMC Patrol, and employs Monarch to provide extensive data
analysis and reporting capabilities.
PRICING
The Company's desktop products are sold under single and multi-user
licenses. A single user license for Monarch is priced at $499. Multi-user
licenses are priced at $150 to $250 per user, depending upon the number of
users. A single user license for Monarch Data Pump Personal Edition is priced at
$1,495. A single user license for Redwing is priced at $499. A five-user license
is priced at $1,995.
The Company's report enterprise and service center products are sold under
named-user and concurrent-user licenses. An entry-level Monarch|ES system is
priced at approximately $18,000. Typical configurations are priced in the range
of $40,000 to $250,000. Server editions of Monarch Data Pump are typically
priced at approximately $20,000 per server. An entry-level Quetzal/Q-Support
system is priced at approximately $10,000. Typical configurations sell in the
range of $15,000 to $125,000. Maintenance agreements, training and
implementation services are sold separately.
MARKETING AND DISTRIBUTION
Datawatch markets its products through a variety of channels in order to
gain broad market exposure and to satisfy the needs of its customers. Datawatch
believes that some customers prefer to purchase products through
service-oriented resellers, while others buy on the basis of price, purchase
convenience, and/or immediate delivery.
The Company is engaged in active direct sales of its products to
end-users, including repeat and add-on sales to existing customers and sales to
new customers. Datawatch utilizes direct mail, telemarketing and direct personal
selling to generate its sales.
Datawatch uses a variety of marketing programs to create demand for its
products. These programs include advertising, cooperative advertising with
reseller partners, direct mail, exhibitor participation in industry shows,
executive participation in press briefings and on-going communication with the
trade press.
The Company offers its resellers the ability to return obsolete versions
of its products and slow-moving products for credit which can be used against
purchases of other Datawatch products on a dollar-for-dollar basis. Defective
products may also be returned for credit or exchange. Based on its historical
experience relative to products sold to these distributors, the Company believes
that its exposure to such returns is minimal. It has provided a provision for
such estimated returns in the financial statements.
Datawatch warrants the physical disk media and printed documentation for
its products to be free of defects in material and workmanship for a period of
90 days from the date of purchase. Datawatch also offers a 30-60 day money-back
guarantee on certain of its products sold directly to end-users. Under the
guarantee, customers may return purchased products within the 60 days for a full
refund if they are not completely satisfied. To date, the Company has not
experienced any significant product returns under its money-back guarantee.
During fiscal 1999, one distributor represented approximately 15% of the
Company's net sales. No other customer accounted for more than 10% of the
Company's net sales in fiscal 1999. Datawatch sells its products outside of the
U.S. directly through the sales force of its wholly owned subsidiary, Datawatch
International Limited ("Datawatch International") and through international
resellers. Such international sales represented approximately 55%, 56% and 47%
of the Company's net sales for fiscal 1999, 1998 and 1997,
<PAGE>
respectively. See Note 12 to Consolidated Financial Statements which appear
elsewhere in this Report on Form 10-K.
RESEARCH AND DEVELOPMENT
The Company believes that timely development of new products and
enhancements to its existing products is essential to maintain a strong position
in its market. Datawatch intends to continue to invest sizeable effort in
research and product development, particularly in the area of computing
technology trends and the Internet. The Company's product development efforts
are focused on the Monarch|ES suite of Enterprise Reporting products and the
expansion of the feature set of the Monarch shrink-wrap and Quetzal|SC Service
Center products and their related core technologies.
Datawatch's product development efforts are conducted through in-house
software development engineers or by external developers, who are compensated
either through royalty payments based on product sales levels achieved or under
contracts based on services provided. Datawatch has established long-term
relationships with several development engineering firms, providing stability
and reliability in its development process.
Datawatch's product managers work closely with developers, whether
independent or in-house, to define product specifications. The initial concept
for a product originates from this cooperative effort. The developer is
generally responsible for coding the development project. Datawatch's product
managers maintain close technical control over the products, giving the Company
the freedom to designate which modifications and enhancements are most important
and when they should be implemented. The product managers and their staff work
in parallel with the developers to produce printed documentation, on-line help
files, tutorials and installation software. In some cases, Datawatch may choose
to subcontract a portion of this work on a project basis to third-party
suppliers under contracts. Datawatch personnel also perform extensive quality
assurance testing for all products and coordinate external beta test programs.
Datawatch has contractual agreements with the independent developers of
Monarch and Monarch|ES which require that source codes be placed into escrow.
The principal developers for the products are also bound by contractual
commitments which require their continuing involvement in product maintenance
and enhancement. Under the agreements, the Company has been granted
manufacturing, marketing and sales rights under license agreements which provide
for royalty payments based on net sales. The Company has also been granted
exclusive worldwide rights to Monarch with a stated term expiring in the year
2009, and to Monarch|ES with a stated term expiring in the year 2001. The
Monarch|ES license automatically renews for successive annual periods unless
terminated for cause by either party prior to the regular termination date.
Other Datawatch products have been developed through in-house software
development or by independent software engineers hired under contract. Datawatch
maintains source code and full product control for these products, which include
Monarch Data Pump (Personal and Server Editions), Monarch Report Publisher,
Monarch ES|Web, Quetzal|SC and Quetzal/Q-Support.
BACKLOG
The Company's software products are generally shipped within seven days of
receipt of an order. Accordingly, the Company does not believe that backlog for
its products is a meaningful indicator of future business.
<PAGE>
COMPETITION
The software industry is highly competitive and is characterized by
rapidly changing technology and evolving industry standards. Datawatch competes
with a number of companies including IBM, Remedy, Actuate, and others which have
substantially greater research and development, marketing and financial
resources than Datawatch. Competition in the industry is likely to intensify as
current competitors expand their product lines and as new competitors enter the
market.
PRODUCT PROTECTION
Although Datawatch does not generally own patents on its software
technologies, it relies on a combination of trade secret, copyright and
trademark laws, nondisclosure and other contractual agreements and technical
measures to protect its rights in its products. Despite these precautions,
unauthorized parties may attempt to copy aspects of Datawatch's products or to
obtain and use information that Datawatch regards as proprietary. Patent
protection is not considered crucial to Datawatch's success. Datawatch believes
that, because of the rapid pace of technological change in the software
industry, the legal protections for its products are less significant than the
knowledge, ability and experience of its employees and developers, the frequency
of product enhancements and the timeliness and quality of its support services.
Datawatch believes that none of its products, trademarks and other proprietary
rights infringe on the proprietary rights of third parties, but there can be no
assurance that third parties will not assert infringement claims against it or
its developers in the future.
PRODUCTION
Production of Datawatch's products involves the duplication of floppy and
compact disks, and the printing of user manuals, packaging and other related
materials. Floppy disk duplication is performed in-house with high-capacity disk
duplication equipment, and is occasionally supplemented with duplication
services performed by non-affiliated subcontractors. High volume compact disk
duplication is performed by non-affiliated subcontractors, while low volume
compact disk duplication is performed in-house. Printing work is also performed
by non-affiliated subcontractors. To date, Datawatch has not experienced any
material difficulties or delays in production of its software and related
documentation and believes that, if necessary, alternative production sources
could be secured at a commercially reasonable cost.
EMPLOYEES
As of September 30, 1999, Datawatch had 162 full-time employees, including
58 engaged in marketing, sales, and customer service; 24 engaged in product
consulting, 11 engaged in product management, development and quality assurance,
27 in technical support, 33 providing general, administrative, accounting, and
IT functions and 9 in software production and warehousing.
The Company believes that its future success may depend on its ability to
continue to attract and retain highly-skilled technical, marketing and
management personnel, who are in great demand. The Company currently has written
agreements with each of its employees prohibiting disclosure of confidential
information to anyone outside of the Company, both during and subsequent to
employment. These agreements also require disclosure to the Company of ideas,
discoveries or inventions relating to or resulting from the employee's work for
the Company, and assignment to the Company of all proprietary rights to such
matters.
<PAGE>
ITEM 2. PROPERTIES
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The Company is currently headquartered in a 21,000 square foot sub-leased
facility in Lowell, Massachusetts. The lease expires in January 2001. The
Company also maintains small offices in California, Illinois, Georgia, and New
Jersey.
The Company also leases approximately 6,000 square feet in Kings Langley,
Hertfordshire, England, which expires in January 2009, approximately 16,000
square feet in Plymouth, Devon, England, which expires in December 2017, and
maintains small offices in Germany, France and Australia.
ITEM 3. LEGAL PROCEEDINGS
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The Company is not a party to any litigation that management believes will
have a material adverse effect on the Company's consolidated financial
condition, results of operations, or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No matters were submitted to a vote of the Registrant's security holders
during the last quarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and titles of the executive officers of the Company are as
follows:
Bruce R. Gardner 56 President, Chief Executive Officer and Director
Marco D. Peterson 44 Senior Vice President of North American Operations
Robert Hagger 51 Senior Vice President of International Operations,
Managing Director of Datawatch International Limited
Betsy J. Hartwell 52 Vice President of Finance, Chief Financial Officer
and Treasurer
John Loring 49 Vice President of Information Technology
Officers are elected by, and serve at the discretion of, the Board of Directors.
BRUCE R. GARDNER, President, Chief Executive Officer and Director. Mr.
Gardner, a founder and director of Datawatch, was the Chief Financial Officer
and Treasurer since the Company was founded in 1985 until November 1, 1997. Mr.
Gardner was a Senior Vice President until June, 1993 when he became Executive
Vice President. Mr. Gardner assumed his current position on November 1, 1997.
MARCO D. PETERSON, Senior Vice President of North American Operations. Mr.
Peterson was the founder of Personics Corporation and has been its President
since its founding in 1984. Mr. Peterson took on the additional role of Vice
President of Marketing and Product Development of the Company in October, 1994
until he became Senior Vice President on November 1, 1997.
ROBERT HAGGER, Senior Vice President of International Operations, Managing
Director of Datawatch International. Mr. Hagger joined Datawatch as Managing
Director of Datawatch International on March 4, 1997 and assumed the title of
Senior Vice President of International Operations on November 1, 1997. Mr.
Hagger, since 1993, was founder and Managing Director of Insight Strategy
Management Ltd. Prior to that he was Managing Director of Byrne Fleming Ltd.
BETSY J. HARTWELL, Vice President of Finance, Chief Financial Officer and
Treasurer. Ms. Hartwell assumed the positions of Vice President of Finance,
Chief Financial Officer and Treasurer on November 1, 1997. Prior to that, and
since July, 1990, Ms. Hartwell was Datawatch's Corporate Controller.
<PAGE>
JOHN LORING, Vice President of Information Technology. Mr. Loring assumed
the position of Vice President of Information Technology on November 1, 1997.
Prior thereto and since November, 1993, Mr. Loring was the Company's Director of
Business Development/Information Systems. Prior to that, Mr. Loring was
Datawatch's Manager of Systems Engineering.
Part II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
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MATTERS
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The Registrant's common stock is listed and traded on the Nasdaq National
Market under the symbol DWCH. The range of high and low prices during each
fiscal quarter for the last two fiscal years is set forth below:
For the Year Ended Common Stock
September 30, 1999 High Low
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4th Quarter 1 9/16 1/2
3rd Quarter 1 9/16 1 1/8
2nd Quarter 1 11/16 1 1/8
1st Quarter 1 5/8 1 1/8
For the Year Ended Common Stock
September 30, 1998 High Low
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4th Quarter 2 1/16 1 1/16
3rd Quarter 2 7/8 1 7/8
2nd Quarter 3 1/2 1 13/16
1st Quarter 4 1/16 1 15/16
There are approximately 197 shareholders of record as of December 15,
1999. The Company believes that the number of beneficial holders of common stock
exceeds 2,000.
The Company has not paid any cash dividends and it is anticipated that
none will be declared in the foreseeable future. The Company intends to retain
future earnings, if any, to provide funds for the operation, development and
expansion of its business.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
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The following table sets forth selected consolidated financial data of the
Company for the periods indicated. The selected consolidated financial data for
and as of the end of the years in the five-year period ended September 30, 1999
are derived from the Consolidated Financial Statements of the Company. The
information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and notes appearing elsewhere in this
Annual Report on Form 10-K.
<TABLE><CAPTION>
Statements of Operations Data
Years Ended September 30, 1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
Net Sales
PC-based Products $27,171,401 $25,123,468 $25,995,197 $24,216,794 $18,839,265
Macintosh-based Products 172,254 6,052,298 5,805,328 4,520,716
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Net Sales 27,171,401 25,295,722 32,047,495 30,022,122 23,359,981
Costs and Expenses 31,480,281 35,800,154 33,929,460 28,894,600 23,678,935
Income (Loss) from
Operations (4,308,880) (10,504,432) (1,881,965) 1,127,522 (318,954)
Gain on Sale
of Product Line 15,431,253
Net Income (Loss) $(3,847,181) $4,703,996 ($1,995,433) $1,125,360 ($331,423)
Net Income (Loss)
per Common Share - Basic $(.42) $.52 ($0.22) $0.13 ($0.04)
Net Income (Loss)
per Common Share - Diluted $(.42) $.51 ($0.22) $0.13 ($0.04)
Balance Sheet Data
September 30, 1999 1998 1997 1996 1995
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Total Assets $14,780,755 $18,332,215 $16,146,645 $15,240,571 $12,358,132
Working Capital 4,838,234 8,503,428 4,451,821 5,210,457 2,631,759
Long-Term Obligations 354 44,190 1,399,089 209,824 163,868
Shareholders' Equity $ 7,817,707 $11,636,482 $6,924,849 $ 8,238,886 $ 6,062,170
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
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The following discussion and analysis is qualified by reference to, and
should be read in conjunction with, the Consolidated Financial Statements of
Datawatch and its subsidiaries which appear elsewhere in this Annual Report on
Form 10-K.
GENERAL
Datawatch Corporation (the "Company" or "Datawatch"), is engaged in the
design, development, manufacture, marketing, and support of business computer
software. Its products address the enterprise reporting, business intelligence,
data replication and help desk markets.
Over the last two years, the Company has focused primarily on PC-based
software. Prior to October, 1997 the Company also marketed MacIntosh-based
products. The sale of this product line is discussed in Note 2 to Consolidated
Financial Statements which appear elsewhere in this Annual Report on Form 10-K.
Datawatch's principal products are: Monarch, a report mining application
that lets users extract and manipulate data from ASCII report files produced on
any mainframe, midrange, client/server or PC system; Redwing, a plug-in for
Adobe Acrobat that lets users extract text and tables from Adobe PDF documents;
Monarch|ES, a configurable enterprise reporting solution that lets organizations
deliver reports electronically via their network; Monarch|ES Web, an extension
to Monarch|ES that supports browser-based report retrieval via the Worldwide
Web; Monarch|ES Report Publisher, an extension to Monarch|ES that supports
automated delivery of reports via MAPI-compliant email; Monarch Data Pump, a
data replication and migration tool that offers a shortcut for populating and
refreshing data marts and data warehouses and for migrating legacy data into new
applications; Quetzal (internationally) and Q-Support (in the United States
("U.S.")), an integrated help desk and asset management solution for multi-user,
networked support centers; and Quetzal|SC, a major new release of the Company's
Quetzal/Q-Support software, introduced in December, 1998.
RESULTS OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1999 AS COMPARED TO
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FISCAL YEAR ENDED SEPTEMBER 30, 1998
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Net sales for the fiscal year ended September 30, 1999 were $27,171,000
which represents an increase of $1,875,000 or approximately 7% from the net
sales of $25,296,000 for the fiscal year ended September 30, 1998. The increase
in sales results from an increase of the Company's Monarch|ES product sales and
non-recurring revenue resulting from a one-time license of a customized version
of the Company's Redwing product. In fiscal 1999 and 1998 respectively, Monarch
products accounted for approximately 53% and 51% of net sales; Quetzal/Q-Support
products accounted for approximated 33% and 37% of net sales; and third-party
products accounted for 14% and 11%. In fiscal 1999 there were no sales of
Macintosh-based products; these products had accounted for 1% of net sales in
fiscal 1998, owing to the disposition of the product line in early fiscal 1998.
Cost of sales for the fiscal year ended September 30, 1999 were $6,148,000
or approximately 23% of net sales. Cost of sales for the fiscal year ended
September 30, 1998 were $5,213,000 or approximately 21% of net sales. Included
in the cost of sales for fiscal 1999 were $420,000 of non-recurring engineering
costs paid to a third-party developer for a one-time customization of the the
Company's Redwing product. Excluding these expenses from the cost of sales, cost
of sales for fiscal 1999 would have been $5,728,000 or 21% of net sales, which
is comparable to cost of sales for fiscal 1998.
<PAGE>
Engineering and product development expenses include those expenditures
attributable to both internal development efforts and efforts undertaken by
third-party developers. Engineering and product development expenses were
$2,386,000 for the fiscal year ended September 30, 1999, a decrease of $997,000
or 29% from $3,383,000 for the fiscal year ended September 30, 1998. This
decrease was due to the discontinuance in October, 1998 of parallel external
development efforts undertaken for Quetzal|SC during fiscal 1998.
Selling, general and administrative expenses were $22,297,000 for the
fiscal year ended September 30, 1999, a decrease of $2,228,000 or approximately
9% from $24,525,000 for the fiscal year ended September 30, 1998. Included in
the expenses for fiscal 1999 were approximately $571,000 of non-recurring legal
expenses associated with the Palms Technology litigation, which has been
settled. Included in the expenses for fiscal 1998 were approximately $196,000 of
one-time expenses associated with leased space no longer required as a result of
the Company's restructuring subsequent to the sale of its Macintosh-based
product line to Dr Solomon's, and $91,000 of administrative and consulting costs
associated with the Company's second restructuring during fiscal 1998. Excluding
these specifically identified costs, selling, general and administrative
expenses would have been $21,726,000 for fiscal 1999, a decrease of $2,512,000
or approximately 10% from $24,238,000 for fiscal 1998. This decrease is
primarily due to the reduction of personnel in the Company's worldwide
operations pursuant to a restructuring during the fourth quarter of fiscal 1998
and the third quarter of fiscal 1999, as well as a decrease in promotional
activities associated with the Company's Monarch product.
During the first quarter of fiscal 1999, the Company approved and
completed a restructuring plan to centralize in the United States the quality
assurance efforts for its Quetzal|SC product. The restructuring plan consisted
of charges for severance benefits and related costs for 10 terminated employees.
These charges, totaling approximately $200,000, have been paid. There was no
change to the initial estimate in subsequent quarters.
During the third quarter of fiscal 1999, the Company approved and
completed a plan to further reduce costs and focus resources on key areas of the
business. The restructuring plan consisted of charges for severance benefits and
related costs for 21 terminated employees. These charges, totaling approximately
$449,000, have been paid. There was no change to the initial estimate in
subsequent quarters.
As a result of the foregoing, the net loss from operations for the fiscal
year ended September 30, 1999 was $4,309,000, which compares to the net loss
from operations of $10,504,000 for the fiscal year ended September 30, 1998.
Elements of other income and expense changed substantially from year to year. In
1998, the Company recognized a $15,431,000 pre-tax gain on the sale of its
Macintosh-based product line. Because such sale generated significant cash
balances - balances that have been used for working capital purposes during
fiscal 1998 and 1999 - interest income for fiscal 1998 was approximately
$470,000 compared to approximately $180,000 for fiscal 1999. The interest
expense recorded by the Company also increased in fiscal 1999 relative to fiscal
1998 owing to the continued use of working capital balances. The Company
recorded a tax benefit in fiscal 1999 of approximately $412,000. This benefit
was attributable to the Company's utilization of tax loss carrybacks that arose
as a result of taxes paid in fiscal 1998. The tax provision in fiscal 1998 of
$600,000 reflected the utilization, in the U.S., of all of the Company's
previous net operating loss carryforwards and the actual incurrence of a tax
liability. The Company still maintains significant foreign net operating loss
carryforwards. The net loss for fiscal 1999 was $3,847,000, which compares to
net income of $4,704,000 for fiscal 1998.
<PAGE>
FISCAL YEAR ENDED SEPTEMBER 30, 1998 AS COMPARED TO
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FISCAL YEAR ENDED SEPTEMBER 30, 1997
------------------------------------
Net sales for the fiscal year ended September 30, 1998 were $25,296,000
which represents a decrease of $6,752,000 or 21% from the net sales of
$32,047,000 for the fiscal year ended September 30, 1997. Sales have been
segregated on the statements of operations so as to highlight the product lines
which remains after the disposition of the Macintosh-based product line (sold to
Dr Solomon's on October 9, 1997). Excluding sales of the Company's
Macintosh-based products, net sales for fiscal 1998 were $25,123,000 which
represents a decrease of $872,000 or 3% from net sales of $25,995,000 for fiscal
1997. The decline in sales is principally attributable to lower sales of
Quetzal/Q-Support products as customers awaited the introduction of the next
generation product, Quetzal|SC, subsequently released in December 1998. In
fiscal 1998, Monarch products accounted for approximately 51% of net sales;
Quetzal/Q-Support products accounted for approximately 37% of net sales; and
third-party products accounted for approximately 11% of net sales. For the
fiscal 1998, the Company's PC-based products accounted for approximately 99% of
net sales while the Company's Macintosh-based products accounted for
approximately 1%.
The Company's cost of sales for the fiscal year ended September 30, 1998
were $5,213,000 or approximately 21% of net sales. Cost of sales for the fiscal
year ended September 30, 1997 were $5,900,000 or approximately 18% of net sales.
Excluding the sales and costs of sales related to the Company's Macintosh-based
products, costs of sales for fiscal 1997 would have been approximately 20%.
Without the influence of the Company's Macintosh-based products (sold to Dr.
Solomon's in October, 1997) margins remained relatively comparable.
Engineering and product development expenses include those expenditures
attributable to both internal development efforts and efforts undertaken by
third-party developers. Fiscal 1998 external development expense included costs
incurred for parallel development efforts undertaken for the next generation
Quetzal/Q-Support product. Expenditures of approximately $1,080,000 were
directly related to the terminated Palms Technology development project. In
addition, external costs of approximately $543,000 attributable to maintenance
of Quetzal/Q-Support, the next generation help desk product, Quetzal|SC,
released in December 1998, and certain enterprise solutions products were also
recorded. Internal engineering and product development expenses were $1,760,000
for the fiscal year ended September 30, 1998, a decrease of $1,044,000 or 37%
from $2,804,000 for the fiscal year ended September 30, 1997. This decrease was
due to both the discontinuance of certain internal development efforts and the
non-recurrence of development costs incurred in fiscal 1997 relating to the
Macintosh-based-product line (sold to Dr Solomon's in October, 1997).
Selling, general and administrative expenses were $24,525,000 for the
fiscal year ended September 30, 1998, a decrease of $700,000 or approximately 3%
from $25,225,000 for the fiscal year ended September 30, 1997. Included in the
expenses for fiscal 1998 were approximately $196,000 of one-time expenses
primarily associated with leased space no longer required as a result of the
Company's restructuring subsequent to the sale of its Macintosh-based product
line in the first quarter of 1998, and $91,000 of administrative and consulting
costs associated with the Company's second restructuring during the fourth
quarter of fiscal 1998. Included in the expenses for 1997 were $608,000 of
one-time expenses principally associated with organizational changes within the
Company's European subsidiaries. Excluding these expenses, the decrease would
have been $379,000 or 2% which is principally attributable to selling expenses
associated with the Company's Macintosh-based product line.
In October, 1997, the Company sold its Macintosh-based product line to Dr
Solomon's Software for $16,750,000 in cash. The Company realized a pre-tax gain
on the sale of approximately $15,431,000. After the sale of this product line
the Company initiated a corporate-wide restructuring effort so as to allow the
Company to centralize both its administrative infrastructure and the development
efforts of its remaining products. The total amount charged to operations for
the quarter ended December 31, 1997 was approximately $2,364,000. The plan
included charges for salaries and wages and the related
<PAGE>
severance benefits for 25 terminated employees. These charges totaling
approximately $1,884,000, have paid. The plan also included special payments
made to outside developers associated with the centralization of the Company's
development efforts. These charges, totaling $433,000, have been paid. There was
no change to the initial estimate in subsequent quarters.
During the fourth quarter of fiscal 1998 the Company approved and
completed a second restructuring plan to further centralize the Company's
administrative infrastructure and its development efforts. The restructuring
plan consisted of charges for severance benefits and costs for 14 terminated
employees. These charges, totaling approximately $315,000, have been paid. There
was no change to the initial estimate in subsequent quarters.
As a result of the foregoing, the net loss from operations for the fiscal
year ended September 30, 1998 was $10,504,000, which compares to the net loss
from operations of $1,882,000 for the fiscal year ended September 30, 1997. The
Company recorded a tax provision in the amount of $600,000 for the fiscal year
ended September 30, 1998. The Company recorded a de minimis tax provision during
fiscal year ended September 30, 1997 because of its ability to utilize domestic
net operating loss carryforwards and foreign losses. The Company's 1998
effective tax rate of 11% was primarily the result of utilizing domestic net
operating loss carryforwards and certain credit carryforwards. Such
carryforwards were exhausted in the U.S. although the foreign operations still
maintained substantial amounts in carryforwards. Net income for fiscal 1998 was
$4,704,000, which compares to the net loss of $1,995,000 for fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
Working capital decreased by approximately $3,665,000 during fiscal 1999
primarily as a result of the above mentioned unprofitable operations,
non-recurring expenses requiring cash outlays and cash requirements of the
Company's international subsidiaries. Management believes that the significant
cash outflows experienced will not be repeated in fiscal 2000.
Accordingly, Company's management believes that its currently anticipated
capital needs for future operations will be satisfied through at least September
30, 2000 by funds generated from operations and by availability under the
Company's lines of credit which total $3,500,000. As of September 30, 1999,
advances from the lines of credit amount to $1,314,000. These lines were
committed to on December 27, 1999 and will provide for working capital
borrowings through December 27, 2000.
Management believes that the Company's current operations are not
materially impacted by the effects of inflation.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which, as amended, is effective for fiscal
years beginning after June 15, 2000. The new standard requires that all
companies record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. Management is currently assessing
whether there will be any impact of SFAS No. 133 on the Company's consolidated
financial statements upon adoption, which is required in October, 2000.
<PAGE>
YEAR 2000 READINESS DISCLOSURE STATEMENT
General
The Company is aware of the global concerns related to what is known as
the Year 2000 issue and the potential for the associated system failures and
business interruptions that may result. The Year 2000 issue concerns three main
areas: the ambiguity that may result from processing and storing data using
2-digit year formats; the recognition that the year 2000 is a leap year; and the
use of dates (most commonly 9/9/99) for special programming functions. Any of
these problems could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions or engage in normal business activities for both the
Company and its customers who rely on its products.
Year 2000 Compliance Program
The Company has been aware of the Year 2000 issue for several years and
has been actively engaged in correcting Year 2000 deficiencies as they are
recognized. In late 1998, the Company appointed a Year 2000 Readiness
Coordinator responsible for developing and administering the Company's Year 2000
compliance program. The purpose of the compliance program is to identify
important internal systems that are not yet Year 2000 compliant; to initiate
replacement or remedial action to assure that key systems and products will
continue to operate in the Year 2000 and to test the replaced or remediated
systems and products; to identify and contact key suppliers, vendors, customers
and business partners to evaluate their ability to maintain normal operations in
the Year 2000; and to develop appropriate contingency plans for dealing with
foreseeable Year 2000 complications.
Internal Systems
The assessment of the Company's internal use hardware and software began
in 1997 and the preliminary results of this assessment, including the review of
telephone systems and other facilities equipment, determined that it was
necessary to modify or replace some of its internal use software and hardware.
During 1998, a project was initiated at the corporate offices in Massachusetts
and at the Company's largest subsidiary, Datawatch International, in Potters
Bar, England to upgrade the Company's accounting software to a Year 2000
compliant version. These simultaneous projects were completed in September 1998.
The accounting systems at some of its other subsidiaries have also been
upgraded, but the accounting systems at these locations are significantly less
critical to the continued operation of the Company. The Company currently
believes that all other "mission critical" software is Year 2000 compliant. The
Company also believes that all major internal use hardware, including network
servers and telephone systems, has been upgraded or replaced so that it is now
Year 2000 compliant. A complete assessment of all desktop and laptop computers,
with all major Year 2000 issues corrected as identified, is now complete. This
assessment included the rollover of December 31, 1999 to January 1, 2000 and the
computer's ability to accept the date February 29, 2000. The Company feels
certain that all Year 2000 issues related to internal use software and hardware
have been identified and corrective action will be complete by December 31,
1999. With the assessment of internal use hardware and software now complete,
the estimated cost to bring internal operations into compliance has been reduced
to $50,000.
The Company has contacted mission critical vendors concerning the status
of their Year 2000 readiness and has received statements back from all such
vendors that they are Year 2000 compliant. The Company does not anticipate any
delays in obtaining goods and services from any mission critical vendors due to
Year 2000 related issues. All supplies used to market, sell or produce the
Company's products are readily available from many different suppliers. Should
any vendor have Year 2000 compliance issues that result in a disruption in its
ability to deliver products or services, alternative suppliers can and will be
utilized immediately.
<PAGE>
Software Products
The Company has designed, tested and continues to test the most current
versions of its products for Year 2000 issues. With respect to certain of those
products, the Company has relied on testing and representations by its
third-party developers. Based on its internal testing and the testing done by
its third-party developers to date, the Company believes that the latest
versions of its products are substantially Year 2000 compliant and are not
likely to pose a significant Year 2000 liability issue for the Company or any
significant operational problems for its customers. In the event problems are
discovered, the Company intends to issue product updates to correct such
anomalies. The Company has received Year 2000 compliance statements from vendors
of certain widely-accepted database and middleware tools which are used in the
development of its products and there are no known Year 2000 compliance issues
with such tools. In the event that Year 2000 compliance issues are found with
such tools in the future, the Company believes achieving compliance will require
upgrades to newer versions of such tools.
The Company also has performed and continues to perform limited Year 2000
compliance assessments of certain older versions of its products, and where
problems are discovered, will determine the practicality of modifying older
versions. Where such modifications are deemed impractical, the Company will
discontinue the sale of such older versions. Certain of the Company's customers
use older 16-bit operating systems which are believed not to be Year 2000
compliant and, until recently, the Company made available to these customers
older 16-bit versions of its software, which in some cases are not Year 2000
compliant. The Company believes it does not have material financial exposure to
customers with respect to older versions of its products.
As the Year 2000 compliance assessment and/or testing of a product is
completed, the Company makes this information available to its customers via the
Company's web site. Information is also communicated to registered customers in
newsletters and other special mailings. The Company estimates the total cost for
testing its products for Year 2000 compliance will not exceed $50,000, including
$28,000 already expended, and estimates the total cost associated with customer
communication to be approximately $20,000.
Contingency Plans
The Company has developed Year 2000 contingency plans to provide limited
support for customers utilizing its software products for the period December
31, 1999 through January 2, 2000. This contingency plan provides for technical
support and assistance during this holiday period for major customers utilizing
the Company's products in mission critical applications. In some cases customers
may be invoiced for this support.
The Company is also in the process of developing a general corporate
contingency plan which it anticipates will be in place prior to December 31,
1999. The purpose of this plan will be to allow the Company to recognize
internal system failures, if any, and identify resources needed and available to
restore operations in a timely manner.
Risks Associated with Year 2000 Issue
The Company believes its Year 2000 compliance program has allowed it to
identify and correct any material Year 2000 compliance deficiencies. This
assessment is subject to revision based on the results of the Company's on-going
Year 2000 compliance efforts. If unforeseen compliance efforts are required or
if present compliance efforts are not completed on time, or if the cost of any
required updating, modification or replacement of the Company's systems or
equipment exceeds the Company's estimates, the Year 2000 issue could result in
material costs and have a material adverse effect on the Company. However, the
Company believes that the risk is minimal.
<PAGE>
The Company utilizes third-party vendors for product development and
testing. Should these vendors not be compliant in a timely manner, product
releases scheduled to take place after December 31, 1999 could be delayed. The
Company also utilizes third-party vendors for processing data and payments, e.g.
payroll services, 401(k) plan administration, check processing, medical benefits
processing, etc. These vendors have been contacted and have stated that they are
compliant. If it is later shown that they are not Year 2000 compliant, the
Company may be required to process transactions manually or delay processing
until such time as the vendors are Year 2000 compliant. The Company has
warranted, to certain customers, that certain of its products are or will be
Year 2000 compliant. Non-compliance with these warranties may result in legal
action for breach of warranty.
RISK FACTORS
The Company does not provide forecasts of its future financial
performance. However, from time to time, information provided by the Company or
statements made by its employees may contain "forward looking" information that
involves risks and uncertainties. In particular, statements contained in this
Annual Report on Form 10-K that are not historical facts (including, but not
limited to statements contained in "Item 7: Management's Discussion and Analysis
of Financial Condition and Results of Operations" relating to liquidity and
capital resources) may constitute forward looking statements and are made under
the safe harbor provisions of The Private Securities Litigation Reform Act of
1995. The Company's actual results of operations and financial condition have
varied and may in the future vary significantly from those stated in any forward
looking statements. Factors that may cause such differences include, without
limitation, the risks, uncertainties and other information discussed below and
within this Annual Report on Form 10-K, as well as the accuracy of the Company's
internal estimates of revenue and operating expense levels. The following
discussion of the Company's risk factors should be read in conjunction with the
financial statements and related notes thereto. Such factors, among others, may
have a material adverse effect upon the Company's business, results of
operations and financial condition.
Fluctuations in Quarterly Operating Results
The Company's future operating results could vary substantially from
quarter to quarter because of uncertainties and/or risks associated with such
things as technological change, competition, delays in the introduction of
products or product enhancements and general market trends. Historically, the
Company has operated with little backlog of orders because its software products
are generally shipped as orders are received. As a result, net sales in any
quarter are substantially dependent on orders booked and shipped in that
quarter. Because the Company's staffing and operating expenses are based on
anticipated revenue levels and a high percentage of the Company's costs are
fixed in the short-term, small variations in the timing of revenues can cause
significant variations in operating results from quarter to quarter. Because of
these factors, the Company believes that period-to-period comparisons of its
results of operations are not necessarily meaningful and should not be relied
upon as indications of future performance. There can be no assurance that the
Company will not experience such variations in operating results in the future
or that such variations will not have a material adverse effect on the Company's
business, financial condition or results of operation.
Dependence on Principal Products
In fiscal 1999, Monarch and Quetzal/Q-Support accounted for approximately
53% and 33%, respectively, of the Company's net sales. With the disposal of the
Virex and netOctopus products, the Company is wholly dependent on Monarch and
Quetzal/Q-Support. As a result, any factor adversely affecting sales of either
of these products could have a material adverse effect on the Company. The
Company's future financial performance will depend in part on the successful
introduction of its new and enhanced versions of these products and development
of new versions of these and other products and subsequent
<PAGE>
acceptance of such new and enhanced products. In addition, competitive pressures
or other factors may result in significant price erosion that could have a
material adverse effect on the Company's business, financial condition or
results of operations.
International Sales
In 1999, 1998 and 1997, international sales accounted for approximately
55%, 56% and 47%, respectively, of the Company's net sales. The Company
anticipates that international sales will continue to account for a significant
percentage of its net sales. A significant portion of the Company's net sales
will therefore be subject to risks associated with international sales,
including unexpected changes in legal and regulatory requirements, changes in
tariffs, exchange rates and other barriers, political and economic instability,
difficulties in account receivable collection, difficulties in managing
distributors or representatives, difficulties in staffing and managing
international operations, difficulties in protecting the Company's intellectual
property overseas, seasonality of sales and potentially adverse tax
consequences.
Acquisition Strategy
Although the Company has no current acquisition plans, it has addressed
and may continue to address the need to develop new products, in part, through
the acquisition of other companies. Acquisitions involve numerous risks
including difficulties in the assimilation of the operations, technologies and
products of the acquired companies, the diversion of management's attention from
other business concerns, risks of entering markets in which the Company has no
or limited direct prior experience and where competitors in such markets have
stronger market positions, and the potential loss of key employees of the
acquired company. Achieving and maintaining the anticipated benefits of an
acquisition will depend in part upon whether the integration of the companies'
business is accomplished in an efficient and effective manner, and there can be
no assurance that this will occur. The successful combination of companies in
the high technology industry may be more difficult to accomplish than in other
industries.
Dependence on New Introductions; New Product Delays
Growth in the Company's business depends in substantial part on the
continuing introduction of new products. The length of product life cycles
depends in part on end-user demand for new or additional functionality in the
Company's products. If the Company fails to accurately anticipate the demand
for, or encounters any significant delays in developing or introducing, new
products or additional functionality on its products, there could be a material
adverse effect on the Company's business. Product life cycles can also be
affected by the introduction by suppliers of operating systems of comparable
functionality within their products. The failure of the Company to anticipate
the introduction of additional functionality in products developed by such
suppliers could have a material adverse effect on the Company's business. In
addition, the Company's competitors may introduce products with more features
and lower prices than the Company's products. Such increase in competition could
adversely affect the life cycles of the Company's products, which in turn could
have a material adverse effect on the Company's business.
Software products may contain undetected errors or failures when first
introduced or as new versions are released. There can be no assurance that,
despite testing by the Company and by current and potential end-users, errors
will not be found in new products after commencement of commercial shipments,
resulting in loss of or delay in market acceptance. Any failure by the Company
to anticipate or respond adequately to changes in technology and customer
preferences, or any significant delays in product development or introduction,
could have a material adverse effect on the Company's business.
<PAGE>
Rapid Technological Change
The markets in which the Company competes have undergone, and can be
expected to continue to undergo, rapid and significant technological change. The
ability of the Company to grow will depend on its ability to successfully update
and improve its existing products and market and license new products to meet
the changing demands of the marketplace and that can compete successfully with
the existing and new products of the Company's competitors. There can be no
assurance that the Company will be able to successfully anticipate and satisfy
the changing demands of the personal computer software marketplace, that the
Company will be able to continue to enhance its product offerings, or that
technological changes in hardware platforms or software operating systems, or
the introduction of a new product by a competitor, will not render the Company's
products obsolete.
Year 2000 Issue
Although the Company does not expect that the Year 2000 issue will have a
material effect on the Company's results of operations or financial condition,
the Company is potentially exposed to Year 2000 issues with respect to internal
software and external product offerings. If the Company's internal systems or
its products fail to operate properly as a result of Year 2000, the Company's
results of operations and financial condition could be materially and adversely
impacted. The Company continues to evaluate the Year 2000 issue. See "Year 2000
Readiness Disclosure Statement" particularly the subsection headed "Risks
Associated with Year 2000 Issue" which appears immediately before this "Risk
Factors" section of this Annual Report on Form 10-K, for a discussion of the
Company's Year 2000 readiness and the risks associated with the Year 2000 issue.
Competition in the PC Software Industry
The software market for personal computers is highly competitive and
characterized by continual change and improvement in technology. Several of the
Company's existing and potential competitors (including IBM, Remedy, and
Actuate) have substantially greater financial, marketing and technological
resources than the Company. No assurance can be given that the Company will have
the resources required to compete successfully in the future.
Dependence on Proprietary Software Technology
The Company's success is dependent upon proprietary software technology.
Although the Company does not own any patents on any such technology, it does
hold exclusive licenses to such technology and relies principally on a
combination of trade secret, copyright and trademark laws, nondisclosure and
other contractual agreements and technical measures to protect its rights to
such proprietary technology. Despite such precautions, there can be no assurance
that such steps will be adequate to deter misappropriation of such technology.
Reliance on Software License Agreements
Substantially all of the Company's products incorporate third-party
proprietary technology which is generally licensed to the Company on an
exclusive, worldwide basis. Failure by such third-parties to continue to develop
technology for the Company and license such technology to the Company could have
a material adverse effect on the Company's business and results of operations.
<PAGE>
Indirect Distribution Channels
During fiscal 1999, 1998 and 1997, the Company derived approximately 26%,
22% and 20%, respectively, of its net sales through resellers, none of which are
under the direct control of the Company. The loss of major resellers of the
Company's products, or a significant decline in their sales, could have a
material adverse effect on the Company's operating results. Other than Ingram
Micro Inc., which accounted for approximately 15%, 12%, and 14% of the Company's
fiscal 1999, 1998 and 1997 net sales, respectively, no reseller or other
customer accounted for more than 10% of the Company's revenues in fiscal 1999,
1998 or 1997. There can be no assurance that the Company will be able to attract
or retain additional qualified resellers or that any such resellers will be able
to effectively sell the Company's products. The Company seeks to select and
retain resellers on the basis of their business credentials and their ability to
add value through expertise in specific vertical markets or application
programming expertise. In addition, the Company relies on resellers to provide
post-sales service and support, and any deficiencies in such service and support
could adversely affect the Company's business.
Volatility of Stock Price
As is frequently the case with the stocks of high technology companies,
the market price of the Company's common stock has been, and may continue to be,
volatile. Factors such as quarterly fluctuations in results of operations,
increased competition, the introduction of new products by the Company or its
competitors, expenses or other difficulties associated with assimilating
companies acquired by the Company, changes in the mix of sales channels, the
timing of significant customer orders, and macroeconomic conditions generally,
may have a significant impact on the market price of the stock of the Company.
Any shortfall in revenue or earnings from the levels anticipated by securities
analysts could have an immediate and significant adverse effect on the market
price of the Company's common stock in any given period. In addition, the stock
market has from time to time experienced extreme price and volume fluctuations,
which have particularly affected the market price for many high technology
companies and which, on occasion, have appeared to be unrelated to the operating
performance of such companies.
ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ---------------------------------------------------------------------
Derivative Financial Instruments, Other Financial Instruments, and Derivative
Commodity Instruments.
At September 30, 1999, the Company did not participate in any derivative
financial instruments, or other financial and commodity instruments for which
fair value disclosure would be required under SFAS No. 107. The Company holds no
investment securities that would require disclosure of market risk.
Primary Market Risk Exposures.
The Company's primary market risk exposures are in the areas of interest
rate risk and foreign currency exchange rate risk. The Company utilized U.S.
dollar denominated borrowings to fund its operational needs through its
$1,500,000 working capital line. The line that was operative in fiscal 1999,
which bore an interest rate of prime plus 1% (9.25% at September 30, 1999), is
subject to annual renewal. Had the interest rates under the line of credit been
10% greater or lesser than actual rates, the impact would not have been material
in the Company's consolidated financial statements for the year ended September
30, 1999. As of September 30, 1999, the Company had $1,314,000 outstanding on
its working capital line. On December 27, 1999, the Company renegotiated its
line of credit and increased availability under this line, and an additional
line, to $3,500,000.
The Company's exposure to currency exchange rate fluctuations has been and
is expected to continue to be modest due to the fact that the operations of its
international subsidiaries are almost exclusively conducted in their respective
local currencies.
<PAGE>
International subsidiary operating results are translated into U.S. dollars and
consolidated for reporting purposes. Currently the Company does not engage in
foreign currency hedging activities.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
The information required by this item is set forth in Item 14(a) under the
captions "Consolidated Financial Statements" and "Consolidated Financial
Statement Schedule" as a part of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
Information with respect to Directors may be found under the caption
"Election of Directors" appearing in the Company's definitive Proxy Statement
for the Annual Meeting of Shareholders for the fiscal year ended September 30,
1999. Such information is incorporated herein by reference. Information with
respect to the Company's executive officers may be found under the caption
"Executive Officers of the Registrant" appearing in Part I of this Annual Report
on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
The information set forth under the caption "Compensation and Other
Information Concerning Directors and Officers" appearing in the Company's
definitive Proxy Statement for the Annual Meeting of Shareholders for the fiscal
year ended September 30, 1999 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The information set forth under the caption "Principal Holders of Voting
Securities" appearing in the Company's definitive Proxy Statement for the Annual
Meeting of Shareholders for the fiscal year ended September 30, 1999 is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The information set forth under the caption "Certain Transactions"
appearing in the Company's definitive Proxy Statement for the Annual Meeting of
Shareholders for the fiscal year ended September 30, 1999 is incorporated herein
by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------------------------------------------------------------------------
The following documents are filed as part of this report:
(A) 1. CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report
Consolidated Balance Sheets as of September 30, 1999 and 1998
Consolidated Statements of Operations for the Years Ended September
30, 1999, 1998 and 1997.
Consolidated Statements of Changes in Shareholders' Equity for the
Years Ended September 30, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the Years Ended September
30, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements
2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
Schedule VIII Valuation and Qualifying Accounts
All other schedules are omitted as the required information is not
applicable or is included in the financial statements or related
notes.
The Independent Auditors' Report included with the Consolidated
Financial Statements under Item 14(a)1 above contains the Independent
Auditors' Report on the Consolidated Financial Statement Schedule.
3. LIST OF EXHIBITS
EX.NO DESCRIPTION
- --------------------------------------------------------------------------------
(5) 2.1 Asset Purchase Agreement, dated October 9, 1997, among Datawatch
Corporation, Pole Position Software GmbH and Dr Solomon's
Software, Inc. (Exhibit 2.1)
(5) 2.2 Escrow Agreement, dated October 9, 1997, among Datawatch
Corporation, Dr Solomon's Software, Inc. and State Street Bank and
Trust Company. (Exhibit 2.2)
(1) 3.1 Restated Certificate of Incorporation of the Registrant (Exhibit
3.2)
(1) 3.2 By-Laws, as amended, of the Registrant (Exhibit 3.3)
(1) 4.1 Specimen certificate representing the Common Stock (Exhibit 4.4)
10.1 Sub-Lease, dated April 30, 1999, by and between Datawatch
Corporation and Eastman Kodak Company (filed herewith)
(1) 10.2* 1987 Stock Plan (Exhibit 10.7)
(1) 10.3* Form of Incentive Stock Option Agreement of the Registrant
(Exhibit 10.8)
(1) 10.4* Form of Nonqualified Stock Option Agreement of the Registrant
(Exhibit 10.9)
(1) 10.6 Software Development and Marketing Agreement by and between
Personics Corporation and Raymond Huger, dated January 19, 1989
(Exhibit 10.12)
(2) 10.6 Marketing Agreement, dated May 1, 1994, between WorkGroup Systems
Ltd. and Datawatch Corporation (Exhibit 10.1)
(3) 10.7 Commercial Security Agreement between Datawatch Corporation and
Silicon Valley Bank doing business as Silicon Valley East, dated
November 1, 1994 (Exhibit 10.23)
(3) 10.8 Commercial Security Agreement between Personics Corporation and
Silicon Valley Bank doing business as Silicon Valley East, dated
November 1, 1994 (Exhibit 10.24)
(4) 10.9* Executive Agreement between the Company and Marco D. Peterson,
dated April 11, 1996 (Exhibit 10.2)
10.10* Amendment No. 1 to Executive Agreement dated April 11, 1996
between the Registrant and Marco D. Peterson, dated July 15, 1999,
(filed herewith)
<PAGE>
(4) 10.11* Executive Agreement between the Company and Bruce R. Gardner,
dated April 11, 1996 (Exhibit 10.3)
(6) 10.12 Loan Modification Agreement dated, October 31, 1996, between
Datawatch Corporation, Personics Corporation and Silicon Valley
Bank (Exhibit 10.29)
(6) 10.13* 1996 Non-Employee Director Stock Option Plan, as amended on
December 10, 1996 (Exhibit 10.30)
(6) 10.14* 1996 International Employee Non-Qualified Stock Option Plan
(Exhibit 10.31)
(7) 10.15 Amended and Restated Letter Agreement, dated February 12, 1997, by
and between Datawatch Corporation, Personics Corporation and
Silicon Valley Bank (Exhibit 10.1)
(7) 10.16 Promissory Note, dated February 12, 1997, by and between Datawatch
Corporation, Personics Corporation and Silicon Valley Bank
(Exhibit 10.2).
(8) 10.17 Loan Modification Agreement, dated October 30, 1997, by and
between Datawatch Corporation, Personics Corporation and Silicon
Valley Bank (Exhibit 10.23)
(9) 10.18* 1996 Stock Plan (Appendix A)
(10) 10.19 Loan Modification Agreement, dated January 30, 1998, by and
between Datawatch Corporation, Personics Corporation and Silicon
Valley Bank (Exhibit 10.1)
(11) 10.20 Loan Modification Agreement, dated December 18, 1998, by and
between Datawatch Corporation, Personics Corporation and Silicon
Valley Bank (Exhibit 10.19)
(12) 10.21 Loan Modification Agreement, dated March 16, 1999, by and between
Datawatch Corporation, Personics Corporation and Silicon Valley
Bank (Exhibit 10.1)
10.22 Loan Modification Agreement, dated December 27, 1999, by and
between Datawatch Corporation and Silicon Valley Bank (filed
herewith)
10.23 Intellectual Property Security Agreement, dated December 27, 1999
by and between Datawatch Corporation and Silicon Valley Bank
(filed herewith)
10.24 Export-Import Bank Loan and Security Agreement, dated December 27,
1999, by and among Datawatch Corporation, Datawatch International
Limited, Datawatch Europe Limited, Guildsoft Limited and Silicon
Valley Bank in favor of Export-Import Bank of the United States
(filed herewith)
10.25* Contract of Employment, dated February 24, 1997, by and between
WorkGroup Systems Limited and Robert Hagger (filed herewith)
10.26* Amendment to Contract of Employment dated February 24, 1997, by
and between WorkGroup Systems Limited and Robert Hagger, dated
July 15, 1999 (filed herewith)
10.27 Mortgage Debenture, dated December 27, 1999, by and between
Datawatch Europe Limited and Silicon Valley Bank (filed herewith)
10.28 Deed of Guarantee, dated December 27, 1999, by and between
Datawatch Europe Limited and Silicon Valley Bank (filed herewith)
10.29 Mortgage Debenture, dated December 27, 1999, by and between
Datawatch International Limited and Silicon Valley Bank (filed
herewith)
10.30 Deed of Guarantee, dated December 27, 1999, by and between
Datawatch International Limited and Silicon Valley Bank (filed
herewith)
10.31 Mortgage Debenture, dated December 27, 1999, by and between
Guildsoft Limited and Silicon Valley Bank (filed herewith)
10.32 Deed of Guarantee, dated December 27, 1999, by and between
Datawatch Guildsoft Limited and Silicon Valley Bank (filed
herewith)
10.33 Export-Import Bank of the United States Working Capital Guarantee
Program Borrower Agreement, dated December 27, 1999, by and among
Datawatch Corporation, Datawatch International Limited, Datawatch
Europe Limited, Guildsoft Limited and Silicon Valley Bank in favor
of Export-Import Bank of the United States (filed herewith)
21.1 Subsidiaries of the Registrant (filed herewith)
23.1 Consent of Independent Auditors (filed herewith)
27 Financial Data Schedule (filed herewith)
- --------------------------------------------------------------------------------
* Indicates a management contract or compensatory plan or contract.
(1) Previously filed as an exhibit to Registration Statement 33-46290 on Form
S-1 and incorporated herein by reference (the number given in parenthesis
indicates the corresponding exhibit in such Form S-1).
<PAGE>
(2) Previously filed as an exhibit to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1994 and incorporated herein by
reference (the number given in parenthesis indicates the corresponding
exhibit in such Form 10-Q).
(3) Previously filed as an exhibit to Registrant's Annual Report on Form 10-K
for the fiscal year ended September 30, 1994 and incorporated herein by
reference (the number given in parenthesis indicates the corresponding
exhibit in such Form 10-K).
(4) Previously filed as an exhibit to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1996 and incorporated herein by
reference (the number given in parenthesis indicates the corresponding
exhibit in such Form 10-Q).
(5) Previously filed as an exhibit to Registrant's Current Report on Form 8-K
dated October 9, 1997 and incorporated herein by reference (the number
given in parenthesis indicates the corresponding exhibit in such Form
8-K).
(6) Previously filed as an exhibit to Registrant's Annual Report on Form 10-K
for the fiscal year ended September 30, 1996 and incorporated herein by
reference (the number given in parenthesis indicates the corresponding
exhibit in such Form 10-K).
(7) Previously filed as an exhibit to Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1997 and incorporated herein by
reference (the number in parenthesis indicates the corresponding exhibit
in such Form 10-Q).
(8) Previously filed as an exhibit to Registrant's Annual Report on Form 10-K
for the fiscal year ended September 30, 1997 and incorporated herein by
reference (the number given in parenthesis indicates the corresponding
exhibit in such Form 10-K).
(9) Previously filed as Appendix A to the Company's definitive Proxy Statement
for the Annual Meeting of Shareholders held on March 19, 1997 and
incorporated herein by reference (the number given in parenthesis
indicates the corresponding Appendix in such definitive Proxy Statement).
(10) Previously filed as an exhibit to Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1998 and incorporated herein by
reference (the number in parenthesis indicates the corresponding exhibit
in such Form 10-Q).
(11) Previously filed as an exhibit to Registrant's Annual Report on Form 10-K
for the fiscal year ended September 30, 1998 and incorporated herein by
reference (the number given in parenthesis indicates the corresponding
exhibit in such Form 10-K).
(12) Previously filed as an exhibit to Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999 and incorporated herein by
reference (the number in parenthesis indicates the corresponding exhibit
in such Form 10-Q).
(B) REPORTS ON FORM 8-K
No current report on Form 8-K was filed during the quarterly period ended
September 30, 1999.
(C) EXHIBITS
The Company hereby files as exhibits to this Annual Report on Form 10-K
those exhibits listed in Item 14(a)3 above.
(D) FINANCIAL STATEMENT SCHEDULES
The Company hereby files as financial statement schedules to this Annual
Report on Form 10-K the Consolidated Financial Statement Schedules listed
in Item 14(a)2 above which are attached hereto.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Datawatch Corporation
Date: December 28, 1999 By: /s/ Bruce R. Gardner
-----------------------
Bruce R. Gardner
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Bruce R. Gardner President, Chief Executive December 28, 1999
- ----------------------- Officer and Director
Bruce R. Gardner (Principal Executive Officer)
/s/ Betsy J. Hartwell Vice President Finance, December 28, 1999
- ----------------------- Chief Financial Officer
Betsy J. Hartwell and Treasurer
(Principal Financial
and Accounting Officer)
/s/ Jerome Jacobson Director December 28, 1999
- -----------------------
Jerome Jacobson
/s/ David T. Riddiford Director December 28, 1999
- -----------------------
David T. Riddiford
/s/ Terry W. Potter Director December 28, 1999
- -----------------------
Terry W. Potter
/s/ Don M. Lyle Director December 28, 1999
- -----------------------
Don M. Lyle
<PAGE>
================================================================================
DATAWATCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF
SEPTEMBER 30, 1999 AND 1998 AND CONSOLIDATED STATEMENTS OF OPERATIONS,
CHANGES IN SHAREHOLDERS' EQUITY, AND CASH FLOWS FOR THE YEARS ENDED
SEPTEMBER 30, 1999, 1998 AND 1997 AND INDEPENDENT AUDITORS' REPORT
================================================================================
<PAGE>
DATAWATCH CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
----
INDEPENDENT AUDITORS' REPORT ............................................ 1
CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1999 AND 1998
AND FOR THE THREE YEARS IN THE PERIOD ENDED SEPTEMBER 30, 1998:
Consolidated Balance Sheets .......................................... 2
Consolidated Statements of Operations ................................ 3
Consolidated Statements of Changes in Shareholders' Equity ........... 4
Consolidated Statements of Cash Flows ................................ 5
Notes to Consolidated Financial Statements ........................... 6-18
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Datawatch Corporation
Wilmington, Massachusetts
We have audited the accompanying consolidated balance sheets of Datawatch
Corporation (the "Company") and subsidiaries as of September 30, 1999 and 1998,
and the related consolidated statements of operations, changes in shareholders'
equity, and cash flows for each of the three years in the period ended September
30, 1999. Our audits also included the consolidated financial statement schedule
listed in Item 14(a)2. These financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and the financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Datawatch Corporation and
subsidiaries as of September 30, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1999, in conformity with generally accepted accounting principles.
Also, in our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
/s/ Deloitte & Touche LLP
- -------------------------
Boston, Massachusetts
November 19, 1999 (December 27, 1999 as to Note 8)
<PAGE>
DATAWATCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND 1998
- -------------------------------------------------------------------------------
ASSETS 1999 1998
------------ ------------
CURRENT ASSETS:
Cash and equivalents $ 1,684,485 $ 3,575,256
Short-term investments 1,479,698 3,395,410
Accounts receivable, less allowance for
doubtful accounts and sales returns of
approximately $467,000 in 1999 and
$353,000 in 1998 7,282,452 5,568,754
Income tax recoverable 230,922 833,211
Inventories 409,753 511,669
Prepaid advertising and other expenses 713,618 1,270,671
------------ ------------
Total current assets 11,800,928 15,154,971
------------ ------------
PROPERTY AND EQUIPMENT:
Office furniture and equipment 4,096,358 4,120,118
Manufacturing and engineering equipment 202,187 159,982
------------ ------------
4,298,545 4,280,100
Less accumulated depreciation
and amortization (2,805,418) (2,453,240)
------------ ------------
Net property and equipment 1,493,127 1,826,860
------------ ------------
OTHER ASSETS 942,128 625,293
------------ ------------
EXCESS OF COST OVER NET ASSETS OF
ACQUIRED COMPANIES - Less accumulated
amortization of approximately $2,370,000
in 1999 and $2,190,000 in 1998 544,572 725,091
------------ ------------
TOTAL $ 14,780,755 $ 18,332,215
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998
------------ ------------
CURRENT LIABILITIES:
Accounts payable $ 2,851,120 $ 3,791,323
Accrued expenses 1,136,365 1,301,599
Deferred revenue 1,619,715 1,161,556
Borrowings under credit lines 1,313,705 250,000
Current portion of long-term obligations 41,789 147,065
------------ ------------
Total current liabilities 6,962,694 6,651,543
------------ ------------
LONG-TERM OBLIGATIONS 354 44,190
------------ ------------
COMMITMENTS AND CONTINGENCIES
(Notes 6,7 and 8)
SHAREHOLDERS' EQUITY:
Preferred stock, par value $.01- authorized,
1,000,000 shares; no shares issued -- --
Common stock, par value $.01- authorized,
20,000,000 shares; issued, 9,221,165 shares and
9,180,364 shares in 1999 and 1998, respectively;
outstanding, 9,189,113 shares and 9,148,312
shares in 1999 and 1998, respectively 92,211 91,803
Additional paid-in capital 19,864,296 19,823,887
Accumulated deficit (11,676,735) (7,829,554)
Accumulated other comprehensive loss (321,677) (309,266)
------------ ------------
7,958,095 11,776,870
Less treasury stock, at cost - 32,052 shares (140,388) (140,388)
------------ ------------
Total shareholders' equity 7,817,707 11,636,482
------------ ------------
TOTAL $ 14,780,755 $ 18,332,215
============ ============
-2-
<PAGE>
DATAWATCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
<TABLE><CAPTION>
- -----------------------------------------------------------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES:
PC-based products $ 27,171,401 $ 25,123,468 $ 25,995,197
Macintosh-based products -- 172,254 6,052,298
------------ ------------ ------------
Net sales 27,171,401 25,295,722 32,047,495
COSTS AND EXPENSES:
Cost of sales 6,147,938 5,212,595 5,899,849
Engineering and product development 2,386,256 3,383,260 2,804,434
Selling, general and administrative 22,297,320 24,524,839 25,225,177
Restructuring and centralization costs 648,767 2,679,460 --
------------ ------------ ------------
Total costs and expenses 31,480,281 35,800,154 33,929,460
------------ ------------ ------------
LOSS FROM OPERATIONS (4,308,880) (10,504,432) (1,881,965)
INTEREST EXPENSE (135,562) (62,306) (167,871)
INTEREST INCOME AND OTHER 179,846 470,367 54,503
GAIN ON SALE OF PRODUCT LINE -- 15,431,253 --
FOREIGN CURRENCY TRANSACTION
GAINS (LOSSES) 5,785 (30,886) (100)
BENEFIT (PROVISION) FOR INCOME TAXES 411,630 (600,000) --
------------ ------------ ------------
NET (LOSS) INCOME (3,847,181) $ 4,703,996 $ (1,995,433)
============ ============ ============
NET (LOSS) INCOME PER SHARE - Basic $ (0.42) $ 0.52 $ (0.22)
============ ============ ============
NET (LOSS) INCOME PER SHARE - Diluted $ (0.42) $ 0.51 $ (0.22)
============ ============ ============
WEIGHTED-AVERAGE NUMBER OF
SHARES OUTSTANDING - Basic 9,160,831 9,133,385 9,060,612
ADJUSTMENT FOR POTENTIAL COMMON
STOCK -- 176,868 --
------------ ------------ ------------
WEIGHTED-AVERAGE NUMBER
OF SHARES OUTSTANDING - Diluted 9,160,831 9,310,253 9,060,612
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
DATAWATCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
<TABLE><CAPTION>
- -----------------------------------------------------------------------------------------------------------------
ADDITIONAL
COMMON STOCK PAID-IN TREASURY STOCK
SHARES AMOUNT CAPITAL SHARES AMOUNT
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 1, 1996 8,965,988 $ 89,659 $ 18,665,402 -- $ --
Stock issued pursuant to
acquisition of Guildsoft 125,000 1,250 905,000 -- --
Stock options exercised 25,125 251 27,173 -- --
Escrowed shares returned to treasury -- -- 140,388 (32,052) (140,388)
Comprehensive loss:
Translation adjustment -- -- -- -- --
Net loss -- -- -- -- --
Total comprehensive loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
BALANCE, SEPTEMBER 30, 1997 9,116,113 91,160 19,737,963 (32,052) (140,388)
Stock options exercised 64,251 643 85,924 -- --
Comprehensive income:
Translation adjustment -- -- -- -- --
Net income -- -- -- -- --
Total comprehensive income -- -- -- -- --
------------ ------------ ------------ ------------ ------------
BALANCE, SEPTEMBER 30, 1998 9,180,364 91,803 19,823,887 (32,052) (140,388)
Stock options exercised 40,801 408 40,409 -- --
Comprehensive loss:
Translation adjustment -- -- -- -- --
Net income -- -- -- -- --
Total comprehensive loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
BALANCE, SEPTEMBER 30, 1999 9,221,165 $ 92,211 $ 19,864,296 (32,052) $ (140,388)
============ ============ ============ ============ ============
- --------------------------------------------------------------------------------------------------
ACCUMULATED
OTHER COMPREHENSIVE
ACCUMULATED COMPREHENSIVE INCOME
DEFICIT INCOME (LOSS) (LOSS) TOTAL
------------ ------------ ------------ ------------
BALANCE, OCTOBER 1, 1996 $(10,538,117) $ 21,942 $ 8,238,886
Stock issued pursuant to
acquisition of Guildsoft -- -- 906,250
Stock options exercised -- -- 27,424
Escrowed shares returned to treasury -- -- --
Comprehensive income:
Translation adjustment -- (252,278) $ (252,278) (252,278)
Net loss (1,995,433) -- (1,995,433) (1,995,433)
------------
Total comprehensive loss -- -- $ (2,247,711)
------------ ------------ ============ ------------
BALANCE, SEPTEMBER 30, 1997 (12,533,550) (230,336) 6,924,849
Stock options exercised -- -- 86,567
Comprehensive income:
Translation adjustment -- (78,930) $ (78,930) (78,930)
Net income 4,703,996 -- 4,703,996 4,703,996
------------
Total comprehensive income -- -- $ 4,625,066
------------ ------------ ============ ------------
BALANCE, SEPTEMBER 30, 1998 (7,829,554) (309,266) 11,636,482
Stock options exercised -- -- 40,817
Comprehensive income:
Translation adjustment -- (12,411) $ (12,411) (12,411)
Net income (3,847,181) -- (3,847,181) (3,847,181)
------------
Total comprehensive loss -- -- $ (3,859,592)
------------ ------------ ============ ------------
BALANCE, SEPTEMBER 30, 1999 $(11,676,735) $ (321,677) $ 7,817,707
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
DATAWATCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
<TABLE><CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (3,847,181) $ 4,703,996 $ (1,995,433)
Adjustments to reconcile net (loss) income to net cash used in
operating activities:
Depreciation and amortization 1,151,719 1,300,813 1,522,877
Amortization of interest on short-term investments (121,003) (176,034) --
Gain on sale of product lines -- (15,431,253) --
Gain (loss) on disposition of equipment 2,825 (8,537) --
Changes in current assets and liabilities, net of acquisitions:
Accounts receivable (1,535,541) 1,036,395 353,381
Inventories 96,117 275,884 (175,144)
Prepaid advertising and other expenses 918,675 482,255 (672,054)
Accounts payable and accrued expenses (1,026,772) (1,030,528) 132,358
Deferred revenue 496,608 (143,020) 196,730
------------ ------------ ------------
Net cash used in operating activities (3,864,553) (8,990,029) (637,285)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and fixtures (410,920) (818,143) (647,888)
Proceeds from sale of equipment - net 14,885 18,862 91,233
Proceeds from sale of short-term investments 7,979,405 6,245,000 2,069,065
Purchase of short-term investments (5,942,690) (9,464,376) (1,276,400)
Proceeds from sale of product lines -- 16,750,000
Acquisition of Guildsoft Holdings, Ltd., net of working capital acquired -- -- 19,833
Other assets (585,487) (346,731) (314,608)
------------ ------------ ------------
Net cash provided by (used in) investing activities 1,055,193 12,384,612 (58,765)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 40,817 86,567 27,424
Principal payments on long-term obligations (145,460) (242,769) (307,380)
Borrowings (payments) under credit lines - net 1,063,705 250,000 (633,468)
Proceeds from bank term loan -- -- 1,500,000
Payments of bank term loan -- (1,500,000) --
------------ ------------ ------------
Net cash provided by (used in) financing activities 959,062 (1,406,202) 586,576
------------ ------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (40,473) -- --
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS (1,890,771) 1,988,381 (109,474)
CASH AND EQUIVALENTS, BEGINNING OF YEAR 3,575,256 1,586,875 1,696,349
------------ ------------ ------------
CASH AND EQUIVALENTS, END OF YEAR $ 1,684,485 $ 3,575,256 $ 1,586,875
============ ============ ============
SUPPLEMENTAL INFORMATION:
Interest paid $ 135,562 $ 62,306 $ 159,954
============ ============ ============
Income taxes paid $ -- $ 1,175,000 $ 167,490
============ ============ ============
NONCASH INVESTING AND FINANCING ACTIVITIES:
Equipment acquired under capital lease agreements $ -- $ 77,311 $ 267,277
============ ============ ============
Escrowed shares returned to treasury $ -- $ -- $ 140,388
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
-5-
<PAGE>
DATAWATCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - Datawatch Corporation (the "Company") develops,
markets and distributes commercial software products. The Company also
provides a wide range of consulting services surrounding the
implementation and support of its software products.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of Datawatch Corporation and its wholly owned
subsidiaries. All significant intercompany balances and transactions have
been eliminated in consolidation.
ACCOUNTING ESTIMATES - The preparation of the Company's consolidated
financial statements in conformity with generally accepted accounting
principles necessarily requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from
those estimates.
REVENUE RECOGNITION - Revenue from sales of software products is
recognized at the time of shipment when no significant obligations remain
and collectibility is probable. The Company's software products are sold
under warranty against certain defects in material and workmanship for a
period of 30 to 60 days from the date of purchase. Software products sold
directly to end users include a guarantee under which such customers may
return products within 30 to 60 days for a full refund. The Company offers
its resellers the ability to return obsolete versions of its products and
slow-moving products for credit which can be used against purchases of
other Company products on a dollar-for-dollar basis. During each of the
three years in the period ended September 30, 1999, returns under these
warranty and guarantee arrangements were not material.
Revenue from the sale of separate consulting agreements to provide field
service support is deferred at the time of sale. The Company recognizes
its revenue on these agreements ratably over their 12-month contractual
periods. Revenue from the sale of annual subscription agreements to
provide upgrades for minor product improvements is deferred at the time of
sale and recognized ratably over their 12-month contractual periods.
Revenue from consulting services is recognized as revenue as the services
are provided.
-6-
<PAGE>
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
CASH AND EQUIVALENTS - Cash and equivalents include cash on hand, cash
deposited with banks, and highly liquid debt securities with remaining
maturities of 90 days or less when purchased.
SHORT-TERM INVESTMENTS - Short-term investments consist of United States
Treasury Bills and commercial paper with relatively short-term maturities
(less than one year from the date of purchase) for which the carrying
value approximates market value.
OTHER ASSETS - Pursuant to Statement of Financial Accounting Standards
("SFAS") No. 86, "Accounting for the Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed," issued by the Financial Accounting
Standards Board ("FASB"), the Company is required to capitalize certain
software development and production costs once technological feasibility
has been achieved. The cost of purchased software is also required to be
capitalized when related to a product which has achieved technological
feasibility or that has an alternative future use. For the years ended
September 30, 1999, 1998 and 1997, the Company did not capitalize any
internal software development costs. For the years ended September 30,
1999, 1998 and 1997, the Company purchased and capitalized software
amounting to approximately $468,000, $487,000 and $315,000, respectively.
Software development costs incurred prior to achieving technological
feasibility are charged to research and development expense as incurred.
Capitalized software development and purchased software costs are reported
at the lower of unamortized cost or net realizable value. Commencing upon
initial product release, these costs are amortized using the straight-line
method over the estimated life (which approximates the ratio that current
gross revenues for a product bear to the total of current and anticipated
future gross revenues for that product), generally 12 to 36 months for
purchased software. For the years ended September 30, 1999, 1998 and 1997,
amortization was approximately $267,000, $125,000 and $22,000,
respectively.
ADVERTISING AND PROMOTIONAL MATERIALS - Advertising costs are expensed as
incurred and amounted to approximately $475,000, $339,000 and $721,000 in
1999, 1998 and 1997, respectively. Direct mail/direct response costs are
expensed as the associated revenue is recognized. The amortization period
is based on historical results of previous mailers (generally three to six
months from the date of the mailing). Direct mail expense was
approximately $1,682,000, $2,979,000 and $3,152,000 in 1999, 1998 and
1997, respectively. At September 30, 1999 and 1998, deferred direct
mail/direct response costs were approximately $117,000 and $725,000,
respectively.
CONCENTRATION OF CREDIT RISKS AND MAJOR CUSTOMERS - The Company sells its
products and services to U.S. and non-U.S. dealers and other software
distributors, as well as to end users under normal credit terms. One
customer individually accounted for 15%, 12%, and 14% of net sales in
1999, 1998 and 1997, respectively. This same customer accounted for 24%
and 16% of outstanding trade receivables as of September 30, 1999 and
1998, respectively. Other than this customer, no base of customers in one
geographic area constitutes a significant portion of sales. The Company
performs ongoing credit evaluations of its customers and generally does
not require collateral. Allowances are provided for anticipated doubtful
accounts and sales returns.
INVENTORIES - Inventories consist of software components - primarily
software manuals, diskettes and retail packaging materials. Inventories
are valued at the lower of cost (first-in, first-out) method or market.
-7-
<PAGE>
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
PROPERTY AND EQUIPMENT - Purchased equipment and fixtures are recorded at
cost. Leased equipment accounted for as capital leases is recorded at the
present value of the minimum lease payments required during the lease
terms. Depreciation and amortization are provided using the straight-line
method over the estimated useful lives of the related assets or over the
terms, if shorter, of the related leases. Useful lives and lease terms
range from three to seven years. The cost and the related accumulated
amortization of equipment leased under capital lease agreements were
approximately $804,000 and $746,000 at September 30, 1999, respectively,
and approximately $914,000 and $690,000 at September 30, 1998,
respectively. Amortization expense was approximately $149,000, $232,000
and $296,000 for the years ended September 30, 1999, 1998 and 1997,
respectively.
INCOME TAXES - The Company accounts for income taxes in accordance with
SFAS No. 109, "Accounting for Income Taxes." This statement requires an
asset and liability approach to accounting for income taxes based upon the
future expected values of the related assets and liabilities. Deferred
income taxes are provided for items which are recognized in different
years for tax and financial reporting purposes.
EXCESS OF COST OVER NET ASSETS OF ACQUIRED COMPANIES - The excess of cost
over net assets of acquired companies is being amortized on a
straight-line basis over seven years. In addition, the net carrying amount
of the excess of cost over net assets of acquired companies is reduced if
it is probable that the estimated undiscounted operating cash flow before
depreciation and amortization from related operations will be less than
the carrying amount of the excess of cost over net assets of acquired
companies.
The Company also evaluates other long-lived assets using the same
methodology in accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of."
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of cash and
equivalents, short-term investments, accounts receivable, accounts
payable, accrued expenses and deferred revenue approximate fair value
because of their short-term nature. The carrying amounts of the Company's
current and long-term obligations approximate fair value.
EARNINGS (LOSS) PER SHARE - Basic earnings (loss) per share reflect the
weighed-average number of common shares outstanding during each period.
Diluted earnings (loss) per share reflect the impact, when dilutive, of
the exercise of options using the treasury stock method. The Company's
stock options were antidilutive in 1999 and 1997. Options to purchase
approximately 43,000 shares and 164,000 shares in 1999 and 1997,
respectively, were therefore excluded from the treasury stock calculation.
FOREIGN CURRENCY TRANSLATIONS AND TRANSACTIONS - The financial statements
of foreign subsidiaries are translated into U.S. dollars in accordance
with SFAS No. 52, "Foreign Currency Translation". The related translation
adjustments are reported as a separate component of shareholders' equity
under the heading "Accumulated Other Comprehensive Income (Loss)." Gains
and losses resulting from transactions and related accounts that are
denominated in currencies other than the U.S. dollar are included in the
net operating results of the Company in accordance with SFAS No. 52.
-8-
<PAGE>
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
STOCK-BASED COMPENSATION - The Company accounts for stock-based
compensation using the intrinsic value method in accordance with
Accounting Principles Board ("APB") Opinion No. 25. The difference between
accounting for stock-based compensation under APB Opinion No. 25,
"Accounting for Stock Issued to Employees", and SFAS No. 123, "Accounting
for Stock-Based Compensation", is disclosed in Note 10.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Accumulated other
comprehensive income (loss) reported in the consolidated balance sheets
consists only of foreign currency translation adjustments.
RECENT ACCOUNTING PRONOUNCEMENTS - In June 1998, the FASB issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities,"
which, as amended, is effective after June 15, 2000. The new standard
requires that all companies record derivatives on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting
from changes in the values of those derivatives would be accounted for
depending on the use of the derivative and whether it qualifies for hedge
accounting. Management is currently assessing whether there will be any
impact of SFAS No. 133 on the Company's consolidated financial statements
upon adoption, which is required in October 2000.
In March 1998, the AICPA released Statement of Position ("SOP") 98-1,
"Accounting for Costs of Computer Software Developed or Obtained for
Internal Use," which requires certain expenditures made for internal use
software to be capitalized. The Company adopted the provisions of SOP 98-1
in October 1999. The adoption of these provisions did not have a material
impact on the Company's consolidated results of operations.
RECLASSIFICATIONS - Certain prior year amounts have been reclassified to
conform with the current consolidated financial statement presentation.
2. DIVESTITURE
On October 9, 1997, the Company sold its Macintosh-based product line for
approximately $16,750,000 in cash, resulting in a pretax gain of
approximately $15,431,000. The assets sold consisted primarily of
inventory, property and equipment, trademarks, and the technological
rights related to the product line. In connection with the sale, the
Company wrote off certain assets and liabilities related to the product
line sold, including approximately $286,000 representing the unamortized
balance of goodwill initially recorded in a prior acquisition of a
business.
3. RESTRUCTURING AND CENTRALIZATION COSTS
Subsequent to the sale of its Macintosh-based product line, the Company
undertook a corporate-wide restructuring effort so as to centralize both
its administrative infrastructure and its development efforts for its
remaining products. The plan was approved and completed in the first
quarter of fiscal 1998. The total amount charged to first quarter
operations was approximately $2,364,000. The plan included charges for
salaries and wages and the related severance benefits for 25 terminated
employees. These charges, totaling approximately $1,884,000, have been
paid. The plan also included special one-time payments made to outside
developers associated with the centralization of the Company's development
efforts. These charges, totaling approximately $433,000, have been paid.
There was no change to the initial estimate in subsequent quarters.
During the fourth quarter of fiscal 1998, the Company approved and
completed a restructuring plan to further centralize its administrative
infrastructure and its development efforts. The restructuring plan
resulted in charges for severance benefits and related costs for 14
terminated employees. These charges, totaling approximately $315,000, have
been paid. There was no change to the initial estimate in subsequent
quarters.
-9-
<PAGE>
3. RESTRUCTURING AND CENTRALIZATION COSTS (CONTINUED)
During the first quarter of fiscal 1999, the Company approved and
completed a restructuring plan to centralize in the United States the
quality assurance efforts for its Quetzal/SC product. The restructuring
plan resulted in charges for severance benefits and related costs for 10
terminated employees. These charges, totaling approximately $200,000, have
been paid. There was no change in the initial estimate in subsequent
quarters.
During the third quarter of fiscal 1999, the Company approved and
completed a plan to further reduce costs and focus resources on key areas
of the business. The restructuring plan resulted in charges for severance
benefits and related costs for 21 terminated employees. These charges,
totaling approximately $449,000, have been paid. There was no change in
the initial estimate in subsequent quarters.
4. INVENTORIES
Inventories consisted of the following at September 30:
1999 1998
---------- ----------
Materials ........................ $ 233,830 $ 303,426
Finished goods ................... 175,923 208,243
---------- ----------
Total ............................ $ 409,753 $ 511,669
========== ==========
5. ACCRUED EXPENSES
Accrued expenses consisted of the following at September 30:
1999 1998
---------- ----------
Accrued salaries and benefits ..... $ 247,840 $ 155,694
Accrued royalties and commissions . 557,518 491,300
Accrued professional fees ......... 104,917 136,716
Accrued restructuring costs (Note 3) -- 181,344
Other ............................. 226,090 336,545
---------- ----------
Total ............................. $1,136,365 $1,301,599
========== ==========
6. COMMITMENTS
LEASES - The Company leases various facilities, equipment and automobiles
in the U.S. and overseas under noncancelable operating leases which expire
through 2017. The lease agreements generally provide for the payment of
minimum annual rentals, pro-rata share of taxes, and maintenance expenses.
Rental expense for all operating leases was approximately $1,023,000,
$1,006,000 and $803,000 for the years ended September 30, 1999, 1998 and
1997, respectively.
-10-
<PAGE>
6. COMMITMENTS (CONTINUED)
As of September 30, 1999, minimum rental commitments under noncancelable
operating leases are as follows:
YEAR ENDING SEPTEMBER 30
2000 ............................. $ 902,701
2001 ............................. 413,456
2002 ............................. 201,500
2003 ............................. 184,642
2004 ............................. 83,960
Thereafter ....................... 993,531
----------
Total minimum lease payments ..... $2,779,790
==========
ROYALTIES - The Company is also committed to pay royalties relating to the
sales of certain software products. Royalty expense included in cost of
sales was approximately $1,637,000, $1,380,000 and $1,867,000 for the
years ended September 30, 1999, 1998 and 1997, respectively.
7. LITIGATION
The Company is not a party to any litigation that management believes will
have a material adverse effect on the Company's consolidated financial
statements or its business.
8. FINANCING ARRANGEMENTS
LINE OF CREDIT - On December 27, 1999 the Company finalized two
line-of-credit agreements which will provide for working capital
borrowings through December 27, 2000. The lines provide for maximum
borrowings up to the lesser of $3,500,000 or 50% to 90% of defined
eligible accounts receivable. Borrowings under the lines are
collateralized by substantially all assets of the Company and a maximum of
$2,000,000 is guaranteed by the Export-Import Bank of the United States.
Outstanding borrowings bear interest at the bank's prime rate plus 1%
(9.25% at September 30, 1999). The lines of credit contain customary
covenants which require, among other items, a minimum level of
consolidated tangible net worth and the maintenance of a minimum liquidity
ratio, as defined.
As of September 30, 1999 and 1998, there were approximately $1,314,000 and
$250,000, respectively, of outstanding borrowings under a previously
negotiated line. As of September 30, 1999, the Company was in default on
its covenant to maintain the minimum level of consolidated net worth under
covenants. The bank subsequently waived this default.
TERM LOAN - On February 12, 1997, the Company obtained an equipment line
of credit with a bank. The line of credit provided for maximum borrowings
up to $1,500,000. Payments of interest only were required from March 12,
1997 through February 12, 1998, at which time the equipment line was to
convert to a term loan payable. The Company fully repaid the loan on
October 16, 1997.
CAPITAL LEASE OBLIGATIONS - The Company leases certain office and computer
equipment under capital leases.
-11-
<PAGE>
8. FINANCING ARRANGEMENTS (CONTINUED)
Future minimum lease payments under the noncancelable capital lease
obligation at September 30, 1999 are as follows:
2000 $ 42,459
2001 and thereafter 356
--------
Total minimum lease payments 42,815
Amounts representing interest (672)
--------
Present value of minimum lease commitments 42,143
Current portion (41,789)
--------
Long-term portion $ 354
========
9. INCOME TAXES
The (benefit) provision for income taxes consisted of the following for
the years ended September 30:
1999 1998 1997
---------- ---------- ----------
Current:
Federal $ (412,000) $ 580,000 $ --
State -- 10,000 --
Foreign -- 10,000 --
---------- ---------- ----------
(412,000) 600,000 --
---------- ---------- ----------
Deferred:
Federal 525,000 1,663,000 (797,000)
State 387,000 688,000 (141,000)
Foreign 22,000 (1,621,000) --
Change in valuation allowance (934,000) (730,000) 938,000
---------- ---------- ----------
-- -- --
---------- ---------- ----------
Total $ (412,000) $ 600,000 $ --
========== ========== ==========
At September 30, 1999, the Company had federal tax loss carryforwards of
approximately $1,284,000 expiring in 2019 and had approximately $3,572,000
in state tax loss carryforwards, which commence expiring in 2007. An
alternative minimum tax credit of approximately $132,000 is available for
offset against future regular federal taxes. Research and development
credits of approximately $289,000 expire beginning in 2013. In addition,
tax loss carryforwards in certain foreign jurisdictions total
approximately $6,439,000.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes and
operating loss carryforwards and credits.
-12-
<PAGE>
9. INCOME TAXES (CONTINUED)
The tax effects of significant items comprising the Company's net deferred
tax position as of September 30 were as follows:
1999 1998
---------- ----------
Deferred tax liabilities:
Depreciation and amortization $ (153,000) $ (60,000)
Prepaid expenses -- (309,000)
Accrued commissions (174,000) --
---------- ----------
(327,000) (369,000)
---------- ----------
Deferred tax assets:
Goodwill 337,000 362,000
Inventory-related items -- 100,000
Accounts and notes receivable reserves 180,000 239,000
Net operating loss carryforwards 3,351,000 2,563,000
Research and development credits 289,000 75,000
Alternative minimum tax credits 132,000 132,000
Other 130,000 57,000
---------- ----------
4,419,000 3,528,000
---------- ----------
Total 4,092,000 3,159,000
Valuation allowance (4,092,000) (3,159,000)
---------- ----------
Deferred taxes, net $ -- $ --
========== ==========
The Company has experienced significant losses from operations both
domestically and internationally over the past several years. Accordingly,
management does not believe the tax assets satisfy the realization
criteria set forth in SFAS No. 109 and has thus recorded a valuation
allowance for the entire net tax asset. The valuation allowance increased
by approximately $933,000 in 1999 primarily because of increased net
operating loss and credit carryforwards.
-13-
<PAGE>
9. INCOME TAXES (CONTINUED)
The following table reconciles the Company's effective tax rate to the
federal statutory rate of 34% for the years ended September 30, 1999, 1998
and 1997:
<TABLE><CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
(Benefit) taxes at federal statutory rate $(1,785,000) $ 1,803,000 $ (678,000)
Reversal of valuation allowances against
net operating loss carryforwards -- (2,066,000) (371,000)
Provision of valuation allowance against currently
generated net operating loss carryforwards 1,160,000 962,000 1,049,000
Benefit of research credits -- (280,000) --
Nondeductible goodwill -- 96,000 --
Other 213,000 85,000 --
----------- ----------- -----------
(Benefit) provision for income taxes $ (412,000) $ 600,000 $ --
=========== =========== ===========
</TABLE>
10. SHAREHOLDERS' EQUITY
STOCK OPTION PLANS - The Company's four stock option plans described below
provide for granting of options and other stock rights to purchase common
stock of the Company to employees, officers, consultants, and directors
who are not otherwise employees. The options granted are exercisable as
specified at the date of grant and generally expire five to ten years from
the date of grant. Generally, options and other stock rights are granted
at exercise prices not less than fair market value at the date of the
grant.
The Company's 1987 Stock Option Plan provided for the issuance of
nonqualified or incentive stock options to employees, officers,
consultants, and directors. As of February 25, 1997, the Company may no
longer issue stock options under the 1987 Stock Option Plan pursuant to
terms of the plan.
On June 1, 1996, the Company established the 1996 Non-Employee Director
Stock Option Plan (the "1996 Director Plan") which was amended December
10, 1996. The 1996 Director Plan, as amended, provides for an initial
grant of 12,000 options to each nonemployee director elected as a member
of the Board of Directors and for the subsequent automatic annual grant of
4,000 options (at the then-current fair market value) to each member as
long as that member remains on the Board of Directors. Options granted
pursuant to this plan vest at 8.33% during each three-month period
subsequent to date of grant so as to be fully vested three years from date
of grant. Options may be granted under this plan through June 1, 2006.
On October 4, 1996, the Company established the 1996 International
Employee Non-Qualified Stock Option Plan (the "1996 International Plan").
Pursuant to this plan, nonqualified options may be granted to any employee
or consultant of any of the Company's foreign subsidiaries through October
4, 2006.
-14-
<PAGE>
10. SHAREHOLDERS' EQUITY (CONTINUED)
On December 10, 1996, the Company established the Datawatch Corporation
1996 Stock Plan (the "1996 Stock Plan") which provides for the granting of
both incentive stock options and nonqualified options, the award of
Company common stock, and opportunities to make direct purchases of
Company common stock (collectively, "Stock Rights"), as determined by a
committee appointed by the Board of Directors. Options pursuant to this
plan may be granted through December 10, 2006 and shall vest as specified
by the Committee.
Selected information regarding the above stock option plans as of and for
the year ended September 30, 1999 is as follows:
AUTHORIZED AVAILABLE FOR
FOR GRANT FUTURE GRANT
------------ ------------
1987 Stock Option Plan 790,791 --
1996 Director Plan 72,000 4,000
1996 International Plan 200,000 17,000
1996 Stock Plan 1,000,000 80,515
------------ ------------
2,062,791 101,515
============ ============
The following table is a summary of activity for all of the Company's
stock option plans:
WEIGHTED-
AVERAGE
OPTIONS EXERCISE
OUTSTANDING PRICE
------------ ------------
Outstanding, October 1, 1996 275,541 $ 3.56
Granted 719,820 1.98
Canceled (198,527) 4.53
Exercised (25,125) 1.09
------------
Outstanding, September 30, 1997 771,709 1.92
Granted 388,200 2.30
Canceled (181,499) 2.19
Exercised (64,251) 1.35
------------
Outstanding, September 30, 1998 914,159 2.06
Granted 518,300 1.21
Canceled (176,517) 1.82
Exercised (40,801) 1.00
------------
Outstanding, September 30, 1999 1,215,141 1.78
============ ============
Exercisable, September 30, 1999 446,210 2.21
============ ============
Exercisable, September 30, 1998 272,360 $ 2.05
============ ============
-15-
<PAGE>
10. SHAREHOLDERS' EQUITY (CONTINUED)
The following table sets forth information regarding options outstanding
at September 30, 1999:
<TABLE><CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------- -----------------------
WEIGHTED-AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
EXERCISE NUMBER OF CONTRACTUAL EXERCISE EXERCISE
PRICES SHARES LIFE (YEARS) PRICE SHARES PRICE
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 0.75 3,000 10 $0.75 -- $ --
1.13-1.59 527,900 10 1.24 27,029 1.52
1.69-2.47 478,501 7 1.83 292,917 1.80
2.56 173,740 8 2.56 95,584 2.56
4.31-4.87 20,000 4 4.65 18,680 4.67
7.06 12,000 7 7.06 12,000 7.06
-------- -------- -------- -------- --------
1,215,141 8 $1.78 446,210 $2.21
======== ======== ======== ======== ========
</TABLE>
PRO FORMA DISCLOSURE - As described in Note 1, the Company uses the
intrinsic method of valuing its stock options in accordance with APB No.
25 to measure compensation expense associated with grants of stock options
to employees and directors. Had the Company recognized compensation for
its stock options and purchase plans based on the fair value for awards
under those plans after October 1, 1995, in accordance with SFAS No. 123,
"Accounting for Stock Based Compensation," pro forma net income (loss) and
pro forma net income (loss) per share would have been as follows:
<TABLE><CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Pro forma net income (loss) .... $ (4,248,287) $ 4,410,742 $ (2,263,219)
Pro forma net income (loss)
per share:
Basic ...................... $ (0.46) $ 0.48 $ (0.25)
Diluted .................... (0.46) 0.47 (0.25)
</TABLE>
-16-
<PAGE>
10. SHAREHOLDERS' EQUITY (CONTINUED)
The fair values used to compute pro forma net income (loss) and net income
(loss) per share were estimated on the grant date using the Black-Scholes
option-pricing model with the following weighted-average assumptions:
<TABLE><CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Risk-free interest rate 5.5% 5.8% 6.7%
Expected life of option grants (years) 5.0 5.0 5.0
Expected volatility of underlying stock 75.8% 92.8% 87.2%
Expected dividend payment rate 0.0% 0.0% 0.0%
Expected forfeiture rate 0.0% 0.0% 0.0%
</TABLE>
The weighted-average fair values of stock options granted were $0.79,
$1.71 and $1.26 during the years ended September 30, 1999, 1998 and 1997,
respectively.
The option pricing model was designed to value readily tradeable stock
options with relatively short lives. The options granted to employees are
not tradeable and have contractual lives of five to ten years. However,
management believes that the assumptions used and the model applied to
value the awards yield reasonable estimates of the fair values of the
grants made under the circumstances.
11. RETIREMENT SAVINGS PLAN
The Company has a 401(k) retirement savings plan covering substantially
all of the Company's full-time domestic employees. Under the provisions of
the plan, employees may contribute a portion of their compensation within
certain limitations. The Company, at the discretion of the Board of
Directors, may make contributions on behalf of its employees under this
plan. Such contributions, if any, become fully vested after five years of
continuous service. The Company has not made any contributions during
1999, 1998 or 1997.
12. SEGMENT INFORMATION
The following is presented in accordance with SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information." This statement
establishes new standards for defining and disclosing information about a
company's business segments and requires a company to define its segments
along its internal structure and reporting methodology. The Company has
determined that it has only one reportable segment meeting the criteria
established under SFAS No. 131. The Company's chief operating
decision maker, as defined, (determined to be the Chief Executive Officer)
does not manage any part of the Company separately, and the allocation of
resources and assessment of performance is based solely on the Company's
consolidated operations and operating results.
-17-
<PAGE>
12. SEGMENT INFORMATION (CONTINUED)
The Company's operations are conducted in the U.S. and in Europe
(principally in the United Kingdom). The following table presents
information about the Company's geographic operations:
<TABLE><CAPTION>
EUROPE
(PRINCIPALLY
DOMESTIC U.K.) ELIMINATIONS TOTAL
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1999
Net sales $ 12,923,636 $ 15,358,563 $ (1,110,798) $ 27,171,401
Long-lived assets 1,884,875 1,094,952 -- 2,979,827
YEAR ENDED SEPTEMBER 30, 1998
Net sales 11,635,959 14,058,471 (398,708) 25,295,722
Long-lived assets 1,731,766 1,445,478 -- 3,177,244
YEAR ENDED SEPTEMBER 30, 1997
Net sales 20,502,363 12,398,815 (853,683) 32,047,495
Long-lived assets 2,293,445 1,578,672 -- 3,872,117
</TABLE>
Export sales aggregated approximately $5,862,000, $3,132,000 and
$3,484,000 in 1999, 1998 and 1997, respectively.
* * * * * *
<PAGE>
Schedule VIII
DATAWATCH CORPORATION & SUBSIDIARIES
VALUATION AND QUALIFIED ACCOUNTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------------------------------------------------------------------
Description Balance at Additions Charged to Deductions from Balance at
Beginning of Period Expenses (a) Other Reserves End of Period
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended September 30, 1999
- -----------------------------
Allowance-doubtful
accounts and
sales returns $352,517 $707,276 $114,589 (e) ($707,343)(b)(c) $476,039
---------------------------------------------------------------------------------
TOTAL $352,517 $707,276 $114,589 ($707,343) $476,039
=================================================================================
Year Ended September 30, 1998
- -----------------------------
Allowance-doubtful
accounts and
sales returns $227,913 $322,128 $74,540 (e) ($272,064)(b)(c) $352,517
---------------------------------------------------------------------------------
TOTAL $227,913 $322,128 $74,540 ($272,064) $352,517
=================================================================================
Year Ended September 30, 1997
- -----------------------------
Allowance-doubtful
accounts and
sales returns $73,145 $177,334 $54,138 (d)(e) ($76,704)(b) $227,913
---------------------------------------------------------------------------------
TOTAL $73,145 $177,334 $54,138 ($76,704) $227,913
=================================================================================
</TABLE>
(a) Current year provision
(b) Doubtful accounts written off
(c) Product returns
(d) Allowance acquired through purchase of Datawatch Europe Ltd.
(e) Bad debt recoveries
<PAGE>
EXHIBIT INDEX
(5) 2.1 Asset Purchase Agreement, dated October 9, 1997, among Datawatch
Corporation, Pole Position Software GmbH and Dr Solomon's
Software, Inc. (Exhibit 2.1)
(5) 2.2 Escrow Agreement, dated October 9, 1997, among Datawatch
Corporation, Dr Solomon's Software, Inc. and State Street Bank and
Trust Company. (Exhibit 2.2)
(1) 3.1 Restated Certificate of Incorporation of the Registrant (Exhibit
3.2)
(1) 3.2 By-Laws, as amended, of the Registrant (Exhibit 3.3)
(1) 4.1 Specimen certificate representing the Common Stock (Exhibit 4.4)
10.1 Sub-Lease, dated April 30, 1999, by and between Datawatch
Corporation and Eastman Kodak Company (filed herewith)
(1) 10.2* 1987 Stock Plan (Exhibit 10.7)
(1) 10.3* Form of Incentive Stock Option Agreement of the Registrant
(Exhibit 10.8)
(1) 10.4* Form of Nonqualified Stock Option Agreement of the Registrant
(Exhibit 10.9)
(1) 10.6 Software Development and Marketing Agreement by and between
Personics Corporation and Raymond Huger, dated January 19, 1989
(Exhibit 10.12)
(2) 10.6 Marketing Agreement, dated May 1, 1994, between WorkGroup Systems
Ltd. and Datawatch Corporation (Exhibit 10.1)
(3) 10.7 Commercial Security Agreement between Datawatch Corporation and
Silicon Valley Bank doing business as Silicon Valley East, dated
November 1, 1994 (Exhibit 10.23)
(3) 10.8 Commercial Security Agreement between Personics Corporation and
Silicon Valley Bank doing business as Silicon Valley East, dated
November 1, 1994 (Exhibit 10.24)
(4) 10.9* Executive Agreement between the Company and Marco D. Peterson,
dated April 11, 1996 (Exhibit 10.2)
10.10* Amendment No. 1 to Executive Agreement dated April 11, 1996
between the Registrant and Marco D. Peterson, dated July 15, 1999,
(filed herewith)
(4) 10.11* Executive Agreement between the Company and Bruce R. Gardner,
dated April 11, 1996 (Exhibit 10.3)
(6) 10.12 Loan Modification Agreement dated, October 31, 1996, between
Datawatch Corporation, Personics Corporation and Silicon Valley
Bank (Exhibit 10.29)
(6) 10.13* 1996 Non-Employee Director Stock Option Plan, as amended on
December 10, 1996 (Exhibit 10.30)
(6) 10.14* 1996 International Employee Non-Qualified Stock Option Plan
(Exhibit 10.31)
(7) 10.15 Amended and Restated Letter Agreement, dated February 12, 1997, by
and between Datawatch Corporation, Personics Corporation and
Silicon Valley Bank (Exhibit 10.1)
(7) 10.16 Promissory Note, dated February 12, 1997, by and between Datawatch
Corporation, Personics Corporation and Silicon Valley Bank
(Exhibit 10.2).
(8) 10.17 Loan Modification Agreement, dated October 30, 1997, by and
between Datawatch Corporation, Personics Corporation and Silicon
Valley Bank (Exhibit 10.23)
(9) 10.18* 1996 Stock Plan (Appendix A)
(10) 10.19 Loan Modification Agreement, dated January 30, 1998, by and
between Datawatch Corporation, Personics Corporation and Silicon
Valley Bank (Exhibit 10.1)
(11) 10.20 Loan Modification Agreement, dated December 18, 1998, by and
between Datawatch Corporation, Personics Corporation and Silicon
Valley Bank (Exhibit 10.19)
(12) 10.21 Loan Modification Agreement, dated March 16, 1999, by and between
Datawatch Corporation, Personics Corporation and Silicon Valley
Bank (Exhibit 10.1)
<PAGE>
10.22 Loan Modification Agreement, dated December 27, 1999, by and
between Datawatch Corporation and Silicon Valley Bank (filed
herewith)
10.23 Intellectual Property Security Agreement, dated December 27, 1999
by and between Datawatch Corporation and Silicon Valley Bank
(filed herewith)
10.24 Export-Import Bank Loan and Security Agreement, dated December 27,
1999, by and among Datawatch Corporation, Datawatch International
Limited, Datawatch Europe Ltd, Guildsoft Limited and Silicon
Valley Bank in favor of Export-Import Bank of the United States
(filed herewith)
10.25* Contract of Employment, dated February 24, 1997, by and between
WorkGroup Systems Limited and Robert Hagger (filed herewith)
10.26* Amendment, dated July 15, 1999, to Contract of Employment by and
between WorkGroup Systems Limited and Robert Hagger (filed
herewith)
10.27 Mortgage Debenture, dated December 27, 1999, by and between
Datawatch Europe Ltd. and Silicon Valley Bank (filed herewith)
10.28 Deed of Guarantee, dated December 27, 1999, by and between
Datawatch Europe Ltd. and Silicon Valley Bank (filed herewith)
10.29 Mortgage Debenture, dated December 27, 1999, by and between
Datawatch International Limited and Silicon Valley Bank (filed
herewith)
10.30 Deed of Guarantee, dated December 27, 1999, by and between
Datawatch International Limited and Silicon Valley Bank (filed
herewith)
10.31 Mortgage Debenture, dated December 27, 1999, by and between
Guildsoft Limited and Silicon Valley Bank (filed herewith)
10.32 Deed of Guarantee, dated December 27, 1999, by and between
Datawatch Guildsoft Limited and Silicon Valley Bank (filed
herewith)
10.33 Export-Import Bank of the United States Working Capital Guarantee
Program Borrower Agreement, dated December 27, 1999, by and among
Datawatch Corporation, Datawatch International Limited, Datawatch
Europe Ltd, Guildsoft Limited and Silicon Valley Bank in favor of
Export-Import Bank of the United States (filed herewith)
21.1 Subsidiaries of the Registrant (filed herewith)
23.1 Consent of Independent Auditors (filed herewith)
27 Financial Data Schedule (filed herewith)
- --------------------------------------------------------------------------------
* Indicates a management contract or compensatory plan or contract.
(1) Previously filed as an exhibit to Registration Statement 33-46290 on Form
S-1 and incorporated herein by reference (the number given in parenthesis
indicates the corresponding exhibit in such Form S-1).
(2) Previously filed as an exhibit to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1994 and incorporated herein by
reference (the number given in parenthesis indicates the corresponding
exhibit in such Form 10-Q).
(3) Previously filed as an exhibit to Registrant's Annual Report on Form 10-K
for the fiscal year ended September 30, 1994 and incorporated herein by
reference (the number given in parenthesis indicates the corresponding
exhibit in such Form 10-K).
(4) Previously filed as an exhibit to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1996 and incorporated herein by
reference (the number given in parenthesis indicates the corresponding
exhibit in such Form 10-Q).
(5) Previously filed as an exhibit to Registrant's Current Report on Form 8-K
dated October 9, 1997 and incorporated herein by reference (the number
given in parenthesis indicates the corresponding exhibit in such Form
8-K).
(6) Previously filed as an exhibit to Registrant's Annual Report on Form 10-K
for the fiscal year ended September 30, 1996 and incorporated herein by
reference (the number given in parenthesis indicates the corresponding
exhibit in such Form 10-K).
(7) Previously filed as an exhibit to Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1997 and incorporated herein by
reference (the number in parenthesis indicates the corresponding exhibit
in such Form 10-Q).
(8) Previously filed as an exhibit to Registrant's Annual Report on Form 10-K
for the fiscal year ended September 30, 1997 and incorporated herein by
reference (the number given in parenthesis indicates the corresponding
exhibit in such Form 10-K).
(9) Previously filed as Appendix A to the Company's definitive Proxy Statement
for the Annual Meeting of Shareholders held on March 19, 1997 and
incorporated herein by reference (the number given in parenthesis
indicates the corresponding Appendix in such definitive Proxy Statement).
(10) Previously filed as an exhibit to Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1998 and incorporated herein by
reference (the number in parenthesis indicates the corresponding exhibit
in such Form 10-Q).
(11) Previously filed as an exhibit to Registrant's Annual Report on Form 10-K
for the fiscal year ended September 30, 1998 and incorporated herein by
reference (the number given in parenthesis indicates the corresponding
exhibit in such Form 10-K).
(12) Previously filed as an exhibit to Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999 and incorporated herein by
reference (the number in parenthesis indicates the corresponding exhibit
in such Form 10-Q).
EXHIBIT 10.1
SUBLEASE
THIS SUBLEASE is made as of the 30th day of April, 1999, between
EASTMAN KODAK COMPANY, a New Jersey corporation, having an office at 343 State
Street, Rochester, New York 14650, hereinafter called "Sublandlord" and
DATAWATCH CORPORATION, a Delaware corporation, having an office and place of
business at 234 Ballardvale Street, Wilmington, Massachusetts 01887 hereinafter
called "Subtenant".
WITNESSETH:
WHEREAS, by a certain Lease dated as of September 30, 1995 (the
"Lease") as amended by a certain First Amendment to Lease dated as of January
31, 1996 (the "First Amendment"; together, hereinafter collectively called the
"Prime Lease"), Sublandlord leases from CROSS POINT LIMITED PARTNERSHIP (the
"Prime Landlord"), approximately 89,465 rentable square feet of space at Tower 3
of the building located at 900 Chelmsford Street, in Lowell, Massachusetts
(herein called the "Building"), a copy of which Prime Lease is attached hereto
as EXHIBIT "A"; and
WHEREAS, Subtenant desires to sublease certain premises from
Sublandlord;
NOW, THEREFORE, for a good and valuable consideration and in
consideration of the mutual agreements hereinafter set forth, the receipt and
sufficiency of which are hereby acknowledged, Sublandlord and Subtenant
stipulate, covenant and agree as follows:
1. PREMISES.
(a) Leased Premises. Sublandlord does hereby sublease to Subtenant a
portion of the Building consisting of approximately 21,029 square feet of
rentable area on the fifth (5th) floor of the Building (the "Premises") as
outlined on EXHIBIT "B" which is attached hereto and made a part hereof. In
addition to the sublease of the Premises, Subtenant shall have the right to use
any common areas and amenities of the Building including any common restrooms,
accessways and utility and mechanical closets, to the same extent and in the
same manner as is allowed by the terms of the Prime Lease.
(b) Furniture. In addition to the Premises, Subtenant shall have the
right to use all of the furniture described on EXHIBIT "C" attached hereto and
made a part hereof (hereinafter collectively called the "Furniture").
2. TERM. The term of this Sublease shall commence on June 1, 1999 or
such earlier or later date as Sublandlord shall deliver possession of the
Premises to Subtenant free of tenants and occupants and in the condition
otherwise required by Paragraph 6 herein (the "Commencement Date") and expire at
5:00 p.m. on January 31, 2001, unless sooner terminated.
3. USES. Subtenant shall use and occupy the Premises for general
business office purposes and for the training of Subtenant's customers and
employees but for no other use, but subject, however, to the same limits imposed
on Sublandlord under the Prime Lease.
<PAGE>
4. RENT. Beginning on the Commencement Date of this Sublease, Subtenant
shall pay Sublandlord annual base rent (the "Annual Base Rent") of THREE HUNDRED
FIFTEEN THOUSAND FOUR HUNDRED THIRTY FIVE DOLLARS ($315,435.00) payable in equal
monthly installments of TWENTY SIX THOUSAND TWO HUNDRED EIGHTY SIX DOLLARS AND
25 CENTS ($26,286.25) each (the "Monthly Base Rent") in advance on the first day
of each calendar month and continuing for the remainder of the term of this
Sublease. Payments of Monthly Base Rent and any additional rent due pursuant to
Paragraph 5 of this Sublease for any portion of a month shall be prorated on a
thirty (30) day basis. Rent payments will be delivered to Sublandlord's office
located at 343 State Street, Rochester, New York 14650, Attention: Corporate
Real Estate Office, or such other place as Sublandlord may designate.
5. ADDITIONAL RENT.
(a) Electricity. In addition to the Base Rent, Subtenant shall pay
Sublandlord, as additional rent, electricity charges in the annual amount OF
TWENTY ONE THOUSAND TWENTY-NINE AND 00/100 DOLLARS ($21,029.00), payable in
equal monthly installments of ONE THOUSAND SEVEN HUNDRED FIFTY-TWO AND 42/100
DOLLARS ($1,752.42) each, beginning on the Commencement Date and continuing on
the first day of each and every calendar month thereafter.
(b) Defined. Subtenant shall also pay Sublandlord, as additional rent,
Adjustment Rent in accordance with the terms of Paragraph 2 of the Lease except
that, for purposes of this Sublease, (1) the Base Expense Year shall be calendar
year 1998 (i.e., January 1, 1998 through December 31, 1998); (ii) the Base Tax
Year shall be fiscal tax year 1999 (i.e., July 1, 1998 through June 30, 1999);
and (iii) Tenant's Proportionate Share (for Subtenant herein) shall have the
definition set forth in Paragraph 5(d) below.
(c) Intentionally Deleted.
(d) Proportionate Share. For purposes of this Sublease and Subtenant,
"Tenant's Proportionate Share" shall be one and eight-tenths (1.8%) percent. It
is understood that for purposes of this Sublease, Subtenant shall pay twenty
five percent (25%) of the Expenses and the Taxes charged to Sublandlord as
additional rent pursuant to the terms of the Prime Lease.
(e) Other Charges. If Subtenant shall procure any additional services
from the Building, such as alterations or after-hours air conditioning,
Subtenant shall pay for same at the rates charged therefor to Sublandlord by the
Prime Landlord and shall make such payment to the Sublandlord within fifteen
(15) days after demand for same. Any rent or other sums payable by Subtenant
under this Article 5 shall be additional rent under this Sublease and
collectable as such.
6. PREPARATION FOR OCCUPANCY. As of the Commencement Date, Sublandlord
shall deliver to Subtenant and Subtenant shall accept from Sublandlord the
Premises in its then "as is" condition (except as otherwise provided in
Paragraph 6 herein), broom clean, and all of Sublandlord's furniture, fixtures,
equipment and other personal property shall be removed therefrom at
Sublandlord's expense (except the Furniture). On or before the Commencement
date, Sublandlord shall be responsible for demising the Premises so as to
separate the same from the premises leased pursuant to the Prime lease. Except
for such construction, Sublandlord shall not be required to
<PAGE>
perform tenant improvements of any kind or nature, and all such improvements and
the performance thereof shall be subject to the provisions of this Sublease and
the Prime Lease. The Premises will be delivered to Subtenant with all mechanical
systems (including heating, ventilating, air-conditioning, life safety,
electrical and lighting systems) in working order as of the Commencement Date.
7. INCORPORATION OF PRIME LEASE.
(a) Subordination to Prime Lease. This Sublease is subject and
subordinate to the Prime Lease. Except as otherwise specifically provided herein
or as may be inconsistent with the terms hereof, all of the terms, covenants and
conditions with which Sublandlord is bound to comply under the Prime Lease
shall, to the extent only that they apply to the Premises, be binding upon
Subtenant and Sublandlord shall be bound by those certain obligations of Prime
Landlord set forth in the Prime Lease to the extent that those obligations apply
to the Premises (unless otherwise provided herein to the contrary in Paragraph
11 of this Sublease). In the case of any breach of this Sublease by Subtenant,
Sublandlord shall have all the rights against Subtenant as would be available to
the Prime Landlord against Sublandlord under the Prime Lease if such breach of
the Prime Lease were by the Sublandlord. It is the intention of the parties
that, except as otherwise provided in this Sublease, the respective rights and
obligations of Sublandlord and Subtenant under this Sublease shall be governed
by the language of the various articles of the Prime Lease as if they were typed
out in this Sublease in full, and for that purpose the words "Landlord",
"Tenant" and "Lease" as used in the Prime Lease, shall read, respectively,
"Sublandlord", "Subtenant" and "Sublease".
(b) Deletions; Modifications. For the purposes of this Sublease, the
following provisions of the Prime Lease are hereby deleted or modified as
follows:
(i) DELETIONS: Delete in their entirety, the following sections of
the Lease:
A. From the of the Prime Lease, delete Paragraph 15 entitled
"Preliminary Term";
B. Delete the second, third and fourth sentences of the last
paragraph of Paragraph 5(A) of the Lease;
C. Delete Paragraph 10(C) entitled "Self-Insurance";
D. Delete Paragraph 22 entitled "Notices";
E. Delete the third sentence of Paragraph 23(M) entitled
"Definition of Landlord's Liability";
F. Delete the third sentence of Paragraph 23(M) entitled
"Definition of Landlord's Liability";
G. Delete the second full paragraph of Paragraph 24 entitled
"Parking;
H. Delete the second paragraph of Paragraph 26 entitled
"Option to Extend";
<PAGE>
I. Delete Paragraph 28 entitled "Preliminary Term";
J. Delete Paragraph 29 entitled "Access to Tower 3 Roof";
K. Delete Paragraph 30 entitled "Expansion Option;
L. Delete Exhibit E entitled "Original Premises Tenant
Improvement Work Agreement; and
M. Delete Exhibit F entitled "Expansion Space Tenant
Improvement Work Agreement".
N. Delete in its entirety, all provisions of the First
Amendment. to the Prime Lease except Paragraph 5 of such
First Amendment.
(ii) MODIFICATIONS: Modify the following sections of the Prime
Lease:
A. From the Schedule of the Prime Lease, modify the following
defined terms: (1) Paragraph 6 entitled "Premises" in
accordance with the provisions of Paragraph 1 herein; (2)
Paragraph 7 entitled "Commencement Date" in accordance with
Paragraph 2 herein; (3) Paragraph 9 entitled "Annual Base
Rent" in accordance with Paragraph 4 herein; (4) Paragraph 10
entitled "Monthly Base Rent" in accordance with Paragraph 4
herein; (5) Paragraph 11 entitled "Tenant's Proportionate
Share" in accordance with Paragraph 5(d) herein; (6) Paragraph
12 entitled "Base Expense Year" in accordance with the terms
of Paragraph 5(b) herein; (7) Paragraph 13 entitled "Base Tax
Year" in accordance with the terms of Paragraph 5(c) herein;
(8) Paragraph 14 entitled "Brokers" in accordance with the
terms of Paragraph 17 herein.; (9) The Lease Schedule
Paragraphs 16 and 17 entitled, respectively, "Address of
Landlord" and "Address of Tenant" in accordance with such
addresses as are set forth for Sublandlord and Subtenant in
Paragraph 9 of this Sublease.
B. Paragraph 3 of the Lease entitled "Use" in accordance with
the terms of Paragraph 3 herein.
C. Paragraph 9(A) of the Lease entitled "Requirements" in the
Section entitled "Alterations" to require Subtenant to obtain
the consent of Sublandlord to any and all alterations desired
by Subtenant as well as the consent of Prime Landlord to any
and all alterations that require the consent of Prime Landlord
pursuant to Paragraph 9(A) of the Lease desired by Subtenant,
which consent of Sublandlord shall not be unreasonably
withheld, conditioned or delayed.
<PAGE>
D. Paragraph 10A of the Lease entitled "Tenant's Insurance" to
require Subtenant to name both Prime Landlord and Sublandlord
as additional insureds on all insurance policies required of
Subtenant therein. Paragraph 21 of the Lease entitled
"Brokers" in accordance with the terms of Paragraph 17 herein.
E. Paragraph 24 of the Lease entitled "Parking" in accordance
with the terms of Paragraph 15 herein.
F. Paragraph 26 of the Prime Lease entitled "Option To Extend"
to grant an option to extend the term of this Sublease for the
Premises to Subtenant, if and only if Sublandlord exercises
its option to extend the Prime Lease as provided in Paragraph
26 of the Prime Lease. If Sublandlord so exercises its option
to extend the term of this Sublease, it shall give Subtenant
prior notice of its exercise of such option within thirty (30)
days after the determination of the Additional Term Annual
Base Rent according to Paragraph 26 of the Lease, but no later
than September 1, 2000, and Subtenant may exercise its option
to extend the term of this Sublease within thirty (30) days
after Subtenant's receipt of such notice from Sublandlord (the
reference to April 1, 2000 in said Paragraph 26
notwithstanding). If Subtenant exercises its option to extend
the term of this Sublease in a timely manner, the term of this
Sublease shall be extended and all of the terms, covenants and
conditions of this Sublease shall continue except: (1) there
shall be no further option to extend the term of this
Sublease; and (2) the Annual Base Rent shall be changed to the
Additional Term Annual Base Rent as determined in accordance
with the terms of the Prime Lease. If Subtenant fails to
notify Sublandlord of its intention to exercise its option to
extend within such thirty day period or determines not to
exercise its option to extend, the option to extend shall
thereafter be null, void and of no further force and effect.
G. Paragraph 27 of the Prime Lease entitled "Directory; Signs"
to provide Subtenant with Subtenant's name and suite number on
the Building standard directory and to install Building
standard tenant identification signage within the elevator
lobby to the extent such are acceptable and allowable by Prime
Landlord but in no event to exceed a maximum of twenty-five
percent (25%) of Sublandlord's signage available pursuant to
the Prime Lease.
H. Exhibit A attached to the Prime Lease showing Floor Plans
of the Premises by replacing said Exhibit A with EXHIBIT "B"
attached hereto.
8. QUIET ENJOYMENT; NO FORFEITURE.
<PAGE>
(a) Quiet Enjoyment. Sublandlord covenants and agrees with Subtenant
that so long as no Default (as defined in the Lease) exists which has not been
cured within any applicable grace or cure periods, and upon Subtenant paying the
rent and additional rent reserved in this Sublease and observing and performing
all of the other obligations, terms, covenants and conditions of this Sublease
on Subtenant's part to be observed and performed within any applicable grace or
cure periods, Subtenant may peaceably and quietly enjoy the Premises during the
term of this Sublease; provided, however, that this Sublease shall automatically
terminate upon termination of the Prime Lease and Subtenant shall have no claim
against Sublandlord unless such termination was caused by the default of
Sublandlord in the performance of its obligations under the Prime Lease which
default does not arise from the failure of Subtenant (which failure is not cured
within any applicable grace or cure periods) to pay or perform its obligations
under this Sublease. Sublandlord shall not during the term of this Sublease
exercise any right or remedy under the Prime Lease to cause the termination of
the Prime Lease with respect to the Premises, nor shall Sublandlord voluntarily
agree to any such termination of the Prime Lease. In the event of any default by
Sublandlord under the Prime Lease, Sublandlord shall use its best efforts to
cure such default in such a manner as to avoid the termination of the Prime
Lease.
(b) No Forfeiture. Subtenant covenants and agrees that Subtenant shall
not do or suffer or permit its employees, agents, contractors, invitees or
anyone over whom Subtenant has control to do anything which would constitute a
default under the Prime Lease or would cause the Prime Lease to be cancelled,
terminated or forfeited by virtue of any rights of cancellation, termination, or
forfeiture reserved or vested in Prime Landlord under the Prime Lease, and that,
following notice from Sublandlord to Subtenant of the nature of such default and
the expiration of any cure or grace periods without such failure or default
being cured by Subtenant, Subtenant will indemnify and hold harmless Sublandlord
from and defend Sublandlord against all claims, liabilities, losses and damages
of any kind whatsoever (excepting special and consequential damages) that
Sublandlord may incur by reason of, resulting from or arising out of any such
cancellation, termination or forfeiture.
9. NOTICES. Any notice, demand or request under this Sublease shall be
in writing and shall be considered properly delivered when addressed as
hereinafter provided and delivered by registered or certified mail (return
receipt requested) or delivered by a nationally recognized overnight courier
service. Any notice, demand or request by Subtenant to Sublandlord shall be
addressed to Sublandlord at the following address (which shall be the "Address
of Landlord" for the purposes of this Sublease):
Eastman Kodak Company
Corporate Real Estate
343 State Street
Rochester, New York 14650-1265
Attention: Lease Management Office
Any notice demand or request by Sublandlord to Subtenant shall be
addressed to Subtenant at the following address (which shall be the "Address of
Tenant" for the purposes of this Sublease) until otherwise directed in writing
by Subtenant:
Before the Commencement Date:
Datawatch Corporation
<PAGE>
234 Ballardvale Street
Wilmington, MA 01887
Attention: Ms. Betsy J. Hartwell
After the Commencement Date:
Datawatch Corporation
900 Chelmsford Street
Lowell, Massachusetts 01851
Attention: Ms. Betsy J. Hartwell
In either case with a copy of:
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02110
Attention: Real Estate Department
Sublandlord agrees that it shall provide to Prime Landlord, copies of
any notices given to Subtenant hereunder with respect to any default by
Subtenant or of any event which, with the passage of time, could constitute a
default by Subtenant pursuant to either the Prime Lease or this Sublease. Copies
of any notices which are required to be sent to the Prime Landlord shall be sent
to:
Cross Point Limited Partnership
900 Chelmsford Road
Lowell, Massachusetts 01851
Attention: James Lesko, Management Office
10. ASSIGNMENT AND SUBLETTING. Subtenant agrees that it shall not
assign, mortgage, transfer, pledge or encumber its interest in this Sublease, in
whole or in part, or sublet or permit the subletting of the Premises, or permit
the Premises or any part thereof to be occupied or used by any person or entity
other than Subtenant, in each case without first obtaining the prior written
consent of Sublandlord, which consent Sublandlord will not unreasonably withhold
or delay. No such assignment or sublease shall operate to release Subtenant from
its obligations under this Sublease. Failure of Sublandlord to obtain the
consent of Prime Landlord or submission by Subtenant of a proposed assignee or
subtenant who, in the opinion of Sublandlord reasonably exercised, is a
competitor of Sublandlord shall in each case be a reasonable and conclusive
basis for withholding consent.
11. PRIME LANDLORD'S RESPONSIBILITIES. Subtenant recognizes that
Sublandlord is not in position to furnish the services set forth in the Prime
Lease, obtain an agreement of non-disturbance or to perform certain other
obligations which are not within the control of Sublandlord, such as, without
limitation, maintenance, repairs and replacements to the Building and the
Premises, compliance with laws, and restoration of the Premises and the Building
(other than alterations made by or on behalf of the Sublandlord, including any
alterations in accordance with Exhibits E and F attached to the Lease) after
casualty or condemnation. Therefore, notwithstanding anything to the contrary
contained in this Sublease, Subtenant agrees that Subtenant shall look solely to
Sublandlord to cause Prime Landlord to furnish all services and to perform all
obligations agreed upon by Prime Landlord under the Lease to furnish and
perform. Sublandlord shall not be liable to Subtenant or be deemed in default
hereunder for failure of Prime Landlord to furnish or perform the same provided
that Sublandlord use its reasonable efforts to cause Prime Landlord to furnish
or perform that which is required
<PAGE>
by the Prime Lease including, the reasonably timely prosecution by Sublandlord
of any enforcement actions reasonably necessary to compel the performance
required by and from Prime Landlord..
12. INTENTIONALLY DELETED.
13. SECURITY DEPOSIT. Subtenant has paid Sublandlord on the execution
and delivery of this Sublease the sum of TWENTY SEVEN THOUSAND FIVE HUNDRED AND
00/100 DOLLARS ($27,500.00) as security (the "Security Deposit") for the full
and faithful performance of the terms, covenants and conditions of this lease on
Subtenant's part to be performed or observed. If Sublandlord fails to pay or
perform in a full and timely manner any of its obligations under this Sublease
and such failure shall continue after any required notice and the expiration of
any applicable cure period, Sublandlord may apply all or any portion of the
Security Deposit toward curing any such failure and compensating Sublandlord for
any loss, damage or expenses arising from such failure. The Security Deposit, or
any unapplied balance thereof after deductions for any failures of Subtenant in
accordance with the provisions of this paragraph, shall be returned to Subtenant
after the time fixed as the expiration of the demised term and after the removal
of Subtenant and surrender of possession of the demised Premises to Sublandlord.
14. SUBLANDLORD'S RIGHT TO REMEDY SUBTENANT DEFAULTS. Sublandlord shall
have the right, but shall not be obligated, to correct or remedy any default on
the part of Subtenant under any provision of the Sublease or the Prime Lease (to
the extent applicable to the Subtenant under the terms hereof) in respect of the
Premises which continues after notice to Subtenant and the expiration of any
applicable cure period. Subtenant agrees that in the event Sublandlord shall
correct or remedy any such default after the cure period therefor, Subtenant
shall pay to Sublandlord the reasonable cost thereof, including reasonable
expenses and attorney's fees, upon written demand therefor. Subtenant shall have
the right, but shall not be obligated, to correct or remedy any default after
the cure period therefor on the part of Sublandlord under this Sublease or under
the Prime Lease, and Sublandlord agrees that in such event, Sublandlord shall
pay to Subtenant the reasonable cost thereof including reasonable expenses and
attorney's fees upon written demand.
15. PARKING. Subtenant shall have the right to use, at no additional
cost to Subtenant, seventy-eight (78) parking spaces in the Parking Lot (as
defined in the Prime Lease) in accordance with the terms of the first paragraph
of Paragraph 24 of the Prime Lease.
16. SURRENDER OF THE PREMISES. Upon the expiration or earlier
termination or cancellation of this Lease (the "Termination Date"), Subtenant
shall surrender possession of the Premises to Sublandlord broom clean and in as
good condition as existed on the Commencement Date and all of the Furniture of
Sublandlord located therein, also in as good condition as existed on the
Commencement Date, reasonable wear and tear and damage from fire or other
casualty excepted. If Subtenant shall fail to comply with the requirements of
this Section 16 regarding the removal of its property and other items from the
Premises on the Termination Date, Subtenant shall be deemed to have failed to
vacate the Premises and as a result shall be subject to the provisions of
Paragraph 17 of the Prime Lease regarding "Holding Over."
<PAGE>
17. BROKERS. For purposes of this Sublease, the "Brokers" (as defined
in the Lease) shall mean CB Richard Ellis, Inc. and TC New England Brokerage,
Inc., doing business as Fallon Hines & O'Connor. Sublandlord and Subtenant
represent to each other that each has only dealt with the Brokers in connection
with this Sublease and that, insofar as each party herein knows, no other broker
negotiated this Sublease or is entitled to any commission herewith. Each party
agrees to indemnify, defend and hold the other harmless from and against any
claims for a fee or commission made by any broker, other than Brokers, claiming
to have acted by or on behalf of such party in connection with this Lease.
Sublandlord shall pay the Brokers a commission pursuant to the terms of a
separate agreement.
18. BINDING EFFECT; ENTIRE AGREEMENT. This Sublease shall bind and
inure to the benefit of Subtenant, Sublandlord and their respective legal
representatives, successors and assigns. This Sublease contains the entire
agreement of the parties with respect to the subject matter herein and may not
be modified except by instrument in writing which is signed by both parties.
19. SUBLANDLORD'S WARRANTIES AND REPRESENTATIONS. Sublandlord warrants
and represents to Subtenant that:
(a) True Copy of Prime Lease. The copy of the Lease attached hereto
as EXHIBIT "A" is a complete and accurate copy of the Lease
which has not been amended except by the First Amendment as
attached thereto.
(b) No Defaults. To the best of Sublandlord's knowledge, Prime
Landlord is not in default under the Prime Lease, not has any
event occurred which, after applicable notice and/or the
expiration of any grace period shall constitute a default by
Prime Landlord under the Prime Lease. To the best of
Sublandlord's knowledge, Sublandlord is not in default under
the Prime Lease, not has any event occurred which, after
applicable notice and/or the expiration of any grace period
shall constitute a default by Prime Sublandlord under the Prime
Lease.
(c) Payment of Rent. All payments of Annual Base Rent, Adjustment
Rent, additional rent and other charges due under the Prime
Lease have been paid as billed or required in the normal course
of business through April 30, 1999.
IN WITNESS WHEREOF, duly authorized representatives of the parties
hereto have executed this Sublease as of the day and year first above written.
EASTMAN KODAK COMPANY, SUBLANDLORD DATAWATCH CORPORATION,
SUBTENANT
BY: /s/ MEE F. WING BY: /s/ BETSY J. HARTWELL
----------------------- -----------------------
NAME: MEE F. WING NAME: BETSY J. HARTWELL
----------------------- ----------------------
TITLE: DIRECTOR, REAL ESTATE TITLE: VP FINANCE/CFO
----------------------- --------------------
EXHIBIT 10.10
AMENDMENT NO. 1 TO EXECUTIVE AGREEMENT
This AMENDMENT NO. 1 TO EXECUTIVE AGREEMENT (the "Amendment") dated as
of July 15, 1999 is made by and between Datawatch Corporation, a Delaware
corporation (the "Corporation") and Marco D. Peterson (the "Executive").
WITNESSETH:
A. The Corporation and the Executive entered into an Executive
Agreement dated as of April 11, 1996 (the "Executive Agreement").
B. The Corporation and the Executive desire to amend the Executive
Agreement as set forth herein.
NOW, THEREFORE, the Corporation and the Executive hereby agree as
follows:
1. Proviso (ii) of Section 1 of the Executive Agreement is hereby
amended to replace the phrase "eighteen (18) months" with the
phrase "twelve (12) months".
2. Proviso (B) of Section 6 of the Executive Agreement is hereby
amended to replace the phrase "eighteen (18) months" with the
phrase "twelve (12) months".
3. Except as amended hereby, the terms and conditions of the
Executive Agreement shall remain unchanged and in full force and
effect, and are hereby ratified and confirmed in all respects.
4. This Amendment may be executed in one or more counterparts, and
shall be construed by the laws of the United States of America and
the Commonwealth of Massachusetts.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Corporation has
caused this Amendment to be executed in its name and on its behalf, and its
corporate seal to be hereunto affixed and attested by its Secretary, or
Assistant Secretary, all as of the day and year first above written.
(SEAL)
ATTEST: DATAWATCH CORPORATION
By:/s/ William B. Simmons, Jr. By: /s/ Bruce R. Gardner
--------------------------- ---------------------------------
Name: William B. Simmons, Jr. Name: Bruce R. Gardner
Title: Assistant Secretary Title: President and Chief Executive
Officer
WITNESS: EXECUTIVE:
By:/s/ Betsy J. Hartwell By: /s/ Marco D. Peterson
--------------------------- ---------------------------------
Name: Betsy J. Hartwell Marco D. Peterson
EXHIBIT 10.22
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of December 27,
1999, by and between DATAWATCH CORPORATION, a Delaware corporation with its
principal place of business at 900 Chelmsford Street, Tower 3, 5th Floor,
Lowell, Massachusetts 01851-8100 ("Borrower") and SILICON VALLEY BANK, a
California-chartered bank ("Bank"), with its principal place of business at 3003
Tasman Drive, Santa Clara, CA 95054 and with a loan production office located at
Wellesley Office Park, 40 William Street, Suite 350, Wellesley, MA 02481, doing
business under the name "Silicon Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan
arrangement dated as of March 16, 1999, evidenced by, among other documents, a
certain Amended and Restated Loan and Security Agreement dated as of March 16,
1999 by and among the Borrower, Personics Corporation, and the Bank (as amended
to date, the "Loan Agreement"). The Loan Agreement established in favor of the
Borrower a revolving line of credit in the maximum principal amount of One
Million Five Hundred Thousand Dollars ($1,500,000.00) (the "Revolving Line").
Capitalized terms used but not otherwise defined herein shall have the same
meaning as in the Loan Agreement.
2. Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to
as the "Indebtedness".
3. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by the Collateral as described in the Loan Agreement (together with any
other collateral security granted to Bank, the "Security Documents").
4. Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Indebtedness shall be referred to as the "Existing
Loan Documents".
5. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Loan Agreement.
1. Bank hereby waives: Borrower's existing Defaults
under the Loan Agreement by virtue of Borrower's
failure to comply with the financial covenants in
Section 6.7 for the periods ending July 31, 1999,
August 31, 1999, and September 30, 1999. Bank's
waiver of Borrower's compliance of said covenants
shall apply only to the foregoing periods.
Bank's agreement to waive the above-described
compliance (i) shall not be deemed an agreement by
Bank to waive Borrower's compliance with the
above-described covenants as of any other dates, (ii)
shall not limit or impair Bank's right to demand
strict performance of these covenants as of any other
dates, and (iii) shall not limit or impair Bank's
right to demand strict performance of all other
covenants as of any date.
2. All references in the Loan Agreement to "Personics
Corporation" are deleted in each instance they appear
and all references to the Borrower in the Loan
Agreement shall now mean and refer to Datawatch
Corporation singly.
<PAGE>
3. The Loan Agreement shall be amended by inserting the
following text immediately after the last sentence of
Section 4.1:
"Notwithstanding the foregoing, it is expressly
acknowledged and agreed that the security interest
created in this Agreement with respect to EXIM
Eligible Foreign Accounts only is subject to and
subordinate to the security interest granted to the
Bank in the EXIM Agreement with respect to such EXIM
Eligible Foreign Accounts, but only to the extent any
advances are actually made to the Borrower based upon
such EXIM Eligible Foreign Accounts."
4. The Loan Agreement shall be amended by deleting the
following text appearing as Section 6.2:
"6.2 Financial Statements, Reports, Certificates. (a)
Borrower shall deliver to Bank: (i) at such times as
outstanding Advances exist, as soon as available, but
in any event within 35 days after the end of each
month, a company prepared consolidated balance sheet
and income statement covering Borrower's consolidated
operations during the period, in a form and certified
by a Responsible Officer acceptable to Bank; (ii) as
soon as available, but no later than 120 days after
the last day of Borrower's fiscal year, audited
consolidated financial statements of Borrower
prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such
financial statements from an independent certified
public accounting firm acceptable to Bank; (iii) at
such times as no outstanding Advances exist, within 5
days of filing, copies of all statements, reports and
notices made available to Borrower's security holders
or to any holders of Subordinated Debt and all
reports on Form 10-K, 10-Q and 8-K filed with the
Securities and Exchange Commission; (iv) a prompt
report of any legal actions pending or threatened
against Borrower or any Subsidiary that could result
in damages or costs to Borrower or any Subsidiary of
$100,000 or more; and (v) budgets, sales projections,
operating plans or other financial information Bank
requests; and (vi) prompt notice of any material
change in the composition of the Intellectual
Property, including any subsequent ownership right of
Borrower in or to any Copyright, Patent or Trademark
not shown in any intellectual property security
agreement between Borrower and Bank or knowledge of
an event that materially adversely affects the value
of the Intellectual Property.
(b) At such times as outstanding Advances exist and
prior to the initial Advance, within 25 days after
the last day of each month, Borrower will deliver to
Bank a Borrowing Base Certificate signed by a
Responsible Officer in the form of Exhibit C, with
aged listings of accounts payable.
(c) Borrower will deliver to Bank with the monthly
financial statements and with the quarterly 10-Q
report a Compliance Certificate signed by a
Responsible Officer in the form of Exhibit D.
(d) Bank has the right to audit Borrower's Collateral
at Borrower's expense at such times as outstanding
Advances exist, but the audits will be conducted no
more often than annually (or every 6 months if the
aggregate outstanding Advances exceed 25% of the
Committed Revolving Line) unless an Event of Default
has occurred and is continuing."
-2-
<PAGE>
and inserting in lieu thereof the following:
"6.2 Financial Statements, Reports, Certificates.
Borrower shall deliver to Bank: (a) as soon as
available, but in any event within thirty five (35)
days after the end of each month during which either
Advances have been requested or are outstanding, a
company prepared consolidated balance sheet and
income statement covering Borrower's consolidated
operations during such period, in a form and
certified by a Responsible Officer of Borrower
acceptable to Bank; (b) as soon as available, but in
any event within one hundred twenty (120) days after
the end of Borrower's fiscal year, audited
consolidated financial statements of Borrower
prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such
financial statements of an independent certified
public accounting firm acceptable to Bank; (c) within
five (5) days of filing, copies of all statements,
reports and notices sent or made available generally
by Borrower to its security holders or to any holders
of Subordinated Debt and all reports on Form 10-K
10-Q, and 8-K filed with the Securities and Exchange
Commission; (d) promptly upon receipt of notice
thereof, a report of any legal actions pending or
threatened against Borrower or any Subsidiary that
could result in damages or costs to Borrower or any
Subsidiary of One Hundred Thousand Dollars ($100,000)
or more; (e) such budgets, sales projections,
operating plans or other financial information as
Bank may reasonably request from time to time; and
(f) prompt notice of any material change in the
composition of the Intellectual Property, including
any subsequent ownership right of Borrower in or to
any Copyright, Patent or Trademark not shown in any
intellectual property security agreement between
Borrower and Bank or knowledge of an event that
materially adversely affects the value of the
Intellectual Property.
Within twenty five (25) days after the last day of
each month during which either Advances have been
requested or are outstanding, Borrower shall deliver
to Bank a Borrowing Base Certificate signed by a
Responsible Officer in substantially the form of
Exhibit C hereto, together with aged listings of
accounts receivable.
Within thirty five (35) days after the last day of
each month during which either Advances have been
requested or are outstanding, Borrower shall deliver
to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible
Officer in substantially the form of Exhibit D
hereto.
Bank shall have a right from time to time hereafter
to audit Borrower's Accounts at Borrower's expense at
any time when either Advances have been requested or
are outstanding, provided that such audits will be
conducted no more often than every six (6) months
unless an Event of Default has occurred and is
continuing."
5. The Loan Agreement shall be amended by deleting the
following text appearing as Sections 6.7(a)(ii)
thereof:
"(ii) TANGIBLE NET WORTH. A Tangible Net Worth of
at least $6,000,000."
and inserting in lieu thereof the following:
-3-
<PAGE>
"(ii) TANGIBLE NET WORTH. A Tangible Net Worth of at
least (1) $4,500,000.00 commencing with the month
ending October 31, 1999 through the month ending
August 31, 2000, and (2) $5,000,000.00 commencing
with the month ending October 31, 2000 and for each
November, January, February, April, May, July,
August, and October thereafter."
6. The Loan Agreement shall be amended by deleting the
following text appearing as Sections 6.7(b)(ii)
thereof:
"(ii) TANGIBLE NET WORTH. A Tangible Net Worth of
at least $7,000,000."
and inserting in lieu thereof the following:
"(ii) TANGIBLE NET WORTH. A Tangible Net Worth of at
least (1) $5,500,000.00 for each calender quarter
commencing with the calender quarter ending September
30, 1999, and (2) $6,000,000.00 commencing with the
quarter ending September 30, 2000 and for each
quarter thereafter."
7. The Loan Agreement is hereby amended by the deletion
of Section 10.1 in its entirety and the insertion of
the following in its stead:
"Unless otherwise provided in this Agreement, all
notices or demands by any party to this Agreement or
any other related agreement must be in writing and be
personally delivered or sent by an overnight delivery
service, by certified mail, postage prepaid, return
receipt requested, or by telefacsimile at the
addresses listed at the beginning of this Agreement.
Either Bank or Borrower may change its notice address
by giving the other written notice.
If to Borrower: Datawatch Corporation
900 Chelmsford Street
Tower 3, 5th Floor
Lowell, Massachusetts 01851-8100
Attn: Betsy J. Hartwell
FAX: (978) 453-4443
With a copy to: Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02110
Attn: William B. Simmons, Esquire
FAX: (617) 248-7100
If to Bank: Silicon Valley Bank
40 William Street
Wellesley, Massachusetts 02481
Attn: Jonathan L. Gray
FAX: (781) 431-9906
-4-
<PAGE>
with a copy to: Riemer & Braunstein LLP
Three Center Plaza
Boston, Massachusetts 02108
Attn: David A. Ephraim, Esquire
FAX: (617) 880-3456"
8. The Loan Agreement is hereby amended by the addition
of the following text appearing as a new Section 8.9:
"8.9 CROSS DEFAULT. The occurrence of any Event of
Default under the EXIM Loan Documents."
9. The Loan Agreement is hereby amended by the deletion
of the defined term "Eligible Foreign Accounts" in
Section 13.1 thereof and in each other instance it
appears in the Loan Agreement.
10. The Loan Agreement is hereby amended by the insertion
of the following new defined terms in Section 13.1
thereof:
""EXIM Agreement: shall mean that certain
Export-Import Loan and Security Agreement dated
December 27, 1999 by and between the Borrower and the
Bank."
""EXIM Eligible Foreign Accounts shall have the
meaning set forth in the EXIM Agreement."
""EXIM Loan Documents" shall mean the EXIM Agreement
together with all documents, instruments and
agreements executed in conjunction therewith."
11. The Loan Agreement is hereby amended by the deletion
of the following defined terms in Section 13.1
thereof:
""Borrowing Base" is (a) 80% of Eligible Accounts in
which the Account debtor is a non-distributor, plus
(b) 50% of Eligible Accounts (not to exceed 40% of
the aggregate Borrowing Base) in which the Account
debtor (i) is a distributor and (ii) is approved in
writing by Bank on a case by case basis, plus (c) 60%
of Eligible Foreign Accounts (not to exceed $400,000)
each as determined by Bank from Borrower's most
recent Borrowing Base Certificate."
""Eligible Accounts" are Accounts in the ordinary
course of Borrower's business that meet all
Borrower's representations and warranties in Section
5; but Bank may change eligibility standards by
giving Borrower notice. Unless Bank agrees otherwise
in writing, Eligible Accounts will not include:
(a) Accounts that the account debtor has
not paid within 90 days (or 60 days
if account debtor is a distributor)
of invoice date;
(b) Accounts for an account debtor, 50%
or more of whose Accounts have not
been paid within 90 days (or 60 days
if account debtor is a distributor)
of invoice date;
-5-
<PAGE>
(c) Credit balances over 90 days from
invoice date;
(d) Accounts for an account debtor,
including Affiliates, whose total
obligations to Borrower exceed 25%
of all Accounts, for the amounts
that exceed that percentage, unless
Bank approves in writing;
(e) Accounts for which the account
debtor does not have its principal
place of business in the United
States except for Eligible Foreign
Accounts;
(f) Accounts for which the account
debtor is a federal, state or local
government entity or any department,
agency, or instrumentality;
(g) Accounts for which Borrower owes the
account debtor, but only up to the
amount owed (sometimes called
"contra" accounts, accounts payable,
customer deposits or credit
accounts);
(h) Accounts for demonstration or
promotional equipment, or in which
goods are consigned, sales
guaranteed, sale or return, sale on
approval, bill and hold, or other
terms if account debtor's payment
may be conditional;
(i) Accounts for which the account
debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor
disputes liability or makes any
claim and Bank believes there may be
a basis for dispute (but only up to
the disputed or claimed amount), or
if the Account Debtor is subject to
an Insolvency Proceeding, or becomes
insolvent, or goes out of business;
(k) Accounts for which Bank reasonably
determines collection to be
doubtful."
""Obligations" are debts, principal, interest, Bank
Expenses and other amounts Borrower owes Bank now or
later, including letters of credit and Exchange
Contracts and including interest accruing after
Insolvency Proceedings begin and debts, liabilities,
or obligations of Borrower assigned to Bank."
""Revolving Maturity Date" is January 30, 2000."
""Tangible Net Worth" is, on any date, the
consolidated total assets of Borrower and its
Subsidiaries minus (i) any amounts attributable to
(a) goodwill, (b) intangible items such as
unamortized debt discount and expense, Patents, trade
and service marks and names, Copyrights and research
and development expenses except prepaid expenses, and
(c) reserves not already deducted from assets, minus
(ii) Total Liabilities."
-6-
<PAGE>
and inserting in lieu thereof the following:
""Borrowing Base" is (a) 80% of Eligible Accounts in
which the Account debtor is a non-distributor, plus
(b) 50% of Eligible Accounts (not to exceed 40% of
the aggregate Borrowing Base) in which the Account
debtor (i) is a distributor and (ii) is approved in
writing by Bank on a case by case basis, each as
determined by Bank from Borrower's most recent
Borrowing Base Certificate."
""Eligible Accounts" are Accounts in the ordinary
course of Borrower's business that meet all
Borrower's representations and warranties in Section
5.2; but Bank may change eligibility standards by
giving Borrower notice. Unless Bank agrees otherwise
in writing, Eligible Accounts shall not include:
(a) Accounts that the account debtor has
not paid within ninety (90) days (or
sixty (60) days if account debtor is
a distributor) of invoice date;
(b) Accounts for an account debtor,
fifty percent (50%) or more of whose
Accounts have not been paid within
ninety (90) days (or sixty (60) days
if account debtor is a distributor)
of invoice date;
(c) Credit balances over ninety (90)
days from invoice date;
(d) Accounts for an account debtor,
including Affiliates, whose total
obligations to Borrower exceed
twenty-five (25%) of all Accounts,
for the amounts that exceed that
percentage, unless Bank approves in
writing;
(e) Accounts for which the account
debtor does not have its principal
place of business in the United
States;
(f) Accounts for which the account
debtor is a federal government
entity or any department, agency, or
instrumentality thereof;
(g) Accounts for which Borrower owes the
account debtor, but only up to the
amount owed (sometimes called
"contra" accounts, accounts payable,
customer deposits or credit
accounts);
(h) Accounts for demonstration or
promotional equipment, or in which
goods are consigned, sales
guaranteed, sale or return, sale on
approval, bill and hold, or other
terms if account debtor's payment
may be conditional;
(i) Accounts for which the account
debtor is Borrower's Affiliate,
officer, employee, or agent;
-7-
<PAGE>
(j) Accounts in which the account debtor
disputes liability or makes any
claim and Bank believes there may be
a basis for dispute (but only up to
the disputed or claimed amount), or
if the Account Debtor is subject to
an Insolvency Proceeding, or becomes
insolvent, or goes out of business;
(k) Accounts for which Bank reasonably
determines collection to be
doubtful."
""Obligations" are debts, principal, interest, Bank
Expenses and other amounts Borrower owes Bank now or
later whether under this Agreement, the EXIM Loan
Documents, or otherwise, including letters of credit
and foreign exchange contracts and including interest
accruing after Insolvency Proceedings begin and
debts, liabilities, or obligations of Borrower
assigned to Bank."
""Revolving Maturity Date" is December 27, 2000."
""Tangible Net Worth" is, on any date, the
consolidated total assets of Borrower and its
Subsidiaries minus (i) any amounts attributable to
(a) goodwill, (b) intangible items such as
unamortized debt discount and expense, Patents, trade
and service marks and names, Copyrights and research
and development expenses except prepaid expenses, and
(c) reserves not already deducted from assets, minus
(ii) Total Liabilities, plus (iii) Subordinated
Debt."
13. The Borrower ratifies, confirms and reaffirms, all
and singular, the terms and conditions of that
certain Collateral Assignment, Patent Mortgage and
Security Agreement dated as of November 1, 1994
between Borrower and Bank, and acknowledges, confirms
and agrees that said Collateral Assignment, Patent
Mortgage and Security Agreement shall remain in full
force and effect.
14. The Borrowing Base Certificate appearing as EXHIBIT C
to the Loan Agreement is hereby replaced with the
Borrowing Base Certificate attached as EXHIBIT A
hereto.
15. The Compliance Certificate appearing as EXHIBIT D to
the Loan Agreement is hereby replaced with the
Compliance Certificate attached as EXHIBIT B hereto.
6. FEE. Borrower shall pay to Bank a modification fee equal to Two Thousand Five
Hundred Dollars ($2,500.00), which fee shall be due on the date hereof and which
shall be deemed fully earned as of the date hereof. The Borrower shall also
reimburse Lender for all legal fees and expenses incurred in connection with
this amendment to the Loan Documents and the preparation of the EXIM Loan
Documents.
7. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
-8-
<PAGE>
8. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Indebtedness.
9. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
defenses against the obligations to pay any amounts under the Indebtedness.
10. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Indebtedness, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Indebtedness pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Indebtedness. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Indebtedness. It is the intention of Bank
and Borrower to retain as liable parties all makers and endorsers of Existing
Loan Documents, unless the party is expressly released by Bank in writing. No
maker, endorser, or guarantor will be released by virtue of this Loan
Modification Agreement.
11. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
properties, 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 Loan Modification Agreement; provided, however, that if for any
reason Bank cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Clara County, California.
12. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).
-9-
<PAGE>
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: BANK:
DATAWATCH CORPORATION SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: /s/ Bruce R. Gardner By: /s/ James C. Maynard
---------------------- ------------------------------
Name: Bruce R. Gardner Name: James C. Maynard
-------------------- ----------------------------
Title: President and Chief Title: Senior Vice President
Executive Officer ---------------------------
-------------------
SILICON VALLEY BANK
By: /s/ Heidi Fetty
------------------------------
Name: Heidi Fetty
----------------------------
Title: Assistant Vice President
---------------------------
(signed in Santa Clara County, California)
-10-
<PAGE>
EXHIBIT A
BORROWING BASE CERTIFICATE
Borrower: Datawatch Corporation Bank: Silicon Valley Bank
Commitment Amount: $ 1,500,000.00
ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
12. Accounts Receivable Book Value as of $
-------- ----------------------
13. Additions (please explain on reverse) $
----------------------
14. TOTAL ACCOUNTS RECEIVABLE $
----------------------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication) Distributor Non-Distributor
----------- ---------------
12. Amounts over 90* days due $ $
---------------------- -----------------
13. Balance of 50% over 90* day accounts $ $
---------------------- -----------------
14. Concentration Limits $ $
---------------------- -----------------
15. Foreign Accounts $ $
---------------------- -----------------
16. Governmental Accounts $ $
---------------------- -----------------
17. Contra Accounts $ $
---------------------- -----------------
18. Promotion or Demo Accounts $ $
---------------------- -----------------
19. Intercompany/Employee Accounts $ $
---------------------- -----------------
20. Other (please explain on reverse) $ $
---------------------- -----------------
21. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $ $
---------------------- -----------------
22. Eligible Accounts (#3 minus #13) $ $
---------------------- -----------------
23. LOAN VALUE OF ACCOUNTS (80.0% of #14
for Non-Distributor accounts plus 50.0%
of #14 for Distributor accounts**) $ $
---------------------- -----------------
*60 days if account debtor is distributor
**Loan value of accounts for account debtors which are
distributors shall not exceed 40% of aggregate borrowing base.
BALANCES
12. Maximum Loan Amount $1,500,000.00
13. Total Funds Available (Lesser of #16 or #15) $____________
14. Present balance owing on Line of Credit $____________
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
15. Outstanding under Sublimits (including Letters of Credit) $____________
16. RESERVE POSITION (#17 minus #18 and #19) $____________
</TABLE>
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS: ================================
BANK USE ONLY
DATAWATCH CORPORATION ================================
RECEIVED BY:____________________
DATE:___________________________
By: _______________________ REVIEWED BY:____________________
Authorized Signer COMPLIANCE STATUS: YES / NO
-12-
<PAGE>
EXHIBIT B
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: DATAWATCH CORPORATION
The undersigned authorized officer of DATAWATCH CORPORATION hereby
certifies that in accordance with the terms and conditions of the Amended and
Restated Loan and Security Agreement between Borrower and Bank (the
"Agreement"), (i) Borrower is in complete compliance for the period ending
____________ with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and
correct in all material respects as of the date hereof. Attached herewith are
the required documents supporting the above certification. The Officer further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes. The Officer
expressly acknowledges that no borrowings may be requested by the Borrower at
any time or date of determination that Borrower is not in compliance with any of
the terms of the Agreement, and that such compliance is determined not just at
the date this certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
<TABLE>
<CAPTION>
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
<S> <C> <C>
Monthly financial statements & CC Monthly within 35 days* Yes No
Annual (CPA Audited) FYE within 120 days Yes No
10-K, 10-Q and 8-K Within 5 days after filing with SEC Yes No
A/R & BBC Monthly within 25 days* Yes No
</TABLE>
*when Advances are outstanding or have been requested
<TABLE>
<CAPTION>
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
<S> <C> <C> <C>
Maintain on a Monthly Basis
(only for months ending January, February, May, July, August, October and November)
Minimum Adjusted Quick Ratio 1.50:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth $4,500,000.00** $________ Yes No
Maintain on a Quarterly Basis:
Minimum Adjusted Quick Ratio 1.75:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth $5,500,000.00*** $________ Yes No
</TABLE>
**increasing to $5,000,000.00 as of October 31, 2000 as set forth in Section
6.7(a)(ii)
***increasing to $6,000,000.00 as of September 30, 2000 as set forth in Section
6.7(b)(ii)
-13-
<PAGE>
COMMENTS REGARDING EXCEPTIONS: ==============================
Sincerely, BANK USE ONLY
==============================
_______________________ Date:_______________ RECEIVED BY:__________________
SIGNATURE DATE:________________
- ------------------------ REVIEWED BY:__________________
TITLE COMPLIANCE STATUS: YES / NO
-14-
EXHIBIT 10.23
INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Intellectual Property Security Agreement (this "IP Agreement") is
made as of the 27th day of December, 1999 by and between Datawatch Corporation,
a Delaware corporation ("Grantor"), and Silicon Valley Bank, a California
banking corporation ("Lender").
RECITALS
A. Lender has agreed to make advances of money and to extend certain
financial accommodations to Grantor (the "Loans"), pursuant to an Export-Import
Loan and Security Agreement of even date herewith (the "Loan Agreement") and
Grantor desires to borrow such funds from Lender. The Loan is or will be secured
in part pursuant to the terms of the Loan Agreement. Lender is willing to make
such Loans to Grantor, but only upon the condition, among others, that Grantor
shall grant to Lender a security interest in certain Copyrights Trademarks,
Patents, and Mask Works to secure the obligations of Grantor under the Loan
Agreement. Defined terms used but not defined herein shall have the same
meanings as in the Loan Agreement.
B. Pursuant to the terms of the Loan and Security Agreement, Grantor
has granted to Lender a security interest in all of Grantor's right title and
interest, whether presently existing or hereafter acquired in, to and under all
of the Collateral (as defined herein).
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged and intending to be legally bound, as collateral security
for the prompt and complete payment when due of Grantor's Indebtedness under the
Loan Agreement, Grantor hereby represents, warrants, covenants and agrees as
follows:
1. Grant of Security Interest. As collateral security for the prompt and
complete payment and performance of all of Grantor's present or future
Indebtedness, obligations and liabilities to Lender, Grantor hereby grants a
security interest in all of Grantor's right, title and interest in, to and under
its Intellectual Property Collateral (all of which shall collectively be called
the "Intellectual Property Collateral"), including, without limitation, the
following:
(a) Any and all copyright rights, copyright applications, copyright
registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and whether
or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held, including without limitation those
set forth on Exhibit A attached hereto (collectively, the
"Copyrights");
(b) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to Grantor now or
hereafter existing, created, acquired or held;
(d) All patents, patent applications and like protections including,
without limitation, improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same, including
without limitation the patents and patent applications set forth on
Exhibit B attached hereto (collectively, the "Patents");
(e) Any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Grantor
connected with and symbolized by such trademarks, including without
limitation those set forth on Exhibit C attached hereto (collectively,
the "Trademarks")
<PAGE>
(f) All mask works or similar rights available for the protection of
semiconductor chips, now owned or hereafter acquired, including,
without limitation those set forth on Exhibit D attached hereto
(collectively, the "Mask Works");
(g) Any and all claims for damages by way of past, present and future
infringements of any of the rights included above, with the right, but
not the obligation, to sue for and collect such damages for said use or
infringement of the intellectual property rights identified above;
(h) All licenses or other rights to use any of the Copyrights, Patents,
Trademarks, or Mask Works and all license fees and royalties arising
from such use to the extent permitted by such license or rights; and
(i) All amendments, extensions, renewals and extensions of any of the
Copyrights, Trademarks, Patents, or Mask Works; and
(j) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
2. Authorization and Request. Grantor authorizes and requests that the Register
of Copyrights and the Commissioner of Patents and Trademarks record this IP
Agreement.
3. Covenants and Warranties. Grantor represents, warrants, covenants and agrees
as follows:
(a) Grantor is now the sole owner of the Intellectual Property
Collateral, except for non-exclusive licenses granted by Grantor to its
customers in the ordinary course of business.
(b) Performance of this IP Agreement does not conflict with or result
in a breach of any other intellectual property security agreement to
which Grantor is bound, except to the extent that certain intellectual
property agreements prohibit the assignment of the rights thereunder to
a third party without the licensor's or other party's consent and this
IP Agreement constitutes a security interest.
(c) During the term of this IP Agreement, Grantor will not transfer or
otherwise encumber any interest in the Intellectual Property
Collateral, except for security interests granted to Lender and
non-exclusive licenses granted by Grantor in the ordinary course of
business or as set forth in this IP Agreement;
(d) To its knowledge, each of the Patents is valid and enforceable, and
no part of the Intellectual Property Collateral has been judged invalid
or unenforceable, in whole or in part, and no claim has been made that
any part of the Intellectual Property Collateral violates the rights of
any third party;
(e) Grantor shall promptly advise Lender of any material adverse change
in the composition of the Collateral, including but not limited to any
subsequent ownership right of the Grantor in or to any Trademark,
Patent, Copyright, or Mask Work specified in this IP Agreement;
(f) Grantor shall (i) protect, defend and maintain the validity and
enforceability of the Trademarks, Patents, Copyrights, and Mask Works,
(ii) use its best efforts to detect infringements of
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<PAGE>
the Trademarks, Patents, Copyrights, and Mask Works and promptly advise
Lender in writing of material infringements detected and (iii) not
allow any Trademarks, Patents, Copyrights, or Mask Works to be
abandoned, forfeited or dedicated to the public without the written
consent of Lender, which shall not be unreasonably withheld, unless
Grantor determines that reasonable business practices suggest that
abandonment is appropriate.
(g) Grantor shall promptly register the most recent version of any of
Grantor's Copyrights, if not so already registered, and shall, from
time to time, execute and file such other instruments, and take such
further actions as Lender may reasonably request from time to time to
perfect or continue the perfection of Lender's interest in the
Intellectual Property Collateral;
(h) This IP Agreement creates, and in the case of after acquired
Intellectual Property Collateral, this IP Agreement will create at the
time Grantor first has rights in such after acquired Intellectual
Property Collateral, in favor of Lender a valid and perfected first
priority security interest in the Intellectual Property Collateral in
the United States securing the payment and performance of the
obligations evidenced by the Loan Agreement upon making the filings
referred to in clause (i) below, subject only to a prior security
interest in the Intellectual Property Collateral in favor of Lender
evidenced by, among other documents, instruments, and agreements, a
Collateral Assignment, Patent Mortgage and Security Agreement dated
November 1, 1994;
(i) To its knowledge, except for, and upon, the filing with the United
States Patent and Trademark office with respect to the Patents and
Trademarks and the Register of Copyrights with respect to the
Copyrights and Mask Works necessary to perfect the security interests
created hereunder and except as has been already made or obtained, no
authorization, approval or other action by, and no notice to or filing
with, any U.S. governmental authority or U.S. regulatory body is
required either (i) for the grant by Grantor of the security interest
granted hereby or for the execution, delivery or performance of this IP
Agreement by Grantor in the U.S. or (ii) for the perfection in the
United States or the exercise by Lender of its rights and remedies
thereunder;
(j) All information heretofore, herein or hereafter supplied to Lender
by or on behalf of Grantor with respect to the Intellectual Property
Collateral is accurate and complete in all material respects.
(k) Grantor shall not enter into any agreement that would materially
impair or conflict with Grantor's obligations hereunder without
Lender's prior written consent, which consent shall not be unreasonably
withheld. Grantor shall not permit the inclusion in any material
contract to which it becomes a party of any provisions that could or
might in any way prevent the creation of a security interest in
Grantor's rights and interest in any property included within the
definition of the Intellectual property Collateral acquired under such
contracts, except that certain contracts may contain anti-assignment
provisions that could in effect prohibit the creation of a security
interest in such contracts.
(l) Upon any executive officer of Grantor obtaining actual knowledge
thereof, Grantor will promptly notify Lender in writing of any event
that materially adversely affects the value of any material
Intellectual Property Collateral, the ability of Grantor to dispose of
any material Intellectual Property Collateral of the rights and
remedies of Lender in relation thereto, including the levy of any legal
process against any of the Intellectual Property Collateral.
4. Lender's Rights. Lender shall have the right, but not the obligation, to
take, at Grantor's sole expense, any actions that Grantor is required under this
IP Agreement to take but which Grantor fails to take, after fifteen (15) days'
notice to Grantor. Grantor shall reimburse and indemnify Lender for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this section 4.
5. Inspection Rights. Grantor hereby grants to Lender and its employees,
representatives and agents the right to visit, during reasonable hours upon
prior reasonable written notice to Grantor, any of Grantor's plants and
facilities that manufacture, install or store products (or that have done so
during the prior six-month period) that are sold utilizing any of the
Intellectual Property Collateral, and to inspect the products and quality
control records relating thereto upon reasonable written notice to Grantor and
as often as may be reasonably requested, but not more than once in every six (6)
months; provided, however, nothing herein shall entitle Lender access to
Grantor's trade secrets and other proprietary information.
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<PAGE>
6. Further Assurances; Attorney in Fact.
(a) On a continuing basis, Grantor will, subject to any prior licenses,
encumbrances and restrictions and prospective licenses, make, execute,
acknowledge and deliver, and file and record in the proper filing and
recording places in the United States, all such instruments, including
appropriate financing and continuation statements and collateral
agreements and filings with the United States Patent and Trademarks
Office and the Register of Copyrights, and take all such action as may
reasonably be deemed necessary or advisable, or as requested by Lender,
to perfect Lender's security interest in all Copyrights, Patents,
Trademarks, and Mask Works and otherwise to carry out the intent and
purposes of this IP Agreement, or for assuring and confirming to Lender
the grant or perfection of a security interest in all Intellectual
Property Collateral.
(b) Grantor hereby irrevocably appoints Lender as Grantor's
attorney-in-fact, with full authority in the place and stead of Grantor
and in the name of Grantor, Lender or otherwise, from time to time in
Lender's discretion, upon Grantor's failure or inability to do so, to
take any action and to execute any instrument which Lender may deem
necessary or advisable to accomplish the purposes of this IP Agreement,
including:
(i) To modify, in its sole discretion, this IP Agreement
without first obtaining Grantor's approval of or signature to
such modification by amending Exhibit A, Exhibit B, Exhibit C,
and Exhibit D hereof, as appropriate, to include reference to
any right, title or interest in any Copyrights, Patents,
Trademarks or Mask Works acquired by Grantor after the
execution hereof or to delete any reference to any right,
title or interest in any Copyrights, Patents, Trademarks, or
Mask Works in which Grantor no longer has or claims any right,
title or interest; and
(i) To file, in its sole discretion, one or more financing or
continuation statements and amendments thereto, relative to
any of the Intellectual Property Collateral without the
signature of Grantor where permitted by law.
7. Events of Default. The occurrence of any of the following shall constitute an
Event of Default under this IP Agreement:
(a) An Event of Default occurs under the Loan Agreement, a certain
Amended and Restated Loan and Security Agreement dated March 16, 1999
between Grantor and Lender, as affected and amended pursuant to a Loan
Modification Agreement of even date (as so amended, the "Domestic Loan
Agreement"), or any document from Grantor to Lender; or
(b) Grantor breaches any warranty or agreement made by Grantor in this
IP Agreement.
8. Remedies. Upon the occurrence and continuance of an Event of Default, Lender
shall have the right to exercise all the remedies of a secured party under the
Massachusetts Uniform Commercial Code, including without limitation the right to
require Grantor to assemble the Intellectual Property Collateral and any
tangible property in which Lender has a security interest and to make it
available to Lender at a place designated by Lender. Lender shall have a
nonexclusive, royalty free license to use the Copyrights, Patents, Trademarks,
and Mask Works to the extent reasonably necessary to permit Lender to exercise
its rights and remedies upon the occurrence of an Event of Default. Grantor will
pay any expenses (including reasonable attorney's fees) incurred by Lender in
connection with the exercise of any of Lender's rights hereunder, including
without limitation any expense incurred in disposing of the Intellectual
Property Collateral. All of Lender's rights and remedies with respect to the
Intellectual Property Collateral shall be cumulative.
9. Indemnity. Grantor agrees to defend, indemnify and hold harmless Lender and
its officers, employees, and agents against: (a) all obligations, demands,
claims, and liabilities claimed or asserted by any other party in connection
with the transactions contemplated by this IP Agreement, and (b) all losses or
expenses in any way suffered, incurred, or paid by Lender as a result of or in
any way arising out of, following or consequential to transactions between
Lender and Grantor, whether under this IP Agreement or otherwise
5
<PAGE>
(including without limitation, reasonable attorneys fees and reasonable
expenses), except for losses arising from or out of Lender's gross negligence or
willful misconduct.
10. Reassignment. At such time as Grantor shall completely satisfy all of the
obligations secured hereunder, Lender shall execute and deliver to Grantor all
deeds, assignments, and other instruments as may be necessary or proper to
reinvest in Grantor full title to the property assigned hereunder, subject to
any disposition thereof which may have been made by Lender pursuant hereto.
11. Course of Dealing. No course of dealing, nor any failure to exercise, nor
any delay in exercising any right, power or privilege hereunder shall operate as
a waiver thereof.
12. Attorneys' Fees. If any action relating to this IP Agreement is brought by
either party hereto against the other party, the prevailing party shall be
entitled to recover reasonable attorneys fees, costs and disbursements.
13. Amendments. This IP Agreement may be amended only by a written instrument
signed by both parties hereto.
14. Counterparts. This IP Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute the same instrument.
15. Law and Jurisdiction. This IP Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts. GRANTOR
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, 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
AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON LENDER CANNOT AVAIL ITSELF
OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, GRANTOR ACCEPTS JURISDICTION
OF THE COURTS AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA.
16. GRANTOR AND LENDER EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH
PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
17. Confidentiality. In handling any confidential information, Lender shall
exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this IP
Agreement except that the disclosure of this information may be made (i) to the
affiliates of the Lender, (ii) to prospective transferee or purchasers of an
interest in the obligations secured hereby, provided that they have entered into
comparable confidentiality agreement in favor of Grantor and have deliver a copy
to Grantor, (iii) as required by law, regulation, rule or order, subpoena
judicial order or similar order and (iv) as may be required in connection with
the examination, audit or similar investigation of Lender.
18. Subordination. Notwithstanding anything to the contrary contained in this IP
Agreement ,it is expressly acknowledged and agreed that this IP Agreement and
the security interest created herein in favor of Lender (and all rights and
remedies available to Lender hereunder) is subject and subordinate to a prior
security interest granted by the Grantor to the Lender in the Intellectual
Property Collateral to secure the Domestic Loan Agreement. In the event of any
exercise of any rights and remedies available hereunder, unless otherwise agreed
to in writing by Lender, all "Obligations" under the Domestic Loan Agreement
shall
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<PAGE>
be paid in full from any proceeds obtained hereunder prior to any payment in
satisfaction of the Indebtedness and "Obligations" (as defined in the Loan
Agreement) of Grantor.
EXECUTED as a sealed instrument this 27th day of December, 1999
under the laws of the Commonwealth of Massachusetts.
ADDRESS OF GRANTOR: GRANTOR:
DATAWATCH CORPORATION
900 Chelmsford Street
- ------------------------- By: /s/ Bruce R. Gardner
--------------------------
Lowell, MA 01851-8100
- ------------------------- Name: Bruce R. Gardner
------------------------
Title: President and Chief
Executive Officer
-----------------------
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<PAGE>
Exhibit "A" attached to that certain Intellectual Property Security
Agreement dated December 27, 1999.
EXHIBIT "A"
COPYRIGHTS
SCHEDULE A - ISSUED COPYRIGHTS
------------------------------
COPYRIGHT REGISTRATION DATE OF
DESCRIPTION NUMBER ISSUANCE
- ----------- ------ --------
SCHEDULE B - PENDING COPYRIGHT APPLICATIONS
-------------------------------------------
FIRST DATE
COPYRIGHT APPLICATION DATE OF DATE OF OF PUBLIC
DESCRIPTION NUMBER FILING CREATION DISTRIBUTION
- ----------- ------ ------ -------- ------------
SCHEDULE C - UNREGISTERED COPYRIGHTS
(Where No Copyright Application is Pending)
-------------------------------------------
DATE AND
RECORDATION
NUMBER OF IP
AGREEMENT WITH
OWNER OR ORIGINAL
GRANTOR IF ORIGINAL AUTHOR
AUTHOR OR OWNER OR OWNER OF
FIRST DATE OF COPYRIGHT COPYRIGHT IS
COPYRIGHT DATE OF OF IS DIFFERENT DIFFERENT ROM
DESCRIPTION CREATION DISTRIBUTION FROM GRANTOR GRANTOR
- ----------- -------- ------------ ------------ -------
8
<PAGE>
Exhibit "B" attached to that certain Intellectual Property Security Agreement
dated December 27, 1999.
EXHIBIT "B"
PATENTS
PATENT
DESCRIPTION DOCKET NO. COUNTRY SERIAL NO. FILING DATE STATUS
- ----------- ---------- ------- ---------- ----------- ------
9
<PAGE>
Exhibit "C" attached to that certain Intellectual Property Security Agreement
dated December 27, 1999.
EXHIBIT "C"
TRADEMARKS
TRADEMARK
DESCRIPTION COUNTRY SERIAL NO. REG. NO STATUS
- ----------- ------- ---------- ------- ------
DATAWATCH US 14/553,269 1,963,783 Registered
(07/25/1994) (03/26/1996)
DATAWATCH EU 210,476 210,476 Registered
(04/01/1996) (04/01/1996)
Q-SUPPORT EU 210,682 210,682 Registered
(04/01/1996) (04/01/1996)
QUETZAL EU 210,831 210,831 Registered
(04/01/1996) (04/01/1996)
QUETZAL AUSTRALIA 634,675 A634,675 Registered
(07/11/1994) (09/13/1995)
QUETZAL/SC US 75/580,763 Pending
(10/29/1998)
Q-BROWSER US 75,315,418 2,255,961 Registered
(06/26/1997) (06/22/1999)
Q-BROWSER EU 547,323 Published
(05/21/1997)
Q-BROWSER AUSTRALIA 752,268 752,268 Registered
(01/07/1998) (01/07/1998)
Q-FLOW US 75/364,269 2,256,046 Registered
(09/29/1997) (06/22/1999)
Q-FLOW EU 633,834 Published
(09/22/1997)
Q-FLOW CANADA 873,647 Published
(03/27/1998)
Q-FLOW AUSTRALIA 744,567 744,567 Registered
(09/22/1997) (11/06/1998)
10
<PAGE>
Exhibit "D" attached to that certain Intellectual Property Security Agreement
dated December 27, 1999.
EXHIBIT "D"
MASK WORKS
MASK WORK
DESCRIPTION COUNTRY SERIAL NO. REG. NO STATUS
- ----------- ------- ---------- ------- ------
11
EXHIBIT 10.24
EXPORT-IMPORT BANK LOAN AND SECURITY AGREEMENT
This EXPORT-IMPORT BANK LOAN AND SECURITY AGREEMENT (the "Exim
Agreement") is entered into as of December 27, 1999, by and among SILICON VALLEY
BANK, a California-chartered bank ("Bank"), with its principal place of business
at 3003 Tasman Drive, Santa Clara, CA 95054 and with a loan production office
located at Wellesley Office Park, 40 William Street, Suite 350, Wellesley, MA
02481, doing business under the name "Silicon Valley East" ("Bank") and
DATAWATCH CORPORATION a Delaware corporation with its principal place of
business at 900 Chelmsford Street, Tower 3, 5th Floor, Lowell, Massachusetts
01851-8100 ("Datawatch US"), DATAWATCH INTERNATIONAL LIMITED, a company
registered under the laws of England and Wales with its principal place of
business at 10th Floor, Maple House, High Street, Potters Bar, Hertfordshire,
England EN6 5BS ("Datawatch International"), DATAWATCH EUROPE, LTD., a company
registered under the laws of England and Wales with its principal place of
business at The Software Centre East Way, Lee Mill Industrial Estate, Ivybridge,
Plymouth, England PL21 9PE ("Datawatch Europe"), and GUILDSOFT LIMITED, a
company registered under the laws of England and Wales with its principal place
of business at The Software Centre East Way, Lee Mill Industrial Estate,
Ivybridge, Plymouth, England PL21 9PE ("Guildsoft")(hereinafter Datawatch US,
Datawatch International, Datawatch Europe and Guildsoft are referred to herein
jointly and severally as the "Borrower").
RECITALS
A. Borrower and Bank are parties to that certain Amended and Restated
Loan and Security Agreement dated March 16, 1999, as affected and amended to
date, including without limitation, pursuant to Loan Modification Agreement of
even date (as so amended and as amended to date, the "Domestic Agreement"),
together with related documents executed in conjunction therewith.
B. Borrower and Bank desire in this Exim Agreement to set forth their
agreement with respect to a working capital facility to be guaranteed by the
Export-Import Bank of the United States (the "Exim Bank").
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. Except as otherwise defined, terms that are capitalized in this
Exim Agreement shall have the meanings assigned in the Domestic Loan Documents.
As used in this Exim Agreement, the following terms shall have the following
definitions:
"Acceptable Foreign Currency" means any one of British Pounds,
the Euro, Swedish Krona, Irish Punt, Dutch Guilders, Deutsche Marks,
and Italian Lire.
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to
each of the entities comprising the Borrower arising out of the sale or
lease of goods (including, without limitation, the licensing of
software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's books
relating to any of the foregoing.
<PAGE>
"Advances" means any loans or other extensions of credit
hereunder.
"Borrower Agreement" means the Export-Import Bank of the
United States Working Capital Guarantee Program Borrower Agreement of
even date between Borrower and Bank as modified by that certain letter
dated November 4, 1999 from the Export-Import Bank of the United States
to the Bank.
"Borrowing Base" means an amount equal to ninety percent (90%)
of Exim Eligible Foreign Accounts which Exim Eligible Foreign Accounts
(i) are billed and collected by each of the entities comprising the
Borrower in the United States or United Kingdom and (ii) if payable in
an Acceptable Foreign Currency, Borrower has made arrangements
satisfactory to the Bank in its sole discretion with respect to a hedge
on such Exim Eligible Foreign Accounts, provided however that such
percentage shall be reduced to (A) eighty (80%) percent with respect to
Exim Eligible Foreign Accounts which (i) are billed and collected by
the Borrower in the United States or United Kingdom, (ii) are billed in
British Pounds and (iii) Borrower has not made arrangements
satisfactory to the Bank in its sole discretion with respect to a hedge
on such Exim Eligible Foreign Accounts, and (B) seventy (70%) percent
with respect to Exim Eligible Foreign Accounts which (i) are billed and
collected by the Borrower in the United States or United Kingdom (ii)
are billed in any Acceptable Foreign Currency other than British Pounds
and (iii) Borrower has not made arrangements satisfactory to the Bank
in its sole discretion with respect to a hedge on such Exim Eligible
Foreign Accounts.
"Collateral" is the property described on EXHIBIT A.
"Domestic Agreement" has the meaning set forth in recital
paragraph A.
"Domestic Loan Documents" means the Domestic Agreement and all
instruments, documents, and agreements executed in connection with the
Domestic Agreement.
"Exim Bank" means Export-Import Bank of the United States.
"Exim Bank Expenses" means all reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in
connection with the preparation, negotiation, and administration of the
Exim Loan Documents, including any costs incurred in relation to
opposing or seeking to obtain relief from any stay or restructuring
order prohibiting Bank from exercising its rights as a secured
creditor, foreclosing upon or disposing of Collateral, or such related
matters; and Bank's reasonable attorneys' fees and expenses incurred in
enforcing or defending the Exim Loan Documents, whether or not suit is
brought, unless a final court of competent jurisdiction finds the Bank
acted with gross negligence or willful misconduct.
"Exim Committed Line" means a credit extension of up to Two
Million Dollars ($2,000,000.00).
"Exim Eligible Foreign Accounts" means those Accounts payable
in United States Dollars that arise in the ordinary course of each of
the entities comprising the Borrower's respective businesses which are
derived from eligible exports under the Borrower Agreement originating
from the United States and (i) with respect to which the account debtor
is not a resident of the United States; (ii) that have been validly
assigned or pledged to Bank in a manner satisfactory to the Bank giving
the Bank a first priority perfected security interest, or its
equivalent, in such Accounts, (iii) that are billed and collected in
the United States or the United Kingdom, (iv) that either (A) the Bank
pre-approves on a case by case basis or (B) are supported by letter(s)
of credit acceptable to Bank, and (v) comply with all of Borrower's
representations and warranties to Bank; standards of eligibility may be
fixed revised from time to time by Bank in Bank's reasonable judgment
and upon notification thereof to the Borrower in accordance with the
provisions hereof. Exim Eligible Foreign Accounts shall not include the
following:
(a) Accounts with a term in excess of ninety (90) days;
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<PAGE>
(b) Accounts that the account debtor has failed to pay within
sixty (60) calendar days of the original due date of the
invoice unless such accounts are insured through Exim Bank
export credit insurance for comprehensive commercial and
political risk, or through Exim Bank approved private insurers
for comparable coverage, in which case ninety (90) calendar
days shall apply;
(c) Accounts with respect to an account debtor, fifty percent
(50%) or more of whose Accounts the account debtor has failed
to pay within ninety (90) days of the original date of
invoice;
(d) Accounts evidenced by a letter of credit until the date of
shipment of the items covered by the subject letter of credit;
(e) Accounts with respect to which an invoice has not been
sent;
(f) Accounts with respect to which the account debtor is an
Affiliate, officer or director of Borrower;
(g) Accounts with respect to which the account debtor is
located in a country in which Exim Bank is legally prohibited
from doing business as designated in the Country Limitation
Schedule (as such term is defined in the Borrower Agreement);
(h) Accounts with respect to which the account debtor is
located in a country in which Exim Bank coverage is not
available for commercial reasons;
(i) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the
account debtor to Borrower, but only to the extent of
Borrower's liability to such account debtor.
(j) Accounts with respect to which the account debtor has
disputed liability or makes any claim with respect thereto
(but only to the extent of the amount subject to such dispute
or claim), or is subject to any Insolvency Proceeding, or
becomes insolvent, or goes out of business;
(k) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to
Borrower exceed twenty-five percent (25%) of the aggregate
dollar amount of all Accounts, only to the extent such
obligations exceed such percentage, except as approved in
writing by Bank;
(l) Accounts generated by the sale of products purchased for
military purposes or that are due and payable from a military
Buyer;
(m) Accounts, if any, generated by sales of inventory which
constitutes defense articles or defense services;
(n) Accounts payable in currency other than Dollars or an
Acceptable Foreign Currency, except as may be approved in
writing by the Bank and the Exim Bank;
(o) Accounts which are due and owing and the collection of
which must be made outside the United States or United
Kingdom;
(p) Accounts the collection of which Bank or Exim Bank
determines in its reasonable judgment to be doubtful; and
(q) Accounts which are not "Eligible Export-Related Accounts
Receivable", as such term is defined in the Borrower
Agreement.
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"Exim Guarantee" means that certain Master Guarantee Agreement
or other agreement, as amended from time to time, the terms of which
are incorporated by reference into this Exim Agreement, pursuant to
which Exim Bank guarantees Borrower's obligations under this Exim
Agreement.
"Exim Loan Documents" means, collectively, this Exim
Agreement, the Domestic Loan Documents, any note or notes executed by
Borrower, and any other agreement entered into between Borrower and
Bank in connection with this Exim Agreement, all as amended or extended
from time to time.
"Exim Maturity Date" means the earliest of (i) the Maturity
Date under the Domestic Loan Documents, or (ii) the date which is one
day prior to one (1) year from the date of this Exim Agreement.
"Guarantor" means jointly and severally each of Datawatch
International Ltd, Datawatch Europe Limited, and Guildsoft Ltd.
"Note" is defined in Section 2.1.1.
"Obligations" shall mean all debts, principal, interest, Exim
Bank Expenses arising under the Exim Loan Documents, the Domestic Loan
Documents, and other amounts Borrower owes Bank now or later, and
including interest accruing after Insolvency Proceedings begin and
debts, liabilities, or obligations of Borrower assigned to Bank.
"Responsible Officer" means each of the Chief Executive
Officer, President, Chief Financial Officer and Treasurer of the
Borrower.
2. LOAN AND TERMS OF PAYMENT
2.1.1 Revolving Advances. Subject to the terms and conditions of this Exim
Agreement, Bank agrees to make Advances to Borrower in an amount not to exceed
the Exim Committed Line or the Borrowing Base, whichever is less, minus the then
outstanding principal balance of the Advances.
To evidence the Advances, Borrower shall execute and deliver to Bank on
the date hereof a promissory note (the "Note") in substantially the form
attached hereto as EXHIBIT B.
Whenever Borrower desires an Advance, Datawatch US will notify Bank by
facsimile transmission or telephone no later than 3:00 p.m. Eastern time, on the
Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
EXHIBIT C hereto together with any additional documentation required under the
Borrower Agreement, including without limitation, as set forth in Section 2.03
of the Borrower Agreement. In addition to the procedure set forth in the
preceding sentence, Bank is authorized to make Advances under this Exim
Agreement based upon instructions received from a Responsible Officer of
Datawatch US or without instructions if in Bank's discretion such Advances are
necessary to meet Obligations which have become due and remain unpaid. Bank
shall be entitled to rely on any telephonic notice given by a person who Bank
reasonably believes to be a Responsible Officer of Datawatch US or a designee
thereof, and Borrower shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the amount
of Advances made under this Section 2.1.1 to Borrower's deposit account. Amounts
borrowed pursuant to this Section 2.1.1 may be repaid at any time and
re-borrowed at any time during the term of this Exim Agreement so long as no
Event of Default has occurred and is continuing.
Only Datawatch US may request Advances hereunder.
Notwithstanding the foregoing, each Borrower hereunder shall be obligated to
repay all Advances made hereunder, regardless of which Borrower actually
receives said Advance, as if each Borrower hereunder directly received all
Advances. Each Borrower acknowledges and agrees that, to the extent the other
Borrower has or may have certain rights of subrogation or reimbursement against
the other for claims arising out of this Exim Agreement, that those rights are
hereby waived.
2.2 Overadvances. If, at any time or for any reason, the amount of Obligations
pursuant to this Exim Agreement owed by Borrower to Bank pursuant to Section
2.1.1 of this Exim Agreement is greater than the lesser of
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(i) the Borrowing Base or (ii) the Exim Committed Line, Borrower shall
immediately pay to Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in Section 2.3(b), or as specified to the
contrary in any Loan Document, any Advances under this Exim Agreement shall bear
interest, on the average daily balance, at a rate equal to the Prime Rate plus
one percent (1.0%) per annum.
(b) Default Rate. All Obligations shall bear interest, after the occurrence and
during the continuance of an Event of Default, at a rate equal to five (5%)
percentage points above the interest rate that applied immediately prior to the
occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on the first (1st) day
of each month. Bank shall, at its option, charge such interest, all Exim Bank
Expenses, and all Periodic Payments against Borrower's deposit account or
against the Exim Committed Line, in which case those amounts shall thereafter
accrue interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time to time
hereafter, the applicable rate of interest hereunder shall be increased or
decreased contemporaneously with such change by an amount equal to such change
in the Prime Rate. All interest chargeable under the Exim Loan Documents shall
be computed on the basis of a three hundred sixty (360) day year for the actual
number of days elapsed.
2.4 Crediting Payments. The receipt by Bank of any wire transfer of funds,
check, or other item of payment shall be immediately applied to conditionally
reduce Obligations, but shall not be considered a payment on account unless such
wire transfer is of immediately available federal funds and is made to the
appropriate deposit account of Bank or unless and until such check or other item
of payment is honored when presented for payment. Notwithstanding anything to
the contrary contained herein, any payment (other than a wire transfer of
immediately available funds) received by Bank after 12:00 p.m. (noon) Eastern
time shall be deemed to have been received by Bank as of the opening of business
on the immediately following Business Day.
2.5 Fees. Borrower shall pay to Bank the following fees:
(a) Financial Examination and Appraisal Fees. Bank's customary fees and
out-of-pocket expenses for Bank's audits of Borrower's Accounts and
financial analysis and examination of Borrower performed from time to
time by Bank or its agents;
(b) Exim Fee. A facility fee equal to Thirty Thousand Dollars
($30,000.00), which fee shall be due and fully earned upon the Closing
Date; and
(c) Exim Bank Expenses. On the Closing Date, Exim Bank Expenses
incurred through the Closing Date and, after the Closing Date, all Exim
Bank Expenses as they become due, if any.
2.6 Additional Costs. In case any law, regulation, treaty or official directive
or the interpretation or application thereof by any court or 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):
(a) subjects Bank to any tax with respect to payments of principal or
interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except
for taxes on the overall net income of Bank imposed by the United
States of America or any political subdivision thereof);
(b) 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, Bank; or
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(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall promptly notify Borrower thereof. Borrower agrees to pay
to 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 Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
2.7 Term. This Exim Agreement shall become effective once duly executed and
authorized by Borrower and Bank and shall continue in full force and effect for
a term ending on the Exim Maturity Date, on which date all Obligations shall
become immediately due and payable. Notwithstanding the foregoing, Bank shall
have the right to terminate this Exim Agreement immediately and without notice
upon the occurrence of an Event of Default. Notwithstanding any termination of
this Exim Agreement, Bank's security interest in all of the Collateral and all
of the terms and provisions of this Exim Agreement shall continue in full force
and effect until all Obligations have been paid and performed in full, and no
termination shall impair any right or remedy of Bank, nor shall any such
termination relieve Borrower of any Obligation to Bank until all of the
Obligations have been paid and performed in full.
2.8 Use of Proceeds. Borrower will use the proceeds of Advances only for the
purposes specified in the Borrower Agreement. Borrower shall not use the
proceeds of the Advances for any purpose prohibited by the Borrower Agreement.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to all Advances. The obligation of Bank to make each
Advance, including the initial Advance, is subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as provided in
Section 2.1;
(b) timely receipt by Bank of a Borrowing Base Certificate as defined
in the Borrower Agreement;
(c) receipt of guaranties by the Guarantor(s) in form and substance
satisfactory to the Bank;
(d) the Exim Guarantee shall be in full force and effect; and
(e) the representations and warranties contained in Section 5 hereof
shall be true and accurate in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each
Advance as though made at and as of each such date (except to the
extent they relate specifically to an earlier date, in which case such
representations and warranties shall continue to have been true and
accurate as of such date), and no potential Event of Default or Event
of Default shall have occurred and be continuing, or would result from
such Advance.
The making of each Advance shall be deemed to be a representation and
warranty by Borrower on the date of such Advance as to the accuracy of the facts
referred to in this Section 3.1. The initial Advance shall be further subject to
the precondition that the Bank obtain a field audit of the Collateral
satisfactory to the Bank in its discretion, the costs of which shall be borne by
the Borrower.
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4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower grants and pledges to Bank a continuing
security interest in all presently existing and hereafter acquired or arising
Collateral in order to secure prompt payment of any and all Obligations (which
Obligations shall include, without limitation, all obligations of the Borrower
to the Bank under the Domestic Loan Documents) and in order to secure prompt
performance by Borrower of each of its covenants and duties under the Exim Loan
Documents and Domestic Loan Documents. Except for Permitted Liens or as set
forth in the Schedule, such security interest constitutes a valid, first
priority security interest in the presently existing Collateral, and will
constitute a valid, first priority security interest in Collateral acquired
after the date hereof. Borrower acknowledges that Bank may place a "hold" on any
Deposit Account pledged as Collateral to secure the Obligations. Notwithstanding
termination of this Agreement, Bank's Lien on the Collateral shall remain in
effect for so long as any Obligations are outstanding. Notwithstanding the
foregoing, it is expressly acknowledged and agreed that the security interest
created in this Exim Agreement in all of the Collateral, with the exception of
Exim Eligible Foreign Accounts (but only to the extent any Advances are actually
made by the Bank to the Borrower based upon such Exim Eligible Foreign
Accounts), is subject to and subordinate to the security interest granted to the
Bank in the Domestic Agreement with respect to the Collateral.
4.2 Delivery of Additional Documentation Required. Borrower shall from time to
time execute and deliver to Bank, at the request of Bank, all financing
statements and other documents that Bank may reasonably request, in form
satisfactory to Bank, to perfect and continue perfected Bank's security
interests in the Collateral and in order to fully consummate all of the
transactions contemplated under the Exim Loan Documents.
4.3 Right to Inspect. Each of Bank and Exim Bank (through any of their
respective officers, employees, or agents) shall have the right, upon reasonable
prior notice, from time to time during Borrower's usual business hours, to
inspect Borrower's Books, facilities and activities, and to check, test, and
appraise the Collateral in order to verify Borrower's financial condition or the
amount, condition of, or any other matter relating to, the Collateral. The Bank
may, in its discretion, elect to inspect the books and records of any one or
more of the Guarantors at the chief executive office of Datawatch US and the
Borrower shall cooperate with the Bank in such regard and make the books and
records of each of the Guarantors available to the Bank at such location upon
reasonable prior notice. In addition to the foregoing, Bank shall have a right
from time to time hereafter to audit Borrower's Accounts at Borrower's expense,
provided that (i) such audits will be conducted no more often than every six (6)
months unless an Event of Default has occurred and is continuing, and (ii) Bank
may, in its discretion, elect to conduct such audits of any one or more of the
Guarantors at the chief executive office of Datawatch US and the Borrower shall
cooperate with the Bank in such regard and make the pertinent books and records
of each of the Guarantors available to the Bank at such location upon reasonable
prior notice . Borrower will cause its officers and employees to give their full
cooperation and assistance in connection therewith. The initial Advance
hereunder shall be subject to a field audit satisfactory to the Bank in its
discretion, the costs of which shall be borne by the Borrower.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents, warrants and covenants as follows:
5.1 Domestic Loan Documents. The representations and warranties contained in the
Domestic Loan Documents, which are incorporated by reference into this Exim
Agreement, are true and correct.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of the
Obligations, each Borrower shall do all of the following:
6.1 Domestic Loan Documents. Borrower shall comply in all respects with the
terms and provisions of the Domestic Loan Documents, which terms and provisions
are incorporated into this Exim Agreement and which shall include, without
limitation, compliance with the financial reporting requirements set forth in
Section 6.2 and the financial covenants set forth in Section 6.7of the Domestic
Agreement. In addition, the Borrower shall deliver to the Bank when a request
for an Advance is made and within twenty five (25) days of the end of each month
during
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which any Advances are outstanding or a request for an Advance is made, an aged
listing of accounts receivable together with a Borrowing Base Certificate in the
form annexed hereto as EXHIBIT D. In addition to the foregoing, each of
Datawatch International, Datawatch Europe, and Guildsoft shall remit monthly to
the United States all proceeds of collected Accounts, net of reasonable and
customary operating expenses of each of Datawatch International, Datawatch
Europe, and Guildsoft.
6.2 Terms of Sale. Borrower shall cause all sales of products upon which
Advances are based to be on open account to creditworthy buyers that have been
preapproved in writing by Bank.
6.3 Borrower Agreement. Borrower shall comply with all of the terms of the
Borrower Agreement, including without limitation, the delivery of any and all
notices required pursuant to Sections 2.11 and/or 2.18 of the Borrower
Agreement. In the event of any conflict or inconsistency between any provision
contained in the Borrower Agreement with any provision contained in this Exim
Agreement, the more strict provision, with respect to Borrower, shall control.
6.4 Notice in Event of Filing of Action for Debtor's Relief. Borrower shall
notify Bank in writing within five (5) days of the occurrence of any of the
following: (1) Borrower begins or consents in any manner to any proceeding or
arrangement for its liquidation in whole or in part or to any other proceeding
or arrangement whereby any of its assets are subject generally to the payment of
its liabilities or whereby any receiver, trustee, liquidator or the like is
appointed for it or any substantial part of its assets (including without
limitation the filing by Borrower of a petition for appointment as
debtor-in-possession under Title 11 of the U.S. Code); (2) Borrower fails to
obtain the dismissal or stay on appeal within thirty (30) calendar days of the
commencement of any proceeding arrangement referred to in (1) above; (3)
Borrower begins any other procedure for the relief of financially distressed or
insolvent debtors, or such procedure has been commenced against it, whether
voluntarily or involuntarily, and such procedure has not been effectively
terminated, dismissed or stayed within thirty (30) calendar days after the
commencement thereof, or (4) Borrower begins any procedure for its dissolution,
or a procedure therefor has been commenced against it.
6.5 Payment in Dollars. Borrower shall require payment in United States Dollars
or an Acceptable Foreign Currency subject to the terms and conditions of this
Exim Agreement for all of its products, except as the Exim Bank has authorized
and agreed in the Borrower Agreement, or otherwise agrees in writing hereafter.
6.6 Further Assurances. At any time and from time to time Borrower shall (i)
execute and deliver such further instruments, (ii) take such further action as
may reasonably be requested by Bank, and (iii) deliver such additional
information, reports, contracts, invoices and other data concerning the
Collateral as may reasonably be requested by Bank, all of the foregoing in
furtherance of the purposes of this Exim Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any Advance hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Bank may have any commitment to make any Advances, Borrower will
not do any of the following:
7.1 Domestic Loan Documents. Violate or otherwise fail to comply with any
provisions of the Domestic Loan Documents, which provisions are incorporated
into this Exim Agreement.
7.2 Loans to Shareholders or Affiliates. Without Exim Bank's prior written
consent, make any loans to any shareholder or entity affiliated with Borrower
other than loans from Datawatch US to one or more of the Guarantors in the
ordinary course of its business. As used in this Section 7.2, the term "loan"
does not include salary, reasonable rent paid to an affiliated entity owned by
the shareholders, or to other expenses incurred in the ordinary course of
Borrower's business.
7.3 Borrower Agreement. Violate or otherwise fail to comply with any provision
of the Borrower Agreement, including without limitation the negative covenants
set forth in Section 2.15.
7.4 Exim Guarantee. Take any action, or permit any action to be taken, that
causes or, with the passage of time, could reasonably be expected to cause, the
Exim Guarantee to cease to be in full force and effect.
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8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Exim Agreement:
8.1 Payment Default. If Borrower fails to pay within three (3) days of when due,
any of the Obligations;
8.2 Covenant Default; Cross Default. If Borrower fails or neglects to perform,
keep, or observe any material term, provision, condition, covenant, or agreement
contained in this Exim Agreement, in any of the Domestic Loan Documents, the
Borrower Agreement, or the Exim Loan Documents, or an Event of Default occurs
under any of the Domestic Loan Documents or the Borrower Agreement and as to any
such failure, neglect, or Event of Default that can be cured, has failed to cure
such default within ten (10) days after the occurrence thereof; provided,
however, that if the default cannot by its nature be cured within the ten (10)
day period or cannot after diligent attempts by Borrower be cured within such
ten (10) day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional reasonable period (which shall not
in any case exceed thirty (30) days) to attempt to cure such default, and within
such reasonable time period the failure to have cured such default shall not be
deemed an Event of Default (provided that no Advances will be required to be
made during such cure period);
8.3 Guaranty. Any guaranty of all or a portion of the Obligations ceases for any
reason to be in full force and effect, or any Guarantor fails to perform any
obligation under any guaranty of all or a portion of the Obligations, or any
material misrepresentation or material misstatement exists now or hereafter in
any warranty or representation set forth in any guaranty of all or a portion of
the Obligations or in any certificate delivered to Bank in connection with such
guaranty, or any of the circumstances described in Sections , 8.6, or 8.7 of the
Domestic Agreement shall occur with respect to any Guarantor;
8.4 Exim Guarantee. If the Exim Guarantee ceases for any reason to be in full
force and effect, or if the Exim Bank declares the Exim Guarantee void or
revokes or purports to revoke any obligations under the Exim Guarantee.
8.5 Cross-Default. The occurrence of any Event of Default (as defined in the
Domestic Loan Documents) with respect to the Domestic Loan Documents.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the continuance of an
Event of Default, Bank may, at its election, without notice of its election and
without demand, do any one or more of the following all of which are authorized
by the Borrower:
(a) Declare all Obligations, whether evidenced by this Exim Agreement,
the Domestic Loan Documents, or by any of the other Exim Loan
Documents, or otherwise, immediately due and payable (provided that
upon the occurrence of an Event of Default described in Section of the
Domestic Agreement, all Obligations shall become immediately due and
payable without any action by Bank);
(b) Cease advancing money or extending credit to or for the benefit of
Borrower under this Exim Agreement or under any other agreement between
Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) Notify customers of Borrower or other third parties to pay amounts
owing to Borrower directly to the Bank;
(e) Without notice to or demand upon Borrower, make such payments and
do such acts as Bank considers necessary or reasonable to protect its
security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to
Bank as Bank may designate. Borrower authorizes Bank to enter the
premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase,
contest, or compromise any encumbrance, charge, or lien which in Bank's
determination appears to be prior or superior to its security interest
and to pay all expenses incurred in connection therewith. With respect
to any of Borrower's
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premises, Borrower hereby grants Bank a license to enter such premises
and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or
otherwise;
(f) Without notice to the Borrower, set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by
Bank, or (ii) indebtedness at any time owing to or for the credit or
the account of Borrower held by Bank;
(g) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a non-exclusive,
royalty-free license or other right, solely pursuant to the provisions
of this Section 9.1, to use, without charge, Borrower's labels,
patents, copyrights, mask works, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and
selling any Collateral and, to the extent required for Bank's exercise
of its rights under this Section 9.1, Borrower's rights under all
licenses and all franchise agreements shall inure to Bank's benefit;
(h) Sell the Collateral at either a public or private sale, or both, by
way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply the proceeds thereof
to the Obligations in whatever manner or order it deems appropriate;
and
(i) Bank may credit bid and purchase at any public sale, or at any
private sale as permitted by law.
Any deficiency that exists after disposition of the Collateral as
provided above will be paid immediately by Borrower.
9.2 Exim Direction. Upon the occurrence of an Event of Default, Exim Bank shall
have a right to: (i) direct Bank to exercise the remedies specified in Section
9.1 and (ii) request that Bank accelerate the maturity of any other loans to
Borrower as to which Bank has a right to accelerate.
9.3 Exim Notification. Bank shall have the right to immediately notify Exim Bank
in writing if it has knowledge of the occurrence of any of the following events:
(1) any failure to pay any amount due under this Exim Agreement or the Note; (2)
the Borrowing Base is less than the sum of outstanding Advances hereunder; (3)
any failure to pay when due any amount payable to Bank by the Borrower under any
loan(s) extended by Bank to Borrower; (4) the filing of an action for debtor's
relief by, against, or on behalf of Borrower; or (5) any threatened or pending
material litigation against Borrower, or any material dispute involving
Borrower.
In the event that it sends such a notification to Exim Bank, Bank shall have the
right to thereafter send Exim Bank a written report on the status of the events
covered by said notification on each Business Day which occurs every thirty (30)
calendar days after the date of said notification, until such time as Bank files
a claim with Exim Bank or said default or other events have been cured. Bank
shall not have any obligation to make any Advances following said notification
to Exim Bank, unless Exim Bank gives its written approval thereto. If directed
to do so by Exim Bank, Bank shall have a right promptly to exercise any rights
it may have against Borrower to demand the immediate repayment of all amounts
outstanding under the Exim Loan Documents.
9.4 Remedies Cumulative. Bank's rights and remedies under this Exim Agreement,
the Exim Loan Documents, the Domestic Loan Documents and all other agreements
shall be cumulative. Bank shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by Bank of one right or remedy shall be deemed an election, and no
waiver by Bank of any Event of Default on Borrower's part shall be deemed a
continuing waiver. No delay by Bank shall constitute a waiver, election, or
acquiescence by it. No waiver by Bank shall be effective unless made in a
written document signed on behalf of Bank and then shall be effective only in
the specific instance and for the specific purpose for which it was given.
9.5 Power of Attorney. Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill of
lading relating to any Account,
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drafts against account debtors, schedules and assignments of Accounts,
verifications of Accounts, and notices to account debtors; (d) make, settle, and
adjust all claims under and decisions with respect to Borrower's policies of
insurance; (e) settle and adjust disputes and claims respecting the accounts
directly with account debtors, for amounts and upon terms which Bank determines
to be reasonable; and (f) to file, in its sole discretion, one or more financing
or continuation statements and amendments thereto, relative to any of the
Collateral without the signature of Borrower where permitted by law provided
Bank may exercise such power of attorney to sign the name of Borrower on any of
the documents described in Section regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide advances hereunder is terminated.
9.6 Accounts Collection. Upon the occurrence and during the continuance of an
Event of Default, Bank may notify any Person owing funds to Borrower of Bank's
security interest in such funds and verify the amount of such Account. Borrower
shall collect all amounts owing to Borrower for Bank, receive in trust all
payments as Bank's trustee, and if requested or required by Bank, immediately
deliver such payments to Bank in their original form as received from the
account debtor, with proper endorsements for deposit.
9.7 Bank Expenses. If Borrower fails to pay any amounts or furnish any required
proof of payment due to third persons or entities, as required under the terms
of this Agreement, then Bank may do any or all of the following: (a) make
payment of the same or any part thereof; (b) set up such reserves under the
Committed Revolving Line as Bank deems necessary to protect Bank from the
exposure created by such failure; or (c) obtain and maintain insurance policies
of the type discussed in Section 6.5 of the Domestic Agreement, and take any
action with respect to such policies as Bank deems prudent. Any amounts so paid
or deposited by Bank shall constitute Bank Expenses, shall be immediately due
and payable and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the future
or a waiver by Bank of any Event of Default under this Agreement.
9.8 Bank's Liability for Collateral. So long as Bank complies with reasonable
banking practices, Bank shall not in any way or manner be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto
occurring or arising in any manner or fashion from any cause; (c) any diminution
in the value thereof; or (d) any act or default of any carrier, warehouseman,
bailee, forwarding agency, or other person whomsoever. All risk of loss, damage
or destruction of the Collateral shall be borne by Borrower.
9.9 Demand; Protest. Borrower waives demand, protest, notice of protest, notice
of default or dishonor, notice of payment and nonpayment, notice of any default,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by Bank on which Borrower may in any way be liable.
10. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
The laws of the Commonwealth of Massachusetts shall apply to this
Agreement. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
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
AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF OF
THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER ACCEPTS JURISDICTION
OF THE COURTS AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA.
BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE
EXIM LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH
PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
11
<PAGE>
11. WAIVERS; INDEMNIFICATION
11.1 Indemnification. Borrower shall defend, indemnify and hold harmless Bank
and its officers, employees, and agents against: (a) all obligations, demands,
claims, and liabilities claimed or asserted by any other party in connection
with the transactions contemplated by this Exim Agreement, and (b) all losses or
Exim Bank Expenses in any way suffered, incurred, or paid by Bank as a result of
or in any way arising out of, following, or consequential to transactions
between Bank and Borrower whether under this Exim Agreement, or otherwise
(including without limitation reasonable attorneys fees and expenses), except
for losses caused by Bank's gross negligence or willful misconduct.
12. NOTICES
Unless otherwise provided in this Exim Agreement, all notices or
demands by any party relating to this Exim Agreement or any other agreement
entered into in connection herewith shall be in writing and (except for
financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by a
recognized overnight delivery service, by certified mail, postage prepaid,
return receipt requested, or by telefacsimile to Borrower or to Bank, as the
case may be, at the address set forth in the Domestic Loan Documents. The
parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.
13. GENERAL PROVISIONS
13.1 Successors and Assigns. This Exim Agreement shall bind and inure to the
benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Exim Agreement nor any rights
hereunder may be assigned by Borrower without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank shall
have the right without the consent of or notice to Borrower to sell, transfer,
negotiate, or grant participations in all or any part of, or any interest in
Bank's obligations, rights and benefits hereunder.
13.2 Time of Essence. Time is of the essence for the performance of all
obligations set forth in this Exim Agreement.
13.3 Severability of Provisions. Each provision of this Exim Agreement shall be
severable from every other provision of this Exim Agreement for the purpose of
determining the legal enforceability of any specific provision.
13.4 Amendments in Writing. This Exim Agreement cannot be changed or terminated
orally. Without the prior written consent of Exim Bank, no material amendment of
or deviation from the terms of this Exim Agreement or the Note shall be made
that would adversely affect the interests of Exim Bank under the Exim Guarantee,
including without limitation the rescheduling of any payment terms provided for
in this Exim Agreement. All prior agreements, understandings, representations,
warranties, and negotiations between the parties hereto with respect to the
subject matter of this Exim Agreement, if any, are merged into this Exim
Agreement.
13.5 Counterparts. This Exim Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Exim
Agreement.
13.6 Survival. All covenants, representations and warranties made in this Exim
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding. The obligations of Borrower to indemnify Bank with respect
to the expenses, damages, losses, costs and liabilities described in Section
11.1 shall survive until all applicable statute of limitations periods with
respect to actions that may be brought against Bank have run.
13.7 Countersignature. This Agreement shall become effective only when it shall
have been executed by Borrower and Bank (provided, however, in no event shall
this Agreement become effective until signed by an officer of Bank in
California).
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Exim Agreement
to be executed as of the date first above written.
DATAWATCH CORPORATION
By: /s/ Bruce R. Gardner
------------------------------------------
Name: Bruce R. Gardner
----------------------------------------
Title: President and Chief Executive Officer
---------------------------------------
DATAWATCH INTERNATIONAL LIMITED
By: /s/ Bruce R. Gardner
------------------------------------------
Name: Bruce R. Gardner
----------------------------------------
Title: Director
---------------------------------------
DATAWATCH EUROPE LTD.
By: /s/ Bruce R. Gardner
------------------------------------------
Name: Bruce R. Gardner
----------------------------------------
Title: Director
---------------------------------------
GUILDSOFT LTD.
By: /s/ Bruce R. Gardner
------------------------------------------
Name: Bruce R. Gardner
----------------------------------------
Title: Director
---------------------------------------
SILICON VALLEY BANK, d/b/a SILICON VALLEY EAST
By: /s/ James C. Maynard
------------------------------------------
Name: James C. Maynard
----------------------------------------
Title: Senior Vice President
---------------------------------------
SILICON VALLEY BANK
By: /s/ Heidi Fetty
------------------------------------------
Name: Heidi Fetty
----------------------------------------
Title: Assistant Vice President
---------------------------------------
(Signed in Santa Clara County, California)
13
<PAGE>
EXHIBIT A
---------
The Collateral consists of all of Borrower's right, title and interest
in and to the following:
All goods, equipment, inventory, contract rights, trademarks,
servicemarks, trade styles, trade names, patents, patent applications, leases,
license agreements, franchise agreements, general intangibles, accounts,
documents, instruments, chattel paper, cash, deposit accounts, fixtures, letters
of credit, investment property, and financial assets, whether now owned or
hereafter acquired, wherever located; and
Any copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work, whether
published or unpublished, now owned or later acquired; any patents, trademarks,
service marks and applications therefor; any trade secret rights, including any
rights to unpatented inventions, know-how, operating manuals, license rights and
agreements and confidential information, now owned or hereafter acquired; or any
claims for damages by way of any past, present and future infringement of any of
the foregoing; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.
14
<PAGE>
EXHIBIT B
---------
Revolving Promissory Note
(Export-Import Line)
$2,000,000.00 December 27, 1999
FOR VALUE RECEIVED, the undersigned (the "Borrower"), promises to pay
to the order of Silicon Valley Bank ("Bank"), at such place as the holder hereof
may designate, in lawful money of the United States of America, the aggregate
unpaid principal amount of all advances ("Advances") made by Bank to Borrower,
up to a maximum principal amount of Two Million Dollars ($2,000,000.00), plus
interest on the aggregate unpaid principal amount of such Advances, at the rates
and in accordance with the terms of the Export-Import Bank Loan and Security
Agreement between Borrower and Bank of even date herewith, as amended from time
to time (the "Loan Agreement") on the first calendar day of each month after an
Advance has been made. The entire principal amount and all accrued interest
shall be due and payable on December 27, 2000, or on such earlier date, as
provided for in the Loan Agreement.
Borrower irrevocably waives the right to direct the application of any
and all payments at any time hereafter received by Bank from or on behalf of
Borrower, and Borrower irrevocably agrees that Bank shall have the continuing
exclusive right to apply any and all such payments against the then due and
owing obligations of Borrower as Bank may deem advisable. In the absence of a
specific determination by Bank with respect thereto, all payments shall be
applied in the following order: (a) then due and payable fees and expenses; (b)
then due and payable interest payments and mandatory prepayments; and (c) then
due and payable principal payments and optional prepayments.
Bank is hereby authorized by Borrower to endorse on Bank's books and
records each Advance made by Bank under this Note and the amount of each payment
or prepayment of principal of each such Advance received by Bank; it being
understood, however, that failure to make any such endorsement (or any errors in
notation) shall not affect the obligations of Borrower with respect to Advances
made hereunder, and payments of principal by Borrower shall be credited to
Borrower notwithstanding the failure to make a notation (or any errors in
notation) thereof on such books and records.
Borrower promises to pay Bank all reasonable costs and reasonable
expenses including all reasonable attorneys' fees, incurred in such collection
or in any suit or action to collect this Note or in any appeal thereof, unless a
final court of competent jurisdiction finds that the Bank acted with gross
negligence or willful misconduct. Borrower waives presentment, demand, protest,
notice of protest, notice of dishonor, notice of nonpayment, and any and all
other notices and demands in connection with the delivery, acceptance,
performance, default or enforcement of this Note, as well as any applicable
statute of limitations. No delay by Bank in exercising any power or right
hereunder shall operate as a waiver of any power or right. Time is of the
essence as to all obligations hereunder.
This Note is issued pursuant to the Loan Agreement, which shall govern
the rights and obligations of Borrower with respect to all obligations
hereunder.
The law of the Commonwealth of Massachusetts shall apply to this
Agreement. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
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 OR THE LOAN AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK
CANNOT AVAIL ITSELF OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER
ACCEPTS JURISDICTION OF THE COURTS AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA.
BORROWER WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF ANY OF THE EXIM LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER
RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
15
<PAGE>
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. BORROWER REPRESENTS AND WARRANTS
THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
DATAWATCH CORPORATION
By: _____________________________________
Name: ____________________________________
Title: __________________________________
DATAWATCH INTERNATIONAL LIMITED
By: _____________________________________
Name: ___________________________________
Title: __________________________________
DATAWATCH EUROPE LTD.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
GUILDSOFT LTD.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
16
<PAGE>
EXHIBIT C
---------
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., E.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE: ______________________
FAX#: (781) 431-0755 TIME: ______________________
================================================================================
FROM:_____________________________________________________________________
CLIENT NAME (BORROWER)
REQUESTED BY:__________________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE: _________________________________________________________
PHONE NUMBER:__________________________________________________________________
FROM ACCOUNT #______________________________ TO ACCOUNT#_______________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE) $__________________________________
PRINCIPAL PAYMENT (ONLY) $__________________________________
INTEREST PAYMENT (ONLY) $__________________________________
PRINCIPAL AND INTEREST (PAYMENT) $__________________________________
OTHER INSTRUCTIONS: ___________________________________________________________
_______________________________________________________________________________
All representations and warranties of Borrower stated in the Loan
Agreement are true, correct and complete in all material respects as of the date
of the telephone request for and Advance confirmed by this Borrowing
Certificate; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
================================================================================
- --------------------------------------------------------------------------------
BANK USE ONLY:
TELEPHONE REQUEST:
- ------------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
- ------------------------------------------- ------------------------------------
Authorized Requester Phone #
- ------------------------------------------- ------------------------------------
Received by (Bank) Phone #
-----------------------------------
Authorized Signature (Bank)
17
<PAGE>
EXHIBIT D
---------
BORROWING BASE CERTIFICATE
COLLATERAL SCHEDULE
(FOREIGN A/R LINE OF CREDIT)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C>
Borrower: Datawatch Corporation Lender: Silicon Valley Bank
Datawatch International Limited 3003 Tasman Drive
Datawatch Europe Ltd. Santa Clara, CA 95054
Guildsoft Ltd.
900 Chelmsford Street, Tower 3, 5th Floor
Lowell, Massachusetts 01851-8100
Commitment Amount: $2,000,000.00
- ------------------------------------------------------------------------------------
</TABLE>
FOREIGN ACCOUNTS RECEIVABLE FROM EXPORT ACTIVITIES
1. Accounts Receivable Book Value as of ____________________ $__________
2. Additions (please explain on reverse) $__________
3. TOTAL FOREIGN ACCOUNTS RECEIVABLE $__________
ACCOUNTS RECEIVABLE DEDUCTIONS
1. Term in excess of 90 days $__________
2. Amounts over 60 days from due date of invoice $__________
3. Balance of 50% over 90 day accounts $__________
4. Excess 25% Concentration $__________
5. Accounts not payable in the U.S. $__________
6. Governmental and Military Accounts $__________
7. Contra Accounts $__________
8. Promotion, Demo or Consignment Accounts $__________
9. Intercompany/Employee and Affiliate Accounts $__________
10. Accounts in the form of L/Cs, if subject items have
not yet been shipped by Borrower $__________
11. Accounts, if any, arising from Inventory not originally
located in and shipped from the U.S. $__________
12. Accounts arising from the sale of defense articles
or items $__________
13. Accounts of buyers located in or from countries in
which shipment is prohibited or no coverage available $__________
14. Amounts due and collectable outside U.S. $__________
15. Other exclusions under Borrower Agreement or otherwise $__________
16. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $__________
17. Eligible Accounts (No. 3 - No. 19) $__________
18. Loan Value of Accounts (90% of No. 20)* $__________
*only if account payable in US Dollars or Acceptable Foreign Currency and
currency risk hedged, 80% for accounts in British Pounds where currency risk is
not hedged and 70% for other Acceptable Foreign Currencies where currency risk
is not hedged
BALANCES
1. Maximum Loan Amount $2,000,000.00
2. Total Funds Available [Lesser of #22 or #21] $__________
3. Present balance owing on Line of Credit $__________
4. Outstanding under Sublimits $__________
5. RESERVE POSITION (No. 23 minus No. 24 and No. 25) $__________
18
<PAGE>
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Collateral Schedule complies
with the representations and warranties set forth in the Borrower Agreement,
executed by Borrower and acknowledged by Lender, and the Export-Import Bank Loan
and Security Agreement, executed by Borrower and acknowledged by Lender dated
December 27, 1999, as may be amended from time to time, as if all
representations and warranties were made as of the date hereof, and that
Borrower is, and shall remain, in full compliance with its agreements,
covenants, and obligations under such agreement. Such representations and
warranties include, without limitation, the following: Borrower is using
disbursements only for the purpose of enabling Borrower to finance the cost of
manufacturing, producing, purchasing or selling items intended for export.
Borrower is not using disbursements for the purpose of: (a) servicing any of
Borrower's unrelated pre-existing or future indebtedness; (b) acquiring fixed
assets or capital goods for the use of Borrower's business; (c) acquiring,
equipping, equipping or renting commercial space outside the United States; (d)
supporting research and development; (e) paying salaries of non-U.S. citizens or
non-U.S. permanent residents who are located in the offices of the United
States; or (f) serving as a retainage or warranty bond. Additionally,
disbursements are not being used to finance the manufacture, purchase or sale of
any of the following: (a) items to be sold to a buyer located in a country in
which the Export Import Bank of the United States is legally prohibited from
doing business; (b) that part of the cost of the items which is not U.S. Content
unless such part is not greater than fifty percent (50%) of the cost of the
items and is incorporated into the items in the United States; (c) defense
articles or defense services or items directly or indirectly destined for use by
military organizations designed primarily for military use (regardless of the
nature or actual use of the items); or (d) any items to be used in the
construction, alteration, operation or maintenance of nuclear power, enrichment,
reprocessing, research or heavy water production facilities.
Sincerely,
DATAWATCH CORPORATION
By:_______________________________________
Name:_____________________________________
Chief Financial Officer
Date:_____________________________________
DATAWATCH INTERNATIONAL LIMITED
By: _____________________________________
Name: ___________________________________
Title: __________________________________
DATAWATCH EUROPE LTD.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
GUILDSOFT LTD.
By: _____________________________________
19
<PAGE>
Name: ___________________________________
Title: __________________________________
=================================
BANK USE ONLY
=================================
RECEIVED BY:____________________
DATE:________________
VERIFIED BY:____________________
20
EXHIBIT 10.25
DATED 24 February 1997
CONTRACT OF EMPLOYMENT
relating to
WORKGROUP SYSTEMS LIMITED (1)
ROBERT HAGGER (2)
S J BERWIN & CO
Ref: 22/504/LT:160367.2/D9803.17/fm
<PAGE>
DATE 24 FEBRUARY 1997
PARTIES
(1) WORKGROUP SYSTEMS LIMITED (NO. 2515018) WHOSE REGISTERED OFFICE IS AT
MAPLE HOUSE, POTTERS BAR, HERTFORDSHIRE, EN6 5BS INCLUDING ANY AND
ALL SUBSIDIARIES OF WORKGROUP SYSTEMS LIMITED, ("THE COMPANY")
(2) ROBERT HAGGER OF 16 DOMAINE DE LA BRAGUE, 06560 VALBONNE, FRANCE
("THE EMPLOYEE")
OPERATIVE PROVISIONS
1 JOB TITLE
1.1 The Company shall initially employ the Employee and the Employee
shall initially serve the Company as Managing Director and Chief
Operating Officer, reporting to the Chairman and Chief Executive
Officer of the Company.
1.2 After a period of three months from the Commencement Date, if in the
opinion of the Chairman and Chief Executive Officer, the Employee has
performed to a satisfactory standard (and his decision shall be
final), the job title of the Employee shall change. From that date
the Company shall employ the Employee and the Employee shall serve
the Company as Managing Director and Chief Executive Officer
reporting to the Executive Vice President of Datawatch Corporation.
2 PERIOD OF EMPLOYMENT
2.1 The Appointment shall commence on 4 March 1997 (the "Commencement
Date"). The Appointment is subject to a probationary period of three
months' duration. During this period the Appointment may be
terminated by two weeks' notice by either party.
2.2 Unless terminated earlier under Clause 2.1 or 10, the Appointment
will continue until terminated by either Party giving to the other
not less than two months' notice to expire on the last day of any
calendar month.
3 PAY AND EXPENSES
<PAGE>
3.1(b) The Employee shall be granted on signing the Agreement, an Option
under the Datawatch Corporation 1987 Stock Plan ("the Plan") to
purchase such number of Datawatch Corporation Common Stock $0.01 par
value shares at the market price, in Sterling, at the close of
trading on the Commencement Date, or the closest business day
thereto, if the Commencement Date is on a non-business day, divided
by (pound)25,000. The Option may be exercised in accordance with the
Plan, a copy of which is attached hereto as Schedule 7.
3.1(b) Clause 3.1(a) is subject to satisfactory completion of the
probationary period as set out in Clause 2.1 above. If the
probationary period is not completed, the Datawatch Corporation shall
cancel the Option as set out above with immediate effect and no
rights will arise in respect of the Option.
3.2 The Company shall pay to the Employee for the proper performance of
his duties under this Agreement:
(a) a fixed salary at the rate of (pound)115,000 per annum; and
(b) a bonus payable in accordance with and subject to the terms of
Schedule 6.
3.3 The fixed salary of the Employee will:
(a) accrue from day to day and be payable by equal monthly
instalments in arrears by not later than the last day of each
month;
(b) be paid by credit transfer to the account nominated by the
Employee from time to time; and
(c) be capable of set off by the Company from time to time against
any liability of the Employee to the Company.
3.3 The Employee undertakes not to divulge details of his salary to any
other employee of the Company or any Group Company.
3.4 The Employee hereby authorises the Company to deduct from any
remuneration accrued and due to him under the terms of this Agreement
or from any pay in lieu of notice:
(a) any overpayment of salary or expenses or payment made to the
Employee by mistake or through any misrepresentation;
<PAGE>
(b) any debt owed by the Employee to the Company or any Group
Company;
(c) any other sum or sums which may from time to time be deductible
pursuant to Section 13(1)(a) of the Employment Rights Act 1996;
and
(d) any tax or social security contributions due in respect of
remuneration or any other monies received or receivable by the
Employee from the Company.
3.5 The Company shall repay to the Employee all reasonable travelling,
hotel and other expenses properly incurred by him in or about the
performance of his duties, subject to the Employee having delivered
to the Company such form(s) and vouchers or other evidence of actual
payment of such expenses as the Company may from time to time
require. The decision of the Company as to what constitutes
reasonable expenses shall be conclusive.
4 OTHER BENEFITS
4.1 Until notice of termination of the Appointment is given and subject
to the Employee holding and continuing to hold a full driving
licence, the Company shall provide to the Employee a mid-size motor
car or car allowance for use by him in the proper performance of his
duties in accordance with the Company's car policy in force from time
to time.
4.2 The Employee shall be entitled to participate, at the Company's
expense, in a recognised medical health scheme for himself on terms
acceptable to the Company.
4.3 The Employee shall be entitled to participate, at the Company's
expense, in a recognised life insurance scheme for himself, with a
policy value not to exceed four times the Employee's fixed salary as
identified in Clause 32.(a), on terms acceptable to the Company.
5 HOLIDAY
5.1 In addition to the usual public and bank holidays, the Employee shall
be entitled to twenty (20) days' paid holiday in each complete
holiday year worked (and pro rata for part of each holiday year
worked) to be taken at such time or times as shall be agreed by the
Board.
5.2 The holiday year runs from 1 January each year to the following 31
December. Holiday entitlement may only be carried forward from one
holiday year to the next with the prior
<PAGE>
written permission of the Board. No money will be paid in lieu of any
untaken holiday entitlement.
5.3 Upon termination of the Appointment, other than pursuant to Clause
10.1, the Employee's entitlement to holiday will be calculated on the
basis of 1.5 calendar days for each calendar month of service
completed during the holiday year in which termination occurs and any
payment in lieu of untaken holiday entitlement will be made rounded
down to the next whole number of days' holiday. If the Employee has
exceeded the holiday entitlement there will be a deduction from
salary.
6 DUTIES
6.1 During the term of the Appointment, the Employee shall:
(a) undertake the duties and obligations agreed with the Company
from time to time and reporting to the individual as specified
in Clause 1;
(b) at all times use all reasonable endeavours to promote the
interests and welfare and maintain the goodwill of the Company
and any other Group Company and not to do and to exercise all
reasonable endeavours to prevent there being done anything with
may be prejudicial or detrimental to the Company or any Group
Company;
(c) faithfully and diligently perform his duties;
(d) devote the whole of his working time and attention and the full
benefit of his knowledge, expertise and skills in the proper
performance of his duties;
(e) comply with all lawful directions from time to time given to him
by the Board, and the individuals specified in Clause 1, and all
applicable rules and regulations from time to time laid down by
the Company;
(f) comply with the provisions of Schedule 2 with regard to
Copyright and Inventions;
(g) comply with the provisions of the Company's Policy regarding
Insider Trading; and
<PAGE>
(h) comply with, save as is inconsistent with the express terms of
this Agreement, all applicable rules and regulations from time
to time laid down by the Company concerning its employees in the
Staff Handbook.
6.2 The Employee shall attend and work at any of the places of business
of the Company and/or the Group and/or any client of the Company or
Group as determined from time to time by the Company and shall travel
to and work at such places (whether within or outside the United
Kingdom) in the manner and on the occasions required from time to
time by the Company. The Company shall not, without the Employee's
consent, require him to reside or work (other than temporarily)
outside the United Kingdom.
6.3 The Company may require the Employee to perform services for any
Group Company wherever situated and without further fees or
remuneration and any duties that he may have under this Agreement
will be deemed to extend to such Group Company.
6.4 The hours of the Employee are not fixed but are the usual working
hours of the Company and such additional hours as may be necessary to
enable him to properly discharge his duties. For the avoidance of
doubt, the Employee consents to working in excess of 48 hours when
required.
7 CONFIDENTIALITY
The Employee shall comply with the provisions of Schedule 3 with
regard to Confidentiality.
8 RESTRICTIONS DURING AND AFTER EMPLOYMENT
The Employee shall comply with the provisions of Schedule 4 with
regard to restrictions during and after employment.
9 ABSENCE, ILLNESS AND INCAPACITY
9.1 If at any time the Employee is prevented by reason of ill-health,
accident or other incapacity from properly performing his duties he
shall comply with the reporting and certification provisions set out
in the Staff Handbook.
<PAGE>
9.2 Any payment of remuneration made by the Company to the Employee
during period of absence due to sickness will be in accordance with
the Company's Sick Pay Policy as set out in the Staff Handbook from
time to time. Such payment is subject to deductions equivalent to any
amounts of state benefit that the Employee is entitled to claim. It
is the responsibility of the Employee to claim from the appropriate
authority such entitlement.
10 TERMINATION
10.1 The Company may at any time terminate the Appointment with immediate
effect (or by such longer period of notice as the Company shall see
fit) by giving the Employee written notice in any of the following
events:
(a) if the Employee at the time the notice is given is prevented by
reason of ill-health or accident or other incapacity from
properly performing his duties and has been so prevented
(whether by the same or another reason):
(i) where the Employee has been employed by the Company, for a
period of less than 2 complete years for an aggregate
period of at least 30 days (whether or not, in either
case, working days) in the preceding 12 months; and
(ii) where the Employee has been employed by the Company, for a
period of more than 2 complete years for an aggregate
period of at least 13 weeks (whether or not, in either
case, working days) in the preceding 12 months;
(b) if the Employee shall have:
(i) neglected or failed or refused to carry out any of his
duties or committed any material breach or non-observance
or, after having been given warning in writing, any
repeated or continued breach or non-observance of any of
his duties or any of his express or implied obligations
arising from the Appointment including refusing to comply
with any reasonable/lawful instructions given to him by
the Company;
<PAGE>
(ii) been guilty of conduct or permitted or suffered events
tending in the reasonable opinion of the Board to bring
himself/herself, the Company or any Group Company into
disrepute;
(iii) committed any act of fraud or dishonesty (whether or not
connected with the Appointment) or committed any act
which, in the reasonable opinion of the Company, adversely
affects his ability properly to carry out his duties;
(iv) been convicted of a criminal offence or been banned from
driving (drink/speed), before or after the Appointment,
and the Employee shall promptly notify the Company of any
such conviction; or
(v) become of unsound mind or a patient as defined in the
Mental Health Act 1983 or been admitted to hospital in
pursuance of an application made under Part 11 of that
Act.
10.2 For the avoidance of doubt, poor performance by the Employee will be
a disciplinary issue and will be dealt with under the company's
disciplinary rules and grievance procedure as contained in the Staff
Handbook.
10.3 The Company (and any relevant Group Company) shall not be obliged to
provide work to the Employee at any time after notice of termination
of the Appointment shall have been given by either party under any of
the provisions of this Agreement and the Company may, in its
discretion, take any one or more of the following steps in respect of
all or part of any unexpired period of notice:
(a) require the Employee to comply with such conditions as it may
specify in relation to attending at, or remaining away from, the
place(s) of business of the Company, the Group Companies and any
of the clients of the Company or Group Companies;
(b) assign the Employee to other duties; or
(c) withdraw duties assigned to the Employee.
<PAGE>
10.4 The Appointment shall automatically terminate without notice at the
end of the month in which the Employee attains the age of 60 years.
10.5 On the giving of notice to terminate the Appointment by either party
the Employee shall forthwith deliver up to the Company in accordance
with the directions of the Company the Company car, mobile telephone
and all computer equipment (including but not limited to any
computer, modem, printer, software and accessories) which may be in
his possession or control.
10.6 Upon termination of the Appointment however arising the Employee
shall deliver up to the Company in accordance with the directions of
the Company all keys, security passes, credit cards, Documents and
other property belonging to or relating to the business or affairs of
the Company or any Group Company, including all copies of all
Documents containing or referring to Confidential Information which
may be in his possession or under his control and shall not retain
copies, extracts or notes of any of the same.
10.7 The Company, if it has reason to suspect that any one or more of the
events set out in Clause 10.1(b) has or may have occurred, may
suspend the Employee pending the making and completion of such
investigation(s) as the Board thinks fit. While the suspension
continues, the Company shall pay to the Employee his fixed salary and
provide to him the other benefits set out in this Agreement. During
the period of suspension the Company and relevant Group Companies
shall not be obliged to provide work to the Employee and may require
the Employee to comply with such conditions as the Company may
specify in relation to attending at or remaining away from the places
of business of the Company and/or the Group Companies during the
period of the suspension. The Company may later terminate the
Appointment, pursuant to the terms of this Agreement, on the grounds
of the same or any other event.
11 THE EMPLOYMENT RIGHTS ACT 1996
This Agreement and Schedule 5 contain the employment particulars
required to be given under Sections 1 to 3 of the ERA.
12 NOTICES
Notices by either party must be sent by recorded delivery:
<PAGE>
(i) to the Company at its principal trading office for the time
being; and
(ii) to the Employee at his place of work or at the address set out
in this Agreement or such other address as the Employee may
from time to time have notified to the Company for the purpose
of this Clause.
13 GENERAL
13.1 This Agreement, which contains all the terms of employment of the
Employee, is in substitution for all existing contract(s) of
employment between the Company and any Group Company and the Employee
(whether written, oral or governed by a course of dealings) which
shall terminate with effect from the Commencement Date.
13.2 The waiver, express or implied, by either Party of any right under
this Agreement or any failure to perform or breach by the other shall
not constitute or be deemed a waiver of any other right under this
Agreement or of the same right on another occasion.
13.3 No amendment, change or addition to the terms of this Agreement shall
be effective or binding on either Party unless reduced to writing and
signed by each party adversely affected by such amendment, change or
addition. The Company reserves the right to amend or vary the terms
and/or conditions of the Employee's employment. Written notice will
be given to the Employee of any such changes. Acceptance of changes
of terms and conditions so made will be assumed unless the Employee
notifies the Company in writing of his objection within one calendar
month of notification of any changes.
13.4 The Employee represents and warrants that he is not a party to any
agreement, contract (whether of employment or otherwise) or
understanding which would in any way restrict or prohibit him from
undertaking or performing any of the duties of the Appointment in
accordance with this Agreement.
13.5 This Agreement is governed by and is to be construed in accordance
with the laws of England and the Parties hereby submit to the
non-exclusive jurisdiction of the High Court of Justice of England
and Wales.
<PAGE>
SCHEDULE 1
(1) In this Agreement, unless the context otherwise requires, the
following expressions have the meanings set out below:
Agreement this contract of employment;
Appointment the employment of the Employee pursuant to
this Agreement;
Board the board of directors of the Company for the
time being (including any committee of the
Board);
Combined Year-To-Date
Revenue and Profit
Percentage Achievement if, at the end of any Quarterly Accounting
Period, either the year-to-date revenue or
profit achievement is less than 100% of the
Company's Pre-determined Consolidated
Budgeted Year-to-Date Revenue or Profit
Objectives at the end of the same quarter,
the Combined Year-to-Date Revenue and Profit
Percentage Achievement at the end of that
quarter is computed by averaging the
year-to-date profit achievement and the
year-to-date revenue achievement at the end
of that quarter. If both the year -to-date
revenue and profit achievements at the end of
a quarter are 100% of the Company's
Pre-determined Consolidated Budgeted year-to
-Date Objectives at the end of the same
quarter, or higher, the Combined Year-to-Date
Revenue and Profit Percentage Achievement at
the end of that quarter is computed by
multiplying the year-to-date revenue
achievement at the end of the quarter by the
year-to-date profit achievement at the end of
the same quarter.
Commencement Date 4 March 1997;
Confidential
Information all information which may be imparted in
confidence or be of a confidential nature
relating to the business or prospective
business, current or projected plans or
internal affairs of the Company or any Group
Company and, in particular, but not limited
to
<PAGE>
all Know-how, Marketing Information, trade
secrets, unpublished information relating to
the Company's or any Group Company's
intellectual property and any other
commercial, financial or technical
information relating to the business or
prospective business of the Company or any
Group Company or to any client or potential
client, licensee, officer, supplier or
potential supplier or employee of the Company
or any Group Company;
Datawatch Corporation the parent company of the Company;
Documents documents, disks, memory, notebooks, tapes or
any other medium, whether or not
eye-readable, on which information (whether
confidential or otherwise) may from time to
time be referred to, written or recorded;
ERA the Employment Rights Act 1996;
Group all companies being any of a subsidiary of
the Company, or of its parent company, or a
holding company of the Company or a
subsidiary of any such holding company or any
other Company of which the Company's holding
company or any of its subsidiaries holds at
least 10% of the share capital or an
associate of the Company within the meaning
of Section 435 of the Insolvency Act 1986;
Group Company any company within the Group;
Key Employee any employee who is or was (in the period of
12 months prior to the Termination Date)
employed to the knowledge of the Employee in
a capacity in which he has access to or
obtained Confidential Information;
Know-how information (including without limitation
that comprised in formulae, specifications,
designs, drawings, component lists, software
(or pre-cursor documents), databases,
manuals, instructions and catalogues) held in
whatever form relating to the creation,
production or supply of any products or
services by the Company or any Group Company
or by or to any of the suppliers and
<PAGE>
customers of such company and in particular
the Staff Handbook;
Marketing Information information relating to the current or
prospective marketing or sales of any
products or services of the Company or any
Group Company, including any contact details
of any clients or prospective clients, and
the Company's electronic database of clients'
and prospective clients' names, addresses and
contacts, sales targets and statistics,
market share and pricing statistics,
marketing surveys, research and reports and
advertising and promotional material;
Permitted Interest an interest in any class of shares or other
securities of any company which are traded on
a recognised investment exchange which amount
to not more than 3% of such class of issued
shares or securities and an interest in any
units of any authorised unit trust;
Percent of
Year-To-Date Profit Achievement the actual year-to-date profit
achieved at the end of any Quarterly
Accounting Period divided by the
Pre-determined company's Year-To-Date
Consolidated Budgeted Profit Objective at the
end of the same quarter.
Percent of Year-To-Date
Revenue Achievement the actual year-to-date revenue achieved at
the end of any Quarterly Accounting Period
divided by the Pre-determined Company's
Year-To-Date Consolidated Budgeted Revenue
Objective at the end of the same quarter.
Pre-determined
Consolidated Budgeted
Year-To-Date Revenue
and Profit Objectives Year-to-date revenue and profit objectives
for each of the Company's Quarterly
Accounting Periods, consolidated to include
all of the Company's subsidiaries, said
objectives having been approved, prior to the
start of the Company's fiscal year, by the
President or the Executive Vice President of
Datawatch Corporation.
Quarterly Accounting
Periods three month periods, which, collectively,
from the Company's fiscal year, and
<PAGE>
individually, end of 30 September, 31
December, 31 March, and 30 June.
Staff Handbook the staff handbook containing all applicable
rules and regulations from time to time laid
down by the Company covering its employees;
Termination Date the date of termination or expiration of the
Appointment.
(2) The expressions "subsidiary" and "holding company" have the meanings
given to them by Sections 736 and 736A of the Companies Act 1985.
(3) References to Clauses, Parties, and the Schedules are respectively to
Clauses of and the Parties and the Schedules to this Agreement.
(4) References to any enactment are to be construed as referring also to
any enactment or re-enactment thereof (whether before or after the
date hereof), and to any previous enactment which such enactment has
replaced (with or without amendment provided that the amendment does
not change the law as at the date hereof) and to any regulation or
order made thereunder.
<PAGE>
SCHEDULE 2
COPYRIGHT AND INVENTIONS
1 In this Schedule "Intellectual Property" shall mean patents, trade
marks and service marks, rights in inventions, design rights,
registered designs, trade names and copyrights (whether or not any of
these is registered and including applications for registration of
any such thing) and all forms of protection of a similar nature which
may subsist anywhere in the world.
2 The Employee acknowledges, having regard to the nature of the
business of the Company and other Group Companies and the nature of
the Employee 's expertise, that:
(a) the normal duties of the Employee under the Appointment may
include the making of inventions;
(b) inventions may reasonably be expected to result from the
carrying out by the Employee of such duties; and
(c) due to the nature of the Employee's duties and the particular
responsibilities arising from the nature of his duties, the
Employee has a special obligation to further the interests of
the Company's undertaking.
3 The Employee shall disclose to the Company any invention made or
discovered or produced by the Employee in the course of the
Appointment (whether or not during office hours or using office
stationery and equipment) in connection with or in any way affecting
or relating to or capable of being used or adapted for use in the
business of the Company or any other Group Company.
4 The Employee shall do all things and execute all documents that may
be necessary to enable the Company or its nominee to obtain the
benefit of every invention made by the Employee in the course of his
duties and to secure patent or other appropriate protection for it.
5 Without prejudice to the provisions of paragraph 2 of this Schedule
2, the Employee shall disclose to the Company full details of any
Intellectual Property or copyright work made or created by the
Employee during the continuance of the Appointment (whether or not
<PAGE>
during office hours or using office stationery and equipment) and the
Employee hereby assigns to the Company, by way of assignment of
future copyright or other Intellectual Property rights, all rights of
copyright or other Intellectual Property rights throughout the world
in that copyright work or Intellectual Property.
6 The Employee shall, before working, assigning or granting rights in
relation to any invention or copyright work or other Intellectual
Property rights to which the Company is not entitled under this
Agreement and/or at law, allow the Company or any Group Company
nominated by it a reasonable opportunity to evaluate the same and the
Employee shall not dispose of any rights to any third party unless he
shall first have given written notice to the Company with full,
complete and bona fide details of the price and terms offered by the
third party offering the Company, or any Group Company, an
opportunity to purchase the rights concerned at the same price and on
the same terms within 28 days of the date of the notice.
<PAGE>
SCHEDULE 3
1 CONFIDENTIALITY
1.1 Neither during the continuance of the Appointment, other than in the
proper course of his duties and for the benefit of the Company, nor
after the Termination Date for any reason whatsoever, shall the
Employee:
(a) use, disclose or communicate to any person any Confidential
Information which he shall have come to know or have received or
obtained at any time (before or after the date of this
Agreement) by reason of or in connection with his service with
the Company; or
(b) copy or reproduce in any form or by or on any media or device or
allow others access to or to copy or reproduce Documents
containing or referring to Confidential Information.
1.2 The Employee acknowledges that all Documents containing or referring
to Confidential Information at any time in his control or possession
are and shall at all times remain the absolute property of the
Company and the Employee undertakes, both during the Appointment and
after the Termination Date:
(a) to exercise due care and diligence to avoid any unauthorised
publication, disclosure or use of Confidential Information and
any Documents containing or referring to it;
(b) at the direction of the Company, to deliver up any Confidential
Information (including all copies of all Documents whether or
not lawfully made or obtained) or to delete Confidential
Information from any re-usable medium; and
(c) to do such things and sign such documents at the expense of the
Company as shall be reasonably necessary to give effect to this
Clause and/or to provide evidence that it has been complied
with.
1.3 The restrictions in paragraph 1.1:
(a) will not restrict the Employee from disclosing to the proper
recipient any Confidential Information which the Employee is
required to disclose by law or
<PAGE>
any order of the court or any relevant regulatory body provided
that the Employee shall have given prior written notice to the
Company of the requirements of the information to be disclosed
and allowed the Company an opportunity to comment on the
requirement before making the disclosure; and
(b) will not apply to Confidential Information which is or which
comes into the public domain otherwise than as a result of an
unauthorised disclosure by the Employee or any other person who
owes the Company an obligation of confidentiality in relation to
the information disclosed.
1.4 The Employee agrees that the restrictions set out in this Schedule 3
are without prejudice to any other duties of confidentiality owed to
the Company whether express or implied and are to survive the
termination of the Appointment.
2 RELEVANT DEFINITIONS
For the purposes of the restrictions set out in Schedule 3 and
Schedule 4:
(a) the expression "Company" shall include any former owner or
transferor of a business acquired by the Company by which the
Employee shall have been employed under a contract of employment
in respect of which his service is included for the purposes of
calculating continuous employment with the Company;
(b) any reference to the Company and to the Company's trade or
business shall be deemed to include any Group Company and its
trade or business and/or to apply to them as if the words were
repeated by reference to such company insofar as the Employee
shall have been performing services to any material extent for a
period of not less than three (3) months for such Group Company
at any time during the period of one year prior to the
Termination Date and the Employee hereby undertakes to execute
any further documents which the Company may require to confirm
this; and
(c) where references to the Company and Company's trade or business
are deemed to include and/or apply to a Group Company and to a
Group Company's business pursuant to paragraph 2(b) of this
Schedule, the Employee covenants with the
<PAGE>
Company for itself and in the same terms in relation to each
such Group Company and each Group Company's business as he does
with the Company and in respect of the Company's business.
<PAGE>
SCHEDULE 4
1 RESTRICTIONS DURING EMPLOYMENT
1.1 Save as permitted under paragraph 2 of this Schedule 4, the Employee
shall not during the Appointment carry on or be concerned, engaged or
interested directly or indirectly (whether as principal, shareholder,
partner, employee, officer, agent or otherwise) in any trade or
business other than that of the Company.
1.2 The Employee may:
(a) hold a Permitted Interest; and/or
(b) carry on or be concerned, engaged or interested in any other
trade or business if he shall have:
(i) provided, on the basis of the utmost good faith, full
particulars of its nature and of the likely demands it
will make on his time and abilities; and
(ii) obtained the prior written consent of the Company, which
consent may be given subject to such terms or conditions
as it may decide (each of which shall be considered to be
a term of this Agreement) and the Company shall have the
right to reconsider the consent or the terms if it
reasonably considers that it is in the interests of the
Company to do so.
(c) retain a directorship in Insight Strategy Management Limited
during the probationary period identified in Clause 2.1.
1.3 The Employee shall not during the Appointment either on his own
behalf or on behalf of any person, firm or company:
(a) solicit or endeavour to entice away from the Company an actual
employee, or discourage from being employed by the Company any
person who, to the knowledge of the Employee, is a prospective
employee of the Company; or
(b) employ or procure another person to employ any such person.
<PAGE>
1.4 The Employee shall not, other than in the proper cause of his duties
and for the benefit of the Company, directly or indirectly, to any
member of the press or broadcasting media or via electronic bulletin
board make any statements (whether written or oral) on matters
concerning the Company's business or affairs or those of any client
of the Company, or in any way referring to his position in the
Company, or using the Company's address, without the prior written
permission of the Company.
1.5 The Employee undertakes to promptly inform the Company if his spouse,
partner or a close relative with whom he is living is engaged or
employed by any competitor of the Company.
2 RESTRICTIONS AFTER EMPLOYMENT
2.11 The Employee shall not, save in respect of a Permitted Interest or
with the prior written consent of the Company (which shall not be
unreasonably withheld), for a period of four (4) months from the
Termination Date carry on or be concerned or engaged or interested
directly or indirectly (whether as principal, shareholder, partner,
employee, officer, agent or otherwise) in any part of any trade or
business which competes with any part of any trade or business
carried on by the Company in which the Employee (or any other
employee on his behalf or under his instructions) shall have been
actively engaged or involved at any time during the period of six (6)
months prior to the Termination Date.
2.22 The Employee shall not for a period of four (4) months from the
Termination Date either on his own behalf or on behalf of any person,
firm or company in relation to the business activities of the Company
in which the Employee has been engaged or involved directly or
indirectly:
(a) solicit, approach or offer services to or entice away from the
Company; or
(b) deal with or accept custom from; or
(c) carry on or be concerned or engaged or interested directly or
indirectly (whether as principal, shareholder, partner,
employee, officer, agent or otherwise) in;
any person, firm or company who at the Termination Date (or at any
time during 6 months prior to the Termination Date) was a client of
the Company and in each case with whom
<PAGE>
the Employee (or any other employee on his behalf or under his direct
instruction) has been actively engaged or involved by virtue of his
duties hereunder;
PROVIDED THAT nothing contained in paragraph 2(a), (b) or (c) shall
prohibit the Employee from carrying out any activities which are not
in competition with any part of the business of the Company with
which the Employee was involved during six (6) months prior to the
Termination Date.
2.3 The Employee shall not for a period of four (4) months from the
Termination Date either on his own behalf or on behalf of any person,
firm or company in relation to the business activities of the Company
in which the Employee has been engaged or involved directly or
indirectly approach, solicit, endeavour to entice away, employ, offer
employment to or procure the employment of any person who, at the
Termination Date (or at any time during the six (6) months prior to
the Termination Date), is or was a Key Employee, (in each case being
a person which the Employee or any other employee on his behalf or
under his direct instruction has had dealings within a period of six
(6) months prior to the Termination Date) whether or not such person
would commit any breach of his contract of employment or engagement
by reason of so leaving the service of the Company or otherwise.
2.4 The Employee shall not, at any time after the Termination Date,
either on his own behalf or on behalf of any other person, firm or
company directly or indirectly represent himself as being in any way
connected with or interested in the business of the Company (other
than as a Employee or a member if such be the case) or use any name
which is identical or similar to or likely to be confused with the
name of the Company or any product or service produced or provided by
the Company or which might suggest a connection with the Company.
2.5 The Employee (who acknowledges that, in the course of the
Appointment, he is likely to have dealings with the clients, and Key
Employees of the Company) agrees that each of the restrictions in
paragraphs 2.2, 2.2(a), (b) and (c), 2.3 and 2.4 is separate and
distinct, is to be construed separately from the other restrictions,
and is reasonable as regards its duration, extent and application for
the protection of the legitimate business interests of the Company.
However, in the event that any such restriction shall be found to be
void or unenforceable but would be valid or enforceable if some part
or parts of it were deleted,
<PAGE>
the Employee agrees that such restriction shall apply with such
deletions as may be necessary to make it valid and effective.
<PAGE>
SCHEDULE 5
1 The Company's disciplinary rules and grievance procedure are
contained in the Staff Handbook which will be issued to the Employee
on the first day of his employment.
2 If the Employee is dissatisfied with any disciplinary decision
relating to him then the Employee may apply in writing within three
working days to the Personnel Manager.
3 A contracting-out certificate under the Pension Schemes Act 1993 is
not in force in respect of the Appointment.
The Company shall be at liberty at any time and at its own discretion
to vary the rules and procedures referred to in this Schedule.
<PAGE>
SCHEDULE 6
BONUSES WHICH THE EMPLOYEE IS ELIGIBLE TO EARN
The rules as set out below regarding cash bonuses and stock option bonuses which
the Employee is eligible to earn are flexible and may, at the absolute
discretion of the Company, be varied from time to time. The Employee will be
notified by the Company in writing prior to any such variation of any changes to
the rules.
A. CASH BONUS
1 Bonus Eligibility
The Employee is eligible to earn cash bonuses for each of the
Company's Quarterly Accounting Periods in which the Company's revenue
and profit results for the Company's fiscal year-to-date do not fall
below acceptable limits as set out below.
1.1 For the third quarter of the Company's 1997 fiscal year, which is the
period from 1 April 1997 to 30 June 1997, and which is the first
Quarterly Accounting Period in which the Employee is eligible to earn
a bonus, the minimum acceptable limit which must be achieved before
the Employee is eligible to earn a cash bonus is a 75% combined
Quarterly Revenue and Profit Percentage Achievement for that quarter
predicated solely on the Company's consolidated performance in the
third quarter, and ignoring prior year-to-date performance of the
Company.
1.2 For the fourth quarter of the Company's 1997 fiscal year, which is
the period from 1 July 1997 to 30 September 1997, and for each of the
Company's Quarterly Accounting Periods thereafter, the minimum
acceptable limit, which must be achieved before the Employee is
eligible to earn a cash bonus, is a Combined Year-To-Date Revenue and
Profit Percentage Achievement at the end of the relevant quarter of
at least 80%. In the Company's 1997 fiscal year, the year in which
the Employee begins his participation in this bonus plan, for the
purposes of bonus computation only, the fiscal year will consist
solely of the third and fourth quarters of the Company's 1997 fiscal
year. In fiscal year 1998, and each year thereafter, the bonus
computation will be based upon all of the Quarterly Accounting
Periods of the Company's fiscal year.
2. Bonus Computation
<PAGE>
Bonus is calculated by multiplying the Combined Year-To-Date Revenue
and Profit Percentage Achievement at the end of a Quarterly
Accounting Period by the aggregate year-to-date Cash Bonus for the
same Quarterly Accounting period, and subtracting from that total any
bonuses previously paid in the same year.
2.1 The Cash Bonus is presently established at(pound)10,000 for each of
the Company's Quarterly Accounting periods.
3. Bonus Payments
Subject to paragraph 3.1 below, any cash bonus payments payable to
the Employee under paragraphs 1 and 3 above, shall be paid not later
than the last day of the month following the end of the Quarterly
Accounting Period to which the bonus relates.
3.1 A bonus shall not be paid to the Employee for any Quarterly
Accounting period if during that period the company has given the
Employee notice to terminate the Appointment for any reason specified
in Clauses 2.1 or 10.1, or notice to terminate has been served under
Clause 2.2.
4. Reimbursement of Unearned Bonus Payments
Combined Year-To-Date Revenue and Profit Percentage Achievement,
during the course of the fiscal year, may require the repayment of
earlier quarterly bonuses, or options thereof, paid in the same
fiscal year. For example, if the Combined Year-To-Date Revenue and
profit Percentage Achievement in the first two quarters of a fiscal
year were 105% the Employee would have been paid a bonus of
(pound)30,000. If, at the end of the third Quarterly Accounting
Period, in the same fiscal year, the Combined Year-To-Date Revenue
and Profit Percentage Achievement for the Company were to drop to
80%, this figure, when multiplied by the aggregate of the
year-to-date quarterly cash bonuses for that quarter, in this
instance (pound)30,000, would produce an amount, in this instance,
(pound)24,000, which falls below the total value of previously paid
bonuses, (pound)30,000 in this example, thus, generating a
requirement for a payback of a portion of the earlier bonus payments,
in this instance (pound)6,000 ((pound)30,000-(pound)24,000=(pound)
6,000).
4.1 Subject to paragraph 4.2 below, reimbursement of any unearned bonus
payments shall normally be effected by deducting the repayment amount
from future bonuses earned.
<PAGE>
Special alternative arrangements for the repayment of unearned
bonuses can be made only upon the written authorizaiton of the
President or Executive Vice President of Datawatch Corporation.
4.2 If the Company has given the Employee notice to terminate the
Appointment for any reason specified in Clause 10.1, or notice to
terminate has been served under Clause 2.2, any unearned bonuses owed
by the Employee to the Company shall become immediately due and
payable, and the Company is specifically authorized to collect the
same in accordance with Clause 3.3(c), and such other means as may be
at its disposal.
B. STOCK OPTION BONUS
1. Bonus Eligibility
The Employee is eligible to earn stock option bonuses for each of the
Company's Quarterly Accounting Periods in which the Company's revenue
and profit results for the Company's fiscal year-to-date do not fall
below acceptable limits as set out below.
1.1 For the third quarter of the Company's 1997 fiscal year, which is the
period from 1 April 1997 to 30 June 1997, and which is the first
Quarterly Accounting Period in which the Employee is eligible to earn
a bonus, the minimum acceptable limit which must be achieved before
the Employee becomes eligible to earn a stock option bonus is a 75%
Combined Revenue and Profit Percentage Achievement for that quarter
predicated solely on the Company's consolidated performance in the
third quarter, and ignoring the prior year-to-date performance of the
Company.
1.2 For the fourth quarter of the Company's 1997 fiscal year, which is
the period from 1 July 1997 to 30 September 1997, and for each of the
Company's Quarterly Accounting Periods thereafter, the minimum
acceptable limit, which must be achieved before the Employee becomes
eligible to earn a stock option bonus is a Combined Year-To-Date
Revenue and Profit Percentage Achievement at the end of the relevant
quarter of at least 80%. In the Company's 1997 fiscal year, the year
in which the Employee begins his participation in this bonus plan,
for the purposes of bonus computation only, the fiscal year will
consist solely of the third and fourth quarters of the Company's 1997
fiscal year. In fiscal year
<PAGE>
1998, and each year thereafter, the bonus computation will be based
upon al of the Quarterly Accounting Periods of the Company's fiscal
year.
2. Bonus Computation
Bonus is calculated by multiplying the Combined Year-To-Date Revenue
and Profit Percentage Achievement at the end of a Quarterly
Accounting Period by the aggregate year-to-date Stock Option Bonus
for same Quarterly Accounting Period, and subtracting from that total
nay stock option bonuses previously paid in the same year. The total
value of the stock option earned in that quarter when divided by the
market price, in Sterling, of Datawatch Corporation Common Stock
$0.01 par value shares, at the close of trading on the day of
issuance, shall determine the number of shares for which the Employee
is granted an option.
2.1 The Stock Option Bonus is presently established at(pound)6,250 for
each of the Company's Quarterly Account Periods.
3. Bonus Payments
Subject to paragraph 3.1 below, any stock option bonus payments
payable to the Employee under paragraph 2 above, shall be paid not
later than the last day of the month following the end of the
Quarterly Accounting period to which the bonus relates.
3.1 A bonus shall not be paid to the Employee for any Quarterly
Accounting Period if during that period the Company has given the
Employee notice to terminate the Appointment for any reason specified
in Clauses 2.1 or 10.1, or notice to terminate has been served under
Clause 2.2.
4. Reimbursement of Unearned Stock Option Grants
Combined Year-To-Date Revenue and Profit Percentage Achievement,
during the course of the fiscal year, may require the repayment of
earlier quarterly bonuses paid in the same fiscal year. For example,
if the Combined Year-To-Date Revenue and Profit Percentage
Achievement in the first two quarters of fiscal year were 150%, the
Employee would have been paid a stock option bonus with a value of
(pound)18,750. If at the end of the third Quarterly
<PAGE>
Accounting period, in the same fiscal year, the Combined Year-To-Date
Revenue and Profit Percentage Achievement for the Company were to
drop to 80%, this figure, when multiplied by the aggregate value of
the year-to-date quarterly stock option bonus for that quarter, in
this instance (pound)18,750, would produce an amount, in this
instance a stock option bonus value of (pound)15,000, which falls
below the total value of previously paid stock option bonuses,
(pound)18,750 in this example, thus, generating a requirement for a
payback of a portion of the earlier stock option bonus payments, in
this instance (pound)3,750
((pound)18,750-(pound)15,000=(pound)3,750).
4.1 Subject to paragraph 4.2 below, reimbursement of any unearned stock
option grants shall normally be effected by deducting any unearned
grants in full from future stock option bonuses earned, until
complete repayment has been accomplished.
4.2 If the Company has given the Employee notice to terminate the
Appointment for any reason specified in Clause 10.1, or notice to
terminate has been served under Clause 2.2, any unearned stock option
grants owed by the Employee to the Company shall be cancelled by
Datawatch Corporation on the date of the termination.
5. Stock Option Grants Under 1987 Stock Plan
Stock options provided under paragraph 3, above, are granted pursuant
to and are governed by Datawatch Corporation's 1987 Stock Plan, a
copy of which is attached hereto as Schedule 7. This Plan also
governs the exercise of such options.
<PAGE>
ATTESTATIONS
Signed on behalf of
WORKGROUP SYSTEMS LIMITED ) /s/ Clifford G. Zimmer, Jr.
by its duly authorised officers: ) Chairman & Chief Executive Officer
Signed by ROBERT HAGGER: ) /s/ Robert Hagger
EXHIBIT 10.26
AMENDMENT AGREEMENT
Amendment Agreement (the "Agreement") dated as of July 15, 1999, by and
between Datawatch International Limited (formerly WorkGroup Systems Limited)
(the "Company") and Robert Hagger (the "Employee").
RECITALS
WHEREAS, the Company and the Employee are parties to a contract of
employment dated February 24, 1997 (the "Employment Contract"); and
WHEREAS, the parties desire to amend the Employment Contract.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties hereto agree as follows:
1. The following sentence is hereby inserted at the end of
Section 2.2:
; provided, however, that in the event that the Company
terminates the Employee's employment for any reason except as
provided in Section 10 hereof, the period of notice shall be
not less than twelve (12) months.
2. Except as hereby amended the Employee Contract shall remain in
full force and effect.
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
DATAWATCH INTERNATIONAL LIMITED
By: /s/ Bruce R. Gardner
--------------------------
Name: Bruce R. Gardner
Title: Director
/s/ Robert Hagger
--------------------------
Robert Hagger
EXHIBIT 10.27
Date: December 27, 1999
DATAWATCH EUROPE LIMITED
(as Chargor)
SILICON VALLEY BANK
(as Bank)
MORTGAGE DEBENTURE
FIELD FISHER WATERHOUSE 35 Vine Street London EC3N 2AA
<PAGE>
Contents
NO HEADING PAGE
CLAUSES
1. Definitions and interpretation 1
2. Covenant to pay 5
3. Mortgages and Charges 5
4. Restrictions on other Securities and Disposals 10
5. Perfection of the Bank's Security 11
6. Collection of Debts 13
7. Conversion of Floating Charge 13
8. Insurance 15
9. Undertakings by the Chargor 18
10. Extension and Variation of the Law of Property Act 1925 26
11. Appointment of Receiver 28
12. No Liability as Mortgagee in Possession 37
13. Expenses 38
14. Power of Attorney 39
15. Protection of Purchasers 41
16. Subsequent Charges 41
17. Redemption of Prior Mortgages 42
18. Set-Off 42
19. Payments 43
<PAGE>
20. Currency 45
21. Suspense Account 46
22. The Bank's Remedies 47
23. Provisions Severable 49
24. The Bank's Discretion 49
25. Certificates 49
26. Assignment; Successors 49
27. Discharge 50
28. Law and Jurisdiction 50
29. Constitutional Documents 51
30. Counterparts 51
31. Notices 51
Schedule 1 Details of the Property 54
<PAGE>
THIS MORTGAGE DEBENTURE is made on December 27, 1999
BETWEEN
(1) DATAWATCH EUROPE LIMITED (Company No. 02887429) whose registered office
is at The Software Centre, East Way, Lee Mill Industrial Estate,
Ivybridge, Plymouth, PL21 9PE (the "CHARGOR"); and
(2) SILICON VALLEY BANK a California chartered bank having its principal
place of business at 3003 Tasman Drive, Santa Clara, California 95054,
United States of America (the "BANK").
WITNESSES as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINED TERMS
In this Mortgage Debenture:-
"BANK'S RIGHTS" means any of the rights, powers and remedies provided
by this Mortgage Debenture or by law;
"BANK" means Silicon Valley Bank (and includes its successors in title
and assigns);
"CHARGED DEBTS" means the book and other debts and liabilities hereby
charged as more particularly referred to in Clause 3.1(B)(ii);
"COLLATERAL" means the property, assets and income of the Chargor for
the time being mortgaged, assigned or charged (whether by way of fixed
or floating charge) to the Bank by or pursuant to this Mortgage
Debenture and each and every part thereof;
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"DEFAULT RATE" means the rate of interest described under the heading
"Default Rate" in Section 1 of the Loan Agreement;
"ENVIRONMENTAL LAWS" means all laws (statutory, common or otherwise)
including, without limitation, circulars, guidance notes and codes of
practice from time to time relating to the protection of the
environment (including, without limitation, any laws requiring the
remediation of contaminated land or water), or regulating the carrying
on of any process or activity on premises and any emissions from, and
all waste produced by, such process or activity and any such chemicals
or substances relating to the same whether relating to health and
safety, the workplace, the environment or the provision of energy
(including without limitation the Health and Safety at Work etc Act
1974, the Control of Pollution Act 1974, the Environmental Protection
Act 1990, the Environment Act 1995, the Water Industry Act 1991, the
Water Resources Act 1991, the Statutory Water Companies Act 1991, the
Water Consolidation (Consequential Provisions) Act 1991, the Clean Air
Acts, the Alkali & c. Works Regulation Act 1906, the Planning Hazardous
Substances Act 1990, the Public Health Acts and the Radioactive
Substances Act 1960 and any European Community legislation regarding
the same) from time to time in force and any other instrument, plan,
regulation, permission, authorisation and direction made or issued
thereunder or deriving validity therefrom;
"ENVIRONMENTAL LICENCE" means any permit, licence, authorisation,
consent or other approval required by or given pursuant to any
Environmental Laws;
"GUARANTEE" means the Guarantee dated of even date herewith and made
between the Chargor as guarantor and the Bank in respect of Datawatch
Corporation;
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"PERMITTED ENCUMBRANCES" means any lien arising in the ordinary course
of business of the Chargor which is discharged in the ordinary course
of such business;
"PROPERTY" means all the freehold and/or leasehold properties (if any)
more particularly described in the Schedule which is the subject of
this security and refers to each and every part of the Property
including all buildings, fixtures and fittings and fixed plant and
machinery from time to time thereon owned by the Chargor and the
proceeds of sale of all or any part thereof, and the benefit of any
covenants for title given or entered into by any predecessor in title
of the Chargor and any moneys paid or payable in respect thereof;
"RECEIVER" means a receiver receivers or receiver and manager or
administrative receiver or receivers appointed by the Bank under this
Mortgage Debenture;
"SECURED OBLIGATIONS" means all monies which now are or at any time
hereafter may be or become due or owing by the Chargor to the Bank
under or in connection with the Guarantee and all other liabilities
(including, without limitation, liability to pay liquidated or
unliquidated damages), whether actual or contingent, now existing or
hereafter incurred by the Chargor to the Bank anywhere and in any
manner whatever (and in either case whether due, owing or incurred by
the Chargor alone or jointly with any other person(s) and in whatever
name, form or style and whether as principal or surety) and all other
monies and liabilities payable or to be discharged by the Bank under or
pursuant to this Mortgage Debenture;
"SECURITY INTEREST" means any mortgage, charge, pledge, lien,
hypothecation, encumbrance, assignment, trust arrangement, title
retention, or other security interest (other than a lien
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<PAGE>
arising in the ordinary course of business by operation of law);
"SECURITY PERIOD" means the period commencing on the date of this
Mortgage Debenture and ending on the date upon which all the Secured
Obligations have been unconditionally and irrevocably paid and
discharged in full; and
"VAT" means Value Added Tax payable pursuant to the provisions of the
Value Added Tax Act 1994 or any other tax amending, replacing or
substituting the same.
1.2 TERMS DEFINED IN GUARANTEE
Terms defined in the Guarantee shall unless otherwise defined in this
Mortgage Debenture or unless the context otherwise requires, have the
same meaning when used herein.
1.3 CONSTRUCTION OF CERTAIN TERMS
In this Mortgage Debenture:
(a) Clause headings are inserted for convenience only and shall
not affect the construction of this Mortgage Debenture and
unless otherwise specified, all references to Clauses and to
Schedules (if any) are to clauses of, and the schedules to,
this Mortgage Debenture and references to Sub-clauses are to
sub-clauses of the Clause in which the reference appears;
(b) Section 61 of the Law of Property Act 1925 shall govern the
construction hereof, and where the context so admits, any
reference herein to any statute or any provision of any
statute shall be deemed to include reference to any statutory
modification or re-enactment thereof and to any regulations or
orders made thereunder and from time to time in force;
4
<PAGE>
(c) the masculine gender shall include the feminine and neuter
genders and the singular shall include the plural and vice
versa;
(d) references to persons shall include references to bodies
corporate and unincorporate;
(e) references to any document are to be construed as references
to such document as amended or supplemented from time to time;
and
(f) references to the Bank include references to any person or
persons to whom the Bank may dispose of this Mortgage
Debenture or any interest or right created by or existing
under it and the successors in title to any such person in
respect of any such interest or right.
1.4 EFFECT AS A DEED
It is intended that this Mortgage Debenture take effect as a deed
notwithstanding the fact that the Bank may only execute this document
under hand.
2. COVENANT TO PAY
The Chargor covenants with the Bank that it will pay and discharge to
the Bank the Secured Obligations on the due date therefor in the
currency specified and otherwise in all respects in the manner provided
in the Guarantee.
3. MORTGAGES AND CHARGES
3.1 MORTGAGES AND FIXED AND FLOATING CHARGES
The Chargor, with full title guarantee, hereby (and to the intent that
the security so constituted shall be a continuing security in
5
<PAGE>
favour of the Bank) charges with the payment and discharge of the
Secured Obligations:
(A) by way of first legal mortgage the Property.
(B) by way of first fixed charge (which so far as it relates to
land in England and Wales and Northern Ireland vested in the
Chargor at the date hereof shall be a charge by way of legal
mortgage) the following namely:-
(i) all estates and other interests in freehold,
leasehold and other immovable property wheresoever
situate now or hereafter belonging to the Chargor
(including, without limitation, all its right, title
and interest in the Property (other than so far as
the same is charged by way of first legal mortgage
under sub-clause (A)) and all buildings, trade and
other fixtures, fixed plant and machinery belonging
to the Chargor from time to time on any such
freehold, leasehold and other immovable property;
(ii) all book and other debts and monetary claims now or
at any time hereafter due or owing or incurred to the
Chargor including all accounts with banks (including
but not limited to the account referred to in Clause
6.1) and the moneys deposited therein and interest
accruing the arrears and claims arising in respect of
accounts, together with the full benefit of all
guarantees and securities therefor and indemnities in
respect thereof and all liens, reservations of title,
rights of tracing and other rights enabling the
Chargor to enforce any such debts or claims;
(iii) the benefit of all insurance policies and contracts
of insurance
6
<PAGE>
relating to the Property and all moneys payable under
any such policies and contracts and all VAT payable
on the same;
(iv) the benefit of all rentals, rents, service charges
and licence fees (if any) payable under or in respect
of any lease, underlease, tenancy or agreement for
lease affecting the Property and all VAT payable on
the same, and of all personal covenants given by any
tenant or occupier of the Property or guarantor of
such tenant or occupier to the Chargor;
(v) the Chargor's rights now or hereafter to recover any
VAT on any supplies made to it relating to the
Property and any sums so recovered;
(vi) the benefit of all contracts, deeds, undertakings,
agreements, rights, warranties, securities,
covenants, guarantees, bonds and indemnities of any
nature now or at any time enjoyed or held by the
Chargor and relating to the Property (including but
without limitation any deposit or other sum paid by
way of security or paid under any contract for the
sale of the Property or any part thereof or under any
option contract relating to the Property (whether or
not such deposit is forfeited), and all compensation
paid in relation to the Property) and all VAT payable
on the same;
(vii) all stocks, shares, debentures, loan capital, rights
to subscribe for, convert other securities into or
otherwise acquire any stocks, shares, debentures and
loan capital of any other body corporate now or at
any time
7
<PAGE>
hereafter belonging to the Chargor, together with all
dividends, interest and other income and all other
rights of whatsoever kind deriving from or incidental
to any of the foregoing;
(viii) the goodwill of the Chargor and its uncalled capital
now or at any time hereafter in existence and future
calls (whether made by the directors of the Chargor
or by a Receiver appointed hereunder or a
liquidator);
(ix) all and any sums payable, by purchasers or others,
upon the disposal (whether by transfer, assignment or
otherwise) of, or the grant or creation of, any
interest in the Property or any part thereof, and
including any other sums of a capital nature derived
from the Property or any part thereof, and including,
compensation or damages received for any use or
disturbance, blight or compulsory purchase in respect
of the Property or any part thereof, after deduction
in each case of all reasonable costs and expenses
directly and properly incurred in connection with
such disposal, grant or creation;
(x) all chattels now or at any time hereafter hired,
leased or rented by the Chargor to any other person
together in each case with the benefit of the related
hiring, leasing or rental contract and any guarantee,
indemnity or other security for the performance of
the obligations of any person under or in respect of
such contract insofar as the same are capable of
being charged; and
(xi) all present and future copyrights, patents and all
registered patents owned
8
<PAGE>
by the Chargor from time to time and all applications
for registration of any patent owned by the Chargor
from time to time, design rights and all registered
designs owned by or licenced by or to the Chargor
from time to time, trademarks and all applications
for trademarks (and all goodwill associated
therewith), service marks and all applications for
service marks, brand names and/or business names,
inventions, design rights, all trade secrets and
know-how and all other intellectual property rights
whatsoever without limitation, whether registered or
unregistered in all or any part of the world in which
the Chargor is legally, beneficially or otherwise
interested and the benefit of any pending
applications for the same and all benefits deriving
therefrom and thereunder including but not limited to
royalties, fees, profit sharing agreements and income
arising therefrom and all licences in respect of or
relating to any intellectual property rights, whether
such licences are granted to the Chargor or granted
by the Chargor.
(C) By way of first floating charge the whole of the Chargor's
undertaking and all its property, rights and assets whatsoever
and wheresoever, present and future, other than any property
or assets from time to time or for the time being effectively
charged to the Bank by way of the legal mortgage or fixed
charge or assigned to the Bank by sub-clauses (A) or (B) of
Clause 3.1 respectively or otherwise pursuant to this Mortgage
Debenture.
3.2 CONTINUING SECURITY
9
<PAGE>
The security from time to time constituted by or pursuant to this
Mortgage Debenture shall:-
(a) be in addition to and shall be independent of every bill,
note, guarantee, mortgage or other security which the Bank may
at any time hold for any of the Secured Obligations and it is
hereby declared that no prior or other security or other
interest held by the Bank over the Collateral or any part
thereof shall merge in the security created hereby or pursuant
thereto; and
(b) remain in full force and effect as a continuing security until
the discharge and satisfaction of all the Secured Obligations
and the Chargor is under no further obligation actual or
contingent under this Mortgage Debenture.
4. RESTRICTIONS ON OTHER SECURITIES AND DISPOSALS
4.1 NEGATIVE PLEDGE
The Chargor shall not at any time without the prior written consent or
agreement of the Bank (and to the intent that any purported dealing in
contravention of this Clause shall be void and of no effect):-
(a) create, or purport to create, extend or permit to subsist any
mortgage or other fixed security, floating charge, pledge,
hypothecation or lien (other than a lien arising by operation
of law) or other security interest of any kind, whether in any
such case ranking in priority to or PARI PASSU with or after
the fixed and floating charges created by the Chargor under
Clause 3.1 above or any other security of the Bank created
pursuant to this Mortgage Debenture other than the Permitted
Encumbrances; or
10
<PAGE>
(b) sell, transfer, lease, lend or otherwise dispose of, whether
by means of one or a number of transactions related or not and
whether at one time or over a period of time, the whole or any
material part of the Chargor's undertaking or of its assets,
or enter into an agreement for sale, transfer, lease, loan or
other disposal of the whole or any such part.
4.2 RESTRICTION AT HM LAND REGISTRY
In the case of any part of the Property consisting of land which is for
the time being registered at HM Land Registry, the Chargor and the Bank
jointly apply to the Chief Land Registrar to enter a restriction in the
Proprietorship Register of the relevant title or titles in the
following terms:
"EXCEPT UNDER AN ORDER OF THE REGISTRAR NO DEALING BY THE PROPRIETOR OF
THE PROPERTY COMPRISED IN THIS TITLE OR MADE IN EXERCISE OF A POWER OF
SALE UNDER ANY CHARGE SUBSEQUENT TO CHARGE NUMBER [ o ] IN THE CHARGES
REGISTER IS TO BE REGISTERED WITHOUT THE CONSENT OF THE PROPRIETOR FOR
THE TIME BEING OF THE CHARGE NUMBER [ o ] IN THE CHARGES REGISTER".
The "charge number [ o ]" referred to above will be the entry number in
the Charges Register of the relevant title which relates this Mortgage
Debenture."
5. PERFECTION OF THE BANK'S SECURITY
5.1 FURTHER ASSURANCE
The Chargor shall from time to time, whensoever requested by the Bank
and at the Chargor's cost, execute in favour of the Bank, or as it may
direct, such further or other legal assignments, transfers, mortgages,
legal or other charges or
11
<PAGE>
securities as in each such case the Bank shall reasonably stipulate
over the Chargor's estate or interest in any property or assets of
whatsoever nature or tenure and wheresoever situate and forming part of
the Collateral for perfecting the security intended to be created by
this Mortgage Debenture and for facilitating the realisation of the
Collateral. Without prejudice to the generality of the foregoing, such
assignments, transfers, mortgages, legal or other charges, or
securities shall be in such form as shall be prepared on behalf of the
Bank and may contain provisions such as are herein contained or
provisions to the like effect and/or such other provisions of
whatsoever kind as the Bank shall reasonably consider requisite for the
improvement or perfection of the security constituted by or pursuant to
this Mortgage Debenture (but not otherwise). The obligations of the
Chargor under this Clause 5.1 shall be in addition to and not in
substitution for the covenants for further assurance deemed to be
included herein by virtue of the Law of Property (Miscellaneous
Provisions) Act 1994.
5.2 DEPOSIT OF TITLE DEEDS
The Chargor shall immediately upon the execution of this Mortgage
Debenture (or upon becoming possessed thereof at any time hereafter)
deposit with the Bank all deeds, certificates and other documents
constituting or evidencing title to the Collateral or any part thereof.
5. 3 AFFIXING OF NOTICES
The Chargor shall, whenever requested by the Bank and at the Chargor's
cost, affix to such items of the Collateral or register, endorse or
cause to be registered or endorsed on such documents as are referred to
in Clause 5.2 as the Bank shall in each case stipulate, labels, signs
or memoranda in such form as the Bank shall reasonably require
referring or drawing attention
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<PAGE>
to the security constituted by or pursuant to this Mortgage Debenture.
5.4 NOTICES TO THIRD PARTIES
The Chargor will from time to time as requested by the Bank deliver any
notices to any third party having rights or liabilities in or to any of
the Collateral will procure the issue by such third party of
acknowledgements reasonably required by the Bank.
6. COLLECTION OF DEBTS
6.1 COLLECTION AND PAYMENT INTO DESIGNATED ACCOUNT
The Chargor shall at all times during the continuance of the security
constituted by or pursuant to this Mortgage Debenture get in and
realise and pay into a designated account in the name of the Chargor
with such bank as the Bank may stipulate all monies which the Chargor
may receive in respect of the Charged Debts, and if its authority to do
so is terminated by the Bank giving notice following an Event of
Default under either of the Loan Agreements, shall not draw money from
such account.
6.2 NOT TO DEAL
The Chargor shall not at any time following an Event of Default under
either of the Loan Agreements without the prior written consent of the
Bank deal with the Charged Debts or other monies otherwise than by
getting in the same and making payment thereof into such designated
account referred to in Clause 6.1. Without prejudice to the generality
of the foregoing, the Chargor shall not at any such time factor or
discount any of such debts or claims or enter into any agreement for
such factoring or discounting.
7. CONVERSION OF FLOATING CHARGE
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<PAGE>
7.1 BY NOTICE
The Bank shall be entitled immediately upon the occurrence of any Event
of Default under either of the Loan Agreements or at any time
thereafter or if the Bank reasonably considers such assets to be in
danger of being seized or sold under any form of distress, attachment,
execution or other legal process or to be otherwise in jeopardy, by
notice in writing to the Chargor to convert the floating charge created
by Clause 3.1(C) into a fixed charge affecting all the property and
assets which for the time being are the subject of such floating charge
or, as the case may be, such of the said property and assets as are
specified by such notice. This provision shall not preclude the
floating charge from becoming fixed in any of the events in which under
this Mortgage Debenture or under the general law it would do so.
7.2 AUTOMATIC CONVERSION
The floating charge hereby created shall (in addition to the
circumstances in which the same will occur under general law)
automatically be converted into a fixed charge:
(a) on the convening of any meeting of the members of the
Chargor to consider a resolution to wind the Chargor up (or
not to wind the Chargor up);
(b) on the presentation of a petition (other than a frivolous or
vexatious petition) to wind the Chargor up; or
(c) if the Chargor fails to comply with its obligations under
Clause 4.1.
7.3 Service by the Bank of a notice pursuant to Clause 7.1 in relation to
any class of the
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Chargor's assets shall not be construed as a waiver or abandonment of
the Bank's rights to serve similar notices in respect of any other
class of assets or of any other of the rights of the Bank.
8. INSURANCE
8.1 REQUIRED COVER
The Chargor shall at all times during the subsistence of the security
constituted by or pursuant to this Mortgage Debenture comply with all
covenants, undertakings and conditions as to insurance of any part of
the Collateral in any of the Loan Documents and/or required by the
terms of any lease, agreement for lease or tenancy granted by the
Chargor or to which any of the Collateral is for the time being subject
or under which the Chargor derives its estate or interest therein and,
subject to the foregoing and so far as this Clause is not inconsistent
with the said terms of such lease, agreement for lease or tenancy, the
Chargor shall at all such times:-
(a) cause all buildings, trade and other fixtures, fixed and other
plant and machinery forming part of the Collateral (if any) to
be insured and to be kept insured:-
(i) (if the Bank shall so stipulate) in an insurance
office or with underwriters approved by the Bank
against loss or damage by fire, and all such other
risks which it is usual to insure against in the case
of the relevant Collateral (including, in the case of
the Property, full cover against terrorism to the
extent available) and against such other or
additional risks as the Bank shall direct, to the
full reinstatement value thereof (together in the
case of the Property with additional amounts
estimated as sufficient to cover
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architects', surveyors' and other requisite
professional advisers' fees in relation to the
reinstatement of the Property and five years' loss of
rent and Service Charge in respect of the Property
and the costs of demolition, site clearance and
shoring-up and VAT on the cost of reinstatement) and
with the interest of the Bank noted on the policy of
insurance and providing for the Bank to be the loss
payee thereunder (or, if the Bank shall so direct, in
the joint names of the Chargor and the Bank); or
(ii) (if and to the extent that the Bank does not so
stipulate) in such insurance office of repute as
shall have been selected by the Chargor or with
Lloyd's underwriters on the same basis as insurances
are maintained by prudent companies carrying on
businesses comparable with that of the Lessee and on
a comparable scale as regards the property and assets
insured, the insured risks and the classes of risk to
be covered; and
(iii) procure that any such policy of insurance contains a
Bank protection clause whereby the insurance effected
will not be vitiated or avoidable as against a
mortgagee in the event of any misrepresentation act
or neglect or failure to disclose on the part of the
Chargor (subject to the payment of any increased
premium required by the insurer) and a Landlord
protection clause whereby the insurance will not be
vitiated or avoidable as against the Chargor or the
mortgagee as a result of anything done or omitted by
a tenant of the Property without the knowledge of the
Chargor and the mortgagee (subject
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<PAGE>
to usual terms as to notification and payment of
additional premiums),
(b) procure that there are maintained such other insurances as are
normally maintained by prudent persons carrying on similar
businesses to the Lessee or which may be required by the Bank
(acting reasonably) including without limitation insurance
against liability to third parties arising out of the
ownership or occupation of the Property or the state or
condition thereof;
(c) duly and punctually pay all premiums and other moneys payable
under all such insurances as aforesaid and as soon as
reasonably practicable following written request by the Bank
produce to the Bank the premium receipts or other evidence of
the payment thereof; and
(d) (if so required by the Bank) deposit all policies and other
contracts of insurance relating to the Collateral or any part
thereof with the Bank or produce the same to the Bank for
inspection.
8.2 BANK'S RIGHT TO INSURE
If default shall be made by the Chargor in complying with Clause 8.1
after a reasonable demand regarding such has been made by the Bank to
the Chargor in writing it shall be lawful for the Bank, but not
obligatory on the Bank, to insure and keep insured such Collateral
either in its own name or in its name and that of the Chargor jointly
or in the name of the Chargor with an endorsement of the Bank's
interest. The monies expended by the Bank on so effecting or renewing
any such insurance shall be reimbursed by the Chargor to the Bank on
demand and until so reimbursed shall carry interest from the date of
payment to the date of reimbursement at the Default Rate.
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8.3 TRUST
All claims and monies received or receivable under any such insurance
as aforesaid shall (subject to the rights and claims of and obligations
of the Chargor to any prior mortgagee or chargee or any lessee, lessor
or landlord of any part of the Collateral) be held by the Chargor in
trust for the Bank and shall be applied by the Chargor in repaying or
reducing the Secured Obligations or, if the Bank shall so require, in
repairing, replacing, restoring or rebuilding the property damaged or
destroyed.
8.4 NO AVOIDANCE OF INSURANCE
The Chargor shall not do any act or commit any default by which any
policy of insurance may become void or voidable.
8.5 PAYMENT OF PROCEEDS
The Chargor shall not do any act or commit any default by which the
Bank may be prevented from receiving all monies payable under any
policy of insurance relating to the Collateral and shall ensure that
all sums at any time payable under any of such policies of insurance of
the Collateral shall be paid to the Bank.
9. UNDERTAKINGS BY THE CHARGOR
The Chargor hereby undertakes with the Bank that the Chargor will at
all times while there shall subsist any security constituted by or
pursuant to this Mortgage Debenture:-
(a) INFORMATION
provide the Bank, its employees, professional advisers and
agents with all such information respecting the Chargor's
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business and affairs as the Bank may from time to time
require;
(b) PAY OUTGOINGS
punctually pay or cause to be paid all rents, rates, taxes,
duties, assessments and other outgoings payable in respect of
the Collateral or any part thereof;
(c) REPAIR
keep all buildings and erections on or forming part of the
Property or any other freehold or leasehold property hereby
charged in good and substantial repair and condition and
adequately and properly painted and decorated and keep the
fixtures and fittings thereon and all plant, machinery,
implements and other effects for the time being owned by it in
a good state of repair and in good working order and condition
(in each case replacing, rebuilding, and renewing the same
when necessary);
(d) RIGHT OF ENTRY
permit the Bank and such persons as the Bank may from time to
time for that purpose appoint at reasonable times and upon
reasonable notice to enter and inspect and view the state and
condition of the Property and if any unauthorised alterations
or additions or any defects or disrepair are found upon such
inspection the Bank may enter onto the Property and execute
such replacements or removals, repairs or works as may be
necessary, the cost of which shall be paid by the Chargor to
the Bank on demand. The Chargor shall not be in breach of this
undertaking where the terms of any lease prohibit such entry
and the Chargor, having used all reasonable endeavours to
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obtain the relevant tenant's consent to such entry, has failed
to obtain the requisite permission;
(e) LEASES AND USE
not without the prior written consent of the Bank:
(i) grant or agree to grant (whether in exercise of any
statutory power or otherwise) any lease, underlease,
tenancy or agreement for lease affecting the
Collateral;
(ii) confer or agree to confer on any other person any
other right or licence to occupy any land or
buildings forming part of the Collateral or grant any
licence to assign or sub-let the Collateral or any
part thereof;
(iii) waive, release or vary or agree to waive, release or
vary any of the terms of any lease, underlease,
tenancy or agreement for lease affecting the
Collateral including the determination or review of
any rent payable thereunder nor exercise any power to
terminate or extend the same;
(iv) forfeit nor commence proceedings for forfeiture nor
exercise any right of re-entry nor accept the
surrender of any lease, underlease, tenancy or
agreement for lease affecting the Collateral; or
(v) change or permit or suffer to be changed the present
user of any part of the Collateral,
(f) ENVIRONMENTAL
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not cause, permit or suffer any substance, the presence of
which may require work of containment, restoration or clean up
to be undertaken under any applicable law whether on or off
the Collateral, or which causes or threatens to cause either a
nuisance under the provisions of the Environmental Protection
Act 1990 or the Environment Act 1995, or the presence of which
on adjacent properties could constitute a trespass by the
Chargor or which in an uncontained form may cause pollution of
the environment or harm to human health or detriment to the
amenities of the locality or which is otherwise toxic,
explosive, corrosive, radioactive, carcinogenic or mitogenic,
to be brought upon, treated, kept, stored, disposed of,
discharged, released, processed, produced, manufactured,
generated, refined or used upon, above or beneath any freehold
or leasehold forming part of the Collateral;
(g) PERFORM LEASE COVENANTS
observe and perform or (as the case may be) enforce the
observance and performance of all regulations, covenants and
provisions reserved by or contained in any lease, agreement
for lease or tenancy agreement affecting the Collateral and
neither take any step nor omit to take any step whatsoever if
in consequence of the taking or omission to take such step
such lease, agreement for lease or tenancy agreement may be
surrendered or forfeited or the rent thereunder may be
increased;
(h) PERFORM RESTRICTIVE AND OTHER COVENANTS
observe and perform all restrictive and other covenants and
stipulations for the time being affecting any part of the
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Collateral or the use or the enjoyment of the same or any part
thereof;
(i) INDEMNITY AGAINST OUTGOINGS
indemnify the Bank (and as a separate covenant any Receiver or
Receivers appointed by it) against all existing and future
rents, taxes, duties, fees, renewal fees, charges,
assessments, impositions and outgoings whatsoever (whether
imposed by deed or statute or otherwise and whether in the
nature of capital or revenue and even though of a wholly novel
character) which now or at any time during the continuance of
the security constituted by or pursuant to this Mortgage
Debenture are payable in respect of the Collateral or any part
thereof or by the owner or occupier thereof and so that if any
such sums as are referred to in this sub-paragraph (i) of
Clause 9.1 shall be paid by the Bank (or any such Receiver or
Receivers) the same shall be repaid by the Chargor on demand
with interest from the time or respective times of the same
having been paid at the Default Rate;
(j) COMPLY WITH STATUTORY PROVISIONS
comply or cause compliance in all respects with the provisions
of all statutes for the time being in force and requirements
of any competent authority relating to the Collateral or
anything done thereon by the Chargor and in particular (but
without prejudice to the generality of the foregoing) to
observe and perform or cause to be observed and performed all
the provisions and requirements of the Town and Country
Planning Act 1990, the Planning (Listed Buildings and
Conservation Areas) Act 1990, the Planning (Hazardous
Substances) Act 1990, the Planning
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(Consequential Provisions) Act 1990, the Planning and
Compensation Act 1991 and any Act amending, replacing or
modifying such Acts and all regulations and orders thereunder
(together, the "PLANNING ACTS") and the Registered Homes Act
1984 and all regulations and orders thereunder and before the
Chargor serves any discretionary notices the Chargor will
obtain the Bank's consent and to obtain or cause to be
obtained any development or other consent which may be
requisite by reason of the development of or on any of the
Collateral;
(k) VAT
not without the prior written consent of the Bank to exercise
any option to waive exemption from VAT in relation to the
Collateral or any part thereof and to give to the Bank on
demand all such details of the Chargor's registration for VAT
purposes as the Bank shall require;
(l) SUPPLY DETAILS OF NOTICES RECEIVED
give full particulars to the Bank of any notice or order or
proposal for a notice or order made, given or issued to the
Chargor under or by virtue of any statute including (without
prejudice to the generality of the foregoing) the Planning
Acts, or any regulation or order issued thereunder, within
seven days of receipt of such notice, order or proposal by the
Chargor and, if so required by the Bank, to produce such
notice, order or proposal to the Bank or its agents and also
as soon as practicable take all reasonable and necessary steps
to comply with any such notice, order or proposal or (if
required to do so by the Bank) to join with the Bank at the
cost of the Chargor in making such representation or appeals
as the Bank may deem fit in respect of any such
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notice, order or proposal and (without prejudice to the
generality of the foregoing) at all times during the
continuance of this security to give to the Bank or its agents
such information as they shall reasonably require as to all
matters relating to the Collateral;
(m) NOT TO WASTE
not do or permit or suffer to be done in or upon the
Collateral any waste, spoil or destruction nor to make or
permit any development, alteration or addition whatsoever,
structural, external, internal or otherwise, or any change of
user, to the Collateral without the consent in writing of the
Bank (which shall not be withheld where the Chargor cannot
withhold it under the terms of any Lease) and in the event of
the Bank giving any such consent as aforesaid to carry out all
such works in accordance with the provisions and conditions of
the consent and to the reasonable satisfaction of the Bank;
provided that the consent of the Bank shall not be required in
the case of minor alterations to shop fronts or fascias nor in
the case of internal non-structural alterations;
(n) CHARGED DEBTS
not without the prior written consent of the Bank release,
exchange, compound set-off, grant time or indulgence in
respect of or in any other manner, deal with all or any of the
Charged Debts otherwise than in the ordinary course of its
business or except as expressly provided for herein;
(o) NOTIFY MATERIAL MATTERS
notify the Bank of any matters materially affecting the value,
enforceability or
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collectability of any part of the Collateral and of all
material disputes, counterclaims, returns and rejections by or
of customers of the Company;
(p) COMPLIANCE WITH ENVIRONMENTAL LICENCES
obtain all requisite Environmental Licences applicable to the
Collateral and comply with the terms and conditions of the
same;
(q) COMPLIANCE WITH ENVIRONMENTAL LAWS
comply with all Environmental Laws applicable to the
Collateral and not permit a contravention of the same;
(r) NOTIFY CLAIMS
notify the Bank of the receipt of and contents of all claims,
notices or other communications in respect of any alleged
breach of any Environmental Licences or any Environmental Laws
which may, if substantiated, have a material adverse effect on
the market value of the Collateral and shall forthwith take
such steps as the Bank may reasonably direct to remedy and/or
cease the continuation of any such alleged breach;
(s) PAY ENVIRONMENTAL LICENCE FEES
promptly pay all fees and other charges in respect of any
Environmental Licence applicable to the Collateral;
(t) NOTIFY NOTICES CONCERNING ENVIRONMENTAL LICENCES
forthwith notify the Bank of the receipt of and the contents
of any notices or other communications varying or suspending
any Environmental Licence relating to the
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Collateral and forthwith take such steps as the Bank may
reasonably direct to reinstate in full force and effect any
Environmental Licence so varied or suspended;
(u) SUPPLY ENVIRONMENTAL REPORTS
forthwith supply the Bank with copies of any environmental
reports, audits or studies undertaken in relation to the
Collateral; and
(v) ENVIRONMENTAL INDEMNITY
indemnify the Bank and each Receiver appointed under this
Mortgage Debenture and their respective officers, employees,
agents and delegates (together the "INDEMNIFIED PARTIES")
against any cost or expense suffered or incurred by them
which:-
(i) arises by virtue of any actual or alleged breach of
any Environmental Laws (whether by the Chargor, an
Indemnified Party or any other person);
(ii) would not have arisen if this Mortgage Debenture had
not been executed; and
(iii) was not caused by the negligence or wilful default of
the relevant Indemnified Party.
10. EXTENSION AND VARIATION OF THE LAW OF PROPERTY ACT 1925
10.1 POWER OF SALE
Section 103 of the Law of Property Act 1925 shall not restrict the
exercise by the Bank of the statutory power of sale conferred on it by
section 101 of such Act, which power shall arise and may be exercised
by the Bank immediately upon and at any time after the Bank has made
demand under the Guarantee and the provisions of the
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said Act relating to and regulating the exercise of the said power of
sale shall, so far as they relate to the security constituted by or
pursuant to this Mortgage Debenture, be varied and extended
accordingly.
10.2 STATUTORY POWERS OF LEASING
The statutory powers of leasing, letting, entering into agreements for
leases or lettings and accepting and agreeing to accept surrenders of
leases conferred by Sections 99 and 100 of the said Act shall not be
exercisable by the Chargor in relation to any part of the Collateral
without the prior written consent of the Bank, but the foregoing shall
not be construed as a limitation of the powers of any Receiver
appointed hereunder and being an agent of the Chargor. Such statutory
powers shall be exercisable by the Bank upon or at any time after the
occurrence of an Event of Default and, whether or not the Bank shall
then be in possession of the premises proposed to be leased, so as to
authorise the Bank to make a lease or agreement for lease at a premium
and for any length of term and generally without any restriction on the
kinds of leases and agreements for lease that the Bank may make and
generally without the necessity for the Bank to comply with any
restrictions imposed by or the other provisions of the said Sections 99
and 100. The Bank may delegate such powers to any person and no such
delegation shall preclude the subsequent exercise of such powers by the
Bank itself or preclude the Bank from making a subsequent delegation
thereof to some other person; and any such delegation may be revoked.
10.3 CONSOLIDATION OF MORTGAGES
The restriction on the right of consolidating mortgage securities
contained in Section 93 of the Law of Property Act 1925 shall not apply
to this Mortgage Debenture.
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11. APPOINTMENT OF RECEIVER
11.1 TIMING OF APPOINTMENT AND JOINT RECEIVERS
At any time after having been requested so to do by the Chargor or at
any time after making demand under the Guarantee following an Event of
Default, the Bank may appoint one or more persons to be a Receiver or
Receivers of the whole or any part of the Collateral. The Bank may:-
(i) remove any Receiver previously appointed hereunder; and
(ii) appoint another person or other persons as Receiver or
Receivers, either in the place of a Receiver so removed or who
has otherwise ceased to act or to act jointly with a Receiver
or Receivers previously appointed hereunder.
If at any time and by virtue of any such appointment(s) any two or more
persons shall hold office as Receivers of the same assets or income,
each one of such Receivers shall be entitled (unless the contrary shall
be stated in any of the deed(s) or other instrument(s) appointing them)
to exercise all powers and discretions hereby or by law conferred on
Receivers individually and to the exclusion of the other or others of
them.
11.2 FORM OF APPOINTMENT AND REMOVAL
Every such appointment or removal, and every delegation, appointment or
removal by the Bank in the exercise of any right to delegate its power
or to remove delegates herein contained, may be made either by deed or
by instrument in writing under the hand of any officer of the Bank or
any person authorised in writing in that behalf by any such officer.
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11.3 POWERS OF RECEIVER - STATUTORY
Every Receiver for the time being holding office by virtue of an
appointment made by the Bank hereunder shall (subject to any
limitations or restrictions expressed in the deed or other instrument
appointing him but notwithstanding any winding-up or dissolution of the
Chargor) have, in relation to the Collateral, or as the case may be,
that part of the Collateral in respect of which he was appointed:-
(a) all the powers (as varied and extended by the provisions
hereof) conferred by the Law of Property Act 1925 on
mortgagors and on mortgagees in possession and receivers
appointed under the Act; and
(b) power in the name or on behalf and at the cost of the Chargor
to exercise all powers and rights of an absolute owner and do
or omit to do anything which the Chargor itself could do.
11.4 POWERS OF RECEIVER - SPECIFIC
In addition and without prejudice to the generality of the foregoing or
any other provision of this Mortgage Debenture, every Receiver for the
time being holding office by virtue of an appointment made by the Bank
hereunder shall (notwithstanding any winding-up or dissolution of the
Chargor) have the following powers, namely:-
(i) TAKE POSSESSION
power to take possession of, collect and get in all or any
part of the Collateral and for that purpose to make, or to
require the directors of the Chargor to make, calls upon the
holders of the Chargor's share capital in respect of any such
capital of the Chargor which remains uncalled and to
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enforce payment of calls so made and any previous unpaid calls
by taking proceedings in the name of the Chargor or by his own
name;
(ii) CARRY ON BUSINESS
power to carry on, manage, develop, amalgamate, reconstruct or
diversify the whole or any part of the Chargor's business,
including the power where the Chargor has one or more
subsidiaries of supervising, controlling and financing such
subsidiary or subsidiaries (inclusive of any bodies corporate
as are referred to in sub-paragraph (iv) below) and its or
their business or businesses and the conduct thereof;
(iii) SELL ASSETS
power to sell or assign all or any of the Charged Debts or
Collateral in such manner and generally upon such terms and
conditions as he thinks fit and to convey the same in the name
of the Chargor;
(iv) FORM SUBSIDIARIES
power to promote, or subscribe for or otherwise acquire the
share capital of any body corporate with a view to such body
corporate becoming a subsidiary of the Chargor and purchasing,
leasing or otherwise acquiring an interest in the whole or any
part of the Collateral or carrying on any business in
succession to the Chargor or any subsidiary of the Chargor;
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(v) SEVER
power to sever and sell separately from the Collateral all or
any fixed plant and machinery and other fixtures and fittings
relevant thereto;
(vi) IMPROVE, DEVELOP OR REPAIR
power to alter, improve, develop, complete, construct, modify,
refurbish or repair any building or land and to complete or
undertake or concur in the completion or undertaking (with or
without modification), of any project in which the Chargor was
concerned or interested prior to his appointment being a
project for the alteration, improvement, development,
completion, construction, modification, refurbishment or
repair of any building or land;
(vii) NO STATUTORY RESTRICTION ON SALE ETC
power to sell, lease or otherwise dispose of or concur in
selling, leasing, accepting surrenders or otherwise disposing
of the whole or any part of the Collateral without the
restriction imposed by Section 103 of the Law of Property Act
1925 or the need to observe any of the restrictions or other
provisions of Section 99 or 100 of the said Act and upon such
terms as he shall think fit;
(viii) METHOD OF SALE OR DISPOSAL
power to carry any sale, lease or other disposal of any land
or buildings and other property and assets into effect by
conveying, transferring, assigning or leasing in the name of
the Chargor and for that purpose to enter into covenants and
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other contractual obligations in the name of and so as to bind
the Chargor;
(ix) CONSENTS AND LICENCES
power to apply for and obtain any appropriate consents,
licences or approval in relation to the Collateral, its use or
development;
(x) ADDITIONAL LAND AND EASEMENTS
power to acquire additional land or any interest therein and/
or easements for the benefit of any of the Collateral and
power to grant easements or rights over the Collateral;
(xi) CHARGOR'S NAME
power to use the Chargor's name for registration and to effect
any necessary election for tax or other purposes;
(xii) COMPROMISE
power to make any arrangement or compromise or settlement of
claims or enter into any contracts or arrangements as he shall
think fit;
(xiii) INSURANCES
power to effect and renew insurances;
(xiv) PROCEEDINGS
power to take or defend proceedings in the name of the Chargor
including proceedings for the compulsory winding-up of the
Chargor and proceedings for directions under Section 35(1) of
the Insolvency Act 1986 and power to settle and compromise any
proceedings;
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(xv) EMPLOYEES
power to employ, engage and appoint such managers, agents,
servants and other employees and professional advisers on such
terms as he shall think fit including without limitation power
to engage his own firm in the conduct of the receivership;
(xvi) BORROW MONEY
power to raise or borrow money from the Bank or any other
person to rank for payment in priority to the security
constituted by or pursuant to this Mortgage Debenture and with
or without a mortgage or mortgage debenture on the Collateral
or any part of it;
(xvii) GENERAL POWERS
power to do all such other things as may seem to the Receiver
to be incidental or conducive to any other power vested in him
or to be conducive to the realisation of the security
constituted by or pursuant to this Mortgage Debenture as if he
were the absolute beneficial owner of the Collateral;
(xviii) PROTECTION OF ASSETS
to make and effect all repairs and insurances and do all other
acts which the Company might do in the ordinary conduct of its
business as well for the protection as for the improvement of
the Collateral and to commence and/or complete any building
operations on the Collateral and to apply for and maintain any
planning permissions, building regulation approvals and any
other permissions, consents or licences, in each case as he
may in his absolute discretion think fit;
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(xix) LEASES
to let all or any part of the Collateral for such term and at
such rent (with or without a premium) as he may think proper
and to accept a surrender of any lease or tenancy thereof on
such terms as he may think fit (including the payment of money
to a lessee or tenant on a surrender); and
(xx) RECEIPTS
to give valid receipts for all moneys and execute all
assurances and things which may be proper or desirable for
realising the Collateral.
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11.5 CONSIDERATION ON DISPOSAL
In making any sale or other disposal of any of the Collateral in the
exercise of their respective powers (including a disposal by the
Receiver to any such subsidiary as is referred to in Clause 11.4 (iv))
the Receiver or the Bank may accept, by way of consideration for such
sale or other disposal, cash, shares, loan capital or other
obligations, including without limitation consideration fluctuating
according to or dependent upon profit or turnover and consideration the
amount whereof is to be determined by a third party. Any such
consideration may be receivable in a lump sum or by instalments and
upon receipt by the Receiver shall IPSO FACTO be and become charged
with the payment of the Secured Obligations. Any contract for any such
sale or other disposal by the Receiver or the Bank may contain
conditions excluding or restricting the personal liability of the
Receiver or the Bank. Plant, machinery and other fixtures may be
severed and sold in the exercise of their respective powers by the
Receiver or the Bank separately from the premises to which they are
attached without any consent being obtained from the Chargor.
11.6 APPLICATION OF PROCEEDS
All monies received by the Bank or any Receiver appointed under this
Mortgage Debenture shall (subject to the rights and claims of any
person having a security ranking in priority to the security
constituted by or pursuant to this Mortgage Debenture) be applied in
the following order:
(i) in the payment of or provision for all costs, charges and
expenses incurred and payments made by the Bank and in the
payment of all costs, charges and expenses of and
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incidental to the Receiver's appointment and the payment of
his remuneration;
(ii) in the payment and discharge of any liabilities incurred by
the Receiver on the Chargor's behalf in the exercise of any of
the powers of the Receiver;
(iii) in providing for the matters (other than the remuneration of
the Receiver) specified in the first three paragraphs of
Section 109(8) of the Law of Property Act 1925;
(iv) in or towards payment of any debts or claims which are by
statute payable in preference to the Secured Obligations but
only to the extent to which such debts or claims have such
preference;
(v) in or towards the satisfaction of the Secured Obligations,
and any surplus shall be paid to the Chargor or other person entitled
thereto.
The provisions of this Clause 11.6 and of Clause 11.8 shall take effect
as and by way of variation and extension to the provisions of the said
section 109, which provisions as so varied and extended shall be deemed
incorporated herein.
11.7 RECEIVER AS AGENT
Every Receiver so appointed shall be deemed at all times and for all
purposes to be the agent of the Chargor which shall be solely
responsible for his acts and defaults and liable on any contracts or
engagements made or entered into by him and for the payment of his
remuneration. The Bank shall not be responsible for his misconduct,
negligence or default.
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11.8 RECEIVER'S REMUNERATION
Every Receiver so appointed shall be entitled to remuneration for his
services at a rate to be fixed by agreement between him and the Bank
(or, failing such agreement, to be fixed by the Bank) appropriate to
the work and responsibilities involved upon the basis of charging from
time to time adopted in accordance with his current practice or the
current practice of his firm and without being limited to the maximum
rate specified in Section 109(6) of the Law of Property Act 1925. The
amount of such remuneration may be debited by the Bank to the Chargor,
but shall in any event form part of the Secured Obligations.
11.9 MONIES ACTUALLY RECEIVED
Only monies actually paid by the Receiver to the Bank in satisfaction
or discharge of the Secured Obligations and unconditionally and
irrevocably retained by the Bank shall be capable of being applied by
the Bank in satisfaction thereof.
11.10 RECEIVER'S INDEMNITY
The Chargor agrees to indemnify and hold harmless the Receiver from and
against all actions, claims, expenses, demands and liabilities (save
where the same is due to gross negligence or wilful misconduct of the
Receiver) whether arising out of contract or tort or in any other way
incurred or which may at any time be incurred by him or by any manager,
agent, servant or other employee for whose debt, default or miscarriage
he may be answerable for anything done or omitted to be done in the
exercise or purported exercise of his powers under the provisions of
this deed or pursuant hereto.
12. NO LIABILITY AS MORTGAGEE IN POSSESSION
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The Bank shall not nor shall any Receiver appointed as aforesaid by
reason of it or such Receiver entering into possession of the
Collateral or any part thereof be liable to account as mortgagee in
possession or be liable for any loss on realisation or for any default
or omission which mortgagee in possession might be liable except for
its gross negligence or wilful misconduct.
13. EXPENSES
13.1 UNDERTAKING TO PAY
All costs, charges and expenses incurred and all payments made by the
Bank or any Receiver appointed hereunder in the lawful exercise of the
powers hereby conferred whether or not occasioned by any act, neglect
or default of the Chargor shall carry interest (as well after as before
judgment) at the Default Rate from the date of the same being incurred
or becoming payable until the date the same are unconditionally and
irrevocably paid and discharged in full.
The amount of such costs, charges, expenses and payments and all such
interest thereon and all remuneration payable hereunder shall be
payable by the Chargor on demand. All such costs, charges, expenses and
payments shall be paid and charged as between the Bank and the Chargor
on the basis of a full indemnity and not on the basis of party and
party or any other kind of taxation.
13.2 INDEMNITY
The Bank and every Receiver, attorney, manager, agent or other person
appointed by the Bank hereunder shall be entitled to be indemnified out
of the Collateral in respect of all liabilities and expenses properly
incurred by them in the execution or purported execution of any of the
powers, authorities or discretions vested in them
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pursuant hereto and against all actions, proceedings, costs, claims and
demands in respect of any matter or thing done or omitted in any way
relating to the Collateral and the Bank and any such Receiver may
retain and pay all sums in respect of the same out of any monies
received under the powers hereby conferred.
13.3 STAMP DUTIES
The Chargor shall pay and, forthwith on demand, indemnify the Bank
against any liability it incurs in respect of any stamp, registration
and similar tax which is or becomes payable in connection with the
entry into, performance or enforcement of this Mortgage Debenture.
14. POWER OF ATTORNEY
14.1 APPOINTMENT AND POWERS
The Chargor hereby irrevocably appoints the following, namely:-
(i) the Bank,
(ii) each and every person whom the Bank shall from time to time
nominate in writing under the hand of any officer of the Bank,
and
(iii) each and any Receiver appointed hereunder and for the time
being holding office as such,
jointly and also severally its attorney and attorneys for it and in the
name of the Chargor and otherwise on its behalf and as its act and deed
to sign, seal, execute, deliver, perfect and do all deeds, instruments,
acts and things which may be required (or which the Bank or any
Receiver appointed hereunder shall consider requisite) for carrying out
any obligation imposed on the Chargor by or pursuant to this Mortgage
Debenture (including but not limited to
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the obligations of the Chargor under Clause 5.1 and the statutory
covenant referred to in such Clause), for carrying any sale, lease or
other dealing by the Bank or such Receiver into effect, for conveying
or transferring any legal estate or other interest in land or other
property or otherwise howsoever, for getting in the Collateral, and
generally for enabling the Bank and the Receiver to exercise the
respective powers conferred on them by or pursuant to this Mortgage
Debenture by law. The Bank shall have full power to delegate the power
conferred on it by this Clause, but no such delegation shall preclude
the subsequent exercise of such power by the Bank itself or preclude
the Bank from making a subsequent delegation thereof to some other
person; and any such delegation may be revoked by the Bank at any time.
All money properly expended by any attorney shall be deemed to be
expenses incurred by the Bank under this Mortgage Debenture.
14.2 RATIFICATION
The Chargor shall ratify and confirm all transactions entered into by
the Bank or such Receiver or delegate of the Bank in the exercise or
purported exercises of the Bank's or such Receiver's respective powers
and all transactions entered into, documents executed and things done
by the Bank or such Receiver or delegate by virtue of the power of
attorney given by Clause 14.1.
14.3 IRREVOCABLE
The power of attorney hereby granted is as regards the Bank, its
delegates and (so far as permitted by law) any such Receiver (and as
the Chargor hereby acknowledges) granted irrevocably and for value as
part of the security constituted by this Mortgage Debenture to secure
proprietary interests of and the performance of obligations
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owed to, the respective donees within the meaning of the Powers of
Attorney Act 1971.
15. PROTECTION OF PURCHASERS
No purchaser or other person dealing with the Bank or its delegate or
any Receiver appointed hereunder shall be bound to see or inquire
whether the right of the Bank or such Receiver to exercise any of its
or his powers has arisen or become exercisable or be concerned with
notice to the contrary, or be concerned to see whether any such
delegation by the Bank shall have lapsed for any reason or been
revoked.
16. SUBSEQUENT CHARGES
If the Bank shall at any time receive notice of any subsequent
mortgage, charge, assignment, hypothecation, pledge or other like
interest, matter, event or transaction affecting the Collateral or any
part of it (otherwise than with the prior written consent of the Bank
as permitted by this Mortgage Debenture) or that a receiver has been
appointed to all or any part of the Chargor's assets or that a petition
for an administration order or for compulsory liquidation has been
presented or a resolution for voluntary liquidation has been passed in
relation to the Chargor, the Bank may open a new account or accounts
for the Chargor in its books. If the Bank does not in fact open any
such new account then, unless it gives express written notice to the
Chargor to the contrary, the Bank shall be treated as if it had in fact
opened such account or accounts at the time when it received such
notice. As from that time and unless such express written notice shall
be given to the Chargor, all payments by or on behalf of the Chargor to
the Bank shall (in the absence of any express contrary appropriation by
the Chargor) be credited, or treated as having been credited, to the
new account(s) of the Chargor opened or deemed to have been opened and
not as having been
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applied in reduction of the Chargor's indebtedness and other
liabilities to the Bank at the time when the Bank received such notice.
17. REDEMPTION OF PRIOR MORTGAGES
The Bank may, at any time after the security hereby constituted has
become enforceable, redeem any prior security interest against the
Collateral or any part thereof or procure the transfer thereof to
itself and may settle and pass the accounts of the prior mortgagee,
chargee or encumbrancer. Any accounts so settled and passed shall be
conclusive and binding on the Chargor. All principal moneys, interest,
costs, charges and expenses of, and incidental to, such redemption and
transfer shall be paid by the Chargor to the Bank on demand.
18. SET-OFF
18.1 CONSOLIDATION OF ACCOUNTS
In addition to any general lien or similar right to which it may be
entitled by operation of law, the Bank shall have the right upon or at
any time after the occurrence of an Event of Default and with notice to
the Chargor to combine or consolidate all or any of the Chargor's then
existing accounts opened pursuant to this Mortgage Debenture with any
liabilities of the Chargor to the Bank and to set-off or transfer any
sum or sums standing to the credit of any one or more of such accounts
in or towards satisfaction of any of the liabilities of the Chargor to
the Bank on any other such account or in any other respect. The
liabilities referred to in this Clause may be actual, contingent,
primary, collateral, several or joint liabilities, and the accounts,
sums and liabilities referred to in this Clause may be denominated in
any currency.
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18.2 SET-OFF
The Bank may set-off any Secured Obligations owed by the Chargor
against any obligation (whether or not matured) owed by the Bank to the
Chargor regardless of the place of payment or currency of either
obligation. If the obligations are in different currencies, the Bank
may convert either obligation in the manner provided in Clause 20.
19. PAYMENTS
19.1 MANNER OF PAYMENT
All payments to be made by the Chargor hereunder shall be made in the
same currency in which the Secured Obligations are expressed to be
payable under the Loan Agreement.
19.2 TAXES
All payments by the Chargor under or in connection with this Mortgage
Debenture shall be made without set-off or counterclaim, free and clear
of and without deduction for or on account of all taxes. All taxes in
respect of this Mortgage Debenture and payments hereunder shall be for
the account of and shall be paid by the Chargor for its own account
prior to the date on which penalties attach thereto. If the Chargor is
compelled by law to make payment subject to any tax and the Bank does
not actually receive for its own benefit on the due date a net amount
equal to the full amount provided for hereunder, the Chargor will pay
all necessary additional amounts to ensure receipt by the Bank of the
full amounts so provided for, provided that the Chargor shall have no
liability to the Bank under this Clause 19.2 if and to the extent that
such liability would not have been incurred or arisen if the Bank had
retained its rights under the Loan Agreement and/or had not changed its
lending office. The Chargor will indemnify the Bank in respect of all
such taxes upon the Bank providing
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to the Chargor evidence that the Bank has suffered or incurred any
liability to pay such taxes.
19.3 TAX CREDITS
If the Bank receives the benefit of a tax credit or an allowance
resulting from a payment which includes an additional amount paid by
the Chargor under Clause 19.2, it shall (to the extent that it can do
so without prejudice to the retention of such credit or allowance and
to the extent that it is not unlawful or contrary to any official
directive for it to do so) pay to the Chargor such part of that benefit
as is, in the reasonable opinion of the Bank, attributable to the
withholding or deduction giving rise to payment of that additional
amount, provided that the Bank shall:
(i) be the sole judge of the amount of any such benefit to be so
paid to the Chargor and of the date on which it is received
by the Bank;
(ii) have an absolute discretion as to the order and manner in
which it employs or claims tax credits and allowances
available to it;
(iii) not be obliged to disclose to the Chargor or any other person
any confidential information regarding its tax affairs or tax
computations.
19.4 APPROPRIATION OF PAYMENTS
The Bank shall have an absolute and unfettered right to appropriate any
payments received from the Chargor, or otherwise recovered under the
Loan Documents to such indebtedness of the Chargor hereunder or
thereunder as the Bank may determine, to the exclusion of any right on
the
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part of the Chargor to make an appropriation in respect of such
payments.
20. CURRENCY
20.1 CURRENCY CONVERSION
(a) The Chargor's liability hereunder shall be to pay to the Bank the full
amount of the Principal's Obligations in such currency in which they
are for the time being denominated provided that if and to the extent
the Chargor shall not pay such amount in such currency the Bank may
accept payment of all or part of such amount in any other currency
and/or require the Chargor , in substitution for its liability to pay
such amount in such currency, to pay an amount in pounds Sterling which
is equivalent to the amount of such currency remaining unpaid (and in
either case the provisions of Clause 20.1(b) below shall apply);
(b) The equivalent on any day in one currency of any amount denominated in
another currency shall be an amount in the first currency equal to the
amount which the Bank would have received if the Bank had on such day
(or, if such day shall not be a business day, on the next succeeding
business day) made a purchase of the first currency with such amount of
such other currency at the then prevailing spot rate of exchange of the
Bank less all costs, charges and expenses normally incurred by the Bank
in connection with such a purchase.
20.2 CURRENCY INDEMNITY
If the Bank receives an amount in respect of the Chargor's liability
under this Mortgage Debenture or if that liability is converted into a
claim, proof, judgment or order in a currency other than the currency
(the "CONTRACTUAL CURRENCY") in which the amount is expressed to be
payable under this Mortgage Debenture (as the case may be):-
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(a) the Chargor shall indemnify the Bank as an independent
obligation against any loss or liability arising out of or
as a result of the conversion;
(b) if the amount received by the Bank, when converted into the
contractual currency at a market rate in the usual course of
its business is less than the amount owed in the contractual
currency, the Chargor shall forthwith on demand pay to the
Bank an amount in the contractual currency equal to the
deficit and to the extent that such conversion results in the
Chargor receiving more than the amount owed in the contractual
currency the amount of such excess (as conclusively determined
by the Bank) shall be paid to the Chargor; and
(c) the Chargor shall pay to the Bank forthwith on demand any
exchange costs and taxes payable in connection with any such
conversion.
20.3 WAIVER
The Chargor waives any right it may have in any jurisdiction to pay any
amount under this Mortgage Debenture in a currency other than that in
which it is expressed to be payable.
21. SUSPENSE ACCOUNT
All monies received, recovered or realised by the Bank under this
Mortgage Debenture (including the proceeds of any conversion of
currency) may in the discretion of the Bank be credited to any suspense
or impersonal account and may be held in such account for so long as
the Bank may think fit. The Bank shall not charge interest on so much
of the Chargor's indebtedness to the Bank as otherwise accrued under
the Principal's Obligations as is equal to the credit balance
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from time to time on such separate suspense account.
22. THE BANK'S REMEDIES
22.1 EFFECT OF RELEASE
Any receipt, release or discharge of the security provided by, or of
any liability arising under, this Mortgage Debenture shall not release
or discharge the Chargor from any liability to the Bank for the same or
any other liability which may exist independently of this Mortgage
Debenture.
22.2 ARRANGEMENTS WITH THIRD PARTIES
The Bank may in its discretion grant time or other indulgence, or make
any other arrangement, variation or release with, any person or persons
not party hereto (whether or not such person or persons are jointly
liable with the Chargor) in respect of any of the Secured Obligations
or of any other security therefor or guarantee in respect thereof
without prejudice either to the security constituted by or pursuant to
this Mortgage Debenture or to the liability of the Chargor for the
Secured Obligations or the exercise by the Bank of any rights, remedies
and privileges conferred upon it by this Mortgage Debenture.
22.3 RIGHTS CUMULATIVE
The rights, powers and remedies provided in this Mortgage Debenture are
cumulative and are not, nor are they to be construed as, exclusive of
any rights, powers or remedies provided by law, or under any of the
other Loan Documents.
22.4 WAIVER
No failure on the part of the Bank to exercise, or delay on its part in
exercising, any of the
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powers and remedies provided by this deed or by law, shall operate as a
waiver thereof, nor shall any single or partial waiver of such rights,
powers and remedies preclude any further or other exercise of that one
of such rights, powers and remedies concerned or the exercise of any
other of such rights, powers and remedies.
22.5 COSTS
All the costs, charges and expenses of the Bank in relation to this
Mortgage Debenture or for the Secured Obligations (including, without
limitation, the costs, charges and expenses incurred in the carrying
out of this Mortgage Debenture into effect or in the exercise of any of
the rights, remedies and powers conferred on the Bank hereby or in the
perfection or enforcement of the security constituted hereby or
pursuant hereto or in the perfection or enforcement of any other
security for or guarantee in respect of the Secured Obligations) shall
be reimbursed by the Chargor to the Bank on demand on a full indemnity
basis provided always that any costs, charges and expenses incurred by
the Bank prior to an Event of Default shall be reasonable.
22.6 INSOLVENCY RELATION BACK
Any settlement or discharge between the Bank and the Chargor shall be
conditional upon no security of, or payment to, the Bank (whether by
the Chargor or otherwise) being avoided or reduced or required to be
paid away by virtue of any requirement (whether or not having the force
of law) or enactment, whether relating to bankruptcy, insolvency,
liquidation, administration or otherwise, at any time in force or by
virtue of any obligation to give effect to any preference or priority
and the Bank shall be entitled to recover the value or amount of any
such security or payment from the Chargor as if such settlement or
discharge had not occurred.
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23. PROVISIONS SEVERABLE
Every provision contained in this Mortgage Debenture shall be severable
and distinct from every other provision and if at any time any one or
more of such provisions is or becomes invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining such provisions shall not in any way be affected thereby.
24. THE BANK'S DISCRETION
Any power which may be exercised or any determination which may be made
hereunder by the Bank may be exercised or made in the absolute and
unfettered discretion of the Bank.
25. CERTIFICATES
A certificate of the Bank setting out the amount of any Secured
Obligation due from the Chargor shall be prima facie evidence of such
amount against the Chargor in the absence of manifest error.
26. ASSIGNMENT; SUCCESSORS
26.1 SUCCESSORS
The expression the "BANK" wherever used herein shall be deemed to
include the assignees and other successors, whether immediate or
derivative, of the Bank, who shall be entitled to enforce and proceed
upon this Mortgage Debenture in the same manner as if named herein.
26.2 ASSIGNMENT
The Bank shall be entitled at any time to assign all or any of its
rights and benefits hereunder to any person to whom the rights and
benefits of the Bank under the Loan Agreements are assigned
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in accordance with the terms thereof and this Mortgage Debenture shall
remain in full force and effect after, and shall continue to secure the
Secured Obligations after and resulting from, any such assignment.
27. DISCHARGE
If the Chargor shall have unconditionally and irrevocably paid and
discharged the Secured Obligations in full (which event shall not occur
until all contingent liabilities have either crystallised or expired)
and the Bank will at the request and cost of the Chargor duly discharge
this Mortgage Debenture and re-assign to the Chargor or as it shall
direct such of the Collateral as is hereby assigned to the Bank.
28. LAW AND JURISDICTION
28.1 LAW
This Mortgage Debenture shall be governed by and construed in
accordance with English law.
28.2 SUBMISSION TO JURISDICTION
For the exclusive benefit of the Bank, the Chargor irrevocably agrees
that the courts of England are to have jurisdiction to settle any
disputes which may arise out of or in connection with this Mortgage
Debenture and the other Loan Documents and irrevocably submits to the
jurisdiction of such courts and agrees that accordingly any suit,
action or proceeding arising out of or in connection with this Mortgage
Debenture (together in this Clause referred to as "PROCEEDINGS") may be
brought in such courts.
28.3 OTHER JURISDICTIONS
Nothing contained in this Clause shall limit the right of the Bank to
take Proceedings against the
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Chargor in any other court of competent jurisdiction, nor shall the
taking of Proceedings in one or more jurisdictions preclude the taking
of Proceedings in any other competent jurisdiction, whether
concurrently or not.
28.4 WAIVER OF OBJECTION
The Chargor irrevocably waives any objection which it may have now or
hereafter to the laying of the venue of any Proceedings in any such
court as is referred to in Clause 28.2 and any claim that any such
Proceedings have been brought in any inconvenient forum and further
irrevocably agrees that a final judgment in any Proceedings brought in
the English courts shall be conclusive and binding and may be enforced
in the courts of any other competent jurisdiction.
29. CONSTITUTIONAL DOCUMENTS
The Chargor hereby certifies that its creation by this Mortgage
Debenture of charges in favour of the Bank does not contravene any of
the provisions of its constitutional documents.
30. COUNTERPARTS
This Mortgage Debenture may be executed in any number of counterparts
and by the different parties on separate counterparts and this will
have the same effect as if the signatures on the counterparts were on a
single copy of this Mortgage Debenture and each such counterpart shall
be treated as an original.
31. NOTICES
Any notice or other communication required or permitted to be given by
this Mortgage Debenture or by applicable law shall be in writing and
shall be deemed received (a) on the date delivered, if sent by hand
delivery (to the person or department if one is specified below),
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(b) three (3) days following the date deposited in U.S. mail, certified
or registered, with return receipt requested, or (c) one (1) day
following the date deposited with Federal Express or other national
overnight carrier, and in each case addressed as follows:
IF TO THE CHARGOR:
The Company Secretary
Datawatch Europe Limited
The Software Centre
East Way
Lee Mill Industrial Estate
Ivybridge
Plymouth PL21 9PE
IF TO THE BANK:
Mr Andrew H Tsao, Senior Vice President
Silicon Valley Bank
40 William Street
Suit 350
Wellesley
Massachusetts 02481
USA
WITH COPY TO:
Mr James Krumsiek
Rieimer & Braunstein LLP
Counselors at Law
Three Centre Plaza
Boston
Massachusetts 02108
USA
Fax: 001 (617) 723 6831
Failure to provide any courtesy copy shall not invalidate any notice
otherwise properly given to the designated party set out above. Any
party may change its address to another single address by notice given
as herein provided, except any
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change of address notice must be actually received in order to be
effective.
IN WITNESS whereof this Mortgage Debenture has been executed as a deed and
delivered by the parties hereto on the day and the year first before written.
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SCHEDULE 1
DETAILS OF THE PROPERTY
PROPERTY INTEREST TITLE
NUMBER/DESCRIPTION
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EXECUTED and DELIVERED ............................ )
AS A DEED BY DATAWATCH............................. )
EUROPE LIMITED..................................... )
Acting by: Bruce R. Gardner Director /s/ Bruce R. Gardner
John F. Cave Director/Secretary /s/ John F. Cave
EXECUTED and DELIVERED ............................ )
AS A DEED by SILICON VALLEY ....................... )
BANK............................................... )
By: Heidi Fetty Assistant Vice President /s/ Heidi Fetty
A person authorised under the laws of California to execute and deliver as a
deed.
55
EXHIBIT 10.28
Date: December 27, 1999
DATAWATCH EUROPE LIMITED
in respect of
Datawatch Corporation
Deed of Guarantee
in favour of Silicon Valley Bank
FIELD FISHER WATERHOUSE 35 Vine Street London EC3N 2AA
<PAGE>
Contents
NO HEADING PAGE
CLAUSES
1. Interpretation 1
2. Guarantee and Security 2
3. Indemnity 2
4. Continuing Security 3
5. Interest 3
6. Opening of New Accounts 3
7. Dealings with the Principal and Others 3
8. Discharges and Release Avoided 4
9. Claims of the Guarantor against the Principal 5
10. Set-off 6
11. Suspense Account 6
12. Right To Make Demand 7
13. Certificate 7
14. Payment Free of Deduction 7
15. Tax credits 8
16. Effectiveness of Security 8
17. Currency Conversions 8
18. Costs and Expenses 9
<PAGE>
19. Provisions Severable 9
20. Benefit of Guarantee 9
21. Notices and Demands 10
22. Law and Jurisdiction 10
<PAGE>
THIS GUARANTEE made by way of Deed on the 27th day of December, 1999 by
DATAWATCH EUROPE LIMITED a company registered under the laws of England and
Wales under company number 02887429 whose registered office is at The Software
Centre, East Way, Lee Mill Industrial Estate, Ivybridge, Plymouth PL21 9PE (the
"GUARANTOR") in favour of SILICON VALLEY BANK a California chartered bank, with
its principal place of business at 3003 Tasman Drive, Santa Clara, California
95054 USA (the "BANK").
WITNESSES as follows:-
1. INTERPRETATION
In this Guarantee:-
(i) the expression the "LOAN AGREEMENTS" means the Amended and Restated
Loan and Security Agreement dated 16 March 1999 made between the Bank
and the Principal and Personics Corporation as amended by the Loan
Modification Agreement dated of even date herewith and made between
Datawatch Corporation and the Bank and the Export-Import Bank Loan and
Security Agreement of even date herewith made between INTER ALIA the
Bank and Datawatch Corporation;
(ii) the expression the "Exim Loan Documents" means the Export-Import Bank
Loan and Security Agreement dated of even date herewith made between
INTER ALIA the Bank and Datawatch Corporation and all associated
documentation;
(iii) terms and expressions defined in the Loan Agreement shall have the same
meanings when used herein unless otherwise herein defined or the
context otherwise requires;
(iv) any reference in this Guarantee to a "PERSON" shall be construed as a
reference to any person, firm, company, corporation, government, state
or agency of a state or any association or
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partnership (whether or not having separate legal personality) of two
or more of the foregoing;
(v) "PRINCIPAL" means Datawatch Corporation, a Delaware corporation with
its principal place of business at 900 Chelmsford Street, Tower 3, 5th
Floor, Lowell, Massachusetts;
(vi) the expression the "PRINCIPAL'S OBLIGATIONS" means all monies whether
certain or contingent, now or at any time hereafter becoming due, owing
or incurred by the Principal to the Bank under or in connection with
the Loan Agreements and the other Exim Loan Documents and/or the Loan
Documents whether due, owing or incurred by the Principal alone or
jointly with any other person(s) and whether as principal or in some
other capacity; and
(vi) words and expressions defined in either of the Loan Agreements shall,
where the context permits, have the same meanings in this Guarantee.
2. GUARANTEE AND SECURITY
In consideration of the Bank making available and/or continuing to make
available banking accommodation and/or facilities under the Loan
Agreements, the Guarantor hereby irrevocably and unconditionally (i)
guarantees to the Bank the due and prompt payment and discharge of the
Principal's Obligations; and (ii) undertakes that the Guarantor will on
demand make good any default by the Principal in the payment or
discharge of the Principal's Obligations or any part thereof as if the
Guarantor instead of the Principal were expressed to be the primary
obligor in respect thereof, together with interest (as well after as
before judgment) at the rate per annum from time to time expressed to
be payable by the Principal on the Principal's Obligations under the
Exim Loan Documents and/or the Loan Documents from the date the same
became payable hereunder until payment
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thereof in full but provided that nothing in this Clause 2 shall
entitle the Bank to recover any interest from the Guarantor to the
extent that the same constitutes or otherwise represents
double-counting.
3. INDEMNITY
For the same consideration the Guarantor hereby agrees as a primary
obligor to indemnify the Bank against any loss (as defined below) which
the Bank may incur in the event of the whole or any part of the
Principal's Obligations or any actual or purported agreement,
arrangement or instruction relating thereto (including, without
limitation, the Loan Agreements or any other document referred to
therein) being invalid or being or becoming irrecoverable,
unenforceable or void or being avoided for any reason whatsoever,
irrespective of whether such reason was or ought to have been known to
the Bank or its officers, employees, agents or professional advisers.
For the purposes of this Clause "ANY LOSS" means the amount which the
Bank would otherwise have been entitled to recover from the Principal
under the Exim Loan Documents and/or the Loan Documents.
4. CONTINUING SECURITY
This Guarantee shall be a continuing security for all the Principal's
Obligations and shall not be discharged by any intermediate discharge
or payment of or on account of the Principal's Obligations or any of
them or any settlement of accounts between the Bank and the Principal,
any other guarantor or any other person. No demand made by or on behalf
of the Bank hereunder shall prejudice or restrict the rights of the
Bank to make further or other demands.
5. INTEREST
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The Guarantor shall pay interest on any amount for the time being due
from the Guarantor to the Bank under this Guarantee from the date of a
valid demand for payment hereunder until actual payment in full, at the
rate (as well after as before judgment) payable by the Principal on
such amount in accordance with the relevant Security Documents but
provided that nothing in this Clause 5 shall entitle the Bank to
recover any interest from the Guarantor to the extent that the same
constitutes or otherwise represents double-counting.
6. OPENING OF NEW ACCOUNTS
If for any reason this Guarantee ceases to be a continuing security,
the Bank may either continue any then existing account or open one or
more fresh accounts for the Principal, but in either case the
obligations of the Guarantor under this Guarantee shall remain
unaffected by, and be computed without regard to, any payment into or
out of any such account.
7. DEALINGS WITH THE PRINCIPAL AND OTHERS
The liability of the Guarantor hereunder shall not be impaired,
discharged or otherwise affected by (i) any determination, renewal,
variation, discharge, release or increase of, or composition or
arrangement by the Bank relating to, any credit or facilities to the
Principal or of or relating to the Principal's Obligations or of or
relating to any other guarantee in respect thereof or any agreement
relating thereto; or (ii) the grant by the Bank to the Principal or any
other person (including, without limitation, any other guarantor of the
Principal's Obligations or any of them) of any time or indulgence; or
(iii) any dealing, exchange, renewal, variation, release, discharge,
composition, arrangement, modification or abstaining from perfecting or
enforcing or claiming in relation to any securities, guarantees or
rights which the Bank may now or hereafter have
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in respect of the Principal's Obligations; or (iv) the renewal by the
Bank of any bills, promissory notes or other negotiable instruments or
securities; or (v) the Bank obtaining or failing to obtain any other
guarantee or security (whether contemporaneously with this Guarantee or
otherwise); or (vi) any other act, event or omission which but for this
provision would or might operate to impair, discharge or otherwise
affect the obligations of the Guarantor hereunder.
8. DISCHARGES AND RELEASE AVOIDED
No assurance security or payment which may be avoided or adjusted under
the law, including under any enactment, relating to individual or
corporate insolvency and no release settlement or discharge given or
made by the Bank on the faith of any such assurance security or payment
shall prejudice or affect the right of the Bank to recover all
liabilities due and owing under this Guarantee from the Guarantor
(including any monies which it may be compelled to refund under the
provisions of the Insolvency Act 1986 and any costs payable by it or
otherwise incurred in connection therewith) or to enforce the security
created by or pursuant to this deed to the full extent of the
liabilities due and owing under this Guarantee.
If the Bank has reasonable grounds for believing that any assurance
security or payment received by it from the Principal or the Guarantor
or any other person in respect of the Principal's Obligations may be
avoided or adjusted under any law relating to bankruptcy, insolvency or
winding-up then the Bank shall be at liberty to retain the security
created by or pursuant to this Deed for the relevant period (as defined
below) after the payment and discharge in full of all amounts due and
owing notwithstanding any release, settlement, discharge or arrangement
given or made by the Bank on, or as a consequence of, such payment or
termination or liability provided that, if at any
5
<PAGE>
time within the relevant period (as defined below) after such payment
or discharge, a petition shall be presented to a competent court for an
order for the winding-up or the making of an administration order in
respect of the Principal or the Principal shall commence to be wound-up
or to go into administration, or if any analogous proceedings are taken
in respect of the Guarantor or such other person, the Bank shall be at
liberty to continue to retain such security (including the documents
aforesaid) for and during the relevant period (as defined below) in
which event such security shall be deemed to have continued to have
been held as security for the payment and discharge to the Bank of all
amounts due and owing under this Guarantee. In this Clause the
"RELEVANT PERIOD" means a period of one month plus any statutory period
during which any assurance, security or payment such as is referred to
above may be avoided or invalidated (or such longer period as the Bank
shall reasonably consider comparable in the light of the provisions of
any applicable law of any jurisdiction).
When the Bank is satisfied that the Principal's Obligations have been
discharged in full and that the relevant period has expired it will
give written notice to the Guarantor and, at the written request of the
Guarantor, return this deed to the Guarantor.
9. CLAIMS OF THE GUARANTOR AGAINST THE PRINCIPAL
9.1 Until the Principal's Obligations shall have been paid or discharged in
full, and the Guarantor released from this Guarantee, the Guarantor
will not by virtue of such payment or by any other means or on any
other grounds, except with the prior written consent of the Bank or as
provided below (i) make or enforce any claim (whether by way of
set-off, counterclaim or otherwise) or right against the Principal or
prove in competition with the Bank, whether in respect of
6
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any payment hereunder made by the Guarantor or otherwise; or (ii) be
entitled to claim or have the benefit of, any set-off, counterclaim or
proof against, or dividend paid on a winding up or composition with
creditors by the Principal; or (iii) be entitled to claim or otherwise
obtain the benefit (by way of subrogation or otherwise) of any security
or guarantee or indemnity at any time held by the Bank for or in
respect of any of the Principal's Obligations; or (iv) claim or enforce
any right of contribution against any co-surety.
9.2 If the Guarantor shall have any right of proof or claim in the
winding-up, voluntary arrangement, receivership or administration of
the Principal which does not derive from a payment made hereunder, the
Guarantor shall (except where the Bank otherwise require) exercise that
right, or claim on behalf of the Bank and hold any dividend or other
money received in respect thereof upon trust for the Bank to the extent
of such liability or in like manner hold upon trust any money which it
may receive or recover from any co-surety by virtue of any rights of
contribution.
9.3 If while the Guarantor shall remain under liability to the Bank
hereunder, any monies or other property or assets shall be received or
recovered by the Guarantor in breach of any provisions of this Clause,
such monies or other property or assets shall be held upon trust to pay
or transfer the same to the Bank to the extent of such liability.
10. SET-OFF
Without prejudice to and in addition to any other remedy of set-off,
combination or consolidation of accounts which the Bank may have, at
any time after a demand hereunder or if at the relevant time the
Principal's Obligations and all other monies payable hereunder shall
not have been fully paid or otherwise discharged, the Bank shall be
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entitled without prior notice to the Guarantor, to set off the
liability of the Guarantor hereunder against any monies in whatsoever
currency standing to the credit of the Guarantor in any current or
other account with the Bank and to combine any such account with any
other such account. The Bank may for the purposes of this Clause 10 and
from time to time convert all or any part of such monies in such
account into the currency of the Guarantor's liability in accordance
with Clause 16.
11. SUSPENSE ACCOUNT
The Bank may at any time place and keep to the credit of a separate
suspense account any monies received under this Guarantee for so long
and in such manner as the Bank may determine without any obligation to
apply such monies or any part of them in or towards the discharge of
the Principal's Obligations. In the event of any proceedings in or
analogous to liquidation, composition or arrangement of or concerning
the Principal, the Bank may notwithstanding any payment made under this
Guarantee prove for a claim (as the case may be) and agree to accept
any dividend or composition in respect of the whole or any part of the
Principal's Obligations in the same manner as if this Guarantee had not
been given. The Bank shall not charge interest on so much of the
Guarantor's indebtedness to the Bank as otherwise accrued under the
Principal's Obligations as is equal to the credit balance from time to
time on such separate suspense account.
12. RIGHT TO MAKE DEMAND
If the right to make a demand for payment of any sum from the Principal
has arisen under the Security Documents the Bank may make a demand
under this Guarantee (i) before making any demand on the Principal or
any other surety or enforcing any other guarantee or security for the
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Principal's Obligations and (ii) for the payment of the ultimate
balance after resorting to other means of payment or for the balance
due at any time notwithstanding that the Bank has not resorted to other
means of payment (in which case the Guarantor shall not be entitled to
any benefit from such other means of payment so long as any of the
Principal's Obligations remain outstanding).
13. CERTIFICATE
The Bank's certificate of the amount of the Principal's Obligations
outstanding at any time shall, in the absence of manifest error, be
prima facie evidence for all purposes of this Guarantee as against the
Guarantor.
14. PAYMENT FREE OF DEDUCTION
The Guarantor will pay all monies due under this Guarantee free and
clear of and without deduction for or on account of either any set-off
or counterclaim or any and all present or future taxes, levies,
imposts, charges, fees, deductions or withholdings. If any sums payable
hereunder shall be or become subject to any such deduction or
withholding, the amount of such payments shall be increased so that the
net amount received by the Bank shall equal the amount which, but for
such deduction or withholding, would have been received by the Bank
hereunder provided that the Guarantor shall have no liability to the
Bank under this Clause 14, if and to the extent that such liability
would not have been incurred or arisen if the Bank had retained its
rights under the Loan Agreement and/or had not changed its lending
office.
15. TAX CREDITS
If the Bank receives the benefit of a tax credit or an allowance
resulting from a payment which includes an additional amount paid by
the
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Guarantor under Clause 14, it shall (to the extent that it can do so
without prejudice to the retention of such credit or allowance and to
the extent that it is not unlawful or contrary to any official
directive for it to do so) pay to the Guarantor such part of that
benefit as is, in the reasonable opinion of the Bank, attributable to
the withholding or deduction giving rise to payment of that additional
amount, Provided that the Bank shall:-
(i) be the sole judge of the amount of any such benefit to be so
paid to the Borrower and of the date on which it is received
by the Bank;
(ii) have an absolute discretion as to the order and manner in
which it employs or claims tax credits and allowances
available to it; and
(iii) not be obliged to disclose to the Borrower or any other person
any confidential information regarding its tax affairs or tax
computations.
16. EFFECTIVENESS OF SECURITY
This Guarantee is in addition to and is not prejudiced, or to be
prejudiced, by any other guarantee or security for the Principal's
Obligations or any of them which is/are now or may hereafter be held by
the Bank whether from the Guarantor, any other guarantor or otherwise.
17. CURRENCY CONVERSIONS
17.1 The Guarantor's liability hereunder shall be to pay to the Bank the
full amount of the Principal's Obligations in such currency in which
they are for the time being denominated provided that if and to the
extent that the Guarantor shall not pay such amount in such currency
the Bank may accept payment of all or part of such amount in any other
currency and/or require the Guarantor, in
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substitution for its liability to pay such amount in such currency, to
pay an amount in pounds Sterling which is equivalent to the amount of
such currency remaining unpaid (and in either case the provisions of
Clause 17.2 below shall apply).
17.2 The equivalent on any day in one currency of any amount denominated in
another currency shall be an amount in the first currency equal to the
amount which the Bank would have received if the Bank had on such day
(or, if such day shall not be a business day, on the next succeeding
business day) made a purchase of the first currency with such amount of
such other currency at the then prevailing spot rate of exchange of the
Bank less all costs, charges and expenses normally incurred by the Bank
in connection with such a purchase.
18. COSTS AND EXPENSES
The Guarantor shall pay on demand all proper legal and other costs and
expenses (together with any value added tax or other taxes in respect
thereof) properly incurred by the Bank in connection with the
preservation of rights under and enforcement of this Guarantee.
19. PROVISIONS SEVERABLE
Each of the provisions contained in this Guarantee shall be severable
and distinct from one another and if any one or more of such provisions
is now or hereafter becomes invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions of
this Guarantee shall not in any way be affected, prejudiced or impaired
thereby.
20. BENEFIT OF GUARANTEE
The Bank shall have a full and unfettered right to assign the whole or
any part of the benefit of this Guarantee to any person to whom the
right and
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benefits of the Bank under the Loan Agreement are assigned in
accordance with the terms thereof and the expression the "BANK"
wherever used herein shall be deemed to include such assignees and
other successors of the Bank, who shall be entitled to enforce and
proceed upon this Guarantee in the same manner as if named therein. The
Bank shall be entitled to impart any information concerning the
Guarantor to any such assignee or other successor or any participant or
proposed assignee, successor or participant in relation to the Bank's
rights under or in connection with the Loan Agreement upon the same
terms as applicable under the Loan Agreement to any information
imparted thereunder in relation to the Borrower, but by reference to
the Guarantor and its obligations hereunder.
21. NOTICES AND DEMANDS
Any notice or demand may be given or made hereunder by any of the
methods specified in Clause 31 of the Mortgage Debenture which clause
shall be deemed to be incorporated herein (MUTATIS MUTANDIS).
22. LAW AND JURISDICTION
(A) This Guarantee shall be governed by and construed in accordance with
English law.
(B) The Guarantor hereby agrees for the benefit of the Bank, and without
prejudice to the right of the Bank to take proceedings in relation
hereto before any other court of competent jurisdiction, that the
courts of England shall have jurisdiction to hear and determine any
suit, action or proceeding that may arise out of or in connection with
this Guarantee and for such purposes irrevocably submits to the
jurisdiction of such courts.
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Executed by the Guarantor as a Deed and delivered on the date first above
written.
EXECUTED BY )
DATAWATCH EUROPE LIMITED )
acting by:- )
Bruce R. Gardner Director /s/ Bruce R. Gardner
John F. Cave Director/Secretary /s/ John F. Cave
13
EXHIBIT 10.29
Date: December 27, 1999
DATAWATCH INTERNATIONAL LIMITED
(as Chargor)
SILICON VALLEY BANK
(as Bank)
Mortgage Debenture
FIELD FISHER WATERHOUSE 35 Vine Street London EC3N 2AA
<PAGE>
Contents
NO HEADING PAGE
CLAUSES
1. Definitions and interpretation 1
2. Covenant to pay 5
3. Mortgages and Charges 5
4. Restrictions on other Securities and Disposals 10
5. Perfection of the Bank's Security 11
6. Collection of Debts 13
7. Conversion of Floating Charge 13
8. Insurance 15
9. Undertakings by the Chargor 18
10. Extension and Variation of the Law of Property Act 1925 26
11. Appointment of Receiver 28
12. No Liability as Mortgagee in Possession 37
13. Expenses 38
14. Power of Attorney 39
15. Protection of Purchasers 41
16. Subsequent Charges 41
17. Redemption of Prior Mortgages 42
18. Set-Off 42
<PAGE>
19. Payments 43
20. Currency 45
21. Suspense Account 46
22. The Bank's Remedies 47
23. Provisions Severable 49
24. The Bank's Discretion 49
25. Certificates 49
26. Assignment; Successors 49
27. Discharge 50
28. Law and Jurisdiction 50
29. Constitutional Documents 51
30. Counterparts 51
31. Notices 51
Schedule 1 Details of the Property 54
<PAGE>
THIS MORTGAGE DEBENTURE is made on December 27, 1999
BETWEEN
(1) DATAWATCH INTERNATIONAL LIMITED (Company No. 02515018) whose registered
office is at 10th Floor, Maple House, Potters Bar, Hertfordshire EN6
5BS (the "CHARGOR"); and
(2) SILICON VALLEY BANK a California chartered bank having its principal
place of business at 3003 Tasman Drive, Santa Clara, California 95054,
United States of America (the "BANK").
WITNESSES as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINED TERMS
In this Mortgage Debenture:-
"BANK'S RIGHTS" means any of the rights, powers and remedies provided
by this Mortgage Debenture or by law;
"BANK" means Silicon Valley Bank (and includes its successors in title
and assigns);
"CHARGED DEBTS" means the book and other debts and liabilities hereby
charged as more particularly referred to in Clause 3.1(B)(ii);
"COLLATERAL" means the property, assets and income of the Chargor for
the time being mortgaged, assigned or charged (whether by way of fixed
or floating charge) to the Bank by or pursuant to this Mortgage
Debenture and each and every part thereof;
"DEFAULT RATE" means the rate of interest described under the heading
"Default Rate" in Section 1 of the Loan Agreement;
<PAGE>
"ENVIRONMENTAL LAWS" means all laws (statutory, common or otherwise)
including, without limitation, circulars, guidance notes and codes of
practice from time to time relating to the protection of the
environment (including, without limitation, any laws requiring the
remediation of contaminated land or water), or regulating the carrying
on of any process or activity on premises and any emissions from, and
all waste produced by, such process or activity and any such chemicals
or substances relating to the same whether relating to health and
safety, the workplace, the environment or the provision of energy
(including without limitation the Health and Safety at Work etc Act
1974, the Control of Pollution Act 1974, the Environmental Protection
Act 1990, the Environment Act 1995, the Water Industry Act 1991, the
Water Resources Act 1991, the Statutory Water Companies Act 1991, the
Water Consolidation (Consequential Provisions) Act 1991, the Clean Air
Acts, the Alkali & c. Works Regulation Act 1906, the Planning Hazardous
Substances Act 1990, the Public Health Acts and the Radioactive
Substances Act 1960 and any European Community legislation regarding
the same) from time to time in force and any other instrument, plan,
regulation, permission, authorisation and direction made or issued
thereunder or deriving validity therefrom;
"ENVIRONMENTAL LICENCE" means any permit, licence, authorisation,
consent or other approval required by or given pursuant to any
Environmental Laws;
"GUARANTEE" means the Guarantee dated of even date herewith and made
between the Chargor as guarantor and the Bank in respect of Datawatch
Corporation;
"PERMITTED ENCUMBRANCES" means any lien arising in the ordinary course
of business of the Chargor
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which is discharged in the ordinary course of such business;
"PROPERTY" means all the freehold and/or leasehold properties (if any)
more particularly described in the Schedule which is the subject of
this security and refers to each and every part of the Property
including all buildings, fixtures and fittings and fixed plant and
machinery from time to time thereon owned by the Chargor and the
proceeds of sale of all or any part thereof, and the benefit of any
covenants for title given or entered into by any predecessor in title
of the Chargor and any moneys paid or payable in respect thereof;
"RECEIVER" means a receiver receivers or receiver and manager or
administrative receiver or receivers appointed by the Bank under this
Mortgage Debenture;
"SECURED OBLIGATIONS" means all monies which now are or at any time
hereafter may be or become due or owing by the Chargor to the Bank
under or in connection with the Guarantee and all other liabilities
(including, without limitation, liability to pay liquidated or
unliquidated damages), whether actual or contingent, now existing or
hereafter incurred by the Chargor to the Bank anywhere and in any
manner whatever (and in either case whether due, owing or incurred by
the Chargor alone or jointly with any other person(s) and in whatever
name, form or style and whether as principal or surety) and all other
monies and liabilities payable or to be discharged by the Bank under or
pursuant to this Mortgage Debenture;
"SECURITY INTEREST" means any mortgage, charge, pledge, lien,
hypothecation, encumbrance, assignment, trust arrangement, title
retention, or other security interest (other than a lien arising in the
ordinary course of business by operation of law);
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<PAGE>
"SECURITY PERIOD" means the period commencing on the date of this
Mortgage Debenture and ending on the date upon which all the Secured
Obligations have been unconditionally and irrevocably paid and
discharged in full; and
"VAT" means Value Added Tax payable pursuant to the provisions of the
Value Added Tax Act 1994 or any other tax amending, replacing or
substituting the same.
1.2 TERMS DEFINED IN GUARANTEE
Terms defined in the Guarantee shall unless otherwise defined in this
Mortgage Debenture or unless the context otherwise requires, have the
same meaning when used herein.
1.3 CONSTRUCTION OF CERTAIN TERMS
In this Mortgage Debenture:
(a) Clause headings are inserted for convenience only and shall
not affect the construction of this Mortgage Debenture and
unless otherwise specified, all references to Clauses and to
Schedules (if any) are to clauses of, and the schedules to,
this Mortgage Debenture and references to Sub-clauses are to
sub-clauses of the Clause in which the reference appears;
(b) Section 61 of the Law of Property Act 1925 shall govern the
construction hereof, and where the context so admits, any
reference herein to any statute or any provision of any
statute shall be deemed to include reference to any statutory
modification or re-enactment thereof and to any regulations or
orders made thereunder and from time to time in force;
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<PAGE>
(c) the masculine gender shall include the feminine and neuter
genders and the singular shall include the plural and vice
versa;
(d) references to persons shall include references to bodies
corporate and unincorporate;
(e) references to any document are to be construed as references
to such document as amended or supplemented from time to time;
and
(f) references to the Bank include references to any person or
persons to whom the Bank may dispose of this Mortgage
Debenture or any interest or right created by or existing
under it and the successors in title to any such person in
respect of any such interest or right.
1.4 EFFECT AS A DEED
It is intended that this Mortgage Debenture take effect as a deed
notwithstanding the fact that the Bank may only execute this document
under hand.
2. COVENANT TO PAY
The Chargor covenants with the Bank that it will pay and discharge to
the Bank the Secured Obligations on the due date therefor in the
currency specified and otherwise in all respects in the manner provided
in the Guarantee.
3. MORTGAGES AND CHARGES
3.1 MORTGAGES AND FIXED AND FLOATING CHARGES
The Chargor, with full title guarantee, hereby (and to the intent that
the security so constituted shall be a continuing security in
5
<PAGE>
favour of the Bank) charges with the payment and discharge of the
Secured Obligations:
(A) by way of first legal mortgage the Property.
(B) by way of first fixed charge (which so far as it relates to
land in England and Wales and Northern Ireland vested in the
Chargor at the date hereof shall be a charge by way of legal
mortgage) the following namely:-
(i) all estates and other interests in freehold,
leasehold and other immovable property wheresoever
situate now or hereafter belonging to the Chargor
(including, without limitation, all its right, title
and interest in the Property (other than so far as
the same is charged by way of first legal mortgage
under sub-clause (A)) and all buildings, trade and
other fixtures, fixed plant and machinery belonging
to the Chargor from time to time on any such
freehold, leasehold and other immovable property;
(ii) all book and other debts and monetary claims now or
at any time hereafter due or owing or incurred to the
Chargor including all accounts with banks (including
but not limited to the account referred to in Clause
6.1) and the moneys deposited therein and interest
accruing the arrears and claims arising in respect of
accounts, together with the full benefit of all
guarantees and securities therefor and indemnities in
respect thereof and all liens, reservations of title,
rights of tracing and other rights enabling the
Chargor to enforce any such debts or claims;
(iii) the benefit of all insurance policies and contracts
of insurance
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<PAGE>
relating to the Property and all moneys payable under
any such policies and contracts and all VAT payable
on the same;
(iv) the benefit of all rentals, rents, service charges
and licence fees (if any) payable under or in respect
of any lease, underlease, tenancy or agreement for
lease affecting the Property and all VAT payable on
the same, and of all personal covenants given by any
tenant or occupier of the Property or guarantor of
such tenant or occupier to the Chargor;
(v) the Chargor's rights now or hereafter to recover any
VAT on any supplies made to it relating to the
Property and any sums so recovered;
(vi) the benefit of all contracts, deeds, undertakings,
agreements, rights, warranties, securities,
covenants, guarantees, bonds and indemnities of any
nature now or at any time enjoyed or held by the
Chargor and relating to the Property (including but
without limitation any deposit or other sum paid by
way of security or paid under any contract for the
sale of the Property or any part thereof or under any
option contract relating to the Property (whether or
not such deposit is forfeited), and all compensation
paid in relation to the Property) and all VAT payable
on the same;
(vii) all stocks, shares, debentures, loan capital, rights
to subscribe for, convert other securities into or
otherwise acquire any stocks, shares, debentures and
loan capital of any other body corporate now or at
any time
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<PAGE>
hereafter belonging to the Chargor, together with all
dividends, interest and other income and all other
rights of whatsoever kind deriving from or incidental
to any of the foregoing;
(viii) the goodwill of the Chargor and its uncalled capital
now or at any time hereafter in existence and future
calls (whether made by the directors of the Chargor
or by a Receiver appointed hereunder or a
liquidator);
(ix) all and any sums payable, by purchasers or others,
upon the disposal (whether by transfer, assignment or
otherwise) of, or the grant or creation of, any
interest in the Property or any part thereof, and
including any other sums of a capital nature derived
from the Property or any part thereof, and including,
compensation or damages received for any use or
disturbance, blight or compulsory purchase in respect
of the Property or any part thereof, after deduction
in each case of all reasonable costs and expenses
directly and properly incurred in connection with
such disposal, grant or creation;
(x) all chattels now or at any time hereafter hired,
leased or rented by the Chargor to any other person
together in each case with the benefit of the related
hiring, leasing or rental contract and any guarantee,
indemnity or other security for the performance of
the obligations of any person under or in respect of
such contract insofar as the same are capable of
being charged; and
(xi) all present and future copyrights, patents and all
registered patents owned
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<PAGE>
by the Chargor from time to time and all applications
for registration of any patent owned by the Chargor
from time to time, design rights and all registered
designs owned by or licenced by or to the Chargor
from time to time, trademarks and all applications
for trademarks (and all goodwill associated
therewith), service marks and all applications for
service marks, brand names and/or business names,
inventions, design rights, all trade secrets and
know-how and all other intellectual property rights
whatsoever without limitation, whether registered or
unregistered in all or any part of the world in which
the Chargor is legally, beneficially or otherwise
interested and the benefit of any pending
applications for the same and all benefits deriving
therefrom and thereunder including but not limited to
royalties, fees, profit sharing agreements and income
arising therefrom and all licences in respect of or
relating to any intellectual property rights, whether
such licences are granted to the Chargor or granted
by the Chargor.
(C) By way of first floating charge the whole of the Chargor's
undertaking and all its property, rights and assets whatsoever
and wheresoever, present and future, other than any property
or assets from time to time or for the time being effectively
charged to the Bank by way of the legal mortgage or fixed
charge or assigned to the Bank by sub-clauses (A) or (B) of
Clause 3.1 respectively or otherwise pursuant to this Mortgage
Debenture.
3.2 CONTINUING SECURITY
9
<PAGE>
The security from time to time constituted by or pursuant to this
Mortgage Debenture shall:-
(a) be in addition to and shall be independent of every bill,
note, guarantee, mortgage or other security which the Bank may
at any time hold for any of the Secured Obligations and it is
hereby declared that no prior or other security or other
interest held by the Bank over the Collateral or any part
thereof shall merge in the security created hereby or pursuant
thereto; and
(b) remain in full force and effect as a continuing security until
the discharge and satisfaction of all the Secured Obligations
and the Chargor is under no further obligation actual or
contingent under this Mortgage Debenture.
4. RESTRICTIONS ON OTHER SECURITIES AND DISPOSALS
4.1 NEGATIVE PLEDGE
The Chargor shall not at any time without the prior written consent or
agreement of the Bank (and to the intent that any purported dealing in
contravention of this Clause shall be void and of no effect):-
(a) create, or purport to create, extend or permit to subsist any
mortgage or other fixed security, floating charge, pledge,
hypothecation or lien (other than a lien arising by operation
of law) or other security interest of any kind, whether in any
such case ranking in priority to or PARI PASSU with or after
the fixed and floating charges created by the Chargor under
Clause 3.1 above or any other security of the Bank created
pursuant to this Mortgage Debenture other than the Permitted
Encumbrances; or
10
<PAGE>
(b) sell, transfer, lease, lend or otherwise dispose of, whether
by means of one or a number of transactions related or not and
whether at one time or over a period of time, the whole or any
material part of the Chargor's undertaking or of its assets,
or enter into an agreement for sale, transfer, lease, loan or
other disposal of the whole or any such part.
4.2 RESTRICTION AT HM LAND REGISTRY
In the case of any part of the Property consisting of land which is for
the time being registered at HM Land Registry, the Chargor and the Bank
jointly apply to the Chief Land Registrar to enter a restriction in the
Proprietorship Register of the relevant title or titles in the
following terms:
"EXCEPT UNDER AN ORDER OF THE REGISTRAR NO DEALING BY THE PROPRIETOR OF
THE PROPERTY COMPRISED IN THIS TITLE OR MADE IN EXERCISE OF A POWER OF
SALE UNDER ANY CHARGE SUBSEQUENT TO CHARGE NUMBER [ o ] IN THE CHARGES
REGISTER IS TO BE REGISTERED WITHOUT THE CONSENT OF THE PROPRIETOR FOR
THE TIME BEING OF THE CHARGE NUMBER [ o ] IN THE CHARGES REGISTER".
The "charge number [ o ]" referred to above will be the entry number in
the Charges Register of the relevant title which relates this Mortgage
Debenture."
5. PERFECTION OF THE BANK'S SECURITY
5.1 FURTHER ASSURANCE
The Chargor shall from time to time, whensoever requested by the Bank
and at the Chargor's cost, execute in favour of the Bank, or as it may
direct, such further or other legal assignments, transfers, mortgages,
legal or other charges or
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<PAGE>
securities as in each such case the Bank shall reasonably stipulate
over the Chargor's estate or interest in any property or assets of
whatsoever nature or tenure and wheresoever situate and forming part of
the Collateral for perfecting the security intended to be created by
this Mortgage Debenture and for facilitating the realisation of the
Collateral. Without prejudice to the generality of the foregoing, such
assignments, transfers, mortgages, legal or other charges, or
securities shall be in such form as shall be prepared on behalf of the
Bank and may contain provisions such as are herein contained or
provisions to the like effect and/or such other provisions of
whatsoever kind as the Bank shall reasonably consider requisite for the
improvement or perfection of the security constituted by or pursuant to
this Mortgage Debenture (but not otherwise). The obligations of the
Chargor under this Clause 5.1 shall be in addition to and not in
substitution for the covenants for further assurance deemed to be
included herein by virtue of the Law of Property (Miscellaneous
Provisions) Act 1994.
5.2 DEPOSIT OF TITLE DEEDS
The Chargor shall immediately upon the execution of this Mortgage
Debenture (or upon becoming possessed thereof at any time hereafter)
deposit with the Bank all deeds, certificates and other documents
constituting or evidencing title to the Collateral or any part thereof.
5. 3 AFFIXING OF NOTICES
The Chargor shall, whenever requested by the Bank and at the Chargor's
cost, affix to such items of the Collateral or register, endorse or
cause to be registered or endorsed on such documents as are referred to
in Clause 5.2 as the Bank shall in each case stipulate, labels, signs
or memoranda in such form as the Bank shall reasonably require
referring or drawing attention
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to the security constituted by or pursuant to this Mortgage Debenture.
5.4 NOTICES TO THIRD PARTIES
The Chargor will from time to time as requested by the Bank deliver any
notices to any third party having rights or liabilities in or to any of
the Collateral will procure the issue by such third party of
acknowledgements reasonably required by the Bank.
6. COLLECTION OF DEBTS
6.1 COLLECTION AND PAYMENT INTO DESIGNATED ACCOUNT
The Chargor shall at all times during the continuance of the security
constituted by or pursuant to this Mortgage Debenture get in and
realise and pay into a designated account in the name of the Chargor
with such bank as the Bank may stipulate all monies which the Chargor
may receive in respect of the Charged Debts, and if its authority to do
so is terminated by the Bank giving notice following an Event of
Default under either of the Loan Agreements, shall not draw money from
such account.
6.2 NOT TO DEAL
The Chargor shall not at any time following an Event of Default under
either of the Loan Agreements without the prior written consent of the
Bank deal with the Charged Debts or other monies otherwise than by
getting in the same and making payment thereof into such designated
account referred to in Clause 6.1. Without prejudice to the generality
of the foregoing, the Chargor shall not at any such time factor or
discount any of such debts or claims or enter into any agreement for
such factoring or discounting.
7. CONVERSION OF FLOATING CHARGE
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7.1 BY NOTICE
The Bank shall be entitled immediately upon the occurrence of any Event
of Default under either of the Loan Agreements or at any time
thereafter or if the Bank reasonably considers such assets to be in
danger of being seized or sold under any form of distress, attachment,
execution or other legal process or to be otherwise in jeopardy, by
notice in writing to the Chargor to convert the floating charge created
by Clause 3.1(C) into a fixed charge affecting all the property and
assets which for the time being are the subject of such floating charge
or, as the case may be, such of the said property and assets as are
specified by such notice. This provision shall not preclude the
floating charge from becoming fixed in any of the events in which under
this Mortgage Debenture or under the general law it would do so.
7.2 AUTOMATIC CONVERSION
The floating charge hereby created shall (in addition to the
circumstances in which the same will occur under general law)
automatically be converted into a fixed charge:
(a) on the convening of any meeting of the members of the Chargor
to consider a resolution to wind the Chargor up (or not to
wind the Chargor up);
(b) on the presentation of a petition (other than a frivolous or
vexatious petition) to wind the Chargor up; or
(c) if the Chargor fails to comply with its obligations under
Clause 4.1.
7.3 Service by the Bank of a notice pursuant to Clause 7.1 in relation to
any class of the
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Chargor's assets shall not be construed as a waiver or abandonment of
the Bank's rights to serve similar notices in respect of any other
class of assets or of any other of the rights of the Bank.
8. INSURANCE
8.1 REQUIRED COVER
The Chargor shall at all times during the subsistence of the security
constituted by or pursuant to this Mortgage Debenture comply with all
covenants, undertakings and conditions as to insurance of any part of
the Collateral in any of the Loan Documents and/or required by the
terms of any lease, agreement for lease or tenancy granted by the
Chargor or to which any of the Collateral is for the time being subject
or under which the Chargor derives its estate or interest therein and,
subject to the foregoing and so far as this Clause is not inconsistent
with the said terms of such lease, agreement for lease or tenancy, the
Chargor shall at all such times:-
(a) cause all buildings, trade and other fixtures, fixed and other
plant and machinery forming part of the Collateral (if any) to
be insured and to be kept insured:-
(i) (if the Bank shall so stipulate) in an insurance
office or with underwriters approved by the Bank
against loss or damage by fire, and all such other
risks which it is usual to insure against in the case
of the relevant Collateral (including, in the case of
the Property, full cover against terrorism to the
extent available) and against such other or
additional risks as the Bank shall direct, to the
full reinstatement value thereof (together in the
case of the Property with additional amounts
estimated as sufficient to cover
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architects', surveyors' and other requisite
professional advisers' fees in relation to the
reinstatement of the Property and five years' loss of
rent and Service Charge in respect of the Property
and the costs of demolition, site clearance and
shoring-up and VAT on the cost of reinstatement) and
with the interest of the Bank noted on the policy of
insurance and providing for the Bank to be the loss
payee thereunder (or, if the Bank shall so direct, in
the joint names of the Chargor and the Bank); or
(ii) (if and to the extent that the Bank does not so
stipulate) in such insurance office of repute as
shall have been selected by the Chargor or with
Lloyd's underwriters on the same basis as insurances
are maintained by prudent companies carrying on
businesses comparable with that of the Lessee and on
a comparable scale as regards the property and assets
insured, the insured risks and the classes of risk to
be covered; and
(iii) procure that any such policy of insurance contains a
Bank protection clause whereby the insurance effected
will not be vitiated or avoidable as against a
mortgagee in the event of any misrepresentation act
or neglect or failure to disclose on the part of the
Chargor (subject to the payment of any increased
premium required by the insurer) and a Landlord
protection clause whereby the insurance will not be
vitiated or avoidable as against the Chargor or the
mortgagee as a result of anything done or omitted by
a tenant of the Property without the knowledge of the
Chargor and the mortgagee (subject
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to usual terms as to notification and payment of
additional premiums),
(b) procure that there are maintained such other insurances as are
normally maintained by prudent persons carrying on similar
businesses to the Lessee or which may be required by the Bank
(acting reasonably) including without limitation insurance
against liability to third parties arising out of the
ownership or occupation of the Property or the state or
condition thereof;
(c) duly and punctually pay all premiums and other moneys payable
under all such insurances as aforesaid and as soon as
reasonably practicable following written request by the Bank
produce to the Bank the premium receipts or other evidence of
the payment thereof; and
(d) (if so required by the Bank) deposit all policies and other
contracts of insurance relating to the Collateral or any part
thereof with the Bank or produce the same to the Bank for
inspection.
8.2 BANK'S RIGHT TO INSURE
If default shall be made by the Chargor in complying with Clause 8.1
after a reasonable demand regarding such has been made by the Bank to
the Chargor in writing it shall be lawful for the Bank, but not
obligatory on the Bank, to insure and keep insured such Collateral
either in its own name or in its name and that of the Chargor jointly
or in the name of the Chargor with an endorsement of the Bank's
interest. The monies expended by the Bank on so effecting or renewing
any such insurance shall be reimbursed by the Chargor to the Bank on
demand and until so reimbursed shall carry interest from the date of
payment to the date of reimbursement at the Default Rate.
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8.3 TRUST
All claims and monies received or receivable under any such insurance
as aforesaid shall (subject to the rights and claims of and obligations
of the Chargor to any prior mortgagee or chargee or any lessee, lessor
or landlord of any part of the Collateral) be held by the Chargor in
trust for the Bank and shall be applied by the Chargor in repaying or
reducing the Secured Obligations or, if the Bank shall so require, in
repairing, replacing, restoring or rebuilding the property damaged or
destroyed.
8.4 NO AVOIDANCE OF INSURANCE
The Chargor shall not do any act or commit any default by which any
policy of insurance may become void or voidable.
8.5 PAYMENT OF PROCEEDS
The Chargor shall not do any act or commit any default by which the
Bank may be prevented from receiving all monies payable under any
policy of insurance relating to the Collateral and shall ensure that
all sums at any time payable under any of such policies of insurance of
the Collateral shall be paid to the Bank.
9. UNDERTAKINGS BY THE CHARGOR
The Chargor hereby undertakes with the Bank that the Chargor will at
all times while there shall subsist any security constituted by or
pursuant to this Mortgage Debenture:-
(a) INFORMATION
provide the Bank, its employees, professional advisers and
agents with all such information respecting the Chargor's
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business and affairs as the Bank may from time to time
require;
(b) PAY OUTGOINGS
punctually pay or cause to be paid all rents, rates, taxes,
duties, assessments and other outgoings payable in respect of
the Collateral or any part thereof;
(c) REPAIR
keep all buildings and erections on or forming part of the
Property or any other freehold or leasehold property hereby
charged in good and substantial repair and condition and
adequately and properly painted and decorated and keep the
fixtures and fittings thereon and all plant, machinery,
implements and other effects for the time being owned by it in
a good state of repair and in good working order and condition
(in each case replacing, rebuilding, and renewing the same
when necessary);
(d) RIGHT OF ENTRY
permit the Bank and such persons as the Bank may from time to
time for that purpose appoint at reasonable times and upon
reasonable notice to enter and inspect and view the state and
condition of the Property and if any unauthorised alterations
or additions or any defects or disrepair are found upon such
inspection the Bank may enter onto the Property and execute
such replacements or removals, repairs or works as may be
necessary, the cost of which shall be paid by the Chargor to
the Bank on demand. The Chargor shall not be in breach of this
undertaking where the terms of any lease prohibit such entry
and the Chargor, having used all reasonable endeavours to
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obtain the relevant tenant's consent to such entry, has failed
to obtain the requisite permission;
(e) LEASES AND USE
not without the prior written consent of the Bank:
(i) grant or agree to grant (whether in exercise of any
statutory power or otherwise) any lease, underlease,
tenancy or agreement for lease affecting the
Collateral;
(ii) confer or agree to confer on any other person any
other right or licence to occupy any land or
buildings forming part of the Collateral or grant any
licence to assign or sub-let the Collateral or any
part thereof;
(iii) waive, release or vary or agree to waive, release or
vary any of the terms of any lease, underlease,
tenancy or agreement for lease affecting the
Collateral including the determination or review of
any rent payable thereunder nor exercise any power to
terminate or extend the same;
(iv) forfeit nor commence proceedings for forfeiture nor
exercise any right of re-entry nor accept the
surrender of any lease, underlease, tenancy or
agreement for lease affecting the Collateral; or
(v) change or permit or suffer to be changed the present
user of any part of the Collateral,
(f) ENVIRONMENTAL
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not cause, permit or suffer any substance, the presence of
which may require work of containment, restoration or clean up
to be undertaken under any applicable law whether on or off
the Collateral, or which causes or threatens to cause either a
nuisance under the provisions of the Environmental Protection
Act 1990 or the Environment Act 1995, or the presence of which
on adjacent properties could constitute a trespass by the
Chargor or which in an uncontained form may cause pollution of
the environment or harm to human health or detriment to the
amenities of the locality or which is otherwise toxic,
explosive, corrosive, radioactive, carcinogenic or mitogenic,
to be brought upon, treated, kept, stored, disposed of,
discharged, released, processed, produced, manufactured,
generated, refined or used upon, above or beneath any freehold
or leasehold forming part of the Collateral;
(g) PERFORM LEASE COVENANTS
observe and perform or (as the case may be) enforce the
observance and performance of all regulations, covenants and
provisions reserved by or contained in any lease, agreement
for lease or tenancy agreement affecting the Collateral and
neither take any step nor omit to take any step whatsoever if
in consequence of the taking or omission to take such step
such lease, agreement for lease or tenancy agreement may be
surrendered or forfeited or the rent thereunder may be
increased;
(h) PERFORM RESTRICTIVE AND OTHER COVENANTS
observe and perform all restrictive and other covenants and
stipulations for the time being affecting any part of the
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Collateral or the use or the enjoyment of the same or any part
thereof;
(i) INDEMNITY AGAINST OUTGOINGS
indemnify the Bank (and as a separate covenant any Receiver or
Receivers appointed by it) against all existing and future
rents, taxes, duties, fees, renewal fees, charges,
assessments, impositions and outgoings whatsoever (whether
imposed by deed or statute or otherwise and whether in the
nature of capital or revenue and even though of a wholly novel
character) which now or at any time during the continuance of
the security constituted by or pursuant to this Mortgage
Debenture are payable in respect of the Collateral or any part
thereof or by the owner or occupier thereof and so that if any
such sums as are referred to in this sub-paragraph (i) of
Clause 9.1 shall be paid by the Bank (or any such Receiver or
Receivers) the same shall be repaid by the Chargor on demand
with interest from the time or respective times of the same
having been paid at the Default Rate;
(j) COMPLY WITH STATUTORY PROVISIONS
comply or cause compliance in all respects with the provisions
of all statutes for the time being in force and requirements
of any competent authority relating to the Collateral or
anything done thereon by the Chargor and in particular (but
without prejudice to the generality of the foregoing) to
observe and perform or cause to be observed and performed all
the provisions and requirements of the Town and Country
Planning Act 1990, the Planning (Listed Buildings and
Conservation Areas) Act 1990, the Planning (Hazardous
Substances) Act 1990, the Planning
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(Consequential Provisions) Act 1990, the Planning and
Compensation Act 1991 and any Act amending, replacing or
modifying such Acts and all regulations and orders thereunder
(together, the "PLANNING ACTS") and the Registered Homes Act
1984 and all regulations and orders thereunder and before the
Chargor serves any discretionary notices the Chargor will
obtain the Bank's consent and to obtain or cause to be
obtained any development or other consent which may be
requisite by reason of the development of or on any of the
Collateral;
(k) VAT
not without the prior written consent of the Bank to exercise
any option to waive exemption from VAT in relation to the
Collateral or any part thereof and to give to the Bank on
demand all such details of the Chargor's registration for VAT
purposes as the Bank shall require;
(l) SUPPLY DETAILS OF NOTICES RECEIVED
give full particulars to the Bank of any notice or order or
proposal for a notice or order made, given or issued to the
Chargor under or by virtue of any statute including (without
prejudice to the generality of the foregoing) the Planning
Acts, or any regulation or order issued thereunder, within
seven days of receipt of such notice, order or proposal by the
Chargor and, if so required by the Bank, to produce such
notice, order or proposal to the Bank or its agents and also
as soon as practicable take all reasonable and necessary steps
to comply with any such notice, order or proposal or (if
required to do so by the Bank) to join with the Bank at the
cost of the Chargor in making such representation or appeals
as the Bank may deem fit in respect of any such
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notice, order or proposal and (without prejudice to the
generality of the foregoing) at all times during the
continuance of this security to give to the Bank or its agents
such information as they shall reasonably require as to all
matters relating to the Collateral;
(m) NOT TO WASTE
not do or permit or suffer to be done in or upon the
Collateral any waste, spoil or destruction nor to make or
permit any development, alteration or addition whatsoever,
structural, external, internal or otherwise, or any change of
user, to the Collateral without the consent in writing of the
Bank (which shall not be withheld where the Chargor cannot
withhold it under the terms of any Lease) and in the event of
the Bank giving any such consent as aforesaid to carry out all
such works in accordance with the provisions and conditions of
the consent and to the reasonable satisfaction of the Bank;
provided that the consent of the Bank shall not be required in
the case of minor alterations to shop fronts or fascias nor in
the case of internal non-structural alterations;
(n) CHARGED DEBTS
not without the prior written consent of the Bank release,
exchange, compound set-off, grant time or indulgence in
respect of or in any other manner, deal with all or any of the
Charged Debts otherwise than in the ordinary course of its
business or except as expressly provided for herein;
(o) NOTIFY MATERIAL MATTERS
notify the Bank of any matters materially affecting the value,
enforceability or
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collectability of any part of the Collateral and of all
material disputes, counterclaims, returns and rejections by or
of customers of the Company;
(p) COMPLIANCE WITH ENVIRONMENTAL LICENCES
obtain all requisite Environmental Licences applicable to the
Collateral and comply with the terms and conditions of the
same;
(q) COMPLIANCE WITH ENVIRONMENTAL LAWS
comply with all Environmental Laws applicable to the
Collateral and not permit a contravention
of the same;
(r) NOTIFY CLAIMS
notify the Bank of the receipt of and contents of all claims,
notices or other communications in respect of any alleged
breach of any Environmental Licences or any Environmental Laws
which may, if substantiated, have a material adverse effect on
the market value of the Collateral and shall forthwith take
such steps as the Bank may reasonably direct to remedy and/or
cease the continuation of any such alleged breach;
(s) PAY ENVIRONMENTAL LICENCE FEES
promptly pay all fees and other charges in respect of any
Environmental Licence applicable to the Collateral;
(t) NOTIFY NOTICES CONCERNING ENVIRONMENTAL LICENCES
forthwith notify the Bank of the receipt of and the contents
of any notices or other communications varying or suspending
any Environmental Licence relating to the
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Collateral and forthwith take such steps as the Bank may
reasonably direct to reinstate in full force and effect any
Environmental Licence so varied or suspended;
(u) SUPPLY ENVIRONMENTAL REPORTS
forthwith supply the Bank with copies of any environmental
reports, audits or studies undertaken in relation to the
Collateral; and
(v) ENVIRONMENTAL INDEMNITY
indemnify the Bank and each Receiver appointed under this
Mortgage Debenture and their respective officers, employees,
agents and delegates (together the "INDEMNIFIED PARTIES")
against any cost or expense suffered or incurred by them
which:-
(i) arises by virtue of any actual or alleged breach of
any Environmental Laws (whether by the Chargor, an
Indemnified Party or any other person);
(ii) would not have arisen if this Mortgage Debenture had
not been executed; and
(iii) was not caused by the negligence or wilful default of
the relevant Indemnified Party.
10. EXTENSION AND VARIATION OF THE LAW OF PROPERTY ACT 1925
10.1 POWER OF SALE
Section 103 of the Law of Property Act 1925 shall not restrict the
exercise by the Bank of the statutory power of sale conferred on it by
section 101 of such Act, which power shall arise and may be exercised
by the Bank immediately upon and at any time after the the Bank has
made demand under the Guarantee and the provisions of
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the said Act relating to and regulating the exercise of the said power
of sale shall, so far as they relate to the security constituted by or
pursuant to this Mortgage Debenture, be varied and extended
accordingly.
10.2 STATUTORY POWERS OF LEASING
The statutory powers of leasing, letting, entering into agreements for
leases or lettings and accepting and agreeing to accept surrenders of
leases conferred by Sections 99 and 100 of the said Act shall not be
exercisable by the Chargor in relation to any part of the Collateral
without the prior written consent of the Bank, but the foregoing shall
not be construed as a limitation of the powers of any Receiver
appointed hereunder and being an agent of the Chargor. Such statutory
powers shall be exercisable by the Bank upon or at any time after the
occurrence of an Event of Default and, whether or not the Bank shall
then be in possession of the premises proposed to be leased, so as to
authorise the Bank to make a lease or agreement for lease at a premium
and for any length of term and generally without any restriction on the
kinds of leases and agreements for lease that the Bank may make and
generally without the necessity for the Bank to comply with any
restrictions imposed by or the other provisions of the said Sections 99
and 100. The Bank may delegate such powers to any person and no such
delegation shall preclude the subsequent exercise of such powers by the
Bank itself or preclude the Bank from making a subsequent delegation
thereof to some other person; and any such delegation may be revoked.
10.3 CONSOLIDATION OF MORTGAGES
The restriction on the right of consolidating mortgage securities
contained in Section 93 of the Law of Property Act 1925 shall not apply
to this Mortgage Debenture.
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11. APPOINTMENT OF RECEIVER
11.1 TIMING OF APPOINTMENT AND JOINT RECEIVERS
At any time after having been requested so to do by the Chargor or at
any time after making demand under the Guarantee following an Event of
Default, the Bank may appoint one or more persons to be a Receiver or
Receivers of the whole or any part of the Collateral. The Bank may:-
(i) remove any Receiver previously appointed hereunder; and
(ii) appoint another person or other persons as Receiver or
Receivers, either in the place of a Receiver so removed or who
has otherwise ceased to act or to act jointly with a Receiver
or Receivers previously appointed hereunder.
If at any time and by virtue of any such appointment(s) any two or more
persons shall hold office as Receivers of the same assets or income,
each one of such Receivers shall be entitled (unless the contrary shall
be stated in any of the deed(s) or other instrument(s) appointing them)
to exercise all powers and discretions hereby or by law conferred on
Receivers individually and to the exclusion of the other or others of
them.
11.2 FORM OF APPOINTMENT AND REMOVAL
Every such appointment or removal, and every delegation, appointment or
removal by the Bank in the exercise of any right to delegate its power
or to remove delegates herein contained, may be made either by deed or
by instrument in writing under the hand of any officer of the Bank or
any person authorised in writing in that behalf by any such officer.
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11.3 POWERS OF RECEIVER - STATUTORY
Every Receiver for the time being holding office by virtue of an
appointment made by the Bank hereunder shall (subject to any
limitations or restrictions expressed in the deed or other instrument
appointing him but notwithstanding any winding-up or dissolution of the
Chargor) have, in relation to the Collateral, or as the case may be,
that part of the Collateral in respect of which he was appointed:-
(a) all the powers (as varied and extended by the provisions
hereof) conferred by the Law of Property Act 1925 on
mortgagors and on mortgagees in possession and receivers
appointed under the Act; and
(b) power in the name or on behalf and at the cost of the Chargor
to exercise all powers and rights of an absolute owner and do
or omit to do anything which the Chargor itself could do.
11.4 POWERS OF RECEIVER - SPECIFIC
In addition and without prejudice to the generality of the foregoing or
any other provision of this Mortgage Debenture, every Receiver for the
time being holding office by virtue of an appointment made by the Bank
hereunder shall (notwithstanding any winding-up or dissolution of the
Chargor) have the following powers, namely:-
(i) TAKE POSSESSION
power to take possession of, collect and get in all or any
part of the Collateral and for that purpose to make, or to
require the directors of the Chargor to make, calls upon the
holders of the Chargor's share capital in respect of any such
capital of the Chargor which remains uncalled and to
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enforce payment of calls so made and any previous unpaid calls
by taking proceedings in the name of the Chargor or by his own
name;
(ii) CARRY ON BUSINESS
power to carry on, manage, develop, amalgamate, reconstruct or
diversify the whole or any part of the Chargor's business,
including the power where the Chargor has one or more
subsidiaries of supervising, controlling and financing such
subsidiary or subsidiaries (inclusive of any bodies corporate
as are referred to in sub-paragraph (iv) below) and its or
their business or businesses and the conduct thereof;
(iii) SELL ASSETS
power to sell or assign all or any of the Charged Debts or
Collateral in such manner and generally upon such terms and
conditions as he thinks fit and to convey the same in the name
of the Chargor;
(iv) FORM SUBSIDIARIES
power to promote, or subscribe for or otherwise acquire the
share capital of any body corporate with a view to such body
corporate becoming a subsidiary of the Chargor and purchasing,
leasing or otherwise acquiring an interest in the whole or any
part of the Collateral or carrying on any business in
succession to the Chargor or any subsidiary of the Chargor;
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(v) SEVER
power to sever and sell separately from the Collateral all or
any fixed plant and machinery and other fixtures and fittings
relevant thereto;
(vi) IMPROVE, DEVELOP OR REPAIR
power to alter, improve, develop, complete, construct, modify,
refurbish or repair any building or land and to complete or
undertake or concur in the completion or undertaking (with or
without modification), of any project in which the Chargor was
concerned or interested prior to his appointment being a
project for the alteration, improvement, development,
completion, construction, modification, refurbishment or
repair of any building or land;
(vii) NO STATUTORY RESTRICTION ON SALE ETC
power to sell, lease or otherwise dispose of or concur in
selling, leasing, accepting surrenders or otherwise disposing
of the whole or any part of the Collateral without the
restriction imposed by Section 103 of the Law of Property Act
1925 or the need to observe any of the restrictions or other
provisions of Section 99 or 100 of the said Act and upon such
terms as he shall think fit;
(viii) METHOD OF SALE OR DISPOSAL
power to carry any sale, lease or other disposal of any land
or buildings and other property and assets into effect by
conveying, transferring, assigning or leasing in the name of
the Chargor and for that purpose to enter into covenants and
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other contractual obligations in the name of and so as to bind
the Chargor;
(ix) CONSENTS AND LICENCES
power to apply for and obtain any appropriate consents,
licences or approval in relation to the Collateral, its use or
development;
(x) ADDITIONAL LAND AND EASEMENTS
power to acquire additional land or any interest therein and/
or easements for the benefit of any of the Collateral and
power to grant easements or rights over the Collateral;
(xi) CHARGOR'S NAME
power to use the Chargor's name for registration and to effect
any necessary election for tax or other purposes;
(xii) COMPROMISE
power to make any arrangement or compromise or settlement of
claims or enter into any contracts or arrangements as he shall
think fit;
(xiii) INSURANCES
power to effect and renew insurances;
(xiv) PROCEEDINGS
power to take or defend proceedings in the name of the Chargor
including proceedings for the compulsory winding-up of the
Chargor and proceedings for directions under Section 35(1) of
the Insolvency Act 1986 and power to settle and compromise any
proceedings;
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(xv) EMPLOYEES
power to employ, engage and appoint such managers, agents,
servants and other employees and professional advisers on such
terms as he shall think fit including without limitation power
to engage his own firm in the conduct of the receivership;
(xvi) BORROW MONEY
power to raise or borrow money from the Bank or any other
person to rank for payment in priority to the security
constituted by or pursuant to this Mortgage Debenture and with
or without a mortgage or mortgage debenture on the Collateral
or any part of it;
(xvii) GENERAL POWERS
power to do all such other things as may seem to the Receiver
to be incidental or conducive to any other power vested in him
or to be conducive to the realisation of the security
constituted by or pursuant to this Mortgage Debenture as if he
were the absolute beneficial owner of the Collateral;
(xviii) PROTECTION OF ASSETS
to make and effect all repairs and insurances and do all other
acts which the Company might do in the ordinary conduct of its
business as well for the protection as for the improvement of
the Collateral and to commence and/or complete any building
operations on the Collateral and to apply for and maintain any
planning permissions, building regulation approvals and any
other permissions, consents or licences, in each case as he
may in his absolute discretion think fit;
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(xix) LEASES
to let all or any part of the Collateral for such term and at
such rent (with or without a premium) as he may think proper
and to accept a surrender of any lease or tenancy thereof on
such terms as he may think fit (including the payment of money
to a lessee or tenant on a surrender); and
(xx) RECEIPTS
to give valid receipts for all moneys and execute all
assurances and things which may be proper or desirable for
realising the Collateral.
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11.5 CONSIDERATION ON DISPOSAL
In making any sale or other disposal of any of the Collateral in the
exercise of their respective powers (including a disposal by the
Receiver to any such subsidiary as is referred to in Clause 11.4 (iv))
the Receiver or the Bank may accept, by way of consideration for such
sale or other disposal, cash, shares, loan capital or other
obligations, including without limitation consideration fluctuating
according to or dependent upon profit or turnover and consideration the
amount whereof is to be determined by a third party. Any such
consideration may be receivable in a lump sum or by instalments and
upon receipt by the Receiver shall IPSO FACTO be and become charged
with the payment of the Secured Obligations. Any contract for any such
sale or other disposal by the Receiver or the Bank may contain
conditions excluding or restricting the personal liability of the
Receiver or the Bank. Plant, machinery and other fixtures may be
severed and sold in the exercise of their respective powers by the
Receiver or the Bank separately from the premises to which they are
attached without any consent being obtained from the Chargor.
11.6 APPLICATION OF PROCEEDS
All monies received by the Bank or any Receiver appointed under this
Mortgage Debenture shall (subject to the rights and claims of any
person having a security ranking in priority to the security
constituted by or pursuant to this Mortgage Debenture) be applied in
the following order:
(i) in the payment of or provision for all costs, charges and
expenses incurred and payments made by the Bank and in the
payment of all costs, charges and expenses of and
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incidental to the Receiver's appointment and the payment of
his remuneration;
(ii) in the payment and discharge of any liabilities incurred by
the Receiver on the Chargor's behalf in the exercise of any of
the powers of the Receiver;
(iii) in providing for the matters (other than the remuneration of
the Receiver) specified in the first three paragraphs of
Section 109(8) of the Law of Property Act 1925;
(iv) in or towards payment of any debts or claims which are by
statute payable in preference to the Secured Obligations but
only to the extent to which such debts or claims have such
preference;
(v) in or towards the satisfaction of the Secured Obligations,
and any surplus shall be paid to the Chargor or other person entitled
thereto.
The provisions of this Clause 11.6 and of Clause 11.8 shall take effect
as and by way of variation and extension to the provisions of the said
section 109, which provisions as so varied and extended shall be deemed
incorporated herein.
11.7 RECEIVER AS AGENT
Every Receiver so appointed shall be deemed at all times and for all
purposes to be the agent of the Chargor which shall be solely
responsible for his acts and defaults and liable on any contracts or
engagements made or entered into by him and for the payment of his
remuneration. The Bank shall not be responsible for his misconduct,
negligence or default.
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11.8 RECEIVER'S REMUNERATION
Every Receiver so appointed shall be entitled to remuneration for his
services at a rate to be fixed by agreement between him and the Bank
(or, failing such agreement, to be fixed by the Bank) appropriate to
the work and responsibilities involved upon the basis of charging from
time to time adopted in accordance with his current practice or the
current practice of his firm and without being limited to the maximum
rate specified in Section 109(6) of the Law of Property Act 1925. The
amount of such remuneration may be debited by the Bank to the Chargor,
but shall in any event form part of the Secured Obligations.
11.9 MONIES ACTUALLY RECEIVED
Only monies actually paid by the Receiver to the Bank in satisfaction
or discharge of the Secured Obligations and unconditionally and
irrevocably retained by the Bank shall be capable of being applied by
the Bank in satisfaction thereof.
11.10 RECEIVER'S INDEMNITY
The Chargor agrees to indemnify and hold harmless the Receiver from and
against all actions, claims, expenses, demands and liabilities (save
where the same is due to gross negligence or wilful misconduct of the
Receiver) whether arising out of contract or tort or in any other way
incurred or which may at any time be incurred by him or by any manager,
agent, servant or other employee for whose debt, default or miscarriage
he may be answerable for anything done or omitted to be done in the
exercise or purported exercise of his powers under the provisions of
this deed or pursuant hereto.
12. NO LIABILITY AS MORTGAGEE IN POSSESSION
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The Bank shall not nor shall any Receiver appointed as aforesaid by
reason of it or such Receiver entering into possession of the
Collateral or any part thereof be liable to account as mortgagee in
possession or be liable for any loss on realisation or for any default
or omission which mortgagee in possession might be liable except for
its gross negligence or wilful misconduct.
13. EXPENSES
13.1 UNDERTAKING TO PAY
All costs, charges and expenses incurred and all payments made by the
Bank or any Receiver appointed hereunder in the lawful exercise of the
powers hereby conferred whether or not occasioned by any act, neglect
or default of the Chargor shall carry interest (as well after as before
judgment) at the Default Rate from the date of the same being incurred
or becoming payable until the date the same are unconditionally and
irrevocably paid and discharged in full.
The amount of such costs, charges, expenses and payments and all such
interest thereon and all remuneration payable hereunder shall be
payable by the Chargor on demand. All such costs, charges, expenses and
payments shall be paid and charged as between the Bank and the Chargor
on the basis of a full indemnity and not on the basis of party and
party or any other kind of taxation.
13.2 INDEMNITY
The Bank and every Receiver, attorney, manager, agent or other person
appointed by the Bank hereunder shall be entitled to be indemnified out
of the Collateral in respect of all liabilities and expenses properly
incurred by them in the execution or purported execution of any of the
powers, authorities or discretions vested in them
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pursuant hereto and against all actions, proceedings, costs, claims and
demands in respect of any matter or thing done or omitted in any way
relating to the Collateral and the Bank and any such Receiver may
retain and pay all sums in respect of the same out of any monies
received under the powers hereby conferred.
13.3 STAMP DUTIES
The Chargor shall pay and, forthwith on demand, indemnify the Bank
against any liability it incurs in respect of any stamp, registration
and similar tax which is or becomes payable in connection with the
entry into, performance or enforcement of this Mortgage Debenture.
14. POWER OF ATTORNEY
14.1 APPOINTMENT AND POWERS
The Chargor hereby irrevocably appoints the following, namely:-
(i) the Bank,
(ii) each and every person whom the Bank shall from time to time
nominate in writing under the hand of any officer of the Bank,
and
(iii) each and any Receiver appointed hereunder and for the time
being holding office as such,
jointly and also severally its attorney and attorneys for it and in the
name of the Chargor and otherwise on its behalf and as its act and deed
to sign, seal, execute, deliver, perfect and do all deeds, instruments,
acts and things which may be required (or which the Bank or any
Receiver appointed hereunder shall consider requisite) for carrying out
any obligation imposed on the Chargor by or pursuant to this Mortgage
Debenture (including but not limited to
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the obligations of the Chargor under Clause 5.1 and the statutory
covenant referred to in such Clause), for carrying any sale, lease or
other dealing by the Bank or such Receiver into effect, for conveying
or transferring any legal estate or other interest in land or other
property or otherwise howsoever, for getting in the Collateral, and
generally for enabling the Bank and the Receiver to exercise the
respective powers conferred on them by or pursuant to this Mortgage
Debenture by law. The Bank shall have full power to delegate the power
conferred on it by this Clause, but no such delegation shall preclude
the subsequent exercise of such power by the Bank itself or preclude
the Bank from making a subsequent delegation thereof to some other
person; and any such delegation may be revoked by the Bank at any time.
All money properly expended by any attorney shall be deemed to be
expenses incurred by the Bank under this Mortgage Debenture.
14.2 RATIFICATION
The Chargor shall ratify and confirm all transactions entered into by
the Bank or such Receiver or delegate of the Bank in the exercise or
purported exercises of the Bank's or such Receiver's respective powers
and all transactions entered into, documents executed and things done
by the Bank or such Receiver or delegate by virtue of the power of
attorney given by Clause 14.1.
14.3 IRREVOCABLE
The power of attorney hereby granted is as regards the Bank, its
delegates and (so far as permitted by law) any such Receiver (and as
the Chargor hereby acknowledges) granted irrevocably and for value as
part of the security constituted by this Mortgage Debenture to secure
proprietary interests of and the performance of obligations
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owed to, the respective donees within the meaning of the Powers of
Attorney Act 1971.
15. PROTECTION OF PURCHASERS
No purchaser or other person dealing with the Bank or its delegate or
any Receiver appointed hereunder shall be bound to see or inquire
whether the right of the Bank or such Receiver to exercise any of its
or his powers has arisen or become exercisable or be concerned with
notice to the contrary, or be concerned to see whether any such
delegation by the Bank shall have lapsed for any reason or been
revoked.
16. SUBSEQUENT CHARGES
If the Bank shall at any time receive notice of any subsequent
mortgage, charge, assignment, hypothecation, pledge or other like
interest, matter, event or transaction affecting the Collateral or any
part of it (otherwise than with the prior written consent of the Bank
as permitted by this Mortgage Debenture) or that a receiver has been
appointed to all or any part of the Chargor's assets or that a petition
for an administration order or for compulsory liquidation has been
presented or a resolution for voluntary liquidation has been passed in
relation to the Chargor, the Bank may open a new account or accounts
for the Chargor in its books. If the Bank does not in fact open any
such new account then, unless it gives express written notice to the
Chargor to the contrary, the Bank shall be treated as if it had in fact
opened such account or accounts at the time when it received such
notice. As from that time and unless such express written notice shall
be given to the Chargor, all payments by or on behalf of the Chargor to
the Bank shall (in the absence of any express contrary appropriation by
the Chargor) be credited, or treated as having been credited, to the
new account(s) of the Chargor opened or deemed to have been opened and
not as having been
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applied in reduction of the Chargor's indebtedness and other
liabilities to the Bank at the time when the Bank received such notice.
17. REDEMPTION OF PRIOR MORTGAGES
The Bank may, at any time after the security hereby constituted has
become enforceable, redeem any prior security interest against the
Collateral or any part thereof or procure the transfer thereof to
itself and may settle and pass the accounts of the prior mortgagee,
chargee or encumbrancer. Any accounts so settled and passed shall be
conclusive and binding on the Chargor. All principal moneys, interest,
costs, charges and expenses of, and incidental to, such redemption and
transfer shall be paid by the Chargor to the Bank on demand.
18. SET-OFF
18.1 CONSOLIDATION OF ACCOUNTS
In addition to any general lien or similar right to which it may be
entitled by operation of law, the Bank shall have the right upon or at
any time after the occurrence of an Event of Default and with notice to
the Chargor to combine or consolidate all or any of the Chargor's then
existing accounts opened pursuant to this Mortgage Debenture with any
liabilities of the Chargor to the Bank and to set-off or transfer any
sum or sums standing to the credit of any one or more of such accounts
in or towards satisfaction of any of the liabilities of the Chargor to
the Bank on any other such account or in any other respect. The
liabilities referred to in this Clause may be actual, contingent,
primary, collateral, several or joint liabilities, and the accounts,
sums and liabilities referred to in this Clause may be denominated in
any currency.
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18.2 SET-OFF
The Bank may set-off any Secured Obligations owed by the Chargor
against any obligation (whether or not matured) owed by the Bank to the
Chargor regardless of the place of payment or currency of either
obligation. If the obligations are in different currencies, the Bank
may convert either obligation in the manner provided in Clause 20.
19. PAYMENTS
19.1 MANNER OF PAYMENT
All payments to be made by the Chargor hereunder shall be made in the
same currency in which the Secured Obligations are expressed to be
payable under the Loan Agreement.
19.2 TAXES
All payments by the Chargor under or in connection with this Mortgage
Debenture shall be made without set-off or counterclaim, free and clear
of and without deduction for or on account of all taxes. All taxes in
respect of this Mortgage Debenture and payments hereunder shall be for
the account of and shall be paid by the Chargor for its own account
prior to the date on which penalties attach thereto. If the Chargor is
compelled by law to make payment subject to any tax and the Bank does
not actually receive for its own benefit on the due date a net amount
equal to the full amount provided for hereunder, the Chargor will pay
all necessary additional amounts to ensure receipt by the Bank of the
full amounts so provided for, provided that the Chargor shall have no
liability to the Bank under this Clause 19.2 if and to the extent that
such liability would not have been incurred or arisen if the Bank had
retained its rights under the Loan Agreement and/or had not changed its
lending office. The Chargor will indemnify the Bank in respect of all
such taxes upon the Bank providing
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to the Chargor evidence that the Bank has suffered or incurred any
liability to pay such taxes.
19.3 TAX CREDITS
If the Bank receives the benefit of a tax credit or an allowance
resulting from a payment which includes an additional amount paid by
the Chargor under Clause 19.2, it shall (to the extent that it can do
so without prejudice to the retention of such credit or allowance and
to the extent that it is not unlawful or contrary to any official
directive for it to do so) pay to the Chargor such part of that benefit
as is, in the reasonable opinion of the Bank, attributable to the
withholding or deduction giving rise to payment of that additional
amount, provided that the Bank shall:
(i) be the sole judge of the amount of any such benefit to be so
paid to the Chargor and of the date on which it is received by
the Bank;
(ii) have an absolute discretion as to the order and manner in
which it employs or claims tax credits and allowances
available to it;
(iii) not be obliged to disclose to the Chargor or any other person
any confidential information regarding its tax affairs or tax
computations.
19.4 APPROPRIATION OF PAYMENTS
The Bank shall have an absolute and unfettered right to appropriate any
payments received from the Chargor, or otherwise recovered under the
Loan Documents to such indebtedness of the Chargor hereunder or
thereunder as the Bank may determine, to the exclusion of any right on
the
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part of the Chargor to make an appropriation in respect of such
payments.
20. CURRENCY
20.1 CURRENCY CONVERSION
(a) The Chargor's liability hereunder shall be to pay to the Bank the full
amount of the Principal's Obligations in such currency in which they
are for the time being denominated provided that if and to the extent
the Chargor shall not pay such amount in such currency the Bank may
accept payment of all or part of such amount in any other currency
and/or require the Chargor , in substitution for its liability to pay
such amount in such currency, to pay an amount in pounds Sterling which
is equivalent to the amount of such currency remaining unpaid (and in
either case the provisions of Clause 20.1(b) below shall apply);
(b) The equivalent on any day in one currency of any amount denominated in
another currency shall be an amount in the first currency equal to the
amount which the Bank would have received if the Bank had on such day
(or, if such day shall not be a business day, on the next succeeding
business day) made a purchase of the first currency with such amount of
such other currency at the then prevailing spot rate of exchange of the
Bank less all costs, charges and expenses normally incurred by the Bank
in connection with such a purchase.
20.2 CURRENCY INDEMNITY
If the Bank receives an amount in respect of the Chargor's liability
under this Mortgage Debenture or if that liability is converted into a
claim, proof, judgment or order in a currency other than the currency
(the "CONTRACTUAL CURRENCY") in which the amount is expressed to be
payable under this Mortgage Debenture (as the case may be):-
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(a) the Chargor shall indemnify the Bank as an independent
obligation against any loss or liability arising out of or as
a result of the conversion;
(b) if the amount received by the Bank, when converted into the
contractual currency at a market rate in the usual course of
its business is less than the amount owed in the contractual
currency, the Chargor shall forthwith on demand pay to the
Bank an amount in the contractual currency equal to the
deficit and to the extent that such conversion results in the
Chargor receiving more than the amount owed in the contractual
currency the amount of such excess (as conclusively determined
by the Bank) shall be paid to the Chargor; and
(c) the Chargor shall pay to the Bank forthwith on demand any
exchange costs and taxes payable in connection with any such
conversion.
20.3 WAIVER
The Chargor waives any right it may have in any jurisdiction to pay any
amount under this Mortgage Debenture in a currency other than that in
which it is expressed to be payable.
21. SUSPENSE ACCOUNT
All monies received, recovered or realised by the Bank under this
Mortgage Debenture (including the proceeds of any conversion of
currency) may in the discretion of the Bank be credited to any suspense
or impersonal account and may be held in such account for so long as
the Bank may think fit. The Bank shall not charge interest on so much
of the Chargor's indebtedness to the Bank as otherwise accrued under
the Principal's Obligations as is equal to the credit balance
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from time to time on such separate suspense account.
22. THE BANK'S REMEDIES
22.1 EFFECT OF RELEASE
Any receipt, release or discharge of the security provided by, or of
any liability arising under, this Mortgage Debenture shall not release
or discharge the Chargor from any liability to the Bank for the same or
any other liability which may exist independently of this Mortgage
Debenture.
22.2 ARRANGEMENTS WITH THIRD PARTIES
The Bank may in its discretion grant time or other indulgence, or make
any other arrangement, variation or release with, any person or persons
not party hereto (whether or not such person or persons are jointly
liable with the Chargor) in respect of any of the Secured Obligations
or of any other security therefor or guarantee in respect thereof
without prejudice either to the security constituted by or pursuant to
this Mortgage Debenture or to the liability of the Chargor for the
Secured Obligations or the exercise by the Bank of any rights, remedies
and privileges conferred upon it by this Mortgage Debenture.
22.3 RIGHTS CUMULATIVE
The rights, powers and remedies provided in this Mortgage Debenture are
cumulative and are not, nor are they to be construed as, exclusive of
any rights, powers or remedies provided by law, or under any of the
other Loan Documents.
22.4 WAIVER
No failure on the part of the Bank to exercise, or delay on its part in
exercising, any of the
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powers and remedies provided by this deed or by law, shall operate as a
waiver thereof, nor shall any single or partial waiver of such rights,
powers and remedies preclude any further or other exercise of that one
of such rights, powers and remedies concerned or the exercise of any
other of such rights, powers and remedies.
22.5 COSTS
All the costs, charges and expenses of the Bank in relation to this
Mortgage Debenture or for the Secured Obligations (including, without
limitation, the costs, charges and expenses incurred in the carrying
out of this Mortgage Debenture into effect or in the exercise of any of
the rights, remedies and powers conferred on the Bank hereby or in the
perfection or enforcement of the security constituted hereby or
pursuant hereto or in the perfection or enforcement of any other
security for or guarantee in respect of the Secured Obligations) shall
be reimbursed by the Chargor to the Bank on demand on a full indemnity
basis provided always that any costs, charges and expenses incurred by
the Bank prior to an Event of Default shall be reasonable.
22.6 INSOLVENCY RELATION BACK
Any settlement or discharge between the Bank and the Chargor shall be
conditional upon no security of, or payment to, the Bank (whether by
the Chargor or otherwise) being avoided or reduced or required to be
paid away by virtue of any requirement (whether or not having the force
of law) or enactment, whether relating to bankruptcy, insolvency,
liquidation, administration or otherwise, at any time in force or by
virtue of any obligation to give effect to any preference or priority
and the Bank shall be entitled to recover the value or amount of any
such security or payment from the Chargor as if such settlement or
discharge had not occurred.
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23. PROVISIONS SEVERABLE
Every provision contained in this Mortgage Debenture shall be severable
and distinct from every other provision and if at any time any one or
more of such provisions is or becomes invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining such provisions shall not in any way be affected thereby.
24. THE BANK'S DISCRETION
Any power which may be exercised or any determination which may be made
hereunder by the Bank may be exercised or made in the absolute and
unfettered discretion of the Bank.
25. CERTIFICATES
A certificate of the Bank setting out the amount of any Secured
Obligation due from the Chargor shall be prima facie evidence of such
amount against the Chargor in the absence of manifest error.
26. ASSIGNMENT; SUCCESSORS
26.1 SUCCESSORS
The expression the "BANK" wherever used herein shall be deemed to
include the assignees and other successors, whether immediate or
derivative, of the Bank, who shall be entitled to enforce and proceed
upon this Mortgage Debenture in the same manner as if named herein.
26.2 ASSIGNMENT
The Bank shall be entitled at any time to assign all or any of its
rights and benefits hereunder to any person to whom the rights and
benefits of the Bank under the Loan Agreements are assigned
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in accordance with the terms thereof and this Mortgage Debenture shall
remain in full force and effect after, and shall continue to secure the
Secured Obligations after and resulting from, any such assignment.
27. DISCHARGE
If the Chargor shall have unconditionally and irrevocably paid and
discharged the Secured Obligations in full (which event shall not occur
until all contingent liabilities have either crystallised or expired)
and the Bank will at the request and cost of the Chargor duly discharge
this Mortgage Debenture and re-assign to the Chargor or as it shall
direct such of the Collateral as is hereby assigned to the Bank.
28. LAW AND JURISDICTION
28.1 LAW
This Mortgage Debenture shall be governed by and construed in
accordance with English law.
28.2 SUBMISSION TO JURISDICTION
For the exclusive benefit of the Bank, the Chargor irrevocably agrees
that the courts of England are to have jurisdiction to settle any
disputes which may arise out of or in connection with this Mortgage
Debenture and the other Loan Documents and irrevocably submits to the
jurisdiction of such courts and agrees that accordingly any suit,
action or proceeding arising out of or in connection with this Mortgage
Debenture (together in this Clause referred to as "PROCEEDINGS") may be
brought in such courts.
28.3 OTHER JURISDICTIONS
Nothing contained in this Clause shall limit the right of the Bank to
take Proceedings against the
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Chargor in any other court of competent jurisdiction, nor shall the
taking of Proceedings in one or more jurisdictions preclude the taking
of Proceedings in any other competent jurisdiction, whether
concurrently or not.
28.4 WAIVER OF OBJECTION
The Chargor irrevocably waives any objection which it may have now or
hereafter to the laying of the venue of any Proceedings in any such
court as is referred to in Clause 28.2 and any claim that any such
Proceedings have been brought in any inconvenient forum and further
irrevocably agrees that a final judgment in any Proceedings brought in
the English courts shall be conclusive and binding and may be enforced
in the courts of any other competent jurisdiction.
29. CONSTITUTIONAL DOCUMENTS
The Chargor hereby certifies that its creation by this Mortgage
Debenture of charges in favour of the Bank does not contravene any of
the provisions of its constitutional documents.
30. COUNTERPARTS
This Mortgage Debenture may be executed in any number of counterparts
and by the different parties on separate counterparts and this will
have the same effect as if the signatures on the counterparts were on a
single copy of this Mortgage Debenture and each such counterpart shall
be treated as an original.
31. NOTICES
Any notice or other communication required or permitted to be given by
this Mortgage Debenture or by applicable law shall be in writing and
shall be deemed received (a) on the date delivered, if sent by hand
delivery (to the person or department if one is specified below),
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(b) three (3) days following the date deposited in U.S. mail, certified
or registered, with return receipt requested, or (c) one (1) day
following the date deposited with Federal Express or other national
overnight carrier, and in each case addressed as follows:
IF TO THE CHARGOR:
The Company Secretary
Datawatch International Limited
First Floor
Novartis House
Station Road
Kings Langley
Hertfordshire
WD4 8LG
IF TO THE BANK:
Mr Andrew H Tsao, Senior Vice President
Silicon Valley Bank
40 William Street
Suit 350
Wellesley
Massachusetts 02481
USA
WITH COPY TO:
Mr James Krumsiek
Rieimer & Braunstein LLP
Counselors at Law
Three Centre Plaza
Boston
Massachusetts 02108
USA
Fax: 001 (617) 723 6831
Failure to provide any courtesy copy shall not invalidate any notice
otherwise properly given to the designated party set out above. Any
party may change its address to another single address
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by notice given as herein provided, except any change of address notice
must be actually received in order to be effective.
IN WITNESS whereof this Mortgage Debenture has been executed as a deed and
delivered by the parties hereto on the day and the year first before written.
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SCHEDULE 1
DETAILS OF THE PROPERTY
PROPERTY INTEREST TITLE
NUMBER/DESCRIPTION
First Floor Leasehold a lease over the Property
Novartis House between Novartis Nutrition UK
Station Road Limited and the Chargor
Kings Langley commencing 18 February 1998
Hertfordshire and, subject to a renewal on 16
WD4 8LG December 2003, for the period
from commencement to 16
December 2009
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EXECUTED and DELIVERED .. )
AS A DEED BY DATAWATCH... )
INTERNATIONAL LIMITED.... )
Acting by: Bruce R. Gardner Director /s/ Bruce R. Gardner
Robert Hagger Director/Secretary /s/ Robert Hagger
EXECUTED and DELIVERED ....... )
AS A DEED by SILICON VALLEY .. )
BANK.......................... )
By: Heidi Fetty Assistant Vice President /s/ Heidi Fetty
A person authorised under the laws of California to execute and deliver as a
deed.
55
EXHIBIT 10.30
Date: December 27, 1999
DATAWATCH INTERNATIONAL LIMITED
in respect of
Datawatch Corporation
Deed of Guarantee
in favour of Silicon Valley Bank
FIELD FISHER WATERHOUSE 35 Vine Street London EC3N 2AA
<PAGE>
Contents
NO HEADING PAGE
CLAUSES
1. Interpretation 1
2. Guarantee and Security 2
3. Indemnity 3
4. Continuing Security 3
5. Interest 3
6. Opening of New Accounts 4
7. Dealings with the Principal and Others 4
8. Discharges and Release Avoided 5
9. Claims of the Guarantor against the Principal 6
10. Set-off 7
11. Suspense Account 8
12. Right To Make Demand 8
13. Certificate 9
14. Payment Free of Deduction 9
15. Tax credits 9
16. Effectiveness of Security 10
17. Currency Conversions 10
18. Costs and Expenses 11
<PAGE>
19. Provisions Severable 11
20. Benefit of Guarantee 11
21. Notices and Demands 12
22. Law and Jurisdiction 12
<PAGE>
THIS GUARANTEE made by way of Deed on the 27th day of December, 1999 by
DATAWATCH INTERNATIONAL LIMITED a company registered under the laws of England
and Wales under company number 02515018 whose registered office is at 10th
Floor, Maple House, High Street, Potters Bar, Hertfordshire EN6 5BS (the
"GUARANTOR") in favour of SILICON VALLEY BANK a California chartered bank, with
its principal place of business at 3003 Tasman Drive, Santa Clara, California
95054 USA (the "BANK").
WITNESSES as follows:-
1. INTERPRETATION
In this Guarantee:-
(i) the expression the "LOAN AGREEMENTS" means the Amended and Restated
Loan and Security Agreement dated 16 March 1999 made between the Bank
and the Principal and Personics Corporation as amended by the Loan
Modification Agreement dated of even date herewith and made between
Datawatch Corporation and the Bank and the Export-Import Bank Loan and
Security Agreement of even date herewith made between INTER ALIA the
Bank and Datawatch Corporation;
(ii) the expression the "Exim Loan Documents" means the Export-Import Bank
Loan and Security Agreement dated of even date herewith made between
INTER ALIA the Bank and Datawatch Corporation and all associated
documentation;
(iii) terms and expressions defined in the Loan Agreement shall have the same
meanings when used herein unless otherwise herein defined or the
context otherwise requires;
(iv) any reference in this Guarantee to a "PERSON" shall be construed as a
reference to any person, firm, company, corporation, government, state
or agency of a state or any association or
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partnership (whether or not having separate legal personality) of two
or more of the foregoing;
(v) "PRINCIPAL" means Datawatch Corporation, a Delaware corporation with
its principal place of business at 900 Chelmsford Street, Tower 3, 5th
Floor, Lowell, Massachusetts;
(vi) the expression the "PRINCIPAL'S OBLIGATIONS" means all monies whether
certain or contingent, now or at any time hereafter becoming due, owing
or incurred by the Principal to the Bank under or in connection with
the Loan Agreements and the other Exim Loan Documents and/or the Loan
Documents whether due, owing or incurred by the Principal alone or
jointly with any other person(s) and whether as principal or in some
other capacity; and
(vi) words and expressions defined in either of the Loan Agreements shall,
where the context permits, have the same meanings in this Guarantee.
2. GUARANTEE AND SECURITY
In consideration of the Bank making available and/or continuing to make
available banking accommodation and/or facilities under the Loan
Agreements, the Guarantor hereby irrevocably and unconditionally (i)
guarantees to the Bank the due and prompt payment and discharge of the
Principal's Obligations; and (ii) undertakes that the Guarantor will on
demand make good any default by the Principal in the payment or
discharge of the Principal's Obligations or any part thereof as if the
Guarantor instead of the Principal were expressed to be the primary
obligor in respect thereof, together with interest (as well after as
before judgment) at the rate per annum from time to time expressed to
be payable by the Principal on the Principal's Obligations under the
Exim Loan Documents and/or the Loan Documents from the date the same
became payable hereunder until payment
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thereof in full but provided that nothing in this Clause 2 shall
entitle the Bank to recover any interest from the Guarantor to the
extent that the same constitutes or otherwise represents
double-counting.
3. INDEMNITY
For the same consideration the Guarantor hereby agrees as a primary
obligor to indemnify the Bank against any loss (as defined below) which
the Bank may incur in the event of the whole or any part of the
Principal's Obligations or any actual or purported agreement,
arrangement or instruction relating thereto (including, without
limitation, the Loan Agreements or any other document referred to
therein) being invalid or being or becoming irrecoverable,
unenforceable or void or being avoided for any reason whatsoever,
irrespective of whether such reason was or ought to have been known to
the Bank or its officers, employees, agents or professional advisers.
For the purposes of this Clause "ANY LOSS" means the amount which the
Bank would otherwise have been entitled to recover from the Principal
under the Exim Loan Documents and/or the Loan Documents.
4. CONTINUING SECURITY
This Guarantee shall be a continuing security for all the Principal's
Obligations and shall not be discharged by any intermediate discharge
or payment of or on account of the Principal's Obligations or any of
them or any settlement of accounts between the Bank and the Principal,
any other guarantor or any other person. No demand made by or on behalf
of the Bank hereunder shall prejudice or restrict the rights of the
Bank to make further or other demands.
5. INTEREST
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The Guarantor shall pay interest on any amount for the time being due
from the Guarantor to the Bank under this Guarantee from the date of a
valid demand for payment hereunder until actual payment in full, at the
rate (as well after as before judgment) payable by the Principal on
such amount in accordance with the relevant Security Documents but
provided that nothing in this Clause 5 shall entitle the Bank to
recover any interest from the Guarantor to the extent that the same
constitutes or otherwise represents double-counting.
6. OPENING OF NEW ACCOUNTS
If for any reason this Guarantee ceases to be a continuing security,
the Bank may either continue any then existing account or open one or
more fresh accounts for the Principal, but in either case the
obligations of the Guarantor under this Guarantee shall remain
unaffected by, and be computed without regard to, any payment into or
out of any such account.
7. DEALINGS WITH THE PRINCIPAL AND OTHERS
The liability of the Guarantor hereunder shall not be impaired,
discharged or otherwise affected by (i) any determination, renewal,
variation, discharge, release or increase of, or composition or
arrangement by the Bank relating to, any credit or facilities to the
Principal or of or relating to the Principal's Obligations or of or
relating to any other guarantee in respect thereof or any agreement
relating thereto; or (ii) the grant by the Bank to the Principal or any
other person (including, without limitation, any other guarantor of the
Principal's Obligations or any of them) of any time or indulgence; or
(iii) any dealing, exchange, renewal, variation, release, discharge,
composition, arrangement, modification or abstaining from perfecting or
enforcing or claiming in relation to any securities, guarantees or
rights which the Bank may now or hereafter have
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in respect of the Principal's Obligations; or (iv) the renewal by the
Bank of any bills, promissory notes or other negotiable instruments or
securities; or (v) the Bank obtaining or failing to obtain any other
guarantee or security (whether contemporaneously with this Guarantee or
otherwise); or (vi) any other act, event or omission which but for this
provision would or might operate to impair, discharge or otherwise
affect the obligations of the Guarantor hereunder.
8. DISCHARGES AND RELEASE AVOIDED
No assurance security or payment which may be avoided or adjusted under
the law, including under any enactment, relating to individual or
corporate insolvency and no release settlement or discharge given or
made by the Bank on the faith of any such assurance security or payment
shall prejudice or affect the right of the Bank to recover all
liabilities due and owing under this Guarantee from the Guarantor
(including any monies which it may be compelled to refund under the
provisions of the Insolvency Act 1986 and any costs payable by it or
otherwise incurred in connection therewith) or to enforce the security
created by or pursuant to this deed to the full extent of the
liabilities due and owing under this Guarantee.
If the Bank has reasonable grounds for believing that any assurance
security or payment received by it from the Principal or the Guarantor
or any other person in respect of the Principal's Obligations may be
avoided or adjusted under any law relating to bankruptcy, insolvency or
winding-up then the Bank shall be at liberty to retain the security
created by or pursuant to this Deed for the relevant period (as defined
below) after the payment and discharge in full of all amounts due and
owing notwithstanding any release, settlement, discharge or arrangement
given or made by the Bank on, or as a consequence of, such payment or
termination or liability provided that, if at any
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time within the relevant period (as defined below) after such payment
or discharge, a petition shall be presented to a competent court for an
order for the winding-up or the making of an administration order in
respect of the Principal or the Principal shall commence to be wound-up
or to go into administration, or if any analogous proceedings are taken
in respect of the Guarantor or such other person, the Bank shall be at
liberty to continue to retain such security (including the documents
aforesaid) for and during the relevant period (as defined below) in
which event such security shall be deemed to have continued to have
been held as security for the payment and discharge to the Bank of all
amounts due and owing under this Guarantee. In this Clause the
"RELEVANT PERIOD" means a period of one month plus any statutory period
during which any assurance, security or payment such as is referred to
above may be avoided or invalidated (or such longer period as the Bank
shall reasonably consider comparable in the light of the provisions of
any applicable law of any jurisdiction).
When the Bank is satisfied that the Principal's Obligations have been
discharged in full and that the relevant period has expired it will
give written notice to the Guarantor and, at the written request of the
Guarantor, return this deed to the Guarantor.
9. CLAIMS OF THE GUARANTOR AGAINST THE PRINCIPAL
9.1 Until the Principal's Obligations shall have been paid or discharged in
full, and the Guarantor released from this Guarantee, the Guarantor
will not by virtue of such payment or by any other means or on any
other grounds, except with the prior written consent of the Bank or as
provided below (i) make or enforce any claim (whether by way of
set-off, counterclaim or otherwise) or right against the Principal or
prove in competition with the Bank, whether in respect of
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any payment hereunder made by the Guarantor or otherwise; or (ii) be
entitled to claim or have the benefit of, any set-off, counterclaim or
proof against, or dividend paid on a winding up or composition with
creditors by the Principal; or (iii) be entitled to claim or otherwise
obtain the benefit (by way of subrogation or otherwise) of any security
or guarantee or indemnity at any time held by the Bank for or in
respect of any of the Principal's Obligations; or (iv) claim or enforce
any right of contribution against any co-surety.
9.2 If the Guarantor shall have any right of proof or claim in the
winding-up, voluntary arrangement, receivership or administration of
the Principal which does not derive from a payment made hereunder, the
Guarantor shall (except where the Bank otherwise require) exercise that
right, or claim on behalf of the Bank and hold any dividend or other
money received in respect thereof upon trust for the Bank to the extent
of such liability or in like manner hold upon trust any money which it
may receive or recover from any co-surety by virtue of any rights of
contribution.
9.3 If while the Guarantor shall remain under liability to the Bank
hereunder, any monies or other property or assets shall be received or
recovered by the Guarantor in breach of any provisions of this Clause,
such monies or other property or assets shall be held upon trust to pay
or transfer the same to the Bank to the extent of such liability.
10. SET-OFF
Without prejudice to and in addition to any other remedy of set-off,
combination or consolidation of accounts which the Bank may have, at
any time after a demand hereunder or if at the relevant time the
Principal's Obligations and all other monies payable hereunder shall
not have been fully paid or otherwise discharged, the Bank shall be
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entitled without prior notice to the Guarantor, to set off the
liability of the Guarantor hereunder against any monies in whatsoever
currency standing to the credit of the Guarantor in any current or
other account with the Bank and to combine any such account with any
other such account. The Bank may for the purposes of this Clause 10 and
from time to time convert all or any part of such monies in such
account into the currency of the Guarantor's liability in accordance
with Clause 16.
11. SUSPENSE ACCOUNT
The Bank may at any time place and keep to the credit of a separate
suspense account any monies received under this Guarantee for so long
and in such manner as the Bank may determine without any obligation to
apply such monies or any part of them in or towards the discharge of
the Principal's Obligations. In the event of any proceedings in or
analogous to liquidation, composition or arrangement of or concerning
the Principal, the Bank may notwithstanding any payment made under this
Guarantee prove for a claim (as the case may be) and agree to accept
any dividend or composition in respect of the whole or any part of the
Principal's Obligations in the same manner as if this Guarantee had not
been given. The Bank shall not charge interest on so much of the
Guarantor's indebtedness to the Bank as otherwise accrued under the
Principal's Obligations as is equal to the credit balance from time to
time on such separate suspense account.
12. RIGHT TO MAKE DEMAND
If the right to make a demand for payment of any sum from the Principal
has arisen under the Security Documents the Bank may make a demand
under this Guarantee (i) before making any demand on the Principal or
any other surety or enforcing any other guarantee or security for the
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Principal's Obligations and (ii) for the payment of the ultimate
balance after resorting to other means of payment or for the balance
due at any time notwithstanding that the Bank has not resorted to other
means of payment (in which case the Guarantor shall not be entitled to
any benefit from such other means of payment so long as any of the
Principal's Obligations remain outstanding).
13. CERTIFICATE
The Bank's certificate of the amount of the Principal's Obligations
outstanding at any time shall, in the absence of manifest error, be
prima facie evidence for all purposes of this Guarantee as against the
Guarantor.
14. PAYMENT FREE OF DEDUCTION
The Guarantor will pay all monies due under this Guarantee free and
clear of and without deduction for or on account of either any set-off
or counterclaim or any and all present or future taxes, levies,
imposts, charges, fees, deductions or withholdings. If any sums payable
hereunder shall be or become subject to any such deduction or
withholding, the amount of such payments shall be increased so that the
net amount received by the Bank shall equal the amount which, but for
such deduction or withholding, would have been received by the Bank
hereunder provided that the Guarantor shall have no liability to the
Bank under this Clause 14, if and to the extent that such liability
would not have been incurred or arisen if the Bank had retained its
rights under the Loan Agreement and/or had not changed its lending
office.
15. TAX CREDITS
If the Bank receives the benefit of a tax credit or an allowance
resulting from a payment which includes an additional amount paid by
the
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Guarantor under Clause 14, it shall (to the extent that it can do so
without prejudice to the retention of such credit or allowance and to
the extent that it is not unlawful or contrary to any official
directive for it to do so) pay to the Guarantor such part of that
benefit as is, in the reasonable opinion of the Bank, attributable to
the withholding or deduction giving rise to payment of that additional
amount, Provided that the Bank shall:-
(i) be the sole judge of the amount of any such benefit to be so
paid to the Borrower and of the date on which it is received
by the Bank;
(ii) have an absolute discretion as to the order and manner in
which it employs or claims tax credits and allowances
available to it; and
(iii) not be obliged to disclose to the Borrower or any other person
any confidential information regarding its tax affairs or tax
computations.
16. EFFECTIVENESS OF SECURITY
This Guarantee is in addition to and is not prejudiced, or to be
prejudiced, by any other guarantee or security for the Principal's
Obligations or any of them which is/are now or may hereafter be held by
the Bank whether from the Guarantor, any other guarantor or otherwise.
17. CURRENCY CONVERSIONS
17.1 The Guarantor's liability hereunder shall be to pay to the Bank the
full amount of the Principal's Obligations in such currency in which
they are for the time being denominated provided that if and to the
extent that the Guarantor shall not pay such amount in such currency
the Bank may accept payment of all or part of such amount in any other
currency and/or require the Guarantor, in
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substitution for its liability to pay such amount in such currency, to
pay an amount in pounds Sterling which is equivalent to the amount of
such currency remaining unpaid (and in either case the provisions of
Clause 17.2 below shall apply).
17.2 The equivalent on any day in one currency of any amount denominated in
another currency shall be an amount in the first currency equal to the
amount which the Bank would have received if the Bank had on such day
(or, if such day shall not be a business day, on the next succeeding
business day) made a purchase of the first currency with such amount of
such other currency at the then prevailing spot rate of exchange of the
Bank less all costs, charges and expenses normally incurred by the Bank
in connection with such a purchase.
18. COSTS AND EXPENSES
The Guarantor shall pay on demand all proper legal and other costs and
expenses (together with any value added tax or other taxes in respect
thereof) properly incurred by the Bank in connection with the
preservation of rights under and enforcement of this Guarantee.
19. PROVISIONS SEVERABLE
Each of the provisions contained in this Guarantee shall be severable
and distinct from one another and if any one or more of such provisions
is now or hereafter becomes invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions of
this Guarantee shall not in any way be affected, prejudiced or impaired
thereby.
20. BENEFIT OF GUARANTEE
The Bank shall have a full and unfettered right to assign the whole or
any part of the benefit of this Guarantee to any person to whom the
right and
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benefits of the Bank under the Loan Agreement are assigned in
accordance with the terms thereof and the expression the "BANK"
wherever used herein shall be deemed to include such assignees and
other successors of the Bank, who shall be entitled to enforce and
proceed upon this Guarantee in the same manner as if named therein. The
Bank shall be entitled to impart any information concerning the
Guarantor to any such assignee or other successor or any participant or
proposed assignee, successor or participant in relation to the Bank's
rights under or in connection with the Loan Agreement upon the same
terms as applicable under the Loan Agreement to any information
imparted thereunder in relation to the Borrower, but by reference to
the Guarantor and its obligations hereunder.
21. NOTICES AND DEMANDS
Any notice or demand may be given or made hereunder by any of the
methods specified in Clause 31 of the Mortgage Debenture which clause
shall be deemed to be incorporated herein (MUTATIS MUTANDIS).
22. LAW AND JURISDICTION
(A) This Guarantee shall be governed by and construed in accordance with
English law.
(B) The Guarantor hereby agrees for the benefit of the Bank, and without
prejudice to the right of the Bank to take proceedings in relation
hereto before any other court of competent jurisdiction, that the
courts of England shall have jurisdiction to hear and determine any
suit, action or proceeding that may arise out of or in connection with
this Guarantee and for such purposes irrevocably submits to the
jurisdiction of such courts.
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Executed by the Guarantor as a Deed and delivered on the date first above
written.
EXECUTED BY )
DATAWATCH INTERNATIONAL LIMITED )
acting by:- )
Bruce R. Gardner Director /s/ Bruce R. Gardner
Robert Hagger Director/Secretary /s/ Robert Hagger
13
EXHIBIT 10.31
Date: December 27, 1999
GUILDSOFT LIMITED
(as Chargor)
SILICON VALLEY BANK
(as Bank)
Mortgage Debenture
FIELD FISHER WATERHOUSE 35 Vine Street London EC3N 2AA
<PAGE>
Contents
NO HEADING PAGE
CLAUSES
1. Definitions and interpretation 1
2. Covenant to pay 5
3. Mortgages and Charges 5
4. Restrictions on other Securities and Disposals 10
5. Perfection of the Bank's Security 11
6. Collection of Debts 13
7. Conversion of Floating Charge 13
8. Insurance 15
9. Undertakings by the Chargor 18
10. Extension and Variation of the Law of Property Act 1925 26
11. Appointment of Receiver 28
12. No Liability as Mortgagee in Possession 37
13. Expenses 38
14. Power of Attorney 39
15. Protection of Purchasers 41
16. Subsequent Charges 41
17. Redemption of Prior Mortgages 42
18. Set-Off 42
19. Payments 43
<PAGE>
20. Currency 45
21. Suspense Account 46
22. The Bank's Remedies 47
23. Provisions Severable 49
24. The Bank's Discretion 49
25. Certificates 49
26. Assignment; Successors 49
27. Discharge 50
28. Law and Jurisdiction 50
29. Constitutional Documents 51
30. Counterparts 51
31. Notices 51
Schedule 1 Details of the Property 54
<PAGE>
THIS MORTGAGE DEBENTURE is made on December 27, 1999
BETWEEN
(1) GUILDSOFT LIMITED (Company No. 02567531) whose registered office is at
Unit A, The Software Centre, East Way, Lee Mill Industrial Estate,
Ivybridge, Devon PL21 9PE (the "CHARGOR"); and
(2) SILICON VALLEY BANK a California chartered bank having its principal
place of business at 3003 Tasman Drive, Santa Clara, California 95054,
United States of America (the "BANK").
WITNESSES as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINED TERMS
In this Mortgage Debenture:-
"BANK'S RIGHTS" means any of the rights, powers and remedies provided
by this Mortgage Debenture or by law;
"BANK" means Silicon Valley Bank (and includes its successors in title
and assigns);
"CHARGED DEBTS" means the book and other debts and liabilities hereby
charged as more particularly referred to in Clause 3.1(B)(ii);
"COLLATERAL" means the property, assets and income of the Chargor for
the time being mortgaged, assigned or charged (whether by way of fixed
or floating charge) to the Bank by or pursuant to this Mortgage
Debenture and each and every part thereof;
"DEFAULT RATE" means the rate of interest described under the heading
"Default Rate" in Section 1 of the Loan Agreement;
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"ENVIRONMENTAL LAWS" means all laws (statutory, common or otherwise)
including, without limitation, circulars, guidance notes and codes of
practice from time to time relating to the protection of the
environment (including, without limitation, any laws requiring the
remediation of contaminated land or water), or regulating the carrying
on of any process or activity on premises and any emissions from, and
all waste produced by, such process or activity and any such chemicals
or substances relating to the same whether relating to health and
safety, the workplace, the environment or the provision of energy
(including without limitation the Health and Safety at Work etc Act
1974, the Control of Pollution Act 1974, the Environmental Protection
Act 1990, the Environment Act 1995, the Water Industry Act 1991, the
Water Resources Act 1991, the Statutory Water Companies Act 1991, the
Water Consolidation (Consequential Provisions) Act 1991, the Clean Air
Acts, the Alkali & c. Works Regulation Act 1906, the Planning Hazardous
Substances Act 1990, the Public Health Acts and the Radioactive
Substances Act 1960 and any European Community legislation regarding
the same) from time to time in force and any other instrument, plan,
regulation, permission, authorisation and direction made or issued
thereunder or deriving validity therefrom;
"ENVIRONMENTAL LICENCE" means any permit, licence, authorisation,
consent or other approval required by or given pursuant to any
Environmental Laws;
"GUARANTEE" means the Guarantee dated of even date herewith and made
between the Chargor as guarantor and the Bank in respect of Datawatch
Corporation;
"PERMITTED ENCUMBRANCES" means any lien arising in the ordinary course
of business of the Chargor
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which is discharged in the ordinary course of such business;
"PROPERTY" means all the freehold and/or leasehold properties (if any)
more particularly described in the Schedule which is the subject of
this security and refers to each and every part of the Property
including all buildings, fixtures and fittings and fixed plant and
machinery from time to time thereon owned by the Chargor and the
proceeds of sale of all or any part thereof, and the benefit of any
covenants for title given or entered into by any predecessor in title
of the Chargor and any moneys paid or payable in respect thereof;
"RECEIVER" means a receiver receivers or receiver and manager or
administrative receiver or receivers appointed by the Bank under this
Mortgage Debenture;
"SECURED OBLIGATIONS" means all monies which now are or at any time
hereafter may be or become due or owing by the Chargor to the Bank
under or in connection with the Guarantee and all other liabilities
(including, without limitation, liability to pay liquidated or
unliquidated damages), whether actual or contingent, now existing or
hereafter incurred by the Chargor to the Bank anywhere and in any
manner whatever (and in either case whether due, owing or incurred by
the Chargor alone or jointly with any other person(s) and in whatever
name, form or style and whether as principal or surety) and all other
monies and liabilities payable or to be discharged by the Bank under or
pursuant to this Mortgage Debenture;
"SECURITY INTEREST" means any mortgage, charge, pledge, lien,
hypothecation, encumbrance, assignment, trust arrangement, title
retention, or other security interest (other than a lien arising in the
ordinary course of business by operation of law);
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"SECURITY PERIOD" means the period commencing on the date of this
Mortgage Debenture and ending on the date upon which all the Secured
Obligations have been unconditionally and irrevocably paid and
discharged in full; and
"VAT" means Value Added Tax payable pursuant to the provisions of the
Value Added Tax Act 1994 or any other tax amending, replacing or
substituting the same.
1.2 TERMS DEFINED IN GUARANTEE
Terms defined in the Guarantee shall unless otherwise defined in this
Mortgage Debenture or unless the context otherwise requires, have the
same meaning when used herein.
1.3 CONSTRUCTION OF CERTAIN TERMS
In this Mortgage Debenture:
(a) Clause headings are inserted for convenience only and shall
not affect the construction of this Mortgage Debenture and
unless otherwise specified, all references to Clauses and to
Schedules (if any) are to clauses of, and the schedules to,
this Mortgage Debenture and references to Sub-clauses are to
sub-clauses of the Clause in which the reference appears;
(b) Section 61 of the Law of Property Act 1925 shall govern the
construction hereof, and where the context so admits, any
reference herein to any statute or any provision of any
statute shall be deemed to include reference to any statutory
modification or re-enactment thereof and to any regulations or
orders made thereunder and from time to time in force;
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<PAGE>
(c) the masculine gender shall include the feminine and neuter
genders and the singular shall include the plural and vice
versa;
(d) references to persons shall include references to bodies
corporate and unincorporate;
(e) references to any document are to be construed as references
to such document as amended or supplemented from time to time;
and
(f) references to the Bank include references to any person or
persons to whom the Bank may dispose of this Mortgage
Debenture or any interest or right created by or existing
under it and the successors in title to any such person in
respect of any such interest or right.
1.4 EFFECT AS A DEED
It is intended that this Mortgage Debenture take effect as a deed
notwithstanding the fact that the Bank may only execute this document
under hand.
2. COVENANT TO PAY
The Chargor covenants with the Bank that it will pay and discharge to
the Bank the Secured Obligations on the due date therefor in the
currency specified and otherwise in all respects in the manner provided
in the Guarantee.
3. MORTGAGES AND CHARGES
3.1 MORTGAGES AND FIXED AND FLOATING CHARGES
The Chargor, with full title guarantee, hereby (and to the intent that
the security so constituted shall be a continuing security in
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favour of the Bank) charges with the payment and discharge of the
Secured Obligations:
(A) by way of first legal mortgage the Property.
(B) by way of first fixed charge (which so far as it relates to
land in England and Wales and Northern Ireland vested in the
Chargor at the date hereof shall be a charge by way of legal
mortgage) the following namely:-
(i) all estates and other interests in freehold,
leasehold and other immovable property wheresoever
situate now or hereafter belonging to the Chargor
(including, without limitation, all its right, title
and interest in the Property (other than so far as
the same is charged by way of first legal mortgage
under sub-clause (A)) and all buildings, trade and
other fixtures, fixed plant and machinery belonging
to the Chargor from time to time on any such
freehold, leasehold and other immovable property;
(ii) all book and other debts and monetary claims now or
at any time hereafter due or owing or incurred to the
Chargor including all accounts with banks (including
but not limited to the account referred to in Clause
6.1) and the moneys deposited therein and interest
accruing the arrears and claims arising in respect of
accounts, together with the full benefit of all
guarantees and securities therefor and indemnities in
respect thereof and all liens, reservations of title,
rights of tracing and other rights enabling the
Chargor to enforce any such debts or claims;
(iii) the benefit of all insurance policies and contracts
of insurance
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relating to the Property and all moneys payable under
any such policies and contracts and all VAT payable
on the same;
(iv) the benefit of all rentals, rents, service charges
and licence fees (if any) payable under or in respect
of any lease, underlease, tenancy or agreement for
lease affecting the Property and all VAT payable on
the same, and of all personal covenants given by any
tenant or occupier of the Property or guarantor of
such tenant or occupier to the Chargor;
(v) the Chargor's rights now or hereafter to recover any
VAT on any supplies made to it relating to the
Property and any sums so recovered;
(vi) the benefit of all contracts, deeds, undertakings,
agreements, rights, warranties, securities,
covenants, guarantees, bonds and indemnities of any
nature now or at any time enjoyed or held by the
Chargor and relating to the Property (including but
without limitation any deposit or other sum paid by
way of security or paid under any contract for the
sale of the Property or any part thereof or under any
option contract relating to the Property (whether or
not such deposit is forfeited), and all compensation
paid in relation to the Property) and all VAT payable
on the same;
(vii) all stocks, shares, debentures, loan capital, rights
to subscribe for, convert other securities into or
otherwise acquire any stocks, shares, debentures and
loan capital of any other body corporate now or at
any time
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<PAGE>
hereafter belonging to the Chargor, together with all
dividends, interest and other income and all other
rights of whatsoever kind deriving from or incidental
to any of the foregoing;
(viii) the goodwill of the Chargor and its uncalled capital
now or at any time hereafter in existence and future
calls (whether made by the directors of the Chargor
or by a Receiver appointed hereunder or a
liquidator);
(ix) all and any sums payable, by purchasers or others,
upon the disposal (whether by transfer, assignment or
otherwise) of, or the grant or creation of, any
interest in the Property or any part thereof, and
including any other sums of a capital nature derived
from the Property or any part thereof, and including,
compensation or damages received for any use or
disturbance, blight or compulsory purchase in respect
of the Property or any part thereof, after deduction
in each case of all reasonable costs and expenses
directly and properly incurred in connection with
such disposal, grant or creation;
(x) all chattels now or at any time hereafter hired,
leased or rented by the Chargor to any other person
together in each case with the benefit of the related
hiring, leasing or rental contract and any guarantee,
indemnity or other security for the performance of
the obligations of any person under or in respect of
such contract insofar as the same are capable of
being charged; and
(xi) all present and future copyrights, patents and all
registered patents owned
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<PAGE>
by the Chargor from time to time and all applications
for registration of any patent owned by the Chargor
from time to time, design rights and all registered
designs owned by or licenced by or to the Chargor
from time to time, trademarks and all applications
for trademarks (and all goodwill associated
therewith), service marks and all applications for
service marks, brand names and/or business names,
inventions, design rights, all trade secrets and
know-how and all other intellectual property rights
whatsoever without limitation, whether registered or
unregistered in all or any part of the world in which
the Chargor is legally, beneficially or otherwise
interested and the benefit of any pending
applications for the same and all benefits deriving
therefrom and thereunder including but not limited to
royalties, fees, profit sharing agreements and income
arising therefrom and all licences in respect of or
relating to any intellectual property rights, whether
such licences are granted to the Chargor or granted
by the Chargor.
(C) By way of first floating charge the whole of the Chargor's
undertaking and all its property, rights and assets whatsoever
and wheresoever, present and future, other than any property
or assets from time to time or for the time being effectively
charged to the Bank by way of the legal mortgage or fixed
charge or assigned to the Bank by sub-clauses (A) or (B) of
Clause 3.1 respectively or otherwise pursuant to this Mortgage
Debenture.
3.2 CONTINUING SECURITY
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<PAGE>
The security from time to time constituted by or pursuant to this
Mortgage Debenture shall:-
(a) be in addition to and shall be independent of every bill,
note, guarantee, mortgage or other security which the Bank may
at any time hold for any of the Secured Obligations and it is
hereby declared that no prior or other security or other
interest held by the Bank over the Collateral or any part
thereof shall merge in the security created hereby or pursuant
thereto; and
(b) remain in full force and effect as a continuing security until
the discharge and satisfaction of all the Secured Obligations
and the Chargor is under no further obligation actual or
contingent under this Mortgage Debenture.
4. RESTRICTIONS ON OTHER SECURITIES AND DISPOSALS
4.1 NEGATIVE PLEDGE
The Chargor shall not at any time without the prior written consent or
agreement of the Bank (and to the intent that any purported dealing in
contravention of this Clause shall be void and of no effect):-
(a) create, or purport to create, extend or permit to subsist any
mortgage or other fixed security, floating charge, pledge,
hypothecation or lien (other than a lien arising by operation
of law) or other security interest of any kind, whether in any
such case ranking in priority to or PARI PASSU with or after
the fixed and floating charges created by the Chargor under
Clause 3.1 above or any other security of the Bank created
pursuant to this Mortgage Debenture other than the Permitted
Encumbrances; or
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(b) sell, transfer, lease, lend or otherwise dispose of, whether
by means of one or a number of transactions related or not and
whether at one time or over a period of time, the whole or any
material part of the Chargor's undertaking or of its assets,
or enter into an agreement for sale, transfer, lease, loan or
other disposal of the whole or any such part.
4.2 RESTRICTION AT HM LAND REGISTRY
In the case of any part of the Property consisting of land which is for
the time being registered at HM Land Registry, the Chargor and the Bank
jointly apply to the Chief Land Registrar to enter a restriction in the
Proprietorship Register of the relevant title or titles in the
following terms:
"EXCEPT UNDER AN ORDER OF THE REGISTRAR NO DEALING BY THE PROPRIETOR OF
THE PROPERTY COMPRISED IN THIS TITLE OR MADE IN EXERCISE OF A POWER OF
SALE UNDER ANY CHARGE SUBSEQUENT TO CHARGE NUMBER [ o ] IN THE CHARGES
REGISTER IS TO BE REGISTERED WITHOUT THE CONSENT OF THE PROPRIETOR FOR
THE TIME BEING OF THE CHARGE NUMBER [ o ] IN THE CHARGES REGISTER".
The "charge number [ o ]" referred to above will be the entry number in
the Charges Register of the relevant title which relates this Mortgage
Debenture."
5. PERFECTION OF THE BANK'S SECURITY
5.1 FURTHER ASSURANCE
The Chargor shall from time to time, whensoever requested by the Bank
and at the Chargor's cost, execute in favour of the Bank, or as it may
direct, such further or other legal assignments, transfers, mortgages,
legal or other charges or
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securities as in each such case the Bank shall reasonably stipulate
over the Chargor's estate or interest in any property or assets of
whatsoever nature or tenure and wheresoever situate and forming part of
the Collateral for perfecting the security intended to be created by
this Mortgage Debenture and for facilitating the realisation of the
Collateral. Without prejudice to the generality of the foregoing, such
assignments, transfers, mortgages, legal or other charges, or
securities shall be in such form as shall be prepared on behalf of the
Bank and may contain provisions such as are herein contained or
provisions to the like effect and/or such other provisions of
whatsoever kind as the Bank shall reasonably consider requisite for the
improvement or perfection of the security constituted by or pursuant to
this Mortgage Debenture (but not otherwise). The obligations of the
Chargor under this Clause 5.1 shall be in addition to and not in
substitution for the covenants for further assurance deemed to be
included herein by virtue of the Law of Property (Miscellaneous
Provisions) Act 1994.
5.2 DEPOSIT OF TITLE DEEDS
The Chargor shall immediately upon the execution of this Mortgage
Debenture (or upon becoming possessed thereof at any time hereafter)
deposit with the Bank all deeds, certificates and other documents
constituting or evidencing title to the Collateral or any part thereof.
5. 3 AFFIXING OF NOTICES
The Chargor shall, whenever requested by the Bank and at the Chargor's
cost, affix to such items of the Collateral or register, endorse or
cause to be registered or endorsed on such documents as are referred to
in Clause 5.2 as the Bank shall in each case stipulate, labels, signs
or memoranda in such form as the Bank shall reasonably require
referring or drawing attention
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to the security constituted by or pursuant to this Mortgage Debenture.
5.4 NOTICES TO THIRD PARTIES
The Chargor will from time to time as requested by the Bank deliver any
notices to any third party having rights or liabilities in or to any of
the Collateral will procure the issue by such third party of
acknowledgements reasonably required by the Bank.
6. COLLECTION OF DEBTS
6.1 COLLECTION AND PAYMENT INTO DESIGNATED ACCOUNT
The Chargor shall at all times during the continuance of the security
constituted by or pursuant to this Mortgage Debenture get in and
realise and pay into a designated account in the name of the Chargor
with such bank as the Bank may stipulate all monies which the Chargor
may receive in respect of the Charged Debts, and if its authority to do
so is terminated by the Bank giving notice following an Event of
Default under either of the Loan Agreements, shall not draw money from
such account.
6.2 NOT TO DEAL
The Chargor shall not at any time following an Event of Default under
either of the Loan Agreements without the prior written consent of the
Bank deal with the Charged Debts or other monies otherwise than by
getting in the same and making payment thereof into such designated
account referred to in Clause 6.1. Without prejudice to the generality
of the foregoing, the Chargor shall not at any such time factor or
discount any of such debts or claims or enter into any agreement for
such factoring or discounting.
7. CONVERSION OF FLOATING CHARGE
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7.1 BY NOTICE
The Bank shall be entitled immediately upon the occurrence of any Event
of Default under either of the Loan Agreements or at any time
thereafter or if the Bank reasonably considers such assets to be in
danger of being seized or sold under any form of distress, attachment,
execution or other legal process or to be otherwise in jeopardy, by
notice in writing to the Chargor to convert the floating charge created
by Clause 3.1(C) into a fixed charge affecting all the property and
assets which for the time being are the subject of such floating charge
or, as the case may be, such of the said property and assets as are
specified by such notice. This provision shall not preclude the
floating charge from becoming fixed in any of the events in which under
this Mortgage Debenture or under the general law it would do so.
7.2 AUTOMATIC CONVERSION
The floating charge hereby created shall (in addition to the
circumstances in which the same will occur under general law)
automatically be converted into a fixed charge:
(a) on the convening of any meeting of the members of the Chargor
to consider a resolution to wind the Chargor up (or not to
wind the Chargor up);
(b) on the presentation of a petition (other than a frivolous or
vexatious petition) to wind the Chargor up; or
(c) if the Chargor fails to comply with its obligations under
Clause 4.1.
7.3 Service by the Bank of a notice pursuant to Clause 7.1 in relation to
any class of the
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Chargor's assets shall not be construed as a waiver or abandonment of
the Bank's rights to serve similar notices in respect of any other
class of assets or of any other of the rights of the Bank.
8. INSURANCE
8.1 REQUIRED COVER
The Chargor shall at all times during the subsistence of the security
constituted by or pursuant to this Mortgage Debenture comply with all
covenants, undertakings and conditions as to insurance of any part of
the Collateral in any of the Loan Documents and/or required by the
terms of any lease, agreement for lease or tenancy granted by the
Chargor or to which any of the Collateral is for the time being subject
or under which the Chargor derives its estate or interest therein and,
subject to the foregoing and so far as this Clause is not inconsistent
with the said terms of such lease, agreement for lease or tenancy, the
Chargor shall at all such times:-
(a) cause all buildings, trade and other fixtures, fixed and other
plant and machinery forming part of the Collateral (if any) to
be insured and to be kept insured:-
(i) (if the Bank shall so stipulate) in an insurance
office or with underwriters approved by the Bank
against loss or damage by fire, and all such other
risks which it is usual to insure against in the case
of the relevant Collateral (including, in the case of
the Property, full cover against terrorism to the
extent available) and against such other or
additional risks as the Bank shall direct, to the
full reinstatement value thereof (together in the
case of the Property with additional amounts
estimated as sufficient to cover
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architects', surveyors' and other requisite
professional advisers' fees in relation to the
reinstatement of the Property and five years' loss of
rent and Service Charge in respect of the Property
and the costs of demolition, site clearance and
shoring-up and VAT on the cost of reinstatement) and
with the interest of the Bank noted on the policy of
insurance and providing for the Bank to be the loss
payee thereunder (or, if the Bank shall so direct, in
the joint names of the Chargor and the Bank); or
(ii) (if and to the extent that the Bank does not so
stipulate) in such insurance office of repute as
shall have been selected by the Chargor or with
Lloyd's underwriters on the same basis as insurances
are maintained by prudent companies carrying on
businesses comparable with that of the Lessee and on
a comparable scale as regards the property and assets
insured, the insured risks and the classes of risk to
be covered; and
(iii) procure that any such policy of insurance contains a
Bank protection clause whereby the insurance effected
will not be vitiated or avoidable as against a
mortgagee in the event of any misrepresentation act
or neglect or failure to disclose on the part of the
Chargor (subject to the payment of any increased
premium required by the insurer) and a Landlord
protection clause whereby the insurance will not be
vitiated or avoidable as against the Chargor or the
mortgagee as a result of anything done or omitted by
a tenant of the Property without the knowledge of the
Chargor and the mortgagee (subject
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to usual terms as to notification and payment of
additional premiums),
(b) procure that there are maintained such other insurances as are
normally maintained by prudent persons carrying on similar
businesses to the Lessee or which may be required by the Bank
(acting reasonably) including without limitation insurance
against liability to third parties arising out of the
ownership or occupation of the Property or the state or
condition thereof;
(c) duly and punctually pay all premiums and other moneys payable
under all such insurances as aforesaid and as soon as
reasonably practicable following written request by the Bank
produce to the Bank the premium receipts or other evidence of
the payment thereof; and
(d) (if so required by the Bank) deposit all policies and other
contracts of insurance relating to the Collateral or any part
thereof with the Bank or produce the same to the Bank for
inspection.
8.2 BANK'S RIGHT TO INSURE
If default shall be made by the Chargor in complying with Clause 8.1
after a reasonable demand regarding such has been made by the Bank to
the Chargor in writing it shall be lawful for the Bank, but not
obligatory on the Bank, to insure and keep insured such Collateral
either in its own name or in its name and that of the Chargor jointly
or in the name of the Chargor with an endorsement of the Bank's
interest. The monies expended by the Bank on so effecting or renewing
any such insurance shall be reimbursed by the Chargor to the Bank on
demand and until so reimbursed shall carry interest from the date of
payment to the date of reimbursement at the Default Rate.
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8.3 TRUST
All claims and monies received or receivable under any such insurance
as aforesaid shall (subject to the rights and claims of and obligations
of the Chargor to any prior mortgagee or chargee or any lessee, lessor
or landlord of any part of the Collateral) be held by the Chargor in
trust for the Bank and shall be applied by the Chargor in repaying or
reducing the Secured Obligations or, if the Bank shall so require, in
repairing, replacing, restoring or rebuilding the property damaged or
destroyed.
8.4 NO AVOIDANCE OF INSURANCE
The Chargor shall not do any act or commit any default by which any
policy of insurance may become void or voidable.
8.5 PAYMENT OF PROCEEDS
The Chargor shall not do any act or commit any default by which the
Bank may be prevented from receiving all monies payable under any
policy of insurance relating to the Collateral and shall ensure that
all sums at any time payable under any of such policies of insurance of
the Collateral shall be paid to the Bank.
9. UNDERTAKINGS BY THE CHARGOR
The Chargor hereby undertakes with the Bank that the Chargor will at
all times while there shall subsist any security constituted by or
pursuant to this Mortgage Debenture:-
(a) INFORMATION
provide the Bank, its employees, professional advisers and
agents with all such information respecting the Chargor's
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business and affairs as the Bank may from time to time
require;
(b) PAY OUTGOINGS
punctually pay or cause to be paid all rents, rates, taxes,
duties, assessments and other outgoings payable in respect of
the Collateral or any part thereof;
(c) REPAIR
keep all buildings and erections on or forming part of the
Property or any other freehold or leasehold property hereby
charged in good and substantial repair and condition and
adequately and properly painted and decorated and keep the
fixtures and fittings thereon and all plant, machinery,
implements and other effects for the time being owned by it in
a good state of repair and in good working order and condition
(in each case replacing, rebuilding, and renewing the same
when necessary);
(d) RIGHT OF ENTRY
permit the Bank and such persons as the Bank may from time to
time for that purpose appoint at reasonable times and upon
reasonable notice to enter and inspect and view the state and
condition of the Property and if any unauthorised alterations
or additions or any defects or disrepair are found upon such
inspection the Bank may enter onto the Property and execute
such replacements or removals, repairs or works as may be
necessary, the cost of which shall be paid by the Chargor to
the Bank on demand. The Chargor shall not be in breach of this
undertaking where the terms of any lease prohibit such entry
and the Chargor, having used all reasonable endeavours to
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obtain the relevant tenant's consent to such entry, has failed
to obtain the requisite permission;
(e) LEASES AND USE
not without the prior written consent of the Bank:
(i) grant or agree to grant (whether in exercise of any
statutory power or otherwise) any lease, underlease,
tenancy or agreement for lease affecting the
Collateral;
(ii) confer or agree to confer on any other person any
other right or licence to occupy any land or
buildings forming part of the Collateral or grant any
licence to assign or sub-let the Collateral or any
part thereof;
(iii) waive, release or vary or agree to waive, release or
vary any of the terms of any lease, underlease,
tenancy or agreement for lease affecting the
Collateral including the determination or review of
any rent payable thereunder nor exercise any power to
terminate or extend the same;
(iv) forfeit nor commence proceedings for forfeiture nor
exercise any right of re-entry nor accept the
surrender of any lease, underlease, tenancy or
agreement for lease affecting the Collateral; or
(v) change or permit or suffer to be changed the present
user of any part of the Collateral,
(f) ENVIRONMENTAL
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not cause, permit or suffer any substance, the presence of
which may require work of containment, restoration or clean up
to be undertaken under any applicable law whether on or off
the Collateral, or which causes or threatens to cause either a
nuisance under the provisions of the Environmental Protection
Act 1990 or the Environment Act 1995, or the presence of which
on adjacent properties could constitute a trespass by the
Chargor or which in an uncontained form may cause pollution of
the environment or harm to human health or detriment to the
amenities of the locality or which is otherwise toxic,
explosive, corrosive, radioactive, carcinogenic or mitogenic,
to be brought upon, treated, kept, stored, disposed of,
discharged, released, processed, produced, manufactured,
generated, refined or used upon, above or beneath any freehold
or leasehold forming part of the Collateral;
(g) PERFORM LEASE COVENANTS
observe and perform or (as the case may be) enforce the
observance and performance of all regulations, covenants and
provisions reserved by or contained in any lease, agreement
for lease or tenancy agreement affecting the Collateral and
neither take any step nor omit to take any step whatsoever if
in consequence of the taking or omission to take such step
such lease, agreement for lease or tenancy agreement may be
surrendered or forfeited or the rent thereunder may be
increased;
(h) PERFORM RESTRICTIVE AND OTHER COVENANTS
observe and perform all restrictive and other covenants and
stipulations for the time being affecting any part of the
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Collateral or the use or the enjoyment of the same or any part
thereof;
(i) INDEMNITY AGAINST OUTGOINGS
indemnify the Bank (and as a separate covenant any Receiver or
Receivers appointed by it) against all existing and future
rents, taxes, duties, fees, renewal fees, charges,
assessments, impositions and outgoings whatsoever (whether
imposed by deed or statute or otherwise and whether in the
nature of capital or revenue and even though of a wholly novel
character) which now or at any time during the continuance of
the security constituted by or pursuant to this Mortgage
Debenture are payable in respect of the Collateral or any part
thereof or by the owner or occupier thereof and so that if any
such sums as are referred to in this sub-paragraph (i) of
Clause 9.1 shall be paid by the Bank (or any such Receiver or
Receivers) the same shall be repaid by the Chargor on demand
with interest from the time or respective times of the same
having been paid at the Default Rate;
(j) COMPLY WITH STATUTORY PROVISIONS
comply or cause compliance in all respects with the provisions
of all statutes for the time being in force and requirements
of any competent authority relating to the Collateral or
anything done thereon by the Chargor and in particular (but
without prejudice to the generality of the foregoing) to
observe and perform or cause to be observed and performed all
the provisions and requirements of the Town and Country
Planning Act 1990, the Planning (Listed Buildings and
Conservation Areas) Act 1990, the Planning (Hazardous
Substances) Act 1990, the Planning
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(Consequential Provisions) Act 1990, the Planning and
Compensation Act 1991 and any Act amending, replacing or
modifying such Acts and all regulations and orders thereunder
(together, the "PLANNING ACTS") and the Registered Homes Act
1984 and all regulations and orders thereunder and before the
Chargor serves any discretionary notices the Chargor will
obtain the Bank's consent and to obtain or cause to be
obtained any development or other consent which may be
requisite by reason of the development of or on any of the
Collateral;
(k) VAT
not without the prior written consent of the Bank to exercise
any option to waive exemption from VAT in relation to the
Collateral or any part thereof and to give to the Bank on
demand all such details of the Chargor's registration for VAT
purposes as the Bank shall require;
(l) SUPPLY DETAILS OF NOTICES RECEIVED
give full particulars to the Bank of any notice or order or
proposal for a notice or order made, given or issued to the
Chargor under or by virtue of any statute including (without
prejudice to the generality of the foregoing) the Planning
Acts, or any regulation or order issued thereunder, within
seven days of receipt of such notice, order or proposal by the
Chargor and, if so required by the Bank, to produce such
notice, order or proposal to the Bank or its agents and also
as soon as practicable take all reasonable and necessary steps
to comply with any such notice, order or proposal or (if
required to do so by the Bank) to join with the Bank at the
cost of the Chargor in making such representation or appeals
as the Bank may deem fit in respect of any such
23
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notice, order or proposal and (without prejudice to the
generality of the foregoing) at all times during the
continuance of this security to give to the Bank or its agents
such information as they shall reasonably require as to all
matters relating to the Collateral;
(m) NOT TO WASTE
not do or permit or suffer to be done in or upon the
Collateral any waste, spoil or destruction nor to make or
permit any development, alteration or addition whatsoever,
structural, external, internal or otherwise, or any change of
user, to the Collateral without the consent in writing of the
Bank (which shall not be withheld where the Chargor cannot
withhold it under the terms of any Lease) and in the event of
the Bank giving any such consent as aforesaid to carry out all
such works in accordance with the provisions and conditions of
the consent and to the reasonable satisfaction of the Bank;
provided that the consent of the Bank shall not be required in
the case of minor alterations to shop fronts or fascias nor in
the case of internal non-structural alterations;
(n) CHARGED DEBTS
not without the prior written consent of the Bank release,
exchange, compound set-off, grant time or indulgence in
respect of or in any other manner, deal with all or any of the
Charged Debts otherwise than in the ordinary course of its
business or except as expressly provided for herein;
(o) NOTIFY MATERIAL MATTERS
notify the Bank of any matters materially affecting the value,
enforceability or
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collectability of any part of the Collateral and of all
material disputes, counterclaims, returns and rejections by or
of customers of the Company;
(p) COMPLIANCE WITH ENVIRONMENTAL LICENCES
obtain all requisite Environmental Licences applicable to the
Collateral and comply with the terms and conditions of the
same;
(q) COMPLIANCE WITH ENVIRONMENTAL LAWS
comply with all Environmental Laws applicable to the
Collateral and not permit a contravention of the same;
(r) NOTIFY CLAIMS
notify the Bank of the receipt of and contents of all claims,
notices or other communications in respect of any alleged
breach of any Environmental Licences or any Environmental Laws
which may, if substantiated, have a material adverse effect on
the market value of the Collateral and shall forthwith take
such steps as the Bank may reasonably direct to remedy and/or
cease the continuation of any such alleged breach;
(s) PAY ENVIRONMENTAL LICENCE FEES
promptly pay all fees and other charges in respect of any
Environmental Licence applicable to the Collateral;
(t) NOTIFY NOTICES CONCERNING ENVIRONMENTAL LICENCES
forthwith notify the Bank of the receipt of and the contents
of any notices or other communications varying or suspending
any Environmental Licence relating to the
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Collateral and forthwith take such steps as the Bank may
reasonably direct to reinstate in full force and effect any
Environmental Licence so varied or suspended;
(u) SUPPLY ENVIRONMENTAL REPORTS
forthwith supply the Bank with copies of any environmental
reports, audits or studies undertaken in relation to the
Collateral; and
(v) ENVIRONMENTAL INDEMNITY
indemnify the Bank and each Receiver appointed under this
Mortgage Debenture and their respective officers, employees,
agents and delegates (together the "INDEMNIFIED PARTIES")
against any cost or expense suffered or incurred by them
which:-
(i) arises by virtue of any actual or alleged breach of
any Environmental Laws (whether by the Chargor, an
Indemnified Party or any other person);
(ii) would not have arisen if this Mortgage Debenture had
not been executed; and
(iii) was not caused by the negligence or wilful default of
the relevant Indemnified Party.
10. EXTENSION AND VARIATION OF THE LAW OF PROPERTY ACT 1925
10.1 POWER OF SALE
Section 103 of the Law of Property Act 1925 shall not restrict the
exercise by the Bank of the statutory power of sale conferred on it by
section 101 of such Act, which power shall arise and may be exercised
by the Bank immediately upon and at any time after the the Bank has
made demand under the Guarantee and the provisions of
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the said Act relating to and regulating the exercise of the said power
of sale shall, so far as they relate to the security constituted by or
pursuant to this Mortgage Debenture, be varied and extended
accordingly.
10.2 STATUTORY POWERS OF LEASING
The statutory powers of leasing, letting, entering into agreements for
leases or lettings and accepting and agreeing to accept surrenders of
leases conferred by Sections 99 and 100 of the said Act shall not be
exercisable by the Chargor in relation to any part of the Collateral
without the prior written consent of the Bank, but the foregoing shall
not be construed as a limitation of the powers of any Receiver
appointed hereunder and being an agent of the Chargor. Such statutory
powers shall be exercisable by the Bank upon or at any time after the
occurrence of an Event of Default and, whether or not the Bank shall
then be in possession of the premises proposed to be leased, so as to
authorise the Bank to make a lease or agreement for lease at a premium
and for any length of term and generally without any restriction on the
kinds of leases and agreements for lease that the Bank may make and
generally without the necessity for the Bank to comply with any
restrictions imposed by or the other provisions of the said Sections 99
and 100. The Bank may delegate such powers to any person and no such
delegation shall preclude the subsequent exercise of such powers by the
Bank itself or preclude the Bank from making a subsequent delegation
thereof to some other person; and any such delegation may be revoked.
10.3 CONSOLIDATION OF MORTGAGES
The restriction on the right of consolidating mortgage securities
contained in Section 93 of the Law of Property Act 1925 shall not apply
to this Mortgage Debenture.
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11. APPOINTMENT OF RECEIVER
11.1 TIMING OF APPOINTMENT AND JOINT RECEIVERS
At any time after having been requested so to do by the Chargor or at
any time after making demand under the Guarantee following an Event of
Default, the Bank may appoint one or more persons to be a Receiver or
Receivers of the whole or any part of the Collateral. The Bank may:-
(i) remove any Receiver previously appointed hereunder; and
(ii) appoint another person or other persons as Receiver or
Receivers, either in the place of a Receiver so removed or who
has otherwise ceased to act or to act jointly with a Receiver
or Receivers previously appointed hereunder.
If at any time and by virtue of any such appointment(s) any two or more
persons shall hold office as Receivers of the same assets or income,
each one of such Receivers shall be entitled (unless the contrary shall
be stated in any of the deed(s) or other instrument(s) appointing them)
to exercise all powers and discretions hereby or by law conferred on
Receivers individually and to the exclusion of the other or others of
them.
11.2 FORM OF APPOINTMENT AND REMOVAL
Every such appointment or removal, and every delegation, appointment or
removal by the Bank in the exercise of any right to delegate its power
or to remove delegates herein contained, may be made either by deed or
by instrument in writing under the hand of any officer of the Bank or
any person authorised in writing in that behalf by any such officer.
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11.3 POWERS OF RECEIVER - STATUTORY
Every Receiver for the time being holding office by virtue of an
appointment made by the Bank hereunder shall (subject to any
limitations or restrictions expressed in the deed or other instrument
appointing him but notwithstanding any winding-up or dissolution of the
Chargor) have, in relation to the Collateral, or as the case may be,
that part of the Collateral in respect of which he was appointed:-
(a) all the powers (as varied and extended by the provisions
hereof) conferred by the Law of Property Act 1925 on
mortgagors and on mortgagees in possession and receivers
appointed under the Act; and
(b) power in the name or on behalf and at the cost of the Chargor
to exercise all powers and rights of an absolute owner and do
or omit to do anything which the Chargor itself could do.
11.4 POWERS OF RECEIVER - SPECIFIC
In addition and without prejudice to the generality of the foregoing or
any other provision of this Mortgage Debenture, every Receiver for the
time being holding office by virtue of an appointment made by the Bank
hereunder shall (notwithstanding any winding-up or dissolution of the
Chargor) have the following powers, namely:-
(i) TAKE POSSESSION
power to take possession of, collect and get in all or any
part of the Collateral and for that purpose to make, or to
require the directors of the Chargor to make, calls upon the
holders of the Chargor's share capital in respect of any such
capital of the Chargor which remains uncalled and to
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enforce payment of calls so made and any previous unpaid calls
by taking proceedings in the name of the Chargor or by his own
name;
(ii) CARRY ON BUSINESS
power to carry on, manage, develop, amalgamate, reconstruct or
diversify the whole or any part of the Chargor's business,
including the power where the Chargor has one or more
subsidiaries of supervising, controlling and financing such
subsidiary or subsidiaries (inclusive of any bodies corporate
as are referred to in sub-paragraph (iv) below) and its or
their business or businesses and the conduct thereof;
(iii) SELL ASSETS
power to sell or assign all or any of the Charged Debts or
Collateral in such manner and generally upon such terms and
conditions as he thinks fit and to convey the same in the name
of the Chargor;
(iv) FORM SUBSIDIARIES
power to promote, or subscribe for or otherwise acquire the
share capital of any body corporate with a view to such body
corporate becoming a subsidiary of the Chargor and purchasing,
leasing or otherwise acquiring an interest in the whole or any
part of the Collateral or carrying on any business in
succession to the Chargor or any subsidiary of the Chargor;
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(v) SEVER
power to sever and sell separately from the Collateral all or
any fixed plant and machinery and other fixtures and fittings
relevant thereto;
(vi) IMPROVE, DEVELOP OR REPAIR
power to alter, improve, develop, complete, construct, modify,
refurbish or repair any building or land and to complete or
undertake or concur in the completion or undertaking (with or
without modification), of any project in which the Chargor was
concerned or interested prior to his appointment being a
project for the alteration, improvement, development,
completion, construction, modification, refurbishment or
repair of any building or land;
(vii) NO STATUTORY RESTRICTION ON SALE ETC
power to sell, lease or otherwise dispose of or concur in
selling, leasing, accepting surrenders or otherwise disposing
of the whole or any part of the Collateral without the
restriction imposed by Section 103 of the Law of Property Act
1925 or the need to observe any of the restrictions or other
provisions of Section 99 or 100 of the said Act and upon such
terms as he shall think fit;
(viii) METHOD OF SALE OR DISPOSAL
power to carry any sale, lease or other disposal of any land
or buildings and other property and assets into effect by
conveying, transferring, assigning or leasing in the name of
the Chargor and for that purpose to enter into covenants and
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other contractual obligations in the name of and so as to bind
the Chargor;
(ix) CONSENTS AND LICENCES
power to apply for and obtain any appropriate consents,
licences or approval in relation to the Collateral, its use or
development;
(x) ADDITIONAL LAND AND EASEMENTS
power to acquire additional land or any interest therein and/
or easements for the benefit of any of the Collateral and
power to grant easements or rights over the Collateral;
(xi) CHARGOR'S NAME
power to use the Chargor's name for registration and to effect
any necessary election for tax or other purposes;
(xii) COMPROMISE
power to make any arrangement or compromise or settlement of
claims or enter into any contracts or arrangements as he shall
think fit;
(xiii) INSURANCES
power to effect and renew insurances;
(xiv) PROCEEDINGS
power to take or defend proceedings in the name of the Chargor
including proceedings for the compulsory winding-up of the
Chargor and proceedings for directions under Section 35(1) of
the Insolvency Act 1986 and power to settle and compromise any
proceedings;
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(xv) EMPLOYEES
power to employ, engage and appoint such managers, agents,
servants and other employees and professional advisers on such
terms as he shall think fit including without limitation power
to engage his own firm in the conduct of the receivership;
(xvi) BORROW MONEY
power to raise or borrow money from the Bank or any other
person to rank for payment in priority to the security
constituted by or pursuant to this Mortgage Debenture and with
or without a mortgage or mortgage debenture on the Collateral
or any part of it;
(xvii) GENERAL POWERS
power to do all such other things as may seem to the Receiver
to be incidental or conducive to any other power vested in him
or to be conducive to the realisation of the security
constituted by or pursuant to this Mortgage Debenture as if he
were the absolute beneficial owner of the Collateral;
(xviii) PROTECTION OF ASSETS
to make and effect all repairs and insurances and do all other
acts which the Company might do in the ordinary conduct of its
business as well for the protection as for the improvement of
the Collateral and to commence and/or complete any building
operations on the Collateral and to apply for and maintain any
planning permissions, building regulation approvals and any
other permissions, consents or licences, in each case as he
may in his absolute discretion think fit;
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(xix) LEASES
to let all or any part of the Collateral for such term and at
such rent (with or without a premium) as he may think proper
and to accept a surrender of any lease or tenancy thereof on
such terms as he may think fit (including the payment of money
to a lessee or tenant on a surrender); and
(xx) RECEIPTS
to give valid receipts for all moneys and execute all
assurances and things which may be proper or desirable for
realising the Collateral.
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11.5 CONSIDERATION ON DISPOSAL
In making any sale or other disposal of any of the Collateral in the
exercise of their respective powers (including a disposal by the
Receiver to any such subsidiary as is referred to in Clause 11.4 (iv))
the Receiver or the Bank may accept, by way of consideration for such
sale or other disposal, cash, shares, loan capital or other
obligations, including without limitation consideration fluctuating
according to or dependent upon profit or turnover and consideration the
amount whereof is to be determined by a third party. Any such
consideration may be receivable in a lump sum or by instalments and
upon receipt by the Receiver shall IPSO FACTO be and become charged
with the payment of the Secured Obligations. Any contract for any such
sale or other disposal by the Receiver or the Bank may contain
conditions excluding or restricting the personal liability of the
Receiver or the Bank. Plant, machinery and other fixtures may be
severed and sold in the exercise of their respective powers by the
Receiver or the Bank separately from the premises to which they are
attached without any consent being obtained from the Chargor.
11.6 APPLICATION OF PROCEEDS
All monies received by the Bank or any Receiver appointed under this
Mortgage Debenture shall (subject to the rights and claims of any
person having a security ranking in priority to the security
constituted by or pursuant to this Mortgage Debenture) be applied in
the following order:
(i) in the payment of or provision for all costs, charges and
expenses incurred and payments made by the Bank and in the
payment of all costs, charges and expenses of and
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incidental to the Receiver's appointment and the payment of
his remuneration;
(ii) in the payment and discharge of any liabilities incurred by
the Receiver on the Chargor's behalf in the exercise of any of
the powers of the Receiver;
(iii) in providing for the matters (other than the remuneration of
the Receiver) specified in the first three paragraphs of
Section 109(8) of the Law of Property Act 1925;
(iv) in or towards payment of any debts or claims which are by
statute payable in preference to the Secured Obligations but
only to the extent to which such debts or claims have such
preference;
(v) in or towards the satisfaction of the Secured Obligations,
and any surplus shall be paid to the Chargor or other person entitled
thereto.
The provisions of this Clause 11.6 and of Clause 11.8 shall take effect
as and by way of variation and extension to the provisions of the said
section 109, which provisions as so varied and extended shall be deemed
incorporated herein.
11.7 RECEIVER AS AGENT
Every Receiver so appointed shall be deemed at all times and for all
purposes to be the agent of the Chargor which shall be solely
responsible for his acts and defaults and liable on any contracts or
engagements made or entered into by him and for the payment of his
remuneration. The Bank shall not be responsible for his misconduct,
negligence or default.
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11.8 RECEIVER'S REMUNERATION
Every Receiver so appointed shall be entitled to remuneration for his
services at a rate to be fixed by agreement between him and the Bank
(or, failing such agreement, to be fixed by the Bank) appropriate to
the work and responsibilities involved upon the basis of charging from
time to time adopted in accordance with his current practice or the
current practice of his firm and without being limited to the maximum
rate specified in Section 109(6) of the Law of Property Act 1925. The
amount of such remuneration may be debited by the Bank to the Chargor,
but shall in any event form part of the Secured Obligations.
11.9 MONIES ACTUALLY RECEIVED
Only monies actually paid by the Receiver to the Bank in satisfaction
or discharge of the Secured Obligations and unconditionally and
irrevocably retained by the Bank shall be capable of being applied by
the Bank in satisfaction thereof.
11.10 RECEIVER'S INDEMNITY
The Chargor agrees to indemnify and hold harmless the Receiver from and
against all actions, claims, expenses, demands and liabilities (save
where the same is due to gross negligence or wilful misconduct of the
Receiver) whether arising out of contract or tort or in any other way
incurred or which may at any time be incurred by him or by any manager,
agent, servant or other employee for whose debt, default or miscarriage
he may be answerable for anything done or omitted to be done in the
exercise or purported exercise of his powers under the provisions of
this deed or pursuant hereto.
12. NO LIABILITY AS MORTGAGEE IN POSSESSION
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The Bank shall not nor shall any Receiver appointed as aforesaid by
reason of it or such Receiver entering into possession of the
Collateral or any part thereof be liable to account as mortgagee in
possession or be liable for any loss on realisation or for any default
or omission which mortgagee in possession might be liable except for
its gross negligence or wilful misconduct.
13. EXPENSES
13.1 UNDERTAKING TO PAY
All costs, charges and expenses incurred and all payments made by the
Bank or any Receiver appointed hereunder in the lawful exercise of the
powers hereby conferred whether or not occasioned by any act, neglect
or default of the Chargor shall carry interest (as well after as before
judgment) at the Default Rate from the date of the same being incurred
or becoming payable until the date the same are unconditionally and
irrevocably paid and discharged in full.
The amount of such costs, charges, expenses and payments and all such
interest thereon and all remuneration payable hereunder shall be
payable by the Chargor on demand. All such costs, charges, expenses and
payments shall be paid and charged as between the Bank and the Chargor
on the basis of a full indemnity and not on the basis of party and
party or any other kind of taxation.
13.2 INDEMNITY
The Bank and every Receiver, attorney, manager, agent or other person
appointed by the Bank hereunder shall be entitled to be indemnified out
of the Collateral in respect of all liabilities and expenses properly
incurred by them in the execution or purported execution of any of the
powers, authorities or discretions vested in them
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pursuant hereto and against all actions, proceedings, costs, claims and
demands in respect of any matter or thing done or omitted in any way
relating to the Collateral and the Bank and any such Receiver may
retain and pay all sums in respect of the same out of any monies
received under the powers hereby conferred.
13.3 STAMP DUTIES
The Chargor shall pay and, forthwith on demand, indemnify the Bank
against any liability it incurs in respect of any stamp, registration
and similar tax which is or becomes payable in connection with the
entry into, performance or enforcement of this Mortgage Debenture.
14. POWER OF ATTORNEY
14.1 APPOINTMENT AND POWERS
The Chargor hereby irrevocably appoints the following, namely:-
(i) the Bank,
(ii) each and every person whom the Bank shall from time to time
nominate in writing under the hand of any officer of the Bank,
and
(iii) each and any Receiver appointed hereunder and for the time
being holding office as such,
jointly and also severally its attorney and attorneys for it and in the
name of the Chargor and otherwise on its behalf and as its act and deed
to sign, seal, execute, deliver, perfect and do all deeds, instruments,
acts and things which may be required (or which the Bank or any
Receiver appointed hereunder shall consider requisite) for carrying out
any obligation imposed on the Chargor by or pursuant to this Mortgage
Debenture (including but not limited to
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the obligations of the Chargor under Clause 5.1 and the statutory
covenant referred to in such Clause), for carrying any sale, lease or
other dealing by the Bank or such Receiver into effect, for conveying
or transferring any legal estate or other interest in land or other
property or otherwise howsoever, for getting in the Collateral, and
generally for enabling the Bank and the Receiver to exercise the
respective powers conferred on them by or pursuant to this Mortgage
Debenture by law. The Bank shall have full power to delegate the power
conferred on it by this Clause, but no such delegation shall preclude
the subsequent exercise of such power by the Bank itself or preclude
the Bank from making a subsequent delegation thereof to some other
person; and any such delegation may be revoked by the Bank at any time.
All money properly expended by any attorney shall be deemed to be
expenses incurred by the Bank under this Mortgage Debenture.
14.2 RATIFICATION
The Chargor shall ratify and confirm all transactions entered into by
the Bank or such Receiver or delegate of the Bank in the exercise or
purported exercises of the Bank's or such Receiver's respective powers
and all transactions entered into, documents executed and things done
by the Bank or such Receiver or delegate by virtue of the power of
attorney given by Clause 14.1.
14.3 IRREVOCABLE
The power of attorney hereby granted is as regards the Bank, its
delegates and (so far as permitted by law) any such Receiver (and as
the Chargor hereby acknowledges) granted irrevocably and for value as
part of the security constituted by this Mortgage Debenture to secure
proprietary interests of and the performance of obligations
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owed to, the respective donees within the meaning of the Powers of
Attorney Act 1971.
15. PROTECTION OF PURCHASERS
No purchaser or other person dealing with the Bank or its delegate or
any Receiver appointed hereunder shall be bound to see or inquire
whether the right of the Bank or such Receiver to exercise any of its
or his powers has arisen or become exercisable or be concerned with
notice to the contrary, or be concerned to see whether any such
delegation by the Bank shall have lapsed for any reason or been
revoked.
16. SUBSEQUENT CHARGES
If the Bank shall at any time receive notice of any subsequent
mortgage, charge, assignment, hypothecation, pledge or other like
interest, matter, event or transaction affecting the Collateral or any
part of it (otherwise than with the prior written consent of the Bank
as permitted by this Mortgage Debenture) or that a receiver has been
appointed to all or any part of the Chargor's assets or that a petition
for an administration order or for compulsory liquidation has been
presented or a resolution for voluntary liquidation has been passed in
relation to the Chargor, the Bank may open a new account or accounts
for the Chargor in its books. If the Bank does not in fact open any
such new account then, unless it gives express written notice to the
Chargor to the contrary, the Bank shall be treated as if it had in fact
opened such account or accounts at the time when it received such
notice. As from that time and unless such express written notice shall
be given to the Chargor, all payments by or on behalf of the Chargor to
the Bank shall (in the absence of any express contrary appropriation by
the Chargor) be credited, or treated as having been credited, to the
new account(s) of the Chargor opened or deemed to have been opened and
not as having been
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applied in reduction of the Chargor's indebtedness and other
liabilities to the Bank at the time when the Bank received such notice.
17. REDEMPTION OF PRIOR MORTGAGES
The Bank may, at any time after the security hereby constituted has
become enforceable, redeem any prior security interest against the
Collateral or any part thereof or procure the transfer thereof to
itself and may settle and pass the accounts of the prior mortgagee,
chargee or encumbrancer. Any accounts so settled and passed shall be
conclusive and binding on the Chargor. All principal moneys, interest,
costs, charges and expenses of, and incidental to, such redemption and
transfer shall be paid by the Chargor to the Bank on demand.
18. SET-OFF
18.1 CONSOLIDATION OF ACCOUNTS
In addition to any general lien or similar right to which it may be
entitled by operation of law, the Bank shall have the right upon or at
any time after the occurrence of an Event of Default and with notice to
the Chargor to combine or consolidate all or any of the Chargor's then
existing accounts opened pursuant to this Mortgage Debenture with any
liabilities of the Chargor to the Bank and to set-off or transfer any
sum or sums standing to the credit of any one or more of such accounts
in or towards satisfaction of any of the liabilities of the Chargor to
the Bank on any other such account or in any other respect. The
liabilities referred to in this Clause may be actual, contingent,
primary, collateral, several or joint liabilities, and the accounts,
sums and liabilities referred to in this Clause may be denominated in
any currency.
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18.2 SET-OFF
The Bank may set-off any Secured Obligations owed by the Chargor
against any obligation (whether or not matured) owed by the Bank to the
Chargor regardless of the place of payment or currency of either
obligation. If the obligations are in different currencies, the Bank
may convert either obligation in the manner provided in Clause 20.
19. PAYMENTS
19.1 MANNER OF PAYMENT
All payments to be made by the Chargor hereunder shall be made in the
same currency in which the Secured Obligations are expressed to be
payable under the Loan Agreement.
19.2 TAXES
All payments by the Chargor under or in connection with this Mortgage
Debenture shall be made without set-off or counterclaim, free and clear
of and without deduction for or on account of all taxes. All taxes in
respect of this Mortgage Debenture and payments hereunder shall be for
the account of and shall be paid by the Chargor for its own account
prior to the date on which penalties attach thereto. If the Chargor is
compelled by law to make payment subject to any tax and the Bank does
not actually receive for its own benefit on the due date a net amount
equal to the full amount provided for hereunder, the Chargor will pay
all necessary additional amounts to ensure receipt by the Bank of the
full amounts so provided for, provided that the Chargor shall have no
liability to the Bank under this Clause 19.2 if and to the extent that
such liability would not have been incurred or arisen if the Bank had
retained its rights under the Loan Agreement and/or had not changed its
lending office. The Chargor will indemnify the Bank in respect of all
such taxes upon the Bank providing
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to the Chargor evidence that the Bank has suffered or incurred any
liability to pay such taxes.
19.3 TAX CREDITS
If the Bank receives the benefit of a tax credit or an allowance
resulting from a payment which includes an additional amount paid by
the Chargor under Clause 19.2, it shall (to the extent that it can do
so without prejudice to the retention of such credit or allowance and
to the extent that it is not unlawful or contrary to any official
directive for it to do so) pay to the Chargor such part of that benefit
as is, in the reasonable opinion of the Bank, attributable to the
withholding or deduction giving rise to payment of that additional
amount, provided that the Bank shall:
(i) be the sole judge of the amount of any such benefit to be so
paid to the Chargor and of the date on which it is received by
the Bank;
(ii) have an absolute discretion as to the order and manner in
which it employs or claims tax credits and allowances
available to it;
(iii) not be obliged to disclose to the Chargor or any other person
any confidential information regarding its tax affairs or tax
computations.
19.4 APPROPRIATION OF PAYMENTS
The Bank shall have an absolute and unfettered right to appropriate any
payments received from the Chargor, or otherwise recovered under the
Loan Documents to such indebtedness of the Chargor hereunder or
thereunder as the Bank may determine, to the exclusion of any right on
the
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part of the Chargor to make an appropriation in respect of such
payments.
20. CURRENCY
20.1 CURRENCY CONVERSION
(a) The Chargor's liability hereunder shall be to pay to the Bank the full
amount of the Principal's Obligations in such currency in which they
are for the time being denominated provided that if and to the extent
the Chargor shall not pay such amount in such currency the Bank may
accept payment of all or part of such amount in any other currency
and/or require the Chargor , in substitution for its liability to pay
such amount in such currency, to pay an amount in pounds Sterling which
is equivalent to the amount of such currency remaining unpaid (and in
either case the provisions of Clause 20.1(b) below shall apply);
(b) The equivalent on any day in one currency of any amount denominated in
another currency shall be an amount in the first currency equal to the
amount which the Bank would have received if the Bank had on such day
(or, if such day shall not be a business day, on the next succeeding
business day) made a purchase of the first currency with such amount of
such other currency at the then prevailing spot rate of exchange of the
Bank less all costs, charges and expenses normally incurred by the Bank
in connection with such a purchase.
20.2 CURRENCY INDEMNITY
If the Bank receives an amount in respect of the Chargor's liability
under this Mortgage Debenture or if that liability is converted into a
claim, proof, judgment or order in a currency other than the currency
(the "CONTRACTUAL CURRENCY") in which the amount is expressed to be
payable under this Mortgage Debenture (as the case may be):-
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(a) the Chargor shall indemnify the Bank as an independent
obligation against any loss or liability arising out of or as
a result of the conversion;
(b) if the amount received by the Bank, when converted into the
contractual currency at a market rate in the usual course of
its business is less than the amount owed in the contractual
currency, the Chargor shall forthwith on demand pay to the
Bank an amount in the contractual currency equal to the
deficit and to the extent that such conversion results in the
Chargor receiving more than the amount owed in the contractual
currency the amount of such excess (as conclusively determined
by the Bank) shall be paid to the Chargor; and
(c) the Chargor shall pay to the Bank forthwith on demand any
exchange costs and taxes payable in connection with any such
conversion.
20.3 WAIVER
The Chargor waives any right it may have in any jurisdiction to pay any
amount under this Mortgage Debenture in a currency other than that in
which it is expressed to be payable.
21. SUSPENSE ACCOUNT
All monies received, recovered or realised by the Bank under this
Mortgage Debenture (including the proceeds of any conversion of
currency) may in the discretion of the Bank be credited to any suspense
or impersonal account and may be held in such account for so long as
the Bank may think fit. The Bank shall not charge interest on so much
of the Chargor's indebtedness to the Bank as otherwise accrued under
the Principal's Obligations as is equal to the credit balance
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from time to time on such separate suspense account.
22. THE BANK'S REMEDIES
22.1 EFFECT OF RELEASE
Any receipt, release or discharge of the security provided by, or of
any liability arising under, this Mortgage Debenture shall not release
or discharge the Chargor from any liability to the Bank for the same or
any other liability which may exist independently of this Mortgage
Debenture.
22.2 ARRANGEMENTS WITH THIRD PARTIES
The Bank may in its discretion grant time or other indulgence, or make
any other arrangement, variation or release with, any person or persons
not party hereto (whether or not such person or persons are jointly
liable with the Chargor) in respect of any of the Secured Obligations
or of any other security therefor or guarantee in respect thereof
without prejudice either to the security constituted by or pursuant to
this Mortgage Debenture or to the liability of the Chargor for the
Secured Obligations or the exercise by the Bank of any rights, remedies
and privileges conferred upon it by this Mortgage Debenture.
22.3 RIGHTS CUMULATIVE
The rights, powers and remedies provided in this Mortgage Debenture are
cumulative and are not, nor are they to be construed as, exclusive of
any rights, powers or remedies provided by law, or under any of the
other Loan Documents.
22.4 WAIVER
No failure on the part of the Bank to exercise, or delay on its part in
exercising, any of the
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powers and remedies provided by this deed or by law, shall operate as a
waiver thereof, nor shall any single or partial waiver of such rights,
powers and remedies preclude any further or other exercise of that one
of such rights, powers and remedies concerned or the exercise of any
other of such rights, powers and remedies.
22.5 COSTS
All the costs, charges and expenses of the Bank in relation to this
Mortgage Debenture or for the Secured Obligations (including, without
limitation, the costs, charges and expenses incurred in the carrying
out of this Mortgage Debenture into effect or in the exercise of any of
the rights, remedies and powers conferred on the Bank hereby or in the
perfection or enforcement of the security constituted hereby or
pursuant hereto or in the perfection or enforcement of any other
security for or guarantee in respect of the Secured Obligations) shall
be reimbursed by the Chargor to the Bank on demand on a full indemnity
basis provided always that any costs, charges and expenses incurred by
the Bank prior to an Event of Default shall be reasonable.
22.6 INSOLVENCY RELATION BACK
Any settlement or discharge between the Bank and the Chargor shall be
conditional upon no security of, or payment to, the Bank (whether by
the Chargor or otherwise) being avoided or reduced or required to be
paid away by virtue of any requirement (whether or not having the force
of law) or enactment, whether relating to bankruptcy, insolvency,
liquidation, administration or otherwise, at any time in force or by
virtue of any obligation to give effect to any preference or priority
and the Bank shall be entitled to recover the value or amount of any
such security or payment from the Chargor as if such settlement or
discharge had not occurred.
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23. PROVISIONS SEVERABLE
Every provision contained in this Mortgage Debenture shall be severable
and distinct from every other provision and if at any time any one or
more of such provisions is or becomes invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining such provisions shall not in any way be affected thereby.
24. THE BANK'S DISCRETION
Any power which may be exercised or any determination which may be made
hereunder by the Bank may be exercised or made in the absolute and
unfettered discretion of the Bank.
25. CERTIFICATES
A certificate of the Bank setting out the amount of any Secured
Obligation due from the Chargor shall be prima facie evidence of such
amount against the Chargor in the absence of manifest error.
26. ASSIGNMENT; SUCCESSORS
26.1 SUCCESSORS
The expression the "BANK" wherever used herein shall be deemed to
include the assignees and other successors, whether immediate or
derivative, of the Bank, who shall be entitled to enforce and proceed
upon this Mortgage Debenture in the same manner as if named herein.
26.2 ASSIGNMENT
The Bank shall be entitled at any time to assign all or any of its
rights and benefits hereunder to any person to whom the rights and
benefits of the Bank under the Loan Agreements are assigned
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in accordance with the terms thereof and this Mortgage Debenture shall
remain in full force and effect after, and shall continue to secure the
Secured Obligations after and resulting from, any such assignment.
27. DISCHARGE
If the Chargor shall have unconditionally and irrevocably paid and
discharged the Secured Obligations in full (which event shall not occur
until all contingent liabilities have either crystallised or expired)
and the Bank will at the request and cost of the Chargor duly discharge
this Mortgage Debenture and re-assign to the Chargor or as it shall
direct such of the Collateral as is hereby assigned to the Bank.
28. LAW AND JURISDICTION
28.1 LAW
This Mortgage Debenture shall be governed by and construed in
accordance with English law.
28.2 SUBMISSION TO JURISDICTION
For the exclusive benefit of the Bank, the Chargor irrevocably agrees
that the courts of England are to have jurisdiction to settle any
disputes which may arise out of or in connection with this Mortgage
Debenture and the other Loan Documents and irrevocably submits to the
jurisdiction of such courts and agrees that accordingly any suit,
action or proceeding arising out of or in connection with this Mortgage
Debenture (together in this Clause referred to as "PROCEEDINGS") may be
brought in such courts.
28.3 OTHER JURISDICTIONS
Nothing contained in this Clause shall limit the right of the Bank to
take Proceedings against the
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Chargor in any other court of competent jurisdiction, nor shall the
taking of Proceedings in one or more jurisdictions preclude the taking
of Proceedings in any other competent jurisdiction, whether
concurrently or not.
28.4 WAIVER OF OBJECTION
The Chargor irrevocably waives any objection which it may have now or
hereafter to the laying of the venue of any Proceedings in any such
court as is referred to in Clause 28.2 and any claim that any such
Proceedings have been brought in any inconvenient forum and further
irrevocably agrees that a final judgment in any Proceedings brought in
the English courts shall be conclusive and binding and may be enforced
in the courts of any other competent jurisdiction.
29. CONSTITUTIONAL DOCUMENTS
The Chargor hereby certifies that its creation by this Mortgage
Debenture of charges in favour of the Bank does not contravene any of
the provisions of its constitutional documents.
30. COUNTERPARTS
This Mortgage Debenture may be executed in any number of counterparts
and by the different parties on separate counterparts and this will
have the same effect as if the signatures on the counterparts were on a
single copy of this Mortgage Debenture and each such counterpart shall
be treated as an original.
31. NOTICES
Any notice or other communication required or permitted to be given by
this Mortgage Debenture or by applicable law shall be in writing and
shall be deemed received (a) on the date delivered, if sent by hand
delivery (to the person or department if one is specified below),
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(b) three (3) days following the date deposited in U.S. mail, certified
or registered, with return receipt requested, or (c) one (1) day
following the date deposited with Federal Express or other national
overnight carrier, and in each case addressed as follows:
IF TO THE CHARGOR:
The Company Secretary
Guildsoft Limited
Unit A
The Software Centre
East Way
Lee Mill Industrial Estate
Ivybridge
Plymouth
PL21 9PE
IF TO THE BANK:
Mr Andrew H Tsao, Senior Vice President
Silicon Valley Bank
40 William Street
Suit 350
Wellesley
Massachusetts 02481
USA
WITH COPY TO:
Mr James Krumsiek
Rieimer & Braunstein LLP
Counselors at Law
Three Centre Plaza
Boston
Massachusetts 02108
USA
Fax: 001 (617) 723 6831
Failure to provide any courtesy copy shall not invalidate any notice
otherwise properly given to the designated party set out above. Any
party
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may change its address to another single address by notice given as
herein provided, except any change of address notice must be actually
received in order to be effective.
IN WITNESS whereof this Mortgage Debenture has been executed as a deed and
delivered by the parties hereto on the day and the year first before written.
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SCHEDULE 1
DETAILS OF THE PROPERTY
PROPERTY INTEREST TITLE NUMBER/DESCRIPTION
Unit A Leasehold a lease over the Property
The Software Centre between Hopkins Developments
East Way Limited and the Chargor
Lee Mill Industrial Estate commencing 18 September 1998
Ivybridge for the period to 31
Plymouth December 2017
PL21 9PE
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EXECUTED and DELIVERED .......... )
AS A DEED BY GUILDSOFT LIMITED... )
Acting by:
Bruce R. Gardner Director /s/ Bruce R. Gardner
John F. Cave Director/Secretary /s/ John F. Cave
EXECUTED and DELIVERED .......... )
AS A DEED by SILICON VALLEY ..... )
BANK............................. )
By: Heidi Fetty Assistant Vice President /s/ Heidi Fetty
A person authorised under the laws of California to execute and deliver as a
deed.
55
EXHIBIT 10.32
Date: December 27, 1999
GUILDSOFT LIMITED
in respect of
Datawatch Corporation
FIELD FISHER WATERHOUSE 35 Vine Street London EC3N 2AA
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Contents
NO HEADING PAGE
CLAUSES
1. Interpretation 1
2. Guarantee and Security 2
3. Indemnity 3
4. Continuing Security 3
5. Interest 3
6. Opening of New Accounts 4
7. Dealings with the Principal and Others 4
8. Discharges and Release Avoided 5
9. Claims of the Guarantor against the Principal 6
10. Set-off 7
11. Suspense Account 8
12. Right To Make Demand 8
13. Certificate 9
14. Payment Free of Deduction 9
15. Tax credits 9
16. Effectiveness of Security 10
17. Currency Conversions 10
18. Costs and Expenses 11
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19. Provisions Severable 11
20. Benefit of Guarantee 11
21. Notices and Demands 12
22. Law and Jurisdiction 12
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THIS GUARANTEE made by way of Deed on the 27th day of December, 1999 by
GUILDSOFT LIMITED a company registered under the laws of England and Wales under
company number 02567531 whose registered office is at Unit A, The Software
Centre, East Way, Lee Mill Industrial Estate, Ivybridge, Devon PL21 9PE (the
"GUARANTOR") in favour of SILICON VALLEY BANK a California chartered bank, with
its principal place of business at 3003 Tasman Drive, Santa Clara, California
95054 USA (the "BANK").
WITNESSES as follows:-
1. INTERPRETATION
In this Guarantee:-
(i) the expression the "LOAN AGREEMENTS" means the Amended and Restated
Loan and Security Agreement dated 16 March 1999 made between the Bank
and the Principal and Personics Corporation as amended by the Loan
Modification Agreement dated of even date herewith and made between
Datawatch Corporation and the Bank and the Export-Import Bank Loan and
Security Agreement of even date herewith made between (INTER ALIA) the
Bank and Datawatch Corporation;
(ii) the expression the "Exim Loan Documents" means the Export-Import Bank
Loan and Security Agreement dated of even date herewith made between
(INTER ALIA) the Bank and Datawatch Corporation and all associated
documentation;
(iii) terms and expressions defined in the Loan Agreement shall have the same
meanings when used herein unless otherwise herein defined or the
context otherwise requires;
(iv) any reference in this Guarantee to a "PERSON" shall be construed as a
reference to any person, firm, company, corporation, government, state
or agency of a state or any association or
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partnership (whether or not having separate legal personality) of two
or more of the foregoing;
(v) "PRINCIPAL" means Datawatch Corporation, a Delaware corporation with
its principal place of business at 900 Chelmsford Street, Tower 3, 5th
Floor, Lowell, Massachusetts;
(vi) the expression the "PRINCIPAL'S OBLIGATIONS" means all monies whether
certain or contingent, now or at any time hereafter becoming due, owing
or incurred by the Principal to the Bank under or in connection with
the Loan Agreements and the other Exim Loan Documents and/or the Loan
Documents whether due, owing or incurred by the Principal alone or
jointly with any other person(s) and whether as principal or in some
other capacity; and
(vi) words and expressions defined in either of the Loan Agreements shall,
where the context permits, have the same meanings in this Guarantee.
2. GUARANTEE AND SECURITY
In consideration of the Bank making available and/or continuing to make
available banking accommodation and/or facilities under the Loan
Agreements, the Guarantor hereby irrevocably and unconditionally (i)
guarantees to the Bank the due and prompt payment and discharge of the
Principal's Obligations; and (ii) undertakes that the Guarantor will on
demand make good any default by the Principal in the payment or
discharge of the Principal's Obligations or any part thereof as if the
Guarantor instead of the Principal were expressed to be the primary
obligor in respect thereof, together with interest (as well after as
before judgment) at the rate per annum from time to time expressed to
be payable by the Principal on the Principal's Obligations under the
Exim Loan Documents and/or the Loan Documents from the date the same
became payable hereunder until payment
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thereof in full but provided that nothing in this Clause 2 shall
entitle the Bank to recover any interest from the Guarantor to the
extent that the same constitutes or otherwise represents
double-counting.
3. INDEMNITY
For the same consideration the Guarantor hereby agrees as a primary
obligor to indemnify the Bank against any loss (as defined below) which
the Bank may incur in the event of the whole or any part of the
Principal's Obligations or any actual or purported agreement,
arrangement or instruction relating thereto (including, without
limitation, the Loan Agreements or any other document referred to
therein) being invalid or being or becoming irrecoverable,
unenforceable or void or being avoided for any reason whatsoever,
irrespective of whether such reason was or ought to have been known to
the Bank or its officers, employees, agents or professional advisers.
For the purposes of this Clause "ANY LOSS" means the amount which the
Bank would otherwise have been entitled to recover from the Principal
under the Exim Loan Documents and/or the Loan Documents.
4. CONTINUING SECURITY
This Guarantee shall be a continuing security for all the Principal's
Obligations and shall not be discharged by any intermediate discharge
or payment of or on account of the Principal's Obligations or any of
them or any settlement of accounts between the Bank and the Principal,
any other guarantor or any other person. No demand made by or on behalf
of the Bank hereunder shall prejudice or restrict the rights of the
Bank to make further or other demands.
5. INTEREST
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The Guarantor shall pay interest on any amount for the time being due
from the Guarantor to the Bank under this Guarantee from the date of a
valid demand for payment hereunder until actual payment in full, at the
rate (as well after as before judgment) payable by the Principal on
such amount in accordance with the relevant Security Documents but
provided that nothing in this Clause 5 shall entitle the Bank to
recover any interest from the Guarantor to the extent that the same
constitutes or otherwise represents double-counting.
6. OPENING OF NEW ACCOUNTS
If for any reason this Guarantee ceases to be a continuing security,
the Bank may either continue any then existing account or open one or
more fresh accounts for the Principal, but in either case the
obligations of the Guarantor under this Guarantee shall remain
unaffected by, and be computed without regard to, any payment into or
out of any such account.
7. DEALINGS WITH THE PRINCIPAL AND OTHERS
The liability of the Guarantor hereunder shall not be impaired,
discharged or otherwise affected by (i) any determination, renewal,
variation, discharge, release or increase of, or composition or
arrangement by the Bank relating to, any credit or facilities to the
Principal or of or relating to the Principal's Obligations or of or
relating to any other guarantee in respect thereof or any agreement
relating thereto; or (ii) the grant by the Bank to the Principal or any
other person (including, without limitation, any other guarantor of the
Principal's Obligations or any of them) of any time or indulgence; or
(iii) any dealing, exchange, renewal, variation, release, discharge,
composition, arrangement, modification or abstaining from perfecting or
enforcing or claiming in relation to any securities, guarantees or
rights which the Bank may now or hereafter have
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in respect of the Principal's Obligations; or (iv) the renewal by the
Bank of any bills, promissory notes or other negotiable instruments or
securities; or (v) the Bank obtaining or failing to obtain any other
guarantee or security (whether contemporaneously with this Guarantee or
otherwise); or (vi) any other act, event or omission which but for this
provision would or might operate to impair, discharge or otherwise
affect the obligations of the Guarantor hereunder.
8. DISCHARGES AND RELEASE AVOIDED
No assurance security or payment which may be avoided or adjusted under
the law, including under any enactment, relating to individual or
corporate insolvency and no release settlement or discharge given or
made by the Bank on the faith of any such assurance security or payment
shall prejudice or affect the right of the Bank to recover all
liabilities due and owing under this Guarantee from the Guarantor
(including any monies which it may be compelled to refund under the
provisions of the Insolvency Act 1986 and any costs payable by it or
otherwise incurred in connection therewith) or to enforce the security
created by or pursuant to this deed to the full extent of the
liabilities due and owing under this Guarantee.
If the Bank has reasonable grounds for believing that any assurance
security or payment received by it from the Principal or the Guarantor
or any other person in respect of the Principal's Obligations may be
avoided or adjusted under any law relating to bankruptcy, insolvency or
winding-up then the Bank shall be at liberty to retain the security
created by or pursuant to this Deed for the relevant period (as defined
below) after the payment and discharge in full of all amounts due and
owing notwithstanding any release, settlement, discharge or arrangement
given or made by the Bank on, or as a consequence of, such payment or
termination or liability provided that, if at any
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time within the relevant period (as defined below) after such payment
or discharge, a petition shall be presented to a competent court for an
order for the winding-up or the making of an administration order in
respect of the Principal or the Principal shall commence to be wound-up
or to go into administration, or if any analogous proceedings are taken
in respect of the Guarantor or such other person, the Bank shall be at
liberty to continue to retain such security (including the documents
aforesaid) for and during the relevant period (as defined below) in
which event such security shall be deemed to have continued to have
been held as security for the payment and discharge to the Bank of all
amounts due and owing under this Guarantee. In this Clause the
"RELEVANT PERIOD" means a period of one month plus any statutory period
during which any assurance, security or payment such as is referred to
above may be avoided or invalidated (or such longer period as the Bank
shall reasonably consider comparable in the light of the provisions of
any applicable law of any jurisdiction).
When the Bank is satisfied that the Principal's Obligations have been
discharged in full and that the relevant period has expired it will
give written notice to the Guarantor and, at the written request of the
Guarantor, return this deed to the Guarantor.
9. CLAIMS OF THE GUARANTOR AGAINST THE PRINCIPAL
9.1 Until the Principal's Obligations shall have been paid or discharged in
full, and the Guarantor released from this Guarantee, the Guarantor
will not by virtue of such payment or by any other means or on any
other grounds, except with the prior written consent of the Bank or as
provided below (i) make or enforce any claim (whether by way of
set-off, counterclaim or otherwise) or right against the Principal or
prove in competition with the Bank, whether in respect of
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any payment hereunder made by the Guarantor or otherwise; or (ii) be
entitled to claim or have the benefit of, any set-off, counterclaim or
proof against, or dividend paid on a winding up or composition with
creditors by the Principal; or (iii) be entitled to claim or otherwise
obtain the benefit (by way of subrogation or otherwise) of any security
or guarantee or indemnity at any time held by the Bank for or in
respect of any of the Principal's Obligations; or (iv) claim or enforce
any right of contribution against any co-surety.
9.2 If the Guarantor shall have any right of proof or claim in the
winding-up, voluntary arrangement, receivership or administration of
the Principal which does not derive from a payment made hereunder, the
Guarantor shall (except where the Bank otherwise require) exercise that
right, or claim on behalf of the Bank and hold any dividend or other
money received in respect thereof upon trust for the Bank to the extent
of such liability or in like manner hold upon trust any money which it
may receive or recover from any co-surety by virtue of any rights of
contribution.
9.3 If while the Guarantor shall remain under liability to the Bank
hereunder, any monies or other property or assets shall be received or
recovered by the Guarantor in breach of any provisions of this Clause,
such monies or other property or assets shall be held upon trust to pay
or transfer the same to the Bank to the extent of such liability.
10. SET-OFF
Without prejudice to and in addition to any other remedy of set-off,
combination or consolidation of accounts which the Bank may have, at
any time after a demand hereunder or if at the relevant time the
Principal's Obligations and all other monies payable hereunder shall
not have been fully paid or otherwise discharged, the Bank shall be
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entitled without prior notice to the Guarantor, to set off the
liability of the Guarantor hereunder against any monies in whatsoever
currency standing to the credit of the Guarantor in any current or
other account with the Bank and to combine any such account with any
other such account. The Bank may for the purposes of this Clause 10 and
from time to time convert all or any part of such monies in such
account into the currency of the Guarantor's liability in accordance
with Clause 16.
11. SUSPENSE ACCOUNT
The Bank may at any time place and keep to the credit of a separate
suspense account any monies received under this Guarantee for so long
and in such manner as the Bank may determine without any obligation to
apply such monies or any part of them in or towards the discharge of
the Principal's Obligations. In the event of any proceedings in or
analogous to liquidation, composition or arrangement of or concerning
the Principal, the Bank may notwithstanding any payment made under this
Guarantee prove for a claim (as the case may be) and agree to accept
any dividend or composition in respect of the whole or any part of the
Principal's Obligations in the same manner as if this Guarantee had not
been given. The Bank shall not charge interest on so much of the
Guarantor's indebtedness to the Bank as otherwise accrued under the
Principal's Obligations as is equal to the credit balance from time to
time on such separate suspense account.
12. RIGHT TO MAKE DEMAND
If the right to make a demand for payment of any sum from the Principal
has arisen under the Security Documents the Bank may make a demand
under this Guarantee (i) before making any demand on the Principal or
any other surety or enforcing any other guarantee or security for the
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Principal's Obligations and (ii) for the payment of the ultimate
balance after resorting to other means of payment or for the balance
due at any time notwithstanding that the Bank has not resorted to other
means of payment (in which case the Guarantor shall not be entitled to
any benefit from such other means of payment so long as any of the
Principal's Obligations remain outstanding).
13. CERTIFICATE
The Bank's certificate of the amount of the Principal's Obligations
outstanding at any time shall, in the absence of manifest error, be
prima facie evidence for all purposes of this Guarantee as against the
Guarantor.
14. PAYMENT FREE OF DEDUCTION
The Guarantor will pay all monies due under this Guarantee free and
clear of and without deduction for or on account of either any set-off
or counterclaim or any and all present or future taxes, levies,
imposts, charges, fees, deductions or withholdings. If any sums payable
hereunder shall be or become subject to any such deduction or
withholding, the amount of such payments shall be increased so that the
net amount received by the Bank shall equal the amount which, but for
such deduction or withholding, would have been received by the Bank
hereunder provided that the Guarantor shall have no liability to the
Bank under this Clause 14, if and to the extent that such liability
would not have been incurred or arisen if the Bank had retained its
rights under the Loan Agreement and/or had not changed its lending
office.
15. TAX CREDITS
If the Bank receives the benefit of a tax credit or an allowance
resulting from a payment which includes an additional amount paid by
the
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Guarantor under Clause 14, it shall (to the extent that it can do so
without prejudice to the retention of such credit or allowance and to
the extent that it is not unlawful or contrary to any official
directive for it to do so) pay to the Guarantor such part of that
benefit as is, in the reasonable opinion of the Bank, attributable to
the withholding or deduction giving rise to payment of that additional
amount, Provided that the Bank shall:-
(i) be the sole judge of the amount of any such benefit to be so
paid to the Borrower and of the date on which it is received
by the Bank;
(ii) have an absolute discretion as to the order and manner in
which it employs or claims tax credits and allowances
available to it; and
(iii) not be obliged to disclose to the Borrower or any other person
any confidential information regarding its tax affairs or tax
computations.
16. EFFECTIVENESS OF SECURITY
This Guarantee is in addition to and is not prejudiced, or to be
prejudiced, by any other guarantee or security for the Principal's
Obligations or any of them which is/are now or may hereafter be held by
the Bank whether from the Guarantor, any other guarantor or otherwise.
17. CURRENCY CONVERSIONS
17.1 The Guarantor's liability hereunder shall be to pay to the Bank the
full amount of the Principal's Obligations in such currency in which
they are for the time being denominated provided that if and to the
extent that the Guarantor shall not pay such amount in such currency
the Bank may accept payment of all or part of such amount in any other
currency and/or require the Guarantor, in
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substitution for its liability to pay such amount in such currency, to
pay an amount in pounds Sterling which is equivalent to the amount of
such currency remaining unpaid (and in either case the provisions of
Clause 17.2 below shall apply).
17.2 The equivalent on any day in one currency of any amount denominated in
another currency shall be an amount in the first currency equal to the
amount which the Bank would have received if the Bank had on such day
(or, if such day shall not be a business day, on the next succeeding
business day) made a purchase of the first currency with such amount of
such other currency at the then prevailing spot rate of exchange of the
Bank less all costs, charges and expenses normally incurred by the Bank
in connection with such a purchase.
18. COSTS AND EXPENSES
The Guarantor shall pay on demand all proper legal and other costs and
expenses (together with any value added tax or other taxes in respect
thereof) properly incurred by the Bank in connection with the
preservation of rights under and enforcement of this Guarantee.
19. PROVISIONS SEVERABLE
Each of the provisions contained in this Guarantee shall be severable
and distinct from one another and if any one or more of such provisions
is now or hereafter becomes invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions of
this Guarantee shall not in any way be affected, prejudiced or impaired
thereby.
20. BENEFIT OF GUARANTEE
The Bank shall have a full and unfettered right to assign the whole or
any part of the benefit of this Guarantee to any person to whom the
right and
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benefits of the Bank under the Loan Agreement are assigned in
accordance with the terms thereof and the expression the "BANK"
wherever used herein shall be deemed to include such assignees and
other successors of the Bank, who shall be entitled to enforce and
proceed upon this Guarantee in the same manner as if named therein. The
Bank shall be entitled to impart any information concerning the
Guarantor to any such assignee or other successor or any participant or
proposed assignee, successor or participant in relation to the Bank's
rights under or in connection with the Loan Agreement upon the same
terms as applicable under the Loan Agreement to any information
imparted thereunder in relation to the Borrower, but by reference to
the Guarantor and its obligations hereunder.
21. NOTICES AND DEMANDS
Any notice or demand may be given or made hereunder by any of the
methods specified in Clause 31 of the Mortgage Debenture which clause
shall be deemed to be incorporated herein (MUTATIS MUTANDIS).
22. LAW AND JURISDICTION
(A) This Guarantee shall be governed by and construed in accordance with
English law.
(B) The Guarantor hereby agrees for the benefit of the Bank, and without
prejudice to the right of the Bank to take proceedings in relation
hereto before any other court of competent jurisdiction, that the
courts of England shall have jurisdiction to hear and determine any
suit, action or proceeding that may arise out of or in connection with
this Guarantee and for such purposes irrevocably submits to the
jurisdiction of such courts.
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Executed by the Guarantor as a Deed and delivered on the date first above
written.
EXECUTED BY )
GUILDSOFT LIMITED )
acting by:- )
Bruce R. Gardner Director /s/ Bruce R. Gardner
John F. Cave Director/Secretary /s/ John F. Cave
EXHIBIT 10.33
EXPORT-IMPORT BANK OF THE UNITED STATES
WORKING CAPITAL GUARANTEE PROGRAM
BORROWER AGREEMENT
THIS BORROWER AGREEMENT (this "Agreement") is made and entered into by
the entity identified as Borrower on the signature page hereof ("Borrower") in
favor of the Export-Import Bank of the United States ("Ex-Im Bank") and the
institution identified as Lender on the signature page hereof ("Lender").
RECITALS
Borrower has requested that Lender establish a Loan Facility in favor
of Borrower for the purposes of providing Borrower with pre-export working
capital to finance the manufacture, production or purchase and subsequent export
sale of Items.
It is a condition to the establishment of such Loan Facility that Ex-Im
Bank guarantee the payment of ninety percent (90%) of certain credit
accommodations subject to the terms and conditions of a Master Guarantee
Agreement, the Loan Authorization Agreement, and to the extent applicable, the
Delegated Authority Letter Agreement.
Borrower is executing this Agreement for the benefit of Lender and
Ex-Im Bank in consideration for and as a condition to Lender's establishing the
Loan Facility and Ex-Im Bank's agreement to guarantee such Loan Facility
pursuant to the Master Guarantee Agreement.
NOW, THEREFORE, Borrower hereby agrees as follows:
ARTICLE I
DEFINITIONS
1.01 Definition of Terms. As used in this Agreement, including the Recitals to
this Agreement and the Loan Authorization Agreement, the following terms shall
have the following meanings:
"Accounts Receivable" shall mean all of Borrower's now owned or
hereafter acquired (a) "accounts" (as such term is defined in the UCC), other
receivables, book debts and other forms of obligations, whether arising out of
goods sold or services rendered or from any other transaction; (b) rights in, to
and under all purchase orders or receipts for goods or services; (c) rights to
any goods represented or purported to be represented by any of the foregoing
(including unpaid sellers' rights of rescission, replevin, reclamation and
stoppage in transit and rights to returned, reclaimed or repossessed goods); (d)
moneys due or to become due to such Borrower under all
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purchase orders and contracts for the sale of goods or the performance of
services or both by Borrower (whether or not yet earned by performance on the
part of Borrower), including the proceeds of the foregoing; (e) any notes,
drafts, letters of credit, insurance proceeds or other instruments, documents
and writings evidencing or supporting the foregoing; and (f) all collateral
security and guarantees of any kind given by any other Person with respect to
any of the foregoing.
"Advance Rate" shall mean the rate specified in Section 5(C) of the
Loan Authorization Agreement for each category of Collateral.
"Business Day" shall mean any day on which the Federal Reserve Bank of
New York is open for business.
"Buyer" shall mean a Person that has entered into one or more Export
Orders with Borrower.
"Collateral" shall mean all property and interest in property in or
upon which Lender has been granted a Lien as security for the payment of all the
Loan Facility Obligations including the Collateral identified in Section 6 of
the Loan Authorization Agreement and all products and proceeds (cash and
non-cash) thereof.
"Commercial Letters of Credit" shall mean those letters of credit
subject to the UCP payable in Dollars and issued or caused to be issued by
Lender on behalf of Borrower under a Loan Facility for the benefit of a
supplier(s) of Borrower in connection with Borrower's purchase of goods or
services from the supplier in support of the export of the Items.
"Country Limitation Schedule" shall mean the schedule published from
time to time by Ex-Im Bank and provided to Borrower by Lender which sets forth
on a country by country basis whether and under what conditions Ex-Im Bank will
provide coverage for the financing of export transactions to countries listed
therein.
"Credit Accommodation Amount" shall mean, the sum of (a) the aggregate
outstanding amount of Disbursements and (b) the aggregate outstanding face
amount of Letter of Credit Obligations.
"Credit Accommodations" shall mean, collectively, Disbursements and
Letter of Credit Obligations.
"Debarment Regulations" shall mean, collectively, (a) the
Governmentwide Debarment and Suspension (Nonprocurement) regulations (Common
Rule), 53 Fed. Reg. 19204 (May 26, 1988), (b) Subpart 9.4 (Debarment,
Suspension, and Ineligibility) of the Federal Acquisition Regulations, 48 C.F.R.
9.400-9.409 and (c) the revised Governmentwide Debarment and Suspension
(Nonprocurement) regulations (Common Rule), 60 Fed. Reg. 33037 (June 26, 1995).
"Delegated Authority Letter Agreement" shall mean the Delegated
Authority Letter Agreement, if any, between Ex-Im Bank and Lender.
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"Disbursement" shall mean, collectively, (a) an advance of a working
capital loan from Lender to Borrower under the Loan Facility, and (b) an advance
to fund a drawing under a Letter of Credit issued or caused to be issued by
Lender for the account of Borrower under the Loan Facility.
"Dollars" or "$" shall mean the lawful currency of the United States.
"Effective Date" shall mean the date on which (a) the Loan Documents
are executed by Lender and Borrower or the date, if later, on which agreements
are executed by Lender and Borrower adding the Loan Facility to an existing
working capital loan arrangement between Lender and Borrower and (b) all of the
conditions to the making of the initial Credit Accommodations under the Loan
Documents or any amendments thereto have been satisfied.
"Eligible Export-Related Accounts Receivable" shall mean an
Export-Related Account Receivable which is acceptable to Lender and which is
deemed to be eligible pursuant to the Loan Documents, but in no event shall
Eligible Export-Related Accounts Receivable include any Account Receivable:
(a) that does not arise from the sale of Items in the ordinary course
of Borrower's business;
(b) that is not subject to a valid, perfected first priority Lien in
favor of Lender;
(c) as to which any covenant, representation or warranty contained in
the Loan Documents with respect to such Account Receivable has been breached;
(d) that is not owned by Borrower or is subject to any right, claim or
interest of another Person other than the Lien in favor of Lender;
(e) with respect to which an invoice has not been sent;
(f) that arises from the sale of defense articles or defense services;
(g) that is due and payable from a Buyer located in a country with
which Ex-Im Bank is prohibited from doing business as designated in the Country
Limitation Schedule;
(h) that does not comply with the requirements of the Country
Limitation Schedule;
(i) that is due and payable more than one hundred eighty (180) days
from the date of the invoice;
(j) that is not paid within sixty (60) calendar days from its original
due date, unless it is insured through Ex-Im Bank export credit insurance for
comprehensive commercial and political risk, or through Ex-Im Bank approved
private insurers for comparable coverage, in which case it is not paid within
ninety (90) calendar days from its due date;
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(k) that arises from a sale of goods to or performance of services for
an employee of Borrower, a stockholder of Borrower, a subsidiary of Borrower, a
Person with a controlling interest in Borrower or a Person which shares common
controlling ownership with Borrower;
(l) that is backed by a letter of credit unless the Items covered by
the subject letter of credit have been shipped;
(m) that Lender or Ex-Im Bank, in its reasonable judgment, deems
uncollectible for any reason;
(n) that is due and payable in a currency other than Dollars, except as
may be approved in writing by Ex-Im Bank;
(o) that is due and payable from a military Buyer, except as may be
approved in writing by Ex-Im Bank;
(p) that does not comply with the terms of sale set forth in Section 7
of the Loan Authorization Agreement;
(q) that is due and payable from a Buyer who (i) applies for, suffers,
or consents 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 or calls a meeting of its creditors, (ii) admits in writing its
inability, or is generally unable, to pay its debts as they become due or ceases
operations of its present business, (iii) makes a general assignment for the
benefit of creditors, (iv) commences a voluntary case under any state or federal
bankruptcy laws (as now or hereafter in effect), (v) is adjudicated as bankrupt
or insolvent, (vi) files a petition seeking to take advantage of any other law
providing for the relief of debtors, (vii) acquiesces to, or fails to have
dismissed, any petition which is filed against it in any involuntary case under
such bankruptcy laws, or (viii) takes any action for the purpose of effecting
any of the foregoing;
(r) that arises from a bill-and-hold, guaranteed sale, sale-and-return,
sale on approval, consignment or any other repurchase or return basis or is
evidenced by chattel paper;
(s) for which the Items giving rise to such Account Receivable have not
been shipped and delivered to and accepted by the Buyer or the services giving
rise to such Account Receivable have not been performed by Borrower and accepted
by the Buyer or the Account Receivable otherwise does not represent a final
sale;
(t) that is subject to any offset, deduction, defense, dispute, or
counterclaim or the Buyer is also a creditor or supplier of Borrower or the
Account Receivable is contingent in any respect or for any reason;
(u) for which Borrower has made any agreement with the Buyer for any
deduction therefrom, except for discounts or allowances made in the ordinary
course of business for prompt payment, all of which discounts or allowances are
reflected in the calculation of the face value of each respective invoice
related thereto; or
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(v) for which any of the Items giving rise to such Account Receivable
have been returned, rejected or repossessed.
"Eligible Export-Related Inventory" shall mean Export-Related Inventory
which is acceptable to Lender and which is deemed to be eligible pursuant to the
Loan Documents, but in no event shall Eligible Export-Related Inventory include
any Inventory:
(a) that is not subject to a valid, perfected first priority Lien in
favor of Lender;
(b) that is located at an address that has not been disclosed to Lender
in writing;
(c) that is placed by Borrower on consignment or held by Borrower on
consignment from another Person;
(d) that is in the possession of a processor or bailee, or located on
premises leased or subleased to Borrower, or on premises subject to a mortgage
in favor of a Person other than Lender, unless such processor or bailee or
mortgagee or the lessor or sublessor of such premises, as the case may be, has
executed and delivered all documentation which Lender shall require to evidence
the subordination or other limitation or extinguishment of such Person's rights
with respect to such Inventory and Lender's right to gain access thereto;
(e) that is produced in violation of the Fair Labor Standards Act or
subject to the "hot goods" provisions contained in 29 US.C.ss.215 or any
successor statute or section;
(f) as to which any covenant, representation or warranty with respect
to such Inventory contained in the Loan Documents has been breached;
(g) that is not located in the United States;
(h) that is demonstration Inventory;
(i) that consists of proprietary software (i.e. software designed
solely for Borrower's internal use and not intended for resale);
(j) that is damaged, obsolete, returned, defective, recalled or unfit
for further processing;
(k) that has been previously exported from the United States;
(l) that constitutes defense articles or defense services;
(m) that is to be incorporated into Items destined for shipment to a
country as to which Ex-Im Bank is prohibited from doing business as designated
in the Country Limitation Schedule;
(n) that is to be incorporated into Items destined for shipment to a
Buyer located in a country in which Ex-Im Bank coverage is not available for
commercial reasons as designated in the Country Limitation Schedule, unless and
only to the extent that such Items are to be sold to such country on terms of a
letter of credit confirmed by a bank acceptable to Ex-Im Bank; or
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(o) that is to be incorporated into Items whose sale would result in an
Account Receivable which would not be an Eligible Export-Related Account
Receivable.
"Eligible Person" shall mean a sole proprietorship, partnership,
limited liability partnership, corporation or limited liability company which
(a) is domiciled, organized, or formed, as the case may be, in the United
States; (b) is in good standing in the state of its formation or otherwise
authorized to conduct business in the United States; (c) is not currently
suspended or debarred from doing business with the United States government or
any instrumentality, division, agency or department thereof; (d) exports or
plans to export Items; (e) operates and has operated as a going concern for at
least one (1) year; (f) has a positive tangible net worth determined in
accordance with GAAP; and (g) has revenue generating operations relating to its
core business activities for at least one year.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
and the rules and regulations promulgated thereunder.
"Export Order" shall mean a written export order or contract for the
purchase by the Buyer from Borrower of any of the Items.
"Export-Related Accounts Receivable" shall mean those Accounts
Receivable arising from the sale of Items which are due and payable to Borrower
in the United States.
"Export-Related Accounts Receivable Value" shall mean, at the date of
determination thereof, the aggregate face amount of Eligible Export-Related
Accounts Receivable less taxes, discounts, credits, allowances and Retainages,
except to the extent otherwise permitted by Ex-Im Bank in writing.
"Export-Related Borrowing Base" shall mean, at the date of
determination thereof, the sum of (a) the Export-Related Inventory Value
multiplied by the Advance Rate applicable to Export-Related Inventory set forth
in Section 5(C)(1) of the Loan Authorization Agreement, (b) the Export-Related
Accounts Receivable Value multiplied by the Advance Rate applicable to
Export-Related Accounts Receivable set forth in Section 5(C)(2) of the Loan
Authorization Agreement, (c) if permitted by Ex-Im Bank in writing, the
Retainage Value multiplied by the Retainage Advance Rate set forth in Section
5(C)(3) of the Loan Authorization Agreement and (d) the Other Assets Value
multiplied by the Advance Rate applicable to Other Assets set forth in Section
5(C)(4) of the Loan Authorization Agreement.
"Export-Related Borrowing Base Certificate" shall mean a certificate in
the form provided or approved by Lender, executed by Borrower and delivered to
Lender pursuant to the Loan Documents detailing the Export-Related Borrowing
Base supporting the Credit Accommodations which reflects, to the extent included
in the Export-Related Borrowing Base, Export-Related Accounts Receivable,
Eligible Export-Related Accounts Receivable, Export-Related Inventory and
Eligible Export-Related Inventory balances that have been reconciled with
Borrower's general ledger, Accounts Receivable aging report and Inventory
schedule.
"Export-Related General Intangibles" shall mean those General
Intangibles necessary or desirable to or for the disposition of Export-Related
Inventory.
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"Export-Related Inventory" shall mean the Inventory of Borrower located
in the United States that has been purchased, manufactured or otherwise acquired
by Borrower for resale pursuant to Export Orders.
"Export-Related Inventory Value" shall mean, at the date of
determination thereof, the lower of cost or market value of Eligible
Export-Related Inventory of Borrower as determined in accordance with GAAP.
"Final Disbursement Date" shall mean, unless subject to an extension of
such date agreed to by Ex-Im Bank, the last date on which Lender may make a
Disbursement set forth in Section 10 of the Loan Authorization Agreement or, if
such date is not a Business Day, the next succeeding Business Day; provided,
however, to the extent that Lender has not received cash collateral or an
indemnity with respect to Letter of Credit Obligations outstanding on the Final
Disbursement Date, the Final Disbursement Date with respect to an advance to
fund a drawing under a Letter of Credit shall be no later than thirty (30)
Business Days after the expiry date of the Letter of Credit related thereto.
"GAAP" shall mean the generally accepted accounting principles issued
by the American Institute of Certified Public Accountants as in effect from time
to time.
"General Intangibles" shall mean all intellectual property and other
"general intangibles" (as such term is defined in the UCC) necessary or
desirable to or for the disposition of Inventory.
"Guarantor" shall mean each Person, if any, identified in Section 3 of
the Loan Authorization Agreement who shall guarantee (jointly and severally if
more than one) the payment and performance of all or a portion of the Loan
Facility Obligations.
"Guaranty Agreement" shall mean a valid and enforceable agreement of
guaranty executed by each Guarantor in favor of Lender.
"Inventory" shall mean all "inventory" (as such term is defined in the
UCC), now or hereafter owned or acquired by Borrower, wherever located,
including all inventory, merchandise, goods and other personal property which
are held by or on behalf of Borrower for sale or lease or are furnished or are
to be furnished under a contract of service or which constitute raw materials,
work in process or materials used or consumed or to be used or consumed in
Borrower's business or in the processing, production, packaging, promotion,
delivery or shipping of the same, including other supplies.
"ISP" shall mean the International Standby Practices-ISP98,
International Chamber of Commerce Publication No. 590 and any amendments and
revisions thereof.
"Issuing Bank" shall mean the bank that issues a Letter of Credit,
which bank is Lender itself or a bank that Lender has caused to issue a Letter
of Credit by way of guarantee.
"Items" shall mean the finished goods or services which are intended
for export from the United States, as specified in Section 4(A) of the Loan
Authorization Agreement.
"Letter of Credit" shall mean a Commercial Letter of Credit or a
Standby Letter of Credit.
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"Letter of Credit Obligations" shall mean all outstanding obligations
incurred by Lender, whether direct or indirect, contingent or otherwise, due or
not due, in connection with the issuance or guarantee by Lender or the Issuing
Bank of Letters of Credit.
"Lien" shall mean any mortgage, security deed or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, security title, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the UCC or comparable law of any jurisdiction) by which
property is encumbered or otherwise charged.
"Loan Agreement" shall mean a valid and enforceable agreement between
Lender and Borrower setting forth the terms and conditions of the Loan Facility.
"Loan Authorization Agreement" shall mean the Loan Authorization
Agreement entered into between Lender and Ex-Im Bank or the Loan Authorization
Notice setting forth certain terms and conditions of the Loan Facility, a copy
of which is attached hereto as Annex A.
"Loan Authorization Notice" shall mean the Loan Authorization Notice
executed by Lender and delivered to Ex-Im Bank in accordance with the Delegated
Authority Letter Agreement setting forth the terms and conditions of each Loan
Facility.
"Loan Documents" shall mean the Loan Authorization Agreement, the Loan
Agreement, this Agreement, each promissory note (if applicable), each Guaranty
Agreement, and all other instruments, agreements and documents now or hereafter
executed by Borrower or any Guarantor evidencing, securing, guaranteeing or
otherwise relating to the Loan Facility or any Credit Accommodations made
thereunder.
"Loan Facility" shall mean the Revolving Loan Facility, the Transaction
Specific Loan Facility or the Transaction Specific Revolving Loan Facility
established by Lender in favor of Borrower under the Loan Documents.
"Loan Facility Obligations" shall mean all loans, advances, debts,
expenses, fees, liabilities, and obligations for the performance of covenants,
tasks or duties or for payment of monetary amounts (whether or not such
performance is then required or contingent, or amounts are liquidated or
determinable) owing by Borrower to Lender, of any kind or nature, present or
future, arising in connection with the Loan Facility.
"Loan Facility Term" shall mean the number of months from the Effective
Date to the Final Disbursement Date as originally set forth in the Loan
Authorization Agreement.
"Master Guarantee Agreement" shall mean the Master Guarantee Agreement
between Ex-Im Bank and Lender, as amended, modified, supplemented and restated
from time to time.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the business, assets, operations, prospects or financial or other condition of
Borrower or any Guarantor, (b) Borrower's ability to pay or perform the Loan
Facility Obligations in accordance with the terms
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thereof, (c) the Collateral or Lender's Liens on the Collateral or the priority
of such Lien or (d) Lender's rights and remedies under the Loan Documents.
"Maximum Amount" shall mean the maximum principal balance of Credit
Accommodations that may be outstanding at any time under the Loan Facility
specified in Section 5(A) of the Loan Authorization Agreement.
"Other Assets" shall mean the Collateral, if any, described in Section
5(C)(4) of the Loan Authorization Agreement.
"Other Assets Value" shall mean, at the date of determination thereof,
the value of the Other Assets as determined in accordance with GAAP.
"Permitted Liens" shall mean (a) Liens for taxes, assessments or other
governmental charges or levies not delinquent, or, being contested in good faith
and by appropriate proceedings and with respect to which proper reserves have
been taken by Borrower; provided, that, the Lien shall have no effect on the
priority of the Liens in favor of Lender or the value of the assets in which
Lender has such a Lien and a stay of enforcement of any such Lien shall be in
effect; (b) deposits or pledges securing obligations under worker's
compensation, unemployment insurance, social security or public liability laws
or similar legislation; (c) deposits or pledges securing bids, tenders,
contracts (other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like nature
arising in the ordinary course of Borrower's business; (d) judgment Liens that
have been stayed or bonded; (e) mechanics', workers', materialmen's or other
like Liens arising in the ordinary course of Borrower's business with respect to
obligations which are not due; (f) Liens placed upon fixed assets hereafter
acquired to secure a portion of the purchase price thereof, provided, that, any
such Lien shall not encumber any other property of Borrower; (g) security
interests being terminated concurrently with the execution of the Loan
Documents; (h) Liens in favor of Lender securing the Loan Facility Obligations;
and (i) Liens disclosed in Section 6(D) of the Loan Authorization Agreement.
"Person" shall mean any individual, sole proprietorship, partnership,
limited liability partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability company, institution,
public benefit corporation, entity or government (whether national, federal,
provincial, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof), and shall
include such Person's successors and assigns.
"Principals" shall mean any officer, director, owner, partner, key
employee, or other Person with primary management or supervisory
responsibilities with respect to Borrower or any other Person (whether or not an
employee) who has critical influence on or substantive control over the
transactions covered by this Agreement.
"Retainage" shall mean that portion of the purchase price of an Export
Order that a Buyer is not obligated to pay until the end of a specified period
of time following the satisfactory performance under such Export Order.
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"Retainage Accounts Receivable" shall mean those portions of Eligible
Export-Related Accounts Receivable arising out of a Retainage.
"Retainage Advance Rate" shall mean the percentage rate specified in
Section 5(C)(3) of the Loan Authorization Agreement as the Advance Rate for the
Retainage Accounts Receivable of Borrower.
"Retainage Value" shall mean, at the date of determination thereof, the
aggregate face amount of Retainage Accounts Receivable, less taxes, discounts,
credits and allowances, except to the extent otherwise permitted by Ex-Im Bank
in writing.
"Revolving Loan Facility" shall mean the credit facility or portion
thereof established by Lender in favor of Borrower for the purpose of providing
pre-export working capital in the form of loans and/or Letters of Credit to
finance the manufacture, production or purchase and subsequent export sale of
Items pursuant to Loan Documents under which Credit Accommodations may be made
and repaid on a continuous basis based solely on the Export-Related Borrowing
Base during the term of such credit facility.
"Special Conditions" shall mean those conditions, if any, set forth in
Section 13 of the Loan Authorization Agreement.
"Specific Export Orders" shall mean those Export Orders specified in
Section 5(D) of the Loan Authorization Agreement.
"Standby Letter of Credit" shall mean those letters of credit subject
to the ISP or UCP issued or caused to be issued by Lender for Borrower's account
that can be drawn upon by a Buyer only if Borrower fails to perform all of its
obligations with respect to an Export Order.
"Transaction Specific Loan Facility" shall mean a credit facility or a
portion thereof established by Lender in favor of Borrower for the purpose of
providing pre-export working capital in the form of loans and/or Letters of
Credit to finance the manufacture, production or purchase and subsequent export
sale of Items pursuant to Loan Documents under which Credit Accommodations are
made based solely on the Export-Related Borrowing Base relating to Specific
Export Orders and once such Credit Accommodations are repaid they may not be
reborrowed.
"Transaction Specific Revolving Loan Facility" shall mean a Revolving
Credit Facility established to provide financing of Specific Export Orders.
"UCC" shall mean the Uniform Commercial Code as the same may be in
effect from time to time in the jurisdiction in which Borrower or Collateral is
located.
"UCP" shall mean the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500
and any amendments and revisions thereof.
"U.S." or "United States" shall mean the United States of America and
its territorial possessions.
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"U.S. Content" shall mean with respect to any Item all the labor,
materials and services which are of U.S. origin or manufacture, and which are
incorporated into an Item in the United States.
"Warranty" shall mean Borrower's guarantee to Buyer that the Items will
function as intended during the warranty period set forth in the applicable
Export Order.
"Warranty Letter of Credit" shall mean a Standby Letter of Credit which
is issued or caused to be issued by Lender to support the obligations of
Borrower with respect to a Warranty or a Standby Letter of Credit which by its
terms becomes a Warranty Letter of Credit.
1.02 Rules of Construction. For purposes of this Agreement, the following
additional rules of construction shall apply, unless specifically indicated to
the contrary: (a) wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter; (b) the term "or" is not
exclusive; (c) the term "including" (or any form thereof) shall not be limiting
or exclusive; (d) all references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations; (e)
the words "this Agreement", "herein", "hereof", "hereunder" or other words of
similar import refer to this Agreement as a whole including the schedules,
exhibits, and annexes hereto as the same may be amended, modified or
supplemented; (f) all references in this Agreement to sections, schedules,
exhibits, and annexes shall refer to the corresponding sections, schedules,
exhibits, and annexes of or to this Agreement; and (g) all references to any
instruments or agreements, including references to any of the Loan Documents, or
the Delegated Authority Letter Agreement shall include any and all
modifications, amendments and supplements thereto and any and all extensions or
renewals thereof to the extent permitted under this Agreement.
1.03 Incorporation of Recitals. The Recitals to this Agreement are incorporated
into and shall constitute a part of this Agreement.
ARTICLE II
OBLIGATIONS OF BORROWER
Until payment in full of all Loan Facility Obligations and termination
of the Loan Documents, Borrower agrees as follows:
2.01 Use of Credit Accommodations. (a) Borrower shall use Credit Accommodations
only for the purpose of enabling Borrower to finance the cost of manufacturing,
producing, purchasing or selling the Items. Borrower may not use any of the
Credit Accommodations for the purpose of: (i) servicing or repaying any of
Borrower's pre-existing or future indebtedness unrelated to the Loan Facility
(unless approved by Ex-Im Bank in writing); (ii) acquiring fixed assets or
capital goods for use in Borrower's business; (iii) acquiring, equipping or
renting commercial space outside of the United States; (iv) paying the salaries
of non U.S. citizens or non-U.S. permanent residents who are located in offices
outside of the United States; or (v) in connection with a Retainage or Warranty
(unless approved by Ex-Im Bank in writing).
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(b) In addition, no Credit Accommodation may be used to finance the
manufacture, purchase or sale of any of the following:
(i) Items to be sold or resold to a Buyer located in a country
as to which Ex-Im Bank is prohibited from doing business as designated in the
Country Limitation Schedule;
(ii) that part of the cost of the Items which is not U.S.
Content unless such part is not greater than fifty percent (50%) of the cost of
the Items and is incorporated into the Items in the United States;
(iii) defense articles or defense services; or
(iv) without Ex-Im Bank's prior written consent, any Items to
be used in the construction, alteration, operation or maintenance of nuclear
power, enrichment, reprocessing, research or heavy water production facilities.
2.02 Loan Documents and Loan Authorization Agreement. (a) Each Loan Document and
this Agreement have been duly executed and delivered on behalf of Borrower, and
each such Loan Document and this Agreement are and will continue to be a legal
and valid obligation of Borrower, enforceable against it in accordance with its
terms.
(b) Borrower shall comply with all of the terms and conditions of the
Loan Documents, this Agreement and the Loan Authorization Agreement.
2.03 Export-Related Borrowing Base Certificates and Export Orders. In order to
receive Credit Accommodations under the Loan Facility, Borrower shall have
delivered to Lender an Export-Related Borrowing Base Certificate as frequently
as required by Lender but at least within the past thirty (30) calendar days and
a copy of the Export Order(s) (or, for Revolving Loan Facilities, if permitted
by Lender, a written summary of the Export Orders) against which Borrower is
requesting Credit Accommodations. If Lender permits summaries of Export Orders,
Borrower shall also deliver promptly to Lender copies of any Export Orders
requested by Lender. In addition, so long as there are any Credit Accommodations
outstanding under the Loan Facility, Borrower shall deliver to Lender at least
once each month no later than the twentieth (20th) day of such month or more
frequently as required by the Loan Documents, an Export-Related Borrowing Base
Certificate.
2.04 Exclusions from the Export-Related Borrowing Base. In determining the
Export-Related Borrowing Base, Borrower shall exclude therefrom Inventory which
is not Eligible Export-Related Inventory and Accounts Receivable which are not
Eligible Export-Related Accounts Receivable. Borrower shall promptly, but in any
event within five (5) Business Days, notify Lender (a) if any then existing
Export-Related Inventory no longer constitutes Eligible Export-Related Inventory
or (b) of any event or circumstance which to Borrower's knowledge would cause
Lender to consider any then existing Export-Related Accounts Receivable as no
longer constituting an Eligible Export-Related Accounts Receivable.
2.05 Financial Statements. Borrower shall deliver to Lender the financial
statements required to be delivered by Borrower in accordance with Section 11 of
the Loan Authorization Agreement.
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2.06 Schedules, Reports and Other Statements. Borrower shall submit to Lender in
writing each month (a) an Inventory schedule for the preceding month and (b) an
Accounts Receivable aging report for the preceding month detailing the terms of
the amounts due from each Buyer. Borrower shall also furnish to Lender promptly
upon request such information, reports, contracts, invoices and other data
concerning the Collateral as Lender may from time to time specify.
2.07 Additional Security or Payment. (a) Borrower shall at all times ensure that
the Export-Related Borrowing Base equals or exceeds the Credit Accommodation
Amount. If informed by Lender or if Borrower otherwise has actual knowledge that
the Export-Related Borrowing Base is at any time less than the Credit
Accommodation Amount, Borrower shall, within five (5) Business Days, either (i)
furnish additional Collateral to Lender, in form and amount satisfactory to
Lender and Ex-Im Bank or (ii) pay to Lender an amount equal to the difference
between the Credit Accommodation Amount and the Export-Related Borrowing Base.
(b)For purposes of this Agreement, in determining the Export-Related
Borrowing Base there shall be deducted from the Export-Related Borrowing Base
(i) an amount equal to twenty-five percent (25%) of the outstanding face amount
of Commercial Letters of Credit and Standby Letters of Credit and (ii) one
hundred percent (100%) of the face amount of Warranty Letters of Credit less the
amount of cash collateral held by Lender to secure Warranty Letters of Credit.
(c) Unless otherwise approved in writing by Ex-Im Bank, for Revolving Loan
Facilities (other than Transaction Specific Revolving Loan Facilities), Borrower
shall at all times ensure that the outstanding principal balance of the Credit
Accommodations that is supported by Export-Related Inventory does not exceed
sixty percent (60%) of the sum of the total outstanding principal balance of the
Disbursements and the undrawn face amount of all outstanding Commercial Letters
of Credit. If informed by Lender or if Borrower otherwise has actual knowledge
that the outstanding principal balance of the Credit Accommodations that is
supported by Inventory exceeds sixty percent (60%) of the sum of the total
outstanding principal balance of the Disbursements and the undrawn face amount
of all outstanding Commercial Letters of Credit, Borrower shall, within five (5)
Business Days, either (i) furnish additional non-Inventory Collateral to Lender,
in form and amount satisfactory to Lender and Ex-Im Bank, or (ii) pay down the
applicable portion of the Credit Accommodations so that the above described
ratio is not exceeded.
2.08 Continued Security Interest. Borrower shall not change (a) its name or
identity in any manner, (b) the location of its principal place of business, (c)
the location of any of the Collateral or (d) the location of any of the books or
records related to the Collateral, in each instance without giving thirty (30)
days prior written notice thereof to Lender and taking all actions deemed
necessary or appropriate by Lender to continuously protect and perfect Lender's
Liens upon the Collateral.
2.09 Inspection of Collateral. Borrower shall permit the representatives of
Lender and Ex-Im Bank to make at any time during normal business hours
inspections of the Collateral and of Borrower's facilities, activities, and
books and records, and shall cause its officers and employees to give full
cooperation and assistance in connection therewith.
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2.10 General Intangibles. Borrower represents and warrants that it owns, or is
licensed to use, all General Intangibles necessary to conduct its business as
currently conducted except where the failure of Borrower to own or license such
General Intangibles could not reasonably be expected to have a Material Adverse
Effect.
2.11 Notice of Certain Events. Borrower shall promptly, but in any event within
five (5) Business Days, notify Lender in writing of the occurrence of any of the
following:
(a) Borrower or any Guarantor (i) applies for, consents to or suffers
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, liquidator or similar fiduciary of itself or of all or a substantial
part of its property or calls a meeting of its creditors, (ii) admits in writing
its inability, or is generally unable, to pay its debts as they become due or
ceases operations of its present business, (iii) makes a general assignment for
the benefit of creditors, (iv) commences a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (v) is adjudicated as
bankrupt or insolvent, (vi) files a petition seeking to take advantage of any
other law providing for the relief of debtors, (vii) acquiesces to, or fails to
have dismissed within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) takes any action for the
purpose of effecting any of the foregoing;
(b) any Lien in any of the Collateral, granted or intended by the Loan
Documents to be granted to Lender, ceases to be a valid, enforceable, perfected,
first priority Lien (or a lesser priority if expressly permitted pursuant to
Section 6 of the Loan Authorization Agreement) subject only to Permitted Liens;
(c) the issuance of any levy, assessment, attachment, seizure or Lien,
other than a Permitted Lien, against any of the Collateral which is not stayed
or lifted within thirty (30) calendar days;
(d) any proceeding is commenced by or against Borrower or any Guarantor
for the liquidation of its assets or dissolution;
(e) any litigation is filed against Borrower or any Guarantor which has
had or could reasonably be expected to have a Material Adverse Effect and such
litigation is not withdrawn or dismissed within thirty (30) calendar days of the
filing thereof;
(f) any default or event of default under the Loan Documents;
(g) any failure to comply with any terms of the Loan Authorization
Agreement;
(h) any material provision of any Loan Document or this Agreement for
any reason ceases to be valid, binding and enforceable in accordance with its
terms;
(i) any event which has had or could reasonably be expected to have a
Material Adverse Effect; or
(j) the Credit Accommodation Amount exceeds the applicable
Export-Related Borrowing Base.
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2.12 Insurance. Borrower will at all times carry property, liability and other
insurance, with insurers acceptable to Lender, in such form and amounts, and
with such deductibles and other provisions, as Lender shall require, and
Borrower will provide evidence of such insurance to Lender, so that Lender is
satisfied that such insurance is, at all times, in full force and effect. Each
property insurance policy shall name Lender as loss payee and shall contain a
lender's loss payable endorsement in form acceptable to Lender and each
liability insurance policy shall name Lender as an additional insured. All
policies of insurance shall provide that they may not be cancelled or changed
without at least ten (10) days' prior written notice to Lender and shall
otherwise be in form and substance satisfactory to Lender. Borrower will
promptly deliver to Lender copies of all reports made to insurance companies.
2.13 Taxes. Borrower has timely filed all tax returns and reports required by
applicable law, has timely paid all applicable taxes, assessments, deposits and
contributions owing by Borrower and will timely pay all such items in the future
as they became due and payable. Borrower may, however, defer payment of any
contested taxes; provided, that Borrower (a) in good faith contests Borrower's
obligation to pay such taxes by appropriate proceedings promptly and diligently
instituted and conducted; (b) notifies Lender in writing of the commencement of,
and any material development in, the proceedings; (c) posts bonds or takes any
other steps required to keep the contested taxes from becoming a Lien upon any
of the Collateral; and (d) maintains adequate reserves therefor in conformity
with GAAP.
2.14 Compliance with Laws. Borrower represents and warrants that it has complied
in all material respects with all provisions of all applicable laws and
regulations, including those relating to Borrower's ownership of real or
personal property, the conduct and licensing of Borrower's business, the payment
and withholding of taxes, ERISA and other employee matters, safety and
environmental matters.
2.15 Negative Covenants. Without the prior written consent of Ex-Im Bank and
Lender, Borrower shall not (a) merge, consolidate or otherwise combine with any
other Person; (b) acquire all or substantially all of the assets or capital
stock of any other Person; (c) sell, lease, transfer, convey, assign or
otherwise dispose of any of its assets, except for the sale of Inventory in the
ordinary course of business and the disposition of obsolete equipment in the
ordinary course of business; (d) create any Lien on the Collateral except for
Permitted Liens; (e) make any material changes in its organizational structure
or identity; or (f) enter into any agreement to do any of the foregoing.
2.16 Reborrowings and Repayment Terms. (a) If the Loan Facility is a Revolving
Loan Facility, provided that Borrower is not in default under any of the Loan
Documents, Borrower may borrow, repay and reborrow amounts under the Loan
Facility until the close of business on the Final Disbursement Date. Unless the
Revolving Loan Facility is renewed or extended by Lender with the consent of
Ex-Im Bank, Borrower shall pay in full the outstanding Loan Facility Obligations
and all accrued and unpaid interest thereon no later than the first Business Day
after the Final Disbursement Date.
(b) If the Loan Facility is a Transaction Specific Loan Facility,
Borrower shall, within two (2) Business Days of the receipt thereof, pay to
Lender (for application against the outstanding Loan Facility Obligations and
accrued and unpaid interest thereon) all checks, drafts, cash and
15
<PAGE>
other remittances it may receive in payment or on account of the Export-Related
Accounts Receivable or any other Collateral, in precisely the form received
(except for the endorsement of Borrower where necessary). Pending such deposit,
Borrower shall hold such amounts in trust for Lender separate and apart and
shall not commingle any such items of payment with any of its other funds or
property.
2.17 Cross Default. Borrower shall be deemed in default under the Loan Facility
if Borrower fails to pay when due any amount payable to Lender under any loan or
other credit accommodations to Borrower whether or not guaranteed by Ex-Im Bank.
2.18 Munitions List. If any of the Items are articles, services, or related
technical data that are listed on the United States Munitions List (part 121 of
title 22 of the Code of Federal Regulations), Borrower shall send a written
notice promptly, but in any event within five (5) Business Days, of Borrower
learning thereof to Lender describing the Items(s) and the corresponding invoice
amount.
2.19 Suspension and Debarment, etc. On the date of this Agreement neither
Borrower nor its Principals are (a) debarred, suspended, proposed for debarment
with a final determination still pending, declared ineligible or voluntarily
excluded (as such terms are defined under any of the Debarment Regulations
referred to below) from participating in procurement or nonprocurement
transactions with any United States federal government department or agency
pursuant to any of the Debarment Regulations or (b) indicted, convicted or had a
civil judgment rendered against Borrower or any of its Principals for any of the
offenses listed in any of the Debarment Regulations. Unless authorized by Ex-Im
Bank, Borrower will not knowingly enter into any transactions in connection with
the Items with any person who is debarred, suspended, declared ineligible or
voluntarily excluded from participation in procurement or nonprocurement
transactions with any United States federal government department or agency
pursuant to any of the Debarment Regulations. Borrower will provide immediate
written notice to Lender if at any time it learns that the certification set
forth in this Section 2.19 was erroneous when made or has become erroneous by
reason of changed circumstances.
ARTICLE III
RIGHTS AND REMEDIES
3.01 Indemnification. Upon Ex-Im Bank's payment of a Claim to Lender in
connection with the Loan Facility pursuant to the Master Guarantee Agreement,
Ex-Im Bank may assume all rights and remedies of Lender under the Loan Documents
and may enforce any such rights or remedies against Borrower, the Collateral and
any Guarantors. Borrower shall hold Ex-Im Bank and Lender harmless from and
indemnify them against any and all liabilities, damages, claims, costs and
losses incurred or suffered by either of them resulting from (a) any materially
incorrect certification or statement knowingly made by Borrower or its agent to
Ex-Im Bank or Lender in connection with the Loan Facility, this Agreement, the
Loan Authorization Agreement or any other Loan Documents or (b) any material
breach by Borrower of the terms and conditions of this Agreement, the Loan
Authorization Agreement or any of the other Loan Documents. Borrower also
acknowledges that any statement, certification or representation made by
Borrower in connection with the Loan Facility is subject to the penalties
provided in Article 18 U.S.C. Section 1001.
16
<PAGE>
3.02 Liens. Borrower agrees that any and all Liens granted by it to Lender are
also hereby granted to Ex-Im Bank to secure Borrower's obligation, however
arising, to reimburse Ex-Im Bank for any payments made by Ex-Im Bank pursuant to
the Master Guarantee Agreement. Lender is authorized to apply the proceeds of,
and recoveries from, any property subject to such Liens to the satisfaction of
Loan Facility Obligations in accordance with the terms of any agreement between
Lender and Ex-Im Bank.
ARTICLE IV
MISCELLANEOUS
4.01 Governing Law. This Agreement and the Loan Authorization Agreement and the
obligations arising under this Agreement and the Loan Authorization Agreement
shall be governed by, and construed in accordance with, the law of the state
governing the Loan Documents.
4.02 Notification. All notices required by this Agreement shall be given in the
manner and to the parties provided for in the Loan Agreement.
4.03 Partial Invalidity. If at any time any of the provisions of this Agreement
becomes illegal, invalid or unenforceable in any respect under the law of any
jurisdiction, neither the legality, the validity nor the enforceability of the
remaining provisions hereof shall in any way be affected or impaired.
4.04 Waiver of Jury Trial. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY ACTION, SUIT, PROCEEDING OR OTHER LITIGATION BROUGHT TO RESOLVE
ANY DISPUTE ARISING UNDER, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT,
THE LOAN AUTHORIZATION AGREEMENT, ANY LOAN DOCUMENT, OR ANY OTHER AGREEMENT,
DOCUMENT OR INSTRUMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN), OR ACTIONS OR OMMISSIONS OF LENDER, EX-IM BANK, OR ANY OTHER PERSON,
RELATING TO THIS AGREEMENT, THE LOAN AUTHORIZATION AGREEMENT OR ANY OTHER LOAN
DOCUMENT.
17
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Agreement to be duly
executed as of the 27th day of December, 1999.
DATAWATCH CORPORATION
By: /s/ Bruce R. Gardner
------------------------------------------
(Signature)
Name: Bruce R. Gardner
----------------------------------------
(Print or Type)
Title: President and Chief Executive Officer
---------------------------------------
(Print or Type)
DATAWATCH INTERNATIONAL LIMITED
By: /s/ Bruce R. Gardner
------------------------------------------
(Signature)
Name: Bruce R. Gardner
----------------------------------------
(Print or Type)
Title: Director
---------------------------------------
(Print or Type)
DATAWATCH EUROPE LTD.
By: /s/ Bruce R. Gardner
------------------------------------------
(Signature)
Name: Bruce R. Gardner
----------------------------------------
(Print or Type)
Title: Director
---------------------------------------
(Print or Type)
18
<PAGE>
GUILDSOFT LTD.
By: /s/ Bruce R. Gardner
------------------------------------------
(Signature)
Name: Bruce R. Gardner
----------------------------------------
(Print or Type)
Title: Director
---------------------------------------
(Print or Type)
ACKNOWLEDGED:
SILICON VALLEY BANK
By: /s/ Heidi Fetty
------------------------------
(Signature)
Name: Heidi Fetty
----------------------------
(Print or Type)
Title: Assistant Vice President
---------------------------
(Print or Type)
19
<PAGE>
ANNEXES:
Annex A - Loan Authorization Agreement or Loan Authorization Notice
20
EXHIBIT 21.1
Subsidiaries of the Registrant
------------------------------
<TABLE>
<CAPTION>
Subsidiary Place of Incorporation D/B/A Name
- ---------- ---------------------- ----------
<S> <C> <C>
Personics Corporation Delaware, USA Personics Corporation
WorkGroup GmbH Germany WorkGroup GmbH
Kurt Software GmbH i.L.* Germany Kurt Software GmbH i.L.
Datawatch International Limited England and Wales Datawatch International Limited
Datawatch GmbH** Germany Datawatch GmbH
Datawatch France SARL** France Datawatch France SARL
Datawatch Pty Ltd.** Australia Datawatch Pty Ltd.
Datawatch Europe Limited** England and Wales Datawatch Europe Limited
Guildsoft Limited *** England and Wales Guildsoft Limited
</TABLE>
* All of the shares of capital stock of Kurt Software GmbH i.L. (formerly
Pole Position Software GmbH) are owned by WorkGroup GmbH.
** All of the shares of capital stock of Datawatch Systems GmbH, Datawatch
France SARL, Datawatch Pty Ltd. and Datawatch Europe Limited are owned by
Datawatch International Limited.
*** All of the shares of capital stock of Guildsoft Limited are owned by
Datawatch Europe Limited.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-39627 and No. 33-65786 of Datawatch Corporation on Form S-8 of our report
dated November 19, 1999 appearing in the Annual Report on Form 10-K of Datawatch
Corporation for the year ended September 30, 1999.
/s/Deloitte & Touche LLP
- ---------------------------------
Boston, Massachusetts
December 27, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,684,485
<SECURITIES> 1,479,698
<RECEIVABLES> 7,282,452
<ALLOWANCES> 467,000
<INVENTORY> 409,753
<CURRENT-ASSETS> 11,800,928
<PP&E> 4,298,545
<DEPRECIATION> 2,805,418
<TOTAL-ASSETS> 14,780,755
<CURRENT-LIABILITIES> 6,962,694
<BONDS> 0
0
0
<COMMON> 91,211
<OTHER-SE> 7,726,496
<TOTAL-LIABILITY-AND-EQUITY> 14,780,755
<SALES> 27,171,401
<TOTAL-REVENUES> 27,171,401
<CGS> 6,147,938
<TOTAL-COSTS> 31,480,281
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135,562
<INCOME-PRETAX> (4,258,811)
<INCOME-TAX> (411,630)
<INCOME-CONTINUING> (3,847,181)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,847,181)
<EPS-BASIC> (.42)
<EPS-DILUTED> (.42)
</TABLE>
