<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from to
-------------- -------------
Commission File No. 0-14805
MICROCOM, INC.
(Exact name of registrant as specified in its charter)
------------------------
MASSACHUSETTS 04-2710644
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 RIVER RIDGE DRIVE 02062-5028
NORWOOD, MASSACHUSETTS (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 551-1000
------------------------
Indicate by check (X) 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of June 30, 1996,
15,942,640.
================================================================================
<PAGE> 2
MICROCOM, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS ........................................ 3
CONSOLIDATED STATEMENTS OF OPERATIONS .............................. 4
CONSOLIDATED STATEMENTS OF CASH FLOWS .............................. 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ......................... 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS .......................................... 7
PART II. OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K.................................... 10
SIGNATURES ......................................................... 11
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
<TABLE>
MICROCOM, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
JUNE 30, 1996 MARCH 31, 1996
------------- --------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and equivalents.................................................. $ 5,334 $ 27,336
Accounts receivable, less allowance for doubtful accounts of $305
and $283 at June 30, 1996 and March 31, 1996, respectively......... 46,243 41,811
Inventories........................................................... 52,775 37,391
Prepaid expenses and other current assets............................. 1,780 1,695
-------- --------
Total current assets................................................ 106,132 108,233
Property and equipment, net............................................. 9,329 7,703
Other assets, net....................................................... 14,616 13,263
-------- --------
$130,077 $129,199
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capitalized leases and short-term debt............. $ 9,734 $ 1,073
Accounts payable...................................................... 10,754 19,483
Accrued expenses...................................................... 2,569 3,348
-------- --------
Total current liabilities........................................... 23,057 23,904
-------- --------
Long-term portion of capitalized leases................................. 1,971 2,186
-------- --------
Stockholders' equity:
Common stock, $.01 par value, authorized - 30,000 shares,
issued - 16,924 shares at June 30, 1996, and 16,772 shares
at March 31, 1996................................................... 169 168
Capital in excess of par value........................................ 118,631 116,747
Stock loans - related parties......................................... (2,209) (2,209)
Accumulated deficit................................................... (8,818) (9,099)
Treasury stock, at cost, 981 shares................................... (2,613) (2,613)
Cumulative translation adjustment..................................... (111) 115
-------- --------
Total stockholders' equity.......................................... 105,049 103,109
-------- --------
$130,077 $129,199
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
MICROCOM, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
(In thousands, except per share amounts)
<CAPTION>
THREE MONTHS ENDED
------------------
1996 1995
---- ----
<S> <C> <C>
Net sales............................................................... $41,777 $28,555
Cost of sales........................................................... 27,485 15,802
------- -------
Gross margin............................................................ 14,292 12,753
------- -------
Operating expenses:
Research and development.............................................. 4,596 3,378
Sales and marketing................................................... 7,350 5,174
General and administrative............................................ 1,776 1,129
------- -------
Total operating expenses............................................ 13,722 9,681
------- -------
Income from operations.................................................. 570 3,072
Interest income......................................................... 53 4
Interest and other expense, net......................................... (292) (588)
------- -------
Income before income taxes.............................................. 331 2,488
Provision for income taxes.............................................. 50 373
------- -------
Net income.............................................................. $ 281 $ 2,115
======= =======
Net income per share.................................................... $ .02 $ .17
======= =======
Weighted average number of shares outstanding........................... 16,857 12,708
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
MICROCOM, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
(In thousands)
<CAPTION>
THREE MONTHS ENDED
------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income............................................................ $ 281 $ 2,115
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization....................................... 2,842 1,775
Changes in assets and liabilities:
Accounts receivable, net.......................................... (4,432) (3,967)
Inventories....................................................... (15,384) (70)
Prepaid expenses and other current assets......................... (85) (57)
Accounts payable and accrued expenses............................. (9,508) 5,421
-------- --------
Net cash (used in) provided by operating activities.............. (26,286) 5,217
-------- --------
Cash flows used in investing activities:
Capitalized software development costs and purchased technology..... (2,025) (1,117)
Purchase of property and equipment.................................. (2,580) (565)
Other assets and equity investments................................. (656) (43)
-------- --------
Net cash used in investing activities........................... (5,261) (1,725)
-------- --------
Cash flows provided by financing activities:
Borrowings (payments) under the revolving credit line, net ........... 8,500 (12,020)
Exercise of stock options and employee stock purchase plan............ 1,325 1,460
Payment on capitalized leases......................................... (54) (83)
Proceeds from public offering, net.................................... -- 50,418
Repayment of stock loans.............................................. -- 147
Banker acceptance on inventory purchases.............................. -- (195)
-------- --------
Net cash provided by financing activities........................ 9,771 39,727
-------- --------
Effect of exchange rates on cash........................................ (226) --
-------- -------
Net (decrease) increase in cash and equivalents......................... (22,002) 43,219
Cash and equivalents at beginning of period............................. 27,336 863
-------- --------
Cash and equivalents at end of period................................... $ 5,334 $ 44,082
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
MICROCOM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands)
NOTE 1. BASIS FOR PRESENTATION
The consolidated balance sheet as of June 30, 1996, and the related consolidated
statements of operations and cash flows for the quarters ended June 30, 1996 and
1995, are unaudited. In the opinion of management, all adjustments necessary for
the fair presentation of such financial statements have been included, such
adjustments consisted only of normal recurring items. Interim results are not
necessarily indicative of results for a full fiscal year.
The financial statements are presented as permitted by Form 10-Q and do not
contain certain information included in the Company's annual consolidated
financial statements.
<TABLE>
NOTE 2. INVENTORIES
<CAPTION>
JUNE 30, 1996 MARCH 31, 1996
------------- --------------
<S> <C> <C>
Raw materials................................... $15,570 $ 9,601
Finished goods.................................. 37,205 27,790
------- -------
$52,775 $37,391
======= =======
</TABLE>
<TABLE>
NOTE 3. PROPERTY AND EQUIPMENT
<CAPTION>
Depreciable Life
JUNE 30, 1996 MARCH 31, 1996 in Years
------------- -------------- ----------------
<S> <C> <C> <C>
Computer equipment and software................. $ 11,432 $ 11,029 2-3
Machinery and equipment......................... 3,576 3,090 3-7
Furniture and fixtures.......................... 2,127 1,659 8
Leasehold improvements.......................... 2,471 2,327 Life of Lease
-------- --------
19,606 18,105
Accumulated depreciation and amortization....... (10,277) (10,402)
-------- --------
$ 9,329 $ 7,703
======== ========
</TABLE>
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net Sales - In the first quarter of fiscal 1997, net sales increased by
$13,222,000, or 46%, from the same period in fiscal 1996. The increase was
primarily attributable to increased sales of V.34 modem products and customized
12 port V.34 modem boards. Unit sales of remote site modems increased by more
than three times the volume of the same period of a year ago, reflecting the
market demand for high speed remote access communication products. Additionally,
volume shipments of new products principally customized 12 port V.34 modem
boards accounted for approximately 28% of the Company's total net sales. These
increases in sales were offset by a decrease in net sales of central site remote
network access products particularly the High Density Management Systems
products (HDMS). During the first quarter of fiscal 1997 the favorable impact
from increased unit volume was partially offset by competitive pricing pressures
especially in the United States and European markets. A significant portion of
the first quarter sales were made to one original equipment manufacturer (OEM)
customer, which accounted for 24% of net sales. International sales were
$17,262,000 in the first quarter of fiscal 1997, representing 41% of net sales,
as compared to $9,092,000 in the first quarter of fiscal 1996, or 32% of net
sales. The increase in fiscal 1997 international sales was primarily due to
increased V.34 modem sales.
Gross Margin - Gross margins for the first quarter of fiscal 1997 and 1996, were
34% and 45%, respectively. The decrease was primarily due to increase volume of
lower margin modem products, coupled with the decline in sales of higher margin
HDMS products. Due to the change in product mix the Company expects continued
pressure on gross margins.
Research and Development - Research and development expenses increased by 36% in
the first quarter of fiscal 1997 to $4,596,000 as compared to $3,378,000 in the
first quarter of fiscal 1996. The increase in research and development expenses
was principally due to the hiring of additional engineering personnel and
increased consulting and contract professional fees relating to continued
investment in new and existing technologies.
Sales and Marketing - In the first quarter of fiscal 1997, sales and marketing
expenses increased by $2,176,000, or 42%, over the same period in fiscal 1996
due to increased variable selling expenses attributable to increased sales. The
increases were directly related to the expansion of the Company's international
distribution channels and marketing programs, primarily advertising.
General and Administrative - In the first quarter of fiscal 1997, general and
administrative expenses were $1,776,000, compared to $1,129,000 in the prior
fiscal year. General and administrative expenses were 4% of net sales for first
quarter of in fiscal 1997 and fiscal 1996. The Company's goal is to maintain
general and administrative spending at 4% of net sales
Interest Income and Expense - Interest income increased in the first quarter of
fiscal 1997 by $49,000 to $53,000 and interest and other expense decreased by
$296,000 to $292,000. The decrease in interest and other expense was primarily
due to a decrease in interest paid on reduced borrowings under the Company's
revolving credit facility.
Income Taxes - The Company's effective tax rate was 15% for both periods
reported. The difference between the statutory rate and the effective tax rate
reflects the utilization of a portion of the Company's net operating loss carry
forwards. At June 30, 1996, the Company had available $16,817,000 in net
operating loss carry forwards, which may be used to offset future taxable
income, and $4,169,000 in research and development and other tax credit carry
forwards, which may be used to offset future taxes payable. These carry forwards
expire through 2009 and are subject to review and possible adjustment by the
Internal Revenue Service.
Net Income and Net Income Per Share - For the reasons stated above, net income
for the first quarter of fiscal 1997 was $281,000 as compared to net income of
$2,115,000 for the first quarter of fiscal 1996, and net income per share for
the first quarter of fiscal 1997 was $.02 as compared to $.17 for the first
quarter of fiscal 1996.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and equivalents decreased by $22,002,000 in the first quarter
of fiscal 1997, compared to an increase of $43,219,000 in the first quarter of
fiscal 1996. The decrease in cash and equivalents for the first quarter of
fiscal 1997 was primarily due to the use of $26,286,000 in cash in operating
activities, specifically, increases in accounts receivable of $4,432,000,
inventories of $15,384,000, and a decrease in accounts payable and accrued
expenses of $9,508,000. The increase in accounts receivable is a combination of
a 46% increase in net sales in the first quarter of fiscal 1997, coupled with
the growth in international net sales where payment cycles are longer. The
increase in inventory reflects an anticipated increase in net sales associated
with new product offerings in the central site product line and delayed buying
decisions in the first quarter of fiscal 1997 by a few major customers. Cash
flows from investing activities in the first quarter of fiscal 1997 included
continued investments in software development costs of $2,025,000, and purchases
of property and equipment in the amount of $2,580,000, in both instances to
support the development of new products and growth of the Company. In addition,
issuance of additional shares of common stock under the Company's stock plans
resulted in proceeds of $1,325,000.
As of June 30, 1996, the Company had $5,334,000 in cash and equivalents. In
addition, the Company had a bank revolving credit facility which allowed the
Company to borrow up to an amount (the "Maximum Borrowing Amount") equal to the
lesser of (i) $25,000,000 (increased to $45,000,000 by a subsequent amendment
on July 8, 1996) or (ii) an amount based on the Company's eligible accounts
receivable and inventory. The Maximum Borrowing Amount is reduced by amounts
which may be drawn on outstanding letters of credit and bankers' acceptances
and by a percentage of the Company's exposure under foreign currency exchange
contracts. Under the terms of the credit facility, interest is at the bank's
prime rate (8 1/2% at June 30, 1996) and the Company is required to comply with
certain covenants. At June 30, 1996, the Company was contingently liable with
respect to $11,314,000 in outstanding letters of credit and its bank credit
availability was approximately $5,186,000. At June 30, 1996, there were
$8,500,000 in borrowings under the credit facility and the Company was in
compliance with all covenants.
Since its inception, the Company has met its liquidity requirements through cash
provided by operations, product line dispositions, public and private stock
offerings, lease arrangements for facilities and equipment and short-term
borrowings from banks. Management believes that its cash and equivalents, line
of credit availability, and cash provided by operations will be adequate to meet
the Company's liquidity requirements for the immediate future.
FOREIGN CURRENCY HEDGING
To date, all of the Company's transactions (including customer sales and
purchases from vendors) have been denominated in U.S. dollars, except for
transactions in Japan and an immaterial amount of transactions in the U.K. The
Company's policy is to hedge the currency risk by entering into forward
contracts. The gains or losses on such contracts are deferred until the
contracts are settled and are then recognized as other income or expense. The
Company had no foreign currency contracts outstanding at June 30, 1996, and
$115,000 in foreign currency contracts at June 30, 1995. The Company had no
material gains or losses on these contracts.
INDUSTRY TRENDS
In July 1996, one of the Company's major OEM customers, Cisco Systems, Inc.,
announced the acquisition of a company which competes in certain areas with the
Company's modem technology business. This acquisition is reflective of a
continuing trend toward consolidation in the industry which makes products for
distributed enterprise-wide computing networks ("intranets") and online services
supporting access to the Internet. Although the Company's relationship with
Cisco remains strong and has recently been enhanced and management believes that
the Company's focus on expanding its OEM relationships is a sound strategy for
growth, there can be no assurance that such consolidations of customers with
competitors will not materially and adversely affect its OEM business, results
of operations or financial condition.
8
<PAGE> 9
CAUTIONARY STATEMENT
When used anywhere in this Form 10-Q, in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases and in oral
statements made with the approval of an authorized executive officer of the
Company, the words or phrases "will likely result", "are expected to", "will
continue", "is anticipated", "estimated", "project", or "outlook" or similar
expressions (including confirmations by an authorized executive officer of the
Company of any such expressions made by a third party with respect to the
Company) are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. The Company
wishes to caution readers not to place undue reliance on any such forward
looking statements, which speak only as of the date made. Such statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected. Certain of such risks and uncertainties are described above and in
the risk factors set forth in Part I of the Company's Form 10-K for the fiscal
year ended March 31, 1996 filed with the Securities and Exchange Commission,
including, among others, the risks associated with (i) the Company's focus on
expanding its OEM relationships as described above in Industry Trends and the
Company's reliance on indirect distribution channels generally, (ii) the need to
develop new products and respond to rapid changes in technology, (iii) the
highly competitive markets in which the Company participates, (iv) the Company's
efforts to generate and maintain sales to telecommunications carriers, (v) the
Company's dependence on suppliers and subcontractors, (vi) the Company's
dependence on and the need to protect its proprietary technology, (vii) the
Company's dependence on international operations, and (viii) the Company's focus
on central site and remote access markets. The Company specifically declines any
obligation to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect anticipated or unanticipated events or
circumstances occurring after the date of such statements.
9
<PAGE> 10
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS.
Exhibit 10.1 - Amendment to credit agreement
Exhibit 10.2 - Revolving credit agreement dated July 8, 1996
Exhibit 10.3 - Amended and Restated Promissory Note in the
principal amount of $20,000,000 dated July
8, 1996 made by the Registrant to the
order of BayBank.
Exhibit 10.4 - Amended and Restated Promissory Note in the
principal amount of $15,000,000 dated July
8, 1996 made by the Registrant to the
order of The First National Bank of Boston.
Exhibit 10.5 - Amended and Restated Promissory Note in the
principal amount of $10,000,000 dated July
8, 1996 made by the Registrant to the
order of Silicon Valley Bank.
Exhibit 10.6 - Secured promissory note made by James M. Dow
to the order of the registrant in the
connection with stock loan.
Exhibit 11.0 - Calculation of net income per share.
Exhibit 27.0 - Financial Data Schedule
(B) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed by the Company during
the period covered by this report.
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: AUGUST 14, 1996 BY: /s/ Roland D. Pampel
---------------- --------------------------------------------
Roland D. Pampel, President
Chief Executive Officer and Director
DATE: AUGUST 14, 1996 BY: /s/ Peter J. Minihane
---------------- -------------------------------------------
Peter J. Minihane, Executive Vice President
Chief Financial Officer and Treasurer
11
<PAGE> 1
EXHIBIT 10.1
AMENDMENT TO CREDIT AGREEMENT
Dated as of July 31, 1996
Microcom, Inc.
500 River Ridge Drive
Norwood, Massachusetts 02062-5028
Attn: James T. Fennessy
Re: Amendment to Revolving Credit Agreement dated as of July 8, 1996 by
and among BayBank, N.A., The First National Bank of Boston, Silicon
Valley Bank (collectively, the "Lenders"), Microcom, Inc. (the
"Borrower" or "you"), and BayBank, N.A., as Agent (the "Agent")
Ladies and Gentlemen:
The purpose of this letter is to evidence the agreement of the Lenders, the
Borrower and the Agent that, effective on the Effective Date (as defined below),
the above-captioned Revolving Credit Agreement (together with attached schedules
and exhibits, the "Credit Agreement") is amended in the following respects as
set forth on Annex I appended hereto and incorporated herein by reference.
Unless otherwise defined herein, capitalized terms used in this letter amendment
(the "Amendment") shall have the same respective meanings as set forth in the
Credit Agreement.
This Amendment shall become effective as of July 31, 1996 (the "Effective
Date"), provided that the Agent shall have received three (3) copies of this
Amendment, duly executed by you and the Lenders, together with the attached
consent of Microcom Systems, Inc., duly executed thereby, on or before August 1,
1996; provided, however, that this Amendment shall not become effective until
executed by an officer of SVB in California.
Upon the effectiveness hereof, each reference in the Credit Agreement and
the other Loan Document to "the Credit Agreement", "thereunder", "thereof",
"therein", or words of like import referring to the Credit Agreement, shall mean
and be a reference to the Credit Agreement as amended hereby. Except as
specifically set forth above, the Credit Agreement shall remain in full force
and effect and is hereby ratified and confirmed. Each of the other Loan
Documents is in full force and effect and is hereby ratified and confirmed. The
amendments set forth above (a) do not constitute a waiver or modification of any
term, condition or covenant of the Credit Agreement or any other Loan Document,
other than as expressly set forth herein, and (b) shall not prejudice any rights
which the Bank may now or hereafter have under or in connection with the Credit
Agreement, as modified hereby, or the other Loan Documents.
<PAGE> 2
-2-
You agree to pay on demand all costs and expenses of the Lenders and the
Agent in connection with the preparation, reproduction, execution and delivery
of this Amendment and the other instruments and documents to be delivered
hereunder, including the reasonable fees and out-of-pocket expenses of Sullivan
& Worcester LLP, special counsel for the Agent with respect thereto.
This Amendment may be signed in one or more counterparts each of which
shall constitute and original and all of which, taken together, shall constitute
a single instrument.
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
If you are in agreement with the foregoing, please sign and return the
enclosed copies of this Amendment at your earliest convenience.
Sincerely,
BAYBANK, N.A., as Agent
By: /s/ STEPHEN BUZZELL
-----------------------------------
Name: STEPHEN BUZZELL
Title: Vice President
BAYBANK, N.A., as a Lender
By: /s/ STEPHEN BUZZELL
-----------------------------------
Name: STEPHEN BUZZELL
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON,
as a Lender
By: /s/ DANIEL HEAD
------------------------------------
Name: DANIEL HEAD
Title: Vice President
<PAGE> 3
-3-
SILICON VALLEY EAST, a Division
of Silicon Valley Bank, as a Lender
By: /s/ JAMES MAYNARD
------------------------------------
Name: JAMES MAYNARD
Title: Vice President
SILICON VALLEY BANK, as a Lender
By: /s/ PAMELA DOYLE
------------------------------------
Name: PAMELA DOYLE
Title: Senior Vice President
(signed in Santa Clara, California)
The undersigned has reviewed and
accepts and agrees to the terms
of the foregoing (including the
attached Annex I):
MICROCOM, INC.
By: /s/ JAMES FENNESSY
---------------------------------
Name: JAMES FENNESSY
-------------------------------
Title: Director, Treasury Operations
------------------------------
Date: July 31, 1996
-------------------------------
<PAGE> 4
ANNEX I TO LETTER AMENDMENT
The Credit Agreement is, effective as of the Effective Date and subject to
the conditions set forth in the foregoing letter amendment, hereby amended as
follows:
Subsection (d) of Section 2.6 is amended and restated in its entirety to
read as follows:
"(d) The Borrower shall pay to the Issuing Bank, for the sole benefit
of the Issuing Bank, a fee with respect to each Commercial Letter of Credit
issued or amended (each a "COMMERCIAL LETTER OF CREDIT FEE") equal to such
Issuing Bank's standard issuance or amendment fee. The Commercial Letter of
Credit Fee shall be payable in advance by the Borrower on the date of
issuance, amendment or renewal of the applicable Commercial Letter of
Credit. In addition, the Borrower shall pay to the Issuing Bank a
non-refundable negotiation fee (each a "Negotiation Fee") with respect to
each Commercial Letter of Credit in an amount determined in accordance with
a schedule of negotiation fees furnished by the Issuing Bank to the
Borrower from time to time and approved by the Lenders. A Negotiation Fee
shall be payable by the Borrower from time to time with respect to each
Commercial Letter of Credit upon each drawing under such Commercial Letter
of Credit. The Issuing Bank shall pay to the Lenders in arrears and on a
quarterly basis during the term of each Commercial Letter of Credit, ending
on the date such Commercial Letter of Credit expires or is fully drawn
upon, an amount equal to the Negotiation Fees paid with respect to such
Commercial Letter of Credit during such quarter less 12.5% of such
Negotiation Fees, which shall be retained by the Issuing Bank for its own
account, and less the unreimbursed out-of-pocket costs and expenses
incurred by the Issuing Bank in connection with such Commercial Letter of
Credit during such quarter. Such amount shall be allocated among the
Lenders according to their Commitment Percentages."
<PAGE> 5
-2-
CONSENT
The undersigned, as Guarantor under the Guaranty dated as of July 8, 1996
(the "Guaranty") in favor of BayBank, N.A., The First National Bank of Boston,
Silicon Valley Bank and BayBank, N.A., as agent, hereby consents to the
foregoing letter amendment (the "Amendment") and hereby confirms and agrees that
the Guaranty is, and shall continue to be, in full force and effect and is
hereby ratified and confirmed in all respects, except that, upon the
effectiveness of, and on and after the date of, said Amendment, each reference
in the Guaranty and in each other Loan Document (as defined in the Revolving
Credit Agreement dated as of July 8, 1996) to which the undersigned is a party,
to "the Credit Agreement", "thereunder", "thereof", "therein", or words of like
import referring to the Credit Agreement, shall mean and be a reference to the
Credit Agreement as amended thereby.
MICROCOM SYSTEMS, INC.
By: /s/ ROLAND D. PAMPEL
------------------------------------
Name: Roland D. Pampel
Title: President, Chief Executive
Officer and Director
<PAGE> 1
EXHIBIT 10.2
REVOLVING CREDIT AGREEMENT
AMONG
MICROCOM, INC., as Borrower,
BAYBANK, N.A., as a Lender,
THE FIRST NATIONAL BANK OF BOSTON, as a Lender,
SILICON VALLEY BANK, as a Lender,
AND
BAYBANK, N.A., as Agent
Dated:
July 8, 1996
<PAGE> 2
TABLE OF CONTENTS
SECTION I...................................................................1
DEFINITIONS.................................................................1
1.1 Definitions.....................................................1
1.2 Rules of Interpretation........................................14
SECTION II.................................................................15
DESCRIPTION OF CREDIT......................................................15
2.1 Revolving Credit Loans.........................................15
2.2 The Notes......................................................16
2.3 Notice and Manner of Borrowing or Conversion of Loans..........16
2.4 Funding of Loans...............................................17
2.5 Interest Rates and Payments of Interest........................18
2.6 Fees...........................................................18
2.7 Payments and Prepayments of the Loans..........................20
2.8 Method and Allocation of Payments..............................20
2.9 Eurodollar Indemnity...........................................21
2.10 Computation of Interest and Fees...............................22
2.11 Changed Circumstances; Illegality..............................22
2.12 Increased Costs................................................23
2.13 Capital Requirements...........................................24
SECTION IIA................................................................24
LETTERS OF CREDIT..........................................................24
2A.1 Issuance.......................................................24
2A.2 Reimbursement Obligation of the Borrower.......................25
2A.3 Letter of Credit Payments......................................26
2A.4 Obligations Absolute...........................................26
2A.5 Reliance by the Issuing Bank and the Agent.....................27
SECTION III................................................................27
CONDITIONS OF LOANS AND LETTERS OF CREDIT..................................27
3.1 Conditions Precedent to Initial Loans..........................27
3.2 Conditions Precedent to all Loans and Letters of Credit........29
SECTION IV.................................................................29
i
<PAGE> 3
REPRESENTATIONS AND WARRANTIES.............................................30
4.1 Corporate Status...............................................30
4.2 No Violation...................................................30
4.3 Corporate Power and Authority..................................30
4.4 Enforceability. ..............................................30
4.5 Governmental Approvals.........................................30
4.6 Financial Statements...........................................30
4.7 No Material Change.............................................31
4.8 Litigation.....................................................31
4.9 Compliance with Other Instruments; Compliance with Law.........31
4.10 Subsidiaries...................................................31
4.11 Investment Company Status; Limits on Ability to Incur
Indebtednes....................................................31
4.12 Title to Property..............................................32
4.13 ERISA..........................................................32
4.14 Taxes..........................................................32
4.15 Environmental Matters..........................................32
4.16 Borrowing Base.................................................33
SECTION V
AFFIRMATIVE COVENANTS ..................................................33
5.1 Maintenance of Existence.......................................33
5.2 Taxes and Other Liens..........................................33
5.3 Insurance......................................................34
5.4 Financial Statements, Etc......................................34
5.5 Notice of Default..............................................36
5.6 Environmental Matters..........................................36
5.7 ERISA Information. ...........................................37
5.8 Inspection.....................................................37
5.9 Use of Proceeds................................................37
5.10 Further Assurances.............................................37
5.11 Depository Accounts............................................38
5.12 Subsidiaries...................................................38
SECTION VI
NEGATIVE COVENANTS......................................................38
6.1 ERISA..........................................................38
6.2 Transactions with Affiliates...................................39
6.3 Mergers, Acquisitions, Etc.....................................39
6.4 Disposition of Assets..........................................39
6.5 Indebtedness...................................................40
6.6 Liens..........................................................40
ii
<PAGE> 4
6.7 Restricted Payments............................................41
6.8 Investments....................................................42
6.9 Limitation on Leases...........................................43
6.11 Quick Ratio....................................................43
6.12 Minimum Profitability..........................................43
6.13 Leverage.......................................................43
6.14 Tangible Net Worth.............................................43
SECTION VII
EVENTS OF DEFAULT.......................................................43
7.1 Events of Default..............................................43
7.2 Remedies Upon an Event of Default..............................45
SECTION VIII...............................................................46
ASSIGNMENT AND PARTICIPATION...............................................46
8.1 Assignment.....................................................46
8.2 Participations.................................................47
SECTION IX.................................................................48
THE AGENT..................................................................48
9.1 Appointment of Agent; Powers and Immunities....................48
9.2 Actions by Agent...............................................48
9.3 Indemnification................................................49
9.4 Reimbursement..................................................49
9.5 Non-Reliance on Agent and Other Lenders........................50
9.6 Resignation or Removal of Agent................................50
SECTION X..................................................................51
MISCELLANEOUS..............................................................51
10.1 Notices.......................................................51
10.2 Expenses......................................................52
10.3 Indemnification...............................................52
10.4 Survival of Covenants, Etc....................................53
10.5 Set-Off.......................................................53
10.6 No Waivers....................................................53
10.7 Amendments, Waivers, etc......................................53
10.8 Binding Effect of Agreement...................................54
10.9 Captions; Counterparts........................................54
10.10 Entire Agreement, Etc.........................................55
iii
<PAGE> 5
10.11 Waiver of Jury Trial..........................................55
10.12 Governing Law.................................................55
10.13 Severability..................................................55
SCHEDULES
SCHEDULE 1 - Commitments of the Lenders
SCHEDULE 2 - List of Subsidiaries
SCHEDULE 3 - List of Covered States
SCHEDULE 4 - List of Existing Letters of Credit
EXHIBITS
EXHIBIT A - Form of Revolving Credit Note
EXHIBIT B - Form of Notice of Borrowing or Conversion
EXHIBIT C - Disclosure
EXHIBIT D - Form of Report of Chief Financial Officer
EXHIBIT E - Form of Borrowing Base Report
EXHIBIT F - Assignment and Joinder Agreement
EXHIBIT G - Form of Subsidiary Guaranty
iv
<PAGE> 6
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT (the "AGREEMENT") is made as of July 8,
1996, by and among MICROCOM, INC., a Massachusetts corporation having its chief
executive office at 500 River Ridge Drive, Norwood, Massachusetts 02062 (the
"BORROWER"); BAYBANK, N.A., a national banking association having its head
office at 175 Federal Street, Boston, Massachusetts 02110 ("BAYBANK"); the other
financial institutions listed on SCHEDULE 1 attached hereto (together with
BayBank, the "LENDERS" and each a "LENDER"); and BAYBANK, N.A., as agent for the
Lenders (in such capacity, the "AGENT"). This Agreement amends and restates in
its entirety that certain Amended and Restated Credit Agreement, to which both
the Borrower and BayBank are parties, dated as of March 22, 1995, as previously
amended as of April 28, 1995, June 21, 1995, September 14, 1995 and December 13,
1995 (the "1995 CREDIT AGREEMENT").
WHEREAS, the Borrower has requested the Lenders to extend credit in the
form of loans and letters of credit, and the Lenders are willing to make loans
to the Borrower and the Issuing Bank is willing to issue Letters of Credit, in
each case on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION I
---------
DEFINITIONS
-----------
1.1 Definitions.
-----------
All capitalized terms used in this Agreement or in the Credit Notes or in
any certificate, report or other document made or delivered pursuant to this
Agreement (unless otherwise defined therein) shall have the meanings assigned to
them below:
ACCOUNTS RECEIVABLE AND ACCOUNTS. All of the Borrower's accounts, accounts
receivable, notes, bills, drafts, acceptances, instruments, documents, chattel
paper and all other debts, obligations and liabilities in whatever form owing to
the Borrower from any Person for goods sold by it or for services rendered by
it, or however otherwise established or created, all guaranties and security
therefor, all right, title and interest of the Borrower in the goods or services
which gave rise thereto, including rights to reclamation and stoppage in transit
and all rights of an unpaid seller of goods or services; whether any of the
foregoing be now existing or hereafter arising, now or hereafter received by or
owing or belonging to the Borrower.
AFFECTED LOANS. See Section 2.11(a).
<PAGE> 7
AFFILIATE. With reference to any Person, (i) any director, officer or
employee of that Person, (ii) any other Person controlling, controlled by or
under direct or indirect common control of that Person, (iii) any other Person
directly or indirectly holding 5% or more of any class of the capital stock or
other equity interests (including options, warrants, convertible securities and
similar rights) of that Person and (iv) any other Person 5% or more of any class
of whose capital stock or other equity interests (including options, warrants,
convertible securities and similar rights) is held directly or indirectly by
that Person. For purposes of Sections 4.15, 5.10 and 7.9 hereof, "Affiliate"
shall mean, within the meaning of Section 414(b), (c), (m) or (o) of the Code,
(i) any member of a controlled group of corporations which includes the
Borrower, (ii) any trade or business, whether or not incorporated, under common
control with the Borrower, (iii) any member of an affiliated service group which
includes the Borrower, and (iv) any member of a group treated as a single
employer by regulation.
AGENT. See Preamble and Section IX.
AGENT FEE. See Section 2.6.
AGREEMENT. This Revolving Credit Agreement, including the Exhibits and
Schedules hereto, as the same may be supplemented or amended from time to time.
ALTERNATE BASE RATE. The greater of (i) the rate of interest announced from
time to time by the Agent at its head office as its "Prime Rate", "Base Rate" or
similar reference rate and (ii) the Federal Funds Effective Rate plus 1/2 of 1%
per annum (rounded upwards, if necessary, to the next 1/8 of 1%).
ASSIGNEE. See Section 8.1.
BASE RATE LOAN. Any Loan bearing interest at a rate determined with
reference to the Alternate Base Rate.
BORROWER. See Preamble.
BORROWER'S ACCOUNTANTS. Arthur Andersen & Co. or such other independent
certified public accountants as are selected by the Borrower and reasonably
acceptable to the Agent.
BORROWING BASE. An amount equal to the sum of (i) 80% of all Eligible
Domestic Accounts Receivable, (ii) 80% of all Insured Eligible International
Accounts Receivable, and (iii) 50% of all Eligible International Accounts
Receivable which are not Insured, PROVIDED, HOWEVER, in no event may the sum
determined in clause (iii) hereof exceed 10% of the total Borrowing Base. The
term "INSURED" when used with respect to an Eligible International Account
Receivable shall mean that the obligations of the account debtor under such
Account are supported either (i) by a transferable commercial letter of credit
or standby letter of credit issued for the account of the account debtor and for
the benefit of the Borrower by a bank or other
-2-
<PAGE> 8
financial institution approved by the Agent in writing (and not subsequently
disapproved), that (A) is payable in the United States, (B) provides for the
full payment to the Borrower or its transferee of such Account Receivable either
(x) upon shipment of goods or the provision of services and upon presentation of
documentation that such goods have been shipped or that such services have been
provided or (y) upon default in payment of such Account Receivable in accordance
with its terms or (ii) by insurance covering such obligations with terms that
have been approved by the Agent in writing and underwritten by an insurer that
has been approved by the Agent in writing (and not subsequently disapproved);
PROVIDED, that the Agent and the Lenders hereby confirm that insurance which has
been approved under the 1995 Credit Agreement and is now in place is currently
acceptable to the Agent and the Lenders; and PROVIDED, FURTHER, that the Agent
and the Lenders agree to review and consider with reasonable promptness
insurance and insurers hereafter proposed by the Borrower.
BORROWING BASE REPORT. A report signed by any Responsible Officer and in
substantially the form of Exhibit E hereto.
BUSINESS DAY. (i) For all purposes other than as covered by clause (ii)
below, any day other than a Saturday, Sunday or legal holiday on which banks in
Boston, Massachusetts are open for the conduct of a substantial part of their
commercial banking business; and (ii) with respect to all notices and
determinations in connection with, and payments of principal and interest on,
Eurodollar Loans, any day that is a Business Day described in clause (i) and
that is also a day for trading by and between banks in U.S. Dollar deposits in
the interbank Eurodollar market.
CAPITAL EXPENDITURES. Without duplication, any expenditure for fixed or
capital assets, leasehold improvements, capital leases, installment purchases of
machinery and equipment, acquisitions of real estate and other similar
expenditures including (i) in the case of a purchase, the entire purchase price,
whether or not paid during the fiscal period in question, (ii) in the case of a
capital lease, the entire rental amount for the lease term, and (iii)
expenditures in any construction in progress account of the Borrower.
CAPITAL LEASE. As applied to any Person, any lease of any property (whether
real, personal or mixed) by that Person as lessee that, in conformity with GAAP,
is accounted for as a capital lease on the balance sheet of that Person.
CLOSING DATE. The first date on which the conditions set forth in Sections
3.1 and 3.2 have been satisfied.
CODE. The Internal Revenue Code of 1986 and the rules and regulations
thereunder, collectively, as the same may from time to time be supplemented or
amended and remain in effect.
-3-
<PAGE> 9
COMMERCIAL LETTER OF CREDIT. A letter of credit, commonly known as a
"commercial" or "trade" letter of credit, payable upon the presentation of a
draft and specified documents and issued to facilitate payment for the purchase
of goods.
COMMERCIAL LETTER OF CREDIT. See Section 2.6.
COMMERCIAL LETTER OF CREDIT FEE. See Section 2.6.
COMMERCIAL LETTER OF CREDIT SUBLIMIT. $25,000,000.
COMMITMENT. In relation to any particular Lender, the maximum dollar amount
which such Lender has agreed to loan to the Borrower or make available to the
Borrower pursuant to Letter of Credit Participations upon the terms and subject
to the conditions of this Agreement, initially as set forth on SCHEDULE 1
attached hereto, as such Lender's Commitment may be modified pursuant hereto and
in effect from time to time. SCHEDULE 1 shall be amended from time to time to
reflect any changes in the Commitments of the Lenders.
COMMITMENT PERCENTAGE. In relation to any particular Lender, the percentage
which such Lender's Commitment represents of the aggregate Commitments of all
the Lenders, initially as set forth on Schedule 1 attached hereto, as such
Lender's Commitment Percentage may be modified pursuant hereto and in effect
from time to time. SCHEDULE 1 shall be amended from time to time to reflect any
changes in the Commitment Percentages of the Lenders.
CONTRACTUAL OBLIGATION. As to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.
CONTROLLED GROUP. All members of a controlled group of corporations and all
trades or businesses (whether or not incorporated) under common control which,
together with the Borrower, are treated as a single employer under Section 414
of the Code.
COVERED STATE. A country that is covered by the Borrower's credit insurance
for Accounts Receivable. As of the date hereof, such countries are listed on
SCHEDULE 3 hereto.
CURRENT LIABILITIES. At any time, all liabilities of the Borrower and its
Subsidiaries at such time, on a consolidated basis, that would be classified as
current liabilities in accordance with GAAP, including, without limitation, all
Indebtedness of the Borrower and its Subsidiaries payable on demand or maturing
within one year of such time, or renewable at the option of the Borrower or such
Subsidiary for a period of not more than one year from such time, and all serial
maturity and periodic or installment payments on any Indebtedness, to the extent
such payments are required to be made within one year from such time.
-4-
<PAGE> 10
DEFAULT. An Event of Default or an event or condition that, but for the
requirement that time elapse or notice be given, or both, would constitute an
Event of Default.
DRAWDOWN DATE. The Business Day on which any Loan is made or is to be made.
ELIGIBLE DOMESTIC ACCOUNTS RECEIVABLE. An Account Receivable owing to the
Borrower which met the following specifications at the time it came into
existence and continues to meet the same until it is collected in full:
(a) The original stated maturity of the Account is not more than 90
days after the invoice date thereof, and the Account (regardless of its
stated maturity date) does not remain unpaid more than 90 days after such
invoice date.
(b) The Account arose from the performance of services or an outright
sale of goods by Borrower, such goods have been shipped to the account
debtor, and Borrower has possession of, or has delivered to Agent, shipping
and delivery receipts evidencing such shipment.
(c) The Account is owned solely by the Borrower and is not subject to
any assignment, claim, lien, or security interest.
(d) The Account is not subject to set-off, credit, allowance or
adjustment by the account debtor, except discount allowed for prompt
payment; the Account is not one as to which the account debtor disputes
liability or makes any claim with respect thereto or as to which the Agent
believes, in its sole discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or claim), or
which involves an account debtor subject to any insolvency proceeding, or
who becomes insolvent or goes out of business.
(e) The Account arose in the ordinary course of Borrower's business
and did not arise from the performance of services or a sale of goods to a
supplier or employee of the Borrower.
(f) No notice of bankruptcy or insolvency of the account debtor has
been received by or is known to the Borrower.
(g) The aggregate receivables of the account debtor that have remained
unpaid for a period of more than ninety (90) days from the invoice date
shall not exceed 30% at any time.
(h) The aggregate Accounts Receivable from the account debtor
(including its Subsidiaries and Affiliates) do not exceed 25% of the total
Eligible Domestic Accounts Receivable of the Borrower; that portion of the
Account over the 25% level will be
-5-
<PAGE> 11
disqualified; PROVIDED, that upon the written request of the Borrower, the
Lenders may consent to modify such limitation with respect to an account
debtor identified by the Borrower, which consent shall be evidenced by and
subject to the terms and conditions of a writing signed by the Majority
Lenders.
(i) The Account does not relate to goods placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and hold, or other
terms by reason of which the payment by the account debtor may be
conditional.
(j) The account debtor is not an Affiliate, officer, employee or
agent of the Borrower.
(k) The account debtor is not a Governmental Authority.
(l) The Borrower does not owe any amounts to the account debtor for
goods sold, services rendered or otherwise; to the extent that any amounts
are so owed, the Accounts of such account debtor in an amount equal to the
amounts owed by the Borrower to the account debtor shall be disqualified.
(m) The Agent has not notified the Borrower that the Agent has
determined that an Account or account debtor is unsatisfactory for credit
reasons (which determination shall not be made unreasonably).
(n) The account debtor is a person or entity located in the United
States and the Account arose out of services rendered or goods delivered in
the United States.
ELIGIBLE INTERNATIONAL ACCOUNT RECEIVABLE. An Account Receivable owing to
the Borrower which met the requirements set forth in clauses (a) through (m) for
Eligible Domestic Accounts Receivable and continues to meet the same until it is
collected in full, but either the account debtor is a Person located outside the
United States or the Account arose out of services rendered or goods delivered
outside the United States; PROVIDED, HOWEVER, that if the account debtor is
located in a country other than the United States, such country is a Covered
State.
ERISA. The Employee Retirement Income Security Act of 1974 and the rules
and regulations thereunder, collectively, as the same may from time to time be
supplemented or amended and remain in effect.
ENVIRONMENTAL LAWS. Any and all applicable federal, state and local
environmental, health or safety statutes, laws, regulations, rules and
ordinances (whether now existing or hereafter enacted or promulgated), and all
applicable judicial, administrative and regulatory decrees, judgments and
orders, including common law rulings and determinations, relating to injury to,
or the protection of, real or personal property or human health or the
environment, including, without limitation, all requirements pertaining to
reporting, licensing, permitting,
-6-
<PAGE> 12
investigation, remediation and removal of emissions, discharges, releases or
threatened releases of Hazardous Materials into the environment or relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of such Hazardous Materials.
EURODOLLAR LOAN. Any Loan bearing interest at a rate determined with
reference to the Eurodollar Rate.
EURODOLLAR RATE. With respect to any Eurodollar Loan for any Interest
Period, the rate per annum (rounded upwards, if necessary, to the next higher
1/100 of 1%) obtained by DIVIDING (a) the rate of interest determined by the
Agent to be the prevailing rate per annum at which deposits in U.S. Dollars are
offered to the Agent by first-class banks in the interbank Eurodollar market in
which it regularly participates on or about 10:00 a.m. (Boston time) two
Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Eurodollar Loan to which such
Interest Period is to apply for a period of time approximately equal to such
Interest Period BY (b) a percentage equal to 100% MINUS the Eurodollar Reserve
Percentage; PROVIDED, however, that if at any time during such Interest Period
the Eurodollar Reserve Percentage applicable to such Eurodollar Loan changes,
the Eurodollar Rate for such Interest Period shall automatically be adjusted to
reflect such change, effective as of the date of such change in the Eurodollar
Reserve Percentage.
EURODOLLAR RESERVE PERCENTAGE. For any Interest Period, the aggregate of
the maximum reserve percentages (including any marginal, special, emergency or
supplemental reserves), expressed as a decimal, established by the Board of
Governors of the Federal Reserve System and any other banking authority,
domestic or foreign, to which any Lender is subject with respect to
"Eurocurrency Liabilities" (as defined in regulations issued from time to time
by such Board of Governors). The Eurodollar Reserve Percentage shall be adjusted
automatically on and as of the effective date of any change in any such reserve
percentage.
EVENT OF DEFAULT. Any event described in Section 7.1.
EXISTING LETTERS OF CREDIT. The letters of credit issued by BayBank and
Silicon Valley Bank for the account of the Borrower, listed on Schedule 4
hereto.
FACILITY FEE. See Section 2.6.
FEDERAL FUNDS EFFECTIVE RATE. For any day, a fluctuating interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by the
Agent from three Federal funds brokers of recognized standing selected by the
Agent.
-7-
<PAGE> 13
FINANCIAL INDEBTEDNESS. As applied to the Borrower and its Subsidiaries,
without duplication, (i) all obligations for borrowed money or other extensions
of credit whether secured or unsecured, absolute or contingent, including,
without limitation, unmatured reimbursement obligations with respect to letters
of credit or guaranties issued for the account of or on behalf of the Borrower
and its Subsidiaries and all obligations representing the deferred purchase
price of property, other than accounts payable arising in the ordinary course of
business, (ii) all obligations evidenced by bonds, notes, debentures or other
similar instruments, (iii) all obligations secured by any mortgage, pledge,
security interest or other lien on property owned or acquired by the Borrower or
any of its Subsidiaries whether or not the obligations secured thereby shall
have been assumed, (iv) that portion of all obligations arising under Capital
Leases, and (v) all obligations that are immediately due and payable out of the
proceeds of or production from property now or hereafter owned or acquired by
the Borrower or any of its Subsidiaries, but excluding anything in the nature of
capital stock, capital surplus and retained earnings.
FINANCIAL STATEMENTS DATE. March 31, 1996.
FRONTING FEE. See Section 2.6.
GAAP. Generally accepted accounting principles, consistently applied.
GOVERNMENTAL APPROVALS. Any authorization, consent, order, approval,
license, lease, ruling, permit, tariff, rate, certification, validation,
exemption, filing or registration by or with, or notice to, any Governmental
Authority.
GOVERNMENTAL AUTHORITY. Any federal, state, municipal or other governmental
department, commission, board, bureau, agency, court, tribunal or other
instrumentality, domestic or foreign, and any arbitrator.
GUARANTY OR GUARANTIES. As applied to the Borrower and its Subsidiaries,
all guaranties, endorsements or other contingent or surety obligations (other
than those arising under a Subsidiary Guaranty) with respect to obligations of
others, whether or not reflected on the consolidated balance sheet of the
Borrower and their Subsidiaries, including any obligation to furnish funds,
directly or indirectly (whether by virtue of partnership arrangements, by
agreement to keep-well or otherwise), through the purchase of goods, supplies or
services, or by way of stock purchase, capital contribution, advance or loan, or
to enter into a contract for any of the foregoing, for the purpose of payment of
obligations of any other Person.
HAZARDOUS MATERIAL. Any substance (i) the presence of which requires or may
hereafter require notification, investigation, removal or remediation under any
Environmental Law; (ii) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "pollutant" or "contaminant"
under any present or future Environmental Law or amendments thereto including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 ET SEQ.) and any applicable local
-8-
<PAGE> 14
statutes and the regulations promulgated thereunder; (iii) which is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous and which is or becomes regulated pursuant to
any Environmental Law by any governmental authority, agency, department,
commission, board, agency or instrumentality of the United States, any state of
the United States, or any political subdivision thereof; or (iv) without
limitation, which contains gasoline, diesel fuel or other petroleum products,
asbestos or polychlorinated biphenyls ("PCB'S").
INDEBTEDNESS. As applied to the Borrower and its Subsidiaries, without
duplication, (i) all Financial Indebtedness, (ii) all Guaranties, and (iii) all
other obligations which, in accordance with GAAP, would be included as a
liability on the consolidated balance sheet of the Borrower and its
Subsidiaries, but excluding anything in the nature of capital stock, capital
surplus and retained earnings.
INITIAL FINANCIAL STATEMENT. See Section 4.6.
INTEREST PERIOD. With respect to each Eurodollar Loan, the period
commencing on the date of the making or continuation of or conversion to such
Eurodollar Loan and ending one (1), two (2), three (3) or six (6) months
thereafter, as the Borrower may elect in the applicable Notice of Borrowing or
Conversion; PROVIDED that:
(i) any Interest Period (other than an Interest Period determined
pursuant to clause (iii) below) that would otherwise end on a day that is
not a Business Day shall be extended to the next succeeding Business Day
unless such Business Day falls in the next calendar month, in which case
such Interest Period shall end on the immediately preceding Business Day;
(ii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clause (iii) below, end on the last Business Day of a calendar
month;
(iii) any Interest Period that would otherwise end after the
Maturity Date shall end on the Maturity Date; and
(iv) notwithstanding clause (iii) above, no Interest Period shall
have a duration of less than one month, and if any Interest Period
applicable to a Loan would be for a shorter period, such Interest Period
shall not be available hereunder.
INVENTORY. All of the Borrower's inventory of whatever name, nature, kind
or description, all goods held for sale or lease or to be furnished under
contracts of service, finished goods, work in process, raw materials, materials
used or consumed by Borrower, parts, supplies, all wrapping, packaging,
advertising, labeling, and shipping materials, devices, names and marks, all
contracts,
-9-
<PAGE> 15
rights and documents relating to any of the foregoing, whether any of
the foregoing be now existing or hereafter arising, wherever located, now owned
or hereafter acquired by the Borrower.
INVESTMENT. As applied to any Person (the "INVESTOR"), (a) any investment
by the Investor in any other Person, whether by means of share purchase, capital
contribution, purchase or other acquisition of a partnership or joint venture
interest, loan, time deposit, demand deposit or otherwise and (b) any Guaranty
by the Investor of any Indebtedness or other obligation of any other Person.
ISSUING BANK. BayBank.
LEASE EXPENSE. For any period, the consolidated rental expense of the
Borrower and its Subsidiaries for such period, as determined in accordance with
GAAP, including, whether or not included as a rental expense in accordance with
GAAP, all rent and other amounts accrued during such period under any Capital
Lease under which the Borrower or any Subsidiary thereof is a lessee or tenant.
LENDERS. BayBank, the other financial institutions listed on SCHEDULE 1
attached hereto and each other Person that may after the date hereof become a
party to this Agreement as a "Lender" hereunder.
LETTERS OF CREDIT. All letters of credit issued for the account of the
Borrower as provided in this Agreement, including Standby Letters of Credit and
Commercial Letters of Credit issued by the Issuing Bank, and all Existing
Letters of Credit.
LETTER OF CREDIT APPLICATIONS. Applications for Letters of Credit in such
form as may be required by the Issuing Bank from time to time which are executed
and delivered by the Borrower to the Issuing Bank pursuant to Section IIA, as
the same may be amended or supplemented from time to time.
LETTER OF CREDIT PARTICIPATION. See Section 2A.1(b).
LIEN. Any security interest, mortgage, pledge, hypothecation, assignment,
deposit arrangement or security arrangement of any kind, encumbrance, lien
(statutory or other), preference or priority of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any Capital Lease, and the filing of a financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction), together with
any renewal or extension thereof.
LOAN DOCUMENTS. This Agreement, the Notes, the Letter of Credit
Applications and the Subsidiary Guaranties, together with any agreements,
instruments or documents executed and delivered pursuant to or in connection
with any of the foregoing.
-10-
<PAGE> 16
LOANS. The Loans made or to be made by the Lenders to the Borrower pursuant
to Section II of this Agreement, including Revolving Credit Loans and unpaid
Reimbursement Obligations.
MAJORITY LENDERS. As of any date, the holders of fifty-one percent (51%) of
the outstanding principal amount of the Loans on such date; and if no such
principal is outstanding, the holders of fifty-one percent (51%) of the total
Commitments.
MATERIAL ADVERSE EFFECT. A material adverse effect on (a) the business,
operations, property, condition (financial or otherwise) or prospects of the
Borrower, or of the Borrower and its Subsidiaries taken as a whole, (b) the
ability of the Borrower to perform its obligations under this Agreement, the
Notes or any of the other Loan Documents, (c) the validity or enforceability of
this Agreement, the Notes or any of the other Loan Documents, or the rights or
remedies of the Agent or the Lenders hereunder or thereunder, or (d) the right
of the Agent or the Lenders to enforce the payment of accounts against account
debtors in any particular State.
MATURITY DATE. July 7, 1997.
MAXIMUM DRAWING AMOUNT. The maximum aggregate amount from time to time that
beneficiaries may draw under outstanding Letters of Credit.
NEGOTIATION FEE. See Section 2.6.
NET INCOME (NET LOSS). For any period in respect of which the amount
thereof shall be determined, the aggregate of the consolidated net income (net
loss) after taxes for such period (taken as a cumulative whole) of the Borrower
and its Subsidiaries, determined in accordance with GAAP.
1995 CREDIT AGREEMENT. See Preamble.
NOTE RECORD. Any internal record, including a computer record, maintained
by any Lender with respect to any Loan.
NOTES. See Section 2.2.
NOTICE OF BORROWING OR CONVERSION. The notice, substantially in the form of
EXHIBIT B hereto, to be given by the Borrower to the Agent to request a Loan or
to convert an outstanding Loan of one Type into a Loan of another Type, in
accordance with Section 2.3.
OBLIGATIONS. Any and all obligations of the Borrower to the Agent, the
Issuing Bank or the Lenders of every kind and description pursuant to or in
connection with the Loan Documents, direct or indirect, absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter arising,
regardless of how they arise or by what agreement or instrument, if
-11-
<PAGE> 17
any, and including obligations to perform acts and refrain from taking action as
well as obligations to pay money.
PARTICIPANT. See Section 8.2.
PENSION PLAN. Any Plan which is an "employee pension benefit plan" (as
defined in ERISA).
PBGC. The Pension Benefit Guaranty Corporation or any entity succeeding to
any or all of its functions under ERISA.
PERMITTED LIEN. See Section 6.6.
PERSON. Any individual, corporation, partnership, trust, unincorporated
association, business or other legal entity, and any government or governmental
agency or political subdivision thereof.
PLAN. Any "employee pension benefit plan" or "employee welfare benefit
plan" (each as defined in ERISA) maintained by the Borrower or any Subsidiary.
PROHIBITED TRANSACTION. Any "prohibited transaction" as defined in ERISA
and the Code.
PURCHASE MONEY INDEBTEDNESS. Any Indebtedness incurred to finance the
acquisition of assets or the cost of improvements on real property or
leaseholds, in each case in an amount not in excess of the lesser of (a) the
purchase price or acquisition cost of said assets or the cost of said
improvements and (b) the fair market value of said assets or said improvements
on the date of acquisition of said assets or contract for said improvements,
together with any renewal, extension and refunding of such Purchase Money
Indebtedness in an amount not exceeding the amount thereof remaining unpaid
immediately prior to such renewal, extension or refunding.
PURCHASE MONEY SECURITY INTEREST. A security interest securing Purchase
Money Indebtedness, which security interest applies solely to the particular
assets acquired with the Purchase Money Indebtedness that said Purchase Money
Security Interest secures.
QUICK RATIO. At any time, all cash and accounts receivable, less reserves
for doubtful accounts, of the Borrower and its Subsidiaries at such time, on a
consolidated basis, determined in accordance with GAAP, divided by the aggregate
of all Current Liabilities at such time.
REIMBURSEMENT OBLIGATION. The Obligation of the Borrower to reimburse the
Issuing Bank and the Lenders on account of any drawing under any Letter of
Credit as provided in Section 2A.2.
-12-
<PAGE> 18
RENTALS. As of any date, the aggregate rentals payable by the Borrower and
its Subsidiaries on and after such date under all leases (operating leases as
well as Capital Leases) under which the Borrower or any Subsidiary is a lessee
or tenant.
RESPONSIBLE OFFICER. The chief financial officer of the Borrower or any
other officer of the Borrower designated by the chief financial officer to sign
Borrowing Base Reports and Notices of Borrowing or Conversion.
RESTRICTED PAYMENT. With respect to the Borrower or any Subsidiary thereof,
(a) any dividend or other distribution on any shares of capital stock of the
Borrower or such Subsidiary (except dividends payable solely in shares of such
capital stock or rights to acquire such capital stock) or (b) any payment or
other distribution on account of the purchase, redemption, retirement or
acquisition of (i) any shares of the capital stock of the Borrower or a
Subsidiary thereof (other than the purchase by the Borrower or a wholly-owned
Subsidiary thereof of the capital stock of a wholly-owned Subsidiary of the
Borrower) or (ii) any option, warrant, convertible security or other right to
acquire shares of the capital stock of the Borrower or a Subsidiary thereof.
REVOLVING CREDIT LOAN. See Section 2.1(a) hereof.
SIGNIFICANT ACQUISITION. A merger or consolidation or an acquisition of
assets the aggregate purchase price or consideration for which (including all
payments to be made under any applicable non-compete agreements or any seller
financing) is above $1,000,000, or which, if consummated, would cause the
aggregate purchase price or consideration for all such mergers, consolidations
and acquisitions during any fiscal year to exceed $5,000,000.
STANDBY LETTER OF CREDIT. A letter of credit, commonly known as a "standby"
or "guaranty" letter of credit, issued to pay the beneficiary in the event of
the account party's failure to perform an obligation.
STANDBY LETTER OF CREDIT FEE. See Section 2.6.
STANDBY LETTER OF CREDIT SUBLIMIT. $25,000,000.
SUBSIDIARY GUARANTOR. Any Subsidiary of the Borrower identified as such on
Schedule 2, and any Subsidiary acquired or created after the date hereof that
delivers a Subsidiary Guaranty pursuant to Section 5.12.
SUBSIDIARY GUARANTY. See Section 3.1 and EXHIBIT G.
SUBSIDIARY. Any corporation, association, joint stock company, business
trust or other similar organization of which 50% or more of the ordinary voting
power for the election of a majority of the members of the board of directors or
other governing body of such entity is held
-13-
<PAGE> 19
or controlled by the Borrower or a Subsidiary of the Borrower; or any other such
organization the management of which is directly or indirectly controlled by the
Borrower or a Subsidiary of the Borrower through the exercise of voting power or
otherwise; or any joint venture, whether incorporated or not, in which the
Borrower has a 50% or greater ownership interest.
TANGIBLE NET WORTH. At any time, the consolidated stockholders' equity of
the Borrower and its Subsidiaries at such time determined in accordance with
GAAP, LESS all assets that are reflected on the consolidated balance sheet of
the Borrower and its Subsidiaries at such time that would be treated as
intangibles under GAAP (including, but not limited, to goodwill, capitalized
software and excess purchase costs).
TOTAL COMMITMENT. The sum of the Commitments of the Lenders as in effect
from time to time, which as of the Closing Date shall be $45,000,000 and which
may be any lesser amount, including zero, resulting from a termination or
reduction of such amount in accordance with Sections 2.1 and 7.2 hereof.
TOTAL LIABILITIES. At any time, the consolidated liabilities of the
Borrower and its Subsidiaries at such time, determined in accordance with GAAP.
TOTAL OUTSTANDINGS. At any time, the sum of (i) the aggregate outstanding
principal balance of the Loans at the time and (ii) the Maximum Drawing Amount
at the time.
TYPE. A Eurodollar Loan or a Base Rate Loan.
1.2 Rules Of Interpretation.
-----------------------
(a) All terms of an accounting character used herein but not
defined herein shall have the meanings assigned thereto by GAAP applied on a
consistent basis. Except as otherwise indicated, all calculations for the
purposes hereof shall be made in accordance with GAAP.
(b) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented and in effect from
time to time in accordance with its terms and the terms of this Agreement.
(c) The singular includes the plural and the plural includes the
singular.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) The words "include", "includes" and "including" are not limiting.
-14-
<PAGE> 20
(f) The words "herein", "hereof", "hereunder" and words of like import
shall refer to this Agreement as a whole and not to any particular section
or subdivision of this Agreement.
(g) All terms not specifically defined herein or by GAAP that are
defined in the Uniform Commercial Code as in effect in The Commonwealth of
Massachusetts have the meanings assigned to them in such Uniform Commercial
Code.
SECTION II
----------
DESCRIPTION OF CREDIT
---------------------
2.1 Revolving Credit Loans.
----------------------
(a) Upon the terms and subject to the conditions of this Agreement,
and in reliance upon the representations, warranties and covenants of the
Borrower herein, each of the Lenders agrees, severally and not jointly, to
make revolving credit loans (the "REVOLVING CREDIT LOANS") to the Borrower
at the Borrower's request from time to time from and after the Closing Date
and prior to the Maturity Date, PROVIDED that the Total Outstandings (after
giving effect to all requested Loans and Letters of Credit) shall not at
any time exceed the lesser of (i) the Borrowing Base as at the end of the
fiscal quarter immediately prior to the date of determination and (ii) the
Total Commitment, and PROVIDED, FURTHER that the sum of the aggregate
principal amount of outstanding Revolving Credit Loans made by each Lender
and all outstanding Letter of Credit Participations of such Lender shall
not at any time (after giving effect to all requested Loans and Letters of
Credit) exceed such Lender's Commitment. Subject to the terms and
conditions of this Agreement, the Borrower may borrow, repay, prepay and
reborrow amounts, up to the limits imposed by this Section 2.1, from time
to time between the Closing Date and the Maturity Date upon request given
to the Agent pursuant to Section 2.3. Each request for a Revolving Credit
Loan or Letter of Credit hereunder shall constitute a representation and
warranty by the Borrower that the conditions set forth in Sections 3.1 and
3.2 have been satisfied as of the date of such request.
(b) No Eurodollar Loan shall be requested or made for less
than $1,000,000 in principal amount and in integral multiples of $500,000 in
excess of such minimum amount, and no Base Rate Loan shall be requested or made
for less than $500,000 in principal amount and in integral multiples of $100,000
in excess of such minimum amount. No more than ten (10) Eurodollar Loans may be
outstanding at any time.
(c) Upon the terms and subject to the conditions of this Agreement,
the Borrower may convert all or any part (in integral multiples of $500,000)
of any outstanding Loan into a Loan of another Type on any Business Day (which,
in the case of a conversion of an outstanding Eurodollar Loan shall be the last
day of the Interest Period applicable to such
-15-
<PAGE> 21
Eurodollar Loan). The Borrower shall give the Agent prior notice of each such
conversion (which notice shall be effective upon receipt) in accordance with
Section 2.3.
(d) All Commitments shall automatically terminate at 5:00 p.m. Boston
time on the Maturity Date. Subject to the provisions of Section 2.7 regarding
mandatory payments, the Borrower shall have the right at any time and from time
to time upon five (5) Business Days' prior written notice to the Agent to reduce
by $5,000,000, and in integral multiples of $5,000,000 if in excess thereof, the
Total Commitment or to terminate entirely the Lenders' Commitments to make Loans
hereunder, whereupon the Commitments of the Lenders shall be reduced pro rata in
accordance with their respective Commitment Percentages by the aggregate amount
specified in such notice or shall, as the case may be, be terminated entirely.
No such reduction or termination of any Commitment may be reinstated. If, as a
result of any such reduction, the Maximum Drawing Amount at the time would
exceed the Total Commitment or the amount of Letters of Credit permitted to be
outstanding under Sections 2.1(a) and 2A.1(a) hereof, the Borrower shall, as a
condition precedent to any such reduction, deposit with and pledge to the Agent
for the benefit of the Lenders and the Issuing Bank cash in an amount equal to
105% of such excess. If any Letters of Credit would remain outstanding after the
effective date of any such termination, in addition to satisfaction of all other
applicable terms and conditions of this Agreement, the Borrower shall deposit
with and pledge to the Agent for the benefit of the Lenders and the Issuing Bank
cash in an amount equal to 105% of the Maximum Drawing Amount at the effective
date of such termination.
2.2 THE NOTES. The Revolving Credit Loans shall be evidenced by separate
promissory notes for each Lender, each such note to be in substantially the form
of EXHIBIT A hereto, dated as of the Closing Date and completed with appropriate
insertions (each such note being referred to herein as a "NOTE" and collectively
as the "NOTES"). One Note shall be payable to the order of each Lender in a
principal amount equal to such Lender's Commitment. The Borrower irrevocably
authorizes each of the Lenders to make or cause to be made, at or about the time
of the Drawdown Date of any Revolving Credit Loan or at the time of receipt of
any payment of principal on the Notes, an appropriate notation on its Note
Record reflecting (as the case may be) the making of such Revolving Credit Loan
or the receipt of such payment. The outstanding amount of the Revolving Credit
Loans set forth on the Note Records shall be PRIMA FACIE evidence of the
principal amount thereof owing and unpaid to such Lenders, but the failure to
record, or any error in so recording, any such amount on any Lender's Note
Record shall not limit or otherwise affect the obligations of the Borrower
hereunder or under any Note to make payments of principal of or interest on any
Note when due.
2.3 Notice and Manner of Borrowing or Conversion of Loans.
-----------------------------------------------------
(a) Whenever the Borrower desires to obtain or continue a Loan
hereunder or convert an outstanding Loan into a Loan of another Type, the
Borrower shall give the Agent a written Notice of Borrowing or Conversion (or a
telephonic notice promptly confirmed by a written Notice of Borrowing or
Conversion), which Notice shall be irrevocable and which must
-16-
<PAGE> 22
be received no later than 11:00 a.m. Boston time on the date (i) one Business
Day before the day on which the requested Loan is to be made as or converted to
a Base Rate Loan, and (ii) three Business Days before the day on which the
requested Loan is to be made or continued as or converted to a Eurodollar Loan.
Such Notice of Borrowing or Conversion shall specify (i) the effective date and
amount of each Loan or portion thereof requested to be made, continued or
converted, subject to the limitations set forth in Section 2.1, (ii) the
interest rate option requested to be applicable thereto, and (iii) the duration
of the applicable Interest Period, if any (subject to the provisions of the
definition of the term "Interest Period"). If such Notice fails to specify the
interest rate option to be applicable to the requested Loan, then the Borrower
shall be deemed to have requested a Base Rate Loan. If the written confirmation
of any telephonic notification differs in any material respect from the action
taken by the Agent, the records of the Agent shall control absent manifest
error.
(b) Subject to the provisions of the definition of the term
"Interest Period" herein, the duration of each Interest Period for a Eurodollar
Loan shall be as specified in the applicable Notice of Borrowing or Conversion.
If no Interest Period is specified in a Notice of Borrowing or Conversion with
respect to a requested Eurodollar Loan, then the Borrower shall be deemed to
have selected an Interest Period of one month's duration. If the Agent receives
a Notice of Borrowing or Conversion after the time specified in subsection (a)
above, such Notice shall not be effective. If the Agent does not receive an
effective Notice of Borrowing or Conversion with respect to an outstanding
Eurodollar Loan, or if, when such Notice must be given prior to the end of the
Interest Period applicable to such outstanding Loan, the Borrower shall have
failed to satisfy any of the conditions hereof, the Borrower shall be deemed to
have elected to convert such outstanding Loan in whole into a Base Rate Loan on
the last day of the then current Interest Period with respect thereto.
2.4 Funding of Loans.
----------------
(a) Revolving Credit Loans shall be made by the Lenders PRO RATA in
accordance with their respective Commitment Percentages, PROVIDED, HOWEVER that
the failure of any Lender to make any Loan shall not relieve any other Lender
of its obligation to lend hereunder (it being understood, however, that no
Lender shall be responsible for the failure of any other Lender to make any
Loan required to be made by such other Lender).
(b) The Agent shall promptly notify the Lenders of each Notice
of Borrowing or Conversion received pursuant to Section 2.3 and of each Lender's
portion of the requested Loan. Not later than 1:00 p.m. (Boston time) on the
proposed Drawdown Date of such Loan, each Lender will make available to the
Agent, at its head office, in immediately available funds, the amount of such
Lender's Commitment Percentage of the amount of such requested Loan. Upon
receipt by the Agent of such amount, and upon receipt of the documents required
by Section 3 and the satisfaction of the other conditions set forth therein (to
the extent applicable) the Agent will make available to the Borrower the
aggregate amount of such Loan. The failure or refusal of any Lender to make
available to the Agent at the aforesaid time and place on any
-17-
<PAGE> 23
Drawdown Date the amount of its Commitment Percentage of any requested Loans
shall not relieve any other Lender from its several obligation hereunder to make
available to the Agent the amount of such other Lender's Commitment Percentage
of any requested Loans.
(c) The Agent may, unless notified to the contrary by any Lender
prior to a Drawdown Date, assume that each Lender has made available to the
Agent on such Drawdown Date the amount of such Lender's Commitment Percentage of
the Loans to be made on such Drawdown Date, and the Agent may (but it shall not
be required to), in reliance upon such assumption, make available to the
Borrower a corresponding amount. If any Lender makes available to the Agent such
amount on a date after such Drawdown Date, such Lender shall pay to the Agent on
demand an amount equal to the product of (i) the average, computed for the
period referred to in clause (iii) below, of the weighted average interest rate
paid by the Agent for federal funds acquired by the Agent during each day
included in such period, TIMES (ii) the amount of such Lender's Commitment
Percentage of any such Loans, TIMES (iii) a fraction, the numerator of which is
the number of days that elapse from and including such Drawdown Date to the date
on which the amount of such Lender's Commitment Percentage of such Loans shall
become immediately available to the Agent, and the denominator of which is 365.
A statement of the Agent submitted to such Lender with respect to any amounts
owing under this paragraph shall be PRIMA FACIE evidence of the amount due and
owing to the Agent by such Lender. If the amount of such Lender's Commitment
Percentage of such Loans is not made available to the Agent by such Lender with
three (3) Business Days following such Drawdown Date, the Agent shall be
entitled to recover such amount from the Borrower on demand, with interest
thereon at the rate per annum applicable to the Loans made on such Drawdown
Date.
2.5 Interest Rates and Payments of Interest.
----------------------------------------
(a) Each Loan which is a Base Rate Loan shall bear interest on
the outstanding principal amount thereof at a rate per annum equal to the
Alternate Base Rate, which rate shall change contemporaneously with any change
in the Alternate Base Rate. Such interest shall be payable monthly in arrears on
the first Business Day of each month, commencing June 30, 1996.
(b) Each Loan which is a Eurodollar Loan shall bear interest
on the outstanding principal amount thereof, for each Interest Period applicable
thereto, at a rate per annum equal to the Eurodollar Rate plus 1.50%. Such
interest shall be payable for such Interest Period on the last day thereof and,
if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
(c) If an Event of Default shall occur and be continuing, then
at the option of the Agent or the direction of the Majority Lenders (i) the
unpaid balance of Loans shall bear interest, to the extent permitted by law,
compounded daily at an interest rate equal to 2% per annum above the interest
rate applicable to each such Loan in effect on the day such Event of Default
occurs, until such Event of Default is cured or waived, and the Borrower shall
pay to the
-18-
<PAGE> 24
Agent for the benefit of the Lenders a fee (in addition to the Letter of Credit
Fee) equal to 1% per annum of the Maximum Drawing Amount of all Letters of
Credit outstanding during the period from the occurrence of such Event of
Default until such Event of Default is cured or waived.
2.6 Fees.
----
(a) On the Closing Date, the Borrower shall pay to the Agent
for its account an agency fee (the "AGENT FEE"), payable in advance for the term
hereof, in the amount provided for the commitment letter dated May 21, 1996 from
the Lenders to the Borrower.
(b) On the Closing Date, the Borrower shall pay to the Agent
for the benefit of the Lenders a facility fee (the "FACILITY FEE"), payable in
advance for the term hereof, equal to one-quarter percent (1/4%) per annum of
the Total Commitment, PROVIDED that the Borrower shall be entitled to a credit
against the Facility Fee payable to the Agent for the accounts of BayBank and
Silicon Valley Bank, each in the amount of $8115.85.
(c) The Borrower shall pay to the Issuing Bank, for the
benefit of the Lenders, a fee with respect to each Standby Letter of Credit
issued (each a "STANDBY LETTER OF CREDIT FEE") equal to one and one-quarter
percent (1-1/4%) per annum of the Maximum Drawing Amount of each such Standby
Letter of Credit, payable in advance on the date of issuance or renewal of the
applicable Letter of Credit. In addition, the Borrower shall pay to the Issuing
Bank for its account with respect to each Standby Letter of Credit issued a
fronting fee (each a "FRONTING FEE") equal to one-tenth of one percent (0.10%)
per annum of the Maximum Drawing Amount of each such Standby Letter of Credit,
payable in advance on the date of issuance or renewal of the applicable Standby
Letter of Credit.
(d) The Borrower shall pay to the Issuing Bank, for the sole
benefit of the Issuing Bank, a fee with respect to each Commercial Letter of
Credit issued or amended (each a "COMMERCIAL LETTER OF CREDIT FEE") equal to
such Issuing Bank's standard issuance or amendment fee. The Commercial Letter of
Credit Fee shall be payable in advance by the Borrower on the date of issuance,
amendment or renewal of the applicable Commercial Letter of Credit. In addition,
the Borrower shall pay to the Issuing Bank a non-refundable negotiation fee
(each a "NEGOTIATION FEE") with respect to each Commercial Letter of Credit in
an amount determined in accordance with a schedule of negotiation fees furnished
by the Issuing Bank to the Borrower from time to time and approved by the
Lenders. The Negotiation Fee shall be payable in advance by the Borrower on the
date of issuance of the applicable Commercial Letter of Credit. The Issuing Bank
shall pay to the Lenders in arrears and on a quarterly basis during the term of
each Commercial Letter of Credit, ending on the date such Commercial Letter of
Credit expires or is fully drawn upon, an amount equal to the Negotiation Fee
for such Commercial Letter of Credit less 1/8 of 1% of such Negotiation Fee to
be retained by the Issuing Bank (such amount to be pro rated for such quarter),
and less the unreimbursed out-of-pocket costs and expenses incurred by the
Issuing Bank in connection with such Commercial Letter of
-19-
<PAGE> 25
Credit during such quarter. Such amount shall be allocated among the Lenders
according to their Commitment Percentages.
(e) Without limiting any of the Lenders' other rights
hereunder or by law, if any Loan or any portion thereof or any interest thereon
or any other amount payable hereunder or under any other Loan Document is not
paid within ten days after its due date, the Borrower shall pay to the Agent for
the benefit of the Lenders on demand a late payment charge equal to 5% of the
amount of the payment due.
(f) The Borrower shall pay to the Lenders such other charges
imposed by the Lenders on the Borrower as are customarily imposed by the Lenders
on borrowers generally.
(g) The Borrower shall pay to the Agent, solely for the
account of the Agent, such other fees as the Borrower and the Agent shall agree.
(h) The Borrower authorizes Agent, the Issuing Bank and the
Lenders to charge to their Note Records or to any deposit account which the
Borrower may maintain with the any of them the interest, fees, charges, taxes
and expenses provided for in this Agreement, the other Loan Documents or any
other document executed or delivered in connection herewith or therewith.
2.7 Payments and Prepayments of the Loans.
-------------------------------------
(a) On the Maturity Date, the Borrower shall pay in full the unpaid
principal balance of the Revolving Credit Loans, together with all unpaid
interest thereon and all fees and other amounts due with respect thereto.
Revolving Credit Loans that are Eurodollar Loans may be paid, without premium or
penalty, on the last day of any Interest Period applicable thereto, upon three
Business Days' notice. Revolving Credit Loans that are Base Rate Loans may be
prepaid at any time, without premium or penalty, upon one Business Day's notice.
Any such notice of prepayment shall be irrevocable. Prepayments of Revolving
Credit Loans may be reborrowed to the extent provided in Section 2.1.
(b) If at any time the Total Outstandings exceed the lesser of (i) the
Borrowing Base and (ii) the Total Commitment, the Borrower shall immediately pay
the amount of any such excess to the Agent for application to the Loans.
2.8 Method and Allocation of Payments.
---------------------------------
(a) All payments by the Borrower hereunder and under any of the other
Loan Documents shall be made without set-off or counterclaim and free and clear
of and without deduction for any taxes, levies, imposts, duties, charges, fees,
deductions, withholdings, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any political
subdivision thereof or taxing or other authority therein unless the
-20-
<PAGE> 26
Borrower is compelled by law to make such deduction or withholding. If any such
obligation is imposed upon the Borrower with respect to any amount payable by it
hereunder or under any of the other Loan Documents, the Borrower will pay to
each Lender such additional amount in U.S. Dollars as shall be necessary to
enable such Lender to receive the same net amount which such Lender would have
received on such due date had no such obligation been imposed upon the Borrower.
The Borrower will deliver promptly to each Lender certificates or other valid
vouchers or other evidence of payment reasonably satisfactory to the Agent for
all taxes or other charges deducted from or paid with respect to payments made
by the Borrower hereunder or under such other Loan Document. The Lenders may,
and the Borrower hereby authorizes the Lenders to, debit the amount of any
payment not made by such time to the demand deposit accounts of the Borrower
with the Lenders or to their Note Records.
(b) Except as otherwise specifically provided herein, all payments of
principal of and interest in respect of Loans, Facility Fees, Standby Letter of
Credit Fees and Negotiation Fees shall be made to the Agent or the Issuing Bank,
as the case may be, the for the benefit of the Lenders, PRO RATA in accordance
with their Commitment Percentages, and payments of any other amounts due
hereunder shall be made to the Agent to be allocated among the Agent, the
Lenders and the Issuing Bank as their respective interests appear. All such
payments shall be made at the Agent's head office or at such other location that
the Agent may from time to time designate, in each case in immediately available
funds.
(c) If the Commitments shall have been terminated or the Obligations
shall have been declared immediately due and payable pursuant to Section 7.2,
all funds received from or on behalf of the Borrower by any Lender or the
Issuing Bank in respect of Obligations (except funds received by any Lender as a
result of a purchase of a participant interest pursuant to Section 2.8(d) below)
shall be remitted to the Agent, and all such funds, together with all other
funds received by the Agent from or on behalf of the Borrower in respect of
Obligations, shall be applied by the Agent in the following manner and order:
(i) first, to reimburse the Agent, the Issuing Bank and the Lenders, in that
order, for any amounts payable pursuant to Sections 10.2 and 10.3 hereof; (ii)
second, to the payment of Facility Fees, Letter of Credit Fees and any other
fees payable hereunder; (iii) third, to the payment of interest due on the Loans
and the Reimbursement Obligations; (iv) fourth, to the payment of the
outstanding principal balance of the Loans and the Reimbursement Obligations;
(v) fifth, to the payment of any other Obligations payable by the Borrower; and
(vi) any remaining funds shall be paid to whoever shall be entitled thereto or
as a court of competent jurisdiction shall direct.
(d) Each of the Lenders and the Agent hereby agrees that if it should
receive any amount (whether by voluntary payment, by realization upon security,
by the exercise of the right of set-off or banker's lien, by counterclaim or
cross action, by the enforcement of any right under the Loan Documents, or
otherwise) in respect of principal of, or interest on, the Loans or any fees
which are to be shared PRO RATA among the Lenders, which, as compared to the
amounts theretofore received by the other Lenders with respect to such
principal, interest or fees, is in excess of such Lender's Commitment Percentage
of such principal, interest or fees, such Lender
-21-
<PAGE> 27
shall share such excess, less the costs and expenses (including, reasonable
attorneys' fees and disbursements) incurred by such Lender in connection with
such realization, exercise, claim or action, PRO RATA with all other Lenders in
proportion to their respective Commitment Percentages, and such sharing shall be
deemed a purchase (without recourse) by such sharing party of participant
interests in the Loans or such fees, as the case may be, owed to the recipients
of such shared payments to the extent of such shared payments; provided,
however, that if all or any portion of such excess amount is thereafter
recovered from such Lender, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, but without interest.
2.9 EURODOLLAR INDEMNITY. If the Borrower for any reason (including,
without limitation, pursuant to Sections 2.11, 2.7(b) and 8.2 hereof) makes any
payment of principal with respect to any Eurodollar Loan on any day other than
the last day of an Interest Period applicable to such Eurodollar Loan, or fails
to borrow or continue or convert to a Eurodollar Loan after giving a Notice of
Borrowing or Conversion thereof pursuant to Section 2.3, or fails to prepay a
Eurodollar Loan after having given notice thereof, the Borrower shall pay to the
Agent for the benefit of the Lenders any amount required to compensate the
Lenders for any additional losses, costs or expenses which they may reasonably
incur as a result of such payment or failure, including, without limitation, any
loss (including loss of anticipated profits), costs or expense incurred by
reason of the liquidation or re-employment of deposits or other funds required
by the Lenders to fund or maintain such Eurodollar Loan. The Borrower shall pay
such amount upon presentation by the Agent of a statement setting forth the
amount and the Agent's (or the affected Lenders') calculation thereof pursuant
hereto, which statement shall be deemed true and correct absent manifest error.
2.10 COMPUTATION OF INTEREST AND FEES. Interest and all fees payable
hereunder shall be computed daily on the basis of a year of 360 days and paid
for the actual number of days for which due. If the due date for any payment of
principal is extended by operation of law, interest shall be payable for such
extended time. If any payment required by this Agreement becomes due on a day
that is not a Business Day such payment may be made on the next succeeding
Business Day (subject to the definition of the term "Interest Period"), and such
extension shall be included in computing interest in connection with such
payment.
2.11 Changed Circumstances; Illegality.
---------------------------------
(a) Notwithstanding any other provision of this Agreement, in the
event that:
(i) on any date on which the Eurodollar Rate would otherwise be
set the Agent shall have determined in good faith (which determination
shall be final and conclusive) that adequate and fair means do not
exist for ascertaining the Eurodollar Rate, or
-22-
<PAGE> 28
(ii) at any time the Agent or any Lender shall have determined in
good faith (which determination shall be final and conclusive and, if
made by any Lender, shall have been communicated to the Agent in
writing) that:
(A) the making or continuation of or conversion of any Loan to a
Eurodollar Loan has been made impracticable or unlawful by (1) the
occurrence of a contingency that materially and adversely affects the
interbank Eurodollar market or (2) compliance by the Agent or such Lender
in good faith with any applicable law or governmental regulation, guideline
or order or interpretation or change thereof by any governmental authority
charged with the interpretation or administration thereof or with any
request or directive of any such governmental authority (whether or not
having the force of law); or
(B) the Eurodollar Rate shall no longer represent the effective cost
to the Agent or such Lender for U.S. dollar deposits in the interbank
market for deposits in which it regularly participates;
then, and in any such event, the Agent shall forthwith so notify the Borrower
thereof. Until the Agent notifies the Borrower that the circumstances giving
rise to such notice no longer apply, the obligation of the Lenders to allow
selection by the Borrower of the Type of Loan affected by the contingencies
described in this Section (herein called "AFFECTED LOANS") shall be suspended.
If, at the time the Agent so notifies the Borrower, the Borrower has previously
given the Agent a Notice of Borrowing or Conversion with respect to one or more
Affected Loans but such Loans have not yet gone into effect, such notification
shall be deemed to be a request for Base Rate Loans.
(b) In the event of a determination of illegality pursuant to
subsection (a)(ii)(A) above, the Borrower shall, with respect to the outstanding
Affected Loans, prepay the same, together with interest thereon and any amounts
required to be paid pursuant to Section 2.9, on such date as shall be specified
in such notice (which shall not be earlier than the date such notice is given)
and may, subject to the conditions of this Agreement, borrow a Loan of another
Type in accordance with Section 2.1 hereof by giving a Notice of Borrowing or
Conversion pursuant to Section 2.3 hereof.
2.12 INCREASED COSTS. In case any change in law, regulation, treaty or
official directive or the interpretation or application thereof by any court or
by any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law):
(i) subjects any Lender to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by the
Borrower or otherwise with respect to the transactions contemplated hereby
(except for taxes on the overall net income of such Lender imposed by the
United States of America or any political subdivision thereof), or
-23-
<PAGE> 29
(ii) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, any Lender (other than such
requirements as are already included in the determination of the Eurodollar
Rate), or
(iii) imposes upon any Lender any other condition with respect to its
obligations or performance under this Agreement or in respect of any Letter
of Credit,
and the result of any of the foregoing is to increase the cost to the Lender,
reduce the income receivable by such Lender or impose any expense upon such
Lender with respect to any Loans or its obligations under this Agreement or in
respect of any Letter of Credit, such Lender shall notify the Borrower and the
Agent thereof. The Borrower agrees to pay to such Lender 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 such
Lender of a statement in the amount and setting forth in reasonable detail such
Lender's calculation thereof and the assumptions upon which such calculation was
based, which statement shall be deemed true and correct absent manifest error.
2.13 CAPITAL REQUIREMENTS. If after the date hereof any Lender determines
that (i) the adoption of or change in any law, rule, regulation or guideline
regarding capital requirements for banks or bank holding companies, or any
change in the interpretation or application thereof by any governmental
authority charged with the administration thereof, or (ii) compliance by such
Lender or its parent bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), has the effect of reducing the return on such Lender's or
such holding company's capital as a consequence of such Lender's Commitment to
make Loans hereunder or its obligations in respect of any Letter of Credit to a
level below that which such Lender or such holding company could have achieved
but for such adoption, change or compliance (taking into consideration such
Lender's or such holding company's then existing policies with respect to
capital adequacy and assuming the full utilization of such entity's capital) by
any amount deemed by such Lender to be material, then such Lender shall notify
the Borrower and the Agent thereof. The Borrower agrees to pay to such Lender
the amount of such reduction of return on capital as and when such reduction is
determined, payable within 90 days after presentation by such Lender of a
statement in the amount and setting forth in reasonable detail such Lender's
calculation thereof and the assumptions upon which such calculation was based
(which statement shall be deemed true and correct absent manifest error) unless
within such 90 day period the Borrower shall have prepaid in full all
Obligations to such Lender, in which event no amount shall be payable to such
Lender under this Section. In determining such amount, such Lender may use any
reasonable averaging and attribution methods.
SECTION IIA
-----------
-24-
<PAGE> 30
LETTERS OF CREDIT
-----------------
2A.1 Issuance.
--------
(a) Upon the terms and subject to the conditions hereof, the Issuing
Bank, in reliance upon the representations and warranties of the Borrower
contained herein, agrees to issue Letters of Credit for the account of the
Borrower in such form as may be requested from time to time by the Borrower and
agreed to by the Issuing Bank, PROVIDED that (i) the Maximum Drawing Amount with
respect to Standby Letters of Credit (after giving effect to all requested
Standby Letters of Credit) shall not at any time exceed the Standby Letter of
Credit Sublimit and (ii) the Maximum Drawing Amount with respect to Commercial
Letters of Credit (after giving effect to all requested Commercial Letters of
Credit) shall not at any time exceed the Commercial Letter of Credit Sublimit;
and PROVIDED, FURTHER, that the Total Outstandings (after giving effect to all
requested Loans and Letters of Credit) shall not at any time exceed the lesser
of (x) the Borrowing Base and (y) the Total Commitment; and PROVIDED, FURTHER,
that no Letter of Credit shall have an expiration date later than the Maturity
Date (provided that the Issuing Bank may, at the request of the Borrower and
with the written consent of each Lender (which consent may be withheld in the
sole and absolute discretion of each Lender), issue a Letter of Credit hereunder
with an expiration date later than the Maturity Date, provided that such Letter
of Credit is fully cash collateralized to the satisfaction of the Issuing Bank
and each Lender). At least three (3) Business Days prior to the proposed
issuance date of any Letter of Credit, the Borrower shall deliver to the Issuing
Bank a Letter of Credit Application setting forth the Maximum Drawing Amount of
all Letters of Credit (including the requested Letter of Credit), the requested
language of the requested Letter of Credit and such other information as the
Issuing Bank shall require. Each request for the issuance of a Letter of Credit
hereunder shall constitute a representation and warranty by the Borrower that
the conditions set forth in Sections 3.1 and 3.2 have been satisfied as of the
date of such request.
(b) Effective upon the issuance of each Letter of Credit and
without any further action on the part of the Issuing Bank or the Lenders in
respect thereof, the Issuing Bank hereby grants to each Lender, and each Lender
hereby acquires from the Issuing Bank, a participating interest in such Letter
of Credit to the extent of such Lender's Commitment Percentage thereof (the
"LETTER OF CREDIT PARTICIPATION"), and each Lender severally agrees that it
shall be absolutely liable, without regard to the occurrence of any Default or
Event of Default, to the extent of such Lender's Commitment Percentage thereof,
to reimburse the Issuing Bank on demand for the amount of each draft paid by the
Issuing Bank under each Letter of Credit to the extent that such amount is not
reimbursed by the Borrower. The Issuing Bank shall promptly notify the Lenders
of the issuance of any Letter of Credit hereunder.
(c) All Existing Letters of Credit shall thereafter be deemed
to be outstanding under this Agreement on and after the Closing Date, and
BayBank or Silicon Valley Bank, as the case may be, shall for the purposes
hereof be deemed the "Issuing Bank" with respect to each such Existing Letter of
Credit.
-25-
<PAGE> 31
2A.2 REIMBURSEMENT OBLIGATION OF THE BORROWER. In order to induce the
Issuing Bank to issue, extend and renew each Letter of Credit, the Borrower
hereby agrees to reimburse or pay to the Issuing Bank with respect to each
Letter of Credit issued, extended or renewed by the Issuing Bank hereunder as
follows:
(a) on each date that any draft presented under any Letter of Credit
is honored by the Issuing Bank or the Issuing Bank otherwise makes payment with
respect thereto in accordance with Section 2A.3, the amount paid by the Issuing
Bank under or with respect to such Letter of Credit; and
(b) upon the Maturity Date or the acceleration of the Reimbursement
Obligations pursuant to Section VII, an amount equal to 105% of the then Maximum
Drawing Amount of all Letters of Credit, which amount shall be held by the
Issuing Bank as cash collateral for all Reimbursement Obligations.
Each such payment shall be made to the Issuing Bank at its head office in
immediately available funds. Interest on any and all amounts remaining unpaid by
the Borrower under this Section 2A.2 at any time from the date such amounts
become due and payable (whether as stated in this Section 2A.2, by acceleration
or otherwise) until payment in full (whether before or after judgment) shall be
payable to the Issuing Bank, for the account of Issuing Bank or (as the case may
be) the Lenders, on demand at a rate per annum equal to 2% above the Interest
Rate applicable to Base Rate Loans at the time in the absence of an Event of
Default.
2A.3 LETTER OF CREDIT PAYMENTS. If any draft shall be presented or other
demand for payment shall be made under any Letter of Credit, the Issuing Bank
shall notify the Borrower of the date and amount of the draft presented or
demand for payment and of the date and time when it expects to pay such draft or
honor such demand for payment; provided that the Issuing Bank shall incur no
liability for any failure to so notify the Borrower. The responsibility of the
Issuing Bank to the Borrower shall be only to determine that the documents
(including each draft) delivered under each Letter of Credit in connection with
such presentment shall be in conformity in all material respects with such
Letter of Credit. On the date that such draft is paid or other payment is made
by the Issuing Bank, the Issuing Bank shall promptly notify the Lenders of the
amount of any unpaid Reimbursement Obligation. All such unpaid Reimbursement
Obligations with respect to Letters of Credit shall be deemed to be Revolving
Credit Loans hereunder. No later than 1:00 p.m. (Boston time) on the Business
Day next following the receipt of such notice, each Lender shall make available
to the Agent, at the Agent's head office, in immediately available funds, such
Lender's Commitment Percentage of such unpaid Reimbursement Obligation, together
with an amount equal to the product of (i) the average, computed for the period
referred to in clause (iii) below, of the weighted average interest rate paid by
the Agent for federal funds acquired by the Agent during each day included in
such period, TIMES (ii) the amount equal to such Lender's Commitment Percentage
of such unpaid Reimbursement Obligation, TIMES (iii) a fraction, the numerator
of which is the number of days that have elapsed
-26-
<PAGE> 32
from and including the date the Issuing Bank paid the draft presented for honor
or otherwise made payment until the date on which such Lender's Commitment
Percentage of such unpaid Reimbursement Obligation shall become immediately
available to the Agent, and the denominator of which is 360.
2A.4 Obligations Absolute.
--------------------
(a) The Borrower's Reimbursement Obligations shall be absolute
and unconditional under any and all circumstances and irrespective of the
occurrence of any Default or Event of Default or any condition precedent
whatsoever or any set off, counterclaim or defense to payment which the Borrower
may have or have had against the Issuing Bank, the Agent, the Lenders or any
beneficiary of a Letter of Credit. The Borrower further agrees that the Issuing
Bank, the Agent and the Lenders shall not be responsible for, and the Borrower's
Reimbursement Obligations shall not be affected by, among other things, the
validity or genuineness of documents or of any endorsements thereon, even if
such documents should in fact prove to be in any or all respects invalid,
fraudulent or forged, or any dispute between or among the Borrower, the
beneficiary of any Letter of Credit or any financing institution or other
party to which any Letter of Credit may be transferred or any claims or defenses
whatsoever of the Borrower, against the beneficiary of any Letter of Credit or
any such transferee.
(b) The Issuing Bank, the Agent and the Lenders shall not be
liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with
any Letter of Credit. The Borrower agrees that any action taken or omitted by
the Issuing Bank, the Agent or the Lenders under or in connection with each
Letter of Credit and the related drafts and documents, if done in good faith,
shall be binding upon the Borrower and shall not result in any liability on the
part of the Issuing Bank, the Agent or the Lenders to the Borrower in the
absence of gross negligence or wilful misconduct on the part of the Issuing
Bank, the Agent or the Lenders, as the case may be.
2A.5 RELIANCE BY THE ISSUING BANK AND THE AGENT. To the extent not
inconsistent with Section 2A.4, the Issuing Bank and the Agent shall be entitled
to rely, and shall be fully protected in relying upon, any Letter of Credit,
draft writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel, independent accountants and other experts selected by the Issuing
Bank or the Agent.
-27-
<PAGE> 33
SECTION III
-----------
CONDITIONS OF LOANS AND LETTERS OF CREDIT
-----------------------------------------
3.1 CONDITIONS PRECEDENT TO INITIAL LOANS. The obligation of the Lenders to
make the initial Loans and of the Issuing Bank to issue the initial Letter of
Credit is subject to the satisfaction of the following conditions precedent on
or prior to the Closing Date:
(a) The Agent shall have received the following agreements, documents,
certificates and opinions in form and substance satisfactory to the Agent and
duly executed and delivered by the parties thereto:
(i) This Agreement;
(ii) The Notes, substantially in the form of EXHIBIT A hereto;
(iii) A Subsidiary Guaranty, substantially in the form of EXHIBIT G
hereto, executed by each Subsidiary Guarantor;
(iv) Certificates of insurance or insurance binders evidencing
compliance with Section 5.3 hereof;
(v) Borrowing Base Report as of the Closing Date;
(vi) Notice of Borrowing or Conversion as of the Closing Date;
(vii) A certificate of the Secretary or an Assistant Secretary of the
Borrower and each Subsidiary Guarantor with respect to resolutions of the
Board of Directors authorizing the execution and delivery of the Loan
Documents and identifying the officer(s) authorized to execute, deliver and
take all other actions required under this Agreement, and providing
specimen signatures of such officers;
(viii) The Certificates of Incorporation of the Borrower and each
Subsidiary Guarantor, together with all amendments and supplements thereto,
as filed in the office of the Secretary of State of their respective
jurisdictions of incorporation, certified by each such Secretary of State
as being a true and correct copy thereof;
(ix) The Bylaws of the Borrower and each Subsidiary Guarantor,
together with all amendments and supplements thereto, certified by the
Secretary or an Assistant Secretary of each such corporation as being a
true and correct copy thereof;
-28-
<PAGE> 34
(x) Certificates of the Secretaries of State of the jurisdiction of
incorporation of the Borrower and each Subsidiary Guarantor as to legal
existence and good standing of each such corporation in such jurisdiction;
(xi) Certificates of the Secretary of State of The Commonwealth of
Massachusetts as to the due qualification and good standing of the Borrower
and each Subsidiary Guarantor as a foreign corporation;
(xii) Audited financial statements for the fiscal year of the Borrower
ended March 31, 1996, without material changes from the unaudited financial
statements previously submitted to the Agent;
(xiii) An opinion addressed to the Lenders from Choate, Hall &
Stewart, counsel to the Borrower; and
(xiv) Such other documents, instruments, opinions and certificates and
completion of such other matters, as the Agent may reasonably deem
necessary or appropriate.
(b) No litigation, arbitration, proceeding or investigation
shall be pending or threatened which questions the validity or legality of the
transactions contemplated by any Loan Document or seeks a restraining order,
injunction or damages in connection therewith, or which, in the judgment of the
Agent, might adversely affect the transactions contemplated hereby or might have
a materially adverse affect on the assets, business, financial condition or
prospects of the Borrower.
(c) The Borrower shall have paid to the Agent all fees to be
paid hereunder (including pursuant to Sections 2.6 and 10.2 hereof) on or prior
to the Closing Date.
3.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTERS OF CREDIT. The obligation
of the Lenders to make any Loan, including the initial Loans, or continue or
convert Loans to Loans of another Type, and of the Issuing Bank to issue any
Letter of Credit is further subject to the following conditions:
(a) timely receipt by the Agent of the most recent Borrowing Base
Report required by Section 5.4(d) and the Notice of Borrowing or Conversion with
respect to any Loan, or by the Issuing Bank of the Letter of Credit Application
with respect to any Letter of Credit;
(b) the outstanding Loans and Letters of Credit do not and, after
giving effect to any requested Loan or Letter of Credit, will not exceed the
limitations set forth in Sections 2.1 and 2A.1 hereof;
-29-
<PAGE> 35
(c) the representations and warranties contained in Section IV shall
be true and accurate in all material respects on and as of the date of such
Notice of Borrowing or Conversion or Letter of Credit Application and on the
effective date of the making, continuation or conversion of each Loan or
issuance of each Letter of Credit as though made at and as of each such date
(except to the extent that such representations and warranties expressly relate
to an earlier date);
(d) no Default or Event of Default shall have occurred and be
continuing at the time of and immediately after the making of such requested
Loan or the issuance of such requested Letter of Credit;
(e) the resolutions referred to in Section 3.1 shall remain in full
force and effect; and
(f) no change shall have occurred in any law or regulation or
interpretation thereof that, in the opinion of counsel for any Lender, would
make it illegal or against the policy of any governmental agency or authority
for such Lender to make Loans hereunder or, in the opinion of counsel for the
Issuing Bank, for the Issuing Bank to issue Letters of Credit hereunder (as the
case may be).
The making, continuation or conversion of each Loan and the issuance of
each Letter of Credit shall be deemed to be a representation and warranty by the
Borrower on the date of the making, continuation or conversion of such Loan or
the issuance of such Letter of Credit as to the accuracy of the facts referred
to in subsection (c) of this Section 3.2 and of the satisfaction of all of the
conditions set forth in this Section 3.2.
SECTION IV
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Agent, the Issuing Bank and the Lenders to enter
into this Agreement and to make Loans and to issue Letters of Credit hereunder,
the Borrower represents and warrants to the Agent, the Issuing Bank and the
Lenders that except as set forth on EXHIBIT C attached hereto:
4.1 CORPORATE STATUS. The Borrower and each of its Subsidiaries (if any) is
a duly organized and validly existing corporation in good standing under the
laws of the jurisdiction of its incorporation and is duly qualified or licensed
as a foreign corporation in good standing in each jurisdiction in which the
failure to do so would have a Material Adverse Effect.
4.2 NO VIOLATION. Neither the execution, delivery or performance of this
Agreement or any other Loan Document, nor consummation of the contemplated
transactions will
-30-
<PAGE> 36
contravene any law, statute, rule or regulation to which the Borrower or any of
its Subsidiaries is subject or any judgment, decree, franchise, order or permit
applicable to the Borrower or any of its Subsidiaries, or will conflict or be
inconsistent with or will result in any breach of, or constitute a default
under, or result in or require the creation or imposition of any Lien upon any
of the property or assets of the Borrower or any of its Subsidiaries pursuant
to, any Contractual Obligation of the Borrower or any of its Subsidiaries, or
violate any provision of the corporate charter or by-laws of the Borrower or any
of its Subsidiaries.
4.3 CORPORATE POWER AND AUTHORITY. The execution, delivery and performance
of this Agreement and the other Loan Documents are within the corporate powers
of the Borrower and have been duly authorized by all necessary corporate action.
4.4 ENFORCEABILITY. This Agreement and each other Loan Document constitutes
a valid and binding obligation of the Borrower enforceable against the Borrower
in accordance with its terms, except as be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and subject to general principles of equity,
whether applied in a court of equity or at law.
4.5 GOVERNMENTAL APPROVALS. No order, permission, consent, approval,
license, authorization, registration or validation of, or filing with, or
exemption by, any Governmental Authority is required to authorize, or is
required in connection with, the execution, delivery and performance of this
Agreement or any other Loan Document by the Borrower, or the taking of any
action contemplated hereby or thereby.
4.6 FINANCIAL STATEMENTS. The Borrower has furnished the Agent with
complete and correct copies of the audited consolidated and unaudited
consolidating balance sheets of the Borrower and its Subsidiaries as of the
Financial Statements Date, and the related audited consolidated and unaudited
consolidating statements of income and of cash flows for the fiscal year of the
Borrower and its Subsidiaries ended on such date. Such financial statements
(including the related schedules and notes) fairly present the consolidated and
consolidating financial condition of the Borrower and its Subsidiaries as of the
Financial Statements Date, and the consolidated and consolidating results of
their operations and their consolidated and consolidating cash flows for the
fiscal year then ended.
(a) Neither the Borrower nor any of its Subsidiaries has any
material liabilities, contingent or otherwise, including liabilities for taxes
or any unusual forward or long-term commitments or any Guaranty, which are not
disclosed by or included in the above-referenced financial statements or the
accompanying notes and there are no unrealized or anticipated losses from any
unfavorable commitments of the Borrower or any of its Subsidiaries which may
have a Material Adverse Effect.
(b) All the above-referenced financial statements (including
the related schedules and notes) have been prepared in accordance with GAAP
applied consistently
-31-
<PAGE> 37
throughout the periods involved (except as approved by the Accountants and
disclosed therein and, in the case of interim financial statements, subject to
normal year-end adjustments and the absence of footnotes and schedules).
4.7 NO MATERIAL CHANGE. Since the Financial Statements Date there has been
no development or event, nor to the best knowledge of the Borrower, any
prospective development or event, which has had or could have a Material Adverse
Effect.
4.8 LITIGATION. There are no actions, suits or proceedings pending or
threatened against or affecting the Borrower or any of its Subsidiaries before
any Governmental Authority, which in any one case or in the aggregate, if
determined adversely to the interests of the Borrower or any Subsidiary thereof,
would have a Material Adverse Effect.
4.9 COMPLIANCE WITH OTHER INSTRUMENTS; COMPLIANCE WITH LAW. Neither the
Borrower nor any Subsidiary thereof is in default under any Contractual
Obligation, where such default could have a Material Adverse Effect, or the
terms of any Contractual Obligation relating to any Indebtedness of the Borrower
or such Subsidiary. Neither the Borrower nor any Subsidiary thereof is in
default and or in violation of any applicable statute, rule, writ, injunction,
decree, order or regulation of any Governmental Authority having jurisdiction
over the Borrower or any Subsidiary thereof which default or violation could
have a Material Adverse Effect.
4.10 SUBSIDIARIES. The Borrower has no Subsidiaries except as set forth on
attached SCHEDULE 2, as the same may be supplemented by the Borrower from time
to time in accordance with Section 5.4.
4.11 INVESTMENT COMPANY STATUS; LIMITS ON ABILITY TO INCUR INDEBTEDNESS.
Neither the Borrower nor any of its Subsidiaries is an "investment company" or a
company "controlled by" an investment company within the meaning of the
Investment Company Act of 1940, as amended. The Borrower is not subject to
regulation under any Federal or State statute or regulation which limits its
ability to incur Indebtedness.
4.12 TITLE TO PROPERTY. The Borrower and each of its Subsidiaries has good
and marketable title to all of its properties and assets, including the
properties and assets reflected in the consolidated balance sheet of the
Borrower and its Subsidiaries as of the Financial Statements Date, except such
as have been disposed of since that date in the ordinary course of business, and
none of such properties or assets is subject to (a) any Lien except for
Permitted Liens, or (b) any defect in title or other claim other than defects
and claims that, in the aggregate, would have no Material Adverse Effect. The
Borrower and each of its Subsidiaries enjoys peaceful and undisturbed possession
under all leases necessary in any material respect for the operation of its
properties and assets, none of which contains any unusual or burdensome
provisions which might materially affect or impair such properties or assets.
All such leases are valid and subsisting and are in full force and effect.
-32-
<PAGE> 38
4.13 ERISA. The Borrower and each member of the Controlled Group have
fulfilled their obligations under the minimum funding standards of ERISA and the
Code with respect to each Plan and are in compliance in all material respects
with the presently applicable provisions of ERISA and the Code, and have not
incurred any liability to the PBGC or a Plan under Title IV of ERISA (other than
to make contributions or premium payments in the ordinary course).
4.14 TAXES. All tax returns of the Borrower and its Subsidiaries required
to be filed have been timely filed, all taxes, fees and other governmental
charges (other than those being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate reserves
have been established and, in the case of AD VALOREM taxes or betterment
assessments, no proceedings to foreclose any lien with respect thereto have been
commenced and, in all other cases, no notice of lien has been filed or other
action taken to perfect or enforce such lien) shown thereon which are payable
have been paid. The charges and reserves on the books of the Borrower and its
Subsidiaries for all income and other taxes are adequate, and the Borrower knows
of no additional assessment or any basis therefor. The Federal income tax
returns of the Borrower and its Subsidiaries have not been audited within the
last three years, all prior audits have been closed, and there are no unpaid
assessments, penalties or other charges arising from such prior audits.
4.15 ENVIRONMENTAL MATTERS. The Borrower and each of its Subsidiaries
have obtained all Governmental Approvals that are required for the operation of
its business under any Environmental Law, except where the failure to so obtain
a Governmental Approval would not have a Material Adverse Effect.
(a) The Borrower and each of its Subsidiaries are in compliance with
all terms and conditions of all required Governmental Approvals and are also in
compliance with all terms and conditions of all applicable Environmental Laws,
noncompliance with which would have a Material Adverse Effect.
(b) There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding, notice
or demand letter pending or, to the best knowledge of the Borrower threatened
against the Borrower or any Subsidiary thereof relating in any way to the
Environmental Laws, and there is no Lien of any private entity or Governmental
Authority against any property of the Borrower or any Subsidiary thereof
relating in any way to the Environmental Laws.
(c) There has been no claim, complaint, notice, or request for
information received by the Borrower with respect to any site listed on the
National Priority List promulgated pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA"), 42 USC[Section] 9601 ET
SEQ., or any state list of sites requiring investigation or cleanup with
respect to contamination by Hazardous Substances.
-33-
<PAGE> 39
(d) To the best of the Borrower's knowledge, there has been no
release or threat of release of any Hazardous Substance at any Borrower Property
which would likely result in liability being imposed upon the Borrower or any
Subsidiary thereof, which liability would have a Material Adverse Effect.
4.16 BORROWING BASE. Giving effect to any Loans or Letters of Credit
outstanding or requested as of the date hereof under this Agreement, Total
Outstandings under this Agreement do not exceed either the Total Commitment or
the Borrowing Base on the date hereof or any other limitation imposed by this
Agreement.
SECTION V
---------
AFFIRMATIVE COVENANTS
---------------------
The Borrower covenants and agrees that for so long as this Agreement is in
effect and until the Notes, together with all interest thereon and all other
Obligations of the Borrower to the Lenders are paid or satisfied in full:
5.1 MAINTENANCE OF EXISTENCE. The Borrower will, and will cause each of its
Subsidiaries to, maintain its existence and comply with all applicable statutes,
rules and regulations and to remain duly qualified as a foreign corporation,
licensed and in good standing in each jurisdiction where such qualification or
licensing is required by the nature of its business, the character and location
of its property, business, or the ownership or leasing of its property, except
where such noncompliance or failure to so qualify would not have a Material
Adverse Effect, and the Borrower will, and will cause each of its Subsidiaries
to, maintain its properties in good operating condition, and continue to conduct
its business as presently conducted.
5.2 TAXES AND OTHER LIENS. The Borrower will, and will cause each of its
Subsidiaries to, pay when due all taxes, assessments, governmental charges or
levies, or claims for labor, supplies, rent and other obligations made against
it which, if unpaid, might become a Lien against the Borrower or such Subsidiary
or on its property, except liabilities being contested in good faith and by
proper proceedings, as to which adequate reserves are maintained on the books of
the Borrower or its Subsidiaries, in accordance with GAAP.
5.3 INSURANCE. The Borrower will, and will cause each of its Subsidiaries
to, maintain insurance with financially sound and reputable insurance companies
in such amounts and against such risks as is usually carried by owners of
similar businesses and properties in the same general areas in which the
Borrower and its Subsidiaries operate, provided that in any event the Borrower
and its Subsidiaries shall maintain or cause to be maintained (a) insurance
against casualty, loss or damage covering all property and improvements of the
Borrower and its Subsidiaries in amounts and in respect of perils usually
carried by owners of similar businesses and properties in the same general areas
in which Borrower and its Subsidiaries operate; (b) comprehensive
-34-
<PAGE> 40
general liability insurance against claims for bodily injury, death or property
damage; and (c) workers' compensation insurance to the extent required by
applicable law.
5.4 FINANCIAL STATEMENTS, ETC. The Borrower will furnish to the Agent and
each of the Lenders:
(a) within twenty-one (21) days after the end of each calendar
month (including the last month of each fiscal year), the unaudited consolidated
balance sheet, income statement and statement of cash flows of the Borrower and
its Subsidiaries as at the end of, and for, such month (provided, however, that
in the case of financial statements for the last month of any fiscal quarter,
such financial statements shall include an income statement for such fiscal
quarter), accompanied by a certificate of the chief financial officer of the
Borrower to the effect that such financial statements fairly present the
consolidated financial condition of the Borrower and its Subsidiaries as of the
end of such month, and the consolidated results of their operations for such
month, in each case in accordance with GAAP (except for the absence of
footnotes) consistently applied (subject to normal year-end audit adjustments);
(b) within ninety (90) days after the last day of each fiscal year of
the Borrower, the audited consolidated balance sheet and income statement and
statement of cash flows of the Borrower and its Subsidiaries as at and for the
fiscal year then ended, certified by the Accountants (the substance of such
report to be satisfactory to the Lenders), together with a certificate of the
chief financial officer of the Borrower to the effect that such financial
statements fairly present the consolidated financial condition of the Borrower
and its Subsidiaries as of the end of such fiscal year, and the consolidated
results of their operations for such fiscal year, in each case in accordance
with GAAP. The Borrower shall indicate on said financial statements all
guaranties or unusual forward or long-term commitments made by the Borrower or
any Subsidiary thereof;
(c) within thirty (30) days after the end of each fiscal
quarter of the Borrower, a Compliance Certificate signed by the chief financial
officer or the president of the Borrower in the form attached to this Agreement
as EXHIBIT D, appropriately completed;
(d) within twenty-one (21) days after the end of each calendar month
(i) a Borrowing Base Report signed by the chief financial officer or the
president of the Borrower in the form attached to this Agreement as EXHIBIT E,
appropriately completed, subject to usual and customary year-end audit
adjustments; (ii) a listing of all Inventory of the Borrower, all in reasonable
detail and certified by the chief financial officer or the president of the
Borrower, and following the date that any Lender requests such information, the
accounts receivable aging for the Borrower as of the end of such calendar month
in such form as the Agent may prescribe, all in reasonable detail and certified
by the chief financial officer or the president of the Borrower;
(e) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports, proxy
statements and other materials;
-35-
<PAGE> 41
(f) promptly upon the mailing or furnishing thereof to the Board of
Directors of the Borrower, copies of the Board package so provided to the Board
of Directors;
(g) promptly upon request by any Lender, copies of any management
letter provided by the Accountants, provided that the Borrower shall promptly
advise the Agent in the event the Borrower receives any such letter;
(h) promptly upon the filing thereof by the Borrower with the SEC
(and in any event within ten (10) days of such filing), copies of any
registration statements and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents if such forms no longer exist);
(i) not later than the date of the creation or acquisition of any
Subsidiary of the Borrower created or acquired after the date hereof, a
supplement to Schedule 2 reflecting the creation or acquisition of such
Subsidiary;
(j) promptly upon becoming aware of any litigation or other proceeding
against the Borrower or any Subsidiary thereof that may have a Material Adverse
Effect, notice thereof; and
(k) upon receipt by the Borrower, promptly (but not less than often
than monthly) all sell-through reports provided by the Borrower's distributors
(including, without limitation, Ingram, Merisel and Tech Data) together with
such internally generated inventory management reports as may be required by the
Agent from time to time; and
(l) prior to the beginning of each fiscal year of the Borrower, a
copy of the consolidated operating budget, including, without limitation, pro
forma profit-and-loss statements, balance sheets and cash-flow statements for
such immediately ensuing fiscal year on at least a quarterly basis and a
statement of the assumptions on which such budget was prepared and, with
reasonable promptness following their production, any amendments or supplements
to or restatements of the foregoing; and
(m) promptly following the request of any Lender, such further
information concerning the business, affairs and financial condition or
operations of the Borrower and its Subsidiaries as such Lender may reasonably
request.
5.5 NOTICE OF DEFAULT. As soon as practicable, and in any event, within
three (3) Business Days of becoming aware of the existence of any condition or
event which constitutes a Default, the Borrower will provide the Agent and each
Lender with written notice specifying the nature and period of existence thereof
and what action the Borrower is taking or proposes to take with respect thereto.
-36-
<PAGE> 42
5.6 Environmental Matters.
(a) The Borrower and each of its Subsidiaries shall comply with all
terms and conditions of all applicable Governmental Approvals and all applicable
Environmental Laws, except where failure to comply would not have a Material
Adverse Effect.
(b) The Borrower shall promptly notify the Agent should the Borrower
become aware of:
(i) any spill, release, or threat of release of any Hazardous
Substance at or from any Borrower Property or by any Person for whose
conduct the Borrower or any Subsidiary thereof is responsible, to the
extent the Borrower is required by Environmental Laws to report such to any
Governmental Authority;
(ii) any action or notice with respect to a civil, criminal or
administrative action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter pending or threatened
against the Borrower or any Subsidiary thereof relating in any way to the
Environmental Laws, or any Lien of any Governmental Authority or any other
Person against any Borrower Property relating in any way to the
Environmental Laws;
(iii) any claim made or threatened by any Person against the Borrower
or any Subsidiary thereof or any property of the Borrower or any Subsidiary
thereof relating to damage, contribution, cost recovery compensation, loss
or injury resulting from any Hazardous Substance pertaining to such
property or the business or operations of the Borrower or such Subsidiary;
and
(iv) any occurrence or condition on any real property adjoining or in
the vicinity of any Borrower Property known to the officers or supervisory
personnel of the Borrower or any Subsidiary thereof or other employees
having responsibility for the compliance by the Borrower or any Subsidiary
thereof with Environmental Laws, without any independent investigation,
which does cause, or could cause, such Borrower Property, or any part
thereof, to contain Hazardous Substances in violation of any Environmental
Laws, or which does cause, or could cause, such Borrower Property to be
subject to any restrictions on the ownership, occupancy, transferability or
use thereof by the Borrower or any Subsidiary thereof.
(c) The Borrower will, and will cause each of its Subsidiaries
to, at its own cost and expense, and within such period as may be required by
applicable law or regulation, initiate all remedial actions and thereafter
diligently prosecute such action as shall be required by law for the cleanup of
such Borrower Property, including all removal, containment and remedial actions
in accordance with all applicable Environmental Laws and shall further pay or
cause to be paid, at no expense to the Agent or the Lenders, all cleanup,
administrative, and enforcement
-37-
<PAGE> 43
costs of applicable Government Authorities which may be asserted against such
Borrower Property.
5.7 ERISA INFORMATION. If and when the Borrower or any member of the
Controlled Group gives or is required to give notice to the PBGC of any
"reportable event" (as defined in Section 4043 of ERISA) with respect to any
Plan which might constitute grounds for a termination of such Plan under Title
IV of ERISA, or knows that the plan administrator of any Plan has given or is
required to give notice of any such reportable event, receives notice of
complete or partial withdrawal liability under Title IV of ERISA or receives
notice from the PBGC under Title IV of ERISA of an intent to terminate or
appoint a trustee to administer the Plan, the Borrower shall in each such
instance promptly furnish to the Agent a copy of any such notice.
5.8 INSPECTION. The Borrower shall, and shall cause each of its
Subsidiaries to, permit any authorized representatives designated by any Lender
to visit and inspect any of the properties of the Borrower or any of its
Subsidiaries, including its and their financial and accounting records, and to
make copies and take extracts therefrom, and to discuss its and their affairs,
finances and accounts with its and their officers and independent public
accountants (provided that the Borrower may, if it so chooses, be present at or
participate in any such discussion), all upon reasonable advance notice and at
such reasonable times during normal business hours and as often as may be
reasonably requested . The Borrower further agrees that it shall be an express
condition to the continued effectiveness of the Lenders' respective Commitments
that the Agent and each Lender shall have received at the Borrower's expense the
results of a receivables and inventory audit conducted by a field examiner or
auditor of one of the Lenders with respect to the Borrower with results
satisfactory to the Agent on or before July 15, 1996 and at such other times as
the Agent may in its discretion request; PROVIDED, HOWEVER, that, so long as no
Event of Default has occurred and is continuing, the Borrower shall be
responsible for the expenses incurred by the Agent or any Lender in connection
with only one such field audit per year.
5.9 USE OF PROCEEDS. The Borrower shall use the proceeds of the borrowings
under the Notes for the working capital purposes of the Borrower. Without
limiting the foregoing, no part of such proceeds will be used for the purpose of
purchasing or carrying any "margin security" as such term is defined in
Regulation U of the Board of Governors of the Federal Reserve System.
5.10 FURTHER ASSURANCES. The Borrower will, and will cause each of its
Subsidiaries to, execute and deliver to the Agent any writings and do all things
necessary, effectual or reasonably requested by the Agent to carry into effect
the provisions and intent of this Agreement or any other Loan Document.
5.11 DEPOSITORY ACCOUNTS. The Borrower shall maintain its primary operating
deposit account at the offices of the Agent.
-38-
<PAGE> 44
5.12 SUBSIDIARIES. Immediately following the creation of any Subsidiary of
the Borrower following the Closing Date, or the acquisition of any corporation
by the Borrower or any Subsidiary thereof pursuant to which such corporation
becomes a direct or indirect Subsidiary of the Borrower, the Borrower (a) shall
cause such Subsidiary to become a party to a Subsidiary Guaranty or to execute
and deliver such other guaranties, in form and substance satisfactory to the
Majority Lenders, guaranteeing payment of the Obligations hereunder and under
the Note, and (b) notify the Lenders in writing of the creation or acquisition
of such Subsidiary. The Borrower shall, and shall cause the appropriate
Subsidiaries of the Borrower to, promptly (i) execute and deliver to the Agent
such number of copies as the Agent may specify of documents creating such
guaranties, and (ii) deliver such legal opinions, certificates, evidences of
corporate action or other documents as the Agent or the Majority Lenders may
reasonably request (in light of states of fact and applicable law existing at
such time) all in form and substance reasonably satisfactory to the Agent and
the Majority Lenders, relating to the satisfaction of the Borrower's obligations
under this Section 5.12. The requirements of this Section 5.12 shall be in
addition to any applicable restrictions or requirements imposed by Section 6.3
regarding mergers or acquisitions or Section 6.8 regarding Investments.
SECTION VI
----------
NEGATIVE COVENANTS.
-------------------
The Borrower covenants and agrees that for so long as this Agreement is in
effect and until the Notes, together with all interest thereon and all other
Obligations of the Borrower to the Agent or the Lenders are paid or satisfied in
full, without the prior written consent of the Lenders:
6.1 ERISA. The Borrower will not permit any pension plan maintained by
the Borrower or by any member of a "Controlled Group" (ERISA [Section]210(c) or
ERISA [Section]210(d)) of which the Borrower is a member to: engage in any
"prohibited transaction" (ERISA [Section]2003(c)); fail to report to the Agent
a "reportable event" (ERISA [Section]4043) within 30 days after its occurrence
or as to any reportable event as to which the 30-day notice period requirement
of Section 4043(b) of Title IV of ERISA has been waived by the PBGC, within 30
days of such time as the Borrower is requested to notify the PBGC of such
reportable event; incur any "accumulated funding deficiency" (ERISA
[Section]302); terminate its existence at any time in a manner which could
result in the imposition of a Lien on the property of the Borrower or any
Subsidiary thereof; or fail to report to the Agent any "complete withdrawal" or
"partial withdrawal" by the Borrower or an affiliate from a "multiemployer
plan" (ERISA [Sections]4203, 4205, and 4001, respectively). The quoted terms
are defined in the respective sections of ERISA cited above.
6.2 TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly, pay any funds to or
for the account of, make any
-39-
<PAGE> 45
Investment in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, or engage in any transaction in connection with any
joint enterprise or other joint arrangement with, any Affiliate of the Borrower,
unless such transaction is otherwise permitted under this Agreement, is in the
ordinary course of the Borrower's or such Subsidiary's business, and is upon
fair and reasonable terms no less favorable to the Borrower or such Subsidiary
as those that could be obtained in a comparable arm's length transaction with a
Person not an Affiliate.
6.3 MERGERS, ACQUISITIONS, ETC.
(a) The Borrower will not, and will not permit any of its
Subsidiaries to, be a party to any merger or consolidation, or make any
acquisition of the business of any other Person except (i) the merger of any
Subsidiary of the Borrower into the Borrower or any other wholly-owned
Subsidiary of the Borrower; and (ii) so long as no Default shall have occurred
or be continuing hereunder at the time of such acquisition, or after giving
effect thereto, Permitted Acquisitions.
(b) For purposes of this Section 6.3, a "Permitted
Acquisition" shall mean an acquisition complying with the following:
(i) Such acquisition shall be of assets of a corporation engaged in
the same line of business as the Borrower (or of 100% of the stock of
corporations whose assets consist substantially of such assets) or through
the merger of such a corporation with a Subsidiary of the Borrower, where,
giving effect to such merger, such corporation becomes a wholly-owned
Subsidiary of the Borrower;
(ii) The Borrower shall have complied with the requirements of Section
5.12 (to the extent applicable to such acquisition) at the time of such
acquisition; and
(iii) If such acquisition is a Significant Acquisition, the Borrower
shall have obtained the prior written consent of the Lenders.
6.4 DISPOSITION OF ASSETS. The Borrower will not, and will not permit any
of its Subsidiaries to, convey, sell, lease, transfer or otherwise dispose of
any of its property, business or assets (including, without limitation, Accounts
Receivable and leasehold assets), whether now owned or hereafter acquired,
except:
(a) obsolete or worn out property disposed of in the ordinary course
of business;
(b) the sale or other disposition of any property in the
ordinary course of business, PROVIDED that the aggregate book value of all
assets (other than Inventory) so sold or disposed of in any period of twelve
consecutive months shall not exceed 5% of the consolidated
-40-
<PAGE> 46
total assets of the Borrower and its Subsidiaries as at the beginning of such
twelve month period; and
(c) the sale of Inventory in the ordinary course of business.
6.5 INDEBTEDNESS. The Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness,
except:
(a) Obligations to the Lenders, the Agent or the Issuing Bank
hereunder;
(b) Existing Indebtedness, if any, listed on EXHIBIT C hereto, and
all renewals and extensions thereof not in excess of the amount thereof
originally outstanding; and
(c) Purchase Money Indebtedness (other than capitalized leases)
incurred after the date hereof in an aggregate principal amount not to exceed
$500,000; PROVIDED that, giving effect to the incurrence of such Purchase Money
Indebtedness and to the receipt and application of the proceeds thereof, no
Default or Event of Default shall have occurred and be continuing.
6.6 LIENS. The Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien on any of its
properties or assets, except the following (collectively, "PERMITTED LIENS"):
(a) Liens for taxes not delinquent or being contested in good faith
and by proper proceedings, for which appropriate reserves have been established
in accordance with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's or
similar liens imposed by law incurred in the ordinary course of business in
respect of obligations not overdue, or being contested in good faith and by
proper proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other types of social security legislation;
(d) security deposits made to secure the performance of leases,
licenses and statutory obligations incurred in the ordinary course of business;
(e) existing Liens, if any, listed on EXHIBIT C hereto; PROVIDED that
no such Lien shall apply to property acquired or arising after the date hereof,
and that the amount of the Indebtedness secured thereby shall not be increased;
(f) a judgment or judgments for the payment of money not exceeding
$250,000 in the aggregate, rendered against the Borrower and unsatisfied or
unstayed for a period not in excess of thirty (30) days; and
-41-
<PAGE> 47
(g) Purchase Money Security Interests securing Purchase Money
Indebtedness incurred in accordance with Section 6.5(c).
6.7 RESTRICTED PAYMENTS. The Borrower will not, and will not permit any of
its Subsidiaries to, declare or make any Restricted Payment. Notwithstanding the
foregoing,
(a) Subsidiaries of the Borrower shall be permitted
(i) to pay dividends or make other distributions with respect to
shares of their capital stock to the extent that these payments or
other distributions are made to, and received by, the Borrower as the
owner of such shares and further provided that no Event of Default has
occurred and is continuing and that it is not reasonably foreseeable
that the dividend or other distribution will result in an Event of
Default; and
(ii) to make payments on account of the purchase, redemption,
retirement or acquisition of shares of the capital stock of a
Subsidiary or options, warrants, convertible securities or other
rights to acquire shares of the capital stock of a Subsidiary to the
extent that such payments are made to, and received by, the Borrower
on account of shares, options, warrants, convertible securities or
other rights that are being purchased, redeemed, retired or acquired
from the Borrower; and further provided that no Event of Default shall
have occurred and be continuing and that it shall not be reasonably
foreseeable that such payment will result in an Event of Default.
(b) The Borrower shall be permitted to make payments to repurchase
from employees and consultants of the Borrower options issued pursuant to
the Borrower's Stock Option and Stock Purchase Plan or Long Term
Performance Plan or stock issued by the Borrower upon the exercise of such
options, but only to the extent that
(i) no Event of Default has occurred and is continuing or would
occur as a result of such payment;
(ii) each such repurchase is made at a price not exceeding the
original price paid by the employee or consultant for the options or
shares; and
(iii) the Borrower first gives notice in writing to the Agent of
(x) any payment made at any time when the aggregate of all such
payments to employees and consultants in that fiscal year exceeds
$100,000 and (y) any payment that will reasonably foreseeably cause
the aggregate of all such payments to employees and consultants in
that fiscal year to exceed $100,000.
-42-
<PAGE> 48
6.8 INVESTMENTS. The Borrower will not, and will not permit any of its
Subsidiaries to, make, maintain or acquire any Investment in any Person other
than:
(a) marketable obligations issued or guaranteed by the United States
of America having a maturity of one year or less from the date of purchase;
(b) certificates of deposit, eurodollar time deposits, commercial
paper or any other obligations of the Lenders or of any other bank or trust
company organized or licensed to conduct a banking business under the laws of
the United States or any State thereof and which has capital surplus and
undivided profits of not less than $100,000,000;
(c) depository accounts at the Agent or the Lenders; and depository
accounts maintained with the Lenders or any other bank or trust company meeting
the requirements stated in Section 6.8(b) above;
(d) stock or obligations issued to the Borrower or any Subsidiary
thereof in settlement of claims against others by reason of an event of
bankruptcy or a composition or the readjustment of debt or a reorganization of
any debtor of the Borrower or such Subsidiary;
(e) commercial paper with maturities of not more than 90 days having
the highest rating then given by Moody's Investors Services, Inc. or Standard &
Poor's Corporation;
(f) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in subparagraph 6.8(a) above
entered into with the Lenders or any of the banks referred to in subparagraph
6.7(b) above;
(g) loans or advances not exceeding $3,000,000 in aggregate principal
amount at any one time outstanding to directors and officers and employees of
the Borrower; provided that, giving effect to the making of any such loan or
advance and to the receipt and application of the proceeds thereof, no Default
or Event of Default shall have occurred and be continuing;
(h) Investments consisting of Permitted Acquisitions under Section 6.3
hereof;
(i) Investments (whether now or hereafter existing) by the Borrower in
any Subsidiary Guarantor, and any Investment disclosed on EXHIBIT C hereto made
prior to the date hereof in any other Subsidiary; and
(j) other Investments by the Borrower in an aggregate amount not
exceeding $2,500,000.
-43-
<PAGE> 49
6.9 LIMITATION ON LEASES. The Borrower will not, nor will it permit any
Subsidiary to, enter into any lease (whether operating or capitalized) if such
would cause aggregate Rentals under all then existing leases to exceed
$15,000,000.
6.10 ADDITIONAL STOCK ISSUANCE BY SUBSIDIARIES. The Borrower shall not
permit any of its Subsidiaries to issue any additional shares of their capital
stock or other equity securities, any options therefor or any securities
convertible thereto other than to the Borrower.
6.11 QUICK RATIO. The Borrower will not permit the Quick Ratio at the end
of any fiscal quarter to be less than 2.0 to 1.
6.12 MINIMUM PROFITABILITY. The Borrower will not permit Net Income at the
end of any fiscal quarter to be less than $1.00.
6.13 LEVERAGE. The Borrower will not permit the ratio of Total Liabilities
to Tangible Net Worth at the end of any fiscal quarter to exceed 0.5 to 1.
6.14 TANGIBLE NET WORTH. The Borrower will not permit Tangible Net Worth at
the end of any fiscal quarter to be less than the sum of (i) $80,000,000 PLUS
(ii) fifty percent (50%) of cumulative Net Income for the period (taken as a
single period) from January 1, 1996 to the end of the fiscal period in question,
with no offset for Net Losses.
SECTION VII
-----------
EVENTS OF DEFAULT.
------------------
7.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
be an "EVENT OF DEFAULT" hereunder:
(a) The Borrower (i) shall default in the due and punctual payment of
principal or interest on any Note, or (ii) shall default in the payment of any
other amount due under any Loan Document and such default shall continue for
five (5) days after demand for such payment is made; or
(b) Any representation, warranty or statement made herein or any other
Loan Document, or in any certificate or statement furnished pursuant to or in
connection herewith or therewith, shall prove to be incorrect, misleading or
incomplete in any material respect on the date as of which made or deemed made;
or
(c) The Borrower shall default in the performance or observance of any
term, covenant or agreement on its part to be performed or observed pursuant to
Section 5.5 and Sections 6.3 through 6.14; or
-44-
<PAGE> 50
(d) The Borrower shall default in the performance or observance of any
term, covenant or agreement on its part to be performed or observed pursuant to
any of the provisions of this Agreement or any other Loan Document (other than
those referred to in paragraphs 7.1(a) through 7.1(c) above) and such default
shall continue unremedied for a period of twenty (20) days after the occurrence
of such default; or
(e) Any Subsidiary shall default in the performance or observance of
any material term, covenant or agreement on its part to be performed or observed
pursuant to any of the provisions of any material agreement, contract or
arrangement to which it is a party or by which it or its property may be bound
and such default shall continue unremedied for a period of twenty (20) days
after the occurrence of such default; or
(f) Any obligation of the Borrower or any Subsidiary thereof in
respect of any items of Indebtedness (other than the Notes) in the aggregate
principal amount of $250,000 or more or any Guaranty thereof shall be declared
to be or shall become due and payable prior to the stated maturity thereof, or
such Indebtedness or Guaranty shall not be paid as and when the same becomes due
and payable, or there shall occur and be continuing any default under any
instrument, agreement or evidence of indebtedness relating to any such
Indebtedness or Guaranty, the effect of which is to permit the holder or holders
of such instrument, agreement or evidence of indebtedness, or a trustee, agent
or other representative on behalf of such holder or holders, to cause such
Indebtedness or Guaranty to become due prior to its stated maturity; PROVIDED,
HOWEVER, that no Event of Default shall be deemed to exist under this paragraph
(f) upon the occurrence of any of the foregoing events with respect to any
Indebtedness (other than Financial Indebtedness) where the failure of the
Borrower or any Subsidiary to pay such Indebtedness or the existence of any such
default or other event with respect to such Indebtedness is being contested in
good faith and by proper proceedings, as to which adequate reserves are
maintained on the books of the Borrower or its Subsidiaries in accordance with
GAAP; or
(g) The Borrower or any Subsidiary thereof shall apply for or consent
to the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property,
make a general assignment for the benefit of its creditors, commence a voluntary
case under the Bankruptcy Code, file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Bankruptcy Code, or take any corporate action for
the purpose of effecting any of the foregoing; or
(h) A proceeding or case shall be commenced, without the application
or consent of the Borrower or any Subsidiary thereof in any court of competent
jurisdiction, seeking its liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of its debts, the appointment of
a trustee, receiver, custodian, liquidator or the like of the Borrower
-45-
<PAGE> 51
or such Subsidiary or of all or any substantial part of its assets, or similar
relief in respect of the Borrower or such Subsidiary under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment
of debts, and such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be entered
and continue unstayed and in effect, for a period of 60 days; or an order for
relief against the Borrower or such Subsidiary shall be entered in an
involuntary case under the Bankruptcy Code; or
(i) A final judgment or judgments for the payment of money in excess
of $250,000 (net of insurance proceeds) in the aggregate shall be rendered
against the Borrower or any Subsidiary thereof and any such judgment or
judgments shall not have been vacated, discharged, stayed or bonded pending
appeal within thirty (30) days from the entry thereof; or
(j) The Borrower or any member of the Controlled Group shall fail to
pay when due an amount or amounts aggregating in excess of $100,000 which it is
obligated to pay to the PBGC or to a Plan under Title IV of ERISA; or a notice
of intent to terminate a Plan or Plans having aggregate Unfunded Liabilities in
excess of $100,000 shall be filed under Title IV of ERISA by the Borrower or any
member of the Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any such Plan or
Plans or a proceeding shall be instituted by a fiduciary of any such Plan or
Plans against the Borrower or any member of the Controlled Group to enforce
Sections 515 or 4219(c)(5) of ERISA; or a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that any such
Plan or Plans must be terminated; or there shall occur a complete or partial
withdrawal form, or a default, within the meaning of Section 4219(c)(5) of
ERISA, with respect to, one or more Multiemployer Plans which could cause the
Borrower or one or more members of the Controlled Group to incur a current
payment obligation in excess of $100,000; or
(k) The Borrower or any Subsidiary thereof shall default in the
performance or observance of any material term, covenant or agreement on its
part to be performed or observed pursuant to any of the provisions of any
agreement with the Lenders or any instrument delivered in favor of the Lenders
(other than, in either case, a Loan Document), and such default shall continue
unremedied beyond the grace period (in any) provided for therein.
7.2 REMEDIES UPON AN EVENT OF DEFAULT. Upon the occurrence of an Event of
Default described in subsections 7.1(g) and (h), immediately and automatically,
and upon the occurrence of any other Event of Default, at any time thereafter
while such Event of Default is continuing, at the option of the Agent or the
Majority Lenders and upon the Agent's declaration:
(a) the obligation of the Lenders to make any further Loans and of the
Issuing Bank to issue any Letters of Credit hereunder shall terminate;
-46-
<PAGE> 52
(b) the unpaid principal amount of the Loans together with accrued
interest, all Reimbursement Obligations and all other Obligations shall become
immediately due and payable without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived; and
(c) the Agent, the Issuing Bank and the Lenders may exercise any and
all rights they have under this Agreement, the other Loan Documents or at law or
in equity, and proceed to protect and enforce their respective rights by any
action at law or in equity or by any other appropriate proceeding.
No remedy conferred upon the Agent, the Issuing Bank or the Lenders in the Loan
Documents is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or by
any other provision of law.
SECTION VIII
------------
ASSIGNMENT AND PARTICIPATION
----------------------------
8.1 ASSIGNMENT.
(a) Each Lender shall have the right to assign at any time any portion
of its Commitment hereunder and its interests in the risk relating to any Loans
and Letter of Credit Participations in an amount equal to or greater than
$5,000,000 to other Lenders or to banks or financial institutions acceptable to
the Agent (each an "ASSIGNEE"), provided that any Lender which proposes to
assign less than its total Commitment must retain a Commitment of at least
$5,000,000, and provided, further, that if no Default or Event of Default shall
have occurred and be continuing, each Assignee which is not a Lender, an
Affiliate of a Lender or a Federal Reserve Bank shall be subject to prior
approval by the Borrower (such approval not to be unreasonably withheld or
delayed). Each Assignee shall execute and deliver to the Agent and the Borrower
a counterpart joinder in the form of EXHIBIT F hereto. Upon the execution and
delivery of such counterpart joinder, (a) such Assignee shall, on the date and
to the extent provided in such counterpart joinder, become a "Lender" party to
this Agreement and the other Loan Documents for all purposes of this Agreement
and the other Loan Documents and shall have all rights and obligations of a
"Lender" with a Commitment as set forth in such counterpart joinder, and the
transferor Lender shall, on the date and to the extent provided in such
counterpart joinder, be released from its obligations hereunder and under the
other Loan Documents to a corresponding extent (and, in the case of an
assignment covering all of the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such transferor shall cease to be a party
hereto but shall continue to be entitled to the benefits of Section 10.3 and to
any fees accrued for its account hereunder and not yet paid); (b) the assigning
Lender, if it holds any Notes, shall promptly surrender such Notes to the Agent
for cancellation and delivery to the Borrower,
-47-
<PAGE> 53
provided that if the assigning Lender has retained any Commitment, the Borrower
shall execute and deliver to the Agent for delivery to such assigning Lender a
new Note in the amount of the assigning Lender's retained Commitment; (c) the
Borrower shall issue to such Assignee a Note in the amount of such Assignee's
Commitment dated the Closing Date or such other date as may be specified by such
Assignee and otherwise completed in substantially the form of EXHIBIT A; (d)
this Agreement shall be deemed appropriately amended to reflect (i) the status
of such Assignee as a party hereto and (ii) the status and rights of the Lenders
hereunder; and (e) the Borrower shall take such action as the Agent may
reasonably request to perfect any security interests or mortgages in favor of
the Lenders, including any Assignee which becomes a party to this Agreement.
(b) If the Assignee, or any Participant pursuant to Section 8.2
hereof, is organized under the laws of a jurisdiction other than the United
States or any state thereof, such Assignee shall execute and deliver to the
Borrower, simultaneously with or prior to such Assignee's execution and delivery
of the counterpart joinder described above in Section 8.1(a), and such
Participant shall execute and deliver to the Lender granting the participation,
a United States Internal Revenue Service Form 4224 or Form 1001 (or any
successor form), appropriately completed, wherein such Assignee or Participant
claims entitlement to complete exemption from United States Federal Withholding
Tax on all interest payments hereunder and all fees payable pursuant to any of
the Loan Documents. The Borrower shall not be required to pay any increased
amount to any Assignee or other Lender on account of taxes to the extent such
taxes would not have been payable if the Assignee or Participant had furnished
one of the Forms referenced in this Section 8.1(b) unless the failure to furnish
such a Form results from (i) a condition or event affecting the Borrower or an
act or failure to act of the Borrower or (ii) the adoption of or change in any
law, rule, regulation or guideline affecting such Assignee or Participant
occurring (x) after the date on which any such Assignee executes and delivers
the counterpart joinder, or (y) after the date such Assignee shall otherwise
comply with the provisions of Section 8.1(a), or (z) after the date a
Participant is granted its participation.
8.2 PARTICIPATIONS. Each Lender shall have the right to grant
participations to one or more banks or other financial institutions (each a
"PARTICIPANT") in all or any part of any Loans and Letter of Credit
Participations owing to such Lender and the Note held by such Lender. Each
Lender shall retain the sole right to approve, without the consent of any
Participant, any amendment, modification or waiver of any provision of the Loan
Documents, PROVIDED that the documents evidencing any such participation may
provide that, except with the consent of such Participant, such Lender will not
consent to (a) the reduction in or forgiveness of the stated principal of or
rate of interest on or facility fee with respect to the portion of any Loan
subject to such participation, (b) the extension or postponement of any stated
date fixed for payment of principal or interest or facility fee with respect to
the portion of any Loan subject to such participation or (c) the waiver or
reduction of any right to indemnification of such Lender hereunder.
Notwithstanding the foregoing, no participation shall operate to increase the
Total Commitment hereunder or otherwise alter the substantive terms of this
Agreement. In the event of any such sale by a Lender of participating interests
to a Participant, such Lender's obligations
-48-
<PAGE> 54
under this Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
such Note for all purposes under this Agreement and the Borrower and Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement.
SECTION IX
----------
THE AGENT
---------
9.1 APPOINTMENT OF AGENT; POWERS AND IMMUNITIES.
(a) Each Lender and the Issuing Bank hereby irrevocably appoints and
authorizes the Agent to act as its agent hereunder and under the other Loan
Documents and to execute the Loan Documents (other than this Agreement) and all
other instruments relating thereto. Each Lender and the Issuing Bank irrevocably
authorizes the Agent to take such action on behalf of each of the Lenders and
the Issuing Bank and to exercise all such powers as are expressly delegated to
the Agent hereunder and in the other Loan Documents and all related documents,
together with such other powers as are reasonably incidental thereto. The
obligations of the Agent hereunder are only those expressly set forth herein.
The Agent shall not have any duties or responsibilities or any fiduciary
relationship with any Lender or the Issuing Bank except those expressly set
forth in this Agreement.
(b) Neither the Agent nor any of its directors, officers, employees or
agents shall be responsible for any action taken or omitted to be taken by any
of them hereunder or in connection herewith, except for their own gross
negligence or willful misconduct. Without limiting the generality of the
foregoing, neither the Agent nor any of its Affiliates shall be responsible to
the Lenders or the Issuing Bank for or have any duty to ascertain, inquire into
or verify: (i) any recitals, statements, representations or warranties made by
the Borrower or any of its Subsidiaries or any other Person whether contained
herein or otherwise; (ii) the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, the other Loan Documents or any
other document referred to or provided for herein or therein; (iii) any failure
by the Borrower or any of its Subsidiaries or any other Person to perform its
obligations under any of the Loan Documents; or (iv) the satisfaction of any
conditions specified in Section III hereof, other than receipt of the documents,
certificates and opinions specified in Section 3.1(a) hereof.
(c) The Agent may employ agents, attorneys and other experts, shall
not be responsible to any Lender or the Issuing Bank for the negligence or
misconduct of any such agents, attorneys or experts selected by it with
reasonable care and shall not be liable to any Lender or the Issuing Bank for
any action taken, omitted to be taken or suffered in good faith by it in
accordance with the advice of such agents, attorneys and other experts. BayBank,
in its separate capacity as a Lender shall have the same rights and powers under
the Loan Documents
-49-
<PAGE> 55
as any other Lender and may exercise or refrain from exercising the same as
though it were not the Agent, and BayBank and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of business with the
Borrower as if it were not the Agent.
9.2 ACTIONS BY AGENT.
(a) The Agent shall be fully justified in failing or refusing to take
any action under this Agreement as it reasonably deems appropriate unless it
shall first have received such advice or concurrence of the Lenders and shall be
indemnified to its reasonable satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
of the Loan Documents in accordance with a request of the Lenders, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon the Lenders and all future holders of the Notes.
(b) Whether or not an Event of Default shall have occurred, the Agent
may from time to time exercise such rights of the Agent and the Lenders under
the Loan Documents as it determines may be necessary or desirable to protect
interests of the Agent, the Issuing Bank and the Lenders therein and under the
Loan Documents.
(c) Neither the Agent nor any of its directors, officers, employees or
agents shall incur any liability by acting in reliance on any notice, consent,
certificate, statement or other writing (which may be a bank wire, telex,
facsimile or similar writing) believed by any of them to be genuine or to be
signed by the proper party or parties.
9.3 INDEMNIFICATION. Without limiting the obligations of the Borrower
hereunder or under any other Loan Document, the Lenders agree to indemnify the
Agent and the Issuing Bank, ratably in accordance with their respective
Commitment Percentages, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may at any time be imposed on, incurred
by or asserted against the Agent or the Issuing Bank in any way relating to or
arising out of this Agreement or any other Loan Document or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or the enforcement of any of the terms hereof or
thereof or of any such other documents; PROVIDED, THAT no Lender shall be liable
for any of the foregoing to the extent they result from the gross negligence or
willful misconduct of the Agent or the Issuing Bank, as the case may be.
9.4 REIMBURSEMENT. Without limiting the provisions of Section 9.3, the
Lenders, the Issuing Bank and the Agent hereby agree that the Agent shall not be
obliged to make available to any Person any sum which the Agent is expecting to
receive for the account of that Person until the Agent has determined that it
has received that sum. The Agent may, however, disburse funds prior to
determining that the sums which the Agent expects to receive have been finally
and unconditionally paid to the Agent if the Agent wishes to do so. If and to
the extent that the
-50-
<PAGE> 56
Agent does disburse funds and it later becomes apparent that the Agent did not
then receive a payment in an amount equal to the sum paid out, then any Person
to whom the Agent made the funds available shall, on demand from the Agent
refund to the Agent the sum paid to that Person. If the Agent in good faith
reasonably concludes that the distribution of any amount received by it in such
capacity hereunder or under the other Loan Documents might involve it in
liability, it may refrain from making distribution until its right to make
distribution shall have been adjudicated by a court of competent jurisdiction.
If a court of competent jurisdiction shall adjudge that any amount received and
distributed by the Agent is to be repaid, each Person to whom any such
distribution shall have been made shall either repay to the Agent its
proportionate share of the amount so adjudged to be repaid or shall pay over the
same in such manner and to such Persons as shall be determined by such court.
9.5 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender represents that it
has, independently and without reliance on the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of the financial condition and affairs of the Borrower and
decision to enter into this Agreement and the other Loan Documents and agrees
that it will, independently and without reliance upon the Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own appraisals and decision in taking or not
taking action under this Agreement or any other Loan Document. The Agent shall
not be required to keep informed as to the performance or observance by the
Borrower of this Agreement, the other Loan Documents or any other document
referred to or provided for herein or therein or by any other Person of any
other agreement or to make inquiry of, or to inspect the properties or books of,
any Person. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning any Person which may come into the
possession of the Agent or any of its affiliates. Each Lender shall have access
to all documents relating to the Agent's performance of its duties hereunder at
such Lender's request. Unless any Lender shall promptly object to any action
taken by the Agent hereunder (other than actions to which the provisions of
Section 10.7(b) are applicable and other than actions which constitute gross
negligence or willful misconduct by the Agent), such Lender shall conclusively
be presumed to have approved the same.
9.6 RESIGNATION OR REMOVAL OF AGENT. The Agent may resign at any time
by giving 30 days prior written notice thereof to the Lenders and the Borrower.
Upon any such resignation, the Lenders shall have the right to appoint a
successor Agent which shall be reasonably acceptable to the Borrower and shall
be a financial institution having a combined capital and surplus in excess of
$500,000,000. If no successor Agent shall have been so appointed by the Lenders
and shall have accepted such appointment within 30 days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent which shall be reasonably acceptable
to the Borrower and shall be a financial institution having a combined capital
and surplus in excess of $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent
-51-
<PAGE> 57
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring Agent's
resignation, the provisions of this Agreement shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
SECTION X
---------
MISCELLANEOUS
-------------
10.1 NOTICES. Unless otherwise specified herein, all notices hereunder to
any party hereto shall be in writing and shall be deemed to have been given when
delivered by hand, or when sent by electronic facsimile transmission or by
telex, answer back received, or on the first Business Day after delivery to any
overnight delivery service, freight pre-paid, or three days after being sent by
certified or registered mail, return receipt requested, postage pre-paid, and
addressed to such party at its address indicated below:
If to the Borrower, at
500 River Ridge Drive
Norwood, MA 02062
Attention: James T. Fennessy
Director -- Treasury Operations
Facsimile: (617) 551-1008
With a copy to:
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109-2891
Attention: William C. Rogers, Esq.
Facsimile: (617) 248-4000
If to the Agent or BayBank, at
7 New England Executive Park
Burlington, MA 01803
Attention: Stephen C. Buzzell
Vice President
Facsimile: (617) 564-4127
-52-
<PAGE> 58
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Attention: Dennis J. White, Esq.
Facsimile: (617) 338-2880
If to any other Lender, to its address set forth on SCHEDULE 1 attached
hereto;
or at any other address specified by such party in writing.
10.2 EXPENSES. Whether or not the transactions contemplated herein shall be
consummated, the Borrower promises to reimburse the Agent, the Issuing Bank and
the Lenders for all reasonable out-of-pocket fees and disbursements (including
all reasonable attorneys' fees and collateral evaluation costs) incurred or
expended in connection with the preparation of this Agreement and the other Loan
Documents, or any amendment, modification, approval, consent or waiver hereof or
thereof, or with the occurrence of the Closing Date, or with the enforcement of
any Obligations or the satisfaction of any indebtedness of the Borrower
hereunder or thereunder, or in connection with any litigation, proceeding or
dispute in any way related to the credit hereunder; PROVIDED, HOWEVER, that the
Borrower shall in no event be required to reimburse any Person for fees,
disbursements or expenses incurred or expended in connection with any assignment
effected or participation granted in accordance with Section VIII or otherwise.
The Borrower will pay any taxes (including any interest and penalties in respect
thereof), other than the Lenders' federal and state income taxes, payable on or
with respect to the transactions contemplated by the Loan Documents (the
Borrower hereby agreeing to indemnify the Agent, the Issuing Bank and the
Lenders with respect thereto).
10.3 INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless
the Agent, the Issuing Bank and the Lenders, as well as their respective
shareholders, directors, officers, agents, attorneys, subsidiaries and
affiliates, from and against all damages, losses, settlement payments,
obligations, liabilities, claims, suits, penalties, assessments, citations,
directives, demands, judgments, actions or causes of action, whether statutorily
created or under the common law, all reasonable costs and expenses (including,
without limitation, reasonable fees and disbursements of attorneys, engineers
and consultants) and all other liabilities whatsoever (including, without
limitation, liabilities under Environmental Laws) which shall at any time or
times be incurred, suffered, sustained or required to be paid by any such
indemnified Person (except any of the foregoing which result from the gross
negligence or willful misconduct of the indemnified Person) on account of or in
relation to or any way in connection with any of the arrangements or
transactions contemplated by, associated with or ancillary
-53-
<PAGE> 59
to this Agreement, the other Loan Documents or any other documents executed or
delivered in connection herewith or therewith, all as the same may be amended
from time to time, or with respect to any Letters of Credit, whether or not all
or part of the transactions contemplated by, associated with or ancillary to
this Agreement, any of the other Loan Documents or any such other documents are
ultimately consummated. In any investigation, proceeding or litigation, or the
preparation therefor, the Lenders shall select their own counsel and, in
addition to the foregoing indemnity, the Borrower agrees to pay promptly the
reasonable fees and expenses of such counsel. In the event of the commencement
of any such proceeding or litigation, the Borrower shall be entitled to
participate in such proceeding or litigation with counsel of its choice at its
own expense, provided that such counsel shall be reasonably satisfactory to the
Agent. The Borrower authorizes the Agent, the Issuing Bank and the Lenders to
charge any deposit account or Note Record which it may maintain with any of them
for any of the foregoing. The covenants of this Section 10.3 shall survive
payment or satisfaction of payment of all amounts owing with respect to the
Notes, any other Loan Document or any other Obligation.
10.4 SURVIVAL OF COVENANTS, ETC. Unless otherwise stated herein, all
covenants, agreements, representations and warranties made herein, in the other
Loan Documents or in any documents or other papers delivered by or on behalf of
the Borrower pursuant hereto shall be deemed to have been relied upon by the
Agent, the Issuing Bank and the Lenders, notwithstanding any investigation
heretofore or hereafter made by any of them, and shall survive the making by the
Lenders of the Loans as herein contemplated, and shall continue in full force
and effect so long as any Obligation remains outstanding and unpaid or any
Lender has any obligation to make any Loans hereunder or the Issuing Bank has
any obligation to issue any Letter of Credit. All statements contained in any
certificate or other writing delivered by or on behalf of the Borrower pursuant
hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by the Borrower hereunder.
10.5 SET-OFF. Regardless of the adequacy of any collateral or other means
of obtaining repayment of the Obligations, any deposits, balances or other sums
credited by or due from the head office of any Lender or any of its branch
offices to the Borrower may, at any time and from time to time after the
occurrence of a Default hereunder, without notice to the Borrower or compliance
with any other condition precedent now or hereafter imposed by statute, rule of
law, or otherwise (all of which are hereby expressly waived) be set off,
appropriated, and applied by such Lender against any and all Obligations of the
Borrower in such manner as the head office of such Lender or any of its branch
offices in its sole discretion may determine, and the Borrower hereby grants
each such Lender a continuing security interest in such deposits, balances or
other sums for the payment and performance of all such Obligations.
10.6 NO WAIVERS. No failure or delay by the Agent, the Issuing Bank or any
Lender in exercising any right, power or privilege hereunder, under the Notes or
under any other Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. No waiver shall
extend to or affect any Obligation not expressly waived or impair any right
consequent thereon. No course of dealing or omission on the part of the Agent,
the Issuing Bank or the Lenders in exercising any right shall operate as a
waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon
the Borrower shall entitle the Borrower to
-54-
<PAGE> 60
other or further notice or demand in similar or other circumstances. The rights
and remedies herein and in the Notes and the other Loan Documents are cumulative
and not exclusive of any rights or remedies otherwise provided by agreement or
law.
10.7 AMENDMENTS, WAIVERS, ETC.
(a) Neither this Agreement nor the Notes nor any other Loan Document
nor any provision hereof or thereof may be amended, waived, discharged or
terminated except by a written instrument signed by the Agent on behalf of the
Lenders and, with respect to Letters of Credit, the Issuing Bank, or, as the
case may be, by the Lenders and, with respect to Letters of Credit, the Issuing
Bank, and, in the case of amendments, by the Borrower.
(b) Except where this Agreement or any of the other Loan
Documents authorizes or permits the Agent to act alone and except as otherwise
expressly provided in this Section 10.7(b), any action to be taken (including
the giving of notice) by the Lenders may be taken, and any consent or approval
required or permitted by this Agreement or any other Loan Document to be given
by the Lenders may be given, and any term of this Agreement, any other Loan
Document or any other instrument, document or agreement related to this
Agreement or the other Loan Documents or mentioned therein may be amended, and
the performance or observance by any of the Borrower or any other Person of any
of the terms thereof and any Default or Event of Default (as defined in any of
the above-referenced documents or instruments) may be waived (either generally
or in a particular instance and either retroactively or prospectively), in each
case only with the written consent of the Majority Lenders; PROVIDED, HOWEVER,
that no such consent or amendment which affects the rights, duties or
liabilities of the Agent or Issuing Bank shall be effective without the written
consent of the Agent or Issuing Bank, respectively. Notwithstanding the
foregoing, no amendment, waiver or consent shall do any of the following unless
in writing and signed by ALL of the Lenders: (i) increase the Total Commitment
(or subject the Lenders to any additional obligations) (ii) reduce the principal
of or interest on any of the Notes (including, without limitation, interest on
overdue amounts) or any fees payable hereunder, (iii) postpone any date fixed
for any payment in respect of principal of or interest (including, without
limitation, interest on overdue amounts) on the Notes, or any fees payable
hereunder, (iv) change the definition of "Majority Lenders" or the number of
Lenders which shall be required for the Lenders or any of them to take any
action under the Loan Documents; (v) change the definition of "Borrowing Base"
or "Standby Letter of Credit Sublimit" set forth in Section 1.1, amend Sections
2.1(a) or 2A.1(a) or waive the limitations set forth in Sections 2.1(a) or
2A.1(a); (vi) amend this Section 10.7(b); (vii) change the Commitment or the
Commitment Percentage of any Lender, except as permitted under Section VIII
hereof; or (viii) amend Sections 2.5 or 2.6 hereof.
10.8 BINDING EFFECT OF AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of the Borrower, the Agent, the Issuing Bank, the Lenders
and their respective successors and assigns; PROVIDED that the Borrower may not
assign or transfer its rights or obligations hereunder.
-55-
<PAGE> 61
10.9 CAPTIONS; COUNTERPARTS. The captions in this Agreement are for
convenience of reference only and shall not define or limit the provisions
hereof. This Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, but all of which together shall
constitute one instrument. In proving this Agreement it shall not be necessary
to produce or account for more than one such counterpart signed by the party
against whom enforcement is sought.
10.10 ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents
executed in connection herewith or therewith express the entire understanding of
the parties with respect to the transactions contemplated hereby.
10.11 WAIVER OF JURY TRIAL. THE BORROWER AND EACH OF THE LENDERS HEREBY
WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT
OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER
LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, THE
BORROWER AND EACH OF THE LENDERS HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. THE BORROWER (a) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF THE LENDERS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
THE LENDERS WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS AND (b) ACKNOWLEDGES THAT THE LENDERS HAVE BEEN INDUCED TO ENTER INTO
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH EACH IS A PARTY BECAUSE OF,
AMONG OTHER THINGS, THE BORROWER'S WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.
10.12 GOVERNING LAW. THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS
ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR
ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID
COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE
BORROWER CONSENTS TO THE JURISDICTION OF ANY OF THE FEDERAL OR STATE COURTS
LOCATED IN THE COMMONWEALTH OF MASSACHUSETTS IN CONNECTION WITH ANY SUIT TO
ENFORCE THE RIGHTS OF THE LENDERS UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS. THE BORROWER IRREVOCABLY
-56-
<PAGE> 62
WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY SUCH ACTION BROUGHT IN THE COURTS REFERRED TO IN THE PRECEDING SENTENCE
AND IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH ACTION THAT
SUCH ACTION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
10.13 SEVERABILITY. The provisions of this Agreement are severable and if
any one clause or provision hereof shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or unenforceability
shall affect only such clause or provision, or part thereof, in such
jurisdiction, and shall not in any manner affect such clause or provision in any
other jurisdiction, or any other clause or provision of this Agreement in any
jurisdiction.
-57-
<PAGE> 63
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement under
seal as of the date first above written.
MICROCOM, INC.
By: /s/ JAMES FENNESSY
-----------------------------------
Title: DIRECTOR, TREASURY OPERATIONS
BAYBANK, N.A., as a Lender
and as Agent
By: /s/ STEPHEN BUZZELL
-----------------------------------
Title: VICE PRESIDENT
THE FIRST NATIONAL BANK OF
BOSTON, as a Lender
By: /s/ DANIEL HEAD
-----------------------------------
Title: VICE PRESIDENT
SILICON VALLEY BANK, doing business
as "Silicon Valley East"
By: /s/ JAMES MAYNARD
-----------------------------------
Title: VICE PRESIDENT
SILICON VALLEY BANK, as a Lender
By: /s/ PAMELA DOYLE
-----------------------------------
Title: SENIOR VICE PRESIDENT
(Signed in Santa Clara, California)
-58-
<PAGE> 64
SCHEDULE 1
<TABLE>
COMMITMENTS OF THE LENDERS
--------------------------
<CAPTION>
Commitment
Lender Percentage Commitment
- ------ ---------- ----------
<S> <C> <C>
BayBank, N.A. 44.4445% $20,000,000
7 New England Executive Park
Burlington, MA 01803
The First National Bank
of Boston 33.3333% $15,000,000
100 Federal Street
Boston, MA 02110
Silicon Valley Bank 22.2222% $10,000,000
3003 Tasman Drive
Santa Clara, CA 95054
------- -----------
100% $45,000,000
======= ===========
</TABLE>
<PAGE> 65
SCHEDULE 2
LIST OF SUBSIDIARIES
--------------------
-60-
<PAGE> 66
SCHEDULE 3
LIST OF COVERED STATES
----------------------
Arab Emirates
Ecuador
Iceland
Iran
Ireland
Kuwait
Phillipines
Saudi Arabia
Slovak Republic
Ukraine
-61-
<PAGE> 67
SCHEDULE 4
LIST OF EXISTING LETTERS OF CREDIT
----------------------------------
Commercial Letters of Credit:
L/C number: SVB951MO109
Balance: $6,314,366.92
Expiry Date: July 31, 1996
Beneficiary: Vtech Communications Ltd.
Hong Kong
Standby Letters of Credit:
L/C number: SVB-903
Balance: $5,000,000
Expiry Date: October 31, 1996
Beneficiary: Rockwell International Corp.
New Port Beach, California
-62-
<PAGE> 68
EXHIBIT A
---------
FORM OF
NOTE
----
$ , 199
------------------ ------------ -
FOR VALUE RECEIVED, the undersigned (the "Borrower") absolutely and
unconditionally promises to pay to the order of [LENDER] ("Payee") at the head
office of BayBank, N.A., as Agent at 175 Federal Street, Boston, Massachusetts
02110:
(a) on the Maturity Date, the principal amount of____________
($_________) or, if less, the aggregate unpaid principal amount of Revolving
Credit Loans advanced by the Payee to the Borrower pursuant to the Revolving
Credit Agreement dated as of July 8, 1996 (as amended or supplemented from time
to time, the "Revolving Credit Agreement") by and among the Borrower and the
Lenders (as defined therein); and
(b) interest on the principal balance hereof from time to time
outstanding from the date hereof through and including the date on which such
principal amount is paid in full, at the times and at the rates provided in the
Revolving Credit Agreement.
This Note evidences borrowings under, is subject to the terms and
conditions of and has been issued by the Borrower in accordance with the terms
of the Revolving Credit Agreement and is one of the Notes referred to therein.
The Payee and any holder hereof is entitled to the benefits and subject to the
conditions of the Revolving Credit Agreement and may enforce the agreements of
the Borrower contained therein, and any holder hereof may exercise the
respective remedies provided for thereby or otherwise available in respect
thereof, all in accordance with the respective terms thereof.
All capitalized terms used in this Note and not otherwise defined herein
shall have the same meanings herein as in the Revolving Credit Agreement.
The Borrower has the right in certain circumstances and the obligation
under certain other circumstances to repay or prepay the whole or part of the
principal of this Note on the terms and conditions specified in the Agreement.
If any Event of Default shall occur and be continuing, the entire unpaid
principal amount of this Note and all of the unpaid interest accrued thereon may
become or be declared due and payable in the manner and with the effect provided
in the Revolving Credit Agreement.
<PAGE> 69
The Borrower and every endorser and guarantor of this Note or the
obligation represented hereby waive presentment, demand, notice, protest and all
other demands and notice in connection with the delivery, acceptance,
performance, default or enforcement of this Note, assent to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or Person primarily or secondarily liable.
This Note shall be deemed to take effect as a sealed instrument under the
laws of the Commonwealth of Massachusetts and for all purposes shall be
construed in accordance with such laws (without regard to conflicts of laws
rules).
IN WITNESS WHEREOF, the Borrower has caused this Note to be signed under
seal by its duly authorized officer as of the day and year first above written.
MICROCOM, INC.
By: /s/ JAMES FENNESSY
-----------------------------------
Title: DIRECTOR, TREASURY OPERATIONS
-2-
<PAGE> 70
EXHIBIT B
---------
BayBank, N.A., Agent
7 New England Executive Park
Burlington, MA 01803
Re: Revolving Credit Agreement Dated as of July 8, 1996 (the "AGREEMENT")
Ladies and Gentlemen:
Pursuant to Section 2.3 of the Agreement the undersigned hereby confirms
its request made on , 19 for a [Base Rate] [Eurodollar] Loan in
--------------- --
the amount of
$ on , 199 .
---------------- -
[The Interest Period applicable to said Loan will be [one] [two] [three]
[six] months.]*
[Said Loan represents a conversion of the [Base Rate] [Eurodollar] Loan in
the same amount made on .]**
---------
The representations and warranties contained or referred to in Section IV
of the Agreement are true and accurate on and as of the effective date of the
Loan as though made at and as of such date (except to the extent that such
representations and warranties expressly relate to an earlier date); and no
Default or Event of Default has occurred and is continuing or will result from
the Loan.
MICROCOM, INC.
By:
-----------------------------------
Title:
- -------------------
Date
* To be inserted in any request for a Eurodollar Loan.
** To be inserted in any request for a conversion.
<PAGE> 71
EXHIBIT C
---------
[DISCLOSURE]
<PAGE> 72
EXHIBIT D
---------
MICROCOM, INC.
REPORT OF CHIEF FINANCIAL OFFICER
COMPLIANCE CERTIFICATE
Microcom, Inc. (the "Borrower"), through James T. Fennessy, Director --
Treasury Operations, HEREBY CERTIFIES that:
This Report is furnished pursuant to Section 5.4(c) of the Revolving Credit
Agreement dated as of July 8, 1996 (the "Agreement"). Unless otherwise defined
herein, the terms used in this Report have the meanings given to them in the
Agreement.
As required by Sections 5.4(a) and 5.4(b) of the Agreement, consolidated
financial statements of the Borrower and its Subsidiaries for the [year/month]
ended ________________, 199_ (the "Financial Statements"), prepared in
accordance with GAAP consistently applied, accompany this Report. The Financial
Statements present fairly the consolidated financial position of the Borrower
and its Subsidiaries as at the date thereof and the consolidated results of
operations of the Borrower and its Subsidiaries for the period covered thereby
(subject only to normal recurring year-end adjustments).
The figures set forth in SCHEDULE 1 hereto for determining compliance by
the Borrower with the financial covenants contained in the Agreement are true
and complete as of the date hereof. The information set forth in SCHEDULE 2
hereto disclosing the transactions referred to in Section 6.8(j) and Section 6.9
of the Agreement are true and complete as of the date hereof.
The activities of the Borrower and its Subsidiaries during the period
covered by the Financial Statements have been reviewed by the Chief Financial
Officer or by employees or agents under his immediate supervision. Based on such
review, to the best knowledge and belief of the Chief Financial Officer, and as
of the date of this Report, no Default has occurred.*
Set forth below is a description of any event or occurrence which rendered
the representations and warranties set forth in Section 4.16 inaccurate in any
material respect during the period covered by the Financial Statements:
- ----------------
If a Default has occurred, this paragraph is to be modified with an
appropriate statement as to the nature thereof, the period of existence
thereof and what action the Borrower have taken, are taking, or propose
to take with respect thereto.
<PAGE> 73
WITNESS my hand this day of 199 .
-
MICROCOM, INC.
By:
----------------------------------
Title:
-2-
<PAGE> 74
SCHEDULE 1
to
EXHIBIT D
---------
FINANCIAL COVENANTS
-------------------
Covenant Actual
-------- ------
Minimum 2.0:1 at end of fiscal _._:1
Quick Ratio quarter ($_______/
(cash and accounts $_________)
receivable/current
liabilities)
Minimum Profitability $1.00 for fiscal quarter $__________
(Net Income)
Maximum Leverage 0.5 to 1 at end of fiscal _._:1
(Total Liabilities/ quarter ($_______/
Tangible Net Worth) $_________)
Minimum $80,000,000 PLUS 50% of $__________
Tangible Net Worth cumulative Net Income from
January 1, 1996 to end of
fiscal quarter (with no offset
for net loss in any quarter)
-3-
<PAGE> 75
SCHEDULE 2
to
EXHIBIT D
---------
DISCLOSURE REGARDING CERTAIN TRANSACTIONS
-----------------------------------------
A. The following is a full, accurate and complete description of all
Investments of the Borrower made, or which the Borrower has become
obligated to make, as of the date hereof in accordance with Section
6.8(j) of the Revolving Credit Agreement. (Supply attachments if
necessary.)
B. The following is a full, accurate and complete description (including
the amount of any Rentals payable thereunder) of all lease transactions
which the Borrower has entered, or become obligated to enter, as lessee
or tenant as of the date hereof in accordance with Section 6.9 of the
Revolving Credit Agreement. (Supply attachments if necessary.)
-4-
<PAGE> 76
EXHIBIT E
---------
MICROCOM, INC.
BORROWING BASE REPORT
[to come]
-5-
<PAGE> 77
EXHIBIT F
---------
ASSIGNMENT AND JOINDER AGREEMENT
Dated
-----------------------
Reference is made to the Revolving Credit Agreement dated as of July 8,
1996 as amended (the "Revolving Credit Agreement") between Microcom, Inc. (the
"Borrower"), the Lenders (as defined in the Revolving Credit Agreement) and
BayBank, N.A. as Agent. Terms defined in the Loan Agreement are used herein with
the same meanings.
(the "Assignor") and
- --------------------------------------------
(the "Assignee") agree as follows:
- --------------------------------------------
1. The Assignor hereby sells and assigns to the Assignee, without recourse,
and the Assignee hereby purchases and assumes from the Assignor, a ____%
interest in and to all of the Assignor's rights and obligations under the
Revolving Credit Agreement as of the Effective Date (as defined below),
including, without limitation, a _____ interest (which on the Effective Date is
$________) in the Assignor's share of Loans outstanding and a ________ interest
(which on the Effective Date is $__________) in the Assignor's Letter of Credit
Participations. As a result of such assignment, the Commitment Percentage of the
Assignor shall be _____%, the Commitment of the Assignor shall be $__________,
the Commitment Percentage of the Assignee shall be _____% and the Commitment of
the Assignee shall be $_____________. Concurrently herewith, the Assignee is
remitting to the Assignor, in federal funds, the amount of its participation in
each such outstanding Loan.
2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Revolving Credit Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Revolving Credit Agreement or any other instrument or document furnished
pursuant thereto, other than that the Assignor is the legal and beneficial owner
of the interest being assigned by it hereunder and that such interest is free
and clear of any adverse claim, and (ii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observation by the Borrower of any of its
obligations under the Revolving Credit Agreement or any other instrument or
document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the Revolving
Credit Agreement, together with copies of such financial statements and other
documents and information as it has deemed necessary to make its own credit
analysis and decision to enter into this Agreement; (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Person and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Loan Agreement; (iii) appoints and authorizes the Agent to take
such action as Agent
<PAGE> 78
on its behalf and to exercise such powers under the Loan Agreement as are
delegated to the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; and (iv) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Agreement are required to be performed by it.
4. The Effective Date of this Agreement shall be ____________________ (the
"Effective Date").
5. From and after the Effective Date, (i) the Assignee shall be a party to
the Revolving Credit Agreement and, to the extent rights and obligations have
been transferred to it by this Agreement, shall have the rights and obligations
of a Lender thereunder and (ii) the Assignor shall, to the extent its rights and
obligations have been transferred to the Assignee by this Agreement, relinquish
its rights and be released from its obligations under the Revolving Credit
Agreement. If the Assignor is holding any Notes, the Assignor shall, promptly
after the Effective Date, surrender such Notes to the Agent and the Agent shall
cause the Borrower to issue new Notes in accordance with Section 8.1 of the
Revolving Credit Agreement.
6. From and after the Effective Date, the Agent shall hold in trust all
payments it receives in respect of the interest assigned hereby and shall
promptly remit such payments to the Assignee.
7. This Assignment and Joinder Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Massachusetts
(without regard to conflicts of laws rules).
[NAME OF ASSIGNOR]
By:
-----------------------------------
Title:
[NAME OF ASSIGNEE]
By:
-----------------------------------
Title:
-2-
<PAGE> 79
EXHIBIT G
---------
FORM OF SUBSIDIARY GUARANTY
This GUARANTY (the "AGREEMENT") dated as of July 8, 1996 is made by
MICROCOM SYSTEMS, INC., a Delaware corporation (the "GUARANTOR"), in favor of
BAYBANK, N.A., as agent (in such capacity, the "AGENT") for the several lenders
(hereinafter, the "LENDERS") parties to the Revolving Credit Agreement dated as
of July 8, 1996 by and between MICROCOM, INC. (the "BORROWER") and the Agent on
behalf of the Lenders (as the same may be amended, modified, supplemented,
extended or restated from time to time, the "CREDIT AGREEMENT").
WHEREAS, pursuant to the Credit Agreement the Lenders have agreed, subject
to the terms and conditions thereof, to make Revolving Credit Loans to the
Borrower and the Issuing Bank (as defined in the Credit Agreement) has agreed to
issue Letters of Credit for the account of the Borrower; and
WHEREAS, it is a condition precedent to the obligations of the Lenders to
make Revolving Credit Loans and of the Issuing Bank to issue Letters of Credit
pursuant to the Credit Agreement that, among other things, the Guarantor shall
have executed and delivered a guaranty of the obligations of the Borrower under
the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and to induce the Agent
and the Lenders to enter into the Credit Agreement and the transactions
contemplated thereby, the Guarantor hereby agrees with the Agent and the Lenders
as follows:
1. DEFINED TERMS. All capitalized terms used in this Agreement (including
the Preamble hereto) and not otherwise defined herein shall have the meanings
prescribed therefor in the Credit Agreement. In addition, the following term
shall have the meaning set forth below:
"OBLIGATIONS" shall mean all obligations of the Borrower to the Agent,
the Lenders or the Issuing Bank, whether such obligations are now existing
or hereafter incurred or created, joint or several, direct or indirect,
absolute or contingent, due or to become due, matured or unmatured,
liquidated or unliquidated, arising by contract, operation of law or
otherwise, including, without limitation, (a) all obligations to pay
principal of and interest (including, without limitation, any interest
which accrues after the commencement of any case, proceeding or other
action relating to the bankruptcy, insolvency or reorganization of the
Borrower) with respect to any advance to the Borrower under the Credit
Agreement or the Notes; (b) all obligations with respect to other amounts
(including, without limitation, any fees or expenses) payable by the
Borrower under the Credit Agreement or the Notes or any other Loan
Document; (c) all obligations with respect to amounts payable by the
Borrower in connection with any Letter of Credit issued or deemed issued
under the Credit Agreement or any drawings or payments thereunder or
obligations incurred in connection therewith, including without limitation,
all obligations
<PAGE> 80
-4-
with respect to reimbursement and fees; and (d) any renewals, refinancings
or extensions of any of the foregoing.
2. GUARANTY. The Guarantor hereby unconditionally and irrevocably
guarantees to the Agent for the benefit of the Agent, the Lenders and the
Issuing Bank the prompt and complete payment and performance by the Borrower
when due (whether at stated maturity, by acceleration or otherwise) of the
Obligations. The Guarantor further agrees to pay any and all reasonable expenses
(including, without limitation, all reasonable fees and disbursements of counsel
to the Agent or the Lenders) which may be paid or incurred by the Agent or the
Lenders in enforcing, or obtaining advice of counsel in respect of, any of their
rights under this Guaranty. This Guaranty shall remain in full force and effect
until the Obligations are paid in full and the Commitments under the Credit
Agreement are terminated, notwithstanding that from time to time prior thereto
the Borrower may be free from any Obligations.
3. LIMITATION ON AMOUNT GUARANTEED; CONTRIBUTION BY GUARANTORS.
(A) Anything contained in this Guaranty to the contrary notwithstanding,
the obligations of the Guarantor hereunder shall be limited to a maximum
aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the "FRAUDULENT
TRANSFER LAWS"), in each case after giving effect to all other liabilities of
the Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of the Guarantor
in respect of intercompany indebtedness to the Borrower or other affiliates of
the Borrower to the extent that such indebtedness would be discharged in an
amount equal to the amount paid by the Guarantor hereunder and after giving
effect as assets to the value (as determined under the applicable provisions of
the Fraudulent Transfer Laws) of any rights to subrogation, reimbursement,
indemnification or contribution of the Guarantor pursuant to applicable law or
pursuant to the terms of any agreement (including without limitation any such
right of contribution under subsection 3(B) or under a Related Guaranty (as
hereinafter defined) as contemplated by subsection 3(B)).
(B) The Guarantor under this Guaranty, and the guarantors under other
guaranties, if any, relating to the Credit Agreement (the "RELATED GUARANTIES")
which contain a contribution provision similar to that set forth in this
subsection 3(B), together desire to allocate among themselves (collectively, the
"CONTRIBUTING GUARANTORS"), in a fair and equitable manner, their obligations
arising under this Guaranty and the Related Guaranties. Accordingly, in the
event any payment or distribution is made on any date by the Guarantor under
this Guaranty or a guarantor under a Related Guaranty (a "FUNDING GUARANTOR")
that exceeds its Fair Share (as defined below) as of such date, that Funding
Guarantor shall be entitled to a contribution from each of the other
Contributing Guarantors in the amount of such other Contributing Guarantor's
Fair Share Shortfall (as defined below) as of such date, with the result that
all such contributions will cause each Contributing Guarantor's Aggregate
Payments (as defined below) to equal its
<PAGE> 81
-5-
Fair Share as of such date. "FAIR SHARE" means, with respect to a Contributing
Guarantor as of any date of determination, an amount equal to (i) the ratios of
(x) the Fair Share Contribution Amount (as defined below) with respect to such
Contributing Guarantor to (y) the aggregate of the Fair Share Contribution
Amounts with respect to all Contributing Guarantors, MULTIPLIED BY (ii) the
aggregate amount paid or distributed on or before such date by all Funding
Guarantors under this Guaranty and the Related Guaranties in respect of the
obligations guaranteed. "FAIR SHARE SHORTFALL" means, with respect to a
Contributing Guarantor as of any date of determination, the excess, if any, of
the Fair Share of such Contributing Guarantor over the Aggregate Payments of
such Contributing Guarantor. "FAIR SHARE CONTRIBUTION AMOUNT" means, with
respect to a Contributing Guarantor as of any date of determination, the maximum
aggregate amount of the obligations of such Contributing Guarantor under this
Guaranty and/or the Related Guaranties, as applicable, that would not render its
obligations hereunder or thereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the United States Code
or any applicable provisions of comparable state law; PROVIDED that, solely for
purposes of calculating the "Fair Share Contribution Amount" with respect to any
Contributing Guarantor for purposes of this subsection 3(B), any assets or
liabilities of such Contributing Guarantor arising by virtue of any rights to
subrogation, reimbursement or indemnification or any rights to or obligations of
contribution hereunder or under any similar provision contained in a Related
Guaranty shall not be considered as assets or liabilities of such Contributing
Guarantor. "AGGREGATE PAYMENTS" means, with respect to a Contributing Guarantor
as of any date of determination, an amount equal to (i) the aggregate amount of
all payments and distributions made on or before such date by such Contributing
Guarantor in respect of this Guaranty and/or the Related Guaranties (including,
without limitation, in respect of this subsection 3(B) or any similar provision
contained in a Related Guaranty) MINUS (ii) the aggregate amount of all payments
received on or before such date by such Contributing Guarantor from the other
Contributing Guarantors as contributions under this subsection 3(B) of any
similar provision under similar provisions in the Related Guaranties shall be
determined as of the date on which the related payment or distribution is made
by the applicable Funding Guarantor. The allocation among Contributing
Guarantors of their obligations as set forth in this subsection 3(B) or any
similar provision contained in a Related Guaranty shall not be construed in any
way to limit the liability of the Guarantor hereunder or of any other guarantor
under a Related Guaranty. Each Contributing Guarantor under a Related Guaranty
is a third party beneficiary to the contribution agreement set forth in this
subsection 3(B).
4. RIGHT OF SETOFF. Regardless of the adequacy of any collateral or other
means of obtaining repayment of the Obligations, any deposits (general or
special, time or demand, provisional or final, including, but not limited to
indebtedness evidenced by a certificate of deposit, whether matured or
unmatured) and any other indebtedness at any time held or owing by the Agent or
the Lenders to the Guarantor may, at any time and from time to time after the
occurrence of an Event of Default, without notice to the Guarantor or compliance
with any other condition precedent now or hereafter imposed by statute, rule of
law, or otherwise (all of which are hereby expressly waived to the extent
permitted by law) be set off, appropriated, and applied by the Agent or the
Lenders, as the case may be, against any and all obligations of the Guarantor
<PAGE> 82
-6-
to the Agent or the Lenders (irrespective of whether such obligations may be
contingent or unmatured at such time) in such manner as the Agent and the
Lenders in their sole discretion may determine, and the Guarantor hereby grants
the Agent and the Lenders continuing security interests in such deposits and
indebtedness for the payment and performance of such obligations.
5. EFFECT OF BANKRUPTCY STAY. If acceleration of the time for payment or
performance of any of the Obligations is stayed upon the insolvency, bankruptcy
or reorganization of the Borrower or any other Person or otherwise, all such
amounts otherwise subject to acceleration shall nonetheless be payable in full
by the Guarantor under this Guaranty forthwith upon demand.
6. RECEIPT OF LOAN DOCUMENTS, ETC. The Guarantor confirms, represents and
warrants to the Agent and the Lenders that (i) it has received true and complete
copies of the Credit Agreement, the Notes and the other Loan Documents from the
Borrower, has read the contents thereof and reviewed the same with legal counsel
of its choice; (ii) no representations or agreements of any kind have been made
to or with the Guarantor which would limit or qualify in any way the terms of
this Guaranty; (iii) the Agent and the Lenders have made no representation to
the Guarantor as to the creditworthiness of the Borrower; and (iv) the Guarantor
has established adequate means of obtaining from the Borrower on a continuing
basis information regarding the Borrower's financial condition. The Guarantor
agrees to keep adequately informed by such means of any facts, events, or
circumstances which might in any way affect the Guarantor's risks under this
Guaranty and the Guarantor further agrees that the Agent and the Lenders shall
have no obligation to disclose to the Guarantor any information or documents
acquired by them in the course of their relationship with the Borrower.
7. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The obligations of the
Guarantor under this Guaranty shall remain in full force and effect without
regard to, and shall not be released, altered, exhausted, discharged or in any
way affected by any circumstance or condition (whether or not the Borrower shall
have any knowledge or notice thereof), including without limitation (i) any
amendment or modification of or supplement to the Credit Agreement, the Notes,
or any other Loan Document, or any obligation, duty or agreement of the Borrower
or any other Person thereunder or in respect thereof, (ii) any assignment or
transfer in whole or in part of any of the Obligations, (iii) any furnishing or
acceptance of any direct or indirect security or guaranty, or any release of or
non-perfection or invalidity of any direct or indirect security or guaranty, for
any of the Obligations, (iv) any waiver, consent, extension, renewal,
indulgence, settlement, compromise or other action or inaction under or in
respect of the Credit Agreement, the Notes, or any other Loan Document, or any
exercise or nonexercise of any right, remedy, power or privilege under or in
respect of any such instrument (whether by operation of law or otherwise), (v)
any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or similar proceeding with respect to the Borrower or
any other Person or any of their respective properties or creditors or any
resulting release or discharge of any Obligations, (vi) the voluntary or
involuntary sale or other disposition of all or substantially all the assets of
the Borrower or any other Person, (vii) the voluntary or involuntary
liquidation, dis-
<PAGE> 83
-7-
solution or termination of the Borrower or any other Person, (viii) any
invalidity or unenforceability, in whole or in part, of any term hereof or of
the Credit Agreement, the Notes, or any other Loan Document, or any obligation,
duty or agreement of the Borrower or any other Person thereunder or in respect
thereof, or any provision of any applicable law or regulation purporting to
prohibit the payment or performance by the Borrower or any other Person of any
Obligations, (ix) any failure on the part of the Borrower or any other Person
for any reason to perform or comply with any term of the Credit Agreement, the
Notes, or any other Loan Document or any other agreement, or (x) any other act,
omission or occurrence whatsoever, whether similar or dissimilar to the
foregoing. The Guarantor authorizes the Borrower, each other guarantor in
respect of Obligations and the Agent and the Lenders at any time in their
discretion, as the case may be, to alter any of the terms of the Obligations.
8. GUARANTOR AS PRINCIPAL. If for any reason the Borrower or any other
Person is under no legal obligation to discharge any Obligations, or if any
other moneys included in Obligations have become unrecoverable from the Borrower
or any other Person by operation of law or for any other reason, including,
without limitation, the invalidity or irregularity in whole or in part of any
Obligation or of the Credit Agreement, the Notes, or any other Loan Document,
the legal disability of the Borrower or any other obligor in respect of
Obligations, any discharge of or limitation on the liability of the Borrower or
any other person or any limitation on the method or terms of payment under any
Obligation, or of the Credit Agreement, the Notes, or any other Loan Document,
which may now or hereafter be caused or imposed in any manner whatsoever
(whether consensually, by operation of law or otherwise), this Guaranty shall
nevertheless remain in full force and effect and shall be binding upon the
Guarantor to the same extent as if the Guarantor at all times had been the
principal obligor on all Obligations.
9. WAIVER OF DEMAND, NOTICE, ETC. The Guarantor hereby waives, to the
extent not prohibited by applicable law, (i) all presentments, demands for
performance, notice of nonperformance, protests, notices of protests and notices
of dishonor in connection with the Obligations or the Credit Agreement, the
Notes, or any other Loan Document, including but not limited to notice of
additional indebtedness constituting Obligations or the existence, creation or
incurring of any new or additional indebtedness or obligation or of any action
or non-action on the part of the Borrower, the Agent or the Lenders, any
endorser or creditor of the Borrower or any other Person; (ii) any notice of any
indulgence, extensions or renewals granted to any obligor with respect to
Obligations; (iii) any requirement of diligence or promptness in the enforcement
of rights under the Credit Agreement, the Notes, or any other Loan Document, or
any other agreement or instrument directly or indirectly relating thereto or to
the Obligations; (iv) any enforcement of any present or future agreement or
instrument relating directly or indirectly thereto or to the Obligations; (v)
notice of any of the matters referred to in PARAGRAPH 8 above; (vi) any defense
of any kind which the Guarantor may now have with respect to his liability under
this Guaranty; (vii) any right to require the Agent or the Lenders, as a
condition of enforcement of this Guaranty, to proceed against the Borrower or
any other Person or to proceed against or exhaust any security held by the Agent
or the Lenders at any time or to pursue any other right or remedy in the Agent's
or the Lenders' power before proceeding against the Guarantor; (viii)
<PAGE> 84
-8-
any defense that may arise by reason of the incapacity, lack of authority, death
or dis ability of any other Person or Persons or the failure of the Agent or the
Lenders to file or enforce a claim against the estate (in administration,
bankruptcy, or any other proceeding) of any other Person or Persons; (ix) any
defense based upon an election of remedies by the Agent or the Lenders; (x) any
defense arising by reason of any "one action" or "anti-deficiency" law or any
other law which may prevent the Agent or the Lenders from bringing any action,
including a claim for deficiency, against the Guarantor, before or after the
Agent's or the Lenders' commencement of completion of any foreclosure action,
either judicially or by exercise of a power of sale; (xi) any defense based upon
any lack of diligence by the Agent or the Lenders in the collection of any
Obligation; (xii) any duty on the part of the Agent or the Lenders to disclose
to the Guarantor any facts the Agent or the Lenders may now or hereafter know
about the Borrower or any other obligor in respect of Obligations; (xiii) any
defense arising because of an election made by the Agent or the Lenders under
Section 1111(b)(2) of the Federal Bankruptcy Code; (xiv) any defense based on
any borrowing or grant of a security interest under Section 364 of the Federal
Bankruptcy Code; and (xv) any defense based upon or arising out of any defense
which the Borrower or any other Person may have to the payment or performance of
Obligations (including but not limited to failure of consideration, breach of
warranty, fraud, payment, accord and satisfaction, strict foreclosure, statute
of frauds, bankruptcy, infancy, statute of limitations, lender liability and
usury). Guarantor acknowledges and agrees that each of the waivers set forth
herein on the part of the Guarantor is made with Guarantor's full knowledge of
the significance and consequences thereof and that under the circumstances the
waivers are reasonable. If any such waiver is determined to be contrary to any
applicable law or public policy, such waiver shall be effective only to the
extent permitted by such law or public policy.
10. REINSTATEMENT. This Guaranty shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
the Agent or the Lenders upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Borrower or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Borrower or any substantial part of its property, or otherwise,
all as though such payments had not been made.
11. PAYMENTS. The Guarantor hereby agrees that the Obligations will be paid
to the Agent for the benefit of the Agent and the Lenders without set-off or
counterclaim in U.S. Dollars at the office of the Agent located at 7 New England
Executive Park, Burlington, Massachusetts 01803, or to such other location as
the Agent shall notify the Guarantor.
12. REPRESENTATION AND WARRANTY. The Guarantor represents and warrants that
the execution, delivery and performance of this Guaranty is within the corporate
powers of the Guarantor and has been duly authorized by all necessary corporate
action.
13. NO SUBROGATION. Notwithstanding any payment or payments made by the
Guarantor hereunder, or any set-off or application of funds of the Guarantor by
the Agent or the
<PAGE> 85
-9-
Lenders, the Guarantor shall not be entitled to be surrogated to any of the
rights of the Agent or the Lenders against the Borrower or against any
collateral security or guaranty or right of offset held by the Agent or the
Lenders for the payment of the Obligations, nor shall the Guarantor seek any
reimbursement from the Borrower in respect of payments made by the Guarantor
hereunder, until all amounts owing to the Agent and the Lenders by the Borrower
on account of the Obligations are paid in full and the Commitments of the
Lenders are terminated. If any amount shall be paid to the Guarantor on account
of such subrogation rights at any time when not all of the Obligations shall
have been paid in full, such amount shall be held by the Guarantor in trust for
the Agent and the Lenders, segregated from other funds of the Guarantor, and
shall, forthwith upon receipt by the Guarantor, be turned over to the Agent in
the exact form received by the Guarantor (duly endorsed by the Guarantor to the
Agent, if required), to be applied against the Obligations, whether matured or
unmatured, in such order as the Agent may determine.
14. SEVERABILITY. Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
15. PARAGRAPH HEADINGS. The paragraph headings used in this Guaranty are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
16. NO WAIVER; CUMULATIVE REMEDIES. The Agent and the Lenders shall not
(except by a written instrument pursuant to PARAGRAPH 17 hereof) by any act of
delay, indulgence, omission or otherwise, be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default or in
any breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Agent or the Lenders, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Agent or the Lenders of any right or remedy hereunder
on any one occasion shall not be construed as a bar to any right or remedy which
the Agent or the Lenders would otherwise have on any future occasion. The rights
and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
17. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS. None of the terms or
provisions of this Guaranty may be waived, amended, supplemented or otherwise
modified except by a written instrument executed by the Guarantor and the Agent
and the Lenders, provided that any provision of this Guaranty may be waived by
the Agent and the Lenders in a letter or agreement executed by the Agent and the
Lenders or by telecopy from the Agent and the Lenders. This Guaranty shall be
binding upon the successors and assigns of the Guarantor and shall inure to the
benefit of the Agent, the Lenders and their respective successors and assigns.
<PAGE> 86
-10-
18. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; GOVERNING LAW. THE
GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO A
JURY TRIAL IN ANY SUIT, ACTION OR PROCEEDING WHICH ARISES OUT OF OR BY REASON OF
THIS GUARANTY, ANY LOAN DOCUMENT (AS DEFINED IN THE CREDIT AGREEMENT) OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
BY ITS EXECUTION AND DELIVERY OF THIS GUARANTY, THE GUARAN TOR ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT OR
PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
GUARANTY, ANY LOAN DOCUMENT (AS DEFINED IN THE CREDIT AGREEMENT), OR THE
TRANSACTIONS CONTEMPLATED HEREBY, IN ADDITION TO ANY OTHER COURT IN WHICH SUCH
ACTION, SUIT OR PROCEEDING MAY BE BROUGHT, IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED BY ANY SUCH COURT IN ANY SUCH ACTION, SUIT OR PROCEEDING IN
WHICH IT SHALL HAVE BEEN SERVED WITH PROCESS IN THE MANNER HEREINAFTER PROVIDED,
AND TO THE EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES AND AGREES NOT TO ASSERT,
BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN SUCH ACTION, SUIT OR PROCEEDING
ANY CLAIMS THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT,
THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE
ACTION, SUIT OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE
THEREOF IS IMPROPER, AND AGREES THAT PROCESS MAY BE SERVED UPON IT IN ANY SUCH
ACTION, SUIT OR PROCEEDING IN THE MANNER PROVIDED BY CHAPTER 223A OF THE GENERAL
LAWS OF MASSACHUSETTS, RULE 4 OF THE MASSACHUSETTS RULES OF CIVIL PROCEDURE OR
RULE 4 OF THE FEDERAL RULES OF CIVIL PROCEDURE.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS (EXCEPTING LAWS REGARDING CHOICE OF LAW) OF THE COMMONWEALTH OF
MASSACHUSETTS.
19. NOTICES. All notices under this Guaranty shall be in writing, and shall
be delivered by hand, by a nationally recognized commercial overnight delivery
service, by first class mail or by telecopy, delivered, addressed or
transmitted, if to the Agent or the Lenders, at their respective addresses or
telecopy numbers set out in the Credit Agreement, and if to the Guarantor, at
its address or telecopy number set out below its signature in this Guaranty.
Such notices shall be effective (a) in the case of hand deliveries, when
received, (b) in the case of an
<PAGE> 87
-11-
overnight delivery service, on the next Business Day after being placed in the
possession of such delivery service, with delivery charges prepaid, (c) in the
case of mail, three days after deposit in the postal system, first class postage
prepaid and (d) in the case of telecopy notices, when electronic indication of
receipt is received. The Borrower, the Guarantor, the Agent and the Lenders may
each change addresses and telecopy numbers by written notice to the others.
<PAGE> 88
-12-
IN WITNESS WHEREOF, the undersigned has caused this GUARANTY to be duly
executed and delivered as of the date first above written.
MICROCOM SYSTEMS, INC.
By /s/ ROLAND D. PAMPEL
------------------------------------
Name: ROLAND D. PAMPEL
Title: PRESIDENT, CHIEF EXECUTIVE
OFFICER AND DIRECTOR
Address for Notices:
--------------------------------------
--------------------------------------
--------------------------------------
Telecopy No.:
<PAGE> 1
EXHIBIT 10.3
NOTE
$20,000,000 July 8, 1996
FOR VALUE RECEIVED, the undersigned (the "Borrower") absolutely and
unconditionally promises to pay to the order of BAYBANK, N.A. ("Payee") at the
head office of BayBank, N.A., as Agent at 175 Federal Street, Boston,
Massachusetts 02110:
(a) on the Maturity Date, the principal amount of Twenty Million
Dollars ($20,000,000) or, if less, the aggregate unpaid principal amount of
Revolving Credit Loans advanced by the Payee to the Borrower pursuant to the
Revolving Credit Agreement dated as of July 8, 1996 (as amended or supplemented
from time to time, the "Revolving Credit Agreement") by and among the Borrower
and the Lenders (as defined therein); and
(b) interest on the principal balance hereof from time to time
outstanding from the date hereof through and including the date on which such
prinicpal amount is paid in full, at the times and at the rates provided in the
Revolving Credit Agreement.
This Note evidences borrowings under, is subject to the terms and
conditions of and has been issued by the Borrower in accordance with the terms
of the Revolving Credit Agreement and is one of the Notes referred to therein.
The Payee and any holder hereof is entitled to the benefits and subject to the
conditions of the Revolving Credit Agreement and may enforce the agreements of
the Borrower contained therein, and any holder hereof may exercise the
respective remedies provided for thereby or otherwise available in respect
thereof, all in accordance with the respective terms thereof.
All capitalized terms used in this Note and not otherwise defined
herein shall have the same meanings herein as in the Revolving Credit
Agreement.
The Borrower has the right in certain circumstances and the obligation
under certain other circumstances to repay or prepay the whole or part of the
principal of this Note on the terms and conditions specified in the Agreement.
If any Event of Default shall occur and be continuing, the entire
unpaid principal amount of this Note and all of the unpaid interest accured
thereon may become or be declared due and payable in the manner and with the
effect provided in the Revolving Credit Agreement.
The Borrower and every endorser and guarantor of this Note or the
obligation represented hereby waive presentment, demand, notice, protest and
all other demands and notice in connection with the delivery, acceptance,
performance, default or enforcement of this Note, assent to any extension or
postponement of the time of payment or any other indulgence, to any
<PAGE> 2
substitution, exchange or release of collateral and to the addition or release
of any other party or Person primarily or secondarily liable.
This Note shall be deemed to take effect as a sealed instrument under
the laws of the Commonwealth of Massachusetts and for all purposes shall be
construed in accordance with such laws (without regard to conflicts of laws
rules).
IN WITNESS WHEREOF, the Borrower has caused this Note to be signed
under seal by its duly authorized officer as of the day and year first above
written.
MICROCOM, INC.
By:
--------------------------------
Title:
<PAGE> 1
EXHIBIT 10.4
NOTE
$15,000,000 July 8, 1996
FOR VALUE RECEIVED, the undersigned (the "Borrower") absolutely and
unconditionally promises to pay to the order of THE FIRST NATIONAL BANK OF
BOSTON ("Payee") at the head office of BayBank, N.A., as Agent at 175 Federal
Street, Boston, Massachusetts 02110:
(a) on the Maturity Date, the principal amount of Fifteen Million
Dollars ($15,000,000) or, if less, the aggregate unpaid principal amount of
Revolving Credit Loans advanced by the Payee to the Borrower pursuant to the
Revolving Credit Agreement dated as of July 8, 1996 (as amended or supplemented
from time to time, the "Revolving Credit Agreement") by and among the Borrower
and the Lenders (as defined therein); and
(b) interest on the principal balance hereof from time to time
outstanding from the date hereof through and including the date on which such
prinicpal amount is paid in full, at the times and at the rates provided in the
Revolving Credit Agreement.
This Note evidences borrowings under, is subject to the terms and
conditions of and has been issued by the Borrower in accordance with the terms
of the Revolving Credit Agreement and is one of the Notes referred to therein.
The Payee and any holder hereof is entitled to the benefits and subject to the
conditions of the Revolving Credit Agreement and may enforce the agreements of
the Borrower contained therein, and any holder hereof may exercise the
respective remedies provided for thereby or otherwise available in respect
thereof, all in accordance with the respective terms thereof.
All capitalized terms used in this Note and not otherwise defined
herein shall have the same meanings herein as in the Revolving Credit
Agreement.
The Borrower has the right in certain circumstances and the obligation
under certain other circumstances to repay or prepay the whole or part of the
principal of this Note on the terms and conditions specified in the Agreement.
If any Event of Default shall occur and be continuing, the entire
unpaid principal amount of this Note and all of the unpaid interest accured
thereon may become or be declared due and payable in the manner and with the
effect provided in the Revolving Credit Agreement.
The Borrower and every endorser and guarantor of this Note or the
obligation represented hereby waive presentment, demand, notice, protest and
all other demands and notice in connection with the delivery, acceptance,
performance, default or enforcement of this Note, assent to any extension or
postponement of the time of payment or any other indulgence, to any
<PAGE> 2
substitution, exchange or release of collateral and to the addition or release
of any other party or Person primarily or secondarily liable.
This Note shall be deemed to take effect as a sealed instrument under
the laws of the Commonwealth of Massachusetts and for all purposes shall be
construed in accordance with such laws (without regard to conflicts of laws
rules).
IN WITNESS WHEREOF, the Borrower has caused this Note to be signed
under seal by its duly authorized officer as of the day and year first above
written.
MICROCOM, INC.
By:
--------------------------------
Title:
<PAGE> 1
EXHIBIT 10.5
NOTE
$10,000,000 July 8, 1996
FOR VALUE RECEIVED, the undersigned (the "Borrower") absolutely and
unconditionally promises to pay to the order of SILICON VALLEY BANK ("Payee")
at the head office of BayBank, N.A., as Agent at 175 Federal Street, Boston,
Massachusetts 02110:
(a) on the Maturity Date, the principal amount of Ten Million
Dollars ($10,000,000) or, if less, the aggregate unpaid principal amount of
Revolving Credit Agreement dated as of July 8, 1996 (as amended or supplemented
from time to time, the "Revolving Credit Agreement") by and among the Borrower
and the Lenders (as defined therein); and
(b) interest on the principal balance hereof from time to time
outstanding from the date hereof through and including the date on which such
principal amount is paid in full, at the times and at the rates provided in the
Revolving Credit Agreement.
This Note evidences borrowings under, is subject to the terms and
conditions of and has been issued by the Borrower in accordance with the terms
of the Revolving Credit Agreement and is one of the Notes referred to therein.
The Payee and any holder hereof is entitled to the benefits and subject to the
conditions of the Revolving Credit Agreement and may enforce the agreements of
the Borrower contained therein, and any holder hereof may exercise the
respective remedies provided for thereby or otherwise available in respect
thereof, all in accordance with the respective terms thereof.
All capitalized terms used in this Note and not otherwise defined
herein shall have the same meanings herein as in the Revolving Credit
Agreement.
The Borrower has the right in certain circumstances and the obligation
under certain other circumstances to repay or prepay the whole or part of the
principal of this Note on the terms and conditions specified in the Agreement.
If any Event of Default shall occur and be continuing, the entire
unpaid principal amount of this Note and all of the unpaid interest accured
thereon may become or be declared due and payable in the manner and with the
effect provided in the Revolving Credit Agreement.
The Borrower and every endorser and guarantor of this Note or the
obligation represented hereby waive presentment, demand, notice, protest and
all other demands and notice in connection with the delivery, acceptance,
performance, default or enforcement of this Note, assent to any extension or
postponement of the time of payment or any other indulgence, to any
<PAGE> 2
substitution, exchange or release of collateral and to the addition or release
of any other party or Person primarily or secondarily liable.
This Note shall be deemed to take effect as a sealed instrument under
the laws of the Commonwealth of Massachusetts and for all purposes shall be
construed in accordance with such laws (without regard to conflicts of laws
rules).
IN WITNESS WHEREOF, the Borrower has caused this Note to be signed
under seal by its duly authorized officer as of the day and year first above
written.
MICROCOM, INC.
By:
--------------------------------
Title:
<PAGE> 1
Exhibit 10.6
SECURED PROMISSORY NOTE
-----------------------
$605,244 Boston, Massachusetts
- -------- June 1, 1995
FOR VALUE RECEIVED, the undersigned promises to pay Microcom, Inc. (the
"Company"), or order, the principal amount of SIX HUNDRED FIVE THOUSAND TWO
HUNDRED FORTY-FOUR DOLLARS ($605,244) on June 1, 2004, with interest, compounded
annually, on the unpaid principal amount hereof at the rate per annum of six and
eighty-three one-hundredths percent (6.83%), payable in annual installments of
interest in the amount of $54,629 each on the anniversary date of this Secured
Promissory Note (the "Note") commencing on June 1, 1996 and ending on June 1,
2004.
This Note evidences the obligation of the undersigned in the Company for the
purchase price of 109,776 shares (the "Shares") of Common Stock, par value $.01,
of the Company acquired by the undersigned.
This Note may be prepaid in whole or in part at any time and from time to time
without premium or penalty, and shall be prepaid in whole or in part, as
applicable, before or from the proceeds of the sale (in accordance with the
provisions of the Articles of Incorporation, as amended, of the Company) of all
or any portion of the Shares by the undersigned in an amount equal to the
accrued, unpaid interest together with an amount equal to the original principal
amount hereof multiplied by a fraction, the numerator of which shall be the
number of the Shares so sold and the denominator of which shall be the total
number of the Shares. This Note shall be secured in part by a pledge of Shares
as set forth in the paragraph marked "Pledge of Shares" at the end of this Note.
In the event the undersigned fails to pay the outstanding principal of or
interest on this Note within thirty (30) days after the date such principal or
interest on this Note is due, the undersigned shall be in default hereunder and,
at the option of the holder, the entire amount of principal and interest shall
be accelerated and immediately due and payable. The undersigned agrees to pay
upon default the costs of collection, including reasonable attorneys' fees.
Upon default, the holder hereof shall have full recourse against the undersigned
for up to $135,673 of unpaid amounts due hereunder, and with respect to all
remaining amounts of unpaid principal and interest due hereunder, the holder
hereof shall have recourse only to the holder's rights and remedies under the
Pledge of Shares; PROVIDED, that once $135,673 of principal due hereunder has
been repaid by the undersigned, the holder shall have recourse only to the
holder's rights and remedies under the Pledge Agreement with respect to all
remaining amounts of unpaid principal and interest due hereunder.
<PAGE> 2
No delay or omission on the part of the holder in exercising any right hereunder
shall operate as a waiver of such right or of any other right of such holder nor
shall any delay, omission or waiver on any one occasion be deemed a bar to or
waiver of the same or any other right on any future occasion. The undersigned
and every endorser or guarantor of this Note regardless of the time, order or
place of signing waives presentment, demand, protest and notices of every kind
and assent to any extension or postponement of the time of payment or any other
indulgence, to any substitution, exchange or release of collateral and to the
addition or release of any party or person primarily and secondarily liable.
None of the terms or provisions of the Note may be excluded, modified or amended
except by a written instrument duly executed on behalf of the holder, expressly
referring hereto and setting forth the provision so excluded, modified or
amended.
All rights and obligations hereunder shall be governed by the laws of the
Commonwealth of Massachusetts and this Note shall be deemed to be under seal.
James M. Dow
Pledge of Shares
----------------
The undersigned (the "Pledgor") agrees that it is a condition to the Company's
acceptance of this Note as payment for the shares that the Pledgor grant to the
Company the security interest in the Shares granted hereby. The Pledgor hereby
deposits with the pledges to the Company the Shares, the certificates
representing which shall be held by the Company until such time as the Note is
paid in full (or until such time as the Note is paid in part, in which case
certificates representing Shares equal in value to the portion of the Note so
paid shall be released from this Pledge) and the Pledgor hereby grants to the
Company a security interest in and of the Shares, as security for the due and
punctual payment and performance of the obligations set forth in this Note. Upon
the occurrence of a default under this Note, the Company shall be entitled to
all of the rights of a secured party under the Uniform Commercial Code with
respect to the Shares.
James M. Dow
<PAGE> 1
EXHIBIT 11.0
MICROCOM, INC.
<TABLE>
CALCULATION OF NET INCOME PER SHARE
FOR QUARTERS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
(In thousands, except per share amounts)
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Net income..................................................... $ 281 $ 2,115
======= =======
Reconciliation of average number of shares outstanding to
the amount used in net income per share computation:
Weighted average number of shares outstanding............... 15,836 11,549
Assumed exercise of stock options........................... 1,021 1,159
------- -------
Weighted average number of shares outstanding, as adjusted.. 16,857 12,708
======= =======
Net income per share........................................... $ .02 $ .17
======= =======
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS APPEARING IN THE REGISTRANT'S
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996, TO WHICH THIS
SCHEDULE IS AN EXHIBIT, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
QUARTERLY REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,293
<SECURITIES> 41
<RECEIVABLES> 46,243
<ALLOWANCES> 305
<INVENTORY> 52,775
<CURRENT-ASSETS> 106,132
<PP&E> 19,606
<DEPRECIATION> 10,277
<TOTAL-ASSETS> 130,077
<CURRENT-LIABILITIES> 23,057
<BONDS> 0
<COMMON> 169
0
0
<OTHER-SE> 104,880
<TOTAL-LIABILITY-AND-EQUITY> 130,077
<SALES> 41,777
<TOTAL-REVENUES> 41,777
<CGS> 27,485
<TOTAL-COSTS> 27,485
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 239
<INCOME-PRETAX> 331
<INCOME-TAX> 50
<INCOME-CONTINUING> 281
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 281
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
