<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
- ------------------------------------------------------------------------------
FOR THE QUARTER ENDED OCTOBER 31, 1996 COMMISSION FILE NUMBER 0-22846
CMG INFORMATION SERVICES, INC.
------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 04-2921333
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 BRICKSTONE SQUARE, FIRST FLOOR
ANDOVER, MASSACHUSETTS 01810
(Address of principal executive offices) (Zip Code)
(508) 684-3600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days
Yes X No
--------- ---------
Number of shares outstanding of the issuer's common stock, as of December 9,
1996
COMMON STOCK, PAR VALUE $.01 PER SHARE 9,100,132
- -------------------------------------- --------------------------
Class Number of shares outstanding
<PAGE>
CMG INFORMATION SERVICES, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets
October 31, 1996 and July 31, 1996 3
Consolidated Statements of Operations
Three months ended October 31, 1996 and 1995 4
Consolidated Statements of Cash Flows
Three months ended October 31, 1996 and 1995 5
Notes to Interim Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-11
Part II. OTHER INFORMATION 12-13
SIGNATURE 14
Exhibit 11 15
</TABLE>
2
<PAGE>
CMG INFORMATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
(in thousands, except share and per
share amounts)
October 31, July 31,
1996 1996
----------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 53,689 $ 63,387
Available-for-sale securities 7,630 13,069
Accounts receivable, trade,
less allowance for doubtful
accounts 15,041 10,666
License fees receivable 1,274 1,032
Prepaid expenses and other
current assets 3,391 2,199
Deferred income taxes 585 213
-------- --------
Total current assets 81,610 90,566
Property and equipment, net 10,101 8,461
Investments in affiliates 4,512 4,073
Cost in excess of net assets of
subsidiaries acquired, net of
accumulated amortization 18,908 2,299
Other assets 4,127 4,104
-------- --------
$119,258 $109,503
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,397 $ 7,251
Accrued expenses 11,204 6,245
Deferred revenues 4,195 4,620
Current installments of long
term debt 2,174 245
Other current liabilities 1,421 196
-------- --------
Total current liabilities 27,391 18,557
Long term debt, less current
installments 12,484 208
Deferred income taxes 7,597 9,122
Other long term liabilities 468 347
Minority interest 25,422 27,277
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value.
Authorized 5,000,000 shares; none issued -- --
Common stock, $.01 par value.
Authorized 40,000,000 shares; issued
9,178,251 shares at October 31, 1996
and 9,166,747 shares at July 31, 1996 92 92
Additional paid-in capital 9,380 9,243
Treasury stock, at cost. 85,000 shares
at October 31, 1996 (836) --
Retained earnings 37,260 44,657
-------- --------
Total stockholders' equity 45,896 53,992
-------- --------
$119,258 $109,503
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
CMG INFORMATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
Three months ended October 31,
--------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
Net sales $ 10,640 $ 5,835
Operating expenses:
Cost of sales 6,616 3,593
Research and development 4,965 501
In-process research and
development 1,312 --
Selling 7,956 1,096
General and administrative 4,240 1,679
-------- -------
Total operating expenses 25,089 6,869
-------- -------
Operating loss (14,449) (1,034)
-------- -------
Other income (deductions):
Interest income, net 924 239
Gain on sale of
available-for-sale securities -- 30,049
Gain on sale of investment in
affiliate 3,616 --
Equity in losses of affiliates (1,008) (270)
Minority interest 2,422 43
-------- -------
5,954 30,061
-------- -------
Income (loss) before income taxes (8,495) 29,027
Income tax expense (benefit) (1,098) 10,849
-------- -------
Net income (loss) $ (7,397) $18,178
======== =======
Primary earnings (loss) per share $(0.81) $1.90
======== =======
Fully diluted earnings (loss) per share $(0.81) $1.85
======== =======
Weighted average shares outstanding:
Primary 9,167 9,554
======== =======
Fully diluted 9,167 9,822
======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
CMG INFORMATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
(in thousands)
Three months ended October 31,
--------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (7,397) $ 18,178
Adjustments to reconcile net
income (loss) to net cash
used for operating
activities:
Depreciation and amortization 1,105 412
Deferred income taxes (1,572) (49)
Gain on sale of
available-for-sale securities -- (30,049)
Gain on sale of investment in
affiliate (3,616) --
Equity in losses of affiliates 1,008 270
Minority interest (2,422) (43)
In-process research and
development 1,312 --
Changes in operating assets and
liabilities, excluding effects
of acquired companies:
Accounts and license fees
receivable 223 (1,183)
Prepaid expenses and other
current assets (490) (115)
Other assets 384 101
Accounts payable and accrued
expenses 1,282 674
Deferred revenues (425) --
Refundable and accrued
income taxes 455 10,737
-------- --------
Net cash used for operating activities (10,153) (1,067)
-------- --------
Cash flows from investing activities:
Additions to property and
equipment (1,703) (1,024)
Proceeds from sale or
maturities of
available-for-sale securities 9,519 57,462
Investments in affiliates and
acquisitions of subsidiaries (21,348) --
Proceeds from sale of
investment in affiliate 550 --
Other (456) (610)
-------- --------
Net cash provided by (used for)
investing activities (13,438) 55,828
-------- --------
Cash flows from financing activities:
Proceeds from issuance of
notes payable 14,205 --
Sale of common stock, net 61 164
Purchase of treasury stock (836) --
Other 463 (109)
-------- --------
Net cash provided by financing
activities 13,893 55
-------- --------
Net increase (decrease) in cash and
cash equivalents (9,698) 54,816
Cash and cash equivalents at beginning
of period 63,387 9,423
-------- --------
Cash and cash equivalents at end of
period $ 53,689 $ 64,239
======== ========
Supplemental disclosure information:
Cash paid during the period for:
Interest $ 69 $ --
======== ========
Income taxes $ 16 $ 86
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
CMG INFORMATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared by the
Company in accordance with generally accepted accounting principles. In the
opinion of management, the accompanying consolidated financial statements
contain all adjustments, consisting only of those of a normal recurring nature,
necessary for a fair presentation of the Company's financial position, results
of operations and cash flows at the dates and for the periods indicated. While
the Company believes that the disclosures presented are adequate to make the
information not misleading, these consolidated financial statements should be
read in conjunction with the audited financial statements and related notes for
the year ended July 31, 1996 which are contained in the Company's Form 10-K.
The results for the three month period ended October 31, 1996 are not
necessarily indicative of the results to be expected for the full fiscal year.
Certain prior year amounts in the consolidated financial statements have been
reclassified in accordance with generally accepted accounting principles to
conform with current year presentation and to present the Company's subsidiary,
SalesLink Corporation (SalesLink), as part of the Company's continuing
operations. SalesLink was identified for disposition during the fourth quarter
of fiscal 1995 and had been accounted for as a discontinued operation from that
time until the second quarter of fiscal 1996. During the second quarter of
fiscal 1996, the Company decided to retain SalesLink because of its potential
synergies with the Company's subsidiary, CMG Direct Interactive, Inc.
Accordingly the operating results of SalesLink are now included in continuing
operations, classified as the Company's fulfillment services segment, and
fiscal year 1996 amounts have been reclassified to present SalesLink as part of
continuing operations. During the first quarter of fiscal 1996, SalesLink
generated sales and operating income of $2,473,000 and $172,000, respectively.
The total assets and liabilities of SalesLink were $4,989,000 and $1,255,000,
respectively, as of October 31, 1995.
B. ACQUISITIONS AND INVESTMENTS
During the first quarter of fiscal year 1997 the Company, through its
subsidiary limited partnership, CMG@Ventures, invested a total of
$3,250,000 to acquire a 46% minority interest in Parable LLC (Parable), a
developer of easy-to-use interactive multimedia software, and a 26% minority
interest in Silknet Software, Inc. (Silknet), a provider of Web-based customer
service software. The Company's investments in Parable and Silknet are
accounted for on the equity method. The acquisition accounting for the
Company's investments in Parable and Silknet resulted in a total of $1,312,000
being identified as in-process research and development, which was expensed
during the quarter because technological feasibility had not been reached at
the dates the investments were made.
On October 24, 1996, the Company's fulfillment services subsidiary, SalesLink,
acquired Pacific Link, a company specializing in high technology product and
literature fulfillment and turnkey outsourcing. The consideration for the
acquisition was $17 million, $8.5 million of which was paid in cash at the date
of acquisition, $1 million of which SalesLink is obligated to pay (along with
interest at the annual rate of 7%) on January 31, 1997, and the remaining $7.5
million of which was financed through a seller's note. The seller's note is
supported by a bank letter of credit, bears interest at 7% per year and is
payable monthly in arrears over a term of 30 months beginning July 31, 1997.
The sources of the cash portion of the purchase price were $3 million from
corporate funds provided by the Company to SalesLink for the acquisition and
$5.5 million from a bank loan. The bank loan provides for the option of
interest at the London Interbank Offered Rate (LIBOR) or the higher of 1.) the
rate announced by First National Bank of Boston as its base rate, or 2.) one
half percent above the Federal Funds Effective Rate plus, in any case, an
applicable margin based on SalesLink's leverage ratio. The bank loan is
repayable in quarterly installments beginning January 31, 1998 through July 31,
2001, with the remaining balance to be repaid on October 1, 2001. Additional
purchase price of up to $1 million could be paid if certain future performance
goals are met.
6
<PAGE>
CMG INFORMATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
B. ACQUISITIONS AND INVESTMENTS (CONTINUED)
The acquisition of Pacific Link has been accounted for using the purchase
method of accounting, and, accordingly, the purchase price has been allocated
to the assets purchased and the liabilities assumed based upon the fair values
at the date of acquisition. The excess of the purchase price over the fair
values of the net assets acquired was $16.1 million and has been recorded as
goodwill, which will be amortized on a straight line basis over 15 years.
The net purchase price was allocated as follows:
<TABLE>
<S> <C>
Working capital $ 197,000
Property, plant and equipment 668,000
Other assets 181,000
Goodwill 16,077,000
Other liabilities (123,000)
-----------
Purchase price $17,000,000
===========
</TABLE>
C. SALE OF INVESTMENT IN TELET COMMUNICATIONS
On September 19, 1996, the Company sold its equity interest in TeleT
Communications, LLC (TeleT) to Premiere Technologies (Premiere) for $550,000 in
cash and 320,833 shares of Premiere stock. The Company, through CMG@Ventures,
acquired its equity interest in TeleT for $750,000 during April 1996. As a
result of the sale, the Company recognized a pretax gain of $3,616,000,
reported net of the 22.5% interest attributed to CMG@Ventures' profit partners,
reflected as "Gain on sale of investment in affiliate". Of the shares received,
37,500 are to be held in escrow for a six year period, subject to certain
customary conditions, and have been classified in other long term assets with a
carrying value of $450,000. The remaining shares are subject to an average one
year holding period, and have been classified in available-for-sale securities,
with a carrying value of $4,080,000, net of market value discount to reflect
the holding period requirement.
A. AVAILABLE-FOR-SALE SECURITIES
At October 31, 1996, available-for-sale securities consist of equity and debt
securities, carried at fair value. The estimated fair value of these securities
consists of $4,080,000 of Premiere Technologies common stock and $3,550,000 of
U.S. Government agency obligations which the Company does not intend to hold to
maturity. Since the estimated fair value of each investment approximates its
carrying value or amortized cost, there are no unrealized gains or losses
reflected as of October 31, 1996.
E. EARNINGS (LOSS) PER SHARE
Net income (loss) per common share is computed based upon the weighted average
number of common and common equivalent shares outstanding during each period.
Common equivalent shares, using the treasury stock method, are included in the
per share calculations only when the effect of their inclusion would be
dilutive. Accordingly, since the Company reported a net loss during the first
quarter of fiscal 1997, common equivalent shares have not been included in the
calculation of weighted average shares outstanding for the three month period
ending October 31, 1996. Common stock equivalent shares consist of stock
options. On February 2, 1996, the Company effected a two-for-one common stock
split in the form of a stock dividend. Accordingly, the consolidated financial
statements have been retroactively adjusted to reflect this event.
7
<PAGE>
CMG INFORMATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
F. SEGMENT INFORMATION
The Company's operations are classified in three primary business segments: (i)
lists and database services, (ii) fulfillment services and (iii) investment and
development. Summarized financial information by business segment is as
follows:
<TABLE>
<CAPTION>
Three months ended October 31,
--------------------------------
1996 1995
---------------- --------------
<S> <C> <C>
Net sales:
Lists and database services $ 3,100,000 $ 3,135,000
Fulfillment services 3,544,000 2,473,000
Investment and development 3,996,000 227,000
------------ -----------
$ 10,640,000 $ 5,835,000
============ ===========
Operating income (loss):
Lists and database services $ (1,423,000) $ 441,000
Fulfillment services 585,000 172,000
Investment and development (13,611,000) (1,647,000)
------------ -----------
$(14,449,000) $(1,034,000)
============ ===========
</TABLE>
G. SUBSEQUENT EVENTS
On December 2, 1996, one of the Company's subsidiaries, FreeMark
Communications, Inc. (FreeMark) suspended all operations of its free email
service. Various financing options are being pursued, including the sale of
the business and/or the sale of its subscriber base. Any potential pre-tax
charge-off in the second quarter of fiscal year 1997, with respect to the
Company's investment in FreeMark, is not expected to be material to the
Company's consolidated financial statements.
On December 9, 1996 Microsoft Corp. entered into a definitive agreement to
acquire one of the Company's subsidiaries, NetCarta Corp., for $20,000,000 in
cash, subject to certain customary conditions. Additionally, Microsoft agreed
to acquire previously unissued shares of the Company's stock to obtain an
approximate 4.9 percent ownership interest in the Company.
On December 9, 1996, Vicinity Corporation, in which CMG@Ventures owns a 47%
interest successfully completed a $5,000,000 equity financing, including
$1,845,000 invested by CMG@Ventures. Additionally, the Company's 61% owned
subsidiary, GeoCities, is actively pursuing an additional equity financing
which is expected to be completed in the near future.
8
<PAGE>
CMG INFORMATION SERVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The matters discussed in this report contain forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed in this
section and elsewhere in this report, and the risks discussed in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section included in the Company's 1996 Annual Report on Form 10-K.
DISCONTINUED OPERATIONS OF SALESLINK CORPORATION SUBSEQUENTLY RETAINED
During the second quarter of fiscal 1996, the Company decided to retain
its subsidiary, SalesLink Corporation (SalesLink) as part of the Company's
continuing operations. SalesLink was identified for disposition during the
fourth quarter of fiscal 1995 and had been accounted for as a discontinued
operation since that time. The decision was made to continue to operate
SalesLink because of its potential synergies with the Company's subsidiary, CMG
Direct Interactive, Inc. (CMGDI), which was formed during fiscal 1996.
Accordingly, the operating results of SalesLink are now included in continuing
operations, classified in the Company's fulfillment services segment, and the
accompanying consolidated statements of operations and cash flows for the three
months ended October 31, 1995 have been reclassified to present SalesLink
within continuing operations.
During the first quarter of fiscal 1996, SalesLink generated net sales
and operating income of $2,473,000 and $172,000, respectively.
THREE MONTHS ENDED OCTOBER 31, 1996 COMPARED TO THREE MONTHS ENDED OCTOBER 31,
1995
Net sales for the quarter ended October 31, 1996 increased $4,805,000, or
82.4%, to $10,640,000 from $5,835,000 for the quarter ended October 31, 1995.
The increase was attributable to an increase of $3,769,000 in net sales for the
Company's investment and development segment, primarily reflecting increased
sales by the Company's subsidiary, Lycos, Inc. (Lycos). Additionally,
fulfillment services segment net sales increased $1,071,000, due to the
continued ramp up of several customers in the high technology and healthcare
industries which were added during fiscal 1996, and lists and database services
segment net sales decreased by $35,000 reflecting continued consolidation in
the educational publishing industry and competitive pricing pressure. As the
portfolio companies of the investment and development segment continue to
develop and introduce their products commercially, the Company expects to
report significant future revenue growth in this segment. Also, with the
acquisition of Pacific Link at the close of the first quarter of fiscal 1997,
the Company expects to report significantly increased future revenues in the
fulfillment services segment.
Cost of sales increased $3,023,000, or 84.1%, to $6,616,000 in the first
quarter of fiscal 1997 from $3,593,000 for the corresponding period in fiscal
1996, due primarily to increases of $2,484,000 and $473,000 related to the
investment and development segment and fulfillment services segment,
respectively, resulting from higher sales. In the fulfillment services
segment, cost of sales as a percentage of net sales decreased to 62.1% in the
first quarter of fiscal 1997 from 69.9% in the first quarter of fiscal 1996 due
to a shift in mix of services and the ability to spread significant fixed
costs, such as facilities costs, over a larger revenue base. Cost of sales in
the lists and database services segment increased $66,000 which related mainly
to increases in equipment costs and data center operations for CMGDI.
Research and development expenses increased $4,464,000, or 891.0%, to
$4,965,000 in the quarter ended October 31, 1996 from $501,000 in the prior
year's first quarter. The increase consists primarily of an increase of
$3,245,000 in research and development expenses for the investment and
development segment as product development and enhancement activities continued
at all of the Company's Internet investments. Also, research and development
expenses increased $1,200,000 in the lists and database services segment
reflecting the continued development of CMGDI's data mining, querying, analysis
and targeting products and services. In addition, the Company recorded
$1,312,000 of in-process research and development expenses related to the
investments in Parable LLC (Parable) and Silknet Software, Inc. (Silknet)
during the first quarter of fiscal 1997. The Company anticipates it will
continue to devote substantial resources to product development and that these
costs may substantially increase in future periods.
9
<PAGE>
CMG INFORMATION SERVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
Selling expenses increased $6,860,000, or 625.9% to $7,956,000 in the
first quarter ended October 31, 1996 from $1,096,000 for the corresponding
period in fiscal 1996. This increase was primarily attributable to a
$6,533,000 selling expense increase in the Company's investment and development
segment, reflecting the sales and marketing efforts related to several product
launches and continued growth of sales and marketing infrastructures. Selling
expenses in the lists and database services segment increased by $263,000 in
comparison with the first quarter of fiscal 1996 due to the continued building
of sales and marketing infrastructure for CMGDI. Selling expenses increased as
a percentage of net sales to 74.8% in the first quarter of fiscal 1997 from
18.8% for the corresponding period in fiscal 1996. As the Company's
subsidiaries continue to introduce new products and expand sales, the Company
expects to incur significant promotional expenses, as well as expenses related
to the hiring of additional sales and marketing personnel and increased
advertising expenses, and anticipates that these costs will substantially
increase in future periods.
General and administrative expenses increased $2,561,000, or 152.5%, to
$4,240,000 in the first quarter of fiscal 1997 from $1,679,000 for the
corresponding period in fiscal 1996. The investment and development segment and
lists and database services segment experienced increases of $2,158,000 and
$301,000, respectively, due to the building of management infrastructures in
several of the Company's Internet investments and within CMGDI. General and
administrative expenses increased as a percentage of net sales to 39.9% in the
first quarter of fiscal 1997 from 28.8% in the first quarter of fiscal 1996.
The Company anticipates that its general and administrative expenses will
continue to increase significantly in absolute dollar amounts as the Company's
subsidiaries, particularly in the investment and development segment, continue
to grow and expand their administrative staffs and infrastructures.
Gain on sale of available-for-sale securities occurred when the Company
sold its remaining 1,020,000 shares of America Online common stock, realizing a
gain of $30,049,000 in October 1995. Gain on sale of investment in affiliate
resulted when the Company sold its equity interest in TeleT Communications, LLC
(TeleT) to Premiere Technologies, Inc. (Premiere) in exchange for $550,000 and
320,833 shares of Premiere stock in September 1996. Interest income, net,
increased $685,000 compared with the first quarter of fiscal 1996, primarily
due to income earned by Lycos from investment of the proceeds of their initial
public offering which occurred in April 1996.
Equity in losses of affiliates resulted from the Company's minority
ownership in certain investments which are accounted for under the equity
method. Under the equity method of accounting the Company's proportionate
share of each affiliate's operating losses and amortization of the Company's
net excess investment over its equity in each affiliate's net assets is
included in equity in losses of affiliates. The results for the quarter ended
October 31, 1995 reflect one investment, FreeMark. During the fourth quarter
of fiscal 1996, the Company increased its ownership in FreeMark above 50% and,
accordingly, began including their operating results in the Company's
consolidated operating results beginning on the date when a controlling
interest was obtained. Equity in losses of affiliates for the quarter ended
October 31, 1996 include the results from the Company's minority ownership in
TeleT, Vicinity Corporation, Ikonic Interactive, Inc., Parable, and Silknet.
The Company expects its portfolio companies to continue to invest in
development of their products and services, and to recognize operating losses,
which will result in future charges recorded by the Company to reflect its
proportionate share of such losses.
Minority interest increased to $2,422,000 in the first quarter of fiscal
1997 from $43,000 in the corresponding period of fiscal 1996 reflecting
minority interest in net losses of consolidated subsidiaries within the
Company's investment and development segment.
Income tax benefit in the first quarter of fiscal 1997 was $1,098,000.
Exclusive of taxes provided for significant, unusual or extraordinary items
that will be reported separately, the Company provides for income taxes on a
year to date basis at an effective rate based upon its estimate of full year
earnings. In determining the Company's effective rate for fiscal 1997, equity
in losses of affiliates and gain on sale of investment in affiliate were
excluded.
10
<PAGE>
CMG INFORMATION SERVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Working capital at October 31, 1996 decreased to $54.2 million compared
to $72 million at July 31, 1996. The Company's principal uses of capital during
the first quarter of fiscal 1996 were for funding of start-up activities in the
Company's investment and development segment, the acquisition of Pacific Link,
investments in Parable and Silknet, purchases of property, plant and equipment,
and purchases of treasury stock. The Company intends to continue to fund
existing and future Internet and interactive media investment and development
efforts.
The Company's acquisition of Pacific Link in the first quarter of fiscal
1997 was financed through $3 million from corporate funds provided for the
acquisition, a $5.5 million, 5 year bank loan, a $7.5 million, 3 year seller's
note, and a $1 million seller's note due January 31, 1997. Also, during the
first quarter, the Company received $550,000 in cash and 320,833 shares of
Premiere Technologies common stock from the sale of its investment in TeleT.
During the first quarter of fiscal 1997, the Company's Board of Directors
authorized the Company to buy back up to 500,000 shares of its common stock.
During October 1996, 85,000 shares were repurchased for $836,000 and have been
reflected as treasury stock in the Company's consolidated balance sheets.
Subsequent to October 31, 1996, one of the Company's subsidiaries,
FreeMark Communications, Inc. suspended all operations of its free email
service, and the Company entered into a definitive agreement to sell one of the
its subsidiaries, NetCarta Corp. to Microsoft Corp. for $20,000,000 in cash,
subject to certain customary conditions. Additionally, Microsoft agreed to
acquire previously unissued shares of the Company's stock to obtain an
approximate 4.9 percent ownership interest in the Company. Vicinity
Corporation, in which CMG@Ventures owns a 47% interest, successfully completed
a $5,000,000 equity financing, including $1,845,000 invested by CMG@Ventures.
The Company's 61% owned subsidiary, GeoCities, is actively pursuing an
additional equity financing which is expected to be completed in the near
future, including participation by CMG@Ventures. Completion of such financing
may result in the Company's ownership interest falling below 50%.
The Company's investments in Parable and Silknet during the first quarter
of fiscal 1997 (as well as its investments in Lycos, NetCarta, FreeMark, Black
Sun, GeoCities, Ikonic, TeleT and Vicinity) were made through its majority-
owned limited partnership, CMG@Ventures. The Company owns 100% of the
capital interest and has all voting rights, and is entitled to 77.5% of the net
capital gains, as defined, of these investments. The remaining 22.5% interest
in the net capital gains on these investments are attributed to profit
partners, including the President and Chief Executive Officer of the Company.
Subsequent to October 31, 1996, the sharing of the net gains will be changed to
80% to the Company and 20% to the profit partners. The Company is responsible
for all operating expenses of CMG@Ventures.
The Company believes that existing working capital, cash proceeds from
the sale of NetCarta Corp. and proceeds from the sale of previously unissued
stock to Microsoft Corp. will be sufficient to fund its operations, investments
and capital expenditures for the foreseeable future. Should additional capital
be needed to fund future investment and acquisition activity, the Company may
seek to raise additional capital through public or private offerings of the
Company's or its subsidiaries' stock, or through debt financings.
11
<PAGE>
CMG INFORMATION SERVICES, INC. AND SUBSIDIARIES
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
---------------------------------
(A) Exhibits
The following exhibits are filed herewith or incorporated by
reference pursuant to Rule 12b-32 under the Securities Exchange Act of 1934:
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE METHOD OF FILING
- ----------- ----- ----------------
<S> <C> <C>
3 (i) (1) Amendment to the Restated Incorporated by
Certificate of Incorporation reference to Exhibit 3
(i) (1) to the
Registrant's quarterly
report on Form 10-Q for
the quarter ended April
30, 1996
3 (i) (2) Restated Certificate of Incorporated by reference
Incorporation from Registration Statement
on Form S-1, as amended,
filed on November 10, 1993
(Registration No. 33-71518)
3 (ii) Restated By-Laws Incorporated by reference
from Registration Statement
on Form S-1, as amended,
filed on November 10, 1993
(Registration No. 33-71518)
4 Rights of Common Stockholders Incorporated by reference
to Article FOURTH of the
Registrant's Restated
Certificate of
Incorporation and
ARTICLE II of the
Registrant's Restated
By-Laws.
10.1 Sublease, dated September 26, Filed herewith.
1996 between the Registrant
and FTP Software, Inc.
10.2 Amendment No. 2 to Employment Filed herewith.
Agreement, dated October 25,
1996, between the Registrant
and David S. Wetherell
10.3 Revolving Credit and Term Loan Filed herewith.
Agreement dated as of
October 24, 1996, among
SalesLink Corporation, the
Registrant, Pacific
Direct Marketing Corp.
and the First National
Bank of Boston
</TABLE>
12
<PAGE>
<TABLE>
<S> <C> <C>
10.4 Revolving Credit Note of Filed herewith.
SalesLink Corporation, dated
as of October 24, 1996, in
the principal amount of
$2,500,000
10.5 Term Note of SalesLink Filed herewith.
Corporation, dated as of
October 24, 1996, in the
principal amount of
$5,500,000
10.6 Guaranty by Pacific Direct Filed herewith.
Direct Marketing Corp. dated
as of October 24, 1996
10.7 Guaranty by the Registrant Filed herewith.
dated as of October 24, 1996
11 Statement re computation Filed herewith.
of per share earnings
27 Financial data schedule Filed herewith.
</TABLE>
(B) Reports on Form 8-K.
None.
13
<PAGE>
SIGNATURE
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.
CMG Information Services, Inc.
By: /s/Andrew J. Hajducky III
-------------------------
Date: December 13, 1996 Andrew J. Hajducky III, CPA
Chief Financial Officer
14
<PAGE>
Exhibit 10.1
100 BRICKSTONE SQUARE
ANDOVER, MASSACHUSETTS
SUBLEASE
--------
THIS SUBLEASE is made in Andover, Massachusetts effective on the Date of
SubLease stated in Article 1 between the SubLandlord and the SubTenant named in
Article 1. In consideration of the Rent payable by SubTenant and of the
agreements to be performed and observed by SubTenant, SubLandlord hereby leases
the Premises to SubTenant, and SubTenant hereby takes the Premises from
SubLandlord, subject to the provisions and for the term stated below:
ARTICLE 1
REFERENCE DATA AND DEFINITIONS
------------------------------
SECTION 1.01 - TERMS REFERRED TO. Each reference in this SubLease to any
--------------------------------
of the following terms incorporates the data stated for that term in this
Section 1.01:
DATE OF SUBLEASE: September 26, 1996
SUBLANDLORD: FTP Software, Inc., a Massachusetts corporation
SUBLANDLORD'S ADDRESS: 100 Brickstone Square
Andover, Massachusetts 01810
SUBTENANT: CMG Information Services, Inc., a Delaware corporation
SUBTENANT'S ADDRESS: 187 Ballardvale Street
Suite B110
P.O. Box 7000
Wilmington, MA 01887-7000
TERM COMMENCEMENT DATE: Defined in Section 3.01.
PERMITTED USE: Any use permitted under Section 11 of the Prime Lease.
PREMISES: Approximately 30,277 rentable square feet on the first floor of 100
Brickstone Square, Andover, Massachusetts, more particularly shown in Exhibit A,
---------
together with the right to use in common, with others entitled thereto, the
hallways, stairways, elevators and lavatories.
SUBLEASE TERM: Defined in Section 3.01.
SUBLEASE TERMINATION DATE: Defined in Section 1.03.
RENT: Defined in Section 4.01.
SECTION 1.02 - GENERAL PROVISIONS. For all purposes of this SubLease,
---------------------------------
unless the context otherwise requires:
(a) A pronoun in one gender includes and applies to the other genders as
well.
(b) Each definition stated in Section 1.01 or 1.03 of this SubLease applies
equally to the singular and the plural forms of the word or term defined.
(c) Any reference to a document defined in Section 1.03 of this SubLease is
to the document as originally executed, or, if amended or supplemented as
provided in this SubLease, to the document as amended or supplemented and
in effect at the relevant time of reference.
<PAGE>
(d) All accounting terms not otherwise defined in this SubLease have the
meanings assigned to them under U.S. generally accepted accounting
principles.
(e) All references in Section 1.01 are subject to the specific definitions
(if any) in Section 1.03.
SECTION 1.03 - DEFINITIONS. Each underlined word or term in this Section
--------------------------
1.03 has the meaning stated immediately after it.
Additional Rent. All charges (other than Rent) due from SubTenant to
---------------
SubLandlord.
Affiliates. As defined in Section 24.18 of the Prime Lease.
----------
Authorizations. All franchises, licenses, permits and other governmental
--------------
consents issued by Governmental Authorities under Legal Requirements which are
or may be required for the occupancy of the Premises or the conduct of a
Permitted Use on the Premises.
Building. The building in which the Premises are located.
--------
Business Day. A day which is not a Saturday, Sunday or other day on which
------------
banks in Boston, Massachusetts, are authorized or required by law or executive
order to remain closed.
Default. Any event or condition specified in Article 19 so long as any
-------
applicable requirements for the giving of notice or lapse of time or both have
not been fulfilled.
Event of Default. Any event or condition specified in Article 19 if all
----------------
applicable requirements for the giving of notice or lapse of time or both have
been fulfilled.
Governmental Authority. United States of America, Commonwealth of
----------------------
Massachusetts, Town of Andover, and any political subdivision, agency,
department, commission, board, bureau or instrumentality of any of them.
Hazardous Substances. As defined in Section 25 of the Prime Lease.
--------------------
Improvements. SubTenant's alterations, additions, improvements,
------------
remodeling, repainting, or other changes to the Premises.
Insurance Requirements. All terms of any policy of insurance maintained or
----------------------
required to be maintained by SubLandlord or SubTenant and applicable to the
Premises; all requirements of the issuer of any such policy; and all orders,
rules, regulations and other requirements of the National Fire Protection
Association (or any other body exercising similar functions) applicable to any
condition, operation, use or occupancy of all or any part of the Premises.
Landlord. Andover Mills Realty Limited Partnership, a Massachusetts
--------
limited partnership.
Legal Requirements. (a) All statutes, codes, ordinances (and rules and
------------------
regulations thereunder) and all executive, judicial and administrative orders,
judgments, decrees and injunctions of or by any Governmental Authority which are
applicable to any condition or use of the Premises, and (b) the provisions of
all Authorizations.
Liabilities. As defined in Section 24.18 of the Prime Lease.
-----------
Permitted Exceptions. Any liens or encumbrances on the Premises of the
--------------------
following character:
(a) The lien of any Taxes assessed but not yet due and payable;
(b) Mortgages of record; and
(c) All declarations, covenants, conditions, restrictions, reservations,
rights, rights-of-way,
<PAGE>
easements and other matters of record affecting the Premises or the use of
the Premises now or in the future in force and applicable.
Person. An individual, a corporation, a company, a voluntary association,
------
a partnership, a trust, an estate, an unincorporated organization or other
entity or a Governmental Authority.
Prime Lease. The Lease attached hereto as Exhibit C entered into between
----------- ---------
SubLandlord, as tenant, and Andover Mills Realty Limited Partnership, as
landlord, dated October 1, 1993, as amended by Amendment No. 1 to Lease dated
February 10, 1994, Amendment to Lease dated May 19, 1995, Amendment No. 2 to
Lease dated June 7, 1995, and Notice of Exercise of Option dated as of June,
1995.
SubLease. This document, all exhibits and riders attached and referred to
--------
in this document and all amendments and supplements to this document and the
exhibits and riders hereto.
SubLease Term. The period beginning on the Term Commencement Date and
-------------
ending on the SubLease Termination Date.
SubLease Termination Date. The earliest to occur of (a) July 31, 2002, (b)
-------------------------
the date of the termination of this SubLease by SubLandlord as the result of an
Event of Default, (c) the date of the termination of this SubLease under Article
16 (Damage or Destruction) or Article 17 (Eminent Domain) or Section 3.04 of
this Sublease, or (d) the date of the termination of the Prime Lease.
Taking. The taking or condemnation of title to or of possession or use of
------
all or any part of the Premises by a Governmental Authority for any public use
or purpose, or any proceeding or negotiations which might result in such a
taking, or any sale or lease in lieu of such a taking.
Taxes. As defined in Section 6.1 of the Prime Lease.
-----
Unavoidable Delays. Acts of God, strikes, lock outs, labor troubles,
------------------
inability to procure materials, failure of power, riots and insurrection, acts
of the public enemy, wars, earthquakes, hurricanes and other natural disasters,
fires, explosions, any act, failure to act or default of the other party to this
SubLease or any other reason (except lack of money) beyond the control of any
party to this SubLease.
ARTICLE 2
PREMISES
--------
SECTION 2.01 - PREMISES. SubLandlord hereby leases the Premises to
-----------------------
SubTenant, and SubTenant hereby takes the Premises from SubLandlord, subject to
the provisions of this SubLease and the Permitted Exceptions. The Premises are
to be leased in "as is" condition except as improved by SubLandlord as set forth
in Exhibit D. SubLandlord makes no representations or warranties, express or
---------
implied, with respect to the condition of the Premises. Except to construct the
improvements set forth in Exhibit D, SubLandlord shall have no obligation
---------
whatsoever to make or pay the cost of any alterations, improvements, or repairs
to the Premises, including without limitation, any improvement or repair
required to comply with any Legal Requirements (including the Americans with
Disabilities Act of 1990).
SECTION 2.02 - PARKING. SubTenant shall have the use of the parking spaces
----------------------
depicted in Exhibit B, which use shall be subject to the provisions of Section
---------
15.2 of the Prime Lease. If the parking spaces designated as "A-75" through "A-
79" in Exhibit B are no longer available, SubLandlord agrees to provide to
---------
SubTenant an equal number of parking spaces, which may change from time to time
upon written notice to SubTenant, in the area labeled "A" in Exhibit B.
---------
SECTION 2.03 - FURNITURE. SubLandlord shall provide SubTenant with the
------------------------
fixtures, furniture and equipment set forth in Exhibit E (the "Furniture") for
---------
the SubLease Term. SubLandlord warrants and represents that it has good and
marketable title to the Furniture.
<PAGE>
ARTICLE 3
TERM
----
SECTION 3.01 - TERM COMMENCEMENT. The SubLease Term will begin on the
--------------------------------
latest of the following to occur (the "Term Commencement Date"): (i) October 1,
1996, (ii) the date the Landlord consents to this SubLease or (iii) the date the
improvements to the Premises to be constructed by SubLandlord as set forth in
Exhibit D (not including the "entry area" shown on Exhibit A) are "Substantially
- --------- ---------
Complete" as that term is defined in Exhibit F. The commencement of the
---------
SubLease Term is not contingent upon the construction of the improvements to the
"entry area" being Substantially Complete. SubTenant shall not occupy the
"entry area" until such time as the construction of the improvements to the
"entry area" is Substantially Complete.
SECTION 3.02 - TERMINATION. The SubLease Term will end on the SubLease
--------------------------
Termination Date.
SECTION 3.03 - ESTOPPEL CERTIFICATE. If either the Term Commencement Date
-----------------------------------
occurs on a date other than October 1, 1996 or the SubLease Termination Date
occurs on a date other than July 31, 2002, SubLandlord and SubTenant agree to
execute a certificate in the form of the estoppel certificate referred to in
Section 25.02 or such other comparable form as either may reasonably request,
establishing the Term Commencement Date or the SubLease Termination Date, as
applicable.
SECTION 3.04 - EARLY TERMINATION. SubLandlord and SubTenant shall each
--------------------------------
have the option to terminate this SubLease on February 1, 2000 by providing
written notice to the other party at the address set forth in Section 1.01.
SubTenant shall not have the right to terminate this SubLease under this Section
3.04 if it is in Default at the time the notice is provided or becomes in
Default after the notice is provided and such Default is not cured within ten
(10) days of written notice of such Default, unless SubTenant is using its best
efforts to cure such Default and such Default is cured within sixty (60) days of
written notice of such Default and this SubLease has not been terminated. If
such Default is cured within ten (10) days after written notice of such Default,
SubTenant shall retain its early termination rights under this Section 3.04.
Any written notice terminating this SubLease under this Section 3.04 must be
received by the other party no later than 5:00 p.m. on July 31, 1999. Time is
of the essence with respect to providing the required notice under this Section
3.04.
ARTICLE 4
RENT
----
SECTION 4.01 - RENT. SubTenant agrees to pay SubLandlord the amounts set
-------------------
forth below as rent (the "Rent") for the Premises, without offset or deduction
and without previous demand, in monthly installments in advance on the first day
of each calendar month during the SubLease Term, prorated for any portion of a
month, except that the first monthly installment is due upon execution of this
SubLease:
Term Commencement Date through
March 31, 1997 $32,934.00 per month
April 1, 1997 through
September 30, 1999 $41,630.88 per month
October 1, 1999 through
July 31, 2002 $43,649.34 per month
SubTenant shall mail each monthly installment of Rent to:
FTP Software, Inc.
P.O. Box 4526
Boston, MA 02212-4526
Attn: Chief Financial Officer;
or to such other address as SubLandlord shall designate in writing from time to
time.
<PAGE>
It is the intention of the parties that Rent payable by SubTenant under
this SubLease shall be a "gross rent"; i.e., except for SubTenant's obligations
under Section 8.01 and Section 9.07, SubTenant shall have no obligation to make
any payments to SubLandlord on account of operating costs, taxes, insurance or
other charges payable by SubLandlord to Landlord or on account of any other
services provided by SubLandlord to the Premises for SubTenant.
SECTION 4.02 - SECURITY DEPOSIT. Upon execution of this SubLease,
-------------------------------
SubTenant will deposit with SubLandlord a security deposit in the amount of
$83,262.00 as security for the performance of SubTenant's obligations under this
SubLease. If SubTenant fails to perform its obligations under this SubLease
within the grace period herein provided, SubLandlord may, but shall not be
obligated to, apply all or any part of the security deposit for the payment of
any amounts due or any other Liabilities which SubLandlord may incur as a
result. If any part of the security deposit is so applied, SubTenant shall,
within five (5) days after written demand, deposit cash with SubLandlord in an
amount sufficient to restore the security deposit to its previous amount.
SubLandlord need not keep the security deposit separate from its general funds.
SubLandlord need not deposit the security deposit into an interest bearing
account. If SubTenant complies with all of the provisions of this SubLease, the
unused portion of the security deposit will be returned to SubTenant after the
SubLease Termination Date and the surrender of possession of the Premises to
SubLandlord in the condition required by this SubLease within thirty (30) days
after the written request of SubTenant is received by SubLandlord. SubLandlord
shall not be obligated to pay to SubTenant any interest earned on the security
deposit.
ARTICLE 5
USE OF PREMISES
---------------
SECTION 5.01 - USE RESTRICTED. The Premises may be used for the Permitted
-----------------------------
Use and for no other purpose.
ARTICLE 6
OPERATING EXPENSES
------------------
SECTION 6.01 - OPERATING EXPENSES. SubLandlord agrees to contract for all
---------------------------------
services, materials, labor, commodities and utilities required for the
operation, maintenance and ordinary repair of the Premises, other than for (i)
services for cleaning the Premises which shall be the SubTenant's obligation,
and (ii) SubTenant's maintenance obligations set forth in Section 9.07.
ARTICLE 7
IMPROVEMENTS
------------
SECTION 7.01 - IMPROVEMENTS BY SUBTENANT. SubTenant agrees not to make any
----------------------------------------
Improvements before or during the SubLease Term, except according to plans and
specifications previously approved by the SubLandlord and, if required by the
Prime Lease, Landlord in writing. All Improvements will become part of the
Premises and the property of SubLandlord upon their completion or installation,
unless otherwise agreed upon in writing by SubTenant and SubLandlord.
SubLandlord agrees to notify SubTenant in writing prior to the commencement of
construction whether the Improvements must be removed or must remain at the
Premises. Before making any Improvements, SubTenant agrees to secure all
necessary Authorizations and to deliver to SubLandlord a statement of the names
of all its contractors and subcontractors and the estimated cost of all labor
and material to be furnished by them. The contractors shall all be of
SubTenant's choice and shall be approved by SubLandlord in writing and, if
required by the Prime Lease, Landlord, prior to the commencement of any work.
SubTenant agrees to pay promptly when due the entire cost of any work done on
the Premises by SubTenant, its agents, employees, or independent contractors,
and not to cause or permit any liens, security interests or encumbrances for
labor or materials performed or furnished in connection with its work to attach
to the Premises and immediately to discharge any such liens, security interests
and encumbrances which may attach. All construction work done by SubTenant, its
agents, employees or independent contractors shall be done in a
<PAGE>
good and workmanlike manner and in compliance with all Legal Requirements and
Insurance Requirements and the provisions of the Prime Lease. SubLandlord may
inspect the work at any time.
ARTICLE 8
UTILITIES AND SERVICES
----------------------
SECTION 8.01 - UTILITIES. SubTenant agrees to pay the full cost of all
------------------------
electricity furnished to the Premises promptly when due directly to the company
or other Person providing the electricity. If the electricity furnished to the
Premises is not separately metered or charged, SubTenant will pay SubTenant's
Proportionate Share of such costs directly to SubLandlord as Additional Rent,
either monthly when Rent is due hereunder, or within ten (10) days after receipt
of SubLandlord's bill, at SubLandlord's option. For the purposes of this
SubLease, SubTenant's Proportionate Share shall be as set forth in Exhibit SK-2
and detailed in Exhibit SK-3, attached. SubLandlord is not responsible for any
Liabilities incurred by SubTenant nor may SubTenant abate rent, terminate this
SubLease or pursue any other right or remedy against SubLandlord, SubLandlord's
Affiliates, Landlord, or Landlord's Affiliates, as a result of any termination
or malfunction of any utilities or utility systems or other services furnished
to the Premises.
ARTICLE 9
SUBTENANT'S COVENANTS
---------------------
SECTION 9.01 - PAY RENT. SubTenant agrees to pay when due all Rent and all
-----------------------
charges for utilities rendered to the Premises or to SubTenant.
SECTION 9.02 - INJURY TO THE PREMISES, ETC. SubTenant will not (i) injure
-------------------------------------------
or deface the Premises, (ii) permit to be used or stored in the Premises any
inflammable fluids or chemicals not reasonably related to the Permitted Use, nor
(iii) permit any nuisance or use of the Premises which is improper, offensive or
contrary to any Permitted Use, Legal Requirement or Insurance Requirement. In
any event, SubTenant shall comply with the terms of the Prime Lease.
SECTION 9.03 - OCCUPANCY OF THE PREMISES. SubTenant agrees to occupy the
----------------------------------------
Premises from the Term Commencement Date until the SubLease Termination Date for
the Permitted Use only. SubTenant agrees not to abandon the Premises during the
SubLease Term. SubTenant agrees to comply with all of the obligations of Tenant
under the Prime Lease to the extent such provisions are applicable to the
Premises, including without limitation Exhibit E to the Prime Lease, "rules and
---------
regulations", except (i) for SubLandlord's obligation to pay rent and other
charges to Landlord, and (ii) to the extent such obligations are required to be
performed by SubLandlord pursuant to this SubLease.
SECTION 9.04 - SAFETY. SubTenant agrees to procure all Authorizations
---------------------
required because of SubTenant's use of the Premises and to perform at its
expense any work required under any Authorization because of such use, it being
understood that the provisions of this Section may not be construed to broaden
in any way the Permitted Use.
SECTION 9.05 - EQUIPMENT. SubTenant agrees (i) not to place a load upon
------------------------
the floor of the Premises or to move any safe or other heavy equipment into,
about or out of the Premises which causes damage to the Premises or the Building
and (ii) to repair promptly all damage caused by the installation or moving of
its equipment. SubTenant agrees to isolate and maintain all of SubTenant's
equipment which causes or may cause airborne or structure-borne vibration or
noise so as to eliminate such vibration or noise.
SECTION 9.06 - PAY TAXES. SubTenant agrees to pay promptly when due all
------------------------
Taxes upon personal property owned by the SubTenant (including, without
limitation, fixtures and equipment) on the Premises.
SECTION 9.07 - MAINTENANCE. SubTenant agrees to, at all times during the
--------------------------
term of this SubLease, and at its own expense, (i) clean and maintain the
Premises and the Furniture in good repair and condition (except for ordinary
wear and tear and damage from fire and other casualty), (ii) maintain all
Improvements in good repair
<PAGE>
and condition (except for ordinary wear and tear and damage from fire and other
casualty), (iii) use all reasonable precautions to prevent waste, damage or
injury to any part of the Premises, and (iv) repair all damage to any part of
the Premises, Furniture or the Building caused by SubTenant or any of its
Affiliates. SubLandlord agrees to replace all light bulbs at the Premises at no
cost to SubTenant. SubLandlord's maintenance obligations are set forth in the
Prime Lease. SubLandlord shall have no obligation to perform any of the repairs
required to be performed by Landlord under the Prime Lease.
SubLandlord agrees upon the written request of SubTenant from time to time
to use due diligence and all reasonable efforts to cause Landlord to furnish
such services as are required by the Prime Lease, expend sums and observe and
perform such obligations as are required by the Prime Lease, all at SubTenant's
sole cost and expense. SubTenant agrees to indemnify SubLandlord and hold
SubLandlord harmless from and against all loss, cost, damage, expense, or
liability (including, without limitation, attorneys' fees and disbursements)
which SubLandlord may incur by reason of any action brought by SubTenant against
Landlord.
SECTION 9.08 - REDELIVERY. On the SubLease Termination Date, SubTenant
-------------------------
agrees to leave the Premises and surrender possession of the Premises and,
except as set forth herein, the Furniture to SubLandlord free of (i) all tenants
or occupants claiming through or under SubTenant, and (ii) all liens
encumbrances, restrictions or reservations caused or consented to by SubTenant.
SubTenant agrees to surrender the Premises, including all Improvements, to
SubLandlord broom clean and in good condition and repair, except for ordinary
wear and tear and damage from fire and other casualty, with all damage resulting
from removal of SubTenant's personal property, including without limitation, its
furniture, furnishings and equipment, repaired at SubTenant's expense to
SubLandlord's reasonable satisfaction. SubTenant's personal property remaining
at the Premises after the SubLease Termination Date shall be deemed abandoned
and SubLandlord may keep, sell, destroy or dispose of it without any Liabilities
to SubTenant. If this SubLease is not terminated prior to July 31, 2002 by
either party, and the SubTenant is not in Default on July 31, 2002, SubTenant
may retain the Furniture set forth in Exhibit D following the end of this
---------
SubLease.
ARTICLE 10
COMPLIANCE WITH REQUIREMENTS
----------------------------
SECTION 10.01 - LEGAL REQUIREMENTS. SubTenant agrees, at its own expense,
----------------------------------
promptly to observe and comply with all Legal Requirements relating to it or the
Premises.
SECTION 10.02 - CONTESTS. SubTenant has the right to contest by
------------------------
appropriate legal proceedings diligently conducted in good faith, in the name of
SubTenant or SubLandlord (if legally required) or both (if legally required),
without expense or liability to SubLandlord, the validity or application of any
Legal Requirement. If compliance with the terms of any Legal Requirement may
legally be delayed pending the prosecution of any such proceeding, SubTenant may
delay compliance until the final determination of the proceeding.
SECTION 10.03 - ENVIRONMENTAL LEGAL REQUIREMENTS. SubTenant agrees not to
------------------------------------------------
cause or permit any Hazardous Substances to be released on or into the Premises
or the Building, or into the air, or to be introduced into the sewage or other
waste disposal system serving the Premises. SubTenant agrees not to generate,
store or dispose of Hazardous Substances on the Premises or the Building.
SubTenant agrees to notify SubLandlord of any incident which would require the
filing of a notice under any Legal Requirement. SubTenant agrees to provide
SubLandlord with such information of which it is aware required by Governmental
Authorities as SubLandlord may reasonably request from time to time with respect
to compliance with this Section. In any event, SubTenant shall comply with all
the terms of the Prime Lease. SubLandlord agrees that, as between SubLandlord
and SubTenant, SubLandlord and not SubTenant shall be responsible for any
damages or liability incurred by SubTenant on account of the existence on the
Premises, or release or discharge on or from the Premises, of Hazardous
Materials to the extent caused by an act, omission, fault, negligence or
misconduct of SubLandlord or its Affiliates.
<PAGE>
ARTICLE 11
COVENANT AGAINST LIENS
----------------------
SECTION 11.01 - NO LIENS. SubTenant agrees not to create or permit to be
------------------------
created any lien on the Premises or the Building and to discharge any lien on
the Premises or the Building arising out of any act or omission by it,
including, but not limited to, any tax, mechanic's, laborer's or materialman's
lien or lien arising under Massachusetts General Laws, Chapter 21E. The
provisions of this Section 11.01 may not be construed to limit SubTenant's right
to encumber any equipment installed on the Premises which SubTenant has the
right to remove on the SubLease Termination Date.
SECTION 11.02 - DISCHARGE. If any lien is filed against the Premises or
-------------------------
the Building as a result of any act or omission by SubTenant, SubTenant agrees
to cause the lien to be discharged of record by payment, deposit, bond, order of
a court of competent jurisdiction or otherwise, within sixty (60) days after (i)
SubTenant has actual notice that it is filed, or (ii) final judgment in favor of
the holder of the lien.
ARTICLE 12
ACCESS TO PREMISES
------------------
SECTION 12.01 - ACCESS. SubLandlord, Landlord, or their agents and
----------------------
designees shall have the right, but not the obligation, to enter the Premises at
all reasonable times during ordinary business hours, after reasonable notice
except in the case of an emergency in which case they may enter the Premises at
any time and without any notice, to (a) examine the Premises, (b) make necessary
repairs and replacements, (c) insure compliance with Legal Requirements and (d)
exhibit the Premises to (1) prospective purchasers and mortgagees at any time
during the SubLease Term and (2) prospective tenants after (i) August 1, 1999 if
either party terminates this SubLease pursuant to Section 3.04 and (ii) in any
event, after January 1, 2002.
ARTICLE 13
INDEMNITY
---------
SECTION 13.01 - SUBTENANT'S INDEMNITY. Except to the extent waived by
-------------------------------------
SubLandlord under the provisions of Section 15.02, SubTenant agrees to indemnify
SubLandlord and its Affiliates against all Liabilities, including reasonable
attorneys' fees, which may be imposed upon or incurred by any of them by reason
of any of the following occurrences:
(a) any act or omission on the Premises by SubTenant or any of its
Affiliates, contractors, licensees or invitees;
(b) any use, non-use, possession, occupation, condition, operation,
maintenance or management of the Premises by SubTenant or any of its
Affiliates;
(c) any failure on the part of SubTenant to comply with any of its
obligations under this SubLease, whether or not such failure constitutes a
Default or Event of Default; or
(d) the termination of this SubLease as a result of any act or omission of
SubTenant or any of its Affiliates.
SECTION 13.02 - CLAIMS BY SUBLANDLORD. If any proceeding is brought
-------------------------------------
against SubLandlord or any of its Affiliates arising out of any occurrence
described in Section 13.01, upon notice from SubLandlord SubTenant agrees, at
its expense, to defend the proceeding using legal counsel reasonably
satisfactory to SubLandlord or, if applicable, SubTenant's insurer, provided
that SubTenant has not been prejudiced in any way by failure or delay on the
part of SubLandlord to give SubTenant prompt notice of the proceeding.
<PAGE>
SECTION 13.03 - SUBLANDLORD'S LIABILITY. Except for its intentional acts
---------------------------------------
or negligence or the intentional acts or negligence of its agents, contractors
or licensees SubLandlord will not be responsible or liable for any loss, damage
or injury to the Premises or to any Person or property at any time on the
Premises.
ARTICLE 14
INSURANCE
---------
SECTION 14.01 - SUBTENANT'S INSURANCE. SubTenant agrees to provide, at its
-------------------------------------
expense, and to keep in force:
(a) Comprehensive general public liability insurance (Broad Form CGL),
with contractual liability, cross-liability and fire legal liability
endorsements, protecting against all claims and liabilities for
personal, bodily and other injuries, death and property damage
including, without limitation, broad form property damage insurance,
automobile and personal injury coverage. This insurance also will
insure SubTenant's indemnities pursuant to this SubLease. The amount
of this insurance will not be less than $5,000,000.00 combined single
limit for each occurrence;
(b) "All risk" casualty insurance, covering all of SubTenant's property
and all alterations made by or for the benefit of SubTenant. This
insurance will be for full replacement value;
(c) Worker's compensation insurance in statutory limits, and employer's
liability insurance of not less than $1,000,000.00;
(d) Builder's risk insurance (completed value form) for work required of
or permitted to be made by SubTenant. The amount of this insurance
will be reasonably satisfactory to SubLandlord and Landlord and must
be obtained before any work is begun; and
(e) Such greater limits and such other insurance and in such amounts as
may from time to time be reasonably required by SubLandlord against
other insurable hazards which at the time are customarily insured
against in the case of buildings similarly situated and used.
All policies of insurance carried by SubTenant must: name Landlord and
SubLandlord and their designees as additional insureds; be from insurers
acceptable to Landlord and SubLandlord; and state that the insurers will not
cancel, fail to renew or modify the coverage without first giving Landlord and
SubLandlord and any other additional insureds at least thirty (30) days prior
written notice.
SubTenant will supply copies of each paid-up policy or certificate from the
insurer certifying that the policy has been issued and complies with all of the
terms of this Article. The policies or certificates shall be delivered to
SubLandlord within thirty (30) days after this SubLease is signed, and renewals
shall be provided to SubLandlord not less than thirty (30) days before the
expiration of the coverage. SubLandlord always may inspect and copy any of the
policies. SubTenant waives any right to recover against SubLandlord and
Landlord under the Prime Lease for Liabilities in connection with any type of
cause or peril which is supposed to be insured against under the insurance
policies required to be maintained by SubTenant.
SECTION 14.02 - SUBLANDLORD'S AND LANDLORD'S INSURANCE. SubTenant will not
------------------------------------------------------
undertake, fail to undertake, or permit any acts or omissions which will in any
way increase the cost of, or violate, void, or make voidable, all or any portion
of any insurance policies maintained by SubLandlord or Landlord, unless
SubLandlord and Landlord gives its specific written consent and SubTenant pays
all increased costs directly to SubLandlord or Landlord, as the case may be, on
demand.
<PAGE>
ARTICLE 15
WAIVER OF SUBROGATION
---------------------
SECTION 15.01 - WAIVER OF SUBROGATION. If available, all insurance
-------------------------------------
policies carried by either party covering the Premises will contain a clause or
endorsement expressly waiving any right on the part of the insurer to make any
claim against the other party. The parties agree to use their best efforts to
insure that their policies will include such waiver clause or endorsement.
SECTION 15.02 - WAIVER OF RIGHTS. SubLandlord and SubTenant each waive all
--------------------------------
claims, causes of action and rights of recovery against the other and their
respective partners, agents, officers and employees, for any loss or damage to
persons, property or business which occurs on or about the Premises and results
from any of the perils insured under any policy of insurance maintained by
SubLandlord and/or SubTenant, regardless of cause. This waiver includes the
negligence and intentional wrongdoing of either such party and their respective
agents, officers and employees but is effective only to the extent of recovery,
if any, under any such policy. This waiver will be void to the extent that any
such insurance is invalidated by reason of this waiver.
ARTICLE 16
DAMAGE AND RESTORATION
----------------------
SECTION 16.01 - DAMAGE AND RESTORATION. If the Premises are damaged by
--------------------------------------
fire or other casualty, the provisions of the Prime Lease shall be applicable,
except that the term "Tenant" as used therein shall be deemed to refer to
SubTenant and the term "Premises" as used therein shall be deemed to refer to
the Premises as defined herein.
ARTICLE 17
EMINENT DOMAIN
--------------
SECTION 17.01 - TAKING. If there is a Taking, the provisions of the Prime
----------------------
Lease shall be applicable, except that the term "Tenant" as used therein shall
be deemed to refer to SubTenant and the term "Premises" as used therein shall be
deemed to refer to the Premises as defined herein.
ARTICLE 18
QUIET ENJOYMENT
---------------
SECTION 18.01- SUBLANDLORD'S COVENANT. SubLandlord covenants that if
-------------------------------------
SubTenant pays the Rent and Additional Rent and performs all of its obligations
under this SubLease, SubTenant will, subject to the Permitted Exceptions,
quietly have and enjoy the Premises during the SubLease Term, without
interference from any Person claiming through SubLandlord.
SECTION 18.02- SUBORDINATION AND ATTORNMENT. SubLandlord agrees to comply
-------------------------------------------
with the provisions of the Prime Lease regarding subordination and attornment.
ARTICLE 19
DEFAULTS; EVENTS OF DEFAULT
- ---------------------------
SECTION 19.01 - DEFAULTS. The following shall (i) if any requirement for
------------------------
notice or lapse of time or both has not been met, constitute Defaults, and (ii)
if there are no such requirements or if such requirements have been met,
constitute Events of Default:
<PAGE>
(a) SubTenant's abandoning the Premises;
(b) The failure of SubTenant to pay Rent when due, and the continuation of
the failure for a period of five (5) days;
(c) The failure of SubTenant to perform any of its obligations under this
SubLease, other than its obligation to pay Rent, and the continuation of
the failure for a period of ten (10) days after the receipt of written
notice, unless SubTenant is using its best efforts to perform such
obligation in which case SubTenant shall have fifty-eight (58) days to
perform such obligation; provided that, with respect to any obligation of
SubTenant to be performed under this SubLease, wherever the Prime Lease
grants to SubLandlord a specified number of days to perform its obligations
under the Prime Lease, except as otherwise expressly provided herein,
SubTenant shall have two (2) fewer days to perform the obligation even if
written notice has not been provided to SubTenant;
(d) The occurrence with respect to SubTenant of one or more of the
following events: the dissolution, termination of existence (other than by
merger or consolidation), insolvency, appointment of a receiver for all or
substantially all of its property, the making of a fraudulent conveyance or
the execution of an assignment or trust mortgage for the benefit of
creditors by it, or the filing of a petition of bankruptcy or the
commencement of any proceedings by or against it under a bankruptcy,
insolvency or other law relating to the relief or the adjustment of
indebtedness, rehabilitation or reorganization of debtors; provided that if
any such petition or commencement is involuntarily made against it and is
dismissed within forty-five (45) days of the date of such filing or
commencement, such events will not constitute an Event of Default; or
(e) The issuance of any execution or attachment against SubTenant or any
other occupant of the Premises as a result of which the Premises are taken
or occupied by a Person other than SubTenant.
ARTICLE 20
SUBLANDLORD'S REMEDIES; DAMAGES ON DEFAULT
------------------------------------------
SECTION 20.01 - SUBLANDLORD'S REMEDIES. SubLandlord may, at its option, at
--------------------------------------
any time, whenever an Event of Default exists, give SubTenant a notice
terminating this Sublease on the date specified in the notice. On the date
specified in the notice, this SubLease and all rights of SubTenant under this
SubLease will terminate without further notice or lapse of time, but SubTenant
shall continue to be liable to SubLandlord as provided in this Article 20.
SECTION 20.02 - POSSESSION. Upon any termination of this SubLease as the
--------------------------
result of an Event of Default, SubTenant agrees to leave the Premises peacefully
and surrender possession to SubLandlord as provided in Section 9.08. SubLandlord
may, at any time after any termination of this SubLease and without further
notice, enter the Premises and recover possession by summary proceedings or any
other manner permitted by law, and may remove SubTenant and all other Persons
and property from the Premises and may hold the Premises and the right to
receive all rental income from the Premises.
SECTION 20.03 - RIGHT TO RELET. At any time after termination of this
------------------------------
SubLease as a result of an Event of Default, SubLandlord may relet all or any
part of the Premises in the name of SubLandlord or otherwise, for such term
(which may be greater or less than the period which would otherwise have
constituted the balance of the SubLease Term) and on such conditions (which may
include concessions or free rent) as SubLandlord, in its reasonable discretion,
may determine. SubLandlord shall not be liable for failure to relet the
Premises or for failure to collect any rent due upon any such reletting.
SECTION 20.04 - SURVIVAL OF COVENANTS, ETC. If this SubLease is terminated
------------------------------------------
as provided in Section 20.01:
(a) The termination will not relieve SubTenant of its obligations under
this SubLease which obligations shall survive the termination; and
<PAGE>
(b) At the time of the termination, SubTenant shall pay to SubLandlord the
Rent up to the date of termination. SubTenant also agrees to pay to
SubLandlord, the Rent that would have been payable under this SubLease by
SubTenant from the date of the termination through July 31, 2002.
ARTICLE 21
NOTICES
-------
SECTION 21.01 - NOTICES AND COMMUNICATIONS. All notices, demands, requests
------------------------------------------
and other communications provided for or permitted under this SubLease must be
in writing and delivered by hand, courier, overnight, registered or certified
mail, postage prepaid, to the following addresses:
(a) if to SubLandlord, to the attention of its Chief Financial Officer, at
the address stated in Section 1.01 (or at such other address as SubLandlord
designates in writing to SubTenant), with a copy to such Persons as
SubLandlord designates in writing to SubTenant, or
(b) if to SubTenant, at the address stated in Section 1.01 as well as the
Premises (or at such other address as SubTenant designates in writing to
SubLandlord), with a copy to Palmer & Dodge, LLP, One Beacon Street,
Boston, MA 02108, Attn: William Williams, II, and such other Persons as
SubTenant designates in writing to SubLandlord.
Any communication provided for in this SubLease shall become effective only
upon receipt by the Person to whom it is given, unless mailed by overnight,
registered or certified mail, in which case it will be deemed to be received on
(i) the second Business Day after being sent or (ii) the day of its receipt, if
a Business Day, or the next succeeding Business Day, whichever of (i) or (ii) is
the earlier.
ARTICLE 22
WAIVERS
-------
SECTION 22.01 - NO WAIVERS. Any failure of SubLandlord or SubTenant to
--------------------------
complain of any act or omission on the part of the other no matter how long the
act or omission may continue, shall not be deemed to be a waiver by either
SubLandlord or SubTenant of any of its rights under this SubLease. No waiver by
SubLandlord or SubTenant at any time, expressed or implied, of the breach of any
provision of this SubLease shall be deemed a waiver of a breach of any other
provision of this SubLease or a consent to any subsequent breach of the same or
any other provision. No acceptance by SubLandlord of any partial payment will
constitute an accord or satisfaction but will only be deemed a partial payment
on account. None of SubTenant's obligations under this SubLease and no Default
or Event of Default may be waived or modified except in writing by SubLandlord.
ARTICLE 23
ASSIGNMENT AND SUBLETTING
-------------------------
SECTION 23.01 - ASSIGNMENT AND SUBLETTING. SubTenant shall not voluntarily
-----------------------------------------
or involuntarily or by operation of law, sell, convey, mortgage, subject to a
security interest, license, assign, sublet or otherwise transfer or encumber the
whole or any part of the Premises or allow anyone other than SubTenant's
employees to occupy the Premises without SubLandlord's and Landlord's prior
written consent in each instance. SubTenant shall comply with the notice
provisions applicable to Tenant under Section 18.2 of the Prime Lease, except
that the notice shall be sent to SubLandlord. SubTenant may withhold its
consent if Landlord does not consent to the same but will not unreasonably
withhold its consent if Landlord consents to the same. Notwithstanding such
consent, SubTenant shall remain liable to SubLandlord for the payment of Rent
and for the full performance of the covenants and conditions of this SubLease.
If the total rent on any permitted assignment or sublease is in excess of the
Rent required hereunder, the SubTenant and SubLandlord shall divide such excess
equally. Neither SubLandlord nor SubTenant shall record this SubLease.
<PAGE>
ARTICLE 24
RIGHT OF FIRST REFUSAL
----------------------
SECTION 24.01 - RIGHT OF FIRST REFUSAL. Subject to the terms of the Prime
--------------------------------------
Lease, SubLandlord grants to SubTenant a right of first refusal to lease any
portion of the Building currently occupied by SubLandlord. If SubLandlord
desires to lease any of the space it currently occupies in the Building during
the SubLease Term, SubLandlord shall first give SubTenant prior written notice
of such intention (the "Offer Notice"). The Offer Notice shall list the space
being offered for rent and the rental price. For a period of fifteen (15) days
following receipt by SubTenant of the Offer Notice, SubTenant shall have the
option to lease said space at the price and on the terms stated in the Offer
Notice. SubTenant may exercise its option by written notice to SubLandlord
given at any time within thirty (30) days with occupancy commencing within sixty
(60) days of receipt of the Offer Notice. If SubTenant does not timely exercise
this option or fails to timely occupy such space after timely exercise of this
option, SubLandlord may lease such space to any other party, upon any terms it
desires, and SubTenant shall be deemed to have waived its right of first
refusal with respect to such space for the remainder of the SubLease Term. If
an Offer Notice is provided to SubTenant for a portion of a floor in the
Building currently occupied by SubLandlord and SubTenant does not timely
exercise the option or fails to timely occupy such space after timely exercise
of the option, SubTenant shall be deemed to have waived its right of first
refusal for the entire space on that floor in the Building. Any sublease
pursuant to this Section 24.01 is subject to obtaining Landlord's prior written
consent to the same.
ARTICLE 25
GENERAL PROVISIONS
------------------
SECTION 25.01 - UNAVOIDABLE DELAYS. If SubLandlord or SubTenant is
----------------------------------
delayed, hindered in or prevented from the performance of any act required under
this SubLease by reason of Unavoidable Delays, then performance of the act will
be excused for the period of the delay and the period for the performance of the
act will be extended for a period equivalent to the period of the delay.
SECTION 25.02 - ESTOPPEL CERTIFICATES. SubTenant agrees to deliver to
-------------------------------------
SubLandlord within ten (10) Business Days after the Term Commencement Date an
estoppel certificate specifying the Term Commencement Date and such other
information relating to this SubLease as SubLandlord may reasonably request.
Within ten (10) Business Days after receipt of a request from SubLandlord,
SubTenant agrees to deliver to any prospective purchaser, mortgagee or other
Person specified in the request an estoppel certificate in such form as the
purchaser, mortgagee or other Person may reasonably prescribe. Each estoppel
certificate will be (i) signed by a duly authorized representative of SubTenant,
(ii) delivered without charge to SubLandlord and (iii) binding as to its
contents.
SECTION 25.03 - HOLDING OVER. If SubTenant occupies the Premises after the
----------------------------
SubLease Termination Date, SubTenant shall be a tenant-at-sufferance only,
subject to all of the terms and provisions of this SubLease at two hundred
percent (200%) of the then effective Rent. Such a holding over, even if with
the consent of SubLandlord, shall not constitute an extension or renewal of this
SubLease.
SECTION 25.04 - GOVERNING LAW. This SubLease and the performance of its
-----------------------------
provisions will be governed and construed under the laws of the Commonwealth of
Massachusetts.
SECTION 25.05 - PARTIAL INVALIDITY. If any provision of this SubLease or
----------------------------------
its application to any Person or circumstance is held to be invalid or
unenforceable, the remainder of this SubLease, or the application of the
provision to Persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected, and each provision of this
SubLease shall be enforced to the fullest extent permitted by law.
SECTION 25.06 - INTERPRETATION. The section headings used in this SubLease
------------------------------
are for reference and convenience only, and do not enter into the interpretation
of this SubLease. References herein to a Section shall be deemed to be
references to the specified Section of this SubLease, except as otherwise stated
in such reference. This SubLease may be signed in several counterparts, each of
which is an original, but all of which constitute a single instrument. The term
"SubLandlord" means the holder of "Tenant's" interest under the Prime Lease. In
the event of any assignment or transfer of the "Tenant's" interest under the
Prime Lease, which
<PAGE>
assignment or transfer may occur at any time during the SubLease Term, as
between SubLandlord and SubTenant, SubLandlord shall be and hereby is entirely
relieved of all covenants and obligations of SubLandlord hereunder accruing from
and after the date of such transfer or assignment, and it shall be deemed and
construed, without further agreement between the parties hereto, that any
transferee has assumed and shall carry out all covenants and obligations
thereafter to be performed by SubLandlord hereunder. SubLandlord shall transfer
and deliver any then remaining security of SubTenant to the transferee of the
"Tenant's" interest under the Prime Lease, and SubLandlord shall be discharged
from any further liability with respect thereto upon SubTenant's receipt of
written notice from SubLandlord of such transfer. The liability of SubLandlord
under this SubLease is limited to SubLandlord's interest in the Premises, and no
individual officer, trustee or member will have any liability to SubTenant or
any other Person on account of this SubLease.
SECTION 25.07 - CONSENTS. Except for the consent of SubLandlord required
------------------------
under Article 7, consents or approvals required or requested of either
SubLandlord or SubTenant shall not be unreasonably withheld or delayed, except
that SubLandlord may withhold its consent or approval if Landlord withholds its
consent or approval.
SECTION 25.08 - CHANGES. This SubLease may not be changed or terminated
-----------------------
orally or in any manner other than by an agreement in writing and signed by the
party against whom enforcement of the change or termination is sought.
SECTION 25.09 - BINDING EFFECT. The provisions of this SubLease are
------------------------------
binding on and inure to the benefit of SubLandlord, its successors and assigns,
and SubTenant, its successors and assigns and any Person claiming under
SubTenant.
SECTION 25.10 - TIME OF THE ESSENCE. Any provision of law or equity to the
-----------------------------------
contrary notwithstanding, it is agreed that time is of the essence in this
SubLease.
SECTION 25.11 - PRIME LEASE. SubLandlord represents and warrants to
---------------------------
SubTenant that the Prime Lease is in effect. Notwithstanding any provision
contained in this SubLease to the contrary, if the Prime Lease is terminated,
this SubLease shall terminate immediately. This SubLease is and at all times
shall be subject to and subordinate to the Prime Lease and the rights of
Landlord thereunder. SubLandlord shall not commit or permit any of its
Affiliates to commit on the Premises any act or omission which shall violate any
term or condition of the Prime Lease. SubTenant hereby expressly assumes and
agrees: (i) to comply with all provisions of the Prime Lease which are required
to be performed by SubTenant hereunder; and (ii) to perform all obligations on
the part of the "Tenant" to be performed under the terms of the Prime Lease with
respect to the Premises (other then Tenant's obligations to pay rent and other
charges to Landlord) during the term of this SubLease which are not required to
be performed by SubLandlord hereunder. In the event of a conflict between the
provisions of this SubLease and the Prime Lease, as between SubLandlord and
SubTenant, the provisions of this SubLease shall control. Further, as between
SubLandlord and SubTenant, SubLandlord shall be responsible for the performance
of the obligations of "Tenant" under the Prime Lease if and only to the extent
that such obligations are not required to be performed by SubTenant under this
SubLease.
SubLandlord's only obligations under the Prime Lease with respect to the
Premises are to use due diligence and reasonable efforts (at SubTenant's sole
cost and expense) to cause Landlord to perform its responsibilities and to make
those payments of all rent and other charges due to Landlord thereunder, which
payments SubLandlord hereby agrees to make, provided, however, that SubTenant
makes timely payments to SubLandlord of all rent and other charges payable under
this SubLease.
SubLandlord hereby represents and warrants that: (a) SubLandlord is Tenant
under the Prime Lease; (b) SubLandlord has submitted to SubTenant a true and
complete copy of the Prime Lease, inclusive of all amendments, riders, exhibits
and related agreements; (c) to the best of SubLandlord's knowledge, SubLandlord
has not received any notice of default under the Prime Lease from Landlord; and
(d) SubLandlord is not insolvent and is able to pay its debts and other
obligations as they become due, it has not declared bankruptcy or filed a
petition to take advantage of any law relating to bankruptcy, insolvency, or
reorganization, winding up or composition or adjustment of debt and it has no
present intention of doing so, no such proceeding has been commenced against
SubLandlord seeking such relief and SubLandlord has no knowledge that any such
proceeding is threatened.
<PAGE>
SubLandlord agrees not to amend or modify (nor agree to amend or modify)
the Prime Lease in any way that would increase SubTenant's obligations or
diminish SubTenant's rights under this SubLease without SubTenant's prior
written consent, nor do anything that would cause the Prime Lease to be
canceled, terminated or forfeited prior to its scheduled expiration date or that
would increase SubTenant's obligations or diminish SubTenant's rights under this
SubLease.
SECTION 25.12 - BROKER'S COMMISSION. SubLandlord agrees to pay a
-----------------------------------
commission in connection with this SubLease to CRF Partners, Inc., who shall
make a distribution to Lynch, Murphy, Walsh & Partners, Inc. SubTenant shall
defend, indemnify and hold harmless SubLandlord and Landlord from any claim for
a commission by Lynch, Murphy, Walsh & Partners, Inc._or any other agent,
broker, salesman or finder as a consequence of said party's actions or dealings
with such agent, broker, salesman, or finder.
EXECUTED as a sealed instrument as of the Date of SubLease specified in
Section 1.01.
SUBLANDLORD: SUBTENANT:
- ----------- ---------
FTP SOFTWARE, INC. CMG INFORMATION SERVICES, INC.
By: /s/ John J. Warnock By: /s/ Andrew J. Hajducky III
-------------------- --------------------------
Its Duly Authorized Officer Its Duly Authorized Officer
Name: Name:
Title: Title:
<PAGE>
Exhibit 10.2
CMG INFORMATION SERVICES, INC.
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
October 25, 1996
Mr. David S. Wetherell
30 Kettredge Road
North Andover, MA 01845
Dear Dave:
This Amendment No. 2 to Employment Agreement amends the Employment
Agreement between you and CMG Information Services, Inc. (the "Company") dated
as of November 9, 1993 (the "Employment Agreement"). In connection with the
amendment of the Employment Agreement, you and the Company agree as follows:
1. Amendment of Employment Agreement. Section 4 of the Employment
---------------------------------
Agreement is hereby deleted in its entirety and replaced with the following
which is effective as of October 25, 1996, with respect to the entire 300,000
share option (all numbers are split-adjusted as of October 25, 1996):
4. Grant of Non-Qualified Stock Option. On November 9, 1993, the
-----------------------------------
Company granted to you a non-qualified stock option (the "Option") under
its 1986 Stock Option Plan (the "Plan") to purchase, under the conditions
herein stated, up to three hundred thousand (300,000) shares of the
Company's Common Stock at an option price of $4.00 per share (amended in
January of 1994 to be $2.67 per share), which prices were determined by the
Compensation Committee to be fair market value on November 9, 1993 and in
January, 1994, respectively. This Option was granted by the Company
pursuant to, and subject to the terms and conditions of, the Plan (which
terms and conditions are hereby incorporated herein by reference as fully
as if set forth herein, except if contrary or supplementary terms are set
forth in this Employment Agreement, in which case such terms shall take
precedence over those in the Plan). As of October 25, 1996, this Option
shall became exercisable as follows:
(a) This Option shall become exercisable as to 30,000
shares on each November 1 of the Term of Employment upon the
attainment of annual performance milestones determined from time to
time by the Compensation Committee in its sole discretion with respect
to the performance of the Company and its affiliates during the prior
fiscal year, and, in any event, shall become exercisable (to the
extent not previously exercisable) as to the first 150,000 shares on
November 1, 1998, and as to the second 150,000 shares on November 1,
<PAGE>
2003, if you are employed by the Company on such dates. As of
November 1, 1996, this Option is exercisable as to ninety thousand
(90,000) shares.
(b) In the event of termination of the Term of Employment
pursuant to subparagraph (iv) of paragraph 2 above, or in the event
the Term of Employment is not extended for an additional five years as
provided in Section 2, the Option shall become exercisable on the date
of such termination as to a percentage of 30,000 shares of the
Company's Common Stock for each July 31 following the date of such
termination up to and including July 31, 2003 (but not to exceed three
such dates or 90,000 shares), equal to the percentage of the maximum
number of options which could have become exercisable represented by
the number of those options which have become exercisable, after
giving effect to the following paragraph (c). For example, if your
employment were terminated on September 1, 1999, with a remaining term
hereof ending July 31, 2003, and your Option had as of that date
(after giving effect to the following subparagraph (c)) become
exercisable for 60% of the aggregate maximum of 180,000 shares as to
which it might have become exercisable with respect to the fiscal
years ending prior to the termination date, it would become
exercisable under this clause (b) for 60% of 30,000 shares, or 18,000
shares for a maximum of three of the July 31sts following termination,
--
or an additional 54,000 shares (all numbers are split-adjusted as of
October 25, 1996).
(c) In the event that your Term of Employment hereunder is
terminated pursuant to subparagraph (iv) of paragraph 2 during August,
September or October of any year, the portion of the Option becoming
exercisable on the succeeding November 1 shall be deemed to have
become exercisable on the date of such termination.
Whenever any formula determined by the Compensation Committee relating
to the vesting of your Option results in a fraction of a share, it shall be
rounded up to the next full share.
This Option shall terminate as to the unexercised portion thereof on
November 30, 2003; or on November 30, 1998, if the Term of Employment is
not extended for five years under Section 2.
The Company may, if so determined in the sole discretion of its Board
of Directors, pay to you cash for the purpose of enabling you to provide
for your income tax obligation arising out of any vesting or exercise of
your Option, in lieu of such number of shares (or a portion thereof)
becoming vested or issued to you upon such exercise, all as the Board of
Directors may determine. Cash paid to you hereunder shall be in an amount
equal to the fair
-2-
<PAGE>
market value of shares retained following exercise or cancelled following
vesting, valued on the date on which the amount of tax is determined. You
shall also have the benefit of Articles 14 and 17 of the Plan.
2. Conforming Amendments. The reference to paragraph 4(g) in Section 5 of
---------------------
the Employment Agreement shall be changed to a reference to paragraph 4(c). The
reference to paragraph 4(f) of the Employment shall be changed to a reference to
paragraph 4(b).
3. Continuing Effect of Employment Agreement. Except as amended hereby,
-----------------------------------------
the Employment Agreement shall remain in effect according to its original terms.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized represented and its corporate seal to be hereunto affixed
and you have hereunto set your hand and seal this 25th day of October, 1996.
CMG INFORMATION SERVICES, INC.
By: /s/ Gregory M. Avis
------------------------------
Gregory M. Avis
By: /s/ John A. McMullen
------------------------------
John A. McMullen
ACCEPTED AND AGREED TO:
/s/ David S. Wetherell
---------------------------------
David S. Wetherell
-3-
<PAGE>
EXHIBIT 10.3
REVOLVING CREDIT AND TERM LOAN AGREEMENT
----------------------------------------
Dated as of October 24, 1996
among
SALESLINK CORPORATION,
CMG INFORMATION SERVICES
PACIFIC DIRECT MARKETING CORP.
THE FIRST NATIONAL BANK OF BOSTON
AND THE OTHER LENDING
INSTITUTIONS SET FORTH ON SCHEDULE 1 HERETO
and
THE FIRST NATIONAL BANK OF BOSTON
as Agent
<PAGE>
-1-
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. DEFINITIONS: 1
2. REVOLVING CREDIT FACILITY. 11
2.1. Commitment to Lend 11
2.2. Requests for Loans 12
2.3. Conversion Options 13
2.3.1. Conversion to Different Loan Type 13
2.3.2. Continuation of Loan Type 14
2.3.3. LIBOR Rate Loans 14
2.4. Interest 14
2.5. Repayments and Prepayments 15
2.6. Funds for Revolving Credit Loan 15
2.6.1. Funding Procedures 15
2.6.2. Advances by Agent 16
3. THE TERM LOAN 16
3.1. Commitment to Lend 16
3.2. The Term Notes 16
3.3. Schedule of Installment Payments of Principal of Term Loan 17
3.4. Optional Prepayment of Term Loan 17
3.5. Interest on Term Loan 17
3.5.1. Interest Rates 18
3.5.2. Notification by Borrower 18
</TABLE>
<PAGE>
-2-
<TABLE>
<S> <C>
3.5.3. Amounts, Etc 18
4. LETTER OF CREDIT FACILITY 18
4.1. Letter of Credit Commitment 18
4.2. Reimbursement Obligation of the Borrower 20
4.3. Letter of Credit Payments 20
4.4. Obligations Absolute 21
4.5. Reliance by Issuer 22
4.6. Letter of Credit Fees 22
5. CHANGES IN CIRCUMSTANCES, ETC. 22
5.1. Inability to Determine LIBOR Rate 22
5.2. Illegality 22
5.3. Changes in Circumstances 23
5.4. Certificate 24
5.5. Indemnity. 24
6. FEES AND PAYMENTS 24
7. REPRESENTATIONS AND WARRANTIES. 25
8. CONDITIONS PRECEDENT. 27
9. COVENANTS. 29
9.1. Affirmative Covenants 29
9.2. Negative Covenants 31
9.3. Financial Covenants 32
10. EVENTS OF DEFAULT; ACCELERATION. 33
11. SETOFF. 35
12. THE AGENT. 36
12.1. Authorization. 36
12.2. Employees and Agents. 37
</TABLE>
<PAGE>
-3-
<TABLE>
<S> <C>
12.3. No Liability 37
12.4. No Representations 37
12.5. Payments 38
12.5.1. Payments to Agent. 38
12.5.2. Distribution by Agent. 38
12.5.3. Delinquent Banks. 38
12.6. Holders of Notes. 39
12.7. Indemnity. 39
12.8. Agent as Bank 39
12.9. Resignation 39
12.10. Notification of Defaults and Events of Default 40
12.11. Duties in the Case of Enforcement. 40
13. ASSIGNMENT AND PARTICIPATION. 40
13.1. Conditions to Assignment by Banks 40
13.2. Certain Representations and Warranties; Limitations;
Covenants 41
13.3. Register 42
13.4. New Notes 42
13.5. Participations. 43
13.6. Disclosure. 43
13.7. Assignee or Participant Affiliated with the Borrower. 43
13.8. Miscellaneous Assignment Provisions. 44
</TABLE>
<PAGE>
-4-
<TABLE>
<S> <C>
13.9. Assignment by Borrower 44
14. MISCELLANEOUS 44
</TABLE>
<PAGE>
-1-
REVOLVING CREDIT AND TERM LOAN AGREEMENT
----------------------------------------
This REVOLVING CREDIT AND TERM LOAN AGREEMENT (this "Agreement") is made as of
October 24, 1996, by and among (a) SALESLINK CORPORATION (the "Borrower"), a
Massachusetts corporation having its principal place of business at 25 Drydock
Avenue, Boston, Massachusetts 02210, (b) CMG INFORMATION SERVICES, INC. (the
"Parent Guarantor"), a Delaware corporation having its principal place of
business at 187 Ballardvale St., Suite B110, Wilmington, Massachusetts 01887-
7000, (c) PACIFIC DIRECT MARKETING CORP., a California corporation having its
principal place of business at 8852 Thornton Avenue, Newark, California (the
"Subsidiary Guarantor"), (d) THE FIRST NATIONAL BANK OF BOSTON, a national
banking association, and the other lending institutions listed on Schedule 1
----------
hereto and (e) THE FIRST NATIONAL BANK OF BOSTON as agent for itself and such
other lending institutions.
I. DEFINITIONS:
-----------
Certain capitalized terms are defined below:
Accounts: All rights of the Borrower or any of its Subsidiaries to any payment
- --------
of money for goods sold, leased or otherwise marketed in the ordinary course of
business, whether evidenced by or under or in respect of a contract or
instrument, and to all proceeds in respect thereof.
Acquisition: The acquisition by the Borrower on the Acquisition Closing Date of
- -----------
all of the outstanding shares of capital stock of the Subsidiary Guarantor
pursuant to the Acquisition Documents.
Acquisition Closing Date: The first date on which the conditions set forth in
- ------------------------
the Stock Purchase Agreement have been satisfied and the Acquisition has
occurred.
Acquisition Documents: Collectively, the Stock Purchase Agreement and all
- ---------------------
agreements and documents required to be entered into or delivered pursuant
thereto or in connection with the Acquisition, each in the form delivered to the
Agent on the Acquisition Closing Date.
<PAGE>
-2-
Adjustment Date: The first day of the month immediately following the month in
- ---------------
which a Compliance Certificate is to be delivered by the Borrower to the Agent
pursuant to (S)9.1(a)(iv).
Agent: The First National Bank of Boston acting as agent for the Banks.
- -----
Agent's Head Office: The Agent's head office located at 100 Federal Street,
- ------- ---- ------
Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
Agreement: See the preamble, which term shall include this Agreement and the
- ---------
Schedules and Exhibits hereto, all as amended and in effect from time to time.
Applicable Margin: For each period commencing on an Adjustment Date through the
- -----------------
date immediately preceding the next Adjustment Date (each a "Rate Adjustment
Period"), the Applicable Margin shall be the applicable margin set forth below
with respect to the Borrower's Leverage Ratio, as determined for the fiscal
period of the Borrower and its Subsidiaries ending immediately prior to the
applicable Rate Adjustment Period:
<TABLE>
<CAPTION>
BASE RATE LIBOR RATE
---------- -----------
LEVERAGE RATIO LOANS LOANS
-------------- ---------- -----------
<S> <C> <C>
Greater than or equal to 2.00:1.00 .50% 2.00%
Less than 2.00:1.00 but greater
t han or equal to 1.50:1.00 .25% 1.75%
Less than 1.50:1.00 0% 1.50%
</TABLE>
Notwithstanding the foregoing, (a) for Loans outstanding during the period
commencing on the Closing Date through the date immediately preceding the first
Adjustment Date to occur after the fiscal quarter ending January 31, 1997, the
Applicable Margin shall be at the highest Applicable Margin set forth above and
(b) if the Borrower fails to deliver any Compliance Certificate pursuant to
(S)9.1(a)(iv) hereof, then, for the period commencing on the next Adjustment
Date to occur
<PAGE>
-3-
subsequent to such failure through the date immediately following
the date on which such Compliance Certificate is delivered, the Applicable
Margin shall be the highest Applicable Margin set forth above.
Assignment and Acceptance: See (S)13.
- -------------------------
Banks: FNBB and the other lending institutions listed on Schedule 1 hereto and
- ----- -------- -
any other Person who becomes an assignee of any rights and obligations of a Bank
pursuant to (S)13.
Base Rate: The higher of (a) the annual rate of interest announced from time to
- ---------
time by FNBB at its head office as it's "base rate" and (b) one-half of one
percent (1/2%) above the Federal Funds Effective Rate.
Base Rate Loans: Revolving Credit Loans and all or any portion of the Term Loan
- ---------------
bearing interest calculated by reference to the Base Rate.
Borrower: See the preamble.
- --------
Business Day: Any day on which banking institutions in Boston, Massachusetts,
- ------------
are open for the conduct of a substantial part of its commercial banking
business generally and, in the case of LIBOR Rate Loans, also a day which is a
LIBOR Business Day.
Capitalized Leases: Leases under which the Borrower or any of its Subsidiaries
- ------------------
is the Lessee or obligor, the discounted, future rental payment obligations
under which are required to be capitalized on the consolidated balance sheet of
the Borrower and its Subsidiaries in accordance with GAAP.
<PAGE>
-4-
Cash Equivalents: Collectively, (a) negotiable certificates of deposit and
- ----------------
bankers' acceptances, maturing in one hundred eighty (180) days or less from the
date of issue, or demand deposit or money market accounts, with any commercial
bank or trust company which is organized under the laws of the United States or
of any state thereof and which has, or which is owned by a bank holding company
which has, total assets in excess of $1,000,000,000; (b) any securities (i)
which are commonly known as "commercial paper"; (ii) which are due and payable
within two hundred seventy (270) days from the date of issue; (iii) which have
been issued by any corporation organized under the laws of the United States or
of any state thereof or issued by a foreign corporation if such securities are
denominated in United States dollars; and (iv) the ratings for which, at the
time of the acquisition thereof by the Parent Guarantor, are not less than "P-1"
if rated by Moody's Investors Services, Inc., and not less than "A-1" if rated
by Standard and Poor's Corporation; (c) any marketable direct or unconditionally
guaranteed obligations of the United States or any agency thereof which mature
within one (1) year from the date of acquisition thereof; and (d) solely for
purposes of determining compliance with (S)9.3(f)(i), to the extent the Swap
Program has been entered into, is in full force and effect and no defaults have
occurred and are continuing thereunder, securities held by the Parent Guarantor
which are eligible pursuant to the terms of the Swap Program to be included in
such Swap Program but are not, as of the date of determination, so included.
Charter Documents: In respect of any entity, the certificate or articles of
- -----------------
incorporation or organization and the by-laws of such entity, or other
constitutive documents of such entity.
Closing Date: The first date on which the conditions set forth in (S)8 have
- ------------
been satisfied and any Revolving Credit Loans and the Term Loan are to be made
or the Letter of Credit is to be issued hereunder.
Commitment: Collectively, the Revolving Credit Loan Commitment, the Term Loan
- ----------
Commitment and the Letter of Credit Commitment.
Commitment Percentage: With respect to each Bank, the percentage set forth on
- ---------------------
Schedule 1 hereto as such Bank's percentage of the aggregate Commitments of all
- ----------
the Banks.
<PAGE>
-5-
Compliance Certificate: See (S)9.1(a)(iv) hereof.
- ----------------------
Consent: In respect of any person or entity, any permit, license or exemption
- -------
from, approval, consent of, registration or filing with any local, state or
federal governmental or regulatory agency or authority, required under
applicable law.
Consolidated Current Assets: All assets of any Person and its Subsidiaries on a
- ---------------------------
consolidated basis that in accordance with GAAP are properly classified as
current assets, excluding bad debts and inventory not yet saleable.
Consolidated Current Liabilities: All liabilities of any Person and its
- --------------------------------
Subsidiaries on a consolidated basis payable on demand or maturing within one
(1) year from the date as of which current liabilities are to be determined, and
such other liabilities that in accordance with GAAP are properly classified as
current liabilities.
Consolidated Net Income (or Deficit): The consolidated net income (or deficit)
- ------------------------------------
of any Person and its Subsidiaries, after deduction of all expenses, taxes and
other proper charges, determined in accordance with GAAP.
Consolidated Operating Cash Flow: For any period, the amount equal to (a) the
- --------------------------------
sum of (i) EBITDA for such period, minus (b) cash payments for all taxes paid
-----
during such period, minus (c) capital expenditures made during such period to
-----
the extent permitted hereunder.
Consolidated Total Debt Service: For any Reference Period, all scheduled
- -------------------------------
mandatory payment of principal on Indebtedness of any Person and its
Subsidiaries made or required to be made in that period, plus the Consolidated
Total Interest Expense of such Person and its Subsidiaries for that period.
Consolidated Total Interest Expense. For any period, the aggregate amount of
- -----------------------------------
interest required to be paid or accrued by any Person and its Subsidiaries
during such period on all Indebtedness of such Person and its Subsidiaries
outstanding during all or any part of such period, whether such interest was or
is required to be reflected as an item of expense or capitalized, including
payments consisting of interest in respect of Capitalized Leases and including
commitment fees, agency fees, facility fees, balance deficiency fees and similar
fees or expenses in connection with the borrowing of money.
<PAGE>
-6-
Conversion Request: A notice by the Borrower to the Agent of the Borrower's
- ------------------
election to convert or continue a Loan in accordance with (S)2.3 hereof.
Default: An event or act which with the giving of notice and/or the lapse of
- -------
time, would become an Event of Default.
Domestic Lending Office: Initially, the office of each Bank designated as such
- -----------------------
in Schedule 1 hereto; thereafter, such other office of such Bank, if any,
----------
located within the United States that will be making or maintaining Base Rate
Loans.
Drawdown Date: The date on which any Revolving Credit Loan or the Term Loan is
- -------------
made or is to be made, and the date on which any Revolving Credit Loan is
converted or continued in accordance with (S)2.3 or all or any portion of the
Term Loan is converted or continued in accordance with (S)3.5.
EBITDA: With respect to any fiscal period, an amount equal to the sum of (a)
- ------
Consolidated Net Income for such period, plus (b) to the extent deducted in the
----
calculation of such Person's Consolidated Net Income and without duplication,
(i) depreciation and amortization for such period, plus (ii) other noncash
----
charges, including, without limitation, in process research and development
expenses or charges, made in calculating Consolidated Net Income for such
period, plus (iii) tax expense for such period, plus (iv) Consolidated Total
---- ----
Interest Expense paid or accrued during such period, all as determined in
accordance with GAAP.
Eligible Assignee: Any of (a) a commercial bank or finance company organized
- -----------------
under the laws of the United States, or any State thereof or the District of
Columbia, and having total assets in excess of $1,000,000,000; (b) a savings and
loan association or savings bank organized under the laws of the Untied States,
or any State thereof or the District of Columbia, and having a net worth of at
least $100,000,000, calculated in accordance with GAAP; (c) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development ( the "OECD"), or a
political subdivision of any such country, and having total assets in excess of
$1,000,000,000, provided, that such bank is acting through a branch or agency
--------
located in the country in which it is organized or another country which is also
a member of the
<PAGE>
-7-
OECD; (d) the central bank of any country which is a member of the OECD; and
(e) if, but only if, any Event of Default has occurred and is continuing, any
other bank, insurance company, commercial finance company or other financial
institution or other Person approved by the Agent, such approval not to be
unreasonably withheld.
Environmental Laws: All laws pertaining to environmental matters, including
- ------------------
without limitation, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act of 1986, the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control Act, in each case
as amended, and all rules, regulations, judgments, decrees, orders and licenses
arising under all such laws.
ERISA: The Employee Retirement Income Security Act of 1974, as amended, and all
- -----
rules, regulations, judgments, decrees, and orders arising thereunder.
Eurocurrency Reserve Rate: For any day with respect to a LIBOR Rate Loan, the
- -------------------------
maximum rate (expressed as a decimal) at which any lender subject thereto would
be required to maintain reserves under Regulation D of the Board of Governors of
the Federal Reserve System (or any successor or similar regulations relating to
such reserve requirements) against "Eurocurrency Liabilities" (as that term is
used in Regulation D), if such liabilities were outstanding. The Eurocurrency
Reserve Rate shall be adjusted automatically on and as of the effective date of
any change in the Eurocurrency Reserve Rate.
Event of Default: Any of the events listed in (S)10 hereof.
- ----------------
Federal Funds Effective Rate: For any day, the 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
funds brokers of recognized standing selected by the Agent.
Financials: In respect of any period, the consolidated balance sheet of any
- ----------
Person and its Subsidiaries as at the end of such period, and the related
statement of income and consolidated statement of cash flow for such period,
each setting forth in
<PAGE>
-8-
comparative form the figures for the previous comparable fiscal period, all in
reasonable detail and prepared in accordance with GAAP.
FNBB: The First National Bank of Boston, a national banking association, in its
- ----
individual capacity.
GAAP: Generally accepted accounting principles consistent with those adopted by
- ----
the Financial Accounting Standards Board and its predecessor, (a) generally, as
in effect from time to time, and (b) for purposes of determining compliance by
each of the Guarantors and the Borrower with its financial covenants set forth
herein, as in effect for the fiscal year therein reported in the most recent
Financials submitted to the Agent prior to execution of this Agreement.
Guarantors: The Parent Guarantor and the Subsidiary Guarantor.
- ----------
Guaranty: The Guaranty, dated or to be dated on or prior to the Closing Date,
- --------
made by each of the Guarantor and the Subsidiary Guarantor in favor of the Banks
and the Agent pursuant to which each such Guarantor guaranties to the Banks and
the Agent the payment and performance of the Obligations in form and substance
satisfactory to the Banks and the Agent.
Indebtedness: In respect of any entity, all obligations, contingent and
- ------------
otherwise, that in accordance with GAAP should be classified upon the obligor's
balance sheet as liabilities, or to which reference should be made by footnotes
thereto, including in any event and whether or not so classified, but without
duplication with respect liabilities under swap arrangements where the
underlying obligation appears on the balance sheet of such entity: (a) all debt
and similar monetary obligations, whether direct or indirect, (b) all
liabilities secured by Liens, whether or not the liability secured thereby shall
have been assumed, (c) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,
including any obligation to supply funds to or in any manner to invest in,
directly or indirectly, the debtor, to purchase indebtedness, or to assure the
owner of indebtedness against loss, through an agreement to purchase goods,
supplies or services for the purpose of enabling the debtor to make payment of
the indebtedness held by such owner or otherwise and (d) all liabilities in
respect of bankers' acceptances or letters of credit.
<PAGE>
-9-
Interest Payment Date: (a) As to any Base Rate Loan, the last day of the
- ---------------------
calendar month which includes the Drawdown Date thereof; and (b) as to any LIBOR
Rate Loan in respect of which the Interest Period is (i) ninety (90) days or
less, the last day of such Interest Period and (ii) more than ninety (90) days,
the date that is ninety (90) days from the first day of such Interest Period
and, in addition, the last day of such Interest Period.
Interest Period: With respect to each Revolving Credit Loan or all or any
- ---------------
relevant portion of the Term Loan, (a) initially, the period commencing on the
Drawdown Date of such Loan and ending on the last day of one of the periods set
forth below, as selected by the Borrower in a Loan Request (i) for any Base Rate
Loans, the last day of the calendar month; and (ii) for any LIBOR Rate Loan, 1,
2, 3, 6 or, if available, 12 months; and (b) thereafter each period commencing
on the last day of the immediately preceding Interest Period applicable to such
Loan and ending on the last day of one of the periods set forth above, as
selected by the Borrower in a Conversion Request; provided that all of the
--------
foregoing provisions relating to Interest Periods are subject to the following:
(a) if any Interest Period with respect to a LIBOR Rate Loan would
otherwise end on a day that is not a LIBOR Business Day, that Interest
Period shall be extended to the next succeeding LIBOR Business Day
unless the result of such extension would be to carry such Interest
Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding LIBOR Business Day;
(b) if any Interest Period with respect to a Base Rate Loan would end on a
day that is not a Business Day, that Interest Period shall end on the
next succeeding Business Day;
(c) If the Borrower shall fail to give notice as provided in (S)2.3, the
Borrower shall be deemed to have requested a conversion of the
affected LIBOR Rate Loan to a Base Rate Loan and the continuance of
all Base Rate Loans as Base Rate Loans on the last day of the then
current Interest Period with respect thereto ;
(d) any Interest Period relating to any LIBOR Rate Loan that begins on the
last LIBOR Business Day of a calendar month (or on a day for which
<PAGE>
-10-
there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall end on the last LIBOR Business Day
of a calendar month; and
(e) any Interest period relating to any LIBOR Rate Loan that would
otherwise extend beyond the Revolving Credit Loan Maturity Date (if
comprising a Revolving Credit Loan) or the Term Loan Maturity Date (if
comprising the Term Loan or a portion thereof) shall end on the
Revolving Credit Loan Maturity Date or, as the case may be, the Term
Loan Maturity Date.
Investment Equivalents: Cash Equivalents of the Parent Guarantor, plus, without
- ----------------------
duplication, the amount of any "Allowable Instruments" (as such term is defined
in the Investment Policy) which are set forth in the Parent Guarantor's
quarterly and annual statements as "cash equivalents", provided, however,
Allowable Instruments shall not include any securities issued by a corporation
unless such corporation's securities are publically traded and there are no
restrictions on transferability or sale imposed on the holder thereof.
Investment Policy: The Borrower's investment policy set forth on Schedule 2
- ----------------- ----------
hereto.
Letter of Credit: See (S)4.1(a).
- ----------------
Letter of Credit Application: See (S)4.1(a).
- ----------------------------
Letter of Credit Commitment. With respect to each Bank, the amount set forth on
- ---------------------------
Schedule 1 hereto as the amount of such Bank's commitment to participate in the
- ----------
issuance, extension and renewal of the Letter of Credit for the account of the
Borrower or the Parent Guarantor with a Maximum Drawing Amount under such Letter
of Credit of not more than $7,500,000 in the aggregate, as the same may be
reduced from time to time or terminated hereunder.
Letter of Credit Fee: See (S)4.6.
- --------------------
<PAGE>
-11-
Letter of Credit Maturity Date: October 24, 1997, as the same shall be extended
- ------------------------------
on a yearly basis at the Agent's and the Banks' discretion.
Letter of Credit Participation: See (S)4.1(d).
- -------------------------------
Letter of Credit Participation: See (S)4.1(d).
- ------------------------------
Leverage Ratio: As at any date of determination, the ratio of (a) Total Funded
- --------------
Indebtedness of the Borrower and its Subsidiaries outstanding on such date to
(b) the EBITDA of the Borrower and its Subsidiaries for the period of four (4)
consecutive fiscal quarters (treated as a single accounting period) ending on
such date; provided, however, for purposes of (S)9.3(b) hereof, for the fiscal
-------- -------
quarter ending (1) January 31, 1997, the Leverage Ratio shall be calculated as
twenty-five percent (25%) of Total Funded Indebtedness of the Borrower and its
Subsidiaries outstanding on such date to the EBITDA of the Borrower and its
Subsidiaries for such one quarter period; (2) April 30, 1997, the Leverage Ratio
shall be calculated as fifty percent (50%) of Total Funded Indebtedness of the
Borrower and its Subsidiaries outstanding on such date to the EBITDA of the
Borrower and its Subsidiaries for such two quarter period; and (3) July 31,
1997, the Leverage Ratio shall be calculated as seventy-five percent (75%) of
Total Funded Indebtedness of the Borrower and its Subsidiaries outstanding on
such date to the EBITDA of the Borrower and its Subsidiaries for such three
quarter period.
LIBOR Business Day: Any day on which commercial banks are open for
- ------------------
international business (including dealings in U.S. dollar deposits) in London or
such other eurodollar interbank market as may be selected by the Agent in its
sole discretion acting in good faith.
LIBOR Lending Office: Initially, the office of each Bank designated as such in
- --------------------
Schedule 1 hereto; thereafter, such other office of such Bank, if any, that
- -------- -
shall be making or maintaining LIBOR Rate Loans.
LIBOR Rate: For any Interest Period with respect to a LIBOR Rate Loan, the rate
- ----------
of interest equal to (a) the rate determined by the Agent at which U.S. dollar
deposits for such Interest Period are offered based on information presented on
Telerate Page 3750 (or any successor publication or source selected by the Bank
in its reasonable discretion) at 11:00 a.m. (London time) on the second LIBOR
Business Day, prior to the first day of such Interest Period, divided by (b) a
number equal to 1.00 minus the Eurocurrency Reserve Rate, if applicable.
<PAGE>
-12-
LIBOR Rate Loans: Revolving Credit Loans and all or any portion of the Term
- ----------------
Loan bearing interest calculated by reference to the LIBOR Rate.
Liens: Any encumbrance, mortgage, pledge, hypothecation, charge, restriction or
- -----
other security interest of any kind securing any obligation of any entity or
person.
Loan Documents: This Agreement, the Notes, the Letter of Credit Application,
- --------------
the Letter of Credit and the Guaranty, in each case as from time to time amended
or supplemented.
Loan Request: See (S)2.1.
- ------------
Loans: The Revolving Credit Loans and the Term Loan.
- -----
Majority Banks: As of any date, (a) if there are only two (2) Banks, Majority
- --------------
Banks shall mean Banks, and (b) if there are three (3) or more Banks the Banks
whose aggregate Commitments constitute at least sixty six and two thirds percent
(66 2/3%) of the Total Commitment.
Materially Adverse Effect: Any materially adverse effect on the financial
- -------------------------
condition or business operations of the Guarantors, the Borrower and its other
Subsidiaries taken together or material impairment of the ability of the
Guarantors, the Borrower or any of its other Subsidiaries to perform its
obligations hereunder or under any of the other Loan Documents.
Maximum Drawing Amount: The maximum aggregate amount from time to time that the
- ----------------------
beneficiary may draw under the outstanding Letter of Credit, as such aggregate
amount may be reduced from time to time pursuant to the terms of the Letter of
Credit.
Notes: The Term Note and the Revolving Credit Note.
- -----
<PAGE>
-13-
Obligations: All indebtedness, obligations and liabilities of the Guarantors,
- -----------
the Borrower and its other Subsidiaries to any of the Banks and the Agent,
existing on the date of this Agreement or arising thereafter, direct or
indirect, joint or several, absolute or contingent, matured or unmatured,
liquidated or unliquidated, secured or unsecured, arising by contract, operation
of law or otherwise, arising or incurred under this Agreement or any other Loan
Document or in respect of any of the Loans made or Reimbursement Obligations
incurred or any of the Notes, Letter of Credit Application, Letter of Credit, or
arising or incurred in connection with any interest rate protection arrangements
contemplated by (S)9.1(g) or any documents, agreements or instruments executed
in connection therewith, or other instruments at any time evidencing any
thereof.
Parent Guarantor: See the preamble.
- ----------------
Person: Any individual, corporation, partnership, trust, unincorporated
- ------
association, business or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Rate Adjustment Period: See the definition of Applicable Margin.
- ----------------------
Record: See (S)3.2 hereof.
- ------
Reference Period: The period of four (4) consecutive fiscal quarters (or such
- ----------------
shorter period of one, two or three consecutive fiscal quarters as has elapsed
since the Closing Date), treated as a single accounting period.
Reimbursement Obligation: The Borrower's and, in the event the Letter of Credit
- ------------------------
is issued for the account of the Parent Guarantor, the Parent Guarantor's joint
and several obligation to reimburse the Agent and the Banks on account of any
drawing under the Letter of Credit as provided in (S)4.2.
Requirement of Law: In respect of any person or entity, any law, treaty, rule,
- ------------------
regulation or determination of an arbitrator, court, or other governmental
authority, in each case applicable to or binding upon such person or entity or
affecting any of its property.
<PAGE>
-14-
Revolving Credit Loan Commitment: With respect to each Bank, the amount set
- --------------------------------
forth on Schedule 1 hereto as the amount of such Bank's commitment to make
-------- -
Revolving Credit Loans to the Borrower, as the same may be reduced from time to
time or terminated hereunder.
Revolving Credit Loan Maturity Date: October 1, 1998.
- -----------------------------------
Revolving Credit Loans: Revolving credit loans made or to be made by the Banks
- ----------------------
to the Borrower pursuant to (S)2 hereof.
Revolving Credit Note: See (S)2.2(d) hereof.
- ---------------------
Seller: Each of the Stockholders (as such term is defined in the Stock Purchase
- ------
Agreement) set forth on Schedule 1 to the Stock Purchase Agreement.
----------
Seller Note: The unsecured promissory note from the Borrower to the Seller in
- -----------
the original principal amount of $7,500,000 issued pursuant to the Acquisition,
which promissory note shall be in form and substance satisfactory to the Banks
and the Agent, and any replacement note issued pursuant to Sections 1.4 and 1.6
to the Stock Purchase Agreement, so long as such replacement note is on terms
satisfactory to the Agent.
Stock Purchase Agreement: The Stock Purchase Agreement dated as of October 24,
- ------------------------
1996 among the Borrower, each of the Guarantors, and the Sellers, together with
all schedules, exhibits and annexes thereto.
Subsidiary: In respect of any Person, any business entity of which such Person
- -----------
at any time owns or controls directly or indirectly more than fifty percent
(50%) of the outstanding shares of stock having voting power, regardless of
whether such right to vote depends upon the occurrence of a contingency.
Subsidiary Guarantor: Pacific Direct Marketing Corp., a California corporation
- --------------------
and, immediately upon the effectiveness of the Acquisition, a wholly-owned
Subsidiary of the Borrower.
<PAGE>
-15-
Swap Program: The "total rate of return swap program" or such similar
- ------------
"monitization" program entered into between the Parent Guarantor and FNBB on
terms and conditions substantially as agreed to on the Closing Date.
Term Loan: The term loan made or to be made by the Banks to the Borrower on the
- ---------
Closing Date in the aggregate principal amount of $5,500,000 pursuant to (S)3
hereof.
Term Loan Commitment: With respect to each Bank, the amount set forth on
- --------------------
Schedule 1 hereto as the amount of such Bank's commitment to make the Term Loan
- ----------
to the Borrower on the Closing Date.
Term Loan Maturity Date: October 1, 2001.
- -----------------------
Term Note: See (S)3.2 hereof.
- ---------
Total Commitment: The sum of the Commitments of the Banks, as in effect from
- ----------------
time to time.
Total Revolving Credit Commitment: The sum of the Revolving Credit Commitments
- ---------------------------------
of the Banks, as in effect from time to time. As of the Closing Date the Total
Revolving Credit Commitment is $2,500,000.
Total Funded Indebtedness: All Indebtedness of the Borrower and its
- -------------------------
Subsidiaries for borrowed money, purchase money Indebtedness and with respect to
Capitalized Leases, determined on a consolidated basis in accordance with GAAP.
Unencumbered Cash: The sum of (a) a Person's cash held in demand deposit
- -----------------
accounts or interest bearing accounts at any financial institution, which cash
is not subject to any Lien, and which has not been advanced by FNBB plus (b) a
----
Person's Cash Equivalents which are not subject to any Lien, plus (c) solely for
----
purposes of determining compliance with (S)9(f)(ii) hereof, a Person's
Investment Equivalents which are not subject to any Lien.
Uniform Customs: With respect to any Letter of Credit, the Uniform Customs and
- ---------------
<PAGE>
-16-
Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500 or any successor version thereto adopted by the
Agent in the ordinary course of its business as a letter of credit issuer and in
effect at the time of issuance of such Letter of Credit.
Unpaid Reimbursement Obligation: Any Reimbursement Obligation for which the
- -------------------------------
Borrower or the Parent Guarantor, as the case may be, does not reimburse the
Agent and the Banks on the date specified in, and in accordance with, (S)3.2(a).
II. REVOLVING CREDIT FACILITY.
-------------------------
A. COMMITMENT TO LEND.
------------------
Upon the terms and subject to the conditions of this Agreement, each of the
Banks severally agrees to lend to the Borrower such sums that the Borrower may
request, from the Closing Date until but not including the Revolving Credit Loan
Maturity Date, up to a maximum aggregate amount outstanding (after giving effect
to all amounts requested) at any one time equal to such Bank's Revolving Credit
Loan Commitment, provided that the sum of the outstanding amount of the
--------
Revolving Credit Loans (after giving effect to all amounts requested) shall not
at any time exceed the Total Revolving Credit Commitment. Revolving Credit
Loans shall be in the minimum aggregate amount of $100,000 or an integral
multiple thereof.
B. REQUESTS FOR LOANS.
------------------
(a) The Borrower shall give to the Agent written notice in form and substance
satisfactory to the Agent (or telephonic notice confirmed in writing in form and
substance satisfactory to the Agent) of each Revolving Credit Loan being
requested hereunder (a "Loan Request") (i) no later than 10:00 a.m. (Boston
time) on the proposed Drawdown Date of any Base Rate Loan and (ii) no less than
three (3) LIBOR Business Days prior to the proposed Drawdown Date of any LIBOR
Rate Loan. Each such notice shall specify (A) the principal amount of the
Revolving Credit Loan being requested, (B) the proposed Drawdown Date of such
Revolving Credit Loan, (C) in the event the Revolving Credit Loan being
requested is a LIBOR Rate Loan, the Interest Period for such Revolving Credit
Loan and (D) whether such Revolving Credit Loan shall be a Base Rate Loan or a
LIBOR Rate Loan. Promptly
<PAGE>
-17-
upon receipt of any such notice, the Agent shall notify each of the Banks
thereof. Each Loan Request shall be irrevocable and binding upon the Borrower
and shall obligate the Borrower to accept the Revolving Credit Loan requested
from the Banks on the proposed Drawdown Date. Each Loan Request shall be in a
minimum aggregate amount of $100,000 or an integral multiple thereof.
(b) Notwithstanding the notice requirements set forth in (S)2.2(a) and the
minimum Revolving Credit Loan amount provisions contained in (S)2.1 and 2.2(a),
Revolving Credit Loans may be made from time to time in the following manner:
the Banks may make Revolving Credit Loans to the Borrower by entry of credits by
the Agent to the Borrower's controlled disbursement account (the "Disbursement
Account") with the Agent to cover checks and other charges which the Borrower
has drawn or made against such Disbursement Account. The Borrower hereby
requests and authorizes the Banks to make from time to time such Revolving
Credit Loans by means of appropriate entries of such credits sufficient to cover
checks and other charges then presented. The Borrower and the Banks may also
agree to effect such other controlled disbursement arrangements as may be
mutually satisfactory. The Borrower acknowledges and agrees that the making of
such Revolving Credit Loans in accordance with this (S)2.2(b) shall, in each
case, be subject in all respects to the provisions of this Agreement as if they
were Revolving Credit Loans covered by a Loan Request, including without
limitation, the limitations set forth in (S)2.1 and the requirement that the
applicable provisions of (S)8 be satisfied. All actions taken by the Agent and
the Banks pursuant to the provisions of this (S)2.2(b) shall be conclusive and
binding upon the Borrower.
(c) Notwithstanding the notice requirement set forth in (S)2.2(a) and the
minimum Revolving Credit Loan provisions contained in (S)2.1 and (S)2.2(a), each
of the Banks agrees to make Revolving Credit Loans to the Borrower sufficient to
pay to the Banks any Unpaid Reimbursement Obligations on the date on which such
Reimbursement Obligations become Unpaid Reimbursement Obligations. The Borrower
hereby requests and authorizes the Banks to make from time to time such
Revolving Credit Loans by means of paying Unpaid Reimbursement Obligations. The
Borrower acknowledges and agrees that the making of such Revolving Credit Loans
shall, in each case, be subject in all respects to the provisions of this
Agreement, including, without limitation, the limitations set forth in (S)2.1(a)
and the requirements of the applicable conditions in (S)8. All actions taken by
the Agent and the Banks pursuant to the provisions of this (S)2.2(c) shall be
conclusive and binding on the Borrower.
(d) The obligation of the Borrower to repay to the Banks the principal of the
<PAGE>
-18-
Revolving Credit Loans and interest accrued thereon shall be evidenced by
separate promissory notes (each a "Revolving Credit Note") dated as of the
Closing Date and completed with appropriate insertions. One Revolving Credit
Note shall be payable to the order of each Bank in a principal amount equal to
such Bank's Revolving Credit Loan Commitment or, if less, the outstanding amount
of all Revolving Credit Loans made by such Bank, plus interest accrued thereon,
as set forth in (S)2.4 below.
C. CONVERSION OPTIONS.
------------------
1. CONVERSION TO DIFFERENT LOAN TYPE.
---------------------------------
The Borrower may elect from time to time to convert any outstanding Revolving
Credit Loan from a Base Rate Loan to a LIBOR Rate Loan or from a LIBOR Rate Loan
to a Base Rate Loan, provided that (a) with respect to any such conversion of a
--------
LIBOR Rate Loan to a Base Rate Loan, the Borrower shall give the Agent at least
three (3) Business Day's prior written notice of such election; (b) with respect
to any such conversion of a Base Rate Loan to a LIBOR Rate Loan, the Borrower
shall give the Agent at least three (3) LIBOR Business Days prior written notice
of such election; (c) with respect to any such conversion of a LIBOR Rate Loan
into a Base Rate Loan, such conversion shall only be made on the last day of the
Interest Period with respect thereto; and (d) no Revolving Credit Loan may be
converted into a LIBOR Rate Loan when any Default or Event of Default has
occurred and is continuing. On the date on which such conversion is being made
each Bank shall take such action as is necessary to transfer its Commitment
Percentage of such Revolving Credit Loans to its Domestic Lending Office or its
LIBOR Lending Office, as the case may be. All or any part of Revolving Credit
Loans may be converted as provided herein, provided that any partial conversion
--------
shall be in an aggregate principal amount of $100,000 or a whole multiple
thereof. Each Conversion Request relating to the conversion of a Base Rate Loan
to a LIBOR Rate Loan shall be irrevocable by the Borrower.
2. CONTINUATION OF LOAN TYPE.
-------------------------
Any Base Rate Loan or LIBOR Rate Loan may be continued as such upon the
<PAGE>
-19-
expiration of an Interest Period with respect thereto by compliance by the
Borrower with the notice provisions contained in (S)2.3.1; provided that no
--------
LIBOR Rate Loan may be continued as such when any Default or Event of Default
has occurred and is continuing, but shall be automatically converted to a Base
Rate Loan on the last day of the first Interest Period relating thereto ending
during the continuance of any Default or Event of Default of which officers of
the Agent active upon the Borrower's account have actual knowledge. In the
event that the Borrower fails to provide any such notice with respect to the
continuation of any LIBOR Rate Loan as such, then such LIBOR Rate Loan shall be
automatically converted to a Base Rate Loan on the last day of the first
Interest Period relating thereto.
3. LIBOR RATE LOANS.
----------------
Any conversion to or from LIBOR Rate Loans shall be in such amounts and be made
pursuant to such elections so that, after giving effect thereto, the aggregate
principal amount of all LIBOR Rate Loans having the same Interest Period shall
not be less than $100,000 or a whole multiple thereof, and there shall not be
more than three (3) outstanding Revolving Credit Loans which are LIBOR Rate
Loans at any time.
D. INTEREST.
--------
So long as no Event of Default is continuing, and except as otherwise provided
herein, (a) each Base Rate Loan shall bear interest for the period commencing
with the Drawdown Date thereof and ending of the last day of the Interest Period
with respect thereto at the rate per annum equal to the Base Rate plus the
----
Applicable Margin; (b) each LIBOR Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of the
Interest Period with respect thereto at the rate per annum equal to the LIBOR
Rate for such Interest Period plus the Applicable Margin; and (c) the Borrower
----
promises to pay interest on each Revolving Credit Loan in arrears on each
Interest Payment Date with respect thereto. While an Event of Default is
continuing, amounts payable under any of the Loan Documents shall bear interest
(compounded monthly and payable on demand in respect of overdue amounts) at a
rate per annum which is equal to the sum of (a) the Base Rate, and (b) four
percent (4%) above the Margin until such amount is paid in full or (as the case
may be) such Event of Default has been cured or waived in writing by the
Majority Banks (after as well as before judgment).
E. REPAYMENTS AND PREPAYMENTS.
--------------------------
<PAGE>
-20-
The Borrower hereby agrees to pay to the Agent for the benefit of the Banks on
the Revolving Credit Loan Maturity Date the entire unpaid principal of and
interest on all Revolving Credit Loans. If at any time the outstanding amount
of the Revolving Credit Loans exceeds the Total Revolving Credit Commitment,
then the Borrower shall immediately pay the amount of such excess to the Agent
for the respective accounts of the Banks for application, first to any Unpaid
Reimbursement Obligation; second, to the Revolving Credit Loans; and third, to
provide to the Agent cash collateral for Reimbursement Obligations as
contemplated by (S)4. Each payment of any Unpaid Reimbursement Obligation or
prepayment of Revolving Credit Loans shall be allocated among the Banks, in
proportion, as nearly as practicable, to each Reimbursement Obligation or (as
the case may be) the respective unpaid principal amount of each Bank's Revolving
Credit Note, with adjustments to be extent practicable to equalize any prior
payments or repayments not exactly in proportion. The Borrower may elect to
prepay the outstanding principal of all or any part of any Revolving Credit
Loan, without premium or penalty, in a minimum amount of $100,000 or an integral
multiple thereof, upon written notice to the Agent given by 10:00 a.m. Boston
time on the date of such prepayment, of the amount to be prepaid. Each partial
prepayment shall be allocated among the Banks, in proportion, as nearly as
practicable, to the respective unpaid principal amount of each Bank's Revolving
Credit Note, with adjustments to the extent practicable to equalize any prior
repayments not exactly in proportion. The Borrower shall be entitled to
reborrow before the Revolving Credit Loan Maturity Date such amounts, upon the
terms and subject to the conditions of this Agreement. Each repayment or
prepayment of principal of any Revolving Credit Loan shall be accompanied by
payment of the unpaid interest accrued to such date on the principal being
repaid or prepaid. If at any time the aggregate amount of all outstanding
Revolving Credit Loans shall exceed the Revolving Credit Loan Commitment, the
Borrower shall immediately pay the amount of such excess to the Agent for
application to the Revolving Credit Loans. The Borrower may elect to reduce or
terminate the Revolving Credit Loan Commitment by a minimum principal amount of
$100,000 or an integral multiple thereof, upon written notice to the Agent given
by 10:00 a.m. Boston time at least two (2) Business Days prior to the date of
such reduction or termination. The Borrower shall not be entitled to reinstate
the Revolving Credit Loan Commitment following such reduction or termination.
F. FUNDS FOR REVOLVING CREDIT LOAN.
-------------------------------
1. FUNDING PROCEDURES.
------------------
<PAGE>
-21-
Not later than 11:00 a.m. (Boston time) on the proposed Drawdown Date of any
Revolving Credit Loans, each of the Banks will make available to the Agent, at
the Agent's Head Office, in immediately available funds, the amount of such
Bank's Commitment Percentage of the amount of the requested Revolving Credit
Loans. Upon receipt from each Bank of such amount, and upon receipt of the
documents required by (S)8 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 Revolving Credit Loans made available to
the Agent by the Banks. The failure or refusal of any Bank to make available to
the Agent at the aforesaid time and place on any Drawdown Date the amount of its
Commitment Percentage of the requested Revolving Credit Loans shall not relieve
any other Bank from its several obligation hereunder to make available to the
Agent the amount of such other Bank's Commitment Percentage of any requested
Revolving Credit Loans.
2. ADVANCES BY AGENT.
-----------------
The Agent may, unless notified to the contrary by any Bank prior to a Drawdown
Date, assume that such Bank has made available to the Agent on such Drawdown
Date the amount of such Bank's Commitment Percentage of the Revolving Credit
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 Bank makes available to the Agent such amount on a
date after such Drawdown Date, such Bank shall pay to the Agent on demand an
amount equal to the product of (a) the average computed for the period referred
to in clause (c) 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 (b) the amount of such Bank's Commitment Percentage of such Revolving
- -----
Credit Loans, times (c) 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 Bank's Commitment Percentage of such Revolving Credit Loans shall
become immediately available to the Agent, and the denominator of which is 365.
A statement of the Agent submitted to such Bank 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 Bank. If the amount of such Bank's Commitment
Percentage of such Revolving Credit Loans is not made available to the Agent by
such Bank within 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 Revolving Credit Loans
made on such Drawdown
<PAGE>
-22-
Date.
III. THE TERM LOAN.
-------------
A. COMMITMENT TO LEND.
------------------
Upon the terms and subject to the conditions of this Agreement, each Bank agrees
to lend to the Borrower on the Closing Date the amount of its Commitment
Percentage of the principal amount of $5,500,000.
B. THE TERM NOTES.
--------------
The Term Loan shall be evidenced by separate promissory notes of the Borrower in
form and substance satisfactory to the Agent (each a "Term Note"), dated the
Closing Date and completed with appropriate insertions. One Term Note shall be
payable to the order of each Bank in a principal amount equal to such Bank's
Commitment Percentage of the Term Loan and representing the obligation of the
Borrower to pay to such Bank such principal amount or, if less, the outstanding
amount of such Bank's Commitment Percentage of the Term Loan, plus interest
accrued thereon, as set forth below. The Borrower irrevocable authorizes each
Bank to make or cause to be made a notation on each grid attached to such Bank's
Term Note (the "Record") reflecting the original principal amount of the Term
Loan and, at or about the time of such Bank's receipt of any principal payment
on such Term Note, an appropriate notation on such Record reflecting such
payment. The aggregate unpaid amount set forth on the Record shall be prima
facie evidence of the principal amount thereof owing and unpaid to such Bank,
but the failure to record, or any error in so recording, any such amount on the
Record shall not affect the obligations of the Borrower hereunder or under the
Term Note to make payments of principal of and interest on the Term Note when
due.
C. SCHEDULE OF INSTALLMENT PAYMENTS OF PRINCIPAL OF TERM LOAN.
----------------------------------------------------------
The Borrower promises to pay to the Agent for the account of the Banks the
principal amount of the Term Loan in sixteen (16) consecutive quarterly
payments, payable on the last Business Day of each calendar quarter ending
within any period set forth below in the amount set forth opposite such period,
commencing on January 31,
<PAGE>
-23-
1998 with a final payment on the Term Loan Maturity Date in an amount equal to
the unpaid balance of the Term Loan.
<TABLE>
<CAPTION>
QUARTER ENDING: AMOUNT OF EACH PAYMENT
--------------- ----------------------
<S> <C>
January 31, 1997 - October 31, 1997 $ 0
January 31, 1998 - October 31, 1998 $125,000
January 31, 1999 - October 31, 1999 $125,000
January 31, 2000 - October 31, 2000 $500,000
January 31, 2001 - July 31, 2001 $625,000
Term Loan Maturity Date Remaining unpaid balance of
Term Loan
</TABLE>
D. OPTIONAL PREPAYMENT OF TERM LOAN.
The Borrower shall have the right at any time to prepay the Term Notes on or
before the Term Loan Maturity Date, as a whole, or in part, upon not less than
five (5) Business Days prior written notice to the Agent, without premium or
penalty, provided, that (a) each partial prepayment shall be in the principal
--------
amount of $100,000 or an integral multiple thereof; (b) no portion of the Term
Loan bearing interest at the LIBOR Rate may be prepaid pursuant to this (S)3.4
except on the last day of the Interest Period relating thereto; and (c) each
partial prepayment shall be allocated among the Banks, in proportion, as nearly
as practicable, to the respective outstanding amount of each Bank's Term Note,
with adjustments to the extent practicable to equalize any prior prepayments not
exactly in proportion. Any prepayment of principal of the Term Loan shall
include all interest accrued to the date of prepayment and shall be applied
against the scheduled installments of principal due on the Term Loan in the
inverse order of maturity No amount repaid with respect to the Term Loan may be
reborrowed.
<PAGE>
-24-
F. INTEREST ON TERM LOAN.
---------------------
1. INTEREST RATES.
--------------
So long as no Event of Default is continuing, and except as otherwise provided
herein, the Term Loan shall bear interest during each Interest Period relating
to all or any portion of the Term Loan at the following rates: (a) to the
extent that all or any portion of the Term Loan bears interest during such
Interest Period at the Base Rate, the Term Loan or such portion shall bear
interest during such Interest Period at the rate per annum equal to the Base
Rate plus the Applicable Margin; (b) to the extent that all or any portion of
----
the Term Loan bears interest during such Interest Period at the LIBOR Rate, the
Term Loan or such portion shall bear interest during such Interest Period at the
rate per annum equal to the LIBOR Rate for such Interest Period plus the
----
Applicable Margin. The Borrower promises to pay interest on the Term Loan or
any portion thereof outstanding during each Interest Period in arrears on each
Interest Payment Date applicable to such Interest Period. While an Event of
Default is continuing, amounts payable under any of the Loan Documents shall
bear interest (compounded monthly and payable on demand in respect of overdue
amounts) at a rate per annum which is equal to the sum of (a) the Base Rate, and
(b) three percent (3%) above the Margin until such amount is paid in full or (as
the case may be) such Event of Default has been cured or waived in writing by
the Majority Banks (after as well as before judgment).
2. NOTIFICATION BY BORROWER.
------------------------
The Borrower shall notify the Agent, such notice to be irrevocable, at least
three (3) LIBOR Business Days prior to the Drawdown Date of the Term Loan if all
or any portion of the Term Loan is to bear interest at the LIBOR Rate. After
the Term Loan has been made, the provisions of (S)2.3 shall apply mutatis
-------
mutandis with respect to all or any portion of the Term Loan so that the
- --------
Borrower may have the same interest rate options with respect to all or any
portion of the Term Loan as it would be entitled to with respect to the
Revolving Credit Loans.
<PAGE>
-25-
3. AMOUNTS, ETC..
-------------
Any portion of the Term Loan bearing interest at the LIBOR Rate relating to any
Interest Period shall be in the amount of $100,000 or an integral multiple
thereof. No Interest Period relating to the Term Loan or any portion thereof
bearing interest at the LIBOR Rate shall extend beyond the date on which a
regularly scheduled installment payment of the principal of the Term Loan is to
be made unless a portion of the Term Loan at least equal to such installment
payment has an Interest Period ending on such date or is then bearing interest
at the Base Rate.
IV. LETTER OF CREDIT FACILITY.
-------------------------
A. LETTER OF CREDIT COMMITMENT.
---------------------------
(a) Subject to the terms and conditions hereof and the execution and delivery
by the Borrower or, as the case may be, the Parent Guarantor, of a letter of
credit application on the Agent's customary form (a "Letter of Credit
Application"), the Agent on behalf of the Banks, in reliance upon the agreement
of the Banks set forth in (S)4.1(d) and upon the representations and warranties
of the Borrower and the Parent Guarantor contained herein, agrees, in its
individual capacity, to issue, extend and renew from time to time from the date
hereof until but not including the date which is fourteen (14) days prior to the
then scheduled Letter of Credit Maturity Date, for the account of the Borrower,
or, at the Borrower's request, for the account of the Parent Guarantor, a
standby letter of credit (the "Letter of Credit"), in the form as may be
requested by the Borrower or, as the case may be, the Parent Guarantor and
agreed to by the Agent; provided, however, that, after giving effect to such
-------- -------
request, the aggregate Maximum Drawing Amount and all Unpaid Reimbursement
Obligations shall not exceed $7,500,000 at any one time. The Letter of Credit
shall not be issued, extended or renewed with an expiration date occurring after
the then scheduled Letter of Credit Maturity Date;
(b) The Letter of Credit Application shall be completed to the satisfaction of
the Agent. In the event that any provision of the Letter of Credit Application
shall be inconsistent with any provision of this Agreement, then the provisions
of this Agreement shall, to the extent of any such inconsistency, govern;
<PAGE>
-26-
(c) The Letter of Credit issued, extended or renewed hereunder shall, among
other things, provide for the payment of sight drafts for honor thereunder when
presented in accordance with the terms thereof and when accompanied by the
documents described therein. The Letter of Credit so issued, extended or
renewed shall be subject to the Uniform Customs;
(d) Each Bank severally agrees that it shall be absolutely liable, without
regard to the occurrence of any Default or Event of Default or any other
condition precedent whatsoever, to the extent of such Bank's Commitment
Percentage, to reimburse the Agent on demand for the amount of each draft paid
by the Agent under each Letter of Credit to the extent that such amount is not
reimbursed by the Borrower pursuant to (S)4.2 (such agreement for a Bank being
called herein the "Letter of Credit Participation" of such Bank).
(e) Each such payment made by a Bank shall be treated as the purchase by such
Bank of a participating interest in the Borrower's Reimbursement Obligation
under (S)4.2 in an amount equal to such payment. Each Bank shall share in
accordance with its participating interest in any interest which accrues
pursuant to (S)4.2.
(f) The parties hereto hereby acknowledge and agree that (i) the Letter of
Credit shall be issued solely for the benefit of the Seller to support the
Seller Note, (ii) the Maximum Drawing Amount shall be in the aggregate amount of
$7,500,000, and (iii) such Maximum Drawing Amount being automatically reduced
commencing July 31, 1997 and on the last day of each succeeding month thereafter
for a total of 30 months by the amount (which shall include principal and
interest) set forth on Schedule 1 attached to the Seller Note (or, in the case
-------- -
the original Seller Note is replaced by one or more replacement notes pursuant
to Sections 1.4 or 1.6 of the Stock Purchase Agreement, by the amount set forth
on Schedule 1 to such replacement note, or, if no such revised Schedule 1 is
-------- - -------- -
attached thereto, by an amount equal to the total amount of such replacement
note (which shall include principal and interest) divided by a number which is
equal to the remaining installments due on such replacement note) until the
Maximum Drawing Amount is zero, provided, however, (a) the aggregate amount of
-------- -------
the Letter of Credit will also decrease by the amount of any reductions in the
Base Purchase Price (as such term is defined in the Stock Purchase Agreement)
made pursuant to the Stock Purchase Agreement on the date which is the earliest
to occur of (i) receipt by the Agent of a
<PAGE>
-27-
written statement signed by the Borrower or the Parent Guarantor that such a
reduction in the Base Purchase Price has been made; (ii) receipt by the Agent of
a certified copy of a replacement Seller Note indicating a principal amount of
less than principal amount appearing on the most recent Seller Note; or (iii)
receipt by the Agent of evidence in form and substance satisfactory to the Agent
(which evidence can consistent of copies of an audited balance sheet of the
Parent Guarantor or the Borrower) evidencing a reduction in the Base Purchase
Price; and (b) in the event the Seller delivers to the Agent a written statement
signed by the Seller, duly notarized, at least two (2) Business Days prior to
the date of any scheduled reduction of the Letter of Credit that the Borrower
has failed to make a payment due to the Seller under the Seller Note and the
Seller is prohibited from making a draw under the Letter of Credit pursuant to
Section 7.6 of the Stock Purchase Agreement, such reduction shall not occur on
the date scheduled for such reduction buy any subsequent reductions shall,
unless a similar notice is delivered in the time set forth above, occur as set
forth on Schedule 1 attached hereto.
B. REIMBURSEMENT OBLIGATION OF THE BORROWER.
----------------------------------------
In order to induce the Agent to issue, extend and renew the Letter of Credit and
the Banks to participate therein, each of the Borrower and the Parent Guarantor
hereby jointly and severally agrees to reimburse or pay to the Agent, for the
account of the Agent or, as the case may be, the Banks, with respect to the
Letter of Credit issued, extended or renewed by the Agent hereunder,
(a) except as otherwise expressly provided in (S)4.2(b) and (c), on each date
that any draft presented under the Letter of Credit is honored by the Agent, or
the Agent otherwise makes a payment with respect thereto, (i) the amount paid by
the Agent under or with respect to the Letter of Credit, and (ii) the amount of
any taxes, fees, charges or other costs and expenses whatsoever incurred by the
Agent or any Bank in connection with any payment made by the Agent or any Bank
under, or with respect to, the Letter of Credit;
(b) upon the termination of the Letter of Credit Commitment, or the
acceleration of the Reimbursement Obligations with respect to the Letters of
Credit in accordance with (S)10 an amount equal to the Maximum Drawing Amount,
which amount shall be held by the Agent for the benefit of the Agent and the
Banks as cash collateral for all Reimbursement Obligations.
<PAGE>
-28-
Unless funded by a Revolving Credit Loan pursuant to (S)2.2(c)(i), each such
payment shall be made to the Agent at the Agent's Head Office in immediately
available funds. Interest on any and all amounts remaining unpaid by the
Borrower or the Parent Guarantor under this (S)4.2 and not required to be funded
by a Revolving Credit Loan pursuant to (S)2.2(c)(i) at any time from the date
such amounts become due and payable (whether as stated in this (S)4.2, by
acceleration or otherwise) until payment in full (whether before or after
judgment) shall be payable to the Bank on demand at the rate specified in (S)2.2
following an Event of Default.
C. LETTER OF CREDIT PAYMENTS.
-------------------------
If any draft shall be presented or other demand for payment shall be made under
the Letter of Credit, the Agent 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. If the Borrower
fails to reimburse the Agent as provided in (S)4.2 on or before the date that
such draft is paid or other payment is made by the Agent, the Agent may at any
time thereafter notify the Banks of the amount of any such Unpaid Reimbursement
Obligation. No later than 3:00 p.m. (Boston time) on the Business Day next
following the receipt of such notice, each Bank shall make available to the
Agent, at the Agent's Head Office, in immediately available funds, such Bank's
Commitment Percentage of such Unpaid Reimbursement Obligation, together with an
amount equal to the product of (a) the average, computed for the period referred
to in clause (c) 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 (b) the amount equal to such Bank's Commitment Percentage of such Unpaid
- -----
Reimbursement Obligation, times (c) a fraction, the numerator of which is the
-----
number of days that elapse from and including the date the Agent paid the draft
presented for honor or otherwise made payment to the date on which such Bank's
Commitment Percentage of such Unpaid Reimbursement obligation shall become
immediately available to the Agent, and the denominator of which is 360. The
responsibility of the Bank to the Borrower, the Parent Guarantor and the Banks,
as the case may be, shall be only to determine that the documents (including
each draft) delivered under the Letter of Credit in connection with such
presentment shall be in conformity in all material respects with the Letter of
Credit.
D. OBLIGATIONS ABSOLUTE.
--------------------
Each of the Borrower's and the Parent Guarantor's joint and several obligations
under
<PAGE>
-29-
this (S)4 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 setoff, counterclaim or
defense to payment which the Borrower or the Parent Guarantor may have or have
had against the Agent, any Bank or the beneficiary of the Letter of Credit.
Each of the Parent Guarantor and the Borrower further agrees with the Agent and
the Banks that the Agent and the Banks shall not be responsible for, and the
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 the Letter of Credit or any financing institution or other party
to which the Letter of Credit may be transferred or any claims or defenses
whatsoever of either the Parent Guarantor or the Borrower against the
beneficiary of the Letter of Credit or any such transferee. The Agent and the
Banks 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 the Letter of Credit. Each of the Parent
Guarantor and the Borrower agrees that any action taken or omitted by the Agent
or any Bank under or in connection with the Letter of Credit and the related
drafts and documents, if done in good faith, shall be binding upon the Borrower
and the Parent Guarantor and shall not result in any liability on the part of
the Agent or any Bank to the Borrower or the Parent Guarantor.
E. RELIANCE BY ISSUER.
------------------
To the extent not inconsistent with (S)4.4, the Agent shall be entitled to rely,
and shall be fully protected in relying upon, the 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 entity and upon advice and statements of legal
counsel, independent accountants and other experts selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement unless it shall first have received such advice or concurrence of
the Majority Banks as it reasonably deems appropriate or it shall first be
indemnified to its reasonable satisfaction by the Banks 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 case be fully
protected in acting, or in refraining from acting, under this Agreement in
accordance with a request of the Majority Banks, and such request and any action
taken or failure to act pursuant thereto shall be binding upon the Banks and all
future holders of a Letter of Credit Participation.
<PAGE>
-30-
F. LETTER OF CREDIT FEES.
---------------------
The Borrower shall, on the date of issuance or of any extension or renewal of
the Letter of Credit and at such other time or times as such charges are
customarily made by the Agent, pay a fee (in each case a "Letter of Credit Fee")
to the Agent in an amount equal to one percent (1%) per annum of the face amount
of such Letter of Credit, plus the Agent's customary issuance, amendment and
----
other administrative processing fees, such Letter of Credit Fee (but not such
issuance, amendment or administrative fee) to be for the accounts of the Banks
in accordance with their respective Commitment Percentages.
V. CHANGES IN CIRCUMSTANCES, ETC.
-----------------------------
A. INABILITY TO DETERMINE LIBOR RATE.
---------------------------------
In the event, prior to the commencement of any Interest Period relating to any
LIBOR Rate Loan, the Agent shall determine or be notified by the Majority Banks
that adequate and reasonable methods do not exist for ascertaining the LIBOR
Rate that would otherwise determine the rate of interest to be applicable to any
LIBOR Rate Loan during any Interest Period, the Agent shall forthwith give
notice of such determination (which shall be conclusive and binding on the
Borrower and the Banks) to the Borrower and the Banks. In such event (a) any
Loan Request or Conversion Request with respect to LIBOR Rate Loans shall be
automatically withdrawn and shall be deemed a request for a Base Rate Loan, (b)
each LIBOR Rate Loan will automatically, on the last day of the then current
Interest Period relating thereto, become a Base Rate Loan, and (c) the
obligations of the Banks to make LIBOR Rate Loans shall be suspended until the
Agent or the Majority Banks determines that the circumstances giving rise to
such suspension no longer exist, whereupon the Agent or, as the case may be, the
Agent upon the instruction of the Majority Banks shall so notify the Borrower
and the Banks.
B. ILLEGALITY.
----------
Notwithstanding any other provisions herein, if any present or future law,
regulation, treaty or directive or in the interpretation or application thereof
shall make it unlawful for any Bank to make or maintain LIBOR Rate Loans, such
Bank shall forthwith give notice of such circumstances to the Borrower and the
other Banks and thereupon (a) the commitment of such Bank to make LIBOR Rate
Loans or convert
<PAGE>
-31-
Base Rate Loans to LIBOR Rate Loans shall forthwith be suspended and (b) such
Bank's Loans then outstanding as LIBOR Rate Loans, if any, shall be converted
automatically to Base Rate Loans on the last day of each Interest Period
applicable to such LIBOR Rate Loans or within such earlier period as may be
required by law. The Borrower hereby agrees promptly to pay the Agent for the
account of such Bank, upon demand by such Bank, any additional amounts necessary
to compensate such Bank for any costs incurred by such Bank in making any
conversion in accordance with this (S)5.2, including the discounted present
value of any interest or fees payable by such Bank to lenders of funds obtained
by it in order to make or maintain its LIBOR Loans hereunder.
C. CHANGES IN CIRCUMSTANCES.
------------------------
If, on or after the date hereof any Bank or the Agent determines that (a) the
adoption of, or any change in, any applicable law, rule, regulation or guideline
or the interpretation or administration thereof (whether or not having the force
of law), or (b) compliance by such Bank or the Agent or its parent holding
company with any guideline, request or directive (whether or not having the
force of law), (i) has the effect of reducing the return on the Bank's, the
Agent's or such holding company's capital as a consequence of the Commitment,
the Loans or the Letters of Credit to a level below that which such Bank, the
Agent or such holding company could have achieved but for such adoption, change
or compliance by any amount deemed by such Bank or the Agent to be material, or
(ii) shall subject such Bank to any tax, duty or other charge with respect to
any LIBOR Rate Loan or any Note, or shall change the basis of taxation of
payments to such Bank of the principal of or interest on, LIBOR Rate Loans or in
respect of any other amount due under this Agreement in respect of LIBOR Rate
Loans (other than with respect to taxes based upon such Bank's net income); or
(iii) shall impose, modify or deem applicable any reserve, special deposit or
similar requirement (including, without limitation, any imposed by the Board of
Governors of the Federal Reserve System, but excluding with respect to any LIBOR
Rate Loan any such requirement included in the applicable Eurocurrency Reserve
Rate) against assets of, deposits with or for the account of, or credit extended
by, any Bank or the Agent, or shall impose on any Bank, the Agent or the London
interbank market any other condition affecting LIBOR Rate Loans or the Notes,
and the result of any of the foregoing is to increase the cost to any Bank of
making or maintaining any LIBOR Rate Loan, or to reduce the amount of any sum
received or receivable by such Bank under this Agreement or under any Note with
respect to any Loan or the Letter of Credit, by an amount reasonably deemed by
such Bank or the Agent to be material, then such Bank or the Agent may notify
the Borrower thereof. The Borrower agrees to pay to the Agent for the account
of such Bank or the Agent, as the case may be, (A) the amount of the Borrower's
allocable share of the amount of such reduction in the return on capital as and
when such reduction is determined, upon presentation by such Bank of a
statement in the
<PAGE>
-32-
amount and setting forth such Bank's calculation thereof, which statement shall
be deemed true and correct absent manifest error and (B) such additional amount
or amounts as will compensate such Bank for such other increased costs or
reduction. Each Bank agrees to allocate shares of such reduction among the
Borrower and such Bank's other customers similarly situated on a fair and non-
discriminatory basis.
D. CERTIFICATE.
-----------
A certificate setting forth any additional amounts payable pursuant to (S)5.3
and a brief explanation of such amounts which are due, submitted by any Bank or
the Agent to the Borrower, shall be conclusive, absent manifest error, that such
amounts are due and owing.
E. INDEMNITY.
---------
The Borrower agrees to indemnify each Bank and to hold each Bank harmless from
and against any loss, cost or expense that such Bank may sustain or incur as a
consequence of (a) default by the Borrower in payment of the principal amount of
or any interest on any LIBOR Rate Loans as and when due and payable, including
any such loss or expense arising from interest or fees payable by such Bank to
lenders of funds obtained by it in order to maintain its LIBOR Rate Loans, (b)
default by the Borrower in making a borrowing or conversion after the Borrower
has given (or is deemed to have given) a Loan Request or a Conversion Request
relating thereto in accordance with (S)2.2, (S)2.3 or (S)3.5 or (c) the making
of any payment of a LIBOR Rate Loan or the making of any conversion of any such
Loan to a Base Rate Loan on a day that is not the last day of the applicable
Interest Period with respect thereto, including interest or fees payable by any
Bank to lenders of funds obtained by it in order to maintain any such LIBOR Rate
Loans.
VI. FEES AND PAYMENTS.
-----------------
Contemporaneously with execution and delivery of this Agreement, the Borrower
shall pay to the Agent a closing fee in the amount of three eighths of one
percent (3/8%) of the Commitment. The Borrower shall pay to the Agent for the
Agent's own account an agent's fee at the times and in the amounts determined by
the Agent and the Borrower. The Borrower shall pay to the Agent for the pro
---
rata accounts of the Banks, on the first day of each calendar quarter hereafter,
- ----
and upon the Revolving Credit Loan Maturity Date or the date upon which the
Revolving Credit Loan
<PAGE>
-33-
Commitment is no longer in effect, a commitment fee calculated at a rate per
annum which is equal to one half of one percent (1/2%) of the average daily
difference by which the Total Revolving Credit Commitment amount exceeds the
aggregate sum of the outstanding Revolving Credit Loans during the preceding
calendar quarter or portion thereof. All payments to be made by the Borrower
hereunder or under any of the other Loan Documents shall be made in U.S. dollars
in immediately available funds at the Agent's Head Office, without set-off or
counterclaim and without any withholding or deduction whatsoever. Each Bank and
the Agent shall be entitled to charge any account of the Borrower with such Bank
for any sum due and payable by the Borrower to such Bank hereunder or under any
of the other Loan Documents. If any payment hereunder is required to be made on
a day which is not a Business Day, it shall be paid on the immediately
succeeding Business Day, with interest and any applicable fees adjusted
accordingly. All computations of interest or of the commitment fee or any Letter
of Credit Fees payable hereunder shall be made by the Bank on the basis of
actual days elapsed and on a 360-day year.
VII. REPRESENTATIONS AND WARRANTIES.
------------------------------
Each of the Borrower and the Guarantors represents and warrants to the Banks and
the Agent on the date hereof, on the date of any Loan Request, on the date of
the request for a Letter of Credit, on each Drawdown Date and on the date on
which the Letter of Credit is issued, extended or renewed that:
(a) the Guarantors, the Borrower and each of its other Subsidiaries is duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified and in good standing in
every other jurisdiction where it is doing business, and the execution, delivery
and performance by the Guarantors and the Borrower of the Loan Documents to
which it is a party (i) are within its corporate authority, (ii) have been duly
authorized, (iii) do not conflict with or contravene its Charter Documents;
(b) upon execution and delivery thereof, each Loan Document shall constitute
the legal, valid and binding obligation of the Guarantors, the Borrower and its
other Subsidiaries party thereto, enforceable in accordance with its terms;
(c) each of the Guarantors and the Borrower has good and marketable title to
all its material properties, subject only to Liens permitted hereunder, and
possesses all assets, including intellectual properties, franchises and
Consents, adequate for the
<PAGE>
-34-
conduct of its business as now conducted, without known conflict with any
rights of others. Each of the Guarantors and the Borrower maintains insurance
with financially responsible insurers, copies of the policies for which have
been previously delivered to the Agent, covering such risks and in such amounts
and with such deductibles as are customary in the each of Guarantor's and the
Borrower's business and are adequate;
(d) the Parent Guarantor has provided to the Agent its audited Financials as at
July 31, 1995, and for the fiscal period then ended, and such Financials are
complete and correct and fairly present the position of the Parent Guarantor and
its Subsidiaries on a consolidated basis as at such date and for such period in
accordance with GAAP consistently applied. Each of the Parent Guarantor has
also provided to the Agent its projections of the consolidated operations of the
Parent Guarantor, the Borrower and the Subsidiary Guarantor for the period from
July 31, 1996 through July 31, 1997, and such forecast has been prepared in good
faith based upon reasonable assumptions;
(e) since July 31, 1996, there has been no materially adverse change of any
kind in the Parent Guarantor, the Borrower or any of its other Subsidiaries
which would have a Materially Adverse Effect, and since July 31, 1996 there has
been no materially adverse change of any kind in the business or assets to be
acquired in the Acquisition which would have, either individually or in the
aggregate, a Materially Adverse Effect;
(f) there are no legal or other proceedings or investigations pending or
threatened against the Guarantors, the Borrower or any of their Subsidiaries
before any court, tribunal or regulatory authority which would, if adversely
determined, alone or together, have a Materially Adverse Effect;
(g) the execution, delivery, performance of its obligations, and exercise of
its rights under the Loan Documents by each of the Guarantors and the Borrower,
including borrowing under this Agreement and the obtaining of Letters of Credit
(i) do not require any Consents; and (ii) are not and will not be in conflict
with or prohibited or prevented by (A) any Requirement of Law, or (B) any
Charter Document, corporate minute or resolution, instrument, agreement or
provision thereof, in each case
<PAGE>
-35-
binding on it or affecting its property;
(h) neither of the Guarantors nor the Borrower is in violation of (i) any
Charter Document, corporate minute or resolution, (ii) any instrument or
agreement, in each case binding on it or affecting its property, or (iii) any
Requirement of Law, in a manner which could have a Materially Adverse Effect,
including, without limitation, all applicable federal and state tax laws, ERISA
and Environmental Laws;
(i) the Borrower is a wholly-owned Subsidiary of the Parent Guarantor, the
Borrower has no Subsidiaries other than the Subsidiary Guarantor and neither of
the Guarantors nor the Borrower is a party to any partnership or joint venture;
(j) the Borrower has not amended any of the Acquisition Documents in any
material respect. Each of the representations and warranties made by the
Borrower in any of the Loan Documents or the Acquisition Documents was true and
correct in all material respects when made and continues to be true and correct
in all material respects on the Closing Date, except to the extent that any of
such representations and warranties relate, by the express terms thereof, solely
to a date falling prior to the Closing Date, and except to the extent that any
of such representations and warranties may have been affected by the
consummation of the transactions contemplated and permitted or required by the
Loan Documents or the Acquisition;
(k) no representation or warranty made by either of the Guarantors or the
Borrower in this Agreement or in any agreement, instrument, document,
certificate, statement or letter furnished to the Agent or any Bank by or on
behalf of such Guarantor and the Borrower in connection with any of the
transactions contemplated by any of the Loan Documents and the Acquisition
Documents contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained therein not
misleading in light of the circumstances in which they are made;
(l) to the best of the Borrower's knowledge, each of the representations and
warranties of the Sellers and the Subsidiary Guarantor contained in the Stock
<PAGE>
-36-
Purchase Agreement are true and correct in all material respects as of the
Closing Date and the Acquisition Closing Date; and
(m) the proceeds of the Loans shall be used for the Acquisition and for working
capital and general corporate purposes of the Borrower and its Subsidiaries.
The Borrower or, as the case may be, the Parent Guarantor, will obtain the
Letter of Credit solely as credit enhancement for the Seller Note. No portion
of any Loan is to be used, and no portion of the Letter of Credit is to be
obtained, for the purpose of purchasing or carrying any "margin security" or
"margin stock" as such terms are used in Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
VII. CONDITIONS PRECEDENT.
--------------------
In addition to the making of the foregoing representations and warranties and
the delivery of the Loan Documents, the Acquisition Documents and such other
documents and the taking of such actions as the Agent and each Bank may require
at or prior to the time of executing this Agreement, the obligation of any Bank
to make any Loan or of the Agent or to issue, renew or extend the Letter of
Credit to the Borrower or, as the case may be in respect of the Letter of
Credit, the Parent Guarantor hereunder, is subject to the satisfaction of the
following further conditions precedent:
(a) each of the representations and warranties of each of the Guarantors and
the Borrower to the Agent and the Banks herein, in any of the other Loan
Documents or any documents, certificate or other paper or notice in connection
herewith shall be true and correct in all material respects as of the time made
or claimed to have been made;
(b) no Default or Event of Default shall be continuing;
(c) all proceedings in connection with the transactions contemplated hereby
shall be in form and substance satisfactory to the Agent and the Banks, and the
Agent and the Banks shall have received all information and documents as it may
have reasonably
<PAGE>
-37-
requested;
(d) no change shall have occurred in any law or regulation or in the
interpretation thereof that in the reasonable opinion of the Agent or any Bank
would make it unlawful for such Bank to make such Loan or for the Agent to issue
the Letter of Credit;
(e) each of the Guarantors and the Borrower shall have delivered to the Agent
and the Banks (i) certified copies of its Charter Documents; (ii) evidence that
all corporate action necessary for the valid execution, delivery and
performance by each of the Guarantors and the Borrower of the Loan Documents to
which it is a party has been duly and effectively taken; (iii) an incumbency
certificate signed by a duly authorized officer of each of the Guarantors and
the Borrower, and giving the name and bearing a specimen signature of each
individual who shall be authorized to sign, in the name and on behalf of each of
the Guarantors and the Borrower, each of the Loan Documents to which each is a
party and to give notices and to take action on each of the Guarantor's and the
Borrower's behalf under the Loan Documents; (iv) a solvency certificate of each
of the Guarantors and the Borrower in form and substance satisfactory to the
Agent; and (v) a favorable legal opinion addressed to the Agent and the Banks in
form and substance satisfactory to the Agent and the Banks from counsel to each
of the Guarantors and the Borrower;
(f) the Borrower shall have paid to the Agent the closing fee and the agent's
fee as set forth in (S)6 hereof;
(g) the Agent and the Banks shall have received a draft prepared by KPMG of the
Subsidiary Guarantor's consolidated audited Financials for the fiscal year ended
July 31, 1996 the results of which shall be satisfactory to the Agent and Banks
in all respects;
(h) the Agent and the Banks shall have received an opinion of counsel to the
Borrower and the Guarantor satisfactory to the Agent and the Banks;
<PAGE>
-38-
(i) the Borrower shall have caused the Agent to receive evidence that all of
the closing conditions in the Stock Purchase Agreement have been satisfied
without recourse to any provision permitting the waiver by any party thereto of
any condition, obligation, covenant or other requirement and that the
Acquisition shall have been completed pursuant to the Stock Purchase Agreement
and otherwise on terms and conditions that are satisfactory to the Agent in all
respects. In addition the purchase price of the capital stock acquired pursuant
to the Acquisition and all expenditures and transaction costs associated
therewith shall not exceed $17,300,000 in the aggregate, and the Acquisition
shall have been completed on terms and conditions that are satisfactory to the
Agent in all respects;
(j) the Agent and the Banks shall be satisfied that all information provided to
the Agent and the Banks prior to the Closing Date accurately sets forth the cash
flow for such period attributable to the assets and business to be acquired in
the Acquisition and the Agent and the Banks shall be satisfied with the results
of its due diligence;
(k) the Agent and the Banks shall have received evidence satisfactory to the
Agent and the Banks that the Borrower has received invested capital in cash in a
minimum amount of $3,000,000 on terms and conditions which are satisfactory to
the Agent and the Banks in all respects; and
(l) the Agent and the Banks shall be satisfied with the results of all
environmental site assessments performed on all real property owned or leased by
the Guarantor and the Borrower.
IX. COVENANTS.
---------
A. AFFIRMATIVE COVENANTS.
---------------------
Each of the Guarantors and the Borrower agrees that so long as there are any
Loans or Letter of Credit outstanding and until the termination of the
Commitment and the payment and satisfaction in full of all the Obligations, each
of the Guarantors and the Borrower will, and where applicable the Borrower will
cause each of its other Subsidiaries to comply with, its obligations as set
forth throughout this Agreement
<PAGE>
-39-
and to:
(a) furnish the Agent and the Banks: (i) as soon as available but in any event
within ninety (90) days after the close of each fiscal year, the Parent
Guarantor's and the Borrower's audited consolidated and consolidating Financials
for such fiscal year, certified by the Parent Guarantor's and the Borrower's
accountants, respectfully, and the Parent Guarantor's and the Borrower's
consolidating Financials for such fiscal period; (ii) as soon as available but
in any event within forty-five (45) days after the end of each fiscal quarter
the Parent Guarantor's and the Borrower's unaudited consolidated and
consolidating Financials for such quarter, certified by their respective chief
financial officers; (iii) as soon as available but in any event within thirty
(30) days after the end of each month in each fiscal year of the Parent
Guarantor and the Borrower, unaudited monthly consolidated Financials for such
month, certified by their respective chief financial officers; (iv) together
with the quarterly and annual audited Financials, a certificate of the Borrower
(the "Compliance Certificate") setting forth computations demonstrating
compliance with the Parent Guarantor's and the Borrower's financial covenants
set forth herein, and certifying that no Default or Event of Default has
occurred, or if it has, the actions taken by the Borrower with respect thereto,
and which Compliance Certificate shall include a quarterly (or more frequently,
if required by the Agent) detailed report of the Unencumbered Cash of the Parent
Guarantor and its Subsidiaries, including a mark to market adjustment of the
"Allowable Instruments" included in the calculation of the Investment
Equivalents portion of Unencumbered Cash; (v) contemporaneously with the
delivery thereof, copies of all accountants' management letters delivered to the
Parent Guarantor, the Borrower or any of their Subsidiaries; and (vi) from time
to time such other financial data and information as the Agent or any Bank may
request;
(b) keep true and accurate books of account in accordance with GAAP, maintain
its current fiscal year and permit the Agent or any Bank or its designated
representatives to inspect the Guarantors' and the Borrower's premises during
normal business hours, to examine and be advised as to such or other business
records upon the request of the Agent or any Bank, and to permit the Agent's or
any Bank's commercial finance examiners to conduct periodic commercial finance
examinations which prior to an Event of Default shall be no more often than two
(2) per year;
(c) (i) maintain its corporate existence, business and assets, (ii) keep its
business and assets adequately insured, (iii) maintain its chief executive
office in the United States, (iv) with to the Borrower and its Subsidiaries,
continue to engage in substantially
<PAGE>
-40-
similar lines of business, and (v) comply with all Requirements of Law,
including ERISA and Environmental Laws;
(d) notify the Agent and the Banks promptly in writing of (i) the occurrence of
any Default or Event of Default, (ii) any noncompliance with ERISA or any
Environmental Law or proceeding in respect thereof which could have a Materially
Adverse Effect, (iii) any change of address, (iv) any threatened or pending
litigation or similar proceeding affecting the Guarantors or the Borrower or
its other Subsidiaries or any material change in any such litigation or
proceeding previously reported and (v) claims against any assets or properties
of the Guarantors, the Borrower or any such Subsidiaries encumbered in favor of
the Agent or any Bank;
(e) use the proceeds of the Loans solely to finance the Acquisition and for
working capital purposes of the Borrower and its Subsidiaries, and use the
Letter of Credit solely for credit enhancement for the Seller Note, and not for
the carrying of "margin security" or "margin stock" within the meaning of
Regulations U and X of the Board of Governors of the Federal Reserve System, 12
C.F.R. Parts 221 and 224;
(f) cooperate with the Agent and the Banks, take such action, execute such
documents, and provide such information as the Agent and the Banks may from
time to time reasonably request in order further to effect the transactions
contemplated by and the purposes of the Loan Documents;
(g) by not later than ninety (90) days of the Closing Date, purchase an
interest rate cap or swap or effect other interest rate protection arrangements
for a minimum period of three (3) years applicable to not less than fifty
percent (50%) of the Commitment, on terms and conditions satisfactory to the
Agent; and
(h) simultaneously with delivery thereof, deliver to the Agent a certified copy
of any replacement Seller Note issued by the Company to the Seller pursuant to
Sections 1.4 or 1.6 of the Stock Purchase Agreement.
<PAGE>
-41-
B. NEGATIVE COVENANTS.
------------------
Each of the Guarantors and the Borrower agrees that so long as there are any
Loans or Letter of Credit outstanding and until the termination of the
Commitment and the payment and satisfaction in full of all the Obligations,
neither of the Guarantors nor the Borrower will and where applicable the
Borrower will not permit its other Subsidiaries to:
(a) create, incur or assume any Indebtedness other than (i) Indebtedness to the
Agent and the Banks, (ii) current liabilities of the Guarantors, the Borrower or
any Subsidiaries of the Borrower not incurred through the borrowing of money or
the obtaining of credit except credit on an open account customarily extended,
(iii) Indebtedness in respect of taxes or other governmental charges contested
in good faith and by appropriate proceedings and for which adequate reserves
have been taken; (iv) Indebtedness of the Borrower in respect of interest rate
protection arrangements required to be maintained by (S)9.1(g) or in respect of
currency swap arrangements so long as such arrangements are in the ordinary
course of business and not for speculative purposes; (v) unsecured Indebtedness
of the Parent Guarantor not otherwise provided for in this (S)9.2(a) which, when
taken together with all such Indebtedness of the Parent Guarantor set forth on
Schedule 9.2(a) does not exceed, in the aggregate, $5,000,000; (vi) unsecured
- ---------------
Indebtedness of the Borrower and its Subsidiaries not otherwise provided for in
this (S)9.2(a) which, when taken together with all such Indebtedness of the
Borrower and its Subsidiaries set forth on Schedule 9.2(a) does not exceed, in
---------------
the aggregate, $500,000; and (vii) Indebtedness not included above and listed on
Schedule 9.2(a) hereto;
- -------- ------
(b) create or incur any Liens on any of the property or assets of the
Guarantors, the Borrower or any of its other Subsidiaries except (i) Liens
securing the Obligations; (ii) Liens securing taxes or other governmental
charges not yet due; (iii) deposits or pledges made in connection with social
security obligations; (iv) Liens of carriers, warehousemen, mechanics and
materialmen, less than 120 days old as to obligations not yet due; (v)
easements, rights-of-way, zoning restrictions and similar minor Liens which
individually and in the aggregate do not have a Materially Adverse Effect; (vi)
purchase money security interests in or purchase money mortgages on real or
personal property securing purchase money Indebtedness permitted by
(S)9.2(a)(ii), covering only the property so acquired; and (vii) other Liens
existing on the date hereof and listed on Schedule 9.2(b) hereto;
-------- ------
<PAGE>
-42-
(c) with respect to the Borrower and its Subsidiaries, make any investments
other than investments in (i) marketable obligations of the United States
maturing within one (1) year, (ii) certificates of deposit, bankers' acceptances
and time and demand deposits of United States banks having total assets in
excess of $1,000,000,000, and (iii) Subsidiaries which are parties to the Loan
Documents or (iv) such other investments as the Agent and the Majority Banks may
from time to time approve in writing;
(d) with respect to the Borrower and its Subsidiaries, make any distributions
on or in respect of its capital of any nature whatsoever, other than dividends
payable solely in shares of common stock or distributions by Subsidiaries of the
Borrower to the Borrower;
(e) become party to a merger or sale-leaseback transaction, or to effect any
disposition of assets other than in the ordinary course, or to purchase, lease
or otherwise acquire assets other than in the ordinary course; provided,
--------
however, the Borrower shall be permitted to acquire the assets and/or stock of
- -------
another entity so long as (i) such entity is in the same or a similar line of
business as the Borrower; (ii) the Borrower has provided the Bank with five (5)
Business Days prior written notice of such acquisition, which notice shall
include a reasonably detailed description of the acquisition; (iii) the business
and/or entity to be acquired would not subject the Agent or any Bank to
regulatory or third party approvals in connection with the exercise of its
rights and remedies under this Agreement or the other Loan Documents; (iv) the
Borrower has demonstrated to the satisfaction of the Agent and the Banks, based
on a pro forma Compliance Certificate, compliance with (S)9.3 on a pro forma
--- ----- --- -----
basis immediately prior to and after giving effect to any such acquisition; (v)
the business and assets so acquired in each such acquisition shall be acquired
by the Borrower free and clear of all liens and Indebtedness; (vi) the aggregate
purchase price for each acquisition, or a series of related acquisitions, does
not exceed $5,000,000 and the aggregate purchase price of all acquisitions
permitted hereunder does not exceed $10,000,000 during the term of this
Agreement; and (vii) the Parent Guarantor shall at all times maintain a majority
voting interest in such entity to be acquired;
(f) make any change in or amendment to either of the Guarantors' or the
Borrower's Charter Documents unless such change or amendment that would not have
any adverse effect on the Agent's or any Bank's interest under the Loan
Documents or the
<PAGE>
-43-
Guarantors' or Borrower's obligations under the Loan Documents;
(g) the Parent Guarantor will not make any material change in its Investment
Policy; and
(h) enter into any agreement, contract or arrangement (other than the Credit
Agreement and the other Loan Documents) restricting the ability of any of the
Parent Guarantor's Subsidiaries to pay or make dividends or distributions in
cash or kind, to make loans, advances or other payments of whatsoever nature or
to make transfers or distributions of all or any part of its assets to the
Parent Guarantor if all or any part of such Subsidiary's cash or Investment
Equivalents is included as Unencumbered Cash for purposes of compliance with
(S)9.3(f)(ii).
C. FINANCIAL COVENANTS.
-------------------
Each of the Guarantors and the Borrower agrees that so long as there are any
Loans or Letter of Credit outstanding and until the termination of the
Commitment and the payment and satisfaction in full of all the Obligations,
neither of the Guarantors nor the Borrower will and where applicable the
Borrower will not permit its other Subsidiaries to:
(a) permit the Borrower to make capital expenditures which in the aggregate and
on a consolidated basis which exceed (i) $1,200,000 in fiscal year 1998, and
(ii) $1,000,000 in any fiscal year thereafter; provided, however, that, if
-------- -------
during any fiscal year the amount of capital expenditures permitted for that
fiscal year is not so utilized, such unutilized amount may be utilized in the
next succeeding fiscal year but not in any subsequent fiscal year;
(b) permit the Leverage Ratio of the Borrower and its Subsidiaries for any
fiscal quarter ending during any period described in the table below to be
greater than the ratio set forth opposite such period in such table:
<PAGE>
-44-
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
November 1, 1996 - January 31, 1997 3.30:1.00
February 1, 1997 - October 31, 1997 3.00:1.00
November 1, 1997 - January 31, 1998 2.70:1.00
February 1, 1998 - April 30, 1998 2.60:1.00
May 1, 1998 - July 31, 1998 2.40:1.00
August 1, 1998 - January 31, 1999 2.25:1.00
February 1, 1999 - July 31, 1999 2.00:1.00
August 1, 1999 - thereafter 1.50:1.00
</TABLE>
(c) permit the ratio of the Borrower's Consolidated Operating Cash Flow to
Consolidated Total Debt Service for any Reference Period to be less than the
ratio set forth opposite such period in such table:
<PAGE>
-45-
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
November 1, 1996 - July 31, 1997 2.50:1.00
August 1, 1997 - October 31, 1997 2.00:1.00
November 1, 1997 - January 31, 1998 1.60:1.00
February 1, 1998 - January 31, 1999 1.25:1.00
February 1, 1999 - thereafter 1.50:1.00
</TABLE>
(d) permit the ratio of the Borrower's Consolidated Current Assets to
Consolidated Current Liabilities at any time, commencing April 30, 1996, to be
less than 1.00:1.00.
(e) permit the Borrower's Consolidated Net Income for any fiscal quarter to be
less than $1.00; or
(f) permit (i) the Parent Guarantor's Unencumbered Cash to be less than
$10,000,000 at any time from the Closing Date through November 30, 1996 and
$20,000,000 at any time thereafter; and (ii) the Parent Guarantor's and its
Subsidiaries Unencumbered Cash to be less than $35,000,000 at any time.
X. EVENTS OF DEFAULT; ACCELERATION.
-------------------------------
If any of the following events ("Events of Default") shall occur:
(a) the Borrower shall fail to pay when due and payable any principal of the
Loans when the same becomes due;
<PAGE>
-46-
(b) the Borrower shall fail to pay interest on the Loans, or the Borrower or
the Parent Guarantor shall fail to pay any Reimbursement Obligations not funded
by a Revolving Credit Loan pursuant to (S)2.2(c), or any other sum due under any
of the Loan Documents within two (2) Business Days after the date on which the
same shall have first become due and payable;
(c) either of the Guarantors or the Borrower shall fail to perform any term,
covenant or agreement contained in (S)(S)9.1(a), 9.1(d) through (g), 9.2 and
9.3;
(d) the Guarantors, the Borrower or any other Subsidiary of the Borrower shall
fail to perform any other term, covenant or agreement contained in the Loan
Documents within fifteen (15) days after the Agent has given written notice of
such failure to the Borrower;
(e) any representation or warranty of the Guarantors, the Borrower or any of
its other Subsidiaries in the Loan Documents or in any certificate or notice
given in connection therewith shall have been false or misleading in any
material respect at the time made or deemed to have been made;
(f) the Guarantors, the Borrower or any of its other Subsidiaries shall be in
default (after any applicable period of grace or cure period) under any
agreement or agreements evidencing Indebtedness owing to the Bank or any
affiliates of the Bank, to the Seller, or in excess of $500,000 in aggregate
principal amount, or shall fail to pay such Indebtedness when due, or within any
applicable period of grace;
(g) any of the Loan Documents shall cease to be in full force and effect,
(h) the Guarantors, the Borrower or any of its other Subsidiaries (i) shall
make an
<PAGE>
-47-
assignment for the benefit of creditors, (ii) shall be adjudicated
bankrupt or insolvent, (iii) shall seek the appointment of, or be the subject of
an order appointing, a trustee, liquidator or receiver as to all or part of its
assets, (iv) shall commence, approve or consent to, any case or proceeding under
any bankruptcy, reorganization or similar law and, in the case of an involuntary
case or proceeding, such case or proceeding is not dismissed within forty-five
(45) days following the commencement thereof, or (v) shall be the subject of an
order for relief in an involuntary case under federal bankruptcy law;
(i) the Guarantors, the Borrower or any of its other Subsidiaries shall be
unable to pay its debts as they mature;
(j) there shall remain undischarged for more than thirty (30) days any final
judgment or execution action against the Guarantors, the Borrower or any of its
other Subsidiaries that, together with other outstanding claims and execution
actions against the Guarantors, the Borrower and its other Subsidiaries exceeds
$500,000 in the aggregate;
(k) the Parent Guarantor ceases to own legally or beneficially 100% or more of
the voting stock of the Borrower or more than 51% of the voting stock of any
Subsidiary of the Borrower, and the Borrower ceases to own legally or
beneficially 100% or more of the voting stock of Subsidiary Guaranty;
then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Banks shall, by notice in writing to
the Borrower declare all amounts owing with respect to this Credit Agreement,
the Notes and the other Loan Documents and all Reimbursement Obligations to be,
and they shall thereupon forthwith become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower; provided that in the event of any Event
--------
of Default specified in (S)(S)10.1(h) or 10.1(i), all such amounts shall become
immediately due and payable automatically and without any requirement of notice
from the Agent or any Bank.
If any one or more of the Events of Default specified in (S)10.1(h) or
(S)10.1(i) shall occur, any unused portion of the credit hereunder shall
forthwith terminate and each of the Banks shall be relieved of all further
obligations to make Loans to the
<PAGE>
-48-
Borrower and the Agent shall be relieved of all further obligations to issue,
extend or renew the Letter of Credit. If any other Event of Default shall have
occurred and be continuing, the Agent may and, upon the request of the Majority
Banks, shall, by notice to the Borrower, terminate the unused portion of the
credit hereunder, and upon such notice being given such unused portion of the
credit hereunder shall terminate immediately and each of the Banks shall be
relieved of all further obligations to make Loans and the Agent shall be
relieved of all further obligations to issue, extend or renew the Letter of
Credit. No termination of the credit hereunder shall relieve the Borrower, the
Guarantors or any other of Subsidiaries of the Borrower of any of the
Obligations.
In case any one or more of the Events of Default shall have occurred and be
continuing, and whether or not the Banks shall have accelerated the maturity of
the Loans pursuant to (S)10.1, each Bank, if owed any amount with respect to the
Loans or the Reimbursement Obligations, may, with the consent of the Majority
Banks but not otherwise, proceed to protect and enforce its rights by suit in
equity, action at law or other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in this Agreement and the
other Loan Documents or any instrument pursuant to which the Obligations to such
Bank are evidenced, including as permitted by applicable law the obtaining of
the ex parte appointment of a receiver, and, if such amount shall have become
-- -----
due, by declaration or otherwise, proceed to enforce the payment thereof or any
other legal or equitable right of such Bank. No remedy herein conferred upon
any Bank or the Agent or the holder of any Note or purchaser of a Letter of
Credit Participation 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 any other provision of law.
XI. SETOFF.
------
Regardless of the adequacy of any collateral for the Obligations, any deposits
or other sums credited by or due from any of the Banks to the Borrower or the
Guarantors may be applied to or set off following an Event of Default against
any principal, interest and any other amounts due from the Borrower or either
the Guarantors to the Banks at any time without notice to the Borrower or the
Guarantors, or compliance with any other procedure imposed by statute or
otherwise, all of which are hereby expressly waived by the Borrower and the
Guarantors. Each of the Banks agrees with each other Bank that (a) if an amount
to be set off is to be applied to Indebtedness of the Borrower to such Bank,
other than Indebtedness evidenced by the Notes held by such Bank or constituting
Reimbursement Obligations owed to such Bank, such amount shall be applied
ratably to such other Indebtedness and to the Indebtedness
<PAGE>
-49-
evidenced by all such Notes held by such Bank or constituting Reimbursement
Obligations owed to such Bank, and (b) if such Bank shall receive from the
Borrower, whether by voluntary payment, exercise of the right of setoff,
counterclaim, cross action, enforcement of the claim evidenced by the Notes held
by, or constituting Reimbursement Obligations owed to, such Bank by proceedings
against the Borrower at law or in equity or by proof thereof in bankruptcy,
reorganization, liquidation, receivership or similar proceedings, or otherwise,
and shall retain and apply to the payment of the Note or Notes held by, or
Reimbursement Obligations owed to, such Bank any amount in excess of its ratable
portion of the payments received by all of the Banks with respect to the Notes
held by, and Reimbursement Obligations owed to, all of the Banks, such Bank will
make such disposition and arrangements with the other Banks with respect to such
excess, either by way of distribution, pro tanto assignment of claims,
--- -----
subrogation or otherwise as shall result in each Bank receiving in respect of
the Notes held by it or Reimbursement obligations owed it, its proportionate
payment as contemplated by this Agreement; provided that if all or any part of
--------
such excess payment is thereafter recovered from such Bank, such disposition and
arrangements shall be rescinded and the amount restored to the extent of such
recovery, but without interest.
XII. THE AGENT.
---------
A. AUTHORIZATION.
-------------
(a) The Agent is authorized to take such action on behalf of each of the Banks
and to exercise all such powers as are hereunder and under any of the other Loan
Documents and any related documents delegated to the Agent, together with such
powers as are reasonably incident thereto, provided that no duties or
--------
responsibilities not expressly assumed herein or therein shall be implied to
have been assumed by the Agent.
(b) The relationship between the Agent and each of the Banks is that of an
independent contractor. The use of the term "Agent" is for convenience only and
is used to describe, as a form of convention, the independent contractual
relationship between the Agent and each of the Banks. Nothing contained in this
Agreement nor the other Loan Documents shall be construed to create an agency,
trust or other fiduciary relationship between the Agent and any of the Banks.
(c) As an independent contractor empowered by the Banks to exercise certain
rights
<PAGE>
-50-
and perform certain duties and responsibilities hereunder and under the
other Loan Documents, the Agent is nevertheless a "representative" of the Banks,
as that term is defined in Article 1 of the Uniform Commercial Code, for
purposes of actions for the benefit of the Banks and the Agent with respect to
all collateral security and guaranties contemplated by the Loan Documents.
Such actions include the designation of the Agent as "secured party",
"mortgagee" or the like on all financing statements and other documents and
instruments, whether recorded or otherwise, relating to the attachment,
perfection, priority or enforcement of any security interests, mortgages or
deeds of trust in collateral security intended to secure the payment or
performance of any of the Obligations, all for the benefit of the Banks and the
Agent.
B. EMPLOYEES AND AGENTS.
--------------------
The Agent may exercise its powers and execute its duties by or through employees
or agents and shall be entitled to take, and to rely on, advice of counsel
concerning all matters pertaining to its rights and duties under this Agreement
and the other Loan Documents. The Agent may utilize the services of such
Persons as the Agent in its sole discretion may reasonably determine, and all
reasonable fees and expenses of any such Persons shall be paid by the Borrower
and the Guarantors.
C. NO LIABILITY.
------------
Neither the Agent nor any of its shareholders, directors, officers or employees
nor any other Person assisting them in their duties nor any agent or employee
thereof, shall be liable for any waiver, consent or approval given or any action
taken, or omitted to be taken, in good faith by it or them hereunder or under
any of the other Loan Documents, or in connection herewith or therewith, or be
responsible for the consequences of any oversight or error of judgment
whatsoever, except that the Agent or such other Person, as the case may be, may
be liable for losses due to its willful misconduct or gross negligence.
D. NO REPRESENTATIONS.
------------------
The Agent shall not be responsible for the execution or validity or
enforceability of this Agreement, the Notes, the Letter of Credit, any of the
other Loan Documents or any instrument at any time constituting, or intended to
constitute, collateral security
<PAGE>
-51-
for the Notes, or for the value of any such collateral security or for the
validity, enforceability or collectability of any such amounts owing with
respect to the Notes, or for any recitals or statements, warranties or
representations made herein or in any of the other Loan Documents or in any
certificate or instrument hereafter furnished to it by or on behalf of the
Guarantors, the Borrower or any of its other Subsidiaries, or be bound to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, covenants or agreements herein or in any instrument at any time
constituting, or intended to constitute, collateral security for the Notes or to
inspect any of the properties, books or records of the Guarantors, the Borrower
or any of its other Subsidiaries. The Agent shall not be bound to ascertain
whether any notice, consent, waiver or request delivered to it by the
Guarantors, the Borrower or any holder of any of the Notes shall have been duly
authorized or is true, accurate and complete. The Agent has not made nor does it
now make any representations or warranties, express or implied, nor does it
assume any liability to the Banks, with respect to the credit worthiness or
financial conditions of the Borrower or any of its Subsidiaries. Each Bank
acknowledges that it has, independently and without reliance upon the Agent or
any other Bank, and based upon such information and documents as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement.
E. PAYMENTS.
--------
1. PAYMENTS TO AGENT.
-----------------
A payment by the Borrower or either of the Guarantors to the Agent hereunder or
any of the other Loan Documents for the account of any Bank shall constitute a
payment to such Bank. The Agent agrees promptly to distribute to each Bank such
Bank's pro rata share of payments received by the Agent for the account of the
--- ----
Banks except as otherwise expressly provided herein or in any of the other Loan
Documents.
2. DISTRIBUTION BY AGENT.
---------------------
If in the opinion of the Agent the distribution of any amount received by it in
such capacity hereunder, under the Notes or under any of the other Loan
Documents
<PAGE>
-52-
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.
3. DELINQUENT BANKS.
----------------
Notwithstanding anything to the contrary contained in this Agreement or any of
the other Loan Documents, any Bank that fails (a) to make available to the Agent
its pro rata share of any Loan or to purchase the Letter of Credit Participation
--- ----
or (ii) to comply with the provisions of (S)11 with respect to making
dispositions and arrangements with the other Banks, where such Bank's share of
any payment received, whether by setoff or otherwise, is in excess of its pro
---
rata share of such payments due and payable to all of the Banks, in each case
- ----
as, when and to the full extent required by the provisions of this Agreement,
shall be deemed delinquent (a "Delinquent Bank") and shall be deemed a
Delinquent Bank until such time as such delinquency is satisfied. A Delinquent
Bank shall be deemed to have assigned any and all payments due to it from the
Borrower and the Guarantors, whether on account of outstanding Loans, Unpaid
Reimbursement Obligations, interest, fees or otherwise, to the remaining
nondelinquent Banks for application to, and reduction of, their respective pro
---
rata shares of all outstanding Loans and Unpaid Reimbursement Obligations. The
- ----
Delinquent Bank hereby authorizes the Agent to distribute such payments to the
nondelinquent Banks in proportion to their respective pro rata shares of all
--- ----
outstanding Loans and Unpaid Reimbursement Obligations. A Delinquent Bank shall
be deemed to have satisfied in full a delinquency when and if, as a result of
application of the assigned payments to all outstanding Loans and Unpaid
Reimbursement Obligations of the nondelinquent Banks, the Banks' respective pro
---
rata shares of all outstanding Loans and Unpaid Reimbursement Obligations have
- ----
returned to those in effect immediately prior to such delinquency and without
giving effect to the nonpayment causing such delinquency.
F. HOLDERS OF NOTES.
----------------
The Agent may deem and treat the payee of any Note or the purchaser of any
Letter
<PAGE>
-53-
of Credit Participation as the absolute owner or purchaser thereof for
all purposes hereof until it shall have been furnished in writing with a
different name by such payee or by a subsequent holder, assignee or transferee.
G. INDEMNITY.
---------
The Banks ratably agree hereby to indemnify and hold harmless the Agent from and
against any and all claims, actions and suits (whether groundless or otherwise),
losses, damages, costs, expenses (including any expenses for which the Agent has
not been reimbursed by the Borrower as required by (S)14), and liabilities of
every nature and character arising out of or related to this Agreement, the
Notes, or any of the other Loan Documents or the transactions contemplated or
evidenced hereby or thereby, or the Agent's actions taken hereunder or
thereunder, except to the extent that any of the same shall be directly caused
by the Agent's willful misconduct or gross negligence.
H. AGENT AS BANK.
-------------
In its individual capacity, FNBB shall have the same obligations and the same
rights, powers and privileges in respect to its Commitment and the Loans made by
it, and as the holder of any of the Notes and as the purchaser of any Letter of
Credit Participations, as it would have were it not also the Agent.
I. RESIGNATION.
-----------
The Agent may resign at any time by giving sixty (60) days prior written notice
thereof to the Banks and the Borrower. Upon any such resignation, the Majority
Banks shall have the right to appoint a successor Agent. Unless a Default or
Event of Default shall have occurred and be continuing, such successor Agent
shall be reasonably acceptable to the Borrower. If no successor Agent shall
have been so appointed by the Majority Banks and shall have accepted such
appointment within thirty (30) days after the retiring Agent's giving of notice
of resignation, then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent, which shall be a financial institution having a rating of not
less than A or its equivalent by Standard & Poor's Corporation. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent 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
<PAGE>
-54-
hereunder. After any retiring Agent's resignation, the provisions of this
Agreement and the other Loan Documents 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.
J. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT.
----------------------------------------------
Each Bank hereby agrees that, upon learning of the existence of a Default or an
Event of Default, it shall promptly notify the Agent thereof. The Agent hereby
agrees that upon receipt of any notice under this (S)12.10 it shall promptly
notify the other Banks of the existence of such Default or Event of Default.
XIII. ASSIGNMENT AND PARTICIPATION.
----------------------------
A. CONDITIONS TO ASSIGNMENT BY BANKS.
---------------------------------
Except as provided herein, each Bank may assign to one or more Eligible
Assignees all or a portion of its interests, rights and obligations under this
Credit Agreement (including all or a portion of its Commitment Percentage and
Commitment and the same portion of the Loans at the time owing to it, the Notes
held by it and its participating interest in the risk relating to any Letters of
Credit); provided that (a) each of the Agent and, unless a Default or Event of
--------
Default shall have occurred and be continuing, the Borrower shall have given its
prior written consent to such assignment, which consent, in the case of the
Borrower, will not be unreasonably withheld, (b) each such assignment shall be
of a constant, and not a varying, percentage of all the assigning Bank's rights
and obligations under this Agreement, (c) each assignment shall be in an amount
that is a whole multiple of $1,000,000 and (d) the parties to such assignment
shall execute and deliver to the Agent, for recording in the Register (as
hereinafter defined), an Assignment and Acceptance, in form and substance
satisfactory to the Agent (an "Assignment and Acceptance"), together with any
Notes subject to such assignment. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five (5) Business Days after
the execution thereof, (i) the assignee thereunder shall be a party hereto and,
to the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder, and (ii) the assigning Bank shall, to the
extent provided in such assignment and upon payment to the Agent of the
registration fee referred to in (S)13.3, be released from its obligations under
this Agreement.
<PAGE>
-55-
B. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS.
--------------------------------------------------------------
By executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows:
(a) other than the representation and warranty that it is the legal and
beneficial owner of the interest being assigned thereby free and clear of any
adverse claim, the assigning Bank makes no representation or warranty, express
or implied, and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Credit Agreement, the other Loan Documents or any other instrument
or document furnished pursuant hereto,
(b) the assigning Bank makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower and their
Subsidiaries or any other Person primarily or secondarily liable in respect of
any of the Obligations, or the performance or observance by the Guarantors, the
Borrower and its other Subsidiaries or any other Person primarily or secondarily
liable in respect of any of the Obligations of any of their obligations under
this Agreement or any of the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto;
(c) such assignee confirms that it has received a copy of this Credit
Agreement, together with copies of the most recent financial statements referred
to in (S)9.1 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance;
(d) such assignee will, independently and without reliance upon the assigning
Bank, the Agent or any other Bank 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 this Agreement;
<PAGE>
-56-
(e) such assignee represents and warrants that it is an Eligible Assignee;
(f) such assignee appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement and the
other Loan Documents as are delegated to the Agent by the terms hereof or
thereof, together with such powers as are reasonably incidental thereto;
(g) such assignee agrees that it will perform in accordance with their terms
all of the obligations that by the terms of this Agreement are required to be
performed by it as a Bank;
(h) such assignee represents and warrants that it is legally authorized to
enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements with the assigning
Bank satisfactory to such assignee with respect to its pro rata share of Letter
--- ----
of Credit Fees in respect of the outstanding Letter of Credit.
C. REGISTER.
--------
The Agent shall maintain a copy of each Assignment and Acceptance delivered to
it and a register or similar list (the "Register") for the recordation of the
names and addresses of the Banks and the Commitment Percentage of, and principal
amount of the Revolving Credit Loans owing to and Letter of Credit
Participations purchased by, the Banks from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Agent and the Banks may treat each Person whose name is recorded
in the Register as a Bank hereunder for all purposes of this Credit Agreement.
The Register shall be available for inspection by the Borrower and the Banks at
any reasonable time and from time to time upon reasonable prior notice. Upon
each such recordation, the assigning Bank agrees to pay to the Agent a
registration fee in the sum of $2,500.
<PAGE>
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D. NEW NOTES.
---------
Upon its receipt of an Assignment and Acceptance executed by the parties to such
assignment, together with each Note subject to such assignment, the Agent shall
(a) record the information contained therein in the Register, and (b) give
prompt notice thereof to the Borrower and the Banks (other than the assigning
Bank). Within five (5) Business Days after receipt of such notice, the Borrower,
at its own expense, shall execute and deliver to the Agent, in exchange for each
surrendered Note, a new Note to the order of such Eligible Assignee in an amount
equal to the amount assumed by such Eligible Assignee pursuant to such
Assignment and Acceptance and, if the assigning Bank has retained some portion
of its obligations hereunder, a new Note to the order of the assigning Bank in
an amount equal to the amount retained by it hereunder. Such new Notes shall
provide that they are replacements for the surrendered Notes, shall be in an
aggregate principal amount equal to the aggregate principal amount of the
surrendered Notes, shall be dated the effective date of such in Assignment and
Acceptance and shall otherwise be substantially the form of the assigned Notes.
Within five (5) days of issuance of any new Notes pursuant to this (S)13.4, the
Borrower shall deliver an opinion of counsel, addressed to the Banks and the
Agent, relating to the due authorization, execution and delivery of such new
Notes and the legality, validity and binding effect thereof, in form and
substance satisfactory to the Banks. The surrendered Notes shall be cancelled
and returned to the Borrower.
E. PARTICIPATIONS.
--------------
Each Bank may sell participations to one or more banks or other entities in all
or a portion of such Bank's rights and obligations under this Credit Agreement
and the other Loan Documents; provided that (a) any such sale or participation
--------
shall not affect the rights and duties of the selling Bank hereunder to the
Borrower, and (b) the only rights granted to the participant pursuant to such
participation arrangements with respect to waivers, amendments or modifications
of the Loan Documents shall be the rights to approve waivers, amendments or
modifications that would reduce the principal of or the interest rate on any
Loans, extend the term or increase the amount of the Commitment of such Bank as
it relates to such participant, reduce the amount of any commitment fees or
Letter of Credit Fees to which such participant is entitled or extend any
regularly scheduled payment date for principal or interest.
F. DISCLOSURE.
----------
<PAGE>
-58-
Each of the Borrower and the Guarantors agrees that in addition to disclosures
made in accordance with standard and customary banking practices any Bank may
disclose information obtained by such Bank pursuant to this Agreement to
assignees or participants and potential assignees or participants hereunder;
provided that such assignees or participants or potential assignees or
- --------
participants shall agree (a) to treat in confidence such information unless such
information otherwise becomes public knowledge, (b) not to disclose such
information to a third party, except as required by law or legal process and (c)
not to make use of such information for purposes of transactions unrelated to
such contemplated assignment or participation.
G. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER.
----------------------------------------------------
If any assignee Bank is an Affiliate of either the Guarantors or the Borrower,
then any such assignee Bank shall have no right to vote as a Bank hereunder or
under any of the other Loan Documents for purposes of granting consents or
waivers or for purposes of agreeing to amendments or other modifications to any
of the Loan Documents or for purposes of making requests to the Agent pursuant
to (S)10.1 or (S)10.2, and the determination of the Majority Banks shall for all
purposes of this Agreement and the other Loan Documents be made without regard
to such assignee Bank's interest in any of the Loans. If any Bank sells a
participating interest in any of the Loans or Reimbursement Obligations to a
participant, and such participant is either a Guarantor or the Borrower or an
Affiliate of either the Guarantors or the Borrower, then such transferor Bank
shall promptly notify the Agent of the sale of such participation. A transferor
Bank shall have no right to vote as a Bank hereunder or under any of the other
Loan Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or modifications to any of the Loan Documents or for
purposes of making requests to the Agent pursuant to (S)13.1 or (S)13.2 to the
extent that such participation is beneficially owned by either the Guarantors or
the Borrower or any Affiliate of either the Guarantors or the Borrower, and the
determination of the Majority Banks shall for all purposes of this Agreement and
the other Loan Documents be made without regard to the interest of such
transferor Bank in the Loans to the extent of such participation.
H. MISCELLANEOUS ASSIGNMENT PROVISIONS.
-----------------------------------
Any assigning Bank shall retain its rights to be indemnified pursuant to (S)14
with respect to any claims or actions arising prior to the date of such
assignment. If any
<PAGE>
-59-
assignee Bank is not incorporated under the laws of the United States of America
or any state thereof, it shall, prior to the date on which any interest or fees
are payable hereunder or under any of the other Loan Documents for its account,
deliver to the Borrower and the Agent certification as to its exemption from
deduction or withholding of any United States federal income taxes. Anything
contained in this (S)13 to the contrary notwithstanding, any Bank may at any
time pledge all or any portion of its interest and rights under this Agreement
(including all or any portion of its Notes) to any of the twelve Federal Reserve
Banks organized under (S)4 of the Federal Reserve Act, 12 U.S.C. (S)341. No such
pledge or the enforcement thereof shall release the pledgor Bank from its
obligations hereunder or under any of the other Loan Documents.
I. ASSIGNMENT BY BORROWER.
----------------------
Neither of the Guarantors nor Borrower shall assign or transfer any of its
rights or obligations under any of the Loan Documents without the prior written
consent of each of the Banks.
XIV. MISCELLANEOUS.
-------------
Each of the Guarantors and the Borrower agrees to indemnify and hold harmless
the Agent and the Banks and their officers, employees, affiliates, agents, and
controlling persons from and against all claims, damages, liabilities and losses
of every kind arising out of the Loan Documents, including without limitation,
against those in respect of the application of Environmental Laws to the
Guarantors, the Borrower and its other Subsidiaries absent the gross negligence
or willful misconduct of the Agent and the Banks. The Borrower shall pay to the
Agent and the Banks promptly on demand all costs and expenses (including any
taxes and reasonable legal and other professional fees and fees of its
commercial finance examiner which commercial finance examiner fees shall not
exceed $5,000 in any twelve (12) month period prior to the occurrence of an
-----
Event of Default) incurred by the Agent and the Banks in connection with the
preparation, negotiation, execution, amendment, administration or enforcement of
any of the Loan Documents. Any communication to be made hereunder shall (a) be
made in writing, but unless otherwise stated, may be made by telex, facsimile
transmission, overnight delivery or letter, and (b) be made or delivered to the
address of the party receiving notice which is identified with its signature
below (unless such party has by five (5) days written notice specified another
address), and shall be deemed made or delivered, when dispatched, left at that
address, one (1) day after given to an overnight delivery service, or five (5)
days after being mailed, postage prepaid, to such address. This Agreement shall
be binding upon and inure to the benefit of each party hereto and its successors
and assigns, but neither of the Guarantors nor the Borrower may not assign its
rights or
<PAGE>
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obligations hereunder. This Agreement may not be amended or waived
except by a written instrument signed by the Borrower, the Agent and the
Majority Banks, and any such amendment or waiver shall be effective only for the
specific purpose given; provided, however, notwithstanding the foregoing, the
-------- -------
rate of interest on the Notes, the term of the Notes, the Commitment amounts
and the amount of the fees hereunder, the definition of Majority Banks and this
sentence of (S)14 shall not be changed without the written consent of all the
Banks, and the amount of the agent's fee and (S)12 may not be amended without
the consent of the Agent. No failure or delay by the Bank to exercise any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege preclude any other right, power or
privilege. The provisions of this Agreement are severable and if any one
provision hereof shall be held invalid or unenforceable in whole or in part in
any jurisdiction, such invalidity or unenforceability shall affect only such
provision in such jurisdiction. This Agreement, together with all Schedules
hereto, expresses the entire understanding of the parties with respect to the
transactions contemplated hereby. This Agreement and any amendment hereby may
be executed in several counterparts, each of which shall be an original, and all
of which shall constitute one agreement. In proving this Agreement, it shall
not be necessary to produce more than one such counterpart executed by the party
to be charged. THIS AGREEMENT AND THE NOTES ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL BE CONSTRUED IN ACCORDANCE THEREWITH AND
GOVERNED THEREBY. EACH OF THE GUARANTORS AND THE BORROWER AGREES THAT ANY SUIT
FOR THE ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF
THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN. Each of
the Guarantors and the Borrower, as an inducement to the Bank to enter into this
Agreement, hereby waives its right to a jury trial with respect to any action
arising in connection with any Loan Document.
<PAGE>
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IN WITNESS WHEREOF, the undersigned have duly executed this Revolving Credit and
Term Loan Agreement as a sealed instrument as of the date first above written.
SALESLINK CORPORATION
By: /s/ Its Duly Authorized Officer
Name:
Title:
Address:
25 Drydock Avenue
Boston, Massachusetts 02210
Tel: (617)
Fax: (617)
CMG INFORMATION SERVICES, INC.
<PAGE>
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By: /s/ Its Duly Authorized Officer
Name:
Title:
Address:
187 Ballardvale Street, Suite B110
Wilmington, Massachusetts 01887-7000
Tel: (508)
Fax: (508)
PACIFIC DIRECT MARKETING CORP.
By: /s/ Its Duly Authorized Officer
Name:
<PAGE>
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Title:
Address:
8852 Thornton Avenue
Newark, California
Tel:
Fax:
THE FIRST NATIONAL BANK OF BOSTON, INDIVIDUALLY AND AS AGENT
By: /s/ Tena C. Lindenauer
Name: Tena C. Lindenauer
Title: Director and Vice President
Address:
<PAGE>
-64-
100 Federal Street
High Technology Division
Boston, Massachusetts 02110
Tel: (617)434-7440
Fax: (617)434-0819
<PAGE>
-1-
SCHEDULE 9.2(A)
---------------
<PAGE>
SCHEDULE 9.2(B)
---------------
<PAGE>
-1-
EXHIBIT 10.4
REVOLVING CREDIT NOTE
---------------------
$2,500,000 as of October 24, 1996
FOR VALUE RECEIVED, the undersigned SALESLINK CORPORATION a Massachusetts
corporation (the "Borrower"), hereby promises to pay to the order of THE FIRST
NATIONAL BANK OF BOSTON, a national banking association (the "Bank") at the
Agent's Head Office (as such term is defined in the Credit Agreement referred to
below):
(a) prior to or on the Revolving Credit Loan Maturity Date the principal amount
of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000) or, if less, the
aggregate unpaid principal amount of Revolving Credit Loans advanced by the Bank
to the Borrower pursuant to the Revolving Credit and Term Loan Agreement dated
as of October 24, 1996 (as amended and in effect from time to time, the "Credit
Agreement"), among the Borrower, the Bank and other parties thereto;
(b) the principal outstanding hereunder from time to time at the times provided
in the Credit Agreement; and
(c) interest on the principal balance hereof from time to time outstanding from
the Closing Date under the Credit Agreement through and including the maturity
date hereof at the times and at the rate provided in the Credit Agreement.
This Note evidences borrowings under and has been issued by the Borrower in
accordance with the terms of the Credit Agreement. The Bank and any holder
hereof is entitled to the benefits of the Credit Agreement, the Guaranty and the
other Loan Documents, 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 Credit
Agreement.
<PAGE>
-2-
The Borrower irrevocably authorizes the Bank 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 of this Note, an appropriate notation on
the grid attached to this Note, or the continuation of such grid, or any other
similar record, including computer records, reflecting the making of such
Revolving Credit Loan or (as the case may be) the receipt of such payment. The
outstanding amount of the Revolving Credit Loans set forth on the grid attached
to this Note, or the continuation of such grid, or any other similar record,
including computer records, maintained by the Bank with respect to any Revolving
Credit Loans shall be prima facie evidence of the principal amount thereof owing
----- -----
and unpaid to the Bank, but the failure to record, or any error in so recording,
any such amount on any such grid, continuation or other record shall not limit
or otherwise affect the obligation of the Borrower hereunder or under the Credit
Agreement to make payments of principal of and interest on this Note when due.
The Borrower has the right in certain circumstances and the obligation under
certain other circumstances to prepay the whole or part of the principal of this
Note on the terms and conditions specified in the Credit Agreement.
If any one or more of the Events of Default shall occur, 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 Credit Agreement.
No delay or omission on the part of the Bank or any holder hereof in exercising
any right hereunder shall operate as a waiver of such right or of any other
rights of the Bank or such holder, nor shall any delay, omission or waiver on
any one occasion be deemed a bar or waiver of the same or any other right on
any further occasion.
The Borrower and every endorser and guarantor of this Note or the obligation
represented hereby waives presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note, and assents 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 AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL PURPOSES
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF
MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW).
THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE
BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL
<PAGE>
-3-
COURT SITTING THEREIN AND THE CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER
BY MAIL AT THE ADDRESS SPECIFIED BENEATH THE BORROWER'S SIGNATURE ON THE
SIGNATURE PAGE OF THE CREDIT AGREEMENT. THE BORROWER HEREBY WAIVES ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH
COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
This Note shall be deemed to take effect as a sealed instrument under the laws
of the Commonwealth of Massachusetts.
<PAGE>
-4-
IN WITNESS WHEREOF, the undersigned has caused this Revolving Credit Note to be
signed in its corporate name and its corporate seal to be impressed thereon by
its duly authorized officer as of the day and year first above written.
[Corporate Seal]
SALESLINK CORPORATION
By: /s/ Its Duly Authorized Officer
Title:
<PAGE>
-1-
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Amount of Balance of
Amount Principal Paid Principal Notation
Date of Loan or Prepaid Unpaid Made By:
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<PAGE>
-1-
EXHIBIT 10.5
TERM NOTE
---------
$5,500,000 as of October 24, 1996
FOR VALUE RECEIVED, the undersigned SALESLINK CORPORATION, a Delaware
corporation, (the "Borrower"), hereby promises to pay to the order of THE FIRST
NATIONAL BANK OF BOSTON, a national banking association (the "Bank") at the
Agent's Head Office (as defined in the Credit Agreement referred to below):
(a) prior to or on the Term Loan Maturity Date the principal amount of FIVE
MILLION FIVE HUNDRED THOUSAND DOLLARS ($5,500,000), evidencing the Term Loan
made by the Bank to the Borrower pursuant to the Revolving Credit and Term Loan
Agreement dated as of October 24, 1996 (as amended and in effect from time to
time, the "Credit Agreement"), by and among the Borrower, the Bank and other
parties thereto;
(b) the principal outstanding hereunder from time to time at the times provided
in the Credit Agreement; and
(c) interest from the date hereof on the principal amount from time to time
outstanding to and including the maturity hereof at the rates and terms and in
all cases in accordance with the terms of the Credit Agreement.
This Note evidences borrowings under and has been issued by the Borrower in
accordance with the terms of the Credit Agreement. The Bank and any holder
hereof is entitled to the benefits of the Credit Agreement, the Guaranty and the
other Loan Documents, 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 Credit
Agreement.
<PAGE>
-2-
The Borrower irrevocably authorizes the Bank to make or cause to be made, at the
time of receipt of any payment of principal of this Note, an appropriate
notation on the grid attached to this Note, or the continuation of such grid, or
any other similar record, including computer records, reflecting the receipt of
such payment. The outstanding amount of the Term Loan set forth on the grid
attached to this Note, or the continuation of such grid, or any other similar
record, including computer records, maintained by the Bank with respect to the
Term Loan shall be prima facie evidence of the principal amount of the Term Loan
----- -----
owing and unpaid to the Bank, but the failure to record, or any error in so
recording, any such amount on any such grid, continuation or other record shall
not limit or otherwise affect the obligation of the Borrower hereunder or under
the Credit Agreement to make payments of principal of and interest on this Note
when due.
The Borrower has the right in certain circumstances and the obligation under
certain other circumstances to prepay the whole or part of the principal of this
Note on the terms and conditions specified in the Credit Agreement.
If any one or more of the Events of Default shall occur, 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 Credit Agreement.
No delay or omission on the part of the Bank or any holder hereof in exercising
any right hereunder shall operate as a waiver of such right or of any other
rights of the Bank or such holder, nor shall any delay, omission or waiver on
any one occasion be deemed a bar or waiver of the same or any other right on any
future occasion.
The Borrower and every endorser and guarantor of this Note or the obligation
represented hereby waives presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note, and assents 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 AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL PURPOSES
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF
MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW).
THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE
BROUGHT IN THE
<PAGE>
-3-
COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING
THEREIN AND THE CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE
SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE
ADDRESS SPECIFIED BENEATH THE BORROWER'S SIGNATURE ON THE SIGNATURE PAGE OF THE
CREDIT AGREEMENT. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT
IS BROUGHT IN AN INCONVENIENT COURT.
This Note shall be deemed to take effect as a sealed instrument under the laws
of the Commonwealth of Massachusetts.
<PAGE>
-4-
IN WITNESS WHEREOF, the undersigned has caused this Note to be signed in its
corporate name and its corporate seal to be impressed thereon by its duly
authorized officer as of the day and year first above written.
[Corporate Seal]
SALESLINK CORPORATION
By: /s/ Its Duly Authorized Officer
Title:
<PAGE>
-1-
EXHIBIT 10.6
GUARANTY
--------
GUARANTY, dated as of October 24, 1996, by PACIFIC DIRECT MARKETING CORP., a
California corporation, (the "Guarantor") in favor of (a) THE FIRST NATIONAL
BANK OF BOSTON, a national banking association, as agent (hereinafter, in such
capacity, the "Agent") for itself and the other lending institutions
(hereinafter, collectively, the "Banks") which are or may become parties to a
Revolving Credit and Term Loan Agreement dated as of October 24, 1996 (as
amended and in effect from time to time, the "Credit Agreement") among SalesLink
Corporation, a Massachusetts corporation (the "Borrower"), CMG Information
Services, Inc., a Delaware corporation (the "Parent"), the Guarantor, the Banks
and the Agent and (b) each of the Banks.
WHEREAS, the Borrower, the Parent and the Guarantor have entered into the Credit
Agreement with the Agent and the Banks pursuant to which the Banks and the
Agent, subject to the terms and conditions contained therein, is to make loans
or otherwise to extend to the Borrower and the Parent;
WHEREAS, the Borrower, the Parent and the Guarantor are members of a group of
related corporations, the success of either one of which is dependent in part on
the success of the other members of such group;
WHEREAS, the Guarantor expects to receive substantial direct and indirect
benefits from the extensions of credit to the Borrower and the Parent by the
Agent and the Banks pursuant to the Credit Agreement (which benefits are hereby
acknowledged);
WHEREAS, it is a condition precedent to the Bank's making any loans or otherwise
extending credit to the Borrower or the Parent under the Credit Agreement that
the Guarantor execute and deliver to the Agent and the Banks a guaranty
substantially in the form hereof; and
WHEREAS, the Guarantor wishes to guaranty the Borrower's and the Parent's joint
and several obligations to the Agent and the Banks under or in respect of the
Credit Agreement as provided herein;
<PAGE>
-2-
NOW, THEREFORE, the Guarantor hereby agrees with the Agent adn the Banks as
follows:
I. DEFINITIONS.
-----------
The term "Obligations" and all other capitalized terms used herein without
definition shall have the respective meanings provided therefor in the Credit
Agreement.
II. GUARANTY OF PAYMENT AND PERFORMANCE.
-----------------------------------
The Guarantor hereby guarantees to the Banks and the Agent the full and punctual
payment when due (whether at stated maturity, by required pre-payment, by
acceleration or otherwise), as well as the performance, of all of the
Obligations including all such which would become due but for the operation of
the automatic stay pursuant to (S)362(a) of the Federal Bankruptcy Code and the
operation of (S)(S)502(b) and 506(b) of the Federal Bankruptcy Code. This
Guaranty is an absolute, unconditional and continuing guaranty of the full and
punctual payment and performance of all of the Obligations and not of their
collectibility only and is in no way conditioned upon any requirement that the
Agent or any Bank first attempt to collect any of the Obligations from the
Borrower or the Parent or resort to any collateral security or other means of
obtaining payment. Should the Borrower or the Parent default in the payment or
performance of any of the Obligations, the obligations of the Guarantor
hereunder with respect to such Obligations in default shall become immediately
due and payable to the Agent and the Banks, without demand or notice of any
nature, all of which are expressly waived by the Guarantor. Payments by the
Guarantor hereunder may be required by the Agent or any Bank on any number of
occasions.
III. GUARANTOR'S AGREEMENT TO PAY ENFORCEMENT COSTS, ETC.
----------------------------------------------------
The Guarantor further agrees, as the principal obligor and not as a guarantor
only, to pay to the Agent, on demand, all costs and expenses (including court
costs and legal expenses) incurred or expended by the Agent or any Bank in
connection with the Obligations, this Guaranty and the enforcement thereof,
together with interest on amounts recoverable under this (S)3 from the time when
such amounts become due until payment, whether before or after judgment, at the
rate of interest for overdue principal set forth in the Credit Agreement,
provided that if such interest exceeds the maximum amount permitted to be paid
- --------
under applicable law, then such interest shall be reduced to such maximum
permitted amount.
<PAGE>
-3-
IV. WAIVERS BY GUARANTOR; BANK'S FREEDOM TO ACT.
-------------------------------------------
The Guarantor agrees that the Obligations will be paid and performed strictly in
accordance with their respective terms, regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of the Agent or any Bank with respect thereto. The Guarantor
waives promptness, diligences, presentment, demand, protest, notice of
acceptance, notice of any Obligations incurred and all other notices of any
kind, all defenses which may be available by virtue of any valuation, stay,
moratorium law or other similar law now or hereafter in effect, any right to
require the marshalling of assets of either the Borrower or the Parent or any
other entity or other person primarily or secondarily liable with respect to any
of the Obligations, and all suretyship defenses generally. Without limiting the
generality of the foregoing, the Guarantor agrees to the provisions of any
instrument evidencing, securing or otherwise executed in connection with any
Obligation and agrees that the obligations of the Guarantor hereunder shall not
be released or discharged, in whole or in part, or otherwise affected by (a) the
failure of the Agent or any Bank to assert any claim or demand or to enforce any
right or remedy against the Borrower, the Parent or any other entity or other
person primarily or secondarily liable with respect to any of the Obligations;
(b) any extensions, compromise, refinancing, consolidation or renewals of any
Obligation; (c) any change in the time, place or manner of payment of any of the
Obligations or any rescissions, waivers, compromise, refinancing, consolidation,
amendments or modifications of any of the terms or provisions of the Credit
Agreement, the Notes, the other Loan Documents or any other agreement
evidencing, securing or otherwise executed in connection with any of the
Obligations; (d) the addition, substitution or release of any entity or other
person primarily or secondarily liable for any Obligation, (e) the adequacy of
any rights which the Bank may have against any collateral security or other
means of obtaining repayment of any of the Obligations; (f) the impairment of
any collateral securing any of the Obligations, including without limitation the
failure to perfect or preserve any rights which the Agent or any Bank might have
in such collateral security or the substitution, exchange, surrender, release,
loss or destruction of any such collateral security; or (g) any other act or
omission which might in any manner or to any extent vary the risk of the
Guarantor or otherwise operate as a release or discharge of the Guarantor, all
of which may be done without notice to the Guarantor. To the fullest extent
permitted by law, the Guarantor hereby expressly waives any and all rights or
defenses arising by reason of (i) any "one action" or "anti-deficiency" law
which would otherwise prevent the Agent or any Bank from bringing any action,
including any claim for a deficiency, or exercising any other right or remedy
(including any right of set-off), against the Guarantor before or after the
Agent's or any Bank's commencement or completion of any foreclosure action,
whether judicially, by exercise of power of sale or otherwise, or (ii) any other
law which in any other way would otherwise require any election of remedies by
the Agent or any Bank.
V. UNENFORCEABILITY OF OBLIGATIONS AGAINST BORROWER OR PARENT.
----------------------------------------------------------
<PAGE>
-4-
If for any reason either the Borrower or the Parent has no legal existence or is
under no legal obligation to discharge any of the Obligations, or if any of the
Obligations have become irrecoverable from either the Borrower or the Parent by
reason of the Borrower's or the Parent's insolvency, bankruptcy or
reorganization or by other operation of law or for any other reason, this
Guaranty shall nevertheless be binding on the Guarantor to the same extent as if
the Guarantor at all times had been the principal obligor on all such
Obligations. In the event that acceleration of the time for payment of any of
the Obligations is stayed upon the insolvency, bankruptcy or reorganization of
the Company, or for any other reason, all such amounts otherwise subject to
acceleration under the terms of the Credit Agreement, the Notes, the other Loan
Documents or any other agreement evidencing, securing or otherwise executed in
connection with any Obligation shall be immediately due and payable by the
Guarantor.
VI. SUBROGATION; SUBORDINATION.
--------------------------
A. WAIVER OF RIGHTS AGAINST BORROWER OR PARENT.
-------------------------------------------
Until the final payment and performance in full of all of the Obligations and
any and all other obligations of the Borrower, the Parent or the Guarantor to
the Agent or any Bank or any affiliate of the Agent or any Bank, the Guarantor
shall not exercise any rights against either the Borrower or the Parent arising
as a result of payment by the Guarantor hereunder, by way of subrogation,
reimbursement, restitution, contribution or otherwise, and will not prove any
claim in competition with the Agent or any Bank or such affiliate in respect of
any payment hereunder in any bankruptcy, insolvency or reorganization case or
proceedings of any nature; the Guarantor will not claim any setoff, recoupment
or counterclaim against either the Borrower or the Parent in respect of any
liability of the Guarantor to the Borrower or the Parent; and the Guarantor
waives any benefit of and any right to participate in any collateral security
which may be held by the Agent or any Bank or any such affiliate.
B. SUBORDINATION.
-------------
The payment of any amounts due with respect to any indebtedness of the Borrower
or the Parent now or hereafter owed to the Guarantor is hereby subordinated to
the prior payment
<PAGE>
-5-
in full of all of the Obligations and any and all other obligations of the
Borrower, the Parent or the Guarantor to the Agent or any Bank or any affiliate
of the Agent or any Bank. The Guarantor agrees that, after the occurrence of any
default in the payment or performance of any of the Obligations, the Guarantor
will not demand, sue for or otherwise attempt to collect any such indebtedness
of the Borrower or the Parent to the Guarantor until all of the Obligations
shall have been paid in full. If, notwithstanding the foregoing sentence, the
Guarantor shall collect, enforce or receive any amounts in respect of such
indebtedness, such amounts shall be collected, enforced and received by the
Guarantor as trustee for the Agent for the benefito of the Agent and the Banks
and be paid over to the Agent for the benefit of the Agent and the Banks on
account of the Obligations without affecting in any manner the liability of the
Guarantor under the other provisions of this Guaranty.
C. PROVISIONS SUPPLEMENTAL.
-----------------------
The provisions of this (S)6 shall be supplemental to and not in derogation of
any rights and remedies of the Agent or any Bank or any affiliate of the Agent
or any Bank under any separate subordination agreement which the Agent or such
Bank or such affiliate may at any time and from time to time enter into with the
Guarantor.
VII. SECURITY; SETOFF.
----------------
The Guarantor grants to the Agent for the benefit of the Agent and the Banks, as
security for the full and punctual payment and performance of all of the
Guarantor's obligations hereunder, a continuing lien on and security interest in
all securities or other property belonging to the Guarantor now or hereafter
held by the Agent or any Bank and in all deposits (general or special, time or
demand, provisional or final) and other sums credited by or due from the Agent
or any Bank to the Guarantor or subject to withdrawal by the Guarantor.
Regardless of the adequacy of any collateral security or other means of
obtaining payment of any of the Obligations, the Agent and any Bank is hereby
authorized at any time and from time to time, without notice to the Guarantor
(any such notice being expressly waived by the Guarantor) and to the fullest
extent permitted by law, to set off and apply such deposits and other sums
against the obligations of the Guarantor under this Guaranty, whether or not the
Agent or such Bank shall have made any demand under this Guaranty and although
such obligations may be contingent or unmatured.
VIII. FURTHER ASSURANCES.
------------------
<PAGE>
-6-
The Guarantor agree that it will from time to time, at the request of the Agent,
provide to the Agent the Guarantor's most recent audited and unaudited balance
sheets and related statements of income and changes in financial condition
(prepared on a consolidated basis with the Guarantor's subsidiaries, if any) and
such other information relating to the business and affairs of the Guarantor as
the Agent or any Bank may reasonably request. The Guarantor also agrees to do
all such things and execute all such documents as the Agent may consider
necessary or desirable to give full effect to this Guaranty and to perfect and
preserve the rights and powers of the Agent hereunder. The Guarantor
acknowledges and confirms that the Guarantor itself has established its own
adequate means of obtaining from the Borrower and the Parent on a continuing
basis all information desired by the Guarantor concerning the financial
condition of the Borrower and the Parent and that the Guarantor will look to the
Borrower and the Parent and not to the Bank in order for the Guarantor to keep
adequately informed of changes in the Company's financial condition.
IX. TERMINATION; REINSTATEMENT.
--------------------------
This Guaranty shall remain in full force and effect until the Agent is given
written notice of the Guarantor's intention to discontinue this Guaranty,
notwithstanding any intermediate or temporary payment or settlement of the whole
or any part of the Obligations. No such notice shall be effective unless
received and acknowledged by an officer of the Agent at the address of the Agent
for notices set forth on the signature page of the Credit Agreement. No such
notice shall affect any rights of the Agent or any Bank or of any affiliate of
the Agent or any Bank hereunder, including without limitation the rights set
forth in (S)(S)4 and 6, with respect to any Obligations incurred or accrued
prior to the receipt of such notice or any Obligations incurred or accrued
pursuant to any contract or commitment in existence prior to such receipt, and
all checks, drafts, notes, instruments (negotiable or otherwise) and writings
made by or for the account of the Borrower or the Parent and drawn on the Agent
or any Bank or any of its agents purporting to be dated on or before the date of
receipt of such notice, although presented to and paid or accepted by the Agent
or any Bank after that date, shall form part of the Obligations. This Guaranty
shall continue to be effective or be reinstated, notwithstanding any such
notice, if at any time any payment made or value received with respect to any
Obligation is rescinded or must otherwise be returned by the Agent or any Bank
upon the insolvency, bankruptcy or reorganization of the Borrower, the Parent,
or otherwise, all as though such payment had not been made or value received.
X. SUCCESSORS AND ASSIGNS.
----------------------
This Guaranty shall be binding upon the Guarantor, its successors and assigns,
and shall inure to the benefit of and be enforceable by the Agent, each Bank and
its successors, transferees
<PAGE>
-7-
and assigns. Without limiting the generality of the foregoing sentence, the
Agent or any Bank may assign or otherwise transfer the Credit Agreement, the
Notes, the other Loan Documents or any other agreement or note held by it
evidencing, securing or otherwise executed in connection with the Obligations,
or sell participations in any interest therein, to any other entity or other
person, and such other entity or other person shall thereupon become vested, to
the extent set forth in the agreement evidencing such assignment, transfer or
participation, with all the rights in respect thereof granted to the Agent or
such Bank herein.
XI. AMENDMENTS AND WAIVERS.
----------------------
No amendment or waiver of any provision of this Guaranty nor consent to any
departure by the Guarantor therefrom shall be effective unless the same shall be
in writing and signed by the Agent and each Bank. No failure on the part of the
Agent or any Bank to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right.
XII. NOTICES.
-------
All notices and other communications called for hereunder shall be made in
writing and, unless otherwise specifically provided herein, shall be deemed to
have been duly made or given when delivered by hand or mailed first class,
postage prepaid, or, in the case of telegraphic or telexed notice, when
transmitted, answer back received, addressed as follows: if to the Guarantor,
at the address set forth beneath its signature hereto, and if to the Agent or
any Bank, at the address for notices to the Agent and such Bank set forth on the
signature page of the Credit Agreement, or at such address as either party may
designate in writing to the other.
XIII GOVERNING LAW; CONSENT TO JURISDICTION.
--------------------------------------
THIS GUARANTY IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS. The Guarantor agrees that any suit for the enforcement of this
Guaranty may be brought in the courts of the Commonwealth of Massachusetts or
any federal court sitting therein and consents to the nonexclusive jurisdiction
of such court and to service of process in any such suit being made upon the
Guarantor by mail at the address specified by reference in (S)12. The Guarantor
hereby waives any
<PAGE>
-8-
objection that it may now or hereafter have to the venue of any such suit or any
such court or that such suit was brought in an inconvenient court .
XIV WAIVER OF JURY TRIAL.
--------------------
THE GUARANTOR HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION
OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS
OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY OF SUCH RIGHTS OR
OBLIGATIONS. Except as prohibited by law, the Guarantor hereby waives any right
which 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 Guarantor (a)
certifies that neither the Agent, any Bank nor any representative, agent or
attorney of the Agent or any Bank has represented, expressly or otherwise, that
the Agent or such Bank would not, in the event of litigation, seek to enforce
the foregoing waivers and (b) acknowledges that, in entering into the Credit
Agreement and the other Loan Documents to which the Agent or such Bank is a
party, the Agent and each Bank is relying upon, among other things, the waivers
and certifications contained in this (S)14.
XV. MISCELLANEOUS.
-------------
This Guaranty constitutes the entire agreement of the Guarantor with respect to
the matters set forth herein. The rights and remedies herein provided are
cumulative and not exclusive of any remedies provided by law or any other
agreement, and this Guaranty shall be in addition to any other guaranty of or
collateral security for any of the Obligations. The invalidity or
unenforceability of any one or more sections of this Guaranty shall not affect
the validity or enforceability of its remaining provisions. Captions are for
the ease of reference only and shall not affect the meaning of the relevant
provisions. The meanings of all defined terms used in this Guaranty shall be
equally applicable to the singular and plural forms of the terms defined.
<PAGE>
-9-
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed and
delivered as of the date first above written.
PACIFIC DIRECT MARKETING CORP.
By: /s/ Its Duly Authorized Officer
Title:
Address:
Telex:
<PAGE>
-1-
EXHIBIT 10.7
GUARANTY
--------
GUARANTY, dated as of October 24, 1996, by CMG INFORMATION SERVICES, INC., a
Delaware (the "Guarantor") in favor of (a) THE FIRST NATIONAL BANK OF BOSTON, a
national banking association, as agent (hereinafter, in such capacity, the
"Agent") for itself and the other banking institutions (hereinafter,
collectively, the "Banks") which are or may become parties to a Revolving Credit
and Term Loan Agreement dated as of October 24, 1996 (as amended and in effect
from time to time, the "Credit Agreement"), among SALESLINK CORPORATION, a
Massachusetts corporation (the "Company"), the Guarantor, Pacific Direct
Marketing Corp., the Banks and the Agent and (b) each of the Banks.
WHEREAS, the Company and the Guarantor are members of a group of related
corporations, the success of either one of which is dependent in part on the
success of the other members of such group;
WHEREAS, the Guarantor expects to receive substantial direct and indirect
benefits from the extensions of credit to the Company by the Banks pursuant to
the Credit Agreement (which benefits are hereby acknowledged);
WHEREAS, it is a condition precedent to the Banks' making any loans or otherwise
extending credit to the Company under the Credit Agreement that the Guarantor
execute and deliver to the Agent, for the benefit of the Banks and the Agent, a
guaranty substantially in the form hereof; and
WHEREAS, the Guarantor wishes to guaranty the Company's obligations to the Banks
and the Agent under or in respect of the Credit Agreement as provided herein;
NOW, THEREFORE, the Guarantor hereby agrees with the Banks and the Agent as
follows:
I. DEFINITIONS.
-----------
<PAGE>
-2-
The term "Obligations" and all other capitalized terms used herein without
definition shall have the respective meanings provided therefor in the Credit
Agreement.
II. GUARANTY OF PAYMENT AND PERFORMANCE.
-----------------------------------
The Guarantor hereby guarantees to the Banks and the Agent the full and punctual
payment when due (whether at stated maturity, by required pre-payment, by
acceleration or otherwise), as well as the performance, of all of the
Obligations including all such which would become due but for the operation of
the automatic stay pursuant to (S)362(a) of the Federal Bankruptcy Code and the
operation of (S)(S)502(b) and 506(b) of the Federal Bankruptcy Code. This
Guaranty is an absolute, unconditional and continuing guaranty of the full and
punctual payment and performance of all of the Obligations and not of their
collectibility only and is in no way conditioned upon any requirement that the
Agent or any Bank first attempt to collect any of the Obligations from the
Company or resort to any collateral security or other means of obtaining
payment. Should the Company default in the payment or performance of any of the
Obligations, the obligations of the Guarantor hereunder with respect to such
Obligations in default shall, upon demand by the Agent, become immediately due
and payable to the Agent, for the benefit of the Banks and the Agent, without
demand or notice of any nature, all of which are expressly waived by the
Guarantor. Payments by the Guarantor hereunder may be required by the Agent on
any number of occasions. All payments by the Guarantor hereunder shall be made
to the Agent, in the manner and at the place of payment specified therefor in
the Credit Agreement, for the account of the Banks and the Agent.
III. GUARANTOR'S AGREEMENT TO PAY ENFORCEMENT COSTS, ETC.
----------------------------------------------------
The Guarantor further agrees, as the principal obligor and not as a guarantor
only, to pay to the Agent, on demand, all costs and expenses (including court
costs and legal expenses) incurred or expended by the Agent or any Bank in
connection with the Obligations, this Guaranty and the enforcement thereof,
together with interest on amounts recoverable under this (S)3 from the time when
such amounts become due until payment, whether before or after judgment, at the
rate of interest for overdue principal set forth in the Credit Agreement,
provided that if such interest exceeds the maximum amount permitted to be paid
- --------
under applicable law, then such interest shall be reduced to such maximum
permitted amount.
IV. WAIVERS BY GUARANTOR; BANK'S FREEDOM TO ACT.
-------------------------------------------
The Guarantor agrees that the Obligations will be paid and performed strictly in
accordance with their respective terms, regardless of any law, regulation or
order now or hereafter in
<PAGE>
-3-
effect in any jurisdiction affecting any of such terms or the rights of the
Agent or any Bank with respect thereto. The Guarantor waives promptness,
diligences, presentment, demand, protest, notice of acceptance, notice of any
Obligations incurred and all other notices of any kind, all defenses which may
be available by virtue of any valuation, stay, moratorium law or other similar
law now or hereafter in effect, any right to require the marshalling of assets
of the Company or any other entity or other person primarily or secondarily
liable with respect to any of the Obligations, and all suretyship defenses
generally. Without limiting the generality of the foregoing, the Guarantor
agrees to the provisions of any instrument evidencing, securing or otherwise
executed in connection with any Obligation and agrees that the obligations of
the Guarantor hereunder shall not be released or discharged, in whole or in
part, or otherwise affected by (a) the failure of the Agent or any Bank to
assert any claim or demand or to enforce any right or remedy against the Company
or any other entity or other person primarily or secondarily liable with respect
to any of the Obligations; (b) any extensions, compromise, refinancing,
consolidation or renewals of any Obligation; (c) any change in the time, place
or manner of payment of any of the Obligations or any rescissions, waivers,
compromise, refinancing, consolidation or other amendments or modifications of
any of the terms or provisions of the Credit Agreement, the Note, the other Loan
Documents or any other agreement evidencing, securing or otherwise executed in
connection with any of the Obligations, (d) the addition, substitution or
release of any entity or other person primarily or secondarily liable for any
Obligation; (e) the adequacy of any rights which the Agent or any Bank may have
against any collateral security or other means of obtaining repayment of any of
the Obligations; (f) the impairment of any collateral securing any of the
Obligations, including without limitation the failure to perfect or preserve any
rights which the Agent or any Bank might have in such collateral security or the
substitution, exchange, surrender, release, loss or destruction of any such
collateral security; or (g) any other act or omission which might in any manner
or to any extent vary the risk of the Guarantor or otherwise operate as a
release or discharge of the Guarantor, all of which may be done without notice
to the Guarantor. To the fullest extent permitted by law, the Guarantor hereby
expressly waives any and all rights or defenses arising by reason of (i) any
"one action" or "anti-deficiency" law which would otherwise prevent the Agent or
any Bank from bringing any action, including any claim for a deficiency, or
exercising any other right or remedy (including any right of set-off), against
the Guarantor before or after the Agent's or such Bank's commencement or
completion of any foreclosure action, whether judicially, by exercise of power
of sale or otherwise, or (ii) any other law which in any other way would
otherwise require any election of remedies by the Agent or any Bank.
V. UNENFORCEABILITY OF OBLIGATIONS AGAINST COMPANY.
-----------------------------------------------
If for any reason the Company has no legal existence or is under no legal
obligation to discharge any of the Obligations, or if any of the Obligations
have become irrecoverable from the Company by reason of the Company's
insolvency, bankruptcy or reorganization or by other operation of law or for any
other reason, this Guaranty shall nevertheless be binding on
<PAGE>
-4-
the Guarantor to the same extent as if the Guarantor at all times had been the
principal obligor on all such Obligations. In the event that acceleration of the
time for payment of any of the Obligations is stayed upon the insolvency,
bankruptcy or reorganization of the Company, or for any other reason, all such
amounts otherwise subject to acceleration under the terms of the Credit
Agreement, the Note, the other Loan Documents or any other agreement evidencing,
securing or otherwise executed in connection with any Obligation shall be
immediately due and payable by the Guarantor.
VI. SUBROGATION; SUBORDINATION.
--------------------------
A. WAIVER OF RIGHTS AGAINST COMPANY.
--------------------------------
Until the final payment and performance in full of all of the Obligations, the
Guarantor shall not exercise and hereby waives any rights against the Company
arising as a result of payment by the Guarantor hereunder, by way of
subrogation, reimbursement, restitution, contribution or otherwise, and will not
prove any claim in competition with the Agent or any Bank in respect of any
payment hereunder in any bankruptcy, insolvency or reorganization case or
proceedings of any nature; the Guarantor will not claim any setoff, recoupment
or counterclaim against the Company in respect of any liability of the Guarantor
to the Company; and the Guarantor waives any benefit of and any right to
participate in any collateral security which may be held by the Agent or any
Bank.
B. SUBORDINATION.
-------------
The payment of any amounts due with respect to any indebtedness of the Company
for money borrowed or credit received now or hereafter owed to the Guarantor is
hereby subordinated to the prior payment in full of all of the Obligations. The
Guarantor agrees that, after the occurrence of any default in the payment or
performance of any of the Obligations, the Guarantor will not demand, sue for or
otherwise attempt to collect any such indebtedness of the Company to the
Guarantor until all of the Obligations shall have been paid in full. If,
notwithstanding the foregoing sentence, the Guarantor shall collect, enforce or
receive any amounts in respect of such indebtedness while any Obligations are
still outstanding, such amounts shall be collected, enforced and received by the
Guarantor as trustee for the Banks and the Agent and be paid over to the Agent,
for the benefit of the Banks and the Agent, on account of the Obligations
without affecting in any manner the
<PAGE>
-5-
liability of the Guarantor under the other provisions of this Guaranty.
C. PROVISIONS SUPPLEMENTAL.
-----------------------
The provisions of this (S)6 shall be supplemental to and not in derogation of
any rights and remedies of the Banks and the Agent under any separate
subordination agreement which the Agent may at any time and from time to time
enter into with the Guarantor for the benefit of the Banks and the Agent.
VII. SECURITY; SETOFF.
----------------
The Guarantor grants to each of the Agent and the Banks, as security for the
full and punctual payment and performance of all of the Guarantor's obligations
hereunder, a continuing lien on and security interest in all securities or other
property belonging to the Guarantor now or hereafter held by the Agent or such
Bank and in all deposits (general or special, time or demand, provisional or
final) and other sums credited by or due from the Agent or such Bank to the
Guarantor or subject to withdrawal by the Guarantor. Regardless of the adequacy
of any collateral security or other means of obtaining payment of any of the
Obligations, each of the Agent and the Banks is hereby authorized at any time
and from time to time, without notice to the Guarantor (any such notice being
expressly waived by the Guarantor) and to the fullest extent permitted by law,
to set off and apply such deposits and other sums against the obligations of the
Guarantor under this Guaranty, whether or not the Agent or such Bank shall have
made any demand under this Guaranty and although such obligations may be
contingent or unmatured.
VIII. FURTHER ASSURANCES.
------------------
The Guarantor agrees that it will from time to time, at the request of the
Agent, do all such things and execute all such documents as the Agent may
consider necessary or desirable to give full effect to this Guaranty and to
perfect and preserve the rights and powers of the Banks and the Agent hereunder.
The Guarantor acknowledges and confirms that the Guarantor itself has
established its own adequate means of obtaining from the Company on a continuing
basis all information desired by the Guarantor concerning the financial
condition of the Company and that the Guarantor will look to the Company and not
to the Agent or any Bank in order for the Guarantor to keep adequately informed
of changes in the Company's financial
<PAGE>
-6-
condition.
IX. TERMINATION; REINSTATEMENT.
--------------------------
This Guaranty shall remain in full force and effect until the Agent is given
written notice of the Guarantor's intention to discontinue this Guaranty,
notwithstanding any intermediate or temporary payment or settlement of the whole
or any part of the Obligations. No such notice shall be effective unless
received and acknowledged by an officer of the Agent at the address of the Agent
for notices set forth on the signature page of the Credit Agreement. No such
notice shall affect any rights of the Agent or any Bank hereunder, including
without limitation the rights set forth in (S)(S)4 and 6, with respect to any
Obligations incurred or accrued prior to the receipt of such notice or any
Obligations incurred or accrued pursuant to any contract or commitment in
existence prior to such receipt. This Guaranty shall continue to be effective
or be reinstated, notwithstanding any such notice, if at any time any payment
made or value received with respect to any Obligation is rescinded or must
otherwise be returned by the Agent or any Bank upon the insolvency, bankruptcy
or reorganization of the Company, or otherwise, all as though such payment had
not been made or value received.
X. SUCCESSORS AND ASSIGNS.
----------------------
This Guaranty shall be binding upon the Guarantor, its successors and assigns,
and shall inure to the benefit of the Agent and the Banks and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing sentence, each Bank may assign or otherwise transfer the Credit
Agreement, the Note, the other Loan Documents or any other agreement or note
held by it evidencing, securing or otherwise executed in connection with the
Obligations, or sell participations in any interest therein, to any other entity
or other person, and such other entity or other person shall thereupon become
vested, to the extent set forth in the agreement evidencing such assignment,
transfer or participation, with all the rights in respect thereof granted to
such Bank herein, all in accordance with (S)* of the Credit Agreement. The
Guarantor may not assign any of its obligations hereunder.
XI. AMENDMENTS AND WAIVERS.
----------------------
No amendment or waiver of any provision of this Guaranty nor consent to any
departure by the Guarantor therefrom shall be effective unless the same shall be
in writing and signed by the Agent with the consent of the Majority Banks. No
failure on the part of the Agent or any Bank to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or
<PAGE>
-7-
further exercise thereof or the exercise of any other right.
XII. NOTICES.
-------
All notices and other communications called for hereunder shall be made in
writing and, unless otherwise specifically provided herein, shall be deemed to
have been duly made or given when delivered by hand or mailed first class,
postage prepaid, or, in the case of telegraphic or telexed notice, when
transmitted, answer back received, addressed as follows: if to the Guarantor,
at the address set forth beneath its signature hereto, and if to the Agent, at
the address for notices to the Agent set forth on the signature page of the
Credit Agreement, or at such address as either party may designate in writing to
the other.
XIII. GOVERNING LAW; CONSENT TO JURISDICTION.
--------------------------------------
THIS GUARANTY IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS. The Guarantor agrees that any suit for the enforcement of this
Guaranty may be brought in the courts of the Commonwealth of Massachusetts or
any federal court sitting therein and consents to the nonexclusive jurisdiction
of such court and to service of process in any such suit being made upon the
Guarantor by mail at the address specified by reference in (S)12. The Guarantor
hereby waives any objection that it may now or hereafter have to the venue of
any such suit or any such court or that such suit was brought in an inconvenient
court.
XIV. WAIVER OF JURY TRIAL.
--------------------
THE GUARANTOR HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION
OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS
OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY OF SUCH RIGHTS OR
OBLIGATIONS. Except as prohibited by law, the Guarantor hereby waives any right
which 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 Guarantor (a)
certifies that neither the Agent or any Bank nor any representative, agent or
attorney of the Agent or any Bank has represented, expressly or otherwise, that
the Agent or any Bank would not, in the event of litigation, seek to enforce the
foregoing waivers and (b) acknowledges that, in entering into the Credit
Agreement and the other Loan Documents to
<PAGE>
-8-
which the Agent or any Bank is a party, the Agent and the Banks are relying
upon, among other things, the waivers and certifications contained in this
(S)14.
XV. MISCELLANEOUS.
-------------
This Guaranty constitutes the entire agreement of the Guarantor with respect to
the matters set forth herein. The rights and remedies herein provided are
cumulative and not exclusive of any remedies provided by law or any other
agreement, and this Guaranty shall be in addition to any other guaranty of or
collateral security for any of the Obligations. The invalidity or
unenforceability of any one or more sections of this Guaranty shall not affect
the validity or enforceability of its remaining provisions. Captions are for
the ease of reference only and shall not affect the meaning of the relevant
provisions. The meanings of all defined terms used in this Guaranty shall be
equally applicable to the singular and plural forms of the terms defined.
<PAGE>
-9-
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed and
delivered as of the date first above written.
CMG INFORMATION SERVICES, INC.
By: /s/ Its Duly Authorized Officer
Title:
Address:
187 Ballardvale St., Suite B110
Wilmington, MA 01887-7000
Telex:
<PAGE>
EXHIBIT 11
CMG INFORMATION SERVICES, INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
Three months ended October 31,
-------------------------------
1996 1995
--------------- --------------
Primary:
- --------
<S> <C> <C>
Net income (loss) $(7,397) $18,178
======= =======
Weighted average common and common
equivalent shares outstanding:
Shares outstanding at the beginning
of the period 9,167 8,839
Weighted average shares issued
during the period 4 7
Weighted average treasury stock
acquired during the period (4) --
Weighted average common stock
equivalents -- 708
------- -------
Weighted average common and common
equivalent shares outstanding 9,167 9,554
======= =======
Primary net income (loss) per share $ (0.81) $ 1.90
======= =======
Fully Diluted:
- --------------
Net income (loss) $(7,397) $18,178
======= =======
Weighted average common and common
equivalent shares outstanding:
Shares outstanding at the beginning
of the period 9,167 8,839
Weighted average shares issued
during the period 4 8
Weighted average treasury stock
acquired during the period (4) --
Weighted average common stock
equivalents -- 975
------- -------
Weighted average common and common
equivalent shares outstanding 9,167 9,822
======= =======
Fully diluted net income (loss) per
share $ (0.81) $ 1.85
======= =======
</TABLE>
All share information has been restated to reflect a 2-for-1 Common Stock split
effected as a stock dividend on February 2, 1996.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE OCTOBER
31, 1996 CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED OCTOBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATETMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 53,689
<SECURITIES> 7,630
<RECEIVABLES> 15,041
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 81,610
<PP&E> 10,101
<DEPRECIATION> 0
<TOTAL-ASSETS> 119,258
<CURRENT-LIABILITIES> 27,391
<BONDS> 0
0
0
<COMMON> 92
<OTHER-SE> 45,804
<TOTAL-LIABILITY-AND-EQUITY> 119,258
<SALES> 10,640
<TOTAL-REVENUES> 10,640
<CGS> 6,616
<TOTAL-COSTS> 25,089
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (924)
<INCOME-PRETAX> (8,495)
<INCOME-TAX> (1,098)
<INCOME-CONTINUING> (7,397)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,397)
<EPS-PRIMARY> (0.81)
<EPS-DILUTED> (0.81)
</TABLE>
