<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended JUNE 29, 1996
-------------
OR
[ _ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 0-26646
----------
GENERAL SCANNING INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2445884
(State of incorporation) (I.R.S. Employer No.)
500 ARSENAL STREET
WATERTOWN, MASSACHUSETTS 02172
(Address of principal executive offices)
TELEPHONE: (617) 924-1010
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 [ _ ]
As of July 10, 1996, there were 10,411,400 shares of Common Stock, $.01 par
value, outstanding.
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GENERAL SCANNING INC.
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I - Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheets................. 3
Consolidated Statements of Income........... 4
Consolidated Statements of Cash Flows....... 5
Notes to Consolidated Financial Statements.. 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 8-12
Part II - Other Information..................................... 13
Signatures...................................................... 14
</TABLE>
<PAGE>
GENERAL SCANNING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 29, DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............... $ 24,116 $ 25,691
Accounts receivable, less allowance
of $441 in 1996 and $392 in 1995...... 24,261 17,108
Inventories............................. 21,136 17,576
Deferred tax and other current assets... 3,488 3,043
------- -------
Total current assets................ 73,001 63,418
------- -------
Property, plant and equipment, net of
accumulated depreciation of $16,860
in 1996 and $16,043 in 1995............. 9,751 6,100
Other assets.............................. 395 435
Intangible assets, net of amortization
of $1,711 in 1996 and $1,669 in 1995.... 743 785
------- -------
$ 83,890 $ 70,738
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to bank................... $ 8,026 $ -
Accounts payable........................ 7,779 6,409
Accrued expenses and income taxes....... 8,733 11,095
------- -------
Total current liabilities........... 24,538 17,504
------- -------
Deferred compensation..................... 1,816 1,546
Stockholders' equity:
Preferred stock, $.01 par value;
authorized 1,000,000 shares; issued
and outstanding - none................ - -
Common stock, $.01 par value;
authorized 15,000,000 shares; issued
10,758,395 in 1996 and 10,530,785 in
1995................................. 108 105
Additional paid-in capital.............. 31,242 30,430
Retained earnings....................... 27,277 22,189
Cumulative translation adjustment....... (503) (448)
Treasury stock, at cost; 365,995 shares
in 1996 and 1995...................... (588) (588)
------- -------
Total stockholders' equity.......... 57,536 51,688
------- -------
$ 83,890 $ 70,738
======= =======
</TABLE>
See accompanying notes.
3
<PAGE>
GENERAL SCANNING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------- ----------------------------
JUNE 29, JULY 1, JUNE 29, JULY 1,
1996 1995 1996 1995
-------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Sales:
Laser systems and components................... $ 27,786 $ 18,526 $ 53,979 $ 34,216
Thermal printers............................... 6,148 5,741 12,482 11,368
---------- ---------- ---------- -----------
Total sales............................... 33,934 24,267 66,461 45,584
---------- ---------- ---------- -----------
Cost of sales:
Laser systems and components................... 14,504 10,101 27,923 18,038
Thermal printers............................... 3,491 3,099 7,119 6,267
---------- ---------- ---------- -----------
Total cost of sales....................... 17,995 13,200 35,042 24,305
---------- ---------- ---------- -----------
Gross profit:
Laser systems and components................... 13,282 8,425 26,056 16,178
Thermal printers............................... 2,657 2,642 5,363 5,101
---------- ---------- ---------- -----------
Total gross profit........................ 15,939 11,067 31,419 21,279
---------- ---------- ---------- -----------
Operating expenses:
Research and product development............... 3,762 3,132 7,785 5,984
Selling, general and administrative............ 8,139 5,841 16,018 11,428
---------- ---------- ---------- -----------
Total operating expenses.................. 11,901 8,973 23,803 17,412
---------- ---------- ---------- -----------
Income from operations.............................. 4,038 2,094 7,616 3,867
Interest income (expense)........................... 201 (153) 503 (250)
Foreign exchange transaction gains (losses)......... (42 93 (61 130
---------- ---------- ---------- -----------
Income before income taxes.......................... 4,197 2,034 8,058 3,747
Income taxes........................................ 1,541 815 2,970 1,500
---------- ---------- ---------- -----------
Net income.......................................... $ 2,656 $ 1,219 $ 5,088 $ 2,247
========== ========== ========== ===========
Net income per common and
common equivalent shares outstanding........... $ 0.24 $ 0.15 $ 0.46 $ 0.28
========== ========== ========== ===========
Weighted average common and
common equivalent shares outstanding........... 11,075,986 8,112,032 11,030,640 8,054,120
========== ========== ========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
GENERAL SCANNING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------
JUNE 29, JULY 1,
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $ 5,088 $ 2,247
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 918 892
Deferred compensation.............................. 270 253
Changes in current assets and liabilities:
Accounts receivable................................ (7,447) 785
Inventories........................................ (3,665) (6,427)
Other current assets............................... (509) (60)
Accounts payable, accrued expenses,and taxes
payable.......................................... (850) (386)
-------- --------
Net cash (used in) operating activities.............. (6,195) (2,696)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment........... (4,545) (1,378)
Decrease (increase) in other assets.................. 19 (150)
-------- --------
Net cash (used in) investing activities.............. (4,526) (1,528)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds on notes payable to bank................ 8,115 4,817
Proceeds from exercise of stock options and warrants,
including tax effects.............................. 815 24
-------- --------
Net cash provided by financing activities............ 8,930 4,841
-------- --------
Effect of exchange rate changes on cash and cash
equivalents........................................ 216 (591)
-------- --------
Increase (decrease) in cash and cash equivalents..... (1,575) 26
Cash and cash equivalents, beginning of period....... 25,691 1,357
-------- --------
Cash and cash equivalents, end of period............. $ 24,116 $ 1,383
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest........................................... $ 179 $ 267
Income taxes....................................... $ 3,599 $ 1,109
</TABLE>
See accompanying notes.
5
<PAGE>
GENERAL SCANNING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
---------------------
The unaudited interim financial statements presented herein have been
prepared in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-Q and Regulation S-X
pertaining to interim financial statements. Accordingly, these interim
financial statements do not include all information and footnotes required by
generally accepted accounting principles for complete financial statements. The
financial statements reflect all adjustments and accruals which management
considers necessary for a fair presentation of financial position and results of
operations for the periods presented. The financial statements should be read
in conjunction with the consolidated financial statements and notes thereto
included in the Company's Form 10-K for the year ended December 31, 1995. The
results for the interim periods are not necessarily indicative of results to be
expected for the year or any future periods.
The consolidated financial statements include the accounts of General
Scanning Inc. and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Each of the three month periods presented herein include 13 weeks and each
of the six month periods contain 26 weeks.
2. NET INCOME PER SHARE OF COMMON STOCK
------------------------------------
Net income per common and common equivalent share is computed using the
weighted average number of common shares and dilutive common equivalent shares
outstanding during each period. Dilutive common equivalent shares, consisting
of outstanding stock options and warrants, are determined using the treasury
stock method. Fully diluted net income per common and common equivalent share
has not been presented as it is not materially different from primary net income
per common and common equivalent share or is anti-dilutive.
3. CASH EQUIVALENTS
----------------
Cash equivalents, which consist of investments in money market funds, are
highly liquid investments with original maturity dates of less than three
months.
4. INVENTORIES
-----------
Inventories, which include materials, labor, and manufacturing overhead,
are stated at the lower of cost (first-in, first-out) or market. The components
of inventory are:
<TABLE>
<CAPTION>
June 29, December 31,
1996 1995
------ ------
<S> <C> <C>
Materials............. $ 8,941 $ 7,631
Work-in-process....... 4,463 4,117
Finished goods........ 7,732 5,828
------ ------
$21,136 $17,576
====== ======
</TABLE>
6
<PAGE>
GENERAL SCANNING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5. MERGER AGREEMENT
----------------
On June 7, 1996, the Company signed an Agreement and Plan of Merger with
View Engineering, Inc., a privately-held company. The merger, which is intended
to be accounted for as a pooling of interests, is subject to stockholder and
Board of Directors approval by View Engineering, certain regulatory approvals,
and various other conditions normal to such an agreement (see Part II, Item 1.
Legal proceedings).
Under the terms of the agreement, General Scanning will issue 1,600,000
common shares, subject to adjustment for certain contingencies, for the
outstanding common stock and options of View Engineering.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
General Scanning is a leading manufacturer of laser systems and components, and
thermal printers. In the six months ended June 29, 1996 and in the fiscal year
1995, 81% and 77%, respectively, of the Company's revenues were derived from
sales of laser systems and components, and the balance was derived from sales of
thermal printers. Sales of laser systems and components in the six months ended
June 29, 1996 and in the fiscal year 1995 grew 58% and 42%, respectively, over
sales for this segment in the comparable prior periods. Thermal printers sales
in the six months ended June 29, 1996 and in the fiscal year 1995 increased 10%
and 11%, respectively, over the comparable prior periods.
The Company sells its laser systems primarily to manufacturers of products
containing advanced electronic components and circuitry. In addition, the
Company produces a line of laser subsystems and components which are used in the
Company's own systems, as well as sold to other manufacturers of laser systems.
The Company's net sales have been, and are expected to continue to be, dependent
upon customer capital expenditures which are, in turn, affected by business
cycles in the markets served by those customers. The Company's strategy is to
expand applications for its products into different and varied markets in order
to limit its dependency on any one market, but it may not be successful in doing
so.
The Company also sells thermal printers to manufacturers of medical equipment
for patient care monitoring. This segment of the Company's business has not
experienced significant cyclicality in the past.
Product prices have remained relatively stable during the periods covered by
this discussion, and price fluctuation did not have a material effect on
reported gross profit.
Backlog at June 29, 1996 was approximately $39 million compared to $50 million
at March 30,1996, $40 million at December 31, 1995 and $31 million at July 1,
1995. Following the first quarter's exceptionally strong order flow, orders in
the second quarter were lower. The Company believes that some orders for laser
systems used for DRAM and chip resistor processing received during the prior two
quarters were placed in advance due to customers' concerns of lengthening lead
times.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 29, 1996 AND JULY 1, 1995
Sales. Total sales were $33.9 million for the three months ended June 29,
1996, an increase of 40% over $24.3 million in sales in the comparable three
month period ended July 1, 1995. Laser systems and component sales increased 50%
to $27.8 million from $18.5 million in the comparable period of 1995. This
increase was due to greater unit volumes of systems and, to a lesser extent,
components, worldwide, particularly systems to the semiconductor, consumer
electronics and automotive sensor markets. Thermal printer sales increased 7% to
$6.1 million from $5.7 million
8
<PAGE>
in the comparable period of 1995. Laser systems and components increased as a
percentage of total sales to 82% in the three months ended June 29, 1996 from
76% of total sales in the comparable period of 1995. International sales, as a
percentage of total sales, were approximately 40% in the quarter just ended. The
Company estimates that sales in the quarter ended June 29, 1996 were negatively
impacted by between 3% and 5% compared to the comparable period of 1995 due to
unfavorable currency fluctuations.
Gross profit. Total gross profit was $15.9 million, or 47% of sales, for the
three months ended June 29, 1996, compared to $11.1 million, or 46% of sales,
for the comparable three month period ended July 1, 1995. The increase in gross
profit as a percentage of sales was primarily attributable to favorable
absorption of manufacturing overhead over higher unit volumes and a change in
the product mix of sales towards laser systems and components which carry a
higher percentage gross profit. Laser systems and components gross profit was
48% compared to 46% for the comparable three month period of 1995; the increase
due to favorable absorption of manufacturing overhead over higher unit volumes
and a favorable change in product mix. Thermal printers gross profit was 43%
compared to 46% for the comparable three month period of 1995 primarily due to a
change in product mix .
Research and product development. Research and product development expenses
increased to $3.8 million, or 11% of sales, for the three months ended June 29,
1996, from $3.1 million, or 13% of sales, for the comparable three month period
ended July 1, 1995. This increase was primarily due to the addition of
personnel to support the development of new laser systems and components.
Selling, general and administrative. Selling, general and administrative
expenses increased to $8.1 million in the three months ended June 29, 1996 from
$5.8 million in the comparable period of 1995. This increase was primarily due
to the addition of sales and marketing support personnel and related costs
incurred in supporting increased sales, particularly in overseas locations. As
a percentage of sales, these expenses were 24% in both periods.
Interest. Net interest income was $201,000 for the three-month periods ended
June 29, 1996 compared to net interest expense of $153,000 for the comparable
period in the prior year. The carrying charge for more debt being outstanding
in 1996 was more than offset by interest income earned on investment of the
proceeds of the initial public offering in the Fall of 1995.
Foreign exchange. Foreign exchange transactions resulted in a loss of $42,000
in the three months ended June 29, 1996 compared to a gain of $93,000 in the
comparable period of 1995. Modest gains and losses are incurred when the
Company's net receivables denominated in certain currencies, mostly yen and
deutsche marks, are not fully hedged. The Company continues to utilize foreign
exchange forward contracts, primarily to reduce the impact of foreign currency
fluctuations arising from intercompany balances.
Income tax. The effective income tax rate was 37% in the three months ended
June 29, 1996 compared to 40% in the three months ended July 1, 1995. The
reduction of the effective tax rate in 1996 reflects the distribution of profits
between the Company's headquarters, manufacturing activities and research
centers and the Company's international distribution and support activities.
The Company has not provided a valuation allowance against its deferred tax
assets as the Company believes that the realization of these assets is
recoverable given the Company's historical profits.
9
<PAGE>
Net income. Net income after tax for the three months ended June 29, 1996 more
than doubled to $2.7 million, or $.24 per share based upon 11.1 million common
and common equivalent shares outstanding, compared to $1.2 million in net
income, or $.15 per share based upon 8.1 million common and common equivalent
shares outstanding in the second quarter of 1995. The increase in dollar net
income was due to the various reasons presented above. The increase in common
and common equivalent shares outstanding was due to the effect of the issuance
of 2,585,000 shares in the Company's initial public offering in September 1995.
SIX MONTHS ENDED JUNE 29, 1996 AND JULY 1, 1995
Sales. Total sales were $66.5 million for the six months ended June 29, 1996,
an increase of 46% over $45.6 million in sales in the comparable six month
period ended July 1, 1995. Laser systems and component sales increased 58% to
$54.0 million from $34.2 million in the comparable period of 1995. This
increase was due to greater unit volumes of systems, and to a lesser extent
components, worldwide, particularly systems to the semiconductor, consumer
electronics and automotive sensor markets. Thermal printer sales increased 10%
to $12.5 million from $11.4 million in the comparable period of 1995. Laser
systems and components increased as a percentage of total sales to 81% in the
six months ended June 29, 1996 from 75% of total sales in the comparable period
of 1995. International sales, as a percentage of total sales, were
approximately 41% for the first six months of 1996. The Company estimates that
sales in the six months ended June 29, 1996 were negatively impacted by between
2% and 3% compared to the comparable period of 1995 due to unfavorable currency
fluctuations.
Gross profit. Total gross profit was $31.4 million for the six months ended
June 29, 1996, compared to $21.3 million for the comparable six month period
ended July 1, 1995. Gross profit as a percentage of sales was 47% in both
periods. Laser systems and components gross profit was 48% compared to 47% for
the comparable six month period of 1995. Thermal printers gross profit was 43%
compared to 45% for the comparable six month period of 1995 due to a change in
product mix.
Research and product development. Research and product development expenses
increased to $7.8 million for the six months ended June 29, 1996 from $6.0
million for the comparable six month period ended July 1, 1995. This increase
was primarily due the addition of personnel to support the development of new
laser systems and components. Research and product development expenses as a
percentage of sales were 12% for the six months ended June 29, 1996, compared to
13% for the comparable period in 1995. Because the development of new products
is vital to its continued success, the Company expects to maintain similar
levels of research and product development expenses as a percentage of sales
over the long term.
Selling, general and administrative. Selling, general and administrative
expenses increased to $16.0 million for the six months ended June 29, 1996 from
$11.4 million in the comparable period of 1995. This increase was primarily due
to the addition of sales and marketing support personnel and related costs
incurred in supporting increased sales, particularly in overseas locations.
These expenses as a percentage of sales decreased to 24% in the six months ended
June 29, 1996 from 25% in the comparable period of 1995 due to such expenses
growing more slowly than revenues.
Interest. Net interest income was $503,000 in the first six months of 1996
compared to net interest expense of $250,000 in the comparable period in 1995.
The carrying charge for similar
10
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levels of debt being outstanding in 1996 and 1995 was more than offset in 1996
by interest income earned on investment of the proceeds of the initial public
offering in the Fall of 1995.
Foreign exchange. Foreign exchange transactions resulted in a loss of $61,000
in the six months ended June 29, 1996 compared to a gain of $130,000 in the
comparable period of 1995. Modest gains and losses are incurred when the
Company's net receivables denominated in certain currencies, mostly yen and
deutsche marks, are not fully hedged. The Company continues to utilize foreign
exchange forward contracts, primarily to reduce the impact of foreign currency
fluctuations arising from intercompany balances.
Income tax. The effective income tax rate was 37% in the six months ended
June 29, 1996 compared to 40% in the six months ended July 1, 1995. The
reduction of the effective tax rate in 1996 reflects the distribution of profits
between the Company's headquarters, manufacturing activities and research
centers and the Company's international distribution and support activities.
The Company has not provided a valuation allowance against its deferred tax
assets as the Company believes that the realization of these assets is
recoverable given the Company's historical profits.
Net income. Net income after tax for the six months ended June 29, 1996 more
than doubled to $5.1 million, or $.46 per share based upon 11.0 million common
and common equivalent shares outstanding, compared to $2.2 million in net
income, or $.28 per share based upon 8.1 million common and common equivalent
shares outstanding, in the first six months of 1995. The increase in dollar net
income was due to the various reasons presented above. The increase in common
and common equivalent shares outstanding is due to the effect of the issuance of
2,585,000 shares in the Company's initial public offering in September 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $24.1 million on June 29, 1996 compared to
$25.7 million on December 31, 1995. During the first six months of 1996, cash
inflows from financing activities of $8.9 million, partially from loans in yen
incorporated in the Company's currency hedging strategy, were offset by $6.2
million used in operating activities and $4.5 million used in investing
activities.
A net $6.2 million was used in operating activities. Net income of $5.1
million, supplemented by non-cash charges for depreciation and deferred
compensation totaling approximately $1.2 million, were offset by increases in
working capital, principally accounts receivable and inventory, of $12.5 million
to support expanded business activity.
Capital expenditures were $4.5 million for the six months ended June 29, 1996,
inclusive of renovations on an additional 50,000 square feet of manufacturing,
research and office space, retrofitting of 30,000 square feet of current space
and the acquisition of Oracle software to support improvements in the Company's
manufacturing, distribution and financial processing systems.
The Company's bank credit agreement provides for a maximum $10 million revolving
credit facility and $4 million in international credit lines. At June 29, 1996,
$8.0 million was outstanding under this agreement. Revolving credit borrowings
bear interest at the London InterBank Offered Rate (LIBOR) plus one and one-half
percent or prime, determined at the time of borrowing. International borrowings
accrue interest at a negotiated rate approximating the local country's
11
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prime rate. The agreement requires compliance with certain financial ratios, all
of which were met at June 29, 1996.
On June 7, 1996, the Company signed an Agreement and Plan of Merger with View
Engineering, Inc., a privately-held company. The merger, which is intended to
be accounted for as a pooling of interests, is subject to stockholder and Board
of Directors approval by View Engineering, certain regulatory approvals, and
various other conditions normal to such an agreement. Under the terms of the
agreement, General Scanning will issue 1,600,000 common shares, subject to
adjustment for certain contingencies, for the outstanding common stock and
options of View Engineering.
The Company believes that its existing cash, together with cash generated from
future operations and its existing bank line of credit, will be sufficient to
satisfy anticipated cash needs to fund working capital and investments in
manufacturing facilities and equipment for its existing businesses and for View
Engineering over the next two years. The Company may, from time to time, as
market and business conditions warrant, invest in or acquire complementary
businesses, products or technologies. The Company may require additional equity
or debt financings to fund such activities, which could result in additional
dilution to the Company's shareholders.
SUMMARY
The Company may experience fluctuations in operating results due to a variety of
factors, including: the rate of growth of the markets for laser systems and
components and thermal printers; market acceptance of the Company's products
and those of its competitors; development and promotional expenses relating to
the introduction of new products or new versions of existing products; changes
in pricing policies by the Company and its competitors; the timing of the
receipt of orders from major customers; and timing of shipments. The Company's
expense levels are based, in part, on its expectations as to future sales and,
as a result, operating results would be disproportionately affected by an
increase or reduction in sales or a failure to meet the Company's sales
expectations. The Company believes that its business is not subject to
seasonal fluctuations.
In addition, the Company's ability to expand by acquisition, including the
acquisition of View Engineering, depends on many factors including the
successful consummation of new business agreements and management's ability to
integrate and operate new businesses effectively. As a result of these and
other factors, there can be no assurance that the Company will not experience
material financial fluctuations in future operating results on a quarterly or
annual basis.
12
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GENERAL SCANNING INC.
PART II. OTHER INFORMATION
Item 1. Legal proceedings
-----------------
On August 5, 1996, Robotic Vision Systems, Inc. commenced an action
against General Scanning in the United States District Court for the
Eastern District of New York. Robotic Vision Systems claims that
General Scanning improperly obtained proprietary information from
Robotic Vision Systems for the purpose of obtaining ownership of View
Engineering, Inc. and to thwart Robotic Vision Systems' attempts to
acquire View Engineering. The Plaintiff is seeking compensatory and
punitive damages in an unspecified amount. General Scanning believes
the claims are without merit and intends to defend this action
vigorously.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
An Annual Meeting of Stockholders was held on April 16, 1996. The
following matters were acted upon:
a. The election of two Class III directors to serve for the ensuing
three years. Mr. Charles D. Winston and Mr. Woodie C. Flowers were
elected as Directors, each with 8,334,119 votes cast for, 3,000 votes
withheld, and 1,500 votes abstained.
b. The ratification of the selection by the Board of Directors of
Arthur Andersen LLP to serve as the Company's independent auditors for
the fiscal year ending December 31, 1996. Of the votes cast, there
were 8,334,519 votes for the ratification, 3,000 votes withheld, and
1,500 votes abstained.
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits
-----------
EXHIBIT 99.1 Amended and Restated Revolving Credit Agreement between General
Scanning Inc. and The First National Bank of Boston dated as of
December 28, 1995
EXHIBIT 27 Financial Data Schedule
b) Reports on Form 8-K
----------------------
None
13
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GENERAL SCANNING INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
/s/ Charles D. Winston Date: August 7, 1996
- ----------------------
Charles D. Winston
President and
Chief Executive Officer
/s/ Victor H. Woolley Date: August 7, 1996
- ---------------------
Victor H. Woolley
Vice President Finance and
Chief Financial Officer
14
<PAGE>
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
Between
GENERAL SCANNING INC.
and
THE FIRST NATIONAL BANK OF BOSTON
Dated as of December 28, 1995
-----------------
<PAGE>
TABLE OF CONTENTS
Section Title Page
------- ----- ----
SECTION I - DEFINITIONS
1 Definitions...................................................1
SECTION II - DESCRIPTION OF CREDIT
2.1 Loans.........................................................6
2.2 Notice and Method of Borrowing................................6
2.3 The Note......................................................7
2.4 Interest Rates and Payments of Interest.......................7
2.5 Payment of Principal..........................................8
2.6 Commitment Fee................................................8
2.7 Prepayment....................................................8
2.8 Reduction of Revolving Line of Credit.........................8
2.9 Holiday Payments..............................................8
2.10 Method of Payment.............................................8
2.11 Capital Adequacy..............................................8
2.12 Changed Circumstances.........................................9
SECTION III - CONDITIONS OF LENDING
3.1 Conditions Precedent to Initial Borrowing.....................11
3.2 Conditions Precedent to all Loans.............................12
SECTION IV - REPRESENTATIONS AND WARRANTIES
4.1 Existence and Rights..........................................13
4.2 Subsidiaries..................................................13
4.3 Loan Documents Authorized.....................................13
4.4 No Conflict...................................................13
4.5 Litigation....................................................14
4.6 Financial Condition; Material Adverse Change..................14
4.7 Title to Assets...............................................14
4.8 Tax and Renegotiation Status..................................14
4.9 Trademarks and Patents........................................14
4.10 ERISA.........................................................15
4.11 Compliance with Law...........................................15
4.12 Other Regulations.............................................15
4.13 Use of Proceeds...............................................15
4.14 Investment Company Act........................................15
<PAGE>
EXHIBIT 1.1(a)
GENERAL SCANNING INC.
PROMISSORY NOTE
As of December 28, 1995
$10,000,000.00 Boston, Massachusetts
For value received, the undersigned hereby promises to pay to The First
National Bank of Boston (the "Bank"), or order, at the head office of the Bank
----
at 100 Federal Street, Boston, Massachusetts 02110, the principal amount of Ten
Million and no/100 Dollars ($10,000,000) (or such lesser amount as shall be
outstanding and unpaid) on the Termination Date, as defined in the Agreement
referred to below, in lawful money of the United States and in immediately
available funds, and to pay interest on the unpaid principal amount hereof, at
said office, in like money and funds, for the period commencing on the date
hereof until paid in full, at a rates per annum and on the dates provided in
the Agreement.
Terms not otherwise defined herein shall be used as defined in the
Agreement.
Overdue payments of principal (whether at stated maturity, by acceleration
or otherwise), and, to the extent permitted by law, overdue interest, shall bear
interest, compounded monthly and payable on demand in immediately available
funds, at a rate per annum equal to four percent (4%) above the Base Rate.
This Note is issued pursuant to, and entitled to the benefits of, and is
subject to, the provisions of a certain Amended and Restated Revolving Credit
Agreement dated as of December 28, 1995 by and between the undersigned and the
Bank (herein, as the same may from time to time be amended or extended, referred
to as the "Agreement"), but neither this reference to the Agreement nor any
---------
provision thereof shall affect or impair the absolute and unconditional
obligation of the undersigned maker of this Note to pay the principal of and
interest on this Note as herein provided. This Note is issued in replacement of
all promissory notes issued pursuant to the Revolving Credit and Term Loan
Agreement dated as of January 3, 1989, as amended.
In case an Event of Default (as defined in the Agreement) shall occur, the
aggregate unpaid principal of plus accrued interest on this Note shall become or
may be declared to be due and payable in the manner and with the effect provided
in the Agreement.
The undersigned may at its option prepay all or any part of the principal
of this Note before maturity upon the terms provided in the Agreement.
<PAGE>
-2-
The undersigned maker hereby waives presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.
This instrument shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of The
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained therein).
GENERAL SCANNING INC.
By: _____________________________________
Title: __________________________________
<PAGE>
EXHIBIT 1.1(b)
LEASES
<TABLE>
<CAPTION>
Location Lease Term Square Feet
- --------------------------------------------------------------------------------
<S> <C> <C>
Somerville, MA 6/ 1/93 - 12/31/97 39,000
Arlington, MA 8/ 1/94 - 12/31/97 30,230
Bedford, MA 11/ 1/95 - 1/31/06 50,810
Santa Clara, CA 4/95 - 3/98 1,800
Nakameguro, Tokyo, Japan 5/24/95 - 4/23/97 3,126
Ebisu, Tokyo, Japan 6/ 1/95 - 5/31/97 3,126
Osaka, Japan 2,025
Martinsfried, Germany 11/ 1/94 - 10/31/04 6,687
Hong Kong 1,500
</TABLE>
<PAGE>
EXHIBIT 1.1(c)
REAL PROPERTY
Land and building located at:
500 Arsenal Street
Watertown, MA 02172
<PAGE>
EXHIBIT 2.2
FORM OF NOTICE OF BORROWING
GENERAL SCANNING INC.
The First National Bank of Boston
100 Federal Street
Boston, MA 02110
RE: Amended and Restated Revolving Credit Agreement
dated as of December 28, 1995
Ladies and Gentlemen:
Pursuant to Section 2.2(i) of the Amended and Restated Revolving Credit
Agreement dated as of December 28, 1995, between General Scanning Inc. and The
First National Bank of Boston (the "Agreement"), the undersigned hereby confirms
---------
its request made on ______________________, 19__ for a [Base Rate][Libor] Loan
as defined in the Agreement in the amount of $__________________________ to be
made on ___________.
[The Interest Period applicable to said Loan will be [one] [two] [three]
[six] months days.]*
The representations and warranties contained or referred to in Section IV
of the Agreement are true and accurate as of the effective date of the Loan as
though made at and as of such date (except to the extent that such
representations and warranties expressly relate to an earlier date); and no
default or Event of Default has occurred and is continuing or will result from
the aforesaid Loan.
GENERAL SCANNING INC.
By: ___________________________________
Its: __________________________________
Date: _________________________________
__________________________
* To be inserted in any request for a Eurodollar Loan.
<PAGE>
EXHIBIT 3.1(ii)
GENERAL SCANNING INC.
CERTIFICATE AS TO CORPORATE ORGANIZATION,
INCUMBENCY AND REPRESENTATIONS
-----------------------------------------
The undersigned certifies that he is the Vice President, Chief Financial
Officer and Assistant Clerk of GENERAL SCANNING INC. (the "Company"), a
-------
Massachusetts corporation, and that, as such, he is authorized to execute this
Certificate on behalf of the Company, and further certifies that:
(a) Attached hereto as Exhibit A is a true and complete copy of the
Restated Articles of Organization of the Company, certified by the
Secretary of The Commonwealth of Massachusetts.
(b) Attached hereto as Exhibit B is a true and complete copy of the By-
laws of the Company; such By-laws are in full force and effect and no
proceeding is pending or contemplated for their revision or
modification.
(c) Attached hereto as Exhibit C is a true and complete copy of the Votes
of the Board of Directors of the Company authorizing the Loans and the
execution, delivery and performance of the Amended and Restated
Revolving Credit Agreement dated as of December 28, 1995 (the
"Agreement") by and between the Company and The First National Bank of
----------
Boston, and the Note and other Loan Documents to be issued thereunder;
such resolutions have not been revoked, revised or amended (nor is any
action pending or contemplated for their revocation, revision or
amendment) and are in full force and effect.
(d) No corporate document relating to the Company has been filed with the
Secretary of The Commonwealth of Massachusetts since August 10, 1995,
the date of filing of the Restated Articles of Organization.
(e) No proceeding for the amendment of the Restated Articles of
Organization of the Company or for the merger, consolidation, sale of
assets and business, liquidation or dissolution of the Company has
been taken, and no such proceeding is pending.
(f) The following persons now are and at all relevant times have been the
duly elected, qualified and acting officers of the Company as
specified below, duly authorized to execute and deliver, on behalf of
the Company, the Agreement and the Note and other Loan Documents
issued thereunder, and duly authorized to request loans and take other
action thereunder on behalf of the Company; and the signature of each
such person appearing opposite such person's name below is such
person's true signature:
<PAGE>
-2-
Name Title Signature
---- ----- ---------
Charles D. Winston President and
Chief Executive Officer
Pierre J. Brosens Vice Chairman, Clerk
and Treasurer
Victor H. Wooley Vice President and
Chief Financial Officer
Martin P Rosen Controller
(g) The representations and warranties contained in Section IV of the
Agreement are true and accurate in all material respects on and as of
the date hereof as though made on and as of such date (except to the
extent that such representations and warranties expressly relate to an
earlier date); and no Default (as defined in the Agreement) has
occurred and is continuing.
WITNESS the corporate seal of the Company and the signature of the
undersigned this ___ day of December, 1995.
GENERAL SCANNING INC.
By: __________________________________
Title: Vice President, Chief Financial
Officer and Assistant Clerk
[CORPORATE SEAL APPEARS HERE]
The undersigned does certify that he is the Controller of GENERAL SCANNING
INC. and does further certify that Victor H. Wooley is, and has at all times
since August 11, 1995 been, the duly elected or appointed, qualified and acting
Vice President and Chief Financial Officer of GENERAL SCANNING INC. and that the
signature set forth above is his genuine signature.
WITNESS the signature of the undersigned this ___ day of December, 1995.
_____________________________________
Martin P. Rosen, Controller
<PAGE>
EXHIBIT 3.1(vi)
GENERAL SCANNING INC.
FORM OF OPINION OF COUNSEL TO THE COMPANY
December 28, 1995
The First National Bank of Boston
100 Federal Street
Boston, MA 02110
RE: Amended and Restated Revolving Credit Agreement dated as of December
28, 1995 by and between The First National Bank of Boston and General
Scanning Inc.
-------------
Gentlemen:
We have acted as counsel to the Company in connection with the preparation,
execution and delivery of the Amended and Restated Revolving Credit Agreement,
dated as of December 28, 1995 (the "Agreement") between The First National Bank
---------
of Boston (the "Bank") and the General Scanning Inc. (the "Company") pursuant to
---- -------
which the Company has executed and delivered to the Bank its Note in the
principal amount of $10,000,000. All terms defined in the Agreement shall have
the same meanings herein.
We have examined executed counterparts of the Agreement, the Loan Note and
the other Loan Documents and originals, or copies, the authenticity of which has
been established to our satisfaction of such other documents, corporate records,
agreements and instruments and certificates of public officials and officers of
the Company as we have deemed necessary as the basis for the opinions herein
expressed. As to the questions of fact material to such opinions, we have when
relevant facts were not independently established, relied upon certifications by
officers of the Company.
Based on the foregoing and having regard for legal considerations as we
have deemed relevant, it is our opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of The Commonwealth of Massachusetts, has all
requisite corporate power to own its property and conduct its business as now
conducted and is duly qualified and in good standing as a foreign corporation
and duly authorized to do business in each jurisdiction wherein the nature of
its properties or business requires such qualifications, except where the
failure to be so qualified would not have a material adverse effect on its
business, financial condition, assets or properties taken as a whole.
<PAGE>
-2-
2. The execution and delivery of the Agreement, the Note and the other
Loan Documents and performance by the Company of its obligations thereunder and
of the transactions contemplated thereby are within the corporate power and
authority of the Company, and have been authorized by proper corporate
proceedings and do not contravene any provision of law of the United States or
its political subdivisions or the Articles of Organization or By-Laws of the
Company, or, to the best of our knowledge, contravene any provision of, or
constitute an event of default or event which, with the lapse of time or the
giving of notice, or both, would constitute an event of default under, any other
agreement, instrument or undertaking binding on the Company.
3. The Agreement, the Note and the other Loan Documents have each been
duly executed and delivered and all of the terms and provisions thereof are duly
executed and delivered and all of the terms and provisions thereof will be, the
legal, valid and binding obligations of the Company, enforceable in accordance
with their respective terms except as limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting enforcement of creditors'
rights generally, and except as the remedy of specific performance or of
injunctive relief is subject to the discretion of the court before which any
proceeding therefor may be brought.
4. The execution, delivery and performance of the Agreement and the other
Loan Documents and the transactions contemplated thereby do not require any
approval or consent of, or filing or registration with, any governmental or
other agency or authority, or any other party.
5. Except as set forth on Exhibit 4.5 to the Agreement, there is no
-----------
litigation, proceeding or investigation pending, or, to the best of our
knowledge after due inquiry, threatened, against the Company or any Subsidiary
which, if adversely determined, would result in a material judgment not
substantially covered by insurance or would otherwise have a material adverse
effect on the assets, business or prospects of the Company or any Subsidiary.
6. Each Subsidiary of the Company is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, has all requisite corporate power to own its property and conduct
its businesses as now conducted and is duly qualified and in good standing as a
foreign corporation and is duly authorized to do business in each jurisdiction
where the nature of its properties or businesses requires such qualification,
except where the failure to be so qualified would not have a material adverse
effect on its business, financial condition, assets or properties taken as a
whole.
7. As of the date of the Agreement, all the Subsidiaries of the Company
are listed on Exhibit 4.2 thereto. The Company is the record holder of all of
the issued and outstanding stock of each of its Subsidiaries. All shares of
such stock have been validly issued and are fully paid and nonassessable, and no
rights to subscribe to any additional shares have been granted, and no options,
warrants or similar rights are outstanding.
<PAGE>
-3-
8. Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended.
Very truly yours,
<PAGE>
EXHIBIT 4.2
SUBSIDIARIES
Name Percent Owned
---- --------------
1. General Scanning GmbH 100%
2. General Scanning Export Corporation
(a "Foreign Sales Corporation") 100%
3. General Scanning France 100%
4. General Scanning Japan 100%
5. General Scanning Asia Pacific Ltd. 100%
<PAGE>
EXHIBIT 4.5
LITIGATION
None
<PAGE>
<TABLE>
EXHIBIT 4.7
PERMITTED LIENS
Secured Party Lien Filed Amount Asset
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
General Electric Pick and
Credit Corporation 1993 $500,000 Place Machine
Data Comm Associates, Computer
Inc. 1994 $100,000 Equipment
</TABLE>
<PAGE>
EXHIBIT 4.9
PATENT, TRADEMARK INFRINGEMENTS
None
<PAGE>
EXHIBIT 5.8(iii)
GENERAL SCANNING INC.
FORM OF REPORT OF CHIEF FINANCIAL OFFICER
This Report is furnished pursuant to Section 5.8(iii) of the Amended and
Restated Revolving Credit Agreement dated as of December 28, 1995, as amended
from time to time (the "Agreement") by and between General Scanning Inc. (the
---------
"Company") and The First National Bank of Boston. Unless otherwise defined
-------
herein, the terms used in this Report have the meanings given to them in the
Agreement.
The Company hereby certifies that:
As required by Section 5.8(i) and (ii) of the Agreement, consolidated
financial statements of the Company and its Subsidiaries for the year/quarter
ended __________________, 19__ (the "Financial Statements") prepared in
--------------------
accordance with generally accepted accounting principles consistently applied
accompany this Report. The Financial Statements present fairly the consolidated
financial position of the Company and its Subsidiaries as at the date thereof
and the consolidated results of operations of the Company and its Subsidiaries
for the period covered thereby (subject only to normal recurring year-end
adjustments).
The figures set forth in Schedule A for determining compliance by the
Company with the financial covenants contained in the Agreement are true and
complete as of the date hereof.
The activities of the Company and its Subsidiaries during the period
covered by the Financial Statements have been reviewed by the Chief Financial
Officer or by employees or agents under his immediate supervision. Based on
such review, to the best knowledge and belief of the Chief Financial Officer,
and as of the date of this Report, no Default has occurred.*
WITNESS my hand this ____ day of ____________________, 19__.
GENERAL SCANNING INC.
By: ___________________________________
Title: ________________________________
- ------------------
* If a Default has occurred, this paragraph is to be modified with an
appropriate statement as to the nature thereof, the period of existence
thereof and what action the Company has taken, is taking, or proposes to
take with respect thereto.
<PAGE>
SCHEDULE A
to
EXHIBIT 5.8(iii)
-------------------
FINANCIAL COVENANTS
-------------------
Consolidated Tangible Net Worth (Section 5.4)
- ---------------------------------------------
REQUIRED:
(i) Beginning balance $______________
(ii) Plus: 75% of consolidated net
income of $_____________ for fiscal
[year] [quarter] ended __________ $______________
(iii) Plus: 100% of net cash proceeds
from sale of equity securities
after ____________________ $______________
(iv) Required Amount: $______________
ACTUAL:
(i) Consolidated assets of the
Company and its Subsidiaries $______________
(ii) Less: excluded items1 (if any) ($______________)
(iii) Less: Consolidated Total
Liabilities of the Company
and its Subsidiaries ($______________)
(iv) Total: $______________
- -------------------------
1 Excluded items are: (a) goodwill of $__________, (b) book value, net of any
reserves, of intangible assets, including unamortized debt discount and
expense, patents, trade and service marks and names, copyrights and research
and development expenses, of $___________ (c) reserves not deducted from
assets of $_________, (d) write-up in the book value of assets of
$___________ and (e) value of minority interests in Subsidiaries of
$____________.
<PAGE>
EBIAT (Section 5.5)
- -------------------
REQUIRED: 3.00 : 1.00
===============
ACTUAL:
(i) Consolidated earnings from operations $______________
(ii) Plus: Interest expense $______________
(iii) Less: extraordinary income ($______________)
(iv) Less: taxes paid ($______________)
(v) Less: capital expenditures ($______________)
(vi) Plus: depreciation/ amortization $______________
(vi) Subtotal $______________
(vi) Interest expense $______________
(vii) Current maturities of long term debt $______________
(viii) Subtotal $______________
(ix) EBIAT: line (vi) divided by line (viii) : 1.00
====== ====
Ratio of Consolidated Total Liabilities to Consolidated
Tangible Net Worth (Section 5.6)
- -------------------------------------------------
REQUIRED: 1.00 : 1.00
====== ====
ACTUAL:
(i) Consolidated Total Liabilities $______________
(excluding deferred taxes)
(ii) Consolidated Tangible Net Worth $______________
(iii) Line (iii) divided by line (iv) : 1.00
====== ====
(3)
<PAGE>
Quick Ratio (Section 5.7)
- -------------------------
REQUIRED: 115%
==========
ACTUAL:
(i) Consolidated Quick Assets $______________
(ii) Consolidated Current Liabilities $______________
(iii) Line (i) divided by line (ii) %
==========
WITNESS my hand this _______ day of ______________, 19__.
GENERAL SCANNING INC.
By: ________________________
Title:
(4)
<PAGE>
EXHIBIT 6.2
INDEBTEDNESS
<TABLE>
<CAPTION>
Amount Outstanding.
on Closing Date
-------------------
<S> <C>
1. The First National Bank of Boston revolving line of credit
secured by real estate $ 0
---
2. The First National Bank of Boston
unsecured line of credit $ 0
---
</TABLE>
<PAGE>
GENERAL SCANNING INC.
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THIS AMENDED AND RESTATED REVOLVING CREDIT LOAN AGREEMENT is entered into
as of the 28th day of December, 1995 by and among GENERAL SCANNING INC., a
Massachusetts corporation (the "Company") with its principal executive office at
-------
500 Arsenal Street, Watertown, Massachusetts, and THE FIRST NATIONAL BANK OF
BOSTON, a national banking association with its head office at 100 Federal
Street, Boston, Massachusetts 02110 (the "Bank").
----
WHEREAS, the Company and the Bank have entered into that certain Revolving
Credit and Term Loan Agreement dated as of January 3, 1989, as the same has been
amended; and
WHEREAS, the Company and the Bank wish to further amend such Revolving
Credit and Term Loan Agreement and restate the terms and conditions of the
credit facilities extended thereunder as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the Company and the Bank agree as follows:
SECTION 1
---------
DEFINITIONS
-----------
All accounting terms used in this Agreement shall have the meanings given
to them under generally accepted accounting principles consistent with those
principles applied in the preparation of the audited financial statements
referred to in Section 4.6, modified to the extent, but only to the extent, that
such meanings are specifically modified herein. All capitalized terms used in
this Agreement or in the Note or in any certificate, report, or other document
made or delivered pursuant to this Agreement shall have the following meanings:
Adjusted Libor Rate. Applicable to any Interest Period, shall mean a rate
-------------------
per annum determined pursuant to the following formula:
ALR = [ IOR ]*
----------
[ 1.00 - RP ]
ALR = Adjusted Libor Rate
IOR = London Interbank Offered Rate
RP = Reserve Percentage
* The amount in brackets shall be rounded upwards, if necessary, to
the next higher 1/100 of 1.
<PAGE>
-2-
Where:
"London Interbank Offered Rate" applicable to any Libor Loan
-----------------------------
for any Interest Period means the rate of interest determined by
the Bank to be the prevailing rate per annum at which deposits in
U.S. dollars are offered to the Bank by first-class banks in the
London interbank eurodollar market in which it regularly
participates on or about 11:00 a.m. (London, England time) two
Business Days before the first day of such Interest Period in an
amount approximately equal to the principal amount of the Libor
Loan to which such Interest Period is to apply for a period of time
approximately equal to such Interest Period.
"Reserve Percentage" applicable to any Interest Period means
------------------
the rate (expressed as a decimal) applicable to the Bank during
such Interest Period under regulations issued from time to time by
the Board of Governors of the Federal Reserve System for
determining the maximum reserve requirement (including, without
limitation, any basic, supplemental, emergency or marginal reserve
requirement) of the Bank with respect to "eurocurrency liabilities"
as that term is defined under such regulations.
The Adjusted Libor Rate shall be adjusted automatically as of the effective date
of any change in the Reserve Percentage.
Affiliate. With respect to any Person, any other Person which, directly or
---------
indirectly, controls, or is controlled by, or is under common control with, such
Person. For purposes of this definition, "control" of any Person shall mean the
power, directly or indirectly, either to (i) vote 10% or more of the securities
having ordinary voting power for the election of directors of such Person or
(ii) direct the management and policies of such Person, whether by contract or
otherwise.
Agreement. This Amended and Restated Revolving Credit Agreement as the
---------
same may from time to time be amended or supplemented.
Base Rate. The greater of (i) the rate announced from time to time by the
---------
head office of the Bank as its Base Rate or (ii) the Federal Funds Effective
Rate plus 1/2 of 1% (rounded upwards, if necessary, to the next 1/8 of 1%).
Base Rate Loan. A Loan bearing interest at the Base Rate.
--------------
Business Day. Any day on which the Bank is open for ordinary commercial
------------
banking business, and with respect to all notices and determinations in
connection with, and payments of principal and interest on, Libor Loans, any day
that is such a Business Day and that is also a day for trading between banks in
U.S. Dollar deposits in the London interbank Eurodollar market.
<PAGE>
-3-
Code. The Internal Revenue Code of 1986, as amended from time to time.
----
Commitment Amount. Ten Million Dollars ($10,000,000.00) in the aggregate,
-----------------
or such lesser amount resulting from a reduction thereof in accordance with
Section 2.8 of this Agreement.
Company. See Preamble.
-------
Consolidated Quick Assets. Consolidated cash, accounts receivable and
-------------------------
investments with maturities of less than one year of the Company and its
Subsidiaries.
Consolidated Tangible Net Worth. Consolidated total assets of the Company
-------------------------------
and its Subsidiaries minus (i) the sum of any amounts attributable to (a)
goodwill, (b) other intangible items such as unamortized debt discount and
expense, patents, trade and service marks and names, copyrights and research and
development expenses, (c) all reserves not already deducted from assets, (d) any
write-up in book value of assets resulting from any revaluation thereof
subsequent to the date of the financial statements of the Company referred to in
Section 4.6 of this Agreement and (e) the value of any minority interests in
Subsidiaries and (ii) Consolidated Total Liabilities of the Company and its
Subsidiaries.
Consolidated Total Liabilities. All obligations of the Company and its
------------------------------
Subsidiaries which should, in accordance with generally accepted accounting
principles consistently applied, be classified as liabilities on the
consolidated balance sheet of the Company and its Subsidiaries, but including,
in any event, all Indebtedness of the Company and its Subsidiaries.
ERISA. The Employee Retirement Income Security Act of 1974, as amended
-----
from time to time.
Event of Default. The meaning set forth in Section VII of this Agreement.
----------------
Federal Funds Effective Rate. For any date, a fluctuating interest rate
----------------------------
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such date (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
Bank from three Federal funds brokers of recognized standing selected by the
Bank.
Guarantees. As to any Person, all guarantees, endorsements or other
----------
contingent or surety obligations with respect to Indebtedness of others whether
or not reflected on the balance sheets of such Person, including any obligation
to furnish funds, directly or indirectly (whether by virtue of partnership
arrangements, by agreement to keep-well or otherwise), through the purchase of
goods, supplies, services, or by way of stock purchase,
<PAGE>
-4-
capital contribution, advance or loan, or to enter into a contract for any of
the foregoing for the purpose of payment of Indebtedness of any other Person.
Indebtedness. All obligations (i) for borrowed money or other extensions
------------
of credit, whether or not secured; (ii) representing the deferred purchase price
of property other than accounts payable arising in connection with the purchase
of inventory on terms customary in the trade, whether or not secured; (iii)
evidenced by bonds, notes, debentures or other similar instruments; (iv) secured
by any mortgage, pledge, security interest or other lien on property owned or
acquired whether or not the obligations secured thereby shall have been assumed;
(v) as lessee under capital leases (but excluding in any event obligations as
lessee under operating leases); (vi) under Guarantees; or (vii) which are
immediately due and payable out of the proceeds of or production from property
now or hereafter owned or acquired.
Interest Period. With respect to each Libor Loan, the period
---------------
commencing on the date of such Libor Loan and ending one, two, three, or six
months thereafter, as the Company may elect in the applicable Notice of
Borrowing,
provided that:
--------
(i) any Interest Period (other than an Interest Period determined
pursuant to clause (iii) below) that would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding Business Day unless, in
the case of Libor Loans, such Business Day falls in the next calendar month, in
which case such Interest Period shall end on the immediately preceding Business
Day;
(ii) any Interest Period applicable to a Libor Loan that begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (iii) below, end on the last Business Day of a
calendar month;
(iii) any Interest Period that would otherwise end after the
Termination Date shall end on the Termination Date; and
(iv) no Interest Period applicable to a Libor Loan shall have a
duration of less than one month and if any Interest Period applicable to such
Loans would be for a shorter period, such Interest Period shall not be available
hereunder.
Investment. As applied to the Company and its Subsidiaries, the purchase
----------
or acquisition of any share of capital stock, partnership interest, evidence of
indebtedness or other equity security of any other person or entity, any loan,
advance or extension of credit to, or contribution to the capital of, any other
person or entity, any real estate held for sale or investment, any commodities
futures contracts held other than in connection with bona fide hedging
transactions, any other investment in any other person or entity, and the making
of any commitment or acquisition of any option to make an Investment.
<PAGE>
-5-
Leases. The leases to which the Company is a party, which leases are
------
identified on Exhibit 1.1(b) hereto.
--------------
Libor Loan. A Loan bearing interest at the Adjusted Libor Rate.
----------
Loan or Loans. Individually, a Loan and collectively, the Loans made to
---- -----
the Company by the Bank pursuant to Section II of this Agreement.
Loan Documents. This Agreement, the Note and any other documents
--------------
evidencing or otherwise given in connection with this Agreement.
Note. A promissory note of the Company, substantially in the form of
----
Exhibit 1.1(a) hereto, evidencing the obligation of the Company to repay the
Loans.
Obligations. All loans, advances, debts, liabilities, obligations and
-----------
duties owing by the Company to the Bank of every nature, kind and description
now existing or hereafter arising, and all obligations hereunder, and all
extensions, substitutions, and renewals thereof, all covenants, representations
and warranties of the Company contained herein and without limitation, all
interest, fees, charges, expenses and reasonable attorneys' fees incurred by the
Bank in connection with this Agreement and the Notes.
Operating Cash Flow. The total of (a) earnings from continuing
-------------------
operations before taxes, interest and distributions for the applicable period,
excluding any nonrecurring or extraordinary items, minus (b) taxes paid for such
-----
period, minus (c) capital expenditures made during such period, plus (d)
----- ----
depreciation and amortization expenses for such period.
Permitted Liens. The meaning set forth in Section 6.3 of this Agreement.
---------------
Person. A corporation, association, partnership, trust, organization,
------
business, individual or government or governmental agency or political
subdivision thereof.
Plan. An employee pension benefit plan which is covered by Title IV of
----
ERISA or subject to the minimum funding standards under Section 412 of the Code
and is either (i) maintained by the Company or any Affiliate for employees of
the Company or any Affiliate or (ii) maintained pursuant to a collective
bargaining agreement or any other arrangement under which more than one employer
makes contributions and to which the Company or any Affiliate is then making or
accruing an obligation to make contributions or has within the preceding five
plan years made contributions.
Qualified Investments. As applied to the Company and its Subsidiaries,
---------------------
investments in (i) notes, bonds or other obligations of the United States of
America or any agency thereof that as to principal and interest constitute
direct obligations of or are guaranteed by the United States of America; (ii)
certificates of deposit or other deposit instruments or accounts of banks or
trust companies organized under the laws of the United States or any state
<PAGE>
-6-
thereof that have capital and surplus of at least $100,000,000, (iii) commercial
paper that is rated not less than prime-one or A-1 or their equivalents by
Moody's Investors Service, Inc. or Standard & Poor's Ratings Group,
respectively, or their successors, and (iv) any repurchase agreement secured by
any one or more of the foregoing.
Real Property. The real property with improvements thereon owned by the
-------------
Company described on Exhibit 1.1(c) attached hereto, known and numbered as 500
--------------
Arsenal Street, Watertown, Massachusetts 02172.
Subsidiary. Any Person of which the Company or any other Subsidiary, or
----------
the Company and one or more Subsidiaries, owns or controls, directly or
indirectly, more than fifty percent (50%) of the securities or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other Persons performing similar functions.
Termination Date. December 31, 1998, or such earlier date on which the
----------------
Bank's Commitment to make Loans is terminated or the Commitment Amount is
reduced to zero in accordance with the terms hereof.
Total Debt Service. The total scheduled amount of principal and
------------------
interest payable on Indebtedness for the applicable period.
SECTION II
DESCRIPTION OF REVOLVING LINE OF CREDIT AND TERM LOAN
-----------------------------------------------------
2.1 Loans. Subject to the terms and conditions of this Agreement, the
-----
Bank agrees to make Loans to the Company from time to time until the Termination
Date in such amounts as may be requested by the Company, provided that the
--------
aggregate outstanding principal amount of all the Loans shall not exceed at any
time the Commitment Amount, and provided further that each Loan shall be in
----------------
integral multiples of $50,000. Until the Termination Date, the Company may use
the revolving line of credit by borrowing and prepaying the Loans in whole or in
part and reborrowing, all in accordance with the terms and conditions of this
Agreement. On the Termination Date, (i) all Loans outstanding on such date
shall be due and payable in accordance with Sections 2.4 and 2.5 of this
Agreement, (ii) the Bank's commitment to make Loans shall immediately terminate,
and (iii) the Bank shall deliver to the Company the Note marked "canceled".
2.2 Notice and Method of Borrowing.
------------------------------
(a) Whenever the Company desires to obtain a Base Rate Loan hereunder,
the Company shall notify the Bank by telex, telegraph or telephone, received by
the Bank no later than 11:00 a.m. (Boston, Massachusetts time) on the Business
Day preceding the Business Day on which such requested Loan is to be made,
specifying (a) the date of such
<PAGE>
-7-
Loan, which shall be a Business Day, and (b) the aggregate amount of such Loan.
Notwithstanding the foregoing, in the event that the Company desires to obtain a
Libor Loan, the Company shall notify the Bank as aforesaid on the date three
Business Days before the day on which the requested Libor Loan is to be made.
Such notice shall specify (x) the effective date and amount of each Libor Loan,
subject to the limitations set forth herein, (y) the interest rate option to be
applicable thereto, and (z) the duration of the applicable Interest Period
(subject to the restrictions described herein). If requested by the Bank, each
such notification shall be immediately followed by a written confirmation
thereof substantially in the form of Exhibit 2.2 hereto, provided, that if the
----------- --------
written confirmation differs in any material respect from the action taken by
the Bank, the records of the Bank shall govern absent manifest error.
(b) Not later than 2:00 p.m. (Boston, Massachusetts time) on the date
specified by the Company for such Loan, the Bank shall make available to the
Company the amount of such Loan by crediting the aggregate amount of such Loan
to the general deposit account of the Company maintained with the Bank.
2.3 The Note. The Loans shall be evidenced by the Note, payable to
--------
the order of the Bank on the Termination Date. The Note shall be dated on or
before the date of the first Loan, shall show the Commitment Amount as the
maximum principal amount thereof and shall have the blanks therein appropriately
completed.
2.4 Interest Rate and Payments of Interest.
--------------------------------------
(a) Each of the Base Rate Loans shall bear interest on the outstanding
principal amount thereof, at a rate per annum equal to the Base Rate. All such
interest shall be payable quarterly in arrears on the last Business Day of each,
March, June, September and December, commencing on the first of such dates to
occur after the date of this Agreement, and when any of such Loans are due
(whether at maturity, by reason of acceleration, or otherwise). Each Libor Loan
shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the Adjusted
Libor Rate plus one and one half percent (1.5%). Such interest shall be payable
for such Interest Period on the last day thereof and when such Libor Loan is due
(whether at maturity, by reason of acceleration or otherwise) and, if such
Interest Period is longer than three months, at intervals of three months after
the first day thereof.
(b) The interest rate applicable to Base Rate Loans shall be adjusted
automatically on and as of the effective date of any change in the Base Rate.
Overdue principal and, to the extent permitted by law, overdue interest and fees
shall bear interest each day until paid at a rate per annum equal to the Base
Rate plus four percent (4%), payable on demand. If the date for any payment of
principal is extended by operation of law or otherwise, interest shall be
payable for such extended time. All computations of interest and fees made or
called for hereunder shall be calculated on the basis of a year of 360 days for
the actual number of days elapsed.
<PAGE>
-8-
2.5 Payment of Principal. The principal amount of all Loans then
--------------------
outstanding shall be paid in one installment payable on The Termination Date
together with all accrued interest thereon.
2.6 Commitment Fee. The Company shall pay to the Bank for the period
--------------
beginning on the date of this Agreement and ending on the Termination Date a
commitment fee computed at the rate of three eighths of one percent (3/8%) per
annum on the unborrowed portion of the Commitment Amount from time to time in
effect during each quarter or portion thereof. Payment of the Commitment Fee
shall be made quarterly in arrears on the same day as payments of interest
described in Section 2.4(a).
2.7 Prepayment. The Company shall have the right to prepay in full the
----------
Loans at any time, or in part from time to time, without penalty or premium but
with interest accrued thereon. Notwithstanding the foregoing, the Company may
not voluntarily prepay any Libor Loan and the Company shall pay to the Bank any
losses, costs and damages with respect to any such prepayment, including,
without limitation, any lost profits, including as a result of acceleration of
any such Libor Loan.
2.8 Reduction of Revolving Line of Credit. The Company may, upon 30
-------------------------------------
Business Days' prior written notice to the Bank, at any time permanently reduce
in multiples of $50,000 the Commitment Amount. No reduction of the Commitment
Amount shall be subject to reinstatement.
2.9 Holiday Payments. If any payment to be made by the Company hereunder
----------------
shall become due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day and such extension of time shall be included
in computing any interest in respect of such payment.
2.10 Method of Payment. All payments and prepayments of principal and all
-----------------
payments of interest and fees shall be made by the Company to the Bank at its
address specified in Section 8.4, in immediately available funds, on or before
11:00 a.m. (Boston, Massachusetts time) on the due date thereof, free and
clear of, and without any deduction or withholding for, any taxes or other
payments.
2.11 Capital Adequacy. If the Bank shall have determined that (i) the
----------------
adoption, whether before or after the date hereof, of risk-based capital
guidelines based upon the risk-based capital standards announced jointly by the
United States federal bank regulatory authorities in conjunction with bank
regulatory authorities of other industrialized nations on July 15, 1988 or (ii)
the adoption after the date hereof of any applicable law, rule or regulation
regarding capital requirements for banks or bank holding companies, or any
change therein after the date hereof, or any change after the date hereof in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Bank with any request or directive after the date
hereof of such entity regarding capital adequacy (whether or not having the
force of law) has or would have the effect of
<PAGE>
-9-
reducing the return on the Bank's capital to a level below that which the Bank
could have achieved (taking into consideration the Bank's policies with respect
to capital adequacy immediately before such adoption, change or compliance and
assuming that the Bank's capital was fully utilized prior to such adoption,
change or compliance) but for such adoption, change or compliance as a
consequence of its commitment to make Loans hereunder by any amount deemed by
the Bank to be material:
(i) the Bank shall promptly after its determination of such
occurrence give notice thereof to the Company; and
(ii) the Company shall pay to the Bank as an additional fee from
time-to-time on demand such amount as the Bank certifies to be the
amount that will compensate it for such reduction.
A certificate of the Bank claiming compensation under this Section 2.11
shall be conclusive in the absence of manifest error. Such certificate shall set
forth the nature of the occurrence giving rise to such compensation, the
additional amount or amounts to be paid to it hereunder and the method by which
such amounts were determined. In determining such amount, the Bank may use any
reasonable averaging and attribution methods.
2.12 Changed Circumstances.
---------------------
(a) In the event that:
(i) on any date on which the Adjusted Libor Rate would otherwise be
set the Bank shall have determined in good faith (which determination
shall be final and conclusive) that, by reason of changes affecting
the London interbank eurodollar market, adequate and reasonable means
do not exist for ascertaining the London Interbank Offered Rate, or
(ii) at any time the Bank shall have determined in good faith (which
determination shall be final and conclusive) that:
(A) the making of a Libor Loan has been made impracticable or
unlawful by (1) the occurrence of a contingency that materially and
adversely affects the London interbank eurodollar market or (2)
compliance by the Bank in good faith with any applicable law or
governmental regulation, guideline or order or interpretation or
change thereof by any governmental authority charged with the
interpretation of administration thereof or with any request or
directive of any such governmental authority (whether or not having
the force of law); or
(B) the Adjusted Libor Rate shall no longer represent the
effective cost to the Bank for U.S. dollar deposits in the London
interbank market for deposits in which it regularly participates;
<PAGE>
-10-
then, and in any such event, the Bank shall forthwith so notify the Company
thereof. Until the Bank notifies the Company that the circumstances giving rise
to such notice no longer apply, the obligations of the Bank to allow selection
by the Company of the type of loan affected by the contingencies described in
this Section 2.12 (herein call "Affected Loans") shall be suspended. If at the
--------------
time the Bank so notifies the Company, the Company has previously given the Bank
a Notice of Borrowing with respect to one or more Affected Loans by such Loans
have not yet gone into effect, such notification shall be deemed to be void and
the Company may borrow Loans of a non-affected type by giving a substitute
Notice of Borrowing pursuant to the terms of this Agreement
Upon such date as shall be specified in such notice (which shall not
be earlier than the date such notice is given) the Company shall, with respect
to the outstanding Affected Loans, prepay the same, together with interest
thereon and any amounts required to be paid pursuant to Section 2.12, and may
borrow a Loan of another type in accordance with Section 2.1 hereof by giving a
Notice of Borrowing pursuant to Section 2.2 hereof.
(b) In case any law, regulation, treaty or official directive or the
interpretation or application thereof by any court or by any governmental
authority charged with the administration thereof or the compliance with any
guideline or request of any central bank or other governmental authority
(whether or not having the force of law):
(i) subjects the Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by the Company
or otherwise with respect to the transactions contemplated hereby (except
for taxes on the overall net income of the Bank imposed by the United
States of America or any political subdivision thereof), or
(ii) impose, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, the Bank (other than such
requirements as are already included in the determination of the Adjusted
Libor Rate), or
(iii) imposes upon the Bank any other condition with respect to
its performance under this Agreement,
and the result of any of the foregoing is to increase the cost to the Bank,
reduce the income receivable by the Bank or impose any expense upon the Bank
with respect to any Loans, the Bank shall notify the Company thereof. The
Company agrees to pay to the Bank the amount of such increase in cost, reduction
in income or additional expense as and when such cost, reduction or expense is
incurred or determined, upon presentation by the Bank of a statement in the
amount and setting forth the Bank's calculation thereof, which statement shall
be deemed true and correct absent manifest error.
<PAGE>
-11-
SECTION III
CONDITIONS OF LENDING
---------------------
3.1 Conditions Precedent to Initial Borrowing. The obligation of the
-----------------------------------------
Bank to make its initial Loan shall be subject to the condition precedent that
the Bank shall have received in form and substance satisfactory to the Bank and
its counsel, the following:
(i) executed copies of this Agreement and the Note;
(ii) a certificate of the Secretary or other like officer of the
Company containing copies of the Resolutions of the Board of
Directors and/or stockholders of the Company, as appropriate,
authorizing the execution, delivery, and performance of the Loan
Documents, and the transactions contemplated herein and therein, and
identifying the officers of the Company authorized to execute and
deliver such documents on behalf of the Company and to make requests
for Loans hereunder, which certificate shall be dated and delivered
on the date of this Agreement substantially in the form of
Exhibit 3.1(ii) hereto;
--------------
(iii) the articles of organization of the Company, together with
all amendments and supplements thereto, filed in the office of the
Secretary of The Commonwealth of Massachusetts, certified by such
Secretary to be a true and correct copy thereof;
(iv) the By-laws of the Company, together with all amendments and
supplements thereto, certified by the Secretary or an Assistant
Secretary of the Company to be a true and correct copy thereof;
(v) a certificate of the Secretary of The Commonwealth of
Massachusetts as to legal existence and good standing of the Company
in such state and listing all documents on file in the office of such
Secretary;
(vi) a favorable opinion of Bingham, Dana & Gould, counsel for the
Company, in form and substance satisfactory to counsel for the Bank,
with respect to the representations and warranties of the Company
contained in Sections 4.1, 4.2, 4.3, 4.4, 4.5 and 4.12 of this
Agreement, substantially in the form of Exhibit 3.1(vi) hereto;
---------------
(vii) certificates of reasonably recent date of the Secretary of
The Commonwealth of Massachusetts and the applicable tax authority of
Massachusetts and the Secretaries of State and the applicable tax
authorities of each other state in which the Company is qualified to
do business as a foreign corporation, or other evidence satisfactory
to the Bank, evidencing the
<PAGE>
-12-
legal existence of the Company and certifying that the Company is in
good standing in each such jurisdiction, which certificates shall be
delivered on or before the date of this Agreement; and
(viii) such other documents as the Bank may reasonably request in
order to effect fully the purposes of this Agreement.
3.2 Conditions Precedent to All Loans. The obligation of the Bank to make
---------------------------------
each Loan, including the initial Loan, is further subject to the conditions
precedent that:
(i) the Bank shall have received a request for borrowing in
accordance with Section 2.2 of this Agreement;
(ii) the representations and warranties contained in Section IV
and the covenants contained in Section V and VI of this Agreement
shall be true and accurate in all material respects, or the Company
shall be in compliance therewith, as the case may be, on and as of the
date of each such Loan as though made on and as of such date (except
to the extent that such representations and warranties relate to an
earlier date); no Event of Default shall have occurred and no
condition shall exist which would constitute such an Event of Default
but for the requirement that notice be given or time elapse, or both;
(iii) the corporate actions of the Company referred to in Section
3.1(ii) of this Agreement shall remain in full force and effect; and
(iv) there shall have occurred no material adverse change in the
assets, liabilities, financial condition, business or prospects of the
Company or any of its Subsidiaries other than changes in the ordinary
course of business.
The request for each Loan shall be deemed to be a representation and
warranty by the Company on the date of such request as to the accuracy of the
facts referred to in subsections (ii), (iii) and (iv) of this Section 3.2.
<PAGE>
-18-
SECTION IV
COMPANY'S REPRESENTATIONS AND WARRANTIES
----------------------------------------
The Company makes the following representations and warranties, which shall
be deemed to be continuing representations and warranties so long as any credit
hereunder shall be available and until payment in full of all Obligations
outstanding hereunder:
4.1 Existence and Rights. Each of the Company and its Subsidiaries is a
--------------------
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has full power and authority,
rights and franchises to own its properties and assets and to carry on its
business as now conducted, and is duly qualified and in good standing as a
foreign corporation in every other jurisdiction in which the failure to so
qualify could have a material and adverse effect on the financial condition,
business, or operation of the Company or any Subsidiary; and the Company has the
corporate power and authority to enter into the Loan Documents and to borrow
money as herein contemplated and to carry out the provisions of the Loan
Documents.
4.2 Subsidiaries. As of the date of this Agreement, the Company has no
------------
Subsidiaries other than those described on Exhibit 4.2. In the event there shall
-----------
exist after the date hereof any one or more Subsidiaries of the Company, the
Company or a Subsidiary of the Company shall be the owner, free and clear of all
liens and encumbrances, of all of the issued and outstanding stock of each
Subsidiary and all shares of such stock shall have been validly issued and fully
paid and non-assessable, and no rights to subscribe to any additional shares
shall have been granted, and no options, warrants or similar rights shall be
outstanding.
4.3 Loan Documents Authorized. The execution, delivery, and performance
-------------------------
of the Loan Documents have been duly authorized and do not require the consent,
approval or authorization of or filing or registration with any governmental
body or regulatory authority; and the Loan Documents are legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms.
4.4 No Conflict. The execution, delivery, and performance of the Loan
-----------
Documents will not constitute a material breach or default under any agreement,
indenture, undertaking, or other instrument to which the Company is a party or
by which it or any of its property may be bound or affected and will not
contravene or conflict in any material way with any law, regulation applicable
to the Company or any writ, judgment, decree or order of any court or
governmental body or regulatory agency applicable to the Company or any term or
provision of its articles of incorporation or bylaws; and, other than in favor
of the Bank, such execution, delivery, and performance will not result in the
creation or imposition of (or the obligation to create or impose) any lien,
charge, or encumbrance on, or security interest in, any of its property pursuant
to the provisions of any of the foregoing.
<PAGE>
-14-
4.5 Litigation. There are no actions, suits or proceedings pending or, to
----------
the knowledge of the Company, threatened against or affecting the Company or any
Subsidiary or its respective properties except those listed on Exhibit 4.5
-----------
hereto which, if determined adversely, would have a materially adverse effect on
the financial condition, properties or operations of the Company and its
Subsidiaries taken as a whole, and the Company and each Subsidiary is not in
default with respect to any order, writ, injunction, decree or demand of any
court or other governmental or regulatory authority.
4.6 Financial Condition; Material Adverse Change. The Company has
--------------------------------------------
delivered to the Bank its balance sheet and related statements of operations,
stockholders' equity and cash flows for the fiscal year of the Company ending
December 31, 1994, and similar financial statements for the fiscal years ending
December 31, 1993 and December 31, 1992 certified by Arthur Andersen & Co. Such
statements and all other statements and data submitted in connection with the
credit granted by this Agreement are true and correct, and said financial
statements fairly present the financial condition of the Company as at the date
thereof and have been prepared in accordance with generally accepted accounting
principles consistently applied. The Company has also delivered to the Bank its
balance sheet and related statements of operations for the fiscal quarter of the
company ending on September 30, 1995, certified by management of the Company.
Since December 31, 1994, there have been no changes in the assets or liabilities
or financial condition of the Company other than changes in the ordinary course
of business, and no such changes have been materially adverse changes. The
Company has no knowledge of any liabilities, contingent or otherwise, not
reflected in the December 31, 1994 financial statements, and the Company has not
entered into any commitments or contracts which are not reflected in said
financial statements, other than in the ordinary and normal course of its
business, which may have a materially adverse effect upon its financial
condition, operations, or business as now conducted.
4.7 Title to Assets. Each of the Company and its Subsidiaries has good
---------------
and marketable title to the assets it purports to own, including, without
limitation, the Real Estate and the assets shown on its balance sheet dated
December 31, 1994 except assets disposed of in the ordinary course of its
business, and, except as described in Exhibit 4.7 hereto, the same are not
-----------
subject to any mortgages, deeds of trust, pledges, security interests or other
encumbrances other than Permitted Liens.
4.8 Tax and Renegotiation Status. Each of the Company and its
----------------------------
Subsidiaries has filed all federal, state, and other tax returns required to be
filed, and all taxes, assessments and other governmental charges have been paid.
4.9 Trademarks and Patents. The Company owns or possesses, or can obtain
----------------------
by payment of royalties in amounts which, in the aggregate, do not and will not
materially adversely affect the financial condition or the prospects of the
Company, all of the patents, trademarks, service marks, trade names, copyrights,
proprietary rights, trade secrets, and licenses or rights to the foregoing,
necessary for the Company's business as now conducted and as proposed to be
conducted. To the best of the Company's knowledge, except as
<PAGE>
-15-
described in Exhibit 4.9, the business proposed to be conducted by the Company
-----------
will not cause the Company to infringe or violate any of the patents,
trademarks, service marks, trade names, copyrights, licenses, trade secrets or
other proprietary rights of any other Person. The Company is not aware that any
employee is obligated under any contract (including any license, covenant or
commitment of any nature), or subject to any judgment, decree or order of any
court or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interest of the Company or would conflict
with the Company's business as now conducted or as proposed to be conducted.
4.10 ERISA. The Company has not incurred any accumulated funding
-----
deficiency within the meaning of ERISA, and has not incurred any liability to
the Pension Benefit Guarantee Corporation in connection with any Plan or other
class of benefit which the Pension Benefit Guaranty Corporation has elected to
insure.
4.11 Compliance with Law. The Company has duly observed, conformed and
-------------------
complied in all respects with all laws, decisions, judgments, rules, regulations
and orders of all governmental authorities relative to the conduct of its
business, its properties, and assets, except those being contested in good faith
by appropriate proceedings diligently pursued.
4.12 Other Regulations. Neither the Company nor any of its Subsidiaries
-----------------
is subject to any statute or regulation restricting the ability of the Company
or any such Subsidiary to incur indebtedness or encumber its respective
properties in the manner contemplated hereunder.
4.13 Use of Proceeds. No portion of any Loan is to be used for the
---------------
"purpose of purchasing or carrying" any "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. 221 and 224, as amended; and following the application of the proceeds of
each Loan, the value of all "margin stock" of the Company will not exceed 25% of
the value of the total assets of the Company that are subject to the
restrictions set forth in Sections 6.3 and 6.9.
4.14 Investment Company Act. Neither the Company nor any of its
----------------------
Subsidiaries is subject to regulation under the Investment Company Act of 1940,
as amended.
SECTION V
COMPANY'S AFFIRMATIVE COVENANTS
-------------------------------
The Company covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of all amounts outstanding
hereunder, the Company shall do and cause each of its Subsidiaries to do all of
the following:
<PAGE>
-16-
5.1 Corporate Rights and Facilities. (i) Maintain and preserve its
-------------------------------
corporate existence and all rights, privileges, franchises, and other authority
adequate for the conduct of its business; (ii) maintain its properties,
equipment, and facilities in good order and repair; and (iii) conduct its
business in an orderly manner without voluntary interruption.
5.2 Insurance. Maintain insurance with responsible insurance carriers
---------
against such risks and in such amounts as is customarily carried by similar
businesses, including, without limitation, fire, public liability, property
damage, workers' compensation, and interruption of business insurance.
5.3 Taxes and Other Liabilities. Pay and discharge, before the same
---------------------------
become delinquent and before penalties accrue thereon, all taxes, assessments,
and governmental charges upon or against it or any of its properties, except
that such taxes, assessments and governmental charges need not be discharged so
long as the same are being contested in good faith by appropriate proceedings
and adequate reserves are maintained with respect thereto in accordance with
generally accepted accounting principles and no notice of tax lien has been
filed or other action taken to perfect or foreclose any lien securing such tax,
assessment or charge.
5.4 Consolidated Tangible Net Worth. Maintain at all times Consolidated
-------------------------------
Tangible Net Worth of not less than (i) $36,020,000, plus (ii) 75% of
consolidated net income of the Company and its Subsidiaries for each fiscal
quarter of the Company and its Subsidiaries plus (iii) 100% of the net proceeds
received by the Company from the sale of its equity securities after September
30, 1995.
5.5 EBIAT. Maintain a ratio of Operating Cash Flow to Total Debt Service
-----
of not less than 2 to 1 as at the end of each quarter for the previous two
fiscal quarters then ended.
5.6 Consolidated Total Liabilities to Consolidated Tangible Net Worth.
-----------------------------------------------------------------
Maintain at all times Consolidated Total Liabilities to Consolidated Tangible
Net Worth of not greater than 1 to 1.
5.7 Quick Ratio. Maintain at all times Consolidated Quick Assets equal to
-----------
or greater than 115% of Consolidated Current Liabilities.
5.8 Records and Reports. Maintain a system of accounting in accordance
-------------------
with generally accepted accounting principles on a basis consistently applied,
and furnish to the Bank:
(i) as soon as available to the Company, but in any event within
45 days after the end of each of its fiscal quarters, a consolidated
and consolidating balance sheet as of the end of, and a related
consolidated and consolidating statement of income for, the period
then ended, certified by the principal
<PAGE>
-17-
financial officer of the Company but subject, however, to normal,
recurring year-end adjustments that shall not in the aggregate be
material in amount;
(ii) as soon as available, and in any event within 120 days after
the close of each fiscal year of the Company, a balance sheet,
statements of operations, shareholders' equity and cash flows of the
Company and its Subsidiaries on a consolidated basis, audited by
Arthur Anderson & Co. or other certified public accountants
satisfactory to the Bank, together with a copy of said certified
public accountant's management letter and an unqualified opinion on
such statements;
(iii) concurrently with delivery of the documents provided for in
Sections 5.8(i) and (ii) of this Agreement, a certificate of the chief
financial officer of the Company in the form of Exhibit 5.8(iii)
----------------
hereto, stating that the Company has performed and observed each an
every covenant contained in this Agreement to be performed by it and
that no Event of Default has occurred and no condition then exists
which would constitute such an Event of Default hereunder upon the
giving of notice, the lapse of time, or both or, if any Event of
Default has occurred or any such condition exists, specifying the
nature thereof and the action which the Company proposes to take with
respect thereto;
(iv) promptly after the receipt thereof by the Company, copies of
any audit reports submitted to the Company by independent accountants
in connection with any interim audit of the accounts of the Company
made by such accountants;
(v) promptly after the same are available, copies of all proxy
statements, financial statements, and reports as the Company shall
send to its stockholders, and copies of all reports which the Company
may file with the Securities and Exchange Commission or any successor
thereto;
(vi) promptly upon the completion of the sale or other disposition
of any of the Real Property, notice thereof; and
(vii) such other information relating to the affairs of the Company
as the Bank reasonably may request from time to time.
5.9 Inspection. Upon request, permit the Bank or its designees at any
----------
reasonable time, for the purpose of ascertaining compliance with this Agreement
to visit and inspect the properties of the Company and its Subsidiaries, to
examine and make copies of and take abstracts from the books and records of the
Company and its Subsidiaries and to discuss the affairs, finances and accounts
of the Company and its Subsidiaries with their appropriate officers.
<PAGE>
-18-
5.10 Use of Loan Proceeds. Use the proceeds of the Loans provided for
--------------------
hereunder (i) to repay Obligations outstanding under the Promissory Note dated
January 3, 1989 from the Company to the order of the Bank, (ii) for general
working capital purposes and (iii) for advances to be made by the Company to its
Subsidiaries for general working capital purposes, provided, however, that
--------
notwithstanding such advances described in this subsection (iii), the Company
shall remain solely responsible for payment and performance of all Obligations
hereunder.
5.11 Notice of Certain Events. Promptly, after the Company's discovery
------------------------
thereof, notify the Bank of the occurrence of (a) any Event of Default or of any
condition which would become an Event of Default upon the giving of notice, the
lapse of time, or both; or (b) any litigation which, if adversely determined,
might have a material adverse effect on the financial condition of the Company
and its Subsidiaries taken as a whole.
5.12 Bank Expenses. Pay on demand all reasonable out-of-pocket costs and
-------------
expenses of the Bank and all allocated costs of the in-house legal staff of the
Bank, in connection with the preparation, administration, and enforcement of the
Loan Documents, or any waiver or amendment of any provision thereof, including,
without limitation, the reasonable attorneys' fees of outside counsel, and the
amount of all such expenses shall, until paid, be an Obligation. The Company
agrees to indemnify the Bank from and hold it harmless against any transfer
taxes, documentary taxes, assessments or charges made by any governmental
authority by reason of the execution, delivery, and performance of this
Agreement and the Note. The obligations of the Company under this Section 5.12
shall survive payment of any Loan and assignment of any rights hereunder.
5.13 ERISA Compliance. Comply with the minimum funding of ERISA
----------------
requirements with respect to any Plan and comply with the applicable provisions
of ERISA and the regulations thereunder.
5.14 Compliance with Law. Duly observe, conform and comply in all respects
-------------------
with all laws, decisions, judgments, rules, regulations and orders of all
governmental authorities relative to the conduct of its business, its
properties, and assets, except those being contested in good faith by
appropriate proceedings diligently pursued.
5.15 Further Assurances. Execute and deliver such further instruments and
------------------
take such further action as may reasonably be requested by the Bank to effect
the purposes of this Agreement.
<PAGE>
-19-
SECTION VI
COMPANY'S NEGATIVE COVENANTS
----------------------------
The Company covenants and agrees that so long as any credit hereunder shall
be available and until payment in full of all amounts outstanding hereunder the
Company shall not do, or permit any of its Subsidiaries to do, any of the
following without the prior written consent of the Bank.
6.1 Type of Business. Make any substantial change in the present
----------------
character of its business.
6.2 Indebtedness. Create, incur, assume, or permit to exist any
------------
Indebtedness other than (i) Indebtedness created hereunder; (ii) Indebtedness
outstanding on the date hereof as listed on Exhibit 6.2 hereto; (iii)
-----------
Indebtedness for the purchase of specific items of equipment acquired after the
date hereof which is secured by liens permitted under Section 6.3 of this
Agreement; (iv) Indebtedness consisting of capital leases, so long as no Event
of Default would result from the incurrence of such obligation; (v) trade credit
obtained in the normal course of business; (vi) other Indebtedness to the Bank
or any Affiliates of the Bank; (vii) other Indebtedness subordinated to the
Obligations on terms approved by the Bank in writing; (viii) Indebtedness to and
between the Company and any of its Subsidiaries; (ix) Indebtedness under lines
of credit of Subsidiaries of the Company in an aggregate amount not to exceed
$4,000,000 at any time; and (x) other short term unsecured Indebtedness of the
Company in an aggregate amount not to exceed $1,000,000.
6.3 Liens and Encumbrances. Create, incur, assume, or permit to exit any
----------------------
mortgage, deed of trust, security interest (whether possessory or non-
possessory) or other encumbrance of any kind (including, without limitation, the
charge upon property purchased under conditional sale or other title retention
agreement) upon or in any of its property or assets now owned or hereafter
acquired by the Company or any of its Subsidiaries, or sell or transfer, either
with or without recourse, any Accounts or notes receivable or any monies due or
to become due, other than the following ("Permitted Liens"): (i) liens
---------------
outstanding on the date hereof, as listed on Exhibit 4.7 hereto; (ii) liens for
-----------
taxes not delinquent or being contested in good faith and in appropriate
proceedings, provided that no notice of lien shall have been filed or other
--------
action taken to perfect or foreclose such lien; (iii) liens in connection with
workers' compensation, unemployment insurance, or social security obligations;
(iv) mechanics', workmen's, materialmen's, landlords', carriers', or other like
liens arising in the ordinary and normal course of business with respect to
obligations which are not due or which are being contested in good faith; (v)
liens on specific items of equipment purchased with Indebtedness permitted by
Section 6.2 (iii) of this Agreement which are given solely to secure the
purchase price of such property and which do not extend to any other property
and are given at the time of acquisition of the property or within three months
thereafter; (vi) liens in favor of the Bank or any Affiliates of the Bank; and
(vii) liens of Subsidiaries of the Company encumbering their respective assets
in
<PAGE>
-20-
amounts not exceeding the amounts of their respective lines of credit as
described in Section 6.2(ix).
6.4 Loans and Investments. Make (i) loans in excess of $250,000
---------------------
outstanding at any time to any Person or $1,000,000 outstanding at any time in
the aggregate except for loans and advances made by the Company to its
Subsidiaries or (ii) or maintain any Investments other than (a) existing
Investments in Subsidiaries and (b) Qualified Investments.
6.5 Limitation on Guarantees. Other than the Guarantees by the Company of
------------------------
certain obligations of its Subsidiaries pursuant to lines of credit as described
in Section 6.2(ix), create, incur, assume or permit to exist any Guarantee in
excess of $1,000,000 outstanding for the benefit of any one Person at any time
or in excess of $1,500,000 outstanding at any time in the aggregate (which
$1,500,000 shall not include the guarantees described in clauses (i) and (ii)
above) other than endorsements, in the ordinary course of collection, of
negotiable instruments.
6.6 Acquisition or Sale of Business; Merger or Consolidation. Purchase or
--------------------------------------------------------
otherwise acquire the assets or business of any Person or other entity for
consideration having an aggregate value in excess of 20% of the Company's
Consolidated Tangible Net Worth during the term of this Agreement; merge or
consolidate with any Person unless the Company is the surviving entity and no
Event of Default or event which, with the giving of notice or the passage of
time or both would be an Event of Default would exist after giving effect
thereto; liquidate, dissolve, or sell any assets except in the ordinary and
normal course of its business as now conducted; or sell, lease, assign, or
transfer any substantial part of its business or fixed assets, or any property
or other assets, tangible or intangible, necessary for the continuance of its
business as now conducted, including, without limitation, the selling of any
property or other asset accompanied by the leasing back of the same. The
Company will promptly notify the Bank of any proposed purchase, acquisition,
merger or consolidation. The Bank's consent to any purchase, acquisition,
merger or consolidation not otherwise permitted hereunder will not be
unreasonably withheld.
6.7 Regulations U and X. Use the proceeds of the Loans hereunder, directly
-------------------
or indirectly, to purchase or carry any margin stock (within the meaning of
Regulations U and X of the Board of Governors of the Federal Reserve System) or
extend to others for the purpose of purchasing or carrying, directly or
indirectly, any margin stock.
6.8 Sale of Assets. Sell or permit any Subsidiaries to sell any assets
--------------
the value of which will exceed 3% of the book value of all assets of the Company
and its Subsidiaries at the end of the previous fiscal year.
<PAGE>
-21-
SECTION VII
EVENTS OF DEFAULT
-----------------
The occurrence of any of the following Events of Default shall, immediately
in the case of an Event of Default described in Sections 7.7 and 7.8, and at the
option of the Bank in the case of any other Event of Default, terminate all
obligations of the Bank to make any Loans hereunder and make all sums of
principal and interest and fees then remaining unpaid on the Loans and all other
amounts payable hereunder immediately due and payable, all without demand,
presentment or notice, all of which hereby are expressly waived:
7.1 Failure to Pay Obligations. The Company shall fail to pay (1) any
--------------------------
amount of principal of any Loans when due, or (ii) any interest, fees or
expenses due hereunder or under the Note within three Business Days of the due
date therefor.
7.2 Breach of Certain Covenants. The Company shall fail to perform any
---------------------------
covenant contained in Sections 5.1 through 5.7, 5.10 and 5.11, or 6.1 through
and including 6.8 of this Agreement.
7.3 Breach of Other Covenants. The Company shall fail to perform any
-------------------------
term, covenant or condition contained in this Agreement or the Notes and such
default shall continue for 30 calendar days.
7.4 Breach of Related Agreements. Any failure of the Company to perform
----------------------------
or observe any provision of any Loan Document, other than this Agreement within
the period of grace, if any, provided therein.
7.5 Breach of Representation or Warranty. Any of the Company's
------------------------------------
representations or warranties made herein or any statement or certificate at any
time given in writing pursuant hereto or in connection herewith shall be false
or misleading in any material respect as of the date when made.
7.6 Default in Other Agreements. Default by the Company or any Subsidiary
---------------------------
(as principal or guarantor or other surety) in the payment of any obligation for
borrowed monies or advances, or for the use of real or personal property, or
default by the Company or any Subsidiary in the performance of any agreement
evidencing or securing such borrowed monies or advances, or relating to such use
of real or personal property, for such period of time as would have permitted
the holder, or holders thereof or of any obligations issued thereunder, assuming
the delivery of any required notices, to accelerate the maturity thereof, or
would have constituted an event of default thereunder if such obligations exceed
$1,000,000 in the aggregate.
7.7 Involuntary Bankruptcy; Appointment of Receiver, etc. An involuntary
----------------------------------------------------
petition shall be filed against the Company or any of its Subsidiaries under any
applicable
<PAGE>
-21-
bankruptcy, insolvency or similar law now or hereafter in effect or a court
having jurisdiction in the premises shall enter a decree or order for relief in
respect of the Company or any of its Subsidiaries in an involuntary case under
any such law, which decree or order is not stayed or dismissed within 45 days;
or any other similar relief shall be granted under any applicable federal or
state law and is not stayed or dismissed within 45 days; or a decree or order of
a court having jurisdiction in the premises for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having similar
powers over the Company or any of its Subsidiaries, or over all or a substantial
part of their property, shall have been entered and not stayed or dismissed
within 45 days; or the involuntary appointment of an interim receiver, trustee
or other custodian of the Company or any of its Subsidiaries for all or a
substantial part of their property shall have occurred which appointment remains
in effect for 45 days; or a warrant of attachment, execution or similar process
shall be issued against any substantial part of the property of the Company or
any of its Subsidiaries which remains in effect for 45 days.
7.8 Voluntary Bankruptcy; Appointment of Receiver, etc. The Company or
--------------------------------------------------
any of its Subsidiaries shall have an order for relief entered with respect to
it or commence a voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or shall consent to the entry of
an order for relief in an involuntary case, or to the conversion to such
involuntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, liquidator, sequestrator, trustee or other
custodian for all or a substantial part of its property; or the Company or any
of its Subsidiaries shall make any assignment for the benefit of creditors; or
the Company or any of its Subsidiaries shall fail or shall be unable or shall
admit in writing its inability to pay its debts as such debts become due; or the
board of directors of the Company or any of its Subsidiaries shall adopt any
resolution or otherwise take action to approve any of the foregoing.
7.9 Judgments or Attachments. Any money judgment or judgments in the
------------------------
aggregate sum of $500,000 or more shall be rendered against the Company or any
of its assets, or any writ or warrant of attachment, or similar process in the
aggregate sum of $250,000 or more shall be entered or filed or levied against
the Company, and shall not be discharged, released, stayed or bonded within a
period of 30 days or in any event later than five days prior to the date of any
proposed sale thereunder.
7.10 Dissolution. Any order, judgment or decree shall be entered against
-----------
the Company or any Subsidiary decreeing the dissolution or division of such
entity.
7.11 Unfunded ERISA Liabilities. Any Plan maintained by the Company or
--------------------------
any of its Affiliates shall be terminated within the meaning of Title IV of
ERISA or a trustee shall be appointed by an appropriate United States district
court to administer any Plan, or the Pension Benefit Guaranty Corporation (or
any successor thereto) shall institute proceedings to terminate any Plan or to
appoint a trustee to administer any Plan if as of the date thereof the Company's
liability or any such Affiliate's liability (after giving effect to the tax
consequences thereof) to the Pension Benefit Guaranty Corporation (or any
successor
<PAGE>
-23-
thereto) for unfunded guaranteed vested benefits under the Plans not covered by
insurance exceeds the then current value of assets accumulated in such Plan.
SECTION VIII
MISCELLANEOUS
-------------
8.1 Survival of Warranties. All agreements, representations, and
----------------------
warranties made herein shall survive the execution and delivery of this
Agreement and the making of the Loans hereunder.
8.2 Failure or Indulgence Not Waiver. No failure or delay on the part of
--------------------------------
the Bank in the exercise of any power, right, or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right, or privilege preclude other or further exercise thereof or of
any other right, power, or privilege. All rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
8.3 Amendments, etc. This Agreement may not be amended, waived, or
---------------
modified in any manner without the written consent of the Bank and the Company.
8.4 Notices. Except as otherwise expressly provided herein, any notice
-------
herein required or permitted to be given shall be in writing and may be
personally served or sent by telegram, telex, telecopy or registered or
certified United States mail, and shall be deemed to have been given or made
when transmitted by telex (with answerback received) or by telecopier, delivered
to the telegraph office or personally delivered or three days after deposit in
the United States mail, with postage prepaid and properly addressed to the
intended recipient. For the purposes hereof, the addresses of the parties
hereto shall be as follows:
If to the Company:
GENERAL SCANNING INC.
Watertown, Massachusetts 02172
Attention: Victor H. Wooley
Chief Financial Officer
TELEPHONE: (617) 924-1010
TELECOPY: (617) 924-7327
TELEX: 443-01-05
<PAGE>
-24-
If to the Bank:
THE FIRST NATIONAL BANK OF BOSTON
High Technology Division, 01-04-09
100 Federal Street
Boston, Massachusetts 02110
Attention: Melissa S. Forbes
Vice President
TELEPHONE: (617) 434-9422
TELECOPY: (617) 434-0819
TELEX: 4996527
8.5 Severability. In case any provision in this Agreement shall be
------------
invalid, illegal or unenforceable, such provision shall be severable from the
remainder of such contract and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8.6 Applicable Law. This Agreement, all documents provided for herein and
--------------
the rights and obligations of the parties thereto shall be construed in
accordance with and governed by the laws of The Commonwealth of Massachusetts.
8.7 Assignability. This Agreement shall be binding upon the parties
-------------
hereto and their respective successors and assigns, and shall inure to the
benefit of the parties hereto and the successors and assigns of the Bank, except
that without the prior written consent of the Bank, the Company may not assign
any of its rights or obligations under this Agreement.
8.8 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.9 Section Headings. The various headings used in this Agreement are
----------------
inserted for convenience only and shall not affect the meaning or
interpretations of this Agreement or any provision hereof.
8.10 Right of Offset. The Company hereby grants to the Bank, upon the
---------------
occurrence of any Event of Default and the expiration of any grace periods
provided therefor, the right to set off, appropriate and apply any deposits,
balances or other sums credited by or due from the Bank to the Company, against
any and all Obligations of the Company to the Bank under this Agreement or the
Note, without notice to the Company or compliance with any other condition
precedent now or hereafter imposed by statute, rule of law or otherwise (all of
which are hereby expressly waived).
<PAGE>
-25-
8.11 Waiver of Jury Trial. Except as prohibited by law, neither the
--------------------
Company nor the Bank, nor any assignee or successor of the Company or the Bank,
shall seek a jury trial in any lawsuit, proceeding, counterclaim or any other
litigation procedure based upon or arising out of this Agreement or any related
document or agreement. Neither the Company nor the Bank will seek to
consolidate any such action, in which a jury trial has been waived, with any
other action in which a jury trial has not been waived. The provisions of this
Section have been fully discussed by the parties hereto, and the provisions
hereof shall be subject to no exceptions. No party hereto has in any way agreed
with or represented to any other party that the provisions of this Section 8.11
will not be fully enforced in all instances.
WITNESS the due execution hereof as an instrument under seal as of the date
first above written.
ATTEST: GENERAL SCANNING INC.
_____________________________ By: _____________________________________
[SEAL] Title: ___________________________________
THE FIRST NATIONAL BANK OF BOSTON
By: _____________________________________
Title: ___________________________________
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<PERIOD-START> JAN-01-1996
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