1
Exhibit 10.1
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "AGREEMENT"), is entered into as of
December 10, 1999, between SERVICEWARE, INC., a Pennsylvania corporation (the
"BORROWER"), and PNC BANK, NATIONAL ASSOCIATION (the "BANK").
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and intending to be legally bound, and subject to
the terms and conditions hereof and relying upon the representations and
warranties herein set forth in this Agreement, the Borrower and the Bank agree
as set forth below.
1. LOAN. The Bank agrees to make secured loans to the Borrower at
any time or from time to time on or after the date hereof under the following
credit facilities (collectively, whether one or more, the "LOAN") in the
aggregate maximum amount of $8,250,000 (the "AGGREGATE LOAN AMOUNT") in
accordance with the terms of this Agreement.
(a) REVOLVING CREDIT. A revolving credit facility (the "REVOLVING
CREDIT") in the maximum amount of $7,500,000 (the "REVOLVING
CREDIT AMOUNT"), provided, however, the aggregate principal
balance outstanding at any one time under the Revolving Credit
shall not exceed $5,000,000 unless and until the Borrower has
made a Mandatory Prepayment (as defined hereinafter) in an amount
equal to the then outstanding principal balance of and accrued
but unpaid interest owing on the Term Loan (as defined
hereinafter) as a result of an IPO (as defined hereinafter).
Proceeds of the Revolving Credit shall be used (i); together with
the proceeds of the Term Loan (as defined hereinafter), to repay
on the Closing Date the then outstanding principal balance and
accrued but unpaid interest owing on certain indebtedness (the
"PRIOR BANK INDEBTEDNESS") from the Borrower to the Bank pursuant
to that certain Amended and Restated Loan Agreement dated
September 3, 1998, between the Borrower and the Bank, as amended
by that certain Second Amendment to the Loan Agreement dated May
13, 1999 (the "1998 LOAN AGREEMENT"), except the then outstanding
principal balance and accrued but unpaid interest owing on that
Equipment Line Note (as defined in the 1998 Loan Agreement, the
"PRIOR EQUIPMENT LINE NOTE"), and (ii) to finance the Borrower's
working capital requirements; provided, however, advances under
the Revolving Credit shall be available to the Borrower only to
the extent provided in Section (2)(d)(i) below. Advances under
the Revolving Credit may be borrowed, repaid and re-borrowed at
any time prior to the Revolving Credit Maturity Date.
2
(b) EQUIPMENT LINE. A convertible line of credit facility (the "EQUIPMENT
LINE") in the maximum amount of $750,000 (the "EQUIPMENT LINE AMOUNT")
that shall be used (i) to repay on the Closing Date the then
outstanding principal balance and accrued but unpaid interest owing on
the Prior Equipment Line Note, and (ii) to finance up to 90% of the
invoice amount of new equipment purchased by the Borrower during the
period commencing 30 days prior to the Closing Date and ending on the
day immediately prior to the Conversion Date. After the funding to
occur on the Closing Date, the balance of the principal amount
available under the Equipment Line shall be advanced to the Borrower
in accordance with the provisions of Sections 2(d)(ii) and 2(e)(ii)
below. No amount borrowed under the Equipment Line may be re-borrowed
after being repaid.
(c) TERM LOAN. A term loan (the "TERM LOAN") in the maximum amount of
$2,500,000 (the "TERM LOAN AMOUNT"). Proceeds of the Term Loan shall
be available to the Borrower in a single advance on the Closing Date
and shall be used, together with the proceeds of the Revolving Credit,
to repay on the Closing Date the then outstanding principal balance
and accrued but unpaid interest owing on the Prior Bank Indebtedness.
No amount borrowed under the Term Loan may be re-borrowed after being
repaid.
2. TERMS AND CONDITIONS. The Revolving Credit, the Equipment Line and
the Term Loan shall have the following terms:
(a) MATURITY AND CONVERSION DATES.
(i) REVOLVING CREDIT. The Revolving Credit will mature on December
10, 2001 (the "REVOLVING CREDIT MATURITY DATE").
(ii) EQUIPMENT LINE. On June 8, 2000 (the "CONVERSION DATE") all
amounts then outstanding under the Equipment Line will convert to
a single term loan that will be amortized in equal monthly
installments of principal, plus accrued interest, over a period
of thirty-six (36) months with payments due on the 1st day of
each month commencing on July 1, 2000.
(iii) TERM LOAN. The outstanding principal on the Term Loan shall be
due and payable in two equal installments, the first of which
shall be due and payable on June 10, 2001, with the remaining
outstanding principal, together with accrued and unpaid interest
thereon shall be due and payable on December 10, 2001 (the "TERM
LOAN MATURITY DATE"); provided, however, that principal shall be
due and payable earlier upon the occurrence of a
-2-
3
Mandatory Prepayment (as defined hereinafter) or of an Event of
Default.
(b) INTEREST RATE.
(i) REVOLVING CREDIT. Each advance outstanding under the Revolving Credit
shall bear interest at a rate per annum equal to the sum of the Base
Rate (as defined hereinafter) and 0.50%, but in no event greater than
the maximum rate permitted by law. Interest will be computed on the
basis of a 360 day year and for the actual days elapsed.
(ii) EQUIPMENT LINE. The principal amount from time to time outstanding
under the Equipment Line prior to the Conversion Date, and the
principal amount outstanding on the Equipment Line from and after the
Conversion Date, shall bear interest at a rate per annum equal to the
sum of the Base Rate and 0.75%, but in no event greater than the
maximum rate permitted by law. Interest will be computed on the basis
of a 360 day year and for the actual days elapsed.
(iii) TERM LOAN. The principal amount outstanding on the Term Loan shall
bear interest at a rate per annum equal to the sum of the Base Rate
and 2.25%, but in no event greater than the maximum rate permitted by
law. Interest will be computed on the basis of a 360 day year and for
the actual days elapsed.
(iv) For purposes hereof, the term "BASE RATE" means the lesser of (A) the
Bank's Prime Rate (as defined hereinafter) and (B) the sum of the
Federal Fund's Effective Rate (as defined hereinafter) and 2.0%.
For purposes hereof, the term "PRIME RATE" means the rate of interest
per annum announced by the Bank from time to time as its prime rate.
The Prime Rate is not tied to any external rate or index and does not
necessarily reflect the lowest rate of interest actually charged to
any particular class or category of customers of the Bank. If and when
the Prime Rate changes, the rate of interest on the Loans bearing
interest at the Prime Rate will change automatically without notice to
the Borrower, effective on the date of any such change.
For purposes hereof, the term "FEDERAL FUNDS EFFECTIVE RATE" means,
for any day, the weighted average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the rates on overnight
-3-
4
Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding
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
(rounded upwards, if necessary, to the next 1/100 of 1%) of the
quotations for such day for transactions received by the Bank from
three Federal funds brokers of recognized standing selected by the
Bank.
For purposes hereof, the term "BUSINESS DAY" means any day other than
a Saturday, Sunday or public holiday under the laws of the
Commonwealth of Pennsylvania.
(c) FEES.
The Borrower shall pay to the Bank at Closing (i) $5,000 representing a
facility fee in respect of the Revolving Credit (the "REVOLVING CREDIT
FACILITY FEE"), and (ii) $25,000 representing a facility fee in respect of
the Term Loan (the "TERM LOAN FACILITY FEE" and, collectively with the
Revolving Credit Facility Fee, the "FACILITY FEES").
(d) BORROWING BASE/AVAILABILITY.
(i) REVOLVING CREDIT. Proceeds of the Revolving Credit shall be available
to the Borrower from time to time prior to the Revolving Credit
Maturity Date only in amounts determined in accordance with the
Borrowing Base Rider; provided, however, that, at any time while any
amount of principal shall be outstanding on the Term Loan, advances on
the Revolving Credit shall not exceed $5,000,000.
(ii) EQUIPMENT LINE. The proceeds of the Equipment Line shall be available
to the Borrower in a single advance prior to the Conversion Date in an
amount not less than (A) $200,000 determined in accordance with an
equipment line request to be submitted to the Bank by the Borrower in
the form attached as Exhibit B (the "EQUIPMENT LINE REQUEST") or (B)
the amount available under the Equipment Line after repayment of the
Prior Equipment Line Note on the Closing Date, which amount is the
lesser.
(iii) TERM LOAN. All of the proceeds of the Term Loan shall be available to
the Borrower on the Closing Date.
-4-
5
(e) REQUESTS.
(i) REVOLVING CREDIT. Except as otherwise provided herein, the
Borrower may from time to time prior to the Revolving Credit
Maturity Date, request the Bank to make a loan under the Revolving
Credit, by making a telephonic request to the Bank (each a "LOAN
REQUEST"), not later than 12:00 noon Pittsburgh time on the Business
Day that the loan is to be made, which shall be immediately
confirmed in writing in a form acceptable to the Bank and delivered
by mail, facsimile or telex, it being understood that the Bank may
rely on the authority of any individual making such a telephonic
request without the necessity of receipt of such written
confirmation. Each Loan Request shall be irrevocable and (A) shall
specify (i) the proposed borrowing date, and (ii) the amount of the
requested loan, which shall not exceed the Revolving Credit, and (B)
shall be accompanied by a duly executed and properly completed
Borrowing Base Certificate in the form attached to the Borrowing
Base Rider.
(ii) EQUIPMENT LINE. Except as otherwise provided herein, the Borrower
may prior to the Conversion Date request the Bank to make a loan
under the Equipment Line by delivery to the Bank of a duly executed
and properly completed Equipment Line Request, accompanied by
supporting invoices, not less than one (1) day prior to the date of
the proposed borrowing date and by otherwise following the request
procedures in Section 2(e)(i) above.
(f) NOTES.
The obligation of the Borrower to repay loans under the Revolving Credit,
together with interest thereon, shall be evidenced by a single line of
credit note of the Borrower (the "REVOLVING CREDIT NOTE") payable to the
order of the Bank in a face amount equal to the Revolving Credit Amount.
The obligation of the Borrower to repay the advance under the Equipment
Line, together with interest thereon, shall be evidenced by a single
convertible equipment loan note (the "CONVERTIBLE EQUIPMENT LOAN NOTE")
payable to the order of the Bank in a face amount equal to the Equipment
Line Amount. The obligation of the Borrower to the Term Loan, together
with interest thereon, shall be evidenced by a promissory note (the "TERM
LOAN NOTE" and, together with the Revolving Credit Note and the
Convertible Equipment Loan Note, collectively, the "NOTES"). All loans
evidenced by the Notes and all payments of the principal thereof and
interest thereon and the respective dates thereof shall be recorded in the
books and records of the Bank; provided, however, that
-5-
6
the failure of the Bank to make such a notation or any error in
such a notation shall not affect the obligations of the Borrower
under the Notes.
(g) MANDATORY PREPAYMENTS. From the date hereof through the Term Loan
Maturity Date, each of the following events, (A) a sale of a
material portion of the assets of the Borrower not in the
ordinary course of business or (B) an Initial Public Offering (as
defined hereinafter), will trigger a mandatory prepayment in an
amount equal to the proceeds realized by the Borrower from such
event up to the maximum aggregate amount of the outstanding
principal balance of the Term Loan and accrued interest thereon
(each a "MANDATORY PREPAYMENT"). For purposes hereof, the term
"INITIAL PUBLIC OFFERING" means the Borrower's first firm
commitment underwritten public offering of the its common stock
registered under the Securities Act of 1933.
(h) ADDITIONAL EXIMBANK TERMS.
Additional terms related to the Revolving Credit may be reflected
in an Eximbank Borrower Agreement (as defined in the Borrowing
Base Rider). Upon execution of an Eximbank Borrower Agreement,
the terms thereof shall be incorporated herein in their entirety
and the principal amount available to the Borrower from time to
time under Revolving Credit shall be reduced by then outstanding
principal balance owing under the Eximbank Borrower Agreement,
except as otherwise provided to the contrary in the Eximbank
Borrower Agreement.
3. SECURITY. To secure repayment of the Loan, the Borrower shall
contemporaneously execute and deliver to the Bank the Security Agreement
(including any Riders thereto) (the "SECURITY DOCUMENTS"), which shall secure
repayment of the Loan, the Notes and all other loans, advances, debts,
liabilities, obligations, covenants and duties owing by the Borrower to the Bank
of any kind or nature, present or future, whether or not evidenced by any note,
guaranty or other instrument, whether arising under this Agreement or any other
agreement, instrument or document, whether or not for the payment of money,
whether arising by reason of an extension of credit, opening of a letter of
credit, loan or guarantee or in any other manner, whether arising out of
overdrafts on deposit or other accounts or electronic funds transfers
(whether through automatic clearing houses or otherwise) or out of the Bank's
non-receipt of or inability to collect funds or otherwise not being made whole
in connection with depository transfer check or other similar arrangements,
whether direct or indirect (including those acquired by assignment or
participation), absolute or contingent, joint or several, due or to become due,
now existing or hereafter arising, and any amendments, extensions, renewals or
increases and all reasonable costs and expenses of the Bank incurred in the
documentation, negotiation, modification, enforcement, collection or otherwise
in connection with any of the foregoing, including but not limited to reasonable
attorneys' fees and expenses (hereinafter referred to collectively as the
"OBLIGATIONS"). Unless expressly provided to the contrary in documentation for
any other loan or loans, it is the express intent of the Bank and the Borrower
-6-
7
that all Obligations including those included in the Loan be
cross-collateralized and cross-defaulted, such that collateral securing any of
the Obligations shall secure repayment of all Obligations and a default under
any Obligation shall be a default under all Obligations. This Agreement
(including the Addendum), the Notes, the Security Documents and all other
documents executed and delivered in connection herewith or related hereto are
collectively referred to as the "LOAN DOCUMENTS."
4. REPRESENTATIONS AND WARRANTIES. The Borrower hereby makes the
following representations and warranties, which shall be continuing in nature
and remain in full force and effect until the Obligations are paid in full, and
which shall be true and correct except as otherwise set forth on the Addendum
attached hereto and incorporated herein by reference (the "ADDENDUM").
4.1. EXISTENCE, POWER AND AUTHORITY. The Borrower is duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and has the corporate power and authority to own and operate
its assets and to conduct its business as now or proposed to be carried on,
and is duly qualified, licensed and in good standing to do business in all
jurisdictions where its ownership of property or the nature of its business
requires such qualification or licensing, except where the failure to be so
qualified or licensed would not have a material adverse effect on the
business, operations, or financial condition, or results of operations or
prospects of the Borrower. The Borrower is duly authorized to execute and
deliver the Loan Documents, all necessary corporate action to authorize the
execution and delivery of the Loan Documents has been properly taken, and
the Borrower is and will continue to be duly authorized to borrow under
this Agreement and to perform all of the other terms and provisions of the
Loan Documents. The Borrower is a corporation incorporated under the law of
the Commonwealth of Pennsylvania. The individuals who represent themselves
to the Bank as holding one or more of the executive officer positions with
the Borrower listed in the Addendum hereto (each an "AUTHORIZED OFFICER")
shall be authorized to execute and deliver on behalf of the Borrower the
certifications contemplated under this Agreement to be delivered in the
future.
4.2. FINANCIAL STATEMENTS. The Borrower has delivered or caused to be
delivered to the Bank its audited balance sheet and income statement and
audited statement of results of operations for the period ending December
31, 1998 (the "DECEMBER 1998 FINANCIAL STATEMENTS"), and its unaudited
interim management financial statements as of March 31, 1999 (the "MARCH
1999 FINANCIAL STATEMENTS"), June 30, 1999 (the "JUNE 1999 FINANCIAL
STATEMENTS"), and September 30, 1999 (the "SEPTEMBER 1999 FINANCIAL
STATEMENTS," and, together with the December 1998 Financial Statements, the
March 1999 Financial Statements and the June 1999 Financial Statements, are
true, complete and accurate in all material respects and fairly present the
financial condition, assets and liabilities, whether accrued, absolute,
contingent or otherwise and the result of the Borrower's operations for the
period specified therein. The
-7-
8
Historical Financial Statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied from period to
period.
4.3. NO MATERIAL ADVERSE CHANGE. Since September 30, 1999, the Borrower
has not suffered any damage, destruction or loss to any material portion of its
assets (tangible or intangible), and no event or condition has occurred or
exists, which has resulted or could reasonably be expected to result in a
material adverse change in its business, assets, operations, financial
condition, results of operations or prospects.
4.4. BINDING OBLIGATIONS. The Borrower has full corporate power and
authority to enter into the transactions provided for in this Agreement and has
been duly authorized to do so by appropriate action of its Board of Directors
and there are no consents, approvals or waivers required that have not been
obtained. The Loan Documents, when executed and delivered by the Borrower, will
constitute the legal, valid and binding obligations of the Borrower
enforceable in accordance with their terms, except as such enforceability may
be limited by bankruptcy; insolvency, reorganization or similar laws relating
to or limiting creditors' rights generally or by equitable principles relating
to enforceability.
4.5. NO DEFAULTS OR VIOLATIONS. There does not exist any Event of Default
under this Agreement, or any event, fact or circumstance that, with the
delivery of notice, passage of time, or both would constitute any Event of
Default under this Agreement, or any material default or violation by the
Borrower of or under any of the terms, conditions or obligations of: (i) its
articles or certificate of incorporation or bylaws; (ii) any indenture,
mortgage, deed of trust, franchise, permit, contract, agreement, or other
instrument to which it is a party or by which it or its assets are bound; or
(iii) any law, regulation, ruling, order, injunction, decree, condition or
other requirement applicable to or imposed upon or against the Borrower or its
assets by any law, the action by any court or any governmental authority or
agency; and the consummation of this Agreement and the transactions set forth
herein will not result in any such default or violation.
4.6. TITLE TO ASSETS. Except for assets disposed of by the Borrower in
the ordinary course of business since September 30, 1999, the Borrower has good
title to or a valid leasehold interest in the assets reflected on the September
1999 Financial Statements, free and clear of all liens and encumbrances, except
for (I) current taxes and assessments not yet due and payable, (ii) liens and
encumbrances, if any, reflected or noted in the September 1999 Financial
Statements, (iii) those liens or encumbrances specified on the Addendum, (iv)
liens securing the payment of taxes or other governmental charges not yet
delinquent or being contested in good faith by appropriate proceeding, for
which adequate reserves are maintained in accordance with generally accepted
accounting principles; (v) liens securing claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like persons imposed
without action of such parties, provided that the payment thereof is not yet
required; (vi) liens incurred or deposits made in the ordinary course of the
Borrower's or a subsidiary's
-8-
9
business in connection with worker's compensation, unemployment insurance,
social security and other like laws; (vii) non-exclusive licenses and
sublicenses of its Patent, Trademarks and Copyrights (each as defined in the
Security Agreement) granted to others in the ordinary course of business; (viii)
liens arising from judgments, decrees or attachments to the extent and only so
long as such judgment, decree or attachment has not caused or resulted in an
Event of Default; (ix) liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with the
importation of goods; (x) liens which constitute rights of set-off of a
customary nature or bankers' liens with respect to amounts on deposit, whether
arising by operation of law or by contract, in connection with arrangements
entered into with banks in the ordinary course of business; (xi) those other
liens and encumbrances that do not individually or in the aggregate materially
diminish the value of the assets or impair their use in the Borrower's business
as it is currently conducted; or (xii) those liens and encumbrances in favor of
or approved by the Bank (the liens and encumbrances described in the foregoing
clauses hereof being hereinafter collectively called the "PERMITTED LIENS").
4.7. LITIGATION. There are no actions, suits, proceedings or governmental
investigations pending or, to the Borrower's knowledge, threatened against the
Borrower, which could reasonably be expected to result in a material adverse
change in its business assets, operations, financial condition, results of
operations or prospects and there is no basis known to the Borrower for any
action, suit, proceedings or investigation which could reasonably be expected
to result in such a material adverse change. All litigation pending against the
Borrower or litigation threatened against the Borrower of which Borrower has
knowledge is listed on the Addendum.
4.8. TAX RETURNS. The Borrower has filed all returns and reports that are
required to be filed by it in connection with any federal, state or local tax,
duty or charge levied, assessed or imposed upon it or its property withheld by
it, including unemployment, social security and similar taxes and all of such
taxes, have been either paid or adequate reserves or other provision for the
payment thereof have been made.
4.9. EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which the
Borrower may have any liability complies in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974,
as amended from time to time ("ERISA"), including minimum funding requirements,
and form (i) no Prohibited Transaction (as defined under Section 4043 of ERISA)
has occurred with respect to any such plan which would cause the Pension
Benefit Guaranty Corporation to institute proceedings under Section 4042 of
ERISA, (iii) the Borrower has not withdrawn from any such plan or initiated
steps to do so, and (iv) no steps have been taken to terminate any such plan.
4.10. ENVIRONMENTAL MATTERS. The Borrower is (or, in respect of prior owned
or operated real property, was) in compliance, in all material respects, with
all
-9-
10
Environmental Laws, including, without limitation, all Environmental Laws in
jurisdictions in which the Borrower owns or operates or has owned or operated a
facility or site, stores or has stored Collateral, arranges or has arranged for
a disposal or treatment of hazardous substances, solid waste or other waste,
accepts or has accepted for transport any hazardous substances, solid waste or
other wastes or holds or has held any interest in real property or otherwise.
No litigation or proceeding arising under, relating to or in connection with
any Environmental Law is pending or, to the best of the Borrower's knowledge,
threatened against the Borrower, any real property which the Borrower holds or
has held an interest or any past or present operation of the Borrower. To the
Borrower's knowledge, no release, threatened release or disposal of hazardous
waste, solid waste or other wastes in material violation of any Environmental
Law is occurring, or to the Borrower's knowledge has occurred, on, under or to
any real property in which the Borrower holds any interest or performs any of
its operations. As used in this Section, "LITIGATION OR PROCEEDING" means any
demand, claim notice, suit, suit in equity, action, administrative action,
investigation or inquiry whether brought by a governmental authority or other
person, and "ENVIRONMENTAL LAWS" means all provisions of laws, statutes,
ordinances, rules, regulations, permits, licenses, judgments, writs,
injunctions, decrees, orders, awards and standards promulgated by any
governmental authority concerning health, safety and protection of, or
regulation of the discharge of substances into, the environment.
4.11 INTELLECTUAL PROPERTY. The Borrower owns or has a valid and
enforceable right to use free and clear of all liens and encumbrances except
Permitted Liens all patents and patent rights necessary for the conduct of its
business as currently conducted that are material to the condition, business or
operations of the Borrower. To the knowledge of Borrower, Borrower owns or has
a valid and enforceable right to use all trademarks, trade names, service
marks, copyrights, intellectual property, technology, know-how and processes
necessary for the conduct of its business as currently conducted that are
material to the condition (financial or otherwise), business or operations of
the Borrower free and clear of all liens and encumbrances except Permitted
Liens.
4.12 REGULATORY MATTERS. No part of the proceeds of the Loan will be used
"purchasing" or "carrying" any "margin stock" within the respective meanings of
each of the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time in effect or for any
purpose which violates the provisions of the Regulations of such Board of
Governors.
4.13 SOLVENCY. As of the date hereof and after giving effect to the
transactions contemplated by the Loan Documents, (i) the aggregate value of the
Borrower's assets will exceed its liabilities (including contingent liabilities
of which the Borrower is aware, subordinated, unmatured and unliquidated
liabilities), (ii) the Borrower will have sufficient cash flow to enable it to
pay its debts as they mature, and (iii) the Borrower will not have unreasonably
small capital for the business in which it is engaged.
-10-
11
4.14. YEAR 2000. The Borrower has reviewed the areas within its
business and operations which could be adversely affected by, and has
developed and is implementing a program to address on a timely basis the
risk that certain computer applications used by the Borrower may be unable
to recognize and perform properly date-sensitive functions involving dates
prior to and after December 31, 1999 (the "YEAR 2000 PROBLEM"). The
Borrower does not expect the Year 2000 Problem to have a material adverse
effect on the business, assets, operations, financial condition, or results
of operations or prospects of the Borrower.
4.15. DISCLOSURE. None of the Loan Documents contains any untrue
statement of material fact or omits to state a material fact necessary in
order to make the statements contained in this Agreement or the Loan
Documents not misleading. There is no fact known to the Borrower which
materially adversely affects or is reasonably likely to materially affect,
the business, assets, operations, financial condition, or results of
operations or prospects of the Borrower and which has not otherwise been
fully set forth in this Agreement, the Addendum or in the other Loan
Documents. Each of the certificates delivered or to be delivered by the
Borrower or any of its officers pursuant to the terms of this Agreement
will be true and accurate and complete in all material respects.
5. AFFIRMATIVE COVENANTS. The Borrower agrees that from the date of
execution of this Agreement until all Obligations have been fully paid and any
commitments of the Bank to the Borrower have been terminated, the Borrower will:
5.1. BOOKS AND RECORDS. Maintain accurate and complete books
and records. The Borrower will give representatives of the Bank access to
books and records of account at all reasonable times, including permission
to examine, copy and make abstracts from any of such books and records and
such other information as the Bank may from time to time reasonably
request, and the Borrower will make available to the Bank upon request for
examination copies of any reports, statements or returns which the Borrower
may make to or file with any governmental department, bureau or agency,
federal or state. So long as an Event of Default does not exist, the Bank
shall give reasonable notice prior to conducting any examination under the
preceding sentence and only one of such examinations shall be conducted at
the Borrower's expense in any calendar year. The Bank shall treat as
confidential all non-public information contained in such books and
records; provided, however, that if the Bank is required to disclose
confidential information pursuant to a court order, subpoena or similar
process, prior to disclosure the Bank shall: (i) promptly provide the
Borrower with a copy of the court order or subpoena; (ii) cooperate with
the Borrower at the Borrower's expense in obtaining a protective or similar
order; and (iii) in any event, disclose only such confidential information
as the Bank, with the advice of its counsel, shall deem necessary to comply
with such court order or subpoena.
5.2. INTERIM FINANCIAL STATEMENTS: ACCOUNTS RECEIVABLE AND
CERTIFICATES. Furnish the Bank within 20 days after the end of each month a
detailed
-11-
12
report on its accounts receivable aging and accounts payable aging in such
reasonable detail consistent with the form currently used by the Borrower's
management. The Borrower shall provide within 20 days of the end of each month
its Financial Statements (as defined hereinafter) for such period, in
reasonable detail, certified by an Authorized Officer of the Borrower and
prepared in accordance with GAAP consistently applied from period to period.
Such certification shall accompany the Financial Statements and shall be in the
form attached hereto as Exhibit C, each of which shall report whether the
Borrower has complied with all applicable financial covenants for the period
then ended and whether any Event of Default exists, and, if the Borrower
reports that it has not complied or an Event of Default exists, then such
certification shall state the nature thereof and the corrective measures the
Borrower proposes to take. "FINANCIAL STATEMENTS" means the Borrower's
consolidated and, if required by the Bank in its sole discretion, consolidating
balance sheets, income statements and statements of cash flows for the year,
month or quarter together with year-to-date figures and comparative figures for
the corresponding periods of the prior year. The Borrower shall also deliver an
updated Borrowing Base Certificate within 20 days of month end.
5.3 ANNUAL FINANCIAL STATEMENTS. Furnish the Borrower's Financial
Statements for each annual period ending December 31 (the "ANNUAL FINANCIAL
STATEMENTS") to the Bank within 120 days after the end of each fiscal year
beginning with the fiscal year ending December 31, 1999. The Annual Financial
Statements will be prepared in accordance with GAAP and audited by the
independent certified public accounting firm that audited the December 1998
Financial Statements or by another independent certified public accounting firm
of national standing selected by the Borrower. The audited Annual Financial
Statements shall contain the unqualified opinion of such independent certified
public accountant satisfactory to the bank and its examination shall have been
made in accordance with GAAP consistently applied from period to period. The
Borrower will also provide projections, forecasts, financial pro formas and
such other information reasonably requested by the Bank from time to time.
5.4 PAYMENT OF TAXES AND OTHER CHARGES. Pay and discharge when due all
indebtedness and all taxes, assessments, charges, levies and other liabilities
imposed upon the Borrower, its income, profits, property or business, except
those which currently are being contested in good faith by appropriate
proceedings and for which the Borrower shall have set aside adequate reserves
in accordance with GAAP or made other adequate provision with respect thereto
acceptable to the Bank in its reasonable discretion.
5.5 MAINTENANCE OF EXISTENCE, OPERATION AND ASSETS. Do all things
necessary to maintain, renew and keep in full force and effect its
organizational existence and all rights, permits and franchises necessary to
enable it to continue its business; continue in operation in substantially the
same manner as at present; keep its properties in good operating condition and
repair; and make all necessary and proper repairs, renewals, replacements,
additions and improvements thereto.
-12-
13
5.6. INSURANCE. Maintain with financially sound and reputable insurers
insurance with respect to its property and business against such casualties and
contingencies, of such types and in such amounts as is customary for established
companies engaged in the same or similar business and similarly situated and in
conformity with the requirements of Section 4(j) of the Security Agreement.
5.7. COMPLIANCE WITH LAWS. Comply in all material respects with all laws
applicable to the Borrower and to the operation of its business (including any
statute, rule or regulation relating to employment practices and pension
benefits or to environmental, occupational and health standards and controls).
5.8. FINANCIAL COVENANTS. Comply with all of the financial and other
covenants, if any, set forth on the Addendum.
5.9. ADDITIONAL REPORTS. Provide prompt written notice to the Bank of the
occurrence of any of the following of which the Borrower obtains knowledge
(together with a description of the action which the Borrower proposes to take
with respect thereto): (i) any Event of Default or an event or circumstance that
with the passage of time, provision of notice or both would constitute an Event
of Default, (ii) any litigation filed by or against the Borrower claiming in
excess of $50,000, (iii) any Reportable Event or Prohibited Transaction with
respect to any Employee Benefit Plan(s) (as defined in ERISA) or (iv) any event
which is reasonably expected to result in a material adverse change in the
business, assets, operations, financial condition or results or operation of the
Borrower.
5.10. MEETING OF DIRECTORS. Upon the occurrence and continuation of an
Event of Default, the Borrower shall provide to the Bank copies of all reports
provided to the Board of Directors of the Borrower and the Bank shall be
entitled to attend meetings of the directors of the Borrowers of the purpose of
observing such proceedings, unless such attendance would be inappropriate as
determined in good faith by the Chairman of the Borrower's Board of Directors.
5.11. OPERATING ACCOUNTS. Maintain its primary depositary accounts with
the Bank.
5.12. OPINION OF BORROWER'S COUNSEL. Deliver to the Bank at Closing, or,
upon waiver of such delivery by the Bank, on or prior to the date fifteen (15)
days after the Closing, an opinion of Borrower's counsel in form and substance
reasonably satisfactory to the Bank and its counsel.
14
6. NEGATIVE COVENANTS. The Borrower covenants and agrees that from the
date of execution of this Agreement until all Obligations have been fully paid
and any commitments of the Bank to the Borrower have been terminated, the
Borrower will not, except as set forth in the Addendum, without the Bank's prior
written consent not to be unreasonably withheld:
6.1. INDEBTEDNESS. Incur any indebtedness for borrowed money other
than: (i) the Loan and any subsequent indebtedness to the Bank, and (ii)
existing indebtedness disclosed on the September 1999 Financial Statements
referred to in Section 4.2.
6.2 LIENS AND ENCUMBRANCES. Except for Permitted Liens, create,
assume or permit to exist any mortgage, pledge, encumbrance or other
security interest or lien upon any assets now owned or hereafter acquired
or enter into any lease or any arrangement for the acquisition of property
subject to any conditional sales agreement, other than security interests
granted in connection with indebtedness permitted under Section 6.1 hereof.
6.3. GUARANTEES. Guarantee, endorse or become contingently liable for
the obligations of any person, firm or corporation, except in connection
with the endorsement and deposit of checks in the ordinary course of
business for collection.
6.4. LOANS, INVESTMENTS OR ADVANCES. Purchase or hold beneficially any
stock, other securities or evidences of indebtedness, or make any
investment or acquire any interest whatsoever in, any other person, firm or
corporation, except (i) investments disclosed on the September 1999
Financial Statements, or (ii) investments acceptable to the Bank in its
reasonable discretion or previously approved by the Bank in accordance with
the terms of the documents evidencing the Prior Bank Indebtedness;
provided, however, that the Borrower may in the ordinary course of business
extend (A) loans to employees or make other loans and advances which shall
not at any time exceed in the aggregate $100,000 and (B) loans to
management employees which are directly related to relocation expenses
incurred by such management employees and which do not exceed $15,000 with
respect to any single employee or $50,000 in the aggregate outstanding at
any time.
6.5. MERGER OR TRANSFER OF ASSETS. Merge or consolidate with or into
any person, firm or corporation or lease, sell, transfer or otherwise
dispose of all, or substantially all, of its property, assets and business
whether now owned or hereafter acquired; except for a merger, consolidation
or dissolution of Xxxxxx Group, Inc. provided that the Borrower is the
survivor in any such merger or consolidation.
6.6. CHANGE IN BUSINESS, MANAGEMENT OR OWNERSHIP. Make or permit any
material change (i) in the nature of its business as carried on as of the
date hereof, (ii) in the composition of its current executive management,
as described in the Addendum hereto; or (iii) in its equity ownership other
than transfers to heirs and
-14-
15
beneficiaries of a stockholder upon the death of a stockholder or in connection
with an Initial Public Offering.
6.7 DIVIDENDS. Declare or pay any cash dividends on or make any cash
distribution with respect to any class of its equity or ownership interest, or
purchase, redeem, retire or otherwise acquire any of its equity other than in
connection with employee repurchase agreements entered into by the Borrower
pursuant to the grant of stock options or stock grants issued to employees under
a stock option plan approved by the Borrower's Board of Directors.
7. EVENTS OF DEFAULT; REMEDIES
7.1 EVENT OF DEFAULT. The occurrence of any of the following will be
deemed to be an "EVENT OF DEFAULT":
(a) PAYMENT DEFAULT. The Borrower shall fail to pay any payment of
principal when due or any payment of interest within five (5) calendar
days following the date when due, in respect of the Obligations.
(b) MATERIAL ADVERSE CHANGE. There shall be a material adverse change in
the business, operations, assets, financial condition or results of
operations of Borrower.
(c) COVENANT DEFAULT. The borrower shall default in the performance of, or
violate any of, the covenants or agreements contained in this
Agreement (other than the Obligation to pay principal and interest on
the Notes) and, if capable of being cured, such default or violation
shall continue uncured for a period of fifteen (15) calendar days
after written notice thereof is given to the Borrower by the Bank.
(d) BREACH OF WARRANTY. Any Financial Statement, representation, warranty
or certificate made or furnished by the Borrower to the Bank in
connection with this Agreement shall be false, incorrect or incomplete
in any material respect when made.
(e) BANKRUPTCY OR INSOLVENCY. A proceeding shall have been instituted in a
court having jurisdiction over the Borrower seeking a decree or order
for relief in respect of Borrower in an involuntary case under any
applicable bankruptcy, insolvency reorganization or other similar law
and such involuntary case shall remain undismissed or unstayed and in
effect for a period of thirty (30) consecutive days, or Borrower shall
commence a voluntary case under any such law or consent to the
appointment of a
-15-
16
receiver, liquidator, assignee, custodian, trustee, sequestrator,
conservator (or other similar official).
(f) OTHER DEFAULT. The occurrence of an Event of Default as defined
in the Notes or any of the Security Documents.
7.2. REMEDIES. Upon the occurrence of an Event of Default
described in Section 7.1(e), the principal of and accrued interest and all
other amounts due and owing on the Loan (if not then due and payable) shall
become due and payable immediately, with presentment, demand, notice,
protest, declaration or any other requirement of any kind, all which the
Borrower expressly waives. Upon the occurrence and continuance of an Event
of Default other than as described in Section 7.1(e), the Bank may provide
written notice to the Borrower stating that an Event of Default has
occurred and declaring that the principal of and accrued interest and all
other amounts due and owing on the Loan (if not then due and payable) shall
become due and payable immediately, without any further notice,
presentment, demand, protest, declaration or other requirement of any kind,
all of which the Borrower expressly waives. Upon the occurrence and
continuance of an Event of Default, and irrespective of whether the Loan
has been declared due and payable pursuant to the immediately preceding
sentence, the Bank will have all rights and remedies specified in the Notes
and the Security Documents and all rights and remedies (which are
cumulative and not exclusive) available under applicable law or in equity.
Upon the occurrence and continuance of an Event of Default, the Bank may
notify any persons who are account debtors of the Borrower to submit all
payments in respect of the Borrower's accounts receivable directly to the
Bank and shall provide written notice to the Borrower that it has done so.
8. CONDITIONS. The closing of the loan shall take place at such
place and on such date (the "CLOSING DATE") as the Borrower and the Bank
shall mutually agree. The Bank's obligation to make any advance or fund any
draw under the Loan is subject to the conditions that as of the date of the
advance:
8.1. NO EVENT OF DEFAULT. No Event of Default or fact, event or
circumstance which with the passage of time, provision of notice or both
would constitute an Event of Default shall have occurred and be continuing.
8.2. AUTHORIZATION DOCUMENTS. The Bank shall have been furnished
certified copies of resolutions of the Borrower's Board of Directors
authorizing the execution of this Agreement, the Note or any of the
Security Documents; or other proof of authorization satisfactory to the
Bank.
8.3. RECEIPT OF LOAN DOCUMENTS AND WARRANT. The Bank shall have
received the Loan Documents and such other instruments and documents which
the Bank may reasonably request in connection with the transactions
provided for in this
17
Agreement. As additional consideration for the extension of credit under
the Loan, the Borrower has agreed to issue to the Bank a warrant to
purchase up to 80,000 shares of the Borrower's common stock at a price per
share of $3.75, which price the Borrower represents to the Bank to be the
price per share paid by outside investors in the most recent offering by
the Borrower of shares of its preferred stock, which price will be subject
to adjustment from time to time upon the occurrence of certain events and
contingencies. On the Closing Date and as a condition to Closing, the
Borrower shall deliver to the Bank a duly signed warrant certificate in
form and substance reasonably satisfactory to the Bank and its counsel.
8.4 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Borrower to the Bank shall be true and correct in all
respects.
8.5 OPENING BALANCE SHEET. The Borrower shall furnish the Bank with
its Opening Balance Sheet. "OPENING BALANCE SHEET" means the balance sheet
of the Borrower dated September 30, 1999.
8.6 EQUIPMENT LINE. On or prior to a draw under the Equipment Line,
the Borrower shall deliver to the Bank invoices supporting the invoice cost
amount included in the calculation of the first draw in accordance with
Exhibit B.
8.7 PAYMENT OF FEES. The Borrower shall have paid, to the extent
due, the Facility Fees.
9. EXPENSES. The Borrower agrees to pay the Bank, upon the closing of
this Agreement, and otherwise on demand, all reasonable and necessary legal and
filing costs and expenses incurred by the Bank in connection with the (i)
preparation, negotiation and delivery of this Agreement and the other Loan
Documents, and any modifications thereto, and (ii) collection of payments due
under the Loan or instituting, maintaining, preserving, enforcing and
foreclosing the security interest in any of the collateral securing the Loan,
whether through judicial proceedings or otherwise, including reasonable fees
and expenses of counsel, expenses for auditors, appraisers and environmental
consultants, lien searches, recording and filing fees and taxes.
10. INCREASED COSTS. Within thirty (30) days following written demand,
together with the written evidence of the justification therefor, the Borrower
agrees to pay the Bank, all direct costs incurred and any losses suffered or
payments made by the Bank as a consequence of making the Loan by reason of any
change in law or regulation or its interpretation imposing any reserve,
deposit, allocation of capital or similar requirement (including without
limitation, Regulation D of the board of Governors of the Federal Reserve
System) on the Bank, its holding company or any of their respective assets.
11. MISCELLANEOUS.
11.1 NOTICES. All notices, demands, requests, consents, approvals
and other communications required or permitted hereunder must be in writing
and will be
-17-
18
effective upon receipt if delivered personally to such party, or if sent by
facsimile transmission with confirmation of delivery, or by nationally
recognized overnight courier service, to the address set forth below or to such
other address as any party may give to the other in writing for such purpose:
To the Bank: To the Borrower:
PNC Bank, National Association ServiceWare, Inc.
000 Xxxxx Xxxxxx 000 Xxxxxxxxx Xxxxxx
00xx Xxxxx Xxxxxxx, XX 00000
Xxxxxxxxxx, XX 00000 Attention: Xxxxxxx XxXxxxx,
Attention: Xxxxxxx X. Xxxxxxx Chief Financial Officer
Facsimile No.: 000-000-0000 Facsimile No.: 000-000-0000
11.2 PRESERVATION OF RIGHTS. No delay or omission on the part of the
Bank to exercise any right or power arising hereunder will impair any such
right or power or be considered a waiver of any such right or power or any
acquiescence therein, nor will the action or inaction of the Bank impair any
right or power arising hereunder. The Bank's rights and remedies hereunder are
cumulative and not exclusive of any other rights or remedies which the Bank may
have under other agreements, at law or in equity.
11.3 ILLEGALITY. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
11.4 CHANGES IN WRITING. No modification, amendment or waiver of any
provision of this Agreement nor consent to any departure by the Borrower
therefrom, will in any event be effective unless the same is in writing and
signed by the Bank, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on the Borrower in any case will entitle the Borrower to any other or
further notice or demand in the same, similar or other circumstance.
11.5 ENTIRE AGREEMENT. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
11.6 COUNTERPARTS. This Agreement may be signed in any number of
counterpart copies and by the parties hereto on separate counterparts, but all
such copies shall constitute one and the same instrument.
11.7 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
inure to the benefit of the Borrower and the Bank and their respective,
successors and assigns; provided, however, that the Borrower may not assign
this Agreement in whole or
-18-
19
in part without the prior written consent of the Bank and the Bank at any time
may assign this Agreement in whole or in part.
11.8. INTERPRETATION. In this Agreement, unless the Bank and the Borrower
otherwise agree in writing, the singular includes the plural and the plural the
singular; words importing any gender include the other genders; references to
statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; the word "or"
shall be deemed to include "and/or," the words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections) or exhibits are
to those of this Agreement unless otherwise indicated; and references to
agreements and other contractual instruments shall be deemed to include all
subsequent amendments and other modifications to such instruments, but only to
the extent such amendments and other modifications are not prohibited by the
terms of this Agreement. Section headings in this Agreement are included for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose. Unless otherwise specified in this Agreement, all
accounting terms shall be interpreted and all accounting determinations shall be
made in accordance with GAAP. If this Agreement is executed by more than one
party as Borrower, the obligations of such persons or entities will be joint and
several.
11.9. INDEMNITY. The Borrower agrees to indemnify each of the Bank, its
directors, officers and employees and each legal entity, if any, which controls
the Bank (the "INDEMNIFIED PARTIES") and to hold each Indemnified Party harmless
from and against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, all fees of counsel with whom any Indemnified
Party may consult and all expenses of litigation or preparation therefor) which
any Indemnified Party may incur or which may be asserted against any Indemnified
Party in connection with or arising out of the matters referred to in this
Agreement or in the other Loan Documents by any person, entity or governmental
authority (including any person or entity claiming derivatively on behalf of the
Borrower), whether (a) arising from or incurred in connection with any breach of
a representation, warranty or covenant by the Borrower, or (b) arising out of or
resulting from any suit, action, claim, proceeding or governmental
investigation, pending or threatened, whether based on statute, regulation or
order, or tort, or contract or otherwise, before any court or governmental
authority, which arises out of or relates to this Agreement, any other Loan
Document, or the use of the proceeds of the Loan; provided, however, that the
foregoing indemnity agreement shall not apply to claims, damages, losses,
liabilities and expenses solely attributable to an Indemnified Party's gross
negligence or willful misconduct. The indemnity agreement contained in this
Section shall survive the termination of this Agreement, payment of any Loan and
assignment of any rights hereunder. The Borrower may participate at its expense
in the defense of any such action or claim.
11.10. TERMINATION; REINSTATEMENT. Except as otherwise provided in Section
9 and Section 11.9 and the other indemnification obligations and waivers under
-19-
20
the Loan Documents, this Agreement will terminate upon satisfaction of the
following events: (a) payment to the Bank in full (unconditionally and
indefeasibly) of all monetary Obligations due hereunder and under the Loan
Documents and (b) the termination of the Bank's commitment to lend under the
Revolving Credit; provided, however, that this Agreement and the other Loan
Documents will, to the maximum extent not prohibited by applicable law, be
reinstated and the Obligations correspondingly increased (as though such
payment(s) had not been made) if at any time any amount received by the Bank
in respect of any Obligations is rescinded or must otherwise be restored,
refunded or returned by the Bank to the Borrower or any other person or entity
(X) upon or as a result of the insolvency, bankruptcy, dissolution, liquidation
or reorganization of the Borrower or (Y) upon or as a result of the appointment
of any receiver, intervenor, conservator, trustee or similar official for the
Borrower or for any substantial part of the assets of the Borrower.
11.11. ASSIGNMENTS AND PARTICIPATION. At any time, without any notice to
the Borrower, the Bank may sell, assign, transfer, negotiate, grant
participation in, or otherwise dispose of all or any part of the Bank's
interest in the Loan. The Borrower hereby authorizes the Bank to provide,
without any notice to the Borrower, any information concerning the Borrower,
including information pertaining to the Borrower's financial condition,
business operations or general creditworthiness, to any person or entity not a
competitor of Borrower which may succeed to or participate in all or any part
of the Bank's interest in the Loan, provided that such person or entity agrees
to maintain the confidentiality of such information.
11.12. GOVERNING LAW.
THIS AGREEMENT HAS BEEN DELIVERED TO AN ACCEPTED BY THE BANK AND
WILL BE DEEMED TO BE MADE IN THE COMMONWEALTH OF PENNSYLVANIA. THIS AGREEMENT
WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO
DETERMINED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA,
EXCLUDING ITS CONFLICT OF LAWS RULES.
11.13. CHOICE OF FORUM.
THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT SEATED IN ALLEGHENY COUNTY OR THE
WESTERN DISTRICT OF PENNSYLVANIA, AND CONSENTS THAT ALL SERVICE OF PROCESS BE
SENT BY NATIONALLY RECOGNIZED OVERNIGHT COURIER SERVICE DIRECTED TO THE
BORROWER AT THE BORROWER'S ADDRESS SET FORTH HEREIN AND SERVICE SO MADE WILL BE
DEEMED TO BE COMPLETED ON THE BUSINESS DAY AFTER DEPOSIT WITH SUCH COURIER;
PROVIDED THAT NOTHING CONTAINED IN THIS AGREEMENT
-20-
21
WILL PREVENT THE BANK FROM BRINGING ANY ACTION, ENFORCING ANY AWARD OR JUDGMENT
OR EXERCISING ANY RIGHTS AGAINST THE BORROWER INDIVIDUALLY, AGAINST ANY
SECURITY OR AGAINST ANY PROPERTY OF THE BORROWER WITHIN ANY OTHER COUNTY, STATE
OR OTHER FOREIGN OR DOMESTIC JURISDICTION. THE BANK AND THE BORROWER AGREE THAT
THE VENUE PROVIDED ABOVE IS THE MOST CONVENIENT FORUM FOR BOTH THE BANK AND THE
BORROWER. THE BORROWER WAIVES ANY OBJECTION TO VENUE AND ANY OBJECTION BASED ON
A MORE CONVENIENT FORUM IN ANY ACTION INSTITUTED UNDER THIS AGREEMENT.
11.14. WAIVER OF JURY TRIAL.
EACH OF THE BORROWER AND THE BANK IRREVOCABLY WAIVES ANY AND ALL
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY
NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION WITH
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE
BORROWER AND THE BANK ACKNOWLEDGE THAT THE FOREGOING WAIVER IS KNOWING AND
VOLUNTARY.
THE BORROWER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE WAIVER OF JURY TRIAL, AND HAS BEEN
ADVISED BY COUNSEL AS NECESSARY OR APPROPRIATE.
[Signature Page to Follow]
-21-
22
WITNESS the due execution of this Loan Agreement as a document under seal,
as of the date first written above.
ATTEST: SERVICEWARE, INC.
By: /s/ Xxxxxxx XxXxxxx By: Xxxxx Xxxxx (SEAL)
---------------------------- -----------------------------
Print Name: Xxxxxxx XxXxxxx Print Name: Xxxxx Xxxxx
--------------------
Title: CFO Title: Chief Executive Officer
-------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Xxxxxxx X. Xxxxxxx (SEAL)
------------------------
Print Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
-22-
23
ADDENDUM to that certain Loan Agreement dated December 10, 1999, between
SERVICEWARE, INC., as the Borrower, and PNC BANK, NATIONAL ASSOCIATION, as the
Bank. Capitalized terms used in this Addendum and not otherwise defined shall
have the meanings given them in the Agreement.
FINANCIAL COVENANTS
1. The Borrower will not permit its Tangible Net Worth to be less than the
following amounts as of the end of each quarterly accounting period as
specified below:
Quarter Ending Tangible Net Worth
-------------- ------------------
December 31, 1999 $ 3,450,000
March 31, 2000 $ 4,200,000
June 30, 2000 $ 4,700,000
September 30, 2000 $ 6,300,000
December 31, 2000 $ 8,550,000
2. The Borrower shall have a minimum "Quick Ratio" at the end of each month
or quarterly accounting period as specified below:
Month/Quarter Ending Quick Ratio
-------------------- -----------
November 30, 1999 0.78
December 31, 1999 1.60
March 31, 2000 1.60
June 30, 2000 1.60
September 30, 2000 1.90
3. Reporting to commence with the accounting quarter ending June 30, 2000,
which means that the initial report shall cover the consecutive quarterly
accounting periods ending March 31, 2000 and June 30, 2000, the Borrower
will not report Negative Net Operating Income in any two consecutive
quarterly accounting periods.
A-1
24
DEFINITIONS:
"CASH" means cash, cash equivalents and marketable securities as appears on
the balance sheet delivered in accordance with Section 5.2 of this Agreement.
"CURRENT LIABILITIES" means the sum of all current liabilities determined in
accordance with generally accepted accounting principles other than deferred
revenue plus indebtedness to the Bank for money borrowed under the Term Loan.
"NEGATIVE NET OPERATING INCOME" means earnings before interest, taxes,
depreciation and amortization less than zero calculated in accordance with
generally accepted accounting principles.
"QUICK RATIO" means the sum of Cash and accounts receivable divided by Current
Liabilities.
"TANGIBLE NET WORTH" means shareholders' equity as reflected in the Financial
Statements of the Borrower delivered to the Bank pursuant to Sections 5.2 and
5.3 of this Loan Agreement, plus, without duplication, deferred revenue, and
minus good will and other intangible assets.
25
AUTHORIZED OFFICERS
Xxxxx Xxxxx, Chief Executive Officer
Xxxxxxx XxXxxxx, Chief Financial Officer and Treasurer
Xxxx Xxxxxxx, President
SCHEDULE OF EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
All information contained in the following schedule of exceptions is to be
considered as an entirety and any information appearing under one Section
heading or subheading shall be deemed to be in response to all requests for
information in all Sections of the Agreement. In addition, all descriptions of
agreements or other matters appearing on this schedule are not complete
descriptions of agreements and other matters and are qualified by reference to
the more complete documents and records referred to thereby.
4.1 EXISTENCE, POWER AND AUTHORITY
The Company may not be qualified to do business in certain states in which it
has development and sales offices.
4.2 FINANCIAL STATEMENTS
The financial statements for the years ended December 31, 1998 and 1997 are
completed, but the audit opinion has not yet been signed. Adjustments for a
change in revenue recognition and for preferred stock accretion are to be made
and a footnote regarding subsequent events is to be added to disclose the July
23, 1999 merger and financing.
4.4 BINDING OBLIGATIONS
The Borrower has obtained those shareholder and contractual approvals, waivers
and consents required in connection with (i) the Borrower's incurrence of
indebtedness pursuant to this Agreement and (ii) the Borrower's issuance of the
Warrant in accordance with Section ___ of this Agreement.
4.5 NO DEFAULTS OR VIOLATIONS
As required by the share purchase agreements and the Amended and Restated Loan
Agreement, the Company failed to provide 1998 audited financial statements to
its Series A, Series B, and Series C preferred shareholders and PNC Bank on a
timely basis.
Additionally, monthly financial statements have not been provided to the
Preferred shareholders and Investors in accordance with their stock purchase
agreements and the Amended and Restated Articles of Incorporation.
A-1
26
The Company has not held annual shareholders meetings in accordance with
Section 1.01 of the Bylaws. Only two such meetings have been held on 7/26/94
and 6/15/95. A unanimous written consent in lieu of an annual meeting was
executed on 4/11/96.
At times, the Company has been out of compliance with the covenants and
collateral requirements of the loan agreements with PNC Bank, N.A.
4.7 LITIGATION
The Company is currently being sued for royalty fees owed in connection with a
distribution agreement entered into with another company.
4.8 TAX RETURNS
The Company's tax returns that have been filed to date have not been audited or
settled.
Sales tax: The Company has collected and needs to remit sales tax for sales made
in Texas and Massachusetts amounting to approximately $24,000 in total at
9/30/99. Additionally, a reserve of $100,000 has been set up to account for any
additional unknown sales tax liability.
4.9 EMPLOYEE BENEFIT PLANS
(i) The Company plans to terminate the 401(k) plan of Xxxxxx Group, Inc., its
wholly owned subsidiary, and consolidate this plan into the Service Xxxx
401(k) plan.
4.14 YEAR 2000
The Company has not received Year 2000 compliance certificates from all of its
third party software suppliers.
The Company's voice mail system is not Year 2000 compliant. However, a Year 2000
software upgrade has been ordered, and the system should be Year 2000 compliant
by December 31, 1999.
27
EXHIBIT A
BORROWING BASE RIDER
THIS BORROWING BASE RIDER ("RIDER") is executed this 10th day of
December, 1999, by and between SERVICEWARE, INC., a Pennsylvania corporation
(the "BORROWER"), and PNC BANK, NATIONAL ASSOCIATION (the "BANK"). This Rider is
incorporated into and made part of that certain Loan Agreement by and between
the Borrower and the Bank of even date herewith (the "LOAN AGREEMENT").
Pursuant to and subject to the terms and conditions set forth in the
Loan Agreement, the Bank has extended a Loan to the Borrower which includes a
secured revolving credit facility (the "REVOLVING CREDIT") in an amount not to
exceed $7,500,000, under which the Borrower may borrow, repay and reborrow funds
at any time prior to the Revolving Credit Maturity Date. As a condition to the
Bank's willingness to extend the Revolving Credit to the Borrower, the Bank and
the Borrower are entering into this Rider in order to set forth their agreement
regarding the maximum amount which may be outstanding under the Revolving Credit
at any given time, and for the other purposes set forth below:
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound, the parties hereto covenant and agree as follows:
In addition to the terms defined in Section 3 hereof or elsewhere in
this Rider, initially capitalized terms used and not otherwise defined herein
shall have the same meanings ascribed to them in the Loan Agreement.
1. LIMITATIONS ON BORROWINGS UNDER REVOLVING CREDIT. Notwithstanding
any provisions to the contrary in any of the other Loan Documents, at no time
shall the aggregate principal amounts of indebtedness outstanding at any one
time under the Revolving Credit exceed a dollar amount equal to the Borrowing
Base at such time. If at any time the aggregate principal amount of indebtedness
outstanding under the Revolving Credit exceeds the limitation set forth in this
Section 1 for any reason other than a return of goods by an Account Debtor, then
the Borrower shall immediately repay the amount of such excess to the Bank in
immediately available funds. If the aggregate principal amount of indebtedness
outstanding under the Revolving Credit exceeds the Borrowing Base because of a
return of goods by an Account Debtor such that the Account represented thereby
ceases to constitute a Qualified Account, the Borrower shall repay the amount of
such excess to the Bank in immediately available funds within thirty (30) days
from the date of such return unless the Account Debtor accepts replacement goods
prior to the expiration of such 30-day period.
28
2. BORROWING BASE CERTIFICATES. In addition to any and all provisions of
the other Loan Documents which establish conditions to the Borrower's ability
to request and obtain any advance under the Revolving Credit, the Borrower may
not request an advance under the Revolving Credit unless a Borrowing Base
Certificate shall have been delivered to the Bank not more than five (5)
calendar days prior to the date of such proposed advance.
3. ADDITIONAL DEFINITIONS. The following terms shall have the following
meanings when used in this Rider:
"ACCOUNT" shall mean an "account" or a "general intangible" as defined in
the Uniform Commercial Code as in effect in the jurisdiction whose Law governs
the perfection of the Bank's security interest therein, whether now owned or
hereafter acquired or arising.
"ACCOUNT DEBTOR" shall mean, with respect to any Account, each Person who
is obligated to make payments to the Borrower on such Account.
"AFFILIATE" of the Borrower or any Account Debtor shall mean (a) any
Person who (either alone or with a group of Persons, and either directly or
indirectly through one or more intermediaries) is in control of, is controlled
by or is under common control with the Borrower or such Account Debtor, (b) any
director, officer, partner, employee or agent of the Borrower or such Account
Debtor, and (c) any member of the immediate family of any natural person
described in the preceding clauses (a) and (b). A Person or group of Persons
shall be deemed to be in control of the Borrower or an Account Debtor when such
Person or group of Persons possesses, directly or indirectly, the power to
direct or cause the direction of the management or policies of the Borrower or
such Account Debtor, whether through the ownership of voting securities, by
contract or otherwise.
"BORROWING BASE" at any time shall mean 80% of Qualified Accounts. The
value of Qualified Accounts at any time shall be determined by reference to the
most recent Borrowing Base Certificate delivered by the Borrower to the Bank.
"BORROWING BASE CERTIFICATE" shall mean each Borrowing Base Certificate to
be delivered by the Borrower to the Bank pursuant to Section 2 of this Rider,
in substantially the form attached as Exhibit A to this Rider, with blanks
appropriately completed, as amended, supplemented or otherwise modified from
time to time.
"EXIMBANK BORROWER AGREEMENT" shall mean any agreement made and entered
into by the Borrower and acknowledged by the Bank as a condition to the making
of any Loan (as defined in the applicable Eximbank Borrower Agreement) by the
Bank to the Borrower the repayment of which is guaranteed, in whole or in part,
by the Export-Import Bank of the United States.
"EXIMBANK BORROWING BASE" shall mean the Borrowing Base as defined in the
applicable Eximbank Borrower Agreement.
2
29
"LAW" shall mean any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, order, injunction, writ, decree or award
of any Official Body.
"LIEN" shall mean any mortgage, pledge, security interest, bailment,
encumbrance, claim, lien or charge of any kind, including any agreement to give
any of the foregoing, any conditional sale or other title retention agreement
and any lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code.
"OFFICIAL BODY" shall mean any government or political subdivision or any
agency, authority, bureau, central bank, commission, department or
instrumentality of any government or political subdivision, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
"PERSON" shall mean an individual, sole proprietorship, corporation,
partnership (general or limited), trust, business trust, limited liability
company, unincorporated organization or association, joint venture, joint-stock
company, Official Body, or any other entity of whatever nature.
"QUALIFIED ACCOUNTS" shall mean Accounts which are and at all times
continue to be acceptable to the Bank in its reasonable discretion. In order
for an Account to be acceptable to the Bank it must meet the following
requirements and amounts owing under it shall be subject to the following
limitations:
(a) It complies with all requirements of applicable Law, including,
without limitation, if applicable, usury Laws, the Federal Truth
in Lending Act, the Federal Consumer Credit Protection Act, the
Fair Credit Billing Act, and Regulation Z of the Board of
Governors of the Federal Reserve System;
(b) It is not originated in any jurisdiction the Laws of which, nor is
it subject to any law the effect of which, would make it or the
grant of a security interest in the Account to the Bank unlawful,
invalid or unenforceable;
(c) It was originated by the Borrower in connection with (i) a sale of
goods by the Borrower in the ordinary course of business, which
sale has been consummated and the goods sold therein delivered in
accordance with the terms of such sale, or (ii) the rendering of
services by the Borrower in the ordinary course of business, which
services have been fully rendered, in each case, such that the
performance of the related contract has been completed by the
Borrower and by all parties other than the Account Debtor to the
extent necessary thereunder to enforce payment of the Account
against the Account Debtor;
(d) It is evidenced by a written invoice or other documentation and
arises from an enforceable contract, all of which are in form and
substance satisfactory to the Bank;
-3-
30
(e) It does not arise out of a contract with, or order from, an
Account Debtor that, by its terms, forbids or makes void or
unenforceable the grant of the security interest by the Borrower
to the Bank in and to the Account arising with respect thereto;
(f) The title of the Borrower to the Account and, except as to the
Account Debtor, to any related goods is absolute and is not
subject to any Lien except Liens in favor of the Bank;
(g) It or the contract giving rise to it provides for payment in
United States Dollars by the Account Debtor;
(h) The amounts owing under it are not less than the amounts
represented by the Borrower to be owing under it in the applicable
Borrowing Base Certificate;
(i) Any portion of an Account for which income has not yet been earned
or which constitutes unearned discount, service charges or
deferred interest shall be ineligible;
(j) It is not subject to any defense, claim of reduction,
counterclaim, set-off, recoupment, or any dispute or claim for
credits, allowances or adjustments by the Account Debtor because
of returned, inferior, damaged goods or unsatisfactory service, or
for any other reason;
(k) The goods the sale of which gave rise to the Account were shipped
or delivered or provided to the Account Debtor on an absolute sale
basis and not (i) on a xxxx and hold sale basis, (ii) a
consignment sale basis, (iii) a guaranteed sale basis, (iv) a sale
or return basis, or (v) on the basis of any other similar terms
making the Account Debtor's payment obligations conditional;
(l) No default exists under the Account by any party thereto, and all
rights and remedies of the Borrower under the Account are freely
assignable by the Borrower;
(m) It or the contract giving rise to it does not provide for deferred
payments terms and it has not been outstanding for more than
ninety (90) days past the invoice date;
(n) It shall be ineligible if 50% or more, in amount, of the Accounts
of the Account Debtor and its Affiliates are more than ninety (90)
days past due from the date of original invoice therefor;
(o) If, when added to the outstanding Accounts of the Account Debtor
and its Affiliates, such Accounts in the aggregate would exceed
20% (the
-4-
31
"AGGREGATE LIMIT") of all of the Borrower's Accounts, then amount
thereof in excess of such Aggregate Limit shall be ineligible;
(p) The Borrower has not received any note, trade acceptance, draft,
chattel paper or other instrument with respect to, or in payment of,
the Account, unless, if any such instrument has been received, the
Borrower immediately notifies the Bank and, at the Bank's request,
endorses or assigns and delivers such instrument to the Bank;
(q) The Borrower has not received any notice of (i) the death of the
Account Debtor or a partner thereof; (ii) the filing by or against the
Account Debtor of any proceeding in bankruptcy, receivership,
insolvency, reorganization, liquidation, conservatorship or any
similar proceeding, or (iii) any assignment by the Account Debtor for
the benefit of creditors. Upon receipt by the Borrower of any such
notice, it will give the Bank prompt written notice thereof;
(r) The Account Debtor is not an Affiliate of the Borrower;
(s) The Account Debtor is domiciled in the United States of America or, if
the Account Debtor is domiciled in a country other than the United
States of America, such Account shall be eligible to the extent of the
portion thereof that is (i) supported by a documentary letter of
credit, duly assigned to and in the possession of the Bank, from a
financial institution acceptable to the Bank and the terms and
conditions of which are acceptable to the Bank, and (ii) excluded from
the Eximbank Borrowing Base;
(t) It shall be ineligible if the Account Debtor is an Official Body,
unless the Borrower shall have taken all actions deemed necessary by
the Bank in order to perfect the Bank's security interest therein,
including but not limited to any notices or filings required under the
Federal Assignment of Claims Act of 1940, as amended, or other
applicable Laws; and
(u) The Bank has not reasonably deemed such Account ineligible because of
uncertainty about the creditworthiness of the Account Debtor
(including, without limitation, unsatisfactory past experiences of the
Borrower or the Bank with the Account Debtor or unsatisfactory
reputation of the Account Debtor) or because the Bank otherwise makes
a reasonable determination that the collateral value of the Account to
the Bank is impaired or that the Bank's ability to realize such value
is insecure.
The Bank may revise from time to time the requirements for acceptability of
Accounts, in each case in its reasonable judgment. In the case of any dispute
about whether an Account is or has ceased to be a Qualified Account, the
decision of the Bank shall be final.
32
4. GOVERNING LAW.
THIS RIDER WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE
PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA, EXCLUDING ITS CONFLICT OF LAW RULES.
5. COUNTERPARTS. This Rider may be signed in any number of counterpart
copies and by the parties hereto on separate counterparts, but all such copies
shall constitute one and the same instrument.
[Signature Page to Follow]
-6-
33
WITNESS the due execution of this Borrowing Base Rider as a document under
seal as of the date first written above.
ATTEST: SERVICEWARE, INC.
By:________________________________ By:________________________________(SEAL)
Print Name:________________________ Print Name: Xxxxx Xxxxx
Title:_____________________________ Title: Chief Executive Officer
PNC BANK, NATIONAL ASSOCIATION
By:________________________________(SEAL)
Print Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
-7-
34
EXHIBIT A
BORROWING BASE CERTIFICATE
------------------------------------------------------------------------------------------------------------
ACCOUNTS
COLLATERAL STATUS RECEIVABLE TOTAL
------------------------------------------------------------------------------------------------------------
1. Beginning Balance (Previous Report - Line 4)
------------------------------------------------------------------------------------------------------------
2. Additions (New Xxxxxxxx, Increases and Adjustments)
------------------------------------------------------------------------------------------------------------
3. Deductions (Gross Invoices Paid)
------------------------------------------------------------------------------------------------------------
4. Total
------------------------------------------------------------------------------------------------------------
5. Less Ineligible Amounts
------------------------------------------------------------------------------------------------------------
6. Total Eligible Amounts
------------------------------------------------------------------------------------------------------------
LOAN STATUS
------------------------------------------------------------------------------------------------------------
7. Advance Percentage (Non-EXIM Bank Guaranty) 80%
------------------------------------------------------------------------------------------------------------
8. Value (Eligible Amount x Advance Percentage)
------------------------------------------------------------------------------------------------------------
9. Advance Percentage (EXIM Bank Guaranty) 100%
------------------------------------------------------------------------------------------------------------
10. Value (Eligible Amount x Advance Percentage
------------------------------------------------------------------------------------------------------------
11. Total of Lines 8 and 11
------------------------------------------------------------------------------------------------------------
12. Lesser of Value or Credit Limit of $7,500,000(1)
------------------------------------------------------------------------------------------------------------
13. Previous Loan Balance (Previous Report - Line 14)
------------------------------------------------------------------------------------------------------------
14. Less: Repayments, Adjustments and Other Decreases
------------------------------------------------------------------------------------------------------------
15. Subtotal for Loan Balance
------------------------------------------------------------------------------------------------------------
16. Additional Loan Increase: Request on funds and Return items
------------------------------------------------------------------------------------------------------------
17. Adjusted Loan Balance
------------------------------------------------------------------------------------------------------------
18. Amount Available for Loan
To induce PNC Bank, National Association ("the Bank") to grant advances or
other financial accommodations to us pursuant to the terms of our Loan
Agreement dated as of December 10, 1999 with the Bank, as the same may be
extended, amended, and/or restated from time to time ("Loan Agreement"), we
hereby certify, represent and warrant the following to the Bank, all as of the
date hereof: (1) the foregoing statements of our accounts receivable collateral
described above are true and complete; (2) the total eligible collateral
described in line 6 above represents only Qualified Accounts as defined in the
Loan Agreement, (3) we are in compliance with all of the terms and provisions
of the Loan Agreement; (4) there exists no Default or Event of Default under
the Loan Agreement; and (5) the undersigned is an Authorized Officer.
DATE:
--------------------------
BORROWER: ServiceWare, Inc.
BY:
--------------------------
------------
(1) Except as limited to $5,000,000 pursuant to terms of Loan Agreement while
principal remains outstanding on the Term Loan.
Document #: 1021955v3
35
EXHIBIT B
EQUIPMENT LINE REQUEST
________________________________________________________________________________
-------------------------------------------------------------
BASIS INVOICE COST
@ 100% TOTAL
-------------------------------------------------------------
Beginning Amount
-------------------------------------------------------------
Additional Amounts
-------------------------------------------------------------
Total
-------------------------------------------------------------
Advance Rate x0.90%
-------------------------------------------------------------
Maximum Available $(1)
-------------------------------------------------------------
Remainder Available
-------------------------------------------------------------
To induce PNC Bank, National Association ("the Bank") to grant advances or
other financial accommodations to us pursuant to the terms of our Loan Agreement
dated as of December 10, 1999 with the Bank, as the same may be extended,
amended, and/or restated from time to time ("Loan Agreement"), we hereby
certify, represent and warrant the following to the Bank, all as of the date
hereof: (1) the foregoing statements of equipment purchases described above are
true and complete; (2) we are in compliance with all of the terms and
provisions of the Loan Agreement; (3) there exists no Default or Event of
Default under the Loan Agreement; and (4) the undersigned is an Authorized
Officer.
SERVICEWARE, INC.
By:
-------------------------------------
Print Name:
-----------------------------
Title:
----------------------------------
Date:
--------------
------------------
(1) Enter dollar amount equal to $500,000 minus the lesser of (i) $150,000 or
(ii) the principal amount outstanding as of the Closing Date on that certain
loan to Borrower from Silicon Valley Bank referenced in the Loan Agreement.
36
EXHIBIT C
OFFICER'S FINANCIAL STATEMENT CERTIFICATION
AND CERTIFICATE OF NO DEFAULT
The undersigned hereby certifies that he or she is an Authorized
Officer of SERVICEWARE, INC. (The "BORROWER") and is furnishing this Compliance
Certificate and these certified Financial Statements on behalf of the Borrower
pursuant to that certain Loan Agreement dated December 10, 1999 (as the same
may be extended, amended or restated from time to time, the "LOAN AGREEMENT"),
with PNC BANK, NATIONAL ASSOCIATION (the "BANK").
Initially capitalized terms used and not otherwise defined herein
shall have the meanings ascribed to them in the Loan Agreement.
The undersigned hereby represents and agrees as follows.
1. He or she is familiar with the provisions of the Loan Documents and
the transactions contemplated thereby, and has reviewed the Loan Documents, had
such discussions with the Borrower's management and employees and done such
other investigation as reasonably necessary to support the statements made
below.
2. The attached Financial Statements are delivered pursuant to Section
5.2 of the Loan Agreement, and have been prepared in accordance with GAAP
consistently applied from period to period.
3. No Event of Default exists under the Loan Documents and no event has
occurred which with the passage of time, delivery of notice or both would
constitute an Event of Default.
4. The Borrower has performed all of its obligations under the Loan
Documents, and all of the representations and warranties made by the Borrower
in the Loan Documents are true and correct as of the date hereof in all
material respects.
5. If applicable, the calculations set forth on Exhibit A hereto
manifest in reasonable detail the Borrower's compliance with each and every
financial covenant contained in the Loan Documents as of the close of the
period indicated thereon.
WITNESS the due execution hereof with the intent to be legally bound
hereby as of this ___ day of ___________________, ____.
By: _____________________
Print Name: _____________
Title: __________________
37
EXHIBIT A
Financial Covenants for Period Ending ___________
1. Tangible Net Worth
Actual:
Shareholder's Equity
Less: Intangible Assets
Tangible Net Worth
Covenant: Tangible Net Worth
2. Quick Ratio
Actual:
Cash + Accounts Receivable (A)
Current Liabilities (B)
Quick Ratio (A)/(B)
Covenant: Quick Ratio
3. Quarterly Loss for Most Recent Quarter End
