EXHIBIT 10.27
PERITUS SOFTWARE SERVICES, INC.
000 Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
September 6, 0000
Xxxxx Xxxxxxxx Xxxx
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Gentlemen:
This letter agreement will set forth certain understandings between Peritus
Software Services, Inc., a Massachusetts corporation (the "Borrower") and Fleet
National Bank (the "Bank") with respect to Revolving Loans and Term Loans (each
as hereinafter defined) which may be made by the Bank to the Borrower and with
respect to letters of credit which may hereafter be issued by the Bank for the
account of the Borrower. In consideration of the mutual promises contained
herein and in the other documents referred to below, and for other good and
valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Bank agree as follows:
I. AMOUNTS AND TERMS
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1.1. Reference to Documents. Reference is made to (i) that certain
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$3,500,000 face principal amount revolving promissory note (the "Revolving
Note") of even date herewith made by the Borrower and payable to the order of
the Bank, (ii) those certain $1,500,000 aggregate face principal amount term
promissory notes (the "Term Notes") of even date herewith made by the Borrower
and payable to the order of the Bank, (iii) that certain Inventory, Accounts
Receivable and Intangibles Security Agreement and that certain Supplementary
Security Interest - Security Interest in Goods and Chattels, each of even date
herewith, from the Borrower to the Bank (collectively, the "Security
Agreement"), and (iv) assignments and notices of assignment (collectively, the
"Intellectual Property Assignments") from the Borrower to the Bank relating to
the Borrower's registered trademarks, patents and copyrights, if any.
1.2. Revolving Loans; Revolving Note. Subject to the terms and conditions
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hereinafter set forth, the Bank will make loans ("Revolving Loans") to the
Borrower, in such amounts as the Borrower may request, on any Business Day prior
to the first to occur of (i) the Expiration Date, or (ii) the earlier
termination of the within-described revolving financing arrangements pursuant to
(S)5.2 or (S)6.7; provided, however, that (1) the aggregate principal amount of
Revolving Loans outstanding shall at no time exceed the Maximum
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Revolving Amount (hereinafter defined) and (2) the Aggregate Revolving Bank
Liabilities (hereinafter defined) shall at no time exceed the Borrowing Base
(hereinafter defined). Within such limits, and subject to the terms and
conditions hereof, the Borrower may obtain Revolving Loans, repay Revolving
Loans and obtain Revolving Loans again on one or more occasions. The Revolving
Loans shall be evidenced by the Revolving Note and interest thereon shall be
payable at the times and at the rate provided for in the Revolving Note. Overdue
principal of the Revolving Loans and, to the extent permitted by law, overdue
interest shall bear interest at a fluctuating rate per annum which at all times
shall be equal to the sum of (i) two (2%) percent per annum plus (ii) the per
annum rate otherwise payable under the Revolving Note (but in no event in excess
of the maximum rate from time to time permitted by then applicable law),
compounded monthly and payable on demand. The Borrower hereby irrevocably
authorizes the Bank to make or cause to be made, on a schedule attached to the
Revolving Note or on the books of the Bank, at or following the time of making
each Revolving Loan and of receiving any payment of principal, an appropriate
notation reflecting such transaction and the then aggregate unpaid principal
balance of the Revolving Loans. The amount so noted shall constitute presumptive
evidence as to the amount owed by the Borrower with respect to principal of the
Revolving Loans. Failure of the Bank to make any such notation shall not,
however, affect any obligation of the Borrower or any right of the Bank
hereunder or under the Revolving Note.
1.3. Repayment; Renewal of Revolving Loan Facility. The Borrower shall
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repay in full all Revolving Loans and all interest thereon upon the first to
occur of: (i) the Expiration Date, or (ii) an acceleration under (S)5.2(a)
following an Event of Default. The Borrower may repay at any time, without
penalty or premium, the whole or any portion of any Revolving Loan. In addition,
if at any time the Borrowing Base is in an amount which is less than the then
outstanding Aggregate Revolving Bank Liabilities, the Borrower will forthwith
prepay so much of the Revolving Loans as may be required (or arrange for
termination of such letters of credit as may be required) so that the Aggregate
Revolving Bank Liabilities will not exceed the Borrowing Base. The Bank may, at
its sole discretion, renew the revolving financing arrangements described in
this letter agreement by extending the Expiration Date in a writing signed by
the Bank and accepted by the Borrower. Neither the inclusion in this letter
agreement or elsewhere of covenants relating to periods of time after the
Expiration Date, nor any other provision hereof, nor any action (except a
written extension pursuant to the immediately preceding sentence), non-action or
course of dealing on the part of the Bank will be deemed an extension of, or
agreement on the part of the Bank to extend, the Expiration Date.
1.4. Term Loans; Term Notes. In addition to the foregoing, the Bank may
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make one or more loans (the "Term Loans") to the Borrower in an aggregate
principal amount up to $1,500,000. On or about the date of execution and
delivery of this letter agreement, the Bank is making a Term Loan (the "Initial
Term Loan") to the Borrower in order to refinance the costs of items of
Qualifying Equipment acquired by the Borrower on or prior to June 30, 1996 and
heretofore expressly approved by the Bank for this purpose. The Initial Term
Loan
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will be in the original principal amount of $675,000. Following the Initial Term
Loan, the Bank may make one or more additional loans (the "Additional Term
Loans") to the Borrower, at the Borrower's request, with no more than one
Additional Term Loan to be made per calendar quarter (except that more than one
Additional Term Loan may be made in any calendar quarter provided that each such
Additional Term Loan in any one calendar quarter following the first such
Additional Term Loan during such calendar quarter is in an amount of at least
$50,000). Additional Term Loans shall be made in order to finance costs of
Qualifying Equipment acquired by the Borrower after June 30, 1996 and within the
90 days preceding the request for such Additional Term Loan, each such
Additional Term Loan to be in such amount as may be requested by the Borrower;
provided that (i) no Additional Term Loan will be made after June 30, 1997; (ii)
the aggregate original principal amounts of all Additional Term Loans will not
exceed $825,000; and (iii) no Additional Term Loan will be in an amount more
than 80% of the invoiced actual costs of the tangible property constituting the
items of Qualifying Equipment with respect to which such Additional Term Loan is
made (excluding taxes, shipping, software (other than custom software which is
not prepackaged "shrink-wrapped" software with an invoiced cost not in excess of
$150,000 in the aggregate), installation charges, training fees and other "soft
costs"). Prior to the making of each Term Loan, and as a precondition thereto,
the Borrower will provide the Bank with: (i) invoices supporting the costs of
the relevant Qualifying Equipment; (ii) such evidence as the Bank may reasonably
require showing that the relevant Qualifying Equipment has been delivered to and
installed at the Borrower's Billerica, MA premises, has become fully
operational, has been paid for by the Borrower and is owned by the Borrower free
of all liens and interests of any other Person (other than the security interest
of the Bank pursuant to the Security Agreement); (iii) Uniform Commercial Code
financing statements, if needed, reflecting the relevant Qualifying Equipment
with respect to which such Term Loan is being made; and (iv) evidence
satisfactory to the Bank that the Qualifying Equipment is fully insured against
casualty loss, with insurance naming the Bank as secured party and first loss
payee.
The Initial Term Loan is evidenced by a $675,000 original principal amount
promissory note of the Borrower of even date herewith (the "Initial Term Note")
and the Additional Term Loans will be evidenced by a $825,000 face principal
amount promissory note of the Borrower of even date herewith (the "Additional
Term Note"). Interest on each of the Term Loans shall be payable at the times
and at the rate provided for in the Term Note relating thereto. Overdue
principal of any Term Loan and, to the extent permitted by law, overdue interest
shall bear interest at a fluctuating rate per annum which at all times shall be
equal to the sum of (i) two (2%) percent per annum plus (ii) the per annum rate
otherwise payable under the Term Note relating thereto (but in no event in
excess of the maximum rate from time to time permitted by then applicable law),
compounded monthly and payable on demand. The Borrower hereby irrevocably
authorizes the Bank to make or cause to be made, on a schedule attached to the
relevant Term Note or on the books of the Bank, at or following the time of
making each Term Loan and of receiving any payment of principal, an appropriate
notation reflecting such transaction and the then aggregate unpaid principal
balance of the
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Term Loan or Loans represented by such Term Note. The amount so noted shall
constitute presumptive evidence as to the amount owed by the Borrower with
respect to principal of the relevant Term Loan or Term Loans. Failure of the
Bank to make any such notation shall not, however, affect any obligation of the
Borrower or any right of the Bank hereunder or under any Term Note.
1.5. Principal Repayment of Term Loans. The Borrower will repay principal
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of the Initial Term Loan in 36 equal consecutive monthly installments,
commencing on October 1, 1996 and continuing on the first day of each month
thereafter through and including September 1, 1999, when all remaining principal
of the Initial Term Loan and all interest accrued but unpaid thereon shall be
due and payable in full. The Borrower will repay principal of the Additional
Term Loans in 36 equal consecutive monthly installments, commencing on July 1,
1997 and continuing on the first day of each month thereafter. Each such
monthly installment of principal payable with respect to the Additional Term
Loans will be in an amount equal to 1/36th of the aggregate principal amount of
the Additional Term Loans outstanding at June 30, 1997. In any event, the then
outstanding principal balance of the Additional Term Loans and all interest then
accrued but unpaid thereon shall be due and payable in full on June 1, 2000.
The Borrower may prepay, at any time or from time to time, without premium or
penalty, the whole or any portion of any Term Loan; provided that each such
principal prepayment shall be accompanied by payment of all interest under the
relevant Term Note accrued but unpaid to the date of payment. Any partial
prepayment of principal of the Term Loans will be applied to installments of
principal of the Term Loans thereafter coming due, being applied in inverse
order of normal maturity.
1.6. Advances and Payments. The proceeds of all Loans shall be credited by
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the Bank to a general deposit account maintained by the Borrower with the Bank
or otherwise as the Borrower may direct. The proceeds of each Revolving Loan
will be used by the Borrower solely for working capital purposes and to repay
certain loans owed to Danvers Savings Bank and certain bridge loans owed to
Xxxxxxx Xxxx and Xxxxx Xxxxx. The proceeds of each Term Loan will be used by
the Borrower solely to pay or reimburse acquisition costs of Qualifying
Equipment.
The Bank may charge any general deposit account of the Borrower at the Bank
with the amount of all payments of interest, principal and other sums when same
are due, from time to time, under this letter agreement and/or any Note and/or
with respect to any letter of credit; and will thereafter notify the Borrower of
the amount so charged. The failure of the Bank so to charge any account or to
give any such notice shall not affect the obligation of the Borrower to pay
interest, principal or other sums as provided herein or in any Note or with
respect to any letter of credit.
Whenever any payment to be made to the Bank hereunder or under any Note or
with respect to any letter of credit shall be stated to be due on a day which is
not a Business Day, such payment may be made on the next succeeding Business
Day, and interest payable on
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each such date shall include the amount thereof which shall accrue during the
period of such extension of time. All payments by the Borrower hereunder and/or
in respect of any Note and/or with respect to any letter of credit shall be made
net of any impositions or taxes and without deduction, set-off or counterclaim,
notwithstanding any claim which the Borrower may now or at any time hereafter
have against the Bank. All payments of interest, principal and any other sum
payable hereunder and/or under any Note and/or with respect to any letter of
credit shall be made to the Bank, in immediately available funds, at its office
at 00 Xxxxx Xxxxxx, Xxxxxx, XX 00000 or at such other address as the Bank may
from time to time direct. All payments received by the Bank after 2:00 p.m. on
any day shall be deemed received as of the next succeeding Business Day. All
monies received by the Bank shall be applied first to fees, charges, costs and
expenses payable to the Bank under this letter agreement, any Note and/or any of
the other Loan Documents and/or with respect to any letter of credit, next to
interest then accrued on account of any Loans or letter of credit reimbursement
obligations and only thereafter to principal of the Loans and letter of credit
reimbursement obligations, being applied against the Loans and/or such
obligations in such order as the Borrower may designate (and, failing such
designation, being applied first against the letter of credit reimbursement
obligations, next against the Revolving Loans and thereafter against
installments of the Term Loans in inverse order of normal maturity). All
interest and fees payable hereunder and/or under any Note shall be calculated on
the basis of a 360-day year for the actual number of days elapsed.
1.7. Letters of Credit. At the Borrower's request, the Bank may, from time
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to time, in its sole discretion issue one or more letters of credit for the
account of the Borrower; provided that at the time of such issuance and after
giving effect thereto the Aggregate Revolving Bank Liabilities will in no event
exceed the lesser of (i) $3,500,000 or (ii) the then effective Borrowing Base.
Any such letter of credit will be issued for such fee and upon such terms and
conditions as may be agreed to by the Bank and the Borrower at the time of
issuance. The Borrower hereby authorizes the Bank, without further request from
the Borrower, to cause the Borrower's liability to the Bank for reimbursement of
funds drawn under any such letter of credit to be repaid from the proceeds of a
Revolving Loan to be made hereunder. The Borrower hereby irrevocably requests
that such Revolving Loans be made.
1.8. Conditions to Advance. Prior to the making of the initial Loan
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hereunder or the issuance of any letter of credit hereunder, the Borrower shall
deliver to the Bank duly executed copies of this letter agreement, the Security
Agreement, the Intellectual Property Assignments, the Revolving Note, the Term
Notes and the documents and other items listed on the Closing Agenda delivered
herewith by the Bank to the Borrower, all of which, as well as all legal matters
incident to the transactions contemplated hereby, shall be satisfactory in form
and substance to the Bank and its counsel.
Without limiting the foregoing, any Loan or letter of credit issuance
(including the initial Loan or letter of credit issuance) is subject to the
further conditions precedent that on
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the date on which such Loan is made or such letter of credit is issued (and
after giving effect thereto):
(a) All statements, representations and warranties of the Borrower made in
this letter agreement and/or the Security Agreement shall continue to be correct
in all material respects as of the date of such Loan or issuance of such letter
of credit, as the case may be.
(b) All covenants and agreements of the Borrower contained herein and/or
in any of the other Loan Documents shall have been complied with in all material
respects on and as of the date of such Loan or issuance of such letter of
credit, as the case may be.
(c) No event which constitutes, or which with notice or lapse of time or
both could constitute, an Event of Default shall have occurred and be
continuing.
(d) No material adverse change shall have occurred in the financial
condition of the Borrower from that disclosed in the financial statements then
most recently furnished to the Bank.
Each request by the Borrower for any Loan or for the issuance of a letter
of credit, and each acceptance by the Borrower of the proceeds of any Loan or
delivery of a letter of credit, will be deemed a representation and warranty by
the Borrower that at the date of such Loan or letter of credit issuance, as the
case may be, and after giving effect thereto all of the conditions set forth in
the foregoing clauses (a)-(d) of this (S)1.8 will be satisfied. Each request
for a Revolving Loan or letter of credit issuance will be accompanied by a
borrowing base certificate on a form satisfactory to the Bank, executed by the
chief financial officer of the Borrower, unless such a certificate shall have
been previously furnished setting forth the Borrowing Base as at a date not more
than 30 days prior to the date of the requested borrowing or the requested
letter of credit issuance, as the case may be.
II. REPRESENTATIONS AND WARRANTIES
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2.1. Representations and Warranties. In order to induce the Bank to enter
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into this letter agreement and to make Loans hereunder and/or issue letters of
credit hereunder, the Borrower warrants and represents to the Bank as follows:
(a) The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of The Commonwealth of Massachusetts. The Borrower
has full corporate power to own its property and conduct its business as now
conducted and as contemplated to be conducted, to grant the security interests
contemplated by the Security Agreement and the Intellectual Property Assignments
and to enter into and perform this letter agreement and the other Loan
Documents. The Borrower is duly qualified to do business and in good standing
(or, at the date of this letter agreement, is in the process of qualifying to do
business) in each other jurisdiction in which the Borrower maintains any
facility, sales office or warehouse and in each other jurisdiction where the
failure so to qualify could (singly or in
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the aggregate with all other such failures) have a material adverse effect on
the financial condition, business or prospects of the Borrower, all such
jurisdictions, as at the date of this letter agreement, being listed on item
2.1(a) of the attached Disclosure Schedule. At the date hereof, the Borrower has
no Subsidiaries, except as shown on said item 2.1(a). Except as otherwise
described on the aforesaid item 2.1(a), the Borrower owns 100% of the
outstanding capital stock of each Subsidiary. The Borrower is not a member of
any partnership or joint venture, except as shown on said item 2.1(a). No such
partnership or joint venture arrangement subjects or could subject any of the
Collateral to claims by creditors of such partnership or joint venture or
creditors of any Person (other than the Borrower) which participates in such
partnership or joint venture arrangement.
(b) All of the record owners of 5% or more of the outstanding shares of
the Borrower's capital stock, as at the date of this letter agreement, are as
set forth on item 2.1(b) of the attached Disclosure Schedule.
(c) The execution, delivery and performance by the Borrower of this letter
agreement and each of the other Loan Documents have been duly authorized by all
necessary corporate and other action and do not and will not:
(i) violate any provision of, or require any filings (other than
filings under the Uniform Commercial Code), registration, consent or approval
under, any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to the Borrower;
(ii) violate any provision of the charter or by-laws of the Borrower,
or result in a breach of or constitute a default or require any waiver or
consent under any indenture or loan or credit agreement or any other
material agreement, lease or instrument to which the Borrower is a party or
by which the Borrower or any of its properties may be bound or affected or
require any other consent of any Person; or
(iii) result in, or require, the creation or imposition of any lien,
security interest or other encumbrance (other than in favor of the Bank),
upon or with respect to any of the properties now owned or hereafter
acquired by the Borrower.
(d) This letter agreement and each of the other Loan Documents has been
duly executed and delivered by the Borrower and each is a legal, valid and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its respective terms.
(e) Except as described on item 2.1(e) of the attached Disclosure
Schedule, there are no actions, suits, proceedings or investigations pending or,
to the knowledge of the Borrower, threatened by or against the Borrower or any
Subsidiary of the Borrower before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
could hinder or prevent the consummation of the transactions contemplated hereby
or call into question the validity of this letter agreement or any of the other
Loan Documents or any other instrument provided for or contemplated by this
letter agreement or any of the
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other Loan Documents or any action taken or to be taken in connection with the
transactions contemplated hereby or thereby or which in any single case or in
the aggregate might result in any material adverse change in the business,
prospects, condition, affairs or operations of the Borrower or any such
Subsidiary.
(f) The Borrower is not in violation of any term of its charter or by-laws
as now in effect. Neither the Borrower nor any Subsidiary is in material
violation of any term of any mortgage, indenture or judgment, decree or order,
or any other instrument, contract or agreement to which it is a party or by
which any of its property is bound.
(g) The Borrower has filed (and has caused each Subsidiary of the Borrower
to file) all federal, foreign, state and local tax returns, reports and
estimates required to be filed by the Borrower. All such filed returns, reports
and estimates are proper and accurate and the Borrower (or the Subsidiary
concerned, as the case may be) has paid all taxes, assessments, impositions,
fees and other governmental charges required to be paid in respect of the
periods covered by such returns, reports or estimates. No deficiencies for any
tax, assessment or governmental charge have been asserted or assessed, and the
Borrower knows of no material tax liability or basis therefor.
(h) The Borrower is in compliance with (and each Subsidiary of the
Borrower is in compliance with) all requirements of law, federal, state and
local, and all requirements of all governmental bodies or agencies having
jurisdiction over it, the conduct of its business, the use of its properties and
assets, and all premises occupied by it, failure to comply with which could
(singly or in the aggregate with all other such failures) have a material
adverse effect upon the assets, business, financial condition or prospects of
the Borrower or any such Subsidiary. Without limiting the foregoing, the
Borrower has all the franchises, licenses, leases, permits, certificates and
authorizations needed for the conduct of its business and the use of its
properties and all premises occupied by it, as now conducted, owned and used and
as proposed to be conducted, owned and used.
(i) The audited financial statements of the Borrower as at December 31,
1995 and the management-generated financial statements of the Borrower as at
June 30, 1996, each heretofore delivered to the Bank, are complete and accurate
and fairly present the financial condition of the Borrower as at the date
thereof and for the period covered thereby, except that the management-generated
statements do not have footnotes and thus do not present the information which
would normally be contained in footnotes to financial statements. The Borrower
has no liability, contingent or otherwise, not disclosed in the aforesaid
December 31, 1995 financial statements that could materially affect the
financial condition of the Borrower. Since December 31, 1995, except as set
forth in said December 31, 1995 statements and/or the notes thereto there has
been no material adverse development in the business or condition of the
Borrower, and (except as aforesaid) the Borrower has not entered into any
transaction other than in the ordinary course.
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(j) The principal place of business and chief executive offices of the
Borrower are located at 000 Xxxxxxx Xxxx, Xxxxxxxxx, XX 00000 (the "Premises").
All of the books and records of the Borrower are located at the Premises.
Except as described on item 2.1(j) of the attached Disclosure Schedule, no
assets of the Borrower are located at any other address. Said item 2.1(j) of
the attached Disclosure Schedule sets forth the names and addresses of all
record owners of the Premises and of each other place where any material assets
of the Borrower are located.
(k) The Borrower owns or has a valid right to use all of the patents,
licenses, copyrights, trademarks, trade names and franchises ("Intellectual
Property") now being used or necessary to conduct its business, all of which are
described on item 2.1(k) of the attached Disclosure Schedule. None of the
Intellectual Property owned by the Borrower is represented by a registered
copyright, trademark, patent or other federal or state registration, except as
shown on said item 2.1(k). The conduct of the Borrower's business as now
operated does not conflict with valid patents, licenses, copyrights, trademarks,
trade names or franchises of others in any manner that could materially
adversely affect the business or assets or condition, financial or otherwise, of
the Borrower.
(l) None of the executive officers or key employees of the Borrower is
subject to any agreement in favor of anyone other than the Borrower which limits
or restricts that person's right to engage in the type of business activity
conducted or proposed to be conducted by the Borrower or which grants to anyone
other than the Borrower any rights in any inventions or other ideas susceptible
to legal protection developed or conceived by any such officer or key employee.
(m) The Borrower is not a party to any contract or agreement which now has
or, as far as can be foreseen by the Borrower at the date hereof, may have a
material adverse effect on the financial condition, business, prospects or
properties of the Borrower.
III. AFFIRMATIVE COVENANTS AND REPORTING REQUIREMENTS
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Without limitation of any covenants and agreements contained in the
Security Agreement or elsewhere, the Borrower agrees that so long as the
financing arrangements contemplated hereby are in effect or any Revolving Loan
or any Term Loan or any of the other Obligations shall be outstanding or any
letter of credit issued hereunder shall be outstanding:
3.1. Legal Existence; Qualification; Compliance. The Borrower will
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maintain (and will cause each Subsidiary of the Borrower to maintain) its
corporate existence and good standing in the jurisdiction of its incorporation.
The Borrower will qualify to do business and remain qualified and in good
standing (and will cause each Subsidiary of the Borrower to qualify and remain
qualified and in good standing) in each other jurisdiction where it maintains
any facility, sales office, warehouse or other location and in each other
jurisdiction in which the failure so to qualify could (singly or in the
aggregate with all other such
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failures) have a material adverse effect on the financial condition, business or
prospects of the Borrower or any such Subsidiary. The Borrower will comply (and
will cause each Subsidiary of the Borrower to comply) with its charter documents
and by-laws. The Borrower will comply with (and will cause each Subsidiary of
the Borrower to comply with) all applicable laws, rules and regulations
(including, without limitation, ERISA and those relating to environmental
protection) other than (i) laws, rules or regulations the validity or
applicability of which the Borrower or such Subsidiary shall be contesting in
good faith by proceedings which serve as a matter of law to stay the enforcement
thereof and (ii) those laws, rules and regulations the failure to comply with
any of which could not (singly or in the aggregate) have a material adverse
effect on the financial condition, business or prospects of the Borrower or any
such Subsidiary.
3.2. Maintenance of Property; Insurance. The Borrower will maintain and
----------------------------------
preserve (and will cause each Subsidiary of the Borrower to maintain and
preserve) all of its properties in good working order and condition, making all
necessary repairs thereto and replacements thereof. The Borrower will maintain
all such insurance as may be required under the Security Agreement and will also
maintain, with financially sound and reputable insurers, insurance with respect
to its property and business against such liabilities, casualties and
contingencies and of such types and in such amounts as shall be reasonably
satisfactory to the Bank from time to time and in any event all such insurance
as may from time to time be customary for companies conducting a business
similar to that of the Borrower in similar locales.
3.3. Payment of Taxes and Charges. The Borrower will pay and discharge
----------------------------
(and will cause each Subsidiary of the Borrower to pay and discharge) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or property, including, without limitation, taxes, assessments, charges
or levies relating to real and personal property, franchises, income,
unemployment, old age benefits, withholding, or sales or use, prior to the date
on which penalties would attach thereto, and all lawful claims (whether for any
of the foregoing or otherwise) which, if unpaid, might give rise to a lien upon
any property of the Borrower or any such Subsidiary, except any of the foregoing
which is being contested in good faith and by appropriate proceedings which
serve as a matter of law to stay the enforcement thereof and for which the
Borrower has established and is maintaining adequate reserves. The Borrower
will pay, and will cause each of its Subsidiaries to pay, in a timely manner,
all lease obligations, all trade debt, purchase money obligations, equipment
lease obligations and all of its other material Indebtedness. The Borrower will
perform and fulfill all material covenants and agreements under any leases of
real estate, agreements relating to purchase money debt, equipment leases and
other material contracts. The Borrower will maintain in full force and effect,
and comply with the terms and conditions of, all permits, permissions and
licenses necessary or desirable for its business.
3.4. Accounts. The Borrower will maintain its principal depository and
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operating accounts with the Bank; provided that the Borrower may maintain its
existing accounts at Danvers Savings Bank for 30 days after the date of this
letter agreement.
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3.5. Conduct of Business. The Borrower will conduct, in the ordinary
-------------------
course, the business in which it is presently engaged. The Borrower will not,
without the prior written consent of the Bank, directly or indirectly (itself or
through any Subsidiary), enter into any other lines of business, businesses or
ventures.
3.6. Reporting Requirements. The Borrower will furnish to the Bank:
----------------------
(i) Within 90 days after the end of each fiscal year of the Borrower,
a copy of the annual audit report for such fiscal year for the Borrower,
including therein consolidated and consolidating balance sheets of the
Borrower and Subsidiaries as at the end of such fiscal year and related
consolidated and consolidating statements of income, stockholders' equity
and cash flow for the fiscal year then ended. The annual consolidated
financial statements shall be certified by independent public accountants
selected by the Borrower and reasonably acceptable to the Bank, such
certification to be in such form as is generally recognized as
"unqualified".
(ii) Within 45 days after the end of each fiscal quarter of the
Borrower, consolidated and consolidating balance sheets of the Borrower and
its Subsidiaries and related consolidated and consolidating statements of
income and cash flow, unaudited but complete and accurate and prepared in
accordance with generally accepted accounting principles fairly presenting
the financial condition of the Borrower as at the dates thereof and for the
periods covered thereby (except that such quarterly statements need not
contain footnotes) and certified as accurate (subject to normal year-end
audit adjustments, which shall not be material) by the chief financial
officer of the Borrower, such balance sheets to be as at the end of each
such fiscal quarter and such statements of income and cash flow to be for
such fiscal quarter and for the year to date, in each case together with a
comparison to budget.
(iii) At the time of delivery of each annual or quarterly statement
of the Borrower, a certificate executed by the chief financial officer of
the Borrower stating that he or she has reviewed this letter agreement and
the other Loan Documents and has no knowledge of any default by the
Borrower in the performance or observance of any of the provisions of this
letter agreement or of any of the other Loan Documents or, if he or she has
such knowledge, specifying each such default and the nature thereof. Each
such certificate given as at the end of any fiscal quarter shall also set
forth the calculations necessary to evidence compliance with (S)(S)3.7-
3.10.
(iv) Monthly, within 15 days after the end of each month, (A) an
aging report in form satisfactory to the Bank covering all Receivables of
the Borrower outstanding as at the end of such month and reporting as to
progress on long-term contracts and (B) a certificate of the chief
financial officer of the Borrower setting forth the Borrowing Base as at
the end of such month, all in form reasonably satisfactory to the Bank.
-11-
(v) Promptly after receipt, a copy of all audits or reports submitted
to the Borrower by independent public accountants in connection with any
annual, special or interim audits of the books of the Borrower and any
letter of comments directed by such accountants to the management of the
Borrower.
(vi) Should any securities of the Borrower be publicly traded or if
registration of such securities is being sought, the Borrower will furnish
to the Bank, promptly upon same becoming available, one copy of each
financial statement, report, notice or proxy statement sent by the Borrower
to stockholders or the holders of debt securities generally, and of each
regular or periodic report and any registration statement, prospectus or
listing application filed by the Borrower with the National Association of
Securities Dealers, any securities exchange or the Securities and Exchange
Commission or any successor agency.
(vii) As soon as possible and in any event within five days of the
occurrence of any Event of Default or any event which, with the giving of
notice or passage of time or both, would constitute an Event of Default,
the statement of the Borrower setting forth details of such Event of
Default or event and the action which the Borrower proposes to take with
respect thereto.
(viii) Promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
to which the Borrower or any Subsidiary of the Borrower is a party.
(ix) Promptly upon applying for, or being granted, a federal or state
registration for any copyright, trademark or patent or purchasing any
registered copyright, trademark or patent, written notice to the Bank
describing same, together with all such documents as may be required in
order to give the Bank a fully perfected first priority security interest
in each such copyright, trademark or patent.
(x) Promptly after the Borrower has knowledge thereof, written notice
of any development or circumstance which may reasonably be expected to have
a material adverse effect on the Borrower or its business, properties,
assets, Subsidiaries or condition, financial or otherwise.
(xi) Promptly upon request, such other information respecting the
financial condition, operations, Receivables, inventory, machinery or
equipment of the Borrower or any Subsidiary as the Bank may from time to
time reasonably request.
3.7. Debt to Worth. As used herein, "Determination Date" shall mean the
-------------
last day of each fiscal quarter of the Borrower. The Borrower will maintain as
at each Determination Date (commencing with September 30, 1996) on a
consolidated basis a Leverage Ratio of not more than the following: as at
September 30, 1996 - not more than 1.25 to 1; and as at
-12-
December 31, 1996 and as each subsequent Determination Date - not more than 1.0
to 1. As used herein, "Leverage Ratio" means the ratio of (x) consolidated
Senior Debt of the Borrower and Subsidiaries to (y) consolidated Capital Base of
the Borrower.
3.8. Net Worth. The Borrower will maintain as at each Determination Date
---------
(commencing September 30, 1996) a consolidated Capital Base which shall not be
less than the then-effective Capital Base Requirement. As used herein, the
"Capital Base Requirement" will be deemed to have been $2,500,000 as at June
30, 1996, and as at each Determination Date thereafter (beginning with September
30, 1996) the Capital Base Requirement will be deemed to become an amount equal
to the sum of: (i) that Capital Base Requirement which had been in effect on
the last day of the immediately preceding fiscal quarter, plus (ii) 80% of the
net proceeds of any equity securities sold by the Borrower during the fiscal
quarter ended at such Determination Date and 80% of the proceeds of any
Subordinated Debt issued by the Borrower and/or its Subsidiaries during the
fiscal quarter ended at such Determination Date (nothing contained herein being
deemed to approve the issuance of any additional Subordinated Debt), plus (iii)
80% of the consolidated Net Income of the Borrower and Subsidiaries during said
fiscal quarter ended at such Determination Date (but without giving effect to
any Net Income which is less than zero for any fiscal quarter).
3.9. Liquidity. The Borrower will maintain as at each Determination Date
---------
(commencing September 30, 1996) a ratio of Net Quick Assets to consolidated
Current Liabilities, which ratio shall be not less than 1.5 to 1.
3.10. Profitability. The Borrower will achieve: consolidated quarterly
-------------
Net Income of not less than $500,000 for its fiscal quarter ending September 30,
1996, consolidated quarterly Net Income of not less than $1,000,000 for its
fiscal quarter ending December 31, 1996 and consolidated quarterly Net Income of
not less than $500,000 for its fiscal quarter ending March 31, 1997 and for each
fiscal quarter thereafter. Without limitation of the foregoing, the Borrower
will achieve, as at each Determination Date (commencing with June 30, 1997),
cumulative consolidated Net Income of not less than $2,000,000 for the six-month
period ending at each such Determination Date.
3.11. Books and Records. The Borrower will maintain (and cause each of
-----------------
its Subsidiaries to maintain) complete and accurate books, records and accounts
which will at all times accurately and fairly reflect all of its transactions in
accordance with generally accepted accounting principles consistently applied.
The Borrower will, at any reasonable time and from time to time upon reasonable
notice and during normal business hours (and at any time and without any
necessity for notice following the occurrence of an Event of Default), permit
the Bank, and any agents or representatives thereof, to examine and make copies
of and take abstracts from the records and books of account of, and visit the
properties of the Borrower and any of its Subsidiaries, and to discuss its
affairs, finances and accounts with its managers, officers or directors and
independent accountants, all of whom are hereby authorized and directed to
cooperate with the Bank in carrying out the intent of this (S)3.11. Each
financial
-13-
statement of the Borrower hereafter delivered pursuant to this letter agreement
will be complete and accurate and will fairly present the financial condition of
the Borrower as at the date thereof and for the periods covered thereby.
3.12. Subordination Agreements. Prior to the making of the first Loan,
------------------------
the Borrower will obtain, and will thereafter maintain in effect at all times, a
subordination agreement in form and substance satisfactory to the Bank providing
for full subordination of the $1,000,000 principal amount of Indebtedness of the
Borrower owed to MCRC.
3.13. Landlord's Waiver. Prior to the making of the first Loan the
-----------------
Borrower will obtain, and will thereafter maintain in effect at all times,
waivers from the owners of all premises in which any material amount of
Collateral is located, such waivers to be in form and substance satisfactory to
the Bank.
IV. NEGATIVE COVENANTS
------------------
Without limitation of any covenants and agreements contained in the
Security Agreement or elsewhere, the Borrower agrees that so long as the
financing arrangements contemplated hereby are in effect or any Revolving Loan
or any Term Loan or any of the other Obligations shall be outstanding or any
letter of credit issued hereunder shall be outstanding:
4.1. Indebtedness. The Borrower will not create, incur, assume or suffer
------------
to exist any Indebtedness (nor allow any of its Subsidiaries to create, incur,
assume or suffer to exist any Indebtedness), except for:
(i) Indebtedness owed to the Bank, including, without limitation, the
Indebtedness represented by the Notes and any Indebtedness in respect of
letters of credit issued by the Bank;
(ii) Indebtedness of the Borrower or any Subsidiary for taxes,
assessments and governmental charges or levies not yet due and payable;
(iii) unsecured current liabilities of the Borrower or any Subsidiary
(other than for money borrowed or for purchase money Indebtedness with
respect to fixed assets) incurred upon customary terms in the ordinary
course of business;
(iv) purchase money Indebtedness (including, without limitation,
Indebtedness in respect of capitalized equipment leases) owed to equipment
vendors and/or lessors for equipment purchased or leased by the Borrower
for use in the Borrower's business, provided that the total of Indebtedness
permitted under this clause (iv) plus presently-existing equipment
financing permitted under clause (v) of this (S)4.1 will not exceed
$500,000 in the aggregate outstanding at any one time;
(v) other Indebtedness existing at the date hereof, but only to the
extent set
-14-
forth on item 4.1 of the attached Disclosure Schedule; and
(vi) any guaranties or other contingent liabilities expressly
permitted pursuant to (S)4.3.
4.2. Liens. The Borrower will not create, incur, assume or suffer to exist
-----
(nor allow any of its Subsidiaries to create, incur, assume or suffer to exist)
any mortgage, deed of trust, pledge, lien, security interest, or other charge or
encumbrance (including the lien or retained security title of a conditional
vendor) of any nature (collectively, "Liens") upon or with respect to any of its
property or assets, now owned or hereafter acquired, except:
(i) Liens for taxes, assessments or governmental charges or levies on
property of the Borrower or any of its Subsidiaries if the same shall not
at the time be delinquent or thereafter can be paid without interest or
penalty;
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar Liens arising in the ordinary course of
business for sums not yet due or which are being contested in good faith
and by appropriate proceedings which serve as a matter of law to stay the
enforcement thereof and as to which adequate reserves have been made;
(iii) pledges or deposits under workmen's compensation laws,
unemployment insurance, social security, retirement benefits or similar
legislation;
(iv) Liens in favor of the Bank;
(v) Liens in favor of equipment vendors and/or lessors securing
purchase money Indebtedness to the extent permitted by clause (iv) of
(S)4.1; provided that no such Lien will extend to any property of the
Borrower or any Subsidiary other than the specific items of equipment
financed; or
(vi) other Liens existing at the date hereof, but only to the extent
and with the relative priorities set forth on item 4.2 of the attached
Disclosure Schedule.
4.3. Guaranties. The Borrower will not, without the prior written consent
----------
of the Bank, assume, guarantee, endorse or otherwise become directly or
contingently liable (including, without limitation, liable by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in any debtor or otherwise to assure any creditor
against loss) (and will not permit any of its Subsidiaries so to assume,
guaranty or become directly or contingently liable) in connection with any
indebtedness of any other Person, except (i) guaranties by endorsement for
deposit or collection in the ordinary course of business, and (ii) currently
existing guaranties described on item 4.3 of the attached Disclosure Schedule.
4.4. Dividends. The Borrower will not, without the prior written consent
---------
of the
-15-
Bank, make any distributions to its shareholders, pay any dividends (other than
dividends payable solely in capital stock of the Borrower) or redeem, purchase
or otherwise acquire, directly or indirectly any of its capital stock.
4.5. Loans and Advances. The Borrower will not make any loans or advances
------------------
(and will not permit any of its Subsidiaries to make any loans or advances) to
any Person, including, without limitation, the Borrower's directors, officers
and employees, except advances to directors, officers or employees with respect
to expenses incurred by them in the ordinary course of their duties and advances
against salary, all of which will not exceed, in the aggregate, $250,000
outstanding at any one time.
4.6. Investments. The Borrower will not, without the Bank's prior written
-----------
consent, invest in, hold or purchase any stock or securities of any Person (nor
will the Borrower permit any of its Subsidiaries to invest in, purchase or hold
any such stock or securities) except (i) readily marketable direct obligations
of, or obligations guarantied by, the United States of America or any agency
thereof, (ii) other investment grade debt securities, (iii) mutual funds, the
assets of which are primarily invested in items of the kind described in the
foregoing clauses (i) and (ii) of this (S)4.6, (iv) deposits with or
certificates of deposit issued by the Bank and any other obligations of the Bank
or the Bank's parent, (v) deposits with or certificates of deposit issued by any
United States commercial bank having more than $100,000,000 in capital, and (vi)
investments in any Subsidiaries now existing or hereafter created by the
Borrower pursuant to (S)4.7 below; provided that in any event the Tangible Net
Worth of the Borrower alone (exclusive of its investment in Subsidiaries and any
debt owed by any Subsidiary to the Borrower) will not be less than 90% of the
consolidated Tangible Net Worth of the Borrower and Subsidiaries.
4.7. Subsidiaries; Acquisitions. The Borrower will not, without the prior
--------------------------
written consent of the Bank, form or acquire any Subsidiary or make any other
acquisition of the stock of any Person or of all or substantially all of the
assets of any other Person, except that the Borrower may form or acquire any
Subsidiary so long as the Borrower promptly notifies the Bank of such formation
or acquisition and, in any event, after giving effect to such formation or
acquisition the Borrower is in compliance with the proviso contained in clause
-------
(vi) of (S)4.6 above. The Borrower will not be or become a partner in any
partnership or joint venture if the result of such participation in a
partnership or joint venture would be to subject the assets of the Borrower
generally to claims by creditors of such partnership or joint venture.
4.8. Merger. The Borrower will not, without the prior written consent of
------
the Bank, merge or consolidate with any Person or sell, lease, transfer or
otherwise dispose of any material portion of its assets (whether in one or more
transactions), other than sale of inventory in the ordinary course.
4.9. Affiliate Transactions. The Borrower will not, without the prior
----------------------
written
-16-
consent of the Bank, enter into any transaction, including, without limitation,
the purchase, sale or exchange of any property or the rendering of any service,
with any affiliate of the Borrower, except in the ordinary course of and
pursuant to the reasonable requirements of the Borrower's business and upon fair
and reasonable terms no less favorable to the Borrower than would be obtained in
a comparable arms'-length transaction with any Person not an affiliate; provided
that nothing in this (S)4.9 shall be deemed to prohibit the payment of salary or
other similar payments to any officer or director of the Borrower at a level
consistent with the salary and other payments being paid at the date of this
letter agreement and heretofore disclosed in writing to the Bank, nor to prevent
the hiring of additional officers at a salary level consistent with industry
practice, nor to prevent reasonable periodic increases in salary. For the
purposes of this letter agreement, "affiliate" means any Person which, directly
or indirectly, controls or is controlled by or is under common control with the
Borrower; any officer or director or former officer or director of the Borrower;
any Person owning of record or beneficially, directly or indirectly, 5% or more
of any class of capital stock of the Borrower or 5% or more of any class of
capital stock or other equity interest having voting power (under ordinary
circumstances) of any of the other Persons described above; and any member of
the immediate family of any of the foregoing. "Control" means possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of any Person, whether through ownership of voting
equity, by contract or otherwise.
4.10. Change of Address, etc. The Borrower will not change its name or
-----------------------
legal structure, nor will the Borrower move its chief executive offices or
principal place of business from the address described in the first sentence of
(S)2.1(j) above, nor will the Borrower remove any books or records from such
address, nor will the Borrower keep any Collateral at any location other than
the Premises without, in each instance, giving the Bank at least 30 days' prior
written notice and providing all such financing statements, certificates and
other documentation as the Bank may request in order to maintain the perfection
and priority of the security interests granted or intended to be granted
pursuant to the Security Agreement. The Borrower will not change its fiscal
year or methods of financial reporting unless, in each instance, prior written
notice of such change is given to the Bank and prior to such change the Borrower
enters into amendments to this letter agreement in form and substance
satisfactory to the Bank in order to preserve unimpaired the rights of the Bank
and the obligations of the Borrower hereunder.
4.11. Hazardous Waste. Except as provided below, the Borrower will not
---------------
dispose of or suffer or permit to exist any hazardous material or oil on any
site or vessel owned, occupied or operated by the Borrower or any Subsidiary of
the Borrower, nor shall the Borrower store (or permit any Subsidiary to store)
on any site or vessel owned, occupied or operated by the Borrower or any such
Subsidiary, or transport or arrange the transport of, any hazardous material or
oil (the terms "hazardous material", "oil", "site" and "vessel", respectively,
being used herein with the meanings given those terms in Mass. Gen. Laws, Ch.
21E or any comparable terms in any comparable statute in effect in any other
relevant jurisdiction). The Borrower shall provide the Bank with written notice
of (i) the intended
-17-
storage or transport of any hazardous material or oil by the Borrower or any
Subsidiary of the Borrower, (ii) any potential or known release or threat of
release of any hazardous material or oil at or from any site or vessel owned,
occupied or operated by the Borrower or any Subsidiary of the Borrower, and
(iii) any incurrence of any expense or loss by any government or governmental
authority in connection with the assessment, containment or removal of any
hazardous material or oil for which expense or loss the Borrower or any
Subsidiary of the Borrower may be liable. Notwithstanding the foregoing, the
Borrower and its Subsidiaries may use, store and transport, and need not notify
the Bank of the use, storage or transportation of, (x) oil in reasonable
quantities, as fuel for heating of their respective facilities or for vehicles
or machinery used in the ordinary course of their respective businesses and (y)
hazardous materials that are solvents, cleaning agents or other materials used
in the ordinary course of the respective business operations of the Borrower and
its Subsidiaries, in reasonable quantities, as long as in any case the Borrower
or the Subsidiary concerned (as the case may be) has obtained and maintains in
effect any necessary governmental permits, licenses and approvals, complies with
all requirements of applicable federal, state and local law relating to such
use, storage or transportation, follows the protective and safety procedures
that a prudent businessperson conducting a business the same as or similar to
that of the Borrower or such Subsidiary (as the case may be) would follow, and
disposes of such materials (not consumed in the ordinary course) only through
licensed providers of hazardous waste removal services.
4.12. No Margin Stock. No proceeds of any Loan shall be used directly or
---------------
indirectly to purchase or carry any margin security.
4.13. Subordinated Debt. The Borrower will not directly or indirectly
-----------------
make any optional or voluntary prepayment or purchase of Subordinated Debt or
modify, alter or add any provisions with respect to payment or terms of
Subordinated Debt. The Borrower will not make any payment of any principal of
or interest on any Subordinated Debt at any time when there exists, or if there
would result therefrom, any Event of Default hereunder.
V. DEFAULT AND REMEDIES
--------------------
5.1. Events of Default. The occurrence of any one of the following events
-----------------
shall constitute an Event of Default hereunder:
(a) The Borrower shall fail to make any payment of principal of or
interest on the Revolving Note or any Term Note on or before the date when due;
or the Borrower shall fail to pay when due any amount owed to the Bank with
respect to any letter of credit now or hereafter issued by the Bank; or
(b) Any representation or warranty of the Borrower contained herein shall
at any time prove to have been incorrect in any material respect when made or
any representation or warranty made by the Borrower in connection with any Loan
or letter of credit shall at any time prove to have been incorrect in any
material respect when made; or
-18-
(c) The Borrower shall default in the performance or observance of any
agreement or obligation under any of (S)(S)3.1, 3.3, 3.6, 3.7, 3.8, 3.9 or 3.10
or Article IV; or
(d) The Borrower shall default in the performance of any other term,
covenant or agreement contained in this letter agreement and such default shall
continue unremedied for 30 days after notice thereof shall have been given to
the Borrower; or
(e) Any default on the part of the Borrower or any Subsidiary of the
Borrower shall exist, and shall remain unwaived or uncured beyond the expiration
of any applicable notice and/or grace period, under any other contract,
agreement or undertaking now existing or hereafter entered into with or for the
benefit of the Bank (or any affiliate of the Bank); or
(f) Any default shall exist and remain unwaived or uncured with respect to
any Subordinated Debt of the Borrower or with respect to any instrument
evidencing, guaranteeing, securing or otherwise relating to any such
Subordinated Debt, or any such Subordinated Debt shall not have been paid when
due, whether by acceleration or otherwise, or shall have been declared to be due
and payable prior to its stated maturity, or any event or circumstance shall
occur which permits, or with the lapse of time or the giving of notice or both
would permit, the acceleration of the maturity of any Subordinated Debt by the
holder or holders thereof; or
(g) Any default shall exist and remain unwaived or uncured with respect to
any Indebtedness of the Borrower or any Subsidiary of the Borrower in excess of
$100,000 in aggregate principal amount or with respect to any instrument
evidencing, guaranteeing, securing or otherwise relating to any such
Indebtedness, or any such Indebtedness in excess of $100,000 in aggregate
principal amount shall not have been paid when due, whether by acceleration or
otherwise, or shall have been declared to be due and payable prior to its stated
maturity, or any event or circumstance shall occur which permits, or with the
lapse of time or the giving of notice or both would permit, the acceleration of
the maturity of any such Indebtedness by the holder or holders thereof; or
(h) The Borrower shall be dissolved, or the Borrower or any Subsidiary of
the Borrower shall become insolvent or bankrupt or shall cease paying its debts
as they mature or shall make an assignment for the benefit of creditors, or a
trustee, receiver or liquidator shall be appointed for the Borrower or any
Subsidiary of the Borrower or for a substantial part of the property of the
Borrower or any such Subsidiary, or bankruptcy, reorganization, arrangement,
insolvency or similar proceedings shall be instituted by or against the Borrower
or any such Subsidiary under the laws of any jurisdiction (except for an
involuntary proceeding filed against the Borrower or any Subsidiary of the
Borrower which is dismissed within 60 days following the institution thereof);
or
(i) Any attachment, execution or similar process involving an amount in
excess of $100,000 shall be issued or levied against any of the property of the
Borrower or any Subsidiary and such attachment, execution or similar process
shall not be paid, stayed,
-19-
released, vacated or fully bonded within 10 days after its issue or levy; or
(j) Any final uninsured judgment in excess of $100,000 shall be entered
against the Borrower or any Subsidiary of the Borrower by any court of competent
jurisdiction; or
(k) The Borrower or any Subsidiary of the Borrower shall fail to meet its
minimum funding requirements under ERISA with respect to any employee benefit
plan (or other class of benefit which the PBGC has elected to insure) or any
such plan shall be the subject of termination proceedings (whether voluntary or
involuntary) and there shall result from such termination proceedings a
liability of the Borrower or any Subsidiary of the Borrower to the PBGC which in
the reasonable opinion of the Bank may have a material adverse effect upon the
financial condition of the Borrower or any such Subsidiary; or
(l) The Security Agreement or any other Loan Document shall for any reason
(other than due to payment in full of all amounts secured or evidenced thereby
or due to discharge in writing by the Bank) not remain in full force and effect;
or
(m) The security interests and liens of the Bank in and on any of the
Collateral covered or intended to be covered by the Security Agreement shall for
any reason (other than written release by the Bank) not be fully perfected liens
and security interests; or
(n) If, at any time, more than 50% of any class of voting stock of the
Borrower shall be held, of record and/or beneficially, by any Person or by any
"group" (as defined in the Securities Exchange Act of 1934, as amended, and the
regulations thereunder) other than by one or more of the Persons listed on item
5.1(n) of the attached Disclosure Schedule or a group consisting solely of such
Persons; or
(o) There shall occur any other material adverse change in the condition
(financial or otherwise), operations, properties, assets, liabilities or
earnings of the Borrower.
5.2. Rights and Remedies on Default. Upon the occurrence of any Event of
------------------------------
Default, in addition to any other rights and remedies available to the Bank
hereunder or otherwise, the Bank may exercise any one or more of the following
rights and remedies (all of which shall be cumulative):
(a) Declare the entire unpaid principal amounts of the Revolving Note and
each Term Note then outstanding, all interest accrued and unpaid thereon and all
other amounts payable under this letter agreement and all other Indebtedness of
the Borrower to the Bank to be forthwith due and payable, whereupon the same
shall become forthwith due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived by the Borrower.
(b) Terminate the revolving financing arrangements and term loan facility
provided for by this letter agreement.
-20-
(c) Exercise all rights and remedies hereunder, under the Revolving Note,
under the Term Notes, under the Security Agreement, under the Intellectual
Property Assignments and under each and any other agreement with the Bank; and
exercise all other rights and remedies which the Bank may have under applicable
law.
5.3. Set-off. In addition to any rights now or hereafter granted under
-------
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, the Bank is hereby authorized at any time or
from time to time, without presentment, demand, protest or other notice of any
kind to the Borrower or to any other Person, all of which are hereby expressly
waived, to set off and to appropriate and apply any and all deposits and any
other Indebtedness at any time held or owing by the Bank or any affiliate
thereof to or for the credit or the account of the Borrower against and on
account of the obligations and liabilities of the Borrower to the Bank under
this letter agreement or otherwise, irrespective of whether or not the Bank
shall have made any demand hereunder and although said obligations, liabilities
or claims, or any of them, may then be contingent or unmatured and without
regard for the availability or adequacy of other collateral. As further
security for the Obligations, the Borrower also grants to the Bank a security
interest with respect to all its deposits and all securities or other property
in the possession of the Bank or any affiliate of the Bank from time to time,
and, upon the occurrence of any Event of Default, the Bank may exercise all
rights and remedies of a secured party under the Uniform Commercial Code.
5.4. Letters of Credit. Without limitation of any other right or remedy of
-----------------
the Bank, (i) if an Event of Default shall have occurred and the Bank shall have
accelerated the Revolving Loans or (ii) if this letter agreement and/or the
revolving financing arrangements described herein shall have expired or shall
have been earlier terminated by either the Bank or the Borrower for any reason,
the Borrower will forthwith deposit with the Bank in cash a sum equal to the
total of all then undrawn amounts of all outstanding letters of credit issued by
the Bank for the account of the Borrower.
VI. MISCELLANEOUS
-------------
6.1. Costs and Expenses. The Borrower agrees to pay on demand all costs
------------------
and expenses (including, without limitation, reasonable legal fees) of the Bank
in connection with the preparation, execution and delivery of this letter
agreement, the Security Agreement, the Revolving Note, the Term Notes and all
other instruments and documents to be delivered in connection with any Loan or
letter of credit issued hereunder and any amendments or modifications of any of
the foregoing, as well as the costs and expenses (including, without limitation,
the reasonable fees and expenses of legal counsel) incurred by the Bank in
connection with preserving, enforcing or exercising, upon default, any rights or
remedies under this letter agreement, the Security Agreement, the Revolving
Note, the Term Notes and all other instruments and documents delivered or to be
delivered hereunder or in connection herewith, all whether or not legal action
is instituted. In addition, the Borrower shall be obligated to pay any and all
stamp and other taxes payable or determined to be payable in
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connection with the execution and delivery of this letter agreement, the
Security Agreement, the Revolving Note, the Term Notes and all other instruments
and documents to be delivered in connection with any Obligation. Any fees,
expenses or other charges which the Bank is entitled to receive from the
Borrower under this Section shall bear interest from the date of any demand
therefor until the date when paid at a rate per annum equal to the sum of (i)
two (2%) percent plus (ii) the per annum rate otherwise payable under the
Revolving Note (but in no event in excess of the maximum rate permitted by then
applicable law) .
6.2. Capital Adequacy. If the Bank shall have determined that the adoption
----------------
or phase-in 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 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 of such entity regarding capital
adequacy (whether or not having the force of law) has or would have the effect
of reducing the return on the Bank's capital with respect to the Revolving
Loans, the Term Loans and/or the within-described revolving and term loan
facilities and/or letters of credit issued for the account of the Borrower 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, phase-in, change or compliance and assuming that the Bank's capital
was then fully utilized) but for such adoption, phase-in, change or compliance
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 Borrower;
and (ii) the Borrower shall pay forthwith to the Bank as an additional fee such
amount as the Bank certifies to be the amount that will compensate it for such
reduction with respect to the Revolving Loans, the Term Loans, the within-
described revolving and term loan facilities and/or such letters of credit.
A certificate of the Bank claiming compensation under this Section 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 amounts, the Bank may use any
reasonable averaging and attribution methods. No failure on the part of the
Bank to demand compensation on any one occasion shall constitute a waiver of its
right to demand such compensation on any other occasion and no failure on the
part of the Bank to deliver any certificate in a timely manner shall reduce any
obligation of the Borrower to the Bank under this Section.
6.3. Facility Fees. With respect to the Term Loans, the Borrower is paying
-------------
to the Bank, at the date of execution and delivery of this letter agreement a
non-refundable facility fee in the amount of $7,500. The Borrower will also pay
to the Bank with respect to the within arrangements for Revolving Loans, on the
date of this letter agreement and thereafter on the first day of each calendar
quarter (commencing on October 1, 1996) as long as the
-22-
within-described revolving loan arrangements are in effect a non-refundable
quarterly facility fee payable in advance in the amount of $4,375 per quarter
(appropriately pro-rated for any partial calendar quarter). In addition, if the
within-described revolving financing arrangements are terminated by the Borrower
for any reason or by the Bank as the result of the Borrower's default, the
Borrower shall forthwith upon such termination pay to the Bank a sum equal to
all of the fees which would have become due pursuant to the immediately
preceding sentence from the date of such termination through the Expiration
Date. Fees described in this Section are in addition to any balances and fees
required by the Bank or any of its affiliates in connection with any other
services now or hereafter made available to the Borrower.
6.4. Other Agreements. The provisions of this letter agreement are not in
----------------
derogation or limitation of any obligations, liabilities or duties of the
Borrower under any of the other Loan Documents or any other agreement with or
for the benefit of the Bank. No inconsistency in default provisions between
this letter agreement and any of the other Loan Documents or any such other
agreement will be deemed to create any additional grace period or otherwise
derogate from the express terms of each such default provision. No covenant,
agreement or obligation of the Borrower contained herein, nor any right or
remedy of the Bank contained herein, shall in any respect be limited by or be
deemed in limitation of any inconsistent or additional provisions contained in
any of the other Loan Documents or any such other agreement.
6.5. Governing Law. This letter agreement and the Notes shall be governed
-------------
by, and construed and enforced in accordance with, the laws of The Commonwealth
of Massachusetts.
6.6. Addresses for Notices, etc. All notices, requests, demands and other
--------------------------
communications provided for hereunder shall be in writing and shall be mailed or
delivered to the applicable party at the address indicated below:
If to the Borrower:
Peritus Software Services, Inc.
000 Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx X. XxxXxxx, Director of Finance and Treasurer
If to the Bank:
Fleet National Bank
High Technology Group
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Vice President
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or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communications shall be effective two (2) days after deposit in the United
States mails, if sent postage prepaid, certified or registered mail, return
receipt requested, addressed as aforesaid. If any such notice, request, demand
or other communication is hand delivered, same shall be effective upon receipted
delivery.
6.7. Binding Effect; Assignment; Termination. This letter agreement shall
---------------------------------------
be binding upon the Borrower, its successors and assigns and shall inure to the
benefit of the Borrower and the Bank and their respective permitted successors
and assigns. The Borrower may not assign this letter agreement or any rights
hereunder without the express written consent of the Bank. The Bank may, in
accordance with applicable law, from time to time assign or grant participations
in this letter agreement, the Loans, the Notes and/or any letters of credit
issued hereunder. The Borrower may terminate this letter agreement and the
financing arrangements made herein by giving written notice of such termination
to the Bank, together with the payment described in the third sentence of
(S)6.3; provided that no such termination will release or waive any of the
Bank's rights or remedies or any of the Borrower's obligations under this letter
agreement or any of the other Loan Documents unless and until the Borrower has
paid in full all Loans and all interest thereon and all fees and charges payable
in connection therewith and all letters of credit issued hereunder have been
terminated.
6.8. Consent to Jurisdiction. The Borrower irrevocably submits to the non-
-----------------------
exclusive jurisdiction of any Massachusetts court or any federal court sitting
within The Commonwealth of Massachusetts over any suit, action or proceeding
arising out of or relating to this letter agreement and/or any Note. The
Borrower irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of venue of any such
suit, action or proceeding brought in such a court and any claim that any such
suit, action or proceeding has been brought in an inconvenient forum. The
Borrower agrees that final judgment in any such suit, action or proceeding
brought in such a court shall be enforced in any court of proper jurisdiction by
a suit upon such judgment, provided that service of process in such action, suit
or proceeding shall have been effected upon the Borrower in one of the manners
specified in the following paragraph of this (S)6.8 or as otherwise permitted by
law.
The Borrower hereby consents to process being served in any suit, action or
proceeding of the nature referred to in the preceding paragraph of this (S)6.8
either (i) by mailing a copy thereof by registered or certified mail, postage
prepaid, return receipt requested, to it at its address set forth in (S)6.6 or
(ii) by serving a copy thereof upon it at its address set forth in (S)6.6.
6.9. Severability. In the event that any provision of this letter
------------
agreement or the application thereof to any Person, property or circumstances
shall be held to any extent to be
-24-
invalid or unenforceable, the remainder of this letter agreement, and the
application of such provision to Persons, properties or circumstances other than
those as to which it has been held invalid and unenforceable, shall not be
affected thereby, and each provision of this letter agreement shall be valid and
enforced to the fullest extent permitted by law.
VII. DEFINED TERMS
-------------
7.1. Definitions. In addition to terms defined elsewhere in this letter
-----------
agreement, as used in this letter agreement, the following terms have the
following respective meanings:
"Additional Term Loans" - As defined in (S)1.4.
"Additional Term Note" - As defined in (S)1.4.
"Aggregate Revolving Bank Liabilities" - At any time, the sum of (i) the
principal amount of all Revolving Loans then outstanding, plus (ii) all then
undrawn amounts of letters of credit issued by the Bank for the account of the
Borrower, plus (iii) all amounts then drawn on any such letter of credit which
at said date shall not have been reimbursed to the Bank by the Borrower.
"Borrowing Base" - At any time, the sum of (i) 75% of the aggregate
principal amount of the Qualified Receivables of the Borrower then outstanding,
plus (ii) 50% of the aggregate principal amount of the Eligible Contract Payment
of the Borrower then outstanding.
"Business Day" - Any day which is not a Saturday, nor a Sunday nor a public
holiday under the laws of the United States of America or The Commonwealth of
Massachusetts applicable to a national bank.
"Capital Base" - At any time, the sum of (i) the consolidated Tangible Net
Worth of the Borrower and Subsidiaries then existing plus (ii) the principal
amount of Subordinated Debt of the Borrower then outstanding (nothing contained
herein being deemed to authorize the incurrence of any additional Subordinated
Debt).
"Collateral" - All property now or hereafter owned by the Borrower or in
which the Borrower now or hereafter has any interest which is described as
"Collateral" in the Security Agreement or in Subsection 7.2(b) below.
"Current Liabilities" - All liabilities of the Borrower or of any of the
Borrower's Subsidiaries which are properly shown as current liabilities on a
consolidated balance sheet of the Borrower prepared in accordance with generally
accepted accounting principles consistently applied. Further, "Current
Liabilities" will in any event be deemed to include the Revolving Loans.
"Determination Date" - As defined in (S)3.7.
-25-
"Eligible Contract Payments" - As at any date when same are to be
determined, all amounts earned by the Borrower by performance under any written
contract for services rendered in the ordinary course of the Borrower's business
and not yet billed to the extent that such amounts are scheduled, pursuant to
the respective contracts with customers under which same have arisen, to be
received by the Borrower within the 12 months following such date; provided that
no such amount will be deemed includable in Eligible Contract Payments (i) if
payment of such amount is subject to any developmental milestones, delivery
requirements or other conditions other than the mere passage of time (other than
source code maintenance obligations in the ordinary course of the Borrower's
business); (ii) if the Bank does not have a fully perfected first priority
security interest in the contract under which the Borrower's right to receive
payment of such amount has arisen and in the proceeds thereof; (iii) if the
relevant customer is an affiliate of the Borrower (Bull HN not being deemed to
be an "affiliate" of the Borrower for the purpose of this definition); (iv) if
such amount is owed by a customer located outside the United States; (v) if the
Borrower has failed to perform in any respect under the relevant contract or if
the relevant customer has disputed liability or has failed to pay when due any
monetary obligation under the relevant contract or under any other contract with
the Borrower; (vi) if the relevant customer is not deemed by the Bank to be of
sufficient financial strength for this purpose; (vii) to the extent that such
amount is subject to any offset, dispute, claim, counterclaim, credit,
allowance, reserve or other defense; (viii) if the relevant customer is the
United States of America or any department, agency or instrumentality thereof,
unless the relevant contract has been assigned to the Bank under the Federal
Assignment of Claims Act; or (ix) if such amount is otherwise determined by the
Bank in its discretion to be difficult to collect or uncollectable.
"ERISA" - The Employee Retirement Income Security Act of 1974, as amended.
"Expiration Date" - June 30, 1997, unless extended by the Bank, which
extension may be given or withheld by the Bank in its sole discretion.
"Indebtedness" - The total of all obligations of a Person, whether current
or long-term, senior or subordinated, which in accordance with generally
accepted accounting principles would be included as liabilities upon such
Person's balance sheet at the date as of which Indebtedness is to be determined,
and shall also include guaranties, endorsements (other than for collection in
the ordinary course of business) or other arrangements whereby responsibility is
assumed for the obligations of others, whether by agreement to purchase or
otherwise acquire the obligations of others, including any agreement, contingent
or otherwise, to furnish funds through the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.
"Initial Term Loan" - As defined in (S)1.4.
"Initial Term Note" - As defined in (S)1.4.
"Loan Documents" - Each of this letter agreement, the Revolving Note, the
Term
-26-
Notes, the Security Agreement, the Intellectual Property Assignments and each
other instrument, document or agreement evidencing, securing, guaranteeing or
relating in any way to any of the Loans or to any of the letters of credit
issued hereunder, all whether now existing or hereafter arising or entered into.
"Maximum Revolving Amount" - At any date as of which same is to be
determined, the amount by which (x) $3,500,000 exceeds (y) the sum of (i) all
then undrawn amounts of letters of credit issued by the Bank for the account of
the Borrower plus (ii) all amounts then drawn on any such letter of credit which
at said date shall not have been reimbursed to the Bank by the Borrower.
"MCRC" - The Massachusetts Capital Resource Company.
"Net Income" (or "Net Loss") - The book net income (or book net loss, as
the case may be) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with
generally accepted accounting principles consistently applied.
"Net Quick Assets" - Such current assets of the Borrower as consist of
cash, cash-equivalents, invoiced Receivables (less an allowance for bad debt
consistent with the Borrower's prior experience) and Unbilled Revenues (less an
allowance for uncollectable Unbilled Revenues, as reasonably determined by the
Borrower).
"Notes" - Collectively, the Revolving Note and the Term Notes.
"Obligations" - All Indebtedness, covenants, agreements, liabilities and
obligations, now existing or hereafter arising, made by the Borrower with or for
the benefit of the Bank or owed by the Borrower to the Bank in any capacity.
"PBGC" - The Pension Benefit Guaranty Corporation or any successor thereto.
"Person" - An individual, corporation, company, partnership, joint venture,
trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Premises" - As defined in Subsection 2.1(j) above.
"Qualified Receivables" - Only those Receivables of the Borrower which
arise out of bona fide sales made to customers of the Borrower (which customers
---- ----
are located in the United States and are unrelated to the Borrower) (Bull HN not
being deemed to be "related" to the Borrower for the purposes of this
definition) in the ordinary course of the Borrower's business and which remain
unpaid no more than 60 days past the respective invoice dates of such
Receivables, the payment of which is not in dispute. Unless the Bank in its
sole discretion otherwise determines with respect to any Receivable, a
Receivable which would otherwise be a Qualified Receivable shall be deemed not
to be a Qualified Receivable (i) if the Bank does not have a fully perfected
first priority security interest in such Receivable; (ii)
-27-
if such Receivable is not free and clear of all adverse interests in favor of
any other Person; (iii) if such Receivable is subject to any deduction, off-set,
contra account, counterclaim or condition; (iv) if a field examination made by
the Bank fails to confirm that such Receivable exists and satisfies all of the
criteria set forth herein to be a Qualified Receivable; (v) if such Receivable
is not properly invoiced at the date of sale; (vi) if the customer or account
debtor has disputed liability or made any claim with respect to the Receivable
or the merchandise covered thereby or with respect to any other Receivable due
from said customer to the Borrower; (vii) if the customer or account debtor has
filed a petition for bankruptcy or any other application for relief under the
Bankruptcy Code or has effected an assignment for the benefit of creditors, or
if any petition or any other application for relief under the Bankruptcy Code
has been filed against said customer or account debtor, or if the customer or
account debtor has suspended business, become insolvent, ceased to pay its debts
as they become due, or had or suffered a receiver or trustee to be appointed for
any of its assets or affairs; (viii) if the customer or account debtor has
failed to pay other Receivables so that an aggregate of 25% of the total
Receivables owing to the Borrower by such customer or account debtor has been
outstanding for more than 60 days; (ix) if such Receivable is owed by the United
States government or any agency or department thereof (unless assigned to the
Bank under the Federal Assignment of Claims Act); or (x) if the Bank reasonably
believes that collection of such Receivable is insecure or that it may not be
paid by reason of financial inability to pay or otherwise, or that such
Receivable is not for any reason suitable for use as a basis for borrowing
hereunder. "Qualified Receivables" will in no event include any Eligible
Contract Payments.
"Qualifying Equipment" - Equipment (not including software, except that the
Borrower may include within "Qualifying Equipment" custom software which is not
prepackaged "shrink-wrapped" software with an invoiced cost not in excess of
$150,000 in the aggregate) purchased by the Borrower after June 30, 1996 (except
that for the purposes of the Initial Term Loan the relevant Qualified Equipment
may include equipment purchased prior to June 30, 1996 which is specifically
approved for this purpose by the Bank) for use in the Borrower's business which
meets all of the following criteria: (i) such equipment consists of one of the
items shown on the Equipment List heretofore delivered by the Borrower to the
Bank or has otherwise been approved by the Bank for use in supporting a Term
Loan, (ii) each item of such equipment has been delivered to and installed at
the Premises and has become fully operational, and (iii) the Borrower has paid
in full for each item of such equipment and holds title to same, free of all
interests and claims of any other Person (other than the security interest of
the Bank).
"Receivables" - All of the Borrower's present and future accounts, accounts
receivable and notes, drafts, acceptances and other instruments representing or
evidencing a right to payment for goods sold or for services rendered.
"Senior Debt" - All Indebtedness of the Borrower and/or its Subsidiaries
which does not constitute Subordinated Debt.
-28-
"Subordinated Debt" - Any Indebtedness of the Borrower which is expressly
subordinated, pursuant to a subordination agreement in form and substance
satisfactory to the Bank, to all Indebtedness now or hereafter owed by the
Borrower to the Bank.
"Subsidiary" - Any corporation or other entity of which the Borrower and/or
any of its Subsidiaries, directly or indirectly, owns, or has the right to
control or direct the voting of, fifty (50%) percent or more of the outstanding
capital stock or other ownership interest having general voting power (under
ordinary circumstances).
"Tangible Net Worth" - An amount equal to the total assets of any Person
(excluding (i) the total intangible assets of such Person and (ii) any assets
representing amounts due from any officer, employee or other affiliate of such
Person) minus the total liabilities of such Person. Total intangible assets
shall be deemed to include, but shall not be limited to, the excess of cost over
book value of acquired businesses accounted for by the purchase method,
formulae, trademarks, trade names, patents, patent rights and deferred expenses
(including, but not limited to, unamortized debt discount and expense,
organizational expense, capitalized software costs and experimental and
development expenses).
"Term Loans" - Collectively, the Initial Term Loan and each Additional Term
Loan.
"Term Notes" - Collectively, the Initial Term Note and the Additional Term
Note.
"Unbilled Revenues" - All amounts properly shown by the Borrower as
"unbilled revenues" on a balance sheet of the Borrower prepared in accordance
with generally accepted principles consistently with the balance sheet included
in the Borrower's audited financial statements as at December 31, 1995,
heretofore provided to the Bank.
Any defined term used in the plural preceded by the definite article shall
be taken to encompass all members of the relevant class. Any defined term used
in the singular preceded by "any" shall be taken to indicate any number of the
members of the relevant class.
7.2. Security Agreement. (a) The Borrower acknowledges and agrees that
------------------
the "Obligations" described in and secured by the Security Agreement, include,
without limitation, all of the obligations of the Borrower under the Revolving
Note, the Term Notes and/or this letter agreement.
(b) The Security Agreement is hereby modified to provide as follows:
(i) That the "Collateral" subject thereto includes, without
limitation and in addition to the Collateral described therein, all of the
Borrower's files, books and records (including, without limitation, all
electronically recorded data) all whether now owned or existing or hereafter
acquired, created or arising. The Borrower hereby grants to the Bank a security
interest in all such Collateral in order to secure the full and prompt payment
and performance of all of the Obligations.
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(ii) That, upon the occurrence of any Event of Default (as
defined in (S)5.1 of this letter agreement), the Bank may, at any time, without
further notice to the Borrower, notify account debtors that the Collateral has
been assigned to the Bank and that payments by such account debtors shall be
made directly to the Bank. At any time after the occurrence of an Event of
Default, the Bank may collect the Borrower's Receivables, or any of same,
directly from account debtors and may charge the collection costs and expenses
to the Borrower.
-30-
This letter agreement is executed, as an instrument under seal, as of the
day and year first above written.
Very truly yours,
PERITUS SOFTWARE SERVICES, INC.
By /s/ Xxxxx X. Xxxxx
---------------------------------
Name:
Title:
Accepted and agreed:
FLEET NATIONAL BANK
By /s/ Xxxxxx Xxxxxx
---------------------------
Its
By
---------------------------
Its
-31-
DISCLOSURE SCHEDULE
Item 2.1(a) Jurisdictions in which Borrower is qualified; Subsidiaries; joint
ventures; partnerships
Item 2.1(b) Stock ownership
Item 2.1(e) Litigation
Item 2.1(j) Collateral locations; record owner of Premises and other
locations
Item 2.1(k) Intellectual Property
Item 4.1 Existing Indebtedness
Item 4.2 Existing Liens
Item 4.3 Existing Guaranties
Item 5.1(n) Present Insiders
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