[ROYAL BANK LETTERHEAD]
EXHIBIT 10.2
March 3, 1999
PRIVATE AND CONFIDENTIAL
Changepoint Corporation
0000 00xx Xxx.
Richmond Hill, Ontario
L4B 3N9
Dear Sirs:
Further to our recent discussions, we are pleased to offer the revolving demand
Credit Facility described below, subject to the following terms and conditions.
DEFINITIONS: The definitions attached hereto in Schedule "A" are
incorporated in this agreement by reference as if
set out in full herein.
BORROWER: CHANGEPOINT CORPORATION (the "Borrower").
LENDER: Royal Bank of Canada (the "Bank"), through its
Branch at 000 Xxxx Xxxxxx Xxxxx Xx., Xxxxxxxx Xxxx,
Xxxxxxx (the "Branch of Account").
CREDIT
FACILITY: The Credit Facility is available in the following
segments in Canadian Dollars by way of, at the
Borrower's option:
Segment (1) Operating:
(a) Royal Bank Prime based loans
("RBP Loans").
(b) Letters of Credit ("L/C's")
Segment (2) Corporate Visa expense account(s)
("Visa").
Segment (3) Merchant Visa
Segment (4) Lease line of credit ("Leases").
(collectively the "Borrowings").
AMOUNT(S): Segment (1) $ 1,500,000.
Segment (2) $ 50,000.
Segment (3) $ 50,000.
Segment (4) $ 500,000.
TERMS OF
SEGMENTS (2),(3)
AND (4): The terms and conditions regarding Leases and Visa
will be as outlined in separate agreements entered
into by the Borrower with the Bank.
REPAYMENT: Notwithstanding compliance with the Covenants
section contained herein, Borrowings under Segment
(1) are repayable on demand.
Drawings under L/C's will be charged to the
Borrowers account at their maturity.
REPAYMENT: (Cont'd) Upon demand, the Borrower shall pay to the
Bank all Borrowings under this agreement
CHANGEPOINT CORPORATION
February 3, 1999 Page 2
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including the face amounts of all L/Cs which are
unmatured or unexpired, which face amounts shall
be held by the Bank as collateral security for the
Borrower's obligations to reimburse the Bank for
any payment made by the Bank in respect of such
L/Cs. The Bank may enforce its rights to realize
upon its security and retain sufficient funds to
cover amounts outstanding by way of these
instruments.
AVAILABILITY: The Borrower may borrow, repay, convert and reborrow
up to the amount of the Segment (1) operating
facility, provided that:
(a) the aggregate of Potential Preferred Claims
and Borrowings outstanding under Segment (1)
must not exceed the aggregate of:
(i) 75% of good, effectively assigned,
unencumbered Canadian and U.S. trade
accounts receivable of Changepoint
Corporation and Changepoint Inc.,
excluding:
(a) the entire outstanding balance of
receivables accounts where any
portion exceeds 90 days past
invoice except accounts where the
over 90 days portion has
previously been designated by the
Bank as nevertheless "good", in
which case the under 90 day
portion may be included- (CN RAIL
IS DESIGNATED "GOOD");
AND
(b) all amounts due by any associate
(as defined in the Business
Corporations Act of Ontario);
AND
(ii) it is understood by the Borrower that
the aggregate amount calculated as
outlined in the foregoing clause (i)
represents the maximum Borrowings
available, provided if such amount
exceeds $1,500,000 the maximum
available shall be $1,500,000, until
such time as the next monthly reports
are provided to the Bank as called for
in Covenant (b) below.
(b) the Credit Facility is made available at the
sole discretion of the Bank and the Bank may
cancel any undrawn portion of the Credit
Facility at any time and from time to time
without notice;
(c) L/C's will have sight drawings and bills of
lading will be make payable to the order of
the Bank.
INTEREST
RATES & FEES: (a) Royal Bank Prime ("RBP") plus 1.00%
(b) Fees for L/C's will be advised on a
transaction by transaction basis.
PAYMENT OF
INTEREST & FEES: RBP LOANS
Interest on these loans shall be computed on the
daily principal amounts outstanding, at the
aforementioned rates, based on the actual number of
days elapsed divided by 365, and shall be payable in
arrears on the 26th of each month.
CHANGEPOINT CORPORATION
February 3, 1999 Page 3
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The yearly rates of interest to which the rates
determined in accordance with this Payment of
Interest and Fees section are equivalent, are the
rates so determined multiplied by the actual number
of days in the calendar year and divided by 365.
PAYMENT OF
INTEREST & FEES:
(Cont'd) OVERDUE PAYMENTS
Any overdue payment in Canadian Dollars shall be
deemed to be a RBP Loan with interest payable at RBP
plus 5% per annum.
OTHER FEES: REVOLVEMENT FEE
An administration fee of $175, for revolving RBP
Loans and margining advances under Segment 1)
against accounts receivable is payable monthly in
arrears.
Nothing in this agreement shall be construed as
obliging the Borrower to pay any interest, charges
or other expenses as provided by this agreement or
in any other security agreement related thereto in
excess of what is permitted by law.
COLLATERAL
SECURITY: General Security Agreement covering all assets other
than real property of Changepoint Corporation.
General Security Agreement covering all assets other
than real property of Changepoint Inc. (USA
subsidiary).
Guarantee and Postponement of Claim signed by
Changepoint Inc. (USA subsidiary). Supported by:
- Director's Resolution
- Letter from U.S. Counsel confirming validity
and enforceability of the Guarantees in the
United States.
CONDITIONS
PRECEDENT: The obligation of the Bank to make available the
Borrowings to the Borrower is subject to and
conditional upon:
(1) receipt by the Bank of a properly executed
copy of this agreement;
(2) receipt by the Bank of the within stipulated
Collateral Security in form and substance
satisfactory to the Bank, together with such
corporate authorizations and legal opinions
as the Bank may require;
EVIDENCE OF
INDEBTEDNESS: The Bank shall open and maintain at the Branch of
Account accounts and records evidencing the
Borrowings made available to the Borrower by the
Bank under this agreement. The Bank shall record the
principal amount of such Borrowings, the payment of
principal and interest on account of the loans, and
all other amounts becoming due to the Bank under
this agreement.
The Bank's accounts and records constitute, in the
absence of manifest error, PRIMA FACIE evidence of
the indebtedness of the Borrower to the Bank
pursuant to this agreement.
The Borrower authorizes and directs the Bank to
automatically debit, by mechanical, electronic or
manual means, any bank account of the Borrower for
all amounts payable
CHANGEPOINT CORPORATION
February 3, 1999 Page 4
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under this agreement, including but not limited
to, the repayment of principal and the payment of
interest, fees and all charges for the keeping of
such bank accounts.
REVOLVEMENT: The Bank shall establish an account (the
"Revolvement Account") for the conduct of the
Borrower's day to day banking business other than
pursuant to this agreement and if the balance in
the Revolvement Account:
(a) is a credit, the Bank may apply the amount of
such credit or any part thereof, rounded to
the nearest $10,000, as a repayment of
Borrowings outstanding under Segment (1) of
the Credit Facility, or
(b) is a debit, the Bank shall make available a
Borrowing in an amount, rounded to the
nearest $10,000, required to place the
Borrower in a minimum net credit position of
$10,000, provided there are sufficient funds
available under Segment (1) of the Credit
Facility.
REPRESENTATIONS
AND WARRANTIES: The Borrower represents and warrants to the Bank
that:
(a) it is a corporation validly incorporated and
subsisting under the laws of Ontario, and
that it is duly registered or qualified to
carry on business in all jurisdictions where
the character of the properties owned by it
or the nature of its business transacted
makes such registration or qualification
necessary; and
(b) the execution and delivery of this agreement
has been duly authorized by all necessary
actions and does not violate any law or any
provision of its constating documents or
by-laws or any unanimous shareholders'
agreement to which it is subject, or result
in the creation of any encumbrance on its
properties and assets except as contemplated
hereunder.
NON-MERGER: The provisions of this agreement shall not merge
with any security given by the Borrower to the Bank,
but shall continue in full force for the benefit of
the parties hereto.
COVENANTS: The Borrower agrees:
(a) to pay all sums of money when due under this
agreement;
(b) to provide the Bank with the following
reports on a monthly basis, within 20 days of
each month-end of its fiscal year for
CHANGEPOINT CORPORATION and CHANGEPOINT INC.:
(i) aged listing of accounts receivable;
(ii) aged listing of accounts payable;
(iii) detailed listing of Potential
Preferred Claims;
(c) to provide the Bank with the following
reports on a quarterly basis, within 30 days
of each quarter-end of its fiscal year:
(i) company prepared balance sheet, on a
consolidated and unit basis, income
statement and cash flow comparing
actual to plan;
CHANGEPOINT CORPORATION
February 3, 1999 Page 5
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COVENANTS: (Cont'd) (d) to provide the Bank with the following
reports on an annual basis, within
90 days of the end of its fiscal year:
(i) audited consolidated financial
statements for Changepoint Corporation,
supported by company prepared unit
statements;
(ii) annual proforma balance sheets,
income statements, and cash flow
statements for the next year and
such other reports as the Bank
may reasonably request;(iii)
business plan;
(e) to give the Bank prompt notice of any breach
of covenant or condition of the within
agreement or any event which, with notice or
lapse of time or both, would constitute a
breach;
(f) to maintain, on a consolidated basis,
Tangible Net Worth of not less than
$2,500,000; (TESTED QUARTERLY)
(g) to maintain Total Debt to Tangible Net Worth
of not greater than 1:1; (TESTED QUARTERLY)
(h) to file all material tax returns which are or
will be required to be filed, to pay or make
provision for payment of all material taxes
(including interest and penalties) and other
Potential Preferred Claims which are or will
become due and payable and to provide
adequate reserves for the payment of any tax,
the payment of which is being contested;
(i) not to dispose of shares of any of its
subsidiaries, without the prior written
consent of the bank, not to be unreasonably
withheld except in the ordinary course of
business;
(j) not to grant, create, assume or suffer to
exist any mortgage, charge, lien, pledge,
security interest, including a purchase money
security interest, or other encumbrance
affecting any of its properties, assets or
other rights, without the prior written
consent of the bank, not to be unreasonably
withheld except in the ordinary course of
business;
(k) not to sell, transfer, convey, lease or
otherwise dispose of any part of its property
or assets, without the prior written consent
of the Bank, not to be unreasonably withheld
except in the ordinary course of business;
(l) not to, directly or indirectly, guarantee or
otherwise provide for, on a direct or
indirect or contingent basis, the payment of
any monies or performance of any obligations
by any third party except as provided
herein, without the prior written consent
of the bank, not to be unreasonably withheld
except in the ordinary course of business;
(m) to give the Bank 30 days prior notice in
writing of any intended change in the
ownership of its shares, provided the company
has advance knowledge, if not immediately
after the change;
(n) to insure and to keep fully insured all
properties customarily insured by
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February 3, 1999 Page 6
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companies carrying on a similar business; and
(o) not to change its name or merge, amalgamate
or consolidate with any other corporation,
without the prior written consent of the
bank, not to be unreasonably withheld except
in the ordinary course of business.
EXPENSES: The Borrower agrees to pay all of the Bank's costs
incurred from time to time in the preparation,
negotiation and execution of this agreement and the
collateral security, and any costs incurred in the
operation or enforcement of this agreement or any
other agreement entered into pursuant to this
agreement.
GAAP: Unless otherwise provided, all accounting terms used
in this agreement shall be interpreted in accordance
with Canadian Generally Accepted Accounting
Principles from time to time.
SEVERABILITY: If any provision of this agreement is or becomes
prohibited or unenforceable in any jurisdiction,
such prohibition or unenforceability shall not
invalidate or render unenforceable the provision
concerned in any other jurisdiction nor shall it
invalidate, affect or impair any of the remaining
provisions.
GOVERNING LAW: This agreement shall be construed in accordance with
and governed by the laws of the Province of Ontario
and of Canada applicable therein.
ACCEPTANCE: This offer expires if not accepted by March 19,
1999, unless extended in writing by the Bank.
If this agreement is acceptable, kindly sign and return the attached copy to the
Bank.
Yours truly,
X.X. XxXxxxx
Account Manager
We acknowledge and accept the within terms and conditions.
CHANGEPOINT CORPORATION
Per: Date:
--------------------------------
Name:
Title:
Per: Date:
--------------------------------
Name:
Title:
SCHEDULE "A"
Schedule "A" to the Letter Agreement dated the 19th day of March 1999 between
CHANGEPOINT CORPORATION as the Borrower and Royal Bank of Canada as the Bank.
For purposes of the foregoing agreement, the following terms and phrases shall
have the following meanings:
"Business Day" means a day on which the Branch of Account is open for business;
"Canadian Dollars" and "Cdn$" means lawful money of Canada;
"Person" includes an individual, a partnership, a joint venture, a trust, an
incorporated organization, a company, a corporation, an association, a
government or any department or agency thereof, and any other incorporated or
unincorporated entity;
"Potential Preferred Claims" means amounts owing for wages, employee deductions,
sales tax, excise tax, income tax, worker's compensation, government royalties,
pension fund obligations, overdue rents or taxes, purchase-money security
interests, and other statutory preferred claims;
"RBP" means the annual rate of interest announced by the Bank from time to time
as being a reference rate then in effect for determining interest rates on
Canadian Dollar commercial loans in Canada;
"Tangible Net Worth" means the aggregate of stated capital, retained earnings,
and debt, repayment of which is formally postponed and assigned to the Bank less
amounts invested in or owed by other Persons (other than trade accounts
receivable meeting normal terms) and less goodwill, deferred costs and other
assets normally regarded as intangible under GAAP in Canada;
"U.S. Dollars" and "US$" means lawful money of the United States of America in
same day immediately available funds or, if such funds are not available, the
form of money of the United States of America that is customarily used in the
settlement of international banking transactions on the day payment is due
hereunder.
