[Logo of Integrated Circuit Systems, Inc.]
November 29, 1996
Revolving Credit Agreement and Note
Voyetra Technologies, Inc.
0 Xxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Vice President and Chief Financial Officer
Gentlemen:
We, Integrated Circuit Systems, Inc., a Pennsylvania corporation ("ICS"), hereby
confirm our commitment to make revolving credit loans (the "Loans") to Voyetra
Technologies, Inc., a Delaware corporation ("VTI") or to VTI's wholly-owned
subsidiaries, Turtle Beach Systems, Inc., a Pennsylvania corporation and CFJ
Systems, Inc., a New York corporation (each a "Borrowing Subsidiary") (VTI and
any Borrowing Subsidiary each hereinafter referred to individually as a
"Borrower" and collectively as the "Borrowers") in an aggregate principal amount
not exceeding $3,500,000 at any one time outstanding from time to time, to and
including December 31, 1997, subject to extension pursuant to paragraph 11 of
this Agreement, on the terms and conditions set forth below (the "Commitment").
This Commitment is made in connection with an Agreement and Plan of Merger among
ICS, VTI, CFJ, and TBS, dated November 29, 1996 (the "Agreement and Plan of
Merger"). The Borrowers hereby promise to pay to ICS, its successors or assigns,
such Loans plus interest in accordance herewith.
1. ICS will make each Loan upon not less than five business days prior written
notice from a Borrower specifying the amount and date of such Loan. The funds to
be advanced pursuant to such Loan shall be delivered by wire transfer to the
account of the Borrower specified in such notice.
2. Each Loan shall be made to one Borrower and shall be evidenced by entries in
a loan account maintained at ICS for such Borrower. Each Loan shall be stated to
mature on December 31, 1997, subject to extension pursuant to paragraph 11 of
this Agreement, but may be prepaid without penalty and re-borrowed from time to
time.
3. Each Loan will bear interest, until payment, at the rate of 9.0% per annum.
Interest will be calculated on the basis of actual days elapsed and a 360-day
year and shall be payable in full 30 days after the end of each calendar quarter
during which any amount of a Loan shall be outstanding. After maturity, each
Loan shall bear interest at a rate per annum of 12% per annum until such Loan is
paid.
4. Payments of principal of and interest on each Loan and all other amounts
payable to ICS will be made by wire transfer, drawn on a bank account of a
Borrower and delivered to the account of ICS specified in writing to the
Borrowers. Payments shall be applied first to interest due and thereafter to
principal.
5. Prior to the date hereof, VTI has presented a business plan (the
"Preliminary Business Plan") which projects the need for Loans in an amount, in
the aggregate, of approximately $2.2
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Integrated Circuit Systems Inc.
million through January 31, 1997. Not later than January 31, 1997, VTI shall
submit a revised business plan to its board of directors for approval (such
revised business plan, when approved by the board of directors, shall hereafter
be referred to as the "Approved Business Plan"). In no event shall ICS be
obligated to make any Loan hereunder which would result in an outstanding
aggregate principal amount exceeding $2.2 million at any one time during the
period prior to and including January 31, 1997 or the approval of the Approved
Business Plan, whichever is earlier.
6. Each Borrower represents and warrants to ICS that:
(a) it is a legal and validly existing corporation under the laws of the
jurisdiction of its incorporation;
(b) the execution and delivery of this Agreement is within its authority, has
been authorized by all proper corporate proceedings, and will not contravene any
provision of law or regulation, or any charter, or any decree, agreement, or
instrument binding upon any of them;
(c) this Agreement constitutes a valid and legally binding obligation of such
Borrower, enforceable in accordance with its terms;
(d) the Loans are to be used for operating expenses (whether or not capitalized
for book purposes), non-recurring expenses, capital expenditures contemplated in
either the Preliminary Business Plan or the Approved Business Plan, or working
capital; and
(e) no Event of Default (as hereinafter defined) described in paragraph 8 hereof
has occurred and is continuing.
Each written notice from each Borrower with respect to any Loan shall constitute
a representation and warranty that, and it shall be a condition to each Loan
that, at the time such Loan is made, no Event of Default has occurred and is
continuing and that the representations and warranties contained herein are true
and correct as of the date such Loan is made.
7. It is a condition precedent to ICS's obligation to make each Loan that it
receive together with the notice referred to above, a certificate from the
President or the Chief Financial Officer of a Borrower to the effect that no
Event of Default has occurred and is continuing.
8. If any of the following events ("Events of Default") shall occur and be
continuing:
(a) any Borrower shall default in any payment of principal of or interest on any
Loan when due; or
(b) any representation or warranty made in or in connection with the execution
and delivery of this Agreement or any Loan shall prove at any time to have been
incorrect in any material respect when made; or
(c) any Borrower shall default in the performance of any other obligation or
covenant (excluding the obligations in subparagraphs (a) and (b) of this
paragraph 8) contained in this Agreement and such default shall continue without
remedy for 30 days after notice thereof from ICS; or
(d) any Borrower shall file a petition in bankruptcy, or there shall be
commenced by or against
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any Borrower any proceeding under any bankruptcy, insolvency, reorganization,
dissolution, or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect, and, in the case of a proceeding commenced against such
Borrower, such proceeding shall remain undismissed, undischarged, unstayed, or
unbonded for a period of 60 days, or any Borrower by any act shall indicate its
consent to, approval of, or acquiescence in any such proceeding for the
appointment of any receiver, conservator, trustee, or similar person for itself
or any substantial part of its property or any such person shall be appointed
for any Borrower or for a substantial part of its property; or
(e) by December 31, 1997, VTI fails to file a registration statement for a
public offering of its equity securities; provided, however, that at least one
reputable underwriter has executed a letter of intent (or comparable engagement
letter) to manage such a public offering of VTI (which shall include the
commitment of such underwriter to a pre-offering valuation of VTI of not less
than $30,000,000), provided that the terms of such offering are not deemed
unreasonable by the board (including at least one ICS nominated director) of
VTI, and provided that market conditions as determined by said underwriter
permit such an offering, then the Loans, together with all accrued interest
thereon and expenses as provided for herein, shall, upon written declaration or
notice to such effected delivered or tendered by ICS to the Borrowers (by any
means set forth in the Agreement and Plan of Merger or herein), become and be
immediately due and payable without presentment, demand, protest, or other
notice of any kind (such presentment, demand, protest, or other notice being
hereby affirmatively waived by the Borrowers), and the obligation of ICS to make
further Loans shall thereupon terminate. If any amount is owed to ICS hereunder,
ICS may proceed to protect and enforce its rights by suit in equity, action at
law, and/or other appropriate proceedings whether for specific performance of
any covenant or agreement contained herein, or otherwise.
(f) The Borrowers hereby, voluntarily, intentionally, and irrevocably authorize
and empower ICS, by its attorney, or the prothonotary or clerk of a court of
record in New York, California, and any other applicable jurisdiction in which
Collateral is located, upon the occurrence and continuance of an Event of
Default, upon at least two business days prior written notice ("prior written
notice" for the purposes of this subparagraph 8(f), must be given by hand to an
officer of a Borrower, or by facsimile to VTI, Attention: President, and
confirmed by mail) to VTI, to appear for VTI and confess and enter judgement
against the Borrowers, jointly and severally, in favor of ICS in any
jurisdiction where the Collateral may be located, for the amount of all
obligations, costs, and expenses as hereby provided, and for so doing, a copy of
this Agreement or a copy of a verified affidavit shall be sufficient warrant.
9. VTI covenants as follows:
(a) it shall furnish to ICS within 60 days after then end of VTI's fiscal year,
its annual consolidated balance sheets and consolidated statements of
operations, retained earnings, and changes in financial position, which shall be
audited if audited statements are then available or which, if not audited, shall
be supplemented by audited statements, accompanied by the report of VTI's
independent accountants, promptly upon such audited statements being available;
(b) it shall furnish to ICS within 20 days after the end of each calendar month
a monthly cash flow forecast for the three months following such month end, as
well as its unaudited monthly consolidated balance sheets as at such month end
and consolidated statements of operations, retained earnings, and changes in
financial position for the period then ended;
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(c) it shall not permit the consolidated ratio of current assets ("current
assets" being defined for the purposes of subsections 9(c) and 9(d) as the sum
on VTI's consolidated balance sheet of accounts for cash, cash equivalents,
accounts receivable (including non-recurring accounts receivable), inventories,
and prepaid current expenses) to current liabilities ("current liabilities"
being defined for the purposes of subsections 9(c) and 9(d) as the sum of
balance sheet accounts for current accounts payable, accrued current expenses,
and the aggregate amount of all outstanding interest-bearing indebtedness,
including Loans under this Agreement) as at the end of any month to be less than
1.35:1;
(d) it shall not permit adjusted consolidated current assets (the sum of cash
and cash equivalents valued at 100% of the amounts on the balance sheet,
accounts receivable (including non-recurring accounts receivable) valued at 75%
of the amounts on the balance sheet, and inventories valued at 50% of the
amounts on the balance sheet) less consolidated current liabilities to be an
amount which is less than 0 at the end of any month;
(e) it shall not allow both its consolidated revenue and consolidated earnings
before interest, taxes, depreciation and amortization ("EBITDA") for any two
consecutive calendar quarters beginning with the quarter beginning January 1,
1997 to fall below 85.0% of the projected consolidated revenue and consolidated
EBITDA set forth in the Approved Business Plan (it being understood that this
covenant is not breached if either consolidated revenue or consolidated EBITDA
is greater than or equal to such 85.0%) (revenue and the elements of EBITDA
being defined for the purposes of subsection 9(e) in accordance with generally
accepted accounting principles; provided, however, that EBITDA shall exclude
charges and credits related to non-recurring events and investment expense);
(f) it shall diligently pursue an underwritten public offering of its equity
securities, subject to market conditions and a pre-offering valuation of VTI of
not less than $30,000,000, with a view toward executing a letter of intent,
containing terms reasonably acceptable to the board of VTI, with a reputable
underwriter by December 31, 1997; and
(g) it shall prepay any outstanding Loans together with accrued interest thereon
promptly after any public or private placement of VTI securities (made after the
date hereof and to the extent of the net proceeds thereof).
10. Loans shall be secured by, and the Borrowers do hereby pledge, hypothecate,
transfer, grant, and assign to ICS, and agree that ICS shall have, a security
interest in and to all of the cash, cash equivalents, accounts receivable,
inventories, and intellectual property of the Borrowers, individually and
collectively, whether now owned or existing or hereafter acquired or arising, or
in which any Borrower may have an interest, and wheresoever located (the
"Collateral"). Such security interest shall give to ICS, and ICS is hereby
granted, a continuing security interest in and first priority, non-subordinate
lien on all of the Collateral, and the proceeds thereof, and any replacements,
additions, or substitutions thereof, and to the accounts or proceeds arising
from the sale, assignment, transfer, conveyance, mortgage, encumbrance, or
hypothecation, or other disposition of such Collateral. The Borrowers agree to
execute and deliver to ICS such forms, documents, and agreements and to
otherwise fully cooperate with ICS as required to perfect such security
interest.
11. If by December 31, 1997, the board of directors of VTI, including at least
one director nominated by ICS, shall determine that VTI should not make an
underwritten public offering of its securities, because such an underwritten
public offering is not available on reasonably
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acceptable terms or because of market conditions (as determined by the
underwriter) or because the pre-offering market capitalization (as expressed by
such underwriter) of VTI shall be estimated to be less than $30,000,000, then
ICS agrees to extend the Commitment until not later than December 31, 1998;
provided, however, that during such extension, VTI shall use its best efforts to
obtain alternative financing arrangements to enable it to pay off any and all
Loans under this Agreement.
12. All of the obligations of the Borrowers under this Agreement are joint and
several.
13. This Agreement shall be deemed to be a contract under and shall be
construed and governed by the laws of the Commonwealth of Pennsylvania.
14. With respect to any legal action or proceeding arising out of or in
connection with this Agreement (and, in the case of VTI, the Guarantee), each
Borrower hereby irrevocably:
(a) submits to the non-exclusive in personam jurisdiction of any Pennsylvania
state Court or United States court of competent jurisdiction sitting in the
Commonwealth of Pennsylvania and agree to suit being brought in such courts as
ICS may elect;
(b) waives any objection that it may now or hereafter have to the venue of such
proceeding in any such court or that such proceeding was brought in an
inconvenient court;
(c) designates and directs VTI as its agent to receive service of any and all
process and documents on its behalf in any legal proceeding in the Commonwealth
of Pennsylvania;
(d) agrees to service of process in any legal proceeding by mailing of copies
thereof (by registered or certified mail), postage prepaid, to VTI; and
(e) agrees that nothing herein shall affect ICS's right to effect service of
process in any other manner permitted by law, and that ICS shall have the right
to bring any legal proceedings (including a proceeding for enforcement of a
judgment entered by any of the aforementioned courts) against the Borrowers in
any other court or jurisdiction in accordance with applicable law.
15. The Borrowers agree, subject only to any limitation imposed by applicable
law, to pay all expenses, including reasonable attorney's fees and legal
expense, incurred by ICS, its successor or assigns, in endeavoring to collect
any amounts payable hereunder which are not paid when due, whether by
acceleration or otherwise.
16. If any provision or clause of this Agreement, or portion thereof, shall be
held by any court or other tribunal of competent jurisdiction to be illegal,
void or unenforceable in such jurisdiction, the remainder of such provisions
shall not thereby be affected and shall be given full effect, without regard to
the invalid portion. It is the intention of the parties that, if any court
construes any provision or clause of this Agreement, or any portion thereof, to
be illegal, void, or unenforceable because of the duration of such provision or
the area or matter covered thereby, such court shall reduce the duration, area,
or matter of such provision and, in its reduced form, such provision shall then
be enforceable and shall be enforced.
If this Agreement meets with your approval, please so indicate by executing the
acceptance set forth below on the enclosed copy hereof and returning such copy
to the undersigned, whereupon this Agreement shall become a contract between the
Borrowers and ICS.
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Integrated Circuit Systems Inc.
Very truly yours,
INTEGRATED CIRCUIT SYSTEMS, INC.
By:
Title:
Accepted and agreed to this 29th day of November, 1996
VOYETRA TECHNOLOGIES, INC.
By:
Title:
TURTLE BEACH SYSTEMS, INC.
By:
Title:
CFJ SYSTEMS, INC.
By:
Title:
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