EXHIBIT 10.4
SYCAMORE NETWORKS, INC.
00 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
April 22, 1999
Fleet National Bank
Xxx Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Gentlemen:
This letter agreement will set forth certain understandings between
Sycamore Networks, Inc., a Delaware corporation (the "Borrower"), and Fleet
National Bank (the "Bank") with respect to Term Loans (hereinafter defined) to
be made by the Bank to 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. References to Documents. Reference is made to (i) that certain
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$5,000,000 face principal amount promissory note (the "1999 Term Note") of even
date herewith made by the Borrower and payable to the order of the Bank, (ii)
that certain Inventory and Accounts Receivable Security Agreement and that
certain Supplementary Security Agreement - Security Interest in Goods and
Chattels, each of even date herewith, from the Borrower to the Bank
(collectively, the "Security Agreement"), and (iii) that certain $1,000,000 face
principal amount Commercial Equipment Line of Credit Term Promissory Note dated
August 5, 1998 (the "1998 Term Note") made by the Borrower and payable to the
order of the Bank.
1.2. The Borrowing; 1999 Term Note. Subject to the terms and conditions
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hereinafter set forth, the Bank will make one or more loans (the "1999-2000 Term
Loans") to the Borrower, as the Borrower may request, on any Business Day prior
to the first to occur of (i) January 31, 2000 or (ii) the earlier termination of
the within-described term loan facility pursuant to (S)5.2 or (S)6.6. Each
1999-2000 Term Loan shall be made in order to finance costs of Qualifying
Equipment acquired by the Borrower within the 90 days preceding the request for
such 1999-2000 Term Loan (except that the initial 1999-2000 Term Loan may be
used to finance costs of Qualifying Equipment acquired by the Borrower at any
time on or after November 1, 1998), each such 1999-2000 Term Loan to be in such
amount as may be requested by the Borrower; provided that (i) no 1999-2000 Term
Loan will be made after January 31, 2000; (ii) the aggregate original principal
amounts of all 1999-2000 Term Loans will not exceed $5,000,000; and (iii) no
1999-2000 Term Loan will be in an amount in excess of 100% of the invoiced
actual costs of the items
of Qualifying Equipment with respect to which such 1999-2000 Term Loan is made
(excluding taxes, shipping, installation charges, training fees and other "soft
costs" and excluding software except as expressly permitted by the next
following sentence). The Borrower may include within "Qualifying Equipment"
software (not including "shrink-wrapped" software) purchased by the Borrower for
use in connection with the equipment otherwise included in "Qualifying
Equipment"; provided that the aggregate cost of the software so included will
not exceed 20% of the aggregate principal amount of 1999-2000 Term Loans
outstanding at the Full Drawing Date (hereinafter defined). If for any reason
the aggregate cost of such software exceeds 20% of the aggregate principal
amount of 1999-2000 Term Loans outstanding at the Full Drawing Date, the
Borrower will forthwith repay those 1999-2000 Term Loans made to finance the
cost of such software to the extent necessary so that the aggregate cost of
software financed by 1999-2000 Term Loans (and not so prepaid) will not exceed
20% of the then aggregate outstanding principal amount of the 1999-2000 Term
Loans. As used herein, "Full Drawing Date" means the earlier of: (i) January 31,
2000 or (ii) that date on which 1999-2000 Term Loans with an aggregate original
principal amount of $5,000,000 shall have been advanced. Prior to the making of
each 1999-2000 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 Qualifying Equipment has been delivered to and installed at the
Borrower's Chelmsford, 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
1999-2000 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 1999-2000 Term Loans will be evidenced by the 1999 Term Note. Interest
on the 1999-2000 Term Loans shall be payable at the times and at the rate
provided for in the 1999 Term Note. Overdue principal of any 1999-2000 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) four (4%) percent per annum plus (ii) the per annum rate otherwise payable
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under the 1999 Term 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 1999 Term Note or on the books of the
Bank, at or following the time of making each 1999-2000 Term Loan and of
receiving any payment of principal, an appropriate notation reflecting such
transaction and the then aggregate unpaid principal balance of the 1999-2000
Term Loans. The amount so noted shall constitute prima facie evidence as to the
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amount owed by the Borrower with respect to principal of the 1999-2000 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 the
1999 Term Note.
1.3. Principal Repayment of 1999-2000 Term Loans. The Borrower shall
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repay the principal of the 1999-2000 Term Loans in 36 equal consecutive monthly
installments, commencing on February 1, 2000 and continuing on the first day of
each month thereafter. Each
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such monthly installment of principal of the 1999-2000 Term Loans shall be in an
amount equal to 1/36th of the aggregate principal amount of the 1999-2000 Term
Loans outstanding at the close of business on January 31, 2000. In any event,
the then outstanding principal balance of the 1999-2000 Term Loans and all
interest accrued but unpaid thereon shall be due and payable in full on January
1, 2003. If any installment of the 1999-2000 Term Loans is prepaid prior to its
regularly scheduled due date for any reason, in whole or in part, whether
voluntarily or involuntarily, prior to January 1, 2003, the Borrower will
forthwith pay to the Bank a fee (the "Termination Fee") in the amount of
$12,500. The Borrower may prepay, at any time or from time to time, without
premium or penalty (but subject to the aforesaid Termination Fee), the whole or
any portion of any 1999-2000 Term Loan; provided that each such principal
prepayment shall be accompanied by payment of all interest on the amount so
prepaid accrued but unpaid to the date of payment, and a prepayment in whole
shall be accompanied by said Termination Fee. Any partial prepayment of
principal of the 1999-2000 Term Loans will be applied to installments of
principal of the 1999-2000 Term Loans thereafter coming due in inverse order of
normal maturity. Amounts repaid or prepaid with respect to the 1999-2000 Term
Loans are not available for reborrowing.
1.4. 1998 Term Loans. Prior to the date hereof, the Bank has made certain
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loans (the "1998 Term Loans") to the Borrower pursuant to the 1998 Term Note.
Principal of, and interest on, the 1998 Term Loans will be paid by the Borrower
at the times and at the rates provided for in the 1998 Term Note. The 1998 Term
Note is hereby amended: (i) by deleting from clause (c) of the first sentence
of Section 8 of the 1998 Term Note the words "ninety (90) days" and by
substituting in their stead the words "120 days", and (ii) by adding to clause
a(iv) of the first sentence of Section 9.1 of the 1998 Term Note, at the end of
such clause, the following words: "including other encumbrances specifically
permitted by Section 4.2 of the letter agreement dated April 22, 1999 between
the Bank and the Borrower". The 1998 Term Note is hereby further amended by
deleting in their entireties Sections 9.2 - 9.14, inclusive, of the 1998 Term
Note and by substituting in their stead Sections 4.2-4.13, inclusive, of the
letter agreement, all such provisions of the letter agreement (and any related
definitions) being deemed incorporated into the 1998 Term Note by this reference
and made a part thereof, as effectively as if set forth at length therein. The
1998 Term Note is hereby further amended by deleting in its entirety Section
9.16 of the 1998 Term Note and by substituting in its stead Sections 3.7 - 3.10,
inclusive, of the letter agreement, all such provisions of the letter agreement
(and any related definitions) being deemed incorporated into the 1998 Term Note
by this reference and made a part thereof, as effectively as if set forth at
length therein. The 1998 Term Note is hereby further amended by deleting in
their entireties the "Events of Default" described in clauses (a) - (l),
inclusive, of Section 10 of the 1998 Term Note and by substituting in their
stead, as "Events of Default" under the 1998 Term Note, the provisions of
clauses (a) - (o), inclusive, of Section 5.1 of the letter agreement, all such
provisions of the letter agreement (and any related definitions) being deemed
incorporated into the 1998 Term Note by this reference and made a part thereof,
as effectively as if set forth at length therein. For the purpose of the
incorporation by reference described above, references to "the letter agreement"
will be deemed to refer to the within letter agreement, as in effect at the date
of execution and delivery hereof, and without regard to any subsequent
termination.
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1.5. Advances and Payments. The proceeds of all 1999-2000 Term Loans
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shall be credited by the Bank to a general deposit account maintained by the
Borrower with the Bank. The proceeds of each 1999-2000 Term Loan will be used
by the Borrower solely to pay (or reimburse the Borrower for) the costs of
acquisition 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 due, from
time to time, under this letter agreement, the 1998 Term Note and/or the 1999
Term Note and/or with respect to any Obligations relating to ACH transactions;
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, in the 1998 Term Note or in the 1999 Term Note or with respect
to any Obligations relating to the ACH transactions.
Whenever any payment to be made to the Bank hereunder, under the 1998 Term
Note, under the 1999 Term Note and/or with respect to any Obligations relating
to ACH transactions 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 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 the 1998 Term Note or the 1999 Term Note and/or
with respect to any Obligations relating to ACH transactions 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, under the 1998 Term Note and/or the 1999 Term Note and/or
with respect to any Obligations relating to ACH transactions shall be made to
the Bank, in lawful money of the United States in immediately available funds,
at its office at Xxx Xxxxxxx Xxxxxx, Xxxxxx, XX 00000 or to 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 hereunder shall (unless an Event
of Default has occurred and is then continuing) be applied as designated in
writing by the Borrower at the time of such payment and, failing such
designation (or if an Event of Default has occurred and is then continuing),
shall be applied first to fees, charges, costs and expenses payable to the Bank
under this letter agreement, any Term Note and/or any of the other Loan
Documents and/or with respect to any of the other Obligations, next to interest
then accrued on account of any Term Loans or other Obligations and only
thereafter to principal of the Term Loans and the other Obligations. All
interest and fees payable hereunder and/or under any Term Note and/or with
respect to any of the other Obligations shall be calculated on the basis of a
360-day year for the actual number of days elapsed.
1.6. ACH Exposure. The Bank may from time to time, at the request of the
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Borrower, initiate automated clearinghouse ("ACH") transactions for the
Borrower; provided that the Bank's total ACH Exposure shall not (unless
otherwise agreed by the Bank in its sole discretion) exceed $200,000 at any one
time. ACH transactions will bear such fees and charges as may be agreed upon by
the Bank and the Borrower and will be governed by documentation to be entered
into between the Bank and the Borrower in connection therewith. As used herein,
"ACH
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Exposure" as determined at any date means the sum of (i) all amounts then owed
by the Borrower to the Bank in connection with any ACH transaction pursuant to
which the Bank has advanced funds on behalf of the Borrower plus (ii) the
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maximum amount which could be owed by the Borrower (assuming settlement within
two (2) Business Days of each date when funds are advanced) to the Bank in
connection with all ACH transactions then authorized by the Borrower.
1.7. Conditions to Advance. Prior to the making of the initial 1999-2000
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Term Loan or the initiation of any ACH transaction, the Borrower shall deliver
to the Bank duly executed copies of this letter agreement, the Security
Agreement, the 1999 Term Note 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 1999-2000 Term Loan (including the
initial 1999-2000 Term Loan) and the initiation of any ACH transaction is
subject to the further conditions precedent that on the date on which such 1999-
2000 Term Loan is made or such ACH transaction is initiated (and, in either
event, after giving effect thereto):
(a) All statements, representations and warranties of the Borrower made in
this letter agreement and/or in the Security Agreement shall continue to be
correct in all material respects as of the date of such 1999-2000 Term Loan or
such ACH transaction, as the case may be (except for such statements,
representations and warranties that expressly relate to a specific date).
(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 1999-2000 Term Loan or such ACH
transaction, as the case may be.
(c) No event which constitutes, or which with notice or lapse of time or
both would 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 1999-2000 Term Loan or any ACH
transaction, and each acceptance by the Borrower of the proceeds of any 1999-
2000 Term Loan, will be deemed a representation and warranty by the Borrower
that at the date of such 1999-2000 Term Loan (or such ACH transaction, 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)1.7 will be satisfied.
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 Term Loans hereunder and/or engage in ACH
transactions for the Borrower, the Borrower warrants and represents to the Bank
as follows:
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(a) The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Borrower has full
corporate power to own its property and conduct its business as now conducted
and as proposed to be conducted, to grant the security interests contemplated by
the Security Agreement 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 in Massachusetts and in each other jurisdiction in which the
Borrower maintains any plant, office, warehouse or other facility and in each
other jurisdiction where the failure so to qualify would be reasonably likely
(singly or in the aggregate with all other such failures) to have a material
adverse effect on the financial condition, business or prospects of the
Borrower, all such jurisdictions 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) of the attached Disclosure Schedule. The
Borrower is not a member of any partnership or joint venture.
(b) At the date of this letter agreement, all of the outstanding equity
securities of the Borrower are owned, of record and beneficially, as set forth
on item 2.1(b) of the attached Disclosure Schedule. The Borrower owns 100% of
the outstanding capital stock of each Subsidiary, if any.
(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 filing (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
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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 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 would be reasonably likely to 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 of the Borrower 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, which violation would be reasonably
likely to have a material adverse effect on the financial condition, business or
prospects of the Borrower.
(g) The Borrower has filed (and has caused each of its Subsidiaries to
file) all federal, foreign, state and local tax returns, reports and estimates
required to be filed by the Borrower and/or by any such Subsidiary. All such
filed returns, reports and estimates are proper and accurate and the Borrower or
the relevant Subsidiary 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, other than any such taxes, assessments,
impositions, fees and charges which are being contested in good faith by
appropriate proceedings which serve to stay the remedies of the relevant taxing
authority and as to which the Borrower has established and maintains adequate
reserves. No deficiencies for any tax, assessment or governmental charge have
been asserted or assessed, and the Borrower knows of no material tax liability
nor any basis therefor.
(h) The Borrower is in compliance with (and each Subsidiary of the
Borrower is in compliance with) all requirements of law, federal, foreign, 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 any of which
would be reasonably likely (singly or in the aggregate with all other such
failures) to 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 of the material 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.
(i) The management-prepared financial statements of the Borrower as at
December 31, 1998, 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 said management-prepared
statements do not have footnotes and thus do not present all of the information
which would normally be contained in footnotes to financial statements. Neither
the Borrower nor any of the Borrower's Subsidiaries has any liability,
contingent or otherwise, not disclosed in the aforesaid December 31, 1998
financial statements or in any notes thereto that would be reasonably likely to
materially adversely affect the financial
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condition of the Borrower. Since December 31, 1998, there has been no material
adverse development in the business, condition or prospects of the Borrower, and
the Borrower has not entered into any material transaction other than in the
ordinary course.
(j) The principal place of business and chief executive offices of the
Borrower are located at 00 Xxxxxxxxx Xxxxx, Xxxxxxxxxx, XX 00000. All of the
books and records of the Borrower are located at said address. Except as
described on item 2.1(j) of the attached Disclosure Schedule, none of the assets
of the Borrower are located at any address other than at 00 Xxxxxxxxx Xxxxx,
Xxxxxxxxxx, XX 00000; provided that laptop computers, personal computers and
demonstration and testing equipment with an aggregate value not in excess of
$200,000 may be kept at other locations, subject to the following conditions and
limitations: (i) laptop computers and personal computers may be removed from
said Chelmsford, MA premises so long as same are kept by the Borrower's salesmen
and/or employees, and (ii) demonstration and testing equipment may be removed
from said Chelmsford, MA premises and kept at customers' premises and/or trade
shows so long as, as to each item of such demonstration and testing equipment
which has been removed from the Borrower's Chelmsford, MA premises for 90 days
or more, on or prior to such 90th day the Borrower informs the Bank in writing
of the location of such item and delivers to the Bank all such Uniform
Commercial Code financing statements, consignment agreements, waivers and other
documentation as the Bank may reasonably request in order to establish and/or
maintain perfection of its security interests. Said Item 2.1(j) of the attached
Disclosure Schedule sets forth the names and addresses of all record owners of
any premises where Collateral may be located, except Collateral located off-site
pursuant to the immediately preceding sentence.
(k) The Borrower owns or has a valid right to use all of the material
patents, licenses, copyrights, trademarks, trade names and franchises now being
used or necessary to conduct its business as presently conducted. 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 would be reasonably likely to materially adversely affect the
business or assets or condition, financial or otherwise, of the Borrower.
(l) Except as described on item 2.1(l) of the attached Disclosure
Schedule, 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 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, is reasonably
likely to have a material adverse effect on the financial condition, business,
prospects or properties of the Borrower.
(n) The Borrower has reviewed the material software which it uses in its
business for "Year 2000" compliance and has determined that such software will
continue to function in the manner intended without interruption of service or
other difficulty resulting from the "Year 2000
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problem". The Borrower will, at the request of the Bank, provide such reports
and such other information as the Bank may reasonably request in order to
evidence such Year 2000 compliance.
III. AFFIRMATIVE COVENANTS AND REPORTING REQUIREMENTS
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Without limitation of any other covenants and agreements contained herein
or elsewhere, the Borrower agrees that so long as the financing arrangements
contemplated hereby are in effect or all or any portion of any Term Loan or any
of the other Obligations shall be outstanding or any amount shall be owed by the
Borrower in respect of any ACH transaction:
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 remain qualified to do business and in good standing in
Massachusetts. The Borrower will qualify to do business and will remain
qualified and in good standing (and the Borrower will cause each Subsidiary of
the Borrower to qualify and remain qualified and in good standing) in each other
jurisdiction where the Borrower or such Subsidiary, as the case may be,
maintains any plant, office, warehouse or other facility and in each other
jurisdiction where the failure so to qualify would be reasonably likely (singly
or in the aggregate with all other such failures) to 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 would not (singly or in the
aggregate) be reasonably likely to 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
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preserve (and will cause each Subsidiary of the Borrower to maintain and
preserve) all of its fixed assets 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
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(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
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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
material lease obligations, material trade debt, material purchase money
obligations, material equipment lease obligations and all of its other material
Indebtedness. The Borrower will perform and fulfill all material covenants and
agreements under any material leases of real estate, agreements relating to
material purchase money debt, material equipment leases and other material
contracts. The Borrower will maintain in full force and effect, and comply with
the terms and conditions of, all material permits, permissions and licenses
necessary or desirable for its business.
3.4. Accounts. The Borrower will maintain its primary operating accounts
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with the Bank.
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 which are not substantially related to the business conducted by the
Borrower at the date of this letter agreement. If the Borrower requests such
consent in writing, the Bank will, within 10 Business Days after receipt of such
request (together with all such projections, historical financial information
and other data as may be reasonably necessary for the Bank to make its
decision), inform the Borrower as to whether such consent will or will not be
given; and the failure by the Bank to respond within such 10-Business Day period
will be deemed to constitute a refusal to give such consent.
3.6. Reporting Requirements. The Borrower will furnish to the Bank (or
----------------------
cause to be furnished to the Bank):
(i) Within 120 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 30 days after the end of each month, consolidated and
consolidating balance sheets of the Borrower and 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 consistently applied fairly
presenting the financial condition of the Borrower and Subsidiaries as at
the dates thereof and for the periods covered thereby (except that such
monthly statements
-10-
need not contain footnotes) and certified as accurate by the chief
financial officer or chief executive officer of the Borrower, such balance
sheets to be as at the end of each such month and such statements of income
and cash flow to be for each such month and for the fiscal year to date, in
each case together with a comparison to budget and a comparison to the
results for the corresponding fiscal period of the immediately prior fiscal
year.
(iii) At the time of delivery of each annual or monthly financial
statement of the Borrower, a certificate executed by the chief financial
officer or chief executive 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 financial statement given as at the
end of any fiscal quarter of the Borrower will also set forth the
calculations necessary to evidence compliance with (S)(S)3.7 - 3.9.
(iv) 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 "management letter" prepared by such accountants.
(v) As soon as possible and in any event within five days after the
Borrower knows of or reasonably should have known of the occurrence of any
Default or Event of Default, the statement of the Borrower setting forth
details of each such Default or Event of Default and the action which the
Borrower proposes to take with respect thereto.
(vi) Promptly after the commencement thereof, notice of the
commencement 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; provided, however, that nothing
contained in this clause (vi) will be deemed to require the Borrower to
give notice of any such action, suit or proceeding which seeks monetary
damages only, such damages being in the amount of $100,000 or less.
(vii) Promptly upon filing any registration statement or listing
application, a copy of same.
(viii) If the Borrower at any time has a class of securities which is
publicly traded, a copy of each periodic or current report of the Borrower
filed with the SEC or any successor agency and each annual report, proxy
statement and other communication sent by the Borrower to shareholders or
other securityholders generally or disseminated to the public, such copy to
be provided to the Bank promptly upon such filing with the SEC or such
communication with shareholders or securityholders or such public
dissemination, as the case may be.
-11-
(ix) Promptly after the Borrower has knowledge thereof, written
notice of any development or circumstance which would be reasonably
expected to have a material adverse effect on the Borrower or its business,
prospects, properties, assets, Subsidiaries or condition, financial or
otherwise.
(x) Promptly upon request, such other information (including
budgets) respecting the financial condition, operations, prospects,
receivables, inventory, machinery or equipment of the Borrower or any
Subsidiary as the Bank may from time to time reasonably request.
3.7. Quick Ratio. The Borrower will maintain, as at each Determination
-----------
Date (commencing with its results as at April 30, 1999), a Quick Ratio of not
less than 2.0 to 1. As used herein, the "Quick Ratio", as determined at any
date, is the ratio of (x) Net Quick Assets to (y) Current Liabilities then
outstanding. As used herein, "Determination Date" means the last day of each
fiscal quarter of the Borrower.
3.8. Capital Base. The Borrower will maintain as at each Determination
------------
Date (commencing with its results as at April 30, 1999) a consolidated Capital
Base which shall not be less than $25,000,000.
3.9. Leverage. The Borrower will maintain, on a consolidated basis, as at
--------
each Determination Date (commencing with its results as at April 30, 1999) a
Leverage Ratio which shall not be more than 1.0 to 1. As used herein, the
"Leverage Ratio", as determined at any date, means the ratio of (x) all Senior
Debt of the Borrower and/or any of its Subsidiaries outstanding at such date to
(y) the Borrower's consolidated Capital Base at such date.
3.10. Books and Records. The Borrower will maintain (and will 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 officers, directors and/or
independent accountants, all of whom are hereby authorized and directed to
cooperate with the Bank in carrying out the intent of this (S)3.10; provided
that the Borrower will not be required to pay the costs of more than one
inspection under this (S)3.10 per calendar year unless an Event of Default has
occurred and is continuing. Each financial statement of the Borrower hereafter
delivered pursuant to this letter agreement will be complete and accurate and
will fairly present in all material respects the financial condition of the
Borrower as at the date thereof and for the periods covered thereby.
3.11. Landlord's Waiver. Prior to the making of the first 1999-2000 Term
-----------------
Loan, the Borrower will use its best efforts to obtain, and will thereafter use
its best efforts to maintain in
-12-
effect at all times, waivers from the owners of all premises in which any
Collateral is permanently located, such waivers to be in form and substance
reasonably satisfactory to the Bank.
IV. NEGATIVE COVENANTS
------------------
Without limitation of any other covenants and agreements contained herein
or elsewhere, the Borrower agrees that so long as the financing arrangements
contemplated hereby are in effect or all or any portion of any Term Loan or any
of the other Obligations shall be outstanding or any amount shall be owed by the
Borrower in respect of any ACH transaction:
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 Term Notes or in respect of any ACH
transaction;
(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 including any
embedded software) incurred after the date hereof 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 $100,000 in the
aggregate outstanding at any one time;
(v) other Indebtedness existing at the date hereof, but only to the
extent set 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 (including, without
limitation, any trustee process affecting any accounts of the Borrower
maintained at the Bank), except that the foregoing restrictions shall not apply
to:
-13-
(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 or 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 are maintained;
(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 are maintained;
(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 other than the specific items of equipment financed;
(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; or
(vii) involuntary attachments (not including any trustee process
affecting an account maintained by the Borrower with the Bank) arising
without the consent or acquiescence of the Borrower relating to
Indebtedness not in excess of $100,000 which are discharged or bonded off
within 30 days of the date of attachment.
Without limitation of the foregoing, the Borrower agrees that the Borrower
will not enter into any agreement (a "Restrictive Agreement") which would have
the effect of prohibiting the Borrower from granting to the Bank in the future a
Lien on the Borrower's trademarks, patents, copyrights and other intellectual
property. The Borrower represents that it is not now a party to any such
Restrictive Agreement.
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,
-14-
and (ii) guaranties existing at the date hereof and described on item 4.3 of the
attached Disclosure Schedule.
4.4. Dividends. The Borrower will not, without the prior written consent
---------
of the 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; provided that the Borrower may repurchase from employees, officers and
consultants and former employees, officers and consultants stock issued under
its restricted stock plans and stock option plans, so long as at the time of
each such repurchase and after giving effect thereto there shall be no Default
or Event of Default (with compliance with each of (S)(S)3.7, 3.8 and 3.9 being
determined for this purpose both as at the then most recent fiscal quarter-end
and as at the date of such proposed repurchase).
4.5. Loans and Advances. The Borrower will not make (and will not permit
------------------
any Subsidiary to make) any loans or advances to any Person, including, without
limitation, the Borrower's directors, officers and employees, except advances to
such directors, officers or employees with respect to expenses incurred by them
in the ordinary course of their duties and advances against salesmen's
commissions and employees' salaries, all of which loans and advances 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 (such consent not to be unreasonably withheld or delayed), 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 deposits issued by any other bank
organized in the United States having capital in excess of $100,000,000; 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, acquire any Subsidiary or make any other
acquisition of all or substantially all of the stock of any other Person or of
all or substantially all of the assets of any other Person. The Borrower will
notify the Bank promptly if it forms any Subsidiary. The Borrower will not
become a partner in any partnership.
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. The Bank
agrees that it will not unreasonably withhold its consent to any merger
-15-
transaction pursuant to which the Term Loans and the ACH obligations will be
paid in full at the date of consummation of such merger and the Bank's
obligations in respect of Term Loans and ACH transactions will be terminated.
4.9. Affiliate Transactions. The Borrower will not, without the prior
----------------------
written consent of the Bank (which consent shall not be unreasonably withheld or
delayed), 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 restrict 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, nor to prevent the hiring of additional officers at a level of
salary and other compensation 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.
Notwithstanding the foregoing, nothing contained in this (S)4.9 will be deemed
to prohibit any issuance of equity securities of the Borrower, whether or not to
any affiliate of the Borrower.
4.10. Change of Address, etc. The Borrower will not change its corporate
-----------------------
name or legal structure, nor will the Borrower change its chief executive
offices or principal place of business from the address described in (S)2.1(j),
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
referred to in said (S)2.1(j) 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 reasonably request in order
to maintain the perfection and priority of the security interests granted or
intended to be granted pursuant to the Security Agreement; provided that laptop
computers and personal computers may be kept at other locations for the use of
salesmen and other employees of the Borrower and demonstration and testing
equipment may be kept off-site at customers' premises and trade shows (all such
laptop computers, personal computers and demonstration and testing equipment to
have an aggregate value not in excess of $200,000), subject to the condition
that, as to each item of testing or demonstration equipment which is away from
the Borrower's Chelmsford, MA premises for 90 days or more, on or prior to such
90th day the Borrower informs the Bank in writing of the location of such item
and delivers to the Bank all such Uniform Commercial Code financing statements,
consignment agreements, waivers and other documentation as the Bank may
reasonably request in order to establish and/or maintain perfection of its
security interests. The Borrower will not change its fiscal year or methods of
-16-
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 reasonably
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 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 and other combustible
materials 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 any hazardous wastes (not
consumed in the ordinary course) only through licensed providers of hazardous
waste removal services.
4.12. No Margin Stock. No proceeds of any Term 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 of Subordinated Debt
without the prior written consent of the Bank (the Bank agreeing that it will
not unreasonably withhold or delay its consent to any modification or amendment
of Subordinated Debt documentation which does not affect the subordination
provisions). In any event, 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 Default or Event of Default hereunder.
-17-
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 any Term Note or with respect to any ACH transaction on or before
the date when due; 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 Term
Loan or with respect to any ACH transaction shall at any time prove to have been
incorrect in any material respect when made; or
(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 or 3.9 or any
provision of 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 written 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 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 other Indebtedness of the Borrower or any Subsidiary of the Borrower (for
borrowed money) in excess of $50,000 in aggregate principal amount or with
respect to any instrument evidencing, guaranteeing, securing or otherwise
relating to any such Indebtedness, or any such Indebtedness for borrowed money
in excess of $50,000 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 of holders thereof; or
-18-
(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 execution or similar process relating to Indebtedness in excess of
$100,000 shall be issued or levied against any property of the Borrower or any
Subsidiary and such execution or similar process shall not be paid, stayed,
released, vacated or fully bonded within 30 days after its issue or levy; or
(j) Any 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 and same shall not have been paid in full or satisfied within 30
days after such judgment has become final upon the expiration of all applicable
appeal periods; 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 each case, in the reasonable opinion of the Bank would be reasonably likely
to 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 interest and liens of the Bank in and on any of the
Collateral described in 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 of such
Persons; or
(o) If, for any reason, either or both of Xxxxxxx Xxxxxxxxx and/or Xxxxxx
Xxxxx ceases to be an executive officer of the Borrower actively involved in the
management of the Borrower, unless any such individual who ceases to be such an
executive officer is replaced, within 30 days
-19-
of such cessation, by another equally qualified individual selected by the
Borrower's Board of Directors (and the provisions of this clause (o) will become
applicable in turn to each successive replacement executive officer).
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 amount of 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 arrangements for 1999-2000 Term Loans provided for by
this letter agreement, as well as terminating the within-described facility for
ACH transactions.
(c) Exercise all rights and remedies hereunder, under the Security
Agreement, under each Term Note 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 security for
the Obligations, the Borrower 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. ANY AND ALL
RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO
ANY OTHER COLLATERAL WHICH SECURES ANY OF THE OBLIGATIONS PRIOR TO THE EXERCISE
BY THE BANK OF ITS RIGHT OF SET-OFF UNDER THIS SECTION ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.
5.4. Cash Collateralization. If the within-described facility for ACH
----------------------
transactions expires or is terminated by the Bank at any time, the Borrower will
forthwith deposit with the Bank, in cash, the amount of the then outstanding ACH
Exposure, which cash will be pledged to
-20-
the Bank to secure the Borrower's obligations with respect to ACH transactions.
The cash so pledged will (unless theretofore applied in payment of the ACH
obligations) be released to the Borrower pro tanto as the outstanding ACH
--- -----
obligations are reduced.
VI. MISCELLANEOUS
-------------
6.1. Costs and Expenses. The Borrower agrees to pay, on demand, all
------------------
reasonable costs and expenses (including, without limitation, reasonable legal
fees) incurred by the Bank in connection with the preparation, execution and
delivery of this letter agreement, the Security Agreement, the Term Notes and
all other instruments and documents to be delivered in connection with any Term
Loan or in connection with any other Obligations and any amendments or
modifications of any of the foregoing, as well as the reasonable 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, each Term Note and/or any of the other Obligations 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 connection with the execution and delivery of
this letter agreement, the Security Agreement, any Term Note 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)
four (4%) percent per annum plus (ii) the per annum rate otherwise payable under
----
the 1999-2000 Term 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 any of the
Term Loans and/or the within-described term loan facilities and/or any of the
other Obligations 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 any of Term Loans
and/or the within-described term loan facilities and/or any of the other
Obligations.
-21-
A certificate of the Bank claiming compensation under this Section shall be
conclusive in the absence of manifest error; provided that the Bank will not
claim compensation under this Section unless the Bank is seeking similar
compensation generally from other similar borrowers whose loan documents contain
similar provisions. 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. 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.
6.4. Governing Law. This letter agreement and each of the Term Notes
-------------
shall be governed by, and construed and enforced in accordance with, the laws of
The Commonwealth of Massachusetts.
6.5. 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:
Sycamore Networks, Inc.
00 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx, Chief Executive Officer
-22-
If to the Bank:
Fleet National Bank
High Technology Division
Mail Stop: MA OF D07A
Xxx Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxx, Vice President
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 deemed delivered on the earlier of (i) the date received
or (ii) the date of delivery, refusal or non-delivery indicated on the return
receipt if deposited in the United States mails, 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.
6.6. Binding Effect; Assignment; Termination. This letter agreement shall
---------------------------------------
be binding upon the Borrower and the Bank and their respective 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, any Term Loans and/or
any Term Notes. Without limitation of the foregoing generality,
(i) The Bank may at any time pledge all or any portion of its rights
under the Loan Documents (including any portion of any Term Note) to any of
the 12 Federal Reserve Banks organized under Section 4 of the Federal
Reserve Act, 12 U.S.C. Section 341. No such pledge or the enforcement
thereof shall release the Bank from its obligations under any of the Loan
Documents.
(ii) The Bank shall have the unrestricted right at any time and from
time to time, and without the consent of or notice to the Borrower, to
grant to one or more banks or other financial institutions (each, a
"Participant") participating interests in the Bank's obligation to lend
hereunder and/or any or all of the Term Loans held by the Bank hereunder.
In the event of any such grant by the Bank of a participating interest to a
Participant, whether or not upon notice to the Borrower, the Bank shall
remain responsible for the performance of its obligations hereunder and the
Borrower shall continue to deal solely and directly with the Bank in
connection with the Bank's rights and obligations hereunder. The Bank may
furnish any information concerning the Borrower in its possession from time
to time to prospective assignees and Participants; provided that the Bank
shall require any such prospective assignee or Participant to agree in
writing to maintain the confidentiality of such information to the same
extent as the Bank would be required to maintain such confidentiality.
-23-
The Borrower may terminate this letter agreement and the financing
arrangements made herein by giving written notice of such termination to the
Bank; 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 the Term Loans and all interest thereon and all fees and charges
payable in connection therewith.
6.7. 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 Term
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)6.7 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)6.7
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)6.5 (as
such address may be changed from time to time pursuant to said (S)6.5) or (ii)
by serving a copy thereof upon it at its address set forth in (S)6.5 (as such
address may be changed from time to time pursuant to said (S)6.5).
6.8. 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 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.
6.9. Replacement Note. Upon receipt of an affidavit of an officer of the
----------------
Bank as to the loss, theft, destruction or mutilation of any Term Note or of any
other Loan Document which is not of public record and upon the Bank providing
reasonable indemnification for the Borrower (the Borrower agreeing that the
Bank's unsecured agreement of indemnity will be sufficient for this purpose)
and, in the case of any such mutilation, upon surrender and cancellation of such
Term Note or other Loan Document, the Borrower will issue, in lieu thereof, a
replacement Term Note or other Loan Document in the same principal amount (as to
any Term Note) and in any event of like tenor.
6.10. Usury. All agreements between the Borrower and the Bank are hereby
-----
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of any Term Note or otherwise, shall the
amount paid or agreed to be paid to the Bank
-24-
for the use or the forbearance of the Indebtedness represented by any Term Note
exceed the maximum permissible under applicable law. In this regard, it is
expressly agreed that it is the intent of the Borrower and the Bank, in the
execution, delivery and acceptance of the Term Notes, to contract in strict
compliance with the laws of The Commonwealth of Massachusetts. If, under any
circumstances whatsoever, performance or fulfillment of any provision of any of
the Term Notes or any of the other Loan Documents at the time such provision is
to be performed or fulfilled shall involve exceeding the limit of validity
prescribed by applicable law, then the obligation so to be performed or
fulfilled shall be reduced automatically to the limits of such validity, and if
under any circumstances whatsoever the Bank should ever receive as interest an
amount which would exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the principal balance
evidenced by the Term Notes and not to the payment of interest. The provisions
of this (S)6.10 shall control every other provision of this letter agreement and
of the Term Notes.
6.11. WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY KNOWINGLY,
--------------------
VOLUNTARILY AND INTENTIONALLY MUTUALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS LETTER AGREEMENT, ANY TERM NOTE OR ANY OTHER LOAN DOCUMENTS OR OUT OF ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE
BANK TO ENTER INTO THIS LETTER AGREEMENT AND TO MAKE TERM LOANS AS CONTEMPLATED
HEREIN.
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:
"ACH" - As defined in (S)1.6.
"ACH Exposure" - As defined in (S)1.6.
"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 now or hereafter
described as "Collateral" in the Security Agreement or in Subsection 7.2(b)
below.
-25-
"Current Liabilities" - All liabilities of the Borrower and/or any
Subsidiary of the Borrower which would properly be shown as current liabilities
on a consolidated balance sheet of the Borrower prepared in accordance with
generally accepted accounting principles consistently applied. "Current
Liabilities" will in any event be deemed to include current maturities of the
Term Loans.
"Default" - Any event or circumstance which, with the passage of time or
the giving of notice or both, could become an Event of Default under this letter
agreement.
"Determination Date" - As defined in (S)3.7.
"ERISA" - The Employee Retirement Income Security Act of 1974, as amended.
"Indebtedness" - 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.
"Loan Documents" - Each of this letter agreement, the 1999 Term Note, the
1998 Term Note, the Security Agreement and each other instrument, document or
agreement evidencing, securing, guaranteeing or relating in any way to any of
the Term Loans or to any ACH transaction, all whether now existing or hereafter
arising or entered into.
"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 and Receivables (less an allowance for bad debt
consistent with the Borrower's prior experience).
"1998 Term Loans" - As defined in (S)1.4.
"1998 Term Note" - As defined in (S)1.4.
"1999-2000 Term Loans" - As defined in (S)1.2.
"1999 Term Note" - As defined in (S)1.1.
-26-
"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, whether or not
relating to any of the Term Loans. "Obligations" includes, without limitation,
obligations with respect to ACH transactions.
"PBGC" - The Pension Benefit Guaranty Corporation or any successor thereto.
"Person" - An individual, corporation, partnership, limited liability
company, joint venture, trust or unincorporated organization, or a government or
any agency or political subdivision thereof.
"Qualifying Equipment" - Items of computer and engineering equipment (not
including software, except as provided in the next following sentence) purchased
by the Borrower within the 90 days prior to the date of the advance of the
relevant 1999-2000 Term Loan (after November 1, 1998 with respect to the initial
1999-2000 Term Loan), all of which items of equipment must meet all of the
following criteria: (i) such items of equipment are shown on the Equipment List
heretofore delivered by the Borrower to the Bank or have otherwise been approved
by the Bank for use in supporting a 1999-2000 Term Loan, (ii) each item of such
equipment has been delivered to and installed at the Borrower's Chelmsford, MA
premises and has become fully operational, (iii) the Borrower has paid in full
for each item of such equipment (or is paying for same out of the proceeds of
the relevant 1999-2000 Term Loan substantially simultaneously with the receipt
of such proceeds) and holds title to same, free of all interests and claims of
any other Person (other than the security interest of the Bank), and (iv) the
Bank has a fully perfected first security interest in such equipment.
Notwithstanding the provisions of the immediately preceding sentence, the
Borrower may include within "Qualifying Equipment" any software (not including
"shrink-wrapped" software) which meets all of the conditions and criteria set
forth in the immediately preceding sentence to be Qualifying Equipment (other
than the exclusion of software contained therein) and which is purchased by the
Borrower for use in connection with its tangible Qualifying Equipment; provided
that the aggregate costs of the software so included will be limited as set
forth in (S)1.2.
"Receivables" - As to any Person, all of such Person's present and future
accounts receivable for goods sold or for services rendered.
"SEC" - The Securities and Exchange Commission or any successor thereto.
"Senior Debt" - All Indebtedness of the Borrower and/or any of its
Subsidiaries which is not Subordinated Debt.
"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
-27-
(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, (ii) any minority
interests in Subsidiaries and (iii) any assets representing amounts due from any
officer or employee of such Person or from any Subsidiary 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 1998 Term Loans and the 1999-2000 Term
Loans.
"Term Notes" - Collectively, the 1998 Term Note and the 1999 Term Note.
"Termination Fee" - As defined in (S)1.3.
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 each Term Note
and/or this letter agreement, as well as all ACH transactions.
(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, but excluding any of the foregoing
items in this clause (i) which constitute or relate to intellectual
property. 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.
(ii) That, upon the occurrence and during the continuance of any
Event of Default (as defined in (S)5.1 of this letter agreement), the Bank
may, at any time, 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, without prior notice to the Borrower but with
written notice of such notification to be given to the Borrower promptly
after such notification is given to account debtors. At any time after the
occurrence and during the continuance of an Event of Default, the Bank may
collect the
-28-
Borrower's Receivables, or any of same, directly from account debtors and
may charge the reasonable collection costs and expenses to the Borrower.
-29-
This letter agreement is executed, as an instrument under seal, as of the
day and year first above written.
Very truly yours,
SYCAMORE NETWORKS, INC.
By /s/ Xxxxxx Xxxxx
--------------------------
Name: Xxxxxx Xxxxx
Title: President
Accepted and agreed:
FLEET NATIONAL BANK
By /s/ Xxxxx Xxxxx
-----------------
Name: Xxxxx xxxxx
Title: Vice President
-30-
DISCLOSURE SCHEDULE
Item 2.1(a) Jurisdictions in which Borrower is qualified; Subsidiaries
Item 2.1 (b) Stock Ownership
Item 2.1(e) Litigation
Item 2.1 (j) Collateral locations; record owner of each location
Item 2.1(l) Non-competition Agreements
Item 4.1 Existing Indebtedness
Item 4.2 Existing Liens
Item 4.3 Existing Guaranties
Item 5.1(n) Permitted 50% stockholders
