Exhibit 10.19
FOURTH AMENDMENT AGREEMENT
This Fourth Amendment Agreement (this "Agreement") dated as of December
31, 2001, is by and between ARK CLO 2000-1, Limited (the "Lender") (as assignee
of Fleet National Bank, formerly known as BankBoston, N.A.) and Scan-Optics,
Inc. (the "Borrower"), as parties to that certain Second Amended and Restated
Loan Agreement, dated as of May 10, 1999 (the "Original Loan Agreement"), as
amended pursuant to that certain Amendment and Waiver Agreement, dated as of
January 29, 2001 (the "First Amendment"), the Second Amendment and Waiver
Agreement, dated as of July 1, 2001 (the "Second Amendment") and the Third
Amendment and Waiver Agreement, dated as of September 1, 2001 (the "Third
Amendment"; together with the Original Loan Agreement, the First Amendment, the
Second Amendment and the Third Amendment, collectively, the "Loan Agreement").
W I T N E S S E T H :
WHEREAS, Lender has provided Borrower with (a) that certain revolving
credit loan in the original principal amount of up to $10,000,000.00 as
evidenced by, inter alia, (i) that certain Fourth Amended and Restated Revolving
Credit Note from the Borrower to the Lender in the original principal amount of
up to $10,000,000.00 dated as of May 10, 1999 (the "Revolving Credit Note" (as
such term is amended as set forth below)), (ii) the Loan Agreement, and (iii)
those certain Unlimited Guaranties in favor of the Lender from each of
Scan-Optics Limited and Scan-Optics (Canada) Ltd. both dated as of April 7,
1993, as reaffirmed by a Reaffirmation of Guaranties dated May 10, 1999 (as
amended and reaffirmed from time, to time, collectively, the "Guaranties"), and
(b) that certain term loan in the original principal amount of $10,000,000.00 as
evidenced by, inter alia, (i) that certain Term Note from the Borrower to the
Lender in the original principal amount of $10,000,000.00 dated as of May 10,
1999 (the "Term Note" (as such term is amended as set forth below) and together
with the Revolving Credit Note, collectively, the "Notes"), (ii) the Loan
Agreement and (iii) the Guaranties. The Notes, the Loan Agreement, the
Guaranties, this Agreement and all other instruments, agreements and documents
executed and/or delivered in connection therewith are collectively referred to
herein as the "Loan Documents";
WHEREAS, each of the Borrower, Scan-Optics Limited and Scan-Optics
(Canada) Ltd., (collectively, the "Obligors") entered into the First Amendment,
the Second Amendment and the Third Amendment with the Lender to, inter alia,
waive certain Events of Default (as defined in the First Amendment, the Second
Amendment and the Third Amendment) arising as a result of the Borrower's failure
to comply with certain terms and conditions of the Original Loan Agreement until
the Waiver Termination Date (as defined in the First Amendment) and the Second
Waiver Termination Date (as defined in the Second Amendment) and the Third
Waiver Termination Date (as defined in the Third Amendment) as set forth
therein;
WHEREAS, each of the Obligors acknowledges and agrees that (a) the
Third Waiver Termination Date has occurred and that said Events of Default are
continuing and (b) as a result thereof, the Lender may, if it so elects, proceed
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to enforce its rights and remedies under the Loan Documents and to collect the
Obligors' indebtedness to the Lender under the Loan Documents;
WHEREAS, prior to giving effect to this Agreement, the Revolving Credit
Commitment is $10,000,000, the outstanding principal amount of Revolving Credit
Loans is $9,891,555.91 (the "Current Revolving Loan Balance");
WHEREAS, prior to giving effect to this Agreement, the outstanding
principal amount of the Term Loan is $8,495,100.00 (the "Current Term Loan
Balance");
WHEREAS, the Borrower has failed to comply with certain provisions of
the Loan Documents set forth on Schedule 1 hereto, and each such failure
constitutes an Event of Default under the Loan Agreement; and
WHEREAS, the Obligors and the Lender wish to restructure the Loans (the
"Restructuring") and amend certain terms and conditions of the Loan Agreement
all on the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Definitions. Capitalized terms used herein without definition that
are defined in the Loan Agreement shall have the same meanings herein as
therein.
Section 2. Condition Precedent. The effectiveness of the amendments contained
herein shall be subject to the satisfaction of the following conditions
precedent, on or before January 11, 2002:
(a) the receipt by the Lender of financial projections and reports in
form and substance satisfactory to Lender (in Lender's sole and absolute
discretion);
(b) Lender's approval (in Lender's sole and absolute discretion) of the
form and substance of all the documents, agreements and instruments (including,
without limitation, this Agreement and the Warrant (defined below)) executed in
connection with this Agreement and the Restructuring;
(c) no material adverse change having occurred with respect to the
business or operations of any Obligor since September 1, 2001;
(d) Borrower's execution and delivery to Lender of a revised Revolving
Credit Note (as described in Section 3(c) below) (in the form attached hereto as
Exhibit A), revised Term Note (as described in Section 3(d) below) (in the form
attached hereto as Exhibit B), the Warrant (in the form attached hereto as
Exhibit C (the "Warrant")) and 3,800,000 shares of Series A Redeemable Preferred
Stock having the terms set forth in the Certificate of Designations set forth as
Exhibit D (the "Preferred Shares"); and
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(e) Lender's receipt of a legal opinion from Day, Xxxxx & Xxxxxx LLP,
counsel to Borrower, in form and substance acceptable to Lender (in Lender's
sole and absolute discretion); provided, that if the above-referenced conditions
have been met or satisfied as of January 11, 2002, the parties hereto agree that
transactions set forth herein shall be deemed to be effective as of December 31,
2001.
Section 3. Covenants and Amendments. Without any prejudice or impairment
whatsoever to any of the rights and remedies of the Lender contained in the Loan
Agreement or in any other Loan Documents, each of the Obligors covenants and
agrees with the Lender as follows:
(a) Effective as of the date hereof, the defined terms "Revolving
Credit Commitment", "Revolving Credit Maturity Date", "Term Loan" and "Term Loan
Maturity Date", each as set forth in Section 1 of the Loan Agreement, are hereby
amended in their entirety to read as follows:
"Revolving Credit Commitment: The obligation of the Bank to make
Revolving Credit Loans to the Borrower up to an aggregate outstanding
principal amount not to exceed (i) for the period from the date of the
Fourth Amendment through June 30, 2002, $10,750,000.00, and (ii) for
the period from July 1, 2002 through the Revolving Credit Maturity
Date, $10,000,000.00, in each case as such amount may be reduced from
time to time or terminated hereunder."
"Revolving Credit Maturity Date: December 31, 2004."
"Term Loan: The term loan that shall continue to be made to the
Borrower pursuant to Section 3 hereof in the principal amount of
$2,000,000.00 (after giving effect to the Fourth Amendment)."
"Term Loan Maturity Date: December 31, 2004."
(b) Effective as of the date hereof, the following terms "Fourth
Amendment" and "Excess Cash Flow" are hereby added to Section 1 of the Loan
Agreement.
"Fourth Amendment: That certain Fourth Amendment Agreement, dated as of
December 31, 2001), between the Borrower and the Lender." "Excess Cash
Flow: For any period the amount equal to Consolidated Operating Cash
Flow for such period minus the aggregate amount of Consolidated
Financial Obligations payable during such period."
(c) Effective as of the date hereof, the last sentence of Section 2(a)
of the Loan Agreement is hereby amended in its entirety to read as follows:
"Notwithstanding anything else contained herein to the contrary, the
Borrower shall not maintain any Revolving Credit Loans, or request any
Revolving Credit Loans that would result in the Borrower maintaining
Revolving Credit Loans, in excess of the then applicable Revolving
Credit Commitment. The obligation of the Borrower to repay to the Bank
the principal of the Revolving Credit Loans and interest accrued
thereon shall be evidenced by a fifth amended and restated promissory
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note, dated as of the date of the Fourth Amendment, in the aggregate
principal amount of $10,750,000.00 executed and delivered by the
Borrower and payable to the order of the Bank, in the form and
substance satisfactory to the Bank (the "Revolving Credit Note")."
(d) Effective as of the date hereof, Section 3(a) and Section 3(b) of
the Loan Agreement are hereby amended in their entirety to read as follows:
"ss.3. The Term Loan.
(a) Subject to the terms and conditions set forth in the
Fourth Amendment, the Bank agrees to forgive all
accrued and unpaid interest on the Term Loan through
December 31, 2001, forgive the aggregate outstanding
principal balance of the Term Loan above $2,000,000.00,
and to continue to extend the remaining balance of the
Term Loan (i.e., $2,000,000.00). The Term Loan shall be
evidenced by an amended and restated promissory note of
the Borrower in the aggregate principal amount of
$2,000,000.00 in form and substance satisfactory to the
Bank (the "Term Note"), dated as of the date of the
Fourth Amendment and payable to the order of the Bank.
(b) Subject to the terms and conditions set forth in this
Agreement, the Borrower shall pay the outstanding
principal amount of the Term Loan on the Term Loan
Maturity Date. In addition, within thirty days of the
last day of each calendar quarter beginning on March
31, 2002, the Borrower shall prepay the Term Loan in an
amount equal to 50% of the Excess Cash Flow during such
calendar quarter."
(e) The Bank agrees to forgive all accrued and unpaid interest on the
Revolving Credit Loans and all commitment fees on the unfunded portion of the
Revolving Credit Commitment, in each case through December 31, 2001.
(f) Effective as of the date hereof, the first sentence of Section 7(c)
of the Loan Agreement is hereby amended in it entirety to read as follows:
"All payments to be made by the Borrower hereunder or under any of the
other Loan Documents shall be made in U.S. dollars in immediately
available funds to Ark CLO 2000-1, Limited, c/o JPMorgan Chase Bank,
000 Xxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxx 00000, without set-off or
counterclaim and without any withholding or deduction whatsoever."
(g) Effective as of the date hereof, all Loans hereunder shall be Base
Rate Loans. The first Interest Payment Date after the date hereof shall be
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February 1, 2002 (which shall cover the first Interest Period ending on January
31, 2002). For the avoidance of doubt, each Interest Payment Date thereafter
shall be the first day of such calendar month.
(h) Effective as of the date hereof, Section 10(c) of the Loan
Agreement is hereby amended in its entirety to read as follows:
"(c) The Borrower agrees that as long as any Loan or Note is
outstanding and until the termination of the Revolving Credit
Commitment and the payment and satisfaction in full of all of the
Obligations, the Borrower will not:
(i) make any Capital Expenditures in any fiscal quarter ending
on or after March 31, 2002 in excess of $50,000.00; or
(ii) permit Consolidated Earnings Before Interest and Taxes,
Depreciation and Amortization for (A) the fiscal quarter of
the Borrower ending on March 31, 2002 to be less than
$640,000.00, (B) the period of two consecutive fiscal quarters
of the Borrower ending on June 30, 2002 to be less than
$1,775,000.00, (C) the period of three consecutive fiscal
quarters of the Borrower ending on September 30, 2002 to be
less than $2,380,000.00 and (D) any period consisting of four
(4) consecutive fiscal quarters of the Borrower ending on or
after December 31, 2002 to be less than $3,570,000.00; or
(iii) permit the Borrower's backlog (as defined in the
Borrower's most recent 10K filed with the Securities and
Exchange Commission) to be less than $13,000,000.00 for any
fiscal quarter of the Borrower ending on or after March 31,
2002."
(i) Effective as of the date hereof, the following clause is added to
the end of the first paragraph of Section 11 (Events of Default), as an
additional Event of Default:
"; (j) or more than ten percent (10%) of those accounts receivable of
the Borrower created or arising in connection with any contract
disclosed in the Borrower's backlog report to the Lender are not valid
and legally enforceable obligations of the applicable account debtors
or are subject to any present or contingent offset, deduction or
counterclaim, dispute or other defense on the part of such account
debtors."
(j) Effective as of the date hereof, Section 4(b) and Section 4(d) of
the Third Amendment are hereby deleted in their entirety.
(k) In addition to any of the following required to be delivered by the
Borrower in accordance with and/or pursuant to the First Amendment, the Second
Amendment and/or the Third Amendment, the Borrower shall, on or before January
15, 2002, provide Lender with the following: (i) fully executed UCC-1 financing
statements for all jurisdictions requested by Lender; (ii) a fully executed
perfection certificate in form and detail reasonably satisfactory to the Lender;
(iii) fully executed lessor's agreements in form and substance reasonably
satisfactory to the Lender for all leased property as reasonably requested by
Lender; and (iv) first priority properly perfected security interests in all
property, including without limitation intellectual property, owned by the
Borrower and any of its Subsidiaries pursuant to documentation in form and
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substance reasonably satisfactory to the Lender that may reasonably be required
by Lender to properly perfect security interests in all such property owned by
the Borrower and any of its Subsidiaries.
(l) The Obligors shall comply with all of the terms, covenants and
provisions contained in the Loan Agreement and the other Loan Documents
(including for the avoidance of doubt, the First Amendment, Second Amendment and
Third Amendment), except as such terms, covenants and provisions are expressly
modified by this Agreement.
(m) The Obligors shall at any time and from time to time execute and
deliver such further instruments (including without limitation UCC-1 and other
security/perfection documents), and take such further action as the Lender may
reasonably request, in each case further to effect the purposes of this
Agreement, the Loan Agreement and the other Loan Documents. Without limiting the
generality of the immediately preceding sentence, the Obligors shall permit the
Lender and/or its designated representatives, upon reasonable notice, to visit
and inspect any of the Obligors' properties or any of its affiliates, to examine
the books of account of the Obligors and their affiliates (and to make copies
thereof and extracts therefrom), and to discuss the, affairs, finances and
accounts of the Obligors and their affiliates with, and to be advised as to the
same by, its and their officers, all during normal business hours.
Section 4. Section Waivers under the Loan Agreement. Subject to the
satisfaction of the conditions set forth herein (including without limitations
in Section 2 hereof and the accuracy of the representations set forth in Section
5 hereof), the Lender waives those Events of Default that have occurred under
the Loan Agreement as a result of the Borrower's failure on or before the date
hereof to comply with the provisions of the Credit Agreement set forth on
Schedule 1 attached hereto (the "Current Events of Default").
Section 5. Section Representations and Warranties. Each of the Obligors
hereby represents and warrants to the Lender that (i) all of the representations
and warranties made by such Obligors in the Loan Agreement and the other Loan
Documents are true and correct on the date hereof as if made on and as of the
date hereof, except to the extent that any of such representations and
warranties expressly relate by their terms to a prior date and (ii) there are no
defaults under the Loan Agreement except the Current Events of Default.
Section 6. Section Ratification of Existing Agreements. Each of the
Obligors agrees that the obligations of such Obligors to the Lender as evidenced
by or otherwise arising under the Loan Agreement and the other Loan Documents,
except as otherwise expressly modified in this Agreement upon the terms set
forth herein, are, by each Obligor's execution of this Agreement, ratified and
confirmed in all respects, including (without limitation) the Guaranties which
are hereby reaffirmed and the Security Agreements. In addition, by the execution
of this Agreement, each of the Obligors represents and warrants that it has no
claim, counterclaim, right of set-off or defense of any kind against Lender (or
its predecessors-in-interest) with respect to the obligations under the Loan
Documents or otherwise.
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Section 7. Section Release. The Obligors, on their own behalf and on
behalf of their successors and assigns, hereby waive, release and discharge the
Lender, Patriarch Partners, LLC and all affiliates of the Lender and/or
Patriarch Partners, LLC, and all of their directors, officers, employees,
attorneys and agents, from any and all claims, demands, actions or causes of
action whether known or unknown, arising out of or in any way relating to this
Agreement, the Loan Agreement, the Loan Documents and/or any documents,
agreements, dealings or other matters connected with the Loan Agreement, the
Loan Documents or the administration thereof.
Section 8. Section Expenses. The Obligors agree to pay to the Lender
(a) on or before the date hereof, Lender's legal fees and disbursements incurred
through the date hereof in connection with the negotiation and preparation of
this Agreement and related matters, (b) on or before the date hereof Lender's
examiner and audit fees and disbursements incurred through the date hereof, and
(c) upon demand from time to time any and all reasonable out-of-pocket costs or
expenses (including consultants' fees, commercial examiner fees, audit fees and
reasonable legal fees and disbursements) hereafter incurred by the Lender in
connection with the administration of credit extended by the Lender to the
Obligors or the preservation of or enforcement of its rights under the Loan
Agreement, the Notes and/or the other Loan Documents or in respect of any of
each Obligor's other obligations to the Lender.
Section 9. Section Marshalling. The Lender shall not be required to
marshal any present or future collateral security for the Obligors' obligations
to the Lender under the Loan Documents or to resort to such collateral security
or other assurances of payment in any particular order, and all of its rights in
respect of such collateral security shall be cumulative and in addition to all
other rights, however existing or arising. To the extent that it lawfully may,
each of the Obligors hereby agrees that each will not invoke any law relating to
the marshalling of collateral which might cause delay in or impede the Lender's
rights under any document, agreement or instrument evidencing or securing any of
the Obligors' obligations to the Lender under the Loan Documents and, to the
extent that it lawfully may, each of the Obligors hereby irrevocably waives the
benefits of all such laws.
Section 10. Section No Waiver. Except as otherwise expressly provided
for in this Agreement, nothing in this Agreement shall extend to or affect in
any way any of the rights or obligations of the Obligors or any of the Lender's
obligations, rights and remedies arising under the Loan Documents, and the
Lender shall not be deemed to have waived any or all of its rights or remedies
with respect to any default and which upon the execution and delivery of this
Agreement might otherwise exist or which might hereafter occur.
Section 11. Section Lien and Set-off. Each of the Obligors hereby
grants to the Lender, a lien, security interest and right of set-off as security
for all of the Obligors' liabilities and obligations to the Lender or the
Lender's affiliates, whether now existing or hereafter arising, upon and against
all deposits, credits, collateral and property of the Obligors (other than
Borrower's payroll accounts), now or hereafter in the possession, custody,
safekeeping or control of the Lender or any entity under the control of the
Lender, or in transit to any of them. At any time on or after the date hereof,
without demand or notice, the Lender may set-off the same or any part thereof
and apply the same to any liability or obligation of any of the Obligors even
though unmatured and regardless of the adequacy of any other collateral securing
the Obligations. ANY AND ALL RIGHTS OF THE OBLIGORS TO REQUIRE THE LENDER TO
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EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SET-OFF WITH RESPECT
TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE OBLIGORS, ARE HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
Section 12. Section Governing Law This Agreement shall be governed by
and construed in accordance with the laws of the State of Connecticut.
Section 13. Section Consent to Jurisdiction, Counsel. Each of the
Obligors agrees that the following courts: (i) state court - any state or local
court located in the City of Hartford, State of Connecticut and (ii) federal
court - any United States District Court located in Hartford, Connecticut, or at
the option of the Lender, any court in which the Lender shall initiate legal or
equitable proceedings and which has subject matter jurisdiction over the matter
in controversy, shall have exclusive jurisdiction to hear and determine any
claims or disputes between any Obligor and the Lender pertaining directly or
indirectly to this Agreement and/or the Loan Documents or to any matter arising
therefrom. Each of the Obligors expressly submits and consents in advance to
such jurisdiction in any action or proceeding commenced in such courts. Each of
the Obligors acknowledges that it has carefully read this Agreement and that it
has had an opportunity to consult with an attorney of its own selection before
signing it and each of the Obligors understands the effects of this Agreement
and is signing it voluntarily.
Section 14. Section Waiver of Jury Trial.
EACH OF THE OBLIGORS HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH
RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY OF THE OBLIGORS' OBLIGATIONS HEREUNDER
OR THEREUNDER OR THE PERFORMANCE OF SUCH OBLIGATIONS.
Section 15. Section Entitlement to Relief from Stay.
Each of the Obligors hereby acknowledges and agrees, in further
consideration for the Lender entering into this Agreement with the Obligors,
that, in the event that any Obligor shall make application for or seek relief or
protection under any of the sections or chapters of the federal Bankruptcy Code,
or in the event that any involuntary petition is filed against any Obligor under
the federal Bankruptcy Code and an order for relief is entered as a result
thereof, then the Lender shall thereupon be entitled (upon notice to Borrower
and a hearing thereon) to immediate relief from any automatic stay imposed by
Section 362 of the federal Bankruptcy Code, or otherwise, on or against the
exercise of the Lender's rights and remedies under this Agreement or any of the
other Loan Documents. The Lender in turn acknowledges that this Section 15 shall
not be construed as a restriction or prohibition on the Obligors' right to make
application for or seek relief or protection under the federal Bankruptcy Code.
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Section 16. Section Miscellaneous Provisions.
(a) Except as otherwise expressly provided by this Agreement, all of
the terms, conditions and provisions of the Loan Agreement shall remain the
same. It is declared and agreed by each of the parties hereto and thereto that
the Loan Agreement, as amended hereby, shall continue in full force and effect,
and that this Agreement and the Loan Agreement shall be read and construed as
one instrument.
(b) This Agreement may be executed in any number of counterparts, but
all such counterparts shall together constitute but one instrument. In making
proof of this Agreement it shall not be necessary to produce or account for more
than one counterpart signed by each party hereto by and against which
enforcement hereof is sought. TIME IS OF THE ESSENCE AS TO ALL OF THE PROVISIONS
HEREIN.
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IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be executed in its name and behalf by its duly authorized officer
as of the date first written above,
SCAN-OPTICS, INC.
By : _/s/ Xxxxxxx X. Villano____________
-----------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Financial Officer
SCAN-OPTICS LIMITED
By : _/s/ Xxxxxxx X. Villano____________
-----------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Financial Officer
SCAN-OPTICS (CANADA) LTD.
By : _/s/ Xxxxxxx X. Villano____________
-----------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Financial Officer
ARK CLO 2000-1, LIMITED, as
Assignee of Fleet National
Bank (formerly known as
BankBoston, N.A.)
By: PATRIARCH PARTNERS, LLC,
its Collateral Manager
By : _/s/ Xxxxxx Dolan_________________
-----------------
Name: Xxxxxx Xxxxx
Title: Manager
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Exhibit A
[Revolving Credit Note]
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Exhibit B
[Term Note]
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Exhibit C
[Warrant]
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Exhibit D
[Certificate of Designation for Preferred Stock]
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Current Events of Default
Schedule 1
to
Fourth Amendment Agreement
dated as of December 31, 20011
1. The Borrower's failure to pay the December 31, 2000 installment of
principal on the Term Loan, as required under Section 3(b) of the Loan
Agreement.
2. The Borrower's failure to furnish the Lender monthly unaudited
consolidated Financials, as set forth in Section 10(a)(i)(c) of the
Loan Agreement.
3. The Borrower's failure to maintain interest rate protection
arrangements, as set forth in Section 10(a)(vi) of the Loan Agreement.
4. The Borrower's failure to satisfy each of the financial covenants set
forth in Section 10(c) of the Loan Agreement.
5. The Borrower's failure to pay the required quarterly installments of
principal on the Term Loan that became due and payable on December 31,
2000 and the last day of each calendar quarter in 2001, as required
under Section 3(b) of the Loan Agreement.
6. The Borrower's failure to comply with the covenants in Sections 4(a),
4(d), 4(g) and 4(h) of the Third Amendment and Waiver Agreement.
7. The Borrower's failure to pay interest accrued on the principal amount
of the Loans during the period beginning September 1, 2001 and ending
on December 31, 2001 in accordance with the terms of the Loan
Agreement.
8. The Borrower's failure to pay lease payments on the outstanding leases
with Patriarch Partners, LLC through the period ending on December 31,
2001.
---------------
1 For the avoidance of doubt, the Lender is not waiving any
Defaults or Events of Default under the Loan Agreement (as
amended) that exist on or after January 1, 2002 (after giving
effect to the Fourth Amendment Agreement).
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SECOND AMENDED AND RESTATED
LOAN AGREEMENT
by and between
SCAN-OPTICS, INC.
(the "Borrower")
and
BANKBOSTON, N.A.
(the "Bank")
dated as of
May 10, 1999
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TABLE OF CONTENTS
ss.1. Definitions:..........................................................1
ss.2. Revolving Credit Facility.............................................11
ss.3. The Term Loan.........................................................13
ss.4. Interest..............................................................14
ss.5. Additional Costs, Etc.................................................16
ss.6. Changes in Circumstances..............................................17
ss.7. Fees and Payments.....................................................18
ss.8. Representations and Warranties........................................20
ss.9. Conditions Precedent..................................................21
ss.10. Covenants............................................................21
ss.11. Events of Default; Acceleration......................................27
ss.12. Setoff...............................................................28
ss.13. Miscellaneous........................................................28
ss.14. Prejudgment Remedy Waiver............................................29
ss.15. Effective Date.......................................................30
ss.16. Amendment and Restatement............................................30
SCHEDULES:
Schedule 10(b)(i): Permitted Indebtedness
Schedule 10(b)(ii): Existing Liens
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SECOND AMENDED AND RESTATED LOAN AGREEMENT
This SECOND AMENDED AND RESTATED LOAN AGREEMENT (this "Loan Agreement"
or this "Agreement") is made as of May 10, 1999, by and between SCAN-OPTICS,
INC. (the "Borrower"), a Delaware corporation having its principal place of
business at 000 Xxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxxxxx 00000, and BANKBOSTON,
N.A. (the "Bank"), a national banking association with an office at 000 Xxxxx
Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000 and successor by merger to Bank of Boston
Connecticut.
WHEREAS, the Borrower entered into a certain Amended and Restated
Revolving Loan Agreement dated as of June 12, 1998 between the Borrower and the
Bank, as previously amended by an Amendment Agreement dated as of July 30, 1998
and by a Second Amendment and Waiver Agreement dated as of September 28, 1998
(as heretofore amended, the "Prior Loan Agreement"); and
WHEREAS, the Borrower and the Bank desire to amend and restate the
Prior Loan Agreement in its entirety as set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Bank hereby agree that as of the Effective
Date (as hereinafter defined), the Prior Loan Agreement shall be amended and
restated in its entirety as set forth herein:
ss.1. Definitions: Certain capitalized terms are defined below:
Base Rate: The higher of (i) the annual rate of interest announced from
time to time by the Bank at its head office in Boston, Massachusetts, as its
"base rate" and (ii) one-half of one percent (1/2%) above the Federal Funds
Effective Rate. For the purposes of this definition, "Federal Funds Effective
Rate" shall mean for any day, the rate per annum equal to the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by the Bank from three funds brokers of recognized
standing selected by the Bank.
Base Rate Loans: Revolving Credit Loans and all or any portion of the
Term Loan bearing interest calculated by reference to the Base Rate.
Business Day: Any day on which banks in Hartford, Connecticut are open
for business generally.
Capital Expenditures: Amounts paid or indebtedness incurred by the
Borrower or any of its Subsidiaries in connection with the purchase or lease by
-18-
the Borrower or any of its Subsidiaries of assets that would be required to be
capitalized and shown on the balance sheet of such Person in accordance with
GAAP.
Charter Documents: With respect to any Person, the certificate or
articles of incorporation or organization and the by-laws of such Person, or
other constitutive documents of such entity.
Collateral: All of the property, rights and interests of the Borrower
and its Subsidiaries that are or are intended to be subject to the security
interests created by the Security Documents.
Consent: In respect of any Person, any permit, license or exemption
from, approval, consent of, registration or filing with any local, state or
federal governmental or regulatory agency or authority, required under
applicable law.
Consolidated Current Assets: All assets of the Borrower and its
Subsidiaries on a consolidated basis that, in accordance with GAAP, are properly
classified as current assets, provided that notes and accounts receivable shall
be included only if good and collectible as determined by the Borrower in
accordance with established practice consistently applied and, with respect to
any such notes, only if payable on demand or within one (1) year from the date
as of which Consolidated Current Assets are to be determined and if not directly
or indirectly renewable or extendible at the option of the debtor(s) thereunder,
by their terms, or by the terms of any instrument or agreement relating thereto,
beyond such year, and, with respect to such accounts receivable, only if payable
and outstanding not more than ninety (90) days after the date of the shipment of
goods or other transaction out of which any such account receivable arose; and
such notes and accounts receivable shall be taken at their face value less
reserves determined to be sufficient in accordance with GAAP.
Consolidated Current Liabilities: All liabilities of the Borrower and
its Subsidiaries on a consolidated basis maturing on demand or within one (1)
year from the date as of which Consolidated Current Liabilities are to be
determined, and such other liabilities as may properly be classified as current
liabilities in accordance with GAAP.
Consolidated Earnings Before Interest and Taxes: For any period, an
amount equal to the consolidated earnings (or loss) from the operations of the
Borrower and its Subsidiaries for such period, after all expenses and other
proper charges, but before payment or provision for any income taxes or interest
expense for such period, determined in accordance with GAAP.
Consolidated Earnings Before Interest and Taxes, Depreciation and
Amortization: For any period, an amount equal to the sum of (i) the consolidated
earnings (or loss) from the operations of the Borrower and its Subsidiaries for
such period, after all expenses and other proper charges, but before payment or
-19-
provision for any income taxes or interest expense for such period, plus (ii)
depreciation and amortization for such period, determined in accordance with
GAAP.
Consolidated Financial Obligations: For any period, an amount equal to
the sum of all payments on Indebtedness that become due and payable or that are
to become due and payable during such period pursuant to any agreement or
instrument to which the Borrower or any of its Subsidiaries is a party relating
to the borrowing of money or the obtaining of credit or in respect of
capitalized leases. Demand obligations shall, as of any date of determination,
be deemed to be due and payable during any period during which such obligations
are outstanding.
Consolidated Net Income (or Deficit): The consolidated net income (or
deficit) of the Borrower and its Subsidiaries, after deduction of all expenses,
taxes, and other proper charges, determined in accordance with GAAP.
Consolidated Operating Cash Flow: For any period, an amount equal to
(a) the sum of (i) the earnings (or loss) from the operations of the Borrower
and its Subsidiaries for such period, after payment or provision for all
expenses and other proper charges, but before payment or provision for any
income taxes or interest expense, plus (ii) depreciation and amortization for
such period, minus (b) cash payments for all taxes paid during such period,
minus (c) Capital Expenditures made during such period to the extent permitted
hereunder.
Consolidated Tangible Net Worth: The excess of (a) all assets of the
Borrower determined in accordance with GAAP, over (b) all liabilities of the
Borrower determined in accordance with GAAP, minus (c) the sum of (i) the book
value of all intangibles of the Borrower determined in accordance with GAAP,
including good will and intellectual property, (ii) any write-up in the book
value of assets of the Borrower since the most recent audited Financials in
existence on the date hereof, and (iii) without duplication, any subscriptions
receivable of the Borrower.
Consolidated Total Funded Debt: As to the Borrower and its Subsidiaries
and whether recourse is secured by or is otherwise available against all or only
a portion of the assets of the Borrower or any of its Subsidiaries and whether
or not contingent, but without duplication:
(a) every obligation of the Borrower or any of its
Subsidiaries for money borrowed;
(b) every obligation of the Borrower or any of its
Subsidiaries evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses and the principal portion
of rental obligations under any capitalized lease;
-20-
(c) every reimbursement obligation of the Borrower or any of
its Subsidiaries with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of the
Borrower or any of its Subsidiaries; and
(d) every obligation of the Borrower or any of its
Subsidiaries issued or assumed as the deferred purchase price of
property or services (including securities repurchase agreements but
excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business which are not overdue or which are being
contested in good faith).
Consolidated Total Interest Expense: For any period, the aggregate
amount of interest required to be paid or accrued by the Borrower and its
Subsidiaries during such period on all Indebtedness of the Borrower and its
Subsidiaries outstanding during all or any part of such period, whether such
interest was or is required to be reflected as an item of expense or
capitalized, including payments consisting of interest in respect of capitalized
leases and including commitment fees, agency fees, facility fees, balance
deficiency fees and similar fees or expenses incurred in connection with the
borrowing of money.
Consolidated Total Liabilities: All liabilities of the Borrower and its
Subsidiaries that in accordance with GAAP are properly classified as
liabilities.
Default: An event or act which with the giving of notice and/or the
lapse of time, would become an Event of Default.
Dollars or $: Dollars in lawful currency of the United States of
America.
Drawdown Date: The date on which any Revolving Credit Loan or the Term
Loan is made or is to be made, and the date on which any Revolving Credit Loan
or the Term Loan is converted or continued.
Effective Date: May 10, 1999.
Environmental Laws: All laws pertaining to environmental matters,
including without limitation, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act of 1986, the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control Act, in each case
as amended, and all rules, regulations, judgments, decrees, orders and licenses
arising under all such laws.
ERISA: The Employee Retirement Income Security Act of 1974, as amended,
and all rules, regulations, judgments, decrees, and orders arising thereunder.
Eurocurrency Reserve Rate: For any day with respect to all or any
portion of a Eurodollar Rate Loan, the maximum rate (expressed as a decimal) at
which the Bank would be required to maintain reserves under Regulation D of the
Board of Governors of the Federal Reserve System (or any successor or similar
-21-
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
Eurodollar Business Day: Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in the London
interbank market.
Eurodollar Lending Office: Initially, the office of the Bank, if any,
that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate: For any Interest Period with respect to all or any
portion of any Loan bearing interest at a rate determined by reference to the
Eurodollar Rate, the rate of interest equal to (i) the arithmetic average of the
rates per annum for the Bank (rounded upwards to the nearest 1/16 of one
percent) of the rate at which the Bank's eurodollar lending office is offered
Dollar deposits two Eurodollar Business Days prior to the beginning of such
Interest Period in the interbank eurodollar market where the eurodollar and
foreign currency and exchange operations of such eurodollar lending office are
customarily conducted at or about 10:00 a.m., Boston time, for delivery on the
first day of such Interest Period for the number of days comprised therein and
in an amount comparable to the amount of all or any portion of any Loan bearing
interest at a rate determined by reference to the Eurodollar Rate of the Bank to
which such Interest Period applies, divided by (ii) a number equal to 1.00 minus
the Eurocurrency Reserve Rate, if applicable.
Eurodollar Rate Loans: Loans bearing interest calculated by reference
to the Eurodollar Rate.
Event of Default: Any of the events listed inss.11 hereof.
Financials: With respect to any Person for any period, the balance
sheet of such Person as at the end of such period, and the related statement of
income and expense and statement of cash flow of such Person for such period,
each setting forth in comparative form the figures for the previous comparable
fiscal period, all in reasonable detail and prepared in accordance with GAAP.
GAAP: Generally accepted accounting principles consistent with those
adopted by the Financial Accounting Standards Board and its predecessor, (a)
generally, as in effect from time to time, and (b) for purposes of determining
compliance by the Borrower with the financial covenants set forth herein, as in
effect for the fiscal year ended December 31, 1998.
Guaranties: Collectively, the Unlimited Guaranties from each of
Scan-Optics Canada and Scan-Optics England to the Bank, each as amended and
reaffirmed from time to time.
-22-
Indebtedness: With respect to any Person, all obligations of such
Person, contingent and otherwise, that in accordance with GAAP should be
classified as liabilities, including without limitation (a) all debt
obligations, (b) all liabilities secured by Liens, (c) all guarantees and (d)
all liabilities in respect of bankers' acceptances or letters of credit.
Interest Payment Date: (a) As to any Base Rate Loan, the first day of
the calendar month; and (b) as to any Eurodollar Rate Loan in respect of which
the Interest Period is (i) 3 months or less, the last day of such Interest
Period and (ii) more than 3 months, the date that is 3 months from the first day
of such Interest Period and, in addition, the last day of such Interest Period.
Interest Period: With respect to each Loan, (a) initially, the period
commencing on the Drawdown Date of such Loan and ending on the last day of one
of the periods set forth below, as selected by the Borrower in a request for a
Loan (i) for any Base Rate Loan, the last day of the calendar month, and (ii)
for any Eurodollar Rate Loan, 1, 2 or 3 months; and (b) thereafter, each period
commencing on the last day of the next preceding Interest Period applicable to
such Loan and ending on the last day of one of the periods set forth above as
selected by the Borrower in a request to convert a Loan; provided that all of
the foregoing provisions relating to Interest Periods are subject to the
following:
(i) if any Interest Period with respect to a Eurodollar Rate
Loan would otherwise end on a day that is not a Eurodollar Business
Day, that Interest Period shall be extended to the next succeeding
Eurodollar Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the immediately preceding Eurodollar
Business Day;
(ii) if any Interest Period with respect to a Base Rate Loan
would end on a day that is not a Business Day, that Interest Period
shall end on the next succeeding Business Day;
(iii) if the Borrower shall fail to give notice as provided in
ss.2(d), the Borrower shall be deemed to have requested a conversion of
the affected interest rate from one determined by reference to the
Eurodollar Rate to one determined by reference to the Base Rate on the
last day of the then current Interest Period with respect thereto;
(iv) any Interest Period relating to all or any portion of the
Loan bearing interest at a rate determined by reference to the
Eurodollar Rate that begins on the last Eurodollar Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Eurodollar Business Day of a calendar
month; and
-23-
(v) any Interest Period that would otherwise extend beyond the
Revolving Credit Maturity Date (if a Revolving Credit Loan) or the Term
Loan Maturity Date (if the Term Loan) shall end on the Revolving Credit
Maturity Date or (as the case may be) the Term Loan Maturity Date.
Leverage Ratio: Seess.10(c)(v) hereof.
Liens: Any encumbrance, mortgage, pledge, hypothecation, charge,
restriction or other security interest of any kind securing any obligation of
any Person.
Loans: Collectively, the Revolving Credit Loans and the Term Loan.
Loan Documents: This Agreement, the Notes, the Security Documents and
any other documents, instruments or agreements executed and/or delivered in
connection with this Agreement, in each case as from time to time amended,
reaffirmed or supplemented.
Lockbox Agreement: That certain Lockbox Agreement dated as of November
9, 1995 executed and delivered by the Borrower to the Bank, together with any
and all UCC-1 financing statements executed in connection therewith, all as
amended from time to time.
Materially Adverse Effect: Any materially adverse effect on the
financial condition or business operations of the Borrower and any of its
Subsidiaries taken as a whole or material impairment of the ability of the
Borrower to perform its obligations hereunder or under any of the other Loan
Documents.
Notes: Collectively, the Revolving Credit Note and the Term Note.
Obligations: All indebtedness, obligations and liabilities of the
Borrower to the Bank, existing on the date of this Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, arising or incurred under this
Agreement or any other Loan Document or in respect of any of the Loans, the
Notes or any other instruments at any time evidencing any thereof.
Patent Security Agreement: The Patent Collateral Assignment and
Security Agreement dated April 7, 1993 between the Bank and the Borrower, as
amended from time to time.
Permitted Acquisition: Shall mean any acquisition of all or
substantially all the assets of, or shares or other equity interests in,
Photomatrix Imaging Corporation, a Nevada corporation, and/or Agissar
Corporation, a Connecticut corporation, if immediately after giving effect
thereto: (a) no Default or Event of Default shall have occurred and be
continuing or would result therefrom, (b) all transactions related thereto shall
be consummated in accordance in all material respects with applicable laws, (c)
the Bank shall have received evidence that the Bank has a fully perfected first
priority security interest in all of the assets, shares or other equity
interests acquired (except for liens permitted under ss.10(b)(ii)), (d) any such
acquisition shall have been fully consummated on or before December 31, 1999,
(e) solely with respect to the acquisition of Agissar Corporation, the total
-24-
purchase price (including, without limitation, any Indebtedness assumed in
connection therewith) shall not exceed $2,200,000, and (f)(x) the Borrower and
its Subsidiaries shall be in compliance, on a pro forma basis after giving
effect to such acquisition, with the covenants contained in ss.10 recomputed as
at the last day of each relevant period for testing such compliance, and the
Borrower shall have delivered to the Bank an officer's certificate to such
effect, together with all relevant financial information for such subsidiary or
assets, and (y) any acquired or newly formed subsidiary shall not be liable for
any Indebtedness (except for Indebtedness permitted by ss.10(b)(i) hereof).
Person: Any individual, corporation, partnership, trust, limited
liability company, unincorporated association, business, or other legal entity,
any government or any governmental agency or political subdivision thereof.
Requirement of Law: With respect to any Person, any law, treaty, rule,
regulation or determination of an arbitrator, court, or other governmental
authority, in each case applicable to or binding upon such Person or affecting
any of its property.
Revenue Amount: With respect to any fiscal quarter of the Borrower
ending on or after March 31, 2000, an amount equal to the consolidated revenue
of the Borrower and its Subsidiaries for the immediately preceding fiscal year,
divided by four (4), determined in accordance with GAAP.
Revolving Credit Commitment: The obligation of the Bank to make
Revolving Credit Loans to the Borrower up to an aggregate outstanding principal
amount not to exceed $10,000,000, as such amount may be reduced from time to
time or terminated hereunder.
Revolving Credit Eurodollar Rate Applicable Margin: With respect to any
Revolving Credit Loan bearing interest by reference to the Eurodollar Rate and
any fiscal quarter of the Borrower, the Revolving Credit Eurodollar Rate
Applicable Margin will be calculated by the Bank after review of the Leverage
Ratio of the Borrower and its Subsidiaries for the immediately preceding two
fiscal quarters of the Borrower as at the last day of the immediately preceding
fiscal quarter, all as follows:
--------------------------------------------------------------------------------
Revolving Credit Eurodollar Rate
Leverage Ratio Applicable Margin
--------------------------------------------------------------------------------
Greater than or equal to 2.75 to 1.0 2.25%
--------------------------------------------------------------------------------
Less than 2.75 to 1.0 but
greater than or equal to 2.5 to 1 2.00%
--------------------------------------------------------------------------------
Less than 2.5 to 1.0 1.75%
--------------------------------------------------------------------------------
-25-
Notwithstanding the foregoing, for Revolving Credit Loans outstanding
and bearing interest by reference to the Eurodollar Rate during the period
beginning on the Effective Date through the Bank's receipt of the Financials for
the fiscal quarter ending June 30, 1999, the Revolving Credit Eurodollar Rate
Applicable Margin shall be 2.25%. The Bank shall calculate the Revolving Credit
Eurodollar Rate Applicable Margin for each fiscal quarter on the sixtieth (60th)
day following the last day of the immediately preceding fiscal quarter by
reference to the Leverage Ratio for the immediately preceding two fiscal
quarters as at the end of such immediately preceding fiscal quarter as set forth
in the financial statements delivered to the Bank by the Borrower. Any downward
adjustment in the Revolving Credit Eurodollar Rate Applicable Margin shall occur
only if the applicable Leverage Ratio of the Borrower and its Subsidiaries has
been achieved for each of such two consecutive fiscal quarters of the Borrower.
Revolving Credit Loans: Any loan made or to be made to the Borrower
pursuant toss.2 hereof.
Revolving Credit Maturity Date: May 1, 2002.
Revolving Credit Note: Seess.2(a).
Scan-Optics Canada: Scan-Optics (Canada), Ltd., a limited liability
company organized under the laws of Canada and a wholly-owned Subsidiary of the
Borrower with its principal place of business at 0000 Xxxxxxxx Xxxxxx, Xxxxx
000, Xxxxxxx, Xxxxxxx X0X 0X0 Xxxxxx.
Scan-Optics England: Scan-Optics Limited, a limited liability company
organized under the laws of the United Kingdom and a wholly-owned Subsidiary of
the Borrower with its principal place of business at Dolphin Estate, Windmill
Road, Xxxx X0, Xxxxxxx-xx-Xxxxxx, Xxxxxxxxx XX00 0XX, Xxxxxx Xxxxxxx.
Scan-Optics Germany: Scan-Optics GmbH, a corporation organized under
the laws of Germany and a wholly-owned Subsidiary of the Borrower with its
principal place of business at Xxxxxxxxxxxxxxxx 00, 00000 Xxxxxxxxx, Xxxxxxx
Scan-Optics International: Scan-Optics International Ltd., a limited
liability company organized under the laws of Barbados and a wholly-owned
Subsidiary of the Borrower with its principal place of business at c/o Ernst &
Young Services Ltd, X.X. Xxx 000 Xxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx, Xxxx Xxxxxx.
Security Agreements: Collectively, the Security Agreements dated April
7, 1993 between the Bank and each of the Borrower and Scan-Optics Canada, each
dated as of April 7, 1993 and each as amended and reaffirmed from time to time.
Security Documents: Collectively, the Guaranties, the Stock Pledge
Agreement, the Patent Security Agreement, the Trademark Security Agreement, the
Lockbox Agreement, and the Security Agreements.
-26-
Stock Pledge Agreement: The Stock Pledge Agreement between the Bank and
the Borrower dated as of April 7, 1993, as amended from time to time.
Subsidiary: Any Person with respect to which the Borrower at any time
owns or controls, directly or indirectly, more than fifty percent (50%) of the
outstanding shares of stock or other equity securities or interests having
voting power, regardless of whether such right to vote depends upon the
occurrence of a contingency.
Term Loan: The term loan made to the Borrower on the Effective Date
pursuant toss.3 hereof in the principal amount of $10,000,000.
Term Loan Eurodollar Rate Applicable Margin: With respect to all or any
portion of the Term Loan bearing interest by reference to the Eurodollar Rate
and any fiscal quarter of the Borrower, the Term Loan Eurodollar Rate Applicable
Margin will be calculated by the Bank after review of the Leverage Ratio of the
Borrower and its Subsidiaries for the immediately preceding two fiscal quarters
of the Borrower as at the last day of the immediately preceding fiscal quarter,
all as follows:
--------------------------------------------------------------------------------
Term Loan Eurodollar
Leverage Ratio Rate Applicable Margin
--------------------------------------------------------------------------------
Greater than or equal to 2.75 to 1.0 2.50%
--------------------------------------------------------------------------------
Less than 2.75 to 1.0 but greater
than or equal to 2.5 to 1 2.25%
--------------------------------------------------------------------------------
Less than 2.5 to 1.0 2.00%
--------------------------------------------------------------------------------
Notwithstanding the foregoing, for all or any portion of the Term Loan
outstanding and bearing interest by reference to the Eurodollar Rate during the
period beginning on the Effective Date through the Bank's receipt of the
Financials for the fiscal quarter ending June 30, 1999, the Term Loan Eurodollar
Rate Applicable Margin shall be 2.50%. The Bank shall calculate the Term Loan
Eurodollar Rate Applicable Margin for each fiscal quarter on the sixtieth (60th)
day following the last day of the immediately preceding fiscal quarter by
reference to the Leverage Ratio for the immediately preceding two fiscal
quarters as at the end of such immediately preceding fiscal quarter as set forth
in the financial statements delivered to the Bank by the Borrower. Any downward
adjustment in the Term Loan Eurodollar Rate Applicable Margin shall occur only
if the applicable Leverage Ratio of the Borrower and its Subsidiaries has been
achieved for each of such two consecutive fiscal quarters of the Borrower.
Term Loan Maturity Date: May 1, 2004.
-27-
Term Note: Seess.3(a).
Trademark Security Agreement: The Trademark Collateral Assignment and
Security Agreement dated April 7, 1993 between the Bank and the Borrower, as
amended from time to time.
Type: As to any Revolving Credit Loan or all or any portion of the Term
Loan, its nature as a Base Rate Loan or Eurodollar Rate Loan.
ss.2. Revolving Credit Facility. (a) Upon the terms and subject to the
conditions of this Agreement, the Bank agrees to lend to the Borrower such sums
that the Borrower may request, from the date hereof until but not including the
Revolving Credit Maturity Date; provided that the sum of the outstanding
principal amount of all Revolving Credit Loans (after giving effect to all
amounts requested) shall not exceed the Revolving Credit Commitment. Revolving
Credit Loans shall be in the minimum aggregate amount of $25,000 or an integral
multiple thereof. The Borrower shall notify the Bank in writing or
telephonically (i) not later than 2:00 p.m. Hartford time on the proposed
Drawdown Date of any Base Rate Loan and (ii) no less than three (3) Eurodollar
Business Days prior to the proposed Drawdown Date of any Eurodollar Rate Loan.
Each such notice shall specify (i) the principal amount of the Revolving Credit
Loan requested, (ii) the proposed Drawdown Date of such Revolving Credit Loan,
(iii) the Interest Period for such Revolving Credit Loan and (iv) the Type of
such Revolving Credit Loan. Each request for a Revolving Credit Loan bearing
interest by reference to the Eurodollar Rate shall be irrevocable and binding on
the Borrower and shall obligate the Borrower to accept the Revolving Credit Loan
requested from the Bank on the proposed Drawdown Date. Subject to the foregoing,
so long as the Revolving Credit Commitment is then in effect and the conditions
set forth in ss.9 hereof have been met, the Bank shall advance the amount
requested to the Borrower's bank account at the Bank in immediately available
funds not later than the close of business on such Drawdown Date. The obligation
of the Borrower to repay to the Bank the principal of the Revolving Credit Loans
and interest accrued thereon shall be evidenced by a fourth amended and restated
promissory note in the aggregate principal amount of $10,000,000 executed and
delivered by the Borrower and payable to the order of the Bank, in form and
substance satisfactory to the Bank (the "Revolving Credit Note").
(b) The Borrower hereby agrees to pay the Bank on the
Revolving Credit Maturity Date the entire unpaid principal of and interest on
all Revolving Credit Loans. The Borrower may elect to prepay the outstanding
principal of all or any part of any Revolving Credit Loan, without premium or
penalty, provided that any full or partial prepayment of the outstanding amount
of any Eurodollar Rate Loans pursuant to this ss.2 may be made only on the last
day of the Interest Period relating thereto. The Borrower shall give the Bank,
no later than 10:00 a.m., Hartford time, at least one (1) Business Day's prior
written notice of any proposed prepayment pursuant to this ss.2 of Base Rate
Loans, and two (2) Eurodollar Business Days' notice of any proposed prepayment
-28-
pursuant to this ss.2 of Eurodollar Rate Loans, in each case specifying the
proposed date of prepayment of Revolving Credit Loans and the principal amount
to be prepaid. Each such partial prepayment of the Revolving Credit Loans shall
be in an integral multiple of $25,000, shall be accompanied by the payment of
accrued interest on the principal prepaid to the date of prepayment and shall be
applied, in the absence of instruction by the Borrower, first to the principal
of Base Rate Loans and then to the principal of Eurodollar Rate Loans.
(c) If at any time the outstanding principal amount of the
Revolving Credit Loans exceeds the Revolving Credit Commitment, the Borrower
shall pay immediately the amount of such excess to the Bank for application to
the Revolving Credit Loans. The Borrower may elect to reduce or terminate the
Revolving Credit Commitment by a minimum principal amount of $50,000 or an
integral multiple thereof, upon written notice to the Bank given by 2:00 p.m.
Hartford time on the proposed date of such reduction or termination. The
Borrower shall not be entitled to reinstate the Revolving Credit Commitment
following such reduction or termination
(d) The Borrower may elect from time to time to convert any
outstanding Revolving Credit Loan to a Revolving Credit Loan of another Type,
provided that (i) with respect to any such conversion of a Revolving Credit Loan
to a Base Rate Loan, the Borrower shall give the Bank at least one (1) Business
Day's prior written notice of such election; (ii) with respect to any such
conversion of a Base Rate Loan to a Eurodollar Rate Loan, the Borrower shall
give the Bank at least three (3) Eurodollar Business Days' prior written notice
of such election; (iii) with respect to any such conversion of a Eurodollar Rate
Loan into a Revolving Credit Loan of another Type, such conversion shall only be
made on the last day of the Interest Period with respect thereto; and (iv) no
Loan may be converted into a Eurodollar Rate Loan when any Default or Event of
Default has occurred and is continuing. All or any part of outstanding Revolving
Credit Loans of any Type may be converted into a Revolving Credit Loan of
another Type as provided herein, provided that (i) any partial conversion shall
be in an aggregate principal amount of (A) $100,000 or a whole multiple thereof
with respect to a conversion of a Base Rate Loan to a Eurodollar Rate Loan and
(B) $100,000 or whole multiple thereof with respect to a conversion of a
Revolving Credit Loan to a Base Rate Loan and (ii) with respect to Eurodollar
Rate Loans, there shall be no more than five (5) separate Interest Periods in
effect at one time. Each request relating to the conversion of a Revolving
Credit Loan to a Eurodollar Rate Loan shall be irrevocable by the Borrower.
(e) Any Revolving Credit Loan of any Type may be continued as
a Revolving Credit Loan of the same Type upon the expiration of an Interest
Period with respect thereto by compliance by the Borrower with the notice
provisions contained in ss.2(d); provided that no Eurodollar Rate Loan may be
-29-
continued as such when any Default or Event of Default has occurred and is
continuing, but shall be automatically converted to a Base Rate Loan on the last
day of the first Interest Period relating thereto ending during the continuance
of any Default or Event of Default of which officers of the Bank active upon the
Borrower's account have actual knowledge.
(f) Any conversion to or from Eurodollar Rate Loans shall be
in such amounts and be made pursuant to such elections so that, after giving
effect thereto, the aggregate principal amount of all Eurodollar Rate Loans
having the same Interest Period shall not be less than $100,000 or a whole
multiple of $100,000 in excess thereof.
ss.3. The Term Loan. (a) Subject to the terms and conditions set forth
in this Agreement, the Bank agrees to make the Term Loan to the Borrower on the
Effective Date. The Term Loan shall be in the original principal amount of
$10,000,000. The Term Loan shall be evidenced by a promissory note of the
Borrower in form and substance satisfactory to the Bank (the "Term Note"), dated
the Effective Date and payable to the order of the Bank.
(b) The Borrower shall pay the outstanding principal amount of
the Term Loan in twenty (20) consecutive quarterly installments in the amounts
and during the periods set forth in the table below, such installments to be due
and payable on the last day of each calendar quarter ending during such periods,
commencing on June 30, 1999, with a final payment on the Term Loan Maturity Date
in an amount equal to the unpaid principal amount of the Term Loan, if any, on
such date:
Quarterly Annual
Period Payment Amount Payment Amount
May 10, 1999 through March 31, 2000 $250,000 $1,000,000
April 1, 2000 through March 31, 2000 $500,000 $2,000,000
April 1, 2001 through March 31, 2002 $500,000 $2,000,000
April 1, 2002 through March 31, 2003 $500,000 $2,000,000
April 1, 2003 through March 31, 2004 $500,000 $2,000,000
Term Loan Maturity Date The outstanding principal amount of the
Term Loan, together with all interest
accrued thereon.
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(c) The Borrower shall have the right at any time to prepay
the Term Note on or before the Term Loan Maturity Date, as a whole, or in part,
upon not less than three (3) Business Days' prior written notice to the Bank,
without premium or penalty, provided that (i) each partial prepayment shall be
in the minimum principal amount of (A) $100,000 and (B) no portion of the Term
Loan bearing interest at the Eurodollar Rate may be prepaid pursuant to this
ss.3(c) except on the last day of the Interest Period relating thereto. Any
prepayment of principal of the Term Loan shall include all interest accrued to
the date of prepayment and shall be applied against the scheduled installments
of principal due on the Term Loan in the inverse order of maturity. No amount
repaid with respect to the Term Loan may be reborrowed. Any voluntary prepayment
of principal of the Term Loan shall also include all interest accrued on such
principal to the date of prepayment.
ss.4. Interest. (a) So long as no Event of Default is continuing, the
Borrower shall pay interest on the Revolving Credit Loans as follows:
(i) Each Base Rate Loan shall bear interest for the
period commencing with the Drawdown Date thereof and ending on the last
day of each Interest Period with respect thereto at the rate of the
Base Rate from time to time in effect.
(ii) Each Eurodollar Rate Loan shall bear interest
for the period commencing with the Drawdown Date thereof and ending on
the last day of each Interest Period with respect thereto at the rate
of the Eurodollar Rate determined for such Interest Period plus the
Revolving Credit Eurodollar Rate Applicable Margin.
(iii) The Borrower promises to pay interest on each
Revolving Credit Loan in arrears on each Interest Payment Date with
respect thereto.
(b) So long as no Event of Default is continuing, the Borrower
shall pay interest on the Term Loan as follows:
(i) To the extent that all or any portion of the Term
Loan bears interest during such Interest Period at the Base Rate, the
Term Loan or such portion thereof shall bear interest during such
Interest Period at the rate of the Base Rate from time to time in
effect.
(ii) To the extent that all or any portion of the
Term Loan bears interest during such Interest Period at the Eurodollar
Rate, the Term Loan or such portion shall bear interest during such
Interest Period at the rate of the Eurodollar Rate determined for such
Interest Period plus the Term Loan Eurodollar Rate Applicable Margin.
(iii) The Borrower promises to pay interest on the
Term Loan or any portion thereof outstanding during each Interest
Period in arrears on each Interest Payment Date applicable to such
Interest Period.
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(iv) The Borrower shall notify the Bank, such notice
to be irrevocable, at least two (2) Business Days prior to the Drawdown
Date of the Term Loan if all or any portion of the Term Loan is to bear
interest at the Eurodollar Rate. After the Term Loan has been made, the
provisions of ss.2(d) shall apply mutatis mutandis with respect to all
or any portion of the Term Loan so that the Borrower may have the same
interest rate options with respect to all or any portion of the Term
Loan as it would be entitled to with respect to the Revolving Credit
Loans.
(v) Any portion of the Term Loan bearing interest at
the Eurodollar Rate relating to any Interest Period shall be in the
amount of $100,000 or an integral multiple thereof. No Interest Period
relating to the Term Loan or any portion thereof bearing interest at
the Eurodollar Rate shall extend beyond the date on which a regularly
scheduled installment payment of the principal of the Term Loan is to
be made unless a portion of the Term Loan at least equal to such
installment payment has an Interest Period ending on such date or is
then bearing interest at the Base Rate.
(c) While an Event of Default is continuing, amounts payable
with respect to any Loans shall bear interest (compounded monthly and payable on
demand in respect of overdue amounts) at a rate per annum which is equal to the
sum of (i) the Base Rate and (ii) five percent (5.0%) until such amount is paid
in full or (as the case may be) such Event of Default has been cured or waived
in writing by the Bank (after as well as before judgment).
ss.5. Additional Costs, Etc. If any present or future applicable law,
which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to the Bank by any central bank or other fiscal, monetary or
other authority (whether or not having the force of law), shall:
(a) subject the Bank to any tax, levy, impost, duty, charge,
fee, deduction or withholding of any nature with respect to this Agreement, the
other Loan Documents, the Revolving Credit Commitment or the Loans (other than
taxes based upon or measured by the income or profits of the Bank), or
(b) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to the Bank of the principal
of or the interest on any Loans or any other amounts payable to any Bank or the
Bank under this Agreement or any of the other Loan Documents, or
(c) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
-33-
requirements (whether or not having the force of law) against assets held by, or
deposits in or for the account of, or loans by, or letters of credit issued by,
or commitments of an office of the Bank, or
(d) impose on the Bank any other conditions or requirements
with respect to this Agreement, the other Loan Documents, the Loans, the
Revolving Credit Commitment, or any class of loans or commitments of which any
of the Loans or such Revolving Credit Commitment forms a part, and the result of
any of the foregoing is
(i) to increase the cost to the Bank of making,
funding, issuing, renewing, extending or maintaining any of the Loans
or such Revolving Credit Commitment, or
(ii) to reduce the amount of principal, interest or
other amount payable to the Bank hereunder on account of the Revolving
Credit Commitment or any of the Loans, or
(iii) to require the Bank to make any payment or to
forego any interest or other sum payable hereunder, the amount of which
payment or foregone interest or other sum is calculated by reference to
the gross amount of any sum receivable or deemed received by the Bank
from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by the Bank at
any time and from time to time and as often as the occasion therefor may arise,
pay to the Bank such additional amounts as will be sufficient to compensate the
Bank for such additional cost, reduction, payment or foregone interest or other
sum.
ss.6. Changes in Circumstances. If any change in banking law or
regulation or the administration thereof (whether or not having the force of
law) affects the amount of capital required or expected to be maintained by the
Bank or any entity controlling it, and such amount is increased by reason of the
Revolving Credit Commitment or the Loans, the Bank may notify the Borrower
thereof. The Borrower and the Bank shall negotiate an adjustment payable to the
Bank to compensate for such increase. If no agreement is reached within thirty
(30) days, the Bank may increase the fees payable hereunder by the amount
determined by the Bank to be necessary to provide such compensation.
ss.7. Fees and Payments. (a) Contemporaneously with execution and
delivery of this Agreement, the Borrower shall pay to the Bank a non-refundable
closing fee in the amount of $15,000.
(b) The Borrower shall also pay to the Bank a commitment fee
calculated at the rate of one-quarter of one percent (0.25%) per annum of the
average daily amount during each calendar quarter or portion thereof from the
Effective Date to the Revolving Credit Maturity Date by which the Revolving
Credit Commitment exceeds the aggregate amount outstanding under the Revolving
Credit Loans during such calendar quarter. The commitment fee shall be payable
quarterly in arrears on the first day of each calendar quarter for the
immediately preceding calendar quarter commencing on the first such date
following the Effective Date, with a final payment on the Revolving Credit
Maturity Date or any earlier date on which the Revolving Credit Commitment shall
terminate.
-34-
(c) All payments to be made by the Borrower hereunder or under
any of the other Loan Documents shall be made in U.S. dollars in immediately
available funds at the Bank's office at 000 Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx
00000, without set-off or counterclaim and without any withholding or deduction
whatsoever. The Bank shall be entitled (but shall not be obligated) to charge
any account of the Borrower with the Bank for any sum due and payable by the
Borrower to the Bank hereunder or under any of the other Loan Documents. If any
payment hereunder is required to be made on a day which is not a Business Day,
it shall be paid on the immediately preceding Business Day. All computations of
interest or of the closing or commitment fees payable hereunder shall be made by
the Bank on the basis of actual days elapsed and on a 360-day year.
(d) In the event, prior to the commencement of any Interest
Period relating to any Eurodollar Rate Loan, the Bank shall determine that
adequate and reasonable methods do not exist for ascertaining the Eurodollar
Rate that would otherwise determine the rate of interest to be applicable to any
Eurodollar Rate Loan during any Interest Period, the Bank shall forthwith give
notice of such determination (which shall be conclusive and binding on the
Borrower) to the Borrower. In such event (i) any request for a Loan or request
to convert a Loan with respect to Eurodollar Rate Loans shall be automatically
withdrawn and shall be deemed a request for Base Rate Loans, (ii) each
Eurodollar Rate Loan will automatically, on the last day of the then current
Interest Period relating thereto, become a Base Rate Loan, and (iii) the
obligations of the Bank to make Eurodollar Rate Loans shall be suspended until
the Bank determines that the circumstances giving rise to such suspension no
longer exist, whereupon the Bank shall so notify the Borrower.
(e) Notwithstanding any other provisions herein, if any
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for the Bank to make or maintain
Eurodollar Rate Loans, the Bank shall forthwith give notice of such
circumstances to the Borrower and thereupon (i) the commitment of the Bank to
make Eurodollar Rate Loans or convert Loans of another Type to Eurodollar Rate
Loans shall forthwith be suspended and (ii) the Bank's Revolving Credit Loans
then outstanding as Eurodollar Rate Loans, if any, shall be converted
automatically to Base Rate Loans on the last day of each Interest Period
-35-
applicable to such Eurodollar Rate Loans or within such earlier period as may be
required by law. The Borrower hereby agrees promptly to pay the Bank, upon
demand by Bank, any additional amounts necessary to compensate the Bank for any
costs incurred by the Bank in making any conversion in accordance with this
ss.7(e), including any interest or fees payable by the Bank to lenders of funds
obtained by it in order to make or maintain its Eurodollar Rate Loans hereunder.
(f) The Borrower agrees to indemnify the Bank and to hold it
harmless from and against any loss, cost or expense (including loss of
anticipated profits) that Bank may sustain or incur as a consequence of (i)
default by the Borrower in payment of the principal amount of or any interest on
any Eurodollar Rate Loans as and when due and payable, including any such loss
or expense arising from interest or fees payable by the Bank to lenders of funds
obtained by it in order to maintain its Eurodollar Rate Loans, (ii) default by
the Borrower in making a borrowing or conversion after the Borrower has given
(or is deemed to have given) a request for a Loan, notice (in the case of all or
any portion of the Term Loan pursuant to ss.4(b)(iv) or a request to convert a
Loan relating thereto in accordance with ss.2(d) or ss.4(b)(iv), or (iii) the
making of any payment of a Eurodollar Rate Loan or the making of any conversion
of any such Loan to a Base Rate Loan on a day that is not the last day of the
applicable Interest Period with respect thereto, including interest or fees
payable by such Bank to lenders of funds obtained by it in order to maintain any
such Loans.
ss.8. Representations and Warranties. The Borrower represents and
warrants to the Bank on the date hereof, on the date of any request for any
Loan, and on each Drawdown Date that: (a) the Borrower and each of its
Subsidiaries is duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation and is duly qualified and in good
standing in every other jurisdiction where it is doing business except where the
failure to so qualify does not have a Materially Adverse Effect on the Borrower
or any of its Subsidiaries, and the execution, delivery and performance by the
Borrower and its Subsidiaries of the Loan Documents (i) are within their
respective corporate authority, (ii) have been duly authorized, (iii) do not
conflict with or contravene their respective Charter Documents; (b) upon
execution and delivery thereof, each Loan Document shall constitute the legal,
valid and binding obligation of the Borrower and each Subsidiary party thereto,
enforceable in accordance with its terms; (c) the Borrower and each Subsidiary
have good and marketable title to all their respective material properties,
subject only to Liens permitted hereunder, and possess all assets, including
intellectual properties, franchises and Consents, adequate for the conduct of
their respective businesses as now conducted, without known conflict with any
rights of others; (d) the Borrower has provided to the Bank its audited
Financials as at December 31, 1998 and for the period then ended and its
unaudited management prepared Financials as at March 31, 1999 for the period of
three (3) months then ended, and such Financials are complete and correct and
fairly present the position of the Borrower and its Subsidiaries as at such
dates and for such periods in accordance with GAAP consistently applied; (e)
except as previously disclosed by the Borrower to the Bank in writing since
December 31, 1998, there has been no materially adverse change of any kind in
the Borrower or any of its Subsidiaries which would have a Materially Adverse
-36-
Effect; (f) there are no legal or other proceedings or investigations pending or
threatened against the Borrower or any of its Subsidiaries before any court,
tribunal or regulatory authority which would, if adversely determined, alone or
together, have a Materially Adverse Effect; (g) the execution, delivery,
performance of their respective obligations, and exercise of their respective
rights under the Loan Documents by the Borrower and each Subsidiary party
thereto, including borrowing under this Agreement (i) do not require any
Consents; and (ii) are not and will not be in conflict with or prohibited or
prevented by (A) any Requirement of Law, or (B) any Charter Document, corporate
minute or resolution, instrument, agreement or provision thereof, in each case
binding on any of them or affecting any of their property; (h) neither the
Borrower nor any Subsidiary are in violation of (i) any Charter Document,
corporate minute or resolution, (ii) any instrument or agreement, in each case
binding on it or affecting its property, or (iii) any Requirement of Law, in a
manner which could have a Materially Adverse Effect, including, without
limitation, all applicable federal and state tax laws, ERISA and Environmental
Laws; (i) upon execution and delivery of the Security Documents and the filing
of documents thereby required, the Bank shall have a first-priority perfected
security interest in the properties and assets of the Borrower and its
Subsidiaries stated to constitute collateral thereunder, subject only to Liens
permitted hereunder and entitled to priority under applicable law, with no
financing statements, chattel mortgages, real estate mortgages or similar
filings on record anywhere which conflict with such first-priority interest; (j)
the Borrower has no Subsidiaries except for Scan-Optics International,
Scan-Optics England, Scan-Optics Canada and Scan-Optics Germany and is not a
party to any partnership or joint venture; (k) each fiscal year of the Borrower
begins on January 1 of each calendar year and ends on December 31 of each
calendar year; (l) the Borrower and its Subsidiaries have reviewed the areas
within their businesses and operations which could be adversely affected by, and
have developed or are developing a program to address on a timely basis, the
"Year 2000 Problem" (i.e. the risk that computer applications used by the
Borrower or any of its Subsidiaries may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999) and that based upon such review, the Borrower
reasonably believes that the "Year 2000 Problem" will not have any materially
adverse effect on the business or financial condition of the Borrower or any of
its Subsidiaries; and (m) any information delivered by or on behalf of the
Borrower to the Bank in connection with the Permitted Acquisitions or this
Agreement is accurate and complete in all material respects and is not false or
misleading in any material respect as at the time made or deemed to have been
made, it being understood that no representation is made with respect to
projections of future performance of the Borrower, including without limitation,
as a result of any Permitted Acquisition, other than that such projections were
prepared in good faith and on assumptions the Borrower believes to be
reasonable.
ss.9. Conditions Precedent. In addition to the making of the foregoing
representations and warranties and the delivery of the Loan Documents and such
other documents and the taking of such actions as the Bank may require at or
prior to the time of executing this Agreement, the obligation of the Bank to
make any Loan to the Borrower hereunder is subject to the satisfaction of the
-37-
following further conditions precedent: (a) each of the representations and
warranties of the Borrower to the Bank shall be true and correct in all material
respects as of the time made or claimed to have been made; (b) no Default or
Event of Default shall be continuing and (c) all proceedings in connection with
the transactions contemplated hereby shall be in form and substance satisfactory
to the Bank, and the Bank shall have received all information and documents as
it may have reasonably requested.
ss.10. Covenants.
(a) The Borrower agrees that as long as any Loan or Note is
outstanding and until the termination of the Revolving Credit Commitment and the
payment and satisfaction in full of the Loans and all of the other Obligations,
the Borrower will, and where applicable will cause each of its Subsidiaries to
comply with its obligations as set forth throughout this Agreement and to:
(i) furnish the Bank: (A) as soon as available but in
any event within ninety (90) days after the close of each fiscal year,
its audited consolidated Financials for such fiscal year, certified by
the Borrower's accountants; (B) as soon as available but in any event
within forty-five (45) days after the end of each fiscal quarter, its
unaudited consolidated Financials for such quarter, certified by its
chief financial officer; (C) as soon as available but in any event
within fifteen (15) Business Days after the end of each fiscal month
its unaudited consolidated Financials for such month, certified by its
chief financial officer; and (D) together with the monthly, quarterly
and annual audited consolidated Financials, a certificate of the
Borrower setting forth computations demonstrating compliance with the
Borrower's financial covenants set forth herein, and certifying that no
Default or Event of Default has occurred, or if a Default or an Event
of Default has occurred, the actions taken by the Borrower with respect
thereto;
(ii) keep true and accurate books of account in
accordance with GAAP and to permit the Bank or its designated
representatives, at the expense of the Borrower, to inspect the
Borrower's premises and to examine and be advised as to such or other
business records upon the request of the Bank, provided, that the Bank
shall, prior to the occurrence of an Event of Default, inspect the
Borrower's premises not more than twice each calendar year;
(iii) maintain its corporate existence, business and
assets, to keep its business and assets adequately insured, to maintain
its chief executive office in the United States, to continue to engage
in the same lines of business, and to comply in all material respects
with all Requirements of Law, including ERISA and Environmental Laws;
-38-
(iv) notify the Bank promptly in writing (A) of the
occurrence of any Default or Event of Default, (B) of any noncompliance
with ERISA or any Environmental Law or proceeding in respect thereof
which could have a Materially Adverse Effect, (C) of any change of
address, (D) of any threatened or pending litigation or similar
proceeding affecting the Borrower or such Subsidiary involving claims
in excess of $100,000 in the aggregate or any material change in any
such litigation or proceeding previously reported and (E) of claims in
excess of $100,000 in the aggregate against any assets or properties of
the Borrower or such Subsidiary encumbered in favor of the Bank;
(v) use the proceeds of the Loans for refinancing
existing indebtedness of the Borrower to the Bank, to make the
Permitted Acquisitions and for general corporate and/or working capital
purposes and not for the purchasing or carrying of "margin security" or
"margin stock" within the meaning of Regulations U and X of the Board
of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and
224;
(vi) within 90 days of the Effective Date, effect and
maintain interest rate protection arrangements with respect to the Term
Loan on terms and conditions satisfactory to the Bank;
(vii) on or before March 1, 2000, provide the Bank
with a fully executed lessor's agreement with respect to its business
operations located in Birmingham, Alabama, such lessor's agreement to
be in form and substance satisfactory to the Bank; and
(viii) cooperate with the Bank, take such action,
execute such documents, and provide such information as the Bank may
from time to time reasonably request in order further to effect the
transactions contemplated by and the purposes of the Loan Documents.
(b) The Borrower agrees that as long as any Loan or Note is
outstanding and until the termination of the Revolving Credit Commitment and the
payment and satisfaction in full of the Loans and all of the Obligations, the
Borrower will not:
(i) create, incur or assume any Indebtedness other
than (A) Indebtedness to the Bank arising under the Loan Documents, (B)
Indebtedness in respect of the acquisition of property which does not
exceed $500,000 in aggregate amount, (C) current liabilities of the
Borrower not incurred through the borrowing of money or the obtaining
of credit except credit on an open account customarily extended, (D)
Indebtedness in respect of taxes or other governmental charges
contested in good faith by appropriate proceedings and for which the
Borrower has made appropriate reserves; and (E) Indebtedness not
included in clauses A through D (inclusive) above and listed on
Schedule 10(b)(i) hereto;
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(ii) create or incur, or cause any of its
Subsidiaries to create or incur, any Liens on any of the property or
assets of the Borrower or any of its Subsidiaries except (A) Liens
securing the Obligations; (B) Liens securing taxes or other
governmental charges not yet due; (C) deposits or pledges made in
connection with social security obligations; (D) Liens of carriers,
warehousemen, mechanics and materialmen, less than 120 days old as to
obligations not yet due; (E) easements, rights-of-way, zoning
restrictions and similar minor Liens which individually and in the
aggregate do not have a Materially Adverse Effect; (F) purchase money
security interests in or purchase money mortgages on real or personal
property securing purchase money Indebtedness permitted by
ss.10(b)(i)(B), covering only the property so acquired; and (G) other
Liens existing on the date hereof and listed on Schedule 10(b)(ii)
hereto;
(iii) agree with any other Person to prohibit the
creation of any Liens on any of the property or assets of the Borrower
or any Subsidiary;
(iv) make any investments other than investments in
(A) marketable obligations of the United States maturing within one (1)
year, (B) certificates of deposit, bankers' acceptances and time and
demand deposits of United States banks having total assets in excess of
$1,000,000,000 and otherwise acceptable to the Bank in its discretion,
(C) Investments constituting the Permitted Acquisitions or (D) such
other investments as the Bank may from time to time approve in writing;
(v) make any distributions on or in respect of its
capital of any nature whatsoever without the prior written consent of
the Bank;
(vi) (A) become party to a merger or consolidation,
(B) effect any disposition of assets other than in the ordinary course,
(C) purchase, sell, lease or otherwise dispose of assets other than in
the ordinary course or other than the Permitted Acquisitions, (D) make
any change in Borrower's corporate structure or identity which has a
Materially Adverse Effect or (E) enter into any agreement to do any of
the foregoing; provided, that, any Subsidiary of the Borrower may merge
with and into the Borrower or any Subsidiary of the Borrower upon not
less than thirty (30) days prior written notice to the Bank of such
merger;
(vii) change its or any of its Subsidiaries fiscal
year without the prior written consent of the Bank; or
(viii) without the prior written consent of the Bank,
transfer, purchase or redeem, or permit any subsidiary to transfer or
purchase, any shares of the Borrower's capital stock unless such
transfer, purchase or redemption is effected solely from the proceeds
of and within a reasonable time after the issuance to third parties by
-40-
the Borrower or its Subsidiary of capital stock which is in addition to
the capital stock of the Borrower or its Subsidiary, as the case may
be, outstanding on the date of this Agreement.
(c) The Borrower agrees that as long as any Loan or Note is
outstanding and until the termination of the Revolving Credit Commitment and the
payment and satisfaction in full of all of the Obligations, the Borrower will
not:
(i) permit the ratio of Consolidated Total
Liabilities to Consolidated Tangible Net Worth for any fiscal quarter
of the Borrower ending during any period described in the table set
forth below to exceed the ratio set forth opposite such period in such
table:
--------------------------------------------------------------------
Period Ratio
--------------------------------------------------------------------
Effective Date - December 30, 2000 1.75 to 1.0
--------------------------------------------------------------------
December 31, 2000 and thereafter 1.50 to 1.0
--------------------------------------------------------------------
(ii) permit the ratio of Consolidated Current Assets
to Consolidated Current Liabilities for any fiscal quarter of the
Borrower ending on or after March 31, 1999 to be less than 1.5 to 1.0;
(iii) permit Consolidated Net Income for any two
consecutive fiscal quarters to be less than $1.00;
(iv) permit the ratio of Consolidated Operating Cash
Flow to Consolidated Financial Obligations of the Borrower and its
Subsidiaries to be less than 1.25 to 1.0 for any period of four
consecutive fiscal quarters of the Borrower ending on or after March
31, 1999;
(v) permit the ratio of Consolidated Total Funded
Debt to Consolidated Earnings Before Interest and Taxes, Depreciation
and Amortization (the "Leverage Ratio") for any period consisting of
four (4) consecutive fiscal quarters of the Borrower ending during any
period described in the table set forth below to exceed the ratio set
forth opposite such period in such table:
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-----------------------------------------------------------------------
Period Ratio
-----------------------------------------------------------------------
Effective Date - March 31, 2000 3.0 to 1.0
-----------------------------------------------------------------------
April 1, 2000 and thereafter 2.5 to 1.0
-----------------------------------------------------------------------
(vi) permit Consolidated Net Deficit for any fiscal
quarter of the Borrower ending on or after March 31, 1999 to be greater
than ten percent (10%) of Consolidated Tangible Net Worth of the
Borrower on the last day of the immediately preceding fiscal quarter;
(vii) permit the ratio of Consolidated Earnings
Before Interest and Taxes to Consolidated Total Interest Expense to be
less than 3.0 to 1.0 for any period of four consecutive fiscal quarters
of the Borrower ending on or after March 31, 1999; or
(viii) permit the Borrower's backlog (as defined in
the Borrower's most recent 10K filed with the Securities and Exchange
Commission) to be less than (A) $13,500,000 for each of the fiscal
quarters ending March 31, 1999, June 30, 1999, September 30, 1999 and
December 31, 1999 and (B) the Revenue Amount for any fiscal quarter of
the Borrower ending on or after March 31, 2000.
ss.11. Events of Default; Acceleration. If any of the following
events ("Events of Default") shall occur: (a) the Borrower
shall fail to pay when due and payable any principal of or
interest on
the Loans or any other sum due under any of the Loan Documents when the same
becomes due; (b) the Borrower shall fail to perform any term, covenant or
agreement contained in ss.10; (c) the Borrower or any of its Subsidiaries shall
fail to perform any other term, covenant or agreement contained in the Loan
Documents within thirty (30) days after the Bank has given written notice of
such failure to the Borrower; (d) any representation or warranty of the Borrower
or any of its Subsidiaries in the Loan Documents or in any certificate or notice
given in connection therewith shall have been false or misleading in any
material respect at the time made or deemed to have been made; (e) the Borrower
or any of its Subsidiaries shall be in default under any agreement or agreements
evidencing Indebtedness owing to the Bank or any affiliates of the Bank or any
other Indebtedness for borrowed money to any other third party, or shall fail to
pay such Indebtedness when due, or within any applicable period of grace; (f)
any of the Loan Documents shall cease to be in full force and effect; (g) the
Borrower or any of its Subsidiaries (i) shall make an assignment for the benefit
of creditors, (ii) shall be adjudicated bankrupt or insolvent, (iii) shall seek
the appointment of, or be the subject of an order appointing, a trustee,
liquidator or receiver as to all or part of its assets, (iv) shall commence,
approve or consent to, any case or proceeding under any bankruptcy,
reorganization or similar law and, in the case of an involuntary case or
proceeding, such case or proceeding is not dismissed within forty-five (45) days
following the commencement thereof, or (v) shall be the subject of an order for
-42-
relief in an involuntary case under federal bankruptcy law; (h) the Borrower or
any of its Subsidiaries shall be unable to pay debts as they mature; or (i)
there shall remain undischarged for more than thirty (30) days any final
judgment or execution action against the Borrower or any of its Subsidiaries
that, together with other outstanding claims and execution actions against the
Borrower and its Subsidiaries, exceeds $250,000 in the aggregate;
THEN, or at any time thereafter:
(1) In the case of any Event of Default under clause (g) or (h), the
Revolving Credit Commitment shall automatically terminate, and the entire unpaid
principal amount of the Loans, all interest accrued and unpaid thereon, and all
other amounts payable hereunder and under the other Loan Documents shall
automatically become forthwith due and payable, without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived by the
Borrower; and
(2) In the case of any Event of Default other than (g) and (h), the
Bank may, by written notice to the Borrower, terminate the Revolving Credit
Commitment and/or declare the unpaid principal amount of the Loans, all interest
accrued and unpaid thereof, and all other amounts payable hereunder and under
the other Loan Documents to be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower.
No remedy herein conferred upon the Bank is intended to be exclusive of
any other remedy and each and every remedy shall be cumulative and in addition
to every other remedy hereunder, now or hereafter existing at law or in equity
or otherwise.
ss.12. Setoff. Regardless of the adequacy of any collateral for the
Obligations, any deposits or other sums credited by or due from the Bank to the
Borrower may be applied to or set off against any principal, interest and any
other amounts due from the Borrower to the Bank at any time without notice to
the Borrower, or compliance with any other procedure imposed by statute or
otherwise, all of which are hereby expressly waived by the Borrower.
ss.13. Miscellaneous. The Borrower agrees to indemnify and hold
harmless the Bank against all claims and losses of every kind arising out of the
Loan Documents, including without limitation against those in respect of the
application of Environmental Laws to the Borrower and its Subsidiaries,
provided, however, Borrower shall not be obligated to indemnify the Bank from
and hold it harmless against such claims or losses arising out of the gross
negligence or willful misconduct of the Bank. The Borrower shall pay to the Bank
promptly on demand all reasonable costs and expenses (including any taxes and
legal and other professional fees and fees of its commercial finance examiner)
incurred by the Bank in connection with the preparation, negotiation, execution,
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amendment, administration or enforcement of any of the Loan Documents. Any
communication to be made hereunder shall (i) be made in writing, but unless
otherwise stated, may be made by telex, facsimile transmission or letter, and
(ii) be made or delivered to the address of the party receiving notice which is
identified with its signature below (unless such party has by five (5) days'
written notice specified another address), and shall be deemed made or
delivered, when dispatched, left at that address, or five (5) days after being
mailed, postage prepaid, to such address. This Agreement shall be binding upon
and inure to the benefit of each party hereto and its successors and assigns,
but the Borrower may not assign its rights or obligations hereunder. This
Agreement may not be amended or waived except by a written instrument signed by
the Borrower and the Bank, and any such amendment or waiver shall be effective
only for the specific purpose given. No failure or delay by the Bank to exercise
any right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege preclude any other right,
power or privilege. The provisions of this Agreement are severable and if any
one provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, such invalidity or unenforceability shall affect only such
provision in such jurisdiction. This Agreement, together with all Exhibits and
Schedules hereto, expresses the entire understanding of the parties with respect
to the transactions contemplated hereby. This Agreement and any amendment hereby
may be executed in several counterparts, each of which shall be an original, and
all of which shall constitute one agreement. In proving this Agreement, it shall
not be necessary to produce more than one such counterpart executed by the party
to be charged. THIS AGREEMENT AND THE NOTES ARE CONTRACTS UNDER THE LAWS OF THE
STATE OF CONNECTICUT AND SHALL BE CONSTRUED IN ACCORDANCE THEREWITH AND GOVERNED
THEREBY. THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF ANY OF THE
LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF CONNECTICUT OR ANY
FEDERAL COURT SITTING THEREIN. The Borrower, as an inducement to the Bank to
enter into this Agreement, hereby waives its right to a jury trial with respect
to any action arising in connection with any Loan Document.
ss.14. Prejudgment Remedy Waiver. THE BORROWER ACKNOWLEDGES THAT THE
FINANCING EVIDENCED HEREBY IS A COMMERCIAL TRANSACTION WITHIN THE MEANING OF
CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES. THE BORROWER HEREBY WAIVES ITS
RIGHT TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER UNDER CONNECTICUT GENERAL
STATUTES SECTIONS 52-278a ET. SEQ. AS AMENDED OR UNDER ANY OTHER STATE OR
FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES THE BANK MAY EMPLOY
TO ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER. MORE SPECIFICALLY, THE BORROWER
ACKNOWLEDGES THAT THE BANK'S ATTORNEY MAY, PURSUANT TO CONN. GEN. STAT.
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ss.52-278F, ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT SECURING A COURT
ORDER. THE BORROWER ACKNOWLEDGES AND RESERVES ITS RIGHT TO NOTICE AND A HEARING
SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR PREJUDGMENT REMEDY AS AFORESAID AND THE
BANK ACKNOWLEDGES THE BORROWER'S RIGHT TO SAID HEARING SUBSEQUENT TO THE
ISSUANCE OF SAID WRIT. THE BORROWER FURTHER WAIVES ITS RIGHTS TO REQUEST THAT
BANK POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT BORROWER AGAINST DAMAGES
THAT MAY BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY BANK.
ss.15. Effective Date. This Agreement shall become effective between
the parties hereto as of the Effective Date. Until the Effective Date, the terms
of the Prior Loan Agreement shall remain in full force and effect.
ss.16. Amendment and Restatement. This Agreement amends and restates in
its entirety the Prior Loan Agreement. The execution and delivery of this
Agreement shall not extinguish the indebtedness evidenced by the Prior Loan
Agreement or any promissory notes executed in connection therewith nor will it
impair the lien of any security interest or pledge securing the Obligations, and
no part of such indebtedness shall be discharged or cancelled by the execution
of this Agreement or the execution and delivery of any further instruments
evidencing or securing the Obligations.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed as of the date first above written.
SCAN-OPTICS, INC.
By: /s/Xxxxxxx X. Xxxxxxx
----------------------
Its: CFO
000 Xxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
BANKBOSTON, N.A.
By: /s/
----------------------
Its: Vice President
000 Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Tel: (860) 000- 0000
Fax: (000) 000-0000
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SCHEDULE 10(b)(i)
Permitted Indebtedness
Leases with BancBoston Leasing, Inc. of office furniture and fixtures.
Leases with Xxxxxxxxx Systems, Inc. of laptop computers.
Schedule 10(b)(ii)
Existing Liens
Leases with BancBoston Leasing, Inc. of office furniture and fixtures.
Leases with Xxxxxxxxx Systems, Inc. of laptop computers.
