AMENDED AND RESTATED CREDIT AGREEMENT
AGREEMENT made this 30th day of June, 1994, by and among:
CONTINENTAL BANK, a Pennsylvania banking corporation, with an office
at 1500 Market Street, Philadelphia, Pennsylvania 19102 ("Bank"); and
SAFEGUARD SCIENTIFICS, INC., a Pennsylvania corporation, with an
office at 800 The Safeguard Building, 435 Devon Park Drive, Wayne,
Pennsylvania 19087 ("SSI"); and
SAFEGUARD SCIENTIFICS (DELAWARE) INC., a Delaware corporation, with
an office at 103 Springer Building, 3411 Silverside Road, Wilmington, DE
19810 ("SSD") (SSI and SSD, individually, a "Borrower" and, collectively,
the "Borrowers").
The Borrowers have requested Bank to establish certain secured credit
facilities, and Bank is willing to do so under and subject to the terms
hereof.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, promise and agree as follows:
Article 1. Definitions.
Section 1.1 Terms Defined.
As used in this Agreement, the following terms shall have the
following respective meanings set forth below or set forth in the section
referred to following such term:
"Business Day" - any day other than Saturday, Sunday or any
other day on which commercial banks in Pennsylvania are authorized or
required to close under the laws of the Commonwealth of Pennsylvania or by
executive order.
"Capitalized Lease Obligations" - as to any Person, any obligations
of such Person to pay rent or other amounts under a lease of (or other
agreement conveying the right to use) real and/or personal property which
obligations are required to be classified and accounted for as a capital
lease on a balance sheet of such Person under generally accepted accounting
principles. For purposes of this Agreement, the amount of such obligations
shall be the capitalized amount thereof, determined in accordance with
generally accepted accounting principles.
"Cash Flow" - Pre-Tax Earnings plus (a) the sum of depreciation and
amortization, minus (b) cash expenditures for local, state and federal
income taxes.
"Certificate" - a certificate executed either by the president, the
treasurer or controller or any vice president of any Borrower.
"Closing" - the transactions provided for in Sections 4.1 and 4.2
hereof.
"Collateral" - the collateral provided for herein and in the
Security Documents.
"Collateral Coverage Base" - a dollar amount equal to the following
percentages of the value of the Collateral Coverage Securities, in no
event, however, to exceed the lesser of (i) as to Collateral Coverage
Securities which constitute "margin stock" pursuant to Regulation U of the
Board of Governors of the Federal Reserve System, 12 C.F.R. 221 et seq.
("Regulation U"), 50% (or the then maximum "loan value" for margin stock
pursuant to Regulation U) of the value of such Collateral Coverage
Securities, and (ii) the following dollar maximum specified for each type
of Collateral Coverage Securities:
Securities % Maximum $
CompuCom 33.33% $25 Million
Cambridge 33.33% $20 Million
Novell 50% N/A
Sybase 50% N/A
CenterCore 25% $5 Million
Tangram 25% $5 Million
Gandalf 25% $5 Million
"Collateral Coverage Securities" - Pledged Securities consisting of
common stock issued by one or more of the following corporations but only
as long as such securities are traded on a nationally recognized securities
exchange or on the NASDAQ and OTC markets:
(i) CompuCom Systems, Inc. ("CompuCom")
(ii) Cambridge Technology Partners, Inc. ("Cambridge")
(iii) Novell, Inc. ("Novell")
(iv) Sybase, Inc. ("Sybase")
(v) CenterCore, Inc. ("CenterCore")
(vi) Tangram Enterprise Solutions, Inc. ("Tangram")
(vii) Gandalf Technologies, Inc. ("Gandalf")
"Commitment Termination Date" - March 31, 1997.
"Compliance Certificate" - as defined in Section 4.2 hereof.
"Debt Instrument" - as defined in Section 7.4 hereof.
"Default" - an event which with notice or the lapse of time or
both would constitute an Event of Default.
"Dollars" and "$" - lawful money of the United States of
America.
"ERISA" - as defined in Section 3.14 hereof.
"Event of Default" - as defined in Article 7 hereof.
"Financial Statements" -
(a) The audited balance sheets of SSI, and its Subsidiaries
(including, without limitation, SSD) at December 31, 1993, and the related
audited consolidated statements of operations, shareholder's equity and
cash flows, and the notes thereto, of SSI, SSD and Subsidiaries for the
above mentioned year certified without qualification or explanatory
paragraphs by independent certified public accountants satisfactory to the
Bank;
(b) The unaudited consolidating balance sheets of SSI and its
Subsidiaries (including without limitation, SSD), as at March 31, 1994, and
the unaudited internal consolidating statement of operations and cash
flows, of SSI and its Subsidiaries (including, without limitation, SSD) for
the three months then ended; and
(c) The unaudited consolidated balance sheets of SSI and its
Subsidiaries (including, without limitation, SSD) as at March 31, 1994 and
the related unaudited consolidated statement of operations and cash flows,
and the notes thereto, of SSI and its Subsidiaries for the three months
then ended.
"Fixed Charges" - the sum of principal payments on Funded Debt.
"Fixed Charge Coverage Ratio" - the ratio of (a) the Cash Flow
for the 12 months ending on such date to (b) the Fixed Charges for such 12
month period.
"Funded Debt" means, as of any date, all Indebtedness for
borrowed money (including Capitalized Lease Obligations but not obligations
under operating leases) which is an installment on a note, lease or similar
contract which has one or more other installments which mature more than
one year from such date. Cash advances under the Revolving Loan,
outstanding reimbursement obligations under letters of credit and non-
recourse indebtedness related to real estate known as Moorestown III and
Horsham VII and VIII are not Funded Debt.
"Included Subsidiaries" - all Subsidiaries of SSI or of SSD at
any time, except for Compucom Systems, Inc., a Delaware corporation
("Compucom"), Center Core, Inc., a Delaware corporation ("Center Core"),
Coherent Communications Systems Corporation ("Coherent"), a Delaware
corporation, Laser Communications, Inc., a Pennsylvania corporation, Sky
Alland Research, Inc., a Maryland corporation, Micro Dynamics, Inc., a
Delaware corporation, and their respective successors and Subsidiaries.
"Indebtedness" - with respect to any Person, all (i) liabilities
or obligations which in accordance with generally accepted accounting
principles would be included in determining total liabilities as shown on
the liability side of a balance sheet of such Person at the date as of
which Indebtedness is to be determined, including, without limitation,
Capitalized Lease Obligations of such Person; and (ii) liabilities or
obligations secured by Liens on any assets of such Person, whether or not
such liabilities or obligations shall have been assumed by it.
"Initial Advances" - Loan advances made at the first Closing.
"Interest Coverage Ratio" - as of any date, the ratio of (a) Pre
Tax Earnings plus cash interest expense for the 12 months ending on such
date to (b) the cash interest expense for such 12 month period.
"Investments" - any loans, advances or extensions of credit
(other than guaranties) or any purchase of any debt or equity security,
including without limitation, capital stock, bonds, debentures, notes,
general partnership interests, limited partnership interests, warrants or
other rights, all whether certificated or uncertificated.
"IRS" - as defined in Section 3.14 hereof.
"Leases" - leases and subleases (other than the leases or
subleases the obligation to pay rent or other amounts under which is a
Capitalized Lease Obligation), licenses, easements, grants, pole attachment
and conduit or trench agreements and other attachment rights and similar
instruments under which any Borrower or any of its Included Subsidiaries
has the right to use real or personal property or rights of way.
"Lending Office" - 1500 Market Street, Philadelphia,
Pennsylvania or such other office as the Bank may from time to time specify
to the Borrowers as the office at which Revolving Loan Advances are to be
made.
"Liabilities" - for the purposes of calculating Indebtedness to
Tangible Net Worth and for the purposes of determining "Liabilities" of
Borrowers hereof, Liabilities shall not include minority shareholder
interest which may appear on a balance sheet of SSI, prepared in accordance
with generally accepted accounting principles, consistently applied.
"Lien" - any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute or contract, and
including but not limited to the security interest or lien arising from a
mortgage, encumbrance, pledge, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes. The term "Lien"
shall include reservations, exceptions, encroachments, easements, rights-
of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property. For the purpose of this
Agreement, any Borrower or Subsidiary shall be deemed to be the owner of
any Property which it has acquired or holds subject to a conditional sale
agreement or other arrangement pursuant to which title to the Property has
been retained by or vested in some other person for security purposes.
"Loan Documents" - this Agreement, the Notes, the Security
Documents and all other documents executed and delivered in connection
herewith or therewith, including all amendments, modifications and
supplements of or to all such documents.
"Loans" - the Revolving Loan and the Term Loan.
"Material Adverse Effect" - any specified event, condition or
occurrence as to any Borrower or Subsidiary, as applicable, which
individually or in the aggregate with any other such event, condition or
occurrence and whether through the effect on such Borrower's or
Subsidiary's business, property, prospects, profits or condition (financial
or otherwise) or otherwise could reasonably be expected to (a) result in,
to the extent not fully covered by insurance, any liability, loss,
forfeiture, penalty, costs, fine, expense, payment or other monetary
obligation or loss of property in excess of $1,000,000,000 as to any
Borrower or Subsidiary or as to all Borrowers and Subsidiaries taken as a
whole.
"Maturity Date" - as defined in Section 2.8 hereof.
"Notes" - the Revolving Note and the Term Note.
"Person" - an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
"Pledge Agreement" - The Pledge Agreement between Bank and
Borrowers dated October 7, 1991, as amended from time to time, including by
Amended and Restated Pledge Agreement of even date herewith.
"Pledged Securities" - Securities pledged as collateral from
time to time for the performance of the Borrowers' obligations hereunder
and under the Notes.
"Post-Default Rate" - in respect of any amounts not paid when
due (whether at stated maturity, by acceleration or otherwise), a rate per
annum during the period commencing on the due date until such amounts are
paid in full equal to 2% per annum above the applicable rate provided for
in Section 2.9 hereof.
"Pre-Tax Earnings" shall mean gross revenues and other proper
income credits, plus any cash proceeds realized on the sale of securities,
less all proper income charges other than taxes on income, all determined
on a consolidated basis and in accordance with generally accepted
accounting principles; provided that there shall not be included in such
revenues or charges (a) any gains resulting from the write-up of assets;
(b) any proceeds of any life insurance policy; (c) earnings (or losses)
from minority interests of the Borrowers and their Included Subsidiaries;
(d) earnings (or losses) from equity investments carried on an equity basis
to the extent not received by the Borrowers or any Included Subsidiary; (e)
any loss resulting from the one-time write-off on December 31, 1993 of good
will of Premier Solutions Ltd. and Coherent Communications Systems
Corporation; (f) any gain or loss, other than a gain or loss on the sale of
stock, which is classified as "extraordinary" in accordance with generally
accepted accounting principles; or (g) any book gain (or loss) on the sale
of securities. Pre-Tax Earnings can be less than zero for all purposes of
this Agreement.
"Prime Rate" the interest rate which Bank announces from time to
time at its Principal Office as its prime rate. Each change in any
interest rate provided for herein based upon the Prime Rate resulting from
a change in the Prime Rate shall take effect at the time of such change in
the Prime Rate. The Borrowers acknowledge that such Prime Rate is not tied
to an external rate of interest or index and does not necessarily reflect
the lowest rate of interest actually charged by the Bank to any particular
class or category of customer.
"Principal Office" - Bank's principal office presently located
at 1500 Market Street, Philadelphia, Pennsylvania 19102.
"Property" - any interest in any kind of property or asset,
whether real, personal or mixed or tangible or intangible.
"Quarterly Dates" - the last Business Day of each March, June,
September and December.
"Required Minimum" - the minimum value of Collateral Coverage
Securities consisting of Novell and/or Sybase common stock required under
Section 6.15 hereof, determined by reference to the principal balance of
the Term Loan in accordance with the following schedule:
Minimum Novell/Sybase
Term Loan Balance Value _
$13 Million or $13 Million
more
$6 Million or more, lesser of $10 Million
but less than or Term Loan Balance
$13 Million
less than $6 Million lesser of $5 Million
or Term Loan Balance
"Revolving Credit Period" - as defined in Section 2.1(a) hereof.
"Revolving Loan" - as defined in Section 2.1 hereof.
"Revolving Loan Commitment" - $30,000,000, as the same may be
reduced pursuant to Section 2.2 hereof.
"Revolving Loan Note" - as defined in Section 2.10 hereof.
"Security Documents" - as defined in Section 2.16 hereof.
"Subsidiary" - any corporation at least a majority (meaning in
excess of 50%) of the securities of which having ordinary voting power for
the election of directors (other than securities having such power only by
reason of the occurrence of a contingency) are at the time owned, directly
or indirectly, by either of the Borrowers, by one or more of their
Subsidiaries, or by the Borrowers and one or more of their subsidiaries.
"Tangible Net Worth" - the excess of total assets over the sum
of total liabilities and minority shareholder interests, to be determined
in accordance with generally accepted accounting principles consistent with
those applied in the preparation of the Financial Statements, excluding,
however, from the determination of total assets (a) all assets which would
be classified as intangible assets under generally accepted accounting
principles, including, without limitation, goodwill (whether representing
the excess of cost over book value of assets acquired or otherwise),
patents, trademarks, trade names, copyrights, franchises, and deferred
charges (including, without limitation, unamortized debt discount and
expense, organization costs and research and development costs); (b)
treasury stock; (c) cash set apart and held in sinking or other analogous
funds established for the purpose of redemption or other retirement of
capital stock; (d) to the extent not already deducted from total assets,
reserves for depreciation, depletion, obsolescence and/or amortization of
properties and all other reserves or appropriations of retained earnings
which, in accordance with generally accepted accounting principles, should
be established in connection with the businesses conducted by the Borrowers
and their Subsidiaries; (e) any revaluation or other write-up in book value
of assets subsequent to December 31, 1993; (f) to the extent not provided
for in clause (a) or (e) above, the amount, if any, by which the value of
any assets or business hereafter acquired at the time of the acquisition
thereof unreasonably exceeds the book value thereof on the books of the
person from whom such assets or business were so acquired (before any
write-up of such book value by such Person in contemplation of such
acquisition if such write-up shall have occurred within nine (9) months
prior to the date of signing of any contract relating to such acquisition);
and (g) loans to employees for purchasing stock of the Borrowers or any
Subsidiaries.
"Term Loan" - as defined in Section 2.6 hereof.
"Term Note" - as defined in Section 2.10 hereof.
Section 1.2 Directly or Indirectly.
Where any provision in this Agreement refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provisions
shall be applicable whether such action is taken directly or indirectly by
such Person.
Section 1.3 Accounting Terms; Test Group.
(a) Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given thereto in
accordance with generally accepted accounting principles. If the generally
accepted accounting principles in effect on the date hereof shall change,
the terms calculated herein under such principles shall be changed
accordingly.
(b) Except where specifically otherwise provided herein, the
financial covenants set forth in Sections 6.8, 6.9, 6.10 and 6.21 hereof
shall be computed on a consolidated basis, excluding, however, all
Subsidiaries other than Included Subsidiaries.
Article 2. Amount and Terms of Loans; Collateral.
Section 2.1 Revolving Loan.
(a) Bank shall, subject to the terms and conditions of this
Agreement, establish for Borrowers a revolving credit facility (the
"Revolving Loan") pursuant to which Bank will make loans hereinafter
provided for in this Section 2.1 (individually, a "Revolving Loan Advance"
and, collectively, together with the Initial Advance under the Revolving
Loan, the "Revolving Loan Advances") to the Borrowers, at any time and from
time to time during the period (the "Revolving Credit Period") from the
date hereof to and including the Commitment Termination Date, in an
aggregate principal amount at any one time outstanding (including the face
amount of all outstanding letters of credit) up to but not exceeding the
lesser of the Revolving Loan Commitment as then in effect or the Collateral
Coverage Base. Subject to the terms of this Agreement, during the
Revolving Credit Period the Borrowers may borrow, repay and reborrow (all
as provided herein).
(b) During the Revolving Credit Period, Borrowers may obtain
letters of credit from the Bank in an aggregate amount not to exceed
$5,000,000 (measured by the face amount thereof) at any time outstanding,
upon prior approval of the Bank, on such terms (including without
limitation the expiry date, which Borrowers agree will in no event be
twelve (12) months beyond the Commitment Termination Date) as the Bank may
require and with such documentation, including Bank's then standard Letter
of Credit Application and Security Agreement, as shall be satisfactory in
form and substance to the Bank. The Revolving Loan Commitment shall be
reduced by a dollar amount equal to the aggregate face amount of the
outstanding letters of credits issued hereunder, provided, however that
such reduction shall not be deemed to be a reduction for purposes of
calculating the commitment fee provided in Section 2.4 herein. Borrowers
will pay to Bank a letter of credit fee for each letter of credit issued
hereunder in the amount of 1% per annum of the face amount of such letter
of credit, payable quarterly in advance (commencing upon issuance).
Section 2.2 Changes in Revolving Loan Commitment.
The Borrowers shall be entitled to terminate or reduce the Revolving
Loan Commitment, provided that the Borrowers shall give notice of each such
termination or reduction to the Bank as provided in Section 2.3 hereof and
that any partial reduction of the Revolving Loan Commitment shall be in an
aggregate amount equal to $100,000 or an integral multiple thereof. Any
such termination or reduction shall be permanent and irrevocable.
Section 2.3 Notices.
SSI, as agent hereunder for the Borrowers, shall give the Bank
telephonic and written notice of each termination or reduction of the
Revolving Loan Commitment, each borrowing, and repayment of the Loans. All
requests for borrowings shall be made available to Borrowers, subject to
the terms and conditions of this Agreement, by telephonic or telegraphic
request of any Borrower. Bank may rely upon any and all telephonic,
telegraphic and written requests purported to be made by either Borrower
through any of its officers. Each such written notice shall be irrevocable
and shall be effective only if received by the Bank not later than 12 noon
Philadelphia time, on the date which is: (a) in the case of each notice of
termination one Business Day prior to the date of the related termination,
and (b) in the case of a notice of borrowing or reduction, the Business Day
on which a request for a borrowing or reduction is made, subject, as to
borrowings for which the LIBOR Rate is being selected, to the provisions of
Section 2.09(c) hereof.
Section 2.4 Fees. (a) The Borrowers shall pay to the Bank a
commitment fee at the rate of one-quarter of one percent (1/4%) per annum
on the sum of (A) the daily average unused amount of the Revolving Loan
Commitment (which shall be calculated as the Revolving Loan Commitment
minus all outstanding cash advances on the date of such calculation) plus
(B) the amount of the Term Loan which has not been (but is still available
to be) advanced to Borrowers as set forth in Section 2.6 hereof, during
each calendar quarter for the period from the date hereof to and including
the earlier of the date on which the Revolving Loan Commitment is
terminated or the Commitment Termination Date. The commitment fee shall be
payable quarterly in arrears on the Quarterly Dates and on the earlier of
the date the Revolving Loan Commitment is terminated or the Commitment
Termination Date.
(b) The Borrowers shall pay to Bank, concurrently with the
execution hereof, an origination fee in the amount of $150,000.
(c) The Borrowers shall pay to Bank, on the date hereof and
thereafter on April 1 of each year, an Agent Fee (the "Agent Fee") in the
amount of $50,000.
Section 2.5 Borrowings.
SSI, as agent hereunder for the Borrowers, shall give the Bank
telephonic or telegraphic and written notice of each borrowing of the Loans
hereunder as provided in Section 2.3 hereof. Subject to the terms and
conditions of this Agreement (including the notice provisions of Section
2.09(c) hereof), on telephonic or telegraphic notice given not later than
12:00 noon Philadelphia time on the date specified for each borrowing
thereunder, Bank shall make available the amount of the Revolving Loan
Advance or advance of a Term Loan installment to be made by it, on such
date to the Borrowers by depositing the proceeds thereof, in immediately
available funds, in an account of such of the Borrowers as shall have been
designated by SSI in the borrowing notice, maintained with the Bank at its
Principal Office. Within twenty four (24) hours of such borrowing,
Borrowers shall execute a Borrowing Base Certificate ("Borrowing Base
Certificate") prepared by Borrowers setting forth the present values of the
Collateral and Borrowers' compliance with the Collateral Coverage Base and
the Required Minimum.
Section 2.6 Term Loan.
Bank hereby establishes a Term Loan for Borrowers in the aggregate
amount of $20 Million, to be advanced by Bank to Borrowers in four
installments and pursuant to the procedure set forth in Section 2.5 hereof,
each in the following amounts and on or before the following dates:
Amount of Advance Date
$5 Million Concurrently with execution of
this Agreement
$5 Million June 30, 1994
$5 Million September 30, 1994
$5 Million December 31, 1994.
Any amount not requested by Borrowers on or before the specified advance
date to be advanced to Borrowers hereunder will no longer be available for
advance.
Section 2.7 Use of Proceeds of Loan
The proceeds of the Revolving Loan shall be used solely for working
capital of the Borrowers and their Subsidiaries as the Borrowers shall
determine, for Investments subject to the limitations set forth in Section
6.6 hereof, and for capital expenditures of the Borrowers not to exceed
$3,000,000 in the aggregate. The proceeds of the Term Loan shall be used
by Borrowers solely for the purpose of acquiring Preferred Stock of
CompuCom Systems, Inc. or, as to the first advance thereof, to reimburse
Borrowers for funds previously used by Borrowers to purchase Preferred
Stock of CompuCom Systems, Inc.
Section 2.8 Payment of Loans. Unless sooner accelerated pursuant
to the terms hereof, the Revolving Loan shall be due and payable on the
Commitment Termination Date. The Term Loan shall be repaid in accordance
with the Term Note, incorporated herein by reference, the date of the last
scheduled payment of which is herein called the "Maturity Date", but shall
in all events be repaid in full on the earlier of the date on which the
Revolving Loan Commitment is terminated or on the Commitment Termination
Date.
Section 2.9 Interest.
(a) Subject to the provisions of subsection (c) hereof, the
Borrowers shall pay to Bank interest on the unpaid principal amount of each
Loan for the period commencing on the date of such Loan until such Loan
shall be paid in full, at a rate per annum equal to Bank's Prime Rate.
Notwithstanding the foregoing, the Borrowers shall pay interest on any Loan
or any installment thereof, and on any other amount payable by the
Borrowers hereunder (including, to the extent permitted by law, interest)
which shall not be paid in full when due (whether at stated maturity, by
acceleration or otherwise, and including all reimbursement obligations on
letters of credit which are not immediately repaid from a Revolving Loan
advance or otherwise) for the period commencing on the due date thereof
until the payment in full at the Post-Default Rate. Except as provided in
the next sentence, accrued interest on each Loan shall be payable (i)
monthly in arrears within 10 days of Borrowers' receipt of a bill therefor,
(ii) upon the payment or prepayment thereof (but only on the principal so
paid or prepaid) and (iii) on the earlier of the date the Revolving Loan
Commitment is terminated or the Commitment Termination Date. Interest
payable at the Post-Default Rate shall be payable from time to time on
demand of the Bank. Interest shall continue to accrue and be paid at the
applicable rate provided herein even after Default, an Event of Default,
entry of judgment against either or both of the Borrowers or the
commencement of any bankruptcy, reorganization or insolvency proceeding.
(b) Notwithstanding any provision herein or in the Notes, the
total liability for payments of interest, or in the nature of interest,
shall not exceed the limits imposed by any applicable laws. If the terms
of this Agreement or the Security Documents, the Notes, or any other
agreement or instrument entered into in connection herewith require or
shall require Borrowers to pay interest in excess of amounts allowed by
law, the rate of interest payable shall be reduced immediately, without
action by Bank, to the applicable maximum rate, and any excess payment made
by Borrowers at any time shall be immediately and automatically applied to
the unpaid balance of the outstanding principal due hereunder and not to
the payment of interest. In the event of acceleration of sums due
hereunder, the total charges for interest and in the nature of interest
shall not exceed the maximum allowed by law, and any excess portions of
such charges which may have been prepaid and cannot be applied to repayment
of principal shall be refunded to Borrowers. Borrowers agree that in
determining whether or not any interest payable under this Agreement, the
Notes or the Security Documents exceeds the highest applicable rate
permitted by law, any non-principal payment including, without limitation,
fees, costs, Post-Default Rate and late charges shall be deemed to the
extent permitted by law, to be an expense, fee or penalty not deemed
interest by law.
(c) (A) As used in this Section 2.9(c), the following terms
shall have the following meanings:
(i) "Good Business Day" means any day when both Bank
and banks in London, England are open for business.
(ii) "LIBOR Rate" means for any day during each Rate
Period (a) the per annum rate of interest (computed on a basis of a year of
360 days and actual days elapsed) determined by Bank as being the composite
rate available to Bank at approximately 11:00 a.m. London time in the
London Interbank Market, as referenced by Telerate (page 3750), in
accordance with the usual practice in such market, for the Rate Period
elected by Borrowers, in effect two (2) Good Business Days prior to the
funding date for a requested LIBOR Rate advance for deposits of dollars in
amounts equal (as nearly as may be estimated) to the amount of the LIBOR
Rate advance which shall then be loaned by the Bank to Borrowers as of the
time of such determination, as such rate (the "Base Rate") may be adjusted
by the reserve percentage applicable during the Rate Period in effect (or
if more than one such percentage shall be applicable, the daily average of
such percentages for those days in such Rate Period during which any such
percentage shall be so applicable) under regulations issued from time to
time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal reserve
requirement) for the Bank with respect to liabilities or assets consisting
of or including "Eurocurrency Liabilities" as such term is defined in
Regula-tion D of the Board of Governors of the Federal Reserve System, as
in
effect from time to time, having a term equal to such Rate Period
("Eurocurrency Reserve Requirement"), plus (b) 2.25 percentage points.
Such reserve adjustment shall be effectuated by calculating, and the LIBOR
Rate shall be equal to, (a) the quotient of (i) the Base Rate divided by
(ii) one minus the Eurocurrency Reserve Requirement, plus (b) 2.25
percentage points.
(iii) "Notification" means telephonic notice (which
shall be irrevocable) by Borrowers to Bank that Borrowers have requested
that the LIBOR Rate, as quoted by Bank from time to time upon Borrower's
request for quotation made not less than one (1) Business Day prior to the
requested date of quotation, shall apply to some portion of the principal
amount of the Revolving Loan in accordance with the provisions of Section
2.9(c) hereof, which notice shall be given no later than 9:00 a.m.
Philadelphia time, on the day which is at least 2 Business Days prior to
the Business Day on which such election is to become effective, which
notice shall specify (i) that the LIBOR Rate option is being selected; (ii)
the principal amount of cash advances under the Loans to be subject to such
rate; (iii) whether such amount is a new advance, a renewal of a previous
request of such rate, a conversion from one interest rate to another, or a
combination thereof; (iv) the Rate Period(s) selected; and (v) the date on
which such request is to become effective (which date shall be a date
selected in accordance with Section 2.9(c)(B) hereof).
(iv) "Rate Period" means for any portion of principal
under the Loans for which Borrowers elect the LIBOR Rate the period of time
for which such rate shall apply to such principal portion. Rate periods
for principal earning interest at the LIBOR Rate shall be for periods of
30, 60, 90 or 180 days and for no other length of time, provided, that, no
Rate Period may end on other than a Business Day or after the Commitment
Termination Date.
(v) "Repayment Premium" means the amount which
Borrowers shall pay to Bank as a premium in connection with a repayment of
outstanding principal of the Loans earning interest at the LIBOR Rate at
the time of repayment, which amount shall be the amount determined by Bank
(which determination shall be conclusive) to be the difference between (a)
the present value of the interest payments that would have been paid for
the balance of the Rate Period to Bank by Borrowers on such repaid portion
of principal accruing at the LIBOR Rate but for such repayment, and (b) the
present value of the interest payments that would be paid for the balance
of the Rate Period to Bank at the United States Treasury Rate if on or
about the date of repayment Bank made a hypothetical investment of the
repaid portion of principal accruing at a fixed rate of interest in United
States Treasury securities maturing on or about the last date of the
corresponding Rate Period and bearing interest accruing from the date of
repayment.
(vi) "United States Treasury Rate" means a rate of
interest per annum, equal to (rounded downward to the nearest 1/100 of 1%)
the annual yield Bank could obtain by purchasing on the date of repayment
of a LIBOR Rate Loan United States Treasury Securities with semi-annual
interest payments, maturing on or about the last date of the corresponding
Rate Period, in amounts approximately equal to that amount of the repaid
portion which was applied to principal earning interest at the LIBOR Rate
at the time of repayment.
(B) (1) Subject to the terms of this Section 2.9(c)(B)
(including without limitation the terms of Section 2.9(c)(B)(3)), by giving
Notification, Borrowers may request to have all or a portion of the
outstanding principal of cash advances under the Loans as hereinafter
permitted earn interest at the LIBOR Rate as follows: (i) with respect to
the principal amount of any cash advance under the Loans, from the date of
such advance until the end of the Rate Period specified in the
Notification; and/or (ii) with respect to the principal amount of any
portion of cash advances under the Loans outstanding and earning interest
at the LIBOR Rate at the time of the Notification related to such principal
amount, from the expiration of the then current Rate Period related to such
principal amount until the end of the Rate Period specified in the
Notification; and/or (iii) with respect to all or any portion of the
principal amount of cash advances under the Loans outstanding and earning
interest at the Prime Rate at the time of Notification, from the date set
forth in the Notification until the end of the Rate Period specified in the
Notification.
(2) Borrowers understand and agree: (i) that subject
to the provisions of this Agreement, the Prime Rate and the LIBOR Rate may
apply simultaneously to different parts of the outstanding principal of
cash advances under the Loans, (ii) that the LIBOR Rate applicable to any
portion of outstanding principal may be different from the LIBOR Rate
applicable to any other portion of outstanding principal, (iii) that no
more than 3 portions of principal of cash advances under the Loans bearing
interest at the LIBOR Rate may be outstanding at any one time, (iv) that
the minimum amount of principal for which any LIBOR Rate election may be
made shall be $2,000,000, and (v) that Bank shall have the right to
terminate any Rate Period, and the interest rate applicable thereto, prior
to maturity of such Rate Period, if Bank determines in good faith (which
determination shall be conclusive) that continuance of such interest rate
has been made unlawful by any Law, to which Bank may be subject, in which
event the principal to which such terminated Rate Period relates thereafter
shall earn interest at the Prime Rate.
(3) After expiration of any Rate Period, any
principal portion corresponding to such Rate Period which has not been
converted or renewed in accordance with this Section 2.9(c)(B) shall earn
interest automatically at the Prime Rate from the date of expiration of
such Rate Period until paid in full, unless and until the Borrowers request
and Bank approves a conversion to the LIBOR Rate in accordance with this
Section 2.9. With respect to any cash advances (whether an advance of new
funds or an already outstanding amount), if Borrowers fail to request the
LIBOR Rate option by giving Bank a Notification, or if Bank fails to
approve such request when made, such principal amount shall earn interest
at the Prime Rate.
(4) Borrowers shall indemnify Bank against any and
all loss or expense (including loss of margin) which Bank has sustained or
incurred as a consequence of: (a) any payment of any principal amount
earning interest at the LIBOR Rate on a day other than the last day of the
corresponding Rate Period (whether or not any such payment is made pursuant
to acceleration upon or after an Event of Default, demand by Bank otherwise
made under this Agreement, by reason of an application of proceeds incident
to an insured loss or condemnation of property, or for any other reason,
and whether or not any such payment is consented to by Bank, unless Bank
shall have expressly waived such indemnity in writing); (b) any attempt by
a Borrower to revoke in whole or part any Notification given pursuant to
this Agreement; (c) any attempt by Borrowers to convert or renew any
principal amount earning interest at the LIBOR Rate on a day other than the
last day of the corresponding Rate Period (whether or not such conversion
or renewal is consented to by Bank, unless Bank shall have expressly waived
such indemnity in writing); or (d) any breach of or default by any
Borrower.
Section 2.10 Notes.
Contemporaneously herewith, Borrowers shall execute and deliver to
Bank their Notes ("Notes") in the principal amounts of $30,000,000.00
("Revolving Loan Note") and $20,000,000 ("Term Note"), evidencing
Borrowers' unconditional obligations to repay the Revolving Loan and the
Term Loan, respectively.
Section 2.11 Payments.
All payments of principal, interest and other amounts payable by the
Borrowers hereunder will be made in Dollars, in immediately available
funds, to the Bank at its Principal Office not later than 12:00 noon
Philadelphia time on the date on which such payment shall become due.
Section 2.12 Computations; Application of Payments.
(a) Interest on all Loans and commitment fees shall be computed
on the basis of a year of 360 days and actual days elapsed (including the
first day but excluding the last) in the period for which payable;
(b) Each payment of principal and interest made by either
Borrower hereunder shall be applied first on account of due and unpaid
interest and the balance, if any, toward reduction of the unpaid principal
balance of the Loans.
Section 2.13 Minimum Amounts of Borrowings.
Except for borrowings which exhaust the full remaining amount of the
Revolving Loan Commitment, each borrowing under the Revolving Loan shall be
in the amount of $100,000 or an integral multiple thereof.
Section 2.14 Set-Off.
Each of the Borrowers hereby agrees that, in addition to (and without
limitation of) any right of set-off, banker's lien or counterclaim Bank may
otherwise have, Bank, any participant of Bank in the Loans and any
affiliate of Bank or any such participant shall be entitled, at its option,
to offset balances held by it at any of its offices against any principal
of or interest on any of the Loans hereunder which is not paid when due
(regardless of whether such balances are then due to such Borrower), in
which case it shall promptly notify such Borrower thereof, provided that
its failure to give such notice shall not affect the validity of any such
offset.
Section 2.15 Prepayment.
The Loans may be prepaid in whole or in part and from time to time,
provided that (i) all unpaid accrued interest on the amount(s) prepaid
shall be paid concurrently with any such prepayment, and (ii) in the event
that such of the principal of any Loan earning interest at the LIBOR Rate
at the time of repayment is repaid prior to the last day of the applicable
Rate Period (whether or not any such repayment is made pursuant to
acceleration upon or after an Event of Default, demand by Bank otherwise
made under this Agreement, by reason of an application of proceeds incident
to an insured loss or condemnation of property, or for any other reason),
Borrowers shall, together with such repayment, pay to Bank a Repayment
Premium on the amount so repaid. Any prepayment of the Term Loan will be
applied in the order of maturity.
Section 2.16 Collateral.
(a) Borrowers hereby agree that their grant of a security
interest in the Collateral contained in the Pledge Agreement, in other
security and collateral agreements of Borrowers and of the Guarantors (as
defined herein) and all other agreements executed in connection herewith
and all collateral, liens, security interests and pledges created by
Borrowers and the Guarantors described therein cover and secure all of
Borrowers' existing and future obligations and liabilities to Bank,
including without limitation, Borrowers' liabilities on the Revolving Loan
and the Term Loan (collectively, the "Obligations").
(b) The Pledge Agreement, and the aforesaid agreements,
instruments and documents, are sometimes hereinafter referred to
collectively as the "Security Documents."
Section 2.17 Valuation of Collateral Coverage Securities; Sale.
The value of the Collateral Coverage Securities shall be based on
market value as determined on a nationally recognized exchange or by the
NASDAQ or OTC Markets, National Market Issues or by using the NASDAQ bid
quotations all as of the close of the last previous trading day. Any
determination of the value of the Collateral Coverage Securities by the
Bank through its brokerage services shall be conclusive and binding on
Borrowers absent manifest error. Borrowers may sell Collateral Coverage
Securities in accordance with the terms of the Pledge Agreement so long as
after giving effect to any such sale, Borrowers are not in violation of the
Collateral Coverage Base or the Required Minimum, and the proceeds thereof
shall be paid over to Bank as provided in the Pledge Agreement.
Article 3. Representations and Warranties.
The Borrowers hereby represent and warrant to the Bank that:
Section 3.1 Organization.
(a) Each Borrower is a corporation duly organized, validly
existing and in good standing under the laws of its respective state of
incorporation, as set forth in Exhibit 3.1 hereto, and each of their
Included Subsidiaries is duly organized, validly existing and in good
standing under the laws of its respective state of incorporation, as set
forth in Exhibit 3.1 hereto; each such Borrower and Included Subsidiary has
the power to own its assets and to transact the business in which it is
presently engaged and in which it proposes to be engaged. The authorized
and outstanding shares of capital stock of each such corporation, and the
number of outstanding shares of capital stock of each such corporation
(other than SSI) owned by each of the Borrowers or any Included Subsidiary
thereof and the business in which each of such corporations is engaged is
accurately and completely listed in Exhibit 3.1. All such shares which are
issued and outstanding have been duly and validly issued and are fully paid
and nonassessable, are owned by the persons referred to on Exhibit 3.1,
free and clear of any mortgage, pledge, lien or encumbrance. Except as set
forth in Exhibit 3.1, there are not outstanding any warrants, options,
contracts or commitments of any kind entitling any person to purchase or
otherwise acquire any shares of capital stock owned by either Borrower or
any Included Subsidiary of SSD or SSI, nor are there outstanding any
securities which are convertible into or exchangeable for any shares of
capital stock of SSD or any Included Subsidiary of SSD or SSI. Except as
set forth on Exhibit 3.1, no Borrower has any Subsidiary.
(b) There are no jurisdictions other than as set forth on
Exhibit 3.1 hereto in which the character of the properties owned or
proposed to be owned by the Borrowers or any Included Subsidiary or in
which the transaction of the business of any of the Borrowers or any
Included Subsidiary of the Borrowers as now conducted or as proposed to be
conducted requires or will require any Borrower or any Included Subsidiary
of the Borrowers to qualify to do business in any such other jurisdiction
where the failure to do so would have a material adverse effect on such
Borrower or Included Subsidiary.
Section 3.2 Power, Authority, Consents.
Each Borrower has the power to execute, deliver and perform this
Agreement, the Notes and the Security Documents to be executed by it, and
to borrow hereunder. Each such corporation has taken all necessary action
to authorize (i) the borrowing hereunder on the terms and conditions of
this Agreement, (ii) the execution, delivery and performance of this
Agreement, the Notes, the Security Documents to be executed by it and all
other agreements, instruments and documents provided for herein or therein.
No consent or approval of any person (including, without limitation, any
stockholder of the Borrowers), no consent or approval of any landlord or
mortgagee, no waiver of any lien or right of distraint or other similar
right and no consent, license, approval, authorization or declaration of
any governmental authority, bureau or agency, is or will be required in
connection with the execution, delivery or performance by any Borrower, as
the case may be, or the validity, enforcement or priority of, this
Agreement, the Notes, the Security Documents (or any Lien created and
granted thereunder) or any other agreements, instruments or documents to be
executed or delivered pursuant hereto or thereto, except as set forth on
Exhibit 3.2 annexed hereto, each of which either will have been duly and
validly obtained on or prior to the date hereof and will then be in full
force and effect, or is designated on Exhibit 3.2 as waived by the Bank.
Section 3.3 No Violation of Law or Agreements.
The execution and delivery by each Borrower of this Agreement, the
Notes and the Security Documents executed by it and any other agreements,
instruments or documents to be executed and delivered by it hereunder, and
performance by it hereunder and thereunder will not violate any provision
of law and will not conflict with or result in a breach of any order, writ,
injunction, ordinance, resolution, decree, or other similar document or
instrument of any court or governmental authority, bureau or agency,
domestic or foreign, or certificate of incorporation or by-laws of any
Borrower or create (with or without the giving of notice or lapse of time,
or both) a default under or breach of any agreement, bond, note or
indenture to which any Borrower is a party, or by which it is bound or any
of its properties or assets is affected, or result in the imposition of any
Lien of any nature whatsoever upon any of the properties or assets owned by
or used in connection with the business of such Borrower, except for the
liens and security interests created and granted pursuant to the Security
Documents.
Section 3.4 Due Execution, Validity, Enforceability.
This Agreement has been duly executed and delivered by each Borrower
and constitutes, and the Notes and each of the Security Documents to be
executed by a Borrower, upon execution and delivery by such Borrower in
accordance with the terms hereof, will constitute, the valid and legally
binding obligation and agreement of such Borrower, as the case may be,
enforceable in accordance with its terms.
Section 3.5 Properties, Priority of Liens.
Except as set forth in Exhibit 3.5 hereto, all of the properties and
assets owned by each of the Borrowers and their Subsidiaries are owned by
each of them, respectively, free and
clear of any Lien of any nature whatsoever, except as provided for in the
Security Documents to be executed and delivered pursuant hereto, and as
permitted by Section 6.4 hereof. The Liens which will be created and
granted by the Security Documents upon their execution and delivery by the
parties thereto, will thereupon and thereafter constitute valid first Liens
on the properties and assets covered by the Security Documents, subject to
no prior or equal Lien.
Section 3.6 Judgments, Actions, Proceedings.
There are no outstanding judgments, and no actions, suits or
proceedings pending or threatened before any court, governmental authority,
bureau, commission, board, instrumentality or agency, with respect to or
affecting any Borrower or any Subsidiary of any Borrower or any of their
Properties, which would have a Material Adverse Effect, nor is there any
reasonable basis for the institution of any such action, suit or
proceeding, whether or not covered by insurance, nor are there any such
actions or proceedings in which any Borrower or any Subsidiary of any
Borrower is a plaintiff or complainant, except as set forth on Exhibit 3.6
annexed hereto.
Section 3.7 No Defaults.
None of the Borrowers nor any Subsidiary of any Borrower is in
default under any agreement, ordinance, resolution, decree, bond, note,
indenture, order or judgment to which it is a party or by which it is
bound, or any other agreement or other instrument by which any of the
properties or assets owned by it or used in the conduct of its business is
affected, and each Borrower and each Subsidiary of each Borrower has
complied and is in compliance with all applicable laws, ordinances and
regulations applicable to them, where any of the foregoing would have a
Material Adverse Effect.
Section 3.8 Burdensome Documents.
Except as set forth on Exhibit 3.8 annexed hereto, none of the
Borrowers or any Subsidiary of the Borrowers is a party to or bound by, nor
are any of the properties or assets owned by any of the Borrowers or any
Subsidiary of the Borrowers or used in the conduct of their respective
businesses affected by, any agreement, ordinance, resolution, decree, bond,
note, indenture, order or judgment, or subject to any restriction, which
would have a Material Adverse Effect.
Section 3.9 Financial Statements.
The Borrowers have delivered to the Bank, simultaneously with the
execution and delivery of this Agreement, initialled for identification,
the Financial Statements. Each of the Financial Statements is true and
complete and presents fairly the consolidated financial position of SSI and
its Subsidiaries, including, without limitation, SSD, and the results of
their respective operations and changes in cash flows, as at the dates and
for the period referred to therein; and has been prepared in accordance
with generally accepted accounting principles applied on a basis consistent
with that of the prior period (except as disclosed therein or in the notes
thereto, and with respect to the unaudited financial statements as of March
31, 1994 and for the period then ended, subject to normal year-end audit
adjustments). There has been no material adverse change in the financial
position or operations of any Borrower or Subsidiary since December 31,
1993, except as set forth in Exhibit 3.9 hereto. No Borrower or any
Subsidiary of a Borrower has any material obligation, liability or
commitment, direct or contingent, which is not reflected in the Financial
Statements.
Section 3.10 Tax Returns.
Each of the Borrowers and their Subsidiaries has filed all federal,
state and local tax returns required to be filed by it and has not failed
to pay any taxes, or interest and penalties relating thereto, on or before
the due dates thereof. There are no waivers or agreements by any Borrower
or any of their Subsidiaries for the extension of time for the assessment
of any tax. Except for tax liabilities not in excess of $50,000 in the
aggregate with respect to the Borrowers and all Subsidiaries and except to
the extent that reserves therefor are reflected in the Financial
Statements, (a) there are no material federal, state or local tax
liabilities of any Borrower or any Subsidiary thereof due or to become due
for any tax year ended on or prior to December 31, 1993 whether incurred in
respect of or measured by the income of such Borrower or any Subsidiary
thereof, which are not properly reflected in the Financial Statements, and
(b) there are no material claims pending or, to the knowledge of any
Borrower, proposed or threatened against the Borrower or any Subsidiary
thereof for past federal, state or local taxes, except those, if any, as to
which proper reserves are reflected in the Financial Statements.
Section 3.11 Intangible Assets.
Except as set forth in Exhibit 3.6 hereto, to Borrower's knowledge,
each of the Borrowers and their Subsidiaries possesses all necessary
franchises, patents, licenses, trademarks, trademark rights, trade names,
trade name rights and copyrights to conduct its business as now conducted
and as proposed to be conducted, without any conflict with the franchises,
patents, licenses, trademark rights, trade names, trade name rights and
copyrights of others.
Section 3.12 Name Changes.
Except as described in Exhibit 3.12 attached hereto and made a part
hereof, none of the Borrowers or Subsidiaries has within the six-year
period immediately preceding the date of this Agreement, changed its name,
been the surviving entity of a merger or consolidation, or acquired all or
substantially all of the assets of any Person.
Section 3.13 Full Disclosure.
None of the Financial Statements, nor any certificate, opinion, or
any other statement made or furnished in writing to the Bank by or on
behalf of any of the Borrowers in connection with this Agreement or the
transactions contemplated herein, contains any untrue statement of a
material fact, or omits to state a material fact necessary in order to make
the statements contained therein or herein not misleading, as of the date
such statement was made. There is no fact known to any Borrower which has,
or would in the now foreseeable future have, a Material Adverse Effect,
which fact has not been set forth herein, in any of the Financial
Statements or any certificate, opinion, or other written statement so made
or furnished to the Bank.
Section 3.14 ERISA.
(a) The Borrowers and their Subsidiaries have no pension or
other employee benefit plans which are subject to the provisions of Title
IV of ERISA (any such plans which have been or may hereafter be adopted or
assumed by the Borrowers and their Subsidiaries are hereinafter referred to
individually as a "Plan" and, collectively, as the Plans"), the application
of which could give rise to direct or contingent liabilities of the
Borrowers and their subsidiaries to the Pension Benefit Guaranty
Corporation ("PBGC"), the Department of Labor or the Internal Revenue
Service ("IRS"). None of the Borrowers nor any of their Subsidiaries is a
participating employer in any Plan under which more than one employer makes
contributions as described in Sections 4063 and 4064 of ERISA. The
Borrowers and their Subsidiaries have no withdrawal liability to any
multiemployer plan and no withdrawal from any multiemployer plan is
contemplated or pending by any of the Borrowers or their Subsidiaries.
(b) The Borrowers and their Subsidiaries are and have at all
times been in full compliance with all applicable provisions of ERISA.
(c) With respect to any of the Plans, Borrowers and their
Subsidiaries have no knowledge of any Reportable Event, as described in
Section 4043 of ERISA, except that there has or may have occurred (1) a
reduction in the number of active participants as described in Section
4043(b) (3) of ERISA; (2) a termination or partial termination; or (3) a
merger or consolidation with, or transfer of assets to, another plan. The
Borrowers and their Subsidiaries have no outstanding liability to the PBGC
for reason of any such Reportable Event, and the Borrowers and their
Subsidiaries have not received any notice from the PBGC that any of the
Plans should be terminated or from the Secretary of the Treasury that any
partial or full termination of any of the Plans has occurred.
(d) No termination proceedings with respect to any of the Plans
have been commenced and have not yet been concluded.
(e) With respect to any of the Plans, there has not occurred
any prohibited transaction (as defined in Section 406 of ERISA or Section
4975 of the Internal Revenue Code) for which a prohibited transaction
exemption has not been provided by statute or regulation, ruling or opinion
issued by the Department of Labor or Internal Revenue Service and which may
result in the imposition upon the Borrowers or their Subsidiaries of any
prohibited transaction excise tax or civil liability under Section 502(i)
of ERISA.
(f) The Borrowers and their Subsidiaries have made all required
contributions under the Plans for all periods through and including the
date hereof or adequate accruals therefor have been provided for as shown
in the Financial Statements. No "accumulated funding deficiency" (as
defined in section 302 of ERISA) has occurred with respect to any of the
Plans.
For purposes of this Agreement, all references to "ERISA" shall be deemed
to refer to the Employee Retirement Income Security Act of 1974 (including
any sections of the Internal Revenue Code of 1986 amended by it), as
heretofore amended and as it may hereafter be amended or modified, and all
regulations promulgated thereunder, and all references to the Borrowers and
their Subsidiaries in this Section 3.14, or in any other Section of this
Agreement relating to ERISA, shall be deemed to refer to the Borrowers and
their Subsidiaries, and all other entities which are part of a controlled
or affiliated group or under common control with the Borrowers and their
Subsidiaries within the meaning of Sections 414(b), 414(c) and 415(h) of
the Internal Revenue Code of 1986, as amended, and Section 4001(a) (2) of
ERISA.
Section 3.15 Employee Grievances.
There are no actions or proceedings pending or, to the best of any
Borrower's knowledge, threatened against any Borrower or any Subsidiary
thereof, by or on behalf of or with respect to its employees, which would
have a Material Adverse Effect.
Section 3.16 Indebtedness.
There is set forth on Exhibit 3.16 annexed hereto a true and complete
schedule of all Indebtedness for borrowed money (including guaranties of
borrowed money) and Capitalized Lease Obligations of the Borrowers and each
Included Subsidiary thereof in existence as of the date of this Agreement,
setting forth with respect to all such indebtedness, the holders, the
payment schedules and the interest or other charges payable.
Article 4. The Closings; Conditions to the Loans.
Section 4.1 The Closing.
Subject to the satisfaction of the conditions precedent set forth in
Section 4.2 hereof, the Closing shall take place at the offices of Blank,
Rome, Comisky & McCauley, counsel to the Bank, simultaneously with the
execution and delivery of this Agreement.
Section 4.2 Conditions to Initial Advance.
The obligation of Bank to lend the initial advance pursuant to the
obligations made by it hereunder shall be subject to the fulfillment (to
the satisfaction of the Bank) of the following conditions precedent:
(a) Each Borrower shall have executed and delivered to Bank the
Notes.
(b) SSI and SSD shall have executed and delivered to the Bank
the Pledge Agreement as required by Section 2.16 hereof.
(c) Pioneer Metal Finishing, Inc., an Arizona corporation
("Pioneer"), and all other Subsidiaries of SSI of which the Borrowers own
at least 80% of the issued and outstanding common stock (except for Premier
Solutions Ltd. and Coherent Communications Systems Corporation) (the "80%
Subsidiaries"), shall have each executed and delivered to the Bank their
respective unconditional absolute guaranties of the obligations of the
Borrowers hereunder and under the Notes substantially in the form of
Exhibit "4.2(c)" hereto, Provided, that with respect to 80% Subsidiaries of
which the Borrowers own less than 100% of the issued and outstanding common
stock, their guaranties shall be limited in amount to the amount of
Borrowers' loans from time to time outstanding to such 80% Subsidiaries.
(d) Counsel to the Borrowers and counsel for guarantors shall
have delivered to the Bank their opinions, in form and substance
satisfactory to the Bank.
(e) The Bank shall have received copies of the following:
(i) All of the consents, approvals and waivers
referred to on Exhibit 3.2 hereto, except only those which, as stated on
Exhibit 3.2, shall not be delivered and each such consent, waiver and
approval so delivered shall be in form and substance satisfactory to the
Bank;
(ii) The certificates of incorporation of each
Borrower, and each company that serves as a guarantor of Borrowers'
obligations, certified by the Secretary of State of its respective state of
incorporation;
(iii) By-laws of each Borrower and Pioneer and any
other guarantor certified by its respective secretary;
(iv) Copies of all corporate action (including,
without limitation, directors' resolutions and stockholders' consents)
taken by each Borrower and of Pioneer and any other guarantor to authorize
the execution, delivery and performance of any agreement, instruments and
documents to which it is a party pursuant hereto or in connection herewith,
and an incumbency certificate with respect to each such corporation in each
case, certified by its respective secretary;
(v) Good standing certificates or telegrams as of
dates not more than twenty (20) days prior to the date of the Closing, with
respect to each Borrower and each Subsidiary thereof from the Secretary of
State of its state of incorporation;
(vi) Such other documents, including UCC-l Financing
Statement and UCC-3 Amendment Statements (or other document necessary to
grant or perfect a lien on personal property or real estate under the
applicable law of a particular jurisdiction) as Bank may require;
(f) (A) The Borrowers shall have complied and shall then be in
compliance with all of the terms, covenants and conditions of this
Agreement;
(B) There shall exist no Event of Default or Default; and
(C) The representations and warranties contained in
Article 3 hereof shall be true in all material respects;
(g) The Bank shall have received a Certificate (a "Compliance
Certificate") of the president, a vice president, the treasurer or the
corporate controller of each Borrower dated the date of the Closing
certifying that the conditions set forth in Subsection 4.2(f) hereof are
satisfied on such date;
(h) The Borrowers shall have delivered to the Bank, initialled
by SSI and SSD for identification, copies of the Financial Statements; and
(i) All legal matters incident to the transactions contemplated
hereby shall be satisfactory to counsel to Bank.
Section 4.3 Conditions to Subsequent Advances.
The obligation of Bank to make each advance of the Loans subsequent
to the Initial Advance shall be subject to the fulfillment (to the
satisfaction of the Bank) of the following conditions precedent:
(a) The Bank shall have received a request for a borrowing as
provided for in subsection 2.3 hereof.
(b) The Bank shall have received a Borrowing Base Certificate
dated the date of such advance and effective as of such date, and the
matters contained in Section 4.2(f) hereof shall be true as of such date.
(c) All legal matters incident to such advance shall be
satisfactory to counsel for the Bank.
Article 5. Delivery of Financial Reports, Documents
and Other Information.
While the Revolving Loan Commitment or any Loan remains outstanding,
so long as any Borrower is indebted to the Bank and until payment in full
of the Notes and full and complete performance of all of their other
obligations arising hereunder, the Borrowers shall deliver to Bank:
Section 5.1 Annual Financial Statements.
(a) Annually, as soon as available, but in any event within 90
days after the last day of each of its fiscal years, a Consolidated Balance
Sheet of SSI and its Subsidiaries as at such last day of the fiscal year,
and Consolidated Statements of operations, shareholders' equity and cash
flows of SSI and its Subsidiaries for such fiscal year, each prepared in
accordance with generally accepted accounting principles consistently
applied, each to be in reasonable detail and certified without
qualification or explanatory paragraphs by KPMG Peat Marwick or another
firm of independent certified public accountants satisfactory to Bank.
(b) Annually, as soon as available, but in any event within 120
days after the last day of each of its fiscal years, unaudited
Consolidating Balance Sheets of SSI and its Subsidiaries as at such last
day of the fiscal year, and unaudited Consolidating Statements of
operations and cash flows of SSI and its Subsidiaries, each to be in
reasonable detail.
(c) Annually, as soon as available, but in any event within 120
days after the last day of each of its fiscal years, an unaudited
Consolidated Balance Sheet of SSI and its Subsidiaries (excluding Compucom,
CenterCore and Coherent Communications Systems Corporation) and a schedule
showing the calculation of the covenants in Section 6.8, 6.9, 6.10 and 6.21
of this Credit Agreement each to be in reasonable detail.
Section 5.2 Quarterly Financial Statements.
(a) As soon as available, but in any event within 45 days after
the end of the first three fiscal quarterly periods of each fiscal year, an
unaudited Consolidated Balance Sheet of SSI and its Subsidiaries, as at
such last day of the fiscal quarter, and an unaudited Consolidated
Statement of Operations of SSI and its Subsidiaries for such fiscal
quarter, and with respect to the second and third fiscal quarters such
statements shall also include statements of operations and cash flows for
the period from the commencement of the then current fiscal year to the end
of such quarter, each to be in reasonable detail and certified by the chief
financial officer of the Borrowers as having been prepared in accordance
with generally accepted accounting principles consistently applied, subject
to year-end audit adjustments.
(b) As soon as available, but in any event within 45 days after
the end of the first three fiscal quarterly periods of each fiscal year,
unaudited Consolidating Balance Sheets of SSI and its subsidiaries as at
such last day of the fiscal quarter, and unaudited consolidating statements
of Operations of SSI and its Subsidiaries, for such fiscal quarter, and
with respect to the second and third fiscal quarters such statements shall
also include consolidating statements of operations and cash flows for the
period from the commencement of the current fiscal year to the end of such
quarter, each to be in reasonable detail.
(c) As soon as available, but in any event within 45 days after
the end of the first three fiscal quarterly periods of each fiscal year, an
unaudited Consolidated Balance Sheet of SSI (excluding Compucom, Center
Core and Coherent) and a schedule showing a calculation of the covenants in
Sections 6.8, 6.9, 6.10 and 6.21 of this Credit Agreement each to be in
reasonable detail.
Section 5.3 Additional Information.
Promptly after a written request therefor, such other financial data
or information evidencing compliance with the requirements of this
Agreement, the Notes and the Security Documents, as the Bank may reasonably
request from time to time.
Section 5.4 No Default Certificate.
At the same time as it delivers the financial statements required
under the provisions of Sections 5.1 and 5.2, a Certificate of the
president, treasurer, corporate controller or any vice president of SSI, to
the effect that no Event of Default hereunder, or Default, has occurred and
is continuing, or, if such cannot be so certified, specifying in reasonable
detail the exceptions, if any, to such statement. Such certificate shall
be accompanied by a detailed calculation indicating compliance with the
covenants contained in Sections 6.8, 6.9, 6.10 and 6.21 hereof.
Section 5.5 Copies of Other Reports.
Promptly upon receipt thereof, copies of all other final reports
submitted to the Borrowers by its independent accountants in connection
with any annual or interim audit of the books of the Borrowers made by such
accountants.
Section 5.6 Copies of Documents.
Promptly upon their becoming available, copies of any
(a) financial statements, notices (other than routine correspondence),
requests for waivers and proxy statements delivered by any Borrower or any
Subsidiary thereof to any other lending institution or to its stockholders
(as such); (b) material non-routine correspondence or material official
notices received by any Borrower or any Subsidiary thereof from any
federal, state or local governmental authority which regulates the
operations of such Borrower; (c) registration statements and any amendments
and supplements thereto, and any regular and periodic reports, if any,
filed by any Borrower or any Subsidiary thereof with any securities
exchange or with the Securities and Exchange Commission or any governmental
authority succeeding to any or all of the functions of the said Commission
(including without limitation form 10-K not later than 90 days after the
last day of each fiscal year of SSI and form 10-Q not later than 45 days
after the last day of each fiscal quarter of SSI); (d) all form 8-Ks not
later than 15 days after filing; and (e) letters of comment or material
non-routine correspondence sent to any Borrower or any Subsidiary thereof
by any such securities exchange or such Commission in relation to such
corporation and its affairs.
Section 5.7 Notice of Defaults.
Promptly, notice of the occurrence of an Event of Default hereunder,
or Default which would constitute or cause a material adverse change in the
condition, financial or otherwise, or the operations of any Borrower or
Subsidiary thereof.
Section 5.8 ERISA Notices.
(a) Concurrently with such filing, a copy of each annual report
which is filed with respect to each Plan with the Secretary of Labor or the
PBGC; and
(b) promptly, upon their becoming available, copies of: (i) all
non-routine correspondence with the PBGC, the Secretary of Labor or any
representative of the IRS with respect to any Plan; (ii) copies of all
reports received by any Borrower or Subsidiary from its actuary with
respect to any Plan; and (iii) copies of any notices of Plan termination
filed by any Plan Administrator (as those terms are used in ERISA) with the
PBGC and of any notices from the PBGC to any Borrower or Subsidiary with
respect to the intent of the PBGC to institute involuntary termination
proceedings; and (iv) copies of all non-routine correspondence with the
plan sponsor with respect to any multiemployer plan.
Article 6. Covenants.
While the Revolving Loan Commitment or any Loan remains outstanding,
so long as any Borrower is indebted to the Bank and until payment in full
of the Notes and full and complete performance of all of its other
obligations arising hereunder:
Section 6.1 Payment of Taxes and Claims.
The Borrowers will pay and discharge, and will cause the
Subsidiaries to pay and discharge, before they become delinquent:
(a) all taxes, assessments, and governmental charges or levies
imposed upon each such corporation, its income or its Property;
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like persons which, if unpaid, might
result in the creation of a Lien upon any such corporation's Property;
(c) all claims, assessments, or levies required to be paid by
any such entity pursuant to any agreement, contract, law, ordinance, or
governmental rule or regulation governing any pension, retirement, profit-
sharing or any similar plan of any such corporation; and
(d) all other obligations and liabilities of each such
corporation;
provided that items of the foregoing description need not be paid while
being contested in good faith and by appropriate proceedings and provided
further that a bond is filed in cases where the filing of a bond is
necessary to avoid the creation of a Lien against the Property of any such
corporation.
Section 6.2 Maintenance of Properties, Insurance, Records and
Corporate Existence; Inspections and Audits; etc.
The Borrowers will, and will cause their Subsidiaries to:
(a) Property. Maintain their respective Properties in good
condition, working order and repair, subject to normal wear and tear.
(b) Insurance.
(i) Maintain, with financially sound and reputable
insurers, insurance with respect to their respective Properties and
businesses against such casualties and contingencies of such types and in
such amounts as is customary in the case of corporations of established
reputations engaged in the same or a similar business and file with the
Bank upon its request a detailed list of the insurance then in effect,
stating the names of the insurance companies, the amounts and rates of
insurance, dates of the expiration thereof and the properties and risks
covered thereby.
(ii) Pay all premiums to the PBGC as may be required
for the plan termination and insolvency insurance provided by the PBGC.
(c) Financial Records. Keep proper books of record and account
in a manner satisfactory to the Bank in which full, true and correct
entries in accordance with generally accepted accounting principles shall
be made of all dealings or transactions in relation to its business
activities.
(d) Maintenance of Existence. Subject to the terms of Section
6.7 hereof, do or cause to be done all things necessary to preserve and
keep in full force and effect its and each Subsidiary's corporate existence
and all franchises, rights and privileges necessary for the proper conduct
of its and their respective businesses, continue to engage, and cause each
Subsidiary to continue to engage, in the same type of business as it and
they, respectively, are presently engaged.
(e) Delivery of Amendments. Promptly deliver to the Bank
copies of any amendments or modifications to its and each Subsidiary's
certificate of incorporation or by-laws, certified, with respect to the
certificate of incorporation, by the Secretary of State of its jurisdiction
of incorporation and, with respect to the by-laws, by the Secretary of the
corporation.
(f) Notice of Disputes. Promptly notify the Bank in writing of
any litigation, legal proceeding or dispute which might result in liability
in excess of $500,000 whether or not fully covered by insurance.
(g) Compliance with Law. Comply in all material respects with
all laws, ordinances, governmental rules and regulations to which such
entity is subject (including, without limitation, ERISA) and obtain any
licenses, permits, franchises, or other governmental authorizations
necessary to the ownership of their respective Properties or to the conduct
of their respective businesses. For purposes of the preceding sentence,
"comply in all material respects" shall have the meaning provided for in
Section 3.7 hereof.
(h) Inspections and Audits. Permit the Bank to make or cause
to be made, at the Borrowers' expense (which expense shall be limited to a
reasonable amount prior to any Default), inspections and audits of any
books, records and papers of each Borrower and Included Subsidiary and to
make extracts therefrom, or to make inspections and examinations of any
properties and facilities of any Borrower or Included Subsidiary on
reasonable notice, at all such reasonable times and as often as any Bank
may require.
Section 6.3 Indebtedness
The Borrowers shall not, and shall not permit any Included Subsidiary
to, create, incur, permit to exist or have outstanding any Indebtedness,
except:
(a) Indebtedness of the Borrowers to the Bank under this
Agreement and the Notes and Indebtedness of Included Subsidiaries to the
Borrowers arising from loans and intercompany advances as and to the extent
permitted under Section 6.6 hereof;
(b) Taxes, assessments and governmental charges, current trade
accounts payable, accrued expenses, customer payments received in advance
and deferred liabilities other than for borrowed money (e.g., deferred
compensation and deferred taxes), in each case incurred and continuing in
the ordinary course of business;
(c) Indebtedness set forth on Exhibit 3.16 annexed hereto;
(d) Indebtedness in an aggregate amount for Borrowers and all
Included Subsidiaries not to exceed $6,000,000 at any time outstanding; and
(e) Indebtedness of Borrowers owing to their Subsidiaries in an
aggregate amount not to exceed $5,000,000 at any time outstanding.
Section 6.4 Liens.
No Borrower will, nor will the Borrowers permit any Included
Subsidiary to, cause or permit in the future (upon the happening of a
contingency or otherwise) any of their respective Properties, whether now
owned or hereafter acquired, to be subject to a Lien except:
(a) Liens created by the Security Documents;
(b) Liens for taxes or other governmental charges which are not
delinquent or which are being contested in good faith and for which a
reserve shall have been established as required in accordance with
generally accepted accounting principles;
(c) Pledges or deposits to secure obligations under workmen's
compensation laws or similar legislation; pledges or deposits to secure
performance in connection with bids, tenders, contracts (other than
contracts for the payment of money) or leases to which either of the
Borrowers or any Included Subsidiary is a party; deposits to secure public
or statutory obligations; materialmen's, mechanics', carriers', workmen's,
repairmen's or other like liens, or deposits to obtain the release of such
liens, in an aggregate amount with respect to the Borrowers and all
Included Subsidiaries not exceeding $100,000 at any one time outstanding;
and deposits to secure surety, appeal or customs bonds on which either of
the Borrowers or any Included Subsidiary is the principal; as to all of the
foregoing, however, only to the extent arising and continuing in the
ordinary course of business;
(d) As set forth on Exhibit 3.16 annexed hereto which shall
evidence indebtedness not to exceed $2,600,000 in the aggregate;
(e) Liens for purchase money financing of equipment or real
estate after the date hereof, which liens shall secure Indebtedness not to
exceed $800,000.00 in the aggregate at any one time outstanding.
Section 6.5 Guaranties.
The Borrowers and their Included Subsidiaries shall not assume,
endorse, be or become liable for, or guarantee, the obligation of any
Person, except:
(a) by the endorsement of negotiable instruments for deposit or
collection in the ordinary course of business;
(b) guaranties in favor of the Bank of obligations of others;
(c) guaranties existing on the date hereof, the aggregate
amount of which shall not exceed $14,643,000;
(d) future guaranties to the extent that, after giving effect
to such future guaranties, the aggregate amount of all guaranties by the
Borrowers and their Included Subsidiaries (including those referred to in
Paragraph (c) hereof and excluding those referred to in Paragraph (a)
hereof) would not exceed Fifteen Million ($15,000,000.00) in the aggregate;
and
(e) Guaranties (the "REIT Guaranties") in favor of the
operating partnership of the Safeguard Realty Trust, the aggregate amount
of which shall not exceed SEVENTEEN MILLION DOLLARS ($17,000,000).
For the purposes hereof, the term "guaranties" shall mean any obligation to
pay money on behalf of or in regard to another Person, including without
limitation any obligation as guarantor, surety, purchaser, indemnitor,
lessee, repurchaser, investor, contributor, subscriber, lender or
otherwise. It is intended that the term "guaranties" be interpreted in the
broadest sense possible and the examples in the foregoing sentence are
illustrations and not limitations.
Furthermore, obligations with respect to letters of credit shall not be
"guaranties" which are permitted within the Fifteen Million Dollars
($15,000,000) in accordance with this section 6.5.
Section 6.6 Investments and Loans.
The Borrowers and their Included Subsidiaries may make Investments in
other Persons, in addition to Investments existing on the date of Closing
and disclosed in Exhibit "6.6" hereto and in addition to Borrowers'
Investment in CompuCom Preferred Stock to be made with the proceeds of the
Term Loan, subject to the following limitations:
(a) (i) The aggregate of all Investments may not exceed
$20,000,000 for each of Borrowers' fiscal year 1994, fiscal year 1995,
fiscal year 1996 and fiscal year 1997.
(ii) Subject to the overall limit in subsection (a)(i)
and except as provided in subsection (a)(iii) below, Borrowers may only
invest up to $5,000,000.00 in any fiscal year for each existing Investment
or Subsidiary and may only invest up to $6,000,000.00 in any fiscal year
for each new Investment comprised of an acquisition of assets or stock of a
third Person.
(iii) Subject to the overall limitation contained
in
subsection (a)(i) above and notwithstanding subsec-tion (a)(ii) above,
Borrowers shall not invest more than $5,000,000.00 into CompuCom and
CenterCore, in the aggregate, in any one fiscal year.
(b) Borrowers shall notify the Bank of any Investment in any
Person in which no previous Investment has been made by any Borrower,
within a reasonable period after making such Investment, and shall provide
the Bank with full information on the Investment, including without
limitation, balance sheets, statements of income, statements of
stockholders equity and such other information as the Bank may request.
Section 6.7 Consolidation and Merger.
No Borrower will, nor will the Borrowers permit any Included
Subsidiary to, consolidate with or merge into any other Person (including,
without limitation, either Borrower or any Subsidiary) or permit any other
Person to consolidate with or merge into any Borrower or Included
Subsidiary except that SSD may merge with and into SSI.
Section 6.8 Tangible Net Worth.
The Borrowers shall not permit Tangible Net Worth at any time to be
less than $70,000,000 plus 50% of after tax earnings for all periods after
March 31, 1994 (determined on a cumulative basis).
Section 6.9 Indebtedness to Tangible Net Worth.
The Borrowers shall not permit the ratio of the amount of
Indebtedness to Tangible Net Worth at any time to be greater than 2.5 to 1.
Section 6.10 Interest Coverage Ratio.
The Borrowers shall not permit the Interest Coverage Ratio to be less
than 1.25 to 1 at any time.
Section 6.11 Change of Business; Sale of Assets.
The Borrowers shall not, and shall not permit any Subsidiary, to make
any material change in its business or in the nature of its operations or
liquidate or dissolve itself (or suffer any liquidation or dissolution) or
convey, sell, lease, or otherwise dispose of any of its Properties, assets
or business, except in the ordinary course of business and for a fair
consideration, or dispose of any shares of stock or any Indebtedness of
others owing to either Borrower or any Subsidiary whether now owned or
hereafter acquired; provided, however, that nothing contained in this
Section 6.11 shall prohibit (i) the sale of any Investment, the stock of
which Investment is not a part of the Pledged Securities, so long as Bank
has consented to the sale of such Investment, in writing, or (ii) the
making of any Investment permitted under Section 6.6 hereof or (iii) sales
of Collateral Coverage Securities in the ordinary course of either
Borrower's business provided that Borrowers are at all times in compliance
with the Collateral Coverage Ratio and the other provisions of Section 6.15
hereof.
Section 6.12 Leases.
The Borrowers shall not, and shall not permit their Included
Subsidiaries to, enter into any leases (other than leases giving rise to
Capitalized Lease Obligations) to the extent that, after giving effect to
any such lease, the aggregate amount of rental payments and all other
payments by the Borrowers and their Included Subsidiaries under such leases
in any fiscal year of SSI would exceed $5,000,000.
Section 6.13 Issuance of Stock.
The Borrowers will not permit SSD, or any Person who has guaranteed
Borrowers' obligations to the Bank pursuant to Sections 4.2(c) or 6.18
hereof, to, issue, sell or dispose of any shares of stock of any class,
excluding stock hereafter issued pursuant to outstanding warrants, options,
option plans, contracts or commitments listed in Exhibit 3.1.
Section 6.14 Fiscal Year.
The Borrowers and their Included Subsidiaries shall not change their
fiscal year.
Section 6.15 Required Minimum Value of Novell and Sybase.
Borrowers shall at all times maintain in pledge with Bank no less
than the Required Minimum in value of Novell common stock and Sybase common
stock.
Section 6.16 ERISA Compliance; Obligations.
(a) The Borrowers and their Subsidiaries shall:
(i) comply in all material respects with all
applicable provisions of ERISA now or hereafter in effect;
(ii) promptly notify the Bank in writing of the
occurrence of any Reportable Event, as defined in ERISA together with a
description of such Reportable Event and a statement of the action that any
such Borrower or Subsidiary intends to take with respect thereto, together
with a copy of the notice (if any) thereof given to the PBGC; and
(iii) promptly notify the Bank in writing of any
proposed withdrawal from a multiemployer plan.
(b) The Borrowers and their Subsidiaries will not:
(i) be or become obligated to the PBGC or any
multiemployer plan in excess of $50,000; or
(ii) be or become obligated to the IRS with respect to
excise or other penalty taxes provided for in those provisions of the
Internal Revenue Code which were enacted pursuant to ERISA, as now in
effect or hereafter amended or supplemented, in excess of $50,000.
Section 6.17 Prepayments.
None of the Borrowers or any Included Subsidiary thereof will make
any voluntary or optional prepayment of any Indebtedness for borrowed money
incurred or permitted to exist under the terms of this Agreement, other
than Indebtedness evidenced by the Notes, subject to the prepayment terms
hereof.
Section 6.18 Guarantees of Newly Acquired Subsidiaries.
If Borrowers should acquire any additional Subsidiaries, SSI will not
disburse any of the proceeds of the Loans to any such Subsidiary unless and
until, as to any Subsidiary in which any Borrower owns more than 80% of the
issued and outstanding common stock of such Subsidiary ("Additional 80%
Subsidiaries"), such Additional 80% Subsidiary shall have delivered an
absolute unconditional guarantee of the Loans and the obligations of the
Borrowers hereunder and under the Notes (limited, however, in amount, with
respect to Additional 80% Subsidiaries in which Borrowers own less than
100% of the issued and outstanding common stock, to the amount of
Borrowers' loans from time to time outstanding to such Additional 80%
Subsidiaries) substantially in the form of Exhibit "6.18", together with
(i) the certificate of incorporation of such corporation certified by its
secretary, (ii) the by-laws of such corporation certified by its secretary,
(iii) copies of all corporate action (including, without limitation,
directors' resolutions and stockholders' consents) to authorize the
execution, delivery and performance of such guarantee, (iv) a certificate
of incumbency of the officer executing such guarantee certified by such
corporation's secretary, and (v) a certificate of good standing or telegram
from the Secretary of State of such corporation dated not more than ten
(10) days prior to the date of the delivery of such guarantee.
Section 6.19 Letters of Credit.
Neither the Borrowers nor any Included Subsidiary shall obtain any
letters of credit or enter into any agreements or execute any obligations
with respect to letters of credit except with respect to letters of credit
issued by Bank pursuant hereto.
Section 6.20 Dispositions.
The Borrowers shall notify the Bank of the disposition of the capital
stock or other ownership interest in any Person by telephone at the latest
contemporaneously therewith followed promptly by written notice. In the
event of the disposition of Pledged Securities written notice shall not be
later than twenty-four (24) hours after the time when the Bank is to
deliver such Pledged Securities. The proceeds of the sale of any
Collateral shall be applied as set forth in Section 4.3 of the Pledge
Agreement.
Section 6.21 Fixed Charge Coverage Ratio.
The Borrowers shall not permit the Fixed Charge Coverage Ratio
to be less than 1.25 to 1 as of the end of each fiscal quarter.
Article 7. Events of Default.
If any one or more of the following events ("Events of Default")
shall occur and be continuing (except that, with respect to an Event of
Default under Section 7.2 below, whether or not such Event of Default shall
be continuing), the Revolving Loan Commitment and any obligation to advance
further installments of the Term Loan shall terminate and the entire unpaid
balance of the principal of and interest on the Notes outstanding and all
other obligations and Indebtedness of the Borrowers to the Bank arising
hereunder and under the other Loan Documents shall immediately become due
and payable upon written notice to that effect given to SSI, as agent for
the Borrowers, by the Bank (except that in the case of the occurrence of
any Event of Default described in Section 7.6 no such notice shall be
required), without presentment or demand for payment, notice of non-
payment, protest or further notice or demand of any kind, all of which are
expressly waived by each of the Borrowers:
Section 7.1 Payments.
(a) Failure to make any payment of principal or interest upon
the Notes, or to make any payment of the commitment fee, within seven (7)
days after the date upon which any such payment is due; or
(b) Should the principal balance (including the face amount of
outstanding letters of credit) outstanding under the Loans at any time
exceed the Collateral Coverage Base; or
(c) Failure of Borrowers to at all times maintain in pledge
with Bank the Required Minimum of Novell and Sybase common stock; or
Section 7.2 Covenants.
Failure by any Borrower or Subsidiary (or Included Subsidiary, as
applicable) to perform or observe any of their respective agreements
contained in Article 6 hereof (except Sections 6.1, 6.2, 6.8, 6.9, 6.10,
6.16(a) or 6.21 of Article 6); or
Section 7.3 Other Covenants.
Failure by any Borrower or any Subsidiary (or Included Subsidiary, as
applicable) to perform or observe any other term, condition or covenant of
this Agreement not described in Section 7.2 above, the Notes, the Security
Documents, or any other agreement or document delivered pursuant hereto or
thereto which shall remain unremedied for a period of thirty (30) days
after notice thereof shall have been given by the Bank to SSI; or
Section 7.4 Other Defaults.
(a) Failure by any Borrower or Included Subsidiary to perform
or observe any term, condition or covenant of any bond, note, debenture,
loan agreement, indenture, guaranty, trust agreement, mortgage or similar
instrument (including, without limitation, any debt which is subordinated
to the obligations created pursuant to this Agreement) to which any
Borrower or Included Subsidiary is a party or by which it is bound, or by
which any of its Properties or assets may be affected (a "Debt
Instrument"), and, as a result thereof (assuming the giving of appropriate
notice thereof, if required), Indebtedness in excess of $500,000 which is
included therein or secured or covered thereby shall have been declared due
and payable prior to the date on which such Indebtedness would otherwise
become due and payable; or
(b) Any event or condition referred to in any Debt Instrument
shall have occurred or failed to occur, and, as a result thereof,
Indebtedness in excess of $500,000 which is included therein or secured or
covered thereby shall have been declared due and payable prior to the date
on which such Indebtedness would otherwise become due and payable; or
(c) Failure to pay any Indebtedness for borrowed money in
excess of $500,000 due at final maturity or pursuant to demand under any
Debt Instrument; or
(d) Should the guarantors under the REIT Guaranties ever be
called upon by the obligee thereunder to make any payments thereunder which
equal or exceed $2,500,000 in the aggregate on a cumulative basis.
Section 7.5 Representations and Warranties.
Any representation or warranty made in writing to the Bank in any of
the Loan Documents or in connection with the making of the Loans, or any
certificate, statement or report
made or delivered in compliance with this Agreement, shall have been false
or misleading in any material respect when made or delivered; or
Section 7.6 Bankruptcy.
(a) Any Borrower or Subsidiary shall make an assignment for the
benefit of creditors, file a petition in bankruptcy, be adjudicated
insolvent or bankrupt, suffer an order for relief under any federal
bankruptcy law, petition or apply to any tribunal for the appointment of a
receiver, custodian, or any trustee for it or a substantial part of its
assets, or shall commence any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or there shall have been filed any such petition or application, or
any such proceeding shall have been commenced against it, which remains
undismissed for a period of sixty (60) days or more; or any order for
relief shall be entered in any such proceeding; or any Borrower or
Subsidiary by any act or omission shall indicate its consent to, approval
of or acquiesced in any such petition, application or proceeding or the
appointment of a custodian, receiver or any trustee for it or any
substantial part of any of its properties, or shall suffer any
custodianship, receivership or trusteeship to continue undischarged for a
period of sixty (60) days or more; or
(b) Any Borrower or Subsidiary shall generally not pay its
debts as such debts become due; or
(c) Any Borrower or Subsidiary shall have concealed, removed,
or permitted to be concealed or removed, any part of its property, with
intent to hinder, delay or defraud its creditors or any of them, or made or
suffered a transfer of any of its property which may be fraudulent under
any bankruptcy, fraudulent conveyance or similar law; or shall have made
any transfer of its property to or for the benefit of a creditor at a time
when other creditors similarly situated have not been paid; or shall have
suffered or permitted, while insolvent, any creditor to obtain a lien upon
any of its property through legal proceedings or distraint which is not
vacated within sixty (60) days from the date thereof; or
Section 7.7 Judgments
Any judgment against any Borrower or Subsidiary or any attachment,
levy of execution against any of their respective properties for any amount
in excess of $500,000 shall remain unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of sixty (60) days or
more; or
Section 7.8 ERISA.
(a) The termination of any Plan or the institution by the PBGC
of proceedings for the involuntary termination of any Plan, in either case,
with a vested unfunded liability in excess of $500,000; or
(b) Failure by any Borrower or Subsidiary to fund, in
accordance with the applicable provisions of ERISA, each of the Plans
hereafter established or assumed by it provided, that such failure to fund
shall not constitute an Event of Default hereunder unless such failure
shall continue for 5 days after the date on which such funding was
required; or
(c) The withdrawal by any Borrower or Subsidiary from any
multiemployer plan giving rise to a withdrawal liability in excess of
$500,000; or
Section 7.9 Liens.
Any of the Liens created and granted to the Bank under the Security
Documents shall at any time fail to be valid, first, perfected Liens,
subject to no prior or equal Lien; or
Section 7.10 Maintaining Ownership.
(a) SSI shall cease at any time to own beneficially and of
record: (i) 51% of the issued and outstanding shares of stock of Center
Core, Inc.; (ii) 51% of the issued and outstanding voting stock and
securities convertible to voting stock of Compucom; and (iii) 80% of the
issued and outstanding shares of capital stock of Pioneer.
(b) Any Person shall acquire more than 30 percent of the issued
and outstanding capital stock of SSI.
Section 7.11 Remedies.
In the event an Event of Default shall have occurred and be
continuing (except that, with respect to an Event of Default under Section
7.2 above, whether or not such Event of Default shall be continuing), the
Bank may thereupon or thereafter, in addition to its other rights and
remedies referred to herein, take any action at law or in equity to collect
the outstanding principal amount of and all interest accrued on the Loans
and all other obligations and Indebtedness of the Borrowers to the Bank
under this Agreement and the other Loan Documents and to enforce
performance and observance of such obligation by the Borrowers and may, in
connection therewith, exercise any and all rights and remedies available at
law or in equity or under the Security Documents with respect to the
collateral security created and granted thereunder; provided, however, that
the foregoing provisions of this Article 7 shall not prevent Bank from
enforcing its rights under the Notes or otherwise.
Article 8. Miscellaneous Provisions.
Section 8.1 Fees and Expenses.
The Borrowers, jointly and severally, will promptly (and in any event
within 30 days after receipt of an invoice or statement therefor) pay all
reasonable costs of preparing and complying with this Agreement and all
reasonable costs and expenses of the issue of the Notes and of the
performance by all of the Borrowers of and compliance by all of them with
all agreements and conditions contained herein on their part to be
performed or complied with (including, without limitation, all costs of
filing or recording any assignment, mortgages, financing statements and
other documents), and the reasonable fees and expenses and disbursements of
counsel to the Bank in connection with the preparation, execution and
delivery, administration, interpretation and enforcement of this Agreement,
the Notes, the Security Documents, the other Loan Documents and all other
agreements, instruments and documents relating to this transaction. The
Borrowers, jointly and severally, shall at all times protect, indemnify,
defend and save harmless the Bank from and against any and all claims,
actions, suits and other legal proceedings (commenced or asserted by or
against the Bank), and liabilities, damages, costs, interest, charges,
counsel fees and other expenses and penalties which the Bank may, at any
time, sustain or incur by reason of or in consequence of or arising out of
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, except and to the extent that Borrowers
prove that such claim, action, suit, liability, etc. was caused by the
gross negligence or willful misconduct or manifest bad faith of the Bank.
The provisions of this Section 8.1 shall survive the payment of the Notes
or any disposition thereof by the Bank and the termination of this
Agreement.
Section 8.2 Taxes.
If, under any law in effect on the date of the closing of any Loan
hereunder, or under any retroactive provision of any law subsequently
enacted, it shall be determined that any Federal, state or local tax is
payable in respect of the issuance of the Notes, or in connection with the
filing or recording of any assignment, mortgages, financing statements, or
other documents (whether measured by the amount of indebtedness secured or
otherwise) as contemplated by this Agreement, then the Borrowers will pay
any such tax and all interest and penalties, if any, and will indemnify the
Bank against and save it harmless from any loss or damage resulting from or
arising out of the nonpayment or delay in payment of any such tax. If any
such tax or taxes shall be assessed or levied against Bank, Bank may notify
the Borrowers and make immediate payment thereof, together with interest or
penalties in connection therewith, and shall thereupon be entitled to and
shall receive immediate reimbursement there for from the Borrowers.
Notwithstanding any other provision contained in this Agreement, the
covenants and agreements of the Borrowers in this Section 8.2 shall survive
payment of the Notes and the termination of this Agreement.
Section 8.3 Payments.
All payments by the Borrowers on account of principal, interest and
other charges (including any indemnities) shall be made to the Bank at its
Principal Office, in lawful money of the United States of America in
immediately available funds, by wire transfer or otherwise, not later than
12:00 noon Philadelphia time on the date such payment is due. Any such
payment made on such date but after such time shall, if the amount paid
bears interest, be deemed to have been made on and interest shall continue
to accrue and be payable thereon until the next succeeding Business Day.
If any payment of principal or interest becomes due on a day other than a
Business Day, such payment may be made on the next succeeding Business Day
and such extension shall be included in computing interest in connection
with such payment. All payments hereunder and under the Notes shall be
made without set-off or counterclaim and in such amounts as may be
necessary in order that all such payments shall not be less than the
amounts otherwise specified to be paid under this Agreement and the Notes
(after withholding for or on account of (i) any present or future taxes,
levies, imposts, duties or other similar charges of whatever nature imposed
by any government or any political subdivision or taxing authority thereof,
other than any tax (except those referred to in clause (ii) below) on or
measured by the net income of the Bank pursuant to applicable federal,
state and local income tax laws, and (ii) deduction of an amount equal to
the taxes on or measured by the net income of Bank payable by Bank with
respect to the amount by which the payments required to be made under this
sentence exceed the amounts otherwise specified to be paid in this
Agreement and the Notes). Upon payment in full of the Notes, the Bank
shall mark the Notes "Paid" and return them to SSI, as agent for the
Borrowers.
Section 8.4 Survival of Agreements and Representations; Waiver of
Trial by Jury.
All agreements, representations and warranties made herein shall
survive the delivery of this Agreement and the Notes. EACH BORROWER
IRREVOCABLY WAIVES TRIAL BY JURY AND THE RIGHT THERETO IN ANY LITIGATION IN
ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF, THIS
AGREEMENT, THE NOTES, THE SECURITY DOCUMENTS, ANY OF THE OTHER LOAN
DOCUMENTS, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS
AGREEMENT, OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR
ENFORCEMENT THEREOF.
Section 8.5 Lien on and Set-off of Deposits.
As security for the due payment and performance of all the
Obligations, each Borrower hereby grants to the Bank a lien on and security
interest in any and all deposits or other sums at any time credited by or
due from the Bank to such Borrower, whether in regular or special
depository accounts or otherwise, and any and all monies, securities and
other property of such Borrower, and the proceeds thereof, now or
hereinafter held or received by or in transit to Bank from or for such
Borrower, whether for safekeeping, custody, pledge, transmission,
collection or otherwise, and any such deposits, sums, monies, securities
and other property, may at any time be set-off, appropriated and applied by
Bank against any of the obligations, indebtedness or liabilities hereunder,
under the Note and under the Security Documents whether or not any of such
obligations is then due or is secured by any collateral, or, if it is so
secured, whether or not the collateral held by the Bank is considered to be
adequate, all as set forth in and pursuant to Section 2.16 hereof.
Section 8.6 Modifications, Consents and Waivers;
Entire Agreement.
No modification, amendment or waiver of or with respect to any
provision of this Agreement, the Notes, the Security Documents, or any of
the other Loan Documents and all other agreements, instruments and
documents delivered pursuant hereto or thereto, nor consent to any
departure by any Borrower or Subsidiary from any of the terms or conditions
thereof, shall in any event be effective unless it shall be in writing and
signed by the Bank and then any such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No
consent to or demand on any Borrower or Subsidiary in any case shall, of
itself, entitle it to any other or further notice or demand in similar or
other circumstances. This Agreement embodies the entire agreement and
understanding among the Bank and the Borrowers and supersedes all prior
agreements and understandings relating to the subject matter hereof.
Section 8.7 Remedies Cumulative.
Each and every right granted to the Bank hereunder or under any other
document delivered hereunder or in connection herewith, or allowed it by
law or equity, shall be cumulative and may be exercised from time to time.
No failure on the part of the Bank to exercise, and no delay in exercising,
any right shall operate as a waiver thereof, nor shall any single or
partial exercise of any right preclude any other or future exercise thereof
or the exercise of any other right. The due payment and performance of any
Borrower's indebtedness, liabilities and obligations under the Notes and
this Agreement shall be without regard to any counterclaim, right of offset
or any other claim whatsoever which such Borrower may have against Bank and
without regard to any other obligation of any nature whatsoever which Bank
may have to such Borrower and no such counter-claim or offset shall be
asserted by such Borrower in any action, suit or proceeding instituted by
Bank for payment or performance of such Borrower's indebtedness,
liabilities or obligation under the Notes, this Agreement, the Security
Documents or otherwise.
Section 8.8 Further Assurances.
At any time and from time to time, upon the request of the Bank, the
Borrowers shall execute, deliver and acknowledge or cause to be executed,
delivered and acknowledged, such further documents and instruments and do
such other acts and things as the Bank may reasonably request in order to
fully effect the purposes of this Agreement, the Notes, the Security
Documents, the other Loan Documents and any other agreements, instruments
and documents delivered pursuant hereto or in connection with the Loans.
Section 8.9 Notices.
(a) All notices, requests, reports and other communications
pursuant to this Agreement shall be in writing, either by letter (delivered
by hand or sent by Certified mail, return receipt requested, except for
routine reports which shall be by ordinary first class mail) or by telegram
or telecopy, and, addressed as follows:
(i) If to any Borrower:
To the mailing address as set forth in the heading of
this Agreement;
Attention: Gerald Wilk,
Chief Financial Officer
(ii) If to Bank:
To its address set forth in the heading of this
Agreement;
Attention: Joseph G. Meterchick,
Vice President
With a copy to:
Blank Rome, Comisky & McCauley
1200 Four Penn Center Plaza
Philadelphia, PA 19103
Attention: Bradley D. O'Brien, Esquire
Any notice, request or communication hereunder shall be deemed to have been
given on the day on which it is delivered by hand to such party at its
address specified above, or, if sent by mail, on the third Business Day
after the day deposited in the mail, postage prepaid, or in the case of
telegraphic notice, when delivered to the telegraph company, addressed as
aforesaid. Any party may change the person or address to whom or which
notices are to be given hereunder, by notice duly given hereunder;
provided, however, that any such notice shall be deemed to have been given
hereunder only when actually received by the party to which it is
addressed.
(b) Each of the Borrowers hereby revocably appoints SSI as its
agent to give and receive any notice, request, report and other
communication pursuant to this Agreement, and for such other purposes as
are provided for herein. Each of the Borrowers agrees that the Bank may
rely and act upon, without any investigation or inquiry as to the authority
or power to give, or accuracy or reasonableness of, and each of the
Borrowers will be unconditionally and irrevocably bound and obligated by
any instructions, notice, request, report or other communications given by
SSI to the Bank.
Section 8.10 Counterparts.
This Agreement may be signed in any number of counterparts with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
Section 8.11 Construction; Governing Law; Jurisdiction.
The headings used in this Agreement are for convenience only and
shall not be deemed to constitute a part hereof. All uses herein of the
masculine gender or of the feminine or neuter gender or plural or singular
terms includes the other as the context may require. This Agreement, the
Notes, the Security Documents, the other Loan Documents and all other
documents and instruments executed and delivered in connection herewith and
therewith, shall be governed by, and construed and interpreted in
accordance with, the laws of the Commonwealth of Pennsylvania applicable to
contracts executed and to be performed therein. The Borrowers hereby
irrevocably consent to the jurisdiction of the Courts of Common Pleas of
the Commonwealth of Pennsylvania and of the United States District Court
for the Eastern District of Pennsylvania in any and all actions and
proceedings in connection with this Agreement, the Notes or the Security
Documents and irrevocably consent, in addition to any method of service of
process permissible under applicable law, to service of process by
certified mail, return receipt requested to the addresses of Borrowers as
set forth herein. The Borrowers agree that in any action or proceeding
brought by them in connection with this Agreement or the transactions
contemplated hereby, exclusive jurisdiction shall be in the courts of the
Courts of Common Pleas of the Commonwealth of Pennsylvania, and the United
States District Court for the Eastern District of Pennsylvania.
Section 8.12 Severability.
The provisions of this Agreement are severable, and if any clause or
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall
not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision in this Agreement in any
jurisdiction. Each of the covenants, agreements and conditions contained
in this Agreement is independent and compliance by any Borrower with any of
them shall not excuse non-compliance by any Borrower with any other.
Section 8.13 Binding Effect; No Assignment or Delegation.
This Agreement shall be binding upon and inure to the benefit of each
Borrower and its successors and to the benefit of the Bank and its
successors and assigns. The rights and obligations of each Borrower under
this Agreement shall not be assigned or delegated without the prior written
consent of the Bank, and any purported assignment or delegation without
such consent shall be void.
Section 8.14 Joint and Several Obligations.
(a) All of the Indebtedness, liabilities and obligations of the
Borrowers under this Agreement and the Loan Documents shall be the joint
and several obligations of the Borrowers.
(b) Each Borrower agrees that the Bank may, in its discretion,
without affecting or modifying the joint and several obligations of each
Borrower for all of the Indebtedness, liabilities and obligations under
this Agreement and the Loan Documents including, without limitation, the
Obligations, (i) release, discharge, compromise or settle with, or grant
indulgences to, refuse to proceed or take action against, any one or more
of the Borrowers with respect to their respective obligations under this
Agreement, including, without limitation, the Obligations, (ii) release,
surrender, modify, impair, exchange, substitute or extend the period or
duration of time for the performance, discharge or payment of, refuse to
enforce, compromise or settle its Lien against, any and all deposits and
other property or assets on which the Bank may have a Lien or which secures
any of the Indebtedness, liabilities and obligations, including without
limitation, the Obligations of any Borrower under this Agreement, (iii)
amend, modify, alter or restate, in accordance with their respective terms,
this Agreement or any of the Loan Documents or otherwise, accept deposits
or other property from, or enter into transactions of any kind or nature
with, any one or more of the Borrowers, and (iv) disburse all or part of
the proceeds of all or any Loans as instructed by SSI as agent for all of
the Borrowers, without inquiry or investigation of any kind by the Bank as
to the use of such proceeds (each Borrower confirms that it will be
directly or indirectly benefitted by each and every Loan and any and all
other advances under this Agreement or any of the Loan Documents).
Section 8.15 Third Party.
No rights are intended to be created hereunder for the benefit of any
Third Party donee, creditor or incidental beneficiary.
CONTINENTAL BANK
By:
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SAFEGUARD SCIENTIFICS, INC.
By:
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Attest:
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SAFEGUARD SCIENTIFICS
(DELAWARE) INC.
By:
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Attest:
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