SECOND AMENDED AND RESTATED CREDIT AGREEMENT
AGREEMENT made as of this 1st day of February, 1995, by and
among:
MIDLANTIC BANK, N.A. (successor by merger to Continental
Bank), a national banking association, 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 a certain
secured credit facility, 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.
"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 40% $25 Million
Novell 50% N/A
Sybase 50% N/A
Coherent 33.33% $20 Million
Tangram 25% $5 Million
Gandalf 25% $5 Million
"Collateral Coverage Securities" - Pledged Securities
consisting of common stock issued by one or more of the following
corporations but only as long as such securities are traded on a
nationally recognized securities exchange or on the NASDAQ and OTC
markets:
(i) CompuCom Systems, Inc. ("CompuCom")
(ii) Cambridge Technology Partners, Inc. ("Cambridge")
(iii) Novell, Inc. ("Novell")
(iv) Sybase, Inc. ("Sybase")
(v) Coherent Communications Systems Corporation
("Coherent")
(vi) Tangram Enterprise Solutions, Inc.
("Tangram")
(vii) Gandalf Technologies, Inc. ("Gandalf")
"Commitment Termination Date" - January 31, 1998.
"Compliance Certificate" - as defined in Section 4.2(g)
hereof.
"Debt Instrument" - as defined in Section 7.4(a) hereof.
"Default" - an event which with notice or the lapse
of time or both would constitute an Event of Default.
"Dollars" and "$" - 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
September 30, 1994, and the unaudited internal consolidating statement
of operations and cash flows, of SSI and its Subsidiaries (including,
without limitation, SSD) for the nine months then ended; and
(c) The unaudited consolidated balance sheets of SSI
and its Subsidiaries (including, without limitation, SSD) as at
September 30, 1994 and the related unaudited consolidated statement of
operations and cash flows, and the notes thereto, of SSI and its
Subsidiaries for the nine months then ended.
"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 Note, 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.
"Loan" - the Revolving 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
$1,500,000.00 as to any Borrower or Subsidiary or as to all Borrowers
and Subsidiaries taken as a whole.
"Note" - the Revolving Loan 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 dated June 30, 1994
and by Second 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 Note.
"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 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; (f) any book
gain (or loss) on the sale of securities; or (g) losses resulting from
CenterCore, Inc. in fiscal year 1994. 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.
"Prior Agreement" - that certain Amended and Restated
Credit Agreement dated June 30, 1994, between Borrowers and Bank, as
amended to date.
"Quarterly Dates" - the last Business Day of each March,
June, September and December.
"Revolving Credit Period" - as defined in Section 2.1(a)
hereof.
"Revolving Loan" - as defined in Section 2.1 hereof.
"Revolving Loan Commitment" - $75,000,000, as the same
may be reduced pursuant to Section 2.2 hereof.
"Revolving Loan Note" - as defined in Section 2.9 hereof.
"Security Documents" - as defined in Section 2.15 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.
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 and 6.10
hereof shall be computed on a consolidated basis, excluding, however,
all Subsidiaries other than Included Subsidiaries.
Article 2. Amount and Terms of Loan; 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 Loan.
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 2.08(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 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)
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 on February 1 of
each year, commencing February 1, 1996, a non-refundable Agent Fee (the
"Agent Fee") in the amount of $75,000. On the date hereof, Borrower
shall pay to Bank an Agent Fee for the period from the date hereof
through January 31, 1996 in the amount of $66,666.00.
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
Loan hereunder as provided in Section 2.3 hereof. Subject to the terms
and conditions of this Agreement (including the notice provisions of
Section 2.08(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 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.
Section 2.6 Use of Proceeds of Loan.
The proceeds of the Revolving Loan shall be used, initially,
for the purpose of repaying in full all outstanding principal and
interest on the Term Loan referred to in the Prior Agreement, and
thereafter 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.
Section 2.7 Payment of Loan. Unless sooner accelerated
pursuant to the terms hereof, the Revolving Loan shall be due and
payable on the Commitment Termination Date. Borrowers will, on the
Commitment Termination Date, provide Bank with cash collateral in an
amount equal to 105% of the face amount of all issued and outstanding
letters of credit issued under this Agreement.
Section 2.8 Interest.
(a) Subject to the provisions of subsection (c)
hereof, the Borrowers shall pay to Bank interest on the unpaid principal
amount of each Revolving Loan Advance for the period commencing on the
date of such Revolving Loan Advance until such Revolving Loan Advance
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
Revolving Loan Advance, 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 the 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
Note, 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 Note, 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 Note 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 2.8(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 Regulation 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 2.8(c) hereof, which notice shall be
given no later than 11:00 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 Loan 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 2.8(c)(B) hereof).
(iv) "Rate Period" means for any portion of
principal under the Loan 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 Loan 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
2.8(c)(B) (including without limitation the terms of Section
2.8(c)(B)(3)), by giving Notification, Borrowers may request to have all
or a portion of the outstanding principal of cash advances under the
Loan as hereinafter permitted earn interest at the LIBOR Rate as
follows: (i) with respect to the principal amount of any cash advance
under the Loan, 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 Loan
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 Loan 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 Loan, (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 Loan 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 2.8(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 2.8. 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 2.9 Note.
Contemporaneously herewith, Borrowers shall execute and
deliver to Bank their Note ("Note") in the principal amount of
$75,000,000.00 ("Revolving Loan Note"), evidencing Borrowers'
unconditional joint and several obligations to repay the Revolving Loan.
Section 2.10 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 2.11 Computations; Application of Payments.
(a) Interest on the Loan 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 Loan.
Section 2.12 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 2.13 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 Loan 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 the Loan 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 2.14 Prepayment.
The Loan 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 the 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.
Section 2.15 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 (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 2.16 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 and the proceeds thereof shall
be paid over to Bank as provided in the Pledge Agreement.
SECTION 2.17 Participations. Borrowers acknowledge that
66.66% of the Revolving Loan (and each cash advance and letter of credit
made or issued thereunder) are being and are intended hereafter to be
funded by Meridian Bank, First Bank, National Association and PNC Bank,
National Association (each a "Participant") as participants of Bank in
the Loan, all as more fully set forth in that certain Amended and
Restated Participation Agreement dated as of February 1, 1995 (as
amended from time to time, the "Participation Agreement"). In this
regard, Borrowers agree that:
(A) Bank may from time to time provide financial and
other information concerning the Borrowers to each Participant and, with
Borrowers' prior consent, to any other prospective participant, and
(B) Should any Participant default under its obligations
to Bank to fund any portion of its participation in the Loan, or should
the participation of any Participant be terminated by Bank at either
Borrower's request (to the extent Bank has the right to do so under its
arrangements with such Participant), Bank will have no obligation to
fund (including by issuance of letters of credit) any Loan to the extent
of such Participant's share thereof.
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 Note 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 Note, 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 Note,
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 Note 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 Note 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 September 30,
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 September 30,
1994, 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 $250,000 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 3.11 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 Loan.
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 Note.
(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.) (the "80% Subsidiaries" or the
"Guarantors"), shall have each executed and delivered to the Bank their
respective unconditional absolute guaranties of the obligations of the
Borrowers hereunder and under the Note 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-1
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 Revolving Loan Advance
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 Note 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, Inc. ("CenterCore") and Coherent) and a
schedule showing the calculation of the covenants in Section 6.8, 6.9
and 6.10 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 and 6.10 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 Note 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 and 6.10 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 Revolving Loan
Advance remains outstanding, so long as any Borrower is indebted to the
Bank and until payment in full of the Note 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 80%
Subsidiary's and Additional 80% Subsidiary's (as defined in Section 6.18
hereof) 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 environmental laws) 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 Note 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 $8,000,000 at any time
outstanding; and
(e) Indebtedness of Borrowers owing to their 80%
Subsidiaries or to Persons in which Investments have been or hereafter
are made (as permitted in Section 6.6 hereof) in an aggregate amount not
to exceed $10,000,000 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 $2,100,000 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 $1,500,000.00 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 Paragraphs (a) and (e) hereof) would not exceed Twenty Five
Million ($25,000,000.00) in the aggregate, provided that in no event
will any such guaranty(ies) issued for the indebtedness or obligations
of any one Person (other than XL Vision, Inc.) exceed $5,000,000 in the
aggregate and in no event will any such guaranty(ies) issued for the
indebtedness of XL Vision, Inc. exceed (when taken together with
additional guaranties permitted by subparagraph (e)) $6,800,000 in the
aggregate; and
(e) guaranties hereafter executed and delivered in
Borrowers' fiscal year 1995 for not more than $2,000,000 in the
aggregate of indebtedness of XL Vision, Inc. (which Bank acknowledges
will bring the total indebtedness of XL Vision, Inc. guaranteed by
Borrowers to $6,800,000) and for not more than $3,000,000 in the
aggregate of indebtedness of Premier Solutions Ltd.
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 Twenty-Five Million
Dollars ($25,000,000) 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, subject to the
following limitations:
(a) (i) The aggregate of all Investments may
not exceed $20,000,000 for each of Borrowers' fiscal year 1995, fiscal
year 1996, fiscal year 1997 and fiscal year 1998.
(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 subsection
(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 $75,000,000 plus 75% of after tax earnings for all
periods after September 30, 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 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 Pledged 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
subject to the terms of Section 4(c) of the Pledge Agreement, or (iv)
the sale by CenterCore, Inc. of substantially all of its assets provided
that the proceeds thereof are used to repay amounts outstanding under
the Revolving Loan.
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 [INTENTIONALLY OMITTED]
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 Note, 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 Loan 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" or "Guarantors"), such Additional 80%
Subsidiary shall have delivered an absolute unconditional guarantee of
the Loan and the obligations of the Borrowers hereunder and under the
Note (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(c)
of the Pledge Agreement.
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 shall
terminate and the entire unpaid balance of the principal of and interest
on the Note 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 Note, 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 Loan at
any time exceed the Collateral Coverage Base; 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
or 6.16(a) 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 Note, 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.
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 Loan,
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 voting stock and
securities convertible to voting stock of Compucom; and (ii) 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 Loan 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
Note 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 Note
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 Note, 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, the consummation of the transactions
contemplated hereby, the breach by Borrowers of any of their covenants
contained herein and/or the enforcement by Bank of its rights and
remedies herein and/or in the other Loan Documents, 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 Note 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 the
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 Note, 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 Note 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 Note 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 Note (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 Note). Upon payment in full of the Note, the Bank
shall mark the Note "Paid" and return it 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 Note. 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 NOTE, 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 2.15 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 Note, 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, provided, that each Borrower hereby reaffirms all
liens and security interests, including that created by the Pledge
Agreement, heretofore granted to Bank, and agrees that the same remain
in full force and effect as security for the Obligations.
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 Note 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 Note, 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
Note, the Security Documents, the other Loan Documents and any other
agreements, instruments and documents delivered pursuant hereto or in
connection with the Loan.
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: Michael W. Miles,
Vice President/Controller
Telecopy No.: (610) 293-0601
(ii) If to Bank:
To its address set forth in the heading of
this Agreement;
Attention: Joseph G. Meterchick,
Vice President
Telecopy No.: (215) 564-7087
With a copy to:
Blank Rome, Comisky & McCauley
1200 Four Penn Center Plaza
Philadelphia, PA 19103
Attention: Bradley D. O'Brien, Esquire
Telecopy No.: (215) 569-5555
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, or, if by telecopy, when transmitted. 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 Note, 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 Note 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 the Loan 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 Revolving
Loan Advance 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.
MIDLANTIC BANK, N.A.
By:
SAFEGUARD SCIENTIFICS, INC.
By:
Attest:
SAFEGUARD SCIENTIFICS (DELAWARE) INC.
By:
Attest: