EXHIBIT 4.4
February 17, 1998
Neoware Systems, Inc.
400 Feheley Drive
King of Prussia, PA 19406
Attention: Mr. Edward T. Lack, Chief Financial Officer
Gentlemen:
We are pleased to inform you that CoreStates Bank, N.A. (hereinafter
referred to as "Bank") has reaffirmed and approved the following credit
availability to Neoware Systems, Inc. and Subsidiaries (hereinafter referred to
as "Borrower") under the terms and subject to the conditions set forth below:
I. Line of Credit
1. AMOUNT: $5,000,000.00.
2. CO-BORROWERS: Neoware Systems, Inc., HDS Network Systems Investment,
Inc., and Human Designed Systems Licensing, Inc.(hereinafter referred
to as "Borrower").
3. USE OF PROCEEDS: The advances under the line of credit shall be used
primarily for working capital purposes and short-term borrowings.
4. TERM: The line of credit will be available until November 30, 1998 at
which time continuation of the line will be considered by the Bank on
the basis of the Borrower's financial statements for the year ended
June 30, 1998 and other information available to Bank, or which Bank
may reasonably request.
5. INTEREST RATE: The Borrower shall have the choice of one of the
following rate options; this choice is to be made known to the Bank
at the time an advance is made on this commitment:
OPTION A: Prime Rate, floating. Prime Rate is a reference rate which
floats and is stated from time to time by the Bank for the
guidance of its officers. The determination and statement of
the Prime Rate shall not in any way preclude CoreStates Bank,
N.A. from making loans to other borrowers at differing rates.
OPTION B: Bank's adjusted London Interbank Offered Rate ("LIBOR")
rate plus 175 basis points for 30, 60 or 90 days. A minimum
draw in the amount of $100,000 is required for each advance
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under this rate option. "LIBOR rate" for any applicable
interest paid hereunder shall mean, for the purposes of this
note, the rate per annum at which deposits in dollars are
offered to CoreStates Bank, N.A. in the London Interbank
market. "Adjusted LIBOR rate" for any applicable interest
period hereunder shall mean, for the purposes of this note, a
rate per annum equal to the quotient obtained by dividing the
LIBOR rate by 1.00 minus the reserve requirement (currently
0%). There is no prepayment of principal permitted under this
option.
OPTION C: Overnight Base Rate (OBR) plus 200 basis points. OBR is a
rate stated by CoreStates Bank for overnight borrowings and
may be changed from time to time.
6. UNUSED PORTION FEE: A fee will be due and payable quarterly, based upon
the following schedule, determined on the borrower's daily unused line
of credit commitment:
Minimum Quarter Average
Annualized Fee Deposits held @ Corestates
0% $2,000,000
1/16% $1,000,000 < $2,000,000
1/8% 0 < $1,000,000
7. COLLATERAL: The Bank will require a Negative Pledge on all of the
Borrower's corporate assets including tangible and intangible assets
and noncompete agreement. Borrower will not give a negative pledge to
any other person or entity
8. FINANCIAL COVENANTS: The Borrower shall maintain the following
financial covenants on a consolidated basis throughout the term of the
commitment:
a) Total Liabilities to Tangible Net Worth shall not exceed
l.0:1.0
b) Current Ratio shall not be less than 1.75:1.0
c) Minimum Quick Ratio of 1.25:1.00 Defined as
(Cash + Accounts Receivable divided by Line of Credit
Outstanding)
9. CROSS-DEFAULTED: This commitment will be cross-defaulted with all other
loans to the Borrower from the Bank. If at any time there is a default
under this loan, all loans will be considered in default and all
outstandings under the commitments will be immediately due and payable
in full.
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10. INSURANCE: The Borrower will provide fire and extended coverage
insurance on all insurable assets during the term of the loan
satisfactory to the Bank as to form and insurer and containing the
standard mortgagee and/or loss payee clauses in favor of the Bank. The
insurance will be in effect evidenced by a certificate of insurance
submitted to the Bank prior to or at settlement. The policy shall
require a thirty-day notice of cancellation to the Bank.
11. EXPENSES: The Borrower shall pay all out-of-pocket costs and expenses
incurred by the Bank in connection with the proposed loan and financing
arrangement promptly upon Bank's submission of a statement to the
Borrower. This will include, but not be limited to, attorney's fees and
costs, lien search fees and filing fees. These fees will be paid by
Borrower as a condition to closing and whether or not the transaction
contemplated herein is closed.
12. DOCUMENTATION: Borrower shall duly execute and deliver such
instruments, documents, certificates, opinions, assurances, and do such
other acts and things as the Bank may reasonably request, to effect the
purpose of the transaction described in this commitment letter. All
proceedings, agreements, instruments, documents, and other matters
relating to the making of the loan, and all of the transactions herein
contemplated, shall be satisfactory in form and substance to the Bank
and its counsel. Our counsel must be satisfied with respect to the
legality, validity, binding effect, and enforceability of all
instruments, agreements, and documents used to effect and consummate
the loans and transactions herein contemplated.
13. DUE AUTHORIZATION: The Borrower will obtain all necessary authorization
of their respective board of directors and shareholders to enter into
the agreement evidenced by this letter and will obtain, prior to the
making of the loan, such further authorization of their respective
board of directors and shareholders as may be necessary or appropriate
to the financing arrangements set forth herein.
14. FINANCIAL STATEMENTS: The Borrower shall deliver its annual financial
statements and 10-K to the Bank within ninety (90) days after the close
of each fiscal year during the term of this commitment. The financial
statements will be audited by an independent accountant satisfactory to
the Bank. The statements will be prepared in accordance with generally
accepted accounting principles (GAAP). In addition, the Borrower will
submit on a quarterly basis, a Balance Sheet and Profit and Loss
Statement and 10-Q which may be internally prepared in accordance with
GAAP and signed by the chief financial officer. Submission of the
quarterly statements will be within sixty (60) days after the end of
each period.
15. DEPOSIT RELATIONSHIP: The Borrower will maintain CoreStates Bank, N.A.
as its primary bank of account for the term of the above loan.
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16. SATISFACTORY FINANCIAL CONDITION: The Borrower shall maintain, in the
Bank's reasonable judgment, a satisfactory financial condition and
shall notify the Bank promptly in writing of any material adverse
changes in its financial condition since the date of its financial
statements dated September 30, 1997.
17. COMMITMENT EXPIRATION: The Bank's commitment as outlined herein will
expire 30 days from the date of this letter unless accepted in its
entirety in writing as evidenced by executing the acknowledgment below.
The availability of the within credit facilities is contingent upon the
Borrower and the Bank entering into mutually acceptable loan documentation
setting forth the terms and conditions stated herein and such other terms and
conditions, covenants, warrants, and representations as may be required by the
Bank. This commitment shall terminate if there occurs a material adverse change
in the financial condition, results of operations, assets, business, prospects
or management of the Borrower or if there occur any facts, events, or changes
that could adversely affect the ability to proceed to closing or perform after
closing.
We appreciate the opportunity of making this credit accommodation
available to you. If the terms and conditions outlined herein are acceptable to
you, please execute the acknowledgment on the original of this letter, returning
it to the undersigned in the envelope provided. A copy is enclosed for your
records. Should you have any questions regarding this letter or if the Bank can
be of further service, please feel free to contact the undersigned at (610)
918-8110.
Sincerely,
CORESTATES BANK, N.A.
/S/ Thomas J. Curtis
Thomas J. Curtis
Vice President
Suburban Middle Market
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ACKNOWLEDGMENT:
We hereby accept the terms and conditions outlined herein this 17th day
of February, l998.
BORROWER: Neoware Systems, Inc.
By: /S/Michael Kantrowitz
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Attest: _______________________________
HDS Network Systems Investments, Inc.
By: /S/Edward T. Lack, Jr.
----------------------
Attest: _______________________________
Human Designed Systems Licensing, Inc.
By: /S/Edward T. Lack, Jr.
----------------------
Attest: _______________________________
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