Exhibit 10.9
LOAN AND SECURITY AGREEMENT (this "Agreement"), dated November 8, 1996, by
and among Diamond Technology Partners Incorporated, a Delaware corporation
("Diamond Technology Partners"), and Diamond Partners Incorporated, an Illinois
corporation ('Diamond Partners") and a wholly owned subsidiary of Diamond
Technology Partners Incorporated (collectively, the "Borrower"), and Safeguard
Scientifics (Delaware), Inc. ("Lender"), a Delaware corporation.
BACKGROUND
The Borrower presently has a senior bank credit in the amount of
$3,425,000 (consisting of a $3,000,000 revolving line of credit, a $175,000 term
loan and a $250,000 term loan) (the "Senior Credit") pursuant to Secured Credit
Agreement, dated November 30, 1995 between the American National Bank and Trust
Company of Chicago (the "Bank") and Diamond Technology Partners (as amended to
date, the "Credit Agreement"), a Term Note, Second Term Note, Revolving Note,
Security Agreement, and Trademark Collateral Assignment and Security Agreement
(all as defined in the Credit Agreement), the Modification Agreement dated May
31, 1996 between the Bank and Diamond Technology Partners and Diamond Partners,
the Second Modification Agreement dated November 8, 1996, between the Bank and
Diamond Technology Partners and Diamond Partners (the "Second Modification
Agreement"), the Security Agreement and the Guaranty (all as defined in the
Second Modification Agreement), and wishes to obtain a loan from Lender pursuant
to this Agreement.
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
ARTICLE I
THE LOAN
1.1. The Loan. Subject to the terms and conditions hereinafter provided,
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Lender shall make the following loans and/or lines of credit (whether one or
more, collectively, the "Loan") available to Borrower, for the purposes
indicated below :
The loan shall be for an aggregate amount of Two Million Dollars
($2,000,000) and shall be used only for working capital purposes, which shall
not include the repayment of any existing indebtedness. The Loan shall be
advanced at one time upon request of the Borrower. The request shall be made
pursuant to a notice from the Borrower to the Lender which certifies the Loan is
to be used for working capital purposes of Diamond Partners, which it is
understood includes the purchase of assets for Diamond Partners, that the
representations and warranties hereunder remain true and correct in all material
respects, and that there is no event of default or event which with the passage
of time or giving of notice or both would cause an event of default hereunder or
a default under the documents in respect of the Senior Credit.
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1.2. The Subordinated Note; Repayment. The Loan shall be evidenced by a
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subordinated promissory note from Borrower to Lender (the "Subordinated Note"),
which shall be substantially in the form attached hereto as Exhibit 1.2 . The
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Loan shall be repaid with interest as provided in the Subordinated Note.
ARTICLE II
COLLATERAL
2.1. Collateral. Borrower hereby pledges, assigns and grants to Lender, as
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security for the performance of this Agreement and any other agreements executed
in connection herewith, and the repayment of the Loan and the Subordinated Note
and for all other indebtedness, liabilities and obligations of Borrower
(primary, secondary, direct, contingent, related, unrelated, sole, joint or
several) due or to become due to Lender or which may be contracted for or
acquired hereafter (collectively, the "Obligations"), a security interest under
the Uniform Commercial Code in all Accounts, Inventory, General Intangibles,
Chattel Paper, Instruments, Documents and Equipment (whether or not constituting
fixtures) and any other security of the Senior Credit now owned or hereafter
acquired by Borrower, together with all cash and non-cash proceeds (including
without limitation, insurance proceeds), products, distributions, additions,
accessions, substitutions, exchanges and replacements thereof, (collectively,
the "Collateral").
2.2. Further Assurances. Borrower shall from time to time promptly take
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all actions (and execute, deliver and record all instruments and documents)
necessary or reasonably appropriate or requested by Lender, to perfect and
protect any security interest granted or purported to be granted hereby or to
enable Lender to exercise and enforce its rights and remedies hereunder with
respect to any of the Collateral, subject to the Subordination Agreement (the
"Subordination Agreement") dated as of November 8, 1996 between Lender and the
Bank.
2.3. Attorney-In-Fact. Borrower hereby irrevocably appoints Lender as its
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attorney-in-fact, in the name of Borrower or otherwise, from time to time in
Lender's discretion and at Borrower's expense, to take any action and to
execute, deliver and record any instruments or documents which Lender may deem
necessary or advisable in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable Lender to exercise and
enforce its rights and remedies hereunder with respect to any of the Collateral
including, without limitation, financing or continuation statements under the
Uniform Commercial Code, and amendments thereto. Lender shall not, in its
capacity as such attorney-in-fact, be liable for any acts or omissions, nor for
any error of judgment or mistake of fact or law, but only for gross negligence
or willful misconduct.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Borrower hereby makes the following representations and warranties,
which shall be continuing in nature and remain in full force and effect until
the Obligations are satisfied in full:
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3.1. Existence and Power. Borrower is a corporation duly organized,
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validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to own
and operate its assets and to conduct its business as now or proposed to be
carried on, and is duly qualified, licensed and in good standing to do business
in all jurisdictions where its ownership of property or the nature of its
business requires such qualification or licensing. Borrower has the full power
and authority to execute, deliver and perform this Agreement, the Subordinated
Note, and all other agreements, instruments, and documents evidencing or
securing the Loan (collectively as "Loan Documents").
3.2. Authorization and Enforceability. Borrower has been duly authorized
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to execute, deliver and perform the Loan Documents by all appropriate action of
its Board of Directors if Borrower is a corporation, all of its general partners
if Borrower is a partnership or otherwise as may be required by law, charter or
other organizational documents or agreements. Each of the Loan Documents, when
executed and delivered by Borrower, will constitute the legal, valid and binding
obligation of Borrower, enforceable in accordance with its respective terms.
3.3. No Defaults or Violations. There does not exist any Event of Default
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(as that term is defined in Section 5.1) under this Agreement or any default or
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violation by Borrower of or under any of the terms, conditions or obligations
of: (a) its articles or certificate of incorporation, regulations or bylaws if
Borrower is a corporation, its partnership agreement if Borrower is a
partnership or its other organizational documents as applicable; (b) any
indenture, mortgage, deed of trust, franchise, permit, contract, agreement, or
other instrument to which Borrower is a party or by which it or any of its
properties may be bound, including the documents in respect of the Senior
Credit; or (c) any law, regulation, ruling, order, injunction, decree, condition
or other requirement applicable to or imposed upon Borrower by any law, or by
the action of any court or other governmental authority or agency; and the
execution, delivery and performance of the Loan Documents will not result in any
such default or violation, nor are any approvals, authorizations, licenses,
waivers or consents, governmental (foreign, federal, state or local) or non-
governmental, under the terms of contracts or otherwise, required to be obtained
by Borrower by reason of or in connection with its execution, delivery and
performance of any of the Loan Documents.
3.4. Financial Statements. Borrower has delivered or caused to be
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delivered to Lender its most recent balance sheet, income statement and
statement of cash flows as of September 30, 1996 (the "Financial Statements").
The Financial Statements are true, accurate and complete in all material
respects and fairly present the financial condition, cash flow and the results
of Borrower's operations as of the respective dates thereof and for the periods
therein referred to, all in accordance with generally accepted accounting
principles in effect from time to time ("GAAP"), consistently applied from
period to period subject in the case of interim statements to normal year-end
adjustments and excluding disclosures normally required by XXXX. Borrower does
not have any liabilities or obligations of any nature (whether or not of the
nature required to be reflected in a balance sheet prepared in accordance with
GAAP) that are not reflected on the Financial Statements (including, without
limitation, any liabilities relating to environmental, occupational and health
matters or ERISA) except for current liabilities (within the meaning of
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GAAP) which have been incurred since the date thereof in the ordinary course of
business and consistent in nature and amount with Borrower's operating history.
3.5. No Material Adverse Change. Since the date of its most recent
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Financial Statements, Borrower has not suffered any damage, destruction or loss,
and no event or condition has occurred or exists, which has resulted or could
result in a material adverse change in its business, assets, operations,
financial condition or results of operation.
3.6. Title to Assets; Existing Liens. Borrower has good and marketable
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title to its assets, free and clear of all liens and encumbrances, except for
(a) current taxes and assessments not yet due and payable, (b) liens and
encumbrances, if any, reflected or noted in its most recent Financial
Statements, (c) assets disposed of by Borrower since the date of its most recent
Financial Statements in the ordinary course of business, consistent with past
practice, and (d) the liens and encumbrances described on Schedule 3.6.
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3.7. Litigation. Except as set forth in Schedule 3.7, there are no
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actions, suits, proceedings or governmental investigations pending or, to the
knowledge of Borrower, threatened, against Borrower or any of its properties
which could result in a material adverse change in Borrower's business, assets,
operations, financial condition or results of operations and there is no basis
known to Borrower for any action, suit, proceeding or investigation which could
result in such a material adverse change.
3.8. Tax Returns. Borrower has filed all returns and reports that are
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required to be filed by it in connection with any federal, state or local tax,
duty or charge levied, assessed or imposed upon it or any of its properties or
that it is required to withhold and pay over including, without limitation,
unemployment, social security and similar taxes, and all of such taxes have been
paid or adequate reserves therefor have been set aside or other provisions
therefor have been made.
3.9. Intellectual Property. Borrower owns or is licensed to use all
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patents, patent rights, trademarks, trade names, service marks, copyrights,
intellectual property, technology, know-how and processes necessary for the
conduct of its business as currently conducted that are material to Borrower's
condition (financial or otherwise), business or operations.
3.10. Solvency. As of the date hereof and after giving effect to the
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transactions contemplated by the Loan Documents, (a) the aggregate value of
Borrower's assets exceeds its liabilities (including, without limitation,
contingent, subordinated, unmatured and unliquidated liabilities), (b) Borrower
has sufficient cash flow to enable it to pay its debts as they mature, and (c)
Borrower does not have unreasonably small capital for the business in which it
is engaged.
3.11. Disclosure. None of the Loan Documents contain any untrue statement
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of material fact or omit to state a material fact necessary in order to make the
statements contained in the Loan Documents not misleading. There is no fact
known to Borrower which materially and adversely affects or, so far as Borrower
can now foresee, might materially and adversely affect Borrower's business,
assets, operations, financial condition or results of operation and
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which has not otherwise been fully set forth in this Agreement
or otherwise disclosed in writing to Lender.
3.12. Places of Business. The locations of Borrower's chief executive
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office and other places of business are shown on Schedule 3.12. Borrower
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covenants not to establish any new, or discontinue any existing, place of
business without giving Lender at least 30 days' prior notice.
3.13. Capital Structure. Schedule 3.13 sets forth the authorized capital
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stock of Borrower, the issued and outstanding shares of such stock, and the
owners thereof. There are no options, warrants or other rights outstanding to
purchase any such shares except as indicated on Schedule 3.13.
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3.14. Subsidiaries, Affiliates, and Other Investments. Except as shown on
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Schedule 3.14, Borrower has no subsidiaries or affiliates (other than its own
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shareholders); nor does Borrower have any investment in any other person or
entity.
3.15 Bank Consent. The Bank has consented to this Loan, a copy of such
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consent has been delivered to Lender, and the liens in respect of the Collateral
constitute Permitted Liens (as defined in the Credit Agreement).
3.16 Bank Documents. Accurate copies of all of the documents in respect of
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the Senior Credit have been delivered to Lender.
ARTICLE IV
COVENANTS
4.1. Affirmative Covenants. Borrower agrees that from the date of
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execution of this Agreement until the Obligations are satisfied in full,
Borrower shall (and shall cause each of its majority-owned subsidiaries, if any,
to):
4.1.1. Payments of Taxes and Other Charges. Pay and discharge when
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due all indebtedness and all taxes, assessments, charges, levies and other
liabilities imposed upon Borrower, its income, profits, properties or business,
except those which currently are being contested in good faith by appropriate
proceedings and for which Borrower shall have set aside adequate reserves or
made other adequate provisions acceptable to Lender in its sole discretion.
4.1.2. Maintenance of Existence, Operation and Assets; Inspection.
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Do all things necessary to maintain, renew and keep in full force and effect its
organizational existence and all rights, permits and franchises necessary to
enable it to continue its business; continue in operation in substantially the
same manner as at present; conduct business and enter into transactions only in
the ordinary course, consistent with past practice; keep its properties in good
operating condition and repair; make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto; and permit representatives of
Lender to inspect Borrower's
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properties and its books and records and to make extracts therefrom at all
reasonable times during normal business hours.
4.1.3. Insurance. Keep its assets insured with responsible insurance
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companies against those risks and in such amounts as are commonly insured
against by companies in similar businesses and owning similar assets. At
Lender's request, Borrower shall have Lender named as loss payee on all hazard
insurance policies covering the Collateral and shall have Lender named as an
additional insured on liability policies, subject to the Subordination
Agreement. Borrower shall deliver to Lender such certificates, endorsements, and
other evidence of such insurance as Lender may reasonably request.
4.1.4. Compliance with Laws. Comply with all laws applicable to
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Borrower and to the operation of its business (including, without limitation,
any statute, rule or regulation relating to employment practices and employee
benefits and to environmental, occupational and health standards and controls).
4.1.5. Financial Reports. Deliver promptly such financial statements
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and reports as Lender may reasonably request including, without limitation,
annual financial statements audited or reviewed by independent certified public
accountants and interim financial statements prepared by Borrower's management.
All such financial data shall be true, accurate and complete in all material
respects and shall be prepared in accordance with GAAP consistently applied,
subject, in the case of interim statements, to normal year-end adjustments and
excluding disclosures normally required by GAAP.
4.1.6. Additional Reports. Provide prompt notice to Lender of the
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occurrence of any of the following (together with a description of the action
which Borrower proposes to take with respect thereto): (a) any Event of Default
or potential Event of Default hereunder or under any of the agreements in
respect of the Senior Credit, (b) any litigation filed by or against Borrower,
(c) any event which might result in a material adverse change in Borrower's
business, assets, operations, financial condition or results of operation; and
provide to Lender any other reports reasonably requested thereby.
4.1.7. Use of Proceeds. Use of the proceeds of the Loan only for the
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purposes specified in Section 1.1 above.
4.2. Negative Covenants. Borrower covenants and agrees that from the date
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of execution of this Agreement until the Obligations are satisfied in full,
Borrower shall not (and shall cause each of its majority-owned subsidiaries, if
any, not to), without Lender's prior written consent:
4.2.1. Indebtedness. Except as permitted pursuant to Section 6.6 of
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the Credit Agreement as now in effect, maintain, create or incur any
indebtedness for borrowed money (including, without limitation, the deferred
purchase price of goods and services) other than (a) the Loan and any subsequent
indebtedness to Lender, and (b) existing or proposed indebtedness disclosed on
the Borrower's most recent Financial Statements or on Schedule 4.2.1.
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4.2.2. Liens and Encumbrances. Except for liens in favor of Lender
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and for the liens and encumbrances described on Schedule 3.6, create, assume or
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permit to exist any mortgage, pledge, encumbrance or other security interest or
lien upon any assets now owned or hereafter acquired by Borrower.
4.2.3. Guarantees. Except as permitted pursuant to Section 6.8 of
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the Credit Agreement as now in effect, guarantee, endorse or become contingently
liable for the obligations of any person or entity, except in connection with
the endorsement and deposit of checks in the ordinary course of business for
collection and as permitted under the existing terms of the Credit Agreement.
4.2.4. Merger; Disposition of Assets. Merge or consolidate with or
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into any person or entity or lease, sell, transfer or otherwise dispose of any
material assets, whether now owned or hereafter acquired, other than in the
normal course of business and consistent with past practices.
4.2.5. Change in Business, Management or Ownership. Make or permit
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any material change in the nature of Borrower's business as carried on as of the
date hereof.
4.2.6. Dividends and Other Distributions. Except as permitted
---------------------------------
pursuant to Section 6.7 of the Credit Agreement as now in effect, declare or pay
any dividends on or make any distribution with respect to any class of its
capital stock or equity or ownership interest, or repurchase, redeem, retire or
otherwise acquire any of its capital stock or equity.
4.2.7. Investments. Purchase or hold beneficially any stock, other
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securities or evidence of indebtedness or make any loans or advances to, or make
any investment or acquire any interests in, any other person or entity except as
permitted under the existing terms of the Credit Agreement.
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4.2.8. Modification of the Senior Credit. Without the written
---------------------------------
consent of lender, Borrowers will not amend or modify any of the agreements,
including the Credit Agreement and the Second Modification Agreement, executed
in connection with the Senior Credit or referred to in the Subordination
Agreement (as hereinafter defined); provided, if any of such agreements referred
to in the Subordination Agreement in respect of the Lease Indebtedness and the
Stockholder Indebtedness (each as defined in the Subordination Agreement) have
not been executed as of the date hereof this restriction shall apply upon such
execution and, in any event, all such agreements shall be reasonably acceptable
to Lender.
4.3. Compliance with Terms of Stock Purchase Agreement
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4.3.1. Covenants. Borrower shall also comply with the covenants set
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forth in a certain Stock Purchase Agreement dated as of March 22, 1994, as
amended, among Diamond Technology Partners, Safeguard Scientifics, Inc. and
certain other persons and investors specified therein.
ARTICLE V
DEFAULT
5.1. Events of Default. The occurrence of an event of default as defined
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in the Subordinated Note or any of the other Loan Documents shall constitute an
"Event of Default" hereunder.
5.2. Remedies on Default: Rights in Collateral. Upon any Event of
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Default, Lender may, in addition to its other rights at law, in equity, or under
any other agreement, exercise with respect to the Collateral all of the rights
and remedies of a secured party under the Uniform Commercial Code as in effect
in Delaware.
ARTICLE VI
DISPUTE RESOLUTION
6.1. Resolution of Disputes.
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6.1.1. Good-Faith Negotiations. If any dispute arises under this
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Agreement or any of the other Loan Documents that is not settled promptly in the
ordinary course of business, the parties shall seek to resolve any such dispute
between them, first, by negotiating promptly with each other in good faith in
face-to-face negotiations. These face-to-face negotiations shall be conducted by
the respective designated senior management representative of each party. If the
parties are unable to resolve the dispute between them through these face-to-
face negotiations, within 20 business days (or such period as the parties shall
otherwise agree) following the date of notification (the "Notice Date") by one
party to the other(s) of the existence of such dispute, then any such disputes
shall be resolved in the following manner.
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6.1.2. Mediation. The parties shall endeavor to resolve any dispute
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arising out of or relating to this Agreement by mediation under the CPR
Mediation Procedures for Business Disputes. Unless otherwise agreed, the
parties will select a mediator from the CPR Panels of Neutrals and shall notify
CPR to initiate the selection process.
6.1.3. Resolution of Disputes.
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(a) Any action, suit or proceeding where the amount in
controversy as to at least one party, exclusive of interest and costs, exceeds
$1,000,000 ("Summary Proceeding"), arising out of or relating to this Agreement,
or any of the other Loan Documents or the breach, termination or validity
thereof which has not been resolved by mediation as provided herein within 90
days of the Notice Date, shall be litigated exclusively in the Superior Court of
the State of Delaware (the "Delaware Superior Court") as a summary proceeding
pursuant to Rules 124-131 of the Delaware Superior Court, or any successor rules
(the "Summary Proceeding Rules"). Each of the parties hereto hereby irrevocably
and unconditionally (A) submits to the jurisdiction of the Delaware Superior
Court for any Summary Proceeding, (B) agrees not to commence any Summary
Proceeding except in the Delaware Superior Court, (C) waives, and agrees not to
plead or to make, any objection to the venue of any Summary Proceeding in the
Delaware Superior Court, (D) waives, and agrees not to plead or to make any
claim that any Summary Proceeding brought in the Delaware Superior Court has
been brought in an improper or otherwise inconvenient forum, (E) waives, and
agrees not to plead or to make, any claim that the Delaware Superior Court lacks
personal jurisdiction over it, (F) waives its right to remove any Summary
Proceeding to the federal courts except where such courts are vested with sole
and exclusive jurisdiction by statute, and (G) understands and agrees that it
shall not seek a jury trial or punitive damages in any Summary Proceeding based
upon or arising out of or otherwise related to this Agreement or any of the
other Loan Documents or the breach, termination or validity thereof, and waives
any and all rights to any such jury trial or to seek punitive damages.
(b) In the event any action, suit or proceeding where the
amount in controversy as to at least one party, exclusive of interest and costs,
does not exceed $1,000,000 (a "Proceeding"), arising out of or relating to this
Agreement or any of the other Loan Documents or the breach, termination or
validity thereof, is brought, the parties to such Proceeding agree to make
application to the Delaware Superior Court to proceed under the Summary
Proceeding Rules. Until such time as such application is rejected, such
Proceeding shall be treated as a Summary Proceeding and all of the foregoing
provisions of this Section relating to Summary Proceedings shall apply to such
Proceeding.
(c) If a Summary Proceeding is not available to resolve any
dispute hereunder, the controversy or claim shall be settled by arbitration
conducted on a confidential basis, under the U.S. Arbitration Act, if
applicable, and the then current Commercial Arbitration Rules of the American
Arbitration Association (the "Association") strictly in accordance with the
terms of this Agreement and the substantive law of the State of Delaware
including law in respect of any statute of limitations. The arbitration shall be
conducted at the Association's regional office located closest to Lender's
principal place of business by a single arbitrator. The
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arbitrator is not empowered to award damages in excess of compensating damages
and each party hereby irrevocably waives any right to recover such damages with
respect to any such dispute. Judgment upon the arbitrator's aware may be entered
and enforced in any court of competent jurisdiction.
6.2. Equitable Remedies. Neither party shall be precluded hereby from
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securing equitable remedies in courts of any jurisdiction including, but not
limited to, temporary restraining orders and preliminary injunctions, to protect
its rights and interests, but such shall not be sought as a means to avoid or
stay any of the provisions of this Article VI.
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6.3. Performance Pending Resolution. Each party shall be required to
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continue to perform its respective obligations under the Loan Documents pending
final resolution of any Dispute, unless to do so would be impossible or
impracticable under the circumstances.
ARTICLE VII
MISCELLANEOUS
7.1. Expenses. Borrower shall pay to Lender, upon execution of this
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Agreement, and otherwise on demand, all costs and expenses incurred by Lender in
connection with (a) the preparation, negotiation and closing of this Agreement
and any related documents, and any modifications hereto or thereto, and (b)
instituting, maintaining, preserving, enforcing and foreclosing the security
interest in any of the Collateral, whether through judicial proceedings,
arbitration or otherwise, or in defending or prosecuting any actions,
arbitrations or proceedings arising out of or relating to the Loan Documents
including, without limitation, reasonable fees and expenses of counsel (which
may include costs of in-house counsel), expenses for auditors, appraisers and
environmental consultants, lien searches, recording and filing fees and taxes.
7.2. Amendments, Indulgences, Etc. No amendment or waiver of any
----------------------------
provision of this Agreement nor consent to any departure by Borrower herefrom
shall in any event be effective unless the same shall be in writing and signed
by Lender, and then such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. No failure
or delay on the part of Lender in the exercise of any right, power, or remedy
under this Agreement or any of the other Loan Documents shall under any
circumstances constitute or be deemed to be a waiver thereof, or prevent the
exercise thereof in that or any other instance.
7.3. Notices. All notices given hereunder shall be in writing and deemed
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validly given (a) three (3) business days after sent, postage prepaid, by
certified mail, return receipt requested, (b) one (1) business day after sent,
charges paid by the sender, by Federal Express Next Day Delivery or other
guaranteed delivery service, (c) when confirmation of transmission by facsimile
during normal business hours is received, or (d) when delivered by hand, upon
delivery, in each case to the intended recipient at its address shown below or
to such other address, or in care of such other person, as either party shall
hereafter specify to the other from time to time by due notice:
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If to Borrower:
Diamond Technology Partners Incorporated
000 Xxxxx Xxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: CFO
Fax No.: 312/000-0000
cc: Xxxx X. Xxxxxx, Esq.
Xxxxxx & Xxxxxxxx
000 X. Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
If to Lender:
Safeguard Scientifics (Delaware), Inc.
800 The Safeguard Building
000 Xxxxx Xxxx Xxxxx
Xxxxx, XX 00000
Attn: Senior Vice President, Finance
Fax No.: 610/000-0000
7.4. Interpretation. Except as otherwise indicated, all agreements
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defined herein refer to the same as from time to time amended or supplemented or
the terms thereof waived or modified in accordance herewith and therewith. Any
provision hereof found to be illegal, invalid or unenforceable for any reason
whatsoever shall not affect the legality, validity or enforceability of the
remainder hereof. In this Agreement, in the computation of a period of time from
a specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding." Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
7.5. Entire Agreement. This Agreement, and all agreements and instruments
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to be delivered by the parties pursuant hereto or in connection herewith,
represent the entire understanding of the parties with respect to the subject
matter hereof, and supersede all other prior and contemporaneous agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
7.6. Governing Law. This Agreement shall be binding upon and shall inure
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to the benefit of the parties hereto and their respective successors and
assigns, and construed and interpreted according to the laws of the State of
Delaware.
7.7. Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which taken together shall constitute one and the same
instrument.
7.8. Joint and Several Obligations. The obligations and liabilities of
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the Borrower hereunder and under any of the other documents excluding the
warrants for 319,150 shares
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issued in connection therewith, executed in connection herewith are joint and
several obligations and liabilities, including those in respect of the
representations, warranties, and covenants hereof; provided, however, that the
warrants for 319,150 shares of stock of Diamond Technology Partners are only for
shares thereof and not for shares of Diamond Partners.
IN WITNESS WHEREOF, the parties have executed or caused to be executed this
Agreement as of the day and year first above written.
Diamond Technology Partners Incorporated
By:______________________________
Title:_____________________________
Safeguard Scientifics (Delaware), Inc.
By:______________________________
Title:_____________________________
Diamond Partners Incorporated
By: ______________________________
Title: _____________________________
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SCHEDULES AND EXHIBITS
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Exhibit 1.2 Subordinated Note
Schedule 3.6 Liens and Encumbrances
Schedule 3.7 Litigation
Schedule 3.12 Places of Business
Schedule 3.13 Authorized Capital Stock of Borrower
Schedule 3.14 Subsidiaries and Affiliates; Other Investments
Schedule 4.2.1 Existing Indebtedness for Borrowed Money
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EXHIBIT 1.2
SUBORDINATED NOTE
THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENTDATED AS OF
NOVEMBER 8, 1996 (AS AMENDED, RESTATED, SUPPELEMENTED OR OTHERWISE MODIFIED FROM
TIME TO TIME) BY AND BETWEEN SAFEGUARD SCIENTIFICS (DELAWARE), INC. AND AMERICAN
NATIONAL BANK AND TRUST COMPANY OF CHICAGO
Chicago, Illinois
$2,000,000 November 8, 1996
FOR VALUE RECEIVED, Diamond Technology Partners Incorporated ("DTP or
"Parent"), a Delaware corporation, and Diamond Partners Incorporated, an
Illinois corporation and wholly-owned subsidiary of DTP ("Subsidiary")
(collectively, "Borrower"), each having an office at 000 Xxxxx Xxxxxxxx, Xxxxx
0000, Xxxxxxx, XX 00000, do hereby jointly and severally unconditionally promise
to pay to the order of Safeguard Scientifics (Delaware), Inc., a Delaware
corporation ("Lender"), at Lender's office located at 000 Xxxxx Xxxx Xxxxx,
Xxxxx, Xxxxxxxxxxxx 00000 or at such other place as Lender may from time to time
designate in writing, in lawful money of the United States, the principal sum of
TWO MILLION DOLLARS ($2,000,000) (the "Loan"), with interest, all as provided
below.
1. Rate of Interest. Interest on the principal amount outstanding
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under this Note shall accrue at an annual rate equal to 6%. Such interest rate
shall be increased by 1% on each anniversary of the date of the Subordinated
Note so that in the fifth year the rate shall be 10% per annum and such rate
shall thereafter remain at 10% per annum. Interest payable hereunder shall be
calculated for actual days elapsed on the basis of a 360-day year.
Notwithstanding anything in this Note, the interest rate charged hereon
shall not exceed the maximum rate allowable by applicable law. If any stated
interest rate herein exceeds the maximum allowable rate, then the interest rate
shall be reduced to the maximum allowable rate, and any excess payment of
interest made by Borrower at any time shall be applied to the unpaid balance of
any outstanding principal of this Note.
2. Maturity Date. The "Maturity Date" shall mean November 1, 2001,
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or such later date as may be designated by Lender in writing.
3. Payment of Interest and Principal.
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(a) Accrued interest shall be due and payable on the first day of
each quarter, beginning January 1, 1997 and on the date of repayment of the Loan
in full. Unless prepaid pursuant to Section 3(b) hereof, the principal of the
Loan shall be repaid on the Maturity Date.
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(b) The outstanding principal amount of this Note may be prepaid by
the Borrower upon notice to the Lender in whole at any time or in part from time
to time without any prepayment penalty or premium; provided, that upon such
payment any interest due to the date of such prepayment on such prepaid amount
shall also be paid. In addition, the Borrower shall, without any notice or
demand whatsoever, prepay this Subordinated Note in full upon the consummation
of an initial public offering (which includes a rights offering) of any
securities of the Borrower.
4. Subordination to Bank. Borrower's obligations under this
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Subordinated Note, regardless of whether demand for payment has been made by
Lender, and the lien and security interest granted pursuant to the Loan
Agreement (as hereinafter defined) are subject and subordinate to Borrower's
obligations to American National Bank and Trust Company of Chicago (the "Bank")
and all liens and security interests granted by Borrower to the Bank in
accordance with a certain Subordination Agreement between the Bank and the
Lender.
5. Other Loan Documents. This Subordinated Note is issued in
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connection with, and subject to the provisions of, that certain loan and
security agreement, dated the date hereof, by and between Borrower and Lender
(the "Loan Agreement") and is secured by the property described in the Loan
Agreement and by such other collateral as previously may have been or may in the
future be granted to Lender to secure this Subordinated Note.
6. Method and Application of Payments. All amounts payable hereunder
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shall be paid by Borrower in immediately available and freely transferable funds
at the place designated by Lender to Borrower for such payment. All payments
made on this Subordinated Note shall be applied to fees and expenses (including
attorneys' fees), accrued interest and principal in any order Lender may choose,
in its sole discretion.
7. Events of Default. Each of following events shall constitute an event
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of default (an "Event of Default") hereunder :
a. If Borrower shall fail to pay when due any interest or principal
or any other sum payable to Lender hereunder, and such failure continues
unremedied for five (5) days after the due date thereof.
b. If any representation or warranty made by Borrower to Lender in
any statement, certificate or other document including, but not limited to, the
Loan Agreement or any other documents now or in the future securing the
obligations of Borrower to Lender, is false, erroneous or misleading in any
material respect.
c. If Borrower shall default in the performance of any other
agreement or covenant with Lender contained in any document including, but not
limited to, the Loan Agreement or any other documents now or in the future
securing the obligations of Borrower to Lender, and such default shall continue
uncured for ten (10) days after written notice thereof to Borrower given by
Lender (or, if such default cannot reasonably be cured within such ten (10)
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day period and Borrower is proceeding to cure with reasonable diligence, such
period of time as shall be reasonably necessary to cure such default, but in no
event more that thirty (30) days).
d. If Borrower shall become insolvent, bankrupt or shall generally
fail to pay its debts as such debts become due; or if Borrower shall admit in
writing its inability to pay its debts; or if Borrower shall suffer a receiver
or trustee for it or substantially all of its property to be appointed; or if
Borrower makes an assignment for the benefit of creditors; or if proceedings
under any law related to bankruptcy or insolvency or the reorganization or the
release of debtors are instituted against Borrower and are not dismissed or
stayed within sixty (60) days; or if a receiver or trustee for Borrower or
substantially all of its property shall be appointed without Borrower's consent
and such receiver or trustee shall not be discharged within sixty (60) days; or
if proceedings relating to Borrower under any law related to bankruptcy or
insolvency or the reorganization or the release of debtors are instituted or
commenced by Borrower.
e. A Default (as defined in the Credit Agreement as now in
effect) shall have occurred or exist.
8. Remedies. Upon the occurrence of any Event of Default, (a)
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Borrower's right to request further advances under the Loan Agreement shall
terminate, (b) interest shall automatically and without notice begin to accrue
on the outstanding balance of this Note at the aforesaid interest rate plus 3%,
(c) the entire unpaid principal amount of this Subordinated Note and all unpaid
interest accrued thereon shall, at the sole option of Lender upon notice to
Borrower, become immediately due and payable, (d) Lender shall have the right to
offset all amounts owed by Borrower hereunder against any amounts owed by Lender
in any capacity to Borrower, whether or not due, and (e) Lender shall thereupon
have the immediate right to exercise from time to time all rights and remedies
available to Lender under the Loan Agreement or now or hereafter available at
law or in equity, including the rights of a secured party under the Uniform
Commercial Code, all of which shall be cumulative in nature.
9. Guarantee. Without limiting the effect of the Subsidiary's joint
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and several responsibility with the Parent for all duties, obligations, and
liabilities of the Borrower under this Subordinated Note and the related Loan
Agreement, the Subsidiary, by executing this Subsidiary's Note, also absolutely
and unconditionally guarantees, to and in favor of Lender, the prompt payment
and performance of all principal, interest and other sums due and owing with
respect to this Subordinated Note, when and as the same shall become due and
payable, whether at maturity, by acceleration or otherwise, and the due and
punctual performance of all duties, obligations, and liabilities of the
Borrowers' under this Subordinated Note and the related Loan Agreement and the
documents executed in connection therewith. The Subsidiary hereby agrees that
its obligations hereunder shall be absolute and unconditional, irrespective of,
and shall be unaffected by, any invalidity, irregularity, or unenforceability of
any provision of this Subsidiary's Note or any other loan documents.
10. Miscellaneous. Except as expressly set forth herein, Borrower
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hereby waives presentment, demand, protest and notice of dishonor and protest,
and also waives all other exemptions; and agrees that extension or extensions of
the time of payment of this Note or any
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installment or part thereof may be made before, at or after maturity by
agreement by Lender. Borrower shall pay to Lender, upon demand, all costs and
expenses that may be incurred by Lender in connection with the enforcement of
this Subordinated Note including, without limitation, reasonable fees and
expenses of Lender's counsel. Notices required to be given hereunder shall be
given in accordance with the provisions of the Loan Agreement, as amended from
time to time. Any failure by Lender to exercise any right hereunder shall not be
construed as a waiver of the right to exercise the same or any other right at
any time. No amendment to or modification of this Subordinated Note shall be
binding upon Lender unless in writing and signed by it. Any provision hereof
found to be illegal, invalid or unenforceable for any reason whatsoever shall
not affect the legality, validity or enforceability of the remainder hereof.
This Subordinated Note shall apply to and bind the successors of Borrower and
shall inure to the benefit of Lender, its successors and assigns; provided,
however, that Borrower may not assign its rights and obligations under this Note
without the express prior written consent of Lender. The Subordinated Note shall
be governed by and interpreted in accordance with the laws of the State of
Delaware.
IN WITNESS WHEREOF, Borrower, by its duly authorized officer intending to
be legally bound hereby, has duly executed this Subordinated Note as of the date
first written above.
Diamond Technology Partners Incorporated
By:______________________________
Name:____________________________
Title:_____________________________
Diamond Partners Incorporated
By:_____________________________
Name:___________________________
Title:____________________________
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