AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
EXHIBIT 10.1
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of May 27,
2009 between (i) SILICON VALLEY BANK, a California corporation with a loan production office
located at 000 Xxxxxxxxxx Xxxx, Xxxxxxxx 0, Xxxxx 000, Xxxxxx, Xxxxxxxxxxxx 00000 (“Bank”), and
(ii) SAFEGUARD SCIENTIFICS, INC., a Pennsylvania corporation (“SFE”), with offices located at 000
Xxxxx Xxxx Xxxxx, Xxxxxxxx 000, Xxxxx, Xxxxxxxxxxxx 00000, SAFEGUARD DELAWARE, INC., a Delaware
corporation and SAFEGUARD SCIENTIFICS (DELAWARE), INC., a Delaware corporation, each with offices
located at 0000 X. Xxxxxx Xx., Xxxxx 0000, Xxxxxxxxxx, XX 00000 (individually and collectively, the
“Borrower”), provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank.
This Agreement supersedes in its entirety that certain Loan and Security Agreement between the
parties dated February 6, 2009 (the “Prior Agreement”). The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed following GAAP.
Calculations and determinations must be made following GAAP. Notwithstanding the foregoing, all
financial covenant calculations shall be computed with respect to Borrower, on a consolidated basis
but excluding all other Subsidiaries of Borrower. Capitalized terms not otherwise defined in this
Agreement shall have the meanings set forth in Section 13. All other terms contained in this
Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent
such terms are defined therein.
2 LOAN AND TERMS OF PAYMENT
2.1 Promise to Pay. Borrower hereby unconditionally, jointly and severally promises to pay
Bank the outstanding principal amount of all Credit Extensions and accrued and unpaid interest
thereon as and when due in accordance with this Agreement.
2.1.1 Revolving Advances.
(a) Availability. Subject to the terms and conditions of this Agreement, Bank shall
make Advances not exceeding the Availability Amount. Amounts borrowed under the Revolving Line may
be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable
terms and conditions precedent herein.
(b) Termination; Repayment. The Revolving Line terminates on the Revolving Line
Maturity Date, when the principal amount of all Advances, the unpaid interest thereon, and all
other Obligations relating to the Revolving Line shall be immediately due and payable.
(c) Prepayment. At Borrower’s option, Borrower may prepay any or all of the Advances
under this Agreement without premium or penalty.
2.1.2 Letters of Credit Sublimit.
(a) As part of the Revolving Line, Bank shall issue or have issued Letters of Credit for
Borrower’s account. Such aggregate amounts utilized hereunder shall at all times reduce the amount
otherwise available for Advances under the Revolving Line. The face amount of outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve) may
not exceed Twenty Million Dollars ($20,000,000), inclusive of Credit Extensions relating to Section
2.1.4 and the FX Reduction Amount. If, on the Revolving Line Maturity Date, or the effective date
of any termination of this Agreement by Borrower, there are any outstanding Letters of Credit, then
on such date Borrower shall provide to Bank cash collateral in an amount equal to one hundred two
percent (102%) of the face amount of all such Letters of Credit plus all interest, fees, and costs
due or to become due in connection therewith (as estimated by Bank in its good faith business
judgment), to secure all of the Obligations relating to said Letters of Credit. All Letters of
Credit shall be in form and substance acceptable to Bank in its sole but reasonable discretion and
shall be subject to the terms and conditions of Bank’s standard Application and Letter of Credit
Agreement (the “Letter of Credit Application”). Borrower agrees to execute any further
documentation in connection with the Letters of Credit as Bank may reasonably request.
Borrower further agrees to be bound by the regulations (as in effect on the date of issuance)
and reasonable interpretations of the issuer of any Letters of Credit guaranteed by Bank and opened
for Borrower’s account or by Bank’s reasonable interpretations of any Letter of Credit issued by
Bank for Borrower’s account, and Borrower understands and agrees that Bank shall not be liable for
any error, negligence, or mistake, whether of omission or commission, in following Borrower’s
instructions or those contained in the Letters of Credit or any modifications, amendments, or
supplements thereto.
(b) The obligation of Borrower to immediately reimburse Bank for drawings made under Letters
of Credit shall be absolute, unconditional, and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, such Letters of Credit, and the Letter of Credit
Application.
(c) Borrower may request that Bank issue a Letter of Credit payable in a Foreign Currency. If
a demand for payment is made under any such Letter of Credit, Bank shall treat such demand as an
Advance to Borrower of the equivalent of the amount thereof (plus fees and charges in connection
therewith such as wire, cable, SWIFT or similar charges) in Dollars at the then-prevailing rate of
exchange in San Francisco, California, for sales of the Foreign Currency for transfer to the
country issuing such Foreign Currency.
(d) To guard against fluctuations in currency exchange rates, upon the issuance of any Letter
of Credit payable in a Foreign Currency, Bank shall create a reserve (the “Letter of Credit
Reserve”) under the Revolving Line in an amount equal to ten percent (10%) of the face amount of
such Letter of Credit. The amount of the Letter of Credit Reserve may be adjusted by Bank from
time to time to account for fluctuations in the exchange rate. The availability of funds under the
Revolving Line shall be reduced by the amount of such Letter of Credit Reserve for as long as such
Letter of Credit remains outstanding.
2.1.3 Foreign Exchange Sublimit. As part of the Revolving Line, Borrower may enter into
foreign exchange contracts with Bank under which Borrower commits to purchase from or sell to Bank
a specific amount of Foreign Currency (each, a “FX Forward Contract”) on a specified date (the
“Settlement Date”). Each FX Forward Contract shall have a Settlement Date of at least one (1) FX
Business Day after the contract date and shall be subject to a reserve of ten percent (10%) of the
outstanding amount of the FX Forward Contract (the “FX Reserve”). The aggregate amount of FX
Forward Contracts at any one time may not exceed Twenty Million Dollars ($20,000,000). The amount
otherwise available for Credit Extensions under the Revolving Line shall be reduced by an amount
equal to the aggregate FX Reserves for all outstanding FX Forward Contracts (the “FX Reduction
Amount”). Any amounts needed to fully reimburse Bank will be treated as Advances under the
Revolving Line and will accrue interest at the interest rate applicable to Advances.
2.1.4 Cash Management Services Sublimit. Borrower may use up to Twenty Million Dollars
($20,000,000), inclusive of Credit Extensions relating to Section 2.1.2 and the FX Reduction
Amount, of the Revolving Line for Bank’s cash management services which may include merchant
services, direct deposit of payroll, business credit card, and check cashing services identified in
Bank’s various cash management services agreements (collectively, the “Cash Management Services”).
Any amounts Bank pays on behalf of Borrower for any Cash Management Services will be treated as
Advances under the Revolving Line and will accrue interest at the interest rate applicable to
Advances.
2.2 Overadvances. If, at any time, the sum of (a) the outstanding principal amount of any
Advances (including any amounts used for Cash Management Services), plus (b) the face amount of any
outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve), plus (c) the FX Reduction Amount plus (d) the aggregate amount of all Borrower
Guaranteed Amounts exceeds the lesser of either the Revolving Line or the Borrowing Base, Borrower
shall immediately pay to Bank in cash such excess (the “Overadvance”). The Borrower shall not
obtain any Credit Extension hereunder if the making of such Credit Extension shall result in an
Overadvance.
2.3 Payment of Interest on the Credit Extensions.
(a) Interest Rate. Subject to Section 2.3(b), the principal amount outstanding under
the Revolving Line shall accrue interest at a floating per annum rate equal to the Prime Rate,
which interest shall be payable monthly in accordance with Section 2.3(f) below; provided,
however, that at any time the Borrower is below the Liquidity Threshold, subject to Section
2.3(b), the principal amount outstanding under the Revolving Line shall accrue interest at a
floating per annum rate equal to the Prime Rate plus one percent (1.00%), which interest shall be
payable monthly in accordance with Section 2.3(f) below.
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(b) Default Rate. Immediately upon the occurrence and during the continuance of an
Event of Default, Obligations shall bear interest at a rate per annum which is three percentage
points (3.00%) above the rate that is otherwise applicable thereto (the “Default Rate”). Payment
or acceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted
alternative to timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Bank. Bank shall endeavor to provide
Borrower with prompt notice of any Event of Default of which it becomes aware (other than one of
which Borrower has first notified Bank) and its accrual of interest at the Default Rate, but
failure by Bank to provide such prompt notice shall not in any way be deemed a waiver of Bank’s
rights and remedies hereunder.
(c) Adjustment to Interest Rate. Changes to the interest rate of any Credit Extension
based on changes to the Prime Rate shall be effective on the effective date of any change to the
Prime Rate and to the extent of any such change.
(d) 360-Day Year. Interest shall be computed on the basis of a 360-day year for the
actual number of days elapsed.
(e) Debit of Accounts. Bank may debit any of Borrower’s deposit accounts, including
the Designated Deposit Account, for principal and interest payments or any other amounts Borrower
owes Bank when due. These debits shall not constitute a set-off.
(f) Payments. Unless otherwise provided, interest is payable monthly on the Payment
Date of each month. Payments of principal and/or interest received after 12:00 p.m. Pacific time
are considered received at the opening of business on the next Business Day. When any payment is
due on a day that is not a Business Day, the payment shall be due the next Business Day and all
fees or interest, as applicable, shall continue to accrue until paid.
2.4 Fees. Borrower shall pay to Bank:
(a) [Intentionally omitted];
(b) Anniversary Fee. A fully earned, non-refundable anniversary fee (the “Anniversary
Fee”) of One Hundred Thousand Dollars ($100,000) shall be due and payable on the one (1) year
anniversary of the Effective Date (the “First Anniversary”) and the Revolving Line Maturity Date;
provided, however, that such Anniversary Fee shall not be earned or payable (in
each case, as calculated on a pro-rated basis) to the extent that Borrower maintains, during the
three hundred sixty-five (365) day period ending on the First Anniversary and on the Revolving Line
Maturity Date (as applicable), an Average Daily Balance not less than the Minimum Required Balance.
(c) Letter of Credit Fee. Bank’s customary fees and out-of-pocket expenses for the
issuance or renewal of Letters of Credit, upon the issuance, each anniversary of the issuance, and
the renewal of such Letter of Credit by Bank;
(d) Unused Revolving Line Facility Fee. A fee (the “Unused Revolving Line Facility
Fee”), which fee shall be paid quarterly, in arrears, on the last day of each fiscal quarter, in an
amount equal to one quarter of one percent (0.25%) per annum of the average unused portion of the
Revolving Line for such fiscal quarter; provided, however, that such Unused
Revolving Line Facility Fee shall not be earned or payable (in each case, as calculated on a daily
pro-rated basis) to the extent that Borrower maintains during such quarter an Average Daily Balance
not less than the Minimum Required Balance. Borrower shall not be entitled to any credit, rebate
or repayment of any Unused Revolving Line Facility Fee previously earned by Bank pursuant to this
Section 2.4(d) notwithstanding any termination of this Agreement, or suspension or termination of
Bank’s obligation to make loans and advances hereunder; and
(e) Bank Expenses. All Bank Expenses other than those incurred in connection with the
amendment and restatement of the Prior Agreement by this Agreement incurred through and after the
Effective Date, when due.
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3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. Bank’s obligation to make the initial
Credit Extension is subject to the condition precedent that Bank shall have received, in form and
substance satisfactory to
Bank, such documents, and completion of such other matters, as Bank may reasonably deem
necessary or appropriate, including, without limitation:
(a) Duly executed original signatures to the Loan Documents to which it is a party;
(b) Duly executed original signatures to the Control Agreements, if any;
(c) Borrower’s Operating Documents and a good standing certificate of Borrower certified by
the Secretary of State of the jurisdiction of incorporation of each Borrower as of a date no
earlier than thirty (30) days prior to the Effective Date;
(d) Secretary’s Certificate with completed Borrowing Resolutions for Borrower;
(e) A duly executed Federal Reserve Form U-1 (Regulation U);
(f) Certified copies, dated as of a recent date, of financing statement searches, as Bank
shall request, accompanied by written evidence (including any UCC termination statements) that the
Liens indicated in any such financing statements either constitute Permitted Liens or have been or,
in connection with the initial Credit Extension, will be terminated or released;
(g) The Perfection Certificate executed by Borrower, together with the duly executed original
signatures thereto;
(h) A legal opinion of Borrower’s counsel dated as of the Effective Date together with the
duly executed original signatures thereto; and
(i) Payment of the fees and Bank Expenses then due as specified in Section 2.4 hereof.
3.2 Conditions Precedent to all Credit Extensions. Bank’s obligations to make each Credit
Extension, including the initial Credit Extension, is subject to the following conditions
precedent:
(a) except as otherwise provided in Section 3.4(a), timely receipt of an executed Borrowing
Base Certificate and Payment/Advance Form;
(b) the representations and warranties in Section 5 shall be true, accurate and complete in
all material respects on the date of the Payment/Advance Form, the Borrowing Base Certificate and
on the Funding Date of each Credit Extension; provided, however, that such
materiality qualifier shall not be applicable to any representations and warranties that already
are qualified or modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a specific date shall be true,
accurate and complete in all material respects as of such date, and no Event of Default shall have
occurred and be continuing or result from the Credit Extension. Each Credit Extension is
Borrower’s representation and warranty on that date that the representations and warranties in
Section 5 remain true, accurate and complete in all material respects; provided,
however, that such materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring to
a specific date shall be true, accurate and complete in all material respects as of such date; and
(c) in Bank’s sole discretion, there has not been any material impairment in the general
affairs, management, results of operation, financial condition of the Borrower, taken as a whole,
or the prospect of repayment of the Obligations, or any material adverse deviation by Borrower from
the most recent business plan of Borrower, taken as a whole, presented to and accepted by Bank.
3.3 Covenant to Deliver.
Borrower agrees to deliver to Bank each item required to be delivered to Bank under this
Agreement as a condition precedent to any Credit Extension. Borrower expressly agrees that a
Credit Extension made prior to the receipt by Bank of any such item shall not constitute a waiver
by Bank of Borrower’s obligation to deliver such item, and the making of any Credit Extension in
the absence of a required item shall be in Bank’s sole discretion.
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3.4 Procedures for Borrowing. Subject to the prior satisfaction of all other applicable
conditions to the making of an Advance set forth in this Agreement, to obtain an Advance (other
than Advances under Sections 2.1.2 or 2.1.4), Borrower shall notify Bank (which notice shall be
irrevocable) by electronic mail, facsimile, or telephone by 12:00 noon Pacific time on the Funding
Date of the Advance. Together with any such electronic or facsimile notification, Borrower shall
deliver to Bank by electronic mail or facsimile a completed Payment/Advance Form executed by a
Responsible Officer or his or her designee. Bank may rely on any telephone notice given by a
person whom Bank believes is a Responsible Officer or designee. Bank shall credit Advances to the
Designated Deposit Account. Bank may make Advances under this Agreement based on instructions from
a Responsible Officer or his or her designee or without instructions if the Advances are necessary
to meet Obligations which have become due.
4 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the payment and
performance in full of all of the Obligations, a continuing security interest in, and pledges to
Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof. Borrower represents, warrants, and covenants that the security
interest granted herein is and shall at all times continue to be a first priority perfected
security interest in the Collateral (subject only to Permitted Liens that may have superior
priority to Bank’s Lien under this Agreement). If Borrower shall acquire a commercial tort claim,
Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof
and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon
the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory
to Bank.
If this Agreement is terminated, Bank’s Lien in the Collateral shall continue until the
Obligations (other than inchoate indemnity obligations) are repaid in full in cash. Upon payment
in full in cash of the Obligations and at such time as Bank’s obligation to make Credit Extensions
has terminated, Bank shall, at Borrower’s sole cost and expense, release its Liens in the
Collateral and all rights therein shall revert to Borrower.
4.2 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file
financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or
protect Bank’s interest or rights hereunder, including a notice that any disposition of the
Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of Bank
under the Code. Such financing statements may indicate the Collateral as described on Exhibit
A hereto.
5 REPRESENTATIONS AND WARRANTIES
Except as described in the Perfection Certificate, Borrower represents and warrants as
follows:
5.1 Due Organization, Authorization; Power and Authority. Borrower is duly existing and in
good standing as a Registered Organization in its jurisdiction of formation and is qualified and
licensed to do business and is in good standing in any jurisdiction in which the conduct of its
business or its ownership of property requires that it be qualified except where the failure to do
so could not reasonably be expected to have a material adverse effect on Borrower’s business. In
connection with this Agreement, Borrower has delivered to Bank a completed certificate signed by
Borrower, entitled “Perfection Certificate”. Borrower represents and warrants to Bank that, as of
the Effective Date, (a) Borrower’s exact legal name is that indicated on the Perfection Certificate
and on the signature page hereof; (b) Borrower is an organization of the type and is organized in
the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately
sets forth Borrower’s organizational identification number or accurately states that Borrower has
none; (d) the Perfection Certificate accurately sets forth Borrower’s place of business, or, if
more than one, its chief executive office as well as Borrower’s mailing address (if different than
its chief executive office); (e) Borrower (and each of its predecessors) has not, in the past five
(5) years, changed its jurisdiction of formation, organizational structure or type, or any
organizational number assigned by its jurisdiction; and (f) all other information set forth on the
Perfection Certificate pertaining to Borrower is accurate and complete (it being understood and
agreed that Borrower may from time to time update certain information in the Perfection Certificate
after the Effective Date to the extent permitted by one or more specific provisions in this
Agreement). If Borrower is not now a Registered Organization but later becomes one, Borrower shall
promptly notify Bank of such occurrence and provide Bank with Borrower’s organizational
identification number.
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The execution, delivery and performance by Borrower of the Loan Documents to which it is a
party have been duly authorized, and do not (i) conflict with any of Borrower’s organizational
documents, (ii) contravene, conflict with, constitute a default under or violate any material
Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by which Borrower or any
of their property or assets may be bound or affected, (iv) require any action by, filing,
registration, or qualification with, or Governmental Approval from, any Governmental Authority
(except such Governmental Approvals which have already been obtained and are in full force and
effect) or (v) constitute an event of default under any material agreement (as defined by the
Securities Exchange Act of 1934, as amended) by which Borrower is bound. Borrower is not in
default under any agreement to which it is a party or by which Borrower or any of its Subsidiaries
or any of their property or assets may be bound in which the default could reasonably be expected
to have a material adverse effect on Borrower’s business.
5.2 Collateral. Borrower has good title to, has rights in, and the power to transfer each
item of the Collateral upon which it purports to xxxxx x Xxxx hereunder, free and clear of any and
all Liens except Permitted Liens. Borrower has no deposit accounts other than the deposit accounts
with Bank, the deposit accounts, if any, described in the Perfection Certificate delivered to Bank
in connection herewith, or of which Borrower has given Bank notice and taken such actions as are
necessary to give Bank a perfected security interest therein.
The Collateral is not in the possession of any third party bailee (such as a warehouse) except
as otherwise provided in the Perfection Certificate. None of the components of the Collateral
shall be maintained at locations other than as provided in the Perfection Certificate or as
permitted pursuant to Section 7.2. In the event that Borrower, after the date hereof, intends to
store or otherwise deliver any portion of the Collateral to a bailee, then Borrower will first
receive the written consent of Bank and such bailee must execute and deliver a bailee agreement in
form and substance satisfactory to Bank in its sole discretion.
5.3 Litigation. As of the Effective Date and as and when required by Section 3.2 hereof,
there are no actions or proceedings pending or, to the knowledge of the Responsible Officers,
threatened in writing by or against Borrower or any of its Subsidiaries involving more than Five
Hundred Thousand Dollars ($500,000.00).
5.4 No Material Deterioration in Financial Condition; Financial Statements. As of the
Effective Date and as and when required by Section 3.2 hereof, all consolidated financial
statements of Borrower delivered to Bank fairly present in all material respects Borrower’s
consolidated financial condition and Borrower’s consolidated results of operations. There has not
been any material deterioration in Borrower’s consolidated financial condition, taken as a whole
since the date of the most recent financial statements submitted to Bank.
5.5 Solvency. As of the Effective Date and as when required by Section 3.2 hereof, the fair
salable value of Borrower’s assets (including goodwill minus disposition costs), taken as a whole,
exceeds the fair value of its liabilities, taken as a whole; Borrower, taken as a whole, is not
left with unreasonably small capital after the transactions in this Agreement; and Borrower, taken
as a whole, is able to pay its debts (including trade debts) as they mature.
5.6 Regulatory Compliance. As of the Effective Date and as and when required by Section 3.2
hereof, Borrower is not an “investment company” or a company “controlled” by an “investment
company” under the Investment Company Act. Borrower is not engaged as one of its important
activities in extending credit for margin stock (under Regulations X, T and U of the Federal
Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair
Labor Standards Act. Borrower is not a “holding company” or an “affiliate” of a “holding company”
or a “subsidiary company” of a “holding company” for purposes of and as each term is defined and
used in the Public Utility Holding Company Act of 2005. Borrower has not violated any laws,
ordinances or rules, the violation of which could reasonably be expected to have a material adverse
effect on its business. None of Borrower’s or any of its Subsidiaries’ properties or assets has
been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous
Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other
than legally. Borrower and each of its Subsidiaries have obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices to, all Government
Authorities that are necessary to continue their respective businesses as currently conducted.
5.7 Subsidiaries; Investments. As of the Effective Date and as and when required by Section
3.2 hereof, Borrower does not own any stock, partnership interest or other equity securities except
for Permitted Investments.
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5.8 Tax Returns and Payments; Pension Contributions. Borrower and its Subsidiaries have
timely filed all required tax returns and reports, and Borrower and its Subsidiaries have timely
paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by
Borrower. Borrower may defer payment of any contested taxes, provided that Borrower (a) in good
faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently
instituted and conducted, (b) notifies Bank in writing of the commencement of, and any material
development in, the proceedings, (c) posts bonds or takes any other steps required to prevent the
governmental authority levying such contested taxes from obtaining a Lien upon any of the
Collateral that is other than a “Permitted Lien”. Borrower is unaware of any claims or adjustments
proposed for any of Borrower’s prior tax years which could result in additional taxes becoming due
and payable by Borrower. Borrower has paid all amounts necessary to fund all present pension,
profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not
withdrawn from participation in, and has not permitted partial or complete termination of, or
permitted the occurrence of any other event with respect to, any such plan which could reasonably
be expected to result in any material liability of Borrower, including any material liability to
the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
5.9 Use of Proceeds. Borrower has not and shall not use the proceeds of the Credit Extensions
for anything other than as working capital and to fund its general business requirements, and not
for personal, family, household or agricultural purposes.
5.10 Full Disclosure. No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Bank, as of the date such representation, warranty,
or other statement was made, taken together with all such written certificates and written
statements given to Bank, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the certificates or statements not
misleading (it being recognized by Bank that the projections and forecasts provided by Borrower in
good faith and based upon reasonable assumptions are not viewed as facts and that actual results
during the period or periods covered by such projections and forecasts may differ from the
projected or forecasted results).
6 AFFIRMATIVE COVENANTS
Borrower shall do all of the following:
6.1 Government Compliance.
(a) Borrower shall, and shall cause each of its Subsidiaries to, maintain its legal existence
and good standing in its jurisdiction of formation and each jurisdiction in which the nature of its
business requires them to be so qualified, except where the failure to take such action would not
reasonably be expected to have a material adverse effect on Borrower’s and its Subsidiaries’
business or operations, taken as a whole; provided, that (a) the legal existence of any
Subsidiary that is not a guarantor or Borrower may be terminated or permitted to lapse, and any
qualification of such Subsidiary to do business may be terminated or permitted to lapse, if, in the
good faith judgment of Borrower, such termination or lapse is in the best interests of Borrower and
its Subsidiaries, taken as a whole, and (b) Borrower may not permit its qualification to do
business in the jurisdiction of its chief executive office to terminate or lapse; and
provided, further, that this Section 6.1 shall not be construed to prohibit any
other transaction that is otherwise expressly permitted in Section 7 of this Agreement.
(b) Obtain all of the Governmental Approvals necessary for the performance by Borrower of its
obligations under the Loan Documents to which it is a party and the grant of a security interest to
Bank in all of its property. Borrower shall promptly provide copies of any such obtained
Governmental Approvals to Bank.
6.2 Financial Statements, Reports, Certificates.
(a) Deliver to Bank:
(i) as soon as available, but no later than five (5) Business Days after filing with the
Securities Exchange Commission (the “SEC”), SFE’s 10-K, 10-Q and 8-K reports,
(ii) together with SFE’s 10-K filing, its consolidated financial statements prepared under
GAAP, consistently applied, together with an unqualified opinion on the financial statements from
an independent certified public accounting firm,
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(iii) a Compliance Certificate (delivered with the 10-K and 10-Q reports (as applicable));
(iv) within forty-five (45) days after the end of each fiscal year and upon any material
amendment, cash projections for the following fiscal year (on a quarterly basis) as presented to
SFE’s board of directors (the “SFE Board”);
(v) a prompt report of any legal actions pending or threatened against Borrower or any
Subsidiary that could result in damages or costs to Borrower or any Subsidiary of Five Hundred
Thousand Dollars ($500,000.00) or more; and (vi) budgets, sales projections, operating plans or
other financial information Bank reasonably requests.
Borrower’s 10-K, 10-Q, and 8-K reports and financial statements required to be delivered
pursuant to Sections 6.2(a)(i) and (ii) shall be deemed to have been delivered on the date on which
Borrower files such report with the SEC or provides a link thereto on Borrower’s or another website
on the Internet.
(b) With each Advance request (and if any Advance has been taken and has not been repaid by
Borrower in full, with the filing of SFE’s 10-K and 10-Q reports), deliver to Bank a duly completed
Borrowing Base Certificate signed by a Responsible Officer.
(c) Within forty-five (45) days after the last day of each fiscal quarter, (i) quarterly cash
flow projection reports, in form and substance acceptable to Bank, in its reasonable discretion;
and (ii) quarterly Net Asset Value Reports.
(d) Allow Bank to audit the location and the composition of Borrower’s Collateral, at
Borrower’s expense. Such audits shall be conducted no more often than once every twelve (12)
months unless an Event of Default has occurred and is continuing; provided,
however, Bank agrees that such audits will only be conducted while there are outstanding
Advances under the Revolving Line.
6.3 Taxes; Pensions. Timely file, and require each of its Subsidiaries to timely file, all
required tax returns and reports and timely pay, and require each of its Subsidiaries to timely pay
all foreign, federal, state and local taxes, assessments, deposits and contributions owed by
Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant
to the terms of Section 5.8 hereof, and shall deliver to Bank, on demand, appropriate certificates
attesting to such payments, and pay all amounts necessary to fund all present pension, profit
sharing and deferred compensation plans in accordance with their terms.
6.4 Operating Accounts.
(a) Other than (i) its payroll account, (ii) a collateral account with Comerica Bank
sufficient to secure the Clarient Guaranty and (iii) escrow accounts established from time to time
in the ordinary course of business in connection with Permitted Investment transactions, maintain
with Bank and/or Bank’s Affiliates (x) all depository and operating accounts and (y) not less than
seventy-five percent (75%) (by value) of Borrower’s investment and securities accounts.
(b) Other than described in clause (a)(i), (a)(ii) and (a) (iii) above, provide Bank five (5)
days prior-written notice before establishing any Collateral Account at or with any bank or
financial institution other than Bank or Bank’s Affiliates. For each Collateral Account that
Borrower at any time maintains, Borrower shall cause the applicable bank or financial institution
(other than Bank) at or with which any Collateral Account is maintained to execute and deliver a
Control Agreement or other appropriate instrument with respect to such Collateral Account to
perfect Bank’s Lien in such Collateral Account in accordance with the terms hereunder, which
Control Agreement may not be terminated without the prior written consent of the Bank. The
provisions of the previous sentence shall not apply to deposit accounts exclusively used for
payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of
Borrower’s employees and identified to Bank by Borrower as such.
6.5 Financial Covenant; Delivery of Stock Certificates and Stock Powers. (a) Borrower shall
maintain, at all times, the Liquidity Threshold; provided, however, that in the
event Borrower does not maintain the Liquidity Threshold, and Borrower immediately provides Bank
with evidence acceptable to Bank, in its sole discretion, that Borrower will meet or exceed the
Liquidity Threshold within 180 days (the “180-day Cure Period”), such failure to maintain the
Liquidity Threshold shall not constitute an Event of Default or breach
hereunder until the earlier to occur of (X) any other Default or Event of Default hereunder;
or (Y) the one hundred eighty-first (181) consecutive day after such failure to maintain the
Liquidity Threshold. Borrower is permitted no more than one 180-day Cure Period in any 365 day
period beginning on the Effective Date; and
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(b) Whether or not a 180-day Cure Period is in effect, immediately upon written request by
Bank after Borrower falls below the Liquidity Threshold, Borrower shall (i) deliver the
certificates representing all Publicly Traded Securities and any Private Securities which are part
of the Collateral, together with stock powers therefor executed in blank, in form and substance
reasonably acceptable to Bank; and (ii) if such equity interest is uncertificated, execute such
other documents and agreements requested by Bank, in its reasonable discretion, to grant Bank
“control” (within the meaning of the Code) over such securities owned by the Borrower. Bank shall,
upon written request from Borrower, return to Borrower all items furnished by Borrower to Bank
pursuant to this Section 6.5(b) no later than ten (10) Business Days after Borrower reasonably
demonstrates that it again meets the Liquidity Threshold.
6.6 Litigation Cooperation. From the date hereof and continuing through the termination of
this Agreement, make available to Bank, without expense to Bank, Borrower and its officers,
employees and agents and Borrower’s Books, to the extent that Bank may deem them reasonably
necessary to prosecute or defend any third-party suit or proceeding instituted by or against Bank
with respect to any Collateral or relating to Borrower.
6.7 Further Assurances. Execute any further instruments and take further action as Bank
reasonably requests to perfect or continue Bank’s Lien in the Collateral or to effect the purposes
of this Agreement. Deliver to Bank, within five (5) days after the same are sent or received,
copies of all correspondence, reports, documents and other filings with any Governmental Authority
regarding compliance with or maintenance of Governmental Approvals or Requirements of Law or that
could reasonably be expected to have a material effect on any of the Governmental Approvals or
otherwise on the operations of Borrower or any of its Subsidiaries.
7 NEGATIVE COVENANTS
Borrower shall not do any of the following without Bank’s prior written consent:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of (collectively
“Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or
property, except for:
(a) Transfers associated with the making or disposition of a Permitted Investment;
(b) Transfers to any Borrower from any other Borrower;
(c) Transfers of property in connection with sale-leaseback transactions;
(d) Transfers of property to the extent such property is exchanged for credit against, or
proceeds are promptly applied to, the purchase price of other property used or useful in the
business of Borrower;
(e) sales or discounting of delinquent accounts in the ordinary course of business;
(f) Transfers associated with the making or disposition of a Permitted Investment;
(g) Transfers in connection with a permitted acquisition of a portion of the assets or rights
acquired; and
(h) Transfers of assets (other than assets consisting of Publically Traded Securities
or the Private Securities Portfolio, for which this clause (i) shall not apply),
provided, that the aggregate book value of all such Transfers by Borrower, shall not
exceed, in any fiscal year, ten percent (10%) of Borrower’s consolidated total assets as of
the last day of the fiscal year immediately preceding the date of determination.
Notwithstanding the foregoing or anything else in this Agreement to the contrary, Bank shall
not have the right to notice or approval (provided, any time there are outstanding Credit
Extensions, an Event of Default does not exist immediately prior to or would result in an Event of
Default immediately thereafter), of (i) any acquisition or disposition of Publicly Traded
Securities or Private Securities within the Private Securities Portfolio; (ii) payment of
compensation to employees, consultants and directors or (iii) initiation or settlement of
litigation or other legal recourse.
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7.2 Changes in Business; Change in Control; Jurisdiction of Formation. Engage in any material
line of business other than those lines of business conducted by Borrower and its Subsidiaries on
the date hereof and any businesses reasonably related, complementary or incidental thereto or
reasonable extensions thereof or permit or suffer any Change in Control. Borrower will not,
without prior written notice, change its jurisdiction of formation.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries (other
than Subsidiaries that are part of the Private Security Portfolio or the Publicly Traded
Securities) to merge or consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries (other than Subsidiaries that are part of the Private Security Portfolio or the
Publicly Traded Securities) to acquire, all or substantially all of the capital stock or property
of any other Person; provided, however, that notwithstanding the foregoing, nothing
herein shall be construed as preventing Borrower from acquiring debt or equity securities of
companies to be held as part of the Private Security Portfolio or the Publicly Traded Securities.
7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its property, or assign
or convey any right to receive income, or permit any of its Subsidiaries to do so, except for
Permitted Liens, permit any Collateral not to be subject to the first priority security interest
granted herein, or enter into any agreement, document, instrument or other arrangement (except with
or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of
prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security
interest in or upon, or encumbering any of Borrower’s or any Subsidiary’s intellectual property,
except as is otherwise permitted in Section 7.1 hereof and the definition of “Permitted Liens”
herein.
7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to
the terms of Section 6.5(b) hereof.
7.7 Distributions; Investments. (a) Directly or indirectly acquire or own any Person, or make
any Investment in any Person, other than Permitted Investments, or permit any of its Subsidiaries
to do so; or (b) pay any dividends or make any distribution or payment or redeem, retire or
purchase any capital stock other than Permitted Distributions.
7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any
material transaction with any Affiliate of Borrower except for transactions that are in the
ordinary course of Borrower’s business, upon fair and reasonable terms (when viewed in the context
of any series of transactions of which it may be a part, if applicable) that are no less favorable
to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person.
7.9 Subordinated Debt. Make or permit any payment on or amendments of any Subordinated Debt,
except (a) payments pursuant to the terms of the Subordinated Debt; (b) payments made with
Borrower’s capital stock or other Subordinated Debt; or (c) amendments to Subordinated Debt so long
as such Subordinated Debt remains subordinated in right of payment to this Agreement and any Liens
securing such Subordinated Debt remain subordinate in priority to Bank’s Lien hereunder.
7.10 Compliance. Become an “investment company” or a company controlled by an “investment
company”, under the Investment Company Act or undertake as one of its important activities
extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or
non-exempt Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal
Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably
be expected to have a material adverse effect on Borrower’s business, or permit any of its
Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event with respect to,
any present pension, profit sharing and deferred compensation plan which could reasonably be
expected to result in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
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8 EVENTS OF DEFAULT
Any one of the following shall constitute an event of default (an “Event of Default”) under
this Agreement:
8.1 Payment Default. Borrower fails to (a) make any payment of principal or interest on any
Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days
after such Obligations are due and payable (which three (3) Business Day grace period shall not
apply to payments due on the Revolving Line Maturity Date or the date of acceleration pursuant to
Section 9.1(a) herein). During the cure period, the failure to cure the payment default is not an
Event of Default (but no Credit Extension will be made during the cure period);
8.2 Covenant Default.
(a) Except as otherwise permitted in this Agreement, Borrower fails or neglects to perform any
obligation in Sections 6.2, 6.4, 6.5 or 6.6, or violates any covenant in Section 7; or
(b) Borrower fails or neglects to perform, keep, or observe any other term, provision,
condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any
default (other than those specified in this Section 8) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within fifteen (15) days
after the occurrence thereof; provided, however, that if the default cannot by its nature be cured
within the fifteen (15) day period or cannot after diligent attempts by Borrower be cured within
such fifteen (15) day period, and such default is likely to be cured within a reasonable time, then
Borrower shall have an additional period (which shall not in any case exceed forty-five (45) days)
to attempt to cure such default, and within such reasonable time period the failure to cure the
default shall not be deemed an Event of Default (but no additional Credit Extensions shall be made
during such cure period). Grace periods provided under this Section shall not apply, among other
things, to financial covenants or any other covenants set forth in subsection (a) above;
8.3 Material Adverse Change. A Material Adverse Change occurs;
8.4 Change in Control. If a Change in Control occurs;
8.5 Attachment; Levy; Restraint on Business.
(a) (i) the service of process seeking to attach, by trustee or similar process, any funds of
Borrower or of any entity under control of Borrower (including a Subsidiary) on deposit with Bank
or any Bank Affiliate, or (ii) a notice of lien, levy, or assessment is filed against any of
Borrower’s assets by any government agency, and the same under subclauses (i) and (ii) hereof are
not, within twenty (20) days after the occurrence thereof, discharged or stayed (whether through
the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during
any twenty (20) day cure period; and
(b) (i) any material portion of Borrower’s assets is attached, seized, levied on, or comes
into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents
Borrower from conducting any part of its business;
8.6 Insolvency. (a) Borrower is unable to pay its debts (including trade debts) as they
become due or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an
Insolvency Proceeding is begun against Borrower and not dismissed or stayed within thirty (30) days
(but no Credit Extensions shall be made while of any of the conditions described in clause (a)
exist and/or until any Insolvency Proceeding is dismissed);
8.7 Other Agreements. There is a default in any agreement to which Borrower is a party with a
third party or parties resulting in a right by such third party or parties, whether or not
exercised, to accelerate the maturity of any Indebtedness in an amount in excess of Five Hundred
Thousand Dollars ($500,000) or that could have a material adverse effect on Borrower’s business;
8.8 Judgments. One or more judgments, orders, or decrees for the payment of money in an
amount, individually or in the aggregate, of at least Five Hundred Thousand Dollars ($500,000) (not
covered by independent third-party insurance as to which liability has been accepted by such
insurance carrier) shall be rendered against Borrower and shall remain unsatisfied, unvacated, or
unstayed for a period of thirty (30) days after the entry thereof
(provided that no Credit Extensions will be made prior to the satisfaction, vacation, or stay
of such judgment, order, or decree);
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8.9 Misrepresentations. Borrower or any Person acting for Borrower makes any representation,
warranty, or other statement now or later in this Agreement, any Loan Document or in any writing
delivered to Bank or to induce Bank to enter this Agreement or any Loan Document, and such
representation, warranty, or other statement is incorrect in any material respect when made;
8.10 Subordinated Debt. A default or breach occurs under any agreement between Borrower and
any creditor of Borrower that signed a subordination, intercreditor, or other similar agreement
with Bank, or any creditor that has signed such an agreement with Bank breaches any terms of such
agreement; or
8.11 Governmental Approvals. Any Governmental Approval shall have been (a) revoked,
rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a
full term or (b) subject to any decision by a Governmental Authority that designates a hearing with
respect to any applications for renewal of any of such Governmental Approval or that could result
in the Governmental Authority taking any of the actions described in clause (a) above, and such
decision or such revocation, rescission, suspension, modification or non-renewal (i) has, or could
reasonably be expected to have, a material adverse effect on Borrower’s business, or (ii) adversely
affects the legal qualifications of Borrower or any of its Subsidiaries to hold such Governmental
Approval in any applicable jurisdiction and such revocation, rescission, suspension, modification
or non-renewal could reasonably be expected to affect the status of or legal qualifications of
Borrower or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction.
9 BANK’S RIGHTS AND REMEDIES
9.1 Rights and Remedies. While an Event of Default occurs and continues Bank may, without
notice or demand, do any or all of the following:
(a) declare all Obligations immediately due and payable (but if an Event of Default described
in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);
(b) stop advancing money or extending credit for Borrower’s benefit under this Agreement or
under any other agreement between Borrower and Bank;
(c) demand that Borrower (i) deposits cash with Bank in an amount equal to the aggregate
amount of any Letters of Credit remaining undrawn, as collateral security for the repayment of any
future drawings under such Letters of Credit, and Borrower shall forthwith deposit and pay such
amounts, and (ii) pay in advance all Letter of Credit fees scheduled to be paid or payable over the
remaining term of any Letters of Credit;
(d) terminate any FX Forward Contracts;
(e) settle or adjust disputes and claims directly with Account Debtors for amounts on terms
and in any order that Bank considers advisable, notify any Person owing Borrower money of Bank’s
security interest in such funds, and verify the amount of such account;
(f) make any payments and do any acts it considers necessary or reasonable to protect the
Collateral and/or its security interest in the Collateral. Borrower shall assemble the Collateral
if Bank requests and make it available as Bank designates. Bank may enter premises where the
Collateral is located, take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of
its premises, without charge, to exercise any of Bank’s rights or remedies;
(g) apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any
amount held by Bank owing to or for the credit or the account of Borrower;
(h) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for
sale, and sell the Collateral. Bank is hereby granted a non-exclusive, royalty-free license or
other right to use, without charge, Borrower’s labels, patents, copyrights, mask works, rights of
use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or
any similar property as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral and, in connection
with Bank’s exercise of its rights under this Section, Borrower’s rights under all licenses and all
franchise agreements inure to Bank’s benefit;
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(i) place a “hold” on any account maintained with Bank and/or deliver a notice of exclusive
control, any entitlement order, or other directions or instructions pursuant to any Control
Agreement or similar agreements providing control of any Collateral;
(j) demand and receive copies of Borrower’s Books; and
(k) exercise all rights and remedies available to Bank under the Loan Documents or at law or
equity, including all remedies provided under the Code (including disposal of the Collateral
pursuant to the terms thereof).
9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its lawful
attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of
Default, to pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse
claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same. Borrower hereby appoints Bank as its lawful attorney-in-fact to
sign Borrower’s name on any documents necessary to perfect or continue the perfection of Bank’s
security interest in the Collateral regardless of whether an Event of Default has occurred until
all Obligations have been satisfied in full and Bank is under no further obligation to make Credit
Extensions hereunder. Bank’s foregoing appointment as Borrower’s attorney in fact, and all of
Bank’s rights and powers, coupled with an interest, are irrevocable until all Obligations have been
fully repaid and performed and Bank’s obligation to provide Credit Extensions terminates.
9.3 Application of Payments and Proceeds. Unless an Event of Default has occurred and is
continuing, Bank shall apply any funds in its possession, whether from Borrower account balances,
payments, or proceeds realized as the result of any disposition of the Collateral, first, to Bank
Expenses, including without limitation, the reasonable costs, expenses, liabilities, obligations
and attorneys’ fees incurred by Bank in the exercise of its rights under this Agreement; second, to
the interest due upon any of the Obligations; and third, to the principal of the Obligations and
any applicable fees and other charges, in such order as Bank shall determine in its sole
discretion. Any surplus shall be paid to Borrower or other Persons legally entitled thereto;
Borrower shall remain liable to Bank for any deficiency. If an Event of Default has occurred and
is continuing, Bank may apply any funds in its possession, whether from Borrower account balances,
payments, proceeds realized as the result of any disposition of the Collateral, or otherwise, to
the Obligations in such order as Bank shall determine in its sole discretion. Any surplus shall be
paid to Borrower or other Persons legally entitled thereto; Borrower shall remain liable to Bank
for any deficiency. If Bank, in its good faith business judgment, directly or indirectly enters
into a deferred payment or other credit transaction with any purchaser at any sale of Collateral,
Bank shall have the option, exercisable at any time, of either reducing the Obligations by the
principal amount of the purchase price or deferring the reduction of the Obligations until the
actual receipt by Bank of cash therefor.
9.4 Bank’s Liability for Collateral. Except with respect to certificated securities, so long
as Bank complies with reasonable banking practices regarding the safekeeping of the Collateral in
the possession or under the control of Bank, Bank shall not be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the
value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other
Person. Borrower bears all risk of loss, damage or destruction of the Collateral.
9.5 No Waiver; Remedies Cumulative. Bank’s failure, at any time or times, to require strict
performance by Borrower of any provision of this Agreement or any other Loan Document shall not
waive, affect, or diminish any right of Bank thereafter to demand strict performance and compliance
herewith or therewith. No waiver hereunder shall be effective unless signed by Bank and then is
only effective for the specific instance and purpose for which it is given. Bank’s rights and
remedies under this Agreement and the other Loan Documents are cumulative. Bank has all rights and
remedies provided under the Code, by law, or in equity. Bank’s exercise of one right or remedy is
not an election, and Bank’s waiver of any Event of Default is not a continuing waiver. Bank’s
delay in exercising any remedy is not a waiver, election, or acquiescence.
9.6 Demand Waiver. Borrower waives demand, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by
Bank on which Borrower is liable.
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10 NOTICES
All notices, consents, requests, approvals, demands, or other communication by any party to
this Agreement or any other Loan Document must be in writing and shall be deemed to have been
validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business
Days after deposit in the U.S. mail, first class, registered or certified mail return receipt
requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail or
facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier
with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall
be addressed to the party to be notified and sent to the address, facsimile number, or email
address indicated below. Bank or Borrower may change its mailing or electronic mail address or
facsimile number by giving the other party written notice thereof in accordance with the terms of
this Section 10.
| If to Borrower: | Safeguard Delaware, Inc. Safeguard Scientifics (Delaware), Inc. 0000 X. Xxxxxx Xxxxxx, Xxxxx 0000 Xxxxxxxxxx, Xxxxxxxx 00000 Attn: General Counsel Fax: (000) 000-0000 Email: xxxxxx@xxxxxxxxx.xxx |
|||
| with a copy to (which shall not constitute “Notice” hereunder): | ||||
| Safeguard Scientifics, Inc. 000 Xxxxx Xxxx Xxxxx, Xxxxxxxx 000 Xxxxx, Xxxxxxxxxxxx 00000 Attn: General Counsel Fax: (000) 000-0000 Email: xxxxxx@xxxxxxxxx.xxx |
||||
| If to Bank: | Silicon Valley Bank 000 Xxxxxxxxxx Xxxx, Xxxxxxxx 0, Xxxxx 000, Xxxxxx, Xxxxxxxxxxxx 00000 Attention: Mr. Xxx Xxxxxx Fax: (000) 000-0000 Email: XXxxxxx@xxx.xxx |
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| with a copy to: | Xxxxxx & Xxxxxxxxxx, LLP Xxxxx Xxxxxx Xxxxx Xxxxxx, Xxxxxxxxxxxxx 00000 Attn: Xxxxx X. Xxxxxxx, Esquire Fax: (000) 000-0000 Email: XXxxxxxx@xxxxxxxxx.xxx |
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11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Delaware law governs the Loan Documents without regard to principles of conflicts of law.
Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in
Delaware; provided, however, that nothing in this Agreement shall be deemed to
operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction
to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or
other court order in favor of Bank. Borrower expressly submits and consents in advance to such
jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any
objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non
conveniens and hereby consents to the granting of such legal or equitable relief as is deemed
appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and
other process issued in such action or suit and agrees that service of such summons, complaints,
and other process may be made by registered or certified mail addressed to Borrower at the address
set forth in Section 10 of this Agreement and that service so made shall be deemed completed upon
the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the
U.S. mails, proper postage prepaid.
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TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN
DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH
PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement binds and is for the benefit of the successors
and permitted assigns of each party. Borrower may not assign this Agreement or any rights or
obligations under it without Bank’s prior written consent (which may be granted or withheld in
Bank’s discretion). Bank has the right, without the consent of or notice to Borrower, to sell,
transfer, assign, negotiate, or grant participation in all or any part of, or any interest in,
Bank’s obligations, rights, and benefits under this Agreement and the other Loan Documents.
12.2 Indemnification. Borrower agrees to indemnify, defend and hold Bank and its directors,
officers, employees, agents, attorneys, or any other Person affiliated with or representing Bank
(each, an “Indemnified Person”) harmless against: (a) all obligations, demands, claims, and
liabilities (collectively, “Claims”) asserted by any other party in connection with the
transactions contemplated by the Loan Documents; and (b) all losses or Bank Expenses incurred, or
paid by such Indemnified Person from, following, or arising from transactions between Bank and
Borrower (including reasonable attorneys’ fees and expenses), except for Claims and/or losses
directly caused by such Indemnified Person’s gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance of all Obligations in this
Agreement.
12.4 Severability of Provisions. Each provision of this Agreement is severable from every
other provision in determining the enforceability of any provision.
12.5 Correction of Loan Documents. Bank may correct patent errors and fill in any blanks in
this Agreement and the other Loan Documents consistent with the agreement of the parties.
12.6 Amendments in Writing; Integration. All amendments to this Agreement must be in writing
and signed by both Bank and Borrower. This Agreement and the Loan Documents represent the entire
agreement about this subject matter and supersede prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations between the parties about
the subject matter of this Agreement and the Loan Documents merge into this Agreement and the Loan
Documents.
12.7 Counterparts. This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and delivered, is an
original, and all taken together, constitute one Agreement.
12.8 Survival. All covenants, representations and warranties made in this Agreement continue
in full force until this Agreement has terminated pursuant to its terms and all Obligations (other
than inchoate indemnity obligations and any other obligations which, by their terms, are to survive
the termination of this Agreement) have been paid in full and satisfied. The obligation of
Borrower in Section 12.2 to indemnify Bank shall survive until the statute of limitations with
respect to such claim or cause of action shall have run.
12.9 Confidentiality. In handling any confidential information, Bank shall exercise the same
degree of care that it exercises for its own proprietary information, but disclosure of information
may be made: (a) to Bank’s Subsidiaries or Affiliates; (b) to prospective transferees or purchasers
of any interest in the Credit Extensions (provided, however, Bank shall use commercially reasonable
efforts to obtain such prospective transferee’s or purchaser’s agreement to the terms of this
provision); (c) as required by law, regulation, subpoena, or other order; (d) to Bank’s regulators
or as otherwise required in connection with Bank’s examination or audit; (e) as Bank considers
appropriate in exercising remedies under the Loan Documents; and (f) to third-party service
providers of Bank so long as such service providers have executed a confidentiality agreement with
Bank with terms no less restrictive than those contained herein. Confidential information does not
include information that either: (i) is in the public domain or in Bank’s possession when disclosed
to Bank, or becomes part of the public domain after
disclosure to Bank; or (ii) is disclosed to Bank by a third party, if Bank does not know that
the third party is prohibited from disclosing the information.
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Bank may use confidential information for any purpose, including, without limitation, for the
development of client databases, reporting purposes, and market analysis, so long as Bank does not
disclose Borrower’s identity or the identity of any person associated with Borrower unless
otherwise expressly permitted by this Agreement. The provisions of the immediately preceding
sentence shall survive the termination of this Agreement.
12.10 Right of Set Off. Borrower hereby grants to Bank, a lien, security interest and right
of set off as security for all Obligations to Bank, whether now existing or hereafter arising upon
and against all deposits, credits, collateral and property, now or hereafter in the possession,
custody, safekeeping or control of Bank or any entity under the control of Bank (including a Bank
subsidiary) or in transit to any of them. At any time after the occurrence and during the
continuance of an Event of Default, without demand or notice, Bank may set off the same or any part
thereof and apply the same to any liability or obligation of Borrower even though unmatured and
regardless of the adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO
REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES
THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR
OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
12.11 Borrower Liability. Either Borrower may, acting singly, request Advances hereunder.
Each Borrower hereby appoints the other as agent for the other for all purposes hereunder,
including with respect to requesting Advances hereunder. Each Borrower hereunder shall be
obligated, jointly and severally, to repay all Advances made hereunder, regardless of which
Borrower actually receives said Advance, as if each Borrower hereunder directly received
all Advances. Each Borrower waives any suretyship defenses available to it under the Code
or any other applicable law. Each Borrower waives any right to require Bank to: (i) proceed
against any Borrower or any other person; (ii) proceed against or exhaust any security; or (iii)
pursue any other remedy. Bank may exercise or not exercise any right or remedy it has against any
Borrower or any security it holds (including the right to foreclose by judicial or non-judicial
sale) without affecting any Borrower’s liability. Notwithstanding any other provision of this
Agreement or other related document, each Borrower irrevocably waives all rights that it may have
at law or in equity (including, without limitation, any law subrogating Borrower to the rights of
Bank under this Agreement) to seek contribution, indemnification or any other form of reimbursement
from any other Borrower, or any other Person now or hereafter primarily or secondarily liable for
any of the Obligations, for any payment made by Borrower with respect to the Obligations in
connection with this Agreement or otherwise and all rights that it might have to benefit from, or
to participate in, any security for the Obligations as a result of any payment made by Borrower
with respect to the Obligations in connection with this Agreement or otherwise. Any agreement
providing for indemnification, reimbursement or any other arrangement prohibited under this Section
shall be null and void. If any payment is made to a Borrower in contravention of this Section,
such Borrower shall hold such payment in trust for Bank and such payment shall be promptly
delivered to Bank for application to the Obligations, whether matured or unmatured.
13 DEFINITIONS
13.1 Definitions. As used in this Agreement, the following terms have the following meanings:
“180—day Cure Period” is defined in Section 6.6(a).
“Advance” or “Advances” means an advance (or advances) under the Revolving Line.
“Affiliate” of any Person is a Person that owns or controls directly or indirectly the Person,
any Person that controls or is controlled by or is under common control with the Person, and each
of that Person’s senior executive officers, directors, partners and, for any Person that is a
limited liability company, that Person’s managers and members.
“Agreement” is defined in the preamble hereof.
“Availability Amount” is (a) the lesser of (i) the Revolving Line or (ii) the amount available
under the Borrowing Base minus (b) the amount of all outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit plus an amount equal to the Letter of Credit Reserve), minus (c)
the FX Reduction Amount, minus
(d) any amounts used for Cash Management Services, minus (e) the outstanding principal balance
of any Advances, minus and (f) the aggregate amount of all Borrower Guaranteed Amounts.
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“Average Daily Balance” means, for any period, the average of the daily aggregate closing
balance of all investment accounts maintained by Borrower at Bank and Bank’s Affiliates.
“Bank” is defined in the preamble hereof.
“Bank Expenses” are all audit fees and expenses, costs, and expenses (including reasonable
attorneys’ fees and expenses) for preparing, amending, negotiating, administering, defending and
enforcing the Loan Documents (including, without limitation, those incurred in connection with
appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower.
“Borrower” is defined in the preamble hereof.
“Borrower Guaranteed Amounts” is any Contingent Obligation of the Borrower which is not
secured by cash or Cash Equivalents, including, without limitation, amounts guaranteed by Borrower
of any indebtedness, liabilities or other obligations, other than the Laureate Guaranty (but only
excluded to the extent Borrower’s obligations thereunder remain subject to the indemnification
provisions of Section 9.3(a)(iv) of the Purchase Agreement).
“Borrower’s Books” are all Borrower’s books and records including ledgers, federal and state
tax returns, records regarding Borrower’s assets or liabilities, the Collateral, business
operations or financial condition, and all computer programs or storage or any equipment containing
such information.
“Borrowing Base” is (a) sixty percent (60%) of Borrower’s Unrestricted Cash at Bank
plus (b) fifty percent (50%) of the value of Borrower’s Publicly Traded Securities, as
measured by the public trading price of such stock on a nationally recognized stock exchange
plus (c) fifteen percent (15%) of the value of Borrower’s Private Security Portfolio
(excluding any Private Securities subject to any Stock Restrictions), as measured by the Net Asset
Value Report of such Private Security Portfolio prepared by Borrower; in each case as reasonably
determined by Bank from Borrower’s most recent Borrowing Base Certificate; provided, that
any time the Borrower is below the Liquidity Threshold or any time the making of additional Credit
Extensions would result in the Borrower falling below the Liquidity Threshold, but Borrower is in
each case otherwise permitted to obtain Credit Extensions hereunder, Borrower’s Unrestricted Cash
at Bank must not be less than forty percent (40%) of the sum of (x) all outstanding Obligations of
Borrower plus (y) the aggregate amount of all Borrower Guaranteed Amounts. Following
consultation with Borrower and one (1) day’s notice, Bank may decrease the foregoing percentages in
its good faith business judgment based on events, conditions, contingencies, or risks which, as
determined by Bank, may adversely affect Collateral.
“Borrowing Base Certificate” is that certain certificate in the form attached hereto as
Exhibit C, as delivered and amended by Borrower from time to time.
“Borrowing Resolutions” are, with respect to any Person, those resolutions adopted by such
Person’s board of directors and delivered by such Person to Bank approving the Loan Documents to
which such Person is a party and the transactions contemplated thereby, together with a certificate
executed by its secretary on behalf of such Person certifying that (a) such Person has the
authority to execute, deliver, and perform its obligations under each of the Loan Documents to
which it is a party, (b) that attached to such certificate is a true, correct, and complete copy of
the resolutions then in full force and effect authorizing and ratifying the execution, delivery,
and performance by such Person of the Loan Documents to which it is a party, (c) the name(s) of the
Person(s) authorized to execute the Loan Documents on behalf of such Person, together with a sample
of the true signature(s) of such Person(s), and (d) that Bank may conclusively rely on such
certificate unless and until such Person shall have delivered to Bank a further certificate
canceling or amending such prior certificate.
“Business Day” is any day that is not a Saturday, Sunday or a day on which Bank is closed.
“Cash Equivalents” means (a) marketable direct obligations issued or unconditionally
guaranteed by the United States or any agency or any State thereof having maturities of not more
than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1)
year after its creation and having the highest rating
from either Standard & Poor’s Ratings Group or Xxxxx’x Investors Service, Inc.; and (c) Bank’s
certificates of deposit issued maturing no more than one (1) year after issue.
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“Cash Management Services” is defined in Section 2.1.4.
“Change in Control” means any event, transaction, or occurrence as a result of which (a) any
“person” (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act
of 1934, as an amended (the “Exchange Act”)), other than a trustee or other fiduciary holding
securities under an employee benefit plan of Borrower, is or becomes a beneficial owner (within the
meaning Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of
Borrower, representing a majority or more of the combined voting power of Borrower’s then
outstanding securities; or (b) during any period of twelve consecutive calendar months, individuals
who at the beginning of such period constituted the SFE Board (together with any new directors
whose election by the board of directors of Borrower was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directions at the beginning of such
period or whose election or nomination for election was previously so approved) cease for any
reason other than death or disability to constitute a majority of the directors then in office.
“Claims” are defined in Section 12.2.
“Clarient Guaranty” shall mean the guaranty by Safeguard Delaware, Inc. and Safeguard
Scientifics (Delaware), Inc. of the obligations of Clarient, Inc. under that certain Third Amended
and Restated Unconditional Guaranty in favor of Comerica Bank dated January 17, 2007, as such may
be extended and amended from time to time.
“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in
effect in the State of Delaware; provided, that, to the extent that the Code is used to
define any term herein or in any Loan Document and such term is defined differently in different
Articles or Divisions of the Code, the definition of such term contained in Article or Division 9
shall govern; provided further, that in the event that, by reason of mandatory provisions of law,
any or all of the attachment, perfection, or priority of, or remedies with respect to, Bank’s Lien
on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than
the State of Delaware, the term “Code” shall mean the Uniform Commercial Code as enacted and in
effect in such other jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority, or remedies and for purposes of definitions relating to such
provisions.
“Collateral” is any and all properties, rights and assets of Borrower described on Exhibit
A.
“Collateral Account” is any Deposit Account, Securities Account, or Commodity Account.
“Commodity Account” is any “commodity account” as defined in the Code with such additions to
such term as may hereafter be made.
“Compliance Certificate” is that certain certificate in the form attached hereto as
Exhibit D.
“CompuCom” means CompuCom Systems, Inc.
“CompuCom Guaranty” means the obligations of SFE under that certain letter agreement with
Platinum Equity, LLC dated May 27, 2004.
“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or
not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation
of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted
or sold with recourse by that Person, or for which that Person is directly or indirectly liable;
(b) any obligations for undrawn letters of credit for the account of that Person; and (c) all
obligations from any interest rate, currency or commodity swap agreement, interest rate cap or
collar agreement, or other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent
Obligation” does not include endorsements in the ordinary course of business. The amount of a
Contingent Obligation is the stated or determined amount of the primary obligation for which the
Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability
for it determined by the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.
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“Control Agreement” is any control agreement entered into among the depository institution at
which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary
at which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Bank
pursuant to which Bank obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.
“Credit Extension” is any Advance, Letter of Credit, FX Forward Contract, amount utilized for
Cash Management Services, or any other extension of credit by Bank for Borrower’s benefit.
“Debentures” shall mean those certain 2.625% convertible senior debentures issued by SFE in
February 2004 with a stated maturity of March 15, 2024.
“Default Rate” is defined in Section 2.3(b).
“Deposit Account” is any “deposit account” as defined in the Code with such additions to such
term as may hereafter be made.
“Designated Deposit Account” is Borrower’s designated deposit account to be maintained with
Bank.
“Dollars,” “dollars” and “$” each mean lawful money of the United States.
“Effective Date” is February 6, 2009.
“Equipment” is all “equipment” as defined in the Code with such additions to such term as may
hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles
(including motor vehicles and trailers), and any interest in any of the foregoing.
“ERISA” is the Employee Retirement Income Security Act of 1974, and its regulations.
“Event of Default” is defined in Section 8.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Foreign Currency” means lawful money of a country other than the United States.
“Funding Date” is any date on which a Credit Extension is made to or on account of Borrower
which shall be a Business Day.
“FX Business Day” is any day when (a) Bank’s Foreign Exchange Department is conducting its
normal business and (b) the Foreign Currency being purchased or sold by Borrower is available to
Bank from the entity from which Bank shall buy or sell such Foreign Currency.
“FX Forward Contract” is defined in Section 2.1.3.
“FX Reduction Amount” is defined in Section 2.1.3.
“FX Reserve” is defined in Section 2.1.3.
“GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other Person as may be approved by a significant segment of the
accounting profession, which are applicable to the circumstances as of the date of determination.
“General Intangibles” is all “general intangibles” as defined in the Code in effect on the
date hereof with such additions to such term as may hereafter be made, and includes without
limitation, all copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work, whether published or unpublished, any
patents, trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights, including any rights to
unpatented inventions, payment intangibles, royalties, contract rights, goodwill, franchise
agreements, purchase
orders, customer lists, route lists, telephone numbers, domain names, claims, income and other
tax refunds, security and other deposits, options to purchase or sell real or personal property,
rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise),
insurance policies (including without limitation key man, property damage, and business
interruption insurance), payments of insurance and rights to payment of any kind.
-19-
“Governmental Approval” is any consent, authorization, approval, order, license, franchise,
permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or
other act by or in respect of, any Governmental Authority.
“Governmental Authority” is any nation or government, any state or other political subdivision
thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other
entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions
of or pertaining to government, any securities exchange and any self-regulatory organization.
“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or
services, such as reimbursement and other obligations for surety bonds and letters of credit, (b)
obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease
obligations, and (d) Contingent Obligations.
“Indemnified Person” is defined in Section 12.2.
“Insolvency Proceeding” is any proceeding by or against any Person under the United States
Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit
of creditors, compositions, extensions generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
“Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation all merchandise,
raw materials, parts, supplies, packing and shipping materials, work in process and finished
products, including without limitation such inventory as is temporarily out of Borrower’s custody
or possession or in transit and including any returned goods and any documents of title
representing any of the above.
“Investment” is any beneficial ownership interest in any Person (including stock, partnership
interest or other securities), and any loan, advance or capital contribution to any Person.
“Investment Company Act” means the Investment Company Act of 1940, as amended.
“Laureate Guaranty” is that certain guaranty by SFE of certain obligations of Laureate Pharma,
Inc. pursuant to that certain Lease Guaranty dated December 3, 2004 in favor of College Road
Associates.
“Letter of Credit” means a standby letter of credit issued by Bank or another institution
based upon an application, guarantee, indemnity or similar agreement on the part of Bank as set
forth in Section 2.1.2.
“Letter of Credit Application” is defined in Section 2.1.2(a).
“Letter of Credit Reserve” has the meaning set forth in Section 2.1.2(d).
“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other
encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise
against any property.
“Liquidity Ratio” is the ratio of (i) Borrower’s Unrestricted Cash at Bank to (ii) the
sum of (a) outstanding Obligations plus (b) the aggregate outstanding Borrower Guaranteed
Amounts.
“Liquidity Threshold” is the achievement by Borrower of a Liquidity Ratio of at least
1.00:1.00.
“Loan Documents” are, collectively, this Agreement, the Perfection Certificate, any note, or
notes or guaranties executed by Borrower or any Guarantor, and any other present or future
agreement between Borrower any Guarantor and/or for the benefit of Bank in connection with this
Agreement, all as amended, restated, or otherwise modified.
-20-
“Material Adverse Change” is (a) a material impairment in the perfection or priority of Bank’s
Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the
business, operations, or condition (financial or otherwise) of Borrower; or (c) a material
impairment of the prospect of repayment of any portion of the Obligations.
“Minimum Required Balance” means funds of not less than Fifty Million Dollars ($50,000,000)
maintained by Borrower in investments in accounts with Bank or Bank’s Affiliates, including (i) not
less than Five Million Dollars ($5,000,000) in a non-interest bearing demand deposit account with
Bank or Bank’s Affiliates and (ii) not less than Five Million Dollars ($5,000,000) in a money
market mutual fund account with Bank or Bank’s Affiliates.
“Net Asset Value Report” is that certain report provided by Borrower to Bank, indicating the
net asset value of Borrower’s Private Security Portfolio and Borrower’s Publicly Traded Securities,
as of the date of such report, in form and substance acceptable to Bank, in its reasonable
discretion.
“Obligations” are Borrower’s obligation to pay when due any debts, principal, interest, Bank
Expenses and other amounts Borrower owes Bank now or later, whether under this Agreement, the Loan
Documents, or otherwise, including, without limitation, all obligations relating to letters of
credit (including reimbursement obligations for drawn and undrawn letters of credit), cash
management services, and foreign exchange contracts, if any, and including interest accruing after
Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank,
and the performance of Borrower’s duties under the Loan Documents.
“Operating Documents” are, for any Person, such Person’s formation documents, as certified
with the Secretary of State of such Person’s state of formation on a date that is no earlier than
30 days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in
current form, (b) if such Person is a limited liability company, its limited liability company
agreement (or similar agreement), and (c) if such Person is a partnership, its partnership
agreement (or similar agreement), each of the foregoing with all current amendments or
modifications thereto.
“Overadvance” is defined in Section 2.2.
“Payment/Advance Form” is that certain form attached hereto as Exhibit B.
“Payment Date” is the first day of each calendar month.
“Perfection Certificate” is defined in Section 5.1.
“Permitted Distribution” is (i) stock buybacks, dividends or distributions of any kind or any
retirement of bonds, in an aggregate amount not to exceed Thirty Million Dollars ($30,000,000) in
any fiscal year; provided, that in each case, (I) no Default or Event of Default exists or
could result from such buyback, dividend, distribution or retirement; and (II) such buyback,
dividend, distribution or retirement shall not cause the Borrower to fail to maintain the Liquidity
Threshold; provided further, that at any time Borrower is below the Liquidity
Threshold (regardless of whether or not a 180-day Cure Period is applicable), the buybacks,
dividends, distributions or retirements described above are permitted only with the prior written
consent of the Bank, such consent not to be unreasonably withheld; and (ii) any payments made in
respect of the exercise of put rights by holders of the Debentures.
“Permitted Indebtedness” is:
(a) Borrower’s Indebtedness to Bank under this Agreement or any other Loan Document;
(b) The Debentures;
(c) The Clarient Guaranty, CompuCom Guaranty and the Laureate Guaranty;
(d) any Indebtedness not in excess of One Million Dollars ($1,000,000) in principal amount
existing on the Effective Date and shown on the Perfection Certificate;
(e) Subordinated Debt;
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(f) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;
(g) guaranties of Permitted Indebtedness;
(h) Indebtedness incurred as a result of endorsing negotiable instruments received in the
ordinary course of business;
(i) Indebtedness with respect to documentary letters of credit;
(j) capitalized leases and purchase money Indebtedness not to exceed $2,000,000 in the
aggregate in any fiscal year secured by Permitted Liens; and
(k) refinanced Permitted Indebtedness, provided that the amount of such Indebtedness is not
increased except by an amount equal to a reasonable premium or other reasonable amount paid in
connection with such refinancing and by an amount equal to any existing, but unutilized, commitment
thereunder.
“Permitted Investments” are:
(a) Investments existing on the Effective Date;
(b) (i) marketable direct obligations issued or unconditionally guaranteed by the United
States or its agencies or any state maturing within 1 year from its acquisition, (ii) commercial
paper maturing no more than two (2) years after its creation and having the highest rating from
either Standard & Poor’s Corporation or Xxxxx’x Investors Service, Inc., and (iii) Bank’s
certificates of deposit maturing no more than two (2) years after issue;
(c) Investments approved by the SFE Board or otherwise pursuant to a SFE Board-approved
investment policy, including, without limitation, Investments by Borrower in Publicly Traded
Securities and Private Securities, including, without limitation, those issued by Persons within
the Private Security Portfolio;
(d) Investments of other Subsidiaries in or to other Subsidiaries or Borrower and Investments
by Borrower in other Subsidiaries that are not parties to the Loan Documents in an amount not to
exceed One Million Dollars ($1,000,000.00) in the aggregate in any fiscal year;
(e) Investments consisting of Collateral Accounts in the name of Borrower so long as Bank has
a first priority, perfected security interest in such Collateral Accounts to the extent required
herein;
(f) Investments received in satisfaction or partial satisfaction of obligations owed by
financially troubled obligors;
(g) Investments acquired in exchange for any other Investments in connection with or as a
result of a bankruptcy, workout, reorganization or recapitalization; and
(h) Investments acquired as a result of a foreclosure with respect to any secured Investment.
“Permitted Liens” are:
(a) (i) Liens securing Permitted Indebtedness described under clause (b) of the definition of
“Permitted Indebtedness” or (ii) Liens arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or levies, either not
delinquent or being contested in good faith and for which Borrower maintains adequate reserves on
its books, provided that no notice of any such Lien has been filed or recorded under the
Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;
(c) Liens (including with respect to capital leases) (i) on property (including accessions,
additions, parts, replacements, fixtures, improvements and attachments thereto, and the proceeds
thereof) acquired or held by Borrower incurred for financing such property (including accessions,
additions, parts, replacements, fixtures, improvements and attachments thereto, and the proceeds
thereof), or (ii) existing on property (and accessions,
additions, parts, replacements, fixtures, improvements and attachments thereto, and the
proceeds thereof) when acquired, if the Lien is confined to such property (including accessions,
additions, parts, replacements, fixtures, improvements and attachments thereto, and the proceeds
thereof);
-22-
(d) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by
Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited
to the property encumbered by the existing Lien and the principal amount of the indebtedness it
secures may not increase;
(e) leases or subleases of real property granted in the ordinary course of business, and
leases, subleases, non-exclusive licenses or sublicenses of property (other than real property or
intellectual property) granted in the ordinary course of Borrower’s business, if the
leases, subleases, licenses and sublicenses do not prohibit granting Bank a security interest;
(f) non-exclusive license of intellectual property granted to third parties in the ordinary
course of business;
(g) leases or subleases granted in the ordinary course of Borrower’s business, including in
connection with Borrower’s leased premises or leased property;
(h) Liens arising from attachments or judgments, orders, or decrees in circumstances not
constituting an Event of Default under Sections 8.4 and 8.7;
(i) Liens in favor of other financial institutions arising in connection with Borrower’s
deposit or securities accounts held at such institutions;
(j) Liens to secure payment of workers’ compensation, employment insurance, old-age pensions,
social security and other like obligations incurred in the ordinary course of business (other than
Liens imposed by ERISA); and
(k) Stock Restrictions.
“Person” is any individual, sole proprietorship, partnership, limited liability company, joint
venture, company, trust, unincorporated organization, association, corporation, institution, public
benefit corporation, firm, joint stock company, estate, entity or government agency.
“Prime Rate” is Bank’s most recently announced “prime rate,” even if it is not Bank’s lowest
rate.
“Prior Agreement” is defined in the preamble hereof.
“Private Securities” means any security (other than a Publicly Traded Security) issued by an
operating company.
“Private Security Portfolio” is the portfolio of Private Securities included in the Net Asset
Value Report, as such may change from time to time.
“Publicly Traded Securities” are all securities of companies regulated by the Exchange Act
(without respect to whether such securities are registered (or exempt from registration) under the
Securities Act), including, without limitation, common stock of Clarient, Inc., held by Borrower,
as such may change from time to time.
“Purchase Agreement” means that certain Purchase Agreement, dated as of February 29, 2008, by
and between SFE and Saints Capital Dakota, L.P., as purchaser thereunder.
“Registered Organization” is any “registered organization” as defined in the Code with such
additions to such term as may hereafter be made.
“Requirement of Law” is as to any Person, the organizational or governing documents of such
Person, and any law (statutory or common), treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon
such Person or any of its property or to which such Person or any of its property is subject.
-23-
“Responsible Officer” is any of the Chief Executive Officer, President, Chief Financial
Officer and Controller of Borrower.
“Restricted Cash” is Borrower’s cash (i) that is pledged as collateral for an obligation; (ii)
that is held in a separate account not immediately available for use by Borrower; or (iii) whose
use by Borrower is otherwise restricted, in whole or in part, by virtue of contractual agreement.
“Revolving Line” is an Advance or Advances in an amount not to exceed Fifty Million Dollars
($50,000,000.00).
“Revolving Line Maturity Date” is December 31, 2010.
“Secretary’s Certificate” is the Certificate executed by Secretary of the Borrower, in form
and substance reasonably acceptable to Bank, certifying that the transaction contemplated by this
Agreement, have been authorized.
“Securities Account” is any “securities account” as defined in the Code with such additions to
such term as may hereafter be made.
“Securities Act” means the Securities Act of 1933, as amended.
“Settlement Date” is defined in Section 2.1.3.
“Stock Restrictions” means any transfer restriction, or any right or obligation under a right
of first refusal agreement, co-sale agreement, market stand-off agreement, drag-along agreement,
put/call agreement and the like entered into in connection with the acquisition, disposition or
transfer of any Private Securities.
“Subordinated Debt” is (a) Indebtedness incurred by Borrower subordinated to Borrower’s
Indebtedness owed to Bank and which is reflected in a written agreement in a manner and form
reasonably acceptable to Bank and approved by Bank in writing and (b) to the extent the terms of
subordination do not change adversely to Bank, refinancings, refundings, renewals, amendments or
extensions of any of the foregoing.
“Subsidiary” means, with respect to any Person, any Person of which a majority of the voting
stock or other equity interests (in the case of Persons other than corporations) is owned or
controlled directly or indirectly by such Person or one or more of Affiliates of such Person,
provided that issuers of securities within the Private Securities Portfolio or issuers of Publicly
Traded Securities held by Borrower shall not be considered “Subsidiaries”.
“Transfer” is defined in Section 7.1.
“Unrestricted Cash” is any of Borrower’s cash that does not constitute Restricted Cash.
“Unused Revolving Line Facility Fee” is defined in Section 2.4(d).
[Signature page follows.]
-24-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of May 27,
2009.
| BORROWER: SAFEGUARD SCIENTIFICS, INC. |
|||
| By: | /s/ Xxxxx X. Xxxxx | ||
| Name: | Xxxxx X. Xxxxx | ||
| Title: | Senior Vice President and General Counsel | ||
| SAFEGUARD DELAWARE, INC. |
|||
| By: | /s/ Xxxxx X. Xxxxx | ||
| Name: | Xxxxx X. Xxxxx | ||
| Title: | Vice President | ||
| SAFEGUARD SCIENTIFICS (DELAWARE), INC. |
|||
| By: | /s/ Xxxxx X. Xxxxx | ||
| Name: | Xxxxx X. Xxxxx | ||
| Title: | Vice President | ||
| BANK: SILICON VALLEY BANK |
|||
| By: | /s/ Xxxxxx X. Xxxxxx | ||
| Name: | Xxxxxx X. Xxxxxx | ||
| Title: | Vice President | ||
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