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 100 Matsonford Road, Building 5,
Suite 555, Radnor, Pennsylvania 19087 (“Bank”), and (ii) SAFEGUARD SCIENTIFICS,
INC., a Pennsylvania corporation (“SFE”), with offices located at 435 Devon Park
Drive, Building 800, Wayne, Pennsylvania 19087, SAFEGUARD DELAWARE, INC., a
Delaware corporation and SAFEGUARD SCIENTIFICS (DELAWARE), INC., a Delaware
corporation, each with offices located at 1105 N. Market St., Suite 1300,
Wilmington, DE 19801 (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.

 

 

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(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 grant a Lien
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.
1105 N. Market Street, Suite 1300
Wilmington, Delaware 19801
Attn: General Counsel
Fax: (302) 427-4607
Email: bsisko@safeguard.com
 
            with a copy to (which shall not constitute “Notice” hereunder):
 
       
 
      Safeguard Scientifics, Inc.
435 Devon Park Drive, Building 800
Wayne, Pennsylvania 19087
Attn: General Counsel
Fax: (610) 293-0601
Email: bsisko@safeguard.com
 
       
 
  If to Bank:   Silicon Valley Bank
100 Matsonford Road, Building 5, Suite 555,
Radnor, Pennsylvania 19087
Attention: Mr. Tom Gordon
Fax: (610) 971-2063
Email: TGordon@svb.com
 
       
 
  with a copy to:   Riemer & Braunstein, LLP
Three Center Plaza
Boston, Massachusetts 02108
Attn: David A. Ephraim, Esquire
Fax: (617) 880-3456
Email: DEphraim@riemerlaw.com

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 Moody’s 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.

 

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“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.

 

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“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 Moody’s 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);

 

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(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.

 

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“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.]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of May 27, 2009.

        BORROWER:

SAFEGUARD SCIENTIFICS, INC.
    By:   /s/ Brian J. Sisko       Name:   Brian J. Sisko      Title:   Senior
Vice President and General Counsel      SAFEGUARD DELAWARE, INC.
    By:   /s/ Brian J. Sisko       Name:   Brian J. Sisko      Title:   Vice
President      SAFEGUARD SCIENTIFICS (DELAWARE), INC.
    By:   /s/ Brian J. Sisko       Name:   Brian J. Sisko      Title:   Vice
President      BANK:

SILICON VALLEY BANK
    By:   /s/ Thomas F. Gordon       Name:   Thomas F. Gordon      Title:   Vice
President   

 

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