EXHIBIT 10.1
STERLING SOFTWARE, INC.
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
DATED AS OF JULY 1, 1997
AMONG
STERLING SOFTWARE, INC.,
AND
BANKBOSTON, N.A., FORMERLY KNOWN AS
THE FIRST NATIONAL BANK OF BOSTON,
AS AGENT
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AND
THE BANKS
LISTED ON SCHEDULE 1.1 HERETO
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STERLING SOFTWARE, INC.
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
TABLE OF CONTENTS
Section Page
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SECTION 1. DEFINITIONS AND RULES OF
INTERPRETATION.............................................. 1
1.1. Definitions................................................. 1
1.2. Accounting Terms and Determinations......................... 13
1.3. Rules of Interpretation..................................... 14
SECTION 2. THE CREDIT.................................................. 14
2.1. Loans....................................................... 14
2.2. Reduction of Total Commitment............................... 15
2.3. The Notes................................................... 15
2.4. Interest.................................................... 16
2.5. Interest on Overdue Amounts................................. 16
2.6. Interest Rate Elections; Requests
for Loans................................................. 16
2.7. Conversion Options.......................................... 17
2.8. Funds for Loans............................................. 18
2.9. Maturity of the Loans....................................... 19
2.10. Mandatory Repayments........................................ 19
2.11. Optional Prepayment of Principal............................ 19
2.12. Commitment Fee.............................................. 20
2.13. Agent's Fee................................................. 20
SECTION 2A. LETTERS OF CREDIT........................................... 20
2A.1. Letter of Credit Commitments................................ 20
2A.2. Reimbursement Obligation of the Company..................... 21
2A.3. Letter of Credit Payments................................... 23
2A.4. Obligations Absolute........................................ 23
2A.5. Reliance By Issuer.......................................... 24
2A.6. Letter of Credit Fee........................................ 24
SECTION 3. CERTAIN GENERAL PROVISIONS.................................. 24
3.1. Funds for Payments......................................... 24
3.2. Computations................................................ 25
3.3. Additional Costs, Etc....................................... 26
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3.4. Indemnification for Losses.................................. 27
3.5. Capital Adequacy............................................ 28
3.6. Bank Certificate............................................ 29
3.7. Inability to Determine Eurodollar Rate...................... 29
3.8. Illegality.................................................. 30
3.9. Bank Obligations to Mitigate................................ 30
3.10. Replacement of Bank......................................... 30
SECTION 4. GUARANTY.................................................... 31
SECTION 5. REPRESENTATIONS AND WARRANTIES.............................. 31
5.1. Corporate Existence......................................... 31
5.2. Subsidiaries................................................ 32
5.3. Corporate Authority, etc.................................... 32
5.4. Binding Effect of Documents, etc............................ 33
5.5. No Defaults or Events of Default............................ 33
5.6. Chief Executive Offices..................................... 33
5.7. Financial Statements and Projections........................ 33
5.8. No Material Changes, etc.................................... 34
5.9. Mortgages and Liens......................................... 34
5.10. Litigation.................................................. 34
5.11. No Default.................................................. 35
5.12. Taxes....................................................... 35
5.13. Employee Benefit Plans...................................... 36
5.14. Holding Company and Investment Company Acts................. 37
5.15. Regulations U and X......................................... 37
5.16. Franchises, Patents, Copyrights, etc........................ 37
5.17. Non-Guarantor Subsidiaries.................................. 37
5.18. Environmental Compliance.................................... 38
5.19. Solvency.................................................... 39
SECTION 6. CONDITIONS TO THE FIRST LENDING............................. 39
6.1. Loan Documents, etc......................................... 39
6.2. Legality of Transactions, etc............................... 39
6.3. Representations and Warranties.............................. 40
6.4. Performance, etc............................................ 40
6.5. Certified Copies of Charter Documents....................... 40
6.6. Proof of Corporate Action................................... 40
6.7. Incumbency Certificate...................................... 40
6.8. Proceedings and Documents................................... 41
6.9. Legal Opinions.............................................. 41
6.10. UCC Search Results.......................................... 41
6.11. Insurance Certificates...................................... 41
6.12. Payment of Fees............................................. 41
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SECTION 7. CONDITIONS TO SUBSEQUENT LOANS.............................. 41
7.1. Legality of Transactions.................................... 41
7.2. Representations and Warranties;
No Default or Event of Default............................ 42
7.3. Performance, etc............................................ 42
7.4. Proceedings and Documents................................... 42
7.5. Governmental Regulation..................................... 43
SECTION 8. AFFIRMATIVE COVENANTS OF THE COMPANY........................ 43
8.1. Punctual Payment............................................ 43
8.2. Legal Existence, etc........................................ 43
8.3. Use of Loan Proceeds........................................ 43
8.4. Financial Statements........................................ 43
8.5. Notice of Litigation and Judgment and Environmental Events.. 45
8.6. Notice of Default........................................... 45
8.7. Books and Records........................................... 46
8.8. Insurance................................................... 46
8.9. Taxes....................................................... 46
8.10. Conduct of Business......................................... 47
8.11. Compliance with Law, Contracts, Licenses and Permits........ 47
8.12. Access to Properties and Books; Commercial
Finance Examinations; Confidentiality..................... 47
8.13. Change of Corporate Name; Maintenance of Office............. 48
8.14. Employee Benefit Plan....................................... 48
8.15. Maintenance of Properties................................... 49
8.16. Activation of Non-Guarantor Subsidiaries.................... 49
8.17. Deactivation of Sterling Subsidiaries....................... 50
8.18. New Subsidiaries............................................ 50
8.19. Further Assurances.......................................... 51
SECTION 9. NEGATIVE COVENANTS OF THE COMPANY........................... 51
9.1. Security Interests and Liens................................ 51
9.2. Employee Benefit Plans...................................... 53
9.3. Compliance with Environmental Laws.......................... 54
9.4. Merger and Consolidation.................................... 55
SECTION 10. FINANCIAL COVENANTS......................................... 55
10.1. Total Debt to EBITDA........................................ 55
10.2. EBIT to Interest Charges.................................... 55
10.3. Profitability............................................... 55
SECTION 11. APPLICATION OF ADDITIONAL PROVISIONS........................ 55
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SECTION 12. EVENTS OF DEFAULT;
ACCELERATION................................................ 56
SECTION 13. SETOFF........................................................ 60
SECTION 14. THE AGENT..................................................... 61
14.1. Authorization................................................. 61
14.2. Employees and Agents.......................................... 61
14.3. No Liability.................................................. 61
14.4. No Representations............................................ 61
14.5. Payments...................................................... 62
14.6. Holders of Notes.............................................. 63
14.7. Indemnity..................................................... 63
14.8. Agent as Bank................................................. 63
14.9. Resignation................................................... 63
14.10. Notification of Defaults and Events of Default................ 64
SECTION 15. EXPENSES...................................................... 64
SECTION 16. INDEMNIFICATION............................................... 64
SECTION 17. SURVIVAL OF COVENANTS, ETC.................................... 65
SECTION 18. ASSIGNMENT AND PARTICIPATION.................................. 65
18.1. Conditions to Assignment by Banks............................. 65
18.2. Certain Representations and Warranties;
Limitations; Covenants...................................... 66
18.3. Register...................................................... 67
18.4. New Note...................................................... 67
18.5. Participations................................................ 68
18.6. Disclosure.................................................... 68
18.7. Assignee or Participant Affiliated with the Sterling Companies 68
18.8. Miscellaneous Assignment Provisions........................... 69
18.9. Assignment by the Company..................................... 69
SECTION 19. NOTICES, ETC.................................................. 69
SECTION 20. GOVERNING LAW................................................. 70
SECTION 21. HEADINGS...................................................... 70
SECTION 22. COUNTERPARTS.................................................. 70
SECTION 23. ENTIRE AGREEMENT, ETC......................................... 70
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Section Page
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SECTION 24. CONSENTS, AMENDMENTS, WAIVERS, ETC............................ 71
SECTION 25. NO RESTRICTIONS WITH RESPECT TO
MARGIN STOCK................................................ 71
SECTION 26. USURY PROVISION............................................... 72
SECTION 27. WAIVER OF JURY TRIAL.......................................... 72
SECTION 28. SEVERABILITY.................................................. 73
SECTION 29. TRANSITIONAL ARRANGEMENTS..................................... 73
29.1. Prior Credit Agreement Superseded............................. 73
29.2. Return and Cancellation of Notes.............................. 73
29.3. Fees under Superseded Agreement............................... 73
SECTION 30. DELIVERY IN MASSACHUSETTS..................................... 73
LIST OF SCHEDULES AND EXHIBITS
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SCHEDULES
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SCHEDULE 1.1 - Banks
SCHEDULE 1.2 - Non-Guarantor Subsidiaries
SCHEDULE 1.3 - Sterling Accounts Receivable Agreements
SCHEDULE 1.4 - Sterling Accounts Receivable Guaranties
SCHEDULE 1.5 - Sterling Subsidiaries
SCHEDULE 5.2 - Shares owned by the Company in other
corporations; Subsidiaries
SCHEDULE 5.6 - Mailing Addresses of each of the Sterling Companies
SCHEDULE 5.9 - Locations of Sterling Companies
SCHEDULE 5.10 - Litigation
SCHEDULE 5.11 - Defaults
SCHEDULE 5.12 - Taxes
SCHEDULE 5.16 - Intellectual Property
SCHEDULE 5.18 - Environmental Matters
SCHEDULE 9.1(a) - Existing Liens
SCHEDULE 9.1(b) - Certain Sterling Accounts Receivable
Financing Statements
SCHEDULE E-2.1 - Existing Indebtedness
EXHIBITS
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EXHIBIT A - Amended and Restated Note
EXHIBIT B - Loan Request
EXHIBIT C - Opinion of ▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
EXHIBIT D - Compliance Certificate
EXHIBIT E - Terms and Conditions following Spring-Back Event
EXHIBIT F - Assignment and Acceptance
EXHIBIT G - Guaranty
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
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This THIRD AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of
the 1st day of July, 1997, by and among STERLING SOFTWARE, INC., a Delaware
corporation (the "Company"), BANKBOSTON, N.A., formerly known as The First
National Bank of Boston, a national banking association ("BKB") and the other
lending institutions listed on Schedule 1.1 hereto, and BANKBOSTON, N.A.,
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formerly known as The First Naitonal Bank of Boston, as agent for itself and
such other lending institutions (the "Agent").
The Company, the Agent, the Banks and Bank of America National Trust and
Savings Association ("BOA") have previously entered into a Second Amended and
Restated Revolving Credit and Term Loan Agreement dated as of August 24, 1995,
which agreement has been heretofore amended on several occasions (as heretofore
amended and in effect, the "Prior Credit Agreement"). The Company, the Agent
and the Banks desire further to amend in various respects and restate the Prior
Credit Agreement, and BOA no longer desires to be a party thereto. Accordingly,
the parties hereto hereby agree to amend and restate the Prior Credit Agreement
in order to remove BOA as a lending institution party thereto and as follows:
(S)1 DEFINITIONS AND RULES OF INTERPRETATION.
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(S)1.1. DEFINITIONS. The following terms shall have the meanings set
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forth in this (S)1.1 or elsewhere in the provisions of this Agreement referred
to below:
Affiliate. Any Person that would be considered to be an affiliate Company
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under Rule 144(a) of the Rules and Regulations of the Securities and Exchange
Commission, as in effect on the date hereof, if the Company were issuing
securities.
Agent. BankBoston, N.A., acting as agent for the Banks.
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Agent's Fee. See (S)2.13.
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Agent's Special Counsel. ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP of Boston,
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Massachusetts, or such other counsel as may be approved by the Agent.
Agreement. This Third Amended and Restated Revolving Credit Agreement,
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including the Exhibits and Schedules hereto.
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Assignment and Acceptance Agreement. See (S)18.1.
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Authorized Officer. Any corporate officer of the Company.
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Balance Sheet Date. September 30, 1996.
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Banks. BKB and the other lending institutions listed on Schedule 1.1
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hereto and any other Person who becomes an assignee of any rights and
obligations of a Bank pursuant to (S)18.
Base Rate. The greater of (i) the annual rate of interest announced from
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time to time by BKB at its head office in Boston, Massachusetts as its "base
rate" (computed on the basis of a year of 360 days) and (ii) the annual rate of
interest equal to the sum of (A) the Federal Funds Effective Rate for overnight
funds in effect from time to time plus (B) one-half percent (1/2%). For the
purposes of this definition, "Federal Funds Effective Rate" shall mean for any
day, the rate per annum equal to the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York and reported in The Wall Street Journal or other publication of
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national circulation selected by the Agent, or, if such rate is not so published
and reported for any day that is a Business Day, the average of the quotations
for such day on such transactions received by the Agent from three funds brokers
of recognized standing selected by the Agent.
Base Rate Loan(s). Loans bearing interest calculated by reference to the
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Base Rate.
BKB. BankBoston, N.A., formerly known as The First National Bank of
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Boston, a national banking association.
Business Day. Any day on which commercial banking institutions in Boston,
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Massachusetts, San Francisco, California and Dallas, Texas are open for the
transaction of banking business and, when dealing in the Eurodollar Interbank
Market as contemplated hereunder, also a day which is a Eurodollar Business Day.
Closing Date. The day on which all conditions set forth in (S)(S)6 and 7
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hereof have been satisfied and any Loans may be made or any Letter of Credit may
be issued hereunder.
Code. The Internal Revenue Code of 1986, as amended and in effect from
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time to time.
Commitment. With respect to each Bank, that amount equal to the product of
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(i) the Total Commitment multiplied by (ii) such Bank's Commitment Percentage,
in each case as the same may be in effect from time to time; or if such
Commitment is terminated pursuant to the provisions hereof, zero.
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Commitment Fee. See (S)2.12.
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Commitment Percentage. With respect to each Bank, the percentage referred
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to on Schedule 1.1 hereto as such Bank's percentage of the aggregate Commitments
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of the Banks to make Loans to the Company and to participate in the issuance,
extension and renewal of Letters of Credit for the account of the Company and
the Sterling Subsidiaries.
Company. Sterling Software, Inc., a Delaware corporation.
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Compliance Certificate. See (S)8.4(c).
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Consolidated or consolidated. With reference to any term defined herein,
------------ -- ------------
shall mean that term as applied to the financial statements of the Company and
all of its Subsidiaries, consolidated in accordance with generally accepted
accounting principles.
Consolidated Earnings Before Interest and Taxes or EBIT. For any
------------ -------- ------ -------- --- -------------
particular fiscal period, the consolidated income (or loss) of the Company and
its Subsidiaries before restructuring charges, extraordinary items and other
non-operating acquisition-related charges, interest expense and income taxes,
determined in accordance with generally accepted accounting principles.
Consolidated Earnings Before Interest, Taxes, Depreciation and Amortization
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or EBITDA. For any particular fiscal period, the consolidated income (or loss)
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of the Company and its Subsidiaries before restructuring charges, extraordinary
items and other non-operating acquisition-related charges, interest expenses,
income taxes, depreciation and amortization, determined in accordance with
generally accepted accounting principles.
Consolidated Net Income. With respect to any particular fiscal period, the
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consolidated net income (or net loss) of the Company and its Subsidiaries for
such period, determined in accordance with generally accepted accounting
principles.
Consolidated Net Loss. With respect to any particular fiscal period, the
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consolidated net loss of the Company and its Subsidiaries for such period, as
determined in accordance with generally accepted accounting principles.
Consolidated Net Worth. The excess of the Consolidated Total Assets of the
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Company and its Subsidiaries over Consolidated Total Liabilities of the Company
and its Subsidiaries, in each case determined in accordance with generally
accepted accounting principles.
Consolidated Operating Income. Consolidated Net Income before income
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taxes, extraordinary items of gain or loss, the cumulative effect of a change in
generally accepted accounting principles and the effect of discontinued
operations, determined in accordance with generally accepted accounting
principles.
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Consolidated Total Assets. The consolidated assets of the Company and its
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Subsidiaries, as determined in accordance with generally accepted accounting
principles.
Consolidated Total Liabilities. The consolidated liabilities of the
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Company and its Subsidiaries, determined in accordance with generally accepted
accounting principles.
Conversion Request. A notice given by the Company to the Agent of the
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Company's election to convert or continue a Loan in accordance with (S)2.7.
Credit Rating. The credit rating of the Company, as determined by a Rating
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Agency.
Default. Any event which, but for the giving of notice or the lapse of
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time, or both, would constitute an Event of Default.
Distribution. The declaration or payment of any dividend on or in respect
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of any shares of any class of capital stock of any Person, other than dividends
payable solely in shares of common stock of such Person; or the repurchase,
redemption, or other retirement of shares of, or rights to acquire or obtain
shares of, any class of capital stock of any Person, directly or indirectly
through a Subsidiary or otherwise; the return of capital by any Person to its
shareholders as such; or any other distribution on or in respect of any shares
of any class of capital stock of any Person.
Dollar or $. Dollars in lawful currency of the United States of America.
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Drawdown Date. The date on which any Loan is made or is to be made or any
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Letter of Credit is issued, extended or renewed or is to be issued, extended or
renewed and the date on which any Loan is converted or continued in accordance
with (S)2.7.
Eligible Assignee. Any of (a) a commercial bank or finance company
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organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (b) a
savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, determined in accordance with generally
accepted accounting principles; (c) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000, provided that such
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bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (d) the central
bank of any country which is a member of the OECD; and (e) if, but only if, any
Event of Default has occurred and is continuing, any other bank, insurance
company, commercial finance company or
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other financial institution or other Person approved by the Agent, such approval
not to be unreasonably withheld; provided that in the case of clauses (a)-(d)
--------
above, such bank, finance company or savings and loan association shall be
approved by the Company, such approval not to be unreasonably withheld or
delayed.
Eligible Margin Account Agreement. Any agreement with an investment
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banking company (of recognized national standing or otherwise approved in
writing by the Agent) providing for the making of Permitted Investments,
including, without limitation, the purchase of Margin Stock or other securities
on margin, provided, however, that any such agreement shall not provide for the
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Indebtedness arising thereunder, if any, to be secured by assets of any of the
Sterling Companies, other than by the assets constituting the Investments
subject to such agreement.
Employee Benefit Plan. Any employee benefit plan within the meaning of
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(S)3(3) of ERISA maintained or contributed to by the Company, other than a
Guaranteed Pension Plan or a Multiemployer Plan.
Environmental Laws. See (S)5.18.
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ERISA. The Employee Retirement Income Security Act of 1974.
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ERISA Affiliate. Any Person which is treated as a single employer with the
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Company under (S)414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
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Pension Plan within the meaning of (S)4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
Eurocurrency Regserve Rate. For any day with respect to a Eurodollar Rate
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Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
Eurodollar Business Day. Any Business Day on which commercial banks are
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open for international business (including dealings in dollar deposits) in
London or such other Eurodollar Interbank Market as may be selected by the Agent
in its sole discretion acting in good faith.
Eurodollar Interbank Market. Any lawful recognized market in which
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deposits of United States dollars are offered by international banking units of
United States banking institutions and by foreign banking institutions to each
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other, and where the eurodollar and foreign currency and exchange operations of
the Agent are customarily conducted.
Eurodollar Lending Office. Initially, the office of each Bank designated
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as such in Schedule 1.1 hereto; thereafter, such other office of such Bank, if
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any, that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar Rate
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Loan, the rate of interest equal to (i) the rate per annum (rounded upwards to
the nearest 1/100 of one percent) at which BKB's Eurodollar Lending Office is
offered Dollar deposits two (2) Eurodollar Business Days prior to the beginning
of such Interest Period in the interbank eurodollar market where the eurodollar
and foreign currency and exchange operations of such Eurodollar Lending Office
are customarily conducted, for delivery on the first day of such Interest Period
for the number of days comprised therein and in an amount comparable to the
amount of the Eurodollar Rate Loan to which such Interest Period applies,
divided by (ii) a number equal to 1.00 minus the Eurocurrency Reserve Rate, if
applicable.
Eurodollar Rate Loan(s). Loans bearing interest calculated by reference to
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the Eurodollar Rate.
Event of Default. See (S)12.
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Final Maturity. June 30, 2000.
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Foreign Obligations. All Indebtedness, obligations and liabilities of the
-------------------
Company to any of the Banks or any affiliate of any of the Banks in respect of
guaranties by, and other contingent obligations of, the Company, existing on the
Closing Date or arising thereafter, direct or indirect, joint or several,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
secured or unsecured, in respect of Indebtedness of any Subsidiary of the
Company or of its Subsidiaries which is not organized under the laws of any
jurisdiction of the United States of America and which does not have its
principal place of business in the United States of America.
Generally Accepted Accounting Principles or generally accepted accounting
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principles. Except as provided in (S)1.2, principles which are (A) consistent
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with the principles promulgated or adopted by the Financial Accounting Standards
Board, the American Institute of Certified Public Accountants and the Securities
and Exchange Commission and their predecessors (or successor organizations), as
in effect from time to time and (B) consistently applied with past financial
statements of the Company and its Subsidiaries adopting the same principles
where required by generally accepted accounting principles, provided that in
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each case referred to in this definition of "generally accepted accounting
principles", a certified public accountant would, insofar as the use of such
accounting principles is pertinent, be in a position to deliver an unqualified
opinion (other than a qualification regarding changes in generally accepted
accounting principles) as to financial statements in
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which such principles have been properly applied for any fiscal period end being
reported.
Guaranteed Pension Plan. Any employee pension benefit plan within the
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meaning of (S)3.2(a) of ERISA maintained by the Company or any ERISA Affiliate,
or to which the Company or any ERISA Affiliate contributes, the benefits of
which are guaranteed on termination in full or in part by the PBGC pursuant to
Title IV of ERISA, other than a Multiemployer Plan required to pay plan
termination insurance premiums to the PBGC.
Guaranty. The unlimited joint and several guaranty of the Sterling
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Subsidiaries, substantially in the form of Exhibit G hereto.
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Hazardous Substances. See (S)5.18.
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Indebtedness. All obligations, contingent and otherwise, which in
------------
accordance with generally accepted accounting principles should be and are
classified upon the obligor's balance sheet as liabilities, or to which
reference should be and is made by footnotes thereto, including, in any event
and whether or not so classified: (a) all debt and similar monetary
obligations, whether direct or indirect; (b) all liabilities secured by any
mortgage, pledge, security interest, lien, charge, or other encumbrance existing
on property owned or acquired subject thereto, whether or not the liability
secured thereby shall have been assumed; (c) all rental obligations under
capitalized leases, and (d) all guaranties, endorsements and other contingent
obligations which are probable and estimable, whether direct or indirect, in
respect of Indebtedness of others, and any obligation to supply funds to or in
any manner to invest in, directly or indirectly, the debtor, to purchase
Indebtedness, or to assure the owner of Indebtedness against loss, through an
agreement to purchase goods, supplies, or services for the purpose of enabling
the debtor to make payment of the Indebtedness held by such owner or otherwise,
and the obligations to reimburse the issuer of any letters of credit.
Interest Charges. For any period, the expenses of the Company and its
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Subsidiaries for such period for interest on Indebtedness (including all finance
charges and accrued interest expense, in the case of any Indebtedness on which
interest is payable less frequently than quarterly, and the interest portion of
capitalized lease payments but excluding the interest portion of operating lease
payments and Intercompany Indebtedness), to the extent paid in cash or due and
payable in cash in such period (whether or not such payment is due but is
prohibited from being made pursuant to the terms of such Indebtedness).
Interest Payment Date. (i) As to any Base Rate Loan, the last day of the
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calendar quarter which includes the Drawdown Date thereof; and (ii) as to any
Eurodollar Rate Loan in respect of which the Interest Period is (A) 30, 60 or 90
days or less, the last day of such Interest Period and (B) more than 90 days,
the date that is 90 days from the first day of such Interest Period and, in
addition, the last day of such Interest Period.
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Interest Period. With respect to each Loan, (i) initially, the period
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commencing on the Drawdown Date of such Loan and ending on the last day of one
of the periods set forth below, as selected by the Company in a Loan Request (A)
for any Base Rate Loan, the last day of the calendar quarter; and (B) for any
Eurodollar Rate Loan, 30, 60, 90 or 180 days; and (ii) thereafter, each period
commencing on the last day of the next preceding Interest Period applicable to
such Loan and ending on the last day of one of the periods set forth above, as
selected by the Company in a Conversion Request; provided that all of the
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foregoing provisions relating to Interest Periods are subject to the following:
(a) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar Business Day
unless the result of such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period shall end on the
immediately preceding Eurodollar Business Day;
(b) if any Interest Period with respect to a Base Rate Loan would end
on a day that is not a Business Day, that Interest Period shall end on the next
succeeding Business Day;
(c) if the Company shall fail to give notice as provided in (S)2.7,
the Company shall be deemed to have requested a conversion of the affected
Eurodollar Rate Loan to a Base Rate Loan and the continuance of all Base Rate
Loans as Base Rate Loans on the last day of the then current Interest Period
with respect thereto;
(d) any Interest Period relating to any Eurodollar Rate Loan that
begins on the last Eurodollar Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Eurodollar Business Day of a
calendar month; and
(e) any Interest Period relating to any Loan that would otherwise
extend beyond the Final Maturity shall end on the Final Maturity.
Investment Grade. Where Duff & ▇▇▇▇▇▇ Credit Rating Co. is the Rating
----------------
Agency, a Credit Rating of BBB- or better, and where another credit rating
agency is the Rating Agency, a Credit Rating which qualifies as "investment
grade" for purposes of that agency's rating analysis.
Letter of Credit. See (S)2A.1(a).
------ -- ------
Letter of Credit Application. See (S)2A.1(a).
------ -- ------ -----------
Letter of Credit Fee. See (S)2A.6.
------ -- ------ ---
Letter of Credit Participation. See (S)2A.1(d).
------ -- ------ -------------
-9-
Liquid Investments. Permitted Investments consisting of (a) marketable
------------------
direct or guaranteed obligations of the United States of America; (b) demand
deposits, certificates of deposit, bankers acceptances and time deposits of
United States banks having total assets in excess of $1,000,000,000; (c)
securities commonly known as "commercial paper" issued by a corporation
organized and existing under the laws of the United States of America or any
state thereof that at the time of purchase have been rated by Moody's Investor's
Services, Inc. or Standard & Poor's Ratings Group and the ratings for which are
not less than "P2" if rated by Moody's Investor's Services, Inc. and not less
than "A2" if rated by Standard & Poor's Ratings Group; (d) auction rate
preferred stocks rated "AAA" or "AA" by Standard & Poor's Ratings Group, ▇▇▇▇▇'▇
Investors Services, Inc. or a comparable rating by another comparable rating
agency; and (e) corporate notes rated at least "A" by Standard & Poor's Ratings
Group, ▇▇▇▇▇'▇ Investors Services, Inc. or a comparable rating by another
comparable rating agency.
Loan Documents. Collectively, this Agreement, the Notes, the Guaranty, the
---- ---------
Letter of Credit Applications, the Letters of Credit and any other instruments
or documents delivered or to be delivered pursuant to this Agreement.
Loan Request. See (S)2.6.
---- -------
Loans. Loans made or to be made by the Banks to the Company pursuant
-----
to (S)2.
Majority Banks. As of any date, Banks holding at least 66.67% of the
-------- -----
outstanding principal amount of the Notes on such date; and if no principal is
outstanding, Banks whose aggregate Commitments constitute at least 66.67% of the
Total Commitment.
Margin Stock. "Margin stock", as such term is used in Regulations U and X
------ -----
of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and
224.
Material Foreign Subsidiary. Any Subsidiary of the Company or any of its
----------------------------
Subsidiaries which (a)(i) is organized under the laws of a jurisdiction located
outside the Unites States or (ii) has its principal place of business outside of
the Unites States and (b)(i) is engaged in business of any kind or nature, (ii)
has a net worth in excess of $5,000,000 or (iii) has issued any capital stock to
any person other than (A) the Company or a Subsidiary of the Company, (B) de
--
minimis directors' qualifying shares, (C) as required by law or (D) employees of
-------
such Subsidiary in connection with stock option plans of such Subsidiary.
Maximum Drawing Amount. The maximum aggregate amount from time to time
------- ------- ------
that the beneficiaries may draw under outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to the terms of the
Letters of Credit.
-10-
Multiemployer Plan. Any multiemployer plan within the meaning of (S)3(37)
------------- ----
of ERISA maintained or contributed to by the Company or any ERISA Affiliate.
Non-Guarantor Subsidiaries. As of the date hereof, the Sterling Companies
------------- ------------
listed on Schedule 1.2 hereto and identified as Non-Guarantor Subsidiaries, as
-------- ---
such schedule may be modified from time to time pursuant to the provisions of
(S)8.16 or (S)8.17, and any other Subsidiary of the Company which does not
engage in business of any kind or nature and which does not have a net worth
equal to or in excess of $10,000,000.
Notes. See (S)2.3.
-----
Obligations. All Indebtedness, obligations and liabilities of the Company
-----------
to any of the Banks and the Agent, individually or collectively, existing on the
date of this Agreement or arising thereafter, direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising or incurred by contract, operation
of law, or otherwise, arising or incurred under this Agreement or any of the
other Loan Documents or in respect of Loans made, Reimbursement Obligations
incurred or any Note, Letter of Credit Application, Letter of Credit or other
instruments at any time evidencing any of the foregoing.
Outstanding or outstanding. With respect to the Loans, the unpaid
----------- -- -----------
principal thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by (S)4002 of ERISA
----
and any successor entities having similar responsibilities.
Permitted Investments. Investments not prohibited by this Agreement.
---------------------
Permitted Liens. Liens, security interests and other encumbrances not
---------------
prohibited by this Agreement.
Person. Any individual, corporation, association, partnership, trust,
------
unincorporated association, business, or other legal entity, and any government
or any governmental agency or political subdivision thereof.
Prior Credit Agreement. As defined in the preamble hereto.
----- ------ ---------
Purchase Money Indebtedness. Indebtedness in respect of any conditional
---------------------------
sales agreements, security agreements, equipment or motor vehicle leases
intended as security or otherwise in the nature of title retention agreements or
security agreements or other similar title retention agreements entered into in
the ordinary course of business on, prior to or after the date of this Agreement
in order to secure the payment of the purchase price of any equipment or motor
vehicles purchased, leased or otherwise acquired by any Sterling Company for use
in the ordinary course of its business; provided, however, that (A) no such
-------- -------
agreement or lease shall extend to or cover any property other than the
property, the payment of the
-11-
purchase price of which is secured by such agreement or lease and (B) the
aggregate principal amount of all of the Indebtedness secured by any such
agreement or lease shall not exceed one hundred percent (100%) of the purchase
price or fair market value at the time of purchase or lease, whichever shall be
lower, of the property covered by such agreement or lease.
Rating Agency. Duff & ▇▇▇▇▇▇ Credit Rating Co. or any other independent
-------------
credit rating agency reasonably satisfactory to the Agent and the Company.
Real Estate. All real property (1) owned or leased (as lessee or
---- ------
sublessee) by the Company or any of its Subsidiaries and (2) located within the
United States of America.
Record. The grid attached to a Note, or the continuation of such grid, or
------
any other similar record, including computer records, maintained by any Bank
with respect to any Loan referred to in such Note.
Register. As defined in (S)18.3.
--------
Reimbursement Obligation. The Company's obligation to reimburse the Agent
------------- ----------
and the Banks on account of any drawing under any Letter of Credit as provided
in (S)2A.2.
Spring-Back Date. As defined in (S)11.
----------------
Spring-Back Event. As defined in (S)11.
-----------------
Spring-Back Provisions. As defined in (S)11.
----------------------
Sterling Accounts Receivable. Amounts receivable for products licensed or
-------- -------- ----------
leased, or for product support and services provided, by any of the Sterling
Companies.
Sterling Accounts Receivable Agreement Party(ies). Those entities (other
-------- -------- ---------- --------- ----------
than any of the Sterling Companies) which are party to the Sterling Accounts
Receivable Agreements.
Sterling Accounts Receivable Agreements. Those agreements set forth on
-------- -------- ---------- ----------
Schedule 1.3 hereto, together with any agreement between any Sterling Subsidiary
-------- ---
and another entity pursuant to which such entity agrees to purchase Sterling
Accounts Receivable of such Sterling Subsidiary.
Sterling Accounts Receivable Guaranties. The guaranty agreements issued in
-------- -------- ---------- ----------
connection with the Sterling Accounts Receivable Agreements and set forth on
Schedule 1.4 hereto, together with any guaranty issued by the Company in favor
------------
of a Sterling Accounts Receivable Agreement Party pursuant to which the Company
guaranties the obligations of any of the Sterling Subsidiaries under any of the
Sterling Accounts Receivable Agreements.
-12-
Sterling Companies. Collectively, the Company, the Sterling Subsidiaries
-------- ---------
and the Non-Guarantor Subsidiaries.
Sterling Discounted Accounts Receivable Amounts. The aggregate amounts
-------- ---------- -------- ---------- -------
paid by any Sterling Accounts Receivable Agreement Party for Sterling Accounts
Receivable pursuant to the applicable Sterling Accounts Receivable Agreement,
calculated by using any discount rate set forth in the applicable Sterling
Accounts Receivable Agreement.
Sterling Subsidiaries. Collectively, those Subsidiaries of the Company or
-------- ------------
any of the Company's Subsidiaries listed on Schedule 1.5 hereto, and any other
-------- ---
Subsidiary of the Company or any of its Subsidiaries which (i) is acquired or
created subsequent to the date hereof, (ii) is organized under the laws of the
District of Columbia or of any state of the United States, (iii) has its
principal place of business in the United States, (iv) does not do business
exclusively outside the United States, and (v) is a party to and guarantor under
the Guaranty.
Subsidiary. Any corporation, association, trust, or other business entity,
----------
of which the designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority (by number of votes) of
the outstanding Voting Stock.
Total Commitment. The sum of the Commitments of the Banks, as in effect
----- ----------
from time to time.
Total Debt. At any time of determination, the sum of (a) the sum of (i)
----------
all Loans Outstanding (after giving effect to all amounts requested) plus (ii)
----
the Maximum Drawing Amount plus (iii) all Unpaid Reimbursement Obligations, plus
---- ----
(b) the amount of any Foreign Obligations then outstanding, plus (c) without
----
duplication, any Indebtedness of the Company or any of its Subsidiaries under
any of the Sterling Accounts Receivable Agreements or the Sterling Accounts
Receivable Guaranties, which Indebtedness is on a full or partial recourse
basis.
Total Repurchase Event. The occurrence of any event or circumstance which
----- ---------- -----
would permit any Sterling Accounts Receivable Agreement Party to require the
Sterling Subsidiary party to the applicable Sterling Accounts Receivable
Agreement to repurchase all Sterling Accounts Receivable previously purchased by
such Sterling Accounts Receivable Agreement Party under the applicable Sterling
Accounts Receivables Agreement.
Type. As to any Loan, its nature as a Base Rate Loan or a Eurodollar Rate
----
Loan.
Uniform Customs. With respect to any Letter of Credit, the Uniform Customs
------- -------
and Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500 or any successor version thereto
-13-
adopted by the Agent in the ordinary course of its business as a letter of
credit issuer and in effect at the time of issuance of such Letter of Credit.
Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which
------ ------------- ----------
the Company does not reimburse the Agent and the Banks on the date specified in,
and in accordance with, the provisions of (S)2A.2.
Voting Stock. Stock or similar interests, of any class or classes (however
------ -----
designated), the holders of which are at the time entitled, as such holders, to
vote for the election of a majority of the directors (or persons performing
similar functions) of the corporation, association, trust or other business
entity involved, whether or not the right so to vote exists by reason of the
happening of a contingency.
10-K Report. The report of the Company and its Subsidiaries filed annually
-----------
on Form 10-K with the Securities and Exchange Commission.
10-Q Report. The report of the Company and its Subsidiaries filed
-----------
quarterly on Form 10-Q with the Securities and Exchange Commission.
(S)1.2. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise specified
-----------------------------------
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with generally accepted
accounting principles as in effect from time to time, applied on a basis
consistent (except for changes concurred in by the Company's independent public
accountants) with the most recent audited consolidated financial statements of
the Company and its Subsidiaries; provided, however, that, if any change in
-------- -------
generally accepted accounting principles occurring after the Balance Sheet Date
in itself materially affects Capitalized Computer Software Costs, Capital
Expenditures, Consolidated Current Liabilities, Consolidated Earnings Before
Interest and Taxes, Consolidated Earnings Before Interest, Taxes, Amortization
and Depreciation, Consolidated Net Income, Consolidated Net Loss, Consolidated
Net Worth, Consolidated Operating Income, Consolidated Total Assets,
Consolidated Total Liabilities, Interest Charges, Total Debt and Operating Cash
Flow, the Company may by notice to the Agent, or the Agent (on its own or at the
request of the Majority Banks) may by notice to the Company, require that
Capitalized Computer Software Costs, Capital Expenditures, Consolidated Current
Liabilities, Consolidated Earnings Before Interest and Taxes, Consolidated
Earnings Before Interest, Taxes, Amortization and Depreciation, Consolidated Net
Income, Consolidated Net Loss, Consolidated Net Worth, Consolidated Operating
Income, Consolidated Total Assets, Consolidated Total Liabilities, Interest
Charges, Total Debt or Operating Cash Flow, as the case may be, thereafter be
calculated in accordance with generally accepted accounting principles as in
effect and applied by the Company immediately before such change in generally
accepted accounting principles occurs. If such notice is given, the compliance
certificates delivered pursuant to (S)8.4(c) after such change occurs shall be
accompanied by reconciliations of the difference between the calculation set
forth therein and a
-14-
calculation made in accordance with generally accepted accounting principles as
in effect from time to time after such change occurs.
(S)1.3. RULES OF INTERPRETATION.
----- -- --------------
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented and in effect from
time to time in accordance with its terms and the terms of this Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification
to such law.
(d) A reference to any Person includes its permitted successors
and permitted assigns.
(e) Subject to (S)1.2 hereof, accounting terms not otherwise
defined herein have the meanings assigned to them by generally accepted
accounting principles applied on a consistent basis by the accounting entity to
which they refer.
(f) The words "include", "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts, have the
meanings assigned to them therein.
(h) Reference to a particular "(S)" refers to that section of this
Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Agreement as a whole and not to any particular
section or subdivision of this Agreement.
(S)2. THE CREDIT.
--- ------
(S)2.1. LOANS. Subject to the terms and conditions set forth in this
-----
Agreement, each of the Banks severally agrees to lend to the Company, and the
Company may borrow, repay, and reborrow from time to time between the Closing
Date and Final Maturity, upon notice by the Company to the Agent given in
accordance with (S)2.6, such sums as may be requested by the Company for the
purposes set forth in (S)8.3 hereof, provided, however, that the maximum
-------- -------
aggregate principal amount of any Bank's Loans Outstanding (after giving effect
to all amounts requested) at any one time shall not exceed the amount of such
Bank's
-15-
Commitment minus such Bank's Commitment Percentage of the sum of the
-----
Maximum Drawing Amount and all unpaid Reimbursement Obligations, and provided,
--------
further, that the maximum aggregate principal amount of the Loans of all of the
-------
Banks Outstanding (after giving effect to all amounts requested) at any one time
plus the Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall
----
not at any time exceed the Total Commitment. The Loans shall be made pro rata
--- ----
in accordance with each Bank's Commitment Percentage. Each request for a Loan
hereunder shall constitute a representation by the Company that the conditions
set forth in (S)(S)6 and 7 hereof, in the case of the initial Loans to be made
on the Closing Date and (S)7, in the case of all other Loans, have been
satisfied on and as of the date of such request.
(S)2.2. REDUCTION OF TOTAL COMMITMENT.
--------- -- ----- ----------
(a) The Company shall have the right at any time and from time to
time, upon five Business Days' written notice to each of the Banks, to reduce by
$1,000,000 or integral multiples of $1,000,000, or terminate entirely, the
unutilized portion of the Total Commitment.
(b) Following the occurrence of any Spring-Back Event and upon the
receipt by the Company or any of its Subsidiaries of any net proceeds of any
disposition described in (S)2.6(c)(i) of Exhibit E and the payment thereof to
---------
the Agent as contemplated by such section, the Total Commitment shall, at the
option of the Agent or at the request of the Majority Banks, be reduced by the
amount of such net proceeds.
(c) In the event of a reduction of the Total Commitment pursuant
to subparagraph (a) or (b) of this section, the Commitments of the Banks shall
be reduced pro rata in accordance with their respective Commitment Percentages
--- ----
by the amount specified in such notice or paid over to the Agent or, as the case
may be, terminated. Upon the effective date of any such reduction or termination
pursuant to this (S)2.2, the Company shall pay to the Agent, for the respective
accounts of the Banks, the full amount of any Commitment Fee then accrued on the
amount of the reduction. No reduction of the Commitments of the Banks may be
reinstated.
(S)2.3. THE NOTES. The obligation of the Company to repay to the Banks
--- -----
the principal amount of the Loans and interest accrued thereon shall be
evidenced by separate promissory notes of the Company, each in substantially the
form of Exhibit A hereto (the "Notes"), dated as of the Closing Date and
------- -
completed with appropriate insertions, one Note being payable to the order of
each Bank in a principal amount equal to such Bank's Commitment and representing
the obligation of the Company to pay to such Bank the amount of the Commitment
or, if less, the aggregate unpaid principal amount of all Loans made by such
Bank hereunder, plus interest accrued thereon as set forth below. The Company
hereby irrevocably authorizes each Bank to make or cause to be made, at or about
the time of the Drawdown Date of any Loan or at the time of receipt of any
payment of principal on such Bank's Note, an appropriate notation on such Bank's
Record
-16-
reflecting the making of such Loan or (as the case may be) the receipt of
such payment. The aggregate unpaid amount of Loans made by such Bank set forth
on such Bank's Record, shall be prima facie evidence of the principal amount
----- -----
thereof owing and unpaid to such Bank, but the failure to record, or any error
in so recording, any such amount on such Bank's Record, shall not limit or
otherwise affect the obligations of the Company hereunder or under the Note to
make payments of principal of or interest on the Note when due.
(S)2.4. INTEREST. Except as otherwise provided in (S)2.5, the unpaid
--------
principal amount of the Loans outstanding from time to time shall bear interest
from the Drawdown Date thereof until Final Maturity at the annual rate which at
all times shall be determined in accordance with the following provisions:
(a) Each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of the
Interest Period with respect thereto at a rate equal to the Base Rate in effect
from time to time.
(b) Each Eurodollar Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of the
Interest Period with respect thereto at the rate of one-half of one percent
(1/2%) per annum above the Eurodollar Rate determined for such Interest Period;
provided, however, that for all periods following the occurrence of any Spring-
-------- -------
Back Event during which the sum of the aggregate outstanding amount of Loans
plus the Maximum Drawing Amount of all outstanding Letters of Credit plus the
---- ----
amount of all Unpaid Reimbursement Obligations shall exceed fifty percent (50%)
of the Total Commitment then in effect, each Eurodollar Rate Loan shall bear
interest at the rate of one percent (1%) per annum above the Eurodollar Rate
determined for any applicable Interest Period.
(c) The Company hereby promises to pay interest on each Loan in
arrears on each Interest Payment Date with respect thereto.
(S)2.5 INTEREST ON OVERDUE AMOUNTS. Overdue principal and (to the extent
-------- -- ------- -------
permitted by applicable law) interest on the Loans and all other overdue amounts
payable hereunder shall bear interest compounded monthly and payable on demand
at a rate per annum equal to two percent (2%) above the Base Rate, until such
amount shall be paid in full (after as well as before judgment).
(S)2.6. INTEREST RATE ELECTIONS; REQUESTS FOR LOANS. At the option of the
-------- ---- --------- -------- --- -----
Company, so long as no Default or Event of Default has occurred and is
continuing, the Company may elect from time to time to have a portion of the
unpaid principal amount of the Loans outstanding from time to time bear interest
during any particular Interest Period calculated by reference to the Eurodollar
Rate. The Company shall give to the Agent written or telegraphic notice (or
telephonic notice promptly confirmed in writing) of each Loan requested
hereunder (a "Loan Request") not later than 10:00 a.m. (Boston time) on the
proposed Drawdown Date thereof, in the case of Base Rate Loans or not later than
10:00 a.m. (Boston time)
-17-
three Eurodollar Business Days prior to the proposed Drawdown Date thereof in
the case of Eurodollar Rate Loans from Base Rate Loans. Each such Loan Request
shall be substantially in the form of Exhibit B attached hereto and shall
---------
specify (A) the principal amount of the Loan Requested, (B) the proposed
Drawdown Date of such Loan, (C) the Interest Period for such Loan, (D) the Type
of such Loan, and (E) the bank account of the Company with the Agent's head
office to which the proceeds of the requested Loan are to be credited. Each Loan
Request shall be irrevocable and binding on the Company and shall obligate the
Company to accept the Loans requested from the Banks on the proposed Drawdown
Date thereof. Any election of a Eurodollar Rate Loan shall lapse at the end of
the expiring Interest Period unless extended by a further Loan Request as
hereinabove provided. The Agent shall forthwith, upon determination of any
Eurodollar Rate, provide notice thereof to each Bank and to the Company. Each
such notice shall, absent manifest error, be binding upon each Bank and the
Company.
(S)2.7. CONVERSION OPTIONS.
---------- -------
(a) CONVERSION TO DIFFERENT TYPE OF LOAN. The Company may elect
---------- -- --------- ---- -- ----
from time to time to convert any outstanding Loan to a Loan of another Type,
provided that (i) with respect to any such conversion of a Loan to a Base Rate
--------
Loan, the Company shall give the Agent at least one (1) Business Day prior
written notice of such election; (ii) with respect to any such conversion of a
Base Rate Loan to a Eurodollar Rate Loan, the Company shall give the Agent at
least three (3) Eurodollar Business Days prior written notice of such election;
(iii) with respect to any such conversion of a Eurodollar Rate Loan into a Base
Rate Loan, such conversion shall only be made on the last day of the Interest
Period with respect thereto and (iv) no Loan may be converted into a Eurodollar
Rate Loan when any Default or Event of Default has occurred and is continuing.
On the date on which such conversion is being made, each Bank shall take such
action as is necessary to transfer its Commitment Percentage of such Loans to
its Domestic Lending Office or its Eurodollar Lending Office, as the case may
be. All or any part of outstanding Loans of any Type may be converted into a
Loan of another Type as provided herein, provided that any partial conversion
--------
shall be in an aggregate principal amount of $1,000,000 or a whole multiple
thereof. Each Conversion Request relating to the conversion of a Loan to a
Eurodollar Rate Loan shall be irrevocable by the Company.
(b) CONTINUATION OF TYPE OF LOAN. Any Loan of any Type may be
------------ -- ---- -- ----
continued as a Loan of the same Type upon the expiration of an Interest Period
with respect thereto by compliance by the Company with the notice provisions
contained in (S)2.7(a); provided that no Eurodollar Rate Loan may be continued
--------
as such when any Default or Event of Default has occurred and is continuing, but
shall be automatically converted to a Base Rate Loan on the last day of the
first Interest Period relating thereto ending during the continuance of any
Default or Event of Default of which officers of the Agent active upon the
Company's account have actual knowledge. In the event that the Company fails to
provide any such notice with respect to the continuation of any Eurodollar Rate
Loan as such, then such Eurodollar Rate Loan shall be automatically converted to
a Base Rate Loan
-18-
on the last day of the first Interest Period relating thereto. The Agent shall
notify the Banks promptly when any such automatic conversion contemplated by
this (S)2.7 is scheduled to occur.
(C) EURODOLLAR RATE LOANS. Any conversion to or from Eurodollar
---------- ---- -----
Rate Loans shall be in such amounts and be made pursuant to such elections so
that, after giving effect thereto, the aggregate principal amount of all
Eurodollar Rate Loans having the same Interest Period shall not be less than
$1,000,000 or a whole multiple of $500,000 in excess thereof.
(S)2.8. FUNDS FOR LOANS.
----- --- -----
(a) FUNDING PROCEDURES. Not later than 1:00 p.m. (Boston time)
------- ----------
on the proposed Drawdown Date of any Loans, each of the Banks will make
available to the Agent, at its head office, in immediately available funds, the
amount of such Bank's Commitment Percentage of the amount of the requested
Loans. Upon receipt from each Bank of the amount of its Loan, and upon receipt
of the documents required by (S)(S)6 and 7 hereof to be delivered on or prior to
such Drawdown Date, to the extent applicable, the Agent will make the aggregate
amount of such Loans available to the Company by crediting the Company's account
with the Agent's head office specified in the applicable Loan Request. The
failure or refusal of any Bank to make available to the Agent at the aforesaid
time on any Drawdown Date the amount of its Commitment Percentage of the
requested Loans shall not relieve any other Bank from its several obligation
hereunder to make its respective Commitment Percentage of any requested Loans
available to the Agent.
(b) ADVANCES BY AGENT. The Agent may (unless notified to the
-------- -- -----
contrary by a Bank prior to a Drawdown Date) assume that each Bank has made
available to the Agent on such Drawdown Date such Bank's Commitment Percentage
of the Loans to be made on such Drawdown Date, and the Agent may (but it shall
not be required to), in reliance upon such assumption, make available to the
Company a corresponding amount. The Agent shall notify the Company by telephone
or telecopy to the treasurer or another duly authorized financial officer of the
Company of the failure of any Bank to make available to the Agent its Commitment
Percentage on such Drawdown Date promptly after the account officer of the Agent
with responsibility for the Company's account obtains actual knowledge of such
failure. If any Bank makes available to the Agent such amount on a date after
such Drawdown Date, such Bank shall pay to the Agent on demand an amount equal
to the product of (i) the average computed for the period referred to in clause
(iii) below, of the weighted average interest rate paid by the Agent for federal
funds acquired by the Agent during each day included in such period, times (ii)
-----
the amount of such Bank's Commitment Percentage of such Loans, times (iii) a
-----
fraction, the numerator of which is the number of days that elapse from and
including such Drawdown Date to the date on which the amount of such Bank's
Commitment Percentage of such Loans shall become immediately available to the
Agent, and the denominator of which is 360. A statement of the Agent submitted
to such Bank with respect to any amounts owing under this paragraph shall be
-19-
prima facie evidence of the amount due and owing to the Agent by such Bank. If
----- -----
such Bank shall fail to make its Commitment Percentage of such Loans available
to the Agent, the Company agrees to pay to the Agent within three (3) Business
Days after demand, an amount equal to such corresponding amount, together with
interest thereon at the rate per annum applicable to the Loans made on such
Drawdown Date for each day from the date the Agent shall make such amount
available to the Company until the date such amount is paid or repaid to the
Agent, provided, however, that until and unless such payment has been made in
-------- -------
full by the Company, such Bank shall remain liable to the Agent for the full
amount of such payment, including interest as set forth above. Subject to
(S)2.1, the Company may at any time within such three-day period submit a new
Loan Request to the Agent pursuant to (S)2.6 covering the amount set forth in
the Agent's demand for payment.
(S)2.9. MATURITY OF THE LOANS. The Company promises to pay on the Final
---------------------
Maturity, and there shall become absolutely due and payable on the Final
Maturity, all of the Loans Outstanding on such date, together with any and all
unpaid interest thereon.
(S)2.10. MANDATORY REPAYMENTS. If at any time prior to the Final Maturity
--------- ----------
the sum of the Outstanding amount of the Loans, the Maximum Drawing Amount and
all Unpaid Reimbursement Obligations exceeds the Total Commitment, then the
Company shall immediately pay the amount of such excess to the Agent for the
respective accounts of the Banks for application: first, to any Unpaid
Reimbursement Obligations; second, to the Loans; and third, to provide to the
Agent cash collateral for Reimbursement Obligations as contemplated by
(S)2A.2(b) and (c). Each payment of any Unpaid Reimbursement Obligations or
prepayment of Loans shall be allocated among the Banks, in proportion, as nearly
as practicable, to each Reimbursement Obligation or (as the case may be) the
respective unpaid principal amount of each Bank's Note, with adjustments to the
extent practicable to equalize any prior payments or repayments not exactly in
proportion.
(S)2.11. OPTIONAL PREPAYMENT OF PRINCIPAL. The Company shall have the
-------- ---------- -- ---------
right at any time to prepay the outstanding principal amount of the Loans, as a
whole or in part, without premium or penalty, upon not less than one Business
Day's (with respect to Base Rate Loans) and three (3) Eurodollar Business Days'
(with respect to Eurodollar Rate Loans) written, telegraphic or telephonic
notice to the Agent; provided that (i) each partial prepayment shall be in the
--------
aggregate principal amount of (a) $1,000,000 or an integral multiple thereof
with respect to Eurodollar Rate Loans or (b) $500,000 or some greater integral
multiple of $100,000 with respect to Base Rate Loans, shall be accompanied by
the payment of accrued interest on the principal prepaid to the date of
prepayment and shall be applied, in the absence of instruction by the Company,
first to the principal of Base Rate Loans and then to the principal of
Eurodollar Rate Loans; (ii) each partial prepayment shall be allocated by the
Agent among all of the Banks, in proportion, as nearly as practicable, to the
respective unpaid principal amount of each Bank's Note, with adjustments to the
extent practical to equalize any prior prepayments
-20-
not exactly in proportion; (iii) prepayments on any Eurodollar Rate Loan may be
made only on the last day of the Interest Period applicable to such Eurodollar
Rate Loan; and (iv) amounts so prepaid prior to the Final Maturity may be
reborrowed hereunder until the Final Maturity.
(S)2.12. COMMITMENT FEE. The Company agrees to pay to the Agent, for the
---------- ---
respective accounts of the Banks, in accordance with their respective Commitment
Percentages, a Commitment Fee calculated at the rate of one-fifth of one percent
(1/5%) per annum on the average daily amount during each calendar quarter or
portion thereof from the date hereof to the Final Maturity by which the Total
Commitment exceeds the aggregate outstanding principal amount of Loans plus the
----
Maximum Drawing Amount and all Unpaid Reimbursement Obligations during such
calendar quarter. The Commitment Fee shall be payable quarterly in arrears on
the tenth Business Day of each calendar quarter for the immediately preceding
calendar quarter, commencing on the first such date following the date hereof,
with a final payment on the Final Maturity.
(S)2.13. AGENT'S FEE. So long as there are any Obligations or Commitments
------- ---
Outstanding, the Company shall pay to the Agent, annually in advance, on the
Closing Date and on each anniversary of the Closing Date, an annual Agent's Fee
in the amount set forth in the side letter dated as of the Closing Date between
the Agent and the Company.
(S)2A. LETTERS OF CREDIT.
------- -- ------
(S)2A.1. LETTER OF CREDIT COMMITMENTS.
------ -- ------ -----------
(a) COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms
-------------------------------------
and conditions hereof and the execution and delivery by the Company of a letter
of credit application on the Agent's customary form (a "Letter of Credit
Application") by the Company, or any Sterling Subsidiary, the Agent on behalf of
the Banks and in reliance upon the agreement of the Banks set forth in
(S)2A.1(d) and upon the representations and warranties of the Company contained
herein, agrees, in its individual capacity, to issue, extend and renew for the
account of the Company, between the Closing Date and the Final Maturity, one or
more standby or documentary letters of credit (individually, a "Letter of
Credit"), in such form as may be requested from time to time by the Company and
agreed to by the Agent; provided, however, that, after giving effect to such
-------- -------
request, (i) the sum of the aggregate Maximum Drawing Amount and all Unpaid
Reimbursement Obligations shall not exceed $15,000,000 at any one time and (ii)
the sum of (A) the Maximum Drawing Amount on all Letters of Credit, (B) all
Unpaid Reimbursement Obligations, and (C) the amount of all Loans outstanding
shall not exceed the Total Commitment. As of the Closing Date, the Letter of
Credit initially issued in the amount of $261,991.20 to North Shore Gas Co.,
Australia for the account of the Company shall become a Letter of Credit under
this Agreement for all purposes, shall be issued for the account of the Company
and shall cease to be a Letter of Credit under and as defined in the Prior
Credit Agreement, and BOA shall cease to have any further obligations with
respect thereto.
-21-
(b) LETTER OF CREDIT APPLICATIONS. Each Letter of Credit
-----------------------------
Application shall be completed to the satisfaction of the Agent. In the event
that any provision of any Letter of Credit Application shall be inconsistent
with any provision of this Loan Agreement, then the provisions of this Loan
Agreement shall, to the extent of any such inconsistency, govern, and each
Letter of Credit Application shall so indicate.
(c) TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued,
--------------------------
extended or renewed hereunder shall, among other things, (i) provide for the
payment of sight drafts for honor thereunder when presented in accordance with
the terms thereof and when accompanied by the documents described therein, and
(ii) have an expiry date no later than the date which is fourteen (14) days (or,
if the Letter of Credit is confirmed or otherwise provides for one or more
nominated persons, forty-five (45) days) prior to the Final Maturity. Each
Letter of Credit so issued, extended or renewed shall be subject to the Uniform
Customs.
(d) REIMBURSEMENT OBLIGATIONS OF BANKS. Each Bank severally
----------------------------------
agrees that it shall be absolutely liable, without regard to the occurrence of
any Default or Event of Default or any other condition precedent whatsoever, to
the extent of such Bank's Commitment Percentage, to reimburse the Agent on
demand for the amount of each draft paid by the Agent under each Letter of
Credit to the extent that such amount is not reimbursed by the Company or the
relevant Sterling Subsidiary pursuant to (S)2A.2 (such agreement for a Bank
being called herein the "Letter of Credit Participation" of such Bank).
(e) PARTICIPATIONS OF BANKS. Each such payment made by a Bank
-----------------------
shall be treated as the purchase by such Bank of a participating interest in the
Company's Reimbursement Obligation under (S)2A.2 in an amount equal to such
payment. Each Bank shall share in accordance with its participating interest in
any interest which accrues pursuant to (S)2A.2.
(S)2A.2. REIMBURSEMENT OBLIGATION OF THE COMPANY. In order to induce the
------------- ---------- -- --- -------
Agent to issue, extend and renew each Letter of Credit and the Banks to
participate therein, the Company hereby agrees to reimburse or pay to the Agent,
for the account of the Agent or (as the case may be) the Banks, with respect to
each Letter of Credit issued, extended or renewed by the Agent hereunder,
whether for the account of the Company or for the account of any Sterling
Subsidiary:
(a) except as otherwise expressly provided in (S)2A.2(b) and (c),
within one Business Day following each date that any draft presented under such
Letter of Credit is honored by the Agent and the Agent has provided to the
Company notice pursuant to (S)2A.3, or within one Business Day following any
date on which the Agent notifies the Company that it has otherwise made a
payment with respect thereto, (i) the amount paid by the Agent under or with
-22-
respect to such Letter of Credit, and (ii) the amount of any taxes, fees,
charges or other reasonable costs and expenses whatsoever incurred by the Agent
or any Bank in connection with any payment made by the Agent or any Bank under,
or with respect to, such Letter of Credit; provided, that if such reimbursement
--------
or payment is not otherwise made by the Company within one Business Day
following the honoring of any draft hereunder by the Agent, (x) subject to the
Company's compliance with the conditions precedent set forth in (S)6 (to the
extent applicable) and (S)7 hereof and in the event that the sum of such amount
plus the maximum aggregate principal amount of the Loans Outstanding (after
----
giving effect to all amounts requested) plus the Maximum Drawing Amount and all
----
Unpaid Reimbursement Obligations does not exceed the Total Commitment, the
aggregate amount payable by the Company pursuant to clauses (i) and (ii) above
shall be deemed, for all purposes of this Agreement, a Base Rate Loan made by
the Banks to the Company on the date the Agent honored the relevant draft; and
(y) in the event that no such Base Rate Loan can be made because the sum of the
amount of such Loan plus the maximum aggregate principal amount of the Loans
----
Outstanding (after giving effect to all amounts requested) plus the Maximum
----
Drawing Amount and all Unpaid Reimbursement Obligations exceeds the Total
Commitment or because the Company has not complied or is unable to comply with
the conditions precedent set forth in (S)6 (to the extent applicable) and (S)7
hereof, then the Company hereby authorizes the Agent to debit its Account
"▇▇▇▇▇▇▇" maintained with the Agent for the amount of any reimbursement or
payment pursuant to clauses (i) and (ii) above.
(b) upon the termination of the Total Commitment, or the acceleration
of the Reimbursement Obligations with respect to all Letters of Credit in
accordance with (S)11, an amount equal to the then Maximum Drawing Amount on all
Letters of Credit, which amount shall be held by the Agent for the benefit of
the Banks and the Agent as cash collateral for all Reimbursement Obligations.
Upon the termination of the Total Commitment pursuant to (S)2.2, the Agent
agrees, so long as no Default or Event of Default has occurred and is
continuing, to hold such cash collateral in an interest-bearing account in the
name of the Company, to pay current interest on such cash collateral to the
Company and upon the payment by the Company of any Reimbursement Obligations or
the reduction of the Maximum Drawing Amount upon the cancellation of any Letter
of Credit, the Agent agrees to return to the Company an amount equal to such
payment or reduction together with unpaid interest accrued thereon through the
date of such return; and
(c) upon the reduction (but not termination) of the Total Commitment
to an amount less than the Maximum Drawing Amount, an amount equal to such
difference, which amount shall be held by the Agent for the benefit of the Banks
and the Agent as cash collateral for all Reimbursement Obligations.
Unless funded by a Base Rate Loan or a debit of Account "▇▇▇▇▇▇▇" pursuant to
(S)2A.2(a) hereof, each such payment shall be made to the Agent at the Agent's
head office in immediately available funds. Interest on any and all amounts
remaining unpaid by the Company under this (S)2A.2 after application, in the
case of amounts due under clause (a) hereof, of the provisions contained in the
proviso thereof, at any time from the date such amounts become due and payable
(whether so stated in (S)2A.2, by acceleration or otherwise) until payment in
full (whether before or
-23-
after judgment) shall be payable to the Agent on demand at the rate specified in
(S)2.5 for overdue principal on the Loans.
(S)2A.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or
------ -- ------ --------
other demand for payment shall be made under any Letter of Credit, the Agent
shall, promptly following its receipt thereof, notify the Company of the date
and amount of the draft presented or demand for payment and of the date and time
when it expects to pay such draft or honor such demand for payment. If the
Company fails to reimburse the Agent as provided in (S)2A.2 no later than one
Business Day following the date that such reimbursement is to be made, the Agent
may at any time thereafter notify the Banks of the amount of any such Unpaid
Reimbursement Obligation. No later than 3:00 p.m. (Boston time) on the Business
Day next following the receipt of such notice, each Bank shall make available to
the Agent, at its Head Office, in immediately available funds, such Bank's
Commitment Percentage of such Unpaid Reimbursement Obligation, together with an
amount equal to the product of (a) the average, computed for the period referred
to in clause (c) below, of the weighted average interest rate paid by the Agent
for federal funds acquired by the Agent during each day included in such period,
times (b) the amount equal to such Bank's Commitment Percentage of such Unpaid
-----
Reimbursement Obligation, times (c) a fraction, the numerator of which is the
-----
number of days that elapse from and including the date the Agent paid the draft
presented for honor or otherwise made payment to the date on which such Bank's
Commitment Percentage of such Unpaid Reimbursement Obligation shall become
immediately available to the Agent, and the denominator of which is 360. The
responsibility of the Agent to the Company, the Sterling Subsidiaries for the
respective accounts of which Letters of Credit are issued and the Banks shall be
only to determine that the documents (including each draft) delivered under each
Letter of Credit in connection with such presentment shall be in conformity in
all material respects with such Letter of Credit.
(S)2A.4. OBLIGATIONS ABSOLUTE. Subject to the provisions of (S)2A.5, the
----------- --------
Agent agrees with the Company that it will exercise and give the same care and
attention to each Letter of Credit as it gives to its other letters of credit.
Subject to the provisions of (S)2A.5, the Company agrees with the Agent and the
Banks that the Agent and the Banks shall not be responsible for, and the
Company's and the Sterling Subsidiaries' Reimbursement Obligations under (S)2A.2
are absolute and unconditional and shall not be affected by, among other things,
(a) the validity or genuineness of documents supplied or of any endorsements
thereon, even if such documents should in fact prove to be in any or all
respects invalid, fraudulent or forged, (b) any dispute between or among the
Company or the Sterling Subsidiary for whose account the relevant Letter of
Credit was issued, the beneficiary of any Letter of Credit or any financial
institution or other party to which any Letter of Credit may be transferred, (c)
any setoff, claims or defenses whatsoever of the Company or the Sterling
Subsidiary for the account of which such Letter of Credit was issued against the
Agent, any Bank or any beneficiary of any Letter of Credit or any such
transferee, or (d) the occurrence of any Default or Event of Default. The Agent
and the Banks shall not be liable for any error, omission, interruption or delay
in transmission, dispatch or delivery of any message or advice, however
-24-
transmitted, in connection with any Letter of Credit. The Company agrees that
any action taken or omitted by the Agent or any Bank under or in connection with
each Letter of Credit and the related drafts and documents, if done in good
faith, shall be binding upon the Company and shall not result in any liability
on the part of the Agent or any Bank to the Company or any Sterling Subsidiary.
(S)2A.5. RELIANCE BY ISSUER. To the extent not inconsistent with (S)2A.4,
-------- -- ------
the Agent shall be entitled to rely, and shall be fully protected in relying
upon, any Letter of Credit, draft, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel, independent accountants and
other experts selected by the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Agreement unless it shall
first have received such advice or concurrence of the Majority Banks as it
reasonably deems appropriate or it shall first be indemnified to its reasonable
satisfaction by the Banks against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement in accordance with a request of the Majority Banks,
and such request and any action taken or failure to act pursuant thereto shall
be binding upon the Banks and all future holders of the Revolving Credit Notes
or of a Letter of Credit Participation.
(S)2A.6. LETTER OF CREDIT FEE. The Company agrees to pay, on the date of
------ -- ------ ---
issuance or any extension or renewal of any Letter of Credit and at such other
time or times as such charges are customarily made by the Agent, a fee (in each
case, a "Letter of Credit Fee") to the Agent (i) in respect of each standby
Letter of Credit equal to (A) three-quarters of one percent (3/4%) per annum of
the face amount of such standby Letter of Credit, to be for the accounts of the
Banks in accordance with their respective Commitment Percentages, plus (B) the
----
Agent's customary issuance or amendment fee, as the case may be, in the amount
of one eighth of one percent (1/8%) of the face amount of such standby Letter of
Credit, to be for the Agent's own account, (ii) in respect of each documentary
Letter of Credit equal to (A) three-quarters of one percent (3/4%) per annum of
the face amount of such documentary Letter of Credit, to be for the accounts of
the Banks in accordance with their respective Commitment Percentages, plus (B)
----
the Agent's customary issuance or amendment fee, as the case may be in the
amount of one-eighth of one percent (1/8%) of the face amount of such
documentary Letter of Credit, to be for the Agent's own account, and (iii) in
respect of each Letter of Credit, such customary negotiation fee as determined
by the Agent, to be for the Agent's own account.
(S)3. CERTAIN GENERAL PROVISIONS.
------- ------- ----------
(S)3.1. FUNDS FOR PAYMENTS.
------------------
-25-
(a) PAYMENTS TO AGENT. All payments of principal of and interest
------------------
on the Loans, Reimbursement Obligations, the Agent's Fee, the Commitment Fees
and any other amounts due hereunder shall be made by the Company in United
States Dollars to the Agent for the respective accounts of the Banks, or (in the
case of the Agent's Fee), the Agent, in immediately available funds at the
Agent's head office at the address set forth therefor in Schedule 1.1 hereto or
-------- ---
at such other location in the Boston, Massachusetts area that the Agent may from
time to time designate.
(b) NO OFFSET, ETC. All payments by the Company and the Sterling
---------------
Subsidiaries hereunder and under any of the other Loan Documents shall be made
without setoff or counterclaim and free and clear of and without deduction for
any taxes, levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any jurisdiction or any political subdivision thereof or
taxing or other authority therein unless the Company or such Subsidiary is
compelled by law to make such deduction or withholding. If any such obligation
is imposed upon the Company or the Sterling Subsidiaries with respect to any
amount payable by them hereunder or under any of the other Loan Documents, the
Company will pay to the Agent, for the account of the Banks or (as the case may
be) the Agent, on the date on which such amount is due and payable hereunder or
under such other Loan Document, such additional amount in Dollars as shall be
necessary to enable the Banks or the Agent to receive the same net amount which
the Banks or the Agent would have received on such due date had no such
obligation been imposed upon the Company or such Sterling Subsidiary. The
Company will deliver promptly to the Agent certificates or other valid vouchers
for all taxes or other charges deducted from or paid with respect to payments
made by the Company or such Sterling Subsidiary hereunder or under such other
Loan Document. Nothing contained in this (S)3.1(b) shall be deemed to impose
upon the Company any obligation to pay taxes based upon the income or profits of
the Agent or any Bank.
(S)3.2. COMPUTATIONS. All computations of interest on the Loans and of
------------
Commitment Fees, Letter of Credit Fees or other fees shall be based on a 360-day
year and paid for the actual number of days elapsed. Except as otherwise
provided in the definition of the term "Interest Period" with respect to
Eurodollar Rate Loans, whenever a payment hereunder or under the Notes becomes
due on a day which is not a Business Day, the due date for such payment shall be
(a) in the case of Base Rate Loans, the next succeeding Business Day, and (b) in
the case of Eurodollar Rate Loans, the Business Day next succeeding the day on
which such payment would otherwise have become due, such Business Day to be
selected (such selection to be made by the Agent two Business Days prior to the
Drawdown Date and notice thereof shall be given to the Company and the Banks not
later than five Business Days after the Drawdown Date or upon request by the
Company, provided, that any failure by the Agent to give such notice shall not
--------
in any way affect the obligation of the Company to make such payment when due)
by the Agent in accordance with the then current banking practice in any
Eurodollar Interbank Market selected by the Agent in its sole discretion acting
in good faith, as the case may be, and interest and commitment fees hereunder
shall be adjusted
-26-
accordingly. The outstanding amount of the Loans as reflected on the Records
from time to time shall be considered correct and binding on the Company unless
within five (5) Business Days after receipt of any notice by the Agent or any of
the Banks of such outstanding amount, the Agent or such Bank shall notify the
Company to the contrary
(S)3.3. ADDITIONAL COSTS, ETC. If any present or future applicable law,
---------- ----- ---
which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Bank or the Agent by any central bank or other fiscal,
monetary or other authority (whether or not having the force of law), shall in
the case of any Loans, any Letters of Credit or any Commitment:
(a) subject any Bank or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Agreement, the other Loan Documents, such Bank's Commitment or the Loans or
Letters of Credit (other than taxes based upon or measured by the income or
profits of such Bank or the Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or the
interest on any Loans, any Reimbursement Obligations or any other amounts
payable to any Bank or the Agent under this Agreement or any of the other Loan
Documents, or
(c) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held by, or
deposits in or for the account of, or loans or letters of credit by, or
commitments of, any office of any Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Agreement, the other Loan Documents, the
Loans, any Letters of Credit, such Bank's Commitment, or any class of
commitments, letters of credit or loans of which any of the Loans, any Letters
of Credit or such Bank's Commitment forms a part, and the result of any of the
foregoing is
(i) to increase the cost to any Bank of making, funding, issuing,
renewing, extending or maintaining any of the Loans or such Bank's Commitment or
any Letter of Credit, or
-27-
(ii) to reduce the amount of principal, interest, fees,
Reimbursement Obligations or other amount payable to such Bank or the Agent
hereunder on account of such Bank's Commitment, any Letter of Credit or any
of the Loans, or
(iii) to require such Bank or the Agent to make any payment or
to forego any interest, principal, Reimbursement Obligation or other sum
payable hereunder, the amount of which payment or foregone interest or
Reimbursement Obligation, principal or other sum is calculated by reference
to the gross amount of any sum receivable or deemed received by such Bank
or the Agent from the Company hereunder,
then, and in each such case, the Company will, within fifteen (15) days
following demand made by such Bank (through the Agent) or, as the case may be,
the Agent at any time and from time to time and as often as the occasion
therefor may arise, pay to the Agent for the respective accounts of the Banks or
for the Agent's own account such additional amounts as will be sufficient to
compensate such Bank or the Agent for such additional cost, reduction, payment
or foregone interest, principal or other sum. Each Bank or, as the case may be,
the Agent shall give the Company prompt notice of any event causing such
additional cost, reduction, payment or foregone interest, Reimbursement
Obligation or other sum; provided, however, that if such Bank or the Agent shall
-------- -------
fail to notify the Company or make demand within one hundred twenty (120) days
following the occurrence of any such event, such Bank or, as the case may be,
the Agent shall not be entitled to claim any additional amounts pursuant to this
(S)3.3 for any period ending on a date which is prior to one hundred twenty
(120) days before such notification or demand.
(S)3.4. INDEMNIFICATION FOR LOSSES. Without prejudice to any of the
--------------- --- ------
foregoing provisions of this Agreement, the Company will, on demand by any Bank
(through the Agent), at any time and from time to time and as often as the
occasion therefor may arise, indemnify such Bank against any losses, costs or
expenses which such Bank may at any time or from time to time sustain or incur
with respect to any Eurodollar Rate Loans as a consequence of
(a) the failure by the Company to borrow any Eurodollar Rate Loan
on the date of borrowing designated by the Company,
(b) the failure by the Company to pay, punctually on the due date
thereof, any amount payable by the Company under this Agreement,
(c) the accelerated payment of any of the Company's obligations
under this Agreement as a result of an Event of Default, or
(d) any voluntary or mandatory prepayment made with respect to any
Eurodollar Rate Loan other than on the last day of an Interest Period.
-28-
Such losses, costs or expenses, including interest or fees payable by such Bank
to lenders of funds obtained by it in order to maintain any such Loans, will be
determined by such Bank on a commercially reasonable basis and will include in
the case of any such accelerated payment, but not be limited to, the amount by
which:
(i) the total amount of interest which would have accrued on the
principal so repaid or prepaid during the period (in this (S)3.4 called the
"Reemployment Period") beginning on the date of such repayment or
prepayment and ending on the last day of the Interest Period relating to
the principal so repaid or prepaid, such total amount of interest to be
calculated on the basis of the Eurodollar Rate applicable to such Interest
Period:
exceeds
(ii) the total amount of interest which would accrue and become
payable to such Bank during the Reemployment Period on the principal repaid
or prepaid if such Bank, following such repayment or prepayment, were to
use its best efforts to reemploy as soon as possible the principal so
repaid or prepaid by (A) placing with a prime bank in the Eurodollar
Interbank Market selected by such Bank deposits of dollars in amounts equal
(as nearly as may be) to the principal so repaid or prepaid and for the
number of days equal (as nearly as may be) to the Reemployment Period, or
(as such Bank may elect) (B) buying at face value from a prime bank a
negotiable certificate of deposit issued by such prime bank in an amount
equal (as nearly as may be) to the principal so repaid or prepaid and
having a maturity comparable to the Reemployment Period.
In the event that the Agent or any Bank shall fail to notify the Company of any
such losses, costs or expenses within one hundred twenty (120) days following
the incurrence of any thereof, the Agent or, as the case may be, such Bank shall
not be entitled to claim any additional amounts pursuant to this (S)3.4 for any
period ending on a date which is prior to one hundred twenty (120) days before
such notification.
(S)3.5. CAPITAL ADEQUACY. If any present or future law, governmental
------- --------
rule, regulation, policy, guideline or directive (whether or not having the
force of law) or the interpretation thereof by a court or governmental authority
with appropriate jurisdiction affects the amount of capital required or expected
to be maintained by any Bank or the Agent, or any corporation controlling such
Bank or the Agent and such Bank or the Agent determines that the amount of
capital required to be maintained by it is increased by or based upon the
existence of such Bank's or the Agent's commitment with respect to the credit
facility established hereunder or the Loans, Letter of Credit Participations or
Letters of Credit made, issued, maintained, extended or renewed pursuant hereto,
then such Bank or the Agent may notify the Company of such fact. To the extent
that the costs of such increased capital requirements are not reflected in the
Base Rate or Eurodollar Rate, or in amounts paid or payable by the Company
pursuant to (S)(S)3.3 or 3.4
-29-
hereof, the Company and such Bank or (as the case may be) the Agent shall
thereafter attempt to negotiate in good faith, within thirty (30) days of the
day on which the Company receives such notice, an adjustment payable hereunder
which will adequately compensate such Bank or the Agent in light of these
circumstances. If the Company and such Bank or the Agent are unable to agree to
such adjustment within thirty (30) days of the date on which the Company
receives such notice, then commencing on the date of such notice (but not
earlier than the effective date of any such increased capital requirement), the
fees payable hereunder shall increase by an amount that will, in such Bank's or
the Agent's reasonable determination, provide adequate compensation. Each Bank
and the Agent shall allocate such cost increases among its customers in good
faith and on an equitable basis. For the purposes of (S)3.3 and this (S)3.5, any
costs reimbursed to BKB as a Bank shall not be reimbursable to BKB as Agent, and
to the extent that costs attributable to any Bank's Loans, any Letter of Credit
Participation or Commitment are reimbursed by such Bank to the Agent, such costs
shall not be reimbursable by the Company to the Agent and any costs reimbursed
to the Agent which are attributable to the Commitment, Letter of Credit
Participations or Loans of any Bank shall not be reimbursed to such Bank.
Notwithstanding anything to the contrary contained in this (S)3.5, in the event
that the Agent or any Bank shall fail to notify the Company of any such costs of
increased capital requirements within one hundred twenty (120) days following
the Agent's or such Bank's determination thereof, the Agent or, as the case may
be, such Bank shall not be entitled to claim any additional amounts pursuant to
this (S)3.5 for any period ending on a date which is prior to one hundred twenty
(120) days before such notification.
(S)3.6. BANK CERTIFICATE. A certificate signed by an officer of any Bank,
---- -----------
setting forth any additional amount required to be paid by the Company to such
Bank under (S)(S)3.3, 3.4 or 3.5 hereof and the computations made by such Bank
to determine such additional amount, shall be submitted by such Bank to the
Company in connection with each demand made at any time by such Bank upon the
Company under (S)(S)3.3, 3.4 or 3.5. Without limiting the negotiation
requirements of (S)3.5 (with respect to certificates issued on account of
additional amounts required to be paid pursuant to (S)3.5), such certificate
shall constitute prima facie evidence as to the additional amount owed.
----- -----
(S)3.7. INABILITY TO DETERMINE EURODOLLAR RATE. In the event that, prior
--------- -- --------- ---------- ----
to the commencement of any Interest Period relating to any Eurodollar Rate Loan,
the Agent shall determine that adequate and reasonable methods do not exist for
ascertaining the Eurodollar Rate that would otherwise determine the rate of
interest to be applicable to any Eurodollar Rate Loan during any Interest
Period, the Agent shall forthwith give notice of such determination (which shall
be conclusive and binding on the Company and the Banks) to the Company and the
Banks. In such event (a) any Loan Request or Conversion Request with respect to
Eurodollar Rate Loans shall be deemed a request for Base Rate Loans, (b) each
Eurodollar Rate Loan will automatically, on the last day of the then current
Interest Period relating thereto, become a Base Rate Loan, unless the Agent has
received timely notice of the Company's intent to prepay such Eurodollar Rate
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Loan or any portion thereof pursuant to (S)2.9, and (c) the obligations of the
Banks to make Eurodollar Rate Loans shall be suspended until the Agent
determines that the circumstances giving rise to such suspension no longer
exist, whereupon the Agent shall so notify the Company and the Banks. Neither
the Agent nor any Bank shall in any event be responsible to the Company in any
way if it is not able for any reason beyond its control to quote a Eurodollar
Rate with respect to any proposed Interest Period.
(S)3.8. ILLEGALITY. Notwithstanding any other provisions herein, if any
----------
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for any Bank to make or maintain
Eurodollar Rate Loans, such Bank shall forthwith give notice of such
circumstances to the Company and the other Banks and thereupon (a) the
commitment of such Bank to make Eurodollar Rate Loans or convert Base Rate Loans
to Eurodollar Rate Loans shall forthwith be suspended and (b) such Bank's Loans
then outstanding as Eurodollar Rate Loans, if any, shall be converted
automatically to Base Rate Loans on the last day of each Interest Period
applicable to such Eurodollar Rate Loans, unless the Agent has received timely
notice of the Company's intention to prepay such Eurodollar Rate Loan or any
portion thereof pursuant to (S)2.11, or within such earlier period as may be
required by law. The Company hereby agrees promptly to pay the Agent for the
account of such Bank, upon demand by such Bank, any additional amounts necessary
to compensate such Bank for any costs incurred by such Bank in making any
conversion in accordance with this (S)3.8, including any interest or fees
payable by such Bank to lenders of funds obtained by it in order to make or
maintain its Eurodollar Loans hereunder; provided, however, that if the Agent or
-------- -------
such Bank shall fail to notify the Company or make demand within one hundred
twenty (120) days following the occurrence of any such event, such Bank shall
not be entitled to claim any additional amounts pursuant to this (S)3.8 for any
period ending on a date which is prior to one hundred twenty (120) days before
such notification or demand.
(S)3.9. BANK OBLIGATION TO MITIGATE. Any Bank that makes demand for
---------------------------
payment of additional amounts under (S)3.3 or (S)3.5 or notifies the Agent of
any circumstance pursuant to (S)3.8, shall use reasonable efforts (consistent
with its internal policies and legal and regulatory restrictions) to change the
jurisdiction of its applicable lending office so as to avoid thereafter the
circumstances that give rise to such demand or notification.
(S)3.10. REPLACEMENT OF BANK. In the event that any Bank makes a demand
-------------------
for payment under (S)3.3 or (S)3.5 or notifies the Agent of any circumstances
requiring payment pursuant to (S)3.8, the Company may within one hundred eighty
(180) days of such demand, if no Event of Default or Default then exists,
replace such Bank with an Eligible Assignee in accordance with (S)18 hereof
(including execution of an appropriate Assignment and Acceptance Agreement);
provided that (i) the Note payable to such Bank and all other obligations owed
--------
to such Bank hereunder shall be purchased in full by such assignee without
recourse at par plus accrued interest at or prior to such replacement, (ii) such
Eligible Assignee shall, from and after such replacement, be deemed for all
purposes to be a "Bank"
-31-
hereunder, and shall have all of the rights, duties and obligations hereunder of
the Bank being replaced, and (iii) such other actions shall be taken by the
Company, such Bank and such Eligible Assignee as may be appropriate to effect
the replacement of such Bank with such Eligible Assignee on terms such that such
Eligible Assignee has all of the rights, duties and obligations hereunder as
such Bank (including, without limitation, execution and delivery of a Note to
such Eligible Assignee and redelivery to the Borrower in due course (following
payment in full in cash of all Obligations owing to such Bank) of the Note
payable to such Bank). No Bank shall have any obligation to be such an Eligible
Assignee or otherwise have any obligation to replace any other Bank.
(S)4. GUARANTY.
--------
The Obligations shall be guaranteed by the Sterling Subsidiaries pursuant
to the terms of the Guaranty.
(S)5. REPRESENTATIONS AND WARRANTIES. The Company, for itself and on
--------------- --- ----------
behalf of its Subsidiaries, hereby represents and warrants to the Banks and the
Agent as follows:
(S)5.1. CORPORATE EXISTENCE.
--------- ---------
(a) ORGANIZATION; CORPORATE POWER AND AUTHORITY. Each of the
------------ --------- ----- --- ---------
Company and the Sterling Subsidiaries (i) is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and (ii) has adequate corporate power and authority and full
legal right to own or to hold under lease its properties and to carry on the
business in which it is presently engaged and will be engaged upon consummation
of the transactions contemplated hereby.
(b) FOREIGN QUALIFICATION. Each of the Company and the Sterling
---------------------
Subsidiaries is qualified and in good standing as a foreign corporation and is
licensed, admitted or approved to do business as a foreign corporation in each
jurisdiction wherein the character of the properties owned or held under lease
by it, or the nature of the business conducted by it, makes such qualification
necessary, except where (i) such failure to qualify would not have a material
adverse effect on such Sterling Company or on the enforceability against such
Sterling Company of any of the Loan Documents or (ii) (A) such Sterling Company
is a Subsidiary which was acquired in compliance with the terms hereof within
thirty (30) days prior to the date on and as of which this representation and
warranty is being made or repeated and (B) the Company and such Sterling
Subsidiary are using all reasonable efforts to obtain the appropriate license,
admission or qualification.
(c) Each of the Company and the Sterling Subsidiaries has adequate
corporate power and authority and has full legal right to enter into each of the
Loan Documents to which it is or is to become a party, to perform, observe and
comply with all of its agreements and obligations under each of such
-32-
documents, and, with respect to the Company, to make all of the borrowings
contemplated by this Agreement.
(S)5.2. SUBSIDIARIES. Schedule 5.2 contains a complete list of all
------------ -------- ---
Subsidiaries of the Company and sets forth the authorized capital of all classes
of the capital stock of each Sterling Subsidiary on the date hereof, together
with the ownership on the date hereof of all of the issued and outstanding
shares of each such class. Other than Subsidiaries of the Sterling Companies
organized under the laws of jurisdictions located outside the United States,
none of the Sterling Companies has any Subsidiaries which are not Sterling
Subsidiaries or Non-Guarantor Subsidiaries.
(S)5.3. CORPORATE AUTHORITY, ETC. The execution and delivery by each of
--------- --------- ---
the Company and the Sterling Subsidiaries of each of the Loan Documents to which
it is or is to become a party, the performance by each of the Company and the
Sterling Subsidiaries of all of its agreements and obligations under each of
such documents, and the transactions contemplated hereby and thereby, including
the making by the Company of all of the borrowings contemplated by this
Agreement, have been duly authorized as of the date hereof (except that in the
case of a Sterling Subsidiary acquired in compliance with the terms hereof, such
execution, delivery and authorization shall have been completed no later than
the later to occur of (a) the date of such acquisition, and (b) ten (10)
Business Days following receipt by the Company or such Sterling Subsidiary of
forms of the Loan Documents, or amendments thereto, as appropriate, to which
such Sterling Subsidiary is to become a party), by all necessary corporate
action on the part of the Company, each Sterling Subsidiary and its respective
shareholders and are within the corporate authority of such Person, and do not
and will not (i) contravene or conflict with any provision of its charter or by-
laws (each as from time to time in effect), (ii) conflict with, or result in a
breach of any material term, condition or provision of, or constitute a default
under or result in the creation of any mortgage, lien, pledge, charge, security
interest or other encumbrance upon any of the property of the Company or any of
the Sterling Subsidiaries (other than the liens created under any of the Loan
Documents) under any agreement, trust deed, indenture, mortgage or other
instrument to which the Company or any of the Sterling Subsidiaries is or may
become a party or by which the Company or any of the Sterling Subsidiaries or
any of the property of the Company or any of the Sterling Subsidiaries is or may
become bound or affected, the consequences of which would reasonably be expected
to have a material adverse effect on the Company and the Sterling Subsidiaries
taken as a whole or would have an effect in any material respect on the
enforceability of any of the Loan Documents, (iii) violate or contravene any
provision of any law, regulation, order, ruling or interpretation thereunder or
any decree, order or judgment of any court or governmental or regulatory
authority, bureau, agency or official (all as from time to time in effect and
applicable to the Company or any of the Sterling Subsidiaries), except where
such violation or contravention would not materially adversely affect the
Company and the Sterling Subsidiaries taken as a whole and would not have any
effect in any material respect on the enforceability of the Loan Documents, (iv)
require any waivers, consents or approvals by any of the creditors
-33-
of any the Company or of the Sterling Subsidiaries which have not been obtained,
(v) require any consents or approvals by any shareholders of the Company or any
of the Sterling Subsidiaries, or (vi) require any approval, consent, order,
authorization or license by, or giving notice to, or taking any other action
with respect to, any governmental or regulatory authority or agency under any
provision of any applicable law, except those actions which have been taken or
will be taken prior to the Closing Date or where the failure to do so would not
result in a material adverse effect on the Company and the Sterling Subsidiaries
taken as a whole and would not have any effect in any material respect on the
enforceability of the Loan Documents.
(S)5.4. BINDING EFFECT OF DOCUMENTS, ETC. Each of the Company and the
------- ------ -- --------- ---
Sterling Subsidiaries has duly executed and delivered each of the Loan Documents
to which it is a party and each of such documents is in full force and effect.
The agreements and obligations of each of the Company and the Sterling
Subsidiaries contained in each of the Loan Documents to which it is a party
constitute legal, valid and binding obligations enforceable against it in
accordance with their respective terms, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors' rights and except to the
extent that the availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
therefor may be brought.
(S)5.5. NO DEFAULTS OR EVENTS OF DEFAULT. No Default or Event of Default
-- ------------------ -- -------
has occurred and is continuing.
(S)5.6. CHIEF EXECUTIVE OFFICES. Until the Agent receives written notice
----- --------- -------
of a change, the chief executive offices of the Company and the offices where
all material records and books of account of the Company are kept, shall be
located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, and the
Company's mailing address shall be as provided in (S)18 hereof, and the chief
executive offices of each of the Sterling Subsidiaries, the offices where all
material records and books of account of each of the Sterling Subsidiaries are
kept, and the mailing addresses of each of the Sterling Subsidiaries, shall be
as set forth in Schedule 5.6 hereto.
-------- ---
(S)5.7. FINANCIAL STATEMENTS AND PROJECTIONS.
--------- --------------------------
(a) FINANCIAL STATEMENTS. The Company has furnished to each of the
--------------------
Banks a consolidated balance sheet of the Company and its Subsidiaries as at the
Balance Sheet Date, and consolidated statements of operations and income and
stockholders' equity of the Company and its Subsidiaries for the fiscal year
then ended, certified by Ernst & Young, LLP, and an unaudited consolidated
balance sheet of the Company and its Subsidiaries at March 31, 1997, and
unaudited consolidated statements of operations and retained earnings of the
Company and its Subsidiaries for the fiscal period then ended. Such financial
statements were prepared in accordance with generally accepted accounting
principles and fairly present the financial condition of the Company and its
-34-
Subsidiaries as at the close of business on the dates thereof and the results of
operations for the fiscal period then ended. There are no contingent
liabilities of the Company and its Subsidiaries as of either of such dates
involving material amounts not disclosed in such financial statements and the
related notes thereto.
(b) PROJECTIONS. Copies of the most recently prepared projections
-----------
of the annual and quarterly operating budgets of the Company and its
Subsidiaries on a consolidated basis, balance sheets and cash flow statements
for the fiscal quarter of the Company and its Subsidiaries ending September 30,
1997, together with revisions to such projections for the final fiscal quarter
of such year, have been delivered to each Bank. To the knowledge of the Company
or any of its Subsidiaries, no facts exist that (individually or in the
aggregate) would result in any material change in any of such projections. The
projections are based upon reasonable estimates and assumptions and reflect the
reasonable estimates of the Company and its Subsidiaries of the results of
operations and other information projected therein.
(S)5.8. NO MATERIAL CHANGES, ETC. Except as disclosed in 10-Q Reports and
-- -------- ------- ---
Forms 8-K of the Company and its Subsidiaries filed by the Company and its
Subsidiaries with the Securities and Exchange Commission and previously
delivered to the Agent and the Banks, since the Balance Sheet Date, there has
occurred no materially adverse change in the financial condition or business of
the Company and its Subsidiaries taken as a whole as shown on or reflected in
the consolidated balance sheet of the Company and its Subsidiaries as at the
Balance Sheet Date, or the consolidated statements of operations for the fiscal
year then ended. None of the Sterling Subsidiaries has made any Distribution
since the Balance Sheet Date, except to the Company or another Sterling
Subsidiary.
(S)5.9. MORTGAGES AND LIENS. None of the property, assets, income or
--------- --- -----
revenues of any character, or any rights relating thereto, of any of the
Sterling Companies is subject to any mortgage, lien, pledge, charge, security
interest or other encumbrance of any kind, other than Permitted Liens. Set
forth on Schedule 5.9 hereto is a true and correct list of each office or other
------------
location maintained by any of the Sterling Companies in the United States of
America. In all jurisdictions set forth on Schedule 5.9, and, to the best
------------
knowledge of the Company (without having conducted UCC searches), in all other
jurisdictions located in the United States of America or any state thereof, no
financing statement which names any of the Sterling Companies as a debtor has
been filed pursuant to Article 9 of the Uniform Commercial Code of any state of
the United States, and none of the Sterling Companies has signed any financing
statement or security agreement or authorized any Person to file any such
financing statement in any such jurisdiction, except (a) for notice filings by
lessors of personal property or equipment under leases, or (b) with respect to
Permitted Liens.
(S)5.10. LITIGATION. Except as set forth on Schedule 5.10 hereto as of
---------- -------- ----
the date hereof, or as previously disclosed to the Agent in writing (with the
Agent disclosing such information to the Banks promptly following receipt
thereof), there is no pending or, to the best of the knowledge of any of the
Company's officers and
-35-
directors, threatened action, suit, proceeding or investigation before any
court, tribunal, governmental or regulatory authority, agency, commission, or
board of arbitration against the Company or any of its Subsidiaries which seeks
or demands damages in excess of $20,000,000 or which would otherwise reasonably
be expected materially adversely to affect the transactions contemplated hereby
or the operations or the financial condition of the Company and its Subsidiaries
taken as a whole or to materially impair the right of the Company and its
Subsidiaries, considered as a whole, to carry on business substantially as now
conducted by them, or to result in any material liability not adequately covered
by insurance or for which adequate reserves are not maintained on the
consolidated balance sheet of the Company and its Subsidiaries, or which
questions the validity of this Agreement or any of the other Loan Documents or
any action taken or to be taken pursuant hereto or thereto, nor does the Company
or any of its Subsidiaries know of any reasonable basis for any such litigation
to exist. Set forth on Schedule 5.10 hereto are descriptions of all escrow
-------- ----
arrangements to which the Company or any of its Subsidiaries is a party with
respect to pending litigation against the Company or any of its Subsidiaries
which must be disclosed pursuant to this (S)5.10.
(S)5.11. NO DEFAULT. Except for alleged defaults relating to the matters
-- -------
set forth on Schedules 5.10 and 5.11 hereof as of the date hereof, or as
--------- ---- ----
previously disclosed to the Agent in writing (with the Agent disclosing such
information to the Banks promptly following receipt thereof), no material
default under any contract, agreement or instrument to which any Sterling
Company is a party or by which it or any of its property is bound, has occurred
and is continuing beyond the grace period specified therefore in such contract,
instrument or agreement, the consequence of which default would reasonably be
expected materially adversely to affect the financial condition, assets, or
operations of any of the Company and its Subsidiaries taken as a whole.
Notwithstanding the foregoing, the information set forth on Schedules 5.10 and
--------- ----
5.11 is for disclosure purposes only, and nothing contained in Schedules 5.10 or
---- --------- ----
5.11 shall be deemed an admission by the Company or any Subsidiary that any
----
default exists under any contract, agreement or instrument to which such
Sterling Company is a party or by which such Sterling Company or any of its
property is bound.
(S)5.12. TAXES. Except as set forth on Schedule 5.12, as of the date
----- -------- ----
hereof, the Company, for itself and on behalf of its Subsidiaries, has filed all
United States federal tax returns required to be filed by it, and each of the
Company and, to the best knowledge of the Company, its Subsidiaries has filed
all state and other tax returns required to be filed by it other than (i) those
returns relating to taxes (A) with respect to which the Company or any such
Subsidiary, as the case may be, in good faith and using due diligence and all
deliberate speed, is investigating or ascertaining the extent of its liability,
if any, and (B) with respect to which (1) no lien or notice has been filed in
any public recording office, and (2) neither the Company nor such Subsidiary has
received notice of a lien or the threat or initiation of an enforcement
proceeding or has reason to believe that such a lien or enforcement proceeding
is likely to occur or is specifically contemplated by appropriate authorities,
or (ii) those returns as to which the failure to so file would not, in the
opinion of the Company, create an outstanding liability for taxes due or
-36-
interest and penalties thereon in excess of $1,000,000 in the aggregate for the
Company and its Subsidiaries. As of the date hereof, each of the Company and
its Subsidiaries has paid, or has made reasonable provision for payment of, all
material taxes (if any) which have or may become due and payable with respect to
any past or present taxation period pursuant to any of the said returns or
pursuant to any matters raised by audits or for other reasons known to it, other
than those taxes referenced in subparagraphs (i) and (ii) above and taxes the
amount, applicability, or validity of which are currently being contested by it
in good faith by appropriate proceedings and with respect to which it has set
aside on its books reserves (to the extent required by generally accepted
accounting principles and practices) reasonably deemed by it to be adequate with
respect thereto. Neither the Company nor any of its Subsidiaries has consented
to be treated as a "consenting corporation" as defined in Section 341(f) of the
Code.
(S)5.13. EMPLOYEE BENEFIT PLANS.
-------- ------- -----
(a) IN GENERAL. Each Employee Benefit Plan and each Guaranteed
-- -------
Pension Plan has been maintained and operated in compliance in all material
respects with the provisions of ERISA and, to the extent applicable, the Code,
including but not limited to the provisions thereunder respecting prohibited
transactions and the bonding of fiduciaries and other persons handling plan
funds as required by (S)412 of ERISA.
(b) TERMINABILITY OF WELFARE PLANS. No Employee Benefit Plan which
------------- -- ------- -----
is an employee welfare benefit plan within the meaning of (S)3(1) or (S)3(2)(B)
of ERISA provides benefit coverage subsequent to termination of employment,
except as required by Title I, Part 6 of ERISA or applicable state insurance
laws. Subject to applicable legal requirements, the Company or an ERISA
Affiliate, as appropriate, may terminate each such Plan at any time (or at any
time subsequent to the expiration of any applicable bargaining agreement) in the
discretion of the Company or such ERISA Affiliate without liability to any
Person other than for claims arising prior to termination.
(c) GUARANTEED PENSION PLANS. Each contribution required to be
---------- ------- -----
made to a Guaranteed Pension Plan, whether required to be made to avoid the
incurrence of an accumulated funding deficiency, the notice or lien provisions
of (S)302(f) of ERISA, or otherwise, has been timely made. No waiver of an
accumulated funding deficiency or extension of amortization periods has been
received with respect to any Guaranteed Pension Plan, and neither the Borrower
nor any ERISA Affiliate is obligated to or has posted security in connection
with an amendment of a Guaranteed Pension Plan pursuant to (S)307 of ERISA or
(S)401(a)(29) of the Code. No liability to the PBGC (other than required
insurance premiums, all of which have been paid) has been incurred by the
Company or any ERISA Affiliate with respect to any Guaranteed Pension Plan and
there has not been any ERISA Reportable Event, or any other event or condition
which presents a material risk of termination of any Guaranteed Pension Plan by
the PBGC. Based on the latest valuation of each Guaranteed Pension Plan (which
in each case occurred within twelve months prior to the date of this
representation), and on the
-37-
actuarial methods and assumptions employed for that valuation, the aggregate
benefit liabilities of all such Guaranteed Pension Plans within the meaning of
(S)4001 of ERISA did not exceed the aggregate value of the assets of all such
Guaranteed Pension Plans by a material amount, disregarding for this purpose the
benefit liabilities and assets of any Guaranteed Pension Plan with assets in
excess of benefit liabilities, except as otherwise permitted by (S)9.2(e).
(d) MULTIEMPLOYER PLANS. Neither the Company nor any ERISA
------------- -----
Affiliate has incurred any material liability (including secondary liability) to
any Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan under (S)4201 of ERISA or as a result of a sale of assets
described in (S)4204 of ERISA. Neither the Company nor any ERISA Affiliate has
been notified that any Multiemployer Plan is in reorganization or insolvent
under and within the meaning of (S)4241 or (S)4245 of ERISA or is at risk of
entering reorganization or becoming insolvent, or that any Multiemployer Plan
intends to terminate or has been terminated under (S)4041A of ERISA.
(S)5.14. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. None of the
------- ------- --- ---------- ------- ----
Sterling Companies is a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is it an
"investment company" or a company "controlled" by an "investment company", as
such terms are defined in the Investment Company Act of 1940, as amended.
(S)5.15. REGULATIONS U AND X. The proceeds of the Loans shall be used,
----------- - --- -
and the Letters of Credit shall be obtained solely for financing acquisitions
permitted hereby and for working capital and general corporate purposes. No
portion of any Loan or Letter of Credit is to be used, except as otherwise
permitted herein, for the purpose of purchasing or carrying any "margin
security" or "margin stock" as such terms are used in Regulations U and X of the
Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224,
nor is any portion of any Loan or Letter of Credit to be used in any manner
which, whether after giving effect to (S)8.16 or (S)8.18 or otherwise, would be
in violation of such Regulations U or X.
(S)5.16. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Except as set forth on
---------- ------- ---------- ---
Schedule 5.16 hereto, each of the Company and the Sterling Subsidiaries
-------------
possesses all franchises, patents, copyrights, trademarks, trade names, licenses
and permits, and rights in respect of the foregoing, adequate for the conduct of
its business substantially as now conducted and has not received notice of any
conflict with any rights of others. Attached hereto as Schedule 5.16 is a true,
-------- ----
correct, and complete list of all patents, patent applications, federally
registered copyrights, trademarks, trademark applications, trade names and other
intellectual property owned by the Company or any of the Sterling Subsidiaries
as of the Closing Date.
(S)5.17. NON-GUARANTOR SUBSIDIARIES. No Non-Guarantor Subsidiary (a)
--------------------------
other than Sterling Software (Midwest), Inc. is presently engaged in business of
any kind or nature (except that such Non-Guarantor Subsidiary may have qualified
to do business in a foreign jurisdiction), (b) has a net worth in excess of
-38-
$10,000,000 or (c) has issued any capital stock to any Person other than (A) the
Company or a Subsidiary of the Company, (B) de minimis directors' qualifying
-- -------
shares, (C) as requird by law or (D) employees of such Subsidiary in connection
with stock option plans of such Subsidiary. The Non-Guarantor Subsidiaries,
taken as a whole, do not have assets as a result of which such Non-Guarantor
Subsidiaries' net worth, in the aggregate, equals or exceeds $50,000,000.
(S)5.18. ENVIRONMENTAL COMPLIANCE.
------------- ----------
(a) To the best of the Company's knowledge, none of the Sterling
Companies, nor any of their operations, is in violation or alleged violation of
any judgment, decree, order, law, license, rule and regulation pertaining to
environmental matters, including those arising under the Resource Conservation
and Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended the Superfund Amendments and Reauthorization
Act of 1986 the Federal Clean Water Act, the Federal Clean Air Act, the Toxic
Substances Control Act, or any state or local statute, regulation, ordinance,
order or decree relating to health, safety or the environment (hereinafter
"Environmental Laws"), except where the failure so to comply would not have a
material adverse effect on the business, assets or financial condition of the
Sterling Companies taken as a whole.
(b) None of the Sterling Companies has received notice from any
third party including, without limitation: any federal, state or local
governmental authority, (i) that any one of them has been identified by the
United States Environmental Protection Agency ("EPA") as a potentially
responsible party under CERCLA with respect to a site listed on the National
Priorities List, 40 C.F.R. Part ▇▇▇ ▇▇▇▇▇▇▇▇ ▇; (ii) that any hazardous waste,
as defined by 42 U.S.C. (S)6903(5), any hazardous substances as defined by 42
U.S.C. (S)9601(14), any pollutant or contaminant as defined by 42 U.S.C.
(S)9601(33) and any toxic substances, oil or hazardous materials or other
chemicals or substances regulated by any Environmental Laws ("Hazardous
Substances") which any one of them has generated, transported or disposed of has
been found at any site at which a federal, state or local agency or other third
party has conducted or has ordered that any of the Sterling Companies conduct a
remedial investigation, removal or other response action pursuant to any
Environmental Law; or (iii) that it is or shall be a named party to any claim,
action, cause of action, complaint, or legal or administrative proceeding (in
each case, contingent or otherwise) arising out of any third party's incurrence
of costs, expenses, losses or damages of any kind whatsoever in connection with
the release of Hazardous Substances.
(c) Except as set forth on Schedule 5.18 attached hereto and to
-------- ----
the Company's knowledge: (i) no portion of the Real Estate has been used by any
of the Sterling Companies for the handling, processing, storage or disposal of
Hazardous Substances except in accordance with applicable Environmental Laws;
(ii) in the course of any activities conducted by the Sterling Companies, no
Hazardous Substances have been generated or are being used on the Real Estate
except in accordance with applicable Environmental Laws.
-39-
(d) None of the Sterling Companies, or, to the Company's
knowledge, any of the Real Estate is subject to any applicable Environmental Law
requiring the performance of Hazardous Substances site assessments, or the
removal or remediation of Hazardous Substances, or the giving of notice to any
governmental agency or the recording or delivery to other Persons of an
environmental disclosure document or statement by virtue of the transactions set
forth herein and contemplated hereby, or as a condition to the effectiveness of
any other transactions contemplated hereby.
(S)5.19. SOLVENCY. Each of the Company and the Sterling Subsidiaries, on
--------
an individual basis as of the Closing Date, each Subsidiary which becomes a
Sterling Subsidiary and a guarantor under the Guaranty in accordance with the
requirements of (S)8.16 or (S)8.18, on an individual basis as of any Drawdown
Date following the date on which such Subsidiary becomes a Sterling Subsidiary
and a guarantor under the Guaranty in accordance with the requirements of
(S)8.16 or (S)8.18, and the Sterling Companies on a consolidated basis as of the
Closing Date and each Drawdown Date occurring thereafter, both before and after
giving effect to the transactions contemplated hereby (a) is solvent, (b) has
assets having a fair salable value in excess of the amount required to pay its
probable liabilities as such liabilities become absolute and mature, and (c) has
access to adequate capital for the conduct of its business and the ability to
pay its respective debts from time to time incurred in connection therewith as
such debts mature in the reasonably foreseeable future.
(S)6. CONDITIONS TO THE FIRST LENDING. Each of the Banks' respective
---------- -- --- ----- -------
obligations to convert its outstanding obligations against the Company under the
Prior Credit Agreement into Obligations under this Credit Agreement on the
Closing Date, the effectiveness of this Agreement and the amendments effected
hereby and the obligations of the Banks to make the first Loan hereunder and of
the Agent to issue any initial Letters of Credit shall be subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions precedent:
(S)6.1. LOAN DOCUMENTS, ETC.
---- --------- ---
(a) Each of the Loan Documents shall have been duly and properly
authorized, executed and delivered by the respective party or parties thereto,
shall be in full force and effect on and as of the Closing Date, and shall be in
form and substance satisfactory to each of the Banks.
(b) Executed original counterparts of each of the Loan Documents
shall have been furnished to each of the Banks.
(S)6.2. LEGALITY OF TRANSACTIONS, ETC. No change in applicable law shall
-------- -- ------------ ---
have occurred as a consequence of which it shall have become and continue to be
unlawful (a) for any of the Banks to perform any of its agreements or
obligations under any of the Loan Documents to which it is a party on the
Closing Date or (b) for the Company or any of the Sterling Subsidiaries to
perform any of its
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agreements or obligations under any of the Loan Documents to which it is a party
on the Closing Date. The Banks shall have received such statements, including
applicable Forms U-1, in substance and form reasonably satisfactory to the Agent
as the Banks shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of the
Federal Reserve Systems.
(S)6.3. REPRESENTATIONS AND WARRANTIES. Each of the representations and
--------------- --- ----------
warranties made by or on behalf of the Company and the Sterling Subsidiaries to
the Banks or the Agent in this Agreement or the other Loan Documents shall be
true and correct in all material respects when made, shall, for all purposes of
this Agreement, be repeated on and as of the Closing Date, and shall be true and
correct in all material respects on and as of such date except, in each case, as
affected by the consummation of the transactions contemplated by the Loan
Documents and to the extent that such representation or warranty may relate by
its terms solely to a prior date.
(S)6.4. PERFORMANCE, ETC. Each of the Company and the Sterling
----------- ---
Subsidiaries shall have duly and properly performed, complied with and observed
in all material respects each of its covenants, agreements and obligations
contained in any of the Loan Documents to which it is a party or by which it is
bound which are required to be performed on the Closing Date. No event shall
have occurred on or prior to the Closing Date and be continuing on the Closing
Date, and no condition shall exist on the Closing Date, which constitutes a
Default or an Event of Default or which would constitute a Default or an Event
of Default after giving effect to the Loan or Loans being made on the Closing
Date.
(S)6.5. CERTIFIED COPIES OF CHARTER DOCUMENTS. The Agent shall have
--------- ------ -- ------- ---------
received from each of the Company and the Sterling Subsidiaries copies, in
sufficient quantity for delivery to each Bank, certified by a duly authorized
officer of the Company or such Sterling Subsidiary to be true and complete on
the Closing Date, of each of (a) its charter or other incorporation or
association documents as in effect on such date of certification, and (b) its
by-laws as in effect on such date.
(S)6.6. PROOF OF CORPORATE ACTION. The Agent shall have received from
----- -- --------- ------
each of the Company and the Sterling Subsidiaries copies, in sufficient quantity
for delivery to each Bank, certified by a duly authorized officer of each of the
Company and the Sterling Subsidiaries to be true and complete on the Closing
Date, of the records of all corporate and shareholder action taken by each of
the Company and the Sterling Subsidiaries to authorize (a) its execution and
delivery of each of the Loan Documents to which it is or is to become a party,
(b) its performance of all of its agreements and obligations under each of such
documents, and (c) the borrowings and other transactions contemplated by this
Agreement.
(S)6.7. INCUMBENCY CERTIFICATE. The Agent shall have received from each
---------- -----------
of the Company and the Sterling Subsidiaries incumbency certificates in
sufficient quantity for delivery to each Bank, dated the Closing Date, signed by
a duly authorized officer of each of the Company and the Sterling Subsidiaries,
and giving
-41-
the name and bearing a specimen signature of each individual who shall be
authorized: (i) to sign, in the name and on behalf of each of the Company and
the Sterling Subsidiaries, each of the Loan Documents to which it is or is to
become a party; (ii) in the case of the Company, to make Loan Requests and
Conversion Requests, and to apply for Letters of Credit; and (iii) to give
notices and to take other action on its behalf under the Loan Documents.
(S)6.8. PROCEEDINGS AND DOCUMENTS. All corporate, governmental and other
----------- --- ---------
proceedings in connection with the transactions contemplated by the Loan
Documents and all instruments and documents incidental thereto, shall be in form
and substance reasonably satisfactory to the Agent, and the Agent shall have
received all such counterpart originals or certified or other copies of all such
instruments and documents as the Agent shall have reasonably requested.
(S)6.9. LEGAL OPINIONS. Each of the Agent and the Banks shall have
----- --------
received a written opinion, addressed to the Agent and each Bank, dated the
Closing Date, from ▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to the Company, in
substantially the form of Exhibit C hereto.
------- -
(S)6.10. UCC SEARCH RESULTS. The Agent shall have received the results of
------------------
recent UCC searches with respect to the assets of the Company and the Sterling
Subsidiaries in the jurisdictions listed on Schedule 5.9, indicating no liens
------------
other than Permitted Liens and otherwise in form and substance satisfactory to
the Agent.
(S)6.11. INSURANCE CERTIFICATES. The Agent shall have received (a)
--------- ------------
certificates of insurance from independent insurance brokers dated as of the
Closing Date, identifying insurers, types of insurance, insurance limits and
policy terms, and otherwise describing the insurance obtained in accordance with
the provisions of (S)8.8.
(S)6.12. PAYMENT OF FEES. The Company shall have paid to the Agent, for
---------------
its own account, the Agent's fee pursuant to (S)2.13.
(S)7. CONDITIONS TO SUBSEQUENT LOANS. The obligation of the Banks to make
---------- -- ---------- -----
any Loans subsequent to the initial Loan or of the Agent to issue, extend or
renew any Letter of Credit after the Closing Date shall be subject to the
satisfaction of the following conditions precedent:
(S)7.1. LEGALITY OF TRANSACTIONS. It shall not be unlawful (a) for any of
-------- -- ------------
the Banks or the Agent to perform any of its agreements or obligations under any
of the Loan Documents to which the Banks or the Agent are a party on the
Drawdown Date of such Loan or such Letter of Credit, or (b) for the Company or
any of the Sterling Subsidiaries to perform any of its material agreements or
obligations under any of the Loan Documents to which the Company or such
Sterling Subsidiary is a party on such date.
-42-
(S)7.2. REPRESENTATIONS AND WARRANTIES; NO DEFAULT OR EVENT OF DEFAULT.
--------------- --- ------------------------------------------
Each of the representations and warranties made by or on behalf of the Company
or any of the Sterling Subsidiaries to the Banks or the Agent in this Agreement
or any other Loan Document or in any other document or instrument delivered
pursuant to or in connection with this Agreement shall be true and correct in
all material respects when made and shall, for all purposes of this Agreement,
be deemed to be repeated on and as of the date of the Company's notice of
borrowing for such Loan or the date of the Letter of Credit Application for such
Letter of Credit and on and as of the Drawdown Date of such Loan or such Letter
of Credit and shall be true and correct in all material respects on and as of
each of such dates, except, in each case, as affected by the consummation of the
transactions contemplated by the Loan Documents and to the extent that such
representation or warranty may relate by its terms solely to a prior date, and
except that, within the 30 day period following any acquisition of a new
Subsidiary consummated in accordance with the terms hereof, Schedules 5.2, 5.6,
--------- --- ---
5.10 (but only to the extent that the Company would not be required to report
----
the litigation to be included in Schedules 5.10 within 30 days pursuant to
--------- ----
(S)8.5), 5.11, 5.12 (but only to the extent that any changes to Schedule 5.12
---- ---- -------- ----
arise solely from failure by the newly acquired Subsidiary to file state or
local tax returns or pay state or local taxes and in no event arise as a result
of any failure to pay any federal taxes or failure to file any federal tax
returns or as a result of existence of any tax lien on any assets of such newly
acquired Subsidiary), and Schedule 5.16 may not be complete and accurate as a
-------- ----
result of such acquisition, provided, that the Company shall, during such thirty
--------
(30) day period, take any and all necessary action to bring such newly acquired
Subsidiary into full compliance with each representation and warranty set forth
in (S)5 hereof, and provided, further, that no change resulting from any
-------- -------
acquisition would have a material adverse affect on the Sterling Companies taken
as a whole. No Default or Event of Default shall have occurred and be
continuing.
(S)7.3. PERFORMANCE, ETC. The Company and each of the Sterling
----------- ---
Subsidiaries shall have duly and properly performed, complied with and observed
in all material respects each of its covenants, agreements and obligations
contained in (S)(S)8, 9 and 10 hereof, and, following the occurrence of the
Spring-Back Date, in Exhibit E, and shall have duly and properly performed,
---------
complied with and observed in all material respects its covenants, agreements
and obligations in all other sections of this Agreement and any of the other
Loan Documents to which it is a party or by which it is bound on the Drawdown
Date for such Loan or such Letter of Credit. No event shall have occurred on or
prior to such date and be continuing on such date, and no condition shall exist
on such date, which constitutes a Default or an Event of Default.
(S)7.4. PROCEEDINGS AND DOCUMENTS. All corporate, governmental and other
----------- --- ---------
proceedings in connection with the transactions contemplated by the Loan
Documents and all instruments and documents incidental thereto shall be in form
and substance reasonably satisfactory to the Agent and the Agent shall have
received all such counterpart originals or certified or other copies of all such
instruments and documents as the Agent shall have reasonably requested.
-43-
(S)7.5. GOVERNMENTAL REGULATION. Each Bank shall have received such
------------ ----------
statements in substance and form reasonably satisfactory to such Bank as such
Bank shall require for the purpose of compliance with any applicable regulations
of the Comptroller of the Currency or the Board of Governors of the Federal
Reserve System.
(S)8. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company covenants and
----------- --------- -- --- -------
agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of
Credit or Note is outstanding or the Banks have any obligation to make Loans, or
the Agent has any obligation to issue, extend or renew any Letters of Credit
hereunder, unless the Majority Banks otherwise agree in writing:
(S)8.1. PUNCTUAL PAYMENT. The Company will duly and punctually pay or
-------- -------
cause to be paid the principal and interest on the Loans, the Reimbursement
Obligations, the Letter of Credit Fees, the Commitment Fees, the Agent's Fee and
all other amounts provided for in this Agreement and the other Loan Documents to
which the Company or any of its Subsidiaries is a party, all in accordance with
the terms of this Agreement and such other Loan Documents.
(S)8.2. LEGAL EXISTENCE, ETC. Except for any Sterling Company which is
----- --------- ---
then a Non-Guarantor Subsidiary, which has been merged into another Subsidiary
or the Company without violating the terms hereof, or which has been disposed of
without violating the terms hereof, the Company will, and will cause each of the
other Sterling Subsidiaries to, maintain its legal existence and good standing
under the laws of its jurisdiction of incorporation, maintain its qualification
to do business in each state in which the failure to do so would have a material
adverse effect on the condition, financial or other, of the Company or any of
the Sterling Subsidiaries and maintain all of its rights and franchises
reasonably necessary to the conduct of its business.
(S)8.3. USE OF LOAN PROCEEDS. The Company shall use the proceeds of the
--- -- ---- --------
Loans and will obtain Letters of Credit solely (a) to make acquisitions not
prohibited by the terms hereof and (b) for general corporate and working capital
purposes, and not in violation of Regulations U or X of the Board of Governors
of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
(S)8.4. FINANCIAL STATEMENTS. The Company will furnish financial
--------- ----------
statements and other reports to each of the Banks as follows:
(a) contemporaneously with the filing of the Company's annual 10-K
Report with the Securities and Exchange Commission, the consolidated balance
sheets and the related consolidated statements of operations, stockholders'
equity and cash flows (the "consolidated financial statements") of the Company
and its Subsidiaries, as at the end of such fiscal year, in reasonable detail,
each setting forth in comparative form the corresponding figures for the
preceding year, prepared in accordance with generally accepted accounting
principles consistently
-44-
applied, and accompanied by a report and unqualified opinion of a nationally
recognized firm of independent certified public accountants selected by the
Company and reasonably satisfactory to the Agent (except that a qualification
for a change in accounting principles with which such firm of independent
certified public accountants concurs shall be permitted);
(b) contemporaneously with the filing of the Company's quarterly
10-Q Report with the Securities and Exchange Commission, unaudited consolidated
financial statements of the Company and its Subsidiaries for which a 10-Q Report
is required, prepared in accordance with generally accepted accounting
principles, together with a certification by an Authorized Officer of the
Company that the information contained in such financial statements fairly
presents the financial position of the Company and its Subsidiaries on the date
thereof (subject only to year-end adjustments);
(c) contemporaneously with the delivery of the financial
statements referred to in subparagraphs (a) and (b) above but in no event later
than one hundred twenty (120) days after the close of the fiscal year of the
Company and seventy-five days after the end of each fiscal quarter of the
Company, a statement, substantially in the form of Exhibit D hereto, showing
------- -
compliance by the Company with the covenants set forth in (S)(S)9 and 10 hereof,
and, following the Spring-Back Date, in Exhibit E hereto, and setting forth in
------- -
reasonable detail computations evidencing such compliance and (if applicable)
reconciliations to reflect changes in generally accepted accounting principles
since the Balance Sheet Date, certified by an Authorized Officer of the Company
("Compliance Certificate");
(d) at the time of delivery of each quarterly and annual
statement referred to in clauses (a) and (b) above, a certificate, executed by
an Authorized Officer, (i) stating that such officer has caused this Agreement
to be reviewed and has no knowledge of any default by the Company in the
performance or observance of any of the provisions of this Agreement, during
such quarter or at the end of such year, or, if such officer has such knowledge,
specifying each default and the nature thereof, and (ii) setting forth (A) each
pending or threatened action or suit of which the Company is aware affecting the
Company or any of its Subsidiaries or to which the Company or any of its
Subsidiaries is a party, involving an uninsured claim against any such Person
which is in excess of $20,000,000 or which could otherwise reasonably be
expected to have a material adverse effect on the Company and its Subsidiaries
taken as a whole and which was not previously reported pursuant to (S)8.5, or
the last quarterly certificate and (B) any Sterling Subsidiary activated or
deactivated in accordance with (S)8.16 or (S)8.17 since the date of the last
certificate delivered pursuant to this clause (d);
(e) as soon as practicable but, in any event, within twenty (20)
Business Days after the issuance thereof, copies of all other financial
statements and reports as the Company or the Company shall send to its
stockholders as such, and copies of all regular and periodic reports which any
of the Sterling Companies may be required to file pursuant to federal securities
laws or regulations with the
-45-
Securities and Exchange Commission or any similar or corresponding federal or
state governmental commission, department or agency substituted therefor;
(f) (i) with reasonable promptness following the delivery of the
financial statements referred to in subsection (a) above, annual projections of
the Company and its Subsidiaries on a consolidated basis in the form previously
delivered pursuant to (S)5.7(b) for the fiscal year most recently commenced; and
(ii) upon completion thereof, any forecasts updating such annual projections
prepared by the Company; and
(g) with reasonable promptness, such other data as the Agent or
any of the Banks may reasonably request.
(S)8.5. NOTICE OF LITIGATION AND JUDGMENT AND ENVIRONMENTAL EVENTS.
------ -- ---------- --- -------- --- ------------- ------
(a) LITIGATION AND JUDGMENTS. The Company will, for itself and on
---------- --- ---------
behalf of its Subsidiaries, give notice to the Agent in writing within thirty
(30) days of becoming aware of any pending or threatened action or suit
affecting the Company or any of its Subsidiaries or to which the Company or any
of its Subsidiaries is or becomes a party involving an uninsured claim against
the Company or any of its Subsidiaries which seeks or demands damages in or in
excess of an amount which has the potential to have a materially adverse effect
on the assets, liabilities, financial conditions or operations of the Sterling
Companies taken as a whole, and stating the nature and status of such litigation
or proceedings. The Company will, for itself and on behalf of its Subsidiaries,
give notice to the Agent on behalf of the Banks, in writing, in form and detail
satisfactory to the Agent, within ten (10) days of any judgment not covered by
insurance, final or otherwise, against the Company or any of its Subsidiaries in
an amount in excess of $20,000,000.
(b) ENVIRONMENTAL EVENTS. The Company will promptly give notice to
------------- ------
the Agent upon becoming aware of (i) of any violation of any Environmental Law
that any of the Sterling Companies reports in writing or is reportable by such
Person in writing (or for which any written report supplemental to any oral
report is made) to any federal, state or local environmental agency and (ii)
upon becoming aware thereof, of any inquiry, proceeding, investigation, or other
action, including a notice from any agency of potential environmental liability,
or any federal, state or local environmental agency or board, that has the
potential to materially affect the assets, liabilities, financial conditions or
operations of the Sterling Companies taken as a whole.
(S)8.6. NOTICE OF DEFAULT. The Company, on behalf of itself and the
------ -- -------
Sterling Subsidiaries, will promptly notify the Agent in writing upon becoming
aware of the occurrence of any Default or Event of Default. If any Person shall
give any notice or take any other action in respect of a claimed default
(whether or not constituting a Default or Event of Default) under this
Agreement, the other Loan Documents, or any note, evidence of indebtedness,
indenture or other obligation to which or with respect to which the Company or
any of the Sterling Subsidiaries is
-46-
a party or obligor, whether as principal, guarantor, surety or otherwise, the
Company or such Sterling Subsidiary, as the case may be, shall forthwith, upon
becoming aware thereof, give written notice thereof to the Agent, describing the
notice or action and the nature of the claimed default.
(S)8.7. BOOKS AND RECORDS. The Company will, and will cause each of the
----- --- -------
Sterling Subsidiaries to, keep true and accurate records and books of account in
which full, true and correct entries, together with all financial statements
provided for herein, shall, to the extent generally accepted accounting
principles are applicable thereto, be made in accordance with generally accepted
accounting principles consistently applied.
(S)8.8. INSURANCE. The Company will, for itself and on behalf of the
---------
Sterling Subsidiaries, maintain with financially sound and reputable insurers
insurance with respect to its properties and business against such casualties
and contingencies as shall be in accordance with the general practices of
businesses engaged in similar activities in similar geographic areas (which may
include reasonable self insurance) and in amounts, containing such terms, in
such forms and for such periods as may be reasonably satisfactory to the Agent.
All such policies of insurance shall provide for ten days' prior written minimum
cancellation notice to the Agent. In the event of failure to provide and
maintain insurance as herein provided, the Agent may, at its option, after
giving notice to the Company, provide such insurance and charge the amount
thereof to the Company. The Company shall furnish to the Agent promptly
following receipt of same certificates or other evidence satisfactory to the
Agent of compliance with the foregoing insurance provision, and shall, upon the
request of the Agent, provide certified copies of all policies evidencing such
insurance signed by the insurer or an agent authorized to bind the insurer.
(S)8.9. TAXES. The Company, for itself and on behalf of its Subsidiaries,
-----
will pay or cause to be paid all taxes or other assessments or governmental
charges or levies imposed upon it or upon its income or profits or upon property
belonging to it prior to the time when any penalties or interest (except
interest during extensions of time for filing of returns not in excess of six
months) accrue with respect thereto, unless (a) in any such case, the same is
being contested in good faith by appropriate proceedings and an appropriate
reserve therefor has been established and is maintained in accordance with
generally accepted accounting principles, (b) in any such case, the Company or
any such Subsidiary, as the case may be, is in good faith and using due
diligence and all deliberate speed, investigating or ascertaining the extent of
the liability for such unpaid taxes, if any, and (i) no lien or notice thereof
has been filed in any public recording office with respect to such unpaid taxes,
and (ii) neither the Company nor any such Subsidiary has received notice of a
lien or the initiation of an enforcement proceeding with respect to such unpaid
taxes or has reason to believe that such a lien or enforcement proceeding is
likely to occur or is specifically contemplated by appropriate authorities or
(c) the failure to so pay would not have a material adverse effect on any of the
Sterling Companies individually, or on the Company and its Subsidiaries taken as
a whole.
-47-
(S)8.10. CONDUCT OF BUSINESS. The Company will, and will cause each of
------- -- --------
the other Sterling Subsidiaries to, continue to engage in the businesses engaged
in by such Sterling Subsidiaries on the Closing Date (except in the case of
dispositions of any of the Sterling Subsidiaries not prohibited hereunder); and
will, and will cause each of the Sterling Subsidiaries to, comply in all
material respects with all federal, state and local laws, regulations, rules and
ordinances applicable to it or its properties, noncompliance with which could
reasonably be expected to materially adversely affect its financial condition,
assets or operations, but it shall not be a breach of this (S)8.10 if any
Sterling Subsidiary fails to comply with such laws, rules and regulations during
any period in which such Sterling Subsidiary is in good faith diligently
contesting the validity thereof by appropriate proceedings.
(S)8.11. COMPLIANCE WITH LAW, CONTRACTS, LICENSES AND PERMITS. The
---------- ---- ------------------------------------
Company will, and will cause each of the Sterling Subsidiaries to, (i) comply
(A) with all laws (including Environmental Laws), rules, regulations, orders,
writs, judgments, injunctions, decrees or awards to which it may be subject,
noncompliance with which could reasonably be expected to have a material adverse
effect on its business, operations or financial condition or the ability of the
Company or any of the Sterling Subsidiaries to fulfill its obligations under the
Agreement or the other Loan Documents; (B) the provisions of its charter
documents and by-laws, (C) all agreements and instruments by which it or any of
its properties may be bound (including, without limitation, any of the escrow
arrangements set forth on Schedule 5.10 hereto), non-compliance with which would
-------------
reasonably be expected to have a materially adverse effect on the business,
operations or financial conditions of the Company and the Sterling Subsidiaries
taken as a whole or on the ability of the Company or any of the Sterling
Subsidiaries to fulfill its obligations under this Agreement or the other Loan
Documents; and (D) all applicable decrees, orders and judgments, non-compliance
with which would reasonably be expected to have a materially adverse effect on
the business, operations or financial condition of the Company and the Sterling
Subsidiaries taken as a whole or the ability of the Company or any of the
Sterling Subsidiaries to fulfill its obligations under this Agreement or the
other Loan Documents; and (ii) promptly obtain, maintain, apply for renewal, and
not allow to lapse, any authorization, consent, approval, license or order, and
accomplish any filing or registration with any court or judicial, administrative
or governmental authority which may be or may become necessary in order that it
perform in all material respects all of its obligations under this Agreement or
the other Loan Documents and in order that the same may be valid and binding and
effective in accordance with their terms and in order that the Banks may be able
freely to exercise and enforce any and all of their rights under this Agreement
or the other Loan Documents.
(S)8.12. ACCESS TO PROPERTIES AND BOOKS; COMMERCIAL FINANCE EXAMINATIONS;
------ -- ---------- --- ----- ---------- ------- -------------
CONFIDENTIALITY. Subject to all applicable federal laws and regulations
---------------
relating to the need for appropriate security clearance, the Company will, and
will cause each of the other Sterling Companies to, permit the Agent and each of
the Banks, by its representatives and agents, to inspect any of the
-48-
properties, including corporate books, computer files and tapes and financial
records of each Sterling Company, to examine and make copies of the books of
accounts and other financial records of each Sterling Company, and to discuss
the affairs, finances and accounts of each Sterling Company with, and to be
advised as to the same by, their respective officers and, with the prior consent
of the Company (with such consent not to be unreasonably withheld), by the
Company's independent certified public accountants, at reasonable times and
intervals during normal business hours and upon reasonable notice. The Banks and
the Agent agree that they will treat in confidence all financial and proprietary
information with respect to the Sterling Companies, including financial
projections delivered pursuant to (S)5.7(b) and (S)8.4(f), and all other
information obtained during such inspection which is designated by the Company,
either in advance (which may be in the form of a master list of confidential
information provided to the Agent) or at such inspection as confidential and
will not, without the consent of the Company, disclose such information to any
third party other than its attorneys and auditors (who agree to be bound by the
provisions of this (S)8.12) or at any judicial or administrative proceeding and,
if any representative or agent of the Banks or the Agent shall not be an
employee of one of the Banks or the Agent or any affiliate of the Banks or the
Agent, such designee shall be reputable and of recognized standing and shall
agree in writing to treat in confidence the information obtained during any such
inspection and, without the prior written consent of the Company, not to
disclose such information to any third party or make use of such information for
personal gain. For purposes of this Section, the Agent and the Banks agree that
all software licensed by the Company or its Subsidiaries shall be deemed to be
proprietary information. Notwithstanding the foregoing, the Company hereby
authorizes each of the Agent and Banks to disclose information obtained pursuant
to this Agreement (a) to banks or other financial institutions authorized in
writing by the Company under (S)17 who are participants or potential
participants in the Loans made or to be made or Letters of Credit issued or to
be issued hereunder and who agree to be bound by the provisions of this (S)8.12
together with their respective attorneys and auditors (who agree to be bound by
the provisions of this (S)8.12), (b) where required or requested by governmental
or regulatory authorities or in or as part of any judicial or administrative
proceeding, and (c) to the extent such information otherwise becomes public
knowledge.
(S)8.13. CHANGE OF CORPORATE NAME; MAINTENANCE OF OFFICE. The Company
------ -- --------- ---------------------------
shall notify the Agent within thirty days of any change in its corporate name or
in the corporate names of any of the Sterling Companies. Until the Agent
receives notice of a change (i) the Company will maintain its chief executive
office and the offices where all of its material records and books of account
are kept, at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, and (ii)
each of the Sterling Subsidiaries shall maintain its chief executive office
(which office shall also be the office where all of its material records and
books of account are kept), at the offices set forth in Schedule 5.6 hereto.
-------- ---
(S)8.14. EMPLOYEE BENEFIT PLAN. The Company will (i) promptly upon filing
---------------------
the same with the Department of Labor or Internal Revenue Service, furnish to
the Agent a copy of the most recent actuarial statement required to be
-49-
submitted under (S)103(d) of ERISA and Annual Report, Form 5500, with all
required attachments, in respect of each Guaranteed Pension Plan and (ii)
promptly upon receipt or dispatch, furnish to the Agent any notice, report or
demand sent or received in respect of a Guaranteed Pension Plan under (S)(S)302,
4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a
Multiemployer Plan, under (S)(S)4041A, 4202, 4219, 4242, or 4245 of ERISA.
(S)8.15. MAINTENANCE OF PROPERTIES. The Company will, and will cause each
----------- -- -----------
of the other Sterling Subsidiaries to, (i) cause all of its properties necessary
or appropriate in the conduct of its business to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment,
unless failure to do so would not have a materially adverse effect on the
financial condition, business or operations of the Company and its Subsidiaries
taken as a whole, (ii) cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
such Sterling Subsidiary may be necessary so that the business carried on in
connection therewith may be advantageously conducted at all times, unless
failure to do so would not have a materially adverse effect on the financial
condition, business or operations of the Company and its Subsidiaries taken as a
whole, (iii) comply in all material respects with all federal, state and local
laws, regulations, rules and ordinances applicable to it or its properties,
noncompliance with which would reasonably be expected to materially adversely
affect its financial condition, assets or operations, provided that it shall not
---------
be a breach of this (S)8.15 if any Sterling Subsidiary fails to comply with such
laws, rules and regulations during any period in which such Sterling Subsidiary
is in good faith diligently contesting the validity thereof by appropriate
proceedings, and (iv) continue to engage primarily in the businesses now
conducted by it (except in the case of dispositions not prohibited by the terms
hereof) and in related businesses; provided that nothing in this (S)8.15 shall
-------------
prevent any of the Sterling Subsidiaries from discontinuing the operation and
maintenance of any of its properties if such discontinuance is, in the judgment
of such Sterling Subsidiary, desirable in the conduct of its business and that
do not in the aggregate materially adversely affect the business of the Company
and its Subsidiaries on a consolidated basis.
(S)8.16. ACTIVATION OF NON-GUARANTOR SUBSIDIARIES. On any date upon which
---------- -- ------------- ------------
(a) any one or more of the domestic Non-Guarantor Subsidiaries (i) other than
Sterling Software (Midwest), Inc. commences to engage in business of any kind or
nature (ii) or acquires or otherwise receives assets as a result of which such
Non-Guarantor Subsidiary's net worth equals or exceeds $10,000,000, or (b) the
Non-Guarantor Subsidiaries, taken as a whole, have or receive assets as a result
of which such Non-Guarantor Subsidiaries' net worth, in the aggregate, equals or
exceeds $50,000,000, the Company shall provide written notice thereof to the
Agent, and such Subsidiary or Subsidiaries shall, in accordance with the
provisions of this (S)8.16, be activated and shall be required to become a
Sterling Subsidiary and a guarantor under the Guaranty, except that in the case
of those Non-Guarantor Subsidiaries whose net worth is less than $10,000,000
individually but in the aggregate is greater than $50,000,000, only such of the
Non-Guarantor Subsidiaries as shall reduce the aggregate net worth of all
remaining ▇▇▇-
-▇▇-
▇▇▇▇▇▇▇▇▇ Subsidiaries to an amount less than $50,000,000 shall be required to
become guarantors under the Guaranty. As soon as practicable following receipt
of any such notice, the Agent or the Agent's Special Counsel shall provide such
activated Subsidiary or Subsidiaries with forms of the Loan Documents (including
the Guaranty) to which such activated Subsidiary is or such activated
Subsidiaries are to be a party, or appropriate amendments thereto, as well as
forms of acceptable legal opinions and other documents necessary to demonstrate
the due authorization, execution and delivery by such activated Subsidiary or
Subsidiaries of such Loan Documents or amendments thereto and the enforceability
thereof. The Company shall cause such activated Non-Guarantor Subsidiary or
Subsidiaries, as the case may be, to deliver executed copies of such Loan
Documents, amendments, legal opinions and other documents to the Agent within
fifteen (15) Business Days following its or their receipt of the forms thereof
from the Agent or the Agent's Special Counsel. Upon the later to occur of (i)
the date of activation of such Non-Guarantor Subsidiary or (ii) the delivery of
such executed counterparts of such Loan Documents, amendments, legal opinions
and other documents to the Agent, (A) each such Subsidiary shall cease to be a
Non-Guarantor Subsidiary for purposes of this Agreement and shall become a
Sterling Subsidiary and a guarantor under the Guaranty hereunder and shall
comply with and be bound by all of the terms and conditions of the Loan
Documents (including the Guaranty) to which it becomes a party, and (B) the
Company shall cause such activated Subsidiary or Subsidiaries to take all
actions which it or they would have been required to make or take had it not
been a Non-Guarantor Subsidiary or Non-Guarantor Subsidiaries on the Closing
Date including, without limitation, making all representations and warranties as
a Sterling Subsidiary under each of the Loan Documents as of the date such
representations and warranties are made.
(S)8.17. DEACTIVATION OF STERLING SUBSIDIARIES. Effective immediately
-------------------------------------
upon any Sterling Subsidiary ceasing to do business and ceasing to have a net
worth of $10,000,000 or more, such Sterling Subsidiary shall become a Non-
Guarantor Subsidiary for purposes of this Agreement, provided, that such
--------
Sterling Subsidiary may thereafter be activated again pursuant to (S)8.16
hereto. The Company shall notify the Agent of the Deactivation of any Sterling
Subsidiary in accordance with (S)8.4(d) hereof.
(S)8.18. NEW SUBSIDIARIES. Contemporaneously with the creation or
--- ------------
acquisition of any new domestic Subsidiary of the Company, other than a Non-
Guarantor Subsidiary, the Company will notify the Agent of such Subsidiary's
name and the address of its chief executive offices. No later than fifteen (15)
Business Days following the later to occur of (a) the creation of such new
Subsidiary or (b) receipt by the Company or such new Subsidiary from the Agent
or the Agent's Special Counsel of forms of the Loan Documents (including the
Guaranty) to which such new domestic Subsidiary is to be a party, or appropriate
amendments thereto, as well as forms of acceptable legal opinions and other
documents necessary to demonstrate the due authorization, execution and delivery
by such new Subsidiary of such Loan Documents or amendments thereto, the Company
shall cause such new Subsidiary to deliver executed counterparts of such Loan
Documents, amendments, legal opinions and other documents to the Agent.
-51-
Upon such delivery of such executed counterparts of such Loan Documents,
amendments, legal opinions and other documents to the Agent, (y) such new
Subsidiary shall become a Sterling Subsidiary and a party to the Guaranty and
shall comply with and be bound by all of the terms and conditions of the Loan
Documents as a Sterling Subsidiary thereunder, and (z) the Company shall cause
such new Subsidiary to take all actions, which it would have been required to
make or take had it been a Sterling Subsidiary and a party to the Guaranty on
the Closing Date including, without limitation, making all representations and
warranties as a Sterling Subsidiary under each of the Loan Documents to which it
is a party as of the date such representations and warranties are made.
(S)8.19. FURTHER ASSURANCES. The Company shall, and shall cause all
------- ----------
applicable Sterling Subsidiaries to, at any time or from time to time, execute
and deliver such further instruments and take such further action as may
reasonably be requested by the Agent, in each case further and more perfectly to
effect the purposes of this Agreement and the other Loan Documents.
(S)9. NEGATIVE COVENANTS OF THE COMPANY. The Company covenants and agrees
-------- --------- -- --- -------
that, so long as any Loan, Letter of Credit, Unpaid Reimbursement Obligation, or
Note is outstanding or any Bank has any obligation to make Loans, or the Agent
has any obligation to issue, extend or renew Letters of Credit hereunder, unless
the Majority Banks otherwise agree in writing:
(S)9.1. SECURITY INTERESTS AND LIENS. The Company will not, and will not
-------- --------- --- -----
permit any of its Subsidiaries to, (i) create or permit to exist any mortgage,
pledge, security interest or other lien or encumbrance on any of its property or
assets of any character whether now owned or hereafter acquired, or upon the
income or profits therefrom, unless the Company or such Subsidiary shall,
contemporaneously with any such grant of a mortgage, pledge, security interest
or other lien or encumbrance, grant to the Agent, for the benefit of the Agent
and the Banks and in order to secure the Obligations, a pari passu lien on and
---- -----
security interest in such property or assets on terms and conditions reasonably
satisfactory to the Agent and the Banks (which terms and conditions shall
include, without limitation, designation of a collateral agent for such property
or assets, which collateral agent is reasonably satisfactory to the Agent and
such other creditor), (ii) transfer any of such property or assets or the income
or profits therefrom for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors; (iii) acquire, or agree or have an option to acquire, any
property or assets upon conditional sale or other title retention or purchase
money security agreement, device or arrangement; (iv) suffer to exist for a
period of more than thirty (30) days after the same shall have been incurred any
Indebtedness or claim or demand against it that if unpaid might by law or upon
bankruptcy or insolvency, or otherwise, be given any priority whatsoever over
its general creditors; or (v) unless the Company or such Subsidiary shall,
contemporaneously with any sale, assignment, pledge or other transfer of
accounts, contract rights, general intangibles or chattel paper, grant to the
Agent, for the benefit of the Agent and the Banks and in order to secure the
Obligations, a pari passu lien on and security interest in such accounts,
---- -----
-52-
contract rights, general intangibles or chattel paper on terms and conditions
satisfactory to the Agent and the Banks (which terms and conditions shall
include, without limitation, designation of a collateral agent for such
accounts, contract rights, general intangibles or chattel paper, which
collateral agent is reasonably satisfactory to the Agent and such other
creditor), sell, assign, pledge or otherwise transfer any accounts, contract
rights, general intangibles or chattel paper with or without recourse, except
for the existence or creation of:
(a) existing liens, but, with respect to the Sterling Companies, only
to the extent described on Schedule 9.1(a) hereto;
-------- ------
(b) liens (i) on Sterling Accounts Receivable, any contract pursuant
to which any Sterling Account Receivable arose (to the extent that the rights
therein are necessary to enforce rights to payment of such Sterling Account
Receivable) and on computer software which is the subject of any such contract
(but, with respect to such computer software, solely to the extent set forth on
the UCC-1 financing statements listed on Schedule 9.1(b) hereto, which financing
-------- ------
statements the Company will use its best efforts to amend to cause the deletion
of references to such computer software) and (ii) securing Indebtedness
otherwise not prohibited by this Agreement, incurred by the Company or any of
its Subsidiaries at a time when no Default or Event of Default had occurred and
was continuing or would have occurred after giving effect thereto, and in
connection with the purchase by any of the Sterling Accounts Receivable
Agreement Parties of Sterling Accounts Receivable;
(c) liens arising from attachments or similar proceedings, pending
litigation, judgments or taxes or assessments in any such event whose validity
or amount is being contested in good faith by appropriate proceedings
satisfactory to the Agent and for which appropriate reserves have been
established and are maintained in accordance with generally accepted accounting
principles, or taxes and assessments which are not due and delinquent and which
do not have a material adverse effect on any of the Sterling Companies
individually, or against the Company and its Subsidiaries taken as a whole;
(d) liens of carriers, warehousemen, mechanics and materialmen and
other like liens;
(e) pledges or deposits made in connection with workmen's
compensation, unemployment or other insurance, old age pensions, or other Social
Security benefits, and good faith deposits in connection with tenders, contracts
or leases to which it is a party or deposits to secure, or in lieu of, surety,
penalty or appeal bonds, performance bonds and other similar obligations;
(f) such minor defects, irregularities, encumbrances, easements,
rights of way, and clouds on title as normally exist with respect to similar
properties which do not materially impair the property affected thereby for the
purpose for which it was acquired;
-53-
(g) landlords' liens arising by statute or common law in respect of
real estate leases;
(h) liens, pledges and other encumbrances with respect to Margin Stock
or other securities purchased on margin pursuant to an Eligible Margin Account
Agreement;
(i) liens in respect of Purchase Money Indebtedness in an aggregate
amount not to exceed $15,000,000; provided, in the case of such Purchase Money
--------
Indebtedness, that no such lien or security interest shall extend to or cover
any property other than the property the purchase of which is financed with such
Indebtedness and the aggregate principal amount of the Indebtedness secured by
such liens, security interests or mortgages shall not exceed the original fair
market value of such property;
(j) existing liens being assumed pursuant to or in connection with
acquisitions not prohibited by this Agreement and which do not extend to any
assets other than those specifically acquired and which were not created in
anticipation of such acquisition;
(k) liens on the authorized shares of the capital stock of the Company
held by the Company as treasury stock; and
(l) such other liens as are expressly permitted or otherwise consented
to by the Banks in writing.
(S)9.2. EMPLOYEE BENEFIT PLANS. Neither the Company nor any ERISA
-------- ------- -----
Affiliate will:
(a) engage in any "prohibited transaction" within the meaning of
(S)406 of ERISA or (S)4975 of the Code which could result in a material
liability for the Sterling Companies, which is not covered by a prohibited
transaction exemption granted by the Department of Labor; or
(b) (i) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency" (as such term is defined in (S)302 of ERISA), in excess of
$1,000,000, whether or not such deficiency is or may be waived; or (ii) in the
case of any Person acquired pursuant to the terms hereof, with a Guaranteed
Pension Plan subject to an "accumulated funding deficiency" in excess of
$2,000,000, permit such "accumulated funding deficiency" to exist for a period
of more than twelve months from the date of such acquisition, provided, that the
--------
Company shall, in any such case, deliver to the Agent (A) a certificate
evidencing the amount of such "accumulated funding deficiency", (B) evidence
satisfactory to the Agent that, on a pro-forma basis, the Company will continue
to be in compliance with each of the covenants set forth in (S)10 hereof after
such acquisition and that no Default or Event of Default shall occur after
giving effect to such acquisition, and (C) evidence satisfactory to the Agent
that such "accumulated
-54-
funding deficiency" could be cured through merger with another Guaranteed
Pension Plan or otherwise; or
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could result
in the imposition of a lien or encumbrance on the assets of the Company pursuant
to (S)302(f) or (S)4068 of ERISA;
(d) amend any Guaranteed Pension Plan in circumstances requiring
the posting of security pursuant to (S)307 of ERISA or (S)401(a)(29) of the
Code; or
(e) permit or take any action which would result in the aggregate
benefit liabilities (within the meaning of (S)4001 of ERISA) of all Guaranteed
Pension Plans exceeding the value of the aggregate assets of such Plans by a
material amount, disregarding for this purpose the benefit liabilities and
assets of any such Plan with assets in excess of benefit liabilities, provided,
--------
that if merger of the affected Guaranteed Pension Plan would be permitted under
(S)414(l) of ERISA and would, if consummated, result in such Guaranteed Pension
Plan's aggregate assets equaling or exceeding in value such Guaranteed Pension
Plan's benefit liabilities, such Guaranteed Pension Plan's benefit liabilities
may exceed in value its aggregate assets for a period not to exceed twelve
months.
The Company will (i) promptly upon filing the same with the Department of
Labor or Internal Revenue Service and, upon request of the Agent, furnish to the
Agent a copy of the most recent actuarial statement required to be submitted
under (S)103(d) of ERISA and Annual Report, Form 5500, with all required
attachments, in respect of each Guaranteed Pension Plan and (ii) promptly upon
receipt or dispatch, furnish to the Agent any notice, report or demand sent or
received in respect of a Guaranteed Pension Plan under (S)(S)302, 4041, 4042,
4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan,
under (S)(S)4041A, 4202, 4219, 4242, or 4245 of ERISA.
(S)9.3. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Company will not, and
---------- ---- ------------- ----
will not permit any of its Subsidiaries to, (i) use any of the Real Estate or
any portion thereof for the handling, processing, storage or disposal of
Hazardous Substances, (ii) cause to be located on any of the Real Estate any
underground tank or other underground storage receptacle for Hazardous
Substances, (iii) generate any Hazardous Substances on any of the Real Estate,
(iv) conduct any activity at any Real Estate or use any Real Estate in any
manner so as to cause a release (i.e. releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping) or threatened release of Hazardous Substances on, upon or
into the Real Estate or (v) otherwise conduct any activity at any Real Estate or
use any Real Estate in any manner that would violate any Environmental Law or
bring such Real Estate in violation of any Environmental Law.
-55-
(S)9.4. MERGER AND CONSOLIDATION. The Company will not at any time become
------------------------
a party to any merger or consolidation other than a merger or consolidation
pursuant to which the Company shall be the continuing or surviving entity.
(S)10. FINANCIAL COVENANTS. The Company (which, for purposes of this
--------- ---------
(S)10, shall mean the Company and its Subsidiaries on a consolidated basis)
covenants and agrees that, so long as any Loan, Letter of Credit, Unpaid
Reimbursement Obligation or Note is outstanding or the Banks have any
obligations to make Loans, or the Agent has any obligation to issue, extend or
renew Letters of Credit, hereunder, unless the Majority Banks otherwise agree in
writing:
(S)10.1. TOTAL DEBT TO EBITDA. The Company shall not cause or permit the
--------------------
ratio of Total Debt to EBITDA for any fiscal quarter of the Company to exceed
1.0:1.0.
(S)10.2. EBIT TO INTEREST CHARGES. The Company shall not cause or permit
------------------------
the ratio of EBIT to Interest Charges for any fiscal quarter of the Company to
be less than 3.5:1.0.
(S)10.3. PROFITABILITY. The Company shall not cause or permit (a)
-------------
Consolidated Net Income or Consolidated Operating Income for any two consecutive
fiscal quarters of the Company to be less than $1.00 or (b) Consolidated Net
Loss for any fiscal quarter of the Company to be less than ten percent (10%)
multiplied by Consolidated Net Worth for the immediately preceding fiscal
-------------
quarter of the Company.
(S)11. APPLICATION OF ADDITIONAL PROVISIONS. In the event that any of the
------------------------------------
following events ("Spring-Back Events") shall occur:
(a) the Company shall at any time hold cash plus Liquid
----
Investments, as determined by reference to its most recent balance sheet
delivered to the Agent pursuant to (S)8.4, in an amount less than $160,000,000;
or
(b) (i) the Credit Rating of the Company and its Subsidiaries, as
determined by the Rating Agency upon the request of the Agent or the Majority
Banks and at the expense of the Company, shall decline below Investment Grade or
(ii) following the Agent or the Majority Banks' request for or initiation of the
undertaking of a Credit Rating, the Company requests in writing that the Agent
or, as the case may be, the Majority Banks not require that the Rating Agency
undertake the performance of a Credit Rating of the Company and its
Subsidiaries,
then, and in any such event, the terms, conditions, definitions, provisions,
covenants, and agreements set forth in Exhibit E hereto (the "Spring-Back
---------
Provisions") shall, immediately and without further action on the part of the
Agent or any of the Banks and in addition to all of the other terms and
conditions set forth in this Agreement (other than the provisions of (S)10
hereof, which shall be replaced by the provisions of (S)3 of the Spring-Back
Provisions contained in Exhibit
-------
-56-
E), take full force and effect and apply to the Company and its Subsidiaries as
-
fully as if set forth herein; provided, however, that in the event that on or
-------- -------
prior to the date on which the Spring-Back Provisions become applicable pursuant
to this (S)11 (such date being hereinafter referred to as the "Spring-Back
Date"), the Company or any of its Subsidiaries takes or omits to take any action
which would violate the Spring-Back Provisions but which would otherwise not
constitute a Default or Event of Default, any such action or omission on its own
shall not be deemed to breach the Spring-Back Provisions or to constitute a
Default or Event of Default hereunder; and provided further that upon the
-------- -------
occurrence of a Spring-Back Event described in (S)11(b)(ii) and so long as no
Default or Event of Default (other than an event which, except for the
immediately preceding proviso, would constitute a Default or Event of Default
arising from a failure by the Company or any of its Subsidiaries to comply with
any of the Spring-Back Provisions on or prior to the Spring-Back Date, but
including any Default or Event of Default occurring after the Spring-Back Date)
has occurred and is continuing or thereafter occurs, the Company shall have a
period of one hundred twenty (120) days following the date of any such request
to repay the Obligations in full and to terminate the Commitments and any
obligation of the Agent to issue, extend or renew any Letter of Credit; and
provided further that any failure of the Company to repay the Obligations in
-------- -------
full and terminate the Commitments and any obligation of the Agent to issue,
extend or renew any Letter of Credit within such one hundred twenty (120) day
period shall constitute an Event of Default for purposes of (S)12(a) hereof.
Promptly following the occurrence of any Spring-Back Date, the Company shall
give the Agent written notice of any acts or omissions which would, but for the
provisions of the first proviso contained in the immediately preceding sentence,
violate the Spring-Back Provisions.
(S)12. EVENTS OF DEFAULT; ACCELERATION. If any of the following events
------ -- ------- ------------
("Events of Default" or, if the giving of notice or the lapse of time or both is
required, then, prior to such notice and/or lapse of time, "Defaults") shall
occur:
(a) if the Company shall fail to pay any principal of the Loans, or
the Company or any Sterling Subsidiary shall fail to pay any Reimbursement
Obligation owing by such Person, in each case within one (1) day following the
date on which the same becomes due and payable hereunder, whether at the stated
date of maturity or any accelerated date of maturity or at any other date fixed
for payment;
(b) if the Company or any Sterling Subsidiary shall fail to pay any
interest on the Loans, any Commitment Fee, any Agent's Fee, any Letter of Credit
Fee, or any other sums due hereunder or under any of the other Loan Documents,
in each case within two (2) days following the date on which the same becomes
due and payable hereunder, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment;
(c) if any of the Sterling Companies shall fail to comply with any
of its covenants contained in (S)(S)8, 9 and 10 hereof or, following the
occurrence of
-57-
the Spring-Back Date, any of its covenants contained in the Spring-Back
Provisions;
(d) if any of the Sterling Companies shall fail to perform any term,
covenant or agreement contained herein or in any of the Loan Documents (other
than those specified elsewhere in this (S)11) required to be performed by it for
fifteen (15) days after written notice of such failure has been given to the
Company by the Agent or any Bank;
(e) if any representation or warranty of any of the Sterling Companies
in this Agreement or in any of the other Loan Documents or in any document or
instrument delivered pursuant to or in connection with this Agreement or the
Loan Documents shall prove to have been false in any material respect upon the
date when made;
(f) if any of the Sterling Companies shall fail to pay when due and
payable, or within any applicable period of grace, any obligations for borrowed
money or in respect of capitalized leases, which obligations exceed $10,000,000
in the aggregate, or fail to observe or perform in any material respect any
term, covenant or agreement contained in any material agreement by which it is
bound (excluding, however, any such term, covenant or agreement relating to the
pledge or disposition of Margin Stock), evidencing or securing borrowed money
for such period of time as would permit (assuming the giving of appropriate
notice if required) the holder or holders thereof or of any obligations issued
thereunder to accelerate the maturity thereof;
(g) if any of the Company, the Sterling Subsidiaries or the Material
Foreign Subsidiaries makes an assignment for the benefit of creditors, or admits
in writing its inability to pay or generally fails to pay its debts as they
mature or become due, or petitions or applies for the appointment of a trustee
or other custodian, liquidator or receiver of any of the Company, the Sterling
Subsidiaries or the Material Foreign Subsidiaries or of any substantial part of
the assets of any of the Company, the Sterling Subsidiaries or the Material
Foreign Subsidiaries or commences any case or other proceeding relating to any
of the Company, the Sterling Subsidiaries or the Material Foreign Subsidiaries
under any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law of any jurisdiction, now or
hereafter in effect, or takes any action to authorize or in furtherance of any
of the foregoing, or if any such petition or application is filed or any such
case or other proceeding is commenced against any of the Company, the Sterling
Subsidiaries or the Material Foreign Subsidiaries and any of the Company, the
Sterling Subsidiaries or the Material Foreign Subsidiaries indicates its
approval thereof, consent thereto or acquiescence therein;
(h) if a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating any of the Company, the
Sterling Subsidiaries or the Material Foreign Subsidiaries bankrupt or
insolvent, or approving a petition in any such case or other proceeding, or a
decree or order for
-58-
relief is entered in respect of any of the Company, the Sterling Subsidiaries or
the Material Foreign Subsidiaries in an involuntary case under Federal
bankruptcy laws as now or hereafter constituted;
(i) if there shall remain in force, undischarged, unsatisfied and
unstayed, for more than sixty (60) days, whether or not consecutive, any final
judgment against any of the Sterling Companies which, with other outstanding
final judgments, undischarged, against the Sterling Companies exceeds in the
aggregate $20,000,000;
(j) if the Company or any ERISA Affiliate incurs any liability to the
PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA in an aggregate
amount exceeding $10,000,000; the Company or any ERISA Affiliate is assessed
withdrawal liability pursuant to Title IV of ERISA by a Multiemployer Plan
requiring aggregate annual payments exceeding $10,000,000 or any of the
following occurs with respect to a Guaranteed Pension Plan: (i) an ERISA
Reportable Event, or a failure to make a required installment or other payment
(within the meaning of (S)302(f)(1) of ERISA), provided that the Agent
--------
determines in its reasonable discretion that such event (A) could be expected to
result in liability of the Company to the PBGC or the Plan in an aggregate
amount exceeding $10,000,000 and (B) could constitute grounds for the
termination of such Plan by the PBGC, for the appointment by the appropriate
United States District Court of a trustee to administer such Plan or for the
imposition of a lien in favor of the Guaranteed Pension Plan; (ii) the
appointment by a United States District Court of a trustee to administer such
Plan; or (iii) the institution by the PBGC of proceedings to terminate such
Plan;
(k) if any of the Loan Documents shall be canceled, terminated,
revoked or rescinded except with the express prior written agreement, consent or
approval of the Banks, or any action at law, suit or in equity or other legal
proceeding to cancel, revoke or rescind any of the Loan Documents shall be
commenced by or on behalf of any of the Sterling Companies party thereto or any
of their respective stockholders, or any court or any other governmental or
regulatory authority or agency of competent jurisdiction shall make a
determination that, or issue a judgment, order, decree or ruling to the effect
that, any one or more of the Loan Documents is illegal, invalid or unenforceable
in accordance with the terms thereof;
(l) (i) if the Company or any of the Sterling Subsidiaries shall be
enjoined, restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting any material part of its
business and such order shall continue in effect for more than sixty (60) days
and such inability to conduct its business shall have a material adverse effect
on the business or financial condition of the Company and the Sterling
Subsidiaries taken as a whole, or (ii) there shall occur any strike, lockout,
labor dispute, embargo, condemnation, act of God or public enemy or other
casualty, which, in any such case, causes, for more than thirty (30) consecutive
days, the cessation or substantial curtailment of revenue producing activities
at any facility of any of the
-59-
Company or the Sterling Subsidiaries and which has a material adverse effect or
the business or financial condition of the Sterling Companies taken as a whole;
(m) there shall occur the loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by the
Company or any of the Sterling Subsidiaries if such loss, suspension, revocation
or failure to renew would have a material adverse effect on the business or
financial condition of such Sterling Company;
(n) any of the Sterling Companies shall be indicted for a state or
federal crime, or any civil or criminal action shall otherwise have been brought
or threatened in writing (with the basis for such threatened action specified
therein) against any of the Sterling Companies by any governmental authority, a
punishment for which in any such case could include the seizure and forfeiture
of any assets of the such Sterling Company having a fair market value in excess
of $1,000,000;
(o) any person or group of persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under said Act) of 20% or more of the
outstanding shares of common stock of the Company; or, during any period of
twelve consecutive calendar months, individuals who were directors of the
Company on the first day of such period shall cease to constitute a majority of
the board of directors of the Company; or the Company or one of the Sterling
Subsidiaries shall, except as a result of dispositions not prohibited hereby,
cease to own one hundred percent (100%) of the capital stock of each of the
Sterling Subsidiaries; or
(p) a Total Repurchase Event with respect to Sterling Accounts
Receivable in an aggregate amount equal to or greater than $15,000,000 shall
have occurred under one or more of the Sterling Accounts Receivable Agreements;
then, and in any such event, unless the same shall be cured or waived, the Agent
may, and, upon the request of the Majority Banks, shall, by notice in writing to
the Company, declare all amounts owing with respect to this Agreement and the
Notes or the other Loan Documents, and all Reimbursement Obligations to be, and
they shall thereupon forthwith become, immediately due and payable without
presentment, demand, notice of intent to accelerate, protest or other notice of
any kind, all of which are hereby expressly waived by the Company; provided that
--------
in the event of any Event of Default specified in (S)(S)12(g) and 12(h) hereof,
all such amounts shall become immediately due and payable automatically and
without any requirement of notice from either of the Agent or any Bank;
provided, however, that any amounts representing Reimbursement Obligations shall
-------- -------
be held by the Agent as cash collateral pursuant to (S)2A.2(a). In case any one
or more of the Events of Default shall have occurred and shall not have been
cured or waived, and whether or not the Banks shall have accelerated the
maturity of the Loans and Reimbursement Obligations pursuant to the foregoing,
any Bank, if such Bank is
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owed any amount with respect to the Loans or Reimbursement Obligations, may,
with the consent of the Majority Banks but not otherwise, proceed to protect and
enforce its rights by suit in equity, action at law and/or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Agreement, any of the other Loan Documents or any instrument
pursuant to which the obligations of the Company or any of its Subsidiaries to
such Bank hereunder are evidenced, including as permitted by applicable law the
obtaining of the ex parte appointment of a receiver, and, if such amount shall
-- -----
have become due, by declaration or otherwise, proceed to enforce the payment
thereof or any other legal or equitable right of such Bank. No remedy herein
conferred upon any Bank or holder of the Notes is intended to be exclusive of
any other remedy and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or any other provision of law.
If any one or more of the Events of Default specified in (S)(S)12(g) and
12(h) shall occur, any unused portion of the Total Commitment shall forthwith
terminate and each of the Banks shall be relieved of all further obligations to
make Loans, and the Agent shall be relieved of all further Obligations to issue,
extend or renew Letters of Credit; if any one or more of the Events of Default
specified in this (S)12 (other than those specified in (S)(S)12(g) and (h))
shall occur, then the Agent, upon the request of the Majority Banks, shall, by
notice to the Company, terminate the unused portion of the Total Commitment, and
upon such notice being given such unused portion of the Total Commitment shall
terminate immediately and each of the Banks shall be relieved of all further
obligations to make Loans, and the Agent shall be relieved of all further
Obligations to issue, extend or renew Letters of Credit hereunder. If any such
notice is given to the Company, the Agent will forthwith furnish a copy thereof
to each of the Banks. No termination of the Total Commitment hereunder shall
relieve the Company of any of its existing Obligations to the Banks hereunder or
elsewhere.
(S)13. SETOFF. Regardless of the adequacy of any collateral, during the
------
continuance of an Event of Default, any deposits or other sums credited by or
due from any of the Banks to the Company (but excluding accounts held by the
investment group of BKB or any affiliate of BKB, for investment services
provided to the Company) and any securities (but excluding any securities
constituting Margin Stock) or other property of the Company in the possession of
such Bank may be applied to or set off against the payment of obligations of the
Company hereunder, or under the Notes and any and all other liabilities, direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Company to such Bank. Each Bank agrees with the other
Banks that (i) if an amount to be set off is to be applied to Indebtedness of
the Company to a Bank, other than Indebtedness evidenced by the Notes held by
all of the Banks, such amount shall be applied ratably to such other
Indebtedness and to the Indebtedness evidenced by all such Notes, and (ii) if a
Bank shall receive from the Company, whether by voluntary payment, exercise of
the right of set-off, counterclaim, cross action, enforcement of the claim
evidenced by the Notes held by a Bank by proceedings against the Company at law
or in equity or by proof thereof
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in bankruptcy, reorganization, liquidation, receivership or similar proceedings,
or otherwise, and shall retain and apply to the payment of the Note held by a
Bank any amount in excess of its ratable portion of the payments received by all
of the Banks, such Bank will make such disposition and arrangements with the
other Banks with respect to such excess, either by way of distribution, pro
---
tanto assignment of claims, subrogation or otherwise as shall result in each
-----
Bank receiving, in respect of the Notes held by it, its proportionate payment as
contemplated by this Agreement; provided, however, that if all or any part of
-------- -------
such excess payment is thereafter recovered from such Bank, such disposition and
arrangements shall be rescinded and the amount restored to the extent of such
recovery, but without interest.
(S)14. THE AGENT.
--- -----
(S)14.1. AUTHORIZATION. The Agent is authorized to take such action on
-------------
behalf of each of the Banks and to exercise all such powers as are hereunder and
in related documents delegated to the Agent, together with such powers as are
reasonably incident thereto, provided that no duties or responsibilities not
--------
expressly assumed herein or therein shall be implied to have been assumed by the
Agent. The relationship between the Agent and the Banks is and shall be that of
agent and principal only, and nothing contained in this Agreement or any of the
other Loan Documents shall be construed to constitute the Agent as a trustee for
any Bank.
(S)14.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers and
--------- --- ------
execute its duties hereunder by or through employees or agents and shall be
entitled to take, and to rely on, advice of counsel concerning all matters
pertaining to its rights and duties under this Agreement and the Notes. The
Agent may utilize the services of such Persons as the Agent in its sole
discretion may reasonably determine, and all reasonable fees and expenses of any
such Persons shall be paid by the Company.
(S)14.3. NO LIABILITY. Neither the Agent nor any of its shareholders,
-- ---------
directors, officers or employees nor any other Person assisting it in its duties
nor any agent or employee thereof, shall be liable for any waiver, consent or
approval given or any action taken, or omitted to be taken, in good faith by
them hereunder under the Notes or in connection herewith or therewith, or be
responsible for the consequences of any oversight or error of judgment
whatsoever, except that the Agent or such other Person, as the case may be, may
be liable for losses due to its willful misconduct or gross negligence.
(S)14.4. NO REPRESENTATIONS. The Agent shall not be responsible for the
-- ---------------
execution or validity or enforceability of this Agreement, the Notes or any
instrument at any time constituting, or intended to constitute, collateral
security for the Notes or for the value of any such collateral security or for
the validity, enforceability or collectibility of any such amounts owing with
respect to the Notes or for any recitals or statements, warranties or
representations herein or made in any certificate or instrument hereafter
furnished to either of them by or on behalf
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of the Company, or be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements herein or in
any instrument at any time constituting, or intended to constitute, collateral
security for the Notes. The Agent shall not be bound to ascertain whether any
notice, consent, waiver or request delivered to it by the Company or any holder
of any of the Notes shall have been duly authorized or is true, accurate and
complete. The Agent has not made nor does it now make any representations or
warranties, express or implied, nor does it assume any liability to the Banks
with respect to the creditworthiness or financial condition of any Sterling
Company. Each Bank acknowledges that it has, independently and without reliance
upon the Agent or any other Bank, and based upon such information and documents
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement.
(S)14.5. PAYMENTS.
--------
(a) PAYMENTS TO AGENT. A payment by the Sterling Companies to the
-------- -- -----
Agent hereunder or under any of the other Loan Documents for the account of any
Bank shall constitute a payment to such Bank. The Agent agrees promptly to
distribute to each Bank such Bank's pro rata share of payments received by the
--- ----
Agent for the account of the Banks except as otherwise expressly provided herein
or in any of the other Loan Documents.
(b) DISTRIBUTIONS BY AGENT. If in the opinion of the Agent the
------------- -- -----
distribution of any amount received by it in such capacity hereunder, under the
Notes or under any of the other Loan Documents might involve it in liability, it
may refrain from making distribution until its right to make distribution shall
have been adjudicated by a court of competent jurisdiction. If a court of
competent jurisdiction shall adjudge that any amount received and distributed by
the Agent is to be repaid, each Person to whom any such distribution shall have
been made shall either repay to the Agent its proportionate share of the amount
so adjudged to be repaid or shall pay over the same in such manner and to such
Persons as shall be determined by such court.
(c) DELINQUENT BANKS. Notwithstanding anything to the contrary
---------- -----
contained in this Agreement or any of the other Loan Documents, any Bank that
fails (i) to make available to the Agent its pro rata share of any Loan or to
--- ----
purchase any Letter of Credit Participation when the conditions precedent to the
making of such Loan or the issuance, extension or renewal of such Letter of
Credit have been satisfied or (ii) to comply with the provisions of (S)13 with
respect to making dispositions and arrangements with the other Banks, where such
Bank's share of any payment received, whether by setoff or otherwise, is in
excess of its pro rata share of such payments due and payable to all of the
--- ----
Banks, in each case as, when and to the full extent required by the provisions
of this Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be
deemed a Delinquent Bank until such time as such delinquency is satisfied. A
Delinquent Bank shall be deemed to have assigned any and all payments due to it
from the Company, whether on account of outstanding Loans, Unpaid Reimbursement
Obligations,
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interest, fees or otherwise, to the remaining nondelinquent Banks for
application to, and reduction of, their respective pro rata shares of all
--- ----
outstanding Loans and Unpaid Reimbursement Obligations. The Delinquent Bank
hereby authorizes the Agent to distribute such payments to the nondelinquent
Banks in proportion to their respective pro rata shares of all outstanding Loans
--- ----
and Unpaid Reimbursement Obligations. A Delinquent Bank shall be deemed to have
satisfied in full a delinquency when and if, as a result of application of the
assigned payments to all outstanding Loans and Unpaid Reimbursement Obligations
of the nondelinquent Banks, the Banks' respective pro rata shares of all
--- ----
outstanding Loans and Unpaid Reimbursement Obligations have returned to those in
effect immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency.
(S)14.6. HOLDERS OF NOTES. The Agent may deem and treat the payee of any
------- -- -----
Note as the absolute owner or purchaser thereof for all purposes hereof until it
shall have been furnished in writing with a different name by such payee or
obligor or by a subsequent holder, assignee or transferee.
(S)14.7. INDEMNITY. The Banks ratably agree hereby to indemnify and hold
---------
harmless the Agent from and against any and all claims, actions and suits
(whether groundless or otherwise), losses, damages, costs, expenses (including
any expenses for which the Agent has not been reimbursed by the Company as
required by (S)(S)15 and 16 hereof), and liabilities of every nature and
character arising out of or related to this Agreement, the Notes, or the
transactions contemplated or evidenced hereby or thereby, or the Agent's actions
taken hereunder or thereunder, except to the extent that any of the same shall
be directly caused by the Agent's willful misconduct or gross negligence.
(S)14.8. AGENT AS BANK. BKB shall have the same obligations and the same
----- -- ----
rights, powers and privileges in respect to its Commitment and the Loans made by
it and as the holder of any of the Notes and as the purchaser of any Letter of
Credit Participations, as it would have were it not also the Agent.
(S)14.9. RESIGNATION. The Agent may resign at any time by giving sixty
-----------
(60) days' prior written notice thereof to the Banks and the Company. Upon any
such resignation, the Banks shall have the right to appoint a successor Agent
from among the Banks. Unless a Default or Event of Default shall have occurred
and be continuing, such successor shall be reasonably acceptable to the Company.
If no successor Agent shall have been so appointed by the Banks and shall have
accepted such appointment within thirty (30) days after the retiring Agent's
giving of notice of resignation, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent, which shall be any Bank or any other financial
institution reasonably satisfactory to the Banks and having a rating of not less
than B or its equivalent by Standard & Poor's Ratings Group or its successor.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's
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resignation, the provisions of this Agreement shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent. In the event of a material breach of its duties hereunder,
the Agent may be removed by the Majority Banks for cause and the provisions of
this (S)14 shall apply to the appointment of a successor.
(S)14.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank
------------ -- -------- --- ------ -- -------
hereby agrees that, upon any employee of such Bank active upon the Company's
account learning of the existence of a Default or an Event of Default, it shall
promptly notify the Agent thereof. The Agent hereby agrees that upon receipt of
any notice of the existence of any Default or Event of Default, it shall
promptly notify the other Banks of the existence of such Default or Event of
Default.
(S)15. EXPENSES. Whether or not the transactions contemplated hereby
--------
shall be consummated, the Company will pay (a) the reasonable cost of (i)
producing and reproducing this Agreement, the other Loan Documents and the other
instruments or agreements mentioned herein, (ii) any taxes (including any
interest and penalties in respect thereof) or filing fees payable by the Agent,
any of its Affiliates or any of the Banks (other than taxes based upon the
Agent's, such Affiliate's or any Bank's net income) on or with respect to the
transactions contemplated by this Agreement (the Company hereby agreeing to
indemnify the Agent and each Bank with respect thereto); (b) the reasonable
fees, expenses and disbursements of the Agent and the Agent's Special Counsel
incurred in connection with the preparation, administration, interpretation or
syndication of this Agreement or the other Loan Documents and other instruments
mentioned herein, any prior discussions between the Company and the Agent
relating to proposed extensions of credit to the Sterling Companies, each
closing hereunder, and amendments, modifications, approvals, consents or waivers
hereto or hereunder, including the cost of Uniform Commercial Code and similar
searches conducted with respect to the Sterling Companies; (c) all costs
relating to the obtaining of any Credit Rating pursuant to (S)11; and (d) all
reasonable out-of-pocket expenses (including reasonable attorneys' fees and
costs, which attorneys may be employees of the Agent or any Bank) incurred by
the Agent or any Bank in connection with (i) the enforcement of or preservation
of rights under this Agreement or any of the other Loan Documents against the
Company or any Subsidiary or the administration thereof after the occurrence of
an Event of Default and (ii) any litigation, proceeding or dispute whether
arising hereunder or otherwise, in any way related to the Agent's or the Banks'
relationship with the Company or any of its Subsidiaries hereunder or under any
predecessor financing arrangement. The covenants of this (S)15 shall survive
payment or satisfaction of payment of amounts owing with respect to the Notes.
(S)16. INDEMNIFICATION. The Company agrees to indemnify and hold harmless
---------------
the Agent and the Banks from and against any and all claims, actions and suits
whether groundless or otherwise, and from and against any and all liabilities,
losses, damages and expenses of every nature and character arising out of this
Agreement or any of the other Loan Documents or the transactions contemplated
hereby including (a) any actual or proposed use by the Company or
-65-
any of its Subsidiaries of the proceeds of any of the Loans or Letters of
Credit, (b) any actual or alleged infringement of any patent, copyright,
trademark, service ▇▇▇▇ or similar right of the Company or any of its
Subsidiaries, (c) the Company or any of its Subsidiaries entering into or
performing this Credit Agreement or any of the other Loan Documents or (d) with
respect to the Company and its Subsidiaries and their respective properties and
assets, the violation of any Environmental Law, or any action, suit, proceeding
or investigation brought or threatened with respect to any Hazardous Substances
(including claims with respect to wrongful death, personal injury or damage to
property), in each case including the reasonable fees and disbursements of
counsel and allocated costs of internal counsel incurred in connection with any
such investigation, litigation or other proceeding, in each case including,
without limitation, the reasonable fees and disbursements of counsel and
allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding except to the extent that such
claims, actions, suits, liabilities, losses or damages arise solely as a result
of the Agent's or any Bank's gross negligence or willful misconduct; provided,
--------
however, that the gross negligence or willful misconduct of any Bank or the
-------
Agent shall not impair, infringe on or limit the rights under this (S)16 of any
other Bank or, as the case may be, the Agent which has not committed any gross
negligence or willful misconduct. In litigation, or the preparation therefor,
the Banks and the Agent shall be entitled to select their own counsel and, in
addition to the foregoing indemnity, the Company agrees to pay promptly the
reasonable fees and expenses of such counsel. If, and to the extent that the
obligations of the Company under this (S)16 are unenforceable for any reason,
the Company hereby agrees to make the maximum contribution to the payment in
satisfaction of such obligations which is permissible under applicable law. The
covenants in this (S)16 shall survive payment in full of all other Obligations.
(S)17. SURVIVAL OF COVENANTS, ETC. All covenants, agreements,
-------- -- --------- ---
representations and warranties made herein, in the Notes or in any documents or
other papers delivered by or on behalf of the Company pursuant hereto shall be
deemed to have been relied upon by each of the Agent and the Banks,
notwithstanding any investigation heretofore or hereafter made by it, and shall
survive the making by the Banks of the Loans, and the issuance, extension and
renewal by the Agent of the Letters of Credit, as herein contemplated, and shall
continue in full force and effect so long as any amount due under this Agreement
or the Notes or any Reimbursement Obligations remains outstanding and unpaid or
any Bank has any obligation to make any Loans, or the Agent has any obligation
to issue, extend or renew any Letters of Credit, hereunder and for such further
time as may be otherwise expressly specified in this Agreement. All statements
contained in any certificate or other paper delivered to the Agent or any Bank
at any time by or on behalf of the Company pursuant hereto or in connection with
the transactions contemplated hereby shall constitute representations and
warranties by the Company hereunder.
(S)18. ASSIGNMENT AND PARTICIPATION.
---------- --- -------------
(S)18.1. CONDITIONS TO ASSIGNMENT BY BANKS.
---------- -- ---------- -- -----
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(a) Except as otherwise provided herein, each Bank may assign to
one or more Eligible Assignees all or a portion of its interests, rights and
obligations under this Agreement (including all or a portion of its Commitment
Percentage and Commitment and the same portion of the Loans at the time owing to
it, and the Note held by it and the Letter of Credit Participations purchased by
it); provided that (i) each of the Agent and the Company shall have given its
--------
prior written consent to such assignment, which consent in the case of the
Company will not be unreasonably withheld, (ii) each such assignment shall be of
a constant, and not a varying, percentage of all the assigning Bank's rights and
obligations under this Agreement, (iii) each assignment shall be in an amount
that is at least $5,000,000, (iv) each Bank which is a party to this Agreement
on the date hereof shall, in connection with any such assignment, either assign
one hundred percent (100%) of its rights and obligations under this Agreement or
shall retain at least an interest therein equal to at least fifty percent (50%)
of the interest held by it on the date hereof, and (v) the parties to such
assignment shall execute and deliver to the Agent, for recording in the Register
(as hereinafter defined), an Assignment and Acceptance, substantially in the
form of Exhibit E hereto (an "Assignment and Acceptance"), together with any
------- -
Note subject to such assignment.
(b) Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five (5) Business Days after the execution
thereof, (i) the assignee thereunder shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, have the rights and obligations of a
Bank hereunder and (ii) the assigning Bank shall, to the extent provided in such
assignment and upon payment to the Agent of the negotiation fee referred to in
(S)18.3, be released from its obligations under this Agreement and the other
Loan Documents.
(S)18.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS.
------- --------------- --- ---------- ----------- ---------
By executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows: (a) other than the representation and warranty that it is
the legal and beneficial owner of the interest being assigned thereby free and
clear of any adverse claim, the assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement, the other Loan Documents or any other instrument or
document furnished pursuant hereto; (b) the assigning Bank makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Company or any other Person primarily or secondarily
liable in respect of any of the Obligations, or the performance or observance by
the Company or any other Person primarily or secondarily liable in respect of
any of the Obligations of any of their obligations under this Agreement or any
of the other Loan Documents or any other instrument or document furnished
pursuant hereto or thereto; (c) such assignee confirms that it has received a
copy of this Agreement, together with copies of the most recent financial
statements referred to in (S)5.7 and (S)8.4 and such
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other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (d)
such assignee will, independently and without reliance upon any assigning Bank,
the Agent or any other Bank and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (e) such assignee represents
and warrants that it is an Eligible Assignee; (f) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as are delegated
to the Agent by the terms hereof or thereof, together with such powers as are
reasonably incidental thereto; (g) such assignee agrees that it will perform in
accordance with its terms all of the obligations that by the terms of this
Agreement are required to be performed by it as a Bank; (h) such assignee
represents and warrants that it is legally authorized to enter into such
Assignment and Acceptance; and (i) such assignee acknowledges that it has made
arrangements with the assigning Bank satisfactory to such assignee with respect
to its pro rata share of Letter of Credit Fees in respect of outstanding Letters
--- ----
of Credit.
(S)18.3. REGISTER. The Agent shall maintain a copy of each Assignment and
--------
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the Commitment
Percentages of, and principal amount of the Loans owing to, and the Letter of
Credit Participations purchased by the Banks from time to time. The entries in
the Register shall be conclusive, in the absence of manifest error, and the
Company, the Agent and the Banks may treat each Person whose name is recorded in
the Register as a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Company and the Banks at any
reasonable time and from time to time upon prior notice. Upon each such
recordation, the assigning Bank agrees to pay or cause the assignee to pay to
the Agent a registration fee in the sum of $2,500.
(S)18.4. NEW NOTE. Upon its receipt of an Assignment and Acceptance
--- ----
executed by the parties to such Assignment and Acceptance, together with the
Note subject to such Assignment and Acceptance, the Agent shall (a) record the
information contained therein in the Register, and (b) give prompt notice
thereof to the Company and the Banks (other than the assigning Bank). Within
five (5) Business Days after receipt of such notice, the Company shall execute
and deliver to the Agent, in exchange for its surrendered Note, a new Note to
the order of such Eligible Assignee, in an amount equal to the amount assumed by
such Eligible Assignee pursuant to such Assignment and Acceptance, and, if the
assigning Bank has retained some portion of its obligations hereunder, a new
Note to the order of such assigning Bank in an amount equal to the amount
retained by it hereunder. Such new Note shall provide that it is in replacement
of the surrendered Note, shall be in an aggregate principal amount equal to the
aggregate principal amount of the surrendered Note, shall be dated the effective
date of such Assignment and Acceptance and shall otherwise be in substantially
the form of Exhibit A hereto. Contemporaneously with the issuance of any new
------- -
Note pursuant to this (S)18.4, the Company shall deliver, at its own expense, an
opinion of counsel, addressed to the
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Banks and the Agent, relating to the due authorization, execution and delivery
of such new Note and the legality, validity and binding effect thereof, in form
and substance satisfactory to the Banks. The surrendered Note shall be canceled
and returned to the Company.
(S)18.5. PARTICIPATIONS. Each Bank may sell participations to one or more
--------------
banks or other entities in all or a portion of such Bank's rights and
obligations under this Agreement and the other Loan Documents; provided that (a)
--------
each such participation shall be in an amount of not less than $5,000,000, but
in the case of any Bank which is a party to this Agreement as of the date
hereof, not more than fifty percent (50%) of the aggregate amount of such Bank's
rights and obligations under this Agreement as of the date hereof, (b) any such
sale or participation shall not affect the rights and duties of the selling Bank
hereunder to the Company and (c) the only rights granted to the participant
pursuant to such participation arrangements with respect to waivers, amendments
or modifications of this Agreement or the other Loan Documents shall be the
rights to approve waivers, amendments or modifications that would reduce the
principal of or the interest rate on any Loans, or alter any Letter of Credit
Fees, extend the term or increase the amount of the Commitment of such Bank as
it relates to such participant, reduce the amount of any Commitment Fees or
other fees to which such participant is entitled, or extend any regularly
scheduled payment date for principal or interest, provided, that the Banks may
--------
sell participations hereunder to their respective affiliates without restriction
or limitation.
(S)18.6. DISCLOSURE. The Company agrees that any Bank may disclose
----------
information obtained by such Bank pursuant to this Agreement to assignees,
potential assignees, participants and potential participants hereunder, with the
prior written consent of the Company; provided that such assignees, potential
--------
assignees, participants or potential participants shall agree (a) to treat in
confidence such information unless such information otherwise becomes public
knowledge, (b) not to disclose such information to a third party and (c) not to
make use of such information for purposes of transactions unrelated to such
contemplated assignment.
(S)18.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE STERLING COMPANIES.
--------------------------------------------------------------
If any assignee Bank is an Affiliate of any of the Sterling Companies, then any
such assignee Bank shall have no right to vote as a Bank hereunder or under any
of the other Loan Documents for purposes of granting consents or waivers or for
purposes of agreeing to amendments or other modifications to any of the Loan
Documents or for purposes of making requests to the Agent pursuant to (S)12, and
the determination of the Majority Banks shall for all purposes of this Agreement
and the other Loan Documents be made without regard to such assignee Bank's
interest in any of the Loans. If any Bank sells a participating interest in any
of the Loans or Reimbursement Obligations to a participant, and such participant
is any of the Sterling Companies or an Affiliate of any of the Sterling
Companies, then such transferor Bank shall promptly notify the Agent of the sale
of such participation. A transferor Bank shall have no right to vote as a Bank
hereunder or under any of the other Loan Documents for purposes of
-69-
granting consents or waivers or for purposes of agreeing to amendments or
modifications to any of the Loan Documents or for purposes of making requests to
the Agent pursuant to (S)12 to the extent that such participation is
beneficially owned by any of the Sterling Companies or any Affiliate of any of
the Sterling Companies, and the determination of the Majority Banks shall for
all purposes of this Agreement and the other Loan Documents be made without
regard to the interest of such transferor Bank in the Loans to the extent of
such participation information to a third party and (c) not to make use of such
information for purposes of transactions unrelated to such contemplated
assignment.
(S)18.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank shall
------------- ---------- ----------
retain its rights to be indemnified pursuant to (S)16 and to be reimbursed under
(S)15 with respect to any claims or actions arising prior to the date of such
assignments. If any assignee Bank is not incorporated under the laws of the
United States of America or any state thereof, it shall, prior to the date on
which any interest or fees are payable hereunder or under any of the other Loan
Documents for its account, deliver to the Company and the Agent certification as
to its exemption from deduction or withholding of any United States federal
income taxes. Anything contained in this (S)18 to the contrary notwithstanding,
any Bank may at any time pledge all or any portion of its interest and rights
under this Agreement (including all or any portion of its Note) to any of the
twelve Federal Reserve Banks organized under (S)4 of the Federal Reserve Act, 12
U.S.C. (S)341. No such pledge or the enforcement thereof shall release the
pledgor Bank from its obligations hereunder or under any of the other Loan
Documents.
(S)18.9. ASSIGNMENT BY THE COMPANY. The Company shall not assign or
---------- -- --- -------
transfer any of its respective rights or obligations under this Agreement or any
of the other Loan Documents without the prior written consent of each of the
Banks.
(S)19. NOTICES, ETC. Except as otherwise expressly provided in this
------- ---
Agreement, all notices and other communications made or required to be given
pursuant to this Agreement or the Notes shall be in writing and shall be
delivered in hand, mailed by United States first-class mail, postage prepaid,
sent by overnight express courier, or sent by telecopier and confirmed by
letter, addressed:
(a) if to the Company, at
Sterling Software, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
or
(b) if to the Agent or any Bank, at the address set forth for such
Person on Schedule 1.1 hereto.
-------- ---
Any such notice or demand shall be deemed to have been duly given or made and to
have become effective if delivered by hand or telecopied or otherwise
-70-
telecommunicated, to a responsible officer of the party to which it is directed,
at the time of the receipt thereof by such officer, or if sent by registered or
certified first-class mail, postage prepaid, three days after the date when
mailed, or if sent by overnight mail or overnight courier service to such a
responsible officer, when received by such officer.
(S)20. GOVERNING LAW. THIS AGREEMENT AND, EXCEPT AS OTHERWISE
--------- ---
SPECIFICALLY PROVIDED THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS
UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE COMPANY
AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS
OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NON-EXCLUSIVE
JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE
UPON THE COMPANY BY HAND AT THE ADDRESS SPECIFIED IN (S)18. THE COMPANY HEREBY
WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH
SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
The parties hereto acknowledge that the foregoing shall not be construed to
impose the laws of the Commonwealth of Massachusetts on environmental disputes
arising solely under the environmental laws of any other jurisdiction.
(S)21. HEADINGS. The captions in this Agreement are for convenience of
--------
reference only and shall not define or limit the provisions hereof.
(S)22. COUNTERPARTS. This Agreement and any amendment hereof may be
------------
executed in several counterparts and by each party on a separate counterpart,
each of which when so executed and delivered shall be an original, and all of
which together shall constitute one instrument. In proving this Agreement it
shall not be necessary to produce or account for more than one such counterpart
signed by the party against whom enforcement is sought.
(S)23. ENTIRE AGREEMENT, ETC. This Agreement, together with the Notes,
------ --------- ---
the other Loan Documents and any other documents executed in connection herewith
or therewith, express the entire understanding of the parties with respect to
the transactions contemplated hereby. Neither this Agreement nor any term
hereof may be changed, waived, discharged or terminated, except as provided in
(S)24.
-71-
(S)24. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as otherwise expressly
-------- ---------- ------- ---
provided in this Agreement, any consent or approval required or permitted by
this Agreement to be given by the Banks may be given, and any term of this
Agreement or of any other instrument related hereto or mentioned herein may be
amended, and the performance or observance by the Company of any terms of this
Agreement or such other instrument or the continuance of any Default or Event of
Default may be waived (either generally or in a particular instance and either
retroactively or prospectively) with, but only with, the written consent of the
Company and the written consent of the Majority Banks. Notwithstanding the
foregoing, the rate of interest on the Notes (other than interest accruing
pursuant to (S)2.5(b) following the effective date of any waiver by the Majority
Banks of the Default or Event of Default relating thereto), the term of the
Notes, the amount of the Commitments of the Banks, the scheduled amortization of
the Loans, and the amount of Commitment Fees or Letter of Credit Fees hereunder
may not be changed without the written consent of all of the Banks; except for
the deactivation of Sterling Subsidiaries pursuant to (S)8.17 hereof and the
sale of Subsidiaries not prohibited by the terms hereof, no Sterling Subsidiary
shall be released from its obligations under the Guaranty without the written
consent of all of the Banks; the definitions of Final Maturity and Majority
Banks and the provisions of this sentence may not be amended without the written
consent of all of the Banks; and (S)(S)2.13 and 14 and any Letter of Credit Fees
payable to the Agent hereof may not be amended without the written consent of
the Agent. No waiver shall extend to or affect any obligation not expressly
waived or impair any right consequent thereon. No course of dealing or delay or
omission on the part of the Agent or any Bank in exercising any right shall
operate as a waiver thereof or otherwise be prejudicial thereto. No notice to
or demand upon the Company shall entitle the Company to other or further notice
or demand in similar or other circumstances.
(S)25. NO RESTRICTIONS WITH RESPECT TO MARGIN STOCK. Notwithstanding any
-- ------------ ---- ------- -- ------ -----
other provision of this Agreement, and further implementing the exceptions with
respect to Margin Stock from the restrictions on Indebtedness in the Spring-Back
Provisions, the restrictions on liens in (S)9.1, the restrictions on sale of
assets in the Spring-Back Provisions, certain defaults in (S)12(f), and the
right of setoff in (S)13, (a) nothing in the Loan Documents shall prevent the
sale, transfer, pledge or other disposition of any Margin Stock, and (b) the
Company's right or ability to sell, transfer, pledge or otherwise dispose of
Margin Stock shall not in any way be restricted while any Loan, Reimbursement
Obligation or Note is outstanding, nor shall any such sale, transfer, pledge or
other disposition ever be the cause for acceleration of the maturity of the
Loans or Reimbursement Obligations, it being the intention of the parties hereto
that in no event or manner shall any Loans, Notes, Reimbursement Obligations or
any obligations of any of the Sterling Companies under the Loan Documents be
secured, directly or indirectly, by any Margin Stock.
-72-
(S)26. USURY PROVISION. It is not the intention of any parties to this
----- ---------
Agreement to make an agreement in violation of the laws of any applicable
jurisdiction relating to usury. Regardless of any provision of this Agreement,
neither the Agent nor any Bank shall ever be entitled to receive, collect or
apply, as interest on the Loans, any amount in excess of the maximum amount
permitted by applicable law. If under the laws of any applicable jurisdiction
there is no legal limitation on the rate of interest that may be charged with
respect to an Obligation owing to any Bank or the Agent (including the
outstanding principal amount of the Loans, unpaid interest with respect to any
Loan, or any other Obligations due and payable under any Loan Document), there
shall be no maximum amount applicable to such Obligation, notwithstanding any
reference thereto herein or in any of the Loan Documents. The existence of a
maximum amount for Obligations owing to any one Bank or the Agent shall not
cause such maximum amount to apply to the Obligations owing to any other Bank or
the Agent, the maximum amount being independently determined with respect to
each Bank or the Agent. If at any time the rate at which interest is payable to
any Bank or the Agent on any Loan exceeds the maximum amount, such Loan shall
bear interest at the maximum amount only but shall continue to bear interest at
the maximum amount until such time as the total amount of interest accrued on
such Loan equals (but does not exceed) the total amount of interest which would
have accrued thereon had there been no maximum amount applicable thereto. If at
the maturity or final payment of such Loan (whether at stated maturity, by
acceleration or prepayment or otherwise) the total amount of interest which has
then accrued or been paid thereon as provided above (the "Collected Interest")
is less than the total amount of interest which would have accrued thereon had
there been no maximum amount applicable thereto (the "Unrestricted Interest"),
then the Company shall in addition to the Collected Interest pay to each Bank or
(as the case may be) the Agent an amount equal to (a) the lesser of the
Unrestricted Interest owed or accrued for the benefit of such Bank or (as the
case may be) the Agent or the total amount of interest which would have accrued
thereon for the benefit of each Bank and the Agent had such Loan at all times
borne interest at the maximum amount, minus (b) the Collected Interest paid for
the account of each Bank and the Agent). This Section 25 shall control every
other provision of all agreements pertaining to the transactions contemplated by
or contained in this Agreement and the other Loan Documents.
(S)27. WAIVER OF JURY TRIAL. The Company hereby waives its right to a
------ -- ---- -----
jury trial with respect to any action or claim arising out of any dispute in
connection with this Agreement, the Notes or any of the other Loan Documents,
any rights or obligations hereunder or thereunder or the performance of such
rights and obligations. The Company (a) certifies that neither any
representative, agent or attorney of any Bank has represented, expressly or
otherwise, that such Bank would not, in the event of litigation, seek to enforce
the foregoing waivers and (b) acknowledges that it has been induced to enter
into this Agreement and the other Loan Documents to which it is a party by,
among other things, the mutual waivers and certifications herein.
-73-
(S)28. SEVERABILITY. The provisions of this Agreement are severable and
------------
if any one clause or provision hereof shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or unenforceability
shall affect only such clause or provision, or part thereof, in such
jurisdiction, and shall not in any manner affect such clause or provision in any
other jurisdiction, or any other clause or provision of this Agreement in any
jurisdiction.
(S)29. TRANSITIONAL ARRANGEMENTS.
------------ ------------
(S)29.1. PRIOR CREDIT AGREEMENT SUPERSEDED. This Agreement shall
----- ------ --------- ----------
supersede the Prior Credit Agreement in its entirety, except as provided in this
(S)29. On the Closing Date, the rights and obligations of the parties (other
than BOA) under the Prior Credit Agreement and the "Notes" (as defined in the
Prior Credit Agreement) issued in favor of the Banks under the Prior Credit
Agreement as defined therein shall be subsumed within and be governed by this
Agreement and the other Loan Documents, provided, however, that each of the
-------- -------
"Loans" (as defined in the Prior Credit Agreement) outstanding under the Prior
Credit Agreement on the Closing Date shall, for purposes of this Agreement, be
Loans, and shall continue to bear interest or be subject to fees at the
respective rates in effect immediately prior to the Closing Date to the Closing
Date, in the case of Base Rate Loans, and to the end of the applicable Interest
Period in the case of Eurodollar Rate Loans; and provided further that the
-------- -------
rights and obligations of BOA under the Prior Credit Agreement and the related
Loan Documents (as defined in the Prior Credit Agreement) shall be terminated in
accordance with the terms of, and upon BOA's receipt of the payment specified
in, the payoff letter dated as of the date hereof among the Company, BOA, the
Banks and the Agent.
(S)29.2. RETURN AND CANCELLATION OF NOTES. Upon its receipt of its Note
------ --- ------------ -- -----
or Notes hereunder on the Closing Date, each Bank will promptly return to the
Company, marked "Canceled", any notes of the Company held by such Bank pursuant
to the Prior Credit Agreement.
(S)29.3. FEES UNDER SUPERSEDED AGREEMENT. All commitment, agent's and
---- ----- ---------- ---------
other fees and expenses owing or accruing under or in respect of the Prior
Credit Agreement through the Closing Date shall be calculated as of the Closing
Date (prorated in the case of any fractional periods), and shall be paid in
accordance with the method, and on the dates, specified in the Prior Credit
Agreement, as if the Prior Credit Agreement were still in effect.
(S)30. DELIVERY IN MASSACHUSETTS. This Agreement will not take effect
-------- -- -------------
until it has been duly executed by all parties and delivered, whether in one
fully executed document or in counterparts which together comprise one fully
executed document, to the Agent at its head office in Boston, Massachusetts.
-74-
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement under
seal as of the date first set forth above.
STERLING SOFTWARE, INC.
By:
-------------------------------------------
R. ▇▇▇▇▇ ▇▇▇▇
Senior Vice President,
Chief Financial Officer and Treasurer
BANKBOSTON, N.A.,
individually and as Agent
By:
-------------------------------------------
Title:
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By:
------------------------------------------
Title:
EXHIBIT E
---------
SPRING-BACK PROVISIONS
----------------------
(S)1. For purposes hereof, the following terms shall have the following
meanings:
Accounts Receivable. All rights of the Company and its Subsidiaries to
-------------------
payment for goods sold, leased or otherwise marketed in the ordinary course of
business and all rights of the Company and its Subsidiaries to payment for
services rendered in the ordinary course of business and all sums of money or
other proceeds due or to become due thereon pursuant to transactions with
Persons, recorded on books of account in accordance with generally accepted
accounting principles, excluding, however, from the foregoing definition of
Accounts Receivable, all intercompany accounts receivable and deducting from the
-------- ----------
foregoing definition of Accounts Receivable the aggregate amount of all
-------------------
allowances therefor on the books of the Company and its Subsidiaries in
accordance with generally accepted accounting principles.
Capital Assets. Fixed assets, tangible (such as land, building, fixtures,
--------------
machinery and equipment) and intangible (such as goodwill and marketing rights),
provided that Capital Assets shall not include intangible assets included in
--------
Capitalized Computer Software Costs; and provided further that Capital Assets
----------------
shall not include any item customarily charged directly to expense or
depreciated over a useful life of twelve (12) months or less in accordance with
generally accepted accounting principles.
Capital Expenditures. Amounts paid or indebtedness incurred by the Company
--------------------
or any of its Subsidiaries in connection with the purchase or lease by the
Company or such Subsidiary of Capital Assets that would be required to be
capitalized and shown on the balance sheet of such Person in accordance with
generally accepted accounting principles; provided, however, that amounts paid
-------- -------
or indebtedness incurred by the Company or any of its Subsidiaries in connection
with the purchase or lease by the Company or such Subsidiary of Capital Assets
pursuant to contracts or agreements with the United States government or any
agency thereof shall not be included in the foregoing definition of Capital
-------
Expenditures for so long as such amounts paid or indebtedness incurred is
------------
promptly reimbursed by the United States government or the applicable agency
thereof to the Company or such Subsidiary.
Capitalized Computer Software Costs. For any fiscal period of the Company,
-----------------------------------
the production costs for the development of computer software to be sold, leased
or otherwise marketed which have been capitalized in accordance with generally
accepted accounting principles and which otherwise would have
-2-
been an expense in determining Consolidated Earnings Before Interest and Taxes.
Consolidated Current Liabilities. All liabilities of the Company and its
------------ ------- -----------
Subsidiaries on a consolidated basis which may properly be classified as current
liabilities in accordance with generally accepted accounting principles.
Eligible Accounts Receivable. Those Accounts Receivable of the Company or
-------- -------- ----------
any Subsidiary of the Company which would, in accordance with generally accepted
accounting principles, be classified as current assets on the consolidated
balance sheet of the Company and its Subsidiaries and which are free of any
lien, encumbrance, mortgage, pledge, charge, restriction or security interest of
any kind other than those in favor of the Agent for the benefit of the Banks.
Eligible Investments. The sum of all Permitted Investments which are
-------- -----------
deemed to be current under generally accepted accounting principles plus all
----
Liquid Investments.
Indemnification Agreement. The Indemnification Agreement to be entered
--------------- ---------
into by the Company and/or any of its Subsidiaries (other than SCI and its
Subsidiaries), on the one hand, and SCI and/or any of its Subsidiaries, on the
other hand, each substantially in the form delivered by the Company to the Agent
in connection with the First Amendment and Modification Agreement dated as of
January 31, 1996 among the Company, the Sterling Subsidiaries listed on the
signature pages thereto, the Agent and the Banks.
Intercompany Indebtedness. The aggregate amount of all Indebtedness of any
------------ ------------
Sterling Subsidiary to any other Sterling Subsidiary or to the Company, and of
the Company to any Subsidiary.
Investments. All expenditures made and all liabilities incurred
-----------
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person, which expenditures, liabilities,
loans, advances, capital contributions, transfers of property, guaranties or
obligations, in accordance with generally accepted accounting principles, should
be and are classified upon such Person's balance sheet as an asset. In
determining the aggregate amount of Investments outstanding at any particular
time: (i) the amount of any Investment represented by a guaranty shall be taken
at not less than the principal amount of the obligations guaranteed and still
outstanding; (ii) there shall be included as an Investment all interest accrued
with respect to Indebtedness constituting an Investment unless and until such
interest is paid; and (iii) there shall be deducted in respect of each such
Investment any amount received as a return of capital (but only by repurchase,
redemption, retirement, repayment, liquidating dividend or liquidating
distribution).
-3-
Operating Cash Flow. For any fiscal period, Consolidated Earnings Before
--------- ---- ----
Interest and Taxes less Capitalized Computer Software Costs, less cash taxes,
---- ----
plus depreciation and amortization, less Capital Expenditures, calculated with
---- ----
respect to the Company and its Subsidiaries on a consolidated basis.
Permitted Acquisitions. Asset or stock acquisitions permitted by (S)2.4 of
--------- ------------
this Exhibit E.
---------
Quick Assets. Cash plus Eligible Investments plus Eligible Accounts
------------ ---- ----
Receivable.
Tax Allocation Agreement. The Tax Allocation Agreement to be entered into
--- ---------- ---------
by the Company and/or any of its Subsidiaries (other than SCI and its
Subsidiaries), on the one hand, and SCI and/or any of its Subsidiaries, on the
other hand, each substantially in the form delivered by the Company to the Agent
in connection with the First Amendment and Modification Agreement dated as of
January 31, 1996 among the Company, the Sterling Subsidiaries listed on the
signature pages thereto, the Agent and the Banks.
(S)2. ADDITIONAL NEGATIVE COVENANTS OF THE COMPANY. The Company
--------------------------------------------
covenants and agrees that, following any Spring-Back Date and so long as any
Loan, Letter of Credit, Unpaid Reimbursement Obligation or Note is outstanding
or any Bank has any obligations to make Loans, or the Agent has any obligation
to issue, extend or renew Letters of Credit hereunder, unless the Majority Banks
otherwise agree in writing:
(S)2.1. INDEBTEDNESS. The Company will not, and will not permit any of
------------
its Subsidiaries to, incur or permit to exist or remain outstanding any
Indebtedness to any Person, provided, however, that the Company and its
-------- -------
Subsidiaries may incur or permit to exist or remain outstanding:
(a) Indebtedness of the Sterling Companies arising under this
Agreement or the other Loan Documents;
(b) Indebtedness in respect of (i) operating leases, (ii)
capitalized leases existing as of the date hereof and listed on Schedule E-2.1
-------- -----
and (iii) other capitalized leases entered into in compliance with the
provisions of (S)2.5 of this Exhibit E;
------- -
(c) Indebtedness in respect of taxes, assessments, governmental
charges, and claims for labor, materials, services or supplies and liabilities
under employee benefit plans, including pension plans, to the extent that
payment thereof is not yet due, or to the extent that the amount, applicability,
or validity thereof is actively contested by the Company or its Subsidiaries in
good faith by appropriate proceedings and with respect to which, to the extent
required by generally accepted accounting principles, reserves have been set
aside on the books of the Company or its Subsidiaries (segregated to the extent
required by generally accepted accounting principles and practices)
-4-
reasonably deemed by the Company or its Subsidiaries to be adequate with respect
thereto;
(d) Indebtedness in respect of the Guaranty;
(e) Intercompany Indebtedness;
(f) Indebtedness up to $5,000,000 in the aggregate incurred in the
purchase of Margin Stock or other securities on margin pursuant to the terms of
an Eligible Margin Account Agreement, so long as no such purchase is in
violation of any provision of Regulations U, T, G, and X of the Board of
Governors of the Federal Reserve System as in effect from time to time;
(g) Purchase Money Indebtedness up to $5,000,000 in the aggregate;
(h) up to $30,000,000 in the aggregate of Indebtedness incurred
outside the United States by Subsidiaries of the Company which are organized
under the laws of jurisdictions outside the United States or which conduct
business exclusively outside the United States (including, for purposes hereof,
Indebtedness of the Company to United States branches or subsidiaries of foreign
financial institutions incurred in order to support any such Indebtedness by any
such Subsidiaries of the Company);
(i) Indebtedness and other liabilities incurred in the ordinary
course of business not incurred through the borrowing of money or the obtaining
of credit except for credit on an open account basis customarily extended to the
Company or its Subsidiaries in connection with normal purchases of goods and
services;
(j) Indebtedness consisting of contingent liabilities to which
reference is or should be made by a footnote to the consolidated balance sheets
of the Company and its Subsidiaries in accordance with generally accepted
accounting principles to the extent that such contingent liabilities are not
quantifiable and were not voluntarily incurred;
(k) Indebtedness not otherwise permitted by subparagraph (n) of this
(S)8.1 and not to exceed $2,000,000 in aggregate amount consisting of
Investments in any Person which is in a line of business the same or similar to
that of the Company or its Subsidiaries;
(l) Indebtedness existing on the date hereof and set forth on
Schedule E-2.1;
-------- -----
(m) Indebtedness constituting the purchase price of acquisitions
permitted by (S)2.4(a)(i)(B) of this Exhibit E, to the extent that such
---------
Indebtedness is payable to any Person to whom the purchase price or any portion
thereof is, at
-5-
the time of reference thereto, scheduled to become due and owing at a future
date;
(n) So long as no Default or Event of Default has occurred and is
continuing or would occur after giving effect thereto, Indebtedness incurred by
the Company or any of its Subsidiaries in connection with the purchase by any of
the Sterling Accounts Receivable Agreement Parties of Sterling Accounts
Receivable in an aggregate amount outstanding at any time not to exceed
$35,000,000 for all Sterling Accounts Receivable Agreements; and
(o) Indebtedness under the Tax Allocation Agreement and (S)2 and (S)3
of the Indemnification Agreement.
Guaranties by the Company of the obligations of its Subsidiaries shall not
constitute Indebtedness to the extent that such obligations do not constitute
Indebtedness or are permitted in accordance with the above limitations.
(S)2.2. RESTRICTIONS ON INVESTMENTS. The Company may make Investments of
------------ -- -----------
any kind or nature, except as otherwise limited by this Agreement, and provided
--------
that any Investment which is in the nature of a joint venture or general
partnership or similar investment vehicle shall be made with respect to a Person
in a similar line of business as the Company and its Subsidiaries.
(S)2.3. MERGER AND CONSOLIDATION. The Company will not at any time, and
------ --- -------------
will not cause or permit any of its Subsidiaries at any time to, become a party
to any merger or consolidation other than a disposition permitted pursuant to
(S)2.6 of this Exhibit E, except that a Subsidiary (including a Subsidiary
---------
acquired or created pursuant to permitted acquisitions under (S)2.4 of this
Exhibit E) may be merged or consolidated with the Company if the Company shall
---------
be the continuing or surviving corporation or with any one or more other
Subsidiaries if the successor formed or resulting from such consolidation or
merger shall be a wholly-owned Subsidiary (except, in the case of a Subsidiary
not organized under the laws of the District of Columbia or any state of the
United States, for such third-party ownership as may be permitted pursuant to
(S)2.8 of this Exhibit E) and, in each case, if no Default or Event of Default
---------
shall have occurred and be continuing or would occur upon consummation of such
merger or consolidation.
(S)2.4. ACQUISITIONS.
------------
(a) The Company will not at any time, and will not cause or
permit any of its Subsidiaries at any time to, agree to affect any asset
acquisition (other than an acquisition of inventory in the ordinary course of
business or which is a permitted capital expenditure pursuant to (S)2.5 of this
Exhibit E) or stock acquisition representing a controlling interest in the
------- -
issuer thereof, without the prior consent of the Banks, except that, if no
Default or
-6-
Event of Default has occurred and is continuing, or would occur immediately
after giving affect thereto:
(i) subject to the requirements of clause (b) hereof, the
Company may effect friendly acquisitions if (A) the total consideration for all
such acquisitions, including the sum of the cash, stock (as valued for the
purposes of such acquisitions) and other consideration comprising the deferred
(whether represented by promissory notes or otherwise) portion of the purchase
price, does not exceed, in the aggregate for all such acquisitions made,
$60,000,000 plus such additional amounts to which the Agent and the Banks may
----
from time to time agree, and (B) the amount of cash or other deferred (whether
represented by promissory notes or otherwise) consideration constituting part or
all of the purchase price of such acquisitions does not exceed, in the aggregate
for all such acquisitions made, $60,000,000 plus such additional amounts to
----
which the Agent and the Banks may from time to time agree in writing; and
(ii) the Company or any of its Subsidiaries may acquire
Sterling Accounts Receivable to the extent required or permitted by any of the
Sterling Accounts Receivable Agreements (to the extent Indebtedness in respect
thereof is permitted by (S)2.1 of the Exhibit E).
---------
(b) All businesses acquired or commenced through any acquisition
referred to in paragraph (a) of this (S)2.4 shall be in the same or similar
lines of business (or natural extensions thereof) as current lines of business
of the Company and its Subsidiaries (provided that such businesses may include
--------
Subsidiaries or divisions which are not in such same lines of business, to the
extent that the preponderance of the assets acquired in connection with such
acquired business relate to, and the preponderance of the revenues historically
generated by such acquired business relate to, the same or similar lines of
business as currently engaged in by the Company and its Subsidiaries or natural
extensions thereof). No later than five (5) Business Days following the later
to occur of (a) any such Permitted Acquisition or (b) the receipt by the Company
or the newly acquired Subsidiary from the Agent or the Agent's Special Counsel
of forms of the Loan Documents (including the Guaranty) to which such newly
acquired Subsidiary is to be a party, or appropriate amendments thereto,
together with forms of acceptable legal opinions and other documents necessary
to demonstrate the due authorization, execution and delivery by such newly
acquired Subsidiary of such Loan Documents or amendments thereto, such newly
acquired Subsidiary shall deliver executed counterparts of such Loan Documents,
amendment, legal opinions and other documents to the Agent in accordance with
the requirements of (S)8.17. Upon such delivery of such executed counterparts
of such Loan Documents, amendments, legal opinions and other documents to the
Agent, such newly acquired Subsidiary shall be a party to the Guaranty and a
Sterling Subsidiary and shall comply with and be bound by all of the terms and
conditions of the Loan Documents to which it is a priority. To the extent that
any such acquisition alters the accuracy or completeness of any of Schedules
---------
5.2,
---
-7-
5.6, 5.10 (but only to the extent that the Company would not be required to
--- ----
report the litigation to be included in Schedule 5.10 within 30 days pursuant to
-------- ----
(S)8.5), Schedule 5.12 (but only to the extent that any alteration to Schedule
-------- ---- --------
5.12 results solely from the failure of the newly acquired Subsidiary to file
----
state or local tax returns, or the failure to pay state or local taxes, and in
no event arises from any failure to file any federal tax returns or pay any
federal taxes, or from the existence of any tax lien on any assets of such newly
acquired Subsidiary), or Schedule 5.16, the Company shall deliver to the Agent
-------------
within 30 days of such acquisition, revised schedules reflecting changes
resulting from such acquisition, and during the 30 day period immediately
following such acquisition, the inaccuracy or incompleteness of the
representations and warranties relating to such schedules resulting from such
acquisition shall not constitute a Default or Event of Default, provided, that
--------
the Company shall, during such 30 day period, take any and all necessary action
to bring such newly acquired Subsidiary into full compliance with each
representation and warranty set forth in (S)5 of the Agreement, and provided,
--------
further, that no change resulting from any acquisition would have a material
-------
adverse affect on the Sterling Companies taken as a whole.
(S)2.5. CAPITAL EXPENDITURES. Capital Expenditures unrelated to
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acquisitions permitted under (S)2.4 of Exhibit E hereof shall not exceed, during
---------
any fiscal period set forth in the table below, the amount set forth opposite
such period in the table below:
MAXIMUM
------------------
PERIOD PERMISSIBLE AMOUNT
------ ------------------
October 1, 1996-- September 30, 1997 $45,000,000
October 1, 1997-- September 30, 1998 $50,000,000
October 1, 1998-- September 30, 1999 $50,000,000
October 1, 1999-- Final Maturity $50,000,000
(S)2.6. ASSET DISPOSITIONS. The Company will not at any time, and will
----- ------------
not cause or permit any of its Subsidiaries at any time to, become a party to
any disposition of assets without the consent of the Banks, except for:
(a) Dispositions of inventory and obsolescent equipment and
fixtures in the ordinary course of business;
(b) Sales or other dispositions of any Margin Stock other than
Margin Stock, if any, in Subsidiaries of the Company;
(c) Sales or other dispositions of Subsidiaries, divisions or
product lines, provided, that:
--------
(i) (A) Contemporaneously with the signing of any binding letter of
intent with respect to such sale or other disposition, the Company (I)
notifies the Agent of such proposed sale or other disposition and (II)
-8-
provides preliminary financial information with respect to such proposed
sale or other disposition to the Agent and (B) the Company demonstrates to
the satisfaction of the Agent at least five (5) days in advance of the
consummation of such proposed sale or other disposition that, on a pro
---
forma basis (evidenced by projections and historical financial statements
-----
certified by the treasurer or another duly authorized financial officer of
the Company), it will continue to be in compliance with each of its
covenants set forth in (S)3 of this Exhibit E following such disposition
---------
and that no Default or Event of Default has occurred, is then existing, or
would occur as a result of or after giving effect to such disposition, and
(C) if the Subsidiary being disposed of is any of the Sterling
Subsidiaries, all net proceeds of such sale shall be paid over to the Agent
for the respective accounts of the Banks and the Agent as and when received
by the Company or any of its Subsidiaries to the extent of Outstanding
Loans for application against such Loans under this Agreement (with a
reduction, at the option of the Agent or upon the request of the Majority
Banks, of the Total Commitment in the amount of such proceeds); and
(ii) the aggregate annual revenues attributable to any such
Subsidiary, division or line (measured by the twelve full consecutive
calendar months most recently past as of the date of any such disposition)
disposed of shall not exceed $2,500,000;
(d) Sales or other dispositions of Investments which are
Permitted Investments;
(e) Sales of Sterling Accounts Receivable pursuant to the
Sterling Accounts Receivable Agreements (i) with respect to sales of such
Sterling Accounts Receivable pursuant to or in connection with which the Company
or any of its Subsidiaries incurs Indebtedness, in an aggregate amount
outstanding at any time not to exceed $35,000,000, and (ii) with respect to all
other sales of any Sterling Accounts Receivable in an aggregate amount
outstanding at any time not to exceed $75,000,000; and
(f) Sales or other dispositions of assets by any of the Sterling
Companies (i) in an amount not to exceed $5,000,000 in any individual case or
(ii) $15,000,000 in the aggregate; and
(g) Sales or other dispositions of assets by the Company to any
of the Sterling Subsidiaries or by any of the Sterling Subsidiaries to the
Company or any other Sterling Subsidiary.
(S)2.7. CHANGE OF LOCATION. The Company will not at any time, and will
------ -- --------
not cause or permit any of the Sterling Subsidiaries at any time to, (a) change
the location of its chief executive offices, or (b) change the locations where
its records or books of account are kept without (in each case) giving at least
10 days' prior written notice to the Agent specifying the new location of such
office or location.
-9-
(S)2.8. ADDITIONAL SHARES. The Company will not at any time cause or
---------- ------
permit any of its Subsidiaries at any time, to issue any shares of any class of
capital stock of any Subsidiary without the prior written consent of the
Majority Banks, other than shares issued in connection with acquisitions
permitted by (S)2.4 of Exhibit E or issued to the Company or to any directly or
---------
indirectly wholly-owned Subsidiary of the Company; provided, however, that the
-------- -------
shares of any such Subsidiary not organized under the laws of the District of
Columbia or any of the states of the United States may be issued to third
parties (i) which, in the aggregate own not more than two percent of the shares
of the capital stock of such Subsidiary, or (ii) to the extent mandated by the
laws of the jurisdiction in which such Subsidiary is organized.
(S)2.9. DISTRIBUTIONS. The Company will not, and will not permit any of
-------------
its Subsidiaries to, make any Distributions, other than Distributions by any
Sterling Subsidiary to the Company or by any Subsidiary of a Sterling Subsidiary
to such Sterling Subsidiary; provided, however, that the Company may make
-------- -------
Distributions in respect of its preferred stock in an aggregate amount not to
exceed $500,000 in any fiscal year of the Company; and provided further that, so
----------------
long as no Default or Event of Default shall have occurred and be continuing,
the Company may repurchase shares of its own issued and outstanding capital
stock.
(S)2.10. NEGATIVE PLEDGES. Except as provided for herein, the Company
-------- -------
will not at any time, and will not cause or permit any of the Sterling
Subsidiaries at any time to, enter into any agreement or covenant with any
Person prohibiting the Company or such Sterling Subsidiary from mortgaging,
pledging, or subjecting to, or suffering to arise, any lien, charge or any other
encumbrance of, or against, any of its assets, tangible or intangible, real or
personal.
(S)3. FINANCIAL COVENANTS. The Company (which, for purposes of this (S)3,
--------- ---------
shall mean the Company and its Subsidiaries on a consolidated basis) covenants
and agrees that, following any Spring-Back Date and so long as any Loan, Letter
of Credit, Unpaid Reimbursement Obligation or Note is outstanding or the Banks
have any obligations to make Loans, or the Agent has any obligation to issue,
extend or renew Letters of Credit, hereunder, unless the Majority Banks
otherwise agree in writing:
(S)3.1. PROFITABILITY. The Company shall not cause or permit Consolidated
-------------
Net Income or Consolidated Operating Income for any fiscal quarter of the
Company to be less than $1.00.
(S)3.2. OPERATING CASH FLOW TO INTEREST CHARGES. The Company shall not
---------------------------------------
cause or permit the ratio of Operating Cash Flow to Interest Charges for any
fiscal quarter of the Company to be less than 3.5:1.0.
-10-
(S)3.3. QUICK RATIO. The Company shall not cause or permit the ratio of
----- -----
Quick Assets to the sum of Consolidated Current Liabilities plus Loans
----
outstanding at the end of any fiscal quarter of the Company to be less than
1.25:1.0.
(S)3.4. CONSOLIDATED NET WORTH. The Company shall not cause or permit
------------ --- -----
Consolidated Net Worth at the end of any fiscal quarter of the Company to be
less than the sum of (a) $725,000,000, plus (b) on a cumulative basis,
----
commencing with the fiscal quarter ending December 31, 1996, seventy-five
percent (75%) of the Consolidated Net Income for each fiscal quarter (calculated
without deduction for any net losses) through the fiscal quarter then ended,
after preferred stock dividends actually paid by the Company since September 30,
1996 (to the extent permitted by (S)2.9 of Exhibit E), and as adjusted from time
---------
to time to reflect stock splits, distributions (other than repurchases by the
Company of its issued and outstanding capital stock, as permitted by (S)2.9 of
this Exhibit E), or recapitalizations or reclassifications, plus (c) one hundred
--------- ----
percent (100%) of the net proceeds received by the Company of any new equity
(not including shares of the Company reissued by the Company following the
Company's repurchase thereof as permitted by (S)2.9 of this Exhibit E ) issued
---------
by the Company since September 30, 1996.
(S)3.5. LIABILITIES TO NET WORTH RATIO. The Company shall not cause or
----------- -- --- -----------
permit the ratio of Consolidated Total Liabilities to Consolidated Net Worth at
the end of any fiscal quarter of the Company ending at any time from the Closing
Date through Final Maturity to equal or exceed 1.5:1.0.
(S)3.6. TOTAL DEBT TO OPERATING CASH FLOW RATIO. The Company shall not
----- ---- -- --------- ---- ---- -----
permit the ratio of Total Debt as of the end of any fiscal quarter to Operating
Cash Flow for the four consecutive fiscal quarter period ending on such fiscal
quarter to be greater than 1.0:1.0.