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<PAGE>
EXHIBIT 10.11
LOAN AGREEMENT
BETWEEN
PENSON WORLDWIDE, INC., AS BORROWER
AND
SUNGARD DATA SYSTEMS INC., AS LENDER
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DATED AS OF November 4, 2002
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LOAN AGREEMENT
THIS AGREEMENT is made as of November 4, 2002 by and among
PENSON
WORLDWIDE, INC., a Delaware corporation located at 1700 Pacific,
Suite 1400,
Dallas, Texas 75201 ("Borrower"); and SUNGARD DATA SYSTEMS INC.,
a Delaware
corporation located at 1285 Drummers Lane, Wayne PA 19087
("Lender").
BACKGROUND
Lender's subsidiary, SunGard Financial Systems Inc., is a
Delaware
corporation ("SFS"), which provides data processing services to
registered
brokers. Borrower (and its affiliates) and Lender (and its
affiliate, SFS) are
unrelated corporations that are not affiliated in any
manner.
Borrower, through its Material Subsidiaries, operates a
correspondent
clearing brokerage business providing clearing services and
margin lending
services to other brokerage firms ("Business"). SFS and one of
Borrower's
Material Subsidiaries are parties to a Remote Processing
Agreement, dated July
10, 1995 as amended from time to time ("Processing Agreement")
for certain data
processing services used to operate the Business.
Borrower has borrowed from Lender and has executed a promissory
note,
dated May 31, 2002 ("Old Note") in the principal amount("Old
Note Principal") of
Three Million Dollars ($3,000,000), plus interest at the rate
specified therein.
The Old Note has a maturity date of September 3, 2002, which has
been extended
until November 4, 2002, when both the principal and the accrued
interest ("Old
Note Accrued Interest") in the amount of Nine Thousand Five
Hundred and Sixty
Two Dollars and Fifty Cents ($9,562.50) will be due and payable
to Lender.
Borrower desires to borrow from Lender to pay off the Old Note
Principal
and Old Note Accrued Interest and to contribute to the capital
of its Material
Subsidiaries certain additional funds to provide additional
capital to operate
the Business.
Lender desires to lend to Borrower an additional amount to
operate the
Business. Lender expects to benefit from such loan by receiving
interest
payments on the borrowed funds.
NOW, THEREFORE, in consideration of the mutual agreements and
undertakings
set forth in this Agreement, the parties, intending to be
legally bound hereby,
agree as follows:
SECTION 1. THE LOAN AND THE NOTE
1.1 The Loan. Lender shall, upon the terms and subject to
the
conditions hereinafter set forth and in reliance upon the
representations,
warranties and covenants of Borrower contained herein, make a
loan ("Loan") to
Borrower in the
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principal amount of Six Million Eight Hundred Thousand Dollars
($6,800,000).
Borrower shall use the proceeds of the Loan as specified in its
board of
directors resolution attached hereto as Schedule 1.1 ("Permitted
Use").
1.2 The Note.
(a) The Loan shall be evidenced by Borrower's promissory
note,
substantially in the form attached hereto as Exhibit A ("Note"),
in the
principal amount of $6,800,000, duly executed and delivered on
behalf of
Borrower.
(b) Interest on the outstanding principal balance of the
Note
("Principal Balance") shall be calculated monthly at the end of
each calendar
month as follows: (i) if there is no Excess Net Capital (as
defined below) at
the prior month's month-end, then the entire Principal Balance
shall bear
interest at the Applicable Rate (as defined below); (ii) if
there is Excess Net
Capital at the prior month's month-end equal to or greater than
the Principal
Balance, then the entire Principal Balance shall bear interest
at the Discounted
Rate; and (iii) if there is Excess Net Capital at the prior
month's month-end
less than the Principal Balance, then the portion of the
Principal Balance equal
to such Excess Net Capital shall bear interest at the Discounted
Rate and the
remaining Principal Balance shall bear interest at the
Applicable Rate. As used
in this Agreement: "Applicable Rate" means the sum of the Prime
Rate (as defined
below) plus two percent (2%) per annum, compounded monthly;
"Discounted Rate"
means the Prime Rate, compounded monthly; "Prime Rate" means the
rate of
interest per annum publicly announced from time to time by JP
Morgan Chase Bank
as its prime rate in effect at its principal office in New York
City; and
"Excess Net Capital" means the aggregate net capital (as defined
for SEC
regulatory purposes) of the Material Subsidiaries that are
registered
broker-dealers with the SEC ("SEC-Regulated Material
Subsidiaries") in excess of
five percent (5%) of combined aggregate debit items of the
SEC-Regulated
Material Subsidiaries. Accrued interest on the outstanding
principal balance of
the Note shall be due and payable monthly in arrears on the
second day of each
calendar month commencing December 2, 2002.
(c) The outstanding principal balance of the Note shall be
payable by Borrower in 65 equal monthly payments of $103,031
each on the second
day of each calendar month commencing December 2, 2002 and
continuing until
April 2, 2008, and a final payment of the entire remaining
principal balance on
May 2, 2008.
1.3 Prepayment. Borrower may prepay, without penalty or premium,
all
or any portion of the outstanding principal balance of the Note
at any time and
from time to time, provided
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that each such prepayment is accompanied by all interest accrued
thereon.
Principal prepayments shall be applied to the principal payments
due hereunder
in reverse order of when due.
1.4 Payments and Computations. Borrower shall make each
payment
hereunder and under the Note not later than 1:00 P.M.,
Philadelphia time, on the
day when due in lawful money of the United States, in
immediately available
funds at the office of Lender at 1285 Drummers Lane, Wayne
Pennsylvania 19087.
All computations of interest hereunder shall be made by Lender
based upon the
actual number of days elapsed in a year of 365 days. Should any
payment of
principal or interest become due and payable on a Saturday,
Sunday or legal
holiday under the laws of the State of Pennsylvania, then the
payment date
thereof shall be extended to the next succeeding business day,
and such
extension of time shall in such case be included in computing
such interest. Any
payments made on the Note shall be applied, first, to the
payment of accrued and
unpaid interest on the Note then due as well as any accrued and
unpaid interest
payable on the principal amount of the Note being paid, and,
second, to the
reduction of the outstanding principal balance of the Note.
Attached as Exhibit
B to this Agreement are the wiring instructions for Borrower to
use in wiring
payments to Lender due hereunder and under the Note.
SECTION 2. BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Agreement and to
make the
Loan, Borrower represents and warrants to Lender (regardless of
any
investigation made or information obtained by Lender) as of the
date hereof
that, except as set forth on the Schedules attached hereto:
2.1 Organization. Borrower is a corporation duly organized,
validly
existing and in good standing under the laws of the State of
Delaware and is
duly qualified or licensed as a foreign corporation in good
standing in all
other jurisdictions where the failure to so qualify would have a
Material
Adverse Effect (as hereinafter defined). Neither Borrower nor
its Material
Subsidiaries is in default under and has not breached its
certificate of
incorporation or by-laws such that there would result a Material
Adverse Effect.
2.2 Subsidiaries. As used herein, "Subsidiary" means, with
respect
to a party, any corporation, firm, association, trust,
partnership, joint
venture or other entity (an "Entity") as to which such party
directly or
indirectly owns or has the power to vote, or otherwise control
fifty percent
(50%) or more of the securities or other interests of any class
of such Entity
which are entitled to vote for the election of directors or
others performing
similar functions. Borrower's direct and
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indirect Subsidiaries that have material operations are
described on Schedule
2.2, and are referred to herein as "Material Subsidiaries." The
term "Material
Subsidiaries" shall also include Subsidiaries of Borrower to
whom any assets of
a Material Subsidiary have been transferred or sold or with whom
a Material
Subsidiary has been merged to the extent that any such
transferee or merged
entity after the date of this Agreement accounts for either at
least 20% of
Borrower's consolidated revenues or at least 10% of Borrower's
consolidated
profits.
2.3 Recording and Enforceability. No recording, filing,
registration, notice or other similar action is required to be
taken by Borrower
or any Material Subsidiary to ensure the legality, validity,
binding effect or
enforceability of this Agreement or the Note, or the other
documents and
instruments executed hereunder as against Lender and all third
persons provided
that, notwithstanding the forgoing, the Borrower makes no
representation with
respect to any remedies that may be available to Lender under
applicable law.
2.4 Litigation. There are no (i) Material actions, suits,
arbitrations, claims, investigations, legal or administrative
proceedings
pending or, to the knowledge of Borrower and Material
Subsidiaries, threatened
against Borrower or any Material Subsidiary, or its properties
or assets,
whether at law or in equity, or before or by any federal, state,
municipal or
other governmental department commission, board, bureau, agency
or
instrumentality, domestic or foreign, (ii) governmental
inquiries or audits
involving Borrower or any Material Subsidiary which would
reasonably be expected
individually or in the aggregate to result in a Material Adverse
Effect, or
(iii) judgments, decrees, injunctions or orders of any court,
governmental
department, commission, agency, instrumentality or arbitrator
against Borrower
or any Material Subsidiary which would reasonably be expected
individually or in
the aggregate to result in a Material Adverse Effect.
2.5 Compliance with Law. Borrower's and its Material
Subsidiaries'
respective operations, the conduct of their respective
businesses as and where
such businesses are presently conducted, and Borrower's and its
Material
Subsidiaries' respective assets and their uses comply, in all
material respects,
with all applicable laws, rules and regulations. Borrower and
its Material
Subsidiaries have obtained and maintain all permits and licenses
which are
necessary for the conduct of their businesses, except where the
failure to do so
would not have any Material Adverse Effect and would not subject
Borrower or its
Material Subsidiaries to any Material penalty.
2.6 Authorization of this Agreement. The execution, delivery
and
performance by Borrower of this Agreement and the
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Note, have been duly authorized by all requisite corporate
action, and each such
agreement constitutes the valid and binding obligation of
Borrower, enforceable
in accordance with its terms, subject to the effect of
bankruptcy and insolvency
laws and equitable principles. The execution, delivery and
performance of this
Agreement and the Note, and the consummation of the transactions
contemplated
hereby and thereby, and compliance with the provisions hereof
and thereof by
Borrower, will not (a) violate any provision of law, statute,
rule or
regulation, or any ruling, writ, injunction, order judgment or
decree of any
court, administrative agency or other governmental body
applicable to Borrower
or any Material Subsidiary or any of their properties or assets,
or (b) conflict
with or result in any breach of any of the terms, conditions or
provisions of,
or constitute (with due notice or lapse of time, or both) a
default (or give
rise to any right of termination, cancellation or acceleration)
under, or result
in the creation of any lien, security interest, charge or
encumbrance upon any
of the properties or assets of Borrower or any Material
Subsidiary under the
certificate of incorporation or by-laws of Borrower or such
Material Subsidiary,
or any note, indenture, mortgage, lease agreement or other
contract, agreement
or instrument to which Borrower or a Material Subsidiary is a
party or by which
any of them or any of their property is bound or affected.
2.7 No Consent or Approval Required. Except as described in
Schedule
2.7 to this Agreement, no consent, approval or authorization of,
or declaration
to, or filing with, any governmental or regulatory authority or
third person or
entity is required for the valid authorization, execution,
delivery and
performance by Borrower or a Material Subsidiary, as the case
may be, of this
Agreement or the Note.
2.8 Taxes. Borrower and each Material Subsidiary have filed
all
Material federal, state and local tax returns which each of them
is required by
law to file and have paid all Material taxes, assessments and
other
governmental charges due in respect of such returns, except to
the extent that
any such taxes, assessments or other governmental charges are
being contested in
good faith and as to which any of Borrower or any such Material
Subsidiary has
set aside on its books adequate reserves.
2.9 Financial Information. The financial information of Borrower
and
its Subsidiaries provided to Lender for the year 2001 and the
period from
January 1 to August 31, 2002 is accurate in all material
respects, and there has
been no material adverse change in the financial results,
financial condition or
business of Borrower and its Material Subsidiaries since August
31, 2002.
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2.10 No Notices of Violations. Neither Borrower nor any
Material
Subsidiary has received any notice with respect to Borrower or
the Material
Subsidiaries, not heretofore complied with, from any federal,
state or local
authority or any insurance, self regulatory body or inspection
body to the
effect that any of its properties, facilities, equipment or
business procedures
or practices fail to comply in any Material respect with any
applicable law,
ordinance, regulation, building or zoning law, or any other
requirements of any
such authority or body.
2.11 Disclosure. Neither this Agreement nor any other
document,
certificate, instrument or statement furnished or made to Lender
by or on behalf
of Borrower in connection with the transactions contemplated
hereby contains any
untrue statement of a material fact or omits to state a material
fact necessary
in order to make the statements contained herein and therein not
misleading.
There is no fact known to a Responsible Officer of Borrower that
materially
adversely affects or, so far as the Responsible Officers of
Borrower can now
foresee, will Materially adversely affect, the properties,
business, prospects,
profits or condition (financial or otherwise) of Borrower or its
Material
Subsidiaries or the ability of Borrower to perform its
obligations under this
Agreement, which has not been set forth in this Agreement or in
the other
documents, certificates or other material furnished to Lender in
connection with
the transactions contemplated hereby.
SECTION 3. CLOSING AND CONDITIONS OF LENDING
3.1 Closing. The closing of the Loan and other transactions
contemplated hereby ("Closing") is taking place at the office of
Lender at 1285
Drummers Lane, Wayne Pennsylvania, on November 4, 2002, or such
other date as is
mutually agreeable to the parties ("Closing Date"). At the
Closing, subject to
Section 3.2 hereof, Lender shall deliver to Borrower the
principal amount of the
Loan, less the amount for the payoff the Old Note Principal and
the Old Note
Accrued Interest, as set forth in Section 1.1 hereof, by wire
transfer of
immediately available funds to the account of Borrower, and
Borrower shall
immediately use the proceeds as permitted under this
Agreement.
3.2 Conditions of Lending. The obligation of Lender to make the
Loan
on the Closing Date is subject to the fulfillment, to the
satisfaction of Lender
and its counsel, on or before the Closing Date, of the following
conditions
precedent:
(a) Borrower shall have delivered to Lender the following,
all
of which shall be in form and substance satisfactory to Lender
and shall be duly
completed and executed:
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(i) The Note, dated the Closing Date, executed by
Borrower.
(ii) A certificate, dated the Closing Date, of the
President and Secretary of Borrower to the effect that (a)
attached thereto is a
true and complete copy of the certificate of incorporation and
the by-laws of
Borrower, in each case as in effect on the date thereof, (b)
attached thereto is
a true and complete copy of all resolutions adopted by the Board
of Directors of
Borrower authorizing the execution, delivery and performance of
this Agreement
and the Note, and (c) set forth in such certificate is a list of
the names and
the true signatures of the Responsible Officers of Borrower (d)
the
representations and warranties set forth in Section 2 hereof are
true and
correct on and as of the Closing Date, (e) no Event of Default
(as defined in
Section 6.1 hereof), and no event which with the passage of time
or the giving
of notice, or both, would become an Event of Default, has
occurred and is
continuing as of the Closing Date, (f) no material adverse
change has occurred
in Borrower's consolidated financial condition between the date
of this
Agreement and the Closing Date, and (g) all conditions set forth
in this Section
3.2 hereof have been fulfilled on or before the Closing
Date.
(b) good standing certificates for Borrower from the States
of
Delaware and Texas, dated within five business days before the
Closing Date,
(c) Such additional documents, certificates and information
as
Lender may require pursuant to the terms hereof or otherwise
reasonably request.
(d) The representations and warranties set forth in Section
2
hereof shall be true and correct on and as of the Closing
Date.
(e) No Event of Default, and no event which with the passage
of time or the giving of notice, or both, would become an Event
of Default,
shall have occurred and be continuing.
(f) No act, omission or event shall have occurred that would
have a Material Adverse Effect on Borrower or any of its
Material Subsidiaries.
(g) There shall not be outstanding any court order or
judgment, or any settlement agreement, which, in the opinion of
Lender or its
counsel, prevents or restricts, in any material respect, the
making of the Loan
or the operation of the Business as contemplated by this
Agreement.
<PAGE>
SECTION 4. BORROWER'S AFFIRMATIVE COVENANTS
Borrower covenants and agrees that from and after the date
hereof and so
long as the Loan or any portion thereof is outstanding, or any
obligation or
undertaking to Lender hereunder is not fully performed, Borrower
shall comply
with, and shall cause its Material Subsidiaries to comply with,
the following
covenants:
4.1 Furnishing Financial Statements. Borrower shall furnish
to
Lender or cause to be furnished to Lender:
(a) Within one hundred (100) days after the end of each
calendar year, (i) consolidated financial statements of Borrower
and its
Subsidiaries including a profit and loss statement, statement of
changes in
stockholder's equity and statement of cash flows for such year
and a balance
sheet as of the last day of such year, which statements shall be
prepared in
accordance with generally accepted accounting principles
consistently applied,
and accompanied by the audit report of Borrower's independent
auditors (without
a "going concern" or like qualification or exception and without
any
non-ordinary course qualification or exception as to the scope
of such audit),
(ii) for its Material Subsidiaries audited financial statements
including a
profit and loss statement, statement of changes in stockholder's
equity, and
statement of cash flows for such year and balance sheet as of
the last day of
such year, which statements shall be prepared in accordance with
generally
accepted accounting principles consistently applied, and
accompanied by the
audit report of Borrower's independent auditors (without a
"going concern" or
like qualification or exception), together with, in the case of
Material
Subsidiaries that are registered broker-dealers with the
Securities and Exchange
Commission ("SEC") such firm's letter to management, report on
internal
accounting control required by SEC Rule 17a-5, and computation
of net capital
under SEC Rule 15c3, (iii) for each of the Borrower's other
Material
Subsidiaries, unaudited financial statements including a profit
and loss
statement, statement of changes in stockholder's equity, and
statement of cash
flows for such year and balance sheet as of the last day of such
year, which
statements shall be prepared in accordance with generally
accepted accounting
principles consistently applied, excluding footnotes.
(b) Within fifty five (55) business days after the end of
each
calendar quarter, (i) an unaudited profit and loss statement,
statement of
changes in shareholder's equity, and statement of cash flows of
Borrower and its
Material Subsidiaries for such quarter and balance sheet of
Borrower and its
Material Subsidiaries as of the last day of such quarter, which
statements shall
be prepared in accordance with generally accepted
<PAGE>
accounting principles consistently applied, excluding footnotes
and subject only
to normal year-end audit adjustments, and (ii) Borrower's
internally generated
updated forecast model; and, within twenty-five (25) business
days after the end
of each calendar quarter the Part II FOCUS Report for such
quarter for each
Material Subsidiary that is a registered broker-dealer with the
SEC and its
reasonable equivalent for any Material Subsidiary that is a
registered
broker-dealer registered with a different agency or outside of
the United
States.
(c) Accompanying the financial statements provided pursuant
to
paragraphs (a) and (b) of this Section 4.1, a certificate of the
chief executive
officer and chief financial officer of Borrower, stating (i)
that a review of
the terms of this Agreement has been made by them with a view to
determining
whether all of the obligations and covenants hereunder or in
connection herewith
have been performed and fulfilled in all material respects (it
being understood
that, with respect to obligations and covenants herein that are
already
specifically qualified by the word "Material" and/or the phrase
"Material
Adverse Effect", Borrower shall not be accorded the unintended
benefit of having
compliance with such specific obligations and/or covenants
further qualified by
the phrase "in all material respects" immediately preceding this
parenthetical
phrase), and (ii) that such review showed that there existed
during such period
and there exists as of the date of such certificate no Event of
Default and no
act, condition or event which, with the passage of time or the
giving of notice,
or both, would constitute an Event of Default, or if any such
Event of Default
or act, condition or event existed, specifying the nature
thereof, the period of
existence thereof and what action Borrower proposes to take, or
has taken, with
respect thereto, which certificate shall be accompanied by all
calculations
necessary to evidence compliance with the financial covenant
contained herein.
(d) Within thirty (30) days after the end of each calendar
month, (i) an unaudited profit and loss statement of Borrower
and its Material
Subsidiaries for such month and balance sheet of Borrower and
its Material
Subsidiaries as of the last day of such month, which statements
shall be
prepared in accordance with generally accepted accounting
principles
consistently applied, excluding footnotes and subject only to
normal year-end
audit adjustments, (ii) the Part I FOCUS Report for such month
for each Material
Subsidiary that is a registered broker-dealer with the SEC and
its reasonable
equivalent for any Material Subsidiary that is a registered
broker-dealer
registered with a different agency or outside of the United
States.
(e) Promptly after the receipt of same, copies of all
examination reports or other communications received from the
NASD, SEC, any
state securities office, or any other regulatory
<PAGE>
agency or federal, state or local authority concerning
regulatory compliance
deficiencies of a Material Subsidiary that would be reasonably
be expected to
have a Material Adverse Effect.
(f) Promptly upon request, such other material information
regarding the operations, business affairs and financial
condition of Borrower
and/or any of its Subsidiaries as Lender may, from time to time,
reasonably
request.
4.2 [This Section is Intentionally Omitted]
4.3 Capital Requirement. Borrower shall cause its
SEC-Regulated
Material Subsidiaries to have and maintain, and the
SEC-Regulated Material
Subsidiaries shall have and maintain, regulatory net capital (as
defined under
SEC Rule 15c3-1) such that:
(a) for Material Subsidiaries utilizing the alternative
standard of calculating regulatory net capital requirements:
(i) there shall not be any calendar month-end when the
regulatory net capital of any such Material Subsidiary is below
two percent (2%)
of its aggregate debit items (as defined under SEC Rule 15c3-3)
and;
(ii) there shall not be two consecutive calendar
month-ends when the regulatory net capital of any such Material
Subsidiary is
below five percent (5%) of its aggregate debit items (as defined
under SEC Rule
15c3-3); or
(b) for Material Subsidiaries utilizing the aggregate
indebtedness standard of calculating regulatory net capital
requirements:
(i) there shall not be any calendar month-end when such
aggregate net capital of any Material Subsidiary is below the
minimum required
amount as specified in SEC Rule 15c3-1(a); and
(ii) there shall not be two consecutive calendar
month-ends when the aggregate indebtedness of any Material
Subsidiary is greater
than 1,200 percent of its regulatory net capital.
4.4 Taxes. Borrower shall and shall cause its Material
Subsidiaries
to pay when due all taxes, assessments, charges and levies
imposed upon Borrower
or any of its Material
<PAGE>
Subsidiaries or any of their properties or which Borrower or any
of its Material
Subsidiaries is required to withhold and pay over, and provide
evidence of such
payment to Lender if requested, except where such taxes,
assessments, or charges
shall be contested in good faith by appropriate proceedings and
where adequate
reserves therefor have been set aside on their books, and except
to the extent
there would be no Material Adverse Effect.
4.5 Corporate Existence; Compliance with Laws. Borrower shall
and
shall cause all of its Material Subsidiaries to preserve and
keep in full force
and effect their corporate existence, and comply in all material
respects with
any and all applicable NASD, SEC, other applicable self
regulatory body, state
securities and other laws, regulations, rules or requirements of
any federal,
state, applicable foreign, local or municipal government, agency
or department,
except where such obligations to comply shall be contested in
good faith by
appropriate proceedings or where non-compliance would not be
reasonably expected
to result in a Material Adverse Effect. It is understood that
this Section 4.5
shall not prohibit a Permitted Acquisition.
4.6 Inspection. If Lender has reasonable concerns related to
this
Agreement then, Borrower shall and shall cause its Material
Subsidiaries to
allow any Designated Representative of Lender to visit and
inspect any of its
properties, to examine its books of account and other records
and files, to make
copies thereof, and to discuss their affairs, business, finances
and accounts
with Responsible Officers, all at such reasonable times and as
often as Lender
may request, provided Lender notifies Borrower 3 business days
prior to any such
visitation, inspection, examination or discussion and gives
Borrower the
opportunity to be present, and provided further that such
visitations,
inspections, examination and discussions shall not interfere
with the reasonable
conduct of the Borrower's or its Subsidiaries businesses and so
long as there is
no Event of Default that is then existing, there shall be no
more than two such
visitations, examinations and inspections, collectively, per
calendar year.
Lender's visitations, inspections, examinations and discussions
(including those
under Section 4.17 hereof) are solely for the protection of
Lender, and no
action or inaction of Lender shall constitute any representation
by Lender that
Borrower is in compliance with the terms of this Agreement or
that Lender
approves of Borrower's or any of its Subsidiaries' affairs,
business, finances
or accounts. The cost to Lender of Lender's visitations,
inspections,
examinations and discussions (including those under Section 4.17
hereof) that
are made prior to an Event of Default or the occurrence of an
event which, with
the giving of notice or the passage of time, or both, would
<PAGE>
constitute an Event of Default, shall be borne by Lender. Under
no circumstances
shall Borrower or any Subsidiary be required to provide Lender
with any
confidential information covered by an non-disclosure agreement
with a third
party that would prohibit such disclosure (a) with respect to
any potential
acquisition; provided that such restriction on disclosure to
Lender in this
Section 4.6(a) may continue only so long as there is no
acquisition agreement
entered into by Borrower that is binding as to the acquisition
or (b) with
respect to a potential new vendor to replace the services or
software then
provided by an affiliate of Lender to Borrower or its
Subsidiaries.
4.7 [This Section is Intentionally Omitted].
4.8 Notice of Defaults. Borrower shall notify Lender, within
ten
business days after any Responsible Officer of Borrower has
notice thereof, of
the occurrence of any Event of Default and of the existence of
any event which,
with the passage of time or the giving of notice, or both, would
reasonably be
expected to constitute an Event of Default.
4.9 Insurance. The Borrower will, and will cause each of the
Subsidiaries to, maintain, with financially sound and reputable
insurance
companies insurance in such amounts (with no materially greater
risk retention)
and against such risks as are in all material respects
customarily maintained by
companies of established repute engaged in the same or similar
businesses
operating in the same or similar locations. The Borrower will
furnish to the
Lender, upon request of the Lender, information in reasonable
detail as to the
insurance so maintained.
4.10 Litigation. Borrower shall give prompt written notice to
Lender
of any Material litigation proceedings or other Material legal
process or order,
which notice shall include a description of management's
proposed response
thereto, including any filing or commencement of any action,
suit or proceeding
involving Borrower or any of its Material Subsidiaries by or
before any court or
any federal, state, municipal or other governmental department,
commission,
instrumentality, agency, self regulatory body or any levy of an
attachment,
execution or other process against any property or assets of
Borrower or any of
its Material Subsidiaries.
4.11 Adverse Change. Borrower will promptly notify Lender of
the
occurrence of any Material adverse change affecting Borrower or
any of its
Material Subsidiaries, or any Material litigation, arbitration,
claim,
investigation or other legal proceeding affecting Borrower or
any of its
Material Subsidiaries, which in Borrower's reasonable business
judgment would be
likely to have an Material Adverse Effect.
<PAGE>
SECTION 5. BORROWER'S NEGATIVE COVENANTS
Borrower covenants and agrees that from and after the date
hereof and so
long as the Loan or any portion thereof is outstanding, or any
obligation or
undertaking to Lender hereunder is not fully performed, none of
Borrower nor its
Subsidiaries will, without the prior written consent of Lender
(which shall not
be unreasonably withheld):
5.1 Dissolution or Merger. Wind-up, liquidate or dissolve
its
affairs, convey, sell, lease or otherwise dispose of (whether in
one transaction
or in a series of transactions) all or substantially all of its
properties or
assets (whether now owned or hereafter acquired), except for (a)
transactions
occurring solely among the Borrower and any of its Subsidiaries
or between or
among its Subsidiaries that would not reasonably be expected to
have a Material
Adverse Effect; (b) a Permitted Acquisition; (c) for grants of
non-exclusive
licenses by Borrower or its Subsidiaries to third parties of
software and other
intellectual property where such grant does not result in the
sale of all right,
title and interest therein and would not reasonably be expected
to have a
Material Adverse Effect; (d) leases of property in the ordinary
course of
business that would not reasonably be expected to have a
Material Adverse
Effect; and (e)for the sale of property or assets of an entity
that is not a
Prohibited Subsidiary for fair market value, where the proceeds
of such sale are
retained by the Borrower or the affected Subsidiary, and where
such sale would
not reasonably be expected to result in a Material Adverse
Effect.
5.2 Other Borrowings and Liens. Incur, create, assume or permit
to
exist any Indebtedness or permit to exist any Lien on any of its
properties or
assets (other than Permitted Encumbrances), whether now owned or
hereafter
acquired, except (a) in the ordinary course of business
consistent with past
practices; (b) in accordance with or pursuant to loan
agreements, guaranties,
notes contracts or commitments for the purchase or lease or
other acquisition of
property or services or borrowing or security arrangements and
Liens in
existence as of the date of this Agreement (including
extensions, refinancing
(including with third parties that were not the original lender)
and renewals
thereof); (c) other Indebtedness of the Borrower or a Subsidiary
of the greater
of $1,000,000 in any one year and/or an aggregate at any time
outstanding of
150% of Borrower's net worth measured on a consolidated basis,
provided,
however, that (i) at the time of incurrence of such
Indebtedness, the Borrower
shall be in compliance with Section 4.3 on a pro forma basis
giving effect to
the incurrence of such Indebtedness as if such Indebtedness were
incurred on the
last day of the fiscal quarter of the Borrower most recently
ended on or prior
to the date of such incurrence (ii) that the incurrence of such
Indebtedness
would not otherwise
<PAGE>
create an Event of Default and (iii) that such Indebtedness
neither individually
nor in the aggregate would reasonably be expected to have a
Material Adverse
Effect; (d) indebtedness of the Borrower to any Subsidiary and
of any Subsidiary
to the Borrower or any other Subsidiary; or (e) operating loans
made by
SEC-Regulated Material Subsidiaries of Borrower to its third
party customers
that are made in the ordinary course of the SEC-Regulated
Material
Subsidiaries' business and consistent with past practice, such
as stock lending
activities.
5.3 Disposal of Assets. Sell, lease, transfer or otherwise
dispose
of any part or any amount of its business or assets, real or
personal, including
any accounts, contracts or contract rights, software or other
proprietary
property, other than in the ordinary course of business
consistent with past
practices, except: (a) for a Permitted Acquisition; (b) for
grants of
non-exclusive licenses by Borrower or its Subsidiaries to third
parties of
software and other intellectual property where such grant does
not result in the
sale of all right, title and interest therein and would not
reasonably be
expected to have a Material Adverse Effect; (c) leases of
property in the
ordinary course of business that would not reasonably be
expected to have a
Material Adverse Effect; and (d) for the sale of property or
assets of an entity
that is not a Prohibited Subsidiary for fair market value, where
the proceeds of
such sale are retained by the Borrower or the affected
Subsidiary, and where
such sale would not reasonably be expected to result in a
Material Adverse
Effect.
5.4 Discontinuance or Change of Business. Discontinue any
substantial part of its business or change the nature of its
business in any
material respect (except for (a) such non-compliance as would
not be reasonably
be expected to result in a Material Adverse Effect or (b) for a
Permitted
Acquisition) or engage to any material extent in any business
other than
businesses of the type conducted by the Borrower and its
Subsidiaries on the
date of execution of this Agreement and businesses reasonably
related thereto.
5.5 Use of Proceeds. Directly or indirectly apply any part of
the
proceeds of the Loan to any purpose other than the purpose
expressly permitted
under this Agreement.
5.6 Distributions. Authorize or make any distributions,
including
the declaration or payment of dividends, the return of capital
to its
shareholder, the distribution, payment or delivery of property
or cash to its
shareholders or the withdraw of equity capital from any of
Borrower's
Subsidiaries, or the redemption, retirement, purchase or other
acquisition,
directly or indirectly, of any shares of any class of its stock
or any other
security now or hereafter outstanding,
<PAGE>
or set aside funds for any such distribution, except as
expressly permitted
under this Agreement and except (a) that the Borrower may
declare and pay
dividends with respect to its capital stock payable solely in
additional shares
of its common stock and (b) that the Borrower may make
purchases, not exceeding
5% of outstanding capital stock of Borrower in any one year and
not exceeding
two million dollars ($2,000,000) in any one year or eleven
million dollars
($11,000,000) in the aggregate, pursuant to and in accordance
with plans
approved by the Board of Directors of the Borrower to repurchase
outstanding
equity interests of the Borrower under existing shareholder
agreements and
provided further that no Event of Default is triggered by the
purchases and that
the purchases, neither individually nor in the aggregate would
reasonably be
expected to result in a Material Adverse Effect.
5.7 [This Section is Intentionally Omitted.]
5.8 Change in Management. Change or permit a change of more than
the
one third (1/3) of the current members of the Executive
Committee of Borrower
(as described in Schedule 5.8) except to the extent such change
occurs as a
result of the death or incapacity of such member(s). It being
understood that
the increase in the number of members of such Executive
Committee shall not be,
in and of itself, a breach of this Section 5.8.
5.9 No Misrepresentations or Material Nondisclosure. Furnish
Lender
with any certificate required hereunder or other documents filed
with the NASD,
SEC, any state or foreign securities office, or any other
regulatory agency or
self regulatory body that contains any untrue statement of a
material fact or
that omits to state a material fact necessary in order to make
it not misleading
in light of the circumstances under which it was furnished.
5.10 Corporate Documents. Amend, alter or repeal, or agree to
amend,
alter or repeal, any provision of the certificate of
incorporation or by-laws of
Borrower or any of its Material Subsidiaries or take any action
that materially
adversely affects the ability of Borrower to perform its
obligations under this
Agreement or the Note.
SECTION 6. DEFAULTS AND REMEDIES
6.1 Events of Default. Each of the following is an event of
default
("Event of Default") hereunder and under the Note:
(a) Borrower fails to pay any principal or interest on any
Indebtedness under this Agreement or the Note or any fee or any
other amount
payable under this Agreement or the Note, when
<PAGE>
and as the same shall become due and payable, and such failure
shall continue
unremedied for a period of fifteen (15) days.
(b) Borrower or any of its Subsidiaries fail to comply with
or
perform as and when required any of the terms, conditions or
covenants contained
in Sections 4.3, 4.6, 5.1, 5.2, 5.3, 5.4 or 5.6 hereof.
(c) Borrower or any of its Material Subsidiaries fail to comply
with
or perform as and when required any of the terms, conditions or
covenants
contained in this Agreement or the Note (except for a failure to
pay any
Indebtedness
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