PNC Bank, N.A.
1600 Market Street
Philadelphia, PA 19103
215 585 5000 Tel
February 3, 2000 PNC BANK
Peter W. Knipe
Vice President and Chief Financial Officer
STV GROUP, INCORPORATED
205 West Welsh Drive
Douglassville, Pennsylvania 19518
Re: $12,000,000 Committed Line of Credit
Dear Pete:
We are pleased to inform you that PNC Bank, National Association (the
"Bank"), has approved your request for a committed line of credit (the "Loan")
to STV Group, Incorporated and STV Incorporated and its subsidiaries listed on
the attached Schedule A (individually and collectively, the "Borrower"). We look
forward to this opportunity to help you meet the financing needs of your
business. All the details regarding your Loan are outlined in the following
sections of this letter. If these terms are satisfactory, please follow the
instructions for proceeding with your Loan provided at the end of this letter.
1. Facility and Use of Proceeds. This is a committed revolving line of credit
under which the Borrower may request and the Bank, subject to the terms and
conditions of this letter, will make advances to the Borrower from time to time
until the Expiration Date, in an amount in the aggregate at any time outstanding
not to exceed $12,000,000 (the "Line of Credit"). The "Expiration Date" means
December 31, 2001, or such later date as may be designated by the Bank by
written notice to the Borrower. Advances under the Line of Credit will be used
for working capital, acquisitions or other general business purposes of the
Borrower.
The Borrower may request that the Bank, in lieu of cash advances, issue
standby letters of credit (individually, a "Letter of Credit" and collectively
the "Letters of Credit") under the Line of Credit having expiration dates not to
exceed the earlier of one (1) year from the date of issuance and the Expiration
Date; provided, however, that the total amount of outstanding Letters of Credit
issued hereunder (in the Bank's sole discretion and subject to documentation
satisfactory to the Bank) shall not exceed $2,000,000.00. The availability of
advances under the Line of Credit shall be reduced by the face amount of each
Letter of Credit issued and outstanding (whether or not drawn). Each payment by
the Bank under a Letter of Credit shall in the Bank's discretion constitute an
advance of principal under the Line of Credit and shall be
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STV Group, Incorporated
February 3, 2000
Page 2
evidenced by the Note (as defined below). The Letters of Credit shall be
governed by one or more reimbursement agreements executed by the Borrower (the
"Reimbursement Agreement"). Each request for the issuance of a Letter of Credit
must be accompanied by the Borrower's execution of an application on the Bank's
standard forms, together with all supporting documentation. Each Letter of
Credit will be issued in the Bank's sole discretion and in a form acceptable to
the Bank. The Borrower shall pay the Bank a per annum issuance fee in an amount
equal to 1.5% of the face amount of each Letter of Credit, payable quarterly in
arrears on a basis of a year of 360 days, together with such other customary
fees, commissions and expenses therefor as shall be required by the Bank. This
letter is not a pre-advice for the issuance of a letter of credit and is not
irrevocable.
2. Note. The obligation of the Borrower to repay advances under the Line of
Credit shall be evidenced by a promissory note (the "Note") in form and content
satisfactory to the Bank.
This letter (the "Letter Agreement"), the Note and the other loan
documents delivered pursuant hereto will constitute the "Loan Documents."
Capitalized terms not defined herein shall have the meaning ascribed to them in
the Loan Documents.
3. Interest Rate. Interest on the unpaid balance of the Line of Credit advances
will be charged at the rates, and be payable on the dates and times, set forth
in the Note evidencing the Loan.
4. Repayment. Subject to the terms and conditions of this letter, the Borrower
may borrow, repay and reborrow under the Line of Credit until the Expiration
Date, on which date the outstanding principal balance and any accrued but unpaid
interest shall be due and payable.
5. Security. The Borrower must cause or has previously caused the following to
be executed and delivered to the Bank in form and content satisfactory to the
Bank as security for the Loan:
(a) a security agreement granting the Bank a first priority perfected
lien on the Borrower's existing and future personal property, including but not
limited to accounts, inventory, equipment, general intangibles, chattel paper,
documents and instruments.
If all or any portion of the tangible collateral is located on property
which is not owned by the Borrower or which is subject to a mortgage in favor of
another lender, the Borrower will deliver to the Bank Landlord's or Mortgagee's
Waivers, as applicable, acceptable in form and substance to the Bank for each
such location.
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STV Group, Incorporated
February 3, 2000
Page 3
Hazard insurance must be maintained on all inventory, equipment or real
property securing the Loan in such amounts and with such coverages as are
acceptable to the Bank, containing a standard lender loss payable or mortgagee
clause in favor of the Bank.
The Loan will be cross-collateralized and cross-defaulted with all
other present and future Obligations of the Borrower to the Bank.
6. Covenants. Unless compliance is waived in writing by the Bank or until
payment in full of the Loan and termination of the commitment for the Line of
Credit:
(a) The Borrower will promptly submit to the Bank such information
relating to the Borrower's affairs (including but not limited to annual
financial statements for the Borrower) or any security for the Loan as the Bank
may reasonably request.
(b) The Borrower will notify the Bank in writing of the occurrence of
an Event of Default or an act or condition which, with the passage of time, the
giving of notice or both might become an Event of Default.
(c) The Borrower will comply with the financial and other covenants
included in Exhibit "A" hereto.
7. Representations and Warranties. To induce the Bank to extend the Loan and
upon the making of any advance to the Borrower under the Line of Credit, the
Borrower represents and warrants as follows:
(a) The Borrower's latest consolidated financial statements provided to
the Bank are true, complete and accurate in all material respects and fairly
present the financial condition, assets and liabilities, whether accrued,
absolute, contingent or otherwise, and the results of the Borrower's operations
for the period specified therein. The Borrower's consolidated financial
statements have been prepared in accordance with GAAP (as defined in Exhibit A
hereto) consistently applied from period to period subject in the case of
interim statements to normal year-end adjustments. Since the date of the latest
financial statements provided to the Bank, the Borrower has not suffered any
damage, destruction or loss which has materially adversely affected its
business, assets, operations, financial condition or results of operations.
(b) There are no actions, suits, proceedings or governmental
investigations pending or, to the knowledge of the Borrower, threatened against
the Borrower, including without limitation those described on the attached
Exhibit B, which could result in a material adverse change in its business,
assets, operations, financial condition or results of operations and there is
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STV Group, Incorporated
February 3, 2000
Page 4
no basis known to the Borrower or its officers, directors or shareholders for
any such action, suit, proceedings or investigation.
(c) The Borrower has filed all returns and reports that are required to
be filed by it in connection with any federal, state or local tax, duty or
charge levied, assessed or imposed upon the Borrower or its property, including
unemployment, social security and similar taxes and all of such taxes have been
either paid or adequate reserve or other provision has been made therefor.
(d) The Borrower is duly organized, validly existing and in good
standing under the laws of the state of its incorporation or organization and
has the power and authority to own and operate its assets and to conduct its
business as now or proposed to be carried on, and is duly qualified, licensed
and in good standing to do business in all jurisdictions where its ownership of
property or the nature of its business requires such qualification or licensing.
(e) The Borrower has full power and authority to enter into the
transactions provided for in this Letter Agreement and has been duly authorized
to do so by all necessary and appropriate action and when executed and delivered
by the Borrower, this Letter Agreement and the other Loan Documents will
constitute the legal, valid and binding obligations of the Borrower, enforceable
in accordance with their terms.
(f) There does not exist any default or violation by the Borrower of or
under any of the terms, conditions or obligations of: (i) its organizational
documents; (ii) any indenture, mortgage, deed of trust, franchise, permit,
contract, agreement, or other instrument to which it is a party or by which it
is bound; or (iii) any law, regulation, ruling, order, injunction, decree,
condition or other requirement applicable to or imposed upon the Borrower by any
law or by any governmental authority, court or agency.
(g) The Borrower has reviewed the areas within its business and
operations which could be adversely affected by, and has developed or is
developing a program to address on a timely basis the risk that certain computer
applications used by the Borrower may be unable to recognize and perform
properly date-sensitive functions involving dates prior to and after December
31, 1999 (the "Year 2000 Problem"). The Year 2000 Problem will not result, and
is not reasonably expected to result, in any material adverse effect on the
business, properties, assets, financial condition, results of operations or
prospects of the Borrower, or the ability of the Borrower to duly and punctually
pay or perform its obligations hereunder and under the other Loan Documents.
8. Fees. Beginning on the first day of the quarter after the date of the Note
and continuing on the first day of each quarter thereafter until the Expiration
Date, the Borrower shall pay a
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STV Group, Incorporated
February 3, 2000
Page 5
commitment fee to the Bank, in arrears, at the rate of .375 percent (.375%) per
annum on the average daily balance of the Line of Credit which is undisbursed
and uncancelled during the preceding quarter. For the purpose of calculating the
commitment fee, the face amount of any outstanding Letters of Credit issued
under the Line of Credit shall be deemed to be disbursed. The commitment fee
shall be computed on the basis of a year of 360 days and paid on the actual
number of days elapsed.
9. Expenses. The Borrower will reimburse the Bank for the Bank's reasonable
out-of-pocket expenses incurred or to be incurred in conducting UCC, title and
other public record searches, and in filing and recording documents in the
public records to perfect the Bank's liens and security interests. The Borrower
shall also reimburse the Bank for the Bank's expenses (including the reasonable
fees and expenses of the Bank's outside and in-house counsel) in documenting and
closing this transaction, in connection with any amendments, modifications or
renewals of the Loan, and in connection with the collection of all of the
Borrower's obligations to the Bank, including but not limited to enforcement
actions relating to the Loan.
10. Depository. The Borrower will establish and maintain at the Bank the
Borrower's primary depository accounts.
11. Additional Provisions. Before the first advance under the Loan, the Borrower
shall execute and deliver to the Bank the Note and other required Loan Documents
and such other instruments and documents as the Bank may reasonably request,
such as certified resolutions, incumbency certificates or other evidence of
authority. The Bank will not be obligated to make any advance under the Line of
Credit if any Event of Default or event which with the passage of time,
provision of notice or both would constitute an Event of Default shall have
occurred and be continuing.
12. Other Conditions to Advances. The Bank will not be obligated to make an
advance under the Line of Credit until the Borrower has provided the following,
all in form and content satisfactory to the Bank: evidence of cancellation of
all commitments from and evidence of repayment in full of all indebtedness to
First Union National Bank except for obligations relating to four letters of
credit outstanding on the date hereof, which are listed on the attached Schedule
B, which shall be replaced no later than June 30, 2000; evidence of termination
of all existing liens in favor of First Union National Bank; transfer of
Borrower's primary operating accounts to the Bank.
Prior to execution of the final Loan Documents, the Bank may terminate
this Letter Agreement if a material adverse change occurs with respect to the
Borrower, any guarantor, any collateral for the Loan or any other person or
entity connected in any way with the Loan, or if the
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STV Group, Incorporated
February 3, 2000
Page 6
Borrower fails to comply with any of the terms and conditions of this Letter
Agreement, or if the Bank reasonably determines that any of the conditions
cannot be met.
This Letter Agreement is governed by the laws of the Commonwealth of
Pennsylvania. No modification, amendment or waiver of any of the terms of this
Letter Agreement, nor any consent to any departure by the Borrower therefrom,
will be effective unless made in a writing signed by the party to be charged,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. When accepted, this Letter Agreement and
the other Loan Documents will constitute the entire agreement between the Bank
and the Borrower concerning the Loan, and shall replace all prior
understandings, statements, negotiations and written materials relating to the
Loan.
THE BORROWER AND THE BANK IRREVOCABLY WAIVE ANY AND ALL RIGHTS THEY MAY
HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE ARISING
OUT OF THIS LETTER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY AND
ACKNOWLEDGE THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
If and when a loan closing occurs, this Letter Agreement (as the same
may be amended from time to time) shall survive the closing and will serve as
our loan agreement throughout the term of the Loan.
To accept these terms, please sign the enclosed copy of this Letter
Agreement as set forth below and the Loan Documents and return them to the Bank
within ten (10) days from the date of this Letter Agreement, or this Letter
Agreement may be terminated at the Bank's option without liability or further
obligation of the Bank.
Thank you for giving PNC Bank this opportunity to work with your
business. We look forward to other ways in which we may be of service to your
business or to you personally.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Amy T. Petersen
Title: Vice President
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STV Group, Incorporated
February 3, 2000
Page 7
ACCEPTANCE
With the intent to be legally bound hereby, the above terms and conditions are
hereby agreed to and accepted as of this 3rd day of February, 2000.
BORROWER:
STV GROUP, INCORPORATED
By: /s/ Peter W. Knipe (SEAL)
Print Name: Peter W. Knipe
Title: CFO
STV INCORPORATED
By: /s/ Peter W. Knipe (SEAL)
Print Name: Peter W. Knipe
Title: CFO
STV CONSTRUCTION SERVICES, INC.
By: /s/ Peter W. Knipe (SEAL)
Print Name: Peter W. Knipe
Title: CFO
STV INTERNATIONAL, INC.
By: /s/ Peter W. Knipe (SEAL)
Print Name: Peter W. Knipe
Title: CFO
[SIGNATURES ARE CONTINUED ON THE FOLLOWING PAGE]
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STV Group, Incorporated
February 3, 2000
Page 8
STV/ENVIRONMENTAL, INC.
By: /s/ Peter W. Knipe (SEAL)
Print Name: Peter W. Knipe
Title: CFO
STV SURVEYING, INC.
By: /s/ Peter W. Knipe (SEAL)
Print Name: Peter W. Knipe
Title: CFO
STV CONSTRUCTION, INC.
By: /s/ Peter W. Knipe (SEAL)
Print Name: Peter W. Knipe
Title: CFO
STV ARCHITECTS, INC.
By: /s/ Peter W. Knipe (SEAL)
Print Name: Peter W. Knipe
Title: Secretary
STV SILVER & ZISKIND ARCHITECTS, P.C.
By: /s/ Peter W. Knipe (SEAL)
Print Name: Peter W. Knipe
Title: Secretary
[SIGNATURES ARE CONTINUED ON THE FOLLOWING PAGE]
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STV Group, Incorporated
February 3, 2000
Page 9
STV ARCHITECTS, P.C.
By: /s/ Michael D. Garz (SEAL)
Print Name: Michael D. Garz
Title: President
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STV Group, Incorporated
February 3, 2000
Page 10
SCHEDULE A
STV Construction Services, Inc.
STV International, Inc.
STV/Environmental, Inc.
STV Surveying, Inc.
STV Construction, Inc.
STV Architects, Inc.
STV Silver & Ziskind Architects, P.C.
STV Architects, P.C.
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STV Group, Incorporated
February 3, 2000
Page 11
SCHEDULE B
LC# Amount Expiration Date
519935 $45,415 10/30/2000
598895 $77,000 11/22/2000
SM407974 $180,000 03/02/2000
SM409608 $650,000 07/29/2000
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STV Group, Incorporated
February 3, 2000
Page 12
EXHIBIT A
A. FINANCIAL REPORTING COVENANTS:
(1) The Borrower will deliver to the Bank:
(a) Financial Statements for its fiscal year, within ninety
(90) days after fiscal year end, audited and certified without qualification by
a certified public accountant acceptable to the Bank.
(b) Internally prepared Financial Statements for each fiscal
quarter, within forty-five (45) days after the quarter end, together with
year-to-date and comparative figures for the corresponding periods of the prior
year, certified as true and correct by its chief financial officer.
(c) With each delivery of Financial Statements, the Borrower's
chief financial officer shall also deliver a certificate as to the Borrower's
compliance with the financial covenants, if any, for the period then ended and
whether any Event of Default exists, and, if so, the nature thereof and the
corrective measures the Borrower proposes to take. This certificate shall set
forth all detailed calculations necessary to demonstrate such compliance.
"Financial Statements" means the consolidated and consolidating balance
sheet and statements of income and cash flows prepared in accordance with
generally accepted accounting principles in effect from time to time ("GAAP")
applied on a consistent basis (subject in the case of interim statements to
normal year-end adjustments).
B. FINANCIAL COVENANTS:
(1) The Borrower will maintain at all times a minimum Tangible Net
Worth of $12,500,000.
(2) The Borrower will maintain at all times a ratio of current assets
to current liabilities of at least 1.2 to 1.0.
(3) The Borrower will maintain at all times a ratio of total
liabilities to Tangible Net Worth of less than 3.0 to 1.0.
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STV Group, Incorporated
February 3, 2000
Page 13
"Tangible Net Worth" means stockholder's equity in the Borrower less
any advances to third parties, and less all items properly classified as
intangibles, in accordance with GAAP.
C. NEGATIVE COVENANTS:
(1) The Borrower will not create, assume, incur or suffer to exist any
mortgage, pledge, encumbrance, security interest, lien or charge of any kind
upon any of its property, now owned or hereafter acquired, or acquire or agree
to acquire any kind of property under conditional sales or other title retention
agreements; provided, however, that the foregoing restrictions shall not prevent
the Borrower from:
(a) incurring liens for taxes, assessments or governmental
charges or levies which shall not at the time be due and payable or can
thereafter be paid without penalty or are being contested in good faith by
appropriate proceedings diligently conducted and with respect to which it has
created adequate reserves;
(b) making pledges or deposits under workers' compensation,
unemployment insurance and other social security legislation;
(c) maintaining purchase money security interests in personal
property which are in effect on the date hereof ("Existing Interests"), or from
granting purchase money security interests after the date hereof ("Future
Interests") in personal property of the Borrower existing or created when such
property is acquired, provided that the principal amount of the indebtedness
secured by each such security interest does not exceed the purchase price of the
related property, and provided further that the aggregate amount of all such
Future Interests shall not exceed $2,000,000;
(d) granting liens or security interests in favor of the Bank;
(e) carriers', warehousemen's and mechanics' liens in respect
of property of any Borrower imposed by law which were incurred in the ordinary
course of business;
(f) pledges or deposits to secure the performance of bids,
trade contracts (other than for borrowed money), leases, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(g) easements, rights-of-way, restrictions or minor defects or
irregularities in title incurred in the ordinary course of business, and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of real property or minor imperfections in title thereto
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STV Group, Incorporated
February 3, 2000
Page 14
which, in the aggregate, are not material in amount, and which do not in any
case materially detract from the value of the real property subject thereto or
interfere with the ordinary conduct of the business of any Borrower;
(h) liens consisting of judgment or judicial attachment liens
(including prejudgment attachment) the enforcement of which is effectively
stayed to the reasonable satisfaction of the Bank or payment of which is covered
in full (subject to a commercially reasonable deductible) by insurance as to
which the relevant insurance company has acknowledged coverage, and which do not
otherwise result in an Event of Default under any of the Loan Documents; or
(i) any obligations or duties affecting any of the property of
any Borrower to any municipality or public authority with respect to any
franchise, grant, license or permit which do not materially impair the use of
such property for the purposes for which it is held.
(2) The Borrower will not create, incur, guarantee, endorse (except
endorsements in the course of collection), assume or suffer to exist any
indebtedness, except:
(a) indebtedness to the Bank;
(b) open account trade debt incurred in the ordinary course of
business and not past due, or
(c) indebtedness in respect of which liens are permitted under
subparagraph (1)(c) above, and any refinancings thereof; provided that the
amount of the refinancing indebtedness is not more than the outstanding amount
of the refinanced indebtedness, and the terms of the refinancing indebtedness
are no more favorable to the lender than the terms of the refinanced
indebtedness.
(3) The Borrower will not liquidate, or dissolve, or merge or
consolidate with any person, firm, corporation or other entity, except that upon
prior written notice to the Bank (i) STV Group, Inc., may merge or consolidate
with one of its subsidiary Borrowers or with a corporation acquired as permitted
under subparagraph (5) below, provided it is the surviving corporation, and (ii)
any of the subsidiary Borrowers may merge or consolidate with each other.
(4) The Borrower shall not sell, lease, transfer or otherwise dispose
of all or any substantial part of its property or assets, whether now owned or
hereafter acquired, except upon prior written notice to the Bank, the subsidiary
Borrowers may transfer assets to each other or to STV Group, Inc.
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STV Group, Incorporated
February 3, 2000
Page 15
(5) The Borrower will not make acquisitions of all or substantially all
of the property or assets of any person, firm, corporation or other entity,
except such acquisitions which do not in the aggregate exceed $1,500,000.
(6) The Borrower will not declare or pay any dividends on or make any
distribution with respect to any class of its equity (other than (i) dividends
which in the aggregate in any fiscal year, do not exceed an amount equal to 25%
of the Borrower's net income for the prior fiscal year or (ii) dividends to
another Borrower), and will not purchase, redeem, retire or otherwise acquire
any of its equity.
(7) The Borrower will not make or have outstanding any loans or
advances to or otherwise extend credit to any person, firm, corporation or other
entity, except in the ordinary course of business and in an amount which, in the
aggregate, does not exceed $500,000.
(8) The Borrower will not make or permit any change in the nature of
its business as carried on as of the date hereof.
M:\LEGAL\Simon\STV Group\Letter Agreement4
